Royal Mail Resumes Dividend Payouts as Virus Lifts Parcel Demand

(Bloomberg) -- Royal Mail Plc plans to pay its first dividend since the coronavirus struck after a surge in parcel deliveries during lockdowns triggered by the pandemic boosted earnings.

The U.K. postal service will pay out 10 pence a share, subject to approval at its annual investor meeting, it said in a statement. The company has seen record sales growth in the year that ends Wednesday as more people shop online.

The virus has ushered in a turnaround for Royal Mail, which suffered a string of earnings hits after its 2013 privatization amid declining letter volumes. The firm had the busiest period for parcels in its history in the December quarter, while letter volumes were better than expected. Adjusted operating profit for fiscal 2021 will be around 700 million pounds ($964 million), it reiterated.

While Royal Mail described the dividend as a one-off, it’s set to announce a new policy on shareholder awards with full-year results on May 20. That’s after the London-based company said Nov. 19 that it aimed to re-commence payments in fiscal 2022.

Royal Mail also gave an update on its GLS business Tuesday, saying that the overseas parcel delivery service expects to grow revenue at around 12% from fiscal 2020 through to 2025, more than doubling operating profit to 500 million euros and generating 1 billion euros of free cash. The unit is set to contribute half of group earnings this year.

Analyst Daniel Roeska at Sanford C. Bernstein said the dividend news and “ambitious” targets for GLS were encouraging developments.

Shares of Royal Mail traded 1.7% higher as of 8:06 a.m. in London, taking gains this year to 54%.

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