Royal Mail is set to dish out £400million to shareholders following a bumper period for the company as online deliveries soared during the Covid-19 crisis.
Bosses said £200million will be spent on a buyback of shares and £200million will be given to investors as a special dividend.
Shares in Royal Mail jumped sharply in early morning trading, and are currently up 5.01 per cent or 21.96 points to 459.12p. The group’s share prices were 286p a year ago.
Payouts: Royal Mail is set to dish out £400m to shareholders following a bumper period for the company
It made the decision to pay out shareholders after identifying a shift within its parcel division.
According to it, “We believe that the Covid-19 epidemic resulted in an structural shift with a permanent rise in parcel volumes relative to pre-pandemic levels. Driven by more online e-commerce, this was.”
The group’s half-year revenue jumped from £5.7billion to £6.1billion and pre-tax profits swelled from £17million to £315million, compared with the same period a year ago.
Royal Mail said it expects to be debt-free over the next two years, with net debt being slashed from £1billion to £540million in the past year.
While domestic parcel volumes rose by 33% over pre-Covid levels compared to pre-1999, global parcel volumes fell by 37% because of increased customs processing.
Big changes: Royal Mail said it expects to be debt-free over the next two years
Royal Mail achieved a rise in profit margins. The number of parcels it sent fell but the revenue from parcels increased by 33.6 Percent.
The pandemic lows saw letter-writing recover and increase by 11 percent over a year, while remaining down by 19% for two years.
Royal Mail stated that it is working hard to deliver the services customers want and need in terms of its strategy.
The company stated that they were changing fast and are delivering more of the customer’s needs and wants, such as Sunday delivery, home collection of parcels via Parcel Collect and testing new services like same-day prescriptions or “instant pain relief.”
Martin Hewson is chief market analyst for CMC Markets UK. He stated that the Royal Mail’s share price had struggled since July’s first quarter update. Group revenue increased by 12.5 percent compared with last year and 20.5 percent compared to 2019.
He added: ‘With the improvement seen over the past 12 months, Royal Mail has said it will be returning £400million to shareholders, £200million in the form of a share buyback, and £200million in the form of a special dividend.
“This special payment is what shareholders love to receive.” It would also include the interim dividend at 6.7p per share payable on 12/01/2022.
Richard Hunter from Interactive Investor is the head of markets. He stated: “Royal Mail has also been a beneficiary of forced strategic acceleration resulting in the pandemic.”
‘It is now skilfully spinning a few plates as it continues transformation, and the share prices have reflected that progress. They rose by 55% over the past year, compared with a gain 14% for the wider FTSE 100.
‘It would therefore be with some irony that, at current levels, the company is on the cusp of relegation at next month’s FTSE 100 reshuffle as a result of recent share price weakness which has seen a dip of 16 per cent over the last six months.
“But, the bulls in the Royal Mail story will not be discouraged, as the market consensus for the shares being a buy remains defiantly intact.”