TIDMUKM
RNS Number : 1527S
UK Mail Group PLC
16 November 2011
16 November 2011
UK MAIL GROUP plc
INTERIM RESULTS
For the 6 months ended 30 September 2011
Highlights
-- Group revenues up 5.7% to GBP201.6m (2010: GBP190.7m)
-- Mail revenues up 9.2% to GBP93.8m (2010: GBP85.9m)
-- Parcels revenues up 3.0% to GBP83.5m (2010: GBP81.0m)
-- Group profit before tax (before exceptional items) GBP6.8m
(2010: GBP7.4m) reflecting a reduction in margins and the impact of
one less working day
-- Exceptional items of GBP0.8m (2010: GBPnil) relating to restructuring costs
-- Group profit before tax of GBP6.0m (2010: GBP7.4m)
-- Strong balance sheet, net cash at period end of GBP11.6m (2010: GBP8.5m)
-- Interim dividend maintained at 6.4p per share (2010: 6.4p)
-- Launch of new consumer focused online parcel delivery service - www.ipostparcels.com
Guy Buswell, Chief Executive Officer of UK Mail, said:-
"The Group saw a satisfactory first quarter followed by a more
challenging second quarter for the markets in which we operate.
These conditions have continued into the third quarter to date and
we assume that the economic environment will remain tough
throughout the current financial year.
"Our mail business remains a market leader with an operational
template that is ideally suited to adapt to the demands of an
evolving market, and our parcels business maintains a good 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.
"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."
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
The performance in the first half of the year comprised a
satisfactory trading performance in the first quarter and a more
challenging second quarter.
Reported Group revenues for the first half increased 5.7%
compared to the same period in the previous year. Adjusting for the
increase in Royal Mail prices implemented on 6 May 2011, offset by
there having been one less working day than in the previous year,
underlying Group revenues increased by 2.0%.
Our Mail business grew its revenues on a reported basis; on an
underlying basis, revenues were in line with the same period in the
previous year. Underlying Mail operating profit reduced compared to
the prior year as the continued competitive pricing environment led
to a slight reduction in the operating margin. Our Mail business
remains well positioned in its market with a healthy pipeline of
new business opportunities. We saw good progress from our new
product areas of imail and packets and these should have a
beneficial impact on operating margins in the future.
Parcels revenues continued to grow compared to the same period
in the previous year reflecting the benefit of recent customer
wins, albeit in a pricing environment that remains challenging and
with a continuation of the volume mix seen in the second half of
the last financial year. This mix effect has impacted the parcels
operating margin and the underlying parcels operating profit. We
continue to focus on innovation and improving our operational
efficiency to help offset the effects of a challenging market.
In our Courier business, contract wins from the prior period
helped deliver revenue and profit growth.
Our Pallets business has performed well in a market that remains
challenging, with revenues showing a slight decrease on the same
period last year but a good increase in operating profit as a
result of strong operational management.
Overall, Group revenues at GBP201.6m were up 5.7% compared to
the prior year and Group profit before tax before exceptional items
at GBP6.8m was down GBP0.6m on the previous year, although GBP0.5m
of this decrease is a result of there being one less working
day.
We have taken further action to reduce the fixed costs of our
business. We have closed two depots, reducing our total number of
mail/parcels sites to 52. Along with some restructuring in a number
of other areas of our business, this has resulted in one off costs
of GBP0.8m. We will continue to monitor closely the potential for
further opportunities to reduce our fixed cost base as the year
progresses.
We continue to invest in our I.T. systems to develop increased
capability and further enhance the customer services we can
provide; to this end we have recently successfully completed a
significant upgrade to our hardware platform, on time and on
budget.
We remain highly focused on innovation to continue expanding the
size of the markets available to us and to further increase our
share of those markets. We are continuing to introduce new products
and services across both our Mail and Parcels businesses, a number
of which are already available to customers and gaining valuable
traction.
Our financial position remains strong, with net cash at the
period end of GBP11.6m, compared to GBP8.5m as at 30 September
2010.
Results
The results can be summarised as follows:
Six months ending 30 September
2011 2010 Inc/(Dec)
GBPm GBPm %
Group revenue 201.6 190.7 5.7%
========= ======== ==============
Operating profit 6.0 7.5 (18.4)%
Net finance costs - (0.1) 100.0%
--------- -------- --------------
Profit before taxation 6.0 7.4 (18.2)%
Taxation (1.6) (2.1) 23.2%
--------- -------- --------------
Profit after taxation 4.4 5.3 (16.2)%
========= ======== ==============
Basic earnings per share 8.1p 9.6p (16.1)%
Underlying basic earnings
per share 9.1p 9.6p (5.4)%
Revenue and operating profit are analysed as follows:
Revenue Operating Profit
Inc/ Inc/
2011 2010 (Dec) 2011 2010 (Dec)
GBPm GBPm % GBPm GBPm %
Mail 93.8 85.9 9.2% 5.0 5.6 (9.3)%
Parcels 83.5 81.0 3.0% 5.6 6.5 (14.0)%
Courier 10.1 9.5 6.4% 1.2 1.0 19.6%
Pallets 14.2 14.3 (0.2)% 1.0 0.9 14.7%
------- ------- ------------ ------ ------ ----------
Total 201.6 190.7 5.7% 12.8 14.0 (7.9)%
======= ======= ============
Central costs (6.0) (6.5) 7.6%
------ ------ ----------
Operating profit before exceptional items 6.8 7.5 (8.1)%
====== ====== ==========
Mail
Mail showed further growth in revenues of 9.2% to GBP93.8m
(2010: GBP85.9m). The Mail revenue growth includes the impact of
the Royal Mail price increase on 6 May 2011, which will increase
prices by some 15% on an annualised basis. On an underlying basis,
also adjusted for the reduction in working days, revenues were in
line with the prior year at GBP86.0m.
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, continues to grow
successfully. We are continuing to develop this product to support
its market leadership and have recently launched a new easy-to-use
web site, which includes many new features, such as data
management. Average daily volumes in September 2011 were double
those of a year ago. We have a healthy pipeline of new
opportunities for this product as we identify new areas where it
can be applied successfully.
Our Packets product enables us to offer customers a price
competitive service in a segment of the postal market that is still
growing well, mainly due to the continuing rise in internet-based
shopping and we continue to add customers. We have now widened the
service offering to the SME market, where we see a strong
opportunity.
Mail operating profits were down 9.3% to GBP5.0m (2010:
GBP5.6m). The operating margin reduced to 5.4% (2010: 6.5%), of
which some 0.9% is the mathematical result of the 15% price
increase imposed by Royal Mail. The pricing environment in the
transactional mail market remains very competitive. Overall, mail
volumes on a daily basis were in line with the previous year.
The Act for the privatisation of Royal Mail was enacted in June
2011. One of the key outcomes of the Act is that Ofcom replaced
Postcomm as the mail industry regulator in October 2011, a move
which we support. In October 2011 Ofcom issued a consultation
document concerning their proposals for Mail regulation from April
2012. In this document Ofcom stated the importance of access
remaining in the future because of the benefits it has brought to
the universal service, helping to improve efficiency incentives at
Royal Mail, reducing prices for customers and helping to bring
innovation to the market. We are pleased that Ofcom is proposing to
continue mandating access to the Royal Mail delivery network, with
the headroom between retail and access prices protected by Ofcom.
The nature of headroom control, now referred to as 'margin squeeze
protection', is likely to alter but we expect it will continue to
be regulated. Given the competitive nature of our mail pricing, we
do not expect any material impact on our mail margins.
We will not know the effect of the new regime on mail pricing
until Royal Mail announces its revised prices in early 2012. We are
currently considering the opportunities that may arise for our
business once Ofcom concludes its consultation in January. UK Mail
remains a market leader with an operational template that is
ideally suited to adapt to the demands of an evolving market, and
we will continue to focus on growing our overall volumes, by
gaining additional volumes from new and existing customers and
driving 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 3.0% for the period to GBP83.5m (2010:
GBP81.0m). Operating profit decreased by 14.0% to GBP5.6m (2010:
GBP6.5m) with the operating margin at 6.6% (2010: 7.9%).
Due to the fixed cost nature of our parcels business, the impact
of one less working day reduced operating profit by some GBP0.4m
with an impact on the operating margin of some 0.4%.
Performance was also impacted by the effect of
business-to-business volume growth remaining subdued in the first
half. This was however largely offset by stronger
business-to-consumer volumes, resulting in an overall volume
increase in the parcels we handle of some 11%.
This mix effect 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 have accelerated the plans to reduce our fixed cost base.
This has resulted in the closure of two depots, reducing our total
number of sites to 52, along with restructuring in a number of
support areas.
We have recently introduced a number of major improvements to
our I.T. infrastructure. These include the provision of
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.
An important change we have made is to completely replace our
central I.T. hardware. This was achieved in September 2011 and it
is a credit to our I.T. and operations management that such a major
change was made smoothly and without impact on our operations, on
time and on budget. This change gives us much improved processing
capacity which will allow us to cope with the combined volume
growth we are seeing across our business and to introduce new
services for our customers.
As part of these improvements we have also introduced a
completely new internet platform which will help support business
growth and drive down costs.
Our Retail Logistics product which provides services tailored to
the specific needs of retailers continues to make good progress.
This service is targeted at the extensive list of retail customers
we have access to through our mail, parcels and courier businesses,
and we now have a number of major retailers trading with us. We
estimate the Retail Logistics market to be worth GBP1.2bn overall,
supporting our view that this represents a significant growth
opportunity for the business. We have recently enhanced our service
offering to include the ability to handle hanging garments, as well
as providing customers with returns and inter-store transfer
facilities.
The overall parcels market in the UK is challenging with growth
linked to economic performance in a highly competitive environment.
Our target position in this market is to be a high quality operator
which provides the services that customers want. The key here is a
reliable next day service, providing customers with estimated
delivery windows, which can easily be re-arranged, with the strong
use of I.T. to provide added information.
Our analysis of the parcels market has shown an increasing trend
for customers to buy parcel collection and delivery services
on-line, rather than through the traditional contract based
approach. This trend is partly caused by the growth of on-line
transaction sites, such as ebay and Amazon Marketplace, which allow
small businesses to reach their customers directly. In response to
this trend we are today launching our on-line parcel collection and
delivery service, www.ipostparcels.com, which allows any new
customer, be they an individual or a small business, to arrange
parcel collection and delivery directly with UK Mail through an
easy to use website. We see this as a highly innovative service and
a promising growth prospect for the future, making UK Mail's
parcels offering more accessible to a much wider audience of small
businesses and consumers.
Courier
Revenues in our Courier business, which provides same-day
delivery services, increased 6.4% to GBP10.1m (2010: GBP9.5m).
Operating margins increased to 11.8% (2010: 10.5%) leading to an
increase in operating profit to GBP1.2m (2010: GBP1.0m). The
increase in operating margin reflects the actions we have taken to
improve effectiveness and reduce overheads in the business.
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,decreased by 0.2% for the period
to GBP14.2m (2010: GBP14.3m). We have however again improved the
efficiency of our operations and reduced costs, leading to an
improvement in the operating margin to 7.2% (2010: 6.3%). This
improved margin led to an increase in operating profit for the
period of 14.7% to GBP1.0m (2010: GBP0.9m).
This business has performed well in a market that remains
challenging.
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.
Exceptional Items
As previously indicated the Group has taken action to reduce its
fixed cost base. As a result we have incurred exceptional costs of
GBP0.8m (2010: GBPnil). The actions involved a number of
initiatives including a reduction in headcount and the closure of
two sites, resulting in redundancy costs of GBP0.6m and property
related costs of GBP0.2m.
Finance costs
Net interest payable reduced to nil (2010: GBP0.1m). Our finance
costs continue to reduce as our cash balance improves and we repay
debt.
Cash Flow and Balance Sheet
The Group has a strong balance sheet with net cash at the end of
the period of GBP11.6m (2010: GBP8.5m).
Net cash inflow from operating activities totalled GBP3.9m
(2010: GBP3.2m). Net cash outflow for the period was GBP7.2m (2010:
GBP8.6m) which included GBP5.2m (2010: GBP6.2m) of cash consumed in
working capital, reflecting the normal first half trend in our
business. We expect a substantially smaller outflow for the year as
a whole.
Capital expenditure for the period was GBP3.4m (2010: GBP4.1m).
The capital expenditure for the period includes GBP2.2m on IT, as
we continue to develop our systems infrastructure, and GBP1.0m on
our network.
Earnings per share
Basic earnings per share decreased 16.1% to 8.1p (2010: 9.6p).
The underlying basic earnings per share, excluding the impact of
exceptional items, decreased 5.4% to 9.1p (2010: 9.6p).
Dividend
The Board has declared an unchanged Interim Dividend of 6.4p
(2010: 6.4p), to be paid on 13 January 2012 to shareholders
registered on 2 December 2011.
CURRENT TRADING & OUTLOOK
The more challenging conditions experienced in the second
quarter have continued into the third quarter to date, reflecting
depressed end-consumer activity, and we continue to assume that
economic conditions will remain tough throughout the current
financial year.
We expect a continued decline in underlying mail volumes in the
UK market, exacerbated by the price increases imposed by Royal
Mail. This and continuing regulatory reform will represent
challenges but also new opportunities, and UK Mail's business model
is ideally suited to enable us to adapt as the market evolves. We
will maintain our focus on winning additional mail volumes from new
and existing customers and driving the growth opportunities
presented by our new product developments.
The parcels market will remain challenging and highly
competitive, but we believe our focus on key customer segments such
as Retail Logistics and new product innovations such as
ipostparcels.com will allow us to make further progress in the
future. Our parcels business remains in a good 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.
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, and to take
advantage of any opportunities that arise as those markets
evolve.
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 2011
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 page 15 of the Group's 2011
Annual Report and Accounts. These included risks relating to IT
systems, business continuity, legislation and regulation,
competition and fuel factors, in addition to financial risks
including credit 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 2011 Annual Report and
Accounts.
Cautionary statement
This interim 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. Nothing in this report should be construed as a profit
forecast.
Going concern
As stated in note 2 to the condensed consolidated interim
financial statements, 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 six months ended
30 September 2011
Unaudited
Six months Unaudited Audited
to 30 Six months Year to
September to 30 September 31 March
2011 2010 2011
Note GBPm GBPm GBPm
Continuing operations
Revenue 5 201.6 190.7 395.8
Cost of sales (178.4) (166.8) (347.3)
Gross profit 23.2 23.9 48.5
Administrative expenses (16.4) (16.4) (32.3)
-------------------------------------- ------ ------- ------------ ---- ----------------- --------------
Operating profit before
exceptional items 6.8 7.5 16.2
Exceptional administrative
items 6 (0.8) - -
-------------------------------------- ------ ------- ------------ ---- ----------------- --------------
Operating profit 5 6.0 7.5 16.2
Finance costs (0.1) (0.1) (0.2)
Finance income 0.1 - 0.1
Profit before taxation 6.0 7.4 16.1
-------------------------------------- ------ ------- ------------ ---- ----------------- --------------
Taxation before exceptional
items (1.8) (2.1) (4.5)
Exceptional taxation
items 0.2 - -
-------------------------------------- ------ ------- ------------ ---- ----------------- --------------
Total taxation 12 (1.6) (2.1) (4.5)
------------ ----------------- --------------
Profit for the period 4.4 5.3 11.6
------------ ----------------- --------------
Total comprehensive income
attributable to:
Equity holders of the
company 4.4 5.3 11.6
============ ================= ==============
Basic earnings per share 13 8.1p 9.6p 21.2p
Diluted earnings per
share 13 8.0p 9.3p 21.1p
The notes on the following pages form an integral part of these condensed
consolidated interim financial statements
Consolidated Balance Sheet
at 30 September 2011
Unaudited Unaudited Audited
30 September 30 September 31 March
2011 2010 2011
Note GBPm GBPm GBPm
Assets
Non-current assets
Goodwill 7 9.5 9.5 9.5
Intangible assets 7 3.6 2.8 3.2
Investment properties 7 0.9 1.0 0.9
Property, plant and
equipment 7 35.9 37.6 37.0
Deferred tax assets 0.4 0.5 0.5
50.3 51.4 51.1
-------------- -------------- ----------
Current assets
Inventories 0.3 0.2 0.2
Trade and other receivables 55.9 54.1 56.7
Cash and cash equivalents 10 15.2 13.9 22.4
71.4 68.2 79.3
-------------- -------------- ----------
Liabilities
Current liabilities
Borrowings 10 (1.8) (1.8) (1.8)
Trade and other payables (53.8) (50.5) (58.8)
Current tax liabilities (1.3) (2.1) (1.9)
Provisions 11 (0.1) (0.2) (0.1)
(57.0) (54.6) (62.6)
-------------- -------------- ----------
Net current assets 14.4 13.6 16.7
-------------- -------------- ----------
Non-current liabilities
Borrowings 10 (1.8) (3.6) (3.2)
Deferred tax liabilities (3.1) (3.1) (3.0)
Provisions 11 (0.3) (0.4) (0.5)
(5.2) (7.1) (6.7)
-------------- -------------- ----------
Net assets 59.5 57.9 61.1
============== ============== ==========
Shareholders' equity
Ordinary shares 8 5.5 5.5 5.5
Share premium 8 16.8 16.6 16.7
Retained earnings 37.2 35.8 38.9
Total shareholders'
equity 59.5 57.9 61.1
============== ============== ==========
Consolidated Statement of Cash Flows
for the six months ended 30 September 2011
Unaudited Unaudited Audited
Six months Six months Year to
to 30 September to 30 September 31 March
2011 2010 2011
Note GBPm GBPm GBPm
Continuing operations
Operating activities
Cash generated from operations 9 6.1 5.5 24.2
Finance income received 0.1 - 0.1
Finance costs paid (0.1) (0.1) (0.2)
Taxation paid (2.2) (2.2) (4.8)
Net cash inflow from operating
activities 3.9 3.2 19.3
----------------- ----------------- ---------------
Investing activities
Proceeds from disposal of
property, plant and equipment 7 - 0.1 0.1
Purchase of property, plant
and equipment 7 (2.4) (2.9) (5.7)
Purchase of intangible assets 7 (1.0) (1.2) (2.1)
Net cash outflow from investing
activities (3.4) (4.0) (7.7)
----------------- ----------------- ---------------
Financing activities
Dividends paid to shareholders 14 (6.4) (6.4) (9.9)
Repayment of finance lease
liabilities 10 (0.4) (0.4) (0.8)
Net proceeds from issue of
ordinary share capital 0.1 - 0.1
Purchase of UK Mail shares
by the ESOT - - (0.1)
Repayment of borrowings 10 (1.0) (1.0) (1.0)
Net cash outflow from financing
activities (7.7) (7.8) (11.7)
----------------- ----------------- ---------------
Net decrease in cash and cash
equivalents 10 (7.2) (8.6) (0.1)
Cash and cash equivalents
at the start of the period 10 22.4 22.5 22.5
Cash and cash equivalents
at the end of period 10 15.2 13.9 22.4
================= ================= ===============
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
for the six months ended 30 September 2011
Attributable to equity holders of the
company
Ordinary Share Retained Total
shares premium earnings equity
Note GBPm GBPm GBPm GBPm
Balance as at 1 April 2011 5.5 16.7 38.9 61.1
Dividends paid to shareholders 14 - - (6.4) (6.4)
Employees' share option
scheme:
- value of employee services - - 0.3 0.3
- exercise of share options 8 - 0.1 - 0.1
Profit for the period - - 4.4 4.4
Balance as at 30 September
2011 5.5 16.8 37.2 59.5
-------------- ---------- -------------- ----------
Balance as at 1 April 2010 5.5 16.6 36.4 58.5
Dividends paid to shareholders 14 - - (6.4) (6.4)
Employees' share option
scheme:
- value of employee services - - 0.4 0.4
- tax on employee share
options - - 0.1 0.1
Profit for the period - - 5.3 5.3
Balance as at 30 September
2010 5.5 16.6 35.8 57.9
-------------- ---------- -------------- ----------
Balance as at 1 April 2010 5.5 16.6 36.4 58.5
Dividends paid to shareholders 14 - - (9.9) (9.9)
Purchase of UK Mail shares
by the ESOT - - (0.1) (0.1)
Employees' share option
scheme:
- value of employee services - - 0.9 0.9
- exercise of share options - 0.1 - 0.1
Profit for the period - - 11.6 11.6
-------------- ---------- -------------- ----------
Balance as at 31 March 2011 5.5 16.7 38.9 61.1
-------------- ---------- -------------- ----------
Notes to condensed consolidated interim financial statements
1 General information
UK Mail Group plc ('the Company') and its subsidiaries (together
'the Group') are engaged in the provision of express collection
and delivery services for mail, parcels and palletised goods.
The Company (Registered No. 02800218) 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. The Company is listed on the London Stock Exchange
(LSE:UKM).
The condensed consolidated interim financial statements were
approved for issue on 15 November 2011.
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 2011 and 2010
are unaudited. Statutory accounts for the year ended 31 March
2011 were approved by the Board of directors on 17 May 2011
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 498(2) or (3) of the Companies Act 2006.
2 Basis of preparation
The condensed consolidated interim financial statements for
the half year ended 30 September 2011 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 and disclosures 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 2011, 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 2011 are available upon request
from the Company's registered office at 464 Berkshire Avenue
Slough, SL1 4PL or at www.ukmail.com.
The condensed consolidated interim financial statements are
presented in Sterling.
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 cash
position are shown in note 10. The Group also has GBP12m of
undrawn committed facilities, which are in place until 30 June
2012. Accordingly they continue to adopt the going concern
basis in preparing the condensed consolidated interim financial
statements.
3 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 2011.
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
2011.
-- IAS 1 (revised), 'Presentation of financial statements',
effective for annual periods beginning on or after 1
January
2011
-- IAS 24 (revised), 'Related party disclosures', effective
for annual periods beginning on or after 1 January 2011
-- IAS 27 (amendment), 'Consolidated and separate financial
statements', effective for annual periods beginning on
or
after 1 July 2010
-- IAS 34 (amendment), 'Interim financial reporting',
effective
for annual periods beginning on or after 1 July 2011
-- IFRIC 13 (amendment), 'Customer loyalty programmes',
effective
for annual periods beginning on or after 1 January 2011
-- IFRIC 14 (amendment), 'Pre-payments of a minimum funding
requirement', effective for annual periods beginning on
or
after 1 January 2011
-- IFRIC 19, 'Extinguishing financial liabilities with
equity
instruments', effective for annual periods beginning on
or
after 1 July 2010
-- IFRS 1 (amendment), 'First time adoption on financial
instrument
disclosures', effective for annual periods beginning on
or
after 1 January 2011
-- IFRS 3 (revised), 'Business combinations', effective for
annual periods beginning on or after 1 July 2010
-- IFRS 7 (amendment), 'Financial instruments:
Disclosures',
effective for annual periods beginning on or after 1
January
2011
The adoption of these standards and interpretations had no
material impact on the Group.
The following new standards, interpretations and amendments
have been issued, but are not effective for the financial year
beginning 1 April 2011 and have not been early adopted:
-- IAS 1 (revised), 'Presentation of financial statements',
effective for annual periods beginning on or after 1
July
2012
-- IAS 12 (revised), 'Income taxes', effective for annual
periods
beginning on or after 1 January 2012
-- IAS 19 (amendment), 'Employee benefits', effective for
annual
periods beginning on or after 1 January 2013
-- IAS 27 (amendment), 'Consolidated and separate financial
statements', effective for annual periods beginning on
or
after 1 January 2013
-- IAS 28 (revised), 'Investments in associates and joint
ventures
(as amended in 2011)', effective for annual periods
beginning
on or after 1 January 2013
-- IFRS 1 (amendment), 'First time adoption of IFRS -
Severe
Hyperinflation and Removal of Fixed Dates for First-time
Adopters', effective for annual periods beginning on or
after
1 July 2011
-- IFRS 7 (amendment), 'Financial instruments:
Disclosures',
effective for annual periods beginning on or after 1
July
2011
-- IFRS 9, 'Financial instruments', effective for annual
periods
beginning on or after 1 January 2013
-- IFRS 10, 'Consolidated financial statements', effective
for
annual periods beginning on or after 1 January 2013
-- IFRS 11, 'Joint arrangements', effective for annual
periods
beginning on or after 1 January 2013
-- IFRS 12, 'Disclosure of interests in other entities',
effective
for annual periods beginning on or after 1 January 2013
-- IFRS 13, 'Fair value measurement', effective for annual
periods
beginning on or after 1 January 2013
4 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 2011.
There have been no material changes in contingent liabilities
during the current interim period.
5 Segmental information
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 Mail, Parcels, Courier
and Pallet 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 its
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 6% of revenue
in the periods included in these condensed consolidated interim
financial statements.
Six months ended 30 September 2011 (unaudited)
Mail Parcels Courier Pallets Group
GBPm GBPm GBPm GBPm GBPm
Segmental revenue 93.8 83.5 10.8 14.2 202.3
Inter-segment revenue - - (0.7) - (0.7)
Revenue (from external
customers) 93.8 83.5 10.1 14.2 201.6
Operating profit before
exceptional items 5.0 5.6 1.2 1.0 12.8
Exceptional items - administrative
items - (0.7) (0.1) - (0.8)
-------- -------- -------- --------- -----------
Operating profit before
central costs 5.0 4.9 1.1 1.0 12.0
Central costs (6.0)
Operating profit 6.0
Finance costs (0.1)
Finance income 0.1
Profit before taxation 6.0
Taxation (1.6)
Profit for the period 4.4
-----------
Assets
Segment assets 51.6 76.8 0.1 8.1 136.6
Eliminations (26.9) (16.8) - (3.4) (47.1)
Net segment assets 24.7 60.0 0.1 4.7 89.5
Central assets 32.2
Total assets per balance
sheet 121.7
-----------
Six months ended 30 September 2010 (unaudited)
Mail Parcels Courier Pallets Group
GBPm GBPm GBPm GBPm GBPm
Revenue 85.9 81.0 9.9 14.3 191.1
Inter-segment revenue - - (0.4) - (0.4)
Revenue (from external
customers) 85.9 81.0 9.5 14.3 190.7
Operating profit before
central costs 5.6 6.5 1.0 0.9 14.0
Central costs (6.5)
Operating profit 7.5
Finance costs (0.1)
Finance income -
Profit before taxation 7.4
Taxation (2.1)
Profit for the period 5.3
-----------
Assets
Segment assets 46.4 65.2 0.4 6.1 118.1
Eliminations (23.5) (3.5) - (1.2) (28.2)
Net segment assets 22.9 61.7 0.4 4.9 89.9
Central assets 29.7
Total assets per balance
sheet 119.6
-----------
Year ended 31 March 2011 (audited)
Mail Parcels Courier Pallets Group
GBPm GBPm GBPm GBPm GBPm
Revenue 181.8 166.7 20.3 28.1 396.9
Inter-segment revenue - - (1.1) - (1.1)
Revenue (from external
customers) 181.8 166.7 19.2 28.1 395.8
Operating profit before
central costs 11.8 12.1 2.2 1.8 27.9
Central costs (11.7)
Operating profit 16.2
Finance costs (0.2)
Finance income 0.1
Profit before taxation 16.1
Taxation (4.5)
Profit for the period 11.6
-----------
Assets
Segment assets 48.3 83.6 0.2 7.1 139.2
Eliminations (21.5) (20.5) - (2.5) (44.5)
------------ --------- ------ -------- ------------
Net segment assets 26.8 63.1 0.2 4.6 94.7
Central assets 35.7
Total assets per balance
sheet 130.4
------------
30 September 30 September 31 March
2011 2010 2011
Total segment capital expenditure 1.3 2.7 4.2
Central capital expenditure 2.1 1.4 3.6
Total capital expenditure 3.4 4.1 7.8
----------------- --------------- --------------------
Total segment depreciation
and amortisation 2.8 2.9 5.7
Central depreciation and
amortisation 1.3 0.9 1.9
Total depreciation and amortisation 4.1 3.8 7.6
----------------- --------------- ----------
6 Exceptional items
During the period, the Group has taken action to reduce its
fixed cost base, at a cost of GBP0.8m (2010: GBPnil). The actions
involved a number of initiatives including a reduction in headcount
and the closure of two sites, resulting in redundancy costs
of GBP0.6m and property related costs of GBP0.2m.
7 Property, plant and equipment and intangible assets
Six months ended 30 September 2011 (unaudited) GBPm
Opening net book value at 1 April
2011 50.6
Additions 3.4
Disposals -
Depreciation and amortisation (4.1)
Closing net book value at 30
September 2011 49.9
------------
Six months ended 30 September 2010 (unaudited) GBPm
Opening net book value at 1 April
2010 50.6
Additions 4.1
Disposals -
Depreciation and amortisation (3.8)
Closing net book value at 30
September 2010 50.9
------------
Year ended 31 March 2011 (audited) GBPm
Opening net book value at 1 April
2010 50.6
Additions 7.8
Disposals (0.1)
Depreciation and amortisation (7.7)
Closing net book value at 31
March 2011 50.6
------
8 Share Capital
Number
of Ordinary Share Unaudited
ordinary shares premium Total
Capital shares GBPm GBPm GBPm
At 1 April 2011 54,693,973 5.5 16.7 22.2
Allotted under SAYE schemes 33,723 - 0.1 0.1
--------------- ------------ -------- ------------
At 30 September 2011 54,727,696 5.5 16.8 22.3
--------------- ------------ -------- ------------
At 1 April 2010 and 30
September 2010 54,675,241 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. Shares held by the ESOT are not voted
at shareholder meetings and do not accrue dividends. At 31 March
2011 the ESOT held a total of 127,723 shares (31 March 2010:
342,198 shares). The ESOT has neither acquired nor issued any
shares during the period to 30 September 2011 (Period to 30 September
2010: 233,697 shares issued), and as a result held 127,723 shares
at 30 September 2011 (30 September 2010: 108,501 shares).
During the six months to 30 September 2011, 33,723 shares were
allotted to employees in respect of SAYE schemes (2010: nil).
9 Reconciliation of profit to net cash flow generated from operations
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2011 2010 2011
GBPm GBPm GBPm
Profit for the period 4.4 5.3 11.6
Taxation 1.6 2.1 4.5
Finance costs payable 0.1 0.1 0.2
Finance income receivable (0.1) - (0.1)
Exceptional items 0.8 - -
Depreciation and amortisation 4.1 3.8 7.7
Loss on disposal of property,
plant and equipment - (0.1) (0.1)
Share-based payments 0.4 0.5 1.0
Decrease/(increase) in
trade and other receivables 0.8 (2.3) (4.9)
(Decrease)/increase in
trade and other payables (5.8) (3.8) 4.3
(Decrease)/increase in
provisions (0.2) (0.1) -
Net cash inflow generated
from operations 6.1 5.5 24.2
-------------------- -------------- ------------
10 Analysis of net cash/(debt)
Audited Unaudited
At 1 April At 30 September
2011 Cash flow Other 2011
GBPm GBPm GBPm GBPm
Cash at bank and in hand 22.4 (7.2) - 15.2
Cash and cash equivalents 22.4 (7.2) - 15.2
------------ ---------- ------ -----------------
Debt due within one year (1.0) 1.0 (1.0) (1.0)
Finance leases due within
one year (0.8) 0.4 (0.4) (0.8)
Debt due after one year (2.0) - 1.0 (1.0)
Finance leases due after
one year (1.2) - 0.4 (0.8)
Debt (5.0) 1.4 - (3.6)
------------ ---------- ------ -----------------
Net cash 17.4 (5.8) - 11.6
------------ ---------- ------ -----------------
Cash flow Other
Audited Unaudited
At 1 April At 30 September
2010 2010
GBPm GBPm GBPm GBPm
Cash at bank and in hand 22.5 (8.6) - 13.9
Cash and cash equivalents 22.5 (8.6) - 13.9
------------ ---------- ------ -----------------
Debt due within one year (1.0) 1.0 (1.0) (1.0)
Finance leases due within
one year (0.8) 0.4 (0.4) (0.8)
Debt due after one year (3.0) - 1.0 (2.0)
Finance leases due after
one year (2.0) - 0.4 (1.6)
Debt (6.8) 1.4 - (5.4)
------------ ---------- ------ -----------------
Net cash 15.7 (7.2) - 8.5
------------ ---------- ------ -----------------
Audited
At 31
Cash flow Other March 2011
GBPm GBPm GBPm GBPm
Cash at bank and in
hand 22.5 (0.1) - 22.4
---------- --------
Cash and cash equivalents 22.5 (0.1) - 22.4
----------- ---------- -------- ------------
Debt due within one
year (1.0) 1.0 (1.0) (1.0)
Finance leases due within
one year (0.8) 0.8 (0.8) (0.8)
Debt due after one year (3.0) - 1.0 (2.0)
Finance leases due after
one year (2.0) - 0.8 (1.2)
---------- --------
Debt (6.8) 1.8 - (5.0)
----------- ---------- -------- ------------
Net cash 15.7 1.7 - 17.4
----------- ---------- -------- ------------
11 Provisions for liabilities and charges
Unaudited
Total
Six months ended 30 September
2011 GBPm
At 1 April 2011 0.6
Utilised during the period (0.2)
At 30 September 2011 0.4
-------------
Unaudited
Total
Six months ended 30 September
2010 GBPm
At 1 April 2010 0.6
Utilised during the period -
At 30 September 2010 0.6
-------------
Audited
Total
Year ended 31 March 2011 GBPm
At 1 April 2010 0.6
Utilised during the year -
------------
At 31 March 2011 0.6
------------
The provision for property leases relates to dilapidations on
properties under leases expiring within 1 year and up to 14 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.
12 Taxation
Taxation is provided based on management's best estimate of the
weighted average annual corporation tax rate expected for the
full financial year. The estimated average annual tax rate used
for the year to 31 March 2012 is 27.0% (year to 31 March 2011:
28.8%).
The Finance Bill 2011, which contained legislation for some of
the proposals announced by the Chancellor in the 23 March 2011
Budget, was enacted on 19 July 2011. The Bill introduced a further
reduction in the rate of UK corporation tax to 25% from 1 April
2012. In accordance with accounting standards this change, which
is regarded as 'substantively enacted', has been reflected in
these condensed consolidated interim financial statements.
13 Earnings per share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of
shares on the assumed conversion of all dilutive options.
Underlying earnings per share
It is the directors' view that underlying earnings per share
is a fairer reflection of the underlying results of the business.
The adjusted basic and diluted underlying earnings per share
have been calculated excluding the exceptional items and the
associated tax impact.
The underlying profit for the period is calculated as follows;
Unaudited Unaudited Audited
Six months to Six months Year to
30 September to 30 September 31 March
2011 2010 2011
GBPm GBPm GBPm
Profit after tax 4.4 5.3 11.6
Exceptional items 0.8 - -
Exceptional taxation items (0.2) - -
---------------- ------------------ ---------------
Underlying profit for the
period 5.0 5.3 11.6
---------------- ------------------ ---------------
The weighted average number of shares used in the calculations
are as follows;
No. of shares No. of shares No. of shares
Weighted average number
of shares in issue 54,566,250 54,482,917 54,522,247
Dilutive effect of options 25,637 1,688,004 220,124
---------------- ------------------ ---------------
Diluted weighted average
number of shares 54,591,887 56,170,921 54,742,371
---------------- ------------------ ---------------
Earnings per share - basic 8.1p 9.6p 21.2p
Earnings per share - diluted 8.0p 9.3p 21.1p
Underlying earnings per
share - basic 9.1p 9.6p 21.2p
Underlying earnings per
share - diluted 9.1p 9.3p 21.1p
14 Dividends
The final dividend for the year ended 31 March 2011 of 11.8p
per share (2010: 11.8p) was paid on 22 July 2011. The GBP6.4m
distribution (2010: GBP6.4m) is reflected in the financial statements
for the six months ended 30 September 2011.
In addition, the directors propose an interim dividend of 6.4p
per share (2010: 6.4p per share) payable on 13 January 2012 to
shareholders who are on the register at 2 December 2011. This
interim dividend, amounting to GBP3.5m (2010: GBP3.5m) has not
been recognised as a liability in these condensed consolidated
interim financial statements.
15 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 GBPNil (2010: GBP1.1m).
16 Events occurring after the reporting period
There are no events occurring after the reporting period, other
than the proposed dividend referred to in note 14
17 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 45.7%
of the issued share capital of the Company.
The nature of the related party transactions of the Group has
not changed from those described in the Groups' 2011 Annual Report
and Accounts. There were no transactions with related parties
during the six months ended 30 September 2011 which have had
a material effect on the results or the financial position of
the Group.
Transactions between the Company and its subsidiaries, which
are related parties, have been eliminated on consolidation and
are not disclosed in this note.
18 Risks and uncertainties
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 page 15 of the Group's 2011 Annual Report and Accounts. These
included risks relating to IT systems, business continuity, legislation
and regulation, competition and fuel factors, in addition to
financial risks including credit 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 2011 Annual Report and Accounts.
19 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 Interim report is the responsibility of, and has been approved
by, the directors of UK Mail Group plc. The directors are responsible
for preparing the Interim report in accordance with the Disclosure
and Transparency Rules of the United Kingdom's Financial Services
Authority. The Disclosure and Transparency Rules require that
the accounting policies and presentation applied to the half-yearly
figures must be consistent with those applied in the latest published
annual accounts, except where the accounting policies and presentation
are to be changed in the subsequent annual accounts, in which
case the new accounting policies and presentation should be followed,
and the changes and the reasons for the changes should be disclosed
in the Interim report, unless the United Kingdom Financial Services
Authority agrees otherwise.
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 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 as required by DTR 4.2.7; and
-- related-party transactions that have taken place in the
first
six months of the current financial year and changes in the
related-party transactions described in the last annual
report
that have materially affected the financial position or
performance
of the group during the first six months of the current
financial
year as required by DTR 4.2.8.
The directors of UK Mail Group plc are listed in the UK Mail
Group Annual Report for the year ended 31 March 2011, with the
exception that Trevor Jenkins retired on 31 October 2011, and
Bill Spencer was appointed as a non-executive director on 1 November
2011. A list of current directors is maintained on the UK Mail
Group website: www.ukmail.com.
By order of the Board
Steven Glew, Finance
Guy Buswell, Chief Executive Director
15 November 2011 15 November 2011
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
2011, 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 set of 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 set of consolidated interim financial
statements in the interim financial report for the six months
ended 30 September 2011 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
15 November 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
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