Stobart Group slips to annual loss in ‘transformational’ year

Carlisle-based Stobart Group increased revenues, but reported a pre-tax loss for the year to February 28, which it described as “transformational”.

Group revenues of £146.9m compared with restated revenues of £105m for the previous year. However, the 2018 £109.32m pre-tax profit has plunged to a pre-tax loss of £42.114m this time.

The group operates aviation, energy and rail and civils operations.

In February it was part of a consortium that acquired struggling regional airline Flybe for just £2.8m.

Chief executive Warwick Brady said: “This has been a transformational year for Stobart Group.

“We have significantly strengthened the board and management team and taken the opportunity to deal with legacy issues while putting in place appropriate operational rigour within the business.

“As a result of the disposals and impairments in the year, the group has de-risked its balance sheet.”

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

“We will invest in accelerating the growth of our aviation and energy businesses through existing cash resources and further non-core asset sales.

“By doing this, we can deliver sustainable operating cash flows and significant long-term value for shareholders.”

Today’s announcement explained several items which contributed to the annual loss, including £10.2m of costs in aviation, related to airline marketing, and energy, associated with maintaining the supply chain during third-party plant commission delays, as well as £5.2m of legal costs mainly associated to the shareholder dispute.

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

In addition, the group made an overall loss from discontinued operations of £15.5m, including the profit on disposal of Everdeal (Stobart Air) of £25.9m, which was then reduced by the impact of the UKFFO losses of £31.7m.

Operating profits in Stobart Air and Propius totalling £2.6m were then reduced by an onerous lease provision of £12.3m associated with Propius.

It said £52.5m was returned to shareholders through dividends.

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

Mr Brady said: “We now have a more de-risked balance sheet having decided to impair non-core assets.

“We intend to now grow the value of our core aviation and energy assets and have in place an experienced commercial team with a clear plan to execute our strategy and deliver our targets.”

These will be the last results Iain Ferguson will announce as Stobart Group chairman, after the appointment of turnaround specialist David Shearer from June 1. He will take over from Mr Ferguson at the end of this year’s annual general meeting.

Mr Ferguson announced his intention to step aside after last year’s AGM following a damaging board room row with former chief executive Andrew Tinkler, who attempted to oust Mr Ferguson from the role.

Mr Ferguson said today: “The dispute was especially difficult for the hard-working employees of Stobart Group.

“I want to thank them for remaining focused during this time.

“Despite our disagreement, the board and I want to recognise how much Stobart Group has benefited from Andrew Tinkler’s entrepreneurial flair in the past and thank him for his contribution to the business.

“However, it is now time to move on and focus on building value for all of our shareholders.”

Manchester finance platform AJ Bell investment director Russ Mould said: “Southend Airport owner Stobart is taking flight this morning as it begins to emerge as a more streamlined business.

“Having put some testing boardroom battles behind it and agreed to funnel regional airline Stobart Air into its 30%-owned Connect Air joint venture, the company is free to concentrate on its 2022 target of getting five million passengers through Southend a year from around one million today.

“Assuming these passengers spend the £8 each the company is hoping they will, this could have a dramatic impact on the company’s profitability. The target is underpinned by a partnership with low-cost carrier Ryanair and by the big demands on airport infrastructure around London.

“The company is also being rewarded for thinking in the long term, with shareholders seemingly prepared to take the pain associated with a cut to the full year dividend in order to reap the benefits of investment in the business later on.”

He added: “One fly in the ointment for Stobart, which operates across the infrastructure services space, is the sluggish performance of its rail and civil engineering business, although a strategic plan is in place to turn things around here.”