CHIEF EXECUTIVE’S REVIEW

Nightfreight completed its third year in private ownership at the end of November 2003 following a management buy-out and de-listing from the London Stock Exchange in February 2001.

ACTIVITIES

The Group is focused around two core divisions: (1) delivery of documents, parcels and freight of irregular dimension and weight (IDW Network) and (2) providing logistics services (IDW Logistics).

Most carriers focus mainly on small parcels that are managed by automated handling systems but cannot handle IDW freight. Customers are often forced to split their parcels and freight deliveries between two or more carriers.

Nightfreight has developed its service to handle IDW freight efficiently and is leader of the IDW freight sector of the overnight delivery market.

The logistics division offers two services: Pacemaker and Network Logistics.

Pacemaker provides specialised handling and ‘two-man’ delivery of IDW products, such as furniture and vending machines. This includes installation, removal and disposal of old products, repair, replenishment and on-site training. >p>Network Logistics is a contract service combining the overnight delivery capabilities of the IDW Network division with additional services such as dedicated management and transport, warehousing and stock control.

TRADING RESULTS

Group turnover in 2003 increased by £4.26m (4.3%) to £102.43m compared to the year to 30 November 2002. Group operating profit (before goodwill amortisation) during the same period was up by £0.613m (6.8%) to £9.62m. Profit before tax increased by £1.48m (39.7%) to £5.21m.

TRADING HISTORY

In the interests of a better understanding of the business, unaudited pro-forma profit and loss accounts for this year and the previous 5 years are presented below.

		Years to 30 November
£000’s		1998	1999	2000	2001	2002	2003
Turnover		66,433	69,666	73,763	83,711	93,817	101,194
		=====	=====	=====	=====	=====	======
Divisional operating profit		7,592	9,497	9,670	12,095	14,064	14,876
		11.4%	13.6%	13.1%	14.4%	15.0%	14.7%
Central costs		4,198	4,380	4,306	4,454	4,289	4,872
		6.3%	6.3%	5.8%	5.3%	4.6%	4.8%
Group operating profit (before		3,394	5,117	5,364	7,944	9,775	10,004
exceptional items and goodwill		5.1%	7.3%	7.3%	9.5%	10.4%	9.9%
amortisation)

The above unaudited trading history has been prepared from an aggregation of the trading results of the individual continuing operations of the Group at 30 November 2003 as if the Group had been in existence throughout the period.

The turnover and divisional operating profit shown above for 2003 and 2002 have been adjusted for the effects of the ceased Gateway contract and the sale of the Tanks business as set out in note 2 to the accounts.

The pro-forma results show that Group turnover in 2003 increased by £7.38m (7.9%) over 2002, with divisional operating profits ahead by £0.81m (5.8%). Group operating profit (before exceptional items and goodwill amortisation) during the same period was up by £0.23m (2.3%).

PROGRESS DURING THE YEAR

IDW Network Division

After enjoying rapid growth during 2002, the IDW Network division consolidated its market leading position during 2003.

Significant investment was made in IDW freight handling systems and techniques as part of a continuing progamme of service development.

IDW Logistics Division: Contracts and Pacemaker

Both Logistics Contracts and Pacemaker made significant progress winning new business and investing in new facilities and new services.

Pacemaker, particularly, is evaluating a number of options to expand its main operating base in the South-East with implementation of the preferred option in 2004/05.

Home Delivery

Following extensive external research and feasibility studies, trials commenced of a new IDW home delivery service for delivery of both ‘one’ and ‘two man’ deliveries. Trials are due to be completed during early 2004.

Training

The Training School built on its growing reputation winning new external accreditation and extending services both internally and externally.

Service and People

Nightfreight conducted its first employee survey at the end of 2003 with results and analysis to be communicated during the first quarter of 2004.

The survey is part of a wider initiative, The Nightfreight Way, to further improve and support employee development across the Group.

SUMMARY

Both service divisions, the IDW Network and IDW Logistics, and the Group as a whole made real progress during the year. Research indicates, once again, that not only is Nightfreight the market leader of the IDW freight sector, but has further increased its market share. The business is focused by service and structure on the IDW niche to be the leading provider of IDW freight solutions.

Once again, I would like to thank all the people who work for Nightfreight for their outstanding efforts and commitment.

Robert Kelly
Chief Executive
23 March 2004