Xpediator AIM:XPD, the AIM-listed Essex-based logistics company, released its unaudited interim results for the six months ended 30th June 2022 today (26th September). The company reported “strong organic growth” in 1H22, with revenue of GBP189.2m against GBP126.6m for the same period in 2021.
Interim chief executive, Mike Stone explained that the increase in revenue reflected positive trading in its Central Eastern European freight forwarding operations, which continued to grow, despite the war in Ukraine. Stone said in a call this morning: “Eastern Europe remains the group’s powerhouse, but we hope that in 2023 UK operations will start to make a positive and increasing contribution to revenues.”
Xpediator provides warehouse storage solutions, international freight forwarding and courier services. The company offers road, air and sea freight, warehousing and logistics, e-commerce solutions and fashion warehousing.
Stone said that Xpediator had returned to pre-Covid levels of trading in its Transport Services operations and Pall-Ex Romania divisions.
Xpediator UK restructuring following disappointing UK trading
The shipping company reported adjusted profit before tax of GBP3.1m, compared to GBP3.6m. The decline was attributed to a GBP1.5m goodwill impairment to Delamonde Anglia and restructuring costs of c.GBP300.000.
Richard Myson, chief financial officer said in a presentation this morning: “Our warehousing facilities in Southampton, Beckton and Braintree were all unprofitable for the first half of 2022.”
Stone added: “We saw hugely disappointing trading in the UK this year.”
The company’s management initiated a review of the group’s operations and established its key problem areas with UK logistics and its Delamode Anglia subsidiary being areas of concern. A lot of the problems, explained Stone and Myson in a call this morning, were legacy issues arising from the implementation of shared services across the group; delays in the completion of a new building for its warehousing operation in Southampton; a loss of business in Beckton, London from its customers closing their businesses as the UK High Street declines; and a “unprofessional” implementation of the merger of three businesses to become Delamond Anglia.
On UK logistics the primary issues of the business were the shared services division the company created to streamline support services to its business not working in any way. This led to poor working capital management, low morale, leading to staff losses and an increase in personnel costs as Xpediator had to replace losses with contractors and temps. The company was late in collecting its outstanding invoices and early in making its supplier payments.
Management structure overhaul
The company decided to overhaul its management structure and appointed a new CEO for its warehousing and a new divisional director for UK logistics, which the company hopes will help implement cost savings, restructure and turn around its underperforming businesses.
The company reported GBP200,000 profit before tax for 1H22, compared to GBP2.3m PBT for 1H21 and a loss per share of 1.74p against a profit per share of 0.66p in 1H21. Net debt increased to GBP8m for the period from GBP4.8m in 1H21. As a result, the board did not approve an interim dividend. Prioritising the reduction of net debt instead.
The group opened trading today at 33p and had fallen to 29p within the first two hours. The company has offered a one-year return of -54.6% and a year-to-date return of -36.1%. Xpediator shares have ranged between 65p and 28p over a 52-week period and the company has a market cap of GBP46.8m.Stone said in the call: “We fully-intend to deliver GBP9m profit before tax for 2022 […] the second half of the year has started off very strongly.”
Xpediator net debt concerns
Net debt is a significant concern for Xpediator. Myson said: “[…] up until 2021 we were a largely cash positive business – asset light and cash generative – and we want to get back to that position.”
The losses incurred over the last year led to Xpediator having to increase its borrowing and the company negotiated a new GBP5.4m loan from Investec. “Net debt is higher than we would like or was expected,” said Myson, “repayments on the GBP5.4m [loan] will be starting and we need to make changes [to accommodate the charges] and increase revenues.”
Myson said that the company is making cost savings and improving its cashflow operations.
Stone said in a statement this morning: “”Demand for the group’s freight management services is robust as shown by the 50% increase in revenues, however, profit after tax in 1H22 was lower than 1H21, primarily due to a combination of higher costs, weaker than planned trading by some areas of the business in the UK, and a non-cash goodwill write down of GBP1.5m. Despite this, the company remains on track to meet full year management expectations due to the ongoing strength in customer demand and the improving performance of those UK businesses which under-performed in the first half.”
Revenues from Freight Forwarding improved by 54% to GBP155.5m, up from GBP100.8m in 1H21, which created a standalone profit of GBP5.9m versus GBP4.1m for the corresponding period in 2021. Most of this growth was attributed to the group’s Central and Eastern Europe business.
Logistics and warehousing
Xpediator’s Logistics and Warehousing division saw its revenue increase 31% to GBP30.1m from GBP22.9m in 1H21. However, despite the positive direction of travel, the division saw a GBP1.8m operating loss on the back of poor performance from UK logistics activity. The UK’s poor performance dimmed the record performance of Xpediator’s subsidiary Pallex in Romania and the majority of the company’s losses are attributable to the UK logistics division, said the company.
Transport revenue increased to GBP3.7m up from GBP 3m in 1H21 and this saw operating profits of GBP1.4m, which was back up to pre-pandemic levels, said the company.
Xpediator has a had some significant management changes, appointing Stone and Myson as chief financial officer in June 2022. Myson was a re-hire, as he had spent 16 years at the company in the past.
Stone said: “Having been in the business now for four months, I have been impressed and encouraged by the commitment and capability of the wider management teams and their operations. In short, Xpediator is a healthy business with solid foundations, with a few, specific, areas of underperformance. We have completed the initial business review and have identified several areas where material operational performance improvement can be achieved, and where changes to the governance structure will support the successful execution of this and sustain it going forward.
