Avation plc (LON:AVAP), the specialist commercial aircraft lessor, has delivered a strong set of interim results, highlighting robust fleet utilisation, growing lease revenues, and a solid financial position. According to Zeus Capital, the company’s continued progress on underlying profitability and cash generation positions it well for future growth, with its current valuation offering a compelling opportunity for investors.
Strong Financial Performance
Avation’s interim results for the six months ended 31 December 2024 reflect a 20% increase in revenue to $55.4 million, up from $46.3 million in the previous period. This growth was driven by improved fleet utilisation and a significant boost in maintenance reserve revenue. EBITDA surged by 45% to $55.6 million, while operating profit increased to $18.8 million, despite non-cash fair value adjustments.
The company’s balance sheet remains robust, with net debt reducing by $45 million to $606 million at the end of the period. Additionally, net asset value (NAV) per share increased to 294p, reflecting Avation’s ability to generate shareholder value. Despite these strong fundamentals, the company’s shares continue to trade at a substantial 51% discount to NAV, which Zeus Capital believes is highly unjustified.
Expanding Fleet and Orderbook
Avation is actively expanding its fleet to capitalise on strong demand in the commercial aviation sector. The company has announced plans to acquire an Airbus A320 currently on lease to Etihad Airlines, complementing its orderbook of 11 ATR 72-600 aircraft and 24 purchase rights. This acquisition is expected to be completed in March 2025.
The company has also been executing strategic aircraft sales, with two ATR 72-600 sales set to generate approximately $10 million in net cash proceeds. Looking ahead, Avation plans to deliver two ATR 72-600 aircraft in Q4 2025, with one already placed with a lessee and the second expected to go to a Korean airline. Over the next decade, the company has outlined a plan to take delivery of up to 35 ATR 72 aircraft, reinforcing its long-term growth strategy.
Positive Market Outlook
With the commercial aviation sector experiencing a sustained recovery, Avation is well-positioned to benefit from increasing passenger demand and supply constraints in the aircraft leasing market. Zeus Capital maintains its 250p fair value target, underlining the significant upside potential in the company’s share price.
John Cummins, an analyst at Zeus Capital, remarked:
“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. Given the company’s robust balance sheet position and growth prospects, we view the shares’ 51% discount to NAV as unjustified.”
On a Final Note
Avation’s latest results underscore its ability to generate consistent revenue growth, reduce debt, and strategically expand its fleet. With a favourable market backdrop and a well-managed balance sheet, the company remains in a strong position for the future. Investors seeking exposure to the aviation leasing sector may find Avation’s current valuation an attractive entry point.
