New products hope for UK Mail

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Mail and logistics company UK Mail is hoping for a £5m profits bonanza as the company grows new products. Internet-to-print postal initiative imail currently processes 25,000 items a day, but the company believes the delivery rate could rise ten-fold over time. Other new products include a range of tailored parcel services for retailers.

A marginally better performance than analysts had expected helped underpin the first dividend increase in four years. Underlying pre-tax profits rose 4 per cent to £17.8m despite largely flat revenues. The main drag came from the parcels division, where competitive pressures meant both prices and sales dropped 5 per cent. However, there was some improvement in the second half with sales down 1.3 per cent against a drop of over 10 per cent in the first six months.

A 5.4 per cent sales rise in mail services, UK Mail's biggest business, partly offset the parcels performance and helped drive the division's operating profits up from £11.6m to £12.2m. Most of the growth came from courier services and the pallets business, its two smaller units, which reported profts of £2.4m (up from £1m) and £1.7m (£1.5m), respectively.

Investec Securities is forecasting 2011 adjusted pre-tax profit of £18.8m and EPS of 24.3p (from £17.8m and 23p in 2010).