Royal Mail has said it will need to hike prices and slash costs to offset soaring inflation amid an “uncertain” outlook for the economy as it posted a rise in annual earnings. The group cautioned over “significant headwinds” as it faces higher wage demands, surging energy and fuel costs.
It is cutting costs by more than £350 million to help offset the hit, but said it would also have to look at price increases. The group has already hiked the cost of posting letters by an average of around 7%, and parcel prices by an average of about 4%.
It came as the group reported an 8% rise in underlying operating profits to £758 million for the year to the end of March. On a reported basis, pre-tax profits fell 8.8% to £662 million.
The group said it was at a “crossroads” in its overhaul as parcel delivery becomes ever more important.
Simon Thompson, chief executive of Royal Mail, said: “As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent.
“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.
“The last two years has shown us all how quickly customer needs can change. Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team.
“We have no time to waste.”