The IDS share price has moved sideways in the past few days as investors focused on the company’s growth. The stock was trading at 200p on Friday, which was slightly above this month’s low of 174.20p. It has crashed by more than 60% from its highest level this year, giving it a market cap of more than £1.8 billion.
Royal Mail Group changed its name to International Distributions Services this month. This happened as the company put more emphasis on its General Logistics Systems (GLS). GLS is a business that collects, sorts, and delivers parcels internationally, especially in Europe.
IDS is contemplating separating its two businesses in a bid to prevent cross-subsidy. This is a situation where the profitable GLS business subsidises the unprofitable Royal Mail business. However, some analysts are sceptical about whether that separation will happen.
In its trading statement this month, Royal Mail’s parent company said that it moved to an operating loss of over £219 million in the first half of its financial year. This loss was a sharp decline from a £235 million profit it made in the first half of the last financial year. The firm said that it lost £70 million from 3 days of strikes.
IDS is working to shift its business. One way it is achieving through massive layoffs. It expects to reduce its workforce by about 5,000 full time jobs by March 2023. It also hinted that it may need between 5,000 and 6,000 redundancies by end of August next year. This happened as Royal Mail expects to have an adjusted los of about £350 million. The loss will be much higher if its employees continue with their planned strikes. In addition, the management said that:
“There is an increased risk of impairment of the carrying value of the Royal Mail cash generating unit (CGU)3 , which was £1,366 million at 27 March 2022. Any impairment charge would be classified as a non-cash specific item.”
The daily chart shows that the Royal Mail share price has been in a strong bearish trend in the past few months. This decline saw it crash to the year-to-date low of 174.15p, which was the lowest level since 2020. The stock has dropped below all moving averages while oscillators like the Relative Strength Index (RSI) and the Stochastic have formed a bullish divergence pattern.
The outlook for the IDS share price is bearish, with the next key support level to watch being at 150p, which is about 25% below the current level. The bearish view will be invalidated if the stock moves above the resistance at 245p.
This post was last modified on Oct 29, 2022, 20:23 BST 20:23