Royal Mail swings to loss on pay dispute, cuts dividend

Royal Mail owner International Distributions Systems swung to a half-year loss, blaming weak parcel volumes and strikes at the UK postal carrier, and also axed its interim dividend.

Reported pre-tax losses came in at £127m, compared with a profit of £315m a year earlier. The company also said it would stop talks with the Communication Workers Union (CWU) if it went ahead with further strike action.

Group revenue for the six-month period to September 25 fell 3.9% to £5.84bn. The dividend was pulled, with the company saying the situation would be reviewed next May as the board examined the "potential" for a final payout financed by earnings at its parcels business.

It has also started talks with the government about ending Saturday letter deliveries as part of a move to a an early move to a five day week.

Royal Mail has been locked in a long-running dispute with the CWU over pay and operation changes. The union plans to hold more strikes in the run-up to the busy Christmas period after it rejected a new conditional pay offer tied to staff agreeing to flexible working, including Sundays.

The company threatened to fire up to 10,000 workers. On Thursday it said it expected Royal Mail to make a full-year adjusted operating loss of around £350m-£450m, including the direct impact of 12 days of industrial action but excluding any charges for redundancy costs.

Management also warned it could split the business in two " to preserve value for the group”.