25th Mar 2009 07:00
Air Partner PLC
("the Group" or "the Company")
Results for the six months ended 31 January 2009
Air Partner is a leading provider of private aviation services to industry, commerce, governments and private individuals worldwide
Highlights:
|
* Sales |
Down 2% to £107.1m (H1 2008: £109.4m) |
|
* Profit before tax |
Down 17% to £3.2m (H1 2008: £3.8m) |
|
* Diluted EPS |
Down 2% to 24.5p (H1 2008: 25.1p) |
|
* Proposed interim dividend |
Up 10% to 8.1p (H1 2008: 7.4p) |
|
* Cash |
Up 54% to £22.1m (H1 2008: £14.3m) |
|
* Group remains debt free |
|
|
* Trading environment deteriorated throughout Q2 |
|
|
* Private aviation services market has reduced, but long term drivers remain in place |
|
|
* Diversification strategy provides resilience |
|
|
* Clients increasingly insistent on quality and financially sound providers of aviation services |
|
|
* Group well placed to participate in any market opportunities that may arise |
|
|
* Current trading remains difficult with reduced visibility and shorter lead times |
|
David Savile, Chief Executive of Air Partner commented: "The team at Air Partner has worked hard to produce these results in extremely tough trading conditions. Air Partner's experienced management, strong cash position, zero debt, good cash-generation and excellent dividend growth all position the Group for the difficult trading environment we are currently experiencing. The board remains confident in the long term drivers and prospects of the Group."
25th March 2009
Enquiries:
|
Air Partner plc |
T. 01293 844 805 |
|
David Savile (on March 25th 2009) |
T. 0207 002 1080 |
|
Temple Bar Advisory |
T. 0207 002 1080 |
|
Tom Allison |
T. 0778 999 8020 |
|
Nicola Flynn |
Notes to editors: please ensure "Air Partner" is written in its correct singular form, not in the plural.
Air Partner PLC
("the Group" or "the Company")
Results for the six months ended 31 January 2009
Chairman's Statement
As we are all aware, the business world has been transformed in the six months since we last reported. Despite the extremes of global change, the team has managed to deliver resilient results given the extremely difficult air travel market. Group sales have reduced but only by 2% to £107.1m (H1'08 £109.4m), and profit before tax is down 17% to £3.2m (H1'08 £3.8m). On the positive side the company continues to be highly cash-generative, with this period's cash increasing by 54% to £22.1m (H1'08 £14.3m), equating to £2.17 per share. The board is recommending continuing its historic trend of increasing the core dividend by 10% to 8.1 pence (7.4 pence) to be paid to shareholders on 15th May 2009, to shareholders on the register on 17th April 2009.
As reported in our AGM statement, trading described as 'good' during our first quarter, markedly deteriorated throughout November, and has remained at much reduced levels in subsequent months. Unlike more recent economic slowdowns, the effects of the current one have quickly become universal across all the company's client sectors, product ranges and geographic offices. The effect in this half year was felt from the outset in the USA, then in the UK from the end of Q1, and more recently in our European offices. Looking back, it appears that December was the low point for H1, with a slight improvement occurring after New Year. Across the period average hourly charter rates dropped by as much as 20-30%, compounded by margin erosion and a further shortening of visibility.
Despite these extreme conditions, there remain grounds for cautious optimism for the medium term, albeit within a reduced market. The board is encouraged that transactional evidence confirms that the relevance and viability of our products and services continues, even in the distressed finance and automotive sectors. Relative to our peers, the Company's diversification strategy has provided some protection against the intensity of the drop in demand, giving us the chance to maintain some flow of business across a wide spectrum of client sectors.
In the absence of a listed peer, anecdotal evidence suggests that others in our sector suffered earlier and deeper; we have seen airlines, private jet operators and smaller brokers fail in recent months; and those with flawed business models or over-leveraged positions are unlikely to make the earnings needed this summer to ensure survival. By contrast Air Partner remains debt-free, profitable, and our continued strong cash generation is a real competitive advantage.
Commercial Jets (CJ)
Our primary division continues to represent almost two thirds of Group activity. Sales slipped 2%, but this was more than offset by a 10% increase in divisional profitability. The division remains active from Government and Corporate clients, as well as clients from various niche sectors. Activity levels were good up to the calendar year end, much of which was contracted before the November watershed. However, the lead-in period for quality business has shortened, and it remains to be seen how much of this absence of forward orders develops into an absence of business in the second half. As detailed in the last IMS, we have lost sales to vulnerable supplier airlines prepared to work below positive contribution levels in the short term. Today, in the second phase, the market supply has significantly reduced and this offers some support to price. The combined effect of this has been a change in perceptions of who are viable carriers to maintain substantive dealings with, opening up a trading gap where risk can quickly outweigh reward.
The fundamentals of the CJ division remain sound, and we continue to deliver outstanding operational success in some of the most challenging market conditions. It is also encouraging to see the progress made across mainland Europe, through our key offices in France, Germany, Italy and Austria, as smaller local competitors have waned. Whilst no segment data is available we sense a significant gain in market share, albeit of a reduced market.
Private Jets (PJ)
The speed of the private jet traffic slowdown experienced in November sent shockwaves throughout the entire industry. The normally slow winter period was much quieter, no matter how big you are, what jets you operate, or where you are based. The drop has been universal, led again by the US market. Industry statistics are too generalised to be a reliable indicator for specific markets but low season traffic levels are down by up to 50% in the USA and 20% in Europe, largely on lower corporate levels. Given the decision-justifying process now required, corporate travel is clearly far more negatively affected than private ultra high net worth (UHNW) travel and Governmental use, although modest, is largely non-recessionary. We anticipate that the corporate activity will remain low for the second half, but we were encouraged that after the end of the H1 period, UHNW flying for the winter half term holiday was busy, creating evidence for some optimism ahead of the summer season.
After a strong first quarter, our PJ broking business was 11% lower in Q2 year on year. New JetCard sales were heavily affected at the same time and usage declined, leaving our 'credit hours' above seasonal norms and representing £6m of our cash. This trend appears to be broadly in line with rival products worldwide. Given the inexorable rise in private jet travel from mid-2004 to mid-2008, these abrupt reversions of demand take us back to approximately 2006 levels.
At the operating company in Biggin Hill the drop in sales has magnified traditional seasonal losses due to both high fixed costs from a business tuned to operate at peak activity levels, and by some remaining legacy owner commitments. The compound effect leaves our whole PJ result negative for the half year. The cross synergies between the broking and operating companies remain as valid as ever; the operating company accounts for 5% of overall Group sales but has generated significant halo earnings in the broking division. In return, the broking division today provides 25% of the operating company's business. Our focus for the second half will be to win market share as the industry shakes out weak providers, and clients see the true value of dealing with a financially secure supplier.
Freight
Our niche market freight team derives much of its income from devising and implementing complex logistical air freight solutions for clients in distress. Despite the traditional world airfreight market reportedly dropping by 20% in recent months, this team continues to meet its client demanding expectations and has handled 17% more business. With increased efficiency, it has delivered twice the profitability, a significant achievement in a very difficult and competitive market and a reflection of the skills and capabilities within Air Partner's freight division.
Future Investments
The group has an enviable long term reputation for cash generation, combined with zero debt. Today we report cash at its highest level ever. In these uncertain markets, cash is reassuring, and gives the board more flexibility to take advantage of unexpected opportunities. At the same time, we have increased our focus on strict cost control, and elected to delay the awarding of the construction contract for the new private jet terminal, pending better market clarity. As construction costs continue to fall, so the delay should improve longer term earnings. We expect to report further on this at the year end results.
Last year, we announced the creation and investment in the Air Partner Academy to develop and train new skills. The current trading environment has enabled the Group to commit more time to development, and the Academy has already delivered over 500 days of training in this period, as part of fine-tuning of sales skills in today's challenging environment.
Outlook and Current Trading
The second half of our financial year will clearly continue to be difficult and challenging. While forward orders are down, we believe the summer traffic will improve trading. Once we have an indication of the high season traffic, the Group can plan the next financial year targets and budgets with greater confidence.
The Group's consistent strategy over the last decade is proven and remains valid in today's environment. We aim to maintain our infrastructure in order to be best positioned to seize the advantages that will present themselves as market changes unfold. We will continue to leverage the diverse strength of the Group and our leading market positions to trade through these challenging times and emerge stronger.
In a tough market, the Group's experienced long term management, the fantastic team of professionals, strong cash position, zero debt position, track record of cash-generation and dividend growth, are all precious assets. The board remains confident in the long term drivers and prospects of the Group.
Unaudited condensed consolidated income statement
for the six months ended 31 January 2009
|
Continuing operations |
Note |
Half year to31 January 2009 (unaudited) £'000 |
Half year to31 January 2008 (unaudited) £'000 |
Year to31 July 2008 (audited) £'000 |
|
Revenue |
2 |
107,134 |
109,366 |
251,315 |
|
Cost of sales |
(94,201) |
(95,923) |
(221,410) |
|
|
Gross profit |
12,933 |
13,443 |
29,905 |
|
|
Administrative expenses |
(10,110) |
(9,981) |
(21,444) |
|
|
Operating profit |
2,823 |
3,462 |
8,461 |
|
|
Finance income |
400 |
422 |
784 |
|
|
Finance costs |
(3) |
(3) |
(2) |
|
|
Profit before tax |
3,220 |
3,881 |
9,243 |
|
|
Taxation |
7 |
(721) |
(1,297) |
(2,892) |
|
Profit for the period |
2,499 |
2,584 |
6,351 |
|
|
Attributable to: |
||||
|
Equity holders of the parent |
2,499 |
2,584 |
6,351 |
|
|
2,499 |
2,584 |
6,351 |
||
|
Earnings per share: |
||||
|
Basic |
4 |
24.5p |
25.6p |
62.6p |
|
Diluted |
4 |
24.5p |
25.1p |
61.7p |
Unaudited condensed consolidated statement of recognised income and expense
for the six months ended 31 January 2009
|
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Exchange differences on translation of foreign operations |
1,307 |
451 |
645 |
|
Net income recognised directly in equity |
1,307 |
451 |
645 |
|
Profit for the period |
2,499 |
2,584 |
6,351 |
|
Total recognised income and expense for the period |
3,806 |
3,035 |
6,996 |
|
Attributable to: |
|||
|
Equity holders of the parent |
3,806 |
3,035 |
6,996 |
|
3,806 |
3,035 |
6,996 |
|
Unaudited condensed consolidated balance sheet
as at 31 January 2009
|
Note |
31 January 2009 (unaudited) £'000 |
31 January 2008 (unaudited) £'000 |
31 July 2008 (audited) £'000 |
||
|
Assets |
|||||
|
Non-current assets |
|||||
|
Goodwill |
4,374 |
4,374 |
4,374 |
||
|
Other intangible assets |
116 |
291 |
204 |
||
|
Property, plant and equipment |
1,934 |
1,470 |
1,852 |
||
|
Deferred tax assets |
375 |
171 |
292 |
||
|
6,799 |
6,306 |
6,722 |
|||
|
Current assets |
|||||
|
Inventories |
352 |
371 |
434 |
||
|
Trade and other receivables |
19,724 |
26,551 |
30,388 |
||
|
Financial assets |
- |
216 |
- |
||
|
Cash and cash equivalents |
22,148 |
14,349 |
20,756 |
||
|
42,224 |
41,487 |
51,578 |
|||
|
Total assets |
49,023 |
47,793 |
58,300 |
||
|
Current liabilities |
|||||
|
Trade and other payables |
(11,085) |
(9,601) |
(10,040) |
||
|
Financial liabilities |
- |
- |
(217) |
||
|
Current tax liabilities |
(413) |
(912) |
(1,422) |
||
|
Other liabilities |
(18,783) |
(23,475) |
(29,503) |
||
|
(30,281) |
(33,988) |
(41,182) |
|||
|
Net current assets |
11,943 |
7,499 |
10,396 |
||
|
Non-current liabilities |
|||||
|
Deferred tax liability |
(36) |
(75) |
(36) |
||
|
(36) |
(75) |
(36) |
|||
|
Total liabilities |
(30,317) |
(34,063) |
(41,218) |
||
|
Net assets |
18,706 |
13,730 |
17,082 |
||
|
Equity |
|||||
|
Share capital |
510 |
509 |
509 |
||
|
Share premium account |
4,309 |
4,294 |
4,264 |
||
|
Translation reserve |
1,545 |
162 |
356 |
||
|
Share option reserve |
775 |
419 |
591 |
||
|
Retained earnings |
11,567 |
8,346 |
11,362 |
||
|
Equity attributable to equity holders of the parent |
5 |
18,706 |
13,730 |
17,082 |
|
|
Total equity |
18,706 |
13,730 |
17,082 |
||
Unaudited condensed consolidated cash flow statement
for the six months ended 31 January 2009
|
Note |
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Net cash from operating activities |
6 |
2,799 |
2,176 |
9,440 |
|
Investing activities |
||||
|
Interest received |
400 |
422 |
784 |
|
|
Purchase of minority interest |
- |
(935) |
(935) |
|
|
Purchases of property, plant and equipment |
(288) |
(203) |
(697) |
|
|
Net cash generated by/(used in) investing activities |
112 |
(716) |
(848) |
|
|
Financing activities |
||||
|
Dividends paid |
3 |
(2,306) |
(7,467) |
(8,221) |
|
Proceeds on issue of shares |
46 |
828 |
799 |
|
|
Net cash used in financing activities |
(2,260) |
(6,639) |
(7,422) |
|
|
Net increase/(decrease) in cash and cash equivalents |
651 |
(5,179) |
1,170 |
|
|
Opening cash and cash equivalents |
20,756 |
19,479 |
19,479 |
|
|
Effect of foreign exchange rate changes |
741 |
49 |
107 |
|
|
Closing cash and cash equivalents |
22,148 |
14,349 |
20,756 |
|
Reconciliation of net cash flow to movement net funds
for the six months ended 31 January 2009
|
Note |
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
Increase/(decrease) in cash in the year |
651 |
(5,179) |
1,170 |
|
Effect of foreign exchange rate changes |
741 |
49 |
107 |
|
Movement in net funds during the period |
1,392 |
(5,130) |
1,277 |
|
Opening net funds |
20,756 |
19,479 |
19,479 |
|
Closing net funds |
22,148 |
14,349 |
20,756 |
Selected notes to the condensed consolidated interim financial information
1 Interim statement
Basis of preparation
This unaudited condensed interim financial information for the half year ended 31 January 2009 has been prepared in accordance with IAS 34, 'Interim financial reporting'. The interim condensed financial report should be read in conjunction with the annual financial statements for the year ended 31 July 2008.
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 July 2008, as described in the annual financial statements for the year ended 31 July 2008.
The financial information contained in this document does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The auditors have issued an unqualified opinion on the Group's statutory financial statements under International Financial Reporting Standards for the year ended 31 July 2008, which have been filed with the Registrar of Companies.
2 Segmental analysis
|
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Geographical segment - revenue |
|||
|
United Kingdom |
61,181 |
65,152 |
152,000 |
|
Europe |
37,486 |
33,827 |
76,589 |
|
United States of America |
5,997 |
8,374 |
19,088 |
|
Rest of the World |
2,470 |
2,013 |
3,638 |
|
107,134 |
109,366 |
251,315 |
|
|
Geographical segment - result |
|||
|
United Kingdom |
2,680 |
2,496 |
5,934 |
|
Europe |
462 |
598 |
1,626 |
|
United States of America |
(257) |
299 |
882 |
|
Rest of the World |
(62) |
69 |
19 |
|
2,823 |
3,462 |
8,461 |
|
|
Finance income |
400 |
422 |
784 |
|
Finance costs |
(3) |
(3) |
(2) |
|
Profit before tax |
3,220 |
3,881 |
9,243 |
|
Income tax expense |
(721) |
(1,297) |
(2,892) |
|
Profit for the period |
2,499 |
2,584 |
6,351 |
|
Business segment - revenue |
|||
|
Private jets |
24,655 |
26,405 |
58,644 |
|
Commercial jets |
71,164 |
73,290 |
165,415 |
|
Freight |
10,088 |
8,697 |
24,687 |
|
Other |
1,227 |
974 |
2,569 |
|
107,134 |
109,366 |
251,315 |
|
|
Business segment - result |
|||
|
Private jets |
(153) |
1,027 |
3,178 |
|
Commercial jets |
2,184 |
1,980 |
4,418 |
|
Freight |
572 |
280 |
558 |
|
Other |
220 |
175 |
307 |
|
2,823 |
3,462 |
8,461 |
|
|
Finance income |
400 |
422 |
784 |
|
Finance costs |
(3) |
(3) |
(2) |
|
Profit before tax |
3,220 |
3,881 |
9,243 |
|
Income tax expense |
(721) |
(1,297) |
(2,892) |
|
Profit for the period |
2,499 |
2,584 |
6,351 |
3 Dividends
|
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Interim dividend for year ending 31 July 2008 of 7.4p per share |
- |
- |
754 |
|
Final dividend for year ending 31 July 2008 of 22.6p (2007: 13.3p) per share |
2,306 |
1,356 |
1,356 |
|
Special dividend for year ending 31 July 2008 of 60.0p per share |
- |
6,111 |
6,111 |
|
2,306 |
7,467 |
8,221 |
|
The final dividend for the year ended 31 July 2008 was paid on 19 December 2008.
The proposed 2009 interim dividend of 8.1p per share was approved by the Board on 25 February 2009 and in accordance with IFRS has not been included as a deduction from equity at 31 January 2009. The dividend will be paid on 15 May 2009 to those shareholders on the register at the close of business on 17 April 2009. The ordinary shares will be marked ex-dividend on 15 April 2009.
4 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
|
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Earnings |
|||
|
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent |
2,499 |
2,584 |
6,351 |
|
Earnings for the purposes of diluted earnings per share |
2,499 |
2,584 |
6,351 |
|
Number of shares |
|||
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
10,195,782 |
10,087,454 |
10,138,500 |
|
Effect of dilutive potential ordinary shares |
13,666 |
213,296 |
157,769 |
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
10,209,448 |
10,300,750 |
10,296,269 |
5 Group statement of changes in equity
|
Share capital £'000 |
Share premium account £'000 |
Share option reserve £'000 |
Translation reserve £'000 |
Retained earnings £'000 |
Total equity £'000 |
|
|
Opening equity as at 1 August 2008 |
509 |
4,264 |
591 |
356 |
11,362 |
17,082 |
|
Exchange differences on translation of foreign operations |
- |
- |
- |
1,189 |
- |
1,189 |
|
Net income recognised directly in equity |
- |
- |
- |
1,189 |
- |
1,189 |
|
Profit for the period |
- |
- |
- |
- |
2,499 |
2,499 |
|
Share option movement for period |
- |
- |
196 |
- |
- |
196 |
|
Total recognised income and expense for the period |
- |
- |
196 |
- |
2,499 |
2,695 |
|
Issue of shares under share option scheme |
1 |
45 |
(12) |
- |
12 |
46 |
|
Dividends |
- |
- |
- |
- |
(2,306) |
(2,306) |
|
Closing equity as at 31 January 2009 |
510 |
4,309 |
775 |
1,545 |
11,567 |
18,706 |
During October 2008 11,600 new shares were issued following exercise of staff options under the Air Partner plc Company Share Option Plan 2003.
6 Net cash from operating activities
|
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Operating profit for the period |
2,823 |
3,462 |
8,461 |
|
Adjustments for: |
|||
|
Depreciation and amortisation |
298 |
225 |
565 |
|
Movement on financial (asset)/liability |
(217) |
(386) |
47 |
|
Share option cost for period |
197 |
172 |
346 |
|
Operating cash flows before movements in working capital |
3,101 |
3,473 |
9,419 |
|
Decrease/(increase) in receivables |
10,664 |
124 |
(3,713) |
|
Decrease/(increase) in inventories |
82 |
24 |
(39) |
|
(Decrease)/increase in payables |
(9,237) |
96 |
6,584 |
|
Cash generated from operations |
4,610 |
3,717 |
12,251 |
|
Income taxes paid |
(1,808) |
(1,538) |
(2,809) |
|
Interest paid |
(3) |
(3) |
(2) |
|
Net cash from operating activities |
2,799 |
2,176 |
9,440 |
7 Tax
|
Half year to 31 January 2009 (unaudited) £'000 |
Half year to 31 January 2008 (unaudited) £'000 |
Year to 31 July 2008 (audited) £'000 |
|
|
Current tax: |
|||
|
UK corporation tax |
682 |
850 |
1,803 |
|
Foreign tax |
117 |
443 |
1,264 |
|
799 |
1,293 |
3,067 |
|
|
Deferred tax |
(78) |
4 |
(175) |
|
721 |
1,297 |
2,892 |
|
Income tax for the interim period is charged at 22.4% (2008: 33.4%), representing the best estimate of the weighted average income tax expected for the full financial year.
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