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Business Post Group (UKM)

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Monday 14 November, 2005

Business Post Group

Interim Results

Business Post Group PLC
14 November 2005


         BUSINESS POST GROUP PLC - INTERIM RESULTS AND CURRENT TRADING

Business Post announces results for the half year ended 30 September 2005 in
line with the trading statement of 21 September 2005, which highlighted a
below-expectations performance by Express and the franchise network, together
with successful trading in the rest of the Group. This interim announcement is
being made today, earlier than planned, in the light of a revision in the
Board's expectations of the outcome for the full year. With regard to the half
year:

   • Turnover increased by 21% to £133.0m.


   • Profit before tax and exceptional item totalled £6.2m (2004: £8.6m),
    impacted by the difficult economic conditions. The reported pre-tax profit
    was £3.0m (2004: £8.6m).


   • Basic earnings per share before exceptional item totalled 8.5p (2004:
    11.0p), or 4.3p (2004: 11.0p), unadjusted.


   • Parcel Services (comprising Express, International and HomeServe)
    increased revenue by 8.6% to £97.7m, representing 73% of the Group total,
    but experienced mixed fortunes in a market that was among the most
    challenging in the Group's recent history. Express, the UK B-2-B business,
    found conditions increasingly difficult, but HomeServe, the UK B-2-C
    business, increased its revenue by almost 40% and International increased
    its revenue by 12%.


   • Specialist Distribution Services (comprising UK Pallets and Courier)
    made strong progress, increasing revenue by nearly 17% to £20.4m,
    representing 15% of the Group total, and more than doubling its operating
    profit to £1.5m.


   • UK Mail made excellent progress, increasing revenue almost six-fold, to
    £14.6m, representing 11% (2004: 2%) of the Group total. In line with the
    ahead-of-schedule market penetration, currently estimated at approximately
    2%, an operating profit of £1.1m (2004: loss of £0.5m) was achieved.


   • The Board remains confident of the Group's potential and, accordingly,
    has declared an unchanged interim dividend per share of 6.4p.


Peter Kane, Chairman, stated: 'Since 21 September 2005, market conditions within
Parcel Services have deteriorated, to the point where daily volumes in November
are marginally below last year's and below our previous expectations. In
addition, Express prices remain under pressure.

In the absence of an improvement in market conditions, second half revenue in
Parcel Services is now expected to be lower than last year's. Although trading
in Specialist Distribution Services and Mail Services is expected to remain
strong and the Group's annual results have a historic second-half bias, the
Board now believes that the profit before tax and exceptional items for the year
will be around 20% below current market expectations.'


Presentation:
This morning, from 9:30am to 10:30am, an analyst meeting will be held at Regus,
CityPoint, 1 Ropemaker Street, London EC2Y 9HT. This replaces the presentation 
orginally planned for Tuesday 15 November.

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

Bankside Consultants Limited
Charles Ponsonby                                                 020-7367 8851
                                                 charles.ponsonby@bankside.com




                              CHAIRMAN'S STATEMENT

In the six months to 30 September 2005, good progress was made in both Mail
Services and Specialist Distribution Services, but difficult economic conditions
impacted Parcel Services, primarily Express and our franchise network. This was
signalled in the Trading Statement of 21 September 2005 in which we indicated
that the Group's results for both the full year and half year would be below
expectations. The Board also identified in that announcement additional costs,
amounting to approximately £3m in the current year, for supporting the franchise
network and decided to make a £3.2m exceptional provision against amounts owed
by certain franchises relating to prior years.

FINANCIAL REVIEW

The accompanying interim consolidated financial statements for the half year
ended 30 September 2005 are presented in accordance with International Financial
Reporting Standards ('IFRS'). Since this is the first period in respect of which
the Company has reported under IFRS, comparative figures for the half year to 30
September 2004, and for the year to 31 March 2005, have been restated.

Turnover increased by 21% to £133.0m (2004: £109.9m), with UK Mail, which
commenced operations on 10 May 2004, contributing just over one-half of the
£23.1m increase. Without UK Mail, the turnover increase would have been 10%.

Gross profit reduced to £22.1m (2004: £22.8m), reflecting a reduced gross profit
margin of 16.6% (2004: 20.7%) after £1.5m of additional franchise support costs
Administrative expenses before the exceptional item of £3.2m increased by 12% to
£15.8m (2004: £14.1m). After unchanged interest payable of £0.1m, profit before
tax was £3.0m (2004: £8.6m). Adjusted pre-tax profits, before the exceptional
item, totalled £6.2m (2004: £8.6m) after charging £0.5m (2004: £0.5m) of
share-related costs under IFRS.

The effective tax rate of 23.3% (2004: 31.4%) reflects credits relating to the
exercise of share options in the current and prior years. Excluding
share-related elements, the effective tax rate was 30.2% (2004:30.8%).

Adjusted to exclude the exceptional item, basic earnings per share totalled 8.5p
(2004: 11.0p). The reported basic earnings per share was 4.3p (2004: 11.0p).

Period end net debt of £12.2m compared with £10.1m last year and £5.6m at 31
March 2005, borrowings traditionally being lower at the year end. Capital
expenditure in the period totalled £5.7m (2004: £4.5m), of which £1.3m related
to UK Mail's expansion into the unsorted mail market. With shareholders' funds
totalling £58.1m (2004: £57.3m), gearing increased to 21% (2004: 18%).

DIVIDEND

The Board remains confident of the Group's potential and, accordingly, has
declared an unchanged interim dividend of 6.4p per share. The dividend will be
paid on 3 January 2006 to shareholders on the register on 9 December 2005, with
an ex-dividend date of 7 December 2005.



BUSINESS REVIEW

Parcel Services

Parcel Services comprises the Group's overnight business-to-business (Express),
business-to-consumer (HomeServe) and cross-border (International) parcel
delivery activities, utilising the shared infrastructure of owned and franchised
parcel depots (Network Services).

During the period, Parcel Services increased revenue by 8.6% to £97.7m,
representing 73% of the Group total, but experienced mixed fortunes in a market
which was among the most challenging in the Group's recent history.

Whilst Express started the year well, with daily volumes 8% ahead of the
previous year, market conditions progressively deteriorated to the point where
daily volumes in September were 3.5% below those last year. As a consequence,
Express increased its revenue by only 2.9% to £67.5m; adjusting for the two
additional working days in the period, the increase was 1.3%.

Ahead of contract re-tendering with FedEx next year, International increased its
revenue by 12% to £15.2m, reflecting both the traditionally higher rates of
growth within the cross-border market and also the Group's success in developing
further its road-based services to Continental Europe and its international mail
service. HomeServe increased its revenue by almost 40% to £15.0m, continuing the
strong growth achieved in recent years. A substantial contributor to the
increase in revenue was again the delivery of computers and related equipment,
with an increasing emphasis on evening deliveries.

UK collections and deliveries within Parcel Services are effected by Network
Services through a network of some 60 depots, utilising both owner-drivers and
franchising to achieve flexibility within its cost base. Whilst roughly 60% of
Network Services' costs are variable, the remainder are fixed and, as a
consequence, the sharp decline in volume growth within Express resulted in a
significant reduction in profits. This impact was accentuated by the recent cost
increases in Network Services resulting from the Group's enhancement of its
capabilities to accommodate both a significant increase in volumes and also
greater complexity of services. As a result, Parcel Services' operating profit,
before the exceptional item, reduced to £10.0m (2004: £15.0m).

Throughout this challenging period, Business Post believes that it has been able
to maintain its market share. In response to the impact of market conditions,
and as reported in the Trading Statement of 21 September 2005, a number of
initiatives have been implemented on three fronts - costs, prices and volumes.
Redundancies have been made in support areas, direct operating costs have been
reduced and prices have been selectively raised. The sales force has been
restructured and re-energised under new management to improve further market
share. These initiatives have had little impact on the first half's results but
are expected to have a positive impact on profit margins in the second half.

As was also reported in the Trading Statement, following the appointment of a
new Franchise Director, the Group has undertaken a detailed review of its
franchise operations, which currently comprise 33 locations. With the increasing
complexity of the Group's activities, coupled with the deteriorating economic
background, this review highlighted the need to provide an increased level of
support for certain franchises. The cost of this additional support in the
current year is estimated at approximately £3m, of which £1.5m has been charged
against direct costs in the period. In addition, the Board decided to make a
provision of £3.2m against amounts owed by certain franchises relating to prior
years. This has been charged against administrative expenses as an exceptional
item. After these franchise-related costs, Parcel Services' operating profits
were £6.8m (2004: £15.0m).

The Board's review has identified a number of areas in which the financial
health of the franchise network can be improved and the implementation of a
series of initiatives in the second half of the year is expected to limit the
level of support required in future years.


Specialist Distribution Services

Specialist Distribution Services comprises the Group's overnight palletised
goods delivery (UK Pallets) and same-day courier (Courier) activities. During
the period, Specialist Distribution Services made strong progress, increasing
revenue by nearly 17% to £20.4m, representing 15% of the Group total, and more
than doubling its operating profits to £1.5m (2004: £0.7m).

Following the difficult economic conditions experienced in the second half of
last year, it is particularly pleasing to report an increase in UK Pallets'
revenue of 20% to £13.6m, reflecting the benefits of expanded sales activity.
With a substantial increase in profit in the period and prospects looking good,
UK Pallets is on track for the significantly improved performance predicted in
May's preliminary announcement. Business Post's Courier activity also made good
progress. Revenue increased by 10% to £6.8m and overall profit margins increased
substantially.


Mail Services

UK Mail, as the first mover in the deregulated UK market for business mail,
offers a nationwide two day mail delivery service, operating in both the
business-to-consumer and business-to-business markets and utilising the
collection and delivery activities of Network Services. In the period, UK Mail
made excellent progress, increasing revenue almost six-fold to £14.6m,
representing 11% (2004: 2%) of the Group total.

As well as securing a number of sizeable new business wins with customers
sending pre-sorted mail, the launch in April of UK Mail's service for unsorted
mail has been well received. Market penetration has, to date, been ahead of the
Board's expectations, and market share in terms of volumes is currently
estimated at approximately 2%, maintaining Business Post as the leading
alternative to Royal Mail in the business mail market.

In line with the ahead-of-schedule market penetration, operating profits of
£1.1m (2004: loss of £0.5m) were achieved in the period. With further business
wins since the period end, some important trials in progress and the result of
several tenders awaited, prospects for the second half and beyond remain very
good.


CURRENT TRADING AND PROSPECTS

Since 21 September 2005, market conditions within Parcel Services have
deteriorated, to the point where daily volumes in November are marginally below
last year's and below our previous expectations. This is primarily due to lower
Express volumes than last year and a decline in volumes for a major customer in
HomeServe. In addition, Express prices remain under pressure. Trading in the
other business segments has remained strong.

The Board was already tackling the issues of costs, prices and volumes in Parcel
Services and is reviewing these plans in the light of current market conditions.
As previously reported, the Board is also implementing certain profit
improvement initiatives within the franchise network and we continue to expect
these to limit the additional support required in the current year to
approximately £3m.

In the absence of an improvement in market conditions, second half revenue in
Parcel Services is now expected to be lower than last year's. Although trading
in Specialist Distribution Services and Mail Services is expected to remain
strong and the Group's annual results have a historic second-half bias, the
Board now believes that the profit before tax and exceptional items for the year
will be around 20% below current market expectations.

Peter Kane                                                      14 November 2005
Chairman



                         CONSOLIDATED INCOME STATEMENT
                   for the six months ended 30 September 2005

                                             ---------       ---------    --------
                                Note       Unaudited       Unaudited   Unaudited
                                       Six months to   Six months to     Year to
                                        30 September    30 September    31 March
                                                2005            2004        2005
                                                  £m              £m          £m
                                             ---------       ---------    --------

Revenue                            2           133.0           109.9       233.3

Cost of sales                                 (110.9)          (87.1)     (184.7)
                                             ---------       ---------    --------

Gross profit                                    22.1            22.8        48.6

Administrative expenses                        (19.0)          (14.1)      (28.7)
----------------------          ------       ---------       ---------    --------

Operating profit before
exceptional item                                 6.3             8.7        19.9

Exceptional administrative
expenses                           3            (3.2)              -           -
----------------------          ------       ---------       ---------    --------

Operating profit                   2             3.1             8.7        19.9

Net interest payable                            (0.1)           (0.1)       (0.3)
                                             ---------       ---------    --------
Profit before taxation                           3.0             8.6        19.6

Tax on profit on ordinary
activities                                      (0.7)           (2.7)       (5.9)
                                             ---------       ---------    --------
Profit for the period                            2.3             5.9        13.7
                                             ---------       ---------    --------

Earnings per share - basic         4             4.3p           11.0p       25.6p
                                             ---------       ---------    --------

Earnings per share - diluted       4             4.2p           10.9p       25.2p
                                             ---------       ---------    --------

Earnings per share - adjusted *    4             8.5p           11.0p       25.6p
                                             ---------       ---------    --------

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

* Adjusted earnings per share have been calculated excluding the exceptional item
and the associated tax impact


                           CONSOLIDATED BALANCE SHEET
                              at 30 September 2005

----------------------              ----------          ---------       --------
                                   Unaudited          Unaudited      Unaudited
                                30 September       30 September       31 March
                                        2005               2004           2005
                                          £m                 £m             £m
----------------------              ----------          ---------       --------
Assets
Non-current assets
Goodwill                                 9.5                9.4            9.5
Intangible assets                        0.8                0.5            0.6
Investment properties                    1.1                1.2            1.1
Property, plant and equipment           36.1               33.4           33.1
Trade and other receivables              0.5                1.1            3.3
Deferred tax                             0.4                1.1            1.8
                                    ----------          ---------       --------
                                        48.4               46.7           49.4
                                    ----------          ---------       --------

Current assets
Inventories                              0.2                0.1            0.2
Trade and other receivables             51.6               48.7           47.2
Cash and cash equivalents                0.5                0.9            3.4
                                    ----------          ---------       --------
                                        52.3               49.7           50.8
                                    ----------          ---------       --------
Liabilities
Current liabilities
Borrowings                              (5.7)              (3.0)          (1.0)
Trade and other payables               (27.0)             (23.3)         (23.8)
Current tax                             (1.0)              (3.1)          (2.8)
Provisions                              (0.1)              (0.1)          (0.1)
                                    ----------          ---------       --------
                                       (33.8)             (29.5)         (27.7)
                                    ----------          ---------       --------
                                    ----------          ---------       --------
Net current assets                      18.5               20.2           23.1
                                    ----------          ---------       --------

Non-current liabilities
Borrowings                              (7.0)              (8.0)          (8.0)
Deferred tax                            (1.5)              (1.3)          (1.4)
Provisions                              (0.3)              (0.3)          (0.4)
                                    ----------          ---------       --------
                                        (8.8)              (9.6)          (9.8)
                                    ----------          ---------       --------
                                    ----------          ---------       --------
Net assets                              58.1               57.3           62.7
                                    ----------          ---------       --------

Shareholders' funds
Share capital                            5.4                5.4            5.4
Share premium                           14.5               11.0           12.2
Retained earnings                       38.2               40.9           45.1
                                    ----------          ---------       --------
                                        58.1               57.3           62.7
                                    ----------          ---------       --------

                        CONSOLIDATED CASH FLOW STATEMENT
                   for the six months ended 30 September 2005
---------------------------               -----------      ----------     -------
                                          Unaudited       Unaudited   Unaudited
                                      Six months to   Six months to     Year to
                                       30 September    30 September    31 March
                                               2005            2004        2005
                                                 £m              £m          £m
---------------------------               -----------      ----------     -------

Operating profit                                3.1             8.7        19.9
Exceptional item                                3.2               -           -
Depreciation and amortisation                   2.5             2.1         4.5
Increase in working capital                    (1.7)           (3.0)       (3.8)
Interest paid                                  (0.1)           (0.1)       (0.3)
Tax paid                                       (2.6)           (2.5)       (6.1)
Other non cash items                            0.6             0.5         0.9
                                         ------------      ----------     -------
Net cash inflow from operating
activities                                      5.0             5.7        15.1
                                         ------------      ----------     -------

Acquisitions                                      -               -         0.6
Capital expenditure                            (5.7)           (4.5)       (6.6)
                                         ------------      ----------     -------
Net cash used in investing activities          (5.7)           (4.5)       (6.0)
                                         ------------      ----------     -------

Equity dividends paid                          (6.9)           (6.4)       (9.9)
Issue of share capital                          2.3             0.7         2.0
Purchase of treasury shares                    (1.3)              -        (1.2)
Repayment of term loan                         (1.0)           (1.0)       (1.0)
                                         ------------      ----------     -------
Net cash used in financing activities          (6.9)           (6.7)      (10.1)
                                         ------------      ----------     -------

Net decrease in cash and cash
equivalents                                    (7.6)           (5.5)       (1.0)

Cash and cash equivalents at
beginning of period                             3.4             4.4         4.4
                                         ------------      ----------     -------
Cash and cash equivalents at end of
period                                         (4.2)           (1.1)       (3.4)
                                         ------------      ----------     -------

           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                   for the six months ended 30 September 2005
---------------------------               ---------        ---------   ---------
                                        Unaudited        Unaudited   Unaudited
                                    Six months to    Six months to     Year to
                                     30 September     30 September    31 March
                                             2005             2004        2005
                                               £m               £m          £m
---------------------------               ---------        ---------   ---------

Opening shareholders' funds                  62.7             56.0        56.0
Effect of adopting IAS 39                    (0.1)               -           -
                                          ---------        ---------   ---------
Opening shareholders' funds under
IFRS                                         62.6             56.0        56.0
Dividends                                    (6.9)            (6.4)       (9.8)
Purchase of treasury shares                  (1.3)               -        (1.2)
Employees' share option scheme:
- value of employee services                 (0.9)             1.0         2.0
- proceeds from shares issued                 2.3              0.8         2.0
Profit for the period                         2.3              5.9        13.7
                                          ---------        ---------   ---------
Closing shareholders' funds                  58.1             57.3        62.7
                                          ---------        ---------   ---------


                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 1. General Information

The interim financial statements for the six months to 30 September 2005 have
been prepared using the accounting policies the Group expects to adopt in its
2006 Annual Report. These accounting policies are based on the EU-adopted
International Financial Reporting Standards (IFRS) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations that the Group
expects to be applicable at that time. The IFRS and IFRIC interpretations that
will be applicable at 31 March 2006, including those that will be applicable on
an optional basis, are not known with certainty at the time of preparing these
interim financial statements.

These interim financial statements have been prepared on a modified historical
cost basis. These are the first set of interim statements since adopting IFRS
and therefore reflect the exemptions provided under the first time adoption
rules of IFRS 1.

The Group's consolidated financial statements were prepared in accordance with
UK GAAP until 31 March 2005. The Group has applied the same accounting policies
and methods of computation in these interim financial statements as those
published by the Group within the report 'Transition to International Financial
Reporting Standards' published on 14 November 2005, where the effects of changes
in accounting policies arising as a result of the adoption of IFRS are set out.

The financial information contained in this interim statement does not
constitute accounts as defined by Section 240 of the Companies Act 1985. The
interim report has neither been audited nor reviewed by the Group's auditors.

The interim report will be circulated to all shareholders and copies are
available on the Group's website or from the Company's head office: Express
House, 464 Berkshire Avenue, Slough, SL1 4PL.

The statutory accounts for 2005, which were prepared under UK GAAP, have been
delivered to the Registrar of Companies. The auditors' opinion on those accounts
was unqualified and did not contain a statement under section 237 of the
Companies Act 1985.


 2. Segmental analysis
---------------------                      ---------       ---------   ---------
                                         Unaudited       Unaudited   Unaudited
                                     Six months to   Six months to     Year to
                                      30 September    30 September    31 March
                                              2005            2004        2005
                                                £m              £m          £m
---------------------                      ---------       ---------   ---------

Revenue
Parcel Services                               97.7            90.0       187.0
Specialist Distribution
Services                                      20.4            17.5        35.3
Mail Services                                 14.6             2.1        10.2
Central                                        0.3             0.3         0.8
                                           ---------       ---------   ---------
                                             133.0           109.9       233.3
                                           ---------       ---------   ---------

Operating profit
Parcel Services - before exceptional          10.0            15.0        30.3
                items
                - exceptional item            (3.2)              -           -
                                           ---------       ---------   ---------
                                               6.8            15.0        30.3
Specialist Distribution
Services                                       1.5             0.7         1.9
Mail Services                                  1.1            (0.5)        0.0
Central                                       (6.3)           (6.5)      (12.3)
                                           ---------       ---------   ---------
                                               3.1             8.7        19.9
                                           ---------       ---------   ---------


 3. Exceptional item

The exceptional item of £3.2m represents a provision against amounts owed by
certain franchises relating to prior years.

 4. Earnings per ordinary share

Earnings per share have been calculated by dividing the profit for the period
after taxation by 53,883,375 for the six months ended 30 September 2005, by
53,436,798 for the six months ended 30 September 2004 and by 53,586,502 for the
year ended 31 March 2005, representing the weighted average number of shares
issued 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 and
LTIP awards. Adjustments of 1,028,066 for the six months ended 30 September
2005, 850,652 for the six months ended 30 September 2004 and 888,909 for the
year ended 31 March 2005 have been made, thereby increasing the number of shares
to 54,911,441, 54,287,450, and 54,475,411 respectively.

Adjusted earnings per share have been calculated excluding the exceptional item
and the associated tax impact.



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