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(Bloomberg) — Royal Mail Plc sees sales declining in the coming year as the British company posts fewer Covid-19 test kits and parcel volumes fall with consumers returning to shops.
The historic service said the changing environment means cost savings need to be made faster, according to a statement on Thursday. Parcel volumes for the year ended March 27 were up 31% compared with the pre-pandemic period but test kits accounted for about 7% of total packages sent, while addressed letters continued their decline in volumes.
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“We are at a crossroads with the transformation of Royal Mail,” said Chairman Keith Williams. “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.”
Wage inflation, sharp increases in energy and fuel costs and a cost of living squeeze create uncertainty for the business entering the new fiscal year, Royal Mail said. The Covid-19 boost to parcel volumes from online shopping and test kits is receding, and the business is still suffering pandemic-related costs and inefficiencies.
The company also has to agree pay deals with both of its unions this year, with a 1% pay hike for Communication Workers Union members equating to 45 million pounds ($55.6 million) of cost inflation. Assuming a deal can be agreed, the current adjusted operating profit consensus of 303 million pounds for the coming year is possible but “with downside risk,” the company said.
Full-year adjusted operating profit was 758 million pounds, missing analyst estimates. Royal Mail revenue fell 1.6% year-on-year.
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