Royal Mail chief who received £6m 'golden hello' suddenly quits after two years in role
Less than two years after receiving a £6m "golden hello", the boss steps down as the firm plots "an accelerated pace of change".
Friday 15 May 2020 12:02, UK
Royal Mail's chief executive Rico Back has quit with immediate effect as the group reported a £22m slump in revenue with a sharp drop in letters being sent.
His sudden departure after less than two years in the top job comes as the company hinted at a major shake-up with "an accelerated pace of change across the business".
He will be replaced by a duo of Keith Williams, who becomes interim executive chairman, and Stuart Simpson, who will be the chief executive until a permanent replacement can be found.
Mr Back started his career three decades ago in Royal Mail's parcels operation, General Logistics Systems (GLS).
On becoming the group's boss back in 2018, he controversially received a £6m "golden hello" and stirred tensions further when he said he planned to run the business from Switzerland.
He had promised a £1.8bn turnaround plan last year to transform Royal Mail into a sustainable, profitable operation by 2024, but this had run into delays in the face of staff unrest and the uncertainty caused by the coronavirus crisis.
The company has been locked in a dispute with the Communication Workers Union (CWU), which voted in favour of a strike in March.
In a trading update, Royal Mail said revenue dropped overall by £22m in April when compared with the same month last year.
The number of letters being sent dived by a third - some 308 million - hitting income.
This was partly offset by a 31% hike in the number of parcels being handled, against the backdrop of the coronavirus crisis.
At the same time, costs rose by £40m driven by expenses linked to the COVID-19 outbreak, including overtime and agency staff due to high levels of sickness, the introduction of social distancing measures and personal protective equipment.
In a statement, Mr Back said: "It has been a privilege to lead a company that is so much a part of UK life at this crucial time in its history.
"I am proud of what I, together with our dedicated and loyal team, helped to build in Royal Mail and GLS.
"I look forward to seeing Royal Mail transform into a parcels-led, international delivery company that continues to touch the lives of millions across the world."
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Mr Williams said: "Rico Back has made a significant contribution to the evolution of our business over his 20 years with us, particularly in building our international parcels business and developing our group strategy, which recognised the urgent need for change to create a sustainable business for the future.
"On behalf of the board, I would like to extend my thanks to Rico and wish him well in the future."
A CWU spokesperson said "The change of chief executive by Royal Mail Group must now bring about a total change in strategy and direction.
"Postal workers have been outstanding during this pandemic and are ready to embrace innovation, new products and building on their role in every community in the UK.
"It is absolutely critical that the new chief executive wants to work with the CWU to overcome the challenges we all face and deliver the postal service the public and our members deserve."
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "The coronavirus crisis has accelerated many existing trends, and unfortunately for Royal Mail one of those is the decline in addressed letters.
"That long, slow decline is no longer slow by anyone's measure, and the volumes have probably been lost for good - companies and individuals that have discovered digital alternatives to increasingly expensive stamped envelopes will not go back.
"Of course the immediate headwinds aren't really Royal Mail's fault, but the group went into the current crisis in a less than robust state.
"The group has been slow to modernise its operations and has repeatedly run into resistance from staff, manifesting in higher costs and increased disruption to the service."
He added: "The group's saving grace is a pretty healthy balance sheet and significant levels of liquidity.
"However, we suspect Royal Mail is burning through cash at a fair rate of knots in the current climate and that places a time limit on how long Keith Williams has to turn the ship around."