Royal Mail owner International Distributions Services PLC (LSE:IDS) (IDS) has outlined the significant financial impact of the spate of strikes by its workers this year as it outlined plans to cut 10,000 jobs in less than a year.
In a no-holds-barred update on trading, the company said just three days of industrial action had cost the business £70mln as warned the market it expects the Royal Mail delivery arm to make an operating loss of £219mln.
The update was issued as staff walked out for the first of a planned 19 days of industrial action in a stand-off between managers and the Communications Workers Union (CWU) over pay and conditions.
The stock market statement came with a not-so-veiled warning that IDS management could separate the ailing and strike-hit Royal Mail unit from the profitable Global Logistics Services (GLS) operation.
“The board has always maintained that there should be no cross-subsidy in the group and recognises the need to address improvements in Royal Mail's performance quickly,” investors were told. “In the event that significant change within Royal Mail is not achieved, all options remain open to protect the value and prospects of the group, including separation of the two companies.”
Eye-catching, for City analysts at least, was the cash impact of the turmoil as IDS said the outflow from Royal Mail in the first half was £274mln.
As a direct response to the company’s plight IDS said it must ‘right-size’ the current operation.
This, it added, meant it would have to remove 10,000 full-time equivalent roles by August next year, with 5,000-6,000 potential redundancies required to achieve that target.
In the update, the company said its GLS unit was trading in line with expectations and on track to deliver an operating profit of £320mln-£354mln.