Interim Results

RNS Number : 6633U
Stobart Group Limited
20 October 2010
 



Stobart Group Limited

 

Interim Results for the six months ended 31 August 2010

 

Stobart Group (Stobart) is one of the UK's leading providers of multimodal transport and logistics solutions offering road, rail, sea and air transport. The Group also provides warehousing, storage and handling facilities, and supply of biomass products.

 

 

Financial Highlights

 

·      Revenue from continuing operations up 11.7% to £243.7m (2009: £218.2m)

·      Earnings after fleet financing costs (underlying EAFFC*) up 25.9% to £17.0m (2009: £13.5m)

·      Normalised profit before tax** from continuing activities up 24.2% to £15.4m (2009: £12.4m)

·      Profit before tax up 38.7% to £15.4m (2009: £11.1m)

·      Earnings per share from continuing operations (normalised before restructuring costs and allowing for a 28% tax charge) up 16.2% to 4.3p (2009: 3.7p)

·      Interim dividend of 2.0p (2009: 2.0p) per share payable on 10 December 2010

·      Net cash generated from operations of £13.6m (2009: £19.7m)

* Underlying EAFFC comprises the underlying operating profit of £18.9m (2009: £15.8m) less fleet financing costs of £1.4m (2009: £1.9m) and share based payments of £0.5m (2009: £0.4m).

**PBT before restructuring costs of £nil (2009: £1.3m).

 

Operational Highlights

 

·      Eddie Stobart commences several significant new agreements:

-     new £25m per annum chilled distribution business for Tesco

-     additional agreement with Britvic increasing business

-     new £7m per annum contract with A G Barr

-     new €18m per annum business with Tesco Ballymun, Ireland.

·      Major contract renewals in Eddie Stobart for Procter & Gamble, Gerber, Knauf and Crown.

·      £30m investment in a 50% interest in Stobart Biomass Products Limited in March 2010 and further £1m invested to enable that venture to acquire the business of Amenity Horticultural Services Limited in July 2010.

·      New railway station and control tower at London Southend Airport near completion with advanced discussions ongoing with interested airlines including Aer Arann with whom we have agreed a conditional five year operating agreement with volumes expected to grow to 300,000 passengers per annum.

·      Securing of £100m 10 year development finance with M&G UK Companies Financing Fund.

 

   



Andrew Tinkler, Chief Executive, comments:

 

"We have again shown strong growth and resilience in the business with underlying profits up 24%. Eddie Stobart has performed particularly well after contract wins with Tesco, A G Barr and others which have added volume and margin and there is further growth to come from these contracts. Changes in the way our customers operate have provided challenges to us which we are addressing. In particular we have faced shorter lead times and volatility in volumes. In the long term we are well placed to take advantage of these changes in the market.

 

"Exciting developments include the biomass link-up with A. W. Jenkinson Forest Products, the major improvements at London Southend Airport and agreement with Aer Arann. We are talking to other significant potential customers in both of these businesses.

 

"We have slightly reduced our full year profit expectations as a result of reduced spend by Network Rail and increased overall finance costs. We are also cautious that 2011 may see volumes affected by the increase in VAT rate and the Government spending review. However, in the long term we see this as positive for the economy and our business. Overall, we look forward to further growth in the second half as new contracts fully contribute. Our efficient green fleets and innovative transport solutions continue to impress customers and our improved assets give excellent opportunities for adding value."

 

 

20 October 2010

 

 

 

ENQUIRIES:

 

Stobart Group

Andrew Tinkler, Chief Executive Officer

Ben Whawell, Chief Financial Officer

 

Tel: 01925 605400

 

 

 

i-nfluence

Stuart Dyble

James Andrew

Britt Keay

 

          Tel: 020 7287 9610

 

  

 

 

 

CHAIRMAN'S Statement

 

Overview

 

Stobart Group recently completed three full years as a listed company and I am pleased to be able to report on another period of further progress and increased profitability. Turnover has more than doubled over the three year period and profitability has increased significantly in each reporting period on a like for like basis despite the economic recession in the middle of this period.

 

In the first six months of the financial year, the Eddie Stobart business has grown organically as the business model and improvements in technology provide efficiencies for customers. We have made a strategic investment in a joint venture with A. W. Jenkinson Forest Products which puts us in a strong position in the emerging Biomass market. Macro-economic conditions and Network Rail expenditure have adversely affected volumes at Stobart Rail but due to successful management of costs, profitability has been partly protected and Stobart Rail also continues to help to develop major assets around the Group. There have been steady year-on-year volumes at Stobart Ports and the development of London Southend Airport is progressing well with the near-completion of the railway station and new control tower.

 

Andrew Tinkler covers the divisional performance and strategy in further detail in the Chief Executive's Review.

 

Results

 

Total revenue for the period from continuing operations was £243.7m (2009: £218.2m), producing earnings after fleet financing costs (EAFFC) of £17.0m (2009: £13.5m) and normalised profit before taxation of £15.4m (2009: £12.4m before tax and restructuring costs). Statutory profit before tax was £15.4m (2009: £11.1m). Earnings per share from continuing operations (normalised before restructuring costs and allowing for a 28% tax charge) was 4.3p (2009: 3.7p).

 

Dividend

 

The Board has declared an interim dividend of 2.0p, which will be paid on 10 December 2010 to shareholders on the register as at 12 November 2010. This reflects our confidence in continued strong performance from our proven business model.

 

Income Shares

 

During the period the Income Shares were fully converted to ordinary shares or redeemed at par. There are no Income Shares remaining in issue.

 

People

 

There have been no changes to the Board of Directors or in senior management in the half-year period or to date.

 

Outlook

 

There will be further growth from the full delivery of the business recently announced. We also have strong opportunities to develop new customer relationships and contracts especially in the biomass business and Stobart Air division but profitability in Stobart Rail will continue to be affected by factors to some extent outside of our control.

 

The Board looks forward to reporting on further progress, including a good second half, giving a result for the year as a whole that will be towards the bottom end of our current expectations.

 

RODNEY BAKER-BATES

Chairman

20 October 2010

 

 

CHIEF EXECUTIVE'S REVIEW

 

Results

 

I am pleased to announce another strong set of results for the six months to 31 August 2010 with organic growth in the business and development of some exciting new opportunities.

 







Total revenue from continuing operations


£243.7m

£218.2m

Earnings after fleet financing costs (EAFFC) *


£17.0m

£13.5m

Normalised profit before tax and restructuring costs (2009 only)


 

£15.4m

 

£12.4m

Statutory profit before tax


£15.4m

£11.1m





EPS from continuing activities


4.6p

3.8p

Normalised EPS (before restructuring costs (2009 only) and allowing for a 28% tax charge)


 

4.3p

 

3.7p

 

*EAFFC comprises the underlying operating profit of £18.9m (2009: £15.8m) less share based payments of £0.5m (2009: £0.4m) the fleet financing costs of £1.4m (2009: £1.9m).

 

The Group maintains a strong balance sheet, with net assets of £324.6m (28 February 2010: £305.4m). Non fleet-related net borrowing at £86.8m (28 February 2010: £46.4m) increased principally due to consideration for biomass related investments of £16.0m and development of assets, principally development at Southend Airport. Fleet related borrowing increased to £75.2m (28 February 2010: £50.4m) due to an increase in asset backed finance leases on vehicles replacing over 300 vehicles which were previously on operating leases. Cash (net) generated from operations was £14.0m (31 August 2009: £19.4m) and net cash outflow was £4.2m (31 August 2009: £3.3m) after dividends paid. Operating cash flow has been affected by a volume related increase in working capital and a small increase in debtor days caused by customer mix. Gearing, excluding fleet financing and related assets, was 26.7% (28 February 2010: 15.2%).

 

The effective tax rate for the period is 23.9%. This rate is lower than the standard rate of 28% principally due to the effect on the deferred tax balance of the expected reduction in the UK corporation tax rate from 28% to 27% from 1 April 2011.

 

Strategy

 

We continue our clear strategy to deliver on the Group's vision to become the UK's leading multi-modal transport and logistics provider. We are able to offer customers innovative, flexible and environmentally friendly logistics solutions.

 

Our strategy is underpinned by our brand, people, systems and multimodal service offering.

 

Our brand

 

We have been ranked highly in the Business Superbrands listings for the past few years and our brand is well known and recognised for clean, quality services and for doing things right.

 

We are looking to protect this asset by confirming and collecting all of our trademarks and designs into one entity and controlling and capitalising further on their use.

 

All of our divisions share the Stobart brand and this is valuable in attracting new customers.

 

Our people

 

We have a very experienced and motivated management team and a hard-working and loyal staff.

 

We are committed to training to maintain high standards of work and safety. We have recently introduced a firm-wide management development programme.

During the period we launched an employee reward scheme which offers discounts on high street vouchers. This is open to all employees.

Our systems and technology

 

We have developed and implemented several industry-leading systems and technologies. Our vehicle tracking and driver monitoring systems are leading edge and enable us to run a more efficient fleet than our competitors and therefore offer very competitive rates to customers.

 

Our fleet of trucks is the most modern large fleet on the road. Our newer warehouses contain state-of-the-art organisational systems.

 

Our Multimodal Service Offering

 

Stobart Group owns several major freehold assets including major Port sites at Widnes and Runcorn, airports at London Southend and Carlisle and several operational depots.

 

Our current multimodal portfolio includes the following assets and services:

 

·    1,850 trucks with utilisation rates at one of the highest levels in the industry

·    Chilled, bulk and international fleets with high technology fleet management

·    Operations at 50 locations in the UK and Europe

·    6m sq. ft. of warehousing

·    Successful inland rail freight terminal which receives 6 trains per day

·    5 rail freight services in partnership with customers including European links

·    Two operational airports, with significant development potential to increase activity

·    Waterway port opportunity for development in the medium term

 

We have a large customer base, multimodal capability, high quality brand, people and systems in place to protect us against financial and operational risk.

 

Funding capital developments

 

In June we announced a £100m, 10 year loan facility with M&G Investments. At the same time, the Group repaid all of its term loans, loan notes and income shares. This loan facility will be used to strategically develop the assets in the Group - the current major project being the development of London Southend Airport. This gives the Group the availability of a significant level of funds over a long term and replaced the previous development funding which was coming to the end of its term. This carries a higher rate of interest than the previous loan but will eliminate the fees and management costs of refinancing in the medium term.

 

Environment

 

Environmental sustainability is an increasingly important factor on the agenda of customers and other stakeholders such as business partners, investors and the Government.

An ongoing key element of our strategy is the focus it brings to providing environmental improvements. By the end of the year we expect to disclose a measure of overall CO2 emissions for the business.

 

Sustainability is a key driver in everything we do and we are working hard to eliminate waste through filling up empty journeys and considering other more environmentally friendly modes of transport.

 

Our Eddie Stobart road fleet runs with a utilisation rate of 82.9% meaning that only 17.1% of vehicles are travelling without a load. Our utilisation rate is considerably higher than the industry average and is due to our national network and industry-leading vehicle monitoring technologies.

The proportion of our trucks which are Euro 4/5 compliant is 89.9%. These engines emit a much lower level of damaging particulates than older trucks.

 

We have introduced a driver incentive scheme which directly rewards drivers for performance each day against targets for engine idle time, engine revs, harsh braking and use of cruise control. All of these measures are designed to reduce the environmental impact of the fleet as well as improve fuel consumption and profitability.

 

Load fill in the chilled division has increased by 2% to 78% in the period reducing the empty space in trailers in that operation. The refrigerated trailers used by our chilled fleet are 100% recyclable.

 

The Rugby to Mossend rail freight service is now pulled using an electric traction locomotive. This offers a faster service and emits 30% less CO2 than diesel traction.

 

All water used in the truck washes is recycled.

 

Core operations

 

Eddie Stobart

 

Eddie Stobart is the largest of the Group's divisions and includes its ambient and chilled road transport and warehousing operations. It operates a fleet of more than 1,850 trucks and 3,000 trailers and around 6 million square feet of warehousing across 40 sites in the UK and Ireland.

 

Revenue for the Eddie Stobart division was £219.0m (2009: £188.7m) and divisional EAFFC was £16.4m (2009: £12.0m).

 

UK transport

 

The UK transport operation now runs around 1,200 trucks and 3,000 trailers from common systems and processes. Vehicle utilisation in the period to 31 August 2010 was 82.9% (year to 28 February 2009: 83.5%), a slight reduction from the year end due to the integration of new contracts and the issues highlighted below though this has been improving over the period.

 

We are now operating the £20m Unilever contract at full volume and the £7m A G Barr contract has been building volume through the period. In addition, we recently announced significant new business with Britvic.

 

During the period we have experienced some challenges in running the fleet. Customer lead times have shortened and their forecasting has become less accurate whilst their targets remain demanding. This has caused a drop in our truck utilisation rate. We have taken action to address these issues. In some cases we have been able to increase rates for shorter lead times and in others to adjust the performance requirement to allow us to maintain utilisation. We continue to work closely with customers to address these issues.

 

We have introduced SAFED monitoring technology and driver incentives across the whole of the UK fleet aimed at further enhancing our drivers' existing high driving standards.

   

Chilled transport

 

Chilled transport comprises a fleet of over 350 trucks operating from 6 locations in the UK. The chilled transport business has performed better than expected during the period as a result of additional growth and cost control. This performance is expected to continue to improve further into the second half of the year as new contracts are introduced.

 

Organic growth has been achieved with the main customers as well as developing new relationships. Pallet loadfill for the first half increased from 76% to 78%.

 

The business was awarded the Tesco Widnes chilled transport contract earlier in the year. This represents a significant achievement for the division and is the first chilled distribution centre operated by the business. Volume has been successfully migrated from other sites and the site is now operating at full capacity. This site will add around 30% to the business' revenue.

 

The Stobart brand is now established with Stobart now seen as a key provider in the chilled market place after only two years from our entry through the acquisition of part of Innovate Logistics. Management believe that there are further opportunities in the sector for revenue growth.

 

Environmental transport

 

During the period, the business entered in to a major new transport contract with A. W. Jenkinson Forest Products which involves over 60 vehicles and gives a positive step-change in the business. The remaining fleet of around 20 vehicles continue to transport bio-waste and recycled products to customers throughout the UK. Vehicle utilisation in the period was 81% representing a significant increase on the prior period. We have also recently secured rate increases with customers.

 

International transport

 

International transport comprises a fleet of around 90 vehicles operating in Europe. The performance in International transport is encouraging with performance significantly ahead of prior year. Overheads have been reduced through an ongoing cost reduction programme saving around 10% annually. We have retained our existing customer base despite increasingly difficult trading conditions and price pressure. We have also secured new contracts which will commence in the second half.

 

We continue to focus on niche activities including our involvement in the Formula One and Rally circuits which represents a significant area of growth for International transport.

 

Ireland

 

The increase in the Stobart presence in Southern and Northern Ireland, coupled with Ireland's emergence as one of Europe's leading manufacturers and exporters of pharmaceuticals and dairy products has resulted in significant growth in business and allows for significant opportunity for the Group. The growth has been underpinned by the awarding of the Tesco Donabate ambient distribution contract along with significant contract wins with Coca Cola and Unilever. We can also announce that we have recently been awarded business for chilled transport at Tesco Ballymun worth €18m per annum.

 

The dedicated management team, current fleet of around 80 vehicles and warehousing facilities, which operate to the same exacting standards as the rest of the Stobart Group, are all ideally based within the Dublin port facility. Stobart Ireland can offer a one-stop shop service alleviating the traditional issues of inconsistency across international movements.

 

Warehousing

 

The warehousing division operates from a network of high spec facilities managing a portfolio of blue chip clients with the pharmaceuticals, FMCG, drinks and health and beauty sectors. The services on offer range from case/pallet pick through to value-adding services such as co-packing, process management and direct to consumer order handling.

 

A solid first half performance has been complemented by retention of several key contracts and successful implementation of new business wins from the prior year. Johnson and Johnson have been migrated in to our new Daresbury facility and we have added further new contracts including A G Barr in Crick. These developments should allow the warehousing business to continue to grow revenue and margins.   

 

Stobart Rail

 

Within our rail division are two operations; infrastructure engineering and rail freight transportation. The civil engineering operation is a leading force in rail infrastructure maintenance, undertaking work such as bridge and line-side maintenance, permanent way works and other civil works. The freight division operates a growing number of freight trains each week to complement our road haulage business. Both businesses have an excellent record for safety.

 

Revenue for the Stobart Rail division was £26.3m (2009: £30.0m) and divisional EAFFC was £1.9m (2009: £2.3m).

 

Work on rail infrastructure has been depressed due to cutbacks in expenditure by Network Rail and other major clients with cost savings and budget constraints imposed by the Office of Rail Regulator. This has caused some smaller competitors to drop out of the rail market. Reduced Network Rail expenditure has affected profitability in Stobart Rail and in the near future the market is forecast to remain depressed. In order to mitigate the financial impact of this, strict cost control measures have been implemented within Stobart Rail and we believe that the market will recover but the timescale is difficult to predict.

 

The engineering business has played a major part in the construction of the railway station and control tower at London Southend Airport. Both projects are nearing completion. Work has been put on hold at Carlisle Airport following the blocking of the planning permission. A slightly revised planning application will be submitted to remove the technical issue responsible for quashing it. The business is also looking at potential civil engineering projects work outside the Group, building on its successful delivery of the Distribution Centre at Widnes. The refurbishment of the Bardon site as a Distribution Centre for Nestle is nearing its successful conclusion.

 

The rail freight business is developing and more of Eddie Stobart's road transport customers are considering using rail freight services. In addition, new customers A G Barr and Nestle Purina are now regularly using our rail freight services. The outlook for the rail freight business remains positive as key stakeholders remain committed to environmental impact reductions. We are talking to one of our largest customers about further rail freight services.

 

Stobart Ports

 

Our ports division comprises two main operations. An inland port (container handling facility) in Widnes which currently handles around 100,000 shipping containers a year, and a nearby waterway port, Port of Weston, in Runcorn. The ports transport fleet comprises 50 vehicles.

Revenue for the Stobart Ports division was £7.0m (2009: £6.3m) and divisional EAFFC was £1.0m (2009: £1.5m being higher as the terminal site was owned and so there are no site rental costs but there would have been a significant interest cost on the £25m of associated debt).

The container terminal in Widnes was the subject of a sale and lease back arrangement from the end of the previous year. The division still owns around 100 acres of development land around the Widnes container facility and talks have taken place with a blue chip customer requiring additional warehousing space in the area.

 

Eddie Stobart's Chilled transport has transferred its administration centre to Widnes following the securing of the transport contract at the new Tesco chilled distribution centre which Stobart Group developed and sold at the end of the previous year. The relocation has already provided synergies, with Stobart Ports and Eddie Stobart Chilled transport working in partnership distributing temperature controlled freight from the Widnes chilled warehouse. It is envisaged that more efficiency savings will take place within the year. The Stobart Ports vehicle fleet is being updated to a Stobart branded green livery and Euro 4/5 compliant giving reduced vehicle emissions. Access to the group-wide GTS and Isotrack vehicle route planning systems will allow traffic planners to monitor together all Stobart's fleets, enabling deliveries to be planned more effectively increasing vehicle utilisation and improve profitability.

 

The inland port's container movements for the first 6 months remained steady at a similar level to the prior year and continue to be affected by the economic climate reflected in general import volumes. The new train service from Pomezia in Italy has been successfully trialled and will enable the customer to transport its health and beauty product almost directly by rail to its UK Distribution centre. A new potential train service from Southampton could also provide the division with extra lifting and storage revenue.

 

The Inland transport business has performed in excess of expectations through the first 6 months of the year. Additional contracted work has enabled the transport operation to increase its truck numbers and replace its older trailers.

 

All the major contracts have been retained and additional long term agreements are in place to service blue chip customers through the Shipping Lines. The division continues to look to develop more business partnerships.

 

The waterways port is a 44 acre site on the Manchester Ship Canal and has excellent potential for development with close road, rail and waterway links. Transport by ship of bulk products could be an excellent fit with the emerging biomass business. Revenue is currently being generated from using the land as outside storage space and rental income from warehouses it owns.

 

Stobart Air

 

Stobart Air has traded in line with expectations in the first half. The air division comprises London Southend Airport and Carlisle Lake District Airport.

 

Revenue for the Stobart Air division was £3.6m (2009: £3.2m) and divisional EAFFC was £0.1m (2009: £0.0m).

 

At London Southend Airport, the major development programme has progressed well with the completion of the construction phase of the air traffic control tower and railway station providing train services to Stratford, the site of the Olympics, and to London Liverpool Street in 49 minutes. Subject to commissioning, we expect that the station and tower will open in December 2010 (already completed but awaiting opening for timetable reasons) and early 2011 respectively. We have received planning approval for an extended runway and the project is expected to complete by the end of 2011 and in advance of the Olympic Games. Positive discussions are ongoing with interested passenger airlines.

 

We have agreed terms for a five year operating agreement with Aer Arann to use London Southend Airport, for flights starting in March 2011, with volumes expected to grow to 300,000 passengers annually. As part of the overall investment agreement with others, Stobart Group will invest €2.5 million to incentivise and market Aer Arann's operation from London Southend Airport. The offer remains conditional on certain terms being satisfied; including Aer Arann successfully exiting Examinership; which should be by the end of October.

 

The association with Aer Arann, which is a household name in Ireland, would further strengthen and develop Stobart's position in the Irish market which has grown from no presence to revenues of €40m in two years. Stobart Group is receiving a growing number of enquiries from customers for airfreight services and alignment with Aer Arann offers potential to explore opportunities in the future.

 

London Southend Airport was recently awarded the European Regions Airline Association Airport Achievement Award 2010/11.

 

The review of the operational cost structure at Carlisle Airport has been implemented. During the period, the planning application for utilisation of part of the airport site for a purpose built transport and warehousing facility was rejected by judicial review. An amended application dealing with the issues raised in the judicial review has been prepared for submission.

 

Stobart Biomass

 

In March the Group invested £15m cash and £15m shares in a 50% interest in Stobart Biomass Products Limited. This company is a joint venture between Stobart Group and A. W. Jenkinson Forest Products.

 

In July, Stobart Biomass Products Limited acquired for £2m certain parts of the business and assets of Amenity Horticultural Services Limited, a leading UK manufacturer and supplier of Woodchip Biomass fuel for renewable heat to commercial and domestic users. Stobart Group Limited loaned £1m to Stobart Biomass Products Limited to part fund this investment and this amount has been included in investments in joint venture in the statement of financial position. This business represents contracts for over 150,000 tonnes per year of biomass supply to the rapidly growing renewable heat market, and provides Stobart Biomass with a leading position in a new market. Thanks to progressive corporate policies and Governmental support, this is a market at the tipping point of massive potential growth, and the acquisition of AHS positions Stobart Biomass to grow strategically with the sector. 

 

We are in discussions with several potential customers for supply and transport of Biomass products and the pipeline is very encouraging.

 

Discontinued activities

 

As at the previous year end, certain investment properties, including One Plantation Place, are classified as held-for-sale and included in discontinued operations as they are non-core business assets and part of a co-ordinated disposal plan. The Group has been unable to sell these assets in the period due to the fall in the commercial property market and the difficulty in co-ordinating joint venture partners for a disposal of the assets. We continue to look for opportunities to sell these assets on reasonable commercial terms, and expect to sell them in the next 12 months. These property assets are all written down to nil in the statement of financial position. The commercial property market is showing signs of stabilising.

 

Outlook

 

The second half has started encouragingly and we expect to see good growth across our businesses. New and recently announced agreements mentioned above will support second half performance. In addition, we are in discussion with several other major customers including biomass customers and airlines which should significantly grow the business.

 

We have slightly reduced our full year profit expectations as a result of reduced spend by Network Rail and increased overall finance costs. We are also cautious that 2011 may see volumes affected by the increase in VAT rate and the Government spending review. However, in the long term we see this as positive for the economy and our business. Overall, we look forward to further growth in the second half as new contracts fully contribute. Our efficient green fleets and innovative transport solutions continue to impress customers and our improved assets give excellent opportunities for adding value in to the future.

 

 

ANDREW TINKLER

Chief Executive

20 October 2010

 

 

 

 

Key risks and uncertainties

 

As with any business, risk assessment and the implementation of mitigating

actions and controls are vital to successfully achieving the Group's strategy. The

Board has overall responsibility for risk management and internal control

within the context of achieving the Group's objectives.

 

The key risks and mitigating factors have not changed from those previously reported, namely:

 

·      Business and financial strategy

·      Consumer confidence

·      Seasonality and abnormal weather

·      Government legislation and regulation

·      Information technology

·      Airport safety and security

·      Demand for integrated and outsourced transport and logistics

·      People management

·      Competition

·      Nature of lease obligations

·      Fuel prices

·      Commercial property

·      Acquisitions

·      Capital expenditure

·      Development of the UK biomass market

·      Securing of biomass business

 

For greater detail on these risks and mitigating factors, please refer to our 2010 Annual Report.

 

Going concern

 

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the interim financial statements have been prepared on a going concern basis.

 

Directors' responsibility statement

 

The Board confirms to the best of its knowledge:

• that the consolidated half year financial statements for the six months to 31 August 2010 have been prepared in accordance with IAS 34 'Interim Financial Reporting'; and

• that the Half Year Report includes a fair review of the information required by sections 4.2.7R and 4.2.8R of the Disclosure and Transparency Rules.

 

The above Statement of Directors' responsibilities was approved by the Board on 20 October 2010.

 

For and on behalf of the Board

 

 

 

BEN WHAWELL

Chief Financial Officer

 

20 October 2010



Interim Consolidated Income Statement
For the six months ended 31 August 2010



 

Six months ended 31 August 2010

 

Six months ended 31 August 2009

 

Year ended 28 February 2010



Unaudited

Unaudited

Audited


Notes

£'000

£'000

£'000






Revenue

4

243,689

218,245

447,661






Operating expenses - underlying


(224,805)

(202,438)

(412,642)






Underlying operating profit


18,884

15,807

35,019






Share based payment


(480)

(423)

(2,504)

Less: share based payments associated with   the disposal of Widnes assets


 

-

 

-

 

1,758

Share based payments on underlying operating profit


 

(480)

 

(423)

 

(746)

Profit on disposal of Widnes assets (net of associated costs)


 

-

 

-

 

8,258

Restructuring costs


-

(1,306)

(2,746)






Profit before interest and tax


18,404

14,078

39,785






Finance costs


(3,305)

(3,445)

(6,650)

Finance income


284

442

928






Profit before tax


15,383

11,075

34,063






Income tax

5

(3,682)

(2,139)

(5,071)






Profit for the period from continuing operations


 

11,701

 

8,936

 

28,992






Discontinued operations


(7)

(416)

(770)






Profit for the period attributable to equity holders of the parent


 

11,694

 

8,520

 

28,222
















Earnings per ordinary share

7









From continuing operations





Basic


4.57p

3.75p

12.06p

Diluted


4.56p

3.73p

11.89p






From continuing and discontinued operations





Basic


4.57p

3.58p

11.74p

Diluted


4.56p

3.56p

11.58p

 

 

 

 

 


Interim Consolidated Statement of Comprehensive Income
For the six months ended 31 August 2010

 



 

Six months ended 31 August 2010

 

Six months ended 31 August 2009

 

Year ended 28 February 2010



Unaudited

Unaudited

Audited



£'000

£'000

£'000











Profit for the period


11,694

8,520

28,222






Exchange differences on translation of foreign operations


 

(249)

 

-

 

-

Cash flow hedge


(890)

-

(1,608)

Tax on items relating to components of other comprehensive income


 

249

 

-

 

450






Other comprehensive income / (loss) for the period, net of tax


 

(890)

 

-

 

(1,158)






Total comprehensive income for the period, net of tax, attributable to equity holders of the parent


 

 

10,804

 

 

8,520

 

 

27,064






 

 

 

 

 



Interim Consolidated Statement of Financial Position
As at 31 August 2010




31 August 2010

28 February 2010



Unaudited

Audited


Notes

£'000

£'000





Non-current Assets




     Property, plant and equipment




      - Land and buildings

8

153,648

139,705

      - Plant and machinery

8

16,087

15,835

      - Fixtures, fittings and equipment

8

4,103

4,131

      - Commercial vehicles

8

77,194

51,234



251,032

210,905

     Investment in joint venture


31,000

-

     Investment property


2,000

2,000

     Intangible assets


231,284

231,286

     Other investments


6

10

    


515,322

444,201





Current Assets




     Inventories


1,701

1,559

     Trade and other receivables


103,045

84,411

     Cash and cash equivalents

9

5,727

13,134



110,473

99,104

    Assets of disposal groups classified as held for sale


256

241



110,729

99,345

Total Assets


626,051

543,546





Non-current Liabilities




     Loans and borrowings

9

115,358

42,876

     Other liabilities


12,579

10,941

     Corporation tax


4,774

4,807

     Deferred tax


34,286

34,243



166,997

92,867





Current Liabilities




     Trade and other payables


74,923

74,204

     Loans and borrowings

9

52,619

67,196

     Corporation tax


3,243

-



130,785

141,400

     Liabilities directly associated with the assets classified as held for sale


3,628

3,923



134,413

145,323

Total Liabilities


301,410

238,190





Net Assets


324,641

305,356

 



Interim Consolidated Statement of Financial Position (continued)
As at 31 August 2010



31 August 2010

28 February 2010



Unaudited

Audited



£'000

£'000





Capital and reserves




     Issued share capital


26,516

25,079

     Share premium


181,173

164,255

     Foreign currency exchange reserve


(717)

(468)

     Reserve for own shares held by EBT


(663)

(803)

     Hedge reserve


(1,799)

(1,158)

     Retained earnings


120,131

118,451

Total Equity


324,641

305,356

 

 

  

  

 

 

 


Interim Consolidated Statement of Changes in Equity
For the six months ended 31 August 2010
 

 


Attributable to equity holders of the parent

 

 

Issued share capital

Share premium

Foreign currency exchange reserve

Reserve for own shares held by EBT

Hedge reserve

Retained earnings

Total equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 March 2010

25,079

164,255

(468)

(803)

(1,158)

118,451

305,356

Profit for the period

-

-

-

-

-

11,694

11,694

Other comprehensive income / (loss)

-

-

(249)

-

(641)

-

(890)

Total comprehensive income/(loss)

-

-

(249)

-

(641)

11,694

10,804

Proceeds on share issue

1,437

17,190

-

-

-

-

18,627

EBT shares vested

-

-

-

140

-

-

140

Share issue costs

-

(272)

-

-

-

-

(272)

Share based payment credit

-

-

-

-

-

480

480

Tax on share based payment

-

-

-

-

-

113

113

Dividends

-

-

-

-

-

(10,607)

(10,607)

Balance at 31 August 2010

26,516

181,173

(717)

(663)

(1,799)

120,131

324,641

 

 

 

 



Attributable to equity holders of the parent

 

 


Issued share capital

Share premium

Foreign currency exchange reserve

Reserve for own shares held by EBT

Retained earnings

Total equity



£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 March 2009


24,175

155,805

(468)

(803)

100,521

279,230

Profit for the period


-

-

-

-

8,520

8,520

Other comprehensive income


-

-

-

-

-

-

Total comprehensive income


-

-

-

-

8,520

8,520

Proceeds on share issue


904

8,703

-

-

-

9,607

Share based payment credit


-

-

-

-

431

431

Dividends


-

-

-

-

(7,978)

(7,978)

Balance at 31 August 2009


25,079

164,508

(468)

(803)

101,494

289,810

 

 

 

 

 

 

 

 

 

 

Interim Consolidated Statement of Changes in Equity
For the six months ended 31 August 2010

 

 

 

 

 

 

 

 


Attributable to equity holders of the parent

 

 

Issued share capital

Share premium

Foreign currency exchange reserve

Reserve for own shares held by EBT

Hedge reserve

Retained earnings

Total equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 March 2009

24,175

155,805

(468)

(803)

-

100,521

279,230

Profit for the year

-

-

-

-

-

28,222

28,222

Other comprehensive income / (loss)

-

-

-

-

(1,158)

-

(1,158)

Total comprehensive income/(loss)

-

-

-

-

(1,158)

28,222

27,064

Proceeds on share issue

904

8,703

-

-

-

-

9,607

Share issue costs

-

(253)

-

-

-

-

(253)

Share based payment credit

-

-

-

-

-

2,262

2,262

Tax on share based payment

-

-

-

-

-

439

439

Dividends

-

-

-

-

-

(12,993)

(12,993)

Balance at 28 February 2010

25,079

164,255

(468)

(803)

(1,158)

118,451

305,356

 

 

 

 

 

  

 

 



Interim Consolidated Cash Flow Statement
For the six months ended 31 August 2010

 

 



Six months ended 31 August 2010

Six months ended 31 August 2009

 

Year ended 28 February 2010



Unaudited

Unaudited

Audited


Notes

£'000

£'000

£'000






Cash generated from operations

10

13,569

19,703

39,823

Income taxes received / (paid)


411

(314)

(2,384)

Net cash flow from operating activities


13,980

19,389

37,439






Acquisition of subsidiaries and other businesses - net cash paid


 

-

 

(414)

 

(240)

Purchase of property, plant and equipment


 

(51,382)

 

(45,851)

 

(63,250)

Investment in joint venture


(15,000)

-

-

Proceeds from sale of property, plant and equipment


 

2,649

 

8,306

 

72,807

Vat outflow in relation to disposal of Widnes assets


 

(4,200)

 

-

 

-

Dividends received from joint ventures


 

-

 

63

 

256

Net loans (advanced to)/ repaid by joint ventures


 

(1,000)

 

360

 

545

Interest received


284

442

928






Net cash flow from investing activities


(68,649)

(37,094)

11,046






Issue of ordinary shares less costs of issue


 

(270)

 

-

 

(253)

Repayment of Income Shares


(1,644)

-

-

Dividend paid on ordinary shares


(10,607)

(7,978)

(12,993)

Proceeds from new finance leases


33,674

10,754

17,683

Repayment of capital element of finance leases


 

(8,910)

 

(12,709)

 

(20,672)

Proceeds from new borrowings less costs of issue


 

84,087

 

34,460

 

34,000

Repayment of borrowings


(42,589)

(6,258)

(63,574)

Interest paid


(3,320)

(3,838)

(6,685)






Net cash flow from financing activities


 

50,421

 

14,431

 

(52,494)






Decrease in cash and cash equivalents


 

(4,248)

 

(3,274)

 

(4,009)

Cash and cash equivalents at beginning of period


 

(13,123)

 

(9,114)

 

(9,114)

Cash and cash equivalents at end of period


 

(17,371)

 

(12,388)

 

(13,123)

 

Cash





  - continuing


5,727

8,762

13,134

  - included in disposal group


251

28

179

Overdraft


(23,349)

(21,178)

(26,436)






Cash and cash equivalents at end of period


 

(17,371)

 

(12,388)

 

(13,123)

 

1      Accounting policies of Stobart Group Limited

 

Corporate information

 

The interim consolidated financial statements of the Group for the six months ended 31 August 2010 were authorised for issue in accordance with a resolution of the directors on 20 October 2010.

 

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 4.

 

Basis of preparation

 

The interim consolidated financial statements of the Group for the six months ended 31 August 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting.

 

The interim 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 2010. Except for the 28 February 2010 comparatives, the financial information set out herein is unaudited but has been reviewed by the auditors and their report to the Company is attached.

 

These interim consolidated financial statements are unaudited. The comparative financial information set out in these interim consolidated financial statements do not constitute the Group's statutory accounts for the period ended 28 February 2010 but have been derived from the accounts. Statutory accounts for the period ended 28 February 2010 have been published. The auditors have 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 IFRS as adopted by the European Union.

 

Significant accounting policies

 

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 to 28 February 2010 except for the adoption of new Standards and Interpretations as of 1 March 2010 which are applicable to the group, as noted below:


Revised IFRS 3 Business Combinations

 This amendment changes the treatment of acquisition-related costs and contingent consideration relating to acquisitions after 1 January 2010 and also changes the treatment of non-controlling interests (formerly minority interests) with an option to recognise these at full fair value as at the acquisition date and a requirement for previously held non-controlling interests to be fair valued as at the date control is obtained, with gains and losses recognised in the income statement.

Some of the key features of the revised IFRS3 include:

- Acquisition-related costs to be expensed and not included in the purchase price;
- Contingent consideration to be recognised at fair value on the acquisition date (with subsequent changes recognised in the income statement and not as a change to goodwill); and

- Changes to the accounting treatment of step acquisitions.

Revised IFRS 3 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.

IAS 27R Consolidated and Separate Financial Statements

The revision to this Standard requires the group to attribute losses to non-controlling interests even if this results in the non-controlling interest having a deficit balance. This change is applicable prospectively and the controlling shareholder will not be able to recover any past losses absorbed under the old rules. The revision of the Standard had no material effect on the results for the six months ended 31 August 2010.

 

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. In line with retail cycles, the higher seasonal sales in the months pre-Christmas is balanced by the lower seasonal sales in the months after Christmas, both in the second six months of our financial year.

 

3      Acquisitions and Investment in joint venture

 

Completion of acquisitions in the previous period where the acquisition accounting was determined only provisionally

 

Acquisition of Stobart Air Limited

 

The accounting for the acquisition of Stobart Air Limited was completed in the period with no further adjustments made.

 

Investment in Stobart Biomass Products Limited

 

Investment in joint venture

 

On 23 March 2010 the group invested £15m cash and £15m shares in a 50% interest in Stobart Biomass Products Limited, an unlisted company based in the United Kingdom, which has been set up to source and distribute biomass fuels for renewable energy production in the UK.

 

Investment in Amenity Horticultural Services Limited

 

On 15 July 2010, Stobart Biomass Products Limited acquired for £2m certain parts of the business of Amenity Horticultural Services Limited. The business is a supplier of woodchip biomass fuel for renewable heat to commercial and domestic users. Stobart Group Limited loaned £1m to Stobart Biomass Products Limited to part fund this investment and this amount has been included in investments in joint venture in the statement of financial position.

 

4      Segmental information

 

The operating segments within continuing operations are Eddie Stobart, Stobart Rail, Stobart Ports and Stobart Air (including air freight).

 

The Eddie Stobart segment specialises in haulage, distribution, warehousing, property and process management services and merchandising.

 

The Stobart Rail segment specialises in infrastructure engineering and rail freight services.

 

The Stobart Ports segment specialises in inland port and waterport services, warehousing and distribution.

 

The Stobart Air segment specialises in operation of commercial airports including air freight.

 

The Board of Directors is regarded as the Chief Operating Decision Maker (CODM).  The Board monitors the results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. The main segmental profit measure is earnings after fleet financing costs but before restructuring costs.

 

The results and assets of the biomass business have been included in the Eddie Stobart segment as they are not material for separate disclosure.

 

Income taxes, restructuring costs, non-fleet finance costs and certain central costs are managed on a group basis and are not allocated to operating segments.

 

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

 

The Group has overseas operations in Europe and Ireland which are not considered material for separate disclosure.

 

 

 

 

Period ended 31 August 2010

 

 

 

Eddie Stobart

 

 

 

Stobart Rail

 

 

 

Stobart Ports

 

 

 

Stobart Air

 

 

Adjustments and eliminations

 

 

 

 

Group


£'000

£'000

£'000

£'000

£'000

£'000

Revenue







External

218,989

14,099

7,033

3,568

-

243,689

Internal

-

12,159

-

-

(12,159)

-

Total revenue

218,989

26,258

7,033

3,568

(12,159)

243,689








Segment profit (after fleet financing costs)

 

16,444

 

1,929

 

1,010

 

136

 

(2,547)

 

16,972

Restructuring costs






-

Other finance costs






(1,589)

Profit before tax






15,383








 

Inter-segment revenues are eliminated on consolidation.

 

Included in adjustments and eliminations are central costs of £1,939,000 (2009: £1,744,000) and intragroup profit of £608,000 (2009: £512,000).

 

 

 

 

Period ended 31 August 2009

 

 

 

Eddie Stobart

 

 

 

Stobart Rail

 

 

 

Stobart Ports

 

 

 

Stobart Air

 

 

Adjustments and eliminations

 

 

 

 

Group


£'000

£'000

£'000

£'000

£'000

£'000

Revenue







External

188,673

20,139

6,254

3,179

-

218,245

Internal

-

9,903

-

-

(9,903)

-

Total revenue

188,673

30,042

6,254

3,179

(9,903)

218,245








Segment profit (after fleet financing costs)

 

11,955

 

2,295

 

1,491

 

36

 

(2,256)

 

13,521

Restructuring costs






(1,306)

Other finance costs






(1,140)

Profit before tax






11,075








 

           

 

 

 

 

 

 

 

 

Eddie Stobart

 

 

 

Stobart Rail

 

 

 

Stobart Ports

 

 

 

Stobart Air

 

 

Adjustments and eliminations

 

 

 

 

Group

Segment assets

£'000

£'000

£'000

£'000

£'000

£'000








At 31 August 2010

435,481

21,323

85,647

84,287

(687)

626,051

At 28 February 2010

358,526

24,643

87,571

68,784

4,022

543,546

 

 

5      Taxation

Taxation on profit on ordinary activities

 

Tax charged in the income statement

Six months ended 31 August 2010

Six months ended 31 August 2009

 

Year ended 28 February 2010


Unaudited

Unaudited

Audited


£'000

£'000

£'000





Current income tax:




UK Corporation tax - continuing operations

2,988

2,378

6,166

                                - discontinued operations

-

31

31

Overseas tax

60

-

-


3,048

2,409

6,197

Adjustment in respect of prior years

193

(1,010)

103

Total current tax

3,241

1,399

6,300





Deferred tax:




Origination and reversal of temporary differences

 

631

 

771

 

1,198

Adjustment in respect of prior years

(190)

-

(2,396)

Total deferred tax charge

441

771

(1,198)





Total charge in the income statement

3,682

2,170

5,102

 

 

 

 

The effective tax rate on continuing operations of 23.9% is lower than the standard rate of 28% principally due to the impact on the reduction of the UK corporation tax rate from 28% to 27% with effect from 1 April 2011. The income tax expense recognised is based on the estimated full year effective rate for the year to 28 February 2011.

 

Announcements were made in the Emergency Budget on 22 June 2010 that the following changes to the UK tax legislation would be enacted in the 2010 and subsequent Finance Acts:

 

The main rate of corporation tax is to be reduced from 28% to 24% at a rate of 1% per year. Only the first 1% reduction of the announced 4% reduction in the corporation tax rate has been enacted or substantively enacted at the balance sheet date. This first reduction to a rate of 27% will be effective from1 April 2011.

 

Based on the closing deferred tax liability at the interim balance sheet date, the aggregate impact of the proposed reductions from 27% down to 24% would reduce the deferred tax liability by approximately £3.9m. There will be a reduction of approximately £1.3m per year, if only a 1% reduction in the corporation tax rate is enacted each year.

 

 

6      Dividends

 

A final dividend of 4p per share (2009: 3.3p) totalling £10,606,596 (2009: £7,977,629 paid on 22 June 2009) was declared on 12 May 2010 and was paid on 21 June 2010.

 

An interim dividend of 2.0p (2009: 2.0p) per share totalling £5,303,298 (2009: £5,015,766 paid on 10 December 2009) was declared on 20 October 2010 and will be paid on 10 December 2010. This is not recognised as a liability at 31 August 2010.

 

 

 

 

 

7      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 2010

Six months ended 31 August 2009

 

Year ended 28 February 2010



Unaudited

Unaudited

Audited




 

 

Numerator


£'000

£'000

£'000

Continuing operations





Profit used for basic earnings


11,701

8,936

28,992

Effect on earnings of dilutive potential ordinary shares


 

27

 

152

 

304

Diluted earnings


11,728

9,088

29,296






Discontinued operations





Profit used for basic earnings


(7)

(416)

(770)

Effect on earnings of dilutive potential ordinary shares


 

-

 

-

 

-

Diluted earnings


(7)

(416)

(770)






Total





Profit used for basic earnings


11,694

8,520

28,222

Effect on earnings of dilutive potential ordinary shares


 

27

 

152

 

304

Diluted earnings


11,721

8,672

28,526






Denominator


Number

Number

Number

Weighted average number of shares used in basic EPS


 

256,150,406

 

238,286,604

 

240,479,372

Effects of convertible Income Shares


673,574

5,271,678

4,502,013

Effects of employee share options


-

-

1,420,000

Weighted average number of shares used in diluted EPS


 

256,823,980

 

243,558,282

 

246,401,385






 

On 23 March 2010, 11,278,195 Ordinary Shares were issued in connection with the investment in Stobart Biomass Products Limited at an effective market price of 133p per share.

 

On 25 March 2010, 1,395,000 Ordinary Shares were allocated to directors and employees under the Stobart Executive Equity Incentive Plan. These increased the weighted average number of shares used in the basic EPS calculations.

 

On 9 April 2010, 3,098,440 additional Ordinary Shares were created on conversion of Income Shares at a rate of 0.854 Ordinary Shares per Income Share and an effective price of 117p per share.

 

The normalised basic earnings per share are 4.3p (31 August 2009: 3.7p, 28 February 2010: 8.6p). The numerator used in calculating the normalised earnings per share of £11,076,000 (31 August 2009: £8,914,000, 28 February 2010: £20,557,000) is the profit before tax from continuing operations of £15,383,000 (31 August 2009: £11,075,000, 28 February 2010: £34,063,000) plus the restructuring costs of £nil (31 August 2009: £1,306,000, 28 February 2010: £2,746,000) less the profit on disposal of Widnes assets (after costs) of £nil (31 August 2009: £nil, 28 February 2010: £8,258,000)and allowing for tax at 28% of £4,307,000 (31 August 2009: £3,467,000, 28 February 2010: £10,307,000).

 

 

 

8      Property, plant and equipment

 

Additions and disposals

 

During the six months ended 31 August 2010, the Group acquired or developed assets with a cost of £51,414,000. This included development of the railway station and control tower at London Southend Airport, development at Carlisle Lake District Airport and commercial vehicles.

 

Assets with a book value of £2,670,000 were disposed of by the Group during the six months ended 31 August 2010 resulting in a net profit on disposal of £11,000.

 

Capital commitments

 

At 31 August 2010, the Group had capital commitments of £14,182,652 (2009: £1,602,479) principally relating to tractor units.

 

 

  

 

 

 

 

 

9      Analysis of net debt

 



31 August 2010

28 February 2010



Unaudited

Audited



£'000

£'000

Loans and borrowings




Non-current








Fixed rate:




 - Obligations under finance leases and hire purchase contracts


 

46,152

 

31,509





Variable rate:




 - Bank loans


69,206

11,367







115,358

42,876

Current








Fixed rate:




 - Income shares


-

5,269

 - Obligations under finance leases and hire purchase contracts


 

29,012

 

18,891





Variable rate borrowings




 - Loan notes


-

6,000

 - Overdrafts


23,349

26,436

 - Bank loans


258

10,600







52,619

67,196





Total loans and borrowings


167,977

110,072

Cash


(5,978)

(13,313)





Net debt


161,999

96,759

 

 

The main increases in net debt have resulted from the following: (1) funding the development of the railway station and control tower at London Southend Airport; (2) funding of £16m for the acquisitions of Stobart Biomass Products Limited and of certain parts of the business of Amenity Horticultural Services Limited; (3) net increase in financing of vehicles of £24.8m to growth of the fleet.

 

During the period, the Group refinanced its borrowings. The loan notes, bank loans and Income Shares were repaid and the Group entered in to a new 10 year £100m development facility with M&G UK Companies Financing Fund.

 

During the period 3,628,158 Income Shares were converted to 3,098,440 Ordinary Shares and 1,643,520 Income Shares were redeemed for £1 each. There are no Income Shares remaining in issue.

 

 

 

 

 

 

 

 

10 Cash generated from operations

 

 



 

Six months ended 31 August 2010

 

Six months ended 31 August 2009

 

 

Year to 28 February 2010



Unaudited

Unaudited

Audited



£'000

£'000

£'000






Profit before tax on continuing operations


 

15,383

 

11,075

 

34,063

Loss before tax on discontinued operations


 

(7)

 

(385)

 

(739)

Profit before tax


15,376

10,690

33,324






Adjustments to reconcile profit / (loss) before tax to net cash flows:










Non-cash:





Realised loss/(profit) on sale of property, plant and equipment


 

(11)

 

216

 

(8,910)

Associates and joint ventures


 

(33)

 

(63)

 

131

Depreciation of property, plant and equipment


 

8,617

 

8,203

 

15,668

Investment income


(284)

(442)

(928)

Interest expense


3,305

3,718

6,621

Amortisation of income share issue costs


 

2

 

15

 

29

Share option charge


480

431

755






Working capital adjustments:





(Increase) / decrease in inventories


(142)

8

188

(Increase) / decrease in trade and other receivables


 

(19,020)

 

207

 

(11,605)

Increase / (decrease) in trade and other payables


 

5,279

 

(3,280)

 

4,550






Cash generated from operations


13,569

19,703

39,823











Issue of ordinary shares





Issue of ordinary shares


-

-

-

Issue costs paid on issuance of ordinary shares


 

(270)

 

-

 

(253)



(270)

-

(253)

 

   

 

 

 

 

11         Related Parties

Entities with Joint Control or Significant Influence

 

WA Developments International Limited is owned by A Tinkler and W Stobart. The Group made purchases totalling £15,929 from and sales totalling £306,383 to WA Developments International Limited. £391,300 was due from WA Developments International Limited at the period end.

 

WA Developments International GMBH is a subsidiary of WA Developments International Limited.  The Group made sales totalling £5,181 to WA Developments International GMBH.  £16,540 was due from WA Developments International GMBH at the period end.

 

AstSigns Limited is 27% owned by W Stobart. During the period, the Group made purchases of £174,852 from AstSigns Limited of which £26,809 was outstanding owed by the Group at the period end.

 

Moneypenny Limited is a subsidiary of WA Developments International Limited.  The Group made purchases totalling £209,819 and sales totalling £3,247 to Moneypenny Limited.  £3,248 was due from Moneypenny Limited at the period end.

 

VLL Limited is 27% owned by A Tinkler and 23% owned by W Stobart.  The Group made sales of £41,551 to VLL Limited during the period.  £99,470 was due from VLL Limited at the period end.

 

Joint Ventures

 

The Group had loans outstanding from its joint venture interest, Starion Tottenham Court Road Limited of £2,053,000 at the period end of which £2,053,000 has been provided for.

 

 



INDEPENDENT REVIEW REPORT TO STOBART GROUP LIMITED

 

Introduction

 

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 2010 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related notes 1 to 11.  We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

 

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 Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

 

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.

 

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 United Kingdom. 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. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) 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.

 

Conclusion

 

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 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

Ernst & Young LLP

Manchester

20 October 2010


 


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