The right ingredients to grow
A clear strategy to develop valuable growth assets from aviation and renewable energy
Esken owns two businesses that are expected to generate significant value for shareholders over the medium term as markets recover post COVID-19. Stobart Energy provides immediate cash generation while London Southend Airport (LSA) offers strong medium term growth prospects
- Stobart Energy is the UK’s largest supplier of biomass fuel. It is established, well-run and cash-generative. This positions it as a key component of the broader movement towards more sustainable energy forms.
- Stobart Energy reuses life-expired woods to deliver low-carbon biofuel solutions. To do this, it receives waste woods mainly from the construction sector and recycling plants but also from commercial/undermanaged forests. It stores this life-expired material, processes it into biomass and then distributes it to appropriate energy plants where it is used as fuel to produce renewable energy.
- It earns a Gate fee for receiving waste wood from suppliers that is set below the price of sending the wood to landfill (and thus avoiding the release of methane in to the atmosphere). It also receives income from long term RPI-linked supply contracts with biomass plants.
- Gate fees, supply volumes and margins have continued to show an improving trend and the financial performance is expected to return to pre COVID-19 levels in the current financial year (FY 22).
- Opportunities are being explored to seek additional supply contracts and broaden the base of the market where existing operational expertise can be applied.
- Prior to the pandemic LSA offered passenger services to over 40 destinations to a market of c.8m people living within one hour travel time of the Airport, servicing Central and the expanding East London market. Its cost-efficient base proposition is well positioned for a post pandemic recovery; particularly in short-haul leisure travel.
- LSA has a long-term strategic financial partnership with Carlyle, a major global funds business that has concluded 16 airport transactions around the globe. That partnership has resulted in £20m being made immediately available to LSA to meet its current funding requirements.
- The combination of the proven operational capability of the LSA management along with the airport development experience of Carlyle and its financial muscle is expected to provide a strong partnership as LSA rebuilds its post-Covid commercial relationships with airline partners.
- LSA continues to benefit from strong activity levels in its global logistics operations with opportunities to expand its market-leading logistics service
- Esken completed a £200m refinancing in 2021 that enabled it to refinance fully its existing bank debt, meet its ongoing working capital requirements, underpin its business plan going forward and meet certain of its legacy obligations.
- Esken is also actively working to realise its residual infrastructure assets with a net book value of £39m to provide additional resources for investment.
- As a result, Esken can look ahead with confidence as it navigates the recovery into a post COVID-19 world.