Stobart Group (LON: STOB), the Aviation, Energy and Civil Engineering group, issued today the following pre-close trading statement and capital review update prior to the announcement of the full year results for the 12 months to 28 February 2019, which will be published on 15 May 2019.
The Company continues to make strong commercial progress in its core Aviation and Energy operating divisions and is trading in line with management expectations.
London Southend Airport saw a 33% increase in passenger numbers to 1.5m in FY 2019 (FY18 1.12m). Preparations are well underway to welcome Ryanair, who will base three aircraft at the airport from April 2019. London Southend Airport was also pleased to announce recently that Loganair will be launching flights to Glasgow and Aberdeen from May 2019, and to Carlisle Lake District Airport in July, supporting further passenger growth.
On 22 February, Stobart Group confirmed it had disposed of its regional airline and aircraft leasing businesses in return for becoming a 30% shareholder, alongside Virgin Atlantic and Cyrus Capital, in a newly created private vehicle, Connect Airways. Stobart Group recognised a profit on disposal, on an accounting basis. The disposed businesses will be treated as discontinued operations in the FY 2019 results, with the FY2018 results restated. Stobart Group expects to include 30% of any profit after tax of Connect Airways in its Group results going forward.
All but three of the power plants in the UK and Ireland that Stobart Energy supply to have completed the commissioning phase and are now in full contractual operations, meaning the owners of those are confident that the plants are at a level where it can perform consistently. This improvement has helped Stobart Energy to deliver 1.3 million tonnes of renewable fuel, representing an increase of over 45% on the previous year. This improvement was achieved despite continued challenges with underperforming Power Plants during their commissioning period. As a result of these challenges, Stobart Energy will continue to carry non-underlying pre-contract costs until the plants all reach the end of their commissioning periods. Therefore, Stobart Energy is seeking to negotiate compensation packages with the various plant owners.
Rail & Civils
The Company reported at the time of its interim results that it had seen a material reduction in profitability against management’s expectations. This reduction followed a review of ongoing contracts that were substantially completed in prior periods, resulting in a downgrade in the recorded performance of those contracts.
Following the conclusion of the review, Stobart Rail & Civils strengthened the management team and has put in place a more disciplined approach to contract quality, focusing on securing contracts with external tier-one customers. This process is generating improved results in terms of new business. This year the team has worked on the Newton Heath Maintenance Building Project for Northern Rail and recently signed a significant new contract with Nexus; the Tyne and Wear Passenger Transport Executive.
Capital Review and Dividend
At the time of the publication of Stobart Group’s interim results to 31 August 2018 on 24 October 2018, the Company announced its intention to undertake a capital review. Further details of the review were announced on 3 December 2018.
Stobart Group continues to review its capital requirements. The objective is to ensure that the Company can accelerate and deliver its ambitious plans to fund future growth and shareholder returns from operating cashflow on a sustainable basis.
The majority of the Group’s planned investment will be deployed at London Southend Airport to put in place the infrastructure required to serve up to 10 million passengers per year. The Company continues to evaluate both the quantum of the investment required and the opportunities to fund growth through the disposal of non-core assets. To that end, Stobart Group has recently increased its available cash resources to support its growth plans through asset sales and the placement of shares on 11 January 2019 with Cyrus Capital, generating £24.7m, following the announcement of the recommended cash offer for Flybe PLC.
In light of the current assessment of our investment requirements and cash flow the Board believes it would be more appropriate to move to a twice-yearly dividend made in equal payments of 3p per share. The first payment of 3p per share is expected to be paid in July 2019.