Join our community of smart investors

Eddie Stobart delivers on new contracts

The logistics company added several new contracts during the first half, but reorganising its network has come at a cost
August 30, 2018

During the first half Eddie Stobart Logistics (ESL) won £158m-worth of new business with blue-chip customers. This included deals with CEMEX UK, Knauf, Homebase and Britvic (BVIC), along with PepsiCo after the period end. It also renewed £113m-worth of business with existing customers. But these new contracts have come at a cost. Operating profit fell by nearly a quarter to £5.1m due to costs associated with servicing this new business, specifically reorganising the network and warehousing. But chief executive Alex Laffey is confident the benefits will be evident in the second half.

IC TIP: Buy at 136p

The logistics company reported revenue growth across three of its four divisions, with retail up 28 per cent, manufacturing industrial and bulk rising 13 per cent, and e-commerce improving 118 per cent. Sales in the consumer business fell 6 per cent due to the loss of the Britvic contract in 2017, only for it to be fully regained in May this year. The group has also bought UK and Ireland pallet distributor The Pallet Network for £52.8m, which Mr Laffey called a "major step" in the strategy to become a full end-to-end logistics service provider.

Analysts at Berenberg expect pre-tax profit of £52m during the year to November 2018, giving EPS of 11.9p, compared with £38m and 10.1p in FY2017.

EDDIE STOBART LOGISTICS (ESL)  
ORD PRICE:136pMARKET VALUE:£516m
TOUCH:134-138p12-MONTH HIGH:160pLOW: 123p
DIVIDEND YIELD:4.4%PE RATIO:34
NET ASSET VALUE:53p*NET DEBT:57%
Half-year to 31 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2017287-7.58-2.41.40
20183592.860.41.54
% change+25--+10
Ex-div:6 Sep   
Payment:19 Oct   
*Includes £266m of intangible assets, or 70p a share