REG - Esken Limited - Interim Results
09/11/2022 07:00
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RNS Number : 8055F Esken Limited 09 November 2022
Prior to publication the information communicated in this announcement was
deemed by the Company to constitute inside information for the purposes of
article 7 of the Market Abuse Regulations (EU) No 596/2014 as amended by
regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations No
2019/310 ('MAR'). With the publication of this announcement, this information
is now considered to be in the public domain.
9 November 2022
Esken Limited
("Esken" or the "Group")
Results for the six months ended 31 August 2022
Financing secured and delivering a resilient performance
Esken Limited, the aviation and renewables group, today announces its
unaudited interim results for the six months to 31 August 2022.
The Group will provide a live presentation relating to its results via the
Investor Meet Company platform at 09:30am BST today.
The presentation is open to all existing and potential shareholders. Investors
can sign up to Investor Meet Company for free and add to meet Esken via:
https://www.investormeetcompany.com/esken-limited/registerinvestor. Investors
who already follow Esken on the Investor Meet Company platform will
automatically be invited.
David Shearer, Executive Chairman of Esken said,
"I am pleased that we have been able to conclude our debt financing,
encompassing £50m of committed funds, with £40m uncommitted, despite
challenging market conditions. Upon shareholder approval of an increase in our
borrowing limits, the £50m of committed funds will bring stability and allows
us to clear our residual legacy liabilities."
"Our Renewables business has proved resilient in what have been challenging
conditions with unplanned biomass plant outages, reduced waste wood
availability and rising costs. We expect biomass plant performance to improve
in the Winter months, and Esken Renewables has secured new supply agreements
and implemented annual contract indexation revisions. This is expected to lead
to improved margins, and we have restated our guidance of £22m EBITDA for FY
2022."
"Our Aviation business has continued its recovery but at a slower pace than we
would have wished due to continuing disruption throughout the industry with
many airlines focussing on short term performance ahead of strategic
positioning. The medium-term case for London Southend Airport remains
compelling and our refreshed airport leadership team is well placed as the
market returns to normality."
"As a board we have decided to initiate an updated strategic review of our
operating businesses. This review will consider all options for the operating
businesses and may conclude that it is in the best interests of all
stakeholders to progress a sale or partial sale of one or both of the
Renewables or Aviation divisions to secure the long term potential of these
businesses and deliver value for Esken shareholders."
Financial highlights
· Esken's core Aviation and Renewables businesses generated a positive combined
EBITDA of £6.5m for the six months to 31 August 2022 (HY21: £9.9m).
· Esken Renewables supplied 753k tonnes of biomass fuel, up 6.7% on the same
period last year (HY21: 706k tonnes). Ongoing fluctuations in UK construction
supply chains during the period led to a reduced availability of waste wood,
impacting gate fee income. This, combined with unplanned outages at higher
margin biomass plant customers and cost inflation resulted in Esken Renewables
reporting EBITDA of £7.0m (HY21: £9.1m). However, this performance is
expected to improve in the second half as a result of additional supply
agreements, expected improvements in biomass plant customer performance and
annual contract indexation revisions coming into effect, supporting £22m FY23
EBITDA guidance.
· The Aviation business received £1.4m related to the recovery of airline
marketing support payments and reported an EBITDA loss of £0.5m. This
compares to a £0.8m profit in the same period last year, when the Aviation
business benefitted from £3.5m of one-off payments associated with Connect
Airways and Teesside International Airport. Passenger numbers improved by
32.6% to 61k (HY21: 46K) reflecting continued easyJet operations with flights
to three popular European destinations throughout the Summer.
· The Group's headroom at the period end was £51.0m (HY21: £90.5m), which is
in line with management expectations set out at the time of the refinancing
and includes £10.1m of ring-fenced cash in London Southend Airport.
· Esken today announces it has secured a new lending facility from funds managed
by a specialty lender (the lender), subject to shareholder approval of an
increase in our borrowing limits in our articles of association, comprising
£50m of committed funding and £40m uncommitted funding, which will be used,
inter alia, to fund Esken's residual c.£44m of Propius legacy liabilities,
cancel the undrawn £19.1m RCF, and provide working capital. The uncommitted
element of the new funding could be used, if accessed, alongside the disposal
of £36m of non-core assets and the value of its Logistics Development Group
shares, to refinance Esken's exchangeable bond, which matures in May 2024 and
provide up to £10m of additional working capital for London Southend Airport.
· Esken entered into an agreement for the early return to the lessor of two of
the aircraft leased by Propius, resulting in a net cash benefit of c.£2m.
However, adverse FX movements have also impacted expected future cash
outflows.
£'m Six months ended Six months ended % change
31 August 2022 31 August 2021
Revenue by division
Aviation 14.2 12.9 9.5%
Renewables 43.5 38.1 14.1%
Revenue for two core operating divisions 57.7 51.0 13.1%
Investments and Non-Strategic infrastructure 0.3 0.3 13.9%
Group central and eliminations 0.1 0.4 (63.8%)
Total revenue 58.1 51.7 12.5%
EBITDA by division
Aviation (0.5) 0.8 (168.0%)
Renewables 7.0 9.1 (23.7%)
EBITDA for two core operating divisions 6.5 9.9 (34.8%)
Investments and Non-Strategic infrastructure (0.8) (0.5) (46.4%)
Group central and eliminations (3.2) (3.8) 16.3%
Total EBITDA 2.5 5.6 (55.1%)
Loss before tax (12.7) (12.5) (1.4%)
Tax 2.5 9.0 (72.2%)
Discontinued operations, net of tax 1.6 (2.9) 154.8%
Loss for the period (8.6) (6.4) (33.8%)
£'m 31 August 2022 28 February 2022 % change
Net debt (263.6) (241.9) (9.4%)
Cash and undrawn banking facilities 51.0 72.7 (29.8%)
Financing
Esken today announces a new facility comprising £50m of committed funding,
and £40m of uncommitted funding which will be provided at the discretion of
the lender. The funds are subject to shareholder approval of the matters
specified below at an EGM scheduled for 29 November 2022.
Subject to shareholder approval to increase the borrowing limits in our
articles of association, funds will be provided by the lender on a 3 year term
(maturing in November 2025) with a further year at the discretion of the
lender, with a SONIA plus 9.875% interest rate. The funds are secured
primarily against the Renewables business along with fixed and floating
charges over the assets and shares of all other trading subsidiaries except
London Southend Airport. The committed element of the facility will be used to
fund all of Esken's residual Propius legacy liabilities of c.£44m, fees
payable in respect of the cancellation of the undrawn £19.1m RCF and entry
into the facility itself, and to provide working capital for the Group. £30m
of the uncommitted element of the new funding could be used, if accessed,
alongside the disposal of £36m of non-core assets and the value of its LDG
shares, to refinance Esken's exchangeable bond, which matures in May 2024. The
remaining £10m of the uncommitted element of the new funding could be used,
if accessed, to provide additional working capital for London Southend Airport
to satisfy the funding it is expected to require in the period to April 2024.
As referred to above, Esken will require the approval of its shareholders to
amend certain provisions of its articles of incorporation (the "Articles")
which limit its borrowings to four times its adjusted capital and reserves. We
therefore intend today to issue a Notice of Extraordinary General Meeting
("EGM") to shareholders for the purposes of passing a resolution to approve
the incurrence of borrowings beyond the limits in our Articles. Further
details relating to the EGM are contained in an announcement expected to be
made today.
Strategic review
Esken today announces that it is initiating an updated strategic review of its
operating businesses. This review will consider all options for its operating
businesses and may conclude that it is in the best interests of all
stakeholders to progress a sale or partial sale of one or both of the
Renewables or Aviation divisions to secure the long-term potential of these
businesses and deliver value for Esken shareholders. The strategic review will
be led by the board and supported by advisers as required.
ESG progress
· Esken remains committed to developing a Net Zero roadmap and work
is ongoing to finalise the plan ahead of the year end.
· Esken continues to be committed to reviewing, developing and
reporting Scope 3 emissions and is supported by Logika Consultants in
delivering this.
· The delivery of the overall ESG strategy has been enhanced
following the completion of the Business in the Community Responsible Business
Tracker.
· Each of our businesses continue to support their chosen charity
partners; FareShare, Help for Heroes and MIND and we are proud signatories of
the Military Covenant, achieving Gold and Silver awards across the Group.
· Colleagues have embraced the new employee volunteering programme,
which supports our charity partners, contributes to education, employment and
skills programmes and delivers environmental projects.
· The established good governance programme continues to provide
support to report against the TCFD requirement for governance, metrics, risk
and strategy.
Outlook
Esken Renewables is expected to deliver £22m EBITDA for the full year, which
is a tightened expectation compared to previously announced guidance of in
excess of £22m. The supply of waste wood is expected to return to seasonal
norms in the second half. At the same time, biomass plant customers are
expected to operate more consistently and take advantage of higher electricity
prices. Esken Renewables also secured additional supply agreements that
commenced in September 2022. Moreover, annual contract indexation revisions on
two of its main contracts came into effect toward the end of the first half,
with two contracts having come into effect early in the first half. These
revisions will support margin improvements.
The combination of improved biomass plant performance, additional supply
agreements, annual contract indexation revisions and management's continued
tight cost control is therefore expected to support an improved performance in
the second half.
London Southend Airport welcomed flying with easyJet to three destinations -
Malaga, Faro and Palma - throughout the Summer period. Flights to these
destinations are now on sale for Summer 2023. Positive discussions regarding
additional airline agreements for Summer 2023 and beyond are supported by the
excellent passenger experience provided throughout the period, combined with
the airport's attractive operating cost.
As previously announced, cargo operations with London Southend Airport's
global logistics partner have now ended, with an anticipated impact on EBITDA
for the remainder of FY23 in the order of c.£0.9m before exit fees receivable
by Esken. The FY24 impact on Esken's Aviation business is expected to be a
c.£2.9m reduction in EBITDA, prior to any additional cost savings or new
cargo agreements. However, post period end, the division signed a contract
with a new logistics partner, to support them on a temporary basis from 8(th)
January through to 25(th) March 2023.
London Southend Airport remains well positioned for the recovery and
longer-term growth in commercial passenger flying. As flight volumes continue
to build and more established London airports begin to face capacity
constraints once again, London Southend Airport's proximity to London, strong
transport links and enjoyable passenger experience supports positive growth
prospects.
Divisional review
Esken Renewables
Esken Renewables supplied 753k tonnes of biomass fuel, up 6.7% on the same
period last year. Biomass plant performance varied during the year with plants
which receive higher margin waste wood experiencing further unplanned outages
and plants that receive forestry by-products performing better. However, we
expect biomass plant operations to continue to become increasingly consistent
over time as a result of proactive maintenance and investment programmes, with
many plants under new long-term ownership.
The construction industry in the UK is a significant source of waste wood as
it is regularly involved in stripping out existing buildings ahead of new
construction works. The ongoing fluctuations in UK construction supply chains
impacted activity and led to a reduced amount of waste wood from construction
firms. As a result of this, and the unplanned plant outages, total gate fee
income was lower.
The combination of biomass plant outages during the period, reduced gate fee
income, and increased costs has resulted in Esken Renewables reporting EBITDA
of £7.0m (HY21: £9.1m). However, when allowing for diesel cost increases
(£0.9m), other inflationary cost pressures (£0.4m) and one-off benefits in
HY21 (£0.9m), Esken Renewables' EBITDA performance is consistent with HY21.
Esken anticipates an improved second half performance as a result of a number
of contributing factors. Firstly, Esken Renewables successfully negotiated a
move in its supply contract at Cramlington to an exclusive basis and also
secured a new sub-supply arrangement in Yorkshire, with both starting in
September 2022.
At the same time, biomass plant customers are expected to operate consistently
and optimise energy generation in the second half winter period.
Finally, Esken Renewables will see an improvement in the terms of the majority
of its largest supply contracts as a result of the timing of its annual
contract indexation revisions. The business experienced cost inflation
throughout the first half, with the annual contract indexation revision on two
of its main contracts coming into effect toward the end of the first half.
This, combined with two plants' annual contract indexation having come early
in the first half, will lead to improved margins in the second half. Annual
contract indexation revisions for a further two plants will come into effect
toward the end of the financial year.
Esken Renewables remains well placed to benefit from its position as a key
supplier to UK energy generators at this critical time.
Aviation
London Southend Airport welcomed the return of easyJet passengers this summer
with flights to three destinations: Malaga, Faro and Palma. These proven
routes are popular with the airport's catchment area, and passengers have been
able to enjoy a quick and easy journey to and through the airport. London
Southend Airport welcomed 61k airport passengers in the first half (HY21:
46K). The Aviation division delivered an EBITDA loss of £0.5m, compared to a
£0.8m profit in the same period last year. That period benefitted from £3.5m
of one-off receipts relating to Connect Airways and Teesside International
Airport. During the period under review, London Southend Airport benefitted
from £1.4m related to the recovery of airline marketing support payments.
When stripping out the one-off receipts in both periods the Aviation
division's performance improved by circa £800k.
The airport remains well positioned for the recovery and longer-term growth in
commercial passenger flying and remains confident in its medium term potential
to return to pre-pandemic levels of over 2m passengers.
London Southend Airport was able to deliver its usual quick and easy passenger
experience this summer. That experience reflected both the investment that the
airport made in security screening and baggage handling equipment, and
importantly, the staff it retained while the airport was closed to commercial
passengers during the previous Winter.
London Southend Airport was also able to attract a number of airlines that
were struggling to add additional flights at established London airports. Blue
Air operated a small number of flights through August, and London Southend
Airport also welcomed a small number of flights from Sky Express to Athens and
Wideroe to Bergen in late July.
Encouragingly, the renamed London Southend Jet Centre (previously Stobart Jet
Centre) has also experienced a significant uplift in traffic and is continuing
to unlock additional revenue growth.
Toward the end of the period London Southend Airport was also informed by its
global logistics partner that it would cease cargo operations at the airport,
effective mid-September 2022 following a change of strategic focus from air
freight to road-based cargo. However, following the period end, it was
confirmed that London Southend Airport will support a new logistics partner on
a temporary basis from 8(th) January through to 25(th) March 2023.
London Southend Airport has also welcomed the news that easyJet has put on
sale flights to three destinations next summer - Malaga, Palma and Faro for
the Summer 2023 season, which starts at the end of March 2023.
These developments have come on the back of an increasingly entrepreneurial
spirit and (re-)start-up mentality under the leadership of the newly appointed
CEO, John Upton. John most recently led the £40m international airport lounge
business No1 Lounges (backed by NVM and Santander). As CEO he put in place an
operational structure that enabled the business to double in size, opening new
sites across the world, as well as securing new deals with airlines and
airports. Prior to No1 Lounges, John worked as Managing Director of Leon, the
fast growing natural food chain, and was a member of the senior team during 13
years at McDonald's UK.
With its new leadership team now in place, London Southend Airport is engaging
with multiple existing and potential airline partners to accelerate the growth
of the business. This focus on business development, while remaining closely
aligned with our investment partner and underpinned by LSA's industry-leading
team, will enable the airport to add pace to its recovery while also taking
advantage of the long-term growth trends in commercial passenger flying.
Financial Review
Summary of the period
The Renewables division has seen a 6.7% period-on-period increase in biomass
material supplied to plants. Inflationary pressures on the division have been
mitigated by RPI-linked indexation elements within the division's long-term
customer supply contracts. The increase in biomass material supplied comes
despite challenges caused by external factors. A slowdown in the UK
construction sector, driven by increased costs and supply chain issues, led to
a more competitive market for waste wood impacting gate fee revenues. This had
the knock-on effect of having to find alternative sources of supply in order
to meet contractual demand, thereby increasing costs. The division has
undertaken an appraisal of its vehicle fleet, reducing numbers to ensure the
most efficient use of vehicles and drivers, driven by ongoing driver shortages
and high fuel prices impacting the wider economy.
In the Aviation division, passenger flights returned to London Southend
Airport with the airport servicing three routes. Passenger numbers in the
period increased by 32.6% to 60,734, up from 45,816 in the prior period,
however this is still considerably lower than pre-COVID 19 volumes. As
previously announced in the Group's trading statement on 31 August 2022, the
Aviation division's cargo contract with its global logistics partner ceased
post-period end in September 2022 due to the partner's strategic shift to a
more road-based operation.
The wind-down of Stobart Air and Propius legacy operations, as mentioned in
the annual report for the year ended 28 February 2022, has continued in the
period. Two of the eight ATR aircraft leased by Propius have been handed back
early to the lessor in August 2022 and September 2022 which will lead to a
reduction in the expected future cash outflows of around £2.0m due to a
reduction in maintenance commitments. The return of aircraft, and the
associated cash outflows, will continue until the final aircraft is handed
back in August 2023.
At the period end, Group headroom is £51.0m, consisting of £31.9m cash, of
which £10.1m is ring-fenced within LSA, and £19.1m of undrawn Revolving
Credit Facility (RCF). The RCF was reduced from the original £20m as a result
of non-core asset sales. The cash position was aided by the £3.5m non-core
asset sale of a portion of Widnes land in the period. The Group has remaining
non-core assets with book value of £36.0m to be sold when most beneficial to
the Group.
Following the period end, the group secured committed funding of £50m, with
an additional £40m uncommitted, which will be mainly used to settle Propius
lease and maintenance liabilities and provide working capital to the Group.
This funding is subject to shareholder approval and has a three year term to
November 2025, plus an additional one year at the discretion of the lender.
This new funding enables Esken to exit the RCF with Lloyds and AIB, with
transactional banking transitioning to Barclays.
Revenue
Revenue from continuing operations has increased by 12.5% to £58.1m (2021:
£51.7m) in the six months to 31 August 2022, mainly due to the Renewables
division whose RPI-linked contracts have been impacted by the current high
level of inflation. Aviation revenue has increased by 9.5% to £14.2m (2021:
£12.9m) due to strong performance of the Hotel, Jet Centre and Star Handling,
partly offset by the £1.5m prior period Teesside settlement not being
repeated in the current period. Renewables revenue increased by 14.1% to
£43.5m (2021: £38.1m) and biomass tonnages supplied rose by 6.7% to 753,000
period-on-period.
Profitability
Divisional Continuing Profit Summary 31 August 2022 31 August 2021
£m £m
Aviation (0.5) 0.8
Renewables 7.0 9.1
EBITDA from operating divisions 6.5 9.9
Investments (0.4) (0.2)
Non-Strategic Infrastructure (0.4) (0.3)
Group central and eliminations (3.2) (3.8)
EBITDA 2.5 5.6
Depreciation (9.1) (10.1)
Finance costs (net) (6.1) (8.0)
Loss before tax (12.7) (12.5)
Tax 2.5 9.0
Profit/(loss) from discontinued operations, net of tax 1.6 (2.9)
Loss for the period (8.6) (6.4)
( )
EBITDA has decreased by 55.1% to a profit of £2.5m (2021: £5.6m). In
Aviation, EBITDA has decreased to a loss of £0.5m (2021: £0.8m profit). This
is mainly due to receipts of £3.5m associated with Connect Airways and
Teesside International Airport in the prior period not being repeated, partly
offset by a £1.4m recovery of airline marketing costs and general improvement
across the division due to the return of passenger flights in the current
period. Renewables EBITDA has decreased by 23.7% to £7.0m (2021: £9.1m) due
to waste wood market pressures reducing gate fee revenue and leading to an
increase in the amount of processed material needed to fulfill demand, thereby
increasing costs. The division has also been impacted by longer than planned
shutdowns at plants and high fuel costs.
The loss before tax from continuing operations is £12.7m (2021: £12.5m).
Depreciation has reduced to £9.1m (2021: £10.1m) due to an overall reduction
in the asset base across the Group. Finance costs of £11.3m (2021: £9.9m)
have increased principally due to interest incurred on the Carlyle convertible
debt in the current period but not in the prior, partly offset by a reduction
in RCF interest. Finance income of £5.2m (2021: £1.9m) has increased mainly
because of gains on the revaluation of Esken Limited's intercompany US-Dollar
denominated loan with Propius.
A summary of divisional profitability and further details of divisional
performance are set out in the Divisional Reviews section.
Taxation
The tax credit of £2.5m (2021: £9.0m) has arisen predominantly due to a
change in estimation of uncertain tax provisions in the period.
Loss per share
Loss per share from continuing operations was 1.00p (2021: 0.55p) (see note 8
for further details).
Balance sheet
31 August 2022 28 February 2022
£m £m
Non-current assets 345.8 353.5
Current assets 72.9 89.2
Non-current liabilities (212.8) (239.5)
Current liabilities (154.9) (133.1)
Net assets 51.0 70.1
Non-current assets have decreased in the period, largely due to depreciation
in addition to the reclass of the £1.5m brands deferred consideration to
current assets. Current assets have increased primarily due to the decrease in
cash balance in the period, see the Cash flow section below for more detail.
The decrease in non-current liabilities is mainly due to the reclass of lease
obligations and maintenance provisions in Propius from non-current to current
liabilities. The Propius reclass was the main driver for the increase in
current liabilities in the period.
Debt and gearing
31 August 2022 28 February 2022
Loans and borrowings £295.5m £294.6m
Cash (£31.9m) (£52.7m)
Net debt £263.6m £241.9m
EBITDA/interest 0.3 0.6
Net debt/total assets 62.9% 54.6%
Gearing 516.3% 344.9%
In the period, loans and borrowings have increased by £0.9m. The Carlyle
convertible debt instrument has increased by £6.6m due to £6.6m interest
being rolled into the loan and the release of £1.0m of associated debt-issue
costs, partly offset by the £1.0m revaluation of the compound derivative.
Lease liabilities have reduced by £5.9m due to capital repayments partly
offset by an increase due to the retranslation of US-Dollar denominated leases
in Propius.
During the period, the £3.5m sale of Widnes land triggered a clause in the
current RCF reducing the available facility that the Group can draw on from
£20.0m to £19.1m. At the period end the committed undrawn headroom on the
RCF was £19.1m (28 February 2022: £20.0m) and, together with the cash
balance of £31.9m (28 February 2022: £52.7m), the total headroom was £51.0m
(28 February 2022: £72.7m).
Cash flow
31 August 2022 31 August 2021
£m £m
Operating cash (outflow)/inflow (3.2) 0.1
Investing activities 4.3 (6.5)
Financing activities (10.0) 96.0
(Decrease)/increase in the period (8.9) 89.6
Discontinued operations (11.9) (31.5)
Cash at beginning of period 52.7 12.4
Cash at end of period 31.9 70.5
Discontinued cash flow in the period relates to maintenance and lease payments
in Propius.
Investing inflows include £3.5m for the sale of a portion of Widnes land and
£1.0m received from disposal of plant property and equipment, mainly related
to plant and machinery in Renewables.
The principal financing outflows include £7.9m for the repayment of the
principal element of leases and interest payments of £2.8m. The main
financing inflow was £0.7m from the proceeds of grants in London Southend
Airport.
Key Risks and Uncertainties
As with any business, risk assessment and the implementation of mitigating
actions and controls are vital to successfully achieving the Group's strategy.
The Board has overall responsibility for risk management and internal control
within the context of achieving the Group's objectives. The key risks are set
out in our statutory accounts for the year ended 28 February 2022 and are
still applicable.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
· The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and
· The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the statutory accounts for the
year ended 28 February 2021 that could do so.
The above statement of Directors' responsibilities was approved by the Board
on
8 November 2022.
Lewis Girdwood
Director
9 November 2022
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
Continuing operations Notes £'000 £'000
Revenue 4 58,147 51,684
Other operating income 555 914
Reversal of Impairment - loan receivables from joint venture 5 - 1,963
Operating expenses - other (55,855) (48,899)
Share of post-tax losses of associates and joint ventures (346) (146)
Gain on swaps - 58
EBITDA 2,501 5,574
Depreciation (9,113) (10,089)
Operating loss (6,612) (4,515)
Finance costs 6 (11,333) (9,940)
Finance income 6 5,220 1,906
Loss before tax (12,725) (12,549)
Tax 7 2,511 9,023
Loss for the period from continuing operations (10,214) (3,526)
Discontinued operations
Loss from discontinued operations, net of tax 5 1,596 (2,915)
Loss for the period (8,618) (6,441)
Loss per share expressed in pence per share - continuing operations
Basic 8 (1.00p) (0.55p)
Diluted 8 (1.00p) (0.55p)
Loss per share expressed in pence per share - total
Basic 8 (0.84p) (1.01p)
Diluted 8 (0.84p) (1.01p)
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Loss for the period (8,618) (6,441)
Discontinued operations, net of tax, relating to exchange differences (9,744) (340)
Other comprehensive expense - items that may be reclassified in subsequent (9,744) (340)
periods to profit or loss, net of tax
Re-measurement of defined benefit plan 178 1,258
Change in fair value of financial assets classified as FVOCI (962) (1,927)
Tax on items relating to components of other comprehensive income (200) (262)
Other comprehensive expense - items that will not be reclassified to profit or (984) (931)
loss, net of tax
Other comprehensive expense for the period, net of tax (10,728) (1,271)
Total comprehensive expense for the period (19,346) (7,712)
( )
31 August 2022 28 February 2022
Unaudited Audited
Notes £'000 £'000
Non-current assets
Property, plant and equipment 9 260,541 265,637
Investment in associates and joint ventures 670 1,016
Other financial assets 11 13,243 14,105
Intangible assets 54,669 54,669
Net investment in lease 15,526 16,204
Defined benefit pension surplus 1,150 348
Other receivables - 1,495
345,799 353,474
Current assets
Inventories 10 9,048 12,552
Trade and other receivables 31,959 23,883
Cash and cash equivalents 11 31,931 52,738
72,938 89,173
Total assets 418,737 442,647
Non-current liabilities
Loans and borrowings 11 (203,143) (217,539)
Other liabilities (8,276) (8,643)
Provisions 12 (1,368) (13,279)
(212,787) (239,461)
Current liabilities
Trade and other payables (30,447) (30,160)
Loans and borrowings 11 (39,773) (24,714)
Exchangeable bonds 11 (52,573) (52,385)
Corporation tax 7 (2,100) (5,110)
Provisions 12 (30,010) (20,674)
(154,903) (133,043)
Total liabilities (367,690) (372,504)
Net assets 51,047 70,143
Capital and reserves
Issued share capital 102,534 102,534
Share premium 403,225 403,225
Foreign currency exchange reserve (9,526) 218
Reserve for own shares held by employee benefit trust (7,596) (7,596)
Retained deficit (437,590) (428,238)
Total Equity 51,047 70,143
For the six months ended 31 August 2022
Unaudited
Issued share capital Share premium Foreign currency exchange reserve Reserve for own shares held by EBT Retained deficit Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2022 102,534 403,225 218 (7,596) (428,238) 70,143
Loss for the period - - - - (8,618) (8,618)
Other comprehensive expense for the period - - (9,744) - (984) (10,728)
Total comprehensive expense for the period - - (9,744) - (9,602) (19,346)
Share-based payment charge - - - - 250 250
Balance at 31 August 2022 102,534 403,225 (9,526) (7,596) (437,590) 51,047
For the six months ended 31 August 2021
Unaudited
Issued share capital Share premium Foreign currency exchange reserve Reserve for own shares held by EBT Retained deficit Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2021 62,492 390,336 3,826 (7,480) (400,861) 48,313
Loss for the period - - - - (6,441) (6,441)
Other comprehensive expense for the period - - (340) - (931) (1,271)
Total comprehensive expense for the period - - (340) - (7,372) (7,712)
Issue of ordinary shares 40,042 12,795 - - (600) 52,237
Employee benefit trust - - - (116) (3) (119)
Reclassification of exchange differences on liquidation of subsidiary - - (1,785) - - (1,785)
Share-based payment charge - - - - 400 400
Balance at 31 August 2021 102,534 403,131 1,701 (7,596) (408,436) 91,334
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
Notes £'000 £'000
Cash used in continuing operations 14 (2,184) (137)
Cash outflow from discontinued operations (5,600) (15,133)
Income taxes (paid)/received (1,030) 232
Net cash flow from operating activities (8,814) (15,038)
Purchase of property, plant and equipment (1,250) (2,513)
Proceeds from the sale of property inventory 3,538 -
Proceeds from the sale of property, plant and equipment 1,050 360
Receipt of capital element of net investment in lease 676 641
Cash disposed on liquidation of subsidiary undertaking - (362)
Acquisition of other financial assets - (4,900)
Interest received 323 323
Cash outflow from discontinued operations - (7,808)
Net cash flow from investing activities 4,337 (14,259)
Issue of ordinary shares (net of costs) - 53,262
Proceeds from issue of convertible debt (net of costs) - 111,459
Proceeds from grants 670 1,937
Principal element of lease payments (7,899) (8,331)
Net repayment of revolving credit facility (net of costs) (50) (56,936)
Interest paid (2,763) (5,383)
Cash outflow from discontinued operations (6,288) (8,596)
Net cash flow from financing activities (16,330) 87,412
(Decrease)/increase in cash and cash equivalents (20,807) 58,115
Cash and cash equivalents at beginning of period 52,738 12,408
Cash and cash equivalents at end of period 31,931 70,523
1 Accounting policies
Corporate information
The Condensed Consolidated Financial Statements of the Group for the six
months ended 31 August 2022 (interim financial statements) were authorised for
issue in accordance with a resolution of the Directors on 9 November 2022.
Esken Limited is a Guernsey registered company whose ordinary shares are
publicly traded on the London Stock Exchange. The principal activities of the
Group are described in note 3.
Basis of preparation
The interim financial statements have been prepared in accordance with
UK-adopted IAS 34 Interim Financial Reporting.
The interim financial statements do not include all the information and
disclosures required in the annual financial statements and should be read in
conjunction with the Group's annual financial statements as at 28 February
2022. Except for the 28 February 2022 statutory comparatives, the financial
information set out herein is unaudited but has been reviewed by the auditors,
Mazars LLP, and their report to the Company is attached.
The audited comparative financial information set out in these interim
financial statements does not constitute the Group's statutory accounts for
the year ended 28 February 2022 but has been derived from those accounts.
Statutory accounts for the year ended 28 February 2022 have been published and
KPMG LLP (the Group's auditor until year ended 28 February 2022) has reported
on those accounts. Their audit report was unqualified, however, it highlighted
a material uncertainty regarding going concern in respect of refinancing at a
sufficient level prior to the expiration of the Revolving Credit Facility and
exchangeable bond that mature in February 2023 and May 2024 respectively. The
annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards.
As presented in the Group's annual financial statements, all percentage
calculations are based on results rounded to the nearest £1,000, being the
presentation used across the primary statements and accompanying notes.
Going concern
Position adopted at year end February 2022
The Group's financial statements for the year ended 28 February 2022 were
issued on 24 May 2022. Those financial statements were prepared on the basis
that the Group was a going concern although there was a material uncertainty
in respect of going concern. In arriving at that conclusion, the Directors had
reviewed the Group's updated cash flow forecasts together with the projected
covenant compliance, which covered a period to 30 April 2024, being the period
prior to the maturity of the exchangeable bond on 8 May 2024. The Directors
were satisfied the Group had sufficient cash headroom to continue trading for
the period assessed.
Update to position
Subsequent to the issue of the February 2022 financial statements, the Group
has successfully signed a £50m committed debt facility on 9 November 2022,
subject to ordinary resolution of shareholders, with an additional £40m
uncommitted facility, secured on the Esken Renewables and Infrastructure
businesses, to ensure that the Group has a stable liquidity platform in order
to meet its residual legacy obligations and underpin its business plan. The
facility matures in 3 years, with an additional one year extension option at
the lenders discretion. The Extraordinary General Meeting will take place on
29 November 2022.
The £50m refinancing secures the Group's cashflow headroom up until the
maturity of the exchangeable bond on 8 May 2024, at which point the bond will
require to be refinanced. In forming the conclusion on going concern the
Directors have used the forecast period of 20 months to 30 April 2024, being
the month end prior to the maturity of the exchangeable bond.
The Directors have prepared cash flow forecasts for the going concern
assessment period that reflect both base and severe but plausible downsides.
Those forecasts indicate that in the base scenario, the LSA ring fenced
business will obtain the necessary liquidity of £10m prior to August 2023 to
enable it to operate throughout the going concern period to 30 April 2024.
With this funding, the Group as a whole will also have sufficient liquidity
throughout the going concern period. Even if the LSA business is not able to
obtain the required funding when required, this will not directly impact going
concern assessment of the wider Group. The Group will require significant
additional funding to meet its liabilities when the exchangeable bond matures.
The repayment under the exchangeable bond on 8 May 2024 will be £53.1m less
the value of LDG plc shares held as collateral. These shares were fair valued
at £6.6m as at 31 August 2022. The Directors are confident that sufficient
appropriate funding will be available, though there can be no certainty that
that will be the case.
Base case forecast
In considering the going concern position for the purpose of these interim
financial statements, the Directors have reviewed the Group's updated base
case cash flow forecasts through to 30 April 2024, based on the Directors'
expectations around the return to flying at London Southend Airport and growth
in passenger numbers. The base case, including the assumption that the LSA
ring fenced business will raise the additional liquidity that it requires,
indicates that the Group will have sufficient funds to meet its liabilities
for the period prior to the maturity of the exchangeable bond on 8 May 2024,
when the headroom turns negative. The base case forecasts assume £10m cash
inflows from disposals of non-core assets, which have a net book value of
£36m, and they also demonstrate compliance with all specific funding
covenants, with additional actions available to the Directors to further
improve covenant headroom if required.
The level of flying at London Southend Airport (LSA) has remained below
expectations for the period to 31 August 2022 and its global logistics
partners ceased cargo operations at LSA in mid-September. In light of the
anticipated impact of these factors, and noting that under base case forecasts
for the ringfenced LSA business, LSA would require additional liquidity by
August 2023. The Group has been exploring options to ensure that it can
properly fund LSA to protect value in its investment and a portion of the
£40m uncommitted facility would allow the Group to put funding into the LSA
business as the liquidity requirement at the airport arises as long as the
funds under that uncommitted facility become available in due course. The
Group will alongside seeking to satisfy the conditions to draw down on that
facility in the event that the liquidity requirement arises, continue to
explore other funding options for LSA, in cooperation with its partner at the
airport, to ensure that it has the best-priced financing available when it is
required. LSA remains well positioned for the recovery and longer-term growth
in commercial passenger flying. In the event that the Group is unable to draw
on the funding required to meet the forecast liquidity requirements of LSA at
the relevant time, and either Esken or LSA has not been able to secure any
other source of financing or liquidity, the Group will consider alternative
options, including a possible sale of all or part of the Airport or other
valuable assets within the Group.
Severe but plausible downside forecast
The Directors have also considered a severe but plausible downside scenario
that includes the following:
§ Reduction in passengers forecast, with a downside scenario including a 72%
reduction in passenger volume (albeit this will not impact on the covenant
calculations);
§ Removal of Aviation proceeds from new asset finance leases, with no
corresponding beneficial rephasing of the capital expenditure additions
profile;
§ Reduction in Energy tonnes sold of 4%; and
§ A decrease in gate fee revenue due to a 7% reduction of inbound volumes
accompanied by 2% reduction in net gate fees, driving a 27% reduction in cash
inflows.
This scenario indicates that, before non-controllable mitigating actions such
as accelerated non-core asset disposals, and controllable mitigating actions
such as rephased capital expenditure, accelerated disposal of listed shares
held and reduction in discretionary overheads, the Group has sufficient
funding up until February 2024, at which point additional funding is required.
Any shortfall against the substantial achievement of forecasts will increase
the timing and amount of additional funding required. The Board will of course
seek to mitigate the financial impact of this severe but plausible downside
forecast should it arise.
Conclusion
Overall, the directors have a reasonable expectation that the Group will have
sufficient funds to continue to meet its liabilities as they fall due over the
going concern assessment period to 30 April 2024 and therefore have prepared
the interim financial statements on a going concern basis.
However, the risks and uncertainties associated with the achievement of
forecasts and the availability of sufficient funding indicate the existence of
a material uncertainty related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern and,
therefore, that the Group may be unable to realise its assets and discharge
its liabilities in the normal course of business. The financial statements do
not include any adjustments that would result from the basis of preparation
being inappropriate.
Significant accounting policies
The accounting policies applied in the preparation of the interim financial
statements are consistent with those followed in the preparation of the
Group's annual financial statements for the year ended 28 February 2022. These
accounting policies are expected to be applied for the full year to 28
February 2023.
Key estimates and judgements
The estimates and judgements taken by the Directors in preparing these interim
financial statements are comparable with those disclosed in the annual
financial statements for the year ended 28 February 2022. Estimates for the
defined benefit pension assets principally relate to discount rates, inflation
and mortality. The impact of changes in these estimates has contributed to the
£0.8m increase in pension asset from 28 February 2022 to 31 August 2022. See
note 12 for information on the aircraft maintenance provision estimates.
Presentation of Condensed Consolidated Income Statement
EBITDA, a non-GAAP measure, is the key profitability measure used by
management for performance review in the day-to-day operations of the Group.
Non-GAAP measures are used as they are considered to be both useful and
necessary. They are used for internal performance analysis; the presentation
of these measures facilitates comparability with other companies, although
management's measures may not be calculated in the same way as similarly
titled measures reported by other companies.
The post-tax results of discontinued operations along with any gain or loss
recognised on the disposal of the assets or disposal groups constituting the
discontinued operation are disclosed as a single amount in the Condensed
Consolidated Income Statement.
2 Seasonality of operations
There is a material effect of seasonality in both of our largest operating
divisions. In the Aviation division there are higher seasonal sales in summer,
due to increased demand for overseas travel, and this is partly offset by
higher seasonal sales in winter in the Energy division, due to higher energy
consumption.
3 Segmental information
The reporting segments are Aviation, Renewables, Investments and Non-Strategic
Infrastructure. The results of Propius are presented as discontinued
operations on the face of the Condensed Consolidated Income Statement, see
note 5.
The Aviation segment specialises in the operation of a commercial airport and
the provision of ground handling services. The Renewables segment specialises
in the supply of sustainable biomass material for the generation of renewable
energy.
The Investments segment holds a non-controlling interest in a logistics
services investing business and a baggage handling business. The Non-Strategic
Infrastructure segment specialises in management, development, and realisation
of a portfolio of property assets, including Carlisle Lake District Airport.
The Executive Directors are regarded as the Chief Operating Decision Maker.
The Directors monitor the results of each business unit separately for the
purposes of making decisions about resource allocation and performance
assessment. The main segmental profit measure is EBITDA, which is calculated
as loss before interest, tax, depreciation and impairments. Income taxes and
certain central costs are managed on a Group basis and are not allocated to
operating segments. No segmental assets or liabilities information is
disclosed because no such information is regularly provided to, or reviewed
by, the Chief Operating Decision Maker.
Aviation Renewables Investments Non-Strategic Infrastructure Group central and eliminations
Six months ended 31 August 2022 Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 14,150 43,534 - 302 161 58,147
Internal - - - 50 (50) -
Statutory revenue 14,150 43,534 - 352 111 58,147
EBITDA (518) 6,950 (380) (402) (3,149) 2,501
Depreciation (4,848) (3,879) - (192) (194) (9,113)
Net interest (7,080) (776) (821) (12) 2,576 (6,113)
(Loss)/profit before tax (12,446) 2,295 (1,201) (606) (767) (12,725)
Aviation Renewables Investments Non-Strategic Infrastructure Group central and eliminations
Six months ended 31 August 2021 Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 12,902 38,144 - 259 379 51,684
Internal 22 - - 50 (72) -
Statutory revenue 12,924 38,144 - 309 307 51,684
EBITDA 762 9,106 (152) (382) (3,760) 5,574
Depreciation (5,046) (4,229) - (181) (633) (10,089)
Net interest (937) (844) (789) (154) (5,310) (8,034)
(Loss)/profit before tax (5,221) 4,033 (941) (717) (9,703) (12,549)
Internal revenue above relates to inter-segment revenues that are eliminated
within Group central and eliminations. Intra-segment revenues are eliminated
within each segment.
4 Revenue
Revenue is primarily from contracts with customers. Other sources of revenue
are from owned and leased fixed assets. The following tables detail the split
between revenue from contracts with customers and other revenue, and the
disaggregation of revenue from contracts with customers.
Aviation Renewables Investments Non-Strategic Infrastructure Group central and eliminations
Six months ended 31 August 2022 Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue from contracts with customers 14,045 43,534 - 78 - 57,657
Other revenue - lease income 105 - - 224 161 490
14,150 43,534 - 302 161 58,147
Aviation Renewables Investments Non-Strategic Infrastructure Group central and eliminations
Six months ended 31 August 2022 Total
£'000 £'000 £'000 £'000 £'000 £'000
Major product/service line
Sale of goods 2,944 33,362 - - - 36,306
Rendering of services 11,101 10,172 - 78 - 21,351
14,045 43,534 - 78 - 57,657
Primary geographical markets
United Kingdom 13,385 43,534 - 78 - 56,997
Europe and Ireland 573 - - - - 573
Rest of world 87 - - - - 87
14,045 43,534 - 78 - 57,657
Timing of revenue recognition
Products and services transferred at a point in time 14,045 43,534 - 78 - 57,657
14,045 43,534 - 78 - 57,657
Aviation Renewables Investments Non-Strategic Infrastructure Group central and eliminations
Six months ended 31 August 2021 Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue from contracts with customers 12,711 38,144 - 63 - 50,918
Other revenue - lease income 191 - - 196 379 766
12,902 38,144 - 259 379 51,684
Aviation Renewables Investments Non-Strategic Infrastructure Group central and eliminations
Six months ended 31 August 2021 Total
£'000 £'000 £'000 £'000 £'000 £'000
Major product/service line
Sale of goods 2,139 26,348 - - - 28,487
Rendering of services 10,572 11,796 - 63 - 22,431
12,711 38,144 - 63 - 50,918
Primary geographical markets
United Kingdom 10,882 38,144 - 63 - 49,089
Europe and Ireland 1,827 - - - - 1,827
Rest of world 2 - - - - 2
12,711 38,144 - 63 - 50,918
Timing of revenue recognition
Products and services transferred at a point in time 12,711 38,144 - 63 - 50,918
12,711 38,144 - 63 - 50,918
Opening and closing receivables, contract assets and contract liabilities from
contracts with customers are as follows:
31 August 2022 28 February 2022
Unaudited Audited
£'000 £'000
Receivables 11,040 10,064
Contract assets 5,539 3,327
Contract assets relate to the Group's rights to consideration for work
completed but not billed at the reporting date on contracts in the Renewables
division and have increased mainly due timing of unbilled transport work.
5 Discontinued operations
In the prior year, on 14 June 2021, the Ireland High Court appointed
liquidators to Stobart Air. Following the liquidation, Propius, which leased
all eight of its aircraft to Stobart Air, is abandoned in line with the IFRS 5
definition of a discontinued operation. The results of Propius in the current
and prior periods, and Stobart Air in the prior period only, are reported on a
single line, net of tax on the face of the Condensed Consolidated Income
Statement.
While the results of Propius are presented as discontinued, in the period up
to February 2024 there will be ongoing finance charges and cashflows in
respect of aircraft leases and cashflows in respect of maintenance
obligations, with the corresponding liabilities remaining on the Group's
consolidated statement of financial position.
A summary of the Stobart Air results included in discontinued operations is as
follows:
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Revenue - 3,449
Operating expenses - (5,156)
Net finance costs - 602
Results from operating activities before tax - (1,105)
Profit on liquidation - 9,752
Profit before tax - 8,647
Tax - -
Profit for the period from discontinued operations, net of tax - 8,647
A summary of the Propius results included in discontinued operations is as
follows:
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Operating expenses 2,670 (9,486)
Net finance costs (1,074) (1,727)
Profit/(loss) before tax 1,596 (11,213)
Tax - (48)
Profit/(loss) for the period from discontinued operations, net of tax 1,596 (11,261)
A summary of the discontinued operations recognised in the Condensed
Consolidated Income Statement is as follows:
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Stobart Air discontinued operations, net of tax - 8,647
Propius discontinued operations, net of tax 1,596 (11,261)
Stobart Rail discontinued operations, net of tax - (301)
Loss from discontinued operations, net of tax 1,596 (2,915)
The above losses are attributable to the owners of the company.
The cash flows in relation to Stobart Air are as follows:
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Net cash used in operating activities - (14,301)
Net cash used in financing activities - (2,143)
Net cash flows for the period - (16,444)
The cash flows in relation to Propius are as follows:
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Net cash used in operating activities (5,600) (1,002)
Net cash used in from investing activities - (7,808)
Net cash used in financing activities (6,288) (6,453)
Net cash flows for the period (11,888) (15,263)
A summary of cash flows from discontinued operations is as follows:
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Stobart Air - (16,444)
Propius (11,888) (15,263)
Stobart Rail - 170
Net cash flows for the period (11,888) (31,537)
6 Finance costs and income
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Interest accrued on convertible debt 6,624 -
Amortisation of deferred issue costs 1,959 3,866
Finance charges payable under leases 1,842 2,065
Bank loans 908 3,125
Interest paid on defined benefit pension scheme - 21
Other interest - 99
Foreign exchange losses - 764
Total finance costs 11,333 9,940
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Foreign exchange gains 3,848 1
Revaluation of convertible debt derivative 1,043 -
Fair value of financial liabilities - 1,581
Interest received from net investment in lease 321 324
Interest received on defined benefit pension scheme 8 -
Total finance income 5,220 1,906
Finance costs on bank loans have decreased period on period due to the RCF
being undrawn in the current period. The increase in foreign exchange gains is
due to favourable fluctuations in US Dollar and exchange rates impacting the
Group's foreign-currency denominated intercompany loan. The revaluation of the
compound derivative element of the convertible debt instrument with Carlyle
Global Infrastructure Opportunity Fund led to a gain of £1,043,000 in the
period, see note 11.
In the prior year, on 7 May 2021, the put option the Group entered into with
fellow Connect Airways shareholder Cyrus Capital Partners was exercised and 6
million ordinary shares in Esken Limited were issued. The exercise meant that
the associated financial liability had a fair value of £nil and £1,581,000
was released and presented within finance income in the Condensed Consolidated
Income Statement.
7 Taxation
Taxation on profit on ordinary activities
Total tax in the Condensed Consolidated Income Statement from continuing and Six months ended 31 August 2022 Six months ended 31 August 2021
discontinued operations
Unaudited Unaudited
£'000 £'000
Corporation tax:
Current year corporation tax 1,000 -
Overseas corporation tax - 48
Adjustments in respect of prior years (3,311) (8,500)
Total corporation tax (2,311) (8,452)
Deferred tax:
Origination and reversal of temporary differences (152) (500)
Impact of change in rate (48) (23)
Total deferred tax (200) (523)
Total credit in the income statement (2,511) (8,975)
Split between:
Continuing (2,511) (9,023)
Discontinued - 48
Included in the above tax charges are total current tax credit on continuing
operations of £2,311,000 (2021: £8,500,000) and a total deferred tax credit
on continuing operations of £200,000 (2021: £523,000) giving a total tax
credit on continuing operations in the Condensed Consolidated Income Statement
of £2,511,000 (2021: £9,023,000). In addition, there is a current tax charge
on discontinued operations of £nil (2021: £48,000) giving a total tax credit
on continuing and discontinued operations in the Condensed Consolidated Income
Statement of £2,511,000 (2021: £8,975,000).
An increase in the main rate of corporation tax 25% effective from 1 April
2023 was substantively enacted as at the balance sheet date 31 August 2022. As
such, the deferred tax assets/liabilities as at 31 August 2021 have been
recognised/provided at 25%.
8 Loss per share
The following table reflects the income and share data used in the basic and
diluted earnings per share calculations:
Numerator Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Continuing operations
Loss for the period used for basic and diluted earnings (10,214) (3,526)
Discontinued operations
Profit/(loss) for the period used for basic and diluted earnings 1,596 (2,915)
Total
Loss for the period used for basic and diluted earnings (8,618) (6,441)
Denominator Number Number
Weighted average number of shares used in basic EPS 1,020,735,977 635,625,609
Effects of employee share options - -
Weighted average number of shares used in diluted EPS 1,020,735,977 635,625,609
Own shares held and therefore excluded from weighted average number 4,600,764 3,800,802
9 Property, plant and equipment
Additions and disposals
During the six months ended 31 August 2022, the Group acquired or developed
property, plant and equipment assets with a cost of £3,725,000 (2021:
£2,937,000). This mainly consisted of development work at London Southend
Airport and plant and machinery equipment in the Renewables division.
Property, plant and equipment assets with a book value of £617,000 (2021:
£318,000) were disposed of by the Group during the six months ended 31 August
2022, resulting in a profit on disposal of £430,000 (2021: £42,000).
Capital commitments
At 31 August 2022, the Group had capital commitments of £nil (2021:
£499,000).
10 Inventories
During the period a portion of Widnes land held in property inventories within
the Non-Strategic Infrastructure division was sold for cash proceeds of
£3,538,000 which was equal to the land's book value.
11 Financial assets and liabilities
31 August 28 February 2022
2022
Unaudited Audited
Loans and borrowings £'000 £'000
Non-current
Obligations under leases 77,733 98,677
Convertible debt (net of costs) 125,410 118,862
203,143 217,539
Current
Exchangeable bonds (net of costs) 52,573 52,385
Obligations under leases 39,773 24,714
92,346 77,099
Total loans and borrowings 295,489 294,638
Cash (31,931) (52,738)
Net debt 263,558 241,900
Esken Limited provides support to its subsidiaries where required. Examples of
support include intercompany funding arrangements and the provision of
guarantees in relation to financing lines provided by a number of lenders. In
addition, one Energy contract has a covenant relating to the market capital of
Esken Limited, where a breach would be remedied by additional letters of
credit or a security deposit.
The exchangeable bonds have a May 2024 maturity, with repayment being the
difference between the £53.1m gross bonds and shares in LDG plc into which
the bonds are convertible. At 31 August 2022, the difference amounted to
£44.9m.
Convertible debt
The convertible debt instrument with Carlyle Global Infrastructure Opportunity
Fund (CGI), received in the prior year, includes three derivatives in relation
to conversion which are accounted for as one single compound derivative as
they are not considered independent of each other. The fair value of the
compound derivative is measured at each reporting date using the underlying
equity value of LSA and the fair value of the host contract as inputs into the
valuation model. The compound derivative valuation is materially impacted if
LSA performs substantially above or below its five-year business model.
At 28 February 2022 the fair value of the compound derivative was £1,088,000.
Due to a change in market conditions and a timing in cash flows the fair value
of the compound derivative has reduced to £45,000. The £1,043,000 reduction
in the fair value has been recognised in finance income in the Condensed
consolidated income statement, see note 6.
Revolving Credit Facility (RCF)
The RCF was undrawn at the period end (Feb 2022: £nil). The Group was in
compliance with, or received waivers for, all financial covenants throughout
both the current and prior periods. Following the sale of Widnes land, see
note 10, under the terms of the RCF the available facility was reduced by
£875,000, being 25% of the net proceeds, from £20,000,000 to £19,125,000.
A reconciliation of movements of liabilities to cash flows arising from
financing is as follows:
Exchangeable bond Revolving credit facility Convertible debt Obligations under leases
Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 March 2022 52,385 - 118,862 123,391 294,638
Changes from financing cash flows:
Cash outflow from debt issue costs - (50) - - (50)
Principal elements of lease payments - continuing operations - - - (7,899) (7,899)
Principal elements of lease payments - discontinued operations - - - (5,137) (5,137)
Interest paid - continuing operations (730) (179) - (1,854) (2,763)
Interest paid - discontinued operations - - - (1,151) (1,151)
Total changes from financing cash flows (730) (229) - (16,041) (17,000)
Release of debt issue costs 188 - 967 - 1,155
New leases entered into - - - 3,395 3,395
Termination of lease - - - (11) (11)
The effect of changes in foreign exchange rates - - - 3,780 3,780
Revaluation of derivative - - (1,043) - (1,043)
Non-cash accruals 730 229 6,625 2,991 10,575
Balance at 31 August 2022 52,573 - 125,411 117,505 295,489
Exchangeable bond Revolving credit facility Convertible debt Obligations under leases
Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 March 2021 52,010 52,329 - 158,908 263,247
Changes from financing cash flows:
Additional loans - - 125,000 - 125,000
Net cash repaid - (55,000) - - (55,000)
Cash outflow from debt issue costs - (1,936) (13,541) - (15,477)
Principal elements of lease payments - continuing operations - - - (8,331) (8,331)
Principal elements of lease payments - discontinued operations - - - (6,939) (6,939)
Interest paid - continuing operations (730) (3,075) - (1,578) (5,383)
Interest paid - discontinued operations - - - (1,657) (1,657)
Total changes from financing cash flows (730) (60,011) 111,459 (18,505) 32,213
Release of debt issue costs 188 3,647 31 - 3,866
New leases entered into - - - 3,762 3,762
Termination of lease - - - (4,269) (4,269)
Unwind of discount - - - 97 97
Reclass of debt issue costs to other debtors - 1,688 - - 1,688
Liquidation of subsidiary undertaking - - - (7,265) (7,265)
The effect of changes in foreign exchange rates - - - 360 360
Non-cash accruals 730 2,347 206 3,577 6,860
Balance at 31 August 2021 52,198 - 111,696 136,665 300,559
The book value and fair values of financial assets and financial liabilities
are as follows:
Book Value Fair Value
31 August 2022 31 August 2022
Unaudited Unaudited
£'000 £'000
Financial assets
Other investments 13,243 13,243
Financial Liabilities
Exchangeable bonds - host element 52,449 48,169
Convertible debt - host element 125,365 85,213
Embedded derivatives 169 169
Book Value Fair Value
28 February 2022 28 February 2022
Audited Audited
£'000 £'000
Financial assets
Other investments 14,105 14,105
Financial Liabilities
Exchangeable bonds 52,261 47,278
Convertible debt 117,774 121,423
Embedded derivatives 1,212 1,212
The directors reasonably consider the fair value of other financial assets and
liabilities (such as trade and other receivables, trade and other payables,
and lease liabilities) approximate their book value.
Fair Value Hierarchy
The fair value hierarchy is explained in the statutory accounts for the year
ended 28 February 2022. The fair values in the table below reflect financial
assets and liabilities measured at fair value in condensed consolidated
statement of financial position.
Total Level 1 Level 2 Level 3
As at 31 August 2022 £'000 £'000 £'000 £'000
Financial assets
Other financial assets 13,243 8,243 5,000 -
Financial liabilities
Other financial liabilities 169 - - 169
Total Level 1 Level 2 Level 3
As at 28 February 2022 £'000 £'000 £'000 £'000
Financial assets
Other financial assets 14,105 9,205 4,900 -
Financial liabilities
Other financial liabilities 1,212 - - 1,212
The £5m other financial assets presented within level 2 at 31 August 2022 has
been fair valued by reference to cash held within the bank account of the
captive cell.
The other financial liabilities are recognised within the convertible debt and
exchangeable bonds within loans and borrowings on the face of the condensed
statement of financial position.
There were no transfers between Levels 1, 2 and 3 fair value measurements. The
movement in Level 3 other financial liabilities of £1,043,000 relates to the
value of the single compound derivative within the convertible debt
instrument. This movement has been recognised within finance income in the
condensed consolidated income statement.
12 Provisions
Site restoration Onerous Litigation and claims Remediation provision Maintenance reserves
contracts Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 March 2022 1,250 2,021 3,095 3,942 23,645 33,953
Provisions used (1,250) (682) (391) - (994) (3,317)
Provisions made - - 22 - - 22
Provisions reversed - - - - (2,758) (2,758)
Currency retranslation - - - - 3,478 3,478
At 31 August 2022 - 1,339 2,726 3,942 23,371 31,378
Analysis of provisions
Current - 1,244 2,726 3,942 22,098 30,010
Non-current - 95 - - 1,273 1,368
At the beginning of the period the Group leased a long leasehold property in
respect of which it had annual dilapidation and holding costs. During the
period an agreement was signed with the owners of the property for the Group
to exit the lease in return for payment of £1,250,000, which was made in the
period.
During the period the Group made payments totalling £994,000 for required
maintenance on the eight ATR aircraft leased by Propius. An agreement was
reached with the lessor of the aircraft for the early hand back of two of the
aircraft. The hand back reduced the level of maintenance works required by the
Group leading to a release of provision of £2,758,000. The estimates made in
relation to the six aircraft remaining are unchanged from the year end.
Fluctuations in the exchange rate between the US Dollar and GB Pound led to a
£3,478,000 increase in maintenance reserves.
13 Contingent liabilities
As at 31 August 2022 the Group had no contingent liabilities (28 February
2022: £2.0m).
14 Cash used in operations
Six months ended 31 August 2022 Six months ended 31 August 2021
Unaudited Unaudited
£'000 £'000
Loss before tax (12,725) (12,549)
Adjustments to reconcile loss before tax to net cash flows:
Realised profit on sale of property, plant and equipment (430) (50)
Share of post-tax losses of associate accounted for using the equity method 346 146
Depreciation of property, plant and equipment 9,113 10,089
Finance income (1,364) (1,905)
Finance costs 11,325 9,176
Release of grant income (796) (694)
Charge for share-based payments 250 400
Gain on fuel swaps mark to market valuation - (58)
Retirement benefits and other provisions (2,244) (1,694)
Working capital adjustments:
(Increase)/decrease in inventories (35) 19
(Increase)/decrease in trade and other receivables (5,866) 1,570
Increase/(decrease) trade and other payables 242 (4,587)
Cash used in continuing operations (2,184) (137)
15 Related parties
During the period, the Group made sales of £2,928,000 (2021: £3,392,000) to
its associate Mersey Bioenergy Limited (a subsidiary of Mersey Bioenergy
Holdings Limited) relating to the sale of biomass material. At 31 August 2022,
£549,000 (28 February 2022: £220,000) was owed to the Group.
16 Glossary - Alternative performance measures (APMs)
In the reporting of financial information, the Directors have adopted various
APMs. These measures are not defined by International Financial Reporting
Standards (IFRS) and therefore may not be directly comparable with other
companies' APMs.
APMs should be considered in addition to, and are not intended to be a
substitute for, or superior to, IFRS measurements. Non-GAAP APMs are used as
they are considered to be both useful and necessary as well as enhancing the
comparability of information between reporting periods, by adjusting for
non-recurring or uncontrollable factors which affect IFRS measures, to aid
users in understanding the Group's performance.
Consequently, APMs are used by the Directors and management for internal
performance analysis, planning, reporting and incentive-setting purposes. The
presentation of these measures facilitates comparability with other companies,
although management's measures may not be calculated in the same way as
similarly titled measures reported by other companies.
EBITDA
EBITDA is the key profitability measure used by management for performance
review in the day-to-day operations of the Group. EBITDA represents loss
before interest, tax, depreciation and impairments. Refer to note 3 for
reconciliation to statutory loss before tax.
Net debt
Net debt is defined as the sum of obligations under leases, revolving credit
facility, exchangeable bonds and convertible debt, less cash and cash
equivalents. See note 11 for reconciliations of this measure.
Gearing
This is defined as net debt, as defined above, divided by Group shareholders'
equity per the consolidated statement of financial position.
Headroom
This is the sum of cash per the consolidated statement of financial position
plus the £19.1m revolving credit facility which was undrawn at the year end.
It shows the amount of cash that can be drawn on by the Group at short notice.
Independent Review Report to Esken Limited
Conclusion
We have been engaged by Esken Limited (the 'Company') to review the condensed
consolidated financial statements in the half-yearly financial report for the
six months period ended 31 August 2022 of the Company and its subsidiaries
(together the 'Group') which comprise the condensed consolidated income
statement, the condensed consolidated statement of comprehensive income, the
condensed consolidated statement of financial position, the condensed
consolidated statement of changes in equity and the condensed consolidated
statement of cash flows and the related explanatory notes from 1 to 16. We
have read the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of consolidated
financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated financial statements in the
half-yearly financial report for the six months ended 31 August 2022 are not
prepared, in all material respects, in accordance with UK Adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the
UK FCA").
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 (Revised), "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued for use in the
United Kingdom. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted IFRSs. The condensed consolidated set
of financial statements included in this half-yearly financial report has been
prepared in accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Material uncertainty relating to going concern
Note 1 to the condensed consolidated financial statements sets out the
assessment of the going concern basis of preparation including the material
uncertainty that the directors have identified in respect of the basis of
preparation.
The Group has reported a consolidated loss for the period of £8.6 million and
a total consolidated comprehensive loss for the period of £19.3 million. At
31 August 2022 the consolidated current liabilities of the Group exceed the
consolidated current assets by £82.0 million .
Note 1 also describes the requirement for the Group to secure additional
financing prior to the maturity of the exchangeable bond, which has a carrying
value of £ 52.6 million at 31 August 2022. The bond matures on 8 May 2024.
The risks and uncertainties associated with the achievement of forecasts and
the availability of sufficient funding as set out in Note 1, including the
requirement to obtain shareholder approval of the £50m committed debt
facility that was signed on 9 November 2022, indicate the existence of a
material uncertainty related to events or conditions that may cast significant
doubt on the Group's ability to continue as a going concern.
Our conclusion is not modified in respect of the above matter.
Responsibilities of directors
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed consolidated financial statements in the
half-yearly interim financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Tim Hudson (Senior Statutory Auditor)
For and on behalf of
Mazars LLP
Chartered Accountants
One St. Peter's Square
Manchester
M2 3DE
United Kingdom
9 November 2022
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