Royal Mail (IDS) Shares Are Up 13.3% in a Month. What’s Next?

The Royal Mail share price, International Distributions Services PLC (LON: IDS), has risen 13.34% in the past month after workers represented by the Communication Workers Union (CWU) accepted the pay deal offered by the company. However, does this mean that IDS shares will keep rising? Read on to find out.

The IDS share price rally can be directly attributed to signing the pay deal with the CWU. However, the company is still not in the clear, as significant changes are needed to return to profitability after recording a massive loss in the past financial year, as outlined in its earnings results released in May this year. 

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IDS recorded a £748 million group operating loss for the 52 weeks ended 26 March 2023, marking a significant decline from the £577 million profit generated last year. The group’s massive losses were attributed to Royal Mail, which reported a £1.04 billion loss compared to a £250 million profit in the previous year. 

On the other hand, the company’s international logistics business recorded a £296 million profit, marking a decline from 2022’s £327 million profit. The company blamed its poor performance on the industrial action conducted by the CWU, the delivery of fewer COVID-19 test kits and the delay in implementing company-wide cost-cutting measures. 

Royal Mail CEO Simon Thompson is also expected to resign in October this year following the industrial action and his troublesome relationship with the CWU. However, a new CEO may not solve the company’s problems. 

The parcels and mail delivery company’s problems are rooted in its legacy agreements signed with the CWU that give the union power to veto any decisions implemented by the company’s management board. 

Simon Thompson tried to create new working contracts with the CWU, which led to massive industrial action. The outgoing CEO might have scored some crucial concessions from the CWU, but will they be enough to return the company to profitability? This is nightly unlikely. 

The road ahead for Royal Mail is filled with challenges even as the company prepares to welcome yet another CEO. 

Royal Mail (LON: IDS) share price. 

The Royal Mail (LON: IDS) share price is trading up 13.34% in the past month. Will the rally keep going?