Key points:
- Royal Mail (IDS) shares plunged 16.7% on operations and financial updates.
- The company is on track to significant losses this year on multiple factors.
- IDS is planning several changes at Royal Mail to rightsize the business.
The Royal Mail PLC (LON: IDS) share price plunged 16.7% after the mail and parcels company released a trading update and a revised full-year financial and operational outlook. The company, which recently rebranded into International Distribution Systems (IDS), noted that its Royal Mail business was on track to incur a full-year loss of £350 million.
The firm highlighted the six days of industrial action and the two additional days announced by the Communication Workers Union (CWU) as crucial contributors to the losses. Furthermore, the losses could balloon to £450 million if some customers move their volume away from Royal Mail for more prolonged periods following future strikes.
Also read: 12 Best Shares To Buy As A Beginner.
International Distribution Systems noted that it lost about £70 million during three days of strikes in H1 2022-2023, with the impact of any further industrial action being extremely costly. The firm also highlighted that some of its losses stemmed from the CWU not meeting the agreed productivity improvements and low parcel volumes.
The company also outlined plans to lower its overall headcount by slashing up to 5,000 full-time equivalent employees by May 2023 while warning that the figure could rise to 10,000 by August 2023. In addition, Royal Mail clarified that some cuts would be to overtime, natural attrition and temporary staff.
Royal Mail continued asking the CWU to come for talks under the Acas framework to agree on a suitable path forward instead of calling for further industrial action that could damage the firm significantly, leading to more job cuts than initially planned.
The parcels and mail company noted that CWU had threatened a further 16 days of industrial action during the peak holiday shopping season and that such a move would cause irreparable damage to the firm. However, CWU is yet to notify the company of the same.
However, the GLS business continues to perform well, given that it was on track to meet its full-year guidance of an adjusted operating profit of €370 – €410 million. The company’s resilient business model has thrived despite the challenging economic environment.
IDS shares had bounced off a long-term support zone at writing. However, any further strike action by the CWU could push the shares lower; hence, I wouldn’t buy them until the CWU issues are resolved.
*This is not investment advice.
Royal Mail (IDS) share price.
The Royal Mail (IDS) share price plunged 16.7% to trade at 174.7p, falling from Thursday’s closing price of 209.7p.
