Royal Mail (RMG) produced £325m of adjusted operating profit in the year to 29 March, in the middle of its guided range, but this figure was 14 per cent lower than a year earlier amid higher distribution, conveyance and people costs in the ‘UK parcels, international and letters’ (UKPIL) business. As a result, the group margin contract to 3 per cent, from 3.6 per cent the prior year.
On a reported basis, UKPIL swung to a £140m operating loss, weighed down by £149m of exceptional charges. These include a £91m impairment on the Parcelforce Worldwide business and a £50m provision for a regulatory fine. UKPIL is expected to remain loss-making this year.
The Covid-19 pandemic has pushed up costs by £80m across April and May, driven by increased overtime and use of employment agencies. Royal Mail is now looking to make savings in its 2022 financial year, which will add £330m to operating profit, including £130m from 2,000 management-level job cuts. It will also reduce capital expenditure by £250m over the next two years.
Excluding lease liabilities, net debt improved to £46m, from £300m, and the group generated £635m of free cash flow, but nevertheless the final dividend has been scrapped.
Berenberg anticipates a £229m adjusted operating loss this year.
ROYAL MAIL (RMG) | ||||
ORD PRICE: | 168p | MARKET VALUE: | £ 1.68bn | |
TOUCH: | 168-169p | 12-MONTH HIGH: | 259p | LOW: 119p |
DIVIDEND YIELD: | 4.5% | PE RATIO: | 10 | |
NET ASSET VALUE: | 562p* | NET DEBT: | 21%** |
Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016 | 9.3 | 267 | 21.5 | 22.1 |
2017 | 9.8 | 335 | 27.5 | 23.0 |
2018 | 10.2 | 212 | 25.9 | 24.0 |
2019 | 10.6 | 241 | 17.5 | 25.0 |
2020^ | 10.8 | 180 | 16.1 | 7.5 |
% change | +2 | -25 | -8 | -70 |
Ex-div: | na | |||
Payment: | na | |||
*Includes intangible assets of £948m, or 95p a share, **Includes £1.2bn in lease liabilities, ^Year to 29 Mar |