By William Turvill
Is Eddie steady and still a go?
It’s difficult to picture things staying quiet for too long at Eddie Stobart.
The logistics firm’s shares began trading again last Wednesday following a suspension that was put in place in the summer. The company also released its interim results for the six months to 31 May 2019.
ESL’s share price finished the day at 11.9p, down 83 per cent on the 71p price they were suspended at in August, they ended the week at 10.5p opening Monday at 13p.
What has happened?
Eddie Stobart Logistics, best known for its fleet of red and green lorries, floated on Aim in 2017 at a price of 160p per share.
It marked a return to the public market for a company that was taken private in 2014 when its then-parent, Stobart Group, sold a 51 per cent stake.
At the time of its listing, ESL was helped by the involvement of Neil Woodford, whose investment firm held a near-20 per cent stake.
Despite the fanfare surrounding its return to the market, Eddie Stobart’s share price gradually fell in 2018 and 2019, resting at just over 71p last summer.
On 23 August, ESL stunned its already-frustrated investors by announcing a share suspension prompted by an investigation that found its profits had been overstated. Chief executive Alex Laffey stood down immediately.
In early December, shareholders approved a complicated rescue deal for the firm under which private equity firm Dbay Advisors took a 51 per cent stake.
The dramatic deal involved William Stobart, founder Eddie’s son and the company’s former chairman, and pitted him against his ex-brother-in-law Andrew Tinkler, a former chief executive who had put together a rival rescue offer. William Stobart has since been installed, executive chairman.
Finally last week, in a sign that some level of normality might be restored, Eddie Stobart Logistics resumed trading on Aim after reporting its interim results.
What did the interim results show?
As expected, last week’s results weren’t pretty. While revenues were up 26 per cent, the company reported an underlying EBIT loss of £11.6million, down from a £600,000 profit the year before.
Many of the details released in the interim results had been flagged by the company last November.
But Investors Chronicle highlighted the level of the group’s impairments as an area of concern. At £169million, the figure was higher than the “no less than c. £50million” previously highlighted.
What happens now?
In its interim results announcement, the key word for Eddie Stobart management was “stable”.
The Dbay deal provided £70million of additional liquidity, putting the group “on a stable footing and providing a platform from which to develop,” they said.
“The Eddie Stobart group management team is committed to building on the group’s strong fundamentals and is seeking to deliver an improved performance from a more stable footing,” the statement added.
It also noted that since the start of the reporting period it had won “new customers such as Tilda, Metsa and Lallemand and extended contracts with Tesco, Aldi and Mayborn”.
It added: “No significant contracts have been lost since the start of the six months ended 31 May 2019 (HY19), although two underperforming contracts have been exited.”
But Investors Chronicle does not sound overly optimistic about the company’s future.
It noted that the Dbay deal has allowed Eddie Stobart “to live to fight another day, but one wonders whether the damage is now done”.
Reinstated a “sell” rating on the firm, Investors Chronicle added: “The group’s net debt is now almost nine times its market capitalisation, and with further losses expected – even without the further potential adjustments, we see no reason to stick around.”
Following a torrid period, Eddie Stobart’s investors will be hoping for a steady, improving performance going forward.
That is certainly what management are aiming for. But can they convince their beleaguered investors to stick around to witness it?
The author was remunerated but does not hold shares in the company