Now IDS shares have recovered, do I dump Royal Mail?

The last couple of years have been brutal for shareholders of International Distributions Services (LSE: IDS), formerly known as Royal Mail. They’ve also been hard on the group’s management and staff, due to prolonged strike action. Meanwhile, the IDS share price has plummeted.

IDS shares slump

In mid-2021, the IDS share price was riding high. On 7 June 2021, this FTSE 250 stock hit an intra-day high of 613.8p — a level it’s never been near since. By 31 December 2001, the shares had fallen back to close at 506p.

Then the shares had a truly awful year, ending 2022 at 213p. Horribly, the stock lost a whopping 57.9% of its value in a single year. This happened because lengthy industrial action by Royal Mail workers sent the group hurtling from profit to loss.

Revenues, earnings, and cash flow were all hammered by sustained business disruption. As a result, the board cancelled the company’s cash dividends. The last payout was 13.3p a share, paid on 6 September 2022.

We bought at a terrible time

IDS’s dividend for the 2021/22 financial year totalled 40p, which I viewed as an attractive income stream back then. My wife bought IDS shares for our family portfolio in late June 2022 at an all-in price of 273.2p a share.

Our timing could hardly have been worse, as the IDS share price then dropped and kept falling. At its 52-week low, it bottomed out at 173.65p on 14 October 2022 — almost exactly £1 below our buy price.

At that time, I agonised whether to sell this ailing stock and walk away. But as I cannot know the future, I decided to hold on for recovery. The good news is that the shares are almost back to price we paid.

As I write, this stock trades at 269.9p, valuing the business at £2.6bn. Though this is less than half the peak valuation, I welcome this comeback. We are sitting on a paper loss of just 1.2% today. Phew.

But do I sell and walk away?

Share-price collapse and recovery aside, do I think International Distributions Services is a good business today? Based on recent personal experiences, I’d say not.

For example, several of our Christmas 2022 cards went missing during repeated strikes. Then my wife returned a batch of expiring stamps to Royal Mail, which it promptly lost. In July, my mother’s birthday card (sent First Class) arrived after nine days. Last month, the keys to our holiday flat got lost in the post.

Based solely on these personal anecdotes, I’d have already dumped our IDS stock. But the group is more than just Royal Mail. IDS also owns General Logistics Systems (GLS), which operates parcel delivery networks in Europe. And IDS is making big profits.

What’s more, I find it hard to sell stocks that are on the rise. And IDS shares are up 17.3% over six months and 31.9% over the past year (but 43.4% lower over five years).

To answer my question in the title, I won’t sell my IDS stock just yet. After all, it gives me the right to attend the company’s next AGM to complain about Royal Mail’s poor service. And I might just do that!