House of Commons - Public Accounts

Select Committee on Public Accounts Minutes of Evidence

APPENDIX 2

Supplementary memorandum submitted by Consignia

Question 205: Break down of changes in costs between 1999-2000 and 2000-01

ANALYSIS OF INCREASES IN CONSIGNIA COSTS 1999-2000 TO 2000-01


	£m	£m	% increase on 1999-2000 costs

1999-2000 Net Operating Costs (before Exceptional items)	7,141
Pay increases		110	1.5
Inflation on non-staff costs¹		75	1.1
Costs assocaited with growth in mail volumes²		50	0.7
Investment in mails staff efficiency initiatives		108	2.1

Investment in technology infrastructure		41	2.1
Transport costs		53	3.7
Horizon costs		75	3.7
International conveyance (REIMS) increases		137	3.7
Sick absence		22	2.1
External labour		5	2.1
Plant maintenance		31	2.1
Depreciation		18	2.1
Other changes		24	2.1

		798
2000-01 Net Operating Costs (before Exceptional items and Strategic Acquisitions)	7,939
New staff costs from acquisitions		59
Non staff costs of acquisitions		108

		167

Notes: 1 RPI for the financial year 2000-01 was 3.0 per cent. 2 Traffic growth in inland letters was 2.7 per cent in the year.

Questions 278, 287 and 288: What is the differential unit costs between rural and urban services?

Differential Unit Costs between Rural and Urban Mail Delivery Services

The average end to end (ie from initial collection to final delivery) of an item of mail in offices with less than 20 per cent of routes that are defined as rural is 23 pence.

The average end to end cost to deliver an item of mail in office where 80 per cent or more of routes are defined as rural is 48 pence.

The cost of the delivery element alone (the "final mile") is 7 times more expensive in rural areas, at 29 pence, than in urban areas, at 4 pence.

These figures do not incorporate any adjustment for relative fuel consumption on urban/rural deliveries.

These figures are averages, and are derived by using a sampling methodology. The costs of delivery of a letter will depend on the precise posting as well as delivery location.

Questions 375 and 389: Growth in revenue and costs over the last five years?

Growth in Consignia Revenues and Costs over Five Years

	Revenue	Year on Year Revenue Increase	Total Operating Costs	Year on Year Total Operating Costs Increase	Normal Operating Costs (before Exceptional Items)	Year on Year Normal Operating Costs Increase
Years	£m	%	£m	%	£m	%
1996-97	6,370	2.58	5,893	0.58	5,893	1.20
1997-98	6,759	6.11	6,244	5.96	6,244	5.96
1998-99	7,101	5.06	6,703	7.35	6,703	7.35
1999-2000	7,522	5.93	7,797	16.32	7,141	6.53
2000-01	8,119	7.94	8,189	5.03	8,122	13.74

Question 549: Consultation conducted prior to introduction of the "Consignia" name

Consultation Conducted Prior to Introduction of the Consignia Name

Stage 1—Initial Market Research

An initial research programme was conducted to understanding attitudes our existing corporate and customer-facing brands. This involved:

External stakeholders: business customers (all brands), suppliers, Chief Executives of blue chip companies, MPs, union leaders, 8 general public discussion groups (84 interviews in total);

Internal stakeholders reseach: employees in discussion groups and senior management interviews (28 interviews in total)

The findings of this research were that:

— there was widespread confusion between The Post Office Group and individual business brands which was impeding the development of the customer-facing brands;

— the potential in the market was in the full scope of distribution and associated;

— there was a need for a cross business brand for new ventures and partnerships in the future;

— there was an increasing need to differentiate clearly against global competitors; and

— employee involvement was primarily with their own brand (ie Royal Mail, Parcelforce, Post Office Counters).

In addition, there were specific detailed recommendations on overall brand positioning and attributes that were drawn on to develop the new name at a later stage.

Stage 2—International Market Research

There was further research conducted in respect of international markets, through 78 interviews with business customers, partners and postal administrations. The findings of this research were that there was a need for a brand to: suggest universal reach, support concept of distribution, achieve clear differentiation against other national postal administrations, be protectable in international markets.

Stage 3—Qualitative Research into Suitability of the name

The earlier stages of research provided the platform for generating new names which echoed the themes of distribution, universal reach, and trust. A candidate name was researched against a description of the organisation for suitability and associations among:

— omnibus sample of the general public in the UK, and a boosted sub sample of directors and professionals for suitability and associations;

— omnibus samples in France, Spain, Italy, Germany, Sweden.

Stage 4—Further Consultation

Further detailed consultation was carried out with leaders of the main unions, as a result of which:

— the strapline, "the new name for The Post Office Group" was introduced alongside the new identity;

— it was reiterated that the new name would not replace Royal Mail, Parcelforce or post offices as the UK consumer brands, and that the role of Consignia would be as the overall holding company, for relations with the top 50 corporate clients and for potential use internationally.

Consignia

April 2002