Shares in embattled haulage operator Eddie Stobart Logistics (ESL:AIM) have soared over 50% to 10.2p as the group’s holding company returns to profitability.
In a trading update of associate company GreenWhiteStar Acquisitions Limited (GWSA) - the holding company for the Eddie Stobart operational businesses run by William Stobart, the son of founder Eddie Stobart - the firm reported underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) of £16.6 million in the six months to 31 May, compared to a loss of £6.6 million in the same period a year ago.
GWSA also reported revenue broadly in line with the same period last year at £416.5 million, and provided a full-year outlook of delivering EBITDA in excess of £33 million.
Eddie Stobart holds a 49% interest in GWSA following last year’s 51% sale to private equity group DBAY, who came in when the business was lossmaking and put in a £55 million injection of capital to help turn the business around.
CONTROVERSIAL DBAY DEAL
However, the deal at the end of last year was controversial as the funding was through a payment-in-kind (PIK) loan, which is where the interest -a whopping 25% initially before it reduced to 18% after DBAY’s takeover bid was completed - isn’t paid each year but added back when the time comes to repay the loan, which in this case is no later than August 2021.
The idea with these loans is that company will be able to use the money to sort out their balance sheet and then have more than enough to pay all the loan off when the time comes at maturity.
The deal also implied a valuation for the entire company of £107 million at the time, well below the £269 million market cap the company had before trading in its shares was suspended in August 2019 at a price of 71p. DBAY netted a significant windfall when it floated Eddie Stobart on AIM in April 2017 at 160p per share.
But GWSA said that as proposed at the time of the DBAY transaction, the intention remains to offer Eddie Stobart shareholders the opportunity to refinance the PIK loan ‘as soon as is practicable.’
The Eddie Stobart business itself, meanwhile, reported revenue of £309.5 million and underlying EBITDA of £6.5 million in the half-year to 31 May, attributing the increased profitability to existing and new customers replacing revenue from exited loss-making contracts.
Eddie Stobart reported new business wins in the UK with Morrison’s, (MRW) Hillebrand and McBride, and new wins in its EU business with Nike and Amazon.
