Stobart Group makes good progress in first half

Infrastructure and support services company Stobart Group updated the market on its trading in the first half on Tuesday, reporting good progress in aviation as passenger numbers grew 22% year-on-year at Southend Airport.

The FTSE 250 firm said it was on track to deliver EBITDA on its rail and civil engineering projects for the six months to 31 August, with its infrastructure and investment arm benefiting from a “significant uplift” in value of around £120m and cash generating of £113m following the partial disposal of its stake in Eddie Stobart Logistics.

In energy, delays in the commissioning of “certain third party biomass stations” impacted short-term volumes, though EBITDA was said to be ahead of target.

Stobart Group had now returned £26.4m to shareholders in dividends since 1 March, with the board lifting the quarterly dividend to 4.5p per share from 3p as of July.

“In my first two months as CEO of Stobart Group I have been out meeting our people and key partners, and I continue to review each of our divisions and our ability to meet our targets for calendar year 2018,” said chief executive Warwick Brady.

“Whilst I remain committed to these targets there is some short-term risk in Energy and Aviation.”

Brady said that, in order to meet the aviation target, the company needed to build a portfolio of airlines that would capitalise on London's capacity constraints as well as the large London catchment.

“This has taken longer than we originally envisaged.

“However, I am convinced that the overwhelming demand for additional airport capacity in London means we will ultimately meet this objective.”

Looking ahead, the board set its targets of 2.5m passengers at London Southend Airport and 2m tonnes of biomass supply annually, by the end of calendar year 2018.

It said it believed that the company could achieve those targets, although that was dependent upon the successful commissioning of third party biomass power stations and the securing of another major airline starting operations at the airport in 2018.

Stobart’s board said it was “confident” that short-terms delays will not affect the long-term value creation potential of the business.

Stobart Group also established and communicated extended targets through to 2022 of 5 million passengers through London Southend Airport and 3 million tonnes of fuel supply, and it said it was confident that it could continue to deliver value to shareholders through that period and beyond.

“Our efforts to meet our energy division targets have been frustrated by delays experienced by our partners in commissioning power stations,” Warwick Brady said.

“This has caused some volatility as the new plants come online, and this is impacting short-term performance.”

Brady said he also set “further ambitious targets” for 2022, adding he was “confident” that meeting the#ose targets will deliver “significant dividend returns” for shareholders over a number of years.

“We are also working closely with Stobart Capital to enhance our strategic development and identify new opportunities for increased shareholder returns."