TDG saw its headline operating profit rise from £18.6m to £19.6m last year with its margin improving slightly to 3.8 per cent. But what really excited chief executive David Garman was the fact that an increasing proportion of its business is coming from fourth party logistics contracts.
TDG has been intent on moving into the 4PL sector for several years and initially set up an operation under the “Scio” name. However, it has now dropped the Scio name and is rapidly building a portfolio of contracts in the sector.
The rapid progress is evident from the fact that a year ago it had just one such contract – with Early Learning Centre. Since then it has picked up a massive contract to manage of the transport operations for Corus. And last month it was able to announce a £15m contract supply chain management contract with Johnson Diversey.
In fact, said Garman, it has a number of similar deals in the pipeline and by the end of 2006 could have as much as £100m of business in this sector. TDG turns over some £510m a year, about half of which comes from its UK contract logistics business. This produced £12m operating profit – about the same as last year.
In fact, its was only in Ireland, where a £1m loss was wiped out, that any significant improvement in result was apparent. The group won some £85m in new business during the year – substantially better than previous years but losses, at £65m, were higher than normal because of withdrawals.
The Johnson Diversey contract involves the renewal of an existing £5m contract along with £10 of new business. Garman said: “We have designed an innovative way to re-engineer Johnson Diversey’s UK logistics network that will substantially reduce costs.”