British parcels company Yodel is improving its performance, cutting losses, expanding international services and is definitely not up for sale, new CEO Mike Hancox told CEP-Research in a wide-ranging interview.
The experienced retail and delivery executive, who took over as CEO last September, was clearly optimistic about the future growth potential for the long-term loss-maker, which is owned by the billionaire Barclay brothers but has suffered from quality problems and frequent managerial changes in recent years.
Over the last two decades, Hancox has worked for diverse British companies, including several years as CFO of Yodel’s predecessor companies (White Arrow, Home Delivery Network) nearly 20 years ago. “In my role as CFO I was the key person in selling the business to the Barclays back in 2003, and hence my relationship with the shareholders goes back to 2003,” Hancox said in an interview at the recent TDC Global conference in London.
He later managed Otto Group’s UK retail activities, including Parcelnet (now Hermes UK) where he acquired several courier companies, and then ran a successful TV shopping company before moving to non-executive roles more recently. Last year he was invited by Yodel’s shareholders to become CEO.
“I knew it would be a challenge, but I felt it was a challenge that I wanted to take. I have a lot of respect for the shareholders. They've consistently put a lot of money into the Yodel business to try to make it a really good business, both in terms of the service it offers to its customers but also profitability,” he explained.
But he admitted: “It's not really reached those objectives. Profit has always been a challenge for the business, but we have made huge steps forward in terms of making it a good operation with good service.”
Yodel Delivery Network Ltd, which delivers about 145 million parcels every year for 1,000 mostly retail clients, made an operating loss of £111 million and a net loss of £112 million on revenues of £403 million in the financial year ending June 2018, according to a public filing with the UK’s Companies House. Its financial results for 2018/19 are due to be filed by March 31, 2020.
Asked when Yodel, now halfway through its 2019/20 financial year, might finally turn profitable, Hancox responded: “Our financial year runs to the end of June, it won't be this year. However, I think we’re in a really strong position to make big progress into the next year. I hope we’re at least break-even, maybe better than that. I don't see us staying as a big loss-making business beyond this current financial year.”
The new CEO stressed that he is focusing strongly “on the bottom line” and has rationalised some back-office areas with job losses over the last few months.
“Yodel is not for sale”
Several British newspapers speculated last autumn that Yodel might be one of several companies put up for sale by the Barclays, whose best-known businesses include London’s Ritz Hotel, the Daily Telegraph newspaper and retailer Shop Direct.
But Hancox declared categorically: “Yodel is not for sale. No one has approached us and we’ve not given anyone a mandate to sell it.”
He said no one had approached the company with an “out of this world speculative offer” and it made no sense to sell Yodel now given there is “so much potential in the business and so much upside on the profit line”. “I don't think we’re at the point where people are going to pay the right price for Yodel. There's been a history of losses,” he commented.
He continued: “We are very confident we're going to move this business into profitability. If Yodel is ever sold, then that’s a conversation for a few years down the line when we are a profitable growing business.”
Investments in technology and network
Meanwhile, Yodel is investing to upgrade its technology and operational network. Recent investments have included £17 million in new vehicles and a low million-pound figure in a new route planning software and new IT systems.
The successful deployment of the route planning technology on drivers’ own smartphones enabled some 600 drivers to optimise their rounds, improve the delivery experience and collect more customer signatures during the peak season, he pointed out.
In terms of the network, Yodel will soon announce a significant investment in a new greenfield sorting centre, he added.
At the same time, Yodel will be “flexing” its network as some major retail clients invest in their own new facilities in order to pre-sort packages. One such client is the Very Group (which accounts for 15% of Yodel volumes) with a large facility in the East Midlands region.
“We’re seeing retailers trying to sort the parcels before they get to us, so they can take a bit off the price they pay us. So our capacity on sortation needs to be reviewed all the time,” he explained.
“Best-ever peak season”
Looking back, Hancox claimed that Yodel had seen “a fantastic” peak season in 2019. “It’s probably the best peak ever for Yodel. The retail clients that we've got are really happy, the retail clients that we haven't got want to talk to us, and so we're in a great place.”
The company had achieved a first-time delivery success rate of over 98.5% in every week bar one during peak season, which was “significantly better” than in previous years, he pointed out.
One major factor behind this success, according to the CEO, was that the company had “cleansed” the network by ensuring that it only accepted the right-sized parcels for its operations.
“We had to send some traffic away because it wasn't appropriate. Over the years Yodel has tried to be all things to all people and possibly taking the wrong shape and size and dimensions of parcel and that doesn't suit our network.
“So we've been very vigilant in saying we know the dimensions that work on our conveyor systems and with our drivers. If we have got the right parcels, we can give customers the right price and do a really good service,” he asserted.
Hancox underlined that Yodel had also improved its consumer ratings thanks to its good peak performance and “is starting to be known as a trusted brand”.
New international export service
Finally, Yodel is optimistic about expanding its international outbound business this year through its new partnership with specialist freight forwarder DG International. The new Yodel International service has been developed to provide a fast and efficient home delivery solution to over 200 countries and territories for parcels up to 30kg.
“We have had a very big international business for some time. We’re second to Royal Mail on inbound traffic from China and we do about 25 million parcels a year from China,” Hancox said.
Yodel is now talking with clients about the new international export service, under which it collects shipments from customers or CollectPlus drop-off locations and transports them to airport gateways where DG takes them over for sortation, air transport to the destination country and final delivery.
“It’s very early days but we are very encouraged by the volumes we have already won. We’re very optimistic about that,” he concluded.
