Royal Mail Plunges to £1 Billion Loss After Fight With Union

(Bloomberg) — Royal Mail reported an operating loss of £1 billion ($1.25 billion) after the beleaguered delivery service endured a long dispute with a trade union. 

International Distributions Services Plc, which owns the UK postal service, said industrial action, a weak online retail market and severance costs from redundancies had hit performance.

Shares in IDS fell more than 5% in early trading but pared losses to trade around 1% lower shortly before 10 a.m. in London.

The company said it has “grounds for optimism” following an agreement with the Communication Workers Union which will be voted on by staff. Still, a spokesperson for the CWU labor group said Royal Mail “faces a very serious financial situation,” which it blamed on “gross mismanagement” of the company.

IDS reported revenue of £12 billion for the year to the end of March, down 5.3% on last year. GLS, its international parcels business, reported an operating profit of £296 million, down nearly 10%.

Thompson

Royal Mail’s Chief Executive Officer Simon Thompson is due to leave the business at the end of October. He said on May 12 that now was the right time to hand over to a new boss following a tumultuous few months during which he was accused of “incompetence” and “cluelessness” by British Members of Parliament.

Keith Williams, the IDS chair, said that Royal Mail “does have a future” inside the company. During a call with journalists he also said GLS was better off inside the group, but added: “We’re preserving our optionality on that one.”

IDS threatened last year to split its business if a deal could not be reached with the union. It said Thursday that it wouldn’t recommend a final dividend for the financial year, given the performance of Royal Mail and increased investment in GLS.

Read More: Royal Mail Under Investigation for Failing to Meet Targets

Thompson was recalled to answer lawmakers’ questions in February after they were left unconvinced by his response to accusations that the company was tracking its workers and prioritizing parcels over letters.

(Updates share price in third paragraph and adds union comment in sixth paragraph.)

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