20/05/2010

Royal Mail's Profits Masks Pension Deficit

As Royal Mail Group today announced continued good performance - with operating profit rising by £83 million to £404m - the new Government has confirmed that it will seek "a partial privatisation".

In its latest coalition agreement document, Downing Street said it would seek "an injection of private capital" in Royal Mail.

However, it did not say how much of the still struggling mail group would be up for sale, with over £3.4bn of a shortfall in its pension commitments.

The previous Labour government shelved its controversial plans to part-privatise Royal Mail last year.

There will be "opportunities for employee ownership", the Conservative-Lib Dem agreement said today, while it insisted the Post Office network will "remain in public ownership".

However, post offices may be allowed to offer a wider range of services, and ideas including another go at a Post Office bank - (decades ago it had Girobank) - to provide new sources of revenue.

The announcement came as Royal Mail reported operating profits of £404m for the last financial year - up 26% on the previous year.
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Overall, revenues fell though, and the group admitted that the deficit in its pension scheme is expected to be "significantly higher" than the current £3.4bn valuation.

It said it had already paid £867m into its pension scheme in 2010 in a bid to close the gap.

Donald Brydon, Chairman of Royal Mail Group, said: "These are good results achieved against a backdrop of harsh economic conditions and the relentless reduction in the number of letters sent by customers, not just in the UK but around the world. However huge challenges remain, including the need to find a resolution to our historic pension deficit, and the need to reach agreement with Postcomm on a regulatory regime more suited to today's changing marketplace."

He added: "The strikes called by the CWU in 2009 clearly had an adverse effect on Royal Mail Letters and I am delighted that the recent ballot of union members endorsed the agreement struck between the Group and the CWU which will allow for still further progress towards our modernisation goals.

"It will help us to protect the Universal Service while providing a fair reward for our people and recognising the important role they play in achieving the transformation we so urgently need."

(BMcC/GK)

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