Royal Mail reported a loss of £1 billion, with bosses blaming striking workers and a failure to increase productivity for its poor performance during a year in which it cut 10,000 jobs.
The poor performance of International Distribution Services (IDS), which owns Royal Mail, led to it reporting a total loss of £748m for the year to March 26. That compares to a profit of 577 million pounds a year earlier.
IDS said Royal Mail had turned into a loss “due to an industrial strike” by unionized staff over wages and working conditions that ultimately led to the resignation of its chief executive, Simon Thompson, last week, as well as an “inability to deliver the year’s benefits from planned productivity improvements”. “.
While the company finally reached an agreement the union agreed to put on its membership last month, the Postal Service has also suffered a drop in demand for shipments of Covid test kits, as well as a downturn in online shopping, which has led to a boom in package deliveries during the pandemic.
Together, these problems overshadowed what IDS described as successful efforts to cut costs and “rights” the business in the second half of the fiscal year.
Those efforts included cutting 10,000 jobs at Royal Mail, a target it reached months ahead of schedule that would save the company around £150m over the next financial year. “There are more revisions coming this year,” IDS said.
The company said its deal with the Telecommunications Workers’ Union, which will be voted on by members at the end of the month, opened the door to “further operational efficiencies” that would make Royal Mail more competitive.
Royal Mail, which was privatized in 2013, has spent nearly a decade trying to rejuvenate the business amid a slump in mailings and an increase in online shopping that has increased competition for parcel deliveries.
While the wage deal – reached after workers staged an 18-day strike – would cost around £600m, IDS said it would be largely covered by cost-cutting over the next two years.
IDS Chairman Keith Williams said there was now “a clear path towards a more competitive and profitable Royal Mail, offering improved services to our customers while further reducing our environmental impact”.
But Williams acknowledged the quality of its services had slipped, just days after the telecoms regulator launched an investigation in which it emerged more than a quarter of Royal Mail’s first-class mail had not been delivered on time.
Service quality has been significantly affected by industrial strikes and high levels of absenteeism. I regret that we have not provided the highest levels of service our customers have come to expect. He added that improving the quality of service is our top priority.
“Our plan is to return to group profitability this year but also seize the opportunity for both companies to generate continued profits thereafter, to the benefit of each of our employees, customers and shareholders,” said Williams.
Thompson, who took office in early 2021, will leave in October after a painful tenure that included being accused of “incompetence or ignorance by MPs.”
IDS stock was the biggest loser in the FTSE 250 in early trade, down 3.2%.