LONDON BRIEFING: Esken shares drop 20% as Stobart Air collapses

(Alliance News) - Esken confirmed on Monday that Stobart Air has ceased trading and is appointing ...

Alliance News 14 June, 2021 | 8:18AM
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(Alliance News) - Esken confirmed on Monday that Stobart Air has ceased trading and is appointing a liquidator, after its intended buyer failed to secure funding for the deal.

Esken shares were down 20% early Monday.

Aer Lingus was forced to cancel a number of regional flights over the weekend after operator Stobart Air ended its contract with the Irish airline, which is part of International Consolidated Airlines Group. The announcement affected several flights from Dublin and Belfast City airports to UK cities.

An Aer Lingus statement said: "Stobart Air referred to the continuing impact of the pandemic which has resulted in almost no flying since March 2020. Stobart Air has ceased trading and is now in the process of appointing a liquidator."

Esken, formerly Stobart Group, had agreed back in April to sell Stobart Air to Isle of Man-based Ettyl for a nominal GBP2, plus up to GBP7.5 million by 2024 depending on performance. Late last month, Esken first said the sale was delayed as it awaited change of control consents that would have allowed Stobart Air to keep its contracts under the new ownership. Then it said it had become aware that Ettyl's proposed financing was no longer available and that Ettyl was in discussions with another potential financing source.

On Monday, Esken said it will continue to be responsible for the lease obligations on eight ATR aircraft to April 2023 and will try to sublease these to another operator. It also has some obligations to Aer Lingus.

Overall, the cash outflow if Esken is unable to sublease the planes will be GBP34 million in financial 2022, up from the GBP16 million impact previously expected from Stobart Air. In financial 2023, this is GBP22 million, up from GBP9 million, and in financial 2024, it is GBP26 million, up from GBP24 million.

Meanwhile, Esken will retain ownership of Carlisle Lake District Airport, rather than receive GBP15 million from its sale.

More positively, Esken said it is in the final stages of agreeing a "strategic funding" investment into London Southend Airport by an unnamed partner with "significant investment experience in the airport sector globally". Esken is in talks about its bank facilities, totalling GBP120 million, that expire in January 2022, and the funding agreement for the airport would repay its outstanding bank facilities.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 0.7% at 7,181.38

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Hang Seng: Hong Kong market closed for holiday

Nikkei 225: closed up 0.7% at 29,161.80

DJIA: closed up 13.36 points at 34,479.60

S&P 500: closed up 8.26 points, or 0.2%, at 4,247.44

Nasdaq Composite: closed up 49.09 points, or 0.4%, at 14,069.42

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EUR: flat at USD1.2100 (USD1.2096)

GBP: flat at USD1.4107 (USD1.4105)

USD: down at JPY109.70 (JPY109.80)

GOLD: down at USD1,860.04 per ounce (USD1,894.00)

OIL (Brent): up at USD73.04 a barrel (USD72.85)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Monday's Key Economic Events still to come

China Dragon Boat Festival holiday. Financial markets closed in Hong Kong and Shanghai.

UK Bank of England Governor Andrew Bailey speaks at ACT annual conference

1100 CEST EU industrial production

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UK Prime Minister Boris Johnson is facing a furious backlash from Tory members of Parliament as he prepares to put the final lifting of coronavirus lockdown restrictions in England on hold. Johnson is expected to announce the ending of social-distancing rules – which had been slated for June 21 – will be delayed for four weeks to July 19, with the BBC reporting early on Monday the decision had been signed off by senior ministers. The move follows warnings from scientists that the rapid spread of the Delta variant first identified in India risks a "substantial" third wave if it is allowed to spread unchecked. Johnson is expected to appeal to the public to show patience, with one last push to ensure that when controls do finally end it is "irreversible". However, it comes as a huge setback to many businesses – particularly in the battered hospitality sector – which had pinned their hopes on a full summer reopening to recoup some of the losses of the past year.

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China accused the G7 of "political manipulation" after it criticised Beijing over its human rights record in Xinjiang and Hong Kong. In a communique after a three-day summit in England, G7 leaders slammed China over abuses against minorities in the Xinjiang region and pro-democracy activists in Hong Kong, while US President Joe Biden called for Beijing to "start acting more responsibly in terms of international norms on human rights". The Chinese embassy in the UK responded angrily on Monday, and accused the G7 of "interfering". "The Group of Seven takes advantage of Xinjiang-related issues to engage in political manipulation and interfere in China's internal affairs, which we firmly oppose," an embassy spokesman said in a statement. The statement accused the G7 of "lies, rumours and baseless accusations".

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Industrial production in Japan surged at a greater pace than expected in April. According to the Ministry of Economy, Trade & Industry, industrial output jumped by just shy of 16% annually in April, having risen 3.4% in March. According to consensus cited by FXStreet, another jump of just over 15% was expected for April, so the figure narrowly topped consensus. On a monthly basis, output growth was 2.9% in April, accelerating from March's 1.7% hike. Consensus forecasts were growth of 2.5% in April.

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BROKER RATING CHANGES

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MORGAN STANLEY CUTS CRH TO 'EQUAL-WEIGHT' (OVERWEIGHT) - PRICE TARGET 45 (42) EUR

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BERNSTEIN CUTS DIAGEO TO 'MARKET-PERFORM' (OUTPERFORM) - PRICE TARGET 3,550 PENCE

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RBC CUTS SANNE GROUP TO 'SECTOR PERFORM' ('OUTPERFORM') - TARGET 925 (750) PENCE

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COMPANIES - FTSE 100

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BP said it has joined up with Statkraft and Aker Offshore Wind in a ‎consortium bidding to develop offshore wind energy in Norway. Each company will hold a third stake in the partnership, which will pursue a bid to develop offshore wind power in the Sorlige Nordsjo II licence area. The licence area's "favourable location" provides power export access to local and adjacent markets. The ‎consortium also plans to explore opportunities to provide clean power to electrify ‎offshore oil and gas facilities.

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Royal Dutch Shell is reviewing its holdings in the largest US oil field for a potential sale, Reuters reported, citing people familiar with the matter. The move is part of the oil major's shift away from fossil fuels as it faces growing pressure to slash carbon emissions, according to Reuters. Reuters said the sale could be for part or all of Shell's position in the US Permian Basin, located mostly in Texas, which accounted for around 6% of the Anglo-Dutch company's total oil and gas output last year. The holdings could be worth more than USD10 billion, the people said.

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COMPANIES - FTSE 250

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Serco said Vivo Defence - its joint venture with France's Engie - has been awarded contracts to provide asset and facilities management services by the UK Defence Infrastructure Organisation, an operating arm of the Ministry of Defence. The contracts are for the South West and Central regions of the UK. Serco said the total core contract value for the two regions is estimated to be around GBP900 million over an initial seven-year period, with total potential value of GBP3.4 billion. There are a further three one-year extension options, it noted. Turning to current trading, Serco said the strong performance it saw at the beginning of the year has continued. All of its four divisions have traded in-line or ahead of their budgets in the first five months of the year, the outsourcer said. In the UK in particular, volumes on both its Testing & Tracing contracts have continued to be strong, and Serco now thinks that demand for these services will continue for longer in the second half than previously anticipated. As a result, Serco increased guidance for underlying trading profit in 2021 by GBP15 million, to around GBP200 million. It posted underlying trading profit of GBP163 million for 2020.

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JLEN Environmental Assets Group said it has acquired Cramlington Renewable Energy Developments for an undisclosed amount. Cramlington Renewable Energy is a 28 megawatt biomass combined heat-and-power plant located in Northumberland. The purchase represents JLEN's first investment into a large-scale biomass CHP plant and is in line with its strategy to "further diversify its portfolio" and to secure strong inflation-linked revenue streams, it said. "We believe that assets such as these provide a sustainable source of renewable heat and power that can be utilised as baseload power to the grid and a direct provision to nearby industrial customers. The plant has a strong operational track record, and we look forward to optimising this asset for the future," said JLEN Chair Richard Morse.

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COMPANIES - MAIN MARKET AND AIM

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Retailer Ted Baker reported a fall in annual revenue, amid shop closures due to Covid-19 restrictions. For the financial year ended January 30, revenue was GBP352 million, down 44% from GBP630.5 million the year before, and the company's pretax loss widened to GBP107.7 million from GBP77.6 million. Ted Baker is in the first year of a three-year strategic transformation programme it has dubbed 'Ted's Growth Formula', and said progress on so far has been "encouraging". The retailer said that, given current trading conditions and the high level of uncertainty about the future, the board has decided that no final dividend will be paid, having paid out 40.7 pence last year. In the long term, "we remain committed to paying dividends and returning surplus cash to our shareholders", Ted Baker said. Chief Executive Officer Rachel Osborne said: "While the impact of Covid-19 is clear in our results and has amplified some of the legacy issues impacting the business, Ted Baker has responded proactively and is in a much stronger place than it was a year ago."

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Monday's Shareholder Meetings

Altus Strategies PLC - AGM

Arix Bioscience PLC - AGM

Belvoir Group PLC - GM re dividend

Jupiter Green Investment Trust PLC - GM re further issuance of shares

Lexington Gold Ltd - AGM

Mirriad Advertising PLC - AGM

NB Global Monthly Income Fund Ltd - AGM

Plant Health Care PLC - AGM

Revolution Bars Group PLC - GM re placing

Saga PLC - AGM

SourceBio International PLC - AGM

Spectra Systems Corp - AGM

TBC Bank Group PLC - AGM

Trian Investors 1 Ltd - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Esken Ltd 17.90 GBX -0.56 -
Sanne Group PLC 844.00 GBX -0.47 -
Diageo PLC 3,570.50 GBX 0.86
International Consolidated Airlines Group SA 168.10 GBX -7.45
CRH PLC 3,605.00 GBX 0.14

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