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Stobart to ramp up investment at London Southend airport

Stobart will need upgrade the infrastructure at Southend if it is to hit its long-term target of welcoming ten million passengers a year
southend airport
Stobart said it was trading in line with management expectations

Stobart Group Limited (LON:STOB) is to ramp up investment at its London Southend Airport as it looks to make good on its ambitious long-term target of serving ten million passengers a year.

The FTSE 250 firm’s coffers have been topped up by the recent sale of its airline and aircraft leasing business to Connect Airways – its newly-formed joint venture with Virgin Atlantic and Cyrus Capital.

READ: Connect Airways completes Stobart Air, Flybe acquisitions

Cyrus, a New York-based hedge fund, also subscribed for a 4.65% stake in Stobart back in January which brought in another £24.7mln.

Much of the investment into Southend will go into new infrastructure that will enable the airport to handle several times the number of passengers it welcomed in 2018 when 1.5mln people walked through its departure lounge.

That was up from 1.1mln a year earlier, and the figure looks set to jump again in 2019, with Ryanair basing three of its aircraft at Southend from April, while Loganair is launching three new routes shortly after.

To help fund the planned investment, Stobart is trimming its dividend to 3p every six months. That will mean an annual pay-out of 6p – down from the 15p it is set to return for the 12 months to the end of February.

Biomass deliveries surge in 2018

Away from the aviation side of its business, Stobart supplied 1.3mln tonnes of biomass to UK power stations last year – some 45% more than it supplied the previous year.

The surge in deliveries was because all but three of the power stations have now been commissioned and are in full contractual operations.

The improvement was achieved despite continued teething problems with a handful of the plants during their commissioning period.

As a result of these challenges, Stobart said it will continue to carry non-underlying pre-contract costs until the plants all reach the end of their commissioning periods, although it is looking to recoup some of the costs from the plant owners where possible.

Rail & civils picking up new contracts

Back in its interim results, the company said it had seen a “material reduction” in profitability in its Rail and Civils division following a review of some of its ongoing contracts.

Following that review, Stobart strengthened the management team and tasked it with winning more contracts with tier-one customers. This strategy is “generating improved results” in terms of new business,

“The company continues to make strong commercial progress in its core aviation and energy operating divisions and is trading in line with management expectations,” concluded Wednesday’s statement.

Full-year results for the 12 months to the end of February are due to be published on May 15.

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