Nightfreight review of performance and trading results
CHIEF EXECUTIVE’S REVIEW
In February 2001, Nightfreight plc was the subject of a management buy-out backed by Barclays Private Equity Limited. Nightfreight plc was de-listed from the stock exchange, taken into private ownership, and the Group now operates as Nightfreight Holdings Limited.
ACTIVITIES
Since the MBO, the Group has focused its activities on two core divisions: overnight freight/parcels delivery and logistics.
The Group’s freight/parcels division delivers documents, parcels and freight primarily of irregular dimension and weight (IDW).
Most carriers focus mainly on small parcels that are managed by automated handling systems but cannot handle IDW freight. Customers are often forced to split their parcels and freight deliveries between two or more carriers.
Nightfreight has developed its service to handle IDW freight efficiently and is leader of the mixed parcels and IDW freight sector of the overnight delivery market.
The logistics division offers two services: Pacemaker and network logistics.
Pacemaker provides specialised handling and two-man delivery of IDW products, such as furniture and vending machines. This includes installation, removal and scrapping of old products, repair, replenishment and on-site training.
Network logistics is a contract service combining Group overnight delivery capabilities augmented by additional fulfilment services such as dedicated transport, warehousing and stock control.
The Group also has a small tank container operation serving the international chemicals market.
TRADING RESULTS
The statutory accounting period covered by this report is not for a full 12 months. The turnover for the period was £70.83m and operating profit before goodwill amortisation was £5.74m.
TRADING HISTORY
In the interests of a better understanding of the business, unaudited pro-forma profit and loss accounts for the full 12 month period and for the previous 4 years are presented below.
Years to 30 November
£000’s 1997 1998 1999 2000 2001
Turnover 67,123 70,345 73,684 78,572 89,334
Divisional operating profit
1997: 7,304 10.9%
1998: 8,016 11.4%
1999: 9,708 13.2%
2000: 10,105 12.9%
2001: 12,157 13.6%
Central costs
1997: 3,890 5.8%
1998: 4,198 6.0%
1999: 4,380 5.9%
2000: 4,306 5.5%
2001: 4,454 5.0%
Group operating profit (before exceptional items and goodwill amortisation)
3,414 5.1%
3,818 5.4%
5,328 7.2%
5,799 7.4%
7,703 8.6%
The above unaudited trading history has been prepared from an aggregation of the trading results of the individual continuing operations of the Group in 2001 as if the Group had been in existence throughout the period.
From the unaudited pro-forma results, Group turnover in 2001 increased by £10.76m (13.7%) over 2000, with divisional operating profits ahead by £2.05m (20.3%). Pro-forma Group operating profit (before exceptional items and goodwill amortisation) during the same period was up by £1.90m (32.8%).
PROGRESS DURING THE YEAR
The MBO strategic rationale identified the mixed parcels and IDW freight sector as distinct within the broad overnight delivery market. Development and progress has borne this out and provides evidence that the mixed parcels and IDW freight niche has considerable potential as a source of earnings within an otherwise highly competitive market.
The Group has been restructured: a new Operating Board was created to combine Group subsidiary Boards into a single forum for policy and decision making; and six new Regional Directors were appointed to strengthen management within the freight/parcels division.
A range of quality initiatives were launched to drive service improvements across every part of Nightfreight’s activities to bring the business closer to its customers and make it more responsive to their needs. An independent research agency has been retained to track customer opinion – but the benefits were clearly evident as new business growth increased significantly.
Year on year consignment volumes in the freight/parcels division were up 12.7% over 2000 at all time record levels as the Group continued to increase its market share.
Both Pacemaker and network logistics won new contracts and gained additional business from existing customers.
The loss making freight forwarding division was sold and replaced by a European Gateway service operating from the Group’s three hubs using Nightfreight’s network to provide UK collection and delivery services for European customers.
The Group invested £0.5m in a new Southern hub in Basildon and opened a new depot in South East London to support the rapidly expanding customer base in the region. A further £1.6m was spent in opening two new purpose built freehold depots in Rotherham and Glasgow to replace older, rented sites.
The commitment of all of our people has been exemplary and I would like to thank them for their outstanding contribution and continuing dedication.
Overall, since the MBO, the Group has been streamlined and focused on clearly identified services and opportunities. Improving service quality has become an absolute priority – and customers continue to respond favourably to our initiatives. The business has developed a strong momentum. A foundation for future growth and development has been firmly established.
Robert Kelly
Chief Executive
28 March 2002
