UKM.L Regulatory News (UKM)

6 October 2011

UK Mail Group plc

Pre-Close Trading Update

UK Mail Group plc today issues the following pre-close trading update for the half year ended 30 September 2011.

Overall performance in the first half of the year is anticipated to be in line with our expectations, with a satisfactory trading performance in the first quarter and a more challenging second quarter.

Reported Group revenues for the first half are expected to show an increase of some 5.5% compared to the same period in the previous year. Adjusting for the increase in Royal Mail prices implemented on 6 May 2011, offset by there having been one less working day than in the previous year, underlying Group revenues increased by some 2%. On an underlying basis Group revenues showed a slight increase in the second quarter, compared to the increase of some 4% achieved in the first quarter. We expect the market conditions experienced in the second quarter to continue for the remainder of the current financial year.

Our Mail business grew its revenues on a reported basis; on an underlying basis, revenues were broadly flat with the same period in the previous year. Our Mail business remains well positioned in its market with a strong pipeline of new business opportunities.

Parcels revenues continued to grow compared to the same period in the previous year, reflecting the benefit of recent customer wins, albeit in a pricing environment that remains challenging and with a continuation of the volume mix seen in the second half of last year.

Our Courier business has continued to grow its revenues, whilst our Pallets business has performed well in a market that remains challenging.

We currently expect that the Group's underlying operating profit for the half year will be broadly in line with last year, after adjusting for the profit impact of one less working day (estimated at some £500k). We have taken further action to reduce the fixed costs of our business, with the closure of two depots reducing our total number of parcels/mail sites to 52, along with some restructuring in a number of other areas of our business, which we expect will result in one off costs of some £700k.

We continue to invest in our I.T. systems to develop increased capability and further enhance the customer services we can provide; to this end we have recently successfully completed a significant upgrade to our hardware platform. We are also focused on innovation in our markets to continue to drive our business forward.

The Group remains in a sound financial position.

The Group will report its interim results for the half year ended 30 September 2011 on 16 November 2011.

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Notes to editors:

About UK Mail Group plc

UK Mail Group plc of the leading independent parcels, mail and logistics services companies within the UK and one of the main alternatives to Royal Mail for business mail requirements.

Forward-looking statements

This announcement contains certain forward looking statements with respect to the financial condition, results of operations and businesses of UK Mail Group plc. These statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.

The information in this announcement is based on unaudited management accounts.