7 September 2015
AVATION PLC
("AVAP" or "the Company")
Unaudited Preliminary Financial Results for the Year Ended 30 June 2015
Avation PLC (LSE: AVAP), the commercial passenger aircraft leasing company, today announces its unaudited preliminary financial results for the year ended 30 June 2015.
Overview
· Aircraft lease revenue increased by 17 per cent to $56.9 million (2014: $48.7 million);
· The number of aircraft in the fleet increased to 29 aircraft (2014: 25 aircraft);
· Dividend increase of 49 per cent to 3.00 US cents per share (2014: 2.01 US cents per share);
· Underlying pre-tax profit from leasing business increased to $14.8 million (2014: $13.2 million);
· Net profit for the year decreased by 7 per cent to $13.3 million (2014: $14.3 million);
· Net cash flow from operating activities increased to $43.5 million (2014: $27.6 million);
· Successful issue of first $100 million unsecured tranche and establishment of a $500 million Global Medium Term Note programme; and
· Cash and cash equivalents as at 30 June 2015 of $108.6 million (2014: $23.4 million).
Executive Chairman Jeff Chatfield said:
"Avation has enjoyed remarkable growth and is positioned for further revenue and fleet expansion in the coming year. Lease revenues have increased by 17 per cent during the year, while yield remains at an industry leading 13.1 per cent. The average age of the aircraft fleet has decreased to 5.3 years in 2015.
"Avation has substantially increased lease revenue, cash operating margin, fleet assets and now has significant cash resources which can be deployed to fund additional growth.
"Group profits are slightly lower in 2015 compared to 2014. This small reduction was primarily due to the variability in aircraft trading gains and losses between the respective financial periods. The one off gains from the sales of two aircraft in 2014 were not replicated in 2015. Furthermore, Avation's subsidiary, Capital Lease Aviation (CLA), incurred a loss of $1.2 million net of tax from the cessation of operations and part out of an aircraft which was at the end of its useful life. As a result the Group generated a loss from aircraft trading and discontinued operations in 2015 compared to profit in 2014.
"The issue of the first $100 million unsecured tranche of the $500 million Global Medium Term Note programme (the "GMTN") is transformative as the programme provides greater opportunities for the Group to address the key challenge of financing future aircraft acquisitions. The Group's improved access to capital markets and stronger business fundamentals allow the Directors to propose a significant increase in dividends to shareholders.
"The key objectives for 2016 are to improve profitability through fleet growth, increase customer diversification and add scale to the business."
Financial Results Summary
|
Financial Year 2015
US$ 000’s |
Financial Year 2014
US$ 000’s |
Income |
60,134 |
52,126 |
Lease revenue |
56,932 |
48,691 |
Profit after tax |
13,285 |
14,263 |
Net cash flow from operating activities |
43,451 |
27,571 |
Total assets |
586,182 |
415,628 |
Total shareholders' equity |
128,204 |
110,767 |
EPS |
24.12 cents |
27.4 cents |
Dividend per share |
3.00 cents |
2.01 cents |
Income increased by 15 per cent to $60.1 million for the year ended 30 June 2015 (2014: $52.1 million). Lease revenue increased by 17 per cent to $56.9 million (2014: $48.7 million) as a result of continued fleet growth, whilst lease yields remain at an industry leading level of 13.1 per cent.
Other income was $3.2 million for the year ended 30 June 2015 (2014: $3.4 million). Other income was primarily made up of the recovery of a security deposit from a lessee defaulting on a lease and a one-off gain from the early retirement of various junior loans. Other income for the prior year ended 30 June 2014 included a $2.9 million write back of excess maintenance reserve accruals.
Avation's subsidiary CLA has reported a $1.2 million loss, net of a tax write-back, on the part out disposal of a 25 year old aircraft. This loss is classified within discontinued operations as it represented the Group's only aircraft operating in North America. Avation incurred a loss on the sale of an aircraft of $0.7 million in the year ended 30 June 2015. This loss resulted from the disposal of an aircraft that was repossessed following the lessee's default on the lease. The loss was offset by the security deposit which has been recorded in other income. In 2014, the Group generated gains on sale of aircraft totalling $3.3 million, primarily from the sale of delivery positions of two new aircraft. As Avation continued to build its leasing business in 2015 the Company has preferred to add new ordered aircraft to the leasing fleet for long term returns rather than to sell aircraft for one off gains, as occurred in 2014. Excluding the effect of aircraft trading, the pre-tax profit (ex-trading) from the underlying leasing business increased 11.6 per cent to $14.8 million (2014: $13.2 million).
Depreciation increased by 22 per cent to $17.8 million in the year ended 30 June 2015 (2014: $14.6 million). The increase was due to adoption of a new depreciation policy and increased fleet size and value.
Administrative expenses increased 3 per cent to $7.2 million for the year ended 30 June 2015 (2014: $7.0 million). Administrative expenses as a percentage of leasing revenue decreased to 12.6 per cent in the year ended 30 June 2015 (2014: 14.3 per cent). As Avation continues to deliver economies of scale it is expected that this trend will continue.
Other expenses of $0.8 million include foreign exchange losses and a bad debt associated with a lessee's default on a lease, as noted above, that was offset by the forfeit deposit.
Finance expenses increased by 12 per cent to $18.9 million in 2015 (2014: $16.9 million). Interest expenses included within finance expenses increased by 11 per cent to $17.3 million (2014: $15.6 million). This increase compares favourably to the increase in lease revenues of 17 per cent and resulted from debt raised to finance new aircraft together with interest incurred on the GMTN issued in May 2015. The ratio of interest expense to lease revenue improved to 30.4 per cent (2014: 32.0 per cent). Finance income was $0.8 million (2014: $0.3 million).
Avation's cash operating margin, a core fundamental, has improved in the year ended 30 June 2015. This is defined as cash earnings generated after deducting the key cash operating expenses, being administrative expenses (net of non-cash warrant expenses) and interest expenses, from lease revenue. As a proportion of lease revenue, the cash operating margin has improved to 57.5 per cent (2014: 53.7 per cent).
Taxation for the 2015 year was $1.0 million (2014: $2.5 million). The majority of the Group's operations are now headquartered in Singapore and are included in the Republic of Singapore's Aircraft Leasing Scheme and benefit from a 10 per cent concessionary tax rate.
Profit for the year ended 30 June 2015 decreased by 7 per cent to $13.3 million (2014: $14.3 million) as a result of the above factors.
The Company has amended the presentation of its financial statements in the current period to provide greater clarity. Comparative amounts have been reclassified to conform to the current presentation. Certain comparative amounts have been reclassified as discontinued operations, due to North American operations ceasing during the period.
Fleet Overview
Type |
1 July 2014 |
Added |
Disposed |
30 June 2015 |
On order (at 31 Aug 2015) |
Options |
ATR 72-500 |
6 |
- |
- |
6 |
- |
|
ATR 72-600 |
8 |
6 |
1 |
13 |
9 |
22 |
A320-200 |
3 |
- |
1 |
2 |
1 |
|
A321-200 |
3 |
- |
- |
3 |
2 |
|
Fokker 100 |
5 |
- |
- |
5 |
- |
|
Total |
25 |
6 |
2 |
29 |
12 |
22 |
Six new aircraft were added to the fleet during the period, with one used aircraft sold and one parted out. As at 30 June 2015 the weighted average age of the fleet was 5.3 years (2014: 6.1 years) and the weighted average remaining lease term was 6.5 years (2014: 7.1 years). As at 30 June 2015, the fleet was 100 per cent utilised.
Debt summary
|
Financial Year 2015
US$000’s |
Financial Year 2014
US$000’s |
Loans and borrowings |
428,095 |
281,158 |
Cash & cash equivalents |
108,647 |
23,395 |
Net indebtedness |
317,687 |
257,763 |
Total Loan to Value ratio (LTV) |
72.7% |
67.6% |
Weighted average cost of secured debt |
4.4% |
5.0% |
Weighted average cost of total debt |
5.1% |
5.2% |
Net indebtedness increased due to additional debt being raised to fund fleet additions during the year.
The weighted average cost of debt reduced to 5.1 per cent, as at 30 June 2015 (2014: 5.2 per cent). This was primarily due to a significant reduction in the weighted average cost of the Group's secured debt facilities to 4.4 per cent, as at 30 June 2015 (2014: 5.0 per cent). This reduction was partially offset by interest costs associated with the GMTN established during the period.
The issuance of the first tranche of the GMTN represents a significant achievement, as it marks the introduction of global debt capital markets as a new source of funding for the Company. This will support planned fleet growth in 2016 and provides the opportunity to raise further funds in the short to medium term. Future tranches will be priced based on market conditions and Avation's credit ratings. The Company's credit ratings are expected to improve as increased scale and customer diversification are achieved.
As at June 30th 2015 the majority of the funds raised from the issue of unsecured notes under the GMTN were held as cash. It is intended that these funds will be combined with secured senior debt and deployed to fund aircraft acquisitions during the financial year ending 30 June 2016. At current interest rates, this may result in a decline in the weighted average cost of debt across the fleet.
The Group's loan to value ratio increased as a result of the issue of the $100 million unsecured notes, in May 2015. As at 30 June 2015, 88.8 per cent of total Group debt has fixed interest rates.
Outlook
As at the date of this announcement, Avation has four aircraft contracted for delivery before 31 December 2015 and a further six aircraft for delivery in the six months to 30 June 2016, with a further two contracted for delivery in the second half 2016.
Overall the 10 aircraft to be delivered in the current financial year have a purchase value of approximately $280 million, which represents growth of 48 per cent on the fleet assets as at 30 June 2015. The funds raised from the issuance of unsecured notes under the GMTN support a portion of the funding of these aircraft and provide further capacity to acquire additional aircraft, beyond new aircraft orders, such as the Airbus A320 on lease to Air France announced August 2015.
Committed future revenue from unexpired leases on the current fleet of 29 aircraft totals $369.2 million. Avation has also entered into leases of eight of the aircraft due to be delivered before 30 June 2016. These leases are scheduled to generate additional committed revenue of approximately $196.2 million over the terms of the leases. The total of future lease revenue from the existing fleet and contracted deliveries is $565.4 million.
Management believes that the Company can obtain access to the required debt funding for future fleet growth. However, access to funding does remain a risk, which is common to all capital intensive business models. Specific risks, which are inherent in the aircraft leasing industry, include the creditworthiness of client airlines, residual value risk and the risk of impairment of aircraft assets. The Company is seeking to diversify its airline operator customer base to mitigate both concentration and geographic risks.
The Board of Directors is pleased to deliver a fundamentally strong set of results from a core business in which the fundamentals continued to improve, in a year in which the business was significantly transformed. We remain committed to building growth, diversification and scale to the business.
Interim Dividend
The underlying profitability of the leasing business has improved. The Board would like to thank the shareholders for their continued support as it continues in the successful development of Avation. The Board understands the importance of recognising shareholder ownership and has approved a dividend increase of 49 per cent to 3.00 US cents per share (2014: 2.01 US cents) in respect to the period ending 30 June 2015. The Company aims to continue to maintain a progressive dividend policy.
The record date and timetable for this interim dividend are as follows:
Ex-Dividend Date: 17 September 2015
Record Date: 18 September 2015
Payment Date: 28 September 2015
Payment Amount: USD 0.03
Results Conference Call
Avation's senior management will host a conference call on 8 September 2015, at 3pm BST (UK) / 10am EST (US) / 10pm SGT (Singapore), to discuss the Company's financial results. Participants should dial: United Kingdom 020 3059 8125; United States +1 631 983 3103; Singapore 800 101 2697; other locations +44 20 3059 8125 and quote 'Avation' when prompted. The conference call will also be webcast live through the following link:
http://avation.emincote.com/results/2015finalresults.
To view the webcast investors will be invited to register their name and email address, participants can do this in advance or on the day. A replay of the webcast will be available on the Investor Relations page of the Avation website and a presentation, to support the conference call, will be available on the Avation website prior to the conference call.
Annual General Meeting
The Annual General Meeting of the Company is expected to be held at the Company's headquarters in Singapore on 16 November 2015 at 10am. Formal notice of the Annual General Meeting will follow in due course.
Forward Looking Statements
This release contains certain "forward looking statements". Forward looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for Avation's future business and financial performance. Forward looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks. Further information on the factors and risks that may affect Avation's business is included in Avation's regulatory announcements from time to time, including its Annual Report, Full Year Financial Results and Half Year Results announcements. Avation expressly disclaims any obligation to update or revise any of these forward looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.
- ENDS-
More information on Avation PLC can be found at: www.avation.net
Enquiries:
Avation PLC - Jeff Chatfield, Executive Chairman |
+65 6252 2077
|
WH Ireland - James Joyce / Harry Ansell |
+44 20 7220 1670
|
Blytheweigh - Tim Blythe / Wendy Haowei / Andrea Benton
|
+44 20 7138 3204 |
