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(Alliance News) - International Distributions Services PLC, the parent company of Royal Mail Group Ltd and General Logistics Systems BV, reported a return to profit for the first-half of its financial year, despite facing significant cost pressures from rising national insurance contributions.
The group reported a pretax profit of GBP4 million for the 26 weeks to September 29, a turnaround from the GBP194 million loss in the same period last year.
Revenue for the period increased by 8.2% to GBP6.34 billion, up from GBP5.87 billion in the prior year. Royal Mail contributed GBP3.92 billion, an 11% rise from GBP3.54 billion, supported by an 8.9% increase in parcel revenue despite "challenging market conditions". GLS added GBP2.43 billion, up 4.4% from GBP2.33 billion a year earlier.
The London-based postal services provider declared a special dividend of 8 pence per share.
IDS reported an operating loss of GBP26 million for the first-half of the year, from a GBP243 million loss in the same period last year. The figure includes a GBP134 million impairment charge on the carrying value of Royal Mail, driven by the anticipated GBP120 million annual increase in employer National Insurance contributions announced in the Autumn Budget from financial 2026.
The company, which employs approximately 130,000 people in the UK, said the tax increase disproportionately impacts Royal Mail compared to its competitor.
According to PA, when asked whether the changes to national insurance could lead to job cuts, Chief Executive Officer Martin Seidenberg said it was "too early to say" but did not rule it out.
The company emphasised the need for reforms to the universal service obligation, which mandates six-day first-class delivery, as essential for the company's financial sustainability. IDS is awaiting UK regulator Ofcom's decision on potential adjustments to the USO, including a proposal to eliminate Saturday deliveries for second-class letters, expected early next year.
IDS said it remains focused on its strategic transformation despite ongoing challenges and noted that Royal Mail is on track to achieve adjusted operating profit, excluding voluntary redundancy costs, for the full year.
The company added that it is well-prepared for the festive period, with measures in place including 4,000 new vehicles, 16,000 seasonal hires, extended delivery hours, and an expanded network of parcel lockers and drop-off locations.
Chief Executive Officer Martin Seidenberg said: "We are delivering on the changes we can control, but the cost environment is worsening just at the time when we need to invest. As a major employer with around 130,000 permanent employees, the changes to national insurance will disproportionately impact our business relative to competitors. This makes universal service reform even more urgent."
Shares in International Distributions Services were down 0.9% at 346.65 pence in London on Thursday morning.
By Eva Castanedo, Alliance News reporter
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