Xpediator plc (LON:XPD) has issued a pre-close update for the year-end. Trading was strong through H2, and full year revenue will exceed £300m vs. our estimate for c.£250m. More importantly, the Group is now guiding that PBT will comfortably exceed £8.5m. We have interpreted this as £8.75m of pre-tax profit, noting that numbers are as yet unaudited. Trading was healthy across-the-board but particularly in freight forwarding in Lithuania and Bulgaria, and with increased UK-related customs clearance work. The Pall-Ex freight network in Romania is growing well, and fuel card activity continued to recover in the Balkans. The weak spot was cash. Continuing the trend in H1, and as with many logistics operators, XPD is paying higher advanced supplier payments to lock-in freight capacity for the coming months. This will contribute to a net debt position for the full year, but we estimate that net debt will remain below a comfortable 0.5x EBITDA. In time, prepayments will unwind. The outlook for 2022e is cautiously positive. Investments in new warehouse capacity and specialist eFulfilment services should accelerate growth. That said, given the early stage in the new trading year, our 2022e-23e profit estimates are unchanged for now. Generally, we like XPD’s flexible “forwarder” model, well-established CEE market positions and prospects for M&A and higher earnings growth. The stock is trading at a c.20% PE discount to the European logistics sector. Our DCF-based valuation is 85p.
Positive trading update – Xpediator has issued a brief pre-close update for the year to 31 December 2021. Strong growth in H1 continued to the year-end, and the outturn revenue is guided to over £300m (+c.35% y-o-y). Freight Forwarding revenue has been healthy, driven by growth in CEE markets, higher sea freight volumes generally, and an uplift from UK customs clearance work. Notably, Lithuania and Bulgaria forwarding units continued to outperform. Pall-Ex Romania, the franchised pallet freight network, contributed to positive trading in the Logistics & Warehousing division. Transport Support Services, which provides bundled fuel and toll cards alongside financial and support services for hauliers in Southern Europe, has continued to recover with increased freight movements and expansion into the wider Balkans. Activity across the Group was strong through 2021a.
Profit progression healthy but cash temporarily impacted by advanced payments to secure capacity – XPD upgraded full year guidance in late June and now states that adjusted PBT will be “well in excess” of £8.5m (2020a: £7.2m). For the moment, pre-audit, we assume PBT of £8.75m. Hence, overall levels of profit are much higher (+c.20% y-o-y) but with some margin squeeze (at Group-level 2.9% from 3.3%) – this is not unexpected with a fast-growing forwarding unit. On cash and the balance sheet, XPD expects to report a net debt position at year-end; at H1 net debt was £1.6m (pre-IFRS 16) and the expected outturn is c.£4.9m. This is primarily because of prepayments to sub-contractors to ensure availability of capacity in the coming months – this is common across the supply chain industry currently – it is unwelcome, but the working capital impact should ease through the year, helped by a new operating system and processes.
Outlook and valuation – The outlook for 2022e is cautiously positive. Xpediator should see the full year benefits of new warehousing capacity and from the partnership with eFulfilment expert Synergy Retail Support. We expect resumption of XPD’s roll-up strategy, management has an active pipeline. We are watching cash closely but believe the impact from higher prepayments will be temporary. The stock has drifted with the sector and markets; it is trading at a discount to the comparable European logistics sector – on a 2022e PE of 11.4x versus the sector on 14.5x (a c.20% discount), and EV/EBITDA of 5.3x versus 7.9x (c.30%), with a dividend yield of 3.3% versus 2.7%. XPD is good value, and growth prospects are strong.
