Pilot Freight Services has been under the spotlight in recent weeks as the group is reportedly seeking a buyer willing to acquire a stake in the business.
A buyout could value Pilot about half a billion dollars, according to market reports, although management is thought to be looking for a strategic partner rather than a fully-fledged sale. Financial details are sketchy and limited to its recent sales figures, so they do not include underlying profits or cash flows, which means that any attempt to assess its fair value remains wracked with problems.
It operates domestic and international freight services as well as specialised and cross-border freight services; a market that is highly fragmented and characterised by fierce competition, and consolidation is a top priority for many forwarders as organic growth continues to be an uphill struggle. As with Pilot, other forwarders turning over less than $1bn are looking to bulk up via acquisitions or strategic partnerships.
A $500m valuation for the enterprise could be a stumbling block, however – it would value Pilot at 0.9x revenues, including net debt. We are blind on its capital structure but such a take-out multiple would be rich regardless, given that some of the major freight forwarders with a greater global exposure, and which are growing at a faster clip, trade at significantly lower multiples based on trailing revenues.
Chief Executive Richard Phillips said in February that Pilot’s continued ability to increase revenue “is testament to our domestic and international reach, personalised service, and the customized solutions we offer customers worldwide”.
Phillips added that the firm’s employees, technology, and “unique understanding” of how to optimise ground, ocean, and air capacity all deliver real value to the marketplace and “provide a demonstrative advantage we make available to some of the most sophisticated shippers in the world”.
“Our opening of two new stations in Vancouver and Mexico City, enhances our positioning, and makes us the go-to freight forwarder serving NAFTA markets,” he added.
Pilot closed 2015 with record revenue of $565.5m, up 3.25% year-on-year, and handled more than 1.4m shipments for the year. Its growth rate is slowing based on trailing trends, given that in 2014 its reported revenues of $547.9m were much higher than 2012 sales of $500.6m.
Pilot’s “National Account Domestic business represented the lion’s share of company growth,” the group said in its annual release, up 6.4% to $216.5m, while international revenues grew 6%.
Lower fuel prices hit its growth prospects, but “particular pockets of opportunity were seen for Pilot Automotive, which grew 49% over 2014 volumes, while Pilot’s home delivery business registered a record year with revenues exceeding $123m, representing 17.1% of the year’s business growth”.
Source: Transport Intelligence, July 06, 2016
Author: Alessandro Pasetti