Business Overview
Eddie Stobart Logistics PLC (LON: ESL) is a United Kingdom-based company, which is involved in the business of supply chain and logistics. It was formerly known as Greenwhitestar UK PLC. The group is attentive to its business on Manufacturing, Industrial & Bulk (MIB), retail, consumer, e-commerce sectors, and European and Special Operations sectors. The company’s operations comprise transport hubs and cross-docks, inland ports, warehousing sites, truck stops, and rail terminals. The company offers its services to a variety of international and national clients. The group operates around 2,700 vehicles, 5,000 trailers and more than 43 distribution centres across the United Kingdom and Europe.

Recent News
On 26^th February 2020, the company released the appointment of a Non-Executive Director, name Saki Riffner.

Financial Highlights (for six months ended 31^st May 2019)
For the first half of 2019, the company’s revenue increased by 26% to £421.3 millionas compared with the corresponding period of the last year, which represents a growth of 6.4% in the underlying business and a robust first-half contribution by The Pallet Network. For the current period, the underlying EBIT was at a loss of £11.6 million(2018 restated: profit of £0.6 million) in line with the previous announcement (made on 14^th November 2019). Profits were substantially impacted by earlier communicated accounting-related matters. In the current period, the adjusted loss before tax stood at £16.5 million in H1 FY19(2018 restated: loss of £1.9 million), while statutory loss before tax was stated at £199.8 million. On 31^st May 2019, the net debt was £158 million, an increase from the previous year (2018: £115.6 million). On 30^th November 2019, the net debt was around £215 million. Further, the future net cash flows will not be materially impacted by all the adjustments.

In December 2019, the company concluded the transaction with DBAY (DBAY Advisors Limited) that was approved by shareholders, which results in a new ownership structure under which the company holds an interest of 49 per cent in the Eddie Stobart Group. In addition, this transaction provided liquidity of £70 million. The group has appointed a new leader that has sufficient experience in the logistics sector.

Share Price Performance
 
Daily Chart as at March-02-20, before the market closed (Source: Thomson Reuters)

Eddie Stobart Logistics PLC shares were trading at GBX 13.05 before the market close (at 8:26 AM GMT) on 2nd March 2020 and were up by 23.99% versus the previous day closing price. Stock 52 weeks High and Low are GBX 101.00 /GBX 4.00.  The group’s stock is reflecting the lower volatility as against the benchmark index based on the company’s beta of 0.72. At the current trading level, its stock was trading below its long-term crucial support level of 20-day and 50-day Simple moving average price, and prices could fall further from the current trading level.

Eddie Stobart Logistics PLC V/S FTSE AIM 100 Index – 1 Year
 
(Source: Thomson Reuters)

In the last one year, Eddie Stobart Logistics PLC share price has delivered negative 87.01 per cent return as compared to negative 8.01 per cent return of FTSE AIM 100 index, which shows that the stock has underperformed as compared with the index.

Eddie Stobart Logistics PLC V/S Industry V/S Sector – 1 Year
 
(Source: Thomson Reuters)

In the last one year, Eddie Stobart Logistics PLC share price showed a negative performance of 89.53 per cent. This also reflects that the company is underperforming as compared with the industry and sector performance in one year period.

Key Risks
Changes in the economic environment, whether resulting from the UK’s decision to withdraw from the EU or otherwise, changing government policy and legislation or other external factors, may adversely affect the business and the clients’ businesses. Customer demand for outsourced logistics and warehousing services may change, reflecting the changing behaviours of consumers. Failure to meet covenants in financing documents could result in a lack of available funding. Lack of available cash could result in the Company being unable to meet its financial obligations.

Conclusion
On 26^th February 2020, the restoration of trading in the Group’s shares occurred.For the full year, the Board anticipates a small underlying EBIT loss, however investors should note that the loss could be greater, and this is subject to audit by the company’s auditor, which might give rise to adjustment. The business has persisted in delivering decent service to its clients and since the start of the first half of 2019 period, it has won new clients such as Tilda, Metsa and Lallemand and extended contracts with Tesco, Aldi and Mayborn.

Weakening macro-economic environment could impact the overall business performance of the Group. Presently, the Global market is facing the biggest slowdown in productivity. Eddie Stobart Group needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the company’s financial performance.

Based on the headwinds faced by the company, we have given a "WATCH" recommendation at the current price of GBX 13.49 (as on 2^nd March 2020, before the market close at 8:05 AM GMT), while any correction with support from few catalysts needs to be evaluated at a later stage.

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