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London - Britain's Royal Mail Group said it would have to rely on cost control measures and letters sales to meet full-year expectations after rising competition meant parcels revenue would be lower than anticipated.
UK letter volumes declined 3% - better than the firm's expected range of a 4-6% decline per year - as consumers increasingly use email, but revenue rose by the same amount thanks to price increases.
In parcels, where the firm already generates half of its turnover and sees as its growth driver, the firm said its performance was hit by increased competition at home and in its export market, which also suffered from the impact of a stronger pound. The retail sector also slowed in June, it said.
Battles around price and delivery hours are intense, while the decision of Amazon, Royal Mail's single biggest customer, worth 6% of sales, to launch its own delivery service in the past year has been a blow to the group.
UK parcels volumes grew by just 1% in the period, while revenue declined by 1%.
"Given the increasing challenges we are facing in the UK parcels market, our parcels revenue for the year is likely to be lower than we had anticipated," Royal Mail chief executive Moya Greene said in a statement.
"However, through cost control measures and with continued good letters performance we expect to be able to offset the impact on profit such that our overall performance would remain in line with our expectations for the full year."
Greene said its parcels revenue would be dependent on its second half performance and no further weakening in its addressable UK parcels market.
Concerns around such conditions, as well as the impact of a rival British mail delivery service and regulatory probes and wrangling have helped send Royal Mail's shares down 22% in the last six months to 466 pence.
