9th Apr 2015 08:14
LONDON (Alliance News) - UK Mail Group PLC shares took a hit in early trade on Thursday after the post and parcels company said it incurred higher costs in the final quarter of its financial year and said it expects these to continue into the new year.
UK Mail said that revenue was boosted in its parcels business by the collapse of City Link but that it still expects its results for the year to be at the bottom end of market expectations.
Shares in the company were down 3.9% in early trade to 466.00 pence, the worst performer in the FTSE All-Share.
UK Mail said an increase in parcel volume in the fourth quarter of its financial year to the end of March has meant parcel volumes were taken above its operational capacity, with a resulting increase in operating costs in the quarter.
It expects those higher costs to continue in the first half of its 2016 financial year, though it expects the higher volume to be absorbed once it completes its move to a new hub at Ryton, near Coventry. The move to the new hub is due to start on May 1 and is expected to be completed by the end of July.
Group revenue in the fourth quarter was up 5%, with revenue for the year set to be up around 1%, the company said. Parcels revenue rose around 12% in the fourth quarter on the back of business the company picked up following the collapse of rival City Link in December.
UK Mail said its Mail business produced good volume and revenue growth in the fourth quarter but its Courier arm saw revenue decline, though revenue in the division was higher for the year as a whole.
It expects its overall performance in the fourth quarter and the full year to be at the low end of market expectations.
The company said its Pallets business has now ceased operations and said the costs related to the closure were in line with its expectations.
UK Mail will publish its full-year results on May 20.
By Sam Unsted; [email protected]; @SamUAtAlliance
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