Royal Mail executive delivers, then quits

Landmark 'last-mile' agreement with rival group is followed by the resignation of the man who helped seal it. Jason Nissé reports

The executive in charge of the wholesale division of Royal Mail has quit, only days after a ground-breaking deal was struck with its rival, Business Post.

Adam Novak, head of the business that sells Royal Mail's services to other postal groups, left his job just before Christmas. The division is crucial to the future of Royal Mail, which has warned that it could lose up to £650m a year as a result of competition in its core markets.

Mr Novak has not been replaced and it is understood that his department, which was set up only in the early part of last year, is now being folded into Royal Mail's regulation unit.

Mr Novak, who has been with Royal Mail for 12 years, was until the end of 2002 the head of the media markets division, where he successfully led the group's campaign to persuade advertisers to use direct mail. During his three years in the job, sales rose from £350m to £1.2bn a year.

A year ago he was promoted to head the recently launched wholesale division, set up to sell postal delivery services to rival groups. Royal Mail is required to do this by the new regulator, Postcomm.

The first wholesale deal was struck only two weeks ago. Royal Mail agreed to allow its postmen to deliver post for UK Mail, a division of Business Post, covering the so-called "last mile" of delivery.

The innovative deal, details of which have not been released, came just two days before Postcomm was expected to rule how much Royal Mail could charge for last-mile delivery. Postcomm has now postponed the ruling while it investigates the Business Post deal.

At least three other groups are understood to be interested in breaking into the market: Hays Commercial Services, TPG Post of the Netherlands and Express Dairies.

Mr Novak was instrumental in negotiating the Business Post deal, but it was virtually his last act at Royal Mail. His departure followed a meeting early this month with Elmar Toime, executive deputy chairman of Royal Mail.

The resignation of Mr Novak is in sharp contrast to the impression given at the UK Mail conference at Olympia, central London, in mid-November when Mr Toime and Mr Novak spoke at the same forum. Mr Novak's talk was entitled "The New Royal Mail Wholesale Model".

Royal Mail would not discuss Mr Novak's departure. However, the wholesale division has now been redesignated as part of the regulatory department, reporting to Stephen Agar, the head of regulation.

Mr Novak is the fourth senior executive at Royal Mail to depart this year, following Jerry Cope, group managing director; Kevin Williams, managing director of Royal Mail International; and Mick Linsell, the director in charge of service delivery.

Royal Mail, which is headed by Allan Leighton - currently also working on a rescue for Leeds United football club - recently announced another round of cost-cutting. It said that 3,000 management jobs would be cut.

The group narrowly avoided a national postal strike earlier this year but suffered serious disruption when staff in London went on strike.