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Avation's lease income to rise by nearly a fifth says finance boss

"Any simple maths will tell you that 9.6×6 months will see us generating over US$57.5mln in lease revenue in the second half"
Customer roster is up to 12

Richard Wolanski, aircraft lessor Avation PLC’s (LON:AVAP) chief financial officer, has told Proactive he expects bumper revenues in the second half of the year.

The group ended the first half of the year (December) with 37 aircraft, a record size for its fleet, but the full benefit only started to come through from January.

WATCH: Avation PLC's 'never looked stronger' - CFO Richard Wolanski

“In terms of revenue guidance, because we have that record fleet all through the second half of the financial year we are collecting about US$9.6mln a month in lease revenues.

“Keep in mind that the reported half-year revenue number was about US$42mln, any simple maths will tell you that 9.6×6 months will see us generating over US$57.5mln in lease revenue in the second half.

“Now that’s the clearest guidance we can give on revenue and that's the clearest guidance we’ve ever given on revenue.

“It’s going to be a very large leap from the first half to the second half.”

"That’s the nature of these assets if you buy aircraft in December," he added.

US$57.5mln revenue in second half 

“While they turn up on the balance sheet those assets obviously haven’t generated any rent or only for a few days in December and so they’re going to be generating lease revenue all through the second half and so it’s going to be a very strong second half.”

Avation earned lease revenues of US$49.1mln in the second half of 2016/17, so revenue of US$57.5mln would equal an uplift of at least 17%.

The acquisition of the aircraft in December also meant the fleet’s value topped US$1bln for the first time.

It is the youngest ever fleet with the longest attached lease terms ever in the history of the company, Wolanski added, so as a portfolio of income-producing assets "we've never looked stronger".

“We’ve been going now for 12 years and the business model is to buy brand-new aircraft and lease them for long periods of time to the airlines.

“The risks that we face are in the residual value of the aircraft that we have to buy and sell at periods of time and (because these airlines are paying us rent effectively) to diversify into a broader range of very strong airline customers."

Four strong customers added

On that front, he said Avation has added four new airline customers to take the total to 12 from 8.

“The four airline customers that we picked up are among the strongest on our books:  EasyJet, but also Philippine Airlines, Eva Air and Mandarin Airlines, so a couple in Asia as well.”

“I think if you look at the history of Avation, we’ve never changed our business model.

Double every 2 and half years

“We’ve been around for 12 years and certainly in the last five or six years the reason why investors look to this stock and buy the stock is while we do pay a 2% yield dividend, this is a company that doubles in size on average about every two and a half years and if you look at the last five or six years the share price has followed that.

“We have just delivered 35% asset growth in the first half of the financial year, you’ll see the lease revenue and the earnings from that growth be generated in the second half and for all periods to come.

"We’re still 10% off our record highs in terms of share price, but the company's never been larger, the rental roll has never been bigger, the revenues have never been bigger and the earnings are certainly going to be strong.”

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March 13 2018
"Any simple maths will tell you that 9.6×6 months will see us generating over US$57.5mln in lease revenue in the second half"

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