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Royal Mail’s revenue from parcels has exceeded its revenue from letters for the first time, as online purchases increased during the Covid-19 restrictions. Package deliveries accounted for 60% of the company’s revenue, up from 47% before the pandemic.
Postal service revenue grew 5% year-on-year in the six months to September 27, while overall group revenue increased 10%, to £ 5.7 billion, helping the company post its first growth since privatization in 2013.
Despite this, Royal Mail posted an operating loss of £ 20 million in the first half, compared to a profit of £ 61 million in the same period a year earlier, blaming increased costs. On the pre-tax level, the company made a profit of £ 18 million, a nearly 90% drop from £ 146 million the previous year.
The shift towards handling fewer letters and more packages raised the company’s costs by £ 95 million, as packages require more manual sorting by workers. The company also faced an additional £ 85 million in costs related to doing business during the pandemic, including the purchase of protective gear, social distancing requirements and more worker absences.
Royal Mail said it spent £ 147 million on voluntary redundancy charges following its announcement in June that it was cutting 2,000 jobs, a fifth of its management functions, 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, Acting Executive Chairman of Royal Mail, said: “We have been moving forward with our transformation at Royal Mail and bringing more new innovations, products and services to our customers.
“The level of revenue growth in the first half shows that we have the right strategy and that Royal Mail can generate cash and be a sustainable and profitable business in the future. But we must accelerate the pace of change to create a profitable business in the UK. “
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The company has previously indicated that it can ask the regulator Ofcom if it can stop letter deliveries on Saturdays.
Williams thanked the Royal Mail staff for their “dedication and commitment”, following unions’ concern for the safety of postal workers during the pandemic.
Royal Mail plans to hire a record 33,000 seasonal workers for the holiday period, two-thirds more than usual, to cope with the boom in package deliveries.
