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Risk Management
Consumer Confidence
As a key supplier to UK retailers, the Group’s revenues are not
as sensitive to general economic and consumer spending
conditions. This is because a large proportion of loads carried
are within the Fast Moving Consumer Goods (FMCG) sector.
Where volumes decline, the Group operates a fleet financing
and recruitment policy which allows it to flex its operations in
response to both increases and decreases in demand.
Seasonality and Abnormal Weather
Supplying UK retailers, the Group’s revenue has been
seasonally linked with its customers, with demand peaking in
the summer months and the build-up to Christmas. January
and February have typically been the slowest trading months.
The Group has grown non-seasonal business to minimise these
peaks and troughs, but revenues will still flex in response to
strong or weak retail trading; particularly in the build-up to
Christmas. The ability to flex the fleet in response as outlined
above also mitigates this risk.
Extreme weather, such as high winds and snow, can disrupt
the Group’s business as the fleet and rail terminals can have
difficulty operating.
Government Legislation and Regulation
Operating in the transport and distribution sector, the Group
is subject to a number of areas of legislation and regulation.
Legislation and regulation in areas such as working time, health
and safety, road duties, fuel costs and environment, can have
an impact on a number of operational areas. Management
have worked within these constraints through the introduction
of appropriate systems and controls.
Information Technology
The Group’s business model is dependent on certain
information systems externally hosted and databases. These
are backed up and the Group has in-house IT services.
Airport safety and security
There are inherent safety and security risks involved in
operating an airport. The airport management and staff are
well equipped to manage fire and other safety and security
related risks. London Southend Airport and Carlisle Lake
District Airport are regulated by the Civil Aviation Authority
and the Department for Transport.
Demand for Integrated
and Outsourced Transport and Logistics
The transport and logistics industry in the UK has seen a
general trend towards an increased demand from customers
for an integrated transport and logistics service from suppliers
with national and international operations, as opposed to
companies providing only one service on a limited regional
basis.
The Board believes that the Group is well positioned to take
advantage of this move towards integrated and outsourced
transport and logistics with both national and international
capabilities, offering a more operationally efficient service.
People
The strategic and operational management of the Group
depends on certain key management. Management is retained
by competitive performance based remuneration and key man
insurance policies are in place.
Competition
The transport and logistics industry remains highly polarised,
with a large number of small regional operators competing
for general transport work and a small number of national
and international businesses capable of offering fully
outsourced/integrated solutions to major UK customers.
The Group is targeting national transport and logistics
contracts worth in excess of £10m per annum. This will
increase its direct competition with the small number of
international businesses also looking to target this market
segment.
However, due to the nature of the innovative cost model,
the Group will also seek other business to complement its
traffic flows.
The Group operates an internal risk control system to evaluate and manage
risks as described in the section ‘Internal Control’ on page 43 of this report.
Besides general risk factors, a non-exhaustive summary of specific risks
affecting the Group’s operations and industry is outlined below.
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Risk Management