1 Oct 2020 07:00
1 October 2020
STOBART GROUP LIMITED
('Stobart Group' or 'the Group')
Trading Update
Stobart Group, the aviation and energy infrastructure group, issues the following trading update prior to the publication of its interim results for the six months to 31 August 2020 on 4 November 2020.
Balance Sheet and Liquidity
The Group's core operations at London Southend Airport and Stobart Energy are operating within the scenarios set out at the time of the successful £100m capital raise in June. The Group continues to operate with strict financial discipline to minimise the operating cash burn and is deferring all discretionary capital expenditure until required to meet operational demand. As a result of these actions, Stobart Group's overall cash flows are trading within the range of management expectations and the Group had £119m of cash and undrawn bank facilities available at 31 August 2020.
Trading
In spite of the challenging backdrop for the aviation industry, London Southend Airport continues to benefit from strong uninterrupted income through its global logistics operations and recommenced passenger flights from June 2020. While passenger activity has been modest in the initial months since reopening, London Southend Airport remains well positioned to benefit from the expected recovery in the short-haul leisure travel market as and when restrictions ease. In addition, there is scope for further development of our logistics operations given the growth in online demand.
The immediate priorities for the airport are to continue managing costs to reflect current demand and maintaining flexibility to respond quickly to any change in activity levels. Looking ahead, the airport remains confident in its relationships with its existing carriers and is in positive discussions in relation to the post winter schedule which starts in April 2021. It is also actively engaging with a range of other low-cost carrier airlines regarding their interest in established proven routes that can be operated from next year at a low cost of operation.
Stobart Energy is now an established business with all plants operational and able to receive contracted volumes. This is leading to a more consistent demand profile resulting in predictable cash generation. However, the disruption to the construction industry and the closure of recycling facilities during the initial COVID period resulted in a reduction in available waste wood, requiring the utilisation of existing stockpiles. In order to protect cash generation and earnings for the long-term, the business has taken the strategic decision to ensure certainty of supply for our customers over the winter period and beyond by building stock levels of waste wood. This action has put some short-term pressure on gate fee income, but this is expected to recover to pre COVID levels in the first half of 2021.
Stobart Air is operating below the scenarios set out at the time of the capital raise due to the continued quarantine arrangements in Ireland, with limited flights operating. As with other divisions in the Group, Stobart Air is carefully managing its cost base and is working with its various stakeholders to minimise cash burn while maintaining its ability to respond to changes in restrictions. The Group is engaging actively with a number of parties interested in acquiring its stake and with Aer Lingus to enter into a new commercial arrangement beyond December 2022 as part of this process.
Guidance
Further to our previous announcements, the COVID-19 situation is likely to remain uncertain for some time and all guidance consequently remains suspended.
Warwick Brady, Chief Executive, Stobart Group said,
"The Group is executing the strategy it set out at the time of the capital raise and is employing strict financial discipline to safeguard both the operational capability and the value of its core assets to ensure it will be positioned to respond to a recovery in demand.
We are delivering a cost-effective passenger-focused experience at London Southend Airport; we are reviewing the strategic options to realise value from Stobart Energy; we have exited the Rail & Civils business ahead of plan; and we continue to evaluate opportunities to dispose of remaining non-core assets."
Enquiries:
Stobart Group Limited C/o Tulchan
Charlie Geller, Communications Director
Tulchan
Olivia Peters T: +44 (0)20 7353 4200 E: opeters@tulchangoup.com
David Allchurch T: +44 (0)20 7353 4200 E:DAllchurch@tulchangroup.com