British parcels and postal operator UK Mail Group (formerly Business Post Group) announcedyesterday that it increased half-year profits strongly thanks to continued mail growth and despite
a decline in its parcels business.The company, which completed its re-branding last month, saw revenues drop 3.2% to £188.2million (€210.8 million) in the six months ending September 30, 2009. But operating profits rose18.3% to £7.1 million (€7.9 million) and net profits more than doubled to £5 million (€5.6 million)due to cost-cutting measures.
CEO Guy Buswell commented: “Our first half performance has been robust, despite the marketchallenges. We have taken more cost out of our distribution network, already one of the mostefficient in the industry. This, together with new business wins and innovative new products comingon stream, has increased profit by 18.6% despite a slight revenue reduction.
“Our strategy is to leverage our low-cost network in order to build competitive advantage anddrive profitable revenue growth. By bringing new products and services to market, we aim toincrease both the size of the market available to us and our share of that market. Whilst marketconditions for the balance of the year remain hard to predict, trading in recent weeks has been inline with our expectations, with minimal overall impact from the recent mail strikes. We thereforeremain confident about the outcome for the full year, and about UK Mail Group’s longer-termprospects.”
The mail division, which the company sees as the second-largest British mail service afterRoyal Mail, overtook the original core activity of parcels deliveries during the half-year tobecome UK Mail’s largest business. Its revenues grew 5.6% to £84.6 million and operating profitsimproved 5.4% to £5.9 million. Volumes increased thanks to new and existing customers, and thehybrid electronic-print service ‘imail’ grew to 15,000 items daily and is expected to break eventhis year.
The parcels division suffered a 10.7% drop in revenues to £80 million, a slight operatingprofit drop of 1.6% to £6.3 million and a 0.8% rise in the profit margin. The revenue declineslowed during the half-year, cost savings were increased and operational efficiency was improved,such as through the introduction of partial automation in the Birmingham hub. “We believe we havecontinued to trade well compared to our competitors, through an ongoing strong sales effort,combined with one of the lowest cost networks in the industry which enables us to win profitablebusiness in competitive tenders,” the company stated in its interim report.
Revenues of the specialist businesses (courier and pallets) dropped 4.8% to £23.6 million butoperating profits improved 67% to £2 million. UK Pallets performed well in a difficult market, withrevenues down 8% to £14.9 million but with better profits thanks to lower costs. Courier revenuesincreased by 1.2% to £8.7 million and profits were significantly higher thanks to a focus on moreprofitable areas of business and cost reductions.
Looking ahead, UK Mail said market conditions for the rest of the year up to March remainhard to predict. Parcels revenues are likely to remain under pressure in the second half while mailvolume growth will further slow, it predicted. Referring to the recent strikes at Royal Mail, UKMail said had a limited negative on mail volumes since customers delayed mailings, while theparcels business benefitted from companies seeking alternative delivery methods.
