STOB.L Regulatory News (STOB)

29 August 2014

STOBART GROUP LIMITED

('Stobart' or 'the Group')

Pre-Close Trading Statement

Stobart Group, the infrastructure and support services group, issues the following pre-close trading statement prior to the announcement of the interim results for the six months to 31 August 2014, which is expected to be made on 23 October 2014.

Andrew Tinkler, Chief Executive Officer, said "We have seen encouraging year on year growth in biomass tonnages supplied and passenger numbers, which are key performance indicators in our Energy and Aviation divisions respectively. Whilst the rate of development against our plans in these growing businesses is hard to predict accurately in the short term, the Board is satisfied with the performance achieved to date and is confident of delivering strong returns over the medium term. In the period to date we have returned to shareholders £34.6m via share buybacks, and £13.2m via dividends paid in July."

Following the partial realisation of the Transport & Distribution business in April, the Group is now organised in five divisions: Infrastructure, Energy, Aviation, Rail and Investments. This is the first year of operation for our new divisions and it is pleasing to be able to report satisfactory progress in all of them.

In our Infrastructure division, we are targeting financial close for investment in two large combined heat and power (CHP) energy plants over the next six months. We have continued our strategy of active property asset management and disposals, with the completion of the sale of four properties in the period to date, realising £12.7m of cash. Discussions are on-going around potential future disposals and we are hoping to realise at least a similar level of cash in the second half.

We have secured planning permission at our Carlisle Airport site for an air/road freight distribution centre, which also opens up potential opportunities for further development at the site including passenger and air freight services. In addition, we have secured planning permission for 100 residential houses at our Chelford site.

In the Energy division, tonnages supplied are over 50% ahead year on year in the period to 31 July 2014. However, profit per tonne overall is lower as margins have been affected by a higher proportion of exported products in readiness for UK plants coming on stream, and transport profits are reduced year on year following the ending of a contract on 28 February 2014. Looking forward, cost management work undertaken in the first half is expected to benefit the next six months. We have reorganised our processing sites to allow more efficient supply of products to our customers. We recently entered into a 12 year fuel supply contract for a combined heat and power plant in Speyside, which is expected to be commissioned in 2016. In addition we are at an advanced stage of negotiation for a number of further significant potential supply contracts with plants which are looking to reach financial close in the near future.

In the Aviation division, passenger numbers are over 20% ahead year on year in the period to 31 July 2014. The passenger-related revenue per passenger has also grown by over 10% year on year. This growth has directly benefited underlying EBITDA. We have also been focussed on restructuring management and developing the airport's systems to make the airport operation more efficient. For the second year running the airport has topped the Which? airport passenger satisfaction survey with an improved rating, but there is still work to do in some areas. Based on known traffic, the passenger numbers may be flat in the next six months but we are actively working with operators to identify opportunities to bring further traffic into that period. For example, we have recently announced that SkyWork Airlines will be operating a twice daily new route to Bern starting in October 2014, after transferring this route from London City airport.

Stobart Air, of which we own 45%, has recorded increased passenger numbers for 13 consecutive months up to July 2014, and we are working with the airline's management to identify further opportunities.

The Rail division has grown revenue from external customers by around 40% in the period to 31 July 2014, securing a promising level of work at respectable margins, through collaborations with contractors to Network Rail. This has partially compensated for the lower internal development work in the first half, but we expect that internal work will pick up in the second half. There is also strong interest for rail engineering work in the next six months.

Within the Investments division, the Transport & Distribution business including Eddie Stobart, of which we own 49%, is performing in line with management's expectations, although our recorded share of profit will be subject to transaction accounting fair value adjustments. Growth continues in the aircraft leasing business, of which we own 33%; the eighth aircraft has been delivered and all aircraft are operational.

We have restructured the Energy and Aviation divisions, involving some restructuring cost, and incurred exceptional finance costs in connection with the early repayment of £168m of bank debt in March and April 2014, which has reduced the on-going interest costs significantly.

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