Troubled Royal Mail delivers a £1bn loss as strikes take their toll

Royal Mail slumped to an annual loss of more than £1bn after a miserable year in which it was plagued by strikes.

The delivery company reported a loss of £1.04 billion for the 12 months to March 26 and made a profit of £250 million last year. Sales fell 13 percent to £7.4 billion.

It caused parent company International Distributions Services (IDS) to post a loss of £71m compared to a profit of £758m a year earlier.

Sister company GLS performed lukewarm, with profit slipping 9.5 per cent year-on-year to £296m.

The company reiterated its call for the government to reform Universal Service Obligation (USO) laws that require it to deliver letters six days a week.

IDS chairman Keith Williams said ‘urgent’ changes to the USO were essential to rebuild Royal Mail and boost the company after reports it could save as much as £250m a year if deliveries were extended to five days would be returned.

The grim numbers came after thousands of postal workers went on strike for 18 days last year amid a dispute over pay and planned changes the company insisted were necessary to compete with rivals.

The union action by the Communication Workers Union (CWU), which represents around 115,000 workers, led Royal Mail to warn it was losing more than £1 million a day and could bring in administrators if the situation didn’t improve.

Last month, a deal was finally struck that included a 10 percent pay rise for staff and a two-year profit-sharing plan. CWU members are now voting to approve it.

But chaos took a toll on beleaguered CEO Simon Thompson, who announced last week he would be leaving at the end of October after just two years in the position.

IDS blamed the Royal Mail loss outright on union action, adding that it had incurred a loss of £539m from writing off the value of its UK operations as a result of the strikes.

The company said the problems overshadowed efforts to right-size Royal Mail, which included cutting 10,000 jobs.

IDS said the deal with the CWU would cost it £600m over the next two years, although this would be ‘largely’ covered by cuts elsewhere.

The goal is to return to profit by 2025, when agreed changes to the business begin to take effect. “I said before that we were at a crossroads.

Now that we have a negotiating agreement with CWU which will soon be put to a vote, and thanks to the good progress made on our five-point plan to stabilize Royal Mail, our destination is in sight,” said Williams.

“There is now a clear path to a more competitive and profitable Royal Mail, delivering improved services.”

But investors seemed less convinced than IDS shares fell 6 percent, or 13.3 pence, to 208.9 pence.

Analysts at broker Liberum said there were “doubts” whether the company would be able to offset the cost of its deal with the CWU.

But they added that there was “excessive optimism” about the value of the UK business and that IDS “has yet to devise a convincing strategy” to return Royal Mail to profitability.