There has been a lot of speculative activity around Eddie Stobart Logistics (AIM:ESL) recently, the AIM-listed firm which indirectly holds interests not only in the iconic British haulier Eddie Stobart but also in logistics and freight firms iForce and the Pallet Network.
Last week investors were snapping up shares, positioning themselves for ESL to start trading as a new investment company and under a new name Logistics Development Group. The move, which is due shortly, is expected to be accompanied by a fresh announcement on how the company plans to spend the £9 million it raised in a placement and from subscriptions in December.
Small investors remain confused about Eddie Stobart
But this morning shares dropped 13% before regaining some ground to trade at 13.75, down 9% on the day, because of haulage related pain as small investors remain confused about the new nature of the company.
Eddie Stobart Logistics is now a cash shell which holds a 49% indirect equity interest in Greenwhitestar Acquisitions Limited (“GWSA”), the holding company of the original Eddie Stobart road haulage business and its 2,700 vehicles. The other companies under the same umbrella are iForce, a logistics provider for John Lewis, Dunelm, Waitrose, Aldi and Cath Kidston; freight specialist The Pallet Network and logistics recruitment specialist The Logistics People.
A financial rescue by Isle of Man-based DBay Advisors in late 2019 has set it onto a different course from its logistics roots and the company, which will start trading on AIM under its new name Logistics Development Group, likely within weeks, will now primarily focus on investing in logistics-related assets.
Alongside its £9m placement in December the firm also made an open offer to raise up to an additional £7m to allow qualifying shareholders to participate on the same terms as the placing and subscription.
Debt and Brexit still an issue for investors
The change in business follows a bruising two years when the company tripled losses, accumulated debt and issued two profit warnings. In theory, 2020 should have been a good year for Eddie Stobart Logistics as demand for logistics provisions went through the roof. However, the new contracts, including a fresh three-year logistics deal with Morrisons which comes on top of an already existing contract with the grocery chain, wasn’t enough to make a serious dent the firm’s debt.
Brexit has brought an additional level of pain. Although Eddie Stobart Logistics is in the process of extracting itself from the haulage business shares still dropped after the HMRC announced plans to start charging truckers £50 per hour for waiting to clear Brexit custom checks.
Port operations have slowed down to snail speed since the start of the year, ground down by the sheer volume of paperwork needed to cross the border. In an attempt to speed the process up HMRC has decided that from 1 February haulage companies will be allowed two hours to clear the paperwork and after that will be charged £50 for any additional hour.
The company is now in a state of flux that makes it difficult to plot a future share price prediction. Once it starts trading under a different name it will shrug off its haulage roots and replace it with an investment mantle that will make it easier for investors to take a view on where it is going. Until that happens, trading Eddie Stobbart shares remain a sport for the adventurous.