TIDMDNA
RNS Number : 9486V
Doric Nimrod Air One Limited
16 December 2021
DORIC NIMROD AIR ONE LIMITED (the "Company")
(Legal Entity Identifier: 2138009FPM7EH4WDS168)
HALF-YEARLY FINANCIAL REPORT
The Board of the Company is pleased to announce its results for
the period from 1 April 2021 to 30 September 2021
To view the Company's half-yearly financial report please follow
the link below:
http://www.rns-pdf.londonstockexchange.com/rns/9486V_1-2021-12-16.pdf
In addition, to comply with DTR 6.3.5(1) please find below the
full text of the half yearly financial report. The half-yearly
financial report will also shortly be available on the Company's
website www.dnairone.com .
For further information, please contact:
For administrative and company information:
JTC Fund Solutions (Guernsey) Limited
+44 (0) 1481 702400
For shareholder information:
Nimrod Capital LLP
+44 (0) 20 7382 4565
OF ANNOUNCEMENT
E&OE - in transmission
Doric Nimrod Air One Limited
Half-Yearly Financial Report
For the period from 1 April 2021 to 30 September 2021
DEFINITIONS
"Administrative Subordinated Administrative Shares
Shares"
"AED" United Arab Emirates Dirham
"AGM" Annual General Meeting
"Articles" Company's Articles of Incorporation
"ASKs" Available Seat Kilometres
"Asset" or the Airbus A380 Aircraft, Manufacturer's Serial
"Aircraft" Number 016 owned by DNA
"BA" British Airways
"Board" Company's Board of directors
"CDS" Credit Default Swaps
"Chair" Chair of the Board
"Code" The UK Corporate Governance Code
"CORSIA" Carbon Offsetting and Reduction Scheme for
International Aviation
"DGTRs" Disclosure Guidance and Transparency Rules
"Distribution Distribution of 2.25 Pence per Share per Quarter
Policy "
"DNA" or the Doric Nimrod Air One Limited
"Company"
"Doric" or the Doric GmbH
"Asset Manager"
"Doric LLP" Doric Partners LLP
"DWC" Dubai World Central International Airport
"DXB" Dubai International Airport
"Emirates" or Emirates Airline
the "Lessee"
"EPS or LPS" Earnings / Loss Per Share
"ESG" Environmental, Social and Governance
"EU" European Union
"EU ETS" European Union Emission Trading Scheme
"FCA" Financial Conduct Authority
"FRC" Financial Reporting Council
"FVOCI" Fair Value through Other Comprehensive Income
"FVTPL" Fair Value through Profit or Loss
"GBP", "GBP" Pound Sterling
or "Sterling"
"GFSC" Guernsey Financial Services Commission
"Grant Thornton" Grant Thornton Limited
"IAS 1" International Accounting Standard 1 - Presentation
of Financial Statements
"IAS 8" International Accounting Standard 8 - Accounting
Policies
"IAS 16" International Accounting Standard 16 - Property,
Plant and Equipment
"IAS 36" International Accounting Standard 36 - Impairment
of Assets
"IASB" International Accounting Standards Board
"IATA" International Air Transport Association
"ICAO" International Civil Aviation Organization
"IFRIC" International Financial Reporting Interpretations
Committee
"IFRS" International Financial Reporting Standards
" IFRS 13 " IFRS 13 - Fair Value Measurement
"IFRS 16 " IFRS 16 - Leases
"IPCC" Intergovernmental Panel on Climate Change
"ISAE 3402" International Standard on Assurance Engagement
3402
"ISTAT" International Society of Transport Aircraft
Trading
"JTC" or "Secretary" JTC Fund Solutions (Guernsey) Limited
or "Administrator"
"Law" The Companies (Guernsey) Law, 2008, as Amended
"Lease" Lease of Aircraft to Emirates
"LGW" London Gatwick Airport
"Loan" Borrowings obtained by the Company to part-finance
the acquisition of Aircraft
"LSE" London Stock Exchange
"MAG" Malaysia Aviation Group
"NBV" Net Book Value
"Nimrod" or Nimrod Capital LLP
"Corporate and
Shareholder
Adviser"
"Pandemic" COVID-19 Pandemic
"Period" 1 April 2021 until 30 September 2021
"PIES" Public Interest Entities
"PLF" Passenger Load Factor
"Registrar" JTC Registrars Limited
"RPKs" Revenue Passenger Kilometres
"SAF" Sustainable Aviation Fuel
"SFS" Specialist Fund Segment
" Shareholders" Shareholders of the Company
" Shares" Ordinary Preference Shares of the Company
"Share Capital" Share Capital of the Company
" SIA" Singapore Airlines
" SID" Senior Independent Director
"UAE" United Arab Emirates
"UK" United Kingdom
"USD" or "$" US Dollars
"VIU" Value-In-Use
"WACC" Weighted Average Costs of Capital
" Westpac " Westpac Banking Corporation
SU MM A RY I NF O R M A T ION
Listing LSE
Ticker DNA
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Share Price 32.0p
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Market Capitalisation GBP 13.6 million
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Initial Debt USD 122 million
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Outstanding Debt Balance USD 5.4 million (4% of Initial Debt)
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Current and Targeted Dividend 2.25p per quarter (9p per annum)
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Earned Dividends 94.5p
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Dividend Yield 28.13%
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Dividend Payment Dates January, April, July, October
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Ongoing Charges (OCF) 2.5%
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Currency GBP
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Launch Date/Price 13 December 2010 / 100p
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Remaining Lease Duration 1 year, 3 months
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Incorporation Guernsey
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Aircraft Registration Number A6-EDC (16.12.2022)
(Lease Expiry Date)
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Asset Manager Doric GmbH
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Corp & Shareholder Advisor Nimrod Capital LLP
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Administrator JTC Fund Solutions (Guernsey) Ltd
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Auditor Grant Thornton
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Market Makers finnCap Ltd,
Investec Bank Plc,
Jefferies International Ltd,
Numis Securities Ltd,
Shore Capital Ltd,
Winterflood Securities Ltd
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SEDOL, ISIN, LEI B4MF389, GG00B4MF3899, 2138009FPM7EH4WDS168
--------------------------------------------
Year End 31 March
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Stocks & Shares ISA Eligible
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Website www.dnairone.com
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COMP A NY OVERVIEW
DNA is a Guernsey company incorporated on 8 October 2010. Its
shares were admitted to trading on the SFS of the London Stock
Exchange's Main Market on 13 December 2010.
The Company's total issued share capital currently consists of
42,450,000 Shares which were admitted to trading at an issue price
of 100 pence per share. As at 30 November 2021 the latest
practicable date prior to
publication of this report, these Shares were trading at 28.0 pence per Share.
Investment Objectives and Policy
The Company's investment objective is to obtain income returns
and a capital return for its Shareholders by acquiring, leasing and
then selling a single aircraft. The Company purchased the Aircraft
in December 2010 for $179 million, which it leased for twelve years
to Emirates, the national carrier owned by The Investment
Corporation of Dubai based in Dubai, UAE.
The operating lease is for an Airbus A380 aircraft. The term of
the Lease is for 12 years ending December 2022 with reduced rental
payments in the last two years and no extension option.
A t the end of the le ase term the Lessee has the rig ht to e x
ercise an option to purchase the Asset if the Company chooses to
sell the Asset. If a purchase option e v ent occurs the Company and
the Lessee will be requir ed to arrange f or a current market v
alue appraisal of the Asset to be carried out by three in dependent
appraisers. T he purchase price will be equal to the a v erage v
alu ation of those three appraisals.
Emirates bears all costs (including maintenance, repair and
insurance) relating to the Aircraft during the lifetime of the
Lease.
Distribution Policy
The Company currently targets a distribution of 2.25 pence 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. There can also be no guarantee that
the Company will, at all times, satisfy the solvency test required
to be satisfied pursuant to section 304 of the Law enabling the
Board to effect the payment of dividends.
Performance Overview
All payments by Emirates have been made in accordance with the
terms of the Lease.
During the Period, and in accordance with the Distribution
Policy, the Company declared two interim dividends of 2.25 pence
per Share each. One interim dividend of 2.25 pence per Share was
declared after the Period. Further details of these dividend
payments can be found on page 29.
Return of Capital
If and when the Company is wound up (pursuant to a shareholder
resolution, including the Liquidation Resolution) the Company
intends to return to Shareholders the net capital proceeds upon the
eventual sale of the Asset subject to compliance with the Articles
and the applicable laws (including any applicable requirements of
the solvency test contained therein).
Liquidation Resolution
Although the Company does not have a fixed life, the Articles
require that the directors convene a general meeting of the Company
six months before the end of the term of the Lease where an
ordinary resolution will be proposed that the Company proceed to an
orderly wind-up at the end of the term of the Lease and the
directors will consider (and if necessary, propose to Shareholders)
alternatives for the future of the Company, including re-leasing
the Asset, or selling the Asset and reinvesting the capital
received from the sale of the Asset in another aircraft.
CH A IR'S S T A TE M ENT
During the Period the Company has declared and paid two
quarterly dividends of 2.25 pence per Share each, a rate of
dividend payment equivalent to 9 pence per Share per annum.
The Company's investment objective is to obtain income returns
and a capital return for its Shareholders by acquiring, leasing and
then selling a single aircraft. The Company purchased the Aircraft
in December 2010 which it leased to Emirates. A senior secured
finance facility provided by Westpac, in the amount of USD122
million made up the monies along with the placing proceeds for the
acquisition of the Asset. Upon the purchase of the Aircraft, the
Company entered into a 12 year Lease with Emirates with fixed lease
rentals for the duration. The debt portion of the funding is
designed to be fully amortised over the term of the Lease, which
would leave the Aircraft unencumbered on the conclusion of the
Lease. Emirates bears all costs (including maintenance, repair and
insurance) relating to the Aircraft during the lifetime of the
Lease. At 30 November 2021, the latest practical date prior to this
report, the Company had outstanding debt associated with the
Aircraft totalling USD 5.4 million (4.4% of the initial balance).
At 30 November 2021 the share price was 28.0 pence, representing a
market capitalisation of GBP11.9 million based on the 42,450,000
Shares in issue. The Company's lease expiry falls due in December
2022 and more detail on this event is provided below. All payments
by Emirates during the Period and throughout the Lease have been
made in accordance with the terms of the Lease. MSN 016, the serial
number of the A380 held by the Company, has been stored since March
2020, at DWC.
The emergence of the Omicron variant in late November 2021 has
significantly increased uncertainty over the path of recovery of
global air passenger traffic in the next few months, according to
an IATA report from early December, as it may result in countries
reimposing more extensive travel restrictions again. Israel and
Japan have become the first to shut their borders for foreign
travellers.
There are currently 70 A380 aircraft in service globally of
which 57 are being operated by Emirates. Emirates highlighted in
late September that plans to restore 70% of its capacity by the end
of 2021 are on track with the return to service of more than 50
A380 aircraft. Around the same time Emirates also embarked upon a
worldwide campaign to recruit 3,000 cabin crew and 500 airport
services employees to join its Dubai hub over the following six
months. Pleasingly, several other A380 operators have stated plans
to reintroduce the A380 to their fleets including British Airways,
Singapore Airlines, Qatar Airways and Qantas Airways.
In its recent half-year results Emirates Airline reported that
revenue rose by 86%, supported by increasing passenger demand and
continuous strong cargo business. The airline reported EBITDA
recovered to USD 1.4 billion but posted an overall loss of USD 1.6
billion. In the first half of 2021-22, the Government of Dubai
injected a further USD 681 million into Emirates Group by way of an
equity investment and they continue to support the airline on its
recovery path. The airline reported a cash position of USD 3.9
billion as at 30 September 2021. His Highness Sheikh Ahmed bin
Saeed Al Maktoum, Chairman and Chief Executive, Emirates noted "Our
cargo transport and handling businesses continued to perform
strongly, providing the bedrock upon which we were able to quickly
reinstate passenger services.
While there's still some way to go before we restore our
operations to pre-Pandemic levels and return to profitability, we
are well on the recovery path with healthy revenue and a solid cash
balance at the end of our first half of 2021-22."
Whilst Emirates do not have a formal credit rating, they have
previously issued unsecured USD bonds with maturities in 2023, 2025
and 2028. At the time of writing these instruments are trading at
approximately 101, 102.7 and 103 cents respectively, equivalent to
USD running yields in the range of roughly 3.8% to 4.4%. Further
details on Emirates and the A380 can be found in the Asset
Manager's report by Doric.
There have been no material developments regarding the
remarketing of the Asset since my commentary included in the annual
report. The Company's Lease with Emirates expires on 16 December
2022, approximately 12 months from now. The Lease provided Emirates
with an option to purchase the Aircraft at an average appraised
valuation. The option lapsed on 16 May 2021. Following this the
Company's Asset Manager, Doric, in its role as remarketing agent
has continued to pursue its efforts to remarket MSN 016 for sale or
lease, which may include a lease prolongation with, or sale to,
Emirates at any time before the Lease expires. As the Board obtains
a clearer view of the possible outcome(s) nearer the lease expiry
we will communicate with the Company's Shareholders. Given the
current situation whereby many airlines, including Emirates, remain
uncertain about future fleet planning, the Board does not
anticipate further news in the very near term.
Although the Company does not have a fixed life, the Articles
required that the directors convene a general meeting six months
before the end of the term of the Lease (therefore in June 2022)
where an ordinary resolution will be proposed that the Company
proceed to an orderly wind-up at the end of the term of the Lease.
The directors will consider (and if necessary, propose to
Shareholders) alternatives for the future of the Company depending
on the eventual outcome(s) as we approach lease end.
Doric continues to monitor the Lease and is in frequent contact
with the Lessee and reports regularly to the Board. Nimrod
continues to liaise with Shareholders on behalf of the Board and
has provided valuable feedback on the views of Shareholders in the
current climate.
Shareholders should note that although the underlying cash flows
received and paid during the Period have been received and paid as
anticipated and in accordance with contractual obligations; it may
not be obvious from the accounts that this is so because of the
application of the accounting treatments for foreign exchange,
rental income and finance costs mandated by IFRS.
For instance, the entirety of the rental income that is
receivable under a 12-year lease is credited evenly over each of
the 144 months of the lease. However, the actual rental income is
not received in this uniform pattern, although it does closely
match the similarly uneven pattern of debt servicing and other
payments. The mismatch in timing between the receipt and
recognition of rental income results in large deferred income or
accrued income balances in the balance sheet.
Similarly, the relevant accounting standards require that
transactions denominated in currencies other than the presentation
currency (including, most importantly, the cost of the Aircraft)
are translated into the presentation currency at the exchange rate
ruling at the date of the transaction whilst monetary items
(including also very significantly, the outstanding borrowings and
deferred income creditor) are translated at the rate prevailing on
the reporting date. The result is that the figures sometimes show
large mismatches which are reported as unrealised foreign exchange
differences - although the distortive effect becomes less
pronounced over time as debt is paid down.
On an on-going basis and assuming the lease rental is received,
and the loan payments are made as anticipated, such exchange
differences do not reflect the commercial substance of the
situation in the sense that the key transactions denominated in USD
are in fact closely matched. Rental income received in USD is used
to make loan repayments due which are likewise denominated in USD.
Furthermore, the USD lease rentals and loan repayments are fixed at
the inception of the Lease and are very similar in amount and
timing.
The Board encourages Shareholders to read the Company's
quarterly fact sheets which we believe provide a great deal of
interesting information. We hope these regular reports, in addition
to the communication you receive from Nimrod, are useful and
informative.
The directors welcome Shareholder engagement and feedback and
encourage you to contact Nimrod to request a meeting or to relay
any feedback.
Finally, on behalf of the Board, I would like to thank our
service providers for all their help and, most importantly, all
Shareholders for their continuing support of the Company during
these difficult times. I look forward to keeping all Shareholders
up to date with further progress.
Charles Wilkinson
Chair
16 December 2021
ASSET MANAGER'S REPORT
At the request of the directors of the Company, this commentary
has been provided by the Asset Manager of the Company. The report
reflects the information available at the end of September 2021
unless otherwise noted.
COVID-19
The Pandemic continues to impact private and economic life
worldwide. The consequences of COVID-19 are far reaching and
changing at a significant pace. The impact of this Pandemic on the
aviation sector has been significant with a large part of the
global passenger aircraft fleet grounded. This Asset Manager's
report is exclusively based on known facts at the time of writing
and does not seek to draw on any speculation about any possible
future, long-term impacts of the Pandemic on the aviation sector or
the Company specifically and should be read in such context.
1. The Doric Nimrod Air One Airbus A380
The Airbus A380 is registered in the UAE under the registration
mark A6-EDC. Due to the effects of COVID-19, the Aircraft has been
stored since March 2020, currently at DWC.
For the period from original delivery of the aircraft to
Emirates in November 2008 until the end of September 2021, a total
of 5,995 flight cycles were logged. Total flight hours were 48,721.
This equates to an average flight duration of around eight hours
and ten minutes.
Maintenance Status
Emirates maintains its A380 aircraft fleet based on a
maintenance programme according to which minor maintenance checks
are performed every 1,500 flight hours, and more significant
maintenance checks (C checks) at 36-month or 18,000-flight hour
intervals, whichever occurs first.
Due to the continuing COVID-19 Pandemic, Emirates has stored the
Aircraft owned by the Company in Dubai. The Lessee has "a
comprehensive aircraft parking and reactivation programme [in
place], that strictly follows manufacturer's guidelines and
maintenance manuals". In addition, Emirates has enhanced standards
and protocols of their own, to protect and preserve the Asset
during the downtime. This includes the watertight sealing of all
apertures and openings through which environmental factors - sand,
water, birds, and insects - can find their way inside an aircraft.
During parking, maintenance teams complete periodic checks at
different intervals. Depending on the reactivation date of a
specific aircraft, Emirates might defer due maintenance checks,
which are calendar-based, until that time. This would allow the
airline to make use of the full maintenance interval once the
operation of a specific aircraft resumes. The Aircraft of the
Company is in deep storage condition at this time and could be
reactivated after the performance of the required maintenance
work.
Emirates bears all costs (including for maintenance, repairs and
insurance) relating to the Aircraft during the lifetime of the
Lease.
Inspections
Doric, the Asset Manager, conducted a physical inspection and a
records audit of the aircraft with MSN 016 in May 2021. Due to the
storage of the Aircraft and the protective measures associated
with, the inspection of the Aircraft was limited to viewing from
the outside of the Aircraft from ground level.
The condition of the Aircraft - to the extent visible - and its
technical records were in compliance with the provisions of the
lease agreement, taking into account that the Aircraft was in
storage at the moment of the audit.
Lease Expiry
The Lease with Emirates expires on 16 December 2022. Under the
terms of the Lease the Lessee had an option to purchase the
Aircraft however, Emirates allowed this option to lapse and the
Company's remarketing agent, Doric, continues with its efforts to
remarket MSN 016 for sale or lease. Whilst the current Lease does
not include an extension option beyond its 12-year term, both
parties could agree on a Lease prolongation or a purchase of the
Aircraft at any time before the Lease expires. For high-level
considerations and possibilities surrounding the end of the Lease
and implications of the various potential outcomes for the
Shareholders of the Company, please refer to the Chair's Statement
in the Company's 2020/21 Audited Annual Financial Report.
2. Market Overview
The impact of COVID-19 on the global economy has been severe,
resulting in an estimated contraction in global GDP of 3.5% for
2020, according to the World Bank's latest revision. This is
expected to be followed by a recovery in growth of between 5.6% and
6.0% in 2021. In its latest economic impact analysis from September
2021, the ICAO estimates that the full year 2021 could experience
an overall reduction in seats offered by airlines of 39% to 40%
compared with pre-crisis 2019 levels. However, the actual impact of
COVID-19 on the airline industry will depend on several factors,
including the duration and magnitude of the outbreak and
containment measures, the degree of consumer confidence in air
travel as well as general economic conditions.
The IATA anticipates an airline industry-wide net loss of USD
51.8 billion in 2021, after approximately USD 138 billion in the
previous year, according to its latest estimates from October
2021.
The rebound in global air passenger traffic has continued
through August 2021, supported by vaccine rollouts and a
willingness to travel during the northern hemisphere summer.
In August 2021, industry-wide RPKs fell by 56% compared to
pre-crisis 2019 levels, while industry-wide capacity, measured in
ASKs, contracted by 46.2% compared to pre-crisis 2019 levels. This
resulted in the PLF falling by 15.6 percentage points to 70%. In
comparison to the year prior, RPKs were up 72.9%, ASKs were up
46.9%, and the PLF increased by 10.5 percentage points during the
month of August 2021.
Due to their reliance on international long-haul routes, Middle
Eastern carriers like Emirates continue to experience greater
declines than other regions compared to pre-crisis levels. However,
IATA points out that there was a broad-based improvement in
international markets in August due to growing vaccination rates
and less stringent international travel restrictions in some
regions. RPKs fell 68% in August 2021 compared to pre-crisis 2019
levels. Capacity also fell by 53% during that period. The result
was a 26 percentage points decrease in PLF to 56%. However, in
comparison to the lowest point of the crisis a year prior, RPKs
were up 229%, ASKs were up 123%, and the PLF increased by 18
percentage points in August 2021.
While IATA notes that the spread of the Delta variant globally
did not have a strong impact on international RPKs in August, other
macroeconomic factors could impact the speed of the recovery in air
travel. IATA states that economic concerns, such as supply chain
congestion, labour shortages, a slowdown in Chinese growth as well
as inflation, could lead to reduced economic activity in the coming
months.
In September 2021 the Biden Administration announced that
travellers from 33 countries would be allowed to enter the US again
from early November, if fully vaccinated and with a negative
COVID-19 test result. The list of countries included the UK,
Ireland, the Schengen Area, Brazil, South Africa, India, and China.
IATA sees "a major step forward" in this announcement and expects
support for the economic recovery, according to Willie Walsh,
IATA's Director General.
The emergence of the Omicron variant in late November 2021 has
significantly increased uncertainty over the path of recovery of
global air passenger traffic in the next few months, according to
an IATA report from early December, as it may result in countries
reimposing more extensive travel restrictions again. Israel and
Japan have become the first to shut their borders for foreign
travellers.
Source: IATA, ICAO
(c) International Air Transport Association, 2021. Air Passenger
Market Analysis August 2021. Outlook for the Global Airline
Industry October 2021. All Rights Reserved. Available on the IATA
Economics page.
(c) International Civil Aviation Organization. Effects of Novel
Coronavirus (COVID-19) on Civil Aviation: Economic Impact Analysis,
7 September 2021.
3 . Lessee - Emirates
Network
Emirates' recovery efforts continued through the third quarter
of 2021, coinciding with the easing of entry requirements for
travellers into the UAE. At the same time, other countries, such as
the UK, have also been relaxing their own restrictions on
travellers from the UAE, allowing for a general easing of
restrictions for Emirates' passengers. As a result of such changes,
Emirates has been actively scaling up its operations in key
passenger markets. The carrier now intends to operate 73 weekly
flights to the UK by mid-October and has also begun to restore
routes to Saudi Arabia and Russia. From December, Emirates will
restart flights to LGW with a daily Boeing 777 service, increasing
the number of weekly flights to the UK to 84 by the end of
December. Adnan Kazim, Emirates' Chief Commercial Officer, observed
a surge in demand after the UK simplified travel and is prepared to
accept international vaccination certificates from 55 countries
starting on 4 October.
Emirates has further expanded its network in South Africa
through new codeshare and interline agreements with Airlink and
CemAir as well as in Brazil through a codeshare agreement with
Azul.
On the day of the Biden Administration's decision to lift travel
restrictions to the US from November 2021, Emirates announced plans
to increase frequencies to six of its current 12 US destinations
starting from October. This will result in 78 weekly flights. By
early December Emirates expects to have restored 90% of its
pre-COVID flight frequencies to the US.
Fleet
Throughout the crisis, Emirates' operations largely focused on
the utilisation of its fleet to meet the global demand for cargo
services. As travel restrictions have continued to ease, Emirates
has been redeploying its Boeing 777-300ER and Airbus A380 aircraft
on newly resumed passenger services as well as up-gauging existing
passenger routes. A380s already returned to service are primarily
of recent vintage as younger aircraft usually benefit from more
comprehensive warranty packages, which dwindle the older an
aircraft gets. Warranties can help an operator to reduce its
maintenance costs.
The carrier has resumed passenger services to over 120
destinations, recovering approximately 90% of its pre-Pandemic
network.
The number of pre-Pandemic A380 destinations is expected to
increase from 16 at present to 27 by the end of November, including
Amsterdam, Barcelona, Dusseldorf, Hamburg, Johannesburg, Madrid,
Milan, Riyadh (subject to government approvals), Sao Paulo, and
Zurich. In addition, Emirates will add Istanbul as an A380
destination for the first time, with services starting from 1
October. Recently restored or up-gauged passenger A380 destinations
include Jeddah, London Heathrow, New York JFK, and Manchester.
By the end of the calendar year, the airline expects that more
than 50 A380 aircraft will have returned to service, which -
together with its active Boeing 777-300ER fleet - will amount to
70% of its pre-Pandemic capacity.
The table below details the passenger aircraft fleet activity as
of 30 September 2021:
Passenger Aircraft Fleet Activity
Aircraft Type Grounded In Service
--------- ----------
A380 80 39
--------- ----------
777 1 117
--------- ----------
Total 81 156
--------- ----------
% 34% 66%
--------- ----------
Source: Cirium as of 30 September 2021
After reaching an agreement with Airbus, Emirates now intends to
take delivery of its final Airbus A380 in November 2021, seven
months ahead of the originally planned delivery date in June 2022.
In total, the carrier will have taken delivery of three new A380s
this year, which will bring the fleet to 118 of the type. The three
new A380s will also be equipped with Emirates' new premium-economy
seats in a four-class cabin configuration, giving the carrier a
total of six A380s featuring premium-economy seats. Emirates'
President Sir Tim Clark added: "Emirates will continue to be the
largest operator of this spacious and modern aircraft for the next
two decades, and we're committed to ensuring that the Emirates A380
experience remains a customer favourite with ongoing investments to
enhance our product and services."
Key Financials
In the first half of the financial year ending 31 March 2022,
Emirates recorded a net loss of AED 5.8 billion (USD 1.6 billion)
compared to AED 12.6 billion (USD 3.4 billion) loss for the same
period in the previous year. However, revenues increased 86% to AED
21.7 billion (USD 5.9 billion), with the increasing passenger
demand and strong cargo demand aiding the recovery.
During the first half of the 2021/22 financial year, Emirates
carried 6.1 million passengers up 319% from the same period last
year. As more countries eased travel and flight restrictions,
Emirates increased capacity by 250% and its passenger traffic
increased 335%. This resulted in the average passenger seat load
factor recovering to 47.9% (compared with last year's Pandemic
figure of 38.6%).
Given the substantial increase in flight operations during the
six-month period up to end of September 2021, Emirates' operating
costs increased by 22% against an overall capacity growth of 66%.
The carrier's fuel costs more than doubled compared to the same
period last year, primarily due to an 81% higher fuel uplift in
line with increasing flight operations as well as an increase in
average oil prices. Fuel, which had been the largest component of
the Emirates' operating cost prior to the Pandemic, accounted for
20% of operating costs compared to only 11% in the same period last
year.
The recovery in Emirates' operations during the first six months
of the 2021/22 financial year led to an improved EBITDA of AED 5.0
billion (USD 1.4 billion) compared to AED 290 million (USD 79
million) for the same period last year.
Demand for air freight also remained strong. The volume of cargo
uplifted between April and September 2021 increased by 39% to 1.1
million tonnes, restoring Emirates' cargo operation to 90% of its
pre-Pandemic (2019) levels by volume handle.
As of 30 September 2021, Emirates' total liabilities decreased
by 2.2% to AED 128.7 billion (USD 35.1 billion USD) compared to the
end of the previous financial year. Total equity decreased by 14.7%
to AED 17.2 billion (USD 4.7 billion). Emirates' equity ratio stood
at 11.8% and its cash position amounted to AED 14.2 billion (USD
3.9 billion) at the end of September 2021.
In comparison, the carrier had AED 15.1 billion (USD 4.1
billion) in cash assets at the end of the 2020/21 financial year.
The cash flow from operating activities remained positive at AED
6.9 billion (USD 1.9 billion).
In the first half of the 2021/22 financial year, the carrier's
ultimate shareholder, the Government of Dubai, injected a further
AED 2.5 billion (USD 681 million) into the Emirates Group by way of
an equity investment, demonstrating continued support for the
airline on its recovery path. On the ongoing performance of
Emirates in light of the global Pandemic, HH Sheikh Ahmed bin Saeed
Al Maktoum, chairman and chief executive of Emirates, stated: "Our
cargo transport and handling businesses continued to perform
strongly, providing the bedrock upon which we were able to quickly
reinstate passenger services. While there's still some way to go
before we restore our operations to pre-Pandemic levels and return
to profitability, we are well on the recovery path with healthy
revenue and a solid cash balance at the end of our first half of
2021-22."
In mid-September 2021 the airline announced its intention to
hire 3,000 flight attendants and 500 services personnel for its DXB
operations over the next six months. After Emirates had reduced its
workforce by about 15% of its pre-Pandemic level in an attempt to
reduce the cost base during the Pandemic, additional staff are
needed to support the ramp-up of its operations.
As at the end of September 2021, Emirates has outstanding USD
debt issuances with maturities in 2023, 2025, and 2028. These
respective bonds were all trading at above par (100 cents) and with
running yields ranging from approximately 3.9% to 4.4% in USD.
There has also been no upward pressure on yields. This level of
yields does not appear to indicate any significant financial stress
to the issuer. In its latest annual financial report, the auditor
PricewaterhouseCoopers issued an unqualified audit report and the
airline stated it "remains confident to meet our financial
commitments as they fall due in the coming year and beyond through
proactive working capital management and utilisation of available
credit lines and facilities".
In early November 2021 Emirates' President Sir Tim Clark shared
the news that the airline had just returned to profit and also
achieved a cash surplus. With about 60,000 to 70,000 daily
passengers the airline still has some way to go before reaching its
pre-Pandemic level of 170,000 passengers. However, higher yields
with its passenger and cargo operations allowed for the turnaround.
During the Pandemic Emirates was also able to double its cargo
operations, benefiting from a surge in demand for air cargo
transport.
Source: Airline Ratings, Bloomberg, Cirium, Emirates, Khaleej
Times, Simple Flying
4. Aircraft - A380
As of the end of September 2021, the global A380 fleet consisted
of 240 planes with airline operators. Only 47 of these aircraft
were in service. The remainder of the fleet is currently parked due
to COVID-19. The fifteen operators are Emirates (119), Singapore
Airlines (19), Deutsche Lufthansa (14), Qantas (12), British
Airways (12), Korean Air Lines (10), Etihad Airways (10), Qatar
Airways (10), Air France (8), Malaysia Airlines (6), Thai Airways
(6), Asiana Airlines (6), China Southern Airlines (5), and All
Nippon Airways (3). Another three aircraft are on order.
In April 2021, Etihad chief executive Tony Douglas disclosed
that the carrier has decided to ground its 10 Airbus A380
"indefinitely" as it remodels its fleet around the Boeing 787 and
the Airbus A350. He added that the A380 is "a wonderful product...
but they are no longer commercially sustainable. So, we have taken
the difficult decision to park those machines up indefinitely". As
a part of its streamlining process, the carrier has also already
removed its Airbus A330 aircraft from service and intends to remove
its Boeing 777-300ER aircraft from service by the end of the
year.
Also in April, British Airways chief executive Sean Doyle stated
that the Airbus A380 will continue to play a role in the carrier's
fleet strategy, following the retirement of British Airways' Boeing
747 aircraft in 2020, which represented a large portion of its
pre-COVID capacity. The A380 will serve to offer flexibility on a
range of routes, especially to the USA and Asia, while also
maximising efficiency at carrier's slot-constrained London Heathrow
base, according to Doyle.
In May 2021, MAG, Malaysia Airlines' parent company, announced
its intention to retire its Airbus A380 fleet "in the coming
months".
The retirement of the A380 is a part of MAG's larger
reorganisation plan, known as "Long-Term Business Plan 2.0". Under
the plan, MAG's pilgrimage-focused subsidiary Amal will cease
flying A380s and will instead operate A330-200 aircraft.
In August 2021, Qantas announced plans to return five Airbus
A380s to service in the second half of 2022, a year ahead of
schedule. The aircraft are scheduled to operate between Sydney and
Los Angeles from July 2022 as well as between Sydney and London
(via Singapore) from November 2022.
Qantas CEO Alan Joyce stated that the carrier could return five
additional A380s to service by early 2024, depending on the market
recovery, but its remaining two A380s will be retired "because they
will be surplus to requirements".
In September 2021, Lufthansa's final Airbus A380 arrived in
Teruel, Spain for storage. The German airline group previously
confirmed that its 14 A380s will not be returning to service as it
intends to use the Pandemic as an opportunity to implement a major
reorganisation of its long-haul fleet.
SIA has repatriated three of its A380s from storage in Alice
Springs, Australia in order to conduct scheduled maintenance. The
carrier stated: "This movement is part of the ongoing management of
our fleet, ensuring we remain nimble, flexible, and prepared to
deploy capacity to markets as the demand warrants." After a
Pandemic-related grounding of its entire A380 fleet for about 20
months, the carrier wants to return the superjumbo to the skies and
intends to operate daily A380 flights between Singapore and London
from 18 November 2021. To get the crews certified for the A380 once
again, SIA has scheduled daily flights between Singapore and Kuala
Lumpur for a period of one month, starting in early November. The
flight time between these two destinations is only about 30
minutes.
In late September 2021, Qatar announced that at least five of
its ten Airbus A380s will resume service from November this year in
order to address the increasing demand for flights while 13 of the
carrier's Airbus A350 jets remain grounded over claims of fuselage
degradation. Early in the Pandemic, the airline had withdrawn all
of its A380s from service, declared a permanent retirement for five
of them and later admitted that they never wanted to fly any of its
A380s again. However, given the latest capacity squeeze Qatar's CEO
Akbar Al Baker didn't want to rule out that all ten A380s could be
reactivated, as the shortfall in A350 capacity is leaving the
carrier roughly 4,000 seats short of its required passenger
capacity.
In October 2021, BA announced it will return some of its A380s
to service before the end of this year. UK's flag carrier plans to
re-familiarise its crews on short-haul European connections, before
operating the superjumbos on routes to Los Angeles, Miami, and
Dubai in December. This move is an acceleration of the airline's
previous plans to reintroduce the A380 in March 2022. Recently BA
extended its maintenance contract for all 12 of its A380s with
Lufthansa Technik until at least August 2027.
Source: AeroTime, Cirium, Executive Traveller, One Mile at a
Time, Simple Flying
DIRECTORS
As at 30 September 2021 the Company had four directors all of
whom were independent and non-executive.
Charles Edmund Wilkinson - Chair of the Company and Nomination
Committee
Charles Wilkinson is a solicitor who retired from Lawrence
Graham LLP in March 2005. While at Lawrence Graham he specialised
in corporate finance and commercial law, latterly concentrating on
investment trust and fund work.
Charles is a director of Doric Nimrod Air Two Limited and Chair
of Doric Nimrod Air Three Limited. Charles is also a director of
Landore Resources Ltd, a Guernsey based mining exploration company.
He is resident in Guernsey.
Geoffrey Alan Hall - Chair of the Audit Committee
Geoffrey Hall has extensive experience in asset management,
having previously been Chief Investment Officer of Allianz
Insurance plc, a major UK general insurance company and an
investment manager at HSBC Asset Management, County Investment
Management, and British Railways Pension Funds. Geoffrey is also
the Chair of Doric Nimrod Air Two Limited and a director and Chair
of the Audit Committee of Doric Nimrod Air Three Limited.
Geoffrey earned his master's degree in Geography at the
University of London and is an associate of the CFA Society of the
UK. He is resident in the United Kingdom.
Suzanne Elaine Procter - SID
Suzanne Procter brings over 38 years' experience in financial
markets, with specific expertise in asset management. She was
previously a non-executive director of TR Property Investment Trust
plc, an investment company listed on the FTSE 250 index. Her
executive roles included Partner and member of the Executive
Management Committee at Cantillon Capital Management LLC, Managing
Director of Lazard Asset Management, Head of Institutional Sales at
INVESCO Asset Management, Director and Head of Fixed Income
Business at Pictet International Management Ltd and Head of Fixed
Income at Midland Montagu Asset Management.
Suzanne is also the SID of Doric Nimrod Air Two Limited and
Doric Nimrod Air Three Limited. She is resident in the United
Kingdom.
Andreas Josef Tautscher
Andreas Tautscher brings over 31 years' financial services
experience. He serves as a non-executive director and member of the
Audit Committee of MJ Hudson PLC, a Jersey based holding company
whose shares are traded on the AIM Market of the London Stock
Exchange. He is also a director of Arolla Partners Limited, a
leading independent director services business in the Channel
Islands. From 1994 to 2018 Andreas held various roles at Deutsche
Bank and was most recently CEO of the Channel Islands and Head of
Financial Intermediaries for EMEA. He was previously a
non-executive director of the Virgin Group. Andreas qualified as a
Chartered Accountant in 1994.
Andreas is also Chair of the Audit Committee of Doric Nimrod Air
Two Limited and a director of Doric Nimrod Air Three Limited. He is
resident in Guernsey.
I N T ER IM M A N A GEMENT REPORT
A description of important events which have occurred during the
Period , their impact on the performance of the Company as shown in
the financial statements and a description of the principal risks
and uncertainties facing the Company are given in the Chair's
Statement, Asset Manager's Report, and the Notes to the Financial
Statements contained on pages 24 to 45 and are incorporated here by
reference.
T h e re w ere no ma t erial r ela t ed pa r ty tra nsact ions w
hich t ook place in t he Period, o t her t han t hose disclosed at
no te 22 of t he No t es to t he F i n anci al St a t emen ts.
P ri nc i p al R i sks and U n certa i nti es
T h e principal risks and uncert ain t ies f aced by t he
Company for the remaining six months of the financial year are un c
han g ed from t ho se disclosed in t he C ompa ny 's Annual F
inancial Rep o rt f or t he y ear ended 31 M arch 2021.
G o i n g Concern
The Company's principal activities are set out within the
Company Overview on page 6. The financial position of the Company
is set out on page 21. In addition, note 19 to the Financial
Statements includes the Company's objectives, policies and
processes for managing its capital, its financial risk management
objectives and its exposures to credit risk and liquidity risk.
The directors in consultation with the Asset Manager are
monitoring the continuous effect of the Pandemic generally on the
aviation industry and specifically on the Company's aircraft value
and the financial wellbeing of its Lessee both now and in the
future. The Pandemic continues to have a pervasive impact on the
global economy and it remains possible that the Company's future
performance could be impacted in this prolonged period of
uncertainty. In many jurisdictions restrictions on the ability of
people to travel still adversely affect the airline sector, and by
extension the aircraft leasing sector. The risk therefore remains
that some airlines may not be able to pay rent as it falls due. The
impact of the Pandemic on the aviation industry has been
significant, with a large part of the global passenger aircraft
fleet temporarily grounded. These factors, together with wider
economic uncertainty and disruption, have had an adverse impact on
the future value of the Aircraft owned by the Company, and could
also negatively impact the sale, re-lease or other disposition of
the Aircraft.
Given the prolonged impact of the Pandemic, increased lessee
counterparty credit risk remains in existence and there could be
requests for lease rental deferrals. Reduced rents receivable under
the Lease may not be sufficient to meet the fixed loan interest and
regular repayments of debt scheduled during the life of the Loan
and may not provide surplus income to pay for the Company's
expenses and permit the declaration of dividends.
The option to remarket the Aircraft following a potential event
of default by the Lessee has not been taken into account. The
period of time necessary to successfully complete such a process is
beyond the twelve months forecasting horizon of the going concern
considerations. This applies in particular in times of COVID-19, as
various restrictions are still in place to contain the
Pandemic.
Based on current information the directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, although the risk
to this is clearly higher compared to a pre-COVID-19
environment.
The directors have considered Emirates' ability to continue
paying the lease rentals over the next 12 months and are satisfied
that the Company can meet its liabilities as they fall due over
this period. In forming this conclusion, the directors considered
the following evidence.
- Emirates continues to be a going concern as at the date of the
Lessee's latest signed annual financial report for the financial
year ended on March 31, 2021.
- Challenged by an unprecedented drop in passenger air travel
during 2020, the Lessee reacted quickly and temporarily adjusted
its business model with a particular focus on air cargo services.
The high Pandemic-driven demand in this space helped the Lessee to
offset some of its losses in the passenger segment.
- Although Emirates concluded its last financial year with the
first net loss in more than 30 years and refunded already paid
tickets in the amount of USD 2.3 billion, it still has a
substantial cash position, which also benefited from the support of
its ultimate shareholder.
- Emirates confirmed to have access to the capital markets and
was able already able to secure committed offers for the financing
of two upcoming aircraft deliveries.
- The ultimate shareholder of Emirates Airline has injected
another AED 2.5 billion (USD 681 million) into Emirates Airline,
during the Period. Together with the USD 3.1 billion already
contributed during the previous financial year, this adds up to
approximately USD 3.8 billion in total.
- Emirates' listed debt and CDS are trading at non-distressed
levels, indicating the trust capital markets have in Emirates.
- As of the date of the half-yearly financial report, the Board
is not aware of a formal request to the Group for a lease payment
deferral or any other efforts that would result in the
restructuring of the existing transaction.
- Emirates has paid all the lease rentals to the Group in a timely manner.
- If end of lease negotiations with Emirates have not been
concluded by the end of the terms of each current Lease, the lease
rentals due under the existing agreements must continue to be
paid.
The directors consider that the going concern basis of
accounting remains appropriate however note a material uncertainty
below.
Although the Company does not have a fixed life, the Articles
require that the directors convene a general meeting of the Company
six months before the end of the term of the Lease where an
ordinary resolution will be proposed that the Company proceed to an
orderly wind-up at the end of the term of the Lease (the
"Liquidation Resolution") and the directors will consider (and if
necessary, propose to Shareholders) alternatives for the future of
the Company, including re-leasing the Asset, or selling the Asset
and reinvesting the capital received from the sale of the Asset in
another aircraft.
The outcome of the Liquidation Resolution (which is due to take
place in June 2022) will be known within 12 months of the date the
Board approves the Annual Financial Report for the year ended 31
March 2022, This is six months before the end of the lease term in
December 2022 and as a result creates a material uncertainty over
the Company's ability to continue as a going concern. Such a
determination would mean that the Company, though solvent and able
as before to meet its liabilities as they fall due, would no longer
meet the definition of a going concern i.e. an entity which will
continue its operations for the foreseeable future. As a result of
their review, the directors of the Company have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due until the termination
date of the Lease in 2022.
Respons i b i l i ty Stateme nt
The directors jointly and severally confirm that to the best of
their knowledge:
(a) the financial statements, prepared in accordance with
International IFRS give a fair, balanced and understandable view of
the assets, liabilities, financial position and profits of the
Company and performance of the Company; and
(b) this Interim Management Report includes or incorporates by reference:
i. an indication of important events that have occurred during
the Period, and their impact on the financial statements;
ii. a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
iii. confirmation that there were no related party transactions
in the Period that have materially affected the financial position
or the performance of the Company during that Period.
Si g ne d on beha lf of t he Board of Dire c t ors of t he
Company .
Charles Wilkinson Geoffrey Hall
Chair Director
16 December 2021
STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 April 2 021 to 30 Septe mber 2 021
1 Apr 2021 1 Apr 2020 to
to
Notes 30 Sep 2021 30 Sep 2020
GBP GBP
INCOME
A rent income 4 4,945,732 5,354,671
B rent income 4 2,260,370 2,260,370
------------ --------------
7,206,102 7,615,041
EXPENSES
Operating expenses 5 (437,782) (326,080)
Depreciation of Asset 10 (3,082,335) (3,937,984)
------------ --------------
(3,520,117) (4,264,064)
Net profit for the period
before finance costs and
foreign exchange gains 3,685,985 3,350,977
Finance costs 11 (169,659) (406,633)
------------
Net profit for the period
after finance costs before
foreign exchange gains 3,516.326 2,944,344
Unrealised foreign exchange
(losses)/gains 7 (267,467) 1,021,077
------------ --------------
Profit for the Period 3,248,859 3,965,421
------------ --------------
Other Comprehensive Income - -
------------ --------------
Total Comprehensive Income
for the Period 3,248,859 3,965,421
------------ --------------
Pence Pence
Earnings per Share for the
Period - Basic and Diluted 9 7.65 6.24
In arriving at the results f or the fin ancial perio d, all
amounts abo ve relate to c ontinuing operations.
T h e notes on pages 24 to 45 f orm an integral part of these Fin ancial St atements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2021
3 0 Sep 2021 3 1 Mar 2021
Notes G BP G BP
NON-CURRENT A SSETS
A ircra ft 10 38,523,626 41,605,961
----------------------- ---------------------
CURRENT ASSETS
Accrued income - 471,201
Cash and c ash equiv ale nts 17 2,797,931 2,092,159
Receiv ables 13 76,813 114,362
----------------------- ---------------------
2,874,744 2,677,722
----------------------- ---------------------
TOTAL A SSETS 41,398,370 44,283,683
----------------------- ---------------------
CURRENT LI ABILITIES
B o rrowin gs 15 3,203,885 3,046,374
De f erred income 6,246,622 6,077,975
P a y ab les - due within one y ear 14 77,133 53,405
----------------------- ---------------------
9,527,640 9,177,754
NON-CURRENT LI ABILITIES
B o rrowin gs 15 756,178 2,294,683
Deferred income 2,095,616 5,130,919
----------------------- ---------------------
2,851,794 7,425,602
----------------------- ---------------------
TOTAL LI ABILITIES 12,379,434 16,603,356
----------------------- ---------------------
TOTAL NET A SSETS 29,018,936 27,680,327
----------------------- ---------------------
EQ UITY
S ha re c apital 16 39,016,728 39,016,728
Retain ed loss (9,997,792) (11,336,401)
----------------------- ---------------------
29,018,936 27,680,327
----------------------- ---------------------
P e nce P e nce
Net asset v alue per S hare based
o n 42,450,000 (Mar 2020: 42,450,000) s
hares in issue 68.36 65.21
The Financial Statements were approved by the Board of Directors
and authorised for issue on 16 December 2021 and are signed on its
behalf by:
Charles Wilkinson Geoffrey Hall
Chair Director
T h e notes on pages 24 to 45 f o rm an integral part of these Fin ancial St atements
STATEMENT OF CASH FLOWS
For the period from 1 April 2021 to 30 September 2021
Notes 1 Apr 2021 to 1 Apr 2020 to
30 Sep 2021 30 Sep 2020
G BP G BP
OPE RATING ACTIVITIES
Profit for the Period 3,248,859 3,965,421
Movement in accrued and deferred
income (2,612,567) 552,745
Depreciation of Asset 10 3,082,331 3,937,984
Loan interest payable 11 139,299 376,273
Increase/(decrease) in payables 23,729 (1,786)
Increase in receivables 37,549 10,490
Amortisation of debt arrangement
costs 11 30,360 30,360
Foreign exchange movement 7 267,467 (1,021,077)
--------------------- ---------------------
NET CA SH FROM O PERATING ACTIVITIES 4,217,027 7,850,410
--------------------- ---------------------
FINANCING ACTIVITIES
Divid ends paid 8 (1,910,250) (1,910,250)
Repayments of capital on borrowings 20 (1,490,178) (5,641,918)
Repayments of interest on borrowings 20 (136,945) (372,790)
NET CASH USED IN FINANCING ACTIVITIES (3,537,373) (7,924,958)
--------------------- ---------------------
CA SH AND CA SH EQUIV ALENTS AT
BEGINNING OF P ERIOD 2,092,159 3,770,813
Increase/(de crease) in c ash
and c ash equiv ale nts 679,654 (74,548)
E ff e cts of f oreign e xchange
rates 7 26,118 (120,216)
CA SH AND CA SH EQUIV ALENTS AT OF PE RIOD 17 2,797,931 3,576,049
--------------------- ---------------------
T h e notes on pages 24 to 45 f o rm an integral part of these Fin ancial St atements.
STATEMENT OF CHANGES IN EQUITY
For the period from 1 April 2 021 to 30 Septe mber 2 021
Notes Share Retained
Capital Loss Total
GBP GBP GBP
Balance as at 1
April 2021 39,016,728 (11,336,401) 27,680,327
Total Comprehensive
Income for the
Period - 3,248,859 3,248,859
Dividends paid 8 - (1,910,250) (1,910,250)
----------- ------------- ------------
Balance as at 30
September 2021 39,016,728 (9,997,792) 29,018,936
----------- ------------- ------------
Notes Share Retained
Capital Loss Total
GBP GBP GBP
Balance as at 1
April 2020 39,016,728 (7,216,593) 31,800,135
Total Comprehensive
Income for the
Period - 3,965,421 3,965,421
Dividends paid 8 - (1,910,250) (1,910,250)
----------- ------------- ------------
Balance as at 30
September 2020 39,016,728 (5,161,422) 33,855,306
----------- ------------- ------------
T h e notes on pages 24 to 45 f o rm an integral part of these Fin ancial St atements.
NO TES TO THE FINANCIAL ST A TEMENTS
For the period from 1 April 2021 to 30 September 2021
1 GE NERAL INFORM ATION
The Company was incorporated in Guernsey on 8 October 2010 with
registered number 52484. The address of the registered office is
given on page 46.
Its share capital consists of Shares and Administrative Shares.
The Company's Shares have been admitted to trading on the SFS of
the LSE Main Market.
The Company's investment objective is to obtain income returns
and a capital return for its shareholders by acquiring, leasing and
then selling a single aircraft. The principal activities of the
Company are set out on pages 8 and 17 to 19.
2 A CCOUNTING POLICIES
T h e sig nificant accounting policies adopted by the Company
are as f ollows:
(a) Ba sis of Preparation
The Financial Statements have been prepared in conformity with
the International Accounting Standard 34 Interim Financial
Reporting as adopted by the EU and applicable Guernsey law. The
Financial Statements have been prepared on a historical cost
basis.
This report is to be read in conjunction with the Annual
Financial Report for the year ended 31 March 2021 which is prepared
in accordance with IFRS as adopted by the EU and any public
announcements made by the Company during the interim reporting
Period.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards as set out
below:
(b) Adoption of new and revised Standards
New and amended IFRS Standards that are effective for the
current period
The following Standard and Interpretation issued by the IASB and
IFRIC has been adopted in the current Period. The adoption has not
had any impact on the amounts reported in these financial
statements and is not expected to have any impact on future
financial periods:
-- IFRS 16 - COVID-19 related rent concessions. As a result of
the coronavirus (COVID-19) Pandemic, rent concessions have been
granted to lessees. Such concessions might take a variety of forms,
including payment holidays and deferral of lease payments. Lessees
can elect to account for such rent concessions in the same way as
they would if they were not lease modifications. In many cases,
this will result in accounting for the concession as variable lease
payments in the period(s) in which the event or condition that
triggers the reduced payment occurs. The standard is not expected
to have a material impact on the financial statements or
performance of the Group as it is applicable to lessees. The
effective date is for annual periods beginning on or after June
2020. The standard has not had a material impact on the financial
statements or performance of the Company.
New and Revised Standards in issue but not yet effective
IAS 1 'Presentation of financial statements' Classification of
Liabilities as Current or Non-current. The IASB issued amendments
to paragraphs 69 to 76 of IAS 1 to specify the requirements for
classifying liabilities as current or non-current. The effective
date is for annual periods beginning on or after 1 January 2023.
The standard is not expected to have a material impact on the
financial statements or performance of the Company and is not
endorsed by the EU.
(c) Taxation
The Company has been assessed for tax at the Guernsey standard
rate of 0 per cent.
(d) Share Capital
Shares are classified as equity. Incremental costs directly
attributable to the issue of Shares are recognised as a deduction
from equity.
(e) Expenses
All expenses are accounted for on an accruals basis.
(f) Interest Income
Interest income is accounted f or on an accruals basis.
(g) Foreign Currency Translation
The currency of the primary economic environment in which the
Company operates (the functional currency) is GBP, GBP or Sterling,
which is also the presentation currency.
Transactions denominated in foreign currencies are translated
into Sterling at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into the functional
currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
Statement of Comprehensive Income.
(h) Cash and Cash Equivalents
Cash at bank and short term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits with a term of no more than three
months from the start of the deposit and highly liquid investments
readily convertible to known amounts of cash and subject to
insignificant risk of changes in value.
(i) Segmental Reporting
The directors are of the opinion that the Company is engaged in
a single segment of business, being the acquiring, leasing and
selling of the Asset or the Aircraft.
(j) Going Concern
The directors have prepared these half yearly financial
statements for the period ended 30 September 2021 on the going
concern basis.
The directors in consultation with the Asset Manager are
monitoring the continuous effect of the Pandemic generally on the
aviation industry and specifically on the Company's aircraft value
and the financial wellbeing of its Lessee both now and in the
future. The Pandemic continues to have a pervasive impact on the
global economy, and it remains possible that the Company's future
performance could be impacted in this prolonged period of
uncertainty. In many jurisdictions restrictions on the ability of
people to travel still adversely affect the airline sector, and by
extension the aircraft leasing sector. The risk therefore remains
that some airlines may not be able to pay rent as it falls due. The
impact of the Pandemic on the aviation industry has been
significant, with a large part of the global passenger aircraft
fleet temporarily grounded. These factors, together with wider
economic uncertainty and disruption, have had an adverse impact on
the future value of the Aircraft owned by the Company, and could
also negatively impact the sale, re-lease, refinancing or other
disposition of the Aircraft.
Given the prolonged impact of the Pandemic, increased lessee
counterparty credit risk remains in existence and there could be
requests for lease rental deferrals. Reduced rents receivable under
the Lease may not be sufficient to meet the fixed loan interest and
regular repayments of debt scheduled during the life of the Loan
and may not provide surplus income to pay for the Company's
expenses and permit the declaration of dividends.
The option to remarket the Aircraft following a potential event
of default by the lessee has not been taken into account. The
period of time necessary to successfully complete such a process is
beyond the twelve months forecasting horizon of the going concern
considerations. This applies in particular in times of COVID-19, as
various restrictions are still in place to contain the
Pandemic.
Based on current information the directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, although the risk
to this is clearly higher compared to a pre-COVID-19
environment.
The Board will continue to actively monitor the financial impact
on the Company from the evolving position with its aircraft lessee
and lender whilst bearing in mind its fiduciary obligations and the
requirements of Guernsey law which determine the ability of the
Company to make dividends and other distributions.
Note 15 ('Borrowings') describes the borrowings obtained by the
Company to part-finance the acquisition of its 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 Emirates.
The Company's Aircraft with a carrying value of GBP 38,523,626
is pledged as security for the Company's borrowings (see note
15).
The directors, with the support of its Asset Manager, believe
that it is reasonable to assume as of date of approval of
half-yearly financial statements that Emirates will continue with
the contracted lease rental payments due to the following:
- Emirates continues to be a going concern as at the date of the
Lessee's latest signed annual financial report for the financial
year ended on March 31, 2021.
- Challenged by an unprecedented drop in passenger air travel
during 2020, the Lessee reacted quickly and temporarily adjusted
its business model with a particular focus on air cargo services.
The high Pandemic-driven demand in this space helped the Lessee to
offset losses in the passenger segment.
- Although Emirates concluded its last financial year with the
first net loss in more than 30 years and refunded already paid
tickets in the amount of USD 2.3 billion, it still has a
substantial cash position, which also benefited from the support of
its ultimate shareholder.
- Emirates confirmed to have access to the capital markets and
was already able to secure committed offers for the financing of
two upcoming aircraft deliveries.
- The ultimate shareholder of Emirates Airline has injected
another AED 2.5 billion (USD 681 million) into Emirates Airline,
during the Period. Together with the USD 3.1 billion already
contributed during the previous financial year, this adds up to
approximately USD 3.8 billion in total.
- Emirates' listed debt and CDS are trading at non-distressed levels.
- As of the date of the half-yearly financial report, the Board
is not aware of a formal request to the Company for a lease
deferral or any other efforts that would result in the
restructuring of the existing transaction
- Emirates has paid all the lease rentals to the Company in a timely manner.
- If end of lease negotiations with Emirates have not been
concluded by the end of the terms of the current lease, the lease
rentals due under the existing agreement must continue to be
paid.
The directors have considered Emirates' ability to continue
paying the lease rentals over the next 12 months and are satisfied
that the Company can meet its liabilities as they fall due over
this period. Refer to note 12 for expiry dates of the leases.
Although the Company does not have a fixed life, the Articles
require that the directors convene a general meeting of the Company
six months before the end of the term of the Lease where an
ordinary resolution will be proposed that the Company proceed to an
orderly wind-up at the end of the term of the Lease (the
"Liquidation Resolution") and the directors will consider (and if
necessary, propose to Shareholders) alternatives for the future of
the Company, including re-leasing the Asset, or selling the Asset
and reinvesting the capital received from the sale of the Asset in
another aircraft.
The outcome of the Liquidation Resolution (which is due to take
place in June 2022) will be known within 12 months of the date the
Board approves the Annual Financial Report for the year ended 31
March 2022, This is six months before the end of the lease term in
December 2022 and as a result creates a material uncertainty over
the Company's ability to continue as a going concern. Such a
determination would mean that the Company, though solvent and able
as before to meet its liabilities as they fall due, would no longer
meet the definition of a going concern i.e. an entity which will
continue its operations for the foreseeable future.
(k) Leasing and Rental Income
The Lease relating to the Asset has been classified as an
operating lease as the terms of the lease do not transfer
substantially all the risks and rewards of ownership to the lessee.
The Asset is shown as a non-current asset in the Statement of
Financial Position. Further details of the lease are given in note
12.
Rental income and advance lease payments from the operating
lease are recognized on a straight-line basis over the term of the
lease. Initial direct costs incurred in negotiating and arranging
an operating lease are added to the carrying amount of the leased
asset and recognized in profit or loss on a straight-line basis
over the lease term.
(l) Property, Plant and Equipment - Aircraft
In line with IAS 16, the Asset is initially recorded at the fair
value of the consideration paid. The cost of the Asset is made up
of the purchase price of the Asset plus any costs directly
attributable to bringing it into working condition for its intended
use. Costs incurred by the lessee in maintaining, repairing or
enhancing the Aircraft are not recognised as they do not form part
of the costs to the Company. Accumulated depreciation and any
recognised impairment loss are deducted from cost to calculate the
carrying amount of the Asset.
Depreciation is recognised so as to write off the cost of the
Asset less the estimated residual value of GBP31.2 million (2020:
GBP36.6 million) over the estimated useful life of the Asset of 12
years, using the straight line method. Residual values have been
arrived at by taking the average amount of three independent
external valuers and after taking into account disposition fees
where applicable. During the annual financial report for the year
ended 31 March 2021, it was determined that the use of soft values
excluding inflation best approximates residual value as required by
IAS 16.
The depreciation method reflects the pattern of benefit
consumption. The residual value is reviewed annually and is an
estimate of the amount the Company would receive today if the Asset
were already of the age and condition expected at the end of its
useful life. Useful life is also reviewed annually and, for the
purposes of the financial statements, represents the likely period
of the Company's ownership of the Asset. Depreciation starts when
the Asset is available for use.
At each audited Statement of Financial Position date, the
Company reviews the carrying amounts of the Asset to determine
whether there is any indication that the Asset has suffered an
impairment loss. If any such indication exists, the recoverable
amount of the Asset is estimated to determine the extent of the
impairment loss (if any). Further details are given in note 3.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the Asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of the Asset is estimated to be less
than its carrying amount, the carrying amount of the Asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the Asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the Asset in prior years. A
reversal of an impairment loss is recognised immediately in profit
or loss.
(m) Financial instruments
A financial instrument is recognised when the Company becomes a
party to the contractual provisions of the instrument. Financial
liabilities are derecognised if the Company's obligations,
specified in the contract, expire or are discharged or cancelled.
Financial assets are derecognised if the Company's contractual
rights to the cash flows from the financial assets expire, are
extinguished, or if the Company transfers the financial assets to a
third party and transfers all the risks and rewards of ownership of
the asset, or if the Company 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;
- FVOCI; or
- 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.
i) Financial assets held at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and
interest are measured at amortised cost. These assets are
subsequently measured at amortised cost using the effective
interest method. The effective interest method calculates the
amortised cost of financial instruments and allocates the interest
over the period of the instrument.
The Company's financial assets held at amortised cost include
trade and other receivables and cash and cash equivalents.
The Company assesses on a forward looking basis the expected
credit losses associated with its financial assets held at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
ii) Financial liabilities held at amortised cost
Financial liabilities consist of payables and borrowings. The
classification of financial liabilities at initial recognition
depends on the purpose for which the financial liability was issued
and its characteristics. All financial liabilities are initially
measured at fair value, net of transaction costs. All financial
liabilities are recorded on the date on which the Company becomes
party to the contractual requirements of the financial liability.
Financial liabilities are subsequently measured at amortised cost
using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the
amortised cost of the financial liability and of allocating
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, or,
where appropriate, a shorter period, to the net carrying amount on
initial recognition.
The Company derecognises financial liabilities when, and only
when, the Company's obligations are discharged, cancelled or they
expire.
3 SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the application of the Company's accounting policies, which
are described in note 2, the directors are required to make
judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
T h e f ollowing are the critical judgements and estim ates,
that the Direct ors ha ve made in the process of applying the
Compan y 's accounting policies and that ha ve the most significant
e ff ect on the amounts recognised in fin ancial st atements.
Estimates
Re sidual V alue and Useful Life of the A sset
As described in note 2 (l), the Company depreciates the Asset on
a straight line basis over the estimated useful life of the Asset
after taking into consideration the estimated residual value.
IAS 16 requires the residual value to be determined as an
estimate of the amount that the Company would currently obtain from
the disposal of the Asset, after deducting the estimated costs of
disposal, if the Asset were of the age and condition expected at
the end of its useful life. However, there is currently not
sufficient data available for a comparable 12 year old A380 for the
Directors to make a direct market comparison in making this
estimation. During the annual financial report for the year ended
31 March 2020, it was determined that the use of soft values
excluding inflation best approximates residual value as required by
IAS 16 Property, Plant and Equipment.
In estimating residual value for the year, the directors refer
to future soft values (excluding inflationary effects) for the
Asset obtained from three independent expert aircraft valuers.
Details of which have been disclosed in note 10.
The Company's future performance can potentially be impacted
should COVID-19 have a pervasive and prolonged impact on the
aviation industry and on the business of its lessee and also affect
the residual value of the Aircraft it owns. This together with the
wider economic uncertainty and disruption, are likely to have an
adverse impact on the future value of the aircraft asset owned by
the Company, as well as on the sale, re-lease, or other disposition
of the relevant aircraft. Therefore the estimation of residual
value remains subject to material uncertainty.
If the estimate of uninflated residual value for use in
calculating depreciation had been decreased by 30 per cent. (30
September 2020: 20 per cent.) with effect from the beginning of
this Period, the depreciation charge for the Period would have
increased by approximately GBP2.8 million (30 September 2020:
GBP1.4 million).
An increase in residual value by 30 per cent. (30 September
2020: 20 per cent.) would have been an equal but opposite effect.
This reflects the range of estimates of residual value that the
directors believe would be reasonable at this time. The useful life
of the Asset is based on the expected period for which the Company
will own and lease the Aircraft. The Board of Directors expects
that the Asset will have a working life in excess of this
period.
Impairment
As described in note 2 (l), an impairment loss exists when the
carrying value of an asset or cash generating unit exceeds its
recoverable amount, which is the higher of its current fair value
less costs to sell and its value-in-use.
The directors review the carrying amount of its assets at each
audited Statement of Financial Position date and monitor the assets
for any indications of impairment as required by IAS 16 and IAS
36.
The Board together with the Asset Manager believed that it was
prudent to conduct an impairment test as at the 31 March 2021 year
end as the below items may result in pricing changes for the
current portfolio of Aircraft:
-- As further Airbus A380 aircraft reached the expiry of their
first lease agreements further market data will be available to
Doric and the appraiser community.
-- The announcement to discontinue the A380 program in 2021 may
impact prices in the secondary market.
-- The impact of COVID-19 on the business of airlines and
indirectly aircraft values, as well as on the credit risk profile
of the Company's lessee could indicate the need for impairment.
Based on the impairment review performed, an impairment loss of
GBP 6,316,569 was recognised in the 31 March 2021 year, with the
impairment test resulting in an updated carrying value of the
Aircraft in total to GBP GBP41,605,961 at year end, as reflected in
Note 10 .
For the current period 1 April 2021 to 30 September 2021, the
Board has considered if there are any further impairment triggers
as set out under IAS 36 and concluded that an interim impairment
review at the 30 September 2021 period end was not practicable. The
Company will again be carrying out a full and thorough appraisal of
residual values come the next March financial year end.
Judgements
O perating Le ase Commitments - Company as Lessor
T h e Company has entered into a le ase on the Asset. T he
Company has determin ed, based on an e v alu ation of the terms and
conditions of the arrangements, that it retains all the significant
risks and rewards of ownership of this asset and accounts f or the
c ontract as an operating lease.
The Company has determined that the operating lease on the Asset
is for 12 years.
Functional Currency
The currency of the primary economic environment in which the
Company operates (the functional currency) is GBP, which is also
the presentation currency.
This judgement is made on the basis that this is representative
of the operations of the Company due to the following:
-- the Company's Share Capital was issued in GBP;
-- its dividends are paid to Shareholders in GBP, and that
certain of the Company's significant operating expenses as well as
portion of the Company's rental income are incurred/earned in
GBP.
In addition, the set-up of the leasing structure was designed to
offer a GBP return to GBP investors.
4 RENTAL INCOME
1 Apr 2021 1 Apr 2020
to to
30 Sep 2021 30 Sep 2020
GBP GBP
A rent income 1,863,187 6,006,970
Revenue received but not yet earned - (652,299)
Revenue earned but not yet received 3,082,545 -
4,945,732 5,354,671
------------ ------------
B rent income 2,730,348 2,160,816
Revenue received but not yet earned (469,978) -
Revenue earned but not yet received - 99,554
2,260,370 2,260,370
Total rental income 7,206,102 7,615,041
------------ ------------
Rental income is derived from the leasing of the Asset. Rent is
split into A rent, which is received in US dollars and B rent,
which is received in Sterling. Rental income received in US dollars
is translated into the functional currency (Sterling) at the date
of the transaction.
An adjustment has been made to spread the actual total income
receivable over the term of the Lease on an annual basis. In
addition, advance rentals received have also been spread over the
full term of the Leases.
5 OPERATING EXPENSES
1 Apr 2021 1 Apr 2020
to to
3 0 Sep 2021 3 0 Sep 2020
G BP G BP
Corporate shareholder and advisor fee
(note 22) 62,460 61,086
A sset management f ee (note 22) 156,150 152,714
Liaison agency fees (note 22) 6,058 5,925
A d ministration f ees 29,037 30,762
A ccountancy f ees (note 22) 5,811 5,692
Re gistrars f ee (note 22) 4,830 5,362
A ud it f ee 16,525 11,426
Direct ors' remuneration (note 6) 34,000 34,000
Direct ors' and o fficers' insurance 103,615* 3,961
Lega l and pro f essional e x penses 14,171 4,057
A nnua l f ees 839 3,377
Marketing expenses (note 22) - 1,615
Other operating expenses 4,286 6,103
------------- -------------
437,782 326,080
------------- -------------
*Due to market conditions at renewal, the directors' and
officers' insurance premium was subject to a large increase.
6 DIRECTORS' REMUNERATION
Under their terms of appointment, each director is paid a fee of
GBP15,000 per annum by the Company, except for the Chair, who
receives GBP20,000 per annum and the Chair of Audit, who receives
GBP18,000 per annum. The rate of remuneration per director has
remained unchanged.
7 UNREALISED FOREIGN EXCHANGE GAINS/(LOSSES)
1 Apr 2021 1 Apr 2020
to to
3 0 Sep 2021 3 0 Sep 2020
G BP G BP
Cash at bank 26,113 (120,216)
Deferred income (217,112) 599,581
Borrowings (76,467) 541,712
(267,467) 1,021,077
------------- -------------
The foreign exchange loss in the Period reflects the 2.24 per
cent. movement in the Sterling/US dollar exchange rate from 1.378
as at 31 March 2021 to 1.347 as at 30 September 2021.
8 DIVIDS IN RES PECT OF E QUITY SHARES
1 Apr 2021 to
30 Sep 2021
GBP Pence per
Share
First interim dividend 955,125 2.25
Second interim dividend 955,125 2.25
---------- -----------
1,910,250 4.50
---------- -----------
1 Apr 2020 to
30 Sep 2020
GBP Pence per
Share
First interim dividend 955,125 2.25
Second interim dividend 955,125 2.25
------------------- -----------
1,910,250 4.50
------------------- -----------
Refer to the Subsequent Events in note 23 in relation to
dividends declared in October 2021.
9 E A RNIN G S P E R S H A RE
EPS is based on the net profit for the Period attributable to
holders of Shares in the Company Shareholders of 3,248,859 (30 Sep
2020: net profit for the Period of GBP3,965,421) and 42,450,000
Shares (30 Sep 2020: 42,450,000) being the weighted average number
of Shares in issue during the Period. There are no dilutive
instruments and therefore basic and diluted EPS are identical.
10 PROPERTY , PLANT AND E QUIPMENT - AIRCRAFT
A ir craft
COST G BP
A s at 1 Apr 2021 114 ,532,547
--------------
A s at 30 Sep 2021 114 ,532,547
--------------
A CCUMULATED DEPRECIATION
A s at 1 Apr 2021 66,610,017
Depreciation ch arge f or the period 3,082,335
--------------
A s at 30 Sep 2021 69,692,352
--------------
A CCUMULATED IMPAIRMENT
A s at 1 Apr 2021 6,316,569
--------------
Impairment loss f or the period -
--------------
A s at 30 Sep 2021 6,316,569
CARRYING AMOUNT
A s at 30 Sep 2021 38,523,626
--------------
A s at 31 Mar 2021 41,605,961
--------------
T h e c ost in US dollars and the e xchange rates
at acquisition f or the Aircra ft was as f ollows:
Cost in US dollars 178 ,549,805
GBP /US dollars e xchange rate 1 .5502
The Company used forecast soft values excluding inflation which
best approximates residual value as required per IAS 16 (refer to
note 3) , translated into Sterling at the exchange rate prevailing
at 31 March 2021.
The Company can sell the Asset during the term of the lease
(with the lease attached and in accordance with the terms of the
transfer provisions contained therein).
Under IFRS 16 the direct costs attributed in negotiating and
arranging the lease have been added to the carrying amount of the
Asset and are being recognised as an expense over the lease
term.
Refer to note 3 for details on the impairment review conducted
by the Company as at the 31 March 2021 year end.
1 1 FINANCE COSTS
1 Apr 2021 1 Apr 2020
to to
30 Sep 2021 30 Sep 2020
GBP GBP
Amortisation of debt arrangement
costs 30,360 30,360
Loan interest 139,299 376,273
------------ ------------
169,659 406,633
------------ ------------
12 OPE RATING LE A SES
T h e amounts of minim um f uture le ase receipts at the
reporting date under non cancellable operating le ases are detailed
belo w:
30 September 2021 Next 12 1 to 5 After 5
months years years Total
GBP GBP GBP GBP
Aircraft - A rent
payments 3,860,905 - - 3,860,905
Aircraft - B rent
payments 5,460,696 - - 5,460,696
------------ ---------- -------- -----------
9,321,601 - - 9,321,601
------------ ---------- -------- -----------
31 March 2021 Next 12 1 to 5 After 5
months years years Total
GBP GBP GBP GBP
Aircraft - A rent
payments 3,774,348 1,887,174 - 5,661,522
Aircraft - B rent
payments 5,460,696 2,730,348 - 8,191,044
------------ ---------- -------- -----------
9,235,044 4,617,522 - 13,852,566
------------ ---------- -------- -----------
The operating lease is for an Airbus A380-861 aircraft. The term
of the lease is for 12 years ending December 2022 with reduced
rental payments in the last two years and no extension option.
A t the end of the le ase term the lessee has the rig ht to e x
ercise an option to purchase the Asset if the Company chooses to
sell the asset. If a purchase option e v ent occurs the Company and
the lessee will be requir ed to arrange f or a current market v
alue appraisal of the Asset to be carried out by three in dependent
appraisers. T he purchase price will be equal to the a v erage v
alu ation of those three appraisals.
13 RECEIV ABLES
30 Sep 2021 31 Mar 2021
GBP GBP
Prepayments 76,802 114,351
Sundry debtors 11 11
76,813 114,362
------------ ------------
T h e abo ve c arrying v alue of receiv ables is equiv ale nt to
its f air v alu e.
14 P A Y A BLES (amounts falling due within one y ear)
30 Sep 2021 31 Mar 2021
GBP GBP
Accrued administration fees 34,848 5,805
Accrued audit fee 15,750 24,125
Other accrued expenses 26,535 23,475
77,133 53,405
------------ ------------
T h e abo ve c arrying v alue of receiv ables is equiv ale nt to
its f air v alu e.
15 BORRO WINGS
30 Sep 2021 31 Mar 2021
GBP GBP
Loan 4,032,894 5,444,248
Transaction costs (72,831) (103,191)
------------ ------------
3,960,063 5,341,057
------------ ------------
Current portion 3,203,885 3,046,374
------------ ------------
Non-current portion 756,178 2,294,683
------------ ------------
Notwithstanding the fact that GBP1.5 million of capital was
repaid during the Period, as per the Statement of Cash Flows, the
closing value of the outstanding bank loans decreased by GBP1.4
million to the 2.24 per cent. movement in the Sterling / US dollar
exchange rate for the Period from 1.378 as at 31 March 2021 to
1.347 at 30 September 2021.
The amounts below detail the future contractual undiscounted
cash flows in respect of the Loan, including both the principal and
interest payments, and will not agree directly to the amounts
recognised in the Statement of Financial Position:
30 Sep 2021 31 Mar 2021
GBP GBP
A mount due f or s ettlement within
12 mo nths 3,354,917 3,279,704
----------- -----------
A mount due f or s ettlement a fter
12 mo nths 838,729 2,459,778
----------- -----------
The loan was arranged with Westpac for $122,000,000, runs for 12
years until December 2022 and has an effective interest rate of
5.495 per cent., which is the same as the contractual fixed
interest rate. The Loan is secured on the Asset. No breaches or
defaults occurred in the Period. Transaction costs of arranging the
Loan have been deducted from the carrying amount of the Loan and
are being amortised over its life.
In the Directors' opinion, the above carrying value of the Loan
is approximate to its fair value.
16 S HARE CA PITAL
T h e S hare Ca pital of the Company is represented by an
unlimited number of Shares.
Issued Administrative Ordinary
Shares Shares
Issued shares as at 30 September 2021
and as at 31 March 2021 2 42,450,000
------------------------ --------------
Issued Share GBP
Total Share Capital as at 30 September
2021 and as at 31 March 2021 39,016,728
--------------
Members holding Shares are entitled to receive and participate
in any dividends out of income attributable to the Shares; other
distributions of the Company available for such purposes and
resolved to be distributed in respect of any accounting period; or
other income or right to participate therein.
Upon winding up, Shareholders are entitled to the surplus assets
remaining after payment of all the creditors of the Company.
The holders of Administrative Shares are not entitled to
receive, and participate in, any dividends out of income; other
distributions of the Company available for such purposes and
resolved to be distributed in respect of any accounting period; or
other income or right to participate therein. On a winding up,
holders are entitled to a return of capital paid up on them after
the Shares have received a return of their capital paid up but
ahead of the return of all additional capital to the holders of
Shares.
The holders of Administrative Shares shall not have the right to
receive notice of and shall have no right to attend, speak and vote
at general meetings of the Company, except for the Liquidation
Proposal Meeting (general meeting convened six months before the
end term of the lease where the Liquidation Resolution will be
proposed) or if there are no Shares in existence.
17 CASH AND CASH EQUIVALENTS
30 Sep 2021 31 Mar 2021
GBP GBP
Cash at bank 2,797,931 2,092,159
------------ ------------
18 FINANCIAL INSTRUMENTS
T h e Compan y's main fin ancial instruments c omprise:
(a) Cash and cash equivalents that arise directly from the
Company's operations; and
(b) Loan secured on non-current asset.
19 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
T h e Compan y 's objective is to obtain income returns and a
capital return f or its S harehold ers by acquirin g, le asing and
then s elling a sin gle aircra ft.
T h e f ollowing table details the categories of fin ancial
assets and liabilities held by the Company at the re porting
date:
30 Sep 2021 31 Mar 2021
GBP GBP
Financial assets
Cash and cash equivalents 2,797,931 2,092,159
Receivables (excluding prepayments) 11 11
------------ ------------
Financial assets at amortised cost 2,797,942 2,092,170
------------ ------------
Financial liabilities
Payables 77,133 53,405
Borrowings 3,960,062 5,341,057
------------ ------------
Financial liabilities measured
at amortised cost 4,037,195 5,394,462
------------ ------------
The main risks arising from the Company's financial instruments
are capital management risk, foreign currency risk, credit risk,
liquidity risk and interest rate risk. The Board regularly reviews
and agrees policies for managing each of these risks and these are
summarised below:
(a) Capital Management
The Company manages its capital to ensure that the Company will
be able to continue as a going concern while maximising the return
to Shareholders through the optimisation of the debt and equity
balance. The Company is not subject to any externally imposed
capital requirements.
The capital structure of the Company consists of debt, which
includes the borrowings disclosed in note 15, cash and cash
equivalents disclosed in note 17 and equity attributable to equity
holders, comprising issued capital and retained earnings.
The Company's Board reviews the capital structure on a bi-annual
basis.
Equity includes all capital and reserves of the Company that are
managed as capital.
No changes were made in the objectives, policies or processes
for managing capital during the Period.
(b) Foreign Currency Risk
The Company's accounting policy under IFRS requires the use of a
Sterling historic cost of the Asset and the value of the US dollar
loan as translated at the spot exchange rate on every statement of
financial position date. In addition, US dollar operating lease
receivables are not immediately recognised in the Statement of
Financial Position and are accrued over the period of the Lease.
The directors consider that this introduces artificial variance due
to the movement over time of foreign exchange rates. In actuality,
the US dollar operating lease receivables should offset the US
dollar payables on amortising Loans. The foreign exchange exposure
in relation to the Loan is thus largely naturally hedged.
Lease rentals (as detailed in notes 4 and 12) are received in US
dollars and Sterling. Those lease rentals received in US dollars
are used to pay the loan repayments due, also in US dollars. Both
US dollar lease rentals and loan repayments are fixed and are for
similar sums and similar timings. The matching of lease rentals to
settle loan repayments therefore minimises risks caused by foreign
exchange fluctuations.
The carrying amounts of the Company's foreign currency
denominated monetary assets and liabilities at the reporting date
are as follows:
30 Sep 2021 31 Mar 2021
GBP GBP
Bank loan (US dollar) - liabilities (4,032,892) (5,444,248)
Cash and cash equivalents (US dollar)
- assets 662,636 400,472
------------ ------------
The following table details the Company's sensitivity to a 25
per cent. (31 March 2021: 25 per cent) appreciation of Sterling
against the US dollar. 25 per cent. (31 March 2021: 25 per cent.)
represents the directors' assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and
adjusts their translation at the period end for a 25 per cent. (31
March 2021: 25 per cent.) change in foreign currency rates. A
positive number below indicates an increase in profit and equity
where Sterling strengthens 25 per cent. (31 March 2021: 25 per
cent.) against the US dollar. For a 25 per cent. (31 March 2021: 25
per cent.) weakening of Sterling against the US dollar, there would
be a comparable but opposite impact on the profit and equity .
30 Sep 2021 31 Mar 2021
USD impact USD impact
GBP GBP
Profit or loss 674,051 1,008,756
Assets (132,527) (80,094)
Liabilities 806,578 1,088,850
------------ ------------
On the eventual sale of the Asset, the Company will be subject
to foreign currency risk if settled in a currency other than
Sterling. Transactions in similar assets are typically priced in US
dollars.
(c) Credit Ri sk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company.
Refer to the going concern section on page 21 where an
assessment of Emirates is made.
The credit risk on cash transactions is mitigated by transacting
with counterparties that are regulated entities subject to
prudential supervision, or with high credit ratings assigned by
international credit rating agencies.
T h e Compan y 's fin ancial assets e x posed to credit risk are
as f ollows:
30 Sep 2021 31 Mar 2021
GBP GBP
Receivables (excluding prepayments) 11 11
Cash and cash equivalents 2,797,931 2,092,159
2,797,942 2,092,170
------------ ------------
Surplus cash is held in accounts with Barclays Bank PLC and
Westpac, which have credit ratings given by Moody's of P-1 and P-1
respectively.
There is a contractual credit risk arising from the possibility
that the Lessee may default on the lease payments. This risk is
mitigated, as under the terms of the lease agreement between the
Lessee and the Company, any non-payment of the lease rentals
constitutes a "Special Termination Event", under which the lease
terminates and the Company may either choose to sell the Asset or
lease it to another party.
At the inception of the Lease, the Company selected a Lessee
with a strong balance sheet and financial outlook. The financial
strength of Emirates is regularly reviewed by the Board and the
Asset Manager.
(d) Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments. The Company's main financial commitments are
its ongoing operating expenses and loan repayments to Westpac.
Ultimate responsibility for liquidity risk management rests with
the Board, which established an appropriate liquidity management
framework at the incorporation of the Company, through the timings
of lease rentals and loan repayments. The Company manages liquidity
risk by maintaining adequate reserves by monitoring forecast and
actual cash flows, and by matching profiles of financial assets and
liabilities.
The table below details the residual contractual maturities of
financial liabilities, including estimated interest payments. The
amounts below are contractual undiscounted cash flows, including
both principal and interest payments, and will not agree directly
to the amounts recognised in the Statement of Financial
Position.
30 Sep 2021 over 5
1-3 months 3-12 months 1-2 years 2-5 years years
GBP GBP GBP GBP GBP
Financial
liabilities
Payables
- due within
one year 77,133 - - - -
Loans payable 826,704 2,480,111 826,704 - -
903,837 2,480,111 826,704 - -
----------- ------------ ---------- ---------- -------
31 Mar 2021 over 5
1-3 months 3-12 months 1-2 years 2-5 years years
GBP GBP GBP GBP GBP
Financial
liabilities
Payables
- due within
one year 53,405 - - - -
Loans payable 819,626 2,459,778 2,459,778 - -
873,031 2,459,778 2,459,778 - -
----------- ------------ ---------- ---------- -------
(e) Interest Rate Ri sk
Interest rate risk arises from the possibility that changes in
interest rates will a ff ect f uture cash flo ws. It is the risk
that fluct uations in market interest rates will result in a
reduction in deposit interest earned on bank deposits held by the
Compan y.
T h e Company mitigates interest rate risk by fixing the
interest rate on the Loan and the lease re ntals.
T h e f ollowing table details the Compan y 's e x posure to
interest rate risks, by interest rate re fin ancing perio d:
3 0 September 2021 V a ri Fixed Non-interest
able interest bearing Total
interest GBP GBP GBP
G BP
Financial assets
Receiv ables (excluding
prepayments) - - 11 11
Cash and c ash equiv
ale nts 2,797,931 - - 2,797,931
-------------- --------- ------------ ---------
Total financial assets 2,797,931 - 11 2,797,942
-------------- --------- ------------ ---------
Financial liabilities
P a y ab les - - 77,133 77,133
Loan s pa y able - 3,960,062 - 3,960,062
-------------- --------- ------------ ---------
Total financial liabilities - 3,960,062 77,133 4,037,195
-------------- --------- ------------ ---------
Total interest sensitivity
gap 2,797,931 3,960,062
-------------- ---------
3 1 March 2021 V a ri Fixed Non-interest
able interest interest be aring Total
G BP G BP G BP GBP
Financial assets
Receiv ables (excluding
prepayments) - - 11 11
Cash and c ash equiv
ale nts 2,092,159 - - 2,092,159
-------------- --------- ------------ ---------
Total financial assets 2,092,159 - 11 2,092,170
-------------- --------- ------------ ---------
Financial liabilities
P a y ab les - - 53,405 53,405
Loan s pa y able - 5,444,248 - 5,444,248
-------------- --------- ------------ ---------
Total financial liabilities - 5,444,248 53,405 5,497,653
-------------- --------- ------------ ---------
Total interest sensitivity
gap 2,092,159 5,444,248
-------------- ---------
I f interest rates had been 50 basis points hig her throughout
the Period and all other v aria bles were held const ant, the
Compan y 's pro fit f or the Period and net assets attrib utable to
S harehold ers as at 30 S eptember 2021 would ha ve been GBP13,990
(31 March 2021: GBP10,461 ) greater due to an increase in the
amount of interest receiv able on the bank bala nces.
I f interest rates had been 50 basis points lo wer and all other
v aria bles were held const ant, the Compan y 's pro fit f or the
Period and net assets attrib utable to S harehold ers as at 30 S
eptember 2021 would ha ve been GBP13,990 (31 March 2021: GBP10,461
) lo wer due to an decrease in the amount of interest receiv able
on the bank bala nces.
20 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
The following table discloses the effects of the amendments
to IAS 7 Statement of Cash Flows which requires additional disclosures
that enable users of financial statements to evaluate changes
in liabilities arising from financing activities, including
both changes arising from cash flows and non-cash flows.
The table below excludes non-cash flows arising from the amortisation
of associated costs (see note 15).
30 Sep 2021 30 Sep 2020
GBP GBP
Opening Balance 5,444,248 15,620,114
Cash flows paid - capital (1,490,178) (5,641,918)
Cash flows paid - interest (136,945) (372,790)
Non-cash flows
* Interest accrued 139,299 376,273
* Effects of foreign exchange 76,468 (541,712)
Closing Balance 4,032,892 9,439,967
------------ ------------
21 ULTIMATE CONTROLLING P ARTY
In the opinion of the direct ors, the Company has no ultimate c
ontrolling party.
22 RELATED PARTY TRANSACITONS AND MATERIAL CONTRACTS
Nimrod is the Company's Corporate and Shareholder Advisor.
During the Period, the Company incurred GBP62,460 (30 September
2020: GBP61,608) of expenses with Nimrod, of which GBPnil (31 March
2020: GBPnil) was outstanding to this related party at 30 September
2021. GBP62,460 (30 September 2020: GBP61,608) related to corporate
shareholder and advisor fees as shown in note 5.
Doric is the Company's Asset Manager.
During the Period, the Company incurred GBP162,208 (30 September
2020: GBP158,639) of expenses with Doric, which consisted of asset
management fees of GBP156,150 (30 September 2020: GBP152,714) and
liaison agency fees of GBP6,058 (30 September 2020: GBP5,925).
GBPnil (31 March 2021: GBP5,805) was prepaid to this related party
at 30 September 2021.
JTC Registrars Limited is the Company's registrar, transfer
agent and paying agent.
During the Period, the Company incurred GBP4,830 (30 September
2020: GBP5,362) of expenses with JTC Registrars as shown in note 5.
As at 30 September 2021, GBP2,023 (31 March 2021: GBP923) was owing
to this related party.
JTC Fund Solutions (Guernsey) Limited is the Company's Company
Secretary and Administrator.
During the period, the Company incurred GBP34,848 (30 September
2020: GBP36,454) of expenses with JTC Fund Solutions (Guernsey)
Limited as shown in note 5. As at 30 September 2021, GBP34,848 (31
March 2021: GBP5,805) was owing to this related party.
23 S UBSEQUENT EVENTS
O n 14 Oct ober 2021, a f urther divid end of 2.25 pence per
Ordin ary S hare was declared and this w as paid on 28 Oct ober
2021.
KEY ADVISERS AND CONTACT INFORMATION
KEY INFORMATION
E x chan ge: Special ist Fund S e gme nt of t he London S t o ck
E xchan g e's M a in M ark et
T i c k e r: DN A1
Li st ing Da te: 13 Decemb er
2010
Co mpa ny Secretary a nd A dmi
Fi nancial Year End: 31 M arch n i s trator
JTC Fund Solutions ( G uernse y)
Ba se Curre ncy: Pound Sterling Limi t ed
I S I N: GG 00B4 M F3899 G round Floor
SED O L: B4 M F389 Do rey Court
LEI: 2138009FPM7EH4WDS168 Ad miral Pa rk
Coun t ry of I ncorpora t ion: S t Pe t er P ort
G uernsey
Re g i s t ra t ion number: 52484 G ue rnsey, G Y1 2 HT
M A N A G E ME NT A ND A DMI Leas e and Debt Arran g er
N I S T R A T ION
Do ric Asset Finance Gm bH & Co.
Reg i s tered Off i ce KG
D o ric Nimrod A ir One Limi t Be rliner S t r asse 114
ed
G round Floor 6306 5 O ff enb ach am M a in
Do rey Court G e r many
Ad miral Pa rk
A d voca tes to the Co m pa ny (as
S t Pe t er P ort to G u ernsey Law)
G ue rnsey, G Y1 2 HT Ca rey O lsen
A s se t Manager Ca rey House
D o ric GmbH Le s Ba n q ues
Be rliner S t r asse 114 S t Pe t er P ort
6306 5 O ff enb ach am M a in G ue rnsey, G Y1 4 HP
G e r many
Co rporate and Shareho l d er
Advisor A u d i tor
Nimrod Capital LLP Grant Thornton Limited
1-3 Norton Folgate Lefebvre House
London Lefebvre Street
E1 6DB S t Pe t er P ort
Guernsey C.I, GY1 3TF
So li c i tors to the Comp a
ny (as to Eng l i sh L a w)
He rbert Smi th Freehills LLP Reg i s trar
E x chan ge House JTC Re g i s trars L imi t ed
P rimrose S treet G round Floor
Londo n, England Do rey Court
EC2 A 2EG Ad miral Pa rk
S t Pe t er P ort
Guernsey GY1 2HT
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END
IR BLBDDDUBDGBL
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December 16, 2021 11:56 ET (16:56 GMT)
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