Royal Mail said today it has identified £350m in cost savings this year to battle inflationary pressures and the slowing British economy after the company's 2021-22 profit slightly missed market expectations.
The postal company said market expectations for 2022-2023 adjusted operating profit of £303m for its UK business could be met if it can agree upon a pay deal with its union in line with its current offer, and avoid industrial action.
Royal Mail has been in talks with its largest union Communication Workers Union (CWU) over pay increases.
It is offering a total pay rise worth up to 5.5% - of which 2% is to be paid as soon as a deal is agreed upon.
The CWU had rejected the offer and publicly criticised Royal Mail, making preparations for a possible ballot for industrial action.
The relationship between Royal Mail and the CWU has been a tumultuous one in the past, with a two-year-long clash over pay and operational changes culminating in a December 2020 settlement.
The 500 year old company had benefited from a boom in parcel demand during the Covid-19 pandemic.
But rapid inflation and rising costs of labour and fuel are a challenge as it aims to transform itself from a letter operations to a parcel-led business.
"As we emerge from the pandemic, the need to accelerate the transformation of our business - particularly in delivery - has become more urgent," chief executive Simon Thompson said in a statement today.
The company said its adjusted operating profit for the year ended March 27 came in at £758m, slightly below average market expectations of £771m.
Royal Mail also warned of margin pressures in the US at its more cash-generative international operation, GLS, as inflation bites.
