The Royal Mail share price, also known as International Distributions Services PLC (LON: IDS), has risen 11.4% this year despite losing about £1 million daily as investors discounted the Royal Mail operations and wrote off the UK business.
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The company also operates the highly profitable GLS Group mail and parcel delivery service headquartered in the Netherlands. Investors wrote off the Royal Mail business in the UK due to the months-long tussle between the company’s management and the workers’ union.
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Now that Royal Mail has signed a deal with the Communication Workers Union (CWU), how much the company had to compromise to secure the deal remains to be seen. The deal details between Royal Mail and the CWU are yet to be made public.
Most analysts have assigned no value to the Royal Mail business, which explains why the company’s share price barely moved during the prolonged disagreement between the company and the communication workers union.
Still, many hope that the deal signed by the CWU will help the company stop bleeding money and maybe even break even. However, the path to profitability for the UK business seems quite uncertain, given the significant changes the company wanted to apply to its operations before it could reach profitability.
Most analysts and investors are waiting for the details of the deal between the CWU and Royal Mail to make realistic assessments of the parcels company’s prospects. Meanwhile, the company continues providing uninterrupted services as the CWU must call off future strikes.
The lack of announcements from Royal Mail since the signing of the CWU deal has left us speculating about the concessions made by either side. We cannot accurately predict the company’s future trajectory until we know the deal's details.
However, we can see GLS International as a critical barometer of how Royal Mail could operate if it were an efficient mail and parcel delivery service. Getting Royal Mail to operate similarly to GLS is arduous, given Royal Mail’s storied history.
Some legacy agreements signed between Royal Mail and the workers union have posed a significant challenge to reforming and modernising the company.
*This is not investment advice.
Royal Mail (LON: IDS) share price.
The Royal Mail (LON: IDS) share price has risen 11.39% since the year began. Are there more gains in store for investors?
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