ESKN.L Regulatory News (ESKN)

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.

31 August 2022

ESKEN LIMITED

('Esken' or 'the Group')

Trading Statement

Esken, the aviation and renewables group, issues the following update on trading ahead of the publication of its half year results for the six months to 31 August 2022, which will be announced in November.

Aviation

London Southend Airport (LSA) has been informed by its global logistics partner that it will cease to use cargo operations at LSA, effective mid-September. LSA has been one of its global logistics customer's best performing aviation hubs. However, the operation has over time reduced from an original 18 flights per week to 7 since October 2021 and the global logistics partner has now advised LSA that it will cease operations in line with a change of strategic focus from air freight to road-based cargo. This decision is one of several long-term changes to its logistics network throughout the UK designed to fulfil more customer demand locally.

Esken anticipates that the impact on EBITDA for the remainder of FY23 will be in the order of c.£0.9m before exit fees receivable by Esken. There are exit fee provisions within the contract and the logistics customer will also pay fees related to its 60-day notice period. The FY24 impact on Esken's Aviation business is expected to be a c.£2.9m reduction in EBITDA, prior to any additional cost savings and/or new cargo agreements. The management team has been in discussions with other logistics businesses over the last twelve months to highlight the benefits of the operation at LSA.

LSA employs 12 people within the cargo operation and Star Handling, formerly Stobart Aviation Services, employs 60 people in service of the global logistics partner contract. Esken will explore opportunities to transfer a number of these people to other roles within the Aviation business.

The summer saw the return of passenger flying at LSA with ten flights a week currently being operated by easyJet serving Malaga, Palma and Faro. In addition, as a result of the widely reported disruption in the aviation sector with constraints at other airports, LSA was able to utilise its spare capacity to welcome flights from Blue Air, Sky Express, and Wideroe. LSA continues to have positive dialogue with a range of carriers in relation to summer 2023 schedules.

Esken recently appointed a new Chief Executive to LSA, John Upton, who will join the business on 12 September 2022 to lead the development of the airport.

LSA remains well positioned for the recovery and longer-term growth in commercial passenger flying. As volumes continue to build and more established London airports begin to face capacity constraints once again, LSA's proximity to London, strong transport links and enjoyable passenger experience support positive growth prospects.

Renewables

Esken Renewables continues to perform well despite the widely reported slowdown in the construction sector over the summer as a result of rising input costs and ongoing supply chain issues. The long-term supply contracts to energy generators which all have elements of automatic RPI related annual cost increase continue to be implemented in line with their annual review dates, helping to mitigate input cost pressures in the business.

As a result, the division remains on track to achieve EBITDA in FY23 in excess of £22m.

Non-core assets and legacy matters

Esken also announces that, in line with its strategy to dispose of its non-core assets, it has concluded the sale of a further part of the site at Widnes generating cash proceeds of £3.5m, in line with the current net book value.

Esken has also entered into an agreement for the early return to the lessor of two of the aircraft leased by Propius. The first of these aircraft has been delivered already with the second due to be handed over by mid-September subject only to final aircraft inspection on the date of handover. This arrangement will lead to a net cash benefit of c.£2m compared to the original terms.

Funding and liquidity

Esken expects to have cash and undrawn facilities of c.£50m at close of 31 August 22, including c.£10m of ring-fenced facilities at LSA. Taking into account the above developments, the Group's year end forecast headroom is tracking broadly in line with management expectations set out at the time of the refinancing. The business is in discussion with a number of debt providers in relation to replacing the undrawn RCF facility of £20 million which expires in February 2023 and to provide medium-term debt facilities to meet the funding requirements of the Group. Esken intends that these discussions will be concluded ahead of the interim results which are scheduled for early November.