TIDMESKN
RNS Number : 6096D
Esken Limited
30 June 2021
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.
30 June 2021
Esken Limited
("Esken" or the "Group")
Results for the 12 months ended 28 February 2021
Taking action to secure financing to underpin post COVID-19
recovery
Esken Limited, the aviation and energy infrastructure group,
today announces its results for the 12 months to 28 February
2021.
The Group will provide a live presentation relating to its
results via the Investor Meet Company platform at 9:30am BST today.
The presentation is open to all existing and potential
shareholders.
Investors can sign up to Investor Meet Company for free and add
to meet Esken via:
https://www.investormeetcompany.com/esken-limited/register-investor
. Investors who already follow Esken on the Investor Meet Company
platform will automatically be invited.
David Shearer , Executive Chairman of Esken said,
" I would like to thank the Esken team for their hard work and
dedication in facing the unprecedented challenges presented by
COVID-19, the ramifications of which are likely to continue for
some time. We responded robustly and decisively, minimising losses,
reducing cash burn and protecting liquidity to maintain the
operational capability of our core businesses.
Encouragingly Stobart Energy's margins have been recovering in
the first half of FY2022 and gate fees are now improving toward
pre-COVID-19 levels.
Passenger travel has been severely disrupted by lockdowns and
evolving quarantine arrangements. London Southend Airport (LSA) has
not only withstood the impact of the pandemic but has provided an
essential service through its global logistics operation. Its
low-cost base proposition will position us well for a post pandemic
recovery.
Further to our announcement on 14 June 2021, Carlyle Global
Infrastructure Opportunity Fund L.P. (Carlyle) has informed Esken
that it is seeking final approvals for a definitive transaction
agreement in the coming days for GBP120m of funding via a
convertible loan to LSA. Esken is also in advanced discussions with
its banks, and has commenced discussions with shareholders in
relation to the ongoing funding requirements of the Group. The
strategic funding proposal in relation to LSA together with a
successful completion of a new working capital facility and equity
raise, would enable Esken to repay all outstanding bank debt, meet
its ongoing working capital requirements, underpin its business
plan going forward and meet certain of its legacy obligations."
Richard Hoskins, Managing Director, Carlyle Global
Infrastructure said,
"We have been in detailed discussions with Esken for a number of
months and are seeking final approvals to sign definitive
transaction documents in the coming days that will allow us to work
in partnership with Esken to develop London Southend Airport."
Financial highlights and liquidity update
-- The total loss before tax of GBP150.3m (2020: GBP139.4m) includes non-cash items, being the loss on acquisition
of Stobart Air and Propius (GBP58.2m) and net impairments during the current year (GBP30.1m). Esken funded
GBP42.2m to Stobart Air and Propius from date of acquisition to February 2021.
-- Post year end, Stobart Air was placed into liquidation following the termination of the sale of Stobart Air and
Carlisle Lake District Airport to Ettyl. Esken's total cash outflow resulting from the liquidation of Stobart Air
and ongoing Propius leases and related costs is estimated to be GBP82m over three years. However, this will
reduce in the event that Esken is successful in subleasing Propius' aircraft.
-- Esken expects to sign a definitive transaction agreement with Carlyle in the coming days for GBP120m of funding
net of Carlyle costs via a loan (convertible at Carlyle's option into an equity stake of 29.99% in London
Southend Airport (LSA)), which would release GBP100m gross of liquidity into the rest of the Group, with the
remaining GBP20m ringfenced for LSA (the "Transaction") to cover all anticipated expenditure for LSA for the
period through to the end of February 2024, other than amounts funded from operating cash flows. The Transaction
would be subject to Esken concluding the Group's broader funding arrangements and shareholder approval.
-- Esken's current bank facilities, totalling GBP120m, expire at the end of January 2022. The Group has drawn GBP15m
(GBP9m net of cash) of its GBP40m additional facility (Facility B) and its banks have indicated further support
for access to Facility B to the end of August 2021, subject to certain conditions.
-- Esken expects to conclude discussions on a new 18 month GBP20m working capital facility to support treasury
management in the coming weeks and is targeting an equity issue of around GBP40m by way of a documented
prospectus offering with the prospectus being issued before the end of July. These funding lines are in addition
to the GBP120m funding from the Transaction outlined above.
-- Toscafund, Esken's largest shareholder with 28.66% of the Company's issued share capital, has communicated to the
Company that it sees significant value in the equity of Esken and intends to support an equity raise pro rata
with its shareholding. All Board directors have also indicated their intention to participate in the equity
raise.
-- The strategic funding in relation to LSA together with a successful completion of a new working capital facility
and equity raise, would enable Esken to repay all outstanding bank debt, meet its ongoing working capital
requirements, underpin its business plan going forward and meet certain of its legacy obligations.
GBP'm 2021 2020 % change
---------------------------------------------- -------- -------- ---------
Revenue by division
Aviation 24.7 56.8 (56.4%)
Energy 75.0 76.3 (1.7%)
---------------------------------------------- -------- -------- ---------
Revenue for two main operating divisions 99.7 133.1 (25.1%)
---------------------------------------------- -------- -------- ---------
Investments and Non-Strategic infrastructure 10.1 4.9 105.8%
Central costs and eliminations 0.9 4.1 (78.6%)
---------------------------------------------- -------- -------- ---------
Total revenue 110.7 142.1 (22.1%)
---------------------------------------------- -------- -------- ---------
EBITDA by division
Aviation (6.1) (0.7) (772.8%)
Energy 10.0 15.0 (33.2%)
---------------------------------------------- -------- -------- ---------
EBITDA for two main operating divisions 3.9 14.3 (72.5%)
---------------------------------------------- -------- -------- ---------
Investments(1) and Non-Strategic
infrastructure (12.1) (11.8) (1.4%)
Central costs and eliminations (9.7) (8.7) (13.4%)
---------------------------------------------- -------- -------- ---------
Total adjusted EBITDA(1) (17.9) (6.2) (187.9%)
---------------------------------------------- -------- -------- ---------
Non-cash loss on acquisition of Stobart
Air and Propius (58.2) - -
Loss before tax (150.3) (139.4) (7.8%)
Discontinued operations, net of tax (11.9) (6.9) (72.6%)
Net debt - excluding IFRS 16 127.4 159.0 19.9%
Net debt - total 250.8 235.5 (6.5%)
Cash and undrawn banking facilities 77.4 14.8 423.0%
---------------------------------------------- -------- -------- ---------
(1) Adjusted EBITDA excludes the loss on acquisition of Stobart
Air and Propius in 2021, presented within the Investments
division.
Uninterrupted global logistics income and tight cost control
helped offset the challenges faced in the Aviation division
-- Passenger numbers at LSA fell by 93.1% year on year following restrictions on air travel and airlines reducing
the number of flights.
-- The impact of COVID-19 restrictions on revenue generation led to the Aviation division EBITDA increasing to a
loss of GBP6.1m, from a loss of GBP0.7m in the prior year.
-- This performance was partially offset by a reduction in cost of sales, significant use of the Government's
furlough scheme, tight control of overheads and the benefit of uninterrupted income from our global logistics
operation.
-- The logistics operation handled 28,448,804 packages in the financial year. Having started operations in October
2019, it is already developing a strong reputation and we are exploring further growth opportunities to create a
market-leading logistics service.
-- LSA should also benefit from its low-cost offering for airlines. LSA is well positioned for a post-pandemic
recovery in short-haul leisure travel as travel restrictions ease.
Stobart Energy protected long term value by ensuring certainty
of supply for its customers
-- The closure of the construction industry and recycling centres nationwide for a three-month period from March
2020 led to a significant reduction in available waste wood across the UK.
-- The business took the strategic decision to ensure certainty of supply for customers over the winter period and
beyond by building stock levels of waste wood. This action put short-term pressure on margins.
-- Whilst revenue and the tonnes supplied of 1.4m (2020: 1.5m) are similar to the prior year, EBITDA reduced by
33.2% to GBP10.0m (2020: GBP15.0m).
-- However, gate fees, volumes and margins have continued to show an improving trend and the financial performance
of the business is anticipated to return to pre-COVID-19 levels in the current financial year.
Outlook
The success of the COVID-19 vaccination programme and the staged
release of lockdown measures offer encouragement for the recovery
of the business as we look ahead. The differing pace of these
measures across Europe will continue to create uncertainty as to
the timing of the recovery in passenger demand in the next few
months. A consistent vaccine and testing regime across Europe will
be required before people will feel confident to travel in numbers,
but the short haul leisure market is likely to be the first to
recover. The airport continues to benefit from strong activity
levels in our logistics operations and t here is an opportunity to
build on our service track record and develop a market-leading
logistics service.
It is anticipated that Stobart Energy's performance will return
to pre COVID-19 levels in the current financial year, and
opportunities are being explored to seek additional supply
contracts and broaden the base of the market offering within the
energy from waste space where existing operational expertise can be
applied.
While there remains market uncertainty, the proposal to secure
the financing for the Group allows us to look ahead with confidence
as we navigate the recovery into a post COVID-19 world.
Esken nevertheless cautions that no guarantees can be given at
this stage that the discussions with its banks or in respect of an
equity raise will result in agreement or a transaction being
concluded.
Going concern
The Directors' assessment of the going concern position of the
Group is set out in the notes to the financial statements in this
results announcement. This section must be read in order to fully
understand the significant judgements the Directors have made and
the material uncertainty that exists in respect of the going
concern assumption for the Group.
Chairman's statement
I am pleased to present my Chairman's statement for the year to
the end of February 2021. I am sure it does not need me to remind
our shareholders that this is likely to have been the most eventful
and challenging year in decades.
The impact of the pandemic has been significant on people,
society and the economy and the ramifications are likely to
continue for some period of time. The effort at the outset of the
pandemic to respond to these challenges and to ensure that the
Group had the resources to manage through the crisis has allowed it
to maintain the operational capability of our core businesses.
Carlyle Global Infrastructure Opportunity Fund (Carlyle) has now
informed us it is seeking final approvals for a definitive
transaction agreement in the coming days for a long-term strategic
financing partnership in relation to London Southend Airport (LSA).
We also intend to conclude a new GBP20m working capital facility to
support treasury management and an equity issue of around GBP40m by
way of a documented prospectus offering. Doing so will enable Esken
to repay all outstanding bank debt, meet its ongoing working
capital requirements, underpin its business plan going forward and
meet certain of its legacy obligations.
Review of the year
As we entered the year we were already aware of the growing
threat from the pandemic and the impact which it was likely to have
on the business. An early casualty was the failure of Connect
Airways in early March 2020 due to its inability to access
additional financing given the collapse in demand for air travel.
This resulted in a total loss of our investment in the airline and
led to a decision by the board to reacquire Stobart Air and
Propius, the related aircraft leasing company, from the
administrator. This was to allow the board to take control of
legacy liabilities which would otherwise have had a significant and
immediate impact on the group. In view of the economic outlook for
the business, the board took the decision in early March 2020 to
review the financial structure for the group to ensure we had the
finance to allow it to sustain a prolonged period of reduced
activity. We announced a successful capital raise of GBP100m
together with additional bank facilities of GBP40m in June 2020
which has allowed us to maintain the operational integrity of our
businesses through this period of reduced demand while also meeting
our legacy obligations.
At that time we announced our intention to focus on two core
businesses being energy and aviation with the stated intention of
exiting the other businesses by the end of February 2021 and the
remaining infrastructure assets by June 2023. We announced the sale
of the Rail & Civils business to Bavaria Industries Group AG in
July 2020 and embarked on a process to find a buyer for Stobart Air
and Propius with the objective being to mitigate the residual
liabilities attaching to the group. This process was affected by
the extended lockdown in travel between the UK and Ireland and the
decision by Aer Lingus to award preferred bidder status in relation
to the franchise renewal from January 2023 to another party. While
we announced an agreement to sell the business to Ettyl in April
2021, the continuing uncertainties around travel and issues with
the prospective purchaser's funding package led the board to the
conclusion that it was not possible to complete the transaction. As
a result we notified the board of Stobart Air that Esken was no
longer prepared to continue to provide funding to the airline. This
led the board of Stobart Air to terminate the franchise with Aer
Lingus, cease to trade and appoint a liquidator. While this was not
the outcome which the board hoped to achieve it was just not
possible despite the exhaustive attempts of the respective
management teams to save the business. The Group has retained
responsibility for the eight ATR aircraft which were the subject of
a pre-existing guarantee until the expiry of the leases in April
2023 and will look to sub lease the aircraft to other operators to
minimise the impact on the Group. Although the Group retains
certain liabilities through the period these are now clear as to
quantum and timing (GBP82m over three years assuming Esken does not
successfully sublease the aircraft) and the lease term and
associated cost is less than it could have been had the airline not
been reacquired by Esken in April 2020 and failed then.
During the year the Group made use of the various government
support schemes including furlough, rates relief and deferral of
payments to HMRC. In view of the fact that aviation continues to be
one of the hardest hit sectors in the economy, a number of our
colleagues remain on furlough pending clarity on future demand for
passenger travel at the airport.
Results
As mentioned above, Aviation has been particularly affected by
COVID-19, with passenger numbers at London Southend Airport ('LSA')
falling by 93% year on year following restrictions on air travel
and airlines reducing the number of flights at both our airport and
across the air travel industry. In addition, easyJet announced it
was closing its LSA base from 31 August 2020. The impact of
COVID-19 on revenues led Aviation division EBITDA increasing to a
loss of GBP6.1m, from a loss of GBP0.7m in the prior year. This
performance was partially offset by a reduction in cost of sales,
tight control of overheads and the benefit of uninterrupted income
from our global logistics operation.
Whilst on face value the Energy division appears less exposed to
COVID-19, given the nature of its operation, it has had two key
challenges. The first was the closure of the construction industry
and recycling centres nationwide for
a three-month period. This created an abnormal supply and demand
issue.
This then drove the second key challenge, which was the weakness
in gate fee revenues as wood supply came back online following the
return of construction. The impact on gate fees, combined with an
increased cost of procuring material, including the decision taken
to import waste wood in order to meet contractual obligations, put
pressure on margins. The result was that while revenue and the
tonnes supplied of 1.4m (2020: 1.5m) are similar to the prior year,
EBITDA reduced by 33.2% to GBP10.0m (2020: GBP15.0m). During the
year, a GBP3.1m settlement was reached with Tilbury Green Power in
relation to issues arising through the commissioning of the plant.
A portion of this settlement was recognised in the prior year and
GBP2.4m has been recognised in the current year as a one-off.
The total loss before tax of GBP150.3m (2020: GBP139.4m)
includes non-cash items, being the loss on acquisition of Stobart
Air and Propius and the impairment of investments and fixed assets
during the current year, and significant one off impairments in the
prior year that have not repeated. Whilst the loss on acquisition
of Stobart Air and Propius transaction has been accounted for as a
non-cash item this has subsequently resulted in significant cash
losses and additional funding requirements
Strategy and funding
The impact of the pandemic being both greater and over a longer
period than anticipated last June at the time of the capital raise
has led the board to undertake a refresh of the strategy and the
medium term funding requirement for the Group. This has concluded
that the Group owns two attractive businesses which can generate
significant value for shareholders over the medium term as markets
recover post COVID-19. The key strategic objective will be to drive
shareholder value from these core assets over the medium term and
any decision on the realisation of value will be deferred until the
businesses recover fully from the pandemic and become mature cash
generative business units. While it was intended at the time of the
capital raise to seek to monetise the energy business within an 18
to 24 month period, the board has concluded that this is not the
right answer from a shareholder value perspective.
Stobart Energy is a recovering cash generative business with a
strong market position and long-term supply contracts. The
business' performance is returning to pre COVID-19 levels and
opportunities are being explored to seek additional supply
contracts and look to broaden the base of the market offering
within the energy from waste space where existing operational
expertise can be applied over the medium term. The business offers
the opportunity to generate returns from an infrastructure type
asset with an environmental benefit in recycling waste wood to
produce energy rather than going to landfill.
In the Aviation business the prime asset is LSA which prior to
the pandemic offered passenger services to over 40 destinations to
a market of c.8m people living within one hour travel time to the
Airport. Whilst aviation has been one of the hardest hit sectors by
the pandemic the fundamental long term value drivers of the Airport
remain sound. This is soon to be recognised through the strategic
partnership transaction in relation to LSA which is covered
below.
Esken will continue to invest in the infrastructure of the
Airport in step with passenger demand recovery allowing LSA to meet
the needs of airline partners for an efficient cost effective
London airport and offering a safe and enjoyable passenger
experience. In addition there is an opportunity to develop the
logistics offering both with the existing global logistics partner
and other related businesses. Given the award of the Thames
Freeport status in the Estuary and proximity to East London, the
Airport is well placed to capitalise on accelerated airfreight
growth and movements.
In order to realise the full value potential of LSA we expect to
conclude a funding arrangement with Carlyle , subject to
shareholder approval and the conclusion of a new GBP20m working
capital facility to support treasury management and an equity issue
of around GBP40m. Carlyle would represent a long term strategic
financial partner for the development of the airport. It is a major
global funds business with $260b under management and has concluded
16 airport transactions around the globe. Our expectation is
Carlyle will provide funding of GBP120m net of costs by way of a
secured loan with an option to convert in to 29.99% of the equity
in the airport (which implies a valuation of the airport of
GBP400m). Of this funding, GBP100m would be released to the rest of
the Group to refinance the bank facilities which expire in January
2022 and the remaining GBP20m would be retained within the LSA
business to meet its funding requirements. It is intended that
future capex funding of LSA will be arranged on a standalone basis
as demand recovers. The combination of the proven operational
capability of the LSA management along with the airport development
experience of Carlyle and its financial muscle is expected to
provide a strong partnership as we rebuild our commercial
relationships with our airline and other partners into the
recovery.
We have also put in place plans for a new funding package of
GBP60m gross comprising a new GBP20m working capital facility to
support treasury management and an equity issue of around GBP40m by
way of a documented prospectus offering. Doing this will allow us
to refinance fully the existing bank debt, meet certain of our
remaining legacy obligations and provide the necessary working
capital to underpin our business plan. It is also our intention to
actively look to realise the residual infrastructure assets with a
net book value of GBP39m at the year end to provide additional
resources for investment.
Board and People
I would like to express my personal thanks to my board and all
of our colleagues at Esken for their strong support throughout the
last year. It has been a difficult time for everyone, whether at
work or on furlough and the continuing dedication and support to
each other has been appreciated as we managed our way through these
challenging times.
Our Chief Executive Warwick Brady tendered his resignation from
the board on 8 February 2021 and stepped down on 30 April 2021
having been head hunted to another CEO role with a large global
services business in the sector. Warwick has been in the business
for almost five years and during that period has been fully
committed to the business during some rather turbulent times. On
behalf of the board and personally I would like to express our
thanks for his service to Esken and wish him well in his new role.
I have taken on the role of Executive Chairman on an interim basis
and following completion of the various transactions announced
today I will undertake a review on the future leadership structure
and requirements for the Group as we move forward.
I was pleased to welcome Clive Condie to our board in July as a
Non-Executive Director. Clive has significant experience in the
aviation and airport sectors and his advice and counsel has been
very valuable to the board over his time with us. It was our stated
intention last year to add a further non-executive director to the
board in addition to provide for normal succession and add to the
board's diversity. In view of the significant disruption in the
business it was decided to defer this until after the pandemic and
a recruitment process will be undertaken in the months ahead.
Environmental Social & Governance ('ESG')
The board continues to recognise the importance of its ESG
responsibilities and its importance to all stakeholder groups.
From the outbreak of the pandemic up to today, the focus on our
ESG Framework remained at the core of our business decision making.
The Framework developed was shaped into 'Our Five Pillars':
Developing Our People; Supporting Sustainable Communities; Taking
Climate Action; Excelling in Health & Wellbeing, Safety and
Security; and Minimising Our Environmental Footprint. Admittedly,
and perhaps unsurprisingly, progress across some priority areas was
hindered by the pandemic, with many of our teams placed onto the
government furlough scheme. However, we were able to develop and
make progress on some initiatives, to place the focus of our
business on sustainable growth.
We have focused our attention on processes to gather and monitor
data over the past year which will allow us to drive engagement and
communication through the business and across its stakeholders. We
intend to emerge from the pandemic in a sustainable way and are
embedding ESG in our decision making as we implement our long term
plans.
Future
The success of the vaccination programme and the staged release
of lockdown measures offer some encouragement as we look ahead. The
differing pace of these measures across Europe will continue to
create uncertainty as to the timing of the recovery in passenger
demand in the next few months. A consistent vaccine and testing
regime across Europe will be required before people will feel
confident to travel in numbers but the short haul leisure market is
likely to be the first to recover. The airport continues to benefit
from strong activity levels in our logistics operations and our
energy operations continue to meet our expectations. While there
remains market uncertainty the fact that we are progressing plans
to secure new financing for the Group will allow us to look ahead
with a degree of confidence as we navigate the recovery into a post
COVID-19 world.
David Shearer
Executive Chairman
Aviation operating review
COVID-19 created unprecedented challenges for London Southend
Airport and the aviation sector as a whole. The UK Government's
policies around movement within and between nations, evolving
quarantine arrangements, testing, and the passenger costs
associated with those policies, resulted in the almost complete
collapse in demand for air travel. In the first two weeks of
February 2021, the decrease in passenger traffic at European
airports stood at -89% versus 2020, with airports in the UK, at
-92%, reporting the sharpest declines. London Southend Airport is
very much in line with that overall trend, down 93% in passenger
numbers on the previous 12 months.
However, our global logistics operation remained open throughout
and heightened demand for home deliveries drove a significant
revenue stream. We have taken a proactive approach to finding new
revenue streams, for example by using car park space for storage
and by increasing general aviation flying.
At the same time, we took steps to manage costs. We suspended
all recruitment, modified employment contracts to improve
flexibility and cut both bonus and any annual cost of living
increases, as well as making some roles redundant. In addition, we
took advantage of government support packages, for example putting
large numbers of staff on furlough and applying to the Airport and
Ground Operations Support Scheme. We have also reduced capex to
regulatory and compliance items only, deferring further capex in
line with the return of passenger demand.
We also took further steps to reduce costs within Stobart
Aviation Services, our check-in, baggage handling and logistics
services business. With activity impacted by the restrictions to
flying it closed its operations in Edinburgh and Glasgow Airports.
This allowed the business to manage costs and 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.
Whilst our overall performance has been impacted by enduring
COVID-19 lockdown restrictions, strict financial discipline has
aided the conservation of cash and the delivery of an EBITDA loss
of GBP6.1m for the Aviation division, compared to a GBP0.7m EBITDA
loss in the prior year. The loss before tax was GBP17.5m compared
to a loss before tax of GBP9.8m in the prior year.
Looking forward, the outlook for FY22 is one of slow but sure
recovery, assuming continued progress in the fight against
COVID-19. It is clear that there is underlying demand for air
travel. This is evident from the reaction to markets like Portugal
and the Canary Islands opening up in Autumn and Winter 20/21, or
from the response to the Government's announcement of international
travel from 17 May 2021, when airline bookings increased by several
hundred percent. Once vaccination programmes in the UK and overseas
mature and the pandemic-related restrictions ease, it is clear that
the air travel market will recover relatively rapidly.
Within that, segments served particularly well by London
Southend Airport are widely accepted to be among the first to
return. Low-cost leisure travel where London Southend Airport has
historically been strongest is likely to see an early return to
strong demand. London, a magnet for international travellers and,
pre-COVID-19, a generator of more than 60% of London Southend
Airport's outbound passengers, is the largest aviation market in
the world and, in previous crises, one of the most resilient.
The decision of easyJet to close its base at London Southend was
disappointing. However, it opens up opportunities for other
carriers to move onto established and profitable routes and we are
engaged in several discussions with different airlines.
We do not expect Brexit to have a significant impact on
passenger numbers. The majority of our passengers are UK nationals
travelling to EU countries for leisure purposes. Given the
importance of UK visitors to EU economies, it is unlikely that
those economies will want to see Brexit reduce UK visitor numbers.
There was a short-term impact on cargo movements through January
and February 2021. This has already been resolved and long term we
see no significant change due to Brexit.
The continuing uncertainties represented by the ongoing pandemic
means that the immediate term will be challenging but the
fundamentals of London Southend Airport remain compelling: very low
costs, very high service levels and great access to London. The
consensus view is that demand will return to and then exceed 2019
levels by the mid-2020s. Capacity will once again be constrained at
London's airports and we confidently expect London Southend Airport
to play its part in that return to long-term growth.
Energy operating review
Stobart Energy entered the year having made significant
operational progress in recent years and was reaching a level of
operating maturity.
All customers, with the exception of Port Clarence, had
successfully completed commissioning in the prior year. The focus
was therefore turning to optimising the efficiency of our supply
chain and operations. We were also exploring ways to leverage our
strong fuel supply 'platform' for scale, diversifying into
additional waste streams.
However, the COVID-19 pandemic impacted in the first month of
FY21 with the national lockdown announcement on 23 March 2020. This
initially resulted in the closure of Household Waste and Recycling
Centres and the construction sector. A significant proportion of UK
waste wood is generated via these channels. This caused a national
shortage for waste wood.
Waste wood supply is seasonal. A greater proportion of waste
wood is generated during the Summer months. As a result, gate fees,
the fee Stobart Energy charges third parties for taking waste wood
from them, typically peak in the Summer months and reduce in the
Winter months.
In the prior year, Winter seasonality was also impacted by the
additional demand pressures following the nationwide commissioning
of the Biomass plant network. This caused a negative short-term
compounding effect on gate fees.
As such, Stobart Energy entered the FY21 year at its lowest
level of gate fees in recent years. There was an expectation that
the combination of steady demand profiles nationally and
established supply chains would mean gate fees would gradually
recover upwards.
Unfortunately, the pandemic lockdown coincided with the
beginning of the typical 'Summer' months compounded by the COVID-19
supply shortages.
Supply constraints led Stobart Energy to issue force majeure
notices to a number of its customers. This resulted in sales
volumes being impacted from April through to September 2020.
However, by year end, all force majeure notices with customers had
been lifted.
Stobart Energy responded by working closely with our customers
to co-design forecasting models to help them to mitigate some of
the challenges. Utilising the benefits of our scale as the UK's
number one biomass fuel supplier, we also leveraged our strong data
and market intelligence, facilitating timely data-driven planning
decisions by all parties.
The combination of these transparent supply forecasts and our
long-term contract approach to customer management enabled us to
make timely, longer-term supply decisions with our customers. In
turn, this helped to protect the long-term value of our businesses
by successfully strengthening the working relationships with our
customers allowing us to agree a supply plan with each through to
Spring 2021.
The actions taken in the face of these significant challenges
mean Stobart Energy is able to report EBITDA of GBP10.0m (FY20:
GBP15.0m). In the prior year there were a number of contractual
settlements reached, accounting for c.GBP5.6m of non-recurring net
gains, and adjusting for these non-recurring items, the FY21
trading performance was a 6.7% increase on the prior year.
We are pleased with this outcome, which demonstrates the
robustness of our business and the ability to utilise our scale and
long-term contractual positions to somewhat mitigate what was a
very challenging year.
Our EBITDA performance was largely a result of two factors: the
continued maturity of our operations, resulting in a favourable
year-on-year positive variance of GBP6.1m (primarily due to
full-year supply of Tilbury Green Power contract); and secondly the
impacts of the pandemic, which gave rise to an adverse year-on-year
variance of GBP5.6m (primarily due to adverse volume and supply
margin impacts). We are pleased to report that by the end of FY21,
all of our customer plants were fully operational once again and
our supply margin pricing was trending back towards pre-COVID-19
levels.
Over the next 12 - 24 months, we expect our customer plants to
enter the next stages of plant performance optimisation. This
should benefit Stobart Energy through increasing reliability and
throughput volumes. The continued focus on strong customer
management and collaboration is a complementary focus for us. This
should also assist in our supply chain optimisation strategy.
Assuming a managed national COVID-19 recovery over the next 12
months, we expect to be able to continue the managed recovery of
our supply margins and thus optimise our EBITDA performance.
I would like to thank all our employees, customers and supply
partners for the continued support and proactive collaborations
over the past 12 months. The whole biomass supply chain was
significantly tested during this period. The robustness that we
have collectively demonstrated, together with increased
collaboration to optimise our collective positions, should place us
in an even stronger position to deliver on our long-term
strategies.
Financial review
COVID-19
The COVID-19 pandemic has had an undoubted impact on both the
Group and the industry sectors in which the divisions operate. It
is important to recognise what this means at year end and the
continuing impact into the new financial year.
Aviation has been significantly affected by COVID-19, with
passenger numbers at London Southend Airport (LSA) falling by 93%
year on year following restrictions on air travel and airlines
reducing the number of flights at LSA and across the air travel
industry. In addition, easyJet announced it was closing its LSA
base from 31 August 2020.
Whilst the Energy division appears less exposed to COVID-19,
given the nature of its operation, it has had two key challenges.
The first was the closure of the construction industry and
recycling centres nationwide for a three-month period which created
an abnormal supply and demand issue. This then drove the second key
challenge, which was the weakness in gate fee revenues as wood
supply came back online following the return of construction. This
has resulted in a far greater impact on EBITDA than was originally
envisaged; however, we have in the remainder of the year started to
see this return to normality.
Stobart Air and Propius
During the year, the Group acquired an effective indirect
economic interest of 78.75% in Stobart Air and Propius which
resulted in these businesses being accounted for as subsidiaries.
As previously outlined, the acquisition was necessary to take
control of pre-existing obligations the Group has to these
businesses. Whilst the costs associated with Stobart Air and
Propius have been greater than expected, due to COVID-19
restrictions delaying the return of flights, we are satisfied that
the rationale to acquire remains valid. Despite concerted efforts
to find new owners to take the Stobart Air business forward a
suitable buyer could not be sourced. As a result, post year end the
Group was forced to cease providing financial support to Stobart
Air leading to Stobart Air to cease trading and appoint a
liquidator. The Group has undertaken certain contingency planning
measures as a result of this and will continue to fund the lease
obligations on the eight ATR aircraft in Propius through to
termination of the leases in April 2023 under the terms of its
pre-existing guarantee with GOAL.
Financial discipline
Whilst the challenges faced by the Group this year are
undoubted, the Group has moved quickly to mitigate their impact and
place the business on a sounder footing than would have been the
case. Cash outflows from the Group were minimised, through use of
the UK government furlough scheme, securing payment holidays on
asset financing and deferral of VAT payments. The Group disposed of
its investment in Stobart Rail, removing the need to fund the
expected ongoing losses of this business. Unfortunately, as part of
these measures we had to make a number of our valued members of
staff redundant. This decision was not taken lightly but we felt it
was necessary for the long-term recovery of the Group. Next, there
was a structural change with greater centralising of cash control,
with all discretionary divisional expenditure moved to the Group
centre and a new procedure for cost sign-off. This enabled quicker
decision making as a group and greater oversight on operational
spend. The strict centralised cash control will continue for the
foreseeable future until we emerge from the current climate.
The Group completed a successful capital raise in June 2020,
resulting in greater than expected gross proceeds of GBP100.1m
(GBP91.0m net). If the Group had not done the raise at this time it
may not have been in a position to do it at all. Agreement was
reached with the Group's current bank lenders to fund an additional
GBP40m revolving credit facility bringing the Group's total
revolving credit facility to GBP120m, further increasing headroom
for the Group.
Looking forward
As announced on 4 February 2021, Stobart Group Limited changed
its name to Esken Limited. This allows the Group to move away from
its legacy history and gives clarity on what we are about. The
disposal of the Stobart brands and trademarks also gave rise to a
cash injection of GBP8.5m in the year.
The Energy division has been the first of the operational
divisions to start its recovery from the impacts of COVID-19 and
has seen gate fees increase through the year approaching levels
seen under pre -- COVID conditions. The Aviation division is well
positioned to take advantage of the pent-up demand for travel once
flights can restart.
Revenue
Restated(1)
2021 2020
GBP'm GBP'm Movement
--------------------------------- -------- ------------- ----------
Aviation 24.7 56.8 (56.4%)
Energy 75.0 76.3 (1.7%)
--------------------------------- -------- ------------- ----------
Revenue from two main operating
divisions 99.7 133.1 (25.1%)
Investments 9.0 2.1 324.7%
Non-Strategic Infrastructure 1.1 2.8 (61.9%)
Group Central and Eliminations 0.9 4.1 (78.6%)
--------------------------------- -------- ------------- ----------
110.7 142.1 (22.1%)
--------------------------------- -------- ------------- ----------
(1) 2020 results have been restated where required in line with
IFRS 5 Discontinued Operations.
Revenue from continuing operations has decreased by 22.1% to
GBP110.7m. Revenue from our key growth divisions, Aviation and
Energy, has decreased by 25.1% to GBP99.7m. Revenue in the Aviation
division has been significantly impacted by COVID-19 with passenger
numbers at LSA down by 93.1% year on year. The acquisition of
Stobart Air in the year is the main driver for the increase in the
Investments revenue.
Profitability
Restated(1)
2021 2020
GBP'm GBP'm Movement
------------------------------------ -------- ------------- ----------
EBITDA(2)
Aviation (6.1) (0.7) (772.8%)
Energy 10.0 15.0 (33.2%)
------------------------------------ -------- ------------- ----------
EBITDA(2) from two main operating
divisions 3.9 14.3 (72.5%)
Investments (10.4) (7.6) (35.7%)
Non-Strategic Infrastructure (1.7) (4.2) 60.7%
Group Central and Eliminations (9.7) (8.7) (13.4%)
------------------------------------ -------- ------------- ----------
Adjusted EBITDA(2) (17.9) (6.2) (187.9%)
Depreciation (31.8) (20.0)
Amortisation - (7.5)
Loss on acquisition (58.2) -
Impairment (22.1) (93.4)
Impairment of loan notes (8.0) (2.8)
Finance costs (net) (12.3) (9.5)
------------------------------------ -------- -------------
Loss before tax (150.3) (139.4)
------------------------------------ -------- -------------
Tax 7.0 8.4
------------------------------------ -------- -------------
Loss for the year from continuing
operations (143.3) (131.0)
------------------------------------ -------- -------------
Loss from discontinued operations,
net of tax (11.8) (6.9)
------------------------------------ -------- -------------
Loss for the year (155.1) (137.9)
------------------------------------ -------- -------------
(1) 2020 results have been restated where required in line with
IFRS 5 Discontinued Operations.
(2) EBITDA represents loss before interest, tax, depreciation,
amortisation and impairments. Adjusted EBITDA is EBITDA excluding
loss on acquisition, only impacting the Investments division. Refer
to note 3 of the financial statements for reconciliation of
divisional EBITDA to loss before tax.
Profitability
In the current year, the Group has moved away from the
classification of underlying and non-underlying items in the
financial statements. Adjusted EBITDA and profit before tax are the
Group's key measures of profitability. Adjusted EBITDA has
decreased by 187.9% to GBP17.9m loss (2020: GBP6.2m loss) and the
loss before tax has increased by GBP10.9m to GBP150.3m (2020:
GBP139.4m). The increase in loss before tax is principally driven
by losses in the Investments division partially offset by one-off
impairments in 2020.
The Aviation division EBITDA has decreased by 772.8% to a loss
of GBP6.1m (2020: GBP0.7m) due to the impact of COVID-19 on
revenues, partially offset by a reduction in cost of sales and
tight control of overheads. In the Energy division, challenging
market conditions have impacted gate fees and led to increased cost
of procuring material, including the need to import waste wood in
order to meet contractual obligations. This meant that while
revenue and the tonnes supplied of 1.4m (2020: 1.5m) are similar to
the prior year, EBITDA has reduced by 33.2% to GBP10.0m (2020:
GBP15.0m). During the year, a GBP3.5m settlement was reached with
Tilbury Green Power. A portion of this settlement was recognised in
the year ending 29 February 2020 and GBP2.4m has been recognised in
the current year.
Investments and Non-Strategic Infrastructure are discussed in
more detail below. The Group Central and Eliminations EBITDA loss
increased by 13.4% to GBP9.7m (2020: GBP8.7m) mainly due to the
six-year deferred income from Eddie Stobart ending in the year
ended 29 February 2020.
Business segments
The business segments reported in the financial statements are
Aviation, Energy, Investments and Non-Strategic Infrastructure,
which represent the operational and reporting structure of the
Group.
The Operational review contains further details about the
performance of the operating divisions.
The adjusted EBITDA loss of GBP10.4m (2020: GBP7.6m) in the
Investments division is due to the inclusion of Stobart Air and
Propius, which were acquired in the year. The fair value of the
investment in Logistics Development Group plc (LDG), formerly Eddie
Stobart Logistics plc, increased by GBP5.7m (2020: GBP40.2m
reduction) due to an increase in the LDG share price and additional
investment in the year. The gain on revaluation of the investment
to current market share price is presented in the consolidated
statement of comprehensive income.
The Non-Strategic Infrastructure division continues to realise
value from its property assets when the time and price is right. At
28 February 2021, the book value of Infrastructure assets held was
GBP39.2m (2020: GBP47.3m). During the year, there was one (2020:
two) property disposal that generated net proceeds of GBP1.4m
(2020: GBP2.3m). The disposal relates to four acres of Widnes land.
Year-on-year EBITDA increased from a loss of GBP4.2m to a loss of
GBP1.7m, mainly driven by a one-off revaluation loss on investment
property in the prior year coupled with a year-on-year decrease in
overheads.
Depreciation and amortisation
Depreciation has increased from GBP20.0m to GBP31.8m,
principally due to right-of-use aircraft acquired as part of the
purchase of Stobart Air and Propius in the year. There was no
amortisation in the year (2020: GBP7.5m) due to the Stobart brands
being reclassed to assets held for sale at year ended 29 February
2020.
Loss on acquisition
The Group's acquisition of equity interests in Stobart Air and
Propius from the administrators of Connect Airways led to the
consolidation of both businesses as 100% subsidiaries. A GBP58.2m
loss on acquisition was recorded, due to the settlement of
pre-existing relationships, which is presented on its own line in
the consolidated income statement.
Impairments
Shareholder loan notes relating to Mersey Bioenergy Holdings
Limited, the Widnes biomass plant owner, were impaired from GBP8.0m
to GBPnil in the year based on discounted forecast future cash
flows provided, which had deteriorated over the period with the
awaited refinancing still not complete. The loss on revaluation is
shown on a separate line, Impairment of loan notes, on the
consolidated income statement.
At the year end three land and building and property inventory
assets were subject to external independent development valuations.
This led to an overall reversal of impairment of GBP0.8m.
The Group carried out an impairment review of all plant,
property and equipment in Stobart Air and the right-of-use aircraft
in Propius. The assets were written off in full leading to an
impairment charge of GBP22.9m.
Finance costs
Finance costs increased by GBP2.8m to GBP17.2m, mainly due to
higher interest charges on the revolving credit facility (RCF) and
interest on IFRS 16 leases in Stobart Air and Propius. Finance
income decreased by GBP0.1m to GBP4.8m primarily due to no interest
received on the loans to Connect Airways after it entered
administration in March 2020, partially offset by the revaluation
of financial liabilities in the current year.
Loss before tax
The total loss before tax of GBP150.3m (2020: GBP139.4m)
including non-cash items, such as the loss on acquisition of
Stobart Air and Propius and the impairment of the loans to Mersey
Bioenergy during the current year, and significant one-off
impairments in the prior year that have not repeated. This is in
addition to the trading performance of the Aviation division and
Stobart Air, which has been significantly affected by COVID-19.
Tax
The tax credit on continuing operations of GBP7.0m (2020:
GBP8.4m) reflects an effective tax rate of 4.4% (2020: 5.3%). The
effective rate is lower than the standard rate of 19%, mainly due
to deferred tax assets not recognised in respect of certain
temporary differences in the year. The deferred tax liabilities
have been calculated at 19%, as this was the rate that was
substantively enacted at the statement of financial position
date.
Discontinued operations
On 14 July 2020, the Group divested of Stobart Rail Limited
(Stobart Rail) to Bavaria Industries Group. The operational results
of Stobart Rail prior to the date of disposal and the loss on
disposal of GBP9.5m are presented in discontinued operations. The
operations of Stobart Rail prior to the date of disposal resulted
in a loss of GBP2.4m, which along with the loss on disposal of
GBP9.5m, are presented in discontinued operations. The prior period
results have been restated within the consolidated income
statement, consolidated statement of cash flows and accompanying
notes accordingly.
Loss per share
Loss per share from continuing operations was 26.61p (2020:
35.52p). Total basic loss per share was 28.81p (2020: 37.39p).
Share movements and dividends
2021 2020
-------------------------- ----- -----
Interim per share - -
Final per share - 3.0p
-------------------------- ----- -----
Total dividend per share - 3.0p
-------------------------- ----- -----
The Board suspended the dividend during the prior year,
therefore no final dividend is proposed. The final dividend in the
table for the prior year relates to the year ended 28 February
2019.
On 29 June 2020, the Group issued 250,273,461 new ordinary
shares following a Firm Placing and Placing and Open Offer (Capital
Raise). The Capital Raise resulted in gross proceeds of GBP100.1m
(GBP91.0m net).
The number of shares held by the employee benefit trust
increased from 2,980,992 at 29 February 2020 to 3,778,457 at 28
February 2021 after the trust purchased 797,465 shares issued on
the Capital Raise.
Balance sheet
2021 2020
GBP'm GBP'm
------------------------- -------- --------
Non-current assets 369.4 388.9
Current assets 55.4 75.3
Non-current liabilities (172.6) (222.0)
Current liabilities (203.9) (139.1)
------------------------- -------- --------
Net assets 48.3 103.1
------------------------- -------- --------
Net assets have decreased by GBP54.8m, mainly due to the loss in
the year, partially offset by the Capital Raise and the increase in
the fair value of the investment in LDG, recognised in other
comprehensive income.
The overall value of property, plant and equipment (PPE) of
GBP285.6m (2020: GBP306.6m) has decreased in the year mainly due to
the disposal of Stobart Rail and the annual depreciation charge
across the Group. The revaluation of, and further investment in,
LDG led to an increase in other financial assets of GBP5.6m. The
impairment of the loans to Mersey Bioenergy Holdings reduced
non-current other receivables by GBP8.0m.
Current assets have reduced principally due to an overall
decrease in trade and other receivables across the Group of
GBP12.8m and the disposal of the Stobart brands GBP10.0m, which
were held for sale at the year ended 29 February 2020.
Non-current liabilities have decreased primarily due to the RCF
liability of GBP52.3m being presented as a current liability. There
was an increase in provisions of GBP15.2m, mainly relating to
maintenance reserves in Stobart Air and Propius, and reductions in
the defined benefit pension and deferred tax liabilities.
Current liabilities have increased primarily due to the GBP52.3m
RCF liability being presented as current and Propius IFRS 16 leases
being recognised following acquisition. Year on year the RCF has
reduced by GBP22.4m.
Debt and gearing
2021 2020
--------------------------- ----------- -----------
Asset-backed finance GBP139.8m GBP168.9m
IFRS 16 lease obligations GBP123.4m GBP76.4m
Cash (GBP12.4m) (GBP9.8m)
--------------------------- ----------- -----------
Net debt GBP250.8m GBP235.5m
--------------------------- ----------- -----------
Adjusted EBITDA/ interest -1.4 -0.7
Net debt/total assets 59.0% 50.7%
Gearing 519.2% 228.4%
--------------------------- ----------- -----------
Note 25 of the financial statements includes details on net
debt. The alternative performance measures of net debt and gearing
are explained in note 36 of the financial statements.
During the year, the Group agreed an additional GBP40m variable
rate committed RCF with Lloyds Bank plc and Allied Irish Bank plc
in addition to the existing GBP80m RCF. At 28 February 2021, these
facilities were drawn at GBP55.0m (2020: GBP75.0m).
Asset-backed finance has reduced year on year primarily due to a
net repayment of the RCF. Aircraft lease liabilities recognised on
the balance sheet following the acquisition of Stobart Air and
Propius have driven the increase in IFRS 16 lease obligations.
Cash flow
2021 2020
GBP'm GBP'm
------------------------- ------- -------
Operating cash flow (28.7) (15.1)
Investing activities 6.0 (12.5)
Financing activities 28.8 29.2
------------------------- ------- -------
Increase in the year 6.1 1.6
Discontinued operations (3.5) (6.2)
At beginning of year 9.8 14.4
------------------------- ------- -------
Cash at end of year 12.4 9.8
------------------------- ------- -------
Discontinued cash flow in the year relate to the operations of
Stobart Rail & Civils.
Investing activities include an inflow of GBP8.5m of the total
GBP10.0m consideration for the disposal of the Stobart brands.
There was a cash outflow for the purchase of PPE of GBP3.1m.
Financing activities includes net proceeds from the Capital
Raise of GBP91.0m. Offsetting this there were outflows for the net
repayment of the RCF GBP24.3m, the repayment of the capital element
of lease obligations GBP24.0m, interest payments GBP9.4m and the
repayment of loans to Virgin and Cyrus GBP4.5m.
Lewis Girdwood
Chief Financial Officer
Consolidated income statement
For the year ended 28 February 2021
Restated(1)
Year ended Year ended
28 February 29 February
2021 2020
GBP'000 GBP'000
----------------------------------------- -------------- -------------
Continuing operations
Revenue 110,724 142,098
Other income 5,798 4,700
Operating expenses - other (134,263) (142,943)
Share of post-tax profits of associates
and joint ventures (218) (9,765)
Gain/(loss) on swaps 80 (300)
----------------------------------------- -------------- -------------
Adjusted EBITDA (17,879) (6,210)
----------------------------------------- -------------- -------------
Depreciation (31,814) (20,024)
Amortisation - (7,456)
Loss on acquisition (58,182) -
Impairments - other (22,097) (48,330)
Impairments - loan receivables
from joint venture - (45,105)
----------------------------------------- -------------- -------------
Operating loss (129,972) (127,125)
----------------------------------------- -------------- -------------
Impairment of loan notes (8,000) (2,754)
Finance costs (17,214) (14,453)
Finance income 4,849 4,917
-----------------------------------------
Loss before tax (150,337) (139,415)
Tax 7,083 8,390
----------------------------------------- -------------- -------------
Loss for the year from continuing
operations (143,254) (131,025)
----------------------------------------- -------------- -------------
Discontinued operations
Loss from discontinued operations,
net of tax (11,859) (6,870)
----------------------------------------- -------------- -------------
Loss for the year (155,113) (137,895)
----------------------------------------- -------------- -------------
Loss per share expressed in pence
per share - continuing operations
Basic (26.61)p (35.52)p
Diluted (26.61)p (35.52)p
----------------------------------------- -------------- -------------
Loss per share expressed in pence
per share - total
Basic (28.81)p (37.39)p
Diluted (28.81)p (37.39)p
----------------------------------------- -------------- -------------
(1) The 2020 results have been restated where required due to
IFRS 5 Discontinued Operations. Refer to note 5 of the financial
statements for more details.
Consolidated statement of comprehensive income
For the year ended 28 February 2021
Restated(1)
Year ended Year ended
28 February 29 February
2021 2020
GBP'000 GBP'000
Loss for the year (155,113) (137,895)
Exchange differences on translation
of foreign operations 3,826 -
Discontinued operations, net of
tax, relating to exchange differences - (173)
----------------------------------------
Other comprehensive income/(expense)
to be reclassified to profit or
loss in subsequent years, net of
tax 3,826 (173)
Remeasurement of defined benefit
plan 1,176 (2,049)
Change in fair value of financial
assets classified as fair value
through other comprehensive income 4,643 (40,212)
Tax on items relating to components
of other comprehensive income (182) 348
----------------------------------------
Other comprehensive income/(expense)
not being reclassified to profit
or loss in subsequent years, net
of tax 5,637 (41,913)
----------------------------------------
Other comprehensive income/(expense)
for the year, net of tax 9,463 (42,086)
---------------------------------------- ------------- -------------
Total comprehensive expense for
the year (145,650) (179,981)
---------------------------------------- ------------- -------------
(1) The 2020 results have been restated where required due to
IFRS 5 Discontinued Operations. Refer to note 5 of the financial
statements for more details.
Of the total comprehensive expense for the year, a loss of
GBP133,791,000 (2020: GBP172,938,000) is in respect of continuing
operations and a loss of GBP11,859,000 (2020: GBP7,043,000) is in
respect of discontinued operations.
Consolidated statement of financial position
As at 28 February 2021
28 February 29 February
2021 2020
GBP'000 GBP'000
------------------------------------ ------------ ------------
Non-current assets
Property, plant and equipment 285,621 306,584
Investment in associates and joint
ventures 1,372 1,590
Other financial assets 10,392 4,776
Intangible assets 54,669 54,669
Net investment in leases 15,824 13,247
Trade and other receivables 1,495 8,000
------------------------------------ ------------ ------------
369,373 388,866
------------------------------------ ------------ ------------
Current assets
Inventories 15,334 13,893
Trade and other receivables 27,378 40,167
Cash and cash equivalents 12,408 9,802
Assets held for sale - 11,408
Corporation tax 324 -
------------------------------------
55,444 75,270
------------------------------------ ------------ ------------
Total assets 424,817 464,136
------------------------------------ ------------ ------------
Non-current liabilities
Loans and borrowings (122,116) (177,788)
Defined benefit pension obligation (2,418) (4,422)
Other liabilities (8,271) (9,687)
Deferred tax (261) (5,736)
Provisions (39,534) (24,346)
------------------------------------
(172,600) (221,979)
------------------------------------ ------------ ------------
Current liabilities
Trade and other payables (52,735) (61,899)
Financial liabilities (1,581) (3,500)
Loans and borrowings (89,121) (15,780)
Exchangeable bonds (52,010) (51,689)
Provisions (8,457) (6,191)
------------------------------------
(203,904) (139,059)
------------------------------------ ------------ ------------
Total liabilities (376,504) (361,038)
------------------------------------ ------------ ------------
Net assets 48,313 103,098
------------------------------------ ------------ ------------
Capital and reserves
Issued share capital 62,492 37,465
Share premium 390,336 324,368
Foreign currency exchange reserve 3,826 -
Reserve for own shares held by
employee benefit trust (7,480) (7,161)
Retained deficit (400,861) (251,574)
------------------------------------
Group shareholders' equity 48,313 103,098
------------------------------------ ------------ ------------
Consolidated statement of changes in equity
For the year ended 28 February 2021
Reserve
Foreign for own
Issued currency shares
share Share exchange held by Retained Total
capital premium reserve EBT deficit equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ---------- --------- ---------- ----------
Balance at 1 March
2020 37,465 324,368 - (7,161) (251,574) 103,098
Loss for the year - - - - (155,113) (155,113)
Other comprehensive
income for the year - - 3,826 - 5,637 9,463
------------------------ --------- --------- ---------- --------- ---------- ----------
Total comprehensive
income/(expense)
for the year - - 3,826 - (149,476) (145,650)
Issue of ordinary
shares 25,027 65,968 - - - 90,995
Employee benefit
trust - - - (319) 3 (316)
Share-based payment
credit - - - - 190 190
Tax on share-based
payment credit - - - - (4) (4)
Balance at 28 February
2021 62,492 390,336 3,826 (7,480) (400,861) 48,313
------------------------ --------- --------- ---------- --------- ---------- ----------
For the year ended 29 February 2020
Reserve
Foreign for own
Issued currency shares
share Share exchange held by Retained Total
capital premium reserve EBT deficit equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- ---------- --------- ---------- ----------
Balance at 1 March
2019 37,082 324,379 480 (12,154) (52,833) 296,954
IFRS 16 transition
adjustment, net
of tax - - - - (2,846) (2,846)
------------------------ --------- --------- ---------- --------- ---------- ----------
Balance at 1 March
2019 (adjusted) 37,082 324,379 480 (12,154) (55,679) 294,108
Loss for the year - - - - (137,895) (137,895)
Other comprehensive
expense for the
year - - (173) - (41,913) (42,086)
------------------------ --------- --------- ---------- --------- ---------- ----------
Total comprehensive
expense for the
year - - (173) - (179,808) (179,981)
Issue of ordinary
shares 383 (11) - - (382) (10)
Employee benefit
trust - - - 4,993 (4,937) 56
Removal of exchange
reserve on disposal
of subsidiary - - (307) - - (307)
Share-based payment
credit - - - - 1,271 1,271
Tax on share-based
payment credit - - - - (914) (914)
Dividends - - - - (11,125) (11,125)
Balance at 29 February
2020 37,465 324,368 - (7,161) (251,574) 103,098
------------------------ --------- --------- ---------- --------- ---------- ----------
Consolidated statement of cash flows
For the year ended 28 February 2021
Restated(1)
Year ended Year ended
28 February 29 February
2021 2020
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Cash used in continuing operations (28,209) (15,077)
Cash outflow from discontinued
operations (769) (7,144)
Income taxes paid (465) -
----------------------------------------- ------------- -------------
Net cash outflow from operating
activities (29,443) (22,221)
Purchase of property, plant and
equipment (3,101) (14,311)
Purchase of investment property - (85)
Purchase/development of property
inventories (164) -
Proceeds from the sale of property
inventories - 226
Proceeds from the sale of property,
plant and equipment 426 4,456
Proceeds from the sale of investment
property - 2,111
Proceeds from disposal of assets 9,867 -
held for sale
Proceeds from sale and leaseback
(net of costs) - (62)
Receipt of capital element of
IFRS 16 net investment in lease 768 761
Acquisition of subsidiary undertakings
(net of cash acquired and fees) (864) -
Cash disposed on sale of subsidiary
undertaking (1) (1,729)
Equity investment in associates
and joint ventures - (2,667)
Acquisition of other investments (973) (70)
Net amounts advanced to joint
ventures - (2,114)
Interest received 10 999
Cash (outflow)/inflow from discontinued
operations (989) 2,734
----------------------------------------- ------------- -------------
Net cash inflow/(outflow) from
investing activities 4,979 (9,751)
----------------------------------------- ------------- -------------
Dividend paid on ordinary shares - (11,125)
Issue of ordinary shares (net
of issue costs) 90,996 (12)
Proceeds from issue of exchangeable
bond (net of costs) - 51,305
Repayment of grants - (834)
Principal element of lease payments (24,018) (19,022)
Net (repayment)/drawdown from
revolving credit facility (net
of costs) (24,286) 16,996
Repayment of other borrowings (4,500) -
Interest paid (9,386) (8,112)
Cash outflow from discontinued
operations (1,736) (1,854)
-----------------------------------------
Net cash inflow from financing
activities 27,070 27,342
----------------------------------------- ------------- -------------
Increase/(decrease) in cash and
cash equivalents 2,606 (4,630)
----------------------------------------- ------------- -------------
Cash and cash equivalents at beginning
of year 9,802 14,432
----------------------------------------- ------------- -------------
Cash and cash equivalents at end
of year 12,408 9,802
----------------------------------------- ------------- -------------
(1) The 2020 results have been restated where required due to
IFRS 5 Discontinued Operations. Refer to note 5 of the financial
statements for more details.
Notes to the consolidated financial statements
For the year ended 28 February 2021
Accounting policies of Esken Limited
Basis of preparation and statement of compliance
These Group financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs
and IFRIC interpretations) as adopted by the European Union
(adopted IFRSs). The financial information set out above does not
constitute the Company's statutory accounts for the years ended 28
February 2021 and 29 February 2020 . The information presented is
an extract from the audited consolidated Group statutory accounts.
The Auditors have reported on those accounts; their report was (i)
unqualified, and (ii) contains a material uncertainty in respect of
going concern to which the auditor drew attention by way of
emphasis without modifying their report. The Auditors' report can
be found in the Group's full 2021 Annual Report and Accounts which
will be published on the Group's website.
The financial statements of the Group are also prepared in
accordance with the Companies (Guernsey) Law 2008. Stobart Group
Limited is a Guernsey-registered company. The Company's ordinary
shares are traded on the London Stock Exchange. Esken Limited
announced on 4 February 2021 that it had changed its name from
Stobart Group Limited.
Going concern
The Group's business activities, together with factors likely to
affect its future performance and position, are set out in the
Chairman's statement and the financial position of the Group, its
cash flows and funding are set out in the Financial Review.
Note 25 of the financial statements includes details of the
Group's loans and borrowings at the year end together with the
Group's objectives, policies and processes for managing its
capital, its financial risk management objectives, details of its
financial instruments and its exposure to credit risk and liquidity
risk. After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future through to January
2023. Accordingly, the financial statements have been prepared on a
going concern basis. However, there is a material uncertainty in
respect of this going concern assumption and the Directors have
exercised a very significant degree of judgement in concluding that
the Group remains a going concern, in particular the identification
of the going concern period and identifying and describing the
material uncertainties that exist in concluding that the going
concern basis of preparation remains appropriate.
In performing the going concern assessment, the Directors have
reviewed the cash flow forecasts together with the funding options
that may be available to the Group and the likelihood of them being
accessible, including the current revolving credit facility (RCF),
in the timelines required and anticipated in the forecasts, which
cover the period up to January 2023.
As at 28 February 2021, the Group was drawn GBP55.0m on its
GBP120m existing RCF and had cash balances of GBP12.4m, resulting
in headroom as of that date of GBP77.4m. However as explained below
any further drawdowns from the existing RCF are subject to bank
consent. Whilst the Group continues to tightly manage its cash
resources during the post year end period, the current position is
that the Group has drawn down GBP95m on its existing RCF and plans
to draw down a further GBP13m during July 2021 and GBP5m in August
2021. Whilst the banks have indicated in writing their willingness
to allow the Group to draw down those funds through to August 2021,
there is no certainty that this will be the case. In addition, the
banks have indicated in writing their willingness to defer certain
covenant tests attached to the existing RCF. Should the bank not
defer the covenant tests, or not allow the planned drawdowns to
August 2021, the Group may be unable to continue trading.
To enable the Group to repay its current RCF, the Group has
announced it has entered into a signed term sheet on a GBP125m
convertible debt instrument issued by its 100% owned subsidiary
London Southend Airport Company Limited. The Group is currently
still in negotiations with this lender and the agreed exclusivity
period expires on 30 June 2021. Should this transaction not
complete, the Group, in all likelihood, would need to market London
Southend Airport for sale. In addition, the Group has announced its
intention to raise net proceeds of approximately GBP40m by way of a
documented equity raise (Capital Raise) that will be conditional
upon, among other things, the approval of shareholders. A combined
Prospectus to shareholders containing additional details on the
convertible debt instrument and Capital Raise is intended to be
published towards the end of July 2021. Should shareholders approve
these transactions it is expected that the funds will be received
by the Group before the end of August 2021. The funds raised will
be used to repay the existing RCF, which is expected to be drawn
down by GBP113m at the end of August 2021.
The completion of the convertible debt instrument is dependent
on both the Capital Raise raising at least GBP40m and the Group
securing a new RCF of GBP20m. In respect of the latter, the Group
is in talks with its current banks to enter into a new RCF of
GBP20m that would mature in January 2023. This has not yet been
subject to the bank's credit committee approval process so there is
a significant risk that this funding will not be secured. However,
the banks have indicated in writing their willingness to support a
RCF of GBP20m. The covenant requirements of this new RCF have been
proposed but not yet been agreed. In addition, whilst the Group has
had communication with a significant shareholder in respect of a
Capital Raise of this magnitude, there is no certainty that this
will successfully complete. Consequently, particularly given the
interdependencies between the three funding transactions (being the
convertible debt instrument, Capital Raise and new RCF) meaning all
three need to complete or none will complete, there is a high risk
that the necessary funds will not be obtained.
The reasonableness of the Group in assuming these funds will be
received is a significant judgement and consequently there is a
material uncertainty in respect of securing the necessary funds
from i) the banks not recalling the existing RCF ii) the banks
allowing the further planned drawdowns through to August 2021 iii)
executing the heads of terms in respect of the convertible debt
instrument, iv) successful completion of the Capital Raise and v)
obtaining the new RCF.
The Directors have prepared base case forecasts to January 2023,
together with sensitivity analysis on those forecasts, including a
severe but plausible downside set of assumptions around the
continued COVID-19 recovery for the Group whilst recognising the
different recovery periods likely to be seen given the nature of
the different operating divisions. Those severe but plausible
forecasts reflect the benefit of certain controllable mitigating
actions that the directors could take should the group require it,
for example the deferral of discretionary cash outflows. On the
assumption that the above planned debt and equity raises are
substantially successful, the base case forecast indicates headroom
of c.GBP15m, which would increase to c.GBP27m if non-controllable
non-core asset sales of GBP12m successfully complete, at January
2023; and the severe but plausible downside indicates that the
Group will have a shortfall of c.GBP11m at this point. This
excludes any cash inflows from non-core asset sales or sublease of
aircraft.
The Energy division has almost recovered to its pre-COVID
volumes and the gate fee declines observed as a result of COVID-19
have now reversed. The Aviation division has not shown any signs of
recovery as both airlines and passengers continue to be impacted by
government COVID-19 restrictions and regular government policy
changes making it difficult for airlines to plan and restart
commercial flights. In particular, and for the purposes of this
going concern analysis only, the base case forecast assumes:
-- The banks allow the Group to draw down GBP13m in July 2021 and GBP5m in August 2021 and does not require the
Group to repay the existing RCF before the end of August 2021;
-- The Group completes the Capital Raise and convertible debt issue discussed above, resulting in the receipt of
gross proceeds of at least c.GBP165m which will largely be used to repay the existing RCF, which is expected to
be drawn by GBP113m at the point of completion of the Capital Raise and convertible debt instrument.
-- The Group enters into a new RCF of GBP20m and that this is refinanced prior to maturity in January 2023;
-- A gradual resumption of flying from June 2021, with full year passenger volumes from LSA of c.0.3m for the year
ending February 2022 and c.2.0m passengers in the year ending February 2023;
-- Continued improvements in gate fee income along with the plants we supply experiencing improved availability;
-- The liquidation of Stobart Air and payments for the remaining Propius obligations will result in cash outflows of
c.GBP82m through to August 2023, which includes outflows in respect of aircraft lease payments, break fees in
respect of the aircraft leases, maintenance obligations in respect of the aircraft, professional fees in respect
of the liquidation and a contingency for unforeseen costs of liquidation;
-- Significant professional fees in respect of the convertible debt instrument, equity raise and new RCF;
-- An expectation that the Group will receive no sublease income in respect of the aircraft that will continue to be
held by Propius; and
-- No specific sector support from government and withdrawal of the Job Retention Scheme from 30 September 2021.
Should the banks refuse to allow the planned drawdowns or
require repayment of the existing RCF before the end of August
2021, or the Capital Raise, convertible debt transaction and new
RCF are not successfully completed before the end of August 2021
the Group will have severe liquidity issues and the Director's
would have a limited amount of time to raise additional funds, for
example through a larger equity raise or a distressed sale of major
assets, and this may not be completed in sufficient time to allow
the Group to continue trading. Should this transaction not
complete, the Group, in all likelihood, would need to market London
Southend Airport for sale.
The Directors have considered a severe but plausible downside
forecast. This scenario indicates that, before non-controllable
mitigating actions such as non-core asset disposals, the Group will
have a shortfall in headroom of c.GBP11m at January 2023.
The downside detailed above is deemed by the Directors to
provide a severe but plausible stress test on forecast trading
results. This includes a significant reduction in 2022 and 2023
performance as a result of COVID-19 and reduced trading performance
across both operations, resulting in a pre-mitigation cash
reduction to forecast. If outcomes are unexpectedly significantly
worse, the Directors would need to consider what additional
mitigating actions were needed, for example, accessing the value of
the asset base to support liquidity. Consequently, the Directors
have concluded that to stress test a level of increased severity
(beyond the downside modelled) that may create circumstances that
represent further instances of a material uncertainty and which may
cast an additional significant doubt about the group's ability to
continue as a going concern, is not currently reasonable.
The severe but plausible downside forecast includes:
-- The new GBP20m RCF is not refinanced before maturity in January 2023;
-- Passenger flying from LSA does not start increasing until September 2021 and passenger growth is slowed through
to the year ending February 2023 with 1.3m passengers;
-- No new incremental business in Aviation Services in the next financial year;
-- Volume of waste wood supplied to energy plants is restricted to pre-COVID levels and with raw material in short
supply due to low levels of construction activity, average gate fees reduce to c.90% of base case;
-- An assumption that the proposed new GBP20m RCF is not refinanced prior to its maturity in January 2023;
-- No aircraft sublease income received; and
-- No cash received in respect of non-core asset disposals.
These severe but plausible forecasts beyond 31 August 2021
assume the Capital Raise, convertible debt instrument and new RCF
are successfully completed. If they are not completed by the end of
August 2021 the Group will have severe liquidity issues and as
noted above may not be able to continue trading beyond this point.
The Board will of course seek to further mitigate the financial
impact of this severe but plausible downside forecast should it
arise. The main avenues to mitigate this include the disposal of
non-core asset disposals and sub-letting the Propius aircraft.
However, in the current environment the timing and value of these
transactions may not be sufficient and, should this transaction not
complete, the Group, in all likelihood, would need to market London
Southend Airport for sale.
Overall, despite the material uncertainty set out above, the
directors are satisfied that the group will have sufficient funds
to continue to meet its liabilities as they fall due until at least
January 2023 from the date of approval of the annual financial
statements and therefore have prepared the financial statements on
a going concern basis.
However, this is dependent on the successful completion of the
Group's refinancing plans (certain of which are interdependent),
notably:
-- the banks not requiring repayment of the existing RCF before the end of August 2021;
-- the banks allowing the Group to draw down from the existing RCF GBP13m in July 2021 and GBP5m in August 2021;
-- the successful completion of the Capital Raise of net GBP40m before the end of August 2021,
-- successful completion of the convertible debt instrument of gross GBP125m before the end of August 2021; and
-- the successful completion of the new RCF of GBP20m maturing in January 2023, before the end of August 2021, and
it's refinancing on maturity in January 2023.
The successful completion of the Group's refinancing plans,
along with other matters referred to above, represent a material
uncertainty that may cast significant doubt on the ability of the
Group to continue as a going concern and, therefore, to continue
realising its assets and discharging its liabilities in the normal
course of business. The financial statements do not include any
adjustments that would be necessary if the going concern basis was
inappropriate.
Significant accounting policies
Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those of the
previous financial year except as follows:
(a) New standards, amendments to existing standards and
interpretations to existing standards adopted by the Group
The International Accounting Standards Board issued an amendment
to IFRS 16 Leases relating to COVID-19 rent concessions. The
amendment introduces a practical expedient that exempts lessees
from having to consider individual lease contracts to determine
whether rent concessions occurring as a direct consequence of the
COVID-19 pandemic are lease modifications and allows lessees to
account for such rent concessions as if they were not lease
modifications. The expedient applies to periods commencing on or
after 1 June 2020; however, the Group has chosen early adoption and
applied the expedient retrospectively.
The Group has also considered the following amendments and
definitions that are effective in this financial year and concluded
that they do not have a material impact on the financial position
or performance of the Group:
-- Amendments to References to Conceptual Framework in IFRS Standards
-- Definition of a Business (Amendments to IFRS 3)
-- Definition of Material (Amendments to IAS 1 and IAS 8)
-- Interest Rate Benchmark Reform - Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7)
(b) New standards and interpretations not applied
There are no new EU-endorsed standards and amendments that are
issued but not yet effective that would be expected to have a
material impact on the Group in future reporting periods and on
foreseeable future transactions.
Segmental information
The reportable segment structure is determined by the nature of
operations and services. The operating segments are Stobart
Aviation, Stobart Energy, Stobart Investments and Stobart
Non-Strategic Infrastructure. In the prior period the results of
Stobart Rail were included as a separate reporting segment, Stobart
Rail & Civils. However, due to the disposal of Stobart Rail,
the results of the division are no longer included as a separate
segment but are presented as discontinued operations on the face of
the consolidated income statement. The results of Stobart Air are
also included in discontinued operations. See note 5 of the
financial statements for more detail on discontinued
operations.
The Stobart Aviation segment specialises in the operation of
commercial airports and the provision of ground handling services.
The Stobart Energy segment specialises in the supply of sustainable
biomass for the generation of renewable energy. No segmental assets
or liabilities information is disclosed because no such information
is regularly provided to, or reviewed by, the Chief Operating
Decision Maker.
The Stobart Investments segment primarily represents the
operations of our regional airline operator, Stobart Air, and an
aircraft leasing business, Propius. The segment also holds a
non-controlling interest in a transport and distribution business,
and a baggage handling business. The Stobart Non-Strategic
Infrastructure segment specialises in management, development and
realisation of a portfolio of property assets, including Carlisle
Lake District Airport, as well as an investment in a renewable
energy plant.
The Executive Directors are regarded as the Chief Operating
Decision Maker. The Directors monitor the results of each business
unit separately for the purposes of making decisions about resource
allocation and performance assessment. The main segmental profit
measure is EBITDA, which is calculated as loss before tax,
interest, depreciation, loss on acquisition and swaps. Income taxes
and certain central costs are managed on a Group basis and are not
allocated to operating segments.
Group
Year ended 28 February Non-Strategic Central
2021 Aviation Energy Investments Infrastructure and Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Revenue
External 24,611 75,019 9,034 909 1,151 110,724
Internal 131 - - 150 (281) -
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Total revenue 24,742 75,019 9,034 1,059 870 110,724
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Adjusted EBITDA (6,075) 10,005 (10,367) (1,660) (9,782) (17,879)
Loss on acquisition - - (57,457) - (725,) (58,182)
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
EBITDA (6,075) 10,005 (67,824) (1,660) (10,507) (76,061)
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Depreciation (9,362) (8,635) (12,390) (446) (981) (31,814)
(Impairment)/impairment
reversal (656) - (22,921) 1,480 - (22,097)
Finance costs (net) (1,429) (2,036) (3,873) (8,346) (4,681) (20,365)
--------------------------
Loss before tax from
continuing operations (17,522) (666) (107,008) (8,972) (16,169) (150,337)
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Group
Year ended 29 February Non-Strategic Central
2020 Aviation Energy Investments Infrastructure and Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Revenue
External 56,655 76,339 2,127 2,440 4,537 142,098
Internal 131 - - 337 (468) -
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Total revenue 56,786 76,339 2,127 2,777 4,069 142,098
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
EBITDA (696) 14,975 (7,638) (4,228) (8,623) (6,210)
Depreciation (7,824) (8,467) - (1,981) (1,752) (20,024)
Amortisation of acquired
intangibles - (23) - - (7,433) (7,456)
Impairments - - (46,846) (26,676) (19,913) (93,435)
Finance costs (net) (1,235) (1,293) (2,577) (2,701) (4,484) (12,290)
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
(Loss)/profit before
tax from continuing
operations (9,755) 5,192 (57,061) (35,586) (42,205) (139,415)
-------------------------- --------- -------- ------------ ---------------- ------------------ ----------
Internal revenue above relates to inter-segment revenues that
are eliminated within Group central and eliminations. Intra-segment
revenues are eliminated within each segment.
In the prior year EBITDA was presented before the impact of
swaps. This year the loss on swaps of GBP42,000 (2020: GBP300,000)
is included within EBITDA.
Discontinued operations
Disposal of Stobart Rail Limited
On 14 July 2020, the Group divested of Stobart Rail Limited to
Bavaria Industries Group AG for initial cash consideration of
GBP1,000 and contingent consideration with a fair value of
GBP331,000. The net assets disposed totalled GBP8,902,000 and
GBP940,000 costs were incurred, resulting in a loss on disposal of
GBP9,510,000. The contingent consideration, up to GBP2.9m, relates
to the outcome of a single legacy contract and takes into account
costs and likelihood to complete the contract. Under the SPA, the
Group provided warranties up to a maximum of GBP500,000. The
warranties are title and capacity only, with no trading warranties.
There are no material indemnities provided to Stobart Rail by the
Group.
The operations of Stobart Rail Limited represented a separate
major line of business. The results of the operations, along with
the loss on disposal, have been reported as part of the single line
loss from discontinued operations, net of tax on the face of the
consolidated income statement. The prior year results have been
restated on the same basis.
Results of discontinued operations 2021 2020
GBP'000 GBP'000
------------------------------------- --------- ---------
Revenue 6,309 28,077
Operating expenses (7,902) (35,345)
Depreciation (854) (2,699)
Impairments - (8,474)
Net finance costs (22) (128)
Results from operating activities
before tax (2,469) (18,569)
------------------------------------- --------- ---------
Loss on disposal (9,510) -
------------------------------------- --------- ---------
Loss before tax (11,979) (18,569)
------------------------------------- --------- ---------
Tax 120 -
Loss for the year from discontinued
operations, net of tax (11,859) (18,569)
------------------------------------- --------- ---------
The loss from discontinued operations of GBP11,859,000 (2020:
GBP18,569,000) is attributable to the owners of the Company.
The cash flows in relation to this operation have been included
in the following table.
Cash flow used in discontinued
operations 2021 2020
GBP'000 GBP'000
--------------------------------------- -------- --------
Net cash used in operating activities (769) (1,133)
Net cash (used in)/generated from
investing activities (989) 419
Net cash used in financing activities (1,736) (1,854)
Net cash flows for the year (3,494) (2,568)
--------------------------------------- -------- --------
Effect of the disposals on individual
assets and liabilities 2021 2020
GBP'000 GBP'000
--------------------------------------- -------- --------
Property, plant and equipment 5,499 -
Inventories 88 -
Trade and other receivables 10,599 -
Deferred tax asset 1,020 -
Cash and cash equivalents 2 -
Trade and other payables (177) -
Provisions (560) -
Net assets and liabilities 8,902 -
--------------------------------------- -------- --------
Consideration received, satisfied 1 -
in cash
Cash and cash equivalents disposed (2) -
of
--------------------------------------- -------- --------
Net cash outflow (1) -
--------------------------------------- -------- --------
Disposal of Propius Holdings Limited
In the prior year, the Group completed its disposal of Propius
Holdings Limited on 8 November 2019. The profit from operating
activities of Propius included was GBP906,000. The cash
consideration received for disposal of Propius Holdings Limited was
GBPnil. The profit on disposal recorded in discontinued operations
was GBP7,025,000 after deducting net liabilities of GBP7,025,000.
The cash disposed amounted to GBP1,729,000. As part of the
disposal, GBP2,697,000 of an onerous lease contract provision, that
had been provided for by the Group, was released and included in
discontinued operations.
In the prior year, GBP1,645,000 was released from the provision
for the costs of the UK Flybe Franchise Operation (UKFFO), which
was operated by the group headed by Everdeal Holdings Limited, and
GBP574,000 was provided for litigation and claims in Everdeal
Holdings Limited. These amounts were included in discontinued
operations in the prior year. In the current year Propius was
re-acquired, see note 6 of the financial statements.
The operations of the subsidiary represented a separate major
line of business. The results of the operations are reported as
part of the single line loss from discontinued operations, net of
tax on the face of the consolidated income statement. A summary of
the Propius results included in discontinued operations is as
follows:
Results of discontinued operations 2021 2020
GBP'000 GBP'000
--------------------------------------- -------- --------
Revenue - 8,137
Operating expenses - (8,377)
Depreciation - -
Net finance income - 426
Results from operating activities
before tax - 186
--------------------------------------- -------- --------
Profit on disposal of Propius - 7,025
Propius provision released - 2,697
Everdeal provision made - (574)
UKFFO provision released - 1,645
Profit before tax - 10,979
--------------------------------------- -------- --------
Tax - 720
--------------------------------------- -------- --------
Profit for the year from discontinued
operations, net of tax - 11,699
--------------------------------------- -------- --------
The loss from discontinued operations of GBPnil (2020:
GBP11,699,000 profit) is attributable to the owners of the Company.
Of the revenue included in the above table, GBPnil (2020:
GBP8,137,000) was from the group headed by Everdeal Holdings
Limited.
The revenue from one customer amounted to more than 10% of the
Group's discontinued revenue in the prior year. The revenue from
this one customer reported within discontinued operations was
GBP8,137,000 for the year to 29 February 2020.
The cash flows in relation to this operation have been included
in the below table.
Cash flow used in discontinued
operations 2021 2020
GBP'000 GBP'000
--------------------------------------- -------- --------
Net cash used in operating activities - (6,011)
Net cash generated from investing
activities - 2,315
Net cash used in financing activities - -
Net cash used in discontinued
operations - (3,696)
--------------------------------------- -------- --------
Summary of discontinued operations recognised within the
consolidated income statement
2021 2020
GBP'000 GBP'000
------------------------------------- --------- ---------
Stobart Rail (11,859) (18,569)
Propius - 11,699
------------------------------------- --------- ---------
Loss for the year from discontinued
operations, net of tax (11,859) (6,870)
------------------------------------- --------- ---------
Summary of cash flows from discontinued operations
2021 2020
GBP'000 GBP'000
----------------------------- -------- --------
Stobart Rail (3,494) (2,568)
Propius - (3,696)
----------------------------- -------- --------
Net cash flows for the year (3,494) (6,264)
----------------------------- -------- --------
Loss on acquisition
In April 2017, when Propius Holdings Limited was a subsidiary of
the Group it entered into the sale and leaseback of eight ATR72-600
aircraft to a third party. The Group provided guarantees to the
third party over the $15.4m annual rentals payable by Propius which
expire in April 2027. These guarantees remained in place on
disposal of Propius to Connect Airways Limited (Connect Airways).
On 18 March 2020, Connect Airways, the parent company of Stobart
Air and Propius, entered administration. The administration of
Connect increased the probability of cash outflows in respect of
the guarantees provided and the likelihood of these being called
upon increased as a result of the administration, and hence the
Group recognised a provision of GBP57.5m in respect of these
guarantees (see note 28 of the financial statements). Once Stobart
Air and Propius were reacquired by the Group, these provisions were
reversed, due to both companies being accounted for as 100%
subsidiaries, therefore the liabilities on which the Group had PCGs
were recognised in full on the consolidated statement of financial
position. The Directors reviewed all options available to the Group
in relation to the future of Stobart Air and Propius, and concluded
that the best course of action was to buy back Stobart Air and
Propius to give the Group effective control over the pre-existing
guarantee obligations it has in respect of those businesses.
Accounting for the recognition of these pre-existing guarantee
arrangements has resulted in the current period loss of
GBP58,182,000. The net liabilities recognised on the subsequent
acquisition reflect this loss.
The Group re-acquired equity in Stobart Air and Propius Limited
on 27 April 2020 for initial cash consideration of GBP343,000,
deferred consideration of GBP2,000,000 paid on 15 December 2020,
and deferred contingent consideration up to a maximum of
GBP6,250,000, based on the equity value achieved after disposal
costs, on a realisation of value in respect of both of the
businesses prior to 31 December 2023. The deferred contingent
consideration has a GBPnil fair value. On completion of the
disposal of Stobart Air post year end there is no deferred
consideration payable. These businesses have been accounted for as
100% subsidiaries due to them being solely reliant on the Group for
funding in addition to the equity voting rights held.
In the period between acquisition and year ended 28 February
2021, Stobart Air and Propius contributed revenue of GBP9,034,000
and a loss before tax of GBP48,124,000 in the consolidated income
statement. If the acquisition had occurred on 1 March 2020,
management estimates that Stobart Air and Propius' revenue would
have been GBP15,993,000 and loss before tax would have been
GBP52,021,000. In determining these amounts management has assumed
that the fair value adjustments, determined provisionally, that
arose on the date of acquisition would have been the same if the
acquisition had occurred on 1 March 2020.
Consideration transferred
The following table summarises the acquisition date fair value
of each major class of consideration transferred.
2021
GBP'000
----------------------------------- --------
Cash 343
Deferred consideration 2,000
Deferred contingent consideration -
------------------------------------ --------
Total consideration transferred 2,343
------------------------------------ --------
Acquisition-related costs
The Group incurred acquisition-related costs of GBP725,000 on
legal and due diligence costs. These costs have been included as
part of the loss on acquisition in the consolidated income
statement and as part of the net cash outflow from operating
activities in the consolidated statement of cash flows.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets
acquired, and liabilities assumed at the date of acquisition:
2021
GBP'000
----------------------------------------- ---------
Right-of-use assets 35,171
Property, plant & equipment 1,561
Inventory 4,208
Cash and cash equivalents 1,479
Trade and other receivables 28,993
Trade and other payables (34,270)
Current tax liability (879)
Lease obligations (64,884)
Provisions (32,457)
Derivative financial instruments (3,661)
------------------------------------------ ---------
Net identifiable assets and liabilities
at fair value (64,739)
------------------------------------------ ---------
Fair values
The aircraft lease liabilities have been calculated using the
lease cashflows with the lease being terminated at the break clause
in April 2023 on the payment of the termination charge, in line
with what a market participant would do. An interest charge based
on an incremental borrowing rate has been reflected.
Spare part inventory held by Stobart Air for Embraer aircraft
was fair valued to GBPnil in line with the expected hand back of
aircraft.
The right-of-use aircraft in the Propius balance sheet following
transition to IFRS 16 was based on the contractual monthly lease
charge of $160,000 per aircraft. Under IFRS 3, the fair value of
these right-of-use assets was recalculated using a market lease
rate of $90,000 per aircraft over the lease term to the break
clause in April 2023, which became effective following the loss of
the Aer Lingus franchise. This adjustment did not impact the
liability as that is based on the contractual lease obligation. The
estimate of the lease liabilities is materially sensitive to the
discount rate used, being 8.5%. A 1% movement in discount rate
equates to a $1,103,000 change in lease liabilities.
Post acquisition and prior to the year end an impairment review
was carried out on all plant, property and equipment in Stobart Air
and the right-of-use aircraft in Propius. This led to these assets
being written off in full. Post year end Stobart Air entered
liquidation.
Propius held deferred profit on disposal on its balance sheet
relating to a sale and leaseback transaction. As this liability
will never be settled in cash in the future, as it relates to a
past transaction that has been settled in cash, it has been
attributed a fair value of GBPnil on acquisition. In the Group's 31
August 2020 Interim Statement it was disclosed that a deferred tax
asset of GBP1,790,000 was recognised on acquisition of Propius.
However, as the majority of the asset is related to deferred sale
and lease back profit it has been fair valued to GBPnil.
For all other assets and liabilities book value was equal to
fair value.
Onerous lease contract provision
Esken Limited held a provision for an onerous lease contract for
GBP9,625,000 relating to amounts payable to Connect Airways in
connection with the lease of aircraft which has now been acquired
as part of the transaction. Following the acquisition, there is no
obligation for Esken Limited to settle this liability in cash, as
the lease liability is now on the Group's balance sheet, and so the
reversal of the provision has been reflected in the acquisition
assessment.
2021
GBP'000
---------------------------------------------- ---------
Cash and deferred consideration 2,343
Costs of acquisition 725
Reversal of onerous lease contract provision
held as at 29 February 2020 (9,625)
Loss on Stobart Air and Propius transactions
reflected in subsequent acquisition (58,182)
Fair value of identifiable net liabilities (64,739)
----------------------------------------------- ---------
Dividends
2021 2021 2020 2020
Rate GBP'000 Rate GBP'000
P P
------------------------- ------- ---------- ------ ---------
Final dividend for 2019
paid 31 July 2019 - - 3.0 11,125
------------------------- ------- ---------- ------ ---------
- - 3.0 11,125
------- ------------------------------------ ------ ---------
In the prior year, the Board took the decision to suspend
dividends therefore no final dividend is proposed.
Assets classified as held for sale
At the year ended 29 February 2020, brand assets totalling
GBP10,000,000 were transferred from intangible assets to assets
classified as held for sale. On 20 May 2020 the brand assets were
sold to Eddie Stobart Logistics plc (ESL) for cash consideration of
GBP10,000,000. The consideration equalled the carrying value of the
asset held for sale so there was no gain or loss on disposal. Cash
of GBP6,000,000 was received upon completion, a further
GBP2,500,000 was paid on 1 December 2020 and GBP1,500,000 is to be
paid 36 months after completion.
At the year ended 29 February 2020, four acres of land at Widnes
within the Non-Strategic Infrastructure division, with a carrying
value of GBP1,408,000 was reclassified from property inventories to
assets held for sale. During the year, development of the land held
for sale, relating to the addition of a cycle path, increased its
carrying value by GBP164,000. The land was sold on 2 October 2020
for cash proceeds of GBP1,364,000 leading to a loss on disposal of
GBP208,000.
Financial assets and liabilities
Loans and borrowings 2021 2020
GBP'000 GBP'000
--------------------------------- --------- --------
Non-current
Obligations under leases (pre
IFRS 16) 22,709 29,903
Revolving credit facility (net
of arrangement fees) - 74,757
--------------------------------- --------- --------
22,709 104,660
--------------------------------- --------- --------
Current
Exchangeable bonds 52,010 51,689
Obligations under leases (pre
IFRS 16) 12,784 12,499
Revolving credit facility (net 52,329 -
of arrangement fees)
117,123 64,188
--------------------------------- --------- --------
Total loans and borrowings (pre
IFRS 16) 139,832 168,848
--------------------------------- --------- --------
Cash (12,408) (9,802)
--------------------------------- --------- --------
Comparable net debt (pre IFRS
16) 127,424 159,046
--------------------------------- --------- --------
Non-current
IFRS 16 obligations 99,407 73,128
--------------------------------- --------- --------
Current
IFRS 16 obligations 24,008 3,281
--------------------------------- --------- --------
Net debt 250,839 235,455
--------------------------------- --------- --------
Reconciliation of movements of liabilities to cash flows arising
from financing activities
Liabilities Exchangeable Revolving Obligations Total
bond credit facility under leases
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ----------------- -------------- ---------
Balance at 1 March 2020 51,689 74,757 118,811 245,257
Changes from financing
cash flows:
Net cash repaid - (20,000) - (20,000)
Cash outflow from debt
issue costs (51) (4,286) - (4,337)
Principal elements of
lease payments - continuing
operations - - (24,018) (24,018)
Principal elements of
lease payments - discontinued
operations - - (187) (187)
Total changes from financing
cash flows (51) (24,286) (24,205) (48,542)
-------------------------------- ------------- ----------------- -------------- ---------
Release of deferred
issue costs 372 1,858 - 2,230
New leases entered into - - 3,408 3,408
Termination of lease - - (63) (63)
Unwind of discount - - 141 141
Acquisition of subsidiary - - 64,884 64,884
Disposal of subsidiary
undertaking - - (1,707) (1,707)
The effect of changes
in foreign exchange rates - - (4,752) (4,752)
Non-cash interest accruals - - 2,391 2,391
Balance at 28 February
2021 52,010 52,329 158,908 263,247
-------------------------------- ------------- ----------------- -------------- ---------
Liabilities Exchangeable Revolving Obligations Total
bond credit facility under leases
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------- ----------------- -------------- ---------
Balance at 1 March 2019 - 57,567 39,987 97,554
Changes from financing
cash flows:
Proceeds from bond issue
(net of costs) 51,305 - - 51,305
Net cash drawn - 17,000 - 17,000
Cash outflow from debt
issue costs - (4) - (4)
Principal elements of
lease payments - - (20,783) (20,783)
Total changes from financing
cash flows 51,305 16,996 (20,783) 47,518
------------------------------ ------------- ----------------- -------------- ---------
Release of deferred
issue costs 260 194 - 454
Exchange derivative
recognised 124 - - 124
New leases entered into - - 21,037 21,037
Unwind of discount - - 134 134
Transition liability
recognised - - 78,252 78,252
Non-cash interest accruals - - 184 184
Balance at 29 February
2020 51,689 74,757 118,811 245,257
------------------------------ ------------- ----------------- -------------- ---------
Any variable lease payments that were not included in the
calculation of IFRS 16 lease obligations have been expensed as
incurred in the consolidated income statement. These amounts are
not material.
The GBP120m variable rate committed RCF, with end date January
2022, was drawn at GBP55,000,000 (2020: GBP75,000,000) at the year
end. The RCF variable rate is based on LIBOR plus a margin. Under
the RCF, Esken Limited and all material subsidiaries have charged
security to the lenders via a debenture, and the material
subsidiaries are also guarantors and obligors in relation to the
facility agreement. There are fixed charges over land and
properties including LSA, CLDA, Widnes and Runcorn, in addition to
floating charges and charges over shares. The facility agreement
contains typical security protections for the lender including
negative pledge, and restrictions on disposals and financial
indebtedness, together with allowances for permitted disposals,
permitted security and permitted financial indebtedness.
Included in the RCF and bond liabilities on the balance sheet at
the year end are deferred issue costs of GBP2,671,000 and
GBP1,189,000 respectively.
Esken Limited provides support to its subsidiaries where
required. Examples of support include intercompany funding
arrangements and the provision of guarantees in relation to
financing lines provided by a number of lenders. In addition, one
Energy contract has a covenant relating to the market capital of
Esken Limited, where a breach would be remedied by additional
letters of credit. The Group was in compliance with, or received
waivers for, all financial covenants throughout both the current
and prior year and subsequent to the year end.
Contingent liabilities
Liability under financial guarantees exist across the Group and
a number of these liabilities are no longer considered remote.
Logistics Development Group (LDG), formerly Eddie Stobart
Logistics plc (ESL), property rent guarantees have been in place
since the disposal of ESL in April 2014. The Group believes that
the possibility of any outflow in settlement is no longer remote.
However, an outflow would only materialise if LDG failed in its
lease obligations to the landlord, in addition to a new tenant not
stepping into the lease. The Group's maximum exposure over the
period to February 2034 is GBP54.9m.
During the year, a claim made against the Aviation division
relating to land compensation, that was classed as a contingent
liability at year ending 29 February 2020, has been recognised as a
provision, see note 28 of the financial statements.
Post balance sheet events
On 14 June 2021, the Ireland High Court appointed liquidators to
Stobart Air. The total cash outflow resulting from the liquidation
of Stobart Air and ongoing Propius leases is GBP82 million over
three years, on the basis that Esken is unsuccessful in subleasing
its aircraft. Of these cash flows, GBP43m relates to aircraft lease
payments and break fees, GBP20m relates to maintenance and GBP7m of
other obligations which are all included within the liabilities on
the consolidated statement of financial position as at 28 February
2021. In addition, a further GBP4m of maintenance and up to GBP8m
of other liquidation costs, including legal and advisor fees, are
estimated to be incurred and recognised post year end. The current
estimation of the post year end profit on liquidation is believed
to be in the range of GBP15m to GBP25m, which has predominantly
arisen due to the derecognition of liabilities in respect of
Stobart Air, however, this is subject to final costs and detailed
workings. As such, the final reported number could be materially
different.
The Group received a grant of GBP1.2m post year end from the
Department for Transport, relating to the Airport and Ground
Operations Support Scheme. The grant funding scheme provides
financial support to airports and ground handling operators which
have been adversely impacted by COVID-19. The grant award covers
the year from 1 April 2021 to 31 March 2022.
Notes to the consolidated cash flow statement
Restated
Year ended Year ended
28 February 29 February
2021 2020
GBP'000 GBP'000
Loss before tax from continuing
operations (150,337) (139,415)
Adjustments to reconcile loss
before tax to net cash flows:
Non-cash:
Loss in value of investment properties - 1,835
Realised (profit)/loss on sale
of property, plant and equipment
and investment properties (98) 155
Share of post-tax profits of associates
and joint ventures accounted for
using the equity method 218 9,765
Loss on disposal of assets held
for sale 208 -
Loss on sale and leaseback, net
of costs - 62
Loss on sale of property inventories - 49
Depreciation of property, plant
and equipment 31,814 20,024
Finance income (2,406) (4,346)
Finance costs 23,622 13,269
Release of grant income (479) (565)
Release of deferred premiums (167) (2,617)
Impairment 22,097 96,189
Amortisation of intangibles - 7,456
Loss on acquisition 57,457 -
Chare for share-based payments 81 1,271
Foreign exchange retranslation 579 -
(Gain)/loss on swaps mark to market
valuation (3,761) 300
Retirement benefits and other
provisions (137) (4,400)
Working capital adjustments:
Decrease in inventories 1,253 14
Decease/(increase) in trade and
other receivables 6,434 (18,381)
(Decrease)/increase in trade and
other payables (7,397) 4,258
Decrease in maintenance reserves (7,190) -
----------------------------------------- -------------- -------------
Cash used in continuing operations (28,209) (15,077)
----------------------------------------- -------------- -------------
Related parties
Relationships of common control or significant influence
W A Tinkler was a related party until 14 June 2018 when he
ceased to be a Director of the Group. The amounts outstanding are
unsecured and were entered into under normal commercial terms.
WA Developments International Limited is owned by W A Tinkler.
There were no related party sales or purchases during the current
or prior years. At the year end GBP60,000 (2020: GBP63,000) was due
from WA Developments International Limited. The reduction in the
year is due to the disposal of Stobart Rail Limited with which part
of the balance was due. As of 14 June 2018, WA Developments
International Limited was no longer a related party.
Apollo Air Services Limited is owned by W A Tinkler. There were
no related party sales or purchases during the current or prior
years. At the year end GBP83,000 (2020: GBP83,000) was owed by the
Group and GBP46,000 (2020: GBP46,000) was owed to the Group by this
company. As of 14 June 2018, Apollo Air Services Limited was no
longer a related party.
WA Tinkler Racing is owned by W A Tinkler. There were no related
party sales or purchases during the current or prior years. At the
year end GBP26,000 (2020: GBP26,000) was owed to the Group. As of
14 June 2018, WA Tinkler Racing was no longer a related party.
During the current and prior years, the Group made no purchases
from or sales to Stobart Capital Limited, a business part-owned by
W A Tinkler, relating to investment management. At the year end
GBP6,000 (2020: GBP6,000) was owed to the Group. As of 14 June
2018, Stobart Capital Limited was no longer a related party.
Speedy Hire plc is a related party from 1 June 2019, when David
Shearer became Non-Executive Chairman of the Group, as he is also
Non-Executive Chairman of Speedy Hire plc. During the year, the
Group made purchases of GBP4,000 (2020: GBP285,000) relating to
equipment hire of which GBP1,000 (2020: GBP5,000) was owed by the
Group at the year end.
Associates and joint ventures
The Group has loans, not part of the net investment, outstanding
from its associate interest, Mersey Bioenergy Holdings Limited, of
GBPnil (2020: GBP7,302,000) at the year end due to the loans being
impaired by GBP8,000,000. At 28 February 2019, the balance was
shown within trade and other receivables in non-current assets. The
interest outstanding at the year end, net of amounts provided, was
GBPnil (2020: GBP698,000) and was disclosed within trade and other
receivables in non-current assets at 28 February 2019. The loans
are unsecured and have a ten-year term ending in November 2024.
During the year, the Group made sales of GBP5,937,000 (2020:
GBP6,684,000) to Mersey Bioenergy Limited (a subsidiary of Mersey
Bioenergy Holdings Limited) relating to the sale of material. At
the year end, GBP507,000 (2020: GBP535,000) was owed to the
Group.
At 28 February 2020, the Group had loans outstanding to a
subsidiary of Connect Airways Limited, of GBP18,038,000. This
amount is no longer a related party balance at the year end due to
the Group acquiring the subsidiary from Connect Airways Limited
during the year. During the year, the Group made sales of GBP5,000
relating to fuel and landing fees to subsidiaries of Connect
Airways Limited of which GBP5,000 was owed to the Group at the year
end.
There were no other balances between the Group and its joint
ventures and associates during the current or prior year.
All loans are unsecured and all sales and purchases are settled
in cash on the Group's standard commercial terms.
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END
FR GUGDLXDXDGBG
(END) Dow Jones Newswires
June 30, 2021 02:00 ET (06:00 GMT)
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