Xpediator targets “critical” role in post-Brexit haulage

What it does

Xpediator PLC (LON:XPD) is a freight management firm that helps companies, and more recently consumers, move their goods around the globe. It joined AIM in 2017 and its core division is Delamode, a freight forwarding operation set up thirty years ago by the firm’s chief executive and founder, Stephen Blyth. Delamode remains the group’s largest division, ahead of the Logistics and Warehousing arm, which has more than 80,000 square metres of warehousing capacity and a fast-growing pallet network franchise called Pall-Ex Romania.

Xpediator’s third division, Affinity Transport Solutions, sees the group use the purchasing power derived from a network of 1,700 hauliers operating over 12,700 lorries to buy items such as fuel cards, insurance, leasing and ferry transit. Unlike transport companies, Xpediator’s is an asset-light model and it has developed a network of partners that it uses when it requires trucks for full or part loads and groupage services. There’s also a smaller but fast-growing division called EshopWeDrop – an online delivery business that allows consumers to take advantage of empty space in lorries to ship things bought in the UK to Lithuania or vice versa, for example.

 

How it’s doing

For the year ended 31 December 2019, the firm said turnover had risen 19% to GBP212mln, boosted by acquisitions and organic growth, with adjusted pre-tax profit expected to be in line with guidance at “slightly above” GBP5mln.

The logistics & warehousing division saw the most expansion with a 32% increase in sales, while the freight forwarding business increased by 16%. Transport solutions, meanwhile, saw sales dip by 3%. Looking ahead, the company said it will focus on completing the integration of its recently acquired businesses in the first half of 2020, while volumes from its regional express arm are expected to “increase substantially” with new offices established in China and Germany.

What analysts say

“Xpediator has delivered a strong outcome for 2018.

Revenues and profitability on all measures grew strongly, reflecting a combination of organic and acquisition-led growth,” said research house Equity Development. “The outlook suggests another year of strong growth in 2019, with an emphasis on cash generation. We anticipate free cash flow of GBP6.6mln in 2019, rising to GBP6.7mln in 2020, suggesting FCF yields of above 10% in each of the forecast years.

“This high level highlights the extent which the Brexit uncertainty has hit the shares. We believe that Xpediator’s shares are markedly undervalued, currently reflecting the hefty Brexit-related discount.” The research note concluded: “Our valuation models suggest a fair value of 78p/share, representing an uplift of ~67% compared to current levels.”

Blue sky

The aim is for Xpediator to become a top 25 global freight forwarder further down the line, a big step from its current value of GBP67mln at 50p, but chief executive Stephen Blyth says it is well within his team’s grasp.

While the seemingly never-ending Brexit drama has knocked consumer sentiment, Xpediator believes it is actually well-positioned for when the UK eventually departs. In the recent results, bosses said its services will be “critical” for companies looking to move goods in and out of the UK post-Brexit. That’s because it already holds Authorised Economic Operator status, which will allow it to support importers and exporters in “most forecasted [Brexit] scenarios”.

Demand for its services from customers’ looking to navigate increased red tape and customs checks should help Xpediator rack up more than GBP200mln in revenue this year.

Equity Development expects the top-line to hit GBP207.9mln in 2019. The board said it expects adjusted profit before tax for the current year to be not less than GBP5.0mln.

Analyst viewpoint

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