| Royal Mail’s bag of woes: profits up but pension deficit peaks |
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LONDON: Royal Mail yesterday reported a 20 percent year-on-year rise in half year profits but also warned that it needed 6 billion in funds if it were to secure a long-term future.
Operating profits for the first six months rose to £159m, higher by £27m compared to last year. The biggest revenue generators were the group’s Parcelforce, Post Office and European parcels businesses. Elsewhere in the group, business was largely on a downturn.
The letters business which contributed 76 percent to the group earnings made an operating profit of £168m - a 3 percent decline y-o-y. Revenues from bulk mail, one of the group’s more profitable businesses, registered a 7.1 drop while revenues dipped 4.2 percent and 3.8 percent from first class letters and second class letters respectively.
For Royal Mail this is the second time in the past 25 years that volumes had shown such declines. The first time was in 2002 with losses amounting to almost £1m a day.
While reporting the numbers, the group’s chairman Allan Leighton, hit out at regulator Postcomm and the pensions watchdog. He argued that Postcomm was being unrealistic in demanding that Royal Mail follow its pricing diktat. With the postal market opening up to competition in the next two months time, the regulator’s price control would push Royal Mail back from the impressive turnaround it achieved since 2002. It would defeat Royal Mail’s efforts to stay profitable.
Postcomm had held a meeting yesterday where chairman Nigel Stapleton discussed inconsistencies in the postal giant’s earnings report. He said he wondered how Royal Mail could lose more money than it saved when it had clearly made cost savings in certain areas, e.g. scrapping afternoon post deliveries. He also discussed the extent to which Royal Mail could raise the price of postage stamps from April 2006.
Mr Leighton defended Royal Mail’s efforts by pointing out that after scrapping the second delivery, postal staff were given a substantial pay rise and a five-day working week, but mail continued to be collected as before, i.e. six days and in some areas even on Sundays.
He warned about the huge pensions deficit saying it could bankrupt the group. He explained that the £500m cashflow it generates every year is simply not enough if it were expected to plug the £4billion pensions deficit.
The Royal Mail’s pension scheme is the country’s biggest - by membership with more than 440,000 employees across the UK. Mr Leighton said he hoped the government would grant his organisation the £6 billion aid it needed for the pension fund as well as to invest in new technology and equipment.
Posted
on : Sat, 19 Nov 2005 06:45 GMT | Pensions News
By : Paula Jenkins
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