(Sharecast News) - International Distributions Services, the holding company of Royal Mail and GLS, saw losses more than double in the first half as lower parcel volumes and a pay settlement with workers dented the bottom line.
The company reported an adjusted loss before tax of £186m for the six months to 24 September, down 132.5% from a loss of £80m the year before.
Operating losses widened to £243m from £157m, with a profit of £150m from the GLS division (£162m previously) more than offset by losses of £319m at Royal Mail (-£219m previously).
IDS said the increased losses were a result of a 2.9% drop in Royal Mail revenue to £3.54bn, with both domestic and international parcel volumes falling 6% and 5%, respectively, along with a pay settlement with the Communication Workers Union (CWU). GLS revenues, however, increased by 5.9% to £2.33bn.
The company said that Royal Mail's quality of service during the half had been impacted by high absence levels, vacancies and "lack of operational grip in some units".
The comments came just three days after Royal Mail was fined £5.6m by Ofcom for missing first and second-class delivery targets. Just 74% of its first-class letters were delivered on time in the last financial year, below the target of 93%.
IDS said it has put aside £61m for the one-off payment of £500 for each one of its 110,000 frontline workers "for hitting local and national quality targets".
"We have a clear plan for improvement longer term, including reinforcing operational management at a regional and local level, and recruiting faster than ever before, reducing reliance on agency workers. A number of changes we secured in the agreement with the CWU, such as new sickness and attendance policies, will also help to underpin quality," said chief executive Martin Seidenberg.
"We're making good progress implementing that agreement, but our change agenda is wider and will take time."
"Urgent" reform needed, CEO says
Seidenberg also called on "urgent" reform needed for the Universal Service Obligation, which states that Royal Mail must deliver six days a week at standard prices anywhere in the UK.
"Looking ahead, we are transforming our business every day, but we can't do it all on our own. We also need the regulator and the Government to do their bit," Seidenberg said.
"It's simply not sustainable to maintain a network built for 20 billion letters when we're now only delivering seven billion. The UK is not immune to the trends that we see across the world. Many other comparable countries have already reformed their Universal Service, and the UK is getting left behind. We welcome the fact that Ofcom will be reviewing options for the Universal Service, but the need for reform is urgent."
