logo-loader

Wednesday could be red letter day for Royal Mail if return to FTSE 100 status confirmed

Published: 14:16 27 Feb 2018 GMT

Post box
Laith Khalaf, senior analyst, Hargreaves Lansdown noted: ‘Royal Mail shares have surged thanks to the recent pay and pensions settlement"

Royal Mail Group PLC (LON:RMG) could have a red letter day on Wednesday, with the privatised mail delivery firm expected to make a return to the FTSE 100 index nine months on from its shock demotion.

The latest quarterly FTSE indexes reshuffle will be announced after the market close on Wednesday, based on market closing prices on Tuesday, and Royal Mail looks like it’s going to stage a return to the blue chips, with property company Hammerson PLC (LON:HMSO) falling out.

READ: Royal Mail highlights “continuing good trading” performance, as it confirms agreement in principle with union

Laith Khalaf, senior analyst, Hargreaves Lansdown noted: ‘Royal Mail shares have surged thanks to the recent pay and pensions settlement which has avoided a damaging bout of industrial action.

“Shares are now trading at their highest level since 2014, and around 70% higher than the price set by the government in the 2013 market flotation.”

He added: “Royal Mail has had to cope with pay negotiations alongside cost cutting and modernisation. Technology has been both a blessing and a curse for Royal Mail. It has led to 22% decline in addressed letters in the last five years, but at the same time online shopping has significantly increased the number of parcels whizzing around.“

Dividend yield provides support

Also commenting on Royal Mail’s possible blue chip return, Russ Mould, AJ Bell’s investment director pointed out: ““The company first entered the FTSE 100 following its 2013 flotation at 330p, a deal which raised a political storm over whether the shares had been sold too cheaply as they soared beyond 600p amid demand for its then 20p-a-share annual dividend.

“That pay-out has since crept to 23p and is expected to reach 24p for the fiscal year to March 2018, still enough for a 4.3% dividend yield with earnings cover for the pay-out of some 1.7 times.”

He also noted that if the company’s promotion is confirmed next week, the inclusion of its boss Moya Greene again would take the total of female FTSE 100 chief executives back up to seven, alongside Emma Walmsley at GlaxoSmithKline, Alison Cooper at Imperial Brands, Dame Carolyn McCall at ITV, Veronique Laury at Kingfisher, Liv Garfield at Severn Trent and Alison Brittain at Whitbread.

Hammerson likly demoted, but could make swift return

Meanwhile, shares in shopping centre owner Hammerson has been going into the opposite direction, falling by 20% over the last year, making it ripe for demotion to the FTSE 250.

Although if the real estate firm’s proposed merger with mid-cap Intu Properties PLC (LON:INTU) goes ahead it stands a good chance of returning to the blue-chip index later in the year.

Notable likely relegations from the FTSE 250 should include roadside services group the AA plc (LON:AA.), outsourcer Mitie PLC (LON:MTO), and funeral provider Dignity Group PLC (LON:DTY).

Among those likely to be prompted to the mid-caps, fantasy gaming retailer Games Workshop PLC (LON:SAW) looks set to step up from the FTSE Small Caps.

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

49 minutes ago