According to Royal Mail’s chairman, Allan Leighton, postmen and women will now get a Share in Success payment of £1,074 amounting to £218 million of the company’s profit. “It’s one of the biggest profit shares with employees in UK corporate history,” he said.

First and Second Class mail, along with all Mailsort and Presstream bulk mail services, and Standard Parcels, hitting or exceeding their target levels since last July. Lost letters almost halved – and 99.92% of the mail arrives safely.

The company posted an increase of 144% in its profit on operations for the year-ending March, with the £537 million result comparing to a £220 million profit the previous year, and a record income of £8.96 billion – up 3.7%.

Record mail volumes averaged 84 million letters a day (22 billion a year) – one million more every day than the previous year.

Parcelforce Worldwide making a £3 million profit on its day-to-day operations during the second half of the year – its first period of profitable operations in more than a decade. General Logistics Services, Royal Mail’s European parcels business, posted a £61 million profit on operations – up 144% on the last year.

Post Office Ltd increased its losses to £110 million and has commenced the difficult task of replacing its traditional revenues by entering the financial services market with the launch last year of six new products.

But Leighton warned that there is still a huge amount to do. “Transforming our operations, cutting our costs and, above all, winning the support of our people for the modernisation plan with its top priority being to improve customer service, has been Royal Mail’s greatest achievement in decades. But competing successfully in an open mail market is going to be even more difficult. We’ve a mountain to climb and we’ve only reached the base camp.”

He added that the greatest challenge now is to bring about a complete culture change in Royal Mail. “We need everyone in the company focused on ensuring that we consistently deliver high quality, value-for-money services that customers need and want. Competition has arrived and customers have a choice – so we need to prove that Royal Mail is the best and our people are key to that.”

He said that the company was also facing other daunting hurdles:

• Royal Mail will have to generate sufficient profit to pay millions of pounds into its pension fund to tackle the £2.5 billion deficit
The 14,609-strong network of Post Office branches made a loss on its operations last year of £110 million. Its rural network of 8,037 branches is fundamentally uneconomic and needs an injection of £3 million a week to survive.
Royal Mail lags behind its major rivals in automated sorting technology, and needs to make a several billion pound investment if it is to compete successfully. However, the 8.6% return on its domestic letters business last year compares with the 16.4% Deutsche Post makes in its home market, and 22.2% made by TNT Post Group.