May 15, 2020 / 9:21 AM / 12 days ago

Royal Mail CEO Back quits as board promises to spur change

(Reuters) - Royal Mail Chief Executive Rico Back stood down on Friday after two years in charge marked by battles with unions over a proposed 1.8 billion pound ($2.2 billion) restructuring plan for the former UK postal monopoly.

FILE PHOTO: A Royal Mail post box stands on a street corner in Manchester, northern England September 12, 2013. REUTERS/Phil Noble/File Photo

The company said Back, who founded and ran Royal Mail’s German arm GLS for almost three decades before taking over as group chief executive in 2018, had agreed with the board to step down with immediate effect and would leave the firm on Aug. 15.

Non-executive chairman Keith Williams will act as interim executive chair of Royal Mail Group until a permanent CEO is appointed, the company said.

He has been tasked with leading talks with stakeholders about an “accelerated pace of change across the business”, it added.

Back last year promised a 1.8 billion pound programme to transform Royal Mail into a sustainable, profitable operation by 2024, but that turnaround plan has been delayed by labour unrest and uncertainty caused by the coronavirus crisis.

The company has been locked in a dispute with its largest labour union the Communication Workers Union (CWU) over direction, national agreements on working conditions, and workplace culture.

The CWU, which has been discussing industrial action since the end of last year, voted in favour of a strike in March.

Royal Mail shares, which have lost about 30% of their value this year, turned negative to trade down around 1.2% at 160.2 pence after the news of Back’s departure.

BACK TO SQUARE ONE

“(Royal Mail’s) turnaround plan is likely back to square one,” said Credit Suisse analyst Arthur Truslove.

“This raises serious doubts over the company’s ability to revive its fortunes as the shift from letters to parcels accelerates,” he added.

The company said on Friday that its UK letters business saw revenue fall 22 million pounds year-on-year in April while costs rose by 40 million, driven by overtime and agency resource expenses linked to the coronavirus outbreak.

The UK business ran the risk of booking losses even before the coronavirus-induced lockdowns because of labour tensions and sliding letter volumes.

“I look forward to seeing Royal Mail transform into a parcels-led, international delivery company,” Back said on Friday.

Royal Mail has liquidity, including undrawn credit lines, of around 1.8 billion pounds, and said it also has access to the government’s corporate facility if needed.

It said it would provide another update on measures to put the UK business on a sustainable long-term path when it announces full-year results on June 25.

Reporting by Yadarisa Shabong in Bengaluru; Editing by Anil D'Silva, Sherry Jacob-Phillips and Jan Harvey

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