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Business Post Group (UKM)

  Print      Mail a friend       Annual reports

Thursday 29 November, 2001

Business Post Group

Interim Results

Business Post Group PLC
29 November 2001


BUSINESS POST GROUP PLC - INTERIM ANNOUNCEMENT


*                 Business Post, one of the UK's leading express parcel
delivery companies, announces a 17.8% increase in pre-tax profit to £6.7
million in the six months ended 30 September 2001.


                                                2001       2000        Increase

Turnover (£m)                                   63.0       60.2            4.6%
EBITDA (£m)                                      8.3        7.1           16.6%
Pre-tax profit (£m)                              6.7        5.7           17.8%
Basic earnings per share (p)                     8.8        7.5           17.3%
Dividend per share (p)                           5.3        5.0            6.0%



*                 On 3 September 2001, Business Post commenced its five year
contract with FedEx, the world's largest express transportation company, to
act as its Global Service Participant in the UK. Very good service performance
levels are already being achieved.



*                 On 20 November 2001, UK Mail, a wholly-owned subsidiary of
Business Post, was granted a one year trial licence by Postcomm, the postal
services regulator, for UK business mail services - collection, initial
sortation and transportation - leaving local sortation and final delivery to
the Royal Mail.



*                 A strategic review has concluded that the essence of the
future business will be the provision of time-definite delivery services.   UK
express business parcels will remain the Group's core activity but substantial
growth will be sought from five existing and new businesses - HomeServe (UK
express business-to-consumer parcels), UK Today (UK same day courier
services), UK Mail, Pallet Express (a priority pallet delivery service) and
International business-to-business parcels.



*                 Peter Kane, Chairman, stated 'The Board has been
strengthened by the appointments of Paul Carvell as Chief Executive in
February 2001 and of Russell Hodgson as Operations and Franchise Director in
January 2001, and the stronger operational management and robust cost control
achieved by the team during the period are particularly pleasing'.



*                 Mr Kane added 'Notwithstanding the increased levels of
economic uncertainty prevalent in recent months, with service levels high and
costs under control, progress should be maintained in the second half.   Over
the next few years, the FedEx contract and other initiatives currently
underway or identified by the Strategic Review should create significant
growth'.



Presentation to brokers' analysts:

An analyst presentation, hosted by Bankside Consultants, Business Post's
recently appointed FPR/IR adviser, will be held at 9.00 a.m. today at the
London Capital Club, 15 Abchurch Lane, London EC4.



Notes for editors:

Business Post, which was founded in 1971, is estimated to be the UK's fifth
largest express parcel delivery company, with a market share that has risen to
approximately 6%.  From its national operational hub in Birmingham and more
than 60 other depots (approximately two-thirds of them franchised), its 1,300
drivers cover the UK.

Business Post primarily operates at the top end of the business-to-business
market, focusing primarily on overnight deliveries, and its customer base
exceeds 18,000 business accounts.

Business Post also has a growing business-to-consumer UK delivery service,
HomeServe, which was founded in January 2000, whilst its international
business will be boosted by the FedEx contract which started in September
2001.

Fully listed since 1993, Business Post is the UK's sole quoted parcel company
and the largest non-Post Office owned carrier.



Enquiries:

Business Post Group plc
Paul Carvell (Chief Executive)                                    0121 335 1111
Peter Fitzwilliam (Finance Director)                              01753 706 070

Bankside Consultants Limited
Charles Ponsonby (PR)                                             0207 444 4166
Chris Munden (IR)                                                 0207 444 4150



                              INTERIM STATEMENT

In the six months ended 30 September 2001, Business Post substantially
increased pre-tax profit and successfully started operations as UK Global
Service Participant for FedEx, the world's largest express transportation
company.  Since the end of the period, Business Post has secured an interim
licence for UK business mail services and concluded a strategic review.

The Board has been strengthened by the appointments of Paul Carvell as Chief
Executive in February 2001 and of Russell Hodgson as Operations and Franchise
Director in January 2001, and the stronger operational management and robust
cost control achieved by the team during the period are particularly pleasing.



FINANCIAL OVERVIEW

On turnover 4.6% ahead at £63.0 million (2000: £60.2 million), EBITDA was
16.6% higher at £8.3 million (2000: £7.1 million) and operating profit margins
were 10.3% (2000:  9.0%).   Following a slight decrease in interest
receivable, pre-tax profit was 17.8% higher at £6.7 million (2000:  £5.7
million).  Basic earnings per share improved by 17.3% to 8.8p (2000:  7.5p).

These results reflect a marginal increase in volumes (excluding the one month
of the FedEx contract) and an increase in the gross profit margin to 23.8%
from 22.5% as a result of an increase in unit prices and a reduction in unit
costs.

The balance sheet remains strong, with net cash increasing to £4.2 million
from £2.5 million.



DIVIDEND

In the light of the Group's improved profitability, an increased interim
dividend per share of 5.3p (2000: 5.0p) has been declared.  The increase has
been held at 6.0% with a view to increasing the annual dividend cover.  The
dividend will be paid on 7 January 2002 to shareholders on the register at the
close of business on 14 December 2001.



BUSINESS OVERVIEW

Business Post's core proposition is the provision of time-definite delivery
services, offering a 'can do' mentality, leading edge IT systems and
exceptional delivery performance.

Approximately 90% of Business Post's business is represented by express parcel
delivery in the UK, in which activity its market share has risen to
approximately 6%, making Business Post the fifth largest player.   Almost 90%
of its parcel business is for next day delivery and approximately 90% is
business-to-business.  A national service is provided, currently through 63
depots, of which 21 are owned and 42 are franchised.

The balance of the business is international parcels, through the FedEx
contract and a series of alliances in Continental Europe, and UK business
mail.




DEVELOPMENTS

FedEx

On 30 April 2001, Business Post announced that it had entered into a five year
agreement with FedEx to act as its Global Service Participant in the UK, in
particular collecting and delivering parcels for FedEx customers in those
areas of the UK not served directly by FedEx and marketing FedEx's services to
actual and prospective customers of Business Post.

Prior to commencement of the contract on 3 September 2001, project teams were
established to manage the restructuring of existing linehaul arrangements, the
relocation of premises, the creation of a dedicated call centre, the
integration of IT systems and over 5,000 days of training for staff, drivers
and franchisees.  As a result of the detailed planning undertaken by the
teams, the service is already operating to very good performance levels.

Despite the more subdued economic environment than in the Spring of 2001 and
the events of 11 September, the FedEx contract is already making a positive
contribution to the Group's results.



UK Mail

On 20 November 2001, UK Mail, a wholly-owned subsidiary of Business Post, was
granted a one year trial licence under the Postal Services Act by Postcomm,
effective 1 April 2002, for 'upstream' business mail services in certain
strategic UK locations - Birmingham, Bristol, Edinburgh, Leeds, Leicester,
Liverpool, London, Manchester and the Thames Valley.  No other such licence
currently exists.

Under the licence, UK Mail is responsible for collecting, sorting and
transporting mail to Royal Mail offices throughout the UK, for the Royal Mail
to undertake the local sort and final delivery.

The UK postal market is thought to be worth some £6.5 billion and the
business-to-business market, which includes direct mail activity, is
increasing at over 10% p.a.  The chance to compete in the postal market
therefore represents a significant opportunity for Business Post.  This
initial trial period permits UK Mail to test its business proposition.



HomeServe

The group's specialist business-to-consumer subsidiary, HomeServe.net, whose
principal customer is Tiny Computers, continues to make progress.  The weaker
volumes from customers in the hi-tech sector experienced earlier in the year
stabilised across the summer, and the Christmas period is expected to be the
busiest yet for home deliveries.  Service levels on both distribution and
logistics are consistently high.



Customer service

A recent independent survey of users of parcel delivery services rated
Business Post top for making both collections on time and deliveries on time.
The strengthened focus of the operations team on delivering high quality,
reliable services has further improved service performance levels during the
period.  Another factor enhancing customer service is the quality of the
Group's IT systems.  After three years of major development in this area,
these are among the best in the industry.



Franchises

Business Post is committed to developing its network of franchise depots,
which provide a high quality local service and entrepreneurial spirit.
Progress in attracting new franchisees has been maintained during the period,
with the number of franchises increasing to 42 from 39 out of a total of 63
locations.



City advisers

During or subsequent to the period, the Board has reviewed its professional
advisers and, as a result, Hawkpoint, Old Mutual Securities and Bankside
Consultants have been appointed financial adviser, stockbroker, and financial
public relations and investor relations consultant, respectively.



STRATEGIC REVIEW

Shortly after his appointment as Chief Executive in February 2001, Paul
Carvell instituted a wide-ranging strategic review, involving the senior
executive management of the Group.

The principal conclusions of the review, which may be characterised as
evolutionary rather than revolutionary and which are fully supported by the
Board, are:


*        UK express business parcels should remain the Group's core activity;



*        five existing or new businesses - HomeServe (UK express
business-to-consumer parcels), UK Today (UK same day courier services), UK
Mail, Pallet Express (a priority pallet delivery service) and International
business-to-business parcels - should be developed substantially;



*        strategic acquisitions should be considered, either to achieve
critical mass in a particular activity, or to add a complementary service to
the range of time-definite deliveries;



*        in all its businesses, Business Post should remain a premium rather
than a volume player;



*        the franchise network, which Business Post regards as a competitive
advantage, should be increased in number and strength;  and



*        the Group should be structured into five profit-accountable
businesses - UK Express, HomeServe, UK Today, UK Mail and International - each
led by an expert in that area.



CURRENT TRADING AND PROSPECTS

In the 7 weeks to 18 November 2001, turnover including the benefit of the
FedEx contract was 11% higher than the corresponding period of the previous
year.  Notwithstanding the increased levels of economic uncertainty prevalent
in recent months, with service levels high and costs under control, progress
should be maintained in the second half.   Over the next few years, the FedEx
contract and other initiatives currently underway or identified by the
Strategic Review should create significant growth.



Peter Kane, Chairman                                     29 November 2001



                     CONSOLIDATED PROFIT AND LOSS ACCOUNT
                  for the six months ended 30 September 2001


                                                Unaudited    Unaudited  Audited
                                             30 September 30 September 31 March
                                                     2001         2000     2001
                                                     £000         £000     £000

Turnover                                           62,975       60,198  123,707

Cost of sales                                      48,015       46,676   95,064

Gross profit                                       14,960       13,522   28,643

Administrative expenses                             8,494        8,111   16,361

Operating profit                                    6,466        5,411   12,282

Interest receivable                                   237          278      404

Profit on ordinary activities before taxation       6,703        5,689   12,686

Taxation                                            2,025        1,718    3,747

Profit on ordinary activities after taxation        4,678        3,971    8,939

Dividends                                           2,809        2,651    8,005

Retained profit                                     1,869        1,320      934



Earnings per share                    - basic         8.8p        7.5p    16.9p
Earnings per share                    - diluted       8.8p        7.5p    16.9p


Dividends per share                                   5.3p        5.0p    15.1p


  The profit for the financial period is derived from continuing activities and
                       includes all recognised gains and losses for the period.


Movements in shareholders' funds

Retained profit for the period                      1,869        1,320     934

New share capital subscribed                            -           25      25

Net addition to shareholders' funds                 1,869        1,345     959

Opening shareholders' funds                        41,309       40,350  40,350

Closing shareholders' funds                        43,178       41,695  41,309



                          CONSOLIDATED BALANCE SHEET

                             at 30 September 2001


                                              Unaudited    Unaudited   Audited
                                           30 September 30 September  31 March
                                                   2001         2000      2001
                                                   £000         £000      £000


Fixed assets
Tangible assets                                  29,620       30,767    29,675
Investment in own shares                             69           93        69
                                                 29,689       30,860    29,744



Current assets
Debtors                                          25,617       27,147    23,700
Investments - cash deposits                       3,905        2,000     5,434
Cash                                                314          490       829
                                                 29,836       29,637    29,963


Creditors
Amounts falling due within one year
Trade and other creditors                         9,956       11,694    10,058
Corporation tax                                   2,564        2,773     1,968
Dividends                                         2,809        2,651     5,354
                                                 15,329       17,118    17,380


Net current assets                               14,507       12,519    12,583
Total assets less current liabilities            44,196       43,379    42,327


Creditors
Amounts falling due after more than one
year

Corporation tax                                     679          515       679
Provisions for liabilities and charges              339        1,169       339
Net assets                                       43,178       41,695    41,309


Capital and reserves
Called up share capital                           5,301        5,301     5,301
Share premium account                             9,742        9,742     9,742
Profit and loss account                          28,135       26,652    26,266
Equity shareholders' funds                       43,178       41,695    41,309



                       CONSOLIDATED CASH FLOW STATEMENT

                  for the six months ended 30 September 2001




                                                    Unaudited Unaudited Audited
                                                           30        30      31
                                                    September September   March
                                                         2001      2000    2001
                                                         £000      £000    £000


Net cash inflow from operating activities               6,474     6,830  17,412


Returns on investment
Interest received                                         219       118     459
Tax paid                                              (1,460)   (1,520) (5,026)
Capital expenditure                                   (1,926)   (3,110) (4,105)
Equity dividends paid                                 (5,351)   (5,354) (8,003)

Net cash (outflow)/inflow before management of
liquid resources and financing                        (2,044)   (3,036)     737


Management of liquid resources
Cash withdrawn from/(invested on) deposit               1,529     1,806 (1,628)


Financing
Issue of ordinary share capital                             -        25      25
Decrease in cash                                        (515)   (1,205)   (866)


NOTES


1.      The financial information for the six months ended 30 September 2001
has been prepared using the same accounting policies as in the 31 March 2001
statutory accounts.



2.      The financial information for the year ended 31 March 2001 does not
constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985.  The financial information has been extracted from the
statutory accounts for that year, a copy of which has been delivered to the
Registrar of Companies and which carry an unqualified audit report.



3.      Operating profit is stated after charging £0.4 million in the six
months ended 30 September 2000 relating to management reorganisation costs and
the dissolution of the Eurodis partnership.



4.      Earnings per share have been calculated by dividing the profit for the
period after taxation by 53,012,290 for the six months ended 30 September
2001, by 53,004,147 for the six months ended 30 September 2000 and by
53,007,905 for the year ended 31 March 2001 representing the weighted average
number of shares in issue for each period.  Diluted earnings per share have
been calculated by adjusting the weighted average number of shares for the
effect of the exercise of share options.   Adjustments of 18,344 for the six
months ended 30 September 2001, 44,323 for the six months ended 30 September
2000 and 19,714 for the year ended 31 March 2001 have been made, thereby
increasing the number of shares to 53,030,634, 53,048,470 and 53,027,619
respectively.



5.      The interim statement will shortly be sent to shareholders.  In
addition, copies are available from the Company's registered office, Express
House, 464 Berkshire Avenue, Slough, SL1 4PL, or the Business Post interactive
web site at www.business-post.com.  Click on Investor Relations for figures
and share price information.