Royal Mail has warned that shareholder’s dividend will be cut to support transformation plans from 2020, as there has been a drop in underlying profits.
To free up funds to invest in the UK business the group will change policy to pay out to at least 15p a share next year.
Royal Mail posted adjusted profit before tax of £398m in the year to 31 March, compared to £565m in 2018.
Due to higher income from parcel deliveries, revenue moved higher to £10.58bn.
Rico Back, chief executive said, “Royal Mail is one of the most widely held stocks in the FTSE. The board appreciates the support of our shareholders, including our postmen and women who have received free shares.
“We very much understand the importance of the dividend to all our shareholders. Our decision to rebase the dividend and change the policy is not one that we have taken lightly.
“In doing so, we have sought to find the appropriate balance between investing in the future sustainability of our business, and shareholder returns.”
Ed Monk, associate director at Fidelity Personal Investing’s share dealing service said, “Royal Mail clearly still has some reassuring to do before investors can be confident about its future, and politicians will no doubt want to know that the universal service is secure.
“Higher parcel revenues, which are being delivered, are essential help but the business needs to take more costs out.”