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Stobart progresses Southend expansion

Passenger numbers through London Southend Airport increased by more than a third as the group looks to put management issues behind it
October 25, 2018

After a heated boardroom battle, Stobart Group (STOB) is looking to put past issues behind it. One of its core projects is the expansion of London Southend Airport (LSA). The airport was used by 838,742 passengers in the period under review, a 37 per cent year-on-year increase, which fed through to a 14.6 per cent rise in pro-forma underlying cash profits to £15.7m. Those figures exclude the £18.1m of accelerated investment spent on Flybe’s (FLYB) operations at LSA, which will wind down operations by 2020. Both easyJet (EZJ) and Ryanair (RYA) will expand their operations, with the latter alone expected to bring in an additional 1m passengers each year from 2019. This means that Stobart Group is likely to reach its goal of seeing 5m passengers through LSA by 2022.

IC TIP: Buy at 207p

The biomass energy business has powered ahead with 657,950 tonnes sold, representing a 71.9 per cent increase on FY2017, as plants that were commissioned last year are now approaching commercially viable volume levels. Pro-forma underlying cash profits from energy were up 88.8 per cent to £8.7m – and ahead of the £10 per tonne target. But some sites continue to be underutilised as the commissioning of third-party power stations remains challenging, leading to £2.2m of non-underlying costs.

While the company has done well to progress with its objectives, it has yet to completely overcome previous management issues. Michael Williamson has been appointed interim chief financial officer after Richard Laycock stepped down from the role ahead of July’s annual general meeting, where Iain Ferguson was re-elected as chairman despite protests from former chief executive and Stobart founder Andrew Tinkler. A preliminary hearing for the case between Mr Tinkler and Stobart was held the day before the results, with the formal hearing scheduled for November.

Analysts at Stifel expect pre-tax profits of £10.4m during the year to February 2019, giving EPS of 2.9p, compared with a £6.5m loss and 2.9p loss per share in FY2018.

STOBART GROUP (STOB)  
ORD PRICE:207pMARKET VALUE:£733m
TOUCH:207-208p12-MONTH HIGH:289pLOW: 197p
DIVIDEND YIELD:8.7%PE RATIO:na
NET ASSET VALUE:99p*NET DEBT:22%
Half-year to 31 AugTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201712511232.09.00
2018**151-18.8-5.19.00
% change+21---
Ex-div:na   
Payment:na   

*Includes £102m of intangible assets, or 29p a share

**Quarterly dividends of 4.5p each paid on 6 July and 5 October