ukmailThe mail and parcel carrier UK Mail Group has warned that its costs have been hit by taking on too many parcels in the wake of the collapse of rivals City Link.

The Birmingham-based company said yesterday that it is expecting its financial performance for the fourth quarter of 2014, and for the full year, to be at the lower end of forecasts.

It said parcel volumes in the final quarter rose 12% year-on-year, partly as a result of taking on former City Link clients, as that carrier went into administration on Christmas Eve.

The volumes were “temporarily” above UK Mail’s capacity to deal with them, it said, resulting in extra costs being incurred.

The situation looks set to continue until the company moves into its new hub near Coventry this summer. The facility at Ryton is expected to be completed by the end of July, with UK Mail moving its head office to the site from May.

By September, the company said it was expecting automation levels for parcels sorting to rise from 20% of volume to 80%.

“New opportunities”

Guy Buswell, the UK Mail chief executive, said the new hub will create extra capacity and reduce operating costs across the network.

“To date this transition is proceeding according to plan, although we have much to do in the first half of the new financial year to complete this key process,” he said.

“We continue to see new opportunities to increase our share of the UK parcels market as a result of the improved competitive environment. The medium and long term outlook for the Group therefore remains very positive.”

UK Mail Group said in the pre-close statement yesterday that Group revenues in the fourth quarter rose by around 5% year-on-year, excluding the results of the company’s pallets business, which closed earlier this year. In the full year, excluding the pallets business, revenue grew 1% year-on-year.

The company said its mail division achieved “good volume and revenue growth” in the fourth quarter, with mail volumes up 5% year-on-year, as its share in the Downstream Access market grew.

UK Mail said its courier business saw a decline in fourth quarter revenues, but that it achieved growth over the full year.

In its financial year 2013, spanning to the end of March 2014, UK Mail Group generated £508.5m in revenue, with pre-tax profits of £22.8m.

By Alison