Stobart Group Limited Results

12/05/2016

Results for the year ended 29 February 2016

Stobart Group Limited Results

Stobart Group Limited, the Support Services and Infrastructure Group, today announces its results for the year ended 29 February 2016.

Group overview

Stobart Group is an entrepreneurial company applying its recognised logistics and customer service expertise to create:

  • London Southend Airport - a best airport in Britain award winner as voted by the Airport Operators Association
  • Stobart Energy - the number one supplier of biomass in the UK
  • Stobart Rail - one of the UK’s leading names in rail network maintenance, repair and improvement
  • A diverse portfolio of commercial properties and investments, including Eddie Stobart Logistics

Financial highlights

  • Revenue from continuing operations up 8.6% to £126.7m (2015: £116.6m)
  • Underlying EBITDA increased by 69.8% to £30.0m (2015: £17.6m). All divisions reported EBITDA ahead of prior year
  • Underlying profit before tax increased by 98.0% to £18.4m (2015: £9.3m)
  • Property realisations generated £24.1m cash proceeds (2015: £27.2m)
  • Basic earnings per share from underlying continuing operations of 5.0p (2015: 2.6p)
  • Proposed final dividend of 4.0p per ordinary share (2015: 4.0p)
  • £19.7m returned to shareholders via dividends paid in the year (2015: £19.8m)

Operational highlights

  • Additional biomass contracts secured, completing the target of securing contracts to supply over
    2 million tonnes per annum by 2018
  • London Southend Airport voted best airport in Britain by Which? for third consecutive year
  • Strengthened management team at Stobart Aviation by appointing aviation industry specialists, including newly appointed CEO and COO
  • Stobart Rail completed construction of the air/road freight distribution centre at Carlisle Lake District Airport, which went on to be sold for £16.8m
  • Revenue from external work by Stobart Rail increased by 36.5% to £28.8m
  • Added value and generated cash through our infrastructure and investment portfolios

Chief Executive Andrew Tinkler commented:

“This year we have delivered improved profitability in all five divisions with the foundations, management and organisational structure almost set to achieve our objectives and deliver our plan.

We are on track to deliver our strategy by 2018 and drive shareholder value through our three growth operating divisions of Energy, Aviation and Rail, while generating a cash surplus through the exit of our infrastructure and investment portfolios at the right time allowing increasing returns to shareholders."

FULL YEAR RESULTS SUMMARY

 

 

29 February 2016

£’m

28 February 2015

£’m

Revenue from continuing operations

126.7

116.6

Underlying EBITDA

30.0

17.6

Underlying profit before tax

18.4

9.3

Profit/(loss) before tax from continuing operations

10.0

(9.4)

Profit from discontinued operation (net of tax)

-

6.8

 

Divisional underlying profit summary

 

29 February 2016

28 February 2015

 

 

£’m

£’m

Growth

Underlying divisional EBITDA

 

 

 

 

Energy

9.1

7.8

+17.0%

Aviation

2.3

1.4

+59.8%

Rail

3.4

2.8

+20.1%

Investments

11.1

6.8

+64.1%

Infrastructure

10.5

4.0

+159.4%

Central costs and eliminations

(6.4)

(5.2)

 

Underlying EBITDA

30.0

17.6

+69.8%

(Loss)/gain on diesel swap

(2.2)

0.1

 

Depreciation

(8.4)

(6.7)

 

Underlying finance costs (net)

(1.0)

(1.7)

 

Underlying profit before tax

18.4

9.3

+98.0%

Non-underlying items

(8.4)

(18.7)

 

Profit/(loss) before tax from continuing operations

10.0

(9.4)

+206.2%

Tax

(1.2)

1.4

 

Discontinued operations

-

6.8

 

Profit/(loss) for the year

8.8

(1.2)

+857.5%

 

Enquiries:

Stobart Group

c/o Redleaf Communications

Andrew Tinkler, Chief Executive Officer

Ben Whawell, Chief Financial Officer

 

Redleaf Communications

+44 207 382 4730

Charlie Geller

Emma Kane

Stobart@redleafpr.com

Influence Associates

+44 207 287 9610

Stuart Dyble

James Andrew

 

                                                                                                                                                                                         

Chairman’s Statement

This has been a year of progress across all divisions at Stobart Group, but it is the next 18 to 24 months that are critical for our strategy. We have set clear targets in our Energy and Aviation divisions, and in the next year we aim to make considerable progress on those targets. Our strategy is set.

Strategy Progress

We have made good headway with our strategy so far. We said we would supply over 2mt of biomass by 2018 and have secured contracts to deliver this to plants up and down the country. With six major plants coming onstream over the next 18 months, Stobart Group now has to demonstrate we can fulfil these contracts.

Stobart Group aims to serve 2.5m passengers a year at London Southend Airport by 2018. Again, we have made good progress in terms of laying the foundations for meeting this objective. We have built a world class airport close to London with excellent transport links, and this year we put in place a first class team to help drive the airport forward. 2015 saw the appointment of a new CEO and COO along with changes in the business development team. The challenge for this focused management structure is to grow sustainable passenger numbers.

We are firmly on track with our strategy to grow third party customer work in Stobart Rail; external revenue in that division grew by 37% to £28.8m. We have built a strong order book for work worth c.£68m.

Property value realisation is a key part to our strategy of making returns to shareholders in the short term. During the year we realised net cash of £24.1m from property asset disposals. In addition, property enhancement measures led to revaluations contributing £8.4m to our Group EBITDA.

Our investments have also performed very well, particularly Eddie Stobart Logistics, of which we own 49%. Eddie Stobart Logistics secured a number of significant customer wins towards the end of the financial year, and we expect to see the full benefit of this in future periods. It also generated £21.0m of surplus cash during their financial year to November 2015, which was used to repay its debt, and sold its UK automotive business at a profit of £7.0m.

Results

  • Revenue increased by 8.6%
  • Overall profit for the year of £8.8m
  • Underlying earnings per share of 5.0p
  • Dividend 6.0p 

Board

There have been no changes to the composition of the Board during the year.

Returns to Shareholders

During the year, £19.7m was returned to shareholders via dividends. An interim dividend of 2.0p was paid on 4 December 2015. The Board is proposing a final dividend of 4.0p (2015: 4.0p) per ordinary share totalling £13.8m (2015: £13.1m paid on 3 July 2015) and giving a maintained total dividend for the year of 6.0p. We expect to maintain our current dividend payment level. We will continue to support the funding of the dividend from proceeds of property asset disposals in the short term and the Board will consider additional returns to shareholders should there be surplus funds generated.

The Board is pleased with the progress that has been made this year and looks forward to the challenges over the next 12 months which promise to be very exciting indeed.

Iain Ferguson CBE

Chief Executive’s Statement

We are on track to deliver our strategy by 2018 and drive shareholder value through our three growth operating divisions of Energy, Aviation and Rail, while generating a cash surplus through the exit of our infrastructure and investment portfolios at the right time allowing increasing returns to shareholders.

This year we have delivered improved profitability in all five divisions with the foundations, management and organisational structure almost set to achieve our objectives and deliver our plan.

Energy Division - Supply and Transport

We continue to set-up a sustainable supply chain and infrastructure to supply and deliver over 2m tonnes per annum of waste and virgin wood fuel on long-term contracts to existing and new biomass plants that are coming on stream between now and 2018.

Aviation Division – Airports and Stobart Airline

Our Aviation team has identified airlines and sustainable route networks that complement our catchment areas.  They continue to work closely with existing and new airlines to create additional routes to enable us to achieve 2.5m annual passengers by 2018.

Our airline investment, Stobart Air, flew over 1.4m passengers during FY2016 and continues to grow. The airline returned to profitability in 2015 and continues to work with London Southend Airport and Carlisle Lake District Airport as well as other airports to create further route development opportunities.

Rail Division - Civil Engineering

We have focused on growing external revenue and built a strong order book through to 2018 as well as continuing to support our Group on Infrastructure projects.

Infrastructure Division - Non Airport Property Assets

We have set out a disposal plan of our portfolio and continue to asset manage this plan to extract value at the right time.

Investments Division – ESL and Propius

Eddie Stobart Logistics continue to grow allowing reduction in debt from good operating cash flow and FY2016 saw the disposal of the Automotive business.

Propius continues to trade profitably and we have received a dividend from the sale of two older ATR 72-500 aircraft.

Just Culture

Stobart Group has an enviable safety record which is testament to the people, processes and culture within the business. However, the need to improve safety in a proportionate and cost-effective way remains a priority and challenge faced by the Group. Our Safety Strategy is a key mechanism to drive safety performance across all our divisions. The strategy has been developed by the Group in partnership with senior executives and the Stobart Group Board and I believe it provides a common sense approach. The risks throughout our Group have been identified by each division and placed in a risk register. Safety is therefore a shared responsibility and this strategy shows our continuous commitment to improve our safety performance.

Energy

Management is focusing on the fuel supply strategy for new and existing biomass plants, with all plants expected to be operational by the end of 2018. The new volume which is in excess of 1m t.p.a. will see us achieving our target of over 2mt supplied each year to the biomass market. These supplies are under long-term, index-linked, customer contracts generating predictable income streams for years to come with our focus on delivering solid margins. An improved margin per tonne metric this year is also encouraging given the backdrop of downtime due to unplanned maintenance at UK plants and the delays at Calais which caused increased transport costs. We are securing strategic sites for waste wood processing and have also been sourcing the additional plant and equipment required.

Aviation

As expected, passenger numbers at London Southend Airport were lower than prior years, as we worked with easyJet under a new long-term contract to enhance load factors and yields with a view to growing volumes again in the near future. The experienced and credible new management team led by CEO Glyn Jones are now embedded and are in talks with a number of major operators regarding sustainable new routes to achieve our growth plans. Our target remains to serve 2.5m passengers a year by 2018. The airport has been built with excellent transport links to London and sufficient capacity to handle up to 5m passengers, double our near-term target, providing a platform for growth well beyond 2018. Glyn is well placed to deliver this target based on his track record of building passenger growth when he was Managing Director at Luton Airport.

Grant funding has been secured for development of infrastructure works that will help support airlines to operate from Carlisle to London Southend, Dublin and Belfast in conjunction with Stobart Air. Our civil engineering team is working with the CAA on a proposal for refurbishment of the runway required to enable these services to operate.

The 2.5MW solar project at London Southend Airport was also completed this year delivering renewable electricity for the airport estate and its customers. Our new solar farm is the largest at a UK airport and supports one of our key objectives, which is reducing both our carbon footprint and the electricity we require from the national grid network. We are delighted, as London’s newest airport, to have opportunities to introduce the latest ‘green’ initiatives as part of our development.

Our 45% investment in the airline, Stobart Air, continues to grow with improved passenger volumes and profitability in the year ending December 2015.

Rail

Stobart Rail completed on time and on budget the Carlisle Airport distribution centre which was subsequently sold by the Group this year in line with the plan to capture and realise value. The completion of the all-weather track at Newcastle Racecourse is an example of the division winning contracts and maintaining strong margins in diverse areas. There is a strong order book for 2016/17 on long-term rail infrastructure projects for Network Rail. The division is focused on increasing third party contracts and supporting our Energy division with site developments for its fuel supply strategy. 

Infrastructure

In the past year, we have generated cash from asset sales of over £24m, including the sale of Carlisle Airport distribution centre, and properties at Worcester and Swindon. This has contributed to covering the Group dividend and we remain committed to returning surplus cash to shareholders as we continue to exit mature properties and investments.

The £9.1m valuation uplift of the Speke property is a fantastic demonstration of the division managing assets to deliver their full potential.  This uplift reflects well progressed negotiations taking place around the February 2016 year end in relation to a new 20-year lease with the tenant. This lease was subsequently agreed in March 2016 at an annual rent of £2.1m and an option for the tenant to acquire the site for £37m has also been granted, expiring on 30 June 2016. The property was purchased by the Group for £17.6m this year, including costs.

Investments

Eddie Stobart Logistics continues to grow in line with management expectations and has strengthened its balance sheet via cash generated from operations and the sale of the UK Stobart Automotive business. Propius, the aircraft leasing investment, is also performing well and has this year sold two older aircraft producing a good return on investment and return of cash of £4.3m to the Group.

Our Brand, Our People, Our Values

We are passionate about our brand, its heritage and what it stands for. We live the brand values. Stobart people work hard and think differently and innovatively. We work collaboratively with focus on smart, professional, well planned delivery. We pay attention to and challenge the finest details in all areas of our work to ensure the highest standards of service, capturing and controlling value and de-risking at every opportunity. This focus has resulted in an award winning airport poised for further success and has won us long-term contracts to supply over 2mt of biomass fuel annually by 2018. 

Outlook

This is an exceptional time for the Stobart corporate family and its shareholders. Our Energy and Aviation divisions are finishing the groundwork in preparation for a period of rapid growth. We remain focused on delivering the strategy and realising superior growth and shareholder returns from our strong service, infrastructure and logistics heritage.

I would like to take this opportunity to thank the Board and every Stobart employee for their passion, hard work and dedication during the year and for their contribution to our incredible, valuable and unique Stobart brand and culture.

Andrew Tinkler