TIDMDPA
RNS Number : 3916L
DP Aircraft I Limited
29 April 2020
29 April 2020
DP Aircraft I Limited (the "Company")
Annual Report and Accounts
Please see attached a copy of the Annual Report and Audited
Consolidated Financial Statements for the year ended 31 December
2019 (the "Annual Report"), which is available from the Company's
registered office.
The Board has progressed discussions with its lenders and
lessees in light of the global COVID-19 outbreak and further
details thereof are contained within the Annual Report.
A detailed analysis and commentary of the Company's results for
the year ended 31 December 2019 is presented in the Annual Report
published today, which will shortly be available to view or
download from the Company's website www.dpaircraft.com
For further information please contact:
Aztec Financial Services (Guernsey) Limited, Company
Secretary
+44 (0) 1481 748833
Kellie Blondel / Laura Dunning
This document has been issued by, and is the sole responsibility
of the Company and is for information purposes only. It is not, and
is not intended to be an invitation, inducement, offer, or
solicitation, to deal in the shares of the Company. The price of
shares in the Company and the income from them may go down as well
as up and investors may not get back the full amount invested on
disposal of shares in the Company. An investment in the Company
should be considered only as part of a balanced portfolio of which
it should not form a disproportionate part. Prospective investors
are advised to seek expert legal, financial, tax and other
professional advice before making any investment decision.
DP AIRCRAFT I LIMITED
ANNUAL REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARED 31 DECEMBER 2019
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 company limited by shares and a
UK incorporated private limited company respectively. The Company
and its subsidiaries (the Borrowers and the Lessors) comprise 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$1.00 per Share
by means of a Placing. The Company's Shares were admitted to
trading on the Specialist Fund Segment (previously the Specialist
Fund Market) of the London Stock Exchange on 4 October 2013 and the
Company was listed on the Channel Islands Securities Exchange until
27 May 2015.
On 5 June 2015, the Company offered 96,333,333 Ordinary Shares
(the 'New Shares') of no par value in the capital of the Company at
an issue price of US$ 1.0589 per Share by means of a Placing. The
Company's New 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 & POLICY
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 and Group in accordance with the Articles of
Incorporation and have overall responsibility for the Company's and
Group's activities, including portfolio and risk management. The
asset management activities of the Group are advised by DS Aviation
GmbH & Co. KG (the 'Asset Manager').
THE ASSET MANAGER
The Asset Manager has undertaken to provide the asset management
advisory services to the Company and Group 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.
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. Four
quarterly dividends have been paid during the year ended 31
December 2019 and one has been paid subsequent to the year 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. On 3 April 2020, the
Company announced a suspension of dividends until further
notice.
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$ 0.78 at 31 December 2019
US$ 0.24 as 28 April 2020
Earnings per share US$ 0.11068 for the year ended 31 December
2019
Country of Incorporation Guernsey
Current Ordinary Shares in Issue 209,333,333
Administrator and Company Secretary Aztec Financial Services
(Guernsey) Limited
Asset Manager DS Aviation GmbH & Co. KG
Auditor KPMG, Chartered Accountants
Corporate Broker Investec Bank Plc
Aircraft Registration LN-LNA
LN-LNB
HS-TQD
HS-TQC
Aircraft Serial Number 35304
35305
35320
36110
Aircraft Type and Model B787-8
Lessees Norwegian Air Shuttle ASA ('Norwegian' or 'NAS')
Thai Airways International Public Company Limited ('Thai
Airways')
Website www.dpaircraft.com
PROFIT FOR THE YEAR
Profit for the year ended 31 December 2019 is US$23,169,069
(Earnings per Share US$ 0.11068 per Share) (2018: US$ 21,326,491
(Earnings per Share US$ 0.10188 per Share)).
NET ASSET VALUE ('NAV')
The NAV was US$ 1.03041 per share at 31 December 2019 (2018:
US$1.02169). The NAV excluding the financial effects of the swaps
was US$ 1.04176 per Share at 31 December 2019 (2018: US$
1.02100).
Although the fair values of the derivatives will move over their
terms, at maturity the derivatives will reduce to nil. The NAV
excluding swap liabilities is therefore presented to provide what
the Directors consider to be a more relevant assessment of the
Group's net asset position.
As at 31 December 2019 As at 31 December 2018
US$ US$ per share US$ US$ per share
NAV per the financial
statements 215,699,405 1.03041 213,872,974 1.02169
Add back:
Derivative instrument
(assets)/ liabilities
and swap interest payable 2,376,913 0.01135 (146,084) (0.00069)
NAV excluding swap liabilities 218,076,318 1.04176 213,726,890 1.02100
------------ -------------- ------------ --------------
DIVIDS
Dividends were declared on:
Date Dividend reference period Dividend per Share Payment date
17 January 2019 Quarter ended 31 December US$ 0.0225 per 14 February 2019
2018 Share
23 April 2019 Quarter ended 31 March US$ 0.0225 per 16 May 2019
2019 Share
8 July 2019 Quarter ended 30 June US$ 0.0225 per 15 August 2019
2019 Share
21 October 2019 Quarter ended 30 September US$ 0.0225 per 14 November 2019
2019 Share
15 January 2020 Quarter ended 31 December US$ 0.0225 per 14 February 2020
2019 Share
As a result of the Coronavirus ('Covid-19') pandemic impact on
global aviation and especially its lessees the Group has suspended
dividends until further notice to help preserve liquidity. Further
details on the impact of the Covid-19 pandemic can be found within
the Directors' Report.
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 Annual Report of
the Company for the year ended 31 December 2019.
It is difficult to comment on the 2019 trading year without
starting from the momentous changes to the airline market following
the outbreak of the Covid-19 virus pandemic in the first quarter of
2020.
The outlook for the airline industry for 2020 with a 2019 lens
remained positive, however the airline industry as a whole has been
substantially impacted by the outbreak of the Covid-19 virus. The
extent of the international governmental response has led to the
virtual suspension of international travel for as yet an undefined
period. This has and will put substantial pressure on airlines
ability to fund near term operations. The extent and the duration
of the down turn remains difficult to assess. With revenues
effectively stopped there is substantial pressure on airlines to
review and challenge their current operational financing - this
includes our lessees.
As noted in the announcement on 2 March 2020, NAS requested a
temporary suspension of lease payments with effect from March 2020
until the end of June 2020. NAS has ongoing negotiations with the
Norwegian government for the provision of state aid and that on 19
March 2020 the Norwegian government issued a press release
indicating its willingness to extend loan guarantees of up to three
billion NOK to Norwegian subject to certain terms and conditions.
In these circumstances, the Board has opted to reserve its position
under the two leases until there is greater clarity as to how these
negotiations develop and the Board and the Company's asset manager,
DS Aviation, is prioritising discussions with Norwegian in order to
determine whether and on what basis it may be able to meet its
obligations to the Company under the leases for the Assets.
The Board and the Company's asset manager, is also discussing
the situation with Norddeutsche Landesbank Girozentrale, on behalf
of the banks providing lending to the Company and its subsidiaries
in respect of the Assets. The Board has also taken the
precautionary steps of appointing advisers and implementing
preliminary initiatives with a view to protecting the value of the
Assets.
On 3 April 2020 the Company announced that given the absence of
immediate clarity as to the basis upon which the situation will be
resolved, and in order to place the Company in the best possible
position in its discussions with its lenders, the Board has
suspended the payment of dividends with immediate effect and until
further notice. Maintaining an appropriate level of liquidity is a
key priority given the current challenges.
On 9 April 2020, the Company announced the request from Thai
that the Company consider affording them a temporary relaxation of
their lease payment obligations to the Company in light of the
ongoing Covid-19 crisis. Thai has emphasised that it remains fully
committed to its obligations, and to date it has made all payments
due to the Company in full and in a timely fashion up to and
including 9 April 2020. The Company, with the support of the Asset
Manager, has actively engaged with Thai and agreed certain
concessions to Thai, which include a rent deferral arrangement
(which began on 29 April 2020) in an aggregate amount of
approximately US$ 3.4m. The deferred amounts (with interest
thereon) are due to be repaid in 12 equal monthly instalments
commencing at end of each respective deferral period.
The situations identified above with regard to NAS and Thai and
their resolution, have been determined by the Directors to be a
material uncertainty that may cast doubt upon the Company's ability
to continue as a going concern (see the Directors Report). The
Directors have notwithstanding this material uncertainty concluded
on the viability of the Company (see Directors Report).
The Company has available cash projected at the end of April
2020 after making all bank payments due in excess of US$ 8m and in
certain circumstances access to the three months of security
payments paid by both lessees.
The focus of the Company is to prioritise the preservation of
the Company's long-term financial stability, although the
challenges facing the Company are significant.
The Company's Annual General Meeting ("AGM") is currently
scheduled for 10 July 2020.
Both our lessees continued to meet their lease obligations
throughout 2019. Both lessees successfully implemented cost cutting
measures during the year. There were no material incidents to bring
to the attention of Shareholders concerning the aircraft and
inspections have revealed no matters of concern . As has been
previously reported both lessees have aircraft which are grounded
and awaiting engine refurbishment following the well publicised
Rolls Royce issues with the low pressure turbine('LPT') blades on
their Trent 1000 engines.
The Earnings per Share for the year was US$ 0.11068 per share
compared to US$ 0.10188 per share for last year. All four dividends
for the year ended 31 December 2019 were declared and paid and the
Company continued to meet its annual dividend target of US$ 0.09
per share for 2019. The net asset value per share at the year end
was US$ 1.03041 compared to US$ 1.02169.
Operating revenues for Norwegian Air Shuttle ("NAS") in 2019
increased by 8% compared to the previous year and operating
expenses reduced by 3%. NAS had turned its focus from growth to
profitability during the year and a cost saving programme has been
implemented, along with several other additional measures to
increase liquidity and reduce capital commitments. A capital raise
of NOK 2,500 million was successfully completed during the period
which was planned to fund NAS throughout 2020. NAS continued to be
affected by the Trent 1000 engine issues and the worldwide
grounding of B737MAX aircraft, and compensation has been sought
from Boeing and Rolls-Royce.
During 2019, the profitability for Thai Airways International
Plc ("Thai") further deteriorated and operating revenues decreased
by 8% compared to last year. Operating expenses decreased by 6%
during the year and there is continued focus on reducing costs
further. Thai has faced a number of challenges in the year
including the Covid-19 virus outbreak in China, higher gearing and
lack of profitability. It has also had Trent 1000 engine issues. A
new CFO and Chairman for Thai are now in place, providing direction
and continuity for the company. The CEO has stressed the importance
of the business rehabilitation plan and the necessary support by
airline staff to optimise the cost basis, to improve revenues and
to return to profitability.
I would like to thank our Investors for their continued support
in the Company. My fellow Directors and I are available via our
Company Secretary, whose details can be found at the end of this
report.
Jon Bridel
Chairman
29 April 2020
ASSET MANAGER'S REPORT
The Airline Market
Global
-- Current Outlook
o Airlines worldwide substantially impacted by the Covid-19
pandemic
o A significant number of airlines have completely grounded
their fleets for an as yet undefined period
o About 52% of passenger aircraft (more than 13,500) stored
globally and the number set to increase
o Demand for cargo flights to increase as belly freight capacity
of passenger jets falls away
o The 2020 forecast of the chart below was provided late 2019 by
IATA and will inevitably significantly change, the total impact of
the Covid-19 pandemic cannot be assessed at the current stage
2018 2019 (Expectation) 2020* (Forecast Pre-Covid-19)
Passengers (billion) 4.38 4.54 4.72
----- ------------------- ------------------------------
Capacity (ASK) [% YoY] 6.9 6.5 4.7
----- ------------------- ------------------------------
Demand (RPK) [% YoY] 7.4 4.2 4.1
----- ------------------- ------------------------------
Passenger Load Factor (%) 81.9 82.4 82.0
----- ------------------- ------------------------------
Passenger Yield [% YoY] -2.1 -3.0 -1.5
----- ------------------- ------------------------------
Freight (million freight tonnes) 63.3 61.2 62.4
----- ------------------- ------------------------------
Cargo Yield [% YoY] 12.3 -5.0 -3.0
----- ------------------- ------------------------------
Overall Expenses [% YoY] 9.7 3.8 3.5
----- ------------------- ------------------------------
Overall Revenues [% YoY] 7.6 3.2 4.0
----- ------------------- ------------------------------
Net Profits 27.3 25.9 29.3
----- ------------------- ------------------------------
* These numbers will be significantly impacted by the effects of
Covid-19 as further detailed below.
-- Long term outlook:
o Average annual global fleet growth was anticipated to be 3.4%
within the next 20 years before the current pandemic.
o Expected deliveries of approximately 44,000 aircraft with a
market value of USD 6,810 billion within the next 20 years
Europe
-- 2019
o Net profit of USD 6.2 billion
o Low yields due to fierce competition and regulatory costs
resulted in breakeven load factors of 70.4%
o Uncertainty about the impact of BREXIT with several airline
bankruptcies (e.g. Thomas Cook Airlines, Germania, Wow Air and
Flybmi) downshifted demand growth from 7.5% in 2018 to 4.5%
-- 2020
o Estimated Covid-19 impact on 2020 by IATA
-- 46% decline in demand (RPK)
-- USD 76 billion decrease in revenues
Asia
-- 2019
o Net profit of USD 4.9 billion
o Strongest increase in passenger demand in the Asia-Pacific
region compared with the other regions, although...
o ...significant exposure to the US-China trade war had a
negative impact on passenger demand growth rate and cargo
demand
-- 2020
o Asian airlines were amongst the first affected by the Covid-19
outbreak with significant negative impact on 2020 financial
results
o Estimated Covid-19 impact on 2020 by IATA
-- 37% decline in demand (RPK)
-- USD 88 billion decrease in revenues
Covid-19 Pandemic
The Covid-19 virus was first identified at Wuhan in China at the
end of December 2019 but then continued to spread to neighbouring
countries. As the virus arrived in Europe and all other continents,
the Covid-19 outbreak turned into a global pandemic.
The impact on airlines varies depending on route network,
customer base and place of business but the impact on the whole
airline industry is significant. At the outset, Chinese and Asian
carriers were assumed to be the most affected but currently the
negative impact on European Airlines is greater, although airlines
worldwide are facing challenging and potentially existential
times.
The number of stored aircraft is increasing rapidly; by way of
example the number of stored aircraft went up by over 1,000 within
a single day (31(st) March to 1(st) April 2020). More and more
airlines are completely grounding their fleet, and in particular
those carriers with no freighter business. The demand for cargo
flights itself is strong as the volume of belly freight
opportunities falls away with the decrease of passenger flights.
Some airlines, amongst others Lufthansa and Aegean, are using
passenger aircraft to transport cargo and urgently required medical
equipment and protective clothing.
By the end of March 2020, IATA have forecast that due to the
Covid-19 pandemic, global demand for passenger air traffic will
decrease by 38 per cent in 2020 and 71 per cent in the second
quarter 2020 compared to the comparable periods in 2019. Passenger
revenues are expected to decrease by 68 per cent and USD 61 billion
of cash being burned in the second quarter 2020. The Airports
Council International (ACI World) expects that the recovery period
may last until the end of 2021.
Outlook & Conclusion
The airline business is a cyclical business and sensitive to
external shocks, currently being reinforced by the Covid-19
pandemic. Previously burdens on airlines caused through the
worldwide Boeing 737MAX fleet grounding and the Trent 1000 issues
will be trivial in 2020 by comparison as more than half of the
passenger fleet is already considered as stored with the number
significantly increasing. Even if the spread of coronavirus cases
reduces and travel bans are gradually lifted, it will take time
until capacity and numbers of passenger aircraft will be on
pre-Covid-19 levels.
Compared to other industries and sectors, airlines operate in a
very competitive environment, their profit margins are low and
their operating costs significant. The chart below shows, that
fixed costs, semi-fixed costs and crew expenses amount for nearly
50% of total operating costs. Most of these costs cannot be avoided
in the short-term and as revenue streams are currently marginal or
non-existent, their financial buffer will be used up shortly.
According to IATA, an average airline has an amount of cash and
cash equivalents for about two months. This indicates that the
industry will heavily rely on governmental support.
Source: IATA, March 2020
Not only current travel restrictions and closures of tourist
related infrastructure but also the decrease in manufacturing and
retail industries and the resulting lay-off of employees might
contribute to an economic recession which in turn will impact the
recovery of the airline industry. At the current stage, it is
impossible to make any reliable or resilient statement on the total
impact of the Covid-19 pandemic or its further development.
However, from a historical point of view, the airline industry has
proven to be resilient and has recovered from all previous crises
and external shocks relatively quickly.
The Lessees
Norwegian Air Shuttle ASA
Norwegian Air Shuttle in brief
-- Low-cost carrier; 3(rd) largest in Europe
-- Short-, medium- and long-haul operations
-- 37 Boeing 787s
-- 36 million passengers in 2019
Financial & Operational Figures
[million NOK] 4Q2019 4Q2018 Change FY2019 FY2018 Change Link
-------
Operating Revenues 8,944 9,658 - 7 % 43,522 40,266 + 8 % a)
------- ------- ------- -------- ------- ------- ------
Operating Expenses 10,222 13,251 - 23 % 42,666 44,117 - 3 % b)
------- ------- ------- -------- ------- ------- ------
+ 237
EBITDAR 357 -1,925 --- 7,314 2,171 % c)
------- ------- ------- -------- ------- ------- ------
Operating Result -1,278 -3,593 + 64 % 856 -3,851 --- d) g)
------- ------- ------- -------- ------- ------- ------
- 11
Net Result -1,873 -3,012 + 38 % -1,609 -1,454 % e-h)
====================== ======= ======= ======= ======== ======= ======= ======
Unit Costs incl.
fuel 0.48 0.44 + 10 % 0.44 0.43 + 0 %
------- ------- ------- -------- ------- ------- ------
Unit Costs excl.
fuel 0.35 0.31 + 15 % 0.31 0.31 + 0 %
---------------------- ------- ------- ------- -------- ------- ------- ------
Unit Revenue 0.34 0.30 + 16 % 0.35 0.33 + 7 %
---------------------- ------- ------- ------- -------- ------- ------- ------
Yield 0.40 0.37 + 10 % 0.41 0.38 + 6 %
---------------------- ------- ------- ------- -------- ------- ------- ------
Ancillary Revenues + 10
per Passenger 182 169 + 8 % 184 168 %
====================== ======= ======= ======= ======== ======= ======= ======
Capacity - ASK
(million) 21,018 26,058 - 19 % 100,031 99,220 + 1 %
------- ------- ------- -------- ------- ------- ------
Demand - RPK
(million) 17,835 21,068 - 15 % 86,616 85,124 + 2 %
------- ------- ------- -------- ------- ------- ------
84.9 + 4.0 + 0.8
Load Factor % 80.9 % pp 86.6 % 85.8 % pp
------- ------- ------- -------- ------- ------- ------
Passengers (million) 7.57 9.04 - 16 % 36.20 37.34 - 3 %
------- ------- ------- -------- ------- ------- ------
Average Stage
Length 1,805 1,872 - 4 % 1,876 1,843 + 2 %
------- ------- ------- -------- ------- ------- ------
Aircraft Utilisation
[block hours] 11.7 12.5 - 6 % --- --- ---
====================== ======= ======= ======= ======== ======= ======= ======
Number of Aircraft --- --- --- 156 164 - 5 %
------- ------- ------- -------- ------- ------- ------
Cash & Cash
Equivalents --- --- --- 3,096 1,922 + 61%
------- ------- ------- -------- ------- ------- ------
+ 1.8
Equity Ratio --- --- --- 4.8 % 3.0 % pp g)
------- ------- ------- -------- ------- ------- ------
+ 52
Total Assets --- --- --- 85,343 55,985 % j)
------- ------- ------- -------- ------- ------- ------
Background Information
a) Decreasing revenues in 4Q19 driven by capacity reductions;
Strongest growth of revenue streams from travel originating the
U.S. in FY2019 (+19%)
b) Costs of NOK 300 million (NOK 1,000 million) in 4Q19 (FY2019)
caused by the grounding of B737MAX aircraft
c) Improvement resulted from network optimisation and #Focus2019
d) Loss of NOK 244 million from currency effects in 4Q19
e) Sale of 14.0 million Norwegian Finans Holding ASA (NOFI) shares in 4Q19
f) Gain of NOK 174 million in net profit in FY2019 from the sale
of shares in Lilienthal to NOFI including brand licensing
g) Impact of IFRS 16 (implemented on 1(st) January 2019) on 4Q19 (FY2019), e.g.:
- Net cost reduction on depreciation and aircraft lease of NOK 255 million
- Positive impact of NOK 342 million (NOK 981million) on operating profit
- Negative impact of NOK 456 million (NOK 756 million) on net profit (net financial items)
- Lease liabilities of (NOK 34,274) million included in net interest-bearing debt
- Equity ratio of 4.8% but 9.1% without IFRS 16 as at 31(st) December 2019
h) Results of the previous year 2018 benefitted from a
reclassification of the NOFI holding by NOK 1.9 billion
i) Receivables increased by NOK 4,438 million in FY2019;
particularly due to holdbacks from credit card acquirers
j) IFRS 16 effect on Total Assets compared to 31(st) December
2018: increase by NOK 32,797 million
Tangible fixed assets decreased by NOK 5,558 in 4Q19: No
addition of aircraft and sale of five B737-800s
k) Equity ratio develops in cycles depending on seasonality of
airline business; implementation of IFRS 16 with negative impact on
equity ratio in FY2019 (e.g. equity ratio 4Q19 without IFRS16
effects: 9.1%); please also refer to Comments & Conclusions
Strategic development
In 2019, Norwegian turned its focus from growth to
profitability. The implemented cost saving programme #Focus2019 had
the target to reduce costs by NOK 2,000 million in 2019 but even
generated cost reductions of NOK 2.3 billion.
Norwegian had additionally put several measurements in place to
increase liquidity and reduce capital commitments:
-- Joint venture with China Construction Bank Leasing (CCB)
assumed to reduce capital commitments between 2020 and 2023 by
about NOK 14 billion
-- Restructuring of order book supposed to reduce CapEx by NOK 22 billion in 2019 to 2020
-- Sale of 24 aircraft with deliveries in 2019 and 2020 assumed
to have a net liquidity effect of about NOK 2 billion
-- Sale of shares in Norwegian Finans Holding ASA for an amount
of about NOK 2 billion with an estimated positive effect of about
NOK 900 million on Norwegian's cash position
-- Extension of two unsecured bonds by two years (Norwegian's
slots at London- Gatwick Airport functioning as security)
-- Successful completed capital raise of NOK 2,500 million
through a private placement and a convertible bond issue of USD 150
million; pre-Covid-19 intended to leave Norwegian fully funded
throughout 2020
-- Sale of Argentinian subsidiary to low-cost carrier JetSmart (Chile) early December 2019
Long-haul operations
B787 Deliveries
* 1 B787-9 in 3Q19 and 5 B787-9s in 2019 (4 B787s
financed through sale-and-lease back transactions)
--------------------------------------------------------------
Axed Destinations
* More than 20 routes
* Long haul flights originating Stockholm and
Copenhagen
* U.S. destinations out of Ireland
--------------------------------------------------------------
Increased Frequencies
* Long haul flights originating Oslo, Barcelona, London,
Paris
--------------------------------------------------------------
Seasonality * Better adapt to seasonality driven demand
--------------------------------------------------------------
Connectivity
* Development of feeder traffic with easyjet (Europe)
and JetBlue (U.S. and Caribbean)
--------------------------------------------------------------
End of January 2020, Norwegian introduced a new hand luggage
policy to generate additional revenue. Passengers travelling with a
low fare ticket and more than an underseat bag are required to pay
for the overhead-bin space.
The airline outlook for 2020 include amongst others the
following:
-- NEXT (Norwegian Excelling Together) to generate value of NOK
1.5 billion in 2020 focuses on six workstreams: Network, people,
product & revenue management, operational performance, cost
reductions and value proposition
-- Covid-19 global pandemic will significantly negatively affect
airline's operations and financials; total impact unknown
-- Operation of repatriation flights and several routes in the
Nordics, subsidised by the government to ensure connectivity to
remote areas
-- Minimisation of cash burn
-- Deferral of scheduled aircraft delivery
Current challenges resulting from Covid-19 pandemic
-- Existing liquidity risk (e.g. increased receivables due to
constraints from credit card institutions and financing of aircraft
deliveries) further increased as costs cannot be reduced by the
same amount as revenue streams fall away
-- Norwegian has requested a forbearance period with its main
creditors (lessors and banks) until at least the end of June
2020
-- Government offers support package in three tranches (NOK
300m, NOK 1.2bn, NOK 1.5bn) totalling NOK 3.0bn (USD 286m); each
subject to certain conditions
o Norwegian met requirements for the first tranche which had
been approved (raising additional NOK 30m (USD 2.9m) funding
through banks)...
o Norwegian is working on approval for the second tranche
(required support from banks and lessors through forbearance)
...
o ...if successful, Norwegian will work on meeting the
requirements of tranche 3 (increasing the equity ratio: e.g.
through convertible bonds issued in November 2019 and other
measurement)
-- 85% of flight schedule cancelled and 7,300 employees temporarily laid-off
-- High exposure on transatlantic network and dependent on
development of the pandemic in the U.S.
-- Uncertainty about when and to which extend travel restrictions will be lifted
Opportunities post-Covid-19 pandemic
-- Potential increase in low-cost carriers' overall market
share: passengers are historically more price-sensitive during
economic downturns or recession
-- Launch of NEXT (Norwegian Excelling Together) with the target
of NOK 4,000 million improvement of the run rate EBITDAR within the
next two years
-- Joint venture with China Commerial Bank
-- B737MAX deliveries on hold result in a reduced estimated CapEx of USD 1.4 billion for 2020
-- Partnership with U.S. low-cost carrier JetBlue starting
summer 2020: Norwegian gains access to 40 U.S., Latin American and
Caribbean destinations and JetBlue gains access to Norwegian's
transatlantic flights and twenty intra-European routes (Letter of
Intent signed in October 2019). However the extent and timing of
such links is entirely dependent on Norwegian's financing situation
and in particular the recovery of transatlantic flights.
Comments & conclusions
2019 was a year of changes and restructuring including the
step-down of the airline founder Bjorn Kjos and the interim
appointment as CEO of the CFO Geir Karlsen. After being initially
doubtful and sceptical, it seems that the airline's perception in
the market became more positive and confident than it had been a
year ago.
The reduced capacity growth, particularly if comparing the
second half of 2019 with the previous year, proves the change in
strategy. To grow a business, it is generally necessary to make
investments: in the case of Norwegian it was to the expense of the
financial stability. The new strategy and the earlier listed and
implemented measurements show that the airline is aware of the risk
and the need to address it. Particularly, the completed extension
of the two bonds and the raise in capital were key to more
financial headroom. Related to the previous growth strategy, the
equity ratio significantly decreased over time and the downward
trend continued in cycles. The increase of the equity ratio in the
third quarter 2019 seemed be the beginning of an upward trend.
Although the equity ratio in the fourth quarter being lower, as
this is low season for European carriers, it was above 2018 fourth
quarter levels (IFRS 16 further lowered the equity ratio in 2019
compared to the previous years). At year's end, Norwegian Air
Shuttle was in a significant stronger position than at the
beginning 2019. Although the carrier states a net loss in 2019,
Norwegian succeeded on the operational level, proving the strategy
change and implemented measurements are paying off.
With most of the fleet currently stored due to the Covid-19
pandemic, Rolls-Royce Trent 1000 engine issues and the worldwide
grounding of B737MAX aircraft became less important. However, once
returning to pre-Covid-19 operational levels, it would be
supportive but remains unknown for the airline if these issues had
been resolved.
The total impact of the Covid-19 pandemic on airlines and
therefore on Norwegian is unknown at the current stage. It is
obvious that the impact is significant and the economic survival,
not only for Norwegian but for a majority of the airlines
worldwide, depends on governmental and stakeholders' support.
Norwegian is severely affected by this pandemic through no fault of
its own. The commitment of the Norwegian government to offer
conditional support packages to Norwegian, SAS and Wideroe provides
a backdrop of support.
Thai Airways International Public Company Limited
Thai Airways in brief
-- Full-service and flag carrier; majority-owned by the Thai Government
-- Short-, medium- and long-haul operations
-- Eight Boeing 787s aircraft
-- 80 destinations in more than 30 countries
-- 24 million passengers in 2019
Financial & Operational Key Figures
[billion THB] 4Q2019 4Q2018 Change FY 2019 FY 2018 Change Link
-------
Operating Revenues 46.7 50.8 - 8 % 184.1 199.5 - 8 % a)
------- ------- ------- -------- -------- ------- -----
- 15
Operating Expenses 48.4 57.0 % 196.5 208.6 - 6 % b)
------- ------- ------- -------- -------- ------- -----
- 39
EBITDA 3.7 2.0 +78% 8.8 14.5 %
------- ------- ------- -------- -------- ------- -----
+ 74 - 37
Operating Result - 1.6 - 6.2 % - 12.4 - 9.1 % c)
------- ------- ------- -------- -------- ------- -----
+ 88
Net Result - 0.9 - 7.5 % - 12.0 - 11.6 - 4 % d)
====================== ======= ======= ======= ======== ======== ======= =====
Unit Costs incl.
fuel* 2.03 2.02 + 0 % 2.17 2.24 - 3 %
------- ------- ------- -------- -------- ------- -----
Unit Costs excl.
fuel* --- --- --- 1.52 1.55 - 2 %
------- ------- ------- -------- -------- ------- -----
Unit Revenue* 2.00 2.17 - 8% 2.03 2.14 - 5 %
------- ------- ------- -------- -------- ------- -----
Passenger Yield - 12
[THB/RPK] 1.97 2.25 % 2.04 2.19 - 7 % e)
------- ------- ------- -------- -------- ------- -----
Freight Yield
[THB/RFTK] --- --- --- 7.84 8.51 - 8 % f)
====================== ======= ======= ======= ======== ======== ======= =====
Capacity - ASK
(million) 23,325 23,402 - 0 % 90,622 93,131 - 3 % g)
------- ------- ------- -------- -------- ------- -----
Demand - RPK
(million) 18,962 17,943 + 6 % 71,695 72,315 - 1 %
------- ------- ------- -------- -------- ------- -----
81.3 76.7 + 4.6 79.1 77.6 + 1.5
Load Factor % % pp % % pp
------- ------- ------- -------- -------- ------- -----
Passengers (million) 6.44 6.16 + 5 % 24.51 24.32 + 1 %
------- ------- ------- -------- -------- ------- -----
Aircraft Utilisation
[block hours] 12.1 12.6 - 4% 11.9 12.0 - 1 %
====================== ======= ======= ======= ======== ======== ======= =====
Number of Aircraft --- --- --- 103 103 ---
------- ------- ------- -------- -------- ------- -----
Cash & Cash + 58
Equivalents --- --- --- 21.66 13.69 % h)
------- ------- ------- -------- -------- ------- -----
Total Assets --- --- --- 256.67 268.72 - 5 %
------- ------- ------- -------- -------- ------- -----
Equity Ratio* --- --- --- 5 % 8% - 3 pp
------- ------- ------- -------- -------- ------- -----
ackground Information
a) THB 149.04bn in passenger & access baggage revenues (-7%)
THB 17.78bn in freight & mail revenues (-20%)
THB 13.45bn in revenues from other activities (+1%)
THB 3.77bn in other income (+7%)
b) Increase of 11% (THB 612 million) in crew expenses in FY2019
due to introduction of a new pilot compensation system to align
with industry standards
Decrease of 8.2% in average fuel prices in FY2019
Decrease of 12% (THB 2,258 million) in depreciation and
amortisation expenses due to change in residual value recognition
in FY2019
- Adoption of Thai Financial Reporting Standard No. 15 as at
1(st) January 2019 (Revenue recognition in passenger patents and
mileage rights)
c) Net result FY19 influenced by one-time expenses:
- THB 2,689 million estimated service compensation due to a
change in the severance payment conditions
- THB 4,439 million gain on foreign currency exchange
- THB 634 million impairment loss of assets and aircraft
- THB 273 million gain in ownership interest (dilution of shareholding in NOK Airlines)
d) Decrease in passenger yield mainly driven by the appreciation
of the Thai Baht and the fierce competition; decrease excluding
currency effects would be 2.7%
e) Significant drop in freight volume (-13.7%) and yield
- U.S.-China trade war
- Protests in Hong Kong
- Weaker economy
- Pakistan airspace closure resulted in trading belly freight
against fuel due to longer flight routes to Europe
f) Decrease in capacity particularly due to Trent 1000 engine
issues and temporary closure of Pakistan Airspace
g) Increase in cash due to debenture issue in November 2019
h) The debt to equity ratio (leverage) significantly increases over the last quarters
Strategic development
"Mantra" project:
-- Part of the rehabilitation programme
-- Focus on increasing additional revenues, amongst other measurements
o Sale of preferred seats generating about THB 70 million per
month
o Sale of food, initially frozen meals and ready-made sauces,
under Thai's catering brand in European supermarkets
"Brother & Sister Model":
-- Integration of Thai Smile into Thai Airways
-- Generation of synergies: revenues grew by 32 per cent while
cost only increased by 7 per cent in 2019
As Thai has not met its targets in the first half of 2019, the
carrier launched at year's end a new Transformation 2020 Plan with
three guidelines to focus on:
-- Increasing revenue (supported by the Mantra project and
acceleration of digital marketing operations)
-- Cost control and reduction through a cost management programme
-- Increase in operational efficiency by taking actions in
parallel (e.g. effective fleet management, decrease of debt to
equity ratio)
Further measurements:
-- November 2019: Unsecured debenture issue 13(th) November 2019
o Successful issue of THB 8.8 billion with institutional and
high net worth investors
o Rated category "A" by TRIS Rating
o Divided in five tranches with maturities between one and 15
years
o Coupon rates between 2.32 per cent to 3.98 per cent
-- Memorandum of Understanding (4Q19) with the Toyota Tsusho
[Thailand] company on travel activities: Thai Airways will become
the exclusive and preferred airline for company members' business
travel
-- Sale of six decommissioned aircraft in 2019
Changes in management:
-- January: 2020: vice-chairman Chaiyapruk Didyasarin took over
the role as chairman permanently after Ekniti Nitithanprapas
resigned in November 2019
-- March 2020: second-vice president Chakkrit Parapuntakul became acting president after Sumeth Damrongchaitham resigned
The airline outlook for 2020 include amongst others the
following:
-- Agreed replacement of 17 aircraft after review of 2019-2026 aircraft acquisition plan
-- Reduction of retained earnings by 2022
-- Increase in customer satisfaction and ranking among the world's top five airlines
-- Implementation of Financial Reporting Standard No. 9
(Financial Instruments) and No. 16 (Leases)
-- Scheduled market entry of two low-cost carriers in 2020 will further increase competition
-- Covid-19 global pandemic will negatively affect airline's
operations and financials; total impact unknown
Current challenges resulting from Covid-19 pandemic
-- T hai Airways had been one of the first airlines
significantly affected by the pandemic as the carrier ( including
Thai Smile) has an exposure of 95 weekly flights to nine Chinese
destinations
-- After Thailand declared a state of emergency starting 26(th)
March 2020, Thai Airways suspended all international flights
o Temporary grounding of 69 aircraft
o Domestic flights transferred to Thai Smile
o Thai operates repatriation flights and cargo services
o Majority of employees granted leave until end of May 2020 with
salary cuts of 10 to 50 per cent
-- Liquidity risk deriving from increasing debt to equity ratio and lack of profitability
-- According to Thailand's deputy prime minister Somkid
Jatusripitak, the government would support the carrier if
necessary
Opportunities post-Covid-19 pandemic
-- Tourism stimulation measures by the government (e.g. waived visa on arrival fees)
-- Committed credit line of THB 13.5bn (USD 453 million) at the end of 2019
-- Submission of 2020-2025 rehabilitation plan to Board of
Directors early 2020 to return to profitability and continuously
improve service quality
-- Thai Smile will become a connecting partner of Star Alliance in 2020
Comments & conclusions
Thai Airways have struggled to return to profitability after
low-cost competition increased. For the financial year 2019, the
carrier stated an operating and net loss with no improvement
compared to the previous year. However, the fourth quarter showed
some significant improvement compared to the same quarter in 2018
and it might have been a first step to a turn-around.
The flag carrier of Thailand is dependent on the tourism sector,
particularly on the in-bound tourism and vulnerable to external
shocks such as epidemics, riots, natural disasters or the downturn
of originating passengers' economies. Chinese tourists count for
the biggest share of foreign tourists travelling to Thailand, and
both the US-China trade war and the unrest in Hong Kong had a
negative impact on Thai's performance in 2019. As a consequence of
this correlation, Thai Airways had been affected from the beginning
by the outbreak of Covid-19 in China. After it had turned into a
global pandemic with a growing number of states, including
Thailand, imposing travel restrictions or closing airports for
commercial operations. Thai Airways grounded most of its fleet at
the end of March 2020. As the first quarter is high season for
Asian carriers, the flight cancellations will strongly affect
Thai's revenue streams and operating results in 2020.
Nevertheless, Thai Airways needs to prepare itself for the
post-Covid-19 period. It is essential for the carrier re-adopting
and implementing measurements to at least stabilise the leverage as
well as to increase revenue streams which had been weak before the
pandemic. Restructuring is a necessary move and a strict focus on
the Transformation Plan 2020 (including the objectives form the
Mantra and Brother & Sister model) might be a first step again
to generate synergies and identify and explore additional sources
of revenue generation supporting the return to profitability. The
ongoing Trent 1000 issues limiting Thai Airways' capacity growth in
2019 might currently be trivial until operational levels return to
pre-Covid-19 levels.
The majority ownership by the government seems currently to be
of advantage; particularly as tourism is a major source of income
for the country with both infrastructure and transportation routes
being crucial factors to support this economic sector.
THE ASSETS
Key Facts B787
-- 61 active operators (Airlines) on all continents
-- 73 customers (Airlines and Lessors)
-- Aeroflot cancelled its order of 22 B787s in 4Q19
-- Emirates and Malaysian lessor CALC became new customers in November 2019
-- Reduction of production rate to 10 aircraft monthly by 2021
-- B787 production temporarily suspended at Everett due to Covid-19 pandemic
Assets & Operations
Trent 1000 issues
The availability of Rolls-Royce Trent 1000 spare engines and the
bottleneck of shop visit slots to have impacted airlines' Boeing
787 fleets as some of their aircraft had been temporarily stored,
including aircraft of Thai Airways and Norwegian Air Shuttle
awaiting the LPT remedy :
-- Aircraft TQC stored since 29(th) September 2019 at Bangkok Suvarnabhumi Airport (Thailand)
-- Aircraft TQD stored since 6(th) December 2019 at Bangkok Suvarnabhumi Airport (Thailand)
-- Aircraft LNA stored since 27(th) May 2019 at Glasgow-Prestwick Airport (United Kingdom)
-- Aircraft LNB stored since 17(th) September 2019 at Glasgow-Prestwick Airport (United Kingdom)
The temporary storage has not released Norwegian Air Shuttle or
Thai Airways from paying lease rentals and corresponding
maintenance reserve amounts.
Although for some of the above aircraft in-service dates were
scheduled in accordance with Trent 1000 spare engines availability,
it is very likely that all four aircraft will remain stored at
least throughout the Covid-19 pandemic related restrictions.
Asset Overview
AIRCRAFT OPERATIONS Norwegian Air Shuttle Thai Airways
LN-LNA LN-LNB HS-TQC HS-TQD
----------------- ----------------
Cabin Layout 32 Premium Economy Class 24 Business Class Seats
Seats 240 Economy Class Seats
259 Economy Class Seats
-----------------------------------
PHYSICAL INSPECTION
(by DS Aviation)
----------------- ---------------- ---------------- ----------------
Date 27.02.2020 27.02.2020 03.12.2019 03.12.2019
----------------- ---------------- ---------------- ----------------
Place Prestwick Airport Bangkok Airport
----------------------------------- ----------------------------------
Aircraft & Technical Aircraft/Technical records Aircraft/Technical records
Records condition in good condition with in good condition with
no significant defects no significant defects
or airworthiness related or airworthiness related
issues (Storage inspection) issues
----------------------------------- ----------------------------------
AIRFRAME STATUS
(31(st) December
2019)
----------------- ---------------- ---------------- ----------------
Total Flight Hours 29,177 30,925 16,873 15,536
----------------- ---------------- ---------------- ----------------
Total Flight Cycles 3,386 3,652 3,814 3,598
----------------- ---------------- ---------------- ----------------
Average Monthly Utilisation 373 hours 405 hours 272 hours 256 hours
since Delivery 43 cycles 48 cycles 63 cycles 60 cycles
----------------- ---------------- ---------------- ----------------
Hours/cycles ratio
since delivery 8.62 8.47 4.42 4.32
----------------- ---------------- ---------------- ----------------
ENGINE DATA Engine Serial Number Engine Serial Number
(31(st) December
2019)
----------------------------------- ----------------------------------
10118 10119 10130 10135 10239 10240 10244 10248
-------- ------- ------- ------- ------- ------- ------- -------
Total Time [Flight
Hours] 23,935 26,028 21,497 24,868 15,103 10,518 11,035 16,758
-------- ------- ------- ------- ------- ------- ------- -------
Total Flight Cycles 2,811 3,067 2,393 2,864 3,408 2,583 2,675 3,684
-------- ------- ------- ------- ------- ------- ------- -------
Location Spare LNF LNC Shop TQB Spare Shop TQA
-------- ------- ------- ------- ------- ------- ------- -------
Comments and Conclusions
The order and delivery numbers emphasise that the Dreamliner
Boeing 787 aircraft is favoured by many airlines from different
regions and different business strategies. As new customers placed
orders in 2019 and Lufthansa even decided for Trent 1000 engines,
it seems there is confidence in Rolls-Royce to fix the known
problems and the capacity bottleneck. In an economic environment,
it is possible that there might be a temporary preference towards
the smaller types within an aircraft family. This may lead to
greater interest in the B787-8 series aircraft compared to the
larger 9 and 10 series variants. Moreover, the temporarily
suspension of the B787 production in Everett due to the Covid-19
pandemic (which may also limit production at the Boeing South
Carolina factory) will set back the B787 delivery timetable for
2020 and thereafter. It is though also possible that given the
extent of airline fleet groundings that they might welcome any
delay in new production deliveries.
DIRECTORS
Jonathan (Jon) Bridel, Non- Executive Chairman (55)
Jon is a Guernsey resident and is currently a non-Executive
Director of The Renewables Infrastructure Group Limited (FTSE 250),
Starwood European Real Estate Finance Limited (until 31 December
2020), Sequoia Economic Infrastructure Income Fund Limited (FTSE
250) and SME Credit Realisation Fund Limited (in run off) which are
listed on the Main Market of the London Stock Exchange. Other
companies include Fair Oaks Income Fund Limited. Jon was previously
Managing Director of Royal Bank of Canada's investment businesses
in the Channel Islands. He also has experience defending takeovers
and in corporate restructuring and realisation matters. 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 (64)
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. 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 attended the UK's
senior defence course (Royal College of Defence Studies). He holds
the Institute of Directors Certificate and Diploma in Company
Direction and is an associate of the Chartered Institute of
Arbitration. He holds an M.Sc in Corporate Governance (2016) and
qualified as a Chartered Company Secretary in 2017.
Harald Brauns, (Appointed 1 November 2019), Non-Executive Director (63)
Harald is a German banker with extensive experience in the
specialised lending sector. He joined NORD/LB Hannover, Germany in
1977 with a first engagement in the shipping segment. In 1985 he
started the aircraft finance activities for the bank from scratch.
As the Global Head of Aircraft Finance he built successively a team
of more than 40 dedicated aviation experts located in Hannover, New
York and Singapore. Focused on an asset based business model with
sophisticated solutions for selected clients he and his team
advanced to global leaders in commercial aircraft finance with an
exposure of well above USD 10 bn split over a portfolio of 650
aircraft assets. After more than 35 years in the aviation industry
Harald retired in October 2019. He is a resident in Germany and was
appointed as a non - executive director of the Company with effect
from 1 November 2019.
DIRECTORS' REPORT
The Directors present their Annual Report and Audited
Consolidated Financial Statements for DP Aircraft I Limited for the
year ended 31 December 2019.
Principal Activity and Review of the Business
The Company's principal activity is to purchase, lease and then
sell Boeing 787-8 Aircraft (the 'Assets'). The Company wholly owns
six subsidiaries, DP Aircraft Guernsey I Limited, DP Aircraft
Guernsey II Limited, DP Aircraft Guernsey III Limited, DP Aircraft
Guernsey IV Limited, DP Aircraft Ireland Limited and DP Aircraft UK
Limited (together the 'Group').
The investment objective of the Group is to obtain income and
capital returns for the Company's shareholders by acquiring,
leasing and then, when the Board considers it appropriate, selling
the Assets.
The Company has made its investments in the Assets through its
subsidiaries.
The Ordinary Shares of the Company are currently trading on the
Specialist Fund Segment of the London Stock Exchange.
Throughout the trading year the lessees have met their lease
obligations. Notwithstanding the requirement for the aircraft to be
parked during the year for Trent 1000 repairs there are no
incidents to bring to the attention of Shareholders concerning the
operation of the aircraft. Inspections have revealed no matters of
concern. The Company's debt has been financed throughout the year.
A more detailed review of the business and prospects is contained
in detail in the Asset Manager's Report. Rolls Royce are continuing
to address the Trent 1000 engine warranty related issues which have
not impacted on the Company's revenues.
Results and Dividends
The profit for the year ended 31 December 2019 was US$ 23.17m
(year ended 31 December 2018 US$ 21.33m).
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. Four
quarterly dividends have been paid during the year ended 31
December 2019. All the dividends paid to date have met 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. On 3 April 2020, the Company announced a
suspension of dividends until further notice.
The debt to equity ratio was 0.88 as at 31 December 2019 (2018:
1.01).
Subsequent Events
Since the start of January 2020, the world has been monitoring
and reacting to Covid-19. As of early April 2020, the virus has
spread across the globe, with major outbreaks across China, the
Middle East, Europe and America, resulting in widespread
restrictions on the ability of people to travel, socialise and
leave their homes. Global financial markets have reacted sharply to
this pandemic, with concerns regarding the economic impact this may
have on a global scale, and which is expected to be material for
the airline sector, and by extension the aircraft leasing
sector.
NAS has failed to make any payments due under the NAS Aircraft
Leases since March 2020 (in an aggregate amount of US$ 4.98m). The
Company has agreed certain concessions to Thai, which included a
rent deferral arrangement (which began on 29 April 2020) in an
aggregate amount of approximately US$ 3.40m. The deferred amounts
(with interest thereon) are due to be repaid in 12 equal monthly
instalments commencing at end of each respective deferral
period.
The Company is currently negotiating certain proposed
concessions to NAS, which may include (i) a rent deferral
arrangement (ii) a power by hour arrangement for part of the
remaining term of the lease (iii) a modified rental stream for part
of the remaining term of the lease (which may include a release of
certain amounts already due from NAS) and other lease modifications
or concessions, as well as other forms of compensation for the
Company. No formal agreement on these concessions has yet been
concluded.
The Directors, with the support of the Asset Manager, have
engaged with its lenders following the non-receipt of rentals from
NAS and the request for concessions from both NAS and Thai. The
Company has communicated the terms of concessions agreed to Thai
with its Thai Lenders. The Directors believe that a modification to
the terms of the NAS Loans (which may include an interest-only
period, a re-profiling of future repayment obligations or other
concession) will be necessary to ensure that the Company can
continue to operate following any concessions that may be agreed
with NAS without giving rise to a default under the Loans. No
agreement on the form of any such modification to the Loans has yet
been concluded.
It is therefore not possible to fully estimate the financial
effect that these events may have on the Company's financial
results or position. The Directors, with input from the Asset
Manager, will continue to engage with NAS and its lenders and to
monitor the impact of the virus on the activities of the
Company.
On 15 January 2020 the Company declared a quarterly dividend in
respect of the quarter ended 31 December 2019 of US$ 0.0225 per
ordinary share to holders of shares on the register at 24 January
2020. The ex-dividend date was 23 January 2020 with payment on 14
February 2020. On 3 April 2020 the Board of Directors announced
that it had suspended the payment of dividends with immediate
effect and until further notice.
Directors
The Directors of the Company, who served during the year and to
date, are as shown below:
-- Jonathan Bridel
-- Jeremy Thompson
-- Angela Behrend-Görnemann (resigned 31 October 2019)
-- Harald Brauns (appointed 1 November 2019)
Directors interests
The Directors' interests in the shares of the Company as at 31
December 2019 are set out below and there have been no changes in
such interests up to the current date:
Number of Number of
ordinary shares ordinary shares
31 December 2019 31 December 2018
Jonathan Bridel 7,500 7,500
Jeremy Thompson 15,000 15,000
Angela Behrend-Görnemann N/A -
Harald Brauns - N/A
Principal Risks and Uncertainties
The Statement of Principal Risks and Uncertainties are as
described below.
Substantial Shareholdings
The directors note the following substantial interests in the
Company's share capital as at 31 December 2019 (10% and more
shareholding):
-- M&G Investment Management 52,158,421 - 24.92%
As at the date of this report there have been no significant
changes in the above list of substantial shareholdings.
The Board
The Board comprises three non-executive directors each of whom
are independent.
Jeremy Thompson was appointed as Senior Independent Director
(the 'SID') on 1 April 2016.
During the year ended 31 December 2019 the Board had a breadth
of experience relevant to the Company and a balance of skills
experience and age.
The Board recognises the importance of diversity and will
evaluate applicants to fill vacant positions regardless of gender
and without prejudice. Applicants will be assessed on their broad
range of skills, expertise and industry knowledge, and business and
other expertise. In view of the long-term nature of the Company's
investments, the Board believes that a stable board composition is
fundamental to run the Company properly. The Board has not
stipulated a maximum term of any directorship.
As the Company is not a FTSE 350 company, Directors were not
subject to annual election by the shareholders nor for the
requirement for the external audit contract to be put out to tender
every 10 years. Historically, the Directors had offered themselves
by rotation for re-election at each annual general meeting ('AGM').
Jeremy Thompson was re-elected at the AGM on 8 July 2019. Jonathan
Bridel is offering himself for re-election at the forthcoming
AGM.
The Directors are on a termination notice of three months.
Directors' Duties and Responsibilities
The Board of Directors has overall responsibility for the
Company's affairs and is responsible for the determination of the
investment policy of the Company, resolving conflicts and for
monitoring the overall portfolio of investments of the Company. To
assist the Board in the day-to-day operations of the Company,
arrangements have been put in place for the performance of certain
of the day-to-day operations of the Company to third-party service
providers, such as the Asset Manager, Administrator and Company
Secretary, under the supervision of the Board. The Board receives
full details of the Company's assets, liabilities and other
relevant information in advance of Board meetings.
The Board undertakes an annual evaluation of its own performance
and the performance of its audit committee and individual
Directors, to ensure that they continue to act effectively and
efficiently and to fulfil their respective duties, and to identify
any training requirements. The results of the most recent
evaluation have been reviewed by the Chairman and his fellow
directors. No significant corporate governance issues arose from
this review.
The Board also undertakes an annual review of the effectiveness
of the Company's system of internal controls and the safeguarding
of shareholders' investments and the Company's assets. At each
quarterly meeting the Board will table and review a risk matrix.
There is nothing to highlight from the reviews of these reports as
at the date of this report.
Board Meetings
The Board meets at least four times a year to consider the
business and affairs of the Company for the previous quarter.
Between these quarterly meetings the Board keeps in contact by
email and telephone as well as meeting to consider specific matters
of a transactional nature. There is regular contact with the
Secretary.
The Directors are kept fully informed of investment and
financial controls and other matters that are relevant to the
business of the Company. The Directors also have access, where
necessary in the furtherance of their duties, to professional
advice at the expense of the Company.
The Board considers agenda items laid out in the Notice and
Agenda which are formally circulated to the Board in advance of any
meeting as part of the board papers. Such items include but are not
limited to; investment performance, share price performance, review
of marketing and shareholder communication. The Directors may
request any Agenda items to be added that they consider appropriate
for Board discussion. In addition, each Director is required to
inform the Board of any potential or actual conflict of interest
prior to Board discussion. Board meetings are attended by
representatives of the Asset Manager. The Company's corporate
brokers also attend to assist the Directors in understanding the
views of major shareholders about the Company.
Board Meeting attendance
The table below shows the attendance at Board meetings and Audit
Committee meetings during the year.
Director No of board meetings No of audit committee
attended meetings attended
Jonathan Bridel 4 4
Jeremy Thompson 4 4
Angela Behrend-Görnemann 4 4
Harald Brauns* - -
--------------------- ----------------------
No. of meetings during the year 4 4
--------------------- ----------------------
The Directors also attended 14 ad-hoc Board and Committee
meetings in addition to the regular quarterly meetings as shown in
the below table and the Chairman attended a further 12 meetings
with various stakeholders and on management related matters. The
board also attended committee meetings for the Management
Engagement Committee and the Nominations Committee
*Mr Brauns was appointed starting 1 November 2019 thus did not
attend any quarterly or ad-hoc board meetings during the 2019
financial year.
Directors' Remuneration
The remuneration of the non-executive directors is reviewed on
an annual basis and compared with the level of remuneration for
directorships of funds with similar responsibilities and
commitments. It was subject to an independent consultant review in
2017.
In February 2020 the board reviewed the current director fee
levels (inclusive of all subsidiaries) and agreed that remuneration
levels of directors were set at the correct level, however it was
proposed that the Directors remuneration should be increased by
annual inflation amount of 3.2% in line with the latest published
independent fee survey. This increase was effective from 1 April
2020.
On appointment of Angela Behrend-Görnemann on 1 May 2016, it was
agreed to pay her fees at the agreed GBP/EUR exchange rate of 1.30.
It has been agreed that Harald Brauns will be paid in GBP.
During the current and prior year each Director received the
following remuneration in the form of Director fees from Group
companies:
Year ended Year ended
31 December 2019 31 December 2018
GBP/EUR US$ equivalent GBP/EUR US$ equivalent
Jonathan Bridel (Chairman) GBP62,475 80,035 GBP57,150 76,058
Jeremy Thompson (Audit Committee
Chairman) GBP50,825 65,112 GBP46,700 62,142
Angela Behrend-Görnemann
- resigned 31 October 2019) EUR 60,300 67,283 EUR67,880 79,317
Harald Brauns (Management Engagement GBP9,500 12,591 - -
Committee Chairman) - Appointed
1 November 2019
----------- --------------- ---------- ---------------
US$ 225,021 US$ 217,517
----------- --------------- ---------- ---------------
There are no executive director service contracts in issue.
Remuneration Policy
All directors of the Company are non-executive and therefore
there are no incentive or performance schemes. Each director's
appointment is subject to an appointment letter and article 24 of
the Company's articles of association. Remuneration is paid
quarterly in arrears and reflects the experience, responsibility,
time, commitment and position on the main board as well as
responsibility for sitting on subsidiary boards when required. The
Chairman, Audit Chairman (SID) and other committee Chairmen may
receive additional remuneration to reflect the increased level of
responsibility and accountability. The maximum amount of directors'
fees payable by the Company in any one year is currently set at
GBP200,000 in accordance with article 24. Remuneration may if
deemed appropriate also be payable for special or extra services if
required in accordance with article 24. This is defined as work
undertaken in connection with a corporate transaction including a
new prospectus to acquire, finance and lease an aircraft and/or
engines, managing a default, refinancing, sale or re-lease of
aircraft and for defending a takeover bid. This may include
reasonable travel time if applicable. The board may appoint an
independent consultant to review fees if it is considered an above
inflation rise may be appropriate.
Internal Controls and Risk Management Review
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms
that there is an ongoing process for identifying, evaluating and
monitoring the significant risks faced by the Company.
The Board carries out an annual review of internal controls
including those of the administrator. The internal control systems
are designed to meet the Company's particular needs and the risks
to which it is exposed. Accordingly, the internal control systems
are designed to manage rather than eliminate the risk of failure to
achieve business objectives and by their nature can only provide
reasonable and not absolute assurance against misstatement and
loss.
The Directors of the Company clearly define the duties and
responsibilities of their agents and advisors. The appointment of
agents and advisers is conducted by the Board after consideration
of the quality of the parties involved and the Board monitors their
ongoing performance and contractual arrangements. Each service
provider is reviewed annually, and key risks and operating matters
are addressed as part of that review.
Dialogue with Shareholders
All holders of Shares in the Company have the right to receive
notice of, and attend, all general meetings of the Company, during
which the Directors are available to discuss issues affecting the
Company. The Directors are available to enter into dialogue with
shareholders and make themselves available for such purpose when
reasonably required. The Company believes such communications to be
important. Reports are provided to the Board of Directors on
shareholders' views about the Company and any issues or concerns
they might have.
Board Policy on Tenure and Independence
The Board has not yet formed a policy on tenure, however it does
consider the independence of each Director on an annual basis
during the performance evaluation process.
Auditor
KPMG, Ireland, Chartered Accountants have indicated their
willingness to continue in office. Accordingly, a resolution
proposing their reappointment will be submitted at the Company's
next annual general meeting.
Going Concern - Material Uncertainty
The Directors have prepared the financial statements for the
year ended 31 December 2019 on the going concern basis of
preparations. However, the Directors have identified the matters
referred to below which indicate the existence of a material
uncertainty that may cast doubt on the entity's ability to continue
as a going concern and that the company may, as a consequence, be
unable to realise its assets and discharge its liabilities in the
normal course of business.
Covid-19 has resulted in widespread restrictions on the ability
of people to travel, socialise and leave their homes and is
expected to have a material negative effect on the airline sector,
and by extension the aircraft leasing sector. The Company leases
four (4) Boeing 787 aircraft (the 'Aircraft'), two each to
Norwegian Air Shuttle ASA ('NAS') and Thai Airways International
('Thai').
The application of the going concern basis of preparation is
dependent upon the Company's aircraft leasing and the related
financing activities as described below.
Thai Leases and related Loans
The Thai Leases
During March 2020 Thai formally requested the Company to grant
it concessions under the Thai aircraft leases. The Company, with
the support of the Asset Manager, has actively engaged with Thai
and agreed certain concessions to Thai, which include a rent
deferral arrangement (which began on 29 April 2020) in an aggregate
amount of approximately US$ 3.40m. The deferred amounts (with
interest thereon) are due to be repaid in 12 equal monthly
instalments commencing at end of each respective deferral
period.
Note 13 ('Bank Borrowings') describes the loans (the 'NAS Loans'
and the 'Thai Loans') obtained by the Group to part-finance the
acquisition of the Aircraft. The Company has obligations under the
Loans to make scheduled repayments of principal and interest, which
are serviced by the receipt of lease payments from Thai and NAS
respectively. The Loans are secured by charges over the Aircraft
and the underlying leases.
The concessions proposed by the Company to Thai have been
communicated to the Thai Loan providers. The Directors expect that
under the terms of the concessions granted to Thai the Company will
have sufficient liquidity from (i) the lease payments from Thai and
(ii) utilising certain of its own funds to continue to meet all of
its obligations under the Thai Loans.
Norwegian Leases and related Loans
The NAS Leases
Since March 2020 NAS has failed to make any payments due under
the NAS Aircraft Leases (in an aggregate amount of US$ 4.98m
to-date). NAS have made significant requests for concessions from
its suppliers and financiers including the Company as part of wider
re-organisation and recapitalisation plan to ensure that it can
continue to trade. The plan includes obtaining funding from the
Norwegian Government which is contingent on meeting certain
stipulated criteria including converting a large part of its
outstanding debt to equity which will require a successful vote
from shareholders at its EGM on 4 May 2020. Without Norwegian
Government funding (among others) NAS has stated that it will not
have the liquidity needed to continue to trade.
The Directors, with the support of the Asset Manager, have
actively engaged with NAS in order to determine the extent of any
concessions that may be granted under the NAS Leases. The Company
is currently negotiating certain proposed concessions to NAS, which
may include among other things (i) a rent deferral arrangement,
(ii) a power by hour arrangement for part of the remaining term of
the lease (iii) a modified rental stream for part of the remaining
term of the lease (which may include a release by the Company of
certain amounts already due from NAS) and other lease modifications
or concessions, as well as other forms of compensation for the
Company. No formal agreement on these concessions has yet been
concluded.
The NAS Loans
The Company is unlikely to be able to continue to meet its
obligations as to principal and interest (currently approximately
US$1.45m per month) under the NAS Loans for so long as NAS withhold
payments due under the NAS Leases nor will it likely be able to
meets its committed obligations under the proposed concessions that
may be granted to NAS.
The Directors, with the support of the Asset Manager, have
engaged with its NAS lenders following the non-receipt of rentals
from NAS and the request for concessions. The Directors have
determined that a modification to the terms of the NAS Loans (which
may include an interest-only period, a re-profiling of future
repayment obligations or other concessions) will be necessary to
ensure that the Company can continue to operate following any
concessions that may be agreed with NAS without giving rise to a
default under the Loans.
Whilst progress has been made, the Directors are uncertain as to
the final outcome of these matters. However, on the basis of (i)
the continuing availability of the Thai and NAS Loans which have
been made available to the Group (with certain Loan concessions),
(ii) current cash-flow projections under various scenarios
(including certain Aircraft Lease concessions being granted to NAS
and Thai) and (iii) having regard to the limited recourse nature of
the Loans the Directors believe that it is appropriate to prepare
these financial statements under the going concern basis of
preparation. No adjustments have been made to the financial
statements in the event that the Company was unable to continue as
a going concern.
Viability Statement
The Directors regularly consider and assess the viability of the
Company and prior to approving these financial statements have
conducted an assessment over a three-year period and takes into
account the Company's current position and the potential impact of
the principal risks outlined below.
In making this statement, the Directors have considered the
resilience of the Company the principal risks in relatively severe
scenarios whilst taking into account the effectiveness of any
mitigating factors. This assessment considered the potential
impacts of these risks on the business model, future performance,
solvency and liquidity over the period.
These factors were subjected to a review of different scenarios
based on the key assumptions underlying the forecast. Where
appropriate, this analysis was carried out to evaluate the
potential impact of the Company's principal risks actually
occurring, primarily non-payment of leases, significant impairment
of aircraft values, the impact of Covid-19 and the impact of
Brexit. The Board of Directors have also taken into account the
investment strategy of the Company and the disclosure made in the
Prospectus issued during 2015.
Given the unprecedented circumstances caused by Covid-19, the
Directors have reviewed additional scenarios and have included the
suspension of dividends where required.
The Directors continue to consider that an investment in the
Company should be regarded as long term in nature and is suitable
only for sophisticated investors, investment professionals, high
net worth bodies corporate, unincorporated associations and
partnerships and trustees of high value trusts and private clients
(all of whom will invest through brokers), in each case, who can
bear the economic risk of a substantial or entire loss of their
investment and who can accept that there may be limited liquidity
in the Shares.
The Directors regularly review the timeliness of receipt of the
aircraft rental income. The Directors consider quarterly
consolidated management accounts that include the cash flow
required for dividends and for establishing suitable working
capital requirements.
The Directors consider that the Notes to the Financial
Statements are integral to the support of the Viability Statement.
Note 4 discloses the expected rental income up to and after five
years. Note 18 contains the expected liability flows and when
netted off demonstrates significant net cash inflows, prior to any
future dividend declarations under normal circumstances.
Annual General Meeting
The AGM of the Company will be held in Guernsey on 10 July 2020
at East Wing, Trafalgar Court, Les Banques, St Peter Port,
Guernsey. The meeting will be held to, inter alia; receive the
Annual Report and Audited Consolidated Financial Statements; elect
and re-elect Directors; propose the reappointment of the auditor;
authorise the Directors to determine the auditor's remuneration;
approve the Directors' remuneration and policy; authorise the
Company to issue and allot new shares and approve a partial
disapplication of the pre-emption rights to allow the Company to
issue new shares by way of tap issues. Given the ongoing challenges
regarding Covid-19, it is likely the AGM will be restricted to two
shareholders and shareholders are encouraged to vote in advance by
proxy. The formal notice of AGM will be issued to shareholders in
due course.
The Board continues to welcome engagement with its shareholders
and those who have questions relating directly to the business of
the AGM can forward their questions to the Company Secretary by
email to DPA@aztecgroup.co.uk by no later than one week before the
AGM, being 3 July 2020.
A Q&A reflecting the questions received and responses
provided will be made available on the Company's website at
www.dpaircraft.com as soon as practicable following the AGM.
Corporate Governance
The Company is not required to comply with any particular
corporate governance codes in the UK or Guernsey (since it is not
authorised or regulated by the Financial Conduct Authority ('FCA')
or Guernsey Financial Services Commission ('GFSC')) but the
Directors take corporate governance seriously and will have regard
to relevant corporate governance standards in determining the
Company's governance policies including without limitation in
relation to corporate reporting, risk management and internal
control procedures.
The Directors intend to comply, and ensure that the Company
complies, with any obligations under the Companies (Guernsey) Law,
2008 and the Articles to treat shareholders fairly as between
themselves.
Directors' Share Dealings
The Board has agreed to adopt and implement the Model Code for
Directors' dealings contained in the Listing Rules. The Board will
be responsible for taking all proper and reasonable steps to ensure
compliance with the Model Code.
Board Committees
The Board of Directors has established an audit committee, which
operates under detailed terms of reference, copies of which are
available on request from the Company Secretary. Details of the
Company Secretary are included within the Company information.
The Board have established a Management Engagement Committee
which reviewed the performance of the Asset Manager and the key
service providers at least annually and this review includes a
consideration of the service providers' internal controls, risk
management, operational management, information technology and
their effectiveness.
Alternative Investment Fund Managers Directive ("AIFMD")
In July 2013 the European Alternative Investment Fund Management
Directive ('AIFMD') came into effect with transitional provisions
until July 2014. The Company has been determined to be a
'self-managed' Guernsey Alternative Investment Fund ('AIF') and as
such will be treated as a non-EU AIFM for the purposes of the
Directive. The Company has registered with the Financial Conduct
Authority (and notified the Guernsey Financial Services Commission)
under the AIFMD (Marketing) Rules, 2013.
For a non-EU AIFM that has over EUR 100m (equivalent to US$ 114m
at 31 December 2019) of net assets under management and also
utilises leverage, certain Annual Investor Disclosures are
required.
For the purpose of AIFMD, the Company is a Self-Managed
Alternative Investment Fund Manager with assets above the EUR 100m
(equivalent to US$ 114m at 31 December 2019), with leverage,
threshold.
AIFMD does not prescribe use of any one particular accounting
standard. However, the financial statements must be audited by an
auditor empowered by law to audit the accounts in accordance with
the EU Statutory Audit Directive.
The required disclosures for investors are contained within the
Financial Conduct Authority checklist and the Company's compliance
therewith can be found in Appendix 1 to these financial
statements.
Brexit
The Directors do not expect that the recent UK withdrawal from
the EU will have a significant impact on the Company given the
nature of its operations. However, they continue to monitor the
airline industry for any potential impact on the Company.
By order of the Board
Jon Bridel Jeremy Thompson
Director Director
REPORT OF THE AUDIT COMMITTEE
On the following pages, we present the Audit Committee (the
'Committee') Report for 2019, setting out the Committee's structure
and composition, principal duties and key activities during the
year. The Committee has reviewed the Company's financial reporting,
the independence and effectiveness of the independent auditor (the
'auditor') and the internal control and risk management systems of
service providers.
The Board is satisfied that for the period under review and
thereafter the Committee has recent and relevant commercial and
financial knowledge sufficient to satisfy the requirements of the
Committee's remit.
Structure and Composition
The Committee is chaired by Mr Thompson and its other members
are Mr Bridel and Mr Brauns (from 1 November 2019). Mrs
Behrend-Görnemann was a member of the Committee until her
resignation on 31 October 2019. The Committee operates within
clearly defined terms of reference.
The Committee conducts formal meetings not less than three times
a year. There were four meetings during the period under review and
multiple ad-hoc meetings. All Directors were present and forming
part of the quorum. The auditor is invited to attend those meetings
at which the annual and interim reports are considered.
Principal Duties
The role of the Committee includes:
-- monitoring the integrity of the published financial statements of the Group;
-- keeping under review the consistency and appropriateness of
accounting policies on a year to year basis.
-- satisfying itself that the annual financial statements, the
interim statement of financial results and any other major
financial statements issued by the Group follow International
Financial Reporting Standards and give a true and fair view of the
Group and its subsidiaries' affairs; matters raised by the external
auditors about any aspect of the financial statements or of the
Group's internal control, are appropriately considered and, if
necessary, brought to the attention of the board, for
resolution;
-- monitoring and reviewing the quality and effectiveness of the auditor and their independence;
-- considering and making recommendations to the Board on the
appointment, reappointment, replacement and remuneration of the
Group's auditor;
-- monitoring and reviewing the internal control and risk
management systems of the service providers; and
-- considering at least once a year whether there is a need for an internal audit function.
The complete details of the Committee's formal duties and
responsibilities are set out in the Committee's terms of reference,
a copy of which can be obtained from the Secretary.
Independent Auditor
The Committee is also the forum through which the auditor
reports to the Board of Directors. The Committee reviews the scope
and results of the audit, its cost effectiveness and the
independence and objectivity of the auditor, with particular regard
to the terms under which it is appointed to perform non audit
services including fees. The Committee has established pre-approval
policies and procedures for the engagement of KPMG, Ireland
('KPMG') to provide non-audit services. KPMG has been the
independent auditor from the date of the initial listing on the
Specialist Fund Segment of the London Stock Exchange. The Audit
Partner for the Company is Killian Croke and an Audit Partner
rotation is agreed between KPMG and the Audit Committee to take
place during 2021.
The audit fees proposed by the auditor each year are reviewed by
the Committee taking into account the Group's structure, operations
and other requirements during the year and the Committee make
appropriate recommendations to the Board. The Committee considers
KPMG to be independent of the Company. The Committee also met with
the external auditors without the Asset Manager or Administrator
being present so as to provide a forum to raise any matters of
concern in confidence.
Evaluations or Assessments made during the year
The following sections discuss the assessments made by the
Committee during the year:
Significant Areas of Focus for the Financial Statements
The Committee's review of the interim and annual financial
statements focused on:
-- Valuation of the Company's Assets
-- Lease and loan cash flows
-- The financial statements giving a true and fair view and
being prepared in accordance with International Financial Reporting
Standards and the Companies (Guernsey) Law, 2008
-- Going concern and the viability statement including the
creation of scenario planning and review
The Company's investment in the four aircraft represents
substantially all of the net assets of the Company and as such is
the biggest factor in relation to the accuracy of the financial
statements. The 31 December 2019 valuations of the four aircraft
have been independently obtained from three independent expert
valuers (all certified by the International Society of Transport
Aircraft Trading 'ISTAT'). Two of the independent expert valuers
included encumbered economic full-life valuations in their
valuations. These were in excess of the encumbered depreciated
value indicated within the Company's Statement of Financial
Position. An encumbered valuation assesses the value of an aircraft
with a lease attached and therefore incorporates the value of the
revenue stream into the aircraft valuation. As a result of the
valuations obtained, the Directors determined that no impairment
charge was required and resolved to adhere to current estimation
for residual value and useful economic life of the aircraft for the
purpose of calculating depreciation.
Effectiveness of the Audit
The Committee had formal meetings with KPMG during the period
under review:
1) Before the start of the audit to discuss formal planning,
discuss any potential issues and agree the scope that will be
covered, and
2) After the audit work was concluded to discuss any significant
matters such as those stated above.
The Board considered the effectiveness and independence of KPMG
by using a number of measures, including but not limited to:
-- the audit plan presented to them before the start of the audit;
-- the audit results report;
-- changes to audit personnel;
-- the auditor's own internal procedures to identify threats to independence;
-- feedback from both the Asset Manager and Administrator.
Internal Audit
There is no internal audit function. As all of the Directors are
non-executive and all of the Company's administration functions
have been delegated to independent third parties, the Audit
Committee considers that there is no need for the Company to have
an internal audit function. However, this matter is reviewed
periodically.
Conclusion and Recommendation
After reviewing various reports such as the operation and risk
management framework and performance reports from the directors and
the Asset Manager, liaising where necessary with KPMG, and
assessing the significant areas of focus for the financial
statements, the Committee is satisfied that the financial
statements appropriately address the critical judgements and key
estimates (both in respect to the amounts reported and the
disclosures).
The Committee is also satisfied that the significant assumptions
used for determining the value of assets and liabilities have been
appropriately scrutinised, challenged and are sufficiently robust.
The independent auditor reported to the Committee that no material
misstatements were found in the course of its work. Furthermore,
the Administrator confirmed to the Committee that they were not
aware of any material misstatements including matters relating to
presentation.
The Committee confirms that it is satisfied that the independent
auditor has fulfilled its responsibilities with diligence and
professional scepticism. Following the completion of the financial
statements review process on the effectiveness of the independent
audit and the review of audit services, the Committee will
recommend that KPMG be reappointed at the next Annual General
Meeting.
For any questions on the activities of the Committee not
addressed in the foregoing, a member of the Committee will attend
each Annual General Meeting to respond to such questions.
By order of the Audit Committee
Jeremy Thompson
Audit Committee Chairman
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
Geopolitical and economic risks
The Company leases aircraft to customers in multiple
jurisdictions exposing it to (i) many and varying economic, social,
legal and geopolitical risks, (ii) instability in key markets and
(iii) global health pandemics. The Directors continue to monitor
the development of Covid-19 (see 'Subsequent events') and are
continuing to assess the potential impact on the Company. Exposure
to multiple jurisdictions may adversely affect the Company's future
performance, position and growth potential. The adequacy and
timeliness of the Company's response to emerging risks in these
jurisdictions are of critical importance to the mitigation of their
potential impact on the Company.
Exposure to the commercial airline industry
As a supplier to and partner of the airline industry, the Group
is exposed to the financial condition of the airline industry as it
leases all of its aircraft to two commercial airline customers. The
financial condition of the airline industry is affected by, among
other things, geopolitical events, outbreaks of communicable
pandemic diseases and natural disasters, fuel costs and the demand
for air travel. To the extent that any of these factors adversely
affect the airline industry they may result in (i) downward
pressure on lease rates and aircraft values, (ii) higher incidences
of lessee defaults, restructuring, and repossessions and (iii)
inability to lease aircraft on commercially acceptable terms.
NAS
NAS following an ambitious growth programme and following
internal reviews has developed a programme to focus on
profitability rather than growth. It has appointed a new CEO with
the former CFO and temporary CEO stepping back into his CFO role.
NAS have embarked on some route rationalisation and have closed
some overseas bases. The company has additionally exited from its
Argentinean venture.
The continued grounding of the 737-Max aircraft by Boeing and
global certification authorities has been unwelcome but NAS has
taken steps to keep capacity in place by deferring the sale of
aircraft, leasing aircraft and seeking compensation from
Boeing.
NAS has some of its 787 fleet grounded awaiting replacement
engines with the low pressure turbine (LPT) blades replaced. The
LPT problem impacts all Trent 1000 customers however Rolls Royce's
(RR) ability to refurbish engines is limited by their production
capabilities. It is likely that the NAS fleet will re-enter service
during 2020. NAS has negotiated undisclosed compensation from RR
and NAS continues to pay all lease and maintenance in a timely
manner.
The impact of the Covid-19 has led to widespread fleet grounding
with minimal continuing services. No airline has yet announced when
and how operations will restart. BA, for example, have commented
that at present it is impossible to forecast the impact of the
virus on operations.
Thai Airways
The elections in Thailand are not felt to have impacted the
airline industry but these matters are continually monitored. Rolls
Royce have recently completed a maintenance agreement with Thai to
provide a regional maintenance centre for their engines.
As with NAS some of Thai's 787's are grounded, including both
the Company's aircraft, awaiting replacement engines. The timing of
replacement engines is unknown but likely to be within 2020. Thai
continues to pay all lease and maintenance payments in a timely
manner. However, Thai have requested near term lease relief, which
the Company is currently reviewing and have commenced discussions
with Thai and the Company's lenders. The storage conditions of our
aircraft are monitored to ensure the aircraft are protected to the
high standards.
The impact of the Covid-19 is likely to impact passenger numbers
for Thai given the reduced Chinese and regional demand.
Covid-19 Impact
As of mid-March 2020, COVID-19 has spread across the globe, with
major outbreaks across China, the Middle East, Europe and America,
resulting in widespread restrictions on the ability of people to
travel, socialise and leave their homes. Global financial markets
have reacted sharply to this pandemic, with concerns regarding the
economic impact this may have on a global scale, and which is
expected to be significant for the airline sector, and by extension
the aircraft leasing sector. Subsequent to the year end both
Lessee's have requested lease payment relief and given the
continuing evolution of, the potential significant impact of, and
the uncertainties created by COVID-19 has meant that this new risk
has now become the most significant.
Asset risk
The Company's Assets comprise of four Boeing 787-8 aircraft.
The Group bears the risk of re-leasing or selling the aircraft
in its fleet at the end of their lease terms. If demand for
aircraft decreases market lease rates may fall, and should such
conditions continue for an extended period, it could affect the
market value of aircraft in the fleet and may result in an
impairment charge. The Directors have engaged an asset manager with
appropriate experience of the aviation industry to manage the fleet
and remarket or sell aircraft as required in order to reduce this
risk. Any lasting impact of the Covid-19 situation on both aircraft
demand and lease rated are at present unknown.
There is no guarantee that, upon expiry or cessation of the
leases, the Assets could be sold or released 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.
Potential reconfiguration costs could in certain circumstances be
substantial.
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 a credit rating. The credit rating of
NordLB is A3 (2018: Baa2) and the credit rating of DekaBank is Aa2
(2018: Aa2).
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, 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.
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
remarket the relevant Asset (either sell or enter into a subsequent
lease) to repay the outstanding relevant loan and/or re-negotiate
the loan terms with the relevant lender.
More detailed explanations of the above risks can be found
within note 18 to the Audited Consolidated Financial
Statements.
Emerging Risks
The Group considers the transaction as an asset based investment
in a modern, fuel efficient fleet of liquid, state-of-the-art
aircraft assets backed by initial long term lease contracts with
reputable airlines. As such, the investment is not intended to
serve as a corporate facility to the relevant airline.
Boeing
Company exposure to Boeing in terms of ongoing guarantees and
commitments could be negatively impacted with the recent 737-Max
groundings and as yet the financial impact upon Boeing in terms of
financial compensation and potential loss of orders is not known
although it is expected these matters will be resolved during
either Q2 or Q3 in 2020.
Rolls Royce
Company exposure to Rolls Royce in terms of ongoing guarantees
and commitments could be negatively impacted with the Trent 1000
engine issues and as yet the financial impact upon Rolls Royce in
terms of financial compensation, loss of capacity and loss of
orders is not known. The Company believes that its engines will
actually benefit from the current maintenance and refurbishments
under way. Recent announcements by RR's CEO, Warren East have
implied that LPT issues are now under control. This has led to some
near term rerating of RR as the market responded favourably to his
comments. This was prior to the impact of Covid-19 on business
operations.
Brexit
With negotiations now commencing to define the exit terms of the
UK's agreed departure from the EU it is as yet unknown how these
might impact travel.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
The Companies (Guernsey) Law, 2008 permits the Directors to
prepare financial statements for each financial year. Under that
law they have elected to prepare the financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union ('IFRS'). The financial statements
are required by law to comply with the Companies (Guernsey) Law,
2008.
The Company is also responsible for ensuring its Annual Report
and Audited Consolidated Financial Statements meet the requirements
of the UK's FCA Disclosure and Transparency Rules.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Group and of the profit or
loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and to enable them to ensure that
the financial statements are properly prepared and comply with the
Companies (Guernsey) Law, 2008. They have general responsibility
for taking such steps as are reasonably open to them to safeguard
the assets of the Company and to prevent and detect fraud and other
irregularities.
So far as each of the Directors are aware, there is no relevant
information of which the Company's auditor is unaware, and they
have taken all the steps they ought to have taken as Directors to
make themselves aware of any relevant information and to establish
that the Company's auditor is aware of that information.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for the maintenance and integrity
of the Corporate and Financial information included on the
Company's website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
DIRECTORS' STATEMENT PURSUANT TO THE DISCLOSURE AND TRANSPARENCY
RULES
In accordance with the UK's FCA Disclosure and Transparency
Rules, the Directors, confirm that to the best of each person's
knowledge and belief:
(a) The Directors' Report incorporates a fair review of the
development and performance of the business and the position of the
Group together with a description of the principal risks and
uncertainties that the Group faces; and
(b) The financial statements, prepared in accordance with IFRS,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group.
Signed on behalf of the Board by
Jon Bridel Jeremy Thompson
Director Director
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF DP AIRCRAFT I
LIMITED
1. Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of DP
Aircraft I Limited ("the Company") and subsidiaries (together and
hereinafter the "Group") which comprise the consolidated statement
of financial position as at 31 December 2019, the consolidated
statements of profit or loss and other comprehensive income,
changes in equity and cash flows for the year then ended, and
notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying financial statements
-- give a true and fair view of the financial position of the
Group as at 31 December 2019, and of its financial performance and
its cash flows for the year then ended;
-- have been prepared in accordance with International Financial Reporting Standards (IFRS); and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditors' Responsibilities
for the Audit of the Financial Statements section of our report. We
are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in Guernsey together with International Ethics Standard
Board for Accountants Code of Ethics for professional Accountants
(IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2-a ('Significant Accounting Policies
- Basis of Preparation - Going Concern') in the financial
statements, which indicates that the Group was not paid certain
rental payments when due after the year-end and has received
requests for concessions from its lessees. Additionally, Note 2-a
indicates that the Directors have engaged with the Groups lenders
concerning a modification to the terms of its Loans to avoid a
default as a consequence of any concession that may be granted to
the lessees. These events or conditions, along with other matters
as set forth in Note 22 ('Subsequent Events'), indicate that a
material uncertainty exists that may cast significant doubt on the
Groups ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. In addition to the matter
described in the Material Uncertainty Related to Going Concern
section, we have determined the matters described below to be the
key audit matters to be communicated in our report.
Valuation of Aircraft and associated aircraft lease premium - $
401 million (2018: $ 423 million)
The key audit matter How the matter was addressed in
our audit
Aircraft and aircraft lease premium
make up 89% of total assets (by The procedures we undertook included
value). At the end of each reporting but were not limited to:
period, an impairment assessment * Obtaining and documenting our understanding of the
is prepared that compares the current controls over the valuations of aircraft , including
market of the lease encumbered aircraft testing the design and implementation of those
("recoverable value") to the net controls ;
book value ("NBV") of the aircraft
and aircraft lease premium in line
with the relevant accounting standards. * Obtained the appraiser valuation reports and we: (i)
If the NBV is not recoverable, a assessed whether the methodology and assumptions used
value-in-use calculation is performed, for determining recoverable amounts for aircraft were
the value-in-use is based on the applied consistently across the portfolio.
estimation of expected future cash
flows to be generated by the aircraft,
discounted to a present value. There * We tested the accuracy of the impairment assessment
is a significant risk relating to model via recalculation of the recoverable amount of
the valuation of aircraft given the assets and tested the completeness of the inputs;
the judgmental nature of the assumptions
and inputs that require consideration
by the Board of Directors. * We evaluated and challenged the Board of Directors'
key judgements and assumptions in determining the
recoverable amounts by: (i) comparing them to
evidence obtained through external sources where
possible, our industry knowledge and market
experience; and;
* We assessed the adequacy of the disclosures made by
the Group in relation to their description of the
judgements, assumptions and estimates made, alongside
the adequacy of disclosures made in Note 22
Subsequent events
No material misstatements were
noted as part of our testing.
We have nothing to report on other matters on which we are
required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Other Information
The Directors are responsible for the other information. The
other information comprises of the information included in the
asset manager's report, chairman's statement, AIFMD checklist,
highlights, summary, fact sheet, and the other company
information.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
2. Respective responsibilities and restrictions on use
Responsibilities of the Directors and Those Charged with
Governance for the Financial Statements
The Directors are responsible for the preparation and fair
presentation of the financial statements in accordance with IFRS,
and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors
either intend to liquidate the Group's or to cease operations, or
has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Group's financial reporting process.
Auditors' Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Further details relating to our work as auditor is set out in
the Scope of Responsibilities Statement contained in the appendix
to this report, which is to be read as an integral part of our
report.
Our report is made solely to the Shareholders, as a body, in
accordance with section 262 of the Companies (Guernsey) Law, 2008.
Our audit work has been undertaken so that we might state to the
Group's Shareholders those matters we are required to state to them
in an auditors' 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 Group's Shareholders as a body, for our
audit work, for this report, or for the opinions we have
formed.
29 April 2020
Killian Croke
for and on behalf of
KPMG
Chartered Accountants,
1 Harbourmaster Place
IFSC
Dublin 1
Appendix to the Independent Auditors' Report
Further information regarding the scope of our responsibilities
as auditor
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the Directors.
-- Conclude on the appropriateness of the Directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditors' report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditors' report. However, future events or
conditions may cause the Group's to cease to continue as a going
concern.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the (consolidated) financial
statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors' report unless
law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019
2018
(Restated)
Note US$ US$
Revenue
Lease rental income 4 57,383,604 57,352,909
Expenses
Asset management fees 21 (1,007,149) (982,584)
Asset Manager's disposal fee 21 (622,990) (423,008)
General and administrative expenses 5 (987,816) (959,727)
Depreciation and Amortisation 9 (22,227,528) (23,222,995)
(24,845,483) (25,588,314)
Operating profit 32,538,121 31,764,595
Finance costs 6 (9,758,815) (10,966,998)
Finance income 446,665 574,341
----------------------------------------- ----- ------------- -------------
Net Finance Costs (9,312,150) (10,392,657)
Profit before tax 23,225,971 21,371,938
Taxation 7 (56,902) (45,447)
Profit for the year 23,169,069 21,326,491
----------------------------------------- ----- ------------- -------------
Other Comprehensive Income
Items that are or may be reclassified
to profit or loss
Cash flow hedges - changes in fair
value 19 (2,691,368) 1,166,451
Cash flow hedges - reclassified to
profit or loss 19 188,730 550,401
----------------------------------------- ----- ------------- -------------
Total Other Comprehensive Income (2,502,638) 1,716,852
----------------------------------------- ----- ------------- -------------
Total Comprehensive Income for the
year 20,666,431 23,043,343
----------------------------------------- ----- ------------- -------------
US$ US$
Earnings per Share for the year - basic
and diluted 8 0.11068 0.10188
----------------------------------------- ----- ------------- -------------
All the items in the above statement derive from continuing
operations.
All income is attributable to the Ordinary Shares of the
Company.
The notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2019
2019 2018
(Restated)
Note US$ US$
NON-CURRENT ASSETS
Property, Plant and Equipment
- Aircraft & Related Components 9 400,631,946 422,859,474
Derivative instrument assets 18 - 153,795
----------------------------------- ----- ------------ ------------
Total non-current assets 400,631,946 423,013,269
CURRENT ASSETS
Cash and cash equivalents 12,216,093 11,122,182
Restricted cash 10 34,563,671 30,657,524
Trade and other receivables 363,576 354,127
----------------------------------- ----- ------------ ------------
Total current assets 47,143,340 42,133,833
TOTAL ASSETS 447,775,286 465,147,102
----------------------------------- ----- ------------ ------------
EQUITY
Share Capital 14 210,556,652 210,556,652
Retained Earnings 15 7,491,594 3,162,525
Hedging Reserve 15 (2,348,841) 153,797
Total equity 215,699,405 213,872,974
NON-CURRENT LIABILITIES
Bank borrowings 13 163,739,430 190,531,701
Maintenance reserves 18 20,207,622 16,756,567
Security deposits 11 13,264,420 13,264,420
Derivative instrument liabilities 18 2,348,843 -
Asset manager disposal fee 21 2,479,634 1,856,644
----------------------------------- ----- ------------ ------------
Total non-current liabilities 202,039,949 222,409,332
CURRENT LIABILITIES
Bank borrowings 13 27,107,311 25,983,973
Deferred income 4 2,487,409 2,579,881
Trade and other payables 12 441,212 300,942
----------------------------------- ----- ------------ ------------
Total current liabilities 30,035,932 28,864,796
TOTAL LIABILITIES 232,075,881 251,274,128
----------------------------------- ----- ------------ ------------
TOTAL EQUITY AND LIABILITIES 447,775,286 465,147,102
----------------------------------- ----- ------------ ------------
The financial statements were approved by the Board of Directors
and were authorised for issue on 29 April 2020. They were signed on
its behalf by:
Jon Bridel Jeremy Thompson
Chairman Director
The notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
US$ US$
Profit for the year 23,169,069 21,326,491
Adjusted for:
Depreciation and amortisation 22,227,528 23,222,995
Amortisation of deferred finance costs 293,641 293,641
Finance costs 9,465,175 10,673,357
Income tax expense 56,902 45,447
Changes in:
Increase/(Decrease) in maintenance provision 3,451,055 (13,485,552)
Decrease in deferred income (92,472) (61,777)
Increase in Asset Manager's performance
fee 622,990 423,008
Increase/ (Decrease) in accruals and
other payables 105,783 (102,156)
(Increase)/ Decrease in receivables (9,449) 824,584
Income taxes paid (42,774) (45,352)
----------------------------------------------- ------------- -------------
NET CASH FLOW FROM OPERATING ACTIVITIES 59,247,448 43,114,686
----------------------------------------------- ------------- -------------
INVESTING ACTIVITIES
Restricted cash (3,906,147) 12,826,651
----------------------------------------------- ------------- -------------
NET CASH FLOW USED IN INVESTING ACTIVITIES (3,906,147) 12,826,651
----------------------------------------------- ------------- -------------
FINANCING ACTIVITIES
Dividends paid (18,840,000) (18,840,000)
Bank loan principal repaid (25,899,084) (24,692,717)
Bank loan interest paid (9,339,935) (10,125,177)
Swap interest paid (168,371) (603,481)
NET CASH FLOW USED IN FINANCING ACTIVITIES (54,247,390) (54,261,375)
----------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 11,122,182 9,442,220
Increase in cash and cash equivalents 1,093,911 1,679,962
----------------------------------------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT OF
YEAR 12,216,093 11,122,182
----------------------------------------------- ------------- -------------
The notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
Retained Hedging Total
Share capital Earnings Reserve Equity
Note US$ US$ US$ US$
As at 1 January 2019 210,556,652 3,162,525 153,797 213,872,974
Total comprehensive
income for the year
Profit for the year - 23,169,069 - 23,169,069
Other comprehensive
income - - (2,502,638) (2,502,638)
---------------------- ----- -------------------------- ----------------- ------------------------- -------------
Total comprehensive
income - 23,169,069 (2,502,638) 20,666,431
---------------------- ----- -------------------------- ----------------- ------------------------- -------------
Transactions with
owners
of the Company
Dividends 16 - (18,840,000) - (18,840,000)
As at 31 December
2019 210,556,652 7,491,594 (2,348,841) 215,699,405
---------------------- ----- -------------------------- ----------------- ------------------------- -------------
As at 1 January 2018 210,556,652 676,034 (1,563,055) 209,669,631
Total comprehensive
income for the year
Profit for the year - 21,326,491 - 21,326,491
Other comprehensive
income - - 1,716,852 1,716,852
---------------------- ----- -------------------------- ----------------- ------------------------- -------------
Total comprehensive
income - 21,326,491 1,716,852 23,043,343
---------------------- ----- -------------------------- ----------------- ------------------------- -------------
Transactions with
owners
of the Company
Dividends 16 - (18,840,000) - (18,840,000)
As at 31 December
2018 210,556,652 3,162,525 153,797 213,872,974
---------------------- ----- -------------------------- ----------------- ------------------------- -------------
The notes form an integral part of these financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2019
1) GENERAL INFORMATION
The consolidated audited 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 company limited by shares and a UK incorporated
private limited company respectively.
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 (2018: 209,333,333) 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.
The financial statements were approved by the Board of Directors
and authorised for issue on 24 April 2020.
2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
These financial statements are prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively IFRSs)
issued by the International Accounting Standards Board
('IASB').
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also
requires the Directors to exercise judgement in applying the
Company's accounting policies. The areas where significant
judgements and estimates have been made in preparing the financial
statements and their effect are disclosed in note 3.
The financial statements are presented in United States Dollars
(US$) which is also the functional currency of the Company and its
subsidiaries.
Basis of Measurement
The financial statements have been prepared on the historical
cost basis except for certain financial instruments that are
measured at fair value and designated as hedging instruments.
Going concern
The Directors have prepared the financial statements for the
year ended 31 December 2019 on the going concern basis of
preparations. However, the Directors have identified the matters
referred to below which indicate the existence of a material
uncertainty that may cast doubt on the entity's ability to continue
as a going concern and that the company may, as a consequence, be
unable to realise its assets and discharge its liabilities in the
normal course of business.
Covid-19 has resulted in widespread restrictions on the ability
of people to travel, socialise and leave their homes and is
expected to have a material negative effect on the airline sector,
and by extension the aircraft leasing sector. The Company leases
four (4) Boeing 787 aircraft (the 'Aircraft'), two each to
Norwegian Air Shuttle ASA ('NAS') and Thai Airways International
('Thai').
The application of the going concern basis of preparation is
dependent upon the Company's aircraft leasing and the related
financing activities as described below.
Thai Leases and related Loans
The Thai Leases
During March 2020 Thai formally requested the Company to grant
it concessions under the Thai aircraft leases. The Company, with
the support of the Asset Manager, has actively engaged with Thai
and agreed certain concessions to Thai, which include a rent
deferral arrangement (which began on 29 April 2020) in an aggregate
amount of approximately US$ 3.40m. The deferred amounts (with
interest thereon) are due to be repaid in 12 equal monthly
instalments commencing at end of each respective deferral
period.
Thai Leases and related Loans
The Thai Loans
Note 13 ('Bank Borrowings') describes the loans (the 'NAS Loans'
and the 'Thai Loans') obtained by the Group to part-finance the
acquisition of the Aircraft. The Company has obligations under the
Loans to make scheduled repayments of principal and interest, which
are serviced by the receipt of lease payments from Thai and NAS
respectively. The Loans are secured by charges over the Aircraft
and the underlying leases.
The concessions proposed by the Company to Thai have been
communicated to the Thai Loan providers. The Directors expect that
under the terms of the concessions granted to Thai the Company will
have sufficient liquidity from (i) the lease payments from Thai and
(ii) utilising certain of its own funds to continue to meet all of
its obligations under the Thai Loans.
Norwegian Leases and related Loans
The NAS Leases
Since March 2020 NAS has failed to make any payments due under
the NAS Aircraft Leases (in an aggregate amount of US$ 4.98m
to-date). NAS have made significant requests for concessions from
its suppliers and financiers including the Company as part of wider
re-organisation and recapitalisation plan to ensure that it can
continue to trade. The plan includes obtaining funding from the
Norwegian Government which is contingent on meeting certain
stipulated criteria including converting a large part of its
outstanding debt to equity which will require a successful vote
from shareholders at its EGM on 4 May 2020. Without Norwegian
Government funding (among others) NAS has stated that it will not
have the liquidity needed to continue to trade.
The Directors, with the support of the Asset Manager, have
actively engaged with NAS in order to determine the extent of any
concessions that may be granted under the NAS Leases. The Company
is currently negotiating certain proposed concessions to NAS, which
may include among other things (i) a rent deferral arrangement,
(ii) a power by hour arrangement for part of the remaining term of
the lease (iii) a modified rental stream for part of the remaining
term of the lease (which may include a release by the Company of
certain amounts already due from NAS) and other lease modifications
or concessions, as well as other forms of compensation for the
Company. No formal agreement on these concessions has yet been
concluded.
The NAS Loans
The Company is unlikely to be able to continue to meet its
obligations as to principal and interest (currently approximately
US$ 1.45m per month) under the NAS Loans for so long as NAS
withhold payments due under the NAS Leases nor will it likely be
able to meets its committed obligations under the proposed
concessions that may be granted to NAS.
The Directors, with the support of the Asset Manager, have
engaged with its NAS lenders following the non-receipt of rentals
from NAS and the request for concessions. The Directors have
determined that a modification to the terms of the NAS Loans (which
may include an interest-only period, a re-profiling of future
repayment obligations or other concessions) will be necessary to
ensure that the Company can continue to operate following any
concessions that may be agreed with NAS without giving rise to a
default under the Loans.
Whilst progress has been made, the Directors are uncertain as to
the final outcome of these matters. However, on the basis of (i)
the continuing availability of the Thai and NAS Loans which have
been made available to the Group (with certain Loan concessions),
(ii) current cash-flow projections under various scenarios
(including certain Aircraft Lease concessions being granted to NAS
and Thai) and (iii) having regard to the limited recourse nature of
the Loans the Directors believe that it is appropriate to prepare
these financial statements under the going concern basis of
preparation. No adjustments have been made to the financial
statements in the event that the Company was unable to continue as
a going concern.
New standards, interpretations and amendments effective from 1
January 2019
IFRS 16 Leases
IFRS 16 Leases is the IASB's replacement of IAS 17 Leases ,
however, the standard's approach to lessor accounting is
substantially unchanged from IAS 17.
When the Company acts as a lessor, it determines at the
inception of the lease whether it is a finance lease or an
operating lease. To classify each lease, the Company makes an
assessment of whether the lease transfers substantially all the
risks and rewards incidental to ownership of the underlying assets.
If this is the case, the lease if a finance lease; if not, the
lease is an operating lease. In reaching this conclusion, the
Company considers certain indicators such as whether the lease is
for the majority of the useful economic life of the asset.
The conclusion is that the leases continue to be operating
leases under IFRS 16 and as such the accounting policies applicable
to the Company under IFRS 16 are not different to those in the
comparative period . As such there has been no change to their
classification as operating leases or their measurement following
the implementation of IFRS 16.
As a result of the transition to IFRS 16 and subsequent adoption
of amendments to IFRS 3 Business Combinations it is now required to
present the Property, Plant and Equipment - Aircraft and the
Intangible Asset as a single asset on the Statement of Financial
Position and the related depreciation and amortisation as a single
line item on the Statement of Comprehensive Income. The prior year
primary statements have been restated to reflect this
reclassification. As this is a presentational change only there is
no impact on the Company's profit and loss, cash flows and equity.
The impact on transition to IFRS 16 is shown in the table
below.
Carrying value at Reclassification Carrying value
31/12/18 under IAS at 31/12/18 under
17 IFRS 16
Property, Plant and
Equipment - Aircraft 392,117,975 30,741,499 422,859,474
Intangible Asset
- Aircraft Lease
Premium 30,741,499 (30,741,499) -
----------------------- -------------------- ----------------- -------------------
Total 422,859,474 - 422,859,474
----------------------- -------------------- ----------------- -------------------
New standards, interpretations and amendments in issue but not
yet effective
There are a no new standards, amendments to standards and
interpretations that are effective for annual periods beginning
after 1 January 2020 which are expected to have a material impact
on the financial statements.
b) Basis of consolidation
The financial statements incorporate the financial statements of
the Company and the subsidiary undertakings controlled by the
Company made up to 31 December each year. Control is achieved where
the Company has power over the investee, exposure or rights to
variable returns from its involvement with the investee and the
ability to use its power to affect the amount of the investor's
returns.
The results of subsidiary undertakings acquired or disposed of
during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition or up
to the effective date of disposal as appropriate.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
c) Taxation
The Company and the Guernsey subsidiaries are exempt from
taxation in Guernsey and are charged an annual
exemption fee of GBP 1,200 (2018: GBP1,200). This is treated as an operating expense.
DP Aircraft Ireland Limited is subject to resident taxes in
Ireland. DP Aircraft UK Limited is subject to income tax in the
United Kingdom.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income and expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been enacted or substantially enacted by the reporting
date.
d) Property, plant and equipment - Aircraft and related components
Upon delivery, aircraft (the 'Assets') are initially recognised
at cost plus initial direct costs which may be capitalised under
IAS 16. In accounting for property, plant and equipment, the Group
makes estimates about the expected useful lives, the fair value of
attached leases and the estimated residual value of aircraft. In
estimating useful lives, fair value of leases and residual value of
aircraft, the Group relies upon actual industry experience,
supported by estimates received from independent appraisers.
When an aircraft is acquired with a lease attached, an
evaluation of whether the lease is at fair value is undertaken. A
lease premium is recognised when it is determined that the acquired
lease terms are above fair value. Lease premiums are recognised as
a component of Aircraft and are amortised to profit or loss on a
straight line basis over the term of the lease.
The two aircraft leased to Norwegian Air Shuttle ASA were
acquired in 2013 and had a useful economic lease life of 12 years
at acquisition. The two aircraft leased to Thai Airways
International were acquired in 2015 and had a useful lease life of
12 years at acquisition.
The Group's policy is to depreciate the Assets over their
remaining lease life (given the intention to sell the Assets at the
end of each respective lease) to an appraised residual value at the
end of the lease. Residual values are reviewed annually, and such
estimates are supported by future values determined by three
external valuations and discounted by the inflation rate
incorporated into those valuations, see note 3 for further
details
In accordance with IAS 16 - Property, Plant and Equipment, the
Group's aircraft that are to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying value of the aircraft may not be recoverable. An
impairment review involves consideration as to whether the carrying
value of an aircraft including related assets is not recoverable
and is in excess of its fair value. In such circumstances a loss is
recognised as a write down of the carrying value of the aircraft to
the higher of value in use and fair value less cost to sell. The
review for recoverability has a level of subjectivity and requires
the use of judgement in the assessment of estimated future cash
flows associated with the use of an item of property, plant and
equipment and its eventual disposition. Future cash flows are
assumed to occur under the prevailing market conditions and assume
adequate time for a sale between a willing buyer and a willing
seller. Expected future lease rates are based upon all relevant
information available, including the existing lease, current
contracted rates for similar aircraft, appraisal data and industry
trends.
e) Financial Instruments
A financial instrument is recognised when the Group becomes a
party to the contractual provisions of the instrument. Regular way
purchases and sales of financial assets are accounted for at trade
date, i.e. the date that the Group commits itself to purchase or
sell the asset. Financial liabilities are derecognised if the
Group's obligations, specified in the contract, expire or are
discharged or cancelled. Financial assets are derecognised if the
Group's contractual rights to the cash flows from the financial
assets expire, are extinguished, or if the Group transfers the
financial assets to a third party and transfers all the risks and
rewards of ownership of the asset, or if the Group does not retain
control of the asset and transfers substantially all the risk and
rewards of ownership of the asset.
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.
Financial assets 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 below.
Trade and other receivables are classified at amortised
cost.
Fair values of financial assets at amortised cost, which are
determined for disclosure purposes, are calculated based on the
present value of future principal and interest cash flows,
discounted at the market rate of interest at the reporting
date.
i. Cash and cash equivalents comprise cash balances held for the
purpose of meeting short term cash commitments and investments
which are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
ii. Restricted cash comprises cash held by the Group but which
is ring-fenced or used as security for specific financing
arrangements, and to which the Group does not have unfettered
access. Restricted cash includes monies received in relation to
maintenance provisions and security deposits.
Impairment of financial assets held at amortised cost
The Company has elected to apply the simplified model for trade
receivables, including lease receivables, 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. 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.
Other receivables are immaterial to the financial statements and
therefore no assessment of the ECL has been completed.
Financial assets at 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 below.
Hedge accounting
IFRS 9 adopts a principle based approach to hedge accounting
which includes a number of 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 concluded, given that the critical terms of
the hedged item matched those of the hedging instrument in terms of
risk, timing and quantity, that the hedges meet the hedging
requirements.
Accordingly, the hedges are 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.
Financial Liabilities at amortised cost
i. Bank borrowings are recognised initially at fair value, net
of transaction costs incurred. Bank borrowings are subsequently
stated at amortised cost; any difference between the proceeds (net
of transaction costs) and the redemption value is recognised
through profit or loss in the consolidated statement of
comprehensive income over the period of borrowing using the
effective interest rate method. Bank borrowings are classified as
current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least one year after the
reporting date.
Initial direct costs related to bank borrowings are capitalised,
presented net against the bank borrowings in the statements of
financial position and amortised to the statement of comprehensive
income over the period of the related loan as part of the effective
interest rate.
ii. NAS, for example, has Boeing Gold Care cover and Rolls Royce
Total Care arrangements under which the majority of the maintenance
payments are made. In addition, maintenance reserves are lessee
contributions to a retention account held by the lessor which are
calculated by reference to the budgeted cost of maintenance and
overhaul events (the 'supplemental rentals'). They are intended to
ensure that at all times the lessor holds sufficient funds to cover
the proportionate cost of maintenance and overhaul of the Asset
relating to the life used on the airframe, engines and parts since
new or since the last overhaul. During the term of the lease, all
maintenance is required to be carried out at the cost of the
lessee, and maintenance provisions are required to be released only
upon receipt of satisfactory evidence that the relevant qualifying
maintenance or overhaul has been completed.
Maintenance provisions are recorded in the consolidated
statement of financial position during the term of the lease.
Reimbursements will be charged against this liability as qualifying
maintenance work is performed. Maintenance reserves are restricted
and not distributable until, at the end of the lease, the Group is
released from the obligation to make any further reimbursements in
relation to the aircraft, and the remaining balance of maintenance
provisions, if any, is released through profit or loss as other
income.
iii. Security deposits are paid by the lessee in accordance with
the terms of the lease contract, either in cash or in the form of a
letter of credit. These deposits are refundable to the lessee upon
expiration of the lease and, where such deposits are received in
cash, they are recorded in the consolidated statement of financial
position as a liability. The cash received related to security
deposits is presented as restricted cash in the consolidated
statement of financial position.
iv. Trade and other payables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method.
Fair value measurement
The Group measures certain financial instruments such as
derivatives at fair value at the end of each reporting period using
recognised valuation techniques and following the principles of
IFRS 13.
The fair value measurement of the Group's financial assets and
liabilities utilises market observable inputs as far as possible.
Inputs used in determining fair value measurements are categorised
into different levels based on how observable the inputs used in
the valuation technique utilised are:
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable.
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
The classification of an item into the above levels is based on
the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item.
f) Share capital
Shares are classified as equity. Incremental costs directly
attributable to the issue of shares are recognised as a deduction
from retained earnings.
g) Asset Manager's disposal fee provision
The disposal fee provision is measured at the present value of
the expenditure expected to be required to settle the obligation.
Changes in the estimated timing or amount of the expenditure or
discount rate are recognised in profit or loss in the statement of
comprehensive income when the changes arise.
h) Dividends
Dividends are recognised as a liability in the financial
statements in the period in which they become obligations of the
Company.
Dividends become an obligation when the payment of the dividend
is no longer at the discretion of the Company and are therefore
recognised when they are paid.
i) Lease rental income
Leases relating to the Aircraft are classified as operating
leases where the terms of the lease do not transfer substantially
all the risks and rewards of ownership to the lessee. Rental income
from operating leases is recognised on a straight-line basis over
the term of the lease.
Initial direct costs incurred in setting up a lease are
capitalised to Property, Plant and Equipment and amortised over the
lease term.
j) Expenses
Expenses are accounted for on an accrual basis.
k) Finance costs and finance income
Interest payable is calculated using the effective interest rate
method. The effective interest method is a method of calculating
the amortised cost of a financial asset or liability and of
allocating interest income and expense over the relevant
period.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments (including all fees or
amounts paid or received that form an integral part of the
effective interest rate, including transaction costs and other
premiums or discounts) through the expected life of the financial
asset or liability.
l) Foreign currency translation
Transactions denominated in foreign currencies are translated
into US$ at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into US$ at the
rate of exchange ruling at the reporting date. Foreign exchange
gains or losses arising on translation are recognised through
profit or loss in the consolidated statement of comprehensive
income.
m) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being acquiring, leasing and subsequent
selling of Aircraft. All significant operating decisions are based
upon analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements of the
Group as a whole.
3) SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with IFRS
requires that the Directors make estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. Such estimates and associated
assumptions are generally based on historical experience and
various other factors that are believed to be reasonable under the
circumstances and form the basis of making the judgements about
attributing values of assets and liabilities that are not readily
apparent from other sources.
a) Depreciation of aircraft
As described in Note 2, the Group depreciates the Assets on a
straight line basis over the remaining lease life and taking into
consideration the estimated residual value at the end of the lease
term. In making a judgement regarding these estimates the Directors
will consider previous sales of similar aircraft and other
available aviation information. The Group engage three Independent
Expert Valuers each year to provide a valuation of the Assets and
take into account the average of the three valuations provided. The
Group expects that, in performing their valuations, the Independent
Expert Valuers will have regard to factors such as the prevailing
market conditions (which may impact on the resale value of the
Assets), the leases (including the scheduled rental payments and
remaining scheduled term of the leases) and the creditworthiness of
the lessees. Accordingly, any early termination of the leases may
impact on the valuation of the Assets. As at 31 December 2019 there
was no indication of impairment in the Group's Assets (2018:
nil).
Residual value estimates of the Aircraft were determined by the
full life inflated values at the end of the leases from three
external valuations and discounted by the inflation rate
incorporated into those valuations and the lease premium was
determined to have a US$ nil residual value at the end of the
leases.
The full life inflated value is the appraiser's opinion of the
underlying economic value of the aircraft in an open, unrestricted,
stable market environment with a reasonable balance of supply and
demand, and assumes full consideration of its "highest and best
use". An aircraft's full life value is founded in the historical
trend of values and in the projection of value trend and presumes
an arm's-length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress
and with a reasonable period of time available for marketing. The
full life inflated values used within the financial statements
match up the four lease termination dates and have been discounted
by the inflation rate incorporated into the valuations. The
residual value of the aircraft does not represent the current fair
value of the aircraft.
The residual value estimates at the end of each year are used to
determine the aircraft depreciation of future periods. The residual
value estimates of the leases for the aircraft as at 31 December
2019 was US$ 265,658,601 (31 December 2018: US$255,350,464). As a
result, the year ending 31 December 2020 and future aircraft
depreciation charges, with all other inputs staying constant, will
be US$ 21,714,435 (2019: US$ 22,227,528). The aircraft depreciation
charge for 2020 onwards will vary based on the residual value
estimates as at 31 December 2019.
b) Derivative fair value
The Directors estimate the fair value of derivative contracts
based on valuation techniques. These techniques are significantly
affected by the assumptions used which are observable except for
credit valuation adjustments and derivative valuation adjustments,
including discount rates and estimates of future cash flows.
4) LEASE RENTAL INCOME
Year ended Year ended
31 December 31 December
2019 2018
U$ US$
Deferred income brought
forward 2,579,881 2,641,658
Lease rental income received 57,291,132 57,291,132
Deferred income carried
forward (2,487,409) (2,579,881)
------------------------------- ------------ ------------
Total lease rental income 57,383,604 57,352,909
------------------------------- ------------ ------------
All lease rental income is derived from two customers located in
Norway and Thailand and all four Assets are Boeing 787-8 aircraft.
During the year ended 31 December 2019 the Group earned the
following amounts of rental income from these two customers:
Year ended Year ended
31 December 31 December
2019 2018
U$ US$
Norway 29,852,203 29,895,229
Thailand 27,531,401 27,457,680
Total lease rental income 57,383,604 57,352,909
---------------------------- ------------ ------------
The contracted cash lease rental payments to be received under
non-cancellable operating leases at the reporting date are:
Next 12 months 2 to 5 years* After 5 years Total
31 December 2019 US$ US$ US$ US$
Boeing 787-8 Serial
No: 35304 14,886,012 59,544,048 6,963,799 81,393,859
Boeing 787-8 Serial
No: 35305 14,947,440 59,789,760 9,285,841 84,023,041
Boeing 787-8 Serial
No: 35320 13,745,640 54,982,560 26,345,810 95,074,010
Boeing 787-8 Serial
No: 36110 13,712,040 54,848,160 23,996,070 92,556,270
--------------------- --------------- -------------- -------------- ------------
57,291,132 229,164,528 66,591,520 353,047,180
--------------------- --------------- -------------- -------------- ------------
Next 12 months 2 to 5 years* After 5 years Total
31 December 2018 US$ US$ US$ US$
Boeing 787-8 Serial
No: 35304 14,886,012 59,544,048 21,849,811 96,279,871
Boeing 787-8 Serial
No: 35305 14,947,440 59,789,760 24,233,281 98,970,481
Boeing 787-8 Serial
No: 35320 13,745,640 54,982,560 40,091,450 108,819,650
Boeing 787-8 Serial
No: 36110 13,712,040 54,848,160 37,708,110 106,268,310
--------------------- --------------- -------------- -------------- ------------
57,291,132 229,164,528 123,882,652 410,338,312
--------------------- --------------- -------------- -------------- ------------
*Years 2 to 5 have been aggregated in the above table as the
annual lease rental income contracted during this period is the
same as the annual lease rental income contract within the next 12
months.
5) GENERAL AND ADMINISTRATIVE EXPENSES
Year ended Year ended
31 December 31 December
2019 2018
US$ US$
Legal and professional fees 297,571 314,093
Directors fees and expenses
(note 20) 236,475 227,128
Administration fees (note 21) 253,998 242,449
Insurance 50,185 47,594
Audit fees 53,371 54,503
Foreign exchange gains 20,693 19,025
Professional fees 30,435 35,875
Travel expenses 4,068 16,534
Other fees and expenses 41,020 2,526
------------------------------------ ------------ ------------
Total general and administrative
expenses 987,816 959,727
----------------------------------- ------------ ------------
6) FINANCE COSTS
Year ended Year ended
31 December 31 December
2019 2018
US$ US$
Loan interest paid
and payable 9,276,444 10,122,956
Amortisation of deferred finance
costs 293,641 293,641
---------------------------------------- ------------ ------------
Total finance costs at effective
interest rate* 9,570,085 10,416,597
Cash flow hedges reclassified
from other comprehensive income 188,730 550,401
----------------------------------- --- ------------ ------------
Total finance costs 9,758,815 10,966,998
----------------------------------------- ------------ ------------
*On liabilities measured at amortised cost
7) 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 (2018: 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 paid during the
year ended 31 December 2019 was US$ 42,774 (2018: US$ 45,352). 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 0.27% (2018:
0.20%).
8) EARNINGS PER SHARE
Year ended Year ended
31 December 2019 31 December 2018
US$ US$
Profit for the year 23,169,069 21,326,491
Weighted average number
of shares 209,333,333 209,333,333
Earnings per share 0.11068 0.10188
-------------------------- ----------------- -----------------
There are no instruments in issue that could potentially dilute
earnings per Ordinary Share in future years.
9) PROPERTY, PLANT AND EQUIPMENT- AIRCRAFT & RELATED COMPONENTS
Aircraft Lease Premium Total
US$ US$ US$
COST
As at 1 January 2019 and 31 December
2019 476,751,161 46,979,793 523,730,954
----------------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION / AMORTISATION
As at 1 January 2019 84,633,186 16,238,294 100,871,480
Charge for the year 17,865,508 4,362,020 22,227,528
As at 31 December 2019 102,498,694 20,600,314 123,099,008
----------------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 31 December 2019 374,252,467 26,379,479 400,631,946
----------------------------------------- ------------ -------------- ------------
COST
As at 1 January 2018 and 31 December
2018 476,751,161 46,979,793 523,730,954
----------------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION / AMORTISATION
As at 1 January 2018 65,772,211 11,876,274 77,648,485
Charge for the year 18,860,975 4,362,020 23,222,995
As at 31 December 2018 84,633,186 16,238,294 100,871,480
----------------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
As at 31 December 2018 392,117,975 30,741,499 422,859,474
----------------------------------------- ------------ -------------- ------------
Under the terms of the leases, the cost of repair and
maintenance of the Assets will be borne by NAS 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 2019. 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.
10) RESTRICTED CASH
2019 2018
US$ US$
Security deposits 13,633,876 13,476,273
Maintenance reserves 20,929,795 17,181,251
Total restricted cash 34,563,671 30,657,524
------------------------- ----------- -----------
The security deposits are only accessible in the event of a
formal default by a lessee. The maintenance reserves are held for
the requirement of future maintenance due on the aircraft. The
maintenance reserves are not considered available to the Company
for any other purpose.
During the year, the Company received US$ 3,482,030 (2018: US$
5,017,253) from the lessees in relation to the maintenance
reserves. The lessees made claims on the reserves totalling US$
30,975 (2018: US$ 18,502,815) which were paid by the Company during
the year.
11) SECURITY DEPOSITS
2019 2018
US$ US$
Security deposits:
Refundable to Norwegian 6,400,000 6,400,000
Refundable to Thai Airways 6,864,420 6,864,420
Total security deposits 13,264,420 13,264,420
------------------------------- ----------- -----------
The difference between note 10 and 11 on the security deposits
relates to interest received.
12) TRADE AND OTHER PAYABLES
2019 2018
US$ US$
Swap interest payable 28,070 7,711
Accruals and other payables 345,853 240,070
Taxation payable 67,289 53,161
---------------------------------- -------- --------
Total trade and other payables 441,212 300,942
---------------------------------- -------- --------
13) BANK BORROWINGS
2019 2018
US$ US$
Current liabilities: bank interest
payable and bank borrowings 27,107,311 25,983,973
Non-current liabilities: bank borrowing 163,739,430 190,531,701
------------------------------------------ ------------ ------------
Total liabilities 190,846,741 216,515,674
The borrowings are repayable as follows:
Interest payable 317,062 380,553
Within one year 26,790,249 25,603,420
In two to five years 120,561,601 115,090,480
After five years 43,177,829 75,441,221
Total bank borrowings 190,846,741 216,515,674
------------------------------------------ ------------ ------------
The table below analyses the movements in the Group's bank
borrowings:
2019 2018
US$ US$
Opening balance 216,135,121 240,534,196
Repayment of loan (25,899,083) (24,692,716)
Amortisation of deferred finance
costs 293,641 293,641
---------------------------------- ------------- -------------
Principal bank borrowings 190,529,679 216,135,121
Interest payable 317,062 380,553
---------------------------------- ------------- -------------
Total bank borrowings 190,846,741 216,515,674
---------------------------------- ------------- -------------
The table below sets out an analysis of net debt and the
movements in net debt for the year ended 31 December 2019:
Cash and cash Principal Interest Derivative Net Debt
equivalents Instrument*
At 1 January
2019 11,122,182 (216,135,121) (380,553) 146,083 (205,247,409)
Cash flows 1,093,911 25,899,083 9,339,935 168,372 36,501,301
Non cash:-
Fair value
movement - - - (2,502,638) (2,502,638)
Amortisation
of deferred
finance costs - (293,641) - - (293,641)
Interest charge - - (9,276,444) (188,730) (9,465,174)
-------------- -------------- ------------ ------------- --------------
At 31 December
2019 12,216,093 (190,529,679) (317,062) (2,376,913) (181,007,561)
-------------- -------------- ------------ ------------- --------------
*Including interest payable of US$ 28,070 (2018: US$ 7,712)
Cash and cash Principal Interest Derivative Net Debt
equivalents Instrument*
At 1 January
2018 9,442,220 (240,534,197) (382,774) (1,623,849) (233,098,600)
Cash flows 1,679,962 24,692,717 10,125,177 603,481 37,101,337
Non cash:-
Fair value
movement - - - 1,716,852 1,716,852
Amortisation
of deferred
finance costs - (293,641) - - (293,641)
Interest charge - - (10,122,956) (550,401) (10,673,357)
-------------- -------------- ------------- ------------- --------------
At 31 December
2018 11,122,182 (216,135,121) (380,553) 146,083 (205,247,409)
-------------- -------------- ------------- ------------- --------------
*Including interest payable of US$ 7,712 (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 as facility agent of US$ 78,500,000 each to fund the
purchase of two Boeing 787-8 aircraft. The balance on the loans at
31 December 2019 was US$ 103,073,143 (2018: US$ 115,714,801).
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 NordLB as facility agent of US$ 79,800,000
each to fund the purchase of two Boeing 787-8 aircraft. The balance
on the loans at 31 December 2019 was US$ 87,773,599 (2018:
US$100,800,873).
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 (2018: 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 loans 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 loans 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.
14) SHARE CAPITAL
Authorised share capital
The Company's authorised share capital is unlimited.
Year ended 31 December 2019
Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid:
Number Number Number
Shares as at 1 January 2019 and 31
December 2019 1 209,333,333 209,333,334
----------------------------------------- ------------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January 2019 and
31 December 2019 1 210,556,651 210,556,652
--------------------------------------------- --------------- ------------ ------------
Year ended 31 December 2018
Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid:
Number Number Number
Shares as at 1 January 2018 and 31
December 2018 1 209,333,333 209,333,334
---------------------------------------- --------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January 2018 and
31 December 2018 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.
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.
Without prejudice to the provisions of the applicable company
law and without prejudice to any rights attached to any existing
shares or class of shares, or the provisions of the Articles of
Incorporation, any share may be issued with such preferred,
deferred or other rights or restrictions, as the Company may by
ordinary resolution, subject to or in default of any such
direction, as the Directors may determine.
The Directors are entitled to issue and allot C Shares. No C
Shares have been issued since the Company was incorporated.
15) RESERVES
The movements in the Group's reserves are shown in the
Consolidated Statement of Changes in Equity.
Retained earnings comprises any surplus arising from the profit
for the year or period and is taken to this reserve which may be
utilised for the payment of dividends.
The hedging reserve comprises the cumulative net change in the
value of hedging instruments used in cash flow hedges pending
subsequent recognition in profit or loss as the hedged cash flows
affect profit or loss.
16) DIVIDS
During the year ended 31 December 2019 the Company declared and
paid the following dividends:
Dividend
Dividend reference period Shares per share Paid Payment date
US$ US$
Quarter ended 31 December 14 February
2018 209,333,333 0.0225 4,710,000 2019
Quarter ended 31 March
2019 209,333,333 0.0225 4,710,000 16 May 2019
Quarter ended 30 June
2019 209,333,333 0.0225 4,710,000 15 August 2019
Quarter ended 30 September 14 November
2019 209,333,333 0.0225 4,710,000 2019
---------------------------- ------------ ---------- ----------- ---------------
18,840,000
---------------------------- ------------ ---------- ----------- ---------------
A quarterly dividend of US$ 4,710,000 (US$ 0.0225 per share) for
the quarter ended 31 December 2019 was paid on 14 February 2020. In
accordance with IAS 10, this dividend has not been recognised in
these financial statements as a dividend becomes an obligation of
the Company when its payment is no longer at the discretion of the
Company. Dividends are therefore recognised when they are paid.
On 3(rd) April 2020, the Company announced a suspension of
dividends until further notice.
During the year ended 31 December 2018 the Company declared and
paid the following dividends:
Dividend
Dividend reference period Shares per share Paid Payment date
US$ US$
Quarter ended 31 December 15 February
2017 209,333,333 0.0225 4,710,000 2018
Quarter ended 31 March
2018 209,333,333 0.0225 4,710,000 17 May 2018
Quarter ended 30 June
2018 209,333,333 0.0225 4,710,000 16 August 2018
Quarter ended 30 September 15 November
2018 209,333,333 0.0225 4,710,000 2018
---------------------------- ------------ ---------- ----------- ---------------
18,840,000
---------------------------- ------------ ---------- ----------- ---------------
17) INVESTMENT IN SUBSIDIARY UNDERTAKINGS
The Company's investments in subsidiaries, all of which have
been included in these consolidated financial statements, are as
follows:
Proportion of
Date of Country of ownership interest
Name Incorporation Incorporation at 31 December
2018
DP Aircraft Guernsey
I Limited 10 July 2013 Guernsey 100%
DP Aircraft Guernsey
II Limited 10 July 2013 Guernsey 100%
DP Aircraft Guernsey
III Limited 21 May 2015 Guernsey 100%
DP Aircraft Guernsey
IV Limited 21 May 2015 Guernsey 100%
Republic of
DP Aircraft Ireland Limited 27 June 2013 Ireland 100%
DP Aircraft UK Limited 14 April 2015 United Kingdom 100%
18) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The following table details the categories of financial
instruments held by the Company at the reporting date:
2019 2018
US$ US$
Financial assets
Cash and cash equivalents 12,216,093 11,122,182
Restricted cash 34,563,671 30,657,524
Trade and other receivables (excluding
prepayments) 363,576 354,127
Financial assets measured at amortised
cost 47,143,340 42,133,833
--------------------------------------------- ------------ ------------
Financial liabilities
Bank borrowings 190,846,742 216,515,674
Maintenance reserve 20,207,622 16,756,567
Security deposit 13,264,420 13,264,420
Trade and other payables (excluding tax) 373,923 247,781
--------------------------------------------- ------------ ------------
Financial liabilities measured at amortised
cost 224,692,707 246,784,442
--------------------------------------------- ------------ ------------
Interest rate swaps 2,348,843 (153,795)
--------------------------------------------- ------------ ------------
Financial liabilities designated as hedging
instruments 2,348,843 (153,795)
--------------------------------------------- ------------ ------------
The primary risks arising from the Group's financial instruments
are capital management, credit risk, market risk and liquidity
risk. The principal nature of such risks is summarised below. The
Group's main financial instruments comprise four separate loan
agreements and interest rate swaps.
Capital Management
The capital managed by the Group comprises the ordinary shares
and the subordinated administrative shares. The Company is not
subject to externally imposed capital requirements.
Income distributions are generally made quarterly, subject to
compliance with Applicable Law and regulations, in February, May,
August and November of each year. The Company aims to make a
distribution to investors of US$ 0.0225 per Share per quarter.
There can be no guarantee that dividends will be paid to
Shareholders and, if dividends are paid, as to the timing and
amount of any such dividend. Any distribution of dividend to
Shareholders will be subject always to compliance with the
Companies (Guernsey) Law, 2008.
Before recommending any dividend, the Board will consider the
financial position of the Company and the impact on such position
of paying the proposed dividend. Dividends are declared and paid in
US Dollars.
Credit 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. There are no lease income
receivables at 31 December 2019 (2018: US$ Nil). Cash and
restricted cash is all held at NordLB and DekaBank. The lessees do
not maintain a credit rating. The credit rating of NordLB is A3
(2018: Baa2) and the credit rating of DekaBank is Aa2 (2018:
Aa2).
During the term of the leases, the returns on an investment in
the Shares will depend in large part on the lease rentals received
from Norwegian and Thai Airways under the leases. A failure by
Norwegian or Thai Airways to comply with their payment obligations
under the leases may lead to a reduction or in extreme cases a
suspension in distributions paid on the shares and/or in the value
of the shares and have an adverse effect on the Group.
In advance of the commencement of the lease terms under the
leases, both Norwegian and Thai have paid to the Group a security
deposit in respect of each Asset. However, the security deposits do
not cover the full value of the Group's obligations pursuant to the
loan agreements in the event of termination of the leases or
default by Norwegian or Thai Airways.
The carrying amount of financial assets recorded in the
financial statements represents the Group's maximum exposure to
credit risk.
Market risk - interest rate risk
Interest rate risk arises on the Group's various interest
bearing assets and liabilities from changes in the general economic
conditions of the market from time to time. In respect of the
floating rate loans advanced by NordLB for the purchase of the
first two Assets, the Directors have sought to mitigate this risk
by swapping the interest on each loan from a floating rate of
interest to a fixed rate of interest. The floating rate of interest
is calculated using LIBOR for the length of the interest period and
a margin of 2.6 per cent per annum and has been swapped for a fixed
rate of 5.06 per cent and 5.08 per cent for the duration of the
loans. The Group has entered into ISDA-standard hedging
arrangements with NordLB as hedging provider in order to provide
for fixed-rate interest for 12 years to be payable in respect of
the loan, funded by the fixed rental payments under the
corresponding lease. The interest rate swaps are not under a single
master netting agreement. As at 31 December 2019 the fair value of
the interest rate swaps was a payable of US$ 2,348,843 (2018:
receivable of US$ 153,795).
A 0.25% increase or decrease in interest rates would not have a
material impact on the Group due to the derivatives fixing the
interest rates paid by the group and the intention to hold the
interest rate swaps until maturity.
The following table details the Group's exposure to interest
rate risk:
Non-interest
Fixed rate Variable bearing
rate
31 December 2019 instruments instruments instruments Total
US$ US$ US$ US$
Restricted cash - 34,563,671 - 34,563,671
Cash and cash equivalents - 12,216,093 - 12,216,093
Trade receivables - - 363,576 363,576
--------------------------------- -------------- -------------- ------------- --------------
Total financial assets - 46,779,764 363,576 47,143,340
--------------------------------- -------------- -------------- ------------- --------------
Trade and other payables - - (373,923) (373,923)
Maintenance reserves - - (20,207,622) (20,207,622)
Security deposits - - (13,264,420) (13,264,420)
Notional interest rate
swap (88,486,779) 88,486,779 - -
NordLB loans - (87,605,404) (168,194) (87,773,598)
DekaBank loans (102,924,275) - (148,868) (103,073,143)
--------------------------------- -------------- -------------- ------------- --------------
Total financial liabilities (191,411,054) 881,375 (34,163,027) (224,692,706)
--------------------------------- -------------- -------------- ------------- --------------
Total interest rate sensitivity
gap (191,411,054) 47,661,139
--------------------------------- -------------- --------------
Non-interest
Fixed rate Variable bearing
rate
31 December 2018 instruments instruments instruments Total
US$ US$ US$ US$
Restricted cash - 30,657,524 - 30,657,524
Cash and cash equivalents - 11,122,182 - 11,122,182
Trade receivables 354,127 354,127
--------------------------------- -------------- -------------- ------------- --------------
Total financial assets - 41,779,706 354,127 42,133,833
--------------------------------- -------------- -------------- ------------- --------------
Trade and other payables - - (247,781) (247,781)
Maintenance reserves - - (16,756,567) (16,756,567)
Security deposits - - (13,264,420) (13,264,420)
Notional interest rate
swap (101,620,721) 101,620,721 - -
NordLB loans - (100,587,285) (213,587) (100,800,872)
DekaBank loans (115,547,835) - (166,966) (115,714,801)
--------------------------------- -------------- -------------- ------------- --------------
Total financial liabilities (217,168,556) 1,033,436 (30,649,321) (246,784,441)
--------------------------------- -------------- -------------- ------------- --------------
Total interest rate sensitivity
gap (217,168,556) 42,813,142
--------------------------------- -------------- --------------
Market risk - foreign currency risk
The Group's exposure to foreign currency risk is not significant
as its cash flows are predominantly in US$ which is the functional
currency of the company and subsidiaries, and presentation currency
of the Group.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting its obligations in respect of its financial
liabilities. The Group's main financial commitments are the loans
due to NordLB and DekaBank as well as meeting its ongoing operating
expenses.
Liquidity risk management
In the event that the Leases are terminated as a result of a
default by Norwegian or Thai Airways, there is a risk that the
Group will not be able to remarket the Assets successfully within
the remarketing period specified in the loan agreements and that
(after using the security deposits and the Liquidity Reserve) the
Group will not have sufficient liquidity to comply with its
obligations under the Loan Agreements. This may lead to a
suspension in distributions paid on the shares and/or a reduction
in the value of the shares and have an adverse effect on the Group
and could ultimately result in the lenders enforcing their security
and selling the relevant Asset or Assets on the market. There can
be no guarantee that the Group will be able to re-lease the Assets
on terms as favourable as the existing leases, which may have an
adverse effect on the Group and its ability to meet its investment
objective and its dividend target. The price paid by the Group for
the Assets partly reflects the terms of the leases to which the
Assets are subject. Accordingly, were any or all of the Assets to
be re-leased on less favourable terms, this may have an adverse
effect on the value of the Assets and therefore the share
price.
No right of redemption or repurchase
Shareholders will have no right to have their shares redeemed or
repurchased by the Company at any time. Shareholders wishing to
realise their investment in the Company would be required to
dispose of their shares on the stock market. Accordingly, the
ability of shareholders to realise the Net Asset Value of, or any
value in respect of, their shares is mainly dependent on the
existence of a liquid market in the shares and the market price of
such shares.
Available cash
As of 29 April 2020 the Group has available cash in excess of
US$ 8m once adjusted for current creditors and debtors. This is
intended to fund contingencies and to be available to the Group, in
addition to the security deposits paid by Norwegian and Thai
Airways under the leases which would become available in certain
circumstances, to aid the Group in meeting its loan repayments in
the event of a default by Norwegian or Thai Airways.
Liquidity Proposal
Although the Company does not have a fixed life, the Articles
require that the Directors convene a Liquidity Proposal Meeting to
be held no later than 30 June 2026 at which a Liquidity Proposal in
the form of an ordinary resolution will be put forward proposing
that the Company should proceed to an orderly wind-up at the end of
the term of the leases. In the event the Liquidity Proposal is not
passed, the Directors will consider alternatives for the Company
and shall propose such alternatives at a general meeting of the
shareholders, including re-leasing the Assets, or selling the
Assets and reinvesting the capital received from the sale of the
Assets in other aircraft.
The following table details the contractual maturity analysis of
the Group's financial liabilities. The amounts are contractual
undiscounted cash flows and therefore will not agree directly to
the balances in the statement of financial position. Operating
lease income is not a financial instrument, however, it has been
included in the tables below to illustrate the Group's excess
liquidity.
Next 12 After 5 years
31 December 2019 months 2-5 years Total
US$ US$ US$ US$
Bank borrowings and
interest (35,393,147) (141,413,457) (45,106,859) (221,913,463)
Interest rate swaps (817,348) (2,338,301) (82,671) (3,238,320)
Maintenance provision - - (20,207,622) (20,207,622)
Security deposit - - (13,264,420) (13,264,420)
Trade and other payables (373,923) - - (373,923)
----------------------------- ------------- -------------- -------------- --------------
Total financial liabilities (36,584,418) (143,751,758) (78,661,572) (258,997,748)
----------------------------- ------------- -------------- -------------- --------------
Operating lease income
(note 4) 57,291,132 229,164,528 66,591,520 353,047,180
----------------------------- ------------- -------------- -------------- --------------
Liquidity excess prior
to ongoing expenses
and distributions 20,706,714 85,412,770 (12,070,052) 94,049,432
----------------------------- ------------- -------------- -------------- --------------
Next 12 After 5 years
31 December 2018 months 2-5 years Total
US$ US$ US$ US$
Bank borrowings and
interest (35,407,388) (141,478,138) (80,435,324) (257,320,850)
Interest rate swaps (330,648) (2,839,386) (371,335) (3,541,369)
Maintenance provision - - (16,756,567) (16,756,567)
Security deposit - - (13,264,420) (13,264,420)
Trade and other payables (247,781) - - (247,781)
----------------------------- ------------- -------------- -------------- --------------
Total financial liabilities (35,985,817) (144,317,524) (110,827,646) (291,130,987)
----------------------------- ------------- -------------- -------------- --------------
Operating lease income
(note 4) 57,291,132 229,164,528 123,882,652 410,338,312
----------------------------- ------------- -------------- -------------- --------------
Liquidity excess prior
to ongoing expenses
and distributions 21,305,315 84,847,004 13,055,006 119,207,325
----------------------------- ------------- -------------- -------------- --------------
In addition to the bank loans, the Group may from time to time
use borrowings. To this end the Group may arrange an overdraft
facility for efficient cash management. The Directors intend to
restrict borrowings other than the bank loans to an amount not
exceeding 15 per cent. of the net asset value of the Group at the
time of drawdown. Borrowing facilities will only be drawn down with
the approval of the Directors on a case by case basis. The
Directors may also draw down on an overdraft facility for
extraordinary expenses determined by them, on the advice of DS
Aviation, to be necessary to safeguard the overall investment
objective. With the exception of the loans, the Directors have no
intention, as at the date of this report, to use such borrowings or
overdraft facility for structural investment purposes.
19) FAIR VALUE MEASUREMENT
The accounting policies and basis of measurement in respect of
financial instruments are detailed in Note 2.
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$ 98,515,186 (2018: US$105,600,273).
The fixed rate loans have been categorised within level 2 of the
fair value hierarchy. The fair value of the fixed rate loans for
disclosure purposes have been determined by discounting future cash
flows at a rate of 5.77% (2018: 6.69%). An increase in the discount
rate would decrease the fair value of the fixed rate loans.
Financial liabilities designated as hedging instruments
The fair value of the Group's derivative interest rate swaps is
determined by reference to the mid-point on the yield curves
prevailing on the reporting date and represent the net present
value of the differences between the contracted and the valuation
rate when applied to the projected balances to the period from the
reporting date to the contracted expiry date.
The interest rate swaps are valued on a recurring basis and have
been categorised within level 2 of the fair value hierarchy
required by IFRS 13.
The following table details the contractual undiscounted cash
flows of the interest rate swaps:
As at 31 December 2019 Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Floating rate receivable 3,409,488 6,915,561 144,255 10,469,304
Fixed rate payable (4,226,835) (9,253,862) (226,925) (13,707,622)
-------------------------- --------------- ------------- -------------- -------------
Interest rate swaps (817,347) (2,338,301) (82,670) (3,238,318)
-------------------------- --------------- ------------- -------------- -------------
As at 31 December 2018 Next 12 months 2 to 5 years After 5 years Total
US$ US$ US$ US$
Floating rate receivable 4569,710 9,553,688 943,214 15,066,612
Fixed rate payable (4,900,358) (12,393,074) (1,314,549) (18,607,981)
-------------------------- --------------- ------------- -------------- -------------
Interest rate swaps (330,648) (2,839,386) (371,335) (3,541,369)
-------------------------- --------------- ------------- -------------- -------------
As at 31 December 2019, the fair value of the interest rate
swaps was a liability US$ 2,348,841 (31 December 2018: asset of
US$153,795).
Transfers between levels
The Company determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation based on the
lowest level input that is significant to the fair value
measurement as a whole at the end of each reporting period.
There were no transfers between level 1 and level 2 fair value
measurements and no transfers into or out of level 3 fair value
measurements during the year ended 31 December 2019 or in the year
ended 31 December 2018.
20) RELATED PARTY TRANSACTIONS
The directors who served during the year received the following
remuneration:
Current Year ended Year ended
fee 31 December 31 December
2019 2018
US$ US$
Jon Bridel (Chairman) GBP64,000 80,035 76,058
Jeremy Thompson (Chairman of
the Audit Committee and Senior
Independent Director) GBP52,000 65,112 62,142
Angela Behrend-G ö rnemann*
- Previously Chairman of the
Management Engagement Committee)
resigned 31 October 2019) EUR74,100 67,283 79,317
Harald Brauns (Chairman of the
Management Engagement Committee)
- appointed 1 November 2019 GBP57,000 12,591 -
----------------------------------- ------------ ------------- -------------
Total 225,021 217,517
------------------------------------------------- ------------- -------------
*Ms Behrend-Görnemann received her fee in Euros at the
previously agreed GBP/EUR exchange rate of 1.30
During the year ended 31 December 2019, Directors' remuneration
totalled US$ 225,021 (year ended 31 December 2018: US$217,517) with
US$ 51,051 due at the year-end (2018: US$ 53,118). Directors'
expenses totalling US$ 11,454 were paid during the year ended 31
December 2019 (2018: US$ 9,611), with US$ nil due to be paid at the
year-end (2018: US$ nil).
In February 2020 the board reviewed the current director fee
levels (inclusive of all subsidiaries) and agreed that remuneration
levels of directors were set at the correct level, however it was
proposed that the Directors remuneration should be increased by
annual inflation amount of 3.2% in line with the latest published
independent fee survey. This increase was effective from 1 April
2020:
Proposed fee
Jon Bridel GBP66,000
Jeremy Thompson GBP53,700
Harald Brauns GBP58,800
Director's shareholdings in the Company are detailed in the
Directors' Report and received dividends of US$ 2,025 during the
year (2018: US$ 2,025).
21) 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 aircraft leased to Thai.
The amended agreement provides a new 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 31 December 2018 was US$
2,479,634 (2018: US$ 1,856,644) and the discount rate used was
1.92% (2018: 2.69%). The resulting charge to the Statement of
Comprehensive Income was US$ 622,990 (2018: US$ 423,008).
The directors regularly consider the discount rate and the
underlying forecasted cash flows used in calculating the disposal
fee provision.
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 year ended 31
December 2018 Asset Management fees totalled US$ 1,007,149 (2018:
US$ 982,584) of which US$ 85,112 were due at 31 December 2019
(2018: US$ nil).
Administration Agreement
Following a review of the work performed by the Administrator,
the first detailed review since 2015, it was clear that the initial
fee failed to address the work load resulting from increasing the
fleet size from two to four aircraft and the added complexity
associated with the addition of further subsidiary companies. As a
result, the Company agreed to increase the Administration fees as
follows:
With effect from 1 January 2018 the Company Secretary receives a
fixed fee of GBP50,000 per annum. Any additional ad hoc meetings
are charged on a time spent basis. The Company Administrator
receives a fixed administration fee of the Company of GBP50,000 per
annum plus an additional fixed fee of GBP6,000 for each of the
wholly owned Guernsey subsidiaries. Additional work in excess of
the above is to be charged on a time spent basis or at a rate
agreed between the parties from time to time. Based upon the
GBP/USD exchange rates on the value date of each payment, the total
fees charged by the administrator for the year ended 31 December
2019 were US$187,007 (2018: 183,262).
Directors' fees
Details of the fees paid to the Directors are included in Note
20.
22) SUBSEQUENT EVENTS
Since the start of January 2020, the world has been monitoring
and reacting to Covid-19. As of early April 2020, the virus has
spread across the globe, with major outbreaks across China, the
Middle East, Europe and America, resulting in widespread
restrictions on the ability of people to travel, socialise and
leave their homes. Global financial markets have reacted sharply to
this pandemic, with concerns regarding the economic impact this may
have on a global scale, and which is expected to be material for
the airline sector, and by extension the aircraft leasing
sector.
NAS has failed to make any payments due under the NAS Aircraft
Leases since March 2020 (in an aggregate amount of US$ 4.98m). The
Company has agreed certain concessions to Thai, which included a
rent deferral arrangement (which began on 29 April 2020) in an
aggregate amount of approximately US$ 3.4m. The deferred amounts
(with interest thereon) are due to be repaid in 12 equal monthly
instalments commencing at end of each respective deferral
period.
The Company is currently negotiating certain proposed
concessions to NAS, which may include (i) a rent deferral
arrangement (ii) a power by hour arrangement for part of the
remaining term of the lease (iii) a modified rental stream for part
of the remaining term of the lease (which may include a release of
certain amounts already due from NAS) and other lease modifications
or concessions , as well as other forms of compensation for the
Company. No formal agreement on these concessions has yet been
concluded.
The Directors, with the support of the Asset Manager, have
engaged with its lenders following the non-receipt of rentals from
NAS and the request for concessions from both NAS and Thai. The
Company has communicated the terms of concessions agreed to Thai
with its Thai Lenders. The Directors believe that a modification to
the terms of the NAS Loans (which may include an interest-only
period, a re-profiling of future repayment obligations or other
concession) will be necessary to ensure that the Company can
continue to operate following any concessions that may be agreed
with NAS without giving rise to a default under the Loans. No
agreement on the form of any such modification to the Loans has yet
been concluded.
It is therefore not possible to fully estimate the financial
effect that these events may have on the Company's financial
results or position. The Directors, with input from the Asset
Manager, will continue to engage with NAS and its lenders and to
monitor the impact of the virus on the activities of the
Company.
On 15 January 2020 the Company declared a quarterly dividend in
respect of the quarter ended 31 December 2019 of US$ 0.0225 per
ordinary share to holders of shares on the register at 24 January
2020. The ex-dividend date was 23 January 2020 with payment on 14
February 2020. On 3 April 2020 the Board of Directors announced
that it had suspended the payment of dividends with immediate
effect and until further notice.
COMPANY INFORMATION
Directors Jonathan Bridel
Jeremy Thompson
Angela Behrend-Görnemann (resigned 31.10.19)
Harald Brauns (appointed (01.11.19)
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 Mourant
(as to Guernsey law) Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 1HP
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 From 24 June 2019
Investec Bank plc
30 Gresham Street
London
EC2V 7QN
United Kingdom
Canaccord Genuity Limited were the corporate brokers until 24
June 2019 at which time the mandate was novated to Investec Bank
plc as part of the acquisition of the relevant businesses of
Canaccord.
THE FOLLOWING PAGES DO NOT FORM PART OF THE AUDITED FINANCIAL
STATEMENTS
APPIX 1 - ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE
REGULATORY REFERENCE DOCUMENT NAME, PAGE AND REFERENCE
AIFMD Article 23(1)
(a) a description of the investment Prospectus, page 38, Information
strategy and objectives of the AIF; on the Company.
---------------------------------------------
if the AIF is a feeder AIF, information Not applicable.
on where the master AIF is established;
---------------------------------------------
if the AIF is a fund of funds, Not applicable.
information on where the underlying
funds are established;
---------------------------------------------
a description of the types of assets Prospectus, page 38, Information
in which the AIF may invest; on the Company.
---------------------------------------------
the investment techniques that Prospectus, page 38, Information
the AIF, or the AIFM on behalf of on the Company.
the AIF, may employ and all associated Prospectus, pages 18-31, disclosure
risks; of risk factors.
---------------------------------------------
any applicable investment restrictions; Prospectus, page 8.
---------------------------------------------
the circumstances in which the Prospectus, page 20, Risk of Debt
AIF may use leverage; Financing.
---------------------------------------------
the types and sources of leverage Prospectus, page 20, Risk of Debt
permitted and the associated risks; Financing.
---------------------------------------------
any restrictions on the use of Prospectus, page 20, Risk of Debt
leverage and any collateral and Financing.
asset reuse arrangements; and
---------------------------------------------
the maximum level of leverage which Prospectus, page 20, Risk of Debt
the AIFM is entitled to employ on Financing.
behalf of the AIF;
---------------------------------------------
(b) a description of the procedures Prospectus, page 38, Investment
by which the AIF may change its Policy.
investment strategy or investment
policy, or both;
---------------------------------------------
(c) a description of the main legal Prospectus, page 80, Part IX, Loans
implications of the contractual and Loan Agreements.
relationship entered into for the Prospectus, page 142, Part IV, Definitions.
purpose of investment, including
information on jurisdiction, the
applicable law and the existence
or absence of any legal instruments
providing for the recognition and
enforcement of judgments in the
territory where the AIF is established;
---------------------------------------------
(d) the identity of the AIFM, the Prospectus, page 36, Directors and
AIF's depositary, the auditor and Advisers.
any other service providers and Prospectus, page 152 (h).
a description of their duties and
the investors' rights;
---------------------------------------------
(e) a description of how the AIFM Prospectus, page 151 (g)
complies with the AIFMD's requirements
relating to professional liability
risk;
---------------------------------------------
(f) a description of:
---------------------------------------------
any AIFM management function delegated Not applicable.
by the AIFM;
---------------------------------------------
any safe-keeping function delegated Not applicable.
by the depositary;
---------------------------------------------
the identify of each delegate appointed; Not applicable.
and
---------------------------------------------
any conflicts of interest that Not applicable.
may arise from such delegations;
---------------------------------------------
(g) a description of the AIF's valuation Prospectus, page 152 (i).
procedure and of the pricing methodology
for valuing assets, including the
methods used in valuing any hard-to-value
assets;
---------------------------------------------
(h) a description of the AIF's liquidity Prospectus, page 152 (j).
risk management, including the redemption
rights of investors in normal and
exceptional circumstances, and the
existing redemption arrangements
with investors;
---------------------------------------------
(i) a description of all fees, charges Prospectus, pages 48-50, Fees and
and expenses, and the maximum amounts Expenses.
directly or indirectly borne by
investors;
---------------------------------------------
(j) a description of how the AIFM Prospectus, page 152 (l).
ensures a fair treatment of investors;
---------------------------------------------
whenever an investor obtains preferential
treatment or the right to obtain
preferential treatment, a description
of:
---------------------------------------------
that preferential treatment; Prospectus, page 152 (l).
---------------------------------------------
the type of investors who obtain Prospectus, page 152 (l).
such preferential treatment; and
---------------------------------------------
where relevant, their legal or Not applicable.
economic links with the AIF or AIFM;
---------------------------------------------
(k) the latest annual report Contained in this document.
---------------------------------------------
(l) the procedure and conditions Prospectus, page 44, Further Issue
for the issue and sale of units of Shares.
or shares;
---------------------------------------------
(m) the latest net asset value of The Company's shares are traded
the AIF or the latest market price on the London Stock Exchange so
of the unit or share of the AIF; the latest share price should be
available on www.londonstockexchange.com
.
---------------------------------------------
(n) where available, the historical Not applicable.
performance of the AIF;
---------------------------------------------
(o) the identity of any prime broker; Prospectus, page 152 (o).
---------------------------------------------
a description of any material arrangements Prospectus, page 152 (o).
of the AIF with its prime brokerage
firm and the way any conflicts of
interest are managed;
---------------------------------------------
the provision in the contract with Prospectus, page 151 (a).
the depositary on the possibility
of transfer and reuse of AIF assets;
and
---------------------------------------------
information about any transfer Prospectus, page 152 (o).
of liability to the prime brokerage
firm that may exist; and
---------------------------------------------
(p) a description of how and when Information may be disclosed in
the information required under Art. the Company's annual report or by
23(4) and Art. 23(5) of the AIFMD the Company publishing the relevant
will be disclosed. information on the Company's website
( http://www.dpaircraft.com ) or
by the Company issuing an announcement
via a Regulatory Information Service.
---------------------------------------------
AIFMD Article 23(5)
---------------------------------------------
(a) any changes to the maximum level Not applicable as no changes to
of leverage which the AIFM may employ the maximum level of leverage.
on behalf of the AIF as well as
any right of the reuse of collateral
or any guarantee granted under the
leveraging arrangement;
---------------------------------------------
(b) the total amount of leverage The total leverage employed at 31
employed by that AIF. December 2019 is US$210,339,640.
---------------------------------------------
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
FR UKABRRAUSUAR
(END) Dow Jones Newswires
April 29, 2020 13:30 ET (17:30 GMT)
Dp Aircraft I (LSE:DPA)
Historical Stock Chart
From Jun 2024 to Jul 2024
Dp Aircraft I (LSE:DPA)
Historical Stock Chart
From Jul 2023 to Jul 2024