Stobart Group suspends dividend payments as pre-tax losses double

Stobart Group has suspended its dividend and is seeking long-term debt facilities to fund its growth programme, it revealed today.

The Carlisle-based aviation and energy-focused business released interim results for the six months ended August 31, which showed revenues rose from £69.43m to £93.13m, although pre-tax losses more than doubled from a £10.615m loss last year to a £26.633m loss this year.

It said its decision to suspend the interim and final dividend will save £22m.

Stobart operates London Southen Airport and is developing an environmentally-friendly energy generating business using waste as fuel.

Chief executive Warwick Brady said: “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 five million annual passengers at £8 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.”

The group said its aviation and energy businesses have a clear path to delivering superior value for its shareholders.

It said: “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 £11m of cash in the current period and £22m 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.”

The aviation arm reported that passenger numbers at London Southend Airport increased by 41.8% to 1.2 million, with around 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 around 500,000 passengers annually.

Underlying EBITDA per passenger increased by 3.0% to £3.55 (2018: £3.44). 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, it said.

Meanwhile, in energy, the volume of waste managed increased by 22.5% to 805,663 tonnes.

Underlying EBITDA increased 35.4% to £11.7m (2018: £8.7m), reflecting the growing maturity of the business. Stobart Energy is now set to become increasingly cash generative.

The group said it will continue to invest in the business to maintain its supply chain and infrastructure. It also intends to explore commercial partnerships, collaborations and joint ventures across the waste management and ‘Energy from Waste’ sector.

Stobart said it continues to hold an £80m 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.