Royal Mail made £1 billion loss after damaging strikes: ‘We failed...and we apologise’
Royal Mail made a loss of £1 billion in the year to the end of March 2023 after the postal service was hit by a wave of strikes and slump in demand for parcel deliveries.
Royal Mail owner International Distribution Services said the loss was “due to industrial action, inability to deliver the in-year benefits of planned productivity improvements, lower test kit volumes and a weaker online retail market.”
The firm said it had completed a 10,000 reduction in its staff numbers by the end of March, and last month reached a deal with the Communication Workers Union that would see a 10% pay rise and profit share scheme for remaining staff.
Royal Mail bosses said: “We apologise to everyone for not delivering a quality of service to the standard we expect. We failed on some aspects last year and we apologise for that. It’s obviously been a difficult year for Royal Mail, and our customers and shareholders.”
IDS chair Keith Williams said: “I said before that we had reached a crossroads at Royal Mail. 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.”
IDS made an overall operating loss of £748 million for the year, after the Royal Mail loss was offset by a £296 million profit in its parcel business, GLS.
The £1 billion loss by Royal Mail compares to a £250 million profit it made in the previous year. The bulk of the loss relates to an impairment charge of £539 million for the value of Royal Mail which it said was ‘given the current risk backdrop and ongoing industrial dispute.’
It follows an 18-day spate of strikes by postal workers, including during the crucial Christmas trading season, which the firm said caused shoppers to shop in-person rather than online and retailers to favour other parcel carriers instead of Royal Mail.
Demand for ‘tracked returns’ parcels fell 21% year-on-year, while total parcel revenue was down 18.5% to £3.9 billion. Letter revenue fell 5.7% to £3.5 billion.
The firm also suffered a cyber-attack which is believed to have cost it at least £20 million to deal with, and earlier this week became the subject of an Ofcom investigation into failing to meet its annual delivery targets. Last week, CEO Simon Thompson said he would quit his role and leave the company in October.
“If it does not provide a satisfactory explanation and we determine that Royal Mail has failed to comply with its obligations, we may consider whether to impose a financial penalty,” Ofcom said.
IDS shares fell 2.3% to 217p.
Matt Britzman, Equity Analyst at Hargreaves Lansdown, said: “It’s been difficult to find too much to get excited about at IDS recently, as the owner of Royal Mail has felt the hefty impact of union battles over the past year or so. Results show the full extent of the damage caused by 18 days of strikes alongside a weaker macro environment, with revenue at Royal Mail down over £1bn.
“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. That means IDS can get back to concentrating on hiring a new CEO”.