Results for the 12 months ended 28 February 2022
David Shearer, Executive Chairman of Esken said,
"Our focused strategy for long-term growth is to deliver an improving financial performance, supported by the post-pandemic recovery in Esken Renewables and strict cost management in the Aviation business.
Esken Renewables had a strong year, with profitability and cash generation significantly improved. The business has a good growth outlook and is expected to continue its positive trend supported by long-term index linked contracts and more normalised gate fees.
We are delighted that travel restrictions have been removed and that easyJet has chosen to fly to three destinations from London Southend Airport this summer. With the continued support of our investment partner, we remain in discussions with a number of airlines for 2023. The airport’s attractive operating cost, passenger experience and ease of access by rail, coupled with the constraints at the more established London airport bases underpins the opportunity to secure future airline agreements.
Overall the Group reported a total loss before tax of £34.6m, which includes £20.5m of depreciation, £19.0m of net financing costs and a £5.4m net impairment. The Group’s funding headroom at the year end was £72.7m which is ahead of management expectations set out at the time of the refinancing. While cognisant of macroeconomic uncertainties, we look ahead with a degree of confidence as we navigate the recovery phase of the Group.”
- Esken’s core operating businesses generated a combined adjusted EBITDA of £20.3m (FY21 £10.0m).
- Esken Renewables (formally Stobart Energy) supplied 1.5m tonnes of biomass fuel, up 4.8% on the prior year (FY21 1.4m tonnes). Increased availability of waste wood, improved gate fee income and more consistent biomass plant customer operations delivered a 103.0% increase in adjusted EBITDA to £20.3m (FY21 £10.0m), marginally ahead of the expected range of £18-20m.The Aviation business reported an adjusted EBITDA loss of £0.8m, an improvement from the £6.1m loss in the prior year, as a result of £3.5m of one-off benefits associated with Connect Airways and Teesside, along with strict financial discipline, and a positive contribution from Star Handling Services (formally Stobart Aviation Services), the hotel and solar farm.
- Esken incurred £5.6m of legal costsrelating to historical cases which are still to be concluded, and £7.5m of other central costs including staff costs, tax fees and listing costs. Esken expects legal costs to reduce in the current financial year. The Group benefited by £4.7m following an agreement to exit a long-term onerous property lease, leaving the overall Group adjusted EBITDA at £10.3m.
- The total loss before tax of £34.6m is an improvement on the prior year loss of £44.2m. The total loss before tax in the year under reviewincludes £20.5m of depreciation, £19.0m of net financing costs and a £5.4m net impairment.
- During the year, Esken completed a refinancing that included a £125m convertible loan in relation to LSA, together with a new £20m working capital facility and £55m equity raise.
- TheGroup’s funding headroom at the year end was £72.7m (28 February 2021: £77.4m) which is ahead of management expectations set out at the time of the refinancing, and includes £14.4m of ring-fenced cash in London Southend Airport (LSA) and the £20.0m undrawn Revolving Credit Facility (RCF). The Group has £118.5m of net debt excluding obligations under leases (£241.9m including obligations under leases) and £39.7m of non-core assets, which will be held for sale at the appropriate time.
- As at 28 February 2022 the Group has c.£47m of outstanding cash outflows payable through FY23 and FY24 related to ongoing Propius lease and aircraft-related costs, following the liquidation of Stobart Air in June 2021. Its current undrawn £20m RCF facility expires in February 2023. As a result, the Group is progressing a review of its banking requirements in order to maintain sufficient cash headroom to cover its working capital requirements and residual legacy liabilities.
- The Group's cash position is tracking in line with management expectations at the time of the July 2021 capital raise, although working capital management during the FY22 Financial Year has resulted in an improved cash position as at the Feb 22 year end compared to expectations.The management of costs associated with Stobart Air, following its liquidation in June 2021, and Propius, and work to dispose of the £39.7m portfolio of non-core assets remain in line with management expectations.
|Revenue by division|
|Revenue for two core operating divisions||103.1||99.4||3.7%|
|Investments and Non-Strategic infrastructure||0.7||1.1||(36.4%)|
|Group central and eliminations||0.8||0.9||(11.1%)|
|Adjusted EBITDA¹ by division|
|Adjusted EBITDA¹ for two core operating divisions||19.5||3.9||400.0%|
|Investments and Non-Strategic infrastructure||2.9||(1.6)||281.3%|
|Group central and eliminations||(12.1)||(9.7)||(24.7%)|
|Total adjusted EBITDA¹||10.3||(7.4)||239.2%|
|Loss before tax||(34.6)||(44.2)||21.7%|
|Discontinued operations, net of tax||(2.4)||(118.0)||98.0%|
|Loss for the year||(27.1)||(155.1)||82.5%|
|Cash and undrawn banking facilities||72.7||77.4||(6.1%)|
- 2021 results have been restated where required in line with IFRS 5 Discontinued Operations.
- Adjusted EBITDA represents profit/(loss) before interest, tax, depreciation and impairments. Refer to note 3 of the financial statements for reconciliation of divisional Adjusted EBITDA to loss before tax.
Post Period highlights
- Stobart Energy changed its name to Esken Renewables on 26 April 2022. The change of name, following the sale of the Stobart brands in 2020, reflects both the business’ importance to Esken and the nature of its operations.
- Stobart Aviation Services also changed its name to Star Handling on 24 May 2022 andStobart Jet Centre changed to London Southend Jet Centre on 5 April 2022.
- London Southend Airport saw the return of easyJet operations under an initial short-term contract, with the airline starting flights to Malaga, Palma and Faro on 1 May 2022.
- Esken has for the first time collected and voluntarily reported initial Scope 3 emissions data, in addition to Scope 1-2 reported in prior years.
- Across its businesses Esken produced 139,447 tCO2e, representing a 492% increase on the prior year when adjusted to include Scope 3 data. This increase predominantly relates to the addition of wider Scope 3 emissions for the Renewables division, including third party wood handling and transport plus combustion of biomass fuel by power plant customers.
- Esken Renewables undertook third party research with Logika Consultants to validate Scope 1-3 emissions data. The research established that whilst Esken produced around 121,256 tonnes of Greenhouse Gas (GHG) emissions in FY 22, it saved the UK 630,000 tonnes of additional GHG emissions (equivalent to taking c.136k cars off the road) by supplying biomass power customers over 1.1 million tonnes of waste wood that would have otherwise gone to landfill, producing methane.
- London Southend Airport launched its Connecting Communities Commitment encompassing the launch of one of the UK’s only independent noise forums, a charitable partnership and various community engagement initiatives.
- Esken established charity partnerships for each of its divisions, and across the business Esken established a good governance programme which supported its first TCFD submission. Esken has also put in place an ESG steering group and Board sub-committee with formal terms of references. As a result of this governance process, the business has established an ESG risk register and put in place ESG performance KPIs linked to Executive Team remuneration.
Esken Renewables is continuing its positive trend and Esken anticipates it will achieve EBITDA in FY23 in excess of £22m.
London Southend Airport has secured contracted flying with easyJet to three destinations; Malaga, Faro and Palma. Whilst Esken does not at this stage expect to secure any further airline agreements for Summer 2022, the airport’s attractive operating cost, passenger experience, ease of access by rail, coupled with capacity constraints at the more established London airport bases, underpins the opportunity to secure future airline agreements for Summer 2023 and beyond.
The Group is progressing a review of its banking requirements in order to maintain sufficient cash headroom to cover its working capital requirements and residual legacy liabilities when the existing RCF expires in February 2023.