Lahore, 17 Oct 2023:The Pakistan Credit Rating Agency Limited (PACRA) has maintained its ratings for Secure Logistics Group Limited (SLG), a company that focuses on logistics and vehicle fleet management. The logistics business of SLG is centered on transporting cargos over long and medium distances, while its vehicle fleet management aspect provides tracking services and advanced fleet management solutions.
These ratings are attributed to the robust support from international investors in the form of equity injections, a solid governance structure, an established clientele base, and a professionally qualified management team that has effectively navigated the company amidst a challenging business environment.
The logistics sector is currently grappling with challenges brought about by significant rupee depreciation, escalating inflation, and rising interest rates, leading to an increase in business costs and a subsequent decline in profit margins. The demand and load volume outlooks are also not promising. Moreover, global warming and climate change continue to pose threats to the logistics industry, especially with flood-related damages to road infrastructure.
However, there are anticipated improvements on the horizon for the logistics sector. This optimism stems from infrastructural developments like the Sukkur-Hyderabad highway under the CPEC initiative and the creation of special economic and industrial zones. In CY22, SLG witnessed a top-line growth of around 6%, primarily attributed to price inflation. However, there was a noticeable dilution in margins.
In a significant strategic move, SLG's Board of Directors has decided to transition from traditional logistics operations to tech-based logistics. As part of this shift, the company's subsidiary, LogiServe (Pvt) Ltd, has acquired a license from the Special Technology Zone Authority. The impending merger of LogiServe into SLG, combined with the shift towards tech-enabled logistics through a B2B Marketplace and related software modules, is set to boost the logistic business while also yielding substantial tax benefits.
SLG's future plans also include the reintroduction of its IPO process, with the primary goal of using the proceeds to reduce borrowings. Adding new warehousing ventures and expanding distribution vehicles are also on the company's agenda. SLG is also prepared to tap into the regional transportation segment for Central Asian countries, having secured the necessary licenses and approvals. The company's management is conservative regarding taking on additional borrowings, and the financial risk profile remains satisfactory with a good balance of coverages, cashflows, and working capital cycles.
The company's capital structure, which is moderately leveraged, primarily consists of long-term vehicle fleet lease financings. For the ratings to remain steady, improvements in the business profile and successful execution of the business strategy are essential. Maintaining financial discipline, a prudent financial performance, and an effective liquidity profile will be crucial. The message was disseminated through a press release from the Pakistan Credit Rating Agency Limited (PACRA).