Business Post Group plc – interim results and current trading
Business Post announces results for the half year ended 30 September 2005 in line with the trading statement of 21 September 2005, which highlighted a below-expectations performance by Express and the franchise network, together with successful trading in the rest of the Group. This interim announcement is being made today, earlier than planned, in the light of a revision in the Board’s expectations of the outcome for the full year. With regard to the half year:
Financial Highlights
Turnover increased by 21% to £133.0m .
Profit before tax and exceptional item totalled £6.2m (2004: £8.6m), impacted by the difficult economic conditions. The reported pre-tax profit was £3.0m (2004: £8.6m) .
Basic earnings per share before exceptional item totalled 8.5p (2004: 11.0p), or 4.3p (2004: 11.0p), unadjusted .
Parcel Services (comprising Express, International and HomeServe) increased revenue by 8.6% to £97.7m, representing 73% of the Group total, but experienced mixed fortunes in a market that was among the most challenging in the Group’s recent history. Express, the UK B-2-B business, found conditions increasingly difficult, but HomeServe, the UK B-2-C business, increased its revenue by almost 40% and International increased its revenue by 12%.
Specialist Distribution Services (comprising UK Pallets and Courier) made strong progress, increasing revenue by nearly 17% to £20.4m, representing 15% of the Group total, and more than doubling its operating profit to £1.5m.
UK Mail made excellent progress, increasing revenue almost six-fold, to £14.6m, representing 11% (2004: 2%) of the Group total. In line with the ahead-of-schedule market penetration, currently estimated at approximately 2%, an operating profit of £1.1m (2004: loss of £0.5m) was achieved.
The Board remains confident of the Group’s potential and, accordingly, has declared an unchanged interim dividend per share of 6.4p.
HomeServe had another excellent year, increasing turnover by 54% to £26.8m, representing an eight-fold increase since its relaunch in April 2002.
UK Mail commenced trading on 10 May 2004 and had an outstanding and profitable first year. The annualised year-end volume of approximately 250m items represented a market share of approaching 1%, ahead of expectations.
Peter Kane, Chairman, stated: “ Since 21 September 2005, market conditions within Parcel Services have deteriorated, to the point where daily volumes in November are marginally below last year's and below our previous expectations. In addition, Express prices remain under pressure.
In the absence of an improvement in market conditions, second half revenue in Parcel Services is now expected to be lower than last year's. Although trading in Specialist Distribution Services and Mail Services is expected to remain strong and the Group's annual results have a historic second-half bias, the Board now believes that the profit before tax and exceptional items for the year will be around 20% below current market expectations.”
BUSINESS POST CAUGHT IN PARCELS DOWNTURN
PA News, p 1 11-14-2005
By PA City Staff By David Winning
Parcels group Business Post sent its shares into tailspin today by delivering its second profits warning in three months.
Investors reeled from the news that Business Post was no longer handling as many parcels a day as it was last year and its annual profits were now likely to fall 20% short of market hopes.
Volumes at its Express unit, which makes overnight deliveries between businesses, were up 8% at the start of the year but have worsened since then to be 3.5% below 2004 levels in September.
This matters because 40% of the costs of operating its network of around 60 depots are fixed, reducing the freedom of Business Post to act when volumes fall.
Business Post, whose UK Mail arm is a rival to Royal Mail, said it had raised prices selectively and made a number of job cuts to protect its results – but the benefits of these initiatives would be felt between October and March.
Pre-tax profits before exceptional items fell to £6.2 million during the six months to September 30 from £8.6 million at the same stage of last year. Revenues from Parcel Services, which represents three-quarters of all business and includes the Express unit, increased 8.6% to £97.7 million.
Chairman Peter Kane said: “In the absence of an improvement in market conditions, second-half revenues in parcel services is now expected to be lower than last year's.”
Revenues from its second-largest division, which distributes goods on pallets and offers same-day courier services, were up 17% at £20.4 million, whilst UK Mail turned over six times as much money as last year.
Although trading in both these businesses was expected to remain strong, Mr Kane said: “The board now believes that the profit before tax and exceptional items for the year will be around 20% below current market expectations.”
ING analyst Andrew Beh said the two warnings since September meant that Business Post is now set to produce profits that are 60% below expectations at the start of the year.
Having already cut his estimates for full-year profits to £16 million in the wake of the first warning, he expected a significantly lower figure than the £20.5 million of profits achieved last year.
Shares in Business Post slumped 102.5p to 331p today, meaning they have now halved in value in just three months.
Mr Beh said UK Mail was the “one bright spot” in the statement and it now represents 11% of group turnover in just one year of operation.
The operation collects post from customers and processes it through its network of 64 sites – the largest of which is in Birmingham – before passing it to Royal Mail for delivery by local postmen.
Slough-based Business Post set up the service after regulator Postcomm gave companies the right to enter the UK market in 2003.
