LOGISTICS specialist Stobart Group today said its full year profits are likely to be at the lower end of expectations – but that would still deliver growth of about 20%.

The Warrington-based transport group blamed cutbacks by Network Rail which will impact the engineering operation of its rail division, higher finance costs linked to a new £100m 10-year funding deal, January’s increase in VAT and the impact of today’s comprehensive spending review on the general economy.

Results for the six months to August 31 released today showed an 11.7% increase in revenues of £243.7m and a 38.7% rise in pre-tax profits of £15.4m.

The group, which employs about 1,000 staff across the region at its Warrington haulage base and its rail, road and seaport hub in Runcorn and Widnes, clinched several new deals during the period including a new £25m annual chilled distribution contract with Tesco, an extension to its contract with soft drinks firm Britvic and a £15.8m agreement with Tesco in Ireland.

Eddie Stobart, the group’s road transport and warehousing division, increased revenues from £188.7m to £219m and earnings after fleet financing costs (EAFFC) jumped from £12m to £16.4m.

The ports operation saw an improvement in turnover from £6.3m to £7m, although EAFFC dropped to £1m from £1.5m due to rental costs from a sale and leaseback deal for the site.

Air operations, centred on its airports at Carlisle and London Southend, achieved £3.6m in revenues compared with £3.2m and £100,000 EAFFC, against break even last year.

Revenues for rail operations fell from £30m to £26.3m and EAFFC came in at £1.9m against £2.3m.

Chief executive Andrew Tinkler said the near future in rail is expected to remain depressed due to cutbacks in Network Rail expenditure, but cost controls have been implemented across the division.

Chief financial officer Ben Whawell said the group continues to trade well, with £100m of new business delivered in the past 12 months.

He said talks continue with prospective customers over warehousing and distribution opportunities at Widnes, but added: “The current climate makes it a bit more difficult to get a customer to move from where they are, but there are 95 acres still to develop and we are talking to a variety of customers.”

And he said the seaport operation in Runcorn could benefit from wood imports linked to Stobart’s new biomass joint venture.

He said the note on full year profits was “just a bit of caution”, adding: “We have had six months of strong growth. We are trading very well. Even at the lower end (of profit forecasts) we will show 20% growth.”

Mr Tinkler said in the three years since the group listed on the stock exchange turnover has more than doubled and profitability has increased significantly in each reporting period.

He added: “There will be further growth from the full delivery of the business recently announced.

“The second half has started encouragingly and we expect to see good growth across our businesses.

“In addition, we are in discussion with several other major customers, including biomass customers and airlines, which should significantly grow the business.”