TIDMUKM
RNS Number : 6129R
UK Mail Group PLC
21 November 2012
21(st) November 2012
UK MAIL GROUP plc
INTERIM RESULTS
For the 6 months ended 30 September 2012
Highlights
-- Group revenues up 11.9% to GBP225.7m (2011: GBP201.6m)
o Mail revenues up 23.6% to GBP115.9m (2011: GBP93.8m)
o Parcels revenues up 4.4% to GBP87.2m (2011: GBP83.5m)
-- Group profit before tax (before exceptional items) up 7.8% to GBP7.3m (2011: GBP6.8m)
-- Group profit before tax (reported) up 21.4% to GBP7.3m (2011: GBP6.0m)
-- Strong balance sheet, net cash at period end of GBP15.7m (2011: GBP11.6m)
-- Interim dividend maintained at 6.4p per share (2011: 6.4p)
-- Strong levels of customer retention and new client wins
-- Continued to build market share as the market landscape evolves
-- New products and service offerings, including imail and
ipostparcels, continue to make good progress
Guy Buswell, Chief Executive Officer of UK Mail, said:-
"The Group had an encouraging first half, demonstrating the
results of our continued efforts to reduce costs and further
improve our efficient network. The whole team has done a great job
in enabling us to build on our leading market positions, maintain
our high service levels and strengthen our brand. The second half
to date has continued in this vein, with current trading in line
with our expectations.
"With our highly competitive business model, tight focus on
costs, and strong balance sheet providing strategic flexibility, we
are well prepared for the competitive environment, and general
economic backdrop, to remain tough into 2013. We are therefore
confident that we will come through this period of significant
change in our industry as one of the strongest players in the
markets in which we operate."
For further information, please contact:
UK Mail Group plc
Guy Buswell, Chief Executive Officer 0121 335 1111
Steven Glew, Group Finance Director 0175 370 6070
MHP Communications
John Olsen
Ian Payne
Giles Robinson 0203 128 8100
Introduction
Overall performance in the first half of the year was
encouraging, particularly given the difficult trading environment,
and in line with our expectations. We have continued to benefit
from our strong market positions, high service levels and efficient
network.
Reported Group revenues for the first half increased by 11.9%
compared to the same period in the previous year. Adjusting for the
increase in Royal Mail prices implemented on 2 April 2012, and one
less working day than in the same period in the previous year,
underlying Group revenues increased by 9.9%. Group profit before
tax before exceptional items increased by 7.8% on the previous year
to GBP7.3m.
Our Mail business (51% of group revenues) grew its revenues on a
reported basis by 23.6%; on an underlying basis, revenues were up
by 17.0% compared with the previous year. This good revenue growth
is driven by strong customer retention and new customer wins. Mail
operating profit increased by 12.9% compared to the prior year. Our
Mail business remains well positioned in its market with a healthy
pipeline of new business opportunities. We again saw good progress
from imail and related new product innovations.
Our Parcels business (39% of group revenues) grew its revenues
by 4.4% compared to the same period in the previous year,
reflecting the benefit of recent customer wins. The pricing
environment remains challenging and the shift in mix towards B2C
continues. Despite this mix effect the Parcels operating margin has
improved to 6.7% for the period (2011: 6.6%), leading to good
growth of 5.5% in the Parcels operating profit compared to the same
period last year. We continue to focus on innovation and on
operational efficiency to help drive further Parcels margin
improvements.
In our Courier business (4% of group revenues) revenues have
declined, as expected, by 18.4% compared to the prior year. Strong
operational management reduced operating costs, helping to restrict
the operating profit decline to 6.5%.
Our Pallets business (6% of group revenues) has achieved revenue
growth of 0.8% compared to the same period last year. However,
Pallets operating profits have declined by 26.4% compared to the
same period last year. This decline was caused by temporary gaps in
our nationwide member network which resulted in additional
temporary operating costs. Actions are being taken to fill these
gaps.
We remain highly focused on innovation as we seek to further
expand the size of the markets available to us and continue
increasing our share of those markets. The new products and
services we have introduced in both our Mail and Parcels businesses
in recent years have continued to gain valuable traction and we are
constantly developing these to open up new opportunities.
On our operational network and our costs, we continue to manage
these tightly, whilst keeping our possible future needs under
constant review in the context of changing market dynamics.
Our financial position remains strong, with net cash balances at
the period end of GBP15.7m (2011: GBP11.6m).
Results
The results can be summarised as follows:
Six months ending 30(th) September
2012 2011 Inc/(Dec)
GBPm GBPm %
Group revenue 225.7 201.6 11.9%
========== ========== ===============
Operating profit (before exceptional
items) 7.2 6.8 6.5%
Net finance income 0.1 - -
---------- ---------- ---------------
Profit before taxation (before
exceptional items) 7.3 6.8 7.8%
Exceptional items - (0.8) -
---------- ---------- ---------------
Profit before tax (after exceptional
items) 7.3 6.0 21.4%
Taxation (1.8) (1.6) 11.8%
---------- ---------- ---------------
Profit after taxation 5.5 4.4 25.0%
========== ========== ===============
Basic earnings per share 10.1p 8.1p 24.9%
Underlying basic earnings per
share 10.1p 9.1p 10.7%
Revenue and operating profit are analysed as follows:
Revenue Operating Profit
Inc/ Inc/
2012 2011 (Dec) 2012 2011 (Dec)
GBPm GBPm % GBPm GBPm %
Mail 115.9 93.8 23.6% 5.7 5.0 12.9%
Parcels 87.2 83.5 4.4% 5.8 5.6 5.5%
Courier 8.3 10.1 (18.4)% 1.1 1.2 (6.5)%
Pallets 14.3 14.2 0.8% 0.8 1.0 (26.4)%
------- ------- ------------ ------ ------ ----------
Total 225.7 201.6 11.9% 13.4 12.8 4.7%
======= ======= ============
Central costs (6.2) (6.0) 2.7%
------ ------ ----------
Operating profit before exceptional items 7.2 6.8 6.5%
====== ====== ==========
Mail
Mail showed further growth in revenues of 23.6% to GBP115.9m
(2011: GBP93.8m). The Mail revenue growth includes the impact of
the Royal Mail price increase on 2 April 2012, which increased
prices by some 11.0% on an annualised basis. On an underlying
basis, revenues increased by 17.0%.
Our mail volumes increased by some 2% compared to the prior
year, while the overall UK mail market has experienced a decline in
transactional volumes of some 5% per annum in recent years. We have
therefore gained market share during the period. This growth has
been achieved through generating additional mail volumes from
existing customers, largely due to switching from Royal Mail as
their prices increase, and a number of new customer wins.
Another important factor in the volume growth is product
innovation. imail, our web-to-print postal service, continues to
grow. We have invested to increase our capacity and to provide
additional services, such as high speed insertion. We are
developing this product further to support its market leadership,
including the addition of data services. imail's average daily
volumes in September 2012 were again more than double those of a
year ago. We have a strong pipeline of new opportunities for this
product as we identify new areas where it can be applied
successfully.
Mail operating profits were up 12.9% to GBP5.7m (2011: GBP5.0m).
The operating margin reduced to 4.9% (2011: 5.4%), which is largely
the effect of the 11% price increase imposed by Royal Mail.
On 10 October 2012 Royal Mail published a discussion document on
the development of Access contracts, with the aim that the new
agreements will be in place by April 2013. Overall, we believe that
the document covers issues that have long needed to be addressed
and, to that extent, we welcome it as a step towards a position of
greater clarity for all market participants. Our expectation is
that the proposals, once amended for customer feedback, should not
have a material adverse impact on our business.
Parcels
Revenues in Parcels, which comprises the Group's
business-to-business, business-to-consumer and international parcel
delivery service, were up 4.4% for the period to GBP87.2m (2011:
GBP83.5m). We have again achieved good volume growth in both B2B
and B2C with Parcels volumes increasing by over 10% compared to the
prior year. This performance reflects the benefits of recent
customer wins, although we continue to see an on-going mix change
towards B2C, and further gains in market share.
We achieved good volume growth throughout the summer period with
no noticeable impact from the Olympics. We had planned for the
games period carefully and therefore saw little additional cost
incurred. We also took the decision not to increase charges to our
customers for deliveries into the Olympic area, in contrast to many
of our competitors. The result was good volume growth and many
accolades from our customers for our performance.
Parcels operating profit increased by 5.5% to GBP5.8m (2011:
GBP5.6m) with the operating margin improving to 6.7% (2011:
6.6%).
We continue to drive down costs to improve the profitability of
our parcels operations. A key area of focus is our vehicle fleet,
where we have now introduced telematics into all our trunking
vehicles. This technology allows us to closely monitor vehicles and
driver performance, generating improvements in fuel efficiency and
vehicle damage rates.
We have introduced a number of major improvements to our I.T.
infrastructure. These include the provision of industry-leading
functionality both 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.
A key factor in driving down the operating costs of our Parcels
business is the use of automated sortation. We introduced a major
automated sortation facility into our Birmingham hub in October
2010, which has proved successful. We are continuing to review the
potential opportunities to extend the benefits of automation across
our network and develop our plans in this area.
Our Retail Logistics product, which provides services tailored
to the specific needs of retailers, continues to make good progress
and we have a number of major retailers trading with us. Our
service offering now provides the ability to handle hanging
garments, as well as providing customers with returns and
inter-store transfer facilities.
Our ipostparcels product allows any 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. This
product has been successfully established in the market and is
achieving rapid growth. There is an increasing trend for parcel
collection and delivery services to be purchased on-line, partly
caused by the growth of on-line transaction sites such as ebay and
Amazon market place. We will continue to develop and market this
product which we see as a good source of future profitability.
The overall parcels market in the UK remains a highly
competitive environment. Major change is underway at a number of
our competitors, including the potential consolidation of two of
the major players. For our part, we continue to succeed in winning
new Parcels customers as a result of our high service levels,
low-cost network, innovation and strong brand in the market. We
will seek to benefit further from this position as the market
around us changes.
Courier
Revenues in our Courier business, which provides same-day
delivery services, decreased as expected by 18.4% to GBP8.3m (2011:
GBP10.1m). The same day courier market remains challenging. We are
continuing to focus on national contracts that can leverage our
network and blue chip customer base. Operating margins increased to
13.5% (2011: 11.8%) leading to an operating profit of GBP1.1m
(2011: GBP1.2m). 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, increased by 0.8% for the period
to GBP14.3m (2011: GBP14.2m). Operating profit for the period
declined by GBP0.2m to GBP0.8m (2011: GBP1.0m).
The Pallets business is based on a national network of members.
During the period we experienced temporary gaps in this network
which gave rise to additional delivery costs. Actions are being
taken to fill these gaps.
From a revenue perspective this business has performed well in a
market that remains challenging, and we will continue to focus on
sectors of the palletised distribution market which are best placed
to benefit as the economy recovers.
Finance costs
We continue to repay debt and benefit from the good cash
balances we have maintained. As a result we are now in a position
of generating interest income and so net interest income for the
period was GBP0.1m (2011: nil).
Cash Flow and Balance Sheet
The Group has a strong balance sheet with net cash at the end of
the period of GBP15.7m (2011: GBP11.6m).
Net cash inflow from operating activities totalled GBP8.3m
(2011: GBP3.9m). Net cash outflow for the period was GBP3.4m (2011:
GBP7.2m) which included GBP1.0m of cash consumed in working capital
(2011: GBP4.4m), reflecting the normal first half trend in our
business.
Capital expenditure for the period, including assets acquired
under finance leases, was GBP4.7m (2011: GBP3.4m). The capital
expenditure for the period includes GBP2.4m on IT, as we continue
to develop our systems infrastructure, and GBP1.9m on our
network.
The Group paid GBP6.4m (2011: GBP6.4m) of dividends during the
period being the 11.8p final dividend approved at the AGM on 11
July 2012 (2011: 11.8p).
Earnings per share
Basic earnings per share increased 24.9% to 10.1p (2011: 8.1p).
The underlying basic earnings per share, excluding the impact of
exceptional items last year, increased 10.7% to 10.1p (2011:
9.1p).
Dividend
The Board has declared an unchanged Interim Dividend of 6.4p
(2011: 6.4p), to be paid on 18 January 2013 to shareholders
registered on 7 December 2012.
CURRENT TRADING & OUTLOOK
Trading in the initial weeks of the second half of the year has
been in line with our expectations.
We expect the economic backdrop to remain challenging into 2013
and the pricing environment to stay competitive. We are continuing
to plan accordingly, with tight control of our costs remaining a
key focus. We have a strong brand and leading positions in our
markets, a highly competitive business model and a strong balance
sheet. All of this gives us confidence that we can outperform our
competitors and gain further market share as our industry continues
to undergo significant change.
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 2012
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 2012
Annual Report and Accounts. These included risks relating to HS2,
IT systems, business continuity, legislation and regulation,
competition and fuel factors, in addition to financial risks
including credit risk. Save for the risks relating to HS2 and the
removal of the potential for disruption during the now completed
Olympic games, 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 2012 Annual Report and Accounts.
The plans for HS2 are becoming clearer, including the potential
impact on our Birmingham hub. We continue to actively manage the
situation with the Government and HS2 to ensure any impact on our
business is minimal.
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.
Related-party transactions
As stated in note 18 to the condensed consolidated interim
financial statements, there were no transactions with related
parties during the six months ended 30 September 2012 which have
had a material effect on the results or the financial position of
the Group. The nature of the related party transactions has not
changed from those described in the Group's 2012 Annual Report and
Accounts.
Consolidated Statement of Comprehensive Income
for the six months ended 30
September 2012
Unaudited Unaudited
Six months Six months Audited
to 30 to 30 Year to
September September 31 March
2012 2011 2012
Note GBPm GBPm GBPm
Continuing operations
Revenue 6 225.7 201.6 429.0
Cost of sales (201.6) (178.4) (380.4)
Gross profit 24.1 23.2 48.6
Administrative expenses (16.9) (17.2) (35.7)
---------------------------------------- -------- ----- --------------- ---- ------------ --------------
Operating profit before
exceptional items 7.2 6.8 15.1
Exceptional administrative
items 7 - (0.8) (2.2)
---------------------------------------- -------- ----- --------------- ---- ------------ --------------
Operating profit 6 7.2 6.0 12.9
Finance income 0.1 0.1 0.1
Finance costs - (0.1) (0.1)
Profit before taxation 7.3 6.0 12.9
---------------------------------------- -------- ----- --------------- ---- ------------ --------------
Taxation before exceptional
items (1.8) (1.8) (4.1)
Exceptional taxation items 7 - 0.2 0.6
---------------------------------------- -------- ----- --------------- ---- ------------ --------------
Total taxation 13 (1.8) (1.6) (3.5)
--------------- ------------ --------------
Profit for the period 5.5 4.4 9.4
--------------- ------------ --------------
Total comprehensive income attributable
to:
Equity holders of the
company 5.5 4.4 9.4
=============== ============ ==============
Basic earnings per share 14 10.1p 8.1p 17.3p
Diluted earnings per share 14 10.1p 8.0p 17.3p
The notes on the following pages form an integral part of these condensed
consolidated interim financial statements
Consolidated Balance Sheet
at 30 September 2012
Unaudited Unaudited
30 30 Audited
September September 31 March
2012 2011 2012
Note GBPm GBPm GBPm
Assets
Non-current assets
Goodwill 8 9.5 9.5 9.5
Intangible assets 8 4.9 3.6 3.8
Investment properties 8 1.8 0.9 1.8
Property, plant and equipment 8 33.1 35.9 33.4
Deferred tax assets 0.3 0.4 0.4
49.6 50.3 48.9
----------- ----------- ----------
Current assets
Inventories 0.2 0.3 0.2
Trade and other receivables 62.0 55.9 63.5
Cash and cash equivalents 11 18.2 15.2 21.6
80.4 71.4 85.3
----------- ----------- ----------
Liabilities
Current liabilities
Borrowings 11 (1.4) (1.8) (1.8)
Trade and other payables (62.1) (53.8) (64.1)
Current tax liabilities (1.9) (1.3) (1.7)
Provisions 12 (0.7) (0.1) (1.3)
(66.1) (57.0) (68.9)
----------- ----------- ----------
Net current assets 14.3 14.4 16.4
----------- ----------- ----------
Non-current liabilities
Borrowings 11 (1.1) (1.8) (1.4)
Deferred tax liabilities (2.0) (3.1) (2.2)
Provisions 12 (0.9) (0.3) (0.8)
(4.0) (5.2) (4.4)
----------- ----------- ----------
Net assets 59.9 59.5 60.9
=========== =========== ==========
Shareholders' equity
Ordinary shares 9 5.5 5.5 5.5
Share premium 9 15.3 16.8 15.3
Retained earnings 39.1 37.2 40.1
Total shareholders' equity 59.9 59.5 60.9
=========== =========== ==========
Consolidated Statement of Cash Flows
for the six months ended 30 September 2012
Unaudited Unaudited
Six months Six months
to to Audited
30 30 Year to
September September 31 March
2012 2011 2012
Note GBPm GBPm GBPm
Continuing operations
Operating activities
Cash generated from operations 10 10.0 6.1 21.8
Finance income received 0.1 0.1 0.1
Finance costs paid - (0.1) (0.1)
Taxation paid (1.8) (2.2) (4.5)
Net cash inflow from operating activities 8.3 3.9 17.3
------------ ------------ ---------------
Investing activities
Proceeds from disposal of property,
plant and equipment 8 0.1 - -
Purchase of property, plant
and equipment 8 (3.0) (2.4) (4.7)
Purchase of intangible assets 8 (1.1) (1.0) (1.8)
Net cash outflow from investing activities (4.0) (3.4) (6.5)
------------ ------------ ---------------
Financing activities
Dividends paid to shareholders 15 (6.4) (6.4) (9.9)
Repayment of finance lease liabilities 11 (0.4) (0.4) (0.8)
Net proceeds from issue of ordinary
share capital 0.1 0.1 0.1
Repayment of borrowings 11 (1.0) (1.0) (1.0)
Net cash outflow from financing activities (7.7) (7.7) (11.6)
------------ ------------ ---------------
Net decrease in cash and cash
equivalents 11 (3.4) (7.2) (0.8)
Cash and cash equivalents at
the start of the period 11 21.6 22.4 22.4
Cash and cash equivalents at
the end of period 11 18.2 15.2 21.6
============ ============ ===============
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
for the six months ended 30 September 2012
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 2012 5.5 15.3 40.1 60.9
Dividends paid to shareholders 15 - - (6.4) (6.4)
Employees' share option scheme:
- tax on employee share options - - (0.1) (0.1)
Profit for the period - - 5.5 5.5
Balance as at 30 September
2012 5.5 15.3 39.1 59.9
---------- ------------- -------------- ------------
Balance as at 1 April 2011 5.5 16.7 38.9 61.1
Dividends paid to shareholders 15 - - (6.4) (6.4)
Employees' share option scheme:
- share-based payments - - 0.3 0.3
- exercise of share options - 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 2011 5.5 16.7 38.9 61.1
Dividends paid to shareholders 15 - - (9.9) (9.9)
Employees' share option scheme:
- share-based payments - - 0.2 0.2
- exercise of share options - 0.1 - 0.1
Transfer between reserves - (1.5) 1.5 -
Profit for the period - - 9.4 9.4
---------- ------------- -------------- ------------
Balance as at 31 March 2012 5.5 15.3 40.1 60.9
---------- ------------- -------------- ------------
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 20 November 2012.
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 2012 and 2011
are unaudited. Statutory accounts for the year ended 31 March
2012 were approved by the Board of directors on 21 May 2012
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 2012 have 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 2012, 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 2012 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 11. The Group has committed bank
facilities in place, comprising of a GBP5m undrawn overdraft
facility until 30 June 2013 and a GBP7m revolving credit facility
until 30 November 2014. Accordingly they continue to adopt the
going concern basis in preparing the condensed consolidated
interim financial statements.
3 Accounting policies
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 2012.
Adoption of new standards, and amendments to standards or interpretations,
which are mandatory for the first time for the financial year
beginning 1 April 2012, have had no material impact on the financial
position and performance of the Group.
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 2012.
There have been no material changes in contingent liabilities
during the current interim period.
5 Financial instruments
The activities of the Group exposes it to a number of financial
risks, including credit risk, market risk, price risk, liquidity
risk, foreign exchange risk and capital risk.
These condensed consolidated interim financial statements do
not include all of the financial risk management information
and disclosures required in the annual financial statements,
and should be read in conjunction with the Group's 2012 Annual
Report and Accounts.
There have been no changes in the Group's risk management policies
since the year end 31 March 2012.
The Group's financial instruments measured at fair value are
all classed as Level 2 fair value measurements, which is unchanged
from the position at 31 March 2012.
6 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. The Board assesses the performance of the
operating segments based on a measure of operating profit before
net finance costs and taxation.
Central costs comprises of network costs and central support
costs. Central assets comprise mainly of corporate assets, cash,
current and deferred tax balances.
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 5% of revenue
in the periods included in these condensed consolidated interim
financial statements.
Six months ended 30 September 2012 (unaudited)
Mail Parcels Courier Pallets Group
GBPm GBPm GBPm GBPm GBPm
Segmental revenue 115.9 87.2 9.2 14.3 226.6
Inter-segment revenue - - (0.9) - (0.9)
Revenue (from external
customers) 115.9 87.2 8.3 14.3 225.7
Operating profit before
exceptional expenses 5.7 5.8 1.1 0.8 13.4
Exceptional - administrative
expenses - - - - -
-------- -------- -------- --------- -----------
Operating profit before
central costs 5.7 5.8 1.1 0.8 13.4
Central costs (6.2)
Operating profit 7.2
Finance income 0.1
Finance costs -
Profit before taxation 7.3
Taxation (1.8)
Profit for the period 5.5
-----------
Assets
Segment assets 59.7 94.5 0.1 9.4 163.7
Eliminations (28.2) (35.4) - (4.6) (68.2)
Net segment assets 31.5 59.1 0.1 4.8 95.5
Central assets 34.5
Total assets per balance
sheet 130.0
-----------
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 income 0.1
Finance costs (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
-----------
Year ended 31 March 2012 (audited)
Mail Parcels Courier Pallets Group
GBPm GBPm GBPm GBPm GBPm
Revenue 208.1 172.1 22.2 28.3 430.7
Inter-segment revenue - - (1.7) - (1.7)
Revenue (from external
customers) 208.1 172.1 20.5 28.3 429.0
Operating profit before
exceptional expenses 10.0 11.6 2.7 2.1 26.4
Exceptional - administrative
expenses (0.7) (1.2) (0.3) - (2.2)
-------- -------- -------- --------- -----------
Operating profit before
central costs 9.3 10.4 2.4 2.1 24.2
Central costs (11.3)
Operating profit 12.9
Finance income 0.1
Finance costs (0.1)
Profit before taxation 12.9
Taxation (3.5)
Profit for the period 9.4
-----------
Assets
Segment assets 62.7 89.6 0.1 8.7 161.1
Eliminations (28.2) (31.0) - (4.2) (63.4)
----------- --------- --------- -------- ---------
Net segment assets 34.5 58.6 0.1 4.5 97.7
Central assets 36.5
Total assets per balance
sheet 134.2
---------
30 September 30 September 31 March
2012 2011 2012
Total segment capital expenditure 2.5 1.3 3.5
Central capital expenditure 2.2 2.1 3.0
Total capital expenditure 4.7 3.4 6.5
----------------- --------------- ---------------
Total segment depreciation
and amortisation 2.3 2.8 5.8
Central depreciation and
amortisation 1.5 1.3 2.6
Total depreciation and amortisation 3.8 4.1 8.4
----------------- --------------- ---------------
7 Exceptional administrative items
30 September 30 September 31 March
2012 2011 2012
Restructuring costs - 0.8 2.2
Exceptional taxation credit
- relief on restructuring
costs - (0.2) (0.6)
----------------- -------------------- --------------
Exceptional items - 0.6 1.6
----------------- -------------------- --------------
Restructuring costs
During the year ended 31 March 2012, the board approved a change
programme, designed to improve the efficiency of the network
infrastructure, and to reduce the fixed cost of the business,
This resulted in a number of restructuring changes in operational,
sales and head office management with further changes surrounding
the regionalisation of customer care centres, the closure of
four depots and the restructuring of Courier operations.
The exceptional taxation credit relates to relief in respect
of the restructuring costs above. Further details can be found
in the Annual Report 2012.
8 Property, plant and equipment and intangible assets
Six months ended 30 September 2012 (unaudited) GBPm
Opening net book value at 1 April
2012 48.5
Additions 4.7
Disposals (0.1)
Depreciation and amortisation (3.8)
Closing net book value at 30 September
2012 49.3
---------
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
---------
Year ended 31 March 2012 (audited) GBPm
Opening net book value at 1 April
2011 50.6
Additions 6.5
Disposals (0.2)
Depreciation and amortisation (8.4)
Closing net book value at 31 March
2012 48.5
------
9 Share Capital
Number
of Ordinary Share Unaudited
ordinary shares premium Total
Capital shares GBPm GBPm GBPm
At 1 April 2012 54,731,471 5.5 15.3 20.8
Allotted under SAYE schemes 1,510 - - -
--------------- ------------ -------- ------------
At 30 September 2012 54,732,981 5.5 15.3 20.8
--------------- ------------ -------- ------------
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
--------------- ------------ -------- ------------
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
2012 the ESOT held a total of 126,471 shares (31 March 2011:
127,723 shares). During the period to 30 September 2012, the
ESOT settled 25,400 shares to a number of employees following
the successful vesting of the 2009 SAYE plan (Period to 30 September
2011: no shares issued), and as a result held 101,071 shares
at 30 September 2012 (30 September 2011: 127,723 shares).
10 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
2012 2011 2012
GBPm GBPm GBPm
Profit for the period 5.5 4.4 9.4
Taxation 1.8 1.6 3.5
Finance income receivable (0.1) (0.1) (0.1)
Finance costs payable - 0.1 0.1
Depreciation and amortisation 3.8 4.1 8.4
Loss on disposal of property,
plant and equipment - - 0.2
Share-based payments - 0.4 0.1
Decrease/(increase) in
trade and other receivables 1.4 0.8 (6.8)
(Decrease)/increase in
trade and other payables (2.0) (5.0) 5.5
(Decrease)/increase in
provisions (0.4) (0.2) 1.5
Net cash flow generated
from operations 10.0 6.1 21.8
-------------------- -------------- ------------
11 Analysis of net cash/(debt)
Cash flow Other
Unaudited
Audited At 30
At 1 April September
2012 2012
GBPm GBPm GBPm GBPm
Cash at bank and
in hand 21.6 (3.4) - 18.2
Total cash 21.6 (3.4) - 18.2
------------ ---------- ------ -----------
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)
Debt due after one
year (1.0) - 1.0 -
Finance leases due
after one year (0.4) - (0.7) (1.1)
Total debt (3.2) 1.4 (0.7) (2.5)
------------ ---------- ------ -----------
Net cash 18.4 (2.0) (0.7) 15.7
------------ ---------- ------ -----------
Cash flow Other
Unaudited
Audited At 30
At 1 April September
2011 2011
GBPm GBPm GBPm GBPm
Cash at bank and
in hand 22.4 (7.2) - 15.2
Total cash 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)
Total debt (5.0) 1.4 - (3.6)
------------ ---------- ------ -----------
Net cash 17.4 (5.8) - 11.6
------------ ---------- ------ -----------
Cash flow Other
Audited
Audited At 31
At 1 April March
2011 2012
GBPm GBPm GBPm GBPm
Cash at bank and
in hand 22.4 (0.8) - 21.6
---------- ------
Total cash 22.4 (0.8) - 21.6
------------ ---------- ------ --------
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 (2.0) - 1.0 (1.0)
Finance leases due
after one year (1.2) - 0.8 (0.4)
---------- ------
Total debt (5.0) 1.8 - (3.2)
------------ ---------- ------ --------
Net cash 17.4 1.0 - 18.4
------------ ---------- ------ --------
12 Provisions for liabilities and charges
Unaudited Unaudited Unaudited
Restructuring Property Total
costs related Provisions
Six months ended 30 September
2012 GBPm GBPm GBPm
At 1 April 2012 1.4 0.7 2.1
Provided during the period - 0.2 0.2
Utilised during the period (0.6) (0.1) (0.7)
At 30 September 2012 0.8 0.8 1.6
---------------- ------------ -----------
Unaudited Unaudited Unaudited
Restructuring Property Total
costs related Provisions
Six months ended 30 September
2011 GBPm GBPm GBPm
At 1 April 2011 - 0.6 0.6
Provided during the period - - -
Utilised during the period - (0.2) (0.2)
At 30 September 2011 - 0.4 0.4
---------------- ------------ -----------
Audited Audited Audited
Restructuring Property Total
costs related Provisions
Year ended 31 March 2012 GBPm GBPm GBPm
At 1 April 2011 - 0.6 0.6
Provided during the
period 2.2 0.2 2.4
Utilised during the
period (0.8) (0.1) (0.9)
At 31 March 2012 1.4 0.7 2.1
---------------- ------------ -----------
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.
The provision for restructuring costs relates to exceptional
costs as detailed in note 7.
13 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 2013 is 25.0% (Six months to 30 September
2012: 27.0%, Year to 31 March 2012: 27.1%).
This reduction reflects the fall in the UK Corporation tax rate
from 26% to 25% on 1 April 2012.
The closing deferred tax assets and liabilities as at 31 March
2012 were recognised at a rate of 24% based on the corporation
tax rate substantively enacted at the balance sheet date. On
17 July 2012 a further reduction to 23% was substantively enacted,
and therefore the closing deferred tax assets and liabilities
at 30 September 2012 have been recognised at this rate as required
under IFRS accounting standards. The impact of this change to
the Group is immaterial.
The proposed future reductions in the rate to 22% by 1 April
2014 will be reflected when the relevant legislation is substantively
enacted.
14 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
2012 2011 2012
GBPm GBPm GBPm
Profit after tax 5.5 4.4 9.4
Exceptional items - restructuring
costs - 0.8 2.2
Exceptional taxation credit
- relief on restructuring
costs - (0.2) (0.6)
---------------- ----------------- --------------
Underlying profit for the
period 5.5 5.0 11.0
---------------- ----------------- --------------
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 54,573,649 54,566,250 54,586,755
Dilutive effect of options 14,620 25,637 10,282
---------------- ----------------- --------------
Diluted weighted average
number of shares 54,588,269 54,591,887 54,597,037
---------------- ----------------- --------------
Earnings per share - basic 10.1p 8.1p 17.3p
Earnings per share - diluted 10.1p 8.0p 17.3p
Underlying earnings per share
- basic 10.1p 9.1p 20.1p
Underlying earnings per share
- diluted 10.1p 9.1p 20.1p
15 Dividends
The final dividend for the year ended 31 March 2012 of 11.8p
per share (2011: 11.8p) was paid on 27 July 2012. The GBP6.4m
distribution (2011: GBP6.4m) is reflected in the financial statements
for the six months ended 30 September 2012.
In addition, the directors propose an interim dividend of 6.4p
per share (2011: 6.4p per share) payable on 18 January 2013 to
shareholders who are on the register at 7 December 2012. This
interim dividend, amounting to GBP3.5m (2011: GBP3.5m) 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 GBPnil (2011: GBPnil).
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 45.7%
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' 2012 Annual Report
and Accounts. There were no transactions with related parties
during the six months ended 30 September 2012 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.
19 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 2012 Annual Report and Accounts. These
included risks relating to HS2, IT systems, business continuity,
legislation and regulation, competition and fuel factors, in
addition to financial risks including credit risk. Save for the
risks relating to HS2 and the removal of the potential for disruption
during the now completed Olympic games, 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 2012 Annual Report and Accounts. The plans for HS2 are becoming
clearer, including the potential impact on our Birmingham hub.
We continue to actively manage the situation with the Government
and HS2 to ensure any impact on our business is minimal.
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 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 2012, with the
exception that Bill Cockburn retired on 31 May 2012, and Jessica
Burley was appointed as a non-executive director on 1 September
2012. 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
20 November 2012 20 November 2012
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
2012, 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 2012 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
20 November 2012
Notes:
(a) The maintenance and integrity of the UK Mail Group Plc
website is the responsibility of the directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the half-yearly financial
information since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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