UK Mail Group Plc reported a 56 percent slump in first-half pretax profit, hurt by inefficiencies in its new automated hub and a lower contribution from its parcels unit. UK Mail also said its expectations for the next financial year have softened slightly and the delivery company lowered its interim dividend by 25 percent to 5.5 pence.
Profit before tax and exceptional items fell to 4.9 million pounds ($7.45 million) in the six months ended September 30 from 11.2 million pounds ($17 million) a year earlier. Revenue rose 4.5 percent to 237.6 million pounds. Daily average volumes rose 9 percent at its parcels unit, helped by a jump in online shopping. The unit accounts for more than half of it revenue.
However, UK Mail said operating margins at the unit fell to 6.3 percent from 10.7 percent, due to a temporary increase in operating costs and greater-than-expected customer churn related to its move to a new automated hub in Ryton, near Coventry. The company, which provides mail, parcels and logistics services for clients including Next, Mothercare and Vodafone, had warned in August that its full-year results would be below market expectations due to the transition. UK Mail, which competes with bigger rival Royal Mail Plc, said on Wednesday that near-term challenges related to the transition had been more significant than initially anticipated, but expected to resolve these issues in the next 12 months. Average daily mail volumes rose 8 percent in its mail unit, driven by new customers.
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