Royal Mail hands out £400m to shareholders as it bounces back following pandemic

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The group also saw revenue rise 17.5 percent compared to the same period in 2019. In today’s announcement Royal Mail said it would return £400m of capital to shareholders via a £200m share buyback and a £200m special dividend. It also announced an interim dividend of 6.7 pence per share. It will come as a welcome boost to Royal Mail staff who were offered shares when the company went private in 2013.

Chief Executive Simon Thompson said: “”Re-invention of Royal Mail is inflight; we are making pleasing progress with our change agenda. We’re seeing the benefits of our programmes to reduce costs, and are developing our plans to address inflationary pressures which will impact next year and beyond.“

Commenting on the strength of Royal Mail’s parcel offerings he added: “The pandemic has resulted in a structural shift and accelerated the trends we have been seeing.

“Domestic parcel volumes, excluding international, are up around a third since the pandemic, whilst addressed letter volumes, excluding elections, are down around a fifth.

“This reaffirms that our strategy to rebalance our offering more towards parcels is the right one, and demonstrates the need to start defining what a sustainable Universal Service is for the future.

Since its privatisation Royal Mail has struggled due to the decline in letter sending as more people and businesses become reliant on email.

With the rise in online shopping it has increasingly focused on parcels which boomed in demand during the pandemic with parcel volumes now up 33 percent on pre-pandemic levels.

As a result its share price has more than trebled from lows of under 150p in April 2020 to 469p today.

Nicholas Hyett, equity analyst at Hargreaves Lansdown said Royal Mail’s turnaround had “hugely impressed” adding that the group was potentially becoming an “attractive business”.

He added: “It would be easy to put the current windfall down simply to the effect of the pandemic on parcel demand. And that has played a part.

“But ramping up facilities to cope with the extra demand is no small achievement, and a quick glance under the hood shows a business which is in far better shape than before the pandemic.

“Overall the group is driving higher volumes with lower costs – doing wonders for margins.”

Investment director at AJ Bell, Russ Mould cautioned Royal Mail’s recovery was far from complete though and it faced various challenges to come.

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He explained: “A key risk to a bumper festive season for Royal Mail is whether supply chain issues spoil the party.

“Stock availability is a worry for retailers, and they will be praying that customers find a suitable alternative from their virtual shops if their first choice is not available.

“Royal Mail also flags a higher than expected number of staff off sick, as well as elevated vacancy levels, which means productivity is being impacted.”

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