By Kyle Morris
Royal Mail PLC said Wednesday that it will consider the separation of its namesake Royal Mail business and GLS if it can't achieve significant operational change at Royal Mail in the U.K.
The British letter-and-parcel courier said it will rename the holding company to International Distributions Services PLC to reflect the group structure of two separate companies, being Royal Mail and GLS. The intention is to have clearer financial separation with no cross subsidy, it said, reflecting the increased importance of GLS.
The renaming of the holding company won't have any impact on the brands Royal Mail and GLS, it said.
As parcel growth during the pandemic is now dissipating, the difference in performance between the businesses is re-emerging. As GLS continues to make progress, results at Royal Mail have worsened significantly, it said.
GLS has generated more than two thirds of group operating profit over the last three years and improvements at Royal Mail need to be addressed to boost performance.
"Whilst GLS delivered a solid performance in the first quarter, the performance of Royal Mail was disappointing with an adjusted operating loss of 92 million pounds ($110.4 million) resulting from of a decline in parcel volumes post the pandemic and a lack of progress in delivering efficiencies," Chairman Keith Williams said. "We need to act now in moving to that future in the interests of all stakeholders, employing those advantages to the maximum."
Royal Mail PLC also announced results for its fiscal first-quarter, with group revenue down 11.5% on year. Royal Mail parcel volume was down 15% and total letter revenue was down 6.7% for the quarter ended June 30. The company also said progress on Pathway to Change cost saving program has stalled, with a GBP100 million risk to GBP350 million of benefits identified for fiscal 2023.
Furthermore, the company said it was aware of the strike ballot by the CWU on Tuesday, and it remains committed to reaching an agreement with the union. Performance in the first quarter highlights the need to act promptly to create a more agile and sustainable relationship with the CWU, it said.
Shares in Royal Mail PLC at 1033 GMT were down 6.50 pence, or 2.3%, at 278.50 pence.
Write to Kyle Morris at kyle.morris@dowjones.com
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