Troubled British parcels and mail delivery operator UK Mail Group today issued an upbeat message that it expects stable profits despite lower revenues this year and its new hub is now performing well after initial problems.
The listed company, whose CEO Guy Buswell resigned last autumn after two profit warnings, said in a pre-close trading update that its revenues are expected to show a 1% decrease for the financial year ending March 31, 2016, but pre-tax profit (before one off exceptional items) is anticipated to be “in line with management expectations”.
Overall revenue growth has been impacted by a continued mix effect in the Mail business which is expected to result in a revenue decline for the year of some 3%, despite Mail volumes for the year being up some 5% on the previous year, the company stated.
The Parcels business is expected to achieve volume growth for the year of some 4%. In the October – December 2015 third quarter, parcel volumes grew by 8% driven by e-commerce home deliveries. However, volume growth in the fourth quarter has suffered in comparison to last year due to the spike in volumes in the comparative period as a result of the demise of City Link, it pointed out.
UK Mail underlined: “Service levels in both our Parcels and Mail businesses remain at high levels. Our new automated hub continues to operate well and to achieve good throughput levels. We are making further progress with our plans to improve the efficiency of our network in markets that remain highly competitive.”
However, the company has still not announced a replacement for Buswell, who was chief executive for 10 years but who stepped down after a second profit warning last October. This was caused by the financial impact of major operational problems following last summer’s move to the new Ryton hub in Central England which caused delays and impacted on customer satisfaction.
UK Mail, which will report its 2015/16 results on 24 May 2016, reiterated that it “remains in a sound financial position”. The company increased revenues by 4.5% to £237.6 million in the April – September half-year but pre-tax profits slumped from £12 million to just £2.2 million, including net exceptional cost of £2.7 million from the hub relocation.
The parcel business increased half-year revenues by 5.3% to £124 million with a 9% rise in average daily volumes resulting from new customer wins and more B2C business. But this changed sales mix and higher operating costs meant operating profit declined to £7.9 million from last year’s £12.6 million.
