UK Mail Group to continue cost control in “tough” economy

UK Mail Group told its investors yesterday that its revenues were up 13% year-on-year in the first quarter of its current fiscal year, but that economic conditions in 2012 remain “tough”. The Birmingham-based postal company said the three months up to 10 July 2012 saw revenues up 10% compared to the same period in 2011 when adjusted for April’s price hike at Royal Mail.

Peter Kane, the UK Mail Group chairman, said at his company’s AGM yesterday that the “satisfactory” results were driven by “good volume growth” in the firm’s parcel business and also good growth in the mail division.

Revenue was growing in the parcels business despite a change in mix towards more business-to-consumer parcels, Kane said. B2C parcels, which particularly arise from ecommerce purchases, tend to be lighter-weight and less profitable.

In the mail business, Kane said his company had a “healthy pipeline” of new business opportunities. The company’s mail business collects up to 18m items a day for more than 1,100 customers.

UK Mail said its courier business was showing “expected” decline, but its pallets division achieved revenue growth.

Looking ahead, Kane said that while his firm was in a sound financial position, it had to keep a focus on reigning in costs. Last year saw the company closing four of its depots, taking its network down to 50 sites.

“Tough”

“We fully expect the economic backdrop to remain tough in 2012 and the pricing environment to stay competitive,” said the UK Mail chairman. “We are planning accordingly, with tight control of our costs continuing to be a key focus.

“We have leading and differentiated positions in our markets, a highly competitive business model, and a strong balance sheet, which gives us strategic flexibility. We are therefore confident that we will come through this period of significant change in our industry as one of the strongest players in the markets in which we operate.”

UK Mail Group describes itself as the largest independent parcels, mail and logistics services company in the UK.

In the full year up to the end of March 2012, the company’s GBP 429m annual revenue comprised GBP 208.1m of revenue from its mail division (about 48% of group revenue), while its parcels business achieved GBP 172.1m revenue (about 40%). The Group’s courier business brought in a little over GBP 20m with the pallets business at GBP 28.3m.

During the full year up to March, compared to the year before, group revenues grew 8.4%, with mail revenues growing 14.5% as volume reduced by 2% and parcel revenues up 3.2%. Group profits before tax were down 6.2% to GBP 15.1m.