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Business Post Group plc. “the fast-growing express delivery company”. 2003/04 Interim Results Presentation. November 2003. 1. Presenters. Paul Carvell - Chief Executive Peter Fitzwilliam - Finance Director Russell Hodgson - Group Managing Director, Parcel Services. Programme.

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slide1

Business Post Group plc

“the fast-growing express delivery company”

2003/04 Interim Results Presentation

November 2003

1

slide2

Presenters

Paul Carvell - Chief Executive

Peter Fitzwilliam - Finance Director

Russell Hodgson - Group Managing Director, Parcel Services

slide3

Programme

Introduction Paul Carvell

Financial Review Peter Fitzwilliam

Business Review

- Parcel Services Russell Hodgson

- Other Services Paul Carvell

Conclusion Paul Carvell

slide4

Background

  • First half of Year Two
  • Three Year Plan objective
    • substantial profit growth
  • Year One was investment phase
slide5

Highlights

  • Turnover up 23% to £89.4m
  • Operating profit before goodwill up 18% to £8.0m
  • Express revenues up 7%
  • Substantial percentage growth in HomeServe and UK Today
  • Weaver Pallet Express acquired
  • Board expects further progress in current year and remains very confident about the long-term
slide6

Summarised Profit and Loss Account

Six months to 30 September2003 2002 Increase

Turnover (£m) 89.4 72.9 23%

Operating profit before goodwill (£m) 8.0 6.8 18%

Pre-tax profit (£m) 8.0 7.1 13%

Earnings per share (p) 10.5 9.3 13%

Dividend per share (p) 5.95 5.60 6%

Strong progress in H1

revenues per working day

£800k

£720k

£640k

£560k

£480k

£400k

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

00/01

01/02

02/03

03-04

03-04 Incl Weaver

Revenues per Working Day
slide8

Organic Revenue Growth - by Business Unit (£’m)

2003 2002 Increase

Express 63.0 59.0 7%

International 9.9 8.5 16%

HomeServe 6.9 2.6 165%

UK Today 2.9 1.6 81%

Total Organic* 82.7 71.7 15%

*Excludes BXT (acquired in February 2003) and Weaver Pallet Express (July 2003)

Two-speed strategy delivering strong growth overall

slide9

Gross Profit Margins

  • 21.1% vs 21.5%
  • Affected by business unit mix
    • newer businesses
    • acquisitions
  • Affected by network structure
    • corporate/franchise mix
slide10

Overheads

2002/032003/04 Change

H1H2H1 on H1 on H2

£m £m £m

Like-for-like 8.9 9.7 10.4 17% 7%

Acquisitions - - 0.6

8.9 9.7 11.0 24% 13%

Rate of increase in underlying overheads is slowing

slide11

Operating Profit Margins

  • 8.8% vs 9.3%
  • Affected by business unit mix and overheads growth
  • H2 seasonality
  • Target is to achieve 02/03 levels (excl Weaver)
slide12

Interest Income

  • £0.1m vs £0.3m
  • Weaver acquisition
  • Working capital requirements
  • £10m term loan
slide13

Summarised Cash Flow Statement

Six months to 30 September2003 2002

£m £m

Pre-tax profit 8.0 7.1

Depreciation 1.81.8

Working capital (3.7)(4.3)

Tax (2.2) (2.1)

Capital expenditure (3.8) (2.5)

Trading cash flows 0.1 -

Acquisitions (9.7) -

Dividends (6.0) (5.7)

Cash flow before financing (15.6) (5.7)

Financing 10.1 0.1Net cash flow (5.5) (5.6)

slide14

Summarised Balance Sheet

As at 30 September2003 2002

£m £m

Goodwill 10.6 -

Fixed assets 33.2 30.4

Debtors 40.930.3

Net (debt)/cash (13.9) 1.1

Other creditors <1 year (21.1) (15.3)

Long-term liabilities (1.3) (1.0)

Net assets 48.4 45.5

RONA 23.1% 22.0%

Balance sheet remains strong; RONA improving

slide15

Business Overview

  • Parcel Services
    • Express - UK business-to-business parcels
    • International - International parcels and mail
    • HomeServe - UK business-to-consumer parcels
    • Network Services - Shared activities centrally managed
  • UK Today - UK (same day) business couriers
  • UK Pallets -UK business-to-business freight
  • UK Mail - UK business mail

The provision of time-definite delivery services

slide16

Business Review

Express

  • Core business - although reduced to 70% from 81% of Group turnover
  • Revenues up 7% to £63.0m
  • Action taken to improve quality of revenue
  • Focus remains on premium service
slide17

Business Review

International

  • 11% (2002: 12%) of Group turnover
  • Revenues up 16% to £9.9m
  • FedEx relationship - most of the above - remained strong
  • International Mail, launched in July 2002, made good progress
  • Eurodis road deliveries network commenced trails on 1 October prior to launch in January
  • Market, worth £1.0bn p.a., is growing twice as fast as domestic market
slide18

Business Review

HomeServe

  • 8% (2002: 4%) of Group turnover
  • Revenues up 165% to £6.9m
  • New customers include Walsh Western International
  • Further new services being explored
  • Focus on £250m p.a. upper end of the market
slide19

Business Review

Network Services

  • Level of on-time deliveries consistently high
  • Unit cost increases well below inflationary levels
  • Programme to improve customer satisfaction under way
  • Programme to improve staff satisfaction under way
slide21

Business Review

  • Express - Focus on yield
  • International - Eurodis launch
  • HomeServe - Rapid growth
  • Network Services - Optimise infrastructure
  • Technology - Market leading
  • Cross-selling

Parcel Services

Focus on greater operational leverage

business review
UK PalletsBusiness Review
  • Weaver Pallet Express acquired in late July for £9-12.5 million
  • Pro forma turnover and EBIT of £16.2 million and £1.2 million
  • Nationwide express pallet delivery service through partnership network of 70 independent haulage businesses, with national hub at Lichfield (Staffs)
  • No 4, but outperforming fast-growing market
  • Excellent prospects
slide23

Business Review

UK Today

  • 3% (2002: 2%) of Group turnover, with BXT a further 2% (2002: nil)
  • Revenues up 81% to £2.9m
  • Targeting national contracts
  • FastPart service to be introduced in H2
  • BXT technical courier trading well and developing in line with expectations
  • UK courier market estimated to be worth over £300m p.a
slide24

giving you the choice

Business Review

UK Mail

  • Unique two-day “Business Class” proposition
  • Definitive determination by Postcomm of access terms, requested in April 2002, expected by Christmas 2003
  • Operational details to be agreed
  • Service will not start before April 2004 at the earliest
  • £0.1m H1 costs expensed
  • £5bn p.a. market opportunity
strategy 3 year plan
Express to remain core Further market share gains

Substantially develop HomeServe, International and UK Today by bringing in expertise Excellent sales growth

Identify new growth opportunities UK Mail, UK Pallets

Consider strategic acquisitions BXT, UK Pallets

Maximise use of existing infrastructure ongoing Parcel Services will assist

Strategy - 3 Year Plan

Two-speed strategy backed up by greater focus

strategy markets
Strategy - Markets

Market Market Market Share % Size £bn Growth % 2001 2003

Existing Markets

Express 1.6 c5-6 c6 c7.5

International 1.0 c10 <1 c2

HomeServe 0.2 Rapid c1 c5

UK Today 0.3 Consolidating <1 c2

Prospective Markets

UK Pallets 0.9 >30 Nil c3

UK Mail 5.0 3 Nil Nil

slide27

Current Trading and Prospects

  • October in line with expectations
  • Board expects further good progress this year
  • Very confident about long term potential