Shares in infrastructure group Stobart (STOB) fell by less than 5% to 78.2p on Thursday despite the company confirming it will take a £50m-plus write-off on its stake in collapsed budget airline Flybe.
The UK airline crashed into administration overnight, putting 2,000 jobs at risk, after a bid for fresh financial support failed.
Stobart was a part-owner of Flybe via its investment in Connect Airways - a consortium formed by Stobart (30%), airline Virgin Atlantic (30%) and venture capitalist Cyrus Capital (40%).
Regional airline Flybe was a subsidiary within Connect Airways, which was set up in December 2018 to acquire Flybe, and received merger clearance from the EU in July 2019 to take control of Flybe’s assets.
Stobart said in January, when Flybe had previously teetered on the brink of administration, that it had invested £45m in Connect Airways through a combination of cash and the sale of Stobart Air, its regional airline, and its aircraft leasing business, Propius.
ASSET WRITE-DOWN
But now as a result of Flybe’s collapse, Stobart revealed it will take a £43.3m non-cash hit on its balance sheet, with an additional £7m investment made in 2020 also written off.
It has also foregone deferred interest that it would have benefited from in future periods. Stobart had not expected to receive a contribution from Connect Airways until after its full year 2020 results.
PROMISE TURNS TO DUST
In a statement Stobart said, ‘Flybe had shown promising signs of a turnaround despite the delay to receiving merger control clearance from the European Commission for its acquisition.
‘However, despite the best efforts of all, not least the Flybe people, the impact of COVID-19 on Flybe’s trading means that the consortium can no longer commit to continued financial support.’
Stobart’s main asset is London Southend Airport, and Flybe had planned to operate 10 routes from the airport this spring.
It added that there will be a ‘short-term impact’ on the airport as a result of Flybe’s collapse, but insisted the ‘long-term prospects of that airport remain compelling.’
