Birmingham-based Business Post has reported a 50 per cent rise in pretax profits before exceptionals of £4.8 million for the six months to the end of September, after strong growth in its UK Mail operation and good performances in the business-to-business parcels and pallets businesses.
The company's UK Mail operation continues to win business from Royal Mail, and in the period Abbey, HBOS, and Virgin Media joined its customer list, which already includes TV Licensing and the Department for Work and Pensions.
UK Mail handled 130 million mail items in September - accounting for 7.5 per cent of total mail volumes, up from 5.5 per cent in March.
Chief executive Guy Buswell said he was hopeful that before long, the company would be handling ten per cent.
Mr Buswell said the success of UK Mail had fundamentally changed the company, with the division accounting for 32 per cent of revenues compared to just ten per cent in 2005.
Business Post said strikes at Royal Mail, which provides 'last mile' delivery for UK Mail, had not adversely affected revenues, which increased 59 per cent to £60 million.
"It's had no impact from a mail point of view," said Mr Buswell, who also downplayed the long-term impact of the industrial action on the mail market, citing Postcomm figures showing the size of the UK mail market remaining flat at £6.6 billion.
"There's large growth potential and around £3 billion of that market is available to us," he said.
UK Mail operating profits were up 65 per cent to £4.3 million, reflecting revenue growth and an increase in margin to 7.2 per cent from 6.9 per cent in the first half of 2006. Revenues in the group's parcels business were hit by the end of its contract with Federal Express and were 8.1 per cent lower at £86.8 million.
The company said that on a like-for-like basis, revenues for the mail division were up 0.1 per cent, with a good performance in the B2B segment offsetting an eight per cent drop in sales in the smaller B2C segment.
Business Post said the second half would continue to be challenging for its B2C operation, but it still saw attractive opportunities in the sector, particularly in high value goods.
"B2C is only a small part of the business and will be even smaller in time," said Mr Buswell.
Parcels operating profit for the period was down slightly on last year at £6.5 million, with an £800,000 impact from the loss of the FedEx contract, although the operating margin increased by 0.5 per cent to 7.5 per cent.
The focus in parcels will be on achieving targeted revenue growth while improving efficiency to reduce the cost base.
Sales in the UK pallets and same-day courier businesses were down 0.9 per cent to £20.9 million and operating profits were down 25 per cent to £900,000, reflecting a downturn in courier operations.
Overall group revenues were £167 million, up nine per cent on the same period in 2006, and Business Post said the start of the second half had been encouraging, with trading in the early weeks in line with management expectations.
Mr Buswell said the group was wary of rising fuel costs impacting on performance but added this was just a "fact of life" for logistics businesses and they had to manage the situation as best they could.
Analyst Ben Thefaut, of Arden Partners, said the UK Mail operation went "from strength to strength", adding he was encouraged by the outlook.