IDS returns to profit as Royal Mail losses shrink

(Sharecast News) - Postal and courier giant International Distribution Services returned to an adjusted operating profit in the first half, as revenues increased across the group and losses at Royal Mail reduced. The company - which is currently undergoing a takeover by EP Group, the investment vehicle of billionaire Czech businessman Daniel Kretinsky - said that Royal Mail was on track to return to a profit for the full year, though the outlook for parcel services division GLS remained uncertain with the macro environment across Europe still "challenging".

Chief executive Martin Seidenberg also warned that changes to National Insurance announced in last month's budget would be tough to swallow.

"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," he said.

IDS reported an adjusted operating profit of £61m for the six months to 30 September, compared with a loss of £169m the year before, as losses at Royal Mail fell to £67m from £319m, while GLS profits slipped to £128m from £150m.

Meanwhile, the adjusted operating margin improved to +1.0% from -2.9% a year earlier.

Reported revenues rose to £6.34bn from £5.86bn previously, with Royal Mail revenues rising 10.7% to £3.92bn despite a weaker-than-expected parcel performance.

IDS said "considerable change and investment" was still needed to make Royal Mail financially sustainable for the future, including real and urgent need to reform Universal Service, "which currently is hindering our competitiveness".

Meanwhile, GLS revenues were up 4.4% at £2.43bn, though the business continues to be held back by macroeconomic and regulatory pressures, particularly in Germany and Italy.

Regarding the EP Group takeover, IDS said that the recommended offer is likely to become or be declared unconditional in the first quarter of 2025, "subject to required conditions being satisfied or waived".

Earlier this week, it was announced that the deal would be reviewed by a parliamentary committee on whether it poses a risk to national security, given Kretinsky's ties to Russia.