Air Partner Plc: Full Year Trading Update
Overview
Air Partner, the global aviation services group, today provides a trading update for the year ending 31 January 2020. The Group's UK Charter division has been impacted by slower than expected Q4 trading and as a result the Board expects to announce underlying profit before tax of not less than £4.3 million for the 12 months to 31 January 2020, which is lower than previously expected.
The Board looks ahead to the new financial year with confidence, which is supported by a strong order book in Safety & Security, with order book coverage of c.35% of the forecast outlook, and sizeable business wins in the Charter division for delivery in the first half of the year ending 31 January 2021.
Divisional Review
Charter division
While Group Charter has performed well in the US, and reasonably well in Europe, the UK has been weak, which has impacted Group performance. Our UK sales have been impacted by:
(i) a single UK customer suspending a complex global flying programme in H1, which did not revert in H2 as expected. We continue to support this customer on an ad hoc basis;
(ii) a soft UK private jet market, which worsened in Q4; and
(iii) an A330 Remarketing mandate, where, at the date of this announcement, the sale and purchase agreement is signed but remains subject to closing conditions. As a result, it now looks highly likely that this will fall into the next financial year for revenue recognition purposes.
Outside of the UK, the US market continues to be strong and our US business is performing very well, particularly in Private Jets. This is despite no 'Urgent Action' events taking place in either H1 or H2 of 2019, the absence of which is highly unusual in Charter. We have invested in our US Charter business consistently over the last three years, selectively increasing broker headcount and opening new offices, and investment will continue in 2020, signalling our continued confidence in this division. In continental Europe, Charter has had a reasonable year overall, though performance is mixed depending on region and product.
Safety & Security division
The newly formed Safety & Security division has performed in line with expectations, with revenue growth expected to exceed the prior period by at least 10%.
In line with our stated strategy of diversifying the Group's revenue streams and broadening the portfolio of aviation services we offer, we acquired Redline Assured Security, a leading global aviation security solutions and training company, in December 2019, and the integration is progressing well. We are encouraged by the beneficial synergies this acquisition affords us in safety and security, as well as the strong pipeline of business opportunities.
Divisional Outlook
Charter division
While the visibility around Charter orders is always limited, it has been further impacted by the political uncertainty in the UK and headwinds in the global economy. From the UK perspective, the General Election result on 13 December 2019 delivered a clear majority, which we believe over time will help to build business and consumer confidence.
The Charter division has already secured some sizeable new business wins for the next financial year. Moreover, the 2020 events calendar is significantly better than 2019, with a variety of opportunities for Charter in sectors where we excel, such as large corporate programmes and governmental work. Our Remarketing business has a good pipeline of exclusive mandates and is in the process of growing this even further. Exclusive mandates, which are active, include one B777, one A330, one ATR72, six S76 helicopters and three Twin Otters.
Heightened tensions in the Middle East have resulted in increased interest in our Emergency Planning product. We received several enquiries for Evacuations during and immediately post the events in Iran/Iraq at the beginning of 2020 and we continue to monitor the situation in the region.
Over the last two years, we have opened offices in Los Angeles (June 2018), Houston (February 2019), Singapore (February 2019) and Dubai (September 2019). The cost of new office openings is expensed and a positive contribution is expected after 18/24 months. We remain confident of the contribution that the four recently opened offices will make to the Group within this time period, and are still committed to opening one/two new offices per annum over the next three years to increase our geographical footprint and diversify further.
Safety & Security division
Pleasingly, the Safety & Security division, which includes the full year effect of the Redline acquisition, starts the year with an order book coverage of c.35% of its forecast outlook. Redline is an important addition to this division and during the year will be rebranded as "Air Partner Assured Security".
Group Outlook
While it is disappointing that the last quarter has not traded in line with the Board's expectations, we are encouraged by our forward order book and the increasing levels of visibility that we are gaining through the continued growth of our Safety & Security division. The Board enters the new financial year with confidence that the Group is well positioned to execute its stated strategy to become a world-class aviation services group, for the benefit of all stakeholders.