TIDMESKN
RNS Number : 1276R
Esken Limited
03 November 2021
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of domestic law by virtue of the European Union
(Withdrawal) Act 2018.
3 November 2021
Esken Limited
("Esken" or the "Group")
Results for the six months ended 31 August 2021
Simplified business delivering improved financial performance
and positioned for growth
Esken Limited, the aviation and renewable energy group, today
announces its unaudited interim results for the six months to 31
August 2021.
David Shearer , Executive Chairman of Esken said,
"We are pleased to report an improved financial performance and
are executing our focused strategy to deliver long term growth.
Following the successful completion of the capital raise and
refinancing the Group has GBP90.5m of liquidity available to it at
the half year - ahead of management expectations.
As previously indicated, Stobart Energy has had a strong start
to the year with profitability and cash generation improving
significantly and returning to pre COVID-19 levels. Improving gate
fees and increased wood supply from the construction sector gives
us confidence we should reach GBP18-20m of EBITDA in FY22 after
Group recharges.
Continued global logistics income coupled with the long term
strategic partnership with Carlyle provides LSA with optionality to
focus on securing the right commercial airline agreements for
Esken's shareholders. LSA continues to progress positive
discussions with airline partners and is confident in its offering
including its cost efficient operating base, proven routes, award
winning passenger experience and proximity to London."
Financial highlights
-- Positive EBITDA from our two core operating divisions,
increasing from GBP1.5m in the six months ended 31 August 2020 to
GBP9.9m, driven by a strong performance at Stobart Energy and
management of costs and GBP3.5m of one off receipts within the
Aviation businesses.
-- Loss for the period of GBP6.4m compared to a loss of GBP88.1m
for the six months ended 31 August 2020. The comparator period
includes GBP73.0m of losses associated to discontinued businesses
(Stobart Air, Propius and Stobart Rail & Civils).
-- The GBP6.4m total loss during the period reflects GBP5.6m of
positive EBITDA and a tax contribution of GBP9.0m, GBP10.1m of
depreciation and an increase in net financing costs from GBP2.4m to
GBP8.0m.
-- Completed refinancing that included strategic funding in
relation to LSA together with a new working capital facility and
equity raise. This enabled Esken to repay all outstanding bank debt
and will allow the business to meet its ongoing working capital
requirements, whilst underpinning the business plan going forward.
The management of costs associated with Stobart Air, following its
liquidation in June 2021, and Propius, and work to dispose of the
GBP39m portfolio of non-core assets remain in line with management
expectations.
-- GBP90.5m of liquidity available at the half year, ahead of
management expectations set out at the time of the refinancing,
including GBP19.7m of ring-fenced cash in LSA, and a GBP20m undrawn
Revolving Credit Facility, supported by a continued focus on tight
cost control.
GBP'm 2021 2020 % change
---------------------------------------------- -------- -------- ---------
Revenue by division
Aviation 12.9 13.5 (4.0%)
Energy 38.1 33.2 14.8%
---------------------------------------------- -------- -------- ---------
Revenue for two core operating divisions 51.0 46.7 9.2%
---------------------------------------------- -------- -------- ---------
Investments and Non-Strategic infrastructure 0.3 0.8 (61.7%)
Group central and eliminations 0.4 0.5 (39.3%)
---------------------------------------------- -------- -------- ---------
Total revenue 51.7 48.0 7.7%
---------------------------------------------- -------- -------- ---------
EBITDA by division
Aviation 0.8 (0.9) 181.4%
Energy 9.1 2.4 279.1%
---------------------------------------------- -------- -------- ---------
EBITDA for two core operating divisions 9.9 1.5 573.1%
---------------------------------------------- -------- -------- ---------
Investments and Non-Strategic infrastructure (0.5) (0.8) 31.9%
Group central and eliminations (3.8) (4.5) 16.2%
---------------------------------------------- -------- -------- ---------
Total EBITDA 5.6 (3.8) 246.6%
---------------------------------------------- -------- -------- ---------
Loss before tax (12.5) (16.1) 21.9%
Discontinued operations, net of tax (2.9) (73.0) 96.0%
Loss for the period (6.4) (88.1) 92.7%
Non-cash loss on acquisition of Stobart
Air and Propius - (14.3) -
Net debt - excluding IFRS 16 (123.4) (89.2) (38.4%)
Net debt - total (230.0) (223.7) 2.8%
Cash and undrawn banking facilities 90.5 119.1 24.0%
---------------------------------------------- -------- -------- ---------
Energy
-- Stobart Energy experienced a strong financial recovery in
line with management expectations at the time of the Company's
refinancing. Revenue is up 14.8% to GBP38.1m and EBITDA is up
279.1% to GBP9.1m with market conditions returning to pre-COVID-19
levels as expected, with improvements in waste wood supply, gate
fee pricing and plant availability.
-- It supplied 706k tonnes of biomass fuel to energy plant
customers during the period, representing a 14.5% increase in
volumes compared to the six months ended 31 August 2020.
-- Stobart Energy has continued to deliver on its biomass plant
supply contracts whilst navigating market challenges, including the
well-publicised HGV driver shortage.
Aviation
-- Passenger numbers reduced by 63.2% to 46k during the period
with the airport delaying a restart in commercial passenger
operations to the start of Summer flying in April 2022, allowing
the airport to minimise costs and cash burn during the
traditionally quieter Winter period.
-- Despite the market backdrop and the global retraction in
airline operations, EBITDA improved by 181.4% during the period to
GBP762k. This reflects the performance from the global logistics
operation, continued cost management including a reduction in
airline marketing support, and GBP3.5m of one off receipts
associated with Connect Airways and the conclusion of its
partnership with Teesside International Airport.
-- LSA continues to retain GBP19.7m of ring-fenced cash
following the completion of Esken's refinancing in July 2021.
ESG progress
-- Esken has put in place a new ESG governance structure to
provide performance visibility at Board and Audit Committee levels.
ESG performance KPIs for the Executive Team and Division Boards
will be agreed ahead of the new financial year.
-- Esken is collecting data to enable it to report on Scope 1-3
environmental data at the time of its full year results, when it
also intends to report on financial disclosure on climate change
ahead of government requirements.
-- Esken's divisions have each appointed charity partners for
the year and are organising a series of fundraising events. Esken
colleagues have also been supporting local schools with careers
fairs and mentoring programmes.
Board and Senior Management changes
Esken also announces today an updated management structure which
follows the resignation of Warwick Brady as Chief Executive Officer
in February 2021. The Board has carefully considered the leadership
requirements of the business given the simplified structure of the
Group with two core operating divisions and has consulted with a
number of its major shareholders.
It has been decided to retain the existing structure with some
amendment to responsibilities. David Shearer will remain as
Executive Chairman with responsibility for stakeholder management,
execution of strategy and executive leadership. Lewis Girdwood,
CFO, will take on the additional role as Executive Director -
Aviation with main board responsibility for that division. Nick
Dilworth, COO, will take on the additional role of Executive
Director - Energy with main board responsibility for that business,
in addition to his Executive responsibility for ESG.
The changes have the support of major shareholders and the Board
believe it is in the best interests of investors. In order to
maintain strong corporate governance, David Blackwood will become
Deputy Chairman and Senior Independent Director so that the Board
and shareholders have a point of reference independent from the
Chairman. These changes take effect immediately.
Outlook
Stobart Energy has had a strong start to the year and Esken is
now able to provide guidance for FY22.
Esken anticipates Stobart Energy will achieve EBITDA in the
range of GBP18-20m after Group recharges based on the expectation
it will maintain a supply run rate of 1.5m tonnes, normalised
winter gate fees and that the plants that we supply do not
experience any further unplanned outages. Esken further anticipates
that Stobart Energy is well placed to build on the FY22 outlook as
it continues to improve profitability.
The easing of travel restrictions due to the successful roll out
of the COVID-19 vaccination programme means the outlook for
aviation is becoming more positive. Whilst we do not expect to see
any pick-up in activity during the traditionally quiet Winter
season, the Group remains focused on a steady improvement in
passenger numbers from the Summer season 2022, which commences in
April 2022. LSA has GBP19.7m of ring fenced cash to support its
development through to a cash positive position, which is targeted
for FY24.
Conference call details
The Group will provide a live presentation relating to its
results via the Investor Meet Company platform at 9:30am BST today.
The presentation is open to all existing and potential
shareholders.
Investors can sign up to Investor Meet Company for free and add
to meet Esken via:
https://www.investormeetcompany.com/esken-limited/register-investor
. Investors who already follow Esken on the Investor Meet Company
platform will automatically be invited.
Divisional Review
Energy
Stobart Energy sources waste wood from third party suppliers
such as construction businesses and household waste and recycling
centres. It charges these suppliers a gate fee for taking the waste
wood, which is priced below the cost of sending the waste wood to
landfill; the other viable alternative for disposing of waste wood,
which results in the release of harmful methane into the
atmosphere. It then stores that waste wood before processing it in
to biomass fuel. It supplies that biomass fuel, along with waste
wood processed by third parties and virgin wood supplied via
managed woodlands and other sustainable sources, to biomass plant
customers. Those plants use the fuel to generate renewable energy
and pay Stobart Energy for the wood it supplies to them, based on
long term, RPI linked contracts.
The business has experienced a strong recovery in market
conditions. The availability of waste wood has increased
significantly compared to the same period during the first
lockdown. The construction industry, which generates the majority
of the UK's waste wood, has remained open and has also been
catching up with the lost construction activity experienced at the
start of the pandemic. This has allowed Stobart Energy to utilise
its significant storage capacity to manage supply dynamics toward
higher gate fee pricing levels during the key Summer period. Higher
gate fee prices, alongside improved plant performance and a
reduction in unplanned plant outages, has resulted in a
significantly improved financial performance.
The Energy division supplied 706k tonnes of biomass fuel to
energy plant customers during the period, representing a 14.5%
increase in volumes compared to the six months ended 31 August
2020. This increase in supply, coupled with improved gate fee
income and plant availability led to revenue increasing by 14.8% to
GBP38.1m and EBITDA increasing by 279.1% to GBP9.1m.
Stobart Energy is focused on optimising productivity throughout
the business as it seeks to maintain sustainable profitability. The
foundation for this has been to embed a 'solutions' mindset and
shifted the focus of team performance, as well as the development
and empowerment of its senior leadership team. It has placed
significant focus on its biomass plant customer relationships, and
strengthened its relationships with key partners.
The majority of the capital expenditure required to maintain its
supply chain has already been invested and the infrastructure is
now well established, with only fleet replacement financing
required in order to maintain its core business. Attention has
therefore turned to maximising return on capital and delivering
strong cost discipline and cash management. Stobart Energy has
reduced head count where necessary, and installed daily cashflow
management and forecasting, as well as tight customer collection
management controls.
The key driver of Stobart Energy's profitability is to manage
the risks that can impact margins. Ultimately, Stobart Energy is a
services business managing waste wood supply and demand dynamics
across the UK. The key is to utilise its six strategically located
storage sites to aggregate supply and manage gate fee pricing.
Stobart Energy is exposed to various cost inflation risks, and is
addressing expected price increases for red diesel and the HGV
driver shortage. Stobart Energy actively mitigates these cost
exposures, while benefitting from long-term RPI linked supply
contracts.
Given the steps taken to manage risks and optimise its team,
infrastructure and cash management, Stobart Energy is now on a
fundamentally stable footing. This in turn has allowed Esken to
reinstate market guidance for this business. It is anticipated that
Stobart Energy will achieve EBITDA in the range of GBP18-20m after
Group recharges based on the expectation it will maintain a supply
run rate of 1.5m tonnes, achieve normalised winter gate fees and
that the plants that we supply do not experience any further
unplanned outages. Esken further anticipates that Stobart Energy is
well placed to build on the FY22 outlook as it continues to develop
profitability.
Aviation
The aviation sector continues to experience immense challenges.
Throughout the majority of the period under review travel
restrictions have limited people's ability to travel with
confidence. While restrictions have started to ease, we are now
entering the traditionally quieter Winter flying season.
In order to manage these challenges, airlines have retrenched to
their previously established bases. The restrictions on travelling
to long haul destinations have also freed up slots at Heathrow and
Gatwick and these have been taken up by low cost, short haul
operators on a short term basis. This retrenchment to core bases
and utilisation of previous long haul slots is not expected to
last. Airline fleets are expected to grow again with the delivery
of aircraft ordered pre-pandemic and airlines will seek cost
effective opportunities to establish long term bases with access to
peak time slots in defined catchment areas. This will create an
opportunity for LSA, which offers a cost effective base, peak time
slots and access to a growing East London catchment.
While those opportunities provide confidence for the future, the
challenges brought about by COVID-19 and the resulting impact on
travel led to passenger numbers declining 63.2% to 46k. In order to
manage the impact of this, LSA made use of the Government's
furlough scheme and maintained tight cost control. The airport's
capital expenditure plans are being managed to match a recovery in
passenger demand. The airport is managing to minimise costs and
cash burn at the airport as it prepares to recommence commercial
passenger operations in April 2022.
The airport will continue to benefit from global logistics
income through the Winter period. That operation has been affected
by Brexit and its impact on border controls. This has led to a
reduction in aircraft turns. However, flight volumes are expected
to maintain a generally positive trend over the medium term as
Brexit-related border controls begin to normalise.
The combination of reduced passenger numbers, partially offset
by global logistics income and tight cost management, meant that
the airport made an EBITDA loss. However, the division as a whole
made a GBP762k EBITDA profit, up 181.4% on the same period last
year. This performance was a result of profit contributions from
the airport's hotel, the solar farm and Stobart Aviation Services.
The main contributors to that EBITDA profit however were a result
of GBP3.5m of one off receipts associated with Connect Airways and
the conclusion of its partnership with Teesside International
Airport.
Though passenger airport operations are currently paused, it is
important to ensure LSA is well placed to rebound quickly for the
Summer season 2022. While the majority of capital expenditure has
been suspended, the airport has selected certain investments that
had commenced pre-COVID-19 and that will deliver an enhanced
passenger experience. These include next generation central search
equipment to ensure it continues to have one of the fastest airport
security queues in the UK and new baggage x-ray machines that will
allow the airport to process 3,600 items of hold luggage per hour.
The airport has also invested time and effort into developing its
relationships with the community in which it operates. In June 2021
LSA launched its Connecting Communities Commitment, encompassing an
Environmental Action Plan, its chosen charity partner, Mind, and
details of one of the UK's first airport noise forums in order to
listen to the views of the community.
LSA is also now working closely with its long term strategic
partner, Carlyle. The two parties are closely aligned on the
airport's strategic objectives and Carlyle representatives have
joined the airport's operating board.
Esken, Carlyle and LSA are particularly aligned on the type of
airline agreement that it is targeting. Commercial passenger flying
has to be profitable for all parties to ensure it is sustainable.
The team are in constant and continuing dialogue with a wide range
of airlines, and the airport is able to offer a clear proposition
of proven routes, peak slots, cost effective operations and an
attractive and growing catchment area.
Airlines across the market are currently holding back on
committing to fleet deployment and putting flights on sale for
Summer 2022. We expect that to change following the aviation
conferences including The World Routes Conference in October 2021,
where LSA had a strong presence. Accordingly, LSA remains confident
in both its consumer proposition and its ongoing discussions with
airlines leading to an improvement in passenger numbers from Summer
2022.
Financial Review
Key events in the period
The Group signed an agreement with Carlyle Global Infrastructure
Opportunity Fund (CGI) for a GBP125m investment in London Southend
Airport Company Limited (LSA) through a 30% convertible debt
instrument. Of the funding, GBP20m is ring-fenced for LSA for a
forecast period of three years to support its development and
recovery from the COVID-19 pandemic, and around GBP91m will provide
liquidity to the rest of the Esken Group.
The Group completed a successful capital raise in the period
raising gross proceeds of GBP55.2m. The capital raise resulted in
the issue of 394.4m new shares in Esken Limited.
The CGI loan and capital raise enabled the Group to repay the
old GBP120m Revolving Credit Facility (RCF), drawn at GBP108m, in
full. A new GBP20m RCF, available through to February 2023, was
agreed with the current bank lenders, replacing the GBP120m RCF,
with a simplified covenant structure reflecting the forecast
performance of the business going forward.
These transactions have reduced the Group's overall bank debt,
allowing it to meet certain residual legacy obligations, and
underpin the business plan for the Group. In addition, the CGI
transaction provides a valuable strategic partner for LSA, with CGI
bringing its expertise in investing in and developing airports
around the world.
As mentioned in the Group's annual report for the year ended 28
February 2021, Stobart Air entered liquidation in the period. This
resulted in the de-consolidation of the Stobart Air balance sheet
and reclassification of the results of Stobart Air and Propius to
discontinued operations. The disposal of the net liabilities of
Stobart Air has resulted in a profit of GBP10.4m, after costs. The
operations of Stobart Air contributed a loss of GBP1.8m in the
period up to disposal and Propius contributed a GBP11.3m loss in
the period. While the results of Propius are presented as
discontinued, in the period up to February 2024 there will be
ongoing cashflows in respect of aircraft leases and maintenance
obligations with the corresponding liabilities remaining on the
Group's consolidated statement of financial position.
The Energy division has seen a strong recovery from the
pandemic, with improvements in waste wood supply and gate fee
pricing as market conditions returned to pre-COVID-19 levels,
whilst navigating market risks such as the national HGV driver
shortage. The division supplied 706k tonnes of biomass material in
the period, an increase of 14.5% on the period ended 31 August
2020.
The Aviation division continues to experience intense challenges
caused by the COVID-19 pandemic with varying levels of travel
restrictions remaining in place during the entire period. The
number of passengers at LSA in the period was 46k, compared to 124k
in the period to 31 August 2020, a reduction of 63.2%, with the
prior period including a month of pre-lockdown travel. To mitigate
this the division has maintained tight cost control, including
utilising the UK Government furlough scheme. Despite the lifting of
some travel restrictions, the division has taken the decision to
delay a restart in commercial operations at LSA to the new year to
minimise costs and cash burn during the traditionally quieter
winter period. The division is positioning itself to rebound
strongly during the summer 2022 season, including LSA working
closely with its new long-term strategic partner, CGI.
Revenue
Revenue from continuing operations has increased by 7.7% to
GBP51.7m (2020: GBP48.0m) in the six months to 31 August 2021,
primarily driven by the Energy division which has seen an
improvement in biomass material sales and gate fee revenue.
Aviation revenue has decreased by 4.0% to GBP12.9m (2020: GBP13.5m)
with passenger numbers through LSA decreasing by 63.2% to 46k
period-on-period. Energy revenue has increased by 14.8% to GBP38.1m
(2020: GBP33.2m) and biomass tonnages supplied rose by 14.5% to
706k period-on-period.
Profitability
Divisional Continuing Profit Summary 31 August 31 August
2021 2020
GBPm GBPm
---------- ----------
Aviation 0.8 (0.9)
Energy 9.1 2.4
----------
EBITDA(1) from operating divisions 9.9 1.5
Investments (0.2) (0.1)
Non-Strategic Infrastructure (0.3) (0.7)
Group central and eliminations (3.8) (4.5)
---------- ----------
EBITDA(1) 5.6 (3.8)
Depreciation (10.1) (9.9)
Finance costs (net) (8.0) (2.4)
---------- ----------
Loss before tax (12.5) (16.1)
Tax 9.0 1.0
Loss from discontinued operations,
net of tax (2.9) (73.0)
---------- ----------
Loss for the period (6.4) (88.1)
---------- ----------
(1) Defined in glossary in note 17.
EBITDA has increased by 246.6% to a profit of GBP5.6m (2020:
GBP3.8m loss). In Aviation EBITDA has increased to a profit of
GBP0.8m (2020: GBP0.9m loss) due to receipts of GBP3.5m associated
with Connect Airways and the conclusion of the partnership with
Teesside International Airport alongside continued cost management.
Energy EBITDA has increased by 279.1% to GBP9.1m (2020: GBP2.4m)
due to market conditions returning to pre-COVID levels leading to
the increased revenue mentioned above, in addition to the receipt
of a GBP0.8m research and development tax credit.
The loss before tax from continuing operations is GBP12.5m
(2020: GBP16.1m). Depreciation of GBP10.0m (2020: GBP9.9m) is
broadly in line with the prior period. Finance costs of GBP9.9m
(2020: GBP6.1m) have increased principally due to the increased
cost of borrowing on the RCF. Finance income of GBP1.9m (2020:
GBP3.7m) has reduced mainly because of a lower period-on-period
gain on the revaluation of financial liabilities and minimal
foreign exchange gains in the current period, see note 7.
A summary of divisional profitability and further details of
divisional performance are set out in the Divisional Reviews
section.
Discontinued operations and restatement
Following the liquidation of Stobart Air, the results of Stobart
Air and Propius for the period have been included within
discontinued operations. The prior period results have been
restated within the Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Cash Flows and accompanying
notes accordingly.
Taxation
The tax credit of GBP9.0m (2020: GBP1.0m) has arisen
predominantly due to the release of tax provisions in the
period.
Loss per share
Loss per share from continuing operations(1) was 0.55p (2020:
3.31p) (see note 9 for further details).
(1) Defined in glossary in note 17.
Balance sheet
28 February
31 August 2021 2021
GBPm GBPm
--------------- ------------
Non-current assets 367.4 369.4
Current assets 115.3 55.4
--------------- ------------
Total assets 482.7 424.8
Non-current liabilities (269.0) (172.6)
Current liabilities (122.4) (203.9)
Net assets 91.3 48.3
--------------- ------------
The increase in the net asset position of GBP43.0m principally
relates to the GBP55m capital raise, partially offset by the loss
for the period of GBP6.4m.
Non-current assets have decreased in the period, largely due to
depreciation in the period partially offset by the increase in the
value of the LDG investment.
Current assets have increased primarily due to the increase in
cash balance in the period, see the Cash flow section below for
more detail.
The GBP96.4m increase in non-current liabilities is mainly due
to the recognition of the CGI loan on the balance sheet, net of
debt issue costs, partially offset by a decrease in lease
liabilities due to capital repayment.
Current liabilities have decreased by GBP81.5m, largely due to
the repayment of the RCF, drawn at GBP55.0m at 28 February 2021,
and a reduction in trade creditors across the Group.
Debt and gearing
28 February
31 August 2021 2021
--------------- ------------
Asset-backed finance GBP82.2m GBP139.8m
Convertible loan GBP111.7m -
IFRS 16 lease obligations GBP106.6m GBP123.4m
Cash (GBP70.5m) (GBP12.4m)
Net debt GBP230.0m GBP250.8m
--------------- ------------
EBITDA(1) /interest 0.8 (1.4)
Net debt/total assets 47.7% 59.0%
Gearing 251.9% 519.2%
--------------- ------------
(1) Defined in glossary in note 17.
In the period a new GBP20m RCF was signed with the current bank
lenders replacing the old GBP120m RCF, which was fully repaid in
the period. At 31 August 2021 the committed undrawn headroom on the
GBP20m (28 February 2021: GBP120m) RCF was GBP20m (28 February
2021: GBP65m), and with a cash balance of GBP70.5m (28 February
2021: GBP12.4m), total headroom was GBP90.5m (28 February 2021:
GBP77.4m).
Cash flow
31 August 2021 31 August 2020
GBPm GBPm
--------------- ---------------
Operating cash flow 0.1 (0.7)
Investing activities (6.5) 2.0
Financing activities 96.0 10.5
--------------- ---------------
Increase/(decrease) in the period 89.6 11.8
Discontinued operations (31.5) (11.5)
Cash at beginning of period 12.4 9.8
Cash at end of period 70.5 10.1
--------------- ---------------
Discontinued cash flow in the period relates to the operations
of Stobart Air, Propius and GBP0.2m relates Stobart Rail &
Civils, which was disposed of in the prior year.
Investing outflows include GBP2.5m for the purchase of plant
property and equipment, mainly related to development at London
Southend Airport.
The principal financing inflows include a receipt of GBP111.5m
for the CGI convertible debt instrument and GBP53.3m received
following the capital raise. The main financing outflows were the
GBP56.9m repayment of the RCF, GBP8.3m for the repayment of the
principal element of leases and interest payments of GBP5.4m.
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 are set out in our statutory
accounts for the year ended 28 February 2021 and are still
applicable.
Going concern
The directors have a reasonable expectation that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due over the going concern assessment period and therefore
have prepared the interim financial statements on a going concern
basis. However, the substantial achievement of forecasts and the
availability of sufficient funding indicate the existence of a
material uncertainty related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going
concern and, therefore, that the Group may be unable to realise its
assets and discharge its liabilities in the normal course of
business. The financial statements do not include any adjustments
that would result from the basis of preparation being
inappropriate.
In forming the conclusion on going concern the Directors have
extended the forecasts to cover the maturity of the RCF and
aircraft lease obligations. Accordingly, the going concern
assessment period is the 21 months to August 2023 (the going
concern assessment period). The going concern assessment period has
not been extended further to cover the expected maturity of the
exchangeable bond in 2024, though the Directors note that
additional funding is expected to be required to settle the bond at
maturity. The base case forecasts demonstrate compliance with all
funding covenants, with additional levers available to Management
to further improve covenant headroom if required.
The Directors have considered a severe but plausible downside
forecast. This scenario indicates that, before non-controllable
mitigating actions such as asset disposals, the Group will require
additional funding over and above the base case, from February
2023. As the current covenant thresholds are based on the
availability of the existing RCF facility (which extends to
February 2023), no covenant breaches are forecast prior to the
maturity of the Group's RCF. The covenant calculations are also
based on the Group excluding LSA (in line with RCF facility), as
the funding for LSA was ring-fenced following the completion of the
GBP125m convertible debt instrument and as noted above has
sufficient liquidity throughout the review period. This has the
effect of mitigating the risk of uncertainties around the recovery
of the Aviation industry against the Group's covenant
compliance.
Further details on the Directors' assessment of the going
concern position of the Group is set out in the notes to the
financial statements in this results announcement. This section
must be read in order to fully understand the significant
judgements the Directors have made and the material uncertainty
that exists in respect of the going concern assumption for the
Group.
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place in
the first six months of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the statutory accounts for the year ended
28 February 2021 that could do so.
The above statement of Directors' responsibilities was approved
by the Board on
3 November 2021.
Lewis Girdwood
Director
3 November 2021
Condensed Consolidated Income Statement
For the six months ended 31 August 2021
Restated(1)
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
Continuing operations Notes GBP'000 GBP'000
Revenue 4 51,684 48,002
------------- -------------
Other operating income 914 255
Reversal of Impairment - loan receivables
from joint venture 5 1,963 -
Operating expenses - other (48,899) (51,626)
Share of post-tax losses of associates
and joint ventures (146) (148)
Gain/(loss) on swaps 58 (286)
------------- -------------
EBITDA 5,574 (3,803)
Depreciation (10,089) (9,923)
Operating loss (4,515) (13,726)
Finance costs 7 (9,940) (6,103)
Finance income 7 1,906 3,751
------------- -------------
Loss before tax (12,549) (16,078)
Tax 8 9,023 933
------------- -------------
Loss for the period from continuing
operations (3,526) (15,145)
Discontinued operations
Loss from discontinued operations,
net of tax 6 (2,915) (72,953)
------------- -------------
Loss for the period (6,441) (88,098)
------------- -------------
Loss per share expressed in pence per share - continuing operations
Basic 9 (0.55p) (3.31p)
Diluted 9 (0.55p) (3.31p)
Loss per share expressed in pence
per share - total
Basic 9 (1.01p) (19.27p)
Diluted 9 (1.01p) (19.27p)
(1) The 2020 results have been restated where required due to
IFRS 5 Discontinued Operations. Refer to note 6 for more
details.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 August 2021
Six months Restated
ended Six months
31 August ended 31
2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Loss for the period (6,441) (88,098)
Exchange differences on translation
of foreign operations (975) 18
Discontinued operations, net of tax,
relating to exchange differences 635 -
Other comprehensive (expense)/income
to be reclassified to profit or loss
in subsequent periods, net of tax (340) 18
------------- --------------
Re-measurement of defined benefit plan 1,258 (1,702)
Change in fair value of financial assets
classified as FVOCI (1,927) (1,354)
Tax on items relating to components
of other comprehensive income (262) 323
Other comprehensive expense not being
reclassified to profit or loss in subsequent
periods, net of tax (931) (2,733)
Other comprehensive expense for the
period, net of tax (1,271) (2,715)
------------- --------------
Total comprehensive expense for the
period (7,712) (90,813)
------------- --------------
Condensed Consolidated Statement of Financial Position
As at 31 August 2021
31 August 28 February
2021 2021
Unaudited Audited
Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 10 279,424 285,621
Investment in associates and joint
ventures 1,226 1,372
Other financial assets 11 13,688 10,392
Intangible assets 54,669 54,669
Net investment in lease 16,868 15,824
Other receivables 1,495 1,495
---------- ----------
367,370 369,373
---------- ----------
Current assets
Inventories 12,388 15,334
Corporation tax 8 - 324
Trade and other receivables 32,419 27,378
Cash and cash equivalents 11 70,523 12,408
115,330 55,444
---------- ----------
Total assets 482,700 424,817
---------- ----------
Non-current liabilities
Loans and borrowings 11 (223,358) (122,116)
Defined benefit pension obligations (736) (2,418)
Other liabilities (8,808) (8,271)
Deferred tax - (261)
Provisions 12 (36,071) (39,534)
---------- ----------
(268,973) (172,600)
---------- ----------
Current liabilities
Trade and other payables (37,946) (52,735)
Financial liabilities 11 - (1,581)
Loans and borrowings 11 (25,003) (89,121)
Exchangeable bonds 11 (52,198) (52,010)
Provisions 12 (7,246) (8,457)
(122,393) (203,904)
---------- ----------
Total liabilities (391,366) (376,504)
---------- ----------
Net assets 91,334 48,313
---------- ----------
Capital and reserves
Issued share capital 13 102,534 62,492
Share premium 13 403,131 390,336
Foreign currency exchange reserve 1,701 3,826
Reserve for own shares held by employee
benefit trust (7,596) (7,480)
Retained deficit (408,436) (400,861)
---------- ----------
Total Equity 91,334 48,313
---------- ----------
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 August 2021
For the six months ended 31 August 2021
Unaudited
Reserve
Foreign for own
Issued currency shares
share Share exchange held by Retained
capital premium reserve EBT deficit Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ---------- --------- ---------- -------------
Balance at 1 March
2021 62,492 390,336 3,826 (7,480) (400,861) 48,313
Loss for the period - - - - (6,441) (6,441)
Other comprehensive
expense for the period - - (340) - (931) (1,271)
------------------------------- --------- --------- ---------- --------- ---------- -------------
Total comprehensive
expense for the period - - (340) - (7,372) (7,712)
Issue of ordinary shares 40,042 12,795 - - (600) 52,237
Employee benefit trust - - - (116) (3) (119)
Reclassification of
exchange differences
on liquidation of subsidiary - - (1,785) - - (1,785)
Share-based payment
charge - - - - 400 400
Balance at 31 August
2021 102,534 403,131 1,701 (7,596) (408,436) 91,334
------------------------------- --------- --------- ---------- --------- ---------- -------------
For the six months ended 31 August 2020
Unaudited
Reserve
Foreign for own
Issued currency shares
share Share exchange held by Retained
capital premium reserve EBT deficit Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- ---------- --------- ---------- -------------
Balance at 1 March
2020 37,465 324,368 - (7,161) (251,574) 103,098
Loss for the period - - - - (88,098) (88,098)
Other comprehensive
income/(expense) for
the period - - 18 - (2,733) (2,715)
-------------------------- --------- --------- ---------- --------- ---------- -------------
Total comprehensive
income/(expense) for
the period - - 18 - (90,831) (90,813)
Issue of ordinary shares 25,027 66,043 - - - 91,070
Employee benefit trust - - - - (318) (318)
Share-based payment
credit - - - - (8) (8)
Tax on share-based
payment credit - - - - 160 160
Balance at 31 August
2020 62,492 390,411 18 (7,161) (342,571) 103,189
-------------------------- --------- --------- ---------- --------- ---------- -------------
Condensed Consolidated Statement of Cash Flows
For the six months ended 31 August 2021
For the six months ended 31 August 2020
Unaudited
Restated
Six months Six months
ended 31 August ended 31
2021 August 2020
Unaudited Unaudited
Notes GBP'000 GBP'000
Cash used in continuing operations 15 (137) (738)
Cash outflow from discontinued operations (15,133) (7,125)
Income taxes received 232 -
----------------- -------------
Net cash flow from operating activities (15,038) (7,863)
----------------- -------------
Purchase of property, plant and equipment (2,513) (1,476)
Proceeds from the sale of property,
plant and equipment 360 314
Proceeds from disposal of asset held
for sale - 6,000
Receipt of capital element of IFRS
16 net investment in lease 641 129
Acquisition of subsidiary undertakings
(net of cash acquired and fees) - 603
Cash disposed on liquidation/disposal
of subsidiary undertakings (362) (3,529)
Acquisition of other financial assets (4,900) -
Interest received 323 -
Cash outflow from discontinued operations (7,808) (54)
----------------- -------------
Net cash flow from investing activities (14,259) 1,987
----------------- -------------
Issue of ordinary shares (net of costs) 53,262 91,071
Proceeds from issue of convertible
debt (net of costs) 111,459 -
Proceeds from grants 1,937 -
Principal element of lease payments (8,331) (5,117)
Net repayment of revolving credit
facility (net of costs) (56,936) (68,247)
Repayment of borrowings - (4,500)
Interest paid (5,383) (2,722)
Cash outflow from discontinued operations (8,596) (4,302)
----------------- -------------
Net cash flow from financing activities 87,412 6,183
----------------- -------------
Increase in cash and cash equivalents 58,115 307
Cash and cash equivalents at beginning
of period 12,408 9,802
----------------- -------------
Cash and cash equivalents at end of
period 70,523 10,109
----------------- -------------
Notes to the Condensed Consolidated Financial Statements
For the six months ended 31 August 2021
1 Accounting policies
Corporate information
The Condensed Consolidated Financial Statements of the Group for
the six months ended 31 August 2021 (interim financial statements)
were authorised for issue in accordance with a resolution of the
Directors on 3 November 2021. Esken 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 3.
Basis of preparation
The interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.
The interim 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 2021. Except for the
28 February 2021 statutory comparatives, the financial information
set out herein is unaudited but has been reviewed by the auditors,
KPMG LLP, and their report to the Company is attached.
The audited comparative financial information set out in these
interim financial statements does not constitute the Group's
statutory accounts for the year ended 28 February 2021 but has been
derived from those accounts. Statutory accounts for the year ended
28 February 2021 have been published and KPMG LLP has reported on
those accounts. Their audit report was unqualified, however, it
highlighted a material uncertainty regarding going concern in
respect of securing the necessary funds from: i) the banks not
recalling the existing RCF; ii) the banks allowing the further
planned drawdowns through to August 2021; iii) executing the term
sheet in respect of the convertible debt instrument; iv) successful
completion of the Capital Raise; and v) obtaining the new RCF. The
annual financial statements of the Group are prepared in accordance
with IFRSs as adopted by the EU.
Restatement
Following the liquidation of Stobart Air and subsequent
abandonment of Propius (see note 6), all prior period results have
been restated where applicable to remove the results of Stobart Air
and Propius from continuing operations.
Going concern
Position adopted at year end February 2021
The Group's financial statements for the year ended 28 February
2021 were issued on 30 June 2021. Those financial statements were
prepared on the basis that the Group was a going concern although
there was a material uncertainty in respect of going concern. In
arriving at that conclusion, the Directors had reviewed the Group's
updated cash flow forecasts together with the projected covenant
compliance of the Group, which covered a period up to January 2023
when the Group's RCF facilities were due for renewal. The Directors
were satisfied the Group had sufficient cash headroom to continue
trading for the period assessed.
Update to position
Subsequent to the issue of the February 2021 financial
statements, the Group successfully raised GBP125m of gross proceeds
from the convertible debt instrument issued by its 100% owned
subsidiary London Southend Airport Company Limited to Carlyle
Global Infrastructure Opportunity Fund, in addition to GBP55m of
cash proceeds from an equity raise by Esken Limited. Following the
completion of the debt issue and equity raise, the existing GBP120m
RCF was fully repaid and replaced with a new GBP20m RCF that
remained undrawn as at 31 August 2021 and to the date of this
report. In addition, the Group also has aircraft lease and
maintenance obligations of GBP55.4m related to Propius as at 31
August 2021, falling due prior to August 2023, and a GBP53.1m
exchangeable bond maturing in 2024 (see note 11) presented in
current liabilities.
In forming the conclusion on going concern the Directors have
extended the forecasts to cover the maturity of the RCF and
aircraft lease obligations. Accordingly, the going concern
assessment period is the 21 months to August 2023 (the going
concern assessment period). The going concern assessment period has
not been extended further to cover the expected maturity of the
exchangeable bond in 2024, though the Directors note that
additional funding is expected to be required to settle the bond at
maturity.
As further explained below, the Directors have prepared cash
flow forecasts for the going concern assessment period that reflect
both base and severe but plausible downsides. Those forecasts
indicate that in the base and downside scenarios the Group will
require significant additional funding to meet its liabilities as
they fall due over the going concern assessment period. The
Directors are confident that sufficient appropriate funding will be
available, including the replacement of the RCF and such additional
funding as is needed, though there can be no certainty that that
will be the case.
Base case forecast
In considering the going concern position for the purpose of
these interim financial statements, the Directors have reviewed the
Group's updated base case cash flow forecasts through to August
2023, based on the Directors' expectations around the return to
flying at London Southend Airport and growth in passenger numbers.
The base case indicates that the Group will have sufficient funds
to meet its liabilities for the period prior to the maturity of the
RCF in February 2023, when headroom becomes limited. Those same
forecasts indicate that significant additional funding would then
be required in excess of the existing RCF in order to continue to
meet liabilities to the end of the going concern assessment period
in August 2023. The base case forecasts demonstrate compliance with
all funding covenants until maturity in February 2023, with
additional actions available to the Directors to further improve
covenant headroom if required.
Severe but plausible downside forecast
The Directors have also considered a severe but plausible
downside scenario that includes the following:
-- Passengers previously forecast pre specific airline exit
announcements are not replaced, with a downside scenario including
a 39% reduction in passenger volume (albeit this will not impact on
the covenant calculations);
-- Reduction in Energy tonnes sold and an 8% increase in net
material costs, resulting in remaining volumes having an adverse
margin mix;
-- Net reduction in gate fees received by the Energy division,
driving a 24% decrease in gate fee revenue; and
-- Non-renewal of the Group RCF.
This scenario indicates that, before non-controllable mitigating
actions such as asset disposals, the Group will require further
additional funding over and above the base case, from February
2023. As the current covenant thresholds are based on the
availability of the existing RCF facility (which extends to
February 2023), no covenant breaches are forecast prior to the
maturity of the Group's RCF. The covenant calculations are also
based on the Group excluding LSA (in line with RCF facility), as
the funding for LSA was ring-fenced following the completion of the
GBP125m convertible debt instrument and as noted above has
sufficient liquidity throughout the review period. This has the
effect of mitigating the risk of uncertainties around the recovery
of the Aviation industry against the Group's covenant
compliance.
Any shortfall against the substantial achievement of forecasts
will increase the timing and amount of additional funding
required.
The Board will of course seek to mitigate the financial impact
of this severe but plausible downside forecast should it arise.
Conclusion
Overall, the directors have a reasonable expectation that the
Group will have sufficient funds to continue to meet its
liabilities as they fall due over the going concern assessment
period and therefore have prepared the interim financial statements
on a going concern basis.
However, the substantial achievement of forecasts and the
availability of sufficient funding indicate the existence of a
material uncertainty related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going
concern and, therefore, that the Group may be unable to realise its
assets and discharge its liabilities in the normal course of
business. The financial statements do not include any adjustments
that would result from the basis of preparation being
inappropriate.
Significant accounting policies
Aside from the new convertible debt policy below, adopted in the
period, the accounting policies applied in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 28 February 2021. These accounting policies are expected
to be applied for the full year to 28 February 2022.
Convertible debt
The financial liability element of the convertible debt
instrument, see note 11, is measured at amortised cost. The
convertible debt includes three derivatives in relation to
conversion into shares in London Southend Airport Company Limited.
These have been accounted for as one single compound derivative, as
they are not considered independent of each other, which is
separate from the host contract. The fair value of the embedded
derivative is considered at each reporting date and the movement in
fair value is recognised through profit and loss.
Key estimates and judgements
The estimates and judgements taken by the Directors in preparing
these interim financial statements are comparable with those
disclosed in the annual financial statements for the year ended 28
February 2021.
Presentation of Condensed Consolidated Income Statement
EBITDA, a non-GAAP measure, is the key profitability measure
used by management for performance review in the day-to-day
operations of the Group. Non-GAAP measures are used as they are
considered to be both useful and necessary. They are used for
internal performance analysis; the presentation of these measures
facilitates comparability with other companies, although
management's measures may not be calculated in the same way as
similarly titled measures reported by other companies.
The post-tax results of discontinued operations along with any
gain or loss recognised on the disposal of the assets or disposal
groups constituting the discontinued operation are disclosed as a
single amount in the Condensed Consolidated Income Statement. The
comparative period results are restated accordingly.
2 Seasonality of operations
COVID-19 has impacted the effect of seasonality in the current
and prior periods; however, this does not alter the long-term
seasonality of operations of the Group. There is a material effect
of seasonality in both of our largest operating divisions. In the
Aviation division there are higher seasonal sales in summer, due to
increased demand for overseas travel, and this is partly offset by
higher seasonal sales in winter in the Energy division, due to
higher energy consumption.
3 Segmental information
The reporting segments are Aviation, Energy, Investments and
Non-Strategic Infrastructure. In the prior period, the results of
Stobart Air and Propius were included in the Investments reporting
segment. However, following the liquidation of Stobart Air, the
results of Stobart Air and Propius are no longer included in the
Investments segment but are presented as discontinued operations on
the face of the Condensed Consolidated Income Statement, see note
6.
The Aviation segment specialises in the operation of a
commercial airport and the provision of ground handling services.
The Energy segment specialises in the supply of sustainable biomass
for the generation of renewable energy.
The Investments segment holds a non-controlling interest in a
logistics services investing business and a baggage handling
business. The Non-Strategic Infrastructure segment specialises in
management, development, and realisation of a portfolio of property
assets, including Carlisle Lake District Airport, as well as an
investment in a renewable energy plant.
The Executive Directors are regarded as the Chief Operating
Decision Maker. The Directors monitor the results of each business
unit separately for the purposes of making decisions about resource
allocation and performance assessment. The main segmental profit
measure is EBITDA, which is calculated as loss before tax, interest
and depreciation. Income taxes and certain central costs are
managed on a Group basis and are not allocated to operating
segments. No segmental assets or liabilities information is
disclosed because no such information is regularly provided to, or
reviewed by, the Chief Operating Decision Maker.
Six months ended Non-Strategic Group central
31 August 2021 Aviation Energy Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 12,902 38,144 - 259 379 51,684
Internal 22 - - 50 (72) -
--------- -------- ------------ ---------------- ------------------ ---------
Statutory revenue 12,924 38,144 - 309 307 51,684
--------- -------- ------------ ---------------- ------------------ ---------
EBITDA 762 9,106 (152) (382) (3,760) 5,574
Depreciation (5,046) (4,229) - (181) (633) (10,089)
Net interest (937) (844) (789) (154) (5,310) (8,034)
--------- -------- ------------ ---------------- ------------------ ---------
(Loss)/profit before
tax (5,221) 4,033 (941) (717) (9,703) (12,549)
--------- -------- ------------ ---------------- ------------------ ---------
Restated
Six months ended Non-Strategic Group central
31 August 2020 Aviation Energy Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 13,402 33,223 - 730 647 48,002
Internal 65 - - 76 (141) -
--------- -------- ------------ ---------------- ------------------ ---------
Statutory revenue 13,467 33,223 - 806 506 48,002
--------- -------- ------------ ---------------- ------------------ ---------
EBITDA (936) 2,402 (148) (636) (4,485) (3,803)
Depreciation (4,599) (4,333) - (498) (493) (9,923)
Net interest (418) (961) (760) (221) 8 (2,352)
--------- -------- ------------ ---------------- ------------------ ---------
Loss before tax (5,953) (2,892) (908) (1,355) (4,970) (16,078)
--------- -------- ------------ ---------------- ------------------ ---------
Internal revenue above relates to inter-segment revenues that
are eliminated within Group central and eliminations. Intra-segment
revenues are eliminated within each segment.
In the prior period EBITDA was presented before the impact of
swaps. This period the gain on swaps of GBP58,000 (2020: GBP286,000
loss) is included within EBITDA.
4 Revenue
Revenue is primarily from contracts with customers. Other
sources of revenue are from owned and leased fixed assets. The
following tables detail the split between revenue from contracts
with customers and other revenue, and disaggregate the revenue from
contracts with customers.
Six months ended Non-Strategic Group central
31 August 2021 Aviation Energy Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue from contracts
with customers 12,711 38,144 - 63 - 50,918
Other revenue -
lease income 191 - - 196 379 766
--------- -------- ------------ ---------------- ------------------ --------
12,902 38,144 - 259 379 51,684
--------- -------- ------------ ---------------- ------------------ --------
Six months ended Non-Strategic Group central
31 August 2021 Aviation Energy Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Major product/service
line
Sale of goods 2,139 33,387 - - - 35,526
Rendering of services 10,572 4,757 - 63 - 15,392
12,711 38,144 - 63 - 50,918
--------- -------- ------------ ---------------- ------------------ --------
Primary geographical markets
United Kingdom 10,882 38,144 - 63 - 49,089
Europe and Ireland 1,827 - - - - 1,827
Rest of world 2 - - - - 2
--------- -------- ------------ ---------------- ------------------ --------
12,711 38,144 - 63 - 50,918
--------- -------- ------------ ---------------- ------------------ --------
Timing of revenue recognition
Products and services
transferred at a
point in time 12,711 38,144 - 63 - 50,918
12,711 38,144 - 63 - 50,918
--------- -------- ------------ ---------------- ------------------ --------
Restated
Six months ended Non-Strategic Group central
31 August 2020 Aviation Energy Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue from contracts
with customers 13,017 33,223 - 104 214 46,558
Other revenue -
lease income 385 - - 626 433 1,444
--------- -------- ------------ ---------------- ------------------ --------
13,402 33,223 - 730 647 48,002
--------- -------- ------------ ---------------- ------------------ --------
Restated
Six months ended Non-Strategic Group central
31 August 2020 Aviation Energy Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Major product/service
line
Sale of goods 2,268 33,223 - 27 7 35,525
Rendering of services 10,749 - - 77 - 10,826
Royalties/ commissions - - - - 207 207
13,017 33,223 - 104 214 46,558
--------- -------- ------------ ---------------- ------------------ --------
Primary geographical markets
United Kingdom 10,840 33,223 - 102 214 44,379
Europe and Ireland 2,175 - - 2 - 2,177
Rest of world 2 - - - - 2
--------- -------- ------------ ---------------- ------------------ --------
13,017 33,223 - 104 214 46,558
--------- -------- ------------ ---------------- ------------------ --------
Timing of revenue recognition
Products and services
transferred at a
point in time 13,017 33,223 - 104 7 46,351
Products and services
transferred over
time - - - - 207 207
--------- -------- ------------ ---------------- ------------------ --------
13,017 33,223 - 104 214 46,558
--------- -------- ------------ ---------------- ------------------ --------
Opening and closing receivables, contract assets and contract
liabilities from contracts with customers are as follows:
31 August 2021 28 February
2021
Unaudited Audited
GBP'000 GBP'000
Receivables 11,158 9,301
Contract assets 4,096 5,463
Contract liabilities - (6,326)
--------------- ------------
Contract assets primarily relate to the Group's rights to
consideration for work completed but not billed at the reporting
date on contracts in the Energy division. Contract liabilities
relate to an entity's obligation to transfer goods or services to a
customer for which the entity has received consideration.
Receivables have increased in the period mainly due to the
billing of contract assets in the Energy division.
Contract liabilities at year ended 28 February 2021 related to
advance consideration received from flights booked in advance but
not flown. The deconsolidation of Stobart Air's has resulted in the
decrease in the period.
5 Reversal of Impairment - loan receivables from joint venture
During the period, the Group received GBP813,000 from the
administrators of Connect Airways Limited (Connect), relating to a
secured first ranking loan that was fully impaired in the year
ended February 2020. Subsequent to this, the Group sold its rights
to all fully impaired loans due from Connect for GBP1,150,000.
6 Discontinued operations
In the prior year on 27 April 2020, the Group acquired Stobart
Air. On 14 June 2021, the Ireland High Court appointed liquidators
to Stobart Air. Due to the liquidation the Stobart Air balance
sheet was deconsolidated in the Group accounts. Net liabilities
deconsolidated totalled GBP15,562,000 and GBP5,810,000 of costs in
relation to the liquidation were incurred, resulting in a profit on
liquidation of GBP9,752,000.
Following the liquidation of Stobart Air, the results of
Propius, our aircraft leasing business that leased all eight of its
aircraft to Stobart Air, have been presented as discontinued.
Propius is abandoned in line with the IFRS 5 definition of a
discontinued operation. While the results of Propius are presented
as discontinued, in the period up to February 2024 there will be
ongoing finance charges and cashflows in respect of aircraft leases
and cashflows in respect of maintenance obligations, with the
corresponding liabilities remaining on the Group's consolidated
statement of financial position.
The results of Stobart Air and Propius in the period, which were
both separately considered major lines of business, and the profit
on liquidation, have been reported on a single line, net of tax on
the face of the Condensed Consolidated Income Statement. The
Condensed Consolidated Income Statement for the period ended 31
August 2020 has been restated on the same basis.
The loss for the period from discontinued operations, net of tax
includes GBP301,000 of costs in relation to Stobart Rail which was
disposed in year ended 28 February 2021.
A summary of the Stobart Air results included in discontinued
operations is as follows:
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Revenue 3,449 5,169
Operating expenses (5,156) (6,469)
Depreciation - (2,535)
Net finance costs 602 440
------------- -------------
Results from operating activities before
tax (1,105) (3,395)
Loss on acquisition - (17,351)
Profit on liquidation 9,752 -
------------- -------------
Profit/(loss) before tax 8,647 (20,746)
Tax - -
------------- -------------
Profit/(loss) for the period from discontinued
operations, net of tax 8,647 (20,746)
------------- -------------
A summary of the Propius results included in discontinued
operations is as follows:
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Operating expenses (9,486) (240)
Depreciation - (1,988)
Net finance costs (1,727) (764)
------------- -------------
Results from operating activities before
tax (11,213) (2,992)
Loss on acquisition - (37,626)
Loss before tax (11,213) (40,618)
Tax (48) -
------------- -------------
Loss for the period from discontinued
operations, net of tax (11,261) (40,618)
------------- -------------
A summary of the discontinued operations recognised in the
Condensed Consolidated Income Statement is as follows:
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Stobart Air discontinued operations,
net of tax 8,647 (20,746)
Propius discontinued operations, net
of tax (11,261) (40,618)
Stobart Rail discontinued operations,
net of tax (301) (11,589)
Loss from discontinued operations,
net of tax (2,915) (72,953)
------------- -------------
The above losses are attributable to the owners of the
company.
The effect of the deconsolidation of Stobart Air on individual
assets and liabilities is as follows:
GBP'000
Inventories 3,096
Trade and other receivables 6,377
Cash and cash equivalents 362
Trade and other payables (12,992)
Lease liabilities (7,265)
Provisions (3,356)
Foreign currency exchange reserve (1,784)
Net assets and liabilities (15,562)
---------
The cash flows in relation to Stobart Air are as follows:
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Net cash used in operating activities (14,301) (5,977)
Net cash (used in)/generated from investing
activities - (78)
Net cash used in financing activities (2,143) (1,050)
Net cash flows for the period (16,444) (7,105)
------------- -------------
The cash flows in relation to Propius are as follows:
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Net cash used in operating activities (1,002) (4,298)
Net cash (used in)/generated from investing
activities (7,808) -
Net cash used in financing activities (6,453) (3,045)
Net cash flows for the period (15,263) (7,343)
------------- -------------
A summary of cash flows from discontinued operations is
follows:
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Stobart Air (16,444) (7,105)
Propius (15,263) (7,343)
Stobart Rail 170 2,967
Net cash flows for the period (31,537) (11,481)
------------- -------------
7 Finance costs and income
Restated
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Bank loans 3,125 2,008
Interest on defined benefit pension
scheme 21 33
Finance charges payable under leases 2,065 2,762
Amortisation of deferred issue costs 3,866 769
Other interest 99 403
Foreign exchange losses 764 128
Total finance costs 9,940 6,103
------------- -------------
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Fair value of financial liabilities 1,581 2,378
Interest received from net investment
in lease 324 674
Foreign exchange gains 1 699
------------- -------------
Total finance income 1,906 3,751
------------- -------------
Finance costs on bank loans has increased period on period due
to increased interest charges on the RCF. A new GBP20m RCF was
agreed in the period replacing the old GBP120m RCF. As a result,
debt issue costs of GBP1,717,000 relating to the old RCF were
released in full, driving the increase in amortisation of debt
issue costs in the period. The decrease in foreign exchange gains
and increase in foreign exchange losses is due to adverse
fluctuations in US Dollar and Euro exchange rates impacting the
Group's foreign-currency denominated intercompany loans.
The Group entered into a put option with fellow Connect Airways
shareholder Cyrus Capital Partners (Cyrus) on 11 January 2019. This
agreement gave Cyrus the option to exchange GBP23m of second
ranking six-year 8% RCF debt with Connect Airways, for equity
shares in Esken Limited at 247p per share. The option was
exercisable two years following the acquisition of Flybe plc by
Connect Airways and required 30 days' notice. On 7 May 2021 the put
option was exercised and 6 million shares were issued. The exercise
meant that the associated financial liability had a fair value of
GBPnil and GBP1,581,000 (2020: GBP2,378,000) was released and
presented within finance income in the Condensed consolidated
Income Statement. The share issue resulted in an increase in share
capital and an increase in retained deficit.
8 Taxation
Taxation on profit on ordinary activities
Total tax in the Condensed Consolidated Restated
Income Statement from continuing and Six months Six months
discontinued operations ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Corporation tax:
Overseas corporation tax 48 -
Adjustments in respect of prior years (8,500) 1,000
Total corporation tax (8,452) 1,000
-------------- -------------
Deferred tax:
Origination and reversal of temporary
differences (500) (2,728)
Impact of change in rate (23) 675
Total deferred tax (523) (2,053)
-------------- -------------
Total credit in the income statement (8,975) (1,053)
-------------- -------------
Split between:
Continuing (9,023) (933)
Discontinued 48 (120)
-------------- -------------
Included in the above tax charges are total current tax credit
on continuing operations of GBP8,500,000 (2020: GBP1,000,000
charge) and a total deferred tax credit on continuing operations of
GBP523,000 (2020: GBP1,933,000) giving a total tax credit on
continuing operations in the Condensed Consolidated Income
Statement of GBP9,023,000 (2020: GBP933,000). In addition, there is
a current tax credit on discontinued operations of GBP48,000 (2020:
GBPnil) and a deferred tax charge on discontinued operations of
GBPnil (2020: GBP120,000) giving a total tax credit on continuing
and discontinued operations in the Condensed Consolidated Income
Statement of GBP8,975,000 (2020: GBP1,053,000).
The current period effective tax rate in the year was 4.17%
which was driven by the non-qualifying depreciation, expenses not
deductible, and which were partially offset by deferred tax assets
previously not recognised being utilised. The adjustment in respect
of prior years' tax credit of GBP8,500,000 has arisen due to a
change in the tax provisions held by the Group, see note 12.
The main rate of corporation tax is to increase to 25% with
effect from 1 April 2023. As this rate change was substantively
enacted on 24 May 2021 (before the interim balance sheet date) its
effects have been reflected in computing the deferred tax numbers.
As such, the deferred tax assets/liabilities as at 31 August 2021
have been recognised/provided at 25%.
9 Loss per share
The following table reflects the income and share data used in
the basic and diluted earnings per share calculations:
Restated
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
Numerator GBP'000 GBP'000
Continuing operations
Loss for the period used for basic and
diluted earnings (3,526) (15,145)
Discontinued operations
Loss for the period used for basic and
diluted earnings (2,915) (72,953)
Total
Loss for the period used for basic and
diluted earnings (6,441) (88,098)
------------- -------------
Denominator Number Number
Weighted average number of shares used
in basic EPS 635,625,609 457,090,082
Effects of employee share options - -
------------ ------------
Weighted average number of shares used
in diluted EPS 635,625,609 457,090,082
------------ ------------
Own shares held and therefore excluded
from weighted average number 3,800,802 3,254,037
------------ ------------
10 Property, plant and equipment
Additions and disposals
During the six months ended 31 August 2021, the Group acquired
or developed property, plant and equipment assets with a cost of
GBP2,937,000 (2020: GBP2,222,000). This mainly consisted of
development work at London Southend Airport and plant and machinery
equipment in the Energy division. Property, plant and equipment
assets with a book value of GBP318,000 (2020: GBP291,000) were
disposed of by the Group during the six months ended 31 August
2021, resulting in a profit on disposal of GBP42,000 (2020:
GBP24,000).
Capital commitments
At 31 August 2021, the Group had capital commitments of
GBP499,000 (2020: GBP331,000), principally relating to plant and
equipment at London Southend Airport.
Impairment testing of property, plant and equipment where no
charge for impairment has been recognised
The London Southend Airport (LSA) CGU comprises the business
operations of the commercial airport, airport hotel and railway
station ancillary operations. The Group has estimated the Fair
Value Less Costs to Sell (FVLCS) of the CGU and determined that no
charge for impairment was necessary. The completion of the
investment in LSA through a GBP125m convertible loan from Carlyle
Global Infrastructure Opportunity Fund that completed on 26 August
2021 provides evidence towards the FVLCS recoverable amount. The
announcement that Ryanair will close its base at LSA with effect
from 1 November 2021 does not have a material impact on the LSA
CGU. Management is actively implementing mitigating actions in the
medium term, such as attracting new airlines.
Taking into account climate change factors in addition to the
current aviation market due to COVID-19, it is the view of the
Directors that the FVLCS is approximately GBP400m and as such is
more than sufficient to cover the carrying amount of the LSA CGU
assets. The carrying amount of the LSA CGU asset base as at 31
August 2021 is GBP158,359,000. The assumptions used to determine
this recoverable amount include future forecast EBITDA and
multiples achieved by London airports.
11 Financial assets and liabilities
31 August 28 February
2021 2021
Unaudited Audited
Loans and borrowings GBP'000 GBP'000
Non-current
Obligations under leases 111,662 122,116
Convertible debt (net of costs) 111,696 -
---------- ------------
223,358 122,116
---------- ------------
Current
Exchangeable bonds (net of costs) 52,198 52,010
Obligations under leases 25,003 36,792
Revolving credit facility (net of arrangements
fees) - 52,329
77,201 141,131
---------- ------------
Total loans and borrowings 300,559 263,247
Cash (70,523) (12,408)
---------- ------------
Net debt 230,036 250,839
---------- ------------
Esken Limited provides support to its subsidiaries where
required. Examples of support include intercompany funding
arrangements and the provision of guarantees in relation to
financing lines provided by a number of lenders. In addition, one
Energy contract has a covenant relating to the market capital of
Esken Limited, where a breach would be remedied by additional
letters of credit.
The exchangeable bonds have a May 2024 maturity, with repayment
being the difference between the GBP53.1m gross bonds and shares in
LDG plc into which the bonds are convertible. At 31 August 2021,
this amounted to GBP46.0m.
Convertible debt
On 2 July 2021 the Group announced that it had signed an
agreement with Carlyle Global Infrastructure Opportunity Fund (CGI)
for a GBP125m investment in London Southend Airport Company Limited
(LSA) through a 30% convertible debt instrument. Proceeds from the
instrument were drawn on 26 August 2021 and can be converted by CGI
at any time following this date until maturity in seven years. If
CGI does not convert prior to maturity the loan is repayable at the
greater of an amount achieving 10% IRR for CGI or GBP193.75m. The
loan term is seven years from the draw down date unless conversion
occurs. Interest accrues at 8% per annum to be paid in cash if LSA
generates sufficient revenues in the previous year and meets
liquidity tests, in addition 2% per annum PIK interest is rolled
into the principal. The convertible debt includes three derivatives
in relation to conversion, however these have been accounted for as
one single compound derivative, as they are not considered
independent of each other, which has been fair valued at
GBP1,332,000 and is included in the convertible debt line above.
The option will be revalued at each reporting date, with any gain
or loss recognised in finance costs in the consolidated income
statement, and the host contract measured at amortised cost.
Revolving Credit Facility (RCF)
On 26 August 2021, the current bank lenders signed a new GBP20m
RCF which matures on the 1 February 2023. This facility replaced
the old GBP120m RCF which was fully repaid in the period. The new
RCF is at a similar margin to the old RCF and has a simplified
covenant structure which reflects the forecast performance of the
business going forward. The Group has incurred legal and
professional fees of GBP1,865,000 in relation to the new RCF. These
fees have been capitalised and will be released over the life of
the RCF. The new RCF was undrawn at the period end (Feb 2021:
GBP55,000,000). The Group was in compliance with, or received
waivers for, all financial covenants throughout both the current
and prior periods.
A reconciliation of movements of liabilities to cash flows
arising from financing is as follows:
Exchangeable Revolving Convertible Obligations
bond credit facility debt under leases Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ----------------- ------------ -------------- ---------
Balance at 1 March 2021 52,010 52,329 - 158,908 263,247
Changes from financing
cash flows:
Additional loans - - 125,000 - 125,000
Net cash repaid - (55,000) - - (55,000)
Cash outflow from debt
issue costs - (1,936) (13,541) (15,477)
Principal elements of
lease payments - continuing
operations - - - (13,362) (13,362)
Principal elements of
lease payments - discontinued
operations - - - (1,909) (1,909)
-------------------------------- ------------- ----------------- ------------ -------------- ---------
Total changes from financing
cash flows - (56,936) 111,459 (15,271) 39,252
Release of deferred
issue costs 188 3,647 31 - 3,866
New leases entered into - - - 3,762 3,762
Termination of lease - - - (4,269) (4,269)
Unwind of discount - - - 97 97
Reclass of debt issue
costs to other debtors - 1,688 - - 1,688
Liquidation of subsidiary
undertaking - - - (7,265) (7,265)
The effect of changes
in foreign exchange
rates - - - 360 360
Non-cash accruals - (728) 206 343 (179)
------------- ----------------- ------------ -------------- ---------
Balance at 31 August
2021 52,198 - 111,696 136,665 300,559
------------- ----------------- ------------ -------------- ---------
Exchangeable Revolving Obligations
bond credit facility under leases Total
GBP'000 GBP'000 GBP'000 GBP'000
------------- ----------------- -------------- ---------
Balance at 1 March 2020 51,689 74,757 118,811 245,257
Changes from financing cash
flows:
Net cash repaid - (64,000) - (64,000)
Cash outflow from debt issue
costs (51) (4,247) - (4,298)
Principal elements of lease
payments - continuing operations - - (7,188) (7,188)
Principal elements of lease
payments - discontinued operations - - (983) (983)
------------------------------------- ------------- ----------------- -------------- ---------
Total changes from financing
cash flows (51) (68,247) (8,171) (76,469)
Release of deferred issue costs 184 587 - 771
New leases entered into - - 1,894 1,894
Unwind of discount - - 74 74
Acquisition of subsidiary - - 64,708 64,708
Disposal of subsidiary undertaking - - (1,707) (1,707)
The effect of changes in foreign
exchange rates - - (2,951) (2,951)
Non-cash accruals - - 2,241 2,241
------------- ----------------- -------------- ---------
Balance at 31 August 2020 51,822 7,097 174,899 233,818
------------- ----------------- -------------- ---------
The book value and fair values of financial assets and financial
liabilities are as follows:
Book Value Fair Value
31 August 31 August
2021 2021
Unaudited Unaudited
GBP'000 GBP'000
Financial assets
Cash 70,523 70,523
Other investments 13,688 13,688
Trade receivables 11,658 11,658
Other receivables 11,119 11,119
Swaps 99 99
Financial Liabilities
Trade payables 14,050 14,050
Exchangeable bonds 52,198 48,704
Convertible debt 111,696 125,561
Lease obligations 136,665 131,041
Other payables 109 109
Swaps 135 135
Book Value Fair Value
28 February 28 February
2021 2021
Audited Audited
GBP'000 GBP'000
Financial assets
Cash 12,408 12,408
Other investments 10,211 10,211
Trade receivables 15,658 15,658
Other receivables 9,258 9,258
Swaps 310 310
Financial Liabilities
Trade payables 19,558 19,558
Revolving credit facility 52,329 52,329
Exchangeable bonds 52,010 47,920
Lease obligations 158,908 148,647
Other payables 2,034 2,034
Swaps 404 404
Other financial assets
During the period, the Group utilised a Protected Captive Cell
(PCC) arrangement as part of its insurance portfolio. The PCC had
to be fully funded once the policies were issued, thus of the
GBP5,000,000 paid, GBP100,000 relates to insurance premium which
has been expensed to the Condensed Consolidated Income Statement,
and GBP4,900,000 is included within other financial assets on the
Condensed Consolidated Statement of Financial Position. This
financial asset is presented within other investments in the
current year table above.
The following financial assets and liabilities, included in the
above tables, are measured at fair value: other investments, swaps,
GBPnil (February 2021: GBP1,581,000) within other payables and
GBP1,332,000 within convertible debt. All others are measured at
amortised cost. For trade and other receivables/payables with a
remaining life of less than one year, the carrying amount is
considered to reflect the fair value.
The fair values of loans and borrowings have been calculated by
discounting the expected future cash flows at prevailing interest
rates. The fair value of the exchangeable bonds includes an
immaterial derivative instrument, valued using an option pricing
model, and a debt component where the fair value has been
calculated by discounting the expected future cashflows at
prevailing interest rates.
Fair Value Hierarchy
The fair value hierarchy is explained in the statutory accounts
for the year ended 28 February 2021.
Total Level 1 Level 2 Level 3
As at 31 August GBP'000 GBP'000 GBP'000 GBP'000
2021
Financial assets
Other financial
assets 13,812 8,788 4,900 124
Currency swaps 96 - 96 -
Diesel swaps 3 - 3 -
Financial liabilities
Other financial
liabilities 1,332 - - 1,332
Currency swaps 135 - 135 -
Total Level 1 Level 2 Level 3
As at 28 February GBP'000 GBP'000 GBP'000 GBP'000
2021
Financial assets
Other financial
assets 10,516 10,392 - 124
Currency swaps 310 - 310 -
Financial liabilities
Other financial
liabilities 1,581 - - 1,581
Currency swaps 358 - 358 -
Diesel swaps 46 - 46 -
During the six months ended 31 August 2021, the Cyrus put option
was derecognised, see note 7, leading to a movement in level 3
other financial liabilities. The GBP1,332,000 conversion option of
the convertible debt instrument is included as a level 3 other
financial liability in the above table. There were no transfers
between Level 1 and Level 2 fair value measurements.
12 Provisions
Onerous Litigation Development Maintenance
Site restoration contracts Tax and claims commitments reserves Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------- -------- ------------ ------------- ------------ --------
At 1 March 2021 3,036 508 16,136 3,781 4,466 20,064 47,991
Provisions used - (26) - (1,280) - (2,041) (3,347)
Provisions made - 2,360 - 15 - 8,034 10,409
Provisions utilised - (46) (26) - - - (72)
Provisions reversed - - (8,500) - - - (8,500)
Unwind of discount 38 11 - - - - 49
Currency retranslation - - - (6) (5) 153 142
Liquidation of
subsidiary - - - (963) (519) (1,873) (3,355)
----------------- ----------- -------- ------------ ------------- ------------ --------
At 31 August
2021 3,074 2,807 7,610 1,547 3,942 24,337 43,317
----------------- ----------- -------- ------------ ------------- ------------ --------
Analysis of provisions
Current - 2,388 3,311 1,547 - - 7,246
Non-current 3,074 419 4,299 - 3,942 24,337 36,071
----------------- ----------- -------- ------------ ------------- ------------ --------
In the period there was a reduction in provisions of
GBP3,355,000 due to the liquidation of Stobart Air and subsequent
de-consolidation of their balance sheet, see note 6. The Stobart
Air provisions related to maintenance of GBP1,873,000, flight
cancellation claims of GBP963,000 and development commitments of
GBP519,000. Following the liquidation, a review of maintenance
reserves required to cover all amounts payable on the eight ATR
aircraft prior to redelivery was completed. This was the main
driver for the GBP8,034,000 maintenance provision made in the
period. The estimate of maintenance reserves is sensitive to
changes in market prices and the level of wear on specific
components once in the process of overhaul. There was also a review
of other unavoidable costs related to the ATR aircraft which led to
an onerous contract provision of GBP2,360,000.
During the interim period ended 31 August 2021, the Group has
released GBP8,500,000 from provisions, following a reassessment of
all open enquiries at the period end. The Group changed tax
advisors to PWC in late 2020 and since this appointment there has
been an increase in engagement with HMRC which has provided a
better understanding and clarity regarding the open enquiries.
Consequently, the range of potential exposure as disclosed in the
February 2021 year-end financial statements has also reduced
accordingly.
13 Issue of ordinary shares
On 7 May 2021 the Group issued 6,000,000 ordinary shares in
Esken Limited to Cyrus Capital Partners (Cyrus). The Shares were
issued to satisfy the put option between Esken and Cyrus, see note
7. The share issue resulted in an increase in share capital and an
increase in retained deficit of GBP600,000.
On 26 August 2021 the Group issued 394,410,618 ordinary shares
in Esken Limited at 14p per share raising GBP55.2m. The share
capital increased by GBP39,441,000 and share premium increased by
GBP12,795,000, net of costs.
14 Contingent liabilities
The Group is subject to a number of ongoing unprovided legal
cases, none of which has yet reached trial, that will be vigorously
defended. The Group considers that the net liability in respect of
these claims, if any, is unlikely to exceed approximately GBP1
million.
At the year ended 28 February 2021, Logistics Development Group
(LDG), formerly Eddie Stobart Logistics plc (ESL), property rent
guarantees were considered a contingent liability. An outflow from
the Group would only occur if ESL failed in its lease obligations
to the landlord. In the period LDG's interest in Greenwhitestar
Acquisitions Limited, the holding company for ESL, was sold to
Culina Group Limited. Following the sale, the Directors have
assessed the financial strength of Culina Group Limited and
consider the likelihood of any future economic outflow from the
Group under the lease guarantees to be remote and so are no longer
considered as contingent liabilities.
15 Cash used in operations
Restated
Six months Six months
ended 31 ended 31
August 2021 August 2020
Unaudited Unaudited
GBP'000 GBP'000
Loss before tax (12,549) (16,078)
Adjustments to reconcile loss before
tax to net cash flows:
Realised profit on sale of property,
plant and equipment (50) (24)
Share of post-tax losses of associates
and joint ventures accounted for using
the equity method 146 148
Depreciation of property, plant and
equipment 10,089 9,923
Finance income (1,905) (2,378)
Finance costs 9,176 5,303
Release of grant income (694) (234)
Release of deferred premiums - (207)
Charge/(credit) for share-based payments 400 (8)
(Gain)/loss on fuel swaps mark to market
valuation (58) 286
Retirement benefits and other provisions (1,694) (1,636)
Working capital adjustments:
Decrease/(increase) in inventories 19 (571)
Decrease/(increase) in trade and other
receivables 1,570 (429)
(Decrease)/increase in trade and other
payables (4,587) 5,167
Cash used in continuing operations (137) (738)
------------- -------------
16 Related parties
During the period, the Group made sales of GBP3,392,000 (2020:
GBP2,706,000) to its associate Mersey Bioenergy Limited (a
subsidiary of Mersey Bioenergy Holdings Limited) relating to the
sale of biomass material. At 31 August 2021, GBP509,000 (28
February 2021: GBP507,000) was owed to the Group.
17 Glossary - Alternative performance measures (APMs)
In the reporting of financial information, the Directors have
adopted various APMs. These measures are not defined by
International Financial Reporting Standards (IFRS) and therefore
may not be directly comparable with other companies' APMs.
APMs should be considered in addition to, and are not intended
to be a substitute for, or superior to, IFRS measurements. Non-GAAP
APMs are used as they are considered to be both useful and
necessary as well as enhancing the comparability of information
between reporting periods, by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the Group's performance.
Consequently, APMs are used by the Directors and management for
internal performance analysis, planning, reporting and
incentive-setting purposes. The presentation of these measures
facilitates comparability with other companies, although
management's measures may not be calculated in the same way as
similarly titled measures reported by other companies.
EBITDA
EBITDA is the key profitability measure used by management for
performance review in the day-to-day operations of the Group.
EBITDA represents loss before interest, tax and depreciation. Refer
to note 3 for reconciliation to statutory loss before tax.
Earnings per share from continuing operations
This APM is based on loss after tax, which is loss for the year
from continuing operations, see note 9 for further details.
Net debt and net debt pre IFRS 16
Net debt is defined as the sum of obligations under leases,
revolving credit facility, exchangeable bond and convertible loan,
less cash. Net debt pre IFRS 16 is net debt less obligations under
IFRS 16 leases. See note 11 for reconciliations of these
measures.
Gearing
This is defined as Group shareholders' equity per the
consolidated statement of financial position, divided by net debt
as defined above.
Independent Review Report to Esken Limited
Conclusion
We have been engaged by Esken Limited (the "Company") to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 August 2021 of the
Company and its subsidiaries (together the "Group") which comprises
the Condensed consolidated income statement, Condensed consolidated
statement of comprehensive income, Condensed consolidated statement
of financial position, Condensed statement of changes in equity,
Condensed consolidated statement of cash flows and the related
explanatory notes.
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 2021 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Material uncertainty relating to going concern
We draw attention to note 1 of the condensed financial
statements which describes uncertainties in respect of the
substantial achievement of forecasts and availability of sufficient
funding. These events and conditions, along with the other matters
explained in note 1, constitute a material uncertainty that may
cast significant doubt on the ability of the Group to continue as a
going concern.
Our conclusion is not modified in respect of this matter.
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
UK. 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. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
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 DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
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.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Michael Froom
for and on behalf of KPMG LLP
Chartered Accountants
1 St Peter's Square
Manchester
M2 3AE
3 November 2021
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