Exclusive: Royal Mail Posts £100m Letters Loss

[TrueBlueTerrier]

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I have learned that Royal Mail will next week say that it lost more than £100m in its traditional letters business last year, underlining the case for the urgent privatisation of the company.

Royal Mail Group plc is expected to announce as soon as next Tuesday that its letters business plunged into the red in 2010, despite the fact that it made a modest profit at the group level.

The £100m-plus operating loss will partly reflect the fact that the costs of the company's modernisation programme, led by Moya Greene, the new chief executive, have been taken into account as part of the reported numbers for the first time.

But they will be used by both the company and the Government to demonstrate why further restructuring of Royal Mail, including the injection of private capital, remains essential to securing its future.

In 2009, the letters arm of Royal Mail made an operating profit of £48m, £2m higher than the previous year.

Legislation to privatise the company passed its final parliamentary stage this week, with Royal Assent expected as soon as Monday.

In a statement yesterday, Vince Cable, the Business Secretary, said:

"Today marks a significant milestone for Royal Mail. Legislation has now been agreed that will help tackle the huge challenges facing the company. Royal Mail and the Post Office are important and cherished parts of our society. It was vital we took swift action to put them both on a sustainable footing.

“Passing the legislation, reforming regulation, getting state aid approval, tackling the pension deficit - these are all vital steps that will provide momentum towards a sale of Royal Mail. They will also give the company the security and certainty it needs to press ahead with its essential modernisation programme.”

Ministers are in the latter stages of deciding whether and how to write off a substantial proportion of Royal Mail's £1.7bn of debt, which the FT reported yesterday had sparked complaints from private sector rivals.

A sale of Royal Mail is unlikely for at least a year, for several reasons. The company's historic pension liabilities will not be assumed by the Government until next March, and the European Commission is likely to take several months to determine the fate of a state aid application.

The statement from Cable's department yesterday highlighted another important point.

"Work to establish a new regulatory framework for postal services is already underway. The Bill provides for the transfer of regulatory responsibility from Postcomm to Ofcom alongside significant reform of the existing regime, ensuring that regulation is proportionate to the needs of the market. Ofcom will launch a consultation in the autumn with a view to establishing the new regulatory framework in spring 2012."

It will be impossible for any potential outside investor to attribute a valuation to Royal Mail until the detail of this new regulatory framework is clear. So from the taxpayer's perspective, it will be desirable that Royal Mail will be free to compete as widely as possible (while still being obliged to fulfil its Universal Service Obligation).

Not that that will by itself be sufficient. Greene is already working on plans to radically slim Royal Mail's workforce, possibly (The Sunday Times reported last week) by as many as 40,000 jobs.

And trends in the letters business are all heading in the wrong direction: volumes and margins are sharply down, I'm told next week's results will show, while costs are up.

Those are gloomy signals for the chief executive of any business.

Royal Mail declined to comment on next week's results announcement.

[fishtank]

The £100m-plus operating loss will partly reflect the fact that the costs of the company's modernisation programme, led by Moya Greene, the new chief executive, have been taken into account as part of the reported numbers for the first time.

[flaminmoses]

we made a profit.

what percentage of posties wages and other costs are linked with letters??
have they factored in the 10% year on year forecast letters reduction??and have they done that every year??

they must think we were born yesterday

[norwichchris]

I've been told by the early shift manager in my office, that the DSA mail we process is worth at least 50-60k per day. So that's around 350k per week just in the small mail centre I work in, as we're now swamped with tonnes of the stuff seven days a week! You can only guess how much the big mail centres are making on a daily basis. There's a massive fiddle going on if RM say our profits are down this much. Don't believe the propaganda!

[martin]

Funny how 12 years ago we had two deliveries a day and made a profit. Now we have one VERY late delivery and can't make a . profit.??? My arse :vcfo :dcfo :ncfo

[Coggz]

The Truth is Out There.
[David Duchovny as Fox Mulder]

[Stormproof]

Funny how 12 years ago we had two deliveries a day and made a profit. Now we have one VERY late delivery and can't make a . profit.??? My arse :vcfo :dcfo :ncfo

and we had a LOT more staff! They must think we are f***ing stupid. The stupid ones are the idiots that negiotiated the DSA pricing, RM could've been raking it in and we would'nt be in this mess.

[demon]

they will cook the books again we all no it :dcfo :vcfo :ncfo

[skull]

If you work in an office where revision has been implemented you would have no problem believing these figures .

[norwichchris]

The crooks have saved £200m by diddling us out of colleague share payouts!

[red1968]

The crooks have saved £200m by diddling us out of colleague share payouts!

[steven100]

You can't cook the books they'd burn. What you can do is use accounting standards in different ways. Either rm have been telling a pack of lies about the accounts for years or they are telling us a pack of lies now. Take a pick???

[Night Tonic]

ship of fools

[fishtank]

ship of fools

Aye,aye Cap'n...
Fool steam ahead.

[Wessex]

Funny how 12 years ago we had two deliveries a day and made a profit. Now we have one VERY late delivery and can't make a . profit.??? My arse :vcfo :dcfo :ncfo

and we had a LOT more staff! They must think we are f***ing stupid. The stupid ones are the idiots that negiotiated the DSA pricing, RM could've been raking it in and we would'nt be in this mess.

...aah but then there would be no need to privatise us or if we were to be privatised we would fetch a decent price.It's much easier to sell a privatisation if you can show the company has problems that only the private sector can solve.The price of a failing company will be much less and means much more profit when the miracle turnaround occurs and Royal Mail is re-sold at mega bucks.