Hub move hits profits at UK Mail
UK Mail has issued a profits warning, blaming customer churn and loss of volume following its move to a new automated parcels hub in Coventry.
In a statement, the company said parcel volumes for the first four months of the new financial year were some four per cent up on last year, but the move has caused “a greater level of customer churn and loss of volume than anticipated, with an associated adverse impact on parcels revenue mix”.
In addition, it said: “A greater than anticipated proportion of current parcels volumes is incompatible with UK Mail’s new automated sortation equipment, resulting in additional operating costs and therefore a delay to the full benefits expected from automation.”
And it warned: “Overall, as a result of the above factors, the Board anticipates that the Group’s performance for the current financial year will be materially below current market expectations, with profit before tax (before one-off exceptional items) now expected to be in the range of £10m to £12m, and with some continuing impact into the first half of the next financial year.”
The group has now 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 the 10th August 2015.
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.”