Full-year gross profit fell 3.7% to £34.2m for the global aviation services group

Global aviation services provider Air Partner said its full-year sales and profits declined for the period ending Jan. 31, 2020.

Gross profit was down 3.7% to £34.2 million compared to £35.5 million for the previous year. On a like for like basis, adjusting for constant exchange and acquisitions, profits declined 5.3%.

On the top line, gross transactions dropped 13.4% to £236.8 million with revenues sliding 13.9% to £66.7 million.

Air Partner CEO Mark Briffa blamed the declines on instability in its home market.

“While there was good strategic progress made over the last financial year, our performance was impacted by customers delaying spending as they waited for the uncertainty of, first, Brexit and then the UK’s December election to clear,” he said.

Briffa added, “There were also no significant one-off events requiring urgent action in either H1 or H2, the absence of which is highly unusual in Charter.” 

A bright spot was Air Partner’s Private Jet division which saw sales rise by 12.5% despite a soft U.K. market in the final quarter. Results, however, were boosted by a 42.5% jump in jet card and on-demand private jet charter revenues in the U.S.

Highlights included, “Group Charter and Private Jets working together on the European tour of a high-profile music artist, as well as a number of joint projects between Group Charter and Freight.”

In his division review, Briffa said, “We continue to invest for further organic growth in our Charter division, notably in the US, where the market is strong and our business is performing well. We selectively increased broker headcount and the opening of the Houston office took our number of U.S. offices to five, alongside New York, Los Angeles, Fort Lauderdale, and Washington, D.C. In addition, we opened offices in Singapore and Dubai to offer our full suite of charter solutions, and continue to grow our share of the Asia-Pacific and Middle Eastern markets.”

Air Partner JetCard

Private Jets division gross profit increased by 12.5% to £11.7 million from £10.4 million. U.S. division gross profit increased by 42.5% year over year.

Sales of Air Partner’s JetCard in the U.S. jumped 32% “largely attributable to the continued investment made in hiring the best sales and business development talent.”

Softness in the U.K. market was driven by uncertainty around Brexit and the general election and was compounded by key customers flying less.

JetCard customer numbers remained broadly flat in the U.K. and Europe, as customers were unwilling to change providers due to the economic and political uncertainty, the company said.

Briffa noted, “The Group has had a very encouraging start to the financial year, with the unaudited management accounts for the first quarter of the year showing an expected underlying profit before tax of £6.0 million.”

He said, “April (2020) was a record month, predominantly driven by unusually high levels of activity in Freight and Group Charter,” adding, “The success of the Group in the year to date has been driven by new business wins as a result of the pandemic, such as repatriation contracts and corporate shuttles, which have outweighed a decline in Safety & Security and Private Jets including JetCard.”

Looking forward, the CEO said, “We have seen high levels of activity in May to date and are strongly ahead of budget for the month. The forward order book for June is also encouraging, with continued high demand for our Freight and Group Charter services as part of the ongoing COVID-19 response.”

Bullish on Private Jet Travel

Looking ahead, Briffa said the company anticipates a slowdown in repatriation work and freight charter activity as global supply chains recover.

At the same time, private jet bookings are expected to increase, as international airways start to re-open, with executives and high net worth individuals wanting to travel in more controlled environments via less busy airports.

Briffa said, “We have seen some early signs of recovery within Private Jets as well as Security, but they remain nascent at this stage.”

A recent presentation by McKinsey estimated only 10% of people and businesses that can afford to fly privately in the U.S. do so. However, many in the industry believe fears of contracting the Covid-19 Coronavirus may bring new customers.

A study by one private jet charter operator found potential exposure using business aviation is more than 30 times lower than flying with the airlines.

Air Partner Analysts’ Views

N+1 Singer analyst Greg Poulton commented, “FY20 results report EPS slightly ahead (4%) of our previous forecast. Net debt (pre-IFRS 16) was also slightly better than expected at £6.9m (N+1SE: £7.5m). The Group had a very strong start to FY21, achieving PBT of £6.0m in Q1 and trading is expected to be strongly ahead of budget in May.”

He added, “The order book for June is also encouraging. This is an impressive result against the significant challenges posed by COVID-19 for the aviation industry. Performance in H2 will likely depend upon the recovery in activity levels in Private Jets and Safety & Security, but Air Partner is already seeing some signs of recovery here.”

Poulton concluded, “We believe the Group is well placed to achieve a strong full-year result given the diversity of its model and the strength of the balance sheet.”

Analysts Gert Zonneveld and Caspar Trenchard of Canaccord Genuity Ltd jointly wrote, “Air Partner is well-positioned to benefit from the long-term growth trends in aviation. It continues to make good progress in its strategy of diversifying its revenue streams and aviation services portfolio, which should increase the Group’s forward long-term contract portfolio. Q1 has been strong and with ongoing momentum the Group is heading for record interim results.”

They added, “While some COVID-19-related demand is likely to slow down in H2, we expect Private Jet bookings to increase. Activities in Safety & Security, such as training, consulting and testing are also likely to improve in H2. Our rating, target price and estimates remain Under Review due to a lack of visibility on the impact of COVID-19.”

Key shareholders in the group include Sanford DeLand Asset Management Ltd. (19.4%), Schroder Investment Management Ltd. (13.7%), Aberforth Partners LLP (11.9%), Hargreaves Lansdown Asset Management Ltd (8.5%), and Hargreaves Lansdown Stockbrokers Ltd. (5.9%).

After announcing the results, shares in Air Partner plc (LON: AIR) were down at 70.89 GBX before moving higher to 74.80 GBX. They remain up significantly from its 52-week low of 15.33 GBX. High during the period was 102.9 GBX.

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