Royal Mail fall exposes FTSE relegation vulnerability

[TrueBlueTerrier]

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Royal Mail slipped into the FTSE 100 relegation zone on Friday amid fears that a hoped-for surge in parcel volumes cannot be delivered.

UBS added Royal Mail to its “sell” list. A lack of automation and slow progress with restructuring makes Royal Mail relatively expensive for heavy parcels, which is likely to erode its share of a deteriorating UK ecommerce market and — because costs are largely fixed — any revenue shortfall is likely to hit profits, said the broker.

Investors are wrong to assume parcels revenue growth will continue to cancel out gradual declines for letters, said UBS.

“We believe both those are overly optimistic with larger letter volume declines and weaker parcel market due to the economic outlook,” it said. “In order to stabilise profits, we believe parcel revenue would have to grow by 5 per cent; something that appears highly unlikely in the current environment.”

Royal Mail ended 3.3 per cent lower at 410.3p. Based on Friday’s closing prices, the stock could be a candidate for expulsion from the blue-chips at the next FTSE index review, scheduled for August.

Weaker sterling underpinned the wider market as the FTSE 100 inched 0.2 per cent higher, up 13.64 points, to 7,350.92.

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[wacko74]

Is there ANYONE who can be happy with the way Moya and the senior management are running this company?

It takes a truly advanced level of incompetence and ineptitude to piss off both the employees AND the shareholders of a company!!

[datasaint]

The USO will come under threat by the 2021 review. It'll be argued the USO has to be cut to keep the letters business viable.

Worrying times though, RM really need to go all out and throw everything at parcels at this point, bigger/more automation, deliveries on par with the likes of DPD. We have vans sat in yards doing nothing from late afternoon/evening, get people out doing evening parcels.

[Ringer21]

So should I keep or sell my shares?

[aiden01]

So should I keep or sell my shares?

Only you can decide

[SpacePhoenix]

The USO will come under threat by the 2021 review. It'll be argued the USO has to be cut to keep the letters business viable.

Worrying times though, RM really need to go all out and throw everything at parcels at this point, bigger/more automation, deliveries on par with the likes of DPD. We have vans sat in yards doing nothing from late afternoon/evening, get people out doing evening parcels.

For more parcel automation, probably just about every MC would need to be replaced