1-It seemed to be diversifying into a lot of areas many of which it was paying a very full price for in my opinion. Essentially giving all the upside value away.
2-I was under impressed by a few of the management team that I had come into contact with.
3-The diversification seemed in many respects to be only loosely related. I prefer businesses that add to what they are doing or move up and down the value chain. A lot of what was being bought seemed to only have “things you might do on an airfield” as the link.
4-A number of their acquisitions were not that attractive. The main business of charter transportation was and remains volatile. This is rightly reflected in a low valuation. But whilst the acquisitions seemed less volatile they also seemed to be relatively unexciting. Low growth.
Judging from the 5 year chart this doesn’t look to have been a bad decision.
I have however taken on a position following both the ½ year trading update and Kenyon acquisition. Also the people I was unimpressed by seem largely to have left and the CEO impresses.
Clearly the 2022 results are not going to be as good as the 2021. There were a lot of one off benefits in the 2021. Lots of pandemic repatriation and lots of emergency, mainly PPE freight.
The ½ year trading update gives me confidence that there is a significant and growing private travel business. The differential between First Class and Private Hire on price has been getting smaller and smaller but the difference in Service levels can be huge. As a consequence once you have flown private you are really going to want too again. But First v Business not so much. It is a lot more expensive for not a lot more. I think depending on the economy, but that effects much of what AIR does, the private flight business is “sticky.”
In 2019 the company bought Redline a company broadly focussed on security in the Aviation industry. The Kenyon acquisition is exciting because it adds to this. Yes, with typical Air Partner action it is not the same business, so it brings on first review only a limited synergistic benefit. But I can see that in many cases the customer base could overlap and the same area of a customer business could be the commissioning customer.
I am in at 90.88p and I am not wedded to the holding. But I do think Kenyon is a good business and with the right support could be a very good business and linked with Redline there could be real benefits to come.
This is not a deep value, but a GARP position for me.
Market cap is circa £56m and after the TU and acquisition I estimate EPV is circa £80m so I think there is a margin of safety in the investment.