Avation plc (LON:AVAP), a specialist in aircraft leasing, has demonstrated a robust first half of the financial year, showcasing solid revenue growth and strong cash generation. The company’s latest interim results reflect its resilience and ability to navigate the evolving aviation market successfully.
Strong Financial Performance
Avation reported a 3% increase in net asset value (NAV), driven by higher lease revenues and strong cash generation. Revenue for the period grew to $55.4 million, a significant jump from $46.3 million in H1 2024, reflecting stronger fleet utilisation and increased maintenance reserve income. EBITDA surged by 45% to $55.6 million, underlining the efficiency and profitability of its leasing operations.
This positive financial performance also allowed Avation to reduce its net debt by $45 million, bringing it down to $606 million. The company’s NAV per share climbed to 294p, an increase from 285p as of 30 June 2024, further reinforcing its strong financial standing.
Fleet Expansion and Strategic Growth
Avation continues to execute its growth strategy by expanding its fleet. The company has announced the acquisition of an Airbus A320, currently leased to Etihad Airlines, a move that aligns with its strategy to strengthen its portfolio of high-quality aircraft.
Additionally, Avation remains committed to its ATR 72-600 orderbook, with plans to sell another aircraft in Q2 2025, generating net cash proceeds of approximately $10 million from two recent ATR sales. Looking further ahead, the company aims to deliver up to 35 ATR 72 aircraft over the next 10 years, ensuring sustainable long-term growth.
Analyst’s Perspective
Zeus analysts are optimistic about Avation’s outlook, highlighting the company’s resilient performance and promising growth prospects. Commenting on the interim results, John Cummins of Zeus stated:
“Today’s interim results reflect a positive period of trading for the group, with continued progress on underlying profitability and cash generation, along with value-enhancing aircraft sales and lease placements successfully completed in the period.”
Zeus views Avation as well-positioned to capitalise on strong demand for commercial aircraft, especially given its fully utilised fleet and favourable market conditions.
A Discounted Opportunity?
Despite Avation’s strong financial position and promising growth trajectory, Zeus notes that the company’s shares are trading at just 0.49x the reported NAV. The analysts consider this discount highly unjustified, maintaining a fair value target of 250p per share, which represents significant upside potential from the current share price of 145p.
Final Thoughts
Avation’s resilient performance, strong financials, and fleet expansion strategy put it in a strong position for continued success. With a buoyant aircraft leasing market and a solid balance sheet, the company is well-prepared to navigate future opportunities. Investors may see considerable value at the current share price, given the significant discount to NAV highlighted by Zeus.
