Business Post stock slumps on profits fears

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Business Post, the parcels and letters delivery business, saw 27 per cent wiped off its share price as it warned that profits for the current year would be 20 per cent below current expectations.

Paul Carvell, the company's chief executive, blamed a general downturn in spending among its customers, reflecting lower economic activity, for a market that he described as "the most challenging in the group's recent history".

After delivering the profits warning alongside its interim results, the company's shares slumped 116.5p to 317p.

Its Express business-to-business parcels delivery service was particularly badly hit, Mr Carvell said, although HomeServe, its business-to-consumer distribution service increased revenue by 40 per cent.

The company also revealed profitable trading of £1.1m for its new consumer mail operations it started in May last year in competition to Royal Mail. In the first half of this year, its letters business generated turnover of £14.6m, or 11 per cent of the group total.

In the new year, the wholesale market for the collection and sorting of mail will be fully deregulated, further opening up the domestic mail market, which Mr Carvell said was worth £5.8bn a year.

The company's poor trading performance - pre-tax profits fell from £8.6m to £6.2m on turnover up 21 per cent to £133m in the six months to 30 September - would be addressed by tight cost controls and a more motivated sales force. "We are keeping costs under control and we will keep delivering quality services to customers while getting a regenerated sales force to gain market share," Mr Carvell said. "We'll get through this year and look forward to a better 2006."

The company's confidence in the future was reflected in the board's decision to maintain the interim dividend of 6.4p a share.