The Royal Mail saw profits increase four-fold during the year of Covid-19 as restrictions and lockdowns led to a surge in online shopping.

Bosses revealed pre-tax profits for the year to March hit £726 million – up from £180 million a year earlier – with revenues up 16.6% to £12.6 billion.

The former state-owned service added that parcel revenues rose 38.7%, offsetting a 12.5% fall in letters being sent.

Chief executive Simon Thompson told the PA news agency the shifts to parcels had been faster than anyone expected.

He explained: “The capacity that we felt we needed in 2024 We needed now. That’s what the whole market has seen.

“In terms of parcels, we’re going to increase our investment in automation with parcels as well. That’s not just for efficiency reasons it’s also for later acceptance times, quality and capacity.”

The boss added that letter sending has declined but young people are showing a fondness for sending traditional notes through the post.

He said: “When we had a look at last year we did see some pockets of changes.

“Last year, stamps usage grew in the under 44-year-olds and especially among 18- to 24-year-olds. We do find some interesting trends in the land of stamps.”

The strong profits led to a resumption of payouts to shareholders.

A 10p-a-share, end-of-year dividend for shareholders was declared and the company said it was confident it could keep paying out future dividends of 20p-a-share from next year.

Royal Mail’s shift away from letters to focus on parcels was confirmed as the company revealed it generated more cash from parcel deliveries than letters for the first time in its history.

Parcels now account for 72% of revenues. Its European and US parcel business GLS also enjoyed a boost from the pandemic globally, with its revenues up 27.8% and more than half of its deliveries direct to consumers, compared with two-thirds coming from business-to-business customers.

Bosses added that despite the boosts in profits and revenues during the pandemic, they incurred significant additional costs due to Covid-19.

The company added that it does not expect the speed of parcel volumes to increase at the same levels once the pandemic is over but said it must be ready to capitalise on the shift to more online shopping.

It said: “Commercially we must adapt more quickly to the needs of customers and consumers, and finally deliver the long-promised changes on operational and cost transformation… Without these changes, we cannot be competitive into the future.”