UK Mail is on track to move into its new automated hub at Ryton near Coventry in May next year, the company said in its half year results.
The operator has to leave its current site in Birmingham to make way for the High Speed Two rail development. It expects the total cost of the land and building to be some £35 million over the period to March 2016. “We expect our contribution to the business of the new hub will be come £15m which covers the enhancement of the site and building beyond the scale of the current facility.”
The investment in automation reflects the initial payments for the design and development of the hub and network automation equipment. As previously guided, the total expected to be spent on this equipment, over the period to September 2015, is some £20m.
Operating profit for the first half was down 3.9 per cent to £11.4m, while group revenue was down 0.8 per cent at £241.4m.
Part of the reason for the fall was lower operating profit in the pallets business – down 58.6 per cent to £200,000. The company said: “We are again experiencing gaps in the network which reduce input volumes and cause additional delivery costs, and which have proven difficult to fully resolve.
“We are continuing to try to secure new, long term members for our network, and are taking actions to address the performance of this business. However we now anticipate that it will operate at a lower level of profitability than has been the case historically.”
UK Mail’s CEO Guy Buswell said: “We are now in a period of significant investment and transition, as we put the infrastructure in place for the next phase of growth. The new fully automated hub under construction represents the largest strategic development in our history. Ours is a growth market that is rapidly polarising between high quality, innovative and sophisticated operators and those at the opposite end of the value scale. Against such a backdrop, the investments we are making place us at a significant competitive advantage for the medium and longer term.”
