TIDMUKM
RNS Number : 7762G
UK Mail Group PLC
18 May 2011
18 May 2011
UK MAIL GROUP plc
FINAL RESULTS
For the year ended 31 March 2011
Highlights
-- Group revenues up 2.8% to GBP395.8m (2010: GBP385.2m)
o Mail revenues up 4.8% to GBP181.8m (2010: GBP173.5m)
o Parcels revenues up 1.2% to GBP166.7m (2010: GBP164.7m)
-- As previously announced, second half affected by subdued
levels of business to business volume growth combined with
disruption from adverse December weather during our peak trading
period
-- Group profit before tax down 9.9% to GBP16.1m (2010:
GBP17.8m)
-- Strong balance sheet, with net cash at year end of GBP17.4m
(2010: GBP15.7m)
-- Final dividend maintained at 11.8p per share (2010: 11.8p)
giving a total dividend of 18.2p (2010: 18.2p)
-- Continued focus on innovation and cost reduction to build our
share of a challenging market
-- New products and service offerings including imail, Packets
and Retail Logistics making good progress
Guy Buswell, Chief Executive Officer of UK Mail, said:-
"After a satisfactory start to the year, the second half was
undoubtedly more challenging for the markets in which we operate.
Whilst we continued to grow revenues in our core businesses, our
margins and therefore profits came under pressure.
"Our strategy remains to continue to expand our available
markets and to increase our share of those markets by introducing
new and innovative products and services, whilst enhancing the
low-cost, integrated network that lies at the heart of our
business.
"The difficult conditions impact all operators in our markets.
Our focus on efficiency and innovation, combined with our strong
balance sheet, put us in a strong position to continue to
outperform our competitors and to defend and increase our market
share."
For further information, please contact:
UK Mail Group plc
Guy Buswell, Chief Executive Officer 0121 335 1111
Steven Glew, Group Finance Director 01753 706 070
MHP Communications
John Olsen
Ian Payne
Giles Robinson 020 3128 8100
Introduction
As previously reported, after a satisfactory first half which
saw good growth in revenues and profits, the second half of the
financial year proved challenging for our business. Underlying
levels of volume growth were more subdued than originally expected,
particularly in recent months, reflecting the challenging
underlying economic conditions. This was compounded by the snow in
December which caused disruption, and an increased cost of working,
at a time of peak trading.
Whilst revenues for our Parcels business were up 1.2% for the
full year, operating profits were down some 19% reflecting the
impact on operating margin of a change in volume mix, the
additional costs incurred and the competitive market
environment.
Our Mail business increased its revenues by 4.8% as we continued
to win new customers and progress our new product innovations. The
impact of the continued competitive price environment throughout
the year and the costs of disruption due to the snow reduced Mail
operating profits for the year by some 3%.
Our Courier and Pallets businesses have performed satisfactorily
with overall operating profits broadly in line with last year.
Overall Group revenues at GBP395.8m were up 2.8% compared to the
prior year. Group profit before tax at GBP16.1m was down 9.9%.
Our financial position remains strong with net cash balances at
the year end of GBP17.4m (2010: GBP15.7m).
The Board has proposed that the final dividend be maintained at
11.8p per share, the same level as last year. The total dividend
for the year of 18.2p per share (2010: 18.2p) is covered 1.2 times
by reported earnings per share, which the Board considers an
appropriate level of cover in current circumstances.
STRATEGY
Our aim is to continue to strengthen our position as the UK's
leading independent integrated postal group. There are two central
planks to this strategy:
First, we continue to enhance the market-leading, low-cost,
integrated network that underpins the competitiveness of our
businesses. We are doing this by continuing to drive down cost and
by investing in our IT infrastructure so as to increase efficiency
and introduce new information and data services to the end
customer.
Second, we are focused on continuing to expand the size of the
markets available to us and on increasing our share of those
markets. To do so, we are introducing new and innovative products
and services in both our Parcels and our Mail businesses, a number
of which are already available to customers and gaining valuable
traction.
The current challenging market conditions impact all operators
in our markets. We believe our focus on efficiency and innovation,
combined with our strong balance sheet, mean we are in a strong
position to continue to outperform our competitors and to defend
and increase our market share.
Results
The results can be summarised as follows:
Year to 31 March
Inc/
2011 2010 (Dec)
GBPm GBPm %
Group revenue 395.8 385.2 2.8%
========= ======== ========
Operating profit 16.2 17.9 (10.0)%
Net finance costs (0.1) (0.1) -
--------- -------- --------
Profit before tax 16.1 17.8 (9.9)%
Taxation (4.5) (5.1) 12.7%
--------- -------- --------
Profit after tax 11.6 12.7 (8.8)%
========= ======== ========
Basic earnings per share 21.2p 23.4p (9.4)%
Revenue and operating profit are analysed as follows:
Revenue Operating Profit
Inc/ Inc/
2011 2010 (Dec) 2011 2010 (Dec)
GBPm GBPm % GBPm GBPm %
Mail 181.8 173.5 4.8% 11.8 12.2 (3.3)%
Parcels 166.7 164.7 1.2% 12.1 14.8 (18.9)%
Courier 19.2 17.9 7.3% 2.2 2.4 (8.8)%
Pallets 28.1 29.1 (3.2)% 1.8 1.7 6.3%
====== ====== =======
Total 395.8 385.2 2.8% 27.9 31.1 (10.7)%
====== ====== =======
Central
costs (11.7) (13.2) 11.5%
------- ------- --------
Operating profit 16.2 17.9 (10.0)%
======= ======= ========
Mail
The Mail business enjoyed continued success in attracting good
levels of new business as well as generating further mail growth
from existing customers. As a result, revenues rose 4.8% to
GBP181.8m (2010: GBP173.5m).
Within the overall UK mail market, there has been a decline in
transactional volumes of some 4% per annum in recent years. An
important factor in the continued progress of our Mail business is
therefore product innovation, to open up new segments of the mail
market and extend our reach.
imail, our web-to-print postal service, now includes appointment
cards, 'economy' black and white printing and mailing list
production, and is continually being developed to support its
market leadership. We have now created a very strong platform for
this new concept in the UK mail market, with average daily volumes
in March 2011 more than double those of a year ago, and a good
pipeline of new opportunities.
Our Packets product, launched in early 2010, enables us to offer
customers a price competitive service in a sector that was
previously difficult to access. The packets market is the fastest
growing segment of the postal market, mainly due to the growth in
internet-based shopping. We currently handle up to 20,000 packets
per night and continue to add customers to this service, confirming
our views on the growth potential for this product and establishing
us as a serious player in the cGBP1.5bn p.a. UK packets market. The
next phase for us is to widen the service offering to attract the
SME market.
Mail operating profits were down 3.3% to GBP11.8m (2010:
GBP12.2m) and the operating margin reduced to 6.5% (2010: 7.0%).
Pricing in the transactional mail market is very competitive. In
the past, we have been able to offset pricing pressures through the
increased economies of scale that came from material volume growth;
as the market matures, this is more difficult to achieve. The Mail
operating margin also suffered a slight impact from the increased
operational costs incurred due to the disruption caused by the snow
in December 2010.
The Bill for the privatisation of Royal Mail has now largely
completed its passage through Parliament and we expect it to become
an Act by the time of the Summer recess. One of the key outcomes of
the Bill is that Ofcom will effectively replace Postcomm as the
mail industry regulator, a move which we support. We continue to
believe that the UK postal market needs a successful, commercially
focused and efficient Royal Mail operating within a regulated
framework where competition benefits the customer and allows the
overall mail industry to flourish.
The new Royal Mail pricing regime approved by Postcomm was
implemented in May 2011. This has resulted in wholesale prices
increasing by some 20% with retail prices increasing by some 15%.
There has been a reduction in the pricing headroom between the
price we pay Royal Mail for access to their network and the lowest
prices that Royal Mail can charge their customers directly. This
will have a minor impact on our Mail operating margin given the
competitive prices we already charge our customers. We are highly
conscious of the impact the price increases will have on our
customers, who will see their mailing costs increasing to an
unprecedented extent, at a time when most businesses are trying to
control their costs tightly, all of which may have an impact on the
overall volumes of mail in the UK. We are working closely with our
customers both to understand their position and to help them
identify the most cost effective mailing route for their
business.
From May 2011, in addition to any underlying increase, mail
revenues will increase by some 15% purely as a result of the Royal
Mail price rise, with the operating margin reducing to a
corresponding extent. This overall increase in reported mail
revenues is less than the headline wholesale price increase because
a significant proportion of our customers operate as Customer
Direct Access (CDA) where they pay the access price directly to
Royal Mail and we charge them separately for services we
provide.
The market backdrop for our Mail business is challenging. Our
objective is to strengthen our market leading position by
continuing to grow our overall volumes through gaining additional
volumes from new and existing customers, together with the benefits
from our new product innovations.
Parcels
Revenues in Parcels, which comprises the Group's
business-to-business, business-to-consumer and international parcel
delivery service, were up 1.2% for the period to GBP166.7m (2010:
GBP164.7m). Operating profit decreased by 18.9% to GBP12.1m (2010:
GBP14.8m) with the operating margin at 7.3% (2010: 9.1%).
Parcels performance has been impacted by the effect of
business-to-business volume growth remaining subdued in the second
half, combined with the disruption caused by the snow in December.
This was however largely offset by stronger business-to-consumer
volumes, resulting in an overall volume increase of 4.3%.
The impact of the mix effect and the snow, when combined with
the continued competitive pricing environment, placed pressure on
margins, although this has been largely offset by the continued
improvements in the efficiency and effectiveness of our Parcels
operation. We continue to be successful in winning new Parcels
customers as a result of our high service levels, low-cost network
and strong brand in the market.
We continue to drive down costs to improve the profitability of
our parcels operations. A key area of focus is our network cost
where we are accelerating plans to reduce our fixed cost base in
the coming year. We also intend to reduce our vehicle costs through
improved route planning and vehicle utilisation, and have taken
action to reduce our administrative support costs.
We have recently introduced a number of major improvements to
our I.T. infrastructure. These will provide industry-leading
facilities to our customers, and to the recipients of the parcels
they despatch via our services. All customers can now be notified
in advance of expected delivery times and given easy to use
facilities if they need to re-arrange deliveries.
As part of these improvements we are introducing a completely
new internet platform which will help support business growth and
drive down costs.
In May 2010 we launched a new range of logistics services
tailored to the specific needs of retailers and targeted at the
extensive list of retail customers we have access to through our
parcels, mail and courier businesses. This Retail Logistics product
is making good progress and we now have a number of major retailers
trading with us. We estimate this market to be worth GBP1.2bn,
supporting our view that this represents a significant growth
opportunity for the business.
Courier
Revenues in our Courier business, which provides same-day
delivery services, increased 7.3% to GBP19.2m (2010: GBP17.9m).
Operating margins however reduced to 11.3% (2010: 13.3%) leading to
a reduction in operating profit to GBP2.2m (2010: GBP2.4m). The
decline in operating margin reflects, in part, the strong
performance last year and, in part, the costs of establishing an
extended capability within the wider Group.
We have now developed a highly efficient nationwide courier
network with a proven ability to support national contracts, which
adds to our ability to offer a fully integrated proposition and
supports product development across the Group.
Pallets
Revenues in our Pallets business, which provides a nationwide
palletised goods delivery service were down 3.2% for the period to
GBP28.1m (2010: GBP29.1m). We consider this business to be the most
exposed of all our operations to economic conditions. We have
however improved the efficiency of our operations and reduced
costs, leading to an improvement in the operating margin to 6.4%
(2010: 5.9%). This improved margin has more than offset the revenue
decline, enabling us to increase operating profit for the period by
6.3% to GBP1.8m (2010: GBP1.7m).
We see growth opportunities for this business and will continue
to focus on sectors of the distribution market which are best
placed to benefit as the economy recovers.
Finance costs
Net interest payable remained at GBP0.1m (2010: GBP0.1m).
Cash Flow and Balance Sheet
The Group has a very strong balance sheet with net cash at the
end of the period of GBP17.4m (2010: GBP15.7m).
The improvement in the net cash is comprised of a slight
reduction of GBP0.1m in cash balances to GBP22.4m (2010: GBP22.5m),
combined with a reduction in debt of GBP1.8m to GBP5.0m (2010:
GBP6.8m). The reduction in debt is due to the repayment of loans
and finance lease balances in the year.
Net cash inflow from operating activities totalled GBP19.3m
(2010: GBP23.3m). Net cash outflow for the period was GBP0.1m (2010
inflow: GBP4.5m) which included GBP0.6m of cash consumed in working
capital (2010: GBP2.7m generated from working capital).
Capital expenditure for the period was GBP7.8m (2010: GBP7.0m).
The capital expenditure for the period includes GBP3.8m on IT, as
we continue to develop our systems infrastructure, and GBP3.1m on
our network.
Earnings per share
Basic earnings per share decreased 9.4% to 21.2p (2010:
23.4p).
Dividend
The Board has proposed an unchanged Final Dividend of 11.8p
(2010: 11.8p), resulting in a total dividend for the year of 18.2p
(2010: 18.2p). The Final Dividend is payable on 22 July 2011, to
shareholders registered on 24 June 2011.
The total dividend is covered 1.2 times by earnings (2010: 1.3
times). Taking into account the cash generative nature of the
business and its current investment needs, the Board considers this
level of cover to be appropriate in current circumstances.
CURRENT TRADING & OUTLOOK
Our plans and management actions continue to be based on the
assumption that economic conditions will remain tough throughout
the current financial year. Trading in the early weeks has been in
line with these expectations.
We expect a continued decline in underlying mail volumes in the
UK market as a result of the recent price increases imposed by
Royal Mail. Whilst this will represent a challenge, we maintain our
aim to more than offset this factor through additional mail volumes
from new and existing customers, combined with the growth
opportunities presented by our new product developments.
Our parcels business is in an increasingly strong position
compared to its key competitors thanks to the benefits of our
low-cost network and the industry-leading services we are
continuing to introduce. This market will remain challenging, but
we believe our focus on key customer segments, such as Retail
Logistics, should allow us to make progress in the coming year.
Our strategy remains to continue to build competitive advantage,
developing and investing in our low cost integrated network,
driving down cost, investing in IT infrastructure and bringing to
market new products and services to drive profitable revenue
growth. By capitalising on our leadership and differentiated
positioning, we aim to increase both the size of the markets
available to us and our share of those markets.
Guy Buswell
Chief Executive Officer
ADDITIONAL DISCLOSURES
Principal risks and uncertainties facing the business
UK Mail's business and share price may be affected by a number
of risks, not all of which are within our control. The process UK
Mail has in place for identifying, assessing and managing risks is
set out in the Corporate Governance Report on page 21 of the 2010
Annual Report and Accounts. The specific principal risks and
uncertainties that may affect the Group's performance, together
with relevant mitigating factors as identified by the Group's risk
management process were discussed on pages 69 and 70 of the Group's
Annual Report and Accounts for the 2010 financial year. These
included market, credit, regulatory, price, liquidity, capital and
foreign exchange risk. A number of additional principal risks and
uncertainties have been identified by the Risk Management
Committee; namely IT, business continuity, legislation and
regulation, competitive, and fuel risks. Further details will be
available within the 2011 Annual Report.
Cautionary statement
This announcement contains certain forward-looking statements,
which have been made by the directors in good faith based on the
information available to them up to the time of the approval of
this report and such information should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Going concern
The directors are satisfied that the Group has sufficient
resources to continue in operation for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed consolidated interim financial
statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2011
2011 2010
Note GBPm GBPm
Revenue 1 395.8 385.2
Cost of sales (347.3) (333.5)
Gross profit 48.5 51.7
Administrative expenses (32.3) (33.8)
-------- --------
Operating profit 1 16.2 17.9
Finance costs (0.2) (0.2)
Finance income 0.1 0.1
-------- --------
Profit before taxation 16.1 17.8
Total taxation (4.5) (5.1)
-------- --------
Profit for the year 11.6 12.7
======== ========
Total comprehensive income for
the year 11.6 12.7
======== ========
Total comprehensive income attributable
to:
Equity holders of the company 11.6 12.7
======== ========
Basic earnings per share 2 21.2p 23.4p
Diluted earnings per share 2 21.1p 23.0p
The profit for the financial year arises from the Group's
continuing activities.
Consolidated Balance Sheet
as at 31 March 2011
2011 2010
GBPm GBPm
ASSETS
Non-current assets
Goodwill 9.5 9.5
Intangible assets 3.2 2.0
Investment properties 0.9 1.0
Property, plant and equipment 37.0 38.1
Deferred tax assets 0.5 0.6
51.1 51.2
------- --------
Current assets
Inventories 0.2 0.2
Trade and other receivables 56.7 51.8
Cash and cash equivalents 22.4 22.5
-------
79.3 74.5
------- --------
LIABILITIES
Current liabilities
Borrowings (1.8) (1.8)
Trade and other payables (58.8) (54.3)
Current tax liabilities (1.9) (1.9)
Provisions (0.1) (0.1)
(62.6) (58.1)
------- --------
Net current assets 16.7 16.4
------- --------
Non-current liabilities
Borrowings (3.2) (5.0)
Deferred tax liabilities (3.0) (3.6)
Provisions (0.5) (0.5)
(6.7) (9.1)
------- --------
Net assets 61.1 58.5
======= ========
Shareholders' equity
Ordinary shares 5.5 5.5
Share premium 16.7 16.6
Retained earnings 38.9 36.4
Total shareholders' equity 61.1 58.5
======= ========
Consolidated Cash Flow Statement
for the year ended 31 March 2011
2011 2010
Note GBPm GBPm
Operating activities
Cash generated from operations 4 24.2 28.7
Finance income received 0.1 0.1
Finance costs paid (0.2) (0.2)
Taxation paid (4.8) (5.3)
-------- ----------
Net cash inflow from operating
activities 19.3 23.3
-------- ----------
Investing activities
Proceeds from disposal of property,
plant and equipment 0.1 -
Purchase of property, plant and equipment (5.7) (6.0)
Purchase of intangible assets (2.1) (1.0)
Net cash outflow from investing activities (7.7) (7.0)
------- ----------
Financing activities
Dividends paid to shareholders (9.9) (9.3)
Repayment of finance lease liabilities (0.8) (0.8)
Net proceeds from the issue of ordinary
share capital 0.1 -
Purchase of UK Mail shares by the ESOT (0.1) (0.7)
Repayment of term loan (1.0) (1.0)
-------
Net cash outflow from financing activities (11.7) (11.8)
------- ----------
Net (decrease)/increase in cash and
cash equivalents (0.1) 4.5
Cash and cash equivalents at the beginning
of the year 22.5 18.0
Cash and cash equivalents at the end
of the year 22.4 22.5
------- ----------
Consolidated Statement of Changes in Shareholders'
Equity
for the year ended 31 March 2011
2011 2010
GBPm GBPm
Shareholders' equity as at the beginning
of the year 58.5 54.9
Dividends paid to shareholders (9.9) (9.3)
Purchase of UK Mail shares by the
ESOT (0.1) (0.7)
Employees' share option scheme:
- value of employee services 0.9 0.9
- exercise of share options 0.1 -
Profit for the year 11.6 12.7
-------- ------
Shareholders' equity as at the end
of the year 61.1 58.5
-------- ------
Notes to the Consolidated Financial Information
1 Segmental information
Year ended 31 March
2011
Mail Parcels Courier Pallets Total
GBPm GBPm GBPm GBPm GBPm
Revenue 181.8 166.7 19.2 28.1 395.8
Segmental operating
profit 11.8 12.1 2.2 1.8 27.9
Central costs (11.7)
Operating profit 16.2
-------
Year ended 31 March
2010
Mail Parcels Courier Pallets Total
GBPm GBPm GBPm GBPm GBPm
Revenue 173.5 164.7 17.9 29.1 385.2
Segmental operating
profit 12.2 14.8 2.4 1.7 31.1
Central costs (13.2)
Operating profit 17.9
-------
2 Earnings per share
Basic earnings per share have been calculated by dividing
the profit for the year by the weighted average number
of ordinary shares in issue for the year ended 31 March
2011 of 54,522,247 (2010: 54,245,126). Diluted earnings
per share have been calculated by adjusting the weighted
average number of ordinary shares for the effect of the
exercise of share options, increasing the number of shares
to 54,742,371 (2010: 55,213,086).
3 Analysis of net cash/(debt)
Group
At 1 At 31 At 31
April Cash March Cash March
2009 Flow Other 2010 Flow Other 2011
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cash at bank
and in hand 18.0 4.5 - 22.5 (0.1) - 22.4
18.0 4.5 - 22.5 (0.1) - 22.4
------ ------ -------- ------ ------ ------ -------
Debt due
within one
year (1.0) 1.0 (1.0) (1.0) 1.0 (1.0) (1.0)
Debt due
after one
year (4.0) - 1.0 (3.0) - 1.0 (2.0)
Finance
leases (3.5) 0.7 - (2.8) 0.8 - (2.0)
(8.5) 1.7 - (6.8) 1.8 - (5.0)
------ ------ -------- ------ ------ ------ -------
Net
cash/(debt) 9.5 6.2 - 15.7 1.7 - 17.4
------ ------ -------- ------ ------ ------ -------
Reconciliation of profit to net cash flow generated from
4 operations
Group
2011 2010
GBPm GBPm
Profit for the year 11.6 12.7
Taxation 4.5 5.1
Finance costs payable 0.2 0.2
Finance income receivable (0.1) (0.1)
Depreciation and amortisation 7.7 7.0
Profit on disposal of property, plant and
equipment (0.1) -
Share-based payments 1.0 1.1
(Increase)/decrease in trade and other receivables (4.9) 1.7
Increase/(decrease) in trade and other payables 4.3 1.5
(Decrease)/increase in provisions - (0.5)
Net cash flow generated from operations 24.2 28.7
------ ------
5 General information
The above figures have been extracted from the Group's
full financial statements for the year ended 31 March
2011, which will be delivered to the Registrar of Companies.
Those financial statements carry an unqualified audit
opinion. They have been prepared in accordance with the
Companies Act 2006 and International Financial Reporting
Standards as adopted by the European Union. The accounting
policies, which have been applied consistently to all
the years presented, are set out in those financial statements.
These extracts do not constitute statutory accounts within
the meaning of section 435 of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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