UK Business Post warns amid tough trading
Shares in Business Post Group slumped 27 per cent yesterday after the mail delivery company said pre-tax profit would be “substantially” below last year.
The UK’s fourth-largest mail operator expects pre-tax profit for the year to March 2006 to be 10 per cent lower than last year’s Pounds 20m.
Only in July the company had said trading was in line with expectations.
Paul Jones, analyst at Numis Securities, said: “This is very much a surprise. Business Post had a reputation for delivering good growth and performance. They have been caught out.”
The company said the expected profit fall was due to tough trading at its Express business-to-business parcels unit, which accounts for about half the turnover.
Business Post also identified Pounds 3m in additional costs in the current year for supporting its franchise network and will take a Pounds 3.2m provision against sums owed by franchises for prior years.
The Express parcels unit delivers items, such as computers, to a wide range of customers. But deteriorating economic conditions on the high street have caused a drop off in volumes, the company said.
Customers have also downgraded their service requirements and are not using the most expensive delivery options.
Business Post said it had started to restructure the sales force, made some redundancies and raised prices selectively to address the problems.
The other components of Parcel Services, HomeServe and International, continued their double-digit growth in the five months to August 31, the company said.
Numis downgraded its full-year pre-tax profit forecast from Pounds 26.4m to Pounds 18.5m.
Business Post shares fell 176p to 475p yesterday.
BUSINESS POST HIT BY PARCEL WEAKNESS
PA News, p 1 09-21-2005
Slough-based parcels group Business Post lost a quarter of its market value today after warning annual profits would be “substantially” lower than last year.
The group, whose UK Mail arm is a rival to Royal Mail, said deteriorating economic conditions had led to a sharp decline in trading at its core business-to-business parcel delivery arm.
It said market conditions within Express had progressively deteriorated, with daily volumes during August below last year – after being 8% up at the start of the year.
However, the rate of decline at Express appeared to have slowed during September, meaning revenues from the division were expected to be 3% above last year in its first half.
Business Post also said it had been forced to make a £3.2 million provision to cover outstanding payments from franchisees, relating to previous years. The group has a parcel network of 59 depots, 34 of which are franchised.
Excluding this one-off payment, pre-tax profits for the year to March 31 were expected to fall by around 10% from last year’s £20.5 million.
In contrast, UK Mail continued to make “excellent progress”, with profits ahead of expectations and revenues for the five months to August 31 coming in at £11.5 million.
The operation, which made a profit in its first year, collects post from customers and processes it through its network of 64 sites before passing it to Royal Mail for delivery by local postmen.
Business Post set up the service after regulator Postcomm gave companies the right to enter the UK market in 2003.
Shares were 24% lower at 493p.<
