UK Mail to offer one-hour parcel delivery window

[TrueBlueTerrier]

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News

UK Mail to offer one-hour parcel delivery window
Monday, November 25th, 2013
UK Mail Group is developing new parcel service capabilities that will allow it to offer a one-hour delivery window, text alerts and deliveries to parcel lockers or parcel shops.

The developments come as its parcels business provided most of the growth at the company in a “strong” first half of the year, which saw overall group sales up 8% year-on-year, and pre-tax profit up 63%.

The Birmingham-based mail and parcel company saw sales in its mail revenues slip 0.3% year-on-year in the six months up to the end of September, but a 25% uplift in average daily parcel volumes pushed overall growth.

UK Mail’s overall group profit before tax rose to £11.9m during the period, on a revenue of £243.4m. The company benefitted from three extra working days compared to last year’s first half, but the pre-tax profit increase without these would still have been 42.5%.

Commenting on the results, UK Mail said its current position was the result of a “clear focus” on network efficiency and innovation in its products, moving to become more of a consumer-focused business.

Looking ahead, the company said its next phase would involve investment in new capacity and in customer-facing technology, IT and automation systems.

Guy Buswell (pictured above right), the UK Mail chief executive, said his company’s parcels growth reflected the “excellent progress” made over the past three years.

He said: “We are now entering the next phase of strategic investment. With significant steps forward planned over the next two years in our capacity, customer-facing technology, I.T. infrastructure and automation, these investments will create the platform for the next chapter of growth for the Group over the coming years.”

Parcels

Revenues in the parcel business, which accounts for 43% of group turnover, grew by 21.4% in the first half to £105.8m. Despite a “highly” competitive parcel market, the company extended its parcels operating margin from 6.7% to 10.6%, resulting in a £11.1m operating profit.

The parcels business saw “strong” volume growth in both business-to-business and business-to-consumer activity, but a continuing shift in the mix toward more B2C. The consumer and small business service ipostparcels has been achieving “rapid” growth, and now handles about 12,000 items each week.

The company is currently investing in its software and scanning systems in the coming months in a bid to position itself as a “high quality operator” – this should see UK Mail moving to offer a next day parcel delivery service that can provide a one-hour delivery window, a feature that has proven very successful for rivals DPD, along with text message alerts and better online parcel management for customers.

UK Mail is also expecting to launch a new service within the next six months that will allow customers to send and receive parcels from locker boxes and parcel shops.

Another innovation already being developed is a new Retail Logistics product, which tailors services to the specific needs of retailers, such as those in the fashion sector for whom the company is developing the capability to handle hanging garments following the opening of its new specialist distribution centre in July 2013.

During the first half of the year, the growing parcel business has seen the company expanding 50 of its sites, and UK Mail plans to expand eight further sites over the next 12 months.

A £20m investment in further automating parcel sorting operations is taking place over the next 18 months, with UK Mail expecting a double-digit return on its investment from September 2015. This project is linked to the relocation of the company’s Birmingham hub if the current facility moves because of the High Speed Rail construction currently planned by the government. A new £10m hub could see construction starting in early 2014, to be completed by the following autumn.

Mail

Mail continues to represent the largest part of the UK Mail Group business, accounting for 48% of turnover in the first half.

Volumes increased slightly during the period, but revenues fell 0.3% to £115.6m because of a change in the product mix. Without the three extra working days in the half, mail revenues would have declined 2.6%.

Despite the slight dip in mail revenues, the company improved the profitability of its mail business by 10.9%, with operating profit up to £6.3m with the margin stretching to 5.5%. UK Mail has improved efficiency with investment of £800,000 in two new mail sorting machines.

UK Mail said it grew volumes against a backdrop of 5% decline in the mail market overall, through new customer wins and additional volumes from existing customers. The company sees product innovation as the key to growing its volumes further, investing in capacity and services including high speed insertion and new data services. The hybrid mail service imail is seen as a particular area of promise, with monthly volumes now reaching 2m items and average daily volumes 60% up on this time last year.

As well as looking for new areas in which to push the imail service, UK Mail is also developing plans to grow its market share in the “rapidly growing” packets market.

Courier, pallets

UK Mail’s smaller courier business and pallets business continued their decline in revenues.

The courier business, accounting for 3% of group revenues, saw a 4.4% decline in revenues in this half, to £7.9m, but cost-cutting helped improve the operating margin to 17.8%, leading to a 25.9% growth in operating profit, to £1.4m.

The pallets business, 6% of group revenues, saw revenues down 1.6% year-on-year, to £14.1m, with operating profit down by 26.1% to £600,000.

[UnhappyGremlin]

Be interesting to see if they can make it work.

[CT10]

This is why DPD are huge. I can see others following soon.