UK Mail Group profits soar 28% on booming parcels business
UK Mail Group saw its profits jump 28% last year, as volumes reached the highest levels in company history. The company, which is currently investing in expanded capacity to build on demand levels, achieved double-digit profit growth in both its parcels and mail divisions during the 12 months up to the end of March 2014.
Revenue overall rose 7% year-on-year to £508.5m, while pre-tax profits for the Group increased to £22.8m.
UK Mail claimed an increased market share for its parcels business with operating profits up by 37.2% to £22.4m on the back of a £219.9m revenue that was 16.2% up on last year.
The company’s mail business saw revenues rise by 1.5% year-on-year to £245.3m, or 48% of group revenues. Mail operating profit rose 18% to £12.7m.
UK Mail said it held on to customers and managed to pick up new contracts during the year. March 2014 saw the highest ever daily volumes for both parcels and mail.
Average daily volumes for parcels grew 19% year-on-year thanks to e-commerce growth, while mail volumes grew by 2% compared to 2013.
The Group’s courier business, accounting for 3% of revenue, did see its revenue drop 1.9% over the year, but cost-cutting helped achieve 7.2% profit growth, to £2.7m. The pallets business saw its revenues drop 3.2% year-on-year, but profits rose 18.8% to £900,000.
Guy Buswell, the UK Mail chief executive, said the results reflected an “excellent year” for his firm, with profitable growth in all areas of the business.
“Such a robust performance shows that we have accomplished almost all that we set out to achieve
through the programme of investment and change over recent years,” he said.
“We have now entered a new phase of significant investment, in a new automated hub, in additional capacity, and in further developing our range of innovative consumer-facing services. This strategic approach will position us well for the next stage of profitable growth, with the benefits expected to be seen from 2015 onwards.”
Investment
UK Mail is currently preparing to move its head office and national hub to a new site in Coventry mid-2015, as its current site in Birmingham is in the path of the government’s planned high speed rail project.
The government has agreed to pay UK Mail £9.2m for its Heartlands site, £8.6m of which was paid in December.
The firm said the move would bring extra capacity and reduced operating costs thanks to a higher level of automation, but relocation would create challenges.
Buswell said a programme has already been instigated to manage the relocation.
About 20% of parcels are processed by automated facilities at present, after an installation programme in 2010, but the company intends to increase this to 80% from September 2015, under its current £20m investment programme. Expectation for the new automation technology is that it will increase UK Mail’s central sorting capacity by about 45%.
UK Mail is also expanding its network of 50 depots, with three having capacity expanded last year, and eight earmarked for expansion this year.
Nevertheless, parcels growth at UK Mail is expected to slow in 2014/15 as its capacity is constrained ahead of new capacity coming online.
As well as investing in expanding capacity, UK Mail has been developing its IT network with new scanning software to improve the tracking of the 200,000 parcels and 11.5m mail items it handles each night.
The new software will allow UK Mail to provide one-hour delivery windows for parcel customers, a move it believes will help it to compete in the “highly competitive” UK parcels market.
A new packets delivery service, using Royal Mail final mile delivery, has also been launched recently, to compete against mass-delivery rivals in the low-cost e-commerce shipping market. UK Mail estimates this market to be worth £1.2bn, with its eye particularly on the £200m it estimates being handled by lifestyle couriers.
