TIDMESKN
RNS Number : 3630D
Esken Limited
21 June 2023
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of domestic law by virtue of the European Union
(Withdrawal) Act 2018.
21 June 2023
Esken Limited
("Esken" or the "Group")
Results for the 12 months ended 28 February 202 3
Sale process advancing alongside continuing operational
optimisation
Esken Limited, the Aviation and Renewables Group, today
announces its results for the 12 months to 28 February 2023.
Summary
-- Esken completed a strategic review of its operating businesses and is actively progressing a managed sale process
of its core Renewables and Aviation businesses.
-- The sale of Esken Renewables is progressing well and is now at an advanced stage working with a preferred bidder
on an exclusive basis.
-- Esken has started the process for the sale of London Southend Airport (LSA), its key strategic airport asset
within the Aviation business.
-- In November 2022, Esken secured a new borrowing facility comprising GBP50m of committed funding.
-- Esken Renewables took steps to optimise its margins and secured additional sub supply agreements.
-- easyJet entered a multiyear agreement for the return of flying to LSA with three summer routes and has recently
announced additional all-year-round routes to Paris and Amsterdam. These new routes and airline partnership are
encouraging signs that LSA's recovery is now under way.
-- Since the year end, Esken has completed the sale of Star Handling Limited for up to GBP4.8m in May 2023.
-- As at 28 February 2023, the Group's headroom was GBP50.3m, in line with management expectations (see Alternative
performance measure note for the definition of headroom).
Strategic Review
At the time of our interim results we announced that a decision
had been taken by the Board to conduct a strategic review of the
Group's operational businesses. The Board concluded that the
interests of all stakeholders would be best served by seeking a new
owner for each of the core businesses through a managed sale
process. In each case the Renewables and Aviation businesses will
benefit from long term strategic owners with access to capital to
support growth ambitions, while offering stability and certainty to
the staff, customers and suppliers.
In view of the different rates of recovery of the businesses we
initiated a sale of the Renewables business first and that process
is now at an advanced stage working with a preferred bidder on an
exclusive basis. We have also started the process for the sale of
LSA, the core asset within the Aviation business.
As we progress with these disposals we are reducing the
underlying cost base of the Group to a level sufficient to support
the remaining operations, including an exit from the residual
non-core assets. In line with this approach we are exploring a move
to the Standard segment of the Main Market following completion of
the disposal of Renewables.
David Shearer , Executive Chairman of Esken said,
"Over the last financial year, we secured a successful debt fund
raising in difficult market conditions, completed a strategic
review of our operating businesses, and are now progressing with
our plans to sell our core operating businesses and residual
non-core assets through a managed disposal process with a view to
returning any remaining value to Esken shareholders.
Our Renewables business saw increased revenues albeit at a lower
margin, reflecting increased volumes of lower margin fuel supply,
an increased number of unplanned outages at customer waste wood
biomass plants and the impact of inflationary pressures where there
is a lag before the benefit of indexation on our contracts impact.
The Division is focused on steps to improve margins going forwards,
including optimising the fleet for efficiency and strong cost
control.
Our Aviation business continues to make progress as demand
recovers, with LSA signing a multi-year partnership with easyJet in
January 2023 - the airline will now serve five destinations from
the airport. We installed a new, experienced senior management team
and the case for the airport remains well founded as demonstrated
by the increase in routes served by easyJet."
Restated(1)
GBP'm 2023 2022 % change
---------------------------------------------- -------- ------------- ----------
Revenue by Division
Renewables 93.7 79.7 17.7%
Aviation 25.5 23.4 8.7%
---------------------------------------------- -------- ------------- ----------
15.6
Revenue for two core operating divisions 119.2 103.1 %
---------------------------------------------- -------- ------------- ----------
Investments and Non-Strategic infrastructure 0.6 0.7 (7.1%)
Group central and eliminations 0.2 0.8 (79.6%)
---------------------------------------------- -------- ------------- ----------
Total revenue 120.0 104.6 14.7%
---------------------------------------------- -------- ------------- ----------
Adjusted EBITDA(2) by division
Renewables 18.4 20.3 (9.5%)
(390
Aviation (3.8) (0.8) .9%)
Adjusted EBITDA(2) for two core operating (25.3
divisions 14.6 19.5 %)
---------------------------------------------- -------- ------------- ----------
Investments and Non-Strategic infrastructure (1.7) 3.3 (153.3%)
Group central and eliminations (7.3) (12.2) 41.0%
---------------------------------------------- -------- ------------- ----------
(46.9
Total adjusted EBITDA(2) 5.6 10.6 %)
---------------------------------------------- -------- ------------- ----------
(27.7 (35.7
Loss before tax ) ) 22.4%
---------------------------------------------- -------- ------------- ----------
Tax 2.5 9.9 (74.6%)
Discontinued operations, net of tax (0.0) (2.4) 97.5%
---------------------------------------------- -------- ------------- ----------
(25.2 (28.2 10.5
Loss for the year ) ) %
(17.3
Net debt (290.1) (247.3) %)
Cash and undrawn banking facilities 50.3 72.7 (30.9%)
---------------------------------------------- -------- ------------- ----------
1 The 2022 results have been restated where required due to prior period adjustments.
2 Adjusted EBITDA represents profit/(loss) before interest, tax,
depreciation and impairments. Refer to Segmental information note
for reconciliation to statutory loss before tax.
Financial summary
-- Esken's core Aviation and Renewables businesses generated a combined positive adjusted EBITDA of GBP14.6m (2022:
GBP19.5m).
-- Esken Renewables supplied 1.6m tonnes of biomass fuel, up 9.4% on last year (2022: 1.5m tonnes). The overall
increase i n the volume of f uel supplied reflected an improvement in lower margin forestry by-product and
third-party fuel supply and resulted in revenue increasing by 17.7% to GBP93.7m (2022 GBP79.7m). However, a
series of unplanned outages at plants where we supply higher margin waste wood fuel, coupled with the impacts of
inflation, resulted in a 9.5% reduction in adjusted EBITDA to GBP18.4m (2022 GBP 20.3 m).
-- Within Aviation, staffing challenges and industrial action taking place at airports across Europe reduced some
planned flights inbound to LSA at various points during the second half of the year. As a result, passenger
numbers reduced by 5.3% from 94k to 89k. The Aviation Division received GBP1.4m related to the recovery of
airline marketing support payments and delivered an adjusted EBITDA loss of GBP3.8m in FY23 . In the prior year,
the Division reported a loss of GBP0.8m having benefitted from GBP3.5m of one-off receipts associated with
Connect Airways and the conclusion of the partnership with Teesside International Airport.
-- Group central significantly reduced its costs during the year whilst there was no repeat of the GBP4.7m benefit
of the onerous lease exit in Non-Core Infrastructure in the prior year. Overall Group adjusted EBITDA reduced by
46.9% to GBP5.6m (2022 GBP10.6m). However, the Group benefitted from the reversal of impairment of loan notes and
a reduction in property impairments in the year and, as a result, total losses before tax improved by 22.4% to
GBP27.7m (2022 GBP35.7m).
-- At year end, the Group's portfolio of non-core assets had an aggregate book value of GBP43.1m (2022 GBP39.7m)
following the disposal of a portion of land in Widnes and the reversal of impairment of MBE loan notes during the
year. Since the period end, Esken completed the sale of Star Handling Limited for up to GBP4.8m in May 2023.
-- Esken continues to work to realise value from its remaining non-core assets; future proceeds of which will be
used to reduce debt and provide working capital as the realisation strategy is implemented. Once completed and
any remaining Group liabilities are settled, any surplus will be returned to shareholders.
--
ESG progress
-- Across its businesses Esken produced 23,633 tonnes of carbon
dioxide, representing a 11% decrease on the baseline year for Scope
1 and 2 emissions.
-- Esken has developed a Net Zero Roadmap to reduce its Scope 1 by 8% over the next 3-5 years and aims to reduce its
Scope 2 emissions to nil by 2030.
-- Esken continued to collect and voluntarily reported initial Scope 3 emissions data, with reduction plans under
review.
-- Esken Renewables again undertook third-party research with Logika Consultants to validate Scope 1-3 emissions
data. The research established that whilst Esken produced around 134,925 tonnes of greenhouse gas (GHG) emissions
in FY23, it saved the UK 620,000 tonnes of additional GHG emissions (equivalent to taking c.430k cars off the
road) by supplying biomass power customers directly or via third parties over 1.1m tonnes of waste wood that
would have otherwise gone to landfill, producing methane.
-- Esken continued to support its charity partnerships through fundraising and launched a volunteering programme,
contributing over 500 hours of volunteering to benefit the communities in which we operate.
-- The company established an ESG risk register and put in place ESG performance KPIs linked to Executive
remuneration.
Outlook
The challenges Esken Renewables experienced during the financial
year ending 28 February 2023 regarding biomass plant outages has
continued into the new financial year but there are now signs of an
improvement in gate fees and more consistency of plant performance,
with an expectation of improving performance as the year
progresses.
Following the sale of Star Handling's ground handling operations
at Manchester and Stansted airports the Aviation Division is now
entirely focused on the recovery at LSA. That airport has started
the year positively as demand for flights across the market has
shown a strong recovery towards pre pandemic levels. The return of
a route to Amsterdam and increased flight frequencies to Faro mean
that there is a 30% uplift in planned easyJet flights during the
summer. Flights will then continue through the winter months with
the announcement that easyJet will operate flights to Paris in
addition to Amsterdam starting from 29 October 2023.
These new routes and airline partnerships are encouraging signs
that LSA's recovery is now underway. While signs are encouraging,
the aviation industry as a whole has not yet fully recovered from
the effects of the pandemic. As a result and in view of the current
sale process, Esken has taken the decision not to reinstate
guidance for LSA at this time.
The Board is encouraged by the progress on the sale process for
Renewables and now has a sound base with which to progress the
process for the sale of LSA. The Board would expect to update the
market with further substantive progress in the months ahead.
Going concern
As at 28 February 2023, the Group had cash balances of GBP50.3m
(FY22: GBP52.7m), of which GBP5.3m is ring fenced in LSA and its
subsidiaries, as part of the Carlyle Global Infrastructure
Opportunity Fund (CGI) convertible debt facility. While the Group
continues to tightly manage its cash resources as it executes the
sale of the Renewables and Aviation Divisions, the current position
is that the Group has a material uncertainty primarily in relation
to the timing of the disposal of the Renewables business. Full
discussion around the Group's going concern position is set out in
the notes to the extracts from the audited financial statements in
this results announcement. This section must be read in order to
fully understand the significant judgements the Directors have made
and the material uncertainty that exists in respect of the going
concern assumption for the Group.
The Group will provide a live presentation relating to its
results via the Investor Meet Company platform at 9:30am BST
today.
The presentation is open to all existing and potential
shareholders. Investors can sign up to Investor Meet Company for
free and add to meet Esken via:
https://www.investormeetcompany.com/esken-limited/register-investor
. Investors who already follow Esken on the Investor Meet Company
platform will automatically be invited.
Esken Limited C/O Teneo
Charlie Geller, Communications Director
Teneo +44 207 353 4200
Olivia Peters esken@teneo.com
Chairman's Statement
I am pleased to present my chairman's statement for the year to
the end of February 2023. This has been a year when the Group, in
common with many other businesses, has faced a number of
challenges.
Review of the year
The year has seen continued progress as we streamlined the Group
to focus on the core businesses of Renewables and Aviation while
completing a medium-term debt refinancing in difficult market
conditions to support the Group through the implementation of its
strategy. The Board decided to undertake a strategic review and
concluded that it was in the interests of all stakeholders to
pursue a sale of the core businesses. I refer to the detail of this
review below but we have made good progress with the sale of the
Renewables business at an advanced stage working with a preferred
bidder on an exclusive basis. The process for the sale of LSA now
underway.
This was all achieved against the backdrop of the Russian
invasion of Ukraine which had an immediate impact on energy prices
and a significant knock-on effect on the global economy. This
occurred just as the aviation industry was finally emerging from
the pandemic and created further uncertainty with our airline
customers. In addition, the disruption to global supply chains as
they recovered from the pandemic led to strong inflationary
pressures across the developed world. The response from central
banks was to raise interest rates significantly and tighten money
supply, all of which impacted demand. These inflationary pressures
and interest rate increases affected the cost base of the
Group.
In a year characterised by these significant geo-political and
economic events, we continued our journey toward becoming a
focussed group with interests in Renewables and Aviation, while
managing the exit of non-core assets for value and reducing
residual liabilities. These liabilities had arisen through the
historic decisions in relation to the guarantee of aircraft lease
arrangements by the Group in 2017 which crystallised following the
failure of Stobart Air in June 2021. A number of these aircraft had
been returned by the year end and the remaining liabilities are due
to run off during Q3 of FY24. In total the Group is expecting to
have spent GBP134.2m addressing these matters from the
administration of Connect Airways to conclusion, meaning these
funds were not otherwise available to reduce debt or invest in the
core operations. We continued to streamline the cost base of the
Group consistent with the prevailing needs of the business.
In November 2022, we concluded a successful debt fund raising
with a medium-term facility of GBP50m to support the operational
needs of the business and settle the final residual liabilities of
Stobart Air and Propius. In view of the difficult market conditions
for raising debt at that time, the cost of this funding was
expensive but gave the Group certainty on its funding needs going
forward.
At LSA we changed the entire senior management team to ensure
the right leadership was in place to take that business forward
through the recovery. These changes were a combination of internal
promotions and external recruitment and provide a good blend of
knowledge of the operational assets and a fresh perspective on the
way forward. It was clear in the second half of the year that
aviation demand at London airports would recover to pre pandemic
levels and LSA is starting to see the impact of this with a
continuing momentum in new routes operating from the airport.
Results
Esken Renewables supplied 1.62m tonnes of fuel to biomass plant
customers in the year to 28 February 2023, up 9.4% on the prior
year (2022 1.47m tonnes). However, this increase reflected improved
demand from biomass plants to which Esken Renewables primarily
supplies third party and forestry by-product, which is at a lower
margin. Higher margin biomass plants that use waste wood
experienced an increased number of unplanned outages, particularly
during the winter months. This reduced the total volume of waste
wood supplied by Esken Renewables and the associated gate fee
income. This in turn resulted in adjusted EBITDA reducing by 9.5%
from GBP20.3m to GBP18.4m.
Esken Renewables has taken a number of steps to improve margins
going forward. The fleet has been optimised to achieve the most
efficient use of trucks and drivers, and strong cost control has
resulted in lower overheads. Inflationary pressures have been eased
by RPI-linked indexation elements within the Division's long-term
customer supply contracts, however these are retrospective in a
number of cases and as such the full benefit of indexation will not
be seen until FY24. Esken Renewables also took the decision to
close its Port Clarence site having entered into a new sub-supply
agreement to replace the supply provided from Port Clarence. This
is expected to deliver an additional GBP0.9m of annual recurring
adjusted EBITDA from 1 April 2023.
Whilst LSA maintained adequate staffing levels during the year,
staffing challenges elsewhere across the aviation sector led to the
removal of planned flights at LSA at various points particularly
during the second half of the year. This resulted in passenger
numbers reducing by 5.3% from 94k to 89k.
The Aviation Division received GBP1.4m relating to the recovery
of previously paid airline marketing support payments and delivered
an adjusted EBITDA loss of GBP3.8m in FY23. In the prior year, the
Division reported a loss of GBP0.8m having benefitted from GBP3.5m
of one-off receipts associated with Connect Airways and the
conclusion of the partnership with Teesside International Airport
.
The airport continued to make progress despite the residual
impacts of the pandemic across the sector. It signed a multi-year
partnership with easyJet in January 2023 and easyJet started
operating a new route to Amsterdam at the end of May 2023 with
Paris staring October 2023. These two new routes will operate year
round. The addition of these routes takes the number of
destinations easyJet serves from the airport to five including
Malaga, Palma and Faro. The airline has also announced an increase
in the weekly frequency of flights to Faro.
Central costs were significantly reduced during the year as the
business was streamlined whilst there was no repeat of the GBP4.7m
benefit of the onerous lease exit in Non-Core Infrastructure in the
prior year. Overall Group adjusted EBITDA reduced by 46.9% to
GBP5.6m (2022 GBP10.6m). However, the Group benefitted from the
reversal of impairment of MBE loan notes and a reduction in
property impairments in the year and, as a result, total losses
before tax improved by 22.4% to GBP27.7m (2022 GBP35.7m).
At year end, the Group's portfolio of non-core assets had an
aggregate book value of GBP43.1m (2022 GBP39.7m) following the sale
of a portion of land in Widnes and the reversal of impairment of
MBE loan notes. Esken continues to work to realise the value of its
non-core assets and future proceeds will be used to reduce debt and
provide working capital as the Group executes its realisation
strategy. Since the year end Esken completed the sale of Star
Handling Limited for up to GBP4.8m in May.
Strategic Review of operating businesses
At the time of our interim results, we announced that a decision
had been taken by the Board to conduct a strategic review of the
Group's operational businesses. This was prompted by the fact that
the two core operating Divisions were recovering at differing rates
coming out of the pandemic, there was limited synergy between the
two businesses, each had different strategic and financial needs to
realise the full potential of its business, and the Group remained
financially constrained to support those future growth plans. In
common with many companies at the smaller end of the UK listed
market, there also appeared to be a disconnect between the share
price and the potential value of the businesses on a sum of the
parts basis.
The Board worked with Canaccord Genuity in conducting this
review and the Board has concluded that the interests of all
stakeholders would be best served by seeking a new owner for each
of the core businesses through a managed sale process. In each case
the Renewables and Aviation businesses will benefit from long term
strategic owners with access to capital to support growth
ambitions, while offering stability and certainty to staff,
customers and suppliers. The market will determine the value of
each of these businesses and the proceeds, in conjunction with the
ongoing disposal process of the non-core assets, will be used to
repay debt, provide working capital and ultimately return value to
shareholders.
In view of the different rates of recovery of the businesses we
initiated a sale of the Renewables business first and are at an
advanced stage of process with a preferred bidder now undertaking
due diligence. We have also started the process for LSA which is
the key strategic asset within the Aviation business. The market
for aviation has improved significantly over the last six months
with most external analysis suggesting that capacity use at London
airports will have returned to pre pandemic levels this summer. We
would expect to see continuing positive moves by our airline
partners in the months ahead which will offer support to our market
approach. LSA was a proven airport in the pre pandemic period and
is a key strategic asset in the provision of passenger air services
to London at a time when peak time slots are starting to become
constrained once more. The Board is of the view that the airport
has strong potential within the right ownership structure along
with capital to support its medium to long term growth
ambitions.
In May 2023, we announced the sale of Star Handling, our ground
handling business with operations at Manchester and Stansted
Airports, while retaining the ground handling capability at LSA to
support the airport. While this business had been successful in
winning contracts and delivering for its airline clients it
remained sub scale in a market dominated by major international
competitors and we took the opportunity to exit for value at this
time.
As we progress with these disposals, we are reducing the
underlying cost base of the Group to a level sufficient to support
the remaining operations, including an exit from the residual non
-core assets. In line with this approach, we are exploring a move
to the Standard segment of the Main Market at the time of
completing the disposal of Renewables. The Board believe that
moving from the Premium segment will have a limited effect on
shareholders but will allow us to reduce the costs of being a
listed business while making it easier from an administrative point
of view to conclude the final delivery of the strategy. Once there
is clarity on the outcome of the sale processes, we will review the
appropriate means to return value to shareholders.
Environmental, social and governance
We have continued to build on the last two years of our ESG
journey by increasing the ownership and delivery within our
operating divisions. In light of the outcome of the strategic
review the divisions have further enhanced their own governance
structure to include a Steering Group, Working Groups and ownership
and oversight of their own individual implementation plans and KPI
tracking.
We understand the importance of developing our plans to reduce
our carbon footprint and this year have developed Net Zero Roadmaps
for our operating divisions that aim to bring our carbon footprint
to zero by 2040. These roadmaps are aligned with each division's
growth plans.
Our colleagues have continued to build relationships and
fundraise for our charitable partnerships. A partnership has been
developed with the Co-op Levy Share to contribute a percentage of
Esken's apprenticeship levy to community partners to take on
apprentices. An employee volunteering programme was also launched
during Volunteers' Week and our colleagues contributed over 500
hours of volunteering in the local community. Not only did this
benefit the chosen cause, but also provided invaluable team
building opportunities.
Board and people
I would like to express my personal thanks to my Board and all
of our colleagues at Esken for their hard work and support over the
last year. It has continued to be a challenging time for everyone
and I appreciate the efforts and dedication of our staff through
this difficult period. I do appreciate that the decisions taken
following the strategic review of our operating businesses creates
an element of uncertainty as to the future, in particular for those
people who work in the Group support areas at the centre. In making
the decision to sell the core operating businesses we will have
regard to ensuring that new owners will offer long term security to
the workforce and the opportunity for these businesses to grow.
Throughout the implementation period, the senior management team
and myself have engaged actively with staff affected and will offer
support for those who need to seek new roles outside the Group.
We have deferred any decisions around future Board composition
given the future direction of the Group. In particular, while
recognising that the Group does not meet the diversity targets in
respect of either gender or ethnicity, the skill sets which we have
around the Board table are best placed to support the Group through
its realisation strategy. The Board has decided against adding
additional Board members in view of the revised strategic
objectives.
Future
A successful conclusion to the sale process for Renewables will
allow the Group to reduce its core debt significantly while
providing working capital to facilitate the managed reduction of
Group support functions, facilitate the exit of the remaining
non-core assets and support the liquidity needs of LSA through to
its sale. There is no set timescale on the completion of the
airport sale as the Board wishes to ensure that the value is
optimised from a shareholder perspective as aviation continues to
recover. Following the completion of these steps, the remaining
value will be returned to shareholders.
David Shearer
Executive Chairman
Financial review
Strategic review
The Board has concluded that it is in the best interests of all
stakeholders to secure the long-term potential of the Group's
operating divisions, Esken Aviation and Esken Renewables, and
deliver value for the Esken shareholders through a managed disposal
of both of the businesses. A sale process for Esken Renewables is
at an advanced stage working with a preferred bidder on an
exclusive basis. A sale of the Aviation business will focus on
London Southend Airport (LSA) with the aim of securing a buyer with
the capital to drive growth at the airport over the long term.
Renewables
Adjusted EBITDA for the division was lower than anticipated at
the start of the financial year at GBP18.4m due to a number of
challenges. An increased number of unplanned shutdowns at customer
plants have resulted in a lower than expected supply of biomass
material by the division, along with increases in associated costs.
Gate fee income has been reduced as a result of a more competitive
market for waste wood impacting volumes and prices, in addition to
the reduced ability of several processing sites to take in waste
wood during times of unplanned customer plant closures. The
transport margin has been adversely affected by high fuel costs and
the rollover impact of wage inflation due to driver shortages last
year. The division has taken mitigating actions to counter these
challenges: the fleet size has been reduced to achieve the most
efficient use the trucks and drivers, and strong cost control has
resulted in lower than anticipated overheads. Inflationary
pressures have been eased by RPI-linked indexation elements within
the division's long-term customer supply contracts. However, these
are retrospective in a number of cases and as such the true
benefits of indexation will not be seen until FY24.
Aviation
The division serviced three routes for passenger flights during
the year, however airline take up of available slots at the airport
was lower than expected and passenger numbers are still well below
pre-COVID levels. Due to the slow take up management decided that
the best course of action was for LSA to be closed to commercial
flights for Winter 2022/2023. The division's cargo contract with
its global logistics partner ceased in September 2022 resulting in
an estimated GBP3.8m reduction in adjusted EBITDA for FY23 and
FY24. These downsides have been partly offset by cash benefits of
receipt of airline marketing costs and a number of commercial
initiatives including filming and other media opportunities.
LSA has secured a multi-year agreement with easyJet. The airline
will operate a new route to Amsterdam, in addition to the three
existing destinations of Malaga, Majorca and Faro. For the Summer
2023 season LSA will operate around 30% more flights in Summer 2023
than in Summer 2022 due to the new route and an increase in the
number of flights to Faro.
Liquidity
On 9 November 2022, the Group signed a three-year GBP50m term
loan agreement, see financial assets and liabilities note for
further details. The new loan will be used to settle maintenance
and lease liabilities in Propius, fees payable for cancellation of
the old Revolving Credit Facility (RCF) and entry into the facility
itself, and provide working capital for the Group. This loan was
fully drawn on 15 December 2022 and on the same day the Group
cancelled its GBP19.1m RCF with Lloyds and AIB. Going forward, the
Group will operate all corporate banking through Barclays. The
Group's headroom at the year end is GBP50.3m and includes GBP5.3m
of ringfenced cash in LSA. The Group also has non-core assets with
a net book value of GBP43.1m.
Non-core assets and sale of Star Handling
In August 2022, the Group disposed of another plot of land at
Widnes for GBP3.5m at net book value. Management is exploring a
number of options for the Group's remaining non-core assets. On 15
May 2023, the Group disposed of Star Handling Limited, our ground
handling business with operations at Manchester and Stansted
Airports, to Skytanking UK Ltd for a maximum cash consideration of
GBP4.8m.
Discontinued operations
Four of the eight ATR aircraft leased by Propius have been
successfully returned to the lessor by the year end, with the
remaining four to be returned in the period to September 2023. The
Group agreed the early hand back of two of the four aircraft
returned, resulting in maintenance savings of GBP2.0m. At 28
February 2023, the Group has c.GBP25.2m of obligations relating to
leases, maintenance and other aircraft-related costs, that will be
settled within one year, see alternative performance measure note
for breakdown of the costs. The remaining costs have been fully
provided for in these financial statements.
Revenue
2023 2022
GBP'm GBP'm Movement
--------------------------------- ------- ------- ---------
Renewables 93.7 79.7 17.7%
Aviation 25.5 23.4 8.7%
Revenue from two main operating
divisions 119.2 103.1 15.6%
Investments - - 0%
Non-Strategic Infrastructure 0.6 0.7 (7.1%)
Group Central and Eliminations 0.2 0.8 (79.6%)
--------------------------------- ------- ------- ---------
Total revenue 120.0 104.6 14.7%
--------------------------------- ------- ------- ---------
Revenue from continuing operations has increased by 14.7% to
GBP120.0m. Revenue from our two main operating divisions,
Renewables and Aviation, has increased by 15.6% to GBP119.2m.
RPI-linked contracts in the Renewables division have been the main
driver of the increase in the division's revenue year-on-year.
Revenue in the Aviation division increased due to improved
performance of the hotel, solar farm and Star Handling, partly
offset by a GBP1.5m one-off receipt in the prior year related to
Teesside settlement not repeating in the current year.
Profitability
Restated(1)
2023 2022
GBP'm GBP'm Movement
------------------------------------ -------- ------------- ------------
Adjusted EBITDA(2)
Renewables 18.4 20.3 (9.5%)
Aviation (3.8) (0.8) (390.9%)
Adjusted EBITDA(2) from
two main operating divisions 14.6 19.5 (25.3%)
Investments(3) - - -
Non-Strategic Infrastructure (1.7) 3.3 (151.8%)
Group Central and Eliminations (7.3) (12.2) 41.0%
------------------------------------ -------- ------------- ------------
Adjusted EBITDA(2) 5.6 10.6 (46.9%)
Depreciation (18.3) (20.7)
Impairments (1.0) (6.0)
------------------------------------ -------- -------------
Operating loss (13.7) (16.1)
Reversal of impairment of
loan notes 7.3 -
Finance costs (net) (20.7) (19.2)
Share of post-tax losses of
associates and joint ventures(3) (0.6) (0.4)
------------------------------------ -------- -------------
Loss before tax (27.7) (35.7)
------------------------------------ -------- -------------
Tax 2.5 9.9
------------------------------------ -------- -------------
Loss for the year from continuing
operations (25.2) (25.8)
------------------------------------ -------- -------------
Loss from discontinued operations,
net of tax (0.0) (2.4)
------------------------------------ -------- -------------
Loss for the year (25.2) (28.2)
------------------------------------ -------- -------------
1 The 2022 results have been restated where required due to
prior period adjustments, see prior year restatement note.
2 Adjusted EBITDA represents profit/(loss) before interest, tax,
depreciation and impairments. Refer to segment note for
reconciliation of divisional adjusted EBITDA to loss before
tax.
3 In the prior year the share of post-tax losses of associates
and joint ventures was presented as part of adjusted EBITDA. This
year it is presented on its own line as part of the loss before
tax.
Adjusted EBITDA and profit before tax are the Group's key
measures of profitability. Adjusted EBITDA has decreased by 46.9%
to GBP5.6m (2022: GBP10.6m) and the loss before tax has decreased
by GBP8.0m to GBP27.7m (2022: GBP35.7m).
In the Renewables division, performance has been hit by
unplanned shutdowns of customer plants and the impact of market
pressures on gate fee receipts, leading to a 9.5% decrease in
adjusted EBITDA to GBP18.4m (2022: GBP20.3m). The Aviation division
adjusted EBITDA loss has increased by 390.9% to GBP3.8m (2022:
GBP0.8m) primarily due to one-off receipts in the prior year of
GBP3.5m associated with Connect Airways and the conclusion of the
partnership with Teesside International Airport not being repeated
in the current year.
In the Non-Strategic Infrastructure division a GBP4.7m one-off
receipt in the prior year relating to the agreement to exit a
long-term onerous property lease has not been repeated in the
current year. This is the main driver of the decrease in adjusted
EBITDA to a GBP1.7m loss (2022: GBP3.3m gain). The Group Central
and Eliminations division's adjusted EBITDA loss decreased by 41.0%
to GBP7.3m (2022: GBP12.2m) mainly due to one-off legal fees and an
increase in the provision for part 1 claims relating to LSA in the
prior year which have not been repeated.
Business segments
The business segments reported in the financial statements are
Renewables, Aviation, Investments and Non-Strategic Infrastructure,
which represent the operational and reporting structure of the
Group. The Operational review contains further details about the
performance of the operating divisions.
The fair value of the investment in Logistics Development Group
plc (LDG), increased by GBP1.0m (2022: GBP1.2m decrease) due to an
increase in the LDG share price. The gain on revaluation of the
investment to current market share price is presented in the
consolidated statement of comprehensive income.
The Non-Strategic Infrastructure division continues to realise
value from its property assets when the time and price is right. At
28 February 2023, the book value of Infrastructure assets held was
GBP43.1m (2022: GBP39.7m). During the year, there was a disposal of
a portion of Widnes land generating net proceeds of GBP3.5m (2022:
GBPnil). Following commercial discussions regarding a potential
disposal of the Group's investment in, and shareholder loan notes
issued to, Mersey Bioenergy Holdings Limited (MBHL), the Group
recognised a reversal of impairment of the loan notes from GBPnil
to GBP7.3m.
Depreciation
Depreciation has reduced from GBP20.7m to GBP18.3m due to an
overall reduction in the asset base across the Group.
Impairments and reversal of impairment of loan notes
There was an impairment of GBP1.0m of assets relating to the
Port Clarence site in the Renewables division ahead of the disposal
of the site post year end. The GBP7.3m reversal of impairment of
MBHL loan notes is presented on a separate line, impairment of loan
notes, on the consolidated income statement.
Net finance costs
Finance costs increased by GBP3.3m to GBP24.8m, mainly due to
full year's interest charged on the CGI convertible debt instrument
in the current year, but only part year in the prior. Finance
income increased by GBP1.8m to GBP4.0m primarily due to gains on
the revaluation of Esken Limited's intercompany US Dollar
denominated loan with Propius.
Tax
The tax credit on continuing operations of GBP2.5m (2022:
GBP9.9m) reflects an effective tax rate of 9.1% (2022: 27.7%). The
effective rate is lower than the standard rate of 19%, mainly due
to the net release of provisions relating to uncertain tax
positions. Deferred tax has been calculated at a blended rate. The
amounts expected to unwind pre 1 April 2023 are calculated at 19%
and the amounts expected to unwind post 1 April 2023 are calculated
at 25%.
Discontinued operations
The results of Propius, our aircraft leasing business are
presented as discontinued as it is abandoned in line with the IFRS
5 definition of a discontinued operation. The decrease in the loss
from discontinued operations of GBP2.4m to GBP0.1m is primarily due
to the provision of maintenance and other aircraft related costs
being made in the prior year.
Loss per share
Loss per share from continuing operations was 2.47p (2022:
3.12p). Total basic loss per share was 2.47p (2022: 3.41p).
Balance sheet
Restated
2023 2022
GBP'm GBP'm
------------------------- -------- ---------
Non-current assets 352.7 359.3
Current assets 86.2 89.2
Non-current liabilities (272.7) (244.9)
Current liabilities (126.3) (133.0)
------------------------- -------- ---------
Net assets 39.9 70.6
------------------------- -------- ---------
The overall value of property, plant and equipment (PPE) of
GBP263.4m (2022: GBP269.9m) has decreased in the year mainly due to
the depreciation charge across the Group and the impairment of Port
Clarence assets, partly offset by the reclass of Widnes land from
property inventories, and fixed asset additions related to terminal
improvements at LSA and plant and machinery in Renewables.
There has been a GBP7.3m reversal of impairment of MBHL loan
notes and a GBP3.1m increase in trade receivables, offset by a
GBP10.8m decrease in property inventory and a GBP2.5m decrease in
cash, see following section on the major cash flows in the
year.
Non-current liabilities have increased from GBP244.9m to
GBP272.7m. In the year a GBP44.8m liability was recognised on the
balance sheet relating to the term loan and an interest accrual of
GBP12.2m on the CGI convertible debt. These increases are partially
offset by a GBP19.3m reduction in lease liabilities, due to capital
repayments, and a GBP13.3m reduction in non-current provisions,
mainly due to maintenance payments.
Current liabilities have reduced mainly due to a reduction in
corporation tax provisions.
Debt and gearing(1)
Restated
2023 2022
-------------------------- ----------- ------------
Loans and borrowings GBP340.4m GBP300.0m
Cash (GBP50.3m) (GBP52.7m)
-------------------------- ----------- ------------
Net debt GBP290.1m GBP247.3m
-------------------------- ----------- ------------
Adjusted EBITDA/interest 0.2 0.6
Net debt/total assets 66.1% 55.1%
Gearing 726.8% 350.5%
-------------------------- ----------- ------------
1 See Alternative performance measures note for an explanation
and reconciliation of gearing.
During the year the Group signed a three year GBP50m term loan,
following the loan the GBP19.1m RCF with current bank lenders was
cancelled.
Cash flow
2023 2022
GBP'm GBP'm
------------------------- ------- -------
Operating cash flow (10.5) 3.2
Investing activities 9.6 (5.2)
Financing activities 22.4 82.2
------------------------- ------- -------
Increase in the year 21.5 80.2
Discontinued operations (24.9) (39.9)
Restricted cash 1.0 -
At beginning of year 52.7 12.4
------------------------- ------- -------
Cash at end of year 50.3 52.7
------------------------- ------- -------
Discontinued cash flows in the year relates to Propius lease,
maintenance and other aircraft related costs.
Restricted cash relates to money held in escrow within the
Renewables division as security for one of its contracts.
Investing activities include inflows of GBP3.5m received from
the sale of a portion of Widnes land, GBP2.2m from the sale of PPE
and GBP1.7m for the receipt of the capital element of net
investment in leases.
Financing activities includes net proceeds from the term loan of
GBP44.8m. Offsetting this there were outflows of GBP16.4m for the
repayment of the capital element of lease obligations and GBP6.8m
for interest payments.
Lewis Girdwood
Chief Financial Officer
Operating reviews
Renewables
Esken Renewables supplied 1.6m tonnes of fuel to biomass plant
customers in the year to 28 February 2023, up 9.4% on the prior
year (2022 1.5m tonnes).
However, this increase reflected improved demand from biomass
plants to which Esken Renewables primarily supplies third party and
forestry by-product, at a lower margin. Higher margin biomass
plants that use waste wood experienced an increased number of
unplanned outages, particularly during the winter months. This
reduced the total volume of waste wood supplied by Esken Renewables
and the associated gate fee income. Ongoing fluctuations in UK
construction supply chains also led to a market wide reduction in
waste wood, further impacting gate fee income and margins.
The overall increase in volume supplied resulted in revenue
increasing 17.7% to GBP93.7m (2022 GBP79.7m) but the reduction in
higher margin waste wood income resulted in adjusted EBITDA
reducing by 9.5% from GBP20.3m to GBP18.4m.
Margins are expected to improve as biomass plant customers
continue to better understand their infrastructure and optimise
performance. Margins will also be supported by continued annual
contracted indexation revisions that reflect the cost inflation
experienced during the year. RPI linked contracts for two of the
six largest plants were revised to reflect higher costs in April
2022 with a further two revised by the end of the first half of the
financial year. The remaining two contracts were revised in January
2023.
Further steps were taken to optimise ongoing margins through the
closure of Esken Renewables' Port Clarence processing and storage
site, which had originally been built to service the Port Clarence
Biomass Plant, which was never commissioned. The processing site
had never been profitable as a result. Esken Renewables took the
decision to close the site having entered into a new sub-supply
agreement to support the Chilton Biomass plant, replacing the
supply provided from Port Clarence. The sub-supply agreement and
closure of Port Clarence is expected to deliver an additional
GBP0.9m of annual recurring EBITDA from 1 April 2023.
A new sub-supply arrangement in Yorkshire and the Cramlington
supply contract moving to an exclusive basis from September 2022
will also support improved recurring revenues going forward, and
Esken Renewables continues to seek further supply agreements and
strategic partnerships.
Aviation
The Aviation Division received GBP1.4m related to the recovery
of airline marketing support payments and delivered an adjusted
EBITDA loss of GBP3.8m in FY23. In the prior year, the Division
reported a loss of GBP0.8m having benefitted from GBP3.5m of
one-off receipts associated with Connect Airways and the conclusion
of the partnership with Teesside International Airport . The
adjusted EBITDA loss of GBP3.8m included positive contributions
from the airport hotel, London Southend Jet Centre, and Star
Handling.
The aftereffects of the pandemic continued to impact the
aviation sector during the year. Whilst LSA continued to maintain
adequate staffing levels, several aviation businesses saw their
staffing numbers reduce during the last two years and the industry
experienced challenges in recruiting people back into aviation.
During the summer months, many airline staff also went on strike,
causing airlines to both continue to retrench to traditional hub
bases and remove flights if there weren't staff available to
operate them. The challenges elsewhere in turn led to the removal
of planned flights at LSA at various points over the summer,
reducing passenger numbers by 5.3% from 94k to 89k.
LSA has continued to position itself for recovery despite the
legacy challenges that followed the pandemic. This recovery will be
built on having in place a strong management team that is taking a
proactive approach to airline engagement while continuing to
develop the airport proposition.
John Upton joined the airport team as CEO in September 2022 and
has sought to engender an entrepreneurial spirit in the business.
John leads a new management team with the Finance Director and
Business Development Director appointed toward the beginning of the
year under review. They are joined by recently promoted operations
and commercial directors in a newly formed operational Board.
That team are regularly engaging with airlines on both based and
non-based flying, using the data from 40 previously proven routes
to indicate the profit opportunities arising from operating at
LSA.
Those airlines are increasingly aware that London's traditional
airport hubs are now very close to pre-pandemic operating levels
and that peak slot capacity is reaching a cliff edge. LSA is
therefore making the case for profitable and sustainable growth
capacity now, serving the fast-growing east London and east of
England catchment area. Direct rail access to London Liverpool
Street and Stratford, the UK's busiest train station, with further
connections to the Elizabeth Line 30 minutes away in Shenfield also
add to the attractiveness of the airport's location.
The airport's affluent and growing catchment area, direct, quick
rail access to London and modern airport infrastructure were
important factors that led to LSA signing a multi-year partnership
with easyJet in January 2023. easyJet started operating a new route
to Amsterdam at the end of May 2023 with Paris starting October
2023. These two new routes will operate year round. The addition of
these routes takes the number of destinations easyJet serves from
the airport to five including Malaga, Palma and Faro. The airline
has also announced an increase in the weekly frequency of flights
to Faro.
LSA will also aim to build on its positive engagement last
summer with airlines following a small number of flights that were
added by Blue Air to Bucharest, Sky Express to Athens and Wideroe
to Bergen in late July. The airport team will also continue to
explore further logistics opportunities following a successful
operation supporting a new logistics partner on a temporary basis
from January through to March 2023.
The Board of Esken believe LSA has the potential to grow well
beyond the 2.1m passengers that it welcomed in FY20. The Board
concluded that the best way to help the airport achieve this
potential, and deliver value for Esken shareholders, is through a
managed disposal process. A key objective will be to find the right
buyer with the capital to support the growth prospects of the
airport over the long term and benefit airline partners, customers
and local stakeholders.
Consolidated income statement
For the year ended 28 February 2023
Restated(1)
Year ended Year ended
28 February 28 February
2023 2022
GBP'000 GBP'000
---------------------------------------- -------------- -------------
Continuing operations
Revenue 120,004 104,633
Other income 2,220 8,364
Operating expenses (116,587) (102,386)
Adjusted EBITDA 5,637 10,611
---------------------------------------- -------------- -------------
Depreciation (18,284) (20,749)
Impairments (1,016) (5,970)
Operating loss (13,663) (16,108)
---------------------------------------- -------------- -------------
Reversal of impairment of loan
notes 7,302 -
Finance costs (24,786) (21,446)
Finance income 4,027 2,240
Share of post-tax losses of associates
and joint ventures (566) (356)
----------------------------------------
Loss before tax (27,686) (35,670)
Tax 2,508 9,865
---------------------------------------- -------------- -------------
Loss for the year from continuing
operations (25,178) (25,805)
---------------------------------------- -------------- -------------
Discontinued operations
Loss from discontinued operations,
net of tax (59) (2,386)
---------------------------------------- -------------- -------------
Loss for the year (25,237) (28,191)
---------------------------------------- -------------- -------------
Loss per share expressed in pence
per share - continuing operations
Basic (2.47)p (3.12)p
Diluted (2.47)p (3.12)p
---------------------------------------- -------------- -------------
Loss per share expressed in pence
per share - total
Basic (2.47)p (3.41)p
Diluted (2.47)p (3.41)p
---------------------------------------- -------------- -------------
(1) The 2022 results have been restated where required due to
prior period adjustments, see note below.
Consolidated statement of comprehensive income
For the year ended 28 February 2023
Restated(1)
Year ended Year ended
28 February 28 February
2023 2022
GBP'000 GBP'000
Loss for the year (25,237) (28,191)
Exchange differences from discontinued
operations, net of tax (7,017) (1,824)
----------------------------------------
Other comprehensive expense -
items that are or may be reclassified
subsequently to profit or loss,
net of tax (7,017) (1,824)
Remeasurement of defined benefit
plan 324 1,876
Change in fair value of financial
assets classified as fair value
through other comprehensive income 963 (1,187)
Tax on items relating to components
of other comprehensive income (341) (417)
----------------------------------------
Other comprehensive income - items
that will not be reclassified to
profit or loss, net of tax 946 272
----------------------------------------
Other comprehensive expense for
the year, net of tax (6,071) (1,552)
---------------------------------------- -------------- -------------
Total comprehensive expense for
the year (31,308) (29,743)
---------------------------------------- -------------- -------------
(1) The 2022 results have been restated where required due to
prior period adjustments, see note below.
Of the total comprehensive expense for the year, a loss of
GBP24,232,000 (2022: GBP25,533,000) is in respect of continuing
operations and a loss of GBP7,076,000 (2022: GBP4,210,000) is in
respect of discontinued operations.
Consolidated statement of financial position
As at 28 February 2023
Restated(1)
28 February 28 February
2023 2022
GBP'000 GBP'000
------------------------------------ ------------- --------------
Non-current assets
Property, plant and equipment 263,412 269,944
Investment in associates and joint
ventures 450 1,016
Other financial assets 15,324 14,105
Intangible assets 54,669 54,669
Net investment in leases 16,888 17,763
Defined benefit pension surplus 1,937 348
Other receivables - 1,495
------------------------------------ ------------- --------------
352,680 359,340
------------------------------------ ------------- --------------
Current assets
Inventories 1,729 12,552
Trade and other receivables 34,195 23,883
Cash and cash equivalents 49,264 52,738
Restricted cash 1,000 -
------------------------------------
86,188 89,173
------------------------------------ ------------- --------------
Total assets 438,868 448,513
------------------------------------ ------------- --------------
Non-current liabilities
Loans and borrowings (259,841) (222,981)
Other liabilities (8,894) (8,643)
Provisions (3,942) (13,279)
------------------------------------
(272,677) (244,903)
------------------------------------ ------------- --------------
Current liabilities
Trade and other payables (27,611) (30,160)
Loans and borrowings (80,521) (77,099)
Corporation tax (583) (5,110)
Provisions (17,560) (20,674)
------------------------------------
(126,275) (133,043)
------------------------------------ ------------- --------------
Total liabilities (398,952) (377,946)
------------------------------------ ------------- --------------
Net assets 39,916 70,567
------------------------------------ ------------- --------------
Capital and reserves
Issued share capital 102,534 102,534
Share premium 403,225 403,225
Foreign currency exchange reserve (6,799) 218
Reserve for own shares held by
employee benefit trust (7,596) (7,596)
Retained deficit (451,448) (427,814)
------------------------------------
Group shareholders' equity 39,916 70,567
------------------------------------ ------------- --------------
(1) The 2022 results have been restated where required due to
prior period adjustments, see note below.
Consolidated statement of changes in equity
For the year ended 28 February 2023
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 (restated) 102,534 403,225 218 (7,596) (427,814) 70,567
Loss for the year - - - - (25,237) (25,237)
Other comprehensive
expense for the
year - - (7,017) - 946 (6,071)
------------------------ --------- --------- ---------- --------- ---------- ---------
Total comprehensive
expense for the
year - - (7,017) - (24,291) (31,308)
Employee benefit
trust - - - - (3) (3)
Share-based payment
charge - - - - 630 630
Tax on share-based
payment charge - - - - 30 30
Balance at 28 February
2023 102,534 403,225 (6,799) (7,596) (451,448) 39,916
------------------------ --------- --------- ---------- --------- ---------- ---------
For the year ended 28 February 2022 (restated(1) )
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
Prior period adjustments - - - - 1,204 1,204
------------------------------ --------- --------- ---------- --------- ---------- ---------
Balance at 1 March
2021 - restated 62,492 390,336 3,826 (7,480) (399,657) 49,517
------------------------------ --------- --------- ---------- --------- ---------- ---------
Loss for the year - - - - (28,191) (28,191)
Other comprehensive
(expense)/income
for the year - - (1,824) - 272 (1,552)
------------------------------ --------- --------- ---------- --------- ---------- ---------
Total comprehensive
expense for the
year - - (1,824) - (27,919) (29,743)
Issue of ordinary
shares 40,042 12,889 - - (600) 52,331
Employee benefit
trust - - - (116) (4) (120)
Reclassification
of exchange differences
on disposal of subsidiaries - - (1,784) - - (1,784)
Share-based payment
charge - - - - 285 285
Tax on share-based
payment charge - - - - 81 81
Balance at 28 February
2022 102,534 403,225 218 (7,596) (427,814) 70,567
------------------------------ --------- --------- ---------- --------- ---------- ---------
(1) The 2022 results have been restated where required due to
prior period adjustments, see note below.
Consolidated statement of cash flows
For the year ended 28 February 2023
Year ended Year ended
28 February 28 February
2023 2022
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Cash (used in)/generated from
continuing operations (8,481) 3,291
Cash outflow from discontinued
operations (10,610) (17,775)
Income taxes paid (2,060) -
----------------------------------------- ------------- -------------
Net cash outflow from operating
activities (21,151) (14,484)
Purchase of property, plant and
equipment net of financing 1,705 (3,015)
Proceeds from the sale of property
inventory 3,539 -
Proceeds from the sale of property,
plant and equipment 2,197 1,115
Receipt of capital element of net
investment in lease 1,725 1,547
Cash disposed on liquidation/disposal
of subsidiary undertakings - (362)
Acquisition of other investments - (4,900)
Interest received 451 415
Cash inflow/(outflow) from discontinued
operations 2,171 (7,808)
----------------------------------------- ------------- -------------
Net cash inflow/(outflow)/inflow
from investing activities 11,788 (13,008)
----------------------------------------- ------------- -------------
Proceeds from the issue of ordinary
shares (net of issue costs) - 52,330
Proceeds from issue of convertible
debt (net of costs) - 111,459
Proceeds from new borrowings (net
of costs) 44,784 -
Proceeds from grants 1,705 2,600
Principal element of lease payments (16,603) (17,026)
Net repayment of revolving credit
facility (net of costs) (850) (58,165)
Interest paid (6,658) (8,992)
Cash outflow from discontinued
operations (16,489) (14,384)
-----------------------------------------
Net cash inflow from financing
activities 5,889 67,822
----------------------------------------- ------------- -------------
(Decrease)/increase in cash and
cash equivalents (3,474) 40,330
----------------------------------------- ------------- -------------
Cash and cash equivalents at beginning
of year 52,738 12,408
----------------------------------------- ------------- -------------
Cash and cash equivalents at end
of year 49,264 52,738
----------------------------------------- ------------- -------------
Cash transferred from unrestricted
cash 1,000 -
----------------------------------------- ------------- -------------
Cash , cash equivalents and restricted
cash 50,264 52,738
----------------------------------------- ------------- -------------
Notes to the consolidated financial statements
Accounting policies of Esken Limited
Basis of preparation and statement of compliance
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 28 February 2023
and 28 February 2022. The information presented is an extract from
the audited consolidated Group statutory accounts. The Auditors
have reported on those accounts; their report was (i) unqualified,
and (ii) contains a material uncertainty in respect of going
concern to which the auditor drew attention by way of emphasis
without modifying their report. The Auditors' report can be found
in the Group's full 2023 Annual Report and Accounts which will be
published on the Group's website.
These Group financial statements have been prepared in
accordance with UK-adopted international accounting standards.
The financial statements of the Group are also prepared in
accordance with the Companies (Guernsey) Law 2008.
Esken Limited (the Company) is a Guernsey-registered company.
The Company's ordinary shares are traded on the London Stock
Exchange.
Measurement convention
The financial statements are prepared on the historical cost
basis except financial assets held at fair value through other
comprehensive income (FVOCI) and derivative financial instruments
which are stated at their fair value.
Going concern
The Group's business activities, together with factors likely to
affect its future performance and position, are set out in the
Executive Chairman's statement and the financial position of the
Group, its cash flows and funding are set out in the Financial
Review.
The financial assets and liabilities note of the financial
statements includes details of the Group's loans and borrowings at
the year end, together with the Group's objectives, policies and
processes for managing its capital, its financial risk management
objectives, details of its financial instruments and its exposure
to credit risk and liquidity risk. After making enquiries, the
Directors have a reasonable expectation that the Group will have
adequate resources to continue in operational existence for the
foreseeable future until at least 30 June 2024. Accordingly, the
financial statements have been prepared on a going concern basis.
However, there is a material uncertainty in respect of this going
concern assumption and the Directors have exercised a significant
degree of judgement in concluding that the Group remains a going
concern. In particular, the assumption that the disposal of the
Renewables business will complete prior to 31 August 2023, with the
timing of completion and forecast consideration are both
significant judgements.
In performing the going concern assessment, the Directors have
reviewed the cash flow forecasts together with the funding options
that may be available to the Group and the likelihood of them being
accessible, for the period to 30 June 2024. Within this timescale,
it is forecast that funds will be generated from the disposal of
the Renewables business and that those proceeds, together with
certain non-core asset disposals, will enable the repayment of the
GBP50m term loan, and associated costs, settlement of the
exchangeable bonds (bonds) in May 2024, and provide further
liquidity to London Southend Airport (LSA), in addition to the
short-term facility currently being negotiated with an existing
lender, during the ongoing sale process.
The project to dispose of the Renewables business is
significantly progressed, with the process being at an advanced
stage with a preferred bidder now undertaking due diligence. The
current timetable and management judgement assumes completion in
August 2023.
As at 28 February 2023, the Group had cash balances of GBP50.3m.
Included in this GBP50.3m of cash is GBP5.3m of cash ringfenced in
London Southend Airport (LSA) and its subsidiaries, as part of the
Carlyle Global infrastructure Opportunity Fund (CGI) convertible
debt facility. Whilst the Group continues to tightly manage its
cash resources, the current position is that the Group needs to
complete the disposal of the Renewables business prior to the end
of December 2023, or complete significant asset disposals,
otherwise the Group may be unable to continue trading. The
Directors have a reasonable expectation, following discussions with
the appointed advisor, that the required disposal of the Renewables
business will be completed at the quantum and within the timescales
required.
Should the business disposal not successfully complete before
the end of December 2023, this is expected to lead to severe
liquidity issues and the Group will likely breach its forward
looking covenant. The Directors would have a limited amount of time
to raise additional funds if the timing of the business disposal
was to be delayed, to allow the Group to continue trading. The
Directors have prepared base case forecasts, together with
sensitivity analysis on those forecasts, including a severe but
plausible downside set of assumptions detailed below. Under both
the base and plausible downside scenario, Group liquidity following
the maturity of the bonds in May 2024 becomes negative, excluding
the key mitigating action of disposal of the Renewables business.
The reasonableness of the assumption made by the Directors that
funds from the disposal of the Renewables business will be received
is a significant judgement and this gives rise to a material
uncertainty in respect of securing the necessary funds. Both
forecasts include the critical assumption that the business
disposal is successful, the base case forecast indicates Group
headroom of c.GBP26m at 30 June 2024 and the severe but plausible
downside indicates that the Group will have headroom of c.GBP4m at
this date.
For the purposes of this going concern analysis, the base case
forecast assumes:
-- The Group completes the disposal of its Renewables business before 31 August 2023. The proceeds of which will be
used to repay the term loan drawn in December 2022;
-- The Group settles its bonds, paying cash in excess of the collateral shares held;
-- Full year passenger volumes from LSA of c.0.1m for the year ending 28 February 2024 and c.0.5m passengers in the
year ending 28 February 2025;
-- GBP34.0m cash received in respect of non-core asset disposals in the year ending February 2024;
-- The Group is able to finalise terms with an existing lender for a suitable additional short-term facility that
would enable additional required liquidity of up to GBP5m to be injected into LSA, prior to 31 July 2023; and
-- Proceeds from the Renewables disposal would be available to be used in the LSA Group to meet ongoing forecast
liquidity needs.
e severe but plausible downside excludes all but GBP9m of
non-core asset disposals. That forecast also includes a reduction
in 2025 Aviation operational and trading performance due to the
slower recovery following the COVID-19 pandemic, resulting in a
cash reduction to forecast. The passenger forecast for 2024, of
c.0.1m, is primarily based on the known current routes available,
and therefore management do not believe that a downside sensitivity
is required to these assumptions. The severe but plausible forecast
also assumes that the completion of the Renewables business
disposal will be delayed until November 2023. Based on those
assumptions, the severe but plausible downside scenario does not
have a material impact on the ability of the Group to continue in
operational existence for the foreseeable future. However, it is
important to note that if the Renewables business disposal is
delapyed beyond the severe but plausible downside forecast, the
forward looking covenant will be breached without additional
mitigating actions, including the accelerated disposal of non-core
assets and alternative funding arrangements.
Overall, the Directors are satisfied that the Group will have
sufficient funds to continue to meet its liabilities as they fall
due until at least 30 June 2024 and therefore have prepared the
financial statements on a going concern basis. However, as
previously noted this is highly dependent on the successful
completion of the Group's disposal plans, which indicate the
existence of a material uncertainty related to events or conditions
that may cast significant doubt on the ability of the Group to
continue as a going concern and, therefore, to continue realising
its assets and discharging 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
Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those of the
previous financial year except as follows:
(a) New standards, amendments to existing standards and
interpretations to existing standards adopted by the Group
The Group has considered the following amendments and
definitions that are effective in this financial year and concluded
that they do not have a material impact on the financial position
or performance of the Group:
-- Definition of Accounting Estimates (Amendments to IAS 8)
-- Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction (Amendments to IAS 12)
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
(b) New standards and interpretations not applied
The following UK-endorsed standards and amendments have an
effective date after the date of these financial statements:
Effective
for accounting Proposed
periods commencing adoption in
on or after the year ending
---------------------------------------------- -------------------- ------------------
Classification of Liabilities as Current 1 January 2024 28 February
or Non-current and non-current Liabilities 2024
with Covenants (Amendments to IAS 1)
Disclosure of Accounting Policies (Amendments 1 January 2024 28 February
to IAS 1 and IFRS Practice Statement 2024
2)
---------------------------------------------- -------------------- ------------------
The adoption of these standards and amendments is not expected
to have a material effect on the net assets, results and
disclosures of the Group. There are no other new UK-endorsed
standards and amendments that are issued but not yet effective that
would be expected to have a material impact on the Group in future
reporting periods and on foreseeable future transactions.
Segmental information
The reportable segment structure is determined by the nature of
operations and services. The operating segments are Renewables,
Aviation, Investments and Non-Strategic Infrastructure. The results
for Propius are presented as discontinued operations on the face of
the consolidated income statement.
The Renewables segment specialises in the supply of sustainable
biomass material for the generation of renewable energy. The
Aviation segment specialises in the operation of commercial
airports and the provision of ground handling services. 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 the 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 adjusted 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.
Year ended 28 Non-Strategic Group Central
February 2023 Renewables Aviation Investments Infrastructure and Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ----------- --------- ------------ ---------------- ------------------ ---------
Revenue
External 93,748 25,455 - 516 285 120,004
Internal - - - 100 (100) -
------------------------ ----------- --------- ------------ ---------------- ------------------ ---------
Total revenue 93,748 25,455 - 616 185 120,004
------------------------ ----------- --------- ------------ ---------------- ------------------ ---------
Adjusted EBITDA 18,388 (3,845) (34) (1,694) (7,178) 5,637
----------- --------- ------------ ---------------- ------------------ ---------
Depreciation (7,615) (9,763) - (387) (519) (18,284)
Impairment (1,016) - - - - (1,016)
Reversal of impairment
of loan notes - - - 7,302 - 7,302
Finance costs (net) (1,783) (15,191) (1,535) (46) (2,204) (20,759)
Share of post-tax
losses of associates
and joint ventures - - (566) - - (566)
Profit/(loss)
before tax from
continuing operations 7,974 (28,799) (2,135) 5,175 (9,901) (27,686)
------------------------ ----------- --------- ------------ ---------------- ------------------ ---------
Year ended 28 Non-Strategic Group Central
February 2022 (restated) Renewables Aviation Investments Infrastructure and Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------- --------- ------------ ---------------- ------------------ ---------
Revenue
External 79,650 23,389 - 563 1,031 104,633
Internal - 22 - 100 (122) -
---------------------------- ----------- --------- ------------ ---------------- ------------------ ---------
Total revenue 79,650 23,411 - 663 909 104,633
---------------------------- ----------- --------- ------------ ---------------- ------------------ ---------
Adjusted EBITDA 20,308 (773) (34) 3,273 (12,163) 10,611
----------- --------- ------------ ---------------- ------------------ ---------
Depreciation (8,469) (10,831) - (357) (1,092) (20,749)
(Impairment)/impairment
reversal (6,790) - - 820 - (5,970)
Finance costs (net) (1,753) (8,700) (1,596) (330) (6,827) (19,206)
Share of post-tax
losses of associates
and joint ventures - - (356) - - (356)
----------------------------
(Loss)/profit
before tax from
continuing operations 3,296 (20,304) (1,986) 3,406 (20,082) (35,670)
---------------------------- ----------- --------- ------------ ---------------- ------------------ ---------
Internal revenue above relates to inter-segment revenues that
are eliminated within Group central and eliminations. Intra-segment
revenues are eliminated within each segment.
Discontinued operations
Propius and Stobart Air
Propius, our aircraft leasing business, formerly leased all
eight of its aircraft to Stobart Air. In the prior year the Ireland
High Court appointed liquidators to Stobart Air. Due to the
liquidation the Stobart Air balance sheet was deconsolidated in the
Group accounts. Net liabilities deconsolidated totalled
GBP15,562,000 and GBP4,255,000 of costs in relation to the
liquidation were incurred, resulting in a profit on liquidation of
GBP11,307,000.
Propius and Stobart Air were both separately considered major
lines of business. The results of Propius, along with the prior
year results of Stobart Air and profit on liquidation, are reported
on a single line, net of tax on the face of the consolidated income
statement. While the results of Propius are presented as
discontinued, in the period up to 28 February 2024 there will be
ongoing finance charges and cash flows in respect of aircraft
leases and cash flows in respect of maintenance obligations, with
the corresponding liabilities remaining on the Group's consolidated
statement of financial position.
The results of Propius and Stobart Air included in discontinued
operations are as follows.
Results of discontinued operations
of Propius 2023 2022
GBP'000 GBP'000
------------------------------------- -------- ---------
Operating expenses 783 (9,613)
Reversal of impairment of property
assets 879 -
Net finance costs (1,721) (2,601)
Results from operating activities
before tax (59) (12,214)
------------------------------------- -------- ---------
Tax - (90)
------------------------------------- -------- ---------
Loss for the year from discontinued
operations, net of tax (59) (12,304)
------------------------------------- -------- ---------
Results of discontinued operations
of Stobart Air 2023 2022
GBP'000 GBP'000
--------------------------------------- -------- --------
Revenue - 3,449
Operating expenses - (4,858)
Net finance costs - 325
Results from operating activities
before tax - (1,084)
--------------------------------------- -------- --------
Profit on liquidation - 11,307
Profit for the year from discontinued
operations, net of tax - 10,223
--------------------------------------- -------- --------
The above results from discontinued operations are attributable
to the owners of the Company.
The cash flows in relation to the Propius and Stobart Air
operations are as follows.
Cash flows used in discontinued
operations of Stobart Air 2023 2022
GBP'000 GBP'000
--------------------------------------- --------- ---------
Net cash used in operating activities (10,610) (2,160)
Net cash used in investing activities 2,171 (7,808)
Net cash used in financing activities (16,489) (12,241)
Net cash flows for the year (24,928) (22,209)
--------------------------------------- --------- ---------
Cash flows used in discontinued
operations of Propius 2023 2022
GBP'000 GBP'000
--------------------------------------- -------- ---------
Net cash used in operating activities - (15,751)
Net cash used in financing activities - (2,143)
Net cash flows for the year - (17,894)
--------------------------------------- -------- ---------
The results and cash flows of Stobart Air and Propius
discontinued operations included in the above tables are after the
elimination of intra-group transactions between Propius and Stobart
Air.
Disposal of Stobart Rail Limited
In the prior year, the Group incurred residual costs in relation
to the disposal of Stobart Rail, which the Group divested of on 14
July 2020, along with the receipt of contingent consideration from
the disposal. The prior year loss of GBP305,000 is included as part
of the single line loss from discontinued operations, net of tax on
the face of the consolidated income statement. There was a prior
year cash inflow of GBP136,000 in relation to the operation.
Summary of discontinued operations recognised within the
consolidated income statement
2023 2022
GBP'000 GBP'000
------------------------------------- -------- ---------
Propius (59) (12,304)
Stobart Air - 10,223
Stobart Rail - (305)
------------------------------------- -------- ---------
Loss for the year from discontinued
operations, net of tax (59) (2,386)
------------------------------------- -------- ---------
Summary of cash flows from discontinued operations
2023 2022
GBP'000 GBP'000
----------------------------- --------- ---------
Propius (24,928) (22,209)
Stobart Air - (17,894)
Stobart Rail - 136
----------------------------- --------- ---------
Net cash flows for the year (24,928) (39,967)
----------------------------- --------- ---------
Financial assets and liabilities
Loans and borrowings 2023 Restated
2022
GBP'000 GBP'000
--------------------------------- --------- ---------
Non-current
Obligations under leases 82,895 104,119
Convertible debt (net of costs) 132,977 118,862
Term loan (net of costs) 43,969 -
--------------------------------- --------- ---------
259,841 222,981
--------------------------------- --------- ---------
Current
Exchangeable bonds 52,637 52,385
Term loan (net of costs) 1,250 -
Obligations under leases 26,634 24,714
80,521 77,099
--------------------------------- --------- ---------
Total loans and borrowings 340,362 300,080
--------------------------------- --------- ---------
Cash (49,264) (52,738)
Restricted cash (1,000) -
--------------------------------- --------- ---------
Net debt 290,098 247,342
--------------------------------- --------- ---------
Restricted cash relates to money held in escrow, included within
the Renewables division as security for one of its contracts.
Included in the cash balance of GBP49,264,000 is GBP5,286,000 of
ring-fenced cash for use in London Southend Airport and its
subsidiaries under the terms of the convertible debt agreement with
Carlyle Global Infrastructure Opportunity Fund, and GBP943,000 for
use in the Employee Benefit Trust.
Reconciliation of movements of liabilities to cash flows arising
from financing activities
Liabilities Exchange-able Revolving Convertible Term Obligations Total
bond credit facility debt loan under
leases
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------------- ----------------- ------------ -------- ------------ ---------
Balance at 1 March 2022 52,385 - 118,862 - 128,833 300,080
Changes from financing
cash flows:
Additional loans - - - 50,000 - 50,000
Cash outflow from debt
issue costs - (850) - (5,216) - (6,066)
Principal elements of
lease payments - continuing
operations - - - - (16,603) (16,603)
Principal elements of
lease payments - discontinued
operations - - - - (14,446) (14,446)
Interest paid - continuing
operations (1,460) (331) - (1,457) (3,410) (6,658)
Interest paid - discontinued
operations - - - - (2,043) (2,043)
Total changes from
financing cash flows (1,460) (1,181) - 43,327 (36,502) 4,184
-------------------------------- -------------- ----------------- ------------ -------- ------------ ---------
Release of deferred
issue costs 376 - 1,934 435 - 2,745
Revaluation of derivative (124) - (960) - - (1,084)
New leases entered into - - - - 10,407 10,407
Termination of lease - - - - (2,298) (2,298)
The effect of changes
in foreign exchange
rates - - - - 3,046 3,046
Non-cash interest accruals 1,460 1,181 13,141 1,457 6,043 23,282
Balance at 28 February
2023 52,637 - 132,977 45,219 109,529 340,362
-------------------------------- -------------- ----------------- ------------ -------- ------------ ---------
Deferred issue costs
included in the above
liabilities 438 - 10,608 4,781 - 15,827
-------------------------------- -------------- ----------------- ------------ -------- ------------ ---------
Liabilities Exchange-able Revolving Convertible Obligations Total
bond credit facility debt under
leases
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------------- ----------------- ------------ ------------ ---------
Balance at 1 March 2021 52,010 52,329 - 158,908 263,247
Prior period adjustments - - - 7,232 7,232
-------------------------------- -------------- ----------------- ------------ ------------ ---------
Balance at 1 March 2021
- restated 52,010 52,329 - 166,140 270,479
Changes from financing
cash flows:
Additional loans - - 125,000 - 125,000
Net cash repaid - (55,000) - - (55,000)
Cash outflow from debt
issue costs - (3,165) (13,541) - (16,706)
Principal elements of
lease payments - continuing
operations - - - (17,026) (17,026)
Principal elements of
lease payments - discontinued
operations - - - (11,470) (11,470)
Interest paid - continuing
operations (1,460) (3,624) - (3,908) (8,992)
Interest paid - discontinued
operations - - - (2,913) (2,913)
Total changes from
financing cash flows (1,460) (61,789) 111,459 (35,317) 12,893
-------------------------------- -------------- ----------------- ------------ ------------ ---------
Release of deferred
issue costs 375 4,411 998 - 5,784
Reclass to other debtors - 1,425 - - 1,425
New leases entered into - - - 3,737 3,737
Termination of lease - - - (6,707) (6,707)
Unwind of discount - - - 171 171
Disposal of subsidiary
undertaking - - - (7,265) (7,265)
The effect of changes
in foreign exchange
rates - - - 1,077 1,077
Non-cash interest accruals 1,460 3,624 6,405 6,997 18,486
Balance at 28 February
2022 52,385 - 118,862 128,833 300,080
-------------------------------- -------------- ----------------- ------------ ------------ ---------
Deferred issue costs
included in the above
liabilities 814 - 12,542 - 13,356
-------------------------------- -------------- ----------------- ------------ ------------ ---------
Esken Limited cancelled its GBP19.125m undrawn Revolving Credit
Facility (RCF) with Lloyds/AIB on the 15 December 2022 in line with
signing its new GBP50m three year term loan, see following Term
loan section.
Esken Limited provides support to its subsidiaries where
required including guarantees to certain counterparties in the
Renewables business linked to energy supply contracts. Further
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 Renewables 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 Group was in compliance with, or received
waivers for, all financial covenants throughout both the current
and prior year and subsequent to the year end.
Term loan
On 9 November 2022, the Group signed a three-year (with one year
extension at lender's discretion) GBP50m term loan with Avenue
Capital Management. The term loan also has an optional (at lender's
discretion) GBP40m uncommitted tranche. The GBP50m term loan was
drawn down on 15 December 2022 - in line with the cancellation of
the GBP19.125m Lloyds/AIB RCF. Interest is paid quarterly at SONIA
+ 9.875% with an element of principal amortisation (first year
deferred). The SONIA rate used for the interest is the one-year
SONIA rate and resets on 15 December each year. Secured on all
non-LSA group assets, via fixed and floating charges and
debentures.
Convertible debt
On 26 August 2021, the Group signed an agreement with Carlyle
Global Infrastructure Opportunity Fund (CGI) for a GBP125m
investment in LSA through a 30% convertible debt instrument (loan).
The loan can be converted by CGI at any time following this date
until maturity, being seven years. If CGI does not convert prior to
maturity, the loan is repayable at the greater of an amount
achieving 10% IRR for CGI or GBP193.8m (Repayment Price). Interest
accrues at 8% per annum to be paid in cash or rolled into the
principal, depending on cash generated by LSA in the previous year
and certain minimum liquidity headroom requirements. In addition,
2% per annum PIK interest is rolled into the principal. The loan
includes three derivatives in relation to conversion, however,
these have been accounted for as one single compound derivative as
they are not considered independent of each other.
The loan liability is valued at amortised cost, applying the
effective interest rate (EIR) method. This takes into account the
expected future cash flows and timings of these cash flows over the
life of the instrument. Judgement has been used in determining the
timing of the future cash payments to be earlier than the maturity
date. When judgements relating to the future cash flows are made,
the Group recalculates the gross carrying amount of the amortised
cost of the financial liability as the present value of the
estimated future contractual cash flows that are discounted at the
financial instrument's original
effective interest rate or, when applicable, the revised
effective interest rate. This adjustment is recognised in profit or
loss as interest income or interest expense. The derivative was
fair valued at GBP1,005,000 on issue of the loan and is revalued at
each reporting date, with any gain or loss recognised in finance
costs in the consolidated income statement. The host contract is
measured at amortised cost. At 28 February 2023, the fair value of
the derivative is GBP45,000, which is unchanged from 31 August 2022
interim review.
Exchangeable bonds
On 3 May 2019, the Group placed GBP53.1m of secured guaranteed
exchangeable bonds (Bonds). The Bonds have a five -- year maturity,
bear interest at 2.75% per annum and are exchangeable into ordinary
shares of 1p each in the capital of Logistics Development Group plc
(LDG). The bondholders have an unconditional right to require the
Group to settle the bonds by giving the bondholders contractually
agreed number of shares in LDG at any time. The Bonds have a May
2024 maturity, with repayment being the difference between the
GBP53.1m gross Bonds and shares in LDG into which the Bonds are
convertible. At 28 February 2023 this amounted to GBP42.9m.
Provisions
Site restoration Onerous Litigation Remediation Maintenance Total
contracts and claims provision reserve
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) (1,361) (1,522) - (9,231) (13,364)
Provisions
made - 215 - - 705 920
Provisions
reversed - - - - (2,758) (2,758)
Currency
retranslation - - - - 2,751 2,751
----------------- ----------------- ----------- ------------ ------------ ------------ ---------
At 28 February
2023 - 875 1,573 3,942 15,112 21,502
----------------- ----------------- ----------- ------------ ------------ ------------ ---------
Analysis
of provisions:
Current - 875 1,573 - 15,112 17,560
Non-current - - - 3,942 - 3,942
----------------- ----------------- ----------- ------------ ------------ ------------ ---------
Site restoration
During the year the Group paid the remaining GBP1,250,000 of
dilapidation obligations it had in relation to a long leasehold
property the Group has agreed on 3 March 2022 to exit.
Onerous contracts
The Group holds a provision for unavoidable costs related to the
eight ATR aircraft in Propius which will be incurred prior to their
redelivery to the lessor. During the year, GBP1,351,000 of this
provision has been used. The provision is separate from the
maintenance provision held for the aircraft, see following.
Litigation and claims
The balance at the year end primarily relates to a provision for
part 1 claims relating to London Southend Airport and other legal
costs and claims around the Group. During the year part 1 claims
totalling GBP1,230,000 have been settled and GBP215,000 was paid in
relation to a legal case. It is expected that these claims and
cases will be settled within 12 months.
Remediation provision
This relates to the estimated cost required for remediation
works on leased land in Widnes. The Group commissioned surveys by
independent environmental and sustainability specialists, received
in November 2021 and April 2022, providing options for the scope of
work, methods and estimates of cost of remediation. The surveys
indicated a range of GBP2.1m to GBP5.7m depending on the scope and
method of remediation. Taking into account uncertainties over the
final cost, scope and method of remediation required, in addition
to ongoing discussions with appropriate regulators and sample water
testing, management believes that the provision of GBP3.9m is
appropriate. It is anticipated that the majority, if not all, works
on the site will be carried out after 12 months and so the
provision has been presented as a non-current liability.
Maintenance reserves
The maintenance reserves represent the estimated cost of
ensuring the remaining four ATR aircraft in Propius at the year end
are kept in a suitable condition for when they are handed back at
the end of the leases including redelivery costs. The estimate of
maintenance reserves is sensitive to changes in market prices and
the level of wear on specific components once in the process of
overhaul. The impact of discounting is not material and has not
been recognised.
The estimated proportion of the provision is GBP6.0m and largely
relates to airframe, engines and propeller blade costs. A large
portion of airframe checks (GBP3.8m) is considered estimable due to
the potential for costs to vary significantly. However, the chance
of this significant variance is considered low based on experience
of actual costs incurred on airframe works for the aircraft handed
back to date. The estimable portion of engines covers items outside
of the firm fixed price offered by the supplier and is based on
Propius incurred costs to date. A key estimate of propeller blades
is the scrap rate, currently 15% (c.GBP0.5m). The condition of each
aircraft across the fleet is not expected to significantly differ
due to their age and the hours that each has flown. The key driver
to all provision estimation is the work required to put the
aircraft into a condition defined by the leases prior to
redelivery, outside of the fixed cost work required. If all
estimated costs increased by 20%, this would drive a material
increase in provision of c.GBP1.2m.
Post balance sheet events
On 15 May 2023, the Group disposed of its wholly owned
subsidiary Star Handling Limited to Skytanking UK Ltd, a wholly
owned subsidiary of Prime Flight Aviation Services Inc, for a
maximum cash consideration of GBP4.8m on a debt free cash free
basis. Under the terms of the agreement, the Group received GBP3.5m
in cash, with up to a further GBP0.3m being payable following
agreement of completion accounts. An additional payment of up to
GBP1.0m (equating to 20% of the maximum cash consideration) is
deferred and will be payable subject to the business achieving
forecast customer revenue targets in the 12 months following
completion.
Notes to the consolidated cash flow statement
Restated
Year ended Year ended
28 February 28 February
2023 2022
GBP'000 GBP'000
Loss before tax from continuing
operations (27,686) (35,670)
Adjustments to reconcile loss before
tax to net cash flows:
Non-cash:
Realised profit on sale of property,
plant and equipment (947) (308)
Share of post-tax profits of associates
and joint ventures accounted for
using the equity method 566 356
Depreciation of property, plant and
equipment 18,284 20,749
Finance income (1,922) (2,240)
Finance costs 24,786 20,962
Release of grant income (1,339) (788)
(Impairment reversal)/impairment (6,286) 5,970
Charge for share-based payments 630 285
Foreign exchange retranslation (2,099) 445
Gain on swaps mark to market valuation - (93)
Working capital adjustments:
Decrease/(increase) in inventories 148 (144)
(Increase)/decrease in trade and
other receivables (5,751) 6,625
Decrease in trade and other payables (1,841) (7,840)
Decrease in retirement benefits and
other provisions (4,024) (5,018)
Cash transferred to restricted cash (1,000) -
Cash (used in)/ generated from continuing
operations (8,481) 3,291
------------------------------------------- -------------- -------------
Related parties
Relationships of common control or significant influence
W A Tinkler was a related party until 14 June 2018 when he
ceased to be a Director of the Group. The amounts outstanding are
unsecured and were entered into under normal commercial terms.
WA Developments International Limited is owned by W A Tinkler.
There were no related party sales or purchases during the current
or prior years. At the year end GBP60,000 (2022: GBP60,000) was due
from WA Developments International Limited. As of 14 June 2018, WA
Developments International Limited was no longer a related
party.
Apollo Air Services Limited is owned by W A Tinkler. There were
no related party sales or purchases during the current or prior
years. At the year end GBP83,000 (2022: GBP83,000) was owed by the
Group and GBP46,000 (2022: GBP46,000) was owed to the Group by this
company. As of 14 June 2018, Apollo Air Services Limited was no
longer a related party.
WA Tinkler Racing is owned by W A Tinkler. There were no related
party sales or purchases during the current or prior years. At the
year end GBP30,000 (2022: GBP26,000) was owed to the Group. As of
14 June 2018, WA Tinkler Racing was no longer a related party.
During the current and prior years, the Group made no purchases
from or sales to Stobart Capital Limited, a business part -- owned
by W A Tinkler, relating to investment management. At the year end
GBPnil (2022: GBP6,000) was owed to the Group due to the write-off
of invoices totalling GBP6,000. As of 14 June 2018, Stobart Capital
Limited was no longer a related party.
Speedy Hire plc is a related party from 1 June 2019 when David
Shearer became Non-Executive Chairman of the Group, as he is also
Non-Executive Chairman of Speedy Hire plc. During the year, the
Group made purchases of GBP8,000 (2022: GBP3,000) relating to
equipment hire of which GBP2,000 (2022: GBPnil) was owed by the
Group at the year end.
Buchanan Shearer Associates LLP is a related party from 1 June
2019 when David Shearer became Non-Executive Chairman of the Group,
as he is also a designated member of Buchanan Shearer Associates
LLP. During the year, the Group made purchases of GBP33,000
including VAT (2022: GBP207,000) relating to recharge of expenses.
At the year end, GBPnil (2022: GBPnil) was owed by the Group.
Associates and joint ventures
The Group has loans, not part of the net investment, outstanding
from its associate interest, Mersey Bioenergy Holdings Limited
(MBHL), of GBP7,302,000 (2022: GBPnil) at the year end due to the
reversal of impairment of the loans. The loans are unsecured and
have a ten-year term ending in November 2024.
During the year, the Group made sales of GBP7,246,000 (2022:
GBP7,411,000) to Mersey Bioenergy Limited (a subsidiary of Mersey
Bioenergy Holdings Limited) relating to the sale of material. At
the year end, GBP1,390,000 (2022: GBP220,000) was owed to the
Group.
There were no other balances between the Group and its joint
ventures and associates during the current or prior year.
All loans are unsecured and all sales and purchases are settled
in cash on the Group's standard commercial terms.
Alternative performance measures
In the reporting of financial information, the Directors have
adopted various alternative performance measures (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.
Adjusted EBITDA
Adjusted EBITDA is the key profitability measure used by
management for performance review in the day-to-day operations of
the Group. Adjusted EBITDA represents loss before interest, tax,
depreciation and impairments. Refer to segments note for
reconciliation to statutory loss before tax.
Headroom
This is the sum of cash and restricted cash per the consolidated
statement of financial position.
Net debt and gearing
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 financial assets and
liabilities note above for a reconciliation. Gearing is defined as
net debt divided by Group shareholders' equity per the consolidated
statement of financial position.
Propius lease and aircraft-related costs
This is the sum of cash outflows related to the ATR aircraft in
Propius to be paid in FY24. It consists of net lease payments, less
deposit paid of GBP9.2m, maintenance outflows of GBP15.1m, see
maintenance reserves section of provisions note, and other
unavoidable aircraft costs of GBP0.9m, see note onerous
leases/contracts section of provisions note.
Prior year restatement
During the year, errors were identified relating to the adoption
of IFRS 16: Leases from the year ended 29 February 2020. The errors
concerned minimum rent payment increases built into the terms of
several leases and one sublease across the Group, that were omitted
from the calculations on transition. In addition, the
classification of the difference between a headlease liability and
sublease net investment in lease has been corrected. These errors
led to a material understatement within lease liabilities,
right-of-use assets and net investment in leases, with the balance
of these errors impacting retained earnings.
The cumulative net impact of adjustments to retained earnings as
at 28 February 2022 was a decrease in retained deficit of
GBP424,000. Lease liabilities were understated by GBP5,442,000 and
right-of-use assets were understated by GBP4,307,000 at the same
date. There was no impact on net cash flows.
The following tables summarise the impacts on the Group's
consolidated financial statements.
Consolidated income statement and other comprehensive income
Year ended
28 February
2022 - As Year ended Year ended
previously 28 February 28 February
reported 2022 - Adjustments 2022 - Restated
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- -------------------- -----------------
Depreciation (20,464) (285) (20,749)
Impairments (5,369) (601) (5,970)
Finance costs (21,228) (218) (21,446)
Finance income 2,239 1 2,240
Others 17,734 - 17,734
--------------------------------------- ------------- -------------------- -----------------
Loss for the year (27,088) (1,103) (28,191)
--------------------------------------- ------------- -------------------- -----------------
Others comprehensive (expense)/income
for the year, net of tax (1,875) 323 (1,552)
--------------------------------------- ------------- -------------------- -----------------
Total comprehensive expense
for the year (28,963) (780) (29,743)
--------------------------------------- ------------- -------------------- -----------------
Loss per share
Year ended
28 February
2022 - As Year ended Year ended
previously 28 February 28 February
reported 2022 - Adjustments 2022 - Restated
GBP'000 GBP'000 GBP'000
----------------------------- ------------- -------------------- -----------------
Loss per share expressed in
pence per share - total
Basic (3.28)p (0.13)p (3.41)p
Diluted (3.28)p (0.13)p (3.41)p
----------------------------- ------------- -------------------- -----------------
Consolidated statement of financial position
Year ended
28 February
2022 - As Year ended Year ended
previously 28 February 28 February
reported 2022 - Adjustments 2022 - Restated
GBP'000 GBP'000 GBP'000
------------------------------ ------------- -------------------- -----------------
Assets
Property plant and equipment 265,637 4,307 269,944
Net investment in lease 16,204 1,559 17,763
Others 160,806 - 160,806
------------------------------ ------------- -------------------- -----------------
442,647 5,866 448,513
------------------------------ ------------- -------------------- -----------------
Liabilities
Loans and borrowings (294,638) (5,442) (300,080)
Others (77,866) - (77,866)
------------------------------ ------------- -------------------- -----------------
70,143 (5,442) 70,567
------------------------------ ------------- -------------------- -----------------
Net assets
------------------------------ ------------- -------------------- -----------------
Capital and reserves
Retained deficit (428,238) 424 (427,814)
Others 498,381 - 498,381
------------------------------ ------------- -------------------- -----------------
Group shareholders' equity 70,143 424 70,567
------------------------------ ------------- -------------------- -----------------
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END
FR DGGDLXXDDGXG
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June 21, 2023 02:00 ET (06:00 GMT)
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