Connect Group's CEO and CFO are to leave the business and its Pass my Parcel network will be closed, following a grim trading update that laid bare significant challenges at Tuffnells.
The update said that the group's performance in the third quarter had been "extremely disappointing", and Connect had consequentially "materially reduced" its pre-tax profit forecast for the full year. A difficult peak period for express parcels carrier Tuffnells contributed to this, it added.
Back in May speaking about its results for the half year to 28 February, Connect Group told MT that the division’s performance was expected to improve in the third quarter with peak underway - peak here being the spike in two-man deliveries traditionally experienced as consumers start to buy garden furniture etc in significant volume.
However, today's update revealed that Tuffnells actually suffered a 12.3% drop in turnover during the third quarter to £43.5m (2017: £49.6m).
Tuffnells' turnover for the year to-date is currently down 3.9% at £136.2m, and it has continued to face difficult trading conditions in a "volatile" market.
Connect has warned that it does not expect Tuffnells’ full year performance to be better than in the first six months of the year, which saw the once star performer slump into the red.
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However, a spokesman for Connect Group told MT that the decision to shutter Pass my Parcel would strengthen Tuffnells' position, as it will no longer be required to trunk small parcels for the network and will refocus on its core IDW (irregular dimension and width) operation.
The closure of Pass my Parcel is the result of a six week internal review and the exit from the market will be "orderly and swift".
Connect Group commercial director Stuart Godman said: "It’s hugely disappointing when a new venture doesn’t succeed, but the level of losses is unsustainable, and to continue would potentially compromise investment in our core Tuffnells and Smiths News businesses."
Key actions
Connect Group will proceed with three key operational priorities: a turnaround of the faltering Tuffnells, a clean exit from the click and collect market with the Pass my Parcel closure, and maintaining a resilient performance at Smiths News.
An external hunt for CEO Mark Cashmore's replacement is already underway, but he will remain in-post temporarily to ensure a smooth leadership transition.
However, chief financial officer David Bauernfeind has left the business with immediate effect. Former Yodel CFO Tony Grace will replace him from 18 June.
A spokesman for Connect Group said that Grace’s knowledge in parcel freight will be strengthen the remaining executive team’s knowledge and experience in the parcel freight sector.
“Importantly,” he added, “from an operational perspective there will be no compromise to delivering excellent service as we establish our turnaround plans”.
