TIDMDNA2
RNS Number : 9427V
Doric Nimrod Air Two Limited
16 December 2021
DORIC NIMROD AIR TWO LIMITED
(Legal Entity Identifier: 213800ENH57LLS7MEM48)
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/9427V_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.dnairtwo.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 Two 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
" ANZ" The Australia and New Zealand Banking Group
Limited
"Articles " Company's Articles of Incorporation
"ASKs" Available Seat Kilometres
"Asset(s)" or Airbus A380 Aircraft owned by DNA 2
the "Aircraft"
"BA" British Airways
"Board " Company's Board of directors
"CDS" Credit Default Swaps
" Certificates" DNAFA Pass Through Certificates issued in May
2012
"Chair" Chair of the Board
"Code " The UK Corporate Governance Code
"CORSIA " Carbon Offsetting and Reduction Scheme for
International Aviation
" C Shares " Convertible Preference Shares
"DGTRs " Disclosure Guidance and Transparency Rules
"Distribution Distribution of 4.50 Pence per Share per Quarter
Policy "
"DNA2 " or the Doric Nimrod Air Two Limited
"Company "
"DNAFA" Doric Nimrod Air Finance Alpha Limited
"Doric LLP" Doric Partners LLP
"Doric" or the Doric GmbH
"Asset Manager"
"DWC" Dubai World Central International Airport
"DXB" Dubai International Airport
"EETC" Enhanced Equipment Trust Certificates
"Emirates" or Emirates Airline
the "Lessee"
"EPS or LPS" Earnings / Loss Per Share
"Equity" C Share Issue
"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
"Group" The Company and its Subsidiaries
"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(s)" Lease of Aircraft to Emirates
"LGW " London Gatwick Airport
"Loan(s)" Borrowings obtained by the Group to part-finance
the acquisition of Aircraft
"LSE" London Stock Exchange's
"MAG" Malaysia Aviation Group
"NBV" Net Book Value
"Nimrod" or "Corporate Nimrod Capital LLP
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
"Subsidiaries" MSN077 Limited, MSN090 Limited, MSN105 Limited
and DNAFA
"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
S U MM A RY I N F O R M A T ION
Listing LSE
Ticker DNA2
--------------------------------------------
Share Price 72.5p
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Market Capitalisation GBP 125.2 million
--------------------------------------------
Initial Debt USD 1.03 billion
--------------------------------------------
Outstanding Debt Balance USD 145 million (14% of Initial Debt)
--------------------------------------------
Current and Targeted Dividend 4.5p per quarter (18p per annum)
--------------------------------------------
Earned Dividends 170.0p
--------------------------------------------
Dividend Yield 24.83 %
--------------------------------------------
Dividend Payment Dates January, April, July, October
--------------------------------------------
Ongoing Charges (OCF) 1.9%
--------------------------------------------
Currency GBP
--------------------------------------------
Launch Date/Price 14 July 2011 / 200p
--------------------------------------------
Average Remaining Lease 2 years 9 months
Duration
--------------------------------------------
C Share Issue Date/Price 27 March 2012 / 200p
--------------------------------------------
C Share Conversion Date/Ratio 6 March 2013 / 1:1
--------------------------------------------
Incorporation Guernsey
--------------------------------------------
Aircraft Registration A6-EDP (14.10.2023), A6-EDT (02.12.2023),
Numbers A6-EDX (01.10.2024), A6-EDY (01.10.2024),
(Lease Expiry Dates) A6-EDZ (12.10.2024), A6-EEB (09.11.2024),
A6-EEC (30.11.2024)
--------------------------------------------
Asset Manager Doric GmbH
--------------------------------------------
Corp & Shareholder Advisor Nimrod Capital LLP
--------------------------------------------
Administrator JTC Fund Solutions (Guernsey) Ltd
--------------------------------------------
Auditor Grant Thornton
--------------------------------------------
Market Makers finnCap Ltd,
Investec Bank Plc,
Jefferies International Ltd,
Numis Securities Ltd,
Shore Capital Ltd,
Winterflood Securities Ltd
--------------------------------------------
SEDOL, ISIN, LEI B3Z6252, GG00B3Z62522, 213800ENH57LLS7MEM48
--------------------------------------------
Year End 31 March
--------------------------------------------
Stocks & Shares ISA Eligible
--------------------------------------------
Website www.dnairtwo.com
--------------------------------------------
Please note that the Group has determined that the operating
leases on the Assets are for 12 years based on an initial term of
10 years followed by an extension term of 2 years. For the purpose
of this report the Leases are all referred to as 12 year
leases.
COMPANY OVERVIEW
DNA2 is a Guernsey company incorporated on 31 January 2011.
Pursuant to the Company's prospectus dated 30 June 2011, the
Company, on 14 July 2011, raised approximately GBP136 million by
the issue of Shares at an issue price of GBP2 each. The Company's
Shares were admitted to trading on the SFS at 14 July 2011.
The Company raised a further GBP188.5 million from a C Share
fundraising, which closed on 27 March 2012 with the admission of
100,250,000 convertible preference shares to trading on the
SFS.
On 6 March 2013, the Company's C Shares converted into an
additional 100,250,000 ordinary preference shares. These additional
ordinary preference shares were admitted to trading on the SFS and
rank pari passu with the ordinary preference shares already in
issue.
As at 30 November 2021, the last practicable date prior to the
publication of this report, the Company's total issued Share
Capital consisted of 172,750,000 Shares and these Shares were
trading at 66.50 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 aircraft. The Company receives income from the lease
rentals paid to it by Emirates, the national carrier owned by the
Investment Corporation of Dubai, based in Dubai, UAE, pursuant to
the Leases.
Subsidiaries
The Company has four wholly-owned subsidiaries: MSN077 Limited,
MSN090 Limited, MSN105 Limited and DNAFA which collectively hold
the Assets for the Company.
The first Asset was acquired by MSN077 Limited on 14 October
2011 for a purchase price of $234 million and leased to Emirates
for an initial term of 10 years to October 2021, with an extension
period of 2 years ending October 2023.
The second Asset was acquired by MSN090 Limited on 2 December
2011 for a purchase price of $234 million and leased to Emirates
for an initial term of 10 years to December 2021, with an extension
period of 2 years ending December 2023 .
The third Asset was acquired by MSN105 Limited on 1 October 2012
for a purchase price of $234 million and leased to Emirates for an
initial term of 10 years to October 2022, w ith an extension period
of 2 years ending October 2024.
The fourth Asset, MSN 106, was acquired by DNAFA on 1 October
2012 for a purchase price of $234 million and leased to Emirates
for an initial term of 10 years ending October 2022, with an
extension period of 2 years ending October 2024.
The fifth Asset, MSN 107, was acquired by DNAFA on 12 October
2012 for a purchase price of $234 million and leased to Emirates
for an initial term of 10 years ending October 2022, with an
extension period of 2 years ending October 2024.
The sixth Asset, MSN 109, was acquired by DNAFA on 9 November
2012 for a purchase price of $234 million and leased to Emirates
for an initial term of 10 years ending November 2022, with an
extension period of 2 years ending November 2024.
The seventh Asset, MSN 110, was acquired by DNAFA on 30 November
2012 for a purchase price of $234 million and leased to Emirates
for an initial term of 10 years ending November 2022, with an
extension period of 2 years ending November 2024.
The fourth, fifth, sixth and seventh Assets were acquired by
DNAFA using the proceeds of the issue of the C Shares, together
with the proceeds of equipment notes issued by DNAFA.
The equipment notes were acquired by two separate pass through
trusts using the proceeds of their issue of EETCs. The EETCs, with
an aggregate face amount of approximately $587.5 million were
admitted to the Official List of the UK Listing Authority and to
the LSE on 12 July 2012. These four Assets were also leased to
Emirates
for 10 years followed by an extension term of 2 years to the second half of 2024.
In order to complete the purchase of the related Assets, MSN077
Limited, MSN090 Limited and MSN105 Limited entered into separate
loan agreements with a number of banks (see note 15 to the
financial statements), each of which will be fully amortised with
quarterly repayments in arrears over 12 years. A fixed rate of
interest applies to the Loans except for 50 per cent. of the Loan
in MSN090 Limited which has a related interest rate swap entered
into to fix the interest rate. MSN077 Limited drew down
$151,047,059 under the terms of the first loan agreement to
complete the purchase of the first Asset; MSN090 Limited drew down
$146,865,575 in accordance with the second loan agreement to
finance the acquisition of the second Asset; and MSN105 Limited
drew down $145,751,153 in accordance with the third loan agreement
to finance the acquisition of the third Asset. The first loan
agreement, the second loan agreement and the third loan agreement
are on materially the same terms.
Emirates bears all costs (including maintenance, repair, and
insurance) relating to the Aircraft during the lifetime of the
Leases.
Further information about the construction of these Leases is
available in note 12 to the Financial Statements.
Distribution Policy
The Company currently targets a distribution of 4.50 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
directors to effect the payment of dividends.
Performance Overview
All payments by Emirates have been made in accordance with the
terms of the respective Leases.
During the Period, and in accordance with the Distribution
Policy, the Company declared two interim dividends of 4.5 pence per
Share each. One interim dividend of 4.5 pence per Share was
declared after the Period. Further details of these dividend
payments can be found on page 34.
Return of Capital
The Company intends to return to Shareholders net capital
proceeds if and when the Company is wound-up (pursuant to a
shareholder resolution, including the Liquidation Resolution),
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
in June 2025 where an ordinary resolution will be proposed that the
Company proceed to an orderly wind-up. In the event that the
liquidation resolution is not passed, the directors will consider
alternatives for the future of the Company, including re-leasing
the Assets, or selling the Assets and reinvesting the capital
received from the sale of the Assets in other aircraft.
C H A I R ' S S T A TE M ENT
During the Period the Company has declared and paid two
quarterly dividends of 4.5 pence per Share each, a rate of dividend
payment equivalent to 18 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 aircraft. The structures of the operating leases
relating to the Company's seven Aircraft are described on pages 6
to 7.
The debt portion of the funding is designed to be fully
amortised over the term of the Leases, which would leave the
Aircraft unencumbered on the conclusion of the ultimate Lease.
Emirates bears all costs (including maintenance, repair and
insurance) relating to the Aircraft during the lifetime of the
Leases. At 30 November 2021, the latest practical date prior to
this report, the Company had outstanding debt associated with the
Aircraft totalling USD 145 million (14% of the initial balance). At
30 November 2021 share price was 66.5 pence, representing a market
capitalisation of GBP 114.9 million based on the 172,750,000 Shares
in issue. The Company's first lease expiry falls due in October
2023.
All payments by Emirates during the Period and throughout the
Leases have been made in accordance with the respective terms of
the Leases. The Company's Aircraft have been stored since March
2020, currently 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.
The redelivery procedure for a widebody aircraft is complex and
highly technical and as we move closer to the first lease expiry
your Board will provide more details on the high-level
considerations and also the implications of the various potential
outcomes for Shareholders.
Doric continues to monitor the Leases 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 the 10-year Leases followed by an extension term
of 2-years (including advance rental received as part of the
initial acquisition of the Assets) is credited evenly over each of
the 144 months of the Leases. However, the actual rental income has
been received in advance of this uniform pattern in order to match
and fund the accelerated payment down of debt. Thus as at 30
September 2021, some 90% of income receivable under the Leases has
been received, which has funded the payment down to 86% initial
borrowings, whereas under the relevant accounting standard only
some 77% may be recognised. This mismatch in timing between the
receipt and recognition of rental income results in a deferred
income creditor of some GBP147 million or some 85 pence per share
in the 30 September 2021 balance sheet. This is an artificial
accounting adjustment in the sense that it does not represent a
liability to pay GBP147 million to third parties. The faster that
income is received and debt repaid the larger the resultant
creditor, producing a reduction in reported net asset value.
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 respective Leases 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.
Geoffrey Hall
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 Assets
The Company acquired a total of seven Airbus A380-861 aircraft
between October 2011 and November 2012. Each aircraft is leased to
Emirates - the national carrier owned by the Investment Corporation
of Dubai, based in Dubai, UAE - for a term of 12 years based on an
initial term of 10 years followed by an extension term of 2 years
from the point of delivery, with fixed lease rentals for the
duration. In order to complete the purchase of the first three
Aircraft, MSN077 Limited, MSN090 Limited and MSN105 Limited entered
into three separate Loans, each of which will be fully amortised
with quarterly repayments in arrears over 12 years.
The net proceeds from the C Share issue were used to partially
fund the purchase of four of the seven Airbus A380s. In order to
help fund the acquisition of these final four Aircraft, DNAFA
issued two tranches (Class A & Class B) of EETCs - a form of
debt security - in June 2012 in the aggregate face value of USD
587.5 million. The Certificates are admitted to the official list
of the Euronext Dublin and to trading on the Main Securities market
thereof. DNAFA used the proceeds from both the Equity and the
Certificates to finance the acquisition of four new Airbus A380
aircraft which were then leased to Emirates.
The seven Airbus A380 aircraft bear the manufacturer's serial
numbers (MSN) 077, 090, 105, 106, 107, 109, and 110.
Due to the effects of COVID-19, the Aircraft have been stored
since March 2020, and are currently at DWC.
Aircraft utilisation for the period from delivery of each Airbus
A380 until the end of September 2021 was as follows:
MSN Delivery Date Flight Hours Flight Cycles Average Flight
Duration
077 14/10/2011 36,734 4,392 8 h 20 min
-------------- ------------- -------------- ---------------
090 02/12/2011 34,522 5,584 6 h 10 min
-------------- ------------- -------------- ---------------
105 01/10/2012 32,248 5,142 6 h 15 min
-------------- ------------- -------------- ---------------
106 01/10/2012 34,941 4,072 8 h 35 min
-------------- ------------- -------------- ---------------
107 12/10/2012 34,240 3,987 8 h 35 min
-------------- ------------- -------------- ---------------
109 09/11/2012 31,493 4,953 6 h 20 min
-------------- ------------- -------------- ---------------
110 30/11/2012 31,249 5,038 6 h 10 min
-------------- ------------- -------------- ---------------
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 Group 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 Assets
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 are in deep storage condition at this time and could be
reactivated within weeks.
Emirates bears all costs relating to the Aircraft during the
lifetime of the Leases (including for maintenance, repairs and
insurance).
Inspections
The Asset Manager conducted physical inspections and records
audits of the Aircraft as per the below table. Due to the storage
of the Aircraft and the protective measures associated with this,
the inspection of the Aircraft were limited to viewing the outside
of the Aircraft from ground level. The condition of the Aircraft -
to the extent visible - and their technical records were in
compliance with the provisions of the respective lease agreements,
taking into account that the Aircraft were in storage at the moment
of the audit.
MSN Last Inspection MSN Last Inspection
077 03/2021 & 09/2021 107 03/2021 & 09/2021
------------------ ---- ------------------
090 03/2019 109 11/2020
------------------ ---- ------------------
105 06/2021 110 11/2020
------------------ ---- ------------------
106 09/2021
------------------ ---- ------------------
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. Air Passenger Market Analysis October 2021.
All Rights Reserved. Available on the IATA Economics page.
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. T he 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
D I R E C T O RS
As at 30 September 2021 the Company had four directors all of
whom were independent and non-executive.
Geoffrey Alan Hall - Chair of the Company and of the Nomination
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 a
director and Chair of the Audit Committee of Doric Nimrod Air One
Limited and 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.
Charles Edmund Wilkinson
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 Chair of Doric Nimrod Air One Limited and of Doric
Nimrod Air Three Limited and is a director of Landore Resources
Ltd, a Guernsey based mining exploration company. He is resident in
Guernsey.
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 One Limited and
Doric Nimrod Air Three Limited. She is resident in the United
Kingdom.
Andreas Josef Tautscher - Chair of the Audit Committee
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 Group as shown in
the Consolidated Financial Statements and a description of the
principal risks and uncertainties facing the Group is given in the
Chair's Statement, Asset Manager's Report, and the Notes to the
Consolidated Financial Statements contained on pages 24 to 48 and
are incorporated here by reference.
There were no material related party transactions which took
place in the Period, other than those disclosed at note 22 of the
Notes to the Consolidated Financial Statements.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company for
the remaining six months of the financial year are unchanged from
those disclosed in the Company's Consolidated Annual Financial
Report for the year ended 31 March 2021.
G o i n g Concern
The Group's principal activities are set out within the Company
Overview on pages 6 to 7. The financial position of the Group is
set out on page 21. In addition, note 19 to the Consolidated
Financial Statements includes the Group'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 Group's aircraft values
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 Group'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 more than 60% of the global passenger aircraft
fleet temporarily grounded back in April 2020. This number has
decreased to about 22% at the time of writing, but is still
materially higher than the historical average. These factors,
together with wider economic uncertainty and disruption, have had
an adverse impact on the future value of the Aircraft owned by the
Group, and could also negatively impact the sale, re-lease, or
other disposition of the relevant 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 Leases may not be sufficient to meet the fixed loans or
equipment note interest and regular repayments of debt scheduled
during the life of each Loan and equipment note and may not provide
surplus income to pay for the Group'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.
The directors consider that the going concern basis of
accounting remains appropriate. 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.
Whilst there is some uncertainty as to the airline industry in
general, and specifically Emirates' financial position and credit
risk profile, on the basis that (i) Emirates has shown no intention
of failing to meet its obligations (ii) Emirates has the financial
backing to continue paying these rentals, the directors believe
that it is appropriate to prepare these financial statements under
the going concern basis of preparation.
The directors have considered Emirates' ability to continue
paying the lease rentals over the next 12 months and are satisfied
that the Group 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.
Respons i b i l i ty Stateme nt
T h e d irect ors j oin t ly and se v eral ly co n f irm t h at
to t he best of t he ir k no w ledge:
a. the Consolidated Financial Statements, prepared in accordance
with 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 Consolidated 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 .
Geoffrey Hall Andreas Tautscher
Chair Director
16 December 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 April 2021 to 30 September 2021
1 Apr 2021 1 Apr 2020
to to
Notes 30 Sep 2021 30 Sep 2020
GBP GBP
INCOME
A rent income 4 44,014,715 48,472,895
B rent income 4 18,266,980 18,217,070
Bank interest received 14,749 8,542
62,296,444 66,698,507
EXPENSES
Operating expenses 5 (1,919,978) (1,842,021)
Depreciation of Aircraft 10 (32,442,608) (38,196,096)
----------------- -------------
(34,362,586) (40,038,117)
Net profit for the period before
finance costs and foreign exchange
gains/(losses) 27,933,858 26,660,390
Finance costs 11 (3,669,612) (6,092,448)
Net profit for the period after
finance costs and before foreign
exchange gains/(losses) 24,264,246 20,567,942
Unrealised foreign exchange (losses)/gains 7 (4,441,186) 12,728,837
----------------- -------------
Profit for the Period 19,823,060 33,296,779
Other Comprehensive Income - -
----------------- -------------
Total Comprehensive Income for
the Period 19,823,060 33,296,779
----------------- -------------
Pence Pence
Earnings per Share for the Period
- Basic and Diluted 9 11.47 19.27
In arriving at the results for the financial period, all amounts
above relate to continuing operations.
The notes on pages 24 to 48 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2021
30 Sep 2021 31 Mar 2021
Notes GBP GBP
NON-CURRENT ASSETS
Aircraft 10 413,717,180 446,159,788
413,717,180 446,159,788
CURRENT ASSETS
Accrued income 6,074,928 5,646,316
Receivables 13 258,139 121,312
Cash and cash equivalents 17 30,564,166 29,926,638
36,897,233 35,694,266
TOTAL ASSETS 450,614,413 481,854,054
-------------- --------------
CURRENT LIABILITIES
Borrowings 15 69,598,386 76,027,801
Deferred income 7,840,789 7,840,789
Payables - due within one year 14 134,994 96,745
-------------- --------------
77,574,169 83,965,335
NON-CURRENT LIABILITIES
Borrowings 15 36,618,864 67,277,093
Deferred income 138,871,372 137,249,471
Financial liabilities at fair
value through profit or loss 33,713 121,420
-------------- --------------
175,523,949 204,647,984
TOTAL LIABILITIES 253,098,118 288,613,319
-------------- --------------
TOTAL NET ASSETS 197,516,295 193,240,735
-------------- --------------
EQUITY
Share capital 16 319,836,770 319,836,770
Retained loss (122,320,475) (126,596,035)
-------------- --------------
197,516,295 193,240,735
-------------- --------------
Pence Pence
Net Asset Value per Share based
on 172,750,000 (31 Mar 2021:
172,750,000) shares in issue 114.34 111.86
The consolidated financial statements were approved by the Board
of Directors and authorised for issue on 16 December 2021 and are
signed on its behalf by:
Geoffrey Hall Andreas Tautscher
Chair Director
The notes on pages 24 to 48 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period from 1 April 2021 to 30 September 2021
1 Apr 2021 1 Apr 2020
to to
30 Sep 2021 30 Sep 2020
Notes GBP GBP
OPERATING ACTIVITIES
Profit for the Period 19,823,060 33,296,779
Movement in accrued and deferred income (1,891,603) (543,549)
Interest received (14,749) (8,542)
Depreciation of Aircraft 10 32,442,608 38,196,096
Loan and EETC interest payable 11 3,210,921 5,620,392
Movement in interest rate swap 11 (87,707) (39,115)
Increase/(decrease) in payables 38,248 (10,124)
Increase in receivables (136,826) (197,445)
Foreign exchange movement 7 4,441,186 (12,728,837)
Amortisation of debt arrangement costs 11 511,171 511,171
------------- -------------
NET CASH FROM OPERATING ACTIVITIES 58,336,309 64,096,826
------------- -------------
INVESTING ACTIVITIES
Interest received 14,749 8,542
NET CASH FROM INVESTING ACTIVITIES 14,749 8,542
------------- -------------
FINANCING ACTIVITIES
Dividends paid 8 (15,547,500) (15,547,500)
Repayments of capital on borrowings 20 (39,389,708) (42,520,674)
Repayments of interest on borrowings 20 (3,125,759) (5,777,560)
------------- -------------
NET CASH USED IN FINANCING ACTIVITIES (58,062,967) (63,845,734)
------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 29,926,638 30,016,771
Increase in cash and cash equivalents 288,091 259,634
Effects of foreign exchange rates 7 349,437 (335,840)
CASH AND CASH EQUIVALENTS AT OF
PERIOD 17 30,564,166 29,940,565
------------- -------------
The notes on pages 24 to 48 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from 1 April 2021 to 30 September 2021
Notes Share Retained
Capital Loss Total
GBP GBP GBP
Balance as at 1 April
2021 319,836,770 (126,596,035) 193,240,735
Total Comprehensive
Income for the Period - 19,823,060 19,823,060
Dividends paid 8 - (15,547,500) (15,547,500)
------------ -------------- -------------
Balance as at 30 September
2021 319,836,770 (122,320,475) 197,516,295
------------ -------------- -------------
Share Retained
Capital Loss Total
GBP GBP GBP
Balance as at 1 April
2020 319,836,770 (91,534,081) 228,302,689
Total Comprehensive
Income for the Period - 33,296,779 33,296,779
Dividends paid 8 - (15,547,500) (15,547,500)
------------ -------------- -------------
Balance as at 30 September
2020 319,836,770 (73,784,802) 246,051,968
------------ -------------- -------------
The notes on pages 24 to 48 form an integral part of these
Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the period from 1 April 2021 to 30 September 2021
1 GENERAL INFORMATION
The Consolidated Financial Statements incorporate the results of the
Subsidiaries.
The Company was incorporated in Guernsey on 31 January 2011 with registered
number 52985. The address of the registered office is given on page
49. 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 of the Aircraft. The principal activities of the Group are
set out on pages 8 to 9 and 17 to 18.
2 ACCOUNTING POLICIES
The significant accounting policies adopted by the Group are as follows:
(a) Basis of Preparation
The Consolidated Financial Statements have been prepared in conformity
with IFRS, as adopted by the EU, which comprise standards and interpretations
approved by the IASB and IFRIC as adopted by the EU and applicable
Guernsey law. The Consolidated Financial Statements have been prepared
on a historical cost basis modified for the revaluation value on the
interest rate swap.
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 Group 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 Group and is not endorsed by the EU.
(c) Basis of Consolidation
The Consolidated Financial Statements incorporate the results of the
Company and its Subsidiaries.
The Company owns 100 per cent. of all the shares in the Subsidiaries,
and has the power to govern the financial and operating policies of
the Subsidiaries so as to obtain benefits from their activities. Intra-group
balances and transactions, and any unrealised income and expenses arising
from intra-group transactions, are eliminated in preparing the Consolidated
Financial Statements.
(d) Taxation
The Company and its Subsidiaries have been assessed for tax at the
Guernsey standard rate of 0 per cent.
(e) Share Capital
Shares are classified as equity. Incremental costs directly attributable
to the issue of Shares are recognised as a deduction from equity.
(f) Expenses
All expenses are accounted for on an accruals basis.
(g) Interest Income
Interest income is accounted for on an accruals basis.
(h) Foreign Currency Translation
The currency of the primary economic environment in which the Group
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 Consolidated Statement
of Comprehensive Income.
(i) 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.
(j) Segmental Reporting
The directors are of the opinion that the Group is engaged in a single
segment of business, being acquiring, leasing and selling various Airbus
A380-861 Aircraft.
(k) 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 Group's aircraft values and financial wellbeing of
its lessee both now and in the future. The P andemic continues to have
a pervasive impact on the global economy, and it remains possible that
the Group'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 more than 60% of the
global passenger aircraft fleet temporarily grounded back in April 2020.
This number has decreased to about 22% at the time of writing, but is
still materially higher than the historical average. These factors, together
with wider economic uncertainty and disruption, have had an adverse impact
on the future value of the Aircraft assets owned by the Group, and could
also negatively impact the sale, re-lease or other disposition of the
relevant A ircraft.
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 Leases may not be
sufficient to meet the debt interest and regular repayments of debt scheduled
during the life of each Loan and the EETC, and may not provide surplus
income to pay for the Group'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.
The directors consider that the going concern basis of accounting remains
appropriate.
Based on current information the directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence
for the foreseeable future, although the risk to this is clearly higher
since the Pandemic hit the sector.
The Board will continue to actively monitor the financial impact on Group
from the evolving position with its aircraft lessee and lenders 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 Group
to part-finance the acquisition of its Aircraft. The Group 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
equipment notes were issued by DNAFA to Wilmington Trust and the proceeds
from the sale of the equipment notes financed a portion of the purchase
price of the four Airbus A380-861 aircraft, with the remaining portion
being financed through contribution from the Company of the C Share issue
proceeds.
The Group's Aircraft with carrying values of GBP413,717,180 are pledged
as security for the Group'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 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.
Whilst there is some uncertainty as to the airline industry in general,
and specifically Emirates' financial position and credit risk profile,
on the basis that (i) Emirates has shown no intention of failing to meet
its obligations (ii) Emirates has the financial backing to continue paying
these rentals, the directors believe that it is appropriate to prepare
these financial statements under the going concern basis of preparation.
The directors have considered Emirates' ability to continue paying the
lease rentals over the next 12 months and are satisfied that the Group
can meet its liabilities as they fall due over this period.
(l) Leasing and Rental Income
The Leases relating to the Assets have been classified as operating leases
as the terms of the Leases do not transfer substantially all the risks
and rewards of ownership to the Lessee. The Assets are shown as non-current
assets in the Consolidated Statement of Financial Position. Further details
of the Leases are given in note 12.
Rental income and advance lease payments from operating leases are recognised
on a straight-line basis over the term of the relevant Lease. Initial
direct costs incurred in negotiating and arranging an operating lease
are added to the carrying amount of the leased Asset and amortised on
a straight-line basis over the lease term.
(m) Property, Plant and Equipment - Aircraft
In line with IAS 16, each 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 cost to the Group
Accumulated depreciation and any recognised impairment losses are deducted
from cost to calculate the carrying amount of the Asset.
Depreciation is recognised so as to write off the cost of each Asset
less the estimated residual value over the estimated useful life of
the Asset of 12 years, using the straight line method. The estimated
residual value of the seven planes ranges from GBP32.0 million to GBP34.1
million (2020: GBP37.7 million to GBP40.1 million). 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 fair
amount the entity would receive today if the Assets were already of
the age and condition expected at the end of their useful life. Useful
life is also reviewed annually and for the purposes of the financial
statements represents the likely period of the Group's ownership of
these Assets. Depreciation starts when the Asset is available for use.
At each audited Consolidated Statement of Financial Position date, the
Group reviews the carrying amounts of its Aircraft to determine whether
there is any indication that those Assets have 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
the 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 an 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 periods. A reversal of an impairment
loss is recognised immediately in profit or loss.
(n) Financial instruments
A financial instrument is recognised when the Group becomes a party
to the contractual provisions of the instrument. Financial liabilities
are derecognised if the Group's obligations, specified in the contract,
expire or are discharged or cancelled. Financial assets are derecognised
if the Group's contractual rights to the cash flows from the financial
assets expire, are extinguished, or if the Group transfers the financial
assets to a third party and transfers all the risks and rewards of ownership
of the asset, or if the Group does not retain control of the asset and
transfers substantially all the risk and rewards of ownership of the
asset.
Under IFRS 9, on initial recognition, a financial asset is classified
as measured at:
- Amortised cost;
- 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 Group 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 Group's financial assets held at amortised cost include trade and
other receivables and cash and cash equivalents.
The Group 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 Group 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 Group derecognises financial liabilities when, and only when, the
Group's obligations are discharged, cancelled or they expire.
iii) Financial assets and financial liabilities at fair value through
profit or loss
(a) Classification
The Group classifies its derivative i.e. the interest rate swap, as
financial assets or financial liabilities at fair value through profit
or loss. These financial assets and financial liabilities are designated
by the Board of Directors at fair value through profit or loss. The
Group does not classify any derivatives as hedges in a hedging relationship.
(b) Recognition/derecognition
Financial assets or liabilities are recognised on the trade date - the
date on which the Group commits to enter into the transactions. Financial
assets or liabilities are derecognised when the rights to receive cash
flows from the investments have expired or the Group has transferred
substantially all risks and rewards of ownership.
(c) Measurement
Financial assets and financial liabilities at FVTPL are initially recognised
at fair value. Transaction costs are expensed in the Statement of Comprehensive
Income. Subsequent to initial recognition, all financial assets and
financial liabilities at FVTPL are measured at fair value. Gains and
losses arising from changes in the fair value of the 'financial assets
or financial liabilities at fair value through profit or loss' category
are presented in the Statement of Comprehensive Income in the year in
which they arise.
3 SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the application of the Group'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.
The following are the critical judgements and estimates that the Directors
have made in the process of applying the Group's accounting policies
and that have the most significant effect on the amounts recognised
in the consolidated financial statements.
Estimates
Residual Value and Useful Life of Aircraft
As described in note 2 (m), the Group depreciates the Assets on a straight
line basis over the estimated useful life of the Assets 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 Group would currently obtain from 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 are currently no data for aircraft of a similar type
of sufficient age for the directors available to make a direct market
comparison in making this estimation. The residual values of the A380
Aircraft are determined using soft values excluding inflation since
directors consider this best approximates to residual value as required
by IAS 16.
In estimating residual value for the year, the directors referred 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 Group'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 values of the
Aircraft it owns. This together with the wider economic uncertainty,
disruption and illiquid market for the A380, are likely to have an adverse
impact on the future value of the Aircraft assets owned by the Group,
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 GBP11.0
million (30 September 2020: GBP6.4 million).
An increase in residual value by 30 per cent. (30 September 2020: 20
per cent.) would have had 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 each Asset, for
the purpose of depreciation of the Asset under IAS 16, is estimated
based on the expected period for which the Group will own and lease
the Aircraft. The Board of Directors expects that the Aircraft will
have a working life in excess of this period.
Impairment
As described in note 2 (m), 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 GBP65,060,280
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 446,159,788
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 Group will again
be carrying out a full and thorough appraisal of residual values come
the next March financial year end.
Judgements
Operating Lease Commitments - Group as Lessor
The Group has entered into operating leases on seven (31 Mar 2021: seven)
Assets. The Group has determined, based on an evaluation of the terms
and conditions of the arrangements, that it retains all the significant
risks and rewards of ownership of these assets and accounts for the
contracts as operating leases.
The Group has determined that the operating leases on the Assets are
for 12 years based on an initial term of 10 years followed by an exercised
extension term of 2 years.
Functional Currency
The currency of the primary economic environment in which the Group
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 Group 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 Group's significant operating expenses as well as portion of the
Groups' rental income are incurred/earned in GBP.
In addition, the set-up of the leasing structures 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 42,558,530 48,314,854
Revenue received but not yet earned (14,499,298) (16,224,758)
Revenue earned but not yet received 11,982,736 12,462,404
Amortisation of advance rental income 3,972,747 3,920,395
------------- -------------
44,014,715 48,472,895
------------- -------------
B rent income 17,831,562 17,831,562
Revenue earned but not yet received 438,821 392,295
Revenue received but not yet earned (3,403) (6,787)
------------- -------------
18,266,980 18,217,070
------------- -------------
Total rental income 62,281,695 66,689,965
------------- -------------
Rental income is derived from the leasing of the Assets. 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 Leases 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
30 Sep 2021 30 Sep 2020
GBP GBP
Corporate shareholder and advisor fee (note
22) 442,106 432,378
Asset management fee (note 22) 1,069,000 1,045,477
Liaison agency fees (note 22) 6,058 5,925
Administration fees (note 22) 79,276 87,843
Bank interest and charges 712 809
Accountancy fees (note 22) 16,723 16,599
Registrars fee (note 22) 6,267 10,853
Audit fee 21,250 23,410
Directors' remuneration (note 6) 106,000 106,000
Directors' and officers' insurance 137,140* 68,963
Legal and professional expenses 31,236 24,647
Annual fees 2,256 3,750
Marketing fees (note 22) - 11,305
Other operating expenses 1,954 4,062
--------------- ------------
1,919,978 1,842,021
--------------- ------------
* 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 for their
services as a director of the Company at a fee of GBP48,000 per annum,
except for the Chair, who receives GBP59,000 per annum and the Chair of
Audit, who receives GBP57,000 per annum. The rate of remuneration per
director has remained unchanged.
7 UNREALISED FOREIGN EXCHANGE GAINS/(LOSSES)
1 Apr 2021 to 1 Apr 2020
3 0 Sep 2021 to
G BP 3 0 Sep 2020
G BP
Cash at bank 349,438 (335,840)
Deferred income (3,084,895) 5,457,465
Borrowings (1,705,729) 7,607,212
(4,441,186) 12,728,837
------------- -------------
The foreign exchange gain in the Period reflects the 2.24 per
cent. movement in the Sterling/US dollar e
xchange rate from 1.3783 as at 31 March 2021 t o 1.3474 as at 3 0 September 2021.
8 DIVIDS IN RESPECT OF EQUITY SHARES
Dividends in respect of Shares 1 Apr 2021 to
30 Sep 2021
GBP Pence per
Share
First interim dividend 7,773,750 4.50
Second interim dividend 7,773,750 4.50
15,547,500 9.00
----------------- -----------
Dividends in respect of Shares 1 Apr 2020 to
30 Sep 2020
GBP Pence per
Share
First interim dividend 7,773,750 4.50
Second interim dividend 7,773,750 4.50
15,547,500 9.00
--------------------- -----------------
Refer to the Subsequent Events in note 23 in relation to dividends
declared in October 2021.
9 EARNINGS PER SHARE
EPS is based on the net profit for the Period attributable to the Shareholders
of GBP19,823,061 (30 Sep 2020: net profit for the Period of GBP33,296,779)
and 172,750,000 (30 Sep 2020: 172,750,000) Shares 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 EQUIPMENT - AIRCRAFT
TOTAL
GBP
COST
As at 1 Apr 2021 1,039,148,193
--------------
As at 30 Sep 2021 1,039,148,193
--------------
ACCUMULATED DEPRECIATION
As at 1 Apr 2021 527,928,125
Depreciation charge for the period 32,442,608
------------
As at 30 Sep 2021 560,370,733
------------
ACCUMULATED IMPAIRMENT
As at 1 Apr 2021 65,060,280
------------
Impairment loss f or the period -
------------
A s at 30 Sep 2021 65,060,280
CARRYING AMOUNT
As at 30 Sep 2021 413,717,180
------------
As at 31 Mar 2021 446,159,788
------------
The Group 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 Group can sell the Assets during the term of the Leases (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 operating leases
have been added to the carrying amount of the leased asset and therefore will be recognised
as an expense over the lease term. The costs have been allocated to each Aircraft based on
the proportional cost of the Asset.
Refer to note 3 for details on the impairment review conducted by the Company as at the 31
March 2021 year end.
11 FINANCE COSTS
1 Apr 2021 1 Apr 2020
to 30 Sep to 30 Sep
2021 2020
GBP GBP
Amortisation of debt arrangements costs 511,171 511,171
Loan interest 3,210,921 5,620,392
Fair value adjustment on financial
assets and liabilities at fair value
through profit and loss (52,480) (39,115)
----------- -----------
3,669,612 6,092,448
----------- -----------
12 OPERATING LEASES
The amounts of minimum future lease receipts at the reporting date
under non-cancellable operating leases are detailed below:
30 September 2021 Next 12
months 1 to 5 years After 5 years Total
GBP GBP GBP GBP
Aircraft - A rent
receipts 69,283,107 36,449,238 - 105,732,345
Aircraft - B rent
receipts 36,418,896 71,400,914 - 107,819,810
------------ ------------- -------------- -------------
105,702,003 107,850,152 - 213,552,155
------------ ------------- -------------- -------------
31 March 2021 Next 12
months 1 to 5 years After 5 years Total
GBP GBP GBP GBP
Aircraft - A rent
receipts 78,011,587 68,647,792 - 146,659,379
Aircraft - B rent
receipt 36,041,010 89,610,362 - 125,651,372
------------ ------------- -------------- -------------
114,052,597 158,258,154 - 272,310,751
------------ ------------- -------------- -------------
The operating leases are for seven Airbus A380-861 aircraft. The
terms of the Leases are as follows:
MSN077 - term of the Lease is for 12 years ending October 2023.
The initial lease is for 10 years ending October 2021, with an
extension period of 2 years ending October 2023, in which rental
payments reduce. The lease extension option was confirmed on 17
October 2019 and therefore extended by 2 years to the expiry date
of October 2023.
MSN090 - term of the Lease is for 12 years ending December 2023.
The initial lease is for 10 years ending December 2021, with an
extension period of 2 years, in which rental payments reduce. The
lease extension option was confirmed on 5 December 2019 and therefore
extended by 2 years to the expiry date of December 2023.
MSN105 - term of the Lease is for 12 years ending October 2024.
The initial lease is for 10 years ending October 2022, with an
extension period of 2 years ending October 2024, in which rental
payments reduce. The lease extension option was confirmed on 16
January 2020 and therefore extended by 2 years to the expiry date
of October 2024.
MSN106 - term of the Lease is for 12 years ending October 2024.
The initial lease is for 10 years ending October 2022, with an
extension period of 2 years ending October 2024, in which rental
payments reduce. The lease extension option was confirmed on 16
January 2020 and therefore extended by 2 years to the expiry date
of October 2024.
MSN107 - term of the Lease is for 12 years ending October 2024.
The initial lease is for 10 years ending October 2022, with an
extension period of 2 years ending October 2024, in which rental
payments reduce. The lease extension option was confirmed on 16
January 2020 and therefore extended by 2 years to the expiry date
of October 2024.
MSN109 - term of the Lease is for 12 years ending November 2024.
The initial lease is for 10 years ending November 2022, with an
extension period of 2 years ending November 2024, in which rental
payments reduce. The lease extension option was confirmed on 16
January 2020 and therefore extended by 2 years to the expiry date
of November 2024.
MSN110 - term of the Lease is for 12 years ending November 2024.
The initial lease is for 10 years ending November 2022, with an
extension period of 2 years ending November 2024, in which rental
payments reduce. The lease extension option was confirmed on 16
January 2020 and therefore extended by 2 years to the expiry date
of November 2024.
At the end of each Lease the Lessee has the right to exercise an
option to purchase the Asset if the Group chooses to sell the Asset.
If a purchase option event occurs the Group and the Lessee will
be required to arrange for a current market value appraisal of
the Asset to be carried out by three independent appraisers. The
purchase price will be equal to the average valuation of those
three appraisals.
13 RECEIVABLES
30 Sep
2021 31 Mar 2021
GBP GBP
Prepayments 218,934 82,182
Sundry debtors 39,205 39,130
258,139 121,312
-------- ------------
The above carrying value of receivables is equivalent to fair
value.
14 PAYABLES (amounts falling due within one year)
30 Sep 2021 31 Mar 2021
GBP GBP
Accrued administration fees 96,135 16,158
Accrued audit fee 21,250 51,200
Other accrued expenses 17,609 29,387
------------ ------------
134,994 96,745
------------ ------------
The above carrying value of payables is equivalent to the fair
value.
15 BORROWINGS
30 Sep 2021 31 Mar 2021
GBP GBP
Loans 39,398,379 57,025,093
Equipment Notes 69,663,567 89,635,668
------------ ------------
109,061,946 146,660,761
Associated costs (2,844,696) (3,355,867)
------------ ------------
106,217,250 143,304,894
------------ ------------
Current portion 69,598,386 76,027,801
============ ============
Non-current portion 36,618,864 67,277,093
============ ============
Notwithstanding the fact that GBP39.4 million (31 March 2021: GBP83.1
million) debt was repaid during the Period, as per the Consolidated
Statement of Cash Flows, the closing value of the value of the
outstanding bank loans and equipment notes decreased by GBP37.6
million (31 March 2021: GBP101.7 million) due to the 2.24 per cent
movement in the Sterling / US dollar exchange rate for the period
from 1.3783 at 31 March 2021 to 1.3474 at 30 September 2021. See
note 19.
The amounts below detail the future contractual undiscounted cash
flows in respect of the Loans and equipment notes, including both
the principal and interest payments, and will not agree directly
to the amounts recognised in the Consolidated Statement of Financial
Position:
30 Sep 2021 31 Mar 2021
GBP GBP
Amount due for settlement within
12 months 72,635,988 81,296,113
------------ ------------
Amount due for settlement after
12 months 40,610,171 72,631,218
------------ ------------
The Loan to MSN077 Limited was arranged with Westpac for $151,047,509
and runs for 12 years until October 2023 and has an effective interest
rate of 4.590 per cent.
The Loan to MSN090 Limited was arranged with ANZ for $146,865,575
and runs for 12 years until December 2023 and has an effective
interest rate of 4.558 per cent.
The Loan to MSN105 Limited was arranged with ICBC, BoC and Commerzbank
for $145,751,153 and runs for 12 years until October 2024 and has
an effective interest rate of 4.780 per cent.
Each Loan is secured on one Asset. No significant breaches or defaults
occurred in the Period. The Loans are either fixed rate over the
term of the Loan or have an associated interest rate swap contract
issued by the lender in effect fixing the loan interest over the
term of the Loan. Transaction costs of arranging the Loans have
been deducted from the carrying amount of the Loans and will be
amortised over their respective lives.
In order to finance the acquisition of the fourth, fifth, sixth
and seventh Assets, DNAFA used the Certificates. The Certificates
have an aggregate face amount of approximately $587.5 million,
made up of "Class A" certificates and "Class B" certificates. The
Class A certificates in aggregate have a face amount of $433,772,000
with an interest rate of 5.125 per cent. and a final expected distribution
date of 30 November 2022. The Class B certificates in aggregate
had a face amount of $153,728,000 with an interest rate of 6.5
per cent. and were repaid on 30 May 2019. There is a separate trust
for each class of Certificates. The trusts used the funds from
the Certificates to acquire equipment notes. The equipment notes
were issued to Wilmington Trust, National Association as pass through
trustee in exchange for the consideration paid by the purchasers
of the Certificates. The equipment notes were issued by DNAFA and
the proceeds from the sale of the equipment notes financed a portion
of the purchase price of the four Airbus A380-861 aircraft, with
the remaining portion being financed through contribution from
the Company of the C Share issue proceeds. The holders of the equipment
notes issued for each Aircraft will have the benefit of a security
interest in such Aircraft. The remaining balance is being repaid
by continuing to amortise borrowings that pays both principal and
interest through periodic payments.
In the directors' opinion and with reference to the terms mentioned,
the above carrying values of the Loans and equipment notes are
approximate to their fair value.
16 SHARE CAPITAL
The Share Capital of the Group is represented by an unlimited number
of shares.
Issued Administrative
Shares Shares C Shares
Issued shares as at 30 Sep
2021 and 31 Mar 2021 2 172,750,000 -
------------------ ------------ ----------------------
Issued Administrative
Shares Shares C Shares Total
GBP GBP GBP GBP
Share Capital
Total Share Capital
as at 30 Sep 2021
and as at 31 Mar
2021 2 319,836,770 - 319,836,770
------------------ ------------ ---------------------- ------------
Members holding Shares are entitled to receive and participate
in any dividends out of income attributable to the Share, other
distributions of the Group 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
attributable to the share class remaining after payment of all
the creditors of the Group.
On 6 March 2013, 100,250,000 C Shares were converted into Shares
with a conversion of 1:1.
The holders of Administrative Shares are not entitled to receive,
and participate in, any dividends out of income; other distributions
of the Group 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 Ordinary 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 no right to attend, speak and vote at general
meetings of the Group, except for the Liquidation Proposal Meeting
(general meeting convened six months before the end term of the
Leases 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 17,686,140 29,926,638
Cash deposits 12,878,026 -
------------------- ------------
30,564,166 29,926,638
------------------- ------------
Cash and cash equivalents are highly liquid, readily convertible
and are subject to insignificant risk of changes in value.
18 FINANCIAL INSTRUMENTS
The Group's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Group's
operations;
(b) Loans secured on non-current assets; and
(c) Interest rate swap
19 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's objective is to obtain income and returns and a capital
return for its Shareholders by acquiring, leasing and then selling
aircraft.
The following table details the categories of financial assets and
liabilities held by the Group at the reporting date:
30 Sep 2021 31 Mar 2021
GBP GBP
Financial assets
Cash and cash equivalents 30,564,166 29,926,638
Receivables (excluding prepayments) 39,204 39,130
------------ ------------
Financial assets at amortised cost 30,603,370 29,965,768
------------ ------------
Financial liabilities
Interest rate swap 33,713 121,420
------------ ------------
Financial liabilities at fair value through
profit or loss 33,713 121,420
------------ ------------
Payables 134,994 96,745
Debt payable 106,217,250 143,304,894
------------ ------------
Financial liabilities measured at amortised
cost 106,352,244 143,401,639
------------ ------------
In accordance with IFRS 13, this standard requires the Group to
price its financial assets and liabilities using the price in the
bid-ask spread that is most representative of fair value for both
financial assets and financial liabilities. An active market is a
market in which transactions for the asset or liability take place
with sufficient frequency and volume to provide pricing information
on an ongoing basis.
The level of the Fair Value Hierarchy of an instrument is determined
considering the inputs that are significant to the entire measurement
of such instrument and the level of the fair value hierarchy within
those inputs are categorised.
The hierarchy is broken down into three levels based on the observability
of inputs as follows:
Level 1: Quoted price (unadjusted) in an active market for an identical
instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Valuation techniques using significant unobservable inputs.
The interest rate swap is the only financial instrument held at
fair value through profit or loss and is considered to be level
2 in the Fair Value Hierarchy.
Derivative financial instruments
The following table shows the Group's derivative position:
Financial liability Notional
30 Sep 2021 at fair value amount Maturity
GBP USD
Interest Rate Swap
MSN090 Loan 68,941 5,907,831 4 Dec 2023
-------------------- ----------
Financial liability Notional
31 Mar 2021 at fair value amount Maturity
GBP USD
Interest Rate Swap
MSN090 Loan 121,420 10,154,511 4 Dec 2023
-------------------- -----------
The main risks arising from the Group'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 Group manages its capital to ensure that the Group 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 capital structure of the Group consists of debt, which includes
the borrowings disclosed in note 15, cash and cash equivalents
and equity attributable to equity holders, comprising issued capital
and retained earnings.
The Group's Board of Directors reviews the capital structure on
a bi-annual basis.
Equity includes all capital and reserves of the Group that are managed
as capital.
No changes were made in the objectives, policies or processes for
managing capital during the Period (None for the period from 1 April
2020 to 30 September 2020).
(b) Foreign Currency Risk
The Group's accounting policy under IFRS requires the use of a Sterling
historic cost of the assets and the value of the US dollar debt 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 Consolidated Statement of Financial
Position and are accrued over the period of the Leases. The directors
consider that this introduces an artificial variance due to the movement
over time of foreign exchange rates. In actuality, the US dollar operating
leases should offset the US dollar payables on amortising Loans. The
foreign exchange exposure in relation to the Loans is thus almost
entirely hedged.
Lease rentals (as detailed in notes 4 and 12) are received in US dollar
and Sterling. Those lease rentals received in US dollar are used to
pay the debt repayments due, also in US dollar (as detailed in note
15). Both US dollar lease rentals and debt repayments are fixed and
are for similar sums and similar timings. The matching of lease rentals
to settle debt repayments therefore minimises risks caused by foreign
exchange fluctuations.
The carrying amounts of the Group's foreign currency denominated monetary
assets and liabilities at the reporting date are as follows:
30 Sep 2021 31 Mar 2021
GBP GBP
Debt (US dollar) - Liabilities (109,061,946) (146,660,761)
Financial (liabilities) and assets
at fair value through profit or
loss (33,713) (121,420)
Cash and cash equivalents (US dollar)
- Asset 9,656,781 9,324,381
-------------- --------------
The following table details the Group's sensitivity to a 25 per
cent. (31 March 2020: 25 per cent.) appreciation and depreciation
in Sterling against the US dollar. 25 per cent. (31 March 2020:
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 2020: 25 per cent.) change in foreign currency
rates. A positive number below indicates an increase in profit
and other equity where Sterling strengthens 25 per cent. (31 March
2020: 25 per cent.) against the US dollar. For a 25 per cent. (31
March 2020: 25 per cent.) weakening of the Sterling against the
US dollar, there would be a comparable but opposite impact on the
profit and other equity:
30 Sep 2021 31 Mar 2021
GBP GBP
Profit or loss 19,887,776 27,491,560
Assets (1,924,614) (1,840,592)
Liabilities 21,812,389 29,332,152
------------ ------------
On the eventual sale of the Assets, the Company will be subject
to foreign currency risk if the sale settled in a currency other
than Sterling. Transactions in similar assets are typically priced
in US dollars.
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group.
Refer to the going concern section on pages 27 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.
The Group's financial assets exposed to credit risk are as follows:
30 Sep 2021 31 Mar 2021
GBP GBP
Receivables (excluding prepayments) 39,204 39,130
Cash and cash equivalents 30,564,166 29,926,638
------------ ------------
30,603,370 29,965,768
------------ ------------
Surplus cash in the Company is held in Barclays. Surplus cash in
the Subsidiaries is held in accounts with Barclays, Westpac and
ANZ, which have credit ratings given by Moody's of A1, Aa2 and
Aa3 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 agreements between the
Lessee and the Group, any non-payment of the lease rentals constitutes
a "Special Termination Event", under which the Lease terminates
and the Group may either choose to sell the Asset or lease the
Assets to another party.
At the inception of each Lease, the Group selected a Lessee with
a strong statement of financial position 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 Group will encounter difficulty
in realising assets or otherwise raising funds to meet financial
commitments. The Group's main financial commitments are its ongoing
operating expenses, loan repayments to Westpac, ANZ, ICBC, BoC
and Commerzbank, and repayments on equipment notes.
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which established an appropriate liquidity
management framework at the incorporation of the Group, through
the timings of lease rentals and debt repayments. The Group 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 the principal
and interest payments, and will not agree directly to the amounts
recognised in the Consolidated Statement of Financial Position:
30 Sep 2021 1-3 3-12 1-2 years 2-5 years Over 5
months months years
GBP GBP GBP GBP GBP
Financial liabilities
Payables
- due within
one period 134,994 - - - -
Interest
rate swap - - - 33,713 -
Loans payable 13,526,937 19,420,198 16,392,169 5,921,510 -
Equipment
notes 32,479,932 32,442,664 32,404,465 - -
----------- ----------- ----------- ----------
46,141,863 51,862,862 48,796,634 5,955,223 -
----------- ----------- ----------- ----------
31 Mar 2021 1-3 3-12 1-2 years 2-5 years Over 5
Months months years
GBP GBP GBP GBP GBP
Financial liabilities
Payables
- due within
one year 96,745 - - - -
Interest
rate swap - - - 121,420 -
Loans payable 9,814,220 24,325,091 16,251,577 9,331,009 -
Equipment
notes 23,591,591 23,565,212 47,048,632 - -
----------- ----------- ----------- ----------
33,502,556 47,890,303 63,300,209 9,452,429 -
----------- ----------- ----------- ----------
(e) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest
rates will affect future cash flows. It is the risk that fluctuations
in market interest rates will result in a reduction in deposit interest
earned on bank deposits held by the Group. The MSN090 loan which
is at a variable rate, has an associated interest rate swap contract
issued by the lender in effect fixing the loan interest over the
term of the Loan.
The Group mitigates interest rate risk by fixing the interest rate
on its debts with the exception of MSN090 Limited, which has an associated
interest rate swap as mentioned above. The lease rentals are also
fixed.
The following table details the Group's exposure to interest rate
risks:
Variable Fixed Non-interest
interest interest bearing Total
GBP GBP GBP GBP
30 Sep 2021
Financial assets
Receivables (excluding
prepayments) - - 39,204 39,204
Cash and cash equivalents 30,564,166 - - 30,564,166
----------- ------------ ------------- ------------
Total Financial
Assets 30,564,166 - 39,204 30,603,370
----------- ------------ ------------- ------------
Financial liabilities
Interest rate swap 33,713 - - 33,713
Payables - - 134,994 134,994
Loans payable - 39,398,379 - 39,398,379
Equipment notes - 69,663,567 - 69,663,567
----------- ------------ ------------- ------------
Total Financial
Liabilities 33,713 109,061,946 134,994 109,230,653
----------- ------------ ------------- ------------
Total interest
sensitivity gap 30,597,879 109,061,946
----------- ------------
Variable Fixed Non-interest
interest interest bearing Total
GBP GBP GBP GBP
31 Mar 2021
Financial Assets
Receivables (excluding
prepayments) - - 39,130 39,130
Cash and cash
equivalents 29,926,638 - - 29,926,638
----------- ------------ ------------- ------------
Total Financial
Assets 29,926,638 - 39,130 29,965,768
----------- ------------ ------------- ------------
Financial liabilities
Interest rate
swap 121,420 - - 121,420
Payables - - 96,745 96,745
Loans payable - 57,025,093 - 57,025,093
Equipment notes - 89,635,668 - 89,635,668
----------- ------------ ------------- ------------
Total Financial
Liabilities 121,420 146,660,761 96,745 146,878,927
----------- ------------ ------------- ------------
Total interest
sensitivity gap 29,805,218 146,660,761
----------- ------------
If interest rates had been 50 basis points higher throughout the
Period and all other variables were held constant, the Group's
net assets attributable to Shareholders as at 30 September 2021
would have been GBP152,989 (31 March 2021: GBP149,026) greater
due to an increase in the amount of interest receivable on the
bank balances.
If interest rates had been 50 basis points lower throughout the
Period and all other variables were held constant, the Group's
net assets attributable to Shareholders as at 30 September 2021
would have been GBP152,989 (31 March 2021: GBP149,026) lower due
to a decrease in the amount of interest receivable on the bank
balances.
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 146,660,761 248,459,023
Cash flows paid - capital (39,389,708) (42,520,674)
Cash flows paid - interest (3,125,759) (5,777,560)
Non-cash flows
* Interest accrued 3,210,921 5,620,392
* Effects of foreign exchange 1,705,731 (7,607,208)
------------- -------------
Closing Balance 109,061,946 198,173,973
------------- -------------
21 ULTIMATE CONTROLLING PARTY
In the opinion of the directors, the Group has no ultimate controlling
party.
22 RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTS
Doric is the Group's Asset Manager.
During the Period, the Group incurred GBP1,069,445 (30 September 2020:
GBP1,046,109) of expenses with Doric which consisted of asset management
fees of GBP1,069,000 (30 September 2020: GBP1,045,477) as shown in
note 5, and GBP445 (30 September 2020: GBP632) reimbursed expenses.
At 30 September 2021, GBP1,850 (31 March 2021: GBP7,908) was prepaid
to this related party.
Nimrod is the Group's Corporate and Shareholder Advisor.
During the Period, the Group incurred GBP442,106 (30 September
2020: GBP432,378) of expenses with Nimrod. As at 30 September 2021,
GBPnil (31 March 2021: GBPnil) was owing to this related party.
JTC Registrars Limited is the Group's registrar, transfer agent
and paying agent.
During the year , the Group incurred GBP6,267 (30 September 2020:
GBP10,853) of expenses with JTC Registrars as shown in note 5.
As at 30 September 2021, GBP3,496 (31 March 2021: GBP1,092) was
owing to this related party.
JTC Fund Solutions (Guernsey) Limited is the Group's Company Secretary
and Administrator.
During the year, the Group incurred GBP95,999 (30 September 2020:
GBP104,442) of expenses with JTC Fund Solutions (Guernsey) Limited
as shown in note 5. As at 30 September 2021, GBP96,135 (31 March
2021: GBP16,158) was owing to this related party.
23 SUBSEQUENT EVENTS
On 14 October 2021, a further dividend of 4.5 pence per Share was
declared and this was paid on 28 October 2021.
A D V I S O R S A ND C O N T A CT I N F O R M A T ION
K E Y I N F O R M A T ION
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 A2
Li st ing Da te: 14 July 2011
Financial Year End: 31 M arch
Ba se Curre ncy: Pound Sterling
I S I N: GG 00B3Z62522
SED O L: B3Z6252
LEI: 213800ENH57LLS7MEM48
Coun t ry of I ncorpora t ion: G uernsey
Re g i s t ra t ion number: 52985
M A N A G E ME NT A ND A DMI N I S T R A T ION
Reg i s tered Off i ce Compa ny Secretary a nd A dmi n i s
trator
D o ric Nimrod A ir T wo Limi t ed JTC Fund Solutions ( G uernse
y) Limi t ed
G round Floor Ground Floor
Do rey Court Dorey Court
Ad miral Pa rk Admiral Pa rk
S t Pe t er P ort St Pe t er P ort
G ue rnsey, G Y1 2 HT G uernsey, G Y1 2 HT
A s se t Manager Lease and Debt Arranger
D o ric GmbH Doric Asset Finance Gm bH & Co. KG
Be rliner S t r asse 114 Berliner S t r asse 114
6306 5 O ff enb ach am M a in 63065 O ff enb ach am M a in
G e r many G e rmany
Corporate and Shareholder Advisor A d vocates to the Co m pa ny
Ni mrod Capi t al LLP (as to G u ernsey Law)
1-3 Norton Folgate M ou rant O z annes
London 1 Le Marchant Street
E1 6DB St Peter Port
Guernsey, GY1 4BZ
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 A u d itor
E x chan ge House Grant Thornton Limited
P rimrose S treet Lefebvre House
Londo n Lefebvre Street
EC2 A 2EG St Peter Port
Guernsey C.I, GY1 3TF
Reg i s trar
JTC Re g i s trars L imi t ed
Ground Floor, Do rey Court
Ad miral Pa rk
S t Pe t er P ort
G ue rnsey, G Y1 2 HT
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END
IR BLBDDXUBDGBL
(END) Dow Jones Newswires
December 16, 2021 11:56 ET (16:56 GMT)
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