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(Reuters) - UK Mail Group Plc (L:UKM) said its parcel delivery business had been boosted after rival City Link stopped operations last month, adding it had decided to pull the plug on its ailing pallets unit.
Shares in UK Mail, which provides mail, parcels and logistic services, jumped about 8 percent in thin volumes, making it one of the top percentage gainers on the London Stock Exchange.
The company said it was not revising its full-year outlook at this stage, until it had a better understanding of how sustained the increased business from former City Link customers would prove to be.
The collapse of City Link into administraion is reprieve for delivery companies caught up in a price war in the overcrowded parcel market.
UK Mail, which warned in September of lower-than-expected parcel volumes and pricing pressures, said on Tuesday its parcels business handled record volumes in the peak weeks running up to Christmas.
This came as rivals such as Yodel and Royal Mail, struggled to cope with the pre-Christmas rush, which was much busier than many delivery firms had expected.
Yodel, whose customers include Amazon and Tesco Plc (L:TSCO), warned of delivery delays in mid-December and Royal Mail, Britain's largest parcel delivery firm, was reported to have stopped collections at one point.
"Whilst others have stumbled (Yodel/Hermes) or fallen by the wayside (City Link), the group has had another successful trading period in its parcels business," Investec Securities analyst John Lawson said, as he upgraded his rating on UK Mail's stock to "buy" from "add".
Citing stiff competition from firms such as United Parcel Service Inc (N:UPS), TNT Express NV (AS:TNTE) and Yodel, Royal Mail Plc (L:RMG) cut in July its revenue expectations for its parcels unit.
UK Mail said the closure of its small pallets unit -- which delivers pallet loads of goods -- would incur cash costs of about 1 million pounds ($1.5 million), along with an asset write-down of around 2 million pounds.
The unit, which has suffered from lower volumes, accounted for about 5.3 percent of revenue and 2.3 percent of operating profit in the year to March 31, 2014.