Strong freight demand in Central and Eastern Europe is expected to drive growth at logistics business Xpediator (XPD: AIM) alongside three acquisitions made in 2017.

Xpediator arranges the import and export of products and offers logistics and warehousing services under the Delamode and Easy Managed Transport brands.

The company also specialises in pallet distribution services under Pall-Ex and transport services via its Affinity Transport Solutions division.

Xpediator joined AIM on 11 August 2017 and its shares have since rallied by 81% to 43.5p.

Last week (22 Feb) its shares jumped 7.1% after revealing strong trading and an upbeat outlook. Profit for 2017 is anticipated to be significantly ahead compared to the previous year despite investing in staffing and IT to deal with demand.

ACQUISITION STRATEGY REAPING REWARDS

Xpediator last year acquired EMT Logistics, Benfleet Forwarding and Regional Express, which collectively contributed £10m in sales. It has guided for £116m revenue on a group basis for 2017 (2016: £72.8m).

In November, Xpediator raised £2.8m to fund further acquisitions in the fragmented logistics sector.

While M&A is a vital part of Xpediator’s strategy, the company also generates organic growth. In the year to 31 December, revenue rose 59% to £116m with approximately three-quarters of this from organic growth.

EUROPEAN ROAD TRANSPORTATION SET TO RISE

In 2018, Xpediator expects to take advantage of more road transportation across Europe thanks to strong economic conditions.

The rise in online shopping is another factor set to increase demand for the transportation of products.

However, one of the future risks to consider is demand for logistics services turning about to be weaker than expected and that higher costs cannot be passed through price hikes.

Xpediator’s pre-tax profit is forecast to be £3.76m in 2017 before nearly doubling to £6.21m in 2018, according to the market consensus forecast. In 2019, pre-tax profit is expected to hit £7.06m.

At 43.5p, the shares currently offer a 3.8% prospective dividend yield for 2018. Xpediator is trading on 11.7 times forecast earnings per share (EPS) for 2018 compared to 12.7 times EPS for the UK logistics sector and 22.2 for the global peer group, according to Cantor analyst Robin Byde.

‘Despite a strong debut the stock is still good value and offers attractive growth,’ he comments.

The £51m business is forecast to have ended 2017 with £1.37m net debt and for that figure to rise to £2.67m at the end of 2018. (LMJ)

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