Royal Mail has reported a 12% rise in annual operating profits to £671m from £598m a year ago in its first set of full-year results since the company floated on the stock market.
Sales rose 2% in the year to £9.46bn, from £9.15bn a year earlier.
Royal Mail's parcel deliveries service also overtook its letters business to become the biggest contributor to revenue for the first time.
Revenues in the parcel delivery business were up 7%.
But parcel delivery volumes were flat in the year. Letter delivery volumes fell 4% but this was better than predictions of a 6% fall.
Royal Mail has faced intense competition in its parcel delivery service over the past year as the market has boomed on the back of online shopping.
Continue reading the main storyThe results are the first full-year figures since the controversial flotation of Royal Mail last October.
The flotation was criticised for selling shares in the company too cheaply, as Royal Mail's shares rocketed as much as 87% above the initial share price of 330p in the first few days after it was listed on the stock market.
Shares in Royal Mail fell 29.5p, about 5%, to 545.5p in early trading on Thursday.
Royal Mail chief executive Moya Greene said the company's performance was in line with expectations but she admitted it faces a "couple of headwinds".
She said: "The competitive environment on the parcels side is more intense. We are taking steps to remain the leader in this growing market.
"On the letters side, the headwind is direct delivery and we have strategies in place to counter its adverse financial impact."
Universal serviceRoyal Mail called on communications regulator Ofcom to carry out a full review of direct delivery services across the UK.
These services include the delivery of postal items such as bank cards, bank statements and insurance documents among others and have been opened up to competition.
Royal Mail said the impact of rival TNT Post UK's publicly-stated plans to launch its own direct delivery service could reduce its revenue by more than £200m by 2017-18.
Under Royal Mail's universal service obligation it is required to deliver post to all parts of the UK six days a week.
But the postal business is concerned rivals will undercut its direct delivery service and only deliver to the most profitable parts of the country, leaving it with the cost burden of delivering to remote areas.
Royal Mail said if action was not taken there was a reasonable prospect its Ofcom-set profit margin target range of between 5% and 10% "may never sustainably be achieved".
However, Ofcom rejected Royal Mail's call for a review.
A spokesman said: "We do not believe that there is presently a threat to the financial sustainability of the universal postal service.
"Ofcom keeps the market under constant close review, examining the future business plans of major operators. We have a duty to secure the universal service, and if we identify any future threat we have powers to step in to protect it.
"We would expect Royal Mail to take appropriate steps to respond to the challenge posed by competition, including improving efficiency."
Sunday serviceOn Wednesday, Royal Mail announced plans to trial a Sunday parcel delivery service in response to increasing demand for goods ordered online.
Later this summer it will open about 100 offices on Sunday afternoons for customers to pick up their parcels.
Delivery offices with the highest parcel volumes across the UK will take part in the scheme.
The company will also try out parcel deliveries to addresses within the M25 motorway on Sundays.
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