2023 ANNUAL REPORT
IN V ES TING FOR
GROWTH
BOC AVIATION LIMITED ANNUAL REPORT 2023
CONTENTS
02 Financial Highlights
05 Portfolio and Operational Highlights
07 Chairman's Statement
08 Chief Executive's Comments
10 Business and Financial Review
20 Management Discussion and Analysis
33 Directors, Officers and Senior Management
40 Corporate Governance Report
65 Directors' Statement
81 Five Year Financial Summary
83 Environmental, Social and Governance Report
- Corporate Information
-
Definitions
Appendix A - Financial Statements
01
BOC AVIATION LIMITED ANNUAL REPORT 2023
FINANCIAL HIGHLIGHTS
Our financial highlights for the year ended 31 December 2023 are:
- Total revenues and other income rose 7% year-on-year, to US$2.5 billion
- Record net profit after tax of US$764 million compared with US$20 million in 2022
- Core net profit after tax was US$547 million, excluding US$217 million of net after-tax recoveries in respect of aircraft in Russia. This compared with US$527 million of core earnings in 2022, excluding the net impact of the write-down of aircraft in Russia in 2022
- Earnings per share of US$1.10 and net assets per share of US$8.28
- Operating cash flow net of interest rose 8% to US$1.6 billion
- Total assets of US$24.2 billion at 31 December 2023, up 10% on 2022
- Raised US$4.1 billion of new debt financing comprising US$2.5 billion of loans and US$1.7 billion of bonds
- Maintained strong liquidity of US$5.6 billion, comprising US$392 million in cash and cash equivalents and US$5.2 billion in undrawn committed credit facilities at 31 December 2023
- The Board recommended a final dividend for 2023 of US$0.2721 per share, pending approval at the AGM to be held on 30 May 2024. The final dividend will be payable to Shareholders registered at the close of business on the record date, being 7 June 2024, bringing the total dividend for the financial year 2023 to US$0.38521 per share, calculated at 35% of net profit after tax
Capitalised terms used but not defined in this annual report are found on pages 165 to 167.
Due to rounding, numbers presented throughout this annual report may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
- Includes interim dividend of US$0.1131 per share paid to Shareholders registered at the close of business on 29 September 2023.
02
BOC AVIATION LIMITED ANNUAL REPORT 2023
FINANCIAL HIGHLIGHTS
EXHIBIT 1: FINANCIAL HIGHLIGHTS
Year ended 31 December | |||
2023 | 2022 | Change1 | |
US$m | US$m | % | |
Statement of Profit or Loss | |||
Revenues and other income | 2,4612 | 2,307 | 6.7 |
Costs and expenses | (1,601) | (2,278)3 | (29.7) |
Profit before income tax | 861 | 29 | >100.0 |
Net profit after income tax | 764 | 20 | >100.0 |
Earnings per share (US$)4 | 1.10 | 0.03 | >100.0 |
As at | As at | ||
31 December | 31 December | Change1 | |
2023 | 2022 | ||
US$m | US$m | % | |
Statement of Financial Position | |||
Cash and short-term deposits | 392 | 397 | (1.1) |
Total current assets | 831 | 845 | (1.6) |
Total non-current assets | 23,338 | 21,226 | 10.0 |
Total assets | 24,170 | 22,071 | 9.5 |
Total current liabilities | 3,402 | 2,719 | 25.1 |
Total non-current liabilities | 15,019 | 14,150 | 6.1 |
Total liabilities | 18,421 | 16,869 | 9.2 |
Net assets | 5,748 | 5,202 | 10.5 |
Financial Ratios | |||
Net assets per share (US$) | 8.28 | 7.50 | 10.5 |
Gross debt to equity (times) | 2.9 | 2.9 | |
Net debt to equity (times) | 2.8 | 2.8 |
- Percentage change is calculated based on numbers in US$ thousands as shown in the financial statements.
2Includes the insurance recovery in respect of aircraft in Russia of US$258 million in FY2023.
- Includes the impairment of aircraft in Russia in FY2022.
4Earnings per share is calculated by dividing net profit after tax by total number of shares outstanding at 31 December 2023 and 31 December 2022. Number of shares outstanding at 31 December 2023 and 31 December 2022 was 694,010,334.
03
BOC AVIATION LIMITED ANNUAL REPORT 2023
FINANCIAL HIGHLIGHTS
EXHIBIT 2: OPERATING CASH FLOW
NET OF INTEREST, US$m
1,643 | ||||
1,517 | ||||
1,355 | 1,327 | |||
1,203 | ||||
2019 | 2020 | 2021 | 2022 | 2023 |
EXHIBIT 3: NET PROFIT, US$m
764 | ||||
702 | ||||
561 | ||||
510 | ||||
20 | ||||
2019 | 2020 | 2021 | 2022 | 2023 |
04
BOC AVIATION LIMITED ANNUAL REPORT 2023
PORTFOLIO AND OPERATIONAL HIGHLIGHTS
As at 31 December 2023, BOC Aviation had:
- A total fleet of 684 aircraft owned, managed and on order, with an average aircraft age of 4.6 years and an average remaining lease term of 8.1 years for the 426 owned aircraft fleet, weighted by net book value1
- A customer base of 91 airlines in 45 countries and regions in the owned and managed portfolios
-
Executed a record 348 transactions in 2023, including:
• Commitments to purchase 95 aircraft
• Delivery of 65 aircraft (excluding two acquired by an airline customer on delivery)
• Sale of 20 aircraft and one engine
• 142 lease commitments - An orderbook of 224 aircraft
• Recorded aircraft utilisation of 99% for the owned portfolio for the year ended 31 December 2023
- Includes finance lease receivables in respect of aircraft on leases classified as finance leases in accordance with IFRS 16 (Leases).
05
BOC AVIATION LIMITED ANNUAL REPORT 2023
PORTFOLIO AND OPERATIONAL HIGHLIGHTS
EXHIBIT 4: AIRCRAFT PORTFOLIO AT 31 DECEMBER 2023,
BY NUMBER OF AIRCRAFT
Aircraft Type | Owned | Managed | Aircraft on | Total |
Aircraft1 | Aircraft1 | Order | ||
Airbus A220 family | 18 | 0 | 0 | 18 |
Airbus A320CEO family | 83 | 14 | 0 | 97 |
Airbus A320NEO family | 122 | 0 | 124 | 246 |
Airbus A330CEO family | 8 | 1 | 0 | 9 |
Airbus A330NEO family | 6 | 0 | 0 | 6 |
Airbus A350 family | 9 | 0 | 0 | 9 |
Boeing 737NG family | 61 | 13 | 0 | 74 |
Boeing 737-8/9 | 60 | 0 | 93 | 153 |
Boeing 777-300ER | 27 | 4 | 0 | 31 |
Boeing 787 family | 27 | 1 | 7 | 35 |
Freighters | 5 | 1 | 0 | 6 |
Total | 426 | 34 | 224 | 684 |
EXHIBIT 5: NET BOOK VALUE2 OF AIRCRAFT BY REGION |
10.6% | |||||||
MIDDLE EAST | |||||||
AND AFRICA | 26.7% | ||||||
16.8% | AMERICAS | ||||||
EUROPE | |||||||
22.8% | 23.1% | ||||||
CHINESE MAINLAND, | ASIA-PACIFIC | ||||||
HONG KONG SAR, | (EXCLUDING CHINESE | ||||||
MACAU SAR AND TAIWAN | MAINLAND, HONG | ||||||
KONG SAR, MACAU SAR | |||||||
AND TAIWAN) |
1
2
Adjusted for disposition of 11 owned and one managed aircraft under insurance settlements.
Includes finance lease receivables in respect of aircraft on leases classified as finance leases in accordance with IFRS 16 (Leases) and excludes aircraft off lease.
06
BOC AVIATION LIMITED ANNUAL REPORT 2023
CHAIRMAN'S STATEMENT
In 2023, the Company enjoyed a substantial rebound from the prior year to report a net profit after tax of US$764 million. Total revenues and other income rose to US$2.5 billion in 2023, up 7% year-on-year, while our total assets were US$24.2 billion as at 31 December 2023, an increase of 10% against 31 December 2022.
Our dividend policy remains unchanged and the Board has recommended to pay 35% of our full year net profit after tax to Shareholders, which translates to a final dividend of US$0.2721 per share, and will bring the total dividend for 2023 to US$0.3852 per share.
During the year our Company saw changes at both senior management and Board levels. Our long-standing Managing Director and Chief Executive Officer, Robert Martin, retired at the end of 2023 and we welcomed Steven Townend, a 23-year veteran of the Company and previously
Deputy Managing Director and Chief Financial Officer, as his replacement from 1 January 2024. Steven has been replaced as Chief Financial Officer by Wu Jianguang. Elsewhere, our Chief Operating Officer David Walton retired at the end of June and was replaced by Thomas Chandler. I would like to thank Robert and David for their many years of service and their contributions to the Company.
At the Board level, I replaced Chen Huaiyu as chairman in April 2023, and we added two new directors in November as Jin Hongju and Li Ke joined the Board, replacing Dong Zonglin and Wei Hanguang. I am also pleased to report that Robert Martin remains on the Board as a non-executive director. We thank Mr. Chen, Mr. Dong and Mdm. Wei for their efforts and contributions on behalf of all our Company's stakeholders.
Our Company returned to growth in 2023 as our fleet expanded to 460 owned and managed aircraft leased to 91 airlines in 45 countries and regions. We remain one of the top five global aircraft operating leasing companies and the largest aircraft leasing company based in Asia-Pacific, by value of owned fleet and we thank all of our stakeholders for their ongoing support.
The recovery in our earnings in 2023 is testimony to the high quality development of the Company aligned with recovery of the global aviation market. Industry dynamics remain favourable for 2024 and we are confident that we are well positioned for future growth.
Liu Jin
Chairman
(April 2023 - March 2024)
07
BOC AVIATION LIMITED ANNUAL REPORT 2023
CHIEF EXECUTIVE'S COMMENTS
During 2023 we celebrated our 30th anniversary and our 30th year of unbroken profitability, with growth in revenues, cashflows and earnings. We reported a record net profit after tax of US$764 million, substantially ahead of last year's US$20 million and surpassing our previous record of US$702 million set in 2019. Core net profit after tax (excluding recoveries in respect of aircraft detained in Russia) was US$547 million, ahead of the core earnings for 2022 of US$527 million (adjusted for the net write- down of those Russian aircraft).
The year saw the recovery of the global airline industry, with year-on- year passenger traffic rising 37% in 2023, according to the International Air Transport Association (IATA), and December's traffic at 98% of 2019 levels. This has been accompanied by a rebound in airline profitability, with IATA anticipating net profit after tax for the airline
industry of US$23.3 billion in 2023, more than double its expectations as recently as June 2023 and the best performance since 2019. IATA projects a further 10% growth in airline earnings in 2024.
Robust demand for travel led to rising demand for new and used aircraft. This included both single and twin-aisle aircraft models as the recovery of long-haul travel, particularly in Asia-Pacific markets, boosted demand for the latter. Production and availability of new aircraft, however, have not kept pace with airline capacity requirements, with Boeing and Airbus producing only 6% more passenger aircraft than they did in 2022 and delivering 23% fewer aircraft than the previous delivery peak in 2018.
This supply-side shortage has positively affected both lease rates and aircraft values. Aircraft appraisers have generally reported increases in aircraft valuations to above 2019 levels and lessors have seen higher lease rates for both new and used aircraft.
Despite continued production challenges at all manufacturers, our Company acquired 65 aircraft in 2023, and ended the year with a fleet of 460 owned and managed aircraft.
The growth in used aircraft demand during the year led to airlines either extending leases or purchasing leased aircraft to guarantee access to future capacity. Over 90% of the leases that expired in 2023 were extended with, or sold to, the same airline and all of 2024's maturing leases have already been extended, sold or re-leased.
During the year we sold 20 aircraft. Pre-tax profit from aircraft sales totalled US$78 million, up 22% from 2022. Aircraft sales make an important contribution to our portfolio development strategy that enabled us to end 2023 with a weighted average aircraft age of 4.6 years and a weighted average lease term remaining of 8.1 years, amongst the youngest and longest, respectively, in the aircraft operating leasing industry. At year-end 77% of our fleet comprised latest technology aircraft, up from 71% in 2022, with the entire orderbook comprising latest technology models.
Net lease yield for operating leases ended the year slightly higher at 7.1% compared to 7.0% in 2022. This reflected a continued improvement in our operating lease rate factor to 10.0% from 9.2% and offset a higher cost of funds.
08
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BOC Aviation Ltd. published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2024 23:58:05 UTC.