Pay dispute and spiralling inflation help push ArrowXL into the red, latest financial results reveal

The strategic report to the recently published results attributes ArrowXL’s £9m pre-tax loss in the period to the impact of a long running industrial dispute, high inflation, rising fuel prices and the cost of living crisis.

It also emphasises that LGL’s collapse ”has not resulted from trading performance or other factors related to ArrowXL, which has in recent years, remained consistently profitable and cash generative.”

ArrowXL, which has its headquarters in Wigan, specialises in two-person deliveries and warehousing and employs around 1,280 staff. It has operating licences for 335 trucks and 206 trailers.

Its financial results for the 18 months to 31 December 2022, reveal a rise in turnover to £164.8m in the period, compared to turnover of £114.8m in the 12 months to 30 June 2021. Meanwhile pre-tax profit spiralled into a loss of £9m during the 18 month period, down from a pre-tax profit of £1.9m in the year to 30 June 2021.

On a like-for-like basis EBITDA also fell, with the company reporting this at £15.9m in the 18-month period  and at £13.3m in the year to 30 June 2021

In its strategic review of the results the company said the loss had to be taken in the context of the unusually high volumes in 2021. It stated: ”The directors are naturally disappointed to report a deterioration in adjusted EBITDA margin on a like-for-like 12-month basis, compared to the previous year. However, it is important to note 2021 was a record year for ArrowXL, driven by Covid 19 and the growth of online shopping volumes.”

The report cited spiralling wages, fuels and utilities costs and their “clear dampening effect on consumer spending power” as major contributors to the company’s performance, as well as a long-running industrial dispute over “unacceptable annual pay demands”, which began in October, 2022 and was not settled until March 2023. The report said the industrial action incurred “significant additional cost”.

Despite these challenges, ArrowXL remains positive with the report stating: “The directors are confident that ArrowXL will continue to be profitable on an adjusted EBITDA basis in the year ending December 2023.”

Turning to its future prospects ArrowXL said the UK home delivery market is seeing strong volume growth, driven by the shift in consumer demand for online shopping, post Covid 19, although it noted that “customers have returned to the High Street to some extent”.

Addressing the administration of ArrowXL’s parent company LGL, which also owned Yodel, the report said that HSBC, which is LGL’s major secured creditor, has confirmed in writing its willingness to support Arrow XL achieve a “solvent sale of the business in the medium term”.

The report added that in the meantime HSBC has approved additional overdraft and other facilities be made available to Arrow XL and confirmed it does not intend to take any enforcement actions against Arrow XL, which is a cross guarantor for the £145m debt to HSBC.

It also noted that it is in HSBC’s interest to support ArrowXL as a “profitable and cash generative business, and in due course, to maximise the value of the shareholding, which is subject to the bank’s security”.