RE: The time is now, the game is over, let the rerate begin10 Jul 2023 17:32
Can IDS’s share price rebound?
There’s no getting away from the fact that it’s been a tough time for IDS, but that doesn’t mean that the future has to be a second-class experience for shareholders.
A deal with the CWU over pay and working conditions was reached in April. Under the deal’s terms, Royal Mail staff will receive a 10% pay rise and a £500 one-off payment. The deal still needs to be ratified by union members, but it’s a positive development considering strike action has not only caused volatility in IDS’s share price, but contributed to hefty losses.
Progress has also been made on IDS’s five-point turnaround strategy. A 10,000 reduction in headcount at the end of March 2023 exceeded a 5,000 target and should deliver £150m in benefits for 2023-24.
IDS said that it expects to see a significant year-on-year improvement in the second half of its 2023-24 fiscal year “due to revenue recovery and efficiency initiatives as well as lapping main impacts of industrial disruption”.
For the 2024-25 period, the group is targeting a return to adjusted operating profit for Royal Mail before voluntary redundancy costs.
According to data from Simply Wall Street, IDS is expected to grow earnings and revenue by 113.6% and 3.6% per annum respectively. Earnings per share is forecast to grow 111%, while return on equity is predicted to be 8.4% in three years.
The hiring of a new CEO and an agreement with the unions should help IDS focus on getting back to profitability. But there’s still a long way to go before it starts delivering for its shareholders.
IDS’ share price has a 245p, 12-month median price target from analysts tracking the stock. Hitting this would see a 10.3% upside on Friday’s close.