UK Mail saw operating profit fall 55.5 per cent to £4.9 million for the half year to 30th September as a result of operating issues related to its move to a new hub at Ryton on the outskirts of Coventry.
The company revealed in August that problems at the new hub would hit profits for the current year.
Although turnover was up 4.5 per cent to £237.6m in the first half, the company said in its trading statement: “The profit reduction is primarily due to the temporary increase in operating costs associated with this [the move]and also due to a magnified mix effect as a result of the increased customer churn we experienced in the period.”
“Following a detailed review, it is clear that the automated sortation equipment is working well and is fully capable of delivering the anticipated benefits over the medium term. However, we are facing a number of challenges as a result of a combination of inefficiencies in the new hub and in our transport network.
“This, combined with the volumes of non-machinable and incompatible freight that cannot be handled by our automated sortation equipment, has placed added pressures on the new facility. As a result we have experienced additional costs, a temporary reduction in service levels (now restored) and a greater level of customer churn than anticipated, impacting our parcels revenue mix.”
Chief executive Guy Buswell said: “Trading in the initial weeks of the second half, and overall trends within our individual businesses, have been in line with our revised expectations. Our expectations for the current year therefore remain in line with previous guidance. However, due to the timescales required to fully resolve the challenges, our expectations for the next financial year have softened slightly.”