International Distributions Services, the parent company of Royal Mail, has announced that it will make thousands of job cuts following the publication of its financial results for the first half of the 2022/2023 financial year.
Royal Mail recorded an adjusted operating loss of £219m (US$245m) for H1 2022/2023. It said this included around £70m (US$78m) of direct negative impacts from three days of industrial action. This was in contrast to profits of £235m (US$263m) for the previous year.
As a result, International Distributions Services said it would begin the process of “consulting on rightsizing the business in response to the impact of industrial action, delays in delivering agreed productivity improvements and lower parcel volumes”.
It said that short-term cost efficiencies will be achieved through an estimated reduction of around 5,000 full-time equivalent operational roles (FTEs) by March 2023 and around 10,000 by the end of August 2023 (on a rolling 12-month basis). “Based on current estimates, c.5,000-6,000 redundancies may be required by end of August 2023,” it said.
Royal Mail is expected to make a full year adjusted operating loss of around £350m (US$392m), including the “direct, immediate impact of eight days of industrial action which have taken place or been notified to Royal Mail, but excluding any charges for voluntary redundancy costs”, a statement said. “This may increase to around a £450m (US$504m) loss if customers move volume away for longer periods following the initial disruption.”
Regarding further strikes the statement said, “Communication Workers Union (CWU) has threatened, but not yet formally notified Royal Mail, of a further 16 days of strikes in November and December. If these take place, the loss for the full year would increase materially and may necessitate further operational restructuring and headcount reduction.
“The ongoing uncertainty means that the board is unable to give a clear outlook for the full year. Additionally, this situation may lead to an impairment of the carrying value of the Royal Mail business when H1 results are published on 17 November.
“Royal Mail urges CWU to immediately call off planned strike action and embrace our offer of ACAS talks to urgently find a resolution to the current dispute.”
International Distributions Services said that the performance of GLS remains on track to meet full-year expectations of an adjusted operating profit between €370m and €410m (US$360m to US$400m). “The business continues to benefit from its resilient business model based on high-quality services, wide geographical spread, balanced mix of B2B and B2C revenues, and ability to manage costs and pricing,” the statement said.