Royal Mail warned that the company is at a “crossroads” and urgently needs to adapt to the post-pandemic environment as package deliveries, initially supported by the Covid lockdowns, continue to decline.
As the cost of living rises, he’s putting more pressure on the postal company as he struggles to reach a wage agreement with unionized staff pushing for an inflation-driven wage increase.
Royal Mail announced on Thursday that its annual pre-tax profit fell 8.8% to £662m and revenues remained flat as the easing of Covid restrictions slashed demand for package deliveries. The decline was partly offset by the distribution of Covid test kits, but overall UK parcel demand fell 7% year-on-year.
Chairman Keith Williams admitted that the financial headwinds of the pandemic are “now dissipating” and the company is bracing itself for economic growth and higher inflation that could pose challenges for both its UK and international delivery business.
We are at a turning point with the transformation of Royal Mail.” “We need to adapt our business to the post-pandemic world, and while we are making progress in some areas, more needs to be done in others”.
The news plunged stocks by nearly 10% on Thursday morning, a loss of nearly £400m in the company’s value, with Royal Mail posting the FTSE 100’s biggest drop.
The courier is also facing an ongoing wage demand from staff represented by the Communications Workers Union (CWU), which Royal Mail says its full-year profits are “earned through the hard work of our members.”
“Every penny of £758 million [adjusted operating] Profits are derived from letters, packages and test kits collected, processed, distributed and delivered by our members, not by board members or shareholders, but by key postal workers,” said Terry Pullinger, the CWU’s deputy general secretary.
“An extraordinary effort delivered at unprecedented times by key employees… CWU is immensely proud of our members and more determined than ever to receive the rewards, recognition and pay raises these results prove they deserve.”
The company has so far proposed a 3.5% wage increase for workers, and there is potential for a further 2% increase for workers who meet certain productivity targets.
However, it appears that the union wanted an inflation-based wage increase “unconditionally”. Figures released Wednesday showed UK inflation hit 9% in April after rising food, energy and transport costs, the highest in more than 40 years.
A spokesperson for Royal Mail said it wanted to reach an agreement with the CWU as soon as possible. “Our industry is characterized by a race to the bottom on pay and terms and conditions. We will not participate in this race and will maintain our position as the industry leader in fees and terms and conditions. We value the work we do with the CWU and are committed to reaching an agreement.”