Shares in transport and logistics group Eddie Stobart (ESL) have bounced back to around 71p in mid-morning trading after crashing 9% to 66p in early deals after it issued a mild profit warning.
The company, whose heavy goods delivery trucks are often spotted on motorways up and down the country, warned that profits in the first half of its year to 31 May will be at the lower end of management expectations.
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It blamed this on issues from getting out of a problematic contract in March, as well as slower than anticipated improvements in productivity from its contract logistics and warehousing business.
GOOD ORGANIC GROWTH
But it’s not all gloom for the company. It reported a 25% increase in group revenues over the period, as a result of organic growth and a full first half contribution from The Pallet Network, the pallet distribution business it bought last June for £52.8m.
On a like-for-like basis revenues were up 8%, which Eddie Stobart said reflects its continuing organic growth and a number of new contract wins.
Eddie Stobart’s acquisition of The Pallet Network has helped it meet requirements from some customers for smaller delivery loads.
The firm is trying to add to its range of services so it can target customers across the supply chain, and has a stated aim to become a full end-to-end logistics provider.
VALUATION 'TOO LOW', CLAIMS ANALYST
Despite the revenue growth and the benefits from its acquisition, today’s share price movement has shown investors concerns about the business haven’t eased, following on from its 2018 results which showed a big increase in liabilities compared to assets on its balance sheet, as well as a high number of exceptional items.
But analysts at Berenberg think the market is valuing the business too low, and expects an improvement in its full-year results in 2019 to change the market’s mind.
Berenberg said, ‘despite today’s new news, we expect both of these to normalise in full year 2019, driving a significant improvement in sentiment in the company and ultimately a re-rating in the shares.’
