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CourierPost buys Roadstar

Express Couriers which is the joint venture between DHL and New Zealand Post, has completed the acquisition of Roadstar on the 1st July.

There overall goal in the acquisition seems to be to increase their service offer into multi-package and
palletised product.

“Customers are demanding we offer a full range of services including their multi-package and palletised product” says Jim Quinn, CEO of Express Couriers Limited. “We are delighted to have secured the Roadstar business to achieve our growth aspirations, and meet those needs” he added.

As a signal of the desire to ensure this new ownership is a success, Grant Robertson and the management team of Roadstar have agreed to remain with the business. Both Grant and his team continue to be passionate about the business and the industry, and are delighted to be part of a new ownership that shares this passion.

It is self evident that they will be seeking some synergies, and Roadstars branding is already changing. Even within the last week small changes have taken place in the CourierPost business to take up some of these synergies. I suspect you will see ECL move quickly to gain any synergies as I know they learnt a lot from the purchase of Ansett Couriers and XP couriers of old.

Freightways acquires MSS

Freightways has purchased MSS Records in Christchurch for $1 million dollars. It intends to merge the operation into its Online Security Services business.

“Inclusive of synergies gained by merging MSS into Freightways’ established Archive Security business, incremental EBITDA of NZ$0.3 million is expected to be achieved in the 2008 financial year from MSS.” [Freightways Media Release]

My read on this is that incremental means once the synergies are achieved. Synergies generally save money, so it is safe to assume that the EBITDA (operating cashflow) was lower.

This causes me to wonder what sort of multiplier Freightways paid for MSS against its existing EBITDA.

If the MSS EBITDA was
250k it would have been 4
200k it would have been 5 (my random blink would be this one)

Once they get the synergies (which Freightways will) it becomes a 3. Not a bad buy, one less competitor and 3 years to repay the investment.

Freightways said it is looking for more acquisition opportunities.

Bracewell - MD of Freightways talks Technology

A few weeks ago I posted on Technology in the Courier industry. It is fair to say, from the verbal feedback I received, that it was one of the more provocative posts I have written.

Shortly after wards I saw that the NZ Herald was interviewing Dean Bracewell, MD of Freightways, so I thought I would post a question. Below is my question and his response:

A question from a Herald reader. They are interested to know how technology fits into the future of Freightways. They say that Freightways seems to have lagged behind their largest competitor - CourierPost - in this area, but they have maintained market share and profitability. Do you see any major disadvantages in not having had the technology?

Not at all, but that question's probably got three or four parts to it.

Just stepping through them, technology is a part obviously of running a transport business such as Freightways and it always has been a key part of what we're about.

We've actually three quarters of the way through a $10 million upgrade to our IT system, so there's a fair bit of money and investment attached with IT

It's played a pivotal role in the business for 20 plus years and the information systems that we have are geared around delivering scalability because our business has grown very strongly so you've got to have information systems that can cope with that significant growth.

It's a very robust system but it has also got to be flexible to meet the varying customer needs. So we've got a very powerful, core information management system.

The part about lagging a competitor and still maintaining market share, well I think we've actually done more than that. We've grown our market share and we've grown our profitability over a number of years, so it's not just about maintaining it.

I think we've done this by keeping in touch with our customer needs and developing our services to suit those needs rather than getting caught up in a side-game that technology can distract from what you're really here to do.

We think it's most important not to lag customer demand rather than try and keep up with a competitor whose strategies we might disagree with.

Are we disadvantaged by not having some of the technology? Well, we made a decision to roll out in-van data capture technology this year and that's as a result of our customer demand but a time when we've assessed the network that transmits that data as being ready for us and the scanners that will go into our courier vans as being ready for us.

So, a few things have needed to come together but we believe the time is right.

And whilst we've been lining up to make that decision about the technology in the vans we've been focussing very heavily on ensuring we deliver our core service, which is getting packages to the right place at the right time.

What we believe we now have is a very compelling customer offer - premium service, competitive price and the latest technology to over-lay it all.

You talked about the scanners - how are the trials for those going?

They're going fine. We're rolling them out into the Auckland marketplace which is the most rigorous, high volume market to test the scanners and we'll get any glitches that are involved with new technology out of the way in this market prior to rolling them out around the rest of the country.

What developments - technology or otherwise - can we expect to see from Freightways in 2007?

I think you're going to see more of the same and whilst that might sound a bit ho hum, it's kind of what our customers like.

They want consistency, they want reliability, they want innovation when they're ready to innovate and when there is demand for it.

So what you're going to see from us is really more of the same and hopefully that will continue to deliver the sort of performance to all our stakeholders - our people, our employees, our contractors, our customers and our shareholders.

The article serves as a timely reminder, well to me at least, that technology matters very little if you are not delivering your core service. In NZC's case that is providing consistency and reliability,

You can read the full Herald article [here].

Is customer facing technology worth it?

Freightways Group announced their six monthly result yesterday and had 11% growth, reaching $144.3 million in trading revenue. It would seem that the growth of their core express/couriers business is neutral at best, which is what a few of us suspected.

One of the comments in the NZ Herald article was "A key initiative had been the initial implementation of a data service providing customers with access to real time service information."  Only in the last 12 months have Freightways started to truly provide this technology. Express Couriers, who own CourierPost, have had Track & Trace since 1991.

Track & Trace was always going to be the key to CourierPost's success. It was to be their competitive advantage and reduce their costs to make them more profitable. For 15 years they held this advantage. 15 years is a long time for any competitor in any market to be behind in IT, let alone a time sensitive market. The interesting thing is it never really seemed to make a dent in Freightways.

An insiders view
So, as an ex-insider to both groups, here is I think the key. In the initial years CourierPost focused all of it's energy on building customer facing systems, track & trace, real time scanners etc. All the while they had really poor back end systems, couldn't drive profitability (and therefore ownership) to branch level, had bad stock systems and worst of all couldn't manage their customer inquiries well.

Freightways on the other hand, had very established back office systems, albeit very archaic. But the up side is they have always had profitability to branch level, great stock management, and manual but effective processes for customer inquiries.

Freightways were clearly the market leader 15 years ago and Express Couriers have grown to be the largest, but they never took out Freightways, rather they absorbed many of the smaller players.

So, was CourierPost's 15 years of technology and millions upon millions of dollars worth it?

My conclusion
At the time I was passionate about the advantage that scanners would bring to CourierPost. But given time to reflect I would take strong robust back office systems, any day, over a customer facing system.

Back office systems allow you to manage the business easily and free up people to focus on providing real human service to customers. It also gives you a better platform to build customer facing systems.

I want (& need) both. I now know back office is the most important!