TIDMGMAA
RNS Number : 0594I
Gama Aviation PLC
19 March 2018
Date: 19 March 2018
Gama Aviation Plc (AIM: GMAA)
("Gama Aviation", "the Company" or "the Group")
Final results for the year ended 31 December 2017
Gama announces a 28% rise in underlying operating profits and
strong outlook for growth supported by recent GBP48 million capital
raise
Gama Aviation Plc, one of the world's largest business aviation
service providers is pleased to announce the results for the year
ended 31 December 2017.
Financial Highlights
-- Revenue $207.4m (2016: $196.1m) up 5.8% on a constant currency basis
-- Underlying total operating profit $18.7m (2016: $14.6m) up
28.3% on a constant currency basis
-- Net debt decreased by $6.4m to $13.0m (2016: $19.4m)
-- Operating cash flow increased by $21.6m to $23.8m (2016: $2.2m)
-- Current trading in line with management expectations; company
well placed to achieve its expectations for the current year
Financial Summary
USD millions (unless Underlying results(1) Reported results
otherwise stated)
-------------------
Constant
Currency(2)
Dec-17 Dec-16 Dec-16 Dec-17 Dec-16
------- ------- ------------- --------- --------
Revenue 207.4 203.0 196.1 207.4 203.0
Gross profit 47.2 44.2 42.8 47.2 44.2
Gross profit % 22.8% 21.7% 21.8% 22.8% 21.7%
Total operating profit(3) 18.7 15.1 14.6 17.9 10.9
Profit before tax 17.1 13.7 13.2 16.1 19.3
Basic earnings per
share (cents) 31.6 30.1 29.0 27.8 42.9
Operational Highlights
-- US Air merger with BBA business proceeding well and the
division is benefitting from the Wheels Up growth and contract
wins
-- Europe Air operational efficiency initiatives completed in
2016 have produced strong improvements in operating profit
margins
-- US Ground revenue up 27.5% driven by full period impact of
new bases opened in 2016 and new contract wins
-- Europe Ground revenue growth of 19.8% and operating profit margin of 19.3%
-- Middle East and Asia showed encouraging progress
Strategic Highlights
-- Acquisitions made in 2016 delivering at or above expectations
-- Pipeline of acquisition targets identified
-- Management teams and structures in place to support future growth and acquisitions
-- Middle East and Asia businesses consolidated into the Group
to capture new market opportunities
-- Successful placing raising GBP48m in February 2018, to
accelerate the Group's vision of becoming the leading global
business aviation services group
1 - Underlying results exclude exceptional items, share-based
payment expense, amortisation, reversal of losses of
associate and joint venture from prior years, profit
on disposal of interest in associate, and unrealised
foreign exchange movements included in finance costs,
where applicable. In addition, the basic underlying
earnings per share excludes a one off deferred tax
charge arising in the US from recent tax rate changes.
Detailed calculations are presented in the Financial
review.
2 - Calculated at a constant foreign exchange rate
of $1.29 to GBP1, being the rate that represented the
average for the 2017 financial period.
3 - Total operating profit includes the share of results
from Gama Aviation's associate in the US and joint
venture in Hong Kong. Please refer to page 8.
Marwan Khalek, Chief Executive of Gama Aviation said:
"We are pleased to report financial results for 2017 in line
with expectations. In particular, we have increased our operating
margins and delivered improved operating cash flow.
Strategically this is an exciting time for Gama Aviation, having
recently completed our successful GBP48 million fund raising. This
will allow us to deliver significant growth and scale across all
geographies and service lines, enabling us to make further value
enhancing acquisitions from within our fragmented market and will
help us to fulfil our ambition of becoming the global leader in
business aviation services.
In US Air, following the BBA aircraft management business
merger, we are now the market leader in US business aviation
management. This offers us cross-selling opportunities into our US
Ground division. We will leverage customer relationships across our
national network and invest in base facilities to increase the
scale and scope of services.
Europe Air is positioned for sustainable growth and we continue
to build our offering in Europe Ground. The acquisitions in Europe
have been successful and have added significant value.
Recent corporate developments by us in the Middle East and Asia,
together with the proposed construction of a business aviation
centre in Sharjah will accelerate growth. With Hutchison as a
strategic investor, the addition of two experienced non-executive
board directors and the strengthened management teams across the
regions, we are well positioned for growth in 2018 and beyond."
-S-
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
A presentation for sell-side analysts is being held today at
09:00am at the offices of Camarco, 107 Cheapside, London EC 2V
6DN.
For further information please visit www.gamaaviation.com or
contact:
Gama Aviation Plc +44 (0) 1252 553029
Marwan Khalek, Chief Executive Officer
Camarco +44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
Jefferies International +44 (0) 207 029 8000
Simon Hardy
Will Soutar
Gama Aviation - Notes to Editors
Gama Aviation Plc (AIM:GMAA) is a global business aviation
services group that specialises in providing support for
individuals, corporations and government agencies; allowing them to
deliver on the promises they make.
The Group's services are split into two divisions: Air and
Ground. Air services include aircraft management, special mission
support and charter. Ground services cover aircraft maintenance
services, aircraft modification design and installation, and Fixed
Base Operations (FBO).
More details can be found at: http://www.gamaaviation.com/
Basis of presentation
The analysis of Gama Aviation's operational performance by
division and geography, is shown on a Total Division basis (for
revenue, gross profit and underlying total operating profit)
reflecting 100% of the performance of the division including its
associates and joint ventures. The analysis also includes
inter-segment revenues, which represent the revenues that arise
between divisions in order to present the underlying performance of
each division.
Gama Aviation receives a fee in return for allowing its
associates and joint ventures the use of the Gama Aviation brand.
Such branding fees are excluded from the results on a Total
Division basis but are recognised within Gama Aviation's Group
reported performance.
Under IFRS, the trading results of associates are not
consolidated and are instead shown as a single line in the profit
and loss account under 'share of results from equity accounted
investments'.
Europe is the only region in the Group that is affected by any
material currency changes, primarily between GBP and USD. The 2016
performance has been restated at the same average rate for USD to
GBP as the 2017 financial statements. The average rate for 2017 was
USD1.29 to GBP1.00. The commentary below is based on constant
currency performance unless otherwise stated.
The Group operates through eight divisions with clear lines of
management responsibility. This represents the four geographies and
two business lines. Key financial indicators are measured and
monitored on a continuous basis. In summary the key financial
indicators by division are:
-- Revenue - growth and performance versus plan
-- Gross profit - growth and performance versus plan
-- Gross profit percentage
-- Total operating profit - growth and performance versus plan
The Group also measures and monitors internal non-financial key
performance indicators to control and develop operating
performance. These are reviewed regularly alongside the key
financial indicators reported externally.
Chief Executive Report
I am very pleased to report on another year of strong progress
for the business. We have delivered on a number of strategic
initiatives and now have the leadership and management teams,
systems, processes and capital in place for our next phase of
growth.
The business has performed well, with further progress made
towards our operating margin targets in both the Air and Ground
divisions, as well as a continued improvement in cash generation
driven by a strong improvement in working capital management.
Group strategy
The Group's strategy is to become the global market leader in
business aviation services through organic, joint venture and
acquisition-led profitable growth. The Group is focused on
increasing the depth of its capabilities and expertise, broadening
the regions it operates in and the services it offers in order to
increase the scale of its presence in its chosen markets and to
drive further revenue growth through cross selling
opportunities.
The Group operates a robust and resilient business model and we
have built a strong operational platform to support our growth. We
have successfully raised GBP48m through an equity placing to allow
us to capture the investment opportunities which we are currently
presented with and to accelerate the next stage of our
development.
2017 Performance
The positive momentum seen in the first half of 2017 continued
into the second half and the Group delivered performance in line
with expectations. Revenue growth and improving profitability were
achieved in both divisions. Underlying total operating profit
increased to $18.7m (2016: $14.6m) an increase of 28.3%. We
achieved significant improvements in working capital resulting in a
cash inflow from operations of $23.8m (2016: $2.2m), which led to a
$6.4m reduction in net debt.
The Air division delivered exceptional growth with Total
Divisional revenue up 35% to $518m (2016: $383m), driven
principally by the US associate's merger with the BBA aircraft
management business, growth in the Wheels Up contract and further
contract wins. Total operating profit increased to $13.6m (2016:
$7.4m) on the back of increasing scale. Total operating profit
margin increased to 2.6% (2016: 1.9%).
The Ground division also delivered strong growth of 21% with
Total Divisional revenue of $80m (2016: $66m). The total operating
profit of $10.9m (2016: $9.7m) was underpinned by strong organic
growth in our European business. There remains an opportunity to
improve margins in our US business to our target levels through
further growth, increasing our breadth of services and investment
in our base maintenance capability. Total operating margins across
the Division were 13.6% (2016: 14.8%).
Our developing businesses in the Middle East and Asia have both
made steady progress and we enhanced our positions in both
geographies through the rationalisation of our ownership
structures. In Asia, our joint venture with Hutchison, in
collaboration with China Aircraft Services Limited (CASL), now has
the regulatory approvals to offer line and base maintenance
services at Hong Kong airport.
Acquisitions and corporate development
The Group successfully executed the merger of its US Air
associate with the BBA aircraft management business, which has been
completed delivering strong revenue growth.
In 2016, the Group acquired Aviation Beauport and FlyerTech.
Both businesses have been successfully integrated into the Europe
Air and Ground divisions and have met or exceeded management's
strategic and financial objectives since acquisition.
In October 2017, we announced the acquisition of the remaining
51% interest in Gama MENA for a cash consideration of $5.1m. On the
same date Gama MENA divested a 51% equity interest in Gama Aviation
FZE, its Middle East Air Division for a nominal consideration in
order to comply with national ownership requirements. Under an
agreement between shareholders, Gama MENA will retain management
and operational control of the Middle East Air Division and will be
entitled to 80% of the dividends paid by Gama Aviation FZE. Under
an agreement between shareholders, Gama MENA will also receive a
branding fee of 0.5% of the revenues of Gama Aviation FZE.
The Group's joint venture with Hutchison in Asia, which is
active across both the Air and Ground divisions, established a
commercial partnership with CASL at Hong Kong airport and is
providing line maintenance to business aviation customers.
Leadership
The Company has strengthened its Board and the Group's regional
leadership and functional management teams to ensure it can execute
its strategy and continue to grow profitably and sustainably.
There have been a number of recent hires to supplement the
already strong regional operational management teams. In addition
the Group has enhanced its capabilities across a number of key
business functions including: legal, finance, IT, business process,
risk management and marketing.
Neil Medley, the Group's Chief Operating Officer, who joined the
Company in September 2016, was appointed to the Board in January
2018. Neil has a strong track record of managing change and
business integration as well as implementing business systems,
having previously been at Detica Group Plc and BAE Systems Plc.
Dr Richard Steeves was also appointed to the Board as an
independent Non-Executive Director and brings to the Group valuable
experience in growing a business organically and through
acquisitions, having founded and built Synergy Health Plc from a
market capitalisation of GBP12 million in 2001 to GBP1.4 billion
when it was sold in 2015.
Chi Keung (Simon) To was appointed as a Non-Executive Director
in line with the terms of the relationship agreement agreed with
Hutchison as part of their strategic partnership and investment.
His experience of doing business in Asia and as an AIM Director
will be a valuable addition to the business. Simon is the Managing
Director of Hutchison and Chairman and Executive Director of
Hutchison China MediTech Limited, a company listed on AIM and
Nasdaq with a market capitalisation of approximately US$4 billion.
Simon joined Hutchison in 1980 and has helped build it from a
relatively small trading company into a multi-billion dollar
investment and distribution group.
On 1 February 2018, Kevin Godley resigned as a board director
and as CFO. Since late December 2017 Michael Williamson has been
appointed as interim CFO and an orderly handover has been
undertaken. The Board wishes to thank Kevin for his efforts and
contribution to the Company and to wish him the very best for the
future.
On 8 March 2018, following the successful completion of the
Group's equity placing, we appointed Richard Kearsey as Director of
Corporate Development. Richard is a chartered accountant by
profession and for the last 27 years has worked as a Managing
Director of Close Brothers' Aviation & Marine Finance Division.
Richard has deep experience across syndication, financing and
corporate restructuring. Richard's appointment will increase the
Executive team's capacity to pursue the Group's growth
strategy.
Equity Placing
We announced on 9 February 2018 that we were raising further
capital through the proposed placing of shares. The admission of
the placing shares became effective on 2 March 2018. The Group
raised GBP48 million (approximately US$67 million) to accelerate
the Group's strategy of becoming the leading global business
aviation services group.
Hutchison Whampoa (China) Limited ("Hutchison") subscribed for
shares in the placing and now holds approximately 21% of the
Company's issued share capital. $19.8 million of the proceeds were
used to acquire Hutchison's Hong Kong aviation interests: its 50%
stake in Gama Aviation Hutchison Holdings Ltd and its 20% stake in
China Aircraft Services Limited.
The balance of the proceeds are intended to be deployed during
2018 as follows:
-- $10 million capital investment in two Ground base maintenance facilities in the US;
-- $10 million for the development of the Sharjah business
aviation centre in the Middle East; and
-- the balance to target acquisitions in the Europe Air and
Ground divisions and the Middle East Air division
Hutchison's investment in the Company provides a strong
endorsement of our stated strategy and our readiness to execute
against that strategy. We welcome them as a long term strategic
partner who shares our ambition of becoming the leading global
business aviation services Company.
Outlook
Based on our performance to date and contract visibility, the
Board is confident in the strength of the Group's operations and
believes the Group is well placed to deliver its strategic
objectives and achieve its expectations for the current year.
The recently completed fund raising is an important development
for the business. It will help us accelerate the next stage of
profitable growth and support the delivery our strategic objectives
in the fragmented aviation services markets.
Marwan Khalek
Chief Executive Officer
Operational Performance Review
Air division
The Air division provides aircraft management, special mission
and charter services. It offers a comprehensive fleet management
service to business jet owners including the provision of
management services, crew personnel, fuel, airworthiness,
engineering oversight, insurance management, hangar space, valeting
and all travel arrangements. It also works with public agencies
providing outsourced solutions to manage aviation operations for a
variety of complex, time critical services such as air ambulance
provision and aerial survey. The Group also acts as a charter
broker for its managed aircraft with revenue shared between the
Group and the underlying aircraft owner.
The Air Division saw strong revenue growth primarily driven by
the US Air associate on the back of the BBA aircraft management
business merger, as well as organic growth, including development
of the Wheels Up contract. In Europe revenues have now stabilised
following the exit from difficult contracts. Total divisional
revenue was up 35.5% to $518.4m (2016: $382.6m) and total operating
profit increased to $13.6m (2016: $7.4m), driven by the major
markets of US and Europe. Performance in our new markets in the
Middle East and Asia continued to improve.
December Middle
US Europe East Asia Total
USD 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
thousands
------------ -------- -------- ------- -------- ------- ------- ------- ------- -------- --------
Revenue
- reported 5,000 7,949 91,821 112,837 23,528 19,531 74 80 120,423 140,397
Associate 387,366 231,560 - - - - 14,730 16,525 402,096 248,085
Branding
fee (4,000) (5,788) - - - - (74) (80) (4,074) (5,868)
-------- -------- ------- -------- ------- ------- ------- ------- -------- --------
Revenue 388,366 233,721 91,821 112,837 23,528 19,531 14,730 16,525 518,445 382,614
Gross profit 23,929 14,114 11,887 9,579 1,886 1,345 809 380 38,511 25,418
Gross profit
% 6.2% 6.0% 12.9% 8.5% 8.0% 6.9% 5.5% 2.3% 7.4% 6.6%
Total
operating
profit 9,154 6,089 4,512 1,957 470 (80) (583) (544) 13,553 7,422
Total
operating
profit % 2.4% 2.6% 4.9% 1.7% 2.0% (0.4%) (4.0%) (3.3%) 2.6% 1.9%
-------- -------- ------- -------- ------- ------- ------- ------- -------- --------
Associate (7,355) (5,904) - - - - 583 222 (6,772) (5,631)
Branding
fee 4,000 5,788 - - - - 74 80 4,074 5,868
Total
operating
profit -
reported 5,799 5,973 4,512 1,957 470 (80) 74 80 10,855 7,609
------------- -------- -------- ------- -------- ------- ------- ------- ------- -------- --------
US Air (Associate)
The US Air associate, including the BBA aircraft management
business merger from the start of 2017, has delivered significant
growth with revenue up 66% to $388.4m (2016: $233.7m). The growth
reflects the addition of the Landmark acquisition, as well as a
high contract win rate in our core management business and the
continued growth of our Wheels Up contract.
US Air total operating profit was $9.2m (2016: $6.1m), with the
total operating profit margin of 2.4% (2016: 2.6%). This reduction
in operating margin was expected due to heavy investment in the
Group's US sales force in the final quarter of 2017 to enhance the
growth of the managed fleet and charter. US Air profit margins are
expected to increase towards the total operating profit margin
target of 5% as the benefits of scale and operational gearing
continue.
The integration of the BBA business is delivering the envisaged
benefits: adding complementary West Coast coverage to the US Air
associate's existing East Coast business, diversifying the client
base, providing the ability to cross sell maintenance services into
Gama Aviation's wholly owned US ground business and delivering cost
synergies.
The business was rebranded as Gama Aviation Signature on 1
January 2017. It is the largest aircraft management business in the
US and has significant growth prospects. The Group has a 24.5%
interest and continues to account for the investment as an
associate.
Europe Air
The Europe Air division has continued to build on the
operational efficiencies implemented in 2016, with significant
margin improvements being realised in 2017. Revenue declined, as
expected, reflecting the Group's decision to exit certain
underperforming contracts in 2016 and as a result Europe Air
delivered a significantly improved total operating profit of $4.5m
(2016: $2.0m) with a total operating profit margin of 4.9% (2016:
1.7%).
Middle East Air
Revenue in the Middle Eastern Air business increased by 20.5% to
$23.5m (2016: $19.5m). The division was profitable at the total
operating profit line for the first time, delivering total
operating profit of $0.5m and a 2.0% margin on the back of growth
in revenue. The division's prospects are strong with a healthy
pipeline of contract tenders.
Asia Air
Asia Air has made good progress establishing its brand alongside
our joint venture partner, Hutchison. The division is well
positioned for the future and following the end of the period the
Group acquired the outstanding 50% of its joint venture with
Hutchison to capture more of this growth potential.
Ground division
The Ground division provides base and line maintenance, repair
and overhaul, design and modification (MRO) and fixed base
operations (FBO).
Base maintenance refers to the planned maintenance required by
the aircraft manufacturer or component supplier, whereas line
maintenance is irregular maintenance activity often as a result of
component failure or wear and tear and both services are offered on
either a fee or contract basis. The design and modification
services provided by the Group increase the operating life and/or
capability of an aircraft through services such as avionics or
cabin system upgrades and incorporation of special mission
capability. The Ground division provides FBO facilities at Glasgow,
Aberdeen, Jersey and Sharjah airports offering parking, hangarage,
line maintenance and other related ground handling tasks such as
the fuelling of aircraft.
The Ground division grew revenues by 21.5% to $79.8m (2016:
$65.7m). The division achieved a total operating profit of $10.8m
(2016: $9.7m), with a total operating profit margin of 13.6% (2016:
14.8%). Margins in the Europe Ground business remain broadly in
line with Group targets and there is a real opportunity to scale up
the US, MENA and Asia businesses to develop towards the target
margins. The recent placing of shares and fund raising with the
planned strategic investments will be a key enabler of this.
December US Europe Middle East Total
USD thousands 2017 2016 2017 2016 2017 2016 2017 2016
------------------- ------- ------- --------- ------- ------ ------ --------- -------
Revenue -
reported 30,775 24,130 60,462 36,430 5,371 5,170 96,608 65,730
Sale of aircraft - - (12,885) - - - (12,885) -
Sale of inventory - - (3,929) - - - (3,929) -
------- ------- --------- ------- ------ ------ --------- -------
Revenue 30,775 24,130 43,648 36,430 5,371 5,170 79,794 65,730
Gross profit 6,116 5,560 18,439 16,746 1,240 1,697 25,795 24,003
Gross profit
% 19.9% 23.0% 42.2% 46.0% 23.1% 32.8% 32.3% 36.5%
Total operating
profit 2,348 2,401 8,408 7,282 85 32 10,841 9,715
Total operating
profit % 7.6% 10.0% 19.3% 20.0% 1.6% 0.6% 13.6% 14.8%
-------------------- ------- ------- --------- ------- ------ ------ --------- -------
US Ground
The US Ground division enjoyed strong organic growth during
2017, with revenue up 27.5% to $30.8m (2016: $24.1m) driven by the
full period impact of new bases opened in 2016 and new contract
wins.
As planned, the operating margin and profit achieved in 2017
reflects the focus on scaling up, recruiting line maintenance
engineers ahead of revenue growth and significant investment in
training. There have been variations in the gross profit percentage
as the business grows, driven by the addition of new bases and
revenue mix. The total operating profit of $2.3m (2016: $2.4m) and
margin of 7.6% reflects the effects of these investments. Having
made these investments, the division is poised to return to low
double digit margins in 2018.
Europe Ground
The European Ground division grew revenue by 19.8% to $43.6m
(2016: $36.4m) reflecting the return of discretionary spending,
albeit at low levels, and increased base maintenance activity at
Oxford. Principally as a result of the restructuring in 2016, total
operating profit was up 15.5% to $8.4m (2016: $7.3m). The division
continues to operate broadly in line with management targets with
the total operating margin at 19.3%. The division now has a solid
platform to deliver growth and maintain the total operating margin
of 20% at target levels.
The sale of aircraft and inventory in Europe Ground was $16.8m
(2016: $nil) and is excluded from the revenue above of Europe
Ground. Europe Ground revenue including sales of aircraft and
inventory was $60.5 as per note 3.
Middle East Ground
The Middle East Ground division had a stable year with the
number of aircraft movements through the FBO facilities showing an
improved trend. The division delivered a total operating profit of
$0.1m.
The division is now wholly owned following the acquisition of
the 51% Jet Set interest in October 2017. This provides a strong
foundation for our planned development in the region.
Asia Ground
The business produced its first revenues in the fourth quarter
2017 through its collaboration with CASL. This is an exciting
opportunity for new business going forward.
Financial Review
Basis of presentation of financials
All financial commentary below is provided on a constant
currency basis unless otherwise stated. The 2016 performance has
been restated to the same average rate for USD to GBP as the
reported 2017 financials. The average rate for 2017 was USD1.29 to
GBP1.00.
Group financial performance
Key financial indicators across the group are reported
below.
Constant Currency
December 2017 2016 Change 2016 Change
USD thousands Total Total Total Total Total
---------------------- ---- -------- --- -------- --- -------- --- ------------- --- -------- ---
Revenue 207,360 203,037 2.1% 196,084 5.7%
Gross Profit 47,206 44,151 6.9% 42,839 9.9%
Gross Profit % 22.8% 21.7% 1.1ppt 21.8% 1.0ppt
Underlying EBITDA 20,067 17,294 16.0% 16,783 19.6%
Underlying EBITDA
% 9.7% 8.5% 1.2ppt 8.6% 1.3ppt
Underlying Operating
Profit 18,744 15,057 24.5% 14,605 28.3%
Underlying Operating 9.0% 7.4% 1.6ppt 7.4% 1.6pp
Profit %
Underlying Profit 17,077 13,678 24.8% 13,320 28.2%
before tax
Underlying Profit 8.2% 6.7% 1.5ppt 6.7% 1.5ppt
before tax %
Underlying Basic 31.6c 30.1c 3.5c 29.0c 4.6c
Earnings Per Share
(cents)
---------------------------- -------- --- -------- --- -------- --- --- -------- --- -------- ---
Revenue
Reported revenue grew by 5.8% to $207.4m (2016: $196.1m). We
have seen growth in revenue in Air and Ground divisions across all
geographies, with the exception of the Europe Air division, where
the business continued to exit from onerous aircraft management
contracts dating back to pre-2015. The revenue in the Europe Air
division was $91.8m (2016: $112.8m).
Gross profit
Reported gross profit is up 10.2% to $47.2m (2016: $42.8m) and
there has been an increase in the gross profit margin percentage by
1.0% to 22.8% (2016: 21.8%), on the back of increased scale and
operational efficiencies.
EBITDA
Underlying EBITDA is up 19.6% at $20.1m (2016: $16.8m). This
represents an EBITDA margin of 9.7% against 8.6% for 2016. The
improvement in EBITDA has been driven by the growth in revenue of
5.8% to $207.4m, improvements in gross profit margin percentages by
1.0% to 22.8% and control of administration expenses of $33.2m
(2016: $32.9m).
Reconciliation of underlying total operating profit to
EBITDA
Constant
Currency
December December December
USD thousands 2017 2016 2016
---------------------------- --------- --------- ----------
Underlying total operating
profit
18,744 15,057 14,605
Depreciation
1,845 2,041 1,982
Share of associate's
results (157) 330 330
Share of associate's
exceptional items (365) (134) (134)
--------- --------- ----------
Underlying EBITDA 20,067 17,294 16,783
----------------------------- --------- --------- ----------
Depreciation
Depreciation which is set out in note 11 includes depreciation
on property, plant and equipment of $1.8m (2016: $2.0m).
Share of associate's results
The share of associate's results represents the share of
operating profit as reported in Gama Aviation LLC from the Group's
24.5% interest in Gama Aviation LLC.
Share of associate's exceptional items
The share of associate's exceptional items represents the share
of exceptional items as reported in Gama Aviation LLC from the
Group's 24.5% interest in Gama Aviation LLC. These represent
transaction, integration and legal costs associated with the the
merger of the US Air associate with the BBA aircraft management
business.
Total operating profit
The underlying total operating profit, which includes the
operating profit attributable to Gama Aviation of the 100% owned
group companies together with the results attributable to Gama
Aviation from its associate and joint venture is up 28.3% to $18.7m
(2016: $14.6m).
Underlying total operating profit is arrived at by taking
operating profit before amortisation, exceptional items, share
based payment expense and including the share of profits but
excluding accumulated losses of equity accounted investments.
Constant
USD thousands December December Currency
2017 2016 December
2016
---------------------------- ----------- ----------- ----------
Continuing total operating
profit 17,855 10,937 10,621
Amortisation 1,441 1,438 1,367
Exceptional items 2,622 2,548 2,482
Share of associate's
exceptional items 365 134 134
Share-based payment 195 - -
expense
Release of provisions (2,170) - -
in respect of losses
of associate and joint
venture from prior
years
Disposal of interest (1,564) - -
in associate
----------- ----------- ----------
Underlying total operating
profit 18,744 15,057 14,605
----------------------------- ----------- ----------- ----------
Amortisation
Amortisation which is set out in note 11 includes amortisation
on intangible assets of $1.4m (2016: $1.4m).
Exceptional items
Exceptional items amounted to $2.6m (2016: $2.5m), which are set
out in note 4 and represent transaction costs $0.4m (2016: $1.4m),
integration and restructuring costs $1.2m ($1.2m), and legal costs
$1.1m (2016: $nil). Exceptional items include travel expenses and
costs for executive management incurred in undertaking
transactions, integration and restructuring together with the
salary costs of certain permanent employees who are employed in
place of external professional services.
Share-based payment expense
On 10 August 2016, the Group announced that a total of 1,500,000
share options were granted at GBP1.55 to a number of employees. On
6 January 2017, 1,390,000 share options were formally awarded and
accordingly there is a share based payment charge, which is set out
in note 10 of $0.2m (2016: $nil).
Associates and joint ventures
The release of the provision for our share of associate and
joint venture losses from prior years of $2.2m (2016: $nil) and the
profit from the disposal of the interest in associate of $1.6m
(2016: $nil) are excluded from the underlying total operating
profit.
US Air losses of associate from prior years
During the past few years, the US Air associate has been
loss-making and the Group has been provisioning amounts in
anticipation of additional resourcing requirements. Previously,
these losses have been included in the Group's underlying earnings
and have therefore been included in the Group's underlying EPS.
With the strength of the Associate's performance, its profit-making
position and positive net assets position, together with a
re-organised branding fee structure, the provisions of $1.5m are no
longer required and have been released. The provision release has
not been included in the Group's underlying results in this
period.
Asia Air losses of joint venture from prior years
Similar to the US associate, the Group has been provisioning
amounts in anticipation of additional resourcing requirements.
Previously, these losses have been included in the Group's
underlying earnings and have therefore been included in the Group's
underlying EPS. The provisions of $669,000 are no longer required
and have been released. The provision release has not been included
in the Group's underlying results in this period.
Profit on disposal of interest in associate
On 1 January 2017 the Group and BBA Aviation Plc merged their US
aircraft management and charter businesses. This merger resulted in
the Group's 49% interest in its associated company Gama Aviation
LLC, being reduced to 24.5% and a profit of $1.6m being recorded on
the disposal of the other 24.5% interest.
The share of results from equity accounted investments derived
by the Gama Aviation Group's associates and joint ventures is set
out in note 13 and the consolidated income statement effect is
summarized below:
USD thousands December December
2017 2016
-------------------------- --------- ---------
US associate share
of results 157 (8)
HK joint venture
share of results - (322)
US associate loss 1,501 -
provisions release
Asia joint venture 669 -
loss provisions release
Share of results
from equity accounted
investments 2,327 (330)
--------------------------- --------- ---------
Profit before tax
Constant
USD thousands December December Currency
2017 2016 December
2016
--------------------------- ----------- ----------- ----------
Continuing profit
before tax 16,146 19,308 19,024
Amortisation 1,441 1,438 1,367
Exceptional items 2,622 2,548 2,482
Share of associate's
exceptional items 365 134 134
Share-based payment 195 - -
expense
Release of provisions (2,170) - -
in respect of losses
of associate and joint
venture from prior
years
Profit on disposal (1,564) - -
of interest in associate
Unrealised FX movements
in finance costs 42 (9,750) (9,777)
----------- ----------- ----------
Underlying profit
before tax 17,077 13,678 13,231
---------------------------- ----------- ----------- ----------
Unrealised FX movements within finance costs
Within our global services business, we operate and manage
geographically mobile assets. As a result, Gama Aviation is exposed
to a number of currencies. With the exception of Europe, the rest
of the regions trade in USD which is the same as our Group
reporting currency, leaving little or no foreign exchange
exposure.
The material currency exposure for Gama Aviation is within our
Europe operations between GBP and USD. Gama Aviation experiences
both realised and unrealised trading gains and losses on these
exchange rate movements. These impact our operating performance,
and finance income and costs.
2016 was an especially volatile year between GBP and USD
exchange rates and as a result we reported some material gains
within finance income. This was due to the loan structure within
the business and how the proceeds of equity and debt were deployed
into subsidiary companies whereby translation differences arose
where functional currencies differed from the Gama Aviation
reporting currency of USD.
We reported during 2016, that Gama Aviation was looking to
reduce this complexity by simplifying both the loan structure of
the group and to carry out a review of the functional currencies of
the subsidiaries in the group and we are pleased with the progress
made.
The unrealised FX movement in the period was a loss of $0.04m
(2016: gain of $9.7m).
Earnings per share (EPS)
Constant
USD thousands December December Currency
2017 2016 December
2016
---------------------------------- ----------- ----------- -----------
Profit attributable to
ordinary equity holders
of the parent:
Continuing operations 12,214 18,803 18,499
Add back:
Amortisation 1,441 1,438 1,367
Exceptional items 2,622 2,548 2,482
Share of associate's exceptional
items 365 134 134
Share-based payment expense 195 - -
Release of provisions (2,170) - -
in respect of losses of
associate and joint venture
from prior years
Profit on disposal of (1,564) - -
interest in associate
Unrealised FX movements
in finance costs 42 (9,750) (9,777)
Deferred tax charge 750
----------- ----------- -----------
Profit attributable to
ordinary shareholders
for adjusted earnings 13,895 13,174 12,706
Denominator
Weighted average number
of shares used in basic
EPS 43,994,442 43,827,775 43,827,775
Underlying basic earnings
per share (cents) 31.6c 30.1c 29.0c
----------------------------------- ----------- ----------- -----------
Taxation
There is a total tax charge for the period of $3.9m (2016:
$0.6m) and an effective tax rate of 24% on continuing activities.
The group operates across a number of jurisdictions and the
effective rate of tax reflects the blended rate of operating in
different countries. The lower effective rate of tax in 2016
reflected the effect of the utilization of tax losses, which are no
longer available. In 2017 the US enacted a lower tax rate which
reduced the expected future benefits from temporary differences and
operating loss carry forwards. As a consequence the tax charge in
2017 has a higher effective tax rate reflecting the release of
deferred tax assets no longer available.
Included in the Group's tax charge in 2017 is $0.75m in respect
of a reduction in the value of the Group's deferred tax asset as a
consequence of the recently announced reduction in US corporate tax
rates. As this tax charge does not relate to underlying earnings in
2017 it has been added back for the purpose of calculating
underlying EPS.
Net debt and cash flow movements
The table below highlights the change in the net debt position
which shows a $6.4m improvement in 2017. The Group has operated
well within its banking covenants and net debt to underlying EBITDA
was 0.6x (2016: 0.9x). Cash flow from operations was $23.8m (2016:
$2.2m).
Over the last few years management has been focused upon
improving its working capital management in an effort to reverse
the sizeable outflows experienced in prior years. In 2017 the Group
saw a working capital inflow of $10.6m, of which $6.5m resulted
from client deposits which will unwind in 2018. The remaining
positive inflow demonstrates the improvements in our working
capital management and are consistent with the cash generative
nature of our business model.
USD thousands December December
2017 2016
---------------------------- ----------- -----------
Underlying EBITDA 20,067 17,294
Working capital movement 10,634 (14,084)
Items not included
in underlying EBITDA (2,622) (2,682)
Other (4,308) 1,656
----------- -----------
Cash flow from operations 23,771 2,183
Capex movement (4,521) (4,363)
Net interest & tax
paid (5,281) (1,458)
----------- -----------
Free cash flow 13,969 (3,638)
Dividends paid (1,495) (1,411)
Acquisitions (5,100) (6,239)
Net debt foreign
exchange movements (959) 923
----------- -----------
Change in net debt 6,415 (10,364)
----------- -----------
Net debt
(12,972) (19,387)
Cash and cash equivalents
22,349 11,174
Borrowings
(31,654) (24,941)
Obligations under
finance leases (3,667) (5,620)
----------------------------- ----------- -----------
Items not included in underlying EBITDA
Exceptional items in the cash flow movements are as set out in
note 4 and represent transaction costs $0.4m, integration and
restructuring costs $1.1m, and legal costs $1.1m.
Other Items
Other items in the cash flow movements include losses from
discontinued activities $2.4m as set out in note 6 and unrealized
foreign exchange movements of $2m.
Discontinued operations
The operating losses incurred on the Group's owned aircraft that
are deployed on ad-hoc charter are also separated from the
underlying EBITDA as this is a legacy element of the business model
that the Group has classified as discontinued and is set out in
note 6. The discontinued operations loss for the period was $2.4m
(2016: $2.1m). During the period, the Group sold two of the three
remaining owned aircraft. The book value of the one remaining asset
held for sale is $1.5m.
Capex movement
Capital expenditure includes the purchase of property, plant and
equipment of $8.5m (2016: $3.7m) and intangibles of $1.6m (2016:
$0.4m). The Group has invested in a hangar in Aberdeen, Sharjah
facilities, an aircraft for a contract for a key customer and
ongoing maintenance capital expenditure. Expenditure on intangibles
includes investment in new technology and licenses and approvals.
This capital expenditure has been offset by proceeds on the sale of
two aircraft for $5.5m.
Net interest and tax paid
The Group paid tax on profits of $3.6m (2016: $nil) in the UK
and US including advance payments for 2017. In 2016 the Group
benefited from the utilization of losses brought forward from prior
years. Net interest paid in 2017 was $1.7m (2016: $1.5m) with the
increase due to the higher level of utilization of the RBS credit
facilities during the year.
Dividend
The Directors are recommending a dividend of 2.75p per share, an
increase of 5.7% (2016: 2.6p per share).
Litigation and associated exceptional items, and prior year
adjustment
The Group is involved in a number of legal proceedings, most of
which arise from historic Hangar 8 trading activity, prior to the
merger completed in January 2015, and those relating to disputes
with Dustin Dryden (a former non-executive director of the Company
and of Hangar 8 who resigned in September 2015) and affiliated
entities. Taking account of the circumstances of each set of
proceedings, legal advice received in relation to them and the
Company's views as to the merits of such proceedings, the Company
intends to continue to vigorously pursue/defend such
proceedings.
The Company has incurred legal costs of US$1.1m associated with
these proceedings in the year ended 31 December 2017, which are
treated as an exceptional item. The Board believes a similar amount
will be incurred for future legal costs, through to the conclusion
of the various proceedings, which will also be treated as
exceptional. In respect of one of the proceedings against the
Company, amounting to US$1.9m, the Board has decided to make a
US$1.1m provision in the form of a prior year adjustment. This
arose as a result of an obligation in relation to one particular
customer arrangement for services provided prior to 2014 in the
Hangar 8 business, which had not been recognised at the time in
error. This has resulted in an increase in the liabilities by $1.1m
and reduced reserves by the same amount in the prior period. This
has had no impact on the income statement in the prior period.
The remaining proceedings fall into two categories, the first
involves proceedings by the Company to recover long-standing trade
receivables that amount to approximately US$5.5m. The Company has
made adequate provisions or holds security against these claims and
as a result the Board does not expect any further provisions will
be required. In addition, based on legal advice, the Board
considers the proceedings to recover these receivables are likely
to be successful.
The second involves a number of proceedings brought against the
Company in which the claimants seek to recover damages for alleged
contractual breaches which amount to approximately US$15.3m. Based
on a detailed analysis of the claims and legal advice, the Board
believes that these claims are speculative and/or overlapping and
the Company continues to vigorously defend them and therefore no
provision has been made in the accounts.
By the time all these proceedings, some of which are with the
same counterparties, are determined or settled, the Board expects
the overall awards and settlements to result in a cash inflow to
the Company.
Michael Williamson
Interim Chief Financial Officer
Gama Aviation plc
Consolidated Financial Statements
for the year ended 31 December 2017
Consolidated income statement
For the year ended 31 December 2017
Year Year
ended ended
2017 2016
---------------------------------------- ----- ---------- ----------
Note $'000 $'000
Continuing operations
Revenue 3 207,360 203,037
Cost of sales (160,154) (158,886)
---------------------------------------- ----- ---------- ----------
Gross profit 47,206 44,151
---------------------------------------- ----- ---------- ----------
Administrative expenses (33,242) (32,884)
Underlying EBITDA 20,067 17,294
Items not included in underlying
EBITDA 4 (2,817) (2,548)
Depreciation and amortisation (3,286) (3,479)
---------------------------------------- ----- ---------- ----------
Operating profit 13,964 11,267
Share of results from equity accounted
investments 13 2,327 (330)
Profit on disposal of interest
in associate 13 1,564 -
---------------------------------------- ----- ---------- ----------
Total operating profit 17,855 10,937
---------------------------------------- ----- ---------- ----------
Underlying total operating profit 18,744 15,057
Items not included in underlying
total operating profit 5 (889) (4,120)
---------------------------------------- ----- ---------- ----------
Finance income - 9,750
Finance costs (1,709) (1,379)
---------------------------------------- ----- ---------- ----------
Profit before tax from continuing
operations 16,146 19,308
Taxation 7 (3,886) (615)
---------------------------------------- ----- ---------- ----------
Profit from continuing operations 12,260 18,693
---------------------------------------- ----- ---------- ----------
Discontinued operations
Loss after tax from discontinued
operations 6 (2,412) (2,127)
---------------------------------------- ----- ---------- ----------
Profit for the year 9,848 16,566
---------------------------------------- ----- ---------- ----------
Attributable to:
Owners of the Company 9,802 16,676
Non-controlling interests 46 (110)
---------------------------------------- ----- ---------- ----------
Totals 9,848 16,566
---------------------------------------- ----- ---------- ----------
Earnings per share attributable
to the equity holders of the parent 8
Basic (cents) 22.28c 38.05c
Diluted (cents) 22.05c 38.05c
Basic - continuing operations
(cents) 27.76c 42.90c
Diluted - continuing operations
(cents) 27.48c 42.90c
---------------------------------------- ----- ---------- ----------
Consolidated statement of comprehensive income
For the year ended 31 December 2017
(Restated)
Year Year
ended ended
2017 2016
$'000 $'000
--------------------------------------- -------- -----------
Profit for the year 9,848 16,566
Items that may be reclassified
subsequently to profit or loss:
Prior year adjustment 9 - (1,133)
Exchange differences on translation
of foreign operations 2,732 (18,440)
Gains on cash flow hedges 127 -
--------------------------------------- -------- -----------
Total comprehensive income / (loss)
for the year 12,707 (3,007)
--------------------------------------- -------- -----------
Total comprehensive income / (loss)
is attributable to:
Owners of the Company 12,753 (3,117)
Non-controlling interests (46) 110
--------------------------------------- -------- -----------
Totals 12,707 (3,007)
--------------------------------------- -------- -----------
Consolidated statement of changes in equity
For the year ended 31 December 2017
Share Share Other Foreign Accumulated Total Non-controlling Total
capital premium reserves exchange profit/ shareholders' interest equity
reserve (losses) equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------- -------- --------- --------- --------- ------------ -------------- ---------------- ---------
Balance
at 1 January
2016 670 35,458 57,228 (5,089) (33,304) 54,963 691 55,654
Profit for
the year - - - - 16,676 16,676 (110) 16,566
Other
comprehensive
income for
the year - - - (18,440) - (18,440) - (18,440)
Prior year
adjustment - - - - (1,133) (1,133) - (1,133)
-------- --------- --------- --------- ------------ -------------- ---------------- ---------
Total
comprehensive
income for
the year - - - (18,440) 15,543 (2,897) (110) (3,007)
Issuance
of shares 14 - 4,149 - - 4,163 - 4,163
Cancellation
of share
premium - (35,458) - - 35,458 - - -
Dividend
paid - - - - (1,411) (1,411) - (1,411)
Balance
at 31 December
2016 (restated) 684 - 61,377 (23,529) 16,286 54,818 581 55,399
Profit for
the year - - - - 9,802 9,802 46 9,848
Other
comprehensive
income - - 127 2,732 - 2,859 - 2,859
----------------- -------- --------- --------- --------- ------------ -------------- ---------------- ---------
Total
comprehensive
income for
the year - - 127 2,732 9,802 12,661 46 12,707
Cost of
share-based
payments - - 195 - - 195 - 195
Dividend
paid - - - - (1,496) (1,496) - (1,496)
Acquisition
of
non-controlling
interest - - - - (5,997) (5,997) 897 (5,100)
----------------- -------- --------- --------- --------- ------------ -------------- ---------------- ---------
Balance
at 31 December
2017 684 - 61,699 (20,797) 18,595 60,181 1,524 61,705
----------------- -------- --------- --------- --------- ------------ -------------- ---------------- ---------
Consolidated balance sheet
As at 31 December 2017
(Restated)
2017 2016
$'000 $'000
------------------------------- --- --- --------- --- -----------
Non-current assets
Goodwill 40,716 37,631
Other intangible assets 11,564 9,987
------------------------------- --- --- --------- --- -----------
Total intangible assets 11 52,280 47,618
Property, plant and equipment 11 20,051 12,215
Investments accounted for
using the equity method 13 1,721 -
Deferred tax asset 2,689 4,557
------------------------------- --- --- --------- --- -----------
76,741 64,390
------------------------------- --- --- --------- --- -----------
Current assets
Assets held for resale 12 1,500 7,200
Inventories 9,705 8,410
Trade and other receivables 47,718 46,473
Cash and cash equivalents 22,349 11,174
------------------------------- --- --- --------- --- -----------
81,272 73,257
------------------------------- --- --- --------- --- -----------
Total assets 158,013 137,647
------------------------------- --- --- --------- --- -----------
Current liabilities
Trade and other payables (54,510) (42,815)
Obligations under finance
leases (1,654) (1,644)
Provisions for liabilities (540) (2,416)
Borrowings (30,642) (24,018)
Deferred revenue (4,388) (4,315)
------------------------------- --- --- --------- --- -----------
(91,734) (75,208)
------------------------------- --- --- --------- --- -----------
Total assets less current
liabilities 66,279 62,439
------------------------------- --- --- --------- --- -----------
Non-current liabilities
Borrowings (1,012) (923)
Obligations under finance
leases (2,013) (3,976)
Provisions for liabilities - (492)
Deferred tax liabilities (1,549) (1,649)
------------------------------- --- --- --------- --- -----------
(4,574) (7,040)
------------------------------- --- --- --------- --- -----------
Total liabilities (96,308) (82,248)
------------------------------- --- --- --------- --- -----------
Net assets 61,705 55,399
------------------------------- --- --- --------- --- -----------
Shareholders' equity
Share capital 684 684
Share premium - -
Other reserves 61,699 61,377
Foreign exchange reserve (20,797) (23,529)
Accumulated profit 18,595 16,286
------------------------------- --- --- --------- --- -----------
Total shareholders' equity 60,181 54,818
------------------------------- --- --- --------- --- -----------
Non-controlling interest 1,524 581
Total equity 61,705 55,399
------------------------------- --- --- --------- --- -----------
Consolidated cash flow statement
For the year ended 31 December 2017
Year Year
ended ended
2017 2016
$'000 $'000
------------------------------------------- -------- ---------
Cash flows from operating activities
Profit before tax from continuing
operations 16,146 19,308
Loss before tax from discontinued
operations (2,412) (2,127)
------------------------------------------- -------- ---------
Profit before tax 13,734 17,181
Adjustments for:
Finance income - (9,928)
Finance costs 1,699 1,458
Depreciation and amortisation 3,286 3,479
Loss on disposal of property, plant
and equipment - 8
Impairment of assets held for sale - 1,828
Loss on disposal of assets held 150 -
for sale
Share of results from equity accounted
investments (2,327) 330
Profit on disposal of interest in (1,564) -
associate
Share-based payment expense 195 -
Unrealised foreign exchange movements (2,037) 1,911
Operating cash flows before movements
in working capital 13,136 16,267
Increase in inventories (543) (2,432)
Decrease/(increase) in receivables 699 (462)
Increase/(decrease) in payables 10,950 (9,624)
Decrease in deferred revenue (223) (1,407)
Decrease in provisions (249) (159)
------------------------------------------- -------- ---------
Cash generated from operations 23,770 2,183
Taxes paid (3,624) -
Interest received - -
Interest paid (1,657) (1,458)
------------------------------------------- -------- ---------
Net cash flows from operating activities 18,489 725
------------------------------------------- -------- ---------
Cash flows from investing activities
Purchases of property, plant and
equipment (8,498) (3,697)
Purchases of intangibles (1,573) (400)
Purchases of assets held for resale - (266)
Proceeds on disposal of assets held 5,550 -
for sale
Acquisition of subsidiary, net of
cash acquired - (6,239)
------------------------------------------- -------- ---------
Net cash flows from investing activities (4,521) (10,602)
------------------------------------------- -------- ---------
Cash flows from financing activities
Consideration for acquisition of (5,100) -
non-controlling interest
Repayments of obligations under
finance leases (1,953) (1,900)
Proceeds from borrowings 8,223 17,798
Repayment of borrowings (4,000) (40)
Dividend paid to equity holders
of the parent (1,495) (1,411)
Net cash flows from financing activities (4,325) 14,447
------------------------------------------- -------- ---------
Net increase in cash and cash equivalents 9,643 4,570
Effect of foreign exchange rates 1,532 (1,853)
Cash and cash equivalents at the
beginning of year 11,174 8,457
------------------------------------------- -------- ---------
Cash and cash equivalents at the
end of year 22,349 11,174
------------------------------------------- -------- ---------
Notes to the condensed consolidated financial statements as at
31 December 2017
1. General information
Gama Aviation Plc (previously Hangar8 Plc) is incorporated in
the United Kingdom. The address of the registered office is the
Business Aviation Centre, Farnborough Airport, Hampshire, GU14
6XA.
2. Significant accounting policies
Non statutory financial statements
The financial information set out in this preliminary results
announcement does not constitute the Group's statutory financial
statements for the year ended 31 December 2017 or 2016 but is
derived from those financial statements. Statutory financial
statements for 2016 have been delivered to the Registrar of
Companies. Those for 2017 will be delivered following the Company's
Annual General Meeting, which will be convened on 14 June 2018. The
auditors have reported on those accounts: their reports on those
financial statements were unqualified and did not contain
statements under Section 498 of the Companies Act 2006.
The financial statements, and this preliminary statement, of the
Group for the year ended 31 December 2017 were authorised for issue
by the board of Directors on 16 March 2018 and the balance sheet
was signed on behalf of the Board by Marwan Khalek, Director.
Basis of accounting
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the E.U.
The financial statements have been prepared on the historical
cost basis. Historical cost is generally based on the fair value of
the consideration given in exchange for the assets acquired. The
principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
achieved when the Group is exposed, or has rights to, variable
returns from its involvement in the entity and has the ability to
affect those returns through its power over the entity.
Business combinations are accounted for using the acquisition
method. The consideration transferred in a business combination
shall be measured at fair value, which shall be calculated as the
total of the acquisition date fair values of the assets transferred
by the Group, the liabilities incurred by the Group to former
owners, the equity issued by the Group and the amount of any
non-controlling interest in the acquiree either at fair value or at
the proportional share of the acquiree's identifiable net assets.
The consideration transferred also includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring the accounting
policies used in line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
minority's share of changes in equity since the date of the
combination. Profit or loss and each component of other
comprehensive income are attributed to the equity holders of the
parent of the Group and to the non-controlling interests, even if
this results in the non-controlling interests having a deficit
balance. A change in the ownership interest of a subsidiary,
without a loss of control is accounted for as an equity
transaction, being a disposal or acquisition of non-controlling
interest.
Going concern
The directors have performed a detailed analysis of the cash
flow projections for the Group as a whole covering the period
through to the financial year ended 31 December 2017 and beyond.
The key assumptions in this forecast include the profitable growth
of the trading businesses and the knowledge that the group has
material headroom in its debt covenants.
The directors are therefore of the opinion that in all
reasonably foreseeable circumstances the company will remain a
going concern for at least twelve months from the date on which
these financial statements have been approved. Accordingly, the
going concern basis has been adopted in the preparation of these
financial statements.
Cash and cash equivalents
The Group's cash and cash equivalents in the statements of
financial position comprise cash at bank and on hand and short-term
deposits with a maturity of three months or less from inception,
which are subject to an insignificant risk of changes in value.
For the purpose of the consolidated cash flow statement, cash
and cash equivalents consist of cash and short term deposits, as
defined above, net of outstanding bank overdrafts as they are
considered an integral part of the Group's cash management.
Assets held for sale
The Group classifies assets as held for sale if their carrying
value will be recovered principally through sale rather than
through continuing use. Such assets are measured at the lower of
their carrying amount and fair value less costs to sell. Costs to
sell are the incremental costs directly attributable to the sale,
excluding finance costs and income tax expense. The criteria for
assets held for sale is regarded as only met when the sale is
highly probable and the asset is available for immediate sale in
its present condition. Property, plant and equipment and intangible
assets are not depreciated or amortised once classified as held for
sale.
Events or circumstances may extend the period to complete the
sale beyond one year. An extension of the period required to
complete a sale does not preclude an asset from being classified as
held for sale if the delay is caused by events or circumstances
beyond the entity's control and there is sufficient evidence that
the entity remains committed to its plan to sell the asset.
2. Significant accounting policies (continued)
Investments in associate and joint venture
An associate is an entity over which the Group is in a position
to exercise significant influence, but not control or joint
control, through participation in the financial and operating
policy decisions of the investee.
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or
joint control are similar to those necessary to determine control
over subsidiaries.
The Group's investments in its associate and joint venture are
accounted for using the equity method of accounting. The investment
is carried in the balance sheet at cost as adjusted by
post-acquisition changes in the Group's share of the net assets of
the investment, less any impairment in the value of the investment.
Losses in excess of the Group's interest in the investment (which
includes any long-term interests that, in substance, form part of
the Group's net investment) are recognised only to the extent that
the Group has incurred legal or constructive obligations or made
payments on behalf of the investment.
Where a Group company transacts with an associate of the Group,
profits and losses are eliminated to the extent of the Group's
interest in the relevant associate. Losses may provide evidence of
an impairment of the asset transferred in which case appropriate
provision is made for impairment. The Group's share of the changes
in the carrying value of the investments in associates is
recognised in the income statement.
Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the amount of any non-controlling
interests in the acquiree and the Group's interest in the fair
value of the identifiable assets and liabilities of a subsidiary,
associate or jointly controlled entity at the date of acquisition.
Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment
losses. Goodwill which is recognised as an asset is reviewed for
impairment at least annually. Any impairment is recognised
immediately in profit or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in
a subsequent period.
On disposal of a subsidiary or associate, the attributable
amount of goodwill is included in the determination of the profit
or loss on disposal.
Revenue recognition
The Group measures revenue as the fair value of consideration
received or receivable and represents amounts received for goods
and services provided in the normal course of business, net of
discounts, estimated customer returns, VAT and other sales-related
taxes.
Revenue is recognised when the amount can be reliably estimated,
collection is probable, the Group retains neither continuing
managerial involvement to the degree usually associated with
ownership nor effective control of the goods sold, and the inherent
risks and rewards of ownership of the goods have been transferred
to the other party.
Where contracts include provisions for adjustments, including
yearly increases based on external benchmarks, these are not taken
into consideration until they are known.
Rendering of services
Revenue from services is primarily derived from the management
or provision of aircraft which includes the revenues generated by
special mission support, logistics support and charter. These
services are referred to within the group as "Air". Revenue
includes fixed contract fees and variable fees such as revenue
earned with reference to flying hours. Revenue also includes the
recharges for costs incurred relating to the management or
provision of the aircraft. We record revenue relating to services
rendered using an accrual method and in accordance with the terms
of the contracts pursuant to which such services are rendered.
Revenue from aircraft services is recognised based on contractual
rates as the related services are performed.
"Ground" Revenues are materially associated with engineering
activity which represents amounts derived from the provision of
services to customers during the year, including aircraft
maintenance and overhauls. The amount of profit attributable to the
stage of completion of an engine and maintenance overhaul contract
is recognised when the outcome of the contract can be foreseen with
reasonable certainty. Revenue for such contracts is stated at the
cost appropriate to the stage of completion plus attributable
profits, less amounts recognised in previous years. The stage of
completion is measured by reference to costs (mainly hours and
materials) incurred to date as a percentage of total estimated
costs for each contract. Provision is made for any losses as soon
as they are foreseen. Other services within "ground" include design
and modification work with revenue recognised on the same basis as
that of the engineering and FBO operations and software. Revenues
for FBO operations and software are recognised at the point of
service delivery.
2. Significant accounting policies (continued)
Sale of goods
Revenues associated with the sale of goods represent amounts
derived from sales activity whereby the Group procures aircraft,
parts or components on behalf of customers for their use. Revenue
is recognised when all the following conditions are satisfied:
-- the Group has transferred to the buyer the significant risks
and rewards of ownership of the goods;
-- the amount of revenue can be measured reliably;
-- it is probable that the economic benefits associated with the
transaction will flow to the entity;
-- the costs incurred or to be in incurred in respect of the
transaction can be measured reliably; and
-- the Group retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold.
Interest revenue
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of revenue
can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount on
initial recognition.
Leasing
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Group at their fair value or, if lower, at the present value of the
minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are
apportioned between finance expenses and reduction of the lease
obligation so as to achieve a constant rate of interest on the
remaining balance of the liability.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease. In the
event that lease incentives are received to enter into operating
leases, such incentives are recognised as a liability. The
aggregate benefit of incentives is recognised as a reduction of
rental expense on a straight-line basis.
Foreign currencies
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in US Dollars, which
is the functional currency of the Company, and the presentation
currency for the consolidated financial statements. These financial
statements are presented in US dollars because that is the currency
of the primary economic environment in which the Group
operates.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing on the dates of the transactions. At
each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period. Exchange differences arising are recognised
in other comprehensive income and accumulated in equity. Goodwill
and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate for each year end.
Operating profit
Operating profit is stated after the share of results of
associates but before investment income and finance costs.
Intangible assets
Internally generated intangible assets are recognised only if
they satisfy the IAS 38 criteria in that a separately identifiable
asset is created from which future economic benefits are expected
to flow and the cost can be measured reliably. The life of each
asset is assessed individually. Where the life is considered to be
indefinite no amortisation is charged. Included in intangible
assets are internally generated assets relating to the costs
incurred to commence operations in the United Arab Emirates in the
process of gaining an AOC (Air Operators Certificate). The
certificate has an indefinite life and without the certificate the
operation cannot perform legally and as such amortisation is not
charged.
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses. Included in intangible assets acquired are Part
145 approvals, licences and brand, customer relations and
workforce, and computer software.
-- Part 145 Approvals - These relate to the recognised
regulatory approvals required by a business to perform maintenance
in the EU and US Ground business.
-- Licence and brand, customer relations and software - recognised on acquisitions
A summary of the policies applied to the Group's acquired
intangible assets is as follows:
Part 145 approvals indefinite useful life, no amortisation
charged, annual impairment review
Licences 10% per annum, straight line method
Brand amortised over 18 months, straight line method
Customer relations 10% per annum, straight line method
Software 33% per annum, straight line method
2. Significant accounting policies (continued)
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense when employees have rendered the service
entitling them to the contributions. Payments made to state-managed
retirement benefit schemes are dealt with as payments to defined
contribution schemes where the Group's obligations under the
schemes are equivalent to those arising in a defined contribution
retirement benefit scheme.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates and laws
that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates and laws that have
been enacted or substantively enacted by the balance sheet date
that are expected to apply in the period when the liability is
settled or the asset is realised.
Deferred tax is charged or credited in the income statement,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Inventories
Inventories are valued at the lower of cost and net realisable
value. Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
a) Raw materials and consumables: purchase cost on a first in, first out basis
b) Work in progress: cost of direct materials and labour and a
proportion of manufacturing overheads based on the normal operating
capacity, but excluding borrowing costs
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less
accumulated depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost of assets
less their residual values over their useful lives, using the
straight-line method, on the following bases:
Leasehold property Life of lease
Aircraft hull and refurbishments Remaining life of the aircraft,
various rates between 5% and 20% per annum
Furniture, fixtures and equipment 20% per annum
Motor vehicles 20% per annum
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in the
income statement.
Impairment of tangible and intangible assets excluding
goodwill
At each balance sheet date the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. An intangible asset with an indefinite
useful life is tested for impairment at least annually and whenever
there is an indication that the asset may be impaired.
2. Significant accounting policies (continued)
Impairment of tangible and intangible assets excluding goodwill
(continued)
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets
Trade receivables and other receivables are measured at
amortised cost less provision for doubtful debts, determined as set
out below in "impairment of financial assets". Any write-down of
these assets is expensed to the income statement.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at
each balance sheet date. Financial assets are impaired where there
is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
affected.
For certain categories of financial asset, such as trade
receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio
of receivables could include the Group's past experience of
collecting payments, an increase in the number of delayed payments
in the portfolio past the average credit period, as well as
observable changes in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortised cost, the amount of
the impairment is the difference between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest
rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is
reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognised in
profit or loss.
Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs.
Other financial liabilities
Other financial liabilities, including borrowings and payables,
are initially measured at fair value and subsequently at amortised
cost, net of transaction costs.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. On
derecognition of a financial asset measured at amortised cost, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or
loss.
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire. The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable,
including any non-cash assets transferred or liabilities assumed,
is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best
estimate of the consideration required to settle the present
obligation at the balance sheet date, taking into account the risks
and uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows.
Exceptional items
Exceptional items relate to items which do not contribute to the
underlying performance of the Group, and as a result are presented
separately in the consolidated income statement. Their
determination is made after consideration of their nature and
materiality and is applied consistently from period to period.
3. Segment information
For management purposes, the Group is organised into business
units, based on line of business and geographical location.
An analysis of the Group's revenue, gross profit, underlying
EBITDA and underlying total operating profit for the year ended 31
December 2017 is as follows:
Total Gross profit Gross profit Underlying Underlying Underlying Underlying
Revenue EBITDA EBITDA total total
operating operating
profit profit
$'000 $'000 % $'000 % $'000 %
-------------- -------- ------------ ------------ ---------- ---------- ---------- ----------
US: Air 5,000 5,076 >100 5,354 >100 5,799 >100
Europe:
Air 91,821 11,887 12.9 4,979 5.4 4,512 4.9
MENA:
Air 23,528 1,886 8.0 549 2.3 470 2.0
Asia:
Air 74 74 100.0 74 100.0 74 100.0
-------- ------------ ------------ ---------- ---------- ---------- ----------
120,423 18,923 15.7 10,956 9.1 10,855 9.0
US: Ground 30,775 6,116 19.9 2,901 9.4 2,348 7.6
Europe:
Ground 60,462 18,439 30.5 8,922 14.8 8,408 13.9
MENA:
Ground 5,371 1,240 23.1 240 4.5 85 1.6
-------- ------------ ------------ ---------- ---------- ---------- ----------
96,608 25,795 26.7 12,063 12.5 10,841 22.4
Other 2,488 2,488 100.0 (2,952) (>100) (2,952) (>100)
Eliminations (12,159) - - - - - -
---------------- -------- ------------ ------------ ---------- ---------- ---------- ----------
Totals 207,360 47,206 22.8 20,067 9.7 18,744 9.0
---------------- -------- ------------ ------------ ---------- ---------- ---------- ----------
Underlying total operating profit 18,744
Amortisation (1,441)
Exceptional items (2,622)
Share of associate's exceptional items (365)
Share-based payment expense (195)
Profit on disposal of interest in associate 1,564
Reversal of prior year losses of associate 1,501
Reversal of prior year losses of joint venture 669
Finance income -
Finance costs (1,709)
------------------------------------------------------------------------------ ----------
Profit before tax from continuing operations 16,146
------------------------------------------------------------------------------ ----------
3. Segment information (continued)
An analysis of the Group's revenue, gross profit, underlying
EBITDA and underlying total operating profit for the year ended 31
December 2016 is as follows:
Total Gross profit Gross profit Underlying Underlying Underlying Underlying
Revenue EBITDA EBITDA total total
operating operating
profit profit
$'000 $'000 % $'000 % $'000 %
-------------- -------- ------------ ------------ ---------- ---------- ---------- ----------
US: Air 7,949 6,160 77.5 5,927 74.6 5,173 75.2
Europe:
Air 118,387 10,006 8.5 2,543 2.1 2,031 1.7
MENA: Air 19,531 1,345 6.9 30 0.2 (80) (0.4)
Asia: Air 80 80 100.0 80 100.0 (242) (>100)
-------- ------------ ------------ ---------- ---------- ---------- ----------
145,947 17,591 12.1 8,580 5.9 7,682 5.5
US: Ground 24,130 5,560 23.0 2,778 11.5 2,401 10.0
Europe:
Ground 38,321 17,615 46.0 8,383 21.9 7,660 20.0
MENA: Ground 5,170 1,697 32.8 273 5.3 32 0.6
-------- ------------ ------------ ---------- ---------- ---------- ----------
67,621 24,872 36.8 11,434 16.9 10,093 14.9
Other 1,676 1,688 >100 (2,720) (>100) (2,718) (>100)
Eliminations (12,207) - - - - - -
---------------- -------- ------------ ------------ ---------- ---------- ---------- ----------
Totals 203,037 44,151 21.7 17,294 8.5 15,057 7.6
---------------- -------- ------------ ------------ ---------- ---------- ---------- ----------
Underlying total operating profit 15,057
Amortisation (1,438)
Exceptional items (2,548)
Share of associate's exceptional items (134)
Finance income 9,750
Finance costs (1,379)
------------------------------------------------------------------------------ ----------
Profit before tax from continuing operations 19,308
------------------------------------------------------------------------------ ----------
An analysis of the Group's assets and liabilities by segment is
as follows:
Assets Liabilities
2017 2016 2017 2016
$'000 $'000 $'000 $'000
---------------------------- --------- --------- -------- --------
US: Air 19,177 16,674 (6,342) (1,866)
US: Ground 10,141 8,407 (1,481) (1,168)
Europe: Air 37,457 44,000 (30,882) (38,387)
Europe: Ground 45,938 32,145 (17,870) (8,715)
MENA: Air 5,970 5,165 (5,974) (4,878)
MENA: Ground 2,049 1,040 (758) (4,655)
Asia: Air 889 263 (15) (18)
Other 150,267 143,686 (34,244) (21,977)
Investment eliminations (113,044) (110,963) - -
Other Group adjustments and
eliminations (831) (2,770) 1,258 (584)
---------------------------- --------- --------- -------- --------
158,013 137,647 (96,308) (82,248)
---------------------------- --------- --------- -------- --------
An analysis of the Group's revenue is as follows:
Year Year
ended ended
2017 2016
$'000 $'000
----------------------------------- ------- -------
Continuing operations
Sale of business aviation services 186,472 197,169
Sale of aircraft 12,885 -
Sale of inventories 3,929 -
Branding fees 4,074 5,868
----------------------------------- ------- -------
Totals 207,360 203,037
----------------------------------- ------- -------
3. Segment information (continued)
Geographic information
2017 2016
$'000 $'000
------------------- ------ ------
Non-current assets
US 2,720 2,217
Europe 16,148 9,577
MENA 1,183 421
------------------- ------ ------
20,051 12,215
------------------- ------ ------
Non-current assets for this purpose consist of property, plant
and equipment.
4. Items not included in underlying EBITDA
Year Year
ended ended
2017 2016
$'000 $'000
Exceptional items
Transaction costs 403 1,355
Integration and business re-organisation
costs 1,160 1,193
Legal costs 1,059 -
--------------------------------------------- ------ ------
2,622 2,548
Share-based payment expense 195 -
--------------------------------------------- ------ ------
Totals 2,817 2,548
--------------------------------------------- ------ ------
Transactions costs represent expenses incurred in respect of the
transactions completed in the year, as well as costs associated
with seeking out new potential investment opportunities.
Integration and business re-organisation costs represent the
subsequent third party and internal costs associated with the
acquisitions. Legal costs relate to expenses incurred with respect
to historic Hangar 8 activity, which do not form part of the
underlying earnings of the business. Exceptional items include
travel expenses and costs for executive management incurred in
undertaking transactions, integration and restructuring together
with the salary costs of certain permanent employees who are
employed in place of external professional services.
5. Items not included in underlying total operating profit
Year Year
ended ended
2017 2016
$'000 $'000
Exceptional items
Transaction costs 403 1,355
Integration and business re-organisation
costs 1,160 1,193
Legal costs 1,059 -
--------------------------------------------- ------- ------
2,622 2,548
Share of associate's exceptional
items 365 134
Share-based payment expense 195 -
Amortisation 1,441 1,438
Release of provisions in respect
of losses of associate and joint
venture from prior years (2,170) -
Disposal of interest in associate (1,564) -
Totals 889 4,120
--------------------------------------------- ------- ------
6. Discontinued operations
The losses from discontinued operations are generated by the
owned aircraft within the group that are held for sale as part of
the group strategy to exit the business model of owned aircraft
that are deployed solely for the purposes of ad-hoc charter. The
Group believes that operating the aircraft whilst held for sale
reduces the losses borne in discontinued operations and helps to
maintain their airworthiness, assisting the sale process. Two
aircraft that were held for sale at 31 December 2016 were sold in
2017. The results of these discontinued operations are presented
below:
Year Year
ended ended
2017 2016
$'000 $'000
-------------------------------------------- ------- -------
Discontinued operations
Revenue 141 690
Expenses (2,563) (2,916)
--------------------------------------------- ------- -------
Operating loss (2,422) (2,226)
Net finance income 10 99
--------------------------------------------- ------- -------
Loss before and after tax from discontinued
operations (2,412) (2,127)
--------------------------------------------- ------- -------
Earnings per share
Basic - cents (5.48c) (4.85c)
Diluted - cents (5.43c) (4.85c)
--------------------------------------------- ------- -------
The weighted average number of ordinary shares is included in
Note 8.
The net cash flows incurred by discontinued
operations are as follows:
Operating activities 5,579 234
Investing activities (5,550) (265)
--------------------------------------------- ------- -----
Net cash outflow 29 (31)
--------------------------------------------- ------- -----
7. Taxation
There is a total tax charge for the period of $3.9m (2016:
$0.6m) and an effective tax rate of 24% on continuing activities
(2016: 3%). The group operates across a number of jurisdictions and
the effective rate of tax reflects the blended rate of operating in
different countries. The lower effective rate of tax in 2016
reflected the effect of the utilization of tax losses, which are no
longer available. In 2017 the US enacted a lower tax rate which
reduced the expected future benefits from temporary differences and
operating loss carry forwards. As a consequence the tax charge in
2017 has a higher effective tax rate reflecting the release of
deferred tax assets no longer available.
8. Earnings per share ("EPS")
The calculation of earnings per share is based on the earnings
attributable to the ordinary shareholders divided by the weighted
average number of shares in issue during the year.
Year Year
ended ended
2017 2016
$'000 $'000
----------------------------------------- ---------- ----------
Numerator
Profit attributable to ordinary
equity holders of the parent:
Continuing operations 12,214 18,803
Discontinued operations (2,412) (2,127)
------------------------------------------- ---------- ----------
Profit attributable to ordinary
equity holders of the parent for
basic earnings 9,802 16,676
------------------------------------------- ---------- ----------
Denominator
Weighted average number of shares
used in basic EPS 43,994,442 43,827,775
Effect of dilutive share options 450,572 -
------------------------------------------ ---------- ----------
Weighted average number of shares
used in diluted EPS 44,445,014 43,827,775
Earnings per share
Basic (cents) 22.28c 38.05c
Diluted (cents) 22.05c 38.05c
Basic - continuing operations (cents) 27.76c 42.90c
Diluted - continuing operations
(cents) 27.48c 42.90c
------------------------------------------ ---------- ----------
9. Prior year adjustment
A liability of US$1.1 million has been raised in the form of a
prior year adjustment. This arose as a result of an obligation in
relation to one particular customer arrangement for services
provided prior to 2014 in the Hangar 8 business, which had not been
recognised at the time in error. This has resulted in an increase
in the liabilities by $1.1m and reduced reserves by the same amount
in the prior period. This has had no impact on the income statement
in the prior period.
10. Share-based payments
On 6 January 2017, 1,390,000 share options were awarded, under
the Group's Share Option Plan to senior executives and managers
across the Company. The vesting period is three years and the
options will be exercisable between three and ten years following
grant. There are no cash settlement alternatives. The grant does
not have performance conditions but is subject to the employees
remaining in employment.
The fair value of the share options is estimated at the grant
date using a Black-Scholes model, taking into account the terms and
conditions upon which the options were awarded. The inputs to the
model are shown below:
Share price on date of grant
(pence) 154
Exercise price (pence) 155
Vesting period (years) 3
Expected life of share options
(years) 10
Expected volatility (%) 28.36%
Risk-free interest rate
(%) 1.18%
Expected dividend yield
(%) 1.66%
-------------------------------- -------
11. Property, plant and equipment and intangible assets
Property, Intangible
plant and assets
equipment
$'000 $'000
------------------------------------ ----------- -----------
Net book value at 1 January 2017 12,215 47,618
Additions 8,507 1,573
Disposals (9) -
Depreciation and amortisation (1,845) (1,441)
Exchange movements 1,183 4,530
------------------------------------- ----------- -----------
Net book value at 31 December 2017 20,051 52,280
------------------------------------- ----------- -----------
Property, Intangible
plant and assets
equipment
$'000 $'000
------------------------------------ ----------- -----------
Net book value at 1 January 2016 14,806 48,265
Additions 3,697 400
Additions due to acquisitions 2,978 9,276
Reclassified as assets held for (5,636) -
resale
Disposals (8) -
Depreciation and amortisation (2,041) (1,438)
Exchange movements (1,581) (8,885)
------------------------------------- ----------- -----------
Net book value at 31 December 2016 12,215 47,618
------------------------------------- ----------- -----------
12. Assets held for resale
At the beginning of 2015, the Group had five aircraft that were
held for resale. During the course of 2015, the Group disposed of
three of these aircraft directly to third parties. In 2016, an
aircraft with a carrying value of $5.6 million was transferred to
assets held for resale under IFRS 5. The additions to its book
value in the year are directly related to the continuing
airworthiness of the aircraft. Two aircraft that were held for sale
at 31 December 2016 with a book value of $5.7 million were sold in
the first half of 2017. As at 31 December 2017, there is only one
aircraft classified as held for sale.
Although the time period to sell the assets classified as held
for sale has exceeded one year, this has occurred due to
circumstances beyond the Group's control, and the Group remains
committed to the plan of selling the remaining aircraft. The
aircraft continues to be actively marketed for sale and is held at
a value that the directors believe are realisable within the
current second-hand market place.
Assets
held for
resale
$'000
------------------------------------ ----------
Net book value at 1 January 2017 7,200
Disposals (5,700)
Net book value at 31 December 2017 1,500
------------------------------------- ----------
Assets
held for
resale
$'000
------------------------------------ ----------
Net book value at 1 January 2016 3,126
Reclassified from property, plant
and equipment 5,636
Additions 266
Impairment (1,828)
Net book value at 31 December 2016 7,200
------------------------------------- ----------
13. Investments accounted for using the equity method
Details of the Group's investments accounted for using the
equity method at 31 December 2016 and 2017 are as follows:
Name Investment Place of Proportion Proportion
incorporation of ownership of voting
and operation interest power held
--------------------- --------------- ---------------- -------------- ------------
Gama Aviation
LLC Associate USA 24.5% 25.0%
Gama Aviation
Hutchison Holdings Joint venture Hong Kong 50.0% 50.0%
At 31 December 2016, the Group held a 49% interest in Gama
Aviation LLC and accounted for this investment as an associate. On
1 January 2017, Gama Aviation LLC merged its aircraft management
and charter operations with Landmark Aviation LLC, a wholly owned
subsidiary of BBA Aviation Plc. As a consequence, the Group
transferred a 24.5% interest to BBA Aviation Plc in return for
24.5% of the net assets of Landmark Aviation LLC. This transaction
has resulted in the recognition of a profit on disposal of interest
in associate of $1,564,000. The Group has retained the remaining
24.5% and continues to account for the investment as an
associate.
The results of the equity accounted investments are as
follows:
Associate Joint venture
Year Year Year Year
ended ended ended ended
2017 2016 2017 2016
$'000 $'000 $'000 $'000
------------------------------- ---------- ---------- --------- ---------
Revenue 387,366 231,560 14,793 16,542
Expenditure (386,730) (231,592) (15,335) (17,185)
------------------------------- ---------- ---------- --------- ---------
Profit / (loss) before tax 636 (32) (542) (643)
Income tax expense - 16 - -
------------------------------- ---------- ---------- --------- ---------
Profit / (loss) after tax 636 (16) (542) (643)
Group's share of net profit
/ (loss) 157 (8) - (322)
------------------------------- ---------- ---------- --------- ---------
Reversal of prior year losses 1,501 - 669 -
------------------------------- ---------- ---------- --------- ---------
Share of results from equity
accounted investments 1,658 (8) 669 (322)
------------------------------- ---------- ---------- --------- ---------
13. Investments accounted for using the equity method (continued)
The movements in the carrying value of the investments are as
follows:
Associate Joint venture
2017 2016 2017 2016
$'000 $'000 $'000 $'000
-------------------------------- --------- --------- -------- --------
At 1 January - - - -
Share of net profit / (loss) 157 (8) - (322)
Included in provisions - 8 - 322
Profit on disposal of interest 1,564 - - -
in associate
-------------------------------- --------- --------- -------- --------
At 31 December 1,721 - - -
-------------------------------- --------- --------- -------- --------
The summary financial positions of the equity accounted
investments are as follows:
Total assets 41,276 18,120 5,500 3,914
Total liabilities (37,317) (21,186) (7,381) (5,252)
-------------------------------- --------- --------- -------- --------
Net assets / (liabilities) 3,959 (3,066) (1,881) (1,338)
-------------------------------- --------- --------- -------- --------
Group's share of net assets
/ (liabilities) 970 (1,501) (941) (669)
Goodwill arising on disposal 751 - - -
of investment
Included in provisions - 1,501 - 669
-------------------------------- --------- --------- -------- --------
Investment accounted for 1,721 - - -
using the equity method
(*)
-------------------------------- --------- --------- -------- --------
(*) The Group has discontinued recognising its share of losses
in the joint venture as the carrying value of this investment is
$nil.
14. Events after balance sheet date
On 9 February 2018, Gama Aviation Plc announced its intention to
raise further capital through the proposed placing of shares. The
admission of the placing shares became effective on 2 March 2018.
The Group raised GBP48 million (approximately US$67 million) to
accelerate the Group's strategy of becoming the leading global
business aviation services group. Hutchison Whampoa (China) Limited
("Hutchison") subscribed for shares in the placing and now holds
approximately 21% of the issued share capital. $19.8 million of the
proceeds were used to acquire Hutchison's Hong Kong aviation
interests: its 50% stake in Gama Aviation Hutchison Holdings Ltd
and its 20% stake in China Aircraft Services Limited. The balance
of the proceeds is intended to be deployed in two Ground base
maintenance facilities in the US and the development of the Sharjah
business aviation centre in the Middle East and through
acquisitions targeting Air opportunities in Europe and the Middle
East and Ground opportunities in Europe.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BCGDXBDBBGIL
(END) Dow Jones Newswires
March 19, 2018 03:00 ET (07:00 GMT)
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