TIDMDNA
RNS Number : 9407T
Doric Nimrod Air One Limited
11 January 2017
QUARTERLY FACT SHEET
31 December 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 (31 December
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) 56p 161p 157p 217p 213p
------------- --------------------- ----------- -------------- ----------- --------------
Current
FX Rate(6) 56p 207p 201p 263p 258p
------------- --------------------- ----------- -------------- ----------- --------------
(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) 1.2341 USD/GBP (31 December 2016)
II. Company Facts (31 December 2016)
Listing LSE
---------------------------- ---------------------------------
Ticker DNA
---------------------------- ---------------------------------
Current Share Price 114p (closing)
---------------------------- ---------------------------------
Market Capitalisation GBP 48.4 million
---------------------------- ---------------------------------
Initial Debt USD 122 million
---------------------------- ---------------------------------
Outstanding Debt USD 61.5 million (50% of Initial
Balance Debt)
---------------------------- ---------------------------------
Current/Future Anticipated 2.25p per quarter (9p per
Dividend annum)
---------------------------- ---------------------------------
Earned Dividends 51.75p
---------------------------- ---------------------------------
Current Dividend
Yield 7.89%
---------------------------- ---------------------------------
Dividend Payment April, July, October, January
Dates
---------------------------- ---------------------------------
Expected Future Total 2.26 (based on the Current
Cash Multiple(1) Share Price)(2)
---------------------------- ---------------------------------
Total Expense Ratio 1.5% (based on Average Net
Assets)
---------------------------- ---------------------------------
Currency GBP
---------------------------- ---------------------------------
Launch Date/Price 13 December 2010 / 100p
---------------------------- ---------------------------------
Remaining Lease Duration 6 years
---------------------------- ---------------------------------
Incorporation Guernsey
---------------------------- ---------------------------------
Aircraft Registration A6-EDC (16.12.2022)
Number (Lease Expiry
Date)
---------------------------- ---------------------------------
Asset Manager Doric GmbH
---------------------------- ---------------------------------
Corp & Shareholder Nimrod Capital LLP
Advisor
---------------------------- ---------------------------------
Administrator JTC (Guernsey) Ltd
---------------------------- ---------------------------------
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
(2) Based on the latest appraisal and the current FX rate
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
November 2016, a total of 4,168 flight cycles were logged. Total
flight hours were 35,117. This equates to an average flight
duration of eight hours and 25 minutes.
The A380 owned by the Company visited Milan, Munich, New York
JFK, Rome, and Perth during the fourth 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 October 2016.
Emirates bears all costs (including for maintenance, repairs and
insurance) relating to the aircraft during the lifetime of the
lease.
Inspections
In October 2016 the asset manager Doric inspected the aircraft
during the latest C check at the Emirates Engineering facility at
Dubai International Airport. The physical condition of the A380 was
in compliance with the provisions of the lease agreement.
2. Market Overview
Between January and October 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 5.7%. Growth remains broadly in
line with its ten-year-average, driven by a range of competing
factors. The impact of terrorist attacks and political instability
in parts of the world has eased and global business confidence has
picked up over the last few months. However, the International Air
Transport Association (IATA) expects that lower oil prices and
airfares, the key driver of demand in recent years, might be a
thing of the past as OPEC recently agreed on restricting oil
supplies. In the latest report on the economic performance of the
airline industry released in December, IATA expects an RPK growth
of 5.9% in 2016 and 5.1% in the coming year.
During the first ten months of 2016 passenger load factors
averaged 80.5%, down by 0.2 percentage points compared to the same
period the year before. With minus 2.1 percentage points, the
Middle East recorded the strongest decline in load factors as the
added capacity outstripped brisk demand significantly. IATA
estimates an average worldwide passenger load factor of 80.2% for
this year and 79.8% for 2017.
A regional breakdown reveals that Middle East airlines,
including Emirates, continued to outperform the overall market
demand again this year. Between January and October RPKs increased
by 11.0% compared to the previous period. Asia/Pacific-based
operators ranked second with 8.9%, followed by Africa with 6.6%.
Europe grew by 3.8%. Latin American and North American market
participants recorded RPK growth of 3.6% and 3.2% respectively.
Fuel is the single largest operating cost of airlines and has a
significant impact on the industry's profitability. According to
its latest report released in December, IATA expects an average
fuel price of USD 52.1 per barrel in 2016. This would be 22% lower
compared to the previous year. Jet fuel prices have started to rise
with oil prices and IATA forecasts an average price of USD 64.9 per
barrel of jet fuel for 2017. Fuel costs in 2017 are set to
represent 18.7% of average operating costs, a 0.5 percentage point
reduction from 2016. This is significantly below the recent peak of
33.2% in 2012-13. Slower GDP growth and rising costs have led to a
downward revision of IATA's 2016 airline industry profitability to
USD 35.6 billion. This will still be the highest absolute profit
generated by the airline industry and the highest net profit margin
(5.1%) to date. For 2017 Alexandre de Juniac, IATA's Director
General and CEO, expects a "very soft landing" with an industry net
profit of USD 29.8 billion.
(c) International Air Transport Association, 2016. Air Passenger
Market Analysis October 2016 / Economic Performance of the Airline
Industry, 2016 End-Year Report / Press Release No. 76: Another
Strong Year for Airline Profits in 2017. All Rights Reserved.
Available on the IATA Economics page.
3. Lessee - Emirates Key Financials
In the first half of the 2016/17 financial year ending on 31
March 2017 Emirates made a net profit of USD 214 million - a
decrease of 75% compared to the same period in the previous year.
The net profit margin was 1.9%. Revenue for the period reduced
slightly by 1% to USD 11.4 billion. During the report period
Emirates experienced an unfavourable currency environment. The US
dollar continued to strengthen against most other major,
revenue-generating currencies and increased competition resulted in
lower average fares. Referring to the macroeconomic situation
Emirates Group Chairman and Chief Executive, His Highness (HH)
Sheikh Ahmed bin Saeed Al Maktoum, said: "The bleak global economic
outlook appears to be the new norm, with no immediate resolution in
sight."
Emirates' operating costs significantly benefited from the lower
oil price. Fuel costs were on average 10% lower compared to the
same period last year. The share of operating costs, compared with
the first six months of last year, decreased from 28% to 24%.
Emirates' total operating costs increased by 5% against the overall
capacity increase of 9%.
As of 30 September 2016, the balance sheet total amounted to USD
30.9 billion, a decrease of 5% compared to the beginning of the
financial year. Total equity increased by 4.6% to USD 9.2 billion
with an equity ratio of 29.9%. The current ratio stood at 0.77,
meaning the airline would be able to meet about three-quarters 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 12.4 billion. As of 30 September 2016, the
carrier's cash balance was USD 3.2 billion, down by USD 2.2 billion
compared to the beginning of the financial year. This also included
the repayment of two bonds in the total amount of more than USD 1.1
billion.
During the first half of the 2016/17 financial year Emirates
continued to increase its capacity for passengers (measured in ASK)
by 12%. At the same time the airline recorded 8% more RPKs than in
the same period the previous year. As a result, the passenger load
factor dropped by 3 percentage points to 75.3%. This key indicator
is almost identical to the average passenger load factor in the
Middle East of 75.4%. Emirates carried 28 million passengers
between 1 April and 30 September 2016, 9% up from the same period
last year.
Between April and September 2016 the airline received 16
wide-body aircraft with 20 more scheduled to be delivered before
the end of the financial year. At the same time 19 older aircraft
had been removed from the fleet by the end of September, with a
further 8 to be returned by the end of March 2017. Having retired
its last Airbus A330/A340s in November 2016, Emirates only operates
Airbus A380s and Boeing 777s. New aircraft types, such as the
Airbus A350 and the Boeing 787, will not join the fleet before
2021/22, said Tim Clark, President of Emirates.
Emirates made use of the additional capacity by expanding its
global route network and launched passenger services to four new
destinations in Asia (Hanoi, Yangon, Yinchuan and Zhengzhou). As of
30 September 2016, Emirates' global network spanned 155
destinations in 82 countries.
In December 2016 the Emirates Group released its 6(th) Annual
Environmental Report covering the 2015/16 financial year. Airline
operations constitute the main environmental impact of the Emirates
Group. Emirates has one of the youngest aircraft fleets in the
industry: the aircraft have an average age of just 74 months
compared to the industry average of 140 months. This modern
wide-body fleet delivers environmental benefits with regards to
lower engine and noise emissions. During the period under review
Emirates' fleet achieved a passenger fuel efficiency of 4.2 litres
per 100 RPKs compared with 3.99 litres in the previous period. This
number was adversely impacted by instabilities in many parts of the
world including Ukraine, Syria, Iraq and Yemen. Flights that would
normally transit these regions were re-routed to avoid conflict
zones leading to increased fuel consumption for these flights.
Emirates is committed to redoubling its efforts during the current
financial year, looking at all aspects of its operations including
the continuing cooperation with authorities and air traffic
management providers to ensure that the most fuel-efficient flight
paths can be utilized.
Source: aero.de, Emirates
4. Aircraft - A380
By mid-December 2016 Emirates operated a fleet of 88 A380s which
currently serve 44 destinations from its Dubai hub: Amsterdam,
Auckland, Bangkok, Barcelona, Beijing, Birmingham, Brisbane,
Christchurch, Copenhagen, Doha, Dusseldorf, Frankfurt, Guangzhou,
Hong Kong, Jeddah, Kuala Lumpur, Kuwait, London Gatwick, London
Heathrow, Los Angeles, Madrid, Manchester, Mauritius, Melbourne,
Milan, Moscow, Mumbai, Munich, New York JFK, Paris, Perth, Port
Louis, Prague, Rome, San Francisco, Seoul, Shanghai, Singapore,
Sydney, Taipei, Toronto, Vienna, Washington, and Zurich. From 30
October 2016 Emirates upgraded its Dubai to Christchurch route from
a Boeing 777-300ER to an Airbus A380. The removal of the en-route
stop in Bangkok enables passengers to travel all the way between
Christchurch and Dubai with just one stop in Sydney, reducing the
journey time by about two hours in each direction. On 1 December
2016 Emirates upgraded one of the nine daily flights between Dubai
and Doha to an A380 service. It is the most served destination in
the airline's network. With a flying distance of only 379
kilometres each way, it is the world's shortest scheduled A380
flight, operated in a 3-class configuration with 519 seats in
total.
Johannesburg (South Africa) will complement Emirates' global
list of A380 destinations from February 1, 2017.
By mid-December 2016 the global A380 fleet consisted of 201
commercially operated planes in service. The thirteen operators are
Emirates (88), 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 (5). The
number of undelivered A380 orders stood at 120.
In November 2016 Malaysia Airlines (MAS) detailed its plans to
operate religious pilgrimage flights with its A380 fleet of six
aircraft. According to Peter Bellew, CEO of MAS, they are in the
process of setting up a subsidiary with a separate Malaysian air
operator certificate and it "should be fully operational by spring
2018". "MAS is already transporting Muslim pilgrims on charter
flights to Saudi Arabia very successfully and is in a good position
to cater for increased passenger demand on this route," Bellew
said. The operator will be run on sharia-compliant principles,
which include the use of Islamic financing instruments, but will
not be restricted to Hajj and Umrah business. Bellew also sees
opportunities to operate non-religious charters. Further demand
might come from existing A380 operators seeking temporary increases
in capacity during major overhaul events of their own fleet or for
certain periods during the year. To cover all these future business
opportunities Bellew suspects the initial fleet could grow to up to
twenty aircraft and might also include "the largest" Boeing 777s.
MAS plans to reconfigure its relatively young A380s to accommodate
up to 700 passengers, a capacity increase of more than 40% compared
to the 3-class configuration currently installed.
Also in November 2016 Emirates indicated that it will likely
seek to extend leases on its A380s. Asked about the probability of
using the aircraft beyond the 12 years the operator has typically
contracted, Emirates' senior vice president of corporate treasury
said "we want to keep it for a long time. The type has proven to be
a flexible platform" and is a core product for the airline.
Middle Eastern carrier Emirates is to defer delivery by twelve
months of 6 Airbus A380s which had been due to arrive in 2017 and 6
which had been due to arrive in 2018. The postponement follows an
agreement between Emirates and Rolls-Royce, which manufactures the
Trent 900 engine for the type.
Source: Ascend, CAPA, Emirates, FlightGlobal, New Straits
Times
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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