UK Mail Group has written down the value of its struggling UK Pallets business, revealing a £7.3m impairment charge relating to goodwill dating from its purchase in 2003.

The group took action after revealing that in the six months ended 30 September 2014, turnover at the pallet network fell 1.1% to £13.9m (2013: £14.1m). Operating profit plummeted 58.6% to £200,000 (2013: £600,000).

UK Mail also conceded in its interim results yesterday, that UK Pallets was still suffering “gaps in the network which reduce input volumes and cause additional delivery costs, and which have proven difficult to fully resolve.

“We are continuing to try to secure new, long-term members for our network, and are taking actions to address the performance of this business.  However we now anticipate that it will operate at a lower level of profitability than has been the case historically,” it said.

UK Mail paid £9.4m for UK Pallets in July 2003 – when the business was known as Weaver Pallet Network – recognising an initial goodwill asset for it of £8.2m. The asset stood at £7.9m by the time the group made the transition to IFRS (which requires businesses to asses the value of goodwill annually) on 1 April 2004.

“The decline in the performance of UK Pallets experienced in the first half of the year has led to profitability being below expectations," UK Mail said in its interim results.

“Therefore an interim goodwill impairment test was performed which concluded that the carrying of the intangible asset is not justified and we have thus recognised an impairment charge [treated as an exceptional item] in the first half year,” the statement added.

Back in April 2013 UK Mail claimed that following a tough year, UK Pallets was now back on track with a new management team in place headed by Graeme Wilson and “previous network issues now largely resolved”.

More recently it has seen the likes of the Green Group leave its membership and its European pallet service provider, Hellmann, defect to Pallet-Track.

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