Troubled Royal Mail delivers a £1bn loss as months of industrial action take their toll
Royal Mail tumbled to an annual loss of more than £1billion following a miserable year in which it was hammered by strikes.
The delivery firm reported a loss of £1.04billion for the 12 months to March 26 have made a profit of £250million the previous year. Revenues slumped 13 per cent to £7.4billion.
It caused parent company International Distributions Services (IDS) to post a £71million loss, down from a £758million profit a year earlier.
Sister business GLS saw a tepid performance, with profits falling 9.5 per cent year-on-year to £296million.
The company reiterated calls for the Government to reform the Universal Service Obligation (USO) laws that require it to deliver letters six days a week.
Can’t deliver: Royal Mail reported a loss of £1.04bn for the 12 months to March 26 have made a profit of £250m the previous year. Revenues slumped 13% to £7.4bn
IDS chairman Keith Williams said ‘urgent’ changes to the USO were essential to help rebuild Royal Mail and boost the business after reports it could save as much as £250million per year if deliveries were cut to five days.
The grim figures came after thousands of posties walked out on strike for 18 days last year amid a dispute over pay and planned changes that the firm insisted were needed for it to compete with rivals.
The industrial action by the Communication Workers Union (CWU), which represents around 115,000 workers, caused Royal Mail to warn it was losing more than £1million per day and that it could call in administrators if the situation did not improve.
A deal was finally struck last month and included a 10 per cent pay rise for staff and a profit-sharing scheme for two years. CWU members are now set to vote on whether to approve it.
But the chaos claimed beleaguered chief executive Simon Thompson, who last week announced he would leave at the end of October after only two years in the role.
IDS blamed the loss at Royal Mail squarely on industrial action, adding it had suffered a £539million hit by writing down the value of the UK business as a result of the strikes.
The firm said the problems overshadowed attempts to ‘right-size’ Royal Mail, which included slashing 10,000 jobs.
IDS said the deal with the CWU would cost it £600million over the next two years, although this would be ‘broadly covered’ by cuts elsewhere.
It aims to return to profit by 2025 as agreed changes to the business begin to feed through. ‘I said before that we had reached a crossroads.
Now that we have a negotiators agreement with CWU that will shortly go out to ballot, and thanks to the good progress made on our five-point plan to stabilise Royal Mail, our destination is coming into sight,’ Williams said.
‘There is now a clear path towards a more competitive and profitable Royal Mail, delivering improved services.’
But investors seemed less convinced as IDS shares slumped 6 per cent, or 13.3p, to 208.9p.
Analysts at broker Liberum said there were ‘doubts’ about the business being able to offset the cost of its deal with the CWU.
But they added that there was an ‘excessive optimism’ about the value of the UK business and that IDS had ‘yet to set out a convincing strategy’ to return Royal Mail to profitability.
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