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Avation stays in profit and focuses on liquidity as airlines struggle

Exposure to Virgin Australia, which went bust earlier this year, is US$74.7mln

Avation PLC -
A gain on purchase rights with ATR helped profits

Avation PLC (LON:AVAP), the civil aircraft lessor, said it stayed in profit in its latest financial year in spite of the problems facing airlines due to coronavirus restrictions.

Profits dropped 43% to US$14.6mln in the year to end June, 2020, which was largely the result of US$35.5mln of impairment losses offset partially by an unrealised gain of US$27.1mln for purchase rights with plane manufacturer ATR.

Revenue increased by 14% to US$135.3mln during the year, which was a new record said the company, and before the one-offs profits rose 28% to US$19.8mln.

Avation said it has deferred US$13.1mln of rental payments owed by customers, which it has mitigated by agreeing US$24.4mln of loan rent deferrals.

Exposure to Virgin Australia, which went bust earlier this year, is US$74.7mln, Avation said. Guidance from its administrator is that the return to unsecured creditors will be 9%-13% of the amount owed.

Elsewhere, Jeff Chatfield, Avation's executive chairman, said that it has seen a return to service at certain customers including VietJet, airBaltic, EVA Air and Mandarin Airlines, which combined represent about 60% of the group's future unearned contracted leasing revenue.

"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,” he added in the results statement.

At the end of June, Avation had 48 aircraft in its fleet with borrowings of US$1.04bn and a debt to assets ratio of 75.7%.

The company has already suspended dividend payments to help liquidity and has now also temporarily halted capital expenditure

“Avation is optimistic about the long-term opportunity for airline travel particularly the turboprop and narrow-body aircraft sectors," added Chatfield.

"The company will position itself for a return to growth through opportunistic purchases and delivery of its order book in a post-pandemic environment.” 

Quick facts: Avation PLC

Price: 117.25 GBX

LSE:AVAP
Market: LSE
Market Cap: £73.48 m
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