Global logistics industry still left with acquisition “hangover”

A new report, which analyzes in detail the annual results of 20 of the world’s largest publicly listed freight transport and logistics companies, shows that a quarter of their assets are intangible, largely made up of “goodwill” on acquisitions.
By Patrick Burnson, Executive Editor
May 30, 2011 - SCMR Editorial

New research by Transport Intelligence, contained within its recent report “Financial Ratio Analysis and Benchmarking of Global Transport & Logistics Sector Leaders 2010,” reveals that the industry is still suffering the hangover from its acquisition binge of the past ten years.

The report, which analyzes in detail the annual results of 20 of the world’s largest publicly listed freight transport and logistics companies, shows that a quarter of their assets are intangible, largely made up of “goodwill” on acquisitions. Total assets of the 20 companies in the survey came to €108 billion ($154 billion U.S. dollars) and of this over €25 ($36 billion) – or 23.5 percent – was made up of intangibles.

The reduction in earnings as a result of the economic downturn has given rise to some substantial downward adjustments to the book value of intangible assets as a result of the “impairment tests” required under International Accounting Standards. (These tests are typically based on a forward projection of the cash flows that can be generated by the business unit to which the goodwill belongs.)

Nevertheless this high level of intangible assets remains. SCMR has recently reported on similar findings made by analysts late last year.

Most companies in the survey have borrowed heavily to acquire intangible assets and in several cases the borrowings, net of cash balances, exceed the value of the net tangible assets. The survey shows that six of the twenty companies’ net indebtedness currently exceeds net tangible assets.

“The figures in the report indicate that collectively the industry needs to see an improvement in trading results,” said David Bagshaw, senior analyst at Transport Intelligence, in London. “This is not only to justify the €25 billion of intangible assets that remain in the balance sheets, but more immediately to service the borrowings taken on to acquire both goodwill that remains and also the goodwill that has been written off.”

As part of a new research project, Transport Intelligence’s financial analysts have undertaken a detailed review of the financial accounts of the world’s largest express and logistics companies. The results shed light on the performance of the companies over the past year as well as their financial structure using a range of financial ratios. A total of 20 companies were reviewed and, where appropriate, ranked in order of performance.

Transport Intelligence, a research and analysis company specializing exclusively in the transport, logistics and express sectors, is based in the UK, with offices in Hong Kong and Atlanta.

Cathy Roberson, a senior analyst in Atlanta, told SCMR that some third party logistics companies are nonetheless, poised for growth.

“If their balance sheets are clear, and the 3PL understands how to penetrate a new market or expand in an existing one, the opportunity is still there,” she said.

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About the Author

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Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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About the Author

Patrick Burnson, Executive Editor
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