13th Jan 2015 08:09
LONDON (Alliance News) - UK Mail Group PLC Tuesday said trading in its main businesses had met its expectations in the Christmas quarter and it has taken on some volumes from former City Link customers, while it has also decided to close its struggling pallets business.
City Link went into administration over the Christmas period, which UK Mail said is likely to have a positive impact on the overall UK parcels market.
"We have taken on some volumes from ex-City Link customers but it will be some time before the longer term outcome, on our business and on the industry as a whole, can be properly assessed," it said.
In a trading update, the smaller competitor to Royal Mail PLC said its main businesses performed well in its fiscal third quarter to end-December, with its parcels operation handling "record" volumes during the peak weeks in the run-up to Christmas. It said its expectations for the core businesses remain unchanged for the whole of the financial year.
The company is set to get a boost from a new hub its is building in the Midlands, which will be able to handle more items at faster speeds. It said the construction and fit-out of the new hub is on track for completion next week, while its automation is entering a testing and commissioning phase ahead of implementation in May.
Its UK Pallets Ltd business has been reporting falling profits in recent years, prompting UK Mail to consider its options for the business. It said it had now decided to close the unit, and estimates cash costs for the closure will be about GBP1 million, while it will also write down some GBP2 million of assets.
"This process will be managed over some three months, ensuring that all employees and customers are properly supported. It is hoped that a number of employees would be able to take up alternative roles within UK Mail," the company said.
The pallets business is a relatively small part of the group, and is run separately to the parcels, mail and courier operations. Pallets contributed just 5.3% of group revenue and 2.3% of group operating profit in the year to March 31, 2014.
UK Mail shares were up 8.2% at 480.00 pence early Tuesday, the best-performing stock on the FTSE All-Share index. Royal Mail shares were up 0.7% at 424.00 pence.
By Steve McGrath; [email protected]; @stevemcgrath1
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