Interim results for the six months ended 31 August 2020

Warwick Brady
Chief Executive, Esken

“COVID-19 has created unprecedented challenges for the Group. In response, we have taken decisive action to bolster liquidity, reduce cash burn and protect our long-term strategic objectives. These actions should allow us to emerge from this crisis in the best possible position to deliver our focused strategy.”

“Whilst passenger travel has been severely disrupted by lockdowns and evolving quarantine arrangements, London Southend Airport has benefited from uninterrupted income from its global logistics operation. At Stobart Energy, we are seeing a more consistent demand profile and have taken appropriate actions to ensure certainty of supply of waste wood for customers over the winter period to fulfil our valuable long-term supply contracts. We remain focused on realising value for shareholders from Stobart Energy as a maturing, cash generative and stable business over the next 18 months and are considering all options to achieve this.”

“Looking forward, the Group has immediate access to liquidity, with £119.1m in cash and undrawn banking facilities. Our focus remains on what we can control, namely managing our operations well, optimising both cost and cash management and rationalising the portfolio to maximise value. We continue to believe our future strategy and the medium-term move to a pure play airport and aviation services business will deliver superior shareholder returns.”

Overview of interim results

  • The Group has £119.1m of cash and undrawn banking facilities following its £100m capital raise in June.
  • Within the period under review, the cash burn, excluding capex, for Stobart Group’s core business (excluding Stobart Air and Propius), was reduced to an average of c.£2.0m per month. Of this, c.£1.9m is represented by lease and rental payments and other debt servicing costs.
  • The total cash burn (funding provided by the Group) for Stobart Air and Propius since acquisition is c.£14.7m. In August 2020, the cash burn for those businesses was £3.6m, of which £1.6m was legacy lease payments and £0.5m was maintenance and insurance costs. The Group is actively working towards an exit of these businesses in early course.
  • Group losses before tax excluding the impact of Stobart Air and Propius were £16.1m compared to £15.5m in the six months ended 31 August 2019. However, Stobart Group incurred £68.5m of non-cash items, including a £55.0m non-cash loss on acquisition of Stobart Air and Propius and £14.4m of depreciation. This meant the total Group loss before tax was £77.4m.
  • Net debt pre-IFRS 16 was £89.2m (post IFRS 16 net debt was £223.7m) and the net pension deficit was £5.7m as of 31 August 2020.

Financial Summary

£'m20202019% change
Revenue by division
Revenue for two main operating divisions46.769.3(32.6%)
Investments and Non-Strategic infrastructure6.03.473.7%
Central costs and eliminations0.52.1(75.5%)
Total revenue53.274.8(28.9%)
EBITDA by division
EBITDA for two main operating divisions1.58.9(83.5%)
Investments and Non-Strategic infrastructure(2.2)(2.2)(0.2%)
Central costs and eliminations(4.2)(4.2)(1.0%)
Total EBITDA(4.9)2.5(294.6%)
Non-cash loss on acquisition of Stobart Air and Propius(55.0)--
Loss before tax(77.4)(15.5)(399.0%)
Discontinued operations, next of tax(11.6)(8.5)(35.6%)
Net debt - excluding IFRS 1689.2139.736.2%
Net debt - total223.7216.7(3.2%)
Cash and undrawn banking facilities119.136.7224.3%

Uninterrupted global logistics income and tight cost control is underpinning the Aviation Division

  • The Aviation Division has been severely impacted by COVID-19. Passenger flights resumed from June 2020 but rolling quarantine arrangements led passenger numbers to fall by 89.5% to 124.5k passengers, with revenues down 48.9% to £13.5m.
  • Despite this backdrop, Aviation EBITDA improved from a loss of £1.7m to a £0.9m loss due to strong uninterrupted income through the global logistics operations and lower marketing support costs at London Southend Airport.
  • The Group is carefully managing the cash burn through the winter period and the second national lockdown and is confident in its partnerships with its existing carriers. It is in positive discussions in relation to the post-winter schedule, which starts in April 2021.
  • With a best-in-class passenger experience, London Southend Airport is well positioned to benefit from any recovery in the short-haul leisure travel market as restrictions ease. We are specifically designing and implementing an improved passenger experience for post-COVID-19 travel, making use of significant unutilised space and technology to enhance passenger safety and confidence, while providing a cost-efficient base of operation to airlines.

Stobart Energy has protected long term value by ensuring certainty of supply for its customers

  • Disruption to the construction industry and the closure of recycling facilities during the initial COVID-19 period resulted in a reduction of available waste wood.
  • The business took the strategic decision to ensure certainty of supply for customers over the winter period and beyond by building stock levels of waste wood. This action put short-term pressure on margins, and this is expected to recover in the first half of the next calendar year.
  • Stobart Energy also imported waste wood, taking pressure off UK supply availability and worked closely with its biomass plant partners to plan rolling production stoppages that allowed for maintenance.
  • As a result of these actions, Stobart Energy achieved 86.1% of the supply volumes it delivered in the six months ended 31 August 2019 and supplied 616k tonnes of fuel to biomass plants. EBITDA reduced from £10.6m to £2.4m, with the business impacted by lower supply volumes and downward margin pressures.
  • We are encouraged that the actions taken have alleviated pressure on gate fees whilst ensuring continuity of supply and delivery of a reliable service to customers.
  • September and October 2020 gate fees and volumes show an improving trend, and we remain focused on realising value from Stobart Energy as a maturing, cash generative and stable business over the next 18 months.

The Group remains focused on exiting Stobart Air

  • The trading outlook for Stobart Air has deteriorated significantly since the capital raise due to the continued quarantine arrangements in Ireland, with limited flights operating.
  • At the time of the capital raise in June 2020, Stobart Group planned for a potential no-fly scenario through the winter period and has consequently taken appropriate action to manage its cost base and minimise cash burn.
  • The Group is seeking to exit that business in early course. To that end, it is engaging actively with parties interested in acquiring its stake and with Aer Lingus to enter a new commercial arrangement beyond December 2022 as part of this process.