Parcels account for majority of revenues at Royal Mail for first time

Revenue from parcels has topped revenue from letters at Royal Mail for the first time in its history, as the e-commerce boom during the pandemic transformed its operations.

In a statement to investors Royal Mail said that 60% of its revenues were derived from parcels in the six months ending 27th September – compared to 47% in the prior six month period.

Overall revenue grew 5% year-on-year to £3.8 billion at Royal Mail, while its international arm GLS reported a 21.7% increase in revenues to £1.87 billion. Overall group revenues grew 9.8% year-on-year in the first half.

Keith Williams, Interim Executive Chair at Royal Mail, said: “The growth in online shopping and parcels during the pandemic, combined with our increased focus on delivering more of what customers want, has led to revenue growth of nearly 10% for the Group in the first half, with Royal Mail revenue up nearly 5%. For the first time, parcels revenue at Royal Mail is now larger than letters revenue…”

Looking to the Christmas peak and beyond, Royal Mail said that in the second half of its financial year, ‘if customer behaviours remain similar to our current experience’, it was projecting continued strong growth, with revenues up 30%.

It said that domestic parcel revenue growth is expected to be 35% in the second half, a result of the second national lockdown, and potential subsequent localised lockdowns.

Last month Royal Mail said it was to deploy fully-automated parcel sorting machines from BÖWE SYSTEC in its Tyneside, Medway, Nottingham and Southampton mail centres. It revealed that build will commence on the first machine shortly after Christmas and it was planned to be operational in late Spring, with the others later in financial year 2021-22.

It said that parcel automation remained at 33% across its network.

Royal Mail also said that its North West hub in Warrington would come into operation in 2022 and will begin fit out of the automation equipment in January 2021.

In addition, Royal Mail has also commenced construction of its Midlands parcel hub in Daventry, which is scheduled for completion in 2023. With the capacity to process over 1 million items per day, it will be the largest Royal Mail parcel hub in the UK.