DENIS O’BRIEN’S Dublin-based aircraft leasing company, Aergo Capital, more than doubled its after-tax profit in 2008 despite taking a $15 million (€10 million) hit on a lease arrangement with Italian airline Alitalia and a large impairment charge relating to an acquisition in South Africa.
Aergo chief executive Fred Browne said that the company’s profits would probably double again this year as a result of the impact of its acquisition last December of Safair, a Johannesburg-based aircraft leasing and maintenance business that has transformed the Irish company’s balance sheet and fleet profile.
“The Safair transaction improved the quality of our fleet,” Mr Browne said. “Our aim now is to grow the business by 15 per cent a year.”
Latest accounts for Aergo Capital Ltd show that its after-tax profits rose to $10.7 million in the year to the end of December 2008 from $4.1 million the previous year.
Its lease revenue rose to $49.3 million in 2008 from $45.4 million in the previous 12 months. The company also booked “other” income of $43.8 million, of which $38 million related to a profit on its $80 million cash acquisition of Safair.
On the expenses side, the company recorded an $18 million impairment charge relating to the carrying value of the group’s aircraft following the Safair deal.
It also took a $15 million hit relating to 25 aircraft that were leased to Alitalia through two subsidiaries. Alitalia was placed into administration last year and the aircraft were returned to the Aergo subsidiaries.
Ownership of these aircraft was then transferred to the lenders, who provided the debt financing to Aergo for the aircraft. While Aergo no longer owns the 25 aircraft, it manages them on behalf of the lenders.
Aergo posted an operating profit of $23.1 million last year, up 39 per cent on the previous 12 months. Its pretax profit rose to $8.8 million from $4.7 million in 2007. The company also received an income tax credit of $1.8 million to further boost its bottom line.
Aergo’s accounts for 2008 do not capture the full impact of the Safair acquisition. The company is forecasting a pretax profit of $20 million on turnover of $130 million in 2009.
At the end of 2008, Aergo’s debt had roughly doubled to $332 million as a result of the Safair deal. Mr Browne said this had been steadily reduced and its debt at the end of this year would be about $280 million.
Aergo now has a fleet of 90 aircraft that are placed with 25 operators worldwide, including South African Airways, KLM, DHL and the United Nations. The aircraft had a net book value of $344 million at the end of 2008.
Aergo was founded in 1999 by Mr O’Brien, who owns 85 per cent of the business, and Mr Browne, who holds the balance of shares.
It deals in second-hand aircraft and operates mainly in emerging markets. Aergo’s headquarters are in Dublin for tax reasons but it has operational bases in Johannesburg, Chile and Nairobi, where the company opened a three-aircraft hub on Wednesday.
The company is also considering opening a base in the Middle East.
