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FSTE 350: Recovery in the air for some industrial transporters?

This varied selection of companies was a mixed bag in 2017, but there are some signs of optimism at land and sea
January 25, 2018

A year ago, we noted the diverse mixture of companies in the FTSE 350’s industrial transportation sector. We also noted that share prices in the sector – which varied significantly in 2016 – were likely to diverge again. The lack of a distinct trend was again in evidence in 2017; Royal Mail (RMG) continued to drift, while infrastructure and support services group Stobart (STOB) stormed ahead thanks to some canny dealmaking and strong trading. 

Indeed, Stobart’s aviation division saw a 25 per cent increase in footfall at Southend Airport, while sales surged from £12m to £97.5m in the six months to August, following the acquisitions of a regional airline and an aircraft leasing business. Further investment in this area underlines management's forecasts for fresh growth in capacity demand.

Elsewhere in its sprawling portfolio, Stobart booked £112m from the partial sale of Eddie Stobart Logistics (ESL), a former Stobart subsidiary, which listed on Aim in April. The retention of a 12.5 per cent stake in the haulage group, currently worth £69m, gives Stobart options for further cash windfalls in the year ahead.

Air travel also proved a profitable business line for BBA Aviation (BBA) during 2017. After the private jet specialist swung back to black in the six months to June, a recent trading update revealed 10 per cent revenue growth in the 10 months to October, buoyed by strong organic growth in flight support business Signature, which recently branched out to Mexico. Analysts forecast pre-tax profit of $271m (£196m) for 2017, rising to $304m in 2018, while EPS is currently expected to grow from 1.9¢ to 2.2¢.

Moving from the air to the sea, rebalancing and recovery were messages conveyed by both Clarkson (CLK) and James Fisher and Sons (FSJ). Pointing to signs of "calibration" in some markets, shipbroker Clarkson pointed to the Baltic Dry Index's average of 979 during the first half of 2017 – up 100 per cent year on year. With the index now 30 per cent up on that figure, 2018 has started on the front foot.

Meanwhile, within its half-year results, James Fisher referred to a “degree of recovery in maintenance activity in the oil and gas sector”, although sentiment since then has been decidedly mixed. Even so, the company's marine support activities continued to grow, the renewables businesses won work with the East Anglia One wind farm development, and overall revenue was up 7 per cent for the 10 months to October.

 

CompanyPrice (p)Market value (£m)PE RatioYield (%)1-year change (%)Last IC view
BBA Aviation3643,76018.82.829.0Hold, 307.3p, 2 Aug 2017
Clarkson3,16595730.12.140.7Buy, 2,880p, 21 Sep 2017
Fisher (James )& Sons1,59680120.91.71.0Buy, 1,598p, 31 Aug 2017
Royal Mail4674,67221.95.04.5Sell, 385.1p,16 Nov 2017