UKM.L Regulatory News (UKM)

31 Mar 2006 07:02

Business Post Group PLC31 March 2006 31 March 2006 BUSINESS POST GROUP PLC Trading update and major contract renewal Business Post Group plc provides a trading update to coincide with the financialyear end and announces the renewal of a major long-term contract with FedExExpress. Year end trading update On 27 January 2006 the Board announced that, following the appointment of GuyBuswell as Chief Executive on 5 December 2005, a strategic root and branchapproach was being adopted to turn around the performance of the Company. Good progress is being made. The newly appointed management team has alreadysecured improvements in the quality of service provided to customers and servicelevels in the first quarter of 2006 have been among the highest in the Company'shistory. Initiatives to re-balance the mix of customers and reduce unit costswithin the Core business have been identified and are being implemented. Theseinclude new sales incentives designed to encourage more sales to small andmedium-sized enterprises and a reduction in the number of linehaul routes toimprove capacity utilisation. As previously indicated, it will take time for thebenefits of these initiatives to show through in profits. Rapid progress is being made in tackling the issues within the franchisenetwork. The programme of change has been accelerated, and severalunderperforming franchises, where prospects for improvement were poor, have beenconverted to Business Post ownership since the start of 2006. All conversionshave been effected without any detrimental impact on service levels, but it hasbecome clear that the full cost of the transition will be greater thanpreviously envisaged. Consequently, the Board now expects the one-off costsincurred in conversions to result in a charge of around £2.7m in the currentfinancial year. The increase of £1.2m on the figure of £1.5m advised on 27January relates to the need to strengthen the working capital position ofconverted franchises. These £2.7m costs will be reported as an exceptional item. UK Mail continues to trade ahead of the Board's expectations, winningsignificant levels of new business in both the pre-sorted and unsorted markets.It remains the market leader in downstream access and the main competitor toRoyal Mail. Trading in Specialist Distribution Services (UK Pallets and Courier)remains satisfactory. Major contract renewal The Board is pleased to announce that FedEx Express, the express globaltransportation and logistics corporation, has renewed Business Post's contractas Global Service Participant in the United Kingdom. Business Post's existingfive year contract will be replaced with a new five year contract, with effectfrom 3 September 2006, on similar commercial terms. Guy Buswell, Chief Executive of Business Post, said: "We are delighted that we will continue to act as a key partner for FedExExpress in the UK. FedEx Express have confirmed that our high service levels andnew advanced IT solution were central factors in their decision and this renewalis therefore a significant achievement on the part of our new operationalmanagement team. Sustaining high levels of service for all customers representsthe foundation stone for our overall business performance." Summary and outlook In its statement of 27 January, the Board said that it expected profit beforetax and exceptional items for the year to 31 March 2006 to be approximately £9m.The reclassification as an exceptional item of the previously advised £1.5m ofone-off costs related to the franchise network increases this guidance to£10.5m. Subject to the outcome of the important month of March, the Board continues toexpect results to be in line with this guidance. Total exceptional costs in the current financial year, including the additional£1.2m of exceptional costs referred to above, will be approximately £6.9m. The Board is confident that the major underlying issues affecting profitabilityare being addressed and, as a result, expectations for the year to 31 March 2007remain unchanged. Business Post's preliminary results for the year ending 31 March 2006 will beannounced on Tuesday 23 May 2006. - Ends - Enquiries:Business Post Group plcGuy Buswell (Chief Executive) 0121 335 1111Peter Fitzwilliam (Finance Director) 01753 706 070 Hogarth Partnership Limited 0207 357 9477John OlsenFiona Noblet Conference call: Guy Buswell and Peter Fitzwilliam will conduct a conference call for analystsand investors at 09.00 BST today, 31 March 2006, which can be accessed bydialling 020 7162 0025 and quoting Business Post. The call will be recorded andavailable for seven days by dialling 020 7031 4064 (US dial-in number forrecording: 001 954 334 0342), quoting pass code 700460. This information is provided by RNS The company news service from the London Stock Exchange