Mounting losses of £1.7m accrued by Pall-Ex’s three haulage subsidiaries - Shears Brothers (Transport), Intercounty Distribution and Pall-Ex London - “constrained” HLD Holding's performance last year, according to its latest annual results.

HLD Holdings, which is owned by entrepreneur Hilary Devey, sold Pall-Ex to its management and network members for an undisclosed sum in October this year.

Reporting its annual results to 31 July 2018, the group posted a pre-tax profit of £411,000, up from a loss of £1.1m in 2017. It said Pall Ex UK was the "main driver" for the improved performance, pointing out that the pallet network had separately posted  a profit of £2.5m for the period, up from £1.9m last year. HLD Holdings attributed the profits rise to a 10% increase in pallets and an 8% increase in turnover to £71m (2017: £65.9m).

However Pall-Ex's three haulage subsidiaries continued to struggle in the period, making a combined loss of £1.7m, compared to a loss of £1.4m in the previous year.

In its strategic report to the results the group said the subsidiaries “have not performed to budget and their losses continue to constrain the group’s overall performance.”

It added that all three companies have turnaround plans “and are working hard towards achieving a nearer break-even performance next year.”

The group also pointed out that since coverage costs “would be significantly higher” without the input of the three subsidiaries, they played an “integral” role in the group.

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HLD Holdings’ turnover increased by 8% to £79.7m (2017: £73.6m) in the period, whilst administrative expenses were cut from £11.8m to £11m, “turning an operating loss of £1.1m last year into an operating profit of £0.4m.”

Freight movement revenues provided the lion's share of HDL's turnover with the rest made up of membership fees, which rose to £772,000 from £721,000 in the year. Turnover from diesel sales fell to £680,000 (2017: £1.7m).

Pall-Ex International's performance was boosted by "significantly increased" business with its European partners, the strategic report revealed, with 60% of all pallets handled by Pall-Ex in Europe handled on mainland Europe, rather than in the UK, during the year. Turnover from the group's European operations rose to £2.1m (2017: £1.9m) in the period.

As part of a review of its cash flow position HLD Holdings also extended its discounting facility with Metro Bank to 80% funding of up to £2.5m across the Pall-Ex Group in the period. The strategic report added that this was "extended further post year-end to 85% funding up to £3.25m."