Royal Mail (RMG) to deliver £400m shareholder payout
By Jenni Reid
10:55, 18 November 2021
The UK’s Royal Mail has announced a major payday for shareholders through a £200m ($270) share buyback and £200m special dividend.
It came as the postal service reported half-year results to 26 September, which showed its operating profit swinging from a £20m loss in the same period the year before to a £311m profit.
Revenue was up 7.1% year on year to £6.07bn amid a sharp rise in domestic parcel volumes on both 2020 and pre-pandemic levels, which was enough to offset a decline in international parcel volumes and in letters.
Parcel volumes and revenue were also up at its subsidiary General Logistics Systems (GLS), a European ground parcel delivery firm.
Basic earnings per share rose from 1.4p to 27p.
Royal Mail said the £200m ordinary share buyback would begin immediately, and that a £200m special dividend would be paid alongside an interim dividend of 6.7p per share.
Royal Mail non-executive chair Keith Williams commented: “We now have more visibility on the strategic progress and performance of both [Royal Mail and GLS], and while there is more to do, the board has decided that we should re-examine our retained cash balance.
“We believe it is appropriate now progressively to move towards a net nil cash position pre-IFRS 16. As a first step, we will return £400m of cash to shareholders, partly through a share buyback and partly from a special dividend.”
The company, which was privatised in 2013, was the top riser on the FTSE 100 at 11:00 UTC, with its stock up more than 5% to 461.00p.
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The initial months of the pandemic proved costly for Royal Mail as it battled increased costs, a decline in letter sending and acute staff shortages.
Like many businesses, it has reported continued hiring difficulties and labour shortages.
However, it did feel the benefits of increased parcel volumes in the latter half of 2020, and full-year adjusted operating profit was £702m.
It today said it expected that figure to be in the region of £500m for the full year 2021-2022.
“Whilst we are seeing upward pressure on costs in all of our markets, we maintain our outlook for the full year of low single-digit percentage revenue growth and around 8% operating profit margin,” said Williams.