The demise of delivery group City Link at Christmas has unsurprisingly benefited rivals, and UK Mail has just spelled this out.
The company said it had performed successfully in the run-up to the festive season, with its parcels business handling record volumes. It added:
[City Link’s collapse] 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.
The parcels market has been overcrowded leading to a price war, and in September UK Mail warned of lower than expected volumes and margin pressures.
At Christmas some firms - including Yodel and Hermes - struggled to cope with higher then expected demand.
Meanwhile UK Mail said it planned to close its UK pallets business over the next three months at a cash cost of £1m and with asset write-downs of £2m. It hoped some of the 120 employees at the Lichfield pallets operation would be able to take up other roles within the company.
Analysts at Investec said:
Whilst others have stumbled (Yodel/Hermes) or fallen by the wayside (City Link), the group has had another successful trading period in its Parcels business (with the unit handling record volumes in the run-up to Christmas). Whilst it is too early to say where City Link’s clients will end-up, the group has strong credentials to win its fair share (soon to be supported by the new hub, opening May 2015). The pending closure of the sub-scale and separately run Pallets business is a pragmatic decision in our view. We move to buy [from add].
UK Mail shares are currently up 7% at 465p.
