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UNITED CARRIERS have recorded a slowdown in their growth during
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1977, but this followed a fast rate of expansion over the past two years.
However, a heavy capital expenditure programme should improve services and it is expected that UCL's expansion will be resumed in the coming year. UCL specialises in express parcel services; it has branches throughout Britain and a major subsidiary in Ulster.
In terms of turnover, the group has had a rapid growth over the past few years, though some of the increase in turnover has been due to inflation. In 1976-7, it maintained a rate of increase of about 30 per cent in value and was only marginally affected by the recession in the British economy (see Table 1).
In fact, this growth has fluctuated but, since 1970, total turnover has nearly quadrupled in value, as can be seen from Graph 1.
The trend in pretax profits has been uneven and in 1974-5 the group was adversely affected by declining profit margins. Over the past two years, however, earnings have recovered sharply and, in the financial year ended in January 1977, pretax profits reached a peak of £2.4 million (see Table 2).
Profit margins
Profit margins were well maintained throughout the period, even though they dropped significantly during 1 9745. On average, pretax earnings as a percentage of sales were 15 per cent between 1970 and 1977, while trading profits were 18.2 per cent over the past seven years. Graph 2 shows the trend in margins, which compares favourably with some of the other major transport cornpanies in this sector.
The return on capital has been quite high and in 1976-7 reached over 39 per cent. The group has been conscious of improving its overall efficiency and another key ratio, namely turnover as a proportion of capital employed, has also been above average over the past few years. in 1976-7, this ratio rose to 2.2.
Latest results
In the first half of its current financial year, UCL suffered a small setback in profits. Pretax profits fell from £1.3m to £1.2m, even though turnover was 20 per cent higher in the January-July period. The main reason for this drop was the decline Jo the volume of tonnage transported while higher labour costs and increases in road fuel tax resulted in narrowing margins.
Current prospects
The current outlook is somewhat uncertain and it is possible that the second-half results will show a fall of 10 per cent in earnings. The chairman, himself, has warned that "he does not anticipate profits for the full year to be as high as 1976-7" Thus, it is possible that earnings for the year ended in January 1978 may be in the region of £2.1m — satisfactory in view of the difficult conditions prevailing in this sector at the moment.
But the prospects are promising and higher earnings are likely over the next few years. The group has been maintaining a high level of investments and has been expanding its distribution service as well as its warehouse activities.
With the expected recovery in consumer demand and the better prospects for some sectors of British industry during 1978, United Carriers will be in a good position to take advantage of this trend.
At present, investors are taking a cautious view of UCL's prospects and the share price is standing on a relatively low rating. The price-earnings ratio is only 6.7, but some improvement in the status of the shares can be expected during the current year.
• CM financial correspondent.