Royal Mail profits plunge by half with danger of job cuts

Royal Mail delivered a parcel of bad news to investors on Thursday as profits collapsed by more than half and its new boss admitted performance was “very disappointing”.

Rico Back, the chief executive of four months, oversaw pre-tax profits tumble to £33 million in the six months to October, from £77 million a year earlier. He refused to rule out job cuts to deal with the company’s issues.

The number of letters in Royal Mail’s postbags fell 7%, revenues from its crucial UK parcels business were down 1% and the firm’s much-heralded productivity and cost-cutting targets were widely missed.

The shares barely moved thanks to Royal Mail’s issuing of a damage-control profit warning last month, which saw the stock fall by a third to the lowest since its privatisation flotation in 2013. But Back, who commutes to London from his Zurich home, said things were so serious that: “I’m spending the vast majority of my time here [in the UK] now. Our focus is to fix our UK issues.”

Back said he was “looking at the organisation. Is it streamlined and efficient? And looking jointly with our union to see how can we improve our efficiency.” When questioned twice about whether that would include job cuts, Back would only say: “We do not comment on these issues.”

The German chief executive admitted Royal Mail hadn’t adapted fast enough to the change from letters to parcels demand: “For the first time in our history, 65% of group revenues are from parcels. We’re adapting to that.”

There was a 1% revenue rise to £4.9 billion at international parcels division, GLS. That’s the division Back previously ran, which helped give him a £5.8 million golden hello when he was promoted. That, with his annual pay package worth up to £2.7 million, triggered a major investor revolt over excessive boardroom pay this summer as well as condemnation in Parliament.