Royal Mail to return £400m to shareholders as profit soars

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 FTSE 100 delivery group said its core Royal Mail division would post an adjusted operating profit of about £500m for the full year. The unit's profit by that measure was £235m in the first half. The GLS logistics business posted £169m adjusted operating profit.

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.