THE INVESTMENT COLUMN: TDG gears up for the upturn
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Transport Development, the contract hire and logistics group, has been restructuring for half a decade or more, but it has been like running up the down escalator. The cutthroat competition among supermarkets, traditionally the main customers for TDG's all-encompassing logistics service, has meant that all the savings over the years have been handed back in margins, which have halved since 1990.
That goes a long way to explaining yesterday's pedestrian 7 per cent rise in pre-tax profits to pounds 36.1m for the year to December. Excluding gains and losses on property sales and other disposals, operating profits are still well short of the 1991 peak.
Given the maturity of the market supplying retailers, last year's slide from pounds 22.5m to pounds 20.6m in profits from TDG's new consumer division is unsurprising. More worrying was the industrial distribution business. This relatively undeveloped market for logistics is where the excitement is expected in future, yet most of last year's growth there came from one-offs. Underlying profits soared from pounds 3.9m to pounds 10.1m.
Recent contract renewals have again been at lower margins, but TDG believes that the downturn has now bottomed out and it is hitting its target 15 per cent rate of return on repeat business. Having kept clear of the troubles affecting almost everyone else in the sector and with 6 per cent gearing, TDG should be well placed to benefit from any further rationalisation of the industry, but it could be some way off and meanwhile the group's push into plant and vehicle hire looks unexciting. Flattish profits of pounds 36m this year would put the shares, up 3p to 216p, on a forward rating of 13. About right.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments