After a slightly troubled set of quarterly results, Royal Mail will be slipping down from the top table and leaving the FTSE 100. It will be joining the FTSE 250 instead. How is this determined?
Royal Mail joined the FTSE 100 shortly after it was privatised. It’s all about market capitalisation, or the stock market value of the firm. Royal Mail’s shares closed at 390.5p on Wednesday, representing a market capitalisation of £4bn on the day of the review.
If a business has a value that gives it a position of 90th place or above, when compared to others, it’s in the FTSE 100 club. If it falls to the 111th position or below, it will be demoted to the FTSE 250. That’s what has happened. It’s unlikely to have any day-to-day impact on the national postal service.
Nicholas Hyett is an equity analyst at Hargreaves Lansdown and says: “Royal Mail has lost its struggle to maintain a place in the FTSE 100. We’re not sure that’s something you can lay at chief executive Moya Green’s door though, as the group continues to face tough market conditions. Letter volumes have seeped away faster than the group had expected, partly as a result direct marketing drying up as business confidence slumped after the EU referendum, while pricing remains tough in parcels.”
Of course, the possible threat of Royal Mail strikes by the CWU doesn’t help much. And upstarts such as MyHermes (who we wrote about today with a very attractive pricing promotion) offer attractive alternatives. Read it here: eBay negotiate superb myHermes promotional rates.
Royal Mail, and to a certain extent the Post Office, is making moves at modernisation. But are the efforts enough? My personal RM/PO experiences seems typical: the local Crown branch down my way recently shut down and the franchised alternatives are not up to snuff. Only on Wednesdays can I collect a parcel from the local sorting office after half two. And only on Sundays at all in the run up to Christmas. I don’t get bank statements by post any more. But I do know and like my postie who is a gem and goes out of his way to make sure deliveries are left sensibly and safely with neighbours, or in another secure spot in my small street.
In the face of evening and weekend deliveries from the likes of Amazon, and admirable flexibility (and price cuts) from others, it seems clear that the pace of change at the Royal Mail needs to accelerate. And if that can be done with cooperation from the unions, then so much the better.