DHL sell-off a 'desperate move', says TI

DHL's sale of around two-thirds of its loss-making DHL Express UK division has been described as "a desperate move" by analyst Transport Intelligence.

The firm offloaded its domestic parcel operation to Home Delivery Network (HDNL) earlier this week, putting a positive spin on the move.

No figures are available regarding the size of the deal, however, well-placed sources indicate that DHL paid HDNL around £200m to take the business off its hands. In addition, HDNL will still use the DHL Domestic brand alongside some of the former's back-office infrastructure.

The divestment of the UK operation follows hot on the heels of a similar move in France, plus DHL's well-publicised exit from the US domestic market following serious losses at the business there.

Thomas Cullen, chief analyst at Transport Intelligence, says that the sell-off is a reaction to losses at the business.

He says: "It does give the impression that DHL is cutting in response to an emergency rather than a planned strategic revision. It's rather a desperate move."

He contrasts DHL's decision with that of its big European rival TNT, which has "adapted its model quite successfully to the new market trend for much lower cost services".

Cullen also believes that it will leave DHL increasingly vulnerable to big US operators UPS and FedEx as they look to further encroach into the European market.

His views are shared by a postal sector analyst who asked to remain anonymous.

The analyst says: "It never made much money when it was Securicor [which DHL acquired]. They only did one thing right and that was to drop the Securicor name.

"Rather than drag [that business] up to DHL's level, they allowed it to drag DHL down."

For its part, DHL says that the sale was driven by the need to dedicate resources to its "existing, high-potential businesses".

It adds: "The company's strategy 2015 is all about focusing on profitable businesses and simplified services. Divesting the Day Definite Domestic business will help to improve the quality of our UK and worldwide services. We will be in a position to concentrate on what we do best - our core business of Time Definite International express delivery services, as well as focusing on Same Day services.

"By fully focusing on the business fields with the biggest potential, we will strengthen our position in the UK market, safeguard our market leadership and ultimately protect our future."

Neither DHL or HDNL wished to comment on the structure of the deal.