TIDMSTOB
RNS Number : 3481T
Stobart Group Limited
14 November 2019
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.
14 November 2019
Stobart Group Limited
("Stobart" or the "Group")
Interim results for the six months ended 31 August 2019
Delivering strong strategic and operational performance in line
with expectations
Stobart Group Limited, the aviation and energy focused business,
today announces its interim results for the six months to 31 August
2019.
Warwick Brady, Chief Executive Officer, Stobart Group,
commented
"In London Southend Airport and Stobart Energy, the Group has
two businesses with immediate and considerable growth
opportunities.
"London Southend Airport continues to attract new airlines and
is on course to deliver our target of
5 million annual passengers at GBP8 EBITDA by February 2023. At
the same time, Stobart Energy is now set to become increasingly
cash generative.
"Both of these exciting growth businesses require further
investment in order to deliver their full potential. The Board has
undertaken an extensive review of the capital required to fund this
growth and taken the decision to suspend the dividend in order to
maximise the capital available for the further development of these
growth businesses. We are confident that, with the planned
strategic investment, we will deliver superior future returns."
31 August 31 August
2019 2018 % change
---------------------------------- ----------- ----------- ---------
Aviation
Passenger numbers 1,189,178 838,742 41.8%
Aviation revenue GBP26.4m GBP20.9m 25.8%
Underlying Aviation EBITDA(1) GBP4.1m GBP2.9m 43.0%
---------------------------------- ----------- ----------- ---------
Energy
Volume of waste managed 805,663 657,950 22.5%
Energy revenue GBP42.9m GBP29.9m 43.5%
Underlying Energy EBITDA(1) GBP11.7m GBP8.7m 35.4%
---------------------------------- ----------- ----------- ---------
Underlying EBITDA from the
two main operating divisions(1) GBP15.8m GBP11.6m 37.3%
---------------------------------- ----------- ----------- ---------
Revenue GBP93.1m GBP69.4m 34.1%
Underlying EBITDA(1) GBP12.1m GBP4.2m 187.1%
Loss for period (GBP20.9m) (GBP17.5m) (19.4%)
(1) Defined in glossary in note 15
Summary
Stobart Aviation:
-- Passenger numbers at London Southend Airport increased by
41.8% to 1.2 million, with circa 2.3 million passengers expected
for the year to February 2020.
-- Flybe/Virgin Connect announced yesterday that it is to open a
new base at London Southend that will involve two based aircraft
and a total of five aircraft serving 10 destinations. These
destinations are expected to attract circa 500,000 passengers
annually.
-- Underlying EBITDA per passenger increased by 3.0% to GBP3.55
(2018: GBP3.44). The commencement of operations with a global
logistics customer in October 2019 will make a significant
contribution to underlying EBITDA per passenger in the next
financial year.
-- Stobart Group will continue to invest in London Southend
Airport to deliver its target of welcoming 5 million passengers per
annum at GBP8 EBITDA per passenger in the year to February
2023.
Stobart Energy:
-- Volume of waste managed increased by 22.5% to 805,663 tonnes.
-- Underlying EBITDA increased 35.4% to GBP11.7m (2018:
GBP8.7m), reflecting the growing maturity of the business. Stobart
Energy is now set to become increasingly cash generative.
-- The Group will continue to invest in the business to maintain
its supply chain and infrastructure. The Group also intends to
explore commercial partnerships, collaborations and joint ventures
across the waste management and 'Energy from Waste' sector.
Financial:
-- Group revenue increased by 34.1% to GBP93.1m, driven, in
particular, by a strong performance in Stobart Energy.
-- Underlying EBITDA increased by 187.1% to GBP12.1m and loss
for the period increased by GBP3.4m to GBP20.9m.
-- Loss for the period includes an GBP8.5m non-cash impairment
of intangible assets in Stobart Rail & Civils, GBP3.7m non-cash
brand amortisation and GBP7.4m of new business and new contract
set-up costs.
Balance Sheet:
-- Stobart Group has evaluated the significant growth potential
within its aviation and energy businesses, and its available
sources of investment funding.
-- The Board continues to hold an GBP80m portfolio of
non-strategic infrastructure assets. However, the Board intends to
dispose of these assets at the right time and in such a way that
optimises the value to the Group.
-- The Board's intention is to restore the dividend at the point
at which the Group becomes significantly cash generative at an
operating level, subject to investment requirements to maximise
shareholder returns.
Enquiries:
Stobart Group Limited
Charlie Geller, Head of Communications Via Newgate Communications
Newgate Communications +44 203 757 6880
Giles Croot Stobart@newgatecommunications.com
Ian Silvera
Stobart Group Limited
("Stobart" or the "Group")
Interim Results for the six months ended 31 August 2019
Divisional Revenue Summary 31 August 31 August
2019 2018
GBPm GBPm
Aviation 26.4 20.9
Energy 42.9 29.9
Rail & Civils 29.4 22.6
Investments 2.1 2.0
Non-Strategic Infrastructure 1.3 1.1
Central costs and eliminations (9.0) (7.1)
---------- ----------
Revenue 93.1 69.4
---------- ----------
Divisional Continuing Profit Summary 31 August 31 August
2019 2018
GBPm GBPm
Aviation 4.1 2.9
Energy 11.7 8.7
----------
Underlying EBITDA from two main operating
divisions(1) 15.8 11.6
Rail & Civils (1.0) (4.8)
Investments 2.3 2.8
Non-Strategic Infrastructure (1.5) (1.1)
Central costs and eliminations (3.5) (4.3)
---------- ----------
Underlying EBITDA(1) 12.1 4.2
Non-underlying items (23.0) (6.9)
Gain on swaps 0.1 3.6
Depreciation (11.4) (7.6)
Impairment of loan notes - (2.5)
Finance costs (net) (4.5) (1.4)
Tax 3.2 1.5
---------- ----------
Loss for the period (23.5) (9.1)
---------- ----------
(1) Defined in glossary in note 15
Divisional Reviews
Stobart Group is focused on increasing the value of its
infrastructure assets in its core Aviation and Energy divisions.
The Group also has a Rail & Civils division, and holds a
portfolio of investments, including shareholdings in Connect
Airways and Eddie Stobart Logistics, and non-strategic
infrastructure assets.
Stobart Aviation
Stobart Aviation's principal asset is London Southend Airport.
The airport continues to grow rapidly with passenger numbers
increasing by 42% to 1,189,178 (2018: 838,742) in the period. The
Board expects to welcome circa 2.3 million passengers for the full
year, which would represent 164% growth since 2017. The Board
expects this rapid growth to continue as a result of its planned
investment programme, making the airport more attractive to
passengers and airlines alike.
London Southend Airport now offers flights to more than 40
destinations, and partners with airlines including easyJet, Ryanair
and Wizz Air. During the period, Stobart Group was part of the
Connect Airways consortium that received EU merger approval to take
management control of Flybe. Flybe is in the process of rebranding
to Virgin Connect and yesterday announced its plan to open a new
base at London Southend Airport that will involve two based
aircraft and a total of five aircraft serving 10 destinations.
These destinations are expected to attract circa 500,000 passengers
annually.
London Southend Airport continues to build its reputation for an
excellent passenger experience. A Which? Survey in October said the
Airport had the joint fastest security waiting time across UK
airports. Passengers can also enjoy a growing range of high street
brands in the departure lounge, including Dixons, WH Smith, Costa
Coffee and Giraffe STOP. As a result, London Southend Airport was
reported to be London's best performing airport in a Which? survey
for the sixth consecutive year in September.
Another part of the attraction of London Southend Airport is the
ease of access. This has improved even further in the period.
Passengers can now more easily connect to the first and last
flights following the introduction of early morning and late-night
trains as well as new bus services. The percentage of passengers
travelling to and from the airport by train from Central London has
increased to over 30%.
The increase in airline partnerships and passenger numbers in
2019 gives the Board confidence that the airport will welcome 5
million passengers in the year to February 2023 as planned. The
improved retail offering and revenue from train passengers and car
parking will help deliver the February 2023 EBITDA per passenger
target of GBP8. This target will be further helped by the
commencement of operations with a global logistics customer. That
customer is utilising existing hangarage on the north side of the
airport, away from the passenger operation. In October the Group
announced the agreement has created circa 200 jobs in the area and
will make a significant contribution to our EBITDA per passenger
target from the next financial year onward.
To ensure the customer experience keeps pace with expected
passenger growth, improvements will continue to be made to the
airport. The investment will help the airport meet its passenger
target by enhancing the attractiveness of the airport to airlines
and increasing the terminal capacity for customers. The investment
will also support the EBITDA per passenger target by allowing the
Group to capitalise on the revenue opportunities increased capacity
brings. For example, the Group plans to invest in new car parking,
and the building of a new hotel. The current hotel is reporting 93%
occupancy, higher than other similar hotels at other London
Airports.
Other plans include optimising the space within the departures
terminal and moving arrivals to a new purpose-built facility. This
means London Southend Airport can combine enhanced passenger flow
through check-in and security with an even greater retail offering.
This work is expected to be completed over the next three years,
with the pace of capital expenditure decisions made in reference to
the macro-economic environment. In the immediate term, Stobart
Group intends to introduce automated check-in facilities and the
latest security clearance technology for passenger baggage. This
will help maintain the Airport's reputation for being 'quick and
easy' and ensure the terminal capacity keeps pace with the
short-term increase in passenger numbers.
Stobart Aviation's other businesses have also performed well in
the period. Stobart Aviation Services now has over 400 employees
and 14 airline client contracts operating across five airports. It
has exceeded the targets set in its strategic plan for year one in
terms of both revenue and profitability.
Stobart Aviation's relationship with the Tees Valley Combined
Authority continues to develop. Durham Tees Valley Airport was
rebranded to Teesside International Airport in July and the airport
has seen a number of new airlines start or commit to starting
services.
At London Southend Airport, the Stobart Jet Centre appointed an
experienced new managing director, Fiona Langton. She is tasked
with increasing the centre's share of the London private jet
market, and also look to grow its presence in Cumbria and Teesside.
The pace of growth at Stobart Jet Centre is likely to be tempered
by the reduced availability of night time movements that are
instead being utilised by the airport's global logistics
customer.
Stobart Energy
As of October 2018, 29 out of the 30 energy recovery plants that
Stobart Energy supplies have now reached full contractual
operational volumes. As a result, the volume of waste managed by
Stobart Energy during the period increased by 147,713 tonnes to
805,663 tonnes - equivalent to a run rate of 1.7m tonnes per annum.
This represents a 22% increase on the same period last year.
The increase in the volume of waste managed, the consistent
energy recovery plants performance and a more efficient supply
chain led to a 35% increase in underlying EBITDA to GBP11.7m for
the period.
As these plants have now reached full commercial operations,
Stobart Energy will benefit from improved protections in terms of
contracted fuel supply that were not available during
commissioning. In addition, there will be much lower non-underlying
costs which previously related to pre-contract supply chain
challenges.
During the period Stobart Energy incurred significant costs in
an attempt to maintain the supply chain for the Tilbury Green Power
plant following an extended unplanned outage from the end of April
until the middle of October. Stobart Energy expects to recover the
financial impact of the unplanned outage via an exercise of
contractual take or pay provisions and insurance cover.
Stobart Energy has now reached the point at which the energy
recovery plants it supplies are operating for sustained periods on
a more consistent basis and accepting more contracted fuel. We
expect this in turn to ease the pressure on the wider supply chain
over the next 12 to 18 months, allowing Stobart Energy to realise
the value of the investment it has made to date in its supply
chain. In turn, this means margins are expected to improve,
allowing it to become increasingly cash generative, and deliver
strong and stable cashflows going forward.
A measure of how far Stobart Energy has evolved came through an
independent valuation of the energy business, which was received as
part of the vesting of the Stobart Energy Incentive Plan (SEIP).
The SEIP was an incentive plan put in place to fully align the
management of the energy business with shareholder interests by
benefitting from a significant increase in the value of the
division. For the purpose of determining the value of awards to
management under the SEIP, the Remuneration Committee appointed an
independent valuer to carry out a valuation of the energy business
on a consolidated basis. That independent valuation of the division
was an equity value of GBP237m as at 30 June 2019, compared to a
starting valuation of GBP100m as at 30 June 2016.
The Group is now looking to build on the progress made to date
by Stobart Energy. To deliver this progress, the Group will invest
in the division's fleet replacement programme, storage sites,
replacement mobile processing equipment and IT systems that it
requires. The Board believes there are opportunities for further
growth across the waste management and 'Energy from Waste' sectors.
As a result, it is studying opportunities to leverage its
operational experience through establishing commercial
partnerships, collaborations and joint ventures that will allow it
to grow the volume of waste that it manages.
Update on Capital Plans and Dividend
With the investment programme set out above, the Group's
aviation and energy businesses have a clear path to delivering
superior value for the Group's shareholders.
In recent years, Stobart's dividend has been largely funded from
the sale of assets rather than operational cash generation. The
Board believes that this practice is unsustainable and no longer in
the interest of shareholders. Whilst the Group continues to hold a
significant portfolio of non-strategic infrastructure assets, the
Board, will continue to sell assets in such a way that optimises
the value to the Group.
As a result, and in order to maximise this opportunity and
shareholder value over the medium term, the Board has taken the
decision to suspend the dividend, conserving GBP11m of cash in the
current period and GBP22m per annum that can now be invested in
these growth opportunities within the Group.
The Group has also commenced a process to obtain new long-term
debt to fund its growth programme and will provide a further update
as soon as it is in a position to do so.
Stobart Rail & Civils, Investments and Non-Strategic
Infrastructure
Stobart Group also has a portfolio of non-core businesses and
assets, from which the Board will aim to optimise shareholder value
over time.
Stobart Rail & Civils has been re-orientated to focus on
external works. This follows the appointment of a new management
team last year. That refreshed team has focused its attention and
investment on project delivery and contract management so that
works, such as that for Nexus on the Tyne and Weir Metro, are
consistently delivered profitably, on time and on budget.
Significant milestones were also reached on the design and
construction of the new maintenance facility at Newton Heath for
Arriva Northern Rail.
Stobart Rail & Civils has a clear pathway to reduce both its
exposure to legacy projects and contribution from internal works
and expects to complete all of its legacy projects by February
2023.
Network Rail has been slow to award work at the start of Control
Period 6 (CP6) which has impacted the whole industry. Stobart Rail
& Civils is now well positioned to improve its performance once
the CP6 issues are resolved. While the division is not material in
terms of delivering the Group's targets, the action undertaken to
de-risk and re-focus the business will allow management to realise
value from it in the future.
Another asset, Carlisle Lake District Airport was successfully
opened in July 2019 for commercial flights. It is becoming an
increasingly important business hub for the Cumbrian and Border
regions .
Other investments include stakes in Connect Airways and Eddie
Stobart Logistics. In July 2019, Connect Airways (in which Stobart
Group holds a 30% interest) received merger control clearance from
the European Commission for its acquisition of Flybe. With Connect
Airways taking over full management control of Flybe, the
leadership teams are focused on plans to grow its regional network,
while Stobart Air continues to expand its successful franchise
business.
Stobart Group holds an 11.8% investment in Eddie Stobart
Logistics. The Company raised GBP53.1million of secured guaranteed
exchangeable bonds against its shareholding in Eddie Stobart
Logistics in May 2019. There are no changes to the status or term
of the bonds. That position was not affected by the decision made
by Eddie Stobart Logistics to suspend its dividend and shares, nor
is it impacted by a possible change of ownership. Despite recent
events, there remains considerable value in the Eddie Stobart brand
which continues to be owned by Stobart Group.
Financial Review
Revenue has increased by 34.1% to GBP93.1m (2018: GBP69.4m) in
the six months to 31 August 2019, driven by growth in the operating
divisions. Aviation has grown by 26.2% to GBP26.4m (2018:
GBP20.9m), with London Southend Airport (LSA) passenger numbers
increasing by 41.8% to 1,189,178 year-on-year. Revenue in Energy
has grown by 43.5% to GBP42.9m (2018: GBP29.9m) on the back of an
22.5% increase in tonnes to 805,663.
Underlying EBITDA has increased by 187.1% to GBP12.1m (2018:
GBP4.2m). Aviation has seen underlying EBITDA grow by 43.0% to
GBP4.1m (2018: GBP2.9m) on the back of increasing passenger numbers
through LSA. Energy has delivered a 35.4% increase in underlying
EBITDA to GBP11.7m (2018: GBP8.7m), as the volume of waste managed
increased in the period.
The loss before tax from continuing operations of GBP26.6m
(2018: GBP10.6m) includes a one-off impairment of intangible assets
relating to the Rail & Civils cash generating unit (GBP8.5m),
non-underlying new business and new contract set up costs in the
Aviation division (GBP5.7m), which are expected to be much lower in
the second half of the year, and an increased amortisation charge
in relation to our brand assets (GBP3.7m). 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.
Discontinued presentation on income statement
On 22 February 2019, the Group entered in to an agreement to
dispose of Propius Holdings Limited (Propius) to Connect Airways.
The results of the Propius business for the period are included
within discontinued operations. The prior period results have been
restated accordingly.
Swaps, Depreciation and Interest
The mark to market gain on swaps in the period was GBP0.1m
(2018: GBP3.6m). The current period movement is driven by the mark
to market valuations relating to diesel and US dollar swaps.
Depreciation has increased by GBP3.8m to GBP11.4m, with the
majority of this increase relating to additional processing site
assets and development at London Southend Airport.
Finance costs of GBP6.7m (2018: GBP2.0m) have increased largely
due to the transition to IFRS 16 and the payment of the Eddie
Stobart Logistics plc (ESL) dividend received to the exchangeable
bondholders. Finance income of GBP2.2m (2018: GBP0.6m) increased
due to interest receivable on loans made to Connect Airways and
Flybe, plus GBP0.5m unwind of fair value of the GBP25m 8% loan
notes with Connect Airways. The fair value is based on the present
value of the future cash flows, discounted at the estimated market
rate of interest.
Non-underlying items
31 August 2019 31 August 2018
GBP'000 GBP'000
-------------- --------------
New business and new contract set
up costs 7,367 3,324
Transaction costs - 112
Restructuring costs 552 -
Litigation and claims 330 1,575
Impairment 8,474 -
Share of post-tax losses of joint
venture 2,490 -
Amortisation 3,739 1,969
Total non-underlying items 22,952 6,980
-------------- --------------
We incurred new business and new contract set-up costs in the
Aviation division for new route development (GBP5.7m), the Energy
division relating to delayed commissioning of biomass plants
(GBP1.2m) and in the Non-Strategic Infrastructure division in
connection with Carlisle Lake District Airport development
(GBP0.5m).
Restructuring costs includes the removal of roles within the
Group, Aviation and Rail & Civils businesses. Litigation and
claims relate to the ongoing board dispute and trial costs,
including income received following cost orders. The impairment
charge relates to the write off of goodwill and other intangible
assets attributable to Rail & Civils.
Non-underlying share of post-tax losses of joint venture relate
to costs incurred by Connect Airways in acquiring Flybe, Stobart
Air and Propius. Amortisation relates to the Eddie Stobart brand
(GBP3.7m), which has doubled compared to the prior period,
following a review of the residual value. The charges in relation
to the non-cash amortisation of the brand is expected to continue
in future periods (see note 5 for further details).
Taxation
The tax credit is GBP3.2m (2018: GBP1.5m). This arises due to
the forecast utilisation of tax loss attributes arising in the
period and an accelerated unwind of the Group's deferred tax
liability relating to intangible assets (see note 7 for further
details).
Loss per share
Loss per share from underlying continuing operations(1) was
0.50p (2018: 0.89p). Total basic loss per share from continuing
operations was 6.40p (2018: 2.63p) (see note 8 for further
details).
(1) Defined in glossary in note 15
Dividends
31 August 2019 31 August 2018
-------------- --------------
Interim dividend (April) - 4.5p
Final dividend (July) 3.0p 4.5p
3.0p 9.0p
-------------- --------------
Total dividends paid (GBP'000) 11,125 31,256
-------------- --------------
A final dividend of 3.0p per share was paid on 31 July 2019.
Balance sheet
31 August 2019 28 February 2019
GBP'000 GBP'000
-------------- ----------------
Non-current assets 521,149 467,416
Current assets 89,187 79,736
-------------- ----------------
Total assets 610,336 547,152
Non-current liabilities (195,867) (137,722)
Current liabilities (170,293) (112,476)
Net assets 244,176 296,954
-------------- ----------------
The decrease in the net asset position of GBP52.8m principally
relates to the revaluation of ESL investment (GBP16.4m), dividends
paid (GBP11.1m) and the loss for the period (GBP20.9m).
Non-current assets have increased in the period, largely due to
the transition to IFRS 16. This increase was offset by a reduction
in other financial assets and amortisation, and write off, of
intangible assets.
Other financial assets represent the Groups investment in ESL
with a fair value at 31 August 2019 of GBP28.6m. Included in the
Condensed Consolidated Statement of Comprehensive Income is the
loss of GBP16.4m for the six months to 31 August 2019, following a
29.5p reduction in the ESL share price from 100.5p to 71.0p, prior
to the suspension in trading of ESL shares. Following this
suspension, management have made the judgement that the fair value
of this investment is lower than this share price on the date of
suspension, so have provided for a further 10% reduction in
value.
Current assets have increased by GBP9.5m, which primarily
relates to an increase in receivables, offset by a cash reduction
in the period. Non-current liabilities have increased by GBP58.1m,
principally driven by the increase in loans and borrowings,
following the transition to IFRS 16. See note 11 for further
details.
Current liabilities include the secured guaranteed exchangeable
bonds (Bonds) as in accordance with IAS 1 it is necessary for the
Bonds, issued on 3 May 2019, to be presented as a current liability
because the Group does not have an unconditional right to defer
settlement of the liability for at least 12 months after the
reporting period. The bondholders have an unconditional right to
require the group to settle the Bonds by giving the bondholders
shares in ESL at any time. The Group has no obligation to settle
the Bonds in cash within 12 months of the balance sheet date.
Debt and gearing
31 August 2019 28 February 2019
-------------- ----------------
Net debt:
- asset-backed finance GBP147.5m GBP97.5m
- IFRS 16 lease obligations GBP76.9m -
- cash (GBP7.7m) (GBP14.4m)
Total net debt GBP216.7m GBP83.1m
-------------- ----------------
Underlying EBITDA(1) /underlying
interest 3.1 2.1
Net debt/total assets 35.5% 15.2%
Gearing 88.7% 28.0%
-------------- ----------------
(1) Defined in glossary in note 15
In May 2019, the Group placed GBP53.1m of Bonds issued out of
its wholly owned subsidiary Stobart Finance plc. The Bonds have a
five-year maturity and are unconditionally and irrevocably
guaranteed by the Company and are exchangeable into ordinary shares
of one penny each in the capital of ESL.
On 1 March 2019, The Group adopted IFRS 16 which created lease
liabilities of GBP78.2m. These liabilities have replaced operating
lease charges in the Condensed Consolidated Income Statement for
nearly all leases held. See note 1 for further information and
details of the transition.
At 31 August 2019, the committed undrawn headroom of the RCF was
GBP29.0m (28 February 2019: GBP22.0m), and with cash balances of
GBP7.7m (28 February 2019: GBP14.4m), total headroom was GBP36.7m
(28 February 2019: GBP36.4m).
Cash flow
31 August 2019 31 August 2018
GBP'000 GBP'000
-------------- --------------
Operating cash flow (18,612) (18,143)
Investing activities (9,359) 24,308
Financing activities 21,264 (19,871)
-------------- --------------
Decrease in the period (6,707) (13,706)
Cash at beginning of period 14,432 43,108
Cash at end of period 7,725 29,402
-------------- --------------
There was an operating cash outflow in the period of GBP18.6m
(2018: GBP18.1m) principally relating to adverse working capital
movements in the Energy and Aviation divisions, which are expected
to improve in the second half. The working capital outflows are
principally related to increased receivable balances from new
business.
There was a cash outflow of GBP1.8m in relation to the UK Flybe
Franchise Operation (UKFFO) that is ceasing, but due to ongoing
commitments the Group will see the cash impact until February
2020.
Net cash outflows from investing activities include the purchase
of property, plant and equipment (PPE) totalling GBP13.0m,
principally relating to the development at London Southend
Airport.
Net cash inflows from financing activities include proceeds from
the issue of Bonds (GBP51.4m), repayment of finance leases
(GBP9.5m) and the net repayment of the RCF (GBP7.0m), in addition
to GBP11.1m of dividends paid.
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 statutory
accounts for the year ended 28 February 2019 and are broadly
unchanged.
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 statutory accounts for the year ended 28 February
2019 that could do so.
The above statement of Directors' responsibilities was approved
by the Board on
14 November 2019.
Lewis Girdwood
Director
14 November 2019
Condensed Consolidated Income Statement
For the six months ended 31 August 2019
Unaudited Unaudited
Six months ended 31 August Six months ended 31 August
2019 2018
Underlying Non-underlying Total Underlying Non-underlying Total
Continuing operations Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3 93,131 - 93,131 69,429 - 69,429
----------- --------------- --------- ----------- --------------- ---------
Other operating income 194 - 194 2,248 - 2,248
Operating expenses (81,360) (8,249) (89,609) (66,873) (5,011) (71,884)
Share of post-tax
profits of associates
and joint ventures 140 (2,490) (2,350) (588) - (588)
----------- --------------- --------- ----------- --------------- ---------
EBITDA 12,105 (10,739) 1,366 4,216 (5,011) (795)
Gain on swaps 114 - 114 3,579 - 3,579
Depreciation (11,354) - (11,354) (7,552) - (7,552)
Amortisation 5 - (3,739) (3,739) - (1,969) (1,969)
Impairments 5 - (8,474) (8,474) - - -
----------- --------------- --------- ----------- --------------- ---------
Operating profit/(loss) 865 (22,952) (22,087) 243 (6,980) (6,737)
Impairment of loan
notes - - - (2,500) - (2,500)
Finance costs 6 (6,732) - (6,732) (2,032) - (2,032)
Finance income 6 2,186 - 2,186 654 - 654
----------- --------------- --------- ----------- --------------- ---------
Loss before tax (3,681) (22,952) (26,633) (3,635) (6,980) (10,615)
Tax 7 1,849 1,333 3,182 565 966 1,531
----------- --------------- --------- ----------- --------------- ---------
Loss for the period
from continuing operations (1,832) (21,619) (23,451) (3,070) (6,014) (9,084)
----------- --------------- ----------- ---------------
Discontinued operations
Profit/(loss) from
discontinued operations,
net of tax 2,567 (8,412)
--------- ---------
Loss for the period (20,884) (17,496)
--------- ---------
Loss per share expressed in pence per share - continuing operations
Basic 8 (6.40p) (2.63p)
Diluted 8 (6.40p) (2.63p)
Loss per share expressed in pence per share - total
Basic 8 (5.70p) (5.06p)
Diluted 8 (5.70p) (5.06p)
Condensed Consolidated Income Statement
For the six months ended 31 August 2019
Audited
Year ended 28 February
2019
Underlying Non-underlying Total
Continuing operations Notes GBP'000 GBP'000 GBP'000
Revenue 3 146,889 - 146,889
----------- --------------- ----------
Other operating income 1,310 - 1,310
Operating expenses (135,631) (17,135) (152,766)
Share of post-tax profits of associates
and joint ventures (1,740) - (1,740)
----------- --------------- ----------
EBITDA 10,828 (17,135) (6,307)
Loss on swaps (353) - (353)
Depreciation (16,305) - (16,305)
Amortisation 5 - (3,938) (3,938)
Impairments 5 - (7,800) (7,800)
----------- --------------- ----------
Operating loss (5,830) (28,873) (34,703)
Impairment of loan notes 5 (3,208) - (3,208)
Finance costs 6 (5,213) - (5,213)
Finance income 6 1,010 - 1,010
----------- --------------- ----------
Loss before tax (13,241) (28,873) (42,114)
Tax 7 (3,321) 2,791 (530)
----------- --------------- ----------
Loss for the period from continuing
operations (16,562) (26,082) (42,644)
----------- ---------------
Discontinued operations
Loss from discontinued operations,
net of tax (15,535)
----------
Loss for the period (58,179)
----------
Loss per share expressed in pence per share - continuing operations
Basic 8 (12.19p)
Diluted 8 (12.19p)
Loss per share expressed in pence per share - total
Basic 8 (16.64p)
Diluted 8 (16.64p)
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 August 2019
Six months Six months
ended ended Year ended
31 August 31 August 28 February
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Loss for the period (20,884) (17,496) (58,179)
Change in fair value of assets
classified as available-for-sale - (5,810) -
Discontinued operations, net of
tax, relating to exchange differences (1,212) 1,180 2,041
Tax on items relating to components
of other comprehensive income - 37 -
Other comprehensive (expense)/income
to be reclassified to profit or
loss in subsequent periods, net
of tax (1,212) (4,593) 2,041
------------- ------------- --------------
Re-measurement of defined benefit
plan (1,231) 1,103 (260)
Change in fair value of financial
assets classified as FVOCI (16,358) - (18,772)
Tax on items relating to components
of other comprehensive income/(expense) 273 (188) 45
Other comprehensive (expense)/income
not being reclassified to profit
or loss in subsequent periods,
net of tax (17,316) 915 (18,987)
Other comprehensive expense for
the period, net of tax (18,528) (3,678) (16,946)
------------- ------------- --------------
Total comprehensive expense for
the period (39,412) (21,174) (75,125)
------------- ------------- --------------
Condensed Consolidated Statement of Financial Position
For the six months ended 31 August 2019
31 August 28 February
2019 2019
Unaudited Audited
Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 10 329,569 262,915
Investment in associates and joint
ventures 10,777 10,459
Other financial assets 28,560 44,918
Investment property 3,200 4,000
Intangible assets 88,268 100,482
Net investment in lease 13,763 -
Other receivables 47,012 44,642
---------- ------------
521,149 467,416
---------- ------------
Current assets
Inventories 22,740 22,559
Trade and other receivables 56,640 41,271
Cash and cash equivalents 11 7,725 14,432
Assets held for sale 2,082 1,474
89,187 79,736
---------- ------------
Total assets 610,336 547,152
---------- ------------
Non-current liabilities
Loans and borrowings 11 (156,016) (84,121)
Defined benefit pension scheme (4,006) (3,170)
Other liabilities (10,940) (11,096)
Deferred tax (10,021) (13,560)
Provisions (14,884) (25,775)
---------- ------------
(195,867) (137,722)
---------- ------------
Current liabilities
Trade and other payables (49,699) (53,648)
Loans and borrowings 11 (16,835) (13,433)
Exchangeable bonds* 11 (51,559) -
Corporation tax (12,412) (12,412)
Provisions (8,341) (5,438)
Liabilities held for sale (31,447) (27,545)
(170,293) (112,476)
---------- ------------
Total liabilities (366,160) (250,198)
---------- ------------
Net assets 244,176 296,954
---------- ------------
Capital and reserves
Issued share capital 37,082 37,082
Share premium 324,379 324,379
Foreign currency exchange reserve (732) 480
Reserve for own shares held by employee
benefit trust (8,759) (12,154)
Retained earnings (107,794) (52,833)
---------- ------------
Total Equity 244,176 296,954
---------- ------------
* In accordance with IAS 1 it is necessary for the secured
guaranteed exchangeable bonds (Bonds), issued on 3 May 2019, to be
presented as a current liability because the Group does not have an
unconditional right to defer settlement of the liability for at
least 12 months after the reporting period. The bondholders have an
unconditional right to require the group to settle the bonds by
giving the bondholders shares in Eddie Stobart Logistics plc (ESL)
at any time. The Group has no obligation to settle the Bonds in
cash within 12 months of the balance sheet date.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 August 2019
For the six months ended 31 August 2019
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
2019 37,082 324,379 480 (12,154) (52,833) 296,954
IFRS 16 transition
adjustment, net
of tax - - - - (2,846) (2,846)
---------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 1 March
2019 (adjusted) 37,082 324,379 480 (12,154) (55,679) 294,108
---------------------- --------- --------- ---------- --------- ---------- ---------
Loss for the period - - - - (20,884) (20,884)
Other comprehensive
expense for the
period - - (1,212) - (17,316) (18,528)
---------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
expense for the
period - - (1,212) - (38,200) (39,412)
Employee benefit
trust - - - 3,395 (3,294) 101
Share-based payment
credit - - - - 420 420
Tax on share-based
payment credit - - - - 84 84
Dividends - - - - (11,125) (11,125)
---------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 31 August
2019 37,082 324,379 (732) (8,759) (107,794) 244,176
---------------------- --------- --------- ---------- --------- ---------- ---------
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 year ended 28 February 2019
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
2018 35,434 301,326 (1,884) (330) 71,374 405,920
Loss for the period - - - - (58,179) (58,179)
Other comprehensive
income/(expense)
for the period - - 2,041 - (18,987) (16,946)
-------------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income/(expense)
for the period - - 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)
IFRS 15 transition
adjustment, net
of tax - - - - (3,278) (3,278)
-------------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 28 February
2019 37,082 324,379 480 (12,154) (52,833) 296,954
-------------------------- --------- --------- ---------- --------- ---------- ---------
Condensed Consolidated Statement of Cash Flows
For the six months ended 31 August 2019
Six months Six months Year ended
ended 31 ended 31 28 February
August 2019 August 2018 2019
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
Cash used in continuing operations 13 (16,823) (417) (1,737)
Cash outflow from discontinued operations (1,789) (17,726) (11,059)
Income taxes paid - - -
------------- ------------- -------------
Net cash flow from operating activities (18,612) (18,143) (12,796)
------------- ------------- -------------
Purchase of property, plant and equipment
and investment property (13,031) (9,715) (23,731)
Purchase of property inventories - (1,829) (1,282)
Proceeds from the sale of property
inventories - 25,346 -
Proceeds from the sale of property,
plant and equipment and investment
property 2,731 3,888 8,501
Proceeds from disposal of asset held
for sale - - 6,217
Proceeds from sale and leaseback
(net of fees) - - 30,049
Cash disposed on sale of subsidiary
undertaking - - (3,728)
Non-underlying transaction costs - (112) -
Equity investment in associates and
joint ventures (2,667) - (1,500)
Net amounts repaid from/(advanced
to) joint ventures 2,938 - (143)
Interest received 670 12 57
Cash inflow/(outflow) from discontinued
operations - 6,718 (4,577)
------------- ------------- -------------
Net cash flow from investing activities (9,359) 24,308 9,863
------------- ------------- -------------
Dividend paid on ordinary shares (11,125) (31,256) (52,516)
Issue of ordinary shares less costs
of issue - - 24,702
Proceeds from issue of exchangeable
bonds 51,354 - -
Proceeds from grants 318 - 5,400
Repayment of capital element of finance
leases (8,168) (7,420) (14,382)
Repayment of IFRS 16 leases (1,306) - -
Net (repayment)/drawdown from revolving
credit facility (7,000) 23,609 17,572
Purchase of treasury shares (net
of costs) - (3,416) (3,416)
Interest paid (2,809) (1,722) (3,103)
Cash inflow from discontinued operations - 334 -
------------- ------------- -------------
Net cash flow from financing activities 21,264 (19,871) (25,743)
------------- ------------- -------------
Decrease in cash and cash equivalents (6,707) (13,706) (28,676)
Cash and cash equivalents at beginning
of period 14,432 43,108 43,108
------------- ------------- -------------
Cash and cash equivalents at end
of period 7,725 29,402 14,432
------------- ------------- -------------
1 Accounting policies of Stobart Group Limited
Corporate information
The condensed consolidated financial statements of the Group for
the six months ended 31 August 2019 were authorised for issue in
accordance with a resolution of the Directors on 14 November 2019.
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 2019 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 2019. Except
for the 28 February 2019 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 2019 but
has been derived from those accounts. Statutory accounts for the
year ended 28 February 2019 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 EU.
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.
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 interim financial
statements, together with the projected covenant compliance of the
Group.
The Group, which has net assets of GBP244.2m, made a loss from
continuing operations of GBP23.5m and had negative working capital
of GBP15.2m and an operating cash outflow from continuing
operations of GBP16.8m during the period. The Group has a revolving
credit facility of GBP80.0m, which was drawn at GBP51.0m at 31
August 2019. The Group has cash balances of GBP7.7m and this,
together with the undrawn facility, results in total headroom of
GBP36.7m as at 31 August 2019.
The Directors have prepared forecasts through to February 2024,
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 Group has other available actions should these transactions
not occur as expected, including reducing discretionary capital
expenditure assumed during the forecast period in order for the
Group to further invest in the growth divisions of Aviation and
Energy.
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 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 2019. These accounting
policies are expected to be applied for the full year to 29
February 2020.
The estimates and judgements taken by the Directors in preparing
these interim financial statements are comparable with those
disclosed in the statutory accounts for the year ended 28 February
2019, except where stated.
The Group has initially adopted IFRS 16 Leases from 1 March
2019, which resulted in right-of-use assets of GBP60.9m, a net
investment of GBP14.0m, liabilities of GBP78.2m and GBP2.8m
adjustment to equity being recognised in the Condensed Consolidated
Statement of Financial Position. The right-of-use assets recognised
on transition were adjusted for any prepaid or accrued lease
expenses. The lease liability was calculated as the future lease
repayments, discounted at the incremental borrowing rate. The
weighted average incremental borrowing rate applied on transition
was 4.2%. The Group has a sub-lease on one of its property's and
has recognised a net investment for this particular property, with
the difference between the leases as lessee and lessor taken
directly to retained earnings. The Group applied the modified
retrospective approach and as such the comparative periods have not
been restated. The Group has applied the ongoing recognition
exemptions for short-term leases and low value leases and applied
the following practical expedients on transition:
-- Reliance on previous identification of a lease (as provided
by IAS 17) for all contracts that existed on 1 March 2019;
-- Reliance on previous assessments on whether leases are
onerous instead of performing an impairment review;
-- Accounting for operating leases with a remaining term of less
than 12 months from 1 March 2019 as short-term leases;
-- Exclusion of initial direct costs from the measurement of the
right-of-use asset at 1 March 2019; and
-- Use of hindsight in determining the lease term where there is
the option to extend the lease.
A reconciliation between operating lease commitments as lessee
under IAS 17 and finance lease liability recognised under IFRS 16
is outlined in the table below.
GBP'000
Operating lease commitments disclosed at 28 February
2019 139,679
Impact of discounting (71,627)
IFRS 16 lease liabilities not recognised in prior
period operating lease commitments 6,538
Increases in minimum lease commitment 3,926
Recognition exemption as less than 12 months of lease
term remaining at transition (286)
---------
IFRS 16 liability recognised at 1 March 2019 78,230
---------
IFRS 16 defines the lease term as the non-cancellable period of
a lease together with the options to extend or terminate a lease,
if it is reasonably certain that the option would be taken. The
Group makes a judgement as to whether it is reasonably certain that
the option will be taken when determining the length of the lease.
The Group considers factors such as the length of time before the
option is exercisable, operational requirements and any planned
future capital expenditure.
The following standards and amendments have an effective date
after the date of these financial statements:
Effective for accounting
periods commencing
Standard, amendment and interpretation on or after
IFRIC 23 Uncertainty over Income Tax
Treatments 1 January 2019
Amendments to IAS 28: Long-term Interests
in Associates and Joint Ventures 1 January 2019
Amendments to IAS 19: Plan Amendment,
Curtailment or Settlement 1 January 2019
Annual Improvements to IFRS Standards
2015-2017 Cycle 1 January 2019
Amendments to References to the Conceptual
Framework in IFRS Standards 1 January 2020
IFRS 17 Insurance Contracts 1 January 2021
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 and unconditional right to a refund if the scheme
is in surplus. The adoption of all other standards, amendments and
interpretations is not expected to have a material effect on the
net assets, results and disclosures of the Group.
Presentation of Condensed Consolidated Income Statement
The presentation of the Condensed Consolidated Income Statement
shows the underlying results and non-underlying results in separate
columns. Non-underlying items are income 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. Non-underlying items includes the Group's share of
non-underlying profits of associates and joint ventures. Underlying
operating profit and underlying profit before tax are non-GAAP
measures which comprise operating profit and profit before tax
respectively before non-underlying items. The columnar format is
considered to be the clearest method of presentation of this
information.
Non-GAAP measures are used as they are considered to be both
useful and necessary. They are used for internal performance
analysis; 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.
The post-tax results of discontinued operations along with any
gain or loss recognised on the measurement to fair value less costs
to sell or on the disposal of the assets or disposal groups
constituting the discontinued operation are disclosed as a single
amount in the Condensed Consolidated Income Statement. The
comparative period results are restated accordingly.
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 Non-Strategic
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 Non-Strategic Infrastructure segment specialises in
management, development and realisation of non-strategic property
assets.
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
Period ended Rail Non-Strategic Adjustments
31 August 2019 Aviation Energy & Civils Investments Infrastructure and eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 26,307 42,883 18,375 2,127 1,170 2,269 93,131
Internal 65 - 11,019 - 142 (11,226) -
--------- -------- ---------- ------------ ---------------- ------------------ ---------
Statutory revenue 26,372 42,883 29,394 2,127 1,312 (8,957) 93,131
--------- -------- ---------- ------------ ---------------- ------------------ ---------
Underlying
EBITDA 4,110 11,748 (967) 2,267 (1,454) (3,599) 12,105
Non-underlying
items (5,784) (1,166) (84) (2,490) (532) (683) (10,739)
Swaps - - - - - 114 114
Depreciation (3,653) (4,442) (1,370) - (1,016) (873) (11,354)
Amortisation - (22) - - - (3,717) (3,739)
Impairments - - (8,474) - - - (8,474)
Net interest (581) (585) (95) (479) (255) (2,551) (4,546)
--------- -------- ---------- ------------ ---------------- ------------------ ---------
(Loss)/profit
before tax (5,908) 5,533 (10,990) (702) (3,257) (11,309) (26,633)
--------- -------- ---------- ------------ ---------------- ------------------ ---------
Period ended Rail Non-Strategic Adjustments
31 August 2018 Aviation Energy & Civils Investments Infrastructure and eliminations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 20,895 29,877 12,729 1,967 1,039 2,922 69,429
Internal 66 - 9,895 - 38 (9,999) -
--------- -------- ---------- ------------ ---------------- ------------------ ---------
Statutory revenue 20,961 29,877 22,624 1,967 1,077 (7,077) 69,429
--------- -------- ---------- ------------ ---------------- ------------------ ---------
Underlying
EBITDA 2,875 8,677 (4,840) 2,823 (1,054) (4,265) 4,216
Non-underlying
items (310) (2,170) - - (844) (1,687) (5,011)
Swaps - - - - - 3,579 3,579
Depreciation (2,803) (3,168) (1,114) - (348) (119) (7,552)
Amortisation - (111) - - - (1,858) (1,969)
Impairment
of loan notes - - - - (2,500) - (2,500)
Net interest (131) (366) (116) - (170) (595) (1,378)
--------- -------- ---------- ------------ ---------------- ------------------ ---------
(Loss)/profit
before tax (369) 2,862 (6,070) 2,823 (4,916) (4,945) (10,615)
--------- -------- ---------- ------------ ---------------- ------------------ ---------
Inter-segment revenues are eliminated on consolidation. Included
in adjustments and eliminations underlying EBITDA are central costs
of GBP3,476,000 (2018: GBP4,199,000) and intragroup profits
eliminated of GBP123,000 (2018: GBP66,000).
4 Discontinued operations
On 22 February 2019, the Group entered into an agreement to
dispose of Propius Holdings Limited (Propius) to Connect Airways.
The results of Propius have been reported on a single line, net of
tax on the face of the Condensed Consolidated Income Statement and
the assets and liabilities of Propius are presented as held for
sale in the Condensed Consolidated Statement of Financial Position.
The Condensed Consolidated Income Statement for the period ended 31
August 2018 has been restated on the same basis and also includes
the results of the operations of Everdeal Holdings Limited
(Everdeal) and the UK Flybe Franchise Operation (UKFFO) and the
profit on disposal of Everdeal as explained in the statutory
financial statements for the year ended 28 February 2019.
5 Non-underlying items
Non-underlying items included in the Condensed Consolidated
Income Statement comprise the items set out and described
below.
Six months Six months Year ended
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
New business and new contract
set-up costs 7,367 3,324 11,551
Transaction costs - 112 -
Restructuring costs 552 - 391
Litigation and claims 330 1,575 5,193
Share of post-tax losses of
joint venture 2,490 - -
Non-underlying items within
EBITDA 10,739 5,011 17,135
Amortisation 3,739 1,969 3,938
Impairments 8,474 - 7,800
----------- ----------- -----------
Total non-underlying items 22,952 6,980 28,873
----------- ----------- -----------
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 new contract set-up costs at London Southend Airport
in the Aviation division and pre-contract costs and excess costs
incurred due to delays in customer plants becoming operational in
the Energy 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. Restructuring costs,
including the removal of some roles, have occurred within Group,
Aviation and Rail.
The charge for litigation and claims includes the cost of a High
Court dispute with a former Director, offset by any costs that have
been recovered. Contingent assets relating to any outstanding
claims are not recognised unless recovery is considered virtually
certain, in accordance with accounting standards.
Non-underlying share of post-tax losses of joint venture relates
to costs incurred by Connect Airways in acquiring Flybe, Stobart
Air and Propius.
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 Eddie Stobart
brand (GBP3.7m), which has doubled compared to last half year,
following a review of the residual value.
The impairment charge relates to the write off of goodwill and
intangible assets attributable to Rail & Civils.
6 Finance costs and income
Six months Six months
2019 2018
Unaudited Unaudited
GBP'000 GBP'000
Bank loans 1,292 822
Interest on defined benefit pension scheme 40 47
Finance charges payable under finance leases
and hire purchase agreements 746 640
Interest on IFRS 16 leases 1,306 -
Amortisation of deferred issue costs 182 146
ESL dividend passed to exchangeable bondholders 1,985 -
Other interest 525 377
Foreign exchange losses 656 -
Total finance costs 6,732 2,032
----------- -----------
Six months Six months
2019 2018
Unaudited Unaudited
GBP'000 GBP'000
Bank interest receivable 12 18
Interest receivable from associates and
joint ventures 2,174 -
Foreign exchange gains - 636
----------- -----------
Total finance income 2,186 654
----------- -----------
7 Taxation
Taxation on profit on ordinary activities
Total tax in the Condensed Six months Six months Year ended
Consolidated Income Statement 2019 2018 2019
from continuing and discontinued
operations
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Current income tax:
UK corporation tax - - -
Overseas corporation tax (22) - 1,268
Adjustments in respect of prior
years - 1,015 3,016
Total current tax (22) 1,015 4,284
----------- ----------- -----------
Deferred tax:
Origination and reversal of
temporary differences (2,021) (1,388) (1,872)
Impact of change in rate - - -
Adjustment in respect of prior
years (1,083) (947) (826)
----------- ----------- -----------
Total deferred tax (3,104) (2,335) (2,698)
----------- ----------- -----------
Total (credit)/charge in the
income statement from continuing
and discontinued operations (3,126) (1,320) 1,586
----------- ----------- -----------
Included in the above tax credits are total current tax credit
on continuing operations of GBPnil
(2018: GBP1,015,000 charge) and a total deferred tax credit on
continuing operations of GBP3,182,000 (2018: GBP2,546,000) giving a
total tax credit on continuing operations in the Condensed
Consolidated Income Statement of GBP3,182,000 (2018:
GBP1,531,000).
The GBP3,182,000 credit on continuing operations in the period
is allocated as GBP1,849,000 underlying and GBP1,333,000
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 Condensed Consolidated Statement of
Financial Position date. As such, the deferred tax
assets/liabilities as at 31 August 2019 have been
recognised/provided at 17%.
8 Loss 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
2019 2018 2019
Unaudited Unaudited Audited
Numerator GBP'000 GBP'000 GBP'000
Loss used for basic and diluted
earnings (20,884) (17,496) (58,179)
Denominator Number Number Number
Weighted average number of shares
used in basic EPS 366,331,503 345,974,719 349,698,911
Effects of employee share options - - -
------------ ------------ ------------
Weighted average number of shares
used in diluted EPS 366,331,503 345,974,719 349,698,911
------------ ------------ ------------
Own shares held and therefore
excluded from weighted average
number 4,490,212 8,354,112 6,798,847
------------ ------------ ------------
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
2019 2018 2019
Unaudited Unaudited Audited
Numerator GBP'000 GBP'000 GBP'000
Underlying profit/(loss) used
for basic and diluted earnings 735 (10,969) (31,054)
Underlying earnings/(loss) per
share
Basic 0.20p (3.17p) (8.88p)
Diluted 0.20p (3.17p) (8.88p)
----------- ----------- -----------
9 Dividends
A final dividend of 3.0p (2018: 4.5p) per share totalling
GBP11,125,000 (2018: GBP15,628,000) was declared on 29 May 2019 and
was paid on 31 July 2019.
10 Property, plant and equipment
Additions and disposals
During the six months ended 31 August 2019, the Group acquired
or developed property, plant and equipment assets with a cost of
GBP19,708,000 (2018: GBP18,681,000). This included development work
at London Southend Airport. Property, plant and equipment assets
with a book value of GBP2,537,000 (2018: GBP3,446,000) were
disposed of by the Group during the six months ended 31 August
2019, resulting in a profit of GBP194,000 (2018: GBP442,000).
Capital commitments
At 31 August 2019, the Group had capital commitments of
GBP4,875,000 (2018: GBP946,000), principally relating to
replacement truck and trailers in the Energy fleet.
11 Analysis of net debt
31 August 28 February
2019 2019
Unaudited Audited
Loans and borrowings GBP'000 GBP'000
Non-current
Fixed rate:
* Obligations under finance leases and hire purchase
contracts 14,697 20,668
Variable rate:
* Obligations under finance leases and hire purchase
contracts 16,578 5,886
* Bank loans 50,667 57,567
---------- ------------
81,942 84,121
---------- ------------
Current
Fixed rate:
* Obligations under finance leases and hire purchase
contracts 8,079 6,663
51,559 -
* Exchangeable bonds*
Variable rate:
* Obligations under finance leases and hire purchase
contracts 5,882 6,770
---------- ------------
65,520 13,433
---------- ------------
Total loans and borrowings (excluding IFRS
16) 147,462 97,554
Cash 7,725 14,432
---------- ------------
Comparable net debt (excluding IFRS 16) 139,737 83,122
Non-current
74,074 -
* IFRS 16 lease obligations
Current
2,874 -
* IFRS 16 lease obligations
---------- ------------
Net debt 216,685 83,122
---------- ------------
* In accordance with IAS 1 it is necessary for the secured
guaranteed exchangeable bonds (Bonds), issued on 3 May 2019, to be
presented as a current liability because the Group does not have an
unconditional right to defer settlement of the liability for at
least 12 months after the reporting period. The bondholders have an
unconditional right to require the group to settle the bonds by
giving the bondholders shares in Eddie Stobart Logistics plc (ESL)
at any time. The Group has no obligation to settle the Bonds in
cash within 12 months of the balance sheet date.
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
period, GBP13,343,000 (Feb 2019: GBP14,178,000) of new finance
leases were taken out, GBP8,168,000 (Feb 2019: GBP14,382,000)
repayments made, and GBP74,000 (Feb 2019: GBP142,000) of unwind of
discount.
The GBP80,000,000 variable rate committed revolving credit
facility, with a facility end date of January 2022, was drawn at
GBP51,000,000 (Feb 2019: GBP58,000,000) at the period end.
The Group was in compliance with all financial covenants
throughout both the current and prior periods.
12 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
2019 2019
Unaudited Unaudited
GBP'000 GBP'000
Financial Liabilities
Bank loans 50,667 50,667
Exchangeable bonds 51,559 51,559
Finance leases and hire purchase arrangements 122,184 120,838
Book Value Fair Value
28 February 28 February
2019 2019
Audited Audited
GBP'000 GBP'000
Financial Liabilities
Bank loans 57,567 57,567
Finance leases and hire purchase arrangements 39,987 38,858
The fair values of loans and borrowings have been calculated by
discounting the expected future cash flows at prevailing interest
rates. The fair value of the exchangeable bonds includes a
derivative instrument, valued using an option pricing model, and a
debt component where the fair value has been calculated by
discounting the expected future cashflows at prevailing interest
rates.
Fair Value Hierarchy
The fair value hierarchy is explained in the statutory accounts
for the year ended 28 February 2019.
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
2019
Other financial
assets 31,733 - 31,733 -
Swaps 357 - 357 -
As at 28 February
2019
Other financial
assets 44,918 44,918 - -
Swaps 248 - 248 -
During the six months ended 31 August 2019, there was one
transfer from Level 1 to Level 2 fair value measurements, and no
transfers into and out of Level 3 fair value measurements. The
transfer classified as other financial assets relates to the
Group's investment in ESL shares and arose due to the suspension of
trading in their shares on 23 August 2019 resulting in no
observable price at 31 August 2019. The valuation method at the
period end used the price on the date of suspension and applied a
reduction of 10%, due to the RNS information released regarding the
dividend. This is a judgement taken by management and once the
trading in ESL shares is permitted, the valuation will return to
level 1 and be based on the actively traded share price. A movement
of 1p in the ESL share price changes the investment value by
GBP447,000.
13 Cash used in operations
Six months Six months Year ended
ended 31 ended 31 28 February
August August 2018 2019
2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Loss before tax (26,633) (10,615) (42,114)
Adjustments to reconcile loss before tax to net cash flows:
Loss in value of investment properties 879 - 715
Realised profit on sale of property,
plant and equipment and investment
properties (194) (443) (584)
Share of post-tax profits of associates
and joint ventures accounted for
using the equity method 2,349 588 1,740
Gain on conversion of loan - (1,095) (1,095)
Loss on disposal & loss in value
of assets held for sale - 600 683
Profit on sale and leaseback - (710) (629)
Depreciation of property, plant
and equipment 11,354 7,552 16,305
Finance income (2,186) (18) (63)
Finance costs 3,966 2,032 4,512
Release of grant income (356) (4,867) (609)
Release of deferred premiums (1,308) (1,308) (2,617)
Impairment 8,474 - 7,800
Amortisation of intangibles 3,739 1,969 3,938
Charge for share-based payments 420 674 714
Movement in fair value of exchange
derivative liability 124 - -
(Gain)/loss on fuel swaps mark to
market valuation (114) (3,579) 353
Retirement benefits and other provisions (2,174) 6,171 87
IFRS 15 transition adjustment - - (3,949)
Working capital adjustments:
(Increase)/decrease in inventories (180) 82 (127)
(Increase)/decrease in trade and
other receivables (18,662) 13,974 4,196
Increase/(decrease) in trade and
other payables 3,679 (11,424) 9,007
Cash used in continuing operations (16,823) (417) (1,737)
----------- ------------- -------------
14 Contingent liabilities
The Group is party to a number of ongoing legal cases
principally in relation to general employment, transaction and
property-related matters. The Group will continue to defend any
litigation in respect of such claims and, whilst the outcome of any
claim, and therefore any future liability, cannot be certain, it is
the Directors' opinion, based on external legal and property
advice, that no material liabilities exist in respect of legal
claims at 31 August 2019 beyond those included in provisions.
15 Glossary - Alternative performance measures (APMs)
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 EBITDA from the two main operating divisions
Underlying EBITDA from the two main operating divisions is the
underlying EBITDA results of the two main operating divisions,
Stobart Aviation and Stobart Energy.
Underlying loss before tax
Underlying loss before tax represents loss before tax and before
non-underlying items. Refer to note 3 for reconciliation to
statutory loss/(profit) before tax.
Loss per share from continuing underlying operations
This APM is based on underlying profit after tax from continuing
which is loss for the period before non-underlying items and before
discontinued operations (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 2019 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 2019 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.
The impact of uncertainties due to the UK exiting the European
Union on our review
Uncertainties related to the effects of Brexit are relevant to
understanding our review of the condensed financial statements.
Brexit is one of the most significant economic events for the UK,
and at the date of this report its effects are subject to
unprecedented levels of uncertainty of outcomes, with the full
range of possible effects unknown. An interim review cannot be
expected to predict the unknowable factors or all possible future
implications for a company and this is particularly the case in
relation to Brexit.
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
14 November 2019
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 CKNDNDBDBQDD
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November 14, 2019 02:01 ET (07:01 GMT)
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