Royal Mail to hand shareholders £400m after surge in parcel deliveries

Royal Mail will hand £400million to its shareholders after a surge in parcel deliveries sent profits soaring.

The company posted profits of £315million for the six months to September 26, a massive jump from the £17million figure in the same period last year. Revenues climbed 7.1 per cent to £6.07billion.

As a result, Royal Mail unveiled plans to buy back £200million of shares while shelling out a further £200million in the form of a 20p per share special dividend.

The group also estimated a profit of £500million for the full year.

The blockbuster showing was spurred by a surge in parcel deliveries, which rose 33 per cent above pre-pandemic levels for the company’s UK business as lockdown sparked an explosion in online shopping.

Meanwhile, GLS, Royal Mail’s international parcel delivery arm, saw parcel volumes rise 30 per cent ahead of the levels seen before the onset of Covid-19.

The boom in business also helped the group massively cut down on its debts, which were slashed to £540million from £1billion in the same period a year ago.

However, the group warned that it was ‘increasingly clear that inflationary pressures will persist’ and that it was currently considering a number of cost-cutting measures in response.

‘Re-invention of Royal Mail is in flight,’ said chief executive Simon Thompson. ‘We are making pleasing progress with our change agenda. We’re seeing the benefits of our programmes to reduce costs, and are developing our plans to address inflationary pressures which will impact next year and beyond.’

The figures sent the shares up 9.8 per cent, or 42.7p, to 480.7p.

Analysts at Liberum said the results were ‘largely as expected’, although the bumper £400million payout had come as a surprise. However, they cautioned that the company faced ‘strengthening headwinds’ from rising wages and energy costs.

Thompson said the firm has ‘accelerated’ its recruitment processes ahead of Christmas.