Final Results for the 14 months to 30 June 2011

RNS Number : 7549Q

Hangar 8 Plc

25 October 2011

 



25 October 2011

HANGAR 8 PLC (AIM: HGR8)

("Hangar8", "the Company" or "the Group")

Final Results for the 14 months to 30 June 2011

Hangar8, one of Europe's largest operators of privately owned passenger jet aircraft with worldwide capabilities, announces its maiden final results as an AIM listed company.  The Company changed its year end from 30 April to 30 June during the year.  As a consequence, these results are for the 14 month period to 30 June 2011 while the comparatives are for the 12 months ended 30 April 2010, prepared as if the Group has always been in existence (see Note 1).

Financial highlights:

·     Total Group revenue up 67% to £18.2m (2010: £10.9m)

·     Charter revenue up 72% to £14.1m (2010: £8.2m)

·     Management fees up 19.2% to £3.1m (2010: £2.6m)

·     Gross margin percentage up 1.7% points to 20.2% (2010: 18.5%)

·     Strong cash position of £2.2m

·     Operating profit before exceptional items, depreciation and amortisation of £0.7m (2010: loss £0.1m)

·     Adjusted EPS of 12.7p per share (2010: loss of 2.0p) (see note 9)

·     Basic EPS of (8.7p) per share (2010: loss of 15.9p) (see note 9)

Operational key points:

·     Successful admission to AIM on 10 November 2010 raising £0.8m net of expenses

·     Number of aircraft under management up by 13 to 32 (2010: 19)

·     Number of charter hours flown up 58% to 3,813 (2010: 2,413)

·     Average charter rate per hour up 9% to £3,689 per hour (2010: £3,395)

·     Increased geographical reach with the number of destinations flown to up 31% to 452 (2010: 344)

·     Addition to the fleet of the Embraer Lineage 1000, the largest private jet available to charter in Europe

·     First Hawker 4000 in Europe available for charter

Commenting on the results, Nigel Payne, Chairman, said, "I am delighted with the performance of Hangar8 during its first year as a public company. Leveraging off its strong brand, public company status and first class management team, we have achieved everything and more that we set out to do at the start of the year. Our financial performance has been strong and organic growth has been greater than our expectations. As a result, the business now operates at a materially larger scale and geographical reach than it did a year ago. These factors, together with the move within our industry from both customers and aircraft owners away from smaller operators to larger better capitalised ones leads us to approach the new financial year with confidence."

Dustin Dryden, Chief Executive, added, "With our strong brand and existing platform we will continue to expand our geographical reach by opening bases in new jurisdictions.  We will also review acquisitions on a case by case basis and pursue those which we feel are strategically important to us.  I am hugely enthusiastic about the next phase of our development as a listed business and embrace the year ahead and all of its challenges."

For further information please visit www.hangar8.co.uk or contact:

Hangar 8 plc	Tel: [phone]
Philip Brady / Dustin Dryden
Daniel Stewart and Company plc	Tel: [phone]
Paul Shackleton / James Thomas
Tavistock Communications	Tel: [phone]
Simon Hudson / Simon Compton

Chairman's Statement

On 10 November 2010, Hangar8 was admitted to AIM, raising £2m via the placing of 1,333,334   

1 pence new ordinary shares at a price of £1.50 each. 

The net funds raised of £0.8m were to be used to expand the business across three areas. Firstly, increasing revenue and scale by attracting new corporate jet owners and high net worth charter customers. Secondly, increasing operating efficiency by spreading the larger jet fleet across a broader geographical area. Thirdly, reducing costs and establishing an additional revenue stream by internalising Hangar8's previously outsourced maintenance function.

In our first report as a public company, I am delighted that Hangar8 has met or exceeded all of these objectives - and has achieved much more besides.

Results for 2010/2011

Financially, Hangar8 has performed very well in what has been a generally difficult macro-economic market.

Revenue for the 14 month period ended 30 June 2011 was up 67% at £18.2m (2010: 12 months £10.9m). This yielded an operating profit before exceptional items, depreciation and amortisation of £0.7m and a loss after tax of £0.5m. This compares to a loss of £0.8m in the previous 12 month period.

With a significantly expanded number of jets under management together with a solid balance sheet, we now have a strong platform from which we can continue to expand.

International

Organic growth was ahead of our expectations. As well as strong growth in our traditional markets, we have seen a surge in demand for our products from those markets outside of the Western European theatre.  This has materialised on the back of measured investment into new international markets after careful assessment of the relevant markets to target. 

Acquisitions

As a result of our strong organic growth, we have not focused on acquisitions as much as we might otherwise have done.  We continue to review strategic acquisitions as they arise and seek to reinforce our strategy of partnering with individuals in new targeted jurisdictions through the use of our listed equity.

Management

At the time of our Admission to AIM we established a Board with wide ranging experience to help steer the company through its first year as a public company. With this now successfully behind us, John Blower and Keiron Blay will be standing down from the Board.  Keiron remains with the business and has taken up separate responsibilities.

As we enter the new financial year we have continued to recruit to boost our sales drive in a number of strategic areas as well as further developing our European capacity. I would like to thank all my colleagues for their hard work and commitment during the year. We have the team, the skills and the drive to move the business ever forward in the coming year.

Outlook

The Board believes that the general economic conditions across Europe continue to improve, albeit at a slow pace and with uncertainty still in the back of people's minds. 

We further believe that whilst our markets are not immune to any uncertainty, the Group, which sells products and services into multiple geographic markets, has and continues to demonstrate resilience during these challenging times.

Whilst the prospects for an economic recovery are far from certain, it is clear that in our industry sector, there has been a move from smaller operators to larger better capitalised ones.  As such Hangar8 is perfectly positioned to take full advantage of this change.

We enter the new financial year in robust financial health and well equipped with a great team of people energised by new aircraft, additional operating routes and strong corporate resources and we look forward to the coming financial year with cautious optimism. 

Nigel Payne

Chairman

24 October 2011

Review of Operations

I have great pleasure in presenting our maiden set of financial results for the period ended 30 June 2011.  The financial results speak for themselves and as such I wish to expand upon our strategy and operations.

Strategy

Every day we look to improve our customer service and strengthen our existing stakeholder relationships.  By doing these we believe we will achieve our goal of being the leading worldwide provider of private jet charter and aviation management services.

We believe that quality - in the standard of aircraft, flight crews and service are of more importance to charter customers than absolute price.

Management

I am confident there are still good organic growth opportunities in our current markets.  This is even after we have grown from 19 aircraft under management at float to 32 as at the period end. 

During the period we became the:

·      managers of the largest global fleet of chartered Hawkers;

·      first European operator of the Hawker 4000, the most advanced super-midsize jet in the world;

·      first operator to take delivery of a European registered Embraer Lineage 1000, the longest-cabined private jet available for charter in the UK.

As we gain critical mass our owners will benefit further from our increased buying power across all areas of aviation expense.

In parallel with operating expansion, we have invested in talent and infrastructure. This includes strengthening the senior management team as well as operational infrastructure and flight crews.

Charter

The Group experienced, and is still experiencing, strong charter demand across all of its fleet.

We seek to maintain a balance across our client base between business, leisure and Government clients to ensure we are not unduly exposed to any one sector of the market.

Operators that own their assets, many of which are currently in negative equity, have been forced to charge uneconomic charter rates in order to cover their costs. They have been unable to sustain this and have been falling by the way side allowing Hangar8 to increase its market share with a more competitive pricing structure.

International

Internationally, we see great appetite for our product both in the management and charter sectors.  The quality and integrity of our flight crew coupled with the high standards of our training and maintenance means we are in demand in areas of the world with low aviation regulation.

We have already had tremendous success in expanding our product offering overseas into Africa, India and new areas of Europe.

Future

In addition to the strong organic growth shown above, new bases have been added in Europe and Africa, broadening our geographic presence.  Management continue to examine and evaluate the viability of other operational bases in strategic locations.

With our strong brand and existing platform we will continue to expand our geographical reach by opening bases in new jurisdictions. We will also review acquisitions on a case by case basis and pursue those which we feel are strategically important to us.

I am hugely enthusiastic about the next phase of our development as a listed business and embrace the year ahead and all of its challenges.

Dustin Dryden,

Chief Executive

24 October 2011

Consolidated statement of comprehensive income

for the 14 month period ended 30 June 2011

				14 Month period ended			Year ended
		Before Exceptional	Exceptional	30 June 2011	Before Exceptional	Exceptional	30 April 2010
		Items	Items (note 6)	Total	Items	Items (note 6)	Total
		2011	2011	2011	2010	2010	2010
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	4	18,155	-	18,155	10,925	-	10,925
Cost of sales		(14,361)	(118)	(14,479)	(8,391)	(509)	(8,900)
Gross profit		3,794	(118)	3,676	2,534	(509)	2,025
Administrative expenses		(3,158)	(1,018)	(4,176)	(2,694)	(241)	(2,935)
Operating profit/(loss) before depreciation and amortisation		731	(1,136)	(405)	(102)	(750)	(852)
Depreciation and amortisation		(95)	-	(95)	(58)	-	(58)
Operating profit/(loss)	5	636	(1,136)	(500)	(160)	(750)	(910)
Finance expense		-	-	-	(21)	-	(21)
Profit/(loss) before tax		636	(1,136)	(500)	(181)	(750)	(931)
Taxation	8			-			134
Total comprehensive loss for the period attributable to the owners of the parent				(500)			(797)
Loss per share attributable to the equity holders of the parent
- Basic and diluted (pence)	9			(8.7p)			(15.9p)

All amounts relate to continuing operations

Consolidated statement of financial position

as at 30 June 2011

	Note	30 June	30 June	30 April	30 April
		2011	2011	2010	2010
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		97		28
Intangible assets		180		114
Deferred tax assets		218		193
Total non-current assets			495		335
Current assets
Trade and other receivables		6,963		2,750
Current tax asset		-		26
Cash and cash equivalents		2,221		1,045
Total current assets			9,184		3,821
Total assets			9,679		4,156
Liabilities
Current liabilities
Trade and other payables		9,570		5,252
Corporation tax liability		-		9
Total current liabilities			9,570		5,261
Total liabilities			9,570		5,261
Total net assets/(liabilities)			109		(1,105)
Capital and reserves attributable to equity holders of the company
Share capital	10	63		2
Share premium	11	1,653		-
Retained earnings	11	(1,607)		(1,107)
Total equity			109		(1,105)

Consolidated statement of cash flows

for the 14 month period ended 30 June 2011

		14 Month period ended	14 Month period ended	Year ended	Year ended
	Note	30 June 2011	30 June 2011	30 April 2010	30 April 2010
		£'000	£'000	£'000	£'000
Cash flows from operating activities
Loss for the period/year before taxation	5	(500)		(931)
Adjustments for:
Depreciation and amortisation		95		58
Finance expense		-		21
Loss on disposal of property, plant and equipment		-		1
Cash flows from operating activities before changes in working capital and provisions			(405)		(851)
Increase in trade and other receivables		(4,210)		(317)
Increase in trade and other payables		4,307		2,100
Cash generated from operations			97		1,783
Net cash flows from operating activities			(308)		932
Investing activities
Interest paid		-		(21)
Purchases of property, plant & equipment		(105)		(14)
Purchase of intangibles		(125)		(80)
Net cash used in investing activities			(230)		(115)
Financing activities
Issue of ordinary shares		2,048		-
Share issue costs		(334)		-
Net cash from financing activities			1,714	-	-
Net increase in cash and cash equivalents			1,176		817
Cash and cash equivalents at beginning of period/year			1,045		228
Cash and cash equivalents at end of period/year			2,221		1,045

Consolidated statement of changes in equity

for the 14 month period ended 30 June 2011

				Total equity
				attributable
	Share	Share	Retained	to owners of
	capital	premium	earnings	the parent
	£'000's	£'000's	£'000's	£'000's
At 30 April 2009	2	-	(310)	(308)
Total comprehensive loss for the year	-	-	(797)	(797)
At 30 April 2010	2	-	(1,107)	(1,105)
Issue of shares - 12 October 2010	48	-	-	48
Issue of shares - placing 5 November 2010	13	1,987	-	2,000
Costs associated with the issue of shares	-	(334)	-	(334)
Total comprehensive loss for the period	-	-	(500)	(500)
At 30 June 2011	63	1,653	(1,607)	109

Notes

1. Accounting policies

Basis of preparation

Hangar 8 plc (the "Company") is a company domiciled in England.  The Company was incorporated on 25 May 2010 and these are the first financial statements prepared by the Company.

The financial information set out in this release does not constitute the Company's full statutory accounts for the period ended 30 June 2011 for the purposes of section 435 of the Companies Act 2006, but it is derived from those accounts that have been audited. Statutory accounts for 2011 will be delivered to the Registrar of Companies in due course. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRSs) as endorsed by the European Union and implemented in the UK, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in due course.

The Group was formed on 26 July 2010 when Hangar 8 plc acquired the entire share capital of Hangar 8 Management Limited, Hangar 8 AOC limited and Hangar 8 Engineering Limited (collectively, the "Subsidiaries") through the issue of 2,010 ordinary shares.

During the period, with effect from 31 May 2010, the trade and certain assets and liabilities of Langford Lane Limited and Corporate Crewing Limited were transferred to Hangar 8 Management Limited and Hangar 8 AOC Limited for a consideration of £2.

The acquisitions of the subsidiaries and the transfer of trade are deemed to be 'combinations under common control' as ultimate control before and after the acquisition was the same. As a result, these transactions (the "Group Reconstruction") are outside the scope of IFRS 3 "Business combinations" and have been included under the principles of merger accounting as set out under UK GAAP, which state that the results of the Group should be shown as if the Group had always been in existence, both for current and comparative reporting periods. This is set out in more detail in the basis of consolidation note below.

Comparative results have been based upon audited financial statements of the Subsidiaries for the period ending 30 April 2010. During the period the Subsidiaries have changed their accounting reference date to 30 June.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union ("adopted IFRSs"), and are in accordance with IFRS as issued by the IASB, and are presented in £'000's Sterling.

The principal accounting policies adopted in the preparation of the financial statements are set out below.  The policies have been consistently applied to all the periods presented.

Changes in accounting policies

(a) New standards, amendments to published standards and interpretations to existing standards effective in 2011 adopted by the group

This is the group's first financial period reporting under IFRS and as such all relevant standards and interpretations issued by the International Accounting Standards Board and International Financial Reporting Interpretations Committee have been applied by the group across all periods presented.

(b) Standards, amendments and interpretations to published standards not yet effective

Certain new standards, amendments and interpretations to existing standards have been published that are not yet effective and which the group has decided not to adopt early. Those considered having a potential effect on the company are:

IAS 1 Presentation of Financial Statements - 1 January 2011 *

IAS 1 Presentation of Financial Statements - amendments to revise the way other comprehensive income is presented - 1 July 2012

IAS 12 Income Taxes - Limited scope amendment (recovery of underlying assets) (December 2010) - 1 January 2012

IAS 24 Related Party Disclosures - Revised definition of related parties - 1 January 2011 *

IAS 27 Consolidated and Separate Financial Statements - Reissued as IAS 27Separate Financial

Statements (as amended in May 2011) - 1 January 2013

IFRS 1 First-time Adoption of International Financial Reporting Standards - Permits first time adopters use of same transitional provisions available to existing IFRS financial statements included in 'Improving Disclosures about Financial Instruments' - 1 July 2010 *

IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets (October 2010) - 1 July 2011 *

IFRS 9 Financial Instruments - Classification and Measurement - 1 January 2013

IFRS 10 Consolidated Financial Statements - 1 January 2013

IFRS 12 Disclosure of Interests in Other Entities - 1 January 2013

IFRS 13 Fair Value Measurement - 1 January 2013

Although potentially applicable to Hangar 8 Plc, management do not consider the above would have a material impact on the financial statements if adopted early.

The IASB have also issued a variety of IFRIC amendments and interpretations that are considered to have no impact on the Group's reporting.

* Standard endorsed by the EU - all others are yet to be confirmed.

Basis of consolidation

Where the company has the power, directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. 

The consolidated financial statements present the results of the company and its subsidiaries (the "Group") as if they formed a single entity.  Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements in relation to the Group consist of the results of the following units:

Unit	Summary description
Hangar 8 plc	Holding company
Hangar 8 AOC Limited	Trading company
Hangar 8 Management Limited	Trading company
Hangar 8 Engineering Limited	Trading company
The business and certain assets and liabilities of Langford Lane Limited (formerly Hangar 8 Limited) & Corporate Crewing Limited	-

As set out in the basis of preparation note, the units which comprise the Group have all been under common management and control throughout the period presented in the consolidated financial information but they did not form a legal group throughout that period, the Group coming into existence on 26 July 2010. 

As a result, the Group reconstruction is outside the scope of IFRS 3 "Business combinations". In accordance with IAS 8, the directors have determined that the most appropriate method of accounting for the Group reconstruction is to follow the principles of merger accounting as set out under UK GAAP.

The aim of merger accounting is to show the results and financial position of the Group as if the Group had always been in existence, as follows:

·     The results of the subsidiaries have been included in the consolidated results for the entire period during which the Group reconstruction took place, as well as prior periods.

·     The consolidated results include the assets and liabilities of the subsidiaries at the book values at which they were recorded prior to the Group reconstruction: there is no requirement to fair value, and no goodwill arises as a result.

·      The share capital issued to effect the merger has been shown as if it had always been issued.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Revenue is recognised for major categories as follows:

·      Aircraft charter - on the provision of the service;

·      Contract fee income - over the period of the contract;

·      Insurance commissions - from the date commission is received;

·      Miscellaneous - on the provision of the service.

Foreign currencies

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency).  For the purpose of the combined financial information, the results and financial position of each company are expressed in Sterling (£), which is the presentation currency for the combined financial information.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions.  At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences arising on settlement of foreign currency monetary items and on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the income statement.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the key management personnel.

Financial instruments

Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provision of the instrument.

Financial assets

The group classifies its financial assets into the categories discussed below, depending on the purpose for which the asset was acquired.  The Group has not classified any of its financial assets as held to maturity.

Loans and receivables:  These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.  For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement.  On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associatedprovision.

Trade receivables denominated in a foreign currency are translated into sterling using the exchange rate at the reporting date.  Foreign exchange gains or losses are included in other income or other expenses.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history.  Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts, the effect of discounting is considered to be insignificant.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.

Cash and cash equivalents includes cash in hand and deposits held at call with banks.

Financial liabilities

Financial liabilities include the following:

Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Trade payables denominated in a foreign currency are translated into sterling using the exchange rate at the reporting date.  Foreign exchange gains or losses are included in other income or other expenses.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group.  All other leases are classified as operating leases.

Rights to assets held under finance leases are recognised as assets of the Group at the fair value of the leased property (or, if lower, the present value of the minimum lease payments) at the inception of the lease.  The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.  Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.  Finance charges are deducted in measuring profit or loss.  Assets held under finance leases are included in property, plant and equipment, and depreciated and assessed for impairment losses in the same way as owned assets.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

Impairment of non financial assets

Assets that are subject to amortisation and depreciation are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The impairment review comprises a comparison of the carrying values of the fixed asset with its recoverable amount, which is the higher of fair value less costs to sell and value in use.

Fair value less costs to sell is calculated by reference to the amount at which the asset could be disposed of.  Value in use is calculated by discounting the expected future cash flows obtainable as a result of the assets continued use, including those resulting from its ultimate disposal, at a market based discount rate on a pre tax basis.

An impairment loss is recognised in the Statement of Comprehensive Income whenever the carrying amount of an asset exceeds its recoverable amount.  The carrying amount will only be increased where an impairment loss recognised in the previous period for an asset either no longer exists or has decreased, up to the amount that it would have been had the original impairment not occurred.

Taxation

Income tax expense included in the combined statement of comprehensive income represents the sum of current tax and deferred tax.

Current tax

The tax charge/(credit) payable is based on taxable profit/(loss) for the period.  Taxable profit differs from profit reported in the combined statement of comprehensive income because of items of income or expense that are taxable in other years and items that are never taxable or deductable.  The Group's liability/asset for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred taxation

Deferred tax is recognised on temporary 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.  Deferred tax liabilities are recognised for all temporary differences expected to increase taxable profit in the future.  Deferred tax assets are recognised for all temporary differences that are expected to reduce taxable profit in the future, and unused tax losses or tax credits.  Deferred tax assets are measured at the highest amount that, on the basis of current or estimated future taxable profit, is more likely than not to be recovered.  The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits. 

Any adjustments are recognised in profit or loss.  Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the periods in which it expects the deferred tax asset to be realised or the deferred tax liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period.

Current and deferred tax for the period

Current and deferred tax are recognised as an expense or income in the income statement, except when they relate to items that are recognised outside profit or loss, in which case the tax is also recognised outside profit or loss.

Consumables

Consumables are initially recognised at cost, and subsequently at the lower of cost and net realisable value.  Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the consumables to their present location and condition.

Intangible assets

Computer software

Computer software is recognised on the basis of the costs incurred to acquire and bring to use the specific software.  Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.  Costs are amortised, once commissioned, over their estimated useful lives of four years on a straight line basis. Computer software is valued on an estimated replacement cost basis.

Costs associated with maintenance of computer software are recognised as an expense as incurred.

Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.  Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives, using the straight line method.  The following annual rates are used for the depreciation of property, plant and equipment:

Plant and machinery	Straight line over 8 years
Fixtures and equipment	Straight line over 3 years
Motor vehicles	Straight line over 4 years

2. Critical accounting estimates and judgements

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Revenue recognition

The Group incurs certain expenditure on behalf of owners that is recharged directly with no mark up.  For such expenditure, management have determined that the Group is acting as an agent and as such it is set-off against the associated income and, therefore, neither income nor expense is shown in the Combined Statement of Comprehensive Income.  Expenditure recharged in this manner is not recognised as revenue because the Group does not bear the ultimate risk of the transaction.

(b) Bad debts

The Directors have assessed the recoverability of the Group's trade receivables at each period end based on the information available to them at the time.  Consequently judgements have been made in making a provision for doubtful debts.  Accordingly, due to the size of trade receivables and related provisions, future results could be significantly impacted by subsequent events, such as the eventual recovery of previously impaired debts.

(c) Onerous contract

The Directors have assessed the likely future losses to be incurred under the onerous contract and based upon the historical pattern of trading.  They have made a provision in the financial statements for this amount but future results could be significantly impacted by subsequent events.

(d) Useful lives of and property, plant and equipment and software

Property, plant and equipment and software are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the combined statement of comprehensive income in specific periods.

(e) Deferred taxation

A deferred tax asset is recognised in relation to the tax losses carried forward when future taxable profits are anticipated.  However, future trading may not allow for the utilisation of these losses and therefore the future tax charge may be increased.

(f) Accruals

Flight costs vary according to where and when the flight takes place.  As such certain costs in relation to flights cannot be accurately determined in advance of those flights.  Costs are accordingly accrued to a level which management considers appropriate, having taken into account the nature and destinations of these flights, based on the average flight costs over the period.  The overall level of accruals in relation to these flights is considered globally, and has been assessed by management as adequate in relation to the revenues recognised at period end.

3. Financial instruments - risk management

The Group is exposed through its operations to the following financial risks:

·   Market risk

·   Foreign exchange risk

·   Credit risk

·   Liquidity risk

In common with all other businesses, the group is exposed to risks that arise from its use of financial instruments.  This note describes the group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect of these risks is presented throughout these financial statements.

A summary of the financial instruments held by category is provided below:

	30 June	30 April
	2011	2010
	£'000's	£'000's
Financial assets
Loans and receivables
Trade and other receivables	4,389	2,298
Cash available on demand	2,221	1,045
	6,610	3,343
Financial liabilities
Measured at amortised cost
Trade and other payables	6,191	2,877

Fair values of material financial instruments

There are no material differences between the book and fair values of the Group's financial instruments.

Market risk

The Group has minimal exposure to interest rate risk as it has no borrowings.  With regards to fuel price rises or other associated aviation costs then the Group is largely insulated as most of these variable costs are passed on to aircraft owners.

The Group has little visibility over future bookings and as such has no commitments to fly at set rates that may move against the Group.  It constantly checks the charter market to ensure its rates are set commercially and has no obligation to fly a charter beyond a modest amount of pre-booked blocks of hours.

Foreign exchange risk

The Group is exposed to currency risk on purchases made from suppliers based around the world.  Purchases are made on a central basis and are offset where possible by sales invoices denominated in the same currency.  The vast majority of overseas purchases are made using credit cards, and this effectively fixes the currency risk at the date of purchase.  At the balance sheet date the Group had trade payables of £2,136k (2010 - £765k) denominated in Euro and US Dollars

As at 30 June 2011 the Group's financial assets and financial liabilities were denominated in the following currencies:

Financial assets	Sterling	US Dollar	Euro	Other	Total
	£'000	£'000	£'000	£'000	£'000
As at 30 April 2010
Trade and other receivables	1,643	31	624	-	2,298
Cash available on demand	949	31	64	1	1,045
	2,592	62	688	1	3,343
As at 30 June 2011
Trade and other receivables	3,534	567	288	-	4,389
Cash available on demand	1,138	802	281	-	2,221
	4,672	1,369	569	-	6,610
Financial liabilities
As at 30 April 2010
Trade and other payables	2,112	421	344	-	2,877
	2,112	421	344	-	2,877
As at 30 June 2011
Trade and other payables	4,055	1,498	638	-	6,191
	4,055	1,498	638	-	6,191

The effect of a 25c strengthening of the Euro against Sterling at the balance sheet date on the Euro-denominated trade payables carried at that date would, all other variables held constant, have resulted in a increase in post-tax loss for the period and decrease of net assets of £34k (2010 - £63k).  A 25c weakening in the exchange rate would, on the same basis, have decreased the post-tax loss and increased net assets by £22k (2010 - £63k).

The effect of a 25c strengthening of the US Dollar against Sterling at the balance sheet date on the net US Dollar denominated financial liabilities carried at that date would, all other variables held constant, have resulted in an increase in post-tax loss for the period and decrease the net assets of £239k (2010 £72k).  A 25c weakening in the exchange rate would, on the same basis, have decreased post-tax loss and increased net assets by £175k (2010 £52k).

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss from defaults.

Charter Income

The Group has adopted a policy of receiving money in advance of undertaking the charter to mitigate the risk of default.  Where a customer of the Group is unable to make the necessary payment in advance the Directors have the discretion to provide credit terms.

Management contract income

The Group manage the aircraft on behalf of its owners and charges a fee.  The owners are entitled to a rental recharge for the use of the aircraft and inevitably the Group will owe more than it is due at the end of the accounting period.  The risk of the customer therefore being in default is mitigated through the costs owed to the customer as well as through the deposits received from aircraft owners.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long term funding and liquidity management requirements.  The Group managed liquidity risk by maintaining adequate reserves, banking facilities and borrowing facilities.

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:

	Up to 3 months	Between 3 and 12 months
	£000	£000
At 30 April 2010
Trade and other payables	1,907	970
	1,907	970
At 30 June 2011
Trade and other payables	5,104	1,087
	5,104	1,087

Capital disclosures

The capital structure of the Group consists of cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, share premium and retained earnings as disclosed in note 11.

The Group is not exposed to any externally imposed capital requirements.

4. Revenue

	14 Month period ended	Year ended
	30 June 2011	30 April 2010
	£'000	£'000
Revenue arises from:
Aircraft Charter	14,064	8,192
Aircraft Management	3,076	2,593
Miscellaneous	1,015	140
	18,155	10,925

5. Loss from operations

	14 Month period ended	Year ended
	30 June 2011	30 April 2010
	£'000	£'000
This has been arrived at after charging/(crediting):
Deprecation of property, plant and equipment	36	20
Amortisation of intangible fixed assets	59	38
Foreign exchange differences	71	(16)
Operating lease expense - property	254	66
Auditor's remuneration
-Statutory audit services (Company £30,000)	73	90
-Tax compliance	10	8
-Corporate finance services	-	251
-Tax advisory	-	9
-Other non-audit services	5	5
Loss on disposal of property, plant and equipment	-	1

6. Exceptional items

	14 Month period ended	Year ended
	30 June 2011	30 April 2010
	£'000	£'000
Onerous lease contract in Cost of sales	118	509
Restructuring costs	570	-
Legal costs	80	-
IPO costs	368	-
Bad debts in relation to charter flights	-	241
Exceptional items in Administrative expenses	1,018	241
Total Exceptional items	1,136	750

Exceptional items represent nonrecurring costs that are deemed by the Directors to be of a nature not typically incurred in carrying out the principal activity of the business.

The onerous contract charge in both 2010 and 2011 represents the close out of an aircraft management contract, the terms of which were substantially revised in September 2010. This contract expires in November 2011.

Restructuring costs were incurred in reorganising the previously commonly controlled companies into a single group headed by the Company in anticipation of the flotation on AIM.

Legal costs were incurred in the period for the settlement of outstanding cases both for and against the Group which was an integral part of the reorganisation process.  The bad debts in relation to charter flights were incurred prior to the Group's policy of receiving payment for aircraft charter prior to the flight.

IPO costs are that portion of float costs that relate to the listing of existing (as opposed to newly issued) shares. The balance of these costs (i.e. relating to the issue and listing of new shares), along with costs that related directly to the issue of new shares, were taken direct to Share Premium.

7. Segment information

In accordance with IFRS 8, 'Operating Segments', the Group has derived the information for its operating segments using the information used by the Chief Operating Decision Maker.  The Group has identified the Board of Directors of Hangar 8 plc ("the Board") as the Chief Operating Decision Makers as it is responsible for the allocation of resources to operating segments and assessing their performance.  Operating segments are consistent with those used in internal management reporting and the profit measure used by the Board is the profit before tax as set out below.

The Group considers business segments as determined by reference to the markets in which they operate, which also follows the legal entity structure of the Group.  Information in respect of the Group's three business segments is as follows:

·      Charter - the chartering of aircraft to third parties;

·      Management - the, insurance, operational support and crewing of aircraft; and

·      Engineering - the engineering, maintenance and airworthiness of aircraft.

	Charter	Management	Engineering	Unallocated	Total
	2011	2011	2011	2011	2011
	£'000	£'000	£'000	£'000	£'000
Revenue	14,064	3,570	521	-	18,155
Profit/(loss) before income tax	1,146	(72)	(123)	(1,451)	(500)
Total assets	1,423	7,281	186	789	9,679
Total liabilities	(1,223)	(8,024)	(309)	(14)	(9,570)

Due to the structure of the Group prior to its re-organisation and flotation it is not possible to disclose the comparative segmental analysis for the year ended 30 April 2010.  Given that the resources of aircraft, people and finances were operated in aggregate, the operating results of the business have been historically reviewed and managed as a single unit. Comparative information regarding revenue set out above was not available from management reports but has been extracted from underlying financial records for information purposes only.

	Charter	Management	Engineering	Unallocated	Total
	2010	2010	2010	2010	2010
	£'000	£'000	£'000	£'000	£'000
Revenue	8,192	2,593	140	-	10,925
Loss before income tax	-	-	-	(931)	(931)
Total assets	-	-	-	4,156	4,156
Total liabilities	-	-	-	(5,261)	(5,261)

No other form of segmental analysis has been presented, as no other form is used by management.  Geographical analysis is not considered appropriate due to the fact that many flights are between geographical segments, and therefore geographical analysis is not a relevant measure of business performance.

8. Tax expense

	14 Month period ended	14 Month period ended	Year ended	Year ended
	30 June 2011	30 June 2011	30 April 2010	30 April 2010
	£'000	£'000	£'000	£'000
Current tax expense
UK corporation tax and income tax of overseas operations on profits for the year	-		10
Adjustment for under/(over) provision in prior periods	25		7
		25		17
Deferred tax expense
Origination and reversal of temporary differences	(25)		-
Previously unrecognised deferred tax assets assessed as recoverable at the end of the period/year	-		(151)
		(25)		(151)
Total income tax credit		-		(134)

The reasons for the difference between the actual tax charge for the period/year and the standard rate of corporation tax in the UK applied to profits for the period/year are as follows:

	14 Month period ended	Year ended
	30 June 2011	30 April 2010
	£'000	£'000
Loss for the period/year	(500)	(931)
Expected tax credit based on the standard rate of corporation tax in the UK of 20% (2010 - 21%)	(100)	(195)
Expenses not deductible for tax purposes	75	26
Adjustment for under provision in previous periods	25	7
Unrelieved losses not recognised as deferred tax	-	58
Impact of operations not reflected in combined accounts	-	(29)
Total tax credit	-	(134)

9. Earnings/(loss) per share

	14 Month period ended	Year ended
	30 June 2011	30 April 2010
Numerator	£'000	£'000
(Loss) for the period/year after taxation	(500)	(797)
Earnings used in basic and diluted EPS for the period/year	(500)	(797)
Earnings used in adjusted EPS for the period/year	731	(102)
Denominator
Weighted average number of shares used in basic, diluted and adjusted EPS	5,741,784	5,000,000
Basic and diluted loss per share - pence	(8.7)	(15.9)
Adjusted loss per share - pence	12.7	(2.0)

Adjusted earnings per share is calculated using earnings before exceptional costs (see note 6) of £1,136k (2010 - £750k) and depreciation and amortisation of £95k (2010 - £58k)

The denominator for the basic and diluted EPS is the same as there are no potential ordinary shares in issue.  As the Company was not in existence in the prior year, and therefore there were no shares in existence, the share capital immediately after the merger transaction has been used both to calculate the comparative denominator, and in the calculation of the weighted average of the current period denominator, in accordance with the merger accounting rules under UK GAAP, which are being applied to account for the Group reconstruction (see note 1). The rights issue made in October 2010 and the November 2010 share split prior to flotation have been applied retrospectively to the comparative denominator in accordance with IAS 33.

10. Share capital

Authorised
	Nominal	2011	2011	2010	2010
	Value	Number	£'000	Number	£'000
Ordinary shares
At beginning of the period		-	-	-	-
25 May 2010 issued on incorporation	£1	10	-	-	-
26 July 2010	£1	9,990	10	-	-
12 October 2010	£1	40,000	40	-	-
		50,000	50	-	-
2 November 2010 share split	1p	5,000,000	50	-	-
2 November 2010	1p	2,633,500	26	-	-
At end of the period	1p	6,333,334	76	-	-
Issued and fully paid
	Nominal	2011	2011	2010	2010
	Value	Number	£'000	Number	£'000
Ordinary shares
At beginning of the period		-	-	-	-
25 May 2010 issued on incorporation	£1	10	-	-	-
26 July 2010 issued on merger with subsidiaries	£1	2,010	2	-	-
12 October 2010 rights issue to increase share capital prior to conversion to plc	£1	47,980	48	-	-
		50,000	50
2 November share split	1p	5,000,000	50	-	-
5 November issued on flotation	1p	1,333,334	13	-	-
At end of the period	1p	6,333,334	63	-	-

The company was incorporated on 25 May 2010, and therefore there were no ordinary shares in existence at the comparative year end date of 30 April 2010. However, in accordance with the basis of preparation (see note 1), the consolidated accounts show the results of the group as if it had always been in existence. Therefore the comparative results show the share capital that existed at the date that the group was formed through the merger transaction on 26 July 2010.

The company had 10 £1 ordinary shares on incorporation.

On 26 July 2010 the Company increased its authorised share capital to £10k and issued a further 2,010 ordinary shares as consideration for the acquisition of the entire share capital of the Subsidiaries.

On 12 October 2010 the company increased its authorised share capital to £50k and issued a further 47,980 ordinary shares at par in a rights issue to the existing shareholders in order to enable the company to re-register as a plc.

On 2 November 2010 the Company increased its authorised share capital to £76k and resolved that the ordinary shares of £1 be sub-divided into 100 ordinary shares of 1 pence each.

On 10 November 2010 the Company was successfully admitted to trading on AIM and raised £2m gross via the placing of 1,333,334 new ordinary shares of 1p at a price of £1.50 each. 

11. Reserves

	Share	Share	Retained	Total
	capital	premium	earnings	equity
	£'000	£'000	£'000	£'000
At 1 May 2009	2	-	(310)	(308)
Retained loss for the year	-	-	(797)	(797)
At 30 April 2010	2	-	(1,107)	(1,105)
At 1 May 2010	2	-	(1,107)	(1,105)
Issue of ordinary shares	61	1,987	-	2,048
Share issue costs	-	(334)	-	(334)
Retained loss for the period	-	-	(500)	(500)
At 30 June 2011	63	1,653	(1,607)	109

-ends-

 

END

 

 

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