Today's optimistic trading update from Stobart (STOB) may look good on paper, driving the shares up 2.8% to 82.75p, but it is considerably less pleasing in the context of earlier announcements. To see yet more board-level changes does not imply confidence in the business.

The haulier has axed the role of executive chairman, thereby ousting Avil Palmer-Baunack after only two months in the job. News that full-year results, due to be published on 16 May, are ahead of expectations is somewhat misleading to anyone that hasn't been following the company. What's actually happened is that Stobart has suffered a series of earnings downgrades including a profit warning in January, so expectations were severely reduced prior to today's trading update.

A new contract announced today with Tesco (TSCO) is actually work that Stobart is already undertaking. It is welcome news, nonetheless, as it formalises a previous 'pay as you go' agreement. Espirito Santo analyst Gerald Khoo comments: 'It is not clear if there is a revenue or volume uplift with the new contract, but even without that, the greater security of tenure is a mild positive.'

The departure of Palmer-Baunack is somewhat odd. She was vaunted at her appointment on 21 January as having 'extensive experience in delivery of strategy and shareholder value within the public company environment'. Neil Woodford of Invesco, which has a 36% stake in Stobart through its funds, was seen as instrumental in the creation of this short-lived executive chairman role.

The previous chairman, Rodney Baker-Bates, had held the non-executive role since 2007. Having been demoted to non-executive director, he was due to leave the board in March but will now stay to assist until a new chairman is appointed.

Espirito Santo calculates that four non-executive directors have left the company in the past year; six in the past two years.


STOBART GROUP ORD - Comparison Line Chart (Rebased to first)

Stobart was ejected from the FTSE 250 index last month, a reflection of its poor share price performance. The shares have underperformed the FTSE All-Share by 44% in the past 12 months.

A snapshot of the group's earnings from Company REFS shows that pre-tax profit crashed from £31.2 million in the financial year to February 2011 to £15.9 million a year later. The forthcoming results are expected to show pre-tax profit of £29.9 million, rising to £39.1 million in 2014.

Espirito Santo has a 'sell' rating and reckons the shares are only worth 70p.


By Sean Flynn and Dan Coatsworth

Issue Date: 02 Apr 2013