ESL.L Regulatory News (ESL)

31 August 2017

Eddie Stobart Logistics plc

("Eddie Stobart" or the "Group")

Interim Results for the six months ended 31 May 2017

Eddie Stobart, a leading UK logistics and supply chain company delivering innovative solutions and service excellence to a diverse range of customers in the Retail, Consumer, Manufacturing, Industrial & Bulk (MIB) and E-Commerce sectors, is pleased to announce its interim results for the six months ended 31 May 2017.

Operational Highlights

· Successful initial public offering (IPO) on the Alternative Investment Market (AIM) completed on 25 April 2017 and supported by blue chip institutional investors raised £130m for the Company, used primarily to reduce gearing, partially fund the acquisition of iForce Group and provide Eddie Stobart with a financial platform to support its growth ambitions.

· Experienced plc board in place with Philip Swatman joining as Chairman and Stephen Harley and Christopher Casey as Non-Executive Directors.

· Acquisition of iForce Group for total consideration of £44.9m, a market leading provider of E-Commerce solutions, providing a strong platform for Eddie Stobart to develop its offer to existing and new customers in this growing sector.

· Strong rolling pipeline of potential new business weighted towards strategic growth in E-Commerce and MIB.

· Post period end, acquisition of a 50% interest in Speedy Freight, which offers nationwide B2B express freight services and supports Eddie Stobart's capability to move urgent, time critical and pallet sized loads.

· Further investment into Eddie Stobart's Training Academy, including the acquisition post period end of the remaining interest in The Logistics People staffing business, to attract and retain quality staff for both Eddie Stobart and the wider commercial market.

Financial Highlights

· First half results in line with expectations.

· Continuing double digit turnover growth with Underlying Revenue1  up 13% to £286.8m (2016: £253.6m). Reported revenue increased to £286.8m from £266.4m in the corresponding period in 2016.

· Underlying EBIT2 increasing 14% to £16.9m (2016: £14.8m). Reported profit from operating activities; including exceptional items reduced from £10.2m to £5.6m and Loss for the period of £6.3m (2016: profit for the period of £1.7m) mainly due to the £12.6m of exceptional items, principally relating to the IPO and associated refinancing.

· Significant increases in our targeted areas of MIB and E Commerce, with Underlying Revenue1 growing 22% and 51% respectively

· Underlying EBIT2  margin improving to 5.9% (2016: 5.8%).

· Free Cash Flow4 of £11.1m representing 56% of Underlying EBITDA2 (2016: (£3.4m)).

· Underlying Earnings5 per share of 4.0p. Reported basic earnings per share of (2.5p).

· Net debt of £97.7m (2016: £186.8m).

· Interim dividend of 1.4p per share payable on 20 October 2017 to shareholders on the register on 8 September 2017.

1 Underlying Revenue is defined as Revenue less revenue from the exited Ireland retail segment (see note 3).

2 Underlying EBIT is defined as Profit from operating activities before exceptional items, amortisation of acquired intangibles, and the exited Ireland retail segment and after adding back in the Group's share of profit from equity accounted investees. Underlying EBITDA is defined as Underlying EBIT before depreciation of property, plant and equipment (see Note 3).

3 Adjusted profit before tax is defined as profit or loss before tax adding back exceptional items, the exited Ireland retail segment and amortisation of acquired intangibles (see Note 3).

4 Free Cash Flow is defined as Cash generated from operating activities less purchase of property, plant and equipment adding back proceeds from sale of property, plant and equipment and adding back income taxes paid (see Note 3).

5 Underlying Earnings per Share is defined as Profit from operating activities before exceptional items divided by the weighted average basic and diluted number of shares in issue at balance date (see Note 13).

Chief Executive Alex Laffey commented:

"Following our successful IPO in April this year, we have delivered a strong performance in line with our expectations. The acquisition of iForce Group is integrating well and has provided us with a strong platform to develop our e-commerce offer to existing and new customers. Our focus is now on leveraging cross-selling opportunities with existing customers, implementing synergies and developing new business.

Post period end we have further strengthened our offering through the acquisition of Speedy Freight and the remaining 50% stake in The Logistics People.

I am also pleased to announce our maiden interim dividend in line with our progressive dividend policy and underlying our confidence in the business. Our traditionally stronger second half of the year has started encouragingly and we are confident of delivering a full year performance in line with market expectations."

Eddie Stobart Overview

Eddie Stobart is now recognised as one of the UK's leading providers of end to end supply chain solutions.

Key differentiators of our business are:

· Flexible, scalable operational network which can be leveraged to support future growth.

· Shared-user consulting led operating model delivering a combination of above average levels of asset utilisation and operational efficiency offering customers a flexible 'pay-as-you-go' model to reflect demand.

· Operations which span the whole supply chain via road, rail, container movements and contract warehousing offering the full range of end to end logistical services.

· Continued investment in people and industry relevant skills through our dedicated Training Academy.

· Well positioned across different markets, with a strong growth focus in E-Commerce and MIB sectors.

· Long-term contractual relationships with a diversified blue chip customer base.

· Attractive financial profile with sector leading margins and consistent record of delivering growth both organically and through targeted acquisitions.

Enquiries:

Chief Executive's Review

Following Eddie Stobart's successful launch on the AIM Market of the London Stock Exchange on 25 April 2017, I am pleased to announce the results for the six months ended 31 May 2017 and confirm that trading for the period was in line with expectations. I am also delighted to confirm our maiden dividend of 1.4 pence per share.

In the past six months our Board has been established with Philip Swatman as Chairman, together with Stephen Harley and Christopher Casey as Non-Executive directors, joining me and the CFO Damien Harte.

We continue our track record of above industry average turnover growth with Underlying Revenue1 for the six months to 31 May 2017 growing by £33.2m, representing a 13% increase on the comparable period in 2016.

These results reflect continuing organic growth within our existing customer base as well as over £25m of new annualised contract wins in the period (the majority benefit of which will be felt in the second half) and the full period effect of the £65m of new contract wins from 2016.

Our new business pipeline remains strong with a rolling portfolio of new business opportunities being actioned, the majority of which are in the E-Commerce and MIB sectors.

As anticipated in the Admission document, we completed the acquisition of iForce Group on 27 April 2017. The purchase price was £44.9m, which was satisfied by £36.9m in cash and £8m in shares.

E-Commerce continues to be a growth sector and the acquisition of iForce Group has further bolstered our capability to support clients with fulfilment, carriage and returns management, together with stock clearance services using their proprietary software platform. This business provides services to many well-known, blue chip high-street retailers.

To date the iForce Group has traded to expectations and leveraging synergies and cross-selling opportunities between the two organisations has already commenced. Recent contract wins provide a strong platform for future growth.

We continue to grow with our existing E-Commerce customers and are looking forward to the second half of the year, which is traditionally the busier season supporting online and high street retailers with their logistics and supply chain requirements.

Over the past 18 months we have refocused the business on our new target sectors in order to ensure that Eddie Stobart was a stable and profitable business for its IPO, and is well placed as a platform to support further growth. This has led to a slight decline in our Retail sector turnover during the period due to the expiry of an unprofitable contract that we did not renew in Ireland. A large proportion of that reduction was offset through growth with our other Retail clients.

Consumer revenue continued to grow during the period although the sector has had some commercial challenges due to pressure from its customers. Margin discipline remains a management priority for both existing and new business. We have also continued to grow in the MIB sector with turnover increasing by 25% in the period which reflects our increasing maturity in this sector building upon the full year effect of 2016 contract wins.

In line with the Group's acquisition strategy, since the period end Eddie Stobart has acquired a 50% controlling interest in Puro Ventures Limited, trading as Speedy Freight, which offers nationwide business to business express freight services. This acquisition complements the Group's service offering to business customers in the E-Commerce and MIB sectors and broadens the capability it can provide across the whole supply chain.

Today I am delighted to announce that we have also acquired the remaining 50% of TLP Holdings Limited (parent of The Logistics People Limited). This is consistent with our strategy to utilise and develop the skills and services of the Eddie Stobart Training Academy through the provision of a range of training services and the supply of qualified drivers and warehouse operatives to customers and other logistics service providers.

Further details of these acquisitions are set out in Note 14 to the Interim Financial Statements.

As noted above, the second half is traditionally the Group's stronger period for sales and EBIT as it includes the peak trading periods for customers in Retail, Consumer and E-Commerce. In addition, the second half will benefit from a full six months' contribution from the iForce Group business.

Our operations continue to trade well as we move into the second half of the financial year and we look forward to delivering a full year performance in line with market expectations.

Chief Financial Officer's Review

The statutory revenue and profit for the 6 months ended 31 May 2017 was:

Management believe that a more relevant representation of the financial results for the period is arrived at by excluding the impact of the exited Irish retail segment from the 2016 comparator and by adding back the amortisation of acquired intangibles and exceptional items (the majority of which relate to the IPO and associated refinancing).

This revised presentation of the results is set out below.

Revenue

Underlying Revenue1 for the six months to 31 May 2017 was £286.8m, a 13% increase on the comparable period in 2016 (£253.6m).

This represents organic growth (particularly in E-Commerce), the full year effect of 2016 contract wins and a limited contribution from 2017 contract wins which will mainly impact the second half year.

Within this 13% overall increase we have seen significant increases in our targeted areas of MIB and E-Commerce. MIB Underlying Revenue1 grew 22% year on year from £66.3m to £80.9m. E-Commerce Underlying Revenue1 grew 51% from £24.5m to £36.9m.

Underlying EBIT2 

Underlying EBIT2 for the period was £16.9m, representing a satisfactory 14% increase on the equivalent period in 2016. Underlying EBIT2 margin improved from 5.8% in 2016 to 5.9% in 2017.

Financing costs

Net interest expense before exceptional items for the six month period was £6.9m (2016: £8.6m) a reduction of £1.7m.

As this period included some five months of the previous higher cost financing structure, which was repaid as part of the IPO process, this net interest expense does not fully reflect the significantly reduced cost of the debt structure going forward and this charge will reduce as we move into the second half of the year.

Adjusted Profit before Tax3 and Loss for the period

The resultant Adjusted Profit before Tax3 was £10.0m, a 61% increase on the adjusted comparable figure for 2016 (£6.2m). The reported Loss for the period was £6.3m (2016: profit for the period of £1.7m) as a result of exceptional items of £12.6m, principally in relation to the IPO and related refinancing.

Tax

For the half year to 31 May 2017 we have a tax credit of £1.3m which reflects the tax deductibility for corporation tax of the majority of the exceptional items incurred in connection with the IPO and refinancing exercise and is calculated at the expected effective tax rate for the year end

Underlying Earnings per share5 and Reported Basic Earnings per share

Underlying Earnings per Share5 is 4.0p per share. Reported basic earnings per share were (2.5p).

Cash Flow and funding

Free Cash Flow4 for the period was £11.1m, an improvement of £14.5m against the equivalent period in 2016. This represents a cash conversion ratio of underlying EBITDA2 to Free Cash4 of 56% compared with (19%) in 2016.

A significant contributor to this cash flow performance was the much improved working capital position which utilised £3.0m compared with an outflow of £15.2m in the equivalent period last year. This reflects an increased focus on improved working capital management.

Net Capital expenditure was £4.1m, primarily on operational assets (£4.3m in 2016).

Net debt at 31 May 2017 was £97.7m (2016 - £186.8m) which represented a 1.88 times multiple (2016: 4.14 times multiple) of pro forma annual Adjusted EBITDA,6 thereby significantly improving the financial stability of the Group.

IPO

On 25 April 2017 Eddie Stobart was admitted to the AIM market of the London Stock Exchange through a placing of 76m new shares (£122m) and a further 5m of shares (£8m) were issued in partial payment for iForce Group.

The sources and uses of this funding were as follows:

* Shares issued in consideration for iForce Group

A share capital reduction undertaken in the listed company converted £64.6m share premium into distributable reserves to ensure sufficient reserves are available to satisfy the Group's dividend policy.

Dividend

Eddie Stobart has a progressive dividend policy. An interim dividend of 1.4p per share is declared today for shareholders on the register at the close of business on 8 September 2017 and payable on 20 October 2017.

Borrowing Facilities

On 13 April 2017 the Group entered into a senior facility agreement for £100m with Bank of Ireland, BNP Paribas, Allied Irish Banks and KBC Bank NV, maturing in April 2022.

The facility was drawn in full and was used to repay, in part, the previous facility of £139m.

Subsequent to the period end the Group entered into a four year interest rate hedging arrangement with a 12 month deferred start date covering £60m of the above facility.

At 31 May 2017 the Group also had access to a committed revolving finance facility of £65m (May 2016 - £40m) which can be increased to £75m in certain instances (2016 £50m). At 31 May 2017 the Group held net cash of £15.7m.

Acquisitions

On 28 April 2017 the Group completed the acquisition of iForce Group for consideration of £44.9m (£8.0m in shares and £36.9m in cash).

Post the Balance Sheet date we acquired 50% of the share capital of Puro Ventures (trading as Speedy Freight) for an initial payment of £4.1m. A further payment in respect of this initial 50% shareholding will be due in May 2018, subject to certain agreed EBIT targets being achieved.

On 30 August 2017 the Group also acquired the remaining 50% of TLP Holdings Limited (the parent company of The Logistics People Limited) for consideration of up to £6m. £5m of this was paid on completion and up to a further £1m will be payable by the latest in November 2020, subject to the achievement of certain agreed profit targets. As the Group already fully consolidates the financial results of Logistics People (by virtue of its deemed control over its operations) the impact of this purchase will be to reduce profit attributable to non-controlling interests and to increase earnings per share.

1 Underlying Revenue is defined as Revenue less revenue from the exited Ireland retail segment (see note 3).

2 Underlying EBIT is defined as Profit from operating activities before exceptional items, amortisation of acquired intangibles, and the exited Ireland retail segment and after adding back in the Group's share of profit from equity accounted investees. Underlying EBITDA is defined as Underlying EBIT before depreciation of property, plant and equipment (see Note 3).

3 Adjusted profit before tax is defined as profit or loss before tax adding back exceptional items, the exited Ireland segment and amortisation of acquired intangibles (see Note 3).

4 Free Cash Flow is defined as Cash generated from operating activities less purchase of property, plant and equipment adding back proceeds from sale of property, plant and equipment and adding back income taxes paid.

5 Underlying Earnings per Share is defined as Profit from operating activities before exceptional items divided by the weighted average basic and diluted number of shares in issue at balance date (see note 13).

6 Pro-forma Adjusted EBITDA is defined as Underlying EBITDA for the preceding 12 months at the point of measurement with iForce EBITDA added into the calculations as if acquired and consolidated throughout that period.

Eddie Stobart Logistics plc

("ESL" or the "Group")

Interim Results for the 6 months ended 31 May 2017

Interim Consolidated Income Statement

for the six months ended 31 May 2017

The accompanying notes form part of the interim financial statements.

Interim Consolidated Statement of Comprehensive Income

for the six months ended 31 May 2017

The accompanying notes form part of the interim financial statements.

Interim Consolidated Statement of Changes in Equity

for the six months ended 31 May 2017

The accompanying notes form part of the interim financial statements.

Interim Consolidated Statement of Changes in Equity

for the six months ended 31 May 2016 (unaudited)

The accompanying notes form part of the interim financial statements.

Interim Consolidated Statement of Changes in Equity

for the year ended 30 November 2016

The accompanying notes form part of the interim financial statements.

Interim Consolidated Statement of Financial Position

as at 31 May 2017

The accompanying notes form part of the interim financial statements.

Consolidated Cash Flow Statement

for the six months ended 31 May 2017

The accompanying notes form part of the interim financial statements.

1. Accounting Policies of Eddie Stobart Logistics plc

The consolidated interim financial statements of the Group for the six months ended 31 May 2017 were authorised for issue in accordance with a resolution of the Directors on 30 August 2017. Eddie Stobart Logistics plc is a UK registered company whose ordinary shares are publicly traded on the AIM market of the London Stock Exchange. The principal activities of the Group are described in Note 3.

Basis of preparation

The consolidated financial statements of the Group for the six months ended 31 May 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

The consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the annual financial statements of Eddie Stobart Logistics plc (formerly Greenwhitestar UK plc) as at 30 November 2016. The financial information set out herein is unaudited but has been reviewed by the auditors, KPMG LLP, and their report to the Company is attached.

The comparative financial information set out in these interim consolidated financial statements does not constitute the Group's statutory accounts for the year ended 30 November 2016 but has been derived from those accounts. Statutory accounts for the period ended 30 November 2016 have been published and KPMG Audit LLC reported on those accounts. Their audit report was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report. The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU.

Going concern

The Group has considerable financial resources, together with contracts with a number of customers and suppliers. The financial forecasts show that borrowing facilities are adequate such that the Group can operate within these facilities and meet its obligations when they fall due for the foreseeable future. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the interim financial statements have been prepared on a going concern basis.

Significant accounting policies

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 30 November 2016. These accounting policies are expected to be applied for the full year to 30 November 2017.

The following new standards and amendments to existing standards have been published and are mandatory for accounting periods beginning on or after 1 January 2018:

* The following new standard has not yet been published but is expected to have an implementation date of 1 January 2019.

The Group is currently assessing the potential impact of these new standards, has not applied them early and does not expect to adopt them before the effective dates above. As noted in the annual report, IFRS 16 Leases is expected to have a significant impact on the Group's consolidated financial statements although, at this stage it has not been practicable to quantify the full effect this standard will have upon transition. A number of standards have been modified on miscellaneous points. None of these amendments is expected to have a material effect on the Group's financial statements.

2. Seasonality of operations

Some of our operations are seasonal, with demand for services generally trending higher as the financial year progresses. Whilst this impact is mitigated by operating in different sectors there is still a significant increase in revenue and profits in the second half of the year for the Group as a whole. We aim to further reduce the impact of seasonality by growing in business sectors that have a complementary profile in respect of seasonal trading

3. Segmental Information

Eddie Stobart Logistics plc provides contract logistics services in the UK and Europe. In the year to 30 November 2016 and the six months to 31 May 2017 the Group managed its operations via segments, the performance of which is reported to the board of directors. The segments are set out in the following table. Road Transport represents transport in UK and Ireland, CL & Warehousing represents contract logistics and warehousing services, EU Transport represents transport and vehicle transportation in Europe and Other represents special operations such as Formula 1 transportation, truck-stop parking, motel, restaurant and retail services.

Management are currently in the process of evaluating how they look at the business and going forward may move to a sector based segment rather than a function based segment. Revenues presented by sector are shown in the table below.

Reconciliation to Underlying Revenue, Underlying EBIT, Underlying EBITDA, Adjusted Profit before tax and Free Cash Flow

* Adjusted for amortisation of acquired intangibles, profit share of associates and joint venture entities, exceptional items and impact of exit from Ireland retail segment.

** Adjusted for amortisation, depreciation, profit share of associates and joint venture entities, exceptional items and impact of exit from Ireland retail segment

*** Adjusted profit before tax is defined as profit or loss before tax adding back exceptional items, the exited Ireland segment and amortisation of acquired intangibles

**** Free cash flow is defined as Cash generated from operating activities less purchase of property, plant and equipment adding back proceeds from sale of property, plant and equipment and adding back income taxes paid.

4. Acquisition of iForce Group Limited

On 28 April 2017, Eddie Stobart Logistics plc acquired, through its wholly-owned subsidiary ESLL Group Limited, 100% of the share capital of iForce Group Limited, a leading E-Commerce service provider which supports customers with industry-leading software and operational capability. Subsequent to acquisition management performed a review of the carrying value of all of the identifiable assets and liabilities of the aggregated companies within the iForce Group. This review resulted in a number of fair value adjustments as presented in the table below:

The goodwill arising on acquisition represents the projected profitability of the Group, including the assembled workforce, together with further potential to exploit synergies between business units and within the logistics sector as a whole. None of this goodwill is expected to be deductible for corporation tax purposes. The fair value adjustments are provisional.

The consideration was transferred upon acquisition and there is no further contingent consideration. Transaction costs associated with the acquisition were borne by subsidiaries in the Group, and have been taken directly to the income statement.

In its financial year ended 3 July 2016, iForce Group's audited accounts reported revenue of £56.3m, operating profit of £1.8m and net assets of £6.5m.

5. Exceptional items

Eddie Stobart Logistics plc was listed on the London Stock Exchange on 25 April 2017, with the consequence that a number of professional and adviser costs were incurred. Management also considered the transaction costs and adviser fees relating to the acquisition of iForce Group to be non-trading. Both of these items have therefore been classified as exceptional.

Other exceptional items in the current period include legal and employment costs relating to restructuring and costs associated with the discontinuation of the Ireland retail segment within the Transport business. Other exceptional costs incurred in the prior year also included costs incurred as a consequence of the entrance into new markets. These costs have also been separately classified as exceptional to allow a clearer view of the underlying performance of the business.

Within finance costs a new term loan was arranged in parallel to the listing, with the result that the residual capitalised bank fees relating to the previous loan were written off to the income statement.

6. Taxation

Total tax charged in the Income Statement in respect of continuing operations

7. Property, Plant and Equipment

Additions and disposals

During the six months ended 31 May 2017, the Group developed leaseholds or acquired plant and equipment assets with a cost of £7,879,000 (2016: £4,612,000). This included the development at the two Truckstop sites in Rugby and Carlisle, in addition to the purchase via finance lease of a number of new vehicles and trailers.

Property, plant and equipment assets with a book value of £446,000 (2016: £802,000) were disposed of by the Group during the six months ended 31 May 2016, resulting in a profit of £941,000 (2016: £52,000).

Capital commitments

At 31 August 2017, the Group had capital commitments of £2,152,000 (2016: £3,170,000), principally relating to development of leased sites in Sherburn, Lutterworth, Rugby and Dagenham.

8. Financial Assets and Liabilities