TIDMDNA
RNS Number : 3786M
Doric Nimrod Air One Limited
12 October 2016
QUARTERLY FACT SHEET
30 September 2016
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 its directors are targeting 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 September
2016) 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
provide 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 2016. The table below summarizes the total
return components, calculated on different exchange rates and using
the average value of the aircraft as provided by the three
independent external appraisers. Regarding 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.
The contracted lease rentals are calculated to satisfy interest
and principal in US dollars and distributions and Company running
costs in sterling. The Company is therefore insulated from foreign
currency market volatility during the term of the lease.
I. Implied Future Total Return Components Based on
Appraisals(1)
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(2) USD 107 million
==============================================================================================
per Share Income Distributions Return of Capital Total Return(3)
--------------------- --------------------------- ---------------------------
Prospectus Latest Prospectus Latest
Appraisal Appraisal(4) Appraisal Appraisal(4)
------------- --------------------- ----------- -------------- ----------- --------------
Prospectus
FX Rate(5) 59p 161p 157p 220p 216p
------------- --------------------- ----------- -------------- ----------- --------------
Current FX
Rate(6) 59p 197p 192p 255p 250p
------------- --------------------- ----------- -------------- ----------- --------------
(1) See final sentences in the second paragraph of Investment Strategy
(2) Date of valuation: 31 March 2016
(3) Excluding earned dividend
(4) Average of the three appraisals as at the Company's year-end in
the expiry year of the lease
(5) 1.5900 USD/GBP
(6) 1.2970 USD/GBP (30 September 2016)
II. Company Facts (30 September 2016)
Listing LSE
----------------------------- ----------------------------------------
Ticker DNA
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Current Share Price 112.25p (closing)
----------------------------- ----------------------------------------
Market Capitalisation GBP 47.7 million
----------------------------- ----------------------------------------
Initial Debt USD 122 million
----------------------------- ----------------------------------------
Outstanding Debt Balance USD 64.5 million (53% of Initial Debt)
----------------------------- ----------------------------------------
Current/Future Anticipated 2.25p per quarter (9p per annum)
Dividend
----------------------------- ----------------------------------------
Earned Dividends 49.5p
----------------------------- ----------------------------------------
Current Dividend Yield 8.02%
----------------------------- ----------------------------------------
Dividend Payment Dates April, July, October, January
----------------------------- ----------------------------------------
Expected Future Total 2.23 (based on the Current Share Price)
Cash Multiple(1)
----------------------------- ----------------------------------------
Total Expense Ratio 1.4% (based on Average Net Assets)
----------------------------- ----------------------------------------
Currency GBP
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Launch Date/Price 13 December 2010 / 100p
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Remaining Lease Duration 6 years 3 months
----------------------------- ----------------------------------------
Incorporation Guernsey
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Aircraft Registration A6-EDC (16.12.2022)
Number (Lease Expiry Date)
----------------------------- ----------------------------------------
Asset Manager Doric GmbH
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Corp & Shareholder Advisor Nimrod Capital LLP
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Administrator JTC (Guernsey) Ltd
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Auditor Deloitte LLP
----------------------------- ----------------------------------------
Market Makers Jefferies International Ltd,
Numis Securities Ltd,
Shore Capital Ltd,
Winterflood Securities Ltd
----------------------------- ----------------------------------------
SEDOL, ISIN B4MF389, GG00B4MF3899
----------------------------- ----------------------------------------
Year End 31 March
----------------------------- ----------------------------------------
Stocks & Shares ISA Eligible
----------------------------- ----------------------------------------
Website www.dnairone.com
----------------------------- ----------------------------------------
(1) See final sentences in the second paragraph of Investment
Strategy
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
August 2016, a total of 4,089 flight cycles were logged. Total
flight hours were 34,446. This equates to an average flight
duration of eight hours and 25 minutes.
The A380 owned by the Company visited Auckland, Brisbane,
Frankfurt, Jeddah, New York JFK, Sydney, and Toronto during the
third quarter of 2016.
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 24 month or 12,000 flight hour
intervals, whichever occurs first. The last heavy maintenance
check, the 6-year check, was completed in December 2014.
Emirates bears all costs (including for maintenance, repairs and
insurance) relating to the aircraft during the lifetime of the
lease.
The records audited by the asset manager, Doric, in May were
found to be in good order.
2. Market Overview
During the first seven months of 2016 passenger demand, measured
in revenue passenger kilometres (RPKs), increased by 6.0% compared
to the same period the year before. Adjusted for the extra day, as
2016 is a leap year, traffic grew by 5.5%. "Passenger demand has
broadly grown in line with the average of the past 10 years but the
industry faces some potential headwinds, including lingering
impacts from the series of terrorist attacks and the fragile
economic backdrop", said Alexandre de Juniac, IATA's (International
Air Transport Association) Director General and CEO. But entering
the peak travel months, July and August, RPK growth accelerated in
July with the fastest pace in five months and, according to IATA,
passenger traffic is set for another year of solid growth.In its
latest forecast released in June, it expects an RPK growth of 6.2%
in 2016.
At 79.9% passenger load factors have remained close to the
historic high - in a narrow band around 80% since February - as
airlines have slowed capacity growth in line with the moderation in
demand growth. IATA estimates an average worldwide passenger load
factor of 80.0% for the full year 2016.
A regional breakdown reveals that Middle East airlines,
including Emirates, continued to outperform the overall market
again this year. Between January and July RPKs increased by 10.9%
compared to the previous period. Asia/Pacific-based operators
ranked second with 8.7%, followed by Africa with 7.7%. Europe grew
by 3.7%. Latin American and North American market participants each
recorded 3.6% more RPKs.
Fuel is the single largest operating cost of airlines and has
significant effects on the industry's profitability. According to
its latest report released in June, IATA expects an average fuel
price of USD 55.6 per barrel in 2016. This would be 17% lower
compared to the previous year. It could drive the average share of
fuel costs in operating expenses down to less than 20% for the
first time since 2004. The industry-wide net profit could be
further boosted to an estimated USD 39.4 billion. The net profit
margin of 5.6% would be the highest for more than a decade. In 2015
the revised industry net profit reached USD 35.3 billion, compared
to a revised net profit of USD 13.7 billion the year before. The
profit development during this year will heavily depend on the oil
price level. IATA has based its calculations on an average crude
oil price of USD 45 per barrel. This includes a rising profile
during the course of the year to just above USD 50 per barrel by
the end of 2016.
(c) International Air Transport Association, 2016. Air Passenger
Market Analysis July 2015 / Air Passenger Market Analysis July 2016
/ Economic Performance of the Airline Industry, 2016 Mid-Year
Report / Press Release No. 45: July Passenger Demand Shows
Resilience. All Rights Reserved. Available on the IATA Economics
page.
3. Lessee - Emirates Key Financials
In the financial year 2015/16 ending on 31 March 2016 Emirates
made its highest profit ever with USD 1.9 billion - an increase of
56% compared to the previous period. The profit margin of 8.4% is
the greatest since 2010/11. At the same time, the 28(th)
consecutive year of profit provided a number of global and
operational challenges to the company. The rise of the US dollar
against currencies in most of Emirates' key markets only had a USD
1.1 billion impact on the airline's bottom line. As a result of
this and fare adjustments following the reduction in fuel prices
there was a 4% drop in revenue to USD 23.2 billion. During the
financial year, the airline had to deal with weak consumer
confidence in a slow global economic environment, terror threats
and geopolitical instability in many regions it serves.
Nevertheless, the company was able to maintain its strategy of a
diversified revenue base which limited the carrier's exposure to
single geographical regions.
The airline's operating costs were significantly influenced by
the drop in oil prices with a 39% lower average fuel price compared
to the previous period. As Emirates remained largely unhedged on
jet fuel prices, this significantly paid off. Fuel costs remained
the largest component in operating costs, but significantly
decreased by 9 percentage points to 26%. Total operating costs
decreased by 8% over the 2014/15 financial year.
As of 31 March 2016, the balance sheet total amounted to USD
32.5 billion, an increase of 7% compared to the beginning of the
financial year. Total equity increased by 14.6% to USD 8.8 billion
with an equity ratio of 27.2%. The current ratio stood at 0.82,
meaning the airline would be able to meet about four-fifths of its
current liabilities by liquidating all its current assets.
Significant items on the liabilities side of the balance sheet
included current and non-current borrowings and lease liabilities
in the amount of USD 13.7 billion. As of 31 March 2016, the
carrier's cash balance was USD 5.4 billion, up by USD 846 million
compared to the beginning of the financial year.
New destinations, larger aircraft deployment and increased
frequencies to existing destinations boosted the transport
capacities for passengers (measured in ASKs) by 12.8% compared to
the previous financial year. Passenger demand (in RPKs) grew by
8.4%, resulting in a passenger load factor of 76.5%. The economy
class seat factor stood at 79.2%. About 32% of the 51.9 million
passengers carried in the 2015/16 financial year travelled aboard
an A380. Premium and overall seat factors for Emirates' flagship
aircraft outperformed the network.
During the financial year 2015/16 Emirates added eight new
passenger destinations to its network and added services and
capacity to another 34 cities on its existing route network across
Africa, Asia, Europe, the Middle East and North America. The
increasing number of A380 aircraft joining the fleet allowed the
airline to introduce superjumbo services to a further four
destinations during the course of the 2015 calendar year. At the
same time A380 services to nine existing routes were increased.
This means one out of every four destinations on the carrier's
passenger network is served by an A380.
During the first six months of 2016 Emirates' aircraft travelled
432 million kilometres on over 96,000 flights.
In July Emirates was named the "World's Best Airline 2016" at
the Skytrax World Airline Awards. The ranking is based on the
largest airline passenger satisfaction survey in the industry, with
a total of 19.2 million completed surveys covering 280 airlines.
After 2001, 2002 and 2013 this is the fourth time the top accolade
was awarded to Emirates in the 15-year history of this contest.
Furthermore, the airline received the "World's Best Inflight
Entertainment" award for a record 12(th) consecutive year, and the
"Best Airline in the Middle East" award.
Source: Ascend, Emirates
4. Aircraft - A380
By mid-September 2016 Emirates operated a fleet of 83 A380s
which currently serve 41 destinations from its Dubai hub:
Amsterdam, Auckland, Bangkok, Barcelona, Beijing, Birmingham,
Brisbane, Copenhagen, Dallas, Dusseldorf, Frankfurt, Hong Kong,
Houston, Jeddah, Kuala Lumpur, Kuwait, London Gatwick, London
Heathrow, Los Angeles, Madrid, Manchester, Mauritius, Melbourne,
Milan, Mumbai, Munich, New York JFK, Paris, Perth, Prague, Rome,
San Francisco, Seoul, Shanghai, Singapore, Sydney, Taipei, Toronto,
Vienna, Washington, and Zurich. During the summer Emirates
announced a number of expansions to its A380 operations. This
includes a second daily A380 services to Los Angeles (since July 1)
and Milan (from October 1) and a third daily A380 services to
Munich (since June 20) and Manchester (from January 1, 2017).
Furthermore, Guangzhou (China) is scheduled to become an A380
destination on October 1, 2016. Johannesburg (South Africa) will
complement Emirates' global list of A380 destinations from February
1, 2017. Already this year the operator will deploy the A380 on its
non-stop service between Dubai and Auckland (New Zealand), which
was introduced only a few months ago, currently flown by a Boeing
777-200LR and which is reported to be the longest sector served by
a commercial carrier. Also from October 30, 2016 another New
Zealand city, Christchurch, will be served by an A380, eliminating
the current en-route stop in Bangkok.
By mid-September 2016 the global A380 fleet consisted of 195
commercially operated planes in service. The thirteen operators are
Emirates (83), Singapore Airlines (19), Deutsche Lufthansa (14),
Qantas (12), British Airways (12), Air France (10), Korean Airways
(10), Etihad Airways (8) Malaysia Airlines (6), Qatar Airways (6),
Thai Airways (6), China Southern Airlines (5), and Asiana (4). The
number of undelivered A380 orders stood at 126.
In July 2016 A380 manufacturer Airbus revealed plans to cut A380
production to one aircraft per month from 2018 onwards. According
to Airbus CEO, Fabrice Brégier, the company remains committed to
the superjumbo and will continue to invest in the jet. "The A380 is
here to stay", Brégier was quoted in the press. The adjusted
production rate allows Airbus to keep "all [its] options open" for
the emergence of future A380 demand.
In August 2016 Australian flag carrier Qantas disclosed that the
airline is unlikely to take delivery of the final eight A380s it
has on order with Airbus. The airline's CEO Alan Joyce is very
happy with the current network accommodating 12 A380s but is
struggling to find routes for another eight aircraft. Deliveries
have been repeatedly deferred in recent years as a cost-saving
measure.
In September 2016 Singapore Airlines (SIA) announced that they
had decided not to renew the lease on their first Airbus A380
delivered in 2007. The initial lease term expires in October 2017.
No decisions have been made so far on a further four A380 aircraft
which were delivered to SIA on similar operating lease terms in
2008. This statement comes only days after Malaysia Airlines' (MAS)
reaffirmation to market its six A380s in the near future, as its
new focus is more on Asian flights requiring lower capacity
aircraft, like the 25 Boeing 737 MAX ordered back in July this
year. CEO Peter Bellew said MAS is in talks with carriers in China
and other Association of Southeast Asia Nations countries who might
be interested in leasing or buying superjumbos. In his view there
are a number of airlines in the region "keen to dip their toe in
the water". Already in June last year MAS announced plans to remove
a number of aircraft from its fleet, including two of its six A380
aircraft, as part of its restructuring plans.
Source: aero.de, Airbus, Ascend, Bloomberg, CAPA, Emirates
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 company news service from the London Stock Exchange
END
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