https://www.ft.com/content/49d62c72-631 ... 2f7ee26895
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.
Read more at link