TIDMDNA
RNS Number : 3502U
Doric Nimrod Air One Limited
11 July 2018
QUARTERLY FACT SHEET
30 June 2018
DORIC NIMROD AIR ONE LIMITED
LSE: DNA
The Company
Doric Nimrod Air One Limited ("the Company") is a Guernsey
domiciled company, which is listed on the Specialist Fund Segment
(SFS) of the London Stock Exchange's Main Market. The Company has
purchased one Airbus A380-861 aircraft, manufacturer's serial
number (MSN) 016, which it has leased for an initial term of 12
years, with fixed lease rentals for the duration, to Emirates
Airline ("Emirates"), the national carrier owned by the Investment
Corporation of Dubai, based in Dubai, United Arab Emirates.
Investment Strategy
The Company's investment objective is to obtain income returns
and a capital return for its shareholders by acquiring, leasing and
then selling a single aircraft. The Company receives income from
the lease, and targets a gross distribution to the shareholders of
2.25 pence per share per quarter (9p per annum). It is anticipated
that income distributions will continue to be made quarterly.
The total return for a shareholder investing today (30 June
2018) at the current share price consists of future income
distributions during the remaining lease duration and a return of
capital at dissolution of the Company. The latter payment is
subject to the future value and the respective sales proceeds of
the aircraft, quoted in US dollars and the USD/GBP exchange rate at
that point in time. Since launch, three independent appraisers have
provided the Company with their future values for the aircraft at
the end of each financial year. The latest appraisals available are
dated the end of March 2018. The table No I below summarises the
total return components, calculated on different exchange rates and
using the appraised value of the aircraft, which is the average of
valuations provided by three independent external appraisers and
quoted in US dollars. This residual value at lease expiry takes
inflation into account and is the most reliable estimate available
in the Company's Asset Manager's opinion. Due to accounting
standards, the value used in the Company's financial reports
differs from this disclosure as it excludes the effects of
inflation and is converted to sterling at the prevailing exchange
rate on the reporting date (e.g. 31 March 2018).
The contracted lease rentals are calculated and paid in US
dollars to satisfy debt interest and principal, and in sterling to
satisfy dividend distributions and Company running costs, which are
in sterling. The Company is, therefore, insulated from foreign
currency market volatility during the term of the lease.
With reference to the following two tables, there is no
guarantee that the aircraft will be sold at such a sale price or
that such capital returns would be generated. It is also assumed
that the lessee will honour all its contractual obligations during
the entire anticipated lease term:
I. Implied Future Total Return Components Based on
Appraisals
The implied return figures are not a forecast and assume the Company
has not incurred any unexpected costs.
Aircraft value at lease expiry according to
* Prospectus appraisal USD 110 million
* Latest appraisal(1) USD 101 million
==============================================================================================
Per Share Income Distributions Return of Capital Total Return(2)
(rounded)
--------------------- --------------------------- ---------------------------
Prospectus Latest Prospectus Latest
Appraisal Appraisal(3) Appraisal Appraisal(3)
--------------------- ----------- -------------- ----------- --------------
Prospectus
FX Rate(4) 43p 161p 148p 204p 191p
--------------------- ----------- -------------- ----------- --------------
Current FX
Rate(5) 43p 193p 178p 236p 221p
--------------------- ----------- -------------- ----------- --------------
(1) Date of valuation: 31 March 2018
(2) Includes future dividends
(3) Average of the three appraisals as at the Company's fiscal year-end
in which the lease reached the end of its 12-year term
(4) 1.5900 USD/GBP
(5) 1.3207 USD/GBP (30 June 2018)
II. Company Facts (30 June 2018)
Listing LSE
Ticker DNA
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Current Share Price 100.5p (closing)
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Market Capitalisation GBP 42.7 million
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Initial Debt USD 122 million
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Outstanding Debt Balance USD 43 million (35% of Initial Debt)
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Current/Future Anticipated 2.25p per quarter (9p per annum)
Dividend
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Earned Dividends 65.25p
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Current Dividend Yield 8.96%
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Dividend Payment Dates April, July, October, January
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Cost Base Ratio(1) 1.5% (based on average share capital)
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Currency GBP
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Launch Date/Price 13 December 2010 / 100p
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Remaining Lease Duration 4 years 6 months
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Incorporation Guernsey
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Aircraft Registration A6-EDC (16.12.2022)
Number (Lease Expiry Date)
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Asset Manager Doric GmbH
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Corp & Shareholder Advisor Nimrod Capital LLP
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Administrator JTC Fund Solutions (Guernsey) Ltd
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Auditor Deloitte LLP
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Market Makers Canaccord Genuity Ltd,
finnCap Ltd,
Jefferies International Ltd,
Numis Securities Ltd,
Shore Capital Ltd,
Winterflood Securities Ltd
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SEDOL, ISIN B4MF389, GG00B4MF3899
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Year End 31 March
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Stocks & Shares ISA Eligible
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Website www.dnairone.com
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(1) Calculated as Operating Costs / Average Share Capital as per
the latest published Annual Financial Report.
Asset Manager's Comment
1. The Doric Nimrod Air One Airbus A380
The Airbus A380 is registered in the United Arab Emirates under
the registration mark A6-EDC. For the period from original delivery
of the aircraft to Emirates in November 2008 until the end of May
2017, a total of 5,078 flight cycles were logged. Total flight
hours were 42,244. This equates to an average flight duration of
eight hours and 20 minutes.
The A380 owned by the Company visited Bangkok, Milan, Paris,
Sydney, Tokyo, and Vienna during the second quarter of 2018.
Maintenance Status
Emirates maintains its A380 aircraft fleet based on a
maintenance programme according to which minor maintenance checks
are performed every 1,500 flight hours, and more significant
maintenance checks (C checks) at 36 month or 18,000 flight hour
intervals, whichever occurs first. The increased C check interval
allows for a higher aircraft availability due to lower
downtime.
Emirates bears all costs (including for maintenance, repairs and
insurance) relating to the aircraft during the lifetime of the
lease.
Inspections
Doric, the asset manager, undertook a records audit in March
2018. The lessee was again very helpful in the responses given to
the asset manager's technical staff, and the technical
documentation was found to be in good order.
2. Market Overview
According to the International Air Transport Association (IATA),
falling travel costs have contributed materially to growth in
passenger traffic, measured in global revenue passenger kilometres
(RPKs), over the past several years. IATA forecast RPK growth to
remain robust in 2018 as stronger economic growth partly offsets
the drag from the rise in oil prices. However, IATA still expects
to see RPK growth slowing slightly during this calendar year
relative to that of last year. Reduced stimulus from lower airfares
and a moderate slowdown in economic growth ahead of the summer
passenger peak were mentioned as contributing factors.
Nevertheless, RPKs were up 7.0% between January and April 2018
compared to the same period in 2017, continuing the above-trend RPK
growth.
During the first four months of this year industry-wide
capacity, measured in available seat kilometres (ASK), increased by
6.0%. This pushed worldwide passenger load factors (PLFs) higher by
0.8 percentage points to 81.3% compared to the same period last
year. During this period, passenger load factors of Middle East
based carriers increased similarly by 0.7 percentage points to
76.2%. For the year 2018, IATA estimates an average worldwide PLF
of 81.7%.
Seasonally adjusted RPK growth has strengthened in the Middle
East since the beginning of the year. Growth on key routes to/from
Asia and Europe as well the continued recovery on the market
segment to/from North America contributed to this development. RPKs
flown by Middle Eastern airlines have increased by 4.9% between
January and April 2018 against the same period last year. Given the
disruption caused by the since lifted travel bans to the US and the
temporary ban on personal electronic devices back in 2017, IATA
believes the annual comparison for traffic growth is likely to
become more favourable in the coming months.
Asia/Pacific-based operators continued to outperform the overall
market demand through the beginning of this year. Between January
and April, RPKs increased by 9.5% compared to previous period.
Latin America ranked second with 7.0% followed by Europe with 6.6%.
North America matched the Middle East at 4.9%. Africa saw an
increase of 2.9%.
Fuel remains the single largest operating cost item of airlines
and has a significant impact on the industry's profitability. Jet
fuel prices have risen with oil prices, and IATA forecasts an
average price of USD 70 per barrel for jet fuel for this year,
according to its latest report released in June. This would be
25.9% higher than the previous year. Fuel costs are expected to
represent 24.2% of average operating costs, a 2.8 percentage point
increase over 2017. IATA projects an industry-wide net profit of
USD 33.8 billion for 2018, the fourth highest level of
profitability on record.
(c) International Air Transport Association, 2018. Air Passenger
Market Analysis April 2018 Economic Performance of the Airline
Industry, 2018 Mid-Year Report. All Rights Reserved. Available on
the IATA Economics page.
3. Lessee - Emirates Key Financials
In the 2017/18 financial year ending on 31 March 2018, Emirates
recorded its 30(th) consecutive year of profit with a net result of
AED 2.8 billion (USD 762 million), an improvement of 124% compared
to the previous financial year, leading to a profit margin of 3.0%.
Despite continuing political challenges impacting traveller demand
and fare adjustments due to a highly competitive business
environment, Emirates increased its revenue to AED 92.3 billion
(USD 25.2 billion). This was aided by the decline of the US dollar
against currencies in most of Emirates' key markets, which had an
AED 661 million (USD 180 million) positive impact on the airline's
bottom line.
Emirates' overall passenger traffic continued to grow during the
2017/18 financial year. The airline carried a record 58.5 million
passengers (a 4% increase over last financial year) and achieved a
passenger load factor of 77.5% compared to last year's 75.1%. The
increase in the passenger load factor was the result of capacity
management in response to political uncertainty and strong
competition in many markets despite a moderate 2% increase in seat
capacity.
Total operating costs increased by 7% over the previous
financial year, largely due to the 15% increase in the average
price of jet fuel during the financial year. Including a 3% uplift
in line with capacity expansion, the airline's fuel bill increased
by 18% to AED 24.7 billion (USD 6.7 billion) compared to the
previous financial year. Fuel now accounts for 28% of operating
costs, compared to 25% in the 2016/17 financial year, and it
remains the largest cost category for the airline.
As of 31 March 2018, Emirates' balance sheet amounted to AED
127.6 billion (US$ 34.8 billion), an increase of 5% compared to the
previous financial year. Total equity increased by 5.6% to AED 37.0
billion (USD 10.1 billion) due to higher profit which was partially
offset by dividend payments to the owners amounting to AED 1.0
billion (USD 272 million). The equity ratio remained stable at
nearly 29%. The airline's cash balance amounted to AED 20.4 billion
(US$ 5.6 billion) at the end of the period, up by AED 4.7 billion
(USD 1.3 billion) compared to the previous financial year. Proceeds
from the Sukuk financing of AED 2.2 billion (USD 600 million)
issued in the last quarter of the financial year have been invested
in short term bank deposits and will be used to finance aircraft
deliveries in 2018/19.The current ratio stood at 0.84, meaning the
airline would be able to meet over 80% of its current liabilities
by liquidating all its current assets. Changes on the liabilities'
side of the balance sheet included the financing of seven new
aircraft and the Sukuk issue, which were offset by repayments of
finance lease liabilities, bonds and term loans.
Maintaining its strategy to operate a young and efficient fleet,
Emirates received 17 new aircraft, comprising of eight A380s and
nine Boeing 777-300ERs. During this time, eight older aircraft were
phased out, leading to a total fleet count of 268 at the end of
March. This fleet roll-over resulted in an average fleet age of 5.7
years. Due to the more moderate fleet renewal pace compared to the
previous year, the figure increased by around 6 months. Funding has
come from the Japanese structured finance market in conjunction
with debt from a wide-ranging group of institutions in China,
France, the United Kingdom, and Japan. Emirates raised over AED 3.7
billion (USD 1 billion) during the year from this source. Emirates
has also refinanced a commercial bridge facility (due to
non-availability of ECA cover) of AED 3.8 billion (USD 1.0 billion)
using a finance lease structure for five A380 aircraft, accessing
an institutional investor and bank market base from Korea, Germany,
the United Kingdom, and the Middle East. In total, Emirates raised
AED 17.9 billion (US$ 4.9 billion) using a variety of financing
structures, including the USD 600 million Sukuk in March.
In the 2017/18 financial year, Emirates launched two new
passenger services (Phnom Penh in Cambodia and Zagreb in Croatia)
and added capacity on 15 existing routes. Additionally, Emirates
entered into strategic partnerships with flydubai and Cargolux,
increasing its global connectivity and expanding the choice of air
services on offer to passenger and cargo customers respectively.
Emirates also received authorisation to extend its partnership with
Qantas until 2023. Its global route network spanned 155
destinations in 83 countries by fiscal year end.
In May 2018 FlightGlobal lists several Emirates aircraft -
including seven A380s and 13 Boeing 777 - as having been
temporarily stored. Already in April the airline acknowledged that
it had been reducing frequencies to cope with a shortfall in
cockpit crews, but expects to return to an adequate supply of crew
by September. Emirates further states that its operations are going
through its seasonal low period: "We do have some aircraft units on
the ground over slower periods, which is common industry
practice."
Source: ch-aviation, CNN, Emirates, FlightGlobal
4. Aircraft - A380
As of the end of June 2018, Emirates operated a fleet of 103
A380s, which currently serve 46 destinations within its global
network via its hub in Dubai. A380 destinations include: Amsterdam,
Auckland, Bangkok, Barcelona, Beijing, Birmingham, Brisbane,
Casablanca, Christchurch, Copenhagen, Dusseldorf, Frankfurt,
Guangzhou, Hong Kong, Johannesburg, Kuala Lumpur, Kuwait, London
Gatwick, London Heathrow, Los Angeles, Madrid, Manchester,
Mauritius, Melbourne, Milan, Moscow, Mumbai, Munich, New York JFK,
Nice, Paris, Perth, Prague, Rome, San Francisco, Sao Paulo, Seoul,
Shanghai, Singapore, Sydney, Taipei, Tokyo, Toronto, Vienna,
Washington, and Zurich. Emirates also plans to add two new
destinations to its A380 network in 2018: Hamburg and Osaka. Both
services are scheduled to begin in October.
As of the end of June 2018, the global A380 fleet consisted of
222 commercially operated planes in service. The thirteen operators
are Emirates (103), Singapore Airlines (18), Deutsche Lufthansa
(14), Qantas (12), British Airways (12), Korean Air Lines (10),
Etihad Airways (10), Air France (10), Qatar Airways (10), Malaysia
Airlines (6), Thai Airways (6), Asiana Airlines (6), and China
Southern Airlines (5). Another five were temporarily placed into
storage: three for lease return preparations and two were returned
to their lessor. The number of undelivered A380 orders stood at
104.
Following the redelivery of its second A380 to come off lease
from Singapore Airlines (SIA), German asset manager Dr Peters Group
announced plans to part out two of its four Airbus A380s, while
continuing to lease the engines to Rolls Royce. Dr Peters Group
anticipate that during the two year process the funds will generate
proceeds of around USD 80m per aircraft. However, Dr Peters Group
has not ruled out the secondary market for future A380s. It has an
additional two A380s on lease to Singapore and five with Air
France. It will consider its options for these aircraft as they
return from lease.
In April 2018 Emirates president Tim Clark told journalists that
Emirates could operate its A380s until the end of their service
life, despite the airline's previous record of phasing out aircraft
at an earlier stage.
In May 2018 Hi Fly, according to its own statement the largest
widebody aircraft wet lease specialist, announced it is to become
the 14(th) A380 operator. The ex-SIA second hand A380 is expected
to join Hi Fly's fleet in mid-2018.
Source: Emirates, FlightGlobal, Hi Fly
Contact Details
Company
Doric Nimrod Air One Limited
Dorey Court, Admiral Park
St Peter Port
Guernsey GY1 2HT
Tel: +44 1481 702400
www.dnairone.com
Corporate & Shareholder Advisor
Nimrod Capital LLP
3 St Helen's Place
London EC3A 6AB
Tel: +44 20 7382 4565
www.nimrodcapital.com
Disclaimer
This document is issued by Doric Nimrod Air One Limited (the
"Company") to and for the information of its existing shareholders
and does not in any jurisdiction constitute investment advice or an
invitation to invest in the shares of the Company. The Company has
used reasonable care to ensure that the information included in
this document is accurate at the date of its issue but does not
undertake to update or revise the information, including any
information provided by the Asset Manager, or guarantee the
accuracy of such information.
To the extent permitted by law neither the Company nor the Asset
Manager nor their directors or officers shall be liable for any
loss or damage that anyone may suffer in reliance on such
information. The information in this document may be changed by the
Company at any time. Past performance cannot be relied on as a
guide to future performance. The value of an investment may go down
as well as up and some or all of the total amount invested may be
lost.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
DOCZMGMNVMMGRZM
(END) Dow Jones Newswires
July 11, 2018 12:25 ET (16:25 GMT)
Doric Nimrod Air One (LSE:DNA)
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