Eddie Stobart Logistics — Strong H1 reinforces story

Eddie Stobart Logistics — Strong H1 reinforces story

ESL’s pre-close update confirmed the company traded in-line with expectations in the first half and continues to do so going into the second half. H117 sales grew 13% to £287m with a modest expansion in operating margins despite a challenging economic and political backdrop. Integration of the iForce acquisition continues and management highlighted the potential for cost and revenue synergies. In addition, ESL acquired 50% of Speedy Freight, a B2B express freight service provider. CEO Alex Laffey said he remains confident of meeting market expectations for the full year and once again highlighted E-commerce, Manufacturing, Industrial and Bulk as key end-markets for the group.

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Written by

Eddie Stobart Logistics

Strong H1 reinforces story

Trading statement

Industrial support services

13 July 2017

Price

158.50p

Market cap

£567m

Estimated net debt (£m) at 30 November 2017

79.1

Shares in issue

357.9m

Free float

72.2%

Code

ESL

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

N/A

N/A

Rel (local)

1.4

N/A

N/A

52-week high/low

163.5p

157.5p

Business description

Eddie Stobart Logistics is a market leader in end-to-end multi-modal transport and logistics. Operations are primarily focused in the UK with some activities in mainland Europe. Key customer segments include retail, consumer, industrials and, increasingly, e-commerce.

Next events

Interims

31 August

Analysts

Jamie Aitkenhead

+44 (0)20 3077 5746

Roger Johnston

+44 (0)20 3077 5722

Eddie Stobart Logistics is a research client of Edison Investment Research Limited

ESL’s pre-close update confirmed the company traded in-line with expectations in the first half and continues to do so going into the second half. H117 sales grew 13% to £287m with a modest expansion in operating margins despite a challenging economic and political backdrop. Integration of the iForce acquisition continues and management highlighted the potential for cost and revenue synergies. In addition, ESL acquired 50% of Speedy Freight, a B2B express freight service provider. CEO Alex Laffey said he remains confident of meeting market expectations for the full year and once again highlighted E-commerce, Manufacturing, Industrial and Bulk as key end-markets for the group.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

11/15

496.5

21.0

5.4

0.0

29.3

N/A

11/16

570.2

26.1

6.9

0.0

23.0

N/A

11/17e

648.2

41.4

10.9

5.5

14.5

3.5

11/18e

741.9

50.8

12.3

6.2

12.9

3.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

High growth, expanding margins, strong H2 ahead

ESL’s sales in the six months to 31 May 2017 were up 13% to c£287m while margins expanded year-on-year partly as a result of the Q2 exit of the loss-making Britvic contract (note, the Britvic exit also reduced y-o-y revenue growth). H2 is traditionally the stronger reporting period as it includes peak seasons for retail, consumer and e-commerce. H217 is likely to be especially strong driven by high continuing growth in e-commerce plus full period contributions from both iForce and Speedy Freight. We are reassured by the trading statement and view our full year revenue growth forecast of 13.7% and operating margin expansion to 7.5% from 7.4% as consistent with management’s guidance.

M&A remains a key pillar: New deal announced

H2 will mark the first full period contribution from the iForce acquisition. The e-commerce specialist is currently being integrated with revenue and cost synergies being implemented. In the trading update, management also announced ESL has acquired a 50% stake in Speedy Freight: a provider of nationwide B2B express freight services. We look forward to receiving further financial data on this transaction at the interim statement on 31 August.

Valuation: Unchanged at 200p as story confirmed

Since we initiated on ESL on 19 June, the stock has been broadly flat despite mounting economic concern coupled with the fact that a listed peer has sold off significantly. ESL remains attractive in a sector context given its sector-leading margins, operating flexibility and high level of exposure to growth areas such as e-commerce. Until we have further information on the new investment, we see no need to update our earnings forecasts. We therefore maintain our fair value per share at 200p which offers 26% upside to the current price of 158.50p.

Exhibit 1: Financial summary

£m

2015

2016

2017e

2018e

2019e

Year-end 30 November

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

496.5

570.2

648.2

741.9

835.8

EBITDA

 

 

44.5

48.2

55.7

64.4

73.8

Operating Profit (before amort. and except.)

 

37.7

42.0

48.6

56.3

64.5

Intangible Amortisation

(9.5)

(9.5)

(9.5)

(9.5)

(9.5)

Exceptionals

(3.1)

(2.4)

(18.3)

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

Operating Profit

25.1

30.1

20.8

46.8

55.0

Net Interest

(16.7)

(16.0)

(7.2)

(5.5)

(5.3)

Profit Before Tax (norm)

 

 

21.0

26.1

41.4

50.8

59.1

Profit Before Tax (FRS 3)

 

 

8.5

14.1

13.6

41.3

49.6

Tax

(1.6)

(1.3)

(2.3)

(6.7)

(8.0)

Profit After Tax (norm)

19.4

24.7

39.2

44.1

51.1

Profit After Tax (FRS 3)

6.8

12.8

11.4

34.6

41.6

Minority interest

0.0

0.0

0.9

1.1

3.1

Net Income (norm)

19.4

24.7

40.1

45.2

54.2

Net Income (FRS 3)

6.9

12.8

12.3

35.7

44.7

Average Number of Shares Outstanding (m)

357.9

357.9

357.9

357.9

357.9

EPS (pence per share) - normalised

 

 

5.4

6.9

10.9

12.3

14.3

EPS (pence per share) - normalised and fully diluted

 

5.4

6.9

10.9

12.3

14.3

EPS (pence per share) - (IFRS)

 

 

1.9

3.6

3.2

9.7

11.6

Dividend per share (pence per share)

0.0

0.0

5.5

6.2

7.1

EBITDA Margin (%)

9.0

8.4

8.6

8.7

8.8

Operating Margin (before GW and except.) (%)

7.6

7.4

7.5

7.6

7.7

BALANCE SHEET

Fixed Assets

 

 

262.7

258.1

294.1

283.5

271.7

Intangible Assets

225.5

219.3

209.8

200.3

190.8

Tangible Assets

36.8

37.9

83.3

82.2

79.9

Investments

0.4

0.9

0.9

0.9

0.9

Other

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

120.9

150.3

178.8

207.4

237.3

Stocks

1.9

2.4

2.7

3.1

3.4

Debtors

114.9

133.8

145.6

166.7

187.8

Cash

4.1

14.1

30.5

37.7

46.1

Current Liabilities

 

 

(109.7)

(120.1)

(135.1)

(145.0)

(151.5)

Creditors

(99.6)

(110.6)

(125.5)

(135.5)

(142.0)

Short term borrowings

(5.5)

(6.2)

(6.2)

(6.2)

(6.2)

Other

(4.5)

(3.3)

(3.3)

(3.3)

(3.3)

Long Term Liabilities

 

 

(197.2)

(198.8)

(113.3)

(108.3)

(103.3)

Long term borrowings

(168.5)

(173.4)

(103.4)

(98.4)

(93.4)

Employee benefits

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

(28.7)

(25.5)

(10.0)

(10.0)

(10.0)

Net Assets

 

 

76.8

89.4

224.5

237.5

254.1

CASH FLOW

Operating Cash Flow

 

 

32.7

29.7

24.7

53.0

58.8

Net Interest

(12.8)

(10.3)

(7.2)

(5.5)

(5.3)

Tax

(3.9)

(1.7)

(2.3)

(6.7)

(8.0)

Capex

(7.7)

(8.1)

(7.5)

(7.0)

(7.0)

Acquisitions/disposals

18.7

5.5

(45.0)

0.0

0.0

Financing

0.5

0.0

130.1

0.5

0.5

Dividends

0.0

0.0

(6.5)

(22.1)

(25.5)

Net Cash Flow

27.6

15.2

86.4

12.2

13.4

Opening net debt/(cash)

 

 

191.4

169.9

165.5

79.1

66.9

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

(6.1)

(10.8)

0.0

(0.0)

(0.0)

Closing net debt/(cash)

 

 

169.9

165.5

79.1

66.9

53.5

Source: Edison Investment Research

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Eddie Stobart Logistics and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

dison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Eddie Stobart Logistics and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

NetScientific — PDS collaborates with Merck

One of NetScientific’s portfolio companies, PDS Biotechnology (17.4% stake, 14.5% fully diluted), announced on 10 July 2017 that it has entered into a collaboration agreement with Merck to investigate the combination of the cancer vaccine PDS0101 with the PD-1 inhibitor Keytruda. PDS will be initiating a Phase IIb clinical study of the combination for the treatment of human papilloma virus-16 mediated forms of recurrent and metastatic head and neck cancer.

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