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Royal Mail expected to reveal cost savings amid job cuts

By By Anna Wise, PA
Royal Mail is expected to post higher profits amid cost savings from job cuts (Steve Parsons/PA)

The City will be looking out for signs that Royal Mail has made significant cost savings following substantial job cuts when it updates the market next week.

Earlier this year, the company announced plans to axe 700 management jobs in a bid to reduce costs by about £40 million a year after experiencing a dip in revenue following the Covid delivery boom.

Analysts expect adjusted operating profits from the full year to May 6 to be £771 million, up from £702 million reported the previous year, when it publishes its full-year financial results on Thursday 19 May.

Shareholders will be hoping the results show evidence of its money-saving efforts in the balance sheets, as well any signs it can offset the impact of inflation driving up operation costs.

Royal Mail’s in a tricky position heading into its resultsLaura Hoy, Hargreaves Landsown

It comes amid concerns the rising cost of living could lead to a reduction in consumer spending, so investors will be cautious they could see parcel volumes take a hit.

Analysts warn Royal Mail’s pandemic success may be overshadowed by recent cuts and pressure to keep wages up in line with rising prices.

Laura Hoy, an analyst at Hargreaves Lansdown, said: “Royal Mail’s in a tricky position heading into its results.

“The group’s been delivering on an impressive turnaround that’s seen a shift toward automation and efficiency, which was only helped along by the pandemic.

“Now that those tailwinds have dissipated, much of the transition involves cutting costs, and Royal Mail’s biggest cost is its massive network of employees.”

Ms Hoy added that investors will be looking to see that the group is on track with its planned investment into automation and that spending is not getting out of hand.

“Management forecast well over £400 million of investment costs at the half year. With inflation driving up construction costs, we’re keen to know exactly what that means.

“We’ll also have an eye on parcel volumes, which have come down somewhat from pandemic highs. They appear to be rebasing at a higher level, though, a trend we’d like to see solidified at the full-year results.”

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Dive Deeper:
‘Golden era’ of cheap food over as two in five Britons buy less to eat
ONS survey reveals worsening effects of cost of living crisis, with food prices forecast to have risen by 9% in…
Stock Market Tries To Bounce From Fresh 2022 Lows; Tesla CEO Elon Musk Puts Twitter Deal 'On Hold': Weekly Review
The major indexes fell to fresh 2022 lows before bouncing late in the week. Tesla CEO Elon Musk put his…
NatWest chair says best way to help poorest is through benefits
Across-the-board tax cut would be blunt, very costly and give wealthy a boost, warns Howard Davies
‘Unstoppable until they aren’t’: are tech market losses signs of a bust?
Apple is no longer the most valuable company, Meta took a $230bn hit, Amazon reported its first loss since 2015,…
One subscription that gives you access to news from hundreds of sites
One in five first-class letters and parcels fails to arrive next working day
Just weeks after double-digit price rise, Royal Mail says services hit by continuing effects of Covid and staff absences
Will lifting the minimum wage worsen inflation and raise interest rates?
Wages have become the latest battleground in the election, with debate raging about how much extra workers can get paid…
Get all your news in one place