Unaudited interim results

RNS Number : 5169A

Gama Aviation PLC

30 September 2020

Date: 30 September 2020

Gama Aviation Plc (AIM: GMAA)

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

Unaudited interim results for six months to 30 June 2020

H1 results impacted by COVID-19, as expected; improved cash position

Financial Highlights (post IFRS 16 basis, 2019 comparatives restated)

· Adjusted Revenue $93.7m (H1 2019: $121.8m), down 23%, at constant currency down 22%.

· Adjusted Gross Profit $16.7m (H1 2019: $23.1m), down 28%, at constant currency down 27%.

· Adjusted Gross Profit Margin 17.8% (H1 2019: 19.0%), down 1.2ppts, at constant currency down 1.2ppts.

· Adjusted EBIT loss of $2.2m (H1 2019: profit of $5.2m), down 141%, at constant currency down 142%.

· Adjusting items of $0.2m profit (H1 2019: loss of $4.2m), up 105% largely due to disposal accounting of the US Air Associate partially offset by impairments and net of taxation.

· Net Debt, inclusive of obligations under leases, decreased to $87.9m from $98.0m at 31 December 2019.

Financial Summary

	Adjusted¹ $m		Statutory $m
	Jun-20	Jun-19 Restated²	Jun-20	Jun-19 Restated²
Revenue	93.7	121.8	109.2	121.8
Gross Profit	16.7	23.1	32.2	23.1
Gross Profit %	17.8%	19.0%	29.5%	19.0%
EBIT	(2.2)	5.2	4.0	0.5
(Loss)/ Profit Before Tax	(4.0)	3.2	2.2	(1.6)
(Loss)/ Profit After Tax	(4.4)	2.3	(4.2)	(2.0)
Earnings per share (cents)	(6.9)	3.7	(6.6)	(2.9)

¹ The Alternative Performance Measures (APMs) are defined in Note 4 of the notes to the interim financial statements and reconciled to the nearest IFRS measure. APMs include Adjusted EBIT as well as organic and constant currency Revenue, Gross Profit and Adjusted EBIT.

² The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

· Financial performance across the Group during the period reflects the impact of the global pandemic on the aviation sector.

· Group supported during the pandemic by US Government Paycheck Protection Program loan of $5.75m, of which $3.8m loan forgiveness has been reflected within Adjusted EBIT in the first half of 2020.

· On 2^nd March 2020 the Group announced the sale of the US Air associate, for total consideration of $33m.

· Group's liquidity remains strong with $18.1m cash and $29.9m of its $50m revolving credit facilities undrawn as at 30 June 2020.

Operational Highlights:

· Multiple new major contracts won and commenced in special missions and technology & outsourcing:

o In the Global Services Division, myairops secured a $2.5m Software as a Service contract in March, with one of the world's largest business aviation operators.

o Together with Atkins, Gama was reappointed in May to continue delivering Military Airworthiness Reviews (MARs) to the RAF's HQ Command and the British Army's Joint Helicopter Command.

o Gama commenced all Helicopter Emergency Medical Services (HEMS) on behalf of for the Scottish Ambulance Service on 1 June 2020 using its fleet of three Airbus H145 helicopters.

o Since period end, the Group was awarded two contracts to provide air ambulance services to Guernsey and Jersey, for an initial 5 years from July 2020 with options to extend by up to 5 years.

· Air Division profitability stable supported by reduced start-up funding in the Middle East.

o Ground Division's profitability impacted by a pandemic-related reduction in FBO and MRO revenues and an absence of the one-off gains that benefitted the prior year comparator in Europe.

o China Aircraft Services Limited (CASL) suffered substantial losses due to vastly reduced commercial aviation volumes at Hong Kong airport, impacted by COVID-19 resulting in the Group taking $2.0m of losses in respect of its 20% holding during the period.

Current trading & outlook

· Q3 trading to end September was stable and in line with management expectations.

· Encouraging pipeline for special missions contracts and improved demand levels at the Bournemouth UK facility for jet and turboprop engineering activities.

· Recognising the uncertainty inherent in the ongoing pandemic, underlying performance in the second half is expected to be broadly similar to the first half, however results will be impacted by reduced government support.

· Continued focus on cash generation and conservation with c$30m RCF undrawn and cash of c$18m as at 28 September 2020.

Commenting on the half year results, Marwan Khalek, Chief Executive said:

"Over the years we have strategically evolved resilience into our business and robustness into our business model to ensure that we can overcome the challenges of an inevitable periodic downturn. This pandemic and the significantly detrimental economic consequences that flow from it will continue to test us.

The H1/20 results we are announcing today show that the Group is fairing relatively well in this very difficult business and operating environment. Notwithstanding the share of associate investment loss of $2.0m, the Group has delivered a near breakeven Adjusted EBIT performance from its core operations and the activities where it can exercise full management and operation control. The Group has also preserved its healthy liquidity position throughout this crisis. We have, however, recognised the potential consequences of these challenging times in considering the future prospects for our investments and have also re-assessed the allocation of income from the sale of the US Air Associate and the carrying value of other investments.

The Group's ability to deliver such a performance, both in terms of profits and cash generation, in the most challenging market, economic and operating environment it has ever faced is reflective of the prompt actions of management, the support and confidence of our clients and the dedication and commitment of our people, of whom I am very proud.

I am also very pleased that, despite the challenges and focus on the pandemic and its impact, we have continued to drive our business forward with pleasing and long term contract wins in the special mission division and sizeable maintenance inputs into our Bournemouth maintenance facility.

I have no doubt that our resilience will continue to be severely tested by this evolving pandemic and the resulting uncertainty that it generates. However, I believe that with good control of the cost base and a healthy liquidity, the Group is well placed to navigate through this crisis and emerge stronger."

-ENDS-

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.

For further information please visit www.gamaaviation.com or contact:

Gama Aviation Plc +44 (0) 1252 553029

Marwan Khalek, Chief Executive Officer

Daniel Ruback, Chief Financial Officer

Camarco +44 (0) 20 3757 4992

Ginny Pulbrook

Geoffrey Pelham-Lane

Jefferies International +44 (0) 20 7029 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 core 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). Other products and services are included in the Global Services Division.

More details can be found at: http://www.gamaaviation.com/

Chief Executive Officer's Report

The onset and rapid global spread of the COVID-19 pandemic since the start of 2020 and the resulting global economic crisis has understandably overshadowed and impacted every aspect of our business, operational and financial performance during the first half of 2020.

We took prompt, decisive and pro-active action to protect and safeguard our business. Our first and over-riding priority was and remains the safety and security of our global workforce and our clients. By continuing to operate under the enhanced preventative and protective measures advised by the World Health Organization and by National Governments all our divisions have remained operational throughout the period delivering services in support of our clients' missions across all our operational bases and geographies.

I am very proud of how our people and our teams across the world have responded to and dealt with the challenges presented to us by this pandemic. By maintaining business continuity across our operation, we have been able to support our clients throughout this period, particularly for those providing critical services such as NHS Scotland, the Ministry of Defence and other key industries.

Our other priority is to safeguard the financial performance and stability of our business and we acted swiftly and decisively by immediately implementing a raft of measures to reduce costs and preserve cash as reported in our announcement of 25^th March 2020. The sale of our US Air Associate, Gama Aviation LLC, on March 2^nd, represented good value and proved very timely. We have also re-assessed the prospects for Group investments not fully under our control, given the level of uncertainty remaining in those markets. Further details are provided in this report and in the finance review.

These results, delivered during a period of significant disruption and uncertainty, demonstrate the effectiveness of the actions and measures we have taken as well as the resilience of our business and robustness of our business model. We continue to monitor the development and on-going impact of this pandemic on a daily basis and we will continue to take the necessary and proportionate actions to safeguard our business both in respect of its current performance and future prospects.

Alongside our focused effort to mitigate the impact of the pandemic on our business, we have also maintained the necessary and appropriate focus on continuing to grow the business and implement our strategy. The period saw the successful launch of our rotary services to the Scottish Ambulance Service following a major transition programme involving three new aircraft and the construction of a new operating base. We are also very pleased to have won other special mission contracts such as the Jersey and Guernsey air ambulance services and the renewal of our contract providing critical airworthiness review services to the MoD in partnership with Atkins. The transitions in Scotland and the Channel Islands were delivered on time and operating as planned, a significant achievement in current environment which showcases the skills expertise and dedication of our people.

Our new CFO Daniel Ruback is continuing his diligent and detailed efforts to strengthen our finance function by continuous improvement process for people, system and processes. Much work remains to be done but I am confident we are on the right path in this critical area that has previously held back and impacted our financial performance.

H1/20 Financial Performance

Adjusted revenues were down by 23% to $93.7m for the period (H1 2019, $121.8m) due to the fall in activity resulting from the pandemic and associated lockdowns. Despite this drop in revenues, Adjusted Gross Profit margins were modestly impacted, down 1.2 ppts to 17.8% (H1 2019, 19.0%), reflecting both the effectiveness of the operational cost reduction measures as well the reality of the trading environment and was coupled with the appropriate use of government support initiatives. However, in absolute terms, Adjusted Gross Profits were down $6.4m to $16.7m (H1 2019, $23.1m).

Initiatives to streamline and reduce the overhead cost structure of the Group at both divisional and central level were already underway pre the pandemic and these, with the additional pandemic related cost saving measures, have helped ensure that Adjusted EBIT was not more adversely affected, despite significant increases in adjusted depreciation and amortisation of intangibles in the period.

The Adjusted EBIT loss of $2.2m for the period includes a $2.0m share of associate losses relating to our 20% equity investment holding in China Aircraft Services Limited (CASL), the loss has no cash impact to the Group. CASL provides maintenance and ramp services to airline customers at Hong Kong airport where its revenues have been very severely impacted by the significant drop in movements at the airport. Notwithstanding this share of associate losses, the Group has delivered a near breakeven Adjusted EBIT performance from its core operations and activities over which it exercises management and operational control.

The group generated a net cash inflow from operating activities in the period of $21.8m (2019: $2.2m) which helped fund investment capital expenditure and other relatively small levels of maintenance capital expenditure whilst maintaining a strong liquidity position. As at 30^th June 2020 the Group had $18.1m of cash and $29.9m of its $50m revolving credit facilities undrawn.

Sale of US Air Associate

On 2^nd March 2020 the Group announced the sale of its US Air associate, Gama Aviation LLC, in which the Group had a 24.5% equity interest, for a total consideration of $33m. The finance review section and Note 7 provide detailed commentary on the final accounting treatment that we have applied to the sale proceeds and the reasons for the differences from our original judgment. The economic substance of the transaction remains unchanged.

The strategic rationale was to enable the Group to monetise, at an attractive value, its investment in an associate over which it exercises no control, and which had grown increasingly dependent on a major customer who had an interest in purchasing the business. This sale will allow the Group to focus its US activities on its 100% owned Ground Division which is capable of continuing to deliver significant growth.

Impairment of Investments

The Board has undertaken a review of the carrying values of certain investments with a view to determine the level of impairments that may be necessary with COVID-19 uncertainties prevailing globally.

As stated above and as is evident from the financial statements, the performance of CASL (the Groups' Hong Kong based associate) has been very severely impacted by the pandemic. With revenues running at some 85% below pre pandemic levels, CASL has suffered significant losses during the first half of 2020 resulting in the Group recognising a $2m share of associate loss in its interim results. Despite the cost saving measures implemented by CASL management, losses will continue through the remainder of 2020 and into 2021, and a return to profitability is not expected until there is a significant upturn in activity. Given the continuing uncertainty surrounding the pandemic and the timing of any eventual recovery, the Board has decided to take an impairment write-down in the carrying value of its investment in CASL.

Similarly, the Board has also decided to impair the 'asset under construction' carrying value of its investment in the Sharjah Business Aviation Center project.

Given the one-off and non-recurring nature of these impairment costs, they have been treated as adjusting items. It is however the intention of management to work closely with CASL management, and our partners in Sharjah, to maximise value from these investments.

Strategy

In our FY19 results announced on July 31^st, 2020 we notified the market that we are conducting a strategic review of the business to ensure that, going forward, we are focused on the things that we do best. This review is progressing well and has identified the following primary areas of market focus:

· Special Missions, building on the Group's proven strength in delivering high availability aviation services for defence, law enforcement, healthcare and critical infrastructure.

· Business Aviation, involving the global delivery of the Group's core offerings of aircraft management, charter and engineering to high value customers, with clear priority placed on key markets, especially the United States.

· Technology and Outsourcing, where the Group will leverage its investment in the myairops software platform, FlyerTech and its industry-leading capabilities in core aviation managed service components to offer compelling outsource solutions.

The review will of course take into account the evolving impact of the pandemic and we will make further announcements in due course, including any changes to our future segmental reporting.

Outlook

The Q3 trading to end September was stable and in line with management expectations. We are encouraged by our development of a strong pipeline for special mission opportunities and improved demand levels at the Bournemouth UK facility for jet and turboprop engineering activities.

Recognising the uncertainty inherent in the ongoing pandemic, underlying performance in the second half is expected to be broadly similar to the first half, however results will be impacted by reduced government support as the US PPP scheme ends, and UK and other schemes are reduced.

The Group is expected to maintain its healthy liquidity position. As at 28 September 2020, the Group has cash of c$18m and c$30m RCF borrowing facilities undrawn.

Marwan Khalek

Chief Executive Officer

Group Operational Performance

Revenue

$'000

	Adjusted		Statutory
	2020	2019	2020	2019
Air Division	50,501	65,398	66,001	65,398
Ground Division	41,461	54,879	41,461	54,879
Global Services Division	1,768	1,508	1,768	1,508
Total	93,730	121,785	109,230	121,785

Gross Profit

$'000

	Adjusted		Statutory
	2020	2019*	2020	2019*
Air Division	5,287	5,559	20,787	5,559
Ground Division	10,000	16,509	10,000	16,509
Global Services Division	1,405	1,081	1,405	1,081
Total	16,692	23,149	32,192	23,149

EBIT

$'000

	Adjusted		Statutory
	2020	2019*	2020	2019*
Air Division	1,516	1,197	16,897	979
Ground Division	650	6,764	(3,790)	3,943
Global Services Division	(6)	219	(160)	93
Associates Division	(1,957)	252	(5,567)	252
Central Costs	(2,366)	(3,217)	(3,390)	(4,778)
Total	(2,163)	5,215	3,990	489

* The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

The above Group results are explained in detail below.

Air Division

The Air Division supports customers using business aviation as an integral part of their mission, including corporations and public services such as air ambulance and aerial survey. It provides aircraft management, crewing, charter services, airworthiness and engineering oversight both to single aircraft operations and fleets, and delivers substantial special mission contracts for complex, time critical services.

Adjusted

$'000

	US		Europe		Middle East		Asia		Total
	2020	2019*	2020	2019*	2020	2019*	2020	2019*	2020	2019*
Revenue	1,875	1,875	31,284	46,314	8,574	7,030	8,768	10,179	50,501	65,398
Gross Profit	1,875	1,875	2,062	2,336	731	746	619	602	5,287	5,559
GP %	100%	100%	7%	5%	9%	11%	7%	6%	10%	8%
EBIT	1,854	1,815	(127)	(100)	(36)	(601)	(175)	83	1,516	1,197
EBIT %	99%	97%	0%	0%	0%	(9%)	(2%)	1%	3%	2%

The Air Division revenues fell on reported basis by 23% to $50.5m (2019: $65.4m). On a constant currency basis, the fall was 21% after rebasing for the impact of foreign exchange of $1.2m, as shown in Note 4 of the notes to the financial statements. Reduced recharges as a result of lower flying activity due to the COVID-19 pandemic was the primary driver for revenue reductions in both Europe (down 31% ) and Asia (down 14%), whereas higher recharges relating to maintenance boosted revenues in the Middle East (up 22%). The changes in recharge revenues had no effect on profits, but smaller pandemic-related reductions in revenues from management fees, charter sales and flight planning services did flow through to gross profits. The size of the global managed aircraft fleet increased by one in the first half of 2020 compared to the prior half comparative period.

Total Air Division Adjusted EBIT improved by $0.3m to $1.5m (2019: $1.2m), with the above gross profit shortfalls compensated for by overhead reductions. Adjusted EBIT remained stable in the US and Europe. The Middle East improved due to reduced levels of funding of the start-up business in Saudi Arabia. Cost control in Asia was offset by $0.5m of loss allowances for doubtful debtors.

The in-sourcing by Europe Air of the helicopter emergency medical services (HEMS) for the Scottish Ambulance Service progressed according to plan, leading to the successful go-live of this operation on 1st June 2020. Additionally, in July the Group was awarded new special mission contracts to provide fixed wing air ambulance services to the governments of Guernsey and Jersey for an initial term of 5 years plus options to extend by up to 5 years.

Adjustments to EBIT

$'000

	US		Europe		Middle East		Asia		Total
	2020	2019*	2020	2019*	2020	2019*	2020	2019*	2020	2019*
Exceptional items	-	-	-	(105)	-	-	-	-	-	(105)
Amortisation	-	-	(60)	(54)	-	-	(59)	(59)	(119)	(113)
Accelerated branding fees	15,500	-	-	-	-	-	-	-	15,500	-
Total adjustments	15,500	-	(60)	(159)	-	-	(59)	(59)	15,381	(218)

Statutory

$'000

	US		Europe		Middle East		Asia		Total
	2020	2019*	2020	2019*	2020	2019*	2020	2019*	2020	2019*
EBIT	17,354	1,815	(187)	(259)	(36)	(601)	(234)	24	16,897	979
EBIT %	100%	97%	(1%)	(1%)	0%	(9%)	(3%)	0%	25%	1%

*The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

Air Division Statutory EBIT increased from $1.0m in 2019 to $16.9m in 2020 due to accelerated branding fees on the disposal of the US Air associate, see Note 7 for further details on the disposal. Exceptional items did not recur in the current period and amortisation of the remaining acquired intangibles continues in line with policy.

Ground Division

The Ground Division provides global support to the business aviation, air ambulance, law enforcement and military sectors, deploying a service mix that is designed to deliver new capability and maintain availability of the aircraft for the operator. With a global network and increasingly rare independence from manufacturer ownership, the Division has approvals to maintain aircraft from Gulfstream, Dassault Falcon, Bombardier, Embraer and Textron, providing heavy, ad-hoc and emergency maintenance as well as modifications and refurbishments.

Adjusted

$'000

	US		Europe		Middle East		Asia		Total
	2020	2019*	2020	2019*	2020	2019*	2020	2019*	2020	2019*
Revenue	20,578	24,296	18,490	27,321	1,476	2,266	917	996	41,461	54,879
Gross Profit	4,403	3,748	4,844	11,359	262	963	491	439	10,000	16,509
GP %	21%	15%	26%	42%	18%	42%	54%	44%	24%	30%
EBIT	1,146	653	(41)	6,203	(442)	71	(13)	(163)	650	6,764
EBIT %	6%	3%	(0%)	23%	(30%)	3%	(1%)	(16%)	2%	12%

The Ground Division revenues fell on reported basis by 24% to $41.5m (2019: $54.9m). On a constant currency basis, the fall was 23% after rebasing for the impact of foreign exchange of $0.7m, as shown in Note 4 of the notes to the financial statements. All divisions experienced reductions in revenue: Europe by 31%, Middle East by 35%, US by 15% and Asia by 8%. In Europe, the fall in revenue is $8.8m, or $8.1m on a constant currency basis, with significant variances due to the prior year comparative benefitting from one-off equipment sales of $5.5m, closure of the loss-making Fairoaks maintenance business, and reduced demand for FBO, MRO and design services following the start of the COVID-19 pandemic. In the US, the fall in revenue of $3.7m was materially driven by the COVID-19 pandemic however the impact was partially offset by growth in the Florida Paint-Shop of $1.1m to $1.8m (2019: $0.7m). In the Middle East, revenue fell due to lower FBO movements, lower parking from planes being grounded elsewhere, and a knock-on effect of reduced activity on MRO revenues. Asia also experienced a COVID-related reduction in maintenance revenues of $0.1m to $0.9m (2019: $1.0m).

Adjusted EBIT fell by $6.1m to $0.7m, due to Europe ($6.2m down, on a constant currency basis $6.0m down) and Middle East (down $0.5m to a loss of $0.4m), partially offset by US ($0.5m up to $1.1m) and Asia ($0.2m reduction in losses). In Europe, Gross Profit in the prior period benefited compared to the current period by $2.9m from one-off equipment sales and cost credits which dropped down into Adjusted EBIT, and 2020 was impacted by the COVID-related services revenue reductions. In the Middle East, reduced FBO activity resulted in an Adjusted EBIT loss with fixed cost savings unable to offset gross profit shortfalls. Despite the impact of COVID-19 on revenues and a $0.2m increase in doubtful debts provisions, Adjusted EBIT in the US improved as a result of reduced losses in the first half of 2020 from the Florida Paint-Shop and was supported by PPP loan forgiveness of $3.8m. Asia's Adjusted EBIT improved by $0.2m to a breakeven position (2019: $0.2m loss) due to a combination of improved mix within gross profit plus reduced overheads.

Adjustments to EBIT

$'000

	US		Europe		Middle East			Asia		Total
	2020	2019*	2020	2019*	2020	2019*		2020	2019*	2020	2019*
Exceptional items	-	-	-	(1,364)	-		-	-	-	-	(1,364)
Amortisation	-	(228)	-	(96)	-	-		-	-	-	(324)
Impairment charge	-	-	-	(1,133)	(4,440)	-		-	-	(4,440)	(1,133)
Total adjustments	-	(228)	-	(2,593)	(4,440)	-		-	-	(4,440)	(2,821)

Statutory

$'000

	US		Europe		Middle East		Asia		Total
	2020	2019*	2020	2019*	2020	2019*	2020	2019*	2020	2019*
EBIT	1,146	425	(41)	3,610	(4,882)	71	(13)	(163)	(3,790)	3,943
EBIT %	6%	2%	(1%)	13%	(331%)	3%	(1%)	(16%)	(9%)	7%

*The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

Ground division Statutory EBIT fell from a profit of $3.9m in 2019 to a loss of $3.8m in 2020 as a result of the impairment of assets under the course of construction at Sharjah airport of $4.4m in addition to the fall in Adjusted EBIT. Exceptional items did not recur in the current period.

Global Services Division

The Global Services Division comprises two businesses, FlyerTech and myairops. FlyerTech provides continuing airworthiness management (CAM) and airworthiness review certification (ARC) services for business aviation and commercial airline operators. myairops has developed a suite of business aviation products deployed as "Software as a Service" (SaaS) and mobile app solutions for business aviation operators, flight support companies, FBOs and regional airports.

Adjusted

$'000

	Total
	2020	2019 Restated*
Revenue	1,768	1,508
Gross Profit	1,405	1,081
GP %	79%	72%
EBIT	(6)	219
EBIT %	(0%)	15%

The Global Services Divisions grew revenues by 17% to $1.8m (2019: $1.5m) however EBIT fell to nil (2019: $0.2m). Growth in revenue and gross profit was driven by performance in myairops following the launch of three new products and associated product sales including a $2.5m three-year contract with a large business aviation operator. Associated with the product launches, amortisation of the product development commenced, impacting Adjusted EBIT in the first half by $0.5m. FlyerTech traded broadly in line with prior half, with a modest reduction in revenue offset by enhanced margin performance.

Adjustments to EBIT

$'000

	Total
	2020	2019
Amortisation	(154)	(126)
Total adjustments	(154)	(126)

Statutory

$'000

	Total
	2020	2019 Restated*
EBIT	(160)	93
EBIT %	(9%)	6%

*Restated to show the impact of IFRS 16 within Adjusted EBIT, divisionally for year on year comparability. Refer to Note 2 of the notes to the interim financial statements.

Adjustments to EBIT relate to amortisation of acquired Customer Relationship intangibles of $0.2m (2019: $0.1m). Overall, Global Services Division Statutory EBIT fell to a loss of $0.2m in the first half from a profit of $0.1m in 2019.

Associate Investments

Adjusted

$'000

	US Air Associate		China Aircraft Services Limited		Total
	2020	2019	2020	2019	2020	2019
EBIT	78	29	(2,035)	223	(1,957)	252

The US Air associate was sold on 2 March 2020, see Note 7 of the notes to the interim financial statements for further details. The $78k of Adjusted EBIT represents the Group's share of results from the US Air associate prior to disposal.

China Aircraft Services Limited (CASL) suffered substantial losses of $2.0m due to vastly reduced commercial aviation volumes at Hong Kong airport, impacted by COVID-19.

Adjustments to EBIT

$'000

	US Air Associate		China Aircraft Services Limited		Total
	2020	2019	2020	2019	2020	2019
Impairment charge	-	-	(10,633)	-	(10,633)	-
Profit on disposal of interest in associates	7,023	-	-	-	7,023	-
Total adjustments	7,023	-	(10,633)	-	(3,610)	-

Statutory

$'000

	US Air Associate		China Aircraft Services Limited		Total
	2020	2019	2020	2019	2020	2019
EBIT	7,101	29	(12,668)	223	(5,567)	252

In view of the ongoing COVID-19 pandemic and the related uncertainties, an impairment charge of $10.6m (2019: nil) has been made against the equity accounted investment in CASL, see Note 4 for further details. The disposal of the US Air Associate resulted in a profit before taxation on disposal of the Group's equity interest of $7.0m. Overall, associate Statutory EBIT decreased from a profit of $0.3m in 2019 to a loss of $5.6m in 2020.

Financial Review


	Adjusted¹ $m		Statutory $m
	Jun-20	Jun-19 Restated²	Jun-20	Jun-19 Restated²
Revenue	93.7	121.8	109.2	121.8
Gross Profit	16.7	23.1	32.2	23.1
Gross Profit %	17.8%	19.0%	29.5%	19.0%
EBIT	(2.2)	5.2	4.0	0.5
(Loss)/ Profit Before Tax	(4.0)	3.2	2.2	(1.6)
(Loss)/ Profit After Tax	(4.4)	2.3	(4.2)	(2.0)
Earnings per share (cents)	(6.9)	3.7	(6.6)	(2.9)

Adjusted Revenue Bridge

Revenue - 2019	121.8
Impact of foreign exchange movement	(1.9)
Revenue - 2019 at 2020 exchange rate	119.9
Air Division	(13.7)
Ground Division	(12.8)
Global Services Division	0.3
Revenue - 2020	93.7

· The Air Division had reduced recharges of costs due to reduced flying hours as a result of the ongoing COVID-19 pandemic.

· Ground Division revenue reduced primarily in Europe (a reduction of $8.8m) with the prior year benefiting from one-off equipment sales of $5.5m whilst in the US aircraft maintenance was materially impacted by the ongoing COVID-19 pandemic with a $3.7m reduction in US Ground revenues.

Adjusted EBIT Bridge $m

Adjusted EBIT - 2019 (restated)*	5.2
Impact of foreign exchange movement	(0.1)
Adjusted EBIT - 2019 at 2020 exchange rate	5.1
Gross Profit	(6.1)
Share of loss from associates	(2.3)
Decrease in administrative expenses:	1.1
Adjusted EBIT - 2020	(2.2)

· Reduced Gross Profit driven by Europe Ground reductions partially offset by gross profit growth in US Ground and the Air Division.

· China Aircraft Services Limited (CASL) suffered substantial losses of $2.0m due to vastly reduced commercial aviation volumes at Hong Kong airport, impacted by COVID-19.

Disposal of US Air Associate

On 2^nd March 2020 the Group disposed of its shareholding in its US Air associate for a total consideration of $33m, of which $13m cash was received at closing with the balance due to be received, with interest, at six monthly intervals over the following four years. Following on from the judgement communicated at the time of announcing the disposal, Note 35 to the Group's 2019 Annual Report and Accounts stated that this transaction was expected to be accretive to underlying earnings to FY2020 and FY2021 as well as resulting in a one-off profit on disposal of the Group's equity interest. The Board has now concluded, after consultation with the Group's external auditors PwC, that it is more appropriate only to recognise in Adjusted EBIT for 2020 and 2021 the pre-existing level of branding fee of $3.75m per year (total $7.5m), and to treat the remaining $15.5m relating to accelerated branding fees and other trading items as an adjusting revenue item in the 2020 first half results given its material one-off and non-recurring nature. Adjusted EBIT will continue to reflect branding fee for a two year period. Given the nature of the agreement and the continuing operational and financial uncertainties resulting from the COVID-19 pandemic it is now extremely difficult to assess whether or not the transaction will be accretive to earnings in FY20 and FY21. Notwithstanding the above, the economic substance and the cashflows of the transaction remain unchanged. Refer to Note 7 for further details on the disposal.

Impairments of Investment

The COVID-19 pandemic has also required the Board to consider whether other investment focused assets show signs of impairment. The Board has concluded that the value of the Group's 20% equity interest in its Asia associate, China Aircraft Services Limited, has been adversely impacted by significantly reduced levels of commercial aviation activity at Hong Kong airport. Accordingly, the Group has taken a $10.6m impairment as an exceptional item in the first half of 2020 in respect of this investment. Similarly, the Group's $4.4m asset under construction, representing investment at Sharjah in the Middle East Ground division, has been impaired in full as an exceptional item, due to uncertainties regarding the recoverability of the initial project development costs incurred to date.

The Board considers that treating all three material amounts as exceptional items presents the most fair, balanced and understandable view of the accounting consequences for shareholders.

Statutory EBIT Bridge

Statutory EBIT - 2019 (restated)*	0.5
Items impacting Adjusted EBIT	(7.4)
Adjusting items:	10.9
- Accelerated branding fees	15.5
- Impairment of assets under construction	(4.4)
- Impairment of CASL	(10.6)
- prior year impairment of Fairoaks right-of-use asset	1.1
- Profit on disposal	7.0
- Depreciation and amortisation	0.3
- Integration and business recognition costs	0.9
- Litigation costs	1.4
- Transaction costs	(0.2)
- Other	(0.1)
Statutory EBIT - 2020	4.0

*The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

· $15.5m of accelerated branding fees have been recognised in adjusting items following the disposal of the US Air Associate and the settlement of existing contractual arrangements (see Note 7 for further details on the disposal).

· Impacted by the ongoing COVID-19 pandemic, impairment charges relate to $4.4m in relation to Sharjah and $10.6m in relation to CASL. The prior period included an impairment of the right-of-use asset associated with the Fairoaks lease.

· $7.0m profit before taxation on disposal of the US Air Associate (see Note 7 for further details on the disposal).

· Adjusting items only include amortisation of acquired intangibles. The prior period included amortisation of internally generated intangibles.

· Integration and business re-organisation costs at Fairoaks and Bournemouth did not recur in the first half of 2020.

· Significant reduction on litigation costs following progress on legacy matters.

· Increased transaction cost of $0.2m relating to potential acquisition opportunities.

Interest

Net finance cost of $1.8m (2019: $2.0m), include $0.4m (2019: nil) of finance income on deferred consideration following the disposal of the US Air Associate.

Taxation

There is an adjusted taxation charge for the period of $0.4m (2019: charge of $0.9m) arising from profits in the US where the group has an effective tax rate of 28%. An increased deferred tax asset for additional losses incurred in other jurisdictions has not been recognised due to the uncertainty of future available taxable profits to utilise the losses.

On disposal of the US Air Associate there was a corporation taxation charge of $7.7m, which is included within the Corporation tax liability at 30 June 2020. In addition, a deferred taxation credit of $1.5m has been recognised on deferred revenue on the disposal, and this will be charged to deferred tax in future periods as the revenue is recognised. There is a statutory taxation charge for the period of $6.3m (2019: charge of $0.4m), which reflects a significant increase as a result of the US Air Associate disposal.

EPS

Shares in issue remain unchanged and the average share price for the six months ended was lower than the exercise price of outstanding options and therefore there is no dilutive effect for diluted earnings per share. Basic Statutory EPS reflects an increase loss per share of 6.6 cents (2019: 2.9c).

Net debt and cash flow movements

	Jun-20 $m	Jun-19 Restated* $m
Net cash inflow on operating activities	21.8	2.2

Capital expenditure	(23.0)	(14.4)
Lease payments	(5.0)	(5.7)
Interest paid	(0.6)	(0.6)
Proceeds on disposal of US Air Associate, net of transaction costs	9.7	-
Proceeds from borrowings	30.4	15.1
Repayment of borrowings	(23.4)	-
Acquisition of Florida Paint-Shop	-	(1.4)
Net cash used in investing and financing activities	(11.9)	(7.0)

Increase / (decrease) in cash	9.9	(4.8)
Cash at the beginning of the period	8.5	10.0
Effect of foreign exchange rates	(0.3)	(3.2)
Cash at the end of the period*	18.1	2.0
Borrowings	(46.7)	(24.6)
Obligation under leases	(59.3)	(58.3)
Net (debt)	(87.9)	(80.9)

*Restatements are detailed in Note 2 of the notes to the financial statements.

**Net (debt) at 30 June 2019 excluded obligations under leases that weren't covenant defined. For comparability, Net (debt) with all Obligations under leases is shown above and reconciled in further detail in Note 4.

· The improvement in the net cash inflow on operating activities has been driven by general improvements in working capital and;

o $3.3m US Air Associate consideration, which was in addition to the $9.7m for the disposal of the investment, relating to trading related matters (see Note 7 for further details on the disposal)

o As part of COVID-19 support in the UK, VAT payment of $4.0m have been deferred

o Net receipts on long term contracts in the first half of the year were $5.4m higher than the prior half of the year

· Capital expenditure includes the purchase, for $18.3m of two new helicopters by Europe Air as part of the helicopter emergency medical services which went live on 1^st June 2020, leasehold property improvements of $1.7m, Fixtures & Fittings of $1.4m and internally developed software arising from myairops software development of $1.3m.

· Lease payments reduced by $0.7m on the prior period due to timing of aircraft lease payments.

· $9.7m proceeds on disposal of the US Air Associate, net of transaction costs. Refer to Note 7 for further details on the disposal.

· Proceeds from borrowings include $24.7m in relation to the £20m Term loan for Helicopters and $5.7m from a Payment Protection Program Loan. $23.4m repayment of revolving credit facility borrowings as a result of financing the Helicopters via the Term loan.

Litigation

Following the litigation update provided in the Company's 2019 Annual Report, the Company continues to pursue the recovery of its long-standing trade receivables that amount to approximately $3m both through enforcement actions in the UK and in other jurisdictions. Since the announcement of 2019 Annual Report, the Company has made progress through court proceedings in the UK. It remains the Board's expectation that other than the provisions already made by the Company against these claims, no further provisions will be required.

Responsibility Statements

The Directors confirm that to the best of their knowledge:

a) the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

b) the interim financial report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and,

c) the interim financial report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The basis of preparation of the consolidated financial statements is shown in Note 1 and Note 2, and related party transactions are shown in Note 13. The principal risks and uncertainties for the remaining six months of the year remain the same as set out in the Group's recently published statutory financial statements for the year ended 31 December 2019 and shown below.

The directors consider the principal risks to the business are:

/ Poor operational performance or air accident damaging the Group's reputation.

/ Changes in economic climate that make air transport less attractive such as the ongoing COVID-19 pandemic.

/ Following the UK departure from the EU any changes to the open skies arrangement that may impact air travel, and a slow-down in customs processes that may lead to delays in the cross-border flow of fuel, materials and engines, both for Gama Aviation, our suppliers and their upstream supply chains, and customers shipping engines for repair and overhaul.

/ Increasing regulatory burden and costs of compliance.

/ Foreign exchange risk.

Signed on behalf of the Board,

Marwan Khalek

Chief Executive Officer

Gama Aviation Plc

Consolidated income statement

For the period ended 30 June 2020

	Period ended 30 June 2020			Period ended 30 June 2019 Restated*
	Statutory result $'000	Adjustments $'000	Adjusted result $'000	Statutory result $'000	Adjustments $'000	Adjusted result $'000
Revenue	109,230	(15,500)	93,730	121,785	-	121,785
Cost of sales	(77,038)	-	(77,038)	(98,636)	-	(98,636)
Gross profit	32,192	(15,500)	16,692	23,149	-	23,149
- administrative expenses	(14,188)	1,024	(13,164)	(18,733)	3,032	(15,701)
- depreciation and amortisation	(3,191)	273	(2,918)	(3,434)	1,694	(1,740)
- impairment loss	(4,440)	4,440	-	-	-	-
- impairment of financial assets	(816)	-	(816)	(745)	-	(745)
Total administrative expenses	(22,635)	5,737	(16,898)	(22,912)	4,726	(18,186)
Operating profit/(loss)	9,557	(9,763)	(206)	237	4,726	4,963
Share of results from equity accounted investments	(12,590)	10,633	(1,957)	252	-	252
Profit on disposal of interest in associates (note 7)	7,023	(7,023)	_	-	-	-
Earnings before interest and taxation	3,990	(6,153)	(2,163)	489	4,726	5,215
Finance income	407	-	407	-	-	-
Finance expense	(2,246)	-	(2,246)	(2,049)	-	(2,049)
Profit/(loss) before tax	2,151	(6,153)	(4,002)	(1,560)	4,726	3,166
Taxation	(6,302)	5,945	(357)	(412)	(493)	(905)
(Loss)/profit after tax	(4,151)	(208)	(4,359)	(1,972)	4,233	2,261
Attributable to:
Owners of the Company	(4,180)	(208)	(4,388)	(1,854)	4,233	2,379
Non-controlling interests	29	0	29	(118)	-	(118)

* Restatements are detailed in Note 2.

Earnings per share attributable to the equity holders of the parent

Basic and diluted (cents)

(6.6)c

(0.3)c

(6.9)c

(2.9)c

6.6c

3.7c

Gama Aviation Plc

Consolidated statement of comprehensive income

For the period ended 30 June 2020

	Period ended 30 June 2020 $'000	Period ended 30 June 2019 Restated* $'000
Loss for the period	(4,151)	(1,972)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations	(1,106)	(1,660)
Total comprehensive loss for the period	(5,257)	(3,632)

Total comprehensive loss is attributable to:
Owners of the Company	(5,286)	(3,514)
Non-controlling interest	29	(118)
	(5,257)	(3,632)

Gama Aviation Plc

Consolidated balance sheet

As at 30 June 2020 and 31 December 2019

	2020 $'000	2019 Restated* $'000
Non-current assets
Goodwill (note 8)	20,395	21,750
Other intangible assets (note 9)	9,903	10,148
Total intangible assets	30,298	31,898
Property, plant and equipment (note 10)	48,390	35,324
Right-of-use assets (note 11)	49,236	52,315
Investments accounted for using equity method	2,413	15,112
Trade and other receivables	20,040	4,392
Deferred tax asset	3,774	2,252
Total Non-current assets	154,151	141,293

Current assets
Assets held for sale (note 7)	-	2,598
Inventories	7,282	7,271
Trade and other receivables	52,261	73,167
Current tax receivable	338	338
Cash and cash equivalents	18,088	8,463
	77,969	91,837
Total assets	232,120	233,130
Current liabilities
Trade and other payables	(35,765)	(51,596)
Current tax liabilities	(8,099)	-
Obligations under leases (note 11)	(15,328)	(16,366)
Provisions	(513)	(521)
Borrowings (note 12)	(46,689)	(45,615)
Deferred revenue	(12,130)	(2,867)
	(118,524)	(116,965)

Total assets less current liabilities	113,596	116,165
Non-current liabilities
Borrowings (note 12)	-	(627)
Deferred revenue	(7,053)	(4,553)
Obligations under leases (note 11)	(44,012)	(43,838)
Provisions	(894)	(594)
Deferred tax liabilities	(753)	(819)
	(52,712)	(50,431)
Total liabilities	(171,236)	(167,396)
Net assets	60,884	65,734

* Restatements are detailed in Note 2.

Gama Aviation Plc

Consolidated balance sheet (continued)

As at 30 June 2020 and 31 December 2019

	2020 $'000	2019 Restated* $'000
Shareholders' equity
Share capital	953	953
Share premium	63,473	63,473
Other reserves	35,205	34,798
Foreign exchange reserve	(30,285)	(29,179)
Accumulated loss	(9,242)	(5,062)
Total shareholders' equity	60,104	64,983
Non-controlling interest	780	751
Total equity	60,884	65,734

Gama Aviation Plc

Consolidated statement of changes in equity

For the period ended 30 June 2020

	Share capital	Share premium	Other reserves	Foreign exchange reserve	Accumulated profit/(losses)	Total shareholders' equity	Non-controlling interest	Total equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 31 December 2018, as restated**	953	63,473	33,937	(28,055)	8,112	78,420	656	79,076
Loss for the period, as reported	-	-	-	-	(2,128)	(2,128)	(118)	(2,246)
Restatement*	-	-	-	-	274	274	-	274
Loss for the period, as restated	-	-	-	-	(1,854)	(1,854)	(118)	(1,972)
Other comprehensive income, as reported	-	-	-	(1,660)	-	(1,660)	-	(1,660)
Total comprehensive loss for the period	-	-	-	(1,660)	(1,854)	(3,514)	(118)	(3,632)
Cost of share-based payments	-	-	336	-	-	336	-	336
Balance at 30 June 2019	953	63,473	34,273	(29,715)	6,258	75,242	538	75,780
Loss for the period	-	-	-	-	(9,700)	(9,700)	213	(9,487)
Other comprehensive income	-	-	-	536	-	536	-	536
Total comprehensive loss for the period	-	-	-	536	(9,700)	(9,164)	213	(8,951)
Cost of share-based payments	-	-	525	-	-	525	-	525
Dividend paid					(1,620)	(1,620)	-	(1,620)
Balance at 31 December 2019	953	63,473	34,798	(29,179)	(5,062)	64,983	751	65,734
Profit for the period	-	-	-	-	(4,180)	(4,180)	29	(4,151)
Other comprehensive income	-	-	-	(1,106)	-	(1,106)	-	(1,106)
Total comprehensive loss for the period	-	-	-	(1,106)	(4,180)	(5,286)	29	(5,257)
Cost of share-based payments	-	-	407	-	-	407	-	407
Balance at 30 June 2020	953	63,473	35,205	(30,285)	(9,242)	60,104	780	60,884

* Restatements are detailed in Note 2.

** Balance at 31 December 2018 as restated in the 2019 audited annual report.

Gama Aviation Plc

Consolidated cash flow statement

For the period ended 30 June 2020

	Period ended 30 June 2020 $'000	Period ended 30 June 2019 Restated* $'000
Net cash inflow on operating activities (note 6)	21,808	2,207

Cash flows from investing activities
Purchases of property, plant and equipment (note 10)	(21,678)	(12,792)
Purchases of intangibles (note 9)	(1,262)	(1,656)
Acquisition of subsidiary, net of cash acquired	-	(1,365)
Proceeds from disposal of assets held for sale (note 7)	9,699	-
Net cash used in investing activities	(13,241)	(15,813)

Cash flows from financing activities
Interest paid	(573)	(608)
Lease payments (note 11)	(5,037)	(5,672)
Proceeds from borrowings	30,405	15,107
Repayment of borrowings	(23,426)	-
Net cash from financing activities	1,369	8,827

Net increase/(decrease) in cash and cash equivalents	9,936	(4,779)
Cash and cash equivalents at the beginning of the period	8,463	10,020
Effect of foreign exchange rates	(311)	(3,205)
Cash and cash equivalents at the end of the period	18,088	2,036

* Restatements are detailed in Note 2.

Notes to the interim financial statements

For the period ended 30 June 2020

1. Corporate information and basis of preparation

Gama Aviation Plc is a public company limited by shares, incorporated in the United Kingdom. The address of the registered office has changed from "Business Aviation Centre, Farnborough Airport, Hampshire, GU14 6XA" to "1st Floor, 25 Templer Avenue, Farnborough, Hampshire, England, GU14 6FE" in the first half of 2020. The Company's shares are publicly traded on the AIM market of the London Stock Exchange.

The financial information for the period end 30 June 2020 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. Following the Group's recent Annual General Meeting (AGM), the Group's statutory financial statements for the year ended 31 December 2019 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 of the Companies Act 2006. The interim results are unaudited.

These interim consolidated financial statements (the interim financial statements) are for the six months ended 30 June 2020. They have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2019.

2. Accounting policies

The accounting policies set out in the Group's statutory financial statements for the year ended 31 December 2019 have been applied in the preparation of the interim financial statements. The Directors consider that the Group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the interim financial statements.

During the period there has been the adoption of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance.

In the period to 30 June 2020 the Group received a forgivable loan under the US government Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under IAS 20 a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan. The Group has adopted the income approach where government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate.

$5,750k was received on 12 May 2020 and is recognised as borrowings in current liabilities. During the period to 30 June 2020 $3,778k has been offset against what the company has deemed to be qualifying expenditure reducing the amount of borrowings at the period end to $1,970k. The utilisation of the grant is reflected against the related expenses in cost of sales and administrative expenses.

Restatements

The comparatives have been restated for several items following the restatements made to 2018 in the 2019 financial statements. The impact of restatements on the interim financial statements, where items included in the income statement or statement of cash flows for the six month comparative period ended 30 June 2019 or items presented in the statement of financial position as at 31 December 2019 have been restated, are detailed below:

i. Interest paid of $608k has been restated from operating cash flows to financing cash flows. This is a change in accounting policy to be consistent with the treatment of interest on lease obligations in 2019. The impact of foreign currency movements on borrowings and intercompany loans, which was restated from administrative expenses to finance cost in the 2019 financial statements was not material in the six months ended 30 June 2019, and as a result has not been restated.

ii. The impact of IFRS 16 in the prior year was a credit of $870k to Statutory and Adjusted EBIT of which the credit to gross profit was $582k. The presentation of the impact of IFRS 16 was aggregated into one line item in the prior year and in the current year this has been disaggregated across the respective divisions for year on year comparability. In addition, on the statement of cash flows, lease payments of $5,672k, which were included within operating activities, have been reclassified into financing activities.

iii. Following the disposal of the US Air associate (see Note 7), the presentation of the current tax payable and receivable is material at 30 June 2020 and has been presented separately on the face of balance sheet. As a result, balance sheet reclassifications on current tax receivable ($338k increase),Trade and other receivables ($338k decrease), current tax liabilities ($9k increase) and Trade and other payables ($9k decrease) have been reflected to the balance sheet at 31 December 2019.

v. Tax on Adjusting Items has been restated from nil to $493k, with no impact on the statutory tax charge.

vi. Following a review of mapping to financial statement line items in the prior year, an income statement reclassification between administrative expenses ($920k decrease) and cost of sales ($920k increase) has been reflected.

vii. As communicated in the 2019 financial statements, full year 2018 was restated for errors on accruing for administrative expenses, resulting in a charge to administrative expenses of $274k and an equivalent increase in accruals. These costs were accrued in the six months ending 30 June 2019 and as a result administrative expenses and retained earnings have been restated by an equivalent amount. The reported statutory loss for the six months ending 30 June 2019 of $2,246k has been restated by $274k to $1,972k.

3. Segment information

The Group has eleven reportable segments (Air Division - four regional businesses; Ground Division - four regional businesses; Global Services Division - two businesses combined as one reportable segment; the Associates Division - two businesses; and Central Costs), which are defined by markets rather than product type. Each segment includes businesses with similar operating and marketing characteristics. These segments are consistent with the internal reporting reviewed each month by the Group Chief Executive. Segment information is contained in full in the operational performance review and has not been reproduced here. Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 for separate reporting or are considered by the Board to be appropriately aggregated into reportable segments under IFRS 8.

Reconciliation of divisional to overall Group performance is tabulated below:

	2020							2019
		Adjusted Revenue	Adjusted Gross profit	Statutory EBIT	Adjusted EBIT	Revenue	Gross profit (Restated*)		Statutory EBIT (Restated*)	Adjusted EBIT (Restated*)
US Air		1,875	1,875	17,354	1,854	1,875	1,875		1,815	1,815
Europe Air		31,284	2,062	(187)	(127)	46,314	2,336		(259)	(100)
Middle East Air		8,574	731	(36)	(36)	7,030	746		(601)	(601)
Asia Air		8,768	619	(234)	(175)	10,179	602		24	83
Air Division		50,501	5,287	16,897	1,516	65,398	5,559		979	1,197
US Ground		20,578	4,403	1,146	1,146	24,296	3,748		425	653
Europe Ground		18,490	4,844	(41)	(41)	27,321	11,359		3,610	6,203
Middle East Ground		1,476	262	(4,882)	(442)	2,266	963		71	71
Asia Ground		917	491	(13)	(13)	996	439		(163)	(163)
Ground Division		41,461	10,000	(3,790)	650	54,879	16,509		3,943	6,764
Global Services		1,768	1,405	(160)	(6)	1,508	1,081		93	219
Associates		-	-	(5,567)	(1,957)	-	-		252	252
Central Costs		-	-	(3,390)	(2,366)	-	-		(4,778)	(3,217)
Adjusted Result		93,730	16,692	3,990	(2,163)	121,785	23,149		489	5,215
Adjusting items		-	-	-	6,153	-	-		-	(4,726)
Statutory result		93,730	16,692	3,990	3,990	121,785	23,149		489	489

*Restatements are detailed in Note 2 of the notes to the interim financial statements.

4. Alternative performance measures

The Adjusted result has been arrived at after the following Adjusting items:

	Period ended 30 June 2020	Period ended 30 June 2019 Restated*
	$'000	$'000
Exceptional items
Transaction costs	296	100
Integration and business re-organisation	(3)	906
Legal costs	324	1,690
Total exceptional items	617	2,696
Share-based payments expense	407	336
Amortisation of intangible assets	273	561
Impairment of right-of-use assets	-	1,133
Impairment of assets under construction	4,440	-
Impairment of investment in associate	10,633	-
Accelerated branding fees	(15,500)	-
Profit on disposal of interest in associates	(7,023)	-
Adjusting items in EBIT	(6,153)	4,726
Tax related to adjusting items	5,945	(493)
Adjusting items in profit	(208)	4,233

Transaction costs

Transaction costs in the current year of $296k relate to prospective acquisitions. In the prior year, $100k was incurred in relation to aborted acquisitions.

Integration and business re-organisation costs

Integration and business re-organisation costs include:

· Fairoaks direct closure costs of nil (2019: $684k);

· Non-recurring expenditure related to property and facility re-organisation at Bournemouth and Farnborough of nil (2019: $222k)

Amortisation of intangible assets

Acquisition related intangible amortisation relates to acquired intangible assets (customer lists and brands) recognised as part of the accounting for business combinations $273k (2019: $375k) and amortisation arising on internally generated intangible assets, such as setting up new bases of operations in the US Ground business nil (2019: $186k).

Legal costs

Legal cost in the current and prior year principally relate to professional fees in relation to ongoing litigation in respect of legacy cases going back many years.

Impairment

Impairments comprise:

· An impairment charge of $10,633k has been recognised to reduce the equity accounted investment in CASL from the carrying amount of $13,046k to its recoverable amount of $2,413k. (2019: nil).

· An impairment charge of $4,440k has been recognised to reduce the Business Aviation Centre ("BAC") at Sharjah Airport to its recoverable amount following uncertainties related to the ongoing COVID-19 pandemic (2019: nil).

· Fairoaks impairment of the right-of-use asset associated with the lease of nil (2019: $1,113k).

Accelerated branding fees and profit on disposal of interest in associates

See Note 7 for further details on the profit on disposal.

Tax related to adjusting items

On disposal of the US Air Associate there was a corporation taxation charge of $7,721k, which is included within the Corporation tax liability at 30 June 2020. In addition, a deferred taxation credit of $1,462k has been recognised on deferred revenue on the disposal, and this will be charged to deferred tax in future periods as the revenue is recognised.

Organic and constant currency growth

Organic and constant currency growth in Revenue, Gross Profit and EBIT is a measure which seeks to reflect the performance of the Group that will contribute to long-term sustainable growth. As such, organic and constant currency growth excludes the impact of acquisitions or disposals, and foreign exchange movements. Constant currency growth has been calculated using a constant foreign exchange rate of $1.26 to £1, being the cumulative average USD-GBP exchange rate for the first half of 2020 instead of the reported exchange rate of $1.29 to £1 for the first half of 2019. A reconciliation from the growth in reported revenue, gross profit and EBIT the most directly comparable IFRS measures, to the organic and constant currency growth is set out below.

Results of acquired and disposed businesses are excluded where the results include only part-year results in either current or prior periods. In the prior year, the paint and interior business acquired on 10 January 2019 ("Paint-Shop") was excluded in calculating organic growth. In the current year, the Paint-Shop is in all material respects comparable half on half and not adjusted for the purpose of organic growth. The US Air associate was sold on 2 March 2020 resulting in $78k of Adjusted EBIT in the current half prior to disposal and $29k Adjusted EBIT in the prior half, which in all material respects is comparable half on half and not adjusted for the purpose of organic growth.

			2020		2019
	Adjusted Revenue		% Constant currency growth		Revenue, as restated*	Rebase for FX	Rebased comparative revenue
US Air	1,875	-		1,875		-	1,875
Europe Air	31,284	(31%)		46,314		(1,176)	45,138
Middle East Air	8,574	22%		7,030		-	7,030
Asia Air	8,768	(14%)		10,179		-	10,179
Air	50,501	(21%)		65,398		(1,176)	64,222
US Ground	20,578	(15%)		24,296		-	24,296
Europe Ground	18,490	(31%)		27,321		(694)	26,627
Middle East Ground	1,476	(35%)		2,266		-	2,266
Asia Ground	917	(8%)		996		-	996
Ground	41,461	(23%)		54,879		(694)	54,185
Global Services	1,768	20%		1,508		(38)	1,470
Total	93,730	(22%)		121,785		(1,908)	119,877

	2020				2019
	Adjusted Gross Profit		% Constant currency growth		Gross Profit, as restated*	Rebase for FX	Rebased comparative Gross Profit
US Air	1,875	-		1,875		-	1,875
Europe Air	2,062	(9%)		2,336		(60)	2,276
Middle East Air	731	(2%)		746		-	746
Asia Air	619	3%		602		-	602
Air	5,287	(4%)		5,559		(60)	5,499
US Ground	4,403	17%		3,748		-	3,748
Europe Ground	4,844	(56%)		11,359		(271)	11,088
Middle East Ground	262	(73%)		963		-	963
Asia Ground	491	12%		439		-	439
Ground	10,000	(38%)		16,509		(271)	16,238
Global Services	1,405	33%		1,081		(27)	1,054
Total	16,692	(27%)		23,149		(358)	22,791

	2020				2019
	Adjusted EBIT		% Constant currency growth		Adjusted EBIT as restated*	Rebase for FX	Rebased comparative Adjusted EBIT
US Air	1,854	2%		1,815		-	1,815
Europe Air	(127)	36%		(100)		3	(97)
Middle East Air	(36)	94%		(601)		-	(601)
Asia Air	(175)	(311%)		83		-	83

Air	1,516	26%		1,197		3	1,200
US Ground	1,146	75%		653		-	653
Europe Ground	(41)	(99%)		6,203		(158)	6,045
Middle East Ground	(442)	(722%)		71		-	71
Asia Ground	(13)	(92%)		(163)		-	(163)
Ground	650	(90%)		6,764		(158)	6,606
Associates	(1,957)	(876%)		252		-	252
Central costs	(2,366)	25%		(3,217)		82	(3,135)
Global Services	(6)	(103%)		219		(6)	213
Total	(2,163)	(142%)		5,215		(79)	5,136

Net Debt

A reconciliation of the IFRS financial statement line items that represent the Net Debt APM is tabulated below.

	Jun-20	Dec-19
	$'000	$'000
Cash	18,088	8,463
Borrowings	(46,689)	(46,242)
Net Debt pre IFRS 16	(28,601)	(37,779)
Obligations under leases	(59,340)	(60,204)
Net Debt	(87,941)	(97,983)

5. 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 period.

Earnings $m	Jun-20	Jun-19 Restated*
Numerator Loss attributable to ordinary equity holders of the parent for basic earnings:	(4,180)	(1,854)
Adjusting items	(208)	4,233
Profit attributable to ordinary shareholders for Adjusted earnings	(4,388)	2,379

Denominator
Weighted average number of shares used in basic and diluted EPS	63,636,279	63,636,279

Earnings per share (cents)
Statutory - Basic and diluted	(6.6)	(2.9)
Adjusted - Basic and diluted	(6.9)	3.7

The average share price for the six months ended was lower than the exercise price of outstanding options and therefore there is no dilutive effect.

6. Net cash generated by operating activities

	Jun-20	Jun-19
	$'000	$'000
Profit/ (loss) before tax	2,151	(1,560)
Adjustments for:
Finance income	(407)	-
Finance costs	2,246	2,049
Depreciation - wholly owned assets	1,793	1,572
Depreciation - ROU assets in admin expense	327	-
Depreciation - ROU assets in COS	7,127	5,456
Amortisation of acquired intangible assets	273	561
Amortisation of other intangible assets	798	168
Impairment of right-of-use assets	-	1,133
Impairment loss	4,440	-
Utilisation of PPP Loan	(3,778)	-
Share of loss/(profit) of associates	12,590	(252)
Profit on disposal of interest in associates	(7,023)	-
Share based payment expense	407	336
Operating cash inflow before movements in working capital	20,944	9,463
Unrealised foreign exchange movements	(589)	(323)
Increase in inventories	(11)	(3,232)
Decrease/(increase) in receivables	4,442	(6,203)
Non-cash doubtful debt provision expense	816	745
Decrease in payables	(15,831)	(7,867)
Increase in deferred revenue	11,763	10,257
Increase in provisions	292	-
Cash generated by operations	21,826	2,840
Taxes paid	(18)	(633)
Net cash flows from operating activities	21,808	2,207

7. Disposal of assets held for sale

On 2 March 2020 the Group announced the sale of its US Air associate, Gama Aviation LLC (doing business as "Gama Aviation Signature") to Wheels Up Partners Holdings LLC ("Wheels Up"). Gama Aviation Signature was owned 49% by GB Aviation Holdings LLC, a joint venture between the Group and Signature Aviation Plc, with the remaining 51% held by the Group's US partners.

Gama Aviation received consideration of $33.0m, comprising $10.0m in return for its 24.5% equity interest and $23.0m for licencing and other trading related considerations. $13.0m of the consideration was received in cash at closing, with the remaining $20.0m to be paid in cash, with interest of $2,774k, in eight equal six-month instalments over the next four years.

The $20.0m of deferred consideration is recognised as a financial asset and is measured at amortised cost. The effective interest rate of this financial asset is 6.0%, which results in the recognition of finance income of $403k in the income statement for the 6 months ending 30 June 2020.

Included within trade & other receivables at 30 June 2020 is deferred consideration of $20,403k, with $4,755k in current asset and $15,648k in non-current assets. Included within deferred revenue at 30 June 2020 is licencing and other trading related considerations of $6,250k, with $3,750k in current liabilities and $2,500k in non-current liabilities.

As part of the transaction, GB Aviation Holdings LLC has licensed the continued use of the Gama Aviation Signature brand for up to two years, for which $7.5m of consideration has been allocated and will be recognised as revenue over the two year period. Post disposal, $1.25m has been recognised as revenue for this licencing component in the first half of 2020, in line with the $3.75m annual licence fee prior to disposal. In addition, an accelerated branding fee of $15.5m has been recognised in adjusting items.

	Period ended June 30 2020 $'000
Cash received	13,000
Fair value of deferred consideration	20,000
Total discounted consideration receivable at the transaction date	33,000
Less: Branding fees and other trading related considerations	23,000
Gross proceeds on disposal	10,000
Add: Closing working capital, cash and indebtedness adjustments	591
Less: Transaction costs	(892)
Proceeds on disposal of assets held for sale, net of transaction costs	9,699

Assets held for sale at 31 December 2019	2,598
Share of profit of equity accounted investments prior to disposal	78
Carrying amount of net assets sold	2,676

Gain on sale before taxation	7,023

Following on from the judgement communicated at the time of announcing the disposal, Note 35 to the Group's 2019 Annual Report and Accounts stated that this transaction was expected to be accretive to underlying earnings to FY2020 and FY2021 as well as resulting in a one-off profit on disposal of the Group's equity interest. The Board has now concluded, after consultation with the Group's external auditors PwC, that it is more appropriate only to recognise in Adjusted EBIT for 2020 and 2021 the pre-existing level of branding fee of $3.75m per year (total $7.5m), and to treat the remaining $15.5m relating to accelerated branding fees and other trading items as an adjusting revenue item in the 2020 first half results given its material one-off and non-recurring nature. Adjusted EBIT will continue to reflect branding fee for a two year period. Given the nature of the agreement and the continuing operational and financial uncertainties resulting from the COVID-19 pandemic it is now extremely difficult to assess whether or not the transaction will be accretive to earnings in FY20 and FY21. Notwithstanding the above, the economic substance and the cashflows of the transaction remain unchanged. Refer to Note 7 for further details on the disposal.

8. Goodwill

	$'000
Cost
At 31 December 2019	46,520
Exchange differences	(2,590)
At 30 June 2020	43,930

Accumulated impairment losses
At 31 December 2019	(24,770)
Exchange differences	1,235
At 30 June 2020	(23,535)

Carrying amount

At 30 June 2020	20,395
At 31 December 2019	21,750

The recoverable amount of goodwill is allocated to the following cash generating units ("CGUs"):

	Jun-2020 $'000	Dec-2019 $'000
US: Ground	787	787
Europe: Ground	19,608	20,963
	20,395	21,750

As a result of the ongoing COVID-19 pandemic in first half of 2020, the Group performed an impairment review to determine whether recoverable amounts of the two CGUs above exceeded the carrying amount.

Considering the sensitivity to changes in assumptions and noting that the recoverable amount of all CGUs exceed the carrying amount, no impairment has been recognised.

9. Intangible fixed assets

	Commence operations	Part 145 approvals	Licence and brands	Customer relationships	Computer software	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Cost
At 1 January 2020	1,481	3,442	1,605	15,479	7,334	29,341
Additions	-	-	-	-	1,262	1,262
Write off	(1,481)	(3,442)	-	-	-	(4,923)
Foreign exchange differences	-	-	(4)	(40)	(515)	(559)
At 30 June 2020	-	-	1,601	15,439	8,081	25,121

Amortisation and accumulated impairment losses
At 1 January 2020	(1,481)	(3,442)	(1,549)	(12,204)	(517)	(19,193)
Charge through adjusting items	-	-	(118)	(155)	-	(273)
Charge through adjusted result	-	-	-	-	(798)	(798)
Write off	1,481	3,442	-	-	-	4,923
FX	-	-	113	(88)	98	123
At 30 June 2020	-	-	(1,554)	(12,447)	(1,217)	(15,218)


Carrying Amount
At 30 June 2020	-	-	47	2,992	6,864	9,903
At 31 December 2019	-	-	56	3,275	6,817	10,148

Customer relationship assets are amortised over their useful economic lives estimated to be ten years.

Licences and brands (which include protected intellectual property) are amortised over their useful economic lives estimated

to be ten years. There are no individually material items within this balance.

Commence operations and part 145 approvals are legacy intangible balances comprising internally generated costs which are fully amortised and have been written-off in the current period.

Computer software costs comprise internally developed software costs arising in the Group's myairops business as well as purchased software, such as operational and financial systems. All costs are amortised over their useful economic lives estimated to be between three and five years. The carrying value of internally developed software within this balance is $5,550k (31 December 2019: $5,310k).

10. Property, plant and equipment

	Leasehold property	Aircraft hull and refurbishments	Fixtures, fittings and equipment	Motor vehicles	Helicopters	Asset under construction	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Cost
Balance at 1 January 2020	15,302	9,142	9,516	2,735	-	12,914	49,609
Additions	1,659	-	1,384	19	18,343	273	21,678
Capitalised interest	-	-	-	-	176	-	176
Transfer	-	-	-	-	8,194	(8,194)	-
Foreign Exchange Difference	352	(858)	1,293	(36)	(446)	(553)	(248)
At 30 June 2020	17,313	8,284	12,193	2,718	26,267	4,440	71,215


Accumulated Depreciation & impairment
Balance at 1 January 2020	(5,077)	(2,252)	(5,571)	(1,385)	-	-	(14,285)
Charge for the year	(462)	(239)	(770)	(248)	(74)	-	(1,793)
Impairment	-	-	-	-	-	(4,440)	(4,440)
Foreign Exchange Difference	(761)	206	(1,784)	32	-	-	(2,307)
At 30 June 2020	(6,300)	(2,285)	(8,125)	(1,601)	(74)	(4,440)	(22,825)

Carrying amount

At 30 June 2020		11,013	5,999	4,068	1,117	26,193	-	48,390
At 31 December 2019	10,225		6,890	3,945	1,350	-	12,914	35,324

Helicopters

As previously reported deployment of the helicopters occurred on 1st June 2020 in support of a long-term contract. As a result, helicopters have been transferred from assets under construction into the helicopters asset class within property, plant and equipment. They have been brought into use and depreciated from 1 June 2020.

11. Obligations under leases

The Group leases many assets including property, aircraft, vehicles, fixtures, fittings and equipment. Information about leases for which the Group is a lessee is presented below.

	Leasehold property	Aircraft	Fixtures, fittings and equipment	Vehicles	Total
Right-of-use assets	$'000	$'000	$'000	$'000	$'000
Cost
Balance at 1 January 2020	51,596	19,118	72	205	70,991
Additions	6,727	-	-	-	6,727
Foreign Exchange Difference	(2,077)	(1,245)	(4)	(13)	(3,339)
At 30 June 2020	56,246	17,873	68	192	74,379


Accumulated Depreciation
Balance at 1 January 2020	(8,270)	(10,285)	(46)	(75)	(18,676)
Charge for the year-admin	(290)	-	(16)	(21)	(327)
Charge for the year-cost of sales	(2,638)	(4,469)	-	(20)	(7,127)
Foreign Exchange Difference	173	805	2	7	987
At 30 June 2020	(11,025)	(13,949)	(60)	(109)	(25,143)

Carrying amount
At 30 June 2020	45,221	3,924	8	83	49,236
At 31 December 2019	43,326	8,833	26	130	52,315

	Leasehold property	Aircraft	Fixtures, fittings and equipment	Vehicles	Total
Obligations under leases	$'000	$'000	$'000	$'000	$'000
Cost
Balance at 1 January 2020	47,817	12,228	20	139	60,204
Additions	6,727	-	-	-	6,727
Finance expense	1,250	124	-	2	1,376
Lease payments	(3,056)	(1,972)	(3)	(6)	(5,037)
Foreign Exchange Difference	(2,342)	(1,577)	34	(45)	(3,930)
At 30 June 2020	50,396	8,803	51	90	59,340

At 30 June 2020
Accruals for lease payments	1,376	4,739	44	-	6,159
Lease liabilities	5,648	3,451	5	65	9,169
Current	7,024	8,190	49	65	15,328
Non-current	43,372	613	2	25	44,012
Total	50,396	8,803	51	90	59,340

Additions relate to two new property leases;

· A land lease at Inverness airport which commenced on 1 January 2020, for a 23 year lease term. Construction of a helipad, office building and hangar building at the airport has commenced to service the Group's SAS contract.

· The Group entered into an additional property lease which serves as the new UK headquarters.

In June 2017 the Group entered into a non-cancellable Build-Operate-Transfer and Service Concession agreement with Sharjah Airport Authority under which the Group is committed to construct a Business Aviation Centre ("BAC") at Sharjah Airport. The agreement runs from June 2017 until June 2042 with a ten-year extension option to June 2052. The 10-year extension has not been formalised at the date of signing the financial statements. The lease term for IFRS 16 accounting purposes has not included the 10-year extension because the option to extend is not reasonably certain. The lease liability has been discounted at an incremental borrowing rate of 7.3%. The Sharjah BAC includes a $7,209k right-of-use asset and $7,636k obligation under leases at 30 June 2020.

12. Borrowings

	June-2020 $'000	Dec-2019 Restated* $'000
Secured borrowing at amortised cost
Other loans	112	1,475
Bank borrowings	44,605	44,767
Paycheck Protection Program Loan	1,972	-
	46,689	46,242

Total borrowings
Other loans	112	848
Bank borrowings	44,605	44,767
Payment Protection Program Loan	1,972	-
Amount due for settlement within 12 months	46,689	45,615
Other loans	-	627
Amount due for settlement after 12 months	-	627

* Restatements are detailed in Note 2.

The Paycheck Protection Program (PPP) loan is a loan arrangement from Citi bank guaranteed by the US government for COVID-19 support. $5,750k funds were received on 12 May 2020 and during the period to 30 June 2020 $3,778k has been used against what the company has deemed to be qualifying expenditure reducing the amount of borrowings at the period end to $1,972k. The loan is forgivable if used for payroll costs and other qualifying expenditure within a 24-week period from the date funds were received. Any amounts unused or that do not meet the definition of qualifying expenditure within the 24-week period will need to be repaid along with any incurred interest which accrues from the date the funds are received. The loan matures on 8^th May 2022 and has been presented as current on the basis that settlement, via forgiveness, is expected within 12 months from the balance sheet date.

13. Related party transactions

China Aircraft Services Limited

China Aircraft Services Limited (CASL) is an associate in which the Group owns a 20% equity interest. As at 30 June 2020 there were amounts owed to CASL of $2,340k (2019: $3,344k) and amounts due of $1,248k (2019: $4,224k).

Merritt Property LLC

As reported in the 2018 Annual Report, in January 2017 the Group entered into a Termination Agreement (the "Agreement") with Gama Aviation LLC. The Agreement brought the previous branding agreement between the Group and Gama Aviation LLC to a close at the same time as the Group entered into a new branding agreement with GB Aviation Holdings LLC. The Termination Agreement made provision for a final payment from Merritt Property LLC (which was a 39% owner of Gama Aviation LLC at the time) to the Group of $1.0m in lieu of branding fees forgone. On 2 March 2020, the Group received cash consideration of $1m to settle the full amount due.

14. Dividends

The Directors do not propose a dividend to be paid for the six months to 30 June 2020 (30 June 2019: nil).

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