Royal Mail has said it had its best Christmas for four years, with nearly all festive deliveries arriving on time – despite missing a target that would have handed postal workers a £500 bonus.
The delivery company’s owner, International Distributions Services (IDS), on Thursday reported group revenues rose nearly 10% to £3.6bn in the final three months of 2023.
It said more than 99% of first- and second-class items that were posted by the last recommended posting date were delivered in time for Christmas.
However, the Observer revealed this month that targets that would have paid out a £500 bonus to employees were missed over the period.
In November, the company announced a “one-off quality incentive scheme” to try to avoid a repeat of Christmas 2022, when days of strikes disrupted deliveries. Some its 128,000 employees could have earned up to £500 extra for “hitting local and national quality targets”.
However, the national element of the target was missed, limiting the payout to a maximum of £250. It is understood that staff at about 1,000 delivery offices received some of the bonus.
IDS said it expected to make an operating profit in the second half of the financial year that would “broadly offset” the £169m loss in the first half. Investors reacted positively, with shares rising more than 2% on Thursday.
Total parcel volumes increased 21% during the quarter, compared with a strike-hit period the previous year. This was helped by the return of some big retail customers – as well as small and medium-sized businesses – using the company to handle products.
Christmas represented a brighter end to a year in which , Simon Thompson, departed as chief executive after just two years after the conclusion of a long-running industrial dispute,the company was hit by a cyber hack and was fined £5.6m for missing targets for punctual deliveries of letters.
The IDS chief executive, Martin Seidenberg, who also direct responsibility for Royal Mail as it searches for a chief executive, said the “extraordinary efforts” of its employees “led to a marked improvement in both trading and operational performance for Royal Mail over Christmas and we have continued to win-back customers. We need to build on this momentum.”
The company said that letter volumes were down 31% on pre-pandemic levels. Revenues from letters rose 11.8% due to rising stamp prices, but it said inflation and pay awards had pushed up costs.
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Seidenberg repeated his calls for a reform of the universal service obligation (USO), which requires Royal Mail to deliver nationally at a fixed price, six days a week.
The communications industry regulator, Ofcom, is expected to publish options for the future of the USO this month. Sources have said Ofcom has conducted analysis and consulted Royal Mail’s customers on how cutting back on delivery days would affect households, including studying the impact of a three-day-a-week service, or alternate-day deliveries.
“We are doing all we can to transform, but it is simply not sustainable to maintain a delivery network built for 20bn letters when we are now only delivering 7bn,” Seidenberg said.
He made similar comments in a letter to Liam Byrne, the chair of the business and trade select committee, published earlier this week. “Delivering the current universal service requirements – in a financially sustainable way – is increasingly difficult, if not impossible, to achieve as the mix and number of parcels and letters changes,” Seidenberg wrote.
IDS also announced the appointment of the former Boots, Tesco and Sainsbury’s executive Michael Snape as finance chief, replacing Mick Jeavons.
