TIDMSTOB
RNS Number : 9628E
Stobart Group Limited
24 October 2018
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
24 October 2018
Stobart Group Limited
("Stobart" or the "Group")
Interim results for the six months ended 31 August 2018
Stobart Group Limited, the Aviation, Energy, Rail & Civils,
Investments and Infrastructure business, today announces its
interim results for the six months to 31 August 2018.
Stobart has made strong commercial progress during the period in
its core operating businesses. Stobart Aviation and Stobart Energy
are both well-invested and set for significant growth. The Group
has also moved quickly to advance the steps it outlined following
the AGM to strengthen the commercial management and governance of
the group.
Financial Highlights
-- Revenue growth of 21.4% to GBP151.3m
-- Pro forma underlying EBITDA(1) in our two major growth
divisions have increased to GBP24.4m; Aviation +14.6% and Energy
+88.8%
-- Loss for the period after taxation GBP17.5m (2017: GBP111.9m
profit, which included GBP123.8m profit on disposal of
associate)
-- Returned GBP34.7m to shareholders, including dividends paid
in the period of GBP31.3m (2017: GBP26.4m)
-- Net debt has increased to GBP75.6m (2017: GBP36.6m)
Financial Summary
The 2017 profit included GBP123.8m received from the partial
disposal of Eddie Stobart Logistics. The 2018 loss includes the
investment in London Southend Airport route development and
marketing of GBP18.0m (2017: GBP9.1m).
31 August 31 August
2018 2017
GBPm GBPm
Revenue 151.3 124.6
Pro forma underlying EBITDA(1) (2017:
excluding GBP123.8m profit on disposal
of associate) 17.0 15.4
EBITDA (6.1) 123.1
Loss for the period (2017: excluding
GBP123.8m profit on disposal of associate) (17.5) (11.9)
(Loss)/profit for the period (17.5) 111.9
Dividends paid 9.0p 7.5p
---------- ----------
(1) Underlying EBITDA represents profit/(loss) before interest,
tax, depreciation, amortisation, swaps, non-underlying items. Refer
to note 3 for reconciliation to profit/(loss) before tax. The Group
has defined and outlined the purpose of its alternative performance
measures, in the Glossary in note 14.
Aviation - accelerating passenger growth
-- Pro forma underlying Aviation EBITDA(1) increased 14.6% to GBP15.7 million (2017: GBP13.6m)
-- Aviation EBITDA loss of GBP2.7m (GBP2017: GBP3.6m profit)
including GBP18.1m (2017: GBP9.0m) relating to UK Flybe franchise
operation (UKFFO)
-- London Southend Airport passengers up 37% to 838,742 (2017: 610,492)
-- Milestone five-year agreement with Ryanair at London Southend
Airport - additional one million passengers expected in the first
year of operations
-- easyJet based a fourth aircraft at the airport, adding three
new routes; it now flies to over 20 destinations from London
Southend
-- Stobart Jet Centre delivered 1,000 movements since re-launch in January 2018
-- Stobart Air accelerated route development, marketing, brand
and customer awareness at LSA, with net investment of GBP18.0m
(2017: GBP9.1m). This investment is expected to be significantly
reduced next year
-- Stobart Aviation Services secured a significant ground
handling contract with easyJet at London Stansted Airport
Energy - significantly increasing tonnage
-- Pro forma underlying Energy EBITDA(1) increased 88.8% to GBP8.7 million (2017: GBP4.6m)
-- Energy EBITDA of GBP6.5m (2017: 2.5m)
-- 657,950 tonnes sold - up 71.9% (2017: 382,775)
-- Underlying EBITDA per tonne increased by 9.8% to GBP13.19 (2017: GBP12.01)
-- Year on year improvement driven by customer mix, benefits of
increased volume and tight cost control
Rail & Civils - project reviews and focus on contract
quality
-- Appointment of new commercial team strengthened management,
with the division undertaking a detailed review of its commercial
operations, contracts and project finances
-- Management team now placing more focus on contract quality
and securing contracts with external tier one customers
-- Rail & Civils EBITDA loss of GBP4.8m (2017: GBP1.4m profit)
Strengthened commercial management and governance
-- Strengthened Board with appointments of Nick Dilworth as
Chief Operating Officer and Ginny Pulbrook as Non-Executive
Director
-- Appointed Interim Chief Financial Officer, Michael Williamson
-- Selected leading independent search firm, Russell Reynolds,
to identify additional Board appointments
-- Appointed Alice Mayhew, a senior employment barrister at
Devereux Chambers, to carry out an independent investigation into
the concerns raised by certain employees regarding alleged bullying
and whistleblowing. This investigation was completed on 18 October
2018 and concluded that there is no culture of bullying within
Stobart Group. Interviewees did not report having been bullied or
subjected to undue pressure or having witnessed bullying or undue
pressure being placed on others. The report made recommendations,
and the Company is currently reviewing how best to incorporate
these
Warwick Brady, Chief Executive Officer, Stobart Group,
commented
"We have remained focused on operational progress in our
Aviation and Energy divisions, which have both performed well in
the period.
Having invested in the infrastructure for these divisions, we
are now well placed to accelerate our commercial growth plans and
demonstrate the value of the Group's excellent operating
businesses."
A presentation for analysts will be held today at 9.30am at
Redleaf Communications, Sky Light City Tower, 50 Basinghall Street,
London, EC2V 5DE. Email stobart@redleafpr.com to confirm your
attendance.
The person responsible for arranging the release of this
announcement on behalf of Stobart Group is Louise Brace, Company
Secretary.
Enquiries:
Stobart Group Limited
Charlie Geller, Head of Communications Via Redleaf Communications
Redleaf Communications +44 203 757 6867
Robin Tozer Stobart@redleafpr.com
Ian Silvera
Stobart Group Limited
("Stobart" or the "Group")
Interim Results for the six months ended 31 August 2018
The summary results for the six months to 31 August 2018 are set
out below. The pro forma results are shown before the effect of the
accelerated investment in growth at London Southend airport through
our UK Flybe franchise operation (UKFFO). See income statement and
note 1 for further details.
Divisional Revenue Summary
31 August 31 August
2018 2017
GBPm GBPm
Aviation - pro forma 87.1 82.4
Aviation - effect of UKFFO 15.7 6.6
Aviation statutory 102.8 89.0
Energy 29.9 25.3
Rail & Civils 22.6 20.1
Investments 2.0 -
Infrastructure 1.1 1.9
Eliminations (7.1) (11.7)
---------- ----------
Statutory total revenue 151.3 124.6
---------- ----------
Divisional Profit Summary
31 August 2018 31 August 2017
Pro forma Statutory Pro forma Statutory
Divisional Underlying EBITDA(1) GBPm GBPm GBPm GBPm
Aviation 15.7 (1.9) 13.6 6.2
Energy 8.7 8.7 4.6 4.6
---------- ---------- ----------
Underlying EBITDA(1) from
two main operating divisions 24.4 6.8 18.2 10.8
Rail & Civils (4.8) (4.8) 1.4 1.4
Investments 2.8 2.8 124.6(2) 124.6(2)
Infrastructure (1.1) (1.1) 0.5 0.5
Central costs and eliminations (4.3) (4.3) (5.5) (5.5)
---------- ---------- ---------- ----------
Underlying EBITDA(1) 17.0 (0.6) 139.2(2) 131.8(2)
---------- ----------
Non-underlying items (7.5) (10.6)
Gain/(loss) on swaps 3.6 (1.3)
Depreciation (10.9) (6.6)
Impairment of loan notes (2.5) -
Finance costs (net) (0.9) (1.7)
Tax 1.3 0.3
---------- ----------
(Loss)/profit for the period
- Statutory total (17.5) 111.9
---------- ----------
(1) Defined in glossary in note 14
(2) Includes GBP123.8m relating to the profit on disposal of
associate, Eddie Stobart Logistics. Excluding this from underlying
EBIDTA, Investments would be GBP0.8m, the pro forma underlying
EBITDA would be GBP15.4m and statutory underlying EBITDA would be
GBP8.0m.
Divisional Reviews
Stobart Group has the following operating divisions; Aviation,
Energy and Rail & Civils. Stobart also holds a portfolio of
infrastructure assets and investments, to which the Group aims to
add value and realise when appropriate.
Stobart Aviation
Stobart Group invests in, develops and operates a number of
aviation-related businesses focused on meeting the growing demand
for airport capacity and improved customer experience. The Aviation
division comprises:
-- Airport - London Southend Airport (LSA) including the Holiday
Inn Hotel and Stobart Jet Centre;
-- Airline - Stobart Air regional airline and aircraft leasing business; and
-- Aviation Services - Ground handling business.
31 August 2018 31 August 2017
GBPm GBPm
Pro forma revenue 87.1 82.4
Pro forma underlying EBITDA(1) 15.7 13.6
Revenue 102.8 89.0
EBITDA (1.9) 6.2
-------------- --------------
(1) Defined in glossary in note 14
London Southend Airport
31 August 2018 31 August 2017
GBPm GBPm
Passenger numbers - LSA 838,742 610,492
EBITDA per passenger - LSA GBP3.26 GBP1.74
-------------- --------------
London Southend Airport has successfully attracted new airlines
and passengers as we continue to invest in our airport proposition.
The airport is set for substantial growth in 2019 and beyond as
further airlines are attracted to the airport and new routes are
added.
In the first six months, passenger numbers increased by 37% to
838,742 (2017: 610,492). easyJet's decision to base a fourth
aircraft at the airport is expected to result in over one million
easyJet passengers in 2018. We also signed a milestone agreement
with Ryanair to base three aircraft at London Southend, expected to
bring a further one million additional passengers annually from
Summer 2019. Including agreements with Air Malta and Adria Airways,
we are now offering routes to an additional 11 destinations and
expect to welcome circa 2.5 million passengers in 2019.
We are driving performance through an improving customer
proposition which increases profitability per passenger. For
example, we signed a new agreement with The Restaurant Group (TRG)
to introduce six new food and beverage brands to the airport. So
far, we have opened Giraffe STOP and Costa Coffee outlets under
this agreement and expect to open a new bespoke pub, The Navigator,
later this year. We were also delighted to have achieved an
occupancy rate of over 90% at The Holiday Inn. London Southend was
voted the best London airport by passengers in the annual Which?
magazine survey for the sixth year running, and it was rated the
most accessible airport in London and the South East by the Civil
Aviation Authority (CAA).
With our existing airport capacity becoming better utilised as
passenger numbers increase, we will leverage this fixed cost base,
with additional capital expenditure, resulting in an improved cost
per passenger, in turn increasing profitability.
The progress made with new and existing airlines, combined with
our enhanced customer proposition, puts us well on track to deliver
our target to welcome five million passengers by 2022.
Stobart Jet Centre
With over 1,000 movements so far this year, Stobart Jet Centre
has already exceeded the volume of business seen in the whole of
2017 as capacity has been increased and we have attracted more
international customers. We have been encouraged that The Jet
Centre is securing return visits by customers due to the high
quality of its service.
We are increasingly confident that Stobart Jet Centre will
become a significant contributor to London Southend Airport's
financial performance in the short to medium term.
Stobart Air
Stobart Air operates flights under franchise agreements with Aer
Lingus and Flybe. The business is recognised within the industry
for its operational excellence and quality of customer service.
During the period Stobart Air saw improvements in the total
number of passengers, passengers per flight and revenue per
passenger. Total passenger numbers increased by 16.9% to 1.1
million (2017: 0.9 million) during the period.
Stobart Air has played a fundamental part in the growth strategy
for London Southend Airport. As previously announced, Stobart Group
incurred net costs of GBP18.0 million in route development and
marketing for the airport. This expenditure represents the
development of routes operated under the UK Flybe franchise
operation (UKFFO). Demonstrating route viability and building
customer awareness was central to securing a milestone agreement
with Ryanair that will allow us to accelerate the growth of the
airport. The UKFFO, for which tickets went on sale in December 2016
and which commenced flights in May 2017, is being withdrawn
following the agreements with easyJet and Ryanair to expand their
operations at LSA. The jet operation will cease before the end of
the current financial year, and the ATR turboprop operation before
the end of the following financial year.
Stobart Air intends to grow its valuable relationship with Aer
Lingus, maximise its revenue potential and improve load factors on
established routes. Stobart Air will also leverage the value of its
aircraft by securing additional commercial relationships with other
airlines.
Stobart Aviation Services
Stobart Aviation Services is a start-up business launched to
exploit Stobart's logistics expertise to deliver ground handling
operations at airports.
During the period, Stobart Aviation Services secured its first
major milestone external contract at London Stansted with easyJet.
This contract has been running for circa six months, allowing the
business to demonstrate its service expertise and capabilities.
Stobart Aviation Services has also put in place the right
structure, teams and systems to deliver the backbone of an
efficient ground handling service, so it is now well positioned to
scale-up by securing additional contracts.
Stobart Energy
Stobart Energy is the UK's leading provider of biomass, with
long-term agreements in place to supply two million tonnes per
annum, and the capacity to provide three million tonnes per annum
by FY 2022.
31 August 2018 31 August 2017
GBPm GBPm
Revenue 29.9 25.3
Underlying EBITDA(1) 8.7 4.6
EBITDA 6.5 2.5
Tonnes sold 657,950 382,775
Underlying EBITDA per tonne GBP13.19 GBP12.01
-------------- --------------
(1) Defined in glossary in note 14
A key driver for the 72% growth in tonnes of fuel sold was that
plants commissioned last year are now approaching commercial
volumes. Underlying EBITDA per tonne continues to prove the
business model and is ahead of our 2018 strategic target of GBP10
per tonne with the year-on-year improvement driven by customer mix,
the benefits of increased volume and continued focus on cost
management.
The continuing challenges around the commissioning of
third-party power stations means that, although volumes sold have
increased year-on-year, our infrastructure has been under-utilised.
Two major plants in Widnes and Tilbury have experienced unplanned
outages during the first half of the year. Commissioning also
started later than expected at Margam and Templeborough and the
development of Port Clarence has slipped to early 2019.
Consequently, we continue to work hard to maintain the integrity
and viability of the supply chains we have created for these plants
resulting in non-underlying costs of GBP2.2m.
We continue to invest in people, processing and storage
capacity, and have specialist transport fleet and IT systems to
ensure we have a best in class infrastructure ready to deliver a
full end-to-end supply chain solution to our customers.
Though it continues to prove challenging to forecast accurately
the successful operation of third-party power plants, we expect
further progress in the second half. We are confident the business
has the right infrastructure in place to ensure the division can
grow rapidly as more plants start to operate on a more consistent
basis.
Stobart Rail & Civils
Stobart Rail & Civils is one of the UK's leading providers
of innovative and efficient rail and non-rail civil engineering
projects.
31 August 2018 31 August 2017
GBPm GBPm
Revenue
- External customers 12.7 6.3
- Internal customers 9.9 13.8
Total 22.6 20.1
-------------- --------------
Underlying EBITDA(1) (4.8) 1.4
EBITDA (4.8) 1.4
-------------- --------------
(1) Defined in glossary in note 14
The appointment of a new commercial team, including a new
finance director, has strengthened management. During the period,
Stobart Rail & Civils undertook a detailed review of its
commercial operations, all open contracts and project economics.
During the period, a review of ongoing contracts that commenced in
prior periods was undertaken, including their forecast outturn. The
result of the review was to downgrade the recorded performance of
those contracts which is reflected in the current period
results.
The management team are placing more focus on contract quality
and securing contracts with external tier one customers. To that
end, a new commercial director and two regional directors have been
appointed. The division also secured two framework agreements with
Manchester's Metrolink and achieved delivery partner status for
Transpire, the Trans Pennine route upgrade. The benefits of
improved contract bidding will be seen in future periods.
Infrastructure and Investments
The Stobart Infrastructure segment manages, develops and
realises value from a portfolio of property assets as well as
investments in biomass energy plants. Divisional underlying EBITDA
has reduced compared to the prior period, which is primarily due to
the impact of lost revenue arising from the closure of Carlisle
& Lake District Airport (CLDA) during its development.
There were realisations of GBP27.5m from the disposal of two
property assets in the period, both at or above book value. These
included a sale and leaseback transaction for part of our Widnes
site, which incorporated our waste wood processing plant, the newly
constructed offices for Stobart Group and Stobart Energy, and a
separate plot on which a new 15-acre waste wood storage area is to
be constructed. The net proceeds from this transaction were
GBP25.3m.
Following the relocation of staff to our newly constructed
office and terminal building at CLDA, the division has completed
the disposal of the former Stobart Group/Stobart Rail offices in
Carlisle, realising net disposal proceeds of GBP2.2m. Two further
property disposals have been completed in the second half of the
year. Elsewhere, the business continues to progress the retail-led
development scheme at our site in Speke with a view to disposal in
the next financial year.
The Stobart Investments segment holds non-controlling interests
in Eddie Stobart Logistics and Airport.
Financial Review
Revenue has increased by 21.4% to GBP151.3m in the six months to
31 August 2018, driven by growth in the operating divisions.
Aviation has grown by 5.8% to GBP87.1m (pro forma), with London
Southend Airport (LSA) passenger numbers increasing by 37.4% to
838,742 year-on-year. The division benefitted from the start-up of
the Aviation Services operation with revenue of GBP2.3m. Revenue in
Energy has grown by 18.0% to GBP29.9m on the back of a 71.9%
increase in tonnes to 657,950. Revenue in Rail & Civils has
grown by 12.3% to GBP22.6m.
Pro forma underlying EBITDA, excluding the profit on disposal of
associate, has increased by 10.4% to GBP17.0m (2017: GBP15.4m).
Aviation has seen pro forma underlying EBITDA grow by 14.6% to
GBP15.7m on the back of increasing passenger numbers through LSA.
Energy has delivered an 88.8% increase in underlying EBITDA to
GBP8.7m, while improving underlying EBITDA margins to GBP13.19 per
tonne from GBP12.01 per tonne, an increase of 9.8%. The
performances in these two divisions have offset the losses incurred
in Rail & Civils. This operation is refocusing its efforts on
external contracts and a more rigorous commercial approach.
Group EBITDA loss was GBP6.1m (2017: GBP123.1m profit, including
GBP123.8m profit on disposal of Eddie Stobart Logistics). The
current period includes GBP18.1m of losses in the UK Flybe
franchise operation. A summary of divisional profitability is set
out on page 3 and further details of divisional performance are set
out in the Divisional Reviews section.
The loss for the period of GBP17.5m (2017: GBP111.9m profit) is
after the accelerated expenditure of GBP18.0m (GBP2017: GBP9.1m) in
route development and marketing at LSA, described in detail below.
This expenditure has aided the airport in securing three Ryanair
based aircraft from next year and a fourth easyJet based aircraft
from July 2018.
Central costs and eliminations have reduced from GBP5.5m to
GBP4.3m, due to a reduction in the charge for share-based payments,
after the vestings charged in the prior year, and reduced travel
costs.
Pro forma presentation on income statement
In August, the Group announced that the UK Flybe franchise
operations (UKFFO) out of London Southend Airport will be withdrawn
by February 2020. The operation, for which tickets went on sale in
December 2016, commenced flights in May 2017 with the purpose of
building awareness and accelerating growth at the airport. The
Ryanair contract was secured in June 2018 and easyJet have added a
fourth aircraft based at the airport from July 2018. These
operations will replace the UKFFO. The pro forma loss in the period
was GBP18.0m (2017: GBP9.1m) and has been presented in a separate
unreviewed pro forma column on the face of the income statement to
enable the reader to better understand the results. Further details
can be found in note 1.
Swaps
The mark to market gain on swaps in the period was GBP3.6m
(2017: GBP1.3m loss). The increase is mainly driven by the mark to
market valuations relating to aviation fuel and diesel swaps
following the rise in fuel prices.
Depreciation and interest
Depreciation has increased by GBP4.4m to GBP10.9m, with the
majority of this increase relating to a reassessment of aircraft
depreciation rates in our aircraft leasing business. Other
increases followed from investment in operating assets across all
divisions. The impairment of loan notes relates to a write down in
value of loan notes receivable from green energy plants.
Finance costs of GBP1.7m (2017: GBP2.7m) decreased due to the
repayment of aircraft leasing loans in Propius (GBP1.1m), partly
offset by increased charges following drawdowns on the RCF. Finance
income of GBP0.8m (2017: GBP1.0m) decreased due to interest no
longer being accrued on loan notes due from green energy
plants.
Taxation
The tax credit is GBP1.3m (2017: GBP0.3m). This arises from tax
deductions obtained following the exercise of a significant number
of share options by employees during the interim period and the
utilisation of tax loss attributes (see note 6 for further
details).
Non-underlying items
31 August 2018 31 August 2017
GBP'000 GBP'000
-------------- --------------
New business and new contract set
up costs 3,837 4,873
Transaction costs 112 247
Litigation and claims 1,575 3,300
Share of post-tax profits of associates:
Amortisation of contracts - 237
-------------- --------------
Non-underlying items within EBITDA 5,524 8,657
Amortisation of acquired intangibles 1,969 1,969
Total non-underlying items 7,493 10,626
-------------- --------------
We incurred GBP2.2m of contract set-up costs in the Energy
division in connection with the delayed commissioning of biomass
plants, GBP0.8m in the Aviation division for new route development
and GBP0.8m in the Infrastructure division in connection with
Carlisle Lake District Airport development. Transaction costs are
related to the acquisitions and aborted transactions in the
Aviation division. The charge for litigations and claims relates to
the ongoing board issues. 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 and
contracts, presented below EBITDA in the income statement, are
expected to continue in future periods (see note 4 for further
details).
Earnings per Share
Pro forma earnings per share from underlying operations(1) were
1.89p (2017: 37.13p). Total basic earnings per share were 5.06p
loss (2017: 32.03p profit) (see note 8 for further details).
(1) Defined in glossary in note 14
Dividend and share buybacks
31 August 2018 31 August 2017
-------------- --------------
Interim dividend (April) 4.5p 3.0p
Final dividend (July) 4.5p 4.5p
9.0p 7.5p
-------------- --------------
Total dividends paid (GBP'000) 31,256 26,440
-------------- --------------
Quarterly dividends of 4.5p were paid on 13 April 2018, 6 July
2018 and 5 October 2018. The full-year dividend for the year ended
28 February 2018 was 18.0p.
During the period, the Group purchased 1.5m of its own shares
for GBP3.4m. In addition, 7.0m shares were transferred from
treasury to the Group's Employee Benefit Trust for nil
consideration. These shares will be used to satisfy awards granted
by the Group under its long-term incentive plans. 4.1m shares were
used to satisfy awards in the period. At the period end, there were
no shares held in treasury. Following the AGM, the Group has the
mandate to make further market acquisitions within certain limits.
The Board will consider this on an opportunistic basis.
Balance sheet
31 August 2018 28 February 2018
GBP'000 GBP'000
-------------- ----------------
Non-current assets 484,275 486,935
Current assets 124,659 167,236
-------------- ----------------
Total assets 608,934 654,171
Non-current liabilities (168,453) (141,462)
Current liabilities (90,198) (106,789)
Net assets 350,283 405,920
-------------- ----------------
The decrease in the net asset position of GBP55.6m principally
relates to dividends paid, purchase of treasury shares and the loss
for the period.
Non-current assets have remained stable over the period, with
increases in land and buildings of GBP7.8m, mainly in relation to
the development of Carlisle Lake District Airport. This increase
was offset by a GBP5.8m reduction in available for sale investments
and GBP2.0m amortisation of intangible assets.
Other financial assets represent the Groups investment in Eddie
Stobart Logistics (ESL) with a fair value at 31 August 2018 of
GBP57.9m. During the period, a dividend of 4.4p per share was
received totalling GBP2.0m. Included in the statement of
comprehensive income is the loss of GBP5.8m for the six months to
31 August 2018, following a 13.0p reduction in the ESL share price
from 142.5p to 129.5p.
Current assets have decreased by GBP42.6m. GBP22.8m of the
decrease relates to the sale and leaseback of property inventory at
Widnes and GBP13.7m relates to the reduction in cash over the six
months to 31 August 2018.
Non-current liabilities have increased by GBP27.0m, principally
driven by the increase in loans and borrowings. See note 10 for
further details. The GBP16.6m reduction in current liabilities
relates to the seasonal decrease in forward sales in our regional
airline and a reduction in trade creditors in the Rail division
following the completion of two large Group civils projects and an
external rail contract.
Debt and gearing
31 August 2018 28 February 2018
-------------- ----------------
Net debt/(cash):
- asset-backed finance GBP40.0m GBP40.0m
- other GBP35.6m (GBP3.4m)
Total net debt GBP75.6m GBP36.6m
-------------- ----------------
Pro forma underlying EBITDA(1)
/ interest 17.8 44.4
Net debt/total assets 12.4% 5.6%
Gearing 21.6% 9.0%
-------------- ----------------
(1) Defined in glossary in note 14
On 30 July 2018, the Group completed the amendment and extension
of our Revolving Credit Facility (RCF) with Lloyds Bank and Allied
Irish Bank. The increased GBP80m facility will continue to provide
the group with flexibility and committed headroom at a competitive
rate. Along with other factors within the control of the Group,
this facility will help to mitigate liquidity risk for the next
four years to January 2022.
At 31 August 2018, the committed undrawn headroom in the RCF was
GBP16.0m (28 February 2018: GBP25.0m), and with cash balances of
GBP29.4m (28 February 2018: GBP43.1m), total headroom was GBP45.4m
(28 February 2018: GBP68.1m).
Cash flow
31 August 2018 31 August 2017
GBP'000 GBP'000
-------------- --------------
Operating cash flow (18,143) (7,075)
Investing activities 24,308 168,768
Financing activities (19,871) (153,317)
-------------- --------------
(Decrease)/increase in the period (13,706) 8,376
At beginning of period 43,108 30,653
Cash at end of period 29,402 39,029
-------------- --------------
There was an operating cash outflow in the period of GBP18.1m
(2017: GBP7.1m) principally relating to losses in the period
relating to the UKFFO and adverse working capital movements. The
working capital outflows principally related to a reduction in
creditors in Rail following the completion of major projects and
the seasonal reduction in forward sales in our airline.
There was a cash outflow of GBP14.9m in relation to the UKFFO
that is ceasing. This operation will be replaced by the Ryanair
flights that are due to start in summer 2019 and the fourth based
easyJet aircraft that arrived in July 2018. Due to ongoing
commitments, the Group will incur further costs through to February
2020.
Net cash inflows from investing activities include proceeds from
the sale of property inventories and property, plant and equipment
(PPE) totalling GBP29.2m, purchase of property inventories and PPE
of GBP11.7m, principally relating to the development of Carlisle
Lake District Airport, and receipt of refundable deposits relating
to aircraft GBP7.0m. Within the GBP29.2m proceeds is GBP25.3m in
relation to land at Widnes that was subject to sale and
leaseback.
Net cash outflows from financing activities includes the
repayment of finance leases and the net drawdown of the RCF
(GBP16.2m), in addition to GBP31.3m of dividends paid, GBP3.4m for
the purchase of 1.5m treasury shares and interest paid of
GBP1.4m.
As the Group focuses on growth opportunities for Aviation and
Energy, we will be undertaking a capital review in the second half
to ensure we are best placed to optimise shareholder returns.
Key Risks and Uncertainties
As with any business, risk assessment and the implementation of
mitigating actions and controls are vital to successfully achieving
the Group's strategy. The Board has overall responsibility for risk
management and internal control within the context of achieving the
Group's objectives. The key risks are set out in our 2018 Annual
Report and are broadly unchanged except that an additional risk has
been identified in connection with the Board dispute.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The above statement of Directors' responsibilities was approved
by the Board on
23 October 2018.
Iain Ferguson Warwick Brady Nick Dilworth
Ginny Pulbrook Andrew Wood John Coombs
Stobart Group Limited
Condensed Consolidated Income Statement
For the six months ended 31 August 2018
Six months ended 31 August Six months ended 31 August
2018 2017
Unreviewed Unreviewed
pro forma Unreviewed pro forma Unreviewed
before pro forma Statutory before pro forma Statutory
UKFFO UKFFO total UKFFO UKFFO total
Continuing operations Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3 135,602 15,717 151,319 118,003 6,550 124,553
----------- ----------- ---------- ----------- ----------- ----------
Other operating income 3,924 - 3,924 124,381 - 124,381
Operating expenses (126,958) (33,775) (160,733) (110,740) (15,550) (126,290)
Share of post-tax
profits of associates
and joint ventures (588) - (588) 474 - 474
----------- ----------- ---------- ----------- ----------- ----------
EBITDA 11,980 (18,058) (6,078) 132,118 (9,000) 123,118
Analysed as
Underlying EBITDA 16,991 (17,545) (554) 139,225 (7,450) 131,775
Non-underlying items
included in EBITDA 4 (5,011) (513) (5,524) (7,107) (1,550) (8,657)
EBITDA 11,980 (18,058) (6,078) 132,118 (9,000) 123,118
---------------------------- ------ ----------- ----------- ---------- ----------- -----------
Gain/(loss) on swaps 3,579 - 3,579 (1,298) - (1,298)
Depreciation (10,931) - (10,931) (6,540) - (6,540)
Amortisation 4 (1,969) - (1,969) (1,969) - (1,969)
----------- ----------- ---------- ----------- ----------- ----------
Operating profit/(loss) 2,659 (18,058) (15,399) 122,311 (9,000) 113,311
Analysed as
Underlying operating
profit/(loss) 9,639 (17,545) (7,906) 131,387 (7,450) 123,937
Non-underlying items
included in EBITDA 4 (5,011) (513) (5,524) (7,107) (1,550) (8,657)
Non-underlying items
below EBITDA 4 (1,969) - (1,969) (1,969) - (1,969)
----------- ----------- ---------- ----------- ----------- ----------
Operating profit/(loss) 2,659 (18,058) (15,399) 122,311 (9,000) 113,311
---------------------------- ------ ----------- ----------- ---------- ----------- ----------- ----------
Impairment of loan
notes 5 (2,500) - (2,500) - - -
Finance costs 5 (1,698) - (1,698) (2,628) (75) (2,703)
Finance income 5 741 40 781 979 - 979
----------- ----------- ---------- ----------- ----------- ----------
(Loss)/profit before
tax (798) (18,018) (18,816) 120,662 (9,075) 111,587
Tax 6 1,320 - 1,320 292 - 292
----------- ----------- ---------- ----------- ----------- ----------
Profit/(loss) for
the period 522 (18,018) (17,496) 120,954 (9,075) 111,879
----------- ----------- ---------- ----------- ----------- ----------
Analysed as
Underlying profit/(loss)
for the period 6,536 (17,505) (10,969) 129,695 (7,525) 122,170
Non-underlying items
included in profit/(loss)
for the period (6,014) (513) (6,527) (8,741) (1,550) (10,291)
----------- ----------- ---------- ----------- ----------- ----------
Profit/(loss) for
the period 522 (18,018) (17,496) 120,954 (9,075) 111,879
---------------------------- ------ ----------- ----------- ---------- ----------- ----------- ----------
Earnings per share
Basic 8 (5.06p) 32.03p
Diluted 8 (5.06p) 31.16p
Stobart Group Limited
Condensed Consolidated Income Statement
For the six months ended 31 August 2018
Audited
Year ended 28 February
2018
Unaudited
pro forma Unaudited Audited
before pro forma statutory
UKFFO UKFFO total
Continuing operations Notes GBP'000 GBP'000 GBP'000
Revenue 226,974 15,019 241,993
----------- ----------- -----------
Other operating income 133,513 - 133,513
Operating expenses (219,643) (36,974) (256,617)
Share of post-tax profits of associates
and joint ventures 3,480 - 3,480
----------- ----------- -----------
EBITDA 144,324 (21,955) 122,369
Analysed as
Underlying EBITDA 154,107 (18,945) 135,162
Non-underlying items included in EBITDA 4 (9,783) (3,010) (12,793)
----------- ----------- -----------
EBITDA 144,324 (21,955) 122,369
------------------------------------------------ ------ ----------- ----------- -----------
Gain on swaps 1,038 - 1,038
Depreciation (15,332) - (15,332)
Amortisation (3,938) - (3,938)
----------- ----------- -----------
Operating profit/(loss) 126,092 (21,955) 104,137
Analysed as
Underlying operating profit/(loss) 139,813 (18,945) 120,868
Non-underlying items included in EBITDA 4 (9,783) (3,010) (12,793)
Non-underlying items below EBITDA 4 (3,938) - (3,938)
----------- ----------- -----------
Operating profit/(loss) 126,092 (21,955) 104,137
------------------------------------------------ ------ ----------- ----------- -----------
Finance costs 5 (5,173) (43) (5,216)
Finance income 5 1,701 - 1,701
----------- ----------- -----------
Profit/(loss) before tax 122,620 (21,998) 100,622
Tax 6 (618) - (618)
----------- ----------- -----------
Profit/(loss) for the period 122,002 (21,998) 100,004
----------- ----------- -----------
Analysed as
Underlying profit/(loss) for the period 132,595 (18,988) 113,607
Non-underlying items included in profit/(loss)
for the period (10,593) (3,010) (13,603)
----------- ----------- -----------
Profit/(loss) for the period 122,002 (21,998) 100,004
------------------------------------------------ ------ ----------- ----------- -----------
Earnings per share
Basic 8 28.66p
Diluted 8 28.00p
Stobart Group Limited
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 August 2018
Six months Six months
ended ended Year ended
31 August 31 August 28 February
2018 2017 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period (17,496) 111,879 100,004
Change in fair value of assets
classified as available-for-sale (5,810) - (7,822)
Foreign currency translation differences
- equity accounted associate - (45) (45)
Items recycled to income statement
- equity accounted associates - 1,397 1,397
Items recycled to income statement
- equity accounted joint ventures - - (3,006)
Exchange differences on translation
of foreign operations 1,180 (2,068) (2,103)
Tax on items relating to components
of other comprehensive income 37 1,130 -
Other comprehensive (expense)/income
to be reclassified to profit or
loss in subsequent periods, net
of tax (4,593) 414 (11,579)
Re-measurement of defined benefit
plan 1,103 564 1,311
Tax on items relating to components
of other comprehensive income (188) (96) (226)
Other comprehensive income not
being reclassified to profit or
loss in subsequent periods, net
of tax 915 468 1,085
Other comprehensive (expense)/income
for the period, net of tax (3,678) 882 (10,494)
------------- ------------- --------------
Total comprehensive (expense)/income
for the period (21,174) 112,761 89,510
------------- ------------- --------------
Stobart Group Limited
Condensed Consolidated Statement of Financial Position
As at 31 August 2018
31 August 28 February
2018 2018
Unaudited Audited
Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment
- Land and buildings 9 186,837 179,936
- Plant and machinery 9 54,707 59,210
- Fixtures, fittings and equipment 9 8,995 4,649
- Commercial vehicles and aircraft 9 54,646 57,347
---------- ------------
305,185 301,142
Investment in associates and joint
ventures 3,856 349
Other financial assets 57,880 63,690
Investment property 4,711 4,700
Intangible assets 102,451 104,420
Other receivables 10,192 12,634
---------- ------------
484,275 486,935
---------- ------------
Current assets
Inventories 29,394 51,801
Trade and other receivables 59,563 65,427
Cash and cash equivalents 10 29,402 43,108
Assets held for sale 6,300 6,900
124,659 167,236
---------- ------------
Total assets 608,934 654,171
---------- ------------
Non-current liabilities
Loans and borrowings 10 (88,934) (63,023)
Defined benefit pension scheme (2,181) (3,652)
Other liabilities (45,584) (47,259)
Deferred tax (17,424) (19,435)
Provisions (14,330) (8,093)
---------- ------------
(168,453) (141,462)
---------- ------------
Current liabilities
Trade and other payables (64,785) (80,820)
Loans and borrowings 10 (16,019) (16,710)
Corporation tax (9,394) (8,384)
Provisions - (875)
(90,198) (106,789)
---------- ------------
Total liabilities (258,651) (248,251)
---------- ------------
Net assets 350,283 405,920
---------- ------------
Capital and reserves
Issued share capital 35,434 35,434
Share premium 301,326 301,326
Foreign currency exchange reserve (704) (1,884)
Reserve for own shares held by employee
benefit trust (1,033) (330)
Retained earnings 15,260 71,374
---------- ------------
Total Equity 350,283 405,920
---------- ------------
Stobart Group Limited
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 August 2018
For the six months ended 31 August 2018
Unaudited
Reserve
Foreign for own
Issued currency shares
share Share exchange held Retained Total
capital premium reserve by EBT earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 1 March
2018 35,434 301,326 (1,884) (330) 71,374 405,920
Loss for the period - - - - (17,496) (17,496)
Other comprehensive
income/(expense)
for the period - - 1,180 - (4,858) (3,678)
---------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income/(expense)
for the period - - 1,180 - (22,354) (21,174)
Employee benefit
trust - - - (703) 238 (465)
Share-based payment
credit - - - - 674 674
Sale of treasury
shares - - - - (3,416) (3,416)
Dividends - - - - (31,256) (31,256)
---------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 31 August
2018 35,434 301,326 (704) (1,033) 15,260 350,283
---------------------- --------- --------- ---------- --------- ---------- ---------
For the six months ended 31 August 2017
Unaudited
Reserve
Foreign for own
Issued currency shares
share Share exchange held Retained Total
capital premium reserve by EBT earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 1 March
2017 35,434 301,326 2,766 (330) 48,338 387,534
Profit for the
period - - - - 111,879 111,879
Other comprehensive
(expense)/income
for the period - - (1,609) - 2,491 882
---------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
(expense)/income
for the period - - (1,609) - 114,370 112,761
Employee benefit
trust - - - - 238 238
Share-based payment
credit - - - - 1,093 1,093
Purchase of treasury
shares - - - - (10,143) (10,143)
Dividends - - - - (26,440) (26,440)
Balance at 31 August
2017 35,434 301,326 1,157 (330) 127,456 465,043
---------------------- --------- --------- ---------- --------- ---------- ---------
For the year ended 28 February 2018
Audited
Reserve
Foreign for own
Issued currency shares
share Share exchange held Retained Total
capital premium reserve by EBT earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ---------- --------- ---------- ---------
Balance at 1 March
2017 35,434 301,326 2,766 (330) 48,338 387,534
Profit for the
period - - - - 100,004 100,004
Other comprehensive
expense for the
period - - (4,650) - (5,844) (10,494)
------------------------ --------- --------- ---------- --------- ---------- ---------
Total comprehensive
(expense)/income
for the period - - (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
------------------------ --------- --------- ---------- --------- ---------- ---------
Stobart Group Limited
Condensed Consolidated Statement of Cash Flows
For the six months ended 31 August 2018
Six months Six months Year ended
ended 31 ended 31 28 February
August 2018 August 2017 2018
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
Cash used in continuing operations 12 (18,143) (7,006) (9,335)
Income taxes paid - (69) (215)
------------- ------------- -------------
Net cash flow from operating activities (18,143) (7,075) (9,550)
------------- ------------- -------------
Purchase of property, plant and equipment
and investment property (9,840) (50,532) (75,058)
Purchase of property inventories (1,829) (2,624) (4,098)
Proceeds from the sale of property,
plant and equipment and investment
property 3,888 1,012 6,772
Proceeds from the sale of property
inventories - - 3,356
Non-underlying transaction and restructuring
costs (112) (1,443) (1,962)
Proceeds from disposal of assets
held for sale - - 7,916
Proceeds from sale and leaseback,
net of fees 25,346 115,028 127,473
Movement in maintenance reserves (300) (3,324) 10,296
Refundable deposit repaid/(advanced) 7,043 (1,416) (4,759)
Distributions from joint ventures - - 937
Net amounts advanced to joint ventures - (33) -
Other loans advanced - - (2,000)
Proceeds from disposal of associate - 111,966 111,931
Interest received 112 152 216
Cash outflow from discontinued operations - (18) (18)
Net cash flow from investing activities 24,308 168,768 181,002
------------- ------------- -------------
Dividend paid on ordinary shares (31,256) (26,440) (58,124)
Repayment of capital element of finance
leases (7,420) (5,089) (12,365)
Repayment of borrowings - (66,792) (66,792)
Net drawdown from/(repayment of)
revolving credit facility 23,609 (42,420) (2,420)
Purchase of treasury shares, net
of fees (3,416) (10,728) (16,568)
Interest paid (1,388) (1,848) (2,728)
Net cash flow from financing activities (19,871) (153,317) (158,997)
------------- ------------- -------------
(Decrease)/increase in cash and cash
equivalents (13,706) 8,376 12,455
Cash and cash equivalents at beginning
of period 43,108 30,653 30,653
------------- ------------- -------------
Cash and cash equivalents at end
of period 29,402 39,029 43,108
------------- ------------- -------------
1 Accounting policies of Stobart Group Limited
Corporate information
The condensed consolidated financial statements of the Group for
the six months ended 31 August 2018 were authorised for issue in
accordance with a resolution of the Directors on 23 October 2018.
Stobart Group Limited is a Guernsey registered company whose
ordinary shares are publicly traded on the London Stock Exchange.
The principal activities of the Group are described in note 3.
Basis of preparation
The condensed consolidated financial statements of the Group for
the six months ended 31 August 2018 have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
The condensed consolidated financial statements do not include
all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements as at 28 February 2018. Except
for the 28 February 2018 statutory comparatives, the financial
information set out herein is unaudited but has been reviewed by
the auditors, KPMG LLP, and their report to the Company is
attached.
The audited comparative financial information set out in these
interim consolidated financial statements does not constitute the
Group's statutory accounts for the year ended 28 February 2018 but
has been derived from those accounts. Statutory accounts for the
period ended 28 February 2018 have been published and KPMG LLP has
reported on those accounts. Their audit report was unqualified and
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report.
The annual financial statements of the Group are prepared in
accordance with IFRSs as adopted by the European Union.
Pro forma financial information
A pro forma income statement for the period ended 31 August
2018, and all comparative periods, has been prepared by the
Directors, on the basis described below. This is to show the
financial effect of the accelerated investment in growth at London
Southend Airport (LSA), described on the face of the income
statement as UKFFO (UK Flybe franchise operations), through the
Flybe franchise operation on a risk share basis. This operation,
for which tickets went on sale in December 2016 and which commenced
flights in May 2017, is being withdrawn following the agreements
with easyJet and Ryanair to expand their operations at LSA. The jet
operation will cease by the end of the current financial year and
the ATR turboprop operation by the end of the following financial
year.
The unaudited pro forma information is presented alongside the
statutory consolidated income statement. This is to provide
information which the Directors consider helps to provide a better
understanding of the underlying performance of the Group. The
differences between the pro forma income statement information and
the consolidated statutory income statement for the year are
summarised as follows:
-- The pro forma income statement excludes the income received,
and the costs incurred, by the airline in respect flights operated
under the UK Flybe franchise operation (UKFFO) out of LSA.
-- Income received includes ticket and ancillary revenue in
relation to the flights. This revenue amounts to GBP15.7m (2017:
GBP6.6m). The passenger numbers were 318,000 (2017: 128,000).
-- Costs include fuel, pilots, cabin crew, aircraft leases,
landing fees and overheads. In addition, foreign exchange gains and
losses now presented within finance income/costs have been included
within the pro forma presentation. The total value of these costs
amount to GBP33.8m (2017: 15.6m).
-- The comparative period's results to 31 August 2017 and to 28
February 2018 have been restated on a consistent basis.
-- The passengers on these flights operated under the UK Flybe
Franchise operation will have also generated commercial income, and
related costs, within the airport from revenue streams such as food
and beverage, railway, car parking and retail. It is not possible
to reliably measure this income, and these passenger numbers
through the airport are expected to be replaced by a growing number
of passengers on easyJet and Ryanair flights. No adjustment to the
results has been made in relation to these transactions.
-- The pro forma income statement includes non-underlying items
directly linked to the accelerated investment in LSA. These
non-underlying items are incomes and expenses, which because of
their nature, infrequency or occurrence, or the events giving rise
to them, merit separate presentation to allow shareholders to
better understand the financial performance for the period. Total
cost included in the pro forma income statement is GBP0.5m (2017:
GBP1.6m) and relates to new business and new contract set up
costs.
A detailed analysis of the effect on the pro forma income
statement in the Aviation segment is set out below:
Six months Six months
ended 31 ended 31 Year ended
August August 28 February
2018 2017 2018
GBP'000 GBP'000 GBP'000
----------- ----------- -------------
Revenue from UKFFO 15,717 6,550 15,019
Operating expenses from UKFFO (33,262) (14,000) (33,964)
Non-underlying items (513) (1,550) (3,010)
Finance income/(costs) - FX 40 (75) (43)
----------- ----------- -------------
Effect of UKFFO (18,018) (9,075) (21,998)
----------- ----------- -------------
Going concern
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the interim financial statements
have been prepared on a going concern basis.
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 interim financial statements, together with
the projected covenant compliance of the Group.
The Group, which has net assets of GBP350.3m and positive
working capital of GBP34.5m, made a loss of GBP17.5m and had an
operating cash outflow of GBP18.1m during the period. The group has
a revolving credit facility of GBP80.0m, which was GBP64m drawn at
31 August 2018. The Group has cash balances of GBP29.4 million and
this together with the undrawn facility results in total headroom
of GBP45.4m.
The Directors have performed sensitivity analysis on the
forecasts, including the timing and amount of cash generated from
asset and investment disposals or refinancing, and forecast revenue
and costs. The Group has other available actions should these
transactions not occur as expected, including reducing significant
levels of discretionary expenditure assumed during the forecast
period. 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 renewed in July 2018 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 and key estimates and
judgements
The accounting policies adopted in the preparation of the
interim consolidated financial statements are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 28 February 2018. These accounting
policies are expected to be applied for the full year to 28
February 2019.
The estimates and judgements taken by the Directors in preparing
these interim financial statements are comparable with those
disclosed in the 2018 annual report, except where stated. The Group
has initially adopted IFRS 15 Revenue from Contracts with Customers
and IFRS 9 Financial Instruments from 1 March 2018. There is no
material effect of initially applying these standards and the prior
year results have been presented as previously reported. On
adoption of IFRS 9, the financial asset investment, 11.8%
investment in Eddie Stobart Logistics, was chosen to be designated
as fair value through other comprehensive income.
IFRS 15 now applies a five-step model for revenue recognition.
In assessing the impact of the adoption of IFRS 15 management
considered each revenue stream individually and applied the
five-step model in recognising revenue for each respective stream.
On conclusion of this assessment, revenue for each revenue stream
would be recognised at the same point as if the existing policy had
remained in place and therefore there has been no changes to the
Group's existing revenue recognition policy.
Revenue recognition within the Aviation division is at a point
in time. This covers passenger ticket revenue recognised on the
date of travel, airline, airport and handling income recognised in
the month of service or operation.
The Energy division recognises revenue for processed material
delivered to plants at a point in time which is consistent with the
previous IAS 18 treatment. This treatment is consistent for gate
receipt income relating to waste wood received.
The Rail division previously recognised some of its contracts
under IAS 11 construction contracts, which has been superseded by
IFRS 15. Both standards allow for revenue to be recognised over
time, however, the new standard requires the determination of
whether the performance obligations in the contract are satisfied
over time, i.e. control of the good or service transfers to the
customer over time. There has been no need for restatement of
revenue in the prior periods.
The Group's trade receivables resulting from sales are subject
to IFRS 9's new expected credit loss model. The Group was required
to revise its impairment methodology under IFRS 9 for this class of
asset. There was no material impact as a result in this change in
impairment methodology.
During the period, there has been a material change to the
estimate of the economic life and residual of three aircraft owned
by our aircraft leasing business. The changes are a result of an
alteration in strategy for the use of these assets within the
Group.
The following standards and amendments have an effective date
after the date of these financial statements:
Effective for
accounting periods
commencing on
Standard, amendment and interpretation or after
IFRS 16 - Leases 1 January 2019
Amendments to IAS 19/IFRIC 14 1 January 2019
IFRS 16: The new Leases standard, with certain exceptions,
requires the Group, where the Group is a lessee, to recognise right
of use assets and lease liabilities for all leases, there no longer
being a distinction between operating and finance leases for
lessees. The profile of the consolidated income statement impact
for items previously accounted for as operating leases is likely to
change for the Group, where the Group is a lessee, with a higher
periodic expense in the earlier periods of a lease. Following a
review of the impact of this standard, it will have a material
effect on the consolidated statement of financial position and
consolidated income statement presentation and measurement. Based
on the leases at 31 August 2018, the new standard would result in
right of use or lease assets and corresponding liabilities of
approximately GBP196m when the standard becomes effective.
Approximately GBP118m of this amount relates to leased aircraft
operated by our regional airline, Stobart Air.
Amendments to IAS 19 are not expected to have a material effect
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.
2 Seasonality of operations
There is a material effect of seasonality in both of our largest
operating divisions. In the Aviation division there are higher
seasonal sales in summer and this is partly offset by higher
seasonal sales in winter in the Energy division.
3 Segmental information
The reporting 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, airline operations and aircraft
leasing. The Stobart Energy segment specialises in 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 Eddie Stobart Logistics plc.
The Stobart Infrastructure segment specialises in management,
development and realisation of Group land and buildings assets as
well as investments in biomass energy plants.
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. Non-underlying costs, income taxes
and certain central costs are managed on a Group basis and are not
allocated to operating segments. Reportable segments have been
prepared on a consistent basis to the prior interim period.
Period ended Adjustments
31 August 2018 Aviation Energy Rail Investments Infrastructure and eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 87,068 29,877 12,729 1,967 1,039 2,922 135,602
Internal 66 - 9,895 - 38 (9,999) -
--------- -------- -------- ------------ --------------- ------------------ ---------
Pro forma revenue 87,134 29,877 22,624 1,967 1,077 (7,077) 135,602
Effect of UKFFO 15,717 - - - - - 15,717
--------- -------- -------- ------------ --------------- ------------------ ---------
Statutory revenue 102,851 29,877 22,624 1,967 1,077 (7,077) 151,319
--------- -------- -------- ------------ --------------- ------------------ ---------
Pro forma underlying
EBITDA 15,650 8,677 (4,840) 2,823 (1,054) (4,265) 16,991
Effect of UKFFO (17,545) - - - - - (17,545)
--------- -------- -------- ------------ --------------- ------------------ ---------
Underlying
EBITDA (1,895) 8,677 (4,840) 2,823 (1,054) (4,265) (554)
Non-underlying
items (823) (2,170) - - (844) (1,687) (5,524)
Swaps - - - - - 3,579 3,579
Depreciation (6,182) (3,168) (1,114) - (348) (119) (10,931)
Amortisation - (111) - - - (1,858) (1,969)
Impairment
of loan notes - - - - (2,500) - (2,500)
Interest 330 (366) (116) - (170) (595) (917)
--------- -------- -------- ------------ --------------- ------------------ ---------
(Loss)/profit
before tax (8,570) 2,862 (6,070) 2,823 (4,916) (4,945) (18,816)
--------- -------- -------- ------------ --------------- ------------------ ---------
Inter-segment revenues are eliminated on consolidation. Included
in adjustments and eliminations underlying EBITDA are central costs
of GBP4,199,000 (2017: GBP5,246,000) and intragroup profits
eliminated of GBP66,000 (2017: GBP252,000).
Period ended Adjustments
31 August 2017 Aviation Energy Rail Investments Infrastructure and eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 82,299 25,328 6,318 - 1,352 2,706 118,003
Internal 65 - 13,833 - 543 (14,441) -
--------- -------- -------- ------------ --------------- ------------------ --------
Pro forma revenue 82,364 25,328 20,151 - 1,895 (11,735) 118,003
Effect of UKFFO 6,550 - - - - - 6,550
--------- -------- -------- ------------ --------------- ------------------ --------
Statutory revenue 88,914 25,328 20,151 - 1,895 (11,735) 124,553
--------- -------- -------- ------------ --------------- ------------------ --------
Pro forma underlying
EBITDA 13,653 4,596 1,383 124,581 510 (5,498) 139,225
Effect of UKFFO (7,450) - - - - - (7,450)
--------- -------- -------- ------------ --------------- ------------------ --------
Underlying
EBITDA 6,203 4,596 1,383 124,581 510 (5,498) 131,775
Non-underlying
items (2,574) (2,126) - (237) (17) (3,703) (8,657)
Swaps (756) - - - - (542) (1,298)
Depreciation (3,042) (2,696) (386) - (302) (114) (6,540)
Amortisation - (111) - - - (1,858) (1,969)
Interest (727) (210) (96) - 629 (1,320) (1,724)
--------- -------- -------- ------------ --------------- ------------------ --------
(Loss)/profit
before tax (896) (547) 901 124,344 820 (13,035) 111,587
--------- -------- -------- ------------ --------------- ------------------ --------
4 Non-underlying items
Non-underlying items included in the consolidated income
statement comprise the items set out and described below.
Six months Six months Year ended
2018 2017 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
New business and new contract
set up costs 3,837 4,873 9,037
Transaction costs 112 247 766
Litigation and claims 1,575 3,300 4,058
Bad debt recovery - - (1,305)
Share of post-tax profits of
associates: Amortisation of
contracts - 237 237
Non-underlying items within
EBITDA 5,524 8,657 12,793
Amortisation of acquired intangibles 1,969 1,969 3,938
----------- ----------- -----------
Total non-underlying items 7,493 10,626 16,731
----------- ----------- -----------
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. The
costs in the current year were principally relating to (i)
pre-contract costs and excess costs incurred due to delays in
customer plants becoming operational in the Energy division and
(ii) marketing and support costs in relation to introducing routes
at London Southend Airport.
Transaction costs comprise costs of making investments that are
not permitted to be debited to the cost of investment or as issue
costs. These costs include costs of any aborted transactions.
The charge for litigation and claims includes costs incurred in
relation to the ongoing board dispute and associated legal claims.
Contingent assets in relation 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
principally relates to the amortisation of the brand assets.
5 Finance costs, finance income and impairment
Six months Six months
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
Bank loans 822 1,486
Interest on defined benefit pension
scheme 47 71
Finance charges payable under finance
leases and hire purchase agreements 640 459
Amortisation of deferred issue costs 146 148
Other interest 43 40
Foreign exchange losses - 499
Total finance costs 1,698 2,703
----------- -----------
Six months Six months
2018 2017
Unaudited Unaudited
GBP'000 GBP'000
Bank interest receivable 118 151
Interest receivable from associates
and joint ventures - 828
Foreign exchange gains 663 -
----------- -----------
Total finance income 781 979
----------- -----------
In addition to the amounts above, an impairment charge of
GBP2.5m has been recognised. This relates to the 25% investment in
the associated undertaking, Shuban Power Limited, principally
comprising shareholder loan notes. The Group receives periodic
valuations from the third-party investment manager. The valuation
undertaken in the period ended 31 August 2018 indicated there is a
potential risk that the shareholder loan notes will not be repaid
in full. This impairment may reverse in the future in the event of
operational improvement of the energy plant, an increase in long
term power price forecasts or changes in the price of
feedstock.
6 Taxation
Taxation on profit on ordinary activities
Total tax in the Condensed Six months Six months Year ended
Consolidated Income Statement 2018 2017 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Current income tax:
UK corporation tax - - 1,500
Overseas corporation tax - 30 -
Adjustments in respect of prior 1,015 -
years -
Total current tax 1,015 30 1,500
----------- ----------- -----------
Deferred tax:
Origination and reversal of
temporary differences (1,388) (567) (389)
Impact of change in rate - - (493)
Adjustment in respect of prior
years (947) 245 -
----------- ----------- -----------
Total deferred tax (2,335) (322) (882)
----------- ----------- -----------
Total (credit)/charge in the
income statement (1,320) (292) 618
----------- ----------- -----------
The GBP1,320,000 credit in the period is allocated GBP354,000
underlying and GBP966,000 non-underlying. Reductions in the UK
corporation tax rate from 20% to 19% (effective from 1 April 2017)
and a further reduction to 17% (effective from 1 April 2020) have
been announced and were substantively enacted at the balance sheet
date. As such, deferred tax has been calculated using a rate of
17%.
7 Dividends
A final dividend of 4.5p per share (2017: 4.5p) totalling
GBP15,628,000 (2017: GBP15,945,000) was declared on 10 May 2018 and
was paid on 6 July 2018.
An interim dividend of 4.5p per share (2017: 4.5p) totalling
GBP15,944,797 (2017: GBP15,843,953) was declared on 6 September
2018 and was paid on 5 October 2018 to shareholders on the register
as at 14 September 2018.
8 Earnings per share
The following table reflects the income and share data used in
the basic and diluted earnings per share calculations:
Six months Six months Year ended
2018 2017 2018
Unaudited Unaudited Audited
Numerator GBP'000 GBP'000 GBP'000
(Loss)/profit used for basic
and diluted earnings (17,496) 111,879 100,004
Denominator Number Number Number
Weighted average number of
shares used in basic EPS 345,974,719 349,275,009 348,915,545
Effects of employee share
options - 9,782,447 8,276,738
------------ ------------ ------------
Weighted average number of
shares used in diluted EPS 345,974,719 359,057,456 357,192,283
------------ ------------ ------------
Own shares held and therefore
excluded from weighted average
number 8,354,112 5,053,823 5,413,286
------------ ------------ ------------
The following table reflects the income used in the basic and
diluted underlying earnings per share calculations. The denominator
is consistent with the disclosed data in the table above.
Six months Six months Year ended
2018 2017 2018
Unaudited Unaudited Audited
Numerator GBP'000 GBP'000 GBP'000
Underlying profit used for
basic and diluted earnings 6,536 129,695 132,595
Underlying earnings per share
Basic 1.89p 37.13p 38.00p
Diluted 1.89p 36.12p 37.12p
----------- ----------- -----------
9 Property, plant and equipment
Additions and disposals
During the six months ended 31 August 2018, the Group acquired
or developed property, plant and equipment assets with a cost of
GBP18,681,000 (2017: GBP51,834,000). This included development work
at Carlisle Lake District Airport.
Property, plant and equipment assets with a book value of
GBP3,446,000 (2017: GBP98,688,000) were disposed of by the Group
during the six months ended 31 August 2018, resulting in a profit
of GBP442,000 (2017: GBP192,000).
Capital commitments
At 31 August 2018, the Group had capital commitments of
GBP946,000 (2017: GBP315,000), principally relating to the
development of a processing site in the Energy business.
10 Analysis of net debt
31 August 28 February
2018 2018
Unaudited Audited
Loans and borrowings GBP'000 GBP'000
Non-current
Fixed rate:
* Obligations under finance leases and hire purchase
contracts 20,471 14,873
Variable rate:
* Obligations under finance leases and hire purchase
contracts 5,025 8,466
* Bank loans 63,438 39,684
---------- ------------
88,934 63,023
---------- ------------
Current
Fixed rate:
* Obligations under finance leases and hire purchase
contracts 6,595 3,932
Variable rate:
* Obligations under finance leases and hire purchase
contracts 9,424 12,778
---------- ------------
16,019 16,710
---------- ------------
Total loans and borrowings 104,953 79,733
---------- ------------
Cash 29,402 43,108
---------- ------------
Net debt 75,551 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.
On 30 July 2018 the Group completed the amendment and extension
of our Revolving Credit Facility (RCF) with Lloyds Bank and Allied
Irish Bank. The increased GBP80m facility will continue to provide
the group with flexibility and committed headroom at a competitive
rate to mitigate liquidity risk for the next 4 years to January
2022.
The GBP80,000,000 variable rate committed revolving credit
facility, with a facility end date of January 2022, was drawn at
GBP64,000,000 (Feb 2018: GBP40,000,000) at the period end.
The Group was compliant with all financial covenants throughout
both the current and prior periods.
11 Fair values
Financial assets and liabilities
The carrying amounts of the following financial assets and
financial liabilities are a reasonable approximation of their fair
value: cash and cash equivalents, financial assets at fair value
through other comprehensive income, investments in associates and
joint ventures, trade and other receivables, trade and other
payables, derivative financial assets/liabilities.
The book value and fair values of the remaining financial
liabilities are as follows:
Book Value Fair Value
31 August 31 August
2018 2018
Unaudited Unaudited
GBP'000 GBP'000
Financial Liabilities
Bank loans 63,438 63,438
Finance leases and hire purchase arrangements 41,515 42,428
Book Value Fair Value
28 February 28 February
2018 2018
Audited Audited
GBP'000 GBP'000
Financial Liabilities
Bank loans 39,684 39,684
Finance leases and hire purchase arrangements 40,049 41,317
The fair values of loans and borrowings have been calculated by
discounting the expected future cash flows at prevailing interest
rates.
Fair Value Hierarchy
The fair value hierarchy is explained in the 2018 Annual
Report.
Financial Assets measured at Fair Value
Total Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000 GBP'000
As at 31 August
2018
Other financial
assets 61,975 61,975 - -
Swaps 4,993 - 4,993 -
As at 28 February
2018
Other financial
assets 63,690 63,690 - -
Swaps 1,414 - 1,414 -
During the six months ended 31 August 2018, there were no
transfers between Level 1 and Level 2 fair value measurements, and
no transfers into and out of Level 3 fair value measurements.
12 Cash generated from operations
Six months Six months Year ended
ended 31 ended 31 28 February
August 2018 August 2018
2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
(Loss)/profit before tax (18,816) 111,587 100,622
Adjustments to reconcile profit before tax to net cash flows:
Gain in value of investment properties - (319) (939)
Realised profit on sale of property,
plant and equipment and investment
properties (443) (192) (136)
Share of post-tax profits of associates
and joint ventures accounted for
using the equity method 588 (474) (474)
Gain on conversion of loan (1,095) - -
Loss/(gain)/(profit) on disposal
of assets held for sale 600 (400) (3,942)
Profit on disposal of associate - (123,870) (123,892)
Profit on sale and leaseback (710) - (4,064)
Profit on sale of property inventories - - (540)
Release of deferred profit on
sale and leaseback (204) (239) (404)
Gain on redelivery of aircraft (1,676) - -
Depreciation of property, plant
and equipment 10,931 6,540 15,332
Finance income (118) (979) (1,701)
Finance cost 1,698 2,204 3,411
Release of grant income (4,867) (359) (890)
Release of deferred premiums (1,308) (1,142) (2,346)
Amortisation of intangibles 1,969 1,969 3,938
Share option charge 674 1,093 1,678
Recycling of other comprehensive
income amounts on disposal of
associate - - (3,006)
Foreign exchange retranslation (1,292) (1,789) 30
(Gain)/loss on swaps mark to market
valuation (3,579) 659 (971)
Retirement benefits and other
provisions 4,879 (267) (1,398)
Working capital adjustments:
Decrease/(increase) in inventories 406 (1,004) (1,789)
Decrease/(increase) in trade and
other receivables 1,618 (3,477) (9,867)
(Decrease)/increase in trade and
other payables (7,398) 3,453 22,013
Cash used in continuing operations (18,143) (7,006) (9,335)
------------- ----------- -------------
13 Contingent liabilities
The Group is currently involved in a number of legal
proceedings, including claims against, and by a former director.
Due to inherent uncertainties, no accurate quantification of any
potential cost, or timing of such cost, which may arise from any of
the legal proceedings outlined can be made.
14 Glossary - Alternative performance measures
In the reporting of financial information, the Directors have
adopted various APMs. These measures are not defined by
International Financial Reporting Standards (IFRS) and therefore
may not be directly comparable with other companies' APMs.
APMs should be considered in addition to, and are not intended
to be a substitute for, or superior to, IFRS measurements.
Non-GAAP APMs are used as they are considered to be both useful
and necessary as well as enhancing the comparability of information
between reporting periods, by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the Group's performance.
Consequently, APMs are used by the Directors and management for
internal performance analysis, planning, reporting and
incentive-setting purposes. The presentation of these measures
facilitates comparability with other companies, although
management's measures may not be calculated in the same way as
similarly titled measures reported by other companies.
Underlying EBITDA
Underlying EBITDA is the key profitability measure used by
management for performance review in the day to day operations of
the Group.
Underlying EBITDA represents profit/(loss) before interest, tax,
depreciation, amortisation, swaps, and non-underlying items. Refer
to note 3 for reconciliation to statutory (loss)/profit before
tax.
Underlying profit before tax
Underlying profit before tax represents profit before tax and
before non-underlying items. Refer to note 3 for reconciliation to
statutory loss/(profit) for the period.
Earnings per share from underlying operations
This APM is based on underlying profit after tax which is
(loss)/profit for the year before non-underlying items and before
pro forma effect of UKFFO (see note 8 for further details).
LSA
London Southend airport.
UKFFO
UK Flybe franchise operation operating out of LSA and currently
being withdrawn.
Independent Review Report to Stobart Group Limited
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 August 2018 which comprises the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Financial
Position, Condensed Consolidated Statement of Changes in Equity,
Condensed Consolidated Statement of Cash Flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
August 2018 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Mick Davies
for and on behalf of KPMG LLP
Chartered Accountants
1 St Peter's Square
Manchester
M2 3AE
24 October 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKNDBDBDBNKB
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