Signature Aviation swings to a loss on lower flight activity

The impact on underlying operating profit was more severe with a 60 per cent plunge to $63m (£48m). While the group did cut costs – including rent reductions and deferrals for its airport bases – there was a delay in furloughing its US staff as it went through the process of applying for government support under the CARES Act. Direct labour is Signature Aviation’s second largest cost after fuel.

On a statutory basis, operating profit was pulled down to $15.6m owing to the amortisation of acquired intangibles. Together with a $5m impairment from the closure of its operations at Paris-Le Bourget Airport, this pushed the group into a pre-tax loss.  

Net debt (excluding lease liabilities) remained relatively flat from the December year-end position at $1bn, although the drop in earnings means leverage has increased from 2.2 times underlying cash profits to a multiple of 3.1. Yet this was still below the covenant limit multiple on its $400m revolving credit facility of 4.25. The group has secured a covenant waiver for the December 2020 and June 2021 testing dates, meaning it now has to maintain a minimum of $150m of liquidity. It was sitting on more than $520m of liquidity at the end of June.

Peel Hunt anticipates adjusted pre-tax profit will come in at $58m for the full year – down from $177m in 2019 – recovering to $124m in 2021.