Why did the LDG share price originally crash? Is the recent growth a sign of a turnaround? And should I be adding the business to my portfolio?

Falling share price

Over the years, Logistics Development had signed various news contracts with companies like Homebase and Britvic and made several key acquisitions to expand its portfolio of service offerings. But despite this, the firm struggled to generate profits and racked up a lot of debt in the process.

Naturally, a continuous stream of disappointing results led to a steadily falling share price. And by mid-2019, it had lost around half its value in two years. But this decline quickly accelerated. In the following August, CEO Alex Laffey stepped down with immediate effect. Why? Because an internal accounting review revealed that operating profits were “significantly lower than anticipated”. This led to the delayed publication of its half-year results and consequently caused the shares to be suspended from trading.

By the time trading was reinstated in November 2019, the LDG share price had been slashed again from 64p to 5.4p. But just as the company looked like it was going insolvent, it received a £55m rescue package from private equity group, DBAY Advisors.

Time for a comeback?

With new cash injected into the business, Eddie Stobart began restructuring itself into an investment company and renamed itself Logistics Development. Using its industry knowledge, combined with investing expertise provided by DBAY Advisors, the company’s new business model is to seek out investment opportunities within the logistics, transport, warehousing, and e-fulfilment sectors.

This new strategy was approved by shareholders in December 2020. And so its effects were not captured in the most recent published results. But the preliminary report did show a good base from which to start.

The net debt of the company has been cut by £77.2m to £144.5m. By comparison, based on the current LDG share price, the firm’s market capitalisation stands at around £90m. So the business is still highly leveraged. But it’s a significant improvement compared to the year before. Meanwhile, underlying profits increased from £4.2m to £47.8m. Impairments ultimately resulted in an overall loss for the year. But as these are one-time expenses, I give it the benefit of the doubt.

The bottom line

Overall, I think the new strategy sounds like it has potential, especially since the rising popularity of ecommerce has led to a considerable boost in demand for the sectors in which Logistics Developments intends to invest. And if successful, then I believe the LDG share price can make an exciting comeback over the long term.

However, at this stage, there are simply too many unknowns. For now, I’m keeping this stock on my watch list until I see how effective the new strategy actually is.

The post Can the Logistics Development (LDG) share price make a comeback? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Logistics Development. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But if this method is a bit too narrow for your tastes, an easier way to profit may be to invest in the property companies that own the warehouses that support package storage, sorting and shipping.

A history of success not to be ignored

This is one area where Hansteen Holdings (LSE: HSTN) shines with its portfolio of around 300 estates in the UK and a smattering in Belgium and France that support a respectable 3.9% dividend yield. The group focusses solely on industrial properties and has a wide variety of tenants that provide a very nice level of diversification, so not too much exposure to any one particular sector.

The group’s management team also has a very long track record of success and knowing when to enter and exit certain markets. The latest call made was to sell off the entirety of the group’s German and Dutch holdings for €1.28bn at a time when occupancy and rental rates were high and the weak pound made the transaction even more attractive in sterling terms.

The proceeds of this sale were used to retire a significant amount of debt, fund a relatively small acquisition and return a lot of cash to shareholders. That return was facilitated though a shareholder-friendly tender offer that repurchased and retired a whopping 50% of the group’s outstanding shares for a total of £580m.

The group is now concentrating on the UK market, where it still sees a solid medium-term outlook for the industrial property market as GDP growth continues despite recent wobbles in the housing market. And on top of GDP growth, fact that the group’s portfolio properties are concentrated on large estates close to major highways means it should continue to benefit hugely from the shift towards e-commerce.

An aptly named option

Another company operating in the same vein is newly public Warehouse REIT (LSE: WHR). The group raised £150m in its September IPO and has already invested a bit more than this in building a portfolio that stretches from the south coast of England to Glasgow.

Like Hansteen, Warehouse REIT’s portfolio is concentrated on industrial properties that are either situated in close proximity to vital infrastructure links or in urban areas themselves. The latter are part of the group’s plan to be a key part of the ‘last mile’ delivery networks for e-commerce firms.

And with relatively high demand and limited supply for suitable properties, Warehouse REIT is expecting to achieve very high occupancy rates and steadily rising rental rates going forward. It’s still a bit early to tell if this is working out as planned, but the group’s acquisitions so far have taken place on estates with low vacancy rates and very nice annual yields.

Warehouse REIT isn’t a screaming bargain as it trades at a 7% premium to its net asset value, but if domestic economic growth continues apace and shoppers begin buying ever greater amounts of goods online, the company looks well positioned to benefit hugely.

The post 2 ‘secret’ winners from the e-commerce boom to watch in 2018 appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Hansteen Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.