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Royal Mail to return £400m to investors | DMGT update


5pm: Strong close for Royal Mail

Royal Mail ended the best performer on the FTSE 100, up 9.8%, after the postal operator reported a surge in interim profits.

Blue-chip housebuilders also saw strong gains after strong figures from Crest Nicholson. Persimmon closed up 4.8%, Berkeley up 3.9%, Taylor Wimpey up 3.8% and Barratt Developments up 3.6%.

The FTSE 100 index closed down 35.24 points, or 0.5%, at 7,255.96. 

7am: Royal Mail

Royal Mail is returning £400m of cash to shareholders as the company reported a surge in first-half profit on the back of a boom in parcel deliveries.

Pretax profit rose to £315m in the six months to 26 September from £17m a year earlier. Adjusted operating profit soared to £404m from £37m.

Royal Mail declared an interim dividend of 6.7p a share and said it would pay out £200m in a special dividend. The company also said it would start a £200m share buyback immediately.

The buyback process will be handled by Merrill Lynch International.

Keith Williams, Royal Mail’s chairman, said: “The first half saw continued revenue growth across the group, with improved profitability in Royal Mail and GLS performing strongly.

“We believe that both Royal Mail and GLS will be able to fund their respective investment pipelines from future cash flows.

“We believe it is appropriate now progressively to move towards a net nil cash position. As a first step, we will return £400m of cash to shareholders, partly through a share buyback and partly from a special dividend.”

Royal Mail’s fortunes have been transformed by a surge in parcel deliveries during the pandemic as shoppers went online. Royal Mail domestic parcel volumes rose by a third in the first half from two years earlier and the company said the shift was structural.

John Moore, senior investment manager at Brewin Dolphin, said: “Trading has been strong for Royal Mail, with GLS remaining its standout performer. Debt has more or less been halved in the last 12 months, while profitability has grown significantly and cashflow is solid.

“Despite well understood cost pressures, the management team seems confident enough to boost shareholder returns through the share buyback programme coupled with a special dividend. This may go some way towards offsetting the share price decline of around one-quarter from recent highs.”

7am: Daily Mail & General Trust

Adjusted profit before tax was up 7% to £50 million on a 1% decline in revenue to £885m.

The company’s stake in the flotation of online car retailer Cazoo was valued at £763m at year end, equivalent to six and a half times its investment.

Paul Zwillenberg, CEO, commented: “We achieved premium valuations for RMS, our Insurance Risk business, and Hobsons, our EdTech business, with net proceeds totalling over £1.5bn.

“DMGT is now more tightly focused in three sectors with a notably higher weighting to Consumer Media.”

“Our Property Information businesses delivered strong growth, supported by particularly high residential property transaction volumes in the UK. 

“In Consumer Media, we saw good revenue and profit contribution growth from MailOnline and a solid performance from the Mail print titles driving profit contribution growth for the Mail businesses as a whole. 

“Unsurprisingly, the commuter newspaper Metro and our Events business continue to be significantly impacted by the pandemic.”

A proposed final dividend of 17.3p will see the full year dividend increase by 3% to 24.9p.

7am: Metro Bank talks off

Further to the announcement 4 November, Carlyle and Metro Bank have agreed to terminate discussions regarding a possible offer for the company.

7am: Aviva switches auditor

Insurance group Aviva intends to appoint Ernst & Young as its auditor for the financial year ending 31 December 2024, subject to shareholder approval at the 2024 Annual General Meeting. 

The proposal has been approved by the board and follows an extensive competitive tender process, which was overseen by the audit committee.

PwC, Aviva’s current external auditor, will undertake the audit for the financial years ending 31 December 2022 and 2023.  PwC was appointed as auditor for the financial year ending 31 December 2012.

Global markets

Asian markets were generally lower as coronavirus cases continue to rise even though beleaguered Hong Kong property group Evergrande appeared to buy itself some time with the sale of its stake in streaming service HengTen.

Some of the tech majors listed on Hong Kong’s Nasdaq-style technology board Hang Seng tech index, including Alibaba, Baidu, and Tencent, declined sharply.

China’s Shanghai Composite fell 0.35% while Hong Kong’s Hang Seng index slumped 1.35%.

In Japan, the Nikkei 225 slid 0.3% and South Korea’s Kospi fell 0.34%.

All of the three main US markets closed lower.

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