UK Mail has warned that its operating margin in its mail business will drop by 15%, despite an equal rise in mail volumes, following the introduction of a new pricing regime from Royal Mail giving the firm access to its network.
The warning comes as UK Mail revealed a 2.8% increase in overall revenues to £395.8m for the year ending 31 March, compared to £385.2m a year ago.
However, group pre-tax profit was down 9.9% from £17.8m to £16.1m. In a statement to investors, the company reveals volumes were more subdued than expected and trading was worsened by snow in December (when its peak trading was disrupted and its cost of working increased).
CEO Guy Buswell says: "The second half was undoubtedly more challenging for the markets in which we operate. While we continued to grow our revenues in our core businesses, our margins and our profits came under pressure."
Its mail division, which recorded a 4.8% increase in revenue to £181.8m, is now subject to a new Royal Mail pricing regime, approved by Postcomm, implemented this month. Wholesale prices are up by 20% as a result, with retail prices increasing 15%, with operating margin reducing for UK Mail as a result.
UK Mail anticipates next years' figures to reflect "continued decline in mail volume" as a result of the price increases imposed by Royal Mail.
Its parcels business saw revenue rise 1.2% to £166.7m, while its courier business also grew by 7.3% to £19.2m. Both divisions saw operating profit fall to £12.1m and £2.2m respectively.
Its pallets division, UK Pallets, saw revenue fall 3.2% to £28.1m, while operating profit rose 6.3% to £1.8m.
