The company today announced its Half Yearly Financial Results and attached to this LTB is a summary of the key points. The overall results show an improved financial position compared with the same period last year with increases in revenue and profits across the main business units and a positive cash flow for the Group as a whole.
We have also attached a copy of our Press Release issued today. In the Press Release the Union has focussed on the need for the company to recognise the efforts of CWU members and reward them with extended job security and higher pay. These issues are currently being pursued in our National talks.
The company shared these results with the Union at the end of last week. The company told us the main reasons for the improvements were as follows:
- The benefit of price increases in April 2011.
- Better than anticipated cash generation from property sales.
- Significant cost reduction through procurement initiatives and the central functions reorganisation.
Although the company say they see the benefits of staff cost reduction beginning to come through, they stated this is well behind what they expected at this stage of the Modernisation Programme. They confirmed a headcount reduction figure of approximately 5,000 between September 2010 and September 2011, and stated that just under 2,000 of these were managerial grades.
As previously reported, with the cooperation of the company, the Union has engaged an independent organisation to scrutinise the new business plan, the assumptions and forecasts that underpin the plan and the overall finances of the company. These six monthly results will now be included in the assessment currently being undertaken. The intention is for the Executive Council to be provided with a Report on the overall financial position before Christmas. In turn we will be providing Branches with appropriate information in due course.
On ColleagueShare, the company stated that the latest results would not reverse the negative valuation of the Scheme. This continues to be pursued in our National talks.
We would ask Branches to ensure that the content of this LTB is shared with all Representatives and conveyed to our members in the workplace.
Any enquiries to this LTB should be directed to the DGS (P) Department.
Yours sincerely
Dave Ward
Deputy General Secretary (P)
Royal Mail half year results 2011/12 (Apr – Sept 2011)
The key points Royal Mail are looking to highlight in their six monthly results are:
- revenues increased across the group;
- costs are being controlled, with 5,000 fewer staff in the UK business since September 2010 (2,000 of these coming from central re-organisation) leading to a £50m reduction in staff costs;
· investment in modernisation is continuing, with £132m spent in the past six months; and
· the business has generated £309m in cash, against an outflow of £52m last year, due to property disposals (£190m) and working capital inflows (which they expect to be redressed in the second half of the year).
Royal Mail believes the European Commission will see the results as supportive of the state aid application.
However, it is stressing that it is behind on modernisation – with hours down by 2.9%, compared to a 5% decline in core volumes – and that it has profits of £12m after modernisation costs when POL is excluded, a margin of only 0.3%. It is also emphasising that UKLPI remains loss making after modernisation costs.
Royal Mail Group results
| RMG 6 months to Sept 2011 | RMG 6 months to Sept 2010 | RMG excluding POL 6 months to Sept 2011 | |
| Revenue | £4,606m | £4,402m | £4,200m |
| Operating costs | (£4,406) | (£4,350m) | (£4,056m) |
| Profit before modernisation | £200m | £52m | £144m |
| Modernisation costs | (£132m) | (£28m) | (£132m) |
| Profit after modernisation costs | £67m | £22m | £12m |
- Group revenues increased by 5% year on year, while net operating costs increased by 1% (substantially below inflation). Revenues and profits increased across UKLPI, GLS and POL.
- Profits were £67m after modernisation up from £22m in the first half of 2010. Excluding POL, profits of £12m after modernisation costs mean a margin of 0.3% on sales. This is up from profits of £4m for the same period last year, a margin of around 0.1%.
- Royal Mail Group had a positive cash flow of £309m compared with an outflow of £52m in the same period in 2010. However, it has explained that this year’s figure is ‘flattered’ by property disposals and certain reporting factors to do with the timing of the accounts: it therefore expects this cash inflow to fall in the second half of the year.
- The sale of property including Rathbone Place brought in over £100m and the disposal of businesses, such as Romec Services, brought in £28m.
- The accounting pension deficit (the IAS 19 measure) of £4.6bn is roughly the same level as it was in March 2011 when it stood at £4.5bn – the small increase is because corporate bond values have been stable. This is separate from the triennial accounting deficit on which Royal Mail’s deficit repayments are based.
UKLPI (Royal Mail Letters and Parcelforce)
- Revenues were £3,414m, up £137m from £3,277m in the same period last year, which was better than expected.
- Profits before modernisation were £91m, up from a loss of £27m in the first half of 2010 as revenues increased ahead of costs.
- After modernisation costs however, which were £104m higher in 2011, UKLPI made a loss of £41m, up from a loss of £55m in 2010.
- The £137m improvement in revenue was due to the price increase: £279m extra was raised through raising prices, partly offset by a 6% decline in core letter volumes (worth around £142m in revenue).
- Costs including modernisation were £3,455m up by £123m from £3,332m in the first half of 2010. People costs were lower by £50m, reflecting modernisation and re-organisation benefits, but inflationary pressure and modernisation costs (up by £104m) meant overall costs increased.
- Packets and parcels volumes increased by 5%.
POL
- Total revenues were up by £14m as a result of a £15m increase in the network subsidy payment. However, while mails revenues increased income from, government, financial services and telephony all fell.
- POL’s profits after modernisation costs were £55m, up from £18m in the first half of 2010. Royal Mail state that this is due to lower project costs, which they expect to increase in the second half of the year before transformation starts in 2012.
GLS
- Underlying revenues are up by £41m as a result of a 4% increase in volumes and a 3% increase in prices.
- This increase in revenue outpaced a £36m increase in costs, resulting in a £7m increase in GLS’s operating profit, which rose to £58m in 2011 from £51m in 2010.
21st November 2011
CWU says Royal Mail results should reward staff
Commenting on Royal Mail’s half year financial results today (Monday) – which show operating profit up by £45 million and improvements in all parts of the business – the Communication Workers Union says the improvement in performance should be shared with its workers and calls for greater job security, including no compulsory redundancies.
Dave Ward, CWU deputy general secretary, said: “Better performance and improved profits is welcome news for Royal Mail and its staff – but the industry still faces major challenges to secure its future. We want this success to be shared with postal workers in the form of higher pay and a commitment to job security, with an extension to Royal Mail’s commitment to completing modernisation with no compulsory redundancies.
“The modernisation programme has brought major change, including voluntary job losses, new machinery and equipment and changes to workplaces. It’s been difficult for both postal workers and customers and rewarding staff is the right thing to do. The current talks we’re in with the company are crucial to maintaining the successful modernisation of Royal Mail and in those we’re seeking commitments on pay and job security.
“Royal Mail workers know what’s going on in terms of competition and change in the industry and the crucial thing is to reward and motivate postal workers. Any redundancies must be voluntary, not forced, and the postal service must be protected. Without that it doesn’t matter what you do. The progress so far proves this can be successfully achieved under public ownership and clearly shows the importance of keeping the group of businesses – letters, Post Office, Parcelforce and GLS – integrated. Breaking this business up would be a disaster for UK postal services.”
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