Royal Mail has tumbled to a first-half operating loss, but hiked its sales outlook amid a boom in parcel deliveries as online shopping surges during the pandemic.

The group reported a £20 million operating loss for the 26 weeks to September 27 compared with earnings of £61 million a year ago, which comes after its core Royal Mail postal arm plunged to a £176 million operating loss.

Group pre-tax profits crashed 90.2% to £17 million over the first half as the woes in its letters business and soaring costs offset a near-10% jump in revenues to £5.7 billion.

But it said full-year revenues at Royal Mail are now expected to be between £380 million to £580 million higher year-on-year, which could see the division deliver a “better than break-even” result.

The firm cheered the boost from rocketing online shopping and delivery demand, with parcels revenue dwarfing turnover from letters for the first time.

Parcels revenues now represent 60% of group-wide sales, compared with 47% a year earlier.

Keith Williams, interim executive chairman at Royal Mail, said: “Whilst the Covid-19 pandemic continues to present challenges for both Royal Mail in the UK and (international parcels business) GLS, the first-half performance has been above our initial expectations in many areas.”

But the first-half results show the costs faced during the coronavirus crisis, with the group forking out £155 million in its first half for social distancing measures and to cover a rise in absence rates.

The ongoing decline in letters also continued to weigh on the group, with mailings down 33%, while parcel mailings lifted 31%.