UK Mail sends confident message about parcel hub

Having axed its chief executive in November, UK Mail Group delivered a third-quarter result to help it return to investor's good books, showing 8% parcel volume growth as its new automated plant coped with the Black Friday and Christmas surges in demand from online shoppers.

Shares in the small cap company were up 13% on Tuesday as it said it was confident of hitting full-year profit forecasts.

UK Mail, which said goodbye to CEO Guy Buswell after almost a decade as he struggled to cope with the transition to the new Ryton high-tec parcel sorting hub, also lifted mail volumes 2%, though this was lower than was expected.

Chairman Peter Kane, who has taken over as CEO, said: "Our new automated hub operated very well throughout the peak period, and is starting to achieve good throughput levels. As a result our strong customer service levels were maintained throughout this very busy trading period."

He said he was satisfied with mail volumes, but due to mix effect revenues were down compared to the same period last year.

"Our new hub is now working effectively and delivering good service levels to our customers. We need to build on this base as we move forward into 2016."

Although the mail result will lead to lower revenue and operating profit, analysts at house broker Investec said the offset by general efficiencies would leave its forecasts unchanged.

Investec said work to recalibrate the network is ongoing and likely to be completed around the end of the financial year.

"We continue to expect this to provide a material uplift to profitability, both from lower dual-running costs with the temporary hub, and from efficiency gains associated with the parcel sorting machine. Additionally, most parcels operators appear to have increased prices in January indicating that the market is firming."