An Post delivered the killing blow to Fastway Couriers

The appointment of receivers to Fastway, the private equity-backed courier, has created chaos. Parcels are being repatriated to retailers, leaving consumers in limbo.

Roughly 600 drivers and franchisees are owed close to €1 million in total and have seen their livelihoods crumple, weeks before the busy Christmas period. About 300 staff face potential statutory redundancy.

Welcome to the sharp end of the ecommerce revolution.

The company, which had annual sales close to €65 million, has next to no assets; its properties and vehicles are leased. The Irish company is a master franchisee, so the Fastway brand will revert to its New Zealand owner.

It has an automated sorting line at its hub in Portarlington, Co Laois, and that is pretty much all there is.

Mark Degnan and Brendan O’Reilly, receivers from Interpath Advisory, may look to rescue some value from two related businesses, Parcel Connect, a collection service, and Nugo, which delivers large items. Yet these are not likely to make even the smallest of a dent in the debt outstanding to secured lender Muzinich, which at the end of March last year stood at €48 million, including accrued interest.

At that same date, Elysian Capital, the London private equity firm that bought Fastway in 2022, was out €24 million in equity and a further €20 million in shareholder loans. In September this year, Elysian and Muzinich agreed to advance a further €11 million.

It is not clear how much of these additional funds were ultimately drawn down, but it is possible that the total exposure is close to a very frightening €90 million.

Road hauliers are blaming government taxes for Fastway’s fall. Yet that looks just a little bit convenient.

The failure is largely down to the wrong-headed belief of an overzealous private equity firm that the Covid-19 pandemic would fundamentally change the way that Ireland and the world shopped, for ever. It didn’t.

Another contributing factor was the killer instinct of a competitor: sleepy old An Post.

Elysian Capital bought Fastway from local private equity firm MML Capital, the packaging tycoon Patrick Dornan and former managers in May 2022. It paid way over the odds, based on exceptional sales and profits.

In 2021, buoyed by pandemic purchasing, Fastway revenues rose 70 per cent to €73 million and earnings tripled to top €9 million. Revenues peaked at just over €80 million a year later just as Elysian came to buy. Within 12 months, sales were down below €65 million.

Fastway pitched itself as the low-cost operator in the market, relying on a network of franchisees and drivers. Price per parcel was low, so it relied heavily on high volumes. Asos, the British online fashion retailer, was its single biggest customer.

A cursory look at the Asos share price will give a fair indication of how hostile the market turned for ecommerce after the pandemic. As sales volumes fell, operators looked to cut costs. Asos shifted its main UK delivery contract from Royal Mail to Evri, which then in turn re-tendered the Irish contract for Asos deliveries.

The loss of Asos and Sports Direct, another Evri customer, was fatal for Fastway. The franchise model proved inflexible. When pressure hit prices, it had little control over its fixed costs.

Asset light should also mean capital light, yet the scale of the acquisition debt was a huge burden. Debt service costs were as high as the inter-bank rate plus a margin of 5.75 percentage points. That was quite a handicap. So the business model and balance sheet both limited Fastway’s ability to compete on price.

An Post won both the Asos and Sports Direct contracts. There will be an argument that Fastway found itself undercut by a state operator, which leverages its parcels business off the infrastructure of a subsidised national postal network.

An Post has received stamp price increases of 130 per cent in the past seven years while going toe to toe with private companies on its parcels business. The post office maintains that the stamp increases subvent falling mail volumes, rather than subsidise its parcels business. Rising stamp prices are a feature of postal services globally.

As Evri showed in the UK, in securing the Asos contract, national mail companies are not impervious to competition.

At the very least, the Fastway collapse is something the watchdog ComReg should probably investigate, even if it offers little succour for those who relied on the business for a living.