Carvell leaves post haste
There is a mystery over the timing of the resignation of Paul Carvell, the chief executive of delivery firm Business Post. He quit after the company issued two profits warnings in three months. But why didn't Carvell step down in November when Business Post issued its last warning?
Perhaps he fought to stay and had to be persuaded by chairman Peter Kane, whose family owns nearly 40 per cent of the shares. Kane has intimated that Carvell wasn't pushed, but whatever the truth, the three-week time lag between the November profits warning and the departure of Carvell has been cause for concern.
Some investors have convinced themselves that the delay was due to the fact that the company found that trading conditions deteriorated further in the last 21 days, and that there could be another profits alert around the corner. On the basis of three profits warnings and you are out, Carvell had no choice but to go.
But that is speculation; there is no evidence to suggest that trading has got worse. So why lose Carvell? His supporters contend that the company's woes have been brought about by a tough market, not through any management failing.
Customers using Business Post's services, such as Dell, are under cost pressure as the price of computers continues to tumble. For Dell and others, the temptation must be to force the cost of postage down and to use the threat of switching supplier if prices aren't cut.
Factor in soaring fuel prices and a high-street slowdown and it becomes clear that Business Post, which delivers parcels and letters around the UK, is going to be pinched on two fronts: by slowing consumer demand and customers who like to squeeze their suppliers until the pips squeak.
The sad thing for Carvell is that Business Post's prospects are good in the medium term. As the Royal Mail's monopoly is broken, so the company has been picking up more and more business. Soon, it will be able to deliver first class post, although there are costs linked to its expansion, and this requires something of a balancing act, one that will now have to be performed by Carvell's successor Guy Buswell.
He has been head of the group's UK mail business since 2002. Carvell had been targeting about pounds 500 million of Royal Mail's activities, and if all had gone according to plan, new business would have plugged the gap left by harsher terms imposed by the likes of Dell.
Postal groups are taking advantage of the liberalisation of the UK market, which has allowed competition in the business-to-consumer market for bulk mailings, such as bills issued by utilities. Not that Business Post has a free run: TMT, the Dutch postal operator, has launched a UK mail service, and Deutsche Post of Germany has also reached a deal with Royal Mail.
Buswell's first task is to review the business and hope that a contract to deliver on behalf of FedEx, the US postal group, is renewed in March.
The US contract is thought to be worth a significant chunk of sales, so if the Americans fail to renew it, Buswell is going to be in trouble. Under a five-year agreement, which began in 2001, Business Post agreed to make collections and deliveries on behalf of FedEx in areas of the UK it does not serve directly.
The uncertainty surrounding the FedEx dealing is spooking the market and keeping investors away.
But the Kane family have seen all this before. Peter Kane started the business in north London in 1971 when the company was little more than a motorcycle dispatch service, and then floated it in 1993 at 120p a share. Kane left in 1996 only to return two years later when management ran into difficulties and the shares bombed. Now he must turn the business round again. When he does, he will surely be tempted to sell to the highest bidder and get out for a tidy sum once and for all.
Business Post Group
THE KANE family floated the company 12 years ago, but it has been a rollercoaster ride for investors. The shares reached a high in 1997 but management turmoil and a profits warning soon saw the stock price plunge. The Kanes, who had stepped back from the business when it ran into trouble, returned in 1998 and have been attempting to restore its fortunes. The shares have been up as high as 700p in the last 12 months, but have dived since profits alerts this year. Some view Business Post as a takeover target once its position has been stabilised. The Kane family are said to want 500p.
