Will Kuwait-based Agility once again hit the acquisition trail to grow its core cash flows after flat trading restricted organic growth?
The company was one of the most aggressive buyers of logistics assets of the last decade – acquiring around 40 companies in a shopping spree that lasted between 2004 and 2009 and turned it into a top tier 3PL. Subsequent years have largely been spent digesting these buys.
Given its solid net cash position, the Gulf’s largest logistics company can easily borrow to resume its chase for growth, which would not come as a big surprise to financial market observers. Its management team remains highly ambitious, and at some point a return to the acquisition trail is a distinct possibility.
The Agility group has two main business streams – logistics and infrastructure development – and deal-making could bulk it up in a challenging market as sagging volumes are weighing on its financial performance.
Its shares were suspended on June 22, soon after reports suggested it was in talks to invest in Kharafi National, the contracting and construction subsidiary of Kuwait’s Al Kharafi Group. Agility confirmed negotiations are taking place.
Last week it also said it had teamed up with Johannesburg-based Super Group, offering logistics and supply chain solutions in South Africa, “after acquiring a minority stake in Super Group’s freight forwarding unit”.
Its latest financials indicate that the group is on the right path, although many of its global rivals have recently laid out similar corporate doctrines, and there are risks to aggressive corporate strategies – consolidation has pushed asset prices, which heightens the risk of future impairments and write-downs.
First-quarter results for the three months ended March 31 were mildly satisfactory, with lower gross revenues year-on-year, but higher net sales at KWD102m, up 9% year-on-year – rising net sales helped Agility offset soaring administrative and staff costs, which came in at KWD29.1m and KWD48.7m, respectively.
Notably, EBITDA margin rose in the first quarter, up to 8.8% from 7.4% the year before. A higher level of underlying profitability boosted the net income margin, too, which rose by 70 basis points to 4.4% year-on-year.
EBITDA grew almost 13% to KWD26.2m year-on-year, yielding a positive effect on earnings per share (EPS), which increased 11% to 11.39 fils (KWD) on a constant share count. Operating cash flow rose in the period rose to KWD30m from KWD25m one year earlier, while the amount of cash absorbed from investing was KWD24m, double the KWD12m in the first quarter of 2015.
Cash flow from financing positively contributed to rising cash and cash equivalents at the end of the period, with pro-forma return on assets and return on equity marginally higher on comparable basis.
Its net cash position dropped to KWD14m from KWD70m one year earlier. Total assets are stable, and so too are gross cash and cash equivalents year-on-year.
Source: Transport Intelligence, July 06, 2016
Author: Alessandro Pasetti
