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07 December 2018

Royal Mail drops back out of FTSE 100

Royal Mail will fall out of the FTSE 100 following a tough year for the letter and parcel delivery company.
Its share price has been on a rollercoaster ride since listing on the London Stock Exchange in October 2013. Having peaked at an all-time high of above 630p in May this year, it was around half that price at 315.4p on Wednesday 5th December, when the FTSE reshuffle was announced.

The company first faced relegation in September 2017, but was promoted back into the FTSE 100 in March this year.

James Rowbury, Investment Research Coordinator, said: “When Royal Mail first went private in 2013, the IPO was shrouded in controversy. The then-Shadow Business Secretary, Chuka Umunna, was calling for the deal to be halted as the shares were significantly undervalued. According to Umunna, the government’s valuation did not account for Royal Mail’s significant property portfolio. Needless to say, the shares jumped 38% in their opening day of trading, illustrating a very different valuation from investors.”

In October, the group issued a profit warning, saying cost savings would be £100m this year compared to the £230m it had previously forecast. Royal Mail has also had its target price cut 16% by Deutsche Bank last week over concerns about its ability to handle the challenges it faces.

Joining Royal Mail in relegation to the FTSE 250 is Just Eat. Over the past year, the takeaway company has had more than £1bn wiped off its market capitalisation. The company issued a profit warning as a result of investing in its delivery services to help battle competition from Deliveroo and Uber Eats.

Promoted into the FTSE 100 is the Bermuda-headquartered insurance company Hiscox. It has been a turbulent period for insurers in general, due to natural disasters worldwide such as hurricanes. However, the group announced some encouraging results in its trading update last month and said its preparations for the UK leaving the EU were well advanced, including the possibility of a hard Brexit.

Also promoted into the FTSE 100 is steam systems engineering firm Spirax-Sarco Engineering, which announced earlier this month it had sold its German-based subsidiary HygroMatik to Carel Industries for €59m.  

Aston Martin has entered the FTSE 250, two months after its London listing that initially valued the iconic carmaker at £4.33bn. Joining the company are gold miner Acacia Mining, loan platform Funding Circle Holdings, retirement community developer McCarthy & Stone and investment trusts Smithson Investment Trust and Woodford Patient Capital Trust.

Travel agency Thomas Cook’s woes have been well-publicised, and it will therefore not come as a surprise to many that it has been relegated from the FTSE 250 after issuing two profit warnings in two months. Contributing to its issues was the warmer-than-usual British summer, which meant more people opted for holidays in the UK instead of going abroad.

The year’s weather has also impacted the AA, which is also out of the FTSE 250. Due to the harsh winter of early 2018, the breakdown organisation saw a pothole epidemic and an increase in the number of callouts across the country.

Also exiting the FTSE 250 will be geotechnical contractor Keller, construction and services organisation Kier Group, online holiday retailer On The Beach Group and independent hospital group Spire Healthcare.
The changes will take place from 24th December 2018.
Ends

Notes to Editors

Please note, past performance and forecasts are not reliable indicators of future results or performance.
Please note that this article is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.

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Royal Mail drops back out of FTSE 100
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