The IDS share price came under pressure as the Royal Mail strike continued. The stock was trading at 205p on Thursday, bringing the year-to-date losses to about 60%. This is a remarkable downfall for a company that made a big acquisition and gave a large special dividend in 2021. The shares have tumbled by more than 66% from its highest point in 2021.
Royal Mail Group made a big change recently when it decided to change its name to International Distribution Services (IDS). This change happened as a reflection that Royal Mail’s business was changing from just sending letters to other delivery products.
Indeed, the most recent results showed that Royal Mail Group’s total revenue was more than 2.99 billion in the three months to June. A closer look at the results showed that GLS, its international delivery business contributed 1.1 billion pounds, which was a 7.8% revenue growth rate. Its other businesses like parcels and letters had a strong loss of momentum.
Therefore, the change of name was seen as a first step towards separating the two main businesses. One business will focus on Royal Mail products while the other one will be focused on GLS. In the most recent results, the company’s CEO said that:
“ In the event that significant change within Royal Mail is not achieved, the Board will consider all options to protect the value and prospects of the Group, including separation of the two companies.”
Royal Mail share price has struggled because of the planned strikes by CWU. The workers will go on strike on October 13, 20, and 25. These disruptions will lead to loss of revenue for the company, meaning that it could push it to a big loss this year.
So, is the International Distribution Services share price a buy or sell? In my view, I see potential value in separating Royal Mail with GLS. Such a move will create value for the company since Royal Mail seems to be dragging it down. Until then, there is a likelihood that the stock will continue falling in the near term.
On the daily chart, we see that the IDS share price has been in a strong downward trend for months. This decline saw it crash to a low of 176.7p last week. At the time of writing, the stock was trading at 205p, which was below all moving averages while the MACD has made a bullish crossover pattern.
Still, with the strikes continuing, and with the UK economy unraveling, there is a likelihood that the shares will continue falling. The next key support to watch will be at 176p. A move above 220p will invalidate the bearish view.
This post was last modified on Oct 13, 2022, 08:57 BST 08:57