XPD.L Regulatory News (XPD)

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

XPEDIATOR PLC

("Xpediator", the "Company" or the "Group")

INTERIM RESULTS

Xpediator Plc (AIM: XPD), a leading provider of freight management services across the UK and Central and Eastern Europe, is pleased to announce its unaudited condensed consolidated interim results for the six months ended 30 June 2022 ("H1 2022").

Financial Highlights

· Strong organic growth and significant increase in Group revenue to £189.3m (H1 2021: £126.6m) reflecting continued positive trading in our Central Eastern European ("CEE") freight forwarding operation, in spite of the conflict in Ukraine, a return to pre-covid levels of trading in our Transport Services operations, and Pall-Ex Romania recording a strong period.

· Delivered adjusted profit before tax[1] of £3.1m (H1 2021: £3.6m) after adjusting for:

o  £1.5m goodwill impairment to Delamode Anglia

o  Restructuring costs £0.3m

· Reported profit before tax of £0.2m (H1 2021: £2.3m)

· Adjusted earnings per share of 0.27 pence (H1 2021: 1.58 pence).

· Reported loss per share of 1.74 pence (H1 2021: profit 0.66 pence).

· Net debt (excluding right-of-use assets debt) on 30 June 2022 was £8.0m (31 Dec 2021: £4.8m)

· No interim dividend (H1 2021: 0.50 pence per share) given priority focus of the Board in reducing net debt.

Overview of Divisional Performance

· Freight Forwarding revenue increased 54% to £155.5m (H1 2021: £100.8m) generating operating profit of £5.9m (H1 2021: £4.1m), principally driven by the Group's CEE operations.

· Logistics and Warehousing revenue increased 31% to £30.1m (H1 2021: £22.9m) generating an operating loss of £1.8m (H1 2021: £0.4m profit). Despite a record performance by Pallex in Romania, the impact of the UK logistics activity, which is currently loss making, had a significant impact on overall divisional performance.

· Transport Services revenue increased to £3.7m (H1 2021: £3.0m) and operating profit to £1.4m (H1 2021: £1.3m), representing a return to pre-pandemic levels.

Post Period Highlights

· Good start to the traditionally stronger second half of the year and on track to meet full year management expectations.

· Ongoing business review by the new management team has identified potential cost efficiencies across the Group. Restructuring plans for the underperforming UK operations have begun to be implemented to improve profitability.

· New build 200,000 sq. ft warehouse in Southampton dock fully let and achieving competitive pricing for all types of storage, handling, fulfilment, and distribution services.

· Construction of new, purpose built 180,000 sq. ft (35,000 pallet spaces) storage, fulfilment and distribution warehouse in Roosendaal, Netherlands commenced.

1 Profit before tax has been adjusted for exceptional items of restructuring costs, £336,000, (H1 2021 £nil), deferred consideration release of £nil (H1 2021: £398,000), amortisation of acquisition related intangibles of £731,000 (H1 2021: £742,000), additional interest charge of £313,000 (H1 2021: £167,000) following the application of IFRS 16, and impairment on of goodwill in Delamode Anglia Limited of £1,474,000, (H1 2021: £nil)

Commenting on trading in H1 2022, Mike Stone, Interim CEO said:

"Demand for the Group's freight management services is robust as shown by the 50% increase in revenues, however, profit after tax in H1 2022 was lower than H1 2021, primarily due to a combination of higher costs, weaker than planned trading by some areas of the business in the UK, and a non-cash goodwill write down of £1.5m. Despite this, the Company remains on track to meet full year management expectations due to the ongoing strength in customer demand and the improving performance of those UK businesses which under-performed in the first half.

Having been in the business now for four months, I have been impressed and encouraged by the commitment and capability of the wider management teams and their operations. In short, Xpediator is a healthy business with solid foundations, with a few, specific, areas of underperformance. We have completed the initial business review and have identified several areas where material operational performance improvement can be achieved, and where changes to the governance structure will support the successful execution of this and sustain it going forward.

I am of course very mindful of the immediate headwinds caused by the inflationary environment and the impact this may have on consumers generally, but with a solid first half performance behind us, the Board look forward to the future with confidence." 

Enquiries:

About Xpediator:

Xpediator is a well-established international provider of freight management services. Established in 1988, the Group's international network of offices provides road, sea and air freight services, together with logistics and warehousing in the UK and Romania. The business offers integrated freight management within the supply chain logistics and fulfilment sector, through its three main areas: freight forwarding, logistics & warehousing and transport services. With headquarters in Braintree, Essex and country offices in nine CEE countries across 34 sites, the Group currently employs over 1,400 people and was successfully listed on London's AIM market in 2017.

For more information, please visit: www.xpediator.com.

Alternatively, do follow us on Twitter at @Xpediator or find us on LinkedIn at Xpediator Plc.

Chief Executive Statement

Introduction

I am pleased to present these financial results for the first six months of 2022. The significant increase in revenue to a record £189.3 million reflects the high demand for the Group's freight management services in the UK and across Europe. The Group's trading performance was particularly encouraging given the wider macro and economic challenges that emerged during the period which have impacted some parts of the business, but overall, Xpediator has to date weathered these challenges.

Business review

Our CFO Richard Myson, our Non-Executive Chairman, Gillian Wilmot and I all joined the Company in the last four months and so we are a new team. Our first priority has been to review the whole business, a process that is still ongoing, but it is clear the Company is fundamentally sound and has significant further potential.

With that said, the current level of net debt is too high and needs to reduce to a more sustainable level which we envisage is achievable by the end of 2023. Following a prudent reassessment of Delamode Anglia, and based on current trading expectations and forecast performance, the Group has impaired the goodwill in Delamode Anglia Limited by £1.5m whilst £0.3m of restructuring costs were also recognised in this period.

These factors have significantly reduced adjusted PBT in H1 2022 but have cleared up the majority of the historical issues we have discovered in the past months. Looking ahead, the business review has highlighted the opportunity to achieve greater operational efficiencies across the business and reduce the cost base of the Group, without impacting the quality of service we provide to our customers. Our target is to reduce the cost of support functions by 30% over the next 12 months, with efficiencies coming from a range of initiatives that are all scoped, and most of which are underway.

Operationally, several of the UK businesses have lagged the performance of those on the Continent, particularly the CEE operations. There are several reasons for this underperformance, and we are implementing a series of changes to address them.

Specifically, our largest UK freight forwarding business, Delamode Anglia, has not been able to consistently achieve the same profit margins as those achieved by the freight forwarding operations on the Continent, particularly in Lithuania. Therefore, from September 2022, Justas Versnickas, MD of Delamode Baltics, will also take up the role of MD of Delamode Anglia. Justas will implement the relevant elements of the successful template he has developed for Delamode in Lithuania, the most profitable and dynamic business in the Group, and instil a more entrepreneurial approach to the challenges Delamode Anglia are facing. Richard Myson and I will work closely with Justas, especially in the coming months, and he already clearly has the support of the Anglia management team and staff for the transformation we will be making to their business.

UK warehousing has also been an area of weakness. Both the Braintree and Beckton warehouses have underperformed, and Southampton suffered badly during its peak trading period last year with the late delivery of the new facility. Beckton which serves the traditional UK retail high street fashion market by specialising in the storage and fulfilment of hanging garments, has struggled since loss of its largest customer, Arcadia, two years ago, and this continues post-pandemic from the well-publicised challenges in this sector. The future of the Beckton warehouse is continually under review as we work in partnership with current key customers to grow their businesses and build a healthy pipeline of prospective new customers. Braintree has for some time not been profitable on a standalone basis, and very simply this is because the income from the current customers base is too low. Therefore, we are judiciously increasing prices and refreshing the customer base by attracting new customers with better stock and fulfilment activity profiles. The new Southampton warehouse is now fully operational, is at capacity and fully prepared for the peak period, so it is expected to contribute strongly in the second half of the year.

As mentioned earlier, one of our key areas of focus will be to reduce the net debt position. This has increased over the past 12 months, and even accelerated in the first six months of 2022, to reach (excluding right-of-use assets debt) £8.0m as at 30 June 2022 (31 December 2021: £4.8m).

The increase in net debt is primarily due to an increase of £5.4m in borrowing from Investec which was used to cover the losses in the two UK trading entities and the increased central costs brought about by the implementation of a shared services centre. It is also a result of the increased early payments to suppliers to secure their services, though it should be noted that these early payments to suppliers attract a discounted rate which has helped the Group mitigate any downturn in margins. The Group also experienced delays in collecting customer payments in the UK following a change in operational systems and personnel within the Delamode Anglia business brought about by the creation of a central Shared Services function in late H1 of 2021.

It takes some time to get to know a business of Xpediator's size, but from the detailed business review we have carried out, and from the many site visits I have made, I feel very comfortable I have clarity on not just the key drivers for the business results, but also the factors affecting the performance and engagement of our people. In my mind, there is no doubt the Group is in a good position to continue to grow from here, but more importantly, to achieve the levels of profitability that the revenue growth deserves. We have identified and prioritised the immediate areas for improvement and initiated the actions required to achieve this. Our review process is ongoing and will be continuous.

Therefore, I am confident the Company is well placed to deliver a healthy performance in the second half of this financial year, and indeed, beyond. 

Board and Management

During the period there have been several changes to the Board. In March, Mark Whiteling, Non-executive Chairman, and Stephen Blyth, Non-Executive Director ("NED"), & Founder, stepped down from the Board. In June Richard Myson re-joined the Company as Chief Financial Officer having previously worked for the Group for 16 years, replacing Mike Williamson the outgoing Chief Financial Officer. In June, Mike Stone joined as Interim Chief Executive and Gillian Wilmot joined as Interim Non-executive Chairman. Mike replaced Wim Pauwels who had stepped in from his NED role to Interim Chief Executive. Wim left the company on 31 May 2022.

Dividend

Due to the need to reduce the net debt position of the Group, the Board are not recommending an interim dividend. Payment of a final dividend will be considered once trading has been completed for the year and will be predicated on our progress in reducing net debt.

Operational Review

Freight Forwarding

Revenue H1 2022: £155.5m H1 2021: £100.8m

Operating profit H1 2022: £5.9m H1 2021: £4.1m

The Freight Forwarding division includes businesses in the UK and CEE operating under the Delamode brand. The division specialises in moving freight, primarily internationally by road, rail, air and sea, and continues to be the largest core service of the Group. The division which accounts for 82% of the Group's revenue continued to grow in 2022 with revenue in H1 2022 increasing by 54% and resulting in an increase of operating profit of 45%.

Growth within Freight Forwarding has been principally driven by strong performances in Lithuania and Bulgaria. In Lithuania in particular, now Xpediator's largest country in terms of revenue, it has been a very successful period with growth in revenue, market share and profit compared to H1 2021. The team in Bulgaria have also had a very good period and overall, all our CEE freight forwarding operations have traded well, despite of the conflict in the Ukraine. However, our largest UK freight forwarding business, Delamode Anglia, underperformed in the same period, so in response, Justas Versnickas, (MD of Delamode Baltics) has been seconded to Delamode Anglia with the aim of transferring the successful business processes and systems used in Lithuania to the UK.

Logistics & Warehousing

Revenue H1 2022: £30.1m H1 2021: £22.9m

Operating (loss) / profit H1 2022: (£1.8m) H1 2021: £0.4m

The Logistics and Warehousing division include businesses in the UK (with sites in Beckton, Braintree and Southampton) and Romania under the Delamode and Pall-Ex brands. It offers storage, fulfilment, transport and value-added services to customers serving primarily B2B markets for their products.

Overall, revenue increased by 32% but due to the continued poor performance in the UK warehousing activity, the division made an operating loss in the period.

Both the Braintree and Beckton warehouses remain loss making, and continued investment during H1 2022 in the new Southampton facility, much of it in preparation for the peak in 2022, held back the overall result for this facility. With the new Southampton facility now at operational capacity and preparations for the peak period already implemented, the Southampton warehouse is expected to have a positive impact on trading in H2. The steps taken to review customer pricing and to change the customer base in Braintree will result in an improved result in H2. The same will be true for Beckton where we have been working with our largest customer there to launch their direct-to-consumer offer (which will be fulfilled from Beckton), and to selectively add profitable customers from a healthy sales pipeline.

The Group's Pall-Ex franchise in Romania recorded another strong period of trading, handling a record number of pallets, up 16% in H1 2022 against the same period last year. Revenue and operating profit increased by 20% and 11% respectively versus H1 2021.

Warehousing activity in Romania has remained robust. Revenue increased by 18% versus H1 2021 but increased running costs, resulted in reduced operating profit, down by 26%.

Post period end, construction commenced of the new, purpose built 180,000 sq ft (35,000 pallet spaces) storage, fulfilment and distribution warehouse in Roosendaal, Netherlands. This facility serves current UK customers who, post Brexit, find it optimal to split stock between the UK and mainland Europe. Roosendaal is well located for the onward transport to the rest of continental Europe by road and also conveniently located for the import of product via the two major container ports of Rotterdam and Antwerp.

Such is the demand in the short term, the Company has leased 6,500 pallet spaces in a partner warehouse for 12 months in Roosendaal and customer stock has been moved from the UK to this warehouse

Transport Services

Revenue H1 2022: £3.7m H1 2021: £3.0m

Operating profit H1 2022: £1.4m H1 2021: £1.3m

Transport Services, trading principally under the Affinity brand, provides bundled fuel and toll cards, financial and support services for hauliers in Southern Europe. Affinity is an agent of DKV, one of the world's largest fuel card providers, and supplies the DKV fuel card across the East and West Balkan region to a database of approximately 2,000 Eastern European hauliers and over 14,500 trucks. In addition, Affinity offers a "one stop shop" of transport services including ferry bookings, insurances and recently, VAT refund services.

Transport Services performed well in H1 2022 with revenue increasing by 22% and operating profit by 8%. The difference in growth between these two measures being primarily due to the implementation of new services and the increased fuel prices.

Trading has now returned to pre-Covid levels and is expected to continue to benefit from both higher fuel prices and the launch of new products and services to hauliers

Outlook

The Group has continued the strong sales momentum in the first half into the second half of the year this being traditionally the stronger of the two periods. Overall, the business divisions are trading well with the strong performance in the CEE countries now showing a level of profitability exceeding 2021 levels. The Group is therefore well placed for H2 and has actions in place to reduce net debt and address the under-performance of some of the UK operations. These will place the Group in a good position longer term and enable it to return to better capitalise on the synergies inherent in the network of companies in the UK and on the Continent.

At the same time, the Board and Management, both at Group and subsidiary level, remain vigilant to the broader economic challenges, particularly for consumers, stemming from rising inflation and conflict escalation, to create a generally more challenging economic environment. We will react accordingly both to mitigate any risks to our business and people, but also to seize any opportunities identified.

Mike Stone

26 September 2022

Chief Financial Officer Financial Review

Revenue

Revenue for the six months to 30 June 2022 was £189.3m, an increase of £62.7m or 49.5% on the comparable period (H1 2021: £126.6m).

Revenue increased within the Freight Forwarding business by £54.7m, Logistics and Warehousing revenue increased by £7.2m and Transport Services revenue increased by £0.7m.

Gross Profit

Gross profit increased by £12.1m mainly as a result of the increased freight forwarding revenue generated in the Baltics but also from Romania. Margins have seen a slight decline from 22.8% to 21.7%. This is partly due to the mix of activity between the divisions and the losses on the UK logistics activity.

Administration costs

Administration costs have increased by 56% in H1 2022 compared to H1 2021, this is due to an increase in the costs arising from the increased head count in Delamode Baltics. This increase was required to accommodate the increase in the activity in the region

H1 2022 saw a full six months of operating costs for the new warehouse facility in Southampton which came into operation in H2 2021.

In addition to this the Group incurred additional costs associated with the shared services operations.

Operating profit

The Group delivered an operating profit, of £1.5m for the period compared to £2.9m in H1 2021.

Financing costs

The net interest expense for the period was £1.3m (H1 2021: £0.6m), due to the increased borrowing in the period.

Tax

The tax charge for the period was £1.6m (H1 2021: £0.8m). This is due to the amount of taxable profit being generated in Europe compared to the losses and unrecovered costs in the UK for which a deferred tax asset has not been recognised.

Adjusted profit before tax

A reconciliation between reported profit before tax and adjusted profit before tax is shown below:

2 The additional incurred interest charge - IFRS 16 represents the difference between the cash rental payments and the accounting charges for depreciation and interest.

Statement of Financial Position

Total Assets: The Group had total assets of £207.9m as at 30 June 2022 (31 December 2021: £196.1m).

Total Liabilities: The Group had total liabilities of £180.8m as at 30 June 2022 (31 December 2021: £166.9m).

Net Assets: The Group had net assets of £27.1m as at 30 June 2022 (31 December 2021: £29.2m).

Net debt reconciliation

Net debt (excluding right-of-use assets) at 30 June 2022 was £8.0m (31 December 2021: £4.8m).

The increase in the net debt arose due to the increase in borrowing from Investec in the period of £5.4m, which is secured against the assets of the Group's UK entities. This was used to cover the losses in the UK trading entities and cover the incremental costs of the shared services centre.

The increase in the net debt position is also a result of market dynamics, with increased early payments to suppliers, which is required to secure their services, given the reduced market availability. Early payments to suppliers also attract a discounted rate which has helped the Group mitigate any downturn in margins.

The Group also experienced delays in collecting client payments in the UK, following a change in operational system, personnel and structures between the Delamode Anglia business and the newly created shared service teams. This is being addressed and the resulting issues resolved and will be monitored with an increased focus from senior managers at Group Finance and Delamode Anglia.

Richard Myson

26 September 2022

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Cash Flows

Condensed Consolidated Statement of Changes in Equity

For the six months to 30 June 2022 (unaudited)

For the six months to 30 June 2021 (unaudited)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD TO 30 JUNE 2022

General information

The financial information included in this condensed consolidated interim statement of results does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.The unaudited accounts for the six-month period ended 30 June 2022 have been prepared on a consistent basis and using the same accounting policies as those adopted in the financial statements for Xpediator PLC for the year ended 31 December 2021, except as noted below for new standards adopted. The statutory accounts of Xpediator PLC for the year ended 31 December 2021 are available on the Xpediator Plc website, www.xpediator.com. The auditors reported on those accounts: their report was unqualified and did not draw attention to any matters by way of emphasis.

The interim condensed consolidated financial statements were authorised for issue by the board of directors on 26 September 2022.

Basis of preparation

Xpediator Plc (the 'Company') is a company incorporated in England. The condensed consolidated interim financial statements of the Company for the six-month period ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as the 'Group'). The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the United Kingdom. They are unaudited but have been reviewed by the Company's auditor and should be read in conjunction with the condensed consolidated financial statements of the Group for the year ended 31 December 2021.

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Accounting policies

The financial statements have been prepared on the historical cost basis except for the revaluation of certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period.

Going concern

The Directors have concluded that it is appropriate that the financial statements have been prepared on a going concern basis given the current funding in place, which it does not envisage will be withdrawn, and the forecast profitability for the next 12 months, there will be sufficient funds available to meet its liabilities as they fall due. The financial statements have therefore been prepared on a going concern basis.

1) Revenue analysis by Country & Segment

2) Segmental Analysis

Types of services from which each reportable segment derives its revenues

During the period, the Group had three main divisions: Freight Forwarding, Warehousing & Logistics and Transport Support Services. All revenue is derived from the provision of goods and services.

• Freight Forwarding - This division is the core business and relates to the movement of freight goods across Europe. This division accounts for the largest proportion of the Group's business, generating 82.2% of its external revenues contributed in 2022 (H1 2021: 79.6%)

• Warehousing & Logistics - This division provides warehousing and domestic distribution and generated 15.9% of the Group's external revenues in 2022 (H1 2021: 18.1%).

• Transport Support Services - This division focuses on the reselling of DKV fuel cards, leasing, ferry crossings and other associated transport related solutions. This division accounts for 1.9% of the Group's business in terms of external revenue (H1 2021: 2.3%)

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team comprising the Divisional COOs, the Chief Executive Officer and the Chief Financial Officer.

No single customer accounted for more than 10% of the Group's total revenue.

Measurement of operating segment profit or loss, assets and liabilities

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with IFRS.

Inter-segment sales are priced at market rates and on an arm's length basis, along the same lines as sales to external customers. This policy was applied consistently throughout the current and prior period.

3) Earnings per share

4) Dividends

5) Intangible Assets

For the period from 1 January 2022 to 30 June 2022 (unaudited)