Second quarter fails to deliver for UK Mail

PARCELS and post delivery group, UK Mail, has said performance during the past six months has remained in line with expectations – despite a difficult second quarter.

In a trading update covering the six months to September 30, 2014 the group said revenues were expected to decline by around 1% compared with the same period last year although, adjusting for there being one less working day in the period, underlying revenues were expected to be in line with the previous year.

“Whilst the first quarter showed good revenue performance, the second quarter has been more challenging with parcels volumes below expectations, particularly in the latter weeks of the period. It is too early to assess whether this represents a more persistent trend and therefore the extent of any possible impact on the full year outcome,” it said.

Its Parcels business saw average daily volumes for the first half increase by 6% compared to the same period last year.  This volume growth has been driven partly by an increase in home deliveries related to online shopping, with a continuation of the mix change towards B2C.  

It said the level of parcels volume growth had continued to moderate, although it expects this to pick up again towards the end of the year.

Revenues in the Mail business are expected to be down by some 6%, due to mix changes, with average daily mail volumes some 2% ahead of the same period last year.  

“We have experienced a mix change in the second quarter towards the lower revenue per item Customer Direct Access mail. This is due to new customer account wins which utilise this service,” it said.  

Its Courier business is predicted to show a satisfactory revenue increase on the same period last year, while the Pallets operation is expected to report underlying revenues broadly in line with last year.  

However, it said the Pallets business had suffered from increasing network costs which have resulted in the overall performance being below expectations. Action is currently being taken to address this.

The company said its strategic investments were progressing to plan and its new automated hub – being built at Ryton to replace the existing Birmingham hub – remained on course to be operational from May 2015. It said this new facility would provide a “significant step forward” in how the business operated.

“Our focus over the period until May 2015 is to manage the transition of our business to the new location and changed working practices whilst maintaining the underlying momentum in our business,” it said.

“With the strength of our market position, a well invested, integrated and automated network, and a growing suite of innovations and industry-leading products and services, we remain excited about the medium term growth prospects for UK Mail.”
 
The group will report its interim results for the half year ended September 30, 2014 on November 18.