News / Logistics proves the star performer as ND announces €4.7bn revenue for last year

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Norbert Dentressangle’s excellent prospects were reaffirmed on Thursday, and are even brighter if possible, after the company announced 2014 full-year revenue of €4.7bn, for a 15.8% annual increase on a reported basis, and a 4.1% rise on a like-for-like basis.

Currency swings contributed to 1.7% of that rise in 2014, it added. However, the company may need to cut its debt.

Ahead of full year results, which are due on 26 February, ND announced that the logistics unit, now the group’s leading business in terms of size, reported revenue of €2.35bn, for a 20.9% surge year-on-year (+5.7% on a like-for-like basis). Growth has been boosted by the integration of Jacobson, a US-based warehousing and 3PL provider that was acquired in July and catapulted ND into fourth place among contract logistics providers. Quarterly revenue stood at €689m, up 27.3% on a reported basis and 3.4% on a like-for-like basis.

The transport division posted revenues of €2.18bn, up 8.7% (+2.6% on a like-for-like basis), boosted by the strong performance of the pallet distribution business, although the full load transport operations were impacted by “the sluggish situation in France”, ND said. Similar remarks were made at the end of October. Fourth-quarter revenues – at €571m, up 14.2% on a reported basis, down 0.4% on a like-for-like basis – were “affected by the drastic drop in oil prices, which triggered a corresponding fall in our transport service prices”.

The smaller freight forwarding (Air & Sea) unit reported revenue of €206m, for a 42.2% rise on a reported basis, and a 2.8% increase on a like-for-like basis. The company wouldn’t give away too many details, noting that results point to the “division’s strong fundamentals, which will continue to drive its future growth.”

Elsewhere, the geographical breakdown for revenue pointed to sluggish growth in France (€1.6bn revenue, +1% like-for-like), while the UK (€1.3bn, +4.4%), Spain (€556m, + 9.6%) and the rest of the world (€855m, +8.7%) fared much better. Total revenue also included a €225m contribution from Jacobson in the last four months of the year.

The conference call that followed the 2014 revenue results added little to the overall picture.

Debt pile

Group revenue came in slightly above consensus estimates. All that glitters is not gold, however.

At the time the $750m acquisition of Jacobson was announced, ND said that the deal would push up the “company’s annual revenues by 15%”. So, what should investors expect in the next few quarters?

ND must stay focused and continue to grow fast across its three core divisions, while keeping operating margin in the region of 4% or higher in order to be able to cut its debt load and continue to support its generous dividend policy. Its forward dividend yield stands at 1.3%, and is a benchmark in the industry.

ND boasts a market cap of €1.3bn and an enterprise value of €2.3bn, which signals a stretched balance sheet, and could jeopardise value. The shares look fully valued, given that they trade at almost 8x EV/Ebitda and 0.5x sales, based on forecasts for 2014 results. The projected price-to-earnings ratio is 17x.

Shareholders have enjoyed a terrific performance on the stock exchange in the last couple of years, with the shares up 110% over the period, but a steeper growth rate in Ebitda may be needed to bring down net leverage (expected at roughly 3.3x in 2014), which in about 60% above the average for the last three years.

In other words, debt must come down and to do that, if revenues do not rise at a faster pace, operating profitability will have to go up, which means ND will have to pay a lot of attention to its cost base.

“Upon completion of the transaction, the leverage ratio of ND is expected to be in the range of 3.2x by the end of 2014 pro-forma, in accordance with the group’s bank covenants. This leverage ratio is below the one reached with the acquisition of Christian Salvesen in 2007 and comparable to the one reached with the acquisition of TDG in 2011, the last two large strategic moves undertaken by the group,” ND said when the Jacobson deal was announced.

Between 1 January 2007 and 31 December 2012, ND’s stock performance read -14%.

“Group net debt is under control following the acquisition of Jacobson in 2014 and despite the strengthening of the US dollar against the euro,” the French group said on Thursday.