21st May 2014 12:48
LONDON (Alliance News) - UK Mail Group PLC, one of Royal Mail Group PLC's main competitors in the British mail market, Wednesday reported higher pretax profit for its last financial year, driven by further strong growth in parcels revenue and as investments in technology and efficiency improvements pushed up its profit margin.
The company raised its final dividend to 14.2 pence a share, from 12.4 pence in the previous year, giving a total dividend of 21.3 pence, up from 18.8 pence, after it said it had achieved almost all it intended in its investment programme over the past three years.
UK Mail said pretax profit rose to GBP22.8 million in the year to end-March, from GBP17.8 million a year earlier, as revenue rose to GBP508.5 million, from GBP475.4 million.
Revenue growth was again driven by the burgeoning parcels market in the UK, which is being fueled by the rapid increase in online shopping volumes. UK Mail said parcels revenue increased 16% to GBP219.9 million, although mail revenue also increased 1.5%, to GBP245.3 million. It said it had won new clients, while retention of existing customers was strong.
The company said the operating margin in its parcels business grew to 10.2%, from 8.6% in fiscal 2013, thanks to technology and operational efficiency improvements. The margin in the mail business rose to 5.2%, from 4.4%.
"We have now entered a new phase of significant investment, in a new automated hub, in additional capacity, and in further developing our range of innovative consumer-facing services. This strategic approach will position us well for the next stage of profitable growth, with the benefits expected to be seen from 2015 onwards," Chief Executive Guy Buswell said in a statement.
UK Mail is continuing to invest in improving its infrastructure and IT systems. It will move its head office and national hub to a newly built site next year, automating the hub in the process. That will further cut operating costs and create extra capacity. It said the process was progressing well.
It is also rolling out new scanning software to all its sites so that it can provide one hour delivery windows as it tries to get ahead in the key battle to offer customers better ability to track their parcels and prepare for delivery.
The company said trading in the initial weeks of the current financial year had been as anticipated, with parcels volumes still growing, though "inevitably" at a lower rate than in the second half of last year due to higher comparative figures and its current partial capacity constraints.
"Our expectations for the current year therefore remain unchanged," it said, reiterating that it expects the benefits of the latest stage of its investment programme to kick in next year.
UK Mail shares were down 1.1% at 603.05 pence Wednesday.
Competitor Royal Mail will put out its full-year results Thursday.
By Steve McGrath; [email protected]; @stevemcgrath1
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