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The new structure will clarify and sharpen the focus, strategic aims and value of each part of the business.
We will be investing in the new divisions and expect to generate a significant return for shareholders.
Chief Executive Officer’s Report
7
Chief Executive Officer’s Report
Outlook
The Group is now entering an exciting phase of delivering
the full value potential in the various business streams. We
have spent the past three years in a build phase, so we are
looking at the next three to four years in terms of delivery.
In transport, we will aim to achieve a better margin than
the industry has traditionally managed because of our
differentiated business model.
The model emphasises controlled growth, cost reductions,
improved utilisation and increased margins, with additional
contributions to the bottom line being generated by new
revenue from airports and biomass. To support the model we
have put more framework around management and
developed control mechanisms to deliver it. In addition,
we are giving much greater focus to our Management
Development Programme, bringing existing employees up
through the ranks to support the running of the business.
New Structure
Although Eddie Stobart currently represents around 85% of
the Group’s turnover, the Group has diversified in recent
years through the acquisition of further transport businesses,
airports, an interest in biomass and other properties.
Following an operational review, we remain committed to
the Eddie Stobart business, but we are also forming new
divisions with their own management teams. The new
divisions are Transport & Distribution, Estates, Air, Biomass
and Infrastructure & Civil Engineering.
The new structure will clarify and sharpen the focus, strategic
aims and value of each part of the business. We will be
centralising certain functions such as business/IT systems,
finance/analysis, corporate purchasing, business services
(legal, HR, insurance etc) to take the burden off the divisions,
freeing up each business leader’s time to focus on developing
opportunities and performance delivery.
Having raised approximately £115m in additional funding, we
will be investing in the new divisions and expect to generate
a significant return. In particular, we have identified value-
enhancing projects relating to properties in the Air division
and a Biomass related facility in Widnes that will form part of
the Estates division.
We also hope that the investment and the divisional re-
alignment will help investors develop a better understanding
of the value of the Group’s assets.
Delivering Value
We are confident that restructuring the company and
investing in our Estates and Airports divisions, where there is
significant untapped potential, will create the greatest value.
Our Transport and Distribution division, including Eddie
Stobart Limited (ESL), will remain at the heart of the Group.
ESL is a market leading transport business with the best fleet
in the industry. It will continue to be the Group’s cornerstone.
This division will include all of the forms of transport, storage
and handling services provided by the Group, encompassing
all of the multimodal services currently provided through road,
rail and ports. It has achieved a profit growth rate of
approximately 15% year on year and whilst we will continue
to focus on adding contracts it does not require any
significant further investment.
The Estates division will be responsible for the management,
development and realisation of all Group land and building
assets. The division will hold around 20 properties spread
throughout England. These include a number of sites that are
already in use as part of our multimodal platform, but which
have considerable potential to develop both physically and in
terms of their operational value. For example, we are looking
at building biomass plants on some of the sites which will
enhance both the property value and contribute to revenue
generation in terms of both biomass and transport contracts.
Our Airport operations – London Southend Airport and
Carlisle Lake District Airport – offer significant growth
potential. Our target is to achieve in excess of two million
passengers annually at Southend and to develop our
distribution and freight operations at Carlisle to enhance our
customer proposition. Both airports have the potential to
deliver impressive yields.
The Biomass division currently sources sustainable biomass,
primarily life-expired timber and low grade softwood, for the
new generation of minimum-carbon power plants utilised
both in large-scale electricity generation and smaller on-site
industrial power plants. The strategy is to build the Biomass
division up to between three and four million tonnes per year
over the next few years, all on long term contracts and all
using Eddie Stobart for transport.
The Infrastructure and Civil Engineering division is split into
two main sub-groups: Rail and Civil Engineering. Rail is one
of the UK’s leading names in rail network maintenance, repair
and improvement. Civil Engineering is responsible for the
development and improvement of the Group’s property
holdings, concentrating on the regeneration of brownfield