OneLogix faces a long, hard road to recovery
As with most companies that rely mainly on the SA economy for their profits, OneLogix was taking strain even before the Covid-19 lockdown began in March.
Most of the companies in the group were affected negatively by the lockdown as national closure of the business landscape severely restricted its trading capability. Particularly hard hit was the delivery of motor vehicles via subsidiary VDS as car sales halted.
Only the Jackson operation was relatively unaffected, being involved in food transport, which was deemed an essential service.
The management acted quickly and decisively and applied emergency lockdown interventions such as retrenchments, defleeting and cost management. It has survived the pandemic, but the road to recovery is likely to be long and hard.
For the financial year to end-May the group suffered a severe setback and posted its worse set of results in 11 years. It did well to contain the fall in revenue to only 4%. But trading profit took a 33% hit, coming in at R135m while operating profit fell 36% to R115m.
An extremely low 3.5% tax rate as a result of SA Revenue Service learnership allowances for skills upliftment helped limit the reduction in headline earnings per share to 17.1c, a fall of 46%.
The group remains a going concern and its debt covenants with lenders are intact. The ratio of gross debt to equity is still well within its self-imposed limit of 0.8 times. However, the debt coverage ratio fell back significantly at year-end to 0.2 times compared with 2.5 times the previous year and a limit of 1.3 times. This was due entirely to the effect of lockdown, and the ratio has now recovered completely.
Pivotal to the success of OneLogix over the years has been its cornerstone operation VDS, which allows OneLogix to integrate into the supply chain of its customers. It achieves this by taking delivery of the vehicles from Durban port, performing forwarding and clearing as well as predelivery inspection, preparation of the vehicle for delivery and then delivery itself.
A slow recovery of VDS is likely as consumers begin buying big-ticket items such as motor vehicles once more. Allied to VDS is the group s
’ logistics hub at Umlaas Road in KwaZulu-Natal, a large and growing feature with phase 3 nearing completion at a total cost of R310m. Of that amount, R160m will have been funded by debt and R150m internally.
The group is completing a sale and leaseback arrangement on Umlaas 3. This will have an expiry date of 2030 and on completion of the project, R61m regarding a lease premium will be released and repaid to OneLogix.
In other industries in SA, such as retail for example, the Covid-19 pandemic has often resulted in acquisition opportunities as some companies go bust.
Intuitively the highly fractured nature of logistics in this country would suggest a similar pattern evident in this industry. But it may take time to materialise as companies desperately fight to survive.
OneLogix doesn t appear to
’ have anything on its acquisitions radar but this may change depending on the length of the economic collapse. The group recently made meaningful acquisitions and cleverly managed to retain the vendors in senior positions, ensuring continuity of operations. For the moment, growth will have to be predominantly organic.
GROWING FEATURE
A SLOW RECOVERY OF VDS IS LIKELY AS CONSUMERS BEGIN BUYING BIG-TICKET ITEMS SUCH AS MOTOR VEHICLES ONCE MORE
THE MANAGEMENT ACTED QUICKLY AND DECISIVELY AND APPLIED EMERGENCY LOCKDOWN INTERVENTIONS
Its share price has fallen 63% since peaking at 639c in February 2015. The share is now trading at 237c, and on latest year end numbers the price-toearnings ratio is a fairly rarefied 13.7 times.
Provided the highly restrictive lockdowns of March, April and May are not repeated, OneLogix should experience a gradual recovery in revenue, profits and earnings. This wellmanaged company has a strong track record and will surely come right, but there seems little reason to rush in and buy at these levels.