(Reuters) - Royal Mail (RMG.L) laid out a restructuring plan that included 2,000 job cuts on Thursday, as management sought to push through change at Britain’s former postal monopoly after a battle with unions drove out the previous CEO.
Announcing a 31% fall in profits, the company said it plans to save 130 million pounds ($161.59 million) in staff costs next year and cut 300 million pounds in capital spending, the first stage of a three-step revival plan.
Royal Mail shares traded 10% lower at 1220 GMT after it scrapped dividend payouts for 2020-2021.
“The uncomfortable truth is that Royal Mail’s abominable performance in recent years is largely because it has failed to adapt to a world where people send fewer letters and more parcels,” eToro analyst Adam Vettese said.
The company’s British operation, which is expected to be loss-making this year, saw letter revenues fall 23% in April and May, while parcel revenue grew 28%.
Executive Chairman Keith Williams told Reuters the coranavirus crisis had brought forward by three-to-four years the need to focus on logistics and parcel deliveries.
He also said the layoffs would mostly affect back-office staff, but would include some frontline managers.
One of the world’s oldest postal companies, Royal Mail said it was in talks with unions, as well as regulators and the government.
“We will be pressing the top management to clarify how sweeping away the very employees managing the transition process is going to produce faster and better company decisions for the benefit of customers,” Unite, which represents more than 6,000 Royal Mail managers said.
Rico Back, who founded and ran the company’s international parcels operation General Logistics Systems before becoming CEO, resigned last month following a year of union resistance to his 1.8 billion pound restructuring plan.
Back’s proposals did not explicitly mention job cuts, but they were implied by increased use of parcel machines. He also sought to cut working hours.
($1 = 0.8045 pounds)
Reporting by Yadarisa Shabong in Bengaluru; editing by Patrick Graham and Barbara Lewis