Overview
Exel’s contract logistics operations made good progress overall, led by strong turnover growth and the benefits from recent acquisitions which helped offset the impact of a small number of underperforming business units. In particular, the Americas and Asia Pacific generated double-digit organic growth in both turnover and profit. In freight management, both airfreight and seafreight volumes were strong and helped the business achieve a satisfactory level of organic growth despite significant cost pressures in Asia Pacific, related mainly to higher fuel prices and capacity restrictions.
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Secondly, changes in pensionservice cost charges, related to financial market rate 11:09 AM 10/15/2004assumptions which are set annually in advance, increased the non-cash service costs by 1.8m in the first six months.This principally impacted the UK and Ireland contract logistics and freight management operations,reducing operating profits by £1.5m and £0.3m respectively. The action in the charge is not comparable with the actuarial basis used in open book contract cost recovery and, as a result, distorts the organic presentation of the underlying performance of the business. At constant exchange rates, turnover from continuing operations was up 15.3% at £2,621m (2003: £2,273m) and adjusting for acquisitions was up 11.2% on an organic basis. At constant exchange rates,operating profit, which is stated before goodwill amortisation, exceptional items and net return on pension schemes, was up 10.8% at £74.1m (2003: £66.9m).
On an organic basis operating profit was broadly unchanged (up 2.7% excluding the changes in pension service cost assumptions outlined above). Total contract logistics turnover increased by 16.6% to £1,432m at constant exchange rates, up 9.1% on an organic basis. Overall,contract logistics operating profit increased by 13.4% to £44.0m (2003: £38.8m) at constant exchange rates, and reduced 4.6% on an organic basis(reduced 0.8% excluding the changes in pension service cost assumptions outlined above). Margins remained broadly unchanged at 3.1% (2003: 3.2%). |
