Business Review of Eddie Stobart Logistics Plc

DBAY Advisors stands firm behind Eddie Stobart Logistics plc

Business overview-Eddie Stobart Logistics PLC

Incepted in 1970 by Edward Stobart (Founder), Eddie Stobart Logistics PLC (LON: ESL) has come a long way to become one of the most well-known companies of the supply chain sector in the United Kingdom. The company owns a fleet of around 2,700 vehicles, 5,000 trailers, 40 plus operating centres throughout the Europe and the United Kingdom with a headcount of more than 6,000 people. The company provides services to both domestic and international customers.

The company owns a collection of subsidiaries, whose services complement the offering of the group. The company constitutes the most comprehensive supply chain, transport and logistics group in the United Kingdom.

(Source: Company’s website)

The company operates in various sectors, namely E-commerce, Consumer, Retail, Special operations (unconventional operations to F1 racing industry), European Operations (logistics across Europe) and logistics for Manufacturing/ Industrial/ Infrastructure projects.  The company’s solutions include in-cab technology, Warehousing management systems, and E-commerce software. The in-cab technology provides best in class technology custom designed in-vehicle device deployed across the entire fleet of the group. The company’s Warehousing management systems provide high levels of control, visibility and efficiency by optimising and directing product flows through receiving, put-away, picking, packaging, yard management and dispatch. The E-commerce software facilitates warehousing and Multi-channel fulfilment, processing returns and margin recovery, delivery management and dynamic carriage and many other options which provide greater flexibility and agility to adapt to trends and could be updated from time to time.

Rival suitor of ESL requests watchdog to intervene on DBAY bid

 Background story

On 23rd August 2019, the company made some announcements of a change in Chief Executive Officer and after subsequent announcements, the Board of ESL had looked forward to work constructively with entities which have expressed interest in assisting Eddie Stobart for making proposals to all its stakeholders.

The Board of the company, on 18th September 2019, noted the speculation in the media and confirmed that it had received a preliminary expression of interest from TVFB Ltd with reference to acquire the entire issued, and to be issued share capital of the company. However, the board of the company, on 16th October 2019, confirmed that it had not received any proposal from TVFB regarding a possible offer for the company. TVBF also confirmed that it has no intention to make an offer to the company.

As TVFB expressed an interest earlier, the company’s management provided TVFB with the access to company’s information, multiple interactions with senior management. The Board of the company has allowed TVFB (and its representatives) to work with due diligence information in order to facilitate making a proposal which would satisfy all stakeholders.

Proposal made by TVBF Limited

The Board of Eddie Stobart has worked constructively with TVFB Limited and has continued to provide it with access to due diligence.

The Board of Eddie Stobart (and its advisers) have reiterated to TVFB and its representatives, that it must reach agreement with the Lenders in order to be able to put across a proposal that the Board of the company (ESL) is capable of putting it across to the shareholders.

The Board of Eddie Stobart understands that TVBF Limited has not reached any agreement with the Lenders. The lenders have intimated the Board of the company (ESL), that they are in favour of the DBAY Proposal and that if the company requires funding in order to be able to pursue an alternative option, the lenders would not support this.

The representatives of the lenders have communicated their position directly to representatives of TVFB on 20th November 2019. However, no further proposal came from TVFB Limited. The Board of the ESL believes that the TVFB proposals are currently not capable of being implemented as they lack support of the lenders.

Proposal made by DBAY Advisors Limited

DBAY Advisors Limited will acquire a 51 per cent stake in Greenwhitestar Acquisitions Limited on satisfaction of certain conditions, which is currently a wholly-owned Subsidiary of the company and in turn holds the company’s interests in the trading entities of the Group, and DBAY will agree to  inject approximately £55 million of new financing into the Group’s operations directly or indirectly. The management of the company looks forward to the Proposal made by DBAY, as it is in the best interests of the company’s shareholders and the group. The DBAY Proposal has gathered the support of the Lenders, who have agreed to provide the financing arrangements necessary for the DBAY Proposal to being implemented.

The Board of the company (ESL) is looking forward to voting in favour of the DBAY Proposal by the shareholders at the General Meeting to be held on 6th December 2019. This seems to be a concrete proposal as it secures the long-term future of the company and has obtained the support of the lenders.

DBAY has acquired more shares in the ESL, took its current holding in the business to 29.9 per cent. This proves DBAY’s strong belief in the company’s business and its prospects. With DBAY’s extensive experience gained during its past ownership, it has worked non-stop over the past months to develop a robust plan for the business, which would ensure its stability going forward and restore value in the equity to the benefit of all shareholders, and to make the company a highly profitable and cash-generative logistics business. The lenders and the board of the company support this plan.

DBAY and William Stobart collectively maintain roughly 30 per cent stake, and TVFB wants the Takeover Panel to block them from voting. Overall, DBAY wants more than 50 per cent of shareholders’ approval which includes buying management of Eddie Stobart Logistics’ in return for a £55 million high-interest mortgage.

 

ESL- Trading update for H1 FY19 period ended 31st May 2019

The revenues of the company increased by 25 per cent for the period versus the comparable period in 2018 due to organic growth and significant contribution from The Pallet Network. The revenues were up by 8 per cent on like-for-like basis due to continued organic growth and several new contracts wins by the company. At an adjusted EBIT level, the results for the first half of the fiscal year 2019 are expected to be towards the lower end of management expectations due to slower productivity improvements in Warehousing business and Contract Logistics, which also affected the efficiency of operations of the transport network.  The company’s net debt stood at £154 million as on 31st May 2019. However, the group expected the results to be in line with the Board’s expectations.

 

On 23rd August 2019, the company in a press release mentioned that the Board is applying a more prudent approach to revenue recognition, re-assessing the recoverability of certain receivables and certain provisions. The expected revenue for the first half of the fiscal year 2019 was in line with guidance, however, the full impact cannot be ascertained now. The company has applied to suspend trading of its ordinary shares on AIM due to pending clarification of the impact of these items.

On 16th September 2019, the company provided an update on its interim results. The group is looking forward to revenue for the first half to around £450 million and Underlying EBIT to be in the range of £10-£11 million for the same period.

The Net debt of the company is expected to be approximately £155 million as on 31st May 2019. The Group Auditor’s review is under process, and any impact on the company’s expectations for the HY 2019 Interim Results has not been determined yet. The Board expects further clarity to be able to publish the Group’s full interim results. The shares will remain suspended pending release of the Interim Results of HY 2019.

The stock last traded on 23rd August 2019 at GBX 71.00 and trading status is currently suspended.