UK Mail hits challenging few weeks, as parcel growth slows
UK Mail Group has hit a more challenging period of the year than expected — with parcel volumes not growing as hoped. The British mail and parcels carrier issued a pre-close trading update last week that warned that its second quarter of the year has proven tougher than anticipated.
The company said September has proven particularly challenging, but said it was too early to tell whether this was likely to be a persistent trend.
UK Mail, which has been expecting some tougher times as it moves its national hub to a new location near Coventry and associated capacity constraints, said it was expecting revenue for the six months up to the end of September to be 1% below the same period last year.
Discounting the fact there has been one less working day in the half compared to last year, underlying revenue looks set to be similar to last year, and “broadly in line with our previous expectations”.
But the big growth area for the business, driven by e-commerce, has underwhelmed in the latest quarter.
UK Mail said its average daily parcel volumes are expected to come in 6% up on last year’s first half as the company’s overall parcels mix continues to skew towards more business-to-consumer deliveries. This compares to the 10% year-on-year growth seen in the first quarter, and 19% seen in last year’s full year.
“As previously indicated, the level of parcels volume growth has continued to moderate as we annualize the higher volume growth achieved during the last financial year,” the firm said.
UK Mail said its mail business revenues are expected to be down by 6% compared to last year, with new customers taken on board using less profitable services, with average daily volumes growing 2% year-on-year.
With the courier business showing a “satisfactory” revenue increase, and the pallets business expected to see revenues broadly in line with last year, albeit with increasing network costs hampering overall performance, UK Mail said that overall the first half had been “satisfactory”.
Expansion
UK Mail, which is moving its hub because the British government wants to build a high-speed rail line through its current facility in Birmingham, said its new automated hub continues to be “on track” to be operational from May 2015.
The firm said the new facility would provide a “significant step forward” in how it operates, creating extra capacity and cutting costs.
“Our focus over the period until May 2015 is to manage the transition of our business to the new location and changed working practices whilst maintaining the underlying momentum in our business,” said the firm in its pre-close statement.
“With the strength of our market position, a well invested, integrated and automated network, and a growing suite of innovations and industry-leading products and services, we remain excited about the medium term growth prospects for UK Mail.”
UK Mail is expected to release its results for the first half on 18 November.
The company has a national network of more than 50 sites and 3,500 vehicles. As well as the new hub, the company is expanding eight of its depots this year, after expanding three last year.
Last year the firm turned over £508.5m, with pre-tax profits of £22.8m.
