International Distributions Services PLC (LSE:IDS) (IDS), the owner of the loss-making Royal Mail business, repeated warnings that the company could be split in two if significant operational changes are not made.
The news came as the FTSE 250-listed company swung sharply into the red at the half-way stage hit by weak parcel volumes, an inability to deliver productivity improvements and impacts from industrial action.
Keith Williams, non-executive chair, commented: "The board reiterates that in the event of the lack of significant operational change in Royal Mail it will look at all options to preserve value for the group including the possibility of separation of the two businesses."
IDS posted an operating loss of £163mln on a reported basis compared to a profit of £311mln this time last year, while on an adjusted basis losses were £57mln against a £404mln profit a year ago.
Revenue fell 3.9% to £5,838mln while net debt soared to £1,472mln from £540mln.
Royal Mail saw a hefty swing in fortunes posting an adjusted operating loss of £219mln compared to a profit of £235mln this time last year while GLS adjusted operating profit of £162 million was down 4.1% due to inflationary pressures.
"The position of Royal Mail has deteriorated due to poor cost performance, the impact of the industrial dispute and an inability to deliver the productivity improvements agreed with CWU under the Pathway to Change agreement," the company said.
The impact of the three days of industrial action in the first half of the year on adjusted operating profit was estimated to be c.£70mln with the further five days of action in October estimated to have cost a another £30mln.
IDS said talks with the CWU continue although the group warned these will cease if further industrial action goes ahead.
Full-year adjusted operating losses at Roya Mail are forecast between £350mln to £450mln with IDS targeting a return to profitability in full-year 2024-25.
GLS guidance of high single-digit revenue growth and adjusted operating profits of €370mln to €410mln was maintained.
Williams said: "The difference between the performances of our two companies could not be more stark.
“GLS has adapted well to inflationary pressures across its geographies.
“However, we have been standing at a crossroads with CWU in the UK for several months. We are now heading in a clear direction in light of the substantial losses in Royal Mail.”
No dividend was paid.