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Royal Mail reports surge in annual operating profits to £211m Royal Mail reports surge in annual operating profits to £211m
(about 7 hours later)
Royal Mail has reported a fivefold surge in annual operating profits to £211m just weeks after getting rid of its pension liabilities to the government and introducing major increases in stamp prices. Royal Mail has reported a fivefold surge in annual profits to £211m weeks after hiving off its near-£10bn pension liabilities to the government and introducing the biggest stamp price increase in its history.
The state-owned business, which is being fattened up for privatisation, also removed 4,000 staff through retirement or redundancy but said it was still producing only "skinny" profit margins unworthy of a commercial business. The state-owned business, which is being fattened up for privatisation, also made 4,000 staff redundant but said it was still producing only "skinny" profit margins unworthy of a commercial business.
Moya Greene, the chief executive, said much more work needed to be done to modernise the Royal Mail and she had pencilled in a 5% annual decrease in letter volumes for the next five years. Moya Greene, the chief executive, won a £371,000 bonus, but said much more needed to be done to modernise Royal Mail before a possible stock market float at the end of next year.
Asked whether more price increases to follow two rounds over the last 18 months and staffing cuts were on the cards, she replied: "I am not speculating on stamp price increases or jobs either". Asked whether more price increases, to follow two rounds over the past 18 months, and staffing cuts were on the cards, she replied: "I am not speculating on stamp price increases or jobs either."
Greene revealed the personnel reductions, mainly in management positions, for the year ending 25 March 2012 had cost the business £77m but said she was proud that no one had been forced to go and it had all been achieved with union agreement. Greene revealed that the personnel reductions, mainly in management, for the year ending 25 March 2012 had cost the business £77m but said she was proud that no one had been forced to go and it had all been achieved with union agreement.
Greene, the first woman and foreigner to run the post service, earned £1.1m in salary and bonuses the annual report showed but she said it would be "ungracious" for her to comment on her own pay except to say she recognised she was "paid well." The company said later that the ownership structure of Royal Mail had no bearing on the number of people employed. "Whether we are in the public sector or the private sector, we have been clear that Royal Mail will be a smaller and more efficient company … We know this is a difficult and painful process for our people as we are changing every aspect of their jobs and we're grateful for their commitment," said a spokesman.
It fell to Royal Mail chairman Donald Brydon to justify the remuneration level which he argued was appropriate given the major turnaround in the financial position of the business. Greene, a Canadian – the first woman and foreigner to run the post service – earned £1.1m in salary and bonuses but Royal Mail chairman Donald Brydon said it was justified. "Without Moya Greene's unwavering determination, Royal Mail would not have achieved many of its strategic milestones over the past year, such as the successful achievement of [EU] state aid clearance and the creation of a new regulatory structure," he said.
"Without Moya Greene's unwavering determination, Royal Mail would not have achieved many of its strategic milestones over the past year, such as the successful achievement of (European Union) State Aid clearance and the creation of a new regulatory structure," he added. The Department for Business, Innovation and Skills (BIS) also justified the executive payouts. "Bonuses have been paid where stretching targets have been achieved. But none of the Royal Mail board got a full bonus this year because not all targets were met," said a BIS spokesman.
The Department for Business also justified the executive payments on the basis that successes were being notched up. "Bonuses have been paid where stretching targets have been achieved. But none of the Royal Mail board got a full bonus this year because not all targets were met," said a spokesman. The payouts could be bolstered further by the award of two tranches of long-term investment plans over the past 24 months, each of which could pay out 70% of Greene's salary in two and three years' time. Greene has also obtained other perks such as two free flights back to Canada each year, but the £1.1m compares with a 2010 figure of £2.4m for her predecessor, Adam Crozier, who is now boss of ITV.
But the sizable payouts, which could be bolstered further in future due to the award of two tranches of a longterm investment plans over the last 24 months, each of which could payout 70% of her salary in two and three years time. In April, Royal Mail raised the price of first class stamps by 14p to 60p, the biggest single rise in the 172-year history of the organisation. Second class prices were raised nearly 40% to 50p.
Greene has also obtained other perks such as two free flights back to her native Canada each year but the £1.1m compares with a 2010 figure of her predecessor, Adam Crozier who is now boss of ITV, of £2.4m. Consumer Focus said it was pleased to see the business profitable again, while the CWU union said improved financial results were "good news for the industry, the public and the workers who serve them".
But the current level of pay could still be controversial given the introduction in April this year of a 14p increase in first-class stamps – the biggest single rise in the 172-year history of the organisation - while second class prices were raised nearly 40% to 50p. Greene said decisions on stamp price rises were difficult and she recognised the impact on customers on fixed incomes and businesses struggling in a recession. But she said the prices were still relatively cheap compared with almost any other country in Europe and such moves were necessary to protect universal delivery, where a letter can be delivered anywhere in the country for the same price. The guarantee is being secured at a time when internet and email is eating into the business.
Greene said decisions on such price rises were difficult to take and that she recognised the impact for those customers on fixed incomes and businesses struggling in a recession. The UK parcels, international and letters arm of the business (UKPIL) made an operating profit of only £23m over the past year, but this compares with a loss of £120m for the previous 12 months. The bulk of the group profits came from European "logistics", the delivery of parcels and other services by trucks and vans.
But she said the prices were still relatively cheap compared to almost any other country in Europe and these kinds of moves were necedssary to protect the universal delivery system in Britain. This is where a letter can be delivered anywhere in the country for the same price and is being secured at a time when internet and email is eating into the business.
The UK parcels, international and letters arm of the business, (UKPIL) made an operating profit of only £23m over the past year but this compares with a loss of £120, for the 12 months earlier.
The Royal Mail is expected to be fully or partly privatised towards the end of 2013 but Greene said there needed to be "less turbulence" in the financial markets to make this possible as well as further improvements in the company's profits. The government has just taken a major problem off its hands by taking responsibility for its pension fund.The Royal Mail is expected to be fully or partly privatised towards the end of 2013 but Greene said there needed to be "less turbulence" in the financial markets to make this possible as well as further improvements in the company's profits. The government has just taken a major problem off its hands by taking responsibility for its pension fund.
The government obtained permission in March from the EU to effectively nationalise the postal company's pension scheme. This did not affect the balance sheet of the Royal Mail immediately but has transformed the cash position of the business because it no longer had to put aside cash to fill the £9bn deficit. The government obtained permission in March from the EU to in effect nationalise the postal company's pension scheme. This did not affect the balance sheet of the Royal Mail immediately but has transformed the cash position of the business because it no longer had to put aside cash to fill the £9.5bn deficit.
The unions supported this move and Greene has generally built bridges with the CWU which was at war with some of her predecessors. Last month the former head of the Canada Post made history by being invited to address the union's annual conference in Bournemouth. The unions supported this move and Greene has generally built bridges with the CWU, which was at war with some of her predecessors. Last month the former head of the Canada Post made history by being invited to address the union's annual conference in Bournemouth.
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