Kinaxia logistics slumps to £21m loss due to UK’s ‘challenging trading environment’

Macclesfield logistics group, Kinaxia, has slumped to a £21.57m pre-tax loss, due to the UK’s “challenging trading environment” which has seen a fall in the demand for transport and warehousing services.

Posting its latest accounts for the year to December 31, 2023, with Companies House, the group revealed that revenues dropped from £206.646m in 2022 to £189.248m in 2023.

A pre-tax profit of £1.82m in 2022 became a £21.57m pre-tax loss for the latest financial year.

Once again, no final dividend is recommended by the board.

Worryingly, the group revealed that trading in the current financial year has failed to improve.

It said its trading performance to the end of October, 2024, continued to be disappointing, “with the group trading behind its three-year plan as the group continues to battle the headwinds and cost pressures in the current UK economy and manages to reduce its warehousing capacities to align to customer demand”.

The accounts revealed that the group will have to raise costs once more, saying “to mitigate against the risks of economic downturn and inflation the business intends to repeat its annual price increases to customers in future as well as continuing to closely monitor and manage costs”.

Last December the group underwent a restructuring which paid off a loan to DE Shaw, leading to a new term loan for £39m and 90% equity in the group.

The new facility is due for repayment in June 2027, with an option to break in June 2026.

It also provides for a further £5m funding in the form of an accordion facility which can be provided at the discretion of the group’s main lender.

Kinaxia said this provides certainty to the group in the short to medium term.

This has enabled the directors to prepare the 2023 accounts on a going concern basis.

Kinaxia’s headcount dropped from 1,726 in 2022 to 1,650 in 2023. Managerial and administration staff numbers rose by 14, but there was a reduction of 90 drivers and warehouse staff.

The directors’ report said: “High inflationary pressures within the UK economy … materially impacted the gross margins of the business. Despite a number of steps being taken to reduce costs and attempt to pass some cost increases onto customers the bulk of these pressures resulted in reduction to gross profit.

“During the year the business also incurred significant increases in its interest charges as a result of underlying increases in interest rates, particularly the Sonia (Sterling Overnight Index Average) rate used as a basis for the companies (sic) £41,500,000 term loan facility.”

This meant that the group faced an overall increase in interest costs of £2,675,246.

Kinaxia chief financial officer, Ben Warrillow, said: “Like most logistics businesses, our financial performance during the period was impacted by market challenges around freight volumes and an increased cost base.

“However, most of the losses posted were due to impairment charges and non-cash items and, in reality, the business is operationally robust and has the financial stability to underpin future growth.

“Kinaxia has made many changes since then, most notably around its senior team and the investment in key areas of the business, including operational efficiency, technology and sustainability.”