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INTERVIEW Yodel CEO predicts profitability this year as cost-cutting and ‘cleaner network’ pay off

Yodel is expecting to achieve profitability in its current financial year, its CEO says, after a surge in volumes and cost-cutting programmes.

The carrier, which counts the likes of Shop Direct and Missguided amongst its customers, has seen volumes up 16% in the three months to the end of September compared to the previous year. It expects to see revenue of between £500 and £520 million in the year to June 2021, with positive EBITDA.

Speaking exclusively to eDelivery, Mike Hancox says the business is “very confident in the position [it’s] in now”.

The CEO, who has also worked at Otto Group and Sorted, assumed his role in September 2019 with a mission to deliver profitability at Yodel. His tenure has so far been marked by a focus on the quality of service offered, “putting delivering parcels as the number one priority”.

The company has made targeted investments in technology to allow drivers and workers to do a better job, such as deploying smartphone barcode scanner technology to allow them to work more quickly and installing cameras in cabs.

The Covid-19 pandemic has led to a huge surge in ecommerce which all major carriers have benefited from, but Hancox says the company has both been winning new business and making existing accounts more profitable. Hancox believes peak 2020 could be as much as 20% bigger than peak 2019 in terms of volumes.

In terms of driving profitability, the company has made cuts in areas of the business that are not involved with handling parcels and delivery, creating a “very lean, very efficient structure”.

It has also focused on creating a “cleaner” network, where Yodel only accepts the type of parcels it is suited to delivering. It has looked to charge more appropriate prices for items based on their weights where before it had been undercharging for heavier items.

Hancox cites the company’s vastly improved Trustpilot scores, which have risen to 4.5 out of 5, as well as positive feedback from weekly customer surveys, as a sign that the strategy is working. There has also been a noticeable improvement in Yodel’s fortunes in annual surveys by MoneySavingExpert, which in 2017 had only 43% of respondents giving the company a “great” or “ok” rating. In the latest update in January 2020, this number had risen to 54%, although this was the second lowest of the 17 carriers examined, beating Hermes.

He says the 2020 results will show a “growing and profitable business”, with a substantial improvement in the year to the end of June.

There are other major events in the pipeline ahead. The company is planning to build a new parcel sortation superhub in northern England, replacing the existing one in Oldham, which can no longer be expanded to offer the necessary capacity.

Finding the land, designing and building the site will take at least three years and possibly as many as five, Hancox says. With the project potentially costing between £60 and £90 million by his account, the company will raise the funds through shareholder equity and debt, with the improving financial position offering a carrot to investors.

Amidst a turbulent year, Hancox says that there haven’t been any lasting changes in how Yodel operates. However, he says Yodel has benefited from some retailers moving towards a multi-carrier model through a desire to spread risk, as opposed to trying to win the best price through assigning their whole volume to one provider.

In a multi-carrier world, Yodel may evaluate other parts of its strategy. When eDelivery spoke to Hancox last year, he said his company was fundamentally a B2B business, focused on its relationships with clients, and that building a consumer brand was not the priority.

Hancox says that while this was right for a year ago, “it may be time to reassess whether we want to be a consumer brand”.

He says he is not convinced of the case yet as this is not Yodel’s core strength, but cites the possibility that retailers using a multi-carrier strategy may offer consumers a choice of which carrier they want to use.

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