FTSE 100

Royal Mail share price: company on track to report £700m profit in 2021

Royal Mail (LON: RMG) (RMG.L) has today released a pre-close announcement and provided an update on its GLS business unit.

It reports that recent trading has broadly been in line with the update published by the company on 10 March. Its adjusted operating profit for the 2021 financial year is still forecast to be around £700 million.

Following a Board review of the firm’s performance, it has decided to pay a one-off final dividend of 10p per share for the 2021 financial year. It will be payable on 6 September 2021 to shareholders who are on the register as at 30 July 2021. Using the current Royal Mail share price, this equates to a yield of around 2%.

The company will announce a new dividend policy when it releases its 2021 results on 20 May 2021. It also plans to provide an update on its UK operations on that date.

GLS Business Update

Royal Mail also included information regarding its GLS business in today’s update. It now expects the international division to grow revenue at a compound annual growth rate (CAGR) of 12% between the 2020 financial year and the 2025 financial year.

It anticipates that GLS’s operating profit will more than double to €500 million during this period, with free cash flow in excess of €1 billion set to be generated. Meanwhile, capital expenditure during the five-year period is due to remain in the current range of 3-4% of revenue.

For the 2021 financial year, Royal Mail expects its GLS segment to produce adjusted operating profit of around €390 million (£350 million). Its adjusted operating profit margin is expected to be around 8.7%.

The company will provide further details on the prospects for GLS at 14:30 BST today. The update will be delivered by Martin Seidenberg, CEO of GLS, and Thorsten Pruin, CFO of GLS.

At the time of writing, the Royal Mail share price is trading at 510p. Over the past year, it has gained 304% versus a rise of 47% for the FTSE 250 index (INDEXFTSE: MCX).

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.