UK Mail Group to close pallets business
UK Mail Group has decided to close its ailing pallets business after failing to turn around years of “underperformance”. The company’s Lichfield-based pallets business is the smallest part of the Group, bringing in £13.9m in revenue in the first half of 2014, or 5.3% of the total Group first half turnover of £241.4m.
The operation had been suffering from challenges and reduced profitability in recent years thanks to increased network costs, with profit in the first half of last year down 58.6% year-on-year to just £200,000.
UK Mail told investors back in November that it was taking action to address the underperformance of the pallets business.
Today it said after considering all options for the business, which has around 120 employees, a proposal was made to close it. The firm said the closure of the “non-core” business would have no impacts on its core parcels, mail and courier operations.
“This process will be managed over some three months, ensuring that all employees and cutomers are properly supported,” the company said. “It is hoped that a number of employees would be able to take up alternative roles within UK Mail.”
UK Mail said it was expecting the closure to cost it £1m, with an asset write-down of around £2m.
The company had already taken a £7.3m impairment charge against the pallets business last year.
Group “performing well”
The closure of the pallets business came after revenues in the Group as a whole dropped by 0.8% year-on-year in the first half of 2014, with pre-tax profits falling by 4.5%.
However, the company said today that trading in its third quarter of the financial year was as expected, with core businesses “performing well”.
The company’s share price was up 5.35% today as analysts viewed its festive performance positively in comparison to rivals who struggled this Christmas, or collapsed completely.
UK Mail, which has a network of 50 sites and 2,500 vehicles, is in the process of moving to a new national hub at Ryton, near Coventry, and said today that construction and fit out of the new hub is on track for completion next week. The firm is expecting to move into the hub in May.
“The hub automation has been installed and is now entering a commission and testing phase ahead of implementation in May 2015,” the firm said.
Parcels
As UK Mail Group looks to close its pallets business, the company said in its trading statement today that the demise of its rival parcel carrier City Link over the festive period would have a “positive impact” on the rest of the highly competitive UK parcels industry.
UK Mail revealed that it has already taken on some ex-City Link customers after the carrier went into administration on Christmas Eve with the subsequent loss of more than 2,300 jobs. It will take time before the longer-term impact from City Link’s collapse can be properly assessed, added the trading statement.
UK Mail said its parcel business handled record volumes in the peak weeks running up to Christmas, with its network “remaining robust”. Parcels represent about 45% of Group turnover and have been the significant growth area for the firm thanks to e-commerce growth.
