Royal Mail share price sees tough year amid industrial woes and FTSE 100 demotion

Analysts nevertheless see potential

Royal Mail share price sees tough year amid industrial woes and FTSE 100 demotion

Royal Mail Group (LON:RMG) has seen a tough year, with a drop in the company’s shares resulting in the postal operator’s demotion from the benchmark FTSE 100 index. While 2017 has been dominated by Royal Mail’s plans to replace its defined benefit scheme with a cheaper alternative, prompting unions to threaten strike action, some analysts nevertheless remain upbeat on the company amid accelerating parcel growth and strong performance at the company’s GPS business.

Royal Mail sees tough 2017

Perhaps one of the most notable events for Royal Mail in the current year was the company’s demotion from the FTSE 100, following the index’s quarterly reshuffle in September. The move downwards reignited concerns over the postal operator’s initial public offering on the London Stock Exchange back in 2013, when Royal Mail’s share price soared 38 percent on the first day of trading, prompting doubts that the stock was sold off too cheaply.

The postal operator has faced a number of challenges this year, including an ongoing decline in letter volumes, as well as a row with staff over its plans to replace its defined benefit pension scheme, which guarantees a retirement income to members, with a cheaper alternative.

Not all doom and gloom

Despite this year’s worries, 2017 has not all been doom and gloom for Royal Mail. At its latest update for the City, the privatised postal operator reported a rise in profits for the first half of its financial year, revealing strong performance at its GLS division.

Analysts have also been more upbeat on Royal Mail lately, with JPMorgan and Investec staying bullish on the shares, as the postal operator revealed progress over its talks with unions, managing to avert a strike over the crucial Christmas period.

It, however, remains to be seen whether Royal Mail’s share price will see a recovery going forward which would help the company return to the LSE’s blue-chips club in 2018.

As of 14:29 GMT, Friday, 22 December, Royal Mail share price is 453.10p.

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