Royal Mail doubles its profit

Published on Thursday 23 October 2008 21:53

ROYAL Mail doubled interim operating profit to £177 million (from £86m last time) as its branch network division, Post Office Ltd, bounced back into the black, the state-owned organisation revealed yesterday.

Royal Mail said the better performance was despite "clearly difficult economic circumstances", but Scots-born chief executive Adam Crozier warned yesterday that it still faced "huge pressures".

Crozier, who received a salary of 633,000 and a bonus of 190,000 in the previous full trading year to last March, said these pressures included a still lossmaking "one-price-goes-anywhere" universal postal service.

They also included more people using e-mail, internet advertising, and rival operators now handling almost one letter in every three posted in the UK.

Figures published yesterday showed that the average daily postbag at Royal Mail fell to 79 million items in the six months to end-September – five million fewer than two years ago.

Crozier said Royal Mail, which has been heavily criticised for awarding heavy bonuses while closing thousands of post office branches, also had to service a 3.4 billion pension deficit. He said this actuarial deficit was likely to increase "substantially" when it is revalued next year.

Post Offices Ltd made an operating profit of 28m compared with a 7m loss in the same six months of 2007.

The division's closure of 2,500 Post Office branches across the UK is near completion, leaving a network of 12,000 outlets.

In Scotland 277 branches have been closed, leaving 1,466. Alan Cook, the managing director of Post Office Ltd, got a 72,000 bonus last year on top of a 207,000 salary.

Royal Mail's profits soared to 46m from 5m, partly due to costcutting and other efficiencies, such as in IT, it said. Parcelforce Worldwide doubled its profits to 4m, while the general logistics systems division, the European parcels network, boosted profits by 31 per cent.

Royal Mail said it faced additional risks "from the squeeze in the UK economy, as mail volumes and revenues track GDP".

The government set up a review of the postal sector, which is due to report shortly.

The Business Secretary, Lord Mandelson, refused to rule out a partial-privatisation of Royal Mail earlier this week.

The plan would have been implemented if he had not been made to resign as trade and industry secretary under Tony Blair, Mandelson said in an interview.

Crozier said there was an "urgent need" to step up the pace of modernisation of Royal Mail's operations.

"Most importantly we need clarity over the future of the industry and Royal Mail's status in an increasingly competitive communications market," he added.

Consumer Focus, the successor to the Postwatch consumer watchdog, said the performance was "impressive" – but urged Royal Mail "to continue to modernise and improve so that no more post offices need to close".