Air Partner take-off delayed

Profit halved at aviation charter business Air Partner in the six months to July as the core commercial jets division flew fewer one-off projects - things like disaster relief flights and emergency airlifts for governments. It had already warned of a shortfall back in July, so these numbers were no surprise. Thankfully, there has been no further deterioration and the second half has started well.

Air Partner made an underlying pre-tax profit of just £1.1 million during the period, down from £2.7 million last year on revenue a fifth lower at £93.1 million. However, it has kept a tight grip on corporate costs - flat at £0.6 million - and is cutting back further at the commercial jets business.

There, sales fell by over a third, or £21 million, to £60 million, driving profit down by 49% to £1.1 million despite £300,000 of cost savings. Big one-off contracts like last year's deals with Google and Royal Caribbean were not repeated this time, and organising aid flights to both Iraq and Ebola-stricken West Africa could not offset the shortfall.

On a positive note, the small tour operating business did well in the UK, Austria and Italy, while flying oil & gas workers to ever more remote locations is generating much better profits. Air Partner also has contracts to jet executives at VW, Audi and BMW around the globe for conferences and car launches.

But it's hardly boom time at the private jet broking unit, either, with weak demand in Europe clipping sales by 8% to £30.5 million. Throwing money at its sales teams in the UK and the US generated record sales of its JetCard loyalty card - they almost tripled to £5 million in the first half and deposits are at a record £11.9 million. Still, JetCard sales are only recognised as profit once the flying hours are used, and divisional profit fell by 45% to £0.6 million.

It's clear that limited visibility and late bookings make forecasting hard at Air Partner. Broker Liberum currently expects adjusted pre-tax profit of £2.4 million this year, giving adjusted earnings per share (EPS) of 21.4p, rising to £3 million and 20.9p in 2016.

Strip out net cash of £18 million, worth 175p per share, and Air Partner trades on just 7 times forward earnings. Even if you exclude the JetCard money worth 116p a share, the forward multiple is still a modest 12.4. That cash will, however, be needed to bankroll a promised 10% hike in the dividend to maintain that prospective yield of 6.4%.

Down 6% at 325p, Air Partner shares are at a significant technical support level. If that fails, next stop looks to be 270-280p. An upturn will come. Management must hope it's sooner rather than later.

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