Royal Mail’s revenue from parcels has overtaken its revenue from letters for the first time as online shopping has surged during Covid-19 restrictions. Parcel deliveries accounted for 60% of the company’s revenue, up from 47% before the pandemic.
The postal service’s revenue grew by 5% year on year in the six months to 27 September, while revenue at the wider group increased by 10%, to £5.7bn, helping the firm register its first growth since privatisation in 2013.
Despite this, Royal Mail swung to a £20m operating loss in the first half, compared with a £61m profit in the same period the previous year, blaming increased costs. At the pre-tax level, the company made a profit of £18m, a fall of almost 90% on the previous year’s £146m.
The shift towards handling fewer letters and more parcels pushed up the company’s costs by £95m, as parcels require more manual sorting by workers. The company also faced an extra £85m in costs related to doing business during the pandemic, including the purchase of protective equipment, social distancing requirements and more worker absences.
Royal Mail said it spent £147m on voluntary redundancy charges following its announcement in June that it was cutting 2,000 jobs – a fifth of its management roles – in a cost-cutting plan accelerated by the coronavirus crisis.
The postal service has long struggled with the shift from letters to parcels as businesses rely on email for more routine communications, and consumers increasingly turn to online shopping.
Keith Williams, Royal Mail’s interim executive chair, said: “We have been pushing forward with our transformation in Royal Mail and delivering more new innovations, products and services for our customers.
“The level of revenue growth in the first half shows we have the right strategy and that Royal Mail can be cash-generative and a sustainable, profitable business in the future. But we need to speed up the pace of change in order to create a profitable business in the UK.”
The company has previously signalled it may ask the regulator Ofcom if it can end Saturday letter deliveries.
Williams thanked Royal Mail staff for their “dedication and commitment”, following concern from trade unions about postal workers’ safety during the pandemic.
Royal Mail is planning to hire a record 33,000 temporary workers for the festive period, two-thirds more than usual, to deal with the boom in parcel deliveries.