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Royal Mail is seeking to reduce its commitment to letter deliveries as an estimated £70m impact from strike action is blamed for plunging its parent firm into the red.

International Distributions Services, which includes its GLS global delivery division, reported pre-tax losses of £127m for the 26 weeks to 25 September.

That compared to profits of £315m a year ago.

Royal Mail, it said, slumped to an underlying operating loss of £219m after recording profits of £235m in the same period in 2021.

It cited weaker parcel volumes and said three days of strikes over the six month period cost the UK business £70m.

The company estimated a further five days of action during October had resulted in additional losses of £30m.

Royal Mail, which is no stranger to strikes amid an often tempestuous relationship with its largest union the CWU, remains locked in a dispute over pay and its modernisation plans, including Sunday and flexible working, affecting 115,000 frontline postal staff.

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The union has threatened further walkouts in the run-up to the core Christmas season.

The strike dates are pencilled-in for 24 and 25 November, which is Black Friday, 30 November and 1 December.

For its part, Royal Mail has warned it could axe up to 10,000 jobs without an agreement.

Just last month, it revealed a consultation on up to 6,000 redundancies.

It has also approached the government about slashing letter deliveries to five days a week – instead of the current six – with its boss Simon Thompson saying he must do “whatever it takes” to turn the business around.

A government spokesperson said there are “no current plans to change the universal service”.

He added: “While we recognise the issues that Royal Mail raise, there would need to be a strong case that showed changes would meet reasonable needs of users of postal services and ensure the financial sustainability of the universal postal service.”

There is a sign of progress in the company’s negotiations with the CWU, which resumed last week.

Royal Mail revealed earlier this week that the talks, which had been scheduled to conclude on Tuesday, had been extended to allow more time for a resolution to be reached.

A spokesperson said then: “Time is tight given the notified strikes starting on 24 November.

“If these strikes go ahead, they will cause more damage to the business and make our improved 9% pay offer over two years less affordable.”

IDS said it still expected a full-year adjusted operating loss for Royal Mail of between £350m-£450m.

It is targeting for Royal Mail to return to adjusted operating profit in the next financial year.

Keith Williams, non-executive chairman of IDS, said: “We are now heading in a clear direction in light of the substantial losses in Royal Mail.

“Whilst our frontline management population under Unite/CMA has agreed both pay and change in the last few months, progress on a deal for frontline employees has been blocked by the actions of CWU.

“Accordingly, we have started to implement the change needed to rightsize Royal Mail which will ensure that it is both better placed to serve our customers’ needs in parcels, as well as letters, bring it back to profitability and provide a sustainable future.

“We believe that this is the best course of action for the long-term survival of Royal Mail even if it results in short-term disruption.”

He added: “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.”

Such a move would affect Royal Mail staff who have retained shares awarded under its 2013 flotation.

IDS shares opened more than 6% down but later recovered much of that ground.

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Woman and three teenagers arrested over M&S, Co-op and Harrods cyber attacks

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Woman and three teenagers arrested over M&S, Co-op and Harrods cyber attacks

Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.

A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.

They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.

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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.

M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.

The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.

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Disruption is expected to continue at the retailer until the end of this month.

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Mickey Carroll in May answered why M&S cyber attack was so bad.

The Co-op and Harrods were also subsequently targeted by hackers.

Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.

He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”

The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.

The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.

The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.

Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.

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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.

“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.

It is estimated that the cyber attack will cost M&S up to £300m this year.

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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.

Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.

Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.

A 19-year-old man was from London and a 20-year-old woman from Staffordshire.

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US-listed Ulta Beauty swoops on high street chain Space NK

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US-listed Ulta Beauty swoops on high street chain Space NK

A New York-listed company with a valuation of more than $21bn is to snap up Space NK, the British high street beauty chain.

Sky News has learnt that Ulta Beauty, which operates close to 1,500 stores, is on the verge of a deal to buy Space NK from existing owner Manzanita Capital.

Ulta Beauty is understood to have registered an acquisition vehicle at Companies House in recent weeks.

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The exact price being paid by Ulta was unclear on Thursday morning, although one source said it was likely to be well in excess of £300m.

Manzanita Capital, a private investment firm, engaged bankers at Raymond James to oversee an auction in April 2024.

The firm has owned Space NK for more than 20 years.

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Manzanita has also owned the French perfume house Diptyque and Susanne Kaufmann, an Austrian luxury skincare brand.

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Founded in 1993 by Nicky Kinnaird, Space NK – which is named after her initials – trades from dozens of stores and employs more than 1,000 people.

It specialises in high-end skincare and cosmetics products.

Manzanita previously explored a sale of Space NK in 2018, hiring Goldman Sachs to handle a strategic review, but opted not to proceed with a deal.

None of Ulta, Manzanita, Space NK and Raymond James could be reached for comment.

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Royal Mail to scrap second-class post on Saturdays and some weekdays

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Royal Mail to scrap second-class post on Saturdays and some weekdays

Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.

From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.

The post will still be delivered within three working days of collection from Monday to Friday.

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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.

Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.

Those delivery targets are now being revised downwards.

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Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.

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The sale of Royal Mail was approved in December

The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.

A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.

It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.

A welcome change?

Unsurprisingly, the company welcomed the announcement.

“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.

“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”

Citizens Advice, however, doubted whether services would improve as a result of the changes.

“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.

“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”

Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.

Changing habits

Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.

According to Ofcom research, people want reliability and affordability more than speedy delivery.

Royal Mail has been loss-making in recent years as revenues fell.

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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.

“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.

Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.

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