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Profits slide

Dividend slashed as Royal Mail seeks quick turnaround

Royal Mail letters post boxRoyal Mail said it would be slashing its dividend by 40% and invest a further £1.8 billion over the next five years in the hope of turning the business around.

Adjusted profit before tax fell from £565 million to £398m as chief executive Rico Back said “Our ambition is to build a parcels-led, more balanced and more diversified international business.” He added that scaling up its General Logistics Systems business was a key priority.

It said it would pay an annual dividend of 15 pence per share in 2019-20, compared with the 25 pence paid in 2018-19.

Market reaction

John Moore, senior investment manager at Brewin Dolphin, said: “Profits continue to slide at Royal Mail – that will be a real worry for investors, who have already had to contend with two recent profit warnings.

“The letters business remains in decline, which was expected, but the move towards further investment in parcels is a positive step in the right direction – even if that market is proving more volatile than you might expect. Investors were anticipating painful results today and, to a certain degree, they got them – the dividend cut is particularly hurtful.

“But there is a relatively clear indication of where the business goes from here from management and that will be welcome, even if the shares continue to fall in the short term.”

 Ed Monk associate director from Fidelity Personal Investing’s share dealing service, said: “The bad news at Royal Mail has been in the post since October, but today’s final results still make for grim reading. Profits before tax of £398m was at least no worse than feared but shareholders also have to swallow a cut to the Royal Mail dividend from beyond this year.

“After 12 months in which the share price has collapsed by almost two thirds that’s painful, particularly for those staff who had been thinking of selling before October’s profit warning.

“Royal Mail clearly still has some reassuring to do before investors can be confident about its future, and politicians will no doubt want to know that the universal service is secure. Higher parcel revenues, which are being delivered, are essential help but the business needs to take more costs out.”

 



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