Stobart Group on the Right Flight Path

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Wednesday, May 29: Following a belated start to the week, indices in London were sharply lower(FTSE 100: -1.15%) at the open despite sustained weakness in sterling, as sentiment took a hit on the back of negative trade rhetoric from the White House. Trump stated that tariffs could “go up substantially” and that the US wasn’t ready to accommodate a deal with China, sparking selling on US indices yesterday, across Asian bourses overnight, and at the open for Europe.

Speculation has been rising in Chinese media that President Xi Jinping could use China’s position as a major exporter of rare earth chemical elements as leverage in the ongoing trade spat. Though such a restriction on rare earth sales to US companies would hurt China, it would be disproportionately more damaging to the US and its tech and defence industries. China accounted for 80% of the US’s rare earth imports between 2014 and 2017. Tariffs on rare metal ores are already slated to increase from 10% to 25% on June 1.

Stobart Group(+8.37%) was the big winner on the FTSE 250, despite swinging to a pretax loss of £42.1m(FY2018: £109.3m) in FY2019 and slashing its full year dividend. During the year expenses rose 34% to £152.8m as the company also recognised an impairment to the tune of £7.8m. Adjusted underlying EBITDA fell 24% to £10.8m, as revenue rose 39% to £146.9m in the year. The company proposed a final dividend of 3p per share, down from 4.5p for FY2018. Despite what may seem disappointing results at first glance, Investors have appraised that the Group has a real chance of making market share gains in London’s air transport market.

European equities were lower at the close, with the FTSE 100 -1.15%, the CAC 40 -1.70% and the DAX 30 -1.57%.

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