Shares in Stobart Group (STOB) have rocketed more than 10% to 130p in mid-morning trading despite the company swinging to a big loss in its full-year results.
The firm described its 12 months to 28 February as ‘transformational’ as it cleared the decks to put its focus squarely on its aviation and energy divisions.
READ MORE ABOUT STOBART HERE
The infrastructure services company had cut its dividend in December to focus on investment in the business, and despite the loss for last year shareholders clearly believe the short-term pain is worth it for the long-term gain.
In the year to the end of February, the Southend Airport owner reported net losses including from discontinued operations of £58.2m, compared to a £100m profit the year before.
On a continuing operations basis, pre-tax losses amounted to £42.6m, compared to an adjusted £14.3m loss the previous year.
STREAMLINED BUSINESS
However revenues were up 39% to £146.9m and the results paint a picture of a more focused, streamlined business emerging.
Chief executive Warwick Brady hailed the year as ‘transformational’ for the firm as it ‘significantly strengthened’ its board and management team, taking the opportunity to deal with legacy issues and de-risk the balance sheet.
Brady said Stobart now has a ‘clear focus’ on developing its infrastructure assets in the aviation and energy sectors, which he added are ‘high growth assets with strong market positions that are now well positioned to become increasingly cash-generative.’
The investment will be funded through existing cash in the business as well as more sales of non-core assets.
ATTRACTIVE AVIATION AND ENERGY EARNINGS
Canaccord Genuity analyst Gert Zonneveld says the two divisions have highly valuable assets and should deliver attractive earnings and cash flows ‘for many years to come’.
He points out that while net losses reached £58.2m, this reflects a £26.1m hit from non-underlying items and a £15.5m loss from discontinued operations, and that more importantly revenue and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in aviation and energy were up markedly, rising by 30% (to £104.4m) and 35% (to £24.1m) respectively.
One blot on the copybook for Stobart is the low-margin rail and civil engineering business, which reported an underlying loss of £4.8m having had to write down the value of its contracts.
The loss disappointed some analysts, but they note that Stobart has addressed it by strengthening the division’s management team and refocusing it going forward to secure contracts with external tier one customers.
