Half-year Report

Source: RNS
RNS Number : 4798Q
Avation PLC
26 February 2021
 

AVATION PLC

("Avation" or "the Company")

 

UNAUDITED INTERIM Financial Results for the SIX MONTHS ended 31 December 2020 and Interim Management Statement

 

Avation PLC (LSE: AVAP), the commercial passenger aircraft leasing company, announces unaudited interim financial results for the six months ended 31 December 2020.

Key Financial Results

·   Revenue and Other income decreased by 6% to $63.3 million;

·   Impairment loss on aircraft of $46.7 million;

·   Expected credit loss on receivables and accrued revenue of $12.9 million;

·   Loss before tax of $60.5 million;

·   Loss per share of 97.9 cents; and

·   Net asset value per share is $2.38.

 

COVID-19 Strategy

·   Focus on preservation of liquidity and cashflow;

·   Rent deferrals totalling $25.9 million provided to airline customers;

·   Loan repayment deferrals totalling $31.0 million obtained from secured lenders;

·   Agreement with bondholders to extend maturity of Avation Capital S.A. 6.5% senior notes to October 2026; and

·   Capital expenditure and dividends have been temporarily suspended.

 

Executive Chairman, Jeff Chatfield, said:

"The half year ended 31 December 2020 represents a complex period for the airline industry and Avation. Avation has been working diligently and with success on its COVID-19 strategy implemented early in the crisis to preserve liquidity. Recently the Company announced an agreement to extend the maturity of the unsecured bonds by over 5 years until October 2026.

"The pandemic related disruption to the airline industry has impacted aircraft valuations and Avation has impaired the value of its fleet and provided for credit losses on receivables. These impairments are largely related to aircraft leased to Philippines Airlines, Virgin Australia and Braathens who have all been subject to formal or informal restructuring processes. There was also a negative adjustment to the value of purchase rights held for ATR aircraft. The impairment loss dominates the financial result.

"We believe that global immunisation programmes should lead to an end to the pandemic.  Assuming that Avation's customers continue to meet their contractual obligations to pay rent and arrears the Company believes that it is unlikely that there will be further significant impairments to asset values in future. The underlying business remains profitable.

"The past six months has seen most of Avation's customers returning to operating at above 50% of pre-COVID levels. At the current date, 12 of Avation's 19 customers are being charged normal monthly rentals. The Company has been fortunate that some of its largest customers are based in countries where there has been a less severe impact from the pandemic including VietJet, airBaltic, EVA Air and Mandarin Airlines. These airlines combined represent over 60% of Avation's future unearned contracted revenue.

"The Company will position itself for a return to growth through opportunistic aircraft trading and deliveries from its orderbook in the post pandemic environment."

 

Financial Highlights and Analysis

 

6 mths to
31 Dec 2019
US$ 000's

 

Change

 

Revenue

61,340

67,606

(9%)

Depreciation

(23,652)

(24,232)

(2%)

Administrative expense

(5,542)

(6,145)

(10%)

Other income and expenses (net) excluding Expected credit losses on receivables and accrued revenue

896

(1,127)

 

Operating Profit excluding Unrealised gain on purchase rights, Gains on disposal and impairment loss on aircraft

33,042

36,102

(8%)

Finance Expenses (net of finance income)

(25,968)

(27,527)

(6%)

Profit before tax excluding Unrealised gain on purchase rights, Gains on disposal of aircraft and Impairment loss on aircraft

7,074

8,575

(17%)

Unrealised gain on aircraft purchase rights

(7,930)

36,980

 

Gains on disposal of aircraft

-

2,229

 

Impairment loss on aircraft

(46,652)

(2,456)

 

Expected credit loss on receivables and accrued revenue

(12,945)

(123)

 

(Loss)/Profit before taxation

(60,453)

45,205

(234%)

Taxation

(883)

(7,051)

 

Total profit after tax

(61,336)

38,154

(261%)

EPS

(97.9) cents

60.0 cents

 

Dividend per share

-

2.1 cents

 

 

 

 

 

 

As at
31 Dec 2020
US$ 000's

As at
30 June 2020
US$ 000's

 

Fleet assets (1)

1,163,263

1,242,176

(6%)

Total assets

1,350,632

1,415,584

(5%)

Cash and bank balances

117,661

114,585

3%

 

 

 

 

Net asset value per share (US$) (2)

$2.38

$3.53

(33%)

Net asset value per share (GBP) (3)

£1.74

£2.86

(39%)

1.   Fleet assets are defined as property, plant and equipment plus assets held for sale plus finance lease receivables.

2.   Net asset value per share is total equity divided by the total number of shares in issue, excluding treasury shares, at period end.

3.   Based on GBP:USD exchange rate as at 31 December 2020 of 1.37 (30 June 2020 : 1.23)

 

Aircraft Fleet

Aircraft Type

31 December 2020

Boeing 777-300ER

1

Airbus A330-300

1

Airbus A321-200

7

Boeing 737-800NG

1

Airbus A320-200

2

Airbus A220-300

6

ATR 72-600

22

ATR 72-500

6

Total

46

As at 31 December 2020, Avation's fleet comprised 46 aircraft, including three aircraft on finance lease. The weighted average age of the fleet is 4.6 years (30 June 2020: 4.1 years) and the weighted average remaining lease term is 6.5 years (30 June 2020: 6.9 years).

Fleet assets decreased 6.4% to $1,163.3 million (30 June 2020: $1,242.2 million). Two Fokker 100 aircraft were transferred to the lessee airline upon completion of their finance leases. Narrowbody aircraft make up 49% of fleet assets as at 31 December 2020.

Avation had orders for eight ATR72-600 aircraft and purchase rights for a further 25 aircraft as at 31 December 2020. The Company is in discussions with ATR regarding its current order book.

Virgin Australia Update

On 20 April 2020, Virgin Australia entered into voluntary administration. Avation had two Fokker 100 aircraft on finance lease and 11 ATR 72 aircraft on operating lease to Virgin Australia, two of which were subleased to another airline. The two Fokker 100 aircraft were sold at the end of their leases in September 2020. Of the 11 ATRs, four have been re-leased at market rates, three are being actively marketed for sale or lease, and the remaining four are being marketed for sale or lease but have not yet been through maintenance. Avation's claim against Virgin Australia has been mitigated by the transactions noted above and is expected to be approximately US$56 million. The administrators have advised an expected pay-out of 9.5-13 cents on the dollar for unsecured claims.

 

Debt summary

 

31 December 2020
US$000's

30 June 2020
US$000's

Loans and borrowings

1,065,096

1,071,738

Unrestricted cash and bank balances

25,424

 

35,290

 

Net indebtedness (1)

1,039,672

1,036,448

Net debt to assets (2)

77.0%

73.2%

Weighted average cost of secured debt (3)

3.7%

3.6%

Weighted average cost of total debt (4)

4.6%

4.5%

 

1.   Net indebtedness is defined as loans and borrowings less unrestricted cash and bank balances.

2.   Net debt to assets is defined as net indebtedness divided by total assets.

3.   Weighted average cost of secured debt is the weighted average interest rate for secured loans and borrowings at period end.

4.   Weighted average cost of total debt is the weighted average interest rate for total loans and borrowings at period end.
 

The weighted average cost of total debt increased slightly to 4.6% as at 31 December 2020 (30 June 2020: 4.5%).

The weighted average cost of secured debt increased to 3.7% at 31 December 2020 (30 June 2020: 3.6%).

At the end of the financial period, Avation's net debt to total assets ratio has increased to 77.0% (30 June 2020: 73.2%). As at 31 December 2020, 90.7% of total debt was at fixed or hedged interest rates (30 June 2020: 90.7%). The proportion of unsecured debt to total debt was 32.1% (30 June 2020: 32.3%).

During the period Avation initiated a process to extend the date of maturity of the $342.6 million outstanding Avation Capital S.A 6.5% senior notes due May 2021 to October 2026. The Company recently announced that it reached agreement with sufficient bondholders to vote in favour of the extension and the consent solicitation exercise was launched on 23 February 2021. The Company expects the extension will be completed on 16 March 2021.

 

Market Positioning

Avation's long-term strategy is to target growth and diversification by adding new airline customers, while maintaining a low average aircraft age and long remaining lease term metrics. Avation focuses on new and relatively new commercial passenger aircraft on long-term leases. Avation is capable of owning, managing and leasing turboprop, narrowbody and twin-aisle aircraft and engines.

The Company's business model involves rigorous investment criteria that seeks 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 consideration of risk and revenue concentrations.

 

Interim Management Statement

The Company's continuing focus for the remainder of the 2021 financial year is to preserve liquidity.

Avation instituted a programme of support for its airline customers by agreeing to defer payment of a portion of their rent in the short-term. The cashflow impact of this support programme has been mitigated by adjusting the amortisation profiles of related financings with the agreement of lenders. Since the start of the pandemic the Company has also reduced administration costs and temporarily suspended capital expenditure.

The Company believes that airlines will require significant number of leased aircraft in the post pandemic phase due to the vast number of older aircraft that have been retired and the impact of the pandemic on airline balance sheets, reducing their ability to purchase aircraft directly. This supports the Company strategy of being focussed on relatively new and popular commercial aircraft types.

In addition to operational cash flows, funding is traditionally sourced from capital markets, asset-backed bank lending and disposals 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, ongoing pandemic impacts on travel, the creditworthiness of airline customers, 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.    


Results Conference Call

Avation's senior management team will host a conference call on 26 February 2021, at 1pm GMT (UK) / 8am EST (US) / 9pm SGT (Singapore), to discuss the Company's financial results. Investors can participate in the conference call by using the following link:

 

https://avation.emincote.com/avapHY2021/vip_connect

 

You will need to register your name and email address. You will receive a telephone number, a passcode and an individual PIN number. The conference call will also be webcast live through the following link:

 

https://avation.emincote.com/avapHY2021

 

To view the webcast, you will need to register your name and email address.  A replay of the broadcast will be available on the Investor Relations page of the Avation Plc website.

 

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.

 

Basis of presentation

This announcement covers the unaudited results of Avation PLC for the financial period ended 31 December 2020.

Financial information presented in this announcement is being published for the purposes of providing preliminary Group financial results for the half year ended 31 December 2020. The financial information in this preliminary announcement is not audited and does not constitute statutory financial statements of Avation PLC within the meaning of section 434 of the Companies Act 2006. The Board of Directors approved this financial information on 26 February 2021. Avation PLC's most recent statutory financial statements for the purposes of Chapter 7 of Part 15 of the Companies Act 2006 for the year ended 30 June 2020 , upon which the auditors have given an unqualified audit report (with reference to a material uncertainty related to going concern), were published on 30 October 2020 and have been annexed to the annual return and delivered to the Registrar of Companies.

All "$" amounts in this release are US Dollar amounts unless stated otherwise. Certain comparative amounts have been reclassified to conform with current year presentation.

 

 

-ENDS-

Enquiries:

Avation PLC - Jeff Chatfield, Executive Chairman                                      +65 6252 2077

 

Avation welcomes shareholder questions and comments and advises the email address is: investor@avation.net

 

More information on Avation is available at www.avation.net.

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

Note

31 Dec

2020

 

31 Dec

2019

 

 

 

US$'000s

US$'000s

Continuing operations

 

 

 

Revenue

5

61,340

67,606

Other income

6

1,997

113

 

 

63,337

67,719

 

 

 

 

Depreciation

11

(23,652)

(24,232)

Gain on disposal of aircraft

11

-

2,229

Unrealised (loss)/gain on aircraft purchase rights

16

(7,930)

36,980

Impairment loss on aircraft

11

(46,652)

(2,456)

Administrative expenses

 

(5,542)

(6,145)

Other expenses

7

(14,046)

(1,363)

Operating (loss)/profit

 

(34,485)

72,732

 

 

 

 

Finance income

8

2,175

717

Finance expenses

9

(28,143)

(28,244)

(Loss)/Profit before taxation

 

(60,453)

45,205

 

 

 

 

Taxation

 

(883)

(7,051)

(Loss)/Profit from continuing operations

 

(61,336)

38,154

 

 

 

 

(Loss)/Profit attributable to:

 

 

 

Equity holders of the Company

 

(61,337)

38,153

Non-controlling interests

 

1

1

 

 

(61,336)

38,154

Earnings per share for (loss)/profit

attributable to equity holders of the Company

 

 

 

Basic earnings per share

 

(97.87) cents

60.04 cents

Diluted earnings per share

 

(97.87) cents

59.67 cents

 

 

 

 

 

 

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

Note

31 Dec

2020

31 Dec

2019

 

 

US$'000s

US$'000s

 

(Loss)/Profit from continuing operations

 

(61,336)

38,154

 

 

 

 

Other comprehensive income:

 

 

 

Items may be reclassified subsequently to profit or loss:

 

 

 

Net (loss)/gain on cash flow hedge

 

(10,249)

1,730

 

 

(10,249)

1,730

Items may not be reclassified subsequently to profit or loss:

 

 

 

Revaluation loss on property, plant and equipment, net of tax

 

(858)

(793)

Other comprehensive income, net of tax

 

(11,107)

937

 

 

 

 

Total comprehensive income for the period

 

(72,443)

39,091

 

 

 

 

Total comprehensive income attributable to:

 

 

 

Equity holders of the Company

 

(72,444)

39,090

Non-controlling interests

 

1

1

 

 

(72,443)

39,091

 

 

 

 

 

 

 

 

 

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

 

Note

31 Dec

2020

30 June

2020

 

 

US$'000s

US$'000s

ASSETS:

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

11

1,110,980

1,057,901

Trade and other receivables

12

12,052

11,601

Finance lease receivables

13

48,455

85,019

Goodwill

14

1,902

1,902

Aircraft purchase rights

16

19,180

27,110

Lease incentive assets

 

6,753

-

 

 

1,199,322

1,183,533

Current assets

 

 

 

Trade and other receivables

12

28,731

18,210

Finance lease receivables

13

3,828

7,988

Cash and bank balances

17

117,661

114,585

Lease incentive assets

 

1,090

-

 

 

151,310

140,783

Assets held for sale

18

-

91,268

 

 

151,310

232,051

Total assets

 

1,350,632

1,415,584

EQUITY AND LIABILITIES

 

 

 

Equity

 

 

 

Share capital

19

1,108

1,108

Share premium

 

57,747

57,747

Treasury shares

19

(7,811)

(7,811)

Merger reserve

 

6,715

6,715

Asset revaluation reserve

 

29,304

30,162

Capital reserve

 

8,876

8,876

Other reserves

 

(34,282)

(24,302)

Retained earnings

 

87,397

148,455

Equity attributable to equity holders of the parent

 

149,054

220,950

Non-controlling interest

 

68

72

Total equity

 

149,122

221,022

 

 

 

 

Non-current liabilities

 

 

 

Loans and borrowings

20

627,305

534,755

Trade and other payables

 

15,602

11,725

Derivative financial liabilities

15

24,035

27,928

Maintenance reserves

21

57,529

57,141

Lease maintenance contribution

 

8,908

-

Deferred tax liabilities

 

1,469

698

 

 

734,848

632,247

Current liabilities

 

 

 

Loans and borrowings

20

437,791

536,983

Trade and other payables

 

12,246

10,155

Derivative financial liabilities

15

105

-

Maintenance reserves

21

15,238

3,836

Income tax payables

 

1,282

1,058

 

 

466,662

552,032

Liabilities directly associated with assets held for sale

18

-

10,283

 

 

466,662

562,315

Total equity and liabilities

 

1,350,632

1,415,584

 

             AVATION PLC

             CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

             FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

 

 

 

 

 

 

 

 

 

 

Attributable to shareholders of the parent

 

Note

Share capital

Share

premium

Treasury

Shares

Merger reserve

Asset revaluation reserve

Capital reserve

Other

reserves

Retained earnings

Total

Non-controlling interest

Total

equity

 

 

 

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at1 July 2020

 

1,108

57,747

(7,811)

6,715

30,162

8,876

(24,302)

148,455

220,950

72

221,022

 

Loss for the period

 

-

-

-

-

-

-

-

(61,337)

(61,337)

1

(61,336)

 

Other comprehensive income

 

-

-

-

-

(858)

-

(10,249)

-

(11,107)

-

(11,107)

 

Total comprehensive income

 

-

-

-

-

(858)

-

(10,249)

(61,337)

(72,444)

1

(72,443)

 

Dividends paid to non-controlling interest of a subsidiary

 

-

-

-

-

-

-

-

-

-

(5)

(5)

 

Share warrant expense

 

-

-

-

-

-

-

548

-

548

-

548

 

Total transactions with owners recognised directly in equity

 

 

-

 

-

 

-

 

-

 

-

 

-

 

548

 

-

 

548

 

(5)

 

543

 

Expiry of share warrants

 

-

-

-

-

-

-

(279)

279

-

-

-

 

Total others

 

-

-

-

-

-

-

(279)

279

-

-

-

 

Balance at 31 December 2020

 

1,108

57,747

(7,811)

6,715

29,304

8,876

(34,282)

87,397

149,054

68

149,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                 

 

 

Other reserves consist of capital redemption reserve, warrant reserve, fair value reserve and foreign currency translation reserve.

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

 

 

 

 

 

Attributable to shareholders of the parent

 

 

Note

Share capital

Share

premium

Treasury

Shares

Merger reserve

Asset revaluation reserve

Capital reserve

Other

reserves

Retained earnings

Total

Non-controlling interest

Total

equity

 

 

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2019

 

1,104

56,912

(1,147)

6,715

34,392

8,876

(11,809)

145,644

240,687

70

240,757

 

Effect of adoption of IFRS 16 Leases

 

 

 

-

 

-

 

-

 

 

 

-

 

-

 

-

 

(199)

 

(199)

 

-

 

(199)

 

As at 1 July 2019 (adjusted)

 

1,104

56,912

(1,147)

6,715

34,392

8,876

(11,809)

145,445

240,488

70

240,558

 

Profit for the period

 

-

-

-

-

-

-

-

38,153

38,153

1

38,154

 

Other comprehensive income

 

-

-

-

-

(793)

-

1,730

-

937

-

937

 

Total comprehensive income

 

-

-

-

-

(793)

-

1,730

38,153

39,090

1

39,091

 

Dividends paid

24

-

-

-

-

-

-

-

(5,454)

(5,454)

-

(5,454)

 

Issue of new shares

19

4

835

-

-

-

-

(69)

-

770

-

770

 

Purchase of treasury shares

19

-

-

(6,548)

-

-

-

-

-

(6,548)

-

(6,548)

 

Share warrant expense

 

-

-

-

-

-

-

299

-

299

-

299

 

Total transactions with owners recognised directly in equity

 

 

4

 

835

 

(6,548)

 

-

 

-

 

-

 

230

 

(5,454)

 

(10,933)

 

-

 

(10,933)

 

Expiry of share warrants

 

-

-

-

-

-

-

(2)

2

-

-

-

 

Total others

 

-

-

-

-

-

-

(2)

2

-

-

-

 

Balance at 31 December 2019

 

1,108

57,747

(7,695)

6,715

33,599

8,876

(9,851)

178,146

268,645

71

268,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                     

 

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

Note

31 Dec

2020

31 Dec

2019

 

 

 

 

 

 

US$'000s

US$'000s

Cash flows from operating activities:

 

 

 

(Loss)/Profit before taxation

 

(60,453)

45,205

Adjustments for:

 

 

 

    Amortisation of lease incentive asset

5

541

-

    Depreciation expense

11

23,652

24,232

    Depreciation of right-of-use assets

 

108

109

    Expected credit loss on receivables and accrued revenue

7

12,945

123

    Finance income

8

(2,175)

(717)

    Finance expense

9

28,143

28,244

    Gain on disposal of aircraft

 

-

(2,229)

    Interest income from finance lease

5

(765)

(1,318)

    Impairment loss on aircraft

11

46,652

2,456

    Share warrants expense

 

548

299

    Unrealised loss/(gain) on aircraft purchase rights

 

7,930

(36,980)

    Operating cash flows before working capital changes

 

57,126

59,424

Movement in working capital:

 

 

 

    Trade and other receivables and finance lease receivables

 

(24,969)

8,009

    Trade and other payables

 

4,914

3,573

    Maintenance reserves

 

11,655

16,947

    Cash from operations

 

48,726

87,953

Finance income received

 

1,066

1,631

Finance expense paid

 

(24,836)

(25,540)

Income tax paid

 

(46)

(1,930)

Net cash from operating activities

 

24,910

62,114

 

 

 

 

Cash flows from investing activity:

 

 

 

Purchase of property, plant and equipment

 

-

(56,676)

Net cash used in investing activity

 

-

(56,676)

 

 

 

 

Cash flows from financing activities:

 

 

 

Net proceeds from issuance of ordinary shares

 

-

770

Dividends paid to shareholders

24

-

(5,454)

Dividends paid to non-controlling interest of a subsidiary

 

(5)

-

Purchase of treasury shares

 

-

(6,548)

Placement of restricted cash balances

 

(12,942)

(20,679)

Proceeds from loans and borrowings, net of transactions costs

 

11,815

76,875

Repayment of loans and borrowings

 

(33,644)

(38,480)

Net cash (used in)/from financing activities

 

(34,776)

6,484

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(9,866)

11,922

Cash and cash equivalents at beginning of financial period

 

35,290

61,689

Cash and cash equivalents at end of financial period

17

25,424

73,611

 

 

 

 

AVATION PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

This interim condensed consolidated financial statements for Avation PLC for the six months ended 31 December 2020 were authorised for issue in accordance with a resolution of the Directors on 26 February 2021.

 

1          CORPORATE INFORMATION

 

Avation PLC is a public limited company incorporated in England and Wales under the Companies Act 2006 (Registration Number 05872328) and is listed as a Standard Listing on the London Stock Exchange.

 

The Group's principal activity is aircraft leasing. 

 

 

2          BASIS OF PREPARATION AND ACCOUNTING POLICIES

 

These interim condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority and in accordance with International Accounting Standard (IAS) 34 'Interim Reporting'.

 

The interim condensed consolidated financial statements do not include all the notes of the type normally included within the annual report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financial and investing activities of the consolidated entity as the annual report.

 

It is recommended that the interim condensed consolidated financial statements be read in conjunction with the annual report for the year ended 30 June 2020 and considered together with any public announcements made by Avation PLC during the six months ended 31 December 2020.

 

The accounting policies and methods of computation are the same as those adopted in the annual report for the year ended 30 June 2020 except for the adoption of new accounting standards effective as of 1 July 2020. 

 

The preparation of the interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported income and expenses, assets and liabilities and disclosure of contingencies at the date of the Interim Report, actual results may differ from these estimates.

 

The statutory financial statements of Avation PLC for the year ended 30 June 2020, which carried an unqualified audit report, have been delivered to the Registrar of Companies and did not contain any statements under section 498 of the Companies Act 2006.

 

The interim condensed consolidated financial statements are unaudited.

 

The interim condensed consolidated financial statements do not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

 

 

 

3           NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2020

 

(a)                 New standards and interpretations not applied

 

The Group has not adopted the following new or amended standards and interpretations which are relevant to the Group that have been issued but are not yet effective:

 

(b) 

Description

Effective date

(period beginning)

Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (Not yet endorsed for use in the EU.)

1 January 2021

 

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

1 January 2022

Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract

1 January 2022

Amendments to IAS 16: Property, Plant and Equipment, Proceeds before Intended Use

1 January 2022

AIP (2018-2020 cycle): IFRS 9 Financial Instruments - Fees in the '10 per cent' Test for Derecognition of Financial Liabilities

1 January 2022

Amendments to IFRS 3:  Reference to the Conceptual Framework

1 January 2022

Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or joint venture

No effective date

 

Based on a preliminary assessment using currently available information, the Group does not expect the adoption of the above standards to have a material impact on the financial statements in the period of initial application. These preliminary assessments may be subject to changes arising from ongoing analyses when the Group adopts the standards. The Group plans to adopt the above standards on the effective date.

 

(b)       Standard in effect in 2020

 

The Group has adopted all new standards that have come into effect during the six months ended 31 December 2020. The adoptions do not have an impact on the Group's interim condensed consolidated financial statements.

 

 

 

 

 

4          FAIR VALUE MEASUREMENT

 

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

The carrying amounts of cash and bank balances, trade and other receivables, finance lease receivables - current, trade and other payables - current, loans and borrowings - current are a reasonable approximation of fair value either due to their short-term nature or because the interest rate charged closely approximates market interest rates or that the financial instruments have been discounted to their fair value at a current pre-tax interest rate.

 

The fair value of the maintenance reserves is not disclosed in the table below as the timing and cost of the maintenance reserves cannot be determined with certainty in advance and hence the fair value of the maintenance reserve cannot be measured.

 

 

31 Dec 2020

30 Jun 2020

 

Carrying amount

Fair value

Carrying amount

Fair value

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Financial assets:

 

 

 

 

Finance lease receivables - non-current

48,455

47,331

85,019

82,631

 

 

 

 

 

Financial liabilities:

 

 

 

 

Deposits collected - non-current

12,956

11,507

9,185

8,639

Loans and borrowings other than unsecured notes - non-current

627,305

593,400

 

534,755

502,534

Unsecured notes

341,371

254,525

346,656

261,143

Derivative financial liabilities

24,140

24,140

27,928

27,928

 

 

 

 

 

 

 

 

 

 

The fair values (other than the unsecured notes and derivative financial assets and liabilities) above are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the end of the reporting period.

 

The fair value of the unsecured notes are based on level 1 quoted prices (unadjusted) in active market that the Group can access at measurement date.

 

The fair value of the derivative financial instruments is determined by reference to marked-to-market values provided by counterparties.  The fair value measurement of all derivative financial instruments under the Group is classified under Level 2 of the fair value hierarchy, for which inputs other than quoted prices that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) are included as inputs for the determination of fair value.

 

 

 

4          FAIR VALUE MEASUREMENT (continued)

 

Non-financial assets measured at fair value:

 

 

 

 

 

 

 

 

31 Dec

2020

30 Jun

2020

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Fair value measurement using significant unobservable inputs

 

 

 

 

Aircraft

 

 

1,109,342

1,055,970

Aircraft purchase rights

 

 

19,180

27,110

 

 

 

 

 

 

 

 

 

 

Aircraft were valued at 30 June 2020. Refer to Note 11 for the details on the valuation technique and significant inputs used in the valuation.

 

Classification of financial instruments:

 

 

 

 

 

 

 

 

 

 

 

31 Dec

2020

30 Jun 2020

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Financial assets measured at

amortised cost:

 

 

 

 

Cash and cash balances

 

 

117,661

114,585

Trade and other receivables

 

 

33,148

19,800

Finance lease receivables

 

 

52,283

93,007

 

 

 

203,092

227,392

 

 

 

 

 

Financial liabilities measured at amortised cost:

 

 

 

 

Trade and other payables

 

 

20,285

15,282

Loans and borrowings

 

 

1,065,096

1,071,738

Maintenance reserves

 

 

72,767

60,977

 

 

 

1,158,148

1,147,997

 

 

 

 

 

Derivative used for hedging:

 

 

 

 

Derivative financial liabilities

 

 

(24,140)

(27,928)

 

 

 

 

 

Financial assets fair value through profit or loss:

 

 

 

 

Aircraft purchase rights

 

 

19,180

27,110

 

 

 

 

 

 

 

 

5          REVENUE

 

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

Lease rental revenue

60,174

65,046

Less: amortisation of lease incentive asset

(541)

-

 

59,633

65,046

Interest income on finance leases

765

1,318

Deposits released revenue

726

-

Maintenance reserves revenue

216

1,242

 

 

 

 

61,340

67,606

 

 

 

 

Geographical analysis

        

 

 

Europe

Asia Pacific

Total

 

 

 

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

31 Dec 2020

15,919

45,421

61,340

 

31 Dec 2019

21,115

46,491

67,606

 

 

 

 

 

 

 

                     

 

Operating lease commitments

 

The Group leases out aircraft under operating leases. The maturity analysis of the undiscounted lease payments to be received under operating leases are as follows:

 

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

Within one year

100,572

129,744

One to two years

108,300

125,529

Two to three years

111,335

104,790

Three to four years

97,924

91,386

Four to five years

88,339

89,224

Later than five years

249,806

287,665

 

 

 

 

6          OTHER INCOME

 

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

Aircraft purchase option activation fee

1,182

-

Foreign currency exchange gain

384

42

Others

431

71

 

 

 

 

1,997

113

 

 

 

       
 

 

7          OTHER EXPENSES

 

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

 

 

 

Aircraft repossession expenses

205

1,237

Aircraft maintenance expenses

896

-

Expected credit loss on receivables and accrued revenue

12,945

123

Others

-

3

 

 

 

 

14,046

1,363

 

 

 

 

8          FINANCE INCOME

 

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

Interest income from financial institution

4

503

Interest income from non-financial institutions

68

-

Finance income from discounting non-current deposits to fair value

230

214

Gain on early cancellation of unsecured note

1,873

-

 

 

 

 

2,175

717

 

 

 

 

9          FINANCE EXPENSES

 

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

Interest expense on borrowings

13,123

13,935

Interest expense on unsecured notes

11,199

11,375

Amortisation of loan transaction costs

3,134

2,554

Amortisation of interest expense on non-current deposits

217

220

Others

470

160

 

 

 

 

28,143

28,244

 

 

 

 

 

10        RELATED PARTY TRANSACTIONS

 

Significant related party transactions:

 

 

 

31 Dec

2020

31 Dec

2019

 

US$'000s

US$'000s

 

 

 

Entities controlled by key management personnel

(including directors):

 

 

 

 

 

Rental expenses paid

(125)

(145)

Consulting fee paid

(42)

(174)

Service fee received

51

52

 

 

 

 

11       PROPERTY, PLANT AND EQUIPMENT

 

 

Furniture and equipment

 

Aircraft engine

Jet

aircraft

Turboprop aircraft

Total

 

 

US$'000s

US$'000

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 December 2020:

 

 

 

 

 

 

Cost or valuation:

 

 

 

 

 

At 1 July 2020

92

1,940

814,749

441,799

1,258,580

Additions

-

-

-

-

-

Reclassified from held under finance leases

-

-

-

41,434

41,434

Reclassified from asset held for sale

-

-

106,124

-

106,124

Impairment recognised in equity

-

-

(934)

-

(934)

 

 

 

 

 

 

At 31 December 2020

92

1,940

919,939

483,233

1,405,204

 

 

 

 

 

 

Representing:

 

 

 

 

 

At cost

92

1,940

-

-

2,032

At valuation

-

-

919,939

483,233

1,403,172

 

 

 

 

 

 

 

92

1,940

919,939

483,233

1,405,204

 

 

 

 

 

 

Accumulated depreciation and impairment:

 

 

 

 

 

 

At 1 July 2020

60

41

97,542

103,036

200,679

 

Depreciation expense

8

43

16,609

6,992

23,652

 

Reclassified from asset held for sale

-

-

23,241

-

23,241

 

Impairment loss

-

-

32,318

14,334

46,652

 

 

 

 

 

 

 

 

At 31 December 2020

68

84

169,710

124,362

294,224

 

 

 

 

 

 

 

 

Net book value:

 

 

 

 

 

 

At 1 July 2020

32

1,899

717,207

338,763

1,057,901

 

At 31 December 2020

24

1,856

750,229

358,871

1,110,980

 

 

 

 

 

 

 

 

                                           
 

11        PROPERTY, PLANT AND EQUIPMENT (continued)

 

 

 

Furniture and equipment

 

Aircraft engine

Jet

aircraft

Turboprop aircraft

Total

 

 

US$'000s

US$'000

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 June 2020:

 

 

 

 

 

 

Cost or valuation:

 

 

 

 

 

At 1 July 2019

80

-

916,534

450,439

1,367,053

Additions

12

1,940

-

57,737

59,689

Reclassified as held under finance leases

-

-

-

(57,047)

(57,047)

Reclassified as asset held for sale

-

-

(106,124)

-

(106,124)

Impairment recognised in equity

-

-

4,339

(9,330)

(4,991)

 

 

 

 

 

 

At 30 June 2020

92

1,940

814,749

441,799

1,258,580

 

 

 

 

 

 

Representing:

 

 

 

 

 

At cost

92

1,940

-

-

2,032

At valuation

-

-

814,749

441,799

1,256,548

 

 

 

 

 

 

 

92

1,940

814,749

441,799

1,258,580

 

 

 

 

 

 

Accumulated depreciation and impairment:

 

 

 

 

 

 

At 1 July 2019

41

-

73,065

68,623

141,729

 

Depreciation expense

19

41

31,928

14,678

46,666

 

Reclassified as asset held for sale

-

-

(16,189)

-

(16,189)

 

Impairment loss

-

-

8,738

19,735

28,473

 

 

 

 

 

 

 

 

At 30 June 2020

60

41

97,542

103,036

200,679

 

 

 

 

 

 

 

 

Net book value:

 

 

 

 

 

 

At 1 July 2019

39

-

843,469

381,816

1,225,324

 

At 30 June 2020

32

1,899

717,207

338,763

1,057,901

 

 

 

 

 

 

 

 

                                           

 

Assets pledged as security

 

The Group's aircraft with carrying values of US$1,080.2 million (30 June 2020 : US$1,083.6 million) are mortgaged to secure the Group's borrowings (Note 20).

 

Additions and disposals

 

During the six months ended 31 December 2020, two turboprop aircraft held under finance leases were reclassified to property, plant and equipment.

 

During the six months ended 31 December 2020, two jet aircraft were reclassified to property, plant and equipment from assets held for sale.

 

 

11       PROPERTY, PLANT AND EQUIPMENT (continued)

 

Valuation

 

The Group's aircraft were valued in June 2020 by independent valuers on a lease-encumbered value basis ("LEV').  LEV takes into account the current lease arrangements for the aircraft and estimated residual values at the end of the lease. These amounts have been discounted to present value using discount rates ranging from 5.50% to 8.00% (2019: 5.75% to 7.75%) per annum for jet aircraft and 5.50% to 9.00% (2019: 6.00% to 9.25%) per annum for turboprop aircraft.  Different discount rates are considered appropriate for different aircraft based on their respective risk profiles.

 

During the six months ended 31 December 2020, a downward revaluation of US$0.9 million to equity and an impairment loss of US$46.6 million was recognised during the year.

 

 

If the aircraft were measured using the cost model, carrying amounts would be as follows:

 

 

31 Dec 2020

30 Jun 2020

 

Jets

Turbo

props

Jets

Turbo

props

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Cost

899,015

471,701

792,891

430,267

Accumulated depreciation and impairment

(167,924)

(120,388)

(97,291)

(99,149)

Net book value

731,091

351,313

695,600

331,118

 

Geographical analysis

 

31 Dec 2020

 

Europe

Asia Pacific

Total

 

 

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Capital expenditure

 

-

-

-

Net book value - aircraft and aircraft engines

 

356,459

754,497

1,110,956

 

 

 

 

 

30 Jun 2020

 

Europe

Asia Pacific

Total

 

 

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Capital expenditure

 

59,583

106

59,689

Net book value - aircraft and aircraft engines

 

331,651

726,218

1,057,869

 

 

 

 

 

 

 

12       TRADE AND OTHER RECEIVABLES

 

 

 

 

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

 

 

 

Current

 

 

Trade receivables

34,294

7,900

Less:

 

 

Allowance for expected credit loss for trade receivables

(12,874)

(205)

 

21,420

7,695

Accrued revenue

4,506

8,522

Less:

 

 

Allowance for expected credit loss for accrued revenue

(393)

(137)

 

4,113

8,385

Other receivables

2,519

1,922

Less:

 

 

Allowance for expected credit loss for other receivables

(670)

(670)

 

1,849

1,252

Interest receivables

82

217

Less:

 

 

Allowance for expected credit loss for interest receivables

(29)

(9)

 

53

208

Deposits

50

46

Prepaid expenses

1,246

624

 

 

 

 

28,731

18,210

 

Non-current:

 

 

Other receivables

652

-

Deposits for aircraft

10,599

10,599

Prepaid expenses

191

279

Right-of-use assets

610

723

 

 

 

 

12,052

11,601

 

 

 

13        FINANCE LEASE RECEIVABLES

 

Future minimum lease payments receivable under finance leases are as follows:

 

 

31 Dec 2020

31 Jun 2020

 

Minimum lease payments

Present value of payments

Minimum lease payments

Present value of payments

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Within one year

5,793

3,828

11,126

7,988

One to two years

5,793

4,014

8,785

6,167

Two to three years

5,793

4,210

8,785

6,443

Three to four years

33,825

31,287

8,785

6,728

Four to five years

9,295

8,944

62,546

57,545

Later than five years

-

-

8,185

8,136

Total minimum lease payments

60,499

52,283

108,212

93,007

 

 

 

 

 

Less: amounts representing interest income

(8,216)

-

(15,205)

-

 

 

 

 

 

Present value of minimum lease payments

52,283

52,283

93,007

93,007

 

14       GOODWILL

 

The Group performs its annual impairment test in June and when circumstances indicate the carrying value may be impaired. For the purpose of these financial statements there was no indication of impairment. The key assumptions used to determine the recoverable amount for the different cash generating units were disclosed in the annual consolidated financial statements for the year ended 30 June 2020.

 

 

15       DERIVATIVE FINANCIAL LIABILITIES

 

 

Contract/

notional amount

Fair value

 

31 Dec 2020

30 Jun

2020

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Current liability

 

 

 

 

Interest rate swap

11,113

-

(105)

-

 

 

 

 

 

Non-current liability

 

 

 

 

Interest rate swap

282,619

304,507

(23,554)

(27,458)

Cross-currency interest rate swap

4,000

4,000

(481)

(470)

 

 

 

 

 

 

286,619

308,507

(24,035)

(27,928)

 

Hedge accounting has been applied for interest rate swap contracts and cross-currency interest rate swap contracts which have been designated as cash flow hedges.

 

The Group pays fixed rates of interest of 1.0% to 2.6% per annum and receives floating rate interest equal to 1-month to 3-month LIBOR under the interest rate swap contracts. 

 

The Group pays fixed rates of interest of 3.1% to 4.9% per annum and receives floating interest equal to 3-month LIBOR under the cross-currency interest rate swap contracts.

 

The swap contracts mature between 23 September 2021 and 21 November 2030.

 

Changes in the fair value of these interest rate swap and cross-currency interest rate swap contracts are recognised in the fair value reserve. The net fair value gain net of tax of US$3.6 million (31 December 2019: loss of US$0.5 million) on these derivative financial instruments was recognised in the fair value reserve for the six month period ended 31 December 2020.

 

The fair value of the derivative financial instruments is determined by reference to marked-to-market values provided by counterparties.  The fair value measurement of all derivative financial instruments under the Group is classified under Level 2 of the fair value hierarchy, for which inputs other than quoted prices that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) are included as inputs for the determination of fair value.

 

The Group has also designated certain Euro denominated loans as cash flow hedges of foreign currency exchange risk derived from Euro denominated leases.  Unrealised foreign exchange gains and losses arising on Euro denominated loans designated as cash flow hedges are recognised in the foreign currency hedge reserve.  Unrealised foreign exchange gains and losses recorded in the foreign currency hedging reserve are systematically re-cycled through profit or loss over the remaining term of the related loan on a straight-line basis.

 

 

16       AIRCRAFT PURCHASE RIGHTS

 

 

 

 

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

 

 

 

Aircraft purchase rights, at fair value

19,180

27,110

 

 

 

 

17       CASH AND BANK BALANCES

 

 

 

 

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

 

 

 

Fixed deposits

-

10,067

Other cash and bank balances

117,661

104,518

Total cash and bank balances

117,661

114,585

Less: restricted

(92,237)

(79,295)

Cash and cash equivalents

25,424

35,290

 

 

 

The Group's restricted cash and bank balances have been pledged as security for certain loan obligations.

 

In the consolidated statement of cash flows, cash and cash equivalents comprises unrestricted cash and bank balances.

 

18       ASSETS HELD FOR SALE

 

The Group's aircraft which met the criteria to be classified as assets held for sale and the associated liabilities were as follows:

 

 

 

 

 

31 Dec

2020

30 Jun 2020

 

 

 

US$'000

US$'000s

 

 

 

 

 

Assets held for sale:

 

 

 

 

Property, plant and equipment - aircraft

 

 

 

 

At 1 July 2020/ 1 July 2019

 

 

82,884

-

Additions

 

 

-

89,935

Impairment loss

 

 

-

(7,051)

Transfer to property, plant and equipment

 

 

(82,884)

-

At 31 Dec/30 June

 

 

-

82,884

 

 

 

 

 

Lease incentive asset

 

 

-

8,384

 

 

 

-

91,268

 

 

 

 

 

Liabilities directly associated with assets held for sale:

 

 

 

 

Deposit collected

 

 

-

1,240

Lessor maintenance contribution

 

 

-

8,908

Maintenance reserves

 

 

-

135

 

 

 

-

10,283

 

 

 

 

 

 

19        SHARE CAPITAL AND TREASURY SHARES

 

(a)     Share capital

 

 

31 Dec 2020

30 Jun 2020

 

No of shares

US$'000s

No of shares

US$'000s

 

 

 

 

 

 

Allotted, called up and fully paid

Ordinary shares of 1 penny each:

 

 

 

 

 

At 1 July 2020/ 1 July 2019

64,879,942

1,108

64,609,939

1,104

 

Issue of shares

-

-

270,003

4

 

 

 

 

 

 

 

At 31 Dec/30 June

64,879,942

1,108

64,879,942

1,108

 

 

 

 

 

 

               

The holders of ordinary shares (except for treasury shares) are entitled to receive dividends as and when declared by the Company.  All ordinary shares carry one vote per share without restrictions.

 

(b)     Treasury shares

 

 

31 Dec 2020

30 Jun 2020

 

No of treasury shares

US$'000s

No of treasury shares

US$'000s

 

 

 

 

 

At 1 July 2020/ 1 July 2019

2,210,000

7,811

300,000

1,147

Acquired during the period

-

-

1,910,000

6,664

At 31 Dec/30 June

2,210,000

7,811

2,210,000

7,811

 

 

 

 

 

(c)     Net asset value per share

 

 

 

 

 

 

 

31 Dec 2020

30 Jun

2020

 

 

 

 

 

Net asset value per share (US$)(1)

 

 

$2.38

$3.53

Net asset value per share (GBP)(2)

 

 

£1.74

£2.86

 

 

 

 

 

(1)  Net asset value per share is total equity divided by the total number of shares issued and            outstanding at period end.

(2)  Based on GBP:US$ exchange rate as at 31 Dec 2020 of 1.37 (30 June 2020 : 1.23).

 

 

20        LOANS AND BORROWINGS

 

 

 

 

31 Dec

2020

30 Jun

2020

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Secured borrowings

 

 

723,725

725,082

Unsecured notes

 

 

341,371

346,656

 

 

 

 

 

Total loans and borrowings

 

 

1,065,096

1,071,738

 

 

 

 

 

Less: current portion

 

 

(437,791)

(536,983)

 

 

 

 

 

Non-current loans and borrowings

 

 

627,305

534,755

 

 

 

 

 

 

 

Maturity

Weighted average interest rate per annum

 

31 Dec

2020

30 Jun 2020

31 Dec

2020

30 Jun 2020

 

US$'000s

US$'000s

%

%

 

 

 

 

 

Secured borrowings

2021-2031

2021-2031

3.7%

3.6%

Unsecured notes

2021

2021

6.5%

6.5%

 

 

 

 

 

 

Secured borrowings are secured by first ranking mortgages over the relevant aircraft, security assignments of the Group's rights under leases and other contractual agreements relating to the aircraft, charges over bank accounts in which lease payments relating to the aircraft are received and charges over the issued share capital of certain subsidiaries.

 

 

 

 

21       MAINTENANCE RESERVES

 

 

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

 

 

 

Current

15,238

3,836

Non-current

57,529

57,141

 

 

 

Total maintenance reserves

72,767

60,977

 

 

 

 

 

 

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

 

 

 

At 1 July 2020/ 1 July 2019

60,977

32,491

Contributions

14,168

34,503

Utilisations

(2,297)

(4,399)

Released to profit or loss

(216)

(1,618)

Transferred from liabilities associated with asset held for sale

135

-

 

 

 

At 31 Dec/30 June

72,767

60,977

 

 

 

22       CAPITAL COMMITMENTS

 

            Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follows:

 

 

31 Dec

2020

30 Jun

2020

 

US$'000s

US$'000s

 

 

 

Property, plant and equipment

155,140

155,140

 

 

 

Capital commitments represent amounts due under contracts entered into by the group to purchase aircraft. The company has paid deposits towards the cost of these aircraft which are included in trade and other receivables.

 

As at 31 December 2020, the Group has commitments to purchase eight ATR 72-600 aircraft from the manufacturer with expected delivery dates over a three-year period. 

 

The Company is currently in discussion with the manufacturer regarding a reduction in the number of ATR 72-600 aircraft on order and re-scheduling of delivery dates.

 

23       CONTINGENT LIABILITIES

 

            There were no material changes in contingent liabilities since 30 June 2020.

 

 

 

24       DIVIDENDS

 

 

 

 

 

31 Dec

31 Dec

 

2020

2019

 

US$'000s

US$'000s

 

 

 

Dividends declared and/or paid during the six months ended 31 December 2020

 

 

Dividends on ordinary shares

 

 

- First interim exempt (one-tier) dividend for Nil US cents (31 Dec 2019 : 8.50 US cents) per share

-

5,454

 

- Second interim exempt (one-tier) dividend for Nil US cents (31 Dec 2019 : 2.10 US cents) per share

-

1,319

 

-

6,773

 

 

 

Dividends are recorded directly in equity when they are paid. 

 

 

25        SUBSEQUENT EVENTS

 

On 8 February 2021, the Group has entered into a new lease for an ATR 72-600 with an existing Asian client airline for eight years lease at current market rates.

 

On 9 February 2021, the Group advises that it has reach an agreement with a group of bond holders on the terms of a maturity extension in relation to the Avation Capital S.A. 6.5% senior notes due May 2021 issued under Avation's global medium term note programme.


  

 

PRINCIPAL RISKS     

 

The Group's risk management processes bring greater judgement to decision making as they allow management to make better, more informed and more consistent decisions based on a clear understanding of risk involved.  We regularly review the risk assessment and monitoring process as part of our commitment to continually improve the quality of decision-making across the Group.

 

The principal risks and uncertainties which may affect the Group in the second half of the financial year will include the typical risks associated with the aviation business, including but not limited to any downturn in the global aviation industry, fuel costs, finance costs, pandemics, war and radicalism and the like which may affect our airline customers' ability to fulfil their lease obligations.

 

The business also relies on its ability to source finance on favourable terms.  Should this supply of finance contract, it would limit our fleet expansion and therefore growth.

 

 

GOING CONCERN

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the financial statements.  The financial risk management objectives and policies of the Group and the exposure of the Group to credit risk and liquidity risk are discussed in the annual report for the Group for the year ended 30 June 2020.

 

 

DIRECTORS

 

The directors of Avation PLC are listed in its Annual Report for the year ended 30 June 2020.  A list of the current directors is maintained on the Avation PLC website: www.avation.net

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

           

The Directors confirm that, to the best of their knowledge, this condensed consolidated interim financial information have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 namely

 

·      an indication of important events that have occurred during the first six months and their impact on the Interim Report, and a description required by the principal risks and uncertainties for the remaining six months of the financial year; and

 

·      material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

 

 

 

By order of the Board

 

 

 

 

 

Jeff Chatfield

Executive Chairman

Singapore, 26 February 2021

 

 

 

 

 

 

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