UK Mail receives Investec downgrade after profit warning

7th Aug 2015 12:22

(ShareCast News) - Investec has downgraded UK Mail Group to 'add' from 'buy' after the postal services company issued a profit warning. UK Mail said it expects its full-year will be materially below current market forecasts, with profit before tax now predicted to be in the range of £10m to £12m.The profit warning comes as the company has suffered hitches with its new fully automated facility in Coventry which is struggling to cope with many of the parcel sizes, which were said to be "incompatible" with its new automated sorting equipment."The rate of parcel volume growth has slowed with a negative parcel revenue mix and a greater proportion of parcels volume than expected is incompatible with the new sortation equipment resulting in higher costs and lower asset utilisation," Investec analysts noted."Consequently, we cut our forecasts, reduce our target Price to 485p (from 535p) and downgrade to add."Investec has cut its parcels revenue and operating profit forecasts, "assuming a slightly lower revenue per parcel due to the negative mix and higher operating costs".The analysts' parcel volume forecast has been reduced from 5% to 3% for the full-year 2016. The parcels revenue projection has been slashed 2.1% in full-year 2016 and 2.1% in full-year 2017.