UKM.L Regulatory News (UKM)

21 Sep 2005 07:00

Business Post Group PLC21 September 2005 BUSINESS POST GROUP PLC Trading Statement The Board of Business Post announces that it now expects pre-tax profits for thefull year to 31 March 2006 to be substantially below last year's. This in partreflects a reduced expectation of normal trading for Express, the UKbusiness-to-business parcel delivery service. The Board has also identifiedadditional costs, amounting to approximately £3m in the current year, forsupporting the franchise network, and has decided to make a £3.2m provisionagainst amounts owed by certain franchises relating to prior years. Excludingthe one-off provision, the year-on-year reduction in pre-tax profit to 31 March2006 is expected to be around 10%. Normal Trading The reduced expectations of profit from normal trading reflect a sharp declinein the rate of growth of volumes in Express in response to deterioratingeconomic conditions. Whilst daily volumes at the start of the year were 8% abovethose a year earlier, market conditions have progressively deteriorated to thepoint where daily volumes in August were below those last year. The rate ofdecline appears to have slowed in September, and Express revenue for the firsthalf is now expected to be 3% above last year. The other components of Parcel Services (HomeServe and International) havecontinued their double-digit growth in the five months to 31 August 2005.HomeServe, Business Post's UK business-to-consumer parcel delivery service,increased its revenue by 42%, whilst International, Business Post's cross-borderdelivery service, increased its revenue by 11%, albeit this was belowmanagement's expectations. Overall, for the half year to 30 September 2005,Parcel Services is expected to increase its revenue by approximately 9%. To prepare for the broadening of capability associated with the Group'sexpanding range of services, in anticipation of higher volume growth and tomaintain record levels of customer service, the Group made investments whichhave increased the cost base in Network Services this year. In addition, theGroup incurred a number of cost increases. Consequently, the decline in volumegrowth has had a disproportionate effect on profit. To rectify this situation, since July the Group has implemented a number ofinitiatives on three fronts - costs, prices and volumes. Redundancies have beenmade in support areas, and reductions in direct operating cost have been made.Prices have been selectively raised, and the sales force is being restructuredand re-energised under new management to improve further market share. Specialist Distribution Services (which comprises UK Pallets and Courier) hascontinued to trade well; revenue growth in the first five months was 14% andprofit was well ahead of last year's. UK Pallets, the Group's palletised goodsdelivery service, increased its revenue by 16%. The two courier businesses, UKToday and Business Post Technical Couriers, increased their aggregate revenue by12%. UK Mail has continued to make excellent progress. Revenue for the five months to31 August 2005 totalled £11.5m and profit is tracking ahead of expectations. UKMail remains the leading alternative to Royal Mail in the business mail market.It continues to make important client wins, is trialling with some verysubstantial organisations, and awaits the result of several significant newbusiness pitches. Its unsorted mail service, which started in Swindon in April2005, has made a good start and will shortly operate out of four depots. Franchise Network Following the appointment of a new Franchise Director, the Group has undertakena detailed review of its franchise operations. With the increasing complexity ofthe Group's activities, coupled with the deteriorating economic background, thisreview has highlighted the need to provide an increased level of support forcertain franchises. As a result, the Board has decided to restructure certain ofthe existing franchising arrangements by diverting existing central salesresource to service the franchise network and incorporating additionalcommission-sharing incentive arrangements so as to put franchises on a moreprofitable footing. The Board estimates the cost of this additional support toamount to approximately £3m in the current year, and has decided to make aprovision of £3.2m against amounts owed by certain franchises relating to prioryears. Notes for Editors: Business Post has a parcel network of 59 depots, of which 25 are owned and 34are franchised. Enquiries: Business Post Group plc 0121-335 1111Paul Carvell (Chief Executive)Peter Fitzwilliam (Finance Director) Bankside Consultants LimitedCharles Ponsonby 020-7367 8851 Conference Call: Paul Carvell and Peter Fitzwilliam will conduct a conference call for analystsand investors at 08.30 today, Wednesday 21 September 2005, which can be accessedby dialling 020-7162 0080, citing pass code 676586 and quoting Business PostGroup. The call will be recorded and available for seven days on 020-7031 4064via pass code 676586. This information is provided by RNS The company news service from the London Stock Exchange