Royal Mail profit surge leads to special dividend for shareholders

Bosses at Royal Mail have announced they expect to pay a special dividend of 10p a share to hand out surging profits made during the global pandemic.

The former state-owned mail service said the board has reviewed the performance of the past 12 months and is likely to make the payment of around £99 million on September 6.

Royal Mail suspended the dividend during the pandemic to manage any possible fallout and hit to the business, with the last payment to shareholders an interim dividend of 7.5p made in January 2020.

But strong sales meant bosses could announce the new one-off dividend for the full year. The company said it would announce a new dividend policy in May.

Shareholders welcomed the news of a resumption of the dividend, with shares opening up nearly 2% in early trading at 520p.

The dividend announcement also comes as the boss of Royal Mail’s logistics business, GLS, said he will provide a business update this afternoon.

Martin Seidenberg is set to outline medium-term targets, including a focus on international and business-to-customer as key growth opportunities.

Bosses expect revenues to grow by around 12% a year for the next five years, hitting operating profits of 500 million euros (£426.6 million) and generating free cash flow of more than one billion euros (£850 million).

Royal Mail has seen a large surge in customers posting letters and using its services (PA)

Adjusted operating profits in the Amsterdam-based division are expected to be around £350 million in the current financial year, the company added.

The plans follow a profit upgrade announced earlier this month, with bosses revealing adjusted operating profits are expected to be around £700 million – up from £325 million a year ago.

Royal Mail announced at the time that it had seen a large surge in customers posting letters and using its services during the most recent lockdown.

The cost of a major restructuring is also expected to come in below expectations, costing around £90 million instead of an original estimate of £140 million.

Royal Mail revenues are set to be £900 million higher than last year – at around £8.6 billion.

New chief executive Simon Thompson, who joined in January after a stint as the boss of the NHS Test and Trace app, will give a fuller update on the group’s performance in May.