Eddie Stobart Logistics (ESL) has warned that 2019 profits will be “significantly below the board’s expectations”.
In a trading update to investors, it also confirmed news last week that it had received a takeover bid from one of its current shareholders, Dbay Advisors.
Last month, ESL suspended shares on the AIM market and announced the departure of CEO Alex Laffey after it failed to publish its half-year results in time.
The company said it expected revenue for the first half of the year to be approximately £450m and underlying EBIT for the same period to be in the range of £10-11m.
Net debt at 31 May is expected to be approximately £155m.
The board blamed the downturn on “an adverse performance against an ambitious budget alongside delays in the implementation of operational efficiencies”.
Other contributing factors included “provisions made against customer recoveries, a significant proportion of which relate to underperforming contracts" as well as "delays on a significant property consultancy project and lower than planned property utilisation”.
ESL confirmed it is "considering all strategic options (including the potential for raising new equity) and is currently engaging with its lenders".
The group’s senior management team, led by new CEO Sebastien Desreumaux, has begun a wide-ranging review of the group’s operations with a view to improving operating margins and its overall financial performance, taking into account current market conditions.
The management team stressed that it is focused on “continuing to deliver excellent customer service and commitment, while simultaneously prioritising cash generation within the business. Actions to strengthen internal processes are underway and steps to improve cash collection have been taken.”
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The group said revenue has grown at a compound rate of 19.3% over the last three years.
However, set-up activities following new business wins, particularly in Road Transport, have continued to place substantial demands on the group’s working capital as it claimed customer payment terms can be significantly longer than the payment terms associated with its principal delivery activities.
In addition, the balance sheet position of the group has been further impacted by the reduction in EBIT, poor cash collection and its historical dividend policy.
The company is therefore relying more heavily on its available debt facilities, it explained, so current group net debt has increased.
The statement concluded by stressing that ESL has seen “significant growth in its operational capabilities over the past two years, providing end-to-end supply chain solutions with some of the highest levels of customer satisfaction in the industry.
“The board believes that the immediate issues that the group faces can be addressed with positive steps already being taken. The Group has a solid business model and a robust customer base, with a clear path to sustainable growth and profitability.
“The board remains confident in the strength of the company’s network and operational capabilities in providing a full end-to-end supply chain solution to our customers.”
