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'Significant growth' confirmed

Xpediator’s pre-close trading update said that revenues and profits are both in-line with market expectations. Top-line growth was significantly ahead, rising 54% y-o-y to c.£179m (c.1% ahead of ED estimate), while profits have more than doubled to c.£7.1m. The uplift to revenues has been driven by organic growth, most notably in Freight Forwarding (Baltics and Balkans), Pall-Ex Romania, and Affinity. Plus, there were benefits from the acquisition of ISL and Anglia Forwarding in 2018, and Regional Express in late 2017.
FY2018F proved eventful, with two acquisitions made and strong organic progress witnessed across much of the Group. The acquisition of Anglia Freight in June and ISL in July added approximately £21m of revenues, accounting for c.18% of the y-o-y increase. The wider group has benefitted from the sea and air freight capabilities, wider customer base and service offerings added
The significant improvement in revenues in the Group’s operations in the Baltic states and the Balkans, despite challenging comparatives, reflects the continued development of the customer base within the Freight Forwarding division and the rising revenues from Greece (via the Group’s Bulgarian operations).
There is a comprehensive investment programme underway during FY2019F, which is likely to boost central headcount. There will be further improvement in systems and expansion of the warehousing footprint. We think this is likely to have a small short-term impact on margins in FY2019F, but then resulting in ongoing improvement in returns as early as FY2020F onwards.
Management has suggested that the acquisition pipeline remains strong, as do the opportunities for organic growth. With approximately two-thirds of revenues generated outside of the UK, we believe that the share price has recently over-reacted to Brexit uncertainty and as a result consider it on attractive valuations currently. Xpediator’s shares are now at a FY2019F PER of just 10.9x and well below our valuation of 85p.