Royal Mail PLC (LON:RMG) is to axe 2,000 jobs or more than 20% of its managerial staff as part of a shake-up to save the letters and parcels group £130mln.
The postal service, which employs 9,700 managers out of 140,000 staff in total, said the largest reductions will be in senior executive roles and non-operational functions.
Keith Williams, interim executive chair, said the business had not adapted quickly enough to a marketplace of more parcels and fewer letters.
The cuts will cost around £150mln and Williams said the FTSE 250-listed group is seeking to open talks with the CWU union on the “need for change, future pay, and to address the issues raised in the ongoing industrial dispute”.
In addition to the job cuts, Royal Mail said it is also reducing capital spending by £300mln over the next two years to address the immediate impact of COVID-19.
Williams took over in May after the shock departure of chief executive Rico Back, who had been in the post for less than two years.
Back’s departure sparked speculation about the future of overseas parcels arm GLS, but Williams said the aim is to capitalise on growth opportunities in parcels.
“[At GLS] we will focus investment on growing markets, and improve cashflow,” he said.
The reorganisation accompanied results for the year to end-March, which showed profits before tax fell 25% to £180mln while revenues of £10.8bn were up from £10.6bn the year before.
Since April, however, letter volumes have slumped by 23mln with advertising mail down by 63%.
Parcel volume and revenues are up by 37% and 28% respectively, but overall Royal Mail’s operating profit in the first two months of the new financial year has dropped by £108mln.
Going forward, Royal Mail is expected to be materially loss-making in 2020-21, the company said in the statement, while profits at GLS might also be lower.
No dividend will be paid in the current year, but the aim is to restart a payment in 2021-22.