Xpediator Plc is an integrated freight management business operating in the supply chain logistics and fulfilment sector across the UK and Europe with a particular focus on, and expertise in, CEE countries.
Reassuring outcome and actions
Preliminary results to December 2019 were ahead of revised expectations across several metrics, not least revenue, profits, net cash and the dividend. 2020 started strongly, albeit trade was then affected by the COVID-19 related measures during March, meaning that Q1 trading was in-line with expectations.
Steps have been taken to conserve cash and to reduce costs, with the final dividend payable in shares during Q3. The Group’s strategy continues to be ambitious, targeting organic growth supplemented by acquisitions and the pipeline for the latter is reported as strong.
FY20 started well, with Pall-Ex Romania continuing to deliver 20% volume growth and the Freight Forwarding division performing strongly in the CEE region. But activity slowed across most areas during March as the COVID-19 related restrictions took effect. More recently, the Far Eastern and Chinese businesses began to recover towards the end of the quarter following an understandably difficult start to the year.
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We continue to be encouraged by actions on costs, the resilient trading, a healthy net cash buffer and the payment of a final dividend. Indeed, the dividend highlights Management’s confidence in the medium-term outlook for the business. The shares are well supported by the Group’s net cash (18% of the market capitalisation) and its NAV of 21p per share.
Cash rich, asset light
Planning ahead and removing bottlenecks
Out with the old..
Cost of growth
Investing for growth
Free cash flow yield high
'Significant growth' confirmed
Xpediator’s pre-close trading update said that revenues and profits are both in-line with market expectations. Top-line growth was significantly ahead, rising 54% y-o-y to c.£179m (c.1% ahead of ED estimate), while profits have more than doubled to c.£7.1m. The uplift to revenues has been driven by organic growth, most notably in Freight Forwarding (Baltics and Balkans), Pall-Ex Romania, and Affinity. Plus, there were benefits from the acquisition of ISL and Anglia Forwarding in 2018, and Regional Express in late 2017.
FY2018F proved eventful, with two acquisitions made and strong organic progress witnessed across much of the Group. The acquisition of Anglia Freight in June and ISL in July added approximately £21m of revenues, accounting for c.18% of the y-o-y increase. The wider group has benefitted from the sea and air freight capabilities, wider customer base and service offerings added
The significant improvement in revenues in the Group’s operations in the Baltic states and the Balkans, despite challenging comparatives, reflects the continued development of the customer base within the Freight Forwarding division and the rising revenues from Greece (via the Group’s Bulgarian operations).
There is a comprehensive investment programme underway during FY2019F, which is likely to boost central headcount. There will be further improvement in systems and expansion of the warehousing footprint. We think this is likely to have a small short-term impact on margins in FY2019F, but then resulting in ongoing improvement in returns as early as FY2020F onwards.
Management has suggested that the acquisition pipeline remains strong, as do the opportunities for organic growth. With approximately two-thirds of revenues generated outside of the UK, we believe that the share price has recently over-reacted to Brexit uncertainty and as a result consider it on attractive valuations currently. Xpediator’s shares are now at a FY2019F PER of just 10.9x and well below our valuation of 85p.Download Now Missing Out Get our research first