Gama Aviation warns on profits

29th Oct 2018 08:09

(Sharecast News) - Aviation service provider Gama Aviation warned on Monday that its full-year underlying profit will be below initial expectations as trading in certain divisions has not improved enough.In an update for the full year to the end of December, the company said that while no individual division was "significantly weaker", the substantial second-half growth it had expected at the time of its interim results did not materialise, partly due to weakness in the US air division.As a result, it now expects full-year underlying operating profit to be $3m below its original forecast."Nevertheless, the investments made into the capacity and capability of the business during 2018 have progressed well and provide a robust operational baseline for continuing the execution of our strategy into 2019," it said.Gama said the performance of its Europe, Middle East and Asia air divisions remains stable, with the businesses performing broadly as expected, despite difficult trading conditions in Europe and the Middle East.However, profit from the group's US Air associate is not in line with expectations for the full year due to slower-than-expected growth in charter and aircraft management revenues. As far as the Europe ground division is concerned, Gama said it has successfully completed its transition of operations from Farnborough and Oxford airports to its major new facility at Bournemouth International Airport."This has been a substantial endeavour and business continuity has been achieved with key staff retained in line with the transition plan," it said.The group said that while productivity gains have already been delivered as intended and business prospects are good, its forecast assumed a level of revenue growth during this transition that has proved too ambitious in the circumstances. Still, it expects a proportion of these lost revenues to be realised in 2019.The US ground division continues to deliver strong organic growth and solid productivity, but the growth in maintenance revenues, whilst strong, has not been at the level required to achieve the company's expectations, partly as a result of it taking longer for new capacity to come on stream.In Asia, meanwhile, the associate China Air Services Limited has continued to underperform with the unexpected loss of contracts denting margins. Chief executive Marwan Khalek said: "The reduction in our expectations for this year is disappointing with the growth that we had anticipated not coming through as strongly as expected. Nonetheless, we are still expecting healthy growth for the year whilst continuing to make good progress in building capability and capacity and securing encouraging new business in all of our key markets. The fundamentals of our business remain strong."At 0805 BST, the shares were down 21% to 120p.