Agreement with Department for Transport

6 December 2013

UK Mail Group Plc

Agreement with Department for Transport - relocation of central hub

UK Mail Group plc ("UK Mail") is pleased to confirm that agreement has been reached with the Department for Transport for the relocation of our central hub.

As indicated in our interim results announcement on 20th November 2013, our central hub in Birmingham is on the route of HS2 (the UK Government's planned high-speed rail route between London and the Midlands and Northern England) and therefore needs to be relocated.

An agreement has now been reached with the Department for Transport that they will support the relocation of the hub to a new 200,000 sq. ft. facility, in the Coventry area, subject to planning approval.

Construction is scheduled to commence in early 2014 and the move will take place over a period commencing in Spring 2015. This timescale supports our plans to introduce significantly increased automation of our operations from Spring 2015 onwards, with new automated sortation equipment being installed at the new hub.

The cost of replacing our existing facility and associated relocation costs will be funded by HS2 Ltd. UK Mail will fund the costs of deemed upgrades to our existing facility, expected to be some £10m; this is in addition to the previously announced investment of approximately £20m in the new automated sortation equipment. Of this combined investment, £10m is expected to fall into the current financial year and £20m into the year to 31 March 2015. The investment will be funded from UK Mail's existing cash resources and new bank facilities. We continue to expect a double digit net return on the investment in automation, with the full run-rate of benefits expected from September 2015.

Guy Buswell, CEO of UK Mail, said:

"This move will represent an important component of our plans to develop UK Mail into one of the leading and most advanced parcel carriers in the UK, with a new state-of-the-art, highly automated hub at the heart of our network."

Beth West, HS2 Ltd Commercial Director, said: 

"We are pleased to have reached this agreement with UK Mail. This is a significant step forward and provides clear evidence that HS2 Ltd can work successfully with businesses to secure long term benefits for both." 

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Notes to Editors:

The UK Mail Group (formerly known as Business Post Group) is the largest independent parcels, mail and logistics services company within the UK, offering innovative delivery solutions both locally and worldwide. The Group has a national network of 50 sites and 2500 vehicles enabling it to offer business customers a unique integrated service with a full range of time-sensitive and secure delivery options for parcels, letters and pallets.

Financial information in this announcement is primarily sourced from UK Mail's unaudited management accounts. Statements made in this announcement that look forward in time or that express UK Mail's management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect management's current expectations concerning future events and actual results may differ materially from current expectations or historical results.