John G Russell warns of continuing squeeze ahead

Glasgow haulier John G Russell (Transport) has warned the distribution sector of a “difficult” 12 months ahead as costs keep rising while rates and profit margins continue to stagnate.

Alan Poulton, chief executive, logistics at the group, told MT the firm was finding it increasingly difficult to squeeze further efficiencies out of its operation and said that, in terms of rates: “We are not getting, and have not got for some time now, an increase that reflects the quality and level of service that we offer or the increase in costs we have to swallow.”

Insurance costs, business rates, property overheads and vehicle expenses were all rising fast, said Poulton, and while the firm had made and continues to make every effort to increase efficiency and cut costs, it had already taken all the low-hanging fruit. “It’s getting more and more difficult to squeeze further efficiencies out of the business and our prices are not rising,” he said.

Higher costs and stagnant rates largely explain the discrepancy between the firm’s turnover and profit in the year to 31 March 2012, said Poulton. Despite raising group turnover by 11% in the year to £58.8m (2011: £53m), profit before tax fell 16% to £1.64m (2011: £1.95m).

Turnover was boosted by a number of developments in the business, he said, which included a new e-fulfilment operation at the Glasgow depot; a new national distribution service for packaging; the opening of an ATF in Glasgow; an increase in the group’s bonded warehouse capacity; and an expansion of its international operations. The group’s core logistics operations, however, remain the main driver of growth.

Looking ahead, Poulton warned the current year would be a hard one. “We’re not expecting it to be any different to 2012,” he said. “I would hope our turnover would be at least that of last year but it’s hard to say – we don’t see any light at the end of the tunnel.”