Nightfreight finds a niche it can nurture
"Ugly" is turning beautiful for Nightfreight.
The company reported a turnover of £98.2m in the year to 30 November, an increase of 9.9%, if the 41-week figures for the previous year are extrapolated back before its management buyout.
Most of the increase went straight to the bottom line, with operating profit up 9.2% to £9m. And the improvement is largely thanks to Nightfreight's renewed focus on a sector variously called ugly, awkward or out of gauge, but which the company has redefined as "IDW"– irregular dimension and weight.
"Overnight carriers built their systems around serving the parcels market, but along with that came IDW. No-one had defined it and we were the first to do so,” claims chief executive Robert Kelly. “We gave it a name, researched it and stripped the business down to serve it." IDW consists of products such as window blinds, bicycles and garden furniture; segments which Kelly says are "under-served in this country. A lot of people carry a bit alongside their normal parcels, but they're not really interested. It doesn't fit automatic sorting systems." Nightfreight has manual and semi-automated sorting, and most of its vehicles are 7.5 tonnes. Although you can find yourself carrying round a lot of air, this is the minimum practical size for IDW and can create a barrier to entry for those wanting to serve this niche, Kelly believes.
IDW has generated 34% growth in two years for Nightfreight. "We've established a sound business base. It's real and defensible business, "says Kelly. And further expansion is still possible. “We estimate we have 15-17% of the IDW market, which makes us the leader, but the rest is spread around and there's more to go for." The MBO was completed in February 2001.
De-listing Night-freight from the stock market was appropriate for a business turning over less than £100m and operating in a sector that analysts do not find "glittery" says Kelly.
But it wasn't just a case of returning to private ownership and carrying on "as you were" The move was accompanied by radical surgery. “We have restructured the business from top to bottom – and we have exceeded the expectations of our backers, "he says.
Before joining Nightfreight three years ago, Kelly had worked for a subsidiary of Yorkshire Water.But he had prior experience with FedEx and United Carriers, so he knew his way around the transport business.
First priority was to sell the loss making Hay Pollock freight forwarding division, which went to ABX. Forwarding was a tough operating environment and Nightfreight needed a scale that it didn't have.A tanks division has also subsequently been sold, allowing the company to focus on the overnight freight and parcels market and on logistics, which now accounts for 20% of overall business.
Overnight is a dynamic market, but you're only as good as what you put through the network each night, Kelly points out.
Operators with spare capacity are chasing volumes, with a predictable effect on price and on customers' decisions. In the out-of-gauge niche it has developed, he says, Nightfreight is "not quite as exposed" to that pressure.
On the logistics side, likewise, the company has tried to exploit its own niche through Pacemaker, a specialist two-man operation for equipment such as vending machines. Its intensively trained employees can replenish these as well as taking away old equipment, plumbing and wiring in replacements and training customers.
Pacemaker employs around 200.The operation is based at Heywood, near Manchester, and a site near Heathrow – but a search is on for new premises in the south as this one is bursting at the seams.
Although the company is primarily involved in B2B, it is now evaluating opportunities in home delivery."We feel it shouldn't be ignored, but the question is whether it can work off our existing operation – we wouldn't want to twist that out of shape, "says Kelly.
Nightfreight currently has 52 depots and directly owns and operates 32 of them, with a gradual shift in that direction.Most of the service partners are in rural locations."There's never an ideal network but 50-60 is close to right, "he says.
As with most distribution companies, however, the Working Time Directive is chewing up a lot of management time."It is not helpful to the UK transport and logistics industry.The UK relies on its flexibility of labour. As one of the more deregulated markets, this will erode our competitiveness, "Kelly believes.
Options when the new legislation is introduced may include diverting traffic away from Nightfreight's main hub in Willenhall, West Midlands, and towards its regional hubs in Burnley and Basildon.
It seems inevitable that more drivers will be needed.The company currently employs around 600.
Nightfreight's investment programme this year has included a greenfield development in Cambridge, extending its Newport depot and the redevelopment of the Liverpool facility.There will also be a staff training centre to complement the Burnley training school, which is open to employees and third parties.
The company is running ahead of its projections for this year and Kelly's recipe is simple: customer care."We're well into the upper 90%s on on-time, undamaged delivery. I know everybody says it, but you've got to do what you say you're going to do, even if you're not as quick as the next guy."
