Has Logwin reached its zenith?


Luxembourg-based Logwin enjoyed a solid 2016, its annual results showed on March 2, 2017. Its strong performance was the result of rising air and ocean freight volumes that mitigated difficult market conditions, “very low freight rates” and downwards pressure on revenues.

Annual sales fell 6.5% to about €990m, with air and ocean revenues hit the hardest, down 7.8% to €623m, while the smaller solutions unit experienced a drop in sales of 3.1% to €369m. Germany and Austria remain its core markets, jointly turning over 62% of group revenues.

As far as some key value-drivers are concerned, sea freight rates surged significantly in the fourth quarter – it said that in the run-up to the Chinese New Year, “capacity bottlenecks were observed for the first time in many years at the end of 2016, particularly on transport routes from Asia to Europe and the US”.

However, it added that “a noticeable increase in freight rates can also have considerable negative effects on the earnings position of Logwin if higher rates cannot be fully passed on to customers in a timely manner”.

Nonetheless, its underlying financial performance was not hindered by turbulent market conditions. In fact, operating income, or EBITA, rose to €35.5m from €30.2m one year earlier, thanks to higher gross profit and good operating costs management, which led to a significant rise in net earnings, up almost 70% to €26.5m from €15.6m in 2015. Given a virtually unchanged share count, its earnings per share surged 80% year-on-year to €0.18 from €0.10 in 2015.

In the past fiscal year, the group also benefited from zero goodwill impairments – which, by comparison, stood at €4.4m one year earlier.

Operating cash flow was also on the rise, up to €32.8m from €29.9m in 2015, while capital expenditures were unchanged at €6.5m during the period – its core free cash flow of €26.3m was €6.5m lower year-on-year, but in 2015 it was boosted by one-off items worth €9m, so it turned out to be higher on an adjusted basis in 2016.

Its current free cash flow yield (free cash flow divided by market cap) hovers around 6.5%, which gives it plenty of options in terms of capital allocation, as well as in terms of a cash and cash equivalents positon that surged to €116m from €92.6m year-on-year, confirming a highly conservative capital structure.

The group said it “expects a moderate increase in revenues and earnings for the 2017 financial year”, while signaling the intention to reinstate a sustainable dividend policy, with a payout ratio that we estimate at 22.3%, based on its current share count and the stated amount that might be paid out to each shareholder.

Based on the “sustainable positive earnings and liquidity development of Logwin, the board of directors (…) decided to propose a dividend distribution of €0.04 per share to the annual general meeting in April 2017 for the fiscal year 2016”, it noted, adding that the board will also “propose to consolidate the shares of the company in a ratio of 1:50 and to convert the shares of Logwin from bearer shares to registered shares”.

Unsurprisingly, its shares are trading at record highs – in August, following its second-quarter update, we argued that more upside had to be expected given its relative valuation, and a solid operating performance.

Source: Transport Intelligence, March 8, 2017

Author: Alessandro Pasetti