TIDMDPA
RNS Number : 3503Y
DP Aircraft I Limited
20 August 2018
DP AIRCRAFT I LIMITED
UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT
FOR THE SIX MONTH PERIODED 30 JUNE 2018
COMPANY OVERVIEW
DP Aircraft I Limited (the 'Company') was incorporated with
limited liability in Guernsey under the Companies (Guernsey) Law,
2008 on 5 July 2013 with registered number 56941.
The Company was established to invest in aircraft. The Company
is a holding company, and makes its investment in aircraft through
four wholly owned subsidiary entities, DP Aircraft Guernsey I
Limited, DP Aircraft Guernsey II Limited, DP Aircraft Guernsey III
Limited and DP Aircraft Guernsey IV Limited (collectively and
hereinafter, the 'Borrowers'), each being a Guernsey incorporated
company limited by shares and two intermediate lessor companies, DP
Aircraft Ireland Limited and DP Aircraft UK Limited (the
'Lessors'), an Irish incorporated private limited company and a UK
incorporated private limited company respectively. The Company and
its subsidiaries (the Borrowers and the Lessors) comprise the Group
(the 'Group').
Pursuant to the Company's Prospectus dated 27 September 2013,
the Company offered 113,000,000 Ordinary Shares of no par value in
the capital of the Company at an issue price of US$ 1.00 per Share
by means of a Placing. The Company's Shares were admitted to
trading on the Specialist Fund Segment of the London Stock Exchange
on 4 October 2013.
On 5 June 2015, the Company offered 96,333,333 Ordinary Shares
of no par value in the capital of the Company at an issue price of
US$ 1.0589 per Share by means of a Placing. These Shares were
admitted to trading on the Specialist Fund Segment of the London
Stock Exchange on 12 June 2015.
In total there are 209,333,333 Ordinary Shares in issue with
voting rights.
INVESTMENT OBJECTIVE
The Company's investment objective is to obtain income and
capital returns for its Shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling aircraft
(the 'Asset' or 'Assets').
THE BOARD
The Board comprises independent non-executive directors. The
directors of the Board are responsible for managing the business
affairs of the Company in accordance with the Articles of
Incorporation and have overall responsibility for the Company's
activities, including portfolio and risk management while the asset
management of the Group is undertaken by DS Aviation GmbH & Co.
KG (the 'Asset Manager').
THE ASSET MANAGER
The Asset Manager has undertaken to provide the asset management
services to the Company under the terms of an asset management
agreement but does not undertake any regulated activities for the
purpose of the UK Financial Services and Markets Act 2000.
BREXIT
Refer to note 21 of the financial statements for the Directors
considerations of the impact of Brexit on the Company.
DISTRIBUTION POLICY
The Company aims to provide Shareholders with an attractive
total return comprising income, from distributions through the
period of the Company's ownership of the Assets, and capital, upon
any sale of the Assets. The Company targets a quarterly
distribution in February, May, August and November of each year.
The target distribution is US$ 0.0225 per share per quarter. Two
quarterly dividends have been paid during the period ended 30 June
2018 and one has been paid subsequent to the period end, each
meeting the US$ 0.0225 per share target. The target dividends are
targets only and should not be treated as an assurance or guarantee
of performance or a profit forecast. Investors should not place any
reliance on such target dividends or assume that the Company will
make any distributions at all.
FACT SHEET
Ticker DPA
Company Number 56941
ISIN Number GG00BBP6HP33
SEDOL Number BBP6HP3
Traded Specialist Fund Segment ('SFS') of the
London Stock Exchange
SFS Admission Date 4-Oct-13
Share Price US$ 1.076 at 30 June 2018
Earnings per share US$ 0.0503 for the period ended 30 June
2018
Country of Incorporation Guernsey
Current Shares in Issue 209,333,333
Administrator and Company Aztec Financial Services (Guernsey) Limited
Secretary
Asset Manager DS Aviation GmbH & Co. KG
Auditor KPMG, Chartered Accountants
Corporate Broker Canaccord Genuity Limited
Aircraft Registrations LN-LNA
LN-LNB
HS-TQD
HS-TQC
Aircraft Serial Numbers 35304
35305
35320
36110
Aircraft Type and Model Boeing 787-8
Lessees Norwegian Air Shuttle ASA ('Norwegian'
or 'NAS')
Thai Airways International Public Company
Limited ('Thai Airways')
Website www.dpaircraft.com
HIGHLIGHTS
PROFIT FOR THE PERIOD
Profit for the period ended 30 June 2018 is US$10,533,504 and
Earnings per Share is US$ 0.0503 per Share. The profit for the
period ended 30 June 2017 was US$9,648,349 and Earnings per Share
was US$ 0.0461.
NET ASSET VALUE ('NAV')
The NAV excluding swap liabilities was US$1.01451 per Share at
30 June 2018 (31 December 2017: US$1.00937).
Although the fair values of the derivatives will move over their
terms, at maturity the derivatives fair values will reduce to nil.
The NAV excluding swap instruments is therefore presented to
provide what the Directors consider to be a more relevant
assessment of the Group's net asset position.
As at 30 June 2018 As at 31 December 2017
US$ US$ per share US$ US$ per share
NAV per the financial
statements 213,231,777 1.01862 209,669,631 1.00161
Add back:
Derivative instruments
and swap interest payable (859,717) -0.00411 1,623,849 0.00776
NAV excluding swap instruments 212,372,060 1.01451 211,293,480 1.00937
------------ -------------- ------------ --------------
INTERIM DIVIDS
Dividends were declared on:
Date Dividend reference period Dividend per Share Payment date
18 January 2018 Quarter ended 31 December US$ 0.0225 per 15 February 2018
2017 Share
18 April 2018 Quarter ended 31 March US$ 0.0225 per 17 May 2018
2018 Share
16 July 2018 Quarter ended 30 June 2018 US$ 0.0225 per 16 August 2018
Share
OFFICIAL LISTING
The Company's Shares were first admitted to trading on the
Specialist Fund Segment of the London Stock Exchange on 4 October
2013.
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the Interim Report of
the Company for the six-month period to 30 June 2018.
The Lessees have continued to meet their lease obligations.
There are no incidents to bring to the attention of Shareholders
concerning the operation of the aircraft, inspections have revealed
no matters of concern and the Company and group continues to report
a healthy performance.
The Earnings per Share for the period was US$ 0.0503 compared to
US$ 0.0461 for the same period last year. The first interim
dividend for 2018 was paid on 17 May 2018, with the second interim
dividend being declared on 16 July 2018, with a payment date of 16
August 2018. The Lessees are continuing to perform as expected.
The outlook for the airline industry for 2018 remains positive.
During the first half of 2018, travel demand continued to grow, and
there was reported increased profitability for the first quarter
compared to the same period in the previous year. It is expected
that costs will continue to challenge profitability in 2018,
particularly rising fuel costs, although global revenues are still
anticipated to increase over the next 12 months. The Asset
Manager's report that follows provides a detailed overview of the
expectations for 2018.
The Company has previously noted the implementation of
substantial growth plans for NAS. The Company notes that NAS now
plans a phase of moderate growth in the second half of 2018,
expecting to see benefits from economies of scale. During the first
half, operating revenues increased by 32% to NOK 17.2 billion (USD
2.1 billion), capacity increased by 43% and demand by 42%.
Operating losses decreased by 19% to NOK 2.1 billion (USD 260
million). Net profit was NOK 250 million (USD 31 million) compared
to a loss in the previous half year of NOK 2.18 billion (USD 260
million) but results were influenced by a NOK 1.9 billion financial
gain on investments. NAS had cash and equivalents of NOK 3.7
billion (USD 0.46 billion).
The Company also notes that Thai Airways continues to show
increased operating revenues and continues to upgrade their
international fleet to newer more fuel-efficient aircraft. Further,
following the modifications of TQC and TQD, including the
installation of a Wi - Fi antenna and a crew rest compartment, the
B787 aircraft is now able to be deployed more flexibly, including
on long haul destinations.
I would like to thank our Investors for their continued support
of the Company and should the investors wish to contact us, I and
my fellow Directors are available via our Company Secretary, whose
details can be found at the end of this report.
Jon Bridel
Chairman
ASSET MANAGER'S REPORT
The Aviation Market - Overview and Development
The outlook for 2018 remains solid despite the International Air
Transport Association (IATA) having lowered its expectation of
collective net profits from USD 38.4 billion to USD 33.8 billion
because of increasing costs, mainly of fuel and labour, as well as
rising interest rates. Unit costs are expected to increase by 5.2
per cent in 2018 compared to the previous year. The average jet
fuel price is expected to rise by 25.9 per cent so that jet fuel
costs will account for about 24 per cent of total operating costs
compared to 21 per cent in 2017. The number of passengers
transported by air in 2018 is expected to reach 4.36 billion; an
increase of 6.5 per cent. While capacity (ASK - Available Seat
Kilometres) is expected to grow by 6.7 per cent, demand for air
travel (RPK - Revenue Passenger Kilometres) is forecast to increase
by 7.0 per cent and the overall load factor is expected to increase
slightly to 81.7 per cent. Demand therefore increased for the sixth
year in a row faster than the 20-year average of 5.5 per cent
annually. Passenger yield is expected to increase by 3.2 per cent
after a decline of 0.8 per cent the previous year. Demand for cargo
is expected to increase by 4.0 per cent benefitting from the
growing global economy.
Total passenger demand in April 2018 increased by 6.2 per cent
while capacity rose by 5.9 per cent compared to the same month in
2017. Therefore the load factor increased to 82.3 per cent. In the
first four months of 2018, global passenger demand grew by 7.0 per
cent and worldwide capacity increased by 6.0 per cent compared to
the same period of the previous year. The load factor increased by
0.8 percentage points to 81.3 per cent. The Asia-Pacific region
outperformed the other regions in regard to capacity and passenger
demand in the first four months of 2018. While passenger demand
increased by 9.5 per cent, capacity rose one per cent less and the
load factor improved by 0.8 percentage points to 81.9 per cent.
European carriers report the highest load factor (82.5 per cent)
amongst the regions. In regard to profits, they currently benefit
from extensive hedging delaying the impact of increased fuel costs
to a future point in time.
As part of an IATA survey in early April 2018, 67 per cent of
the interviewed airline CFOs and Heads of Cargo indicated an
increase in profitability for the first quarter compared to the
same period in the previous year. 61 per cent shared the opinion
that profitability will continue to improve over the next twelve
months. 42 per cent of the participants reported an increase in
input costs in the first quarter 2018, mainly due to increased fuel
prices. Half of the respondents anticipated employment growth over
the coming year.
The latest Boeing Outlook (Current Market Outlook 2017-2036)
anticipates deliveries of 41,030 commercial aircraft with a total
market value of USD 6.1 trillion within the next 20 years. Both
Boeing and Airbus (Global Market Forecast 2017-2036) continue to
forecast that the global passenger and freighter fleet will at
least double by 2036. According to Boeing, airline fleets will grow
by 3.5 per cent per annum over the next 20 years. Boeing forecasts
the fleet in the Asia-Pacific region will increase from 29 per cent
to 37 per cent of the global fleet. European airline fleet growth
is anticipated to be lower than the global average, with an average
annual growth rate of 2.7 per cent. According to IATA, there will
be 1,900 aircraft deliveries in 2018 with the commercial aircraft
fleet increasing by 4.2 per cent compared to the previous year. The
number of city pairs served in 2018 will increase to a total of
58,000.
The Assets - Four Dreamliner Boeing 787-8s
As at 30 June 2018, Boeing had delivered 708 Boeing 787
Dreamliner aircraft, of which 353 aircraft are B787-8s, 349
aircraft are B787-9s and six are B787-10s. The first B787-10 was
delivered to Singapore Airlines in March 2018. The total order for
the B787 family amounts to 1,377 aircraft from 69 customers.
Turkish Airlines placed an order for 25 Dreamliners this March,
American Airlines ordered an additional 25 B787-9s in April, Qantas
ordered an additional six Dreamliners in May and the Vietnamese
start-up Bamboo Airways ordered 20 B787s in June.
Norwegian has equipped its B787 fleet with a total of 291 seats,
of which 32 are premium economy and 259 economy class seats. This
type of aircraft is used to fly from Europe to destinations in Asia
and America, amongst others, Oakland, Los Angeles, New York and
Bangkok. On 14th January 2018, aircraft LNA was inspected in
Birmingham (UK) at the Monarch maintenance facilities during a Base
Check (every 6,000 flight hours). Our inspector considers the
aircraft and its records to be in good condition with no
significant defects or airworthiness related issues. Aircraft LNB
is scheduled to be inspected early August, subject to airline
operations. Technical records have already been collected and are
considered to be in good condition with no airworthiness related
issues.
Thai Airways' B787-8 offers a total of 264 seats, of which 24
are business and 240 economy class seats. The carrier operates this
aircraft type to destinations such as Taipei, Nagoya, Brisbane,
Auckland and Vienna. Modifications of both TQC and TQD, including
the installation of a Wi-Fi antenna and a crew rest compartment,
have been completed. As a result, the aircraft can be deployed more
flexibly, including now long-haul destinations. The table below
reporting average monthly utilisation illustrates this fact as the
average stage length in May is significantly higher than the
average stage length since delivery. TQC and TQD were inspected on
28 February 2018 at Bangkok International Airport. TQC was
inspected during a daytime A-check and TQD during a night stop in
the airport bay. Our inspector considers the aircraft and their
records to be in good condition with no significant defects or
airworthiness related issues.
DP Aircraft's Trent 1000 Engines are B-Pack versions (second
upgraded version of originally produced engines). The latest
Airworthiness Directive (AD) includes this type of engines and
requires an additional precautionary one-off inspection. This can
be carried out on-wing, however using existing techniques. The
Asset Manager's technical advisor confirmed that at present there
is no suggestion that this development will affect ETOPS
certification (the level of ETOPS certification for extended range
operations by twin--engine aeroplanes defines a certain amount of
flying time away from the nearest suitable alternative airport at
which the aircraft can land). Rolls-Royce is taking precautionary
preventive measures and is redesigning the specific parts.
Since 1st July 2018, the Asset Manager DS Aviation has performed
the technical asset management in-house (previously performed by DS
Skytech Limited - a joint venture between Skytech-AIC and DS
Aviation). This will further strengthen the relationships and
reduce any response time in regard to Lessees and manufacturers. DS
Aviation employs its own highly experienced technical personnel
with detailed technical aircraft knowledge. Additionally, DS
Aviation signed an agreement with AKKA (AeroConseil) to have any
back-up services contractually guaranteed should a need arise. Such
services include, amongst others, aircraft inspections or
maintenance forecasting. AKKA, with its headquarters in Toulouse
(France), has more than 30 years of experience in the aviation
sector and more than 90 employees. It is one of the largest
suppliers in terms of technical aviation consultancy services and
DS Aviation has worked successfully together with them in regard to
other assets under management.
The tables below give a short overview of the utilisation of
airframes and engines on each of the four aircraft as at 30th June
2018.
AIRFRAME STATUS Norwegian Air Shuttle
(30(th) June 2018)
LN-LNA LN-LNB
------------------------------- ------------------------
TOTAL 1 - 30 June TOTAL 1 - 30 June
2018 2018
------------------ ----------- ----------- -----------
Flight Hours 24,396 407 25,553 416
------------------ ----------- ----------- -----------
Flight Cycles 2,866 46 3,057 46
------------------ ----------- ----------- -----------
Average Monthly Utilisation 406 hours --- 439 hours ---
48 cycles 53 cycles
------------------ ----------- ----------- -----------
Flight Hours/Flight
Cycles Ratio 8.51 : 1 8.85 : 1 8.36 : 1 9.04 : 1
------------------ ----------- ----------- -----------
ENGINE DATA Norwegian Air Shuttle
(30(th) June 2018)
---------------------------------------------------------
LN-LNA LN-LNB
------------------------------- ------------------------
Engine Serial Number 10118 10119 10130 10135
------------------ ----------- ----------- -----------
Engine Manufacturer Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce
------------------ ----------- ----------- -----------
Engine Type and Model Trent 1000 Trent 1000 Trent 1000 Trent 1000
------------------ ----------- ----------- -----------
Total Time [Flight
Hours] 16,940 18,570 14,960 19,771
------------------ ----------- ----------- -----------
Total Flight Cycles 2,056 2,249 1,671 2,308
------------------ ----------- ----------- -----------
Location LN-LNE In shop In shop LN-LNA
------------------ ----------- ----------- -----------
AIRFRAME STATUS Thai Airways International
(30(th) June 2018)
HS-TQC HS-TQD
---------------------------------- ------------------------------
TOTAL 1 - 30 June TOTAL 1 - 30 June
2018 2018
------------------ -------------- -------------- --------------
Flight Hours 15,144 314 12,666 364
------------------ -------------- -------------- --------------
Flight Cycles 3,460 52 3,033 56
------------------ -------------- -------------- --------------
Average Monthly Utilisation 345 hours --- 297 hours ---
80 cycles 72 cycles
------------------ -------------- -------------- --------------
Flight Hours/Flight
Cycles Ratio 4.38 : 1 6.04 : 1 4.18 : 1 6.50 : 1
------------------ -------------- -------------- --------------
ENGINE DATA Thai Airways International
(30(th) June 2018)
------------------------------------------------------------------
HS-TQC HS-TQD
---------------------------------- ------------------------------
Engine Serial Number 10239 10240 10244 10248
------------------ -------------- -------------- --------------
Engine Manufacturer Rolls-Royce Rolls-Royce Rolls-Royce Rolls-Royce
------------------ -------------- -------------- --------------
Engine Type and Model Trent 1000 Trent 1000 Trent 1000 Trent 1000
------------------ -------------- -------------- --------------
Total Time [Flight
Hours] 12,216 10,518 11,031 11,490
------------------ -------------- -------------- --------------
Total Flight Cycles 2,840 2,583 2,674 2,708
------------------ -------------- -------------- --------------
Location In shop In shop TQF TQC
------------------ -------------- -------------- --------------
The Lessees
Norwegian Air Shuttle ASA
Norwegian Air Shuttle ASA operates as a low-cost carrier on
short-, medium- and long-haul routes. In 2017, the airline
transported more than 33 million passengers, an increase of 13 per
cent on the previous year. As at 30 June 2018, the airline operated
a network of more than 500 routes to over 150 destinations
including more than 60 intercontinental city pairs. The fleet
comprises 155 passenger aircraft, including 28 Boeing 787s. The
airline will take delivery of 11 Dreamliners in 2018.
During the second quarter 2018, operating revenues increased by
32 per cent to NOK 10.23 billion (USD 1.26 billion) compared to the
same quarter in 2017. EBITDAR grew by 64 per cent to 1.62 billion
(USD 0.20 billion). Norwegian stated an operating profit of NOK 154
million (USD 19 million) compared to an operating loss of NOK 863
million (USD 103 million) in the same quarter the previous year.
Excluding other losses and gains (including effects from currency
and forward fuel contracts), the operating result turned into a
loss of NOK 301 million (USD 37 million). Net profit amounted to
NOK 300 million (USD 37 million) compared to a net loss of NOK 691
million (USD 82 million) in the second quarter 2017. Capacity
increased by 48 per cent while demand grew by 46 per cent and
therefore the load factor slightly decreased by 0.9 percentage
points to 86.8 per cent. Results were affected by reduced unit
costs which - including depreciation and excluding fuel - decreased
by 19 per cent. Unit revenue decreased by 11 per cent which is
partly a result of upon an increased average sector length of 20
per cent. Ancillary revenues per passenger grew by 19 per cent to
NOK 162 (USD 20).
During the first half of 2018, passenger numbers increased by 14
per cent to 17.45 million compared to the same period in the
previous year, while operating revenues increased by 32 per cent to
NOK 17.22 billion (USD 2.11 billion). While capacity was increased
by 43 per cent, demand grew by 42 per cent. The passenger load
factor was 85.8 per cent. Ancillary revenues per passenger
increased by 18 per cent during the first half of 2018. Operating
losses decreased by 19 per cent to NOK 2.08 billion (USD 254
million). The carrier stated a net profit of NOK 0.25 billion (USD
31 million) compared to a net loss of NOK 2.18 billion (USD 260
million) in the same period in 2017. Results were influenced by a
NOK 1.94 billion financial gain from reclassification of its
investment in Norwegian Finans Holding, in which the airline has a
16.4 per cent shareholding. Furthermore, results were impacted by
increased fuel prices, foreign currency effects and strong capacity
growth. In March 2018, Norwegian raised NOK 1.30 billion (USD 168
million) through a share issue. Cash and cash equivalents as at 30
June 2018 stood at NOK 3.71 billion (USD 0.46 billion). Aircraft
utilisation during the second quarter increased from 11.5 to 12.7
block hours a day compared with the same quarter in the previous
year. The equity ratio as at 30 June 2018 was 7 per cent, up 3
percentage points compared to the previous year.
For 2018, Norwegian further reduced gross capex commitment from
USD 1.9 billion to USD 1.75 billion. Growth in terms of capacity
and fleet peaked in the first half 2018; particularly in the second
quarter which marked the strongest growth in the airline's history.
The second half of the year will be a phase of moderate growth and
benefit from economies of scale. This year, Norwegian will launch
flights to Krabi (Thailand), transatlantic routes from Madrid,
Amsterdam and Milan and the carrier will add Tampa to its network.
The U.S. is the strongest market for Norwegian outside of Norway.
Moreover, the carrier plans to add some Canadian destinations to
its transatlantic network in 2019, which were approved by the
Canadian Transportation Agency this March. In July, the carrier
announced it had applied for a Swedish AOC (Air Operator
Certificates) as it seeks a stronger foothold in the European Union
and this AOC would facilitate accessibility in Sweden and increased
traffic rights throughout Scandinavia. Norwegian Air Argentina is
scheduled to start commercial operations by the end of this
year.
In May 2018, capacity and demand increased by 51 per cent
compared to the same month in 2017. The load factors remained
stable at 86.5 per cent while passenger numbers grew by 17 per cent
to 3.4 million. Yield and unit revenues decreased by 6 per cent
while the average flying distance increased by 24 per cent compared
to the same month a year ago.
In April 2018, the International Airlines Group (IAG), parent
company of British Airways, Iberia, Aer Lingus, Vueling and LEVEL,
acquired a 4.61 per cent stake in Norwegian. A potential
acquisition could offer IAG network synergies and access to new
aircraft deliveries. Norwegian had rejected two offers made by IAG
but they have set up a steering committee and they have engaged
advisors to review potential offers and to safeguard all
shareholders' interests as they are said to have received offers
from other interested parties including Lufthansa.
Thai Airways International PCL
Thai Airways International Public Company Limited, full service
network carrier and flag carrier of the Kingdom of Thailand, is
majority-owned by the Thai Government (Ministry of Finance) (51.03
per cent). In 2017, Thai Airways International, excluding any
subsidiaries, transported nearly 20 million passengers. As at 30
April 2018, the fleet of Thai Airways, including its subsidiary
Thai Smile, comprised 104 active aircraft. The carrier currently
operates 63 destinations in 34 countries, including 11 destinations
in 13 European countries. In the first quarter 2018, Thai Airways
received an award as "Top Agent Award 2017" from Japan National
Tourism Organization and the airline's CFO was named "Asia's Best
CFO 2017" by the Corporate Treasurer Marquee Awards. The latter
award takes into consideration financial transformation and changes
with results of significant impact.
Operating revenues in 2017 increased by 6.3 per cent to THB
191.95 billion (USD 5.89 billion) compared to 2016. THB 157.48
billion related to passenger and excess baggage revenue, THB 20.27
billion to freight and mail and 14.20 billion to other revenue and
income. Operating profits decreased by 29.8 per cent to THB 2.86
billion (USD 88 million) and net losses amounted to THB 2.07
billion (USD 64 million) compared to net profits of THB 47 million
(USD 1 million). Capacity increased by 6.4 per cent and demand by
14.7 per cent. Therefore, the load factor improved by 5.8
percentage points to 79.2 per cent. Results were impacted by
impairment losses (USD 98 million), loss on changes in ownership
regarding the stake hold in NOK (USD 13 million) and exchange
losses (USD 48 million). The airline's results were also affected
by the 24.2 per cent rise in average jet fuel prices. Liabilities
have been continuously decreasing since 2015 and were recently
restructured to maximise the benefit of natural hedging (revenues
of foreign currencies versus expenses in foreign currencies).
During the first quarter of 2018, total operating revenues
increased by 7.4 per cent to THB 53.47 billion (USD 1,716 million)
compared to the same quarter in the previous year. Operating profit
increased by 49.4 per cent to THB 3.84 billion (USD 123 million)
while net profit decreased by 13.6 per cent to THB 2.74 billion
(USD 88 million). Results were impacted by an impairment loss of
assets and aircraft of THB 2.47 billion as well as a gain on
foreign currency exchange of THB 583 million. Thai increased
capacity by 4.9 per cent, while demand only grew by 2.2 per cent
and the load factor decreased by 2.2 percentage points to 80.6 per
cent. The passenger yield grew by 4.5 per cent compared to the
first quarter of 2017. At the end of the quarter, cash and cash
equivalents stood at THB 16.97 billion (USD 545 million) and assets
amounted to THB 286.17 billion (USD 9,182 million).
Thai considers its restructuring efforts - summarised in its
Transformation Plan - as key to a profitable future in the long
run. Therefore, the airline implemented a revised 2017 - 2021 Plan
with five key strategies to continually drive from the third phase
of its transformation plan to ensure sustainable operating results,
increasing efficiency and continuous improvement of service quality
to be competitive in the global market. The five strategies
are:
- Increase in revenues by improving network, yields, ancillary
revenues and cost structure by implementing common fleet and
adopting low-cost business models
- Seeking new business opportunities; e.g. launching of joint
ventures in the MRO (Maintenance, Repair and Overhaul), cargo and
logistic business at U-Tapao airport
- Creating seamless travel between pre-flight, in-flight and
post-flight services
- Implementation of digital applications to generate a
competitive advantage
- Human resources development with focus on organizational
structure, culture and leadership
As part of the Transformation plan, the carrier successfully
sold unused assets in the Mae Hong Son province and foreign
property in Sydney as well as 22.5 million shares or 24 per cent of
Royal Orchid Hotel (Thailand) PCL which are not considered as core
business. For the second quarter 2018 it is planned to sell further
shares in such subsidiaries and associated companies. Moreover,
Thai Airways focuses on improving the fleet efficiency and on
increasing passenger revenue. In 2018, Thai Airways already took
delivery of five A350-900s as part of the renewal fleet plan.
Further route expansion is planned, as codeshare agreements with
NOK and Shenzhen Airlines have been signed. Frequencies to Vienna
will increase to daily in autumn 2018.
In May, the carrier announced that the acting president, Usanee
Sangsingkeo, will retire from the carrier in September. During a
Board Meeting, Sumeth Damrongchaitham was announced to become the
new president in September. He was managing director at Dhanarak
Asset Development, a government-owned company set up to manage
state assets and properties.
Thai Airways and Airbus are moving ahead with their MRO joint
venture. It is planned to offer heavy maintenance and line services
for wide-body aircraft. Thai and Airbus have scheduled to
incorporate the MRO joint venture early in 2020 and to launch
services in 2022 at U-Tapao airport which is 140 kilometres south
of Bangkok. This new MRO facility is planned to become one of the
most modern and extensive in the Asia-Pacific region.
In June it was announced that Thai Airways and Rolls-Royce had
signed an agreement to explore how to expand the Trent CareNetwork
by building on Thai's existing MRO capabilities. Thai becoming an
Authorised Maintenance Centre (AMC) for Rolls-Royce will enable the
carrier to support its own growing fleet of Rolls-Royce engines and
to generate additional capacity within the Rolls-Royce CareNetwork.
The maintenance centre is also expected to start servicing Trent
1000 engines in the fourth quarter 2018 or early 2019. While in the
first year it is assumed that up to 30 engines can be serviced,
from the second year on it could be 70 to 80 annually.
In 2017, the number of foreign tourists arriving in Thailand
increased by 8.9 per cent to 35 million, mainly from China, Russia,
India, Laos, Cambodia and South Korea. In the first quarter of
2018, the number of foreign tourists increased by 15.2 per cent
compared to the first quarter of last year. Additionally, the
economy of Thailand and private consumption is improving
steadily.
DS Aviation GmbH & Co. KG
Member of Dr. Peters Group
Stockholmer Allee 53
44269 Dortmund, Germany
DIRECTORS
Jonathan (Jon) Bridel, Non- Executive Chairman (53)
Jon is a Guernsey resident and is currently a non-Executive
Director of The Renewables Infrastructure Group Limited (FTSE 250),
Alcentra European Floating Rate Income Fund Limited, Starwood
European Real Estate Finance Limited, Sequoia Economic
Infrastructure Income Fund Limited (FTSE 250) and Funding Circle
SME Income Fund Limited which are listed on the Main Market of the
London Stock Exchange. Other companies include Fair Oaks Income
Fund Limited and Phaunos Timber Fund Limited which is in the
process of asset realisation. Jon was previously Managing Director
of Royal Bank of Canada's investment businesses in the Channel
Islands and served as a Director on other RBC companies including
RBC Regent Fund Managers Limited. Prior to joining RBC, Jon served
in a number of senior management positions in banking, specialising
in credit and corporate finance and private businesses as Chief
Financial Officer in London, Australia and Guernsey having
previously worked at Price Waterhouse Corporate Finance in
London.
Jon graduated from the University of Durham with a degree of
Master of Business Administration, holds qualifications from the
Institute of Chartered Accountants in England and Wales (1987)
where he is a Fellow, the Chartered Institute of Marketing and the
Australian Institute of Company Directors. Jon is a Chartered
Marketer and a Member of the Chartered Institute of Marketing, a
Chartered Director and Fellow of the Institute of Directors and a
Chartered Fellow of the Chartered Institute for Securities and
Investment.
Jeremy Thompson, Non- Executive Director (63)
Jeremy Thompson is a Guernsey resident with sector experience in
Finance, Telecoms, Aerospace and Oil & Gas. He acts as a
consultant to a number of businesses which include independent
non-executive directorships for three private equity funds and to
an Investment Manager serving the listed NextEnergy Solar Fund
Limited. In addition Jeremy is also a non-executive director of
Riverstone Energy Limited (FTSE 250). Between 2005 and 2009 he was
a director of multiple businesses within a London based private
equity group. This entailed board positions on both private, listed
and SPV companies and highly successful exits. Prior to that he was
CEO of four autonomous global businesses within Cable &
Wireless PLC and earlier held CEO roles within the Dowty Group.
Jeremy has studied and worked in the UK, USA and Germany.
Jeremy currently serves as chairman of the States of Guernsey
Renewable Energy Team and is a commissioner of the Alderney
Gambling Control Commission. He is also an independent member of
the Guernsey Tax Tribunal panel. Jeremy is a graduate of Brunel
(B.Sc) and Cranfield (MBA) Universities and was an invited member
to the UK's senior defence course (Royal College of Defence
Studies). He holds the Institute of Directors (IoD) Certificate and
Diploma in Company Direction and is an associate of the Chartered
Institute of Arbitration. He completed an M.Sc in Corporate
Governance in 2016 and qualified as a Chartered Company Secretary
in 2017.
Angela Behrend-Görnemann, Non-Executive Director (61)
Angela started her career with Hapag-Lloyd AG and was, from 1984
until 2015, employed with HSH Nordbank AG, Hamburg, Germany as the
Global Head of Aviation Finance and Global Head of Transportation
Finance. In this function she was responsible for Aviation, Rail
and Infrastructure Finance with more than 100 employees in teams in
New York, London, Hamburg, Kiel, Singapore and Shanghai. She
initiated the foundation of the Dublin based Aviation Asset Manager
Amentum Capital. Between 2007 and 2011 she was Class B Manager and
member of the Investment Committee of HSH Global Aircraft I
S.a.r.l, Luxembourg, a closed ended Aircraft Fund. She has
extensive experience in the transportation and banking industries
with more than 20 years experience in aviation. Angela is resident
in Germany.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
Asset risk
The Company's Assets comprise of four Boeing 787-8 aircraft.
The Boeing 787-8 is a newly developed generation of aircraft and
therefore there is insufficient experience and data currently
available to be able to give a complete assessment of the long-term
use and operation of the aircraft. The Group is exposed to the used
aircraft market of the Boeing 787-8, which at this time is
untested.
Market risk
The airline industry is particularly sensitive to changes in
economic conditions and is highly competitive; risks affecting the
airline industry generally could affect the ability of Norwegian or
Thai Airways to comply with its obligations under the Leases (or
any subsequent lease).
There is no guarantee that, upon expiry of the leases, the
Assets could be sold for an amount that would enable shareholders
to realise a capital profit on their investment or to avoid a loss.
Costs regarding any future re-leasing of the assets would depend
upon various economic factors and would be determinable only upon
an individual re-leasing event.
Key personnel risk
The ability of the Company to achieve its investment objective
is significantly dependent upon the advice of certain key personnel
at DS Aviation GmbH & Co. KG; there is no guarantee that such
personnel will be available to provide services to the Company for
the scheduled term of the Lease or following the termination of the
Lease. However, Key Man clauses within the Asset Management
Agreement do provide a base line level of protection against this
risk.
Credit risk & Counterparty risk
Credit risk is the risk that a significant counterparty will
default on its contractual obligations. The Group's most
significant counterparties are Norwegian and Thai Airways as
lessees and providers of income and Norddeutsche Landesbank
Girozentrale ('NordLB') and DekaBank Deutsche Girozentrale
('DekaBank') as holder of the Group's cash and restricted cash. The
lessees do not maintain individual corporate credit ratings. The
credit rating of NordLB is Baa2 (2017: Baa1) and the credit rating
of DekaBank is Aa2 (2017: Aa3).
Norwegian's stated strategy of providing low-cost long haul
flights may not be successful; failure of this strategy, or of any
other material part of Norwegian's business including its financing
strategy combined with ambitious growth objectives, may adversely
affect Norwegian's ability to comply with its obligations under the
leases.
There is no guarantee that the business model of Thai Airways
will be successful. Failure of any material part of the business
model may have an adverse impact on its ability to comply with its
obligations under the leases.
Any failure by Norwegian or Thai Airways to pay any amounts when
due would have an adverse effect on the Group's ability to comply
with its obligations under the loan agreements, could ultimately
have an impact on the Company's ability to pay dividends and could
result in the lenders enforcing their security and selling the
relevant Assets on the market potentially negatively impacting the
returns to investors. In mitigation, Norwegian is the second
largest airline in Scandinavia and the third largest low-cost
airline in Europe and Thai Airways is an International full service
carrier.
Maintenance reserves are being paid by the lessees to the
manufacturers The Boeing Company ('Boeing') and Rolls Royce plc
('Rolls Royce') under Gold and Total Care Agreements. Failure of
the manufacturers to fulfil their respective obligations might
adversely affect the lessees' compliance under the leases. The
credit rating of Boeing is A2 (2017: A2) and the credit rating of
Rolls Royce is A3 (2017: A3).
Liquidity risk
In order to finance the purchase of the Assets, the Group has
entered into four separate loan agreements pursuant to which the
Group has borrowed an initial amount of US$ 316,600,000 in total.
Pursuant to the loan agreements, the lenders are given first
ranking security over the Assets. Under the provisions of each of
the loan agreements, the Borrowers are required to comply with loan
covenants and undertakings. A failure to comply with such covenants
or undertakings may result in the relevant lenders recalling the
relevant loan. In such circumstances, the Group may be required to
sell the relevant Asset to repay the outstanding relevant loan.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
For the half year ended 30 June 2018
The Directors are responsible for preparing this interim
management report in all material respects, in accordance with IAS
34 Interim Financial Reporting as adopted by the EU, and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's
Financial Conduct Authority ("the UK FCA").
In preparing the interim financial information, the directors
are required to:
- prepare and present the interim financial information in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU, and the DTR of the UK FCA;
- ensure the interim financial information has adequate
disclosures;
- select and apply appropriate accounting policies; and
- make accounting estimates that are reasonable in the
circumstances.
The directors are responsible for designing, implementing and
maintaining such internal controls as they determine is necessary
to enable the preparation of the interim financial information that
is free from material misstatement whether due to fraud or
error.
We confirm that to the best of our knowledge:
(1) the condensed set of financial statements in the half-yearly
financial report of DP Aircraft I Limited ("the Company") for the
six months ended 30 June 2018 ("the interim financial information")
which comprises the Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Financial
Position, Condensed Consolidated Statement of Cash Flows, Condensed
Consolidated Statement of Changes in Equity and the related
explanatory notes, have been presented and prepared in accordance
with International Accounting Standard 34, Interim Financial
Reporting, as adopted by the European Union.
(2) The interim financial information presented, as required by
the DTR of the UK FCA, includes:
a. an indication of important events that have occurred during
the first 6 months of the financial year, and their impact on the
condensed set of financial statements;
b. a description of the principal risks and uncertainties for
the remaining 6 months of the financial year
c. related parties' transactions that have taken place in the
first 6 months of the current financial year and that have
materially affected the financial position or the performance of
the enterprise during that period; and
d. any changes in the related parties' transactions described in
the last annual report that could have a material effect on the
financial position or performance of the enterprise in the first 6
months of the current financial year.
On behalf of the board
Director Director
INDEPENT REVIEW REPORT TO THE MEMBERS OF DP AIRCRAFT I
LIMITED
Introduction
We have been engaged by the company to review the condensed set
of consolidated financial statements in the half-yearly financial
report for the six months ended 30 June 2018 which comprises
Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Cash Flows, Condensed Consolidated
Statement of Changes in Equity and the related explanatory notes.
Our review was conducted in accordance with the Financial Reporting
Council's ("FRCs") International Standard on Review Engagements
("ISRE") 2410, 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly report for the six months
ended 30 June 2018 is not prepared, in all material respects, in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the EU, and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA. The annual financial statements of the
company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for ensuring that the condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with the International
Standard on Review Engagements 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. A
review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
KPMG 20 August 2018
Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the six month period ended 30 June 2018
30 June 2018 30 June 2017
(unaudited) (unaudited)
Note US$ US$
Revenue
Lease rental income 4 28,688,669 28,730,567
Amortisation 10 (2,181,009) (2,181,009)
--------------------------------------------------- ----- ------------- -------------
26,507,660 26,549,558
Expenses
Asset management fees 19 (487,816) (475,629)
Asset Manager's disposal fee 19 (159,308) (157,254)
General and administrative expenses 5 (491,792) (394,608)
Depreciation 10 (9,481,279) (9,811,456)
(10,620,195) (10,838,947)
Operating profit 15,887,465 15,710,611
Finance costs 6 (5,587,252) (6,138,486)
Finance income 7 254,251 101,739
--------------------------------------------------- ----- ------------- -------------
Net Finance Costs (5,333,001) (6,036,747)
Profit before tax 10,554,464 9,673,864
Taxation 8 (20,960) (25,515)
Profit for the period 10,533,504 9,648,349
--------------------------------------------------- ----- ------------- -------------
Other Comprehensive Income / (Expense)
Items that are or may be reclassified
to profit or loss
Cash flow hedges - changes in fair
value 17 2,049,291 (752,931)
Cash flow hedges - reclassified to
profit or loss 17 399,351 972,441
--------------------------------------------------- ----- ------------- -------------
Total Other Comprehensive Income 2,448,642 219,510
--------------------------------------------------- ----- ------------- -------------
Total Comprehensive Income for the
period 12,982,146 9,867,859
--------------------------------------------------- ----- ------------- -------------
US$ US$
Earnings per Share for the period
- basic and diluted 8 0.0503 0.0461
--------------------------------------------------- ----- ------------- -------------
All the items in the above statement derive from continuing
operations.
The notes form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
As at 30 June 2018
30 June 2018 31 December
2017
(unaudited) (audited)
Note US$ US$
NON-CURRENT ASSETS
Property, Plant and Equipment
- Aircraft 10 401,497,671 410,978,950
Intangible Asset - Aircraft
Lease Premium 10 32,922,510 35,103,519
----------------------------------- ----- ------------- ------------
Total non-current assets 434,420,181 446,082,469
CURRENT ASSETS
Cash and cash equivalents 9,611,461 9,442,220
Restricted cash 11 47,025,597 43,484,175
Trade and other receivables 13 1,199,921 1,178,711
Derivate instrument assets 17 885,585 -
----------------------------------- ----- ------------- ------------
Total current assets 58,722,564 54,105,106
TOTAL ASSETS 493,142,745 500,187,575
----------------------------------- ----- ------------- ------------
EQUITY
Share Capital 15 210,556,652 210,556,652
Retained Earnings 1,789,538 676,034
Hedging Reserve 885,587 (1,563,055)
Total equity 213,231,777 209,669,631
NON-CURRENT LIABILITIES
Bank borrowings 14 203,471,824 216,136,376
Maintenance reserves 33,189,701 30,242,119
Security deposits 13,264,420 13,264,420
Derivative instrument liabilities 17 - 1,563,058
Asset Manager's disposal
fee 19 1,592,944 1,433,636
----------------------------------- ----- ------------- ------------
Total non-current liabilities 251,518,889 262,639,609
CURRENT LIABILITIES
Bank borrowings 14 25,355,117 24,780,594
Deferred income 4 2,598,555 2,641,658
Trade and other payables 12 438,407 456,083
----------------------------------- ----- ------------- ------------
Total current liabilities 28,392,079 27,878,335
TOTAL LIABILTIES 279,910,968 290,517,944
----------------------------------- ----- ------------- ------------
TOTAL EQUITY AND LIABILITIES 493,142,745 500,187,575
----------------------------------- ----- ------------- ------------
The financial statements were approved by the Board of Directors
and were authorised for issue on 20 August 2018. They were signed
on its behalf by:
Jon Bridel Jeremy Thompson
Chairman Director
The notes form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
For the six month period ended 30 June 2018
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Profit for the period 10,533,504 9,648,349
Adjusted for:
Depreciation 9,481,279 9,811,456
Amortisation 2,181,009 2,181,009
Amortisation of deferred finance costs 146,033 146,821
Finance costs 5,441,219 5,991,665
Income tax expense 20,960 25,515
Changes in:
Increase in maintenance reserve 2,947,582 4,479,970
Decrease in deferred income (43,103) (82,871)
Increase in Asset Manager's disposal
fee 159,308 157,254
(Decrease)/ Increase in accruals and
other payables (3,710) 23,450
(Increase)/ Decrease in receivables (21,210) 24,636
NET CASH FLOW FROM OPERATING ACTIVITIES 30,842,871 32,407,254
--------------------------------------------- ------------- -------------
INVESTING ACTIVITIES
Restricted cash (3,541,422) (4,581,708)
--------------------------------------------- ------------- -------------
NET CASH FLOW USED IN INVESTING ACTIVITIES (3,541,422) (4,581,708)
--------------------------------------------- ------------- -------------
FINANCING ACTIVITIES
Dividends paid (9,420,000) (9,420,000)
Bank loan principal repaid (12,233,704) (11,686,890)
Bank loan interest paid (5,044,227) (5,022,495)
Swap interest paid (434,277) (1,009,455)
NET CASH FLOW USED IN FINANCING ACTIVITIES (27,132,208) (27,138,840)
--------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,442,220 9,011,045
Increase in cash and cash equivalents 169,241 686,706
--------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT OF
PERIOD 9,611,461 9,697,751
--------------------------------------------- ------------- -------------
The notes form an integral part of these financial
statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the six month period ended 30 June 2018
Retained Hedging Total
Share capital Earnings Reserve Equity
Note US$ US$ US$ US$
As at 1 January 2017 210,556,652 616,483 (3,394,282) 207,778,853
Total comprehensive
income for the period
Profit for the period - 9,648,349 - 9,648,349
Other comprehensive
income - - 219,510 219,510
--------------------------------- ----- -------------- ------------ ------------ ------------
Total comprehensive
income - 9,648,349 219,510 9,867,859
-------------------------------- ---------------------- ------------ ------------ ------------
Transactions with owners
of the Company
Dividends 16 - (9,420,000) - (9,420,000)
As at 30 June 2017 (unaudited) 210,556,652 844,832 (3,174,772) 208,226,712
--------------------------------- ----- -------------- ------------ ------------ ------------
As at 1 January 2018 210,556,652 676,034 (1,563,055) 209,669,631
Total comprehensive
income for the period
Profit for the period - 10,533,504 - 10,533,504
Other comprehensive
income - - 2,448,642 2,448,642
--------------------------------- ----- -------------- ------------ ------------ ------------
Total comprehensive
income - 10,533,504 2,448,642 12,982,146
-------------------------------- ---------------------- ------------ ------------ ------------
Transactions with owners
of the Company
Dividends 16 - (9,420,000) - (9,420,000)
As at 30 June 2018 (unaudited) 210,556,652 1,789,538 885,587 213,231,777
--------------------------------- ----- -------------- ------------ ------------ ------------
The notes form an integral part of these financial
statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
For the six month period ended 30 June 2018
1) GENERAL INFORMATION
The unaudited condensed consolidated financial statements
('financial statements') incorporate the results of the Company and
that of wholly owned subsidiary entities, DP Aircraft Guernsey I
Limited, DP Aircraft Guernsey II Limited, DP Aircraft Guernsey III
Limited, DP Aircraft Guernsey IV Limited (collectively and
hereinafter, the 'Borrowers'), each being a Guernsey Incorporated
company limited by shares and two intermediate lessor companies, DP
Aircraft Ireland Limited and DP Aircraft UK Limited (the
'Lessors'), an Irish incorporated private limited company and a UK
incorporated private limited company respectively. The Company and
its subsidiaries (the Borrowers and the Lessors) comprise the
Group.
DP Aircraft I Limited (the 'Company') was incorporated on 5 July
2013 with registered number 56941. The Company is admitted to
trading on the Specialist Fund Segment of the London Stock
Exchange.
The Share Capital of the Company comprises 209,333,333 Ordinary
Shares of no par value and one Subordinated Administrative Share of
no par value.
The Company's investment objective is to obtain income and
capital returns for its Shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling
aircraft.
2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial statements for the period 1 January 2018 to 30
June 2018 have been prepared in accordance with International
Accounting Standard (IAS) 34, 'Interim Financial Reporting' as
adopted by the European Union and the Disclosure and Transparency
Rules ('DTR's') of the UK's Financial Conduct Authority
('FCA').
The financial statements do not include all the information and
disclosures required in the annual financial statements and should
be read in conjunction with the Group's annual report and
consolidated financial statements for the year ended 31 December
2017. The Group's annual financial statements for the year ended 31
December 2017 have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union and are available on the Company's website or from the
Company Secretary.
The financial statements have been prepared on the basis of the
accounting policies set out in the Group's annual consolidated
financial statements for the year ended 31 December 2017 but also
taking into account any new policies that will be applied in the
Group's annual consolidated financial statements for the year
ending 31 December 2018.
The Directors considered all new standards, amendments and
interpretations to existing standards effective for the financial
statements for the six month period ended 30 June 2018. The major
new standards and their
impact on the financial statements are detailed below:-
IFRS 9 Financial Instruments
IFRS 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy
or sell non-financial items. This standard replaces IAS 39
Financial Instruments: Recognition and Measurement.
Although the application of IFRS 9 has resulted in changes to
the classification of financial assets and liabilities, there has
been no impact on the carrying values of such financial
instruments. The following table summarises the financial assets
and liabilities held by the Group, the treatment under IAS 39, the
new treatment under IFRS 9 and the impact on the financial
statements at 1 January 2018
Original New classification Original carrying New carrying
classification under IFRS amount under amount under
under IAS 9 IAS 39 at 1 IFRS 9 at 1
39 Jan 2018 Jan 2018
----------------------- --------------------- --------------------- ------------------ --------------
Financial Assets
Trade and other Loans and Amortised
receivables receivables cost 1,178,711 1,178,711
Cash and cash Loans and Amortised
equivalents receivables cost 9,442,220 9,442,220
Restricted Loans and Amortised
cash receivables cost 43,484,175 43,484,175
Financial Liabilities
Interest rate
swaps used Fair value Fair value
for hedging - hedge instrument - hedge instrument 1,563,058 1,563,058
Amortised Amortised
Bank borrowings cost cost 228,826,941 228,826,941
Maintenance Amortised Amortised
reserves cost cost 30,242,119 30,242,119
Amortised Amortised
Security deposits cost cost 13,264,420 13,264,420
Trade and other Amortised Amortised
payables cost cost 1,433,636 1,433,636
Details of new significant accounting policies and the nature
and effect of the changes to the previous accounting policies are
discussed below.
a) Classification and measurement of financial assets and financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification and measurement of financial liabilities.
However, it eliminates the previous IAS 39 categories for financial
assets of held to maturity, loans and receivables and available for
sale.
The adoption of IFRS 9 has not had a significant effect on the
Group's accounting policies related to financial liabilities and
derivative financial instruments (for derivatives that are used as
hedging instruments, see (c) below). The impact of IFRS 9 on the
classification and measurement of financial assets is set out
below.
Under IFRS 9, on initial recognition, a financial asset is
classified as measured at:
-- amortised cost;
-- Fair value through other comprehensive income ("FVOCI") -
debt investment;
-- FVOCI - equity investment; or
-- Fair value through profit or loss ("FVTPL").
The classification of financial assets under IFRS 9 is generally
based on the business model in which a financial asset is managed
and its contractual cash flow characteristics. The company only has
financial assets that are classified as amortised cost or
FVTPL.
i. Financial assets held at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets at amortised cost are initially measured fair
value plus transaction costs that are directly attributed to its
acquisition, unless it is a trade receivable without a significant
financing component which is initially measured at its transaction
price.
These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses as detailed in (b) below.
Trade and other receivables that were classified as loans and
receivables under IAS 39 are now classified at amortised cost.
ii. FVTPL
All financial assets not classified as measured at amortised
cost or FVOCI are measured at FVTPL which includes derivative
financial assets.
Financial assets at FVTPL are initially and subsequently
measured at fair value. The company has designated its derivative
financial instruments as hedging instruments as detailed in (c)
below.
b) Impairment of financial assets
IFRS 9 has introduced the expected credit loss ("ECL") model
which brings forward the timing of impairments. Under IFRS 9 for
trade receivables, including lease receivables, the Company has
elected to apply the simplified model as the trade receivables all
have a maturity of less than one year and do not contain a
significant financing component. Under the simplified approach the
requirement is to always recognise lifetime ECL. Under the
simplified approach practical expedients are available to measure
lifetime ECL but forward looking information must still be
incorporated. Under the simplified approach there is no need to
monitor significant increases in credit risk and entities will be
required to measure lifetime expected credit losses at all times.
The board consider that a significant movement would be required to
the credit quality of the lessees, oil prices and inflation to
increase the ECL.
The directors have concluded that any ECL on the lease
receivables would be highly immaterial to the financial statements
following consideration of:
-- the historical payment history of the lessees which have
always been met in accordance with the lease agreement terms,
-- the ability of the lessees to pay the current amounts due
based on forward looking information and expectations over items
such as oil prices and inflation.
-- collateral being held in the form of a security deposit for
each lease which can be utilised should there be any payment
defaults.
-- The credit risk of the lessees.
Accordingly, there has been no change in the allowance for
impairment over these receivables in opening retained earnings at 1
January 2018 on transition to IFRS 9.
Other receivables are immaterial to the financial statements and
therefore no assessment of the ECL has been completed.
c) Hedge accounting
Hedge accounting under IFRS 9 adopts a more principle based
approach than that under IAS 39. The quantitative effectiveness
test under IAS 39 has been removed and replaced with a number of
other effectiveness requirements which must all be met. IFRS 9
requires the company to ensure that the hedge accounting
relationships are aligned with its risk management objectives and
strategy and to apply a more qualitative and forward looking
approach to assessing hedge effectiveness.
The company has two interest rate swaps in order to provide for
fixed rate interest to be payable in respect of two of the bank
loans. The interest rate swaps have been entered into to provide
certainty of cash flows and elimination of volatility.
The directors have considered the requirements of IFRS 9 and
given that the critical terms of the hedged item matches that of
the hedging instrument in terms of risk, timing and quantity, have
concluded that it meets all the hedging requirements. Accordingly,
the company has elected to adopt the new general hedge accounting
model in IFRS 9.
The hedges under IAS 39 were accounted for at fair value with
the fair value movements being recorded as other comprehensive
income and the swap interest being reclassified from other
comprehensive income and recognised in profit or loss. Under IFRS 9
there is no change to this accounting treatment.
As the hedging relationship designated under IAS 39 at 31
December 2017 met the criteria for hedge accounting under IFRS 9 at
1 January 2018 it is regarded as a continuing hedge
relationship.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. The standard
replaced IAS 18 Revenue, IAS 11 Construction Contracts and related
interpretations.
As the Company's revenue is solely derived from leases which are
outside the scope of IFRS 15 this standard has had no impact on the
company's consolidated financial statements.
New standards, interpretations and amendments in issue but not
yet effective
There are a number of new standards, amendments to standards and
interpretations that are effective for annual periods beginning
after 1 January 2019 which will be adopted from their effective
date. The most significant of these is IFRS 16 Leases.
IFRS 16 Leases is the IASB's replacement of IAS 17 Leases which
eliminates the classification by a lessee of leases as either
operating or finance. Instead all leases are treated in a similar
way to finance leases in accordance with IAS 17. The standard's
approach to lessor accounting is substantially unchanged from IAS
17 and as such is not expected to have a significant impact on the
Group. The standard is effective for annual periods beginning on or
after 1 January 2019.
Going Concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Directors
believe the Group is well placed to manage its business risks
successfully as the interest on the Group's loans have been fixed
with the bank or via an interest rate swap and the lease rental
income and supplemental rental income have been set at an aggregate
absolute income stream in excess of the Group's expenses,
distributions and finance costs.
3) SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of unaudited condensed consolidated financial
statements in compliance with IAS 34 requires management to make
judgements, estimates and assumptions about the carrying amount of
assets and liabilities that are not readily apparent from their
sources.
The adoption of IFRS 9 has resulted in management considering
the impact of ECL. As detailed in the annual financial statements
for the year ended 31 December no material changes to judgements
and estimates were expected. There have been no other material
revisions to the significant judgements made by management or the
nature and amount of changes in estimates of amounts reported in
the annual financial statements for the year ended 31 December
2017.
4) LEASE RENTAL INCOME
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Deferred income brought forward 2,641,658 2,681,426
Lease rental income received 28,645,566 28,647,696
Deferred income carried forward (2,598,555) (2,598,555)
--------------------------------- ------------- -------------
Total lease rental income 28,688,669 28,730,567
--------------------------------- ------------- -------------
5) GENERAL AND ADMINISTRATIVE EXPENSES
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Legal and professional fees 141,166 111,343
Directors fees and expenses 117,581 104,466
Administration fees 155,315 95,767
Insurance 17,993 31,677
Audit fees 34,044 30,260
Other fees and expenses 25,693 21,095
----------------------------------- ------------- -------------
Total general and administrative
expenses 491,792 394,608
----------------------------------- ------------- -------------
6) FINANCE COSTS
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Loan interest paid
and payable 5,041,868 5,019,224
Amortisation of deferred finance costs 146,033 146,821
------------------------------------------------- ------------- -------------
Total finance costs at effective interest
rate 5,187,901 5,166,045
Cash flow hedges reclassified
from other comprehensive income 399,351 972,441
-------------------------------------------- --- ------------- -------------
Total finance costs 5,587,252 6,138,486
------------------------------------------------- ------------- -------------
7) FINANCE INCOME
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Bank interest received 254,251 101,739
Total finance income 254,251 101,739
------------------------- ------------- -------------
8) TAXATION
With the exception of DP Aircraft Ireland Limited and DP
Aircraft UK Limited, all companies within the Group are exempt from
taxation in Guernsey and are charged an annual exemption fee of
GBP1,200 each (2017: GBP1,200).
DP Aircraft Ireland Limited and DP Aircraft UK Limited are
subject to taxation at the applicable rate in Ireland and the
United Kingdom respectively. The amount of taxation charged during
the period ended 30 June 2018 was US$ 20,960 (period 1 January 2017
to 30 June 2017: US$ 25,515). The Directors do not expect the
taxation payable to be material to the Group.
A taxation reconciliation has not been presented in these
financial statements as the effective tax rate is 0.5%.
9) EARNINGS PER SHARE
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Profit for the period 10,533,504 9,648,349
Weighted average number of shares 209,333,333 209,333,333
Earnings per share 0.0503 0.0461
------------------------------------ ------------- -------------
There are no instruments in issue that could potentially dilute
earnings per Ordinary Share in future periods.
10) PROPERTY, PLANT, EQUIPMENT & INTANGIBLE ASSETS - AIRCRAFT & LEASE PREMIUM
Aircraft Lease Premium Total
(unaudited) (unaudited) (unaudited)
US$ US$ US$
COST
As at 1 January and 30 June
2018 476,751,161 46,979,793 523,730,954
--------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION
As at 1 January 2018 65,772,211 11,876,274 77,648,485
Charge for the period 9,481,279 2,181,009 11,662,288
As at 30 June 2018 75,253,490 14,057,283 89,310,773
--------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 30 June 2018 401,497,671 32,922,510 434,420,181
--------------------------------- ------------ -------------- ------------
COST
As at 1 January and 31 December
2017 476,751,161 46,979,793 523,730,954
--------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION
As at 1 January 2017 46,248,187 7,514,254 53,762,441
Charge for the period 19,524,024 4,362,020 23,886,044
As at 31 December 2017 65,772,211 11,876,274 77,648,485
--------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 31 December 2017 410,978,950 35,103,519 446,082,469
--------------------------------- ------------ -------------- ------------
The Boeing 787-8 is a new generation of aircraft. Due to the new
type of design, in particular in respect of innovative materials
and technology, there is currently insufficient experience and data
available to be able to give a complete assessment of the long-term
use and operation of the aircraft. There is a risk that the newly
developed materials may be found to be less efficient or durable
than expected and thereby may lead to higher maintenance and repair
costs. Under the terms of the Leases, the cost of repair and
maintenance of the Assets will be borne by Norwegian and Thai
Airways. However, upon expiry or termination of the leases, the
cost of repair and maintenance will fall upon the Group. Therefore
upon expiry of the leases, the Group may bear higher costs and the
terms of any subsequent leasing arrangement (including terms for
repair, maintenance and insurance costs relative to those agreed
under the leases) may be adversely affected, which could reduce the
overall distributions paid to the Shareholders.
The first aircraft was acquired in June 2013, the second
aircraft acquired in August 2013 and the third and fourth aircraft
were acquired in June 2015. All four of the aircraft are used as
collateral for the loans as detailed in note 13.
The estimated residual value of the Boeing 787-8 Assets as at
the end of their respective leases in 2025 and 2026 have been
supported by independent experts as at 31 December 2017. The
residual value will depend upon a variety of factors including
actual or anticipated fluctuations in the results of the airline
industry, market perception of the airline industry, general
economic and social and political development, changes in industry
conditions, fuel prices or rates of inflation.
The future cash in-flows for the Assets (excluding the assets
residual value in the event of a sale) have been fixed at a set
rate as agreed between the Group and the lessees.
The loans entered into by the Group to complete the purchase of
the first two aircraft are cross collateralised. Each of the loans
are secured by way of security taken over each of the first
aircraft and the second aircraft.
The loans entered into by the Group to complete the purchase of
the second two aircraft are cross collateralised. Each of the loans
are secured by way of security taken over each of the third
aircraft and the fourth aircraft.
11) RESTRICTED CASH
30 June 2018 31 December 2017
(unaudited) (audited)
US$ US$
Security Deposits 13,396,948 13,355,045
Maintenance reserves 33,628,649 30,129,130
Total restricted
cash 47,025,597 43,484,175
----------------------- ------------- -----------------
The security deposits held have been provided by the two lessees
in accordance with the lease agreements, Norwegian Air Shuttle ASA
has provided security deposit of US$ 6,400,000 and Thai Airways
International PCL has provided a security deposit of US$
6,864,420.
12) TRADE AND OTHER PAYABLES
30 June 2018 31 December 2017
(unaudited) (audited)
US$ US$
Swap interest payable 25,865 60,791
Accruals and other
payables 338,516 342,226
Taxation payable 74,026 53,066
Total trade and other payables 438,407 456,083
--------------------------------- --- ------------- -----------------
13) TRADE AND OTHER RECEIVABLES
30 June 2018 31 December 2017
(unaudited) (audited)
US$ US$
Lease income receivable 1,142,672 1,142,672
Bank interest receivable 48,375 -
Prepayments 8,874 36,039
Total trade and other receivables 1,199,921 1,178,711
------------------------------------ --- ------------- -----------------
14) BANK BORROWINGS
31 December
30 June 2018 2017
(unaudited) (audited)
US$ US$
Current liabilities: bank interest payable
and bank borrowings 25,355,117 24,780,594
Non-current liabilities: bank borrowing 203,471,824 216,136,376
-------------------------------------------- ------------- ------------
Total liabilities 228,826,941 240,916,970
The borrowings are repayable as follows:
Interest payable 380,416 382,774
Within one year 24,974,701 24,397,820
In two to five years 112,469,696 109,886,121
After five years 91,002,128 106,250,255
Total bank borrowings 228,826,941 240,916,970
-------------------------------------------- ------------- ------------
The table below analyses the movements in the Group's bank
borrowings:
31 December
30 June 2018 2017
(unaudited) (audited)
US$ US$
Opening balance 240,534,196 263,852,408
Repayment of loan (12,233,704) (23,612,667)
Amortisation of deferred finance costs 146,033 294,455
Total bank borrowings 228,446,525 240,534,196
---------------------------------------- ------------- -------------
The table below analyses the movements in the Group's bank
borrowings:
30 June 2018 31 December 2017
(unaudited) (audited)
US$ US$
Opening balance 240,534,196 263,852,408
Repayment of loan (12,233,704) (23,612,667)
Amortisation of deferred finance
costs 146,033 294,455
---------------------------------- ------------- -------------------
Principal bank borrowings 228,446,525 240,534,196
Interest payable 380,416 382,774
---------------------------------- ------------- -----------------
Total bank borrowings 228,826,941 240,916,970
---------------------------------- ------------- -----------------
The table below sets out an analysis of net debt and the
movements in net debt for the period ended 30 June 2018:
Cash and Principal Interest Derivative Net Debt
cash equivalents Instrument*
At 1 January
2018 9,442,220 (240,534,196) (382,775) (1,623,845) (233,098,596)
Cash flows 169,241 12,233,704 5,044,227 434,274 17,881,446
Non cash:-
Fair value movement - - - 2,448,642 2,448,642
Amortisation
of
deferred finance
costs - (146,033) - - (146,033)
Interest charge - - (5,041,868) (399,351) (5,441,219)
------------------ -------------- ------------ ------------- --------------
At 30 June 2018 9,611,461 (228,446,525) (380,416) 859,720 (218,355,760)
------------------ -------------- ------------ ------------- --------------
The balance of unamortised deferred finance costs at 30 June
2018 was US$ 2,289,101 (31 December 2017: US$ 2,435,134).
*Including interest payable of US$25,865 (2017: US$60,793)
Loans
During the year ended 31 December 2015 the Company utilised the
proceeds from the placing and the proceeds of two separate loans
from DekaBank Deutsche Girozentrale ('DekaBank') of US$ 78,500,000
each to fund the purchase of two Boeing 787-8 aircraft. The balance
on the loans at 30 June 2018 was US$ 121,661,598 (31 December 2017:
US$ 127,666,181).
During the period ended 31 December 2014 the Company utilised
the proceeds from the initial public offering and the proceeds of
two separate loans from Norddeutsche Landesbank Girozentrale
('NordLB') of US$ 79,800,000 each to fund the purchase of two
Boeing 787-8 aircraft. The balance on the loans at 30 June 2018 was
US$ 106,784,925 (31 December 2017: US$ 112,868,015).
All of the loans will be fully amortised with monthly repayments
in arrears over the term until the scheduled expiry of each
respective lease. There have been no defaults or breaches under the
loan agreements (2017: none).
Structure and term
The committed term of each loan is from the drawdown date until
the date falling twelve years from the Delivery Date of the
relevant Asset. Each Loan will be amortised with repayments every
month in arrears over the term in amounts as set out in a schedule
agreed by the Company and the Lenders. Amortisation will be on an
annuity-style (i.e. mortgage-style) basis.
Interest
Interest on each DekaBank loan is payable in arrears on the last
day of each interest period, which is one month long. Interest on
the loan accrues at a fixed rate of 4.10 per cent including a
margin of 1.95 per cent per annum. If any amount is not paid by the
Borrower when due under the loan agreements, interest will accrue
on such amount at the then current rate applicable to the loan plus
2.0 per cent per annum.
Interest on each NordLB loan is payable in arrears on the last
day of each interest period, which is one month long (the 'Interest
Period'). Interest on each Loan accrues at a floating rate of
interest which is calculated using LIBOR for the length of the
Interest Period and a margin of 2.6 per cent per annum (the 'Loan
Margin') ('Loan Floating Rate'). For the purposes of calculating
the Loan Floating Rate, if on the date when LIBOR is set prior to
the beginning of an Interest Period it is not possible for LIBOR to
be determined by reference to a screen rate at the time that LIBOR
is to be set for that Interest Period (a 'Market Disruption
Event'), the amount of interest payable to each affected Loan
Lender during the Interest Period will be the aggregate of each
Lender's cost of funds during that monthly period and the Loan
Margin. If any amount is not paid by the Borrower when due under
the Loan Transaction Documents, interest will accrue on such amount
at the then current rate applicable to the Loan plus 2.0 per cent
per annum. The Group has entered into ISDA-standard hedging
arrangement with NordLB as hedging provider in connection with the
Loans, in order to provide for a fixed interest rate of 5.06% and
5.08% to be payable in respect of the loans throughout the whole
term.
Cross Collateralisation
The DekaBank loans entered into by the Group to complete the
purchase of the third and fourth Assets are cross collateralised.
Each of the third and fourth loan is secured by way of security
taken over the third and fourth Assets and enforce security over
both Assets. This means that a default on one loan places both of
the Assets at risk.
Similarly the NordLB loans entered into by the Group to complete
the purchase of the first two Assets are cross collateralised. Each
of the first and second loan is secured by way of security taken
over the first and second Assets and enforce security over both
Assets. This means that a default on one loan places both of the
Assets at risk.
Following the enforcement of security and sale of the aircraft,
the remaining proceeds, if any, may be substantially lower than
investors' initial investment in the Company.
15) SHARE CAPITAL
Period ended 30 June 2018 Subordinated
(unaudited)
Administrative Ordinary
Share Shares Total
Issued and fully paid: Number Number Number
Shares as at 1 January and 30
June 2018 1 209,333,333 209,333,334
------------------------------------- --------------- ------------ ------------
Share capital: US$ US$ US$
Share capital as at 1 January
and 30 June 2018 1 210,556,651 210,556,652
------------------------------------- --------------- ------------ ------------
Period ended 30 June 2017
(unaudited)
Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid: Number Number Number
Shares as at 1 January and 31
December 2017 1 209,333,333 209,333,334
------------------------------------- --------------- ------------ ------------
Share capital: US$ US$ US$
Share capital as at 1 January and
31 December 2017 1 210,556,651 210,556,652
------------------------------------- --------------- ------------ ------------
Subject to the applicable company law and the Company's Articles
of Incorporation, the Company may issue an unlimited number of
shares of par value and/or no par value or a combination of
both.
On 12 June 2015 a total of 96,333,333 shares were issued under
the placing at an issue price of US$ 1.0589 per share raising gross
proceeds of US$ 102 million. Total issue costs were US$ 2.3 million
which included the 1.5% placing commission paid to Canaccord
Genuity as placing agent.
On 10 June 2013 a total of 113,000,000 shares were issued under
the initial public offering placing at an issue price of US$ 1 per
share raising gross proceeds of US$ 113 million. Total issue costs
were US$ 2.1 million which included the 1.5% placing commission
paid to Canaccord Genuity as placing agent.
The Subordinated Administrative Share is held by DS Aviation
GmbH & Co. KG, (the Asset Manager).
Holders of Subordinated Administrative Shares are not entitled
to participate in any dividends and other distributions of the
Company. On a winding up of the Company the holders of the
Subordinated Administrative Shares are entitled to an amount out of
the surplus assets available for distribution equal to the amount
paid up, or credited as paid up, on such shares after payment of an
amount equal to the amount paid up, or credited as paid up, on the
Ordinary Shares to the Shareholders. Holders of Subordinated
Administrative Shares shall not have the right to receive notice of
and have no right to attend, speak and vote at general meetings of
the Company except if there are no Ordinary Shares in
existence.
The Directors are entitled to issue and allot C Shares. No C
Shares have been issued since the Company was incorporated.
16) DIVIDS
During the period ended 30 June 2018 the Company declared and
paid the following dividends:
Dividend
Dividend reference Shares per share Paid Declaration Payment date
period date
US$ US$
Quarter ended 18 January 15 February
31 December 2017 209,333,333 0.0225 4,710,000 2018 2018
Quarter ended 18 April
31 March 2018 209,333,333 0.0225 4,710,000 2018 17 May 2018
9,420,000
-------------------- ------------ ---------- ---------- ------------ -------------
A quarterly dividend of US$ 4,710,000 (US$ 0.0225 per share) for
the quarter ended 30 June 2018 was paid on 16 August 2018. In
accordance with IAS 10, this dividend has not been recognised in
these financial statements.
During the period ended 30 June 2017 the Company declared and
paid the following dividends:
Dividend
Dividend reference Shares per share Paid Declaration Payment date
period date
US$ US$
Quarter ended 18 January 13 February
31 December 2016 209,333,333 0.0225 4,710,000 2017 2017
Quarter ended 20 April
31 March 2017 209,333,333 0.0225 4,710,000 2017 19 May 2017
9,420,000
-------------------- ------------ ---------- ---------- ------------ -------------
17) FAIR VALUE MEASUREMENT
Financial assets and financial liabilities at amortised cost
The fair value of cash and cash equivalents, trade and other
receivables, restricted cash and interest payable approximate their
carrying amounts due to the short term maturities of these
instruments.
The fair value of floating rate borrowings is estimated by
discounting future cash flows using rates currently available for
debt of similar returns and remaining maturities and therefore the
carrying value approximates fair value.
The fair value of fixed rate borrowings is estimated by
discounting future principal and interest cash flows, discounted at
the market rate of interest at the reporting date. The fair value
of the loans is US$ 113,370,928 (31 December 2017: US$ 121,610,356)
and the carrying value of the loans is US$ 121,661,598 (31 December
2017: US$ 127,666,181).
The fixed rate loans have been categorised within level 3 of the
fair value hierarchy. The fair value of the fixed rate loans for
disclosure purposes have been determined by discounting future cash
flows at a rate of 6.21% (31 December 2017: 5.57%). An increase in
the discount rate would decrease the fair value of the fixed rate
loans.
Financial liabilities designed as hedging instruments
The fair value of the Group's derivative interest rate swaps are
determined by reference to the mid-point on the yield curves
prevailing on the reporting date and represent the net present
value of the differences between the contracted and the valuation
rate when applied to the projected balances to the period from the
reporting date to the contracted expiry date.
The interest rate swaps are valued on a recurring basis and have
been categorised within level 2 of the fair value hierarchy
required by IFRS 13.
The following table details the contractual undiscounted cash
flows of the interest rate swaps:
As at 30 June 2018 Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Floating rate receivable 2,900,973 7,638,891 1,197,775 11,737,639
Fixed rate payable (5,276,824) (13,895,232) (2,179,007) (21,351,063)
-------------------------- --------------- ------------- -------------- -------------
Interest rate swaps (2,375,851) (6,256,341) (981,232) (9,613,424)
-------------------------- --------------- ------------- -------------- -------------
As at 30 June 2017 Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Floating rate receivable 3,237,543 9,254,064 2,483,575 14,975,182
Fixed rate payable (5,889,021) (16,833,121) (4,517,942) (27,240,084)
-------------------------- --------------- ------------- -------------- -------------
Interest rate swaps (2,651,478) (7,579,057) (2,034,367) (12,264,902)
-------------------------- --------------- ------------- -------------- -------------
As at 30 June 2018, the aggregate gain on the fair value of the
interest rate swaps was US$ 885,585 (31 December 2017: aggregate
loss of US$ 1,563,058).
Transfers between levels
The Company determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation based on the
lowest level input that is significant to the fair value
measurement as a whole at the end of each reporting period.
There were no transfers between level 1 and level 2 fair value
measurements and no transfers into or out of level 3 fair value
measurements during the six month period ended 30 June 2018 or in
the year ended 31 December 2017.
18) RELATED PARTY TRANSACTIONS
The Directors of the Company received total fees from the Group
as follows:
30 June 2018 30 June 2017
(unaudited) (unaudited)
US$ US$
Jon Bridel (Chairman) 39,054 36,006
Jeremy Thompson (Audit Committee
Chairman) 31,921 29,459
Angela Behrend-Görnemann 39,641 36,797
---------------------------------- ------------- -------------
Total 110,616 102,262
---------------------------------- ------------- -------------
Between 1 April 2017 until 31 March 2018 the Directors received
the following fees:
-- Jon Bridel, Chairman -GBP56,400 per annum;
-- Jeremy Thompson, Chairman of the Audit Committee and Senior
Independent Director -GBP46,100 per annum; and
-- Angela Behrend-Görnemann, Chairman of the Management
Engagement Committee - EUR66,600 per annum.
Following the Directors annual review of the Directors' fees and
subsequent approval at the Company's AGM on 16 July 2018, with
effect from 1 April 2018 the Directors receive the following
fees:
-- Jon Bridel, Chairman -GBP57,900 per annum;
-- Jeremy Thompson, Chairman of the Audit Committee and Senior
Independent Director -GBP47,300 per annum; and
-- Angela Behrend-Görnemann, Chairman of the Management
Engagement Committee - EUR68,300 per annum.
The Directors' interests in the shares of the Company are
detailed below:
30 June 2018 31 December 2017
Number of Number of
ordinary shares ordinary shares
Jonathan Bridel 7,500 7,500
Jeremy Thompson 15,000 15,000
Angela Behrend-Görnemann - -
19) MATERIAL CONTRACTS
Asset Management Agreement
The Asset Management Agreement, dated 19 September 2013, between
the Company and DS Aviation was amended on 5 June 2015 to reflect
the acquisition of the two new aircraft.
The amended agreement provides a calculation methodology for the
disposal fee which will only become payable when all four of the
Assets have been sold after the expiry of the fourth Thai Airways
lease in December 2026. The fee will be calculated as a percentage
of the aggregate net sale proceeds of the four Assets, such
percentage rate depending upon the Initial Investor Total Asset
Return per share being the total amount distributed to an initial
investor by way of dividend, capital return or otherwise over the
life of the Company. If each of the Assets is sold subsequent to
the expiry of their respective leases, the percentage rate shall
be:
-- Nil if the Initial Investor Total Asset Return per share is less than 205%,
-- 1.5% if the Initial Total Asset Return per share equals or
exceeds 205% but is less than 255%,
-- 2% if the Initial Total Asset Return per share equals or
exceeds 255% but is less than 305%, or
-- 3% if the Initial Total Asset Return per share equals or exceeds 305%.
In the event that any of the Assets is sold prior to the expiry
of its lease the percentage hurdles set out above will be adjusted
on the following basis:
(i) an amount will be deducted in respect of each Asset sold
prior to the expiry of its lease, equal to the net present value of
the aggregate amount of dividends per share that were targeted to
be paid but were not paid as a result of the early divestment of
the relevant Asset; and
(ii) a further amount will be deducted, in respect of each Asset
sold prior to the expiry of its lease, equal to the amount by which
the proportion of the non-dividend component of the relevant
percentage hurdle attributable to the relevant Asset would need to
be reduced in order to meet its net present value.
The disposal fee is a cash-settled payment to the Asset Manager.
In determining the provision for the financial statements, the
Directors have estimated the fee that will be payable on disposal
of the assets. This is then being discounted and is then recognised
straight line over the period until the estimated payment date. The
provision for the disposal fee at 30 June 2018 was US$ 1,592,944
(31 December 2017: US$ 1,433,636) and the discount rate used was
2.85% (31 December 2017: 2.34%).
The Asset Manager is paid a base fee which is US$ 21,354 per
month in respect of the first two Assets increasing by 2.5% per
annum and US$ 16,666 per month in respect of the second two Assets
increasing by 2.5% per annum from May 2016. In the six month period
ended 30 June 2018 Asset Management fees totalled US$ 487,816 (Six
month period ended 30 June 2017 US$ 475,629) of which US$ 81,886
were due at 30 June 2018 (31 December 2017: US$ 81,011).
Pursuant to the agreement, the Asset Manager received an
arrangement fee of US$ 2.72 million in respect of the acquisition
of the first two assets in the period ended 31 December 2014, and
an arrangement fee of US$ 2.07 million in respect of the
acquisition of the third and fourth assets in the year ended 31
December 2015.
20) SEGMENTAL INFORMATION
The Group is engaged in one operating segment, being acquiring,
leasing and subsequent selling of Aircraft. The geographical
location of the Assets of the Group is Norway and Thailand, where
the Assets are registered. The income arising from the lease of the
Assets originates from two lessees, one in Norway and one in
Thailand.
21) BREXIT
On 29 March 2019 the United Kingdom ('UK') will leave the
European Union ('EU') - 'Brexit'. The terms of the withdrawal
agreement between the UK and EU have not yet been finalised and
consequently the impact, if any on the Company and/or its lessees
cannot, at this time, be determined with any certainty. The Company
has not identified any likely material effect of Brexit, and no
actions to-date have been identified as being required to be taken
in this regard. The impact, if any, of Brexit on the Company remain
subject to review and oversight by the Board as the Brexit
negotiations develop and the form of a withdrawal agreement is
determined. Set out below are some observations on Brexit as it
relates to the Company:
-- DPA is an internally managed, non-EU AIF
-- DPA has not relied on EU regulations to market the shares in
the Company to EU investors, rather all shares have been promoted
and sold under the UK private placement exemption only.
-- All placements of shares to-date have been to UK
institutional investors, not to EU institutional or retail
investors, although some EU investors have subsequently purchased
shares independently in the Company
-- No commitment or obligation was provided in any Prospectus
issued by the Company to attain non-UK EU authorisation
-- The UK's exit from the EU is at this stage not expected to
impact the Company's operations, its capital structure or its
regulatory status
The Company has also identified some potential risks that may
result from Brexit although it is not possible to quantify any
outcome or plan of action at this stage:
-- Impact upon airline, maintenance, components and safety
regulations as the UK leaves the EU regulatory framework in these
regards - in particular the possible impact on one of the lessees
given the significant number of flights that it operates from the
UK.
-- Possible changes to tax treatment as it relates to the UK no longer being part of the EU.
22) SUBSEQUENT EVENTS
On 16 July 2018 the Company declared a dividend in respect of
the quarter ended 30 June 2018 of US$ 0.0225 per ordinary share to
holders of shares on the register at 27 July 2018. The ex-dividend
date was 26 July 2018 with payment on 16 August 2018.
The company changed the advocates to the Company (Guernsey law)
from Ogier to Mourant Ozannes with effect from 23 July 2018.
COMPANY INFORMATION
Directors Jonathan Bridel
Jeremy Thompson
Angela Behrend-Görnemann
Registered Office East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Asset Manager DS Aviation GmbH & Co. KG
Stockholmer Allee 53
44269 Dortmund
Germany
Solicitors to the Company Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London
SE1 2AQ
United Kingdom
Advocates to the Company to 23 July 2018 Ogier
(as to Guernsey law) Ogier House
St Julian's Avenue
St Peter Port
Guernsey
GY1 1WA
Channel Islands
Advocates to the Company from 23 July Mourant Ozannes
2018 Royal Chambers
(as to Guernsey law) St Julian's Avenue
St Peter Port
Guernsey
GY1 4HP
Channel Islands
Auditor KPMG, Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
Ireland
Administrator and Company Secretary Aztec Financial Services (Guernsey)
Limited
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Corporate Broker Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
United Kingdom
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR QBLFLVVFLBBQ
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August 20, 2018 12:30 ET (16:30 GMT)
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