by Nimrod • November 26, 2013 • Doric II
DORIC NIMROD AIR TWO LIMITED
REPLACEMENT – Announcement of Half Yearly Financial Report
The Announcement of Half Yearly Financial Report released at 2.00 p.m. on 25 November 2013 under RNS number 8526T contained a formatting error wherein the Consolidated Statement of Financial Position was not visible on RNS. The below announcement contains the Consolidated Statement of Financial Position and replaces the previous announcement in its entirety.
DORIC NIMROD AIR TWO LIMITED
Announcement of Half Yearly Financial Report 25 November 2013
Doric Nimrod Air Two Limited (the “Company”), a Guernsey-domiciled company, is pleased to present its Half-Yearly Financial Report in respect of the period from 1 April 2013 to 30 September 2013.
Doric Nimrod Air Two Limited
SUMMARY INFORMATION
Company Facts
| Listing | LSE and CISX |
| Ticker | DNA2 |
| Share Price | 251.0p (as at 30 September 2013) |
| 246.0p (as at 21 November 2013) | |
| Market Capitalisation | GBP 434 million (as at 30 September 2013) |
| Aircraft Registration Numbers | A6-EDP, A6-EDT, A6-EDX, A6-EDY, A6-EDZ, A6-EEB, A6-EEC |
| Current/Future Anticipated Dividend | Future dividends are expected to be 4.5p per quarter per share (18p per annum) until the aircraft leases terminate. |
| Dividend Payment Dates | April, July, October, January |
| Currency | GBP |
| Launch Date/Price | 14 July 2011 / 200p |
| Incorporation | Guernsey |
| Asset Manager | Doric GmbH |
| Corp & Shareholder Advisor | Nimrod Capital LLP |
| Administrator | Anson Fund Managers Ltd |
| Auditor | Deloitte LLP |
| Market Makers | Shore Capital Ltd/Winterflood Securities Ltd/Jefferies International Ltd/Numis Securities Ltd |
| SEDOL, ISIN | B3Z6252, GG00B3Z62522 |
| Year End | 31-Mar |
| Stocks & Shares ISA | Eligible |
| Website | www.dnairtwo.com |
Company Overview
Doric Nimrod Air Two Limited (LSE:DNA2) (“DNA2” or the “Company”) is a Guernsey company incorporated on 31 January 2011.
Pursuant to the Company’s Prospectus dated 30 June 2011, the Company offered its shares for issue by means of a placing and on 14 July 2011, raised approximately £136 million by the issue of Ordinary Preference Shares at an issue price of £2 each. The Company’s Ordinary Preference Shares were admitted to the Official List of the Channel Islands Stock Exchange (“CISX”) and trading on the Specialist Fund Market of the London Stock Exchange (“SFM”) on 14 July 2011. Subsequently the Company raised a total of approximately £188.5 million from a C share fundraising (the “C Share Issue”), which closed on 27 March 2012 with the admission of 100,250,000 Convertible Preference Shares to trading on the SFM and the CISX.
On 6 March 2013, the Company converted 100,250,000 Convertible Preference Shares (the “C Shares”) into an additional 100,250,000 Ordinary Preference Shares. These newOrdinary Preference Shares were admitted to trading on the SFM and to listing on the Official List of the CISX on 6 March 2013 and rank pari passuwith, and have the same right as, the existing Ordinary Preference Shares already in issue. As at 21 November 2013, the last practicable date prior to the publication of this report, the Company’s total issued share capital consisted of 172,750,000 Ordinary Preference Shares (the “Shares”) and the Shares were trading at 246 pence per share
Investment Objectives and Policy
The Company’s investment objective is to obtain income returns and a capital return for its shareholders by acquiring, leasing and then selling Airbus A380-800 aircraft (each an “Asset” and together the “Assets”). The Company will receive income from the lease rentals paid by Emirates Airlines (“Emirates”) the national carrier owned by the Investment Corporation of Dubai, based in Dubai, United Arab Emirates, pursuant to the leases. It is anticipated that income distributions will be made quarterly
Distribution Policy
The Company aims to provide Shareholders of the Company (the “Shareholders”) with an attractive total return comprising income, from distributions through the period of the Company’s ownership of the Assets, and capital, upon the sale of the Assets.
The Company will receive income from the lease rentals paid by Emirates pursuant to the relevant leases. It is anticipated that income distributions will be made quarterly, subject to compliance with applicable laws and regulations. The Company currently targets a distribution of 4.5 pence per Share per quarter.
There can be no guarantee that dividends will be paid to Shareholders and, if dividends are paid, as to the timing and amount of any such dividend. There can also be no guarantee that the Company will, at all times, satisfy the solvency test required to be satisfied pursuant to section 304 of the Companies (Guernsey) Law 2008 (the “Guernsey Law”) enabling the Directors to effect the payment of dividends.
The Company has four wholly-owned subsidiaries; MSN077 Limited, MSN090 Limited, MSN105 Limited and Doric Nimrod Air Finance Alpha Limited (“DNAFA”) which each hold or will hold the Assets for the Company (together the Company and the Subsidiaries are known as the “Group”).
The first Asset was acquired by MSN077 Limited on 14 October 2011 for a purchase price of US$234 million. Upon delivery, MSN077 Limited entered into the first operating lease with Emirates, pursuant to which the first Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration the second Asset was acquired by MSN090 Limited, on 2 December 2011 for a purchase price of US$234 million. MSN090 Limited has entered into the second operating lease with Emirates pursuant to which the second Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.
The third Asset was acquired by MSN105 Limited on 1 October 2012 for a purchase price of US$234 million MSN105 Limited has entered into the third operating lease with Emirates pursuant to which the third Asset has been leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.
In order to complete the purchase of the relative Assets, MSN077 Limited, MSN090 Limited and MSN105 Limited entered into separate loan agreements, each of which will fully amortise with quarterly repayments in arrears over 12 years (together the “Loans”). A fixed rate of interest applies to the Loans. MSN077 Limited drew down US$151,047,509 under the terms of the first loan agreement to complete the purchase of the first Asset, MSN090 Limited drew down US$ 146,865,575 in accordance with the second loan agreement to finance the acquisition of the second Asset and MSN105 Limited drew down US$ 145,751,153 in accordance with the third loan agreement to finance the acquisition of the third Asset. The first loan agreement, second loan agreement and the third loan agreement are on materially the same terms.
The fourth, fifth, sixth and seventh Assets were acquired by DNAFA using the proceeds of the issue of the C Shares by the Company, which closed on 27 March 2012 together with the proceeds of the Equipment Notes issued by DNAFA The Equipment Notes were acquired by two separate pass through trusts using the proceeds of their issue of enhanced equipment trust certificates (the “Certificates”). The Certificates, with an aggregate face amount of approximately $587.5 million were admitted to the officiallist of the UK Listing Authority and to the SFM on 12 July 2012. These four Assets were also leased to Emirates for an expected initial term of 12 years, with fixed lease rentals for the duration.
Distribution Policy
The Company aims to provide Shareholders of the Company (“Shareholders”) with an attractive total return comprising income, from distributions through the period of the Company’s ownership of the Assets, and capital, upon the sale of the Assets.
The Company will receive income from the lease rentals paid by Emirates pursuant to the relevant leases. It is anticipated that income distributions will be made quarterly, subject to compliance with applicable laws and regulations. The Company currently targets a distribution of 4.5 pence per Share per quarter.
There can be no guarantee that dividends will be paid to Shareholders and, if dividends are paid, as to the timing and amount of any such dividend. There can also be no guarantee that the Company will, at all times, satisfy the solvency test required to be satisfied pursuant to section 304 of the Companies (Guernsey) Law 2008 (the “Guernsey Law”) enabling the Directors to effect the payment of dividends.
Performance Overview
All payments by Emirates have to date been made in accordance with the terms of the respective Lease.
During the period under review and in accordance with the Distribution Policy specified in its prospectus, DNA2 declared two interim dividends of 4.50 pence per Share and subsequent to the period under review DNA2 declared one further interim dividend, of 4.50 pence Share. Future dividend payments are anticipated to continue to be declared and paid on a quarterly cycle on the basis specified by the Company’s Distribution Policy and subject to compliance with applicable laws and regulations.
Doric Nimrod Air Two Limited
CHAIRMANS STATEMENT
I am pleased to present shareholders with the Company’s consolidated financial report covering the period from 1 April 2013 until 30 September 2013.
Admission of 72,500,000 Ordinary Preference Shares of the Company to trading on the Specialist Fund Market of the London Stock Exchange and listing on the Channel Islands Stock Exchange took place on 14 July 2011(the “Placing”). The issue price under the Placing was 200 pence each. On 27 March 2012 the Company issued 100,250,000 Convertible Preference Shares (the “C – Share Placing”). The issue price under the C-Share placing was 200 pence each.
The Company used the net proceeds of the C – Share Placing together with debt of approximately US$600 million, issued in the debt security form of Enhanced Equipment Trust Certificates, to fund the purchase of four additional Airbus A380-800 aircraft, and to lease them to Emirates Airlines in the fourth quarter of 2012.
Once all seven aircraft were acquired, the C – Shares were converted into Ordinary Preference Shares at a conversion ratio of one Ordinary Preference Share for every one C – Share, and the Company now targets a distribution of 4.5p per Share per quarter, equating to 9 per cent per annum on the issue price of the Shares.
The lessee has performed well over the period and recently announced an order for 50 additional Airbus A380 aircraft at the opening of the Dubai Airshow 2013. Despite the turmoil in the global economy, international passenger air traffic remained robust with growing demand particularly from the Asian sub-continent. Emirates continue to report strong performance. This was greatly aided by the airline’s ability to adjust flight schedules swiftly, and redeploy aircraft about the network, thus optimising revenue. The airline operates with a remarkably high passenger seat factor whilst at the same time increasing seat capacity.
The lease payments received by the Company from Emirates cover repayment of the debt as well as income to pay dividends to shareholders. Emirates bears all costs (including maintenance, repair and insurance) relating to the aircraft during the lifetime of the lease. The Company’s Asset Manager, Doric GmbH, continues to monitor the lease performance and reports regularly to the Board. Nimrod Capital LLP, the Company’s Placing and Corporate and Shareholder Advisory Agent, continues to liaise between the Board and Shareholders, which includes distribution of quarterly fact sheets and the interim management statements.
In economic reality, the Company has performed well. Two interim dividends were declared in the financial period and future dividends are anticipated to be declared and paid on a quarterly basis. However, the financial statements do not properly convey this economic reality due to several factors; foreign exchange, and the accounting treatments for rental income and finance costs.
Foreign exchange has influenced the financial statements as, under the requirements of International Financial Reporting Standards, the items in the Statement of Financial Position are translated into Sterling from US Dollars at varying foreign exchange rates, either the year end rate or historic transaction rate,
which will inevitably produce foreign exchange differences (profits for the period ended 30 September 2013). In reality those lease rentals received in US Dollars are used to pay the loan repayments due, also in US Dollars. Both US Dollars lease rentals and loan repayments are fixed and are for similar sums and similar timings. The matching of lease rentals to settle loan repayments therefore mitigates risks caused by foreign exchange fluctuations.
In addition to this the rental income is spread evenly over the term of each of the leases, rather than the rentals being accounted for as actually received into the Company’s bank account. Furthermore, interest on borrowings is recognised using the effective interest rate method, resulting in higher charges in earlier periods when the outstanding principal balances are greater. The loan repayments are, in reality, constant over much of the lease term, reducing in the final two years.
On behalf of the Board I would like to thank all Shareholders for their continued support of the company.
Norbert Bannon
Chairman
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