UK Mail forecasts tough second half
LOGISTICS group UK Mail has said it expects its tough market conditions to continue for the rest of the financial year.
In a pre-close statement, the firm, which has a large operations hub in Birmingham, said first half revenues were expected to be up around 5.5% on last year, largely due to a strong first quarter.
However, it said the second quarter had been much tougher and these conditions were likely to remain in place during the second half.
The announcement disappointed the markets and shares were down almost 12% in early trading.
“Overall performance in the first half of the year is anticipated to be in line with our expectations, with a satisfactory trading performance in the first quarter and a more challenging second quarter,” it said.
Adjusting for the increase in Royal Mail prices implemented in May 2011 and offset by there having been one less working day than in the previous year, underlying group revenues increased by around 2%. On an underlying basis, group revenues showed a slight increase in the second quarter, compared to the increase of 4% in the first quarter.
“We expect the market conditions experienced in the second quarter to continue for the remainder of the current financial year,” added the firm.
Its Mail business grew its revenues on a reported basis; on an underlying basis, revenues were broadly flat with the same period last year. It said the Mail business remained well positioned in its market with a strong pipeline of new business opportunities.
Parcels revenues continued to grow compared to the same period in the previous year, reflecting the benefit of recent customer wins, although costs are set to remain challenging.
Its Courier business has continued to grow its revenues, while the Pallets business performed well in a challenging market.
“We currently expect the group’s underlying operating profit for the half year will be broadly in line with last year, after adjusting for the profit impact of one less working day (estimated at some £500k).
“We have taken further action to reduce the fixed costs of our business, with the closure of two depots reducing our total number of parcels/mail sites to 52, along with some restructuring in a number of other areas of our business, which we expect will result in one off costs of some £700k.,” it said.
UK Mail said it continued to invest in IT systems to improve efficiency and that the overall financial position of the group was sound.
