It was all going so well. An investor in Stobart Group in the spring of 2016 would by this time last year have tripled their money.
What was not to like? Stobart owned Southend airport, a southeastern hub whose growth is likely to be exponential because every other London gateway is as good as full. It is also a distributor of woodchip, offcuts that are being used by incinerators and considered renewable because they burn biomass. And it has a civil engineering contracting arm for Network Rail, the state-owned keeper of the railway network whose £8 billion-a-year maintenance and upgrade work is the equivalent of repainting the Forth Bridge — a job that will never be finished.
Oh, and then there is a legacy stable of investments, property that is regularly sold and mainly includes its residual holding in the company that gave it its name: Eddie Stobart Logistics, the spun-out and separately quoted trucking company in which Stobart Group holds a 12.5 per cent stake. Stobart Group happens to own the Eddie Stobart brand, which could yet prompt a legal wrangle at some stage, but that is a story for another day.
On the face of it, the argument behind those investors’ good fortune — and they include famed stock-pickers such as Invesco and Neil Woodford, who together speak for 45 per cent of the company — remains the same. Especially as the company has committed to paying a 4½p a share quarterly dividend. Southend’s passenger numbers are increasing at a rate of more than a third a year and it should hit 2.5 million next year. If there were two airlines you would want operating out of your airport, they are Ryanair and Easyjet and from next summer they both are. Southend is less than an hour from London, serves a fairly wealthy region and is hassle-free and popular with passengers. With more biomass being burnt to satisfy the insatiable demand for electricity, particularly of the renewable kind, the amount Stobart is delivering has risen by 70 per cent and the division’s operating profits are up 150 per cent.
But now for the not so good news. The rail and civil engineering business is increasing its revenues but is in the red with a familiar story from the railways: poor management and uneconomic contracting.
And the final tally for the six months to the end of August is not as good as the investor relations folk would have you believe. Including the £18 million Southend has spent promoting itself, the losses add to £17.5 million worse on a comparable basis to the £11.9 million in the same period last year.
But none of that explains why, since September last year, Stobart’s share price has crashed by nearly 30 per cent.
That is down to the sort of boardroom civil war that is rarely seen in public. The long story short is this: Andrew Tinkler, founder of the group, is removed from the board in a coup amid allegations of nefarious behaviour; he fights back and effectively engineers the defenestration of the chairman and one-time friend; he falls out with the chief executive and the two are expected to see each other in court, which few may care about but is glorious in its spitefulness.
This is why Stobart Group, despite all its economic upside, remains a toxic stock. Both sides of the boardroom split are calling each other liars, and the row has divided the shareholders. Both sides talk of battling for the sake of corporate governance when the board’s total lack of it has left it in a mess. Yes, there are good businesses here but when you can’t trust the principal players, you have no way of knowing where it is all going to end.
ADVICE Avoid
WHY There are some good businesses here but while the company remains in civil war it is impossible to back
Goals Soccer Centres
It has been a bumpy ride for shareholders in Goals Soccer Centres with the dividend suspended since 2016 amid tough trading conditions and a need to invest in its five-a-side football centres (Greig Cameron writes).
Goals, which has its headquarters in East Kilbride, South Lanarkshire, is one of the largest providers of small-scale football arenas in Britain. It was founded in 1987 and listed on the junior Aim exchange towards the end of 2004. The company also has a joint venture with City Football Group, the company behind Manchester City, in the US with a fourth centre expected before the end of this year.
Just over two years ago the leisure company did a £16.75 million share placing to help modernise facilities at 46 UK sites.
Mark Jones joined as chief executive before the share placing and early signs were good with better trading at sites where investments were made. Mr Jones announced he was leaving in October last year to join Carluccio’s, the restaurant chain. Andy Anson, a former Manchester United commercial director, succeeded him in April. In July he had to warn that the poor spring weather meant annual targets would be missed, sending them down from 85p to below 70p. Yesterday they closed at 72.5p.
Mike Ashley’s Sports Direct is the largest shareholder in the company but what he intends to do with his investment is hard to fathom.
Goals reported a 2.8 per cent decline in like-for-like sales with turnover down almost 7 per cent to £16.2 million in the six months to the end of June. There was a pre-tax loss of £1.1 million. However, sales grew strongly over the summer and some analysts suggested that was equivalent to between 8 and 9 per cent growth across August and July. There continues to be speculation about a combination with Powerleague, the main UK rival. Powerleague received backing from creditors earlier this month to enter into a company voluntary arrangement which will see it close 13 sites. Canaccord Genuity estimates that five Goals sites are likely to benefit from increased custom as a result.
ADVICE Hold
WHY Major investment phase is almost complete and Goals looks better placed than rivals
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