Business Post wins FedEx contract renewal as restructuring makes progress
British express parcels carrier Business Post has won a major boost with the extension of a vital FedEx contract as it makes progress on its ongoing restructuring. Shares in the company rose strongly on the news, closing up 9.9% at 383 pence on March 31.
Business Post announced that FedEx Express had renewed its contract as Global Service Participant in the United Kingdom. Business Post’s existing five-year contract will be replaced with a new five-year contract, with effect from 3 September 2006, on similar commercial terms. Chief executive Guy Buswell commented: “We are delighted that we will continue to act as a key partner for FedEx Express in the UK. FedEx Express has confirmed that our high service levels and new advanced IT solution were central factors in the decision and this renewal is therefore a significant achievement on the part of our new operational management team. Sustaining high levels of service for all customers represents the foundation stone for our overall business performance.”
In a trading statement issued on March 31, the end of its financial year, Business Post said that “good progress” was being made on the major restructuring programme launched last December following the appointment of Guy Buswell as chief executive. “The newly appointed management team has already secured improvements in the quality of service provided to customers and service levels in the first quarter of 2006 have been among the highest in the company’s history,” Business Post stated. Measures included initiatives to re-balance the mix of customers by focusing more on SMEs, to reduce unit costs and to improve capacity utilisation by reducing the number of linehaul routes.
Business Post said it was rapidly tackling issues in its franchise network, including buying out several underperforming franchises. This, however, would increase costs for the transition programme, resulting in a charge of around £2.7 million in the current financial year rather than the figure of £1.5 million stated on 27 January.
The postal service UK Mail continued to trade ahead of the board’s expectations, winning significant levels of new business in both the pre-sorted and unsorted markets, Business Post added. UK Mail remained the market leader in downstream access and the main competitor to Royal Mail. Trading in Specialist Distribution Services (UK Pallets and Courier) remained satisfactory.
Business Post restated its guidance for full-year profit before tax and exceptional items to £10.5m due to reclassification of additional franchise network costs as an additional item. The company board said it is confident that the major underlying issues affecting profitability are being addressed and, as a result, expectations for the year to 31 March 2007 remain unchanged. The company will announce its full 2005/06 results on 23 May 2006.
