Half Yearly Report ...

/**/

RNS Number : 0714G

UK Mail Group PLC

18 November 2015

 

 

18^th November 2015

 

UK MAIL GROUP plc

 

UNAUDITED INTERIM RESULTS

For the 6 months ended 30 September 2015

 

Highlights

 

·   Results in line with previous guidance

 

·   Relocation of national hub from Birmingham to Ryton completed in July 2015

 

·   Group revenues of £237.6m up 4.5% on the previous year (2014: £227.5m)

 

·   Group profit before tax (pre-exceptional) £4.9m (2014: £11.2m)

 

·   Group profit before tax (post-exceptional) £2.2m (2014: £12.0m)

 

·   Net exceptional costs of £2.7m (2014: net exceptional income of £0.8m), including hub relocation costs of £7.3m, partly offset by HS2 compensation of £6.8m

 

·   Net debt at period end of £12.7m (2014: net cash of £9.5m), reflecting significant investment in new hub and automation

 

·   Final HS2 compensation payment of £10.3m agreed, to be received in December 2015

 

·   Interim dividend of 5.5p per share (2014: 7.3p)

 

The results stated above are for continuing operations and exclude the prior results of UK Pallets which ceased operation in March 2015.

 

 

Guy Buswell, Chief Executive Officer of UK Mail, said:-

 

"The current period of major investment and transition will deliver significant long term benefits.  However, as we advised in August, it has become clear that the near-term challenges associated with the transition have been more significant than first anticipated.

 

"Trading in the initial weeks of the second half, and overall trends within our individual businesses, have been in line with our revised expectations.  Our expectations for the current year therefore remain in line with previous guidance.  However, due to the timescales required to fully resolve the challenges, our expectations for the next financial year have softened slightly.

 

"Whilst this is disappointing, the strategic rationale for the transformation we are undertaking is as compelling as ever, and we are confident both of our ability to restore our parcels business to previous levels of profitability and to build from there.  The medium term operational and financial benefits will place us amongst the most efficient and competitive operators in our market."

  

 

For further information, please contact:

 

UK Mail Group plc
Guy Buswell, Chief Executive Officer  Steven Glew, Group Finance Director	0175 370 6070
MHP Communications
John Olsen Giles Robinson Gina Bell	0203 128 8100

 

Introduction

 

The Group remains in the midst of a period of major investment and transition, having completed the move of its Birmingham hub and head office to a new, automated facility in Ryton in July 2015.

 

This transition, as the single most significant strategic development in the Group's history, will deliver significant long term opportunities but was always expected to be challenging in the short-term. However, as we advised the market in August 2015, it has become clear that the near-term challenges and their impact on the current year's performance have been more significant than anticipated.

 

These challenges, relating to inefficiencies both in the new hub and in our transport network, are discussed in more detail below.  A detailed plan is underway to address the issues and return our Parcels business to its target levels of profitability, and service levels are already back where they should be. In the meantime, we will be managing our customer acquisition and overall volumes very carefully as we approach the peak Christmas period, with an absolute focus on profitability and maintaining high service levels.

 

It will take longer than originally anticipated to resolve the issues but we expect to achieve this over the next 12 months. We remain confident that the stated medium term operational and financial benefits from the new hub will place us amongst the most efficient and competitive operators in our market.

 

The impact of these issues on our profitability, despite continued good volume and revenue growth, means that the financial performance of the Group for the first half has been very disappointing.

 

Reported Group revenues for the first half (for continuing operations) increased by 4.5% compared to the same period last year.  Group profit before tax and exceptional items (for continuing operations) decreased by 55.5%, or £6.3m, to £4.9m (2014: £11.2m).

 

In our Parcels business (52% of group revenues) revenues grew by 5.3%.  Our Parcels business now includes our Courier business.  This revenue growth was supported by average daily volume growth of 9.0%, reflecting some important new customer wins and weighted towards B2C customers, related to the growth in online shopping.  The impact of the sales mix effect combined with the increased operating costs we have incurred as a result of the relocation of our operations, has meant that the parcels operating margin reduced to 6.3% (2014: 10.7%), and the operating profit decreased to £7.9m (2014: £12.6m).

 

Revenues in our Mail business (48% of group revenues) increased by 3.6%.  Our daily mail volumes increasing by 8.1% in the half year, compared to a market that saw an overall volume decline of some 5.0%.  This volume growth was driven by strong customer retention and new customer wins.  The mail market is highly competitive and this has meant that the operating profit decreased by 16.6% to £5.1m (2014:  £6.2m) with the operating margin reducing to 4.5%, back within our target range after a strong 5.6% in H1 2014, which benefitted from a particularly favourable product mix.  Our Mail business remains well positioned in its market with a healthy pipeline of new business opportunities.  We continue to see good progress from imail and related new product innovations.

 

The Group remains in a sound financial position.  Whilst net debt at the period end was £12.7m (2014: net cash £9.5m) the period of substantial investment in the hub and automation is now complete.  We have agreed a final compensation payment from HS2 of £10.3m which will be received in December 2015.

 

However, due to the longer than expected timescales required to fully resolve the operational cost issues in our Parcels network and the consequential impact on earnings this year and next, the Board considers it prudent to rebase the dividend at this time. We would expect to return to prior levels of dividend cover in due course as our earnings grow.

 

The Board has therefore declared an Interim Dividend of 5.5p per share (2014: 7.3p).

 

 

Results

 

The results can be summarised as follows:

 

	Six months ended 30th September
Continuing Operations	Unaudited 2015  £m		Unaudited 2014  £m		Inc/(Dec) %
Group revenue	237.6		227.5		4.5%
Operating profit (before exceptional items)	5.2		11.2		(53.4)%
Net finance costs	(0.3)		-		-
Profit before tax (before exceptional items)	4.9		11.2		(55.5)%
Net exceptional items	(2.7)		0.8		-
Profit before tax (after exceptional items)	2.2		12.0		(81.2)%
Taxation	(0.5)		(2.7)		(80.0)%
Profit after taxation	1.7		9.3		(81.6)%
Basic earnings per share	3.1p		17.0p		(82.0)%
Underlying basic earnings per share *	7.1p		15.9p		(55.3)%

 

* - excludes exceptional items

 

Revenue and operating profit (before exceptional items) are analysed as follows:

 

	Revenue						Operating Profit (before exceptional items)
	2015      £m		2014      £m		Inc/     (Dec)       %		2015          £m		2014          £m		Inc/   (Dec)      %
Parcels	124.0		117.8		5.3%		7.9		12.6		(37.6)%
Mail	113.6		109.7		3.6%		5.1		6.2		(16.6)%
Total	237.6		227.5		4.5%		13.0		18.8		(30.6)%
Central costs							(7.8)		(7.6)		(2.9)%
Operating profit before exceptional items							5.2		11.2		(53.4)%

 

Parcels

 

Revenues in Parcels, which comprises the Group's business-to-business (B2B), business-to-consumer (B2C) international parcel delivery service and courier operations, were up 5.3% to £124.0m (2014: £117.8m).

 

Parcels average daily volumes increasing by 9.0% compared to last year, with volume growth in both the B2B and B2C market segments.  We continue to see an on-going volume mix change towards the lower margin B2C segment. 

 

The Parcels operating margin for the period reduced to 6.3% (2014: 10.7%), resulting in operating profit for the period reducing to £7.9m (2014: £12.6m). 

 

Both the rate of volume growth and the operating margin have been impacted by the operational issues related to our move to the new hub.  The profit reduction is primarily due to the temporary increase in operating costs associated with this and also due to a magnified mix effect as a result of the increased customer churn we experienced in the period.

 

Following a detailed review, it is clear that the automated sortation equipment is working well and is fully capable of delivering the anticipated benefits over the medium term.  However, we are facing a number of challenges as a result of a combination of inefficiencies in the new hub and in our transport network.  This, combined with the volumes of non-machinable and incompatible freight that cannot be handled by our automated sortation equipment, has placed added pressures on the new facility.  As a result we have experienced additional costs, a temporary reduction in service levels (now restored) and a greater level of customer churn than anticipated, impacting our parcels revenue mix.

 

A detailed plan is underway to address these issues and therefore to restore our Parcels business to its previous levels of profitability and to build from there.  There are a number of near-term initiatives that have already eased the pressures on the hub, including securing additional, short term, hub capacity to ease the pressure on the main hub whilst the wider issues are being addressed.  The efficiency of the hub will also improve as certain new larger customers come on board whose volumes arrive at the new hub throughout the day rather than just in the peak hours.

 

More widely, our plan involves re-engineering our line haul template to fully align it with the efficiency of the new hub, and a new operational plan for incompatible freight volumes.  Peter Fuller joins as Operations Director in early 2016 and will be instrumental in the execution of this plan.  Peter has substantial experience in parcels distribution and specifically in managing automated facilities, most recently at Parcelforce where he has been Operations Director since 2011.

 

Some progress has already been made.  The sortation equipment is operating at target efficiency, we saw an improving trend of volume performance in the latter weeks of the half, service levels are now back to where they should be, and we have a number of significant potential customers keen to use the services available through our new hub.  However, we will be managing our customer acquisition and overall volumes very carefully as we approach the peak Christmas period, with an absolute focus on profitability and maintaining high service levels.

 

We continue to make good progress with our product innovations in this division.  These include Retail Today, our same day delivery service combining our parcels and courier operations, and ipostparcels, which represents one of the lowest-cost and most user-friendly online collection and delivery services available in the UK.  Revenues and profits grew well for these operations, and we continue to invest in further enhancing our services in these areas.

 

Key to our parcels market position is the provision of value added services that customers increasingly demand.  Our enhanced next day delivery service, which offers advance-notice one-hour delivery and collection windows, is now fully operational and is consistently achieving strong service levels of over 95%.  In addition, our sales initiative, carrier of contingency, is proving successful, with three major retailers already won. We are also progressing Parcel drop-off and collection points, with a trial in place with a national multi-site retailer.

 

 

Mail

 

Mail revenues increased by 3.6% to £113.6m (2014: £109.7m). 

 

Our daily Mail volumes increased by 8.1% compared to the same period last year, while the overall UK mail market has seen a decline in transactional volumes of some 5% per annum, demonstrating further market share gains.

 

Mail operating profits decreased by 16.6% to £5.1m (2014: £6.2m).  The operating margin decreased to 4.5% (2014: 5.6%). 

 

Mail operating margin in the first half of last year was strong, reflecting a particularly favourable product mix.  The operating margin we have achieved in the first half of this year is within our target range for this business, reflecting the competitive pricing environment.

 

There are a number of substantial competitor accounts currently out for tender, and we are seeing a significant success rate in these, albeit with some pricing pressures.

 

imail, our web-to-print postal service, continues to show good revenue growth.  We continue to invest to increase our capacity and provide additional services.  'imailprint' has now been successfully launched.  This provides a specialist printing service which, rather than being purely mailed as with our current service, can produce printed documents for general usage.  We see this as a medium-term low risk growth opportunity using our existing infrastructure.

 

A key growth element of the Access Mail market is the rising popularity of packets; a segment that we estimate currently represents some £200m of the total Access Mail market of £1.5bn.  Whilst we have made some progress in this area in recent years, our share of the Access packets market remains very low and we are now reinvigorating this business, investing in specialist automated packets sortation equipment and increasing the size of our sales team and we expect to see an impact from early FY 2016.  We continue to believe that this area will be key to growing our Mail revenues and profitability in the future.

 

UK Mail remains a market leader with an operational template ideally suited to the evolving demands of the mail market.  We remain focused on growing our business by handling additional mail for existing customers and winning volumes from other Access operators.  We continue to invest for the future, and see substantial growth opportunities for the medium and longer term.

 

Central costs

 

Central costs for the period increased by 2.9% to £7.8m (2014: £7.6m).  We continue to invest in I.T., although this spend has been partially offset by savings in other areas.

 

Net Finance cost

 

Net finance cost for the period was £0.3m (2014: £nil).  The investment in our new hub and automation was largely completed in the period.

 

HS2

 

In December 2013 we reached agreement with the Secretary of State for Transport concerning the relocation of our Birmingham National hub and head office as a result of the proposed High Speed Two (HS2) railway.  This involved the sale of our Birmingham site to the Department for Transport (DfT) and the relocation to a newly constructed facility at Ryton near Coventry.  This contract completed on 10 August 2015.

 

We have agreed specific compensation payments with the DfT and HS2 Ltd.  Of these amounts, £11.9m was received in the period (2014: £2.7m) and a final compensation payment of £10.3m has been agreed with HS2 which is to be paid in December 2015.

 

The costs of the move to the new site, including the I.T. data centre move and related staff costs have now been largely incurred.  The costs we have incurred to reinstate our existing capability have been fully compensated by the DfT and HS2.

 

Exceptional Items

 

Our results include a net exceptional charge as follows:                                                     

		£m
Profit on sale of national hub		1.1
HS2 compensation		6.8
Exceptional income		7.9
Cost of automation implementation		(0.7)
National hub relocation costs		(6.7)
Impairment of intangible assets		(3.2)
Exceptional costs		(10.6)
Net exceptional costs		2.7

 

The profit on sale of the national hub represents the profit on sale following the compulsory acquisition of the National hub and offices at Birmingham by the DfT and HS2 Ltd, as a result of the proposed HS2 railway.

 

The amounts received from HS2 relate to agreed compensation for the impact of HS2 on our business.  The final compensation payment of £10.3m has now been agreed with HS2 and will be recognised as exceptional income in the second half of the financial year.

 

The cost of automation implementation represents the cost incurred as we implement and roll out the new automation equipment.  The costs primarily relate to asset write-offs of equipment no longer required.

 

National hub relocation costs represent disturbance costs associated with the relocation of our National hub and offices to Ryton. These costs have now been largely incurred, we expect the remaining balance of some £0.6m will be incurred in the second half, and this will be recognised as an exceptional cost.

 

The impairment of intangible assets charge represents the impairment cost recognised following a comprehensive strategic review of the Group's I.T. systems which identified a number of software assets that did not fit within the medium and long term strategic goals of the Group, and which therefore offered no future economic value.  We do not believe this change in strategy has a prior year impact.

 

Financial Position

 

The Group's financial position remains sound.  Despite the significant investment in our new hub and in automation - details of which are set out below - we had net debt at the end of the period of £12.7m (2014: net cash of £9.5m).

 

The group invested a further £2.8m (net of HS2 compensation) in the new hub and automation in the period, taking the total investment to £52.2m.  The final payments for the new hub and automation will be made in the second half year to an expected value of some £1.3m.  The investment in the period has been offset by capital payments received from HS2 relating to the hub move of £5.4m.

 

Net cash inflow from operations totalled £5.7m (2014: £11.0m), including £5.3m (2014: £10.7m) from continuing operations. 

 

The total consolidated net cash inflow for the period was £1.9m (2014: outflow £17.9m) which included £4.2m cash consumed in working capital (2014: £4.8m), and a net £5.7m (after allowing for the deferred compensation received from HS2) expended on capital additions (2014: £17.6m).

 

The Group paid £7.9m (2014: £7.8m) in dividends during the period.

 

To provide funding for the investment in the new hub and automation the Group agreed a £25m five year revolving credit facility with Lloyds Bank plc in May 2014.  This facility which supports the cash requirements of the investment programme, was £14.4m drawn at 30 September 2015.

 

A final compensation payment for HS2 of £10.3m has been agreed which will be received in December 2015.

 

The Group has in place further funding facilities to support our investment programme and to provide adequate working capital facilities.  These comprise asset lease funding and overdraft facilities.

 

 

Capital Additions

 

Capital additions for the period included our underlying business capital expenditure combined with the initial investment in our new hub and in automation.

 

This can be summarised as follows:

 

	6 months to 30 September				Year to 31 March
	2015 £m		2014  £m		2015 £m
Underlying capital additions	4.1		5.4		12.0
Investment in new hub	1.3		12.1		26.8
Investment in automation	1.5		3.2		13.5
Total gross capital additions	6.9		20.7		52.3
Compensation from DfT and HS2	(5.4)		(4.0)		(4.2)
Net capital additions	1.5		16.7		48.1

 

The underlying capital additions includes £2.6m on I.T. as we continue to develop our system infrastructure, and £1.5m on our network.

 

The investment in the new hub and head office in the period comprises the continuing payments for their construction.  The new hub and head office were completed in February 2015. Final payments are expected to be made in the second half of the financial year of £0.7m.  The cumulative total expected to be spent on the land and buildings over the period to March 2016 is £35.1m, which is in line with our original budget of £35.0m. We expect our cash contribution to the building of the new hub and head office, after the contribution from the DfT and HS2, will be £12.4m which covers the enhancement of the site and building beyond the scale of the previous facility. 

 

The automation equipment was placed live in May 2015.  The investment in automation reflects the payments for the development, installation and commissioning of the hub and network automation equipment.  Final payments are expected to be made in the second half of the financial year of £0.6m.  The total capital spent on the introduction of automation will be £18.4m, compared to the original budget of £20.0m.

 

Earnings per share

 

Underlying basic earnings per share decreased by 55.3% to 7.1p (2014: 15.9p). Basic earnings per share decreased 28.8% to 2.9p (2014: 4.1p).

 

Dividend

 

Due to the longer than expected timescales required to fully resolve the operational cost issues in our Parcels network and the consequential impact on earnings this year and next, the Board considers it prudent to rebase the dividend at this time. We would expect to return to prior levels of dividend cover in due course as our earnings grow.

 

The Board has therefore declared an Interim Dividend of 5.5p per share (2014: 7.3p), payable on 15 January 2016 to shareholders on the register on 4 December 2015.

 

CURRENT TRADING AND OUTLOOK

 

Trading in the initial weeks of the second half, and overall trends within our individual businesses, have been in line with our revised expectations, albeit with our peak trading weeks still to come.  It will take longer than originally anticipated to resolve the operational cost issues relating to the new hub but we are confident of achieving this over the next 12 months.

 

As a result, our expectations for the current year remain in line with previous guidance, but our expectations for the next financial year have softened slightly. 

 

Whilst this is disappointing, the strategic rationale for the transformation we are undertaking is as compelling as ever, and we are confident both of our ability to restore our parcels business to previous levels of profitability and to build from there.  The medium term operational and financial benefits will place us amongst the most efficient and competitive operators in our market.

 

Guy Buswell

Chief Executive Officer

 

ADDITIONAL DISCLOSURES

Principal risks and uncertainties facing the business

 

UK Mail's business and share price may be affected by a number of risks, not all of which are within our control. The process UK Mail has in place for identifying, assessing and managing risks is set out in the Corporate Governance Report on page 34 of the 2015 Annual Report and Accounts. The specific principal risks and uncertainties that may affect the Group's performance, together with relevant mitigating factors as identified by the Group's risk management process were discussed on page 22 of the Group's 2015 Annual Report and Accounts. These included risks relating to national hub, IT systems, competition, business continuity, legislation and regulation and fuel factors, in addition to financial risks (details of which can be found in note 25 of the 2015 Annual Report and Accounts) including credit risk. It is considered that these still remain the most likely areas of potential risk and uncertainty, with the position unchanged from that set out in the 2015 Annual Report and Accounts.

 

Cautionary statement

 

This interim announcement contains certain forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. Nothing in this report should be construed as a profit forecast.

 

Going concern

As stated in note 2 to the condensed consolidated interim financial statements, the Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements. 

 

Related-party transactions

As stated in note 18 to the condensed consolidated interim financial statements, there were no transactions with related parties during the six months ended 30 September 2015 which have had a material effect on the results or the financial position of the Group. The nature of the related party transactions has not changed from those described in the Group's 2015 Annual Report and Accounts. 

 

  

Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2015
						Unaudited Six months to 30 September 2015	Unaudited Six months to 30 September 2014 (1)	Audited Year to 31 March 2015
Continuing operations					Note	£m	£m	£m
Revenue					6	237.6	227.5	485.1
Cost of sales						(213.2)	(198.6)	(428.3)
Gross profit						24.4	28.9	56.8
Administrative expenses						(19.2)	(17.7)	(35.8)
Operating profit before exceptional items						5.2	11.2	21.0
HS2 compensation					7	6.8	0.8	2.0
Profit on sale of national hub					7	1.1	-	-
National hub relocation costs					7	(6.7)	-	(2.5)
Automation implementation					7	(0.7)	-	(0.4)
Impairment of intangible assets					7	(3.2)	-	-
Exceptional items - (cost)/income						(2.7)	0.8	(0.9)
Operating profit						2.5	12.0	20.1
Finance costs						(0.3)	-	-
Profit before taxation						2.2	12.0	20.1
Taxation - on profit before exceptional items					13	(1.1)	(2.5)	(4.4)
Taxation - on exceptional items						0.6	(0.2)	0.2
Total taxation					13	(0.5)	(2.7)	(4.2)
Profit for the period from continuing operations						1.7	9.3	15.9
Loss for the period from discontinued operations						(0.1)	(7.1)	(10.8)
Profit for the period						1.6	2.2	5.1
Total comprehensive income attributable to:
- Continuing operations						1.7	9.3	15.9
- Discontinued operations						(0.1)	(7.1)	(10.8)
Total comprehensive income attributable to equity holders of the company						1.6	2.2	5.1
Earnings/(loss) per share from continuing and discontinued operations
Basic earnings per share
From continuing operations					14	3.1p	17.0p	29.0p
From discontinued operations					14	(0.2)p	(12.9)p	(19.8)p
Total basic earnings per share						2.9p	4.1p	9.2p
Diluted earnings per share
From continuing operations					14	3.1p	15.9p	28.9p
From discontinued operations					14	(0.2)p	0.3p	(19.7)p
Total diluted earnings per share						2.9p	16.2p	9.2p
(1)		Restated for the reclassification of UK Pallets to discontinued operations as detailed in note 2.
The notes on the following pages form an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Consolidated Balance Sheet
as at 30 September 2015
					Unaudited 30 September 2015			Unaudited 30 September 2014			Audited 31 March 2015
				Note	£m			£m			£m
Assets
Non-current assets
Goodwill				9	1.6			2.2			1.6
Intangible assets				9	7.7			10.2			11.6
Investment properties				9	1.7			1.7			1.7
Property, plant and equipment				9	74.4			60.9			85.4
Deferred tax assets					0.6			0.8			0.7
					86.0			75.8			101.0
Current assets
Inventories					0.2			0.2			0.2
Trade and other receivables					70.5			70.0			76.2
Cash and cash equivalents				11	6.5			9.5			4.6
Current tax assets					0.1			-			-
					77.3			79.7			81.0
Liabilities
Current liabilities
Borrowings				11	(14.6)			-			(9.8)
Trade and other payables					(79.5)			(82.7)			(101.1)
Current tax liabilities					-			(2.5)			(0.2)
Provisions				12	(0.8)			(0.6)			(1.5)
					(94.9)			(85.8)			(112.6)
Net current liabilities					(17.6)			(6.1)			(31.6)
Non-current liabilities
Borrowings				11	(4.6)			-			-
Deferred tax liabilities					(2.9)			(1.7)			(2.6)
Provisions				12	(0.7)			(0.7)			(0.7)
					(8.2)			(2.4)			(3.3)
Net assets					60.2			67.3			66.1
Shareholders' equity
Ordinary shares				10	5.5			5.5			5.5
Share premium				10	15.6			15.3			15.3
Retained earnings					39.1			46.5			45.3
Total shareholders' equity					60.2			67.3			66.1

 

 

Consolidated Cash Flow Statement
for the six months ended 30 September 2015
			Unaudited	Unaudited	Audited
			30 September 2015	30 September 2014 1	31 March 2015
Continuing operations		Note	£m	£m	£m
Profit for the period			1.7	9.3	15.9
Adjustments for:
Net exceptional items		7	2.7	(0.8)	0.9
Depreciation and amortisation		9	4.4	3.7	7.9
Share-based payment expense			0.2	0.6	0.6
Loss on sale of property, plant and equipment			0.1	0.1	0.1
Finance costs			0.3	-	-
Taxation		13	0.5	2.7	4.2
Operating profit before changes in working capital			9.9	15.6	29.6
Decrease/(increase) in inventories			-	0.1	-
Decrease/(increase) in trade and other receivables			4.1	(0.9)	(10.1)
(Decrease)/increase in trade and other payables			(8.4)	(4.0)	8.5
(Decrease)/increase in provisions			(0.3)	(0.1)	0.2
Total cash flow from changes in working capital - continuing operations			(4.6)	(4.9)	(1.4)
Cash generated from continuing operations			5.3	10.7	28.2
Discontinued operations
(Loss)/profit for the year			(0.1)	(7.1)	(10.8)
Adjustments for:
Exceptional items		7	0.1	7.3	10.4
Depreciation and amortisation			-	-	0.1
Taxation			-	-	(0.7)
Operating profit before changes in working capital			-	0.2	(1.0)
Decrease/(increase) in trade and other receivables			1.4	3.3	6.6
(Decrease)/increase in trade and other payables			(0.7)	(3.2)	(5.8)
(Decrease)/increase in provisions			(0.3)	-	0.6
Total cash flow from working capital - discontinued operations			0.4	0.1	1.4
Cash generated from continuing operations			5.3	10.7	28.2
Cash generated from discontinued operations			0.4	0.3	0.4
Total cash generated from operations			5.7	11.0	28.6
Income taxes paid			(0.5)	(2.8)	(5.0)
Finance costs paid			(0.2)	-	-
Net cash flow from continuing operating activities			4.6	7.9	23.2
Net cash flow from discontinued operating activities			0.4	0.3	0.4
Total net cash flow from operating activities			5.0	8.2	23.6
Investing activities
Purchase of property, plant and equipment			(8.5)	(16.7)	(39.1)
Purchase of intangible assets			(2.6)	(2.9)	(6.4)
Deferred compensation		7	5.4	2.0	2.0
Proceeds from sale of property, plant and equipment		7	0.8	-	-
Net cash flow from investing activities - continuing operations			(4.9)	(17.6)	(43.5)
Net cash flow from investing activities - discontinued operations			-	(0.3)	(0.4)
Total net cash flow from investing activities			(4.9)	(17.9)	(43.9)
Financing activities
Proceeds from re-financing under finance leases			13.7	-	-
Repayment of finance leases			(8.7)	(0.4)	(0.4)
Dividends paid to shareholders		15	(7.9)	(7.8)	(11.8)
Net proceeds from issue of ordinary share capital			0.3	-	-
Draw down of revolving credit facility			4.4	-	10.0
Facility arrangement costs paid			-	-	(0.3)
Net cash flow from financing activities - continuing operations			1.8	(8.2)	(2.5)
Net cash flow from financing activities - discontinued operations			-	-	-
Total net cash flow from financing activities			1.8	(8.2)	(2.5)
Net increase/(decrease) in cash and cash equivalents			1.9	(17.9)	(22.8)
Cash and cash equivalents at the beginning of the period			4.6	27.4	27.4
Cash and cash equivalents at the end of the period		11	6.5	9.5	4.6
(1)	Restated for the reclassification of UK Pallets to discontinued operations as detailed in note 2.

 

 

 

Consolidated Statement of Changes in Equity (unaudited) for the six months ended 30 September 2015
		Attributable to equity holders of the company
		Ordinary shares		Share premium					Retained earnings					Total equity
	Note	£m		£m					£m					£m
Balance as at 1 April 2015		5.5			15.3				45.3					66.1
Profit for the period		-			-				1.6					1.6
Total comprehensive income for the period		-			-				1.6					1.6
Dividends paid to shareholders	15	-			-				(7.9)					(7.9)
Employees' share option scheme:
- share-based payments		-			-				0.2					0.2
- exercise of share options		-			0.3				-					0.3
- tax charged directly to equity		-			-				(0.1)					(0.1)
Total transactions with shareholders recorded  directly in equity		-			0.3				(7.8)					(7.5)
Balance as at 30 September 2015		5.5			15.6				39.1					60.2
Balance as at 1 April 2014		5.5			15.3				51.5					72.3
Profit for the period		-			-				2.2					2.2
Total comprehensive income for the period		-			-				2.2					2.2
Dividends paid to shareholders	15	-			-				(7.8)					(7.8)
Employees' share option scheme:
- share based payments		-			-				0.6					0.6
Total transactions with shareholders recorded directly in equity		-			-				(7.2)					(7.2)
Balance as at 30 September 2014		5.5			15.3				46.5					67.3
Balance as at 1 April 2014		5.5			15.3				51.5					72.3
Profit for the year		-			-				5.1					5.1
Total comprehensive income for the year		-			-				5.1					5.1
Dividends paid to shareholders	15	-			-				(11.8)					(11.8)
Employees' share option scheme:
- share-based payments		-			-				0.6					0.6
- tax charged directly to equity		-			-				(0.1)					(0.1)
Total transactions with shareholders recorded directly in equity		-			-				(11.3)					(11.3)
Balance as at 31 March 2015		5.5			15.3				45.3					66.1

 

 

	Notes to condensed consolidated interim financial statements
1	General information
	UK Mail Group Plc ('the Company') and its subsidiaries (together 'the Group') are engaged in the provision of parcels, mail and logistical service solutions.
	The Company (registration 02800218) is a public limited company incorporated and domiciled in England. The address of its registered office is 120 Buckingham Avenue, Slough, SL1 4LZ. The Company is listed on the London Stock Exchange (LSE: UKM).
	The condensed consolidated interim financial statements were approved for issue on 17 November 2015.
	The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Within the notes to these financial statements, the half year periods to 30 September 2015 and 2014 are unaudited. Statutory accounts for the year ended 31 March 2015 were approved by the Board of directors on 19 May 2015 and delivered to the Registrar of Companies.  The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498(2) or (3) of the Companies Act 2006.
2	Basis of preparation
	The condensed consolidated interim financial statements for the half year ended 30 September 2015 have been prepared in accordance with the Disclosure and Transparency Rules ('DTR') of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. They do not include all of the information and disclosures required for full annual financial statements, and should be read in conjunction with the consolidated annual financial statements of the Group as at and for the year ended 31 March 2015, which were prepared in accordance with IFRSs as adopted by the European Union.
	The consolidated financial statements of the Group as at and for the year ended 31 March 2015 are available upon request from the Company's registered office at 120 Buckingham Avenue, Slough, SL1 4LZ or at www.ukmail.com.
	The condensed consolidated interim financial statements are presented in Sterling.
	As a result of the discontinuation of operations in UK Pallets in March 2015, the prior period figures for the six months ended 30 September 2014 in the consolidated statement of comprehensive income and the consolidated cash flow statement have been restated, together with any associated notes.
	After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. The Group meets its day to day working capital requirements through operating cash flows, with borrowings to fund acquisitions and capital expenditure, as necessary. Movements in the Group's overall net (debt)/funds position are shown in note 11. The Group has committed bank facilities in place, comprising of a five year £25m revolving credit facility available until 31 May 2019, and a £20m overdraft facility available until 30 December 2015. Accordingly they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.
3	Accounting policies
	The accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent with those applied by the Group in its consolidated annual financial statements as at and for the year ended 31 March 2015.
	Adoption of new standards, and amendments to standards or interpretations, which are mandatory for the first time for the financial year beginning 1 April 2015, have had no material impact on the financial position and performance of the Group.

 

 

4	Changes in accounting estimates
	The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
	In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 March 2015.
	There have been no material changes in contingent liabilities during the current interim period.
5	Financial instruments
	The activities of the Group exposes it to a number of financial risks, including credit risk, market risk, price risk, interest risk, liquidity risk and capital risk.
	These condensed consolidated interim financial statements do not include all of the financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's 2015 Annual Report and Accounts.
	There have been no changes in the Group's financial risk management policies since the year end 31 March 2015.

 

6	Segmental information
	Management has determined the operating segments based on reports that are reviewed by the Board for making strategic decisions. These reports reflect the Group's defined management structure, whereby distinct managers are accountable to the Board for the results and activities of their identified segments and the different markets in which they operate. The Board, which is the Group's chief operating decision maker, considers that the Group has two reportable operating segments following the integration of the Courier operations into Parcels and the cessation of trading of UK Pallets Ltd in March 2015.
	The Group's operating segments consist of Mail and Parcels (which are shown as continuing operations). In recent years the Courier business has been undergoing a period of transition away from a traditional same-day courier operation towards an operation which provides specialist service support to our Parcels business. Consequently results for the comparative periods have been restated to reflect the integration of the Courier operations into Parcels.   The Board assesses the performance of the operating segments based on a measure of operating profit before net finance costs and taxation.   Central costs comprises of network costs and central support costs. Central assets comprise mainly of corporate assets, cash, current and deferred tax balances.
	The Group manages its business segments on a national basis, with all its operations in the UK, as are nearly all of the customers.
	Inter-company transactions, (which are conducted on an arm's length basis), balances and unrealised gains on transactions between segments are eliminated. Unrealised losses are also eliminated.
	No individual customer accounted for more than 7% of revenue in the periods included in these condensed consolidated interim financial statements.

 

	Six months ended 30 September 2015 (unaudited)
		Continuing operations
		Parcels	Mail	Central	Total
		£m	£m	£m	£m
	Segmental revenue	124.0	113.6	-	237.6
	Operating profit/(loss) before exceptional items	7.9	5.1	(7.8)	5.2
	Exceptional items - administrative expenses	0.9	(0.2)	(3.4)	(2.7)
	Operating profit	8.8	4.9	(11.2)	2.5
	Finance costs				(0.3)
	Profit before taxation				2.2
	Taxation				(0.5)
	Profit attributable to equity shareholders				1.7
	Intangible assets	0.2	2.0	7.1	9.3
	Property, plant and equipment	68.2	3.0	4.9	76.1
	Deferred tax assets	-	-	0.5	0.5
	Inventories	0.2	-	-	0.2
	Cash and cash equivalents	0.2	2.5	3.8	6.5
	Current tax assets	-	-	0.1	0.1
	Trade and other receivables	34.6	39.7	1.1	75.4
	Intercompany eliminations	-	(4.9)	-	(4.9)
	Total assets	103.4	42.3	17.5	163.2

 

	Six months ended 3 September 2014 (unaudited)
		Continuing operations (restated)
		Parcels 1	Mail	Central 2	Total
		£m	£m	£m	£m
	Segmental revenue	117.8	109.7	-	227.5
	Operating profit/(loss) before exceptional items	12.6	6.2	(7.6)	11.2
	Exceptional items - administrative expenses	0.8	-	-	0.8
	Operating profit	13.4	6.2	(7.6)	12.0
	Finance income/(costs)				-
	Profit before taxation				12.0
	Taxation				(2.7)
	Profit attributable to equity shareholders				9.3
	Intangible assets	0.1	0.6	10.6	11.3
	Property, plant and equipment	54.2	2.5	5.9	62.6
	Deferred tax assets	-	-	0.7	0.7
	Inventories	0.2	-	-	0.2
	Cash and cash equivalents	1.6	3.2	5.2	10.0
	Trade and other receivables	33.4	39.1	2.2	74.7
	Intercompany eliminations	-	(9.6)	-	(9.6)
	Total assets	89.5	35.8	24.6	149.9

               
 

	Year ended 31 March 2015 (audited)		Continuing operations (restated)
			Parcels 1	Mail	Central	Total
			£m	£m	£m	£m
	Segmental revenue		244.6	240.5	-	485.1
	Operating profit/(loss) before exceptional items		23.6	12.5	(15.1)	21.0
	Exceptional items - administrative expenses		(0.9)	-	-	(0.9)
	Operating profit		22.7	12.5	(15.1)	20.1
	Finance income					-
	Finance costs					-
	Profit before taxation					20.1
	Taxation					(4.2)
	Profit attributable to equity shareholders					15.9
	Intangible assets		0.2	1.6	11.4	13.2
	Property, plant and equipment		76.5	2.4	8.2	87.1
	Deferred tax assets		-	-	0.6	0.6
	Inventories		0.2	-	-	0.2
	Cash and cash equivalents		2.0	4.3	-	6.3
	Trade and other receivables		36.0	52.1	30.7	118.8
	Intercompany eliminations		-	(14.2)	(29.9)	(44.1)
	Total assets		114.9	46.2	21.0	182.1

 

1 Restated for the integration of the Courier operation into Parcels

2 The impairment charge for UK Pallets in the six month period to 30 September 2014 has been reclassified within discontinued operations

 

 

7	Exceptional items - Income/(cost)	Unaudited 30 September 2015	Unaudited 30 September 2014	Audited 31 March 2015
		£m	£m	£m
	Profit on sale of national hub	1.1	-	-
	HS2 compensation	6.8	0.8	2.0
	Exceptional income - continuing items	7.9	0.8	2.0
	Cost of automation implementation	(0.7)	-	(0.4)
	National Hub relocation costs	(6.7)	-	(2.5)
	Impairment of intangible assets	(3.2)	-	-
	Exceptional costs - continuing operations	(10.6)	-	(2.9)
	Net exceptional income/(costs) - continuing operations (*)	(2.7)	0.8	(0.9)
	Impairment charges (including goodwill)	-	(7.3)	(9.0)
	Closure costs	(0.1)	-	(1.4)
	Exceptional costs - discontinued operations (**)	(0.1)	(7.3)	(10.4)
	Net Exceptional items	(2.8)	(6.5)	(11.3)

 

* Presented on the face of the Income Statement

** Presented within the loss for the period from discontinued operations

 

	Profit on sale of national hub
	This represents the profit on sale following the compulsory acquisition of our  National hub and offices at Birmingham by the DfT and HS2 Ltd, as a result of the proposed High Speed Two ('HS2') railway.
	HS2 compensation
	HS2 compensation comprises of £6.8m (2014: £0.8m) of disturbance and other costs reimbursed from the Department of Transport ('DfT') and HS2 Ltd under the Compensation Code.
	Cost of automation implementation
	The cost of automation implementation represents the costs incurred largely in the March - April 2015 period as the Group moved towards the implementation and roll-out of new automation equipment. These costs comprise of £0.5m (2014:£nil) asset write-offs and £0.2m (2014:£nil) of contract termination costs.
	National hub relocation costs
	These comprise of £3.7m (2014: £nil) of disturbance costs (including recruitment and redundancy costs), £2.5m (2014: £nil) dual running costs (largely property costs relating to running two sites whilst relocating), £0.3m (2014:£nil) compensation paid to customers following a temporary deterioration in service performance, and £0.2m (2014: £nil) in relation to the loss of profit resulting from the delay in increasing the hub's extended capacity.
	Impairment of intangible assets
	The Group undertook a comprehensive strategic review of its IT systems during the period which identified a number of software assets that did not fit within the medium- and long-term strategic goals of the Group, and which therefore offered no future economic value to the Group.  As a result an impairment charge of £3.2m (2014: £nil) was recognised.
	Discontinued operations - Impairment charges (including goodwill)
	In the six month period to 30 September 2014, a £7.3m goodwill impairment charge was recognised following deterioration in the trading performance of UK Pallets Ltd.   As reported in the 2015 Annual Report and Accounts, and following a decision to close the business the remaining goodwill was written-off. Consequently, the results of UK Pallets Ltd have therefore been reclassified within discontinued operations for the six months to 30 September 2014.
	Discontinued operations - Closure costs
	As detailed above, a decision was taken to close the business of UK Pallets in January 2015, and consequently recognised £1.4m of closure costs in the financial statements to 31 March 2015 (details of which can be found in the 2015 Annual Report and Accounts). A further £0.1m (2014: £nil) of costs have been recognised in the six month period to 30 September 2015 as the Group administers the company's voluntary liquidation.

 

8	Discontinued operations	Unaudited 30 September 2015	Unaudited 30 September 2014 1	Audited 31 March 2015
		£m	£m	£m
	The results of discontinued operations were as follows:
	Revenue	-	13.9	22.8
	Cost of sales	-	(12.8)	(22.0)
	Gross profit	-	1.1	0.8
	Administrative expenses	-	(0.9)	(1.9)
	Operating (loss)/profit before exceptional items	-	0.2	(1.1)
	Exceptional items	(0.1)	(7.2)	(10.4)
	Operating (loss)/profit	(0.1)	(7.0)	(11.5)
	Taxation on (loss)/profit before exceptional items	-	(0.1)	0.2
	Taxation on exceptional items	-	-	0.5
	Total taxation	-	(0.1)	0.7
	(Loss)/profit for the period	(0.1)	(7.1)	(10.8)

 

1 The impairment charge for UK Pallets in the six month period to 30 September 2014 has been reclassified within discontinued operations

 

These represent the results of UK Pallets Ltd which ceased trading in March 2015.

 

9	Property, plant and equipment, intangible assets, goodwill and investment properties
		Six months ended 30 September 2015		Unaudited
			Note	£m
		Opening net book value at 1 April 2015		100.3
		Additions		6.9
		Disposals		(12.0)
		HS2 Compensation		(5.4)
		Depreciation and amortisation		(4.4)
		Closing net book value at 30 September 2015		85.4

 

	Six months ended 30 September 2014		Unaudited £m
	Opening net book value at 1 April 2014		69.4
	Additions		16.7
	Disposals		(0.1)
	Impairment of goodwill	7	(7.3)
	Depreciation and amortisation		(3.7)
	Closing net book value at 30 September 2014		75.0

 

	Year ended 31 March 2015		Audited £m
	Opening net book value at 1 April 2014		69.4
	Additions		48.2
	Disposals		(1.3)
	Impairment of goodwill	7	(7.9)
	Depreciation and amortisation		(8.1)
	Closing net book value at 31 March 2015		100.3

 

					Unaudited 30 September		Unaudited 30 September		Audited 31 March
					2015		2014		2015
					£m		£m		£m
		Total segment capital expenditure			0.7		12.9		38.7
		Central capital expenditure			0.8		3.5		9.0
		Total capital expenditure			1.5		16.4		47.7
		Total segment depreciation and amortisation			2.8		2.0		4.5
		Central depreciation and amortisation			1.6		1.7		3.4
		Total depreciation and amortisation			4.4		3.7		7.9

 

 

10	Share capital
						Number of				Ordinary		Share		Unaudited
						ordinary				shares		premium		Total
	Capital					shares				£m		£m		£m
	At 1 April 2015					54,740,618				5.5		15.3		20.8
	Allotted under SAYE schemes					174,199				-		0.3		0.3
	At 30 September 2015					54,914,817				5.5		15.6		21.1
	At 1 April 2014					54,734,482				5.5		15.3		20.8
	Allotted under SAYE schemes					2,123				-		-		-
	At 30 September 2014					54,736,605				5.5		15.3		20.8
	The Company's Employee Share Ownership Trust ('ESOT') holds shares in the Company for subsequent transfer to employees under its incentive scheme awards. Shares held by the ESOT are not voted at shareholder meetings and do not accrue dividends.  At 30 September 2015 the trust held a total of 6,801 shares (30 September 2014: 6,801 shares and 31 March 2015: 6,801 shares)

 

 

11	Analysis of net (debt)/cash
					Audited  1 April 2015						Unaudited   30 September 2015
							Cash flow		Other
					£m		£m		£m		£m
	Cash at bank and in hand				4.6		1.9		-		6.5
	Total cash				4.6		1.9		-		6.5
	Revolving credit facility				(10.0)		(4.4)		-		(14.4)
	RCF arrangement fee				0.2		-		-		0.2
	Finance leases due within one year				-		(0.4)		-		(0.4)
	Finance leases due after more than one year				-		(4.6)		-		(4.6)
	Total debt				(9.8)		(9.4)		-		(19.2)
	Net (debt)/cash				(5.2)		(7.5)		-		(12.7)

 

				Audited 1 April 2014						Unaudited  30 September 2014
						Cash flow		Other
				£m		£m		£m		£m
	Cash at bank and in hand			27.4		(17.9)		-		9.5
	Total cash			27.4		(17.9)		-		9.5
	Finance leases			(0.4)		0.4		-		-
	Total debt			(0.4)		0.4		-		-
	Net cash/(debt)			27.0		(17.5)		-		9.5

                                                 

				Audited 1 April 2014		Cash flow		Other		Audited 31 March 2015
				£m		£m		£m		£m
	Cash at bank and in hand			27.4		(22.8)		-		4.6
	Total cash			27.4		(22.8)		-		4.6
	Revolving credit facility			-		(10.0)		-		(10.0)
	RCF arrangement fee			-		0.3		(0.1)		0.2
	Finance leases			(0.4)		0.4		-		-
	Total debt			(0.4)		(9.4)		(0.1)		(9.8)
	Net cash/(debt)			27.0		(32.2)		(0.1)		(5.2)

 

 

12	Provisions
					Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
					Automation	Closure costs	Lease dilapidations	Restructuring	Total Provisions
	Six months ended 30 September 2015				£m	£m	£m	£m	£m
	At 1 April 2015				0.2	0.3	1.5	0.2	2.2
	Provided in the year				-	-	0.1	-	0.1
	Utilised during the period				(0.2)	(0.3)	(0.2)	(0.1)	(0.8)
	At 30 September 2015				-	-	1.4	0.1	1.5
					Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
					Automation	Closure costs	Lease dilapidations	Restructuring	Total Provisions
	Six months ended 30 September 2014				£m	£m	£m	£m	£m
	At 1 April 2014				-	-	1.1	0.3	1.4
	Utilised during the period				-	-	-	(0.1)	(0.1)
	At 30 September 2014				-	-	1.1	0.2	1.3
					Audited	Audited	Audited	Audited	Audited
					Automation	Closure costs	Lease dilapidations	Restructuring	Total Provisions
	Year ended 31 March 2015				£m	£m	£m	£m	£m
	At 1 April 2014				-	-	1.1	0.3	1.4
	Provided during the period				0.4	0.3	0.6	-	1.3
	Utilised during the period				(0.2)	-	(0.2)	(0.1)	(0.5)
	At 31 March 2015				0.2	0.3	1.5	0.2	2.2

 

	The automation provision largely relates to the early termination costs of exiting existing contracts as a result of the roll-out of a programme of large scale automation within the network.
	The closure costs relate to UK Pallets and largely relate to redundancy payments and contractual cancellation charges.
	Lease dilapidations represent the anticipated expenditure resulting from the Group's contractual obligations to make good properties prior to reversion of the building to the landlord in respect of leases expiring within one year and up to 14 years. The timing of outflows is variable, and is dependent not only on property lease expiry dates, and opportunities to surrender leases, but repair programmes and the results of negotiation.
	Restructuring relates to provisions arising following a change programme initiated in the financial year ended 31 March 2012 and relates to onerous property lease costs, which are expected to be utilised within one year and up to two years.

 

 

13	Taxation
	Taxation is provided based on management's best estimate of the effective tax rate expected for the full financial year. The estimated annual tax rate (pre-exceptional items) used for the six months to 30 September 2015 is 21.7% (Six months to 30 September 2014: 21.9%).   This reduction reflects the reduction in the UK Corporation tax rate from 21% to 20% on 1 April 2015.   The deferred tax asset/liability at 30 September 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.   Reductions in the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the company's future current tax charge accordingly and reduce the deferred tax liability at 30 September 2015, which has been calculated based on the rate of 20% substantively enacted at the balance sheet date.

 

 

14	Earnings per share
	The basic, diluted and underlying earnings per share are calculated based on the following data:
				Unaudited	Unaudited	Audited
				Six months to 30 September 2015	Six months to 30 September 2014	Year to 31 March 2015
					(restated)
				£m	£m	£m
	Profit after taxation - continuing operations			1.7	9.3	15.9
	(Loss)/profit after taxation - discontinued operations			(0.1)	(7.1)	(10.8)
				1.6	2.2	5.1
	The weighted average number of shares used in the calculations are as follows;
				No. of shares	No. of shares	No. of shares
	Weighted average number of shares in issue			54,762,072	54,728,824	54,729,788
	Dilutive effect of options			335,533	200,026	182,336
	Diluted weighted average number of shares			55,097,605	54,928,850	54,912,124
	The Group has two classes of dilutive potential ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year, and the contingency issuable shares under the Group's Long Term Incentive Plan.
				Unaudited	Unaudited	Audited
				Six months to 30 September 2015	Six months to 30 September 2014	Year to 31 March 2015
					(restated)
	Basic earnings per share - continuing operations			3.1p	17.0p	29.0p
	Basic (loss)/earnings per share - discontinued operations			(0.2)p	(12.9)p	(19.8)p
	Basic earnings per share			2.9p	4.1p	9.2p
	Basic earnings per share is calculated by dividing the profit for the year (the 'earnings') attributable to ordinary shareholders by the weighted average number of ordinary shares during the year, excluding those held in the ESOT (note 10), which are treated as cancelled.
	Diluted earnings per share - continuing operations			3.1p	15.9p	28.9p
	Diluted (loss)/earnings per share - discontinued operations			(0.2)p	0.3p	(19.7)p
	Diluted earnings per share			2.9p	16.2p	9.2p
	For diluted earnings per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares.

 

 

	Underlying earnings per share
			Unaudited 30 September 2015	Unaudited 30 September 2014	Audited 31 March 2015
				(restated)
		Note	£m	£m	£m
	Profit before taxation - continuing operations		2.2	12.0	20.1
	Adjustments:
	Exceptional administrative items - continuing operations		2.7	(0.8)	0.9
	Underlying profit before taxation - continuing operations		4.9	11.2	21.0
	Taxation - continuing operations		(1.1)	(2.5)	(4.4)
	Underlying profit after taxation - continuing operations		3.8	8.7	16.6
	Underlying earnings per share
	Basic		7.1p	15.9p	30.3p
	Diluted		7.1p	15.8p	30.1p
	The directors consider that the underlying EPS more accurately reflects the underlying performance of the business.
	The figures for the six month period to 30 September 2014 have been restated to reflect the reclassification of UK Pallets to discontinued operations as detailed in note 2.

 

15	Dividends
	The final dividend for the year ended 31 March 2015 of 14.5p per share (2014: 14.2p) was paid on 28 August 2015. The £7.9m distribution (2014: £7.8m) is reflected in the financial statements for the six months ended 30 September 2015.
	In addition, the Directors propose an interim dividend of 5.5p per share (2014: 7.3p per share) payable on 15 January 2016 to shareholders who are on the register at 4 December 2015.  This interim dividend, amounting to £3.0m (2014: £4.0m) has not been recognised as a liability in these condensed consolidated interim financial statements.

 

16	Commitments and contingencies
	Contingent assets
	As reported in the 2015 Annual Report and Accounts, the Group was required to relocate the Birmingham National hub and offices to a newly constructed facility at Ryton, near Coventry, given the site was situated on land required for the proposed HS2 railway.   Consequently, the Group incurred significant costs largely resulting from the construction of a new National hub and offices, installation of automation equipment, and staff relocation and redundancy costs; a large proportion of which are the subject of a claim against the DfT and HS2 Ltd under the Compensation Code.   As at the balance sheet date, (and as detailed in Note 7), the Group has received partial reimbursement of these costs, but remained to agree the final claim. Consequently, no recoverable asset has been recognised as at 30 September 2015.   Following the period end, a final settlement was agreed as detailed in Note 17.
	Contingent liabilities
	The Company has guaranteed bank and other borrowings of subsidiary undertakings in a cross-guarantee agreement of an undrawn Group borrowing facility amounting to £20m (2014: £12m).   As reported in the 2015 Annual Report and Accounts, the Group has further contingent liabilities in respect of bank guarantees and documentary credit facilities entered into during the normal course of business, and is subject to litigation from time to time as a result of its activities, in respect of which no loss is expected.
	Group capital expenditure committed, for the purchase of property, software, plant and equipment, but not provided for in these financial statements amounted to £1.4m (2014: £17.2m).
17	Events occurring after the reporting period
	In November 2015 a final compensation payment of £10.3m was contractually agreed with the DfT and HS2 Ltd, with funds anticipated to be received within calendar 2015.
	There are no material events occurring after the reporting period, other than the proposed dividend referred to in note 15.
18	Related-party transactions
	The nature of the related party transactions of the Group has not changed from those described in the Groups' 2015 Annual Report and Accounts. There were no transactions with related parties during the six months ended 30 September 2015 which have had a material effect on the results or the financial position of the Group.   Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
19	Risks and uncertainties
	The specific principal risks and uncertainties that may affect the Group's performance, together with relevant mitigating factors as identified by the Group's risk management process were discussed on page 22 of the Group's 2015 Annual Report and Accounts. These included risks relating to the relocation of the National hub, IT systems, competition, business continuity, legislation and regulation, and fuel factors, in addition to financial risks (details of which can be found in Note 25 of the 2015 Annual Report and Accounts) including credit risk. It is considered that these still remain the most likely areas of potential risk and uncertainty, with the position unchanged from that set out in the 2015 Annual Report and Accounts.
20	Seasonality
	Historically, the Group experiences marginally greater demand for its parcel collection and delivery services in the second half of the year, as consignments increase in advance of the Christmas season.  Such trends are not discernible within the mail market.

 

   

Statement of directors' responsibilities
The Interim report is the responsibility of, and has been approved by, the directors of UK Mail Group plc. The directors are responsible for preparing the Interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. The Disclosure and Transparency Rules require that the accounting policies and presentation applied to the half-yearly figures must be consistent with those applied in the latest published annual accounts, except where the accounting policies and presentation are to be changed in the subsequent annual accounts, in which case the new accounting policies and presentation should be followed, and the changes and the reasons for the changes should be disclosed in the Interim report, unless the United Kingdom Financial Conduct Authority agrees otherwise.
The directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union, and that the interim management report includes a fair review of:
■	the important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year as required by DTR 4.2.7; and
■	related-party transactions that have taken place in the first six months of the current financial year and changes in the related-party transactions described in the last annual report that have materially affected the financial position or performance of the group during the first six months of the current financial year as required by DTR 4.2.8.
The directors of UK Mail Group plc are as those listed in the UK Mail Group Annual Report for the year ended 31 March 2015, save for Carl Moore who resigned on 8 October 2015. A list of current directors is maintained on the UK Mail Group website: www.ukmail.com.
By order of the Board
Guy Buswell, Chief Executive							Steven Glew, Group Finance Director
17 November 2015							17 November 2015

Independent review report to UK Mail Group Plc

Report on the condensed consolidated interim financial statements

  Our conclusion

We have reviewed UK Mail Group Plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results of UK Mail Group Plc for the 6 month period ended 30 September 2015. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority

What we have reviewed

The interim financial statements comprise:

·      the consolidated balance sheet as at 30 September 2015;

·      the consolidated statement of comprehensive income for the period then ended;

·      the consolidated cash flow statement for the period then ended;

·      the consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the condensed consolidated interim financial statements and the review Our responsibilities and those of the directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

 

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Uxbridge

17 November 2015

a)   The maintenance and integrity of the UK Mail Group Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

 

 

This information is provided by RNS

The company news service from the London Stock Exchange

 

  END

 

 

IR VDLFFEFFZFBX