Published: 2020-02-05 15:51:35 CET
Magnetic MRO
Interim information

CONSOLIDATED NON-AUDITED INTERIM REPORT FOR Q4 2019

GENERAL INFORMATION

Magnetic MRO is a total technical care maintenance and asset management organization with a global presence and more than two decades of worldwide experience. The company has a well-established reputation in innovative aviation solutions and proven track record as a one-stop shop for airlines, asset owners, OEMs and operators. It offers a wide range of services varying from asset management and engineering, to line and base maintenance.

 

Q4 2019 OPERATIONS AND ACTIVITIES

 

  • Magnetic MRO painted first ATR72 into a brand new Scandinavian Airlines (SAS) livery

Magnetic MRO has painted first ATR72 into a new SAS livery at the Magnetic MRO dedicated paint hangar in Tallinn. SAS had launched a brand new visual identity for the first time in 21 years and revealed a new design for its aircraft exterior in late September 2019. The new livery is a modern take on classic Scandinavian design and is created to highlight the future of SAS.

 

  • Magnetic MRO Training received Airbus A320 NEO LEAP 1A and PW1100G type training approval

Magnetic MRO Training has received an approval to provide Airbus A320 NEO LEAP 1A and PW1100G type training. The new capability’s scope ranges from Airbus A320 CEO/NEO difference course to full Airbus A320 NEO type training for specialists with no previous background on the type.

 

  • Magnetic MRO finishes the 60th Base check on Austrian Airlines’ aircraft and signs new Slot Reservation Agreement

Magnetic MRO has signed a Slot Reservation Agreement with Austrian Airlines. By this agreement, Austrian Airlines is booking two nose-to-tail slots during the winter maintenance season, and it will be valid for three years during winter seasons from 2020 until 2023. Austrian Airlines has been using Magnetic MRO services since 2005 when the base maintenance services were provided for Boeing 737-800 aircraft. Since 2013, Magnetic started servicing Austrian Airline’s Airbus 320 family aircraft. By the end of 2019, a total of 60 Austrian Airline’s aircraft has been successfully serviced at Tallinn facility.

 

  • Magnetic MRO acquires four airBaltic’s Boeing 737s

Magnetic MRO acquired four Boeing 737 Classic aircraft from airBaltic. Following the delivery from Latvia’s flag carrier, all aircraft will continue their service in the fleets of new owners. Being the launch operator of Airbus A220, airBaltic operates a fleet of 36 aircraft, including twenty-one Airbus A220, twelve Bombardier Dash 8 Q400 NextGen, and four Boeing 737 CL, as of December 2019. The decision to sell Boeing 737 CL aircraft was a pre-planned move by airBaltic in order to focus on its new Airbus 220 fleet which delivers higher fuel efficiency and reduces the carbon footprint.

 

 

STATEMENT OF THE MANAGEMENT BOARD

 

Magnetic MRO Group AS (further on Magnetic MRO Group or the Group) consists of parent company Magnetic MRO AS (EE), and its subsidiaries: MAC Aero Interiors Ltd (UK), Magnetic Leasing Ltd (IE), Arrowhead assistance UAB (LT), Magnetic MRO Malaysia Sdh Bhd (MY). Starting from March 01 2019 Magnetic MRO Group consolidates newly acquired group of line maintenance companies - Direct Maintenance Holding BV (NL) (further on Direct Maintenance Group). In December 2019 MAC Sichuan Aviation Technology Ltd (CN) was moved from the Group to Hangxin Aviation Services Co Limited (Magnetic MRO’s parent company) and its results are no longer consolidated in the Group results.

The financial and other additional information of the Magnetic MRO Group published in the interim report Q4 2019 is true and complete. The consolidated main financial statements give a true and fair view of the actual financial position, results of operations and cash flows of the Group.

The consolidated financial statements of the Magnetic MRO Group in the report for the period Q4 2019 and Q4 2018 are not audited. The financial information in Interim Report is prepared in accordance with the Estonian financial reporting standards. The Estonian financial reporting standards are prescribed by the Accounting Act of Estonia and supplemented by the guidelines issued by the Accounting Standards Board.

COMPLIANCE WITH COVENANTS

According to p.3.4.2 and 3.4.3 of the Terms and Conditions of Magnetic MRO 8% 21.12.2021 bonds, the Issuer shall be obliged to comply with the following covenants until the Notes are fully repaid:

3.4.2 Equity Ratio shall not fall under 25% at the end of each Reporting Period;

3.4.3 Net Debt/EBITDA Ratio shall not be higher than 3.2.

The Management Board confirms the following execution of covenants as of December, 31 2019:

1) Equity Ratio - 37%.

2) Net Debt/EBITDA – 2.1.

3) In July Magnetic MRO Group received two thirds of the contribution from the equity capital injection announced in Q2 2019, in Q4 2019 this contribution is reported as unregistered share capital (in Q3 2019 equity contribution was reported under Liabilities). At the date of the release Q4 2019 Interim Report the equity increase is not registered in Commercial Register of Estonia. The remaining one third is expected in Q1 2020.

 

Covenants calculation:

  kEUR TTM 12.2019 TTM 12.2018
1 Interest bearing liabilities 16,638 11,712
     incl. Bonds 8,000 2,722
2 Cash and bank 5,659 929
3=1-2 Net Debt 10,980 10,783
4 Total Equity 23,924 16,253
5 Total Assets 65,419 37,834
6=4/5 Equity Ratio 37% 43%
       
7 EBITDA 5,217 6,315
8=3/7 Net Debt/EBITDA 2.1 1.7
       
9 EBITDA Direct Maintenance (up to 02.2019) 109 1,472
10=7+9 EBITDA pro-forma (Direct Maintenance) 5,326 7,787
11=3/10 Net Debt/EBITDA pro-forma 2.1 1.4

 

*TTM - trailing twelve months

** Per p.2.1.11 of Terms and Conditions of Magnetic MRO 8% 21.12.2021 bonds, EBITDA means the net income of the measurement period before:

  1. Any provision on account of taxation;
  2. Any interest, commission, discounts or other fees incurred or payable, received or receivable in respect of financial indebtedness;
  3. Any depreciation and amortization of tangible and intangible assets; and
  4. Any re-valuation, disposal or writing off of assets.

*** Equity method income:

  • 49,9% of net income from associated company Magnetic Parts Trading Ltd;
  • 10,0% of net income from associated company MAC Sichuan Aviation Technology Ltd.

 

 

Astrit Viisma-Kass

CFO, Member of the Management Board

Tallinn

 

 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS, kEUR

 

PROFIT and LOSS STATEMENT CONSOLIDATED    
  Q4 2019 Q4 2018
Sales revenue 37,216 19,439
Variable direct costs -33,897 -15,645
Fixed direct costs -131 -151
Other operating income 1,070 102
Other operating expenses -923 -531
GROSS PROFIT 3,333 3,214
Marketing expenses -160 -189
Administrative costs -1,633 -1,315
Personnel costs -939 -867
EBITDA 601 842
Depreciation and amortization -1,109 -369
Financial income and expenses -216 138
Assets revaluation (FX) 206 -61
Equity method income * 525 97
NET PROFIT 7 647
Minority Interest ** 159  
ATTRIBUTABLE NET PROFIT -152 647

* Shareholding in Magnetic Parts Trading Ltd: 49.9%

*Shareholding in MAC Sichuan Aviation Technology Ltd: 10.0%

 

**Minority Interest:

Direct Maintenance East Africa Ltd 49%

Direct Maintenance Zanzibar Ltd 49%

   

Magnetic MRO had an opportunity to step into a new business line, which it had included in its strategy since 2012, and that is the signing of a 3 year ‘power-by-hour’ contract with a fleet of 22 airplanes with Enter Air. This project generates significant cross-synergies within the Group and boosts further our exposure to the international spare parts market. The start-up costs of the project brought negative impact to EBITDA. Magnetic MRO management foresaw the shortcoming in the results to a degree, but there was a negative impact to the results, as the investment to warehouse materials happened with a delay. At that point, both the investment to material stock had started and a revision to the Enter Air PBH agreement with better financial terms to Magnetic MRO was agreed.

The negative impact to Q4 2019 EBITDA in total amount of 587kEUR is caused by the following year-end adjustments:

  • Yearly write-off of repair costs made for leased components under PBH agreement in amount of 287kEUR;
  • Reserve for possible impairment of MAC Aero Interiors stock value in amount of 300kEUR.

The following one-off costs took place in 4th quarter, total amount of 523kEUR:

  • MAC Aero Interiors relocation to Estonia started at the end of December 2019. Relocation related costs reported in Q4 2019 are 150kEUR;
  • Direct Maintenance Group - Personnel costs temporary increase during Q4 2019 related to the opening of new stations (permanent staff training and their replacement by contractors during type training courses for period 1-3 months) in amount of 373kEUR. Permanent staff for new stations will complete type training courses in February 2020.

During the last quarter the Group purchased four Boeing 737s from airBaltic which had a material impact to revenues and likewise to direct costs. Of the four aircraft purchased, three were sold in Q4 2019 with the remaining aircraft sale to conclude in Q1 2020.

Q4 2019 net profit is impacted by the amortization of goodwill from the acquisition of Direct Maintenance Group as the purchase price allocation was finalized in that period.

 

 

CASHFLOW CONSOLIDATED    
  Q4 2019 Q4 2018
OPERATIONAL ACTIVITIES    
Operating profit 601 842
Adjustments 395 195
Change in receivables and prepayments -2,345 -1,079
Change in inventories -170 417
Change in liabilities and prepayments 9,818 -581
TOTAL from OPERATIONAL ACTIVITIES 8,299 -206
     
INVESTMENT ACTIVITIES    
Proceeds from sale and purchase of Fixed Assets -294 -1,156
Long-Term Investments -622 -428
TOTAL from INVESTMENT ACTIVITIES -917 -1,585
     
FINANCING ACTIVITIES    
Financing activities -2,458 1,928
TOTAL from FINANCING ACTIVITIES -2,458 1,928
     
TOTAL CASHFLOW 4,924 137

 

 

 

 

BALANCE SHEET CONSOLIDATED    
  12.2019 12.2018
Cash and bank 5,659 929
Receivables 22,617 15,956
Inventory 12,963 7,392
Total current assets 41,238 24,277
Non-current assets    
Long-term Investments 7,052 6,588
Fixed Assets 12,791 6,415
Goodwill 4,338 555
Total non-current assets 24,181 13,558
TOTAL ASSETS 65,419 37,834
     
LIABILITIES AND OWNERS EQUITY    
Short term liabilities    
Short-term Loans 7,553 6,881
Payables 24,857 9,869
Total Short-term liabilities 32,409 16,750
Long-term liabilities    
Long-term Loans 9,086 4,831
Total long-term liabilities 9,086 4,831
TOTAL LIABILITIES 41,495 21,581
Share capital 1,090 1,093
Unregistered Share Capital 5,317  
Share premium 6,619 6,619
Reserves 79 79
Unrealized FX BS 201 58
Minority Interest 31  
Retained earnings 8,178 3,325
Profit for the period 2,409 5,079
Total Owners' equity 23,924 16,253
TOTAL LIABILITIES AND OWNERS EQUITY 65,419 37,834

 


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY            
  Issued capital Unregistered Share Capital Share premium Statutory
reserve capital
Unrealised
exchange rate
Retained
earnings (loss)
Minority interest Total
31.12.2017 1,090   6,619 79 -58 3,446   11,177
Annual period profit (loss) -       117 4,326   4,443
30.09.2018 1,090   6,619 79 60 7,772   15,620
Annual period profit (loss) -       -123 753   630
31.12.2018 1,090   6,619 79 -63 8,524   16,250
Annual period profit (loss)       -47 159 3,047   3,158
Minority interest             -103 -103
30.09.2019 1,090   6,619 32 95 11,571 -103 19,305
Annual period profit (loss)   5,317   47 106 -985   4,485
Minority interest             134 134
31.12.2019 1,090 5,317 6,619 79 201 10,586 31 23,924

 

 

Astrit Viisma-Kass

CFO, Member of the Management Board

Tallinn

         Astrit Viisma-Kass
         Astrit.Viisma@magneticmro.com


MagneticMRO_Q4_2019_ENG.pdf