25th Sep 2014 07:56
LONDON (Alliance News) - UK Mail Group PLC, one of the smaller competitors to Royal Mail Group PLC, saw its shares slide early Thursday after it warned that parcels volumes had been below expectations in the three months to end-September, particularly in the latter weeks.
In a trading update, the letters and parcels handling company said overall revenue for the six months to end-September, the first half of its financial year, are expected to be some 1% below the year-earlier period. Adjusted for one less working day in the period this year, underlying revenue will be flat, it said.
"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," the company said.
All the UK's mail companies are experiencing the same trend: parcels business has grown enormously due to the rapid takeup of internet shopping, while letter volumes are in a gradual long-term decline as more correspondence takes place online. However, the strong growth in parcels volumes is expected to plateau at some point.
Average daily volumes in UK Mail's parcels business for the first half of the financial year are expected to be 6% higher than in the first half of its last financial year, driven by home deliveries to online shoppers, it said.
Revenues in its mail business are expected to be down about 6%, even though average daily mail volumes were about 2% above last year. It blamed a change in the mix of letters it was handling towards lower-revenue-per item customer direct access mail.
Its added that its courier business is expected to show a "satisfactory" revenue increase for the first half, while its pallets business is expected to report underlying revenue broadly in line with last year. The pallets business has, however, suffered from increasing network costs which have resulted in the overall performance being below expectations, it said, adding that it is taking action to address this.
UK Mail shares were down 15.9% at 475.00 pence early Thursday, one of worst-performing stocks in the London market. That marked a 16 month low for the stock. Royal Mail shares were down 2.4% at 404.30 pence, one of the worst-performing stocks in the FTSE 100.
By Steve McGrath; [email protected]; @stevemcgrath1
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