(Alliance News) - Stobart Group Ltd on Wednesday reported a very sharply widened half-year loss after a sharp revenue fall as well as non-cash losses on its Stobart Air and Propius acquisitions.
Shares in Stobart were up 6.6% at 20.00 pence in London in morning trading.
The Guernsey-headquartered aviation and energy infrastructure firm posted a GBP77.4 million pretax loss for the six months ended August 31, far wider than its GBP15.5 million loss the year before.
Revenue fell 29% to GBP53.2 million from GBP74.8 million as lockdown restrictions resulted from Covid-19 hurt both of its operating divisions, Aviation and Energy. Aviation revenue dropped 49% to GBP13.5 million as passenger numbers dropped 90% to 124,499 from the prior year while Energy revenue fell 23% to GBP33.2 million.
Additionally, Stobart recognised a GBP55.0 million non-cash loss on acquisition of Stobart Air and Propius, accounting for the recognition of pre-existing guarantee arrangements.
Stobart explained: "Whilst Propius was originally a subsidiary of the group it entered into the sale and leaseback of eight ATR72-600 aircraft to a third party in April 2017. The group provided guarantees to the third party over the USD15.4 million annual rentals payable by Propius which expire in April 2027. These guarantees remained in place on disposal of Propius to Connect Airways Ltd.
"On 18 March 2020, Connect Airways, the parent company of Stobart Air and Propius, entered administration. The directors reviewed all options available to the group in relation to the future of Stobart Air and Propius, and concluded that the best course of action was to buy back Stobart Air and Propius to give the group effective control over the pre-existing guarantee obligations it has in respect of those businesses. Accounting for the recognition of these pre-existing guarantee arrangements has resulted in the current period loss of GBP55.0 million. The net liabilities recognised on the subsequent acquisition reflect this loss."
Stobart Air's trading outlook has deteriorated considerably since Stobart's June capital raise as a result of ongoing quarantined arrangements in Ireland. At the time of the capital raise, Stobart has been planning for a possible no-fly scenario though winter and has taken action to manage costs and minimise cash burn.
It plans "to exit that business in early course" and is already engaging with parties interest in acquiring its stake and, with Aer Lingus, to enter enter a new commercial arrangement base December 2022.
Chief Executive Warwick Brady said: "Looking forward, the group has immediate access to liquidity, with GBP119.1 million 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."
By Anna Farley; annafarley@alliancenews.com
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