Eddie Stobart steers path to recovery as losses cut by 77%

Eddie Stobart Limited (ESL) slashed its losses by 77% in 2020 after exiting a number of “unprofitable” contracts, implementing cost cutting measures and applying a new accounting standard.

However, its decision to turn its back on its “uneconomic” industrial, retail and bulk contracts also saw turnover fall by 7% in the period.

ESL operates a fleet of around 2,200 trucks and 5,000 trailers and employs over 4,000 staff, based at 43 operating centres around the UK.

Reporting its annual results for the year to 30 November 2020, the company revealed that turnover in 2020 fell to £559m (2019: £604m) whilst pre-tax losses plummeted from £33.4m in 2019 to a loss of just £7.7m in 2020.

In its strategic report to the results, ESL said its losses had reduced partly thanks to the implementation of accounting standard IRFS 16, which boosted operating profit by an additional £19.7m to £51m, up from a loss of £17.3m in 2019.

It added that a strategy of “increasing efficiency, reducing empty miles and exiting unprofitable contracts” had also played a major role in reducing losses, despite sector exit costs amounting to £1.4m.

ESL’s fortunes were also boosted in the year by a “substantial” contract it won in August with supermarket retailer Morrisons to provide transportation services from two distribution centres. The three year contract involves the management of all transport planning and deliveries of chilled and ambient groceries from two depots to Morrisons’ network of supermarkets.

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The win should help mitigate ESL’s loss of part of a major contract with Tesco, which saw DHL Supply Chain replace it on the transport operations out of Tesco’s Goole and Doncaster distribution centres (DCs) in April this year.

The company also confirmed that the pandemic had taken its toll, hitting ESL consumer customer volumes in the second half of the year, particularly in the hospitality sector, with the overall cost of the pandemic on the business amounting to £1.8m.

During the year the company secured its brand, acquiring the “Eddie Stobart” and “Stobart” monikers for £10m from Esken Limited, formerly the Stobart Group, £4m of which is deferred.

In terms of future developments, the report hailed the new management which it said will continue the re-organisation and streamlining of operations, maintaining warehouse utilisation levels and servicing its customer base.

The new leadership team includes William Stobart who returned to ESL after backing a £75m bailout of the logistics firm by private equity firm DBAY Advisors in 2019. The bailout followed a turbulent year which saw ESL come close to collapse after its shares were suspended following the discovery that its 2018 profits had been overstated by £2m.

With its losses continuing to reduce, the report went on to praise ESL’s achievements during the pandemic and its ongoing strategy to cut costs and increase efficiencies.

It added: “Despite the pandemic we have continued to deliver excellent customer service to our customers at times of exceptional demand and we have provided additional resource on very short notice to support both customers' internal and external supply chains. This ability to demonstrate flexibility and provide support on short lead times has been a contributing factor to further customer wins in the year.”

ESL has yet to respond for a request for comment.