(Reuters) - UK Mail Group Plc (L:UKM) warned that its full-year profit would be materially below market expectations, as its move to a new automated hub in Ryton near Coventry had led to a greater-than-expected customer churn and loss of parcel volume.
Shares in the company, which provides mail, parcels and logistic services, fell as much as 22.6 percent and were on track for their largest one-day drop in more than 14 and a half years.
The stock was one of the top percentage losers on the London Stock Exchange on Friday.
UK Mail said it expected pretax profit before one-off exceptional items to be in the range of 10 million pounds to 12 million pounds for the year ending March 31.
It had reported a comparable profit of 21 million pounds in the last fiscal year.
European postal firms are having to slash costs and invest in new technology and services as they try to stay ahead of new entrants in the lucrative parcel delivery market such as U.S. online retailer Amazon.com (O:AMZN).
UK Mail's move to a fully automated hub is expected to help it cut costs by reducing manual labour and allowing more parcels to be packaged in the same delivery van.
The company, which had earlier warned that results would be more weighted towards the second half, said the negative impact from the transition would also be felt in the first half of the next fiscal year.
Brokerage Investec said costs rose as the volume of parcels not compatible with automation was greater than expected so that more were being sorted by hand and asset utilisation was lower.
The brokerage cut its target price by 9 percent to 485 pence and downgraded the stock to "add" from "buy".
Shares in UK Mail, a competitor to larger postal and parcel services provider Royal Mail Plc (L:RMG), were down 13 percent at 410 pence at 0740 GMT (0840 BST).