Royal Mail posts £220m profits

Royal Mail has reported a profit of £220 million for last year – the first time in four yours that the business has posted positive results.

Today's figures are a massive turnaround on losses of £197 million last year. Royal Mail reported a 4% growth in turnover to £8,633 million, largely as a result of the postage price rise in May 2003, and customers posting more letters last year – with volumes up 1.6%. Cost efficiencies from operational changes also played a key role, the group said.

However, pay increases in the letters business and in other parts of the company, and increased pension costs, will add almost £700 million to Royal Mail’s costs, the company said.

The return to profitability follows a two-year period when losses from operations reached more than £1 million a day. However the return on turnover of just 2.5% is still way below a commercial return and much lower than in the 1990’s when returns of around 6% were generated in some years, and significantly lower than our main competitors, Royal Mail said.

Despite not reaching licence targets, group chairman Allan Leighton said that in the period covered by the results prior to the unofficial industrial action last autumn, the 'Quality of Service' results in the company were the best for 15 years.

Royal Mail achieved 90.1% next-day delivery for First Class mail last year, short of the 92.5% target set by Postcomm.

Without the strike, Mr Leighton said, Royal Mail would have reported Quality of Service levels "higher than at the beginning of the Renewal Plan, as well as an even higher profit number".

He added: "However, the current reductions in quality, which are driven partially by the lack of a full recovery from the unofficial action, but largely by the massive modernisation changes required in the company, are not acceptable, are now beginning to improve and are the key focus of everyone in the company.”

To underline this, Mr Leighton said that he will defer his entire earned bonus for the year until the group meets "key agreed quality of service targets in 2004-05". If these numbers are not achieved, the bonus is waived.

Elmar Toime, the Deputy Executive Chairman, has also agreed to defer half his earned bonus for the year into 2004-05, to be conditional on achievement of key Quality of Service targets. At the same time, other executive directors including Adam Crozier, Group Chief Executive, are to waive the quality of service element of their bonus for the year, which can be up to 20% of the total.

It was also confirmed today that the company had written to Channel 4 and Hardcash, the producers of the Dispatches programme, asking for an apology for the "innuendo created by accusations in the programme that credit cards, which Barclaycard has since confirmed were not posted into Royal Mail’s system, had been stolen from the postal system in an organised way".

(gmcg)