Royal Mail shares tumbled yesterday as the firm issued an afternoon profit warning after it failed to meet cost-saving targets.
In an unscheduled trading update for the half year to September 23, the group said that its "productivity performance is significantly below plan" and cost saving target has been slashed from £230 million to £100 million.
As a result, Royal Mail expects group adjusted operating profit before transformation costs to be in the range of £500 million to £550 million, compared with £694 million last year.
The news sent shares plummeting as much as 20% before closing down 18%, a fall of 85.7p to 391.4p.
Sterling received a boost yesterday following reports that the Government is preparing a Brexit compromise on the Irish border as it attempts to break the negotiating deadlock with the EU.
The pound surged against the US dollar before settling at 0.2% higher at 1.304. Versus the euro, sterling was up 0.3% at 1.125 at the London close.
Speculation is mounting that Theresa May plans to offer a compromise on the Northern Irish border in an effort to kick-start talks as Britain's exit day in March looms.
Craig Erlam, senior market analyst at OANDA, said: "It's been rumoured that the offer could involve checks between Northern Ireland and the rest of the UK, something I struggle to imagine would generate the necessary support in Parliament, not least from the DUP - the junior coalition partner May's government is reliant on.
"Still, while the solution may attract widespread opposition, it could prove to be a step in the right direction."
The FTSE 100, meanwhile, closed the day down 14.53 points, or 0.19%, at 7,495.67.
Ryanair shares also nosedived after it warned over profits, with the budget airline suffering the effects of recent crew strikes and rising fuel prices.
The firm said that full-year profits will be 12% lower than expected, having dropped its guidance to between 1.1 billion euro and 1.2 billion euro (£978 million to £1 billion).
It had previously expected profits to fall within a range of 1.25 billion euro to 1.35 billion euro (£1.1 billion to 1.2 billion).
Shares closed down 1.68p at 11.43p.
Tesco was also in the doldrums following a £16.4 million fine slapped on its banking arm for failings linked to a 2016 cyber attack.
The Financial Conduct Authority (FCA) said the fine was due to Tesco Bank having failed to "exercise due skill, care and diligence in protecting its personal current account holders".
The regulator said the attackers took advantages of "deficiencies" in the design of Tesco Bank's debit card, as well as its financial crime controls and its financial crime operations team to carry out the hack.
Shares closed down 3.10p at 236.7p.
In Europe, Germany's DAX closed up 0.75% while France's CAC ended up 0.24%.
A barrel of Brent crude was trading at 84.3 US dollars, a rise of 1.82%.
The biggest risers on the FTSE 100 were Halma up 59p at 1,504p, Rentokil up 11.3p at 329.7p, DCC up 200p at 7,165p and RSA up 16p at 591p.
The biggest fallers on the FTSE 100 were Royal Mail down 85.7p to 391.4p, EasyJet down 92p at 1,222p, Berkeley Group down 124p at 3,555p and Standard Chartered down 20.9p at 615.5p.
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