Royal Mail among stocks at risk of dropping out of FTSE 100

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Recently privatised Royal Mail is in the danger zone for potentially being relegated out of the FTSE 100 index of the UK’s top shares, according to experts.

The postal service’s shares have stagnated since the group’s sell-off by the Government in October 2013, which triggered so much interest from retail clients that it knocked Hargreaves Lansdown’s website out of service.

A demotion from the FTSE 100 to the FTSE 250 index of mid-cap shares would cause blue-chip trackers to divest from the firm, potentially hampering its returns further.

Royal Mail’s shares were initially traded by institutional clients for a fixed period and rocketed from their sale price at £3.30 a share to close at £4.55 on their first day of trading.

The shares peaked at £6.15 in mid-January 2014 but following a choppy first three years they were trading at £4.36 on Thursday (25 May) afternoon – 30% lower than their peak.

The price creates a market capitalisation for the firm of £4.29bn, which leaves the firm hovering precariously close to the bottom of the FTSE 100 ranking.

Helal Miah, analyst at The Share Centre, said: “Despite recently posting full year results which pleased the markets, in which group revenue and profits before tax were up, [Royal Mail’s] heavily reliant on the international parcels business as letter volumes continue to act as a drag on overall performance. “It rubber stamps the ethos that the uncertainty amongst UK businesses in the current Brexit environment means less are using direct mail marketing.”

Elsewhere, The Share Centre said real-estate investment trust Intu Properties looked “highly likely” to lose its place in the FTSE 100, along with Hikma Pharmaceuticals.