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Business Post Group (UKM)

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Wednesday 21 September, 2005

Business Post Group

Trading Statement

Business Post Group PLC
21 September 2005




                            BUSINESS POST GROUP PLC
                               
                                Trading Statement

The Board of Business Post announces that it now expects pre-tax profits for the
full year to 31 March 2006 to be substantially below last year's. This in part
reflects a reduced expectation of normal trading for Express, the UK
business-to-business parcel delivery service. The Board has also identified
additional costs, amounting to approximately £3m in the current year, for
supporting the franchise network, and has decided to make a £3.2m provision
against amounts owed by certain franchises relating to prior years. Excluding
the one-off provision, the year-on-year reduction in pre-tax profit to 31 March
2006 is expected to be around 10%.

Normal Trading

The reduced expectations of profit from normal trading reflect a sharp decline
in the rate of growth of volumes in Express in response to deteriorating
economic conditions. Whilst daily volumes at the start of the year were 8% above
those a year earlier, market conditions have progressively deteriorated to the
point where daily volumes in August were below those last year. The rate of
decline appears to have slowed in September, and Express revenue for the first
half is now expected to be 3% above last year.

The other components of Parcel Services (HomeServe and International) have
continued their double-digit growth in the five months to 31 August 2005.
HomeServe, Business Post's UK business-to-consumer parcel delivery service,
increased its revenue by 42%, whilst International, Business Post's cross-border
delivery service, increased its revenue by 11%, albeit this was below
management's expectations. Overall, for the half year to 30 September 2005,
Parcel Services is expected to increase its revenue by approximately 9%.

To prepare for the broadening of capability associated with the Group's
expanding range of services, in anticipation of higher volume growth and to
maintain record levels of customer service, the Group made investments which
have increased the cost base in Network Services this year. In addition, the
Group incurred a number of cost increases. Consequently, the decline in volume
growth has had a disproportionate effect on profit.

To rectify this situation, since July the Group has implemented a number of
initiatives on three fronts - costs, prices and volumes. Redundancies have been
made in support areas, and reductions in direct operating cost have been made.
Prices have been selectively raised, and the sales force is being restructured
and re-energised under new management to improve further market share.

Specialist Distribution Services (which comprises UK Pallets and Courier) has
continued to trade well; revenue growth in the first five months was 14% and
profit was well ahead of last year's. UK Pallets, the Group's palletised goods
delivery service, increased its revenue by 16%. The two courier businesses, UK
Today and Business Post Technical Couriers, increased their aggregate revenue by
12%.

UK Mail has continued to make excellent progress. Revenue for the five months to
31 August 2005 totalled £11.5m and profit is tracking ahead of expectations. UK
Mail remains the leading alternative to Royal Mail in the business mail market.
It continues to make important client wins, is trialling with some very
substantial organisations, and awaits the result of several significant new
business pitches. Its unsorted mail service, which started in Swindon in April
2005, has made a good start and will shortly operate out of four depots.

Franchise Network

Following the appointment of a new Franchise Director, the Group has undertaken
a detailed review of its franchise operations. With the increasing complexity of
the Group's activities, coupled with the deteriorating economic background, this
review has highlighted the need to provide an increased level of support for
certain franchises. As a result, the Board has decided to restructure certain of
the existing franchising arrangements by diverting existing central sales
resource to service the franchise network and incorporating additional
commission-sharing incentive arrangements so as to put franchises on a more
profitable footing. The Board estimates the cost of this additional support to
amount to approximately £3m in the current year, and has decided to make a
provision of £3.2m against amounts owed by certain franchises relating to prior
years.


Notes for Editors:

Business Post has a parcel network of 59 depots, of which 25 are owned and 34
are franchised.


Enquiries:

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

Bankside Consultants Limited
Charles Ponsonby                                                 020-7367 8851


Conference Call:

Paul Carvell and Peter Fitzwilliam will conduct a conference call for analysts
and investors at 08.30 today, Wednesday 21 September 2005, which can be accessed
by dialling 020-7162 0080, citing pass code 676586 and quoting Business Post
Group. The call will be recorded and available for seven days on 020-7031 4064
via pass code 676586.



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