(Alliance News) - International Distributions Services PLC on Thursday reported a fall in Royal Mail revenue in the nine months to December 31, as it cited strike action by the Communication Workers Union for being responsible for over two thirds of Royal Mail adjusted operating loss.
Meanwhile, the Royal Mail parent company said it will need fewer people to voluntarily leave the company by August 2023 than previously anticipated, noting current employee turnover rates. It added that no worker will be forcibly laid off.
It said it is on track for a reduction of 5,000 full time equivalent by March. The company's financial year runs until late March.
The Royal Mail parent company said revenue at the unit was down 13% year on year due to weaker retail trends and 18 strike days during the nine month period. Adjusted operating loss was GBP295 million, of which 68%, GBP200 million, was due to the net cost of the strikes, IDS said.
Total Royal Mail parcel revenue fell by 18% year-on-year, while total letter revenue was down 6.1%.
For Royal Mail in financial 2023, IDS expects an adjusted operating loss "around the mid-point" between GBP350 million and GBP450 million, assuming no further strikes and that the CWU accepts a pay settlement which IDS said was its "final pay offer."
In financial year 2022, Royal Mail posted an adjusted operating profit of GBP758 million.
Further, looking ahead to financial year 2024 starting in April 2023, IDS expects a negative in-year trading cash flow, "given the ongoing industrial dispute", compared to a positive in-year trading cash flow of GBP353 million in financial year 2022.
For financial year 2025, it still targets a return to an adjusted operating profit. The company cautioned that further strikes could impair the carrying value of Royal Mail's cash generating unit, which it reiterated was GBP1.41 billion at September 25.
For parcel delivery service GLS, also known as General Logistics Systems, International Distributions said 9-month volumes fell by 2% from a year ago, with an adjusted operating margin of 7.5%, 100 basis points down from a year earlier.
It maintained financial 2023 guidance for GLS with an annual revenue growth of a high single digit percentage.
IDS expects a financial 2023 adjusted operating profit of EUR380 million to EUR400 million for GLS, revised from a previous anticipation of EUR370 million to EUR410 million.
International Distributions Services shares rose 2.1% to 224.16 pence each on Thursday morning in London.
By Tom Budszus, Alliance News reporter
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International Distributions Services (IDS)