Royal Mail has cheered a good Christmas, having delivered 130 million parcels in its crucial festive season.
Parcel deliveries rose 6% year on year in December and by 4% overall in the first nine months of its financial year.
But tough competition put pressure on pricing, leaving parcel revenues up by a more muted 1%.
Letter volumes continued to fall down 3% in the nine months to December 27.
Royal Mail said this was an improvement on the first half, when it saw a 4% drop. Letter revenues fell 2% in the past nine months.
Royal Mail, which is now fully privatised after the Government sold its final stake in October for just over £591m, added that it remained on track to cut costs by at least 1% over the full year.
Chief executive Moya Greene said: “Our postmen and women delivered a great Christmas even better than last year’s strong performance.”
Planning for the peak Christmas season began in the spring to ensure the company was able to handle the surge in deliveries.
Shares in Royal Mail lifted 3% as analysts praised a solid performance.
The parcels business is being seen as Royal Mail’s engine for growth, given the ongoing decline in letters.
Rival City Link was forced out of business in December 2014 amid the fallout from Amazon’s increased use of its own network for deliveries, with a raft of other firms in the sector also since warning of pricing pressures.
Royal Mail is fighting back with investment in technology to improve its service, while it also bought same-day delivery firm eCourier in November.
Royal Mail’s European parcels business, GLS, which accounts for almost a sixth of group revenues, is also performing better than expected.
It saw deliveries rise 11% and revenues jump by 10% in the first nine months of its year.
As part of efforts to cut costs, Royal Mail shed around 5,500 staff last year and secured around £40m of savings from a head office reorganisation.
It was a tough year for the group, framed by the threat posed by the roll-out of Amazon’s delivery network.
An Ofcom review on prices will report this year.