Royal Mail set to hand out £400 million to shareholders after Covid

File photo dated 05/02/20 of a member of staff for the Royal Mail delivering mail, as the company is set to hand out 400 million to shareholders following a bumper period for the company during the Covid-19 crisis where online deliveries soared. Issue date: Thursday November 18, 2021.
File photo dated 05/02/20 of a member of staff for the Royal Mail delivering mail, as the company is set to hand out 400 million to shareholders following a bumper period for the company during the Covid-19 crisis where online deliveries soared. Issue date: Thursday November 18, 2021.

Company says 'the Covid-19 pandemic resulted in a structural shift, with a permanent step up in the level of parcel volumes compared to pre-pandemic levels'

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Royal Mail is set to hand out £400 million to shareholders following a bumper period for the company during the Covid-19 crisis where online deliveries soared.

Bosses said £200 million will be spent on a buyback of shares and £200 million will be given as a special dividend.

The company made the decision as it hailed a structural shift in the parcel division.

It said: “We believe the Covid-19 pandemic resulted in a structural shift, with a permanent step up in the level of parcel volumes compared to pre-pandemic levels, driven by increased online e-commerce activity.”

It comes as revenues jumped from £5.7 billion to £6.1 billion and pre-tax profits rose from £17 million to £315 million in the six months to September 26 compared with the same period a year ago.

As a result of the changes, Royal Mail said it expects to be debt-free over the next two years, with net debt being cut from £1 billion to £540 million in the past year alone.

Domestic parcel volumes increased 33% compared to pre-Covid levels, however, increased customs processing and reduced air freight capacity saw international parcel volumes drop 37%.

But Royal Mail managed to increase profit margins, meaning whilst the number of packages being shipped fell, the amount of revenue for parcels grew 33.6%.

Letter sending started to recover since the pandemic lows and were up 11% on a year ago, but remain down 19% on a two-year basis.