Royal Mail dividends set to tip £133 million

[TrueBlueTerrier]

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Royal Mail (RMG) shares were up by nearly 6% on Wednesday morning after the postal service reported its first half-year results since listing.

Revenue for the six months to 29 September was up 2% at £4.5 billion, compared with £4.3 billion a year earlier.

Meanwhile, earnings before interest, taxes, depreciation and amortisation (EBITDA) were 19% higher at £483 million, from £405 million in 2012.

Moya Greene, chief executive of Royal Mail, said the first half was in line with the company's expectations and operating costs after transformation costs were flat, due to tight control.

The group confirmed its directors intend to propose a final dividend this year, to be paid in July 2014, and predicted the payout would be £133 million "in the absence of unforeseen circumstances".

Royal Mail said this amount is approximately two-thirds of the notional full-year dividend of £200 million the directors believe they would have proposed had the company been listed throughout its financial year.

The threat of industrial action still hangs and transformational costs were lower than expected during the half in part due to delays related to the industrial relations situation, Royal Mail said.

Discussions with the Communication Workers Union (CWU) on a new multi-year agreement are ongoing, according to Royal Mail. It said significant progress was being made on proposals for a legal framework to deliver a stable industrial relations environment, protections for employees and a competitive pay increase.

Parcel revenues of £1.48 billion were up 9% on the previous year and parcel revenue now accounts for 40% of UK Parcels, International & Letters (UKPIL). The volume of parcels were broadly unchanged compared with the same period in 2012, but prices were increased.

This offset a 4% decline in overall letter revenue, with the decline in addressed letter volumes reported as 6% - the upper end of Royal Mail's forecast range.

Analyst view

Gert Zonneveld, analyst at Panmure Gordon, said the maiden interim results were strong: "They reflected solid revenue growth and strong improvements in underlying profits and margins. Cash flows were strong and net debt fell from £906 million at the end of March 2013 to £723 million by the end of September 2013."

He retained a 'buy' recommendation and a target price of 570p.

Last week Investec started coverage of the stock with a 'hold' recommendation. Analyst John Lawson said: "Royal Mail is undergoing one of the UK's largest business transformation programmes witnessed in recent years and, providing that the group can continue to retain the support of its employees, this 'self-help' programme should be a powerful driver of earnings growth and cash going forward.

"Factors to remember: Royal Mail does have its challenges and the business only became a cash positive entity in financial year 2012. While at present attention is focused on the threat of industrial action (and the consequences that would ensue) the challenging letters market should not be overlooked," he added.

Investor view

Over on the Interactive Investor discussion board, 'Ecologist' said: "I find today's results underwhelming and believe they serve to underline the top nature of the share price. I have sold my meagre allocation and will not look to come back before the 460p-470p mark."

But 'Deshulme' disagreed: "These are excellent results and put more pressure on the initial undervalue of the company. There will be a few calculators coming out now to figure out the value of the company plus the likelihood of up to £1 billion of property which is hidden off the balance sheet."

[Red Robbo]

Let's get down to the " nitty gritty" what's the divvy going to be for those who got shares ???

[clashcityrocker]

Let's get down to the " nitty gritty" what's the divvy going to be for those who got shares ???

Yes lets all talk big about being anti-privatisation and how it will destroy our terms and conditions and the quality of service the public has come to enjoy and how a much cherished institution is being sold off to hedge-funds, but lets also have a wank fest when some cash is being offered to us.

[bensonhedge]

Let's get down to the " nitty gritty" what's the divvy going to be for those who got shares ???

£133,000,000 million dividend,10% of is £13,300,000.Divided by 150,000 staff=£88 thereabouts.

[wandle]

Let's get down to the " nitty gritty" what's the divvy going to be for those who got shares ???

£133,000,000 million dividend,10% of is £13,300,000.Divided by 150,000 staff=£88 thereabouts.

The dividend will be paid as xx pence per share. I believe it will be either 13p or 14p per share.

725 x 13p = £94.25
or
725 x 14p = £101.50