UK Mail cuts profits outlook

Picture: PA
Picture: PA
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Royal Mail rival UK Mail Group warned its profits would be hit this year as an office move and problems with newly-installed technology resulted in “more significant than anticipated” impacts

The firm, which was forced to move its Birmingham hub as a result of HS2, completed the shift to a new, fully-automated facility in Coventry in the first half of the year.

However, the group said the move created “a greater level of customer churn” than expected.

It said: “While parcel volumes for the first four months of the new financial year were some four per cent ahead of the comparable period last year, 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, 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.”

Its board now expects profit before tax to be “materially lower than market expectations”, between £10m and £12m, compared to previous expectations of around £20m.

There will also be some financial impact early next year, it added.