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Royal Mail to reinstate dividend as parcel business booms

Royal Mail says operating profits for year will be around £700m

Royal Mail (LON:RMG) confirmed on Tuesday that it will pay a one-off final dividend of 10p per share, as well as saying it will outline a new dividend policy alongside its upcoming results announcement in May.

The postal service slashed its dividend after the first lockdown due to the uncertainty caused by the policy announcement.

However, the business benefited from lockdowns as the number of parcels being sent due to people increasingly shopping online led Royal Mail to upgrade its profit forecasts.

Royal Mail revealed its operating profits for the year ending in March 2021 would be in the region of £700m which would be be more than twice that of a year ago.

The FTSE 100 company also provided medium-term expectations for GLS, the overseas parcel deliverer.

GLS is expecting to grow its revenue at 12% annually from a base of €3.6bn in 2019-20 up to the 2023-25 financial year. It also expects to double its operating profit to €500m while generating €1bn of free cash flow with capital expenditure in the range of 3-4% of revenue.

In the nearer-term, GLS is forecasting its adjusted operating profit for FY2020-21 to be around £350mln (€390mln) and adjusted operating profit margin 8.7%, according to a statement released today.

For the year ending in March 2019 Royal Mail paid a total dividend of 25p per share, however, it suspended its shareholder payout at the time of the annual results in June 2020 due to the impact of the pandemic.

Russ Mould, investment director at AJ Bell, commented on the company’s outlook:

“Royal Mail is currently in a sweet spot as the pandemic has accelerated the shift from physical to online retail, thereby creating a massive tailwind for companies that deliver parcels. It will be hoping that this trend remains intact even when people start to go back to work in offices and get out of the house more.”

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