Stobart trading in line as Southend passenger numbers grow

(Sharecast News) - Southend Airport owner Stobart Group said on Wednesday that it was trading in line with market expectations, with "strong" commercial progress in its core energy and aviation divisions.

In an update ahead of its interim results, the company said passenger numbers at Southend Airport have risen 42% in the six months to 31 August 2019 compared to the same period last year. This was driven by the start of Ryanair flights in April, Loganair flights in May and "the continued successful growth" of easyJet.

Access was further improved by the introduction of early and late rail services between London Liverpool Street and Southend Airport.

Stobart said Wizz Air will start flying from Southend in October to three new destinations, which will help support the continued growth in passenger numbers there, in line with its target of 5 million passengers a year by February 2023.

The group said it was taking a cautious approach to passenger forecasts in the short term given ongoing uncertainty in the sector, partly caused by Brexit. It's working on the basis of around 2.3 million passengers for the year ending 29 February 2020, which would represent a 53% increase on the previous year.

In the energy business, the volume of waste managed, which is mostly processed into waste wood fuel, increased by 148k tonnes to 806k tonnes during the half. This is equivalent to a run rate of 1.7m tonnes a year, which is a 22% jump on last year. Stobart put the improvement down to all the energy recovery plants that it supplies under long term contracts - bar one - having reached full contractual operational volumes.

Chief executive officer Warwick Brady said: "Stobart Group has made considerable progress in the period, particularly in terms of the number of passengers that we have welcomed at London Southend Airport and the volume of waste fuel that we have been in a position to supply under contract. I am particularly encouraged by the quality of airline partners that we are now working with and the opportunity that brings to deliver future sustainable operating profits."

At 1040 BST, the shares were up 0.6% at 128.53p.

Canaccord Genuity said: "Going forward, we believe the airport is well placed to capture a growing share of the London air travel market, especially considering its location, catchment area, transport links, limited curb to gate times and the increasingly congested nature of other London airports.

"Stobart Energy volumes are on track to hit 1.7m tonnes this year with nearly all the plants now having reached full contractual obligation volumes. We expect Stobart Group's two main divisions to deliver increasingly attractive earnings and cash flows in the coming years."

Canaccord retained its 'buy' recommendation on the stock and 350p target price.