Turnover and pre-tax profit at Royal Mail Group continued to climb last year, despite increased competition in the parcels sector and declining letter volumes.

The newly-privatised operator saw year-on-year turnover increase by 2% in the 12 months to 30 March 2014. Turnover derived from its parcels business increased by 7% to £3.1bn (2013: £2.9bn), despite what CEO Moya Greene described as more intense competition in the sector.

However, Royal Mail expects parcel volume growth to slow this year, stating that it does not operate some growing areas of online retail. It claimed volume from its largest, unnamed parcel customer is likely to reduce this year as the customer has made changes to its final-mile distribution, including expanding its own delivery service. This customer accounts for 6% of its UK Parcels, International and Letter (UKPIL) business turnover.

Greene said: “We are facing a couple of headwinds. The competitive environment on the parcels side is more intense. We are taking steps to remain the leader in this growing market.”

Turnover in its letter delivery business fell 2% to £4.6bn (2013:£4.7bn), which the company said was at the “better end” of its expectations. Mail volumes dropped 4% during the year, but the firm saw volumes level-out in the second half of the year due to improved economic conditions and increased volume of letters from energy companies.

Royal Mail said it would be cooperating fully with postal regulator Ofcom, following a complaint made by rival final-mile carrier TNT Post earlier this year. It hopes the investigation, surrounding changes to some of its final-mile delivery contracts, will be concluded soon so that its planned changes can be made.

“Our key value drivers of single digit revenue growth, margin expansion and underlying free cash flow growth remain the objectives for the group for the 2014-15 financial year,” Greene added.

Group financial highlights

  • Turnover up 2% to £9.4bn (2013:£9.1bn).
  • Reported pre-tax profit increased to £1.6bn from £283m last year.
  • Turnover for UKPIL increased by 2% to £7.7bn (2013:£7.6bn).
  • Turnover for European logistics company GLS up 10% to £1.6bn (2013: £1.4bn).