Half year trading statement 2008-09

Post by **TrueBlueTerrier** » 23 Oct 2008, 15:54

Half year trading statement 2008-09
23/10/2008

http://www.news.royalmailgroup.com/news ... mail_group

• Operating profit doubles despite fall in letter volumes
• Continued downward drive on costs cuts overheads
• Quality of service targets now being achieved
• Post Office Limited in profit helped by growth in new product sales and cost savings
• Government Post Office closure programme nearing completion
• Transformation in Letters business underway
• Huge challenges to be overcome to secure the future of the Universal Service
• Structural market decline accelerating as more customers switch to electronic communications
• Post Office awaits critical decision on the future of the Card Account

Royal Mail Group’s operating profit more than doubled from £86 million to £177 million in the first half of the 2008-09 financial year compared to the same period the previous year despite a further fall in mail volumes, the company announced today.

The strong financial performance came alongside a rise in customer quality of service with the most recent figures showing the vast bulk of mail hitting or exceeding its targets.

Operating profit grew by £91 million in the first half of the year compared to the same period last year. The company’s continued focus on reducing overheads as competitive and economic pressures mount played a significant role in the financial uplift with reductions in IT and other costs in the Post Office network and efficiency gains in the Royal Mail Letters business.

Read financial results for the six-month period from April to September 2008 table
*All references to operating profit/ (loss) are before exceptional items. To aid a like-for-like comparison, the 2007-08 operating profit for Royal Mail includes the annualised impact of the pay deal agreed in October 2007.

Royal Mail Group’s Chairman Allan Leighton said: "These are good results that demonstrate that real progress has been made in what are clearly difficult economic circumstances. This strong performance has been delivered against a backdrop of falling mail volumes, increased competition, an unsatisfactory regulatory regime and the challenge of meeting the heavy demands of our pension scheme. Everyone at Royal Mail understands the importance of the one-price-goes-anywhere Universal Service and these results demonstrate our determination to protect and strengthen it."

Chief Executive Adam Crozier said: "The increase in our profitability that we are reporting today underlines the huge effort that has been made across the company to drive up quality of service, to cut our costs and to improve our current financial performance. However we are also facing huge pressures with the Universal Postal Service still loss-making, competition intensifying still further both from electronic communications and rival operators - and the increasingly heavy costs of servicing the historic pension deficit. The scale of these challenges means there is an urgent need to step up the pace of modernisation and to ensure that everyone in the company is playing their part in transforming our operations and delivering a world class postal service."

The challenges facing the company are:
• The one-price-goes-anywhere Universal Service - used by social customers and by businesses big and small to communicate with their customers and each other, and which underpins the economic and social fabric of the country - continues to be loss-making and its future is under threat.
• Increasing competition in the overall communications market in which we operate has seen an acceleration in the switch by businesses and individuals away from mail to electronic media, including internet and email. At the same time, rival mail operators in the open letters market are increasing their share of volumes with competitors currently handling almost one letter in every three posted.
• The rate of structural volume decline in UK postal market - as in the rest of the postal world - has accelerated, leading to a 4% fall in Royal Mail’s volumes in the first half of 2008-09. Royal Mail is now handling an average daily postbag of around 79 million letters - some five million fewer on average each day compared to just two years ago when mail volumes peaked.
• On top of the structural decline in the mail market, Royal Mail faces additional risk from the squeeze in the UK economy, as mail volumes and revenues track GDP, and from the drive by both businesses and individuals to cut their costs as the economy tightens. Royal Mail is particularly vulnerable to a downturn in the advertising market, which is a key element in overall mailings.
• Royal Mail Group remains heavily cash-constrained and, in contrast to its rivals, currently has no ability to raise money in the financial markets while Government funding, even at commercial interest rates, is subject to scrutiny by the European Commission.
• Earlier this year the company reformed the pension scheme to reduce the risk going forward. Despite this, however, the pension deficit in accounting terms has increased by more than £1 billion to £4 billion - up from the £2.9 billion deficit at March earlier this year - as a result of the heavy falls in the stock markets. Of particular concern is the actuarial deficit, which is due to be revalued as at 31 March 2009 and it is likely to have increased substantially from the previous level of £3.4 billion in March 2006. The urgent need to tackle this major challenge is underlined by the continuing burden of the heavy cash contributions the company is required to pay towards the deficit and servicing the pension plan.
• Following the wide-ranging national agreement last autumn with the Communication Workers Union on flexible working practices, the essential drive to modernise the Royal Mail Letters business - to ensure it can compete effectively in a market that is both declining and gets ever more competitive - is now underway. Although many offices are working hard to introduce new working arrangements and get efficiency gains from the new technology being installed there has also been resistance on the ground at local level that’s damaging the pace of change.
• Swifter transformation means we must continue to bring in people, across the business, with the skills and experience in operational change which Royal Mail needs for the next stage of our transformation, which in turn will enable us to compete effectively in the competitive market.
• The regulatory regime constrains Royal Mail’s ability to compete fairly and respond with price flexibility, new products and services in the business mail market - the only sector of the market where competition is well developed. As the independent review of the postal services sector said in its initial report in May this year, the way in which the sector is regulated will "need to change."

Mr Crozier said: "Royal Mail has always firmly believed that the Universal Service to the UK’s 28 million addresses is a crucial part of the economic and social fabric of the country - and we remain determined to transform our operations and build on the progress we have made to protect the one-price-goes-anywhere postal service for every customer. However, the Universal Service is undoubtedly in danger unless we have fairer regulation, the ability to access cash going forward to keep investing in the business, and a long-term solution to the pension funding burden that currently consumes so much of the revenues we generate.

"The industry as a whole faces a number of challenges and that’s why the Government set up an independent review of the sector, which is due to report shortly. Irrespective of the outcome of that review, we know that central to any industry solution is the need for Royal Mail to accelerate its transformation, and we have a robust plan in place to do so. Most importantly we need clarity over the future of the industry and Royal Mail’s status in an increasingly competitive communications marketplace."

POST OFFICE BACK IN PROFIT
A strong push to cut overheads, especially the cost of running the IT systems crucial to the operation of every branch, along with growth in new products and services, particularly the Post Office’s HomePhone and broadband services, helped reverse a lengthy period of losses in Post Office Limited.

The business made an operating profit of £28 million in the first half of the year compared to a £7 million loss 12 months earlier, after taking account of the Government’s annual £150 million Social Network Payment which is helping keep open thousands of loss-making Post Office branches.

The business’s turnover was up 2.7% on the 2007 half year performance with income from new products and services exceeding falls in traditional Government business. This is another positive sign for the future of the business as the Network Change programme to reduce the size of the branch network, in line with the available Government funding, nears completion.

However, despite all the efforts of the Post Office team to turn the business around, of critical importance going forward is the decision on the Card Account contract to replace the current Post Office Card Accounts in April 2010. This crucial decision is clearly central to the future of the branch network and Post Office Limited has submitted a very competitive bid.

PARCELFORCE WORLDWIDE PROFITS UP
Parcelforce Worldwide’s operating profit doubled to £4 million over the period of the two half years and its revenues grew by an impressive 5.7% in an exceptionally tough market. The business’s quality of service remains among the strongest in the field.

GLS - STRONG PERFORMANCE
GLS, the Group’s European parcels business which operates in 36 European states, again improved its performance with a half year operating profit of £59 million. On a like-for-like basis, including when the impact of a favourable exchange rate in favour of the Euro against Sterling is taken out, the company has recorded underlying sales growth of 4.5% and profit growth of 6%.

Ends

Issued by Royal Mail Group:
148 Old Street
LONDON
EC1V 9HQ

Post by **trythat** » 23 Oct 2008, 16:46

"Operating profit grew by £91 million in the first half of the year compared to the same period last year. The company’s continued focus on reducing overheads as competitive and economic pressures mount played a significant role in the financial uplift with reductions in IT and other costs in the Post Office network and efficiency gains in the Royal Mail Letters business."

Not down to us postmen, doing even more for even less, having to put up with some diabolical managers who's only way of doing things is to bully and harress?

"Chief Executive Adam Crozier said: "The increase in our profitability that we are reporting today underlines the huge effort that has been made across the company to drive up quality of service, to cut our costs and to improve our current financial performance. However we are also facing huge pressures with the Universal Postal Service still loss-making, competition intensifying still further both from electronic communications and rival operators - and the increasingly heavy costs of servicing the historic pension deficit. The scale of these challenges means there is an urgent need to step up the pace of modernisation and to ensure that everyone in the company is playing their part in transforming our operations and delivering a world class postal service."

Perhaps he should look in the mirror and at other top level managers, rather than the humble postman, for his savings.

"Mr Crozier said: "Royal Mail has always firmly believed that the Universal Service to the UK’s 28 million addresses is a crucial part of the economic and social fabric of the country - and we remain determined to transform our operations and build on the progress we have made to protect the one-price-goes-anywhere postal service for every customer. However, the Universal Service is undoubtedly in danger unless we have fairer regulation, the ability to access cash going forward to keep investing in the business, and a long-term solution to the pension funding burden that currently consumes so much of the revenues we generate."

That sounds like similar to statement he made about our final salary pension scheme, and look where that got us,lower wages, lower pensions for LIFE, working longer for less.

P739 · Post by **P739** » 23 Oct 2008, 16:50

http://news.bbc.co.uk/1/hi/business/7686826.stm

Post by **dvbuk55** » 23 Oct 2008, 16:50

Excellent news - We should be in for a nice little bonus and a good % increase in pay then

Post by **trythat** » 23 Oct 2008, 16:52

dvbuk55 wrote:Excellent news - We should be in for a nice little bonus and a good % increase in pay then

I thought only those who earnt it were due, ie Crozier and his buddies.

BELIAL · Post by **BELIAL** » 23 Oct 2008, 18:52

You couldn't make it up could you

silly me

Welcome to the weird and wonderful world of RM's incredible YOYO financial figures

Sandyman · Post by **Sandyman** » 23 Oct 2008, 19:13

:cfo lied, "the huge effort that has been made across the company to drive up quality of service".

Come to our D.O. sunshine and see the mail left behind because your managers, working to your cost cutting regime, won't pay to get it sorted & delivered.

Captain Scarlet · Post by **Captain Scarlet** » 23 Oct 2008, 22:27

We are going to be privatised as soon as Mandelson cuddles up to Big Gordon who then pumps some money into the pension deficit..And hey presto....Rupert Muroch buys us all up and 40,000 jobs down the toilet overnight. THE END.

Night Tonic · Post by **Night Tonic** » 23 Oct 2008, 22:32

I'll second that

BELIAL · Post by **BELIAL** » 23 Oct 2008, 23:21

I'll third it, with the proviso that if the workforce stands together and says sod off you rip off merchants then the grand plan will fall flat

F0zziebear · Post by **F0zziebear** » 24 Oct 2008, 11:36

Did former colleagues. For those in know about RM financials one would have noticed that when Dearest Al came to RM he put all the bad news into the first year i.e. the £1.5bn loss (losing more than £1M per day). What this allows Al to do is claim he has been the saviour of the business. Now that he is stepping down he needs to show that RM has been turned around and is making a profit etc. Some might call this accounting fraud, but you will never been able to prove it. RM has a history of creative accountancy, but is able to hide things and move things around to allow for increased spending or cost cutting.

So one man's truth is another's lie.

k979aaa · Post by **k979aaa** » 24 Oct 2008, 20:46

SHOW ME THE MONNEY ££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££££ NOW SHOW ME THE SERVICE

Post by **POSTMAN** » 24 Oct 2008, 20:49

F0zziebear wrote:Did former colleagues. For those in know about RM financials one would have noticed that when Dearest Al came to RM he put all the bad news into the first year i.e. the £1.5bn loss (losing more than £1M per day). What this allows Al to do is claim he has been the saviour of the business. Now that he is stepping down he needs to show that RM has been turned around and is making a profit etc. Some might call this accounting fraud, but you will never been able to prove it. RM has a history of creative accountancy, but is able to hide things and move things around to allow for increased spending or cost cutting.

So one man's truth is another's lie.

According to the CWU's accountants it was all bollox,they wanted someone independent to look into it.
I will never understand how we suddenly went from £500+M profit to mass losses in such a short time,then we turned it round,then it went pair shaped,now it's looking good.
Total bollox.

Eric · Post by **Eric** » 24 Oct 2008, 21:00

Remamber how those Share in Success figures came in just as they "forecast"?

F0zziebear · Post by **F0zziebear** » 28 Oct 2008, 12:53

It's quite simple. When Allan Leighton came to Royal Mail he could put all of the bad aquisitions etc. into that years accounts. As far as I'm aware nothing illegal was done, but the world of corporate accounting is a somewhat murky one becasue the rules and regulations are complex and change on a relatively regular basis. This may explain why rich people pay so much to accountants so that they pay so little tax (sorry of the subject). So whilst RM were not probably losing £1M per day it is impossible to prove that they weren't.

on the flipside the current performance by RM of operating profits inspite of falling volumes and rising pension deficits seems strange, and probably is. But then RM might have hedged on their purchasing of fuel (which is in a huge chunk of RM's expenditure). They may have sold alot of surplus property at the height of the boom. Unless you were able to unpick the accounts it is not possibly to know exactly what is going on.

So, it is the presever of senior management to put off their bonus in lieu of improved performance. in theory this is a gamble, but when you can potentially influence the corporate accounts it is about as good a bet as one could be involved in.

In summary I would argue that Allan Leighton is a shrewd operator and to be honest would prefer him on my team rather than facing him. Now you may disagree with this, but having worked in the prviate sector he is seen as a formidable character. Having said that I am under no illusion about how he operates be it in ASDA or RM. I suppose he is up there with Campbell and Mandelson, neither of whom I would want anything to do with, but would prefer them batting for my team rather than leaking stories and plotting against me.