UK letter and parcel carrier Royal Mail warned of price increases and £350m in cost cuts to combat soaring inflation after reporting a rise in full-year profits.
The company on Thursday said underlying operating profits rose 8% to £758m for the year to March 31. On a reported basis, pre-tax profits fell 8.8% to £662m.
Looking forward, Royal Mail said consensus forecasts of a £303m adjusted operating profit could be hit “with downside risk”, assuming it could reach a deal with unions on pay staff pay rises “and without material industrial disruption”.
In its Royal Mail division, the company expected a decline in revenue in the current fiscal year, especially in the first half which had strong comparatives in the prior year when Covid lockdowns were in force and high volumes of virus test kits were delivered and people did more online shopping.
“For addressed letter volumes excluding elections, our current models suggest a high single digit percentage decline,” it added.
The warned of “significant headwinds” as it faces higher wage demands, surging energy and fuel costs.
In addition to the £350m in cost savings, the company said it was also looking at price increases. The group has already hiked the cost of posting letters by an average of around 7%, and parcel prices by an average of about 4%.
“As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent,” said chief executive Simon Thompson.
“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.”
