DHL Supply Chain’s UK operating profit fell by 11 per cent to £99.8 million for the year to 31st December 2016. In its annual results, the company said underlying business performance had been robust with underlying sales growth of four per cent.
However, turnover was down by 23 per cent to £3.1 billion last year as a result of changes to the terms of DHL’s giant NHS Supply Chain contract.
The NHS contract was renewed in October 2015 for three years. Under the old contract DHL acted as a principal in the provision of procurement services so the revenue and costs were shown in its P&L, but under the new contract it acts as an agent and consequently only includes its management fee.
The report said: “Taking into account the change in the treatment of expected revenue relating to NHS Supply Chain, the underlying business performance was robust with new business and renewals off-setting the effect of any lost business resulting in underlying turnover growth of four per cent.
The report said operating profit had been impacted by a reduction in other operating income.
DHL has been working to make the company the main trading entity for DHL’s supply chain business. This means that some retail and consumer contracts held in other DHL companies, such as Exel UK and Tradeteam, have been renewed in DHL Supply Chain.