Royal Mail owner nudged higher by trading update, but bigger narratives are afoot

Royal Mail owner International Distribution Services (LSE:IDS) shares nudged higher, closing Thursday’s session up 1.8% priced at 342p, after a trading update delivered a strong showing.

First quarter revenue was up just over 8%, totaling £3.3 billion, with the postal company pointing to higher stamp prices, strong demand for parcels and election post.

It comes as the company is on the receiving end of takeover interest from Czech billionaire Daniel Křetínský, who has offered £3.6 billion to buy the company.

The Royal Mail business contributed £2 billion to group revenue, up 10.6%, whilst the GLS parcels business generated £1.3 billion, up 4.8%.

British first-class stamp prices increased in April, by 10p to £1.35, whilst second-class stamps increased to 85p from 75p.

Despite the upbeat quarter, and the looming takeover, chief executive Martin Seidenberg called for the support of the UK’s new Labour government.

"Whilst we are making good progress on our transformation in Royal Mail, we can't do it all on our own and we urgently need to see regulatory reform of the Universal Service.

“Letter volumes have declined from 20 billion at their peak to just 6.7 billion now, making the one-price-goes-anywhere Universal Service unsustainable in its current form.

“Ofcom is due to provide an update on Universal Service reform this summer.

“We urge Ofcom to move quickly to consult on the changes needed to ensure an efficient, financially sustainable Universal Service that protects what customers value the most."