UK Mail Group has made the long expected decision to close its ailing UK Pallets business, after its failure to turn around years of “underperformance”.
The company’s Lichfield-based pallets business which is the smallest part of the Group, brought in around £13.9m in revenue in the first half of 2014, or 5.3% of the total Group first half turnover of £241.4m.
The pallet operation had been suffering from numerous challenges and reduced profitability in recent years. The company attempted to tap into existing pallet networks, by offering to pay reduced prices to those networks, for pallet delivery on the basis that UK Pallet work could act as vehicle fillers. This often led to delays and reduced service levels. The strategy would now seem to have failed with customers opting for service levels above just price alone. Profit in the first half of last year was down 58.6% year-on-year to just £200,000.
UK Mail had told its investors in November that it was taking action to address the underperformance of the pallets side of the business. After considering all options for the business, which has around 120 employees, it seems that the challenges were deemed to great and the only option was to close it.
The firm, keen to avoid any customers becoming concerned about other aspects of the group’s business said, the closure of the “non-core” business would have no impact on its parcels, mail and courier operations.
“This closure will be managed over some three months, ensuring that all employees and customers are properly supported,” the company said. “It is also hoped that a number of employees would be able to take up alternative roles within UK Mail.”
UK Mail said that it was expecting the closure to cost it £1m, with an asset write-down of around the £2m mark.