Stobart Group Ltd (LON:STOB)

Stobart Group Ltd (LON:STOB)


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Stobart Group Ltd RNS Release

Final Results


RNS Number : 3943A
Stobart Group Limited
29 May 2019
 

29 May 2019

Stobart Group Limited

("Stobart" or the "Group")

 

Results for the 12 months ended 28 February 2019

 

"A transformational year"

 

Stobart Group Limited, the aviation, energy and civil engineering group, today announces its full year results for the 12 months to 28 February 2019. The Group is delivering underlying EBITDA results in line with management expectations and continues to make strong commercial progress.

 

Warwick Brady, Chief Executive Officer, Stobart Group, said:

"This has been a transformational year for Stobart Group. We have significantly strengthened the Board and management team and taken the opportunity to deal with legacy issues while putting in place appropriate operational rigour within the business.  As a result of the disposals and impairments in the year, the Group has de-risked its balance sheet.

 

"Stobart Group has a clear focus on developing infrastructure assets in the aviation and energy sectors. These are high growth assets with strong market positions that are now well positioned to become increasingly cash generative. 

 

"We will invest in accelerating the growth of our aviation and energy businesses through existing cash resources and further non-core asset sales. By doing this, we can deliver sustainable operating cash flows and significant long-term value for shareholders."

 

 

 

 

28 February 2019

 

Adjusted

28 February 2018

% change

Restated

Statutory

28 February 2018

Aviation

 

 

 

 

Passenger numbers

1.5m

1.1m

+33%

1.1m

Aviation revenue

£39.4m

£25.8m

+53%

£25.8m

Underlying Aviation EBITDA2

£4.9m

£1.7m1

+177%

£5.8m

 

 

 

 

 

Energy

 

 

 

 

Tonnes supplied

1.3m

0.9m

+51%

0.9m

Energy revenue

£65.1m

£54.7m

+19%

£54.7m

Underlying Energy EBITDA2

£19.2m

£12.1m

+60%

£12.1m

 

 

 

 

 

Underlying EBITDA2 from two main operating divisions

£24.1m

£13.8m1

+75%

£17.9m

Group

 

 

 

 

Revenue

£146.9m

£105.4m

+39%

£105.4m

Underlying EBITDA2

£10.8m

£14.2m3

-24%

£138.1m

(Loss)/profit for period after taxation from continuing operations

(£42.6m)

(£14.3m)3

-199%

£109.6m

(Loss)/profit for period

(£58.2m)

(£23.9m)3

-144%

£100.0m

1 Excluding profit on disposal of hotel of £4.1m to allow for underlying trading comparison

2 Underlying EBITDA represents (loss)/profit before tax and before swaps, interest, depreciation and non-underlying items

3 Excluding profit on sale of Eddie Stobart Logistics plc shares of £123.9m

 

The Statutory 2018 results have been restated where required due to IFRS 5 Discontinued Operations.

The adjusted 2018 column has been presented to better allow the reader to compare our year on year continuing performance by making adjustments to the restated 2018 statutory results for certain items described in the above footnotes.

 

 

 

Financial performance: Strong core growth and legacy issues dealt with

·      Group revenue from continuing operations increased by 39% to £146.9m and adjusted underlying EBITDA from our two main operating divisions, Aviation and Energy, was up 75% to £24.1m.

·      The Rail & Civils division reported an underlying EBITDA loss of £4.8m, having reassessed the forecast outturn of all contracts, including those committed to in prior periods. This EBITDA loss was improved by £3.9m as a result of an IFRS 15 transition adjustment.

·      There are a number of items that contributed to the Group loss of £58.2m.

This included £10.2m of costs in Aviation (related to airline marketing) and Energy (associated with maintaining the supply chain during third-party plant commission delays), and £5.2m of legal costs mainly associated to the shareholder dispute.

Non-cash items included £16.3m of depreciation from continuing operations, impairment charges of £7.8m related to infrastructure assets and £3.2m of loan note impairment charges.

In addition, the Group made an overall loss from discontinued operations of £15.5m, including the profit on disposal of Everdeal (Stobart Air) of £25.9m, which was then reduced by the impact of the UKFFO losses of £31.7m. Operating profits in Stobart Air and Propius totalling £2.6m were then reduced by an onerous lease provision of £12.3m associated with Propius.

·      £38.4m (2018: £27.3m) was realised from the sale of non-operating assets. Following this, the Group has £82.6m (2018: £127.2m) of non-operating infrastructure assets and £44.9m (2018: £63.7m) of Eddie Stobart Logistics plc shares held on the balance sheet at the year end.

·      £52.5m was returned to shareholders through dividends. This was largely paid from non-core asset sales of £38.4m and debt facilities, leading to an increase in net debt to £83.1m. Subsequent to this, as previously announced, the dividend has been appropriately rebased.

 

Strategic highlights: A clear investment plan

·      Stobart Group was part of the consortium that successfully bid for Flybe, simultaneously selling Stobart Air and entered into an agreement to sell our aircraft leasing business, Propius. Following this transaction, Stobart Group has a 30% investment in Connect Airways, which will identify cost synergies between Stobart Air and Flybe, reset the cost base and develop a London connectivity strategy that will involve London Southend Airport.

·      Post year end, the Group monetised its holding in Eddie Stobart Logistics plc through the issuance of a five-year exchangeable bond secured over its shares raising £53.1m, pre fees, and in excess of £50m of cash.

·      Stobart Group now has a clear plan to invest in accelerating the growth of its core operation divisions, and the cash resources with which to fund that investment this year.

 

Operating highlights: Focused on two excellent growth businesses

·      Stobart Aviation is now focused entirely on airports and aviation services. Its principal asset, London Southend Airport, saw a 33% increase in passenger numbers. easyJet flew circa 1m passengers at London Southend Airport in 2018. Ryanair flights commenced in April, and Loganair flights in May 2019.

·      97% of the renewable energy plants that Stobart Energy supplies to have now started commissioning and 90% have reached commercial operations. Stobart Energy reached a year end run rate of 1.7m tonnes per annum as a result of more consistent plant performance. The Mersey Bioenergy and Margam plants are expected to reach commercial operations in the near term. Port Clarence is yet to start commissioning.

 

A presentation for sell-side analysts will be held today at 9.30am at Newgate Communications, Sky Light City Tower, 50 Basinghall Street, London, EC2V 5DE.

 

 

Enquiries: 

 

Stobart Group Limited

 

Charlie Geller, Group Head of Communications

Via Newgate Communications

Newgate Communications

+44 203 757 6880

Robin Tozer/ Ian Silvera

 

[email protected]

Bridge from reported 2018 results to restated 2018 results

 

 

2018

Reported

£m

Everdeal Holdings Limited restated to discontinued operations

£m

Propius Holdings Limited restated to discontinued operations

£m

UKFFO restated to discontinued operations

£m

Reversal of intra-divisional revenue elimination

£m

2018

Restated

£m

Revenue

242.0

(115.6)

(18.7)

(15.0)

12.7

105.4

Underlying EBITDA

135.2

(4.6)

(11.4)

18.9

-

138.1

Profit before tax

100.6

(3.0)

(10.3)

22.0

-

109.3

Discontinued operations

-

3.0

9.4

(22.0)

-

(9.6)

Profit for the year

100.0

-

-

-

-

100.0

 

 

Chairman's statement

 

Overview

I am pleased to report significant commercial progress in our two principal operating divisions; Stobart Aviation and Stobart Energy.

 

In Aviation, London Southend Airport welcomed 1.5m passengers during the year, up 33% from 1.1m last year. We secured a landmark agreement with Ryanair, which will bring more than 1m additional passengers per annum through the airport from Spring 2019 onwards. 

 

It is not just London Southend Airport where we can report progress. In July 2019, the first commercial flight for over 25 years will take off from Carlisle Lake District Airport, and we have become the operators for Durham Tees Valley Airport.

 

We have also seen commercial progress in Stobart Energy. During the year, the division delivered a 51% increase in the volume of biomass fuel supplied to renewable energy plants, equivalent to 1.3m tonnes. This increase is a result of more renewable energy plants reaching full contractual operational volumes.

 

Furthermore, as announced at the time of our interims, we have taken action to improve performance within Stobart Rail & Civils. The division reported an underlying EBITDA loss of £4.8m. This division has played an important role in supporting the infrastructure growth of our Aviation and Energy divisions to date. To ensure the division is better positioned going forward, we have refocused the business to secure contracts with external tier-one customers. To support this, we have strengthened the management team. The team has already secured significant new contracts such as the project with Nexus to deliver a full track renewal for the Tyne and Wear Metro.

 

Financial performance

We have seen a marked improvement in the financial performance of our two core operating businesses. Our Aviation division increased underlying EBITDA by 177% once the £4.1m profit from the sale and leaseback of our hotel in the prior year is adjusted for. Our Energy Division saw underlying EBITDA increased by 60% from £12.1m to £19.2m. Total revenues from continuing operations across the Group increased by 39%.

 

The loss for the year reflects a combination of investment in our Aviation and Energy Divisions, one-off legal costs and non-cash items resulting from the intention to ensure a de-risked balance sheet. Non-cash items included £16.3m of depreciation from continuing operations, £7.8m of impairment charges related to infrastructure assets and £3.2m related to loan notes.

 

In addition, the Group made an overall loss from discontinued operations of £15.5m, including the profit on disposal of Everdeal (Stobart Air) of £25.9m, which was then reduced by the impact of the UKFFO losses of £31.7m. Operating profits in Stobart Air and Propius totalling £3.0m were then reduced by a one-off onerous lease provision of £12.3m associated with Propius).

 

To support the funding of our planned growth, post the year-end the Board took the decision to rebase its dividend and move to twice-yearly equal payments of 3p per share, as announced on 13 March 2019. The Board recognises the importance of dividends to shareholders.  However, the rebased dividend will remove £44m of cash requirements from the business over the next 12 months.

 

Boardroom challenges

The increase in underlying EBITDA from our two main operating divisions has been achieved against a challenging backdrop. Sadly, it was necessary for the Board to devote significant time to the dispute with former CEO Andrew Tinkler, which gathered pace ahead of the Company's AGM in July 2018. 

 

The dispute was especially difficult for the hard-working employees of Stobart Group. I want to thank them for remaining focused during this time. Despite our disagreement, the Board and I want to recognise how much Stobart Group has benefitted from Andrew Tinkler's entrepreneurial flair in the past and thank him for his contribution to the business. However, it is now time to move on and focus on building value for all of our shareholders. 

 

Boardroom changes

The appointment of Chairman-elect David Shearer was announced earlier this month. He brings a lot of valuable experience as an independent director and corporate financier. He is currently the Non-Executive Chairman of Speedy Hire Plc, Aberdeen New Dawn Investment Trust plc and the Scottish Edge Fund, a role from which he will step down at its September 2019 AGM. He has considerable knowhow, which will help Warwick and the management team to implement the Group's strategy and deliver our ambitious growth targets.

During the year, we made further changes to the Board. Nick Dilworth joined as Chief Operating Officer in August 2018. Nick originally joined Stobart Group in December 2017 as Group Commercial Director. In a short time, he has had a significant impact on improving performance across our divisions as well as taking a leading role in the consortium's offer for Flybe. We also added two new non-Executive Directors, Ginny Pulbrook and David Blackwood. They have already brought their extensive public company experience to bear and made significant contributions.

Post the year-end we also appointed a new Chief Financial Officer, Lewis Girdwood. Lewis previously served as Chief Financial Officer to IAG Cargo, which provides global cargo services to IAG airlines. Before that, he was Head of Financial Planning and Analysis at easyJet, responsible for financial business partnering across the airline.

Andrew Wood will retire as a non-Executive Director at the AGM following six years on the Board. I want to thank him for his advice and support over this time, and his contribution to the success of the Group. Of course, Andrew is not the only Board member to be stepping down. This statement is my last as Chairman before I hand over to David Shearer.

 

The right commercial team in place

It has been an honour to serve as your Chairman over the last six years. I hand over a much-transformed business which is well positioned for the future. The Company is investing in the infrastructure and capabilities that we need to enable the Group to fulfil its ambitions. We have a rapidly-growing London airport set to serve millions of passengers per year and a 30% share in the newly formed Connect Airways. An Energy Division that is now well positioned to deliver its contracted commercial volumes and already achieving planned margins. Also, our reoriented Rail & Civils Division is successfully securing high-value external contracts.

 

This progress has been delivered by an outstanding management team, with considerable commercial experience who, I believe, can deliver our ambitious targets. Achieving these will generate significant value for shareholders. I will be enthusiastically following Stobart Group's progress.

 

 

Iain Ferguson CBE

Chairman

 

 

CEO report

Simplifying the business

On taking over the role of CEO in July 2017, I agreed with the Board a clear, ambitious plan for the future of Stobart Group. Along with management across the Group, we have worked hard to reposition Stobart as a high quality, growth business. We intend to focus on establishing a major London Airport and creating a high margin renewable energy business.  

 

Active participation in a major, connected airline

In February 2019, Stobart Group was part of the consortium that successfully bid for Flybe, simultaneously selling Stobart Air and entering an agreement to sell aircraft leasing business, Propius. Following this transaction, Stobart Group has a 30% shareholding in Connect Airways, alongside consortium partners, Virgin Atlantic (30%) and Cyrus Capital (40%). Stobart Group will share in any future profits of Connect Airways.

 

The creation of Connect Airways is the first step towards further regional airline consolidation. Stobart Air will continue to provide high-quality franchise operations to Aer Lingus and other key partners. The transaction will also see Flybe change its name over time under the Virgin brand and benefit from a more integrated commercial cooperation with Virgin Atlantic's long-haul operations from London and Manchester. It will identify cost synergies between Stobart Air and Flybe, reset the cost base and develop a London regional connectivity strategy that will incorporate London Southend Airport as a key to unlocking capacity for London.

 

A focused aviation division

Following this transaction, Stobart Aviation is now focused solely on airports and aviation services. Its principal asset, London Southend Airport, reported a 33% increase in passenger numbers to 1.5m, with easyJet reporting circa 1m passengers flying from the airport in the year. Post-period, Ryanair commenced flying from the airport in April 2019 and is expected to welcome more than 1m passengers per annum. Loganair started operations in May 2019.

 

London Southend Airport now has aircraft from Ryanair, easyJet and Flybe based at the airport, with each aircraft expected to deliver 300,000 passenger per annum on average. Non-aeronautical revenues grew by 15% per passenger with increased contributions from our train station and car parks. We have also extended our food and beverage offering and installed two Costa Coffee outlets, a landside WH Smith, a Giraffe STOP, and our bespoke pub, The Navigator.

 

Our growth in passenger numbers and revenues reflects a continued investment in the airport over ten years, having taken it from circa 47,000 passengers to 1.5m passengers during that time. We have spent over £150m to date developing the airport, attracting tier one airlines and building a new terminal, control tower, jet centre, hotel, car parks and train station. During the year we also spent circa £10m on a runway improvement programme.

 

As a result of this investment, we have a valuable London asset and differentiated earnings profile, with revenue contributions from rail passengers, car parking, hotel visitors and executive jet handling.

 

London Southend Airport is now well placed to realise the value of that investment to date and benefit from capacity constraints elsewhere in the Capital. This opportunity is only likely to increase with the aviation sector growing at 1.5-2x GDP. 

 

Stobart Energy coming of age

97% of the renewable energy plants that Stobart Energy supplies have now started commissioning and 90% have reached commercial operations. As a result of the improved and more consistent plant performance, Stobart Energy reached a year-end run rate of 1.7m tonnes per annum. The Mersey Bioenergy and Margam plants are expected to reach commercial operations in the near term. Port Clarence is yet to start commissioning.

 

Stobart Energy is increasingly demonstrating the potential of the business model. More of the plants we supply to are now operating consistently, and this will relieve the cost pressures associated with maintaining the supply chain. Stobart Energy benefits from high-quality earnings given the long-term nature of its supply contracts and is now positioned to generate significant operating cashflow going forward.

 

Clear targets

The sale of Stobart Air provides an opportunity to give greater clarity to the medium-term EBITDA per passenger target for London Southend Airport. The February 2023 target has been updated as a result of this to £8 EBITDA per passenger, made up entirely of income arising from the airport's estate. We remain confident of welcoming 5m passengers in the year to February 2023.

 

Stobart Energy is benefitting from more consistent operations at the renewable energy plants it supplies and has a February 2023 target to maintain EBITDA per tonne of £12.

 

Stobart Rail & Civils has set a five-year strategic plan to increase contracts with existing partners and external customers. It has a revised target to return to profitability over the medium term.

 

Outlook

We have entered the new financial year with increased confidence. We have a clear aim to develop a London airport that will benefit from the capacity constraints within the Capital's other airports and a highly cash generative Energy business with long-term contracts to supply 2m tonnes per annum.

 

London Southend Airport has visibility on passenger growth following the arrival of Ryanair and Loganair flights, and an enhanced customer proposition that will allow non-aeronautical revenues to mature over time. Stobart Energy is now better positioned to maintain attractive margins and generate cash. We also have a plan in place to improve the performance of the Rail & Civils Division through an increased focus on securing external contracts.

 

We now have a more de-risked balance sheet having decided to impair non-core assets. We intend to now grow the value of our core Aviation and Energy assets and have in place an experienced commercial team with a clear plan to execute our strategy and deliver our targets.

 

Stobart Group now intends to invest in developing a 10m+ passenger airport and the infrastructure required to maintain a supply chain to deliver 2m tonnes per annum of biomass fuel. The Group will also invest in core IT and central services, including our people while retaining an appropriate Group cost base. The majority of our investment will be focused on London Southend Airport and will be partly funded by the receipt of over £50m raised through the issuance of an exchangeable bond secured over our shares in Eddie Stobart Logistics plc, further asset sales and cash generated from operating businesses.

 

By undertaking this investment in our infrastructure assets, we can generate strong and sustainable operating cashflows and significant long-term value for shareholders.

 

 

Warwick Brady

Chief Executive

Financial review

 

Refocussing the business

 

Aviation and Energy, our key growth divisions, have performed well this year and underlying profitability across these businesses has increased by 35% from last year.

 

Revenue

 

2019

£'m

Restated

2018

£'m

Movement

Aviation

39.4

25.8

+53%

Energy

65.1

54.8

+19%

Rail & Civils

52.3

41.0

+28%

Investments

2.7

0.6

+324%

Infrastructure

2.2

3.1

-30%

Eliminations

(14.8)

(19.9)

-26%

 

146.9

105.4

+39%

 

Revenue from continuing operations has grown by 39% to £146.9m, driven by increased revenue in our operating divisions, following an increase in passenger numbers in Aviation and tonnages in Energy.

 

Profitability

 

2019

£'m

Restated

2018

£'m

Movement

Underlying EBITDA1

 

 

 

Aviation

4.9

5.82

-15%

Energy

19.2

12.1

+60%

Underlying EBITDA1 from two main operating divisions

 

24.1

 

17.9

 

+35%

Rail & Civils

(4.8)

4.4

-209%

Investments

2.4

125.23

-98%

Infrastructure

(3.0)

3.9

-178%

Central function and eliminations

(7.9)

(13.3)

-41%

Underlying EBITDA1

10.8

138.1

-92%

Non-underlying items

(28.8)

(13.3)

 

Impact of swaps

(0.4)

1.0

 

Depreciation

(16.3)

(13.4)

 

Impairment of loans

(3.2)

-

 

Finance costs (net)

(4.2)

(3.1)

 

Tax

(0.5)

0.3

 

(Loss)/profit for the year

(42.6)

109.6

 

1 Underlying EBITDA represents (loss)/profit before tax and before swaps, interest, depreciation and non-underlying items.

2 Includes £4.1m profit on disposal of hotel. Excluding this, the underlying EBITDA of the Aviation division for 2018 would be £1.7m.

3 Includes £123.9m relating to the profit on disposal of associate, Eddie Stobart Logistics. Excluding this and the £4.1m profit on disposal of the hotel, the underlying EBITDA of the Investments division for 2018 would be £1.3m and the total underlying EBITDA would be £10.1m.

 

2018 figures in the tables above are restated for discontinued operations.

Restatement of 2018 results

Following the disposal of Everdeal Holdings Limited on 22 February 2019 and the agreement to sell Propius Holdings Limited, the results of both entities have been presented within discontinued operations, net of tax below the (loss)/profit for the year in the consolidated income statement, for the current and prior year. Accordingly, the 2018 results have been restated, explaining why the revenue and profitability within the Aviation segment for 2018 is lower than reported last year.

 

Underlying EBITDA

Underlying EBITDA is the Group's key measure of profitability and has reduced by 24% to £10.8m, when excluding the £123.9m profit on disposal of our associate, Eddie Stobart Logistics, from the prior year.

 

The Aviation division has welcomed a record number of passengers to London Southend Airport this year. However, overall underlying EBITDA in the division has reduced from £5.8m to £4.9m reflecting the profit on disposal of £4.1m for the hotel at London Southend Airport (LSA) in the prior year. The Energy division continues to deliver a strong underlying performance through increased revenue and tight cost control, increasing underlying EBITDA by 60% to £19.2m (2018: £12.1m). The Rail & Civils division has overcome some operational challenges during the year, resulting in an underlying EBITDA loss of £4.8m (2018: £4.4m profit). However, the management team has been strengthened and we remain positive about the future of this business.

 

Central functions and eliminations costs have decreased, principally due to a reduced share-based payment charge following LTIP share options that lapsed during the year.

 

Business segments

The business segments reported in the financial statements are Aviation, Energy, Rail & Civils, Investments and Infrastructure, which represent the operational and reporting structure of the Group.

 

The Investments division contains our investment in AIM-listed Eddie Stobart Logistics plc (ESL), our 30% investment in Connect Airways and the investment in luggage transportation company, AirportR. We received dividends of £2.7m (2018: £0.6m) during the year and underlying EBITDA was £2.4m (2018: £125.2m). The prior year results included underlying EBITDA of £123.9m from the profit on partial disposal of our holding in ESL. The fair value of our remaining holding in ESL reduced by £18.8m as a direct result of the reduction in the ESL share price. This loss is presented in the consolidated statement of comprehensive income.

 

The Infrastructure division continues to realise value from property assets and generated £38.4m of net proceeds from four property sales during the year. The disposals included the sale and leaseback of the terminal building and office at Carlisle Lake District Airport, the sale and leaseback of a site in Widnes and the disposal of an asset held for sale in Lillyhall. At 28 February 2019, the book value of Infrastructure assets held was £82.6m (2018: £127.2m) and underlying EBITDA reduced to a £3.0m loss (2018: £3.9m profit).

 

Swaps

The impact of mark-to-market (MTM) valuations of swaps is £0.4m adverse in the year compared to £1.0m favourable in the prior year, mainly due to a downturn in fuel prices and currency exchange rates.

 

Depreciation

Depreciation has increased to £16.3m, mainly because of additional plant and machinery and fixtures and fittings in the Aviation and Rail & Civils divisions.

 

Finance costs

Finance costs (net) increased from £3.1m to £4.2m, as foreign exchange improvements of £2.9m were offset by increased interest payable, following an increased level of borrowing on the revolving credit facility (RCF) throughout the year.

 

 

 

 

 

Non-underlying items

 

2019

£'m

Restated

2018

£'m

New business and contract set-up costs

11.6

5.6

Litigation and claims

5.2

4.1

Amortisation of brand

3.9

3.9

Impairments

7.8

-

Other

0.4

(0.3)

 

28.9

13.3

 

2018 figures in the table above are restated for discontinued operations.

 

The Energy division incurred £5.9m of contract set-up costs in connection with delayed commissioning of renewable energy plants, and the Aviation division incurred £4.3m in relation to new route development and marketing. The charge for litigation and claims includes costs in relation to a High Court dispute with a former Director. Contingent assets relating to any outstanding claims are not recognised unless recovery is considered virtually certain, in accordance with accounting standards. The charges in relation to the non-cash amortisation of the brands are expected to continue in future periods. Impairments relates to a decrease in value of property, plant and equipment (PPE) and property inventory.

 

Taxation

The tax charge on continuing operations of £0.5m (2018: £0.3m credit) reflects an effective tax rate of -2.8% (2018: 0.6%). The effective rate is lower than the standard rate of 19.08%, mainly due to deferred tax assets not recognised in respect of certain losses and other temporary differences in the year.

 

Discontinued operations

On 22 February 2019, the Group disposed of subsidiaries headed by Everdeal Holdings Limited and entered in to an agreement to dispose of Propius Holdings Limited to Connect Airways Limited. As a result of this transaction, the financial effect of the accelerated investment in growth at LSA, previously described as UK Flybe Franchise Operation (UKFFO) has been presented as discontinued, including a provision for the estimated investment in the year ending February 2020 of £7.0m.

 

The profit from discontinued operations in Everdeal Holdings Limited was £8.7m and the profit on disposal was £25.9m. The loss attributable to the UKFFO operation was £31.7m and the loss from discontinued operations in Propius holdings Limited was £18.4m. These amounts sum to the £15.5m loss from discontinued operations, net of tax on the face of the consolidated income statement. The prior year results have been restated accordingly.

 

Loss per share

Loss per share from underlying continuing operations was 4.74p (2018: 34.33p earnings per share). Total basic loss per share was 16.64p (2018: 28.66p earnings per share).

 

Share movements and dividends

 

2019

2018

Interim per share

6.0p

13.5p

Final per share

3.0p

4.5p

Total dividend per share

9.0p

18.0p

 

The Board has proposed a final dividend of 3.0p per share which, subject to the approval of shareholders at the AGM, will be payable to investors on the record date of 21 June 2019, with an ex-dividend date of 20 June 2019, and will be paid on 31 July 2019.

 

On 18 January 2019, the Group issued 16,492,884 shares at a price of 150p per share to Cyrus Capital Partners LP, raising £24.7m.

 

During the year, the Group purchased 1.5 million treasury shares for net consideration of £3.4m. Subsequently, 7.0 million treasury shares were transferred to the employee benefit trust and no shares were held in treasury at the year end.

 

Balance Sheet

 

2019

£'m

2018

£'m

Non-current assets

467.4

486.9

Current assets

79.7

167.3

Non-current liabilities

(137.7)

(141.5)

Current liabilities

(112.4)

(106.8)

Net assets

297.0

405.9

 

The net asset position has decreased by £108.9m in the year to £297.0m at 28 February 2019, due to the losses for the year and dividends paid in the year.

 

Non-current assets

PPE and investment property of £266.9m (2018: £305.8m) have decreased following the disposal of Stobart Air and assets in Propius, partly offset by additions of £12.8m in the Aviation division and £11.2m in the Energy division.

 

During the year, £23.7m (2018: £31.1m) of asset investment has been made including development works of £9.7m at Carlisle Lake District Airport and £11.1m at LSA.

 

Investment in associates and joint ventures of £10.5m (2018: £0.3m) has increased due to the investment in Connect Airways and the conversion of a loan to equity in AirportR. Other financial assets of £44.9m (2018: £63.7m) represent the 11.8% shareholding in the AIM-listed business Eddie Stobart Logistics plc.

 

Amounts owed by associates and joint ventures of £44.6m (2018: £12.6m) represent amounts owed by our joint venture Connect Airways Limited and interest-bearing loans to renewable energy plant investments in which we also hold equity interests.

 

Intangible assets of £100.5m (2018: £104.4m) include the Stobart and Eddie Stobart brands, and goodwill which principally relates to the Energy division.

 

Current assets and current liabilities

Current assets include £21.5m (2018: £46.2m) of property inventories. Excluding these assets, the net current liabilities at the year end total £54.2m (2018: £14.2m net current assets).

 

Debt and gearing

 

2019

2018

Asset-backed finance

£97.5m

£79.7m

Cash

(£14.4m)

(£43.1m)

Total net debt

£83.1m

£36.6m

 

 

2019

2018

Underlying EBITDA/Underlying interest

2.1

122.3

Gearing

28.0%

9.0%

Operating lease commitments as lessee

£139.7m

£237.5m

Operating lease rentals receivable as lessor

£26.8m

£44.8m

 

At the year end, the Group held a variable rate committed revolving credit facility with Lloyds Bank plc and Allied Irish Bank. During the year, this facility was extended to January 2022 and amended from £65m to £80m. At the year end, the Group has drawn £58m (2018: £40m) of the £80m facility.

 

Operating lease commitments as lessee and lessor have both decreased in the year primarily due to the agreement to sell Propius Holdings Limited.

 

On 3 May 2019, the Group placed £53.1m of secured guaranteed exchangeable bonds (Bonds) issued out of its wholly owned subsidiary Stobart Finance PLC. The Bonds will have a five-year maturity and will be unconditionally and irrevocably guaranteed by the Company and will be exchangeable into ordinary shares of 1 penny each in the capital of Eddie Stobart Logistics plc.

 

Cash flow

 

2019

£'m

Restated

2018

£'m

Operating cash flow

(1.7)

8.1

Investing activities

14.4

105.9

Financing activities

(25.7)

(91.5)

(Decrease)/increase in the year

(13.0)

22.5

Discontinued operations

(15.7)

(10.0)

At beginning of year

43.1

30.6

Cash at end of year

14.4

43.1

2018 figures in the table above are restated for discontinued operations.

 

Operating cash flow in the year was adversely impacted by the cash outflows relating to litigation and claims and non-underlying items.

 

Net cash inflow from investing activities included £30.0m of proceeds from the sale and leaseback of the terminal and office at Carlisle Lake District Airport and the sale and leaseback of the site in Widnes. These inflows were offset by net cash outflows relating to purchase of PPE and property inventories of £25.0m. The prior year included proceeds from the disposal of Eddie Stobart Logistics of £111.9m, net of cash disposed.

 

Net cash outflow from financing activities includes dividends paid of £52.5m, the net drawdown of borrowings on the RCF and repayment of finance leases (£3.2m) and proceeds from the issue of 16.5 million new shares (£24.7m).

 

 

Lewis Girdwood

Chief Financial Officer

 

 

Consolidated Income Statement

For the year ended 28 February 2019

 

 

Restated1

 

Year ended 28 February 2019

Year ended 28 February 2018

 

Underlying

Non-underlying

Total

Underlying

Non-underlying

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Continuing operations

 

 

 

 

 

 

Revenue

146,889

-

146,889

105,367

-

105,367

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

Other operating income

1,310

-

1,310

133,525

-

133,525

Operating expenses

(135,631)

(17,135)

(152,766)

(104,524)

(9,133)

(113,657)

Share of post-tax profits of associates and joint ventures

(1,740)

-

(1,740)

3,717

(237)

3,480

EBITDA

10,828

(17,135)

(6,307)

138,085

(9,370)

128,715

 

 

 

 

 

 

 

(Loss)/gain on swaps

(353)

-

(353)

1,038

-

1,038

Depreciation

(16,305)

-

(16,305)

(13,405)

-

(13,405)

Amortisation

-

(3,938)

(3,938)

-

(3,938)

(3,938)

Impairments

-

(7,800)

(7,800)

-

-

-

Operating (loss)/profit

(5,830)

(28,873)

(34,703)

125,718

(13,308)

112,410

 

 

 

 

 

 

 

Impairment of loan notes

(3,208)

-

(3,208)

-

-

-

Finance costs

(5,213)

-

(5,213)

(4,710)

-

(4,710)

Finance income

1,010

-

1,010

1,624

-

1,624

(Loss)/profit before tax

(13,241)

(28,873)

(42,114)

122,632

(13,308)

109,324

Tax

(3,321)

2,791

(530)

(2,835)

3,128

293

(Loss)/profit for the year from continuing operations

(16,562)

(26,082)

(42,644)

119,797

(10,180)

109,617

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

 

Loss from discontinued operations, net of tax

(15,535)

 

 

(9,613)

(Loss)/profit for the year

 

 

(58,179)

 

 

100,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per share expressed in pence per share - continuing operations

 

Basic

(4.74)p

 

(12.19)p

34.33p

 

31.42p

Diluted

(4.74)p

 

(12.19)p

33.54p

 

30.69p

 

 

 

 

 

 

 

(Loss)/earnings per share expressed in pence per share - total

 

Basic

 

 

(16.64)p

 

 

28.66p

Diluted

 

 

(16.64)p

 

 

28.00p

 

 

 

 

 

 

 

1 The 2018 results have been restated where required due to IFRS 5 Discontinued Operations.

Consolidated Statement of Comprehensive Income

For the year ended 28 February 2019

 

 

 

Year ended 28 February 2019

Restated1

Year ended 28 February 2018

 

£'000

£'000

 

 

 

(Loss)/profit for the year

(58,179)

100,004

 

 

 

Change in fair value of assets classified as available-for-sale

-

(7,822)

Foreign currency translation differences - equity accounted associates

-

(45)

Equity accounted associates - items recycled to income statement

-

1,397

Discontinued operations, net of tax, relating to exchange differences                                                                           

2,041

(5,109)

Other comprehensive income/(expense) to be reclassified to profit or loss in subsequent years, net of tax

2,041

(11,579)

 

 

 

Remeasurement of defined benefit plan

(260)

1,311

Change in fair value of financial assets classified as fair value through other comprehensive income

(18,772)

-

Tax on items relating to components of other comprehensive income

45

(226)

Other comprehensive (expense)/income not being reclassified to profit or loss in subsequent years, net of tax

(18,987)

1,085

Other comprehensive expense for the year, net of tax

(16,946)

(10,494)

Total comprehensive (expense)/income for the year

(75,125)

89,510

 

 

 

Of the total comprehensive (expense)/income for the year, a loss of £61,631,000 (2018: £104,232,000 profit) is in respect of continuing operations and loss of £13,494,000 (2018: £14,722,000 loss) is in respect of discontinued operations.

 

1 The 2018 results have been restated where required due to IFRS 5 Discontinued Operations.

 

 

 

Consolidated Statement of Financial Position

As at 28 February 2019

 

28 February

 2019

28 February

 2018

 

£'000

£'000

Non-current assets

 

 

Property, plant and equipment

262,915

301,142

Investment in associates and joint ventures

10,459

349

Other financial assets

44,918

63,690

Investment property

4,000

4,700

Intangible assets

100,482

104,420

Trade and other receivables

44,642

12,634

     

467,416

486,935

Current assets

 

 

Inventories

22,559

51,801

Trade and other receivables

41,271

65,427

Cash and cash equivalents

14,432

43,108

Assets held for sale

1,474

6,900

 

79,736

167,236

 

 

 

Total assets

547,152

654,171

 

 

 

Non-current liabilities

 

 

Loans and borrowings

(84,121)

(63,023)

Defined benefit pension scheme

(3,170)

(3,652)

Other liabilities

(11,096)

(47,259)

Deferred tax

(13,560)

(19,435)

Provisions

(25,775)

(8,093)

 

(137,722)

(141,462)

Current liabilities

 

 

Trade and other payables

(53,648)

(80,820)

Loans and borrowings

(13,433)

(16,710)

Corporation tax

(12,412)

(8,384)

Provisions

(5,438)

(875)

Liabilities held for sale

(27,545)

-

 

(112,476)

(106,789)

 

 

 

Total liabilities

(250,198)

(248,251)

 

 

 

Net assets

296,954

405,920

 

 

 

Capital and reserves

 

 

Issued share capital

37,082

35,434

Share premium

324,379

301,326

Foreign currency exchange reserve

480

(1,884)

Reserve for own shares held by employee benefit trust

(12,154)

(330)

Retained (deficit)/earnings

(52,833)

71,374

Group shareholders' equity

296,954

405,920

Consolidated Statement of Changes in Equity

For the year ended 28 February 2019

 

 

 

Issued share capital

Share premium

Foreign currency exchange reserve

Reserve for own shares held by EBT

Retained (deficit)/

earnings

Total

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 March 2018

35,434

301,326

(1,884)

(330)

71,374

405,920

IFRS 15 transition adjustment, net of tax

-

-

-

-

(3,278)

(3,278)

Balance at 1 March 2018 (adjusted)

35,434

301,326

(1,884)

(330)

68,096

402,642

Loss for the year

-

-

-

-

(58,179)

(58,179)

Other comprehensive income/(expense) for the year

-

-

2,041

-

(18,987)

(16,946)

Total comprehensive income/(expense) for the year

-

-

2,041

-

(77,166)

(75,125)

Issue of ordinary shares

1,648

23,053

-

-

24,701

Employee benefit trust

-

-

-

(11,824)

12,380

556

Reclassification of exchange differences on disposal of subsidiaries

-

-

323

-

-

323

Share-based payment credit

-

-

-

-

714

714

Tax on share-based payment credit

-

-

-

-

(925)

(925)

Purchase of treasury shares

-

-

-

-

(3,416)

(3,416)

Dividends

-

-

-

-

(52,516)

(52,516)

Balance at 28 February 2019

37,082

324,379

480

(12,154)

(52,833)

296,954

 

 

Consolidated Statement of Changes in Equity

For the year ended 28 February 2018

 

 

 

Issued share capital

Share premium

Foreign currency exchange reserve

Reserve for own shares held by EBT

Retained earnings

Total

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 March 2017

35,434

301,326

2,766

(330)

48,338

387,534

Profit for the year

-

-

-

-

100,004

100,004

Other comprehensive expense for the year

-

-

(4,650)

-

(5,844)

(10,494)

Total comprehensive (expense)/income for the year

-

-

(4,650)

-

94,160

89,510

Employee benefit trust

-

-

-

-

513

513

Share-based payment credit

-

-

-

-

1,678

1,678

Tax on share-based payment credit

-

-

-

-

792

792

Sale of treasury shares

-

-

-

-

2,500

2,500

Purchase of treasury shares

-

-

-

-

(18,483)

(18,483)

Dividends

-

-

-

-

(58,124)

(58,124)

Balance at 28 February 2018

35,434

301,326

(1,884)

(330)

71,374

405,920

 

 

 

 

Consolidated Statement of Cash Flows

For the year ended 28 February 2019

 

 

Year ended 28 February 2019

Restated1

Year ended 28 February 2018

 

£'000

£'000

Cash (used in)/generated from continuing operations

(1,737)

8,152

Cash outflow from discontinued operations

(11,059)

(17,642)

Income taxes paid

-

(60)

Net cash outflow from operating activities

(12,796)

(9,550)

 

 

 

Purchase of property, plant and equipment and investment property

(23,731)

(31,062)

Purchase/development of property inventories

(1,282)

(4,098)

Proceeds from the sale of property inventories

-

3,356

Proceeds from the sale of property, plant and equipment and investment property

8,501

6,772

Proceeds from disposal of assets held for sale

6,217

7,916

Proceeds from sale and leaseback (net of fees)

30,049

12,445

Cash disposed on sale of subsidiary undertaking

(3,728)

-

Proceeds from disposal of associate

-

111,931

Refundable deposits repaid

-

1,542

Non-underlying transaction costs

-

(1,962)

Equity investment in associates and joint ventures

(1,500)

-

Net amounts (advanced to)/received from joint ventures

(143)

937

Other loans advanced

-

(2,000)

Interest received

57

139

Cash (outflow)/inflow from discontinued operations

(4,577)

75,086

Net cash inflow from investing activities

9,863

181,002

 

 

 

Dividend paid on ordinary shares

(52,516)

(58,124)

Issue of ordinary shares (net of issue costs)

24,702

-

Purchase of treasury shares (net of costs)

(3,416)

(16,568)

Proceeds from grants

5,400

-

Repayment of capital element of finance leases

(14,382)

(12,365)

Net drawdown from/(repayment of) revolving credit facility

17,572

(2,420)

Interest paid

(3,103)

(2,070)

Cash outflow from discontinued operations

-

(67,450)

Net cash outflow from financing activities

(25,743)

(158,997)

(Decrease)/increase in cash and cash equivalents

(28,676)

12,455

Cash and cash equivalents at beginning of year

43,108

30,653

Cash and cash equivalents at end of year

14,432

43,108

 

 

 

1 The 2018 results have been restated where required due to IFRS 5 Discontinued Operations.

 

 

 

 

 

 

 

 

Notes to the Consolidated Financial Statements

For the year ended 28 February 2019

 

Accounting Policies of Stobart Group Limited

 

Basis of Preparation and Statement of Compliance

 

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

 

These Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) as adopted by the European Union (adopted IFRSs). The financial information set out above does not constitute the Company's statutory accounts. The information presented is an extract from the audited consolidated Group statutory accounts. 

 

The financial statements of the Group are also prepared in accordance with the Companies (Guernsey) Law 2008. Stobart Group Limited is a Guernsey-registered company. The Company's ordinary shares are traded on the London Stock Exchange.

 

Going concern

 

The Group's business activities, together with factors likely to affect its future performance and position, are set out in the Chief Executive's Review and the financial position of the Group, its cash flows and funding are set out in the Financial Review.

 

The financial statements include details of the Group's loans and borrowings at the year end together with the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposure to credit risk and liquidity risk. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

 

In arriving at this expectation the Directors have reviewed the cash flow forecasts of the Group, which cover a period of more than 12 months from the date of authorisation of these financial statements, together with the projected covenant compliance of the Group.

 

The Group, which has net assets of £297.0m and negative working capital of £32.7m, made a loss from continuing operations of £42.6m and had an operating cash outflow from continuing operations of £1.7m during the year. The Group has a revolving credit facility of £80.0m, which was drawn at £58.0m at 28 February 2019. The Group has cash balances of £14.4m and this, together with the undrawn facility, results in total headroom of £36.4m as at 28 February 2019.

 

Post year end, the Directors have raised in excess of £50m cash proceeds, as a result of issuing a five-year European bond securitised against the Eddie Stobart plc shares.

 

The Directors have prepared forecasts through to July 2020, together with sensitivity analysis on those forecasts including a reasonable downturn in trading performance, the risk of some provisions crystallising in the foreseeable future and the timing of cash generated from asset disposals. The Directors have not included potential areas of cash upside in the sensitivity analysis.

 

The cash received from the bond partially covers this sensitised position although there remains a funding requirement if these downward sensitivities crystallise. To mitigate this, the Group has other available actions including reducing discretionary capital expenditure assumed during the forecast period and undertaking a further capital review which could result in the dividends expected in November 2019 and July 2020 being reduced in order for the Group to further invest in the growth divisions of Energy and Aviation. The deferral of this capital expenditure, which does not impact the trading cash flows generated significantly, and the capital review are actions which are wholly in the control of the Directors. As an alternative to these arrangements the Directors may seek further external finance.

The Directors are satisfied that the Group has adequate resources to fund its cash requirements for the foreseeable future. The base and sensitised forecasts indicate that the Group will continue to operate within the covenant requirements of the revolving credit facility in the forecast period. The going concern basis has been adopted and the financial statements do not include any adjustments that would be necessary if this basis were inappropriate.

 

Significant accounting policies

 

New standards, amendments to existing standards and interpretations to existing standards adopted by the Group

 

Amendments arising from the Annual Improvement Project 2014-2016 were endorsed by the EU for periods commencing on or after 1 January 2017. There were separate transitional provisions for each amendment. The adoption of the amendments did not have any material impact on the financial position or performance of the Group.

 

IFRS 15: Revenue from Contracts with Customers was adopted on 1 March 2018, for the year ended 28 February 2019. The Group transitioned using the cumulative effect method, with transition adjustments recognised for the Rail & Civils business which generates a significant proportion of its revenue from long-term contracts. None of the other divisions has been materially impacted by IFRS 15. The revenue recognition from contracts in our Rail & Civils division up to 28 February 2018 has been reviewed. An adjustment has been made to adjust the revenue in the year ended 28 February 2018 by £3.9m (£3.3m net of tax) where the balances were not considered legally enforceable or where it was not considered highly unlikely that the revenue would reverse in future as required under IFRS 15. The transition adjustment has been accounted for through equity, with no effect on the prior year results. Under IFRS 15 in the current year, additional disclosures have been made in relation to revenue from contracts and disaggregation of revenue.

 

IFRS 9: Financial Instruments was adopted on 1 March 2018, for the year ended 28 February 2019. Following the adoption of IFRS 9 there was no material impact on the Group at a consolidated or segmental level as the fair value movement on the Eddie Stobart plc investment was already recognised in OCI and the Directors elected to present this as FVOCI on transition to IFRS 9.

 

New standards and interpretations not applied

 

The following standards and amendments have an effective date after the date of these financial statements:

 

 

Effective for accounting periods commencing on or after

 

Proposed adoption in the year ending

IFRS 16: Leases

1 January 2019

29 February 2020

Amendments to IAS 19/IFRIC 14

1 January 2019

29 February 2020

Amendments to IAS 28: Long term interests in Associates and Joint Ventures

 

1 January 2019

 

29 February 2020

IFRIC 23 Uncertainty over Income Tax Treatments

1 January 2019

29 February 2020

Annual Improvement Project 2015-17

1 January 2019

29 February 2020

 

IFRS 16: Leases was issued in 2016 to replace IAS 17 Leases and will be adopted in the year ending 28 February 2020. Under the new standard all lease contracts, with limited exceptions, are recognised in financial statements by way of right-of-use assets and corresponding lease liabilities. The Directors have undertaken an assessment of the impact of IFRS 16 and currently expect that the Group will apply the modified retrospective approach, which means that the cumulative effect of initially applying the standard is recognised at the date of initial application and there is no restatement of comparative information. Compared with the existing accounting for operating leases, application of the standard will have a significant impact on the classification of expenditures and consequently the classification of cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. It will also impact the timing of expenses recognised in the statement of income. No impact is expected in relation to lease contracts previously classified as finance leases. The adoption of the new standard at 1 March 2019, is expected to have a negligible impact on equity following the recognition of lease liabilities and additional right of use and lease assets totalling approximately £77m. This has reduced significantly from the amount previously disclosed following the disposal of our regional airline in February 2019. In addition, it is expected that lease liabilities and assets totalling approximately £104m will be recognised in assets and liabilities held for sale.

 

Amendments to IAS 19 are not expected to have a material impact on the defined benefit obligation disclosures, due to scheme rules giving the Group an unconditional right to a refund if the scheme is in surplus.

 

The adoption of all the other standards, amendments and interpretations is not expected to have a material effect on the net assets, results and disclosures of the Group.

 

Segmental information

 

The reportable segment structure is determined by the nature of operations and services. The operating segments are Stobart Aviation, Stobart Energy, Stobart Rail & Civils, Stobart Investments and Stobart Infrastructure.

 

The Stobart Aviation segment specialises in the operation of commercial airports. The Stobart Energy segment specialises in the supply of sustainable biomass for the generation of renewable energy. The Stobart Rail & Civils segment specialises in delivering internal and external civil engineering development projects including rail network operations.

 

The Stobart Investments segment holds a non-controlling interest in a transport and distribution business, a regional airline business and a baggage handling business. The Stobart Infrastructure segment specialises in management, development and realisation of a portfolio of property assets, including Carlisle Lake District Airport, as well as investments in renewable energy plants.

 

The regional airline operations and aircraft leasing company that were previously reported as part of the Aviation segment have been reported within discontinued operations. There were no other changes in segmental reporting during the year. No segmental assets or liabilities information is disclosed because no such information is regularly provided to, or reviewed by, the Chief Operating Decision Maker.

 

The Executive Directors are regarded as the Chief Operating Decision Maker. The Directors monitor the results of each business unit separately for the purposes of making decisions about resource allocation and performance assessment. The main segmental profit measure is underlying EBITDA, which is calculated as profit/(loss) before tax, interest, depreciation, amortisation, swaps and non-underlying items. Income taxes and certain central costs are managed on a Group basis and are not allocated to operating segments.

 

 

 

Year ended 28 February 2019

Aviation

Energy

Rail

Investments

Infrastructure

Adjustments and eliminations

 

Group

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

 

 

 

External

39,266

65,143

31,867

2,655

2,112

5,846

146,889

Internal

145

-

20,480

-

75

(20,700)

-

Total revenue

39,411

65,143

52,347

2,655

2,187

(14,854)

146,889

 

 

 

 

 

 

 

 

Underlying EBITDA

4,948

19,200

(4,815)

2,359

(3,026)

(7,838)

10,828

Loss on swaps

-

-

-

-

-

(353)

(353)

Depreciation

(5,816)

(7,012)

(2,245)

-

(978)

(254)

(16,305)

Finance costs (net)

(231)

(734)

(180)

-

(3,546)

(2,720)

(7,411)

Underlying (loss)/profit before tax from continuing operations

(1,099)

11,454

(7,240)

2,359

(7,550)

(11,165)

(13,241)

New business and new contract set up costs

(4,308)

(5,909)

-

-

(1,334)

-

(11,551)

Restructuring costs

(161)

-

(230)

-

-

-

(391)

Litigation and claims

-

-

(160)

-

-

(5,033)

(5,193)

Amortisation of acquired intangibles

 

-

 

(221)

 

-

 

-

 

-

 

(3,717)

 

(3,938)

Impairments

-

-

-

-

(7,800)

-

(7,800)

(Loss)/profit before tax from continuing operations

(5,568)

5,324

(7,630)

2,359

(16,684)

(19,915)

(42,114)

 

 

 

Year ended 28 February 2018, restated

Aviation

Energy

Rail

Investments

Infrastructure

Adjustments and eliminations

 

Group

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Revenue

 

 

 

 

 

 

 

External

25,693

54,697

16,253

626

2,402

5,696

105,367

Internal

131

-

24,701

-

724

(25,556)

-

Total revenue

25,824

54,697

40,954

626

3,126

(19,860)

105,367

 

 

 

 

 

 

 

 

Underlying EBITDA

5,848

12,041

4,408

125,229

3,870

(13,311)

138,085

Gain on fuel swaps

-

-

-

-

-

1,038

1,038

Depreciation

(4,945)

(6,538)

(1,089)

-

(619)

(214)

(13,405)

Finance costs (net)

(220)

(488)

(201)

-

1,102

(3,279)

(3,086)

Underlying profit/(loss) before tax from continuing operations

683

5,015

3,118

125,229

4,353

(15,766)

122,632

New business and new contract set up costs

(1,752)

(3,756)

-

-

(106)

-

(5,614)

Transaction costs

-

-

-

-

(16)

(750)

(766)

Bad debt recovery

-

1,305

-

-

-

-

1,305

Litigation and claims

-

-

(4,058)

-

-

-

(4,058)

Amortisation of acquired intangibles

 

-

 

(221)

 

-

 

-

 

-

 

(3,717)

 

(3,938)

Non-underlying items included in share of post-tax profits of associates and joint ventures

-

-

-

(237)

-

-

(237)

(Loss)/profit before tax from continuing operations

(1,069)

2,343

(940)

124,992

4,231

(20,233)

109,324

 

Inter-segment revenues are eliminated on consolidation. Included in adjustments and eliminations are net central costs of £7,746,000 (2018: £12,607,000) and an intra-group profit of £92,000 (2018: £704,000). There is also external income within adjustments and eliminations which comprises brand licence income, merchandising income and rental income.

 

Discontinued operations

 

On 22 February 2019, the Group disposed of subsidiaries headed by Everdeal Holdings Limited and entered in to an agreement to dispose of Propius Holdings Limited. These disposals and acquisitions by Connect Airways Limited have been permitted by the EU Commission in connection with the merger regulations, subject to certain short-term conditions which are being followed, and final approval is expected in 2019.

 

The operations of both subsidiaries represented a separate major line of business and the results of the operations have been reported separately as the single amount loss from discontinued operations, net of tax on the face of the consolidated income statement. This single amount also includes the profit on disposal of Everdeal Holdings Limited detailed below and totals £15.5m. The consolidated income statement for the year ended 28 February 2018 has been restated on the same basis. The assets and liabilities disposed of were not presented as held for sale in the prior year.

 

Disposal of Everdeal Holdings Limited

 

The profit from discontinued operations of £8,733,000, (2018: £2,920,000), excluding the results of the UK Flybe Franchise Operation (UKFFO), is attributable to the owners of the Company. There was no loss recorded on remeasurement to fair value less costs to sell. The cash consideration received for disposal of the business was £10,000,000. The profit on disposal recorded within discontinued operations was £25,910,000 after deducting costs of £479,000 and net liabilities of £16,389,000. The cash disposed of amounts to £3,728,000.

 

Results of discontinued operations

2019

2018

 

£'000

£'000

Revenue

122,072

119,791

Operating expenses - other

(114,630)

(115,261)

Loss on swaps

(88)

-

Depreciation

(395)

(211)

Net finance income/(costs)

1,774

(986)

New business and new contract set-up costs

-

(413)

Profit before tax

8,733

2,920

Tax

-

-

Profit for the year from discontinued operations, net of tax

8,733

2,920

Basic earnings per share

2.50p

0.84p

Diluted earnings per share

2.50p

0.82p

 

 

Cash flows used in discontinued operations

 

 

Net cash used in operating activities

(25,735)

(18,601)

Net cash (used in)/generated from investing activities

(664)

10,209

Net cash used in financing activities

-

(234)

Net cash flows for the year

(26,399)

(8,626)

 

Following the disposal of Everdeal Holdings Limited, the results of the UKFFO, which was operated by the group headed by Everdeal Holdings Limited, has been presented as discontinued in the consolidated income statement in both current and prior years. The loss from discontinued operations was £31,707,000 (2018: £21,998,000). The cash flows in relation to this operation have been included in the above table.

 

Subsequent to the disposal of Everdeal Holdings Limited, the continuing Group continues to trade with the discontinued operation. Intra-group transactions between Everdeal and the continuing Group have been presented without elimination as these transactions will continue post disposal. Management believes this is useful to the users of the financial statements. All other intra-group transactions have been fully eliminated.

 

Propius Holdings Limited

 

On 22 February 2019, the Group entered in to an agreement to dispose of Propius Holdings Limited for cash consideration of £30,000,000. At the same time and as part of the arrangements between the Group and Connect Airways Limited, the Group entered in to an arrangement such that certain parts of the business and assets of Propius Holdings Limited and Propius Limited, principally the ATR leasing business but not the three E195 aircraft owned by Propius Limited, could be transferred back to the Group for £1. This transfer back to the Group would only take place if the Group and Connect Airways Limited do not agree for the Group to provide an appropriate indemnity to Connect Airways Limited which provides a similar economic position as the position under the transfer back arrangements. The Group and Connect Airways Limited have agreed in good faith to pursue discussions to agreeing such an indemnity.

 

As these discussions have not yet been concluded at the time of approval of these financial statements, there is some uncertainty as to the outcome of the discussions and therefore the Group has not accounted for the disposal of Propius in these financial statements. Instead the accounting includes the disposal of the three E195 aircraft, with a net book value of £31.5m, and cash of £10m, to Connect Airways Limited, in consideration for cash of £30m, resulting in a loss on disposal of £10.5m included in the table below. The remaining business, assets and liabilities of the Group headed by Propius Holdings Limited are presented as assets and liabilities held for sale on the consolidated balance sheet as the Group's intention is to conclude discussions for the remaining business to remain within Connect Airways Limited. The results in the current and prior year for Propius have been presented as discontinued in the consolidated income statement.

 

The loss from discontinued operations of £18,471,000 (2018: £9,466,000 profit) is attributable to the owners of the Company. This includes an onerous contract provision to cover an estimate of the difference between the lease rentals for certain aircraft payable to a lessor between 2023 and 2027, and a lower amount agreed as a contribution by Connect Airways Limited.

 

Results of discontinued operations

2019

2018

 

£'000

£'000

Revenue

18,616

18,753

Operating expenses - other

(29,998)

(7,260)

Depreciation

(6,275)

(1,716)

Transaction costs

(594)

-

Net finance costs

836

600

(Loss)/profit before tax

(17,415)

10,377

Tax

(1,056)

(911)

(Loss)/profit for the year from discontinued operations, net of tax

(18,471)

9,466

Basic (loss)/earnings per share

(5.28)p

2.71p

Diluted (loss)/earnings per share

(5.28)p

2.65p

 

 

Cash flows used in discontinued operations

 

 

Net cash generated from operating activities

14,676

959

Net cash generated from investing activities

(3,913)

64,877

Net cash used in financing activities

-

(67,216)

Net cash flows for the year

10,763

(1,380)

 

Of the revenue included in the above table, £13,852,000 (2018: £12,700,000) was from the group headed by Everdeal Holdings Limited.

 

The revenue from two customers amounted to more than 10% of the Group's discontinued revenue including the groups headed by Everdeal Holdings Limited and Propius Holdings Limited. The revenue from these two customers reported within discontinued operations was £105,801,000 and £25,916,000 for the year to 28 February 2019. In the prior year, only one customer amounted to more than 10% of the Group's discontinued revenue at £110,592,000.

 

Non-Underlying Items

 

Non-underlying items included in the consolidated income statement (loss)/profit before tax comprise the following:

 

 

2019

2018

 

£'000

£'000

New business and new contract set up costs

11,551

5,614

Transaction costs

-

766

Restructuring costs

391

-

Impairments

7,800

-

Bad debts

-

(1,305)

Litigation and claims

5,193

4,058

Amortisation of acquired intangibles

3,938

3,938

Share of post-tax profits of associates and joint ventures: Amortisation of acquired intangibles

 

-

 

237

 

28,873

13,308

 

 

 

New business and new contract set-up costs comprise costs of investing in major new business areas or major new contracts to commence or accelerate development of our business presence. These costs include pre-contract costs and excess costs incurred due to delays in customer plants becoming operational in the Energy division and new contract set-up costs at London Southend Airport in the Aviation division.

 

Transaction costs comprise costs of making investments or costs of financing transactions that are not permitted to be debited to the cost of investment or as issue costs. These costs include costs of any aborted transactions.

 

Restructuring costs comprise costs of integration plans and other business reorganisation and restructuring undertaken by management. Costs include cost rationalisation, site closure costs, certain short-term duplicated costs and other costs related to the reorganisation and integration of businesses. These are principally expected to be one-off in nature.

 

There were impairment charges against property, plant and equipment of £6,500,000 (2018: £nil) and against property inventory of £1,300,000 (2018: £nil).

 

The bad debts in the prior year relate to the partial recovery of a significant receivable, written off due to the customer entering administration.

 

The charge for litigation and claims in the current year includes the cost of a High Court dispute with a former Director, and in the prior year is in respect of settlement of historical matters. Contingent assets relating to any outstanding claims are not recognised unless recovery is considered virtually certain, in accordance with accounting standards.

 

Amortisation of acquired intangibles comprises the amortisation of intangible assets including those identified as fair value adjustments in acquisition accounting. The charge in the year is principally in connection with amortisation of the brand assets.

 

Non-underlying items included in the share of post-tax profits of associates and joint ventures in the prior year, relates to the investment in Greenwhitestar Holding Company 1 Limited. Amortisation of acquired intangibles includes amortisation of the customer relationships.

 

 

 

 

Dividends

 

Dividends paid on ordinary shares

2019

2019

2018

2018

 

Rate

 

Rate

 

 

p

£'000

p

£'000

Interim dividend for 2019 paid 31 January 2019

1.5

5,315

-

-

Interim dividend for 2019 paid 4 October 2018

4.5

15,945

-

-

Final dividend for 2018 paid 6 July 2018

4.5

15,628

-

-

Interim dividend for 2018 paid 13 April 2018

4.5

15,628

-

-

Interim dividend paid 19 January 2018

-

-

4.5

15,842

Interim dividend paid 6 October 2017

-

-

4.5

15,842

Final dividend for 2017 paid 7 July 2017

-

-

4.5

15,810

Interim dividend paid 3 April 2017

-

-

3.0

10,630

 

15.0

52,516

16.5

58,124

 

A final dividend of 3.0p per share, totalling £11,125,000, was declared on 29 May 2019 and subject to shareholder approval will be paid on 31 July 2019. This is not recognised as a liability as at 28 February 2019.

 

Assets classified as held for sale

 

On 22 February 2019, the Propius aircraft leasing business, Propius Holdings Limited, was reclassified as a disposal group held for sale. During the year, the one remaining property, previously classified as an investment property, was sold, generating net proceeds of £6,217,000.

 

The major classes of assets and liabilities of the disposal groups classified as held for sale at 28 February 2019 are as follows:

 

 

2019

£'000

2018

£'000

Assets

 

 

Investment properties

-

6,900

Other receivables

1,474

-

Total assets classified as held for sale

1,474

6,900

 

 

 

Liabilities

 

 

Corporation tax

(1,030)

-

Deferred tax liability

(2,498)

-

Maintenance reserves

(17,889)

-

Other payables

(6,128)

-

Total liabilities classified as held for sale

(27,545)

-

 

There is an intercompany receivable of £19,689,000 which is not included in the disposal group held for sale, as it is eliminated under IFRS 10. However, when Propius Holdings Limited is disposed of, the continuing group will recognise the above amount as payable.

 

There was no loss on the measurement of fair value less costs to sell in relation to the assets and liabilities of the Propius aircraft leasing business.

Financial Assets and Liabilities

 

Loans and borrowings

2019

2018

 

£'000

£'000

Non-current

 

 

Fixed rate:

 

 

-       Obligations under finance leases and hire purchase contracts

20,668

14,873

Variable rate:

 

 

-       Obligations under finance leases and hire purchase contracts

5,886

8,466

-       Revolving credit facility (net of arrangement fees)

57,567

39,684

 

84,121

63,023

Current

 

 

Fixed rate:

 

 

-       Obligations under finance leases and hire purchase contracts

6,663

3,932

Variable rate:

 

 

-       Obligations under finance leases and hire purchase contracts

6,770

12,778

 

13,433

16,710

 

 

 

Total loans and borrowings

97,554

79,733

Cash

14,432

43,108

Net debt

83,122

36,625

 

The obligations under finance leases and hire purchase contracts are taken out with various lenders at fixed or variable interest rates prevailing at the inception of the contracts. During the year, £14,178,000 of new finance leases were taken out (2018: £13,855,000), £14,382,000 repayments made (2018: £12,365,000) and £142,000 of unwind of discount

(2018: £148,000).

 

During the year, the variable rate committed revolving credit facility was amended from £65m to £80m and the facility end date was extended from January 2020 to January 2022. This facility was drawn at £58,000,000 (2018: £40,000,000) at the year end, with net cash drawdown in the year of £18,000,000 and non-cash release of deferred debt issue costs of £311,000 offset by cash-settled debt issue costs capitalised of £428,000.

 

In relation to the revolving credit facility, Stobart Group Limited and all material subsidiaries have charged security to the lenders via a debenture, the material subsidiaries are also guarantors and obligors in relation to the facility agreement. There are fixed charges over properties including London Southend Airport, Widnes and Runcorn and in addition, floating charges and charges over shares. The facility agreement contains typical security protections for the lender including negative pledge and restrictions on disposals and financial indebtedness together with allowances for permitted disposals, permitted security and permitted financial indebtedness.

 

Stobart Group Limited provides support to its subsidiaries where required. Examples of support include intercompany funding arrangements and the provision of guarantees in relation to financing lines provided by a number of lenders.

 

The Group was in compliance with all financial covenants throughout both the current and prior year.

 

 

 

 

 

 

 

 

Note to the Consolidated Cash Flow Statement

 

 

Year ended 28 February 2019

Restated

Year ended 28 February 2018

 

£'000

£'000

 

 

 

(Loss)/profit before tax from continuing operations

(42,114)

109,324

 

 

 

Adjustments to reconcile (loss)/profit before tax to net cash flows:

 

 

 

 

 

Non-cash:

 

 

Loss/(gain) in value of investment properties

715

(939)

Realised profit on sale of property, plant and equipment and investment properties

(584)

(148)

Share of post-tax profits of associates and joint ventures accounted for using the equity method

1,740

(474)

Gain on conversion of loan

(1,095)

-

Loss/(gain) in value/loss/(profit)on disposal of assets held for sale

683

(3,942)

Profit on disposal of associate

-

(123,892)

Profit on sale and leaseback

(629)

(4,064)

Profit on sale of property inventories

-

(540)

Depreciation of property, plant and equipment

16,305

13,405

Finance income

(63)

(1,624)

Finance costs

4,512

2,753

Release of grant income

(609)

(890)

Release of deferred premiums

(2,617)

(2,346)

Impairment

7,800

-

Amortisation of intangibles

3,938

3,938

Charge for share based payments

714

1,678

Loss/(gain) on swaps mark to market valuation

353

(971)

Retirement benefits and other provisions

87

(1,921)

IFRS 15 transition adjustment

(3,949)

-

 

 

 

Working capital adjustments:

 

 

Increase in inventories

(127)

(298)

Decrease in trade and other receivables

4,196

20,687

Increase/(decrease) in trade and other payables

9,007

(1,584)

 

 

 

Cash (used in)/generated from continuing operations

(1,737)

8,152

               

In addition to the cash flow statement disclosures, there were material non-cash transactions in the year. These predominantly relate to the £40m disposal proceeds received from Connect Airways Limited following the disposal of Everdeal Holdings Limited and certain assets of Propius Holdings Limited. These proceeds were immediately loaned to Connect Airways Limited.

Related parties

 

Relationships of common control or significant influence

 

W A Tinkler was a related party until 14 June 2018 when he ceased to be a Director of the Group. The sales and purchases disclosed below cover the period from 1 March 2018 until 14 June 2018. The amounts outstanding are unsecured and were entered into under normal commercial terms.

 

WA Developments International Limited is owned by W A Tinkler. During the period, the Group made purchases of £20,000 (2018: £170,000) relating to the provision of passenger transport and the Group levied recharges of £5,000 (2018: £87,000) relating to the recovery of staff costs and expenses to WA Developments International Limited. £63,000 (2018: £75,000) was due from and £nil (2018: £7,000) was due to WA Developments International Limited at the year end. As of 14 June 2018, WA Developments International Limited was no longer a related party.

 

Apollo Air Services Limited is owned by W A Tinkler. During the period, the Group made purchases of £185,000 (2018: £368,000) relating to the provision of passenger transport and sales of £21,000 (2018: £396,000) relating to fuel to Apollo Air Services Limited. £83,000 (2018: £56,000) was owed by the Group and £46,000 (2018: £202,000) was owed to the Group by this company at the year end. As of 14 June 2018, Apollo Air Services Limited was no longer a related party.

 

During the period, the Group made purchases of £nil (2018: £nil) and sales of £27,000 (2018: £34,000) to WA Tinkler Racing, a business owned by W A Tinkler, relating to car and race box hire. £26,000 (2018: £3,000) was owed to the Group at the year end. As of 14 June 2018, WA Tinkler Racing was no longer a related party.

 

During the period, transactions with W A Tinkler and close family members of W A Tinkler totalled £10,000 (2018: £47,000) and £7,000 (2018: £16,000) was owed to the Group at the year end. As of 14 June 2018, W A Tinkler and his close family members were no longer a related party.

 

During the period, the Group made purchases of £150,000 (2018: £600,000) and sales of £3,000 (2018: £11,000) to Stobart Capital Limited, a business part owned by W A Tinkler, relating to investment management. £6,000 (2018: £3,000) was owed to the Group and £nil (2018: £150,000) was owed by the Group at the year end. As of 14 June 2018, Stobart Capital Limited was no longer a related party.

 

Associates and joint ventures

 

The Group had loans, not part of the net investment, outstanding from its associate interest, Shuban Power Limited, of £3,700,000 (2018: £5,332,000) at the year end, disclosed within trade and other receivables in current assets. The interest outstanding at the year end was £nil (2018: £1,475,000) and is disclosed within trade and other receivables. The loans are unsecured, will be settled in cash and have no fixed repayment date. These amounts were fully repaid in cash after the year end.

 

The Group had loans, not part of the net investment, outstanding from its associate interest, Mersey Bioenergy Holdings Limited, of £7,302,000 (2018: £7,302,000) at the year end which is disclosed within trade and other receivables in non-current assets. The interest outstanding at the year end was £3,451,000 (2018: £3,451,000) and is disclosed within trade and other receivables in non-current assets. The loans are unsecured, have a ten-year term ending in November 2024 and will be settled in cash. In addition, the Group made sales of £33,000 (2018: £nil) to Mersey Bioenergy Holdings Limited relating to director fees. At the year end, £10,000 (2018: £nil) was owed to the Group.

 

During the year, the Group made sales of £5,171,000 (2018: £5,413,000) to Mersey Bioenergy Limited (a subsidiary of Mersey Bioenergy Holdings Limited) relating to the sale of material. At the year end, £885,000 (2018: £1,265,000) was owed to the Group.

The Group had loans, not part of the net investment, outstanding from its joint venture interest, Connect Airways Limited, of £33,888,000 (2018: £nil) at the year end. This balance was shown within trade and other receivables in non-current assets. £18,745,000 (2018: £nil) is an unsecured loan note and £15,143,000 (2018: £nil) is part of a second-ranking facility, both with a six-year term ending February 2025 and will be settled in cash.

 

During the year, the Group made sales of £488,000 (2018: £nil) to subsidiaries of Connect Airways Limited relating to passenger handling services and cost recharges. At the year end, £488,000 (2018: £nil) was owed to the Group.

 

There were no other balances between the Group and its joint ventures and associates during the current or prior year.

 

All loans are unsecured and all sales and purchases are settled in cash on the Group's standard commercial terms

               

Post balance sheet events

 

On 3 May 2019, the Group placed £53.1m of secured guaranteed exchangeable bonds (Bonds) issued out of its wholly owned subsidiary Stobart Finance PLC. The Bonds will have a five-year maturity and will be unconditionally and irrevocably guaranteed by the Company and will be exchangeable into ordinary shares of 1 penny each in the capital of Eddie Stobart Logistics plc (ESL). The Bonds were issued at par, in principal amounts of £100,000 and integral multiples of £1,000 in excess thereof, and will bear interest at 2.75% per annum, payable semi-annually in arrear in equal instalments. The issuer will also pay holders of the Bonds a cash amount equal to the gross value of all cash dividends attributable to the ESL shares during the term of the Bonds. Unless previously exchanged, redeemed, or purchased and cancelled, and subject to a share redemption option of the Group, the Bonds will be redeemed at par on 8 May 2024. The Group intends to make the ESL shares underlying the Bonds available to bondholders for hedging purposes and will lend such ESL shares under a stock lending arrangement.

 

In March 2019, Stobart Group was announced as the operator for Durham Tees Valley Airport. The Group is responsible for the oversight and strategic development of the airport and will receive an annual fee for services provided.       

 

Changes in significant accounting policies

 

The Group has applied IFRS 15 using the retrospective with cumulative effect method by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of equity at 1 March 2018. Therefore, the comparative information has not been restated and continues to be reported under IAS 18 and IAS 11.

 

The quantitative impact of adopting IFRS 15 on the Group's financial statements for the year ending 28 February 2018 was a £3,433,000 reduction in revenue and an additional £516,000 of operating expenses. These gave rise to an equity adjustment of £3,949,000, presented in the consolidated statement of changes in equity. The opening retained earnings balance as at 1 March 2018 without adoption of IFRS 15 was £71,374,000 and as reported was £67,425,000. The pre-tax adjustment of £3,949,000 relates to the timing of revenue recognised (£3,433,000) and recognition of capitalised costs (£516,000).

 

There has been no impact on the reported statement of comprehensive income or cash flow statement. The impact on retained earnings brought forward on 1 March 2018 was a decrease of £3,278,000, net of tax. The Group has transitioned using the cumulative effect method and has applied practical expedients relating to disclosure of performance obligations and the incremental costs.

 


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