Warning as Royal Mail posts £3m profit
The Royal Mail made a £3m profit in the first half of the financial year, the first time it has been in the black at this stage for five years, it was announced today.
But despite the good news, chairman Allan Leighton said there was a "long way" to go before the organisation achieved sustainable profitability.
The company, which is still clearing a backlog of mail following a series of wildcat strikes by postal workers, said its day-to-day operations made a £55 million profit compared with a £147 million loss a year ago.
The financial figures covered the six months to September, before the unofficial strikes which are believed to have cost Royal Mail millions of pounds.
The Royal Mail made a £542 million loss in the first half of last year but has benefited from a 1p rise in stamp prices in May.
Mr Leighton said the figures had brought "welcome news" but he said the Royal Mail had not yet achieved a turnaround.
"Crucially, Royal Mail has still not implemented key operational changes in most of the letters business.
"We did not earn this profit from efficiency gains through much needed operational changes."
Royal Mail was facing "very heavy" additional costs including pay increases for 165,000 postal workers and an extra £100 million a year to the pension fund.
Mr Leighton said the organisation had to earn almost half a billion pounds to keep the renewal plan on track.
"The key task for the rest of this year is to achieve the operational changes in Royal Mail as rapidly as possible by moving to a single daily delivery, improving the efficiency of the Mail centres and streamlining the transport operation. We can afford any delay."
Talks between the Royal Mail and the Communication Workers Union covering issues such as the single delivery as well as pay are set to continue to day at the conciliation service Acas in a bid to resolve differences between the two sides.
Chief Executive Adam Crozier said the unofficial strike action had been a "setback" which had hit millions of customers.
"We must now rebuild customer confidence in Royal Mail in addition to the existing work of pressing ahead with the renewal plan."
Mr Crozier said the unofficial strikes had made it harder for Royal Mail to hit its customer service target this year which increased the risk of a fine by the postal regulator.
The Post Office, which runs the network of offices, and Parcelforce both made "significant progress" in the latest six-month period but they both remained loss making.
Parcelforce's losses were cut by 40% to £59 million and the Post Office reduced its loss by 13% to £91 million.
Almost 500 urban Post Office branches were closed during the six months as part of a programme to reduce the size of the urban network by 3,000.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies