Eddie Stobart profit falls as increased costs bite

Stobart Group’s transport and distribution division, Eddie Stobart, saw revenue grow but profit fall in its most recent trading year, as it failed to cover increased costs through rate rises.

For the 12 months ending 29 February turnover rose to £519.5m from £475.3m a year ago.

However, pre-tax profit fell from £34.2m to £27.4m, due to cost increases of £4m “which have not been fully recovered through rate increases, mainly due to the increase in our customers' costs”.

Furthermore, £11.4m of revenue growth (a quarter of the total increase) was a direct result of fuel surcharge increases passed on to customers. This reduced its margin by 0.2%.

However Stobart has begun work on a new contract for Tesco grocery at the Daventry rail terminal, as well as completing a full year of its contract with Britvic.

It also benefited from growth in transport work for Stobart Biomass. The division, it its first full year of trading under full ownership by Stobart Group had a turnover of £8.4m and a pre-tax profit of £1.2m.

In the latter half of the financial year Stobart restructured its ambient fleet, to improve vehicle utilisation and reduce costs. This saw the company incur a one-off £1.4m restructuring cost, but it expects to make savings of £1m a year.

During the same period it also closed its depot in Leeds and reduced headcount by 284 in the ambient fleet giving it an “optimal ratio of tramper drivers to day-night drivers”, according to chief executive Andrew Tinkler.

Stobart is also restructuring its chilled operations, with the closure of its Corby and Alcester distribution centres (DCs), which are transferring to a new site in Manga Park, near Lutterworth in Leicestershire.

Tinkler says: “This is expected to lead to a significant saving in mileage and reduction in vehicles, drivers and site staff required to service the existing work.

“We estimate that the one-off costs of site closures and new site set up costs will be in the region of £2.9m and fall in the financial year to 28 February 2013. This restructuring should lead to ongoing cost savings of approximately £1.5m per annum.”

However, in its chilled business, and despite winning a new contract with Arla Foods, volumes declined by approximately £3m in revenue terms.

• Stobart Group  says it is planning to resubmit proposals for a new development at Magna Park in Lutterworth, following a public meeting with locals to address concerns. It originally withdrew its plans for the development, which included an office complex and parking for 130 HGVs, in March, due to technical issues with the. These included concerns about flooding and further information needed with regards to a potential increase in traffic to the area. Magna Park owner Gazeley UK, who is submitting the plans on behalf of Stobart, is due to attend a public meeting at Lutterworth Town Council on 28 May, to respond to any queries from the council or local residents. If given the go-ahead, the new site is anticipated to create 100 jobs.