Berenberg lowers target price on International Distributions Services

Berenberg said International Distributions Services' interim results, which follows a string of profit warnings and negative headlines, may come as "some relief" to investors as they included no further cuts to guidance.

However, the German bank said that given there was no sign of a resolution between IDS and worker's unions in the UK and that the macro outlook remains "gloomy", the situation for the company formerly known as Royal Mail continues to be "challenging".

"The shares are now in deep-value territory in our view, but a deal with the unions is probably needed for the shares to perform," said the analysts, who stood by their 'buy' rating on the stock.

"Due to earnings uncertainty and volatility, traditional earnings multiples are now of limited use for IDS, in our view. However, despite the negative earnings momentum, the shares seem to have found a floor at around 200.0p, possibly reflecting the backstop valuation of the GLS asset. Given the deteriorating macro environment in Europe, we reduce our estimate of GLS's current fair value to 330.0p."

Reporting by Iain Gilbert at Sharecast.com