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Last Updated: Thursday, 18 November, 2004, 16:51 GMT
Q&A: Royal Mail recovery
Festive first class stamp
Will the future be rosy for the Royal Mail?
The Royal Mail is once more in the news, after reporting that it is now making 1m in profit a day, compared to a loss of the same amount two years ago.

Has the company finally managed to turn itself around?

So is it all good news again at Royal Mail?

It certainly looks that way.

Royal Mail has just reported a half year profit of 217m ($404m) and said it is now delivering nine out of every 10 first class letters on time.

For the full 12 months, it estimates that its profit will increase to 400m (compared to 220m last year), and if that is achieved, every Royal Mail member of staff will pocket an 800 bonus.

Second class deliveries are also doing well, achieving 98.6% of their target delivery times, above the benchmark figure of 98.5%.

It really does appears that Royal Mail's efforts to return to profitability after 2002's 1m a day losses are now firmly established.

In total it has also made more than 1bn in savings.

Why then are some commentators still unhappy?

The return to profitably has not been achieved without some pain, and some commentators say it has come at the expense of service.

A major cost-cutting programme has led to large-scale job losses, with more than 37,000 people leaving the organisation.

And of Britain's 15,300 post office branches, 2,400 will have been closed by the end of the current financial year.

What do postal pressure groups say?

Consumer watchdog Postwatch has complained that Royal Mail failed to achieve 14 of its 15 performance targets, and that - compared with the same period last year - services had deteriorated.

Postwatch chairman Peter Carr said customers were paying for the profits without receiving the service.

It is, for example, still managing to lose some 14 million items a year, although this is half the 30 million lost in 2001/2002.

Anything else clouding the horizon?

Royal Mail is also still losing an average of 5p on first class letter delivery and 9p on second class stamps.

With its Post Office division still also making a loss, both it and domestic deliveries are affectively being subsided by its business mail deliveries.

Royal Mail has also upset some customers by scrapping the second post, and households in certain parts of the UK are unlikely to forget how poor the service got back in the spring, when staff struggled to adapt to new distribution systems.

What next for Royal Mail?

With Royal Mail chairman Allan Leighton himself saying he would currently only rate the company five out of ten, it has vowed to continue with its modernisation and reform programmes.

The key to the company's future is how it prepares itself for market liberalisation in 2007.

Thousands of companies already deliver parcels and there are now four firms who do business letter deliveries.

While Royal Mail still has 99.7% of the market for delivery of letters, from April 2007 most people will be able to choose who they post their letters with.

If Royal Mail's service is not up to scratch, it could see its market share and its profits decline.

Royal Mail urges pricing shake-up
27 Apr 04 |  Business
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25 Apr 04 |  Business

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