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Business Performance Review
31
Business Performance Review
Taxation
The tax charge of £6.2m (2010: £5.1m) is at an effective rate
of 21.1% (2010: 15.2%). The effective rate has been reduced
from the standard rate by adjustments in respect of prior years
of £1.4m being mainly additional capital allowances and land
remediation relief on the Widnes assets and by £1.5m for the
reduction in rate applied to deferred tax from 28% to 27%.
Statement of Financial Position
We have a strong balance sheet with net assets of £331.7m
(2010: £305.4m) including operational fixed assets of £237.7m
(2010: £210.9m). The increase in fixed assets is principally due
to the capital developments at London Southend Airport and
the investment in the truck fleet in the year. Freehold property
includes five operational road transport sites, land at the Mersey
Multimodal Gateway (3MG) in Widnes, the Port of Weston at
Runcorn, London Southend Airport, Carlisle Lake District Airport
and an investment property at Debden, Essex.
Associates and joint ventures includes the investments in Stobart
Biomass Products, Aer Arann Group and certain property related
assets which were previously classified as held for sale.
There has been no change in the accounting carrying value of
intangible brand assets in the year though we believe that the
profile of our brand continues to grow.
Funding
The net debt of the Group has increased to £156.1m from
£96.8m at 28 February 2010 (and decreased from £162.0m at
the interim position at 31 August 2010). This is principally due
to the capital expenditure at London Southend Airport, the
investment in the fleet and the cash investment in Stobart
Biomass Products of £15m.
During the year, the Group refinanced its borrowings. The loan
notes, bank loans and Income Shares were repaid and the Group
entered in to a new 10 year, £100m development facility with
M&G UK Companies Financing Fund. Of this £100m facility,
there remains £30m undrawn.
The finance lease liabilities have decreased to £45.0m from
£50.4m. The nature of the guaranteed buyback arrangements,
which reduces our residual risk, has led to some vehicles added
to the fleet in the year being classified as operating leases
rather than finance leases.
The gearing ratio* is 47.1% (2010: 31.7%) and the gearing ratio
ignoring fleet financing* is 33.5% (2010: 15.2%).
There is £64.3m of net debt due within one year at the balance
sheet date. Of this, £54.3m was working capital and finance
lease debt which revolves on normal cycles. The remaining
£10m is a term loan from BLME which is repayable by 3 August
2011. The Eddie Stobart working capital facility limit was
increased in April 2011 to £65m.
Cashflow
Cash generated from operations was £27.7m (2010: £39.8m).
The reduction is due to the increase in working capital due to
volume growth, increase in new customers’ credit terms and
timing of payments as well as £3.3m operating lease rental
charges for trucks on leases classified as operating leases due to
the fixed nature of the buyback arrangements.
Cash outflow for capital expenditure in the year totalled £55.4m
(2010: £63.3m) including assets backed by finance leases of
£18.3m (2010: £17.7m). The principal expenditure was for
development of the railway station, control tower and terminal
at London Southend Airport funded by a new loan facility.
Cash received from disposal of property, plant and equipment
was £10.5m (2010: £72.8m including £61m from disposal of
the Widnes assets). Of the remaining amount, £5.8m (2010:
£5.1m) related to the buyback and resulting repayment of
finance lease balloon payments on vehicles.
The increase in net borrowings (excluding finance lease liabilities)
was £64.7m (2010: £29.6m).
Dividends paid totalled £15.9m (2010: £13.0m) reflecting an
increased number of shares but the same annual dividend rate
of 6p (2010: 6p).
Outlook, Recent Transaction and New Structure
We look forward to a period of continued profitability and
growth from our core businesses and realising further
profitability and value from the assets held and investments
that we have made in the past years including Stobart Biomass
Products and at London Southend Airport as well as our
property assets.
In the new financial year we have reorganised our business
divisions to better align them with the value drivers in the
businesses. Our new business divisions are Transport &
Distribution, Estates, Air, Biomass, and Infrastructure & Civil
Engineering. We will present our segmental results on this
basis going forward.
In May 2011 the Group completed a transaction issuing 77.3m
new Ordinary Shares at 155 pence raising net cash of
£114.9m. At the same time the Group acquired the remaining
50% of Stobart Biomass Products Limited for £20m
comprising £11m of loan notes and 5.8m shares at 155 pence
per share. The Group was also granted an option giving the
right to purchase Westbury Properties Limited before mid
August 2011 for a consideration based on an independent
valuation. The funds will be used to invest in assets which are
expected to enhance the performance of the Group’s business
divisions, in particular development of the Group’s property
assets. The Group also implemented a senior executive
incentive plan which covers up to 38million Ordinary Shares
which aligns the interests of management with those of
shareholders.
* The gearing ratio is calculated as a percentage of net debt to net assets. The gearing ratio ignoring fleet financing is a percentage of net debt (excluding obligations under
finance leases and hire purchase contracts) to net debt.