IDS rallies as Royal Mail and CWU reach agreement on pay

(Sharecast News) - International Distribution Services rallied on Monday after Royal Mail and the Communication Workers Union said over the weekend that they had reached an agreement on pay and employment terms.

The CWU said in a statement on Saturday that after nearly a year of talks, the two sides had reached a negotiators' agreement in principle.

"The proposed agreement will now be considered by the executive of the union before being voted on by the union's membership," the CWU said.

"An announcement on the detailed content of the proposed agreement will be made when it is ratified by the union's executive committee. It is expected this will take place next week."

At 0920 BST, shares in Royal Mail parent IDS were up 5.2% at 243.60p.

Victoria Scholar, head of investment at Interactive Investor, said: "The agreement marks an end to the period of heightened uncertainty for the group which has been grappling with industrial action including a series of nationwide strikes involving over 110,000 postal staff last year.

"Shareholders have had a difficult time with this stock which has plunged from a high of around 591.00p in June 2021 to a low below 200.00p late last year. But the bulls have been gathering momentum with shares rebounding by around 25% in the past six months to just shy of 250.00p.

"If the agreement marks an end to the recent strike action, this will be a major win for the company as it looks to shift its workers dispute to the rear-view mirror. Plus, there are hopes that the UK's inflationary pressures will ease this year, also supporting real terms wage growth for workers and helping to alleviate the sense of discontent over pay."

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The walk-outs have put the group into a precarious position in terms of liquidity. It's delayed the group's attempt to re-size operations in the face of falling letter and parcel volumes and has meant the group will only have limited breathing room when it comes to its loan agreements.

"The breakthrough will be a huge relief, but still needs to pass hurdles of approval by the union's executives and the members. Even once the heavy bag of industrial strife has been offloaded, the group faces a long road back to profitability."