Royal Mail To Rebase Payout Policy; Expects Profit Decline

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LONDON (Alliance News) - Royal Mail PLC on Wednesday said it has decided to rebase its dividend going forward as it reported a fall in adjusted operating profit before transformation costs.

In a separate statement, the FTSE 250-listed firm confirmed Keith Williams has taken over as chair, replacing Les Owen, who stepped down after nine years of service.

Meanwhile, former British Airways executive Maria da Cunha and Michael Findlay, who currently serves as chair of Morgan Sindall Group PLC, have been appointed as non-executive directors with immediate effect.

"When Les was appointed chair, it was with a brief to refresh the board. The appointment of Maria and Michael is an important first step in that process," said Williams.

Turning back to the results, the postal services provider said revenue for the 53 weeks to March was up to GBP10.58 billion from GBP10.17 billion in the 52-week period the year before.

Pretax profit rose to GBP241 million from GBP212 million, while adjusted operating profit before transformation costs fell 34% to GBP376 million. Royal Mail recorded GBP133 million of transformation expenses during the year.

Addressed letter volumes, excluding political parties' election mailings, fell 8%, in line with revised expectations, with total letter revenue down 6%.

UKPIL revenue was flat at GBP7.60 billion, while GLS revenue was up 8% on volume growth of 5%.

The company highlighted that it handled around 1.3 billion parcels in the UK during the year.

In its recently-started financial year, Royal Mail expects addressed letter volume declines of 5% to 7% due to continuing business uncertainty.

In addition, the company forecasts its adjusted operating profit after transformation costs to come in between GBP300 million and GBP340 million.

Royal Mail said it will pay out a full-year dividend of 25.0p, up 4% from 24.0p the year before.

However, the firm then plans to rebase its payout policy. For the 2020 financial year, Royal Mail said the plan is for a full-year dividend "underpin" of 15.0p, which may then be supplemented by additional payouts in years with "substantial excess cashflow".

"At the heart of our refreshed strategy is a UK 'turnaround and grow' programme. In 2018-19, after a challenging year, we delivered productivity improvements and cost avoidance in line with our revised expectations," said Chief Executive Rico Back.

"Over the next five years, through a focus on new ways of working and extending our network, we will ensure a contemporary UK Universal Service," Back added.

Royal Mail shares were trading 5.1% higher early on Wednesday at 222.20 pence each.

[Celgar]

Appointing Les Owen was a bit of a cock up as due to the amount of time he had been in RM he couldn't be left in the position very long. Keith Williams was previously working for BA so it seems a bit 'old boys network' to pass some cushy jobs onto two old workmates from BA already.
Keith Williams is similar to a previous occupant of the job, Peter Long, in that he already has a stack of complicated and important jobs including one to reorganise the UK railway network.
Note that Miss Ni-Chionna, who was responsible for some unfortunate decisions regarding executive pay is still in her position as well.