UKM.L Regulatory News (UKM)

13th January 2015

UK MAIL GROUP PLC

Q3 TRADING UPDATE

PROPOSED CLOSURE OF PALLETS BUSINESS

UK Mail Group plc ("UK Mail" or the "Group"), provides the following update on trading in the three months to 31st December 2014.

Trading

Trading in our core businesses in the third quarter to 31st December 2014 has been in line with our expectations. 

Our core businesses have performed well with our Parcels business successfully handling record volumes, and our network remaining robust, during the peak weeks running up to Christmas.

The demise of City Link is likely to have a positive impact on the overall UK parcels industry. We have taken on some volumes from ex-City Link customers but it will be some time before the longer term outcome, on our business and on the industry as a whole, can be properly assessed.

Our expectations for the full year outcome for our core businesses remain unchanged.

New Hub/Automation

The construction and fit out of the new hub is on track for completion next week. The hub automation has been installed and is now entering a commission and testing phase ahead of implementation in May 2015.

UK Pallets Ltd

In our interim results statement we reported that our non-core subsidiary UK Pallets Ltd, having suffered declining profitability in recent years, was continuing to experience a number of challenges and that we were taking action to address this underperformance.

As previously indicated, we have been actively considering all options for this business and a proposal has now been made to close it. This process will be managed over some three months, ensuring that all employees and customers are properly supported. It is hoped that a number of employees would be able to take up alternative roles within UK Mail.

We estimate that the cash costs will be approximately £1m, with asset write downs of some £2m, including the residual goodwill that arose on acquisition. These will be treated as exceptional items.

Pallets is the Group's smallest business, contributing just 5.3% of group revenue and 2.3% of group operating profit in the year to 31 March 2014, and is run separately from the Parcels, Mail and Courier operations. These core businesses will therefore be unaffected by the proposed closure.

Ends

For further information, please contact:

All financial information in this announcement is sourced from UK Mail's unaudited management accounts. Statements made in this announcement that look forward in time or that express UK Mail's management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect management's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

Notes to Editors:

The UK Mail Group is the largest independent parcels, mail and logistics services company within the UK, offering innovative delivery solutions both locally and worldwide. The Group has a national network of 50 sites and 2500 vehicles enabling it to offer business customers a unique integrated service with a full range of time-sensitive and secure delivery options for parcels, letters and pallets.

Forward-looking statements

All financial information in this announcement is sourced from UK Mail's unaudited management accounts. These are before taking account of any exceptional items, impairments, or other non-recurring items which would only be decided upon at the time of the formal review of the interim results. Statements made in this announcement that look forward in time or that express UK Mail's management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect management's current expectations concerning future events and actual results may differ materially from current expectations or historical results.