Eddie Stobart Logistics (LON:ESLE) saw a strong level of new contract wins in H118, which contributed to its 25% revenue growth, of which 10% was organic. We believe that new opportunities are arising as customers look to outsource their logistics to both save money and cope with the shift to e-commerce. ESL’s e-commerce revenues rose from 5% of the total in FP14 (8M14) to 21% in H118. As well as organic growth, the company is seeing a good revenue and profit contribution from acquisitions as it looks to further consolidate a fragmented market. In June, ESL completed its largest acquisition since listing when it bought The Pallet Network (TPN), which adds pallet distribution to its range.
Contract wins boosting growth
ESL has had a good run of new contract wins recently, with £158m annualised won in H118, compared to £89m across the whole of FY17. We think that customers deciding to outsource logistics as they look to save money provides a tailwind for growth, especially in the consumer and retail sectors where there is revenue and cost pressure. ESL’s unique pay-as-you-go model offers customers considerable cost savings compared to running their own logistics network. Plus the pay-as-you-go model offers customers considerable flexibility so that they can cope with seasonal demand better and also grow more easily. Another boost to revenue comes from the shift to e-commerce, where ESL can use its capability in this sector to help customers reorganise their logistics.
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