Royal Mail plans to cut 1,600 jobs, mostly in operational and head office managerial population; move expected to deliver annual cost savings of £50M, of which about £25M will be realized in 2014-15

Sandy Yang

LONDON , March 27, 2014 (press release) – Royal Mail has a continuous focus on efficiency. As part of this programme, it will today commence a formal consultation with Unite and Title: CWU Description: Communication Workers Union - Represents 250,000 people in postal, telecommunications and finanical services industries in the UK CWU with a proposal to achieve a net reduction of around 1,300 roles. It is proposed that there will be a reduction of approximately 1,600 roles, with around 300 new or enhanced roles created.

The vast majority of employees impacted will be in the Group’s operational and head office managerial population. There is no impact from this initiative on frontline employees, including postmen and women, or the services Royal Mail provides to its customers.

The programme is expected to deliver annualised cost savings of around £50 million, of which approximately £25 million will be realised in 2014-15.

No impact on expected cumulative cash investment over 2013-14 and 2014-15, which remains at around £1.2 billion.

Charge of around £100 million associated with the programme will be recognised in transformation costs, resulting in a total charge of around £230 million for 2013-14.

The underlying trends for the full year are expected to be broadly in line with those seen in the first half.

Royal Mail Group (RMG.L) will today commence a formal consultation with Unite and Title: CWU Description: Communication Workers Union - Represents 250,000 people in postal, telecommunications and finanical services industries in the UK CWU, primarily across its managerial population and with some impact in its support and administrative functions. There is a proposed reduction of approximately 1,600 roles, with around 300 new or enhanced roles created. Since 2003, almost 50,000 employees have left the Group. Royal Mail is committed to conducting this consultation carefully and sensitively. The Group has a strong track record of achieving change through natural turnover, redeployment and voluntary redundancy wherever possible.GLS, Royal Mail’s European, ground-based parcels delivery company, is not impacted.

Financial impact
The programme is expected to deliver annualised cost savings of around £50 million, of which approximately £25 million will be realised in 2014-15. In 2014-15, this benefit will partly mitigate a likely increase of around £70-80 million (1) in the IAS19 non-cash pension service charge, due to external market conditions, and the potential impact of any increase in direct delivery competition.

There is no impact on the expected cumulative cash investment over 2013-14 and 2014-15, which remains at around £1.2 billion, as reduced costs of implementing certain projects in 2013-14 will help to offset the cash costs of the efficiency programme in 2014-15.

A charge of around £100 million associated with the efficiency programme will be recognised in the income statement for 2013-14 and included in transformation costs. Total transformation costs for the year will now be around £230 million, compared with our previous expectation of approximately £160 million.

The underlying trends for the full year are expected to be broadly in line with those seen in the first half.

Moya Greene, Chief Executive Officer, Royal Mail plc, said:“We are continuously improving our efficiency, whilst maintaining our high Title: Quality of Service Description: Measurement of Royal Mail’s performance against the service targets set out in its licence. Quality of Service. We need to do so in order to effectively compete in the letters and parcels markets. This is the best way to ensure the continued delivery of the Title: Universal Service Description: Postal products and associated minimum service standards that must be available to all addresses in the UK. Universal Service and the good quality jobs we provide for our people.”

Notes
(1) Based on current estimates of long-term corporate bond yields, and inflation forecasts, and current pensionable payroll. This may differ to the final outcome, which will be based on market conditions at 30 March 2014, and pensionable payroll during 2014-15.

About Royal Mail plc: Royal Mail plc is the parent company of Royal Mail Group Limited, the leading provider of postal and delivery services in the UK and the UK's designated universal postal service provider. UK Parcels, International and Letters ("UKPIL") comprises the company's UK and international parcels and letters delivery businesses operating under the "Royal Mail" and "Parcelforce Worldwide" brands. Through the Royal Mail Core Network, the company delivers a one-price-goes-anywhere service on a range of parcels and letters products. Royal Mail has the capability to deliver to more than 29 million addresses in the UK, six days a week (excluding UK public holidays). Parcelforce Worldwide operates a separate UK network which collects and delivers express parcels. Royal Mail also owns General Logistics Systems (GLS) which operates one of the largest ground-based, deferred parcel delivery networks in Europe. 

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