Impressively, UK Mail’s (UKM) hefty jump in first-half profits wasn't down to one-offs or exceptionals - but just good, solid trading. The main driver was a robust showing in the parcels business, which generates 43 per cent of group revenues. Parcels saw average daily volume growth of 25 per cent, as the nation continued its love affair with online shopping.
Solid revenue growth for parcels was magnified at the profit line with a 91 per cent jump in cash profits to £11.1m, thanks to an improved operating margin. Chief executive Guy Buswell says this was due to the fact that a lot of the costs of the business are fixed so, when volumes jump, "a lot falls to the bottom line."
Even the mail business, which Mr Buswell describes as "theoretically a declining media", managed a respectable performance. Volumes in the overall mail market fell 5 per cent, but UK Mail managed to grow volumes slightly, and an improved operating margin meant that cash profits for this division grew 11 per cent to £6.3m. Innovations are helping both the mail and parcels business with ventures such as web-to-print postal service, invisible mail (iMail), and online parcel service, ipostparcels, achieving rapid growth.
Broker Investec Securities expects pre-tax profit of £22m, giving adjusted EPS of 31.1p (from £17.8m/24.6p in 2013), with a 20.5p dividend.
| UK MAIL (UKM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 625p | MARKET VALUE: | £342m | |
| TOUCH: | 618p-630p | 12-MONTH HIGH: | 645p | LOW:273p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 123p* | NET CASH: | £19.5m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 226 | 7.30 | 10.1 | 6.40 |
| 2013 | 243 | 11.9 | 17.0 | 7.10 |
| % change | +8 | +63 | +68 | +11 |
Ex-div: 4 Dec Payment: 17 Jan *Includes intangible assets of £15.3m, or 28p a share | ||||
