7 August 2015

UK MAIL GROUP PLC

("UK Mail" or the "Group")

TRADING STATEMENT

As stated in its preliminary results statement on 20 May 2015, UK Mail is in the midst of a period of major investment and transition. Whilst the longer term opportunities for the Group are substantial, the first half of the current financial year was expected to be challenging.

It is now clear that the near-term challenges and their impact on the current year's performance are more significant than anticipated.

The Group has now completed the move of its Birmingham hub and head office to a new, fully-automated facility in Coventry, with the relocation contract with HS2 expected to complete on the 10^th August 2015.

While parcel volumes for the first four months of the new financial year were some 4% ahead of the comparable period last year, the move has caused a greater level of customer churn and loss of volume than anticipated, with an associated adverse impact on parcels revenue mix.  In addition, a greater than anticipated proportion of current parcels volumes is incompatible with UK Mail's new automated sortation equipment, resulting in additional operating costs and therefore a delay to the full benefits expected from automation.

Management is taking action to resolve these issues, and the Group remains satisfied that the anticipated financial and operational benefits from the new hub and increased automation will be achieved in the medium term.

The Group's Mail business continues to perform well, with volumes up by some 6% during the first four months of the new financial year, representing a further increase in UK Mail's share of the access mail market. The Group has recently won a number of major contracts and has a good pipeline of opportunities, as a significant number of competitor contracts are now coming out to tender.  UK Mail's packets initiative also continues to make good progress, with a strong pipeline of opportunities in this market.

Overall, as a result of the above factors, the Board anticipates that the Group's performance for the current financial year will be materially below current market expectations, with profit before tax (before one-off exceptional items) now expected to be in the range of £10m to £12m, and with some continuing impact into the first half of the next financial year.

Guy Buswell, Chief Executive Officer of UK Mail, said:-

"This near-term setback to our financial performance is clearly very disappointing.  However we are taking decisive action to address these issues and we are confident that they can be reversed.

"The completion of our new fully-automated hub represents the largest strategic development in our corporate history and the rationale for this significant investment remains compelling.

"We continue to believe that it will make us one of the most efficient and competitive operators in our markets and, with number of significant new customers keen to use our services as a result of this investment, we remain confident in our medium and long term growth prospects."

ENDS

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