Doorstep mail deliveries help Express Dairies return to profit

Express Dairies, which was awarded a Postcomm mail delivery licence in April, yesterday said it is already delivering 100,000 items a week and has deals to deliver books, CDs, contact lenses and catalogues. It said it has an agreement with Trueprint to deliver photos with other deals in the pipeline.

The licence entitles it to deliver 46 million items a year and Neil Davidson, the chief executive, said he was pleased with progress so far. He added that the new service was increasing the revenue that could be made by its milkmen, who operate on a franchise basis. "This is helping reduce turnover among our franchisees, which is helping reduce the decline in our doorstep milk delivery business," he said.

Mr Davidson said that he hoped to receive a ruling on Express's proposed merger with Arla Foods of Denmark within the next few weeks. A referral to the Competition Commission it could delay completion until October. The deal is expected to yield cost savings of £20m a year within three years.

Mr Davidson said he was watching the Safeway bid battle with interest, having lost a milk supply contract with Safeway last year. Express is hoping to win the business back and its best hope is William Morrison as it already supplies it with milk.

The comments came as Express reported improved results for the year to March. It reported profits of £12m compared with losses of £10.1m the previous year. Net debt fell sharply and the company paid a full-year dividend of a penny a share, having returned to the payout list in November.

The rate of volume decline in the doorstep delivery business was 10 per cent, - better than the market as a whole, which fell 11.5 per cent. Like all milk groups, Express has been cutting capacity and closing plants to tackle over-supply.

There was a pension deficit of £109m at the year end but Express said the recovery in equity markets meant the deficit is now likely to be £88m.

The all-share merger with Arla would create a company with combined annual sales of £1.3bn and a broader spread of products. The business will be renamed Arla Foods and be 51 per cent owned by the Danish group. Shareholders are in line to receive a special dividend of 9.6p per share.

Express shares closed up 1.5p at 35p yesterday.