Norbert Dentressangle’s acquisitions of Christian Salvesen in 2007 and TDG in 2011 made the French group’s UK logistics operation a £1bn a year business, representing almost a third of group turnover, and silencing critics who had questioned the company’s commitment to the UK.
On the face of it, ND’s desire to build its UK business seems odd, as profit margins in UK in contract logistics have been seriously eroded since the 2008 recession.
But François Bertreau, chief executive of ND, says that viewed from France the UK is a good place to invest.
“For sure, the UK is a good market,” he tells MT. “It is roughly the size of the French market and Norbert Dentressangle has always been active in the UK. When it started expanding in the 1980s one of the major axes of development was transporting fruit and vegetables from the south of Europe to the north, especially the UK. So the UK has always been a very important country for Norbert Dentressangle.”
Norbert Dentressangle was founded by the eponymous Frenchman – who still chairs the group’s family-owned holding company - in England in 1979, hauling French apples to the UK, and has come a long way in the last 32 years to become the UK’s third largest logistics operator.
“In 1998, 20 years after the creation of the group, the company entered the logistics market with warehousing and distribution in France,” says Bertreau. “Progressively we expanded outside France, but were not strong in the UK market until 2007 when we bought Salvesen.”
The 2008 MT Top 100, based on 2007 data, ranked ND sixth – up from 52nd the year before – with turnover of £512m while TDG was placed 7th with sales of £478m.
“In 2008 we were present in transport and logistics, and thanks to TDG we reinforced our international presence not only in the UK but also in Spain and the Netherlands,” says Bertreau.
Since then, ND’s progress has continued, and in the first nine months of 2011, group revenue was £2.78bn, up 25% on the same period in 2010. Transport revenue was up 20% including TDG, and up 7.8% on a like-for-like basis. Logistics revenue grew 26% including TDG and 4.1% like for like, with the UK leading the way.
While ND’s nine months figures leave out profits, its interim results for the first six months of 2011 reveal that group operating profit rose 30% to almost £59m on sales up 22% to £1.47bn. As a result, ND’s overall profit margin rose to 3.4%, up from 3.2% in the first six months of 2010. The transport division made a margin of 2.5% while logistics fared better with 4.3%.
“In logistics, wherever we are, the level of profitability is the same, and the profitability of the former Salvesen operation is roughly the same as for historic ND activities,” says Bertreau. “We don’t have a target profit margin for France, the UK or other countries. We have targets for our businesses – some are close to target, some are above and some are more difficult and we are working hard to get them on track.”
With hindsight, the timing of the acquisition of a large UK contract logistics company in 2007 just before the credit crunch struck was bad luck. But Bertreau insists Salvesen was a good buy.
“Buying Salvesen was very important for the group in terms of size, internationalisation and reinforcing our range of services in cold logistics and pallet distribution,” he says. “We had eight business units when we bought Salvesen and already some of these have got to a level of profitability which is the same or better than the historic profitability of the group. So from the pure financial standpoint there is no doubt about the Salvesen acquisition.”
While the absorption of TDG into ND is progressing apace, Bertreau says it will take eight to 12 months to fully integrate. Only then will he get a full understanding of the value TDG has brought to the group.
“With TDG, as with any third party logistics provider, you have plenty of good contracts and some contracts in some countries which have been negotiated in poor conditions,” he says. “In TDG’s case it is mainly outside the UK that we will find contracts which could be renegotiated. In the UK the contracts were not badly managed.”
With two big UK acquisitions now successfully under its belt, and the pound weak against the Euro, the question on everyone’s lips now is ‘will ND buy in the UK again?’ But Bertreau says exchange rates will have no bearing on the timing of further deals.
“We are not making acquisitions for monetary or financial reasons,” he says. “We are making acquisitions because they make sense from a strategic standpoint, and the strategy is develop the business inside and outside France.”
With Wincanton under its new CEO busy restructuring and possibly vulnerable, Bertreau must be among the predators eyeing up the company. “No comment,” he says with a smile.
Bertreau also refuses to be drawn on whether ND has a target for the percentage of turnover it wants to see outside its home French market, which is in danger of being dragged into the spreading eurozone sovereign debt crisis.
“The group wants to be international,” he says. “It was very French up to the year 2000. Thanks to the Salvesen acquisition, the importance of France decreased and that of other European countries increased. We want to be a European company and there are more opportunities outside France. It is important to understand that it is the will of the group, its shareholder and the management to develop on an international basis. That is why entered the freight forwarding market in 2010, because it is a super vehicle to internationalise the group even more.”
As a result of its acquisition of freight forwarder Schneider International, ND has established itself in new markets such as Chile, Brazil, US and China.
“We want to make this division part of the group and consistent with the size of the other divisions,” says Bertreau. “We are concentrating on sea and air freight, maybe with more emphasis on air freight, but we want to be able to serve our clients whatever the means of transport. For our logistics and transport clients in Europe, now we can manage flows of goods from other parts of the world. Freight forwarding is also a first step to develop contract logistics and maybe transportation in other countries.”
While ND is happy to use third party carriers for its sea and air legs, Bertreau aims to have ND people at either end of the supply chain. “We have invested to have people in the US and China at the start of the transportation chain,” he says. “That is very important for us.”
ND’s major logistics markets are in retail and FMCG such as mobile phones, electronics, white goods and automotive spare parts, and these will naturally be the initial focus for the freight forwarding business. Here it will be coming up against the big boys of international freight, but Bertreau is clearly unconcerned about the challenge.
“Yes we are competing with DHL and Kuehne + Nagel, but we already compete with them in logistics,” he laughs. “K+N entered logistics by buying ACR, while DHL is a big player in logistics thanks to its acquisition of Exel and Tibbett & Britten. We have an advantage, which is our organisation and culture. I am very impressed by the size of DHL but I am not impressed by the way they operate.
“ND’s approach is to ‘keep it simple, stupid’ - be a giant but be flexible, and answer your clients’ questions quickly. Our style is very different from DHL and K+N. We have people at local level able to make decisions without going to the boss or a committee and waiting a month or two for an answer. We empower people – our founder in 1979 was very entrepreneurial and we try to keep that spirit in the company.
“When I came to ND in 1998 we were making €600m turnover, now we are at €3.6bn, so we have grown six times in 13 years. But the spirit of the company has not changed. The group HQ is just 30 people and we keep decision making as low in the organisation as possible. We keep working on simplifying the lives of people working at ND and we try not to create bureaucracy.
“We also want to keep our people committed and feeling part of the company. So with our entrepreneurial spirit and commitment from the operational standpoint I think we are not too bad. The culture of the organisation is one of our main competitive advantages. We are smaller than K+N and DHL – but maybe in 10 years’ time that will be different. We are on a development track – the TDG acquisition was part of that. It’s an important step towards a bigger, global group but it is not the end of the story.”
ND group at a glance
- Revenue (2010)
- By business: Transport £1.65bn; Logistics £1.38bn; Freight forwarding £86m
- By country: France 42%; UK 31%; Rest of the world 27%
- Total employees: 33,000
- Total fleet: 8,300
- Warehousing: 6.5 million m2
- Sites: 500 in 20 countries
- ND in the UK
- Annual revenue: £1.04bn
- Employees: 13,000
- Sites: 195
- Fleet: 1,800
- Warehousing: 2.5 million m2
