Shares in parcel and mail delivery group Royal Mail (RMG) topped the FTSE 100 leader, rising 5.7% to 463p after the firm said it would return £400 million to shareholders after reporting a jump in profit in first half profits.
For the six months to September, the firm swung to an operating profit of £311 million against a loss of £20 million a year ago thanks to a recovery in margins and the absence of restructuring charges which burdened last year’s results.
CAPITAL RETURN
Revenues climbed 7.1% to £6.07 billion, slightly ahead of market forecasts of £6 billion, as domestic parcel volumes in the core Royal Mail business almost reached the same levels as last year, when lockdown forced shoppers to order online and volumes soared.
Compared with pre-pandemic levels, Royal Mail domestic parcel volumes were up 33% while GLS or General Logistics Systems saw a similar rise.
In a show of confidence, Royal Mail said it plans to return £400 million of capital to shareholders, of which £200 million will be via a share buyback and the balance by way of a special dividend to be paid alongside interim dividend.
STRUCTURAL SHIFT
Chief executive Simon Thompson said ‘the re-invention of Royal Mail is inflight; we are making pleasing progress with our change agenda’.
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.’
The firm said that while it was seeing upward pressure on costs in all of its markets, it was keeping its outlook for the full year of low single digit percentage revenue growth and about an 8% operating profit margin.
