A special dividend is paid for the Royal Mail share price (RMG Stock)

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The Royal Mail share price has struggled since its first quarter update in July, with group revenue increasing 12.5% ​​from last year and 20.5% from last year. to 2019.

While at first glance these numbers were solid, the parcels division saw a 13% slowdown in volumes as stores began to reopen, although these numbers must be placed in the context of the lockdown of the year. last when the comparisons were much more difficult because of everyone. to be at the house.

In contrast, revenue was higher, with the company reiterating its forecast for the full year.

In September, the outlook remained the same, with a marked slowdown compared to the figures for the first quarter, with the volume of domestic parcels declining by 5% year on year.

That said, the group’s revenue grew 8.2% year on year and 17.7% from 2019, and while this was a significant slowdown from first quarter numbers, biggest concerns seem to be the rising costs.

Today’s first half figures showed as-expected revenue of just over £ 6bn, up 7.1%, with the group’s adjusted operating profit at 404m. pounds sterling, which was just above the forecast released in September of between £ 395million and £ 400million, while operating margins improved to 6.7%, up 600 points from base compared to a year ago.

Royal Mail saw revenue rise 6.4% to £ 4.07 billion, with domestic letters and parcels helping to boost that number. GLS revenue rose 7.5% to just over £ 2 billion. Package volume increased 33% from pre-pandemic levels, but fell 4% from the same period a year ago.

Pre-tax profits reached £ 315million, up from £ 17million a year ago.

With the improvement observed over the past 12 months Royal Mail said it would return £ 400million to shareholders, £ 200million in the form of a share buyback and £ 200million in the form of a special dividend. This is exactly the kind of special delivery that shareholders tend to welcome. This would be in addition to the interim dividend of 6.7 pence per share, payable on January 12, 2022.

As for the outlook and the Christmas period ahead, Royal Mail expects adjusted operating profit to be £ 500million, with operating margins expected to rise to 8% , although he warned that GLS could see significant headwinds that could subside. growth in turnover in H2 compared to H1. This matches the forecast of £ 500million for full year operating profit, given that Royal Mail has already declared £ 400million in the first half of the year.

Operating costs continue to be a challenge, increasing by £ 73million in the first half of the year, a theme we’ve already seen with FedEx in the US having had to raise salaries for new hires, while management has warned that increasing NI contributions next year will add an additional £ 50million to its costs, while warning of additional costs of £ 40million in fiscal 2022 / 23 due to a shorter work week for its staff.

To offset this, the company has identified an additional £ 190million in cost savings, through increased automation and other measures.


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