Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Avation PLC (LSE:AVAP, Financial) reported a strong net profit for the year, despite higher IFRS 9 non-cash amortization.
- The company has a diversified fleet of 34 aircraft, including widebody, narrowbody, and turboprop, with a weighted average aircraft age of 7.3 years.
- Net debt was reduced by nearly $80 million, showing effective deployment of surplus cash flows.
- The fleet is 100% utilized, with successful placements of older aircraft and new leases.
- Avation PLC (LSE:AVAP) has a 10-year growth program with 12 ATR 72s on order, aiming to double the company's size over the period.
Negative Points
- Total income decreased by about $4 million due to lower foreign currency exchange gains and lower distributions from Virgin Australia's administration.
- The weighted average cost of debt increased slightly to 6.4%, impacting overall financial performance.
- The company faces potential delays in ATR aircraft deliveries, which could affect future operations.
- There is a significant tax charge this year due to adjustments in deferred tax provisions, which may not be repeated in future.
- The share price remains significantly below the net asset value, indicating potential market skepticism about the company's valuation.
Q & A Highlights
Highlights from Avation PLC (LSE:AVAP) Full-Year 2024 Earnings Call
Q: Is the company considering a management buyout?
A: No, at this stage. - Jeff Chatfield, Executive Chairman
Q: Are you seeing any significant changes to utilization compared to pre-pandemic levels? What effect has increased wear and tear had on residuals?
A: Residual values of aircraft have gone up due to a shortage of new aircraft and a huge backlog. - Jeff Chatfield, Executive Chairman
Q: Do you have any financial recourse if an aircraft is delivered late?
A: Yes, but there are basic limitations to the penalties we can claim. - Soeren Ferre, Chief Commercial Officer
Q: How did you overcome the typical JOLCO method for financing the JCAS Airways ATR?
A: The JOLCO structure is usually used for Japanese investors. This aircraft is financed through our normal method of equity and commercial bank financing. - Duncan Scott, Joint Company Secretary
Q: Are ATR 72-600 cargo conversions for your older aircraft worthwhile?
A: We've looked at opportunities but concluded not to pursue them due to the financial weakness of potential counterparties. - Soeren Ferre, Chief Commercial Officer
Q: How many aircraft are financed with an option to buy?
A: Only three older ATR 72-500s. We generally discourage giving away options. - Jeff Chatfield, Executive Chairman
Q: Is there sufficient full-time work to justify the appointment of a Director of Investor Relations?
A: We parted ways with the Director of Investor Relations as it turned out there may not have been enough work to justify the role. - Jeff Chatfield, Executive Chairman
Q: Given the importance of reducing debt, will the company not be repurchasing its shares in the future?
A: The company will balance buying shares, bonds, and paying down debt based on market conditions and appropriate ratios. - Jeff Chatfield, Executive Chairman
Q: How do you assess the right timing for aircraft sales?
A: Aircraft values are strong due to a shortage of new aircraft. Sales are opportunistic and based on age and market conditions. - Jeff Chatfield, Executive Chairman
Q: What is the company's floating rate debt percentage at June 30, before the impact of hedging?
A: We don't differentiate between fixed rate debt and hedged debt. I can provide the exact split upon request. - Iain Cawte, Chief Financial Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
