Avation PLC (LSE: AVAP), the commercial passenger aircraft leasing company, announces reviewed financial results for the six months ending 31 December 2017.
Key Financial Metrics
· Fleet assets increased by 35% to $1.008 billion since 30 June 2017;
· Revenue increased by 16% year on year to $52.4 million;
· Weighted average cost of total debt declined to 4.8%;
· Total profit after tax decreased by 8% year on year to $6.7 million; and
· Earnings per share ("EPS") decreased 15% year on year to 10.9 cents.
· Record growth with over $286 million in aircraft acquired in December 2017;
· First twin-aisle aircraft delivered into the fleet;
· First Boeing aircraft delivered into the fleet;
· Airbus A320 transitioned from Air Berlin to easyJet; and
· Four new customers added taking total airline customers to twelve.
Executive Chairman, Jeff Chatfield, said:
" During the six months ended 31 December 2017 Avation focused on re-deploying net proceeds generated by the sale of six ATR aircraft in June 2017, adding new customers to further diversify our revenue base and concluding our first investments in twin-aisle aircraft.
"Avation is pleased to report record growth in the value of its fleet assets. The Company took delivery of its first twin-aisle aircraft in December, completing the transformation into a diversified full service aircraft leasing platform. We also welcome four new airline customers .
"Lease revenue and total profit for the financial period were slightly reduced year on year. This was due to starting the period with a reduced fleet following the sale of six ATR 72 aircraft in June 2017. The sale of these aircraft de-risked the portfolio by lowering airline concentration and released equity which facilitated the acquisition of four new aircraft in December 2017.
"Avation ends the financial period with a larger, more diversified fleet and an increased revenue base that will deliver long-term shareholder returns."
As at 31 December 2017 Avation's fleet comprised 37 aircraft including five aircraft on finance lease. The weighted average age of the fleet (excluding finance leases) has reduced to 2.9 years (30 June 2017: 3.3 years) and the weighted average remaining lease term has increased to 7.9 years (30 June 2017: 7.5 years). As at 31 December 2017, all aircraft owned by the Company were fully utilised. Avation has three ATR 72 turboprop aircraft on order for placement during calendar year 2018 and three aircraft in calendar year 2019.
Fleet assets increased 35% to $1,008.5 million (30 June 2017: $744.7 million). Four aircraft were added to the fleet in the period including a Boeing 777-300ER delivered to Philippine Airlines, an Airbus A330-300 on lease to EVA Air and two ATR72-600 aircraft delivered to Mandarin Airlines.
During the period an Airbus A320 on lease to Air Berlin was transitioned to easyJet. This resulted in the release of maintenance reserves of $10.5 million into revenue and a corresponding impairment charge on the aircraft of $8.0 million.
Two older narrowbody aircraft with total book value of $38.4 million were re-classified as assets held for sale. Finance lease receivables totalled $10.3 million (30 June 2017: $45.4 million).
At the end of the financial period, Avation's overall loan to value ratio was 77% (30 June 2017: 72%). At 31 December 2017, 95% of total debt was at fixed or hedged interest rates (30 June 2017: 95%).
Avation issued an additional $30.0 million Senior 7.5% Unsecured Guaranteed Notes due 2020 under its Global Medium Term Note programme at a premium to par value in November 2017.
Avation will continue to source competing forms of secured and unsecured debt finance to fund growth with the overriding objective of achieving the lowest cost of finance.
The Company confirms its aim to maintain a progressive dividend policy.
Recognising that the Company's functional currency is US Dollars (USD) and to reduce exchange rate risk, shareholders are reminded that dividend payments are declared in USD. Shareholders who prefer to receive dividends in British Pounds (GBP) can elect to receive GBP by completing a form that can be downloaded at www.avation.net/dividends.html
Avation's strategy is to target growth and diversification by adding new airline customers, while maintaining strong average aircraft age and lease term metrics. Avation focuses on new and relatively new commercial passenger aircraft on long-term leases. Avation is able to supply regional, narrowbody and twin-aisle aircraft to the airline industry.
The Company's business model involves rigorous investment criteria and has a history of delivering consistent profitability while seeking to mitigate the risks associated with the aircraft leasing sector. Avation will typically sell mid-life and older aircraft and redeploy capital to newer assets. This approach is intended to mitigate technology change risk, operational and financial risk, support sustained growth and deliver long-term shareholder value.
Avation is an active trader of aircraft and from time to time will consider the acquisition or sale of individual or smaller portfolios of aircraft, based on prevailing market opportunities and considerations of risk and revenue concentrations.
Outlook and Interim Management Statement
The outlook for the second half of the 2018 financial year is for materially increased lease revenue due to increased fleet size.
Management believes that the risks associated with its portfolio of assets have been reduced through the repositioning of the fleet, growth and diversification that has been achieved during the financial period. Avation has demonstrated that it has the capability to acquire, finance and deliver a number of aircraft in a short period of time when the opportunity presents itself and has a platform which supports future growth.
Management believes that it can attract airline customers, acquire aircraft and obtain the required funding for growth. In addition to operational cash flows, funding is traditionally sourced from capital markets, asset backed bank lending and disposal of selected aircraft. Access to acceptably priced funding is a risk, which is common to all capital-intensive businesses. Specific risks which are inherent to the aircraft leasing industry include, but are not limited to, the creditworthiness of customer airlines, over-production of new aircraft and market saturation, technology change, residual value risks, competition from other lessors and the risk of impairment of aircraft assets.
Avation's Board of Directors is pleased to deliver satisfactory financial results from its aircraft leasing business through this period of fleet repositioning, diversification and growth.