Takeovers point the way ahead
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THE TAKEOVER of Atlas Express by United Parcels of Wellingborough at the beginning of December was a landmark for the parcels business in the UK. Few would have predicted 10 years ago, although there were already signs of growing competition, that Atlas would be a loser.
At the helm there were two of the industry's best respected names, Jack Brown and Dick Farmer. Sadly, it would appear that they exercised less day-today control as they moved towards retirement and the fortunes of Atlas declined.
The past 10 years have seen an unparalleled period of competition in parcels carrying, and the acquisition of Atlas must be seen in this light. A decade ago there were no more than 10 national parcel carriers. Today there are 15 or more with storage and distribution specialists overlapping the activities of general parcels carriers, the main head-on competition perhaps coming from the Australian-backed TNT organisation.
Atlas is not the only parcels company to have suffered from the intense competition. One wonders what would have happened to Road line and National Carriers in the period leading up to the formation of the National Freight Consortium had they not been owned by the National Freight Corporation. Both Roadline and National Carriers were shadows of their former selves when the consortium was formed. The NEC accounts since have shown the operation of these two companies to be the consortium's main problem area.
But to return to Atlas Express, the main difficulty there seems to have been that in relatively recent times it did not get its rates structure right. This resulted in their having to do a deal with a competitor.
• Atlas, I understand, also had problems with cash flow ,and redundancy payments.
Fortunately the company has gone to a rival of similar standing. It is not only the market leader but has a good profit record. According to the recent survey by Inter Company Comparisons (CM November 3), the turnover of United Parcels in the year to January 1984 was £60,719,000 and the profit before tax £7,769,000. That is an exceptionally good level of profit on turnover. There is consistency too, for in the previous year, the turnover figure of £53,603,000 was matched by a profit of £6,725,000.
The Atlas name is not, I understand, to disappear. It will continue to be used by United Parcels, with the Atlas organisation run largely as an independent unit.
United Parcels has not acquired all of the Atlas Group companies, just the mainstream parcels business as represented by Atlas Express. Other main subsidiaries of the group have been the subject of management buy-outs, the successful Atlasair company going to a group headed by Tony Keating and Atlas Bow International becoming a part of a group headed by Peter Farmer.
To side-track slightly, the recent ICC reports on road hauliers referred to in the context of United Parcels' results have some peculiar anomalies. Among the companies included in the reports (one covers the Midlands and the North, the other London and the South) is Scottish Road Services. The principle place of business is listed as Falkirk, a legacy presumably from the Road Services (Forth) days.
Oddly, too, other public companies listed are Felixstowe Tank Development, a Tankfreight subsidiary, itself part of NFC. Then there is Lyon and Lyon of Knottingly, West Yorks, described as Ford main dealers, vehicle repair specialists shipbuilders and repairers.
I would have thought that the formation of the National Freight Consortium alone would have caused the automatic removal of Felixstowe Tank Developments and Scottish Road Services from the quoted companies list. It also seems odd that a company such as Lyon and Lyon, which according to the ICC activities description has no haulage interests at all, should be listed.
To be fair, the reports on individual companies seem on the whole to provide a very real measure of the industry's performance.
Returning to the other major takeover of the moment, that of Unilever's SPD Group by the National Freight Consortium, it must be said that this move really makes sense for the consortium as SPD's activities totally align with the NFC's mainstream storage and distribution business particularly.
The two organisations operate parallel functions in many ways although that of the SPD Group is much smaller. It employs 2,700 people compared with the 23,000 of the NFC. Last year its turnover was £55m compared with the NFC's £500m.
When the acquisition was announced it was explained that SPD had four divisions. The first of these covers national distribution and warehousing, brand named SPD Distribution, and compares broadly with such NFC services as BRS Distribution which forms an integral part of the services offered by the four BRS regional companies.
The second is the national distribution of fragile and highvalue goods under the Carrycare name which has a direct counterpart in the Chinaflow operation which originated from National Carriers.
Then there is SPD's tailormade warehousing and distribution operation dedicated to individual clients in the form of its contracts and trading division which has counterparts at both BRS and National Carriers.
Finally, there is Unispeed which, although described as a contract bulk haulage company, in the original joint statement from the NFC and SPD in fact operates largely in the temperature controlled transport sector. It has not only a parallel with the NFC's Tempco-Union, but would fit in well with a number of other operations, not least fridge vehicle hire at BRS Truck Rental.
Overall, the move to shed SPD reflects the new thinking of many large groups like Unilever which have decided to hive off their transport interests. With Unilever it is a massive decision involving the sale of Norfolk Line (among other activities) which makes the disposal of SPD appear small.
The tendency of other giant companies like J. Sainsbury and Whitbread to seek the services of specialists in the storage and distribution function (both companies have signed up on multi-million-pound deals with BRS) point the way to a healthy future for the NEC.
No wonder then that Geoff Pygall, BRS group managing director, was able to report at a press lunch recently that the 1984 results at BRS would show a revenue increase of 13 per cent and an increase in profitability of 30 per cent, with growth in several main sectors like truck rental (up 20 per cent) and distribution (up 11 per cent).
He also said he was "optimistic about contracts" which augers well for the future, not only for BRS but the NFC as a whole.