Royal Mail to cut 2,000 jobs in fight to reform as profits shrink

Royal Mail 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.

As it reported a 31 percent 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 fell 6.6 percent in morning trade 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 make significant losses this year, saw letter revenues fall 23 percent in April and May, while parcel revenue grew 28 percent.

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 and away from letters.

He also said most of the planned layoffs were back-office staff but would include some frontline workers.

One of the world's oldest postal companies, Royal Mail said it was in talks with unions, as well as with regulators and the government.

Rico Back, who founded and ran the Royal Mail's international parcels operation General Logistics Systems (GLS) 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.

Royal Mail said GLS Chief Executive Officer James Rietkerk had stepped down with immediate effect without giving the reasons for his departure.