The owner of Royal Mail rose for a second day amid hopes incoming proposals from the UK’s postal watchdog could help alleviate pressure on the struggling business.
Shares in International Distributions Services (IDS), which owns Royal Mail and overseas post firm GLS, gained 3 per cent, or 7.6p, to 261.9p. That followed a 3.4 per cent rise in the previous session.
The mini-rally came ahead of the publication of an Ofcom review into options to reform the group’s legal obligations for delivering letters, which is widely expected to appear today.
Among the options looked into by Ofcom include the scrapping of Saturday letter deliveries which Royal Mail has repeatedly lobbied for – but would be highly controversial.
The company argues the system is not financially viable due to a sharp decline in the number of posted letters over the last decade.
Ofcom review: Shares in International Distributions Services, which owns Royal Mail and overseas post firm GLS, gained 3%. That followed a 3.4% rise in the previous session
But Prime Minister Rishi Sunak this week said he would ‘not countenance’ allowing letter deliveries to be reduced to five days a week from six.
With the row rumbling on, some industry analysts warn scrapping the Saturday post would be the least bad option to avoid Royal Mail requiring taxpayer money to prop up its business.
‘At some point, something’s got to give,’ said Gerald Khoo, analyst at broker Liberum.
Other options that could be in the Ofcom document include relaxing delivery targets for first and second-class post as well as implementing alternate delivery days and allowing the firm to raise stamp prices.
IDS shares have crept steadily higher this week as investors grow more optimistic that the regulator will propose options to reform the postal service in Royal Mail’s favour.
But the stock remains well below the 330p a share float price in 2013 and the peak over 600p in 2018. Shares were still trading hands for over 580p in mid-2021.
The FTSE 100 inched down 0.03 per cent, or 1.98 points, to 7485.73 and the FTSE 250 lost 0.44 per cent, or 83.02 points, to 18,992.62.
Stock Watch – H&T
Shares in H&T tumbled even though it expects to make record profits.
The pawnbroker said it was on course to report its highest-ever profit following a ‘robust’ final three months of 2023.
But trading worsened in December as customers took a ‘cautious’ approach to spending and opted to buy cheaper items.
As a result, H&T expects its profits for 2023 to be around 10 per cent below the £29.9million analysts had forecast. Shares plunged 12.1 per cent, or 48p, to 350p.
Asia-focused stocks rose amid reports that China could inject a major stimulus to help prop up its fragile equity market.
Anglo American rose 2.2 per cent, or 38.4p, to 1789.6p, Standard Chartered added 4.3 per cent, or 25.2p, to 605.8p and Prudential was up 2.5 per cent, or 19.6p, or 816p.
B&M is on the hunt for a chairman after Peter Bamford, who has been in the job since March 2018, said he plans to step down sometime this year.
Shares in the discount retailer slipped 0.6 per cent, or 3p, to 521p.
A downgrade from HSBC sent catering giant Compass Group into the red. The broker said it expects French food service company Sodexo to outperform the firm, which appears less bullish over improving its margins.
On Monday, Compass Group agreed to buy Reading-based rival CH&Co for £475million. Shares fell 2.6 per cent, or 56p, to 2109p.
Boohoo made gains after it announced its finance chief Shaun McCabe had stepped down with immediate effect.
He will be replaced at the fast fashion chain by former Zoopla financial officer Stephen Morana next month. Shares rose 6.8 per cent, or 2.3p, to 36.28p.
Heading in the other direction was Diversified Energy after it was attacked by a short-seller flagging concerns over its finances.
Activist investor Snowcap Research claimed the US natural gas producer could be forced to cut its dividend due to a huge debt bill.
Last month shares hit a record low after four US politicians wrote a letter warning the firm’s strategy risked undermining ‘efforts to fight climate change’. Shares slumped 12.2 per cent, or 117p, to 845p.
