Xpediator “is resilient and flexible, with unique knowledge and skills” says Zeus

Xpediator

Xpediator plc (LON:XPD) has re-hired Richard Myson as Group CFO to build back the Board and improve financial management, following various recent senior resignations. This is welcome news. Richard previously worked at XPD for 16 years, held numerous senior finance and non-finance positions, and helped steer the Group through the successful IPO in mid-2017. He left XPD in late 2018 but has remained in close contact with the Group. Richard owns c.1.4% of the shares. Further, hiring of a new non-executive chair and CEO is reportedly progressing well.

Separately, XPD has stated that despite events in Ukraine and other macro-economic headwinds, the Group continues to trade well and in-line with market expectations. To recap, XPD reported strong earnings for 2021a in early April. PBT was up 25% to £9.1m, with healthy trading across all three divisions. The weak spot was working capital; net debt was higher (£4.8m) due to significant advanced payments made to secure freight capacity, and some delays in collecting receivables relating to implementation of a new freight forwarding system. At the time, trading for Q1 2022e was reported to be positive, and the announcement today confirms this position. Of course, many companies are experiencing significant volatility in demand and costs at the moment. Consistent with the statement today, our expectations for 2022e remain that PBT will be about flat y-o-y at c.£9m.

The Group is resilient and flexible, with unique knowledge and skills in CEE and UK logistics markets. Xpediator has delivered a total return since IPO of more than 50%. The Group is trading on a forward PE of 7.9x vs. the wider logistics sector on 13.6x, a 42% discount. The dividend yield is 3.8%. Our DCF-based valuation remains 85p, indicating good potential upside.

Richard Myson re-joins – Richard will return to the Group and re-join the Board as Group CFO, from 1 June 2022. Mike Williamson, current CFO, will leave on 31 May 2022. Richard is a highly experienced CFO with significant knowledge of XPD having worked within the Group for 16 years across a variety of roles. Overall, he has nearly 30 years’ experience in the logistics and supply chain management sector, also including 10 years at well-regarded Tibbett & Britten Group. Richard previously served as XPD’s Group CFO between 2016 and 2018, overseeing the successful IPO (at 24p). He originally joined the finance team of the Group in 2004 and became Group CFO of Delamode International Logistics Limited in 2010. Richard has also performed the role of CEO for the Affinity Transport Solutions unit, which is a key division of the Group. We believe Richard’s experience within the Group, presenting to investors, and in the logistics sector generally, will be important to the next steps for XPD. The Group has also stated today that good progress is being made with hiring a new non-executive chair and CEO.

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Outlook, Zeus estimates and valuation – In the April 2021a statement, management said that Xpediator is “well placed” to deliver solid earnings this year (i.e., 2022e). We believe the brief update today confirms this view. Our expectations for growth in 2022e were already prudent; the profit beat for 2021a shows that run-rate growth for the Group is higher than we expected, and costs more flexible. Hence, for 2022e, we continue to estimate PBT at c.£9m (i.e., about flat y-o-y) – but we are also mindful of the volatile earnings environment for many companies at this time. A detailed plan to improve cash management is in place and we forecast an improvement in net debt by year-end. XPD is trading on a forward PE of 7.9x vs. the European/US sector on 13.6x, a 42% discount. The dividend yield is 3.8% compared with 2.6% for the sector. Our DCF-based valuation remains 85p, indicating good potential upside.

Summary financials

Price32p
Market Cap£45m
Shares in issue142m
12m Trading Range30p–83p
Free float35%
Next EventH1 earnings – September

Financial forecasts

Dec. y/e (£m)2021a2022e2023e2024e
Revenue297303321337
Adj. PBT9.199.510.1
EPS (p) Adj.3.74.14.24.3
DPS (p)1.11.21.31.5
Net cash/(debt)-4.8-22.45.1
P/E, x12.67.97.67.4
EV/EBITDA, x6.54.843.3
Div. Yield, %2.43.84.24.6

Source: Company data, Zeus estimates

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