Royal Mail cost cuts to rein in 2023 losses

Postal workers across Britain go on strike

By Aby Jose Koilparambil

(Reuters) -Britain's Royal Mail expects its 2023 losses to be around the mid-point of its prior forecast range as the firm took measures to cut costs and mitigate the impact of strikes, its parent company said on Thursday, sending shares up as much as 4.4%.

The 507-year-old Royal Mail, which was privatised in 2013, is in the middle of a crisis, losing millions of pounds due to staff strikes in a long-running row over pay and conditions.

The company said it now expects an adjusted operating loss near the mid-point of its previous forecast range of 350 million-450 million pounds ($433.5 million-$557.4 million) for the fiscal year ending March 31.

"Credit should go to management, that actions taken to mitigate the impact of more recent strikes have limited the financial impact," Hargreaves Lansdown analyst Matt Britzman said in a note.

Shares of the FTSE MidCap firm were trading about 2.3% higher at 224.8 pence as of 1028 GMT, off earlier highs.

Royal Mail, part of International Distributions Services Plc, said its 2023 outlook was hurt by strikes on 18 days in the fiscal year - six more than previously expected - with "tight control of costs and strike contingency measures" reining in some of the losses.

Strikes by British postal workers roiled the key Christmas period after Royal Mail's largest labour union rejected the company's revised offer to increase wages by up to 9% over 18 months, instead of the previously planned two years.

Royal Mail said the number of voluntary job cuts required to achieve its target of a reduction of 10,000 Full Time Equivalent (FTE) roles by August will be significantly lower than the forecast cuts of 5,000-6,000 made in October, partially helped by strong attrition levels.

In a trading update, the company said Royal Mail's revenue fell 12.8% year-on-year in the nine-month period to end-December, while total parcel revenue declined 17.8%. Parcels account for 54% of the firm's total revenue.

In the first nine months of the fiscal year, London-headquartered Royal Mail said the net cost of the strikes was about 200 million pounds. It also expects cash flow to turn negative in 2024.

($1 = 0.8074 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Subhranshu Sahu, Anil D'Silva and Sharon Singleton)