British group UK Mail today announced its exit from its struggling pallets freighttransportation business while MPs are demanding an investigation into the sudden collapse of
parcels firm City Link.UK Mail announced in a Q3 trading update that it plans to close down its ‘non-core’ subsidiaryUK Pallets Ltd, which has suffered declining profitability in recent years and faces variouschallenges. In particular, the cooperation-based national pallets network suffered from gaps whichreduced volumes and generated additional delivery costs.
Operated by some 80 independent partners with some 1,000 vehicles via a central hub inStaffordshire, central England, UK Pallets provides a range of pallet delivery services, includingtime-definite next-day and economy, as well as daily departures to European destinations.
“As previously indicated, we have been actively considering all options for this business and aproposal has now been made to close it. This process will be managed over some three months,ensuring that all employees and customers are properly supported. It is hoped that a number ofemployees would be able to take up alternative roles within UK Mail,” the company stated.
UK Pallets is the group’s smallest business. In the year ending March 2014, its revenues dropped3.2% to £27 million but profits increased nearly 19% to £0.9 million. But in the April –September 2014 half-year its operating profits slumped by 59% to just £200,000 while revenuesdeclined by 1.1% to £13.9 million. The group took an exceptional charge of £7.3 million to reflectthe lower value of the business. UK Mail said today that a further £3 million worth of costs arelikely due to the closure.
The company stressed that the pallets business, which accounts for just 5.3% of its overallrevenues and 2.3% of operating profits, is run separately from its Parcels, Mail and Courieroperations which will be unaffected by the proposed closure.
Addressing overall business development in the third quarter, ending December 31, 2014, UK Mailsaid that trading in the core businesses “has been in line with our expectations. Our corebusinesses have performed well with our Parcels business successfully handling record volumes, andour network remaining robust, during the peak weeks running up to Christmas. Our expectations forthe full year outcome for our core businesses remain unchanged.”
UK Mail said that it had picked up some additional business following the collapse and closureof City Link. “The demise of City Link is likely to have a positive impact on the overall UKparcels industry. We have taken on some volumes from ex-City Link customers but it will be sometime before the longer term outcome, on our business and on the industry as a whole, can beproperly assessed,” it commented.
Meanwhile, the construction and fit out of the new parcels hub near Coventry is on track forcompletion next week, UK Mail said. The hub automation has been installed and is now entering acommission and testing phase ahead of implementation in May 2015.
Separately, British MPs are increasing pressure on business secretary Vince Cable to hold anofficial investigation into the collapse of City Link, which went into administration on ChristmasEve and effectively closed down on New Year’s Eve, resulting in nearly 2,600 job losses out of the2,700-strong workforce. MPs on the business, innovation and skills select committee were due toquestion the business secretary today (Tuesday) and were expected to demand an officialinvestigation.
Last week, the Labour party’s shadow business secretary Chuka Umunna demanded “a full and properinquiry”, saying that “those who have lost their jobs and contractors who are owed money deservenothing less”. Speaking in Parliament, he criticised the “utterly appalling” situation in whichCity Link workers had learned of the company’s demise from TV reports on Christmas Day.
In response, Business Secretary Vince Cable told him that an inquiry might take place but woulddepend on the outcome of an auditor’s report that is expected in about six months’ time. “Dependingon what that says, we may want to initiate an investigation, but let us wait and see the findingsof that,” he said.
