REG - Stobart Group Ltd - Interim Results <Origin Href="QuoteRef">STOB.L</Origin> - Part 2
19/10/2017 07:06
- Part 2: For the preceding part double click ID:nRSS0136Ua
Six months ended 31 August 2017 Six months ended 31 August 2016 Year ended 28 February 2017
Unaudited Unaudited Audited
Notes £'000 £'000 £'000
Cash (used)/generated in operations 12 (10,330) (8,562) 64
Income taxes paid (69) - -
Net cash outflow from operating activities (10,399) (8,562) 64
Purchase of property, plant and equipment and investment property (50,532) (7,651) (14,496)
Purchase of property inventories (2,624) (248) (1,784)
Proceeds from grants - - 3,925
Proceeds from the sale of property, plant and equipment and investment property 1,012 37,523 47,063
Acquisition of subsidiary undertakings (net of cash acquired) - - 7,664
Non-underlying transaction and restructuring costs (1,443) (478) (400)
Proceeds from disposal of assets held for sale - - 7,328
Proceeds from sale and leaseback, net of fees 115,028 - -
Refundable deposit advanced/received (1,416) - (1,618)
Distributions from joint ventures - 29 2,926
Net amounts advanced to joint ventures (33) - -
Equity investment in associate and joint venture - - (12,455)
Proceeds from disposal of associate 111,966 - -
Interest received 152 - 302
Cash outflow from discontinued operations (18) (829) (235)
Net cash flow from investing activities 172,092 28,346 38,220
Dividend paid on ordinary shares (26,440) (13,770) (34,727)
Repayment of capital element of finance leases (5,089) (5,541) (10,942)
Repayment of borrowings (66,792) - -
Net (repayment of)/drawdown from revolving credit facility (42,420) (5,000) 15,197
(Purchase)/sale of treasury shares, net of fees (10,728) (81) 14,961
Interest paid (1,848) (825) (1,978)
Net cash flow from financing activities (153,317) (25,217) (17,489)
Increase/(decrease) in cash and cash equivalents 8,376 (5,433) 20,795
Cash and cash equivalents at beginning of period 30,653 9,858 9,858
Cash and cash equivalents at end of period 39,029 4,425 30,653
1 Accounting policies of Stobart Group Limited
Corporate information
The condensed consolidated financial statements of the Group for the six
months ended 31 August 2017 were authorised for issue in accordance with a
resolution of the Directors on 19 October 2017. Stobart Group 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 condensed consolidated financial statements of the Group for the six
months ended 31 August 2017 have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
The condensed consolidated 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 2017. Except for the 28 February 2017 comparatives, the
financial information set out herein is unaudited but has been reviewed by the
auditors, KPMG LLP, and their report to the Company is attached.
The comparative financial information set out in these interim consolidated
financial statements does not constitute the Group's statutory accounts for
the year ended 28 February 2017 but has been derived from those accounts.
Statutory accounts for the period ended 28 February 2017 have been published
and KPMG LLP has reported on those accounts. Their audit report was
unqualified and did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their report.
The annual financial statements of the Group are prepared in accordance with
IFRSs as adopted by the European Union.
Going concern
The Group has considerable financial resources, together with contracts with a
number of customers and suppliers. The financial forecasts show that borrowing
facilities are adequate such that the Group can operate within these
facilities and meet its obligations when they fall due for the foreseeable
future. As a consequence, the Directors believe that the Group is well placed
to manage its business risks successfully. After making enquiries, the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. Accordingly,
the financial statements have been prepared on a going concern basis.
Significant accounting policies and key estimates and judgements
The accounting policies adopted in the preparation of the interim consolidated
financial statements are consistent with those followed in the preparation of
the Group's annual financial statements for the year ended 28 February 2017.
These accounting policies are expected to be applied for the full year to 28
February 2018.
The estimates and judgements taken by the Directors in preparing these interim
financial statements are comparable with those disclosed in the 2017 annual
report. During the current period a new key judgement is the presentation of
the profit on disposal of the Greenwhitestar investment (as disclosed in note
4) as an underlying item. The Directors have determined this is appropriately
disclosed as underlying because development and realisation of assets is the
objective of our Infrastructure and Investments divisions.
The following standards and amendments have an effective date after the date
of these financial statements:
Standard, amendment and interpretation Effective for accounting periods commencing on or after
IFRS 9 - Financial instruments 1 January 2018
IFRS 15 - Revenue from contracts with customers 1 January 2018
IFRS 16 - Leases 1 January 2019
IFRS 15: The Group is in the process of analysing the impact of this standard,
however, the impact has yet to be quantified.
IFRS 16: Leases was issued in January 2016 and will have a significant impact
on the Group's consolidated financial statements although, given the timing of
the issue of this standard, at this stage it has not been practicable to
quantify the full effect this standard will have on the Group's consolidated
financial statements upon transition. This standard is likely to have a
significant impact on the Consolidated Statement of Financial Position and
Consolidated Income Statement presentation and measurement. A project to
oversee the implementation of this standard is in progress.
The adoption of all the other standards, amendments and interpretations is not
expected to have a material effect on the net assets, results and disclosures
of the Group.
2 Seasonality of operations
There is no significant seasonal effect on revenues and profits between the
first and second six months of the financial year for the Group. The higher
seasonal sales in summer in Stobart Aviation are expected to be approximately
balanced by the higher seasonal sales in winter in Stobart Energy.
3 Segmental information
The reporting segments are Stobart Energy, Stobart Aviation, Stobart Rail,
Stobart Investments and Stobart Infrastructure. The Stobart Energy segment
specialises in supply of sustainable biomass for the generation of renewable
energy. The Stobart Aviation segment specialises in the operation of
commercial airports, airline operations and aircraft leasing. The Stobart Rail
segment specialises in delivering internal and external civil engineering
development projects including rail network operations. The Stobart
Investments segment holds a non-controlling interest in Eddie Stobart
Logistics plc. The Stobart Infrastructure segment specialises in management,
development and realisation of Group land and buildings assets as well as
investments in biomass energy plants.
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 underlying EBITDA1. The
results of the aircraft leasing business were included in the Investments
segment in the prior period ended 31 August 2016, but are included in the
Aviation segment at 31 August 2017, so the prior period ended 31 August 2016
has been restated to be consistent. This is also consistent with the
disclosure in the financial statements for the year to 28 February 2017. This
is considered to better reflect the management of the business.
Income taxes, finance costs and certain central costs are managed on a Group
basis and are not allocated to operating segments.
Period ended 31 August 2017 Energy Aviation Rail Investments Infrastructure Adjustments and eliminations Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 25,328 88,849 6,318 - 1,352 2,706 124,553
Internal 4,368 8,619 13,833 - 543 (27,363) -
Total revenue 29,696 97,468 20,151 - 1,895 (24,657) 124,553
Underlying EBITDA1 4,596 6,203 1,383 124,581 510 (5,498) 131,775
Foreign exchange gains and losses 17 546 - - - (1,062) (499)
Swaps - (756) - - - (542) (1,298)
Depreciation (2,696) (3,042) (386) - (302) (114) (6,540)
Interest (227) (1,273) (96) - 629 (258) (1,225)
Underlying PBT2 1,690 1,678 901 124,581 837 (7,474) 122,213
New business and new contract set up costs (2,126) (2,574) - - - (173) (4,873)
Litigation and claims - - - - - (3,300) (3,300)
Transaction costs - - - - (17) (230) (247)
Amortisation of acquired intangibles (111) - - - - (1,858) (1,969)
Non-underlying items included in share of post-tax profits of associates and joint ventures - - - (237) - - (237)
(Loss)/profit before tax (547) (896) 901 124,344 820 (13,035) 111,587
Inter-segment revenues are eliminated on consolidation. Included in
adjustments and eliminations underlying EBITDA1 are central costs of
£5,750,000 (2016: £4,061,000) and intragroup profits eliminated of £252,000
(2016: £232,000).
RestatedPeriod ended 31 August 2016 Energy Aviation Rail Investments Infrastructure Adjustments and eliminations Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 32,350 11,978 14,382 - 3,684 2,867 65,261
Internal 3,621 - 9,500 - 208 (13,329) -
Total revenue 35,971 11,978 23,882 - 3,892 (10,462) 65,261
Underlying EBITDA1 4,915 958 1,039 5,154 11,973 (3,829) 20,210
Foreign exchange gains and losses - - - - - - -
Swaps - - - - - 688 688
Depreciation (1,648) (2,071) (630) - (20) (146) (4,515)
Interest 3 (131) (94) - 1,038 (1,032) (216)
Underlying PBT2 3,270 (1,244) 315 5,154 12,991 (4,319) 16,167
New business and new contract set up costs (1,489) - - - - - (1,489)
Transaction costs - - - - (400) (400)
Restructuring costs (53) - - - - - (53)
Amortisation of acquired intangibles - - - - - (1,969) (1,969)
Non-underlying items included in share of post-tax profits of associates and joint ventures - - - (1,421) - - (1,421)
Profit/(loss) before tax 1,728 (1,244) 315 3,733 12,991 (6,688) 10,835
4 Profit on disposal of investment in associate
On 25 April 2017, the Group disposed of its 49% investments in Greenwhitestar
Holdings Company 1 Limited and Greenwhitestar Finance Limited for
consideration comprising cash of £112.0m and a 12.5% shareholding in Eddie
Stobart Logistics plc. This disposal generated £123.9m profit on disposal.
Eddie Stobart Logistics plc was admitted to AIM on 25 April 2017 and the 12.5%
investment was valued at £71.5m on admission, which was equivalent to 160p per
share. As at 31 August 2017, the investment remains valued at £71.5m.
5 Non-underlying items
Non-underlying items included in the Consolidated Income Statement comprise
the items set out and described below.
Six months ended 31 August 2017 Six months ended 31 August 2016 Year ended 28 February 2017
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating expenses:
- New business and new contract set up costs 4,873 1,489 2,999
- Transaction costs 247 400 2,003
- Restructuring costs - 53 83
- Litigation and claims 3,300 - -
- Bad debt write off - - 1,869
- Amortisation of acquired intangibles 1,969 1,969 3,938
- Impairment of goodwill/credit for business purchase - - 21,646
10,389 3,911 32,538
Share of post-tax profits of associates and joint ventures:
- Amortisation of acquired intangibles 237 1,421 2,839
237 1,421 2,839
New business and new contract set up costs comprise costs of investing in
major new business areas or major new contracts to commence or accelerate
development of our business presence. The costs in the current year were (i)
pre-contract costs and excess costs incurred due to delays in customer plants
becoming operational in the Energy division and (ii) marketing and support
costs in relation to introducing 11 additional routes at London Southend
Airport, operated by our regional airline.
Transaction costs comprise costs of making investments that are not permitted
to be debited to the cost of investment or as issue costs. These costs include
costs of any aborted transactions.
Restructuring costs comprise costs of integration plans and other business
reorganisation and restructuring undertaken by management. Costs include cost
rationalisation, site closure costs, certain short-term duplicated costs and
other costs related to the reorganisation and integration of businesses. These
are principally expected to be one-off in nature.
The charge for litigation and claims includes payments in respect of historic
matters. Contingent assets relating to any outstanding claims are not
recognised unless recovery is considered virtually certain, in accordance with
accounting standards.
The bad debt write-off relates to a significant receivable, written off due to
the customer entering administration.
Amortisation of acquired intangibles comprises the amortisation of intangible
assets including those identified as fair value adjustments in acquisition
accounting. The charge in the year principally relates to the amortisation of
the brand assets.
Impairment of goodwill/credit for business purchase relates to the
acquisitions of Everdeal Holdings Limited and Propius Holdings Limited in
February 2017. Prior to acquisition, these investments were previously
accounted for as an associates and joint venture respectively.
6 Taxation
Taxation on profit on ordinary activities
Total tax in the Condensed Consolidated Income Statement Six months ended 31 August 2017 Six months ended 31 August 2016 Year ended 28 February 2017
Unaudited Unaudited Audited
£'000 £'000 £'000
Current income tax:
UK corporation tax - - -
Overseas corporation tax 30 - -
Total current tax 30 - -
Deferred tax:
Origination and reversal of temporary differences (567) 1,858 2,512
Impact of change in rate - - (996)
Adjustment in respect of prior years 245 (63) (358)
Total deferred tax (322) 1,795 1,158
Total (credit)/charge in the income statement (292) 1,795 1,158
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1
April 2017) and 18% (effective from 1 April 2020) were substantively enacted
on 26 October 2015. As part of the March 2016 Budget, a further reduction to
17% (effective from 1 April 2020) was announced and substantively enacted in
September 2016. The deferred tax liability as at 31 August 2017 has been
provided at 17%.
7 Dividends
A final dividend of 4.5p per share (2016: 4.0p) totalling £15,945,000 (2016:
£13,770,000) was declared on 11 May 2017 and was paid on 7 July 2017.
An interim dividend of 4.5p per share (2016: 3.0p) totalling £15,841,953
(2016: £10,327,412) was declared on 5 September 2017 and was paid on 6 October
2017 to shareholders on the register as at 15 September 2017.
The annualised dividend now stands at 18.0p per share.
8 Earnings per share
The following table reflects the income and share data used in the basic and
diluted earnings per share calculations:
Six months ended 31 August 2017 Six months ended 31 August 2016 Year ended 28 February 2017
Unaudited Unaudited Audited
Numerator £'000 £'000 £'000
Profit/(loss) used for basic and diluted earnings 111,879 9,040 (9,184)
Denominator Number Number Number
Weighted average number of shares used in basic EPS 349,275,009 341,160,922 343,529,160
Effects of employee share options 9,782,447 1,113,367 -
Weighted average number of shares used in diluted EPS 359,057,456 342,274,289 343,529,160
Own shares held and therefore excluded from weighted average number 5,053,823 10,081,778 10,799,671
The numerator used for the basic and diluted underlying earnings per share is
the underlying profit for the period of £122,170,000 (Aug 2016: £13,765,000 /
Feb 2017: £27,606,000), disclosed in the Condensed Consolidated Income
Statement.
9 Property, plant and equipment
Additions and disposals
During the six months ended 31 August 2017, the Group acquired or developed
property, plant and equipment assets with a cost of £51,834,000 (2016:
£8,674,000). This included the acquisition of three Embraer E195 aircraft for
£33.1m. These aircraft are leased outside of the Group until late 2018.
Property, plant and equipment assets with a book value of £98,688,000 (2016:
£532,000) were disposed of by the Group during the six months ended 31 August
2017, resulting in a profit of £192,000 (2016: £132,000). This included the
sale and leaseback of eight ATR 72-600 in April 2017. The Group received net
proceeds of $62.7m (£50.2m) after repayment of existing financing in respect
of the aircraft of $85.3m (£68.2m), including refundable deposits withheld of
$3.8m (£3.0m) and $1.0m (£0.8m) in rental payments. The leases are for a
ten-year term with an option to terminate after six years. Aggregate payments
under the leases will amount to $15.4m (£12.3m) per annum. The Group will
continue to operate all eight aircraft within its airline, primarily providing
flights under the Aer Lingus franchise agreement.
Capital commitments
At 31 August 2017, the Group had capital commitments of £315,000 (2016:
£2,703,000), principally relating to new and upgraded IT systems in Rail, HR
and London Southend Airport.
10 Analysis of net (cash)/debt
31 August2017 28 February 2017
Unaudited Audited
Loans and borrowings £'000 £'000
Non-current
Fixed rate:
- Obligations under finance leases and hire purchase contracts 7,685 7,847
- Bank loans - 64,269
Variable rate:
- Obligations under finance leases and hire purchase contracts 18,455 19,252
- Bank loans - 41,704
26,140 133,072
Current
Fixed rate:
- Obligations under finance leases and hire purchase contracts 1,586 1,401
- Bank loans - 6,975
Variable rate:
- Obligations under finance leases and hire purchase contracts 8,452 9,911
10,038 18,287
Total loans and borrowings 36,178 151,359
Cash (39,029) (30,653)
Net (cash)/debt (2,851) 120,706
The obligations under finance leases and hire purchase contracts are taken out
with various lenders at fixed or variable interest rates prevailing at the
inception of the contracts.
The £65,000,000 variable rate committed revolving credit facility, with a
facility end date of January 2020, was drawn at £Nil (Feb 2017: £42,200,000)
at the period end.
The Group was compliant with all financial covenants throughout both the
current and prior periods.
11 Fair values
Financial assets and liabilities
The book value and fair values of financial assets and financial liabilities
are as follows:
Book Value31 August 2017 Fair Value31 August 2017
Unaudited Unaudited
£'000 £'000
Financial Assets
Cash 39,029 39,029
Amounts owed by associates and joint ventures 17,874 17,874
Trade receivables 25,619 25,619
Other receivables 4,740 4,740
Swaps 809 809
Financial Liabilities
Trade payables 16,585 16,585
Finance leases and hire purchase arrangements 36,178 36,178
Swaps 1,028 1,028
Book Value28 February 2017 Fair Value28 February 2017
Audited Audited
£'000 £'000
Financial Assets
Cash 30,653 30,653
Amounts owed by associates and joint ventures 16,956 16,956
Trade receivables 24,272 24,272
Other receivables 297 297
Swaps 540 540
Financial Liabilities
Trade payables 22,804 22,804
Loans and borrowings 112,948 111,705
Finance leases and hire purchase arrangements 38,411 40,098
Other payables 5,536 5,536
Swaps 101 101
For trade and other receivables/payables with a remaining life of less than
one year, the carrying amount is considered to reflect the fair value.
The fair values of loans and borrowings have been calculated by discounting
the expected future cash flows at prevailing interest rates.
Fair Value Hierarchy
The fair value hierarchy is explained in the 2017 Annual Report.
11 Fair values (continued)
Financial (Liabilities)/Assets measured at Fair Value
As at 31 August 2017 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Swaps (219) - (219) -
As at 28 February 2017 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Swaps 439 - 439 -
During the six months ended 31 August 2017, there were no transfers between
Level 1 and Level 2 fair value measurements, and no transfers into and out of
Level 3 fair value measurements.
12 Cash generated from operations
Six months ended 31 August 2017 Six months ended 31 August 2016 Year ended 28 February 2017
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit/(loss) before tax 111,587 10,835 (8,026)
Adjustments to reconcile profit/(loss) before tax to net cash flows:
(Gain)/loss in value of investment properties (319) 250 (2,898)
Realised profit on sale of property, plant and equipment and investment properties (192) (11,752) (15,196)
Share of post-tax profits of associates and joint ventures accounted for using the equity method (474) (4,038) (6,876)
Profit on disposal/gain in value of assets held for sale (400) - (2,747)
Profit on disposal of associate (123,870) - -
Release of deferred profit on sale and leaseback (239) - (772)
Depreciation of property, plant and equipment 6,540 4,515 9,378
Finance income (979) (887) (2,925)
Finance cost 2,204 1,103 2,532
Release of grant income (359) (89) (313)
Release of deferred premiums (1,142) (1,142) (3,045)
Impairment of goodwill/credit for business purchase - - 21,646
Amortisation of intangibles 1,969 1,969 3,938
Share option charge 1,093 450 1,000
Foreign exchange retranslation (1,789) - (420)
Loss/(gain) on swaps mark to market valuation 659 (1,104) (1,820)
Cash movement on maintenance reserves (3,324) - -
Retirement benefits and other provisions (267) (186) (1,141)
(Increase)/decrease in inventories (1,004) 257 1,999
(Increase)/decrease in trade and other receivables (3,477) (3,292) 5,767
Increase/(decrease) in trade and other payables 3,453 (5,451) (17)
Cash (used)/generated in operations (10,330) (8,562) 64
INDEPENDENT REVIEW REPORT TO STOBART GROUP LIMITED
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
August 2017 which comprises the Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed Consolidated Statement
of Changes in Equity, Condensed Consolidated Statement of Cash Flows and the
related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 August 2017 is not prepared, in
all material respects, in accordance with IAS 34 Interim Financial Reporting
as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. 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.
We read the other information contained in the half-yearly financial report
and consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
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.
Directors' responsibilities
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.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the condensed
set of financial statements included in the half-yearly financial report in
accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
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 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.
Mick Davies
for and on behalf of KPMG LLP
Chartered Accountants
1 St Peter's Square
Manchester
M2 3AE
19 October 2017
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