Stobart Group trading as expected through COVID crisis
Stobart Group said it is confident it has sufficient resources to overcome the difficult trading conditions caused by the coronavirus pandemic.
The Carlisle-based aviation and biomass group is holding its annual general meeting this morning.
In a statement released before the meeting, chairman, David Shearer, said: “Having carefully stress tested the group’s liquidity position under a variety of operating scenarios at the time of our successful capital raise in June, the board remains confident in the group’s balance sheet, liquidity position and outlook.”
He added: “The global COVID-19 pandemic has had an unprecedented impact on economies and businesses as a whole, and the aviation sector in particular.
“In spite of the challenges which we have faced, Stobart Group has made good progress in the execution of the strategy which was set out in the prospectus on 5th June.”
The group is exiting all non-core businesses over the next three years, focusing, instead, on biomass and aviation, including its two airports at Southen and Carlisle.
As a first step it has already sold its loss-making rail and civils business, which it said secured a future for 188 staff.
Mr Shearer said London Southend Airport is a key strategic asset for the group and there is the opportunity to create further shareholder value in the medium term due to three key factors – the ability to establish an enhanced passenger experience for post-COVID-19 travel, the ability to offer a cost efficient London base of operation to all airlines, and the airport’s location serving London, which pre-COVID-19, was the largest travel market in the world.
He said: “London Southend Airport has now installed and is operating next generation security scanning equipment that is part of our contact-free plan for the airport. We will continue to invest in line with the anticipated increase in the passenger volumes.”
Ryanair recommenced operations at Southen on July 1, and is now flying to nine destinations, increasing to 14 in August, including routes to new destinations such as Bucharest and Marseille.
Wizz Air started flying on July 6, and easyJet restarted its schedule with flights to four destinations on July 20. The airport is currently servicing 35 flights per week, achieving good load factors.
While easyJet said it aims to close operations at London Stansted and Southend, Mr Shearer said Stobart remains in discussion with the carrier, but is in consultation with other airlines regarding interest in some of their routes.
The group has appointed a new management team at Stobart Energy which has been undertaking a full review of the operations to identify potential improvements in the business model.
Mr Shearer said: “This business remains profitable, cash generative, with high barriers to entry and long-term contracts. Our objective remains to monetise this business over the next 18 to 24 months.”
He said the Stobart Air airline is operating limited flights from Dublin to Kerry, and Donegal under public service arrangement, as well as Edinburgh and Glasgow. Wider UK services remain suspended until August 20, pending the Irish Government’s decision on the 14-day quarantine exemption.
He said: “In order to optimise the existing fleet and to minimise financial exposure to the Stobart Group, Stobart Air has opened a new base at Belfast City Airport and has put on sale routes to Edinburgh, Glasgow, Manchester, Birmingham, East Midlands and Leeds Bradford under its Aer Lingus franchise agreement.
“Despite this positive progress, the operating environment remains challenging and costs are being closely monitored with steps being taken to conserve cash.
“Stobart Group’s overriding objective is to mitigate its financial exposure and we have commenced early discussions with potential partners around the long-term future of this business.”
He added: “Stobart Group continues to maintain tight cost controls.
“The board and senior leadership team have taken extended pay reductions until October, a recruitment freeze remains in place and all discretionary spend continues to be deferred. Staff are increasingly returning to work in locations where sufficient operational recovery makes it viable.
“Overall, despite the impacts of the COVID-19 pandemic, the group continues to own a valuable London airport with significant medium-term growth opportunities and a strong cash generative energy business.
“It has available liquidity to maintain and develop these assets following its successful capital raise and is focused on building value for shareholders as we move into a post-COVID world.”