Avation PLC Announces Unaudited Results For Six Months Ending Dec 2022

SINGAPORE / ACCESSWIRE / March 3, 2023 / Avation PLC (LSE:AVAP), the commercial passenger aircraft leasing company, announces unaudited results for the six months ended 31 December 2022.

Financial Highlights

· Revenue and other income reduced to US$55.3 million (2021: US$60.1 million);

· Operating profit increased to US$ 35.0 million (2021: US$18.8 million);

· Profit before tax of US$6.7 million (2021: Loss before tax US$15.9 million);

· Net indebtedness reduced by US$46.0 million to US$746.9 million (30 June 2022: US$792.9 million); and

· Net asset value per share increased 5.2% to £2.82 (30 June 2022: £2.68);

Operational Highlights

· Two ATR 72-600 turboprop aircraft were sold during the period;

· One ATR 72-600 aircraft was repossessed from an airline in Myanmar;

· One off-lease ATR 72-500 started a lease with a new airline customer in Nepal;

· Avation received a creditors' distribution of US$3.4 million from Virgin Australia;

· Two Airbus A220-300 aircraft were re-financed with fixed rate long-term loans, reducing Avation's exposure to interest rate changes;

Outlook

Avation is focussed on the execution of lease deliveries and sale agreements for the remaining off-lease aircraft in the fleet in the second half-year period and managing the overall cost of debt. The airline industry is continuing its recovery from the lows seen during the COVID-19 pandemic. Global domestic air travel in December 2022 as reported by IATA, has recovered to around 79.9% of December 2019 passenger numbers while international travel, while lagging, has recovered to around 75.1% of December 2019 levels.

The Company believes that airlines will require significant numbers of leased aircraft in the short to medium term due to the large number of older aircraft that have been retired as a result of the COVID-19 pandemic, and the impact of the pandemic on airline balance sheets, reducing their ability to purchase aircraft directly.

The Company's future strategy will focus on leasing modern, low CO2 emissions, fuel-efficient aircraft. Avation is supportive of the aviation industry's goal of becoming more sustainable through a transition to new technology more fuel-efficient aircraft engines and the use of sustainable aviation fuel to reduce CO2 emissions.

The Company will cautiously position itself for a return to organic self-funded growth through deliveries from its orderbook, opportunistic aircraft trading and may convert ATR purchase rights to firm orders should attractive lease opportunities arise."

Executive Chairman, Jeff Chatfield, said:

"During the six months ended 31 December 2022 Avation reduced the number of off-lease aircraft in the fleet from six to four. In addition, the sale of a Boeing 737-800 in February 2023 has further reduced the number of off-lease aircraft to three. A key strategic aim for Avation over the coming months is to conclude sales or lease agreements for all remaining off-lease aircraft and we are pleased to announce that we have recently concluded a lease agreement with a new airline customer for one of the three remaining aircraft.

Avation has continued to de-lever its balance sheet, achieving a reduction to 62.9% in the ratio of net debt to total assets as at 31 December 2022. A significant portion of the cashflow generated by the fleet has been directed towards repayments of debt. Scheduled loan repayments for the 2023 calendar year, amounting to around US$57 million, exceed the expected depreciation of the fleet over the same period.

A bond repurchase tender was concluded in February, resulting in the repurchase and retirement of US$7.1m of Avation Capital S.A. 8.25%/9.0% unsecured notes. The Company may pursue other liability management exercises from time to time with the aim of further reducing the cost and/or outstanding amount of unsecured debt in issue. The Company has retained Citibank as a strategic adviser for potential future debt reduction exercises.

After the recovery from the COVID-19 pandemic, Avation plans to re-grow its business in an organic prudent and sensible manner. We will target organic growth, which includes the placement of the remaining off-lease aircraft and leasing the two ATR aircraft we have on order for delivery in 2024. We have paid all pre-delivery payments due for the two ordered ATR aircraft and believe that the balance due on delivery of the aircraft can be funded with senior secured debt.

We note that most of our peer leasing companies have suffered large losses due to the seizure of aircraft leased to Russian airlines. Avation was fortunate in that it did not have any exposure to Russian airlines. Our policy is, and has always been, to only lease planes in jurisdictions where we are confident that we can arrange repossession, if ever required.

The Company has taken steps to reduce overheads by reducing headcount and actively managing legal expenses and other expenditure. The Company has an in-house technical team and management was pleased that the overall cost of managing the transition of one Boeing 737-800 was less than anticipated.

Few aircraft were built during the COVID-19 pandemic so lessors that own them have seen positive developments in valuations. As an owner we have managed to move, sell, service and, most importantly, transition aircraft.

We are reasonably confident that the Company will be able to place its remaining inventory of off-lease aircraft and arrange leases for the two new aircraft ordered for delivery in 2024."

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SOURCE: Avation PLC