Updates on COVID19 Impact & 2019 Full Year Results

RNS Number : 7669Q

Gama Aviation PLC

23 June 2020

 

Date: 23rd June 2020

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014

Gama Aviation Plc (AIM: GMAA)

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

Updates on COVID-19 Impact and 2019 Full Year Results

Gama Aviation, the global business aviation service provider, is today updating investors on the continuing impact of COVID-19 and on its results for the year ended 31 December 2019 ("FY19").

COVID-19 Impact Update

The Group has continued to follow national government guidelines to safeguard its staff and clients, while taking the steps necessary to ensure on-going service provision. The Group's management have held regular Global Leadership Team calls to manage and update its policies, procedures and controls in response to the evolving pandemic. The Group has maintained a strong focus on controlling cashflow including reducing discretionary expenditure and close management of outstanding debtors.

COVID-19 has impacted the Group's divisions as follows:

· US maintenance activity stabilised at around 50% of the budgeted level in April and has increased slightly since then. The division received a loan of $5.75m from the US Paycheck Protection Program under the CARES Act and expects to qualify for forgiveness of the majority of the loan. The division has undergone a significant restructuring including elimination of a number of management positions and additional cost reduction measures to provide a more efficient foundation for the resumption of normal activity levels as the impact of COVID-19 recedes.

· In Europe, special mission contract activity has continued broadly as budgeted for UK government customers, and the major transition to in-house operation of the Scottish Ambulance Service helicopter fleet was completed successfully on 1st June 2020. Charter sales continue to be heavily impacted by the lockdown whereas aircraft management charges have been sustained. Maintenance activities have recovered well since the low point in April and recent maintenance bookings for the second half of the year have been encouraging. A modest number of staff remain on furlough in both the Europe Air and Ground divisions.

· In the Middle East, pressure on aircraft management charges and the lack of charter sales have been mitigated by cost reduction measures. The three-month waiver of airport fees and rental charges is coming to an end and the authorities have indicated that flight activity can resume shortly, although the operational outlook remains uncertain.

· The Asia business has had to reduce pricing in order to retain clients during the COVID-19 period, which will impact divisional performance in the medium term. The Group's CASL associate continues to suffer substantial losses due to the lack of civil aviation activity at Hong Kong airport.

· Outsourced service revenues have continued for FlyerTech and Myairops, while project activity reduced significantly in April before starting to recover in May.

Following his arrival in December 2019 the Group's new CFO planned a number of initiatives to strengthen and enhance the finance function and the Group's accounting and financial reporting systems and processes. These initiatives, together with progress on the external audit, have been significantly impeded and delayed by the impact of COVID-19. This has particularly impacted the staffing within the finance function, both in terms of recruitment and operating efficiency.  The Board remains committed to actively addressing this staffing shortfall as well as enhancing the Group's processes, procedures and controls as quickly as possible.

Liquidity and Financial Guidance

In terms of liquidity, the Group retains a $50m credit facility with HSBC of which c.$29m remains currently undrawn together with cash of c.$19m.  We remain focused on improving the collection of receivables, eliminating non-essential expenditure, mitigating costs and making use of available financial support to ensure we preserve the Group's healthy liquidity position. 

Given the continuing operational and financial uncertainties resulting from the COVID-19 pandemic the Group's financial guidance for the year ending 31st December 2020 remains suspended.

FY19 Results

Further to the announcement made on 9th April 2020, the Company re-confirms its intention to publish its FY19 annual audited accounts before the end of July 2020.

Together with PwC, our new auditors, the Company is continuing to thoroughly review and assess the Group's key accounting practices, judgments and treatments to ensure the 2019 results provide a sound platform for the 2020 financial year. 

Although the audit is still on-going, the Company now expects to recognise the following:

· Net additional costs of between $1.0m to $1.5m arising from trading related audit adjustments and further management reviews.  These relate principally to the under recognition of parts and other costs in respect of 2019 and timing adjustments reflecting a more prudent approach to long-term contract accounting with the reduction in revenue in 2019 to be recognised in future periods.

· Given the significant increase in economic uncertainty globally, the Board has prudently considered the carrying value of its receivable and inventory balances. As a result the Board now expects to make further provisions in respect of:-

o  between $2.5m and $3.0m for accounts receivable (of which c$2m is expected to be considered as an exceptional cost); and

o  $1.0m for inventory (of which c$0.6m is expected to be considered as an exceptional cost).

· As a result of a change of accounting policy, the Group will now recognise its foreign exchange gains/losses on its borrowings within the finance charge rather than within operating costs.  This is expected to reduce 2019 EBIT by $0.7m ($0.2m reduction in 2018 EBIT) but will not impact the Group's net income.

In addition, the year-end closing process has identified a number of errors (relating to the carrying value of inventory and receivables as well as the under recognition of costs) which should have been reflected in 2018.  These will result in a further $1.2m reduction to restated 2018 EBIT.

Further details on all these matters will be provided in the Company's audited annual report and accounts, as will any impact of impairment on the carrying value of material investments and goodwill which currently remain under review.

Marwan Khalek, Chief Executive Officer of Gama Aviation Plc, said:

"COVID-19 has created a number of significant challenges for our people, our partners and our clients.  However, we believe our prompt action, our ongoing prudence and the Group's contracted revenue streams is helping the Group to navigate its way through the ongoing pandemic."

ENDS

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

Gama Aviation Plc  [phone]

Marwan Khalek, Chief Executive Officer

Daniel Ruback, Chief Financial Officer

Jefferies International  [phone]

Simon Hardy

Will Soutar 

Camarco  [phone]

Ginny Pulbrook

Geoffrey Pelham-Lane

Gama Aviation - Notes to Editors

Founded in 1983 on the simple principle of delivering its clients' missions with passion & dedication, Gama Aviation Plc (LSE AIM: GMAA) is a highly valued global partner to those who use aviation as a platform to perform.

The Group has three divisions: Air, Ground & Global Services. Air services include: aircraft management, special mission support and charter; with Ground services covering: base & line aircraft maintenance services, aircraft modification design and installation and Fixed Base Operations (FBO).  Global Services provides CAM, change management consultancy and industry leading software.

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

 

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