Royal Mail share price rallies as group unveils ‘refreshed strategy’

Shares in Royal Mail Group (LON:RMG) have soared in London in today’s session as the company update investors on its full-year performance and announced a new five-year strategy. The postal operator meanwhile announced plans to slash its payout to shareholders as it looks to fund its ‘refreshed strategy’.

As of 09:52 BST, Royal Mail’s share price had added 4.59 percent to 221.10p. The shares are outperforming the mid-cap FTSE 250 index which currently stands about 0.1 percent higher at 19,455.84 points.

Royal Mail posts FY results

Royal Mail announced in a statement this morning that its adjusted revenue had inched two percent higher to £10.6 billion in the financial year ended March 31, as the privatised postal operator benefitted from strong performance at its UKPIL parcels and GLS units, which more than offset the decline in the company’s letter revenue. The group’s operating profit before transformational costs, however, came in 26 percent lower at £544 million.

‘Refreshed strategy’

Royal Mail’s chief executive Rico Back further updated investors on the group’s turnaround strategy, saying that the company was targeting operating profit margin of over four percent in 2021-22, increasing to over five percent in 2023-24.

“At the heart of our refreshed strategy is a UK ‘turnaround and grow’ programme,” Back pointed out in the statement, adding, however, that “investment in the UK, and expected lower cash flow in the early years, means we are rebasing the dividend and changing our dividend policy”.

Back meanwhile told Reuters that it would seek to earn 40 percent of revenue from its operations outside Britain and 70 percent from parcel deliveries by the end of the five-year period. He further noted that the decision for the dividend was not “taken lightly as we know how important the dividend is to our shareholders”.

According to MarketBeat, the privatised postal operator currently has a consensus ‘hold’ rating, while the average target for the Royal Mail share price stands at 317p.