An Post will have to cut 2,000 jobs – nearly a quarter of its workforce – over the next four years to secure its future, the Cabinet has been told, despite earlier optimistic forecasts from management.
The warning to members of the Cabinet were given in a confidential briefing to Ministers, just days before An Post announced a €50 million investment in the post office network.
While An Post said about 20 new post offices would be opened, the Cabinet was informed that the company would need “on average 500 job losses per annum over a four-year period”.
The details were set out in a memo from Minister for Communications Denis Naughten for last Tuesday's Cabinet meeting.
The memo was to formally note the annual report and financial statements of An Post for 2017, but included a shareholder overview of the state of the company.
“Substantial progress has been made with the company recording a profit before non-recurring items, pension interest and taxation of €8.4 million compared to a corresponding loss of €12.4 million the previous year,” the memo, seen by The Irish Times, says, before adding: “However, challenges remain.”
‘Considerable test’
These challenges “present a considerable test to the company and will require close monitoring by the company’s board and their shareholder”, Ministers were told.
“While the plan has a number of elements such as growing the parcels business, pricing adjustments and renewing the post office network, the main element involves a redesign of the mails business with an average 500 job losses per annum over a four-year period. A change-management programme of this scale will be challenging and costly to implement.”
The memo says that in late 2017 the board of An Post submitted a strategic plan and future-funding proposals. The company forecast losses of €5 million in 2017, which could rise to €145 million by 2021.
The cost of its restructuring plan is estimated to be €150 million, the majority of which will be taken up by redundancy costs. An Post itself is expected to generate €50 million through “asset disposal”.
At present, An Post employs about 9,000 people and 333 people have left the company since last summer, with a further 306 expected to leave by the end of this year. It is understood that the majority have been voluntary redundancies.
Price cap
Overall, revenue in 2017 was up by €14.8 million – or 1.2 per cent – on 2016. The introduction of legislation one year ago to raise the price cap on postal prices contributed significantly to this. The move led to the price of a normal stamp rising to €1.
“Recognising the scale of the challenges facing An Post, government agreed to introduce legislation to repeal the price cap mechanism,” the memo says. “This avoided a cash crunch in 2017 and enabled An Post to develop and begin implementing a strategic plan to transform the company and target improved profitability through growth, pricing and cost-reduction strategies.”
The Government has given An Post a €30 million long-term, low-interest loan to help it deal with its financial difficulties.
“In 2017 An Post found itself in a very serious financial position recording losses of €12.4 million with the core mails business losing over €30 million. This reflects the fact that An Post has entered into a period of structural decline in activity mainly due to the impact of e-substitution on mails volumes and post office transactions.
“The funding is subject to stringent conditions and key performance indicators. Government agreed it would be necessary, towards the end of 2018, to review An Post’s position and its ability to continue to deliver on the plan as well as its ability to generate the remaining €70 million funding required.”