Investors keep on trucking with OneLogix
Company takes the high road for investors
These days it’s rare to find a growing JSE-listed company that derives its earnings in any reporting period exclusively from organic, rather than acquisitive, sources. But that’s what logistics services provider OneLogix has just done in its interim results to end November 2017, with revenue rising by 14% and headline earnings per share (HEPS) up by 21%.
Over the past five years the group has made nine acquisitions, and now these have all been absorbed and bedded down. And while OneLogix is open to the prospect of further acquisitions in future, given its very clean balance sheet and low gearing, any further acquisitions would obviously have to make good business sense.
OneLogix services extend across South Africa and into many neighbouring countries, as far afield as Angola and Tanzania.
“We have a comprehensive footprint in the African subcontinent”, says OneLogix CEO Ian Lourens. “And nine out of our 11 businesses occupy positions one, two or three in terms of market share.”The group can conveniently be viewed in two main segments, being Abnormal Logistics and Primary Product Logistics. Abnormal Logistics, consisting of Vehicle Delivery Services and Commercial Vehicle Delivery Services is the largest contributor to revenue (48%) and trading profit (51%) before head office costs. Primary Product Logistics is an almost equal contributor at 45% of revenue and 44% of trading profit at the interim stage. The much smaller Other Logistics Services contributed 7% to revenue and 5% to trading profit.
OneLogix’s acquisition strategy over the years has been clever, as it insistently retains the entrepreneurs from whom it bought the target companies, ensuring they are freed up from admin and bureaucracy to concentrate on growing the business within the expanded OneLogix base.
“We won’t just buy a new business without taking the entrepreneur as well”, says Lourens. “Having brought him on board, we provide him with the whole back office environment, so he can then operationally focus on what he is good at.”
The group recently entered into a R240-million 10-year sale and leaseback agreement regarding its 14ha logistics hub at Umlaas Road near Cato Ridge, KwaZulu-Natal, having paid R130-million for it in 2015, and is looking to extend this facility by around another 10ha. This transaction strengthened the financial position considerably, with gearing now at a very comfortable 32%.Lourens highlights continuing margin squeeze as one of the main risks facing the group, but emphasises that this is an industry-wide problem and that OneLogix in fact enjoys better margins than most.
A very remote risk comes in the form of possible greater usage of rail freight services in the southern African region, but in the unlikely event rail makes a comeback, existing logistics operators could indeed participate profitably in the rail freight space, as well-known UK road logistics operator Eddie Stobart has done in recent years.
With a total fleet of 806 units, average age is around 4.5 to 5 years, with 70 of these vehicles structured on an operating lease product. All new expansion and replacement of trucks will be done on an operating rental basis at somewhere between 60 to 80 trucks a year, depending on the usage profile at the different businesses, meaning that progressively less capital is being tied up on the balance sheet in the form of fixed assets. All trailer equipment will always be owned on-balance sheet.
OneLogix has an enviable earnings growth track record, coupled with low gearing and capacity to expand as and when conditions permit. It has not only survived the current economic downturn but has adapted and flourished. With nascent signs of an upturn in the local economy as well as a continued turnaround in most other African jurisdictions, the outlook for OneLogix is perhaps worth considering. Trading at an 11 times price: earnings ratio, it is not expensive.