one of the UKs leading express delivery companies

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Business Post Group plc
one of the UKs leading express delivery
companies
2002/03 Preliminary Results Presentation
20 May 2003
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Presenters
Paul Carvell Chief Executive Peter
Fitzwilliam Finance Director
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Programme
Introduction Paul Carvell Financial Review Peter
Fitzwilliam
Business Review, Current Trading
and Prospects Paul Carvell
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Segmentation of Delivery Market
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Business Post is expanding in areas requiring
time certainty
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Background

• In May 2002, we predicted further progress in
  2002/03 despite it being a year of investment
  for the future, notably in the franchise network
  and the Groups newer and smaller businesses
• 2002/03 the first of a three year strategic plan
  during which substantial progress was expected

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2002/03 Highlights

• Further growth in turnover, profit and dividends
  despite background and continuing soft economy
• Express turnover (79 of Group turnover)
  increased by 14
• FedEx relationship continues to prosper
• HomeServe and UK Today making excellent progress
  (incl. BXT acquisition)
• UK Mail determination progressing
• Board remains very confident re prospects for the
  short and long term

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Summarised Profit and Loss Account
2003 2002 Increase Turnover (m) 156.3 131.7 18.7
Operating profit (m) 15.6 14.6 6.8 Pre-tax
profit (m) 16.1 15.1 6.6 Earnings per share
(p) 21.2 20.0 6.0 Dividends per share
(p) 16.9 16.0 5.6
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A strong performance in a year of investment for
the future
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Business Unit Turnover
By Value By Proportion 2003 2002
Increase 2003 2002 m m Express 123.8 108
.4 14 79 82 International 18.2 12.1 50 12 9 HomeSe
rve (exc Tiny) 7.6 3.3 130 5 3 UK
Today 4.5 1.7 165 3 1 Other (inc Tiny _at_
3.6m) 2.2 6.2 (65) 1 5 156.3 131.7 19 100 100
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Gross Profit Margins - Reconciliation
2003 2002 Diff Reported 21.9 24.0 (2.1) S
ale of franchise (0.1) (0.4) Change in network
structure 0.3 N/A Like-for-like 22.1 23.6 (1.5)
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Impact of investments contained at 1.5 at gross
profit level
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Gross Profit Margins - Seasonality
2003 2002 Diff First Half 21.5 23.8 (2.3)
Second Half 22.2 24.2 (2.0) 21.9 24.0
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Benefit of investments starting to show in second
half
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Administrative Expenses
2003 2002 Increase m m Non-IT
related 14.4 13.0 11 IT-related 4.2 4.0 5 18.6 17
.0 9
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Overhead growth contained at half turnover growth
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Operating Profit Margins
2003 2002 Diff Reported 10.1 11.1 (1.0) Sa
le of franchises (0.1) (0.4) Like-for-like 10.0 10
.7 (0.7)
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Impact of investments contained at 0.7 at
operating profit level
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Summarised Cash Flow Statement
2003 2002 m m Pre-tax profit 16.1 15.1 Depreci
ation 3.3 3.6 Working capital (4.7) 1.0 Franchise
financing (0.5) (3.4) Capital expenditure (4.1) (3
.3) Acquisition of BXT (1.9) - Tax/share
issues (4.7) (4.3) Cash inflow before
dividends 3.5 8.7
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Strong revenue growth and timing differences have
led to higher working capital demands
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Summarised Balance Sheet
2003 2002 m m Fixed assets 30.5 29.6 Goodwill
1.7 - Current assets 36.5 32.6 Creditors lt1
year (21.9) (17.8) Long-term liabilities (1.0) (1.
0) Net assets 45.8 43.4 Net cash 1.6 6.7 Post-tax
ROANA 25.1 24.9
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Balance sheet remains strong improved ROANA
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Business Overview

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

The provision of time-definite delivery services
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Express - UK business-to-business parcels

• 79 (2002 82) of Group turnover
• Highly reliable service, gt90 for next day
  delivery
• Express now has 7 share of 1.6 billion market
• Turnover increased by 14 to 123.8m (2002
  108.4m)
• UK Pallets in / 72 hour out
• Current focus on yield and quality of revenue

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International - International parcels and mail

• 12 (2002 9) of Group turnover
• Estimated to have lt2 market share of a 1
  billion market
• Turnover up 50 to 18.2m (12.1m) - FedEx
  contract
• Exploring new opportunities for growth in
  association with FedEx
• Tariffs simplified, new products were introduced
• International Mail launched in July 2002
• European single pack network under development

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HomeServe - UK business-to-consumer parcels

• 5 (2002 6) of Group turnover
• Target market estimated at 200m
• Turnover growth of 130 - excluding the loss of
  Tiny Computers - due to growing market and
  targeted sales approach
• New products introduced, such as signature not
  required, local delivery and Collectpoint
• Measured development planned

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UK Today - UK (same day) business couriers

• 3 (2002 1) of Group turnover
• Market estimated at 300m
• Uses separate delivery vehicles, aircraft space
  and National Express coaches
• Now operating out of 24 Group Depots, previously
  only 6
• National coverage now achieved
• Good source of referral work for Express and
  HomeServe
• BXT acquisition - technical, medical and utilities

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giving you the choice
UK Mail - UK business mail

• Unique two-day Business Class proposition
• November 2001, Postcomm granted interim licence
• April 2002, UK Mail requested Postcomm to
  determine tariff
• 2002/03 no trading, charge limited to 0.4m
• 5 billion p.a. opportunity

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giving you the choice
Postcomm Determination

• Details of published determination
• Realistic price based on solid cost plus approach
  - not retail minus
• 11.88p for Business Class Service
• Workable access arrangements
• 98.5 Service Level Agreement (contractually
  supported)
• Next steps
• Three months consultation before Postcomm final
  determination
• Royal Mail acceptance
• Possible commencement of operations post April
  2004

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Recent Developments

• The continuing restructuring of overnight
  linehaul arrangements will reduce unit costs
• Customer experience further improved by Discovery
  (CRM package)
• Expert Managing Directors now established and
  delivering results for all business units
• Significant investment in training and management
  development

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Recent Developments

• Remuneration increased from 1 April 2002
• Share option plan approved at EGM in July 2002
• Franchise Board of Management established in
  April
• Closer management

Franchises
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Current Trading

• Volumes and yield up in first seven weeks
• Service performance levels remain high
• Costs remain tightly controlled

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Prospects 2003/04

• Express - focus on revenue quality
• International - new European single pack network
• HomeServe - major new accounts
• UK Today - further expansion
• UK Mail - uncertain start date

Overall - further good progress expected
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Prospects Long Term
The Board remains very confident about the
Groups long-term potential
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