Business Post extends share of UK postal market
Guy Buswell, chief executive of Business Post, the private parcel and mail delivery group, said the postal strike beginning on Thursday could endanger the future of the mail industry if the dispute was not resolved soon.
During the strike, he said, the 6m to 8m pieces of mail which Business Post’s UK Mail subsidiary collects every night would continue to be delivered into Royal Mail depots and wait there for final delivery once the postmen and women were back at work.
Mr Buswell also said the group’s parcels business had seen a sudden slump in deliveries to consumers in the days following the Northern Rock crisis. He said there had been “a huge reduction in volumes” of parcel deliveries from companies which sell electronic goods, such as computers, over the internet.
He said the business had picked up again since, but that it showed that consumer confidence could be hit by such events.
In a trading update covering the group’s half year to the end of September, the group said the UK Mail business “continues to achieve strong growth with revenues in the period up by some 60 per cent.” The mail market in the UK was fully opened to competition in 2006 and UK Mail now has a 7½ per cent market share.
Mr Buswell said that in the new year the group was launching a service called iMail, which would allow customers to send letters electronically to UK Mail’s offices, where they would be printed, put in envelopes, stamped and delivered at a price the same or lower than first class mail.
This service would be available to anyone, whereas UK Mail caters for customers posting at least 500 pieces of mail a night, such as banks and utilities.
Group revenues in the half year were affected by the loss of a contract with Federal Express. That contract, worth GBP 20m a year in revenues and GBP 2m in operating profits, ended on April 30 after FedEx acquired a UK parcels business.
Mr Buswell said that the group was having success in winning new contracts, however, the loss of the FedEx contract meant that group revenues had increased in the first half by 9 per cent rather than an underlying 15 per cent.
Revenues from the group’s parcels operation were in-line with the same period of last year, as “good growth” in the business-to-business parcels operation had been offset by a decline in deliveries to consumers.
Mr Buswell said that consumer business was increasingly competitive with rivals setting up and offering a cheaper, but lower quality, service. Business Post – which delivers time-sensitive products such as top-quality meat and fish – would “not chase volume at low margins,” Mr Buswell said.
The group’s shares, which have fallen from around 480p in recent weeks ahead of the postal strike, slipped another 6p to 394p in morning trading.
Interim results will be published on November 14.
