Half-year Report

Avation PLC
01 March 2024
 

AVATION PLC

("Avation" or "the Company")

 

UNAUDITED Results for the SIX MONTHS ended 31 DECEMBER 2023

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

 

Financial Highlights

 

·    Revenue and other income US$46.3 million (2022 restated: US$55.7 million);

·    Operating profit US$17.5 million (2022 restated: US$35.4 million);

·    Net indebtedness reduced by US$31.8 million to US$699.4 million (30 June 2023: US$731.2 million);

·    Group total cash increased to US$150.1 million (30 June 2023: US$116.9 million);

·    Loss before tax US$9.6 million (2022 restated: Profit before tax US$7.1 million);

·    Loss before tax includes US$2.9 million loss on sale resulting from aircraft repossession in India and US$4.7 million non-cash amortisation expense resulting from the 2021 modification of terms of Avation Capital S.A. Senior PIK Toggle Notes due 2026 under IFRS 9; and

·    Net asset value per share decreased 5.5% to £2.56 (30 June 2023 restated: £2.71).

 

Operational Highlights

 

·    One Airbus A320-200 started a new four-year lease with Cebu Pacific;

·    A lease for an ATR 72-500 was terminated and the aircraft was repossessed from an airline in India and sold;

·    Avation refinanced four leased aircraft with a new loan facility; and

·    Avation repurchased US$8.0 million face value Avation Capital S.A. Senior PIK Toggle Notes due 2026.

 

Outlook

According to IATA, 2023 was marked by strong industry-wide recovery with revenue passenger kilometres increasing 25% year-on-year in December 2023 to 94% of 2019 levels.

Avation's fleet will be 100% utilised once the delayed sale of an 11-year-old ATR 72-600 and a delayed lease of the remaining off-lease ATR 72-600 aircraft are concluded.  Both transactions are expected to close shortly. There are no leases expiring before September 2024 at the earliest, with the next earliest lease expiry not until January 2026.

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 latest technology more fuel-efficient aircraft engines and the use of sustainable aviation fuel to reduce CO2 emissions. A portion of Avation's fleet comprises latest technology ATR72-600 aircraft which have impeccable and world leading environmental characteristics.

The Company is focussed on optimising its capital structure, refinancing and continuing to lower debt levels and is positioned to cautiously return to organic growth through deliveries from its environmentally friendly ATR72-600 orderbook, opportunistic aircraft trading and the potential exercise of ATR purchase rights should attractive lease opportunities arise. Avation intends to repurchase Avation Capital S.A. Senior PIK Toggle Notes on the open market as and when attractive valuation opportunities arise and liquidity is available.

Executive Chairman, Jeff Chatfield, said:

"During the six months ending 31 December 2023 Avation repossessed an ATR 72-500 aircraft from an airline in default in India.  Although this resulted in a book loss of US$2.9 million, we were satisfied with this outcome in what can be a difficult jurisdiction for repossessions.  The aircraft was not in contractual physical return condition when repossessed and was subsequently sold at a loss which was appropriate for a plane in that physical condition.  We expect to conclude a delayed sale of an 11-year-old ATR 72-600 aircraft in the coming weeks at a much higher price.  The sale was originally announced in September 2023, but completion has been delayed due to exchange control issues in the buyer's jurisdiction.  The buyer has now fully paid the purchase price for the aircraft and will take delivery shortly. We also expect to commence a new lease of our remaining off-lease ATR 72-600 aircraft in the coming months having signed the associated letter of intent.  We expect to conclude the formal lease agreement with a new lessee shortly.

Avation has continued to de-lever its balance sheet, achieving a reduction to 59.7% in the ratio of net debt to total assets as at 31 December 2023.  Improved collection of rent arrears has led to a reduction in total trade and other receivables of US$13.9 million in the six-month period ended 31 December 2023. A significant portion of the cashflow generated by the fleet is directed towards repayments of debt.  Scheduled loan maturities for the 2024 calendar year amount to US$58.5 million.

The Company repurchased US$8.0 million Avation Capital S.A. 8.25%/9.0% Senior PIK Toggle Notes due 2026 in December 2023.  The Company intends to repurchase additional unsecured notes from time to time subject to availability and attractive pricing.

Avation's management believes that short-term interest rates, which increased dramatically in 2022 and 2023, may have peaked and may stabilise over the coming years.  This background should create opportunities for Avation to refinance debt at lower interest rates in future.  Avation will review its capital structure and look for opportunities to refinance existing loans to improve its overall capital structure and cost of debt.

Avation has two ATR 72-600 aircraft on order for delivery in 2024.  The delivery dates for these aircraft are likely to be pushed back by the manufacturer to the fourth quarter of 2024 due to supply chain issues.  Avation will make further announcements regarding placement of these aircraft in due course.

The Company owns 28 purchase rights for ATR 72-600 aircraft which provide a pathway to future fleet growth."

Change in accounting policy for maintenance rent

The Directors resolved to change the company's accounting policy for maintenance reserve rents at a meeting held on 8 February 2024.  Under the adopted accounting policy Avation will recognise any excess maintenance reserves as revenue over the duration of a lease, to the extent that maintenance reserves collected are not expected to be reimbursed to the lessee.  Under the previous accounting policy, surplus maintenance reserves were recognised as revenue only at the end of the lease term.  The change in accounting policy has been recorded with comparative amounts for prior financial periods restated.  The change in accounting policy has led to recognition of US$1.0 million maintenance reserve revenue in the six-months ended 31 December 2023 (2022 restated: US$0.4 million).

 



Financial Summary

US$ '000s

Six months ended 31 December,

 

2023

2022

(restated)

Revenue

44,733

48,617

Other income

1,544

7,082


46,277

55,699

Operating profit

17,547

35,398

Profit/(loss) before tax

(9,583)

7,077

Profit/(loss) after tax

(8,804)

8,679

EPS

(12.42c)

12.50c

 

 

 

US$ '000s

31 December 2023

30 June

2023

(restated)

Fleet assets (1)

870,960

898,616

Total assets

1,172,432

1,179,596

Cash and bank balances (2)

150,072

116,905

Unrestricted cash and cash equivalents

43,456

24,816




Net asset value per share (US$) (3)

$3.25

$3.44

Net asset value per share (GBP) (4)

£2.56

£2.71

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

2.   Cash and bank balances as at 31 December 2023 comprise cash and cash equivalents of US$43.5 million (30 June 2023: US$24.8 million) and restricted cash balances of US$106.6 million (30 June 2023: US$90.9 million).

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

4.   Based on GBP:USD exchange rate as at 31 December 2023 of 1.27 (30 June 2023:1.27).

Aircraft Fleet

Aircraft Type

31 December 2023

30 June 2023

Boeing 777-300ER

1

1

Airbus A330-300

1

1

Airbus A321-200

6

6

Airbus A320-200

2

2

Airbus A220-300

5

5

ATR 72-600

16

16

ATR 72-500

4

5

Total

35

36

At 31 December 2023, Avation's fleet comprised 35 aircraft, including five aircraft on finance lease. Avation serves 15 customers in 13 countries. The weighted average age of the fleet is 6.9 years (30 June 2023: 6.4 years) and the weighted average remaining lease term is 4.6 years (30 June 2023: 5.0 years).

One ATR 72-500 aircraft was sold during the period. Turboprop and narrowbody aircraft make up 82% of fleet assets as at 31 December 2023. Fleet assets have decreased 3.1% to US$871.0 million (30 June 2023: US$898.6 million). As at the date of this report, Avation has two off-lease ATR 72-600 aircraft.  One aircraft is due to be sold shortly and one aircraft is currently subject to a non-binding letter of intent with a prospective lessee.

Avation has two new ATR 72-600 aircraft on order for delivery later this year and purchase rights for a further 28 aircraft as at 31 December 2023.

 

 

Debt summary

US$ '000s

31 December 2023

30 June

2023

Current loans and borrowings

60,012

61,401

Non-current loans and borrowings

682,836

694,575

Total loans and borrowings

742,848

755,976

Unrestricted cash and bank balances

43,456

24,816

Net indebtedness (1)

699,392

731,160

Net debt to total assets (2)

59.7%

62.0%

Weighted average cost of secured debt (3)

4.7%

4.5%

Weighted average cost of total debt (4)

6.3%

6.1%

 

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.

Net indebtedness was reduced by 4.3% to US$699.4 million (30 June 2023: US$731.2 million). Four aircraft were re-financed with long-term fixed rate loans during the period.

The weighted average cost of total debt has increased to 6.3% at 31 December 2023 (30 June 2023: 6.1%) due to repayments of lower cost secured loans in the period and new secured loans with higher interest rates. The weighted average cost of secured debt also increased to 4.7% at 31 December 2023 (30 June 2023: 4.5%).

At the end of the period, Avation's net debt to total assets ratio improved to 59.7% (30 June 2023: 62.0%).  As at 31 December 2023, 96.2% of total debt was at fixed or hedged interest rates (30 June 2023: 95.8%). The ratio of unsecured debt to total debt was 41.1% (30 June 2023: 40.1%).

Financial Analysis

Revenue

US$ '000s

Six months ended 31 December,

 

2023

2022

(restated)

Lease rental revenue

43,887

42,608

Less: amortisation of lease incentive assets

(1,169)

(612)


42,718

41,996

Interest income from finance leases

1,036

1,171

Maintenance reserves revenue

979

5,450

 

44,733

48,617

 

Lease rental revenue increased by 3.1% from US$42.6 million in the six months ended 31 December 2022 to US$43.9 million in the six months ended 31 December 2023.  The increase was principally due to improved fleet utilisation.  There were two off-lease aircraft in the fleet at 31 December 2023 compared to five at 31 December 2022.

Interest income from finance leases decreased by 11.5% from US$1.2 million in the six months ended 31 December 2022 to US$1.0 million in the six months ended 31 December 2023.  There were five aircraft leased on finance leases at 31 December 2022 and 2023.

 

 

 

 

Other income

US$ '000s

Six months ended 31 December,

 

2023

2022

(restated)

Fees for late payment

608

390

Deposit released

350

-

Foreign currency exchange gain

-

3,481

Claim recovery

385

3,166

Others

201

45

 

1,544

7,082

 

The claim recoveries recognised in other income in the six months ended 31 December 2023 and 31 December 2022 are distributions paid to creditors of Virgin Australia in excess of amounts allocated to trade receivables.

Foreign currency exchange gains in the six months ended 31 December 2022 arose principally from the release of deferred hedged foreign currency exchange gains on two Euro loans that were refinanced during the period.

Administrative expenses

 

US$ '000s

Six months ended 31 December,

 

2023

2022

(restated)

Staff costs

2,792

2,868

Other administrative expenses

1,739

1,591

 

4,531

4,459

 

Staff costs reduced by 2.6% from US$2.9 million in the six months ended 31 December 2022 to US$2.8 million in the six months ended 31 December 2023 principally due to lower charges for employee share warrants.

Other administrative expenses increased by 9.3% from US$1.6 million in the six months ended 31 December 2022 to US$1.7 million in the six months ended 31 December 2023.

Finance income

US$ '000s

Six months ended 31 December,

 

2023

2022

(restated)

Interest income

2,814

853

Fair value gain on financial derivatives

645

44

Finance income from discounting non-current deposits to fair value

332

304

Gain on repurchase of unsecured notes

311

486

Gain on early full repayment of borrowings

161

1,657

 

4,263

3,344

 

Interest income increased in the six months ended 31 December 2023 due increased cash and bank balances and improved interest rates for cash deposits.  The group deploys surplus cash balances into fixed term deposits while maintaining sufficient liquidity to meet near-term payment obligations.

Avation generated a gain of US$0.3 million on the repurchase of US$8.0 million of Avation Capital S.A. 8.25%/9.0% unsecured notes at a discount in December 2023.

A gain of US$0.2 million on early full repayment of borrowings arose when an in-the-money interest rate swap was terminated concurrently with repayment of a loan in November 2023.

Finance expenses

US$ '000s

Six months ended 31 December,

 

2023

2022

(restated)

Interest expense on secured borrowings

10,125

10,742

Interest expense on unsecured notes

15,555

15,504

Amortisation of loan transaction costs

543

669

Amortisation of IFRS 9 gain on debt modification

4,730

4,342

Amortisation of interest expense on non-current borrowings

326

283

Others

114

125

 

31,393

31,665

 

Interest expense on secured borrowings reduced by 5.7% to US$10.1 million in the six months ended 31 December 2023 from US$10.7 million in the six months ended 31 December 2022 as a result of repayments of secured loans.  Secured loans have been paid down by US$40.3 million from US$478.0 million at 31 December 2022 to US$437.5 million at 31 December 2023.

Interest expense on unsecured notes includes US$4.3 million of non-cash interest paid in kind by increasing the face value of Avation Capital S.A. 8.25%/9.0% unsecured notes.

Amortisation of IFRS 9 gain on debt modification of US$4.7 million represents the non-cash accretion in the book value of Avation Capital S.A. 8.25%/9.0% unsecured notes resulting from the accounting treatment of the extension and changes to the terms of the notes agreed with noteholders in March 2021.  The extension was accounted for as a substantial modification of a debt instrument in accordance with IFRS 9.  The face value of Avation Capital S.A. 8.25%/9.0% unsecured notes outstanding as of 31 December 2023 is US$341.6 million.

Results Conference Call

Avation's senior management team will host an investor update call on 1 March 2024, at 12:00 PM GMT (UK) / 7:00 AM EST (US) / 8:00 PM SGT (Singapore), to discuss the Company's financial results. Investors can participate in the call by using the following link:

 

https://www.investormeetcompany.com/avation-plc/register-investor

 

A replay of the investor update call will be made 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," "initiate", "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 six months ended 31 December 2023.

Financial information presented in this announcement is being published for the purposes of providing preliminary Group financial results for the six months ended 31 December 2023. 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 29 February 2024. 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 2023, upon which the auditors have given an unqualified audit, were published on 26 October 2023 and have been annexed to the annual return and delivered to the Registrar of Companies.

All "US$" 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 2023


Note

31 Dec

2023

 

31 Dec

2022

(Restated)



US$'000s

US$'000s

Continuing operations

 



Revenue

6

44,733

48,617

Other income

7

1,544

7,082



46,277

55,699





Depreciation

12

(18,660)

(18,932)

Gain on derecognition of finance lease


-

3,235

Loss on disposal of aircraft


(2,855)

(1,000)

Unrealised gain on aircraft purchase rights

17

2,190

1,880

Unrealised (loss)/gain on equity investment

18

(500)

6,869

Impairment loss on aircraft


-

(315)

Aircraft transition expenses


(2,933)

(5,790)

Reversal of/(provision for) expected credit losses


38

(250)

Administrative expenses


(4,531)

(4,459)

Legal and professional fees


(1,254)

(1,149)

Other expenses

8

(225)

(390)

Operating profit


17,547

35,398





Finance income

9

4,263

3,344

Finance expenses

10

(31,393)

(31,665)

(Loss)/profit before taxation


(9,583)

7,077





Taxation


779

1,602

(Loss)/profit from continuing operations


(8,804)

8,679





(Loss)/profit attributable to:




Shareholders of Avation PLC


(8,804)

8,680

Non-controlling interests


-

(1)



(8,804)

8,679

Earnings per share for (loss)/profit

attributable to shareholders of Avation PLC


 

 

Basic earnings per share


(12.42 cents)

12.50 cents

Diluted earnings per share


(12.38 cents)

12.50 cents

 

 

 

 

 

 

 



AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 DECEMBER 2023


 

31 Dec

2023

 

31 Dec

2022

(Restated)



US$'000s

US$'000s





 

(Loss)/profit from continuing operations


(8,804)

8,679





Other comprehensive income:




Items may be reclassified subsequently to profit or loss:




Net (loss)/gain on cash flow hedge, net of tax


(5,089)

1,427

Other comprehensive income, net of tax


(5,089)

1,427

 




Total comprehensive (loss)/income for the period

 

(13,893)

10,106





Total comprehensive (loss)/income attributable to:




Shareholders of Avation PLC


(13,893)

10,107

Non-controlling interests


-

(1)



(13,893)

10,106

 

 



AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2023


Note

31 Dec

2023

 

30 Jun

2023

(Restated)

1 Jul

2022

(Restated)



US$'000s

US$'000s

US$'000s

ASSETS

 




Non-current assets





Property, plant and equipment

12

819,325

845,471

813,908

Finance lease receivables

14

13,530

41,213

55,208

Trade and other receivables

13

8,930

14,258

19,388

Derivative financial assets

16

8,944

13,442

5,920

Aircraft purchase rights

17

88,010

85,820

65,280

Lease incentive assets


7,569

4,686

310

Goodwill

15

1,902

1,902

1,902



948,210

1,006,792

961,916

Current assets





Finance lease receivables

14

30,105

3,932

5,624

Trade and other receivables

13

22,494

31,035

13,202

Derivative financial assets

16

-

54

-

Investment in equity, fair value through profit or loss

18

10,735

11,235

3,715

Lease incentive assets


2,816

1,643

137

Cash and bank balances

19

150,072

116,905

119,171



216,222

164,804

141,849

Assets held for sale

20

8,000

8,000

113,255



224,222

172,804

255,104

Total assets

 

1,172,432

1,179,596

1,217,020

EQUITY AND LIABILITIES





Equity





Share capital

21

1,182

1,182

1,203

Share premium


70,024

70,024

67,681

Treasury shares

21

-

-

(7,811)

Merger reserve


6,715

6,715

6,715

Asset revaluation reserve


50,764

50,764

51,730

Capital reserve


8,876

8,876

8,876

Other reserves


10,436

15,069

14,174

Retained earnings


82,500

91,295

86,067

Equity attributable to shareholders of Avation PLC


230,497

243,925

228,635

Non-controlling interest


7

7

6

Total equity


230,504

243,932

228,641

Non-current liabilities





Loans and borrowings

22

682,836

694,575

764,230

Trade and other payables


18,102

20,185

18,274

Derivative financial liabilities

16

933

1,632

1,055

Maintenance reserves

23

76,299

52,033

73,754

Deferred tax liabilities


25,060

26,694

25,613



803,230

795,119

882,926

Current liabilities





Loans and borrowings

22

60,012

61,401

63,900

Trade and other payables


23,766

17,167

15,940

Maintenance reserves

23

54,191

61,456

10,156

Income tax payable


729

521

658



138,698

140,545

90,654

Liabilities directly associated with assets held for sale

20

-

-

14,799



138,698

140,545

105,453

Total equity and liabilities


1,172,432

1,179,596

1,217,020

 


 

 

 

 

Attributable to shareholders of Avation PLC


 

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 2023 as previously reported


 

1,182

 

70,024

 

-

 

6,715

 

50,764

 

8,876

 

15,069

 

88,995

 

241,625

 

7

 

241,632

 

Effects of changes in accounting policies


 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,300

 

2,300

 

-

 

2,300

 

Balance at 1 July 2023 as restated

 

 

1,182

 

70,024

 

-

 

6,715

 

50,764

 

8,876

 

15,069

 

91,295

 

243,925

 

7

 

243,932

 














 

Loss for the period


-

-

-

-

-

-

-

(8,804)

(8,804)

-

(8,804)

 

Other comprehensive loss


-

-

-

-

-

-

(5,089)

-

(5,089)

-

(5,089)

 

Total comprehensive loss

 

-

-

-

-

-

-

(5,089)

(8,804)

(13,893)

-

(13,893)

 














 

Share warrant expense


-

-

-

-

-

-

465

-

465

-

465

 

Total transactions with owners recognised directly in equity

 

 

-

 

-

 

-

 

-

 

-

 

-

 

465

 

-

 

465

 

-

 

465

 

Expiry of share warrants


-

-

-

-

-

-

(9)

9

-

-

-

 

Total others

 

-

-

-

-

-

-

(9)

9

-

-

-

 

Balance at 31 December 2023

 

1,182

70,024

-

6,715

50,764

8,876

10,436

82,500

230,497

7

230,504

 














 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 DECEMBER 2023

 

 

Capital reserve comprises acquisitions with non-controlling interests that do not result in a change of control.

 

Other reserves consists of capital redemption reserve, share warrant reserve, fair value reserve and foreign currency hedge reserve.

 

The merger reserve arose on acquisition of additional shares of the Company's subsidiary Capital Lease Aviation Limited through the allotment of ordinary shares in the year ended 30 June 2015.  The merger reserve represents the difference between the fair value and the nominal value of the shares issued by the Company.



AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 DECEMBER 2022

 


 

 

 

Attributable to shareholders of Avation PLC

 


 

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 2022 as previously reported

 

 

1,203

 

67,681

 

(7,811)

 

6,715

 

51,730

 

8,876

 

14,174

 

84,519

 

227,087

 

6

 

227,093

Effects of changes in accounting policies


 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,548

 

1,548

 

-

 

1,548

Balance at 1 July 2022 as restated


 

1,203

 

67,681

 

(7,811)

 

6,715

 

51,730

 

8,876

 

14,174

 

86,067

 

228,635

 

6

 

228,641

Profit for the period


-

-

-

-

-

-

-

8,680

8,680

(1)

8,679

Other comprehensive income


-

-

-

-

-

-

1,427

-

1,427

-

1,427

Total comprehensive income

 

-

-

-

-

-

-

1,427

8,680

10,107

(1)

10,106














Issuance of shares


2

226

-

-

-

-

(51)

-

177

-

177

Purchase of treasury shares


-

-

(94)

-

-

-

-

-

(94)

-

(94)

Cancellation of treasury shares


(39)

-

7,905

-

-

-

39

(7,905)

-

-

-

Share warrant expense


-

-

-

-

-

-

655

-

655

-

655

Total transactions with owners recognised directly in equity

 

 

(37)

 

226

 

7,811

 

-

 

-

 

-

 

643

 

(7,905)

 

738

 

-

 

738

Expiry of share warrants


-

-

-

-

-

-

(112)

112

-

-

-

Total others

 

-

-

-

-

-

-

(112)

112

-

-

-

Balance at 31 December 2022

 

1,166

67,907

-

6,715

51,730

8,876

16,132

86,954

239,480

5

239,485














 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2023


Note

31 Dec

2023

 

31 Dec

2022

(Restated)


 

 

 



US$'000s

US$'000s

Cash flows from operating activities:




(Loss)/profit before taxation


(9,583)

7,077

Adjustments for:




    Amortisation of lease incentive asset

6

1,169

612

    Depreciation expense

12

18,660

18,932

    Depreciation of right-of-use assets


138

110

    (Reversal of)/provision for expected credit losses


(38)

250

    Finance income

9

(4,263)

(3,344)

    Finance expense

10

31,393

31,665

    Gain on derecognition of finance lease


-

(3,235)

    Loss on disposal of aircraft


2,855

1,000

    Interest income from finance lease

6

(1,036)

(1,171)

    Impairment loss on aircraft


-

315

    Share warrants expense


465

655

    Unrealised loss/(gain) on equity investment

18

500

(6,869)

    Unrealised gain on aircraft purchase rights

17

(2,190)

(1,880)

    Foreign currency exchange loss/(gain)


344

(3,438)

    Operating cash flows before working capital changes


38,414

40,679

Movement in working capital:




    Trade and other receivables and finance lease receivables


15,513

(9)

    Trade and other payables


3,785

5,940

    Maintenance reserves


11,776

3,275

    Cash from operations


69,488

49,885

Finance income received


3,865

1,866

Finance expense paid


(27,947)

(21,856)

Income tax paid


(345)

(346)

Net cash from operating activities


45,061

29,549

 


 

 

Cash flows from investing activities:




Investment in fixed term deposits


1,225

-

Purchase of property, plant and equipment


-

(568)

Proceeds from disposal of aircraft


4,049

21,500

Net cash from investing activities


5,274

20,932

 


 

 

Cash flows from financing activities:




Net proceeds from issuance of ordinary shares


-

177

Purchase of treasury shares


-

(94)

(Increase)/decrease of restricted cash balances


(15,752)

4,578

Proceeds from loans and borrowings, net of transactions costs


26,171

42,958

Repayment of loans and borrowings


(42,114)

(101,247)

Net cash used in financing activities


(31,695)

(53,628)





Net increase/(decrease) in cash and cash equivalents


18,640

(3,147)

Cash and cash equivalents at beginning of financial period


24,816

35,267

Cash and cash equivalents at end of financial period

19

43,456

32,120

 

 

 

AVATION PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2023

 

This interim condensed consolidated financial statements for Avation PLC for the six months ended 31 December 2023 were authorised for issue in accordance with a resolution of the Directors on 29 February 2024.

 

1          CORPORATE INFORMATION

 

Avation PLC is a public limited company incorporated in England and Wales under the Companies Act 2006 (Registration Number 05872328) and its shares are traded on the Standard Segment of the Main Market of 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 UK-adopted International Accounting Standard (IAS) 34 'Interim Financial 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 2023 and considered together with any public announcements made by Avation PLC during the six months ended 31 December 2023.

 

The accounting policies and methods of computation are the same as those adopted in the annual report for the year ended 30 June 2023 except for as explained in note 3, which addresses a change in accounting policy for maintenance reserves and in note 4, the adoption of new accounting standards effective as of 1 July 2023. 

 

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 2023, 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.

 

 



AVATION PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2023

 

3          CHANGE IN ACCOUNTING POLICY

 

Maintenance reserves

 

With effect from 1 July 2023, the Group changed its accounting policy for maintenance reserves.  Under the previous accounting policy, the Group recognised any surplus or shortfall identified in maintenance reserve liabilities for an aircraft as compared to the expected future reimbursement obligations to a lessee in profit or loss at the end of lease or on sale of an aircraft.

 

Under the new accounting policy, the Group will recognise maintenance reserves as revenue over the term of a lease, to the extent that collected maintenance reserves are not expected to be reimbursed to the lessee. 

 

The Group will recognise maintenance revenue once the balance the Group projects will be reimbursed to the lessee over the lease term has been collected.  The policy would be applied on a component-by-component basis for aircraft where the Group collects cash maintenance reserves. 

 

The Group believes that the new accounting policy which provides for a timely release of maintenance reserves to profit or loss over the lease term will ensure that financial statements reflect the Group's financial performance more accurately. This change in accounting policy has been applied retrospectively.

 

Summary of quantitative impact

 

The following tables summarise the material impacts on the condensed consolidated statement of profit or loss, condensed consolidated statement of comprehensive income and condensed consolidated statement of financial position resulting from the change in accounting policy.

 

Condensed consolidated statement of profit or loss

 

For six months ended 31 December 2022

Impact of changes in accounting policy

 

As previously reported

Adjustments

 

As restated


US$'000s

US$'000s

US$'000s





Total income

55,311

388

55,699

Taxation

1,643

(41)

1,602

Profit from continuing operations

8,332

347

8,679

 




Profit attributable to:




Shareholders of Avation PLC

8,333

347

8,680

Non-controlling interest

(1)

-

(1)


8,332

347

8,679





Earnings per share for profit

attributable to shareholders of Avation PLC




Basic earnings per share (US cents)

12.00 cents


12.50 cents

Diluted earnings per share (US cents)

12.00 cents


12.50 cents


 


 

 



AVATION PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2023

 

3          CHANGE IN ACCOUNTING POLICY (continued)

 

Condensed consolidated statement of comprehensive income

 

For six months ended 31 December 2022

Impact of changes in accounting policy

 

As previously reported

Adjustments

 

As restated


US$'000s

US$'000s

US$'000s





Total comprehensive income for the period

9,759

347

10,106





Total comprehensive income attributable to:




Shareholders of Avation PLC

9,760

347

10,107

Non-controlling interest

(1)

-

(1)


9,759

347

10,106





 

Condensed interim statement of financial position

 

As at 1 July 2022

Impact of changes in accounting policy

 

As previously reported

Adjustments

 

As restated


US$'000s

US$'000s

US$'000s





Maintenance reserves - non-current

75,131

(1,377)

73,754

Deferred tax liabilities

25,437

176

25,613

Liabilities associated with assets held for sale

15,146

(347)

14,799

Retained earnings

84,519

1,548

86,067

 

As at 30 June 2023

Impact of changes in accounting policy

 

As previously reported

Adjustments

 

As restated


US$'000s

US$'000s

US$'000s





Maintenance reserves - non-current

54,587

(2,554)

52,033

Deferred tax liabilities

26,440

254

26,694

Retained earnings

88,995

2,300

91,295

 

 

 



4           NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2024

 

(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)

Amendments to IFRS 16 - Lease liability in a Sale and Leaseback

1 January 2024

Amendments to IAS 7 and IFRS 7 - Disclosures : Supplier Finance Arrangements

1 January  2024

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

1 January 2024

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

Postponed indefinitely

 

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 2024

 

The Group has adopted all new standards that have come into effect during the six months ended 31 December 2023. The adoptions do not have a material impact on the Group's interim condensed consolidated financial statements.

 

 

 



5          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 settlement of maintenance reserves cannot be determined with certainty in advance and hence the fair value of maintenance reserve cannot be accurately measured.

 

 

31 Dec 2023

30 Jun 2023

 

Carrying amount

Fair value

Carrying amount

Fair value


US$'000s

US$'000s

US$'000s

US$'000s

 

 

 



Financial assets:





Finance lease receivables - non-current

13,530

12,241

41,213

38,555

Derivative financial assets

8,944

8,944

13,496

13,496

Investment in equity, fair value through profit or loss

10,735

10,735

11,235

11,235

 

 

 

 

 

Financial liabilities:

 

 

 

 

Deposits collected - non-current

14,983

12,001

15,907

13,502

Loans and borrowings other than unsecured notes - non-current

377,531

338,847

 

391,110

360,055

Unsecured notes

305,305

292,030

303,465

300,539

Share warrants

933

933

1,632

1,632






 





The fair values (other than for unsecured notes, investment in debt instrument, fair value through profit or loss) 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, which is classified under level 2 of the fair value hierarchy.

 

The fair value of the unsecured notes and share warrants are based on level 1 quoted prices (unadjusted) in an 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 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.

 



 

5          FAIR VALUE MEASUREMENT (continued)

 

Assets measured at fair value classified under level 3:




 

 




31 Dec

2023

30 Jun

2023




US$'000s

US$'000s

 

 

 



Fair value measurement using significant unobservable inputs:

 

 



Aircraft



819,314

845,455

Aircraft purchase rights



88,010

85,820

Investment in equity, fair value through profit or loss



10,735

11,235

 

 

 

 

 






Aircraft were valued at 30 June 2023. Refer to Note 12 for the details on the valuation technique and significant inputs used in the valuation.

 

6          REVENUE

 


 


31 Dec

2023

 

31 Dec

2022

(Restated)


US$'000s

US$'000s

 



Lease rental revenue

43,887

42,608

Less: amortisation of lease incentive asset

(1,169)

(612)


42,718

41,996

Interest income on finance leases

1,036

1,171

Maintenance reserves revenue

979

5,450





44,733

48,617


 

 

Geographical analysis

        

 

 

 

Europe

Asia Pacific

Total

 

 



US$'000s

US$'000s

 

 






 

 

31 Dec 2023


10,621

34,112

44,733

 

 

31 Dec 2022 (Restated)


13,588

35,029

48,617

 






 



 

6          REVENUE (continued)

 

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

2023

31 Dec

2022


US$'000s

US$'000s

 



Within one year

92,367

91,067

One to two years

87,210

89,924

Two to three years

72,240

85,575

Three to four years

64,442

69,896

Four to five years

37,535

62,236

Later than five years

49,527

85,277




 

7          OTHER INCOME

 


 


31 Dec

2023

31 Dec

2022


US$'000s

US$'000s

 



Fees for late payment

608

390

Deposit released

350

-

Foreign currency exchange gain

-

3,481

Recovery of claims from customer

385

3,166

Others

201

45





1,544

7,082




 

8          OTHER EXPENSES

 


 


31 Dec

2023

31 Dec

2022


US$'000s

US$'000s

 



Deferment fees

-

390

Foreign currency exchange loss

225

-


 



225

390




 

 



 

9          FINANCE INCOME

 


 


31 Dec

2023

31 Dec

2022


US$'000s

US$'000s

 



Interest income from financial institutions

2,365

204

Interest income from non-financial institutions

449

649

Fair value gain on financial derivatives

645

44

Finance income from discounting non-current deposits to fair value

332

304

Gain on repurchases of unsecured notes

311

486

Gain on early full repayment of borrowings

161

1,657





4,263

3,344


 

 

 

10        FINANCE EXPENSES

 


 


31 Dec

2023

31 Dec

2022


US$'000s

US$'000s

 



Interest expense on borrowings

10,125

10,742

Interest expense on unsecured notes

15,555

15,504

Amortisation of loan transaction costs

543

669

Amortisation of gain on loan modification

4,730

4,342

Amortisation of interest expense on non-current deposits

326

283

Others

114

125


 

 


31,393

31,665


 

 

 

11        RELATED PARTY TRANSACTIONS

 

Significant related party transactions:


 


31 Dec

2023

31 Dec

2022


US$'000s

US$'000s

 



Entities controlled by key management personnel

(including directors):






Lease liability paid

(164)

(159)

Consulting fee expense

(205)

(123)

Maintenance service

(7)

(47)

Interest expense

-

(40)

Service fee income

37

43




Directors:






Interest expense

-

(8)

 



 

12       PROPERTY, PLANT AND EQUIPMENT

 

 

Furniture and equipment

Jet

aircraft

Turboprop aircraft

Total


US$'000s

US$'000s

US$'000s

US$'000s

 

 

 








31 December 2023:





Cost or valuation:





At 1 July 2023

97

851,435

310,169

1,161,701

Disposals

-

-

(17,692)

(17,692)






At 31 December 2023

97

851,435

292,477

1,144,009






Representing:





At cost

97

-

-

97

At valuation

-

851,435

292,477

1,143,912






 

97

851,435

292,477

1,144,009






Accumulated depreciation and impairment:





At 1 July 2022

81

230,783

85,366

316,230

Depreciation expense

5

13,890

4,765

18,660

Disposals

-

-

(10,206)

(10,206)

 

 

 

 

 

At 31 December 2023

86

244,673

79,925

324,684

 

 

 

 

 

Net book value:

 

 

 

 

At 1 July 2023

16

620,652

224,803

845,471

At 31 December 2023

11

606,762

212,552

819,325

 

 

 

 

 

 



 

12        PROPERTY, PLANT AND EQUIPMENT (continued)

 

 

Furniture and equipment

Jet

aircraft

Turboprop aircraft

Total


US$'000s

US$'000s

US$'000s

US$'000s

 

 

 








30 June 2023:





Cost or valuation:





At 1 July 2022

91

771,859

305,923

1,077,873

Additions

6

-

-

6

Reclassified from held under finance lease

-

-

16,166

16,166

Reclassified from asset held for sale

-

106,124

-

106,124

Reclassified as asset held for sale

-

(28,034)

(9,354)

(37,388)

Revaluation recognised in equity

-

1,486

(2,566)

(1,080)






At 30 June 2023

97

851,435

310,169

1,161,701






Representing:





At cost

97

-

-

97

At valuation

-

851,435

310,169

1,161,604






 

97

851,435

310,169

1,161,701






Accumulated depreciation and impairment:





At 1 July 2022

68

182,815

81,082

263,965

Depreciation expense

13

28,615

9,938

38,566

Reclassified from asset held for sale

-

28,124

-

28,124

Reclassified as asset held for sale

-

(9,784)

(1,354)

(11,138)

(Reversal of)/impairment loss

-

1,013

(4,300)

(3,287)

 

 

 

 

 

At 30 June 2023

81

230,783

85,366

316,230

 

 

 

 

 

Net book value:

 

 

 

 

At 1 July 2022

23

589,044

224,841

813,908

At 30 June 2023

16

620,652

224,803

845,471

 

 

 

 

 

 

Assets pledged as security

 

The Group's aircraft and aircraft held under asset for sale with carrying values of US$819.3 million (30 June 2023: US$838.5 million) are mortgaged to secure the Group's borrowings (Note 22).

 

Additions and disposals

 

During the six months ended 31 December 2023, one turboprop aircraft was sold.



 

12       PROPERTY, PLANT AND EQUIPMENT (continued)

 

Valuation

 

The Group's aircraft were valued in June 2023 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 7.00% (30 June 2022: 5.5% to 7.0%) per annum for jet aircraft and 5.50% to 9.00% (30 June 2022: 5.5% to 8.0%) per annum for turboprop aircraft.  Different discount rates are considered appropriate for different aircraft based on their respective risk profiles.

 

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

 


31 Dec 2023

30 Jun 2023

 

Jets

Turbo

props

Jets

Turbo

props


US$'000s

US$'000s

US$'000s

US$'000s

 

 

 



Cost

801,559

276,103

801,559

293,795

Accumulated depreciation and impairment

(229,295)

(77,734)

(216,316)

(83,657)

Net book value

572,264

198,369

585,243

210,138

 

Geographical analysis

 

31 Dec 2023

 

Europe

Asia Pacific

Total



US$'000s

US$'000s

US$'000s






Capital expenditure


-

-

-

Net book value - aircraft


219,536

599,778

819,314






30 Jun 2023

 

Europe

Asia Pacific

Total



US$'000s

US$'000s

US$'000s






Capital expenditure


-

6

6

Net book value - aircraft


241,508

603,947

845,455








13        TRADE AND OTHER RECEIVABLES

 


 


31 Dec

2023

30 Jun

2023


US$'000s

US$'000s

 



Current



Trade receivables

9,053

26,545

Less:



Allowance for expected credit losses

(173)

(10,542)


8,880

16,003

Accrued revenue

2,754

3,375

Less:



Allowance for expected credit losses

(7)

(8)


2,747

3,367

Other receivables

10,420

12,012

Less:



Allowance for expected credit losses

(499)

(1,358)


9,921

10,654

Interest receivables

561

752

Less:



Allowance for expected credit losses

(28)

(44)


533

708

Deposits

49

48

Prepaid expenses

364

255




 

22,494

31,035

 

Non-current:



Other receivables

281

5,487

Deposits for aircraft

8,139

8,139

Right-of-use assets

510

632




 

8,930

14,258

 



 

14        FINANCE LEASE RECEIVABLES

 

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

 

 

31 Dec 2023

30 Jun 2023

 

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

31,915

30,125

5,675

3,952

Less:





Allowance for expected credit losses

(20)

(20)

(20)

(20)


31,895

30,105

5,655

3,932

One to two years

2,430

1,571

30,041

28,491

Two to three years

9,032

8,413

2,430

1,627

Three to four years

3,588

3,546

11,358

11,095

Four to five years

-

-

-

-

Later than five years

-

-

-

-

Total minimum lease payments

46,945

43,635

49,484

45,145

Less: amounts representing interest income

(3,310)

-

(4,339)

-

Present value of minimum lease payments

43,635

43,635

45,145

45,145

 

 

15       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 2023.

 

16       DERIVATIVE FINANCIAL ASSETS/LIABILITIES

 


Contract/

notional amount

Fair value

 

31 Dec 2023

30 Jun

2023

31 Dec

2023

30 Jun

2023


US$'000s

US$'000s

US$'000s

US$'000s

 

 

 



Derivative financial assets -current





Interest rate swap - current

-

3,531

-

54

 





Derivative financial assets -non- current





Interest rate swap

198,903

220,110

8,445

12,847

Cross-currency interest rate swap

4,000

4,000

499

595

 

202,903

224,110

8,944

13,442

 

 

 

 

 

Derivative financial liabilities





Share warrants

-

-

933

1,632






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.



 

16       DERIVATIVE FINANCIAL ASSETS/LIABILITIES (continued)

 

The Group determines the economic relationship between the finance lease income, loans and borrowings and the derivative by matching the critical terms of the hedging instrument with the terms of the hedged item. The hedge ratio (the ratio between notional amount of the derivative financial instrument to the amount of the finance lease income and loans and borrowings being hedged) is determined to be 1:1. There were no expected sources of ineffectiveness on the Group's hedges as the critical terms of the derivative match exactly with the terms of the hedged item.

 

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 SOFR or 3-month EURIBOR 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 SOFR under the cross-currency interest rate swap contracts.

 

The swap contracts mature between 24 January 2026 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 loss net of tax of US$4.2 million (31 December 2022: gain of US$6.5 million) on these derivative financial instruments was recognised in the fair value reserve for the year.

 

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 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 entered into Euro denominated lease agreements which create exposure to variability in cash flows due movements in the EUR:USD exchange rate.  To hedge its exposure to variable cash flows resulting from changes in EUR:USD spot rates, the Group has arranged Euro denominated financing which reduces overall exposure to variable cash flows to the extent that lease receipts and debt service cashflows are matched. The Group is making use of a non-derivative hedging instrument and has designated the cash flows with respect to the loan interest and principal repayment (hedging instrument) against a specific portion of the lease receivable (hedged item).

 

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.

 

The Group determine the hedging relationship between the hedging instruments and the hedged item on a number of criteria including the reference interest rates, tenors, repricing dates and maturities and to notional or par amounts.  The Group assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged item using the hypothetical derivative method.  In these hedge relationships, the main sources of ineffectiveness are:

 

·      Differences in the pricing dates between the swaps and the borrowings

·      Differences in the timing of the cash flows of the hedged items and the hedging requirements

·      The counterparties' credit risk differently impacting the fair value movements of the hedging instruments and the hedged items

·      Changes to the forecasted amount of cash flows of hedged items and hedging instruments

 

17       AIRCRAFT PURCHASE RIGHTS

 


 


31 Dec

2023

30 Jun

2023


US$'000s

US$'000s

 



Aircraft purchase rights, at fair value:



At 1 July 2023/ 1 July 2022

85,820

65,280

Unrealised gain

2,190

20,540

At 31 December/30 June

88,010

85,820




The Group holds 28 purchase rights to acquire additional ATR 72-600 aircraft from the manufacturer.  The purchase rights are available for aircraft to be delivered on or before the end of June 2027.

 

The Group has determined that it would seek to dispose of excess aircraft purchase rights over and above its requirement to acquire additional aircraft for its fleet.  The Group accounts for aircraft purchase rights at fair value through profit or loss.

 

18       INVESTMENT IN EQUITY, FAIR VALUE THROUGH PROFIT OR LOSS

 


 


31 Dec

2023

30 Jun

2023


US$'000s

US$'000s

 



Non-listed equity, at fair value



At 1 July 2023/ 1 July 2022

11,235

3,715

Unrealised (loss)/gain

(500)

7,520

At 31 December/30 June

10,735

11,235




            The Group received 8,014,602 ordinary shares from an airline customer as part of the airline's restructuring plan. The Group entered into an agreement to exchange 8,014,602 ordinary shares in Philippine Airlines, Inc. with 124,787,353 ordinary shares in PAL Holdings, Inc. The exchange of shares is expected to be completed in the first quarter of 2024.



 

19       CASH AND BANK BALANCES

 


 


31 Dec

2023

30 Jun

2023


US$'000s

US$'000s

 



Fixed deposits

71,980

62,306

Other cash and bank balances

78,092

54,599

Total cash and bank balances

150,072

116,905

Less: restricted

(106,616)

(90,864)

Less: investment in fixed terms deposit

-

(1,225)

Cash and cash equivalents

43,456

24,816


 

 

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.

 

20       ASSETS HELD FOR SALE AND LIABILITIES DIRECTLY ASSOCIATED WITH 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

2023

30 Jun 2023




US$'000s

US$'000s

 

 

 



Assets held for sale:





Property, plant and equipment - aircraft





At 1 July 2023/ 1 July 2022



8,000

100,500

Additions



-

26,250

Disposals



-

(40,750)

Transfer to property, plant and equipment



-

(78,000)

At 31 December/30 June

 

 

8,000

8,000






 

 

 



 

21        SHARE CAPITAL AND TREASURY SHARES

 

(a)     Share capital

 


31 Dec 2023

30 Jun 2023


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 2023/ 1 July 2022

70,883,124

1,182

71,698,124

1,203

Issue of shares

-

-

1,495,000

18

Cancellation

-

-

(2,310,000)

(39)






At 31 December/30 June

70,883,124

1,182

70,883,124

1,182






 

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 2023

30 Jun 2023


No of shares

US$'000s

No of shares

US$'000s






At 1 July 2023/ 1 July 2022

-

-

2,210,000

7,811

Acquired during the period

-

-

100,000

94

Cancellation

-

-

(2,310,000)

(7,095)

 

 

 

 

 

At 31 December/30 June

-

-

-

-






 

(c)     Net asset value per share

 


 

 




31 Dec 2023

30 Jun

2023

(Restated)






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



$3.25

$3.44

Net asset value per share (GBP)(2)



£2.56

£2.71

 

 

 

 

 

(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 December 2023 of 1.27 (30 June 2023: 1.27).

 



 

22        LOANS AND BORROWINGS

 




31 Dec

2023

30 Jun

2023




US$'000s

US$'000s

 

 

 



Secured borrowings



437,543

452,511

Unsecured notes



305,305

303,465






Total loans and borrowings

 

 

742,848

755,976






Less: current portion



(60,012)

(61,401)






Non-current loans and borrowings

 

 

682,836

694,575






 


Maturity

Weighted average interest rate per annum


31 Dec

2023

30 Jun 2023

31 Dec

2023

30 Jun 2023




%

%

 

 

 



Secured borrowings

2025-2031

2024-2031

4.70%

4.52%

Unsecured notes

2026

2026

8.25%

8.25%






 

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.

 



 

23       MAINTENANCE RESERVES

 


31 Dec

2023

30 Jun

2023

(Restated)


US$'000s

US$'000s

 



Current:



Maintenance reserves

54,191

61,456




Non-current:



Maintenance reserves

58,903

41,639

Maintenance lease contribution

17,396

10,394


76,299

52,033




Total maintenance reserves

130,490

113,489





 


31 Dec

2023

30 Jun

2023

(Restated)


US$'000s

US$'000s

 



At 1 July 2023/ 1 July 2022

113,489

83,910

Contributions

18,952

29,152

Utilisations

(390)

(7,544)

Released to profit or loss

(1,561)

(2,773)

Transfer from liabilities directly associated with asset held for sale

-

10,744




At 31 December/30 June

130,490

113,489




During the six months ended 31 December 2023, maintenance reserves of US$1.0 million were released to profit or loss as revenue and US$0.6 million was offset against loss on disposal of aircraft.

 

24       CAPITAL COMMITMENTS

 

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

 


31 Dec

2023

30 Jun

2023


US$'000s

US$'000s

 



Property, plant and equipment

31,446

32,761




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 2023, the Group has commitments to purchase two ATR 72-600 aircraft from the manufacturer with expected delivery dates in 2024. 

 

 

25       CONTINGENT LIABILITIES

 

            There were no material changes in contingent liabilities since 30 June 2023.

 


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, war and acts of terror 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 2023.

 

 

DIRECTORS

 

The directors of Avation PLC are named in its Annual Report for the year ended 30 June 2023.  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 UK-adopted IAS 34 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, 29 February 2024

 

 

 

 

 

 

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