First Day of Dealings

RNS Number : 9088V

Hangar 8 Plc

10 November 2010

 



 10 November 2010

HANGAR 8 PLC

PLACING, ADMISSION TO AIM AND FIRST DAY OF DEALINGS

TOTAL FUNDRAISING OF £2.0 MILLION

Hangar 8 plc ("Hangar 8" or "the Company"), one of Europe's largest operators of privately owned passenger jet aircraft¹, is pleased to announce its admission to the AIM market of the London Stock Exchange ("Admission") and the first day of dealings in its ordinary shares under ticker symbol HGR8.

The Company has raised £2.0 million through a placing of 1,333,334 new ordinary shares ("the Placing") representing 21.05% of the enlarged share capital of the Company at Admission. The market capitalisation of the Company at the Placing price of £1.50 per Ordinary Share is £9.5 million.

Daniel Stewart and Company plc is acting as Nominated Adviser and Broker to the Company.  A copy of the Admission Document is available on the Company's website www.hangar8.co.uk.

Dustin Dryden, Chief Executive of Hangar 8 said: "We have developed a simple, scalable business model with minimal risk - we are a service business with no large capital assets, base costs are typically covered by contracted management fees and revenues are tied to hours flown rather than number of passengers."

"The very fragmented charter market is growing with business aircraft traffic forecast to grow by 5% per annum from 2011.  Hangar 8 is perfectly positioned to take full advantage of its growing market and to act as a consolidator of smaller operations.  We are looking forward to meeting the challenges of our next phase of growth."

"Admission to AIM is an obvious next step for us as we pursue our plans to grow Hangar 8 into the largest charter operator in Europe, Middle East, Russia and Africa. I'd like to take this opportunity to welcome our new shareholders and look forward to updating them and the market on our progress at the time of announcement of our maiden half year results in December''.

¹  Source: Avinode

PLACING STATISTICS

Placing Price	150p
Gross proceeds raised by the Placing	£2.0 million
Estimated net proceeds of the Placing receivable by the Company	£0.81 million
Number of new Ordinary Shares being issued pursuant to the Placing	1,333,334
Number of Ordinary Shares in issue following the Placing and Admission	6,333,334
Placing Shares as a percentage of the Ordinary Shares in issue following the Placing and Admission	21.05%
Market capitalisation following the Placing at the Placing Price	£9.50 million

For further information please visit www.hangar8.co.uk or contact:

Hangar 8 plc	Tel: [phone]
Dustin Dryden / Keiron Blay
Daniel Stewart and Company plc	Tel: [phone]
Paul Shackleton / Emma Earl
Tavistock Communications Limited	Tel: [phone]
Simon Hudson

Information on the Group:

INTRODUCTION

The Hangar 8 group (the "Group") derives income from both aircraft owners for whom it manages their aircraft ("Owners"), and third party charter customers. The Group currently manages a fleet of 19 aircraft on behalf of Owners and typically provides bespoke services to both Owners and third party charter customers.

The primary source of income for the Group is from the charter of the aircraft it manages to third parties. This increased significantly in the year ended 30 April 2010 compared to the previous year aided by an increase in the fleet size operated by the Group coupled with a rise in the average number of charter hours per aircraft.

The Group's strategy is to concentrate on certain aircraft types to obtain economies of scale, and to increase the size of the fleet it manages both organically and through the potential acquisition of other private jet charter operators with the intention of being able to provide an aircraft to a charter customer at any airport in any EMEA location within three hours of an order being confirmed. By increasing the size of the fleet managed by the Group and locating the aircraft at strategic airports, the Directors intend to reduce the time needed to provide an aircraft to charter customers and Owners around the world and leverage efficiency benefits through spreading certain costs, such as crew, over a larger number of operating bases.

The Group holds a worldwide Air Operator's Certificate permitting the Group to provide charter flights across the globe (with certain exceptions such as Northern Canada, Northern Russia and Australia) and at any one time, the fleet of aircraft managed by the Group is typically spread across airports in the UK, Europe, the former Soviet Union countries, and the Middle East. In addition, the Group has a US visa waiver agreement with the US Department of Justice which enables the Group's customers to fly to the US at short notice without having to obtain a visa. The Directors believe that this provides an advantage to the Group over other private jet operators who have not been issued a similar waiver agreement.

THE GROUP'S BUSINESS

The Group provides the following key services to Owners depending on the terms of the individual agreement: the organisation of the use of the aircraft by its Owner; the provision of qualified flight crew (through agreements with crewing companies); management of aircraft cleaning and preparation (through agreements with subcontractors); and hangarage of the Owner's aircraft. Currently aircraft maintenance work is outsourced. However the Group manages the maintenance of the aircraft on behalf of Owners, for example, it maintains the maintenance records.

Typically, all the direct costs arising from owning and flying an aircraft are either charged to the Owner or charter customer. In addition, as the Group does not own any aircraft it does not carry the risk of high capital investment or depreciation associated with aircraft ownership. This gives the Group the flexibility to adjust the size of its fleet for relatively small cost as demand requires.

Owners benefit from the sums they are paid as a result of Hangar 8 AOC Ltd chartering their aircraft to third parties (when provided for in the relevant agreement with the Owner), tax efficiencies arising from the aircraft being on an AOC (Air Operator Certificate) such as the AOC held by the Group, and economies of scale arising from the Group's buying power such as reduced insurance premiums, maintenance or fuel costs. As such, the Directors believe that the Group's business provides an attractive solution to Owners who are seeking to reduce their aircraft ownership costs, particularly in light of the global recession.

AIRCRAFT FLEET

The fleet of jets managed and operated by the Group increased from 10 aircraft at 30 April 2008 to 19 as at the date of Admission (of which currently 15 can be chartered to third parties).

The Group is one of the largest operators of private jet aircraft in Europe, based on the size of its fleet available for charter, as listed on Avinode. Avinode shows that the European charter market is fragmented in that the average operator has a charter fleet listed of just 3 aircraft. Of the aircraft showing on Avinode as available for charter, the Group has around a 10 per cent. share of the UK corporate jet charter market in terms of fleet size, and around a 1.5 per cent. share of the Europe and Middle East market in terms of fleet size.

The fleet currently comprises:

·     Three heavy weight aircraft (Falcon 2000EX, Challenger 601 and Hawker 4000).

·     Ten medium weight aircraft (Hawker HS125s and Cessna Citation XLSs).

·     Six light weight aircraft (Citation Jets and a Beech B200 Super Kingair Aircraft).

The Group manages the largest charter fleet of mid-size Hawker aircraft in the world.

The Directors believe that greater variety, size and distribution of the fleet gives the Group an operational advantage over a number of its competitors in providing its services to charter customers. The aircraft managed by the Group can be configured to carry between 5 and 10 passengers. The medium weight aircraft typically have a range of between 1,850 and 2,950 miles while the Hawker 4000 can reach the east coast of the US from the UK without refuelling.

STRATEGY

The Directors believe that the increase in the size of the Group's fleet in the past year has led to several benefits. These include reducing the time needed to reach charter customers and Owners around the world, being able to fill empty return leg journeys more readily and pricing benefits through the ability to spread certain costs, such as crew, over a larger number of operating bases.

The Directors believe that the Group's current variety of aircraft provides the flexibility to service a range of different charter clients around the world and provides a scalable operating platform from which to achieve future growth. To achieve further flexibility, the Group intends to increase the number of heavy and medium weight aircraft, as well as standardising its small and medium sized aircraft fleet. The Directors believe that standardising the fleet in this way will help to minimise costs through economies of scale.

To date the Group has outsourced the maintenance of the aircraft it manages. However it is the Directors intention to bring this specialist maintenance and engineering work in-house (subject to obtaining the necessary approval from the CAA) which the Directors believe will lead to cost savings.

Historically, the Group has won the majority of its Owners by referral rather than through advertising. Going forward, the Directors intend to implement a planned public relations and marketing programme in order to accelerate the Group's growth. The Directors believe that there is significant scope to grow both the number of aircraft Owners and charter customers following Admission as a result of the Company's profile being raised and through making select acquisitions should suitable acquisition opportunities arise at prices which the Directors believe are attractive and will be in the best interests of the Company's Shareholders.

INDUSTRY BACKGROUND

Demand for charter flights on Avinode shows significant growth in 2010 when compared to 2009. For example, in August 2010 the total number of flight searches on Avinode was around 25 per cent. up year on August 2009 at 86,680. Likewise, flight requests sent by brokers to operators in August 2010 nearly doubled to 90,710 compared to August 2009. Currently, jets managed by the Group feature in the results list in 35 per cent. of all searches on Avinode.

In addition, European air traffic control figures show a 6.35 per cent. growth in private aviation for July 2010 compared to July 2009. The most recent business aviation report published by Eurocontrol (the European Organisation for the Safety of Air Navigation) in April 2010 estimates that the number of business aviation flights will grow by 5 per cent. per year from 2011.

Avinode shows that the most popular airports in terms of the number of private jet charter flights to or from them are located in Moscow, London, Paris, Nice, Geneva, Dubai and Riyadh. Other popular destinations include holiday resorts in Spain and Italy and other cities in the Russian Federation or Ukraine.

The Directors believe that despite the difficult economic climate, the ad hoc charter market is gaining at the expense of fractional ownership, and that the key costs of aircraft ownership (aircraft depreciation and management costs) are typically avoided when purchasing ad hoc or block-booked flights from operators such as the Group who manage, but do not own, their fleets.

CURRENT TRADING AND PROSPECTS

In preparation for Admission, the Group has put in place an experienced Board of Directors and has adopted rigorous financial reporting controls and procedures. The new Board intends to focus on profitable growth, capitalising upon the benefits of scale from running one of the largest fleets in its sector in terms of fleet size as listed on Avinode. Current trading for the year to date is already ahead of management expectations and materially ahead of previous years. The Directors believe that the future prospects of the Group are strong and that additions to the Group's fleet will deliver further growth and revenue. To this end, the Directors are in conversation with the owners of a number of aircraft that would add to the current fleet.

REASONS FOR THE PLACING AND USE OF FUNDS

The net proceeds of the Placing receivable by the Company will be approximately £0.81 million. The Directors intend to use the net proceeds arising from the Placing to attract new corporate jet owners and high net worth charter customers through increased marketing. The Directors believe that increasing the size of the fleet operated by the Group will lead to increased operating efficiencies. In particular, the Directors hope to attract the owners of larger aircraft. Furthermore, it is expected that the Placing proceeds will be used to bring the specialist maintenance of aircraft in-house through its subsidiary Hangar 8 Engineering Ltd, which the Directors anticipate will provide a cost benefit to the Group resulting in a further improvement in profit margins.

The Directors also anticipate that admission to AIM will raise the Company's profile and stature, particularly as very few of the Company's competitors are currently listed on a public market and will facilitate the acquisition of other private jet charter operators should suitable acquisition opportunities arise.

BOARD OF DIRECTORS

Nigel Payne, aged 50, Non-Executive Chairman

Nigel Payne has 26 years experience at board level, covering a wide range of industries. Nigel was Chief Executive of Sportingbet UK plc between 2000 and 2006 and since 2006 he has been a non-executive director. Between 1995 and 2000 Nigel was group finance, business development and IT director of Polestar Magazines, the largest independent printer in Europe (operating in 19 countries). Between 1993 and 1995 Nigel was finance and IT director of Home Brewery plc, a subsidiary of Scottish & Newcastle plc.

Dustin Dryden, aged 34, Chief Executive Officer

Dustin Dryden is a qualified pilot and has been flying for 18 years both on fixed wing and rotary aircraft. He co-founded the Hangar 8 business in 2002. He has over 15 years experience in aviation sales and jet management having represented several of the major aircraft manufacturers in their global marketplace. He has specialist technical and contractual knowledge within the business jet environment.

Keiron Blay, aged 45, Chief Financial Officer

Keiron Blay trained with Shaw & Co. accountancy practice before moving to the Williams Formula One racing team as Financial Controller between 1994 and 2004. He then took up a role as finance controller of Houston Jet Services Limited between 2004 and 2006 and general manager and director of Direct Air Executive Limited between 2006 and 2009.

David Cowham, aged 70, Non-Executive Director

David is a non-executive director of Betex Group plc. David has over 34 years of experience in the finance industry. He served as CEO of First National Bank plc from 1988 to 1994 and more recently was a director and Chairman of Loans.co.uk plc from 1995 to 2001.

George Rolls, aged 50, Non-Executive Director

Over the last 25 years, George Rolls has been a director, manager and adviser to many private companies in a variety of sectors.  George founded Beaufort Securities, of which he was a director between 1992 and 2006. Since selling Beaufort Securities in 2008, George has acted as a consultant for private high net worth individuals and more recently has been involved with the launch of a software technology fund. George is a trustee of the Geoffrey de Havilland Flying Foundation and the Honorary Secretary of The Air Squadron.

John Blower, aged 69, Non-Executive Director

John Blower has founded and provided start-up capital and management to many private and listed companies including Warmplan, which was sold to Seaflame plc, Chamberlain Properties which was sold to Taylor Woodrow, Wakeworth Finance Ltd (Mortgage Support Services) of which John is Chairman, and Waste Management Inc, a NASDAQ multi-billion dollar company which specialises in the disposal of waste products.  John provided start-up capital for Sportingbet plc where he was a director until 2004. John has been a non-executive director of Betex Group plc since 2005.

It is the Company's intention that following Admission, to strengthen the Board further to assist in facilitating and managing the Company's anticipated growth, a new Chief Financial Officer will be appointed to the Board and Keiron Blay will revert to the role of Chief Operating Officer.

 

END

 

 

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