Royal Mail boss blames slow change for 2,000 job cuts
Slow post: changes coming to mail business
Royal Mail is to cut 2,000 jobs in a management restructuring aimed at addressing “long-standing challenges”.
The staff reductions will be part of a plan to take £430 million of costs out of the business over the next two years.
Keith Williams, interim executive chairman, said: “In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. COVID-19 has accelerated those trends, presenting additional challenges.”
His comments came in final results showing pre tax profit fell to £275m from £398m last time. Operating profit was down by 13.6% from £411m to £325m.
Mr Williams said the company was taking “immediate action on costs”, which will result in a £130m saving in people costs next year and flat non-people costs, along with a reduction of around £300m in capex across the group over the next two years, to address the immediate impact of COVID-19.
“Regrettably, we are also proposing a management restructure impacting around 2,000 roles,” he said.
The company will be accelerating the pace of operational change in the UK to address long-standing challenges and be sustainable for the long term.
It is working with all stakeholders to underpin the universal service obligation (USO) to ensure it reflects user needs and is modern, contemporary and sustainable.
“We want to ensure Royal Mail remains a key part of the UK economy, a good employer, and the nation’s delivery partner of choice,” said Mr Williams.
It is capitalising on growth opportunities in parcels, protecting margin in the short term with opportunities for margin expansion in the future.
“At the same time, we are seeking to improve performance in key markets. We will focus investment on growing markets, and improve cashflow.”
The board does not intend to pay any dividend in relation to 2020-21, but it said its ambition is to re-commence dividend payments in 2021-22.
Russ Mould, AJ Bell investment director, says: “The debate over who got short-changed and by how much when Royal Mail was floated by the Cameron-Osborne administration in autumn 2013 is over.
“As it turns out, it was taxpayers who got the better end of the sale at 330p a share. Investors, who should have known the risks they were taking with the stock and unfortunately employees, who may not have, got the worst of it.
““The shares now trade at barely half of their flotation price and the likely absence of a dividend in the year to March 2021 demolishes what was left of the investment case for the stock when it was floated.
“That had rested largely on Royal Mail’s consistent cash flow and dividend yield, although the foundations of that thesis had been crumbling for some time.”