UK Mail fleet

Express parcels and mail provider UK Mail Group says it is taking action to plug the gaps in its pallet distribution business UK Pallets.

It reported a significant decline in operating profit from this division during the first six months of the financial year.

While revenue from its pallets business rose 0.8% to £14.3m in the six months to 30 September compared to the same period last year, operating profit fell over 26% to £800,000, said the firm.

UK Mail chief executive Guy Buswell said the decline was due to “temporary gaps” in the network of members that make up the business, which resulted in additional delivery costs. “Actions are being taken to fill those gaps,” he added.

Declines were also evident in the firm’s courier division, where revenues fell over 18% to £8.3m with operating profit down 6.5% to £1.1m.

This didn’t stop the group raising total revenue by almost 12% to £225.7m in the first six months, however, with group profit before tax rising over 21% to £7.3m.

The group’s mail division chalked up a 23% rise in revenue during the period to just under £116m on the back of a 2% increase in volumes, with operating profits up nearly 13% to £5.7m. Its parcels business raised revenues by 4.4% to £87.2m, with operating profit up 5.5% to £5.8m.

UK Mail Group said it had enjoyed “strong levels of customer retention and new client wins” in the first half of the year.

“The Group had an encouraging first half, demonstrating the results of our continued efforts to reduce costs and further improve our efficient network,” said Buswell. “The second half to date has continued in this vein, with current trading in line with our expectations.

“We expect the economic backdrop to remain challenging into 2013 and the pricing environment to stay competitive,” he added. “We are continuing to plan accordingly, with tight control of our costs remaining a key focus.”