New research report: Speedy improves margins



Following completion of extensive investment program, leading courier in Bulgaria – Speedy, embarks on optimizing costs and new assets utilization. Initial efforts turn into better margins despite deceleration in top line growth, yet profitability to further improve on strengthened Romanian operations.

This is what ELANA Trading analysts say in their updated corporate profile for the Group.

Top line growth slowed down on higher prices and customer changes

Revenues growth failed to deliver the traditional double digit growth in FY2017. Group sales went up only 7% y/y to BGN 151.3m, mainly on Bulgarian operations. Organic growth on the Bulgarian arm stood at 9% y/y, down from 15% in FY2016, on low summer season, client base restructuring and higher prices. The latter together with operational adjustments hampered growth in Romania, yet client reshuffling was fully offset with SME customers.

Improved operational efficiency

In H2’17 Speedy improved its operational efficiency with the introduction of a new software system achieving a total of 4% cut in cost of materials for the year. Cost of external services grew slower than revenues – 3% y/y compared to double digit growth in previous years with only labor costs adding 13% y/y on economy wide labor cost pressure in both Bulgaria and Romania.

Positive effects as 2016 investments kicked in with higher asset utilization, improved logistics and optimized transportation costs.

Profitability margins slowly improving

Profitability margins slowly improved on both asset utilization and cut-down on costs in FY2017. EBIT margin is up 58 bps y/y to 6.36%, net income margin increased 34 bps to 5.04%.

Overall, consolidated EBITDA margin added 97 bps to 13% on strong Bulgarian arm EBITDA margin improvement. The latter posted 18% EBITDA margin for three consecutive quarters in 2017, close to historical averages while Romanian arm still lagging behind.

Management expects 18%-20% EBITDA margin in Bulgaria in 2019 while margins in Romania are to double, driven by e-commerce and B2B services in both countries.

Catching up with competitors on diversified services

In FY2017, Speedy diversified its services, investing in its put-on network, the latter reaching 360-380 locations, thus matching main Bulgarian competitor Econt. It further built on its parcel lockers services, which are yet to start efficient utilization, expanded its Speedy Post and Speedy Balkan services.

International outbound services in Romania expected to accelerate, which coupled with projected 12-18% growth in B2B and above 25% growth in ecommerce in Romania in 2018, is to bring Romanian arm to a solid 3rd place, outperforming its closest competitor Nemo Express in the next 2-3 years.

Check the latest equity research report on Speedy in ELANA Online