Agree that Directors and Management painted a positive picture at the annual meeting today. Comments which were relevant to me:
Dividend wasn’t declared for FY21 as “the Board believed the capital was better retained within the business to fund the substantial E190 expansion program. The Board will continue to monitor the capital requirements of the company as we progress into the 2022 calendar year ensuring that capital deployment delivers positive outcomes for Alliance and its shareholders”. My read is that it’s far from certain that there will be a FY22 dividend which may have further scared off some dividend yield holders.
AQZ is in growth mode for at least the next 12 months, which is a positive given the huge increase in the business scale which is evident from the comment that by June 2023 annualised flying hours will have increased by a factor of between 3.0 and 3.4 times greater activity.
I expect FY22 financial results to also be impacted by ongoing costs of recruiting and training staff and the costs of bringing further E190’s to Australia and into service.
Comparing the E190 deployment slide attached to Lee Schofield’s address today with the version attached to the Annual Results announcement back in August, it looks like there has been three months slippage on the rollout schedule. While disappointing it is understandable given the huge COVID restrictions over the last three months.
In a comment on the outlook, Lee Schofield said “The FIFO contract book remains strong and has seen flight hour growth in the first quarter of the 2022 financial year. Ad-hoc charter operations are forecast to continue at current levels subject to aircraft availability and Alliance has made the decision to reduce its RPT footprint”. Lee also commented that strong cash flow had continued in this financial year. This trading update is positive.
The response to a question on what happened following the ACCC approval to cooperate with Virgin on regional flying was spot on. AQZ indicated that they weren’t prepared to take RPT service risk and that as an alternative there was increased Virgin wet lease flying about to ramp up. This model allows AQZ to lock in a margin rather than taking traditional airline risks.
I’m happy to maintain my buy sentiment and look forward to AQZ continuing to deliver over the next 18 months.
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(20min delay)