Avation Share Discussion Threads

[stocktrawler] 20/2/2015 12:18

Reassuring comments from Paul Scott today following call with CFO

Good morning! I was settling down to my evening meal last night, when the phone rang. It was the CFO of Avation (LON:AVAP). I had been rather negative about some aspects of the company's interim results statement, so he wanted to chat through the numbers and clarify a few points. It's always slightly awkward when I've been critical of a company, and they then get in contact, but it happens quite a lot, and as long as my criticisms have been fair, then I stand my ground.

In this case, the CFO was refreshingly honest, in saying that my criticism was fair, and that he took full responsibility for not explaining the numbers clearly enough in the narrative to the results statement. I should emphasise that no new information was given to me, but he did explain the way in which rapid growth in the aircraft fleet had skewed the figures somewhat.

So what originally looked like a big miss against forecast, will probably turn out to be reasonably alright, as the H2 numbers are expected to be stronger than H1, due to H2 containing a full 6 months income on the newly leased aircraft - and with the operational gearing of more income flowing through a fixed cost base that should boost H2 profits vs H1 profits. Sounds reasonable to me.

Rather than repeating it all here, I just want to flag up that I added a new "Update" section to yesterday's report, explaining what was said on my phone call with the CFO. So for anyone interested, that is in yesterday's report, in the Avation section, just below the chart.

I like talking to company management, as it helps me understand the business better. Although some scepticism is necessary, as obviously they will always talk up the company's performance and prospects - that's part of their job!

I'm reassured that my decision to buy a few more Avation shares yesterday morning was probably a sensible one, but time will tell.

[sogoesit] 20/2/2015 07:36

Am still a holder here albeit that I have same concerns as mentioned in last day's postings. The non-declaration of the "European Airline" last year and the late declaration of default on that aircraft raised flags in my mind but, having been away, it is too late for an exit now.
At $1.50/£ the NAV is approx. 147p in my calculation so it is currently oversold given the growth prospects.
Let's hope someone gives them the message that they need to tighten up on transparency and the professionalism of their declarations to the market but certainly my holding is now under review.

[alibx11] 19/2/2015 23:58

I too sold out today at over 20% loss. Lost all confidence in this.Should have followed my gut instincts when then notified sole brokerage.Had another suspicious feeling when the rns came out about selling the 2 planes.Funny, but the part that I didn't like was that they kept everyone in the dark that they had to repossess an aircraft and a lease contract had ended early, given that they release positive rns about the new contract and lease the fact that the contract ended should also be market sensitive, and released.I lost trust in them then but couldn't bring myself to sell at a loss, well i paid for that mistake today.Good luck to any that still hold. Hope they improve for you but I've cut my losses. Time to move on.

[daz] 19/2/2015 21:26

The company is a paradox, Richard Wolanski has made numerous presentations in the last 3 or 4 months to get investors interested in the company and credit to him for that but when it comes to basic communication to investors about half yearly results:- explaining the rise in admin charges and the effects of exceptional items, they or maybe their advisers choose not to do so.

You are always reading RNS's that refer to adjusted earnings, they could easily have presented some underlying figures to present earnings in a better light.

I just don't get it.

[pj 1] 19/2/2015 20:48

I think a key question here is why any Co would want to cloud the position with a dubiously written RNS

Can we trust the BoD going forward to be open and transparant? They never intimated they would be anything but @ Mello14

They were swamped by PI's eager for information after the presentation, they really came over well, extremely impressive!!

I sold today so you have my answer!!

[macarre] 19/2/2015 19:18

Avation : First-Half Profit Down But Confident For 2015 And 2016 Growth

LONDON (Alliance News) - Aircraft leasing company Avation PLC posted Thursday a decline in pretax profit for its first half, but expressed confidence it can achieve continued and sustainable growth in 2015 and 2016, and expects additional growth in lease revenue from future aircraft acquisitions.

In the half year to end-December 2014, Avation reported pretax profit of USD7.0 million, down from USD7.9 million a year before, as a rise in revenue to USD27.7 million from USD24.6 million was offset by higher administrative expenses. Also, in the previous year, Avation posted a USD1.4 million exceptional profit from the sale of property, plant and equipment.

The company currently has an aircraft fleet of 29 aircraft generating a gross rental yield of around 13%. It secured the sale and leaseback of two new Airbus A321 jet aircraft with Thomas Cook Group PLC during the half year. The delivery of these aircraft is scheduled for 2016.

The company has 13 aircraft scheduled to be delivered between now and the end of 2016, it said.

"The board is confident that this increase in the scale of the business combined with the significant reduction in average cost of debt across the fleet will continue to provide sustainable growth and drive future earnings," said Chairman Jeff Chatfield.

Meanwhile, Avation's subsidiary Capital Lease Aviation PLC, which was incorporated by Avation in 2007 to own and lease a portfolio of commercial jet aircraft, posted Thursday a pretax profit of USD1.2 million, down from USD1.3 million on lower revenue of USD5.9 million from USD6.2 million.

Capital Lease said it has a positive outlook for future periods, as it expects to benefit from its recently reduced cost of capital.

"The board remains optimistic and will continue to evaluate opportunities to grow the company," Capital Lease said in a statement.

[russman] 19/2/2015 17:34

4/9/14 I paraphrase Jeff:- "in the short term with a view to enhancing profitability". CLA's EPS down 8%; Admin Expenses up 7%. For how many planes?

[davydoo] 19/2/2015 12:54

good posts ragehammer

I think you're right to have some healthy scepticism over management, a read back through old posts will see some excellent commentary on the subject of overall professionalism with financial reporting from Harrogate.

Back at the 125p I said I was waiting for, but this time its not a trading spike down, its on results, so I will wait a while longer.

[macarre] 19/2/2015 12:16

Been waiting patiently for a number of weeks, but this morning I finally gave in. Bought back at 126p. This morning's statement was not really exciting, but still see AVAP as a good under-valued business. If share price goes in the wrong direction I can always exit at a small loss.

[imranawan] 19/2/2015 12:10

Interesting write up from Paul Scott on Stockopedia: hxxp://www.stockopedia.com/content/small-cap-value-report-19-feb-2015-avap-mjw-92517/

Agree the results were lacklustre, but so was the narrative around them.

[dasv] 19/2/2015 10:01

I'm staying in

the fleet size has gone from 22 to 29 aircraft in the 6 month period. That's a 31.8% increase in fleet size.

Also they are buying 2x A321's (new) to lease to Thomas Cook (for early 2016).

A minimum of 13 aircraft will be added by 2016 increasing total assets by 61%.

The way this co will grow is by increasing the total assets it can lease.

"As at the date of this report the Company has firm orders for 11 new ATR 72 and two new Airbus A321 aircraft and holds further options and purchase rights for an additional 22 ATR 72 aircraft."

I realise existing aircraft will depreciate in value so there will always be churn and the sale of older aircraft, but AVAP's growing its assets and therefore assuming costs proportionate to asset base, total revenue and profit should grow commensurately.

I don't like the admin cost hike, and like others I'm unimpressed by the lack of proof reading here. But its a relatively simple business with an undemanding valuation.

A miss on EPS though (despite rise in profit - more shares in issue?). That's disappointing.

[pj 1] 19/2/2015 09:18

Im also out at a 22% loss

These guys really gave a truly professional hard sell at Mello14

Shame the performance does not match the talk, I expected much better

The seemed genuinely concerned it traded on such a discount to its peers,, coupled with low P/E.

Sometimes that is for a reason as these HY Results show

Still on W/L but lost quite some confidence here

Good luck

[ragehammer] 19/2/2015 08:51

I haven't sold out as the current price is about the level of net tangible assets now and the company is still decently profitable. However I have now become quite suspicious of management here, so will need to watch it like a hawk.

[wilk1] 19/2/2015 08:30

Lucky stock for me this. Sold at 145 for my 6th profit on Monday and just bought back at 125p. Still a single digit PE.

[gohil18] 19/2/2015 08:23

Sadly, I've sold out this morning.

Must admit I'm quite surprised and disappointed about PBT/EPS being down and no reference being made to this. All sounded quite lacklustre to me too considering previous announcements have been quite bullish. Taken a loss and moved on.

Despite on fundamentals being even cheaper, I question whether those forecasts are going to be met. Can't see this doing anything other than drifting to c£1 unless their is some more positive news in the pipeline before the next trading update.

Very best of luck if you continue to hold, but I'm unimpressed by the management now.

[jeanesy2] 19/2/2015 08:17

ouchh ! Not a good response . people jumping ship.. sorry plane !

[daz] 19/2/2015 08:17

I don't recall reading such a terse narrative for a set of results, they really ought to be able to do better than that. What the so called advisers are doing I don't know, they really ought to be replaced on the basis of what has been presented (poorly) here.

[harriiiiddda] 19/2/2015 08:01

Maintaining eps while growing business

[jeanesy2] 19/2/2015 07:59

im expecting a fall in shareprice nevertheless

[ragehammer] 19/2/2015 07:57

The results look a bit underwhelming at first glance, but I think there are a number of exceptional and/or one-off factors impacting the figures. Revenue growth of $3.1m translates to lower PBT down $0.9m, but the new favourable Singaporean tax rate of 10% kicks in to give an increase in PAT, but with the recent Placing and an increased number of shares in issue, EPS is flat. The one off factors are $1.4m of profit in the prior period from sale of aircraft and a FX gain of $0.2m in prior turning into a FX loss of $0.6m this period.

Taking a look at the actual leasing business, we have revenue up 12.7%, depreciation up 13.7% (so in line), interest expense up only 6.6% (so reduced cost of debt starting to come through) but admin expenses up 31%. I don't know what this is about, but it's a bad figure IMO. Given the relative sizes of the interest and admin expenses they actually net each other out so that margins taking only the above expenses into account has stayed almost the same at 27.7% (2013: 27.9%).

Overall the RNS is somewhat unprofessionally presented, with some grammatical errors (e.g. Growth in core leasing revenue and total fleet assets will through the execution of these contracted deliveries of aircraft.[sic]") and other basic errors, such as leaving "Profit for the financial year" on the face of the P&L despite it being a 6 month period they're reporting on. However I think the underlying story is of steady growth and the company is still undervalued on the key metrics, particularly PE ratio as it has superior return on equity and assets and gearing in line with its industry peers.

[stocktrawler] 19/2/2015 07:52

In 2013 they had profit from sale of property,plant and equipment of 1,433,784 under other income. I'm surprised there wasn't more narrative related to lack of growth in profitability explaining the reasons why.

[wilk1] 19/2/2015 07:08

Disappointing eps figure, no growth from the same period last year ? Were we expecting more ?

[wilk1] 17/2/2015 17:31

Only problem at the moment is that we have more sellers than buyers. Simples.

[davydoo] 17/2/2015 16:58

not sure id ever say they know exactly what they are doing, but to their credit they seem to be nimble operators