Royal Mail’s profit outlook ‘shaky’

LONDON: Royal Mail Group Plc said yesterday that the pay dispute with its largest labour union was a “key uncertainty” for the group this fiscal year after 2021-22 profit missed analysts’ estimates.

The Communication Workers Union (CWU), which represents more than a hundred thousand Royal Mail postal workers, had criticised and rejected the company’s latest wage offer, and the two parties are now in a dispute resolution procedure.

Royal Mail said it could meet 2022-23 market expectations of adjusted operating profit of £303 million ($375.11 million) if it reached a deal with the union in line with its current offer, and if it avoids a strike.

Analysts at JPMorgan said they believed it was unlikely that wage talks would go smoothly, and expected there still could be a material downside risk to estimates.

The relationship between Royal Mail and the CWU has been a tumultuous one in the past, with the prior dispute lasting two years before the December 2020 settlement.

“We are at a crossroads with the transformation of Royal Mail,” nonexecutive chairman Keith Williams said. “We need to adapt our business to a post-pandemic world and whilst we are making progress in some areas, more needs to be done in others.”

The 500-year-old company had benefited from a boom in parcel deliveries during the Covid-19 pandemic, but a slowing UK economy, subsiding demand on lower consumer spending amid the cost-of-living crisis, and rapid inflation also pose a challenge to its outlook.

Adjusted operating profit for the year ended March 27 was £758 million, slightly below average market expectations of £771 million, as cost savings fell short of targets and parcel volumes tapered off lockdown highs.