Subdued volume growth, compressed margins and extreme winter weather combined to restrict second-half earnings at UK Mail.
The faltering UK economy effectively forced UK Mail to process a much higher proportion of lower-margin 'retail' traffic during the final calendar quarter of last year and in March - the crucial business periods for the company. For example, the 'Parcels' segment - which accounts for 42 per cent of group revenues - recorded a 19 per cent decline in operating profits to £12.1m, despite a marginal (1.2 per cent) improvement in sales. Operating margins were also under pressure within the 'Mail' segment; a situation that will have been exacerbated this month by Royal Mail's price rises.
However, it's worth noting that business-to-consumer volumes within the 'Parcels' segment actually increased by 4.3 per cent, which provides a pointer to the likely driver of future growth. Indeed, UK Mail is confident that its 'Packets' product will allow the business to increasingly tap into the £1.5bn logistics industry that supports the expanding UK online retail market.
Seymour Pierce anticipates adjusted current year EPS of 22.2p (21.2p in 2011).
| UK MAIL (UKM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 272p | MARKET VALUE: | £149m | |
| TOUCH: | 270-275p | 12-MONTH HIGH: | 402.25p | LOW: 260p |
| DIVIDEND YIELD: | 6.7% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 112p | NET CASH: | £17.4m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 326 | 9.8 | 12.8 | 17.2 |
| 2008 | 359 | 14.2 | 18.0 | 17.2 |
| 2009 | 386 | 16.0 | 16.5 | 17.2 |
| 2010 | 385 | 17.8 | 23.4 | 18.2 |
| 2011 | 396 | 16.1 | 21.2 | 18.2 |
| % change | +3 | -10 | -9 | - |
Ex-div: 22 Jun Payment: 22 Jul *Includes intangible assets of £12.7m, or 23p a share | ||||
