TIDMDNA
RNS Number : 2233C
Doric Nimrod Air One Limited
11 April 2017
QUARTERLY FACT SHEET
31 March 2017
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 March
2017) 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 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 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.
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) 54p 161p 157p 215p 211p
------------- --------------------- ----------- -------------- ----------- --------------
Current
FX Rate(6) 54p 204p 199p 258p 253p
------------- --------------------- ----------- -------------- ----------- --------------
(1) See final sentences in the second paragraph of
Investment Strategy
(2) Date of valuation: 31 March 2016
(3) Includes future dividends
(4) 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
(5) 1.5900 USD/GBP
(6) 1.2488 USD/GBP (31 March 2017)
II. Company Facts (31 March 2017)
Listing LSE
---------------------------- ---------------------------------
Ticker DNA
---------------------------- ---------------------------------
Current Share Price 115.5p (closing)
---------------------------- ---------------------------------
Market Capitalisation GBP 49 million
---------------------------- ---------------------------------
Initial Debt USD 122 million
---------------------------- ---------------------------------
Outstanding Debt USD 58.5 million (48% of Initial
Balance Debt)
---------------------------- ---------------------------------
Current/Future Anticipated 2.25p per quarter (9p per
Dividend annum)
---------------------------- ---------------------------------
Earned Dividends 54p
---------------------------- ---------------------------------
Current Dividend
Yield 7.79%
---------------------------- ---------------------------------
Dividend Payment April, July, October, January
Dates
---------------------------- ---------------------------------
Total Expense Ratio 1.5% (based on Average Net
Assets)
---------------------------- ---------------------------------
Currency GBP
---------------------------- ---------------------------------
Launch Date/Price 13 December 2010 / 100p
---------------------------- ---------------------------------
Remaining Lease Duration 5 years 9 month
---------------------------- ---------------------------------
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 Fund Solutions (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
---------------------------- ---------------------------------
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
February 2017, a total of 4,324 flight cycles were logged. Total
flight hours were 36,360. This equates to an average flight
duration of eight hours and 25 minutes.
The A380 owned by the Company visited Bangkok, Hong Kong,
Johannesburg, London Heathrow, Melbourne, Milan, New York JFK, and
Sydney during the first quarter of 2017.
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.
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
2017. The final report was not available at the editorial
deadline.
2. Market Overview
During 2016, passenger demand, measured in revenue passenger
kilometres (RPKs), increased by 6.3% compared to the year before.
Adjusted for the extra day, as 2016 was a leap year, traffic grew
by 6.0%. Growth was well ahead of its 5.5% ten-year-average. The
first half of the previous year was characterized by a combination
of high-profile terrorist attacks, political instability in many
parts of the world and subdued economic activity. However,
passenger demand significantly improved between June and December
2016. According to the International Air Transport Association
(IATA), passengers adapted to the uncertain environment. The
moderate upturn in the global economic cycle was another
contributing factor, which let RPKs grow at an annualized pace of
nearly 9% in the second half of 2016. That development persisted
beyond the end of 2016 with the strongest start to the year since
2005. In January 2017, RPKs grew by 9.6% compared to the same month
the year before. For the full year, IATA expects a demand growth of
5.5%, according to a report released in March. However, there is
uncertainty whether lower airfares will continue to fuel demand as
in the recent past. As oil prices have significantly increased,
since their 12-year low point reached in January 2016, further
leeway for lower-priced tickets is limited. For this reason, the
strength of the economic cycle will play an important role for the
pace of global passenger growth during the course of this year.
Passenger load factors were pushed to 80.5% during the calendar
year 2016, the highest annual average on record, improving
marginally on the record set in 2015. With minus 1.6 percentage
points, the Middle East recorded the largest decline in load
factors as the added capacity outstripped brisk demand. In January
2017, a worldwide passenger load factor of 80.2% was recorded, an
improvement of 1.2 percentage points compared to the same month the
year before and close to an all-time high. IATA estimates an
average worldwide passenger load factor of 79.8% for this year.
In 2016, a regional breakdown reveals that Middle East airlines,
including Emirates, continued to outperform the overall market
demand again last year. RPKs increased by 11.2% compared to the
year 2015. Asia/Pacific-based operators ranked second with 9.1%,
followed by Africa with 6.5%. Europe grew by 4.6%. 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 expected 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 this year. 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 is still 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, 2017. Air Passenger
Market Analysis December 2016 / Air Passenger Market Analysis
January 2017/ Press Release No. 11: Passenger Demand Growth Hits
Five-Year Peak in January. 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.
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.
In March 2017, Emirates' president Tim Clark provided guidance
on the results for the financial year ending on March 31, 2017:
Full-year results are expected to be below those of the 2014/15 and
2015/16 financial years, during which the carrier generated a net
income of USD 1.24 billion and USD 1.94 billion respectively.
Responding to an increased volatility of the business environment
Emirates is undertaking a "major exercise" to adjust its business
amid changing customer demand. "The world is in a high degree of
volatility for all sorts of reasons. And the way people travel,
their decision to be travelling, the amount of money they are
prepared to pay, new entrants coming to the market ... this is all
changing." Clark also said Emirates is evaluating the future
deployment of narrow body aircraft. But a strategic decision has
not been made so far.
During the calendar year 2016, the airline received 36 wide body
aircraft, consisting of 20 Airbus A380 and 16 Boeing 777-300ER. At
the same time, 29 older aircraft were retired. At year end, the
fleet had an average age of 5.0 years, well below the industry
average of over 11 years. Emirates placed its latest aircraft order
in April 2016. The pair of Airbus A380s, originally assigned to
Skymark Airlines, is scheduled to be delivered in the final quarter
of this year. Operating a young fleet not only minimizes Emirates'
carbon footprint, but it also enables the airline to put the latest
products and services on board its fleet.
In 2016, Emirates launched services to seven new passenger
points (Cebu and Clark in the Philippines, Yinchuan and Zhengzhou
in China, Yangon in Myanmar, Hanoi in Vietnam, Fort Lauderdale in
the US). The fleet's aircraft circled the globe more than 20,500
times during the year, carrying 55 million passengers on about
194,000 passenger flights. By year end, the global network spanned
154 destinations in 83 countries.
Sources: Emirates, FlightGlobal
4. Aircraft - A380
By the end of March 2017, Emirates operated a fleet of 94 A380s,
which currently serve 48 destinations from its Dubai hub:
Amsterdam, Auckland, Bangkok, Barcelona, Beijing, Birmingham,
Brisbane, Casablanca, Christchurch, Copenhagen, Doha, Dusseldorf,
Frankfurt, Guangzhou, Hong Kong, Jeddah, Johannesburg, 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, Sao Paulo, Seoul, Shanghai, Singapore, Sydney, Taipei,
Tokyo, Toronto, Vienna, Washington, and Zurich.
On 26 March 2017, Emirates launched three A380 destinations on
the same day. With the deployment of the superjumbo to Casablanca
and Sao Paulo, the airline is providing the first scheduled A380
services into Latin America and North Africa. Healthy demand for
travel between Dubai and Japan is the reason for reintroducing the
A380 to Tokyo-Narita. Another destination back on the A380 flight
schedule is Johannesburg, which was already served by an A380 for a
few months back in 2011/12. In the meantime, Dubai - Johannesburg
is the airline's busiest route in Africa with four daily services.
One of these is now operated by an A380.
At the end of March 2017, the global A380 fleet consisted of 210
commercially operated planes in service. The thirteen operators are
Emirates (94), Singapore Airlines (19), Deutsche Lufthansa (14),
Qantas (12), British Airways (12), Air France (10), Korean Airways
(10), Etihad Airways (9) Malaysia Airlines (6), Qatar Airways (7),
Thai Airways (6), China Southern Airlines (5), and Asiana (6). The
number of undelivered A380 orders stood at 109.
In December 2016 it became known that Iran Air had decided to
drop the 12 Airbus A380s from its Airbus order. Earlier that year,
the Iranian flag carrier had signed a heads of term agreement for
the acquisition of 118 aircraft in total, including 12 A380s. The
airline's chief executive officer Farhad Parvaresh attributes the
decision to shelve the order to a lack of infrastructure in the
country. He assumes that it might take another five to six years
until Iran will be able to accommodate high-density aircraft like
the A380.
As per Airbus' monthly-published order book update, Air France
finally decided to swap its two remaining A380 orders for three
Airbus A350 aircraft.
Airbus' president of commercial aircraft Fabrice Brégier is
convinced that the demand for A380 aircraft will rebound by 2020.
Considering the growth in international traffic in the next few
years, he expects an increasing level of airport congestion,
especially in Europe and the US. "So the trend is towards bigger
aircraft, and you will see, I'm sure, a second wave of A380
[procurement] when we reach this congestion."
In March 2017, Qatar Airways indicated that it does not intend
to exercise an option for another three A380s. The fleet currently
consists of seven aircraft and will grow by another three due for
delivery by 2018.
Sources: Ascend, Emirates, FlightGlobal, The Edge Financial
Daily
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
STREASLFFEFXEFF
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April 11, 2017 11:15 ET (15:15 GMT)
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