Royal Mail deal with unions crucial as profits plummet

Royal Mail has seen profits drop by nearly a third and warned that efforts to reach a deal with unions over workers’ pay and pensions could hit financial performance.

The FTSE 250 firm said yesterday it was a “priority” to reach an agreement with the CWU – the communications union – with the mediation process likely to run until Christmas or beyond.

While the company’s annual results hang on the crucial festive period, Royal Mail said the “industrial relations environment” could knock its second-half performance.

Pre-tax profits for the six months to September 24 tumbled 30% to £77million, from £110million a year ago.

Adjusted operating profits before transformation costs – the Royal Mail’s preferred measure – climbed by 7% to £323million over the period.

Revenue also rose, by 2% to £4.8billion, with the lion’s share of the growth coming from the group’s Europe-focused parcel business General Logistics Systems (GLS), helping to offset flat revenue at the UK letters and parcels business.

Chief executive Moya Greene said the firm had enjoyed a good start to the year.

She added: “GLS delivered a strong performance, with revenue up 9%. Outside the EU, GLS is also growing through selective acquisitions to capture higher growth markets.

“Our priority is to reach agreement with the CWU to help underpin the sustainability of the business.”