By Yadarisa Shabong
(Reuters) -International Distributions Services is targeting a return to profit this financial year after its UK business Royal Mail (LON:IDSI) made a 1 billion pound ($1.26 billion) loss last year, partly the result of strikes in a long-running pay dispute.
More than 115,000 postal workers at Royal Mail held a total of 18 days of strikes between September and December last year, demanding higher pay and better working conditions. After months of negotiations, workers union CWU and Royal Mail reached a deal. Staff are yet to vote on that deal.
"The economic climate remains challenging, and Royal Mail faces the task of rebuilding business from the damage caused by industrial action," Chairman Keith Williams said in a statement.
Royal Mail posted an operating loss of 1.04 billion pounds on a reported basis, because of impairment charges related to the accounting value of its UK business.
On an adjusted basis, its operating loss came in at 419 million pounds, better than analysts average expectations of 449 million.
International Distributions Services shares were down 3% early on Thursday.
Royal Mail, which is being investigated by Ofcom for failing to meet delivery targets is expected to return to profit only in its 2024-25 financial year.
Royal Mail's CEO Simon Thompson plans to step down later this year, as the British postal group tries to draw a line under the pay dispute.
Finance chief Mick Jeavons told reporters the UK business lost four percentage points of market share this past year as customers looked elsewhere for delivery services because of the disruptions.
Williams said that after five years of capital investments at Royal Mail UK, the focus would now turn to international logistics business GLS.
A range of strategic initiatives such as faster roll out of parcel lockers is expected to lead to a fall in adjusted operating profit to between 350 to 370 million euros ($407.30 million) at GLS in the 2023-24 financial year.
"We do not think much good news was expected from these results, and think the GLS downbeat guidance is okay - given the macro backdrop," JP Morgan analysts wrote in a note.
The group's bottom line, including adjusted losses at Royal Mail and profits at international operations GLS, came in better than market expectations for the year to March, but revenue was slightly below expectations as demand for parcels and letters dropped.
IDS reported a group adjusted operating loss of 71 million pounds for the year ended March 26, compared with a profit of 758 million pounds a year earlier.
Analysts on average had expected a loss of 114 million pounds, according to a company-compiled consensus.
($1 = 0.7923 pounds)
($1 = 0.9084 euros)