Pall-Ex Group saw a return to profit in 2020 after improving operational efficiency, building greater network coverage and being aided by a “stable” membership.

Reporting its latest annual results to 31 July 2020, the group unveiled a 6% rise in turnover to £87.2m (2019: £82.2m) with a pre-tax profit of £334,000, up from a loss of £1.8m on the previous year.

In its strategic report to the results, the group attributed the improved performance to Pall-Ex UK, its pallet management and haulage arm, which it said delivered improved network coverage, reduced operating costs and made operational efficiency improvements at its main hub.

Whilst the Covid-19 pandemic hit volumes, the group said the loss was partly mitigated by the £0.5m recovered through the furlough scheme.

Pall-Ex UK saw pallet volumes increase 6%, resulting in a 4% increase in its turnover to £76.6m compared to £73.4m in the previous year.

During the year, Pall-Ex UK acquired Cranleigh Freight Services, which was bought via its subsidiary Cranleigh Distribution Services. However, the report noted that the four subsidiaries, which also include Pall-Ex London, Shears Brothers and Intercounty Distribution “continue to constrain the group’s overall performance”, with losses amounting to £0.8m compared to £1.6m in the previous year.

The group is forecasting that turnaround plans will see an improved performance from the four subsidiaries, the report added.

It also noted the necessity of the four subsidiaries for network coverage adding that “without them the incidence of coverage costs would be significantly higher”.

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Pall-Ex International delivered a £48,000 profit in the period, up from a £0.7m loss in the prior year, which the group attributed to a reduction in administrative expenses.

It’s interaction with its international partners increased “significantly” the report said, with more than 65% of the pallets handled by Pall-Ex in Europe now being on mainland Europe rather than in the UK, making it “Brexit-proof”, it added

Speaking to motortransport.co.uk this week, MD Kevin Buchanan (pictured) said that the annual results covered just eight months of the company under new management ownership, following the departure of founder Hilary Devey in October 2019.

He added: “We have turned the business round and brought it back into profit. We expect to finish this financial year - in July 2021 - with more than £2.5m of EBITDA.”

Buchanan said Pall-Ex’s owned operations are also on track to turn a profit, after a major management restructuring which saw new management teams put in place at each company.

“By the next financial year - 1 August 2021 - we expect them all to be profitable. I think we will end up with four really strong businesses all contributing to group profits and with a very diverse activity range.”

Turning to the purchase of Fortec last August, Buchanan said the pallet network was making significant strides.

“We knew the first six to nine months would be tough and we planned for that – we’ve been building their confidence, recruiting new members, taking coverage cost out and getting volumes up and Fortec is on track to start to be profitable from this month,” he added.