UK Mail profits down in first half, during infrastructure investment period
UK Mail Group has seen its profits slump in the first half of the year, as the company prepares for its major move into a new national hub.
Group revenue for the six months up to the end of September slipped by 0.8% to £241.4m, while profit after tax was down 75.8% year-on-year, to £2.2m.
The company’s mail division saw revenue down 5.1% compared to last year’s first half, to £109.7m, with its operating profit down 2.4% to £6.2m.
The parcels division saw revenue up 3.4% year-on-year to £109.4m, with operating profit up only 0.3% year-on-year to £11.2m.
The company’s courier division saw its revenue up 5.8% to £8.4m and its operating profit down 4.1% to £1.4m, while the pallets business slipped 1.1% to a £13.9m revenue, with operating profit down 59% to £200,000.
Despite the backward step, UK Mail chief executive Guy Buswell said he believed the Group had a “satisfactory” first half considering comparison to a “very strong performance” last year.
“Trading in the initial weeks of the second half, and overall trends within our individual businesses, have been as anticipated, with our peak trading weeks still to come. Our expectations for the full year remain unchanged,” said Buswell.
“We are now in a period of significant investment and transition, as we put the infrastructure in place for the next phase of growth. The new fully automated hub under construction represents the largest strategic development in our history. Ours is a growth market that is rapidly polarising between high quality, innovative and sophisticated operators and those at the opposite end of the value scale. Against such a backdrop, the investments we are making place us at a significant competitive advantage for the medium and longer term.”
UK Mail is set to move into its new national hub in Ryton, near Coventry, in May 2015. It has previously warned of constrained capacity until the move is completed.
Volumes
UK Mail said its parcel business has achieved 6.3% volume growth in the first half of this year, compared to the same period last year.
The company is continuing to see business-to-consumer deliveries becoming a bigger part of the volume mix as e-commerce popularity continues to soar in the UK. It said the B2C volumes offer a lower profit margin than its traditional business-to-business deliveries.
UK Mail said the back end of the second quarter of the year saw weaker trading than expected in the retail sector. And, in the second half of the year the company is expecting slower parcels growth as it faces “challenging” market conditions and comparison to last year’s strong performance.
Over in the mail division, UK Mail saw its daily mail volumes up 2% year-on-year in the first half, stating that the UK market as a whole saw a 3% decline. The company said it is building on growth in its hybrid mail service, imail, with a new printing service for documents.
The company has also launched a new packets service that aims to provide deliveries in the low cost end of the e-commerce market, to compete with rivals like Hermes and Yodel, who use self-employed lifestyle couriers for last mile delivery.
UK Mail said when it has its new hub near Coventry, it will continue to develop its services for this end of the market.
