TIDMDNA
RNS Number : 2946Z
Doric Nimrod Air One Limited
14 December 2017
DORIC NIMROD AIR ONE LIMITED (the "Company")
HALF-YEARLY FINANCIAL REPORT
The Board of the Company is pleased to announce its results for
the period from 1 April 2017 to 30 September 2017.
To view the Company's half yearly financial report please visit
the Company's website, http://www.dnairone.com.
In addition, to comply with DTR 6.3.5(1) please find below the
full text of the half yearly financial report.
Enquiries:
For further information, please contact:
For administrative and company information:
JTC Fund Solutions (Guernsey) Limited
+44 (0) 1481 702400
For shareholder information:
Nimrod Capital LLP
Richard Bolchover
Marc Gordon
+44 (0) 20 7382 4565
E&OE - in transmission
SUMMARY INFORMATION
Listing Specialist Fund Segment of the London
Stock
Exchange's Main Market
Ticker DNA
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Share Price 114.5p (as at 30 September 2017)
102.50p (as at 11 December 2017)
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Market Capitalisation GBP 48.6 million (as at 30 September
2017)
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Aircraft Registration Number A6-EDC
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Current/Future Anticipated Current dividends are 2.25p per quarter
Dividend per share (9p per annum) and it is anticipated
this will continue until the aircraft
lease terminates in 2022.
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Dividend Payment Dates April, July, October, January
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Currency Sterling
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Launch Date/Price 13 December 2010 / 100p
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Incorporation and Domicile Guernsey
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Asset Manager Doric GmbH
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Corporate & Shareholder Nimrod Capital LLP
Advisor
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Administrator JTC Fund Solutions (Guernsey) Limited
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Auditor Deloitte LLP
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Market Makers Canaccord Genuity Limited
Jefferies International Limited
Numis Securities Limited
Shore Capital Limited
Winterflood Securities Limited
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SEDOL, ISIN B4MF389, GG00B4MF3899
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Year End 31 March
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Stocks & Shares ISA Eligible
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Website www.dnairone.com
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COMPANY OVERVIEW
Doric Nimrod Air One Limited
Doric Nimrod Air One Limited (LSE Ticker: DNA) ("DNA" or the
"Company") is a Guernsey company incorporated on 8 October 2010.
Its shares were admitted to trading on the Specialist Fund Segment
("SFS") of the London Stock Exchange's Main Market ("LSE") on 13
December 2010.
The Company's total issued share capital currently consists of
42,450,000 Ordinary Preference Shares (the "Shares"). As at 11
December 2017, the latest practicable date prior to publication of
this report, the Shares are trading at 102.50 pence per Share.
Investment Objectives and Policy
The Company's investment objective is to obtain income returns
and a capital return for its shareholders (the "Shareholders") by
acquiring, leasing and then selling a single aircraft. The Company
purchased one Airbus A380-861 aircraft, manufacturers' serial
number 016 (the "Asset" or the "Aircraft") in December 2010 for USD
179m, which it leased (the "Lease") for twelve years to Emirates
Airline ("Emirates"), the national carrier owned by The Investment
Corporation of Dubai based in Dubai, United Arab Emirates.
Distribution Policy
The Company aims to provide its Shareholders with an attractive
total return comprising income, from distributions through the
period of the Company's ownership of the Asset, and capital, upon
the sale of the Asset.
The Company receives income from the lease rentals paid by
Emirates pursuant to the Lease. It is anticipated that income
distributions will be made quarterly, subject to compliance with
applicable laws and regulations. The Company currently targets a
distribution of 2.25 pence per Share per quarter. Emirates bears
all costs (including maintenance, repair and insurance) relating to
the Aircraft during the lifetime of the Lease.
There is no guarantee that dividends will be paid to
Shareholders, nor is there a guarantee of the timing or amount of
any such dividend. There is also no guarantee that the Company
will, at all times, satisfy the solvency test required by section
304 of the Law enabling the Directors to effect the payment of
dividends.
Performance Overview
All payments by Emirates, have to date been made in accordance
with the terms of the Lease.
During the period under review (the "Period") and in accordance
with the Distribution Policy the Company declared two interim
dividends of 2.25 pence per Share. One interim dividend of 2.25
pence per Share was declared after the reporting period. Further
details of these dividend payments can be found on page 24.
Return of Capital
If and when the Company is wound up (pursuant to a shareholder
resolution, including the liquidation resolution) the Company
intends to return to Shareholders the net capital proceeds upon the
eventual sale of the Asset subject to compliance with the Company's
Articles of Incorporation (the "Articles") and the applicable laws
(including any applicable requirements of the solvency test
contained therein).
Liquidation Resolution
Although the Company does not have a fixed life, the Articles
require that the Directors convene a General Meeting of the Company
six months before the end of the term of the Lease where an
ordinary resolution will be proposed that the Company proceed to an
orderly wind-up at the end of the term of the Lease and the
Directors will consider (and if necessary, propose to Shareholders)
alternatives for the future of the Company, including re-leasing
the Asset, or selling the Asset and reinvesting the capital
received from the sale of the Asset in another aircraft.
CHAIRMAN'S STATEMENT
I am very pleased to present Shareholders with the Company's
half-yearly financial report, covering the period from 1 April 2017
until 30 September 2017 ("the Period").
I am happy to report that during the Period the Company has
performed as anticipated and has declared and paid quarterly
dividends of 2.25p per share, as expected, representing 9p per
share annually.
The Company owns one Airbus A380, leased to Emirates. The lease
payments received by the Company from Emirates cover repayment of
the debt as well as income to pay operating expenses and dividends
to Shareholders. Emirates bears all costs (including maintenance,
repair and insurance) relating to the aircraft during the lifetime
of the lease.
The Company's Asset Manager, Doric GmbH, continues to monitor
the Lease and to report regularly to the Board. Nimrod Capital
LLP-, the Company's Corporate and Shareholder Advisor, continues to
liaise between the Board and Shareholders, and to distribute
quarterly fact sheets.
According to the International Air Transport Association
("IATA"), 2017 is on course to be another year of strong traffic
growth with data for the month of August (measured in total revenue
passenger kilometers or RPKs) showing demand climbed 7.9% during
the year to date while the load factor climbed 1.1 percentage
points to 81.7%. During the first half of 2017, premium passenger
demand growth was stronger than economy seat demand in a number of
markets, particularly across the Pacific and within Asia. This is
consistent with the recent pick-up in global trade conditions,
which tends to correlate well with premium travel demand. By
contrast, premium demand lagged behind its economy counterpart in a
number of cases, notably between Europe and the Middle East.
Over the past year Middle Eastern carriers have faced a
multitude of challenges, including geo-political turbulence in
various parts of the world, heightened concern about immigration on
an international scale and enhanced security procedures impacting
operations to the US. Fortunately, in the latter case, some of
these headwinds are starting to ease during the period with the US
laptop ban being lifted fully during July.
In July, Emirates announced that it is entering a broad
partnership with low-cost operator Flydubai, which will include a
codeshare and optimisation of the airlines' networks. Both carriers
are government-owned, and the move aims to reduce unnecessary
competition, enabling Emirates to benefit from Flydubai's
single-aisle operations. Between them, the airlines operate routes
to 216 cities with networks that overlap to an extent. However,
they expect to be serving 240 destinations as a combined operation
by 2022, with a total fleet of 380 aircraft.
The Board took note of a number of A380-related information and
events, which became available or took place after September 30,
2017. This includes the return of the first A380, previously
operated by Singapore Airlines, to its lessor. The aircraft is
temporarily stored in Southern France, with the four engines leased
to manufacturer Rolls-Royce. Furthermore, it was noted that
Emirates did not commit to purchase additional A380 aircraft so
far. It was widely expected that Emirates would sign a
corresponding agreement at the Dubai Air Show in November this
year. The Board and its Asset Manager continue to monitor these
developments carefully.In economic reality, the Company has also
performed well. Two interim dividends were declared in the
half-year and future dividends are targeted to be declared and paid
on a quarterly basis. However, as required by International
Financial Reporting Standards ("IFRS"), the financial statements do
not in the Board's view properly convey the economic reality due to
the accounting treatment for foreign exchange, rental income and
finance costs.
IFRS require that transactions denominated in US Dollars
(including, most importantly, the cost of the aircraft) are
translated into Sterling at the exchange rate ruling at the date of
the transaction whilst monetary items (principally the outstanding
borrowings) are translated at the rate prevailing on the reporting
date. The result is that the figures sometimes show very large
mismatches which are reported as unrealised foreign exchange
differences. When the lease matures and the debt is repaid these
foreign exchange differences will disappear.
On an on-going basis and assuming the lease and loan payments
are made as anticipated, such exchange differences do not reflect
the commercial substance of the situation in the sense that the key
transactions denominated in US Dollars are in fact closely matched.
Rental income received in US Dollars is used to pay loan repayments
due which are likewise denominated in US Dollars. US Dollar lease
rentals and loan repayments are furthermore fixed at the outset of
the Company's life and are very similar in amount and timing.
In addition to this, rental income receivable is credited evenly
to the Statement of Comprehensive Income over the planned life of
the Company. Conversely, the methodology for accounting for
interest cost means that the proportion of the loan repayments
which is treated as interest, and is debited to the Statement of
Comprehensive Income, varies over the course of the loan with a
higher proportion of interest expense recognised in earlier
periods, so that the differential between rental income and
interest cost (as reported in the Statement of Comprehensive
Income) reduces over the course of 12 years. In reality however,
the amount of rental income is fixed so as to closely match the
interest and principal components of each loan repayment instalment
and allow for payments of operating costs and dividends.
The Company produces a fact sheet on a quarterly basis which is
available on its website and which I encourage all shareholders to
view. On behalf of the Board, I would like to thank our service
providers for all their help and all shareholders for their
continuing support of the Company.
Charles Wilkinson
Chairman
ASSET MANAGER'S REPORT
At the request of the Directors of the Company, this commentary
has been provided by the Asset Manager of the Company.
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
September 2017, a total of 4,685 flight cycles were logged. Total
flight hours were 39,184. This equates to an average flight
duration of eight hours and 22 minutes. The A380 owned by the
Company visited Auckland, Dubai, Kuala Lumpur, Melbourne, Milan,
Moscow, Munich, and New York JFK during the first half of the
2017/18 financial year.
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 months 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
In the first seven months of 2017, global revenue passenger
kilometres (RPKs) grew by 7.7% compared to the same period in the
previous year. The robust end to 2016 provided for a favourable
start for RPK growth rates in 2017. However, IATA notes that the
upward trend in seasonally-adjusted (SA) passenger traffic has
slowed since the end of 2016. While industry-wide RPKs were growing
at an annualized rate of more than 12% coming into 2017, that
growth has begun to slow to around 6% over the past three months.
This annualized growth rate is between its five-year and ten-year
averages (6.4% and 5.5%, respectively).
During the first seven months of this year, industry-wide
available seat kilometres (ASKs) increased by 6.1%. As ASKs and
RPKs have trended upward at similar rates, the global passenger
load factor (PLF) rose by 1.2 percentage points in the first seven
months of 2017, resulting in a PLF of 81.3%. All regions, except
for the Middle East, recorded increases in PLF in the first seven
months of 2017 compared to the same period in 2016. PLF in the
Middle East decreased by 0.2 percentage points to 74.7% during this
period.
International RPKs flown by Middle Eastern airlines have grown
by 7.0% in the first seven months of 2017, compared with the
five-year average of 11.2%. Adjusting for the later timing of Eid
(the Muslim holiday at end of Ramadan)this year, which could have
led to a jump in July on a month-on-month basis, SA traffic volumes
are still level with where they started this year. In particular,
the Middle East to North America market continues to feel the
effects of a combination of factors, including the
(recently-lifted) ban on personal electronic devices (PED) as well
as the proposed travel bans to the US. Traffic growth on the
segment was already slowing in early-2017, in line with the slowing
growth rate of non-stop services flown by the largest Middle
Eastern airlines. However, in June, RPKs on these routes between
the Middle East and North America fell for the fourth consecutive
month in year-on-year terms (-6.8%).
With an RPK growth of 10.2% until July 2017 Asia/Pacific-based
operators outperformed the overall market demand this year. Europe
ranked second with 8.6% and Africa third with 7.7%, ahead of Latin
America (6.8%). With a combined domestic and international RPK
growth of 6.7% the Middle East reached the second-last place, with
North America achieving 3.9%.
For 2017, IATA forecasts that the airlines fuel bill will rise
to USD 129 billion and represent 18.8% of average operating costs.
As jet fuel prices have begun to rise with oil prices, IATA expects
an average price of USD 64 per barrel of jet fuel during 2017.
(c) International Air Transport Association, 2017. Air Passenger
Market Analysis July 2017, Air Passenger Market Analysis June 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 29th 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 the 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 by Emirates A380 aircraft 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% 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%.
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 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 number 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 six years two months down to five years three 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.
In June, the airline won the World's Best Inflight Entertainment
award for a record 13th year at this year's Skytrax World Airline
Awards, which are considered a global benchmark of airline
excellence. Nearly 20 million passengers reviewed over 320
airlines.
In July, Emirates announced that it is entering a broad
partnership with low-cost operator Flydubai, which will include a
codeshare and optimization of the airlines' networks. Both carriers
are government-owned, and the move aims to reduce unnecessary
competition, enabling Emirates to benefit from Flydubai's
single-aisle operations. Between them, the airlines operate routes
to 216 cities with networks that overlap to an extent. However,
they expect to be serving 240 destinations as a combined operation
by 2022, with a total fleet of 380 aircraft.
Source: ch-aviation, CNN, Emirates, FlightGlobal
4. Aircraft - A380
By mid-September 2017, Emirates operated a fleet of 97 A380s,
which currently serve 47 destinations within its global network via
its hub in Dubai. A380 destinations include: Amsterdam, Auckland,
Bangkok, Barcelona, Beijing, Birmingham, Brisbane, Casablanca,
Christchurch, Copenhagen, Doha, 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, Nice,
Paris, Perth, Prague, Rome, San Francisco, Sao Paulo, Seoul,
Shanghai, Singapore, Sydney, Taipei, Tokyo, Toronto, Vienna,
Washington, and Zurich.
As of mid-September 2017, the global A380 fleet consisted of 215
commercially operated planes in service. The 13 operators are
Emirates (97), Singapore Airlines (19), Deutsche Lufthansa (14),
Qantas (12), British Airways (12), Air France (ten), Korean Air
Lines (ten), Etihad Airways (ten) Malaysia Airlines (six), Qatar
Airways (eight), Thai Airways (six), China Southern Airlines
(five), and Asiana Airlines (six). The number of undelivered A380
orders stood at 102.
Singapore Airlines are taking delivery of five new A380s, three
by March 2018 and two during the remainder of 2018. However,
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 this type.
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. 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, the then CEO of MAS.
Furthermore, he was 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." 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".
Emirates expects the delivery of its 100th A380 later this year.
The increasing number of superjumbos allows the airline to increase
the number of A380 destinations as well as frequency on existing
routes: From March 2018, the carrier will add a fourth daily A380
service from Dubai to Sydney, which will increase the capacity for
Emirates' Australian services by more than 7%. Also from March
2018, the carrier will upgrade its third daily flight between Dubai
and Melbourne from a Boeing 777-300ER to an A380. From October this
year, Emirates will make its second daily flight to Moscow an A380
service. On 29 October 2017, Emirates launched 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 replaced the current
Boeing 777-300ER operations with two more superjumbos to Beijing
and Shanghai on 1 July 2017. This move increased the capacity and
opportunity for passengers heading to either destination. In August
2017, Emirates commenced Hajj services. The airline operated 45
additional flights to Jeddah and 12 additional flights to Medina
between 17 August 2017 and 11 September 2017, in addition to its
regular three time daily Jeddah and twice daily Medina frequencies.
The A380 was used to support the increased demand to Medina during
this time. Emirates anticipated a total of 2 million pilgrims
traveling to Mecca, 20,000 of which would fly with Emirates from
destinations such as Yangon, Manchester, Mauritius, Jakarta,
Karachi, Lagos and Nairobi.
Speaking during the Aviation Festival event in London on 7
September, Emirates president Tim Clark stated that the airline
will capitalize on its flexibility in order to compete with
long-haul, low-cost operators. Clark noted that Emirates' fleet of
97 A380s would enable the airline to "compartmentalise" by offering
"three or four economy classes" on the main deck alone. This would
allow Emirates to match long-haul, low-cost operators in their base
price while still being to offer additional enhancements.
This summer, Airbus presented a development study for an
enhanced A380, called "A380plus". It includes aerodynamic
improvements like large winglets. An optimised cabin layout would
allow up to 80 additional seats.
As a result of weak sales, Airbus announced that it will cut
A380 deliveries in 2019 to eight aircraft. The production rate for
2018 remains at 12 aircraft. Airbus is expecting only a relatively
small impact from the cut in production rate, as a result of its
continuing effort to bring down fixed costs associated with the
programme.
Source: Ascend, Aviation Week, Bloomberg, CAPA, Emirates,
FlightGlobal, iflyA380, MarketWatch, Reuters
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. 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.
Directors
Charles Edmund Wilkinson - Chairman (Age 74)
Charles Wilkinson is a solicitor who retired from Lawrence
Graham LLP in March 2005. While at Lawrence Graham he specialised
in corporate finance and commercial law, latterly concentrating on
investment trust and fund work.
Charles is currently Chairman of Doric Nimrod Air Three Limited,
Chairman of the Audit Committee of Doric Nimrod Air Two Limited,
and a Director of Landore Resources Ltd, a Guernsey based mining
exploration company. He is resident in Guernsey.
Norbert Bannon (Age 68)
Norbert Bannon is chairman of a large UK DB pension fund, a
major Irish DC pension scheme and is a Director of and advisor to a
number of other financial companies. He is Chairman of Doric Nimrod
Air Two Limited and Chairman of the Audit Committee of Doric Nimrod
Air Three Limited. He has extensive experience in international
finance having been CEO of banks in Singapore and New York. He was
CEO of Ireland's largest venture capital company and was Finance
Director and Chief Risk Officer at a leading investment bank in
Ireland. He has worked as a consultant on risk issues
internationally.
He earned a degree in economics from Queen's University, studied
at Stanford Graduate School of Business and is a Chartered
Accountant.
Geoffrey Alan Hall (Age 69)
Geoffrey Hall has extensive experience in investment management,
having previously been Chief Investment Officer of Allianz
Insurance plc, a major UK general insurance company and an
investment manager at HSBC Asset Management, County Investment
Management, and British Railways Pension Funds. Geoffrey is also
currently a Director of Doric Nimrod Air Two Limited and Doric
Nimrod Air Three Limited.
Geoffrey earned his masters degree in Geography at the
University of London. He is an associate of the CFA Society of the
UK.
John Le Prevost (Age 66)
John Le Prevost is the Chief Executive Officer of Anson Group
Limited and Chairman of Anson Registrars Limited (the Company's
Registrar). He has spent over 30 years working in offshore trusts
and investment business during which time he was Managing Director
of County NatWest Investment Management (Channel Islands) Limited,
Royal Bank of Canada's mutual fund company in Guernsey and Republic
National Bank of New York's international trust company. John is a
Director of Guaranteed Investment Products I PCC Limited,
Guernsey's largest protected cell company. He is a Director of a
number of other companies associated with Anson Group's business as
well as being a trustee of the Guernsey Sailing Trust. John is also
currently a Director of Doric Nimrod Air Two Limited, Doric Nimrod
Air Three Limited and Amedeo Air Four Plus Limited. He is resident
in Guernsey.
INTERIM MANAGEMENT REPORT
A description of important events which have occurred during the
Period, their impact on the performance of the Company as shown in
the financial statements and a description of the principal risks
and uncertainties facing the Company are given in the Chairman's
Statement, Asset Manager's Report, and the Notes to the financial
statements contained on pages 18 to 34 and are incorporated here by
reference.
There were no material related party transactions which took
place in the Period, other than those disclosed at Note 20 of the
Notes to the financial statements.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company are
unchanged from those disclosed in the Company's annual financial
report for the year ended 31 March 2017.
Going Concern
The Company's principal activities are set out within the
Company Overview on page 2. The financial position of the Company
is set out on pages 14 to 34. In addition, Note 17 to the financial
statements includes the Company's objectives, policies and
processes for managing its capital, its financial risk management
objectives and its exposures to credit risk and liquidity risk. The
loan interest rate has been fixed and the fixed rental income under
the Lease means that the rent should be sufficient to repay the
Loan and provide surplus income to pay for the Company's expenses
and permit payment of dividends.
After making reasonable enquiries, and as described above the
Directors have a reasonable expectation that the Company has
adequate resources to continue in its operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis of accounting in preparing these financial
statements.
Responsibility Statement
The Directors jointly and severally confirm that to the best of
their knowledge:
(a) The financial statements, prepared in accordance with IFRS
give a fair, balanced and understandable view of the assets,
liabilities, financial position and profits of the Company and
performance of the Company;
(b) This Interim Management Report includes or incorporates by
reference:
a. an indication of important events that have occurred during
the Period, and their impact on the financial statements;
b. a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
c. confirmation that there were no related party transactions in
the Period that have materially affected the financial position or
the performance of the Company during that period.
Signed on behalf of the Board of Directors of the Company on 13
December 2017
John Le Prevost
Director
STATEMENT OF COMPREHENSIVE INCOME
For the period from 01 April 2017 to 30 September 2017
1 Apr 2017 1 Apr 2016
to to
Notes 30 Sep 2017 30 Sep 2016
GBP GBP
INCOME
A rent income 4 5,215,075 4,942,607
B rent income 4 2,260,370 2,260,370
Bank interest received - -
------------------------ ------------------------
7,475,445 7,202,977
EXPENSES
Operating expenses 5 (308,782) (298,891)
Depreciation of Asset 9 (1,040,691) (2,033,265)
------------------------ ------------------------
(1,349,473) (2,332,156)
Net profit for the period before
finance costs and foreign exchange
gains/ (losses) 6,125,972 4,870,821
------------------------ ------------------------
Finance costs 10 (1,239,898) (1,483,899)
Net profit for the period after
finance costs before foreign
exchange gains/ (losses) 4,886,074 3,386,922
Unrealised foreign exchange
gains/ (losses) 17b 3,383,896 (5,609,317)
------------------------ ------------------------
Profit /(Loss) for the period 8,269,970 (2,222,395)
------------------------ ------------------------
Other Comprehensive Income - -
------------------------ ------------------------
Total Comprehensive Income
/(Loss) for the period 8,269,970 (2,222,395)
======================== ========================
Pence Pence
Earnings /(Loss) per Share
for the period - Basic and
Diluted 8 19.48 (5.24)
In arriving at the results for the financial period, all amounts
above relate to continuing operations.The notes on pages 18 to 34
form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2017
30 Sep 2017 31 Mar 2017
Notes GBP GBP
NON-CURRENT ASSETS
Aircraft 9 91,146,504 92,187,195
CURRENT ASSETS
Cash and cash equivalents 4,123,572 4,376,502
Accrued income 380,911 281,357
Receivables 12 6,583 12,684
4,511,066 4,670,543
--------------------- -------------------
TOTAL ASSETS 95,657,570 96,857,738
--------------------- -------------------
CURRENT LIABILITIES
Borrowings 14 9,492,655 9,856,765
Deferred income 10,894,680 10,973,695
Payables - due within one year 13 54,373 57,604
20,441,708 20,887,866
NON-CURRENT LIABILITIES
Borrowings 14 29,432,028 36,545,758
29,432,028 36,545,758
--------------------- -------------------
TOTAL LIABILITIES 49,873,736 57,433,624
--------------------- -------------------
TOTAL NET ASSETS 45,783,834 39,424,114
--------------------- -------------------
EQUITY
Share capital 15 39,016,728 39,016,728
Retained earnings 6,767,106 407,386
45,783,834 39,424,114
--------------------- -------------------
Pence Pence
Net asset value per Ordinary Preference Share
based
on 42,450,000 (Mar 2017: 42,450,000) shares
in issue 107.85 92.87
The financial statements were approved by the Board of Directors
and authorised for issue on
13 December 2017 and are signed on its behalf by:
John Le Prevost
Director
The notes on pages 18 to 34 form an integral part of these
financial statements.
STATEMENT OF CASH FLOWS
For the period from 01 April 2017 to 30
September 2017
1 Apr 2017 to 1 Apr 2016
Notes to
30 Sep 2017 30 Sep 2016
GBP GBP
OPERATING ACTIVITIES
Profit / (loss) for the period 8,269,970 (2,222,395)
Movement in deferred income 525,201 1,436,731
Depreciation of Asset 9 1,040,691 2,033,265
Loan interest 10 1,209,538 1,453,539
Decrease in payables (3,033) (2,412)
Decrease in receivables 6,101 6,733
Amortisation of debt arrangement
costs 10 30,360 30,360
Foreign exchange movement 17b (3,383,896) 5,609,317
---------------------- -------------------
NET CASH FROM OPERATING ACTIVITIES 7,694,932 8,345,138
---------------------- -------------------
FINANCING ACTIVITIES
Dividends paid 7 (1,910,250) (1,910,250)
Repayments of capital on borrowings (4,641,785) (4,250,166)
Repayments of interest on borrowings (1,206,906) (1,406,110)
---------------------- -------------------
NET CASH USED IN FINANCING ACTIVITIES (7,758,941) (7,566,526)
---------------------- -------------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 4,376,502 4,213,957
Increase in cash and cash equivalents (64,009) 778,612
Effects of foreign exchange rates (188,921) (609,572)
---------------------- -------------------
CASH AND CASH EQUIVALENTS AT
OF
PERIOD 4,123,572 4,382,997
---------------------- -------------------
The notes on pages 18 to 34 form an integral part of these
financial statements.
STATEMENT OF CHANGES IN EQUITY
For the period from 01 April 2017 to 30 September 2017
Notes Share Retained Total
Capital Earnings
GBP GBP GBP
Balance as at 1 April 2017 39,016,728 407,386 39,424,114
Total Comprehensive Income for
the period - 8,269,970 8,269,970
Dividends paid 7 - (1,910,250) (1,910,250)
------------------- ------------------ ----------------
Balance as at 30 September
2017 39,016,728 6,767,106 45,783,834
------------------- ------------------ ----------------
Notes Share Retained Total
Capital Earnings
GBP GBP GBP
Balance as at 1 April 2016 39,016,728 2,043,428 41,060,156
Total Comprehensive Income for
the period - 4,152,779 4,152,779
Dividends paid 7 - (1,910,250) (1,910,250)
------------------- ------------------ ----------------
Balance as at 30 September
2016 39,016,728 4,285,957 43,302,685
------------------- ------------------ ----------------
The notes on pages 18 to 34 form an integral part of these
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the period from 01 April 2017 to 30 September 2017
1 GENERAL INFORMATION
Doric Nimrod Air One Limited (the "Company") was incorporated in
Guernsey on 8 October 2010 with registered number 52484. Its share
capital consists of one class of Ordinary Preference Shares and one
class of Subordinated Administrative Shares. The Company's Ordinary
Preference Shares have been admitted to trading on the SFS of the
LSE. The Company delisted from Channel Islands Securities Exchange
("CISEA") on the 5 September 2014.
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.
2 ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are
as follows:
(a) Basis of Preparation
The financial statements have been prepared in conformity with
the International Accounting Standard 34 Interim Financial
Reporting as adopted by the European Union, and applicable Guernsey
law. The financial statements have been prepared on a historical
cost basis.
This report is to be read in conjunction with the annual report
for the year ended 31 March 2017 which is prepared in accordance
with the International Financial Reporting Standards adopted by the
European Union and any public announcements made by the Company
during the interim reporting period.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards as set out
below:
Changes in accounting policies and disclosure
The following Standards or Interpretations have been adopted in
the current period. Their adoption has not had any impact on the
amounts reported in these financial statements and is not expected
to have any impact on future financial periods:
IAS 7 Statement of Cash Flows - amendments resulting from the
disclosure initiative effective for annual periods beginning on or
after 1 January 2017 (and was endorsement by the EU in November
2017). The amendments require entities to provide disclosures about
changes in their liabilities arising from financing activities,
including both changes arising from cash flows and non-cash changes
(such as foreign exchange gains or losses). On initial application
of the amendment, entities are not required to provide comparative
information for preceding periods. The Group is not required to
provide additional disclosures in its consolidated half yearly
financial statements, but will disclose additional information in
its annual consolidated financial statements for the year ended 31
March 2018.
The following Standards or Interpretations, which are expected
to affect the Company, have been issued but not yet adopted by the
Company. Other Standards or Interpretations issued by the
International Accounting Standards Board ("IASB") and International
Financial Reporting Standards Interpretations Committee ("IFRIC")
are not expected to affect the Company.
IFRS 9 Financial Instruments - finalised version, incorporating
requirements for classification and measurement, impairment,
general hedge accounting and derecognition. There is no mandatory
effective date, however the IASB has tentatively proposed that this
will be effective for accounting periods commencing on or after 1
January 2018 (EU endorsement is outstanding).
IFRS 15 Revenue from contracts with customers - deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has
the ability to direct the use and obtain the benefits from the good
or service. The standard replaces IAS 18 'Revenue' and IAS 11
'Construction contracts', related interpretations and is endorsed
by the EU. The standard is effective for a period beginning on or
after 1 January 2018.
IFRS 16 Leases - specifies how an IFRS reporter will recognise,
measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise
assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value. Lessors
continue to classify leases as operating or finance, with IFRS 16's
approach to lessor accounting substantially unchanged from its
predecessor, IAS 17 (EU endorsement is outstanding) and is
effective for annual periods beginning on or after 1 January
2019.
IFRIC 22 'Foreign currency transactions and advance
consideration' - this IFRIC addresses foreign currency transactions
or parts of transactions where there is consideration that is
denominated or priced in a foreign currency. The interpretation
provides guidance for when a single payment/receipt is made as well
as for situations where multiple payments/receipts are made. The
guidance aims to reduce diversity in practice and is effective for
annual periods beginning on or after 1 January 2018 (EU endorsement
is outstanding).
The Directors have considered the above and are of the opinion
that the above Standards and Interpretations are not expected to
have an impact on the Company's financial statements except for the
presentation of additional disclosures and changes to the
presentation of components of the financial statements. These items
will be applied in the first financial period for which they are
required.
(b)Taxation
The Company has been assessed for tax at the Guernsey standard
rate of 0%.
(c) Share Capital
Ordinary Preference Shares (the "Shares") are classified as
equity. Incremental costs directly attributable to the issue of
Shares are recognised as a deduction from equity.
(d) Expenses
All expenses are accounted for on an accruals basis.
(e) Interest Income
Interest income is accounted for on an accruals basis.
(f) Foreign Currency Translation
The currency of the primary economic environment in which the
Company operates (the functional currency) is Great British Pounds
("GBP" or "GBP") which is also the presentation currency.
Transactions denominated in foreign currencies are translated
into GBP at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into the functional
currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
Statement of Comprehensive Income.
(g) Cash and Cash Equivalents
Cash at bank and short term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits with a term of no more than 3 months
from the start of the deposit and highly liquid investments readily
convertible to known amounts of cash and subject to insignificant
risk of changes in value.
(h) Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being acquiring, leasing and selling
of one Airbus A380-861 aircraft (the "Asset").
(i) Going Concern
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. The Directors
believe the Company is well placed to manage its business risks
successfully despite the current economic climate as the interest
on the Company's loan has been fixed and the fixed rental income
under the operating lease means that the rents should be sufficient
to repay the loan and provide surplus income to pay for the
Company's expenses and permit payment of dividends. Accordingly,
the Directors have adopted the going concern basis in preparing the
financial information. The Board is not aware of any material
uncertainty that may cast significant doubt upon the Company's
ability to continue as a going concern.
(j) Leasing and Rental Income
The lease relating to the Asset has been classified as an
operating lease as the terms of the lease do not transfer
substantially all the risks and rewards of ownership to the lessee.
The Asset is shown as a non-current asset in the Statement of
Financial Position. Further details of the lease are given in Note
11.
Rental income and advance lease payments from the operating
lease are recognised on a straight-line basis over the term of the
lease. Initial direct costs incurred in negotiating and arranging
an operating lease are added to the carrying amount of the leased
asset and recognised in profit or loss on a straight-line basis
over the lease term.
(k) Property, Plant and Equipment - Aircraft
In line with IAS 16 Property Plant and Equipment, the Asset is
initially recorded at the fair value of the consideration paid. The
cost of the Asset is made up of the purchase price of the Asset
plus any costs directly attributable to bringing it into working
condition for its intended use. Costs incurred by the lessee in
maintaining, repairing or enhancing the aircraft are not recognised
as they do not form part of the costs to the Company. Accumulated
depreciation and any recognised impairment loss are deducted from
cost to calculate the carrying amount of the Asset.
Depreciation is recognised so as to write off the cost of the
Asset less the estimated residual value of GBP80.4 million over the
estimated useful life of the Asset of 12 years, using the
straight-line method. Residual values have been arrived at by
taking into account disposition fees. The depreciation method
reflects the pattern of benefit consumption. The residual value is
reviewed annually and is the amount the Company would receive
currently if the asset were already of the age and condition
expected at the end of its useful life. Useful life is also
reviewed annually and, for the purposes of the financial
statements, represents the likely period of the Company's ownership
of the Asset. Depreciation starts when the Asset is available for
use.
At each audited statement of financial position date, the
Company reviews the carrying amounts of the Asset to determine
whether there is any indication that the Asset has suffered any
impairment loss. If any such indication exists, the recoverable
amount of the Asset is estimated to determine the extent of the
impairment loss (if any).
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the Asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of the Asset is estimated to be less
than its carrying amount, the carrying amount of the Asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the Asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the Asset in prior years. A
reversal of an impairment loss is recognised immediately in profit
or loss.
(l) Financial Liabilities
Financial liabilities consist of payables and borrowings. The
classification of financial liabilities at initial recognition
depends on the purpose for which the financial liability was issued
and its characteristics. All financial liabilities are initially
measured at fair value, net of transaction costs. All financial
liabilities are recorded on the date on which the Company becomes
party to the contractual requirements of the financial liability.
Financial liabilities are subsequently measured at amortised cost
using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the
amortised cost of the financial liability and of allocating
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or,
where appropriate, a shorter period, to the net carrying amount on
initial recognition.
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire.
3. SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the application of the Company's accounting policies, which
are described in Note 2, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The following are the critical judgements and estimates, that
the Directors have made in the process of applying the Company's
accounting policies and that have the most significant effect on
the amounts recognised in financial statements.
Residual Value and Useful Life of the Asset
As described in Note 2 (k), the Company depreciates the Asset on
a straight line basis over the estimated useful life of the Asset
and taking into consideration the estimated residual value. IAS 16
Property, Plant and Equipment requires residual value to be
determined as an estimate of the amount that the Company would
currently obtain from the disposal of the asset, after deducting
the estimated costs of disposal, if the Asset were of the age and
condition expected at the end of its useful life. However, there
are currently no aircraft of a similar type of sufficient age for
the Directors to make a direct market comparison in making this
estimation. After consulting with the Asset Manager, the Directors
have concluded that a forecast market value for the aircraft at the
end of its useful life (including inflationary effects) best
approximates residual value In estimating residual value, the
Directors have made reference to forecast market values for the
aircraft obtained from 3 independent expert aircraft valuers and
determined that the residual value of the asset was USD 104 million
at the 2017 year end (2016: USD 110 million, as determined per the
initial appraisal at inception).
If the estimate of residual value had been decreased by 20% with
effect from the beginning of this period, the net profit for the
period and closing shareholders' equity would have decreased by
approximately GBP1.2 million. An increase in residual value by 20%
would have an equal but opposite effect. This reflects the range of
estimates of residual value that the Directors believe would be
reasonable at this time. The useful life of each Asset, for the
purpose of depreciation of the asset under IAS 16, is estimated
based on the expected period for which the Group will own and lease
the Aircraft. The Board of directors expects that the Aircraft will
have a working life far in excess of this period.
Operating Lease Commitments - Company as Lessor
The Company has entered into a lease on the Asset. The Company
has determined, based on an evaluation of the terms and conditions
of the arrangements, that it retains all the significant risks and
rewards of ownership of this asset and accounts for the contract as
an operating lease.
The Company has determined that the operating lease on the Asset
is for 12 years without an extension option.
Impairment
As described in Note 2 (k), impairment exists when the carrying
value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs to sell
and its value in use. The Directors review the carrying amounts of
its Assets at each audited Consolidated Statement of Financial
Position date and monitor the Assets for any indications of
impairment as required by IAS 16 Property, Plant and Equipment and
IAS 36 Impairment of Assets.
At the 31 March 2017 year end the Directors reviewed the
carrying value of the Asset and concluded that there was no
indication of an impairment.
4. RENTAL INCOME
1 Apr 2017 1 Apr 2016
to to
30 Sep 2017 30 Sep 2016
GBP GBP
A rent income 5,839,830 6,478,892
Revenue received but not yet earned (624,755) (1,536,285)
---------------- ------------
5,215,075 4,942,607
B rent income 2,160,816 2,160,816
Revenue earned but not yet received 99,554 99,554
-------------------- -----------------
2,260,370 2,260,370
Total rental income 7,475,445 7,202,977
------------------ ------------------
Rental income is derived from the leasing of the Asset. Rent is
split into A rent, which is received in US Dollars ("USD" or "$")
and B rent, which is received in GBP. Rental income received in USD
is translated into the functional currency (GBP) at the date of the
transaction.
A and B rental income receivable will decrease / increase
respectively, 10 years from the start of the lease. An adjustment
has been made to spread the actual total income receivable evenly
over the term of the lease.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period from 01 April 2017 to 30 September 2017
5 OPERATING EXPENSES
1 Apr 2017 to 1 Apr 2016
30 Sep 2017 to
GBP 30 Sep 2016
GBP
Corporate shareholder and adviser
fee 57,142 55,884
Asset management fee 148,403 145,115
Administration fees 30,650 30,426
Accountancy fees 5,465 5,345
Registrars fee 4,907 4,909
Audit fee 10,500 10,050
Directors' remuneration 34,000 34,000
Directors' and Officers'
insurance 4,037 4,020
Legal & professional
expenses 1,200 238
Annual fees 3,514 2,707
Sundry costs 8,964 6,197
308,782 298,891
------------------------------ ------------------
6 DIRECTORS' REMUNERATION
Under their terms of appointment, each Director is paid a fee of
GBP15,000 per annum by the Company, except for the Chairman, who
receives GBP20,000 per annum. The Chairman of the audit committee
also receives an extra GBP3,000 per annum.
7 DIVIDS IN RESPECT OF EQUITY SHARES
01 Apr 2017 to
30 Sep 2017
GBP Pence per
share
First interim dividend 955,125 2.25
Second interim dividend 955,125 2.25
------------------- -------------------
1,910,250 4.50
------------------- -------------------
01 Apr 2016 to
30 Sep 2016
GBP Pence per
share
First interim dividend 955,125 2.25
Second interim dividend 955,125 2.25
------------------- -------------------
1,910,250 4.50
------------------- -------------------
8 EARNINGS / (LOSS) PER SHARE
Earnings / (Loss) per Share ('EPS' / 'LPS') is based on the net
profit for the period attributable to Shareholders of GBP8,269,970
(30 Sep 2016: net loss for the period of GBP2,222,395) and
42,450,000 Shares (30 Sep 2016: 42,450,000) being the weighted
average number of Shares in issue during the period. There are no
dilutive instruments and therefore basic and diluted (loss) /
earnings per Share are identical.
9 PROPERTY, PLANT AND EQUIPMENT - AIRCRAFT
COST Aircraft
As at 1 Apr 2017 GBP
114,532,547
----------------
As at 30 Sep 2017 114,532,547
----------------
ACCUMULATED DEPRECIATION
As at 1 Apr 2017 22,345,352
Charge for the period 1,040,691
----------------
As at 30 Sep 2017 23,386,043
----------------
CARRYING AMOUNT
As at 31 Mar 2017 92,187,195
----------------
As at 30 Sep 2017 91,146,504
----------------
The cost in USD and the exchange rates at acquisition
for the aircraft was as follows:
Cost in USD 178,549,805
GBP/USD exchange rate 1.5502
Following review of the aircraft's projected residual value,
using the valuers and methodology set out in Note 3, whilst the
underlying USD residual value of the aircraft has stayed at a
similar level, the GBP value converted at the 2017 year end GBP
exchange rate increased by GBP13,272,539. The directors already
adjusted the residual value for this movement at the 2017 year end.
The adjusted residual value has resulted in a decrease of
GBP992,574 in the depreciation charge at 30 September 2017 from the
comparative period as shown in the Statement of Comprehensive
Income.
The Company cannot sell the Asset during the term of the Lease
without terminating the Lease or Special Termination Events (as
defined by the Lease) occurring. If at the end of the Lease the
Company makes the choice to sell the Asset rather than leasing it
out again, Emirates will be given first refusal to purchase the
Asset at an independently appraised market value.
Under IAS 17 Leases the direct costs attributed in negotiating
and arranging the Lease have been added to the carrying amount of
the Asset and therefore will be recognised as an expense over the
lease term.
10 FINANCE COSTS
1 Apr 2017 1 Apr 2016
to to
30 Sep 2017 30 Sep 2016
GBP GBP
Amortisation of debt arrangement
costs 30,360 30,360
Loan interest 1,209,538 1,453,539
------------ ------------
1,239,898 1,483,899
------------ ------------
11 OPERATING LEASES
The amounts of minimum future lease receipts at the reporting
date under non cancellable operating leases are detailed below:
30 September 2017 After 5
Next 12 1 to 5 years Total
months years
GBP GBP GBP GBP
Aircraft - A rental
payments 11,394,269 30,554,160 - 41,948,429
Aircraft - B rental
payments 4,321,632 19,564,656 - 23,886,288
----------- ----------- ---------- -----------
15,715,901 50,118,816 - 65,834,717
----------- ----------- ---------- -----------
31 March 2017 1 to 5 After 5
Next 12 years years Total
months
GBP GBP GBP GBP
Aircraft- A rental
payments 12,164,199 36,628,190 2,072,583 50,864,972
Aircraft - B rental
payments 4,321,632 18,995,195 2,730,348 26,047,104
----------- ----------- ---------- -----------
16,485,831 55,623,314 4,802,931 76,912,076
----------- ----------- ---------- -----------
The operating lease is for an Airbus A380-861 aircraft. The term
of the lease is for 12 years ending December 2022 with reduced
rental payments in the last two years and no extension option.
At the end of the lease term the lessee has the right to
exercise an option to purchase the Asset if the Company chooses to
sell the Asset. If a purchase option event occurs the Company and
the lessee will be required to arrange for a current market value
appraisal of the Asset to be carried out by three independent
appraisers. The purchase price will be equal to the average
valuation of those three appraisals.
12 RECEIVABLES
30 Sep 2017 31 Mar 2017
GBP GBP
Prepayments 6,572 12,673
Sundry debtors 11 11
6,583 12,684
----------------------- --------------------
The above carrying value of receivables is equivalent to its
fair value.
13 PAYABLES (amounts falling due within one year)
30 Sep 2017 31 Mar 2017
GBP GBP
Accrued administration
fees 6,027 5,918
Accrued audit fee 11,100 13,700
Accrued corporate shareholder and
adviser fees 28,571 28,571
Other accrued expenses 8,675 9,217
54,373 57,406
------------ ------------
The above carrying value of payables is equivalent to its fair
value.
14 BORROWINGS
TOTAL TOTAL
30 Sep 2017 31 Mar 2017
GBP GBP
Bank loan 39,239,896 46,748,096
Transaction
costs (315,213) (345,573)
38,924,683 46,402,523
------------ ------------
Current portion 9,492,655 9,856,765
============ ============
Non-current
portion 29,432,028 36,545,758
============ ============
Notwithstanding the fact that GBP4.6 million capital has been
repaid during the period, as per the Statement of Cash Flow, the
value of the borrowings has decreased by circa GBP7.5 million due
to the 6% increase in the GBP/USD exchange rate from 1 April 2017
to 30 September 2017.
The amounts below detail the future contractual undiscounted
cashflows in respect of the loan, including both the principal and
interest payments, and will not agree directly to the amounts
recognised in the Statement of Financial Position:
Amount due for settlement within 12
months 11,462,837 10,694,523
----------------- --------------
Amount due for settlement after 12 months 32,539,280 46,401,805
----------------- --------------
14 BORROWINGS (continued)
The loan was arranged with Westpac Banking Corporation
("Westpac") for USD 122,000,000, runs for 12 years until December
2022, and has an effective interest rate of 5.4950%, which is the
same as the contractual fixed interest rate. The loan is secured on
the Asset. No breaches or defaults occurred in the Period.
Transaction costs of arranging the loan have been deducted from the
carrying amount of the loan and will be amortised over its
life.
In the Directors' opinion, the above carrying value of the bank
loan is approximate to its fair value.
15 SHARE CAPITAL
The Share Capital of the Company is represented by an unlimited
number of shares of no par value being issued or reclassified by
the Company as Ordinary Preference Shares ("Shares") or
Subordinated Administrative Shares.
Issued Subordinated Ordinary
Administrative Preference
Shares Shares
Shares issued at incorporation - 1
Shares issued 11 October 2010 - 4,000,000
Shares issued 1 December 2010 - 1,000,000
Shares redeemed 1 December 2010 - (2,175,001)
Shares issued 6 December 2010 2 -
Shares issued in Placing - 39,625,000
------------------------ ----------------------
Issued shares as at 30 September
2017 & 31 March 2017 2 42,450,000
GBP
Ordinary Preference Shares
1,825,000 Shares issued prior to Placing -
Fair value 91,260
1,000,000 Shares issued prior to Placing -
Fair value 250,010
39,625,000 Shares issued in Placing 39,625,000
Share issue costs (949,544)
---------------------
Issued Share Capital as at 30 September 2017
& 31 March 2017 39,016,726
Subordinated Administrative Shares
Shares issued 6 December 2010 2
---------------------
Total Share Capital as at 30 September 2017
& 31 March 2017 39,016,728
=====================
Members holding Ordinary Preference Shares are entitled to
receive, and participate in, any dividends out of income; other
distributions of the Company available for such purposes and
resolved to be distributed in respect of any accounting period; or
other income or right to participate therein. On a winding up,
members are entitled to the surplus assets remaining after payment
of all the creditors of the Company. Members have the right to
receive notice of and to attend, speak and vote at general meetings
of the Company.
The holders of Subordinated Administrative Shares are not
entitled to receive, and participate in, any dividends out of
income; other distributions of the Company available for such
purposes and resolved to be distributed in respect of any
accounting period; or other income or right to participate therein.
On a winding up, holders are entitled to a return of capital paid
up on them after the Ordinary Preference Shares have received a
return of their capital paid up but ahead of the return of all
additional capital to the holders of Ordinary Preference Shares.
Holders of Subordinated Administrative Shares shall not have the
right to receive notice of and shall have no right to attend, speak
and vote at general meetings of the Company, except for the
Liquidation Proposal Meeting (general meeting convened six months
before the end term of the Lease where the Liquidation Resolution
will be proposed) or if there are no Ordinary Preference Shares in
existence.
The Ordinary Preference Shares are not puttable instruments as
the holder does not have the right to put the Shares back to the
Company for cash or another financial instrument.
16. FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the
Company's operations;
(b) and Loan secured on non-current asset.
17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's objective is to obtain income returns and a
capital return for its Shareholders by acquiring, leasing and then
selling a single aircraft.
The following table details the categories of financial assets
and liabilities held by the Company at the reporting date:
30 Sep 2017 31 Mar 2017
GBP GBP
Financial assets
Cash and cash equivalents 4,213,572 4,376,502
Receivables (excluding prepayments) 11 11
----------------------- ------------
Financial assets at amortised cost 4,213,583 4,376,513
----------------------- ------------
Financial liabilities
Payables 54,372 57,406
Loans payable 38,924,682 46,402,523
----------------------- ------------
Financial liabilities measured at amortised
cost 38,979,054 46,459,929
----------------------- ------------
The main risks arising from the Company's financial instruments
are capital management risk, foreign currency risk, credit risk,
liquidity risk and interest rate risk. The Board regularly reviews
and agrees policies for managing each of these risks and these are
summarised below:
(a) Capital Management
The Company manages its capital to ensure that the Company will
be able to continue as a going concern while maximising the return
to Shareholders through the optimisation of the debt and equity
balance. The Company is not subject to any externally imposed
capital requirements.
The capital structure of the Company consists of debt, which
includes the borrowings disclosed in Note 14, cash and cash
equivalents and equity attributable to equity holders, comprising
issued capital and retained earnings.
The Company's Board of Directors reviews the capital structure
on a bi-annual basis. Equity includes all capital and reserves of
the Company that are managed as capital.
(b) Foreign Currency Risk
The Company's accounting policy under IFRS requires the use of a
GBP historic cost of the Asset and the value of the USD loan as
translated at the spot exchange rate on every statement of
financial position date. In addition, USD operating lease
receivables are not immediately recognised in the Statement of
Financial Position and are accrued over the period of the Lease.
The Directors consider that this introduces artificial variance due
to the movement over time of foreign exchange rates. In actuality,
the USD operating lease receivables should offset the USD payables
on amortising loans. The foreign exchange exposure in relation to
the loan is thus largely naturally hedged.
Lease rentals (as detailed in Notes 4 and 11) are received in
USD and GBP. Those lease rentals received in USD are used to pay
the loan repayments due, also in USD. Both USD lease rentals and
loan repayments are fixed and are for similar sums and similar
timings. The matching of lease rentals to settle loan repayments
therefore mitigates risks caused by foreign exchange
fluctuations.
The carrying amounts of the Company's foreign currency
denominated monetary assets and liabilities at the reporting date
are as follows:
30 Sep 2017 31 Mar 2017
GBP GBP
Bank loan (USD) - liabilities (39,239,895) (46,748,096)
Cash and cash equivalents (USD) -
assets 2,385,555 2,583,362
================== =============
The following table details the Company's sensitivity to a 25
per cent (31 March 2017: 25 per cent) appreciation of GBP against
USD 25 per cent (31 March 2017: 25 per cent) represents the
Directors' assessment of the reasonably possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their
translation at the period end for a 25 per cent (31 March 2017: 25
per cent) change in foreign currency rates. A positive number below
indicates an increase in profit and equity where GBP strengthens 25
per cent (31 March 2017: 25 per cent) against USD. For a 25 per
cent (31 March 2017: 25 per cent) weakening of GBP against USD,
there would be a comparable but opposite impact on the profit and
equity.
30 September
2017 31 March 2017
USD impact USD impact
GBP GBP
Profit or loss 7,370,868 8,832,947
Assets (477,111) (516,672)
Liabilities 7,847,979 9,349,619
============= ==============
On the eventual sale of the Asset, the Company may be subject to
foreign currency risk if the sale was made in a currency other than
GBP. Transactions in similar assets are typically priced in
USD.
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company.
The credit risk on cash transactions are mitigated by
transacting with counterparties that are regulated entities subject
to prudential supervision, or with high credit ratings assigned by
international credit rating agencies.
The Company's financial assets exposed to credit risk are as
follows:
30 Sep 2017 31 Mar 2017
GBP GBP
Receivables (excluding prepayments) 11 11
Cash and cash equivalents 4,213,572 4,376,502
4,213,583 4,376,513
----------------------- --------------------
Surplus cash is held in accounts with Barclays and Westpac
Banking Corporation, which have credit ratings given by Moody's of
A1 (negative) and Aa2 (negative) respectively. The banks are shown
as having negative rating, as the ratings are currently under
review by Moody's with the near term possibility of a
downgrade.
There is a contractual credit risk arising from the possibility
that the lessee may default on the lease payments. This risk is
mitigated, as under the terms of the lease agreements between the
lessee and the Company, any non-payment of the lease rentals
constitutes a Special Termination Event, under which the lease
terminates and the Company may either choose to sell the Asset or
lease it to another party.
At the inception of the Lease, the Company selected a lessee
with a strong balance sheet and financial outlook. The financial
strength of Emirates is regularly reviewed by the Board and the
Asset Manager.
(d) Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments. The Company's main financial commitments are
its ongoing operating expenses and loan repayments to Westpac.
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which established an appropriate liquidity
management framework at the incorporation of the Company, through
the timings of lease rentals and loan repayments. The Company
manages liquidity risk by maintaining adequate reserves, banking
facilities and borrowing facilities, by monitoring forecast and
actual cash flows, and by matching profiles of financial assets and
liabilities.
The table below details the residual contractual maturities of
financial liabilities, including estimated interest payments. The
amounts below are contractual undiscounted cash flows, including
both principal and interest payments, and will not agree directly
to the amounts recognised in the Statement of Financial
Position.
30 Sep 2017 1-3 months 3-12 months 1-2 years 2-5 years over 5 years
GBP GBP GBP GBP GBP
Financial
liabilities
Payables -
due
within one
year 53,620 - - - -
Loans
payable 2,959,819 8,879,457 11,839,276 29,251,933 4,355,936
3,013,439 8,879,457 11,839,276 29,251,933 4,355,936
-------------- -------------------- ------------------- ------------------------ ----------------------
31 Mar 2017 1-3 months 3-12 months 1-2 years 2-5 years over 5 years
GBP GBP GBP GBP GBP
Financial
liabilities
Payables -
due
within one
year 56,032 - - - -
Loans
payable 2,673,731 8,021,192 10,694,923 30,198,019 5,508,863
2,729,763 8,021,192 10,694,923 30,198,019 5,508,863
-------------- -------------------- ------------------- ------------------------ ----------------------
(e) Interest Rate Risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows. It is the risk that
fluctuations in market interest rates will result in a reduction in
deposit interest earned on bank deposits held by the Company.
The Company mitigates interest rate risk by fixing the interest
rate on the loan and the lease rentals.
The following table details the Company's exposure to interest
rate risks, by interest rate refinancing period:
30 September Variable Fixed Non-interest
2017 interest interest Bearing
GBP GBP GBP TotalGBP
Financial
assets
Receivables - - 6,583 6,583
Cash and cash
equivalents 4,123,572 - - 4,123,572
---------------------- --------------------- ------------------------------ ----------------------
Total
financial
assets 4,123,572 - 6,583 4,123,572
---------------------- --------------------- ------------------------------ ----------------------
Financial
liabilities
Payables - - 54,372 54,372
Loans payable - 39,239,895 - 39,239,895
---------------------- --------------------- ------------------------------ ----------------------
Total
financial
liabilities - 39,239,895 54,372 39,294,267
---------------------- --------------------- ------------------------------ ----------------------
Total
interest
sensitivity
gap 4,123,572 39,239,895
---------------------- ---------------------
31 March Variable Fixed Non-interest TotalGBP
2017 interest interest Bearing
GBP GBP GBP
Financial
assets
Receivables - - 12,684 12,684
Cash and cash
equivalents 4,376,502 - - 4,376,502
---------------------- --------------------- ------------------------------ ----------------------
Total
financial
assets 4,376,502 - 12,684 4,389,186
---------------------- --------------------- ------------------------------ ----------------------
Financial
liabilities
Payables - - 57 ,406 57 ,406
Loans payable - 46,748,096 - 46,748,096
---------------------- --------------------- ------------------------------ ----------------------
Total
financial
liabilities - 46,748,096 57 ,406 46,805,502
---------------------- --------------------- ------------------------------ ----------------------
Total
interest
sensitivity
gap 4,376,502 46,748,096
---------------------- ---------------------
If interest rates had been 50 basis points higher throughout the
period and all other variables were held constant, the Company's
profit for the period and net assets attributable to Shareholders
as at 30 September 2017 would have been GBP10,309 (31 March 2017:
GBP21,883) greater due to an increase in the amount of interest
receivable on the bank balances.
If interest rates had been 50 basis points lower and all other
variables were held constant, the Company's profit for the period
and net assets attributable to Shareholders as at 30 September 2017
would have been GBP10,309 (31 March 2017: GBP21,883) lower due to
an decrease in the amount of interest receivable on the bank
balances.
18 ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, the Company has no ultimate
controlling party.
19 SUBSEQUENT EVENTS
On 12 October 2017, a further dividend of 2.25 pence per
Ordinary Preference Share was declared and this was paid on 28
October 2017.
20 RELATED PARTIES
Nimrod Capital LLP ("Nimrod") is the Company's Corporate and
Shareholder Advisory Agent. The Company pays to Nimrod for its
services as Corporate and Shareholder Advisor a fee of GBP100,000
per annum (adjusted annually for inflation from 2012 onwards at
2.25 per cent. per annum) payable quarterly in arrears.
During the Period, the Company incurred GBP57,142 (30 September
2016: GBP55,884) of expenses with Nimrod, of which GBP28,571 (31
March 2017: GBP28,571) was outstanding to this related party at 30
September 2017.
Doric GmbH ("Doric") is the Company's Asset Manager. The Company
pays Doric a management and advisory fee of GBP250,000 per annum
(adjusted annually for inflation from 2012 onwards, at 2.25 per
cent. per annum), payable quarterly in arrears. Doric will also
receive a fee for its sales and remarketing services upon
disposition of the Asset and subsequent winding up of the Company
("the Disposition Fee"). This will be payable by the Company out of
the proceeds of sale and will follow an incentivised structure.
Doric will not be entitled to the Disposition Fee (but for the
avoidance of doubt will be entitled to reimbursement for properly
incurred costs and expenses) if Shareholders do not recover 100
pence per Share net of all costs, fees and expenses upon the
winding up of the Company. If Shareholders receive between 100
pence per Share and 150 pence per Share (inclusive) (in each case
net of all cost, fees and expense) upon the winding up of the
Company, Doric should receive a Disposition Fee of 2 per cent of
the realised value of the Asset. If Shareholders receive more than
150 pence per Share (net of all costs, fees and expenses) Doric
should receive 3 per cent of the realised value of the Asset.
During the Period, the Company incurred GBP148,515 (30 September
2016: GBP140,079) of expenses with Doric, of which GBPnil (31 March
2017: GBP242) was outstanding to this related party at 30 September
2017.
John Le Prevost is a director of Anson Registrars Limited
("ARL"), the Company's registrar, transfer agent and paying agent.
During the period GBP4,907 (30 September 2016: GBP4,909) of costs
were incurred with ARL, of which GBP609 (31 March 2017: GBP560) was
outstanding as at 30 September 2017.
ADVISORS AND CONTACT INFORMATION
KEY INFORMATION
Exchange Specialist Fund Segment of the London Stock Exchange's
Main Market
Ticker DNA
Listing Date 13 December 2010
Fiscal Year End 31 March
Base Currency GBP
ISIN GG00B4MF3899
SEDOL B4MF389
Country of Incorporation Guernsey -- Registration number
52484
MANAGEMENT AND ADMINISTRATION
Registered Office Secretary and Administrator
Doric Nimrod Air One Limited JTC Fund Solutions (Guernsey)
Limited
Ground Floor Dorey Court
PO Box 156
Dorey Court
Admiral Park Admiral Park
St Peter Port St Peter Port
Guernsey GY1 2HT Guernsey GY1 4EU
Asset Manager Liaison Agent
Doric GmbH Amedeo Services (UK) Limited
Berliner Strasse 114 29-30 Cornhill
63065 Offenbach am Main London, England
Germany EC3V 3NF
Corporate and Shareholder Advisor
Lease and Debt Arranger
Nimrod Capital LLP Doric Asset Finance GmbH & Co. KG
3 St Helen's Place Berliner Strasse 114
London 63065 Offenbach am Main
EC3A 6AB Germany
Solicitors to the Company (as to English Law) Advocates to the Company (as to
Guernsey Law)
Herbert Smith Freehills LLP Carey Olsen
Exchange House Carey House
Primrose Street Les Banques
London EC2A 2HS St Peter Port
Guernsey GY1 4BZ
Registrar Auditor
Anson Registrars Limited Deloitte LLP
PO Box 426 Regency Court
Anson House Glategny Esplanade
Havilland Street St Peter Port
St Peter Port Guernsey GY1 3HW
Guernsey GY1 3WX
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BIBDDLBBBGRX
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