Royal Mail share price up 5% after parcels deliver strong full-year profits

The British postal service saw its share price climbed higher on Wednesday as investors welcome second daily delivery of parcels, despite the company cutting its dividend to finance turnaround plan.

Royal Mail Source: Bloomberg

Royal Mail saw its share price climb more than 5% on Wednesday morning after it recorded a 2% increase in revenue to £10.4 billion in its full-year results, driven by good growth in parcel delivery service which more than offset letter revenue decline.

However, investors are no doubt disappointed by the postal service announcing that it would cut its dividend by 40% to help finance a new five-year turnaround plan that aims to realign the business to help it compete within a industry dominated by online parcel deliveries.

‘Our ambition is to build a parcels-led, more balanced and more diversified international business, delivering adjusted Group operating profit margin of over 4% in 2021-22, increasing to over 5% in 2023-24,’ Royal Mail Group CEO Rico Back said.

Royal Mail results: key figures

In its full-year results, Royal Mail’s adjusted operating profit before transformation costs came in at £509 million, in line with its expected range of £500-530 million. The total of the postal services transformation costs sits at £133 million.

Royal Mail’s share price is up more than 7% to 226p a share as of 11:40am GMT.

Royal Mail looks to refresh its postal service around parcels

Royal Mail is desperate to impress investors with it facing the possibility of being renationalised if the Labour Party comes to power, with the postal service looking to invest an additional £1.8 billion in a turnaround effort aimed at realigning the business to be parcel-led.

‘At the heart of our refreshed strategy is a UK ‘turnaround and grow’ programme. In 2018-19, after a challenging year, we delivered productivity improvements and cost avoidance in line with our revised expectations,’ Back said.

‘The investment in the UK, and expected lower cash flow in the early years, means we are rebasing the dividend and changing our dividend policy.’

‘This is not a decision we have taken lightly as we know how important the dividend is to our shareholders,’ he added.

The postal service is hoping that it has struck the right balance between sustainable shareholder returns and adequate investment in its future growth both in the UK and internationally.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

See an opportunity to trade?

Go long or short on more than 16,000 markets with IG.

Spread bet and trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.