UK Mail expects volume growth in its parcels division to slow down in the second half of this year as it continues to feel the effects of a weakened retail market and poor volumes in the second quarter.
Turnover in its parcels division increased 3.4% to £109.4m (2013: £105.8m) in the first half of this year, while operating profit increased marginally to £11.2m.
Average daily parcel volumes increased 6%, but the majority of volume growth came in the first quarter with poor retail trading leading to a challenging second quarter for the firm.
“We expect slower parcels growth during the second half of the financial year as we continue to face challenging market conditions in the near term and as we continue to annualise the strong volume growth experienced in the previous financial year,” the company said in a trading update this week.
Despite winning a significant public sector customer direct access (CDA) mail contract during the period, turnover in its mail division fell 5.1% to £109.7m from £115.6m last year. UK Mail said CDA mail carries a “substantially low revenue per item”, which has had an impact on its turnover.
Daily mail volumes increased 2% and operating profit in the division fell 2.4% to £6.2m from £6.3m in 2013.
The firm revealed that an increase in capacity from its new hub will allow it to develop its packets service. It plans to move into the new Coventry hub in May.
It is focusing on winning national contracts and developing a blue chip customer base in its courier division. Turnover in the division rose to £8.4m from £7.9m last year, but operating profit remained flat at £1.4m.
CEO Guy Buswell said: "Trading in the initial weeks of the second half, and overall trends within our individual businesses, have been as anticipated, with our peak trading weeks still to come. Our expectations for the full year remain unchanged.
"We are now in a period of significant investment and transition, as we put the infrastructure in place for the next phase of growth,” added Buswell.
UK Mail has also written down the value of its pallet network, UK Pallets.
