Executive Briefings

Parcel Traffic Ambitions Overcome European Borders, Logistics Experts Report

Britain's vote for the "Brexit" may have dealt a blow to the European Union, but the vision of an integrated European parcel network is very much alive, logistics experts say, thanks to the Deutsche Post DHL Group (DP-DHL). The German postal, express and logistics giant is acquiring a strong presence in the British market with the takeover of UK Mail, the second-largest mail provider in the United Kingdom.

UK Mail started out as a courier and express parcel operator and added letters to its portfolio in 2009 after the British mail market was deregulated. It now operates a network of more than 50 depots and some 2,400 delivery vehicles, and handles about 230,000 parcels and 12 million mail items a day.

Between them, UK Mail and Whistl, a former unit of PostNL NV, account for about 45 percent of letter volumes in the British market. In line with government regulations, they can collect and sort letter mail but must feed this traffic to national postal operator Royal Mail, which still makes almost all final deliveries under a state requirement. UK Mail has roughly a 5 percent share of the British parcel market.

DP-DHL is buying the company for $206.3m — a bargain, according to Horst Manner-Romberg, principal of parcel logistics research and consulting firm M-R-U. For one thing, the drop of the British currency in the wake of the Brexit vote has diminished UK Mail’s price tag for the German mail giant. Moreover, UK Mail’s share price suffered in the aftermath of the establishment of a new, automated sorting hub last year, resulting in two profit warnings.

Those problems have been sorted out, which means DP-DHL will not have to invest in new technology, Manner-Romberg said. He added that UK Mail has successfully managed shifts of focus from letter to parcel and from B2B to B2C flows.

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UK Mail started out as a courier and express parcel operator and added letters to its portfolio in 2009 after the British mail market was deregulated. It now operates a network of more than 50 depots and some 2,400 delivery vehicles, and handles about 230,000 parcels and 12 million mail items a day.

Between them, UK Mail and Whistl, a former unit of PostNL NV, account for about 45 percent of letter volumes in the British market. In line with government regulations, they can collect and sort letter mail but must feed this traffic to national postal operator Royal Mail, which still makes almost all final deliveries under a state requirement. UK Mail has roughly a 5 percent share of the British parcel market.

DP-DHL is buying the company for $206.3m — a bargain, according to Horst Manner-Romberg, principal of parcel logistics research and consulting firm M-R-U. For one thing, the drop of the British currency in the wake of the Brexit vote has diminished UK Mail’s price tag for the German mail giant. Moreover, UK Mail’s share price suffered in the aftermath of the establishment of a new, automated sorting hub last year, resulting in two profit warnings.

Those problems have been sorted out, which means DP-DHL will not have to invest in new technology, Manner-Romberg said. He added that UK Mail has successfully managed shifts of focus from letter to parcel and from B2B to B2C flows.

Read Full Article