U.K. Mail Falls 23% as Bust Rival’s Parcel Surge Hits Profit

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U.K. Mail Group Plc fell the most in almost a decade after it said full-year earnings would be “materially below” expectations as an influx of parcels from a collapsed rival was incompatible with new automated sorting equipment.

The stock fell as much as 23 percent, the most since Nov. 14, 2005, and was trading down 7.6 percent at 490 pence as of 09:56 a.m. The drop leaves the company with a value of 246.4 million pounds ($389 million).

Profit before tax will be in the range of 10 million pounds and 12 million pounds in 2016 with some carry-on impact on the following year, the Coventry, U.K.-based company said in a statement Friday. That’s less than an average estimate of 20.2 million pounds from four analysts, according to data compiled by Bloomberg.

The delivery company said volumes had fallen more than expected after it relocated its head office and main operations from Birmingham, U.K. to a fully automated facility in Coventry in the West Midlands. Costs at the new hub have escalated after U.K. Mail found “a greater than anticipated proportion” of parcels -- including from City Link Ltd. which went into administration last year -- were required to be manually sorted.

“This near-term setback to our financial performance is clearly very disappointing,” Chief Executive Officer Guy Buswell said in the statement. “We remain confident in our medium and long term growth prospects.”

The company said it has a “strong pipeline of opportunities” and will bid for competitor contracts coming out to tender.

U.K. Mail is assessing its customer base this month and reviewing its pricing structure for the incompatible freight ahead of the Christmas period, according to a spokesman. The company said in April it expected revenue to be in the lower end of expectations after parcel volumes from City Link exceeded its existing capacity.

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