UK Mail hit with a £2m restructure cost

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UK Mail Group’s depot closure programme will cost it approximately £2m as it looks to continue to cut costs.

In a pre-close trading update for the year ended 31 March, UK Mail says the closure of four depots in the past 12 months will leave it with a low-cost and integrated network. It is left with a network of 50 depots as a result.

The parcels giant also reveals a Q4 revenue increase of 14% year-on-year. However, when adjusting for the increase in Royal Mail prices implemented in May 2011, group revenue for Q4 increased by 8% and for the full year by 3%.

The changed Royal Mail pricing regime has seen wholesale prices rise by 20% with retail prices up 15%. Since the change was implemented, UK Mail has struggled to retain its operating margin.

UK Mail’s parcels division saw rising volumes, up 10% on the previous year, driven by e-commerce home deliveries, but it warns that rates have been challenging.

The company adds: “The change in mix towards B2C did restrict the level of revenue growth and the challenging pricing environment continued to put pressure on margins.”

Its courier and pallets divisions both reported revenue growth for the full year, as did the company’s Mail division, which experienced a solid final quarter and good growth for the full year, primarily boosted by its business class division.

UK Mail insists it remains in a sound financial position, but is expecting a tough trading climate for the rest of the year. It says it aims to keep tight control of costs to offset what it describes as a competitive pricing environment.

The statement adds: “Our strategy remains to continue to build competitive advantage, developing and investing in our low-cost integrated network.”