Britain’s Royal Mail (RMG.L) said on Thursday it would return 400 million pounds ($539.84 million) to shareholders after the postal company forecast higher annual earnings in its UK business following a strong first half.

The company, one of the world’s oldest postal firms, was able to turn a corner since the pandemic began as more people shopped online, boosting its parcel delivery business.

However, analysts have warned that cost inflation could hurt Royal Mail’s margins.

“We’re seeing the benefits of our programmes to reduce costs, and are developing our plans to address inflationary pressures which will impact next year and beyond,” Chief Executive Officer Simon Thompson said.

Royal Mail reported a surge in group adjusted operating profit to 404 million pounds for the six months ended Sept. 26 and forecast full-year profit for its UK business of about 500 million pounds.

The company said it will buy back shares worth 200 million pounds starting immediately, while the remaining 200 million pounds will be paid as a special dividend.

Royal Mail plans to move towards a net nil cash position over the next two years.