New UK mail business delivers strong start

A rival business to Royal Mail was today on course to move into profit less than a year after leading the break-up of the UK postal monopoly.

UK Mail has shifted more than 23 million items since its launch in May and has set its sights on capturing 3% of the UK mailing market – estimated to be worth £5 billion a year.

The service was set up by Slough-based parcels group Business Post after regulator Postcomm gave companies the right to enter the UK market in 2003.

UK Mail collects post from customers and processes it through its network of 64 sites – the largest of which is in Birmingham – before passing it on to Royal Mail for delivery by local postmen.

Peter Kane, chairman of Business Post, said UK Mail had made a “highly satisfactory” debut and was expected to become profitable in the six months from the start of October.

Customers had already been secured in the telecoms, utilities, government and retail sectors, he said.

Details emerged as Royal Mail prepares to unveil results for the first six months of 2004 – expected to show profits of £200 million and improving reliability.

Analysts noted that UK Mail is currently generating £12 million in annualised revenues and this will increase as more customers become aware of its services.

Arbuthnot analyst Michael Morris said 95% of deliveries were on time, which was “far in excess” of that being achieved by Royal Mail.

He said: “We feel that the obvious success UK Mail has achieved in the early months of its operation will facilitate the winning of new contracts with large customers.”

Business Post also announced today that its pre-tax profits rose 12% to £9.1 million during the six months to September 30.

Progress was being driven by growth in its core business-to-business parcel service Express, which accounted for 59% of group turnover of £109.9 million.

Revenues from Express were 6% higher than a year ago during the six months in spite of a tough market for next-day deliveries.

At the same time, a partnership with US giant FedEx was a key contributor to revenues from international deliveries rising 19% to £13.6 million.

HomeServe – its UK business-to-consumer parcels service – reported a 57% jump in turnover to £10.8 million after winning new customers such as Dixons and PC World.

Mr Kane said: “The board believes that the group already contains the elements necessary for further substantial profitable growth.”