This morning brought gruesome news for long-suffering owners of International Distributions Services (LSE: IDS) shares. The company — formerly known as Royal Mail — changed its name to IDS only last month. But ditching this famed brand hasn’t helped the group’s problems one bit.
IDS shares plunge in 2022
At its 52-week high on 5 January, the International Distributions Services share price peaked at 531.4p. Sadly, it’s been brutally downhill since then, as my following table shows:
| One day | 1.5% |
| Five days | 1.0% |
| One month | 24.3% |
| Six months | -29.2% |
| 2022 YTD | -52.0% |
| One year | -44.4% |
| Five years | -38.4% |
Although IDS shares have rebounded by almost a quarter over the past month, they’ve lost more than half of their value this calendar year. What’s more, they’ve tumbled by almost two-fifths in the last half-decade. However, these figures exclude cash dividends, which will boost returns by a few percentage points a year.
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Thus, for former Royal Mail shareholders who bought in pretty much anytime before last month, IDS shares have largely been a disaster. For the record, my wife bought this FTSE 250 stock in late June and we’re currently nursing a paper loss. Bah!
The half-year results were simply terrible
As I write (Thursday lunchtime), IDS shares hover around 243.4p, up 3.6p today. To be honest, I’m surprised that they held up so well, given the horrible half-year results that the group released this morning. Here’s a flavour of how bad these were (for the 26 weeks ending 25 September):
* Revenue declined by 3.9%, from £6.07bn to £5.84bn
* Pre-tax profit collapsed from £311m to a loss of £163m
* Earnings per share reversed from 27p to a loss of 9p
* Net debt almost tripled from £540m to £1.47bn
Frankly, these are some of the worst corporate results I’ve seen this year. But GLS (the international delivery arm of IDS) is doing fine. It generated a half-year adjusted operating profit of £162m, down just 4.1% year on year.
Royal Mail strikes are crippling IDS
For IDS, its current problems stem from ongoing industrial disputes with Royal Mail workers. A prolonged series of strikes has sent Royal Mail’s adjusted operating profit crashing from £235m to a loss of £219m in the latest half year.
In response to this ongoing dispute, the group changed its name last month. What’s more, IDS directors have threatened to split the business in two: the profitable GLS arm and loss-making Royal Mail. But while both sides — employer and union members — rattle their sabres and refuse to give ground, their business suffers.
What comes next?
Even worse for IDS shareholders, the group has withdrawn its interim dividend. The company will “look at the potential to pay a final dividend…from earnings in GLS” — which doesn’t sound optimistic to me. Indeed, I now expect no cash payouts from it over the next 12 months.
What next for the business and its struggling shares? In these highly polarised and politicised times, we sometimes forget that compromise often gets results. If IDS and its employees can find some middle ground to end industrial action, then the group could rapidly return to profit. Otherwise, the two sides face mutually assured destruction, with only losers and no winners. Whatever, we’ll keep our IDS shares for now but won’t buy more.
