Amtrak posts Pounds 2m profit and plans to consolidate market
Amtrak Express Parcels, the 3i-backed delivery business, has returned to profit and pledged to consolidate the over-crowded parcels delivery market.
The comments come amid speculation about the future of Rentokil Initial’s parcels delivery business, although last week Brian McGowan, Rentokil’s new chairman, appeared to rule out the sale of this division.
Amtrak, which was the subject of an Pounds 86m buy-in in 1998, and which underwent a financial restructuring two years’ ago, made pre-tax profits of Pounds 1.9m in the year to May 31, compared with a Pounds 5.5m loss a year earlier.
Jonathan Smith, who became managing director in August 2002, attributed the return to profit to reduced overheads, including the loss of about 60 jobs during the year, as well as the decision to focus on business-to-consumer rather than business-to-business deliveries.
Philip Jones, finance director, said Amtrak had also benefited from the sale, in July 2002, of Nightspeed, a sister company, as part of a financial restructuring necessary for Amtrak to reduce debt and trade through the difficulties it faced at the time, including high overheads and over-capacity in the market. The 2003 accounts included a restructuring charge of Pounds 741,000, and operating losses of Pounds 268,000 from Nightspeed.
Mr Jones added that the financial restructuring, including converting about Pounds 50m of debt into equity, reduced Amtrak’s net debt from Pounds 75m to Pounds 8m. Net debt stood at Pounds 3.55m at May 31.
Mr Smith, whose earlier career included running Rentokil’s parcels delivery and textiles businesses, said Amtrak had decided to concentrate on the high end business-to-consumer delivery market.
“Most people have shied away from delivering to houses. We decided not to shy away because (this was the) only growth area in parcels,” he said.
This helped Amtrak lift turnover from continuing operations from Pounds 66.9m to Pounds 69.7m, which Mr Smith said, represented the first increase in turnover for several years.
Amtrak now intended to pursue acquisitions: “We understand that there has to be consolidation in the industry . . . We think that going down the building (route) would be sensible at the moment.”
He did not specify how much Amtrak could spend on acquisitions, which could be in the business-to-business or home delivery markets.
3i, which owns 67.8 per cent of the company, said it was pleased with Amtrak’s performance and looked forward to further growth. Royal Bank of Scotland owns 19.7 per cent, and management 12.5 per cent.
