Life in the fast lane
Xpediator (XPD) is an integrated freight management business. The Group has three main business areas: freight forwarding services, logistics and warehousing and transport services.Interim results to end of June demonstrated very strong progress, with revenues and operating profits rising 61% and 133% respectively, and underlying growth of 30%. Organic operating profit was 61% ahead y-o-y. Current trading remains in-line with expectations, and demand for freight management services across all core markets is high. To underline this confidence, the interim dividend was increased 21% y-o-y to 0.42p / share.
Key drivers of top-line growth included: strong organic progress at EshopWedrop, record demand at Pall-Ex Romania, the continued move in favour of full loads within Freight Forwarding, the new warehouse in Romania, and new customer wins.
The operating margin declined to 2.1% (H1 2017: 2.7%), which reflected a combination of the investment in support functions, the switch in favour of full-loads, new franchises within EshopWedrop, the rise in ferry crossings in Romania and the marked increase in deferred income.
Adjusted Earnings rose 34% to £1.4m and by 18% on an underlying basis. However, adjusted EPS were slightly lower (-3.6%), owing to the payment of deferred consideration for EMT (£1.1m) and the full-period effect of last year’s IPO and placing in late November.
Even after adjusting estimates modestly lower, we believe that a share price of 90p is merited. Not only is the current share price remaining at a valuation discount to a basket of its competitors, but we also expect further accretive acquisitions that are likely to result in greater earnings momentum and subsequent increase in our fair value.
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