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Royal Mail's shock delivery weighs on FTSE
by Daniel Grote on May 22, 2014 at 14:54
A slump in Royal Mail's share price as it announced its first set of results has weighed on a flat FTSE 100.
Royal Mail (RMG) fell 49p, or 8.5%, to 526p as it reported a 12% rise in profits but delivered a stark warning about competition in the postage sector. The FTSE 100 shed four points to stand at 6,817.
Royal Mail chief executive Moya Greene said the group's letters business could suffer if regulator Ofcom did not intervene with rival TNT Post UK's plans to roll out a direct mail delivery service.
'Our analysis is that, without timely intervention from the regulator, direct delivery competition will have a serious impact on the sustainability of the universal service,' she said. 'This is why we are preparing a regulatory submission calling on Ofcom to take action now and carry out a full review of direct delivery. At the same time, we are raising the issue with HM Government and are seeking a legislative amendment that would require a review of direct delivery if Ofcom does not initiate one in a timely manner.'
Royal Dutch Shell's 'B' class shares (RDSb) slid 106p, or 4.2%, to £24.46, as the petrol giant scrapped its scrip dividend policy that has favoured those class of shares. Tax reasons have meant that Shell has effectively been limited to repurchasing only 'B'-class shares, which has over time led to them trading at a premium. Today's move however brings the treatment of both share classes in line. The 'A'-class shares (RDSa) added 10.5p, or 0.4%, to £23.63.
Brewer SABMiller (SAB) was the biggest blue chip riser, advancing 125p, or 3.8%, to £33.86 after surprising investors with better-than-expected annual results for the year.
Miners traded higher as a private survey showed China's factory sector turned in its best performance in five months in May. Fresnillo (FRES) rose 23p, or 2.8%, to 852.5p; Antofagasta (ANTO) added 17p, or 2.2%, to 788p; while Petrofac (PFC) jumped 19p, or 1.6%, to £12.39.
British American Tobacco (BATS) climbed 44.5p, or 1.3%, to £35.70 on news it could back a potential merger between Reynolds American and Lorillard.
Minutes from the US meeting of Federal Reserve policymakers released overnight also provided a boost, dispelling any fears of imminent interest rate rises.
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