Post-divorce Stobart is back in the black

UK firm Stobart, after delisting and segregating its haulage and logistics business last year, recently reported annual results for the year ended 29 February that saw 2015 yearly losses turn into profits in fiscal 2016.

Its headline figures prove that last year’s corporate reshuffle has worked, although, of course, much remains to be done on its road to recovery through to 2018.

Revenues from so-called continuing operations, which essentially exclude discontinued activities, rose 8.6% to £126.7m (2015: £116.6m), while EBITDA increased by 69.8% to £30m (2015: £17.6m), with all divisions reporting higher adjusted cash flows than in the prior year.

Chief executive Andrew Tinkler said that Stobart “delivered improved profitability in all five divisions with the foundations, management and organisational structure almost set to achieve our objectives and deliver our plan”.

“We are on track to deliver our strategy by 2018 and drive shareholder value through our three growth operating divisions of Energy, Aviation and Rail, while generating a cash surplus through the exit of our infrastructure and investment portfolios at the right time allowing increasing returns to shareholders,” he added.

The performance of its energy unit in terms of adjusted cash flows (+17%) was less impressive than that of the remainder of its assets portfolio – aviation (+60%), rail (+20.1%), investments (+64%), and infrastructures (+159%) – but surely contributed to the rise in group EBITDA.

Not only is energy responsible for a third of group EBITDA but it also bears the hallmarks of a solid cash flow generator in the current environment, especially given the trend towards using renewable energy.

Stobart said that it continues to set-up a sustainable supply chain and infrastructure “to supply and deliver over 2m tonnes per annum of waste and virgin wood fuel on long-term contracts to existing and new biomass plants that are coming on stream between now and 2018”.

In aviation, it is working closely with existing and new airlines to create additional routes, while civil engineering activities focus on growing external revenues.

Underlying pre-tax profit almost doubled to £18.4m (2015: £9.3m), with earnings per share of 5p (2015: 2.6p).

It proposed a final dividend of 4p a share, which was unchanged year-on-year, and also unchanged was the amount of cash returned to shareholders, which stood at about £19.7m yearly in fiscal 2015 and 2016.

“We expect to maintain our current dividend payment level,” Stobart noted, showing confidence in its operational plan, which has pushed up its stock value to a 52-week high in recent days. Given its trading multiples, the shares could rally further if the group continues to deliver on its promises.

Source: Transport Intelligence, 25th May 2016

Author: Alessandro Pasetti