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Business Post Group (UKM)

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Tuesday 18 May, 2004

Business Post Group

Final Results

Business Post Group PLC
18 May 2004


                     BUSINESS POST GROUP PLC - 2004 PRELIMS

Business Post, one of the UK's leading express delivery companies, announces
another year of successful progress in line with the Three Year Plan set out in
November 2001. In particular, pre-tax profit increased substantially and a
strong base has been established for further profitable development.

Financial Highlights


  * Turnover increased by 23% to £192.7m.


  * Profit before goodwill amortisation (of £0.4m) and tax was up 19% at
    £19.1m.


  * Earnings per share before goodwill amortisation increased by 16% to 24.5p.


  * Net cash inflow from operating activities rose strongly to £22.6m from
    £13.7m.


  * Dividends per share of 18.0p, up 7%, are proposed.


Commercial Highlights


  * Express, the Group's core UK business-to-business parcel service, improved
    the quality of its revenue and further increased its market share to some 71
    /2% on turnover up 3% to £127.5m.


  * International, which is primarily a business-to-business service,
    increased its turnover by 17% to £21.2m. The relationship with FedEx as its
    UK Global Service Participant remains strong and International Mail
    continues to develop strongly.

  * HomeServe, the Group's UK business-to-consumer parcel service, increased
    its turnover by an excellent 129% to £17.4m, following an underlying 130%
    increase in 2003.


  * Weaver Pallet Express, a significant palletised goods delivery business,
    was acquired in July 2003. Rebranded UK Pallets, Business Post's most
    significant acquisition to date provides entry into a UK pallet network
    market experiencing annual growth of around 30%.


  * February 2004's access agreement with Royal Mail enabled UK Mail, the
    Group's business mail subsidiary, to commence operations. On 10 May 2004, UK
    Mail commenced daily collections on behalf of a blue chip company.


Peter Kane, Chairman, stated 'Trading since the year end has been encouraging.
Both volumes and yields in April were ahead of the equivalent period last year
and volumes so far in May have advanced further. The Board expects further good
progress in the current year and remains very confident about the Group's long
term potential.'

Analyst Presentation:

Today, from 9.30 a.m. to 10.30 a.m., an analyst presentation will be held at the
London Capital Club, 15 Abchurch Lane, London EC4N 7BW.

Enquiries:

Business Post Group plc
Paul Carvell (Chief Executive)               ) today on          0121-335 1111
Peter Fitzwilliam (Finance Director)         ) 020-7444 4166     01753-706 070

Bankside Consultants Limited
Charles Ponsonby (PR)                                            020-7444 4166





                              CHAIRMAN'S STATEMENT

I am pleased to report another year of successful progress in line with the
Three Year Plan set out in November 2001. In particular, pre-tax profit
increased substantially and a strong base has been established for further
profitable development. Of special note has been the further market share
advances in the core Express business-to-business market, strong growth in
HomeServe, operating in the business-to-consumer market, the acquisition of
Weaver Pallet Express (since re-branded as UK Pallets), a significant palletised
goods delivery business, and the signing of an agreement with Royal Mail which
enables UK Mail, our business mail subsidiary, to commence operations.

FINANCIAL REVIEW

The financial results for the year ended 31 March 2004 relate to the second year
in the Group's Three Year Plan. During the year, turnover increased by 23% to
£192.7m (2003: £156.3m), representing like-for-like growth of 11% and a
contribution from the acquisitions of BXT (since re-branded as BXTech) in
February 2003 and UK Pallets at the end of July 2003.

Operating profit before goodwill amortisation increased by 22% to £19.1m (2003:
£15.6m), representing like-for-like growth of 13% and growth from acquisitions
of 9%. After deducting goodwill amortisation of £0.4m (2003: nil), operating
profit increased by 20% to £18.7m. Operating margins before goodwill
amortisation were 9.9% (2003: 10.0%), diluted slightly from 10.1% on a
like-for-like basis by the acquisition of UK Pallets.

Interest receivable was £nil (2003: £0.5m), reflecting the impact of the
aggregate £11.5m cash costs of the two acquisitions. Profit before goodwill
amortisation and tax was £19.1m (2003: £16.1m), up 19%. After goodwill
amortisation, pre-tax profit increased by 16% to £18.7m (2003: £16.1m).

The tax charge of £6.1m (2003: £4.9m) represents an effective tax rate of 32.6%
(2003: 30.4%), reflecting the effects of non-allowable goodwill amortisation of
£0.4m and prior year deferred tax adjustments of £0.3m. Earnings per share
excluding goodwill amortisation were 24.5p (2003: 21.2p), and 23.8p (2003:
21.2p) after goodwill amortisation. These represent increases of 16% and 12%
respectively.

Net cash inflow from operating activities rose strongly, from £13.7m to £22.6m,
reflecting improved working capital management, particularly in the second half,
and higher profits. Net capital expenditure rose to £5.8m (2003: £4.1m),
reflecting the continuing investments being made in double-decked trailers and
IT.

After £11.5m of aggregate acquisition costs, the Group's net debt position was
£5.6m, representing gearing of 11%.

DIVIDENDS

A final dividend per share of 12.05p (2003: 11.3p), up 7%, is proposed, payable
on 22 July 2004 to shareholders on the register at close of business on 2 July
2004. The ex-dividend date is 30 June 2004.

Together with the interim dividend per share of 5.95p (2002: 5.6p), proposed
dividends per share are 7% higher at 18.0p (2003: 16.9p), covered 1.36 x (2003:
1.25 x) by EPS before goodwill amortisation (1.32 x after goodwill
amortisation), in line with the Board's policy of increasing dividend cover
whilst also increasing dividends per share.

BUSINESS REVIEW


Parcel Services


Express

Express, which accounted for 66% (2003: 79%) of Group turnover, is the Group's
core UK business-to-business parcel service. It specialises in next-day
deliveries for those customers who need a reliable service backed up by
sophisticated information systems, thereby differentiating itself from high
volume/low price operators.

Express made good progress against subdued market conditions, improving its
market share to some 71/2% and increasing its annual turnover by 3% to £127.5m
(2003: £123.8m). The high quality of delivery performance continues to assist in
new business wins and reduction of customer churn. Express implemented a number
of pricing initiatives at the end of last year which have held up well during
the year, and also improved the quality of revenue by targeting users of premium
services and by discontinuing less profitable business.

Recent levels of new business wins have been among the Company's highest on
record and there are initial indications that the high-tech sector may be
experiencing a recovery. Express will maintain its focus on quality of revenue
in the current year, positioning itself further at the premium end of the
market, and will also look to introduce new services to existing customers. The
Directors therefore expect increased growth from Express in the current
financial year.

International

International, which accounted for 11% (2003: 12%) of Group turnover, is
responsible for all shipments coming into and leaving the UK and the Republic of
Ireland and is primarily a business-to-business service. A high proportion of
its activity derives from Business Post's agreement with FedEx, the world's
largest express transportation company, as its Global Service Participant in the
UK. Under this contract, Business Post is responsible for collecting and
delivering parcels for FedEx customers in those areas of the UK not directly
served by FedEx, and Business Post offers a full outward-bound air express
service utilising the worldwide FedEx delivery network. Additionally, as a
member of the Eurodis network, International handles road-based express
shipments within Europe.

International increased its turnover during the year by 17% to £21.2m (2003:
£18.2m), with an increased rate of growth in the second half. International Mail
continues to develop strongly, offering business customers an alternative to
Royal Mail for their overseas postal requirements. First launched in July 2002,
it increased its turnover to £1.6m from £0.3m. FedEx-related business also
showed good progress, reflecting the higher rates of growth in cross-border
shipments than the domestic market. The relationship remains strong, and FedEx
has recently awarded Business Post its international priority freight business,
extending the existing collection and delivery activity from small packages to
bulkier freight items.

The new Eurodis road arrangement, providing a new delivery network across Europe
with full on-line track and trace capabilities, was launched on schedule in
January 2004 and increased both outbound and inbound turnover in the fourth
quarter. Also in January 2004, International expanded its operations in the
Republic of Ireland through the appointment of Nightline, an independent eight
depot business, to carry out its deliveries. This provides a strong platform for
services into this important trading region.

HomeServe

HomeServe, which accounted for 9% (2003: 5%) of Group turnover, is the Group's
UK business-to-consumer parcel service, providing a high quality time-definite
service to residential addresses, with full proof of delivery and
track-and-trace facilities.

During the year, HomeServe increased its turnover by 129% to £17.4m (2003:
£7.6m). The continued success of HomeServe, following an underlying increase of
130% last year, reflects a rapidly growing market and a targeted sales approach,
concentrating on the upper end of the market where customers are looking for a
high quality time-definite delivery service.

HomeServe will continue to focus its sales efforts on major manufacturers and
retailers and will also continue to explore new services, offering improved
service and a wider range of drop-off points.

Network Services

Network Services is responsible for providing high quality collection and
delivery services to the business units within Parcel Services at a low unit
cost.

During the year, the level of on-time deliveries remained consistently high and
cost increases were kept well below inflationary levels. As was reported in the
Interim Announcement, the operation benefited from the continued introduction of
double-decked trailers, which enable more parcels to be shipped in one vehicle
movement, and from the introduction of a new breed of hand-held scanner. Capital
expenditure of £1.6m was incurred during the year on these two initiatives and a
further £2.1m will be spent in the current year as the new scanners are rolled
out across the network.

As the major employer in the Group, Network Services' principal challenges for
the current financial year are to enhance further the level of both employee and
customer satisfaction. Customers are already benefiting from the Group's new
Customer Relationship Management software, Discovery, and further action is
planned to enhance its use and give customers improved service when they contact
our depots.

Courier

Business Post's Courier activity, which comprises UK Today and BXTech, accounted
for 5% (2003: 3%) of Group turnover. During the year, Courier increased its
turnover by 133% to £10.5m (2003: £4.5m).

UK Today is the Group's UK nationwide same-day courier service. It operates out
of corporate and franchised depots, using dedicated delivery vehicles, and has
access to the National Express coach network linking 1,200 locations each day.
UK Today increased its turnover by 48%, with customer wins both nationally and
locally, but its gross profit margins fell as difficulty was experienced in
recruiting high quality owner drivers at the same rate as the growth of the
business. In the current year, growth rates for UK Today will be lower, but the
current focus on improved margins is expected to result in a strong increase in
profit.

BXTech, the Birmingham-based technical courier active in the technical, medical
and utilities sectors, continues to progress well. After a period of
consolidation in its first year in the Group, the emphasis in the current year
will be to expand the geographical spread of activities. The company's first
ever technical sales director has been appointed, with a focus on desktop
support services.

UK Pallets

UK Pallets provides a nationwide express palletised goods delivery service
through a partnership network with 70 independent haulage businesses throughout
the UK. Operating from a national hub at Lichfield (Staffordshire), UK Pallets
currently handles more than 4,000 pallets each night and is estimated to be the
UK's fourth largest pallet network company, in a market that is experiencing
annual growth of around 30%.

In the eight months since its acquisition, UK Pallets generated a turnover of
£14.4m, a substantial increase on the comparable period of the previous year and
representing 8% of Group turnover. In the period to 31 March 2004, operating
profits before goodwill amortisation totalled £1.1m.

A focus for the current financial year is the transfer of existing IT expertise
from Business Post's parcel businesses to benefit UK Pallets' customers and
partnership network. Additionally, following the receipt of planning permission
in January 2004, it is intended to double the size of its national hub by
September 2004 to enable it to handle daily volumes of up to 8,000 pallets.

UK Mail

On 10 February 2004, following an extended period of negotiation, UK Mail and
Royal Mail signed the first agreement of its kind in Europe, on mutually
satisfactory terms. This enables access to Royal Mail's downstream delivery
network for UK Mail's Business Class service, which offers two day mail delivery
with track-and-trace up to the point of handover to Royal Mail and flexibility
of collection for large mailers (initially, businesses mailing over 4,000 and,
typically, over 10,000 pre-sorted letters a day).

We were delighted to reach an amicable agreement with Royal Mail. The terms we
agreed were substantially similar to those that would have been determined by
Postcomm. Following successful trials during April, on 10 May 2004, UK Mail
commenced daily collections on behalf of a blue chip company, and it is also in
advanced stages of negotiation with other significant mailers.

PERSONNEL

In October 2003, Russell Hodgson, Group Operations Director, was promoted to
Group Managing Director, Parcel Services. Thereby, in addition to his
responsibilities for Network Services, Russell assumed responsibility for the
Express, International and HomeServe business units.

As announced on 30 March 2004, Richard Saville will retire as a non-executive
Director with effect from 31 May 2004, having been a non-executive Director
since October 1998. His replacement, who was appointed with effect from 1 April
2004, is Philip Stephens, aged 61, who was involved in corporate finance and
broking for more than 35 years until his retirement in 2002.
To all the Group employees and associates who are involved in the owned and
franchised depots, I extend my thanks on behalf of all shareholders.

CURRENT TRADING AND PROSPECTS

Trading since the year-end has been encouraging. Both volumes and yields in
April were ahead of the equivalent period last year and volumes so far in May
have advanced further.

The Board expects further good progress in the current year and remains very
confident about the Group's long term potential.

Peter Kane                                                         18 May 2004
Chairman



                      CONSOLIDATED PROFIT AND LOSS ACCOUNT

                        for the year ended 31 March 2004

                                     2004         2004   Unaudited     Audited
                                 Continuing   Acquired        2004        2003
                                 Operations   usinesses                    
                                      £m             £m        £m           £m

Turnover                            178.3         14.4       192.7       156.3

Cost of sales                      (137.8)       (11.8)     (149.6)     (122.1)
                                    _____        _____       _____       _____
Gross profit                         40.5          2.6        43.1        34.2

Administrative expenses             (22.6)        (1.8)      (24.4)      (18.6)
      ------------------------    ---------    ---------   ---------     -------

Operating profit before
goodwill amortisation                18.0          1.1        19.1        15.6

Goodwill amortisation                (0.1)        (0.3)       (0.4)          -
      ------------------------    ---------    ---------   ---------     -------

Operating profit                     17.9          0.8        18.7        15.6

Net interest receivable                                          -         0.5
                                                             _____       _____
Profit on ordinary activities
before taxation                                               18.7        16.1

Taxation                                                      (6.1)       (4.9)
                                                             _____       _____
Profit for the financial year                                 12.6        11.2

Dividends                                                     (9.6)       (9.0)
                                                             _____       _____
Retained profit transferred
to reserves                                                    3.0         2.2
                                                                   
                                                           =======     =======
                                       
Earnings per share - basic                                    23.8p       21.2p
                                                              _____       _____
                   - diluted                                  23.6p       21.2p
                                                             _____       _____
Dividends per share                                           18.0p       16.9p
                                                             _____       _____

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


                           CONSOLIDATED BALANCE SHEET
                                at 31 March 2004

                                                      Unaudited        Audited

                                                           2004           2003
                                                             £m             £m

Fixed assets

Intangible assets                                          10.8            1.7
Tangible assets                                            32.7           30.4
Investments                                                 0.1            0.1
                                                          _____          _____
                                                           43.6           32.2
                                                          _____          _____

Current assets

Trade and other debtors                                    37.0           28.9

Franchise debtors                                           5.2            6.0

Cash                                                        4.6            1.6
                                                          _____          _____

                                                           46.8           36.5


Creditors

Amounts falling due within one year
                                                                          
Overdraft                                                  (0.2)             -

Term loan                                                  (1.0)             -

Trade and other creditors                                 (29.4)         (21.9)
                                                          _____          _____


Net current assets                                         16.2           14.6
                                                          _____          _____

Total assets less current liabilities                      59.8           46.8


Creditors

Amounts falling due after more than one year

Term loan                                                  (9.0)             -


Provisions for liabilities and charges                     (1.6)          (1.0)
                                                          _____          _____

Net assets                                                 49.2           45.8
                                                          _____          _____
                                                                  

Capital and reserves

Called up share capital                                     5.3            5.3

Share premium account                                      10.3            9.9

Profit and loss account                                    33.6           30.6
                                                          _____          _____

Equity shareholders' funds                                 49.2           45.8
                                                          _____          _____
                                                                 





                        CONSOLIDATED CASH FLOW STATEMENT
                        for the year ended 31 March 2004

                                                    Unaudited       Audited

                                                  2004     2004   2003   2003
                                                    £m       £m     £m     £m

Operating profit                                           18.7          15.6

Depreciation and amortisation                               4.3           3.3
Decrease/(increase) in amounts due from
franchisees                                                 1.8          (0.5)
Increase in other debtors                                  (3.6)         (6.3)
Increase in creditors and provisions                        1.4           1.6
                                                           ____          ____
Net cash inflow from operating activities                  22.6          13.7

Returns on investments and servicing of finance

Interest received                                  0.4             0.5
Interest paid                                     (0.4)              -
                                                              
Issue costs of hedging instrument                 (0.2)              -
                                                  ____            ____
                                                           (0.2)          0.5

Tax paid                                                   (5.5)         (4.9)


Capital expenditure and financial investment


Purchase of fixed assets                          (5.9)           (4.3)

Proceeds from sale of fixed assets                 0.1             0.2

Acquisition of subsidiary                         (9.6)           (1.9)
                                                  ____            ____

                                                          (15.4)         (6.0)


Equity dividends paid                                      (9.1)         (8.6)
                                                           ____          ____


Net cash outflow before financing                          (7.6)         (5.3)


Financing


Term loan                                                  10.0             -

Issue of ordinary share capital                             0.4           0.2
                                                           ____          ____

Increase/(decrease) in cash                                 2.8          (5.1)
                                                           ____          ____
                                                  



NOTES

1.      The financial information set out above does not constitute the
Company's statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The statutory accounts of the Company for the year ended 31 March 2003
have been delivered to the Registrar of Companies. The auditors' report on those
accounts was unqualified and did not contain any statements under Section 237(2)
or (3) of the Companies Act 1985.

The financial information for the year ended 31 March 2004 is unaudited. This
information has been prepared using the same accounting policies as in the 31
March 2003 statutory accounts and, once finalised, the accounts will be
delivered to the Registrar of Companies following the Annual General Meeting on
13 July 2004.

2.      Basic earnings per share have been calculated by dividing the profit for
the financial year by the weighted average number of ordinary shares in issue
for the year ended 31 March 2004 of 53,155,846 (2003: 53,048,564). Diluted
earnings per share have been calculated by adjusting the weighted average number
of ordinary shares for the effect of the exercise of share options, increasing
the number of shares to 53,569,272 (2003: 53,115,478).




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