Temple bars Ian lance..R/M View12 Nov 2022 14:10
For those who have not read…
I think a lot of people might not know that there are two businesses. The reason that they changed their name from Royal Mail to International Distribution Services reflects the fact that there are two discrete businesses within the group. The first one is a European delivery business called GLS, which is a very, very good business. Made £350m of operating profits last year. As we say there, if you put that on 12 times, that on its own, would probably be worth about £4bn. Market-cap of the entire group today £2bn. So the market is valuing the UK business at -£2bn at the moment. Probably worth adding that the UK business has excess properties. So properties that they could sell off for about £1.5bn, so £1.50 a share. So, you could add that to the £4bn for the GLS business.
In terms of the problems with the UK business. The UK business needs to modernise. The UK business, obviously, has been historically very focused on letters. Letters are going into decline. They need to improve productivity and focus more on parcel delivery. That’s caused the industrial relations issues at the moment. If the management can get that productivity improvement through, that UK business, we reckon, could make £500m operating profits on its own. So, we think there’s enormous potential in the UK business as well.
I think it’s probably that, that Mr Krachinski is looking at. He can see, as well as we can, that there are lots of very valuable assets within this business and at the moment, the stock market is focusing on the near-term earnings movements and not looking at the long-term value.
It’s worth saying that we own about 10% of the business. Daniel Krachinski is going up to 25%, I think. We have spoken to Vesa, which is the family office of Mr Krachinski. So, we both know this business very, very well. It’s possible that he’ll make an offer for it at some stage. If he does make an offer for it, it’s going to be significantly north of today’s share price.
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