(Reuters) - UK Mail Group Plc (L:UKM) reported a 56 percent slump in first-half pretax profit, hurt by inefficiencies in its new automated hub and a lower contribution from its parcels unit.
UK Mail also said its expectations for the next financial year have softened slightly and the delivery company lowered its interim dividend by 25 percent to 5.5 pence.
Shares in UK Mail sank as much as 17.6 percent to their lowest since December 2012 in early trading on the London Stock Exchange on Wednesday.
Profit before tax and exceptional items fell to 4.9 million pounds in the six months ended Sept. 30 from 11.2 million pounds ($17 million) a year earlier. Revenue rose 4.5 percent to 237.6 million pounds.
Daily average volumes rose 9 percent at its parcels unit, helped by a jump in online shopping. The unit accounts for more than half of it revenue.
However, UK Mail said operating margins at the unit fell to 6.3 percent from 10.7 percent, due to a temporary increase in operating costs and greater-than-expected customer churn related to its move to a new automated hub in Ryton, near Coventry.
The company, which provides mail, parcels and logistics services for clients including Next (L:NXT), Mothercare (L:MTC) and Vodafone (L:VOD), had warned in August that its full-year results would be below market expectations due to the transition.
UK Mail, which competes with bigger rival Royal Mail Plc (L:RMG), said on Wednesday that near-term challenges related to the transition had been more significant than initially anticipated, but expected to resolve these issues in the next 12 months.
Average daily mail volumes rose 8 percent in its mail unit, driven by new customers.
The Berkshire-based company's shares were trading at 329.2 pence at 0904 GMT, after hitting a low of 300 pence earlier. The stock has lost nearly 32 percent in value since the company warned on full-year profit in August, as of Tuesday.
The stock is heading for its biggest single-day percentage loss since Aug. 7.