30 Mar 2020 07:00
30 March 2020
COVID-19 Trading update
This announcement contains price sensitive information.
Signature Aviation plc ("the Group"), a market-leading provider of global aviation support services, announces a trading update for the period 1 January 2020 to date.
We are continuing to closely monitor the COVID-19 situation. In these unprecedented times the health and safety of our employees and customers, and the communities in which we operate, remains our utmost priority. We are continuously monitoring the situation to ensure our response is in line with the best interests of our employees, our customers and the advice of governmental and health authorities.
Our businesses, both Signature and Engine Repair and Overhaul (ERO), are essential critical infrastructure providers and as such remain both open and trading.
Flying activity across our US network through to the third week of March was in line with our expectations and we saw limited impact on our fuel volumes from COVID-19. In recent days, however, we have seen a material decline in flight activity across our network of on average 65% per day, as customers observe temporary stay at home orders and enforce social distancing. Whilst flight activity has started to show a material decline, our non-fuel revenues representing approximately one third of our revenues, are predominately related to real estate, and are largely unaffected by COVID-19. In addition, our ERO business continues to operate as expected and has not seen any adverse impact of COVID-19 on revenues so far this year.
As has always been the case, our industry has very limited forward visibility in terms of flying movements and our current US B&GA market guidance for a flat market in 2020, given at our Final Results presentation on 3 March, is now unlikely to materialise. It is worthy of note that the US B&GA market is approximately 90% domestic movements (intra US).
We have already started to take action on our cost base, around 75% of which is variable. Our largest cost, fuel, naturally flexes with the volumes in the market and we hold less than a week's inventory across the network. We have well established practices to manage our second largest cost, labour, and management is taking the appropriate steps to best match our labour costs to flying activity. As a further prudent measure, management has taken the decision to suspend all bonus and variable pay plans throughout the Group. We will continue to evaluate and take advantage of appropriate government financial support and assistance that is available in both the US and Europe.
As well as the cost measures referenced above, our capital expenditure guidance for 2020 of $100-110 million is under review and will be materially curtailed. We will take further action as appropriate to maintain resilience.
Liquidity and balance sheet position
As part of our refinancing on the back of the Ontic sale in late 2019 we repaid both our US private placement notes and the final tranche of our Landmark acquisition debt facilities. We successfully completed our second issuance in the US senior note market with $650 million 4.000% senior notes due March 2028. These are in addition to our $500 million 5.375% notes (issued in April 2018) and due in May 2026, all notes are unsecured.
Our $400m unsecured Revolving Credit Facility (RCF) matures in March 2025 and this facility was undrawn at 31 December 2019. The net debt to underlying EBITDA covenant on our RCF is set at 4.25x (on a pre-IFRS16 covenant basis) and is tested bi-annually at 30 June and 31 December. At 31 December 2019 our net debt to underlying EBITDA ratio stood at 2.2x (on a pre-IFRS16 covenant basis). The interest cover covenant on our RCF is based on underlying EBITDA and is a minimum of 3.0x (on a pre-IFRS16 covenant basis) and is also tested twice per year at 30 June and 31 December. At 31 December 2019 our interest cover, on a covenant basis, was 6.9x.
The Group's debt facilities have a current weighted average maturity of 6.6 years, with no maturities before March 2025. Our RCF facility is currently drawn by $49 million, leaving $351 million of undrawn facilities plus cash as headroom.
Guidance
In the light of the current uncertainty we are suspending all guidance for the year ending 31 December 2020, but we will continue to monitor the situation closely and provide further updates when we are in a position to do so.
2019 final dividend
In order to preserve balance sheet strength and liquidity in these uncertain times, the Board has taken the prudent decision to suspend the final 2019 dividend that was proposed with our full year 2019 results on 3 March 2020. The Board will review this decision again later in the year as trading conditions become clearer.
Mark Johnstone, Signature Aviation CEO commented "The health and safety of our employees and customers remains our utmost priority during these unprecedented times. Our Signature business is a provider of critical infrastructure and as such we remain both open and trading. We are taking the necessary and appropriate action to manage our costs to a level consistent with flying activity. The business continues to have attractive fundamentals and robust medium-term prospects, underpinned by our market leading FBO network and its strong cash generative characteristics."
Notes:
The Group will publish its Q1 AGM trading update on 15 May 2020.
Enquiries:
Signature Aviation plc
David Crook, Group Finance Director
Kate Moy, Head of Investor Relations and Communications
(020) 7514 3999
Tulchan Communications
David Allchurch
(020) 7353 4200
Information on Signature Aviation plc
Signature Aviation plc is a market leading, global aviation support and aftermarket services provider, primarily focused on servicing the Business and General Aviation (B&GA) market. We support our customers through our principal business Signature and Global Engine Services/Engine Repair and Overhaul (ERO).
Signature, including Signature FBO, TECHNICAirTM and EPIC Fuels, provides premium, full-service flight and home base support including refuelling, ground handling and MRO services through the world's largest fixed base operation (FBO) network for B&GA users with around 200 locations covering key destinations in North America, Europe, South America, Caribbean, Africa and Asia. EPIC Fuels is a provider of aviation fuels, supplies and services operating at more than 200 locations.
On 1 March 2018, the Company announced that it was conducting a strategic review of the ERO business and, at the end of May 2018, management committed to a plan to sell substantially all of the business and the relevant assets and liabilities were classified as held for sale. The sale process is ongoing.
On 22 November 2019, the Company changed its name from BBA Aviation plc to Signature Aviation plc.