Eddie Stobart Logistics’ (ESL) turnover increased 25% year-on-year in the half year period the group said today (9 July), but it also warned that profit would be at the lower end of expectations.

In a trading statement, ESL said group turnover increased due to organic growth and a full first-half contribution from The Pallet Network, which ESL purchased last year. On a like-for-like basis turnover increased by 8%, reflecting continuing organic growth and a number of new contract wins.

However, ESL said adjusted EBIT was expected to be towards the lower end of expectations.

It blamed this on slower than anticipated productivity improvements in its contract logistics and warehousing business and the short term adverse effect on the operational efficiency of its transport network from exiting, in early March, a problematic contract.

Although the contract wasn’t named, ESL suffered a high profile loss at the start of the year when Wincanton and several regional hauliers replaced it on a major Aggregate Industries deal that month.

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ESL said that volumes were historically weighted towards the second half of the year and it still expected to deliver full year results in line with expectations.

The group's net debt as of 31 May 2019 was £154m (30 November 2018: £160m).

Share price

Speaking ahead of today’s trading update, Edison Group said that ESL remained a business with a good story to tell and solid “underlying fundamentals”, despite a share slide that has resulted in its value more than halve since it was listed.

Neil Shah, director of research at Edison Group, said he remained a fan ahead of an expected trading update this week.

“We like the trends in the sector. Logistics will continue to expand off the back of e-commerce and there is a lot of fragmentation and opportunity to consolidate,” he said.

Since listing at 160p in April 2017 with a market cap of £572.7m, the share value has fallen to 72.25p, giving the company a market value today of £274.1m.

Shah said the two main things weighing on the stock was firstly the uncertainty around Brexit with a no deal in October certain to have an initial material impact on UK logistics businesses if it comes to pass.

Secondly, ESL’s biggest shareholder Woodford Investment Management has likely seen certain participants within UK finance hedging against the success of the fund. This has ultimately been realised with the freezing of the Neil Woodford owned fund last month to withdrawals.

In the last few days this has also seen the investment company reduce its stake in ESL from 25% to 23%, or 86.9 million shares. It remains the logistic group’s largest shareholder.

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