Royal Mail share price: Ofcom flags concerns over group’s long-term sustainability

Watchdog worried productivity slump could threaten company’s long-term finances

Royal Mail share price: Ofcom flags concerns over group’s long-term sustainability

Industry regulator Ofcom has warned that Royal Mail Group’s (LON:RMG) long-term sustainability could be under threat, City A.M. reports. The comments come with the privatised postal operator expected to be relegated from the FTSE 100 at the index’s next reshuffle scheduled for tomorrow.

Royal Mail’s share price has fallen deep into the red in London in today’s session, having given up 1.34 percent to 315.50p as of 13:53 GMT. The stock is underperforming the broader market rally, with the FTSE 100 currently standing 1.66 percent higher at 7,095.82 points. The group’s shares have given up more than a quarter of their value over the past year, as compared with a near three-percent dip in the Footsie.

Ofcom flags concerns

City A.M. reported yesterday that Ofcom had warned in its annual report that it was concerned that Royal Mail was not meeting productivity targets. While the watchdog said that it believed the universal postal service was “likely to remain financially sustainable in the immediate future”, the postal operator’s admission in an October trading update that productivity growth was ‘significantly below plan’ was a concern.

“We will continue to monitor these developments closely,” the watchdog said in the report. The newswire further quoted an Ofcom spokesman as noting that the regulator kept “a close eye on Royal Mail’s performance and finances”.

Analysts on Royal Mail

The 17 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 325.00p on the shares, with a high estimate of 420.00p and a low estimate of 250.00p. As of December 1, the consensus forecast amongst 18 polled investment analysts covering the postal operator has it that the company will underperform the market. 

As of 14:01 GMT, Monday, 03 December, Royal Mail share price is 316.48p.

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