Royal Mail has warned that the company is at a “crossroads” and urgently needs to adapt to the post-pandemic environment as parcel deliveries, originally fueled by Covid lockdowns, continue to decline.
Pressure is mounting further on the postal company, which is struggling to reach a pay deal with unionized staff pushing for an inflation-based wage increase as the cost of living soars.
Royal Mail said on Thursday it suffered an 8.8% drop in annual pre-tax profit to £662m, explaining revenue was flat as easing of Covid restrictions curbed demand. of package deliveries. The drop was partially offset by the distribution of Covid test kits, but overall, demand for kits across the UK fell by 7% year-on-year.
Chairman Keith Williams admitted that the financial tailwinds of the pandemic “are now dissipating” and that the company was bracing for a drop in economic growth and higher inflation that could pose challenges for both its international delivery business as in the UK.
“We are at a crossroads with the transformation of Royal Mail,” he said. “We need to adapt our business to a post-pandemic world and while we are making progress in some areas, more needs to be done in others.”
The news sent shares tumbling almost 10% on Thursday morning, wiping nearly £400m from the company’s value and making Royal Mail the biggest drop in the FTSE 100.
The courier is also facing an ongoing pay claim with staff represented by the Communication Workers Union (CWU), which said Royal Mail’s profits for the full year were “earned at the cost of the hard work of our members”.
“Every penny of the £758 million [adjusted operating] profits came from letters, packages and test kits collected, processed, distributed and delivered by key postal workers – not by board members or shareholders, but by our members,” said Terry Pullinger, CWU Assistant General Secretary.
“This is an outstanding effort put in during unprecedented times by key workers… The CWU is immensely proud of our members and even more determined than ever to get the reward, recognition and salary increase these results show they deserve.” .
So far, the company has offered a 3.5% pay raise for workers, with the possibility of an additional 2% raise for workers who meet certain productivity targets.
However, the union is understood to be seeking an inflation-based wage increase “with no strings attached”. Figures released on Wednesday showed UK inflation hit 9% in April, its highest level in more than 40 years, following a surge in food, energy and transport costs.
A Royal Mail spokesman said it wanted to reach an agreement with CWU as soon as possible. “Our industry is characterized by a race to the bottom in wages and terms and conditions. We will not join that race and will retain our place as the industry leader in terms of pay and terms and conditions. We value the work we do with CWU and remain committed to reaching an agreement.”