Derek Pain: Developments 'Down Under' may lift Avation
No Pain, No Gain
Friday 09 November 2012
Shares of Avation, recruited to the no pain, no gain portfolio in January last year, have endured a disappointing 2012 journey. The once high-flying stock became quite nervous ahead of its year's figures. Although disappointing, the results, which appeared last week, were clearly better than some anticipated and the shares regained a little altitude.
Even so, year's profits were well below my expectations. Against the £7m, perhaps £8m, that was being predicted back in February, the pre-tax figure that emerged is only £5.2m and compares unfavourably with the £5.6m recorded in the previous year.
What has prompted such a low-level performance? There is no doubt it has been an exciting year for Avation, an aircraft-leasing group, as it ramped up its fleet, gathered orders for more aircraft and arranged further finance. Nevertheless, revenue at £22.1m, is below earlier estimates and no doubt reflects the cost of expansion, the sale of an offshoot, and the more cautious outlook for the Australian economy. The group's major customers are two "Down Under" airlines, Skywest and Virgin Australia. It is possible that the reported resources slowdown is endangering the continuing growth that the two operators have enjoyed. Still, with agreed additions to the fleet, chairman Jeff Chatfield suggests new aircraft should lift income by £4.6m in the current year with a further £2.9m in the following year.
Despite the unsatisfactory profits performance, the portfolio intends, at least for the time being, to stick with the shares. Mr Chatfield's overall report is encouraging. He says the board is "confident that our business provides for continued and sustainable growth in 2013 and beyond". And there are a number of influences that could inspire the shares. One is the proposed takeover of Skywest by Virgin Australia. It's a long way from being a done deal but if it should reach fruition it would value the London quoted Skywest shares at around 30p, not far from their peak but well below analyst forecasts they should hit 45p.
The two Aussie airlines already enjoy close business ties. And it must be significant that Avation has received further orders from Virgin Australia at a time the airline must have been contemplating the Skywest offer. So any merger should not inhibit – and could actually improve – the leaser's relationship with Virgin Australia which hitherto has largely conducted its Avation links through Skywest, a company also headed by Mr Chatfield.
There are other favourable straws in the wind. The group is still working towards a Singapore share quote. In spite of its Australian associations it is based in the city and feels the Asian investment community will be more attracted to the shares if it has a local quote. And, despite the profits reverse, the yearly dividend is being lifted but only by a modest 4 per cent to 1.04p a share. There are also a number of institutional shareholders. One of them, Oceanwood Capital Management, has just increased its shareholding to 15.1 per cent. In addition, Avation controls an AIM-traded leaser called Capital Lease Aviation that has just increased profits – from £3.5m to £3.8m.
The portfolio descended on the shares at 83.5p a time. The leasing group, a spin-off from Skywest, arrived on the fringe Plus share market (now called ISDX following the rescue takeover by inter-dealer broker Icap) six years ago at a mere 4p. By the time it switched to a full listing the shares were around 58p. Subsequently they topped 120p, before slipping to around the portfolio's buying level. The price, as I write, is 95p. I am, of course, disappointed that what I regarded as a sound investment has produced such a pedestrian profits display, and I am far from convinced that the group will manage to achieve the £7m figure in the current year. Earlier this year there was talk the shares should advance to 200p. Sources close to the company even went so far as to put a 400p tag on the stock.
Such hopes, at least in the next few years, are unlikely to be realised. But should Virgin Australia feel that after absorbing Skywest it might be a good idea to also annex the financial muscle of Avation, then the shares could be in for a rousing time.
Donald MacInnes: Who would want to be a Barbie girl in a non-Barbie world?
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
Millions in line for compensation after being sold unnecessary credit card cover
- 1 Stephen Fry explains what he would say if he was 'confronted by God'
- 2 City traders pay £200 for a quick hangover cure
- 3 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 4 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 5 Ball pool for adults opens in London
Stephen Fry explains what he would say if he was 'confronted by God'
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
President Putin is a dangerous psychopath - reason is not going to work with him
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion