Stobart shares slide on profit warning

20.10.2010   (BBC)

Haulage firm announces 39% leap in profits but warns that cuts in spending at
Network Rail and tax rises will hit earnings

by Tom Bawden

Shares in Eddie Stobart tumbled by nearly 9% today as the haulier known for its
green lorries warned that government spending cuts and tax rises could hit its
profits this year and next.

Announcing a 39% jump in its first-half pre-tax profits to £15.4m, the parent company of the Eddie Stobart haulage business said it
had “slightly reduced” its full-year profit forecast as its railway engineering
unit suffers from a dramatic fall in spending by the government-owned Network

The group said it was “cautious that 2011 may see volumes affected by the increase
in VAT [from 17.5% to 20% in January] and the government spending review”. It
added that rising unemployment would put further pressure on its bottom line.

The group, which operates a 1,850-strong fleet of lorries that are a feature
of Britain’s motorway system, is a barometer of domestic trade.

Andrew Tinkler, Stobart’s chief executive, said: “We transport goods that people
buy; if people don’t buy, that will hit the business. Network Rail is not spending
any money and, since the construction industry has been on its knees, everyone
is fighting for any business that does come up.”

Stobart said it was also being hurt as struggling retailers sought to cut spending
by reducing stockpiles. They were increasingly ordering items at the last minute,
leaving the group less time to plan deliveries, which increased costs by reducing
its “vehicle utilisation” rate. However, Stobart was able to increase revenues
by 11.7% to £243m in the first half as it benefited from significant contract
wins from Tesco and AG Barr, maker of Irn Brew, together worth about £48m a year.

Sales at the group’s biggest division, Eddie Stobart, increased by 16% to £219.0m
in the first half.

Revenues at the Stobart Rail division fell by 12% to £26.3m in the first half as a result of “cutbacks in
expenditure by Network Rail and other major clients with cost savings and budget
constraints imposed by the Office of the Rail Regulator”.

Revenue from Stobart Ports, a container handling and distribution unit, rose 11% to £7m and Stobart Air was up 12.5% to £3.6m. Stobart declined to specify the reduced profit expectations
for the year.

The shares closed down 13.5p at 143p.