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Profit trends...

20th May 1977, Page 47
20th May 1977
Page 47
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Page 47, 20th May 1977 — Profit trends...
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Which of the following most accurately describes the problem?

MITCHELL Cotts Transport has been facing mixed trading conditions, but its financial results showed an improving trend.

For the six months ended in December 1976, total turnover reached £3.8m, which represented a rise of nearly 12 per cent in value terms. Pretax profits also increased by 4.9 per cent during this period, though after-tax earnings were lower as a result of higher allowances.

The company is a subsidiary of Mitchell Cotts Group, which owns 77 per cent of its shares. Its principal interests include warehousing, cold storage and road transport.

The company has a number of subsidiaries including Camomile Investments Ltd, the holding company for the group's warehousing properties; Mitchell Cotts Transport Services Ltd, responsible for contract hire, road transport and warehousing; and West Kent Cold Storage Co Ltd, which operates warehousing and cold Storage facilities The group has maintained a reasonable rate of growth 'though, after taking into account inflation, the increase in turnover has been Jimited in real terms see graph 1). In 1975-6, turnover rose by 18.6 per cent and the rate of expansion has been slowing down over recent years as a result of the slack economic conditions prevailing in the country. For the year ended in June 1976, pretax profits amounted to £767,000 and the company was on a recovery tack following the difficult conditions experienced in the previous year.

During most of 1976, overall conditions were slack and reduced tonnages and lower mileage were reported by the transport side.

Moreover, considerably higher costs were incurred, even though the number of employees was marginally lower. in fact, the wage bill went up by an average of 17 per cent in 1975-6, and tighter margins were being experienced by the company. The level of profit margins has been disappointing for a number of years and the trend has been sharply downward recently. Trading profits as a percentage of total sales dropped to 14 per cent in 1975-6, compared to 15.8 per cent in the previous year ;see graph 2) while pretax profits only amounted to 11 per cent in that year.

Obviously, the fall in demand for some of Mitchell Cotts' services coupled with escalating costs, especially higher wages and fuel costs, were the main reason for these lower margins; at the moment, there are no signs of this trend being reversed, especially as competition has remained quite fierce.

The 16-ieit figures were reasonably satisfactory in view of the general economic uncertainties. Pretax profits amounted to £403000 and were better than last year, but were still below the peak reached in 1973, when earnings amounted to £417,000.

Trading margins have continued to be under pressure and averaged only 10.5 per cent during the July-December 1976 period, and this compared with 12.9 per cent in the previous year.

The increase in turnover was less than the rate of inflation and, obviously, Mitchell Cats had some 'difficulty in achieving a higher level of turnover in the current economic climate. It is believed that Mitchell Cotts is still not operating at full capacity and it will take time for the company to use its capacity to its maximum potential.

For the second half of its financial year, the directors have said that they expect profits to continue at least at the same level during the second six months.

It is possible that pretax earnings for the full year will

amount to between £800,000 and £850,000, if conditions in industry do not deteriorate any further. Thus, higher profits of .about 10 per cent could be seen during the current year, but a significant upswing in • earnings will have to wait until 1977-8.

It is encouraging, however, that the interim dividend has remained unchanged and was fixed at 1.155 pence per share.

'FflRI_ORRIES are being Idedeithis afternoon. They'll be carrying apples, French apples, from Anjou, to British markets in Manchester, Hull, Halifax and Leeds.

Four thousands bushels are coming in, 1,000 in each lorry. On a normal day five lorries arrive, every day of the week, bringing in a year, 25,000 tonnes of fruit to the UK.

This business, to put it mildly, is booming.

The company that runs it all is called Les Vergers d'Anjou, literally "The Orchards of . Anjou." It's a co-operative society, owned by the 100 or so producers in the region around Angers, in north-central France, growing apples and pears for export.

The Society, explains Yves Glemarec, the "directeur administratif" (md), is "very oriented toward the British market." Despite other export business (notably to Germany the firm looks toward the UK for the bulk of its foreign trade.

The decision to move into the British market was taken in 1960. The director of the company came to England at that time to study our likes and dislikes in fruit. He concluded that we eat small, green apples, preferring them with an elusive quality called "crispness."' We don't like, it was decided, sugary yellow or red apples, the sort that are eaten in Latin countries after a meal. Yves Glemarec finds this perplexing, but nonetheless the orchards around Angers began producing apples for our odd English tastes. Business, after all, is business.

"If I had to analyse it," Glemarec says, apropos national tastes in fruit, ''l would say it's because the English eat apples between meals, and the French after a meal, for dessert." .. - The company was one of the first from France to create its own office in England to handle the marketing of its product in this country. At first, in the early 60s, transport from France to the UK was carried out by the railways.

Now, seventeen year later, the company has switched to lorries exclusively. Glemarec explains: "There were delays in delivery with the railways. And also the price wasn't right. Using the railways was 20 or 30 per cent more expensive than using lorries.

"And a third reason was that many of our clients didn't have rail links and the wagons couldn't discharge at the premises, obliging the clients to go and collect the produce."

The first road trailers to go out to England were pulled from the Society's headquarters in Angers to their port, then sent over to England as unaccompanied traffic. From there they were pulled by English units to the market place.

All the transport of the fruit is done by vehicles on contract hire, even now. The Society has never bought any lorries of its own, because of the seasonal nature of its work. Glernarec estimates the company would need 10 lorries if it were to purchase its own, and during the harvest season, when there are no shipments, they would be standing idle. That, obviously, is not economically sensible.

"When I look to contract lorries," Glemarec says, "I ask for the vehicles to be in a good state: good floors, and of certain dimensions. I also want a guarantee of delivery in the best conditions."

The lorries used now are both from French and British firms. The French, after an initial disinterest in hauling fruit, became interested when the full force of the economic recession in Europe hit home. For British hauliers, in need of backloads from the Continent, there was an attraction from the outset.

"I use now about half English and half French lorries. Ifs a question of opportunity and of service, If I asked for 25 British lorries I risk getting 15 on Wednesday and 10 on Friday. That is the fundamental problem, "I must have the 25 lorries a week, but I must have them spread out, every day, five on Monday, five on Tuesday, and so on, "So to regulate the loading I am obliged to diminish my opportunities of working with English lorries. I am forced to use more French hauliers to equalise the number of lorries a day.

"On Mondays, any truck from England will be unloading, say in Narbonne, or Bordeaux, or elsewhere. It takes them time to get here. If they discharge in Toulouse on Monday, for instance, they'll be here on Tuesday, If they discharge in Lyon or Marseille, they won't be here until Wednesday.

"To use English lorries I must be assured of service: I must have a set number of trucks at a set time. If I want four lorries a day for example, I, want two at 10am and two at 4 in the afternoon. I doubt there is an English haulier who can guarantee that. Especially with seasonal work.

'1 would like to use English lorries though. Their prices are less than the French, probably 20 per cent less expensive." The loading arrangement now, one that seems to suit the Society, is for a contract haulier to leave his trailers overnight at the premises. They are then loaded whenever the schedule requires, and picked up by tractive units from the company.

One of the units picking up this afternoon, a Volvo from Maison LeFlem tone of the primary contractors to the • Society), is driven by Claude Lescodan. He will be taking the load as far as Halifax, following the other three lorries up the motorway tomorrow.

Tonight, after the loading, he will go home — he lives near Angers — then in the morning take the Brittany Ferry sailing from St Maio to Portsmouth.

Getting across the Channel is one of the regulators of the delivery times of loads from the Society. When the service began, all crossings were made from Calais or Le Havre, often unaccompanied. Since then the Society has abandoned unaccompanied traffic. "accompanied is much faster,'" says Glemarec) and, more importantly, new ferry services have been started linking Brittany directly to the UK.

Most of the traffic from the Society now crosses on the Brittany Ferries sailing from St Maio and Roscoff. But it is not up to Glemarec where the hauliers sail from. It's up to them.

Glemarec explains: "I ask for a service from a transporter, to carry apples to England. He can cross where he likes, as long as he delivers on schedule.

"The ferries from Roscoff, Cherbourg and St Malo have given us a choice of crossings. But there are problems in passing certain ports, from delays in Customs. The Customs procedures vary greatly, but I don't know why.

"The better, faster ports are Poole, Plymouth and Portsmouth. Dover is quite good, but there are some delays due to heavy traffic.

''Southampton is the worst. So bad that I've advised our transporters not to pass there.'

For Claude Lescodan the decision to take the St Malo-Portsmouth sailing in the. morning was determined bythe vagaries of booking. Had he loaded in the morning he would have caught the night crossing from Roscoff, slept on the boat and arrived in Halifax the same day. But because he didn't know what time the loading was, he couldn't reserve space on the boat.

As it is now he will arrive in Portsmouth at seven in the evening, then drive to Haifax during the night.

The tractive unit, a Volvo F89 Turbo, is a sleeper ''couchette" in French making it sound something like a train) and he will sleep in the cab. Unloading is in the morning, then it's back to France, with, Claude hopes, a backload.

He arrives at the St Malo ferry docks at 10 in the morning, ready for the 11' o'clock sailing. The next seven hours will be, officially, rest time, and the company has reserved a cabin on board for all the drivers.

Because it's only Claude's second trip in Britain, he will be following one of the other drivers up the motorway. He doesn't, he says, have any idea where Halifax is, but, he adds, "the English are very helpful people."

For his travel to England he receives a -prime," a taxable bonus of about FF800 ;£100) a month. On the road he gets an extra FF70 ;£9) a day, for food and expenses. Petrol is paid for by credit card, and among Claude's limited English vocabularly are two new words: "Full, please.

The Volvo unit is one he drives every day. The trailer is 121/2 metres long with three axles, and obviously it changes

from job to job.

On the boat Claude doesn't spend as much time .sleeping as he usually does. Beyond talking to journalists ius) he has a meal and spends some time at the bar. But it's still, after all, rest time.

Upon arrival in Portsmouth he is met by the usual Customs procedures. This time, it takes. less than 40 minutes. The papers -loading papers, tax papers, and Customs papers -are examined, and a few of the cases are weighed. Then he's through, all set to get used to driving on the opposite side of the road again. •

"For us in England, or in any other country, the work is the same,he says. "We have a load, and we are paid to take it to a destmaticin. Whether it is in France, or England, or Germany, it's still the same. We're paid for a job.

Once in England the four lorries will go their own ways, two of them, including Claude's, towards Leeds. He expects to be in Halifax by two or three in the morning. The time depends on how tired he is and if he feels it necessary to pull off the road for a rest. But, whatever happens, he will get to Halifax in time for the unloading in the morning.

"That is why we try and sleep on the boats; so we can deliver to our clients at the right time,he says.

Before driving off there's the small problem of dinner. English cooking is not universally admired among French drivers "The English eat one way, we another,Claude says, but in

Portsmouth there is a small café that seems to be known to Continental hauliers. "We eat well there," Claude says. "It's French cooking."

After dinner he will begin the drive to Halifax. The backload is being arranged by a brokerage firm from France. As yet, Claude doesn't know where it will come from, but with any luck he guesses he'll be home again in two days.

• Paul Mungo


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