Royal Mail £350m in the red but ‘back on track’, says owner
- The results came days before the crucial deadline, which could see the company fall into foreign hands
The owner of Royal Mail yesterday insisted the postal service is back on track, despite missing delivery targets and losing almost £1 million a day over the past year.
The results came days before a crucial deadline that could see the 508-year-old company fall into foreign hands for the first time.
Parent company International Distributions Services (IDS) said the business had ‘stabilized’ after it emerged Royal Mail was £348 million in the red in the year to the end of March.
Uncertain future: Royal Mail could fall into foreign hands
But it called on regulators to accelerate reforms to cut costs by £300 million a year.
It came as watchdog Ofcom launched a new investigation into Royal Mail after it failed to meet delivery targets. The operator has already been fined £5.6 million for its abysmal performance the year before.
IDS’s annual results were published a day later than planned after accountant KPMG requested more time to sign off the accounts. It came after the board said last week it ‘intended to recommend a £3.5 billion takeover bid from Czech billionaire Daniel Kretinsky’.
Kretinsky, known as the “Czech Sphinx,” has until 5 p.m. Wednesday to make a formal offer or walk away. A takeover of Royal Mail would likely receive intense attention from Westminster and regulators.
However, Martin Seidenberg, the boss of parent company IDS, said: ‘Over the past six months we have put Royal Mail on the right trajectory. We have made good progress in delivering on our modernization agenda and returned to growth in the second half of the year.
‘We improved quality, won back customers lost during a strike, controlled costs and delivered Christmas to our customers.
“The positive momentum is increasing, although we are working hard to return to profitability.” He reiterated calls for regulators to reform the service, saying they must “get on with it” for Royal Mail to make a profit.
Bosses have been lobbying for changes to the universal service obligation, which will mean Royal Mail must deliver letters six days a week for a fixed price.
Ofcom said yesterday that Royal Mail is delivering just 74.5 per cent of first-class mail within one working day, compared to a target of 93 per cent.
The country delivered 92.4 percent of second-class mail within three working days, missing the 98.5 percent threshold.
Royal Mail, which was privatized in 2013, has said it cannot meet its target, which is estimated to cost the company £675 million a year.
It has asked ministers and Ofcom to agree to scrap second-class letter deliveries on Saturdays and return the service to every other weekday in a bid to save money.
IDS said yesterday that the number of voluntary redundancies would be less than 1,000.
As a group, IDS reported a loss of £28 million, compared with £71 million a year earlier, while European parcel company GLS posted a profit of £320 million.