CALC (1848.HK) announces 2020 annual results Identifying opportunities in a crisis while persisting

China Aircraft Leasing Group Holdings Limited ("CALC" or the "Company", HKSE stock code: 01848; together with subsidiaries, the "Group"), a full value chain aircraft solutions provider for the global aviation industry, is pleased to announce the Group's results for the year ended 31 December 2020 (the "Review Year").

Financial Highlights

• CALC navigated its journey through an extremely challenging year in 2020. During the Review Year, total revenue of the Group amounted to HK$3,485.8 million (2019: HK$3,523.2 million). Operating profit was approximately HK$948.7 million (2019: HK$967.6 million). Both were maintained at similar levels to those of last year.
• Profit attributable to shareholders of the Company was HK$334.1 million. Earnings per share were HK$0.482. Stripping out the HK$300 million unrealized mark-to-market RMB exchange loss and the HK$200 million share of loss and provision for the investment in Aviation Synergy, the adjusted profit attributable to shareholders of the Company for 2020 should have been HK$846.1 million (2019 profit attributable to shareholders of the Company: HK$896.0 million). Adjusted earnings per share should have been HK$1.22 (2019 earnings per share: HK$1.323), maintained at the similar levels as last year.
• As at 31 December 2020, the Group had a cash balance of HK$5,289.4 million, representing an increase of 15.3% from the beginning of the Review Year.
• The Board of Directors has continued its scrip dividend scheme for the final dividend for 2020, and has recommended the payment of a final dividend of HK$0.2 (2019: HK$0.48) per ordinary share. Together with the 2020 interim dividend of HK$0.2 per share (2019: HK$0.23) already paid, the total dividend payout for the year amounts to HK$0.4 per share (2019: HK$0.71).

Business Review

Identifying Opportunities in the Middle of the Crisis to Reinforce Strength in Aircraft Operating Lessors

• During the Review Year, 2020, the Group delivered 10 aircraft and disposed of 18 aircraft. As of 31 December 2020, CALC had 128 aircraft in its fleet, including 103 owned and 25 managed aircraft.
• As of 31 December 2020, by number of aircraft, 91% of CALC's owned fleet were narrow-body aircraft, a highly liquid asset class and the most popular aircraft type mainly serving domestic routes and short-haul flights, which had been proven to be less impacted by the pandemic. According to the statistics released by the industry consultant Cirium, CALC ranked first among the world's large-scale lessors in November 2020 with 95% of its fleet in service.
• By number of aircraft, 78% of CALC's owned fleet as of 31 December 2020 were leased to Chinese clients, the majority of which are state-owned airlines with strong financial and liquidity strengths. CALC's non-Chinese clients are mainly flag-carriers or backed by strong shareholders. As of 31 December 2020, CALC's owned and managed aircraft were on lease to 35 airlines in 15 countries and regions.
• CALC's owned fleet had an average age of 5.7 years and an average remaining lease period of 7.6 years as at 31 December 2020. CALC continued to pursue its long-standing strategy of investing in modern jet aircraft that are the most fuel-efficient and sought-after category as it prepared itself for recovery and growth in the future. As at 31 December 2020, CALC had 253 narrow-body aircraft in its order book, to be delivered in stages by 2027.

Persisting in the asset-light model to enhance earnings quality further

• Perfecting the asset-light model is instrumental in CALC's long term strategy of increasing its presence in the aviation industry chain as a lessor playing heavier roles. CALC rolled out ARG Cayman 1 Limited ("ARG"), another aircraft investment vehicle focusing on old aircraft portfolios and trading of parts and components following the full operation of CAG. During the Review Year, CALC injected four aircraft into ARG.
• During the Review Year, CALC also disposed of two aircraft to a joint venture it established with HNCA Aviation & Equipment Leasing Co., Ltd. Furthermore, CALC joined forces with Moutai Financial Leasing Co., Ltd. in a strategic cooperative partnership for the investment in lease-attached aircraft portfolio in May 2020.
• CALC also completed the disposal of seven aircraft from its portfolio to Everbright Financial Leasing Co., Ltd., to achieve win-win cooperation during the Review Year.

Pursuing strategies to perfect full-value-chain operations

• In March 2020, CALC acquired a 72.82% interest in Aviation Synergy Ltd., which holds a 49% indirect equity interest in an Indonesian regional airline PT TransNusa Aviation Mandiri ("TAM"). In January 2021, CALC placed firm orders for 30 ARJ21 aircraft from Commercial Aircraft Service Corporation of China Ltd. ("COMAC"), and deepened its cooperation with China Everbright Group and China Everbright Limited ("CEL") in the fields of aircraft asset management, maintenance, repair and overhaul ("MRO") and aviation aftermarket services.
• Also in March, FLARI Aircraft Maintenance & Engineering Company Ltd, the Group's MRO joint venture set up with FL Technics, obtained certification as an approved EASA Part 145 Maintenance Organization, and was permitted to provide line maintenance services for aircraft from the Boeing 737 NG series to Airbus A320 families.

Enhancing financing capabilities

• Capitalizing on the relative abundance of liquidity in the domestic market in China, CALC completed a RMB1 billion short term debenture issuance at a 3.65% coupon in March, followed by a RMB300 million short-term debenture issuance at a 4% coupon in June. The Group intends to apply proceeds from these two issues in aircraft procurement.
• In June, CALC obtained approval from the Shanghai Stock Exchange for its asset-backed securities (ABS) issuance programme of RMB5 billion. As the first ABS programme for the aircraft leasing industry in China, it allows multiple issuances within a two-year period without further approval requirements.
• In August 2020, the Group received the highest AAA credit rating from Dagong Global Credit Rating Co., Ltd, an accolade conducive to future financings in the domestic market in China.
• CALC had also been working in parallel in the offshore market. During the Review Year, the Group arranged US$70 million five-year unsecured bonds at a coupon of 5.90% with two issuances of US$35 million each completed in November 2020 and January 2021, respectively.
• In December 2020, the Group completed a US$200 million issue of perpetual bonds at a coupon of 6.4% over London Interbank Offered Rate ("LIBOR"). This transaction showcased the recognition from reputable institutional investors in CALC's creditworthiness backed by its strong business fundamentals and sound development prospects.
• To better prepare itself for the imminent market recovery, CALC also received strong support from the associate companies under China Everbright Group. Together with liquidity provided by other commercial banks, CALC had been granted US$275 million of standby credits and committed working capital facilities.

Mr. Zhao Wei, Chairman of CALC said: "2020 was the most challenging year. The CALC team had been proactively identifying opportunities in the middle of the crisis and actually turned crises into opportunities. They continued to enhance the Group's strengths in aircraft operating leasing around the world. In the past few years, CALC has been tirelessly enhancing its aircraft full-industry-chain operation capabilities and extending its service coverage to all major segments of the aircraft aftermarket. The establishment of a world-leading aircraft leasing full-industry-chain service provider constitutes key objectives of the '143' strategy of CEL under the '433' development architecture of China Everbright Group. In the new year of CALC will continue its prudence in business operations, consolidating its business foundation in various areas to unleash its industry edges in full, treading ahead our journey of accomplishing the vision of becoming a world-leading aircraft leasing full-industry-chain service provider."

Mr. Mike Poon, CEO of CALC said: "Although the external environment is full of challenges and will exact considerable pressure on CALC in the near term, our footing for long-term development remains intact. Unlike traditional lessors, CALC is on the path of competition by differentiation. Our professional qualifications in aircraft leasing, disassembly, maintenance and aviation component distribution are the core competences supporting our sustainable development and ensuring our stability as a Company. The pandemic has been accelerating retirement of old fleet. Yet the imminent market recovery will draw on support from more new aircraft for capacities. This is the right timing for CALC's one-stop fleet upgrade service to establish a foothold. In an era when the civil aviation sector in China is leading the world's growth momentum, as the only lessor in China with capabilities and a proven track record in aircraft asset management, CALC must continue to sharpen our strengths and reinforce our own edges to tap market opportunities with in-tandem steps, and payback to our shareholders, customers, investors and industry partners who have been relentlessly supporting us for a long time."