Energy wastes no time, Aviation in holding pattern
Stobart Group Ltd (L:STOB)’s interims mark the next stage in demonstrating progress towards its 2018 strategic targets while maintaining underlying EBITDA (+3%). The partial disposal of the transport division in 2014 allowed the group to significantly strengthen its balance sheet and flexibility to finance its more embryonic businesses. In this context, we view the increase in debt as short term and reflective of certain project timings that help long-term value creation. Whereas tangible progress can be seen with further biomass contacts taking volume beyond the 2018 targets, airline talks at Southend are still ongoing, but have taken longer to complete. To reward shareholders’ patience as the repositioning feeds through to profitability, dividends have been maintained and represent an attractive 5.3% yield.
Solid results: Focus on long-term strategic targets
While the results saw solid underlying group profitability (EDITDA £9.0m), the focus remains on winning the ‘right’ contracts to hit its strategic targets for Biomass and Aviation. Having previously announced a number of new long-term contracts in Biomass to hit its 2018 tonnage targets, Stobart had indicated that it would be very selective in bidding for new contracts. Recent wins will lift target tonnage to 2.5m, ensure it fully utilises its national coverage and allow it to have the appropriate capacity in place to maximise long-term profitability and reduce its risk profile.
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