Royal Mail posts record profits; seeks £2bn government funds for pension scheme |
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Wed, 18 May 2005 16:30
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Allan Leighton is one British gentleman who does not know what failure means. How else could the dramatic turnaround of a slumbering giant called the Royal Mail be explained? Three years ago when Leighton took over as the Royal Mail chairman, he admitted that the concern was a 'basket case.' But three years is a long time in corporate history.
Lat year the Royal Mail made profits of £537m on turnover of £9bn, a figure that has analysts in raptures and its chairman on cloud 9. Allan Leighton called this a milestone in 25 years of British corporate history. He must know what he is talking about since he has in the company of chief executive Adam Crozier weathered the storm and was able to announce a £1,000 bonus for each for the institution's 130,000 staff.
But there is a downside as finance director Marisa Cassoni put it, the institution is "technically insolvent" despite all the efforts of the top brass. This label is mainly due to a pension deficit of £2.5billion under old accounting standards. If the new international financial reporting standards (IFRS) are applied, then this deficit soars to a staggering £4.6billion. Ms Cassoni commented, "This produces a negative balance sheet. Technically the business is insolvent, which means that we can't pay out dividends."
| Royal Mail chairman, Allan Leighton, has sought the government's intervention in this regard and asked that it share half the burden which amounts to a cash injection of £2bn to £2.5bn.The government Gordon Brown and the Trade and Industry Secretary Alan Johnson included are thought to be in flavour of an employee buyout which would enrich the exchequers' coffers by about £1.5bn.
As if this was not a big enough headache, Leighton and Co will have to contend with the opening up of the market that is slated early next year, "Competing successfully in an open mail market is going to be even more difficult. We’ve a mountain to climb and we’ve only reached base camp," Leighton admitted. He however appeared confident that the institution would weather the storm, "We've a mountain to climb and we've only reached base camp," he said.
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