Express Dairies granted business mail licence

Express Dairies, Britain's biggest milk supplier, was yesterday given the green light by the postal regulator PostComm for its milkmen to deliver business mail to homes along with the morning milk.

Shares in the company, which is struggling to cope with overcapacity in the milk market, jumped 4.3 per cent, or 1.25p, to 30.25p to value the company at £90.3m.

Express said it had been granted a 12-month licence to deliver a maximum of 4.6 million items of business mail through the company's 3,500 milk rounds.

The interim licence is part of PostComm's plan to gradually introduce competition to Consignia, the struggling state-owned postal service, ahead of full market liberalisation in 2007.

Express also said trading since the end of its financial year on 31 March was running ahead of the same period last year, but that market conditions remained challenging.

The company suffered a particularly weak first half in 2000-01 due to overcapacity in the milk market, but picked up in the second half after making progress with farmers about achieving long-term security of its milk supply. Underlying pre-tax profit fell to £25.3m in the year to 31 March, from £41.9m the year before.

Express has said overcapacity will remain a problem until the four leading dairy companies have been reduced to three.

But talks with an unnamed suitor – widely thought to be Arla Foods of Denmark, the makers of Lurpak butter – collapsed in February.

Express Dairies has had to cut 1,650 staff in the past year and close or sell plants in an attempt to reduce costs and boost its profitability in the tough markets it finds itself operating in.

The company is expected to sell off more dairies this year and has signalled its interest in possible deals.