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.

11 March 2021

Esken Limited

("Esken" or "the Group")

Trading update

Esken, the aviation and energy infrastructure group, issues the following update on trading for the year to 28 February 2021.

Summary

· Strict financial discipline has resulted in £77.4m of cash and undrawn bank facilities available as at 28 February.

· London Southend Airport benefited from continued activity through its global logistics operation.

· Gate fees at Stobart Energy have continued to improve toward pre-COVID-19 levels.

· Esken is progressing a range of options regarding Stobart Air & Propius and expects to bring the matter to conclusion in the near term.

David Shearer, Executive Chairman said, "We have continued to deliver against the strategy we set out at the time of our capital raise in June 2020 despite the business interruption caused by COVID-19 extending far beyond all reasonable expectations at that time."

"Esken is becoming a more focused business. We divested the Rail & Civils division and remain committed to exiting Stobart Air and Propius. As a Board, we are undertaking a review of our strategic options in light of the impact of the pandemic. We are doing this to ensure that we protect the capability of our core operations and focus on delivering value for shareholders."

"We continue to maintain strict financial discipline. This has allowed us to minimise cash burn and protect our liquidity position. Stobart Energy is delivering important cash generation at a time of challenge within our aviation businesses. This discipline, coupled with the depth of operational talent within our businesses, will allow us to protect the value of our core assets and navigate the recovery as vaccine programmes are rolled out across Europe and activity levels recover."

Balance sheet and liquidity

Esken's strict financial discipline has resulted in the Group having £77.4m of cash and undrawn bank facilities available at 28 February 2021. The cash burn for the Group excluding Stobart Air and Propius was £9.4m for the six months to 28 February 2021. Esken remains committed to exiting Stobart Air and Propius in the near term.

The COVID-19 pandemic has created unprecedented challenges for Esken and the aviation sector as a whole. Overall cash flows are currently trading ahead of the budget set out of for a reasonable worst case scenario at the time of the capital raise in June 2020. That scenario envisaged lockdown restrictions extending no later than March 2021 and a slow recovery in the aviation sector through to June 2021. It is now clear that lockdown restrictions will last longer and the recovery will be slower than was predicted in June 2020. 

Trading

London Southend Airport

London Southend Airport has a strong and differentiated commercial passenger proposition and allows airlines to generate similar yields to other London airports but at a lower cost per passenger. This low cost proposition will appeal to cost conscious airlines as the aviation sector recovers from the pandemic.

Lockdown restrictions curtailed much of the commercial passenger operations at London Southend Airport during the year as evolving quarantine arrangements and late changes to travel corridors eroded passenger confidence when restrictions were lifted. As a result, 147k passengers flew through London Southend Airport compared to 2.1m in the prior year. Of those 147k passengers, 68k flew in March 2020 before the travel restrictions really took hold. Though some flying is expected to resume in May 2021 we do not envisage this to restart in earnest before June 2021.

In response to this trading environment, management took a range of decisive actions to greatly reduce cash burn, including extensive use of the Government's furlough scheme. London Southend Airport benefitted from continued operations and income from its global logistics operation throughout the year. However, movements reduced during January and February 2021 due to Brexit uncertainty and seasonal variances. The logistics operation is confirmed to return to previous full operational levels by the end of March 2021.

Stobart Aviation Services

Stobart Aviation Services provides check in and baggage handling services to airlines at airports across the UK. Activity has been impacted by the restrictions to flying during the year. It closed its operations in Edinburgh and Glasgow Airports which helped to manage costs and allow it to focus on operations at London Southend Airport, London Stansted Airport and Manchester Airport. Stobart Aviation Services is developing a strong reputation within global logistics and cargo operations and is exploring further growth opportunities in that sphere.

Stobart Energy

Stobart Energy is the UK's number one supplier of waste wood fuel with long-term, high-margin contracts and was cash generative in the year. It has high entry barriers, and its supply contracts are underpinned by long-term UK Government subsidies (ROCs) received by its customers.

Lockdown restrictions that took place through November and from late December onward have not inhibited the construction industry in the same way that the March 2020 lockdown did. As a result, the availability of waste wood has been uninterrupted since the end of that first lockdown. This has meant that Stobart Energy has continued to meet the supply needs of its biomass plant partners and fulfil its contractual obligations.

As previously announced, the demands on waste wood supply have remained particularly high as a range of end users re-stock. This initially resulted in lower gate fees (the fee that the business charges to its suppliers for taking their waste wood) for Stobart Energy. However, these have since been continually improving toward pre-COVID-19 levels.

Stobart Air and Propius

Esken remains in advanced discussions regarding its exit from Stobart Air and Propius. These discussions have been impacted by the fact that the restrictions on commercial passenger flying have extended beyond the original reasonable worst case scenario and the outlook for aviation has continued to decline.

This has not provided a favourable backdrop for an exit from an airline and aircraft leasing business. Despite this, Esken has a number of options and is engaged actively in achieving the best outcome. Esken remains confident of bringing this matter to a conclusion in the near term.

Guidance

Further to our previous announcements, the COVID-19 situation is likely to remain uncertain for some time and all guidance consequently remains suspended.

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