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You can find the current article at its original source at http://www.theguardian.com/business/2015/nov/18/uk-mail-first-half-profits-more-than-halve-delays-delivery-centre-coventry
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| UK Mail profits more than halve amid delays at new delivery centre | UK Mail profits more than halve amid delays at new delivery centre |
| (about 1 hour later) | |
| UK Mail has cut its dividend and warned that profits next year will be lower than expected after lengthy problems at its new automated delivery centre. | UK Mail has cut its dividend and warned that profits next year will be lower than expected after lengthy problems at its new automated delivery centre. |
| Announcing first-half profit down by more than half on Wednesday, the parcels and logistics company said its performance had been very disappointing. | |
| Pre-tax profit excluding exceptional items for the six months to the end of September fell to £4.9m from £11.2m a year earlier. The firm slashed its interim dividend to 5.5p a share from 7.3p because of lower than anticipated earnings this year and next. | Pre-tax profit excluding exceptional items for the six months to the end of September fell to £4.9m from £11.2m a year earlier. The firm slashed its interim dividend to 5.5p a share from 7.3p because of lower than anticipated earnings this year and next. |
| UK Mail issued a profit warning in August for the current year, blaming a significant number of large parcels that its new hub in Ryton-on-Dunsmore, near Coventry, could not deal with. The problems led to customer losses and reduced volumes. | UK Mail issued a profit warning in August for the current year, blaming a significant number of large parcels that its new hub in Ryton-on-Dunsmore, near Coventry, could not deal with. The problems led to customer losses and reduced volumes. |
| Guy Buswell, UK Mail’s chief executive, said he expected profits this year to meet reduced forecasts but that next year’s results would be worse than expected. | Guy Buswell, UK Mail’s chief executive, said he expected profits this year to meet reduced forecasts but that next year’s results would be worse than expected. |
| Related: UK Mail shares tumble after profits warning | Related: UK Mail shares tumble after profits warning |
| It means UK Mail will go into the Christmas trading period suffering continued operational trouble amid fierce competition for parcel delivery business. | It means UK Mail will go into the Christmas trading period suffering continued operational trouble amid fierce competition for parcel delivery business. |
| Buswell said: “Due to the timescales required to fully resolve the challenges, our expectations for the next financial year have softened slightly. | Buswell said: “Due to the timescales required to fully resolve the challenges, our expectations for the next financial year have softened slightly. |
| “In the meantime, we will be managing our customer acquisition and overall volumes very carefully as we approach the peak Christmas period, with an absolute focus on profitability and maintaining high service levels.” | “In the meantime, we will be managing our customer acquisition and overall volumes very carefully as we approach the peak Christmas period, with an absolute focus on profitability and maintaining high service levels.” |
| UK Mail shares fell 12% to 320p in early trading, having been down 18% at one stage. They have dropped 40% since the profit warning was issued. | UK Mail shares fell 12% to 320p in early trading, having been down 18% at one stage. They have dropped 40% since the profit warning was issued. |
| Buswell said the automated sorting equipment at Ryton-on-Dunsmore was working well and that it would eventually lead to greater efficiency and service. | Buswell said the automated sorting equipment at Ryton-on-Dunsmore was working well and that it would eventually lead to greater efficiency and service. |
| Increased costs to solve problems and more lower margin items cut parcels profit by more than a third to £7.9m, despite increased revenues. Revenues from delivering letters also rose, but the division’s profit fell 17% to £5.1m as UK Mail cut prices to win contracts. | Increased costs to solve problems and more lower margin items cut parcels profit by more than a third to £7.9m, despite increased revenues. Revenues from delivering letters also rose, but the division’s profit fell 17% to £5.1m as UK Mail cut prices to win contracts. |
| The British mail delivery market is in a state of upheaval as smaller competitors such as UK Mail battle for customers with Royal Mail, which was privatised two years ago. | The British mail delivery market is in a state of upheaval as smaller competitors such as UK Mail battle for customers with Royal Mail, which was privatised two years ago. |
| City Link, the parcel delivery company, collapsed last Christmas, partly due to intense competition. Amazon, a major source of parcel business, is increasingly delivering its own goods, while letter volumes are falling fast as people instead turn to email and social media. | City Link, the parcel delivery company, collapsed last Christmas, partly due to intense competition. Amazon, a major source of parcel business, is increasingly delivering its own goods, while letter volumes are falling fast as people instead turn to email and social media. |
| The parcel delivery company DX Group issued a profit warning last week, saying prices were under pressure and that it was having to pay more to recruit drivers. Royal Mail will report its first-half results on Thursday. | The parcel delivery company DX Group issued a profit warning last week, saying prices were under pressure and that it was having to pay more to recruit drivers. Royal Mail will report its first-half results on Thursday. |
| Alex Paterson, an analyst at Investec Securities, said: “The churn of ‘ugly’ freight is now largely complete. However, UK Mail needs to optimise the scheduling of parcels into the sorting centre throughout the day, to achieve a more even spread. We expect this process to be completed around autumn 2016.” | Alex Paterson, an analyst at Investec Securities, said: “The churn of ‘ugly’ freight is now largely complete. However, UK Mail needs to optimise the scheduling of parcels into the sorting centre throughout the day, to achieve a more even spread. We expect this process to be completed around autumn 2016.” |