History of the PTB Group
PTB Group Limited (“PTB”) was established in 2001, when it was incorporated to acquire the Brisbane assets of Pacific Turbine Pty Ltd ACN: 079 166 653. It focused on providing services in relation to the Pratt & Whitney PT6A and Honeywell TPE331 light turbine engines.
The Company performed:
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Specialist turbine engine repair and overhaul based at Brisbane Airport, Australia
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Trading operations in Australia and internationally in aircraft turbine engines and related parts
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The provision of finance for PT6A and TPE331 turbine engines for customers
The Company listed on the Stock Exchange of Newcastle Ltd (NSX) in March 2005. In September 2006 it acquired IAP Group for $13.8 million. IAP Group is a Sydney-based niche aviation asset management company providing aircraft inventory support, encompassing:
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Global supply of aviation parts
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Global aircraft and engine financing and sales
Its business operations are highly complementary to PTB Group’s business. Steve Ferris, the founder of IAP Group, took approximately 80 per cent of the consideration as PTB Group shares and now holds approximately 25 per cent of the expanded Group.
In October 2006 the Company announced it had acquired the aircraft and associated parts of the UK companies Emerald Airways Ltd and Emerald Airways Engineering Ltd for approximately $16.25 million. The assets acquired comprised five British Aerospace ATPs, 14 HS 748s, 10 Shorts 360s and their related spare parts along with a lease of an engineering facility at the Blackpool airport. The ATP and HS 748 aircraft are assets in which IAP Group has a long-term history of trading and managing. During this half year the Shorts aircraft and related parts were sold.
In December 2006 the Company moved from the NSX to the ASX. In conjunction with this move the Company issued 2.5 million shares at $2 to raise $5 million. This followed capital raisings totalling $7.9 million earlier in the period to fund part of the IAP Group and Emerald assets acquisitions.
In June 2007, a USD $40 million financing and rental fund was created with debt provided by an Australian financial institution. The purpose of the fund was to acquire and refurbish a diverse array of aviation assets for resale or lease. By this time, PTB Emerald had also refurbished and delivered one of the ATP and three of the HS748 freighters to European customers.
The 2008 financial year saw a complete change of fortunes for the PTB Group as the effect of the global financial crisis impacted on all areas of its operations. Most significantly, the refurbishment of the Emerald aircraft was largely financed with debt with the intention to roll these aircraft into the USD $40 million fund on completion. As the financial crisis impacted on global passenger and freight activity, the decision was take to sell these aircraft in order to pay down the expensive debt. A delay in settlement by a Middle Eastern customer on two of the LFD ATP aircraft impacted on the interest and holding costs of the Emerald project. In addition, despite better than expected underlying sales activity three long-standing customers of Pacific Turbine Brisbane and IAP defaulted resulting in unprecedented bad debt write-offs of $1.13 million.
The 2009 financial year was characterised by the efforts the Group undertook to respond to the external challenges imposed on its operations, and a consolidation of its position in order to rebuild its growth prospects. The effect of the financial crisis continued to impact on global passenger and freight activity, creating a fall in aircraft values, the inability to source financing, and significant oversupply of aircraft which limited sale and leasing opportunities. As a result, the sale of the two LFD ATP aircraft did not proceed as the customer defaulted. As the sale was for cash, the default resulted in the company being forced to renegotiate the $14.7 Emerald loan to an amortising facility over four years at an expensive interest rate. As part of this renegotiation, $2.875 million ordinary shares were granted to the Financier, and as the Financier was unable to continue funding the debt in USD, a $2.4 currency loss was realised, which would otherwise have reversed to 30 June 2009. In addition the USD $40 million facility was let lapse due to the global economic conditions as the Group was unable to secure profitable projects within its risk profile.
On the positive side, as part of the strategic consolidation of its operations, the company completed the sale of the Belmont Land resulting in a profit of $1.9m, the sale of Aeropelican Air Services an RPT operator based at Newcastle Airport, the rollover of the $4.5 million in Unsecured Note funding, the completion of a purpose built workshop and office complex in Brisbane, and the extension of the existing ANZ financing facilities. Core operating business in PTB and IAP exceeded prior year and current forecasts in a difficult year, and a major Australian freight operator was signed up to an engine management contract. Prior to year end, the two LFD ATP aircraft were sold to an Indonesian freight operator on an extended credit type of arrangement.
To limit the operational cash drain a decision was made to close the UK refurbishment facility and complete one of the remaining PAX ATP and HS748 aircraft, and reduce to spares the remaining HS748’s as part of the closedown. This left one partially complete PAX ATP, one complete PAX ATP and four HS748 aircraft available for sale or lease.
The 2010 financial year has seen a continued rebuilding of the Group’s operational capabilities and capacity, financing facilities, and asset utilisation and deployment. Specifically, the ANZ and Emerald debt funding were replaced with separate facilities with the CBA at significantly reduced interest rates. The Emerald facility was paid out at a discount resulting in a $3.6 million profit on this transaction. This was a significant undertaking given the limited availability of debt funding.
The Brisbane operations secured two new engine management contracts, and extended its existing contracts with domestic freight, and international tourism operators, while continuing to build capacity and profitability in its core PT6 and 331 engine parts and supply business.
The IAP business continued to experience the effects of the global downturn as passenger and freight activity in its key customer markets continued to lag the global recovery. Despite adverse operating conditions, IAP continued to secure new inventory holdings with the purchase of the MD90 aircraft, which will underpin future profitability.
The Emerald operations saw the deployment and commencement of flying operations of the LFD ATP aircraft in Indonesia and the ongoing reduction in operating costs in this company.
