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Salus Aviation decides to fly above the radar

A relatively unsung aircraft leasing and maintenance company, Salus Aviation Group, could be the first new listing on the New Zealand stock exchange this year. 

Auckland-based Salus Aviation, which operates, leases, repairs and overhauls helicopters and small aircraft in Australasia and the wider Asia Pacific region, plans to go public next month, raising up to $35 million ahead of a dual listing on the ASX and NZX.

Bancorp Wealth Management is Salus' largest shareholder and this will be the first time the merchant and investment banking group has brought its own business to market, Salus founder and managing director Craig Brownie says. The company is aiming to list in late June after selling about half the company to the public.

Salus about doubled in size last November after acquiring aviation engineering firm Oceania Aviation for cash and shares and bringing on board Oceania investors including Jonathan Bowen, Joshua Camp and Gordon Luke. The capital raising will be used to repay debt and fund the company's expansion plans, with no selldown by existing shareholders.

Following the IPO, the company would have total assets of $85 million and total debt of $18.8 million, the Australian Financial Review reported today. It also has a $40 million facility at Bank of New Zealand, which the AFR reported would leave Salus with about $20 million available post-listing. It said Salus chief executive Don McCracken and CFO Stephen Dey have met with fund managers in Australia and plan to do the same in New Zealand in coming days. Brownie confirmed the financial details in the report were correct.

Bancorp first flagged its plans for an NZX/ASX listing of Salus last June, as part two of a restructuring plan, having reduced its direct holding in aviation insurance broker Boston Marks last year. Taking Salus public may see Bancorp's own shares eventually delist from the Frankfurt Stock Exchange, where they have lacked liquidity, as shareholders will be encouraged to exchange their Bancorp shares for Salus shares. Bancorp Wealth Management New Zealand listed on the German bourse in 2014.

What's booming at the moment is agriculture and tourism. They're not necessarily buying more choppers but flying more hours. That's what really underlies our business.

Brownie said he is constrained in talking about the plans ahead of IPO documents being lodged, expected to be in late May or early June. He said Salus is a beneficiary of the tourism boom in New Zealand and increased demand for light aircraft and helicopters in the primary sector as operators tend to run their aircraft harder.

"What's booming at the moment is agriculture and tourism," he said. "They're not necessarily buying more choppers but flying more hours. That's what really underlies our business. You've got to have all your maintenance stuff certified by engineers."

The value of the helicopter fleet in New Zealand is about US$1.7 billion, while Australia's fleet is worth about US$4 billion, suggesting that market has more scope to grow. The expansion is likely to include strategic acquisitions, Brownie said.

Salus has a fleet of 27 fixed-wing and rotor-wing aircraft across its operations and leasing businesses and the company also imports and refurbishes aircraft for sale. Its services include sales of parts, aircraft maintenance, avionic systems, flight operations, parts design, component overhaul, leasing and sales. It has about 180 staff, 11 facilities across New Zealand and customers across the ANZ region.

"When you buy a secondhand helicopter you're buying an engine with metal attached," he said. As parts are overhauled and replaced over time, the airframe is often the only original item left.

Salus expects to generate revenue in full-year 2019 of about $73 million and earnings before interest, tax, depreciation and amortisation of $11.5 million.

The joint lead managers for the IPO are expected to be Bancorp and Foster Stockbroking. Last August, Bancorp gained NZX accreditation as an NZX sponsor and NZX distribution and underwriting sponsor.

"We see opportunities in that sub-$100 million market cap range for listings in New Zealand and Australia," and the decision to dual list reflected the need to cast a wider net for capital than just New Zealand, to ensure there was enough support for the IPO, Brownie said.

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