Royal Mail share price subdued as group joins FTSE 250

Shares in Royal Mail Group (LON:RMG) have been subdued today, as the company started trading in the mid-cap FTSE 100 250 index. The privatised postal operator dropped out of the FTSE 100 this month, having seen its shares slide over the past quarter amid concerns about a potential strike over pensions.

As of 09:49 BST, Royal Mail’s share price had given up 0.57 percent to 374.70p, underperforming the mid-cap FTSE 250 index, which has climbed into positive territory and currently stands 0.29 percent higher at 19,434.87 points. The group’s shares have lost more than 27 percent of their value over the past year, and are down by some 18 percent in the year-to-date.

Today marks Royal Mail’s first day of trading as a mid-cap company, nearly four years after the postal operator floated on the London Stock Exchange at 330p per share. The shares, however, have come under pressure this year, amid dwindling letter volumes as well as a row with the Communication Workers Union over the group’s plans to replace its defined benefit pension scheme with an alternative plan. The union’s members are currently voting on whether to take industrial action.

The Financial Times reported over the weekend that according to calculations by Jefferies, the union’s demands on pay and working hours equated to a roughly five percent annual increase in the wage bill.

“That would have a huge impact and is probably unaffordable for Royal Mail,” the broker’s analyst David Kerstens said, as quoted by the newspaper. “The profitability of Royal Mail and its share price valuation are highly sensitive to small changes in wage inflation assumptions.”

The FT notes that if a walkout does happen, it would be the first following Royal Mail’s flotation, with the potential to disrupt mail deliveries across the UK ahead of the key Christmas period.

As of 10:07 BST, Monday, 18 September, Royal Mail share price is 374.90p.