International Distribution Services, formerly known as Royal Mail, released a fairly disappointing set of half year results this morning and shares in the company dropped in very early trade on Thursday.
An underlying operating loss of £57m due to low parcel delivery volumes and strike action saw IDS shares trade down as low as 223p. International Distribution Services profit was £404m in the same period last year.
Royal Mails losses for the year are expected to total around £400m.
“A new name hasn’t made old problems go away as IDS, the owner of Royal Mail, delivers news today of a challenging first half, to say the least. Battles with Unions over pay are never good for business, and when that leads to strike action it has a material impact on performance,” said Matt Britzman, Equity Analyst at Hargreaves Lansdown.
However, the weakness is shares didn’t last long. As the session progressed, IDS shares staged a rally to recover into positive territory as investors digested the implications of management’s ‘Five Point Plan’. The plan involves possible redundancies, reduction in overtime, new resourcing models and increasing efficiencies.
The measures would go a long way improve profitability at IDS and investors have been pleased to hear the plan is already underway.
“Royal Mail’s now expected to lose in the region of £400m this year. A fresh pay offer has been delivered to the Union, which would represent a 9% pay rise for workers over two years. But management aren’t waiting for an answer and have begun taking action to address the poor performance,” Britzman said.