Stobart launches 5.5% retail bond
Carlisle-based transport and logistics company Stobart Group has launched a six-year retail bond paying a coupon of 5.5%.
The interest will be split into two payments each year, paid out to investors in June and December. The first interest payment will be made on 4 June 2013.
The minimum initial investment is £2,000, and the bond is issued in denominations of £100.
The bond offer is expected to close on 27 November. However it will close earlier if there is large demand. Once the offer is closed, private investors will be able to buy and sell the bond on the London Stock Exchange's Order Book for Retail Bonds.
Assuming Stobart, which is listed on the FTSE 250, does not go out of business or become insolvent, the bonds will be redeemed at their face value of £100 per bond on 4 December 2018.
The bond can be bought through stockbrokers and wealth management firms and it is suitable for a stocks and shares ISA, a self-invested personal pension, a junior ISA and child trust fund. It is available to residents of the UK, Jersey, Guernsey and the Isle of Man.
Lauren Charnley, Redmayne-Bentley stockbroker, comments on the launch: "Stobart is the latest household name to issue a retail bond into an ever growing market.
Like its contemporaries, we expect the subscription levels to be met in full, however with only a relatively small target of £25 million, it will be more likely a question of how quickly demand will be met rather than if."
Stobart operates a fleet of more than 5,400 vehicles and trailers from sites across the UK, Ireland and Belgium. Its transport and distribution division accounts for more than 90% of revenue for the group. Stobart also has divisions involved in biomass and air, for example Stobart Air operates the London Southend and Carlisle Lake District airports.
Stobart generated £552 million in revenue and £31 million in net profit in the financial year ending 29 February 2012. In the previous financial year it generated £500 million in revenue and £29 million in net profit.
However, in the first half of the current financial year (to 31 August 2012), revenue and profit fell slightly. Revenue dropped from £281 million to £278 million while underlying pre-tax profit fell from £16.4 million to £13.2 million.
The company is in the process of restructuring its underperforming chilled business. It has also closed several UK sites and reduced its fleet size to try and create a more profitable operation.
In the absence of a credit rating, Redmayne-Bentley has rated the bond issue as a medium to high risk investment.
This article was written for our sister website Money Observer
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.