Infrastructure company Stobart (STOB) delivered a strong set of results for year ending 28 February 2017. It has also passed over the day-to-day running of the business in an orderly fashion. The company runs operations as diverse as transport hubs to energy businesses.
Founder and chief executive Andrew Tinkler is stepping down, handing over the top job to deputy Warwick Brady. Tinkler tells Shares that talks of the transition started a year ago when he realised a different skill set was needed.
Brady has ambitious targets of his own, hoping to increase the market cap of the company from today’s £829m to over £2bn in five years.
Great numbers
Stobart is increasing its final quarter dividend by 50% to 4.5p per share, putting the full year payout at 16p. That's after doubling its annual dividend to 12p in the previous 12 months.
This confident move is backed up by the numbers. The company’s profit before tax rose 48.9% to £27.4m and its underlying basic earnings per share by 62.4% to 8p. An operating cash outflow of £1.72m is largely down to non-cash items such as goodwill impairments on acquisitions. Stobart ended the year with £30.7m of net cash, up from £20.8m a year ago.
Big plans in Southend
This diversified company has interests in energy, aviation and rail, setting itself ambitious targets in these sectors. Stobart's goal for London Southend Airport, which it operates, is 2.5m passengers in 2018, but its plans for the airport do not stop there.
Brady describes Southend Airport as ‘London’s best airport that can support over 10m passengers a year’. That's a big hike in capacity but one which Sandy Chen, an analyst at Cenkos, believes is ‘entirely credible’.
New ventures
Tinker is not leaving the company but instead is focusing on a new venture, Stobart Capital, which aims to bring the company's investment activities under a single entity. Tinkler says that the business has ‘the potential to create further returns for shareholders’.
Broker Stifel likes the idea, saying Tinkler’s knowledge is retained for the company as he stays on the board while also being able to seek out investment opportunities.
Despite this strong set of year end results, the markets response is rather muted. Stobart’s share price is only up by 1.7% to 234p suggesting that the news had been anticipated. But since the start of the year, the share price has rallied 32.2%.
That leaves the stock on a forward price to earnings ratio (PE) of around 29-times, with an implied income yield 5%.
The company floated Eddie Stobart Logistics (ESL:AIM) on the AIM market in April, valuing its 49% stake at £184.8m, a good return on a £40m investment. Stobart retains a 12.5% investment in the smaller company. This is clearly a business that knows what it’s doing.
