14th Nov 2006 07:02
Business Post Group PLC14 November 2006 14 November 2006 BUSINESS POST GROUP PLC INTERIM RESULTS 2006/07 6 months ended 30 September 2006 Highlights • Group revenue up 15% to £153m (2005: £133m) • UK Mail revenue up 157% to £37m (2005: £15m) • Operating profit (before exceptional items) £3.5m (2005: £6.6m)* • Profit before tax (before exceptional items) £3.2m (2005: £6.5m)* • Exceptional charges of £1.5m (2005: £3.2m) • Profit before tax £1.7m (2005: £3.3m)* • Interim dividend 6.4p per share (2005: 6.4p) *as restated for prior year adjustments. Guy Buswell, Chief Executive said: "Good progress has been made in addressing the operational issues in the ParcelServices business which undermined our performance last year, and UK Mail hascontinued to grow strongly, reinforcing its position as the leading competitorto Royal Mail. We have recently undertaken a review to establish the medium term strategicagenda for the Group, which is to develop Business Post into the UK's leadingindependent integrated postal group. We are creating a robust platform fromwhich this can be achieved. Current trade remains in line with our expectations and the Board expects a muchimproved second half." For further information, please contact: Business Post Group plcGuy Buswell (Group Chief Executive) 0121 335 1111Steven Glew (Group Finance Director) 01753 706 070 Hogarth PartnershipJohn Olsen 020 7357 9477Fiona NobletSarah Richardson Introduction As expected, the reported financial performance for the half is below last year.The first half has, however, been a period of encouraging progress bothoperationally and in terms of the Group's underlying financial performance. We are continuing to address the operational issues in the Parcel Servicesbusiness which undermined our performance in the previous year. Good progresshas been made and, whilst the interim results reflect the continuing impact ofthose issues in the early part of the year, we believe that they will be firmlybehind us by the year end. At the same time, UK Mail continued to grow strongly, reinforcing its positionas the leading competitor to Royal Mail. In addition, the Board has undertaken a comprehensive review to establish themedium term strategic agenda for the Group. Our goal is to develop Business Postinto the UK's leading independent integrated postal group and to fully exploitthe growth dynamics of the markets in which we operate. OPERATIONAL PERFORMANCE Following the appointment of Guy Buswell as Chief Executive in December 2005 theimmediate priority was to stabilise the business, particularly within ParcelServices. The key requirements were to: • improve customer service; • improve network operational efficiency; and • address the under-performing franchise operations. Customer Service Our focus on the operations of our business has resulted in customer servicelevels remaining consistently high. Delivery performance improved significantlyearly in the year and has remained above 98%, which is amongst the highest inour industry. Network Operational efficiency The main focus has been on our linehaul operations - the bulk overnight movementof parcels. Through a review of capacity utilisation and the effectivemanagement of operations we have achieved a good reduction in average linehaulcost per consignment. Franchise Operations We continue to work with the remaining 18 successful franchises to ensure theirbusinesses continue to trade profitably and add value to our network. We have made further progress in improving the former franchise network nowunder Corporate ownership. We have transferred 14 to corporate ownership sincethe beginning of the calendar year. Overall, these operations will make asignificant trading loss in the current year. We have reduced the run-rate ofthese losses and expect to eliminate them by the start of the new financialyear. Results The interim results can be summarised as follows: 6 months to 30 September 2006 2005* Inc/(Dec) £m £m %Group revenue 153.0 133.0 15.0 ======= ======= ======== Operating profit (before exceptional items) 3.5 6.6 (47.0)Exceptional items (1.5) (3.2) ------- ------- --------Operating profit 2.0 3.4 (41.2)Net interest payable (0.3) (0.1) ------- ------- --------Profit before tax 1.7 3.3 (48.5)Tax (0.5) (0.8) ------- ------- --------Profit after tax 1.2 2.5 (52.0) ======= ======= ======== Basic earnings per share 2.2p 4.7p Revenue and operating profit (before exceptional items) are analysed as follows: Revenue Operating Profit (before exceptional items) 2006 2005 Inc/ 2006 £m 2005* Inc/ £m £m (Dec) £m (Dec) % % Parcel services 94.4 98.0 (3.7) 6.6 10.1 (34.7)Mail services 37.5 14.6 156.8 2.6 1.1 136.4Specialist services 21.1 20.4 3.4 1.2 1.5 (20.0) ------- ------ ------ ------- ------- ------- Total 153.0 133.0 15.0 10.4 12.7 (18.1) ======= ====== ====== Central costs (6.9) (6.1) (13.1) ------- ------- -------Total operatingprofit (beforeexceptionalitems) 3.5 6.6 (47.0) ======= ======= ====== * restated Parcel Services Revenues in Parcel Services comprising the Group's business-to-business,business-to-consumer, and international parcel delivery services, were down 3.7%to £94.4m (2005: £98.0m). (When adjusted for the lower number of working dayscompared to last year, comparable revenues are down 1.1%.) Parcel volumes(measured as consignments per working day) were up 4% over the period. International parcel revenues continued to show good levels of growth. InSeptember 2006 we commenced a major new contract with FedEx Express, whichextends our strategic relationship with them for a further five years on similarcommercial terms. Parcel operating profits were down 34.7% to £6.6m (2005: £10.1m), reflecting thecontinuing costs of addressing the underperforming franchise operations. Nine franchises have been brought back into corporate ownership in the period,bringing the total transferred since the beginning of the calendar year to 14.As previously advised, these losses will impact our operating profit by some £3mfor the current financial year, of which £1.9m has been incurred in the firsthalf. In addition, as previously advised, we have incurred £0.8m in the periodon the transfer of franchises to corporate ownership which has been charged tooperating profit. Whilst underlying margins within Parcel Services remained acceptable, we believethere is scope to further enhance these over time. UK Mail Revenues in UK Mail (the leading competitor to Royal Mail) showed continuedstrong growth, rising 157% to £37.5m (2005: £14.6m) and reflecting our furthersuccess in attracting new business, particularly in the financial servicesindustry. Operating profits were up 136% to £2.6m (2005: £1.1m). Since inception of our mail business in May 2004, we have processed over onebillion mail items and in October alone we handled over 88 million mail items.We have invested a further £2.1m in the installation of new sorting machines tocreate capacity for future growth. Specialist Services Overall revenues in Specialist Services, comprising our nationwide palletisedgoods delivery service (UK Pallets) and same-day courier activities (UK Today),were up 3.4% to £21.1m (2005: £20.4m). UK Pallets revenues were up 8.8% to £14.8m (2005: £13.6m), driven byimprovements in the quality of the pallet network, our management and ourmarketing activities. We have incurred one-off costs of some £0.2m as we havemanaged the changes to our pallet network. These costs are a key factor in theoperating profit for this business being down 25% on last year to £0.6m (2005:£0.8m). UK Today revenues were down 7.4% to £6.3m (2005: £6.8m), and operating profitwas down 14.3% to £0.6m (2005: £0.7m). The result reflects the discontinuationof two major accounts at the end of last year, as we acted to improve thequality of the overall customer base. We expect this temporary downturn toreverse as we rebuild the revenues, in particular through leveragingopportunities amongst customers elsewhere in the Group. Exceptional item The exceptional item of £1.5m relates to outstanding franchise debt, aspreviously advised. During the year ended 31 March 2006 a provision was made against outstandingfranchise debt. Recoverability of the amounts due from franchises, particularlythose poorly performing franchises being brought back into Corporate ownership,has been less than anticipated resulting in the need to provide this furtheramount against the franchise debt. Interest Net interest payable has increased to £0.3m (2005: £0.1m). This increase isprincipally due to a reduction in loan interest recoverable from franchisees. Cash Flow and Balance Sheet The Group had a net cash outflow of £0.7m in the period, leading to netborrowings at the end of the half year of £9.9m (2005: £12.2m). Cash inflow fromoperating activities totalled £11m, including £4.7m of cash released fromworking capital. Capital expenditure for the period was £5.5m (2005: £5.7m) ofwhich the cost of mail sortation machines was £2.1m. Dividend The Interim Dividend has been held at 6.4p (2005: 6.4p). The Interim Dividendwill be paid on 15 January 2007 to shareholders registered on 15 December 2006with an ex-dividend date of 13 December 2006. Prior Year Adjustment As previously advised, a review of our balance sheet at 31 March 2006 hasidentified a number of items relating to prior years. A prior year adjustment of£1.2m (£1.5m before tax) has therefore been made to the brought-forward balancesheet at 31 March 2006. STRATEGIC AGENDA Whilst we continued to focus on existing performance improvement initiatives theBoard has also undertaken a comprehensive review to establish the medium termstrategic agenda for the Group. Our goal is to develop Business Post into the 'UK's leading integrated postalgroup'. In recent times, Business Post has evolved as a series of independentbusinesses, with separate management and customer relationship management. Ouranalysis has shown that a significantly more integrated approach will enhancethe effectiveness and competitiveness of our services and will allow us to makethe most of the business development opportunities that exist within the Group'soverall customer base. Against this background, we have identified four key elements to our strategicagenda:- • An integrated management approach, particularly in customer relationship management - to fully leverage the competitive advantage created by our integrated physical infrastructure, and the growth opportunities within our group-wide customer base. • The further customer orientation of our Parcel Services business - continually adapting to address the changing requirements of the market, in the fast-growing home delivery segment in particular. • Building further on our leading position in the deregulating mail industry - through customer focus, product innovation, technology leadership and successful supplier relationships. • The exploitation of new opportunities in specialist services - building on the capabilities within our existing niche offerings, introducing new services, and leveraging the wider customer relationships within the Group. SUMMARY AND OUTLOOK Through our management actions across the Group, our continued focus on thegrowth opportunities in our markets and on the changing needs of our customers,we are creating a robust platform from which our strategic ambitions can beachieved. Current trading remains in line with our expectations, and the Board expects amuch improved second half. CONSOLIDATED INCOME STATEMENT for the six months ended 30 September 2006 ------ --------- --------- --------- Note Unaudited Unaudited Unaudited Six months to (as restated) (as restated) 30 September Six months to Year to 2006 30 September 31 March £m 2005 2006 £m £m ------ --------- --------- --------- Revenue 2 153.0 133.0 278.2 Cost of sales (130.2) (110.6) (231.4) --------- --------- --------- Gross profit 22.8 22.4 46.8 Administrative expenses (20.8) (19.0) (41.7) ------ --------- --------- --------- Operating profit beforeexceptional items 3.5 6.6 11.8 Exceptional items 3 (1.5) (3.2) (6.7) ------ --------- --------- --------- Operating profit 2 2.0 3.4 5.1 Interest payable (0.4) (0.3) (0.8) Interest receivable 0.1 0.2 0.4 --------- --------- ---------Profit before taxation 1.7 3.3 4.7 Taxation (0.5) (0.8) (1.3) --------- --------- ---------Profit for the period 1.2 2.5 3.4 ========= ========= ========= Earnings per share - basic 4 2.2p 4.7p 6.4p ========= ========= ========= Earnings per share - diluted 4 2.2p 4.6p 6.3p ========= ========= ========= CONSOLIDATED BALANCE SHEET at 30 September 2006 ---------- ---------- ---------- Unaudited Unaudited Unaudited 30 September (as restated) (as restated) 2006 30 September 31 March £m 2005 2006 £m £m ---------- ---------- ----------AssetsNon-current assetsGoodwill 9.5 9.5 9.5Intangible assets 1.2 0.8 0.7Investment properties 1.1 1.1 1.1Property, plant and equipment 37.6 36.0 35.2Trade and other receivables - 0.5 0.4Deferred tax assets 0.1 0.4 0.1 ---------- ---------- ---------- 49.5 48.3 47.0 ---------- ---------- ---------- Current assetsInventories 0.2 0.2 0.2Trade and other receivables 57.1 51.6 53.3Current tax assets 0.2 - 0.6Cash and cash equivalents - 0.5 - ---------- ---------- ---------- 57.5 52.3 54.1 ---------- ---------- ----------LiabilitiesCurrent liabilitiesBorrowings (2.3) (5.7) (1.6)Trade and other payables (44.7) (27.9) (34.0)Current tax liabilities - (0.7) -Provisions (0.1) (0.1) (1.3) ---------- ---------- ---------- (47.1) (34.4) (36.9) ---------- ---------- ---------- ---------- ---------- ----------Net current assets 10.4 17.9 17.2 ---------- ---------- ---------- Non-current liabilitiesBorrowings (7.6) (7.0) (8.0)Deferred tax liabilities (1.3) (1.5) (1.3)Provisions (0.5) (0.3) (0.3) ---------- ---------- ---------- (9.4) (8.8) (9.6) ---------- ---------- ---------- ---------- ---------- ----------Net assets 50.5 57.4 54.6 ========== ========== ========== Shareholders' equityOrdinary shares 5.5 5.4 5.5Share premium 14.7 14.5 14.6Retained earnings 30.3 37.5 34.5 ---------- ---------- ---------- 50.5 57.4 54.6 ========== ========== ========== CONSOLIDATED CASH FLOW STATEMENT for the six months ended 30 September 2006 ---------- --------- --------- Unaudited Unaudited Unaudited Six months to (as restated) (as restated) 30 September Six months to Year to 2006 30 September 31 March £m 2005 2006 £m £m ---------- --------- --------- Operating profit 2.0 3.4 5.1Exceptional items 1.5 3.2 6.7Depreciation and amortisation 2.8 2.5 5.3Decrease/(increase) in workingcapital 4.7 (2.0) 0.1Net interest paid (0.3) (0.1) (0.4)Tax paid - (2.6) (3.6)Other non cash items 0.3 0.6 (0.4) ---------- --------- ---------Net cash inflow from operatingactivities 11.0 5.0 12.8 Capital expenditure (5.5) (5.7) (7.5) ---------- --------- ---------Net cash outflow frominvesting activities (5.5) (5.7) (7.5) Equity dividends paid (5.8) (6.9) (10.4)Proceeds from re-financingunder finance leases 0.6 - 1.2Repayment of finance leaseliabilities (0.1) - -Issue of share capital 0.1 2.3 2.4Purchase of Business Postshares by the ESOT - (1.3) (1.3)Repayment of borrowings (1.0) (1.0) (1.0) ---------- --------- ---------Net cash outflow fromfinancing activities (6.2) (6.9) (9.1) ---------- --------- ---------Net decrease in cash and cashequivalents (0.7) (7.6) (3.8)Cash and cash equivalents atbeginning of period (0.4) 3.4 3.4 ---------- --------- ---------Cash and cash equivalents atend of period (1.1) (4.2) (0.4) ========= ========= ========= CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY for the six months ended 30 September 2006 ------ ---------- ---------- ---------- Note Unaudited Unaudited Unaudited Six months to (as restated) (as restated) 30 September Six months to Year to 2006 30 September 31 March £m 2005 2006 £m £m ------ ---------- ---------- ----------Opening shareholders'equity as previouslyreported 55.8 62.6 62.6Prior year adjustment 5 (1.2) (0.9) (0.9) ---------- ---------- ----------Opening shareholders'equity as restated 54.6 61.7 61.7Dividends (5.8) (6.9) (10.4)Purchase of Business Postshares by the ESOT - (1.3) (1.3)Employees' share optionscheme:- value of employeeservices 0.4 (0.9) (0.5)- proceeds from sharesissued 0.1 2.3 2.5Tax on items takendirectly - - (0.8)to equityProfit for the period 1.2 2.5 3.4 ---------- ---------- ----------Closing shareholders'equity 50.5 57.4 54.6 ========== ========== ========== NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. General Information This financial information has been prepared in accordance with the ListingRules of the Financial Services Authority. The interim financial statements for the six months to 30 September 2006 havebeen prepared using the accounting policies consistent with EU-adoptedInternational Financial Reporting Standards (IFRS) and IFRIC interpretationswhich are the same as those set out in the Group's published accounts for theyear ended 31 March 2006. These interim financial statements have been prepared under the historical costconvention as modified by the revaluation of certain financial assets andliabilities held for trading. The Group has chosen not to adopt IAS 34, 'Interim Financial Statements', inpreparing the 2006 Interim Statement, and therefore, this interim financialinformation is not in compliance with IFRS. The financial information contained in this interim statement does notconstitute accounts as defined by Section 240 of the Companies Act 1985. Theinterim report has neither been audited nor reviewed by the Group's auditors. The interim report will be circulated to all shareholders and copies areavailable on the Group's website or from the Company's head office: ExpressHouse, 464 Berkshire Avenue, Slough, SL1 4PL. The statutory accounts for 2006, which were prepared under IFRS, have beendelivered to the Registrar of Companies. The auditors' opinion on those accountswas unqualified and did not contain a statement under section 237 of theCompanies Act 1985. 2. Segmental analysis --------- --------- --------- Unaudited Unaudited Unaudited Six months to (as restated) (as restated) 30 September Six months to Year to 2006 30 September 31 March £m 2005 2006 £m £m --------- --------- --------- RevenueParcel Services 94.4 97.7 195.8Specialist Services 21.1 20.4 41.6Mail Services 37.5 14.6 40.4Other 0.0 0.3 0.4 --------- --------- --------- 153.0 133.0 278.2 ========= ========= ========= Operating profitParcel Services - before 6.6 10.1 17.5 exceptional items - exceptional (1.5) (3.2) (6.7) items --------- --------- --------- 5.1 6.9 10.8 ========= ========= ========= Specialist Services 1.2 1.5 2.1Mail Services 2.6 1.1 3.2Other (6.9) (6.1) (11.0) --------- --------- --------- 2.0 3.4 5.1 ========= ========= ========= 3. Exceptional item The exceptional item of £1.5m represents a provision against amounts owed bycertain franchises relating to prior years. 4. Earnings per ordinary share --------- --------- --------- Unaudited Unaudited Unaudited Six months to Six months to Year to 30 September 30 September 31 March 2006 2005 2006 pence pence pence per share per share per share --------- --------- --------- Earnings per share - basic 2.2p 4.7p 6.4pEarnings per share - diluted 2.2p 4.6p 6.3pAdjusted earnings per share - basic 4.2p 8.9p 15.0pAdjusted earnings per share - diluted 4.1p 8.7p 14.8p Earnings per share have been calculated by dividing the profit for the periodafter taxation by 54,124,195 for the six months ended 30 September 2006, by53,883,375 for the six months ended 30 September 2005 and by 53,962,493 for theyear ended 31 March 2006, representing the weighted average number of sharesissued for each period. Diluted earnings per share have been calculated by adjusting the weightedaverage number of shares for the effect of the exercise of share options andLTIP awards. Adjustments of 425,104 for the six months ended 30 September 2006,1,028,066 for the six months ended 30 September 2005 and 607,910 for the yearended 31 March 2006 have been made, thereby increasing the number of shares to54,549,299, 54,911,441 and 54,570,403 respectively. Adjusted earnings per share have been calculated excluding the exceptional itemsand the associated tax impact. 5. Prior year adjustment The prior year adjustment relates to an understatement of accruals and theoverstatement of certain fixed assets. The effect of the adjustment on operatingprofit and profit after tax is as follows; Unaudited Unaudited (as previously Unaudited (as previously Unaudited reported) (as restated) reported) (as restated) Six months to Six months to Year to Year to 30 September 30 September 31 March 31 March 2005 2005 2006 2006 Total Adj Total Total Adj Total £m £m £m £m £m £m Operatingprofit 3.1 0.3 3.4 5.4 (0.3) 5.1Profitafter tax 2.3 0.2 2.5 3.7 (0.3) 3.4 ======== ======== ======== ========= ======== ======== Earningsper 4.3p 0.4p 4.7p 6.9p (0.5p) 6.4pshare -basic The effect of the prior year restatement on net assets is as follows; Total £m Net assets at 31 March 2005 as previously reported 62.7Prior year adjustment (0.9) -----------Net assets at 31 March 2005 as restated 61.8 ----------- Net assets at 31 March 2006 as previously reported 55.8Prior year adjustment (1.2) -----------Net assets at 31 March 2006 as restated 54.6 ----------- The reported net cash flows of the Group remain unchanged. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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