Avation PLC (LSE:AVAP) told investors it expects to report profit significantly ahead of current market expectations for the financial year ending 30 June.
Shares in the aircraft leasing company rose around 9% in Friday’s morning’s trade.
"The company is at a transition point in terms of improving shareholder returns alongside cash flow generation and growth,” executive chair Jeff Chatfield said in a statement.
“We are confident of improving returns to shareholders by carefully optimising the mix of sources of finance available to the company and are finding asset-backed financiers to be extremely constructive."
Avation highlighted that it continues to reduce its debt and improve liquidity.
During the ten months to the end of April, the company has paid down secured loans by US$37.2 million and repurchased US$18.0 million of senior PIK notes due in 2026.
Also, prepayment notices have been issued to repay three secured loans with a total outstanding balance of US$36.9 million by 30 June 2024.
The company’s current cash balances stood at US$141.7 million, Avation noted.
Investors in London cheered the pre-close update, with the share rising 11.5p or 8.7% changing hands at 143.1p – though it traded as high as 155p in early deals.
Avation’s fleet
Avation's fleet comprises 34 aircraft leased to 16 airlines in 14 countries, including 19 ATR turboprop, 13 narrowbody jet, and 2 widebody jet aircraft. As of 30 April 2024, the average age of the fleet was 7.2 years, with an average remaining lease term of 4.3 years.
All aircraft are currently leased, generating total monthly lease rentals of US$7.9 million due to the fleet being fully utilized.
The company has orders for 12 ATR 72-600 aircraft, which are integral to its ten-year low-carbon new technology strategy.
The first two aircraft are scheduled for delivery in Q4 2024 and Q1 2025, and Avation has agreed to sell these two aircraft on delivery at a profit to be recognized in FY2025.
Additionally, ten more ordered aircraft are expected to be delivered between Q2 2025 and Q2 2028. Avation has exercised purchase rights for these aircraft, resulting in six additional purchase rights with an expiry date extended to June 2034.
The estimated value of these purchase rights is US$115 million based on the current market conditions, the company noted.