UK Mail 'has momentum' ahead of Christmas peak

UK Mail said it has “positive momentum” before it enters the Christmas peak, as investments in additional capacity have allowed it to make “further progress” , while it waits for its proposed acquisition by Deutsche Post DHL to conclude.

However in the six-months to 30 September turnover was down 3.2% to £230.2m, compared to £237.6m in the same six-month period a year ago. Pre-tax profit was up 158.4% year-on-year to £5.8m – but in H1 2015 it reported net exceptional costs of £2.7m, primarily relating to the cost of relocating its central hub. UK Mail had to leave an existing site in Birmingham last year, moving to Ryton-on-Dunsmore, Coventry, to make way for construction of HS2.

UK Mail chairman Peter Kane said: "Today's results are further evidence of the good strategic progress we have made in recent years. Our operations are consistently delivering strong service levels while our new automated hub continues to perform very well and is starting to achieve the targeted efficiency levels.

“We are also creating the capacity for future growth with the further development of our site network and have recently won a number of major new customers,” Kane added. “Given this positive momentum in our business, we are confident heading into our peak trading period.”

Turnover in its parcels business dropped 1.2% to £122.5m (2015: £124m) with average daily volumes decreasing 2.1% year-on-year. UK Mail said that this decline was due to exceptionally strong growth in the first half of 2015, when it had taken on short-term volumes from failed parcels carrier City Link.

It warned that the company would continue to see an on-going volume mix change towards the lower margin B2C segment but in recent weeks it had seen a number of significant contract wins. It renewed its contract with Royal Bank of Scotland in June.

Mail turnover fell 5.3% to £107.7m (2015: £113.6m) with daily volumes decreasing 0.4% - which it put in the context of the overall UK mail market falling 4% per annum. It is targeting growth in packets to offset mail volume falls, and has opened a packet sortation centre in Leeds

On 28 September Deutsche Post DHL made a 440p per share offer to buy UK Mail at a premium of 43.1% on its closing price the day before. That offer remains conditional on UK Mail shareholder approval at a general meeting set for tomorrow (18 November), as well as a court sanction at a hearing expected to be held on 20 December, and European Commission merger control clearance.

Kane said: "The board believes that UK Mail will benefit significantly from becoming part of Deutsche Post DHL, and will be better positioned to continue to develop our parcels and mail businesses with the benefit of their greater financial and operational resources.”