UK Mail suffers 82% drop in profits

UK Mail saw its share value dip by 10% this morning after reporting half year pre tax profits of £4.9 million, less than half the £11.2 million reported in the same period in 2014. Post exceptional profit was £2.2 million, as against £12.0 million in 2014. Revenues were up 4.5% at £237.6 million.

The company issued a profit warning in August saying that its overall performance was being impacted by the transition to its new national parcel hub in Ryton, Coventry.

The Chief Executive of UK Mail, Guy Buswell seems to be positive even though the company’s profits have taken a hit. He said, “Trading in the initial weeks of the second half, and overall trends within our individual businesses, have been in line with our revised expectations.  Our expectations for the current year therefore remain in line with previous guidance.  However, due to the timescales required to fully resolve the challenges, our expectations for the next financial year have softened slightly.

“Whilst this is disappointing, the strategic rationale for the transformation we are undertaking is as compelling as ever, and we are confident both of our ability to restore our parcels business to previous levels of profitability and to build from there.” 

While Stock Exchange investors have been described as ‘snarling dogs’ to UK Mail’s ‘timid postman’, the company is not the only mail business in the UK that has taken a hit in profits in the last year. DX Group reported “disappointing” results for the same period this week, and both companies are looking toward the recently privatised Royal Mail to see if the national postal operator is doing as well as they are.

Given the overall change of business for all mail operators from letters to parcels as their core business, all mail operators around the world are in the midst of structural and operational change. Dips in profits this year seem par for the course, with booming parcel businesses and struggling letter businesses.