Royal Mail £350m in red but ‘back on track’, according to owner

Royal Mail’s owner yesterday insisted the postal service is back on track despite missing delivery targets and losing nearly £1m a day over the past year.

The results came days before a crunch deadline that could see the 508-year-old firm fall into foreign ownership for the first time.

Parent company International Distributions Services (IDS) said the business had ‘stabilised’ as it revealed that Royal Mail was £348m in the red in the year to the end of March.

But it urged regulators to accelerate reforms so it can cut costs by £300m a year.

It came as watchdog Ofcom launched a fresh investigation into Royal Mail after it failed to meet delivery targets. The operator has already been fined £5.6m for its woeful performance the year before.

The IDS annual results were published a day later than planned after auditor KPMG asked for more time to sign off the accounts. It came after the board last week said it was ‘minded to recommend’ a £3.5billion takeover bid from Czech billionaire Daniel Kretinsky.

Kretinsky, known as the ‘Czech Sphinx’, has until 5pm on Wednesday to make a formal offer or walk away. A takeover of Royal Mail would probably receive intense scrutiny from Westminster and regulators.

However, Martin Seidenberg, the boss of parent company IDS, said: ‘In the last six months we have set Royal Mail on the right trajectory. We made good progress delivering our modernisation agenda and returned to growth in the second half.

‘We have improved quality, won back customers lost during industrial action, controlled costs and delivered Christmas for our customers.

‘Positive momentum is building although there is hard work to get back to profitability.’ He reiterated calls for regulators to reform the service, saying they ‘need to get on with it’ to allow Royal Mail to turn a profit.

Bosses have been lobbying for changes to the universal service obligation, which means Royal Mail must deliver letters six days a week for a fixed price.

Ofcom yesterday said that Royal Mail delivered just 74.5 per cent of first-class mail within one working day, compared to a target of 93 per cent.

It handed over 92.4 per cent of second-class mail within three working days, missing a threshold of 98.5 per cent.

Royal Mail, which was privatised in 2013, has said it is unable to meet the target, which it has estimated cost the business up to £675m a year.

It has asked ministers and Ofcom to allow it to scrap second-class letter deliveries on Saturdays and to cut the service to every other weekday in a bid to save money.

IDS yesterday said that voluntary redundancies would be fewer than 1,000.

As a group, IDS reported a loss of £28m compared to £71m a year earlier, with its European parcel business GLS making a £320m profit.