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Transcript of PowerPoint Presentation/media/Files/A/Avolon-IR/... · · 2015-06-24The Appendix to this...
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1459743-001.pptx
Confidential and Proprietary
Avolon Holdings Limited
Tom Ashe – COO & Head of RiskDavy Transport & Logistics - June 2015
Avolon | Slide 2
Disclaimer Concerning Forward-Looking Statements and Non-GAAP Information
This document includes forward-looking statements, beliefs or opinions, including statements with respect to Avolon’s business, financial condition, results of operations and plans.
These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond our control and all of which are based on our management’s
current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as “believe,” “expects,”
“may,” “will,” “could,” “should,” “shall,” “risk,” “intends,” “estimates,” “aims,” “plans,” “predicts,” “continues,” “assumes,” “positioned” or “anticipates” or the negative thereof,
other variations thereon or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all
matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. No assurance can be given that such future results will be
achieved.
These risks, uncertainties and assumptions include, but are not limited to, the following: general economic and financial conditions; the financial condition of our lessees; our
ability to obtain additional capital to finance our growth and operations on attractive terms; decline in the value of our aircraft and market rates for leases; the loss of key
personnel; lessee defaults and attempts to repossess aircraft; our ability to regularly sell aircraft; our ability to successfully re-lease our existing aircraft and lease new aircraft; our
ability to negotiate and enter into profitable leases; periods of aircraft oversupply during which lease rates and aircraft values decline; changes in the appraised value of our
aircraft; changes in interest rates; competition from other aircraft lessors; and the limited number of aircraft and engine manufacturers. These and other important factors,
including those discussed under “Item 3. Key Information—Risk Factors” included in our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on
March 3, 2015, may cause our actual events or results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking
statements contained in this document. Such forward-looking statements contained in this document speak only as of the date of this document. We expressly disclaim any
obligation or undertaking to update these forward-looking statements contained in this document to reflect any change in our expectations or any change in events, conditions, or
circumstances on which such statements are based unless required to do so by applicable law.
The financial information included herein includes financial information that is not presented in accordance with generally accepted accounting principles in the United States
(“GAAP”), including adjusted net income and adjusted return on equity (“adjusted ROE”). The Appendix to this presentation includes a reconciliation of adjusted net income, and
adjusted ROE with the most directly comparable financial measures calculated in accordance with GAAP.
Avolon | Slide 3
Avolon at a Glance
TOP 3Independent Lessor
3.7% Cost of Funds4.5 year WAL
251 aircraftIncluding MAX, neo and 787-9 orders
1Independent lessor defined as any publicly traded aircraft lessor (including Avolon); Ranking determined by current and committed portfolio as of March 31, 20152As at March 31, 2015 and reflects owned, managed and committed portfolio3As at March 31, 20154Annualized Cost of Funds at March 31, 2015 does not include the effect of up front fees, undrawn fees, issuance cost amortization or fair value gains / losses on derivative financial instruments5As at March 31, 20156As of December 31, 2014, measured by current market value. Our estimates are based on the value opinions for our portfolio that we have received from independent aircraft appraisers, reports by industry analysts and data providers,news of similar aircraft sales and other assumptions. Although we believe our estimated values are based on reasonable assumptions and estimates, our estimates may not be indicative of the current or future market value of ourportfolio or of prices that we could achieve if we were to sell the portfolio
1
2.6 years7.1 year Average remaining Lease Term
$5.8bnOwned Fleet Net Book Value
$568m Embedded Value10.1% Premium to Net Book Value
$
2
4
24 yearsAverage experience of executive leadership
150+ airline relationshipsHeadquartered in Dublin with five global offices
6
3
5
Avolon | Slide 4
Q12014
Q1 2015
Change
Adjusted NetIncome1
Net Income
Commitments
46
36
4,871
62
49
6,976
+34%
+36%
+43%
Cost of Funds 4.25% 3.73% -52bps
Strong Growth and Disciplined Risk ManagementQ1 2015
STRONG GROWTH
1Non-GAAP measure. See slide 14
$ millions 2.6Average Fleet Age
7.1Lease Term Remaining
4.5Debt WAL
Match Funded
DISCIPLINED RISK MANAGEMENT
Avolon | Slide 5
Positive Near-term OutlookFLEET
VA
LUE
Traffic: +7% forecast in 2015
Load factors: ~80% globally
Utilization: +15% vs. 2003
Parked fleet: Post-recession low
Profits: $29bn forecast in 2015
Stable values & lease rates
Growing, efficient and profitable utilization of fleets and capacity
DEM
AN
D
Source: Boeing, IATA
Avolon | Slide 6
• Airlines will need 36,000 new aircraft,
valued at $3.5 trillion, over the next 20
years
16,000 deliveries in the next 10 years
• Lessor share of aircraft deliveries has
increased from 6% in 1984 to 40% in 2014
Share is expected to increase to 50% by 2020 (Boeing)
• Diverse lessor funding sources, with capital markets taking growing share
1 Source: Boeing
2014 2015 2016 2017 2018 2020
Cash Capital Markets Bank Debt Export Credit Tax Equity
$115B$124B $125B
$132B$141B
Source: Boeing Capital
50%Lessor Share~40%
Average $130 bn funding requirement over next 4 years
Multiple funding choices, with leasing taking the dominant share
$522bn Delivery Funding Requirement to 2018
Avolon | Slide 7
Our Liability Management Strategy1
4.5year WAL
Match hedged
3:1 Net Debt:Equity
3.7% CoF3
$10bn Capital since 2010
$1.6bn Undrawn Debt2
1) Data as of 31 March 2015 unless otherwise stated2) $920m at end Q1 and $675m April 2015 new facility3) Annualised Cost of Funds at end of period does not include the effect of up-front fees, undrawn fees, issuance cost
amortization or fair value gains / losses on derivative financial instruments
Access to Liquidity
Stable Liability Profile
Optimal D:E / Cost of Funds
1
2
3
Avolon | Slide 8
Rising lease yields
Reduced funding cost
Widening net yield
Increasing ROE
Are the Returns Robust?
Financially Rational Competitive Dynamic Underpins Market Returns
1) Annualised Lease Yield - annualised lease revenue for flight equipment held at the end of each reporting period divided by the aggregate Net Book Value of flight equipment held at each reporting period
2) Interest Rate -annualised cost of debt as at the end of each period, does not include the effect of up front fees, undrawn fees, issuance cost amortization or fair value gains / losses on derivative financial instruments.
11.0%
3.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2011 2012 2013 2014
Annualised Lease Yield Interest Rate21
INCREASING YIELD
Avolon | Slide 9
Increasing Scale and Credit Profile
NET BOOK VALUE
3,5764,260
5,607 5,844
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2012 2013 2014 Q1 2015
$ millions
CAGR1 25% CAGR1 36%
326
450
606
176
0
100
200
300
400
500
600
700
2012 2013 2014 Q1 2015
$ millions
REVENUE
61
11391
49
0
20
40
60
80
100
120
2012 2013 2014 Q1 2015
$ millions
NET INCOME CAGR1 22%
73
125
179
620
100
200
2012 2013 2014 Q 1 2015
ADJUSTED NET INCOME2
$ millionsCAGR1 57%
1 CAGRs represent growth from 2012FY to 2014FY.2 Non-GAAP measure. See appendix for details.
Avolon | Slide 10
Five Essential Pillars for Success
Minimum scale requirement of $10bn – on BS1
and locked in growth
1
Multi-cycle management experience
2
Sustainable and efficient access to capital
3
Top 10 lessors account for 60% of delivered and committed fleet on operating lease
Founded & scaled two leading global lessors with a core focus on risk management
Recurring, long term relationships with OEMs2
4 5
Depth & quality of airline relationships
Repeat access to deep pools of liquidity with global capital markets & banks
20 year order history with Boeing & Airbus
Network of 150+ airline customers globally
1 Balance Sheet (BS)2 Original Equipment Manufacturer (OEM)
Avolon | Slide 11
A320 NEO
A330 NEO
B737 MAX
B787-9$1.6bn undrawn debt
Adjusted ROE1 14.7% -15%ROE 12.8% - 13.1%
Positioned for Growth
FY 2015 Outlook Commitments3
Liquidity2
1 Non-GAAP measure. See appendix for details2 As of March 31, 2015. Includes $675m debt facility announced in April.3 For FY’15 Commitments include aircraft delivered in Q1 2015 and commitments as of 31 March 2015 for the remainder of 2015
$1.67bn in FY’15$900m in FY’16$4.9bn Orders:
Avolon | Slide 13
Appendix 1 | Portfolioat March 31 2015
AIRCRAFT TYPE OWNED MANAGED COMMITTED TOTAL
A319 1 - - 1
A320ceo 46 3 18 67
A321ceo 9 1 9 19
A320neo - - 20 20
A330neo - - 15 15A330-200/300 10 - - 10
B737-800 55 3 16 74
B737 MAX - - 20 20
B787-8/9 2 - 10 12
Boeing B777-300ER 3 - - 3
B777-200LRF - 4 - 4E190 6 - - 6
132 11 108 251
Avolon | Slide 14
Appendix 2 | Reconciliation of Adjusted Net Income
Adjusted net income is a measure of both liquidity and operating performance that is not defined by GAAP and should not be considered as an alternative to net income, income from operations, net cash provided by operating activities, or any other liquidity or performance measure derived in accordance with GAAP. We use adjusted net income to assess our core operating performance on a consistent basis from period to period. In addition, adjusted net income helps us identify certain controllable expenses and make decisions designed to help us meet our near-term financial goals. Adjusted net income has important limitations as an analytical tool and should be considered in conjunction with, and not as substitutes for, our results as reported under GAAP.
$ thousands FY 2012 FY 2013 FY 2014 Q1 2014 Q1 2015
Net Income 61,161 112,800 91,103 36,422 49,354
Amortization of debt issuance costs 9,457 18,766 24,277 5,711 5,626
Unrealized (gain) loss on derivatives
2,199 (6,390) 12,240 4,134 5,895
Share based compensation - - 53,733 - 1,555
Tax effect 268 (25) (2,359) (345) (726)
Adjusted net income 73,085 125,151 178,994 45,922 61,704
Avolon | Slide 15
Appendix 3 | Reconciliation of 2015 Adjusted ROE
% FY 2015 FY 2015
ROE outlook range 12.8% 13.1%
Amortization of debt issuance costs 1.4% 1.4%
Unrealized (gain) loss on derivatives - -
Share based compensation 0.6% 0.6%
Tax effect (0.1%) (0.1%)
Adjusted ROE outlook range 14.7% 15.0%
Avolon | Slide 16
Appendix 4 | Reconciliation of Net Debt to Equity
$ thousands Q1 2015
Debt Financing 4,632,542
Capital Lease Obligation 80,479
Total Debt 4,713,021
Cash and cash equivalents 137,437
Net Debt 4,575,584
Total shareholder’s equity 1,483,832
Debt to Equity 3.2
Net Debt to Equity 3.1
Net Debt to Equity is calculated as (Debt Financing + Capital Lease Obligation – Cash and cash equivalents) / Total shareholder’s equity