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Initial Targets parcels sedor with its latest acquisition
Page 10
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There has been consolidation in the parcels sector with Rentokil Initial spending £210m for rival Target Express. Chris Tindall reports.
RENTOKIL INITIAL says its purchase of Target Express has helped it go from being the fifth to the second largest parcels delivery service in the UK (CM 7 December).
An Initial spokesman says the £210m acquisition has also helped boost its coverage from 11% to 15% of the sector — only DHL is larger, with 16%.
However, analysts are speculating about the cost of the consolidation to Target's delivery staff, all of whom are owner-drivers who might suffer in the integration process.
Last year City Link, Initial's parcels arm, decided to buy back its franchises (CM 15 June). It now owns 56 of them, representing 80% of the network. It expects to buy the remaining 13 next year.
The company describes Target and City Link as "highly complementary businesses with similar operating models", predicting that the integration of the businesses.which is expected to cost £12m, will continue to expand parcels volumes and revenues above the market rate.
David Bagshaw of analysts Transport Intelligence says the acquisition is the latest in a line of similar purchases in a highly competitive sector: "The domestic market is still served by a large number of players [but] they are thinning out.
"There have been a lot of people saying the market will consolidate as so many other markets have done —and this is a step towards that.
"Target very much uses ownerdrivers, If there's consolidation it could mean that they are going to be on the wrong end of it." But Initial insists it is too early to say what will happen to these ownerdrivers: "When two large operations come together it's usual to have some duplication of roles," says a spokesman.
"However, in this instance the vast majority of people in the business are employed in driving and sorting roles, and we will still need them to sort and drive in the future — particularly as we aim to keep growing the business.
think it is worth highlighting that as we continue to grow we may also need additional people in certain areas or certain According to Target's last set of accounts, for the financial year ending 30 April, it increased turnover by 4% to £146m, but made a pre-tax loss of £25.6m.