Stobart Group (STOB) has given a teaser of what is meant when it promised a “capital review” to determine the optimal way to generate shareholder returns: the fourth-quarter (Q4) dividend has been slashed to 1.5p, compared with payments of 4.5p during the first three quarters. The ultimate conclusions of the review, announced at the first-half results in October, are not due until next March.
Since March 2017, dividend payments have been funded primarily through non-core asset disposals, prompting analysts at Stifel to view the move to cut the dividend as unsurprising. Instead, the proceeds from disposals will now be used to invest in “value-creating opportunities” in the aviation and energy divisions. Stifel analysts have forecast a 6p total dividend a year for FY2020 and FY2021. A spokesperson for Stobart said the remaining dividend payments would be funded through “existing cash and other resources”, although the cash outflow from operating activities more than doubled to £18.1m at the half year.
Stobart’s focus will be on how to best deploy disposal proceeds in the aviation and energy businesses. The company has around £149m-worth of non-strategic assets based on the book value. Since Stobart began the disposal process in March 2017, it has spent £67m on its operating divisions and £105m on dividends.
During the first half, passenger numbers at Stobart’s London Southend airport were up 37 per cent to 838,742. Stobart is aiming to have 5m passengers per year through the airport by 2022, estimating that £10 of cash profits could be generated per passenger. However, the logistics group still has to improve the infrastructure at Southend so that it has the capacity to sustain that many travellers, such as extending runways and expanding terminal areas. Both Ryanair (RYA) and easyJet (EZJ) have commercial deals for planes based at Southend.
Stobart also has ambitions to extend the services it can offer in its energy business and to supply 3m tonnes of biomass per year by 2022. Stobart supplied 657,950 tonnes during the first half – a 72 per cent increase on the previous year, but it is looking at how it could increase its scale in energy, including building, owning and operating renewable energy plants.
