Eddie Stobart Logistics surges after spending spree pays dividends

Eddie Stobart Logistics (ESL) achieved a major milestone in 2018 as it spent big on transforming itself into an end-to-end transport supplier with turnover, profit and debt surging as a consequence.

The company went on a buying spree following its listing on the Alternative Investment Market in 2017.

It said its acquisitions: iForce, The Pallet Network (TPN), The Logistic People and Speedy Freight, had all performed strongly.

This, with contract wins worth £162m on an annualised basis and growth via its existing clients, drove annual turnover up 35% to £843.1m (2017: £623.9m) in the year to 30 November 2018.

Pre-tax profit for the period, which included £7.8m of exceptional items relating in the main to the acquisitions, was up more than 138% year on year at £23.6m (2017: £9.9m).

There was also a 45% increase in ESL’s debt in the twelve months, which increased by more than £50m to £159.7m (2017: £109.5m).

The company said £24m of this was additional debt drawn down in connection with the purchase of TPN last June, and £26.2m used as working capital to support sales growth.

This has pushed its gearing (borrowing) ratio to 2.4% of EBITDA. While ESL said its financing strategy allowed for a temporary increase its intention in 2019 is to reduce this towards the long-term average of 2%.

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For the full year, earnings per share were 4.4p compared with 1.2p a year earlier.

ESL will pay a final dividend of 4.76p per share in June. This, including an interim payment, will take the total dividend to 6.3p per share, or £23.9m for the full year.

Despite strong growth at ESL, the transport provider’s share value has been under pressure having declined almost 40% since listing at 160p per share in April 2017.

As this article was published ESL’s share value was up on its opening price at 99.45p per share.

Strong performance

Alex Laffey, chief executive of ESL (pictured), said: "We were pleased with our strong performance in 2018, during which we made significant progress in delivering our strategy of becoming a full-service logistics and supply chain organisation.

“We continue to develop our end-to-end supply chain capabilities and in June acquired The Pallet Network, which gave the group a presence in pallet distribution across the UK and provides cross-selling opportunities to serve our customers' growing needs.

“Whilst we remain mindful of the current political and economic uncertainty, we are confident that our unique operating model provides us with the flexibility to respond rapidly to changing market conditions.”

“The new financial year has started in line with the board's expectations."

A year of contract wins and e-commerce growth

ESL saw growth across the board e-commerce turnover growing 65% to £171m (2017: £103.4m); Retail increasing by 43% to £241.1m (2017: £168.6m); Consumer increasing by 26% to £182.1m (2017: £144.6m) and Manufacturing, Industry and Business up 16% to £211.1m (2017: £182.0m).

E-commerce now makes up 20% of the group’s sales, and annual turnover growth has been explosive (up almost 250% since 2016).

ESL said it had reacted to the specific demands of e-commerce over the traditional retail model and, including capacity added through the TPN acquisition, now has 8.8 million sq ft of warehousing.

In 2018 it completed the redevelopment of its Goresbrook, Dagenham site adding a 180,000sq ft warehouse to increase the total warehouse space at the site to 441,000sq ft.

This has doubled pallet capacity of the site to 60,000 pallet spaces.

In Corby it has recently opened a 840,000sq ft purpose built facility, supporting iForce and ESL, while iForce also gained a new facility in Rugby.

Subject to planning permission, ESL is looking to open a 644,000sq. ft warehouse at Appleton, adjacent to its operational headquarters and group head office and training centre, by the end of next year.

Key contracts won in the year included: PepsiCo Walkers, Britvic, Cemex and Tarmac.

In addition, it renewed contracts with Johnson & Johnson, Unilever and Coca-Cola.

However, ESL hasn’t had it all its own way with the high-profile loss of its Aggregate Industries deal to Wincanton and several independents since during its current financial year.

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