UK Mail pre-tax profit falls 18.2% in first half

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UK Mail saw pre-tax profit fall 18.2% to £6m, in interim results for the six months ending 30 September, down from £7.4m this time last year, as it blamed a fall in margins on the impact of the extra bank holiday for the royal wedding.

The firm also took a hit of £800,000 in restructuring costs as it looked to drive down costs in its parcels division this year as it closed two depots last month, taking its site network to 52. Group revenue was up 5.7% to £201.6m, on last year’s £190.7m.

Its parcels division recorded a revenue increase of 3% to £83.5m, however operating profit fell 14% to £5.6m, with the operating margin slipping from 7.9% in 2010 to 6.6%.

"Due to the fixed cost nature of our parcels business, the impact of one less working day reduced operating profit by some £400,000, with an impact on operating margin of some 0.4%." It says performance was also affected by subdued B2B growth in the first half of the year, although this has been partly offset by an upturn in B2C volumes.

Pallets revenue remained steady at £14.2m (2010: £14.3m), however operating margin rose to 7.2% from 6.3% the previous year, leading to a rise in operating profit from £900,000 in 2010 to £1m. UK Mail says it sees growth opportunities for the division as the economy recovers.

The Mail division saw revenue climb by 9.2% to £93.8m (2010:£85.9m), however this figure includes the effect of the Royal Mail price increases on 6 May, which it says pushed up prices by 15% annually. Operating profit was down 9.3% to £5m, from £5.6m in 2010; a margin of 5.4% (2010:6.5%). Some 0.9% of the margin decrease is due to Royal Mail pricing.

Guy Buswell, CEO at UK Mail, says: "The group saw a satisfactory first quarter followed by a more challenging second quarter for the markets in which we operate. These conditions have continued into the third quarter to date and we assume that the economic environment will remain tough throughout the current financial year."