Avation PLC

Good afternoon, ladies and gentlemen, and welcome to the Avation half-year results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time using the Q&A tab situated on the right-hand side of your screen. Just simply press submit your question. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll, and if you would give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand over to Group General Counsel, Duncan Scott. Good morning.

Thank you, and good morning to everyone. Today, on the 3rd of March, Ovation published its unaudited financial results for the six months ended 31st December 2022. A copy of our results announced by Ovation on our website at www.ovation.net. This conference call is being webcast and recorded and the webcast will be available for replay on our website. Please note that certain statements in this conference call, including answers to your questions, are forward-looking statements, including without limitation statements regarding our future operations and performance, revenues, operating expenses, other income and expense items. These statements and any projections as to the company's future performance represent management's estimates of future results and speak only as of today, 3rd March 2023. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information on the factors and risks that may affect Ovation's business are included in Ovation's regulatory announcements from time to time, including its annual report and off-year announcements. Ovation assumes no obligation to update any forward-looking statements or information in light of new information or future events. Unauthorised recording of this conference call is not permitted. I will now hand over to Executive Chairman Jeff Chatfield.

Thank you, Duncan. Good afternoon or evening, everybody. Thank you for joining this investor conference call where we discuss our half-year results for the six months ended 31st of December 2022. Evasion has generated a profit, increased its net asset value per share, maintained liquidity and continued to reduce debt. The company is well positioned to execute its business strategy as the aviation sector continues to recover from the impacts of the COVID-19 pandemic. So the snapshot of the company as at December 31st. At the end of the half-year period, aviation's fleet comprises 37 aircraft, leased to 16 airlines in 13 countries. By value, we own a diverse fleet of aircraft, including 52% narrow-body, 30% regional turboprop, and 18% wide-body by value. The fleet has excellent metrics with 6.1-year weighted average age and 5.4-year weighted average remaining lease term. Fleet assets have a net book value of $936 million, and we have 536 million future contracted lease receivables. The portfolio as of 31st of December, 2022. It's dominated by modern fuel efficient regional and narrow body aircraft, which generally operate on domestic and short haul routes. These have been the fastest to recover after the COVID-19 pandemic. The number of unutilised aircraft has been reduced to now two with the sale of an off-lease 737-800 and the commencement of a lease announced this week. There is only one lease for an Airbus A320-200 aircraft set to expire this year. Then the next schedule lease expiry is not until the year 2025. Moving on to our outlook. Aviation has placed two firm orders for two new ATR 72600. We hold purchase rights for a further 28 ATR 72600 aircraft. The two aircraft are due to be delivered in 2024. while the purchase rights for aircraft are to be delivered out to June, 2027. The order book and purchase rights provide the company with the visible fleet growth opportunity. Avations purchase rights have increased in value, partly due to a capped inflation formula, which we believe is now significantly below the actual cost inflation. In respect to the first two aircraft, Avations paid all pre-delivery installments and believes that the balance of the purchase price can be funded with secured debt. Avatian is reasonably confident that it can source an attractive lease contract for the ordered aircraft. Avatian's aircraft come with the Pratt & Whitney 127XTM engine, which provides lower fuel consumption and 5% more power, and also can operate sustainable aviation fuel. And we expect it'll be able to operate with 100% sustainable aviation fuel from 2025. If we just go forward again, so this is an ATR slide which shows the range of customers around the world for ATR72 aircraft. It's actually got As many customers or operators as, for example, Boeing 737 aircraft, more than the Dash 8s and E-Jets and so on. So it's an extremely popular aircraft type all over the world. So there's plenty of choices on where to place aircraft. Now, this is another ATR slide, but it's actually really important in the sense that it demonstrates that of the ATR aircraft that have been made, over 1,200 are over retirement age. So in other words, as they retire and hopefully get replaced, we'll be So, for example, there was 1,600 delivered, but as I've just said, there's 1,200 over retirement age. So that's a really important business opportunity because clearly there's a market there for a lot of replacements, which is very important because I think that Ovation is one of the world's largest, if not the largest, option for that type of aircraft. They're a very extremely fuel efficient and low carbon dioxide aircraft. So at the moment you've got ATRs operating with sustainable aviation fuel. And as I said earlier, by 2025, you can operate an aircraft, an ATR 72 with 100% sustainable aviation fuel. So it's CO2 production will basically be virtually zero. And so we have a background with green finance. In late 2019, we established the world's first commercial aircraft financing with a green loan, which was provided by Deutsche Bank and it was signed off by an agency and we won an award for doing that. So we have a history of green financing. This is another ATR slide. So at the moment, That's actually, that plane is operated by one of our customers, which was financed by, that customer was financed, the aircraft for that customer was financed by that green loan. It's already 50% sustainable aviation fuel compliant. And so it is sort of happening now, the transition to low CO2 operations. And as I said earlier, the ATR is a very successful program. In total of all ATR models, there's 1,800 sold, 200 operators, a billion passengers. So it's the sort of number one turboprop in the world. And we believe given the CO2 initiatives around the world with governments and taxes and it'll have a strong future. But overall, coming back to our broader business, we have 16 customers in 13 countries. We're now 14, given the events of this week. We have 70% of our customers by revenue are in Asia, with the remainder in Europe. Our top three customers by revenue are VHF, AirBaltic, and EVA Air. We have no exposure to anything Russia. We have no impact. We're not aware of any impact from sanctions resulting from Russia. We tend to only want to lease aircraft in places where we're confident that we'd be able to repossess it in the event of a default. So we are a sort of a buyer of new or relatively new aircraft and the natural seller of midlife and older aircraft. So you've seen us sell older aircraft so we can transition to new modern technology aircraft going forward. Some of the highlights, we sold two ATR-72E600 aircraft in the period We transitioned and sold a Boeing 737-800 that we repossessed. We wrote a new lead for an airline in Nepal. And we've successfully repossessed an aircraft from Myanmar. So we're good at transitioning, selling, and leasing aircraft. Now we talk about the financial results and I'll hand over at this point to Ian Court who's the CFO to continue this presentation.

Thanks Jeff and good morning everybody. The next few slides of the presentation provide a summary of the financial results. Further detail is included in today's stock exchange announcement which is also available on the company's website. In the half year to 31 December 2022, total revenue and other income was $55.3 million. The reduction in revenue is mostly a reflection of the reduced fleet size. Operating profit increased by 86% to $35 million compared with the prior year. Operating profit includes a $3.2 million gain on derecognition of a finance lease, a $6.9 million unrealised valuation gain on an equity investment, and $5.8 million of aircraft transition costs. The gain on derecognition of a finance lease represents the positive difference between the outstanding finance lease receivable and an independent broker valuation for the ATR72 aircraft repossessed from an airline in Myanmar. The gain on an equity investment is a mark to market adjustment to the value of shares in Philippine Airlines, which Ovation received following the Airlines Chapter 11 restructuring process. Aircraft transition costs are principally costs incurred in the transition of a Boeing 737-800 repossessed from Garuda, which was sold in February. Profit after tax of $8.3 million for the period. compares with a loss of $15.3 million in the comparable period. Profit after tax includes a gain of $1.7 million on the early full repayment of two loans that were refinanced in the period and a gain of $0.5 million on repurchased bonds. Finance expenses were reduced by 9.5% to $31.7 million compared with $35 million in the prior year. Net indebtedness was reduced by $46 million in the half year period as the company continued to deliver its balance sheets. Total assets were largely unchanged at around $1.2 billion at both the 31st of December and 30th of June. Moving to the next slide, an analysis of our debt. As noted on the previous slide, net indebtedness has been reduced. Weighted average cost of debt increased from 5.7% to 6.1% over the six-month period. The face value of unsecured notes outstanding was largely unchanged at $348 million as at 31st of December. Weighted average cost of secured debt increased to 4.5% from 4.0% in the period before. due to increases in floating rates and mandatory scheduled repayments skewed towards lower cost facilities. Following the refinance of two floating rate euro loans with long-term fixed rate debt in November 2022, the proportion of fixed rate debt increased to 94.8%. The ratio of net debt to total assets was further reduced to 62.9% as at 31st of December and is forecast to continue to fall as scheduled loan repayments exceed depreciation of aircraft. Looking at some key ratios, obviously net asset value per share has increased to £2.82 in the period from £2.68 at 30th of June. Lease yield was 9.4%, but will increase slightly once all off-lease aircraft are placed or sold. Lease yield for aircraft on lease was around 9.6% in the period. Credit ratios have all improved over the period as net debt has been reduced. Looking at our summary of liquidity, the company has preserved liquidity over the half year period while deploying funds generated from operations and aircraft sales to pay down debt. Other current assets includes 8 million shares in Philippine Airlines, issued as part of the restructuring of the airline via a Chapter 11 bankruptcy process. The shares are due to be exchanged for listed shares in Powell Holdings Inc. later this year. We have revalued the shares based on the ratio for the share exchange, which has been established by an independent valuation, and the published share price for Powell Holdings at 31st of December. We include unencumbered aircraft as potential sources of liquidity as they may be used as security for new loans or sold. The Boeing 737 aircraft was sold in February, 2023. Following slide shows the maturity profile of Avations loans and borrowings and following the successful extension of Avations warehouse loan facility in June, 2022. there are no significant near-term debt maturities other than scheduled monthly and quarterly loan instalments. The following slide illustrates how scheduled repayments of secured debt exceed projected depreciation of aircraft over time, reducing the expected senior loan LTV ratio. The bars represent estimated amounts at each fiscal year end for the current fleet only. I'll now pass you back to Jeff for the conclusion of the presentation.

So let's talk about the future. Clearly, we've got to leverage the industry recovery from COVID. The management plan is to transition, reposition, sell, lease the last couple of unutilised aircraft. Continue to manage capital structure and repay debt. Clearly, obviously, in an environment where there's 1,200 ATR aircraft over a time and age, there is opportunities to organically grow by the... self-funding delivery of ATRs to that client pool, which should be a very, you know, steady progression as we deliver aircraft. In conclusion, there's obviously, and the sector has demonstrated recovery, our company's returning to profitability slowly and getting lower leverage. Clearly in the macro environments changing where people want modern technology and low CO2 aircraft, which is sort of being forced on them by governments more than anything else. So we're aligned with that as far as a sustainable future goes. Now, what we will do is we can have a question and answer session. Please feel free to use your system to answer questions.

That's great, Geoff, and to the team from Avation, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the right-hand corner of your screen. Just please simply type in your questions at any time and press send. But just while Jeff and the team take a few moments to review those questions you've submitted already, I'd like to remind you that recording this presentation, along with a copy of the slides and the Q&A, will be available via your InvestorMeet company dashboard. Jeff, no surprise, probably, as you can see, you've got a number of questions from investors given the attendance on today's call. If I may, Jeff, just hand back to you, if I could ask you to read out the question and then obviously a response where it's appropriate to do so, and then I'll pick up from you at the end.

Okay, well, there's one from the IMC host, which was, over the years, aviation has been proud of the fact that there was a young fleet. COVID put a stop to that. I disagree with that. When can investors expect to see genuine fleet growth, especially amongst A220s? Well, we've got two aircraft due to be livered in early 2024, so that's growth. and we have purchase rights for ATR-72s, which is more growth. A220 is more difficult, given that they're probably one of the best aircraft, commercial aircraft in the world at the moment, so they're not particularly easy to come by. We do see opportunities, but, you know, it's not that easy. So that's that question dealt with. I think the next one is, when is AVAP expected to pay dividends? Well, at the moment, we're focused on lowering the cost of debt and lowering the amount of debt. And once there is excess free cash flow above and beyond what we need for that, we will be paying dividends again. Next one's Nick B. Can you explain how purchase rights work? Well, I think Soren Ferre, which would love to take this question. So why don't you take it, Soren?

Just bringing Soren back in. Just a second. Thank you, Soren.

Amon?

Go ahead, sir.

Okay. Well, basically, purchase rights are, it's like an option you have with the aircraft manufacturer, in this case, ATR. where basically you give a notice. So unlike options, pattern strikes are just pure options. They don't have a date attached to it. So in our case, we basically give notification to ATR, and ATR has to give best efforts to give us a slot, at least in the coming 18 months. Traditionally, it's never been an issue. So that enables us today, like for example, today we have two firm aircraft, but we have actually submitted offers for three aircraft to some campaigns because we've already discussed with ETR, ETR has the aircraft available. So if we exercise purchase rights, basically we can get the slots. And once the purchase right has been firmed up, the order the um the benefits we have to with the uh the fleet of aircraft as part of the whole contract apply as well so we as jeff said you know we have an excellent uh escalation cap that discussion card will be transferred to all the purchase right without a limitation of time thank you um next one i think could you discuss the outlook and time for asset sales well they're

They're slowing down. Our preference is to lease the remaining aircraft. We may sell one because clearly there's interest in it, but we certainly would like to lease the others, and we'd like to have it all wrapped up by June 30th. Another question is regarding the delivery of time for the former Golden Myanmar ATR. Well, we've transitioned that aircraft, I believe. Nick B's asked, any plans to have exposure in the US? We tend to find that the United States has very low cost of money to airlines, so they tend not to be that attractive to lessors, but there's sort of some second-tier and third-tier airlines that we could look at. in the future. The next one, what's the total free cash flow from the sale of free aircraft? Well, it's not something we would ordinarily discuss in any great detail. I think you'll see it. If you'd study the accounts, you should be able to work out roughly what it is. Unless, Ian, you want to take that? No, he doesn't. He's on mute. The next question is, thanks for the presentation. Why do you think that the current share price is only about 50% of the net asset value? There's no real, very simple answer to that. I mean, it's a question of investor relations, promotion, risk size. Clearly, over the... Over the coming days, our job is to promote the company so that the shares are at least in the same postcode as net asset value, like the rest of the lessors. But clearly, you know, we've come out of COVID and there's a lot of disruption in the world and very difficult. Stephen P asks, what does the company to do with the Equity investments in airlines received in the receipt of debt. Well, you know, our business is leasing aircraft, so typically we would sell those. Jonathan Jays, Richard Walaski, still the FD of Avation. On the call, the way we manage the company is we effectively had Two people dealing with different types of investors and financiers. And on the call is Ashley Nichols, who has taken Richard's role in terms of investor relations. So Ashley's on this call and feel free to introduce yourself if you want, Ashley.

Thank you, Jeff. Yes, if investors have questions after this call, then they can certainly send them through to the investor at Ovation.net or my email address, which I think is at the end. And we'll happily answer those questions post this call.

Actually, he's been with the company for many years and principally deals with banks. So he's raised most of the asset-backed finance. The next question is from Damien. Both United and Abation have talked about new aircraft and other shortages limiting industry growth. What impact does this have on aircraft values, lease rates, useful leasing lives for the existing fleet and ATR orders and purchase rights? Number two has stated a focus on organic growth. Can you expand on how you view industry consolidation with standard chartered Exploration of a disposal, one of the latest. Might this create more opportunities as airlines seek diversity of supply? So I think Sorin would really like to talk about, Sorin was one of the, has an Airbus and an Aircap background. I'm sure that you would like to talk about aircraft shortage, industry growth and impact on aircraft values.

Yes, what we've seen, I would say, since the last half of 2022 was slowly, I mean, in 2022, beginning of 2022, we had an oversupply of ATRs as the traffic from COVID hasn't totally recovered. But thanks God, the regional traffic and domestic traffic is the traffic that has recovered the most compared with international traffic. And the situation we're in today is basically now we have a shortage of ATRs. We are getting all of our ATRs are now spoken for, either they're being sold or they're being placed with new operators, actually not discussed yet. And we are getting about, I would say, two calls a week from existing airlines or startup airlines who are looking for ATRs because basically that's the only aircraft in its category which can do the job. The Bombardier is not being made anymore. And that goes to what Jeff was saying when he was saying that there are 1,200 aircraft to be replaced. They can only be replaced by ATR. Whereas in the past, you had actually two suppliers. You had Bombardier and ATR. So we're in a situation where we have a shortage, and I don't think the shortage is going to improve, I would say, in the next two years. We're already seeing that the lease rates for aircraft in the last six to eight months have increased by about 20%. We were talking about aircraft at 60K, 65K mid-year last year. We are not talking to anyone now with lease rates for all the aircraft below 80K. And the trend is clearly going up. And as the lease rate goes up, clearly valuations are going up. We even have customers who are on the market looking for used aircraft. They just can't find them. So now they're talking to us and say, well, is there a way we can make it work with new aircraft? Obviously at much higher lease rate. So yeah, I think there is a good momentum for us simply because the exposure we have on the regional market, and that also includes the A220, has really the biggest potential today.

I will on number two organic what I mean by organic growth is self-funded growth so you know investor question that we've had in the past was are you going to raise money for example to fund the two aircraft that you've ordered for early 2024 you know as in terms of raise money from shareholders and the answer is no we don't need to because we've paid from that, from operations, and we've paid all of the PDPs. And when we're talking about organic growth, we're talking about self-funded growth rather than hitting up shareholders for more money to fund growth because clearly with the share price where it is, it's an expensive undertaking. I've got no comment really on standard chartering in particular. However, I will say that some pure financial investors have sort of struggled because they don't have the technical capacity to transition an aircraft. You know, for example, you know, we must have transitioned 14 aircraft in the past couple of years. You know, we've had to get them, fly them somewhere, fix them, you know, pay for the engine, shop visits, do everything. And that's a bank or a normal financial institution is not really geared up to do that. So you can understand it might be too complicated. The next question comes from Ken B. With the historic low LTV, are you not making yourselves vulnerable to be acquired? I don't know that LTV is driven by M&A appetite. But, yeah, I mean, what we want is to make a profit for our shareholders. And so getting rid of debt is a really good thing. Kellen, what are the net sales? Well, we own that aircraft, that 737. You know, I don't really want to go into the precise details, but we did... We actually did super well with the aircraft because Evasion has a technical team. And we basically spent about roughly, say, 60% of what someone else would have spent to bring that aircraft up to the state that it needed to be sold. So we managed two engines to go through the shop. We managed... to repossess the aircraft from Garuda in the first place. We had to fly it to Malaysia. We put the airframe through the shop. And so we did super well. So our proceeds proportionately were above what a lot of lessors would have achieved with that aircraft. So we're very, very pleased with the technical and transition team. Um, next question is James, are you strategically attempted recycled cat capital tied up in wide bodies and new ATF ATR aircraft? Well, that's, you know, we're constantly buying and selling aircraft. So, you know, every aircraft you buy at some point you've got to sell. So, um, all the, you know, that's all we've done to grow the company in the last 16 years. So at some point the whole lot will get sold. Um, So not any particular aircraft. Next question's for Ian. I think how much secured debt will be, well, Ashley, how much secured debt will be needed to fund the remaining delivery payments for the next two ATFs? There's no pre-delivery payments required, but Ashley, do you want to talk about your process to raise the debt to finance those?

Yeah, I mean, we go out to the whole universe of secured bank lenders. And, you know, the balance of the payments that's due to ATR, we would expect to most likely pay or get all of that financed through the secured debt market. So having already paid the PDPs, we would expect the rest of the balance at delivery to be paid or funded by secured lenders. I think he's asking how much secured debt is required. Around 15 or so million per aircraft.

Next one, John C. You've made good progress, reduced the number of off-lease aircraft to two. What was the peak number of off-lease aircraft in the fleet during the pandemic? From what can you see, what is the current monthly production rate? Well, I think the annual production rate of ATR-72s is literally about 35. Is that correct, Soren?

Sorry? Yes, yes, yes. They are at 35 and they're going to 40 next year.

Right. And Ian, do you want to answer the first one? Where did we peak out?

Yeah, well, we peaked with off-lease aircraft on the day that Virgin went bankrupt and re-delivered 13 aircraft. So we actually had one aircraft, one unutilised aircraft already at that time. So that took us to 14 aircraft. And since then, we've obviously brought that back down to two. But, yeah, 14 is the answer to the question.

Yeah, a number that you won't see in the repeat, we hope, is, you know, we've spent millions and millions of dollars transitioning those aircraft, which was, you know, for all shareholders, a horrible impost. And hopefully it doesn't repeat again. The next question was, Kellen, considering the $100 million tender offer concluded with only $7 million of bonds, would you consider open market purchases of unsecured bonds going forward? Yes, we would. We now know where the market is. Clearly, bondholders' view of the company's possibly got a bit better than it was. but we now certainly know where the market is. So that's something we would consider. Could we see any orders in the near future for narrow body jets? Well, we looked for organic growth at some stage. And if we sell something, we typically recycle it because clearly if we just sell everything, there won't be anything left. So we wouldn't speculate, but you could see some, in the future, some narrow body action, which is a good thing. The next question is Brandon, approximately where are aircraft values currently compared to COVID? How far off the bottom reached are they? Soren, do you want that one?

Yes, I think in terms of ATR, I think the ATR market was actually very soft before COVID. So the values were actually fairly low. The lease rates were under stress. So we are definitely in terms of valuation, I think, above COVID level.

Next question. How easy will it be to raise finance in the current interest rate environment? Well, it's easy, but obviously interest rates have gone up. So lease rates have got to go up proportionately. Stephen B, how much of the profit is the result of exceptional non-recurring items? Well, there's plenty of non-recurring costs. Do you want to try and deal with that one, Ian?

Yeah, I can have a go. I mean, it's not an easy question to answer, obviously, because the fact that we have non-recurring items in this period doesn't mean we won't have more non-recurring items in the next period. But, I mean, if you just look down the P&L chart, Within other income, there's a $3.4 million exchange gain. Obviously, we're going to get more exchange gains in future, but I can't tell you what the numbers will be. Further down the P&L account, there's a gain on derecognition of a finance lease. We hope not to have to do further derecognitions of finance leases because we only had to do that because the original lessee defaulted. And then on the cost side, there's a loss on disposal of an aircraft. Obviously, that only happens if we sell an aircraft and we'd hope to make a profit on future aircraft sales. The purchase rights revaluation, I mean, that will be a feature of our P&L account while we hold purchase rights because we will be revaluing them at every balance sheet date. And I can't tell you if that will be a gain or a loss in future. The gain on the equity investment, again, as long as we hold those shares, we're required to market. So we will have further movements on that share price for sure. And then on the transition expenses, I mean, obviously our business is not to pay maintenance costs for aircraft. We hope to not have to transition costs. And if leases are performing, we shouldn't have too many transition costs in future. But that has been a feature of the P&L account over the last couple of years because of the numbers of aircraft that were re-delivered by airlines that defaulted through the COVID pandemic. So I probably haven't really answered your question except in general terms, but I hope that's helpful.

The next question was, if you had access currently Cash today, how would you rank repurchasing of notes at a discount, stock buyback and three dividend? Well, clearly, while notes are available at a discount, they're very attractive, as would be a dividend down the track. So I guess it's notes first, in the future, dividends, and number three, stock buybacks. A question from Cyprus. What is the lease expiry schedule currently? Any risk of non-renewal over the next two years? We've only actually got one aircraft that is due to come off in the next two years. So what are our prospects on transitioning or releasing or extending that particular aircraft?

Well, fairly good. We're actually reasonably close to extend the aircraft for up to six years with the existing lessee. And if it plays difficult, we already have a handshake agreement with another operator to take the aircraft.

So we don't see a lot of problems in the next two years. What other regions do you see placement opportunities for evasion place ATR other than Southeast Asia? Well, in the slides, that we had the ATR slide, you know, there's a hundred operators around the world. So it's 200, where's the ATR slide? So 200 operators. So, you know, it's a risk versus return question. You know, you look for the optimal risk slash return and you're in an environment where, you know, a lot of them are A lot of them are getting old, so they need to be replaced. So your ideal strategy is to go to an ATR operator that's got a lot that are old and effectively do a fleet rollover. And we're probably the only lesser in the world that can do that, given the size of the order book. Can you comment regarding transition costs? Are they higher than normal? And if so, why? asking about Myanmar. No, it was actually the 737 was the most expensive and also the number of, you know, we put a lot of aircraft through the shops. But the 737, you know, we had to do two very expensive engines in shop visits. You know, one of them, what, you know, clearly putting two engines through a shop is, two, you know, jet engines through a shop is expensive. Tim F, did you say the ATR option price split cost? Well, what happens with when you buy aircraft, you don't really know the delivery price until you get delivery. So for example, if you rang up Airbus today and said, I'd like to buy an A320neo, they'd say, great, here's your order. But on the delivery side, in 2028 or 2029, whenever they're going to deliver it to you, the price has changed with inflation. And what we've got is we've got a, an inflation cap, um, with ATR, which is lower than the real world inflation. It's something we negotiate, you know, in our purchase contract because we were scared about interest rates and inflation. And so as time goes on, our price gets better. Um, which makes them valuable in their own right. And ATR will honor that because clearly we're been a giant customer and they're fully motivated to sell us another five or $600 million worth of aircraft. So those options are very valuable and the exercise price of the option is extremely useful. Next one's from Cyprus. Is there a debt ratio target the company is looking to achieve and sustain? We're mainly interested in the cost of debt in Cyprus. So we're looking to lower the relative cost of debt, average cost of debt, versus the lease yield in the then current environment. Because if the interest rates are high for us, they're also high for airlines. So that's okay as long as we get a higher lease rent. But to improve our profitability, what we need is a cost of funds. So it's not really a, I mean, we've got relatively low percentage of leverage compared with some lessors. But our issue is we need to get the cost of debt down. Jonathan J, sorry to interrupt. Press the point, does Richard still work probation? What is his role? Richard has left the company, Jonathan. He's no longer with us. He's moved back to Perth. He's doing other things. Adil E, how well have residual values for ATRs held up in the past years? Well, over historically, turboprops have got the best residual value equation of any type of aircraft. And the reason for that is they have relatively long lives compared to commercial jet aircraft. And so the residual value is quite high and more importantly, not that valuable. But as Soren just said a little while ago, the market values of ATRs has increased dramatically lately. because there's only been 35 May. There's only 35 May to year. There's not a lot for sale in the secondhand market. And consequently, their value is increasing. Jonathan, in 2020, you put Evasion up for sale by a form of sales process. Do you envisage that happening again in the future? We didn't put it up for sale. We had an inbound proposal from a, another lessor that wanted to acquire the company, and obviously COVID put a stop to that. And if you're a public company, you know, these things occur from time to time. You know, we have Citigroup as an advisor to the company on, you know, standby if that ever happens. It hasn't happened lately, but will it happen? Who knows? Bettina B., How will the new ATR STOL variant impact the value of your ATRs? Are you able to switch your existing orders to this variant? Yes, we are. But the STOL is an ATR 42. So STOL means short takeoff and landing. So it's really ideal for very challenging environments. So in theory, we are able to do that. We probably would be reluctant to do that because we like aircraft where there are a lot of aircraft out there in the world. So there's a secondary market. And as a new variant, we don't know how well the secondary market is going to develop on that type. It's sort of at this stage, it's special mission. Next one is from Nandi. Trades at a substantial discount to NAV. Are there any restrictions in your debt agreements that would prevent you from repurchasing shares? Well, the answer to that is no. So that's, I think, all the questions.

Jeff, you've been very generous. So you've taken every question from investors this afternoon. And should any further questions come in, we will make these available to you post today's meeting. Now, Jeff, I know investor feedback will be particularly important to you and to the rest of the company. And I'll shortly redirect those on the call to give you their thoughts and expectations. But Jeff, I wonder before doing so, if I may just ask you for a few closing comments just to wrap up with. And then I will redirect investors for their feedback.

Well, we want to thank you for your support. We want to reassure you that we don't intend to go and issue new shares for the purchase of aircraft in the short term. So we've been very motivated to sort of survive and lower our leverage and manage all the problems. And clearly the COVID thing's been a real challenge. I mean, it's still challenging for a lot of airlines. And clearly, you know, we've got to overcome that. We're well placed because the CO2 thing is real. Governments want low CO2 aircraft. And so, you know, ATRs, for example, and A220s are very well placed to satisfy those requirements. So thank you for your support. And I think there's a lot of... the most ever investor interest we've ever had. Operator, how many people have we got on the call?

You had 152 that have accepted. You have currently at this precise moment in this conversation, there's 76 alive on the call as we stand here now.

Right. There's a late question from Robert. Please clarify the comment share purchase restrictions under debt are granted. The indenture does seem to limit payments to shareholders. There are buckets within the indenture. There's buckets of money that you can apply to certain things. It's not our intention, but they're fairly big buckets. It's not our intention to repurchase shares. It's more our intention to repay debt, which is what we've been doing. We've been chomping through $46 million in the last six months, for example. I hope that answers your question. If you've got any other questions, you can email us at any time. All right.

Thank you very much. Jeff, you've been most generous with your time. And thank you once again to all the investors for their engagement and their questions this afternoon. Can I please ask investors on this call not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Ovation Group PLC, we'd like to thank you for attending today's presentation. Good afternoon or good evening to you all.