Royal Mail have said it would return £400m to shareholders after the postal company forecast higher annual earnings in its UK business following a strong first half.
The company, one of the world’s oldest postal firms, reported a surge in group adjusted operating profit to £404m for the six months ended Sept. 26 and forecast full-year profit for its UK business of about £500m.
The pandemic led to seismic shifts for the postal service, including new “Scan-in / Scan-out” technology in all Mail Centres and Regional Distribution Centres.
Simon Thompson, chief executive, said: “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. I want to thank our teams for what we have delivered so far: it is an impressive start but there is still much more to do together.”
Analysts at AJ Bell said on the results: “As turnarounds go, Royal Mail can finally say it is making progress. Revenue and profit are growing, net debt is coming down, it has realised some cost savings, and it is confident enough to use some of its cash reserves to buy back shares and pay shareholders a special dividend.
“Like many turnaround situations, Royal Mail’s recovery is far from complete and it says there is still a lot more work to do, and that there are also various headwinds for the business.
“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.”
More to follow