UK Mail today unveiled higher half-year profits thanks to good growth in mail and parcel volumesand claims to be outgrowing rivals in the highly competitive British market.
The mail and parcels operator increased revenues by 11.9% to £225.7 million in the six monthsending September 30, 2012, driven by a double-digit increase in mail revenues. Pre-tax profits roseby 21.4% to £7.3 million.
CEO Guy Buswell said: “The group had an encouraging first half, demonstrating the results of ourcontinued efforts to reduce costs and further improve our efficient network. The whole team hasdone a great job in enabling us to build on our leading market positions, maintain our high servicelevels and strengthen our brand. The second half to date has continued in this vein, with currenttrading in line with our expectations.
“With our highly competitive business model, tight focus on costs, and strong balance sheetproviding strategic flexibility, we are well prepared for the competitive environment, and generaleconomic backdrop, to remain tough into 2013. We are therefore confident that we will come throughthis period of significant change in our industry as one of the strongest players in the markets inwhich we operate.”
The company’s mail business saw revenues surge by 23.6% to £115.9 million. One factor was theRoyal Mail price increase on 2 April 2012, which increased prices by about 11% on an annualisedbasis. However, revenues still increased by 17% on an underlying basis. The division’soperating profits were up 12.9% to £5.7 million, but the operating margin dropped to 4.9% from theprevious year’s 5.4%, largely due to Royal Mail’s price increase.
UK Mail said its mail volumes increased by some 2% compared to the prior year, while theoverall UK mail market experienced a decline in transactional volumes of some 5% per annum inrecent years. “We have therefore gained market share during the period. This growth hasbeen achieved through generating additional mail volumes from existing customers, largely due toswitching from Royal Mail as their prices increase, and a number of new customer wins.” The companysaid it was also benefiting from product innovation, with imail, the web-to-print postal service,continuing to grow at double-digit rates.
UK Mail’s parcel business, covering B2B, B2C and International, had moderate revenue growthof 4.4% to £87.2 million in the first half-year, although volumes increased by more than 10%.Parcels’ operating profit increased by 5.5% to £5.8 million with the operating margin improvingfractionally to 6.7%.
“This performance reflects the benefits of recent customer wins, although we continue to see anon-going mix change towards B2C, and further gains in market share,” the company stated. UK Mailhad “good volume growth throughout the summer period with no noticeable impact from the Olympics”and did not impose any Olympic area surcharges, in contrast to competitors.
The ‘ipostparcels’ service targeted at SMEs and consumers has been successfully established inthe market and is achieving rapid growth, partly due to the growth of eBay and Amazon. In addition,more customers have been won for the Retail Logistics service, which can now also handle hanginggarments, as well as providing customers with returns and inter-store transfer facilities.
The company also invested in its parcels operations to drive down costs and improveprofitability, with new telematics technology in long-haul vehicles and better customer deliveryinformation. “All customers can now be notified in advance of expected delivery times and giveneasy-to-use facilities if they need to re-arrange deliveries,” UK Mail said.
Looking at trends, UK Mail stressed that the overall parcels market in the UK remains a “highly competitive” environment, with “major change underway at a number of our competitors,including the potential consolidation of two of the major players”. UK Mail would aim to winnew customers with high service levels, its low-cost network, innovation and strong brand.
The small Courier business saw revenues drop by 18.4% to just £8.3 million. Costs were cutand the operating profit fell only 6.5% to £1.1m, resulting in a higher margin of 13.5%.
The Pallets business, which provides a nationwide palletised goods delivery service, increasedrevenues fractionally to £14.3 million but the operating profit declined by 26.4% to £0.8 million,blamed on “temporary gaps in our nationwide member network which resulted in additional temporaryoperating costs”.
Looking ahead, UK Mail said that trading in the initial weeks of the second half-year has beenin line with expectations. “We expect the economic backdrop to remain challenging into 2013 and thepricing environment to stay competitive. We are continuing to plan accordingly, with tight controlof our costs remaining a key focus. We have a strong brand and leading positions in our markets, ahighly competitive business model and a strong balance sheet. All of this gives us confidencethat we can outperform our competitors and gain further market share as our industry continues toundergo significant change.”
