TIDMESKN
RNS Number : 8055F
Esken Limited
09 November 2022
Prior to publication the information communicated in this
announcement was deemed by the Company to constitute inside
information for the purposes of article 7 of the Market Abuse
Regulations (EU) No 596/2014 as amended by regulation 11 of the
Market Abuse (Amendment) (EU Exit) Regulations No 2019/310 ('MAR').
With the publication of this announcement, this information is now
considered to be in the public domain.
9 November 2022
Esken Limited
("Esken" or the "Group")
Results for the six months ended 31 August 2022
Financing secured and delivering a resilient performance
Esken Limited, the aviation and renewables group, today
announces its unaudited interim results for the six months to 31
August 2022.
The Group will provide a live presentation relating to its
results via the Investor Meet Company platform at 09:30am 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/registerinvestor.
Investors who already follow Esken on the Investor Meet Company
platform will automatically be invited.
David Shearer, Executive Chairman of Esken said,
"I am pleased that we have been able to conclude our debt
financing, encompassing GBP50m of committed funds, with GBP40m
uncommitted, despite challenging market conditions. Upon
shareholder approval of an increase in our borrowing limits, the
GBP50m of committed funds will bring stability and allows us to
clear our residual legacy liabilities."
"Our Renewables business has proved resilient in what have been
challenging conditions with unplanned biomass plant outages,
reduced waste wood availability and rising costs. We expect biomass
plant performance to improve in the Winter months, and Esken
Renewables has secured new supply agreements and implemented annual
contract indexation revisions. This is expected to lead to improved
margins, and we have restated our guidance of GBP22m EBITDA for FY
2022."
"Our Aviation business has continued its recovery but at a
slower pace than we would have wished due to continuing disruption
throughout the industry with many airlines focussing on short term
performance ahead of strategic positioning. The medium-term case
for London Southend Airport remains compelling and our refreshed
airport leadership team is well placed as the market returns to
normality."
"As a board we have decided to initiate an updated strategic
review of our operating businesses. This review will consider all
options for the operating businesses and may conclude that it is in
the best interests of all stakeholders to progress a sale or
partial sale of one or both of the Renewables or Aviation divisions
to secure the long term potential of these businesses and deliver
value for Esken shareholders."
Financial highlights
-- Esken's core Aviation and Renewables businesses generated
a positive combined EBITDA of GBP6.5m for the six months
to 31 August 2022 (HY21: GBP9.9m).
-- Esken Renewables supplied 753k tonnes of biomass fuel,
up 6.7% on the same period last year (HY21: 706k tonnes).
Ongoing fluctuations in UK construction supply chains
during the period led to a reduced availability of waste
wood, impacting gate fee income. This, combined with unplanned
outages at higher margin biomass plant customers and cost
inflation resulted in Esken Renewables reporting EBITDA
of GBP7.0m (HY21: GBP9.1m). However, this performance
is expected to improve in the second half as a result
of additional supply agreements, expected improvements
in biomass plant customer performance and annual contract
indexation revisions coming into effect, supporting GBP
22m FY23 EBITDA guidance.
-- The Aviation business received GBP1.4m related to the
recovery of airline marketing support payments and reported
an EBITDA loss of GBP0.5m. This compares to a GBP0.8m
profit in the same period last year, when the Aviation
business benefitted from GBP3.5m of one-off payments associated
with Connect Airways and Teesside International Airport.
Passenger numbers improved by 32.6% to 61k (HY21: 46K)
reflecting continued easyJet operations with flights to
three popular European destinations throughout the Summer.
-- The Group's headroom at the period end was GBP51.0m (HY21:
GBP90.5m), which is in line with management expectations
set out at the time of the refinancing and includes GBP10.1m
of ring-fenced cash in London Southend Airport.
-- Esken today announces it has secured a new lending facility
from funds managed by a specialty lender (the lender),
subject to shareholder approval of an increase in our
borrowing limits in our articles of association, comprising
GBP50m of committed funding and GBP40m uncommitted funding,
which will be used, inter alia, to fund Esken's residual
c.GBP44m of Propius legacy liabilities, cancel the undrawn
GBP19.1m RCF, and provide working capital . The uncommitted
element of the new funding could be used, if accessed,
alongside the disposal of GBP36m of non-core assets and
the value of its Logistics Development Group shares, to
refinance Esken's exchangeable bond, which matures in
May 2024 and provide up to GBP10m of additional working
capital for London Southend Airport.
-- Esken entered into an agreement for the early return to
the lessor of two of the aircraft leased by Propius, resulting
in a net cash benefit of c.GBP2m. However, adverse FX
movements have also impacted expected future cash outflows.
Six months Six months
ended ended
31 August 31 August
GBP'm 2022 2021 % change
--------------------------------- ----------- ----------- ---------
Revenue by division
Aviation 14.2 12.9 9.5%
Renewables 43.5 38.1 14.1%
--------------------------------- ----------- ----------- ---------
Revenue for two core operating
divisions 57.7 51.0 13.1%
--------------------------------- ----------- ----------- ---------
Investments and Non-Strategic
infrastructure 0.3 0.3 13.9%
Group central and eliminations 0.1 0.4 (63.8%)
--------------------------------- ----------- ----------- ---------
Total revenue 58.1 51.7 12.5%
--------------------------------- ----------- ----------- ---------
EBITDA by division
Aviation (0.5) 0.8 (168.0%)
Renewables 7.0 9.1 (23.7%)
--------------------------------- ----------- ----------- ---------
EBITDA for two core operating
divisions 6.5 9.9 (34.8%)
--------------------------------- ----------- ----------- ---------
Investments and Non-Strategic
infrastructure (0.8) (0.5) (46.4%)
Group central and eliminations (3.2) (3.8) 16.3%
--------------------------------- ----------- ----------- ---------
Total EBITDA 2.5 5.6 (55.1%)
--------------------------------- ----------- ----------- ---------
Loss before tax (12.7) (12.5) (1.4%)
Tax 2.5 9.0 (72.2%)
Discontinued operations, net of
tax 1.6 (2.9) 154.8%
--------------------------------- ----------- ----------- ---------
Loss for the period (8.6) (6.4) (33.8%)
--------------------------------- ----------- ----------- ---------
31 August 28 February
GBP'm 2022 2022 % change
------------------------------------- ---------- ------------ ---------
Net debt (263.6) (241.9) (9.4%)
Cash and undrawn banking facilities 51.0 72.7 (29.8%)
------------------------------------- ---------- ------------ ---------
Financing
Esken today announces a new facility comprising GBP50m of
committed funding, and GBP40m of uncommitted funding which will be
provided at the discretion of the lender. The funds are subject to
shareholder approval of the matters specified below at an EGM
scheduled for 29 November 2022.
Subject to shareholder approval to increase the borrowing limits
in our articles of association, funds will be provided by the
lender on a 3 year term (maturing in November 2025) with a further
year at the discretion of the lender, with a SONIA plus 9.875%
interest rate. The funds are secured primarily against the
Renewables business along with fixed and floating charges over the
assets and shares of all other trading subsidiaries except London
Southend Airport. The committed element of the facility will be
used to fund all of Esken's residual Propius legacy liabilities of
c.GBP44m, fees payable in respect of the cancellation of the
undrawn GBP19.1m RCF and entry into the facility itself, and to
provide working capital for the Group. GBP30m of the uncommitted
element of the new funding could be used, if accessed, alongside
the disposal of GBP36m of non-core assets and the value of its LDG
shares, to refinance Esken's exchangeable bond, which matures in
May 2024. The remaining GBP10m of the uncommitted element of the
new funding could be used, if accessed, to provide additional
working capital for London Southend Airport to satisfy the funding
it is expected to require in the period to April 2024.
As referred to above, Esken will require the approval of its
shareholders to amend certain provisions of its articles of
incorporation (the "Articles") which limit its borrowings to four
times its adjusted capital and reserves. We therefore intend today
to issue a Notice of Extraordinary General Meeting ("EGM") to
shareholders for the purposes of passing a resolution to approve
the incurrence of borrowings beyond the limits in our Articles.
Further details relating to the EGM are contained in an
announcement expected to be made today.
Strategic review
Esken today announces that it is initiating an updated strategic
review of its operating businesses. This review will consider all
options for its operating businesses and may conclude that it is in
the best interests of all stakeholders to progress a sale or
partial sale of one or both of the Renewables or Aviation divisions
to secure the long-term potential of these businesses and deliver
value for Esken shareholders. The strategic review will be led by
the board and supported by advisers as required.
ESG progress
-- Esken remains committed to developing a Net Zero roadmap and
work is ongoing to finalise the plan ahead of the year end.
-- Esken continues to be committed to reviewing, developing and
reporting Scope 3 emissions and is supported by Logika Consultants
in delivering this.
-- The delivery of the overall ESG strategy has been enhanced
following the completion of the Business in the Community
Responsible Business Tracker.
-- Each of our businesses continue to support their chosen
charity partners; FareShare, Help for Heroes and MIND and we are
proud signatories of the Military Covenant, achieving Gold and
Silver awards across the Group.
-- Colleagues have embraced the new employee volunteering
programme, which supports our charity partners, contributes to
education, employment and skills programmes and delivers
environmental projects.
-- The established good governance programme continues to
provide support to report against the TCFD requirement for
governance, metrics, risk and strategy.
Outlook
Esken Renewables is expected to deliver GBP22m EBITDA for the
full year, which is a tightened expectation compared to previously
announced guidance of in excess of GBP22m. The supply of waste wood
is expected to return to seasonal norms in the second half. At the
same time, biomass plant customers are expected to operate more
consistently and take advantage of higher electricity prices. Esken
Renewables also secured additional supply agreements that commenced
in September 2022. Moreover, annual contract indexation revisions
on two of its main contracts came into effect toward the end of the
first half, with two contracts having come into effect early in the
first half. These revisions will support margin improvements.
The combination of improved biomass plant performance,
additional supply agreements, annual contract indexation revisions
and management's continued tight cost control is therefore expected
to support an improved performance in the second half.
London Southend Airport welcomed flying with easyJet to three
destinations - Malaga, Faro and Palma - throughout the Summer
period. Flights to these destinations are now on sale for Summer
2023. Positive discussions regarding additional airline agreements
for Summer 2023 and beyond are supported by the excellent passenger
experience provided throughout the period, combined with the
airport's attractive operating cost.
As previously announced, cargo operations with London Southend
Airport's global logistics partner have now ended, with an
anticipated impact on EBITDA for the remainder of FY23 in the order
of c.GBP0.9m before exit fees receivable by Esken. The FY24 impact
on Esken's Aviation business is expected to be a c.GBP2.9m
reduction in EBITDA, prior to any additional cost savings or new
cargo agreements. However, post period end, the division signed a
contract with a new logistics partner, to support them on a
temporary basis from 8(th) January through to 25(th) March
2023.
London Southend Airport remains well positioned for the recovery
and longer-term growth in commercial passenger flying. As flight
volumes continue to build and more established London airports
begin to face capacity constraints once again, London Southend
Airport's proximity to London, strong transport links and enjoyable
passenger experience supports positive growth prospects.
Divisional review
Esken Renewables
Esken Renewables supplied 753k tonnes of biomass fuel, up 6.7%
on the same period last year. Biomass plant performance varied
during the year with plants which receive higher margin waste wood
experiencing further unplanned outages and plants that receive
forestry by-products performing better. However, we expect biomass
plant operations to continue to become increasingly consistent over
time as a result of proactive maintenance and investment
programmes, with many plants under new long-term ownership.
The construction industry in the UK is a significant source of
waste wood as it is regularly involved in stripping out existing
buildings ahead of new construction works. The ongoing fluctuations
in UK construction supply chains impacted activity and led to a
reduced amount of waste wood from construction firms. As a result
of this, and the unplanned plant outages, total gate fee income was
lower.
The combination of biomass plant outages during the period,
reduced gate fee income, and increased costs has resulted in Esken
Renewables reporting EBITDA of GBP7.0m (HY21: GBP9.1m). However,
when allowing for diesel cost increases (GBP0.9m), other
inflationary cost pressures (GBP0.4m) and one-off benefits in HY21
(GBP0.9m), Esken Renewables' EBITDA performance is consistent with
HY21.
Esken anticipates an improved second half performance as a
result of a number of contributing factors. Firstly, Esken
Renewables successfully negotiated a move in its supply contract at
Cramlington to an exclusive basis and also secured a new sub-supply
arrangement in Yorkshire, with both starting in September 2022.
At the same time, biomass plant customers are expected to
operate consistently and optimise energy generation in the second
half winter period.
Finally, Esken Renewables will see an improvement in the terms
of the majority of its largest supply contracts as a result of the
timing of its annual contract indexation revisions. The business
experienced cost inflation throughout the first half, with the
annual contract indexation revision on two of its main contracts
coming into effect toward the end of the first half. This, combined
with two plants' annual contract indexation having come early in
the first half, will lead to improved margins in the second half.
Annual contract indexation revisions for a further two plants will
come into effect toward the end of the financial year.
Esken Renewables remains well placed to benefit from its
position as a key supplier to UK energy generators at this critical
time.
Aviation
London Southend Airport welcomed the return of easyJet
passengers this summer with flights to three destinations: Malaga,
Faro and Palma. These proven routes are popular with the airport's
catchment area, and passengers have been able to enjoy a quick and
easy journey to and through the airport. London Southend Airport
welcomed 61k airport passengers in the first half (HY21: 46K). The
Aviation division delivered an EBITDA loss of GBP0.5m, compared to
a GBP0.8m profit in the same period last year. That period
benefitted from GBP3.5m of one-off receipts relating to Connect
Airways and Teesside International Airport. During the period under
review, London Southend Airport benefitted from GBP1.4m related to
the recovery of airline marketing support payments. When stripping
out the one-off receipts in both periods the Aviation division's
performance improved by circa GBP800k.
The airport remains well positioned for the recovery and
longer-term growth in commercial passenger flying and remains
confident in its medium term potential to return to pre-pandemic
levels of over 2m passengers.
London Southend Airport was able to deliver its usual quick and
easy passenger experience this summer. That experience reflected
both the investment that the airport made in security screening and
baggage handling equipment, and importantly, the staff it retained
while the airport was closed to commercial passengers during the
previous Winter.
London Southend Airport was also able to attract a number of
airlines that were struggling to add additional flights at
established London airports. Blue Air operated a small number of
flights through August, and London Southend Airport also welcomed a
small number of flights from Sky Express to Athens and Wideroe to
Bergen in late July.
Encouragingly, the renamed London Southend Jet Centre
(previously Stobart Jet Centre) has also experienced a significant
uplift in traffic and is continuing to unlock additional revenue
growth.
Toward the end of the period London Southend Airport was also
informed by its global logistics partner that it would cease cargo
operations at the airport, effective mid-September 2022 following a
change of strategic focus from air freight to road-based cargo.
However, following the period end, it was confirmed that London
Southend Airport will support a new logistics partner on a
temporary basis from 8(th) January through to 25(th) March
2023.
London Southend Airport has also welcomed the news that easyJet
has put on sale flights to three destinations next summer - Malaga,
Palma and Faro for the Summer 2023 season, which starts at the end
of March 2023.
These developments have come on the back of an increasingly
entrepreneurial spirit and (re-)start-up mentality under the
leadership of the newly appointed CEO, John Upton. John most
recently led the GBP40m international airport lounge business No1
Lounges (backed by NVM and Santander). As CEO he put in place an
operational structure that enabled the business to double in size,
opening new sites across the world, as well as securing new deals
with airlines and airports. Prior to No1 Lounges, John worked as
Managing Director of Leon, the fast growing natural food chain, and
was a member of the senior team during 13 years at McDonald's
UK.
With its new leadership team now in place, London Southend
Airport is engaging with multiple existing and potential airline
partners to accelerate the growth of the business. This focus on
business development, while remaining closely aligned with our
investment partner and underpinned by LSA's industry-leading team,
will enable the airport to add pace to its recovery while also
taking advantage of the long-term growth trends in commercial
passenger flying.
Financial Review
Summary of the period
The Renewables division has seen a 6.7% period-on-period
increase in biomass material supplied to plants. Inflationary
pressures on the division have been mitigated by RPI-linked
indexation elements within the division's long-term customer supply
contracts. The increase in biomass material supplied comes despite
challenges caused by external factors. A slowdown in the UK
construction sector, driven by increased costs and supply chain
issues, led to a more competitive market for waste wood impacting
gate fee revenues. This had the knock-on effect of having to find
alternative sources of supply in order to meet contractual demand,
thereby increasing costs. The division has undertaken an appraisal
of its vehicle fleet, reducing numbers to ensure the most efficient
use of vehicles and drivers, driven by ongoing driver shortages and
high fuel prices impacting the wider economy.
In the Aviation division, passenger flights returned to London
Southend Airport with the airport servicing three routes. Passenger
numbers in the period increased by 32.6% to 60,734, up from 45,816
in the prior period, however this is still considerably lower than
pre-COVID 19 volumes. As previously announced in the Group's
trading statement on 31 August 2022, the Aviation division's cargo
contract with its global logistics partner ceased post-period end
in September 2022 due to the partner's strategic shift to a more
road-based operation.
The wind-down of Stobart Air and Propius legacy operations, as
mentioned in the annual report for the year ended 28 February 2022,
has continued in the period. Two of the eight ATR aircraft leased
by Propius have been handed back early to the lessor in August 2022
and September 2022 which will lead to a reduction in the expected
future cash outflows of around GBP2.0m due to a reduction in
maintenance commitments. The return of aircraft, and the associated
cash outflows, will continue until the final aircraft is handed
back in August 2023.
At the period end, Group headroom is GBP51.0m, consisting of
GBP31.9m cash, of which GBP10.1m is ring-fenced within LSA, and
GBP19.1m of undrawn Revolving Credit Facility (RCF). The RCF was
reduced from the original GBP20m as a result of non-core asset
sales. The cash position was aided by the GBP3.5m non-core asset
sale of a portion of Widnes land in the period. The Group has
remaining non-core assets with book value of GBP36.0m to be sold
when most beneficial to the Group.
Following the period end, the group secured committed funding of
GBP50m, with an additional GBP40m uncommitted, which will be mainly
used to settle Propius lease and maintenance liabilities and
provide working capital to the Group. This funding is subject to
shareholder approval and has a three year term to November 2025,
plus an additional one year at the discretion of the lender. This
new funding enables Esken to exit the RCF with Lloyds and AIB, with
transactional banking transitioning to Barclays.
Revenue
Revenue from continuing operations has increased by 12.5% to
GBP58.1m (2021: GBP51.7m) in the six months to 31 August 2022,
mainly due to the Renewables division whose RPI-linked contracts
have been impacted by the current high level of inflation. Aviation
revenue has increased by 9.5% to GBP14.2m (2021: GBP12.9m) due to
strong performance of the Hotel, Jet Centre and Star Handling,
partly offset by the GBP1.5m prior period Teesside settlement not
being repeated in the current period. Renewables revenue increased
by 14.1% to GBP43.5m (2021: GBP38.1m) and biomass tonnages supplied
rose by 6.7% to 753,000 period-on-period.
Profitability
Divisional Continuing Profit Summary 31 August 31 August
2022 2021
GBPm GBPm
---------- ----------
Aviation (0.5) 0.8
Renewables 7.0 9.1
----------
EBITDA from operating divisions 6.5 9.9
Investments (0.4) (0.2)
Non-Strategic Infrastructure (0.4) (0.3)
Group central and eliminations (3.2) (3.8)
---------- ----------
EBITDA 2.5 5.6
Depreciation (9.1) (10.1)
Finance costs (net) (6.1) (8.0)
---------- ----------
Loss before tax (12.7) (12.5)
Tax 2.5 9.0
Profit/(loss) from discontinued operations,
net of tax 1.6 (2.9)
---------- ----------
Loss for the period (8.6) (6.4)
---------- ----------
EBITDA has decreased by 55.1% to a profit of GBP2.5m (2021:
GBP5.6m). In Aviation, EBITDA has decreased to a loss of GBP0.5m
(2021: GBP0.8m profit). This is mainly due to receipts of GBP3.5m
associated with Connect Airways and Teesside International Airport
in the prior period not being repeated, partly offset by a GBP1.4m
recovery of airline marketing costs and general improvement across
the division due to the return of passenger flights in the current
period. Renewables EBITDA has decreased by 23.7% to GBP7.0m (2021:
GBP9.1m) due to waste wood market pressures reducing gate fee
revenue and leading to an increase in the amount of processed
material needed to fulfill demand, thereby increasing costs. The
division has also been impacted by longer than planned shutdowns at
plants and high fuel costs.
The loss before tax from continuing operations is GBP12.7m
(2021: GBP12.5m). Depreciation has reduced to GBP9.1m (2021:
GBP10.1m) due to an overall reduction in the asset base across the
Group. Finance costs of GBP11.3m (2021: GBP9.9m) have increased
principally due to interest incurred on the Carlyle convertible
debt in the current period but not in the prior, partly offset by a
reduction in RCF interest. Finance income of GBP5.2m (2021:
GBP1.9m) has increased mainly because of gains on the revaluation
of Esken Limited's intercompany US-Dollar denominated loan with
Propius.
A summary of divisional profitability and further details of
divisional performance are set out in the Divisional Reviews
section.
Taxation
The tax credit of GBP2.5m (2021: GBP9.0m) has arisen
predominantly due to a change in estimation of uncertain tax
provisions in the period.
Loss per share
Loss per share from continuing operations was 1.00p (2021:
0.55p) (see note 8 for further details).
Balance sheet
28 February
31 August 2022 2022
GBPm GBPm
--------------- ------------
Non-current assets 345.8 353.5
Current assets 72.9 89.2
Non-current liabilities (212.8) (239.5)
Current liabilities (154.9) (133.1)
Net assets 51.0 70.1
--------------- ------------
Non-current assets have decreased in the period, largely due to
depreciation in addition to the reclass of the GBP1.5m brands
deferred consideration to current assets. Current assets have
increased primarily due to the decrease in cash balance in the
period, see the Cash flow section below for more detail.
The decrease in non-current liabilities is mainly due to the
reclass of lease obligations and maintenance provisions in Propius
from non-current to current liabilities. The Propius reclass was
the main driver for the increase in current liabilities in the
period.
Debt and gearing
28 February
31 August 2022 2022
--------------- ------------
Loans and borrowings GBP295.5m GBP294.6m
Cash (GBP31.9m) (GBP52.7m)
Net debt GBP263.6m GBP241.9m
--------------- ------------
EBITDA/interest 0.3 0.6
Net debt/total assets 62.9% 54.6%
Gearing 516.3% 344.9%
--------------- ------------
In the period, loans and borrowings have increased by GBP0.9m.
The Carlyle convertible debt instrument has increased by GBP6.6m
due to GBP6.6m interest being rolled into the loan and the release
of GBP1.0m of associated debt-issue costs, partly offset by the
GBP1.0m revaluation of the compound derivative. Lease liabilities
have reduced by GBP5.9m due to capital repayments partly offset by
an increase due to the retranslation of US-Dollar denominated
leases in Propius.
During the period, the GBP3.5m sale of Widnes land triggered a
clause in the current RCF reducing the available facility that the
Group can draw on from GBP20.0m to GBP19.1m. At the period end the
committed undrawn headroom on the RCF was GBP19.1m ( 28 February
2022: GBP20.0m) and, together with the cash balance of GBP31.9m (28
February 2022: GBP52.7m), the total headroom was GBP51.0m (28
February 2022: GBP72.7m).
Cash flow
31 August
31 August 2022 2021
GBPm GBPm
--------------- ----------
Operating cash (outflow)/inflow (3.2) 0.1
Investing activities 4.3 (6.5)
Financing activities (10.0) 96.0
--------------- ----------
(Decrease)/increase in the period (8.9) 89.6
Discontinued operations (11.9) (31.5)
Cash at beginning of period 52.7 12.4
Cash at end of period 31.9 70.5
--------------- ----------
Discontinued cash flow in the period relates to maintenance and
lease payments in Propius.
Investing inflows include GBP3.5m for the sale of a portion of
Widnes land and GBP1.0m received from disposal of plant property
and equipment, mainly related to plant and machinery in Renewables
.
The principal financing outflows include GBP7.9m for the
repayment of the principal element of leases and interest payments
of GBP2.8m. The main financing inflow was GBP0.7m from the proceeds
of grants in London Southend Airport.
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 2022 and are still
applicable.
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
8 November 2022.
Lewis Girdwood
Director
9 November 2022
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
Continuing operations Notes GBP'000 GBP'000
Revenue 4 58,147 51,684
------------- -------------
Other operating income 555 914
Reversal of Impairment - loan receivables
from joint venture 5 - 1,963
Operating expenses - other (55,855) (48,899)
Share of post-tax losses of associates
and joint ventures (346) (146)
Gain on swaps - 58
------------- -------------
EBITDA 2,501 5,574
Depreciation (9,113) (10,089)
Operating loss (6,612) (4,515)
Finance costs 6 (11,333) (9,940)
Finance income 6 5,220 1,906
------------- -------------
Loss before tax (12,725) (12,549)
Tax 7 2,511 9,023
------------- -------------
Loss for the period from continuing
operations (10,214) (3,526)
Discontinued operations
Loss from discontinued operations,
net of tax 5 1,596 (2,915)
------------- -------------
Loss for the period (8,618) (6,441)
------------- -------------
Loss per share expressed in pence per share - continuing operations
Basic 8 (1.00p) (0.55p)
Diluted 8 (1.00p) (0.55p)
Loss per share expressed in pence
per share - total
Basic 8 (0.84p) (1.01p)
Diluted 8 (0.84p) (1.01p)
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Loss for the period (8,618) (6,441)
Discontinued operations, net of tax,
relating to exchange differences (9,744) (340)
Other comprehensive expense - items
that may be reclassified in subsequent
periods to profit or loss, net of tax (9,744) (340)
------------- -------------
Re-measurement of defined benefit plan 178 1,258
Change in fair value of financial assets
classified as FVOCI (962) (1,927)
Tax on items relating to components
of other comprehensive income (200) (262)
Other comprehensive expense - items
that will not be reclassified to profit
or loss, net of tax (984) (931)
Other comprehensive expense for the
period, net of tax (10,728) (1,271)
------------- -------------
Total comprehensive expense for the
period (19,346) (7,712)
------------- -------------
31 August 28 February
2022 2022
Unaudited Audited
Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 9 260,541 265,637
Investment in associates and joint
ventures 670 1,016
Other financial assets 11 13,243 14,105
Intangible assets 54,669 54,669
Net investment in lease 15,526 16,204
Defined benefit pension surplus 1,150 348
Other receivables - 1,495
---------- ------------
345,799 353,474
---------- ------------
Current assets
Inventories 10 9,048 12,552
Trade and other receivables 31,959 23,883
Cash and cash equivalents 11 31,931 52,738
72,938 89,173
---------- ------------
Total assets 418,737 442,647
---------- ------------
Non-current liabilities
Loans and borrowings 11 (203,143) (217,539)
Other liabilities (8,276) (8,643)
Provisions 12 (1,368) (13,279)
---------- ------------
(212,787) (239,461)
---------- ------------
Current liabilities
Trade and other payables (30,447) (30,160)
Loans and borrowings 11 (39,773) (24,714)
Exchangeable bonds 11 (52,573) (52,385)
Corporation tax 7 (2,100) (5,110)
Provisions 12 (30,010) (20,674)
(154,903) (133,043)
---------- ------------
Total liabilities (367,690) (372,504)
---------- ------------
Net assets 51,047 70,143
---------- ------------
Capital and reserves
Issued share capital 102,534 102,534
Share premium 403,225 403,225
Foreign currency exchange reserve (9,526) 218
Reserve for own shares held by employee
benefit trust (7,596) (7,596)
Retained deficit (437,590) (428,238)
---------- ------------
Total Equity 51,047 70,143
---------- ------------
For the six months ended 31 August 2022
Unaudited
Reserve
Foreign for own
Issued currency shares
share Share exchange held by Retained Total
capital premium reserve EBT deficit equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 1 March
2022 102,534 403,225 218 (7,596) (428,238) 70,143
Loss for the period - - - - (8,618) (8,618)
Other comprehensive
expense for the period - - (9,744) - (984) (10,728)
------------------------- --------- --------- ---------- --------- ---------- ---------
Total comprehensive
expense for the period - - (9,744) - (9,602) (19,346)
------------------------- --------- --------- ---------- --------- ---------- ---------
Share-based payment
charge - - - - 250 250
------------------------- --------- --------- ---------- --------- ---------- ---------
Balance at 31 August
2022 102,534 403,225 (9,526) (7,596) (437,590) 51,047
------------------------- --------- --------- ---------- --------- ---------- ---------
For the six months ended 31 August 2021
Unaudited
Reserve
Foreign for own
Issued currency shares
share Share exchange held by Retained Total
capital premium reserve EBT deficit 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
------------------------------- --------- --------- ---------- --------- ---------- --------
Six months Six months
ended 31 August ended 31
2022 August 2021
Unaudited Unaudited
Notes GBP'000 GBP'000
Cash used in continuing operations 14 (2,184) (137)
Cash outflow from discontinued operations (5,600) (15,133)
Income taxes (paid)/received (1,030) 232
----------------- -------------
Net cash flow from operating activities (8,814) (15,038)
----------------- -------------
Purchase of property, plant and equipment (1,250) (2,513)
Proceeds from the sale of property 3,538 -
inventory
Proceeds from the sale of property,
plant and equipment 1,050 360
Receipt of capital element of net
investment in lease 676 641
Cash disposed on liquidation of subsidiary
undertaking - (362)
Acquisition of other financial assets - (4,900)
Interest received 323 323
Cash outflow from discontinued operations - (7,808)
----------------- -------------
Net cash flow from investing activities 4,337 (14,259)
----------------- -------------
Issue of ordinary shares (net of costs) - 53,262
Proceeds from issue of convertible
debt (net of costs) - 111,459
Proceeds from grants 670 1,937
Principal element of lease payments (7,899) (8,331)
Net repayment of revolving credit
facility (net of costs) (50) (56,936)
Interest paid (2,763) (5,383)
Cash outflow from discontinued operations (6,288) (8,596)
----------------- -------------
Net cash flow from financing activities (16,330) 87,412
----------------- -------------
(Decrease)/increase in cash and cash
equivalents (20,807) 58,115
Cash and cash equivalents at beginning
of period 52,738 12,408
----------------- -------------
Cash and cash equivalents at end
of period 31,931 70,523
----------------- -------------
1 Accounting policies
Corporate information
The Condensed Consolidated Financial Statements of the Group for
the six months ended 31 August 2022 (interim financial statements)
were authorised for issue in accordance with a resolution of the
Directors on 9 November 2022. 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 UK-adopted IAS 34 Interim Financial Reporting.
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 2022. Except for the
28 February 2022 statutory comparatives, the financial information
set out herein is unaudited but has been reviewed by the auditors,
Mazars 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 2022 but has been
derived from those accounts. Statutory accounts for the year ended
28 February 2022 have been published and KPMG LLP (the Group's
auditor until year ended 28 February 2022) has reported on those
accounts. Their audit report was unqualified, however, it
highlighted a material uncertainty regarding going concern in
respect of refinancing at a sufficient level prior to the
expiration of the Revolving Credit Facility and exchangeable bond
that mature in February 2023 and May 2024 respectively. The annual
financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards.
As presented in the Group's annual financial statements, all
percentage calculations are based on results rounded to the nearest
GBP1,000, being the presentation used across the primary statements
and accompanying notes.
Going concern
Position adopted at year end February 2022
The Group's financial statements for the year ended 28 February
2022 were issued on 24 May 2022. 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, which covered a period to 30 April 2024, being the
period prior to the maturity of the exchangeable bond on 8 May
2024. 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 2022 financial
statements, the Group has successfully signed a GBP50m committed
debt facility on 9 November 2022, subject to ordinary resolution of
shareholders, with an additional GBP40m uncommitted facility,
secured on the Esken Renewables and Infrastructure businesses, to
ensure that the Group has a stable liquidity platform in order to
meet its residual legacy obligations and underpin its business
plan. The facility matures in 3 years, with an additional one year
extension option at the lenders discretion. The Extraordinary
General Meeting will take place on 29 November 2022.
The GBP50m refinancing secures the Group's cashflow headroom up
until the maturity of the exchangeable bond on 8 May 2024, at which
point the bond will require to be refinanced. In forming the
conclusion on going concern the Directors have used the forecast
period of 20 months to 30 April 2024, being the month end prior to
the maturity of the exchangeable bond.
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
scenario, the LSA ring fenced business will obtain the necessary
liquidity of GBP10m prior to August 2023 to enable it to operate
throughout the going concern period to 30 April 2024. With this
funding, the Group as a whole will also have sufficient liquidity
throughout the going concern period. Even if the LSA business is
not able to obtain the required funding when required, this will
not directly impact going concern assessment of the wider Group.
The Group will require significant additional funding to meet its
liabilities when the exchangeable bond matures. The repayment under
the exchangeable bond on 8 May 2024 will be GBP53.1m less the value
of LDG plc shares held as collateral. These shares were fair valued
at GBP6.6m as at 31 August 2022. The Directors are confident that
sufficient appropriate funding will be available, 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 30 April
2024, based on the Directors' expectations around the return to
flying at London Southend Airport and growth in passenger numbers.
The base case, including the assumption that the LSA ring fenced
business will raise the additional liquidity that it requires,
indicates that the Group will have sufficient funds to meet its
liabilities for the period prior to the maturity of the
exchangeable bond on 8 May 2024, when the headroom turns negative.
The base case forecasts assume GBP10m cash inflows from disposals
of non-core assets, which have a net book value of GBP36m, and they
also demonstrate compliance with all specific funding covenants,
with additional actions available to the Directors to further
improve covenant headroom if required.
The level of flying at London Southend Airport (LSA) has
remained below expectations for the period to 31 August 2022 and
its global logistics partners ceased cargo operations at LSA in
mid-September. In light of the anticipated impact of these factors,
and noting that under base case forecasts for the ringfenced LSA
business, LSA would require additional liquidity by August 2023.
The Group has been exploring options to ensure that it can properly
fund LSA to protect value in its investment and a portion of the
GBP40m uncommitted facility would allow the Group to put funding
into the LSA business as the liquidity requirement at the airport
arises as long as the funds under that uncommitted facility become
available in due course. The Group will alongside seeking to
satisfy the conditions to draw down on that facility in the event
that the liquidity requirement arises, continue to explore other
funding options for LSA, in cooperation with its partner at the
airport, to ensure that it has the best-priced financing available
when it is required. LSA remains well positioned for the recovery
and longer-term growth in commercial passenger flying. In the event
that the Group is unable to draw on the funding required to meet
the forecast liquidity requirements of LSA at the relevant time,
and either Esken or LSA has not been able to secure any other
source of financing or liquidity, the Group will consider
alternative options, including a possible sale of all or part of
the Airport or other valuable assets within the Group.
Severe but plausible downside forecast
The Directors have also considered a severe but plausible
downside scenario that includes the following:
-- Reduction in passengers forecast, with a downside scenario
including a 72% reduction in passenger volume (albeit this will not
impact on the covenant calculations);
-- Removal of Aviation proceeds from new asset finance leases,
with no corresponding beneficial rephasing of the capital
expenditure additions profile;
-- Reduction in Energy tonnes sold of 4%; and
-- A decrease in gate fee revenue due to a 7% reduction of
inbound volumes accompanied by 2% reduction in net gate fees,
driving a 27% reduction in cash inflows.
This scenario indicates that, before non-controllable mitigating
actions such as accelerated non-core asset disposals, and
controllable mitigating actions such as rephased capital
expenditure, accelerated disposal of listed shares held and
reduction in discretionary overheads, the Group has sufficient
funding up until February 2024, at which point additional funding
is required.
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 to 30 April 2024 and therefore have prepared the interim
financial statements on a going concern basis.
However, the risks and uncertainties associated with the
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
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 2022. These accounting policies are expected
to be applied for the full year to 28 February 2023.
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 2022. Estimates for the defined benefit pension assets
principally relate to discount rates, inflation and mortality. The
impact of changes in these estimates has contributed to the GBP0.8m
increase in pension asset from 28 February 2022 to 31 August 2022.
See note 12 for information on the aircraft maintenance provision
estimates.
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.
2 Seasonality of operations
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, Renewables, Investments and
Non-Strategic Infrastructure. The results of Propius are presented
as discontinued operations on the face of the Condensed
Consolidated Income Statement, see note 5.
The Aviation segment specialises in the operation of a
commercial airport and the provision of ground handling services.
The Renewables segment specialises in the supply of sustainable
biomass material 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.
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 interest,
tax, depreciation and impairments. 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 2022 Aviation Renewables Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External 14,150 43,534 - 302 161 58,147
Internal - - - 50 (50) -
--------- ----------- ------------ ---------------- ------------------ ---------
Statutory revenue 14,150 43,534 - 352 111 58,147
--------- ----------- ------------ ---------------- ------------------ ---------
EBITDA (518) 6,950 (380) (402) (3,149) 2,501
Depreciation (4,848) (3,879) - (192) (194) (9,113)
Net interest (7,080) (776) (821) (12) 2,576 (6,113)
--------- ----------- ------------ ---------------- ------------------ ---------
(Loss)/profit before
tax (12,446) 2,295 (1,201) (606) (767) (12,725)
--------- ----------- ------------ ---------------- ------------------ ---------
Six months ended Non-Strategic Group central
31 August 2021 Aviation Renewables 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)
--------- ----------- ------------ ---------------- ------------------ ---------
Internal revenue above relates to inter-segment revenues that
are eliminated within Group central and eliminations. Intra-segment
revenues are eliminated within each segment.
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 the disaggregation of revenue
from contracts with customers.
Six months ended Non-Strategic Group central
31 August 2022 Aviation Renewables Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue from contracts
with customers 14,045 43,534 - 78 - 57,657
Other revenue -
lease income 105 - - 224 161 490
--------- ----------- ------------ ---------------- ------------------ --------
14,150 43,534 - 302 161 58,147
--------- ----------- ------------ ---------------- ------------------ --------
Six months ended Non-Strategic Group central
31 August 2022 Aviation Renewables Investments Infrastructure and eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Major product/service
line
Sale of goods 2,944 33,362 - - - 36,306
Rendering of services 11,101 10,172 - 78 - 21,351
14,045 43,534 - 78 - 57,657
--------- ----------- ------------ ---------------- ------------------ --------
Primary geographical markets
United Kingdom 13,385 43,534 - 78 - 56,997
Europe and Ireland 573 - - - - 573
Rest of world 87 - - - - 87
--------- ----------- ------------ ---------------- ------------------ --------
14,045 43,534 - 78 - 57,657
--------- ----------- ------------ ---------------- ------------------ --------
Timing of revenue recognition
Products and services
transferred at a
point in time 14,045 43,534 - 78 - 57,657
14,045 43,534 - 78 - 57,657
--------- ----------- ------------ ---------------- ------------------ --------
Six months ended Non-Strategic Group central
31 August 2021 Aviation Renewables 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 Renewables 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 26,348 - - - 28,487
Rendering of services 10,572 11,796 - 63 - 22,431
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
--------- ----------- ------------ ---------------- ------------------ --------
Opening and closing receivables, contract assets and contract
liabilities from contracts with customers are as follows:
31 August 2022 28 February
2022
Unaudited Audited
GBP'000 GBP'000
Receivables 11,040 10,064
Contract assets 5,539 3,327
--------------- ------------
Contract assets relate to the Group's rights to consideration
for work completed but not billed at the reporting date on
contracts in the Renewables division and have increased mainly due
timing of unbilled transport work.
5 Discontinued operations
In the prior year, on 14 June 2021, the Ireland High Court
appointed liquidators to Stobart Air. Following the liquidation,
Propius, which leased all eight of its aircraft to Stobart Air, is
abandoned in line with the IFRS 5 definition of a discontinued
operation. The results of Propius in the current and prior periods,
and Stobart Air in the prior period only, are reported on a single
line, net of tax on the face of the Condensed Consolidated Income
Statement.
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.
A summary of the Stobart Air results included in discontinued
operations is as follows:
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Revenue - 3,449
Operating expenses - (5,156)
Net finance costs - 602
-------------- -------------
Results from operating activities before
tax - (1,105)
Profit on liquidation - 9,752
-------------- -------------
Profit before tax - 8,647
Tax - -
-------------- -------------
Profit for the period from discontinued
operations, net of tax - 8,647
-------------- -------------
A summary of the Propius results included in discontinued
operations is as follows:
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Operating expenses 2,670 (9,486)
Net finance costs (1,074) (1,727)
------------- -------------
Profit/(loss) before tax 1,596 (11,213)
Tax - (48)
------------- -------------
Profit/(loss) for the period from discontinued
operations, net of tax 1,596 (11,261)
------------- -------------
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 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Stobart Air discontinued operations,
net of tax - 8,647
Propius discontinued operations, net
of tax 1,596 (11,261)
Stobart Rail discontinued operations,
net of tax - (301)
Loss from discontinued operations,
net of tax 1,596 (2,915)
------------- -------------
The above losses are attributable to the owners of the
company.
The cash flows in relation to Stobart Air are as follows:
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Net cash used in operating activities - (14,301)
Net cash used in financing activities - (2,143)
Net cash flows for the period - (16,444)
-------------- -------------
The cash flows in relation to Propius are as follows:
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Net cash used in operating activities (5,600) (1,002)
Net cash used in from investing activities - (7,808)
Net cash used in financing activities (6,288) (6,453)
Net cash flows for the period (11,888) (15,263)
------------- -------------
A summary of cash flows from discontinued operations is as
follows:
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Stobart Air - (16,444)
Propius (11,888) (15,263)
Stobart Rail - 170
Net cash flows for the period (11,888) (31,537)
------------- -------------
6 Finance costs and income
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Interest accrued on convertible debt 6,624 -
Amortisation of deferred issue costs 1,959 3,866
Finance charges payable under leases 1,842 2,065
Bank loans 908 3,125
Interest paid on defined benefit pension
scheme - 21
Other interest - 99
Foreign exchange losses - 764
Total finance costs 11,333 9,940
------------- -------------
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Foreign exchange gains 3,848 1
Revaluation of convertible debt derivative 1,043 -
Fair value of financial liabilities - 1,581
Interest received from net investment
in lease 321 324
Interest received on defined benefit
pension scheme 8 -
Total finance income 5,220 1,906
------------- -------------
Finance costs on bank loans have decreased period on period due
to the RCF being undrawn in the current period. The increase in
foreign exchange gains is due to favourable fluctuations in US
Dollar and exchange rates impacting the Group's foreign-currency
denominated intercompany loan. The revaluation of the compound
derivative element of the convertible debt instrument with Carlyle
Global Infrastructure Opportunity Fund led to a gain of
GBP1,043,000 in the period, see note 11.
In the prior year, on 7 May 2021, the put option the Group
entered into with fellow Connect Airways shareholder Cyrus Capital
Partners was exercised and 6 million ordinary shares in Esken
Limited were issued. The exercise meant that the associated
financial liability had a fair value of GBPnil and GBP1,581,000 was
released and presented within finance income in the Condensed
Consolidated Income Statement.
7 Taxation
Taxation on profit on ordinary activities
Total tax in the Condensed Consolidated Six months Six months
Income Statement from continuing and ended 31 ended 31
discontinued operations August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Corporation tax:
Current year corporation tax 1,000 -
Overseas corporation tax - 48
Adjustments in respect of prior years (3,311) (8,500)
Total corporation tax (2,311) (8,452)
------------- -------------
Deferred tax:
Origination and reversal of temporary
differences (152) (500)
Impact of change in rate (48) (23)
Total deferred tax (200) (523)
------------- -------------
Total credit in the income statement (2,511) (8,975)
------------- -------------
Split between:
Continuing (2,511) (9,023)
Discontinued - 48
------------- -------------
Included in the above tax charges are total current tax credit
on continuing operations of GBP2,311,000 (2021: GBP8,500,000) and a
total deferred tax credit on continuing operations of GBP200,000
(2021: GBP523,000) giving a total tax credit on continuing
operations in the Condensed Consolidated Income Statement of
GBP2,511,000 (2021: GBP9,023,000). In addition, there is a current
tax charge on discontinued operations of GBPnil (2021: GBP48,000)
giving a total tax credit on continuing and discontinued operations
in the Condensed Consolidated Income Statement of GBP2,511,000
(2021: GBP8,975,000).
An increase in the main rate of corporation tax 25% effective
from 1 April 2023 was substantively enacted as at the balance sheet
date 31 August 2022. As such, the deferred tax assets/liabilities
as at 31 August 2021 have been recognised/provided at 25%.
8 Loss per share
The following table reflects the income and share data used in
the basic and diluted earnings per share calculations:
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
Numerator GBP'000 GBP'000
Continuing operations
Loss for the period used for basic and
diluted earnings (10,214) (3,526)
Discontinued operations
Profit/(loss) for the period used for
basic and diluted earnings 1,596 (2,915)
Total
Loss for the period used for basic and
diluted earnings (8,618) (6,441)
------------- -------------
Denominator Number Number
Weighted average number of shares used
in basic EPS 1,020,735,977 635,625,609
Effects of employee share options - -
-------------- ------------
Weighted average number of shares used
in diluted EPS 1,020,735,977 635,625,609
-------------- ------------
Own shares held and therefore excluded
from weighted average number 4,600,764 3,800,802
-------------- ------------
9 Property, plant and equipment
Additions and disposals
During the six months ended 31 August 2022, the Group acquired
or developed property, plant and equipment assets with a cost of
GBP3,725,000 (2021: GBP2,937,000). This mainly consisted of
development work at London Southend Airport and plant and machinery
equipment in the Renewables division. Property, plant and equipment
assets with a book value of GBP617,000 (2021: GBP318,000) were
disposed of by the Group during the six months ended 31 August
2022, resulting in a profit on disposal of GBP430,000 (2021:
GBP42,000).
Capital commitments
At 31 August 2022, the Group had capital commitments of GBPnil
(2021: GBP499,000).
10 Inventories
During the period a portion of Widnes land held in property
inventories within the Non-Strategic Infrastructure division was
sold for cash proceeds of GBP3,538,000 which was equal to the
land's book value.
11 Financial assets and liabilities
31 August 28 February
2022 2022
Unaudited Audited
Loans and borrowings GBP'000 GBP'000
Non-current
Obligations under leases 77,733 98,677
Convertible debt (net of costs) 125,410 118,862
---------- ------------
203,143 217,539
Current
Exchangeable bonds (net of costs) 52,573 52,385
Obligations under leases 39,773 24,714
---------- ------------
92,346 77,099
Total loans and borrowings 295,489 294,638
---------- ------------
Cash (31,931) (52,738)
---------- ------------
Net debt 263,558 241,900
---------- ------------
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 or a security deposit.
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 2022,
the difference amounted to GBP44.9m.
Convertible debt
The convertible debt instrument with Carlyle Global
Infrastructure Opportunity Fund (CGI), received in the prior year,
includes three derivatives in relation to conversion which are
accounted for as one single compound derivative as they are not
considered independent of each other. The fair value of the
compound derivative is measured at each reporting date using the
underlying equity value of LSA and the fair value of the host
contract as inputs into the valuation model. The compound
derivative valuation is materially impacted if LSA performs
substantially above or below its five-year business model.
At 28 February 2022 the fair value of the compound derivative
was GBP1,088,000. Due to a change in market conditions and a timing
in cash flows the fair value of the compound derivative has reduced
to GBP45,000. The GBP1,043,000 reduction in the fair value has been
recognised in finance income in the Condensed consolidated income
statement, see note 6.
Revolving Credit Facility (RCF)
The RCF was undrawn at the period end (Feb 2022: GBPnil). The
Group was in compliance with, or received waivers for, all
financial covenants throughout both the current and prior periods.
Following the sale of Widnes land, see note 10, under the terms of
the RCF the available facility was reduced by GBP875,000, being 25%
of the net proceeds, from GBP20,000,000 to GBP19,125,000.
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
2022 52,385 - 118,862 123,391 294,638
Changes from financing
cash flows:
Cash outflow from debt
issue costs - (50) - - (50)
Principal elements of
lease payments - continuing
operations - - - (7,899) (7,899)
Principal elements of
lease payments - discontinued
operations - - - (5,137) (5,137)
Interest paid - continuing
operations (730) (179) - (1,854) (2,763)
Interest paid - discontinued
operations - - - (1,151) (1,151)
-------------------------------- ------------- ----------------- ------------ -------------- ---------
Total changes from
financing cash flows (730) (229) - (16,041) (17,000)
Release of debt issue
costs 188 - 967 - 1,155
New leases entered into - - - 3,395 3,395
Termination of lease - - - (11) (11)
The effect of changes
in foreign exchange
rates - - - 3,780 3,780
Revaluation of derivative - - (1,043) - (1,043)
Non-cash accruals 730 229 6,625 2,991 10,575
------------- ----------------- ------------ -------------- ---------
Balance at 31 August
2022 52,573 - 125,411 117,505 295,489
------------- ----------------- ------------ -------------- ---------
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 - - - (8,331) (8,331)
Principal elements of
lease payments - discontinued
operations - - - (6,939) (6,939)
Interest paid - continuing
operations (730) (3,075) - (1,578) (5,383)
Interest paid - discontinued
operations - - - (1,657) (1,657)
-------------------------------- ------------- ----------------- ------------ -------------- ---------
Total changes from
financing cash flows (730) (60,011) 111,459 (18,505) 32,213
Release of debt 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 730 2,347 206 3,577 6,860
------------- ----------------- ------------ -------------- ---------
Balance at 31 August
2021 52,198 - 111,696 136,665 300,559
------------- ----------------- ------------ -------------- ---------
The book value and fair values of financial assets and financial
liabilities are as follows:
Book Value Fair Value
31 August 31 August
2022 2022
Unaudited Unaudited
GBP'000 GBP'000
Financial assets
Other investments 13,243 13,243
Financial Liabilities
Exchangeable bonds - host element 52,449 48,169
Convertible debt - host element 125,365 85,213
Embedded derivatives 169 169
Book Value Fair Value
28 February 28 February
2022 2022
Audited Audited
GBP'000 GBP'000
Financial assets
Other investments 14,105 14,105
Financial Liabilities
Exchangeable bonds 52,261 47,278
Convertible debt 117,774 121,423
Embedded derivatives 1,212 1,212
The directors reasonably consider the fair value of other
financial assets and liabilities (such as trade and other
receivables, trade and other payables, and lease liabilities)
approximate their book value.
Fair Value Hierarchy
The fair value hierarchy is explained in the statutory accounts
for the year ended 28 February 2022. The fair values in the table
below reflect financial assets and liabilities measured at fair
value in condensed consolidated statement of financial
position.
Total Level 1 Level 2 Level 3
As at 31 August GBP'000 GBP'000 GBP'000 GBP'000
2022
Financial assets
Other financial
assets 13,243 8,243 5,000 -
Financial liabilities
Other financial
liabilities 169 - - 169
Total Level 1 Level 2 Level 3
As at 28 February GBP'000 GBP'000 GBP'000 GBP'000
2022
Financial assets
Other financial
assets 14,105 9,205 4,900 -
Financial liabilities
Other financial
liabilities 1,212 - - 1,212
The GBP5m other financial assets presented within level 2 at 31
August 2022 has been fair valued by reference to cash held within
the bank account of the captive cell.
The other financial liabilities are recognised within the
convertible debt and exchangeable bonds within loans and borrowings
on the face of the condensed statement of financial position.
There were no transfers between Levels 1, 2 and 3 fair value
measurements. The movement in Level 3 other financial liabilities
of GBP1,043,000 relates to the value of the single compound
derivative within the convertible debt instrument. This movement
has been recognised within finance income in the condensed
consolidated income statement.
12 Provisions
Onerous Litigation Remediation Maintenance
Site restoration contracts and claims provision reserves Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ----------- ------------ ------------ ------------ --------
At 1 March 2022 1,250 2,021 3,095 3,942 23,645 33,953
Provisions used (1,250) (682) (391) - (994) (3,317)
Provisions made - - 22 - - 22
Provisions reversed - - - - (2,758) (2,758)
Currency retranslation - - - - 3,478 3,478
At 31 August
2022 - 1,339 2,726 3,942 23,371 31,378
----------------- ----------- ------------ ------------ ------------ --------
Analysis of
provisions
Current - 1,244 2,726 3,942 22,098 30,010
Non-current - 95 - - 1,273 1,368
----------------- ----------- ------------ ------------ ------------ --------
At the beginning of the period the Group leased a long leasehold
property in respect of which it had annual dilapidation and holding
costs. During the period an agreement was signed with the owners of
the property for the Group to exit the lease in return for payment
of GBP1,250,000, which was made in the period.
During the period the Group made payments totalling GBP994,000
for required maintenance on the eight ATR aircraft leased by
Propius. An agreement was reached with the lessor of the aircraft
for the early hand back of two of the aircraft. The hand back
reduced the level of maintenance works required by the Group
leading to a release of provision of GBP2,758,000. The estimates
made in relation to the six aircraft remaining are unchanged from
the year end. Fluctuations in the exchange rate between the US
Dollar and GB Pound led to a GBP3,478,000 increase in maintenance
reserves.
13 Contingent liabilities
As at 31 August 2022 the Group had no contingent liabilities (28
February 2022: GBP2.0m).
14 Cash used in operations
Six months Six months
ended 31 ended 31
August 2022 August 2021
Unaudited Unaudited
GBP'000 GBP'000
Loss before tax (12,725) (12,549)
Adjustments to reconcile loss before
tax to net cash flows:
Realised profit on sale of property,
plant and equipment (430) (50)
Share of post-tax losses of associate
accounted for using the equity method 346 146
Depreciation of property, plant and
equipment 9,113 10,089
Finance income (1,364) (1,905)
Finance costs 11,325 9,176
Release of grant income (796) (694)
Charge for share-based payments 250 400
Gain on fuel swaps mark to market valuation - (58)
Retirement benefits and other provisions (2,244) (1,694)
Working capital adjustments:
(Increase)/decrease in inventories (35) 19
(Increase)/decrease in trade and other
receivables (5,866) 1,570
Increase/(decrease) trade and other
payables 242 (4,587)
Cash used in continuing operations (2,184) (137)
------------- -------------
15 Related parties
During the period, the Group made sales of GBP2,928,000 (2021:
GBP3,392,000) to its associate Mersey Bioenergy Limited (a
subsidiary of Mersey Bioenergy Holdings Limited) relating to the
sale of biomass material. At 31 August 2022, GBP549,000 (28
February 2022: GBP220,000) was owed to the Group.
16 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, depreciation and
impairments. Refer to note 3 for reconciliation to statutory loss
before tax.
Net debt
Net debt is defined as the sum of obligations under leases,
revolving credit facility, exchangeable bonds and convertible debt,
less cash and cash equivalents. See note 11 for reconciliations of
this measure.
Gearing
This is defined as net debt, as defined above, divided by Group
shareholders' equity per the consolidated statement of financial
position.
Headroom
This is the sum of cash per the consolidated statement of
financial position plus the GBP19.1m revolving credit facility
which was undrawn at the year end. It shows the amount of cash that
can be drawn on by the Group at short notice.
Independent Review Report to Esken Limited
Conclusion
We have been engaged by Esken Limited (the 'Company') to review
the condensed consolidated financial statements in the half-yearly
financial report for the six months period ended 31 August 2022 of
the Company and its subsidiaries (together the 'Group') which
comprise the condensed consolidated income statement, the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of financial position, the condensed
consolidated statement of changes in equity and the condensed
consolidated statement of cash flows and the related explanatory
notes from 1 to 16. We have read the other information contained in
the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of consolidated financial
statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated financial
statements in the half-yearly financial report for the six months
ended 31 August 2022 are not prepared, in all material respects, in
accordance with UK Adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 (Revised), "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued for use in the United Kingdom. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
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.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted IFRSs. The
condensed consolidated set of financial statements included in this
half-yearly financial report has been prepared in accordance with
UK adopted International Accounting Standard 34, "Interim Financial
Reporting".
Material uncertainty relating to going concern
Note 1 to the condensed consolidated financial statements sets
out the assessment of the going concern basis of preparation
including the material uncertainty that the directors have
identified in respect of the basis of preparation.
The Group has reported a consolidated loss for the period of
GBP8.6 million and a total consolidated comprehensive loss for the
period of GBP19.3 million. At 31 August 2022 the consolidated
current liabilities of the Group exceed the consolidated current
assets by GBP82.0 million .
Note 1 also describes the requirement for the Group to secure
additional financing prior to the maturity of the exchangeable
bond, which has a carrying value of GBP 52.6 million at 31 August
2022. The bond matures on 8 May 2024.
The risks and uncertainties associated with the achievement of
forecasts and the availability of sufficient funding as set out in
Note 1, including the requirement to obtain shareholder approval of
the GBP50m committed debt facility that was signed on 9 November
2022, 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.
Our conclusion is not modified in respect of the above
matter.
Responsibilities of directors
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.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed
consolidated financial statements in the half-yearly interim
financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for
Conclusion paragraph of this report.
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.
Tim Hudson (Senior Statutory Auditor)
For and on behalf of
Mazars LLP
Chartered Accountants
One St. Peter's Square
Manchester
M2 3DE
United Kingdom
9 November 2022
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END
IR UPGWWGUPPUQB
(END) Dow Jones Newswires
November 09, 2022 02:00 ET (07:00 GMT)
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