The freight management services provider said it now expects to report adjusted profit before tax of at least £6m for the period, up 18% over the prior year (FY19: £5.15m).
The company said its freight forwarding division, its primary business and an asset light operation, has maintained cost flexibility throughout the ongoing global pandemic, including when volumes dropped sharply at the beginning of the COVID-19 outbreak in March 2020.
Since then, demand for freight forwarding services has strengthened, Xpediator noted, with the group receiving additional income from new markets.
As a result, 2020 revenues for this division are expected to exceed 2019 by approximately £10.0 million (FY19: £159.6 million).
The COVID-19 pandemic also led to ‘reduced traffic volumes and significantly lowered fuel prices’ for the company’s Transport Solutions division, which provides fuel and toll cards to European hauliers, translating into lower income levels in the first half of the financial year.
However, the company highlighted that monthly revenues have recovered well compared to 2019. Revenues for this divison are now expected to be approximately £5m (FY19: £6.2m).
Regarding its third division, logistics and warehousing, Xpediator said Warehousing in Romania and Pall-Ex have performed well, recovering from the impact from the pandemic.
Income from UK warehousing was down due to lower activity with retailing clients, however, 2H20 has been ‘much stronger, especially at Import Services based in the Southampton docks.’ Xpediator expects revenues to be flat year-on-year at around £48m.
Meanwhile, last month, the Company acquired UK-based international groupage freight forwarder and operator, Nidd Transport Ltd (“Nidd”) for £4.6 million. The integration is now underway, and the business is performing ‘slightly ahead of management expectations.’
“For Xpediator, 2020 has demonstrated the strength of being a diversified business,” said Robert Ross, Chief Executive of Xpediator, commenting on the trading performance.
Outlook
The Company said its outlook for 2021 remains strong, ‘even with likely ongoing disruption in specific areas relating to the pandemic.’ The Group said it now anticipates continuing with its progressive dividend policy ‘to reflect the increase in expected profitability.’
Xpediator said its confidence is based on maintaining current trading patterns, the ongoing benefit of cost reductions made, additional income from Nidd and a healthy balance sheet.
Since 2016, XPD has been preparing itself and its clients for a potential hard Brexit. The Company said today that a new customs brokerage team has been established which it set up in order to handle the ‘likely increase’ in declarations whatever the Brexit deal outcome.
The Company believes that should border controls change, that it will have an increased workload which should translate into higher revenues.
“While the COVID-19 pandemic has resulted in less traffic and therefore reduced use of our fuel cards, demand has increased for our freight forwarding and warehouse and logistics services, and we have also delivered on cost saving initiatives,” said Ross.
He added, “The net result is expected to deliver an 18% increase in annual adjusted profit before tax and annual cost savings of £0.5 million. This, combined with our fuel card business returning to normal, means we are moving forward into 2021 with confidence.”
Shares in Xpediator have increased by over 8% since the beginning of the month to open 16.00% higher this morning at 29p following the announcement.
XPD price chartReasons to follow XPD
Xpediator has evolved into an integrated freight management business operating in the supply chain logistics and fulfilment sector across the UK and Europe with a particular focus on, and expertise in, CEE countries. It currently operates across a total of 31 sites.
Financial Performance
In its half-year report for 1H20, Alex Borrelli, Chairman of Xpediator said the group has demonstrated resilient performance and demonstrated that there has been good demand for the group’s services both in the UK and on the continent despite the impact of Covid-19.
The Company also highlighted to investors that the pandemic also showed the value ‘of being an asset light and diversified business not reliant on any one sector, market or customer.’
‘Overall, whilst the impact of Covid-19 reduced profitability in the period, XPD is now trading close to normal levels and has started the traditionally stronger second half of the year well.”
In its FY20 Trading Update announced in November 2020, the freight management services provider said it now expects to report FY20 adjusted profit before tax of at least £6.0 million for the period, an 18% increase over the prior year (FY19: £5.15m).
Furthermore, the Group now anticipates continuing with its progressive dividend policy ‘to reflect the increase in expected profitability.’
Successful M&A
The freight management services provider also recently acquired the UK-based international groupage freight forwarder and operator, Nidd Transport for a total consideration of £4.6m.
The group said it expects the acquisition of Nidd to be immediately earnings enhancing.
Xpediator said at the time that this complementary acquisition of Nidd comes with ‘immediate cross-selling opportunities’ and is ‘a natural fit’ with the Company’s existing operations.
It also said there are operational synergies of linking UK national service offering using Nidd’s transport and distribution in the North would strengthen the Midlands and Southern regions.
Addressable Market Expansion
The group said Nidd’s current western European focus complements its focus on central and eastern Europe, Italy and Germany and provides opportunities ‘to cross sell its own services to Nidd’s customer base and maximise carrying capacities to and from Europe.’
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