Royal Mail slumps to loss of more than £1bn after year of strikes
Royal Mail has blamed strike action for helping send it slumping to a full-year loss of more than £1 billion.
The group’s owner, International Distributions Services (IDS), revealed Royal Mail swung to an operating loss of £1.04 billion for the year to March 26, against earnings of £250 million the previous year.
On an underlying basis, Royal Mail saw operating losses of £419 million, against profits of £416 million the previous year.
IDS said the losses were largely down to crippling industrial action after it booked a £539 million writedown on the value of Royal Mail due to the impact of strikes and the “current risk backdrop”, while it took a hit of around £200 million from 18 days of strikes.
The group also revealed a cyber attack in January cost it £20 million in lost revenues after it was left unable to send international parcels and consumers and businesses faced lengthy delays.
IDS overall posted a £748 million annual operating loss, against profits of £577 million the previous year, but IDS said it was targeting a return to underlying earnings over 2023-24.
The figures come after Royal Mail last month agreed a deal with the Communication Workers Union (CWU), which would see staff get a 10% salary increase and a £500 one-off payment.
But it faces further turbulence with chief executive Simon Thompson recently announcing he will step down by the end of the year and news earlier this week that Royal Mail is being investigated for failing to meet its delivery targets in the past year.
IDS chairman Keith Williams said: “We apologise to everyone for not delivering a quality of service to the standards that we expect.
“It’s been a difficult year for Royal Mail, in particular for customers and our people and shareholders.”
He added: “We are absolutely committed that we do improve our quality of service and start to deliver to customers the service that they pay for.”
It revealed on Monday that only 73.7% of first class mail was delivered within one working day across the year. The target was 93%.
He said the group is not blaming the CWU for the failures but add that “clearly the strikes didn’t help”.
He said strikes accounted for around eight percentage points of the first class target miss.
But Mr Williams added there were “grounds for optimism”, with management expecting Royal Mail to return to profit in 2024-25 following the deal with the CWU.
This will allow staff to take part in a profit sharing scheme in that year, it added.
He insisted that Royal Mail “does have a future in the group”.
Matt Britzman, an equity analyst at Hargreaves Lansdown, said the Royal Mail group’s results “show the full extent of the damage caused by 18 days of strikes alongside a weaker macro environment”.
“The silver lining is that performance wasn’t quite as bad as analysts had forecast, and an agreement is now in place with the union on pay; the final hurdle is a vote from union members, which should end the lingering threat of further strike action.”
He added: “IDS also owns the international parcel business, GLS, which is holding the group together for now.
“Management has previously hinted that splitting the two businesses is an option – that looks less likely now that Royal Mail has a path back to profitability but not something to rule out.”
CWU general secretary Dave Ward said Royal Mail now faces “the biggest challenges in its 500 year history”, adding: “We want to work with the company to try and turn its fortunes around and obviously protect our members’ jobs and the services that Royal Mail provides to customers.”
He said he believes Royal Mail is responsible for “the biggest corporate failure that this country has seen in decades”, adding that it has created “the most toxic atmosphere in every single workplace”.
“And posties, you know, want to see the company succeed, but the company have got to start taking the pressure off of frontline workers and working jointly with us to put things right,” he said.