Tuesday 27th Sep 2016 - Logistics Manager

Stobart targets savings from chilled restructuring

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Stobart expects to make annual savings of £1.5m a year from a restructuring of its chilled transport operations.

Revenue for the Transport & Distribution division was £519.5m (2011: £475.3m) and underlying profit before tax reduced to £27.4m (2011: £34.2m), the group said in its preliminary results for the year to 29th February.

Changes to the chilled transport operation potentially involve the closure of two existing sites and transfer of operations to a new site at Magna Park in Lutterworth, said chief executive Andrew Tinkler.

“This is expected to lead to a significant saving in mileage and reduction in vehicles, drivers and site staff required to service the existing work. We estimate that the one-off costs of site closures and new site set-up costs will be in the region of £2.9m and fall in the financial year to 28 February 2013. This restructuring should lead to ongoing cost savings of approximately £1.5m per annum.”

Despite some notable business wins, the chilled network suffered volume decline in the second half of the year impacting profit by around £3m.

The group has been targeting increased profitability for customers in the Transport and Distribution division through splitting the business into clear profit-responsible units.

Tinkler said: “This level of detailed knowledge enables us to reduce logistics costs for our customers through working in close partnership with them, allowing us to drive up both performance levels and customer service. Our proactive response to customer demands allows us to continue to perform resiliently in tough market conditions.

“This information led to the decision to carry out a large scale restructure of the ambient transport network with the closure of a large site in Leeds.”

This had a one-off cost of £1.4m and savings of £1m per annum. As well as closing a depot in Leeds, headcount was reduced by around 282 adjusting to a more optimal ratio of tramper drivers to day-night drivers. Following the restructure, these operations have been separated into eight fleets with general managers responsible for their own profit and loss. New time based planning software was launched and has resulted in improvements in profit of over 20 per cent in the second half of the year compared to the first six months.

The group said revenue growth had been driven by new and renewed contracts, including the new contract for Tesco grocery at the Daventry rail terminal, a full year of the Britvic contract and growth in transport work for Stobart Biomass.

And Stobart highlighted the fact that £11.4m of the revenue increase in the division could be attributed to fuel price increases passed on to customers. This had a 0.2 per cent downward impact on margins.

In addition, it said, the profitability of the division had been affected by fluctuating customer order volumes caused by a high level of retail promotions and also by reduced volumes in our chilled fleet and reduced utilisation of our warehouses. The division had refocused on cost efficiency and profitability and implemented the two major initiatives during the year – restructuring the ambient and chilled fleets.

Overall, the group reported a marginal rise in underlying operating profit rose to £39.9m for last year in its preliminary results. Sales were up ten per cent to £551.9m.

Looking ahead, Tinkler said: “Over the last year, we have taken a number of major initiatives across the Group which have created the asset base, structure and operational platform to drive up performance and shareholder value in line with our four-year plan.

“Each of the Group’s divisions has good growth potential. As we enter the second year of our plan we are confident that the changes we are implementing will deliver enhanced value across the Group.”