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Adjustments arising from changes in accounting policy

As explained in note 3, the results for previous years have been restated to reflect the accounting required following application of the amendment to IFRS 2, 'Share-based payment', effective for accounting periods beginning on or after 1 January 2009. This requires that where an employee voluntarily withdraws from a share based incentive scheme, which in practice is usually a SAYE plan, then the remaining full accounting cost of the award is required to be expensed at that time such that the accounting treatment is the same as for any other cancellation.

18th Nov 2009 07:00

RNS Number : 6593C

UK Mail Group PLC

18 November 2009

UK MAIL GROUP plc

INTERIM RESULTS (Unaudited)

FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2009

Highlights

Group revenues down 3.2% to £188.2m (2008: £194.5m)

UK Mail revenues up 5.6% to £84.6m (2008: £80.1m)

Group profit before tax up 18.6% to £7.0m (2008: £5.9m)

Net cash at period end of £3.6m (2008: net debt £1.9m)

Interim dividend of 6.4p per share (2008: 6.4p)

Guy Buswell, Chief Executive of UK Mail, said:-

"Our first half performance has been robust, despite the market challenges.

We have taken more cost out of our distribution network, already one of the most efficient in the industry. This, together with new business wins and innovative new products coming on stream, has increased profit by 18.6% despite a slight revenue reduction. Our financial position is also strong, with net cash at the period end.

Our strategy is to leverage our low-cost network in order to build competitive advantage and drive profitable revenue growth. By bringing new products and services to market, we aim to increase both the size of the market available to us and our share of that market.

Whilst market conditions for the balance of the year remain hard to predict, trading in recent weeks has been in line with our expectations, with minimal overall impact from the recent mail strikes. We therefore remain confident about the outcome for the full year, and about UK Mail Group's longer-term prospects."

For further information, please contact:

UK Mail Group plc
Guy Buswell, Group Chief Executive	0121 335 1111
Steven Glew, Group Finance Director	01753 706 070
Hogarth Partnership
John Olsen Ian Payne	020 7357 9477

Introduction

The Group delivered a robust performance in the first half in the face of considerable market challenges. Benefitting from an integrated distribution network which is one of the most efficient in the industry, we achieved strong profit growth of 18.6% despite a 3.2% reduction in revenue.

Our Mail and Courier businesses have grown their revenues and profit, driven by new business wins and the actions we have taken to reduce costs in these businesses.

Our Parcels and Pallets businesses are more closely linked to the economic environment and saw their revenues decline. In both these businesses, however, we have improved efficiency and reduced costs, leading to improved operating margins which have largely offset the revenue decline.

Our financial position remains strong, with net cash at the period end of £3.6m, compared to net debt of £1.9m as at 30 September 2008.

As well as an ongoing focus on cost reduction and efficiency gains, including investment in further automation at our depots, we are accelerating our development of innovative new products and services in order to increase the size of the market available to us, and our share of that market.

Results

The results can be summarised as follows:

	Six months ending 30 September
	2009 £m	2008 £m	Inc/(Dec)

Group revenue	188.2	194.5	(3.2%)

Operating profit	7.1	6.0	18.3%
Net finance costs	(0.1)	(0.1)	-
Profit before taxation	7.0	5.9	18.6%
Taxation	(2.0)	(4.0)	50.0%
Profit after taxation	5.0	1.9	163.2%

Basic earnings per share	9.2p	3.5p	162.9%
Adjusted earnings per share	9.2p	7.6p	21.1%

Revenue and operating profit are analysed as follows:

	Revenue			Operating Profit
	2009 £m	2008 £m	Inc/ (Dec) %	2009 £m	2008 £m	Inc/ (Dec) %

Parcels	80.0	89.6	(10.7%)	6.3	6.4	(1.6%)
Mail	84.6	80.1	5.6%	5.9	5.6	5.4%
Specialist services	23.6	24.8	(4.8%)	2.0	1.2	66.7%
Total	188.2	194.5	(3.2%)	14.2	13.2	7.6%

Central costs				(7.1)	(7.2)	1.4%
Operating profit				7.1	6.0	18.3%

Parcels

In Parcels, comprising the Group's business-to-business, business-to-consumer and international parcel delivery services, revenues showed a decline compared to the first half of last year of 10.7% to £80.0m (2008: £89.6m). The rate of decline reduced as the period progressed, although the future level and sustainability of this improvement will only become clear over the key pre-Christmas trading period.

We believe we have continued to trade well compared to our competitors, through an ongoing strong sales effort, combined with one of the lowest cost networks in the industry which enables us to win profitable business in competitive tenders.

Our ongoing focus on efficiency has enabled us to identify further cost savings which in turn have led to a 0.8 percentage point increase in the Parcels operating margin. Operating profit was therefore almost unchanged at £6.3m (2008: £6.4m).

Our plans to improve the efficiency and effectiveness of our Parcels operation have continued during the period. A key element of this has been the implementation of partial automation, initially into our Birmingham hub. This project has progressed well, with the sorting machine in Birmingham going live in October 2009, on schedule and to budget. We are confident that this £2m investment will bring significant benefits, including greatly improved vehicle utilisation. We plan to extend automation to further hubs in the future, once the Birmingham project has been fully bedded in.

We have also invested in our IT infrastructure during the period to drive further efficiencies.

Mail

UK Mail is, after Royal Mail, the second largest mail service provider in the UK, collecting up to 17m items per day. The business showed further growth in both revenues and profit, and enjoyed continued success in attracting new business and in gaining further volume from existing customers. These gains have more than offset the impact of the economic environment on 'discretionary mailings', with revenues rising 5.6% to £84.6m (2008: £80.1m) at maintained margins.

Some 70% of our mail volume is based on delivering regular statements or statutory notifications. This aspect of our business is less exposed to fluctuations in levels of economic activity than is the remaining 30% which comprises 'discretionary' mail, mainly marketing type mailings. We have seen some reductions in the level of these mailings, particularly over the summer months.

UK Mail operating profit was up 5.4% to £5.9m, reflecting the good revenue growth with the operating margin maintained at 7.0% (2008: 7.0%).

As previously advised, the overall rate of growth in mail volumes will moderate as the deregulated market matures. However, we continue to see good growth opportunities for our business through increasing our penetration of existing customers and, most importantly, through product innovation that will open up new opportunities in the mail market.

A key platform for our new product development is 'imail', which was launched in late 2008. This is a web-to-print postal service that allows customers of any size to electronically transmit mail items to our national network of mail centres where it is colour printed, enveloped and sent for next-day or two-day delivery. imail is now achieving daily volumes of some 15,000 items and the customer base is building as we identify and focus on the markets which will most benefit from this service. The run rate is such that we now expect imail to exceed our original target of breakeven for the full year.

The imail service has recently been extended to include postcards and appointment cards and we are developing a range of further products and new markets based around the imail platform.

Specialist Services

Overall revenues in Specialist Services, comprising our nationwide palletised goods delivery service (UK Pallets) and same-day courier activities (UK Mail - Courier), decreased by 4.8% to £23.6m (2008: £24.8m). Operating profit increased by 66.7% to £2.0m (2008: £1.2m).

UK Pallets performed well in a difficult market, with revenues down 8.0% to £14.9m (2008: £16.2m). We have improved the efficiency of our operations and reduced costs leading to an improvement in operating margin for this business which has largely offset the revenue decline.

Revenues in our Courier business increased by 1.2% to £8.7m (2008: £8.6m). Profits in this business are significantly ahead of last year and were the main factor in the overall increase in Specialist Services profits. This increase has been achieved through the development of our customer base focusing on new more profitable areas of business. Towards the end of the last financial year we also re-structured the operations which has allowed us to significantly reduce its cost base.

We see further opportunities to build on the advantages that our nationwide, efficient network gives us, and on our proven ability to support national contracts with high service levels.

Finance costs

Net interest payable remained at £0.1m (2008: £0.1m) reflecting the decrease in average net debt, offset by a reduction in interest income on surplus cash balances due to the reduced interest rates.

Cash Flow and Balance Sheet

The Group has a strong balance sheet with net cash at the end of the period of £3.6m (2008: net debt £1.9m). Net cash inflow from operating activities totalled £5.1m (2008: £1.7m). Net cash outflow for the period was £7.3m (2008: £9.4m), which included £3.1m (2008: £5.6m) of cash consumed in working capital reflecting the normal first half trend in our business and which we expect to be largely reversed in the second half.

Capital expenditure for the period was £4.4m (2008: £4.2m). This includes £1.2m on computer equipment, as we continue to develop our systems infrastructure, and £2.2m on plant and equipment, primarily investment of some £2.0m in the partial automation of our Birmingham hub.

Dividend

The Board has declared an unchanged Interim Dividend of 6.4p (2008: 6.4p) to be paid on 15 January 2010 to shareholders registered on 4 December 2009.

Earnings per share

Basic earnings per share, adjusted to exclude the impact of the one-off taxation charge last year, increased 21.1% to 9.2p (2008: 7.6p). Basic earnings per share increased 162.9% to 9.2p (2008: 3.5p).

Primary risks and uncertainties facing the business

The potential risks and uncertainties that may affect the Group's performance were discussed on pages 67 and 68 of the Group's Annual Report and Accounts for the 2009 financial year. These included market, credit, regulatory, price, liquidity, capital and foreign exchange risk. It is considered that these still remain the most likely areas of potential risk and uncertainty, with the position unchanged from that set out in the 2009 Annual Report and Accounts.

CURRENT TRADING & OUTLOOK

Whilst market conditions for the balance of the year remain hard to predict, trading in recent weeks has been in line with our expectations.

Parcels revenues are likely to remain under pressure in the second half, but we are confident that our low cost network, enhanced by the introduction of automation, will enable us to maintain a high level of competitiveness, which will keep us well placed as the economic conditions improve.

The rate of volume growth in our Mail business will slow from the high levels achieved during the "early stage" years of the deregulated market. However, we continue to see very attractive growth opportunities, particularly from the introduction and development of higher margin new products and services through imail and other platforms.

We expect to see continued further progression in our courier business in the second half.

With regard to the mail strikes, there was limited negative impact on our Mail volumes, as customers delayed rather than cancelled mailings. Within our Parcels business, volumes benefitted on the days of strike action as businesses sought alternative methods of delivery for their mail items.

Our business model, underpinned by a strong balance sheet, remains robust. Our strategy remains to continue to build competitive advantage and so drive profitable revenue growth. We are achieving this by developing and investing in our low-cost integrated network and bringing to market new products and services. By capitalising on our leadership and differentiated positioning, we aim to increase both the size of the market available to us and our share of that market.

Against such a background, we are confident about the outcome for the full year, and about UK Mail Group's longer-term prospects.

Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2009

			Unaudited Restated * Six months to 30 September 2008 £m	Audited Restated * Year to 31 March 2009 £m
		Unaudited Six months to 30 September 2009 £m



	Note

Continuing operations
Revenue	4	188.2	194.5	385.7
Cost of sales		(161.6)	(168.5)	(332.4)
Gross profit		26.6	26.0	53.3
Administrative expenses		(19.5)	(20.0)	(37.1)
Operating profit before exceptional items		7.1	6.0	17.3
Exceptional administrative items	7	-	-	(1.1)
Operating profit	4	7.1	6.0	16.2
Finance costs		(0.2)	(0.3)	(0.5)
Finance income		0.1	0.2	0.3
Profit before taxation		7.0	5.9	16.0
Taxation before exceptional items	13	(2.0)	(1.8)	(5.2)
Exceptional taxation items	7	-	(2.2)	(1.9)
Total taxation	13	(2.0)	(4.0)	(7.1)
Profit for the period		5.0	1.9	8.9

Total comprehensive income for the period		5.0	1.9	8.9

Total comprehensive income attributable to:
Equity holders of the company		5.0	1.9	8.9

Basic earnings per share	14	9.2p	3.5p	16.5p
Diluted earnings per share	14	9.0p	3.4p	16.2p

* see note 6

Consolidated Balance Sheet
at 30 September 2009
		Unaudited 30 September 2009 £m	Unaudited 30 September 2008 £m	Audited 31 March 2009 £m


	Note
Assets
Non-current assets
Goodwill	8	9.5	9.5	9.5
Intangible assets	8	1.9	1.7	2.0
Investment properties	8	1.0	1.0	1.0
Property, plant and equipment	8	39.3	37.6	38.2
Deferred tax assets		0.4	0.5	0.7
		52.1	50.3	51.4
Current assets
Inventories		0.2	0.2	0.2
Trade and other receivables		52.0	60.9	53.6
Cash and cash equivalents	11	10.7	7.0	18.0
		62.9	68.1	71.8
Liabilities
Current liabilities
Borrowings	11	(1.7)	(1.7)	(1.7)
Trade and other payables		(48.5)	(52.5)	(52.8)
Current tax liabilities		(2.0)	(1.9)	(2.5)
Provisions	12	(0.3)	(0.8)	(0.6)
		(52.5)	(56.9)	(57.6)

Net current assets		10.4	11.2	14.2

Non-current liabilities
Borrowings	11	(5.4)	(7.2)	(6.8)
Deferred tax liabilities		(3.0)	(3.1)	(3.4)
Provisions	12	(0.4)	(0.4)	(0.5)
		(8.8)	(10.7)	(10.7)

Net assets		53.7	50.8	54.9

Shareholders' equity
Ordinary shares	9	5.5	5.5	5.5
Share premium	9	16.6	16.6	16.6
Retained earnings		31.6	28.7	32.8
Total shareholders' equity		53.7	50.8	54.9

Consolidated Statement of Cash Flows
for the six months ended 30 September 2009


		Unaudited Six months to 30 September 2009 £m	Unaudited Six months to 30 September 2008 £m	Audited Year to 31 March 2009 £m



	Note
Continuing operations
Operating activities
Cash generated from operations	10	7.8	3.9	25.6
Finance income received		0.1	0.2	0.3
Finance costs paid		(0.2)	(0.3)	(0.5)
Taxation paid		(2.6)	(2.1)	(4.6)
Net cash inflow from operating activities		5.1	1.7	20.8

Investing activities
Proceeds from disposal of property, plant and equipment	8	-	0.2	0.1
Purchase of property, plant and equipment	8	(4.0)	(3.4)	(6.8)
Purchase of intangible assets	8	(0.4)	(0.8)	(1.5)
Net cash outflow from investing activities		(4.4)	(4.0)	(8.2)

Financing activities
Dividends paid to shareholders	15	(5.9)	(5.8)	(9.3)
Repayment of finance lease liabilities	11	(0.4)	(0.3)	(0.7)
Purchase of UK Mail shares by the ESOT	9	(0.7)	-	-
Repayment of borrowings	11	(1.0)	(1.0)	(1.0)
Net cash outflow from financing activities		(8.0)	(7.1)	(11.0)

Net (decrease)/increase in cash and cash equivalents	11	(7.3)	(9.4)	1.6
Cash and cash equivalents at the start of the period	11	18.0	16.4	16.4
Cash and cash equivalents at the end of period	11	10.7	7.0	18.0

Consolidated Statement of Changes in Shareholders' Equity (unaudited)
for the six months ended 30 September 2009

			Attributable to equity holders of the company
				Share premium		Retained earnings Restated *	Total equity

		Ordinary shares
	Note		£m	£m		£m	£m

Balance as at 1 April 2009			5.5		16.6	32.8	54.9
Dividends paid to shareholders	15		-		-	(5.9)	(5.9)
Purchase of UK Mail shares by the ESOT	9					(0.7)	(0.7)
Employees' share option scheme:
- value of employee services			-		-	0.4	0.4
Profit for the period			-		-	5.0	5.0
Balance as at 30 September 2009			5.5		16.6	31.6	53.7

Balance as at 1 April 2008			5.5		16.6	31.9	54.0
Dividends paid to shareholders	15		-		-	(5.8)	(5.8)
Employees' share option scheme:
- value of employee services			-		-	0.7	0.7
Profit for the period			-		-	1.9	1.9
Balance as at 30 September 2008			5.5		16.6	28.7	50.8

* see note 6

Notes to condensed consolidated interim financial statements

General information

The company is a public limited liability company incorporated and domiciled in England. The address of its registered office is 464 Berkshire Avenue, Slough, Berkshire, SL1 4PL.

In September 2009, the Group restructured its businesses largely through merging the business and activities of the former 'UK Mail Ltd', into the company formally known as 'Business Post Ltd'. The merged 'Business Post Ltd' subsequently changed its name to 'UK Mail Ltd', and the old 'UK Mail Ltd' changed its name to 'UK Mail Express Parcels and Mail Ltd', which is now a dormant company.

On 26 October 2009, the parent company changed its name from Business Post Group plc to UK Mail Group plc.

As a result the company UK Mail Group plc is now the holding company for two trading companies; UK Mail Ltd and UK Pallets Ltd.

The company is listed on the London Stock Exchange (LSE: UKM).

The condensed consolidated interim financial statements were approved for issue on 17 November 2009.

The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Within the notes to these financial statements the half year periods to 30 September 2009 and 2008 are unaudited. Statutory accounts for the year ended 31 March 2009 were approved by the Board of directors on 20 May 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985.

Basis of preparation

This condensed consolidated interim financial statements for the half-year ended 30 September 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated annual financial statements of the Group as at and for the year ended 31 March 2009, which were prepared in accordance with IFRSs as adopted by the European Union.

The consolidated financial statements of the Group as at and for the year ended 31 March 2009 are available upon request from the Company's registered office at 464 Berkshire Avenue Slough, SL1 4PL or at www.ukmail.com.

The interim financial statements are presented in Sterling and all values are rounded to the nearest million (£m), except when otherwise indicated.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The Group meets its day to day working capital requirements through operating cash flows, with borrowings in place to fund acquisitions and capital expenditure. Movements in the Group's overall net debt position are shown in note 11. The Group also has £5m of undrawn committed facilities, which are in place until 31 December 2009. Accordingly they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

Accounting policies

Except as described below, the accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent with those applied by the Group in its consolidated annual financial statements as at and for the year ended 31 March 2009.

During the period the Group has adopted the following new standards, amendments to standards or interpretations, which are mandatory for the first time for the financial year beginning 1 April 2009.

■

IAS 1 (revised), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009

■

IAS 23 (amendment), 'Borrowing costs', effective for annual periods beginning on or after 1 January 2009

■

IAS 32 (amendment), 'Financial instruments: Presentation', effective for annual periods beginning on or after 1 January 2009

■

IAS 36 (amendment), 'Intangible assets', effective for annual periods beginning on or after 1 January 2009

■

IFRIC 13, 'Customer loyalty programmes', effective for annual periods beginning on or after 1 July 2008

■

IFRIC 15, 'Agreements for the construction of real estate', effective for annual periods beginning on or after 1 January 2009

■

IFRIC 16, 'Hedges of a net investment in a foreign operation', effective for annual periods beginning on or after 1 October 2008

■

IFRS 1 (amendment) 'First time adoption of IFRS' and IAS 27, 'Consolidated and separate financial statements', effective for annual periods beginning on or after 1 January 2009

■

IFRS 2 (amendment) 'Share-based payment', effective for annual periods beginning on or after 1 January 2009

■

IFRS 7, 'Financial Instruments: disclosures', effective for annual periods beginning on or after 1 January 2009

■

IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009

The adoption of these standards and interpretations had no material impact on the Group other than those set out below.

IAS 1 (revised) - Presentation of financial statements

The revised standard requires non-owner changes in equity to be presented in a performance statement separately from owner changes in equity. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has elected to present a single statement of comprehensive income. The financial statements have been prepared under the revised disclosure requirements.

IFRS 2 (amendment) - Share based payment: vesting conditions and cancellations

The principal effect of this amendment is that when an award to an employee under a share option scheme lapses due to cancellation then the full cost of the award will be expensed in the period in which the option lapses. It has also been clarified that an individual ceasing to pay contributions is classified as a cancellation. Under the previous interpretation the lapsing of the award would have resulted in the fair value of the option charged being reversed in the income statement. This interpretation is required to be applied fully retrospectively, and has been accounted for as a change in accounting policy. Details of the adjustments arising in relation to the prior periods are set out in note 6.

IFRS 8 - Operating segments

IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented, as the previously reported specialist services segment has been split into pallet and courier service segments.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of the company.

The following new standards, interpretations and amendments have been issued, but are not effective for the financial year beginning 1 April 2009 and have not been early adopted:

■

IAS 39 (amendment), 'Recognition and measurement', effective for annual periods beginning on or after 1 July 2009

■

IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009

■

IFRIC 18, 'Transfers of assets from customers', effective for annual periods beginning on or after 1 July 2009

■

IFRS 3 (revised), 'Business combinations', effective for annual periods beginning on or after 1 July 2009

■

IFRS 5 (amendment), 'Non-current assets held-for-sale and discontinued operations', effective for annual periods beginning on or after 1 July 2009

Segmental reporting

Management has determined the operating segments based on reports that are reviewed by the Board for making strategic decisions. These reports reflect the Group's defined management structure, whereby distinct managers are accountable to the Board for the results and activities of their identified segments and the different markets in which they operate. The Board considers that the Group has four reportable operating segments.

The Group's operating segments consist of Parcel, Mail, Pallets, and Courier Services. Central costs comprises of network costs and central support costs.

The Group manages its business segments on a national basis, with all its operations in the UK, as are nearly all of the customers.

Inter-company transactions, balances and unrealised gains on transactions between segments are eliminated. Unrealised losses are also eliminated.

No individual customer accounted for more than 5% of revenue in the periods included in these condensed consolidated interim financial statements.

Six months ended 30 September 2009 (unaudited)

Parcels

Mail

Pallets

Courier

Group

£m

Total revenue

80.0

84.6

14.9

9.2

188.7

Inter-segment revenue

(0.5)

Revenue (from external customers)

80.0

84.6

14.9

8.7

188.2

Operating profit/(loss)

6.3

5.9

0.8

1.2

14.2

Central costs

(7.1)

Profit before finance costs

7.1

Finance costs

(0.2)

Finance income

0.1

Profit before taxation

7.0

Taxation

(2.0)

Net profit attributable to equity shareholders

5.0

Segmental information for the periods ended 30 September 2008 and 31 March 2009 has been restated as a result of the change in accounting policy adjustment as explained in note 6.

Six months ended 30 September 2008 (unaudited) (restated)

	Parcels	Mail	Pallets	Courier	Group
	£m	£m	£m	£m	£m
Revenue	89.6	80.1	16.2	9.1	195.0
Inter-segment revenue	-	-	-	(0.5)	(0.5)
Revenue (from external customers)	89.6	80.1	16.2	8.6	194.5

Operating profit/(loss)	6.4	5.6	0.9	0.3	13.2
Central costs					(7.2)
Profit before finance costs					6.0
Finance costs					(0.3)
Finance income					0.2
Profit before taxation					5.9
Taxation					(4.0)
Net profit attributable to equity shareholders					1.9

Year ended 31 March 2009 (audited) (restated)

	Parcels	Mail	Pallets	Courier	Group
	£m	£m	£m	£m	£m
Revenue	173.4	164.5	30.8	18.1	386.8
Inter-segment revenue	-	-	-	(1.1)	(1.1)
Revenue (from external customers)	173.4	164.5	30.8	17.0	385.7

Operating profit/(loss) before exceptional items	16.8	11.6	1.5	1.0	30.9
Exceptional items - administrative expenses	(0.8)	-	-	(0.3)	(1.1)
Operating profit/(loss)	16.0	11.6	1.5	0.7	29.8
Central costs					(13.6)
Profit before finance costs					16.2
Finance costs					(0.5)
Finance income					0.3
Profit before taxation					16.0
Taxation					(7.1)
Net profit attributable to equity shareholders					8.9


	Reportable segments' assets are reconciled to total assets and total liabilities as follows:

		30 September	30 September	31 March
		2009	2008	2009
	Total segment assets	118.6	119.0	119.4
	Central assets	40.4	34.8	35.6
	Eliminations	(44.0)	(35.4)	(31.8)
	Total assets per balance sheet	115.0	118.4	123.2


	Total segment liabilities	(89.7)	(88.7)	(85.0)
	Central liabilities	(15.6)	(14.3)	(15.1)
	Eliminations	44.0	35.4	31.8
	Total liabilities per balance sheet	(61.3)	(67.6)	(68.3)

	Segmental information for the periods ended 30 September 2008 and 31 March 2009 has been restated as a result of the change in accounting policy adjustment as explained in note 6.


	Capital expenditure comprises additions to property, plant and equipment, investment properties and intangible assets.



		30 September2009	30 September 2008	31 March2009

	Total segment capital expenditure	3.4	2.9	5.4
	Central capital expenditure	1.0	1.3	2.9
	Total capital expenditure	4.4	4.2	8.3

	Total segment depreciation and amortisation	2.5	2.0	4.3
	Central depreciation and amortisation	0.8	0.8	1.6
	Total depreciation and amortisation	3.3	2.8	5.9

5	Changes in accounting estimates

	The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

	In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 March 2009.

	There have been no material changes in contingent liabilities during the current interim period.

	The following adjustments in respect of share based payments have been included in the statement of comprehensive income; there being no amendment required to the tax charge;


			Unaudited		Audited
			Six months to 30		Year to
			September 2008		31 March 2009
			£m		£m

	Administrative expenses as previously reported		19.9		36.7
	Increase in share-based payment cost following IFRS 2 amendment		0.1		0.4
	Administrative expenses as restated		20.0		37.1

	The statement of cash flows has been adjusted to reduce the 'profit for the period' from continuing operations by the additional share-based payment costs above and to increase the share based payment adjustment. As a result there is no net adjustment to the 'net cash inflow generated from operations' (see note 10). Additionally, there is no adjustment to the consolidated balance sheet.

	Basic and diluted earnings per share have been impacted by the restatement as detailed in note 14.

7	Exceptional items

		Unaudited Six months to 30 September 2009 £m		Unaudited Six months to 30 September 2008 £m		Audited Year to 31 March 2009 £m





	Operations restructure	-		-		1.1
	Exceptional taxation charge - relief on operations restructure costs	-		-		(0.3)
	Exceptional taxation charge - abolition of UK IBA's	-		2.2		2.2
	Total exceptional taxation charge	-		2.2		1.9
	Exceptional items	-		2.2		3.0

Operations restructure

During the year ended 31 March 2008, the board approved a 3 year change programme, designed to both integrate the different parts of the Group more, and to improve the network infrastructure. This resulted in a number of structural changes in operational and sales management, and the regionalisation of the customer care centres, the costs of which were £0.7m.

Further structural changes were made during the year ended 31 March 2009, including the closure of a number of owned and franchised operational sites (with relevant operations transferred to nearby locations), and the restructuring of some central functions. This resulted in one-off redundancy costs of £0.8m and property related costs of £0.3m.

Exceptional taxation charge

The exceptional taxation charge comprised of a £2.2m write-off of deferred taxation balances resulting from the phased abolition of UK Industrial Buildings Allowances ("IBAs") following enactment of the Finance Act 2008. At 31 March 2009, this charge was partially offset by £0.3m taxation relief in respect of the exceptional operations restructuring costs referred to above.

Property, plant and equipment and intangible assets

Unaudited

Tangible and

Intangible assets

Six months ended 30 September 2009

£m

Opening net book value at 1 April 2009

50.7

Additions

4.4

Disposals

(0.1)

Depreciation and amortisation

(3.3)

Closing net book value at 30 September 2009

51.7

Unaudited

Tangible and

Intangible assets

Six months ended 30 September 2008

£m

Opening net book value at 1 April 2008

48.6

Additions

4.2

Disposals

(0.2)

Depreciation and amortisation

(2.8)

Closing net book value at 30 September 2008

49.8

9	Share Capital

		Number of		Ordinary		Share		Unaudited
		ordinary		shares		premium		Total
	Capital	shares		£m		£m		£m

	At 1 April 2009 and 30 September 2009	54,674,237		5.5		16.6		22.1

	At 1 April 2008 and 30 September 2008	54,674,237		5.5		16.6		22.1

	The Company's Employee Share Ownership Trust ("ESOT") holds shares in the Company for subsequent transfer to employees under its incentive scheme awards. At 31 March 2009 the ESOT held a total of 624,817 shares (31 March 2008: 624,817 shares). During July 2009, 522,771 shares were issued to directors and employees, following the successful vesting of awards under the 2006 LTIP and One-off senior executive plans. Subsequently the ESOT re-acquired 248,230 shares disposed of by participants, and as a result held 350,276 shares as at 30 September 2009 (30 September 2008: 624,817 shares). The price in both transactions was 283p per share.

	During the six months to 30 September 2009 no share options were exercised (2008: nil).

10	Reconciliation of profit to net cash flow generated from operations

					Restated * Unaudited Six months to 30 September 2008 £m		Restated * Audited Year to 31 March 2009 £m
			Unaudited Six months to 30 September 2009 £m




	Profit for the period		5.0		1.9		8.9
	Taxation		2.0		4.0		7.1
	Finance costs payable		0.2		0.3		0.5
	Finance income receivable		(0.1)		(0.2)		(0.3)
	Exceptional items		-		-		1.1
	Depreciation and amortisation		3.3		2.8		5.9
	Loss on disposal of property, plant and equipment		0.1		-		0.2
	Share-based payments		0.4		0.7		1.4
	Decrease/(increase) in inventories		-		0.1		0.1
	Decrease/(increase) in trade and other receivables		1.6		(1.4)		5.9
	(Decrease)/increase in trade and other payables		(4.3)		(3.9)		(4.8)
	(Decrease)/increase in provisions		(0.4)		(0.4)		(0.4)
	Net cash inflow generated from operations		7.8		3.9		25.6
	* see note 6

11	Analysis of net cash/(debt)

		Audited At 1 April 2009 £m			Unaudited At 30 September 2009 £m

			Cash flow £m	Other £m
			Cash flow £m	Other £m

	Cash at bank and in hand	18.0	(7.3)	-	10.7
	Net cash and cash equivalents	18.0	(7.3)	-	10.7

	Debt due within one year	(1.0)	1.0	(1.0)	(1.0)
	Debt due after one year	(4.0)	-	1.0	(3.0)
	Finance leases	(3.5)	0.4	-	(3.1)
	Net debt	(8.5)	1.4	-	(7.1)

	Net cash/(debt)	9.5	(5.9)	-	3.6

		Audited At 1 April 2008 £m			Unaudited At 30 September 2008 £m

			Cash flow £m	Other £m
			Cash flow £m	Other £m

	Cash at bank and in hand	16.4	(9.4)	-	7.0
	Net cash and cash equivalents	16.4	(9.4)	-	7.0

	Debt due within one year	(1.0)	1.0	(1.0)	(1.0)
	Debt due after one year	(5.0)	-	1.0	(4.0)
	Finance leases	(4.2)	0.3	-	(3.9)
	Net debt	(10.2)	1.3	-	(8.9)

	Net cash/(debt)	6.2	(8.1)	-	(1.9)

		Audited At 1 April 2008 £m		Cash flow £m						Audited At 31 March

								Other £m		2009 £m


	Cash at bank and in hand	16.4		1.6			-			18.0
	Net cash and cash equivalents	16.4		1.6			-			18.0

	Debt due within one year	(1.0)		1.0			(1.0)			(1.0)
	Debt due after one year	(5.0)		-			1.0			(4.0)
	Finance leases	(4.2)		0.7			-			(3.5)
	Net debt	(10.2)		1.7			-			(8.5)

	Net cash/(debt)		6.2	3.3			-			9.5

12	Provision for liabilities and charges
									Unaudited
					Properties £m	Claims £m			Total
	Six months ended 30 September 2009								£m

	At 1 April 2009				1.1	-			1.1
	Utilised during the period				(0.4)	-			(0.4)
	At 30 September 2009				0.7	-			0.7


									Unaudited
					Properties	Claims			Total
	Six months ended 30 September 2008				£m	£m			£m

	At 1 April 2008				1.5	0.1			1.6
	Utilised during the period				(0.3)	(0.1)			(0.4)
	At 30 September 2008				1.2	-			1.2

	Properties

	The provision for property leases relates to dilapidations on properties under leases expiring within 1 year and up to 16 years. The properties have been inspected by the Group Property Manager, and estimates made for the anticipated dilapidation expenditure to be incurred prior to sub-letting, or reversion of the lease.

	Claims

	During the year ended 31 March 2008, the Group provided £0.1m in respect of a number of legal actions, which were subsequently settled during the six month period ended 30 September 2008.

Income taxes

The income tax expense recognised is based on management's best estimate of the weighted average annual income tax rate expected for the full financial year, together with the exceptional tax adjustments referred to in note 7. The estimated average annual tax rate used for the year to 31 March 2010 is 28.9% (2009: 28.9%).

Earnings per share

Earnings per share attributable to equity holders of the company arises from continuing operations as follows:

Six months ended

30 September (unaudited)

(pence per share)

Restated *

2009

2008

Earnings per share for profit from continuing operations attributable

to the equity holders of the company

- basic

9.2p

3.5p

- diluted

9.0p

3.4p

Adjusted earnings per share have been calculated excluding the exceptional items and the associated tax impact (see note 7).

Adjusted earnings per share for profit from continuing operations

attributable to the equity holders of the company

- basic

9.2p

7.6p

- diluted

9.0p

7.5p

* see note 6

Dividends

The final dividend for the year ended 31 March 2009 of 10.8p per share (2008: 10.8p) was paid on 14 August 2009. The £5.9m distribution (2008: £5.8m) is reflected in the financial statements for the six months ended 30 September 2009.

In addition, the directors propose an interim dividend of 6.4p per share (2008: 6.4p per share) payable on 15 January 2010 to shareholders who are on the register at 4 December 2009. This interim dividend, amounting to £3.5m (2008: £3.5m) has not been recognised as a liability in these condensed consolidated interim financial statements.

16	Commitments and contingencies

	Group capital expenditure committed, for the purchase of property, software, plant and equipment, but not provided for in these financial statements amounted to £0.8m (2008: £0.3m).

17	Events occurring after the reporting period

	There are no events occurring after the reporting period, other than the proposed dividend referred to in note 15.

18	Related-party transactions

	P Kane, a director of the Company, and members of his close family and certain family trusts, the beneficiaries of which are persons connected with P Kane, control directly and indirectly 45.8% of the issued share capital of the Company. In addition his brother M Kane controls a further 12.8% of the issued share capital of the Company.

19	Risks and uncertainties

	The potential risks and uncertainties that may affect the Group's performance were discussed on pages 67 and 68 of the Group's Annual Report and Accounts for the 2009 financial year. These included market, credit, regulatory, price, liquidity, capital and foreign exchange risk. It is considered that these still remain the most likely areas of potential risk and uncertainty, with the position unchanged from that set out in the 2009 Annual Report and Accounts.

20	Seasonality

	Historically, the Group experiences marginally greater demand for its parcels and palletised goods collection and delivery services in the second half of the year, as consignments increase in advance of the Christmas season. Such trends are not discernible within either the mail or courier markets.

Statement of directors' responsibilities

The directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union, and that the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules ('DTR') of the United Kingdom's Financial Services Authority DTR 4.2.7 and DTR 4.2.8, namely:

■	an indication of important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

■	material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of UK Mail Group plc are listed in the Business Post Group Annual Report for the year ended 31 March 2009, with the exception that the following changes took place during the six months to 30 September 2009: Philip Stephens retired on 15 July 2009 and Michael Findlay was appointed on 1 September 2009. A list of current directors is maintained on the UK Mail Group website : www.ukmail.com.

By order of the Board

Guy Buswell, Chief Executive		Steven Glew, Finance Director
17 November 2009		17 November 2009

Independent review report to UK Mail Group plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial statements for the six months ended 30 September 2009, which comprises the Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Shareholders' Equity and related notes. We have read the other information contained in the interim management report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial statements included in this interim financial report has been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements in the interim financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

Thames Valley

17 November 2009

This information is provided by RNS

The company news service from the London Stock Exchange

END

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