Outlook for 2021 remains strong, even with likely disruption
Xpediator has issued a trading update for the current year ending 31 December 2020. Trading since the half year has continued to recover to historic levels and the Group expects to report adjusted profit before tax of at least £6.0 million for the year to 31 December 2020, an 18.0% increase over the prior year (2019: £5.15 million).
2020 has demonstrated the strength of being a diversified business. While the COVID-19 pandemic has resulted in less traffic and therefore reduced use of fuel cards, demand has increased for freight forwarding and warehouse and logistics services. The net result is supported by expected annual cost savings of £0.5 million.
The Group’s primary business is managing the transportation of goods through its freight forwarding division. As an asset light operation, without the fixed costs of owning a large fleet of vehicles, the division is more able to match costs to volumes. This enabled the division to maintain cost flexibility throughout the pandemic, including when volumes dropped sharply at the beginning of the COVID-19 outbreak. Since then, demand for freight forwarding services has strengthened with the Group seeing additional income from new markets. As a result, 2020 revenues for this division are expected to exceed 2019 by approximately £10.0 million (2019: £159.6 million).
The Group’s Transport Solutions division, trading principally under the Affinity brand, provides fuel and toll cards to European hauliers. The COVID-19 pandemic led to reduced traffic volumes and significantly lowered fuel prices, which translated into lower income levels in the first half of the year. Since then, monthly revenues have recovered well from 40.0% down in April (vs 2019) to only 6.5% below in October compared to 2019. Revenues for the year are now expected to be approximately £5.0 million (2019: £6.2 million).
The Group’s third division, logistics and warehousing, owns and manages warehousing in the UK and Romania as well running the leading pallet distribution network in Romania under the Pall-Ex brand. Warehousing in Romania and Pall-Ex have performed well throughout the year, recovering from the impact from the pandemic. Income from UK warehousing was reduced due to lower activity amongst retailing clients, however, the second half has been much stronger, especially at Import Services based in the Southampton docks. As a result, the Group expects revenues for the division to be flat year-on-year at approximately £48.0 million.
On 06 October 2020, the Group acquired UK-based international groupage freight forwarder and operator, Nidd Transport Ltd for £4.6 million. The integration is now underway and the business is performing slightly ahead of management expectations.
Since 2016, the Group has been preparing itself and its clients for a potential hard Brexit. A new customs brokerage team has been established, set up to handle the likely increase in declarations whatever the Brexit deal outcome. If there is a change in border controls, then the Group believes it will have an increased workload which should translate into higher revenues.
The outlook for 2021 remains strong, even with likely ongoing disruption in specific areas relating to the pandemic. The Group’s confidence is based on maintaining current trading patterns, the ongoing benefit of cost reductions made, additional income from Nidd and a healthy balance sheet. The Group anticipates continuing with its progressive dividend policy to reflect the increase in expected profitability.