7 March 20181
Magnus DahlbergCFO
West Atlantic Group – 2018
Introduction
22
Cargo airline group headquartered in Gothenburg, Sweden, with main operation bases in UK and Sweden
Around 460 staff
50+ customized freighter aircraft in the portfolio
100+ flights per weekday to over 50 destinations
Operating on behalf of national Mail organizations and Global Integrators
3
20 years with the same core business model
Aircraft in operation 4 +40
Countries of operation 1 +15
Contracted customers 1 +10
The air freight business
4
West Atlantic Group
West Atlantic UK AOC
B737-300, -400, -800
West Atlantic Sweden AOC
ATP, CRJ, B767
West Atlantic Part-145
B737, ATP, CRJ, B767
Operational Group Structure
5
• UK airline operating B737-300/400/800 aircraft• SE airline operating ATP, CRJ and B767 aircraft• Part-145 maintenance organisation
6
<8,5 tonnes payload 37 BAE ATP – world’s largest fleet
<6,5 tonnes payload2 CRJ200PF
<18 tonnes payload 17 Boeing 737-300/-400 (5 additional pending delivery 1 -400 & 4 -800)
<50 tonnes payload3 Boeing 767-200
Aircraft Fleet 2018-03-01
Scheduled destinations
51 scheduled destinations
Norway [8 airports] LYR TOS BOO AES KRS OSL SVG BGO
Sweden [4 airports]JKG MMX ARN SDL
Denmark [2 airports]CPH BLL
United Kingdom [14 airports] GCI JER EXT STN NCL EMA LTN EDI ABZ IOM BFS WRT BHX INV
Netherlands [1 airport]AMS
Belgium [2 airports]BRU LGG
Germany [3 airports]CGN SXF LEJ
Switzerland [1 airport]BSL
France [8 airports]MRS CDG TLS AJA BIA MPL BOD NTE
Italy [3 airports]CIA LIN BRI
Hungary [1 airport]OTP
Greece [1 airport]HER
Turkey [1 airport]SAW
Saudi Arabia [2 airports] TIF DHA
West Atlantic scheduled Airport
Main Offices (GOT, CVT, MMX)
Main maintenance bases (EMA, IoM, OSL
West Atlantic Routes
January 2018
Saudi Arabia
6
8
New base maintenance setup
MMX (Malmoe)
CVT (Coventry)
EMA (East Midlands)
Move from two smaller hangars into one large where B737 aircraft can be fully maintained
9
The Next Generation of narrow-body
freighters
Launch customer with the
GECAS/Boeing cargo freight
configuration
Letter of Intent signed for operation
of four aircraft on a 5 year contract
All four aircraft will be operating in
Europe for one customer
Lower operating cost
NGs are more environmental friendly
High quality – improved reliability with easy access to maintenance all
over Europe
We believe in future growth with this product
Next Generation (NG) B737-800BCF
10
Growing faster than expected
and accelerating
9.7% online sales of total retail
sales in 2017
Cross border transactions
estimated to grow higher than domestic
Amazon, eBay, Alibaba and Wish websites are dominant
Price and speed of delivery the most important differentiators
Postal organisations are the main delivery provider
E-commerce growth
11
2012
<8 tonnes payload 40 aircraft – around 97% of flight revenue
>8 tonnes payload 1 aircraft – around 3% of flight revenue
2018
<8 tonnes payload20 aircraft – estimated to around 14% of flight revenue
>8 tonnes payload 25 aircraft – estimated to around 86% of flight revenue
Rapid growth in >8 tonnes capacity
Customer Portfolio
Share of revenue (2017 preliminary)
Operations for NMOs are on full charter basis while operations for GIs are on ACMI basis why revenues for NMOs are around 30% higher for ”like for like” operations
13
West Atlantic benefits from longstanding, strong relationships with loyal, blue chip customers
The largest customers have been with the Group between 12-43 years respectively
High customer retention due to close customer cooperation in developing innovative solutions
Over 60% of sales derive from the most stable customers, namely NMOs
Lack of in-house capabilities
Long contract tenors
Each NMO has at most only a handful of suppliers (Posten Norge has only one, West Atlantic)
The Group’s five largest customers accounted for 90 per cent of revenues in 2017
Customer Portfolio, cont
14
Contract status - 5 largest customers
Customer
# of
aircraft
Contract
length,
years 2017 2018 2019 2020 2021 2022 2023
Royal Mail 12 5
Posten Norway* 8 5 (+3)
DHL 8 1-2
FedEx/TNT 3 2-3
La Poste/Chronopost 2 3
*reduced network from 2018 to 3 aircraft Existing contract Extension option
General market
14
<8 tonnes
<18 tonnes
<50 tonnes
Larger aircraft are required due to volume increase driven by E-commerce
Outlook for 2018 and beyond
15
Stable core business with recurring and increasing demand from national mail organisations and global integrators driven by the growing e-commerce.
E-commerce companies – a new customer category.
Appealing market position in response to market shift toward larger payloads.
Reduced operations for Posten Norway.
Focus on further cost efficiencies and strengthening of core competencies.
Over 10 % revenue growth Y-O-Y expected.
Continuing efforts to expand the business beyond Europe.
First sale of ATP aircraft.
Financials
16
Q4 and YTD 2017
Meets the maintenance test covenant 31 Dec 2018
Equity ratio up to 5,3% end of Q4 2017
Approved written procedures of waivers and amendments
Revenue & EBITDA
17
Growing revenue levels in 2017 Record high revenues in Q4 of MSEK 441 due to very
strong peak season operations and the new RM contract fully implemented
Overall stable contract portfolio and growing top line in 2017 by 20.4% mainly due to the new RM contract
The development continues with stronger B737 and B767 revenue but weaker ATP revenue
Lower leasing revenue
EBITDA margin increased in Q3 and Q4 EBITDA margin increased to 15.1 % in Q4 2017 vs 10.8%
in Q4 2016
EBITDA on same level in 2017 as in 2016 but lowermargin mainly due to high delay costs for the start upof the new RM contract
Cost reduction program implemented end of 2017
Staff levels down by 3.8% in 2017
Capital expenditure
18
Quarterly CAPEX Both maintenance and investment capex lower in Q4
2017 vs Q4 2016
Low ongoing maintenance capex while periodicalmainenace capex was higher than Q4 2016
Investment capex low in Q4 2017 as no new aircraft was aquired
YTD CAPEX Maintenance capex down by 25% in 2017 compared to
2016
Both lower ATP and B737 maintenance capex in 2017
No purchase of B737 aircraft in 2017 why investment capex significantly reduced in 2017
Growth in 2017 mainly by operating leases withattached mainenance reserves - OPEX
Decision taken to dismantle up to 6 ATP aircraft in 2018
Cashflow
19
Quarterly Cashflow Operating cashflow improved in Q4 to MSEK 78
Low operating cash flow before changes in WC in Q2 and Q3 2017 due to high delay costs for the start upof the new RM contract
Significant changes in Working Capital both in Q1 and Q2 2016 and 2017 mainly due to trade receivables
YTD Cashflow Operating cashflow decreased by 2.7% in 2017 vs 2016
Significant increased cash flow from changes in Working Capital in 2017
Better credit terms with suppliers and new business and a focused work with cash management
A positive cash flow of MSEK 14.6 for the full year2017
Net Working Capital
20
Net working capital Mainly consists of Inventory (aircraft spare parts)
NWC in Q4 2017 down to MSEK 61, which is the lowest in the last 2 years
NWC decreased by 46% y-o-y
NWC in average 6% of revenues in 2017, down from 10% in 2016
21
Appendix
Income Statement
22
Oct - Dec Oct - Dec Jan - Dec Jan - DecMSEK 2017 2016 2017 2016
Revenue 440,5 353,5 1589,3 1320,4
Cost of services provided -405,2 -342,5 -1562,7 -1291,8
Gross income: 35,3 11,0 26,6 28,6
Selling costs -2,8 -5,2 -7,8 -16,1
Administrative costs -14,2 -18,4 -48,2 -47,9
Other operating income & costs 17,5 12,2 27,3 24,9
Operating income: 35,8 -0,4 -2,2 -10,5
Financial income & costs -20,4 -24,5 -74,7 -84,5
Income before tax: 15,5 -24,9 -76,9 -95,0
Income tax 1,9 1,6 15,1 13,2
Net Income: 17,4 -23,3 -61,7 -81,8
Attributable to:
- Shareholders of the Parent Company 17,4 -23,3 -61,7 -81,8
Earnings per share, before and after dilution (SEK) 0,64 -0,86 -2,28 -3,03
Average number of outstanding shares (Thousands) 27 005 27 005 27 005 27 005
Statement of other comprehensive income
Net income: 17,4 -23,3 -61,7 -81,8
Other comprehensive income:
Items that may or has been classified as net income:
Exchange-rate differences in translation of foreign
operations 0,0 -0,6 -0,7 -1,3
Total comprehensive income for the period: 17,4 -23,9 -62,4 -83,1
Attributable to:
- Shareholders of the Parent Company 17,4 -23,9 -62,4 -83,1
Balance Sheet
23
Dec 31 Dec 31MSEK
2017 2016
Intangible assets 0,1 0,2
Tangible assets796,4 856,3
Financial assets 32,8 22,2
Total non-current assets 829,4 878,6
Inventories 116,7 116,6
Other current assets 196,3 171,5
Cash and cash equivalents 123,4 110,2
Total current assets 436,4 398,2
Assets held for sale 21,3 0,0
Total assets 1287,0 1276,8
Shareholders' equity 68,0 105,3
Non-current liabilities 963,7 991,2
Current liabilities 255,2 180,3
Total shareholders' equity and liabilities 1287,0 1276,8
Cash Flow Statement
24
Oct - Dec Oct - Dec Jan - Dec Jan - DecMSEK 2017 2016 2017 2016
Operating income 35,8 -0,4 -2,1 -10,5
Adjustments for non-cash items
Depreciation 30,6 38,6 128,4 138,0
Other non-cash items 11,2 25,9 65,6 111,5
Income tax paid 6,6 5,6 -2,4 -1,3
Cash flow from operating activities
before changes in working capital 84,2 69,7 189,5 237,8Change in working capital -6,2 -0,8 44,2 2,3
Cash flow from operating activities 78,0 68,9 233,7 240,1
Payments from associated companies 0,0 0,0 0,0 0,0
Investments in intangible assets 0,0 -0,2 0,0 -0,2
Investments in tangible assets -35,6 -42,1 -143,2 -321,7Sales of tangible assets 0,0 0,0 0,0 0,2
Payments from other investing activities -0,2 -2,7 -11,8 -5,5
Cash flow from investing activities -35,8 -45,1 -155,0 -327,2
Contributed capital 25,0 - 25,0 -
Received loans 0,0 0,0 0,0 0,0
Amortisation of interest bearing liabilities -3,9 -3,8 -12,3 -10,5
Repaid/received deposits 0,0 0,0 0,1 13,8
Interest paid -33,9 -34,2 -76,9 -77,2
Cash flow from financing activities -12,8 -38,0 -64,1 -74,0
Cash flow for the period 29,4 -14,2 14,6 -161,0
Cash and cash equivalents at the beginning of the period 94,3 121,3 110,2 266,8Translation difference in cash and cash equivalents -0,4 3,1 -1,4 4,4
Cash and cash equivalents at the end of the period 123,4 110,2 123,4 110,2
Thank you for your attention!