Logistics group upbeat about the outlook for its business in the current year having taken the impact of the COVID pandemic and Brexit in its stride and found a major growth driver in e-commerce.
XPO Logistics Europe is upbeat about the outlook for its business in the current year having taken the impact of the COVID pandemic and Brexit in its stride and found a major growth driver in e-commerce.
The unit’s revenue from logistics rose 19% in the fourth quarter, year over year, and by 13% excluding the currency impact. For the full year, consumer goods generated over 80% of XPO’s revenue in European logistics.
Malcolm Wilson, CEO for XPO Logistics Europe, last week told analysts: “I’m very excited about our momentum in Europe. Our logistics business has fully recovered from COVID and our transportation business is most of the way back.
“Although new lockdowns were implemented in many countries in the fourth quarter, governments have been much more thoughtful about how they apply these measures. The latest restrictions were designed to keep commerce moving. We’ve seen no material impact to our business.
“As for Brexit, we’ve experienced only minimal impact there as well. Our logistics business in the UK has been unaffected by the changes in the trading relationship with the rest of Europe as our UK sites largely serve customers who sell to UK consumers. And with our UK transportation business, Brexit has actually worked in our favour. We have been able to recover costs related to border delays, and some of our competitors have exited the lanes going into the UK – so we’ve picked up share.”
Spin-off of logistics business
XPO expects to complete the spin-off of the company’s logistics segment in the second half of 2021, creating a separate, publicly traded logistics enterprise, with Wilson taking the helm at the new entity to be named SpinCo.
Asked whether new commercial opportunities had opened up to XPO because of the pandemic, Wilson replied: “What we’re seeing is that we’re able to capitalise on being the largest e-fulfilment provider in Europe, with our reverse logistics returns management and the strength we have in omnichannel distribution.
“What we’ve seen through COVID is that it’s brought a new appreciation of the critical nature of the supply chain to our customers, and that’s fuelling our ability to sign longer-term contracts. So, in the past, 10 years would have been a long contract. Now it’s more and more the normal type of contract.”
Wilson underlined that customers are wanting more and more technology in their operations and that XPO is able to meet such requirements with more and more collaborative robots in its warehouses and larger, automated sortation facilities.
“All of this is driving a very, very positive trend in terms of organic growth; and, of course, technology brings productivity, and that’s enabling us also to improve EBITDA levels.”
Integration of acquired KN business
Turning to the completion of the acquisition of the majority of Kuehne + Nagel’s UK contract logistics business (the transaction closed 1 January), he noted that XPO has welcomed almost 6,000 new staff serving three strategic verticals; tech and e-commerce, food service and beverages.
“We’ve also onboarded many new customers with the acquisition. These blue-chip brands operate across Europe, and we are already seeing new business opportunities with them. The tech customers in particular include many industry leaders, such as Virgin Media and BT. All the customers are high-quality relationships.”
He said the transition had gone smoothly with all customers and key employees retained.
“We had identified significant synergy benefits prior to the acquisition, and a number of these are already in process. We expect this acquisition to add more than $600 million to our annual revenue and drive significant synergies during 2021. All in, we have an enormous opportunity in front of us, and even more so as a separate company.”