Royal Mail reveals all-business profit boon
The Royal Mail made an increased profit of £255 million in the nine months to Christmas, and all its businesses are in profit for the first time in almost 20 years, the postal group announced today.
Despite the economic downturn and further falls in mail volumes driven by increased use of emails, group revenue increased by almost 3 per cent during the first nine months of the current financial year to £7.2 billion.
The company made an operating profit of £255 million in the nine months to Christmas, compared with £162 million for the whole of 2007/8.
The Royal Mail said it was on track for an annual profit of nearly double the level it achieved in the last financial year.
Royal Mail chairman Allan Leighton said: "The company and its people have come a long way in just six years when Royal Mail was losing more than £1 million a day and routinely failing quality of service targets.
"A huge amount has been done to put the business on a stable footing - something many believed was not possible - and, having established a firm base on which to build for the future, we are getting on with our modernisation plans and catching up on decades of under-investment."
Chief executive Adam Crozier added: "Royal Mail's modernisation plan agreed with our shareholder, the Government, is on track to deliver across the period of the plan, with more than £600 million spent on transforming the letters business since the investment plan was agreed in 2006-2007.
"We have plans in place to spend every penny of the £1.2 billion commercial loan agreed by the Government in 2007 over the plan's lifespan to 2011, which will clearly help us to improve efficiency and deliver even better service for our customers.
"There will be a need, however, to access further investment in a timely and flexible way as we compete increasingly with electronic communications as well as with other postal operators, while at the same time dealing with the effects of the current economic recession."
The company said mail volumes were expected to fall by around 7 per cent in the UK over the next year, adding that the one-price-goes-anywhere universal delivery service remained loss-making and "under threat"
For the first time in almost 20 years, the letters business, post office network, Parcelforce and the group's European parcels business were all in profit.
Mr Crozier repeated backing for the Government's controversial plan to sell a minority stake in Royal Mail to a private firm, saying it would allow the group to bring in people with the right skills and experience in operational change needed for the next stage of the group's "transformation."
The proposal has been attacked by the Communication Workers Union and scores of Labour MPs.
The Communication Workers Union welcomed the strong financial results, saying they proved the company was thriving while modernising in full public ownership.
General secretary Billy Hayes said: "It's good to see Royal Mail increasing profits while remaining fully publicly owned.
"Today's financial results must not be seen as an invitation for any part sell-off but instead prove the viability and future sustainability of a wholly publicly-owned modern Royal Mail."
Deputy general secretary Dave Ward said: "Royal Mail is again giving us mixed messages on its financial health. These results must not come at the cost of cutbacks in services, terms and conditions for staff and post office closures.
"Future services and standards must at least be retained, if not expanded, to ensure consumer confidence."
A Business Department spokesman said: "We welcome Royal Mail's improving financial performance, but huge challenges still face the company.
"Letter volumes are falling by 7 per cent per year as people turn to email. The volatile multibillion-pound pension deficit remains. These issues must be tackled if we are to have a strong Royal Mail.
"Outside investment and management expertise, action on the pension deficit and on regulation is the way to transform Royal Mail and secure its future in public ownership."
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