TIDMESKN
RNS Number : 6611G
Esken Limited
27 July 2021
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CONTAINED THEREIN, IS RESTRICTED AND IS NOT FOR PUBLICATION,
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OR DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014 AS IT FORMS PART OF UNITED
KINGDOM LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
AS AMED ("UK MAR"). IN ADDITION, MARKET SOUNDINGS (AS DEFINED IN UK
MAR) WERE TAKEN IN RESPECT OF CERTAIN OF THE MATTERS CONTAINED IN
THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME
AWARE OF SUCH INSIDE INFORMATION, AS PERMITTED BY MAR. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL
THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN
OFFER OF SECURITIES IN ANY JURISDICTION.
27 July 2021
Esken Limited
("Esken", the "Company" or the "Group")
Proposed Firm Placing and Placing and Open Offer
to raise MINIMUM GROSS PROCEEDS OF GBP45 MILLION
Following the announcements on 30 June 2021 and 2 July 2021 of a
potential documented prospectus offering, Esken today announces its
intention to raise minimum gross proceeds of GBP45 million by way
of a Firm Placing and Placing and Open Offer (together, the
"Capital Raise") of new ordinary shares in the capital of the
Company (the "New Shares").
The Company also today announces it has agreed a new GBP20
million revolving credit facility with Lloyds Bank plc and AIB
Group (UK) plc (the "New Facility").
The Firm Placing and the Placing will be conducted through an
accelerated bookbuilding process (the "Bookbuild"), which will be
launched immediately following release of this announcement. The
Firm Placing and the Placing are subject to the terms and
conditions set out in Appendix III to this announcement (which
forms part of this announcement). The final price per New Share
(the "Offer Price") will be determined following closing of the
Bookbuild, and is anticipated to be between 14 and 16 pence.
Canaccord Genuity Limited ("Canaccord") and UBS AG London Branch
("UBS") are acting as Joint Sponsors, Joint Global Co-ordinators
and Joint Bookrunners (together the "Joint Bookrunners" and each a
"Joint Bookrunner").
The Capital Raise will be fully underwritten by the Joint
Bookrunners on closing of the Bookbuild (other than the New Shares
for which the Directors and certain senior managers have committed
to subscribe), subject to, and in accordance with, the terms and
conditions of the Placing Agreement.
Reasons for the Capital Raise
In line with the announcement on 2 July 2021 detailing the
proposed investment by Carlyle Global Infrastructure Opportunity
Fund, L.P. ("CGI") in London Southend Airport ("LSA") through a
GBP125 million senior loan facility provided by CGIOF River S.à
r.l. (a special purpose vehicle which is controlled by CGI) to, and
which is convertible into 29.999 per cent. of the entire issued
share capital of, LSA (which shall be increased to 30 per cent.
following receipt of approval from the Office of Rail and Road)
(the "Investment", and together with the Capital Raise, the
"Transaction"), a combination of factors has accelerated the need
for a refinancing and additional liquidity is required both to fund
Esken's short-term requirements and to enable it to build a strong
foundation from which it can return the business to growth and
deliver on its longer-term strategic ambitions for Esken's core
operations. The impact of the COVID-19 pandemic has been
significant on people, society and the economy and the actions
taken to respond to these challenges and to ensure sufficient
resources to manage through the crisis has allowed Esken to
maintain the operational capability of our core operations.
However, the ramifications of the pandemic are likely to continue
for some period of time.
Following the liquidation of Stobart Air Unlimited Company
("Stobart Air") announced on 12 June 2021, the Group now owns and
operates two core businesses: Energy and Aviation (comprising LSA
and Stobart Aviation Services). The Board believes that these
operations have the potential to generate significant value for
Shareholders in a post-COVID environment, however the recovery will
need time and therefore require medium-term funding to underpin the
business plans through this period while there remains market
uncertainty. A refinancing allows us to look ahead with confidence
as we navigate the recovery into a post COVID-19 world.
Completion of the Transaction will enable Esken to repay the
outstanding amounts payable under its existing banking facilities,
which are expected to total GBP113 million by 31 August 2021 allow
it to meet certain of its residual legacy obligations in respect of
Stobart Air (and its liquidation) and Propius Limited ("Propius"),
and, alongside the New Facility, underpin the business plan for
both the Energy and Aviation businesses.
Appendix III to this announcement sets out further details of
and the terms and conditions of the Capital Raise.
Key Highlights
-- Intention to raise minimum gross proceeds of GBP45 million
through a Firm Placing and Placing and Open Offer at the Offer
Price, and is anticipated to be between 14 and 16 pence.
-- Entry into an amendment and restatement agreement in respect
of the Existing Facility Agreement (the Existing Facility
Agreement, as so amended and restated, the "Amended Facility
Agreement") pursuant to which the GBP20 million New Facility will
be made available and up to GBP5 million of funds from the Existing
Facility B will be made available to Esken through to 31 August
2021, subject to satisfaction of certain conditions.
-- Completion of the Transaction, together with entry into the
New Facility, 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.
-- Completion of the Transaction is conditional upon the
approval of Shareholders at a general meeting of the Company which
will take place at 11.00 a.m. on 17 August 2021 (the "General
Meeting"). The New Facility is conditional upon completion of the
Transaction.
-- The Company intends to raise approximately 80 per cent. of
the gross proceeds of the Capital Raise through the Firm Placing at
the Offer Price to certain institutional investors.
-- Approximately 20 per cent. of the Capital Raise is expected
to be raised through the Placing, pursuant to which the Joint
Bookrunners intend to conditionally place the Open Offer Shares
with certain institutional investors at the Offer Price, subject to
clawback to satisfy valid applications by Qualifying Shareholders
under the Open Offer.
-- The Capital Raise will be fully underwritten by the Joint
Bookrunners on closing of the Bookbuild (other than the New Shares
for which the Directors and certain senior managers have committed
to subscribe) and is conditional upon, among other things, the
approval of Shareholders at the General Meeting.
-- The Directors and certain senior managers intend to subscribe
for an aggregate of approximately GBP241,500 of New Shares
(including under the Open Offer).
-- The Company's largest shareholder, Toscafund Asset Management
LLP has communicated to the Company that it sees significant value
in the equity of Esken and intends to fully support the Investment
and the Capital Raise pro rata with its shareholding. All Board
directors have also indicated their intention to participate in the
Capital Raise.
-- Qualifying Shareholders will be offered the opportunity to
apply for Excess Shares at the Offer Price through the Excess
Application Facility pursuant to the Open Offer.
-- Following completion of the Bookbuild, the Company will
publish a press announcement setting out the Offer Price (the
"Pricing Announcement") and a combined prospectus and class 1
circular in connection with the Transaction (the "Prospectus") and
will convene a General Meeting to approve certain matters necessary
to implement the Capital Raise and the Investment. The Company will
hold its Annual General Meeting immediately prior to the General
Meeting.
Bookbuild
The Firm Placing and the Placing are being conducted by way of
the Bookbuild on the Company's behalf by the Joint Bookrunners. The
Bookbuild will open with immediate effect following release of this
announcement. The Firm Placed Shares and Open Offer Shares, when
issued, will be fully paid and will rank pari passu in all respects
with the Existing Shares.
The Bookbuild is expected to close no later than 7.00 a.m. on 28
July 2021, subject to acceleration. Timing of the closing of the
Bookbuild and allocations are at the discretion of the Joint
Bookrunners and the Company. Details of the results of the Firm
Placing and the Placing will be announced as soon as practicable
after the close of the Bookbuild.
If a Placee is entitled to participate in the Open Offer by
virtue of being a Qualifying Shareholder it will be able to apply
to subscribe for Open Offer Shares under the terms and conditions
of the Open Offer. Unless otherwise agreed with the Joint
Bookrunners, any participation by a Placee as a Qualifying
Shareholder in the Open Offer will not reduce such Placee's
commitment in respect of its participation in the Firm Placing
and/or Placing.
The New Shares, Open Offer Entitlements and Excess Open Offer
Entitlements are being offered outside the United States in
reliance on Regulation S under the US Securities Act of 1933, as
amended (the "Securities Act").
Applications will be made to the Financial Conduct Authority
(the "FCA") for admission of the New Shares to the premium listing
segment of the Official List and to the London Stock Exchange for
admission of the New Shares to trading on its main market for
listed securities (together, "Admission").
Settlement for the New Shares and Admission are expected to take
place on or before 8:00 a.m. on the seventh Business Day following
approval of the Transaction by the Company's shareholders at the
General Meeting. The Firm Placing and Placing and Open Offer are
conditional upon, among other things, Admission in respect of the
New Shares becoming effective. The Firm Placing and Placing and
Open Offer are also conditional upon the placing agreement between
the Joint Bookrunners and the Company (the "Placing Agreement") not
being terminated in accordance with its terms. Appendix III to this
announcement sets out further details of the terms of the Placing
Agreement.
The Firm Placing and Placing are subject to the terms and
conditions set out in Appendix III to this announcement (which
forms part of this announcement).
Capitalised terms used but not otherwise defined in the text of
this announcement are defined in Appendix II of this
announcement.
Expected Timetable of Principal Events (1) (2) [1]
Record Date for entitlements under the close of business on 26
Open Offer July 2021
Announcement of the Capital Raise 27 July 2021
----------------------------
Ex-entitlement date for the Open Offer 28 July 2021
----------------------------
Publication and posting of the Prospectus 28 July 2021
and the Application Form (to Qualifying
Non-CREST Shareholders only)
----------------------------
Announcement of the results of the Firm 28 July 2021
Placing through a Regulatory Information
Service
----------------------------
Open Offer Entitlements and Excess Open 29 July 2021
Offer Entitlements enabled in CREST and
credited to stock accounts of Qualifying
CREST Shareholders in CREST
----------------------------
Recommended latest time for requesting 4.30 p.m. on 10 August
withdrawal of Open Offer Entitlements and 2021
Excess Open Offer Entitlements from CREST
----------------------------
Latest time and date for depositing Open 3.00 p.m. on 11 August
Offer Entitlements and Excess Open Offer 2021
Entitlements into CREST
----------------------------
Latest time and date for splitting of Application 3.00 p.m. on 12 August
Forms (to satisfy bona fide market claims 2021
only)
----------------------------
Latest time and date for electronic proxy 11.00 a.m. on 13 August
appointments or receipt of form of proxy 2021
----------------------------
Voting Record Time 6.00 p.m. on 13 August
2021
----------------------------
Latest time and date for receipt of completed 11.00 a.m. on 16 August
Application Forms and payment in full under 2021
the Open Offer or settlement of relevant
CREST instructions (as appropriate)
----------------------------
Announcement of the results of the Placing 7.00 a.m. on 17 August
and Open Offer through a Regulatory Information 2021
Service
----------------------------
General Meeting (3) 11.00 a.m. on 17 August
2021
----------------------------
Results of General Meeting announced through 17 August 2021
a Regulatory Information Service
----------------------------
Admission of, and dealings commence in, 8.00 a.m. on 26 August
the New Shares 2021
----------------------------
CREST members' accounts credited in respect From 8.00 a.m. on 26 August
of New Shares in uncertificated form 2021
----------------------------
Expected dispatch of definitive share certificates Within 14 days of Admission
for New Shares in certificated form
----------------------------
Expected completion of the Transaction 26 August 2021
----------------------------
Draw-Stop Date 31 August 2021
----------------------------
Notes:
(1) References to times in this announcement are to London time unless otherwise indicated.
(2) The ability to participate in the Placing and Open Offer is
subject to certain restrictions relating to Shareholders with
registered addresses outside the United Kingdom, details of which
are set out in the prospectus expected to be published by the
Company on 28 July 2021.
(3) The Company will hold its Annual General Meeting immediately
prior to the General Meeting. The Annual General Meeting is
expected to have concluded by 11.00 a.m. If the Annual General
Meeting has not concluded by 11.00 a.m. then the General Meeting
will commence immediately after its conclusion. If the Annual
General Meeting concludes before 11.00 a.m. then the General
Meeting will commence at 11.00 a.m.
This announcement contains inside information for the purposes
of article 7 of UK MAR. The person who arranged the release of this
announcement on behalf of the Company was Matthew Joy.
For further information, please contact:
Esken Limited
Charlie Geller, Communications Director C/O Tulchan Communications
Canaccord Genuity Limited (Joint Sponsor,
Joint Bookrunner and Joint Global Co-ordinator) +44 20 7523 8000
Adam James / Andrew Potts / Patrick
Dolaghan
Sam Lucas
UBS AG London Branch (Joint Sponsor,
Joint Bookrunner and Joint Global Co-ordinator) +44 207 567 8000
David James / Peter Mackie
Alex Bloch / Tom Snowball
Tulchan Communications +44 207 353 4200
Olivia Peters / David Allchurch esken@tulchangroup.com
Important notices
This announcement including the appendices and the information
contained in it has been issued by and is the sole responsibility
of the Company. The information contained in this announcement is
for information purposes only and does not purport to be full or
complete. No reliance may or should be placed by any person for any
purpose whatsoever on the information contained in this
announcement or on its accuracy or completeness. The information in
this announcement is subject to change.
This announcement is not a prospectus but an advertisement.
Neither this announcement nor anything contained in it shall form
the basis of, or be relied upon in conjunction with, any offer or
commitment whatsoever in any jurisdiction. Investors should not
acquire any Shares referred to in this announcement except on the
basis of the information contained in the Prospectus to be
published by the Company in connection with the Transaction.
Copies of the Prospectus when published will be available on the
Company's website at www.esken.com. Neither the content of the
Company's website nor any website accessible by hyperlinks on the
Company's website is incorporated in, or forms part of, this
announcement. The Prospectus will provide further details of the
New Shares being offered pursuant to the Capital Raise.
This announcement does not contain or constitute an offer for
sale or the solicitation of an offer to purchase securities in the
United States. The New Shares, Open Offer Entitlements and Excess
Open Offer Entitlements have not been and will not be registered
under the US Securities Act of 1933, as amended (the "Securities
Act") or under any securities laws of any state or other
jurisdiction of the United States and may not be offered, sold,
taken up, exercised, resold, renounced, transferred or delivered,
directly or indirectly, within the United States. There will be no
offer of the New Shares in the United States. None of the New
Shares, Open Offer Entitlements, Excess Open Offer Entitlements,
this announcement or any other document connected with the Capital
Raise has been or will be approved or disapproved by the United
States Securities and Exchange Commission or by the securities
commissions of any state or other jurisdiction of the United States
or any US regulatory authority, nor have any of the foregoing
authorities has passed upon or endorsed the merits of the offering
of the New Shares, Open Offer Entitlements, or Excess Open Offer
Entitlements or the accuracy or
adequacy of this announcement or any other document connected
with the Capital Raise. Any representation to the contrary is a
criminal offence in the United States.
This announcement is for information purposes only and, subject
to certain limited exceptions, is not intended to and does not
constitute or form part of any offer or invitation to sell, allot
or issue, or any offer or invitation to purchase or subscribe for,
New Shares, or to take up any entitlements to New Shares, in any
jurisdiction or any solicitation to purchase or subscribe for, any
securities in the United States, Australia, Canada, Hong Kong,
Japan, the People's Republic of China or the Republic of South
Africa (the "Excluded Territories") or in any jurisdiction where
such offer or invitation is unlawful, nor does the fact of its
distribution form the basis of, nor can it be relied upon in
connection with, or act as any inducement to enter into, any
contract or commitment whatsoever with respect to such securities,
the Company or otherwise.
The distribution of this announcement into jurisdictions other
than the United Kingdom may be restricted by law, and, therefore,
persons into whose possession this announcement comes should inform
themselves about and observe any such restrictions. Any failure to
comply with any such restrictions may constitute a violation of the
securities laws of such jurisdiction. In particular, subject to
certain limited exceptions, this announcement, the Prospectus (once
published) and the Application Forms (once printed) should not be
distributed, forwarded to or transmitted in or into any Excluded
Territory.
The New Shares may not be offered or sold in Hong Kong, by means
of any document, other than (i) to "professional investors" as
defined in the Securities and Futures Ordinance (Cap.571, Laws of
Hong Kong) of Hong Kong (the "SFO") and any rules made under the
SFO; or (ii) in other circumstances which do not constitute an
offer to the public within the meaning of the Companies (Winding up
and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong)
of Hong Kong (the "C(WUMP)O") or an invitation to induce an offer
by the public to subscribe for or purchase any shares and which do
not result in this document being a "prospectus" as defined in the
C(WUMP)O. No advertisement, invitation or document relating to the
New Shares or this document may be issued or may be in the
possession of any person for the purpose of issue, whether in Hong
Kong or elsewhere, which is directed at, or the contents of which
are likely to be accessed or read by, the public of Hong Kong
(except if permitted to do so under the C(WUMP)O and the SFO) other
than with respect to the New Shares which are or are intended to be
disposed of only to persons outside Hong Kong or only to
"professional investors" as defined in the SFO and any rules made
under the SFO or in other circumstances which do not constitute an
offer or invitation to the public within the meaning of the
C(WUMP)O. The contents of this document have not been reviewed by
any regulatory authority in Hong Kong. You are advised to exercise
caution in relation to the offer. If you are in any doubt about any
of the contents of this document you should obtain independent
professional advice.
Recipients of this announcement and/or the Prospectus should
conduct their own investigation, evaluation and analysis of the
business, data and property described in this announcement and/or
if and when published the Prospectus. This announcement does not
constitute a recommendation concerning any investor's options with
respect to the Capital Raise. The price and value of securities can
go down as well as up. Past performance is not a guide to future
performance. The contents of this announcement are not to be
construed as legal, business, financial or tax advice. Each
Shareholder or prospective investor should consult his, her or its
own legal adviser, business adviser, financial adviser or tax
adviser for legal, financial, business or tax advice.
Notice to all investors
Canaccord Genuity Limited ("Canaccord") is authorised and
regulated by the Financial Conduct Authority ("FCA") in the United
Kingdom. UBS AG London Branch ("UBS" and together with Canaccord,
the "Joint Bookrunners") is authorised and regulated by the
Financial Market Supervisory Authority in Switzerland, and it is
authorised by the Prudential Regulation Authority ("PRA") and
subject to regulation by the FCA and limited regulation by the PRA
in the United Kingdom.
Canaccord and UBS are each acting exclusively for the Company
and no one else in connection with the Capital Raise or any other
matter referred to in this announcement and will not be responsible
to anyone other than the Company for providing the protections
afforded to their respective clients or for providing advice in
connection with the Capital Raise and/or any other matter referred
to in this announcement.
No representation or warranty, express or implied, is or will be
made as to, or in relation to, and no responsibility or liability
is or will be accepted by the Joint Bookrunners or by any of their
respective affiliates or agents (or any of their respective
directors, officers, employees or advisers) for the contents of the
information contained in this announcement, or any other written or
oral information made available to or publicly available to any
interested party or its advisers, or any other statement made or
purported to be made by or on behalf of either Joint Bookrunner or
any of their respective affiliates in connection with the Company,
the New Shares or the Capital Raise and any responsibility therefor
is expressly disclaimed. The Joint Bookrunners and each of their
respective affiliates accordingly disclaim all and any liability,
whether arising in tort, contract or in respect of any statements
or other information contained in this announcement and no
representation or warranty, express or implied, is made by either
Joint Bookrunner or any of their respective affiliates as to the
accuracy, completeness or sufficiency of the information contained
in this announcement.
No person has been authorised to give any information or to make
any representations other than those contained in this
announcement, the Prospectus and the Application Forms, and, if
given or made, such information or representations must not be
relied on as having been authorised by the Company or Canaccord and
UBS.
In connection with the Capital Raise, the Joint Bookrunners may
release communications to the market as to the extent to which the
book is "covered". A communication that a transaction is, or that
the books are, "covered" refers to the position of the order book
at that time. It is not an assurance that the books will remain
covered, that the transaction will take place on any terms
indicated or at all, or that if the transaction does take place,
the securities will be fully distributed by the Joint
Bookrunners.
In connection with the Capital Raise, each of their Joint
Bookrunners and any of their respective affiliates, acting as
investors for their own accounts, may take up a portion of the
shares in the Capital Raise as a principal position and in that
capacity may retain, purchase, sell, offer to sell for their own
accounts such shares and other securities of the Company or related
investments in connection with the Capital Raise or otherwise.
Accordingly, references in the Prospectus to the Shares being
issued, offered, subscribed, acquired, placed or otherwise dealt in
should be read as including any issue or offer to, or subscription,
acquisition, placing or dealing by, the Joint Bookrunners and any
of their respective affiliates acting as investors for their own
accounts. Except as required by applicable law or regulation, the
Joint Bookrunners do not propose to make any public disclosure in
relation to such transactions.
Cautionary statement regarding forward-looking statements
This announcement contains forward-looking statements, including
with respect to financial information, that are based on current
expectations or beliefs, as well as assumptions about future
events. These forward-looking statements can be identified by the
fact that they do not relate only to historical or current facts.
Forward-looking statements often use words such as "anticipate",
"target", "expect", "estimate", "intend", "plan", "goal",
"believe", "will", "may", "should", "would", "could", "is
confident", or other words of similar meaning. Undue reliance
should not be placed on any such statements because they speak only
as at the date of this announcement and, by their very nature, they
are subject to known and unknown risks and uncertainties and can be
affected by other factors that could cause actual results, and the
Company's plans and objectives, to differ materially from those
expressed or implied in the forward-looking statements. No
representation or warranty is made that any forward-looking
statement will come to pass.
You are advised to read the Prospectus when published and the
information incorporated by reference therein in their entirety,
and, in particular, the section of the Prospectus headed "Risk
Factors", for a further discussion of the factors that could affect
the Group's future performance and the industry in which it
operates. In light of these risks, uncertainties and assumptions,
the events described in the forward-looking statements, including
statements regarding prospective financial information, in this
announcement may not occur. These statements are not fact and
should not be relied upon as being necessarily indicative of future
results, and readers of this announcement are cautioned not to
place undue reliance on the forward-looking statements, including
those regarding prospective financial information.
No statement in this announcement is intended as a profit
forecast, and no statement in this announcement should be
interpreted to mean that underlying operating profit for the
current or future financial years would necessarily be above a
minimum level, or match or exceed the historical published
operating profit or set a minimum level of operating profit.
Neither the Company nor Canaccord nor UBS are under any
obligation to update or revise publicly any forward-looking
statement contained within this announcement, whether as a result
of new information, future events or otherwise, other than in
accordance with their legal or regulatory obligations (including,
for the avoidance of doubt, the Prospectus Regulation Rules, the
Listing Rules and the Disclosure Guidance and Transparency Rules).
Subject to the Prospectus Regulation Rules, the Listing Rules and
the Disclosure Guidance and Transparency Rules, the issue of this
announcement shall not, in any circumstances, create any
implication that there has been no change in the affairs of the
Company since the date of this announcement or that the information
in it is correct as at any subsequent date.
Information to Distributors
Solely for the purposes of the product governance requirements
contained in Chapter 3 of the FCA Handbook Product Intervention and
Product Governance Sourcebook (together, the "UK Product Governance
Requirements"), and disclaiming all and any liability, whether
arising in tort, contract or otherwise, which any "manufacturer"
(for the purposes of the UK Product Governance Requirements) may
otherwise have with respect thereto, the New Shares have been
subject to a product approval process, which has determined that
such securities are: (i) compatible with an end target market of
retail investors and investors who meet the criteria of
professional clients and eligible counterparties, each as defined
in paragraph 3 of the FCA Handbook Conduct of Business Sourcebook;
and (ii) eligible for distribution through all permitted
distribution channels (the "Target Market Assessment").
Notwithstanding the Target Market Assessment, distributors should
note that: the price of the New Shares may decline and investors
could lose all or part of their investment; the New Shares offer no
guaranteed income and no capital protection; and an investment in
the New Shares is compatible only with investors who do not need a
guaranteed income or capital protection, who (either alone or in
conjunction with an appropriate financial or other adviser) are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear any losses
that may result therefrom. The Target Market Assessment is without
prejudice to the requirements of any contractual, legal or
regulatory selling restrictions in relation to the Capital Raise.
Furthermore, it is noted that, notwithstanding the Target Market
Assessment, the Joint Bookrunners will only procure investors who
meet the criteria of professional clients and eligible
counterparties.
For the avoidance of doubt, the Target Market Assessment does
not constitute: (a) an assessment of suitability or appropriateness
for the purposes of Chapter 9A or 10A respectively of the FCA
Handbook Conduct of Business Sourcebook; or (b) a recommendation to
any investor or group of investors to invest in, or purchase, or
take any other action whatsoever with respect to the New
Shares.
Each distributor is responsible for undertaking its own target
market assessment in respect of the New Shares and determining
appropriate distribution channels.
ESKEN LIMITED
PROPOSED FIRM PLACING AND PLACING AND OPEN OFFER
TO RAISE GROSS PROCEEDS OF MINIMUM GBP45 MILLION
1. Introduction
Esken today announces its intention to raise gross proceeds of
minimum GBP45 million by way of a Firm Placing and Placing and Open
Offer.
The Capital Raise will be fully underwritten by the Joint
Bookrunners (other than the New Shares for which the Directors and
certain senior managers have committed to subscribe), subject to,
and in accordance with, the terms and conditions of the Placing
Agreement.
The Company today also announces that it has entered into an
amendment and restatement agreement in respect of the Existing
Facility Agreement pursuant to which, among other terms, the
Company and the Existing Lenders have agreed the terms of the New
Facility, which will be made available to the Group (other than
LSA, Thames Gateway Airport Limited, Stobart Solar Limited and
Stobart Jet Centre Limited) (the "Wider Group") pursuant to the
Amended Facility Agreement. The New Facility will become effective
on the date on which certain conditions have been satisfied (the
"Effective Date") including (i) completion of the Transaction, (ii)
receipt of net proceeds of the Capital Raise and (iii) repayment of
all outstanding borrowings under the Existing Facility. From the
Effective Date, the funds under the New Facility may be applied
towards the general corporate purposes of the Wider Group and in
accordance with the Wider Group's short-term cash flow
forecasts.
Under the terms of the amendment and restatement agreement
entered into with the Existing Lenders, the Existing Lenders have
agreed with the Company to allow further drawings of no more than
GBP5 million under Facility B of its Existing Facility in the
period between 29 July 2021 and 31 August 2021, subject to
satisfaction of certain conditions, including that: (i) the Company
complies with certain reporting requirements including delivery of
weekly cashflow forecasts; and (ii) the key steps towards
implementation of the Capital Raise and the Investment occur such
that the Transaction will be implemented before 31 August 2021.
The Company also announced on 2 July 2021 that they have reached
agreement with CGI on the terms of the Investment.
The Investment will provide funding for the Wider Group of
approximately GBP100 million which, together with the net proceeds
of the Capital Raise of minimum GBP40 million, will enable the
Company to repay the outstanding amounts payable under its Existing
GBP120 million revolving credit Facility which matures on 31
January 2022 (the "Existing Facility"). The Transaction and the New
Facility are intended to secure the financial position of the Group
for the next 18 months from the date of this announcement.
The Board believes the Transaction to be in the best interests
of Shareholders as a whole and this announcement will explain why
the Board unanimously recommends that Shareholders should vote in
favour of the Resolutions, as each Director has committed to do so
in respect of his or her own legal and beneficial holdings of
Shares.
2. Background to and reasons for the Capital Raise
At the time of concluding the 2020 Capital Raise in June 2020,
the Group also agreed an additional bank facility of GBP40 million
to sit alongside its existing facility of GBP80 million through to
the expiry of those facilities in January 2022. At the time, it was
anticipated that this additional funding would be sufficient to
allow the Group to execute its strategy to exit both the Rail &
Civils business and Stobart Air as well as its related aircraft
leasing company Propius Limited (Propius), while at the same time
ensuring that the Group had sufficient funds to manage the impact
of the pandemic. It was the intention that these bank facilities
would be refinanced in the normal course once the pandemic was
over.
A combination of factors (described below) has accelerated the
need for a refinancing and additional liquidity is required both to
fund the Group's short-term requirements and to enable it to build
a strong foundation from which it can return the business to growth
and deliver on its longer-term strategic ambitions for the Group's
core operations: Energy and Aviation. Following the liquidation of
Stobart Air announced on 12 June 2021, the Group now owns and
operates two core businesses, being Stobart Energy and its aviation
business comprising London Southend Airport (refer to paragraph 4
below for further information on the Borrower Group) as well as
Stobart Aviation Services. Whilst the Board believes that these
operations have the potential to generate significant value for
Shareholders in a post-COVID environment, the recovery will need
time and therefore require medium-term funding to underpin the
business plans through the recovery period. The Board has concluded
that while it was originally intended to monetise the Stobart
Energy business within the two-year period following the 2020
Capital Raise, this is not the right answer from a Shareholder
value perspective and so is to be held for the medium term.
The COVID-19 pandemic has created unprecedented challenges for
the Company and the aviation sector as a whole. The Group has
focused on cost control and cash conservation throughout the year
and operational cash flows in the core business have been ahead of
the reasonable worst case scenario set out at the time of the
Capital Raise in June 2020. That scenario envisaged: (i) a phased
recovery in waste wood supply and gate fees through to the end of
August 2020, followed by normalised levels thereafter in the
Stobart Energy division; and (ii) lockdown restrictions extending
no later than March 2021 and a slow recovery thereafter in the
Stobart Aviation division through to June 2021.
The impact of the pandemic has been greater and lasted longer
than all governments' and experts' prevailing forecasts reviewed by
the Directors at the time of the initial outbreak of the COVID-19
pandemic. Whilst Stobart Energy has been performing within the
above parameters, it is now clear that travel restrictions will
last longer and Stobart Aviation's recovery will be slower than was
predicted in June 2020. In addition, cash outflows from Stobart Air
(including the impact of liquidation) and Propius have exceeded the
Directors' expectations at the time of the acquisition in early
2020, with Esken having funded the two entities GBP42.2 million
between May 2020 and February 2021, and thus Group cash outflows
have now exceeded the reasonable worst-case scenario established in
June 2020 on an overall basis.
Stobart Energy was impacted by the first lockdown which affected
construction activity and restricted the availability of waste wood
during a period when the business would traditionally build stock
to meet its contractual commitments during the period of peak
demand through the winter months. The business took an early
decision to secure supply in the UK market by reducing its gate
fees charged to suppliers and in addition sourced additional supply
of waste wood from overseas. These actions impacted both margins
and earnings within that business but enabled the business to
fulfil its contractual commitments to customers.
The extended lockdowns and restrictions on international travel
throughout Europe in 2020 meant that air passenger travel was
limited, which impacted London Southend Airport, Stobart Aviation
Services and the Stobart Air operations. While steps were taken to
minimise cash burn through utilising government schemes including
furlough, freezing all capital expenditure, except safety critical
projects, and all discretionary expenditure, the impact on the
Group's financial resources has been significant.
Stobart Energy is recovering and it is expected to be back to
pre-COVID-19 levels of activity by the end of FY22. It is a
profitable cash-generative business with long term contracts and
benefits from barriers to entry which make it an attractive and
potentially valuable business over the medium term.
While London Southend Airport has been hit hard by the pandemic,
it remains a key strategic asset in the globally important London
airport market as that is expected to recover over the next two to
three years as capacity constraints in London airports again become
an issue. It has also developed a strong logistics operation which
contributed meaningful revenues throughout the pandemic and this
offers scope for further development and value creation. The
airport will take longer to fulfil its full potential and will need
further investment to capitalise on the long-term opportunity.
Discussions with strategic aviation partners have taken place over
the last two years with this aim, but the uncertainty created by
the pandemic meant that the Group had been unable to structure a
transaction until now.
With the envisaged recovery of the London Southend Airport
business and the streamlined operations, the opportunity to raise
finance from an investment in the airport has once again been under
consideration. Over the last nine months, the Group has been in
discussions with CGI in relation to the development of LSA as
aviation recovers from the pandemic. These discussions were
announced on 14 June 2021 and the Investment was announced on 2
July 2021.
The Carlyle Group is a global investment firm with total assets
under management of $260 billion globally. Carlyle has been
attracted to the opportunity at London Southend Airport and has
spent considerable time with the management team understanding the
business and the long-term opportunity. While the Transaction is
structured as a loan with an option to convert into an equity share
in the airport, both parties see this as a long-term strategic
partnership in respect of London Southend Airport.
The Investment provides funding for the Wider Group of
approximately GBP100 million (after the GBP20 million funding for
London Southend Airport by way of the Pari Passu Loan but before
other transaction costs incurred by Esken, including the Commitment
Fee) which, together with the net proceeds of the Capital Raise of
minimum GBP40 million (net of estimated commissions, fees and
expenses), will enable the Company to repay the outstanding amounts
payable under the Existing Facility, which is expected to total
GBP113 million as at 31 August 2021. As a result, post-Closing, the
Transaction will reduce overall bank indebtedness of the Group,
allow it to meet certain of its residual legacy obligations in
respect of Stobart Air (and its liquidation) and Propius and
underpin the business plan for Stobart Energy, as well as London
Southend Airport for a period of 18 months from the date of this
announcement . Any additional capital investment required in the
medium to long term by the Borrower is expected to be raised as
debt funding by the Borrower Group ringfenced from the Wider Group.
In addition to the funding being provided, CGI brings significant
expertise in developing airports around the world. This, together
with the experienced operational team at the Borrower, adds to the
Group's offering to its existing and prospective airline and
logistics partners alike. This is important to the Group's airline
and other partners as the Board looks to renew and rebuild the
Group's commercial relationships with them. A combination of the
Group's proven operational ability at London Southend Airport in a
pre-COVID-19 world and a strong strategic financial partner in CGI
will be powerful as passenger demand returns and activity levels
increase.
The Transaction and the New Facility are intended to secure the
financial position of the Group for the next 18 months from the
date of this announcement . The New Facility matures on 1 February
2023 (the "New Facility Termination Date") and the management fully
intends to refinance or repay the New Facility prior to its expiry
date. In addition, funding for the Group to meet the final residual
legacy obligations for Propius in March to December 2023 totalling
GBP26 million (after which Propius will become dormant), for the
GBP53.1 million Exchangeable Bonds that mature in May 2024 and for
other of the Group's purposes in the medium term would be expected
to be sourced from the sale of non-core infrastructure assets,
additional external funding at the relevant time and/or from cash
flows from trading at levels above the Group budget. The Company
has taken immediate steps to seek sublease arrangements for the
aircraft held by Propius with alternative operators to mitigate the
cash requirements from the Group but any beneficial impact from
this has not been reflected in management's current
expectations.
3. Use of proceeds
The Investment is expected to raise GBP125 million in gross
proceeds and approximately GBP120 million net of lender costs. The
GBP120 million of proceeds will be available for the Group to
refinance its Existing Facility and meet other transaction costs
incurred by Esken, including the Commitment Fee, with GBP20 million
of the proceeds being advanced by the Wider Group to the Borrower
pursuant to the Pari Passu Loan Agreement so as to provide funding
for London Southend Airport to cover all currently anticipated
expenditure of the Borrower Group for the period through to the end
of FY24, other than amounts funded from operating cash flows.
The Group has in place an GBP80 million revolving credit
facility ("Facility A") and a GBP40 million revolving credit
facility ("Facility B") until 31 January 2022, which were drawn
down to GBP80 million and GBP28 million, respectively, as at 23
July 2021. The proceeds from the Investment totalling GBP100
million (after the GBP20 million is advanced under the Pari Passu
Loan but before other transaction costs incurred by Esken,
including the Commitment Fee) will be used to repay amounts drawn
down under Facility A and Facility B, which totalled GBP108 million
as at 23 July 2021 and, pursuant to consents provided as part of
the 2021 Amendment Agreement, the Group anticipates drawing down up
to an additional GBP5 million from Facility B (representing an
aggregate draw down from the Existing Facility of GBP113 million)
to provide working capital to the Group through to 31 August
2021.
The Capital Raise is expected to raise a minimum of GBP45
million in gross proceeds. Following repayment of the remaining
GBP5 million drawn under the Existing Facility Agreement pursuant
to consents provided as part of the 2021 Amendment Agreement out of
the proceeds of the Capital Raise, the Group intends to use the
remaining net proceeds of the Capital Raise, together with the
anticipated Group available cash balance in excess of GBP7 million
as at 1 August 2021 and the GBP20 million New Facility (subject to
meeting certain drawdown conditions) for its working capital
requirements, including to meet certain of its residual legacy
obligations under Stobart Air (and its liquidation) and Propius for
18 months from the date of this announcement . The proceeds will
also be used to underpin the business plan for Stobart Energy.
The Group intends to draw down such funds under the New Facility
as and when they are needed for its working capital requirements,
which are set forth in the following table. Although entry into the
Amended Facility Agreement in relation to the New Facility does not
require the approval of Shareholders and will not be the subject of
a vote at the General Meeting, it is conditional on completion of
the Transaction.
A table [2] setting out the detailed use of proceeds from the
Transaction and the New Facility can be found below, which has been
prepared on a reasonable worst case scenario basis. This table and
the following commentary assumes the Transaction raises gross
proceeds of approximately GBP45 million which is the minimum
targeted amount. By its nature, the information in the following
table involves risks and uncertainties because it relates to events
and depends on circumstances that may or may not occur in the
future, in particular given the risks and uncertainties related to
the COVID-19 pandemic.
18 months
7 months 11 months to 31 Jan 1 month To end
FY22(1) FY23(2) 2023 FY23(3) of FY23
(GBP millions)
Opening available cash balance 7 20 7 5 7
================================== ======== ========= ========== ======== ========
Investment proceeds, net
of Lender costs 120 - 120 - 120
Pari Passu Loan (20) - (20) - (20)
Repay Existing Facility (113) - (113) - (113)
New Facility drawdown - 15 15 - 15
Repay New Facility - - - (15) (15)
Net proceeds of the Capital
Raise 40 - 40 - 40
Transaction costs and Commitment
Fee (8) - (8) - (8)
================================= ======== ========= ========== ======== ========
Proceeds from refinancing
and the Capital Raise 19 15 34 (15) 19
Debt, leases and asset
financing (10) (17) (27) (1) (28)
Capex net of asset financing(4) (1) (1) (2) (0) (2)
Stobart Air liquidation
and Propius(5) (9) (18) (27) (4) (31)
Other cash inflow / (outflow)
including working capital 13 6 20 1 21
Closing available cash
balance 20 5 5 (14) (14)
================================= ======== ========= ========== ======== ========
Notes:
(1) 7 months from 1 August 2021 to 28 February 2022.
(2) 11 months from 1 March 2022 to 31 January 2023.
(3) 1 month from 1 February 2023 to 28 February 2023.
(4) Excludes potential proceeds from infrastructure asset sales.
(5) GBP24.5 million Stobart Air and Propius liquidation cash
flows incurred in FY22 prior to July 2021.
(6) Due to the structure of the Investment, and the Borrower
becoming a ringfenced asset as a result of the Pari Passu Loan,
the subsequent cash flows presented above do not include the
Borrower.
(7) Available cash balances are shown net of restricted cash
of GBP12.8 million.
(8) Figures may not sum fully due to rounding.
The Transaction and the New Facility are intended to secure the
financial position of the Group for the next 18 months from the
date of this announcement and therefore the Prospectus will have a
statement that, taking into account the net proceeds of the
Investment, the net proceeds of the Capital Raise and the New
Facility, the Group has sufficient working capital for its present
requirements, that is for at least 12 months from the date of the
Prospectus, based on certain assumptions.
However, as set out in the table above, management's forecasts
show a working capital shortfall of approximately GBP14 million in
February 2023 for the Group, on a reasonable worst case scenario
basis. This shortfall is principally a result of the requirement to
refinance the New Facility by 1 February 2023. The Group
anticipates incurring additional cash outflow from that date,
pursuant to residual legacy obligations relating to Propius, the
liquidation of Stobart Air and the cash impact of identified
sensitivities and reduced activity levels across all divisions.
Whilst the Company has taken immediate steps to mitigate the
risk of such shortfalls arising in the Group and fully intends to
refinance or repay the New Facility prior to its maturity date on 1
February 2023, any beneficial impact from this has not been
reflected in management's reasonable worst case scenario forecasts.
Mitigating actions that may be available to management include (but
are not limited to): seeking sublease arrangements for the aircraft
held by Propius with alternative operators; the sale of non-core
infrastructure assets; the delaying of certain discretionary
capital expenditure and the refinancing of the New Facility.
4. Terms of the Capital Raise and the New Shares
The Company is proposing to raise gross proceeds of
approximately GBP45 million by way of a Firm Placing and Placing
and Open Offer, at the Offer Price, which is anticipated to be
between 14 and 16 pence. The Firm Placing and Placing and Open
Offer is conditional, among other things, on the passing of the
Resolutions, which will be sought at the General Meeting.
The Directors have given careful consideration as to how to
structure the proposed issuance of equity and have concluded that a
Placing and Open Offer and Firm Placing is the most suitable option
available to the Company and its Shareholders at this time.
Subject to completion of the Bookbuild, the Joint Bookrunners
have agreed to underwrite the settlement of the Firm Placed Shares
and conditionally place Open Offer Shares with Placees procured
through the Bookbuild, on the terms and subject to the conditions
in the Placing Agreement.
The Firm Placing is expected to settle on or before 8:00 a.m. on
the seventh Business Day following approval of the Investment by
the Company's shareholders and is conditional on, among other
things:
(a) Shareholder approval of the Resolutions at the General Meeting; and
(b) the Placing Agreement having become or been declared
unconditional in all respects and the Placing Agreement not having
been terminated by the Managers (being Canaccord and UBS) in
accordance with its terms.
If Admission of the Firm Placed Shares does not take place on or
before 8.00 a.m. on 26 August 2021 (or such later time and/or date
as the Company and the Joint Bookrunners may agree), the Firm
Placing will not proceed and subscription monies will be refunded
to Firm Placees by cheque or CREST payment, as appropriate (at the
Firm Placees' risk).
The New Shares to be issued pursuant to the Firm Placing and
Placing and Open Offer will, following Admission, rank pari passu
in all respects with the Existing Shares and will carry the right
to receive all dividends and distributions declared, made or paid
on or in respect of the ordinary shares after Admission.
Application will be made to the FCA for the New Shares proposed
to be issued in connection with the Firm Placing and Placing and
Open Offer to be admitted to the premium listing segment of the
Official List and to the London Stock Exchange for the New Shares
to be admitted to trading on its Main Market for listed securities.
It is expected that Admission will become effective, and that
dealings in the New Shares will commence, at 8.00 a.m. on or around
26 August 2021.
Firm Placing
Approximately 80 per cent. of the Firm Placing and Placing and
Open Offer will be placed pursuant to the Firm Placing. The Firm
Placed Shares are not to be offered first to Shareholders
generally. The Board has undertaken discussions with key
Shareholders in relation to the Firm Placing. The Firm Placed
Shares are not subject to clawback under, nor do they form part of,
the Open Offer.
Subject to completion of the Bookbuild, the Joint Bookrunners
have agreed to underwrite the settlement of the Firm Placed Shares
and conditionally placed Open Offer Shares placed with Placees
procured through the institutional Bookbuild, on the terms and
subject to the conditions in the Placing Agreement. With effect
from the completion of the Bookbuild and subject to the execution
by the Company and the Joint Bookrunners of the terms of issue
setting out, among other things, the final number of the Firm
Placed Shares and the Open Offer Shares to be issued and the final
Offer Price following completion of the Bookbuild (the "Terms of
Issue"), to the extent that any Firm Placee procured by the Joint
Bookrunners fails to take up any or all of the Firm Placed Shares
which have been allocated to it or which it has agreed to take up
at the Offer Price, each of the Joint Bookrunners has agreed, on
the terms and subject to the conditions set out in the Placing
Agreement, to take up such Firm Placed Shares at the Offer Price in
equal proportions. This underwriting commitment is conditional on
the Placing Agreement becoming fully unconditional and not having
been terminated in accordance with its terms.
The Firm Placed Shares, when issued and fully paid, will be
identical to, and rank pari passu with, the Existing Shares in
respect of all dividends or other distributions declared, made or
paid after Admission. Firm Placees will not be able to participate
in the Open Offer with respect to the Firm Placed Shares.
Placing and Open Offer
Approximately 20 per cent. of the Firm Placing and Placing and
Open Offer will be placed conditionally with Conditional Placees.
The Joint Bookrunners intend, pursuant to the Placing Agreement, to
conditionally place all of the Open Offer Shares at the Offer Price
with institutional investors. The commitments of the Conditional
Placees will be subject to clawback in respect of valid
applications for Open Offer Shares by Qualifying Shareholders
pursuant to the Open Offer. Subject to waiver or satisfaction of
the conditions relating to Admission and the Placing and Open Offer
not being terminated, any Open Offer Shares which are not applied
for in the Open Offer through valid applications received from
Qualifying Shareholders will be issued to the Conditional Placees
procured by the Joint Bookrunners. Certain Conditional Placees who
are existing Shareholders of the Company, at the absolute
discretion of the Joint Bookrunners, may be offered the opportunity
to offset their Placing commitments against the Open Offer Shares
validly taken up and paid for under the Open Offer.
With effect from the completion of the Bookbuild and subject to
the execution by the Company and the Joint Bookrunners of the Terms
of Issue, to the extent that any Conditional Placee procured by the
Joint Bookrunners fails to take up any or all of the Open Offer
Shares which have been allocated to it or which it has agreed to
take up at the Offer Price, each of the Joint Bookrunners has
agreed, on the terms and subject to the conditions set out in the
Placing Agreement, to take up such Open Offer Shares at the Offer
Price in equal proportions. This underwriting commitment is
conditional on the Placing Agreement becoming fully unconditional
and not having been terminated in accordance with its terms.
Subject to the fulfilment of the conditions set out below and in
the terms and conditions of the Open Offer and, in the case of
Qualifying Non-CREST Shareholders, the terms and conditions in the
Application Form, Qualifying Shareholders will be given the
opportunity to subscribe for New Shares pro rata to their existing
shareholdings at the Offer Price on the basis of a ratio determined
at the close of the Bookbuild.
Fractions of ordinary shares will not be issued and each
Qualifying Shareholder's entitlement under the Open Offer will be
rounded down to the nearest whole number.
Shareholders who have sold or otherwise transferred all of their
Existing Shares before the ex-entitlement date will not be entitled
to participate in the Open Offer.
The New Shares will not be made available in whole or in part to
the public except under the terms of the Open Offer. The Open Offer
will not be made to Shareholders in any Excluded Territory.
Accordingly, Application Forms will not be sent to and Open Offer
Entitlements will not be credited to the accounts of Shareholders
in the Excluded Territories.
Shareholders should note that the Open Offer is not a rights
issue. Qualifying Shareholders should be aware that in the Open
Offer, unlike in a rights issue, any Open Offer Shares not applied
for will not be sold in the market on behalf of or placed for the
benefit of Qualifying Shareholders who do not apply under the Open
Offer, but will be subscribed for under the Placing for the benefit
of the Company.
Full terms and conditions of the Open Offer will be contained in
the Prospectus which is expected to be published by the Company on
or around 28 July 2021 following approval by the FCA in accordance
with the Prospectus Regulation Rules and, in respect of Qualifying
Non-CREST Shareholders, in the Application Form.
5. Intentions of the Directors
The Directors, who beneficially hold in aggregate 1,518,134
Existing Shares, representing approximately 0.25 per cent. of the
Company's existing issued ordinary share capital as at 23 July 2021
(being the latest practicable date prior to the date of this
announcement), each have committed to vote their Existing Shares in
favour of the Resolutions.
In addition, each of the Directors has committed to subscribe
for a total investment (including under the Open Offer) of
approximately GBP228,000.
6. Current trading and prospects in respect of the Group
The two core businesses of Aviation and Energy are currently
returning to operations in different phases as a result of the
continued impact of government travel advice.
The Stobart Energy division has continued to see the business
operate at the expected levels now that the availability of waste
wood from the construction industry has returned to pre-COVID-19
levels. The business has continued to see gate fees move in line
with the expected increases with the move into the summer season
and due to increased wood supply from the construction sector. The
business is trading in line with management's expectations for FY22
and continues to develop to pre-COVID-19 levels as all plants are
fully operational compared to FY20 and FY21. It is expected that
Stobart Energy's performance will be back to pre-COVID-19 levels of
activity by the end of FY22. Management intends to develop
near-term growth opportunities from additional supply contracts and
broaden the base of the market offering within the energy from
waste space where existing operational expertise can be
applied.
The challenging aviation sector travel advice and limited
availability of travel routes has meant a slower recovery for
London Southend Airport. However, there has been a return to some
passenger flying though this will continue to be at low levels
whilst "green routes" are limited. The management team remain
focused on maintaining the tight cost control demonstrated
throughout this period and remain prepared for an increased level
of activity once routes open up and travel returns. The business
remains resilient through the continued global logistics operation
which has now returned to similar levels to last year following the
earlier reduction in operations due to planned Brexit risk
mitigation in January and February 2021.
Stobart Aviation Services is also being affected by the slower
return to flying through this summer but, as with London Southend
Airport, it has taken steps to ensure the cost base is reflective
of this reduced level of activity and is ready in anticipation of
the return of travel at the bases it serves.
The Directors have considered various operating scenarios with
regard to the Group's recovery from the impact of COVID-19 for
London Southend Airport and Stobart Aviation Services in 2021 and
the years ending February 2022 and February 2023. The table below
sets forth management's current expectations in respect of its
future business operations.
Management's current expectations refer to the assumptions and
beliefs of management as at the date of this announcement for
London Southend Airport, Stobart Energy and non-core assets which
are reflected in the Company's business plan and budget.
Management's current expectations are not a forecast, but rather
are a management model based on a number of assumptions and beliefs
concerning, amongst other things, results of operations, financial
condition, liquidity, prospects, growth, strategies and recovery
from the impact of COVID-19 for London Southend Airport, Stobart
Energy and non-core assets. By their nature, these assumptions and
beliefs involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future.
These risks are heightened as a result of the risks and
uncertainties resulting from the COVID-19 pandemic. As a result of
these risks and uncertainties, the Directors have considered a
range of operating scenarios with regard to the impact of COVID-19
and the Group's recovery. For a discussion of the 'reasonable worst
case scenario' prepared in connection with the Company's working
capital statement, please see paragraph Error! Reference source not
found. below.
Management's current
expectations(1)(2)
--------------------
London Southend Airport
Passengers numbers at pre-COVID-19 average run April 2022
rate by end of...........................................
Cargo rotations at December 2020 levels October 2021
by..............................................................................
Stobart Energy
Cumulative tonnes sold in excess of FY20 by(3) January 2022
.......................................................................
Cumulative gate fee revenue in excess of FY20 November 2021
by...................................................................
Disposal of Non-Strategic Infrastructure Assets May 2023
.................................................................
Notes:
(1) In the period following the 2020 Capital Raise to the end
of the financial year (February 2021), the core business consumed
GBP13.7 million cash including capital expenditure, an average
of GBP1.7 million per month. This compares favourably to the
downside scenario within the plan produced in 2020 of cash consumption
of GBP37.0 million (GBP4.6 million per month) and management
base case consumption of GBP34.4 million (GBP4.3 million per
month).
(2) Total group cash consumption over the same period was GBP59.1
million (GBP7.4 million per month), including over GBP40 million
of funding support to Stobart Air. The Directors are confident
that the strict cash management disciplines now embedded in
the Group will continue.
(3) Tilbury Green Power plant was offline for part of FY20.
7. Dividends and dividend policy
The Group is focused on strengthening its balance sheet and
maximising the capital available for the further development of its
growth businesses. It is therefore the Directors' intention to
retain the Group's cash flow to achieve these objectives. The
Directors intend to review the Company's dividend policy on an
ongoing basis and restore dividends at the point at which the Group
becomes significantly cash generative at an operating level,
subject to investment requirements to maximise shareholder
returns.
In addition, under the terms of the Amended Facility Agreement,
the Company is restricted from paying or declaring dividends whilst
the New Facility remains in place. Dividends from the Borrower
Group to the Wider Group are subject to certain restrictions under
the terms of the Investment (as described in more detail below) and
are not expected to be paid for a number of years.
8. Working Capital
The Prospectus will contain a statement that the Company is of
the opinion that, taking into account the net proceeds of the
Transaction and the New Facility, the Group has sufficient working
capital for its present requirements, that is for at least 12
months from the date of the Prospectus.
Assumptions in respect of the impact of COVID-19
The COVID-19 pandemic and the attendant public health
interventions to combat the virus have caused considerable
disruption to business globally. Whilst considerable progress has
been made globally in seeking to mitigate the effects of the virus,
notably the global vaccination, monitoring and prevention
programmes, the Directors note the seemingly unpredictability of
new strains and outbreaks and consequential impact on national and
international governments' guidelines and policies, plus their
respective public's response to the continually evolving situation.
Consequently, there remains significant uncertainty as to the
continued magnitude and duration of this disruption, particularly
for the aviation sector. In preparing its working capital
statement, the Company has prepared a 'reasonable worst case
scenario' to reflect the continuing impact and outlook of the
COVID-19 pandemic. The uncertainties created by the COVID-19
pandemic make the construction of a 'reasonable worst case
scenario' uniquely challenging.
The Company has made its working capital statement based on a
model that has sufficient headroom to cover the 'reasonable worst
case scenario', which includes the following principal COVID-19
pandemic-related assumptions:
(a) between September 2021 and February 2022, there will be a
gradual resumption of passenger travel, with an average of 38,000
passengers per month, compared to pre-COVID-19 levels of 159,000 in
the corresponding period in FY20;
(b) the phased recovery will continue, with an average of
107,000 passengers per month at London Southend Airport during FY23
and passenger numbers at pre-COVID-19 average run rate by April
2023, compared to pre-COVID-19 levels of 178,000 for the full year
FY20;
(c) as a result of the Aviation-related assumptions discussed
above, for the period March 2021 to February 2022, Stobart Aviation
revenues will be 53 per cent. of the corresponding period in FY20;
and
(d) within Stobart Energy, there will be no further lockdowns
due to COVID-19 that would impact the construction and recycling
sectors.
The working capital statement to be contained in the Prospectus
has been prepared in accordance with the ESMA Recommendations
(ESMA/2013/319), and the technical supplement to the FCA Statement
of Policy published on 8 April 2020 relating to the COVID-19
crisis.
9. Importance of vote
Shareholders are asked to vote in favour of the Resolutions at
the General Meeting in order for the Transaction to proceed. The
Directors believe that successful completion of the Transaction and
the New Facility becoming effective, is required to fund the
Group's short-term working capital requirements, allow the Group to
refinance the Existing Facility, survive the short-term
difficulties through the ongoing COVID-19 crisis and position the
Group to deliver its medium-term growth strategies.
The Group has obtained a deferral of financial covenant testing
from its lending banks under the Existing Facility Agreement from
May 2021 to 31 August 2021. Facility A is fully drawn down at GBP80
million. Drawdowns under Facility B during July and August 2021 are
subject to meeting certain conditions, including the Company's
ability to successfully complete the Transaction on or prior to 31
August 2021 (the "Draw-Stop Date"). The Group has satisfied these
conditions to date and as at 23 July 2021 has drawn down GBP28
million of the GBP40 million available under Facility B in order to
provide working capital for the Group and to maintain cash headroom
up to 28 July 2021 and expects to draw down up to GBP33 million in
aggregate under Facility B by the Draw-Stop Date.
Accordingly, if the Transaction fails to complete, the Lenders
have no obligation to fund any further drawings and there can be no
guarantee that the lending banks will consent to allow further
drawdowns under Facility B beyond the Draw-Stop Date. If they do so
consent, any further access to drawings under Facility B is
expected to be conditional upon the Group seeking to market and
dispose of all or part of the business of the Group on an
accelerated basis. The New Facility is conditional on completion of
the Transaction and the repayment by the Company of all outstanding
amounts under the Existing Facility.
The Company's auditor has included a paragraph in the
independent auditor's reports in respect of the FY20 Financial
Statements and the FY21 Financial Statements stating that there is
material uncertainty in respect of the Company's ability to
continue as a going concern. The COVID-19 pandemic has continued to
significantly impact the Group's revenue and costs in FY21 and the
first five months of FY22, in particular in the Stobart Aviation
business. The COVID-19 pandemic is expected to continue to
significantly impact the Group given the current restrictions and
limitations on both domestic and international air travel. Since
the start of the COVID-19 pandemic, the Group has implemented the
following measures to manage costs and preserve liquidity:
-- The Group has frozen all capital expenditure other than where
it is considered business critical, including being required to
meet regulatory requirements, and has deferred all discretionary
spend.
-- The Group utilised the UK Government's Job Retention Scheme
and initially put approximately 57 per cent. of the Group's more
than 1,550 employees on furlough at its highest in April 2020.
Approximately 243 of its employees remain on furlough or part time
furlough (out of a total number of employees of the Group of 931 as
at June 2021).
-- The Group has reduced employee numbers from 1,482 as at February 2020 to 931 as at June 2021.
-- The Directors and members of the Management Board agreed to
20 per cent. pay reductions and all other non-furloughed management
accepted 10 per cent. pay reductions for six months during
2020.
-- A recruitment freeze was put in place in early March 2020 and
all variable pay awards were deferred during FY21. No annual bonus
scheme has yet been put in place for FY22 other than for Stobart
Energy.
-- The Group has utilised a number of measures made available by
the UK Government to help conserve cash.
If the Capital Raise is not completed by 31 August 2021, the
Amended Facility Agreement will not become effective and the
lending banks may choose to no longer provide financial covenant
waivers or deferrals under the Existing Facility and may not
provide consent to the Company drawing down further funds under
Facility B prior to or beyond the Draw-Stop Date such that the
Group would be unable to meet its liabilities as they fall due,
and, in respect of the financial covenants, an event of default
would immediately occur on 31 August 2021 following which the
lending banks would be entitled to demand immediate repayment of
all outstanding amounts under the Existing Facility Agreement
(which as at 23 July 2021 are GBP108 million and is anticipated to
total GBP113 million by 31 August 2021). Unless the Group is able
to agree short-term relief with the lending banks and certain of
its other stakeholders in order to explore alternative funding
options to refinance the Existing Facility, or dispose of all or
part of the business of the Group in order to generate sufficient
funds to repay the Existing Facility, the Company does not expect
that the Group would be able to obtain the funds necessary to pay
all due amounts under the Existing Facility, and enforcement of the
security granted in favour of the lending banks, together with
Administration (or equivalent local law procedures), would
therefore become reasonably likely for the Company and key trading
companies in the Group at that time.
The Directors believe that any potential remedial actions, such
as disposals of assets, would not be achievable in the required
timeframe. In addition, as the Group has already implemented
significant cost savings following the outbreak of COVID-19, the
Directors believe that no further significant cost savings are
likely possible to avoid Administration (or equivalent local law
procedures) in the event that the Transaction does not successfully
complete.
Consequently, if (i) the Transaction does not successfully
complete and (ii) the Effective Date does not occur in respect of
the Amended Facility Agreement, in each case by the Draw-Stop Date
(or such later date as agreed with the lending banks including the
provision of further funding under Facility B), the Directors
expect that Administration (or equivalent local law procedures) of
the Company and of certain key trading companies in the Group and
enforcement of the transaction security granted in favour of the
Lenders would be reasonably likely shortly thereafter. Shareholders
would likely lose all or a substantial part of their investment in
the Company as a result.
Accordingly, it is critical that Shareholders vote in favour of
the Resolutions, as the Directors consider the Transaction to
represent the best transaction possible for the Company,
Shareholders and its stakeholders as a whole in the current
circumstances.
Even if the Transaction is approved by Shareholders,
management's forecasts show a working capital shortfall of
approximately GBP14 million in February 2023, on a reasonable worst
case scenario basis. This shortfall is principally a result of the
requirement to refinance the New Facility by 1 February 2023. The
Group anticipates incurring additional cash outflow from that date,
pursuant to residual legacy costs relating to Propius, the
liquidation of Stobart Air and the cash impact of identified
sensitivities, and reduced activity levels across all
divisions.
10. Recommendation and voting intentions
The Board believes the Transaction to be in the best interests
of the Company and its Shareholders as a whole. Accordingly, the
Board unanimously recommends that the Shareholders vote in favour
of the Resolutions to be proposed at the General Meeting to approve
the Capital Raise, as the Directors each intend to do in respect of
their own legal and beneficial holdings.
APPIX I
EXTRACTS OF CERTAIN ADDITIONAL INFORMATION TO BE INCLUDED IN THE
PROSPECTUS
I. SUMMARY OF THE KEY TERMS RELATING TO THE INVESTMENT
Part A - Loan Agreement / security arrangements
Loan Agreement
The Loan Agreement includes provisions to the following
effect:
Borrower and Guarantors
The Loan Agreement includes London Southend Airport Company
Limited ("LSA") as the Borrower and Thames Gateway Airport Limited,
Stobart Solar Limited and Stobart Jet Centre Limited as joint and
several guarantors of the Borrower's obligations (together with the
Borrower, the "Obligors").
Principal amount and interest
The principal amount of the available facility as at the Closing
Date (as defined therein) will be GBP125 million.
Interest shall accrue on the outstanding principal amount of the
Loan at a rate of 2 per cent. per annum (the "PIK Interest") and 8
per cent. per annum (the "Cash Interest"). Interest payment dates
will be the fifth Business Day following the end of each interest
period (being a period of 12 months ending on the last day of
February in each year save that the first interest period shall
commence on the Closing Date and shall end on the last day of
February 2022).
PIK Interest accrued during each Interest Period will be added
to the principal amount of the Loan. Cash Interest will only be
payable to CGIOF River S.à r.l. ( the "Lender") out of revenues
generated by the Obligors during the interest period preceding each
interest payment date (after deducting certain expenditure and debt
service charges of the Obligors) and shall only be payable to the
extent that a minimum headroom liquidity requirement is met. Such
minimum headroom liquidity requirement will be met to the extent
that (i) following payment of the accrued Cash Interest on such
interest payment date, and taking into account any other debt
service charges payable on such date, there is a minimum of GBP5
million of cash to be available to the Obligors; and (ii) during
each month of the three-year period following such interest payment
date, there is a minimum of GBP2.5 million of cash (after deducting
anticipated payments of operating and capital expenditure, debt
service and cash taxes) ("Projected Cash") forecast to be available
to the Obligors and when the Projected Cash for each month of such
three-year period is aggregated, the average Projected Cash
available to the Obligors during such period is forecast to be not
less than GBP5 million. To the extent that Cash Interest is not
paid on an interest payment date, the unpaid amount will be added
to the principal amount of the Loan with effect from such date and
interest will accrue on such increased principal amount
thereafter.
Purpose
The Borrower shall apply all amounts borrowed by it under the
Loan in partial repayment of the outstanding intercompany loans
advanced by the Company and Stobart Aviation Limited ("Stobart
Aviation") and settlement of the transaction fees, costs and
expenses of the Lender incurred in entry into this Agreement.
Conditions precedent
The Loan Agreement requires the satisfaction of certain
conditions precedent prior to the Lender being obliged to make the
Loan available to the Borrower. These conditions precedent
include:
-- Customary corporate authorisations for a transaction of this
type, including board resolutions, directors' certificates,
financial statements and constitutional documents.
-- A legal opinion of the legal advisers to the Lender.
-- Duly executed copies of the ancillary transaction documents,
including the Pari Passu Loan, Intercreditor Agreement, Deed of
Indemnity, Shareholders' Agreement, Implementation Agreement, the
document granting the Transaction Security, deed of release of
existing security and utilisation request.
-- Evidence of the approval of the Investment by the Shareholders of the Company.
-- One or more RNS announcements from the Company which together
confirm that (i) the Group has obtained at least GBP60 million of
committed funding of which at least GBP40 million has been raised
by way of the issue of Shares (which requirement will be met by the
net proceeds from the Capital Raise if it is concluded) and no more
than GBP20 million made available pursuant to a committed working
capital facility; (ii) the equity raise has completed; and (iii)
the working capital facility has been entered into and all initial
conditions precedent have been satisfied.
-- Certain other evidence such as a business plan, a cashflow
statement for the period beginning 1 March 2021 and ending on the
business day prior to the Closing Date demonstrating the funding
injected by the Wider Group into the Borrower Group, a steps paper
for the reorganisation of the Obligors into the Borrower Group and
a licence in favour of the Borrower granting an exclusive and
perpetual license to use the trademarks associated with London
Southend Airport.
Undertakings
The Loan Agreement requires the Obligors to comply, with effect
from the Closing Date and for so long as the Loan remains
outstanding, with a number of customary undertakings and covenants,
which are subject to customary materiality qualifications,
exceptions and baskets. These covenants include, among others:
-- restrictions on the nature and amount of financial
indebtedness that may be incurred by the Obligors, including the
requirement to meet certain debt incurrence tests before certain
types of financial indebtedness can be incurred;
-- restrictions on capital and operating expenditure which may
be incurred by the Obligors during the term of the Loan;
-- restrictions on disposals of assets;
-- restrictions on the ability of the Obligors to make dividend
payments, distributions or payments in respect of subordinated debt
unless certain permitted distribution conditions are met; and
-- restrictions on the ability of the Borrower to make material
changes to the terms of reference for the Operational Committee or
establish further committees for managing the Borrower other than
with the prior consent of the Lender.
In addition, there are certain performance related triggers such
that, in the event of underperformance by the Obligors in terms of
passenger numbers using London Southend Airport and/or its
profitability which are not cured within prescribed timeframes, the
Obligors will be subject to certain tighter restrictions and the
Lender will have certain enhanced rights and powers, including
further restrictions with respect to the incurrence of financial
indebtedness, a restriction on all disposals by the Borrower Group
and a restriction on the payment of any distributions, dividends or
in respect of subordinated debt.
Restrictions on transfer
The Loan Agreement includes restrictions on the ability for the
Lender to transfer its rights and obligations under the Loan
Agreement to a third party. The Lender is at all times restricted
from transferring its interest to any entity on the Restricted List
without the prior written consent of the Borrower.
The Lender may transfer its rights without the prior consent of
the Borrower (subject to the Restricted List restrictions) provided
that any transferee accedes to the relevant finance documents,
and:
-- the transferee is an affiliate of the Lender who has (a)
completed any relevant "know your customer" checks requested to
confirm that such transferee is in fact an affiliate; and (b) where
no person, together with any of its affiliates (excluding any
affiliates of the Lender) holds an economic interest (on a look
through basis, whether held directly or indirectly) of more than 49
per cent. of the Lender ; or
-- an event of default under the Loan Agreement has been continuing for more than 70 days; or
-- an event of default has been continuing for fewer than 70
days, but the Lender has accelerated the loan, confirmed that it
will not exercise its conversion right and the Borrower has failed
to repay the Loan within 10 Business Days.
Conversion and redemption rights
Conversion
At any time, prior to the maturity of the Loan, the Lender may
elect, by serving 30 days' notice to the Borrower, to exercise its
conversion right in respect of the Loan so as to convert the
principal amount outstanding under the Loan (including all accrued
interest) into ordinary shares in an amount equal to 29.9999 per
cent. of the fully diluted share capital of the Borrower (which
shall be increased to 30 per cent. following receipt of approval
from the Office of Rail and Road) ("Conversion") . Following
receipt of such notice, the Borrower must issue the shares to the
Lender on the date specified by the Lender (such date being no less
than 60 days following receipt of the notice).
Upon the exercise of its conversion rights, the Lender may
require that the Borrower (a) capitalise certain outstanding
shareholder indebtedness and (b) procure the release of certain
debt guarantees granted in support of indebtedness incurred by the
Wider Group. In the seven months prior to the final maturity of the
Loan, the Lender will indicate its intention to convert the Loan or
require its repayment at maturity at the request of the
Borrower.
At any time following the fifth anniversary of the Closing Date,
the Borrower may provide written notice to the Lender requesting
that the Lender exercise its conversion right. If the Borrower
provides such notice, the Lender shall either consent to the
conversion, at which point the conversion as described above will
occur, or consent to the Borrower repaying the loan in full at the
Repayment Price (as defined below).
Following any conversion of the Loan, the obligations and
liabilities of all parties under the Loan Agreement shall be
discharged in full.
Redemption
To the extent that the Loan remains outstanding, the Borrower is
obliged to repay the Loan in full on the final maturity date, being
seven years from the Closing Date at the Repayment Price, which is
the greater of: (a) the amount which generates a 10 per cent. IRR
for the period from the Closing Date to the repayment date taking
into account as part of the IRR calculation the amounts of all Cash
Interest paid; or (b) GBP193.75 million less the amounts of all
Cash Interest paid prior to the repayment date.
Following the second anniversary of the Closing Date, the
Borrower may elect to repay the Loan in full by serving a notice on
the Lender. Following delivery of such notice, the Lender will then
have a two-month period to elect to exercise its conversion right.
If the Lender does not exercise its conversion right during that
period, the Borrower is required to repay the Loan at the Repayment
Price on or prior to a pre-specified long-stop date.
The Esken Shareholder is required to notify the Lender of any
proposed change of control of the Borrower Group or certain
insolvency events. In respect of any proposed change of control,
the Lender shall have a right of first offer in respect of the
shares in the Borrower. Subject to such right, and following
receipt of such notice, the Lender may serve notice on the Borrower
to either require the Borrower to repay the Loan at the Repayment
Price or exercise its conversion right. If the Lender does not
elect to pursue either option above within two months of being
notified of a proposed change of control, the Borrower may (at its
option) elect to repay the Loan at the Repayment Price and/or
implement the proposed change of control.
If any sum payable to the Lender by the Borrower Group under the
Loan Agreement becomes subject to gross-up or if the Lender claims
any tax-related indemnification from an Obligor the Borrower may
serve notice on the Lender of its intention to repay the Loan in
full at the Repayment Price on or prior to a long-stop date not
more than 6 months following the date of such notice. If, within
two months of receipt of such notice, the Lender does not serve
notice exercising its conversion right, the Borrower shall repay
the Loan in full at the Repayment Price on or prior to the
long-stop date specified in its notice.
Marketing
The Lender is entitled to informally approach investors in the
market with a view to determining the potential value of a sale of
its stake in the Borrower if it exercised its conversion right
subject to certain restrictions on the number of investors that can
be approached and the scope of information that can be shared with
such investors (and any commercially sensitive information shared
will be subject to the terms of access that the board of the
Borrower shall reasonably determine).
The Borrower will use its reasonable endeavours to procure that
its management shall, upon request from the Lender, provide
reasonable assistance in preparing and providing non-public
information to be shared with such limited number of investors,
provided that any non-public information shared will be subject to
appropriate confidentiality undertakings.
Emergency Funding
The Loan Agreement includes the ability for the Borrower to
submit a notice to the Lender and the Esken Shareholder specifying
that certain emergency funding situations (including urgent
liquidity requirements and events of default occurring under any of
the Borrower's other financing) may arise (or have arisen).
Following submission of such notice, the Borrower may seek
cost-effective third-party financing to remedy such situation. If
the Borrower is unable to secure such financing or considers it to
not be cost-effective, the Borrower may submit a request to the
Lender and the Esken Shareholder to provide such emergency funding.
The Lender and the Esken Shareholder shall notify the Borrower
whether they are prepared to participate and on what terms. The
Borrower shall notify both the Lender and the Esken Shareholder
which terms it is willing to agree to and the other shall be given
the opportunity to match such terms. If insufficient funding is
offered by one party, the other party may elect to provide the
shortfall. Up to GBP10 million of emergency funding may rank senior
to the secured senior liabilities, including the Loan and the Pari
Passu Loan (as set out in the Intercreditor Agreement). Any excess
shall be subordinated to such secured senior liabilities.
Governance
Committees
Under the Loan Agreement, the Borrower shall undertake to
establish an operational committee (the "Operational Committee")
responsible for the day-to-day decision making of the Borrower
Group with delegated authority from the board of the Borrower with
effect from the Closing Date.
The Esken Shareholder will undertake that it will establish a
strategic committee for shareholder-level discussions (the
"Strategic Committee") in accordance with the terms set out in the
Shareholders' Agreement.
Further details on the governance of the Borrower is set out in
the section relating to the Shareholders' Agreement below.
Underperformance events
On the occurrence of certain trigger events related to
underperformance with respect to passenger numbers at and/or
profitability of London Southend Airport at various test dates
(commencing in August 2022), the following shall occur:
-- a revised business plan and annual budget shall be agreed
between the Lender and the Esken Shareholder; and
-- the Lender may commission an independent review to ascertain
the causes of the relevant underperformance and the Lender and the
Esken Shareholder shall meet to consider whether any management
changes ought to be implemented.
In the event such underperformance is not cured within a set
time period (which shorten depending on the severity of the
underperformance), additional restrictions shall apply to the
Obligors (including those outlined in the "Undertakings" above),
the Lender may appoint additional non-executive directors to the
Borrower's board (providing that the Lender's representatives
remain a minority) and the Lenders and the Esken Shareholder shall
promptly meet to discuss senior management changes and, if
considered appropriate, a replacement process shall ensue as part
of which the Lender shall have a deciding right in respect of
replacement of the CEO and/or Finance Director of the Borrower.
Insolvency Event in relation to a Material Person
Following the appointment of an insolvency officeholder in
respect of any of the Company, the Esken Shareholder and any
intermediate holding company between the Company and the Esken
Shareholder (each, a "Material Person") (an "Insolvency Event"),
and until such time as either such Insolvency Event has ceased or a
change of control has occurred such that the Borrower is no longer
controlled by a person subject to an Insolvency Event (whichever is
earlier), the Lender shall have the right to appoint the minimum
number of:
-- directors to constitute the majority of the board of the Borrower; and
-- members of the sub-committees of the Borrower (including the
Operational Committee) to constitute the majority of such
sub-committees.
In the event that the Lender does appoint a majority of the
board of the Borrower following the occurrence of an Insolvency
Event in respect of a Material Person, the Lender shall procure
that:
-- no action or decision is taken in respect of any matters
which are "Reserved Matters" under the Shareholders' Agreement
without the prior consent of at least one director appointed by
each of the Lender and the Esken Shareholder; and
-- no material updates or amendments are made to the then
current Business Plan and Annual Budget without the consent of the
directors appointed by the Esken Shareholder.
Right of First Offer
In certain circumstances relating to transactions which might
give rise to a change of control of the Borrower, the Lender shall
have the right to (i) demand repayment at the Repayment Price, or
(ii) exercise its conversion rights and / or (iii) make an offer to
Esken and the Esken Shareholder to acquire the shares held by the
Esken Shareholder in the Borrower on the same terms implied by the
transaction leading to the change of control, which Esken and the
Esken Shareholder may choose to accept.
Events of Default
The Loan Agreement contains certain customary events of default
(subject in certain cases to agreed grace periods, thresholds and
other qualifications), including, for example, non-payment, breach
of obligations and a cross-default to other financial indebtedness
which ranks senior to liabilities under the Loan Agreement of any
member of the Borrower Group.
Following the occurrence of an event of default, the Lender
shall have 60 days from the date of such occurrence to either
exercise its conversion right in respect of the Loan or to require
that the Borrower repay the Loan in full at the Repayment Price
and/or take enforcement action with respect to the transaction
security. If within 90 days of such occurrence, the Lender has
neither exercised its conversion right nor demanded repayment at
the Repayment Price, nor granted a waiver in respect of the event
of default, the Borrower shall be entitled to repay the Loan at the
Repayment Price.
To the extent that, following the occurrence of an Event of
Default, the Lender has elected to require that the Borrower repay
the Loan in full at the Repayment Price and/or take enforcement
action, the Lender may require that the Borrower (a) capitalise
certain outstanding shareholder indebtedness and (b) procure the
release of certain debt guarantees granted in support of
indebtedness incurred by the Wider Group, to the extent that such
capitalisation and/or release is required to order that the Lender
recover the Repayment Price.
Security Agreement
The obligations of the Obligors under the Loan Agreement and
related finance documents will be secured in favour of the Security
Agent by the security granted under an English-law governed
security agreement to be dated the Closing Date creating fixed and
floating security as applicable over substantially all of the
assets of the Obligors save for certain assets where the consent of
a third party is required to be obtained in order for such security
to be granted or such rights to be assigned (as the case may be),
in relation to which the Borrower will use reasonable endeavours to
obtain such consent as soon as reasonably practicable.
Part B - Summary of the Shareholders' Agreement
The Shareholders' Agreement will be signed on Closing of the
Investment, with certain limited provisions taking effect at
Closing and all other provisions taking effect on Conversion. A
summary of the Shareholders' Agreement is as follows:
Investors
The Shareholders' Agreement is between LSA, Stobart Aviation
Limited (a wholly-owned subsidiary of the Company) (in that
capacity, the "Esken Shareholder") and the Lender (in that
capacity, the "CGI Shareholder"), and governs the relationship
between the Esken Shareholder and the CGI Shareholder as investors
in LSA. The business of the Borrower Group is specified as the
business: (i) operated by the Borrower Group as at the Closing
Date; and (ii) of owning, operating and developing London Southend
Airport (including, without limitation, provision of facilities for
and connected with aeronautical activities and commercial
activities including retail, car parks, jet centres, advertising
and surface transport and the development thereof).
Issue of shares
Following Conversion, any shares in LSA can only be issued with
the consent of the Esken Shareholder (whilst the Esken Shareholder
holds at least 50 per cent. of the shares in LSA) and on a
pre-emptive basis to the CGI Shareholder and the Esken Shareholder
pro rata to their equity proportions.
General governance
Board of LSA
Following Conversion, the board of LSA will be increased up to
seven members. Subject to the consequences of a Material Person
Insolvency Event outlined below, the CGI Shareholder will be
entitled to appoint and remove up to two directors (while it holds
30 per cent. or less of the shares in LSA, and if it holds more
than 30 per cent. of shares, it shall be entitled to appoint such
number of directors equivalent to its equity proportion) who must
have relevant experience in the airport or aviation sector and who
must each be approved by the Esken Shareholder (the "CGI
Directors"). The Esken Shareholder shall be entitled to appoint at
least four directors (for so long as it holds a majority of shares
in LSA), and if it no longer holds a majority of shares, it shall
be entitled to appoint such number of directors equivalent to its
equity proportion (the "Esken Directors"). The Esken Shareholder
and CGI Shareholder shall jointly be entitled to appoint at least
one independent non-executive director who must have relevant
experience in the airport or aviation sector. The rights of the CGI
Shareholder in this respect, and in relation to the other
governance rights referred to below, shall subsist for so long as
it holds at least 25 per cent. of the shares in the Borrower. The
rights of the Esken Shareholder in this respect shall subsist for
so long as it remains, in some circumstances, the holder of the
majority of shares in LSA and in certain other respects for so long
as it holds at least 25 per cent. of the shares in LSA. For the
avoidance of doubt, the CGI Shareholder does not have a right or
option exercisable at its sole discretion under the Shareholders'
Agreement to increase its stake in LSA.
The chair of the board of LSA shall be appointed from the Esken
Directors, whilst the Esken Shareholder remains the largest
shareholder in LSA, but shall not have a casting vote. The quorum
for board meetings shall in most circumstances be at least three
directors, including at least two Esken Directors and one CGI
Director, except at a meeting which has been adjourned and
reconvened twice, in which case the quorum shall be at least three
directors, including at least two Esken Directors.
Each director of LSA shall be entitled to cast one vote, unless
that director has a conflict of interests. However, if the CGI
Shareholder or the Esken Shareholder elects to appoint fewer CGI
Directors or Esken Directors (as applicable) than it is entitled to
appoint pursuant to the Shareholders' Agreement, then the CGI
Directors or Esken Directors (as applicable) shall be entitled to
exercise such number of votes as would have been held by the CGI
Directors or Esken Directors (as applicable) if the maximum number
of CGI Directors or Esken Directors (as applicable) was appointed
pursuant to the Shareholders' Agreement.
Board meetings will take place at least quarterly every
financial year, and the chair of Esken Limited and any executive
director of Esken Limited is permitted to attend such board
meetings (whilst the Esken Shareholder holds at least 25 per cent.
of the shares in LSA).
CGI Observer rights
The CGI Shareholder is entitled to nominate one CGI Director to
attend any board meeting of any Borrower Group company without any
voting rights, provided that it holds at least 25 per cent. of the
shares in LSA.
Operational Committee
At Closing, the Esken Shareholder will establish an Operational
Committee, which will be responsible for the day to day management
of the Borrower Group. The Operational Committee will comprise of
nine members, including two members appointed by the CGI
Shareholder, two members which comprise the existing directors of
LSA (prior to Conversion) or the Esken Directors (following
Conversion) and five members from the senior management of LSA,
comprising the chief executive, finance director, chief operations
officer, business development director and one other member of
senior management of LSA nominated for such purposes by the chief
executive of LSA.
The Operational Committee will take decisions via majority
vote.
The chair of the Operational Committee shall be appointed from
the senior management members but shall not have a casting vote.
The quorum for Operational Committee meetings shall be at least
three members, including at least two senior management members and
one member appointed by the CGI Shareholder, except at a meeting
which has been adjourned and reconvened twice, in which case the
quorum shall be at least three members, including two senior
management members.
Operational Committee meetings shall take place at least
monthly, and as more frequently as required for the management of
LSA. The chair of Esken Limited and any executive director of Esken
Limited may attend any Operational Committee meeting at any
time.
The Esken Shareholder is entitled to nominate one observer to
attend any Operational Committee meeting of LSA, provided that it
holds at least 25 per cent. of the shares in LSA.
The CGI Shareholder is entitled to nominate one observer to
attend any Operational Committee meeting of LSA where the business
plan and annual budget is discussed, provided that it holds at
least 25 per cent. of the shares in LSA.
Appointment of Chief Executive
For so long as the Esken Shareholder holds more than 50 per
cent. of the shares in LSA, the chief executive of LSA will be
appointed and may be removed at any time by the Esken Shareholder,
provided that the Esken Shareholder shall consult with the CGI
Shareholder and take into account the CGI Shareholder's reasonable
comments in relation to any appointment or removal of the chief
executive of LSA. The Esken Shareholder will consult with the CGI
Shareholder on the proposed remuneration of any proposed chief
executive of LSA.
General Meetings
LSA general meetings shall be conducted in accordance with the
articles of association of LSA. A quorum shall only be present if
at least one representative from both the Esken Shareholder and the
CGI Shareholder are present for so long as the CGI Shareholder
holds at least 25 per cent. of the shares in LSA.
Strategic Committee
From Closing, the parties will establish the Strategic Committee
to accommodate discussions between the Esken Shareholder and the
CGI Shareholder for so long as the CGI Shareholder holds at least
25 per cent. of the shares in LSA. Each of the Esken Shareholder
and the CGI Shareholder has up to two appointed representatives on
the Strategic Committee. The quorum for any meeting of the
Strategic Committee is one representative appointed by the Esken
Shareholder and one representative appointed by the CGI
Shareholder.
Investor Conflicts
In the event any of the Esken Shareholder or the CGI Shareholder
or any of their affiliates are involved in litigation or other
legal proceedings against LSA, that party will not be permitted be
counted in the quorum in respect of any general meeting or
Strategic Committee meeting (and the quorum requirement shall be
adjusted as necessary so as not to require the presence of the
conflicted shareholder), nor to vote on that matter at any general
meeting or Strategic Committee meeting (and the non-conflicted
Investor shall be entitled to exercise the votes of any conflicted
Investor) and to the extent that this matter is an Investor Matter
(as defined below), it will be deemed not to require the consent of
that conflicted shareholder.
Reserved Matters
Following Conversion, certain matters are designated as reserved
matters under the Shareholders' Agreement, which require consent
either from CGI Directors and Esken Directors ("Board Matters") or
from the CGI Shareholder and the Esken Shareholder ("Investor
Matters").
Board Matters cover (amongst other matters) incurrence of
borrowings and debt (excluding certain debt which is deemed to be
permitted financing), entry into material contracts, incurrence of
capital expenditure (excluding certain capital expenditure which is
deemed permitted), acquisitions or disposals of intellectual
property rights, actions taken in relation to legal proceedings
with a value of GBP5 million and above or incurrence of material
operating expenditure.
Investor Matters cover (amongst other matters) amendments to the
constitutional documents of the Borrower Group, changes in the
share capital of LSA, changing the nature of the business of LSA,
the Borrower Group making material acquisitions or disposals or
entering into partnerships or joint ventures, the winding up of any
Borrower Group company or entry into certain related party
transactions with investors.
Deadlock
The Shareholders' Agreement includes provisions for resolving a
deadlock ("Deadlock"), which occurs when any reserved matter is
proposed at two consecutive board meetings, Strategic Committee
meetings or general meetings, but is not approved, the LSA board
fails to approve a Subsequent Business Plan or Annual Budget, a
quorum is not present at two consecutive Strategic Committee
meetings, general meetings of the holders of shares in LSA, LSA
board meetings or Operational Committee meetings due to the same
investor (or its directors) failing to attend, or an investor gives
notice that there is a fundamental difference in opinion relating
to the strategy for LSA or the business intended to be carried out
by the Borrower Group (the "Business"), or other circumstances
which seriously threatens the relationship of the shareholders in
relation to the Business.
If a Deadlock occurs, any investor may serve notice on the other
investor stating that a Deadlock has arisen. If a Deadlock cannot
be resolved through amicable negotiation between the interested
parties within 10 Business Days from and including the date on
which a deadlock notice is received, the matter shall be referred
to appointed representatives of each of the investors, who will
attempt in good faith to resolve the Deadlock. If the Deadlock
cannot be resolved through negotiation between the appointed
representatives of the investors within 10 Business Days from and
including the date of the referral, the parties will attempt to
resolve the Deadlock through mediation. If the Deadlock cannot be
resolved by mediation within 20 Business Days following the date of
appointment of the mediator, the status quo shall continue to
apply.
Business Plan and Annual Budget
The initial long-term business plan (the "Initial Business
Plan") and budget (the "Initial Annual Budget") for the Borrower
Group has been agreed between the Esken Shareholder and the CGI
Shareholder and will be adopted by LSA immediately prior to
drawdown of the Loan by LSA. The initial business plan will cover a
seven-year period commencing with the financial year in which the
Shareholders' Agreement is entered into.
Each year the Operational Committee will prepare an update to
the previous year's business plan (a "Subsequent Business Plan"). A
draft of a Subsequent Business Plan will be circulated to each
member of the LSA board at the same time as it is circulated to the
CGI Shareholder (as applicable), the Esken Shareholder and Esken
Limited (as applicable), and each member of the LSA board will have
the opportunity to review and comment on the draft.
LSA shall use all reasonable endeavours to procure that, by no
later than 15 days prior to the end of each financial year, the LSA
board will have approved a revised draft of the annual budget (to
be prepared by the Operational Committee) for the Borrower Group
covering the twelve-month period commencing at the start of the
following financial year to replace the prior existing annual
budget (the "New Annual Budget").
Any Subsequent Business Plan or New Annual Budget may only be
adopted by a majority vote of the LSA board and approval from the
board of Esken Limited while Esken Limited remains a listed entity.
Following Conversion, if Esken Limited is delisted, any Subsequent
Business Plan or Subsequent Annual Budget may only be adopted by a
majority vote of the LSA board and approval from the Esken
Shareholder and the CGI Shareholder. Any material amendment of the
Business Plan or the Annual Budget shall require a majority vote of
the LSA board.
LSA agrees that it will act in a commercially reasonable manner
when setting and approving any Subsequent Business Plan and/or New
Annual Budget and take into account (i) the aim to balance
operating expenditure and capital expenditure needs over the
relevant period with the then current and forecast passenger
numbers, and revenue growth, and recognising that (A) any growth
capital expenditure will be related to and supported by forecast
passenger numbers and related revenue generation and (B) the
current infrastructure of London Southend Airport can support up to
3 million passengers and any increase in passenger capacity beyond
3 million would require significant capital expenditure to be
undertaken; (ii) all commercially reasonable comments on it from
the CGI Shareholder at the time when it is being discussed/settled
at the operations committee/board of LSA; and (iii) the Financial
Principles and other obligations of the Borrower Group.
Based on the information currently available to LSA, the Esken
Shareholder and the CGI Shareholder, the joint view of LSA, the
Esken Shareholder and the CGI Shareholder as at the Closing Date is
that commencing construction on certain key projects prior to the
passenger numbers for the preceding 12 months being at or above the
numbers set out in certain investment principles appended to the
Shareholders' Agreement would (for this purpose) be commercially
unreasonable.
Escalation procedure
In the event that the CGI Shareholder determines (acting
reasonably) that any proposed Subsequent Business Plan or New
Annual Budget is not commercially reasonable, it may, to the extent
that any such concerns are not resolved in the ordinary course
monthly meetings of the Operational Committee/the board meetings of
LSA:
(a) deliver to the Esken Shareholder notice of its concerns
following which a meeting of the Strategic Committee will be
formally convened as soon as is reasonably practicable to discuss
such concerns with a view to resolving them;
(b) if the Esken Shareholder and the CGI Shareholder are unable
to reach agreement as to the commercial reasonableness of the
proposed Subsequent Business Plan and/or New Annual Budget within
15 Business Days of the meeting of the Strategic Committee or
resolve the concerns raised, the CGI Shareholder may request that a
board meeting of Esken Limited be convened at which representatives
of the CGI Shareholder shall be entitled to discuss their concerns
with the board of Esken Limited with a view to resolving such
concerns; and
(c) if, notwithstanding the meetings in paragraphs (a) and (b)
above, the Esken Shareholder wishes to continue with the proposed
Business Plan and/or Annual Budget, then the matters in dispute may
be referred (on the application of either the Esken Shareholder or
the CGI Shareholder) for review by an independent mediator in
accordance with a mediation process provided that the outcome of
the review as to commercial reasonableness of the relevant matters
in dispute by such mediator shall not be binding on either LSA or
the Esken Shareholder.
Failure to approve Business Plan or Annual Budget
If the LSA board fails to approve a Subsequent Business Plan or
a New Annual Budget, the Business Plan or Annual Budget (as
applicable) then in force shall continue to apply, and LSA shall
continue to comply with those provisions of the Business Plan or
Annual Budget (as applicable) as applicable to the relevant
financial year, with the only updates being adjustments by
reference to the Consumer Price Index (as published from time to
time) to the previous Business Plan or Annual Budget, until such
time as a Subsequent Business Plan or Annual Budget (as applicable)
is approved.
If the Company ceases to be a listed entity (including for
example following a takeover of the Company), any Subsequent
Business Plan or New Annual Budget must be approved by: (i) a
majority vote of the board of directors of the LSA; and (ii) each
of the shareholders of LSA which hold at least 25 per cent. of the
shares in LSA.
Transfers of shares
Save with prior written consent of the Esken Shareholder, the
CGI Shareholder may not make any transfer of shares in LSA save for
certain circumstances expressly permitted by the Shareholders'
Agreement (as described below).
No transfer of LSA shares may be made by the CGI Shareholder
unless prior consent from the Esken Shareholder has been received,
except for the following:
-- a transfer to an affiliate which is not a Restricted Person
(provided that: (i) such affiliate is, or is majority-owned by, a
fund or funds which is managed and advised by Carlyle Investment
Management L.L.C. (or its affiliates) (each a "CGI PAT Fund"); (ii)
the CGI Shareholder's Approved Parent controls the affiliate and,
if the affiliate is not a CGI PAT Fund, the CGI PAT Fund(s); and
(iii) no person, together with any of its affiliates (excluding any
affiliates of the CGI Shareholder) holds an economic interest (on a
look-through basis, whether held directly or indirectly) of more
than 49 per cent. of the CGI Shareholder;
-- a transfer required to reverse a previous transfer made in
breach of the Shareholders' Agreement;
-- a transfer permitted by the Shareholders' Agreement in
relation to the right of first refusal, drag-along and tag-along
rights (as further described below);
-- a transfer made as part of the implementation of an exit
approved by both the CGI Shareholder and the Esken Shareholder from
the investment (whether through an IPO or a sale); or
-- a transfer made in accordance with the option to purchase right referred to below.
Save with prior written consent of the Esken Shareholder, the
CGI Shareholder may not transfer any LSA shares to any person
(each, a "Restricted Person"):
-- who is subject to certain insolvency events;
-- unless the CGI Shareholder has provided any "know your
customer" information and evidence reasonably requested by LSA to
enable LSA to satisfy itself (acting reasonably) with respect to
all relevant reasonable "know your customer" requirements relating
to such person;
-- who directly or indirectly, holds an interest exceeding 10
per cent. (excluding any limited partnership interests or any other
interest in which such person does not exert control or influence)
in the following airports: Gatwick Airport, London City Airport,
Luton Airport and Stansted Airport; or
-- who is on the Restricted List.
If the Esken Shareholder transfers any of its LSA shares, the
transferee must accede to relevant documentation to become subject
to the same provisions as the Esken Shareholder, and if the
transferee is a person that is not part of the Esken Group, the
Esken Shareholder must have complied with the right of first
refusal and tag-along rights set out below. The Esken Shareholder
may not transfer shares to any person that is subject to certain
insolvency events or who the Esken Shareholder has not provided
"know your customer" information and evidence reasonably requested
by the CGI Shareholder to enable the CGI shareholder to satisfy
itself (acting reasonably) with respect to all relevant reasonable
"know your customer" requirements relating to such person, in each
case without the CGI Shareholder's prior consent.
Save with prior written consent of the CGI Shareholder, the
Esken Shareholder may not transfer any LSA shares to any
person:
-- who is subject to certain insolvency events; or
-- with respect to whom all relevant reasonable 'know your
customer requirements' for the CGI Shareholder have not been
satisfactorily completed.
Sale by the CGI Shareholder
Subject to the right of first refusal below, the CGI Shareholder
is permitted to sell all (but not some) of its LSA shares to a
third party who is not a Restricted Person following the second
anniversary of the drawdown of the Loan provided Conversion has
occurred. The CGI Shareholder shall consult with the Esken
Shareholder as to the identity of the proposed third party before
implementing any such sale. The Esken Shareholder will procure that
LSA's management provides the CGI Shareholder with such reasonable
assistance in any sale process as the CGI Shareholder may
reasonably request (provided any reasonable third party expenses
are borne by the CGI Shareholder).
Right of first refusal
Where either investor proposes to transfer any of its LSA shares
to a third party, that investor will notify the other investor
prior to signing any agreement relating to such transfer. The
transferring investor must first make an offer to the other
investor to acquire the shares being transferred at such price and
on such terms as the transferring investor proposes in cash. If the
notified investor does not accept the transferring investor's offer
within one month, the transferring investor may agree to sell the
relevant shares offered for transfer to any person at a price
equivalent to no less than 100 per cent. of the transferring
investor's offer and otherwise on customary terms for any such
sale, subject to the definitive agreement for such sale being
entered into within six months after the initial notice of proposed
transfer.
Drag-Along rights
Where the Esken Shareholder proposes to transfer LSA shares
amounting to a majority interest in LSA to a third party and the
CGI Shareholder has not exercised its right of first refusal as set
out in the section entitled "Right of first refusal" above or its
tag-along right as set out in the section entitled "Tag along
rights" below, the Esken Shareholder shall have the right to
require the CGI Shareholder to transfer all (but not some only) of
the shares held by it and its permitted affiliate transferees to
the transferee, at the same price (such price to be payable in
cash) and on the same terms and conditions as the proposed transfer
of shares by the Esken Shareholder to the transferee, by giving
written notice to that effect to the CGI Shareholder accompanied by
copies of all documents necessary to be executed by the CGI
Shareholder to give effect to the transfer of its shares to the
third party.
The minimum price at which the CGI Shareholder shall be required
to transfer its shares shall be a cash amount equal to the greater
of (i) 3x multiple on invested capital and (ii) such amount as
would give the CGI Shareholder 16 per cent. IRR, calculated based
on the initial principal amount of the Loan on the Closing Date.
The minimum price at which any third party of the shares previously
held by the CGI Shareholder shall be required to transfer its
shares shall be a cash amount equal to a 16 per cent. IRR
calculated based on the purchase price of the shares from the CGI
Shareholder.
Tag-Along rights
Where the Esken Shareholder proposes to enter into a transaction
pursuant to which it, or another member of the Group, agrees to
transfer shares in LSA to any person outside the Group (such person
being a "Third Party Purchaser") (a "Third Party Transaction")
which would result in a Third Party Purchaser and/or any affiliate
or any other person known by the Esken Shareholder to be acting on
behalf of the Third Party Purchaser (a "Related Third Party")
(together or separately) acquiring a majority interest in LSA
(taking into account any additional Third Party Transaction either
with the same Third Party Purchaser or with a Related Third Party
(a "Related Transaction")), the Esken Shareholder shall not
complete such Third Party Transaction (or in the case of a series
of Related Transactions, the last Related Transaction) unless it
first ensures that the Third Party Purchaser and/or the Related
Third Party (as applicable) makes a separate offer to the CGI
Shareholder to buy all of the shares held by the CGI Shareholder at
the same price (with the alternative of a cash-equivalent of such
price if for non-cash) and on the same terms and conditions of the
proposed Third Party Transaction (or in the case of a series of
Related Transactions: (i) the weighted average price across the
Third Party Transaction and the series of Related Transactions; and
(ii) the best terms and conditions applicable to any of the Third
Party Transaction and the Related Transactions) (a "Tag Along
Offer").
If the CGI Shareholder accepts such Tag Along Offer then its
shares shall be transferred to the Third Party Purchaser at the
same time as the shares held by the Esken Shareholder are so
transferred. If the CGI Shareholder does not accept the Tag Along
Offer within 30 days it shall lapse.
Marketing
The CGI Shareholder is entitled to, following the second
anniversary of the drawdown of the Loan provided Conversion has
occurred, informally approach investors in the market with a view
to determining the potential value of a sale of its stake or a
syndication of an indirect interest in LSA subject to certain
restrictions on the number of investors that can be approached and
the scope of information that can be shared with such investors
(and any commercially sensitive information shared will be subject
to the terms of access that the senior management members of the
Operational Committee shall determine).
LSA will use its reasonable endeavours to procure that its
management shall, upon request from the CGI Shareholder, provide
reasonable assistance in preparing and providing non-public
information to be shared with such limited number of investors,
provided that any non-public information shared will be subject to
appropriate confidentiality undertakings.
Option to Purchase in the event of a default
Each of the following events shall be a Material Default with
respect to the relevant investor:
(a) the party or any member of its group transferring
Shareholder Instruments otherwise than in accordance with the
Shareholders' Agreement or failing to complete or procure the
completion of a required transfer of Shareholder Instruments in
accordance with the Shareholders' Agreement;
(b) the party failing to provide any reasonable information and
evidence in relation to the transfer or issue of Shareholder
Instruments requested pursuant to the Shareholders' Agreement;
or
(c) the party or any of its affiliates breaching the
restrictions set out in the Restrictive Covenant Side Letter (as
defined herein).
In the event of any of the following:
(a) a Material Default;
(b) an Insolvency Event of the CGI Shareholder or any other
investor other than the Esken Shareholder;
(c) the appointment of a liquidator, trustee in bankruptcy,
receiver, administrator, compulsory manager or other similar
officer of a Material Person (a "Material Person Insolvency
Event");
(d) the Company ceasing to control the Esken Shareholder, and
the appointment of an administrator, liquidator, compulsory manager
or other similar officeholder over the Company shall not in itself
constitute a cessation of control of Esken Limited over the Esken
Shareholder;
(e) the Company ceasing to be the beneficial owner (directly or
indirectly through wholly-owned Subsidiaries) of the majority of
the issued share capital of the Esken Shareholder;
(f) Carlyle Investment Management L.L.C. (or its affiliates)
ceasing to be adviser and manager to Carlyle Global Infrastructure
Opportunity Fund, L.P. or such other funds which, individually or
together, majority-own (directly or indirectly) the CGI Shareholder
(each a "Carlyle Fund");
(g) The Carlyle Group Inc. ceasing to control the CGI
Shareholder or the Carlyle Funds;
(h) Carlyle Funds ceasing to, individually or together,
majority-own (directly or indirectly) the CGI Shareholder;
(i) any person, together with any of its affiliates, (excluding
any affiliates of the CGI Shareholder) holding an economic interest
(on a look-through basis, whether held directly or indirectly) of
greater than 49 per cent. of the CGI Shareholder);
(j) any entity on the Restricted List acquiring any interest or
ownership in (i) the CGI Shareholder or (ii) any entity which holds
an interest or ownership in the CGI Shareholder and is Controlled
by the CGI Shareholder's Approved Parent, in each case otherwise
than through being a limited partner; or
(k) for so long as the Esken Shareholder Controls LSA, LSA
disposing of Material Assets without the Requisite Approval,
(each a "Trigger Event"), the relevant party shall notify the
other investor.
The shareholder in respect of which the Trigger Event applies
will have one month from such notification to rectify the Trigger
Event (if possible). If, after one month, the Trigger Event has not
been rectified or persists, the other shareholder may then exercise
an option to purchase all (but not only some) of the shares held by
the shareholder in respect of which the Trigger Event applies, at
fair market value, which is determined by an independent valuation
(at the cost of LSA).
Upon the occurrence of a Trigger Event set out in (b), (c) and
(j) above until the earlier of the date on which such Trigger Event
is rectified or (i) in the case of the Trigger Events in (b) and
(j), if applicable, the date of expiry of the right to purchase
period set out in the Shareholders' Agreement; and (ii) in the case
of the Trigger Events in (c), if applicable, the date on which a
Material Person Insolvency Event Cessation Event occurs, the
affected investor shall cease to have any rights:
(a) to vote at any LSA board meeting, Operational Committee
meeting and Strategic Committee meeting (as applicable);
(b) to otherwise give its consent in respect of any Reserved
Matter (and where a vote to be taken on any Reserved Matter the
votes attributable to the equity proportion of the affected
investor shall be allocated to the other investor); and
(c) to certain information and access granted under the Shareholders' Agreement.
Upon the occurrence of a Trigger Event set out in (a), (b), (c)
and (j) above until the earlier of the date on which such Trigger
Event is rectified or (i) in the case of the Trigger Events set out
in (a), (b) and (j), if applicable, the date of expiry of the Right
to Purchase Period; and (ii) in the case of the Trigger Events set
out in (c), if applicable, the date on which a Material Person
Insolvency Event Cessation Event occurs, the pre-emption rights,
the right of first refusal and the emergency funding procedure
shall cease to apply in favour of the affected investor.
Upon the occurrence of the Trigger Event set out in (c) above
until the earlier of the date on which such Trigger Event is
rectified or the date on which a Material Person Insolvency Event
Cessation Event occurs:
(a) the right of the Esken Shareholder to appoint and remove the
majority of the Board shall cease to apply;
(b) the right of the Esken Shareholder to appoint and remove the
chief executive of LSA shall cease to apply, provided that the CGI
Shareholder shall consult with the Esken Shareholder and take into
account the Esken Shareholder's reasonable comments in relation to
any appointment or removal and on the proposed remuneration of the
chief executive; and
(c) the right of the Company to approve any Subsequent Business
Plan and Annual Budget under the Shareholders' Agreement shall
cease to apply, provided that (i) LSA agrees that it will take into
account all commercially reasonable comments on any Subsequent
Business Plan and Annual Budget from the Esken Shareholder; and
(ii) the escalation procedure as set out in the section titled
"Escalation Procedure" above will be available in favour of the
Esken Shareholder in the event that the Esken Shareholder
determines (acting reasonably) that any proposed Subsequent
Business Plan or Subsequent Annual Budget is not commercially
reasonable.
Emergency Funding (post-Conversion)
If, following Conversion, the board of LSA, acting in good faith
and first having considered all reasonable and practical
alternatives in the circumstances, considers that there is a
material risk of an emergency funding situation arising (an
"Emergency Funding Situation"), the board will promptly deliver to
the Esken Shareholder and the CGI Shareholder notice of the
circumstances giving rise to the Emergency Funding Situation (an
"Emergency Funding Notice"), and together with such notice or as
soon as practicable thereafter, details of any proposed fundraising
from LSA, in the form of an issue or grant of Shareholder
Instruments.
If the LSA board serves an Emergency Funding Notice on the Esken
Shareholder and the CGI Shareholder, it may resolve to issue or
grant New Shareholder Instruments to investors on a pre-emptive
basis or incur financial indebtedness provided that an Emergency
Funding Situation has arisen.
If the LSA board resolves that an event is an Emergency Funding
Situation it may raise such Emergency Funding (through the issue or
grant of only such number of New Shareholder Instruments or
incurrence of financial indebtedness) as would, in its reasonable
opinion, cure or avoid the relevant Emergency Funding
Situation.
The Esken Shareholder and the CGI Shareholder will first be
offered an opportunity to either subscribe, on the same terms, pro
rata to their equity proportions, for all or some of such New
Shareholder Instruments in accordance with a pre-emption procedure
or to commit to providing any financial indebtedness calculated by
reference to their equity proportion.
If one shareholder does not fully participate in the issue of
the New Shareholder Instruments in such an Emergency Funding
Situation, it shall be given a period following their issue to
exercise a catch-up option to acquire New Shareholder Instruments
from the other investor such that the shareholders return to their
equity proportions as they had been prior to the issue of the New
Shareholder Instruments.
If the funding offered by the shareholders is insufficient, in
aggregate, to cure or avoid the relevant Emergency Funding
Situation then LSA shall seek any shortfall in the Emergency
Funding from third parties, subject to the reserved matters.
Restrictive covenant
The Company, the Esken Shareholder, CGIOF GP L.L.C. and the CGI
Shareholder have also agreed in a separate side letter to the
shareholders' agreement that neither it (nor certain of its
affiliates) shall (without the prior consent of the other
investor):
-- compete with the Business; or
-- in the case of the CGI Shareholder and CGIOF GP L.L.C. only,
directly or indirectly solicit or entice away or endeavour to
solicit or entice away from the Borrower Group or the Group any
Senior Employee (subject to certain customary exceptions) (the
"Restrictive Covenant Side Letter").
For the purposes of this section, "compete" means to directly or
indirectly hold an interest exceeding 10 per cent. of the shares,
equity or voting rights (excluding any limited partnership
interests or any other interest in which such person does not exert
control or influence) in the ownership, operation and/or
development of any of the following airports: Gatwick Airport,
London City Airport, Luton Airport and Stansted Airport (whether
alone or jointly with others, whether as principal, agent,
shareholder or otherwise and whether for its own benefit or that of
others).
The letter shall automatically terminate on the first date to
occur of the following:
-- in respect of an investor and its affiliates who are party to
the letter, the date which is two years following the date on which
it ceases to be an investor under the Shareholders' Agreement;
-- in respect of all parties to the letter:
o prior to Conversion, the date on which LSA repays the Loan in
its entirety;
o prior to Conversion, the date on which the Loan matures in
accordance with its terms; and
o following Conversion, the date which is two years following
the date on which the Shareholders' Agreement is terminated
(subject to certain exceptions).
These restrictions shall not affect or prohibit any investor
(nor any of its affiliates) from owning securities which are
publicly traded in any entity which is listed on a stock exchange
that do not exceed 5 per cent. in nominal value of or voting rights
in such entity.
Part C - Implementation Agreement
The Implementation Agreement has been signed on the date of the
Loan Agreement and governs the obligations and commitments on the
CGI Shareholder, the Lender, the Esken Shareholder and the Company
to implement the Investment:
Commitments to satisfy the conditions precedent in the Loan
Agreement
The Implementation Agreement contains a requirement on each of
the parties to use all reasonable endeavours to satisfy the
conditions precedent in the Loan Agreement as at the utilisation
date. The Lender gives certain warranties as to capacity and
authority to execute the Investment documents, insolvency and that
it has sufficient funds to provide the Loan on the utilisation
date.
Undertakings on Esken
The Company has provided a "no-shop" undertaking from it and its
affiliates from 2 July 2021 until the earlier of (i) the
utilisation of the Loan; (ii) if the Resolution is not approved at
the General Meeting; or (iii) termination of the Implementation
Agreement, prohibiting the Company from soliciting an offer from,
or participating in discussions with, another party to acquire the
Borrower Group or issuing any debt which is convertible into shares
in LSA or entering into any other arrangements which would
frustrate or preclude, or would be an alternative to, the
implementation of the Transaction, or would be an alternative to
the financing provided pursuant to the Loan Agreement.
The Company will use best endeavours to ensure that the General
Meeting is held as soon as reasonably practicable after the date of
publication of the Prospectus and that the General Meeting is in
any event held by no later than 10.00 a.m. (London time) on 21
September 2021.
Commitment Fee payment
The CGI Shareholder will be entitled under the Implementation
Agreement to receive a commitment fee of GBP1,649,871.80 (the
"Commitment Fee") which shall become payable on the earlier of: (i)
the Closing Date and (ii) the date on which the Implementation
Agreement terminates as a result of the conditions to Closing
having not been satisfied by 30 September 2021. If the Commitment
Fee becomes payable on the Closing Date, it may be deducted from
the proceeds of the Loan.
The Implementation Agreement will terminate if all of the
Conditions Precedent have not been satisfied by 30 September
2021.
Part D - Indemnity Deed
In connection with the Investment, the Company has agreed to
enter into a separate deed of indemnity (the "Indemnity Deed") on
the Closing Date pursuant to which it will grant certain
indemnities in favour of the Borrower Group and, in some instances,
the Lender and certain of its affiliates. These indemnities include
obligations of the Company to indemnify:
-- the Borrower Group against any losses arising from implementing the Reorganisation;
-- the Borrower Group against any losses arising from secondary
tax liabilities or VAT liabilities of the Wider Group which are
required to be paid by the Borrower Group to HMRC;
-- the Borrower Group, the Lender and/or CGI and their
affiliates against any "secondary" pension liabilities arising in
connection with the existing defined benefit pension scheme in the
Wider Group which are required to be paid by the Borrower Group,
the Lender, CGI or any such affiliate;
-- the Borrower Group against any losses arising from the noise
litigation proceedings (which are referred to in paragraph Error!
Reference source not found. of Part XI-Additional information)
which were settled or otherwise provided for by the Borrower Group
prior to the Closing Date; and
-- the Borrower Group against any losses directly arising from
certain litigation brought against the Group.
The Indemnity Deed will also contain wrong-pockets provisions
requiring the Group to transfer assets to the Borrower Group (i)
which are exclusively used by the Borrower Group but which are held
by the Group to the Borrower Group and (ii) which were anticipated
to be transferred to the Borrower Group pursuant to the
Reorganisation but were not transferred, following completion of
the Loan Agreement, if any such assets are found. The Borrower
Group will also be subject to a similar obligation to transfer
assets to the Esken Group (excluding the Borrower Group) which are
exclusively used by the Group but which are held by the Borrower
Group and (ii) which were anticipated to be transferred to the
Esken Group pursuant to the Reorganisation but were not so
transferred, to the Group following completion of the Loan
Agreement, if any such assets exist.
Part E - Pari Passu Loan
In connection with the Investment, Stobart Aviation Limited,
acting as "Pari Passu Lender" , will enter into an intercompany
loan agreement which will rank pari passu with the Loan (the "Pari
Passu Loan Agreement") on the Closing Date with the Borrower Group
to advance a GBP20 million loan (the "Pari Passu Loan") to the
Borrower, which will include provisions to the following
effect:
Borrower and Guarantors
Under the Pari Passu Loan Agreement, LSA will be the Borrower
and Thames Gateway Airport Limited, Stobart Solar Limited and
Stobart Jet Centre Limited will be joint and several guarantors of
the Borrower's obligations.
Principal amount and interest
Stobart Aviation Limited, as Pari Passu Lender, will make GBP20
million available to the Borrower.
Interest shall accrue on the outstanding principal amount of the
Pari Passu Loan at a rate of 8 per cent. per annum (the "PP Cash
Interest"). Interest payment dates will be the fifth Business Day
following the end of each interest period (being a period of 12
months ending on the last day of February in each year save that
the first interest period shall commence on the Utilisation Date
and shall end on the last day of February 2022).
PP Cash Interest will only be payable to the Pari Passu Lender
out of revenues generated by the Obligors during the interest
period preceding each interest payment date and shall only be
payable to the extent that a minimum headroom liquidity requirement
is met. Such minimum headroom liquidity requirement will be met to
the extent that (i) following payment of the accrued Cash Interest
on such interest payment date, and taking into account any other
debt service charges payable on such date, there is a minimum of
GBP5 million of cash to be available to the Obligors on that
Interest Payment Date; and (ii) during each month of the three-year
period following such interest payment date, there is a minimum of
GBP2.5 million of Projected Cash forecast to be available to the
Obligors and when the Projected Cash for each month of such
three-year period is aggregated, the average Projected Cash
available to the Obligors during such period is not less than GBP5
million. To the extent that PP Cash Interest is not paid on an
interest payment date, the unpaid amount will be added to the
principal amount of the Loan with effect from such date and
interest will accrue on such increased principal amount
thereafter.
Purpose
The Borrower shall apply all amounts borrowed by it under the
Pari Passu Loan for general corporate purposes.
Redemption
To the extent that the Pari Passu Loan remains outstanding, the
Borrower is obliged to repay the Pari Passu Loan in full on the
final maturity date, being seven years from the date on which the
Pari Passu Loan is drawn by the Borrower.
Events of Default
The Pari Passu Loan Agreement will contain certain customary
events of default (subject in certain cases to agreed grace
periods, thresholds and other qualifications), including, for
example, non-payment, breach of obligations and a cross-default to
the Loan Agreement.
Ranking and Security
The Pari Passu Loan will rank pari passu with the Loan save that
if any part of the Loan and the Pari Passu Loa remain outstanding
on the final maturity date of the Loan, the Pari Passu Loan shall
be subordinated to and all monies then available for repayment of
such loans shall first be applied in payment of the Repayment Price
in full before any monies are applied in repayment of the Pari
Passu Loan.
The Obligors' liabilities to the Pari Passu Lender in respect of
the Pari Passu Loan shall be secured by the Transaction
Security.
Under the terms of the Intercreditor Agreement, the Pari Passu
Lender shall not form part of the "Enforcement Instructing Group"
(as defined below) for so long as the Loan remains outstanding.
Part F - Intercreditor Agreement
In connection with the Investment, each member of the Borrower
Group, the Lender, the Pari Passu Lender and the Security Agent,
amongst others, shall, on the Closing Date, enter into an
intercreditor agreement (the "Intercreditor Agreement").
The Intercreditor Agreement will set out, amongst other
things:
-- the relative ranking of debt incurred by the Borrower Group;
-- when payments can be made in respect of the subordinated debt of the Borrower Group;
-- when enforcement action can be taken in respect of the subordinated debt; and
-- turnover provisions.
Ranking and Priority
The Intercreditor Agreement will provide that in the event that
there are any liabilities owing to holders of Super Senior
Liabilities (as defined therein and which includes up to GBP10
million in emergency funding and up to GBP50 million of capex
funding) and certain agent liabilities will rank pari passu in
right and priority of payment between themselves and in priority to
(A) the liabilities owing to the Lender under the Loan Agreement
(the "Convertible Facility Liabilities") the liabilities owing to
the Pari Passu Lender under the Pari Passu Loan (the "Pari Passu
Liabilities") and/or the Alternative Financing Liabilities (as
defined therein) which will rank pari passu in right and priority
of payment between themselves (except where FMD Subordination (as
defined therein) applies in which case the Convertible Facility
Liabilities shall rank in priority to the Pari Passu Liabilities)
and, in turn, in priority to (B) the Junior Liabilities (as defined
therein). The Super Senior Liabilities, the Convertible Facility
Liabilities, the Pari Passu Liabilities
and the Alternative Financing Liabilities constitute the "Senior
Liabilities" and the creditors in respect of such liabilities, the
"Senior Creditors".
The Intra-Group Liabilities (as defined therein), the Wider
Group Debt Guarantee Liabilities (as defined therein) and
Subordinated Liabilities (being the liabilities in respect of
indebtedness (other than the Pari Passu Loan) owing to any member
of the Wider Group or any Sponsor Affiliate (as defined therein))
will be subordinated to the liabilities owed to the Senior
Creditors. The Intra-Group Liabilities will be subordinated to the
Subordinated Liabilities and the Wider Group Debt Guarantee
Liabilities. The Subordinated Liabilities will be subordinated to
the Wider Group Debt Guarantee Liabilities.
Security and Priority of Security
The Senior Creditors will benefit from the Transaction Security,
which will not become enforceable until the occurrence of an
applicable acceleration event (such creditors and the Security
Agent, the Secured Parties).
The Transaction Security will rank and secure the Senior
Liabilities in the following order, firstly the liabilities in
respect of Super Senior Liabilities and certain agent liabilities
pari passu and without any preference between them; secondly the
liabilities in respect of the Convertible Facility Liabilities,
Pari Passu Liabilities and/or the Alternative Financing Liabilities
(except where FMD Subordination (as defined therein) applies in
which case the Convertible Facility Liabilities shall rank in
priority to the Pari Passu Liabilities) pari passu and without any
preference between them; and thirdly the Junior Liabilities.
Additional Restrictions
The Intercreditor Agreement will restrict (among other things)
with respect to the Borrower and its subsidiaries:
-- the ability of intra-group debtors to pay, prepay, repay,
redeem, defease or discharge or acquire intra-group liabilities
except for certain specified permitted payments;
-- their ability to pay, prepay, repay, redeem, defease or
discharge or acquire Subordinated Liabilities except for certain
specified permitted payments;
-- their ability to pay, prepay, repay, redeem, defease or
discharge or acquire the Wider Group Debt Guarantee Liabilities
except for certain specified permitted payments;
-- their ability of the intra-group lenders and Subordinated
Creditors to take any enforcement action; and
-- the ability of the intra-group lenders and Subordinated
Creditors to take the benefit of any guarantees or security
Instructions and enforcement of Transaction Security
For the purposes of this section, "Enforcement Instructing
Group" means at any time, the Senior Creditors (excluding, before
the Convertible Facility Discharge Date (as defined therein), the
Pari Passu Lender) whose Senior Credit Participations (as defined
therein) at that time aggregate to more than:
(a) if none of (b), (c) and (d) below apply, 66 per cent. of the
total Senior Credit Participations of such Senior Creditors at that
time;
(b) if an Enforcement Trigger Event (as defined therein) is
continuing for more than 6 months but less than 12 months, more
than 50 per cent. of the total Senior Credit Participations of such
Senior Creditors at that time; or
(c) if an Enforcement Trigger Event is continuing for more than
12 months but less than 15 months, more than 33 per cent. of the
total Senior Credit Participations of such Senior Creditors at that
time;
(d) if an Enforcement Trigger Event is continuing for more than
15 months but less than 18 months, more than 25 per cent. of the
total Senior Credit Participations of such Senior Creditors at that
time; or
(e) if an Enforcement Trigger Event is continuing for more than
18 months, more than 10 per cent. of the total Senior Credit
Participations of such Senior Creditors at that time.
At any time after the Security Agent has received notice of an
Enforcement Trigger Event (as defined therein), it shall notify
each Secured Creditor of such Enforcement Trigger Event and shall
promptly request by notice (an "Enforcement Instruction Notice") an
instruction from the Enforcement Instructing Group as to whether
the Security Agent should deliver an Enforcement Notice to enforce
all or any part of the Transaction Security or to take any other
kind of Enforcement Action.
The Security Trustee shall enforce according to the enforcement
instructions received from the Enforcement Instructing Group.
Part G - Reorganisation
Esken will implement a corporate reorganisation to form the
Borrower Group (the "Reorganisation") on the Closing Date. The
Reorganisation will involve the Borrower acquiring Stobart Solar
Limited and Stobart Jet Centre Limited from Stobart Aviation by way
of a share for share exchange.
II. BUSINESS OVERVIEW OF THE GROUP
Overview
Esken is a UK infrastructure group with operations across the
United Kingdom in the aviation and biomass energy industries, with
a strategy to develop valuable growth assets from aviation and
energy from waste. The Group's operations are organised across two
core operating divisions, together with a portfolio of non-core
assets.
The Group's core operating divisions are:
-- Stobart Aviation -The Group owns and operates London Southend
Airport. In addition, Stobart Aviation Services, one of the
businesses within the division, provides check-in, baggage handling
and cargo services for 13 airlines at London Stansted, London
Southend and Manchester airports. Stobart Aviation accounted for
GBP24.7 million of total revenue (before adjustments and
eliminations) in FY21.
-- Stobart Energy -The Directors believe that the Group is the
United Kingdom's largest supplier of waste wood fuel to UK biomass
energy plants, with long-term exclusive contracts in place with
some of the largest biomass energy plants in the United Kingdom.
The Group has contracts in place to supply 1.7 million tonnes of
waste wood fuel and in FY21 supplied 1.4 million tonnes. Stobart
Energy accounted for GBP75.0 million of total revenue (before
adjustments and eliminations) in FY21.
The Group's non-core operating divisions are:
-- Stobart Investments -The Group holds an 9.1 per cent. stake
in Logistics Development Group plc (formerly Eddie Stobart
Logistics plc) ("Eddie Stobart") and a 19.3 per cent. stake in
luggage transportation company, AirportR. The Group holds a 30 per
cent. stake in Connect Airways, and on 10 March 2020 Connect
Airways, which owns Flybe, entered into Administration following
Flybe entering into Administration on 5 March 2020. In addition, on
27 April 2020, the Group announced it had reached agreement with
the administrators of Connect Airways to acquire Stobart Air and
Propius, and the Group now holds a 40 per cent. voting and 75 per
cent. economic interest in Everdeal, the ultimate holding company
of both businesses, and a 15 per cent. shareholding in the company
that holds the remaining 60 per cent. voting interest and 25 per
cent. economic interest in Everdeal, Everdeal Employees 2019
Limited. As announced by the Company on 12 June 2021, Stobart Air
is undergoing liquidation proceedings, and two of Stobart Air's
subsidiaries (Stobart Air Services (UK) Limited and Stobart Air
Services (IOM) Limited) are now also undergoing liquidation
proceedings . Stobart Investments accounted for GBP9.0 million of
total revenue (before adjustments and eliminations) in FY21.
-- Stobart Infrastructure -The Group holds a portfolio of
non-strategic property and infrastructure assets, including the
Carlisle Lake District Airport, with a book value of GBP39.2
million as at 28 February 2021. The Group aims to divest all of its
non-core assets for cash by FY24 with the aim of realising value
over time from a position of strength when market conditions are
right. Stobart Infrastructure accounted for GBP1.1 million of total
revenue (before adjustments and eliminations) in FY21.
The Group divested Stobart Rail & Civils, previously a
non-core operating division, in July 2020 and continues to explore
opportunities to exit its remaining non-core operating divisions as
market conditions for asset sales improve.
Esken is registered in Guernsey, headquartered in London and it
employed 911 people in the United Kingdom as at 28 February
2021.
The Company has been listed on the London Stock Exchange since
2007, at which point it was primarily a logistics provider. Shortly
after the listing, the Group expanded its portfolio to include a
rail and civil engineering business in 2008, London Southend
Airport in 2008, Carlisle Lake District Airport in 2009 and a
biomass energy business in 2010. Since then, the Group has
continued to develop its business through organic operations and
selected acquisitions and disposals.
For the year ended 28 February 2021, the Group's revenue was
GBP110.7 million, its loss for the year from continuing operations
was GBP143.3 million and its Adjusted EBITDA was a loss of GBP17.9
million.
Recent Developments
The COVID-19 pandemic has continued to cause significant
disruption for the Group. However, strict financial discipline has
helped minimise cash burn and protect the Group's liquidity
position. Stobart Energy continues to deliver cash generation
whilst the Stobart Aviation business faces continuing challenges in
terms of weak passenger demand. In addition, the acquisition of
Stobart Air, the liquidation of which was announced on 12 June
2021, and Propius has resulted in cash outflows for the Group
during the past year which will continue at a lower level until
mid-2023. Break fees of US$21.2 million in total plus associated
break fee finance costs will be paid under the lease arrangements
relating to Stobart Air's aircraft as the aircraft are returned to
the GOAL Lessors, following which the aircraft leases and parent
company guarantees will expire and Propius will become dormant. The
Directors believe cash flow discipline, coupled with the depth of
operational talent within the businesses, will help protect the
value of the Company's core assets and aid
recovery as vaccine programmes are rolled out, with activity
expected to slowly increase over the coming months.
London Southend Airport
London Southend Airport has a strong and differentiated
commercial passenger proposition and allows airlines to generate
similar yields to other London airports but at a lower cost per
passenger, including through the current usage of airline marketing
contributions. The Company believes that this low-cost proposition
will appeal to cost conscious airlines as the aviation sector
recovers from the pandemic.
Lockdown restrictions curtailed much of the commercial passenger
operations at London Southend Airport during 2020 and 2021 as
evolving quarantine arrangements and late changes to travel
corridors eroded passenger confidence when restrictions were
lifted. As a result, 147,000 passengers flew through London
Southend Airport in FY21 compared to 2.14 million in the prior
year. Of those 147,000 passengers, 68,000 flew in March 2020 before
travel restrictions took hold. Though some flying resumed in June
2021, with 4,555 passengers flying, the Directors do not expect
commercial passenger operations to restart in earnest until much
later in 2021.
In response to this trading environment, management took a range
of decisive actions to significantly reduce London Southend
Airport's cash burn, including extensive use of the UK Government's
furlough scheme. London Southend Airport benefitted from continued
operations and income from its global logistics operation
throughout the year. However, movements reduced during January and
February 2021 due to Brexit uncertainty and seasonal variances.
While the logistics operations involved five daily rotations
pre-Brexit, it returned to three daily rotations in March 2021.
Stobart Air and Propius
On 20 April 2021, the Group announced it had entered into
agreements for the sale of its entire shareholdings in Stobart Air
Unlimited Company (which operated regional flights under a
franchise agreement for Aer Lingus) and Stobart Air (UK) Limited,
the owner of Carlisle Lake District Airport to Ettyl Limited
("Ettyl").
On 28 May 2021, Ettyl advised that its original funding package
to support the transactions was no longer available and that it was
in discussions on alternative funding options. On 12 June 2021, the
Company announced that it was clear that Ettyl was unable to
conclude the transactions on the original terms or to obtain an
alternative funding package within the required timescale and
exercised its right to terminate the contracts for the transactions
with immediate effect. Further, in the absence of any alternative
purchasers or sources of funding for the Stobart Air business
within the timescales required, the Company advised the board of
Stobart Air that it would not continue to provide financial support
to the Stobart Air business going forward. As a result of this, the
board of Stobart Air terminated its franchise agreement with Aer
Lingus and ceased trading and appointed a liquidator on 14 June
2021.
The Company also announced that it had undertaken certain
contingency planning measures and has agreed in response to these
developments that it will continue to fund the lease obligations
for certain of Stobart Air's aircraft through to termination of the
leases in April 2023 under the terms of its pre-existing guarantee,
and confirmed that it would take immediate steps to seek sublease
arrangements for the aircraft with alternative operators to
mitigate the impact on the Group.
The Company remains responsible for certain obligations to Aer
Lingus under the franchise agreement which were also the subject of
a pre-existing guarantee and have become payable following
termination of the franchise agreement. These obligations and the
guarantees entered into in early 2017 were the reason that the
Group reacquired the airline and its related leasing company in
April 2020. This enabled the Group to manage and seek to mitigate
the impact of these liabilities following the administration of
Connect Airways Limited.
In the announcement on 20 April 2021, the Company set out the
cash flow impact on the Group on the assumption that the
transactions concluded. The following table reflects the amended
position over the period to the end of the leases assuming that the
Group is unable to sublease the aircraft. It also includes the
termination of the sale of Carlisle Lake District Airport which had
been set to be concluded for consideration of GBP15 million.
F Y22 FY23 FY24
Cash outflow reported previously
(GBP millions)......... (16) (9) (24)
Additional cash impact arising
from liquidation..... (18)(1) (13) (2)
Total cash impact ........................................................ (34) (22) (26)
Note:
(1) Cash impact reflects that the Group will retain ownership of
Carlisle Lake District Airport rather than receive sale proceeds of
GBP15 million.
Since April 2020, the Company has taken all steps to minimise
the cash requirement of Stobart Air while seeking to find a
purchaser recognising the importance of the airline to connectivity
between the United Kingdom and Ireland, the 480 jobs involved and
the fact that a sale would have been a better outcome for
Shareholders. The Company has been successful in reducing the
impact of its pre-existing obligations and in agreeing terms under
which it has control of residual obligations through to expiry.
However, the continuing impact of the pandemic which has resulted
in almost no flying since April 2020 and the decision taken by Aer
Lingus to award preferred bidder status to another party for the
franchise agreement beyond its expiry in December 2022
significantly hampered the exhaustive steps taken to secure a
future for the business and its staff.
The Group will retain the ownership of Carlisle Lake District
Airport but will actively explore strategic options for the use of
this asset in discussion with stakeholders including potential
alternative commercial opportunities for the airport.
Stobart Aviation Limited ("SAL") entered into a transaction with
DLP Holdings S.a.r.l. (managed by Cyrus Capital), pursuant to which
SAL agreed to transfer all of its interests as lender under (a) two
facility agreements between it (and others), as lenders, and Flybe
Limited (in administration), as borrower, and (b) one unsecured
loan note issued by Connect Airways Limited (in administration), as
borrower, to SAL (and others), as lenders. The transaction became
unconditional on 23 July 2021 and SAL will be paid a cash
consideration of GBP1.15 million on completion of the transaction,
which is expected to occur in the near future.
Strategic Update
The impact of the pandemic has been both greater and over a
longer period than anticipated at the time of the 2020 Capital
Raise. This has led the Board to undertake a further review of the
strategy and the medium-term funding requirements for the Group.
This concluded that the Group holds two attractive businesses which
can generate significant value for Shareholders as markets recover
post-COVID-19. The key strategic objective will therefore be to
drive value for Shareholders from these assets with any decision on
the realisation of value being deferred until the businesses
recover fully from the pandemic and become mature cash generative
business units. While it was previously intended at the time of the
2020 Capital Raise to seek to monetise the Stobart Energy business
by June 2022, the Board has concluded that this is not the right
option for Shareholder value and so is to be held in the medium
term.
Stobart Energy is a recovering cash generative business with a
strong market position and long-term supply contracts. It is
anticipated that financial performance will return to pre-COVID-19
run rate levels in FY22. Opportunities are being explored for
additional supply contracts and to broaden the base of the market
offering within the energy from waste space where existing
operational expertise can be applied. The business offers the
opportunity to generate returns from an asset with infrastructure
characteristics and a compelling environmental benefit by recycling
waste wood to produce energy rather than it going to landfill.
In the Stobart Aviation business the prime asset is London
Southend Airport, which, prior to the pandemic, offered passenger
services to over 40 destinations to a market of approximately eight
million 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 LSA remain
sound.
The Group will continue to invest in the infrastructure of LSA
in line 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, LSA is well placed to
capitalise on accelerated airfreight growth and movements.
In line with the previously stated strategy, the Group will
actively look to exit from all other non-core infrastructure assets
owned by the Group having a net book value of approximately GBP39
million at 28 February 2021. When this process is complete the
Group will become a focussed group with two operating
businesses.
Business Operations
The Group's operations are organised across two core operating
divisions, together with a portfolio of non-core assets. The core
operating divisions are Stobart Aviation and Stobart Energy, and
the non-core operating divisions are Stobart Investments and
Stobart Infrastructure. The Group divested Stobart Rail &
Civils, previously a non-core operating division, in July 2020 and
continues to explore opportunities to exit its remaining non-core
operating divisions as market conditions for asset sales
improve.
Stobart Aviation
Stobart Aviation's principal asset is London Southend Airport,
which has been rated the best London airport in 2019 for the sixth
consecutive year in the Which? Airport Passenger Survey and was the
United Kingdom's fastest growing airport in 2019 according to CAA
data.
In addition, Stobart Aviation Services, which started operations
in FY17/18, provides check-in, baggage handling and cargo services
for 13 airlines at London Stansted, London Southend and Manchester
airports.
In FY19, London Southend Airport (including the hotel and
Stobart Jet Centre) accounted for approximately three-quarters of
Stobart Aviation's revenue, and Stobart Aviation Services accounted
for approximately one-quarter of Stobart Aviation's revenue.
The Group also owns and operates the Carlisle Lake District
Airport, which is operated and accounted for in Stobart
Infrastructure, as discussed below.
Revenue generation
The Group's airports generate two types of revenue: aeronautical
revenue, which is generated from fees charged to airlines for use
of the airports' facilities, and non-aeronautical revenue from a
variety of sources. During FY19, FY20 and FY21, the majority of
Stobart Aviation's revenue comprised non-aeronautical revenue.
Aeronautical revenue
Aeronautical revenue reflects the tariffs levied by the Group's
airports on their airline customers. The tariff structure through
which the aeronautical revenue is recovered from airlines includes
three key elements:
-- Departing passenger fees -Fees per passenger are based on the
number of passengers on board an aircraft and are levied in respect
of all departing passengers. Fees can vary depending on the route
and are subject to minimum levels.
-- Landing charges - Landing charges are levied for
substantially all aircraft and are calculated with respect to the
weight of the aircraft, as well as other factors such as noise
rating and emissions levels.
-- Parking charges - Aircraft parking charges are levied on
aircraft after they have exceeded a minimum parking time.
Non-aeronautical revenue
The Group generates non-aeronautical income from a variety of
sources, including:
-- the sale of jet fuel to the Group's airline customers;
-- concession fees from retail operators;
-- revenue generated by the train station at London Southend Airport;
-- revenue generated by the hotel at London Southend Airport;
-- direct revenue from car parks and advertising;
-- the leasing of airport premises such as aircraft hangars,
warehouses, cargo storage facilities, maintenance facilities,
offices and airline lounges; and
-- through Stobart Aviation Services, the provision of check-in,
baggage handling and cargo services.
Market Overview
FY21 saw unprecedented challenges for the global aviation
industry as a result of the COVID-19 pandemic, which continues to
have a material impact on the sector. However, the UK Government
has offered support to business, including aviation, and the Group
anticipates that such support will help the industry recover once
travel restrictions are lifted in the United Kingdom and
abroad.
With a long-term view, the Group considers that the underlying
fundamentals of the London aviation market remain strong. The
London aviation market is the largest in the world and, over the
long term, has continued to grow in excess of UK GDP despite
significant constraints at the majority of London airports. As a
result, the Directors believe the growth trajectory will resume and
continue once the COVID-19 pandemic passes, although there is
considerable uncertainty as to the duration and impact of the
pandemic. London is the largest metropolitan area in Europe, with
over 14 million residents and in 2018 ranked in the top three
visitor destinations in the world by number of visitors. It also
serves as a major global international commercial centre.
London metropolitan area air traffic is the busiest in the world
with 181 million passengers in 2019 and is 25 per cent. larger than
New York, the second busiest city. As a consequence, both the
network carriers and low-cost carriers ("LCCs") have been growing
their capacity. Since 2014, LCCs have added 9.2 million seats (a 32
per cent. increase) to the London market, or the equivalent of 41
daily aircraft (a 27 per cent. increase).
Once the unprecedented effects of COVID-19 have subsided, the
Directors believe that LCCs will benefit from their lower cost
bases and will likely return to normalised operations faster than
non- LCCs. The Directors believe that LCCs will likely be focused
on seeking a low cost base for operations and hub capacity at
suitable prices and service levels.
The pace at which this capacity is required will largely depend
on the demand from passengers to return to international travel,
the ability of airlines to react to that demand and the
preparedness of airports to respond to the changing expectations of
passengers and airlines alike. Airports will be expected to provide
clean, secure and spacious environments in which passengers are not
expected to gather in confined retail spaces, where cleaners are
highly visible and where people can move through central search
areas efficiently. The Directors believe that London Southend
Airport has an opportunity therefore to make use of significant
unutilised space and enhanced technology, provide a cost-efficient
base for airlines given the airport's lower capital expenditure to
date, and deliver a passenger-focused experience for its
customers.
London Southend Airport
London Southend Airport is located in the county of Essex,
England, approximately 36 miles east of central London. The airport
has a known catchment area of 8.2 million people and served 1.49
million, 2.14 million and 147.2 thousand passengers in FY19, FY20
and F21, respectively.
In early 2020, London Southend Airport served approximately 40
destinations across Europe and the United Kingdom with flights
operated by easyJet, Ryanair, Loganair, Wizz Air and Flybe, amongst
others. Flybe entered into Administration and ceased flight
operations in March 2020 and easyJet closed its London Southend
Airport base from August 2020. In FY21, Ryanair and Wizz Air
accounted for, in aggregate, approximately 60 per cent. of the
airport's passenger traffic.
London Southend Airport has more than 1,100 square metres of
retail space served by seven retail clients operating 10 retail
outlets. The largest retail client in London Southend Airport is
The Restaurant Group, which operates a number of food concessions
and in FY21 comprised nearly half of the airport's retail
concession fees.
The airport also has a hotel facility on site. The Group sold
the hotel to Interstate Hotels & Resorts in FY18 pursuant to a
sale and leaseback agreement under which the Group continues to
operate and generate revenue from the hotel.
In October 2019, Stobart Aviation Services signed an agreement
with a global logistics customer to provide full cargo handling
facilities including screening and clearance for the import and
export of goods at London Southend Airport, which successfully
handled 28.4 million packages in the 12 months to February
2021.
In 2011, the Stobart Rail & Civils operating division built
a train station at London Southend Airport which serves central
London with up to six trains per hour during peak times. The
journey to London takes approximately 52 minutes, and in FY20
approximately 30 per cent. of London Southend Airport passengers
travelled to/from the airport by train. The Group receives a share
of ticket fares from people using the station at London Southend
Airport.
The Group also operates the Stobart Jet Centre located at the
London Southend Airport, which offers private aviation services.
The Stobart Jet Centre had 1,660, 1,512 and 408 movements in FY19,
FY20 and FY21.
Passenger experience
The Directors believe that, as a result of COVID-19, airports
are expected to provide clean, secure and spacious environments in
which passengers are not expected to gather in confined retail
spaces, where cleaners are highly visible and where people can move
through central search areas efficiently. The Directors believe
that London Southend Airport has a highly flexible, modular and
cost-efficient capital expenditure plan with minimal passenger
disruption. The Directors believe that London Southend Airport has
an opportunity therefore to make use of significant unutilised
space and enhanced technology, provide a cost-efficient base for
airlines given the airport's lower capital expenditure to date, and
deliver a passenger-focused experience for its customers.
The Company made the following enhancements to the passenger
experience at London Southend Airport as a result of COVID-19:
-- Thermal cameras were installed to monitor passenger
temperatures as they approach the entrance to the departure
terminal, allowing airport staff to identify potential infected
people and take appropriate action.
-- Hand sanitisation stations and large wipe dispensers were
installed every 20 paces throughout the terminal journey.
-- Deep cleaning took place nightly whilst the airport's
cleaning team sanitised handrails and surfaces throughout the
day.
-- Bio screens were installed at all face-to-face locations to protect passengers and staff.
-- The security process now uses advanced baggage scanning
devices, which means liquids and laptops can remain within
bags.
-- After security, passengers moved through to a large,
open-plan departure lounge and were encouraged to socially
distance. Whilst the airport's main retail outlets remained closed,
a new pop-up café was introduced serving hot drinks and snacks.
Vending machines were also located throughout the terminal.
Stobart Aviation Services
Stobart Aviation Services began operating in FY17/18 and
provides check-in, baggage handling and cargo services at London
Stansted, London Southend and Manchester airports. The Group has
contracts with 13 airlines, including Scandinavian airlines (SAS),
Wizz Air, Titan, Ryanair, Norwegian, Eurowings and SN Brussels. The
Group's Aviation Services contracts employ cost-plus, fixed cost
and price per turn contracts used to appeal to both larger and
smaller airlines to be handled on a frequent or ad hoc basis, and
the contracts vary in duration, but are typically three to five
years.
Airport Regulation
The Group's airports are regulated by the Civil Aviation
Authority ("CAA"). The CAA is the independent aviation regulator in
the United Kingdom, responsible for economic regulation, airspace
policy, safety and consumer protection.
Under the current regulatory regime, the Group's airports will
not be subject to economic regulation by the CAA unless one or part
of them is found in the future to satisfy the significant market
power test set out in the Civil Aviation Act 2012.
Other duties to which the CAA must have regard include:
-- the need to secure that each holder of a licence is able to
finance its provision of airport operation services in the area for
which the licence is granted;
-- the need to secure that all reasonable demands for airport operation services are met;
-- the need to promote economy and efficiency on the part of
each holder of a licence in its provision of airport operation
services at the airport to which the licence relates;
-- the need to secure that each holder of a licence is able to
take reasonable measures to reduce, control or mitigate the adverse
environmental effects of the airport to which the licence relates,
facilities used or intended to be used in connection with that
airport and aircraft using that airport;
-- any guidance issued to the CAA by the Secretary of State for Transport;
-- any international obligation of the United Kingdom notified
to the CAA by the Secretary of State for Transport; and
-- the principles that regulatory activities should be carried
out in a way which is transparent, accountable, proportionate and
consistent, and that regulatory activities should be targeted only
at cases in which action is needed.
As part of the aerodrome licencing regime, an airport operator
must demonstrate that it is competent to conduct aerodrome
operations safely. The CAA must grant a licence in respect of any
aerodrome in the United Kingdom if it is satisfied that:
-- the applicant is competent, having regard to its previous
conduct and experience, equipment, organisation, staffing,
maintenance and other arrangements, to secure that the aerodrome
and the airspace within which its visual traffic pattern is
normally contained are safe for use by aircraft; and
-- the aerodrome is safe for use by aircraft, having regard in
particular to the physical characteristics of the aerodrome and of
its surroundings.
Carlisle Lake District Airport maintains a CAA aerodrome
licence, whereas London Southend Airport has transitioned from a
CAA aerodrome licence to a certificate issued in accordance with
the European Aviation Safety Agency's ("EASA") regime. Under the
EASA regime, the CAA is still the primary regulatory point of
contact for London Southend Airport, and it remains the CAA's
responsibility to conduct audits of the airport in its capacity as
a National Aviation Authority. However, EASA may conduct audits of
the CAA (and other National Aviation Authorities) to ensure
standardisation across member states. Following the end of the
Brexit transition period on 31 December 2020, the United Kingdom no
longer participates in the EASA regime and the Group anticipates
that London Southend Airport will transition back to a CAA
aerodrome licence.
Environment
Rapid airport growth often raises concerns in neighbouring
communities about aspects of environmental impact. Although it can
be difficult to address all community concerns whilst continuing to
grow, the Directors consider that London Southend Airport has
always complied in full with all of the requirements placed upon it
by its planning authorities.
Aircraft noise in and around UK airports is subject to UK and
local regulation. The UK Government has a key role in setting and
developing the policy framework for aircraft noise control at UK
airports, although individual procedures are generally agreed with
local planning authorities. A range of noise controls relating to
aircraft operations are set out in statutory notices and published
in the UK Aeronautical Information Package and elsewhere as
appropriate. These controls cover aspects such as departure noise
limits and night flight restrictions. Additional noise-related
controls are a feature of the local planning system that often
introduces planning obligations in Section 106 agreements between
airport operators and planning authorities.
Stobart Aviation's airports are also subject to or influenced by
various regulations and legislation designed to improve air quality
and reduce carbon emissions. These include global agreements
binding the United Kingdom to reduce its carbon emissions and UK
regulations setting minimum standards for local air quality and
limits on emissions of nitrogen oxides (whether from airport or
other activities).
Since 2016, the Group has operated a 3.2 hectare solar farm at
London Southend Airport with the objective of reducing its carbon
footprint and electricity requirement from the National Grid
network. Over 20 per cent. of London Southend Airport's electricity
comes from renewable sources.
1. Stobart Energy
The Directors believe that the Group is the United Kingdom's
largest supplier of waste wood fuel to UK biomass energy plants,
with long-term exclusive contracts in place with some of the
largest biomass energy plants in the United Kingdom. The Group has
contracts in place to supply 1.7 million tonnes of waste wood fuel
and in FY21 supplied 1.4 million tonnes.
Biomass energy (including waste wood fuel) is generated using
plant-based products, including wood pellets and wood chips,
bioenergy crops and agricultural and domestic waste. The
plant-based products are processed to create a low-carbon,
renewable alternative to fossil fuels. Bioenergy (including waste
wood fuel) is Britain's second largest source of renewable
electricity (according to UK Department for Business, Energy &
Industrial Strategy statistics), and the UK Committee on Climate
Change has stated that sustainably sourced bioenergy could provide
up to 15 per cent. of the United Kingdom's primary energy by
2050.
The Group offers a range of solutions across the biomass energy
supply chain, from commercial waste collection through to producing
fuel to a specification and delivering fuel to biomass energy
plants using its large logistics function. The Group has expertise
in waste wood, virgin wood, refuse derived fuel ("RDF") and solid
recovered fuel ("SRF"). Stobart Energy employs approximately 320
people, operates 145 walking floor vehicles and operates six large
fuel production and storage facilities, with a significant number
of other fuel production and storage sites contracted to third
parties to operate. The Group supplies more than 15 large, and a
significant number of smaller, biomass energy plants in the United
Kingdom and Ireland.
The following table sets forth Stobart Energy's actual tonnage
of waste wood fuel supplied, revenue, profit before tax from
continuing operations and Adjusted EBITDA for the periods
indicated.
FY21 FY20 FY19
------ ------ ------
Waste wood fuel supplied(1)
....................................................................... 1.4 1.5 1.3
Revenue(2)
.........................................................................................
........ 75,019 76,339 65,143
(Loss)/profit before tax from continuing operations(2)
.................................. (666) 5,192 5,324
(1) 18.3.3
Adjusted EBITDA(3)
................................................................................... 10,005 14,975 19,200
------------------------------------------------------------------------------------------
Notes:
(1) Figures represent millions of tonnes of waste wood fuel
supplied to third-party biomass energy plants.
(2) Figures are presented in thousands of pounds sterling.
(3) Figures are presented in thousands of pounds sterling. Adjusted
EBITDA is referred to as EBITDA in the FY19 Financial Statements,
FY20 Financial Statements and FY21 Financial Statements.
Market and Competition
In November 2019, gate fees declined significantly due to a
combination of a seasonal decline in waste wood supply, demand from
UK biomass energy plants peaking and a six-month drop in
construction output due to Brexit uncertainties. In addition, the
UK national lockdown announced on 23 March 2020 in response to the
COVID-19 pandemic initially resulted in the closure of household
waste and recycling centres operated by local authorities and of
the construction and demolition sectors. Without these key sources
of supply, the Group's inbound waste wood supply decreased as much
as 80 per cent. year-on-year and Stobart Energy entered FY21 at its
lowest level of gate fees in recent years. The supply of waste wood
has improved considerably since the time of the first lockdown and
as a result gate fees are steadily returning toward pre-COVID-19
levels.
Pre-COVID-19, approximately 4.5 million tonnes of waste wood
were produced annually in the United Kingdom, with a large
proportion of this used as fuel for biomass energy plants. Supply
of timber is generally low in the winter months in the United
Kingdom, whilst fuel demand increases during that time due to the
cold weather.
In the long term when the market returns to normal, the Group
believes that waste wood suppliers will continue to find it cheaper
and more environmentally responsible to provide waste wood to
biomass energy producers than to send it to landfill.
In addition, accreditation under the Renewables Obligation
scheme closed to new biomass energy plants in September 2018 and
will terminate entirely in 2037. As a result, the Group does not
expect any new plants to become operational.
Fuel Production and Storage
The Group operates six large fuel production and storage
facilities in England, located at Port Clarence, Pollington,
Rotherham, Widnes and two at Tilbury. The facilities receive waste
wood and other biomass materials, such as virgin wood, and convert
the materials into fuel. Each facility has a dedicated laboratory
where qualified technicians measure moisture, particle size and
bulk density to monitor energy content and plant suitability to
meet customer requirements.
One of the Group's fuel production facilities includes its own
port facility to receive raw materials by water, and the Group has
port operations in Cardiff and Shoreham as well. The Group also
operates a drying facility in Port Clarence to receive and treat
virgin wood and other wastes from across the United Kingdom.
The Group's own facilities can store up to 102,000 tonnes of
unprocessed waste wood, which equates to approximately 1.9 months'
worth of supply. In addition, the Group has a significant number of
other fuel production and storage facilities in strategic locations
around the United Kingdom that are operated by third-party
contractors for supply into UK biomass energy plants. This helps
the Group to balance seasonal demand and supply, as supply of
timber is generally low in the winter months in the United Kingdom,
whilst fuel demand increases during that time due to the cold
weather. The Group's national network of fuel production and
storage facilities are critical to the operation of many of the
United Kingdom's largest biomass energy power plants, which are not
always able to store large volumes of processed material at their
own sites.
Customers and Contracts
The Group supplies more than 15 large, and a significant number
of smaller, biomass energy plants in the United Kingdom and
Ireland. The Group has contracts in place with all of its large and
many of its smaller customers, with an average remaining contract
duration of 12 years. By the end of FY20, all of the plants
currently supplied by the Group had successfully completed
commissioning and become fully operational. The Group supplied 1.4
million tonnes of waste wood fuel in FY21.
The COVID-19 pandemic led to a shortage of waste wood supply,
which resulted in an inability of the Group to fulfil its
requirements under its supply agreements with its biomass energy
plant customers in some respects. As a result, the Group issued
force majeure notices to many of its biomass energy plant customers
pursuant to the terms of certain of its supply agreements, and, as
at the date of the Prospectus, all of those force majeure
situations have ended.
The Group's seven largest biomass energy plant customers
accounted for approximately 72.2 per cent. of the tonnage supplied
by the Group in FY21, and the Group is the exclusive supplier to
six of these seven customers.
A majority of the Group's supply agreements with its large
biomass energy plant customers contain "take or pay" provisions
whereby the plant customer is obligated to pay penalties if it
doesn't meet contracted demand levels or a specified percentage
thereof. Similarly, the Group is obligated to pay penalties if it
cannot supply minimum contracted levels or a specified percentage
thereof.
Procurement and Supply
The Group has relationships with over 300 suppliers, ranging
from local skip companies to tier 1 waste companies, as well as
virgin wood suppliers.
For the collection of waste wood, the Group charges third
parties a gate fee for taking wood from them. The Group's gate fees
are not contracted with many of its waste wood suppliers, and in
many cases such suppliers are not committed to supplying any
minimum volume. Therefore, the Group's gate fee revenue is variable
and subject to shifts in demand and availability of supply. For
example, gate fees in November 2019 declined significantly due to a
combination of a seasonal decline in waste wood supply, demand from
UK biomass energy plants peaking and a six-month drop in
construction output due to Brexit uncertainties. The COVID-19
pandemic has exacerbated this supply shortage, which is negatively
impacting gate fee pricing and may continue to do so for an
extended period. Gate fees impact on pricing into the Group's own
facilities and the facilities operated by its contracted fuel
producers. Therefore, gate fees have a large impact on both the
revenue and cost base of the business.
The Group employs an integrated supply chain IT system that
provides real-time data to various functions within the business.
The system tracks supply from the time of supply order, through the
fuel production, transportation and delivery to customers, and it
provides detailed management information to enable quick
decision-making.
Transport
The Group operates a fleet of 145 walking floor vehicles located
in depots across the United Kingdom. The vehicles are specifically
designed for the transport of waste wood, virgin wood and RDF. The
Group also provides services for the transportation of other waste
products, renewable fuels and power plant residues.
The Group operates a rolling three-year replacement programme of
its fleet to ensure the fleet is operating with the most efficient
and environmentally friendly vehicles available. The Group's
drivers undertake regular training including tailored annual
appraisals, certificate of professional competence training and
career development programmes.
Renewables Obligation Certificates
The Renewables Obligation scheme was introduced in Great Britain
in 2002. The scheme is administered by Ofgem, which is Great
Britain's government regulator for gas and electricity. A similar
scheme operates in Northern Ireland.
Under the scheme, an ROC is issued by Ofgem to an operator of an
accredited renewable energy generator for every megawatt hour of
renewable energy that it generates. The operator then sells its
ROCs to electricity suppliers alongside the electricity supplied,
thereby allowing the operator to receive a premium in addition to
the wholesale electricity price. Suppliers submit their purchased
ROCs to Ofgem to demonstrate compliance with the Renewables
Obligation scheme. Non-compliant suppliers must pay a penalty.
Accreditation under the Renewables Obligation scheme closed to
new biomass energy plants in September 2018 and will terminate
entirely in 2037. Of the biomass energy plants with which the Group
had supply agreements, all but one completed the commissioning
phase before the deadline and have therefore been accredited. The
one plant that did not obtain accreditation is not currently
operating and has terminated its supply agreement with the
Group.
Other Regulatory and Environmental Issues
The Group's fuel production and storage facilities, as well as
its industrial scale drying facility, operate under environmental
permits issued and regulated by the UK Environment Agency.
Compliance under the permits is audited at least once per year by
the UK Environment Agency and on a regular basis by the Group's own
health, safety, quality and environment team, which reports
directly to the Board.
The quality teams in place at each fuel production facility
provides customers with advice on the sampling and testing of
fuels, the environmental characteristics and the best ways to meet
UK and international standards.
The Group also has a number of bespoke permit variations for its
fuel production and storage facilities, allowing storage of
material in larger stockpiles and longer periods for finished
fuel.
Stobart Investments
Stobart Investments holds a 9.1 per cent. stake in Logistics
Development Group plc (formerly Eddie Stobart Logistics plc) and a
19.3 per cent. stake in luggage transportation company, AirportR.
The Group holds a 30 per cent. stake in Connect Airways, which owns
Flybe. Flybe and Connect Airways entered into Administration on 5
March 2020 and 10 March 2020, respectively.
Stobart Infrastructure
Stobart Infrastructure holds a portfolio of non-strategic
property and infrastructure assets with a book value of GBP39.2
million as at 28 February 2021 (compared to GBP47.3 million as at
29 February 2020). The portfolio includes Carlisle Lake District
Airport, the Group's Widnes and Pollington biomass fuel production
facilities and a stake in Mersey Bioenergy Holdings Limited, among
others.
The Group aims to divest all of its non-core assets for cash by
FY24, including Carlisle Lake District Airport, with the aim of
realising value over time from a position of strength when market
conditions are right. The Group has assumed proceeds of GBP11.8
million from asset sales in its base case business plan and nil
proceeds under a 'reasonable worst case scenario'.
Carlisle Lake District Airport
The Group acquired Carlisle Lake District Airport, which largely
serves the private aviation market, in 2009. The airport has also
housed an air freight distribution centre since 2015, which is
leased to Eddie Stobart.
The airport had 6,067, 14,007 and 4,918 movements in FY19, FY20
and FY21. The reduced movements in FY19 were due to the airport
being closed whilst the new runway was being built.
In 2018, Stobart Rail & Civils completed construction of a
new terminal, which began welcoming commercial Loganair flights in
July 2019, although these flights were subsequently suspended in
late March 2020 due to the COVID-19 pandemic. The Group, along with
local government partners, is in discussions with the UK Government
with a view to having services to and from the airport designated
as "Public Service Obligation" routes and therefore able to benefit
from UK Government funding. This would reduce commercial risk to
airlines and therefore encourage operations by other carriers. In
FY21, Carlisle Lake District Airport served approximately 1,108
commercial passengers.
In April 2021, the Group announced it had entered into
agreements with Ettyl Limited for the sale of its entire
shareholding in Stobart Air as well as Carlisle Lake District
Airport, subject to certain change of control and bank facility
consents. On 28 May 2021, Ettyl advised that its original funding
package to support the transactions was no longer available and
that it was in discussions on alternative funding options. On 12
June 2021, the Company announced that it was clear that Ettyl was
unable to conclude the transactions on the original terms or to
obtain an alternative funding package within the required timescale
and exercised its right to terminate the contracts for the
transactions with immediate effect. Customary surviving provisions
have survived termination of the agreements.
Carlisle Lake District Airport's results are accounted for in
Stobart Infrastructure due to the infrastructure potential at the
site.
Health and Safety
The Group has documented systems in place designed to ensure
legal compliance with health and safety legislation. Documentation
is supported by detailed training for staff, monitoring and
reporting routines, key risk analysis and regular internal and
external inspections and audits.
The Group Safety and Compliance team oversees, steers and
challenges the progress of the Group's safety performance, and
ensures that the Group continues to deliver. Divisional senior
managers are directly responsible for their risks and manage the
actions to mitigate or remove risks within their division. They
also identify, through continuous monitoring and review, where
potential new hazards could emerge within the business. There are
regular audits of compliance at all levels within the business.
The Group's strategic objective for enhancing safety is to
manage the Group's risks throughout each of the divisions by
providing support, knowledge, training and appropriate resources,
through continuous performance review and by encouraging open and
honest reporting. In FY21, employee 'accidents' decreased 61 per
cent. and employee 'incidents' decreased 23 per cent. compared to
the prior year. The Group will continue to strive for improved
accident and incident performance throughout the business and
increase hazard awareness with employees through training.
Information Technology
The Group relies on technology solutions and strong information
security to support the delivery of services across the Group.
These information technology systems are either maintained in-house
or by third-party contractors and outsourcers, and support a wide
range of operations including air traffic control, flight planning,
safety and security, supply chain management, finance and data
processing.
The Group monitors its information security arrangements and
continues to enhance controls in this area. In addition to
mitigations that have been in place previously, such as anti-virus
controls, patching policies, perimeter security monitoring, network
management processes, and the implementation of appropriate
policies within the Group, a significant programme of security
enhancements was rolled out in 2019.
The Group has established disaster recovery plans which seek to
ensure that it can continue to operate its business in the event of
an information technology system failure and the Group regularly
reviews and updates these plans.
Intellectual Property
The Group sold the Eddie Stobart and Stobart trademarks and
designs to Eddie Stobart for a total consideration of GBP10 million
on 21 May 2020. Until completion of the sale, the Group owned the
Eddie Stobart and Stobart trademarks and designs and all associated
intellectual property rights.
The sale of the Eddie Stobart and Stobart trademarks and designs
resulted in an immediate cash receipt. It also had the effect of
helping investors and stakeholders to more easily differentiate
between Eddie Stobart's business and Stobart Group's aviation and
energy businesses through the Group's transition to the Esken
name.
The consideration for the sale is GBP10.0 million, of which
GBP6.0 million was received on completion, GBP2.5 million was
received on 1 December 2020 and GBP1.5 million is payable 36 months
following completion of the sale. The cash consideration will be
used for general working capital purposes.
The Shareholders approved a resolution at a general meeting on 3
February 2021 to change the Company's corporate name to Esken
Limited. However, there are a number of Stobart divisions that will
continue to use the brand for up to 36 months after completion and
this will be licenced on a royalty free basis from Eddie
Stobart.
Stobart Air may continue to use its name so long as it is owned
by the Group. If the Group sells the Stobart Air business, it must
use reasonable endeavours to procure a change of name as part of
that sale.
Following this sale, the Group does not consider that it holds
any material intellectual property.
Insurance
The Group's insurance strategy is to maintain an insurance
programme that provides the optimal balance between coverage and
risk retention. The Group maintains insurance policies covering a
wide range of risks (including fleet, directors and officers,
commercial combined liability, material damage and business
interruption, operational engineering and engineering inspection,
airport and operators liability, rail professional indemnity and
trackside liability) that the Group considers are consistent with
customary industry practices in the markets in which the Group
operates and are appropriate to cover the principal risks of its
business, taking into account statutory and regulatory
requirements.
Employees
As at 28 February 2021, the Group had a team of 911 people
located in the United Kingdom. The following table details the
number of the Group's employees by location as at 28 February 2019,
29 February 2020 and 28 February 2021.
As at 28 As at As at
February 29 February 28 February
2021 2020 2019
England
.........................................................
.................................. 870 1,416 1,126
Home-based..........................................
...................................... 8 3 3
Midlands............................................
......................................... 0 0 2
North
East................................................
................................... 62 98 102
North
West................................................
.................................. 312 543 415
South
East................................................
.................................. 481 765 602
South
West................................................
.................................. 7 7 2
Northern
Ireland..................................................
............................. 3 5 1
Scotland.................................................
......................................... 21 114 98
Wales....................................................
........................................... 17 15 12
Total....................................................
............................................ 911 1,482 1,237
The following table details the number of the Group's employees
by operating division as at 28 February 2019, 29 February 2020 and
28 February 2021.
As at As at As at
28 February 29 February 28 February
2021 2020 2019
Stobart Aviation
.....................................................
............................ 540 922 619
Stobart Aviation
Services........................................
....................... 297 607 358
Other...........................................
................................................
.. 243 315 261
Stobart Energy
.....................................................
.............................. 317 358 342
Stobart Rail & Civils(1)
.....................................................
.................... 0 211 222
Central / head office (Stobart Group)
.................................................. 54 59 54
Total
.....................................................
.............................................. 911 1,482 1,237
The percentage of the Group's workforce that is unionised or
covered by a collective bargaining agreement is not significant,
with most of the unionised employees being in the Stobart Aviation
Services business. The Group considers that it has proactive and
productive relationships with unions and its employees in general,
and the Group has not experienced any material labour-related work
stoppages in FY19, FY20 or FY21.
III. OPERATING AND FINANCIAL REVIEW
O VERVIEW
Esken is a UK infrastructure group with operations across the
United Kingdom in the aviation and biomass energy industries, with
a strategy to develop valuable growth assets from aviation and
energy from waste. The Group's operations are organised across two
core operating divisions, together with a portfolio of non-core
assets.
The Group's core operating divisions are:
-- Stobart Aviation- The Group owns and operates London Southend
Airport. In addition, Stobart Aviation Services, one of the
businesses within the division, provides check-in, baggage handling
and cargo services for 13 airlines at London Stansted, London
Southend and Manchester airports. Stobart Aviation accounted for
GBP24.7 million of total revenue (before adjustments and
eliminations) in FY21.
-- Stobart Energy -The Directors believe that the Group is the
United Kingdom's largest supplier of waste wood fuel to UK biomass
energy plants, with long-term exclusive contracts in place with
some of the largest biomass energy plants in the United Kingdom.
The Group has contracts in place to supply 1.7 million tonnes of
waste wood fuel and in FY21 supplied 1.4 million tonnes. Stobart
Energy accounted for GBP75.0 million of total revenue (before
adjustments and eliminations) in FY21.
The Group's non-core operating divisions are:
-- Stobart Investments -The Group holds a 9.1 per cent. stake in
Logistics Development Group plc (formerly Eddie Stobart Logistics
plc) and a 19.3 per cent. stake in luggage transportation company,
AirportR. The Group holds a 30 per cent. stake in Connect Airways,
and on 10 March 2020 Connect Airways, which owns Flybe, entered
into Administration following Flybe entering into Administration on
5 March 2020. In addition, on 27 April 2020, the Group announced it
had reached agreement with the administrators of Connect Airways to
acquire Stobart Air and Propius, and the Group now holds a 40 per
cent. voting and 75 per cent. economic interest in Everdeal, the
ultimate holding company of both businesses, and a 15 per cent.
shareholding in the company that holds the remaining 60 per cent.
voting interest and 25 per cent. economic interest in Everdeal,
Everdeal Employees 2019 Limited. As announced by the Company on 12
June 2021, Stobart Air is undergoing liquidation proceedings, and
two of Stobart Air's subsidiaries (Stobart Air Services (UK)
Limited and Stobart Air Services (IOM) Limited) are now also
undergoing liquidation proceedings. Stobart Investments accounted
for GBP9.0 million of total revenue (before adjustments and
eliminations) in FY21.
-- Stobart Infrastructure- The Group holds a portfolio of
non-strategic property and infrastructure assets, including the
Carlisle Lake District Airport, with a book value of GBP39.2
million as at 28 February 2021. The Group aims to divest all of its
non-core assets for cash by FY24, with the aim of realising value
over time from a position of strength when market conditions are
right. Stobart Infrastructure accounted for GBP1.1 million of total
revenue (before adjustments and eliminations) in FY21.
The Group divested Stobart Rail & Civils, previously a
non-core operating division, in July 2020 and continues to explore
opportunities to exit its remaining non-core operating divisions as
market conditions for asset sales improve.
Esken is registered in Guernsey, headquartered in London and it
employed 911 people in the United Kingdom as at 28 February
2021.
The Company has been listed on the London Stock Exchange since
2007, at which point it was primarily a logistics provider. Shortly
after the listing, the Group expanded its portfolio to include a
rail and civil engineering business in 2008, London Southend
Airport in 2008, Carlisle Lake District Airport in 2009 and a
biomass energy business in 2010. Since then, the Group has
continued to develop its business through organic operations and
selected acquisitions and disposals.
For the year ended 28 February 2021, the Group's revenue was
GBP110.7 million, its loss for the year from continuing operations
was GBP143.3 million and its Adjusted EBITDA was a loss of GBP17.9
million.
R ECENT D EVELOPMENTS
The COVID-19 pandemic has continued to cause significant
disruption for the Group. However, strict financial discipline has
helped minimise cash burn and protect the Group's liquidity
position. Stobart Energy continues to deliver cash generation
whilst the Stobart Aviation business faces continuing challenges in
terms of weak passenger demand. In addition, the acquisition of
Stobart Air, the liquidation of which was announced on 12 June
2021, and Propius has resulted in cash outflows for the Group
during the past year which will continue at a lower level until
mid-2023. Break fees of US$21.2 million in total plus associated
break fee finance costs will be paid under the lease arrangements
relating to Stobart Air's aircraft as the aircraft are returned to
the GOAL Lessors, following which the aircraft leases and parent
company guarantees will expire and Propius will become dormant. The
Directors believe cash flow discipline, coupled with the depth of
operational talent within the businesses, will help protect the
value of the Company's core assets and aid recovery as vaccine
programmes are rolled out, with activity expected to slowly
increase over the coming months.
London Southend Airport
London Southend Airport has a strong and differentiated
commercial passenger proposition and allows airlines to generate
similar yields to other London airports but at a lower cost per
passenger, including through the current usage of airline marketing
contributions. The Company believes that this low-cost proposition
will appeal to cost conscious airlines as the aviation sector
recovers from the pandemic.
Lockdown restrictions curtailed much of the commercial passenger
operations at London Southend Airport during 2020 and 2021 as
evolving quarantine arrangements and late changes to travel
corridors eroded passenger confidence when restrictions were
lifted. As a result, 147,000 passengers flew through London
Southend Airport in FY21 compared to 2.14 million in the prior
year. Of those 147,000 passengers, 68,000 flew in March 2020 before
travel restrictions took hold. Though some flying resumed in June
2021, with 4,555 passengers flying, the Directors do not expect
commercial passenger operations to restart in earnest until much
later in 2021.
In response to this trading environment, management took a range
of decisive actions to significantly reduce London Southend
Airport's cash burn, including extensive use of the UK Government's
furlough scheme. London Southend Airport benefitted from continued
operations and income from its global logistics operation
throughout the year. However, movements reduced during January and
February 2021 due to Brexit uncertainty and seasonal variances.
While the logistics operations involved five daily rotations
pre-Brexit, it returned to three daily rotations in March 2021.
Stobart Air and Propius
On 20 April 2021, the Group announced it had entered into
agreements for the sale of its entire shareholdings in Stobart Air
Unlimited Company (which operated regional flights under a
franchise agreement for Aer Lingus) and Stobart Air (UK) Limited,
the owner of Carlisle Lake District Airport to Ettyl Limited.
On 28 May 2021, Ettyl advised that its original funding package
to support the transactions was no longer available and that it was
in discussions on alternative funding options. On 12 June 2021, the
Company announced that it was clear that Ettyl was unable to
conclude the transactions on the original terms or to obtain an
alternative funding package within the required timescale and
exercised its right to terminate the contracts for the transactions
with immediate effect. Further, in the absence of any alternative
purchasers or sources of funding for the Stobart Air business
within the timescales required, the Company advised the board of
Stobart Air that it would not continue to provide financial support
to the Stobart Air business going forward. As a result of this, the
board of Stobart Air terminated its franchise agreement with Aer
Lingus and ceased trading and appointed a liquidator on 14 June
2021.
The Company also announced that it had undertaken certain
contingency planning measures and has agreed in response to these
developments that it will continue to fund the lease obligations
for certain of Stobart Air's aircraft through to termination of the
leases in April 2023 under the terms of its pre-existing guarantee,
and confirmed that it would take immediate steps to seek sublease
arrangements for the aircraft with alternative operators to
mitigate the impact on the Group.
The Company remains responsible for certain obligations to Aer
Lingus under the franchise agreement which were also the subject of
a pre-existing guarantee and have become payable following
termination of the franchise agreement. These obligations and the
guarantees entered into in early 2017 were the reason that the
Group reacquired the airline and its related leasing company in
April 2020. This enabled the Group to manage and seek to mitigate
the impact of these liabilities following the administration of
Connect Airways Limited.
In the announcement on 20 April 2021, the Company set out the
cash flow impact on the Group on the assumption that the
transactions concluded. The following table reflects the amended
position over the period to the end of the leases assuming that the
Group is unable to sublease the aircraft. It also includes the
termination of the sale of Carlisle Lake District Airport which had
been set to be concluded for consideration of GBP15 million.
FY22 FY23 FY24
Cash outflow reported previously
(GBP millions)......... (16) (9) (24)
Additional cash impact arising
from liquidation..... (18)(1) (13) (2)
Total cash impact.......................................................... (34) (22) (26)
Note:
(1) Cash impact reflects that the Group will retain ownership of
Carlisle Lake District Airport rather than receive sale proceeds of
GBP15 million.
Since April 2020, the Company has taken all steps to minimise
the cash requirement of Stobart Air while seeking to find a
purchaser recognising the importance of the airline to connectivity
between the United Kingdom and Ireland, the 480 jobs involved and
the fact that a sale would have been a better outcome for
Shareholders. The Company has been successful in reducing the
impact of its pre-existing obligations and in agreeing terms under
which it has control of residual obligations through to expiry.
However, the continuing impact of the pandemic which has resulted
in almost no flying since April 2020 and the decision taken by Aer
Lingus to award preferred bidder status to another party for the
franchise agreement beyond its expiry in December 2022
significantly hampered the exhaustive steps taken to secure a
future for the business and its staff.
Esken will retain the ownership of Carlisle Lake District
Airport but will actively explore strategic options for the use of
this asset in discussion with stakeholders including potential
alternative commercial opportunities for the airport.
Teesside International Airport
On 26 July 2021, the Company announced the conclusion of its
role as strategic partner and operator of Teesside International
Airport and transferred its 25% ownership of Teesside International
Airport to a new Teesside Airport Foundation for a nominal
consideration. If there were to be a future sale of Teesside
International Airport before 25 January 2023, the Company has
agreed with TVCA that Esken would be entitled to share in the
proceeds of that sale up to an amount not exceeding GBP31.3
million, which would be used for general corporate purposes.
KEY FACTORS AFFECTING RESULTS OF OPERATIONS
The results of the Group's operations have been, and will
continue to be, affected by many factors, some of which are beyond
the Group's control. This section sets out certain key factors the
Group considers have affected the Group's results of operations in
FY19, FY20 and FY21 and could affect its results of operations in
the future.
Stobart Aviation
Macroeconomic conditions
Stobart Aviation's success depends to a significant extent on
discretionary consumer spending, which is influenced by general
economic conditions, including employment, disposable income,
inflation, consumer credit availability and interest rates. Airport
passenger traffic, which directly impacts both aeronautical and
non-aeronautical revenue, tends to vary with economic growth and
will therefore be impacted by the overall economic outlook.
Passenger traffic and aircraft movements (i.e. landings or
take-offs) over the course of March 2020 fell sharply to nearly
zero as a result of the COVID-19 pandemic. Passenger numbers have
improved to an average of 277 per day over the course of July 2021
and aircraft movements (primarily relating to logistics) have
started to recover at an average of ten per day in the same period
and the Group expects this recovery to continue gradually until the
end of February 2022 under a 'reasonable worst case scenario'. The
Group anticipates that economic conditions in the United Kingdom
and Europe will remain challenging in the short term following the
resumption of flights in the United Kingdom and that the speed of
recovery of passenger traffic will therefore be limited throughout
the remainder of FY22.
Passenger demand
The Group's aeronautical and non-aeronautical revenue is
directly impacted by passenger demand at its airports. In FY19 and
FY20 London Southend Airport served 1.49 million and 2.14 million
passengers, respectively. As described in "Recent Developments"
above, the COVID-19 pandemic has had a significant and adverse
impact on passenger demand, with London Southend Airport serving
147,000 passengers in FY21. Passenger demand has remained
suppressed in the first five months of FY22, which the Group
expects a gradual resumption of passenger travel until the end of
February 2022, with an average of 38,000 passengers per month,
compared to pre-COVID-19 levels of 159,000 in the corresponding
period in FY20, under a 'reasonable worst case scenario', and the
phased recovery will continue with passenger numbers at
pre-COVID-19 average run rate by April 2023, compared to
pre-COVID-19 levels of 178,000 for the full year FY20, under a
'reasonable worst case scenario'.
Aeronautical revenue consists of tariffs levied by the Group's
airports on their airline customers, and a portion of these tariffs
are based on the number of departing passengers per aircraft. In
addition, a portion of the tariffs include landing charges for
aircraft arriving at the Group's airports. Because the operating
contracts with the airlines operating at the Group's airports do
not commit either party to specific volumes of activity, airlines
can add or cancel flights to/from the Group's airports relatively
easily in response to shifts in passenger demand.
Non-aeronautical revenue consists of, among other things, retail
concession fees, car parking, rail services, revenue from the hotel
at London Southend Airport and advertising. Car parking, rail
services and hotel revenue is directly correlated with the number
of passengers using the Group's airports, and the amount the Group
is able to charge for advertising space and retail concessions is
also correlated to passenger demand. In addition, fees paid by
certain of the Group's retail concession customers are based in
part on the concessions' revenue, which is generally directly
related to passenger traffic.
Number of airlines and destinations served
Stobart Aviation's success depends to a significant extent on
its ability to attract new airline customers and increase the
destinations served by those customers, as this will increase
aeronautical revenue and passenger volume-dependent
non-aeronautical revenue.
FY19 saw substantial growth in the number of flights to/from
London Southend Airport operated by easyJet, and in FY20, Ryanair,
Wizz Air, Loganair and FlyOne each began operating flights to/from
London Southend Airport. The COVID-19 pandemic had a significant
and adverse impact on the Group's airline customers in FY21,
contributing to Flybe's entry into Administration on 5 March 2020
and easyJet's decision to close its bases at London Southend
Airport and two further airports in August 2020 as part of a wider
cost-cutting exercise, and continued to have a significant and
adverse impact on passenger volumes in the first three months of
FY22.
Stobart Aviation Services contract wins and renewals
The Group's ability to win new and renew existing contracts is
key to the Stobart Aviation Services business, which accounted for
16 per cent., 27 per cent. and 47 per cent. of Stobart Aviation's
revenue in FY19, FY20 and FY21, respectively. The COVID-19 pandemic
had a significant and adverse impact on the Group's airline
customers in FY21 and contributed to Flybe's entry into
Administration on 5 March 2020.
Stobart Aviation Services was awarded its first external
contract in March 2018 with easyJet to provide ground handling
services at London Stansted Airport. The Group added a further two
airline customers in FY19 and 13 in FY20, and now provides services
to 13 airlines at three airports across the United Kingdom. In
FY21, the arrangements to provide ground handling services for
Logan Air at Glasgow and Edinburgh airports were terminated.
The Group's Aviation Services contracts employ cost-plus, fixed
cost and price per turn contracts used to appeal to both larger and
smaller airlines to be handled on a frequent or ad hoc basis, and
the contracts vary in duration, but are typically three to five
years. Revenue depends on the number of flights operated by the
business' customers.
Seasonality
Stobart Aviation's business is subject to seasonality as it is
largely dependent on the leisure segment of the travel industry,
which is particularly active during the summer season. Accordingly,
the continuation of travel restrictions as a result of the COVID-19
pandemic into the peak summer travel season for a second year can
be expected to have a disproportionate impact on the Group's
results of operations in FY22, as they did in FY21. Ordinarily, the
operating division's profitability tends to increase in the summer
as a result of higher passenger volume and is generally lower in
the fourth quarter of the Group's financial year when fewer people
travel and airlines reduce the number of flights operated. Adverse
weather conditions can also result in short-term fluctuations in
trading patterns, particularly during the winter when severe
weather can result in flight cancellations, although this can be
offset by higher passenger spend in airport as a result of flight
delays.
Stobart Energy
Plant commissioning
The primary driver of Stobart Energy's revenue from the supply
of waste wood fuel in the period under review has been the
completion of the commissioning phase of the biomass energy plants
that the Group is contracted to supply. Plants completed their
commissioning phase throughout the period under review, with the
highest concentration in the summer of 2018. Following
commissioning, the plants become operational and the Group is able
to start supplying waste wood fuel under its contracts.
ROC subsidies
Under the United Kingdom's Renewables Obligation scheme, an ROC
is issued by Ofgem to an operator of an accredited renewable energy
generator for every megawatt hour of renewable energy that it
generates. The operator then sells its ROCs to electricity
suppliers alongside the electricity supplied, thereby allowing the
operator to receive a premium in addition to the wholesale
electricity price. Suppliers submit their purchased ROCs to Ofgem
to demonstrate compliance with the Renewables Obligation scheme.
Non-compliant suppliers must pay a penalty.
Accreditation under the Renewables Obligation scheme closed to
new biomass energy plants in September 2018. Of the biomass energy
plants with which the Group had supply agreements, all but one
completed the commissioning phase before the deadline and have
therefore been accredited. The one plant that did not obtain
accreditation is not currently operating and has terminated its
supply agreement with the Group.
The timing of the Renewables Obligation scheme closure drove the
number of biomass energy plants commencing operations during the
period under review. Because the Renewables Obligations scheme is
now closed to new biomass energy plants and will terminate entirely
in 2037, the Group does not expect further such plants to be
built.
Consumer demand for waste wood fuel
Stobart Energy's business depends on the demand from its biomass
energy plant customers, which in turn is directly dependent on
consumer demand for renewable and biomass energy. Such demand has
increased during the period under review as consumers have become
increasingly focused on climate change and sustainability
initiatives.
Bioenergy (including waste wood fuel) is Britain's second
largest source of renewable electricity (behind wind), generating
more than 11 per cent. of the United Kingdom's electricity in 2019
(according to UK Department for Business, Energy & Industrial
Strategy statistics). The UK Committee on Climate Change has stated
that sustainably sourced bioenergy could provide up to 15 per cent.
of the United Kingdom's primary energy by 2050.
Availability of waste wood and gate fees
Stobart Energy is dependent on the availability of waste wood
supply for its operations, as this is the primary input for the
production of waste wood fuel.
In addition, the Group charges third parties a gate fee for
taking waste wood from them. The Group's gate fees are not
contracted with many of its waste wood suppliers, and in many cases
such suppliers are not committed to supplying any minimum volume.
Therefore, the Group's gate fee revenue is variable and subject to
shifts in demand and availability of supply. For example, in
November 2019, gate fees declined significantly due to a
combination of a seasonal decline in waste wood supply, demand from
UK biomass energy plants peaking and a six-month drop in
construction output due to Brexit uncertainties. In addition, the
UK national lockdown announced on 23 March 2020 in response to the
COVID-19 pandemic initially resulted in the closure of household
waste and recycling centres operated by local authorities and of
the construction and demolition sectors. Without these key sources
of supply, the Group's inbound waste wood supply decreased as much
as 80 per cent. year-on-year and Stobart Energy entered FY21 at its
lowest level of gate fees in recent years. Gate fees impact on
pricing into the Group's own facilities and the facilities operated
by its contracted fuel producers. Therefore, gate fees have a large
impact on both the revenue and cost base of the business. In
addition to the impact on the Group's gate fees, the supply
shortage during the first half of 2020 caused the Group to be
unable to supply its biomass energy plant customers. As a result,
the Group issued force majeure notices to many of its biomass
energy plant customers pursuant to the terms of certain of its
supply agreements, although those force majeure conditions abated
later in 2020.
The supply of waste wood has improved considerably since the
time of the first lockdown and as a result gate fees are steadily
returning toward pre-COVID-19 levels.
Seasonality
Stobart Energy's operations are affected by seasonal factors. In
particular, supply of timber is generally low in the winter months
in the United Kingdom, whilst fuel demand increases during that
time due to the cold weather.
As a result of this imbalance, the Group has strategically
prioritised the storage of fuel in its facilities. The Group has
obtained bespoke permit variations for certain of its fuel
production and storage facilities, allowing storage of material in
larger stockpiles and longer periods for finished fuel. The Group's
own facilities can store up to 102,000 tonnes of waste wood fuel,
which equates to approximately 1.9 months' worth of supply. In
addition, the Group has a significant number of other fuel
production and storage facilities in strategic locations around the
United Kingdom that are operated by third-party contractors for
supply into UK biomass energy plants. The Group's national network
of fuel production and storage facilities are critical to the
operation of many of the United Kingdom's largest renewable biomass
energy plants, which are not always able to store large volumes of
processed material at their own sites.
Notwithstanding the Group's storage capabilities, the Group's
revenue and cash flow may be negatively impacted by supply
shortages in the case of adverse weather affecting the supply of
timber in the United Kingdom or by a decrease in demand if the
United Kingdom experiences uncharacteristically warm winters.
Stobart Rail & Civils
Exiting Stobart Rail & Civils
Stobart Rail & Civils continued to trade below expectations
in the first half of FY21, in part due to delays in Network Rail
awarding contracts at the start of its Control Period 6 and the
Group's continued exposure to a poor performing legacy project. As
a result of that poor performance, the Group divested Stobart Rail
& Civils, previously a non-core operating division, to Bavaria
Industries Group AG in July 2020.
New contracts during FY19 and FY20
Other than contracts with other Group entities, all of the
Group's Rail & Civils contracts were competitively tendered,
and therefore the Group's ability to win new contracts was key to
the Stobart Rail & Civils operating division.
Historically, a significant portion of Stobart Rail &
Civils' revenue was generated from projects for other Group
operating divisions. For example, Stobart Rail & Civils
delivered a runway improvement project and new train station at
London Southend Airport, constructed the new terminal at Carlisle
Lake District Airport and undertook improvement works at Stobart
Energy facilities. In FY19, the Group implemented a strategic plan
aimed at both increasing work with existing partners and securing
new contracts. The following table sets forth Stobart Rail &
Civils' internal and external revenue during the periods
indicated.
FY20 FY19
--------- ------
(GBP'000)
Internal
revenue.....................................................................................
. 13,404 20,480
External
revenue..................................................................................... 28,077 31,867
--------- ------
Total revenue(1)
...................................................................................... 41,481 52,347
Government spending
Stobart Rail & Civils historically derived a majority of its
revenues from contracts with the UK Government, its agencies and
other public sector bodies. The level of government spending on
public infrastructure projects therefore directly affected the
Group's results of operations prior to its disposal of Stobart Rail
& Civils in July 2020.
During FY19 and FY20, there was a trend of national and local
governments and public entities cutting budgets, including spending
on public infrastructure, which continued into FY21. This led to
fewer new projects being available on which to bid, as well as
delays or cancellations of existing projects. For example, Stobart
Rail & Civils traded below expectation in FY20, in part due to
delays in Network Rail awarding contracts at the start of its
Control Period 6.
KEY FACTORS AFFECTING COMPARABILITY
IFRS 16
The Group adopted IFRS 16 Leases on 1 March 2019, which resulted
in right-of-use assets of GBP60.9 million, a net investment of
GBP14.0 million, liabilities of GBP78.2 million and GBP2.8 million
adjustment to equity being recognised on the Group's balance sheet.
The right-of-use assets recognised on transition were adjusted for
any prepaid or accrued lease expenses. The lease liability was
calculated as the future lease repayments, discounted at the
incremental borrowing rate. The weighted average incremental
borrowing rate applied on transition was 4.2 per cent. The Group
has a sub-lease on one of its properties and has recognised a net
investment for this particular property, with the difference
between the leases as lessee and lessor taken directly to retained
earnings. The Group applied the modified retrospective approach and
as such the comparative periods have not been restated. The Group
has applied the ongoing recognition exemptions for short-term
leases and low value leases (less than GBP5,000) and applied the
following practical expedients on transition:
-- reliance on previous identification of a lease (as provided
by IAS 17) for all contracts that existed on 1 March 2019;
-- reliance on previous assessments on whether leases are
onerous instead of performing an impairment review;
-- accounting for operating leases with a remaining term of less
than 12 months from 1 March 2019 as short-term leases;
-- exclusion of initial direct costs from the measurement of the
right-of-use asset at 1 March 2019; and
-- use of hindsight in determining the lease term where there is
the option to extend the lease.
For a reconciliation between operating lease commitments as
lessee under IAS 17 and finance lease liability recognised under
IFRS 16, please see note 1 to the FY20 Financial Statements.
Restated FY20 comparative financial information
On 14 July 2020, the Group divested Stobart Rail Limited to
Bavaria Industries Group AG. The operations of Stobart Rail Limited
represented a separate major line of business. The Group's 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 of the FY21 Financial Statements. The comparative results
for the year ended 29 February 2020 included in the consolidated
income statement of the FY21 Financial Statements have been
restated on the same basis. Refer to note 5 of the FY21 Financial
Statements for more details.
The Group's audited consolidated FY20 Financial Statements have
not been restated or reissued and as a result the audited FY20
Financial Statements are not directly comparable to the financial
information presented by the Group in respect of subsequent
financial periods. The discussion of movements in the Group's
results of operations and financial position between FY20 and FY21
in this Section III (Operating and Financial Review) is based on
the unaudited comparative financial statements for the year ended
29 February 2020 included in the FY21 Financial Statements. The
discussion of movements in the Group's results of operations and
financial position between FY19 and FY20 in this Section III
(Operating and Financial Review) is based on the audited
comparative financial statements for the year ended 28 February
2019 included in the F20 Financial Statements.
DESCRIPTION OF KEY LINE ITEMS ON THE INCOME STATEMENT
Revenue
Stobart Aviation provides some of its services under contracts
and others relate to the sale of goods. Revenue is recognised in
the consolidated income statement in the accounting period in which
the services are rendered. It is recognised at the fair value of
the consideration received or receivable, net of VAT. The principal
sources of revenue within the Stobart Aviation division are
aeronautical income, jet fuel sales, retail and concession income,
hotel income, surface access income (including car parking and
train tickets) and ground handling services.
A receivable is recognised when the services are delivered as
this is the point in time that the consideration is unconditional
because only the passage of time is required before the payment is
due. Any marketing contributions paid to airlines under contractual
agreements are separately disclosed, not netted against revenue, as
the marketing contributions arise from a separate transaction that
is not linked to the revenue generated.
Revenue from Stobart Energy mainly relates to gate fee income,
in relation to waste wood taken, and delivery of processed material
to biomass energy plants. Gate receipts are not contracted, and
revenue received is recognised on receipt of waste material as this
is the point in time that the consideration is unconditional. The
majority of revenue from the supply of processed material is
contracted. These contracts detail the specification of material
required, annual tonnages required and the price per tonne. Revenue
is recognised on delivery as this is the point in time that the
consideration is unconditional.
Within certain fuel supply agreements there are 'take or pay'
provisions where revenue can be recognised on material not taken by
plants. This revenue is recognised at a point in time in line with
specific contractual provisions. During the year, the tonnages
delivered under each contract are reviewed to ensure that
contracted tonnages will be met. As soon as there is reason to
believe contract tonnages will not be met, a contract liability is
provided to reduce the revenue recognised to date.
Prior to its disposal, Stobart Rail & Civils recognised
revenue based on the specification within the contract and the
input method was used to measure progress of delivery. If a
modification to the contract occurred, the specifics of the
modification were assessed as to whether it represented a separate
performance obligation or if it was a modification to the existing
contract. Consideration was given to ensure that recognition of a
contract modification was only recognised as revenue when either it
was approved or it was considered legally enforceable. Revenue was
only recognised on a contract if it was highly probable not to
result in a significant reversal of revenue in future periods.
Stobart Investments revenue relates to dividend income. This
revenue is recognised on receipt of dividend as that is the point
in time that the consideration is unconditional.
Revenue from Stobart Infrastructure relates to rental income
under contracts. Revenue is recognised in the consolidated income
statement at the contractual rental income over the term of the
lease, as these charges represent the service provided.
In FY20 and prior, the Group generated royalty revenue from the
licence of its trademarks and designs, which was recognised over
time in line with the relevant contract.
Other income
Other income comprises the Group's income that does not relate
to its principal activities.
Operating expenses
Operating expenses primarily comprise employee benefits
(including salaries), direct material costs, diesel and jet fuel
and other purchases and external expenses, as well as certain
non-underlying items. Further detail can be found in note 8 to the
FY21 Financial Statements.
Share of post-tax profits of associates and joint ventures
Share of post-tax profits of associates and joint ventures
comprises the results of the Group's Connect Airways joint venture,
which entered Administration on 10 March 2020, including costs
incurred by Connect Airways in acquiring Flybe, Stobart Air and
Propius.
(Loss)/gain on swaps
The Group uses derivative financial instruments such as fuel and
currency swaps to mitigate the risk of fuel price and currency
fluctuations. Losses and gains on these financial instruments are
recorded as (loss)/gain on swaps on the Group's income
statement.
Depreciation
Depreciation of property, plant and equipment is calculated
using the straight line method. Further detail can be found in note
15 to the FY21 Financial Statements.
Amortisation
Amortisation relates to the Eddie Stobart brand, which until May
2020 was owned by the Group.
Impairment-Other
Impairment-Other includes the write down in the value of certain
Stobart Infrastructure assets, the write off of goodwill and other
intangible assets attributable to Stobart Rail & Civils and a
write down in the value of other property, plant and equipment
(PPE) and property inventory.
Impairment-Loan receivables from joint venture
Impairment-Loan receivables from joint venture comprises
primarily the write down of the Connect Airways loans that are
deemed to have nil value following Flybe and Connect Airways
entering Administration in 2020.
Impairment of loan notes
Impairment of loan notes comprises an impairment in FY20 in
relation to the shareholder loan notes relating to Mersey Bioenergy
Holdings Limited, the Widnes biomass plant owner.
Finance costs
Finance costs primarily comprise interest expense related to the
Group's debt, finance charges payable under leases and foreign
exchange losses. Further detail can be found in note 11 to the FY21
Financial Statements.
Finance income
Finance income primarily comprises interest on a loan to Connect
Airways, as well as bank interest receivables and foreign exchange
gains. Further detail can be found in note 10 to the FY21 Financial
Statements.
Tax
Tax primarily comprises accrued charges and credits and payments
made pursuant to UK corporation tax liabilities. Further detail can
be found in note 12 to the FY21 Financial Statements.
COMPARISON RESULTS OF OPERATIONS
The following table sets forth the Group's consolidated income
statement for the periods indicated.
Year ended
29 February
2020
Year ended Year ended Year ended
28 February 29 February 28 February
2021 (restated)(1) 2020 2019
------------- --------------- ------------- -------------
Continuing Operations (GBP'000)
Revenue..............................................
.............................. 110,724 142,098 170,175 146,889
Other
income...............................................
...................... 5,798 4,700 4,700 1,310
Operating expenses -
other................................................
.. (134,263) (142,943) (178,288) (152,766)
Share of post-tax profits of
associates and joint ventures......... (218) (9,765) (9,765) (1,740)
Loss on
swaps................................................
.................... 80 (300) (300) (353)
Adjusted EBITDA(2)
.....................................................
...... (17,879) (6,210) (13,478) (6,660)
Depreciation.........................................
............................. (31,814) (20,024) (22,723) (16,305)
Amortisation.........................................
............................. - (7,456) (7,456) (3,938)
Loss on
acquisition...........................................
.................. (58,182) - - -
Impairment -
other................................................
............. (22,097) (48,330) (56,804) (7,800)
Impairment-loan receivables
from joint venture................... - (45,105) (45,105) -
Operating
loss.................................................
................... (129,972) (127,125) (145,566) (34,703)
Impairment of loan
notes................................................
.... (8,000) (2,754) (2,754) (3,208)
Finance
costs................................................
.....................
.....................................................
................................... (17,214) (14,453) (14,017) (5,213)
Finance
income...............................................
................... 4,849 4,917 4,353 1,010
Loss before
tax..................................................
................. (150,337) (139,415) (157,984) (42,114)
Tax..................................................
................................. 7,083 8,390 8,390 (530)
Loss for the year from continuing
operations(3) ...................... (143,254) (131,025) (149,594) (42,644)
Notes:
(1) The comparative results for the year ended 29 February 2020
included in the consolidated income statement of the FY21 Financial
Statements have been restated where required due to IFRS 5 Discontinued
Operations in connection with the preparation of the FY21 Financial
Statements. Refer to note 5 of the FY21 Financial Statements
for more details. The Group's audited consolidated FY20 Financial
Statements have not been restated or reissued.
(2) Adjusted EBITDA is referred to as EBITDA in the FY20 Financial
Statements and FY21 Financial Statements.
(3) For the avoidance of doubt, the results of Stobart Air are
included in the Group's continuing operations for FY19, FY20
and FY21 as the decision to liquidate Stobart Air did not take
place until after the end of FY21.
Results of operations for the year ended 28 February 2021
compared to the year ended 29 February 2020
As described in "Key factors affecting comparability" above, the
comparative results for the year ended 29 February 2020 included in
the FY21 Financial Statements have been restated. The discussion
below is based on the unaudited comparative financial statements
for the year ended 29 February 2020 included in the FY21 Financial
Statements.
Revenue
Revenue decreased by GBP31.4 million, or 22.1 per cent., to
GBP110.7 million in the year ended 28 February 2021 from GBP142.1
million in the year ended 29 February 2020.
The following table sets forth the Group's total revenue by
operating division.
Year ended Year ended
28 February 29 February
2021 2020(1) Change
(GBP'000) GBP'000 %
Aviation............................................................
........... 24,742 56,786 (32,044) (56.4)
Energy..............................................................
.......... 75,019 76,339 (1,320) (1.7)
Investments.........................................................
........ 9,034 2,127 6,907 324.7
Non-strategic
infrastructure........................................... 1,059 2,777 (1,718) (61.9)
Group central and eliminations(2)
................................... 870 4,069 (3,199) (78.6)
------------- ------------ -------- ------
Total revenue
....................................................................
................. 110,724 142,098 (31,374) (22.1)
-----------------------------------------------------------------------
Notes:
(1) The comparative results for the year ended 29 February 2020
included in the consolidated income statement of the FY21 Financial
Statements have been restated where required due to IFRS 5 Discontinued
Operations in connection with the preparation of the FY21 Financial
Statements. Refer to note 5 of the FY21 Financial Statements
for more details. The Group's audited consolidated FY20 Financial
Statements have not been restated or reissued.
(2) Group central and eliminations revenue comprises rental income,
brand licence income and merchandising income.
Aviation
Total revenue in the Aviation operating division decreased by
GBP32.0 million, or 56.4 per cent., to GBP24.7 million in the year
ended 28 February 2021 from GBP56.8 million in the year ended 29
February 2020. Revenue in the Aviation operating division was
significantly impacted by the COVID-19 pandemic, with passengers
numbers at London Southend Airport down 93.1 per cent. in FY21.
Energy
Total revenue in the Energy operating division decreased by
GBP1.3 million, or 1.7 per cent., to GBP75.0 million in the year
ended 28 February 2021 from GBP76.3 million in the year ended 29
February 2020. Tonnes of waste wood fuel supplied decreased 6.7 per
cent. to 1.4 million tonnes in FY21.
In November 2019, gate fees declined significantly due to a
combination of a seasonal decline in waste wood supply, demand from
UK biomass energy plants peaking and a six-month drop in
construction output due to Brexit uncertainties. In addition, the
UK national lockdown announced on 23 March 2020 in response to the
COVID-19 pandemic initially resulted in the closure of household
waste and recycling centres operated by local authorities and of
the construction and demolition sectors. Without these key sources
of supply, the Group's inbound waste wood supply decreased as much
as 80 per cent. year-on-year and Stobart Energy entered FY21 at its
lowest level of gate fees in recent years. The supply of waste wood
has improved considerably since the time of the first lockdown and
as a result gate fees are steadily returning toward pre-COVID-19
levels.
Investments
Total revenue from the Investments operating division increased
to GBP9.0 million in the year ended 28 February 2021 from GBP2.1
million in the year ended 29 February 2020, primarily due to the
acquisition of Stobart Air in FY21.
Other income
Other income was GBP5.8 million in the year ended 28 February
2021 (compared to GBP4.7 million in the year ended 29 February
2020), which primarily relates to public service obligation income
in Stobart Air (GBP5.5 million) and profit on disposal of PPE.
Operating expenses - other
Operating expenses decreased by GBP8.7 million, or 6.1 per
cent., to GBP134.3 million in the year ended 28 February 2021 from
GBP142.9 million in the year ended 29 February 2020.
Aviation
Operating expenses in the Aviation operating division decreased
by GBP26.7 million, or 46.4 per cent., to GBP30.8 million in the
year ended 28 February 2021 from GBP57.5 million in the year ended
29 February 2020. This decrease was primarily due to the steps
taken by Stobart Aviation to manage costs. Stobart Aviation
suspended all recruitment, modified employment contracts to improve
flexibility and cut both bonus and any annual cost of living
increases, as well as made some roles redundant. In addition,
Stobart Aviation took advantage of government support packages, for
example putting numbers of staff on furlough and applying to the
Airport and Ground Operations Support Scheme. The Group also
reduced costs within Stobart Aviation Services by closing its
operations at Edinburgh and Glasgow Airports, placing a number of
staff on furlough and making some roles redundant. This allowed the
business to manage costs and focus operations at London Southend
Airport, London Stansted Airport and Manchester Airport.
Energy
Operating expenses in the Energy operating division decreased by
GBP1.0 million, or 1.5 per cent., to GBP65.1 million in the year
ended 28 February 2021 from GBP66.1 million in the year ended 29
February 2020. This decrease was primarily due to reduced staff
costs following a review of the business where some roles were made
redundant and the furlough scheme was utilised as a result of the
COVID-19 pandemic.
Share of post-tax profits of associates and joint ventures
Share of post-tax profits of associates and joint ventures was a
loss of GBP0.2 million in the year ended 28 February 2021, compared
to a loss of GBP9.8 million in the year ended 29 February 2020.
Share of post-tax profits of associates and joint ventures in the
year ended 29 February 2020 related to the equity accounted losses
of Connect Airways up to the value of its investment (GBP9.1
million). Connect Airways, and its subsidiary Flybe, entered
Administration in FY21 and the Group impaired all outstanding
balances to nil.
Loss on swaps
Loss on swaps was GBP0.0 million in the year ended 28 February
2021, compared to GBP0.3 million in the year ended 29 February
2020.
Adjusted EBITDA
Adjusted EBITDA was a loss of GBP17.9 million in the year ended
28 February 2021, compared to a loss of GBP6.2 million in the year
ended 29 February 2020, driven by the movements in the Group's
revenue, operating expenses, other income and share of post-tax
profits of associates and joint ventures, as discussed above. In
addition, losses in the Investment operating division resulted from
the inclusion of Stobart Air and Propius, which were acquired in
FY21. Adjusted EBITDA as presented in this announcement is referred
to as EBITDA in the FY20 Financial Statements and FY21 Financial
Statements.
Depreciation
Depreciation increased by GBP11.8 million, or 58.9 per cent., to
GBP31.8 million in the year ended 28 February 2021 from GBP20.0
million in the year ended 29 February 2020. This increase was
primarily due to the right-of-use aircraft acquired as part of the
purchase of Stobart Air and Propius in FY21.
Amortisation
Amortisation decreased to nil in the year ended 28 February 2021
from GBP7.5 million in the year ended 29 February 2020. There was
no amortisation in FY21 due to the Stobart brands being reclassed
to assets held for sale at year end FY21.
Loss on acquisition
Loss on acquisition increased to GBP58.2 million in the year
ended 28 February 2021 from nil in the year ended 29 February 2020.
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 wholly-owned subsidiaries. A
GBP58.2 million loss on acquisition was recorded, due to the
settlement of pre-existing relationships.
Impairment-other
The Group's impairment-other in the year ended 28 February 2021
was GBP22.1 million, which primarily related to the impairment of
all PPE in Stobart Air and the right-of-use aircraft in Propius
(GBP22.9 million), offset in part by the impairment reversal
related to three land and building and property inventory assets
that were subject to external independent development valuations at
the end of FY21 (GBP0.8 million).
The Group's impairment-other in the year ended 29 February 2020
was GBP48.3 million, primarily relating to a write down of Carlisle
Lake District Airport (GBP21.0 million) and impairment of the Eddie
Stobart and Stobart brands following the sale to Eddie Stobart
(GBP19.9 million).
Impairments-Loan receivables from joint venture
The Group's impairments-loan receivables from joint ventures in
the year ended 28 February 2021 were nil.
Operating loss
As a result of the above, the Group's operating loss was
GBP130.0 million in the year ended 28 February 2021, compared to a
loss of GBP127.1 million in the year ended 29 February 2020.
Impairment of loan notes
The Group's impairment of loan notes in the year ended 28
February 2021 were GBP8.0 million, relating to an impairment charge
(from GBP8.0 million to nil) in relation to the shareholder loan
notes relating to Mersey Bioenergy Holdings Limited, the Widnes
biomass energy plant owner. The impairment was based on discounted
forecast future cash flows provided, which had deteriorated over
the period with the awaited refinancing still not complete.
Finance costs (net)
Finance costs (net) increased by GBP2.8 million, or 29.7 per
cent., to GBP12.4 million in the year ended 28 February 2021 from
GBP9.5 million in the year ended 29 February 2020. This increase
was primarily due to higher interest charges on the Existing
Facility and interest on IFRS 16 leases in the Stobart Air and
Propius businesses. Finance income decreased by GBP0.1 million in
FY21 primarily due to no interest being received on the loans to
Connect Airways after it entered administration in March 2020,
partially offset by the revaluation of financial liabilities in
FY21.
Tax
Tax was a credit of GBP7.1 million in the year ended 28 February
2021, compared to a credit of GBP8.4 million in the year ended 29
February 2020. The credit reflects an effective tax rate of 4.4 per
cent., which is lower than the standard rate of 19 per cent. mainly
due to deferred tax assets not recognised in respect of losses
carried forward. The deferred tax liabilities have been
recognised/provided at 19 per cent., being the rate enacted at 28
February 2021.
Loss for the year from continuing operations
As a result of the above, the Group's loss for the year from
continuing operations was GBP143.3 million in the year ended 28
February 2021, compared to a loss of GBP131.0 million in the year
ended 29 February 2020.
Results of operations for the year ended 29 February 2020
compared to the year ended 28 February 2019
As described in "Key factors affecting comparability" above, the
discussion below is based on the audited financial statements for
the year ended 29 February 2020 included in the FY20 Financial
Statements.
Revenue
Revenue increased by GBP23.3 million, or 15.9 per cent., to
GBP170.2 million in the year ended 29 February 2020 from GBP146.9
million in the year ended 28 February 2019.
The following table sets forth the Group's total revenue by
operating division.
Year ended Year ended
29 February 28 February
2020 2019 Change
(GBP'000) (GBP'000) %
Aviation...........................................................
............. 56,786 39,411 17,375 44.1
Energy.............................................................
............. 76,339 65,143 11,196 17.2
Rail &
Civils.............................................................
..... 41,481 52,347 (10,866) (20.8)
Investments........................................................
.......... 2,127 2,655 (528) (19.9)
Non-strategic
infrastructure............................................ 2,777 2,187 590 27.0
Group central and eliminations(1)
..................................... (9,335) (14,854) 5,519 37.2
------------- ------------ --------- ------
Total revenue
............................................................... 170,175 146,889 23,286 15.9
----------------------------------------------------------------------
Note:
(1) Group central and eliminations revenue comprises rental income,
brand licence income and merchandising income.
Aviation
Total revenue in the Aviation operating division increased by
GBP17.4 million, or 44.1 per cent., to GBP56.8 million in the year
ended 29 February 2020 from GBP39.4 million in the year ended 28
February 2019. Passenger numbers increased 43.1 per cent. to 2.14
million in FY20, primarily driven by new relationships with
Ryanair, Wizz Air, Loganair and FlyOne, each of which began
operating flights at London Southend Airport in FY20. In addition,
the Group entered into a strategic partnership with the Tees Valley
Combined Authority to provide management services in respect of the
Teesside International Airport, which has subsequently been
terminated.
In addition, the Group announced in October 2019 that it had
entered into a two-year agreement with a global logistics customer
to provide facilities and expertise to support the import and
export of goods at London Southend Airport. Stobart Aviation
Services added 13 new customers in FY20 and provided services to 16
airlines across five airports in the United Kingdom at the end of
that financial year.
Energy
Total revenue in the Energy operating division increased by
GBP11.2 million, or 17.2 per cent., to GBP76.3 million in the year
ended 29 February 2020 from GBP65.1 million in the year ended 28
February 2019. Tonnes of waste wood fuel supplied increased 11.5
per cent. to 1.5 million tonnes in FY20, primarily due to the
maturing state of the biomass energy plants the Group supplies,
with all of the Group's biomass energy plant customers having
successfully completed commissioning and being fully operational as
at the end of FY20.
The Tilbury biomass energy plant experienced a seven-month
unplanned outage caused by a dust explosion. This meant that the
plant was not in a position to receive its contracted supply of
waste wood fuel from the Group, leading to in excess of 100,000
tonnes of waste wood being diverted to other customers and
processing sites across the United Kingdom, causing the Group to
incur significant costs and losses. During FY21, a settlement of
GBP3.1 million was reached with Tilbury Green Power over the
contractual 'take or pay' amounts due. As part of this one-off
settlement, GBP2.4 million was recognised within revenue under IFRS
15 by applying contract modification accounting.
Rail & Civils
Total revenue in the Rail & Civils operating division
decreased by GBP10.9 million, or 20.8 per cent., to GBP41.5 million
in the year ended 29 February 2020 from GBP52.3 million in the year
ended 28 February 2019. This decrease was primarily due to delays
in Network Rail awarding contracts at the start of its Control
Period 6 and the Group's continued exposure to a poor performing
legacy project. Included in total revenue for Rail & Civils in
FY20 is GBP13.4 million of internal revenue (FY19: GBP20.5
million), which comprises revenue from projects for other Group
divisions and which is eliminated on consolidation.
Other income
Other income was GBP4.7 million in the year ended 29 February
2020 (compared to GBP1.3 million in the year ended 28 February
2019). In February 2020, the Group entered into a settlement deed
with a renewable energy plant owner under which the long-term fuel
supply agreement was terminated. In recognition of the future
revenue forgone and with the plant confirming that it was no longer
intending to operate a waste wood fuel boiler, consideration
payable to the Group was agreed at an amount less than GBP5.0
million.
Operating expenses
Operating expenses increased by GBP25.5 million, or 16.7 per
cent., to GBP178.3 million in the year ended 29 February 2020 from
GBP152.8 million in the year ended 28 February 2019. The increase
was primarily due to the increases in Stobart Aviation and Stobart
Energy, as discussed in the divisional breakdowns below, partially
offset by the decrease in Stobart Rail & Civils and a decrease
in charges for litigation and claims, which in FY19 resulted from
the costs of a High Court dispute with Andrew Tinkler, the Group's
former Chief Executive.
Aviation
Operating expenses in the Aviation operating division increased
by GBP18.4 million, or 47.1 per cent., to GBP57.5 million in the
year ended 29 February 2020 from GBP39.2 million in the year ended
28 February 2019. This increase was primarily due to the division's
increased revenue during the year, as well as an increase in new
business and contract set-up costs related to route development at
London Southend Airport (GBP9.3 million). In addition, jet fuel
costs increased as a percentage of the division's costs as a result
of increased jet fuel sales as the number of aircraft movements
increased at the Group's airports.
Energy
Operating expenses in the Energy operating division increased by
GBP14.2 million, or 27.4 per cent., to GBP66.1 million in the year
ended 29 February 2020 from GBP51.9 million in the year ended 28
February 2019. This increase was primarily due to the division's
increased revenue during the year, as well as an increase in new
business and contract set-up costs related to delayed commissioning
at certain of the Group's customers (GBP2.3 million) and the
unplanned outage at the Tilbury biomass energy plant (GBP6.9
million). In addition, direct material costs increased as a
percentage of the division's costs as a result of the Group's
biomass energy plant customers completing their commissioning
phases. The division's other significant cost inputs, such as staff
costs, are largely fixed costs.
Rail & Civils
Operating expenses in the Rail & Civils operating division
decreased by GBP8.9 million, or 15.5 per cent., to GBP48.6 million
in the year ended 29 February 2020 from GBP57.5 million in the year
ended 28 February 2019. This decrease was primarily due to the
decrease in Stobart Rail & Civils' revenue during the year.
Share of post-tax profits of associates and joint ventures
Share of post-tax profits of associates and joint ventures was a
loss of GBP9.8 million in the year ended 29 February 2020, compared
to a loss of GBP1.7 million in the year ended 28 February 2019. The
change was primarily due to the increase in equity accounted losses
of Connect Airways up to the value of its investment (GBP9.1
million). Connect Airways, and its subsidiary Flybe, entered
Administration following FY20 year end and the Group has impaired
all outstanding balances to nil.
Adjusted EBITDA
Adjusted EBITDA was a loss of GBP13.2 million in the year ended
29 February 2020, compared to a loss of GBP6.3 million in the year
ended 28 February 2019, driven by the movements in the Group's
revenue, operating expenses, other income and share of post-tax
profits of associates and joint ventures, as discussed above.
Adjusted EBITDA as presented in this announcement is referred to as
EBITDA in the FY19 Financial Statements and FY20 Financial
Statements.
Loss on swaps
Loss on swaps was a loss of GBP0.3 million in the year ended 29
February 2020, compared to a loss of GBP0.4 million in the year
ended 28 February 2019. This change was primarily due to a downturn
in fuel prices partly offset by currency exchange rates.
Depreciation
Depreciation increased by GBP6.4 million, or 39.4 per cent., to
GBP22.7 million in the year ended 29 February 2020 from GBP16.3
million in the year ended 28 February 2019. This increase was
primarily due to additional assets recognised on transition to IFRS
16 (GBP3.7 million) and the further development of London Southend
Airport (GBP1.0 million).
Amortisation
Amortisation increased by GBP3.5 million, or 89.3 per cent., to
GBP7.5 million in the year ended 29 February 2020 from GBP3.9
million in the year ended 28 February 2019. This increase was
primarily due to the Eddie Stobart brand, which until May 2020 was
owned by the Group. Following a review of the brand during FY20,
the residual value was reduced, resulting in an increased annual
amortisation charge.
Impairment-Other
The Group's impairments-other in the year ended 29 February 2020
were GBP56.8 million, comprising:
-- a GBP21.0 million write down of Carlisle Lake District
Airport. Regional connectivity was affected by the failure of
Flybe, and so the Group recognised the likely importance of the
land ownership rather than the commercial aviation
opportunities;
-- a GBP19.9 million impairment of the Eddie Stobart and Stobart
brands following the sale to Eddie Stobart;
-- the GBP8.5 million write off of goodwill and brand value in Stobart Rail & Civils;
-- a GBP5.0 million and GBP0.7 million write down of the Stobart
Infrastructure Widnes and Runcorn properties, respectively,
reflecting the commercial reality of development land in the North
West of England; and
-- a GBP1.8 million write down of the Group's investment in
AirportR to reflect the value achieved on its latest
fundraising.
The Group's impairments in the year ended 28 February 2019 were
GBP7.8 million, primarily relating to a decrease in value of PPE at
the water port and storage site at Weston Point, Runcorn (GBP6.5
million) and property inventory at the Widnes site (GBP1.3
million).
Impairments-Loan receivables from joint venture
The Group's impairments-loan receivables from joint ventures in
the year ended 29 February 2020 were GBP45.1 million, comprising
the write down of the Connect Airways loans that were deemed to
have nil value.
Operating (loss)/profit
As a result of the above, the Group's operating loss was
GBP149.6 million in the year ended 29 February 2020, compared to a
loss of GBP34.7 million in the year ended 28 February 2019.
Impairment of loan notes
The Group's impairment of loan notes in the year ended 29
February 2020 were GBP2.8 million, relating to an impairment charge
in relation to the shareholder loan notes relating to Mersey
Bioenergy Holdings Limited, the Widnes biomass energy plant
owner.
The Group's impairments of loan notes in the year ended 28
February 2019 were GBP3.2 million, primarily relating to the
Group's 25 per cent. investment in its associated undertaking,
Shuban Power Limited, principally comprising shareholder loan
notes. The book value of loans outstanding from Shuban Power
Limited as at 28 February 2019 was GBP3.7 million. These amounts
were fully repaid in cash subsequent to the FY19 year end.
Finance costs (net)
Finance costs (net) increased by GBP5.5 million, or 129.9 per
cent., to GBP9.7 million in the year ended 29 February 2020 from
GBP4.2 million in the year ended 28 February 2019. This increase
was primarily due to interest on liabilities recognised following
the transition to IFRS 16. Other new finance costs in the year
include the coupon payable on the Exchangeable Bonds (GBP1.5
million) and dividend received in respect of Eddie Stobart that is
passed to bondholders (GBP2.1 million). Also included in finance
costs are foreign exchange losses of GBP0.6 million, compared to
gains of GBP0.9 million in 2019.
Finance income increased to GBP4.4 million, due to interest
receivable on loans to Connect Airways, which were impaired to nil
at the year-end, therefore this finance income will not continue
next year.
Tax
Tax was a credit of GBP8.4 million in the year ended 29 February
2020, compared to a charge of GBP0.5 million in the year ended 28
February 2019. The credit reflects an effective tax rate of 6.3 per
cent., which is lower than the standard rate of 19 per cent. mainly
due to deferred tax assets not recognised in respect of losses
carried forward. The deferred tax liabilities have been
recognised/provided at 17 per cent., being the rate enacted at 29
February 2020, however, following this date the tax rate has
increased to 19 per cent. If this rate was applied to the year-end
deferred tax liabilities, an additional charge of GBP0.7 million
would be recognised.
(Loss)/profit for the year from continuing operations
As a result of the above, the Group's loss for the year from
continuing operations was GBP149.6 million in the year ended 29
February 2020, compared to a loss of GBP42.6 million in the year
ended 28 February 2019.
LIQUIDITY AND CAPITAL RESOURCES
During FY19, FY20 and FY21, the Group's primary sources of
liquidity were the revenues generated from its operations,
disposals of assets, the Exchangeable Bonds, the Existing Facility
and the 2020 Capital Raise. The primary use of this liquidity was
to fund the Group's operations.
Cash flows
The following table sets out the condensed consolidated
statement of cash flows for the periods indicated.
As at As at As at
28 February 29 February 28 February
2021 2020 2019
------------ ------------ ------------
(GBP'000)
Net cash outflow from operating
activities............... (29,443) (22,221) (12,796)
Net cash inflow/(outflow) from investing
activities.... 4,979 (9,751) 9,863
Net cash inflow/(outflow) from financing
activities... 27,070 27,342 (25,743)
Increase/(decrease) in cash and
cash equivalents.... 2,606 (4,630) (28,676)
Cash and cash equivalents
at the beginning of the year.................................... 9,802 14,432 43,108
Cash and cash equivalents
at the end of the year............................................ 12,408 9,802 14,432
Net cash from operating activities
The Group's net cash outflow from operating activities was
GBP29.4 million in the year ended 28 February 2021 compared to
GBP22.2 million in the year ended 29 February 2020. Within the
Aviation operating division, net cash outflow from operating
activities decreased to GBP4.1 million in the year ended 28
February 2021 from GBP8.0 million in the year ended 29 February
2020, primarily due to the cost cutting measures implemented by the
Group to mitigate the impact on profitability resulting from the
COVID-19 pandemic. Within the Energy operating division, net cash
inflow from operating activities increased to GBP15.4 million in
the year ended 28 February 2021 from GBP9.9 million in the year
ended 29 February 2020, primarily due the strong cash conversion in
the Energy business and strict financial discipline and working
capital management throughout the COVID-19 pandemic.
The Group's net cash outflow from operating activities was
GBP22.2 million for the year ended 29 February 2020 compared to
GBP12.8 million for the year ended 28 February 2019. Operating cash
flow in FY20 was adversely impacted by cash outflows relating to
new business and contract set-up costs, litigation and claims and
working capital requirements in the divisions. There have been
adverse working capital cashflows due to a build-up of receivables
relating to a large ongoing project in the Stobart Rail &
Civils division that was expected to complete in 2021. The
significant debtor balances for this project are considered
recoverable and negotiations with the customers are ongoing.
Net cash from investing activities
The Group's net cash inflow from investing activities was GBP5.0
million in the year ended 28 February 2021 compared to an outflow
of GBP9.8 million in the year ended 29 February 2020. Net cash
inflow from investing activities in FY21 included GBP8.5 million of
the total GBP10.0 million consideration for the disposal of the
Stobart brands, offset by a GBP3.1 million purchase of PPE.
The Group's net cash outflow from investing activities was
GBP9.8 million in the year ended 29 February 2020 compared to a net
cash inflow of GBP9.9 million in the year ended 28 February 2019.
Cash flow from investing activities in FY20 includes purchase of
PPE (GBP14.6 million), partly offset by proceeds from the sale of
PPE and investment property.
Net cash from financing activities
The Group's net cash inflow from financing activities was
GBP27.1 million in the year ended 28 February 2021 compared to
GBP27.3 million in the year ended 29 February 2020. Net cash inflow
from financing activities in FY21 included the net proceeds of the
2020 Capital Raise (GBP91.0 million), offset by a net repayment of
the Existing Facility (GBP24.3 million), the repayment of capital
elements of lease obligations (GBP24.0 million), interest payments
(GBP9.4 million) and the repayment of loans to Virgin and Cyrus
(GBP4.5 million).
The Group's net cash inflow from financing activities was
GBP27.3 million in the year ended 29 February 2020 compared to a
net cash outflow of GBP25.7 million in the year ended 28 February
2019. Cash flow from financing activities in FY20 includes GBP51.3
million of net proceeds from the issuance of the Exchangeable Bonds
and lower dividends paid of GBP11.1 million (compared to GBP52.5
million in FY19). On 14 November 2019, the Group announced it was
suspending the dividend until the Group becomes significantly cash
generative at an operating level, subject to investment
requirements to maximise shareholder returns.
Balance sheet
The following table sets out the Group's net assets as at the
dates indicated.
As at As at As at
28 February 29 February 28 February
2021 2020 2019
------------ ------------ ------------
(GBP millions, unless otherwise
indicated)
Non-current
assets...................................................................
.............................. 369,373 388,866 467,416
Current
assets...................................................................
..................................... 55,444 75,270 79,736
Non-current
liabilities..............................................................
................................ (172,600) (221,979) (137,722)
Current
liabilities..............................................................
....................................... (203,904) (139,059) (112,476)
Net
assets...................................................................
.......................................... 48,313 103,098 296,954
Net assets decreased in FY21 by GBP54.8 million, to GBP48.3
million as at 28 February 2021 from GBP103.1 million as at 29
February 2020, mainly due to the loss in FY21, partially offset by
the net proceeds of the 2020 Capital Raise and the increase in the
fair value of the investment in Logistics Development Group
plc.
Net assets decreased in FY20 by GBP193.9 million, to GBP103.1
million as at 29 February 2020 from GBP297.0 million as at 28
February 2019, mainly due to the loss for the year (GBP137.9
million), which includes the reduction in the fair value of the
Group's investment in Eddie Stobart (GBP40.2 million), and
dividends paid (GBP11.1 million).
Non-current assets
The overall value of PPE decreased by GBP21.0 million, to
GBP285.6 million as at 28 February 2021 from GBP306.6 million as at
29 February 2020, primarily due to the disposal of Stobart Rail
& Civils and the annual depreciation charge across the Group.
The revaluation of, and further investment in, Logistics
Development Group plc led to an increase in other financial assets
of GBP5.6 million. The impairment of the loans to Mersey Bioenergy
Holdings reduced non-current other receivables by GBP8.0
million.
PPE increased by GBP43.7 million, to GBP306.6 million as at 29
February 2020 from GBP262.9 million as at 28 February 2019,
primarily due to IFRS 16, which saw right-of-use assets recognised
for the first time for properties and vehicles that the Group
leases. See note 1 to the FY20 Financial Statements for further
details. Other non-current asset movements include the reduction in
value of the Eddie Stobart investment (GBP40.2 million), impairment
of Connect Airways loans (GBP45.1 million), the write down of
Carlisle Lake District Airport (GBP21.0 million) and the sale of
the Group's last investment property at Speke (GBP4.0 million).
Intangible assets have reduced due to the write off of intangibles
attributable to Stobart Rail & Civils (GBP8.5 million),
impairment of the Eddie Stobart and Stobart brands (GBP19.9
million) prior to the post-year-end sale to Eddie Stobart and
amortisation of the Eddie Stobart brand (GBP7.4 million).
Current assets
Current assets decreased by GBP19.8 million, to GBP55.4 million
as at 28 February 2021 from GBP75.3 million as at 29 February 2010,
primarily due to an overall decrease in trade and other receivables
across the Group of GBP12.8 million and the disposal of the Stobart
brand (GBP10.0 million), which were held for sale at the end of
FY20.
Current assets decreased by GBP4.4 million, to GBP75.3 million
as at 29 February 2020 from GBP79.7 million as at 28 February 2019,
primarily due to a property inventory impairment (GBP7.0 million)
and a reduction in cash (GBP4.6 million) and disposal of assets
held for sale relating to Propius (GBP1.5 million), offset by an
increase in trade receivables.
Non-current liabilities
Non-current liabilities decreased by GBP49.4 million, to
GBP172.6 million as at 28 February 2021 from GBP222.0 million as at
29 February 2020, primarily due to the Existing Facility liability
of GBP52.3 million being presented as a current liability. This was
offset in part by an increase in provisions of GBP15.2 million,
mainly relating to maintenance reserves in Stobart Air and Propius,
and reductions in the defined benefit pension and deferred tax
liabilities.
Non-current liabilities increased by GBP84.3 million, to
GBP222.0 million as at 29 February 2020 from GBP137.7 million as at
28 February 2019, primarily due to liabilities recognised following
the transition to IFRS 16 (GBP76.4 million) and an increased
drawdown on the Existing Facility (GBP17.0 million).
Current liabilities
Current liabilities increased by GBP64.8 million, to GBP203.9
million as at 28 February 2021 from GBP139.1 million as at 29
February 2020, primarily due to the Existing Facility liability of
GBP52.3 million being presented as a current liability and IFRS 16
leases being recognised following the acquisition of Propius in
FY21. The Existing Facility liability decreased in FY21 by GBP22.4
million.
Current liabilities increased by GBP26.6 million, to GBP139.1
million as at 29 February 2020 from GBP112.5 million as at 28
February 2019, primarily due to the Exchangeable Bonds issued in
May 2019 (GBP51.7 million) and an increase in trade payables,
offset in part by a reduction in liabilities held for sale
following the disposal of Propius (GBP27.5 million).
Current liabilities include the Exchangeable Bonds in accordance
with IAS 1 because the Group does not have an unconditional right
to defer settlement of the liability for at least 12 months after
the reporting period. The bondholders have an unconditional right
to require the Group to settle the Exchangeable Bonds by giving the
bondholders shares in Eddie Stobart at any time. The Group has no
obligation to settle the Exchangeable Bonds in cash within 12
months of 29 February 2020.
Net Debt and Gearing
The following table sets forth the Group's Net Debt and Gearing
as at the dates indicated.
As at As at As at
28 February 29 February 28 February
2021 2020 2019
(GBP millions, unless otherwise
indicated)
Loans and
borrowings-current.......................................................
........................... 89.1 15.8 13.4
Loans and
borrowings-non-current...................................................
......................... 122.1 177.8 84.1
Exchangeable
bonds....................................................................
............................. 52.0 51.7 -
Cash and cash
equivalents..............................................................
........................... (12.4) (9.8) (14.4)
------------ ------------ ------------
Net Debt
.........................................................................
.......................................... 250.8 235.5 83.1
------------ ------------ ------------
Group shareholders'
equity...................................................................
..................... 48.3 103.1 297.0
Gearing
.........................................................................
........................................... 519.2% 228.4% 28.0%
In May 2019, the Group placed GBP53.1 million of Exchangeable
Bonds. The Exchangeable Bonds have a five-year maturity and are
unconditionally and irrevocably guaranteed by the Company and are
exchangeable into ordinary shares of one penny each in the capital
of Eddie Stobart.
On 1 March 2019, the Group adopted IFRS 16 which created lease
liabilities of GBP78.2 million. These liabilities have replaced
operating lease charges for nearly all leases held. See note 1 to
the FY20 Financial Statements for more detail.
As at 29 February 2020, the Group held an GBP80 million variable
rate committed revolving credit facility with Lloyds Bank plc and
Allied Irish Bank that was drawn at GBP75.0 million (compared to
GBP58.0 million as at 28 February 2019). As at 23 July 2021, the
Group is drawn down under the Existing Facility as to GBP108
million, which is expected to increase to GBP113 million by 31
August 2021.
Existing Facility
The Company entered into the Existing Facility Agreement
comprising Facility A, the GBP80.0 million revolving credit
facility under which the Group is fully drawn, and Facility B, the
GBP40.0 million revolving credit facility, on 4 June 2020, of which
GBP28 million is drawn as at 23 July 2021. The Company has agreed
with the Existing Lenders that it may draw up to GBP5 under
Facility B (in addition to the GBP28 already drawn under Facility
B) up to and including the date on which the Transaction completes,
subject to certain conditions. Upon completion of the Transaction,
the Company shall apply the proceeds of the Investment and the
Capital Raise in repayment of all outstanding amounts under the
Existing Facility.
New Facility
The Company has today entered into an amendment and restatement
agreement with the Existing Lenders in respect of the Existing
Facility Agreement pursuant to which the Amended Facility Agreement
will become effective, and the New Facility will be made available
thereunder, on the Effective Date . The Company and Stobart Energy
Limited will be borrowers under the New Facility and shall be able
to draw under the New Facility from the date on which the
Transaction completes until one month before the New Facility
Termination Date, subject to certain conditions. The borrowers'
obligations under the New Facility will be guaranteed by members of
the Wider Group and fixed and floating security will be granted by
the borrowers and the guarantors. The terms of the New Facility
will be substantially similar to those of the Existing
Facility.
The New Facility is conditional upon completion of the
Transaction. In the event that the Transaction does not complete,
the New Facility will not be available and the terms of the
Existing Facility shall remain in force, and any further drawings
under the Existing Facility beyond 31 August 2021 shall be subject
to conditions imposed by the Existing Lenders at such time, which
would be expected to include the requirement to seek to market and
dispose of all or part of the business of the Group on an
accelerated basis.
Capital Expenditure
In FY21, the Group's Capital Expenditure was GBP5.1 million, of
which GBP2.0 million was financed. This primarily comprised GBP3.1
million related to the development of London Southend Airport,
including a new hold baggage screening area, and GBP1.1 million in
the Energy operating division principally relating to the
development of processing facilities.
In FY20, the Group's Capital Expenditure was GBP29.1 million.
This primarily comprised development of London Southend Airport
(including improvements to the runway and conversion of existing
hangarage to support the Group's global logistics customer); and
the replacement of part of its vehicle fleet and development of the
Pollington fuel production and storage facility in the Stobart
Energy division.
In FY19, the Group's Capital Expenditure was GBP40.4 million.
This primarily comprised development costs at London Southend
Airport, the construction of a new commercial terminal at Carlisle
Lake District Airport, the replacement of part of its vehicle fleet
in the Stobart Energy division and development of the Port Clarence
fuel production and storage facility.
Pensions
The Group's only defined benefit pension scheme is the Ansa
plan, which remains open for employees of Ansa Logistics Limited.
The latest actuarial valuation of the Ansa plan was as at 31
December 2016 and was carried out by an independent qualified
actuary using the projected unit method. At the date of the latest
actuarial valuation, the realisable value of assets was GBP27.9
million, which was sufficient to cover 82 per cent. of the value of
benefits that had accrued to members, measured on the continuing
basis. Total contributions payable for FY21 amounted to GBP1.2
million (compared to GBP1.2 million in FY20) with no contributions
due to the plan at 28 February 2021 (compared to GBP97,000 at 29
February 2020).
The Group's defined benefit pension liability, which is assessed
each period by actuaries, is based on key assumptions including
return on plan assets, discount rates, mortality rates, inflation
and future salary and pension costs. These assumptions,
individually or collectively, may be different to actual outcomes.
Other key assumptions for pension obligations are based in part on
current market conditions and are updated annually for the purposes
of financial reporting.
The Group also operates a defined contribution plan. The charge
in FY21 to the consolidated income statement was GBP1.0 million
(FY20: GBP1.3 million). The value of contributions outstanding as
at 28 February 2021 and included in other payables was GBP187,000
(GBP97,000 at 29 February 2020).
For further detail, please see note 26 to the FY21 Financial
Statements.
Capitalisation and indebtedness
The following tables set out the Group's capitalisation and
indebtedness as at the dates indicated and, as such, do not reflect
the impact of the Capital Raise. The information below should be
read together with Esken Limited's consolidated financial
information, as well as the rest of the information in this Part
III (Operating and Financial Review). The tables below are prepared
for illustrative purposes only.
Capitalisation
The table below sets out the Company's capitalisation as at 28
February 2021. This information has been extracted without material
adjustment from the Company's historical financial information.
As at
28 February 2021
(GBP'000)
Shareholders' equity
Share
capital.................................................................................................................................................................
62,492
Share
premium.............................................................................................................................................................
390,336
Other
reserves...............................................................................................................................................................
(3,654)
Total
capitalisation.....................................................................................................................................................
449,174
There has been no material change in the Company's
capitalisation since 28 February 2021.
The following table sets out the Company's indebtedness as at 31
May 2021.
As at
31 May 2021
(GBP'000)
Total current debt
Guaranteed...................................................................................................................................................................
-
Secured..........................................................................................................................................................................
177,400
Unguaranteed/Unsecured...........................................................................................................................................
-
Total non-current debt (excluding current portion of long-term
debt)
Guaranteed...................................................................................................................................................................
-
Secured..........................................................................................................................................................................
104,963
Unguaranteed/Unsecured...........................................................................................................................................
-
Net Financial Indebtedness
The following table sets out the Company's net financial
indebtedness as at 31 May 2021.
As at
31 May 2021
(GBP'000)
A.
Cash..........................................................................................................................................................................
11,093
B. Cash
equivalents....................................................................................................................................................
-
C. Financial assets held at fair
value.....................................................................................................................
-
D. Liquidity (A) + (B) +
(C).......................................................................................................................................
11,093
E. Current financial
receivables................................................................................................................................
-
F. Current bank
debt...................................................................................................................................................
(84,233)
G. Bonds
issued............................................................................................................................................................
(52,104)
H. Current portion of non-current
debt....................................................................................................................
-
I. Other current financial
debt................................................................................................................................
.. (41,063)
J. Current financial debt (F) + (G) + (H) +
(I)....................................................................................................
.. (177,400)
K. Net current financial indebtedness (D) + (E) +
(I).......................................................................................
.. (166,307)
L. Non-current bank
debt........................................................................................................................................
.. -
M. Bonds
issued...........................................................................................................................................................
-
N. Non-current other financial
debt......................................................................................................................
.. (104,963)
2. O. Non-current financial indebtedness (L) + (M) +
(N)..............................................................................
.. (104,963)
P. Net financial indebtedness (K) +
(O)..............................................................................................................
.. (271,270)
Notes:
In accordance with IAS 1 it is necessary for the Exchangeable
Bonds, issued on 3 May 2019, to be presented as a current liability
because the Group does not have an unconditional right to defer
settlement of the liability for at least 12 months after the
reporting period. The bondholders have an unconditional right to
require the Group to settle the Exchangeable Bonds by giving the
bondholders shares in Eddie Stobart at any time. The Group has no
obligation to settle the Exchangeable Bonds in cash within 12
months of the balance sheet date.
Non-current bank debt relates to a revolving credit facility
with end date January 2022. Under the terms of the facility, the
Company and all material subsidiaries have charged security to the
lenders via a debenture, the material subsidiaries are also
guarantors and obligors in relation to the facility agreement.
There are fixed charges over land and properties including London
Southend Airport, Carlisle Lake District Airport, Widnes and
Runcorn, in addition floating charges and charges over shares.
Indirect and contingent indebtedness
Capital commitments
At 28 February 2021, the Group had capital commitments of GBP1.2
million related to development works at LSA in the Aviation
division.
At 29 February 2020, the Group had no capital commitments.
Contingent liabilities
Guarantees were given for some Eddie Stobart property leases
when that business formed part of the Group. The guarantees
remained in place following the Group's partial disposal of Eddie
Stobart in 2014. Under the terms of the guarantees, if Eddie
Stobart were to default on its rent or rates payments in respect of
a guaranteed lease, the Group would be liable to pay the applicable
costs until the relevant landlord replaced Eddie Stobart with a new
tenant. The Group's maximum potential liability under the
guarantees as at 28 February 2021 was approximately GBP54.9
million. This liability decreases each year as the various leases
near termination until 2034 when the final lease terminates. The
maximum liability in any one year, should the risk crystallise, is
GBP4.6 million, which is the annual rent and rates liability if all
the properties covered by the guarantee were to become vacant. The
Directors believe that, due to the nature of the properties, it is
unlikely that the properties would remain vacant for any
significant period of time in the event that Eddie Stobart
defaults.
For a discussion of certain risks relating to the above
contingent liabilities, please see the risk factor titled "The
Group has given a number of parent company guarantees".
In addition, various legal claims have been made against the
Stobart Energy and Stobart Aviation divisions, including the claims
against the Stobart Aviation division made under Part 1 of the Land
Compensation Act 1973. The Lands Tribunal have found in favour of
the claimants to an extent which would lead to the Company making
payments in an amount of approximately GBP1.2 million, plus certain
costs of the claimants which are yet to be assessed. The Group has
agreed to make a payment of GBP500,000 on account of such costs. On
10 July 2021, the Upper Tribunal (Lands Chamber) refused the
claimants' application for permission to appeal its decision. The
claimants may apply to the Court of Appeal for permission to
appeal, which must be filed within 28 days of the 10 July 2021
decision of the Upper Tribunal (Lands Chamber).
Accounting systems and processes
The Group's management has implemented several measures to
strengthen its accounting systems and processes in order to enable
the Group to cater more efficiently for its current and near-term
requirements, as well as to establish a more advanced base for the
Directors' strategic ambitions in the medium and longer terms. Such
measures include implementation and unification of new software,
restructuring of the Group's finance team and alignment of
divisional finance functions across the Group.
Qualitative and quantitative disclosures about market risk
The main risks arising from the Group's financial instruments
are credit risk, interest rate risk, capital risk, diesel price
risk, currency price risk, liquidity risk and jet fuel price risk,
as explained below. The Board has overall responsibility for the
determination of the Group's risk management objectives and
policies. The overall objective of the Board is to set policies
that seek to reduce risk as far as possible without unduly
affecting the Group's competitiveness and flexibility.
For further information on the risks discussed below, please see
note 25 to the FY21 Financial Statements.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or a counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from credit sales. It is Group policy, implemented locally, to
assess the credit risk of new customers before entering contracts.
Such credit ratings are taken into account by local business
practices.
All credit sales are made under Group payment and delivery terms
and conditions and are mostly covered by insurance. All credit
limits are formally set and are in agreement with the bank.
The recoverability of the net trade receivables, including
contract assets, is considered highly likely. This is supported by
the collection history of the Group. In generating the expected
credit loss provision, historical credit loss rates for the
preceding five years are observed, including consideration given to
factors that may affect the ability of customers to settle
receivables, and percentages applied to the trade and other
receivable aging buckets at the year end. The Group applies the
simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade receivables.
The expected credit losses on other receivables have not been
recognised as the resultant provision would not be material to the
financial statements.
Interest rate risk
The Group is exposed to cash flow interest rate risk from
long-term borrowings and cash at variable rates. There are loan
facilities at variable rates as well as amounts held on deposit.
These borrowing policies are managed centrally. Although the Board
accepts that this policy neither protects the Group entirely from
the risk of paying rates in excess of current market rates nor
eliminates fully cash flow risk associated with variability in
interest payments, it considers that it achieves an appropriate
balance of exposure to these risks.
The Group's borrowings at variable rate were denominated in GBP
and the fixed rate borrowings were denominated in USD and GBP.
Capital risk
The Group is exposed to capital risk in relation to its
shareholding in Logistics Development Group plc. Any adverse
movement in the quoted share price will directly impact the fair
value of the investment held.
Diesel price risk
The Group is exposed to diesel price risk as diesel fuel is a
key supply to the transport fleet of vehicles in the Stobart Energy
operating division. If diesel prices rise, there will be increases
in the base costs that cannot be fully passed on to customers. In
order to mitigate this risk, the Group has taken out diesel swap
contracts to manage its exposure.
The fair value of diesel swap contracts falling within level 2
of the fair value hierarchy as at 28 February 2021 is GBP46,000
liability (2020: GBP416,000 liability) and the gross swap coverage
was GBP333,000 (2020: GBP1,877,000). The fair value of the swaps is
calculated by Lloyds Bank Corporate Markets plc and Mitsui Bussan
Commodities Ltd based on mid-market levels as of the close of
business on 28 February 2021.
Foreign exchange risk
As at 28 February 2021, the Group had a USD balance payable in
instalments so had taken out currency swap contracts to manage its
exposure. The fair value of currency swap contracts falling within
level 2 of the fair value hierarchy as at 28 February 2021 was
GBP48,000 liability (2020: GBP195,000 asset) and the gross swap
coverage was GBP10,052,000 (2020: GBP13,305,000). The fair value of
the swaps was calculated by Lloyds Bank plc based on mid-market
levels as of the close of business on 28 February 2021.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
See the maturity profile of loans and borrowings below.
The Group prepares and reviews rolling weekly cash flow
projections. Actual cash and debt positions along with available
facilities and headroom are reported weekly. These are monitored by
Group management.
In addition, full annual five-year forecasts are prepared
including cash flow and headroom forecasts. These are full,
detailed forecasts prepared by each division and consolidated for
the Group.
The financial statements have been prepared using the going
concern basis. Please refer to Note 1 to the FY21 Financial
Statements for further discussion on the basis of preparation. The
Company's auditor has included a paragraph in the independent
auditor's reports in respect of the FY20 Financial Statements and
the FY21 Financial Statements stating that there is material
uncertainty in respect of the Company's ability to continue as a
going concern.
The following table summarises the maturity analysis of
financial liabilities based on contractual undiscounted payments as
at 28 February 2021.
One to
Less than five More than
one year years five years Total
--------------- -------------
(GBP'000)
Loans and
borrowings....................................
..............................................
..............................................
......... 55,882 - - 55,882
Obligations under
leases........................................
..............................................
..............................................
.. 39,821 68,571 92,684 201,076
Trade
payables......................................
..............................................
..............................................
................... 19,558 - - 19,558
Swaps.........................................
..............................................
..............................................
................................. 404 - - 404
--------------- ------------ ----------------- -------------
Total
..............................................
..............................................
..............................................
............................. 115,665 68,571 92,684 276,920
--------------- ------------ ----------------- -------------
Sensitivity analysis
The sensitivity analysis set out in the following table
summarises the sensitivity of the market value of financial
instruments to hypothetical changes in market rates and prices.
Sensitivity is calculated based on all other variables remaining
constant.
The interest rate analysis assumes a one per cent. change in
interest rates, the currency analysis assumes a one per cent.
change in currency price and the diesel price analysis assume a ten
per cent. price change. The diesel and currency price sensitivity
analysis is based on diesel- and currency-related derivative
instruments held at the end of each reporting period.
The impact of a one per cent. increase in interest rates, a one
per cent. increase in currency price and a ten per cent. increase
in the diesel price is disclosed. A corresponding decrease results
in an equal and opposite impact on the consolidated income
statement.
Interest Diesel Currency
rate 1% price price 1%
increase 10% increase increase
--------- --------------- ---------
(GBP'000)
At 28 February 2021
Increase in fair value of financial
instruments 767 30 6
Impact on profit: (loss)/gain (731) 30 6
At 29 February 2020
Increase in fair value of financial
instruments 799 146 134
Impact on profit: (loss)/gain (770) 146 134
Jet fuel price risk
Prior to the liquidation of Stobart Air, announced on 12 June
2021, the Group was exposed to jet fuel price risk as jet fuel is a
key supply to the fleet of aircraft in Stobart Air. If jet fuel
prices rose there would have been increases in the base costs that
could not be fully passed on to customers. In order to mitigate
this risk the Group historically took out jet fuel swap contracts
to manage its exposure. Due to the Group's intention to dispose of
Stobart Air, the jet fuel swap contracts were not renewed and
ceased before the end of FY21.
CRITICAL ACCOUNTING POLICIES
The Group makes judgments and estimates in preparing the
financial statements. Judgments and estimates are continually
evaluated based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. In the future, actual
experience may differ from these judgments and estimates. The
judgments and estimates that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed in note 2
to the FY21 Financial Statements.
IV. NEW FACILITY
On 26 January 2015, the Company and certain of its subsidiaries
as original borrowers and original guarantors (collectively, the "
RCF Obligors ") entered into a multicurrency revolving facility
agreement with Lloyds Bank plc as arranger and Lloyds Bank plc as
agent and security trustee (such agreement as subsequently amended
and restated, the "Existing Facility Agreement").
The Existing Facility Agreement provides for borrowings up to an
aggregate of an aggregate principal amount of GBP120,000,000 on a
committed basis, comprising the original GBP80,000,000 revolving
credit facility (Facility A) and a new GBP40,000,000 revolving
credit facility (Facility B) pursuant to the amendment and
restatement agreement in respect of the Existing Facility Agreement
dated 4 June 2020. Under an amendment and restatement agreement in
respect of the Facility Agreement dated 27 July 2021 (the " 2021
Amendment Agreement "), the Existing Facility Agreement will be
amended with effect from the Effective Date so as to provide for
borrowings up to an aggregate principal amount of GBP20,000,000 on
a committed basis (the " New Facility ").
The Effective Date will occur on the date on which certain
conditions have been satisfied, including (i) completion of the
Transaction, (ii) receipt of the net proceeds of the equity raise
and (iii) repayment of all outstanding borrowings under Facility A
and Facility B (totalling GBP108 million as at 23 July 2021 and
anticipated to total GBP113 million prior to repayment on the
Effective Date).
On the Effective Date (i) Stobart Energy Limited shall accede as
a borrower to the Amended Facility Agreement (together with the
Company, the " Esken Borrowers ") and (ii) each member of the
Borrower Group shall be released from the guarantee and security
granted under the Existing Facility and shall cease to be an
RCF
Obligor. The remaining RCF Obligors shall be the " 2021 RCF Obligors ".
From the Effective Date, the funds under the New Facility may be
applied towards the general corporate purposes of the Wider Group
and in accordance with the Wider Group's short-term cash flow
forecasts. Up to GBP10 million of the New Facility may be drawn by
way of standby letter of credit facility. The following terms shall
apply under the Amended Facility Agreement from the Effective
Date.
Conditions to Utilisation
The Esken Borrowers are entitled to utilise the New Facility
provided that (i) no default, or, in the case of a rollover loan,
no event of default is continuing and (ii) certain representations
are true in all material respects as at the date of the proposed
utilisation.
Maturity and repayment
The Amended Facility Agreement will terminate on 1 February 2023
(the " New Facility Termination Date "). Subject to the rollover
provisions in the Amended Facility Agreement (detailed below), each
loan under the New Facility must be repaid on the last day of the
interest period relating thereto. The interest period in respect of
a loan under the New Facility is one, two, three or six months at
the election of the relevant Esken Borrower upon utilisation.
Subject to certain conditions and exceptions, loans under the
New Facility may be borrowed, repaid and re- borrowed at any time
during the availability period under the Amended Facility Agreement
(which runs until the date falling one month prior to the New
Facility Termination Date). All outstanding amounts under the
Amended Facility Agreement must be repaid in full on or prior to
the New Facility Termination Date.
Mandatory Repayment upon asset disposals
The Amended Facility Agreement requires that, within 5 business
days of receipt of the net proceeds of any disposal of non-core
assets as contemplated in the Company's business plan, the Esken
Borrowers must:
1. prepay any outstanding loans under the Facility in an amount
equal to the lower of: (i) 100 per cent. of such net proceeds and
(ii) the then amount outstanding under all loans (but excluding the
principal amount of any outstanding standby letter of credit);
and
2. permanently cancel the available commitments under the New
Facility in an amount equal to 25 per cent. of such net proceeds
but provided always that the available commitments shall not be
reduced to below GBP14 million.
Mandatory Repayment upon change of control
The Amended Facility Agreement requires that upon a change of
control of the Company, the Company must notify the agent. Within
30 days of such notification, the Lender shall have the right to
require repayment of all outstanding loans under the Facility.
Interest rates and fees
The loans under the Amended Facility Agreement accrue interest
at the percentage rate per annum equal to the aggregate of 5.25 per
cent. (with ratchet increases by 0.5 per cent. per financial
quarter after May 2022) in respect of the New Facility (the "
Margin ") and SONIA.
A commitment fee applies to the New Facility at the rate of 35
per cent. of the then applicable Margin payable on the unused and
uncancelled amount available from each lender in respect of each
facility. The commitment fees are payable in arrears on the last
day of each successive period of three months during the term of
the Amended Facility Agreement. Customary fees will also be payable
to the agent and the security agent during the term of the Amended
Facility Agreement.
An arrangement fee applies to the New Facility and is payable on
the earlier of (i) the last day of the availability period (1
January 2023); (ii) the completion of a refinancing in full of the
New Facility; and (iii) acceleration of the New Facility (the "
Arrangement Fee Payment Date "). The arrangement fee is a
percentage of total commitments under the New Facility, depending
on when the Arrangement Fee Payment Date occurs, and ranging from 1
per cent. of total commitments if the Arrangement Fee Payment Date
occurs on or before 31 December 2021 to 4.5 per cent. of total
commitments if the Arrangement Fee Payment Date occurs after 31
December 2022.
Guarantees
Each 2021 RCF Obligor has provided a continuing guarantee of
punctual performance and payment of each 2021 RCF Obligor's
obligations under the Amended Facility Agreement and related
finance documents.
Security
The obligations of the 2021 RCF Obligors under the Existing
Facility Agreement and related finance documents are secured by the
following security documents.
An English-law governed debenture originally dated 26 January
2015 (as supplemented and amended by deeds of accession or release
from time to time, including a supplemental debenture dated 23 May
2020 and a second supplemental debenture dated 4 June 2020)
creating fixed and floating security as applicable over all of the
assets of the following chargors:
-- Esken Limited
-- Westlink Group Limited
-- Westlink Holdings Limited
-- Stobart Air (UK) Limited
-- London Southend Airport Company Limited
-- Stobart Properties Limited
-- Stobart Realisations Limited (formerly known as Eddie Stobart Promotions Limited)
-- Stobart Holdings Limited
-- Stobart Energy Limited
-- Stobart Biomass Transport Limited
-- Stobart Estates Holdings Limited
-- Stobart Green Energy Limited
-- Stobart Group Brands LLP
-- SPD1 Limited
-- Wadi Properties Limited
-- Moneypenny Limited
-- Stobart Aviation Limited
-- Stobart Aviation Services Limited
-- Stobart Jet Centre Limited
-- Stobart Solar Limited
-- Thames Gateway Airport Limited
In connection with the New Facility, a supplemental English law
governed debenture will be granted by the 2021 RCF Obligors on the
Effective Date and each member of the Borrower Group shall be
released from the security granted in respect of the Existing
Facility Agreement on the Effective Date.
Pursuant to an Irish-law governed security assignment agreement
dated 23 May 2020, and an Irish-law governed second security
assignment dated 4 June 2020 entered into between Stobart Aviation
Limited and Lloyds Bank plc as security trustee, Stobart Aviation
Limited assigned by way of security, its rights under a deed of
assignment in respect of a share mortgage (under which Everdeal
2019 Limited had granted, in favour of Connect Airways Limited, a
mortgage over its shares in Everdeal Holdings Limited; Connect
Airways Limited had assigned its rights under such mortgage to
Stobart Aviation Limited pursuant to the deed of assignment); and
its rights under the share mortgage itself.
Pursuant to an English-law governed charge dated 23 May 2020,
and an English-law governed second charge dated 4 June 2020, the
following chargors granted security by way of first fixed charge
over all membership interests in Stobart Group Brands LLP and all
rights and interest in the Limited Liability Partnership Agreement
dated 21 March 2012 entered into, inter alia, by Westlink Holdings
Limited and Stobart Group Brands LLP.
Pursuant to an Irish-law governed share charge dated 23 May
2020, and an Irish-law governed second charge dated 4 June 2020,
Stobart Aviation Limited granted a first fixed charge over its
shares in Everdeal Employees 2019 Limited.
Pursuant to a Guernsey-law governed security interest agreement
dated 4 June 2020, WADI Properties Limited and Estera Nominees
(Guernsey) Limited granted a security interest over their
respective rights, title and interest in and to the shares in
Moneypenny Limited.
On 23 May 2020, the chargors, Lloyds Bank plc as security
trustee, Lloyds Bank plc and AIB as lenders, Lloyds Bank plc as
facilities lenders, Lloyds Bank Corporate Markets plc as hedge
counterparty and the other parties listed therein, entered into an
intercreditor agreement (the " 2020 Intercreditor Agreement ")
which, amongst other things, governs the ranking and priority of
debt liabilities between each of the creditors, and governs the
application of proceeds of enforcement of the security.
Rollover periods
If one or more loans are to be made available to an Esken
Borrower:
(1) on the same day that a maturing loan is due to be repaid by
that borrower;
(2) in the same currency as the maturing loan; and
(3) in whole or in part for the purpose of refinancing the
maturing Loan,
the aggregate amount of the new loan(s) will be treated as if
applied in or towards repayment of the maturing loan.
Covenants
The Amended Facility Agreement requires the 2021 RCF Obligors to
comply, and to ensure the compliance by each other member of the
Wider Group, with a number of customary undertakings and covenants,
which are subject to customary materiality qualifications,
exceptions and baskets. These covenants include, among others, the
following financial covenants:
-- Consolidated EBITDA (as defined in the Amended Facility
Agreement), in respect of any period specified in column 1 below
shall not be less than the amount set out in column 2 below
opposite that period:
Column 1 Column 2
Period Consolidated
EBITDA
Period of 9 months ending 30 November 2021............... 2,900,000
Period of 12 months ending 28 February
2022............... 4,700,000
Period of 12 months ending 31 May
2022..................... 7,100,000
Period of 12 months ending 31 August
2022.................. 8,200,000
Period of 12 months ending 30 November 2022............. 9,000,000
(the " Minimum EBITDA covenant "); and
-- Group Liquidity (as defined in the Amended Facility
Agreement) shall not be, and shall not be forecast to be, less than
(i) GBP10,000,000 for the period up to and including 31 December
2022; and (ii) GBP8,700,000 for the period on and from 1 January
2023:
-- as at the end of each Month for the duration of the relevant Forecast Period; and
-- as at close of business on each business day during the two
months immediately following each utilisation of the New
Facility,
(the " Minimum Liquidity covenant ").
The Amended Facility Agreement also imposes a restriction on
payment of any distributions or dividends by the Company whilst the
New Facility remains in place.
The Amended Facility Agreement includes restrictions on the
ability of the Wider Group to inject or advance any funding or cash
support to the Borrower Group whilst the New Facility remains in
place, other than the Pari Passu Loan. It is however expected that
the Pari Passu Loan will cover the first three years of operating
and capital expenditure of the Borrower Group following the
completion of the Investment.
Repeating representations
A number of standard representations and warranties have been
given in the Amended Facility Agreement, most of which are repeated
on the date of each utilisation request and the first day of each
interest period.
The Amended Facility Agreement also includes certain
representations reflecting the ring-fencing of the Borrower Group
and include representations relating to the transactions or
arrangements between the Wider Group and the Borrower Group,
indebtedness owing by the Wider Group to the Borrower Group and
guarantees granted by the Wider Group in respect of obligations of
the Borrower Group.
Customary materiality tests, carve-outs and grace periods apply
in respect of these representations.
Events of defaults
The Amended Facility Agreement contains certain customary events
of default (subject in certain cases to agreed grace periods,
thresholds and other qualifications), including, for example,
non-payment, breach of financial covenants and a cross-default to
other financial indebtedness of any member of the Wider Group. The
occurrence of an event of default which is continuing would allow
the lenders under the Amended Facility Agreement to, amongst other
things, upon written notice to the Company, accelerate all or part
of the outstanding loans, cancel the commitments and declare all or
part of the loans payable on demand. If the Company is unable to
pay all outstanding loans upon such demand, the lenders shall have
the right to direct the security agent to enforce the transaction
security and thereby take control of the assets of the 2021 RCF
Obligors.
V. ADDITIONAL INFORMATION
NO SIGNIFICANT CHANGE
Other than as described in paragraphs 1 and 2 below, there has
been no significant change in the financial position or financial
performance of the Group since 28 February 2021, being the end of
the last financial period for which the latest financial
information on the Group was published.
Other than as described in paragraph 2 below, there has been no
significant change in the financial position or financial
performance of the Borrower Group since 28 February 2021, being the
date to which the historical financial information relating to the
Borrower Group to be included in the Prospectus was prepared.
1. On 20 April 2021, the Group announced it had entered into
agreements for the sale of its entire shareholdings in Stobart Air
Unlimited Company (which operated regional flights under a
franchise agreement for Aer Lingus) and Stobart Air (UK) Limited,
the owner of Carlisle Lake District Airport to Ettyl Limited.
On 28 May 2021, Ettyl advised that its original funding package
to support the transactions was no longer available and that it was
in discussions on alternative funding options. On 12 June 2021, the
Company announced that it was clear that Ettyl was unable to
conclude the transactions on the original terms or to obtain an
alternative funding package within the required timescale and
exercised its right to terminate the contracts for the transactions
with immediate effect. Further, in the absence of any alternative
purchasers or sources of funding for the Stobart Air business
within the timescales required, the Company advised the board of
Stobart Air that it would not continue to provide financial support
to the Stobart Air business going forward. As a result of this, the
board of Stobart Air terminated its franchise agreement with Aer
Lingus and ceased trading and appointed a liquidator on 14 June
2021.
In the announcement on 20 April 2021, the Company set out the
cash flow impact on the Group on the assumption that the
transactions concluded. As announced on 12 June 2021, the following
table reflects the amended position over the period to the end of
the leases assuming that the Group is unable to sublease the eight
ATR aircraft. It also includes the termination of the sale of
Carlisle Lake District Airport which had been set to be concluded
for consideration of GBP15 million.
F Y22 FY23 FY24
Cash outflow reported previously
(GBP millions)........ (16) (9) (24)
Additional cash impact arising
from liquidation..... (18)(1) (13) (2)
Total cash impact ........................................................ (34) (22) (26)
Note:
(1) Cash impact reflects that the Group will retain ownership of
Carlisle Lake District Airport rather than receive sale proceeds of
GBP15 million.
2. The Board announced on 2 July 2021 that they had reached
agreement with the Lender, a special purpose vehicle controlled by
CGI, on the terms of a proposed investment by CGI through a GBP125
million (minus transaction costs) senior loan facility provided by
the Lender to, and which is convertible into 29.999 per cent. of
the ordinary shares in, the Borrower (which shall be increased to
30 per cent. following receipt of certain approvals from the Office
of Rail and Road).
LITIGATION
Other than as described below, there are no governmental, legal
or arbitration proceedings (including any such proceedings which
are pending or threatened of which the Company is aware), during
the period covering the twelve months preceding the date of this
announcement which may have, or have had in the recent past,
significant effects on the Company's, the Group's and/or the
Borrower Group's financial position or profitability.
Under Part 1 of the Land Compensation Act 1973, compensation can
be claimed by people who own and also occupy property that has been
reduced in value by more than GBP50 by physical factors caused by
the use of a new or altered runway. Such Part 1 claims against the
Group have been brought by approximately 190 landowners in
proximity to London Southend Airport in relation to the extension
of the London Southend Airport runway in 2012. Test cases were
heard in the Upper Tribunal (Lands Chamber) in October 2020. The
aggregate amount claimed by the claimants was approximately GBP9
million. However, the Lands Tribunal have found in favour of the
claimants to an extent which would lead to the Company making
payments in an amount of approximately GBP1.2 million, plus certain
costs of the claimants which are yet to be assessed. The Group has
agreed to make a payment of GBP500,000 on account of such costs. On
10 July 2021, the Upper Tribunal (Lands Chamber) refused the
claimants' application for permission to appeal its decision. The
claimants may apply to the Court of Appeal for permission to
appeal, which must be filed within 28 days of the 10 July 2021
decision of the Upper Tribunal (Lands Chamber).
In addition, the Group has been involved in several court
actions with Andrew Tinkler, the Group's former Chief Executive,
following his removal from the Board on 14 June 2018. A number of
these actions have either run their course in the courts or been
the subject of an agreed confidential settlement. As at the date of
this announcement, there remain the three outstanding matters
relating to Mr Tinkler:
(a) firstly, a commercial dispute between the Group and Stobart
Capital Limited (a company in which Andrew Tinkler is the majority
shareholder) in relation to the termination of a management
agreement on 12 March 2019 regarding management fees and other
costs which may or may not be chargeable. It is expected that a
trial in relation to this matter will take place in January
2022;
(b) secondly, on 17 November 2020, Mr Tinkler served proceedings
against the Company seeking to set aside the judgment of HHJ Russen
QC dated 15 February 2019 for fraud by the Company; and
(c) thirdly, on 19 November 2020, Mr Tinkler served further
proceedings against the Company, Mr Ian Soanes, Mr Warwick Brady (a
former Chief Executive Officer of the Company) and Mr Iain Ferguson
(a former Chairman of the Company) alleging an unlawful means
conspiracy against him.
This third claim has been stayed pending resolution of the claim
to set aside the judgment. A trial in regard to the claim to set
aside the judgment has been listed in a trial window in February
2022. The Company believes these allegations are entirely without
merit and will be vigorously defended.
In addition, Andrew Tinkler may continue to attempt to bring
further claims against the Group or that may affect the Group, but
the Company considers that any such attempts would be vexatious and
without merit. In addition, there are sums due to various Group
companies by Andrew Tinkler and his various related entities for
historic charges which remain unpaid, which the Company will seek
to set off against any liability in relation to the ongoing
disputes. These matters may give rise to litigation either by or
against Group companies. The Company considers that the net
liability to Andrew Tinkler or Stobart Capital Limited in respect
of these claims, if any, is unlikely to exceed approximately GBP1
million.
APPIX II
DEFINITIONS
The following definitions apply throughout this announcement
unless the context requires otherwise:
Admission admission of the New Shares to (a) the premium
listing segment of the Official List and (b)
trading on the London Stock Exchange's main market
for listed securities
Application Form the personalised application form on which Qualifying
Non-CREST Shareholders may apply for the New
Shares under the Open Offer
Board the board of directors of the Company
Bookbuild the accelerated bookbuilding process to be launched
immediately following this announcement by the
Joint Bookrunners to use reasonable endeavours
to procure placees for the Firm Placed Shares
and conditionally placed Open Offer Shares, as
described in this announcement and subject to
the terms and conditions set out in this announcement
and the Placing Agreement
Borrower London Southend Airport Company Limited, a wholly-owned
subsidiary of the Company
Borrower Group the Borrower and each of Thames Gateway Airport
Limited, Stobart Solar Limited and Stobart Jet
Centre Limited
Business Day a day (other than a Saturday or Sunday) on which
banks are open for general business in London
Canaccord Canaccord Genuity Limited
Capital Raise the Placing, the Open Offer and the Firm Placing
CREST the CREST system (as defined in the CREST Regulations)
CREST member a person who has been admitted by Euroclear &
Ireland Limited as a system-member (as defined
in the CREST Regulations)
CREST Regulations the Uncertificated Securities (Guernsey) Regulations,
2009 (GSI 2009/48)
Directors the executive directors and non-executive directors
of the Company as at the date of this announcement
Excess Application the facility for Qualifying Shareholders to apply
Facility for Excess Shares in excess of their Open Offer
Entitlements
Excess Open Offer in respect of each Qualifying Shareholder who
Entitlements has taken up his or her Open Offer Entitlement
in full, the entitlement (in addition to the
Open Offer Entitlement) to apply for Excess Shares,
up to a maximum number equal to four times the
number of that Qualifying Shareholder's Open
Offer Entitlements, pursuant to the Excess Application
Facility, which may be subject to scaling down
at the absolute discretion of the Board in consultation
with the Joint Bookrunners
Excess Shares New Shares which may be applied for by Qualifying
Shareholders in addition to their Open Offer
Entitlements pursuant to the Excess Application
Facility
Excluded Territories the United States of America, Australia, Canada,
Hong Kong, Japan, the People's Republic of China
and the Republic of South Africa
Existing Shares the existing Shares in issue immediately preceding
the issue of the New Shares
FCA the Financial Conduct Authority acting in its
capacity as the competent authority for the purposes
of Part VI of the FSMA
Firm Placed Shares the New Shares which the Company is proposing
to issue pursuant to the Firm Placing
Firm Placees any persons who have agreed or shall agree to
subscribe for Firm Placed Shares pursuant to
the Firm Placing
Firm Placing the subscription by the Firm Placees for the
Firm Placed Shares
FSMA the Financial Services and Markets Act 2000,
as amended
FY19 the year ended 28 February 2019
FY20 the year ended 29 February 2020
FY21 the year ended 28 February 2021
FY19 Financial the audited consolidated financial statements
Statements of the Company, which comprise the consolidated
statement of financial position and the related
consolidated statements of income, comprehensive
income, changes in equity and cash flows and
the related notes to the consolidated financial
statements, as of and for the year ended 28 February
2019 and the comparative financial information
for the year ended 28 February 2018
FY20 Financial the audited consolidated financial statements
Statements of the Company, which comprise the consolidated
statement of financial position and the related
consolidated statements of income, comprehensive
income, changes in equity and cash flows and
the related notes to the consolidated financial
statements, as of and for the year ended 29 February
2020 and the comparative financial information
for the year ended 28 February 2019
FY21 Financial the audited consolidated financial statements
Statements of the Company, which comprise the consolidated
statement of financial position and the related
consolidated statements of income, comprehensive
income, changes in equity and cash flows and
the related notes to the consolidated financial
statements, as of and for the year ended 28 February
2021 and the comparative financial information
for the year ended 29 February 2020
General Meeting the general meeting of the Company to be held
at 11.00 a.m. on 17 August 2021, notice of which
will be set out in the Prospectus
Group the Company and its subsidiary undertakings and,
where the context requires, its associated undertakings
Investment senior loan facility convertible into ordinary
shares of London Southend Airport Company Limited
Joint Bookrunners Canaccord and UBS
London Stock Exchange London Stock Exchange plc
New Shares the new Shares which the Company will issue pursuant
to the Placing and Open Offer and the new Shares
which the Company will issue pursuant to the
Firm Placing
Offer Price the price per New Share, to be determined following
closing of the Bookbuild
Official List the Official List of the FCA
Open Offer the conditional invitation to Qualifying Shareholders
to subscribe for the Open Offer Shares at the
Offer Price on the terms and subject to the conditions
set out in the Prospectus and, in the case of
Qualifying Non-CREST Shareholders only, the Application
Form
Open Offer Entitlements entitlements to subscribe for the Open Offer
Shares, allocated to a Qualifying Shareholder
pursuant to the Open Offer
Open Offer Shares the New Shares for which Qualifying Shareholders
are being invited to apply to be issued pursuant
to the terms of the Open Offer
Placee any persons who have agreed or shall agree to
subscribe for shares pursuant to the Placing
Placing the conditional placing, by the Joint Bookrunners,
as agent of and on behalf of the Company, of
the Open Offer Shares subject to clawback pursuant
to the Open Offer, on the terms and subject to
the conditions contained in the Placing Agreement
Placing Agreement the placing agreement entered into between the
Company and the Joint Bookrunners on 27 July
2021
Prospectus the combined prospectus and class 1 circular
expected to be published by the Company on or
around 28 July 2021 in respect of the Transaction,
together with any supplements thereto
Prospectus Regulation Prospectus Regulation (EU) 2017/1129
Qualifying CREST Qualifying Shareholders holding Shares in uncertificated
Shareholders form
Qualifying Non-CREST Qualifying Shareholders holding Shares in certificated
Shareholders form
Qualifying Shareholders Shareholders on the register of members of the
Company on the Record Date with the exclusion
of persons with a registered address or located
or resident in an Excluded Territory or the United
States
Record Date close of business on 26 July 2021
Regulation S Regulation S promulgated under the Securities
Act
Regulatory Information any of the services set out in Appendix 3 of
Service the Listing Rules
Resolutions the resolutions to be proposed at the General
Meeting in connection with the Capital Raise
Securities Act the US Securities Act of 1933, as amended
Shareholders holders of Shares
Shares ordinary shares of GBP0.10 each in the capital
of the Company having the rights set out in the
Company's articles of incorporation
Transaction the Investment and the Capital Raise
UBS UBS AG London Branch
UK MAR the Market Abuse Regulation (EU) No 596/2014,
as it forms part of United Kingdom law by virtue
of the European Union (Withdrawal) Act 2018 as
amended
UK Prospectus the Prospectus Regulation (EU) 2017/1129 and
Regulation amendments thereto, which is part of United Kingdom
law by virtue of the European Union (Withdrawal)
Act 2018 as amended
United Kingdom the United Kingdom of Great Britain and Northern
or UK Ireland
United States the United States of America, its territories
or US and possessions, any state of the United States
and the District of Columbia
Unless otherwise indicated in this announcement, all references
to "GBP", "GBP", "pounds", "pound sterling", "sterling", "p",
"penny" or "pence" are to the lawful currency of the UK.
Capital Raise Statistics
Offer Price for each New Share Between 14 pence
and 16 pence
Number of Existing Shares in issue at 23 July 2021 630,926,123
-------------------
Open Offer Entitlement To be determined
at the close
of the Bookbuild
(1)
-------------------
Number of New Shares to be issued pursuant to the Approximately
Firm Placing 80 per cent.
of the New Shares
to be issued
under the Firm
Placing and
Placing and
Open Offer
-------------------
Number of New Shares to be issued pursuant to the Approximately
Placing and Open Offer 20 per cent.
of the New Shares
to be issued
under the Firm
Placing and
Placing and
Open Offer
-------------------
Minimum expected gross proceeds from the Capital GBP45 million
Raise
-------------------
Notes:
(1) Fractions of New Shares will not be issued to Shareholders
in the Open Offer and fractional entitlements under the Open Offer
will be rounded down to the nearest whole number of New Shares.
APPIX III
FURTHER DETAILS AND TERMS AND CONDITIONS OF THE FIRM PLACING AND
PLACING
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION,
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED
STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER
JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.
IMPORTANT INFORMATION ON THE FIRM PLACING AND PLACING FOR
INVITED PLACEES ONLY.
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE FIRM
PLACING OR THE PLACING. THIS ANNOUNCEMENT (INCLUDING THE APPICES)
AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION
PURPOSES ONLY AND ARE ONLY DIRECTED AT, AND BEING DISTRIBUTED TO
PERSONS SELECTED BY CANACCORD GENUITY LIMITED ("CANACCORD") AND UBS
AG LONDON BRANCH ("UBS", AND TOGETHER WITH CANACCORD, THE "JOINT
BOOKRUNNERS" AND EACH A "JOINT BOOKRUNNER") (EACH ACTING AS AGENT
FOR THE COMPANY AND AS JOINT BOOKRUNNER): (A) IF IN A MEMBER STATE
OF THE EUROPEAN ECONOMIC AREA ("EEA"), PERSONS WHO ARE QUALIFIED
INVESTORS WITHIN THE MEANING OF ARTICLE 2(E) OF REGULATION (EU)
2017/1129 (THE "PROSPECTUS REGULATION") ("QUALIFIED INVESTORS");
(B) IF IN THE UNITED KINGDOM, PERSONS WHO ARE QUALIFIED INVESTORS
AS DEFINED IN THE PROSPECTUS REGULATION (EU) 2017/1129, AS IT FORMS
PART OF UNITED KINGDOM LAW BY VIRTUE OF THE EUROPEAN UNION
(WITHDRAWAL) ACT 2018 AS AMED (THE "UK PROSPECTUS REGULATION") WHO
ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS
RELATING TO INVESTMENTS FALLING WITHIN THE DEFINITION OF
"INVESTMENT PROFESSIONALS" IN ARTICLE 19(5) OF THE FINANCIAL
SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS
AMED (THE "ORDER"); OR (II) ARE PERSONS FALLING WITHIN ARTICLE
49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED
ASSOCIATIONS, ETC.") OF THE ORDER ("UK QUALIFIED INVESTORS") ; OR
(C) ANY OTHER PERSON TO WHOM IT MAY OTHERWISE LAWFULLY BE
COMMUNICATED; AND, IN EACH CASE, WHO HAVE BEEN INVITED TO
PARTICIPATE IN THE FIRM PLACING AND/OR THE PLACING BY THE JOINT
BOOKRUNNERS (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS
"RELEVANT PERSONS").
THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT HEREIN
MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT
PERSONS. ANY PERSON WHO HAS RECEIVED OR IS DISTRIBUTING THIS
ANNOUNCEMENT AND THESE TERMS AND CONDITIONS MUST SATISFY THEMSELVES
THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY
TO WHICH THIS ANNOUNCEMENT AND THESE TERMS AND CONDITIONS RELATE IS
AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH
RELEVANT PERSONS. THIS ANNOUNCEMENT AND THESE TERMS AND CONDITIONS
DO NOT THEMSELVES CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF
ANY SECURITIES IN THE COMPANY.
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION OF THE UNITED STATES AND THE SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR
INDIRECTLY IN, INTO OR WITHIN THE UNITED STATES. THERE WILL BE NO
OFFERING OF THE SECURITIES IN THE UNITED STATES.
EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL,
TAX, BUSINESS AND RELATED ASPECTS OF AN ACQUISITION OF PLACING
SHARES (AS SUCH TERM IS DEFINED BELOW).
Unless otherwise defined in these terms and conditions,
capitalised terms used in these terms and conditions shall have the
meaning given to them in Appendix II.
If a person indicates to the Joint Bookrunners that it wishes to
participate in the Firm Placing and/or the Placing (together, the
"Equity Placings") by making an oral or written offer to acquire
Firm Placed Shares pursuant to the Firm Placing and/or Open Offer
Shares pursuant to the terms of the Placing (together, the "Placing
Shares") (each such person, a "Placee") it will be deemed (i) to
have read and understood these terms and conditions in this
Appendix and the announcement of which it forms part and the draft
prospectus dated 28 July 2021 prepared by, and relating to, the
Company (the "Preliminary Prospectus") and the Pricing Announcement
in their entirety, (ii) to be participating and making such offer
on the terms and conditions contained in this Appendix, and (iii)
to be providing the representations, warranties, indemnities,
agreements, undertakings and acknowledgements, contained in these
terms and conditions in this Appendix.
In particular, each such Placee represents, warrants and
acknowledges that:
1. it is a Relevant Person and undertakes that it will acquire,
hold, manage and dispose of any of the Placing Shares that are
allocated to it for the purposes of its business only;
2. in the case of any Placing Shares subscribed for by it as a
financial intermediary, as that term is used in Article 5(1) of the
Prospectus Regulation, (i) the Placing Shares acquired by and/or
subscribed for by it in the Equity Placings will not be acquired or
subscribed for on a non-discretionary basis on behalf of, nor will
they be acquired or subscribed for with a view to their offer or
resale to, persons in any member state of the EEA other than
Qualified Investors or in circumstances in which the prior consent
of the Joint Bookrunners has been given to the offer or resale; or
(ii) where Placing Shares have been acquired or subscribed for by
it on behalf of persons in any member state of the EEA other than
Qualified Investors, the offer of those Placing Shares to it is not
treated under the Prospectus Regulation as having been made to such
persons;
3. in the case of any Placing Shares subscribed for by it as a
financial intermediary, as that term is used in Article 5(1) of the
UK Prospectus Regulation, (i) the Placing Shares acquired by and/or
subscribed for by it in the Equity Placings will not be acquired or
subscribed for on a non-discretionary basis on behalf of, nor will
they be acquired or subscribed for with a view to their offer or
resale to, persons in the United Kingdom other than UK Qualified
Investors or in circumstances in which the prior consent of the
Joint Bookrunners has been given to the offer or resale; or (ii)
where Placing Shares have been acquired or subscribed for by it on
behalf of persons in the United Kingdom other than UK Qualified
Investors, the offer of those Placing Shares to it is not treated
under the UK Prospectus Regulation as having been made to such
persons;
4. that the Placing Shares have not been, and will not be,
registered under the Securities Act or with any State or other
jurisdiction of the United States;
5. it is and, at the time the Placing Shares are acquired, will
be outside the United States, and acquiring the Placing Shares in
an offshore transaction in accordance with Rule 903 or Rule 904 of
Regulation S under the Securities Act ("Regulation S") for its own
account or purchasing the Placing Shares for an account with
respect to which it exercises sole investment discretion. Subject
to certain limited exceptions, these terms and conditions do not
constitute an offer to sell or issue or the invitation or
solicitation of an offer to buy or acquire the Placing Shares in
the United States, Australia, Canada, Hong Kong, Japan, the
People's Republic of China, the Republic of South Africa or any
other jurisdiction where the extension or availability of the
Equity Placing would breach any applicable laws or regulations, and
"Excluded Territories" shall mean any of them;
6. it understands (or, if acting for the account of another
person, such person understands) the resale and transfer
restrictions set out in this Appendix; and
7. the Company and the Joint Bookrunners will rely upon the
truth and accuracy of the foregoing representations, warranties and
acknowledgements. Each such Placee hereby agrees with the Joint
Bookrunners and the Company to be bound by these terms and
conditions as being the terms and conditions upon which Placing
Shares will be issued. A Placee shall, without limitation, become
so bound if any of the Joint Bookrunners confirms to such Placee
its allocation of Placing Shares.
These terms and conditions and the information contained herein
are not for release, publication or distribution, directly or
indirectly, in whole or in part, in or into any Excluded Territory,
subject to certain exceptions.
In particular, the Placing Shares referred to in these terms and
conditions have not been and will not be registered under the
Securities Act or the securities laws of any state or other
jurisdiction of the United States and the Placing Shares may not be
offered, sold, transferred or delivered, directly or indirectly in,
into or within the United States, except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities
laws. Accordingly, the Placing Shares are being offered and sold
outside the United States in accordance with Regulation S. There
will be no offering of the Placing Shares in the United States. The
Placing Shares have not been approved or disapproved by the U.S.
Securities and Exchange Commission, or state securities commission
in the United States or any other regulatory authority in the
United States, nor have any of the foregoing authorities passed
upon or endorsed the merits of the Equity Placings or the accuracy
or adequacy of these terms and conditions. Any representation to
the contrary is a criminal offence in the United States.
The distribution of these terms and conditions and the offer
and/or placing of Placing Shares in certain other jurisdictions may
be restricted by law. No action has been or will be taken by the
Joint Bookrunners or the Company that would, or is intended to,
permit an offer of the Placing Shares or possession or distribution
of these terms and conditions or any other offering or publicity
material relating to the Placing Shares in any jurisdiction where
any such action for that purpose is required, save as mentioned
above. Persons into whose possession these terms and conditions
come are required by the Joint Bookrunners and the Company to
inform themselves about and to observe any such restrictions.
Each Placee's commitments will be made solely on the basis of
the information set out in this announcement (including the
Appendix), the Preliminary Prospectus and the Pricing Announcement.
Each Placee, by participating in the Equity Placings, agrees that
it has neither received nor relied on any other information,
representation, warranty or statement made by or on behalf of any
of the Joint Bookrunners or the Company or any of their respective
affiliates. None of the Joint Bookrunners, the Company, or any
person acting on such person's behalf nor any of their respective
affiliates has or shall have liability for any Placee's decision to
accept this invitation to participate in the Equity Placings based
on any other information, representation, warranty or statement.
Each Placee acknowledges and agrees that it has relied on its own
investigation of the business, financial or other position of the
Company in accepting a participation in the Equity Placings.
Nothing in this paragraph shall exclude the liability of any person
for fraudulent misrepresentation.
No undertaking, representation, warranty or any other assurance,
express or implied, is made or given by or on behalf of any Joint
Bookrunner or any of its affiliates, their respective directors,
officers, employees, agents, advisers, or any other person, as to
the accuracy, completeness, correctness or fairness of the
information or opinions contained in the Preliminary Prospectus and
the Prospectus (when published), this announcement, the Pricing
Announcement or for any other statement made or purported to be
made by any of them, or on behalf of them, in connection with the
Company or the Equity Placings and no such person shall have any
responsibility or liability for any such information or opinions or
for any errors or omissions. Accordingly, save to the extent
permitted by law, no liability whatsoever is accepted by any of the
Joint Bookrunners or any of their respective directors, officers,
employees or affiliates or any other person for any loss howsoever
arising, directly or indirectly, from any use of this announcement
or such information or opinions contained herein or otherwise
arising in connection with the Preliminary Prospectus and the
Prospectus (when published).
These terms and conditions do not constitute or form part of,
and should not be construed as, any offer or invitation to sell or
issue, or any solicitation of any offer to purchase or subscribe
for, any Placing Shares or any other securities or an inducement or
recommendation to enter into investment activity, nor shall these
terms and conditions (or any part of them), nor the fact of their
distribution, form the basis of, or be relied on in connection
with, any investment activity. No statement in this announcement is
intended to be nor may be construed as a profit forecast and nor
should any such statement be interpreted to mean that the Company's
profits or earnings per share for any future period will
necessarily match or exceed historical published profits or
earnings per share of the Company.
Proposed Firm Placing of Firm Placed Shares and Placing of Open
Offer Shares subject to clawback in respect of valid applications
by Qualifying Shareholders pursuant to the Open Offer
Placees are referred to these terms and conditions, this
announcement, the Preliminary Prospectus and the Pricing
Announcement containing details of, inter alia, the Equity
Placings. These terms and conditions, this announcement, the
Preliminary Prospectus and the Pricing Announcement have been
prepared and issued by the Company, and each of these documents is
the sole responsibility of the Company.
Applications will be made to the FCA for admission of the
Placing Shares to listing on the premium listing segment of the
Official List of the FCA and to the London Stock Exchange for
admission of the Placing Shares to trading on its main market for
listed securities.
Firm Placing
The Joint Bookrunners have severally agreed, pursuant to the
Placing Agreement, to use reasonable endeavours to procure
subscribers for the Firm Placed Shares, as agent for the Company,
at the Offer Price. The Firm Placed Shares are not subject to
clawback and do not form part of the Placing and Open Offer. The
Firm Placing is subject to the same conditions and termination
rights which apply to the Placing and Open Offer.
Following the execution of the Terms of Issue if any Placee
fails to take up any or all of the Firm Placed Shares which have
been allocated to it or which it has agreed to take up at the Offer
Price, the Joint Bookrunners have severally agreed, on the terms
and subject to the conditions in the Placing Agreement, to take up
such Firm Placed Shares at the Offer Price.
Subject to the conditions below being satisfied, it is expected
that Admission will become effective on 26 August 2021 and that
dealings for normal settlement in the Firm Placed Shares will
commence at 8.00 a.m. on the same day. The Firm Placed Shares, when
issued and fully paid, will be identical to, and rank pari passu
with, the Existing Shares, including the right to receive all
dividends and other distributions declared, made or paid on the
Existing Shares by reference to a record date on or after
Admission.
Placees should note that the Firm Placed Shares do not carry any
entitlement to participate in the Open Offer.
The Firm Placing is conditional, inter alia, upon:
1. the Resolutions being passed by Shareholders at the General Meeting;
2. the Placing Agreement having become unconditional in all
respects and not having been terminated by the Joint Bookrunners in
accordance with its terms prior to Admission; and
3. Admission becoming effective by not later than 8.00 a.m. on
26 August 2021 (or such later time or date as the Company and the
Joint Bookrunners may agree).
Conditional Placing and Open Offer
The Joint Bookrunners have severally agreed, pursuant to the
Placing Agreement, to use reasonable endeavours to procure
subscribers for the Open Offer Shares, as agent for the Company, at
the Offer Price. The commitments of Placees in respect of the Open
Offer Shares in the Placing (the "Conditional Placees") are subject
to clawback in respect of valid applications for Open Offer Shares
by Qualifying Shareholders pursuant to the Open Offer. Following
the execution of the Terms of Issue by the Company and the Joint
Bookrunners, to the extent that placees cannot be found for the
Open Offer Shares which are not applied for in respect of the Open
Offer or any Conditional Placee fails to take up any or all of the
Open Offer Shares which are not applied for in respect of the Open
Offer and which have been allocated to it, the Joint Bookrunners
have severally agreed, on the terms and subject to the conditions
in the Placing Agreement, to take up such Open Offer Shares at the
Offer Price.
Qualifying Shareholders are being given the opportunity to apply
for the Open Offer Shares at the Offer Price on and subject to the
terms and conditions of the Open Offer, pro rata to their holdings
of Existing Shares on the Record Date. Fractions of Open Offer
Shares will be rounded down to the nearest whole number. Qualifying
Shareholders are also being given the opportunity to apply for
Excess Shares at the Offer Price through the Excess Application
Facility. If applications under the Excess Application Facility are
received for more than the number of Excess Shares available
following take up of Open Offer Entitlements, applications will be
scaled back at the absolute discretion of the Company in
consultation with the Joint Bookrunners.
The New Shares issued under the Placing and Open Offer, when
issued and fully paid, will be identical to, and rank pari passu in
all respects with, the Existing Shares including the right to
receive all dividends and other distributions declared, made or
paid on the Existing Shares by reference to a record date on or
after Admission.
Subject to the conditions below being satisfied, it is expected
that Admission will become effective on 26 August 2021 and that
dealings for normal settlement in the Open Offer Shares will
commence at 8.00 a.m. on the same day.
The Placing and Open Offer are conditional, inter alia,
upon:
1. the Resolutions being passed by Shareholders at the General Meeting;
2. the Placing Agreement having become unconditional in all
respects and not having been terminated by the Joint Bookrunners in
accordance with its terms prior to Admission; and
3. Admission becoming effective by not later than 8.00 a.m. on
26 August 2021 (or such later time or date as the Company and the
Joint Bookrunners may agree).
The full terms and conditions of the Open Offer will be
contained in the Prospectus to be issued by the Company in
connection with the Capital Raise and Admission. The Prospectus to
be issued by the Company will be approved by the FCA under section
87A of the FSMA and made available to the public in accordance with
Rule 3.2 of the Prospectus Regulation Rules made under Part VI of
the FSMA.
Bookbuild of the Equity Placings
Commencing today, the Joint Bookrunners will be conducting the
Bookbuild to determine demand for participation in the Equity
Placings. The Joint Bookrunners will seek to procure Placees as
agent for the Company as part of this Bookbuild. These terms and
conditions give details of the terms and conditions of, and the
mechanics of participation in, the Equity Placings.
The Joint Bookrunners and the Company shall be entitled to
effect the Placing by such alternative method to the Bookbuild as
they may, in their sole discretion, determine.
Principal terms of the Bookbuild
(a) The Joint Bookrunners are arranging the Placing as joint
bookrunners and agents of the Company.
(b) By participating in the Equity Placings, Placees will be
deemed (i) to have read and understood this announcement, these
terms and conditions in this Appendix, the Preliminary Prospectus
and the Pricing Announcement in their entirety and (ii) to be
participating and making an offer for any Placing Shares on the
terms and conditions in this Appendix, and (iii) to be providing
the representations, warranties, indemnities, agreements,
undertakings and acknowledgements, contained in this Appendix.
(c) The Joint Bookrunners are arranging the Equity Placings
severally, and not jointly, nor jointly and severally, as agents of
the Company.
(d) Participation in the Equity Placings will only be available
to persons who are Relevant Persons and who may lawfully be, and
are, invited to participate by any of the Joint Bookrunners. The
Joint Bookrunners and their respective affiliates are entitled to
offer to subscribe for Placing Shares as principal in the
Bookbuild.
(e) To bid in the Bookbuild, Placees should communicate their
bid by telephone or in writing to their usual sales contact at any
Joint Bookrunner. Each bid should state the aggregate number of
Firm Placed Shares and Open Offer Shares which the Placee wishes to
acquire or the total monetary amount which it wishes to commit to
acquire Placing Shares at the Offer Price which is ultimately
established by the Company and the Joint Bookrunners, or at a price
up to a price limit specified in its bid. Allocations of Placing
Shares will be made in a combination that reflects an approximately
80:20 ratio of Firm Placed Shares to Open Offer Shares. The Offer
Price will be jointly agreed between the Joint Bookrunners and the
Company following completion of the Bookbuild and will be payable
by the Placees in respect of the Placing Shares allocated to them.
A ny discount to the market price of the ordinary shares will be
determined in accordance with the Listing Rules produced by the FCA
under Part VI of FSMA. Bids may be scaled down by the Joint
Bookrunners on the basis referred to in paragraph (k) below.
(f) The Bookbuild is expected to close no later than 7.00 a.m.
on 28 July 2021 but may close earlier or later, at the discretion
of the Joint Bookrunners and the Company. The timing of the closing
of the books and allocations will be agreed between the Joint
Bookrunners and the Company following completion of the Bookbuild.
The Joint Bookrunners may, in agreement with the Company, accept
offers to subscribe for Placing Shares that are received after the
Bookbuild has closed.
(g) An offer to subscribe for Placing Shares in the Bookbuild
will be made on the basis of these terms and conditions (which
shall be deemed to be incorporated in such offer), the Preliminary
Prospectus and the Pricing Announcement and will be legally binding
on the Placee by which, or on behalf of which, it is made and will
not be capable of variation or revocation.
(h) Subject to paragraph (e) above, the Joint Bookrunners
reserve the right not to accept an offer to subscribe for Placing
Shares, either in whole or in part, on the basis of allocations
agreed with the Company and may scale down any offer to subscribe
for Placing Shares for this purpose.
(i) If successful, each Placee's allocation will be confirmed to
it by the Joint Bookrunners following the close of the Bookbuild.
Oral or written confirmation (at the Joint Bookrunners' discretion)
from the Joint Bookrunners to such Placee confirming its allocation
will constitute a legally binding commitment upon such Placee, in
favour of the Joint Bookrunners and the Company to acquire the
number of Placing Shares allocated to it (and in the respective
numbers of Firm Placed Shares and Open Offer Shares (subject to
clawback) so allocated) on the terms and conditions set out herein
(which shall be deemed to be incorporated in such legally binding
commitment). Each Placee will have an immediate, separate,
irrevocable and binding obligation, owed to the Joint Bookrunners,
to pay to the Joint Bookrunners (or as the Joint Bookrunners may
direct) as agent for the Company in cleared funds an amount equal
to the product of the Offer Price and the sum of the number of Firm
Placed Shares and, once apportioned after clawback (in accordance
with the procedure described in the paragraph entitled "Placing
Procedure" below), the Open Offer Shares, which such Placee has
agreed to acquire.
(j) The Company will make a further announcement detailing the
Offer Price and the number of Placing Shares to be issued. It is
expected that such announcement will be made as soon as practicable
after the close of the Bookbuild.
(k) Subject to paragraphs (h) and (i) above, the Joint
Bookrunners reserve the right not to accept bids or to accept bids,
either in whole or in part, on the basis of allocations determined
at the Joint Bookrunners' discretion and may scale down any bids as
the Joint Bookrunners may determine, subject to agreement with the
Company. The acceptance of bids shall be at the Joint Bookrunners'
absolute discretion, subject to agreement with the Company.
(l) Irrespective of the time at which a Placee's allocation(s)
pursuant to the Equity Placings is/are confirmed, settlement for
all Placing Shares to be acquired pursuant to the Firm Placing will
be required to be made at the time specified and all Placing Shares
to be acquired pursuant to the Placing will be required to be made
at the later time specified, on the basis explained below under the
paragraph entitled "Registration and Settlement".
(m) Commissions are payable to Placees in respect of the
Placing, subject to certain exceptions. No commissions are payable
to Placees in respect of the Firm Placing or any Open Offer Shares
which are subscribed for under the Open Offer.
(n) By participating in the Bookbuild, each Placee agrees that
its rights and obligations in respect of the Firm Placing and/or
the Placing will terminate only in the circumstances described
below and will not be capable of rescission or termination by the
Placee. All obligations under the Equity Placings will be subject
to the fulfilment of the conditions referred to below under the
paragraph entitled "Conditions of the Equity Placings and
Termination of the Placing Agreement".
(o) To the fullest extent permissible by law, no Joint
Bookrunner nor any of its affiliates nor any of its or their
respective affiliates' agents, directors, officers or employees,
respectively, shall have any liability to Placees (or to any other
person whether acting on behalf of a Placee or otherwise). In
particular, no Joint Bookrunner nor any of its affiliates nor any
of its or their respective affiliates' agents, directors, officers
or employees, respectively, shall have any liability (including, to
the extent permissible by law, any fiduciary duties) to Placees (or
to any person whether acting on behalf of a Placee or otherwise) in
respect of the Joint Bookrunners' conduct of the Bookbuild or of
such alternative method of effecting the Equity Placings as the
Joint Bookrunners and the Company may agree.
Conditions of the Equity Placings and Termination of the Placing
Agreement
Placees will only be called on to subscribe for Placing Shares
if the obligations of the Joint Bookrunners under the Placing
Agreement have become unconditional in all respects and the Joint
Bookrunners have not terminated the Placing Agreement prior to
Admission.
The Joint Bookrunners' obligations under the Placing Agreement
in respect of the Firm Placing and the Placing and Open Offer are
conditional upon, inter alia:
(a) the Prospectus being approved pursuant to the Prospectus
Regulation Rules by the FCA not later than 5.00 p.m. on 28 July
2021 (or such other time or date as the Joint Bookrunners may
agree);
(b) Admission occurring not later than 8.00 a.m. on 26 August
2021 (or such later time and/or date as the Joint Bookrunners may
agree with the Company);
(c) the passing of the Resolutions (without amendment or with
such amendments as the Joint Bookrunners may agree) at the General
Meeting;
(d) representations and warranties given by the Company to the
Joint Bookrunners as contained in the Placing Agreement being true
and accurate in all respects and not misleading on and as of the
date of the Placing Agreement, the date of the Prospectus, the date
of any supplementary circular or supplementary prospectus published
prior to Admission and immediately prior to Admission, in each case
by reference to the facts and circumstances then existing;
(e) in the opinion of the Joint Bookrunners (acting in good
faith), there not having occurred a material adverse change (as
such term is defined in the Placing Agreement) at any time prior to
Admission;
(f) no event referred to in Article 23 of the UK Prospectus
Regulation and/or Listing Rule 10.5.4R arising between the time of
publication of the Prospectus and Admission and no supplementary
circular or supplementary prospectus being published by or on
behalf of the Company which the Joint Bookrunners consider (acting
in good faith) to be material in the context of the Investment, the
Firm Placing and the Placing and Open Offer or Admission;
(g) the Company not being in breach of any of its obligations
under the Placing Agreement and/or the terms of the Firm Placing
and the Placing and Open Offer, in each case, to the extent the
same fall to be performed or satisfied prior to Admission, except
for any breaches which the Joint Bookrunners consider (acting in
good faith) not to be material in the context of the Firm Placing
and the Placing and Open Offer or Admission;
(a) in relation to each of the agreements relating to the
Investment and the New Facility, (i) such agreement remaining in
full force and effect, not having lapsed, not having been amended
in any material respect and not having been terminated in
accordance with its terms prior to Admission; (ii) no fact, matter
or circumstance having arisen that would give rise to a right of a
party to terminate such agreement; and (iii) no condition to which
such agreement is subject having become incapable of satisfaction
and not having been waived prior to Admission; and
(h) the Terms of Issue having been executed by the Company and
the Joint Bookrunners by no later than 8.00 a.m. on the Business
Day following signing of the Placing Agreement,
(the Conditions).
The Placing Agreement can be terminated at any time before
Admission by the Joint Bookrunners by giving notice to the Company
in certain circumstances, including (but not limited to): (a) where
there has been a breach by the Company of any of its obligations in
the Placing Agreement which, in the good faith opinion of the Joint
Bookrunners, is material in the context of the Group taken as a
whole, the Investment, the Capital Raise, Admission or the
underwriting of the New Shares; (b) in the good faith opinion of
the Joint Bookrunners, any of the representations and warranties
given by the Company in the Placing Agreement is or if repeated at
any time up to and including Admission (by reference to the facts
and circumstances then existing) would be untrue, inaccurate or
misleading; or (c) in the good faith opinion of the Joint
Bookrunners, there has been a material adverse change (as defined
in the Placing Agreement). If any notice is given to terminate the
Placing Agreement by the Joint Bookrunners, the Joint Bookrunners
shall, on behalf of the Company, withdraw any application to the
FCA and the London Stock Exchange for Admission.
If any Condition has not been satisfied or waived by the Joint
Bookrunners as described below or if the Placing Agreement is
terminated, all obligations under these terms and conditions will
automatically terminate . By participating in the Equity Placings,
each Placee agrees that its rights and obligations hereunder are
conditional upon the Placing Agreement becoming unconditional in
all respects in respect of the Firm Placing (in respect of Firm
Placed Shares subscribed for under the Firm Placing) and/or in
respect of the Placing (in respect of Open Offer Shares subscribed
for under the Placing) and that its rights and obligations will
terminate only in the circumstances described above and will not be
capable otherwise of rescission or termination by it after oral or
written confirmation by the Joint Bookrunners (at the Joint
Bookrunners' discretion) following the close of the Bookbuild.
The Joint Bookrunners may in their absolute discretion waive
fulfilment of certain of the Conditions in the Placing Agreement or
extend the time provided for fulfilment of any of the Conditions.
Any such extension or waiver will not affect Placees' commitments
as set out in these terms and conditions.
By participating in the Equity Placings each Placee agrees that
the exercise by the Company or any Joint Bookrunner of any right or
other discretion under the Placing Agreement shall be within the
absolute discretion of the Company and each Joint Bookrunner (as
the case may be) and that neither the Company nor any Joint
Bookrunner need make any reference to such Placee (or to any other
person whether acting on behalf of any Placee or otherwise) and
that neither the Company nor any Joint Bookrunner nor any person
acting on their behalf shall have any liability to such Placee (or
to any other person whether acting on behalf of any Placee or
otherwise) whatsoever in connection with any such exercise or
failure so to exercise.
Neither the Company nor any Joint Bookrunner nor any of their
respective directors, officers, employees, agents or affiliates
shall have any liability to any Placee (or to any other person
whether acting on behalf of a Placee or otherwise) in respect of
any decision made by the Joint Bookrunners as to whether or not to
waive or to extend the time and/or date for the fulfilment of any
condition in the Placing Agreement and/or whether or not to
exercise any such termination right.
Withdrawal Rights
Placees acknowledge that their acceptance of any of the Placing
Shares is not by way of acceptance of the public offer made in the
Prospectus and (if applicable) the Application Form but is by way
of a collateral contract and as such Article 23(2) of the UK
Prospectus Regulation does not entitle Placees to withdraw in the
event that the Company publishes a supplementary prospectus in
connection with the Firm Placing and Placing and Open Offer or
Admission.
Placing Procedure
Placees shall acquire or subscribe for the Firm Placed Shares
and Open Offer Shares to be issued pursuant to the Equity Placings
(after clawback) and any allocation of the Firm Placed Shares and
Open Offer Shares (subject to clawback) to be issued pursuant to
the Equity Placings will be notified to them on or around 17 August
2021 (or such other time and/or date as the Company and the Joint
Bookrunners may agree).
Placees will be called upon to subscribe for, and shall
subscribe for, the Open Offer Shares only to the extent that valid
applications by Qualifying Shareholders under the Open Offer are
not received by 11.00 a.m. on 16 August 2021 or if applications
have otherwise not been deemed to be valid in accordance with the
Prospectus and the Application Form.
Payment in full for any Firm Placed Shares and Open Offer Shares
so allocated in respect of the Equity Placings at the Offer Price
must be made by no later than 16 August 2021 (or such other date as
shall be notified to each Placee by the relevant Joint Bookrunner)
on the closing date for the Firm Placing and the closing date for
the Open Offer, respectively (or such other time and/or date as the
Company and the Joint Bookrunners may agree). The Joint Bookrunners
will notify Placees if any of the dates in these terms and
conditions should change, including as a result of delay in the
posting of the Prospectus, the Application Forms or the crediting
of the Open Offer Entitlements in CREST or the production of a
supplementary prospectus or otherwise.
Lock-up
The Company has undertaken to the Joint Bookrunners that,
between the date of the Placing Agreement and 90 calendar days
after Admission, it will not, without the prior written consent of
the Joint Bookrunners (acting in good faith) enter into certain
transactions involving or relating to the Shares, subject to
certain customary carve-outs agreed between the Joint Bookrunners
and the Company.
By participating in the Firm Placing and/or the Placing, Placees
agree that the exercise by the Joint Bookrunners of any power to
grant consent to waive the undertaking by the Company of a
transaction which would otherwise be subject to the lock-up under
the Placing Agreement shall be within the absolute discretion of
the Joint Bookrunners and that they need not make any reference to,
or consult with, Placees and that they shall have no liability to
Placees whatsoever in connection with any such exercise of the
power to grant consent.
Registration and Settlement
Settlement of transactions in the Placing Shares following
Admission will take place within the CREST system, subject to
certain exceptions. The Joint Bookrunners and the Company reserve
the right to require settlement for, and delivery of, the Placing
Shares to Placees by such other means that they deem necessary if
delivery or settlement is not possible or practicable within the
CREST system within the timetable set out in the Preliminary
Prospectus and/or Prospectus or would not be consistent with the
regulatory requirements in the Placee's jurisdiction. Each Placee
will be deemed to agree that it will do all things necessary to
ensure that delivery and payment is completed in accordance with
either the standing CREST or certificated settlement instructions
which they have in place with the relevant Joint Bookrunner.
Settlement for the Equity Placings will take place on the
seventh Business Day following approval of the Transaction at the
General Meeting by the Shareholders. Each Placee is deemed to agree
that if it does not comply with these obligations, the Joint
Bookrunners may sell any or all of the Placing Shares allocated to
it on its behalf and retain from the proceeds, for its own account
and benefit, an amount equal to the aggregate amount owed by the
Placee. By communicating a bid for Placing Shares, each Placee
confers on the Joint Bookrunners all such authorities and powers
necessary to carry out any such sale and agrees to ratify and
confirm all actions which the Joint Bookrunners lawfully take in
pursuance of such sale. The relevant Placee will, however, remain
liable for any shortfall below the aggregate amount owed by it and
may be required to bear any stamp duty, stamp duty reserve tax or
any other similar duty or tax payable inside or outside the UK
which may arise upon any transaction in the Placing Shares on such
Placee's behalf.
Acceptance
By participating in the Equity Placings, a Placee (and any
person acting on such Placee's behalf) irrevocably acknowledges,
confirms, undertakes, represents, warrants and agrees (as the case
may be) with the Joint Bookrunners and the Company, the
following:
1. in consideration of its allocation of a placing
participation, to subscribe at the Offer Price for any Placing
Shares comprised in its allocation for which it is required to
subscribe pursuant to these terms and conditions, subject in
respect of the conditional Placing only to clawback of the Open
Offer Shares in respect of valid applications from Qualifying
Shareholders in the Open Offer;
2. it has read and understood this announcement (including these
terms and conditions), the Preliminary Prospectus and the Pricing
Announcement in their entirety and that (i) it has neither received
nor relied on any information given or any investigations,
representations, warranties or statements made at any time by any
person in connection with Admission, the Equity Placings, the
Company, the New Shares, or otherwise, other than the information
contained in this announcement (including these terms and
conditions), the Preliminary Prospectus and the Pricing
Announcement that in accepting the offer of its placing
participation it will be relying solely on the information
contained in this announcement (including these terms and
conditions), the Preliminary Prospectus and the Pricing
Announcement, receipt of which is hereby acknowledged, and
undertakes not to redistribute or duplicate such documents;
3. its oral or written commitment will be made solely on the
basis of the information set out in this announcement, the
Preliminary Prospectus and the Pricing Announcement, such
information being all that such Placee deems necessary or
appropriate and sufficient to make an investment decision in
respect of the Placing Shares and that it has neither received nor
relied on any other information given, or representations or
warranties or statements made, by or on behalf of any of the Joint
Bookrunners or the Company nor any of their respective affiliates
and none of the Joint Bookrunners nor the Company nor any of their
respective affiliates shall be liable for any Placee's decision to
participate in the Equity Placings based on any other information,
representation, warranty or statement;
4. the content of this announcement, these terms and conditions,
the Preliminary Prospectus and the Pricing Announcement are
exclusively the responsibility of the Company and agrees that none
of the Joint Bookrunners nor any of their affiliates nor any person
acting on behalf of any of such persons will be responsible for or
shall have liability for any information, representation or
statements contained therein or any information previously
published by or on behalf of the Company, and none of the Joint
Bookrunners nor the Company nor any of their respective affiliates
or any person acting on behalf of any such person will be
responsible or liable for a Placee's decision to accept its placing
participation;
5. (i) it has not relied on, and will not rely on, any
information relating to the Company contained or which may be
contained in any research report or investor presentation prepared
or which may be prepared by any of the Joint Bookrunners or any of
their affiliates; (ii) none of the Joint Bookrunners nor any of
their affiliates nor any person acting on behalf of any of such
persons has or shall have any responsibility or liability for
public information relating to the Company; (iii) none of the Joint
Bookrunners nor any of its affiliates nor any person acting on
behalf of any of such persons has or shall have any responsibility
or liability for any additional information that has otherwise been
made available to it, whether at the date of publication of such
information, the date of these terms and conditions or otherwise;
and that (iv) none of the Joint Bookrunners nor any of their
affiliates nor any person acting on behalf of any of such persons
makes any representation or warranty, express or implied, as to the
truth, accuracy or completeness of any such information referred to
in (i) to (iii) above, whether at the date of publication of such
information, the date of this announcement or otherwise;
6. it has made its own assessment of the Company and has relied
on its own investigation of the business, financial or other
position of the Company in deciding to participate in the Equity
Placings, and has satisfied itself concerning the relevant tax,
legal, currency and other economic considerations relevant to its
decision to participate in the Firm Placing and/or the Placing;
7. it is acting as principal only in respect of the Equity
Placings or, if it is acting for any other person (i) it is duly
authorised to do so and has full power to make the
acknowledgements, representations and agreements herein on behalf
of each such person, (ii) it is and will remain liable to the
Company and the Joint Bookrunners for the performance of all its
obligations as a Placee in respect of the Equity Placings
(regardless of the fact that it is acting for another person);
8. it is a Relevant Person and undertakes that it will acquire,
hold, manage or dispose of any Placing Shares that are allocated to
it for the purposes of its business;
9. in the case of any Placing Shares subscribed for by it as a
financial intermediary, as that term is used in Article 5(1) of the
Prospectus Regulation, (i) the Placing Shares acquired by and/or
subscribed for by it in the Equity Placings will not be acquired or
subscribed for on a non-discretionary basis on behalf of, nor will
they be acquired or subscribed for with a view to their offer or
resale to, persons in any member state of the EEA other than
Qualified Investors or in circumstances in which the prior consent
of the Joint Bookrunners has been given to the offer or resale; or
(ii) where Placing Shares have been acquired or subscribed for by
it on behalf of persons in any member state of the EEA other than
Qualified Investors, the offer of those Placing Shares to it is not
treated under the Prospectus Regulation as having been made to such
persons;
10. in the case of any Placing Shares subscribed for by it as a
financial intermediary, as that term is used in Article 5(1) of the
UK Prospectus Regulation, (i) the Placing Shares acquired by and/or
subscribed for by it in the Equity Placings will not be acquired or
subscribed for on a non-discretionary basis on behalf of, nor will
they be acquired or subscribed for with a view to their offer or
resale to, persons in the United Kingdom other than UK Qualified
Investors or in circumstances in which the prior consent of the
Joint Bookrunners has been given to the offer or resale; or (ii)
where Placing Shares have been acquired or subscribed for by it on
behalf of persons in the United Kingdom other than UK Qualified
Investors, the offer of those Placing Shares to it is not treated
under the UK Prospectus Regulation as having been made to such
persons;
11. if it has received any "inside information" (as defined in
EU Regulation No. 596/2014 or UK MAR, as applicable) about the
Company in advance of the Equity Placings, it has not (i) dealt in
the securities of the Company; (ii) encouraged or required another
person to deal in the securities of the Company; or (iii) disclosed
such information to any person, prior to the information being made
generally available;
12. it has complied with its obligations in connection with
money laundering and terrorist financing under the Proceeds of
Crime Act 2002, the Terrorism Act 2000, the Terrorism Act 2006 and
the Money Laundering, Terrorist Financing and Transfer of Funds
(Information on the Payer) 2017 Regulations and the Criminal
Justice (Money Laundering and Terrorism Financing) Act 2010 and any
related or similar rules, regulations or guidelines, issued,
administered or enforced by any government agency having
jurisdiction in respect thereof (the "AML Regulations") and, if it
is making payment on behalf of a third party, it has obtained and
recorded satisfactory evidence to verify the identity of the third
party as may be required by the AML Regulations;
13. it has only communicated or caused to be communicated and
will only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning of
section 21 of FSMA) relating to the Placing Shares in circumstances
in which section 21(1) of FSMA does not require approval of the
communication by an authorised person;
14. it is not acting in concert (within the meaning given in the
City Code on Takeovers and Mergers) with any other Placee or any
other person in relation to the Company;
15. it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the Placing Shares in, from or otherwise involving the
United Kingdom;
16. it and any person acting on its behalf is entitled to
acquire the Placing Shares under the laws of all relevant
jurisdictions and that it has all necessary capacity and has
obtained all necessary consents and authorities to enable it to
commit to this participation in the Equity Placings and to perform
its obligations in relation thereto (including, without limitation,
in the case of any person on whose behalf it is acting, all
necessary consents and authorities to agree to the terms set out or
referred to in these terms and conditions);
17. unless otherwise agreed by the Company (after agreement with
the Joint Bookrunners), it is not, and at the time the Placing
Shares are subscribed for and purchased will not be, subscribing
for and on behalf of a resident of any Excluded Territory and
further acknowledges that the Placing Shares have not been and will
not be registered under the securities legislation of any Excluded
Territory and, subject to certain exceptions, may not be offered,
sold, transferred, delivered or distributed, directly or
indirectly, in or into those jurisdictions;
18. it does not expect the Joint Bookrunners to have any duties
or responsibilities towards it for providing protections afforded
to clients under the rules of the FCA Handbook (the "Rules") or
advising it with regard to the Placing Shares and that it is not,
and will not be, a client of any of the Joint Bookrunners as
defined by the Rules. Likewise, any payment by it will not be
treated as client money governed by the Rules;
19. any exercise by the Joint Bookrunners of any right to
terminate the Placing Agreement or of other rights or discretions
under the Placing Agreement or the Equity Placings shall be within
that the Joint Bookrunners absolute discretion and neither of the
Joint Bookrunners shall have any liability to it whatsoever in
relation to any decision to exercise or not to exercise any such
right or the timing thereof;
20. neither it, nor the person specified by it for registration
as a holder of Placing Shares is, or is acting as nominee(s) or
agent(s) for, and that the Placing Shares will not be issued to, a
person/person(s) whose business either is or includes issuing
depository receipts or the provision of clearance services and
therefore that the issue to the Placee, or the person specified by
the Placee for registration as holder, of the Placing Shares will
not give rise to a liability under any of sections 67, 70, 93 and
96 of the Finance Act 1986 (depositary receipts and clearance
services) and that the Placing Shares are not being acquired in
connection with arrangements to issue depository receipts or to
issue or transfer Placing Shares into a clearance system;
21. it has the funds available to pay for, and will make payment
to the Joint Bookrunners (as the Joint Bookrunners may direct) for,
the Placing Shares allocated to it in accordance with the terms and
conditions of this announcement on the due times and dates set out
in this announcement, failing which the relevant Placing Shares may
be sold to or placed with other persons on such terms as the Joint
Bookrunners determine in their absolute discretion without
liability to the Placee and on the basis that such Placee will
remain liable for any shortfall below the net proceeds of such sale
and the placing proceeds of such Placing Shares and may be required
to bear any stamp duty, stamp duty reserve tax or any other similar
duty or tax payable inside or outside the UK (together with any
interest or penalties due pursuant to the terms set out or referred
to in this announcement) which may arise upon the sale of such
Placee's Placing Shares on its behalf;
22. the person who it specifies for registration as holder of
the Placing Shares will be (i) itself or (ii) its nominee, as the
case may be, and acknowledges that the Joint Bookrunners and the
Company will not be responsible for any liability to pay stamp duty
or stamp duty reserve tax (together with interest and penalties)
resulting from a failure to observe this requirement; and each
Placee and any person acting on behalf of such Placee agrees to
participate in the Equity Placings on the basis that the Placing
Shares will be credited to a CREST stock account of one of the
Joint Bookrunners who will hold them as nominee on behalf of the
Placee until settlement in accordance with its standing settlement
instructions with it;
23. where it is acquiring Placing Shares for one or more managed
accounts, it is authorised in writing by each managed account to
acquire Placing Shares for that managed account;
24. if it is a pension fund or investment company, its
acquisition of any Placing Shares is in full compliance with
applicable laws and regulations;
25. it has not offered or sold and will not offer or sell any
New Shares to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for
the purposes of their business or otherwise in circumstances which
have not resulted and which will not result in an offer to the
public in the United Kingdom within the meaning of section 85(1) of
the FSMA or the UK Prospectus Regulation;
26. it has not offered or sold and will not offer or sell any
New Shares to persons in any member state of the EEA prior to
Admission except to persons whose ordinary activities involve them
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purpose of their business or otherwise
in circumstances which have not resulted and will not result in an
offer to the public in any member state of the EEA within the
meaning of the Prospectus Regulation ;
27. participation in the Equity Placings is on the basis that,
for the purposes of the Equity Placings, it is not and will not be
a client of either of the Joint Bookrunners and that none of the
Joint Bookrunner have any duties or responsibilities to it for
providing the protections afforded to their clients nor for
providing advice in relation to the Equity Placings nor in respect
of any representations, warranties, undertakings or indemnities
contained in the Placing Agreement or the contents of these terms
and conditions;
28. to provide the Joint Bookrunners with such relevant
documents as they may reasonably request to comply with requests or
requirements that either they or the Company may receive from
relevant regulators in relation to the Equity Placings, subject to
its legal, regulatory and compliance requirements and
restrictions;
29. any agreements entered into by it pursuant to these terms
and conditions and any noncontractual obligations arising out of or
in connection with such agreement shall be governed by and
construed in accordance with the laws of England and Wales and it
submits (on its behalf and on behalf of any Placee on whose behalf
it is acting) to the exclusive jurisdiction of the English courts
as regards any claim, dispute or matter arising out of any such
contract, except that enforcement proceedings in respect of the
obligation to make payment for the Placing Shares (together with
any interest chargeable thereon) may be taken by the Joint
Bookrunners in any jurisdiction in which the relevant Placee is
incorporated or in which any of its securities have a quotation on
a recognised stock exchange;
30. to fully and effectively indemnify and hold harmless the
Company and the Joint Bookrunners and each of their respective
affiliates (as defined in Rule 501(b) under the Securities Act) and
each person, if any, who controls any Joint Bookrunner within the
meaning of Section 15 of the Securities Act or Section 20 of the US
Securities Exchange Act of 1934, as amended, and any such person's
respective affiliates, subsidiaries, branches, associates and
holding companies, and in each case their respective directors,
employees, officers and agents (each, an "Indemnified Person") from
and against any and all losses, claims, damages, liabilities and
expenses (including legal fees and expenses) (i) arising from any
breach by such Placee of any of the provisions of these terms and
conditions and (ii) incurred by any Indemnified Person arising from
the performance of the Placee's obligations as set out in these
terms and conditions;
31. in making any decision to subscribe for Placing Shares: (i)
it has knowledge and experience in financial, business and
international investment matters as is required to evaluate the
merits and risks of acquiring the Placing Shares; (ii) it is
experienced in investing in securities of this nature and is aware
that it may be required to bear, and is able to bear, the economic
risk of, and is able to sustain a complete loss in connection with,
the Placing; (iii) it has relied on its own examination, due
diligence and analysis of the Company and its affiliates taken as a
whole (including the markets in which the Group operates) and the
terms of the Equity Placings (including the merits and risks
involved); (iv) it has had sufficient time to consider and conduct
its own investigation with respect to the offer and purchase of the
Placing Shares, including the legal, regulatory, tax, business,
currency and other economic and financial considerations relevant
to such investment; and (v) will not look to the Joint Bookrunners,
any of their respective affiliates or any person acting on their
behalf for all or part of any such loss or losses it or they may
suffer;
32. the Joint Bookrunners and the Company and their respective
affiliates and others will rely upon the truth and accuracy of the
foregoing representations, warranties, acknowledgments and
undertakings which are irrevocable; and
33. its commitment to acquire Placing Shares will continue
notwithstanding any amendment that may in future be made to the
terms and conditions of the Firm Placing and/or the Placing, and
that Placees will have no right to be consulted or require that
their consent be obtained with respect to the Company's or the
Joint Bookrunners' conduct of the Firm Placing and/or the
Placing.
Please also note that the agreement to allot and issue Placing
Shares to Placees (or the persons for whom Placees are contracting
as agent) free of stamp duty and stamp duty reserve tax in the UK
relates only to their allotment and issue to Placees, or such
persons as they nominate as their agents, direct from the Company
for the Placing Shares in question. Furthermore, each Placee agrees
to indemnify on an after-tax basis and hold each of the Joint
Bookrunners and/or the Company and their respective affiliates
harmless from any and all stamp duty, stamp duty reserve tax and
all other similar duties or taxes to the extent that such taxes,
interest, fines or penalties arise from the unreasonable default or
delay of that Placee or its agent or from a breach or inaccuracy of
the foregoing representations, warranties, acknowledgements and
undertakings of that Placee or its agent. In addition, Placees
should note that they will be liable for any capital duty, stamp
duty and all other stamp, issue, securities, transfer,
registration, documentary or other duties or taxes (including any
interest, fines or penalties relating thereto) payable outside the
UK by them or any other person on the acquisition by them of any
Placing Shares or the agreement by them to acquire any Placing
Shares.
Selling Restrictions
By participating in the Equity Placings, a Placee (and any
person acting on such Placee's behalf) irrevocably acknowledges,
confirms, undertakes, represents, warrants and agrees (as the case
may be) with the Joint Bookrunners and the Company, the
following:
1. it is not a person who has a registered address in, or is a
resident, citizen or national of, a country or countries, in which
it is unlawful to make or accept an offer to subscribe for Placing
Shares;
2. it has fully observed and will fully observe the applicable
laws of any relevant territory, including complying with the
selling restrictions set out herein and obtaining any requisite
governmental or other consents and it has fully observed and will
fully observe any other requisite formalities and pay any issue,
transfer or other taxes due in such territories;
3. if it is in the United Kingdom, it is a UK Qualified Investor;
4. if it is in a member state of the EEA, it is a Qualified Investor;
5. it is a person whose ordinary activities involve it (as
principal or agent) in acquiring, holding, managing or disposing of
investments for the purpose of its business and it undertakes that
it will (as principal or agent) acquire, hold, manage or dispose of
any Placing Shares that are allocated to it for the purposes of its
business, in each case, not with a view to, or for resale in
connection with, the distribution thereof, in or into the United
States within the meaning of US securities laws;
6. it is and, at the time the Placing Shares are purchased, will
be outside the United States, acquiring the Placing Shares in an
offshore transaction in accordance with Regulation S; not a
resident of any Excluded Territory or a corporation, partnership or
other entity organised under the laws of any Excluded Territory;
subscribing for Placing Shares for its own account (or for the
account of its affiliates or funds managed by the Placee or its
affiliates with respect to which the Placee either has investment
discretion or which are outside the United States);
7. none of the Placing Shares have been or will be registered
under the Securities Act or with any securities regulatory
authority of any state or other jurisdiction of the United
States;
8. that the Placing Shares may not be offered, sold, pledged,
taken up, exercised, resold, renounced, transferred or delivered,
directly or indirectly, except outside the United States in an
offshore transaction in reliance on Regulation S under the
Securities Act ("Regulation S") and in compliance with any
applicable securities law. The Placees understand that no
representation has been, or will be, made as to the availability of
any exemption under the Securities Act or any applicable securities
laws of any state or other jurisdiction of the United States for
the reoffer, resale, pledge or transfer of the Placing Shares,
which may be further subject to applicable restrictions on transfer
of the Placing Shares; and
9. it (on its behalf and on behalf of any Placee on whose behalf
it is acting) has (a) fully observed the laws of all relevant
jurisdictions which apply to it; (b) obtained all governmental and
other consents which may be required; (c) fully observed any other
requisite formalities; (d) paid or will pay any issue, transfer or
other taxes; (e) not taken any action which will or may result in
the Company or the Joint Bookrunners (or any of them) being in
breach of a legal or regulatory requirement of any territory in
connection with the Equity Placings; (f) obtained all other
necessary consents and authorities required to enable it to give
its commitment to subscribe for the relevant Placing Shares; and
(g) the power and capacity to, and will, perform its obligations
under the terms contained in these terms and conditions.
Miscellaneous
If a Placee is entitled to participate in the Open Offer by
virtue of being a Qualifying Shareholder it will be able to apply
to subscribe for Open Offer Shares under the terms and conditions
of the Open Offer. Unless otherwise agreed with the Joint
Bookrunners, any participation by a Placee as a Qualifying
Shareholder in the Open Offer will not reduce such Placee's
commitment in respect of its participation in the Firm Placing
and/or Placing.
The Company reserves the right to treat as invalid any
application or purported application for Placing Shares that
appears to the Company or its agents to have been executed,
effected or dispatched from any Excluded Territory or in a manner
that may involve a breach of the laws or regulations of any
jurisdiction or if the Company or its agents believe that the same
may violate applicable legal or regulatory requirements or if it
provides an address for delivery of the share certificates of
Placing Shares in, or in the case of a credit of Open Offer
Entitlements to a stock account in CREST, to a CREST member whose
registered address would be in, the United States, any Excluded
Territory or any other jurisdiction outside the United Kingdom in
which it would be unlawful to deliver such share certificates or
make such a credit.
When a Placee or person acting on behalf of the Placee is
dealing with any of the Joint Bookrunners, any money held in an
account with any of the Joint Bookrunners on behalf of the Placee
and/or any person acting on behalf of the Placee will not be
treated as client money within the meaning of the rules and
regulations of the FCA made under the FSMA. The Placee acknowledges
that the money will not be subject to the protections conferred by
the client money rules; as a consequence, this money will not be
segregated from the Joint Bookrunners' money in accordance with the
client money rules and will be used by each Joint Bookrunner in the
course of its own business; and the Placee will rank only as a
general creditor of the relevant Joint Bookrunner.
Times
Unless the context otherwise requires, all references to time
are to London time. All times and dates in these terms and
conditions may be subject to amendment. The Joint Bookrunners will
notify Placees and any persons acting on behalf of the Placees of
any changes.
[1] Note to DPW: to be aligned with latest draft prospectus,
including the footnotes where relevant.
[2] Note to DPW: To align with latest UoP table as reflected in
draft prospectus.
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END
MSCEASXXASLFEFA
(END) Dow Jones Newswires
July 27, 2021 11:59 ET (15:59 GMT)
Stobart Group Ld (LSE:STOB)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Stobart Group Ld (LSE:STOB)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
