What Avation (AVAP) Said on Its H2 Earnings Call

Key Points

• Avation reported $8.4 million in profit after tax for the year ended June 30, 2026, while raising its dividend 50% to 1.5 U.S. cents per share. Net asset value per share increased 19.9% to $4.39, helped by share repurchases exceeding 10% of shares outstanding.
• The aircraft lessor reduced net debt by $80 million to $523 million and improved its net debt-to-assets ratio to 52.3%. It also issued $300 million of unsecured notes maturing in 2031, secured a new $100 million warehouse facility, and had 97.3% of debt at fixed rates.
• Avation plans to grow through 13 ATR aircraft already on order, lease placements with Finnair and other customers, and potential narrow-body acquisitions. It is also preparing to transition or extend four A220 aircraft leased to airBaltic amid the airline’s Chapter 11 process.

Avation LON: AVAP reported a profit after tax of $8.4 million for its financial year ended June 30, 2026, while raising its dividend by 50% and continuing to reduce debt as the aircraft lessor expanded its funding options.

Executive Chairman Jeff Chatfield said the company had 33 aircraft, 16 customers and approximately $1 billion in assets at the financial year-end. Its fleet had an average aircraft age of 9.1 years and an average remaining lease term of 3.8 years. Avation reported $303 million of unearned contracted revenue.

The company’s portfolio was weighted toward narrow-body aircraft, which represented 59% of fleet value, alongside 15 ATR 72 turboprops, an Airbus A330, Airbus A321-200 aircraft and a Pratt & Whitney PW127M engine on lease. Avation also has 13 ATR aircraft on order, with deliveries scheduled through 2029, and 19 purchase rights extending to 2034.

Profitability, Dividend and Net Asset Value

Chief Financial Officer Andrew Hiscock said total income was broadly unchanged year over year at $112 million, supported by high fleet utilization. Revenue included $21.6 million of maintenance reserve income and $6.9 million in end-of-lease compensation.

Operating profit totaled $64.3 million and profit after tax was $8.4 million. Hiscock said operating profit included a $1.4 million unrealized loss related to the revaluation of aircraft purchase rights and deposits, substantially below the prior year’s $21.6 million charge.

He said the company recorded costs connected with the final redemption of its previous notes, including amortization and redemption losses totaling about $14 million. Those costs are complete and “will not impact future periods,” according to Hiscock. After adding back specified non-cash and redemption-related items, Avation reported underlying operating profit of just under $66 million and underlying profit before tax of just under $26 million.

Net asset value per share rose 19.9% to $4.39, or £3.33. Hiscock said approximately 8% of the increase reflected higher equity, while 12% resulted from the accretive effect of the company’s share repurchase program. Avation bought back more than 10% of its shares in issue during the year.

The board declared a dividend of 1.5 U.S. cents per share, a 50% increase from the prior year.

Debt Reduction and Liquidity

Avation reduced total loans by $76 million during the year, while net indebtedness declined by $80 million to $523 million. Its net debt-to-total-assets ratio improved by 2.5 percentage points to 52.3%.

The company’s weighted average cost of debt rose to 7.0% from 6.6%, which Hiscock attributed primarily to a greater proportion of unsecured notes in the debt mix, as secured debt was repaid, as well as modestly higher market interest rates. However, 97.3% of Avation’s debt is now fixed-rate.

During the year, Avation issued $300 million of unsecured notes maturing in 2031 and redeemed notes that otherwise would have matured in 2026. S&P Global Ratings upgraded the company to B from B-minus, Moody’s assigned a B1 rating, and Fitch maintained its B rating. All three rating agencies assigned stable outlooks.

Cash balances were $105 million at year-end, down $25 million from the prior year. Hiscock said the decline principally reflected maintenance reserve spending associated with planned shop visits and share buybacks. About half of the cash balance was unrestricted.

Operating cash flow was $31 million, compared with $91 million in fiscal 2025. The company said the difference reflected working-capital movements involving finance lease receivables and maintenance reserves, as well as lower maintenance reserve utilization in the prior year. Capital expenditures totaled nearly $49 million, including spending on aircraft and an engine used as a sales tool. Avation also spent more than $15 million repurchasing shares and bought back $14 million of bonds.

Since the year-end, Avation signed a $100 million committed warehouse facility intended to support future growth. The company said it also had 10 unencumbered aircraft at year-end and other refinancing opportunities available.

Fleet Activity and Growth Plans

Avation took delivery of two ATR aircraft during the year and placed both with new airline customers. It also sold a Boeing 777 in September 2025, generating a $4.1 million profit, transitioned five ATRs to new customers on six- or eight-year leases, and extended the lease on its Airbus A330 with EVA Air by four years through 2031.

Since year-end, Avation signed leases for two ATR aircraft with Finnair. One aircraft had already transitioned at the time of the call, while the second was imminent. The company also signed a lease for another new ATR with an unnamed customer.

Chatfield said Avation intends to continue placing new ATR deliveries, renewing or transitioning existing ATR leases, and pursuing opportunities to expand its narrow-body fleet through secondary-market purchases and airline sale-and-leaseback transactions. He said aircraft prices in the secondary market were “extremely high,” making disciplined pricing important.

The company is also preparing either to transition or extend leases on four Airbus A220 aircraft currently leased to airBaltic. Chatfield said airBaltic had entered a Chapter 11 process in the U.S. and that Avation was willing to continue leasing the aircraft on sensible commercial terms. If that does not occur, the company would transfer the aircraft to other operators. Avation holds approximately $23 million in reserves and deposits against the aircraft.

Chief Commercial Officer Tony Romano said the A220 is a fuel-efficient and increasingly liquid asset, and that Avation is in contact with potential operators if replacement placements are needed. He also described the ATR market as buoyant, noting the lack of competing newly produced regional turboprops.

About Avation (LON:AVAP)

Avation PLC is a specialist commercial passenger aircraft leasing company owning a fleet of commercial aircraft which it leases to airlines across the world.

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