TIDMDNA
RNS Number : 9020K
Doric Nimrod Air One Limited
12 July 2017
QUARTERLY FACT SHEET
30 June 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 targets 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 June
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 2017. The table below summarises 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.
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.
With reference to 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:
I. Implied Future Total Return Components Based on
Appraisals
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(1) USD 104 million
==============================================================================================
Per Share Income Distributions Return of Capital Total Return(2)
--------------------- --------------------------- ---------------------------
Prospectus Latest Prospectus Latest
Appraisal Appraisal(3) Appraisal Appraisal(3)
--------------------- ----------- -------------- ----------- --------------
Prospectus
FX Rate(4) 52p 161p 153p 213p 204p
------------- --------------------- ----------- -------------- ----------- --------------
Current
FX Rate(5) 52p 196p 186p 248p 238p
------------- --------------------- ----------- -------------- ----------- --------------
(1) Date of valuation: 31 March 2017
(2) Includes future dividends
(3) 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
(4) 1.5900 USD/GBP
(5) 1.3003 USD/GBP (30 June 2017)
II. Company Facts (30 June 2017)
Listing LSE
---------------------------- ---------------------------------
Ticker DNA
---------------------------- ---------------------------------
Current Share Price 117.5p (closing)
---------------------------- ---------------------------------
Market Capitalisation GBP 49.9 million
---------------------------- ---------------------------------
Initial Debt USD 122 million
---------------------------- ---------------------------------
Outstanding Debt USD 55.5 million (46% of Initial
Balance Debt)
---------------------------- ---------------------------------
Current/Future Anticipated 2.25p per quarter (9p per
Dividend annum)
---------------------------- ---------------------------------
Earned Dividends 56.25p
---------------------------- ---------------------------------
Current Dividend
Yield 7.66%
---------------------------- ---------------------------------
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 6 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,
Canaccord Genuity 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 May
2017, a total of 4,491 flight cycles were logged. Total flight
hours were 37,675. This equates to an average flight duration of
eight hours and 25 minutes.
The A380 owned by the Company visited Auckland, Kuala Lumpur,
Melbourne, Milan, Moscow, and New York JFK during the second
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 lessee was again very helpful in the responses given to
the asset manager's technical staff, and the technical
documentation was found to be in good order.
2. Market Overview
The robust start to 2017 shows global revenue passenger
kilometres (RPKs) up by 7.9% between January and April 2017
compared to the same period in 2016. Adjusted for the extra day in
2016, due to the leap year, growth amounted to 8.7%, well ahead of
the long-run average RPK growth rate of 5.5%. According to the
International Air Transport Association (IATA), the boost in
passenger growth has been driven by a combination of a broad-based
pick-up in economic conditions, as well as lower airfares, which
helped stimulate passenger demand. The inflation-adjusted price of
air travel in the first quarter this year has been around 10% lower
than this time last year. Further, IATA stated that passenger
yields are bottoming out, which reflects an upward pressure on fuel
and non-fuel costs. Although IATA's data indicate that business
confidence remains at levels consistent with solid economic growth,
the upward trend in confidence looks to have paused, particularly
for the service sector. Though the biggest stimulus for demand is
unlikely to come from low oil prices, the strength of economic
condition is expected to be a key driver of passenger demand in H2
2017 and furthermore into 2018.
During the first four months of this year worldwide passenger
load factors (PLFs) averaged at 80.5%, an increase of 1.5
percentage points compared to the same period in the previous year.
At the same time passenger load factors in the Middle East were
unchanged at 75.5%. In April worldwide average PLFs reached 82.0
percent, a year-on-year improvement of 2.7 percentage points.
During this period PLFs in the Middle East increased year-on-year
by 1.2 percentage points to 76.3%. For the whole year IATA
estimates an average worldwide PLF of 80.6%.
RPKs flown by Middle Eastern airlines have continued to grow by
9.1% between January and April 2017 against the same period of the
previous year. However, recent developments on the Middle East to
North America market have shown disruptions due to a number of
factors, including the ban of personal electronic devices (PED)
entered into force in March and the impact on inbound travel to the
US due to travel bans. Nevertheless, travel demand in the Middle
East has increased by 10.8% in April compared with the same month
in the previous year and Gulf carriers have adapted quickly and
efficiently to this situation with solutions for their customers.
From the list of eight countries initially affected by the PED ban
Abu Dhabi was recently removed after Etihad Airways and Abu Dhabi
International Airport have implemented enhanced security measures
required by the US Transportation Security Administration and the
Department of Homeland Security. The same applies to Emirates
Airline (Dubai, UAE), Qatar Airways (Qatar), and Turkish Airlines
(Turkey), which are no longer affected by the PED ban.
Asia/Pacific-based operators outperformed the overall market demand
this year, surpassing the Middle East. Between January and April,
RPKs increased by 10.1% compared to previous period. Europe ranked
third with 8.8%. Africa grew by 8.0%. Latin American and North
American market participants recorded RPK growth of 6.6% and 3.4%
respectively.
Fuel continues to be the single largest operating cost item of
airlines and has a significant impact on the industry's
profitability. Jet fuel prices have started to rise with oil
prices, and IATA forecasts an average price of USD 64 per barrel of
jet fuel for this year, according to its latest report released in
June. This would be 23% higher compared to the previous year. Fuel
costs are set to represent 18.8% of average operating costs, a 1.8
percentage point reduction from 2016. The 2017 industry-wide net
profit has been slightly revised upward from USD 29.8 billion to an
estimated USD 31.4 billion, which equates to a net profit margin of
4.2%. Nevertheless, the level of profitability still ranks third
highest indicating a soft-landing brought about by changes to
industry structure and behaviour.
(c) International Air Transport Association, 2017. Air Passenger
Market Analysis April 2016/ Air Passenger Market Analysis April
2017 Economic Performance of the Airline Industry, 2017 Mid-Year
Report. All Rights Reserved. Available on the IATA Economics
page.
3. Lessee - Emirates Key Financials
In the 2016/17 financial year ending on 31 March 2017, Emirates
recorded the 29(th) consecutive year of profit with a net result of
USD 340 million (AED 1,250 million), down 82% compared to the
previous financial year. The net profit margin was 1.5%, down by 7
percentage points. Revenue for the period remained unchanged at USD
23.2 billion (AED 85.1 billion). However, lower results were to be
expected as Emirates' president Tim Clark hinted earlier in March
2017 that the increased volatility in the market had affected
Emirates' performance. His Highness Sheikh Ahmed bin Saeed Al
Maktoum, Chairman and Chief Executive of Emirates, listed a number
of destabilizing events, which impacted travel demand during the
year: the Brexit vote, Europe's immigration challenges and terror
attacks, new policies impacting air travel into the US, and
currency devaluation. He deemed the past fiscal year as "one of our
most challenging years to date".
In face of these challenges, Emirates increased its passenger
numbers, RPKs and cargo carried during the 2016/17 financial year.
Emirates carried a record 56.1 million passengers (8.1% more than
in the previous fiscal year), increased capacity for passengers
(measured in ASK) by 10.3% and increased RPKs by 8.4%. As a result,
the passenger seat factor dropped by 1.4 percentage points to
75.1%. In the 2016/17 annual report it was noted that seat factor
on the Emirates' A380 fleet was high - and a testament of the
customer preference for this aircraft. The share of passengers
carried on an A380 increased by 5 percentage points to 37%.
The costs resulting from the ongoing efforts to expand capacity
contributed to a 7.7% increase in operating costs. While fuel
prices fell by 2%, an 8% higher uplift in line with the capacity
increase led the airline's fuel bill to increase 6%. Fuel costs as
a percentage of operating costs only slightly decreased from 25.7%
to 25.4% during the reporting period, remaining the biggest cost
component for the airline, followed by personnel costs. The overall
increase in operating costs is marginally higher than the capacity
growth of 7.2%, measured in available tonne kilometre.
As of 31 March 2017, the balance sheet totalled USD 33.1 billion
(AED 121.6 billion), an increase of 2% compared to the previous
financial year. Total equity increased by 8.3% to USD 9.6 billion
(AED 35.1 billion) with an equity ratio of nearly 29%. The carrier
had a cash balance of USD 4.3 billion (AED 15.7 billion) at the end
of the period, down by USD 1.2 billion (AED 4.3 billion) compared
to the previous financial year. This included the repayment of
bullet bonds in the amount of USD 1.1 billion. The current ratio
stood at 0.73, meaning the airline would be able to meet nearly
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 13.9 billion - an increase of 1.8%
against the previous financial year.
In line with its strategy to increase capacity through a young
and efficient fleet, Emirates received a record of 35 wide-body
aircraft, consisting of 19 Airbus A380 and 16 Boeing 777-300ER,
during the 2016/2017 financial year. At the same time, the airline
also retired 27 older aircraft, bringing the average fleet age of 6
years 2 months down to 5 years 3 months, which is well below the
industry average of nearly 12 years. To fund its fleet growth,
Emirates raised USD 7.9 billion (AED 29.1 billion) during the
financial year through finance and operating leases as well as term
loans. Over the last ten years, the operator raised more than USD
47.3 billion (AED 173.7 billion) for aircraft financing.
In the 2016/17 financial year, Emirates launched services to six
new passenger points (Yinchuan and Zhengzhou in China, Yangon in
Myanmar, Hanoi in Vietnam, Fort Lauderdale and Newark in the US).
These new destinations add to Emirates' well-balanced regional
distribution, whereby no region represents more than 30 percent of
overall revenues. In line with increased demand, the operator added
frequencies and increased capacity to several existing destinations
of its global route network, which spanned 156 destinations in 83
countries by fiscal year end.
After Emirates' president earlier this year said he is
evaluating studies that include buying smaller single-aisle jets,
Tim Clark now looks to Flydubai for the carrier's single-aisle
ambitions. Flydubai is a Dubai-based low cost carrier with a fleet
of more than 50 Boeing 737-800 aircraft and is under the same
ownership as Emirates. "I think you'll see over the next 18 months
a smarter approach, a rationalisation of what we're doing - a
closer-knit working of the two airlines" states Tim Clark. Ruling
out any order for single-aisles from Emirates now, Tim Clark is
focused on the potential offered by the group's existing 737 fleet
with Flydubai. Potential synergies could include coordinated feeder
flights into each other's network and a better utilization of slots
at Dubai International Airport.
Source: ch-aviation, CNN, Emirates, FlightGlobal
4. Aircraft - A380
By the end of June 2017, Emirates operated a fleet of 95 A380s,
which currently serve 46 destinations from its Dubai hub:
Amsterdam, Auckland, Bangkok, Barcelona, Beijing, Birmingham,
Brisbane, Casablanca, Christchurch, Copenhagen, Dusseldorf,
Frankfurt, Guangzhou, Hong Kong, Johannesburg, Kuala Lumpur,
Kuwait, London Gatwick, London Heathrow, Los Angeles, Madrid,
Manchester, Mauritius, Melbourne, Milan, Moscow, Mumbai, Munich,
New York JFK, Paris, Perth, Prague, Rome, San Francisco, Sao Paulo,
Seoul, Shanghai, Singapore, Sydney, Taipei, Tokyo, Toronto, Vienna,
Washington, and Zurich. Nice and Phnom Penh are scheduled to become
an A380 destination on 1 July 2017.
On 29 October 2017, Emirates will launch a second daily A380
service between Dubai and Birmingham. The decision was based on the
high demand from passengers wanting to travel with the iconic
aircraft. A total of 300,000 passengers have already flown on the
aircraft between the two cities since 27 March 2016. Additionally,
due to the high customer demand, Emirates will replace the current
Boeing 777-300ER operations with two more superjumbos to Beijing
and Shanghai on 1 July 2017. This move will increase the capacity
and opportunity for passengers heading to either destination.
At the end of June 2017, the global A380 fleet consisted of 213
commercially operated planes in service. The thirteen operators are
Emirates (95), Singapore Airlines (19), Deutsche Lufthansa (14),
Qantas (12), British Airways (12), Air France (10), Korean Air
Lines (10), Etihad Airways (10) Malaysia Airlines (6), Qatar
Airways (8), Thai Airways (6), China Southern Airlines (5), and
Asiana Airlines (6). The number of undelivered A380 orders stood at
106.
Singapore Airlines confirmed that it will phase out four of its
oldest A380 superjumbo jets by the end of March 2018. These
aircraft, which were leased for a period of ten years, will be one
of the first to test the second hand market for these type.
However, Singapore Airlines will receive three new A380s by March
2018 and two more to be delivered during the remainder of 2018.
Qantas is planning on moving two A380s onto Asian routes in the
next year, once its Boeing 787-9s take over the services between
Melbourne and London in March 2018. The chief executive officer of
Qantas International, Gareth Evans, stated that the carrier plans
on using the additional capacity from the A380s during periods of
higher demand on its Asian network. The nominated destinations,
with high peak periods, include Singapore and Hong Kong.
As sluggish sales with the A380 also continue this year, Airbus
is studying opportunities for another cut in production beyond the
one aircraft per month, which is anyway envisaged from 2018
onwards. A decision is expected by the end of this year.
During the 2017 Paris Air Show in June, Airbus showcased the
development study A380plus to the public. It contains a package of
enhancements to the aircraft. The most obvious changes are
winglets, which will provide up to 4% reduction in fuel-burn. An
upgrade of the maximum take-off weight, changes in the maintenance
intervals and cabin densification initiatives already proposed
earlier this year, together with the changes to the wings, target a
cash operating cost reduction of 13%. The package, which contains
optional elements, will be available for entry into service by
2020, according to A380 marketing head Frank Vermeire.
At the sidelines of the Paris Air Show, Malaysia Airlines (MAS)
provided an update regarding the charter business with religious
pilgrimage flights which MAS intends to run in a subsidiary with a
separate Malaysian air operator certificate: "We've already signed
contracts in the last couple of weeks with operators to do a
significant amount of work", said Peter Bellew, CEO of MAS.
Furthermore, he is very positive about the future of the A380 in
general. "The airframes are spotless. I think these A380s are going
to be flying still in forty years' time, a bit like the 707s that
are still flying in America, nearly 55-60 years later. I think the
A380 will end up being like that." Due to the proliferation of
renewable energies Bellew expects the oil price levelling off at
USD 30 to 35 per barrel for ten years. At that point, an aircraft
like the A380 makes "incredible financial sense" from his point of
view, "because the fuel is not going to be the blocker in the
utilization of these aircraft".
Sources: Ascend, Aviation Week, Bloomberg, Emirates,
FlightGlobal, MarketWatch, Reuters
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
STREALXAFDKXEFF
(END) Dow Jones Newswires
July 12, 2017 10:40 ET (14:40 GMT)
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