Warning sign

Profit margins continue to be held back by customers’ reluctance to increase rates, John G Russell (Transport) chief executive, logistics, Alan Poulton has warned.

“Margins still remain challenging; getting the right price for the job still remains challenging,” he told Motortransport.co.uk. “We believe the market still isn’t paying the right price for the quality they want for the job.

“Although we have a good story to tell about customers staying loyal, the transport margin, in particular, is very difficult to move and [in terms of] trying to win new business, there are always people willing to quote unsustainable rates,” he added.

Turnover at the Glasgow-based logistics group rose 7.5% from £58.8m to £63.18m in the year to the end of March 2013; profit before tax, however, fell over 43% from £1.64m to £933,000 as a result of problems at its chest freezer manufacturing operation Icetech, which was placed into administration in April last year after losing 50% of its revenue following the demise of retailer Comet in late 2012.

The loss of Icetech will wipe around £8m off the group’s turnover for the current year, confirmed Poulton – but also the £962,000 hit to profit the freezer manufacturing operation generated last year.

Growth in the core business in the year to the end of March 2013 helped make up for this, with logistics turnover rising 13% to just under £54m (2012: £47.6m) thanks to a number of small new contract wins and growth in business from existing customers .

Logistics business growth has continued in the current financial year and will be “not dissimilar”, said Poulton.

“The core logistics business will continue to show growth in our existing market sectors of food, drink and consumer products and with existing customers. We are cautiously optimistic, looking forward,” he said.