Aviation and renewables company Esken (LON: ESKN) is the largest faller on the Main Market today following its full year results. The share price slumped 23.8% to 2.82p. The company does have significant break up value, though.
In the year to February 2023, revenues increased from £104.6m to £130m, while the underlying loss reduced from £35.7m to £27.7m. However, the loss is expected to increase this year on lower revenues following disposals. The forecasts loss ranges from £43m to £53.7m.
Net debt jumped from £88.1m to £166.7m at the end of February 2023. That was before the announcement of the £9m disposal of Mersey Biomass and even after this sale net debt is expected to increase to more than £190m by next February.
Divisional prospects
London Southend Airport is the focus of the aviation operations. This is a high fixed cost business so increasing volumes will move the operation closer to profitability. Canaccord Genuity believes that passenger numbers could nearly double to 160,000.
Larger London airports are becoming busier and that provides scope for demand to switch to an airport such as London Southend, particularly the shorter flights. Operational gearing means that the financial performance could improve rapidly.
Esken has a portfolio of renewable assets, where it has invested small amounts in equity, and this provides significant upside. Biomass outages are continuing, but there are improvements in plant performance and gate prices.
The strategy is to dispose of the main businesses when there are realistic selling prices. The renewables business is likely to be sold first with the timing of a sale of the aviation business depending on the rate of recovery in operations.
Canaccord Genuity has a target share price of 12p, which is similar to its current break-up value estimate – although that rises to 15.4p by February 2026. Zeus has a range of sum of the parts valuations from 14.8p at the low end to 19.8p at the high end. These are all much higher than the share price, which reflects high debt levels and the risks of the different businesses.