The Investment Column : Nightfreight is short on volume
Thursday 06 February 1997
Worse, earnings per share dipped slightly to 6.7p from 6.8p while the final dividend was held for a total payout of 3.55p (3.38p).
The company warned that volumes in the core parcels business were about three points below expectations. Bad weather and what Peter Johnson, the chairman, called "the recent downturn in manufacturing output" were blamed. Nor has Nightfreight, with 46 depots, been able to pass on higher fuel costs to customers.
But Nightfreight's problems go back to the loss of a lucrative three- year newspaper distribution contract with the Independent and the Independent on Sunday. Although other contract publishing deals have been struck, notably with WH Smith, Nightfreight admits it has been unable to make up the shortfall in both volumes and margins.
To make up for the lack of critical mass in contract publishing, Nightfreight is looking at a sizeable acquisition, though the balance sheet is already looking stretched, with gearing set to stay at over 90 per cent this year.
At least Nightfreight's recent acquisitions are bedding down well - so well that the earn-out deal for freight forwarder Hay Pollock is being renegotiated due to a conflict of interest arising from Ron Sullivan, the principal vendor, also sitting on Nightfreight's board.
Brokers think Nightfreight will do well to make pounds 5.7m this year, implying a forward p/e ratio of just seven. The group's lack of focus suggests only limited upside.
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