UK Markets closed

Esken’s share price crashes as Stobart Air bites the dust

·2-min read
London Southend Airport, from where Esken Limited operates

Fears over increasing Covid-19 cases have dragged the Esken Limited (LSE: ESKN) share price significantly lower in recent weeks. Concerns over what the emergence of the Delta variant could mean for the UK aviation sector has crushed investor appetite for this UK share.

The Esken share price has plummeted on Monday too. Down 17% on the day, it’s now trading at 25.9p per share.

Stobart Air falls to earth

Esken announced on Monday its flying division is to be officially wound up. This follows news over the weekend that partner and IAG-owned Aer Lingus had to cancel flights from Belfast as Stobart Air ceased operating.

In late April, Esken entered into an agreement to sell Stobart Air to Ettyl Limited. But the financing of the deal encountered subsequent problems. And Ettyl had been seeking alternative methods of stumping up the cash.

However, Esken said today it’s “now clear that Ettyl is unable to conclude the transactions on the original terms or to obtain an alternative funding package” within the necessary timescale. The small-cap has therefore decided to end its agreement with Ettyl with immediate effect.

Esken added that will not continue to finance Stobart Air in the absence of other buyers for the division. Consequently the company “has terminated its franchise agreement with Aer Lingus, will cease trading and is taking steps to appoint a liquidator”.

Cash outflow forecasts upgraded

Following the move Esken has “undertaken certain contingency planning measures”. And it will continue to fund lease obligations on eight ATR aircraft until they expire in April 2023 under existing arrangements. Esken also said it’ll take immediate steps to sublease these planes to other operators.

Esken added it “also remains responsible for certain obligations” to Aer Lingus, under its franchise agreement.

Finally, Esken said it expects to endure a cash outflow of £34m in this financial year (to February 2022) if it’s unable to sublease the planes. This compares with the £16m outflow that was predicted back in April. Outflows for fiscal 2023 and 2024 have also been upgraded to £22m and £26m respectively.

Other big news from Esken

In other news, Esken is in the “final stages” of agreeing strategic funding for London Southend Airport. This would “release significant liquidity into the group while underpinning the funding requirement of the airport in the medium term.” The financial partner “has significant investment experience in the airport sector globally,” Esken said.

Trading at Esken’s Aviation division continues to be troubled by travel restrictions as the pandemic rolls on. This has caused a “slower recovery” at London Southend Airport. But trading at its Global Logistics Operation has been more resilient.

Elsewhere, Esken’s Energy unit is still operating at expected levels as the availability of waste wood from the construction sector has returned to pre-coronavirus levels.

The post Esken’s share price crashes as Stobart Air bites the dust appeared first on The Motley Fool UK.

More reading

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting