Diversification — measuring success
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ANNOUNCEMENTS by a number of concerns reflect the growing diversification of companies into transport — and from transport — in bids to give them a wider base. This was particularly noticeable in the latest Amey Roadstone Corporation report. Apart from being a leading sand and gravel and construction company, ARC is also now one of the biggest road haulage operators in the country.
ARC's transport company is Greenwoods Transport and ARC in its annual report for the year ended June 1982 indicates that the Greenwoods' contribution was £18,701,000 against £15,875,000 in the previour year. Operating income was £644,000 compared with £339,000 in 1981. Capital employed in the business went up from the 1981 level of £6,424,000 to £7,094,000.
These figures indicate a very healthy situation, so what contributed to Greenwoods' turnover? ARC explains that Greenwoods Transport operates a handling, warehousing and distribution service from depots in the United Kingdom, with emphasis on the distribution of foods, oils, chemicals and electrical goods. It is a leading distributor of magazines and periodicals to wholesalers and retail outlets. Note, therefore, that even in haulage it has spread its risk.
"Contribution to profits from these activities has remained steady in the year under ,review," reports the company. It goes on to say: "The company is also engaged in commercial vehicle sales and rental backed up by service and parts provisioning from truck centres at Sand bach (Foden), Haydock (OAF), Hoddesdon (British Leyland) and Oxford (ERF)" and says that: "In spite of the fall in the level of commercial vehicle sales in the UK, this part of the business has increased sales and is establishing itself with improved facilities and a new management team."
ARC has subsequently put Greenwoods up for sale and has sold one of its dealerships.
Turning to an even bigger case of diversification, the way the National Freight Consortium is pinning its flag to bricks and mortar is intriguing. This is not surprising, when, as revealed the other day at the annoucement of the formation of the NFC Porperty Group, property assets owned — just for starters — stand at £66m.
The stated objects of the new group, which is headed by Jack Mather, are: to make operating companies aware of the value of their premises; to improve the NFC property portfolio; to maximise rents of NFC properites let to third parties; to identify development or disposal sites; to develop for in house use and to generate rental income; and to dispose of surplus property.
The figures revealed are staggering. The group has somewhere around 950 sites throughout the UK including around 650 depots, workshops and warehouses, 200 retail premises belonging to Pickfords Travel, and 100 miscellaneous cold stores, waste disposal sites and other such specialist properties.
There is no doubt that the NFC is on to a winner with this aspect of its business. Already property revenue is seen to be propping up the Consortium's financial results in the first months of operation. It is just possible that this is going to be by far the most important part of the NFC's activities.
The transport activities there still have a long way to go to reach the profit levels they should be attaining in spite of the savage cuts made in the past two or three years in a number of the companies so will "the tail", in the form of the NFC property group, wag the dog, in the form of the NFC's operational activities? Its companies have in the past had quite a few lemons to balance out their successes; not least the Pickfords International fiasco in Europe, under the old name of course.
They have been involved in own-account fleet takeovers — as have several other special contract hire concerns. No one seems to know, generally however, just how profitable such deals are in the long term. The companies concerned naturally keep the information close to their chests.
On the face of it, one of the latest deals of this kind must be regarded as a plum for the contract specialist involved, Transfleet Services, the LexLombard company. Transfleet's purchase of the entire TI Raleigh fleet of 38 artic tractive units and 140 trailers on a contract basis is a big deal but the success, or otherwise, of it can only be measured in the future financial results of Transfleet. If the success level there is difficult to assess how much more difficult it is for the outsider to work out if say the takeover by NFC companies of such fleets as that of Hoover are profitable ventures.
Some people are not finding the contract hire game full of profit. Why else has Avis, for example, wrapped up its contract hire operation and sold its 500-strong contract fleet to Mitchell Cats?
Mitchell Cotts makes real money out of contract hire and it is now a very formidable force in road transport. According to its company report for the year ended June 30, last, turnover from transport activities rose from £148.6m to £160m with a profit contribution of £4.16m (£4.12m in the previous year). This was out of the total Group profits (it has other interests) of £9.73m. This was without the Avis takeover, of course, which incidentally boosted the Mitchell Cotts contract hire fleet to 1,500 vehicles.
Avis, it should be said, has not pulled out of truck rental, Avis operations in that sector continue with the company concentrating on vehicles of up to 7.5 tonnes rented out through its 80 car rental locations.
• by George Malcolm