Logistics Manager Magazine

Publishers are facing big changes in their markets which are impacting on the logistics of the whole sector. Malory Davies reports.

News UK, publisher of The Times and The Sun, has launched a print and logistics service for newspaper and magazine publishers – Newssolutions – in a moved designed to make use the spare capacity at its existing printing plants and distribution operations.
At the same time, Connect Group, which owns Smiths News, has bought parcels carrier Tuffnells as it seeks to reduce its dependence on the publishing business. Not only that, Smiths’ rival Menzies recently signed a deal to deliver betting slips to betting shops in a move designed to make more use of its delivery fleet. These changes all reflect that fact that print sales have been falling. Nevertheless, said Mike Darcey, CEO of News UK: “We are in print for the long term – we believe it is pretty durable.
“With shrinking print circulation challenging publishers, we have identified the opportunity to collaborate and achieve the economies of scale that will ensure we all have a thriving and profitable future for the printed product.”
News UK delivers four million newspapers a night to 55,000 retail outlets and directly to more than 16,000 in the London area.
It already does a significant amount of work for other publishers. As well as its own titles, it prints The Financial Times, The Daily Telegraph, The Metro, and the Evening Standard.
It has some of the most modern newspaper presses in the industry, having invested £600m in 2007 in three sites: Broxbourne, Knowsley and Eurocentral near Glasgow. It opened its logistics support centre at Broxbourne in 2009.
News UK has brought Tracey Hart as commercial director of operations. She was recruited from The Daily Mail, where she was head of sales and marketing, and has extensive experience in providing revenue generating services to publishers – be that in print, distribution or other related services.
In August last year News UK signed a joint distribution deal with the Telegraph Media Group using Ceva network. Chris Taylor, chief operating officer at News UK, said at the time: “We are very pleased to be working in partnership with TMG on what we believe will be a platform to promote and expand our distribution services.”
He said today that this arrangement has saved some one million truck miles over the past year.
The delivery to home service currently operates inside the M25. It has just taken on deliveries for a number of other newspapers and is looking for more. One of the advantages of this service, said Tracey Hart, is that it not priced by weight like Royal Mail services.
Hart said News UK was looking at taking on franchisees to expand this service. In the future there might also be potential to extend the home delivery service to other cities, although there are no plans at the moment.
As well as print and distribution, Newssolutions offers a range of operations and technology services designed for the media sector, for example help desks and service desks.
The major wholesalers have been launching initiatives to improve the utilisation of their networks in the face of falling print volumes.
Smiths News recently launched “Pass my Parcel” – a same day parcel collection service with Amazon. Menzies said in its results for the first half of 2014: “The extension of logistics services using our existing network and fleet has expanded. The venture is still in its early stages but there are real signs that further expansion is possible in collaboration with others and through additional print products.”
In the second major move, Connect Group, which owns Smiths News, is acquiring Tuffnells, the Sheffield-based parcels carrier, for £128.7m, which specialises in mixed freight and parcels – particularly “uglies” – items of irregular weight and dimensions.
The deal give Connect distribution network with potential to enhance existing operations, such as Pass my Parcel – the parcel collection service it launched in partnership with Amazon last month. It also expects to synergies worth £2m a year by year three of the deal.
Mark Cashmore, group chief executive of Connect said: “The addition of Tuffnells will see us broaden our reach into an area of specialist distribution which complements our core skills and competences of time sensitive distribution with high levels of service and efficiency.”
Connect Group has its roots in the WH Smith newspaper and magazine wholesaling business. It was demerged from WH Smith in 2006 and has been expanding its range of services since then. In the year to 31st August it had sales of £1.8bn and underlying pre-tax profit of £50m.
The group name was changed to Connect Group plc in April this year, although the newspaper wholesale business has retailed the Smiths News name.
The group’s strategic ambition is to generate 50 per cent of profits from activities outside newspaper and magazine wholesaling over the medium term, and the proposed Acquisition of Tuffnells represents a significant step towards achieving this ambition.
Tuffnells operates through a network of 34 depots and operates a largely depot-to-depot operational model, providing more than ten million deliveries a year to more than 4,200 customers focusing on SMEs.
Many of the items it handles are to large or awkward for automated networks. Sales last year were £127.8m while EBITDA was £15.2m.
Connect reckons that Tuffnells core addressable market is worth £740m, and believes that this market will grow at three to four per cent a year. Following completion of the deal, Tuffnells will operate as a separate division within Connect Group.
Lloyd Dunn, managing director of Tuffnells said: “By combining our businesses we will immediately benefit from opportunities to share skills and create synergies. We are already planning for strong standalone growth and expect there will be significant further benefits as we combine with Connect Group to deliver for the next phase of our development.” The deal will be funded partly through a £55m rights issue, along with extended debt facilities of £50m.

First published in Supply Chain Standard, December 2014