Wed, 28th Nov 2018
Royal Mail Plc could be in danger of being relegated from the FTSE 100 if its profits continue to slip. The postal company has seen profits plunge thanks to a decline in the number of letters being sent. After the company published its latest report, shares initially responded positively as the company promised cost cutting measures, but later in the day the shares had declined, and by the close of trading on Friday they were close to the £3 mark.
Royal Mail reported pre-tax profits of just £33 million for the last six months, down from £77 million during the same time period of the previous year. The number of letters being posted in Britain is down by seven percent, while parcel sales have increased by six percent. The strength of the parcels business is good news for the company, and may have bought it some time to work on cost-cutting plans, but investors remain concerned because Royal Mail is facing competition from Amazon and Deutsche Post. If the company wants to regain its position at the front of the market then it will have a lot of work to do over the coming months.
The company was privatized back in 2013, and while it is listed in the FTSE 100 at the moment it only narrowly escaped relegation during the June market reshuffle. If its share price does not recover over the next couple of weeks then it is likely that it will face relegation to the FTSE 250 during the December reshuffle.