UK Mail has issued a warning on its annual profits. In a recent trading statement, UK Mail stated that it is in the middle of a period of major investment and transition and that the first half of its latest financial year (2015) were more challenging than expected. The Group has admitted that the near term challenges have had a significant impact on the current year’s performance.
UK Mail has completed the move of its Birmingham hub and head office to a new, fully automated facility in Coventry, with the relocation contract with HS2 expected to complete on 10th August 2015.
UK Mail confirmed that parcel volumes for the first four months of the financial year were up 4% on the same period last year, the move to the new hub has caused a higher level of customer churn and loss of volume than anticipated. The reduced volume has impacted on parcel revenue mix.
Strikingly, a higher than anticipated proportion of the company’s parcel volume is incompatible with UK Mail’s new automated sortation equipment, resulting in additional operating costs.
The Group’s mail business saw volumes up by 6% in the first four months of the new financial year, representing a further increase in UK Mail’s share of the access mail market. According to UK Mail, it has secured a number of new mail contracts and has a good pipeline of opportunities, with a number of contracts coming out to tender in due course.
The Group believes that its current financial performance will be below current market expectations, with profit before tax anticipated in the £10-£12 million range.
Guy Buswell, Chief Executive Officer of UK Mail, said “This near-term setback to our financial performance is clearly very disappointing. However we are taking decisive action to address these issues and we are confident that they can be reversed. The completion of our new fully-automated hub represents the largest strategic development in our corporate history and the rationale for this significant investment remains compelling. We continue to believe that it will make us one of the most efficient and competitive operators in our markets and, with number of significant new customers keen to use our services as a result of this investment, we remain confident in our medium and long term growth prospects.”
