Results for the 12 months ended 28 February 2021
Executive Chairman, Esken
"I would like to thank the Esken team for their hard work and dedication in facing the unprecedented challenges presented by COVID-19, the ramifications of which are likely to continue for some time. We responded robustly and decisively, minimising losses, reducing cash burn and protecting liquidity to maintain the operational capability of our core businesses.
Encouragingly Stobart Energy’s margins have been recovering in the first half of FY2022 and gate fees are now improving toward pre-COVID-19 levels.
Passenger travel has been severely disrupted by lockdowns and evolving quarantine arrangements. London Southend Airport (LSA) has not only withstood the impact of the pandemic but has provided an essential service through its global logistics operation. Its low-cost base proposition will position us well for a post pandemic recovery.
Further to our announcement on 14 June 2021, Carlyle Global Infrastructure Opportunity Fund L.P. (Carlyle) has informed Esken that it is seeking final approvals for a definitive transaction agreement in the coming days for £120m of funding via a convertible loan to LSA. Esken is also in advanced discussions with its banks, and has commenced discussions with shareholders in relation to the ongoing funding requirements of the Group. The strategic funding proposal in relation to LSA together with a successful completion of a new working capital facility and equity raise, would enable Esken to repay all outstanding bank debt, meet its ongoing working capital requirements, underpin its business plan going forward and meet certain of its legacy obligations.”
Financial highlights and liquidity update
- The total loss before tax of £150.3m (2020: £139.4m) includes non-cash items, being the loss on acquisition of Stobart Air and Propius (£58.2m) and net impairments during the current year (£30.1m). Esken funded £42.2m to Stobart Air and Propius from date of acquisition to February 2021.
- Post year end, Stobart Air was placed into liquidation following the termination of the sale of Stobart Air and Carlisle Lake District Airport to Ettyl. Esken’s total cash outflow resulting from the liquidation of Stobart Air and ongoing Propius leases and related costs is estimated to be £82m over three years. However, this will reduce in the event that Esken is successful in subleasing Propius’ aircraft.
- Esken expects to sign a definitive transaction agreement with Carlyle in the coming days for £120m of funding net of Carlyle costs via a loan (convertible at Carlyle's option into an equity stake of 29.99% in London Southend Airport (LSA), which would release £100m gross of liquidity into the rest of the Group, with the remaining £20m ringfenced for LSA (the “Transaction”) to cover all anticipated expenditure for LSA for the period through to the end of February 2024, other than amounts funded from operating cash flows. The Transaction would be subject to Esken concluding the Group’s broader funding arrangements and shareholder approval.
- Esken’s current bank facilities, totalling £120m, expire at the end of January 2022. The Group has drawn £15m (£9m net of cash) of its £40m additional facility (Facility B) and its banks have indicated further support for access to Facility B to the end of August 2021, subject to certain conditions.
- Esken expects to conclude discussions on a new 18 month £20m working capital facility to support treasury management in the coming weeks and is targeting an equity issue of around £40m by way of a documented prospectus offering with the prospectus being issued before the end of July. These funding lines are in addition to the £120m funding from the Transaction outlined above.
- Toscafund, Esken’s largest shareholder with 28.66% of the Company’s issued share capital, has communicated to the Company that it sees significant value in the equity of Esken and intends to support an equity raise pro rata with its shareholding. All Board directors have also indicated their intention to participate in the equity raise.
- The strategic funding in relation to LSA together with a successful completion of a new working capital facility and equity raise, would enable Esken to repay all outstanding bank debt, meet its ongoing working capital requirements, underpin its business plan going forward and meet certain of its legacy obligations.
|Revenue by division|
|Revenue for two main operating divisions||99.7||133.1||(25.1%)|
|Investments and Non-Strategic infrastructure||10.1||4.9||105.8%|
|Central costs and eliminations||0.9||4.1||(78.6%)|
|EBITDA by division|
|EBITDA for two main operating divisions||3.9||14.3||(72.5%)|
|Investments and Non-Strategic infrastructure||(12.1)||(11.8)||(1.4%)|
|Central costs and eliminations||(9.7)||(8.7)||(13.4%)|
|Total adjusted EBITDA||(17.9)||(6.2)||(187.9%)|
|Non-cash loss on acquisition of Stobart Air and Propius||(58.2)||-||-|
|Loss before tax||(150.3)||(139.4)||(7.8%)|
|Discontinued operations, next of tax||(11.9)||(6.9)||(72.6%)|
|Net debt - excluding IFRS 16||127.4||159.0||19.9%|
|Net debt - total||250.8||235.5||(6.5%)|
|Cash and undrawn banking facilities||77.4||14.8||423.0%|
- Adjusted EBITDA excludes the loss on acquisition of Stobart Air and Propius in 2021, presented within the Investments division.
Uninterrupted global logistics income and tight cost control is underpinning the Aviation Division
- Passenger numbers at LSA fell by 93.1% year on year following restrictions on air travel and airlines reducing the number of flights.
- The impact of COVID-19 restrictions on revenue generation led to the Aviation division EBITDA increasing to a loss of £6.1m, from a loss of £0.7m in the prior year.
- This performance was partially offset by a reduction in cost of sales, significant use of the Government’s furlough scheme, tight control of overheads and the benefit of uninterrupted income from our global logistics operation.
- The logistics operation handled 28,448,804 packages in the financial year. Having started operations in October 2019, it is already developing a strong reputation and we are exploring further growth opportunities to create a market-leading logistics service.
- LSA should also benefit from its low-cost offering for airlines. LSA is well positioned for a post-pandemic recovery in short-haul leisure travel as travel restrictions ease.
Stobart Energy has protected long term value by ensuring certainty of supply for its customers
- The closure of the construction industry and recycling centres nationwide for a three-month period from March 2020 led to a significant reduction in available waste wood across the UK.
- 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.
- Whilst revenue and the tonnes supplied of 1.4m (2020: 1.5m) are similar to the prior year, EBITDA reduced by 33.2% to £10.0m (2020: £15.0m).
- However, gate fees, volumes and margins have continued to show an improving trend and the financial performance of the business is anticipated to return to pre-COVID-19 levels in the current financial year.