January 25, 2013 5:32 pm

Stobart fights to find fans in the City

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Stobart Group

Stobart Group is one of few companies that can boast a 25,000-strong fan club of lorry-lovers, as well as a reality TV programme that showcases the more nail-biting aspects of time-sensitive palletised goods deliveries.

Stobart truck spotters – whose fan website is self-deprecatingly dubbed StobartSaddos.com – set up their deck chairs outside depots and note the individual names of its 2,000-odd green articulated lorries that pound the UK’s motorways.

The company’s diehard fans have even been acknowledged in a Stobart truck drivers’ version of “The 12 Days of Christmas”, replete with the lyrics “seven spotters spotting”.

But such admiration for Stobart abruptly ends at the entrance to the boardroom door. The FTSE 250 company’s often-tense relationship with the City was accentuated this week when investors initiated a boardroom coup to insert a chairman of their choice.

Avril Palmer-Baunack was promoted to the new role of executive chairman, partnering Andrew Tinkler, chief executive, in the day-to-day running of the group.

“It was time to change the make-up of the board,” says David Lis, head of UK Equities at Aviva Investors, which owns a 3.5 per cent stake in Stobart. “This is the right course of action to release the value that we see in this business.”

After starting life four decades ago as a family-run trucking business, Stobart has evolved into a disparate mini-conglomerate that boasts a transport arm, two airports – Southend and Carlisle – an engineering services division, a property portfolio and a biomass unit.

But such diversity requires a solid City type at the helm, and Mr Tinkler – perhaps better known for his entrepreneurial style than his management nous – was seen by investors as lacking the hard edge required to navigate a path for such an unwieldy company.

Mr Tinkler, who holds a 10 per cent stake, has been slow to demonstrate synergies among the diverse units, and – spurred on by last week’s profit warning – investors eased non-executive chairman Rodney Baker-Bates aside for Ms Palmer-Baunack.

“There has been a need for a change in leadership on the board and Avril fits that role perfectly,” says Neil Woodford, the head of UK equities at Invesco – Stobart’s largest shareholder – and one of the City’s most influential fund managers, controlling £28bn of assets.

Ms Palmer-Baunack joined Stobart last year following the Cumbria-based haulier’s £12.4m takeover of Autologic, the formerly Aim-traded automotive logistics group, and impressed shareholders with her business acumen.

According to the company, she has a mandate to squeeze more cash from the portfolio, which analysts have interpreted to mean the break-up of the company through the sale of several of Stobart’s disparate divisions, honing its focus to its core transport and logistics roots.

“While there is potential within the portfolio to create value for shareholders, we are increasingly worried about some of the risks, in particular, the broadening spread of the group,” say analysts at Killik & Co.

By paring down its broad interests, shareholders hope that Stobart will lose its “conglomerate discount” and will be more accurately valued as a transport and distribution company.

While there is potential within the portfolio to create value for shareholders, we are increasingly worried about some of the risks, in particular, the broadening spread of the group

- Analysts at Killik & Co

“I am working in close partnership with the CEO Andrew Tinkler to ensure that the right value is obtained for all shareholders over the medium term,” says Ms Palmer-Baunack.

However, investors suggest that some of group’s assets – namely Southend airport and its developing biomass unit – have yet to realise their full potential, and any early sale would not be financially advantageous to Stobart.

Such potential can be illustrated in the group’s 10-year partnership agreed with easyJet, which flies to 13 European destinations from Southend in Essex.

The airport aims to become a competitor to London City Airport, with the 620,000 passengers using the airport in 2012 expected to rise to 2m by 2020.

Stobart financed its £35m investment in Southend through a £115m share placing in 2011, and investors who signed up to the 155p per share deal are some way from getting their money back, given the group’s current 102p share price.

Other remedies include Stobart’s recent decision to discontinue its underperforming chilled transport unit as a standalone business, instead wrapping it into its wider transport and distribution network.

“Short-term volatility is likely for Stobart, as underlying market conditions remain challenging. However, the longer-term value opportunity remains from the development of the group’s four-year plan,” says Roger Johnston, analyst at Edison Investment Research.

Ms Palmer-Baunack’s appointment should also go some way towards soothing Stobart’s relationship with the City, which has been strained by a series of controversial purchases, including the acquisition of a property division through related-party transactions with senior executives.

Conversely, the introduction of a boardroom boss wielding executive powers has drawn the ire of corporate governance groups, with both Pirc and Manifest being longstanding critics of the company.

Ultimately, investors in the Carlisle-based group will hope that the newly minted board can replicate the public’s adoration of Eddie Stobart’s lorries and their smartly dressed drivers.

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