Royal Mail set to cut dividend as it launches £1.8bn overhaul

One of the new parcel postboxes elsewhere in the UK where they were tested last year Pic Royal Mail

One of the new parcel postboxes elsewhere in the UK where they were tested last year Pic Royal Mail

The aim of the investment programme is to focus on customer service improvements, digital initiatives, network enhancements and new ways of working to deliver more productivity and efficiency.

Struggling with a market changed by Amazon and online shopping as well as the move away from sending letters, Royal Mail has been reviewing operations and testing new delivery methods.

Royal Mail has a target to earn about 4.5 billion euros in revenue from GLS - its ground-based parcel network - in 2023-24, compared with 3.3 billion euros in 2018-19. This would mean that the company would be in a better position to compete against online parcel deliveries. This initiative will help facilitate that growth.

The separate processing and delivery of Next Day and larger items will generate a reduction for Royal Mail in the cost of handling parcels, including small items.

Royal Mail has warned shareholders to expect lower dividends in future as it ploughs £1.8 billion into a turnaround effort. Adjusted operating profit was down 32 per cent at £332 million.

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Royal Mail plans to spend an extra £1.8bn on its United Kingdom business in a bid to improve efficiency and keep better track of parcels.

Chief executive Rico Back said: "Our ambition is to build a parcels-led, more balanced and more diversified worldwide business, delivering adjusted group operating profit margin of over four per cent in 2021-22, increasing to over five per cent in 2023-24".

To support the delivery of its strategic goals, including the investment to transform the United Kingdom business, Royal Mail is rebasing the dividend and changing its dividend policy.

Mark Street, Head of Campaigns at Royal Mail, said "The parcel postboxes trial past year was a success, and we hope that the wider roll-out gives added flexibility to online sellers who might be running a business in their spare time and not keeping regular office hours".

"GLS is a key part of our strategic plan and will make a major contribution to our product and geographical diversification".

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