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Forwarders face fight for survival
March 2007
Phil Hastings, International Trade Today
UK exporters and importers can expect to see further significant consolidation across the country’s freight forwarding sector, with that industry’s top performers get progressively stronger while many others find it increasingly hard to survive. Latest confirmation of that predictable trend comes from new research undertaken by UK-based business performance analyst Plimsoll Publishing. Less predictably, the study found that, in fact, a ‘staggering’ 97 per cent of the UK forwarding industry’s sales growth in 2006 was generated by just 93 companies. Meanwhile, many other forwarders were struggling to survive ‘in an atmosphere of declining sales and increasing debt, with at least 78 staring failure in the face’.
Those figures – based on research that included an individual analysis of 1,000 freight forwarding companies – prompted David Pattison, Plimsoll’s senior research analyst, to comment that ‘even I would admit to being surprised by the discoveries that my team has made’.
He suggested the latest analysis confirmed that constant rounds of consolidation were creating ‘super companies’, which were exerting an increasing control over the UK forwarding market. ‘Most of the companies in question are large, with sales over £10m. But 12 have sales of less than that – an indication that it is not simply a case of smaller firms being squeezed out,’ he stated.
Expanding further on Plimsoll’s findings, Pattison said that while looked at separately, the performance of the 93 ‘super companies’ could be seen as great news for the UK forwarding industry, the reality was much more disturbing. ‘These companies are forcing such intense competition that others are battling for survival,’ he warned.
‘Unless some of the worst performing companies start to come to terms with the financial implications of flat or declining sales, they will go bust or be forced to sell up. It really is a time of either joy or tears. The market-hungry will use this analysis to seek out companies to approach and buy. For the others, desperate to sell, it’s a case of finding a buyer,’ he claimed.
In fact, Plimsoll found that among the 907 other forwarding companies covered in its latest analysis, the following points emerged:
- 189 firms were in retreat, despite efforts to control their costs, reduce staff numbers or sell off some investment. ‘So far, this has had little impact on their ability to stay in the market.’
- 140 of the worst affected companies saw sales decline by an average of 10 per cent in one year. ‘As a result, more that half of these lost money because extra costs could not be passed on into sales.’
- 78 of those firms were working under such an escalating debt burden ‘that the likelihood of failure must be considered extremely high’.
IT’S NOW ‘DSV’ ALL ROUND
DSV, to date best known on the UK international logistics scene through its DFDS Transport and Frans Maas operations, has just officially rebranded all its businesses with the parent company identity and outlined plans for further major global expansion.
The Danish international road transport, forwarding and logistics service provider will now operate through three divisions – DSV Road (intra-European road transport), DSV Air & Sea (global air/sea forwarding) and DSV Solutions (logistics/ supply chain management). That development, explained senior executives of the group at a recent press briefing in London, was in line with a longer-term strategic objective to build DSV into one of the world’s top 10 air and sea freight companies.
Following the acquisition of Dutch road transport operator and forwarder Frans Maas last year, DSV already claims to be one of the top five transport and logistics providers in Europe. Worldwide, the group as a whole operates more than 500 offices in 50 countries, including the UK and Ireland, and has more than 19,000 employees. Total group annual turnover is currently €4.4bn, of which the road division generates €2.34bn and the air and sea division, €765m.
The managing director of DSV Air & Sea in the UK, Hugh Burnham, admitted the latter figure put the group still ‘far short’ of being a top 10 player in that sector. Right now, he said, it was probably in the leading 20-25 global air and sea freight companies. ‘We would need to make another major acquisition to really leap us into the top 10 and that has to be the objective.’
Burnham would not be drawn on the possible timing of any such move. However, the managing director of DSV Road in the UK, Jens Bjorn Andersen, suggested the group was currently still focused on completing the integration of Frans Maas. ‘With 7,000 employees and a billion euros turnover, that was the second largest acquisition we have ever made. We need to finalise the integration before we make another massive acquisition.’
Meanwhile, said Andersen, DSV was looking at additional smaller acquisitions to further strengthen its European road transport operations. ‘We are not big enough in Germany yet and we would also like to expand in France. Spain and Italy could do with more volume. I know the group is in discussions with some companies in Europe,’ he commented.
As far as global forwarding operations were concerned, Burnham suggested DSV was already present in ‘most of the places we want to be’ but highlighted the Middle East as one area where the group might try and look at making some acquisitions. ‘We in the UK will also be looking at acquisition potential,’ he added. Currently, DSV in the UK has 1,400 employees, 25 locations and an annual turnover of £290m.
In addition, continued Burnham, the group was seeking to further strengthen its presence in some existing worldwide markets. One example was China, where, following acquisitions last year, DSV’s network now covered 13 locations. ‘We have another four or five branch openings in China pencilled in for the next couple of years,’ he said.
Elsewhere in Asia, DSV also last year set up a new joint venture in India under the new brand name DSV Air & Sea. ‘India is certainly going to become a more meaningful market for us over the coming years,’ said Burnham.
