Stobart Group upbeat on aviation performance

(Sharecast News) - Aviation, energy and civil engineering company Stobart Group issued its pre-close trading statement and capital review update on Wednesday, reporting that it had continued to make "strong" commercial progress in its core aviation and energy operating divisions, and was trading in line with management expectations.The FTSE 250 firm said that in its aviation division, London Southend Airport saw a 33% increase in passenger numbers to 1.5m in the financial year ended 2019.Preparations were said to be "well underway" to welcome Ryanair, who would base three aircraft at the airport from April.Southend Airport also announced recently that Loganair would be launching flights to Glasgow and Aberdeen from May, and to Carlisle Lake District Airport in July, supporting further passenger growth.On 22 February, Stobart Group confirmed it had disposed of its regional airline and aircraft leasing businesses in return for becoming a 30% shareholder, alongside Virgin Atlantic and Cyrus Capital, in a newly-created private vehicle, Connect Airways.Stobart said it recognised a profit on disposal, on an accounting basis.The disposed businesses would be treated as discontinued operations in the 2019 results, with the 2018 results restated.Stobart said it expected to include 30% of any profit after tax of Connect Airways in its group results going forward.In its energy operations, the board said all but three of the power plants in the UK and Ireland that Stobart supplied to had completed their commissioning phases, and were now in full contractual operations, meaning the owners of those were confident that the plants were at a level where it could perform consistently.That improvement had helped Stobart Energy to deliver 1.3 million tonnes of renewable fuel, representing an increase of over 45% on the previous year.Stobart said the improvement was achieved despite continued challenges with underperforming power plants during their commissioning period.As a result of those challenges, the company said it would continue to carry non-underlying pre-contract costs until the plants all reached the end of their commissioning periods.As a result, Stobart Energy confirmed it was seeking to negotiate compensation packages with the various plant owners.Finally, in its rail and civils division, the company noted that it had reported at its interim results that it had seen a material reduction in profitability against management's expectations.That reduction followed a review of ongoing contracts that were substantially completed in prior periods, resulting in a downgrade in the recorded performance of those contracts.Following the conclusion of the review, Stobart Rail and Civils strengthened its management team and had put in place a more disciplined approach to contract quality, focusing on securing contracts with external tier-one customers.That process was generating improved results in terms of new business, the board said.In the year, the team had worked on the Newton Heath Maintenance Building Project for Northern Rail, and had recently signed a significant new contract with Nexus - the Tyne and Wear passenger transport executive.On the subject of its capital review, Stobart said it was continuing to review its capital requirements.The objective was to ensure that the company could accelerate and deliver its ambitious plans to fund future growth and shareholder returns from operating cash flow on a sustainable basis, the board explained,"The majority of the group's planned investment will be deployed at London Southend Airport to put in place the infrastructure required to serve up to 10 million passengers per year," Stobart's directors said in their statement."The company continues to evaluate both the quantum of the investment required and the opportunities to fund growth through the disposal of non-core assets."To that end, Stobart Group has recently increased its available cash resources to support its growth plans through asset sales and the placement of shares on 11 January with Cyrus Capital, generating £24.7m, following the announcement of the recommended cash offer for Flybe."In light of the current assessment of its investment requirements and cash flow, the board said it believed it would be more appropriate to move to a twice-yearly dividend made in equal payments of 3p per share.The first payment of 3p per share was expected to be paid in July.Stobart Group said its full-year results for the 12 months to 28 February would be published on 15 May.