Struggling Royal Mail relegated from FTSE 100

Four years after its privatisation Royal Mail is set to be relegated from the FTSE 100, after its shares closed at 390.05p yesterday (30 August).

Fears that Royal Mail would lose its spot in the FTSE 100 surfaced in July of this year, when the company entered the so-called ‘relegation zone’ following a decline the value of its shares, leading some brokers, including UBS, to add the firm to its ‘sell’ list.

Inclusion in the FTSE 100 is based on the market cap of each company and as a result shares that find themselves out of form risk sliding down the rankings.

This year Royal Mail has seen its share value decline by around 15 per cent in total. The company has suffered poor performance owing to reduced letter volumes, partly as a result of a decline in direct marketing among UK firms due weakening confidence among UK businesses.

-FTSE 100 profit gap at highest level since financial crisis

However, despite such trouble, Royal Mail was still, as of August 30st, trading above its IPO price of 330p.

Joining it in relegation to the FTSE 250 is the troubled doorstop lending service Provident Financial. Last week, the company saw its share price dive by a stunning 68 per cent over the course of a single trading session (22 August), with shares trading at a low of 589.50p.

The fall came after it emerged that the lender would face full-year loses of between £80 million and £120 million. The news prompted the company’s boss, Peter Crook, to step down. The collapse in Provident Financial’ share price particularly stung Neil Woodford’s Woodford Investment Management, which owned 19.9 per cent of the company.

Shares had recovered slightly - reaching 892p by close of trading yesterday - but not by enough to keep Provident Financial from being pushed out of the FTSE 100.

-Are builders as safe as houses for income investors?

Taking their place in the FTSE 100 are NMC Health, an Abu Dhabi-based hospital operator, and property company Berkeley Group, both previously listed on the FTSE 250.

NMC Health has seen rapid growth of late, with its share price soaring by 22 per cent since the last quarterly review. Its earnings are expected to grow by 30 per cent in the next couple of years. For Berkley Group, the promotion marks a return to the FTSE 100. The housebuilder found itself knocked out of the index last June following the UK’s referendum on EU membership.

The change in indices listings for each company will come into effect at the end of trading on 15 September.

Keep up to date with all the latest personal finance news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment