Gama Aviation plc (AIM: GMAA)
("Gama Aviation", "the Company" or "the Group")
Final results for the year ended 31 December 2016
Gama Aviation Plc, one of the world's largest business aviation service providers is pleased to announce the results for the year ended 31 December 2016.
Financial Highlights
· Record Total Group revenues of $432.4m, up 12.6% (2015: $383.9m)
· Underlying profit before tax of $13.7m, up 3.8% (2015: $13.2m)
· Net debt of $19.4m (2015: $9.0m) reflecting acquisitions and Aberdeen hangar development
· Cash generation from operations improved to an inflow of $2.2m compared to an outflow of $14.1m in 2015
· Dividend per share up 4% to 2.6p per share (2015: 2.5p)
· 2017 trading in line with management expectations
Financial Summary
USD millions (unless otherwise stated) |
Underlying results1 |
Reported results |
|||
|
Dec-16 |
Dec-15 |
Constant Currency2 Dec-15 |
Dec-16 |
Dec-15 |
Revenue - Total Group3 |
432.4 |
403.8 |
383.9 |
|
|
Associate & JV revenue |
(247.8) |
(183.2) |
(183.2) |
|
|
Inter-group revenue (including branding fee) |
18.4 |
15.4 |
15.3 |
|
|
Revenue |
203.0 |
236.0 |
216.0 |
203.0 |
236.0 |
Gross profit |
44.2 |
51.6 |
47.4 |
44.2 |
51.6 |
Gross profit % |
21.7% |
21.9% |
21.9% |
21.7% |
21.9% |
EBITDA |
17.3 |
20.4 |
18.7 |
|
|
Total operating profit4 |
15.1 |
16.9 |
15.3 |
10.9 |
8.1 |
Profit before tax |
13.7 |
14.6 |
13.2 |
19.3 |
6.9 |
|
|
|
|
|
|
Earnings per share (cents) |
30.1 |
39.3 |
37.1 |
42.9 |
21.3 |
|
|
|
|
|
|
Operational Highlights
· Aircraft under management up 12.2% to 165 (2015: 147)
· US Air revenue up 30% driven by contract wins
· Transformative deal signed on 1 January 2017 with BBA Aviation Plc in the US Air division
· Europe Air revenue down 5% due to exiting underperforming contracts
· Europe Air restructuring successfully completed
· US Ground revenue up 15% driven by 3 new line maintenance bases
· Europe Ground revenue down 20% due to lower levels of discretionary spend
· Europe Ground delivered 20% operating margin despite challenging market
· Acquisitions fully integrated into the Air and Ground divisions in Europe
· Recent multi-year contract wins in the Air and Ground divisions in Europe
· Strong progress establishing Middle East and Asia platforms
· Simplified corporate structure and strengthened management team
1 - Underlying results exclude exceptional items, amortisation, and unrealised foreign exchange movements included in finance costs, where applicable. |
2 - Calculated at a constant foreign exchange rate of $1.36 to £1, being the rate that represented the average for the 2016 financial year. |
3 - Include 100% of the results of Gama Aviation's associate in the US and its joint venture in Hong Kong. |
4 - Total operating profit includes the share of results of equity accounted investments. |
Marwan Khalek, Chief Executive of Gama Aviation said:
"2016 has been an exceptionally busy year. We have delivered a robust financial performance, reflecting strong markets in the US and more challenging conditions in Europe.
Our merger with BBA Aviation Plc in US Air has created a powerful market leader with strong growth potential. It also offers significant cross-selling opportunities into our US Ground division. We feel very confident about the prospects for our US business as we leverage our customer relationships across our national network.
We have successfully restructured our Europe Air business, which is now well positioned for sustainable growth. In Europe Ground we expect a return to modest growth in 2017, encouraged by some early signs of a pick-up in discretionary spend.
We have strengthened our operational management team and, together with the progress made in 2016, we are confident of delivering sustainable growth in 2017 and beyond."
-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.
A presentation for sell-side analysts is being held today at 09:30am at the offices of Camarco, 107 Cheapside, London EC 2V 6DN.
For further information please visit www.gamaaviation.com or contact:
Gama Aviation Plc |
+44 (0) 1252 553029 |
Marwan Khalek, Chief Executive Officer |
|
Kevin Godley, Chief Financial Officer |
|
Camarco |
+44 (0) 20 3757 4992 |
Ginny Pulbrook |
|
Geoffrey Pelham-Lane |
|
Jefferies International |
+44 (0) 207 029 8000 |
Simon Hardy |
|
Harry Nicholas |
|
Gama Aviation - Notes to Editors
Gama Aviation Plc (AIM:GMAA) is a global business aviation services group that specialises in providing support for individuals, corporations and government agencies; allowing them to deliver on the promises they make.
The Group's services are split into two divisions: Air and Ground. Air services include aircraft management, special mission support and charter. Ground services cover aircraft maintenance services, aircraft modification design and installation, and Fixed Base Operations (FBO).
More details can be found at: http://www.gamaaviation.com/
Chief Executive Report
2016 Performance
I am pleased to report on a busy year of strong progress. We delivered a robust financial performance reflecting strong markets in the US and more challenging conditions in Europe.
Cash generation has also improved significantly through 2016 to deliver an inflow of $2.2m compared to an outflow of $14.1m in 2015. Our Air and Ground divisions have, as expected, faced different opportunities and challenges regionally. By taking advantage of the opportunities and decisively addressing the challenges, we have delivered a credible performance.
The US remains our most buoyant region delivering the majority of the Group's revenue growth as well as improved EBITDA margins across both the Air and Ground divisions.
In Europe Air, the remedial actions taken early in the year to exit underperforming contracts and right size the cost base were successfully completed and delivered an improved performance through the second half of the year. Whilst the decline in revenues within Europe Ground, caused by lower levels of discretionary spend on aircraft improvement projects, was disappointing, the division continues to deliver healthy margins and remains the most profitable division within the Group.
The "bolt on" acquisitions during the year of Aviation Beauport in Jersey and of FlyerTech have been integrated and are delivering on their strategic objectives.
Margin improvements in the Middle East region during 2016 saw both the Air and Ground divisions deliver their maiden EBITDA profit. We also saw good progress within our Asia start-up based in Hong Kong.
Growth strategy
Our growth strategy remains a simple one. By increasing the depth of our capability and expertise, we bring more products and service offerings to market across more locations, which together serve to increase the scale of our operations and presence. We leverage this to deliver benefits to our customers, enhancing our value proposition and maximising our cross selling opportunities. The combination of our scale presence and the benefits we provide to our customers enables us to deliver sustainable and profitable organic growth, which we supplement by strategic acquisitions that are value accretive. Strategically we are now positioned as a market leader and consolidator in the highly fragmented business aviation services sector.
2016 has seen us continue to deliver on this strategy with 10.3% organic Total Group revenue growth. We made two "bolt-on" acquisitions that added to the depth of our capability and breadth of our service offering and geographical coverage in Europe Air and Ground. At the start of 2017 we announced two further strategic developments. The merger of our US aircraft management and charter business with that of BBA Aviation Plc creates a market leading platform in the US that is transformational for our US business. The collaboration with CASL in Hong Kong is a significant first step in developing our ground business in the region. These transactions represent significant progress towards our stated objective of doubling the scale of our business.
Leadership team
We have made a number of appointments over the last year across all regions and divisions in a variety of roles including finance, operations, engineering and sales to strengthen our team and support our growth. In particular, Neil Medley joined in September as Chief Operating Officer to drive operational excellence worldwide. Neil brings a wealth of experience having previously fulfilled a similar role within a division of BAe Systems. We are also in the process of recruiting an additional non-executive director.
Outlook
2017 has started well and our expectations for the year remain unchanged.
The US market remains very buoyant and with our enlarged US Air platform, as well as the contracted growth from Wheels Up, we expect the division to continue to grow strongly. Similarly, the roll out of new maintenance bases, coupled with the significant cross selling opportunities that arise from the enlarged fleet within US Air, give us confidence that the US Ground division should also continue to grow strongly.
In Europe, we expect to see a return to modest growth in Air and Ground. We are encouraged by the recent contract wins across both divisions and some early signs of a pick-up in discretionary spend in Europe Ground.
We expect the progress within our Asia and Middle East divisions to continue as these operations develop.
Overall, the Group is well positioned to deliver growth and performance in 2017 in line with our expectations.
Marwan Khalek
Chief Executive Officer
Operational Performance Review
Basis of presentation of financials
The analysis of Gama Aviation's operational performance by division and geography, is shown on a Total Division basis (for revenue, gross profit, underlying EBITDA and underlying total operating profit) reflecting 100% of the performance of associates and joint ventures. The analysis also includes inter-segment revenues, which represent the revenues that arise between divisions, in order to present the underlying performance of each division.
Gama Aviation receives a fee in return for allowing its associates and joint ventures the use of the Gama Aviation brand. Such branding fees are excluded from the results on a Total Division basis but are recognised within Gama Aviation's Group reported performance.
Under IFRS, the trading results of associates are not consolidated and are instead shown as a single line in the profit and loss account under 'share of results from equity accounted investments'.
Air division
Our Air division specialises in the provision of complex, high touch, time critical, solutions for individuals, corporations and government agencies.
Aircraft management: A high touch, outsource solution for individual aircraft or commercial fleet owners looking to receive impeccable service, financial transparency and an unrelenting approach to safety. Services are comprised of flight training, cost management, flight planning and scheduling, crew management, maintenance oversight and regulatory compliance. Services are contract based with costs such as fuel, insurance, crew and maintenance being recharged to the client.
Special mission: A turnkey, outsource solution for Government agencies looking to cost effectively manage aviation operations for a variety of complex, time critical services such as air ambulance provision and infrastructure monitoring. Our services include cost management, flight planning and scheduling, crew management, maintenance oversight and regulatory compliance. Services are provided on a contract basis.
Aircraft charter and contract charter: A time critical, high touch solution aimed at individuals and corporations wishing to maximise the productive time of their aircraft and/or executives. Services include long term charter contracts, provision of charter within the managed fleet and sub-charter on audited operators. Services are provided on a commission or contract basis.
The Air division had a good year overall with strong revenue growth in the US offsetting a decline in Europe. Total Division revenue was up 16.8% to $387.5m (2015: $331.8m). The conversion to EBITDA improved in every region with a total EBITDA margin of 2.2% (2015: 1.2%) which delivered an increase in EBITDA of 123.6% to $8.5m (2015: $3.8m).
|
|
|
|
|
|
|
|
|
Constant Currency |
|||
December |
|
2016 |
|
2015 |
|
Change |
|
|
2015 |
|
Change |
|
USD thousands |
|
Air |
|
Air |
|
Air |
|
|
Air |
|
Air |
|
Total Division Revenue |
|
387,513 |
|
346,886 |
|
11.7% |
|
|
331,768 |
|
16.8% |
|
Total Division Gross Profit |
|
25,407 |
|
24,521 |
|
3.5% |
|
|
23,199 |
|
9.5% |
|
Gross Profit % |
|
6.6% |
|
7.1% |
|
0.5ppt |
|
|
7.1% |
|
0.5ppt |
|
Total Division Underlying EBITDA |
|
8,505 |
|
4,070 |
|
>100% |
|
|
3,836 |
|
>100% |
|
Underlying EBITDA % |
|
2.2% |
|
1.2% |
|
1.0ppt |
|
|
1.2% |
|
1.0ppt |
|
Total Division Underlying Total Operating Profit |
|
7,545 |
|
2,806 |
|
>100% |
|
|
2,662 |
|
>100% |
|
Underlying Total Operating Profit % |
|
1.9% |
|
0.8% |
|
(1.1ppt) |
|
|
0.8% |
|
(1.1ppt) |
|
US Air (Associate)
December |
|
2016 |
|
2015 |
|
Change |
USD thousands |
|
Air |
|
Air |
|
Air |
Revenue |
|
233,721 |
|
179,525 |
|
30.2% |
Gross Profit |
|
14,114 |
|
9,301 |
|
51.7% |
Gross Profit % |
|
6.0% |
|
5.2% |
|
0.8ppt |
Underlying EBITDA |
|
6,407 |
|
2,990 |
|
>100% |
Underlying EBITDA % |
|
2.7% |
|
1.7% |
|
1.0ppt |
Underlying Total Operating Profit |
|
6,089 |
|
2,693 |
|
>100% |
Underlying Total Operating Profit % |
|
2.6% |
|
1.5% |
|
1.1ppt |
US Air division performance reconciliation to reported performance |
||||||||
USD thousands |
|
Revenue |
|
Gross Profit |
|
Underlying EBITDA |
Underlying Total Operating Profit |
|
December 2016 |
|
|
|
|
|
|
|
|
US Air division |
|
233,721 |
|
14,114 |
|
6,407 |
|
6,089 |
Associate |
|
(231,560) |
|
(13,742) |
|
(6,268) |
|
(5,904) |
Branding fee |
|
5,788 |
|
5,788 |
|
5,788 |
|
5,788 |
Reported |
|
7,949 |
|
6,160 |
|
5,927 |
|
5,973 |
|
|
|
|
|
|
|
|
|
December 2015 |
|
|
|
|
|
|
|
|
US Air division |
|
179,525 |
|
9,301 |
|
2,990 |
|
2,693 |
Associate |
|
(176,630) |
|
(8,846) |
|
(2,725) |
|
(3,438) |
Branding fee |
|
4,920 |
|
4,920 |
|
4,920 |
|
4,920 |
Reported |
|
7,815 |
|
5,375 |
|
5,185 |
|
4,175 |
|
|
|
|
|
|
|
|
|
The US Air division have continued to perform strongly in 2016, delivering both significant top line revenue growth, up 30.2% to $234.7m (2015: $179.5m) and margin improvement at gross profit, EBITDA and total operating profit level.
The strength of this performance reflects a high contract win rate in our core management business adding a number of significant contracts. In addition, the growth in aircraft which we operate under our Wheels Up contract continued to progress well. US Air had 116 aircraft under management as at December 2016, up from 93 in December 2015, an increase of 24.7%.
Tender activity within our core management business remains high. Subject to the successful outcome of these tenders, together with the contracted growth under the Wheels Up contract, which will add a further 12 aircraft a year for the next two years, the division's growth prospects are strong.
US Air Total Group underlying EBITDA was $6.4m (2015: $3.0), an increase of 113.3%, with the underlying EBITDA margin of 2.7% (2015: 1.7%). The US Air underlying EBITDA margins are expected to increase towards our target of 5.0% as the benefits of scale and operational gearing continue.
The reported underlying total operating profit (which includes the contribution of the associate) of the US Air Business for Gama Aviation is derived as follows:
USD thousands |
December 2016 |
|
December 2015 |
Branding Fee |
5,788 |
|
4,920 |
Other |
193 |
|
182 |
Line of Associate |
(8) |
|
(927) |
Reported Underlying Total Operating Profit |
5,973 |
|
4,175 |
On 3 January 2017, we announced the merger of our US Air division with that of BBA Aviation Plc creating the US's largest aircraft management business. The merger took place on 1 January 2017 and we will provide a detailed operational review of its performance with the half year numbers later in the year.
Europe Air
Europe is the only region in the Group that is affected by any material foreign exchange movements, primarily between GBP and USD. The 2015 performance has been restated at the same average rate for USD to GBP as the reported 2016 financials. The average rate for 2016 was USD1.36 to GBP1.00. The commentary below is based on constant currency performance unless otherwise stated.
|
|
|
|
|
|
|
|
|
Constant Currency |
|||
December |
|
2016 |
|
2015 |
|
Change |
|
|
2015 |
|
Change |
|
USD thousands |
|
Air |
|
Air |
|
Air |
|
|
Air |
|
Air |
|
Revenue |
|
117,736 |
|
139,224 |
|
(15.4%) |
|
|
124,106 |
|
(5.1%) |
|
Gross Profit |
|
9,568 |
|
13,542 |
|
(29.3%) |
|
|
12,200 |
|
(21.6%) |
|
Gross Profit % |
|
8.1% |
|
9.7% |
|
(1.6ppt) |
|
|
9.7% |
|
(1.7ppt) |
|
Underlying EBITDA |
|
2,607 |
|
2,124 |
|
22.7% |
|
|
1,890 |
|
37.9% |
|
Underlying EBITDA % |
|
2.2% |
|
1.5% |
|
0.7ppt |
|
|
1.5% |
|
0.7ppt |
|
Underlying Total Operating Profit |
|
2,095 |
|
1,254 |
|
67.1% |
|
|
1,110 |
|
88.7% |
|
Underlying Total Operating Profit % |
|
1.8% |
|
0.9% |
|
0.9ppt |
|
|
0.9% |
|
0.9ppt |
|
Europe Air delivered a credible performance in 2016 despite the challenging market conditions. Revenue and gross profit were down 5.1% and 21.6% on a constant currency basis as the business exited underperforming contracts. These contracts on a fully-costed basis were loss-making at EBITDA level and presented an unattractive credit profile.
The EBITDA performance showed significant improvement in the year, up 37.9% to $2.6m (2015: $1.9m) due to exiting the underperforming contracts and the right-sizing of the cost base during the year.
The division also incurred trading foreign exchange losses of approximately $1m, as a result of currency volatility, which is included in EBITDA. Adjusting for this, the underlying business delivered an EBITDA of approximately $3.6m, an increase of 90.5%.
We are now confident that the division is well positioned to deliver modest growth and improve EBITDA margins towards our 5.0% target.
Middle East Air
December |
|
2016 |
|
2015 |
|
Change |
USD thousands |
|
Air |
|
Air |
|
Air |
Revenue |
|
19,531 |
|
21,598 |
|
(9.6%) |
Gross Profit |
|
1,345 |
|
1,431 |
|
(6.0%) |
Gross Profit % |
|
6.9% |
|
6.6% |
|
0.3ppt |
Underlying EBITDA |
|
15 |
|
(160) |
|
>100% |
Underlying EBITDA % |
|
0.1% |
|
(0.7%) |
|
0.8ppt |
Underlying Total Operating Profit |
|
(95) |
|
(247) |
|
61.5% |
Underlying Total Operating Profit % |
|
(0.5%) |
|
(1.1%) |
|
0.6ppt |
Both gross profit and EBITDA margins have slightly improved despite the decline in top line revenue, which was largely pass through in nature. The division signed up three new aircraft in the final quarter of 2016 and, together with a healthy pipeline, we are optimistic about the division's prospects.
Asia Air
December |
|
2016 |
|
2015 |
|
Change |
USD thousands |
|
Air |
|
Air |
|
Air |
Revenue |
|
16,525 |
|
6,539 |
|
>100% |
Gross Profit |
|
380 |
|
267 |
|
42.3% |
Gross Profit % |
|
2.3% |
|
4.1% |
|
(1.8ppt) |
Underlying EBITDA |
|
(524) |
|
(884) |
|
40.7% |
Underlying EBITDA % |
|
(3.2%) |
|
(13.5%) |
|
10.3ppt |
Underlying Total Operating Profit |
|
(544) |
|
(894) |
|
39.2% |
Underlying Total Operating Profit % |
|
(3.3%) |
|
(13.7%) |
|
10.4ppt |
Asia Air division performance reconciliation to reported performance |
||||||||
USD thousands |
|
Revenue |
|
Gross Profit |
|
Underlying EBITDA |
Underlying Total Operating Profit |
|
December 2016 |
|
|
|
|
|
|
|
|
Asia Air division |
|
16,525 |
|
380 |
|
(524) |
|
(544) |
Joint venture |
|
(16,525) |
|
(380) |
|
524 |
|
222 |
Branding fee |
|
80 |
|
80 |
|
80 |
|
80 |
Reported |
|
80 |
|
80 |
|
80 |
|
(242) |
|
|
|
|
|
|
|
|
|
December 2015 |
|
|
|
|
|
|
|
|
Asia Air division |
|
6,539 |
|
267 |
|
(884) |
|
(894) |
Joint venture |
|
(6,539) |
|
(267) |
|
884 |
|
497 |
Branding fee |
|
36 |
|
36 |
|
36 |
|
36 |
Reported |
|
36 |
|
36 |
|
36 |
|
(361) |
|
|
|
|
|
|
|
|
|
Asia continues to develop albeit from a low base. The division is still in a start-up phase but has a promising pipeline of managed aircraft contracts. We are expecting this division to steadily build towards making a positive contribution to the Group over the medium term.
The reported underlying total operating profit (which includes the profit contribution of the joint venture) of the Asia Air division for Gama Aviation is derived as follows:
USD thousands |
December 2016 |
|
December 2015 |
Branding Fee |
80 |
|
36 |
Line of Joint Venture |
(322) |
|
(397) |
Reported Underlying Total Operating Profit |
(242) |
|
(361) |
Ground division
Our Ground division provides solutions to maximise the availability of aircraft and uphold their airworthiness on behalf of individuals, corporations and Government agencies.
Base maintenance: 'Base' refers to the planned maintenance required by the aircraft manufacturer or component supplier. This work is complex, highly regulated and location specific, requiring investment in tooling and training. Our centres of excellence cover a range of aircraft including business jets, helicopters, turbo-prop and piston engine aircraft. Services are provided on a fee or contract basis.
Line maintenance: Our line solutions assist owners with irregular maintenance activities, component failure or simple wear and tear. Depending on the fault, this may be sufficient to ground the aircraft. For private clients, this can be an inconvenience whilst for military or air ambulance clients, the aircraft's re-entry into service is time critical. In all cases it needs to be dealt with efficiently so the aircraft can complete its commitments. Services are provided on a fee or contract basis.
Design and modifications: Our design and modifications team provides solutions to civilian and military aircraft owners to increase the operating life of an aircraft. Typical services include: avionics updates, role or mission changes and cockpit upgrades. Services are provided on a fee or contract basis.
Fixed base operations (FBO): Our FBO's provide infrastructure at airports that are underserved with business / special mission facilities. The business has three dedicated FBOs: Glasgow, Jersey and Sharjah, catering for parking, hangarage, line maintenance and other related ground handling tasks such as the fuelling of aircraft. Services are provided on a fee basis.
The Ground division has delivered solid gross profit, EBITDA and operating profit margins despite some challenging market conditions. Significant progress made in the Ground division in both the US and the Middle East helped offset a significant decline in Europe, following a very strong year in 2015 and a reduction in discretionary spend in 2016.
|
|
|
|
|
|
|
|
|
Constant Currency |
|||
December |
|
2016 |
|
2015 |
|
Change |
|
|
2015 |
|
Change |
|
USD thousands |
|
Ground |
|
Ground |
|
Ground |
|
|
Ground |
|
Ground |
|
Total Division Revenue |
|
67,621 |
|
79,629 |
|
(15.1%) |
|
|
73,521 |
|
(8.0%) |
|
Total Division Gross Profit |
|
24,872 |
|
30,447 |
|
(18.3%) |
|
|
27,697 |
|
(10.2%) |
|
Gross Profit % |
|
36.8% |
|
38.2% |
|
(1.4ppt) |
|
|
37.7% |
|
(0.9ppt) |
|
Total Division Underlying EBITDA |
|
11,434 |
|
16,512 |
|
(30.8%) |
|
|
14,878 |
|
(23.1%) |
|
Underlying EBITDA % |
|
16.9% |
|
20.7% |
|
3.8ppt |
|
|
20.2% |
|
3.3ppt |
|
Total Division Underlying Total Operating Profit |
|
10,093 |
|
15,354 |
|
(34.3%) |
|
|
13,787 |
|
(26.8%) |
|
Underlying Total Operating Profit % |
|
14.9% |
|
19.3% |
|
(4.4ppt) |
|
|
18.8% |
|
(3.9ppt) |
|
US Ground
December |
|
2016 |
|
2015 |
|
Change |
USD thousands |
|
Ground |
|
Ground |
|
Ground |
Revenue |
|
24,130 |
|
20,661 |
|
16.8% |
Gross Profit |
|
5,560 |
|
4,947 |
|
12.4% |
Gross Profit % |
|
23.0% |
|
23.9% |
|
(0.9ppt) |
Underlying EBITDA |
|
2,778 |
|
2,226 |
|
24.8% |
Underlying EBITDA % |
|
11.5% |
|
10.8% |
|
0.7ppt |
Underlying Total Operating Profit |
|
2,401 |
|
1,986 |
|
20.9% |
Underlying Total Operating Profit % |
|
10.0% |
|
9.6% |
|
0.4ppt |
US Ground delivered a good performance with revenue up 16.8% to $24.1m (2015: $20.7m). As expected, the opening of new bases during the year marginally impacted gross profit margins but the benefits of operational leverage delivered improved EBITDA margin of 11.5% (2015: 10.8%).
US Ground has a network of nine regional bases which act as hubs from which 30 mobile units can provide extended coverage. US Ground is now able to service its customers' line maintenance requirements on a national basis.
The US Air merger with the aircraft management and charter business of BBA Aviation Plc has brought a material increase in the number of aircraft into the US Air division which can be cross sold US Ground services.
Europe Ground
Europe is the only region in the group that is affected by any material foreign exchange movements, primarily between GBP and USD. The commentary below is based on constant currency performance unless otherwise stated.
|
|
|
|
|
|
|
|
|
Constant Currency |
|||
December |
|
2016 |
|
2015 |
|
Change |
|
|
2015 |
|
Change |
|
USD thousands |
|
Ground |
|
Ground |
|
Ground |
|
|
Ground |
|
Ground |
|
Revenue |
|
38,321 |
|
54,003 |
|
(29.0%) |
|
|
47,895 |
|
(20.0%) |
|
Gross Profit |
|
17,615 |
|
24,312 |
|
(27.5%) |
|
|
21,562 |
|
(18.3%) |
|
Gross Profit % |
|
46.0% |
|
45.0% |
|
1.0ppt |
|
|
45.0% |
|
1.0ppt |
|
Underlying EBITDA |
|
8,383 |
|
14,449 |
|
(42.0%) |
|
|
12,815 |
|
(34.6%) |
|
Underlying EBITDA % |
|
21.9% |
|
26.8% |
|
(4.9ppt) |
|
|
26.8% |
|
(4.9ppt) |
|
Underlying Total Operating Profit |
|
7,660 |
|
13,847 |
|
(44.7%) |
|
|
12,280 |
|
(37.6%) |
|
Underlying Total Operating Profit % |
|
20.0% |
|
25.6% |
|
(5.6ppt) |
|
|
25.6% |
|
(5.6ppt) |
|
There was a material decline in performance in 2016 after a very strong year in 2015. Europe Ground revenue decreased by 20.0% whilst gross profit decreased by 18.3% on a constant currency basis. The decline in revenue and associated gross profit was the result of lower levels of discretionary spend on modifications, improvements and refurbishment works. However, the division delivered robust gross profit and EBITDA margins of 46.0% and 21.9% respectively, despite this decline in revenues and remains the Group's most profitable division.
2017 has started well with the award of a new multi-year government contract and, together with some early signs of a pick-up in discretionary spend, we are now expecting Europe Ground to return to modest growth.
Middle East Ground
December |
|
2016 |
|
2015 |
|
Change |
USD thousands |
|
Ground |
|
Ground |
|
Ground |
Revenue |
|
5,170 |
|
4,965 |
|
4.1% |
Gross Profit |
|
1,697 |
|
1,188 |
|
42.9% |
Gross Profit % |
|
32.8% |
|
23.9% |
|
8.9ppt |
Underlying EBITDA |
|
273 |
|
(163) |
|
>100% |
Underlying EBITDA % |
|
5.3% |
|
(3.3%) |
|
8.6ppt |
Underlying Total Operating Profit |
|
32 |
|
(479) |
|
>100% |
Underlying Total Operating Profit % |
|
0.6% |
|
(9.6%) |
|
10.2ppt |
Middle East Ground has performed well in 2016. Revenue was up 4.1% to $5.2m (2015: $5.0m), gross profit up 42.8% to $1.7m (2015: $1.2m), and the gross profit margin up 8.9 basis points to 32.8% (2015: 23.9%).
Importantly, the division made a small first time EBITDA profit. Although the division is still in its infancy, new parking and hangarage contracts are coming on stream, and with movements through the FBO increasing, we are confident in the long-term prospects for this division.
Financial Review
Total Group performance
During the year the Total Group performance, which included 100% of the results of the associate and joint venture, delivered revenues of $432.4m. This excludes the divisional inter-segment revenue which is removed on a Total Group consolidated basis.
The Operational Performance Review illustrates the divisions and regions on an unconsolidated basis and therefore includes the divisional inter-segment revenue treating each division as a stand-alone business for comparative purposes in order to assess the underlying performance of each division.
The table below reconciles the Total Divisional performance to the Total Group performance.
|
|
|
|
|
|
|
|
Constant Currency |
|
|||
December |
|
2016 |
|
2015 |
|
Change |
|
2015 |
|
Change |
|
|
USD thousands |
|
Total |
|
Total |
|
Total |
|
Total |
|
Total |
|
|
Air |
|
387,513 |
|
346,886 |
|
11.7% |
|
|
331,768 |
|
16.8% |
|
Ground |
|
67,621 |
|
79,629 |
|
(15.1%) |
|
|
73,521 |
|
(8.0%) |
|
Other |
|
2,327 |
|
935 |
|
>100% |
|
|
829 |
|
>100% |
|
Inter-segment eliminations |
|
(25,036) |
|
(23,615) |
|
6.0% |
|
|
(22,236) |
|
12.6% |
|
Total Group Revenue |
|
432,425 |
|
403,835 |
|
7.1% |
|
|
383,882 |
|
12.6% |
|
Total Group Gross Profit |
|
52,405 |
|
55,732 |
|
(6.0%) |
|
|
51,544 |
|
1.7% |
|
Gross Profit % |
|
12.1% |
|
13.8% |
|
(1.7ppt) |
|
|
13.4% |
|
(1.3ppt) |
|
Total Group Underlying EBITDA |
|
17,170 |
|
17,286 |
|
(0.7%) |
|
|
15,550 |
|
10.4% |
|
Underlying EBITDA % |
|
4.0% |
|
4.3% |
|
(0.3ppt) |
|
|
4.1% |
|
(0.1ppt) |
|
Total Group Underlying Total Operating Profit |
|
14,871 |
|
14,874 |
|
- |
|
|
13,266 |
|
12.1% |
|
Underlying Total Operating Profit % |
|
3.4% |
|
3.7% |
|
(0.3ppt) |
|
|
3.5% |
|
(0.1ppt) |
|
The table below reconciles the Total Group performance to the reported results.
USD thousands |
|
Revenue |
|
Gross Profit |
|
Underlying EBITDA |
Underlying Total Operating Profit |
|
December 2016 |
|
|
|
|
|
|
|
|
Total Group |
|
432,425 |
|
52,405 |
|
17,170 |
|
14,871 |
Associate & joint venture |
|
(247,770) |
|
(14,122) |
|
(5,744) |
|
(5,682) |
Branding fee & other intra-group revenue |
|
18,382 |
|
5,868 |
|
5,868 |
|
5,868 |
Reported |
|
203,037 |
|
44,151 |
|
17,294 |
|
15,057 |
|
|
|
|
|
|
|
|
|
December 2015 |
|
|
|
|
|
|
|
|
Total Group |
|
403,835 |
|
55,732 |
|
17,286 |
|
14,874 |
Associate & joint venture |
|
(183,170) |
|
(9,113) |
|
(1,841) |
|
(2,941) |
Branding fee & other intra-group revenue |
|
15,351 |
|
4,956 |
|
4,955 |
|
4,955 |
Reported |
|
236,016 |
|
51,575 |
|
20,400 |
|
16,888 |
|
|
|
|
|
|
|
|
|
Basis of presentation of financials
In order to aid understanding of Gama Aviation's underlying business performance, all financial commentary below is provided on a constant currency basis unless otherwise stated. The 2015 performance has been restated to the same average rate for USD to GBP as the reported 2016 financials. The average rate for 2016 was USD1.36 to GBP1.00.
Revenue
The business delivered record Total Group revenues in 2016, up 12.6% to $432.4m (2015: $383.9m). The bolt on acquisitions of Aviation Beauport and Flyertech contributed revenues of $8.9m following completion.
Reported revenue is down 6% on a constant currency basis to $203.0m (2015: $216.0m) predominantly as a result of Europe Air and Ground where trading has been muted and certain underperforming contracts have been exited.
|
Pre- acquisitions |
Acquisitions |
Reported |
Associates & JV |
Total Group |
Group Revenue (USD'000) |
194,102 |
8,935 |
203,037 |
229,388 |
432,425 |
Gross profit and EBITDA
Total Group gross profit is up 1.8% to $52.4m (2015: $51.5m), although the margin has slipped from 13.4% to 12.1% in 2016, a trend that has continued from the half year results. This is primarily as a result of the change of business mix with a greater proportion of the growth coming from the US Air business which attracts a lower gross profit margin of 6%.
Total Group underlying EBITDA is up 10.4% to $17.2m (2015: $15.6m) with the significant improvement in our Air and Ground divisions in the US helping to compensate for the decrease in performance in Europe Ground.
Reported gross profit is down 6.8% to $44.2m (2015: $47.4m). Pleasingly, our Air and Ground divisions in the regions outside Europe showed an upturn in gross profit. The decrease has come in Europe Air and Ground with the decrease in discretionary spend in Europe Ground and the exit of underperforming contracts in Europe Air.
Reported underlying EBITDA has dropped 7.5% to $17.3m (2015: $18.7m). Included within our Europe Air is $1m of trading foreign exchange losses borne in the year as a result of the volatile currency movements in the year, particularly the strengthening of USD to GBP. The reported EBITDA would be similar to the prior year if this were added back as part of the underlying performance.
|
Pre- acquisitions |
Acquisitions |
Reported |
Associates & JV |
Total Group |
Group Underlying EBITDA (USD'000) |
15,650 |
1,644 |
17,294 |
(124) |
17,170 |
Exceptional costs
Underlying EBITDA is stated before exceptional costs of $2.5m, details of which are included within note 4. Of the total $2.5m exceptional costs, $1.4m are transaction costs with the remainder being the one-off costs associated with the subsequent integration and re-organisation of these transactions.
Discontinued operations
The operating losses incurred on the Group's owned aircraft that are deployed on ad-hoc charter are also separated from the underlying EBITDA as this is a legacy element of the business model that the Group has classified as discontinued. The discontinued operations loss for the year was $2.1m, of which $1.8m were impairments to their residual values. During the course of the year, an owned aircraft that was not of the right specifications and therefore operationally inefficient, was classified as held for sale. After the year end, Gama Aviation sold one of the three remaining aircraft that was held for sale for $0.75m. The book value of the two remaining assets held for sale is $6.5m.
Total operating profit
Reported underlying total operating profit, which includes the operating profit attributable to Gama Aviation of the 100% owned group companies together with the results attributable to Gama Aviation from its associate and joint venture is in line with 2015 at $15.1m (2015: $15.3m).
|
Pre- acquisitions |
Acquisitions |
Total |
Associates & JV |
Total Group |
Underlying Total Operating Profit (USD'000) |
13,918 |
1,469 |
15,387 |
(330) |
15,057 |
Profit before tax and earnings per share
The reported profit before tax of $19.3m (2015: $6.9m) and earnings per share of (EPS) of 42.9p (2015: 21.3p) both benefitted significantly from a material foreign exchange credit in the year which is explained in more detail in the foreign exchange section below. This credit is excluded from our profit before tax and EPS numbers below to give a better understanding of the underlying performance of the Group.
Underlying profit before tax is up 3.8% at $13.7m (2015: $13.2m).
Underlying EPS is down 18.9% to 30.1 cents (2015: 37.1 cents). However, the EPS in 2015 benefitted from a tax credit of $2.5m against a tax charge of $0.6m in 2016. On a like-for-like basis, the underlying business produced an EPS of 31.5 cents in 2016 compared to 31.2 cents in 2015.
Taxation
There is a total tax charge for the year of $0.6m made up of a tax charge of $1.6m offset by a deferred tax credit of $1.0m. In 2015, there was a tax credit of $2.5m as a result of deferred tax movements in the US business.
Foreign exchange
Within our global services business, we operate and manage geographically mobile assets. As a result, Gama Aviation is exposed to a number of currencies. With the exception of Europe, the rest of the regions trade in USD which is the same as our Group reporting currency, leaving little or no foreign exchange exposure.
The material currency exposure for Gama Aviation is within our Europe operations in GBP to USD. Gama Aviation experiences both realised and unrealised trading gains and losses on these exchange rate movements. These impact our operating performance, and finance income and costs.
As the GBP weakens against the USD, the UK businesses suffer both trading and translational losses at EBITDA level. However, the intercompany loan structure within the Group works in the opposite direction and Gama Aviation experiences foreign exchange gains within finance income as the GBP weakens against the USD.
Given the volatility of the GBP to USD exchange rates over the year, Gama Aviation experienced sizeable losses of over $1m within its underlying EBITDA and material gains within its finance income of $9.7m.
Gama Aviation has not adjusted for the operating losses experienced in the year due to the foreign exchange impact despite the unusual volatility in the rates over the year but it has adjusted out the material foreign exchange credit within profit before tax and EPS.
The use of the constant currency reporting helps to illustrate the underlying performance of the business in the absence of these foreign exchange movements.
An independent foreign exchange review has been carried out which identified a number of small but effective improvements that can be made and these are being put in place. The review concluded that Gama Aviation is managing its foreign exchange exposure in an appropriate way given the size and nature of the business.
Cash
Cash increased by $2.7m to $11.2m (2015: $8.5m).
Operating cash inflow before movements in working capital increased 33.6% to $16.3m (2015: $12.2m) and the working capital movement improved by 46.3% to an outflow of $14.1m (2015: $26.3m outflow).
Cash generated by operations was $2.2m for the year compared with an outflow of $14.1m in 2015. The Group is focused on improving its working capital management and we expect the business to generate significantly higher cash conversion in the future.
Net debt at the year-end was $19.4m, up from $9.0m in 2015 as the Group drew on debt facilities to fund the acquisitions and related costs in the year.
Net debt to underlying EBITDA was 1.1x (2015: 0.4x).
Dividend
The Directors are recommending a dividend of 2.6p per share, an increase of 4.0% (2015: 2.5p per share).
Kevin Godley
Chief Financial Officer
Segmental analysis
(USD thousands)
Total Group1 and Constant Currency2
Year ended 31 December 2016 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
233,721 |
24,130 |
117,736 |
38,321 |
19,531 |
5,170 |
16,525 |
2,327 |
(25,036) |
432,425 |
Gross Profit |
14,114 |
5,560 |
9,568 |
17,615 |
1,345 |
1,697 |
380 |
2,126 |
|
52,405 |
Gross Profit % |
6.0% |
23.0% |
8.1% |
46.0% |
6.9% |
32.8% |
2.3% |
91.4% |
|
12.1% |
EBITDA3 |
6,407 |
2,778 |
2,607 |
8,383 |
15 |
273 |
(524) |
(2,769) |
|
17,170 |
EBITDA3 % |
2.7% |
11.5% |
2.2% |
21.9% |
0.1% |
5.3% |
(3.2%) |
(>100%) |
|
4.0% |
Total Operating Profit4 |
6,089 |
2,401 |
2,095 |
7,660 |
(95) |
32 |
(544) |
(2,767) |
|
14,871 |
Total Operating Profit4 % |
2.6% |
10.0% |
1.8% |
20.0% |
(0.5%) |
0.6% |
(3.3%) |
(>100%) |
|
3.4% |
Year ended 31 December 2015 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
179,525 |
20,661 |
124,106 |
47,895 |
21,598 |
4,965 |
6,539 |
829 |
(22,236) |
383,882 |
Gross Profit |
9,301 |
4,947 |
12,200 |
21,562 |
1,431 |
1,188 |
267 |
648 |
|
51,544 |
Gross Profit % |
5.2% |
23.9% |
9.8% |
45.0% |
6.6% |
23.9% |
4.1% |
78.2% |
|
13.4% |
EBITDA3 |
2,990 |
2,226 |
1,890 |
12,815 |
(160) |
(163) |
(884) |
(3,164) |
|
15,550 |
EBITDA3 % |
1.7% |
10.8% |
1.5% |
26.8% |
(0.7%) |
(3.3%) |
(13.5%) |
(>100%) |
|
4.1% |
Total Operating Profit4 |
2,693 |
1,986 |
1,110 |
12,280 |
(247) |
(479) |
(894) |
(3,183) |
|
13,266 |
Total Operating Profit4 % |
1.5% |
9.6% |
0.9% |
25.6% |
(1.1%) |
(9.6%) |
(13.7%) |
(>100%) |
|
3.5% |
Total Group1
Year ended 31 December 2016 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
233,721 |
24,130 |
117,736 |
38,321 |
19,531 |
5,170 |
16,525 |
2,327 |
(25,036) |
432,424 |
Gross Profit |
14,114 |
5,560 |
9,568 |
17,615 |
1,345 |
1,697 |
380 |
2,126 |
|
52,405 |
Gross Profit % |
6.0% |
23.0% |
8.1% |
46.0% |
6.9% |
32.8% |
2.3% |
91.4% |
|
12.1% |
EBITDA3 |
6,407 |
2,778 |
2,607 |
8,383 |
15 |
273 |
(524) |
(2,769) |
|
17,170 |
EBITDA3 % |
2.7% |
11.5% |
2.2% |
21.9% |
0.1% |
5.3% |
(3.2%) |
(>100%) |
|
4.0% |
Total Operating Profit4 |
6,089 |
2,401 |
2,095 |
7,660 |
(95) |
32 |
(544) |
(2,767) |
|
14,871 |
Total Operating Profit4 % |
2.6% |
10.0% |
1.8% |
20.0% |
(0.5%) |
0.6% |
(3.3%) |
(>100%) |
|
3.4% |
Year ended 31 December 2015 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
179,525 |
20,661 |
139,224 |
54,003 |
21,598 |
4,965 |
6,539 |
935 |
(23,615) |
403,834 |
Gross Profit |
9,301 |
4,947 |
13,542 |
24,312 |
1,431 |
1,188 |
267 |
744 |
|
55,732 |
Gross Profit % |
5.2% |
23.9% |
9.7% |
45.0% |
6.6% |
23.9% |
4.1% |
79.6% |
|
13.8% |
EBITDA3 |
2,990 |
2,226 |
2,124 |
14,449 |
(160) |
(163) |
(884) |
(3,296) |
|
17,286 |
EBITDA3 % |
1.7% |
10.8% |
1.5% |
26.8% |
(0.7%) |
(3.3%) |
(13.5%) |
(>100%) |
|
4.3% |
Total Operating Profit4 |
2,693 |
1,986 |
1,254 |
13,847 |
(247) |
(479) |
(894) |
(3,286) |
|
14,874 |
Total Operating Profit4 % |
1.5% |
9.6% |
0.9% |
25.6% |
(1.1%) |
(9.6%) |
(13.7%) |
(>100%) |
|
3.7% |
1 - Including 100% of the results of Gama Aviation's Associate in the US and Joint Venture in Hong Kong.
2 - Calculated at a constant foreign exchange rate of $1.36 to £1.
3 - Underlying EBITDA is arrived at by taking operating profit before depreciation, amortisation and exceptional items.
4 - Underlying total operating profit is arrived at by taking operating profit before amortisation and exceptional items and including the share of results of equity accounted investments.
5 - 'Elims' represents the elimination of inter-segment revenue.
Segmental analysis (continued)
(USD thousands)
Reported and Constant Currency2
Year ended 31 December 2016 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
7,949 |
24,130 |
117,736 |
38,321 |
19,531 |
5,170 |
80 |
2,327 |
(12,207) |
203,037 |
Gross Profit |
6,160 |
5,560 |
9,568 |
17,615 |
1,345 |
1,697 |
80 |
2,126 |
|
44,151 |
Gross Profit % |
77.5% |
23.0% |
8.1% |
46.0% |
6.9% |
32.8% |
100% |
91.4% |
|
21.7% |
EBITDA3 |
5,927 |
2,778 |
2,607 |
8,383 |
15 |
273 |
80 |
(2,769) |
|
17,294 |
EBITDA3 % |
74.6% |
11.5% |
2.2% |
21.9% |
0.1% |
5.3% |
100% |
(>100%) |
|
8.5% |
Total Operating Profit4 |
5,973 |
2,401 |
2,095 |
7,660 |
(95) |
32 |
(242) |
(2,767) |
|
15,057 |
Total Operating Profit4 % |
75.1% |
10.0% |
1.8% |
20.0% |
(0.5%) |
0.6% |
(>100%) |
(>100%) |
|
7.4% |
Year ended 31 December 2015 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
7,815 |
20,661 |
124,106 |
47,895 |
21,598 |
4,965 |
36 |
829 |
(11,888) |
216,017 |
Gross Profit |
5,375 |
4,947 |
12,200 |
21,562 |
1,431 |
1,188 |
36 |
648 |
|
47.387 |
Gross Profit % |
68.8% |
23.9% |
9.8% |
45.0% |
6.6% |
23.9% |
100% |
78.2% |
|
21.9% |
EBITDA3 |
5,185 |
2,226 |
1,890 |
12,815 |
(160) |
(163) |
36 |
(3,164) |
|
18,665 |
EBITDA3 % |
66.3% |
10.8% |
1.5% |
26.8% |
(0.7%) |
(3.3%) |
100% |
(>100%) |
|
8.6% |
Total Operating Profit4 |
4,175 |
1,986 |
1,110 |
12,280 |
(247) |
(479) |
(361) |
(3,183) |
|
15,281 |
Total Operating Profit4 % |
53.4% |
9.6% |
0.9% |
25.6% |
(1.1%) |
(9.6%) |
(>100%) |
(>100%) |
|
7.1% |
Reported
Year ended 31 December 2016 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
7,949 |
24,130 |
117,736 |
38,321 |
19,531 |
5,170 |
80 |
2,327 |
(12,207) |
203,037 |
Gross Profit |
6,160 |
5,560 |
9,568 |
17,615 |
1,345 |
1,697 |
80 |
2,126 |
|
44,151 |
Gross Profit % |
77.5% |
23.0% |
8.1% |
46.0% |
6.9% |
32.8% |
100% |
91.4% |
|
21.7% |
EBITDA3 |
5,927 |
2,778 |
2,607 |
8,383 |
15 |
273 |
80 |
(2,769) |
|
17,294 |
EBITDA3 % |
74.6% |
11.5% |
2.2% |
21.9% |
0.1% |
5.3% |
100% |
(>100%) |
|
8.5% |
Total Operating Profit4 |
5,973 |
2,401 |
2,095 |
7,660 |
(95) |
32 |
(242) |
(2,767) |
|
15,057 |
Total Operating Profit4 % |
75.1% |
10.0% |
1.8% |
20.0% |
(0.5%) |
0.6% |
(>100%) |
(>100%) |
|
7.4% |
Year ended 31 December 2015 |
||||||||||
|
US |
Europe |
MENA |
Asia |
Other |
Elims5 |
Totals |
|||
|
Air |
Ground |
Air |
Ground |
Air |
Ground |
Air |
|
|
|
Revenue |
7,815 |
20,661 |
139,224 |
54,003 |
21,598 |
4,965 |
36 |
935 |
(13,220) |
236,017 |
Gross Profit |
5,375 |
4,947 |
13,542 |
24,312 |
1,431 |
1,188 |
36 |
744 |
|
51,575 |
Gross Profit % |
68.8% |
23.9% |
9.7% |
45.0% |
6.6% |
23.9% |
100% |
79.6% |
|
21.9% |
EBITDA3 |
5,185 |
2,226 |
2,124 |
14,449 |
(160) |
(163) |
36 |
(3,297) |
|
20,400 |
EBITDA3 % |
66.3% |
10.8% |
1.5% |
26.8% |
(0.7%) |
(3.3%) |
100% |
(>100%) |
|
8.6% |
Total Operating Profit4 |
4,175 |
1,986 |
1,254 |
13,847 |
(247) |
(479) |
(361) |
(3,286) |
|
16,889 |
Total Operating Profit4 % |
53.4% |
9.6% |
0.9% |
25.6% |
(1.1%) |
(9.6%) |
(>100%) |
(>100%) |
|
7.2% |
1 - Including 100% of the results of Gama Aviation's Associate in the US and Joint Venture in Hong Kong.
2 - Calculated at a constant foreign exchange rate of $1.36 to £1.
3 - Underlying EBITDA is arrived at by taking operating profit before depreciation, amortisation and exceptional items.
4 - Underlying total operating profit is arrived at by taking operating profit before amortisation and exceptional items and including the share of results of equity accounted investments.
5 - 'Elims' represents the elimination of inter-segment revenue.
Consolidated income statement for the year ended 31 December 2016
|
|
|
Year ended 2016 |
|
Year ended 2015 |
|
Note |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
Revenue |
3 |
|
203,037 |
|
236,017 |
Cost of sales |
|
|
(158,886) |
|
(184,443) |
Gross profit |
|
|
44,151 |
|
51,574 |
Administrative expenses |
|
|
(32,884) |
|
(42,162) |
|
|
|
|
|
|
Underlying EBITDA |
|
|
17,294 |
|
20,400 |
Exceptional Items |
4 |
|
(2,548) |
|
(7,123) |
Depreciation and amortisation |
|
|
(3,479) |
|
(3,865) |
|
|
|
|
|
|
Operating profit |
|
|
11,267 |
|
9,412 |
Share of results from equity accounted investments |
|
|
(330) |
|
(1,324) |
|
|
|
|
|
|
Total operating profit |
|
|
10,937 |
|
8,088 |
Finance income |
|
|
9,750 |
|
1,044 |
Finance costs |
|
|
(1,379) |
|
(2,256) |
|
|
|
|
|
|
Profit before tax from continuing operations |
|
|
19,308 |
|
6,876 |
Taxation |
|
|
(615) |
|
2,513 |
|
|
|
|
|
|
Profit from continuing operations |
|
|
18,693 |
|
9,389 |
Discontinued operations |
|
|
|
|
|
Loss after tax for the year from discontinued operations |
4 |
|
(2,127) |
|
(1,102) |
Profit for the year |
|
|
16,565 |
|
8,287 |
Attributable to: |
|
|
|
|
|
Owners of the Company: |
|
|
16,676 |
|
8,049 |
Non-controlling interests |
|
|
(110) |
|
238 |
|
|
|
16,566 |
|
8,287 |
|
|
|
|
|
|
Consolidated statement of comprehensive income as at 31 December 2016
|
|
|
Year ended 2016 |
|
Year ended 2015 |
|
Note |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Profit for the year |
|
|
16,566 |
|
8,287 |
Items that may be reclassified to profit or loss: |
|
|
|
|
|
Exchange differences on translation of foreign operations |
|
|
(18,440) |
|
(4,186) |
Total comprehensive profit for the year |
|
|
(1,874) |
|
4,101 |
Non-controlling interest |
|
|
110 |
|
(238) |
Profit and total comprehensive income for the year attributable to the owners of the company |
|
|
(1,764) |
|
3,863 |
Earnings per share attributable to the equity holders of the parent |
5 |
|
|
|
|
- basic (cents) |
|
|
38.05c |
|
18.72c |
- diluted (cents) |
|
|
38.05c |
|
18.72c |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to the equity holders of the parent - continuing operations |
|
|
|
|
|
- basic (cents) |
|
|
42.90c |
|
21.28c |
- diluted (cents) |
|
|
42.90c |
|
21.28c |
Consolidated balance sheet as at 31 December 2016
|
|
|
2016 |
|
2015 |
|
Note |
|
$'000 |
|
$'000 |
Non-current assets |
|
|
|
|
|
Goodwill |
6 |
|
37,631 |
|
39,869 |
Other intangible assets |
7 |
|
9,987 |
|
8,396 |
Total intangible assets |
|
|
47,618 |
|
48,265 |
Property, plant and equipment |
|
|
12,215 |
|
14,806 |
Deferred tax asset |
|
|
4,557 |
|
3,407 |
|
|
|
64,390 |
|
66,478 |
Current assets |
|
|
|
|
|
Assets held for resale |
|
|
7,200 |
|
3,126 |
Inventories |
|
|
8,410 |
|
7,353 |
Trade and other receivables |
|
|
46,473 |
|
49,608 |
Cash and cash equivalents |
|
|
11,174 |
|
8,457 |
|
|
|
73,257 |
|
68,544 |
Total assets |
|
|
137,647 |
|
135,022 |
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
|
(41,682) |
|
(53,956) |
Obligations under finance leases |
|
|
(1,644) |
|
(1,586) |
Provisions for liabilities |
|
|
(2,416) |
|
(2,000) |
Borrowings |
|
|
(24,018) |
|
(8,851) |
Deferred revenue |
|
|
(4,315) |
|
(4,538) |
|
|
|
(74,075) |
|
(70,931) |
Total assets less current liabilities |
|
|
63,572 |
|
64,091 |
Non-current liabilities |
|
|
|
|
|
Borrowings |
|
|
(923) |
|
(1,110) |
Obligations under finance leases |
|
|
(3,976) |
|
(5,932) |
Provisions for liabilities |
|
|
(492) |
|
- |
Deferred tax liabilities |
|
|
(1,649) |
|
(1,395) |
|
|
|
(7,040) |
|
(8,437) |
Total liabilities |
|
|
(81,116) |
|
(79,368) |
Net assets/(liabilities) |
|
|
56,532 |
|
55,654 |
Consolidated balance sheet as at 31 December 2016 (continued)
|
|||||
|
|
|
2016 |
|
2015 |
|
Note |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
|
|
684 |
|
670 |
Share premium |
|
|
- |
|
35,458 |
Other reserves |
|
|
61,377 |
|
57,228 |
Foreign exchange reserve |
|
|
(23,529) |
|
(5,089) |
Accumulated profit/(losses) |
|
|
17,419 |
|
(33,304) |
|
|
|
55,951 |
|
54,963 |
Non-controlling interest |
|
|
581 |
|
691 |
|
|
|
|
|
|
Total equity |
|
|
56,532 |
|
55,654 |
The financial statements were approved and authorised for issue on 24 March 2016 on behalf of the Board of Directors by:
K Godley
Director
Consolidated statement of changes in equity |
|||||||||||||||
|
Share Capital |
|
Share Premium |
|
Other reserves |
|
Foreign exchange reserve |
|
Accumulated profit / (losses) |
|
Total equity attributable to owners of the Company |
|
Non-controlling interest |
|
Total (deficit)/ equity |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2015 |
426 |
|
8,846 |
|
10,937 |
|
(903) |
|
(40,999) |
|
(21,693) |
|
99 |
|
(21,594) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares |
244 |
|
26,612 |
|
- |
|
- |
|
- |
|
26,856 |
|
- |
|
26,856 |
Acquisition of Gama Aviation |
- |
|
- |
|
46,291 |
|
- |
|
- |
|
46,291 |
|
- |
|
46,291 |
Non-controlling interest acquisition |
- |
|
- |
|
- |
|
- |
|
1,146 |
|
1,146 |
|
(1,146) |
|
- |
Non-controlling interest disposal |
- |
|
- |
|
- |
|
- |
|
(1,500) |
|
(1,500) |
|
1,500 |
|
- |
Transactions with owners |
244 |
|
26,612 |
|
46,291 |
|
- |
|
(354) |
|
72,793 |
|
354 |
|
73,147 |
Profit for the year |
- |
|
- |
|
- |
|
- |
|
8,049 |
|
8,049 |
|
238 |
|
8,287 |
Other comprehensive income |
- |
|
- |
|
- |
|
(4,186) |
|
- |
|
(4,186) |
|
- |
|
(4,186) |
Total comprehensive income |
- |
|
- |
|
- |
|
(4,186) |
|
8,049 |
|
3,863 |
|
238 |
|
4,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2015 |
670 |
|
35,458 |
|
57,228 |
|
(5,089) |
|
(33,304) |
|
54,963 |
|
691 |
|
55,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares |
14 |
|
- |
|
4,149 |
|
- |
|
- |
|
4,163 |
|
- |
|
4,163 |
Cancellation of share premium |
- |
|
(35,458) |
|
- |
|
- |
|
35,458 |
|
- |
|
- |
|
- |
Transactions with owners |
14 |
|
(35,458) |
|
4,149 |
|
- |
|
35,458 |
|
4,163 |
|
- |
|
4,163 |
Profit for the year |
- |
|
- |
|
- |
|
- |
|
16,676 |
|
16,676 |
|
(110) |
|
16,566 |
Dividend paid |
- |
|
- |
|
- |
|
|
|
(1,411) |
|
(1,411) |
|
- |
|
(1,411) |
Other comprehensive income |
- |
|
- |
|
- |
|
(18,440) |
|
- |
|
(18,440) |
|
- |
|
(18,440) |
Total comprehensive income |
- |
|
- |
|
- |
|
(18,440) |
|
15,265 |
|
(3,175) |
|
(110) |
|
(3,285) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2016 |
684 |
|
- |
|
61,377 |
|
(23,529) |
|
17,419 |
|
55,951 |
|
581 |
|
56,532 |
|
Consolidated cash flow statement for the year ended 31 December 2016
|
|
|
Year ended 2016 |
|
Year ended 2015 |
|
Note |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Net cash generated by/(expended on) operating activities |
9 |
|
725 |
|
(16,619) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(3,697) |
|
(1,685) |
Purchases of intangibles |
|
|
(400) |
|
(30) |
Purchases of assets held for sale |
|
|
(266) |
|
- |
Proceeds on disposal of property, plant and equipment |
|
|
- |
|
436 |
Proceeds on disposal of assets held for sale |
|
|
- |
|
2,037 |
Investment in joint venture |
|
|
- |
|
(50) |
Acquisition of subsidiary, net of cash acquired |
|
|
(6,239) |
|
3,213 |
Net cash (used)/received by investing activities |
|
|
(10,602) |
|
3,921 |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Issuance of shares (net of share issue costs) |
|
|
- |
|
26,856 |
Consideration for disposal of non-controlling interest |
|
|
- |
|
(1,142) |
Repayments of obligations under finance leases |
|
|
(1,900) |
|
(1,390) |
Proceeds from borrowings |
|
|
17,798 |
|
7,725 |
Repayment of borrowings |
|
|
(40) |
|
(15,767) |
Dividend paid to equity holders of the parent |
|
|
(1,411) |
|
- |
Net cash from financing activities |
|
|
14,447 |
|
16,282 |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
4,570 |
|
3,584 |
Cash and cash equivalents at the beginning of year |
|
|
8,457 |
|
4,985 |
Effect of foreign exchange rates |
|
|
(1,853) |
|
(112) |
Cash and cash equivalents at the end of year |
|
|
11,174 |
|
8,457 |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
2016 |
|
2015 |
|
|
|
$'000 |
|
$'000 |
|
|
|
|
|
|
Cash and bank balances |
|
|
11,174 |
|
8,457 |
|
|
|
|
|
|
Cash and cash equivalents comprise cash and bank balances. The carrying amount of these assets is approximately equal to their fair value.
Gama Aviation Plc (previously Hangar8 Plc) is incorporated in the United Kingdom. The address of the registered office is the Business Aviation Centre, Farnborough Airport, Hampshire, GU14 6XA.
Non statutory financial statements
The financial information set out in this preliminary results announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2016 or 2015 but is derived from those financial statements. Statutory financial statements for 2015 have been delivered to the Registrar of Companies. Those for 2016 will be delivered following the Company's Annual General Meeting, which will be convened on 25 May 2017. The auditors have reported on those accounts: their reports on those financial statements were unqualified and did not contain statements under Section 498 of the Companies Act 2006.
The financial statements, and this preliminary statement, of the Group for the year ended 31 December 2016 were authorised for issue by the board of Directors on 24 March 2017 and the balance sheet was signed on behalf of the Board by Kevin Godley, Director.
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the E.U.
The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for the assets acquired. The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Group is exposed, or has rights to, variable returns from its involvement in the entity and has the ability to affect those returns through its power over the entity.
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the total of the acquisition date fair values of the assets transferred by the Group, the liabilities incurred by the Group to former owners, the equity issued by the Group and the amount of any non-controlling interest in the acquiree either at fair value or at the proportional share of the acquiree's identifiable net assets. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control is accounted for as an equity transaction, being a disposal or acquisition of non-controlling interest.
2. Significant accounting policies (continued)
Going concern
The directors have performed a detailed analysis of the cash flow projections for the Group as a whole covering the period through to the financial year ended 31 December 2016 and beyond. The key assumptions in this forecast include the profitable growth of the trading businesses and the knowledge that the group has material headroom in its debt covenants.
The directors are therefore of the opinion that in all reasonably foreseeable circumstances the company will remain a going concern for at least twelve months from the date on which these financial statements have been approved. Accordingly, the going concern basis has been adopted in the preparation of these financial statements.
Cash and cash equivalents
The Group's cash and cash equivalents in the statements of financial position comprise cash at bank and on hand and short-term deposits with a maturity of three months or less from inception, which are subject to an insignificant risk of changes in value.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.
Assets held for sale
The Group classifies assets as held for sale if their carrying value will be recovered principally through sale rather than through continuing use. Such assets are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding finance costs and income tax expense. The criteria for assets held for sale is regarded as only met when the sale is highly probable and the asset is available for immediate sale in its present condition. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.
Events or circumstances may extend the period to complete the sale beyond one year. An extension of the period required to complete a sale does not preclude an asset from being classified as held for sale if the delay is caused by events or circumstances beyond the entity's control and there is sufficient evidence that the entity remains committed to its plan to sell the asset
Business combinations
On 5 January 2015 Hangar8 Plc (now Gama Aviation Plc) became the legal parent of Gama Aviation Holdings (Jersey) Limited via a share-for-share exchange transaction. To acquire 100% of Gama Aviation Holdings (Jersey) Limited 's issued share capital, Hangar8 Plc (now Gama Aviation Plc) issued 27,341,960 shares in exchange for each ordinary shares of Gama Aviation Holdings (Jersey) Limited. The newly combined entity is now owned by shareholders of Gama Aviation Holdings (Jersey) Limited and Hangar8 Plc (now Gama Aviation Plc), with each ordinary share holding equal share of the profits and returns from the newly combined entity. However, due to the relative values of the companies, the shareholders of Gama Aviation Holdings (Jersey) Limited became the majority shareholder with 60% of the combined share capital following the share for share transaction. The allocation of the key roles and the Board composition has been driven by Gama Aviation Holdings (Jersey) Limited and the majority of the company's continuing operations and executive management are those of Gama Aviation Holdings (Jersey) Limited. It was therefore concluded that Gama Aviation Holdings (Jersey) Limited obtained control of Gama Aviation Plc. Accordingly, the transaction has been accounted for in accordance with IFRS 3 as a reverse takeover. The consolidated financial statements present the substance of the transaction with Hangar8 Plc as the legal parent but Gama Aviation Holdings (Jersey) Limited as the accounting acquirer.
2. Significant accounting policies (continued)
Investments in associate and joint venture
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
The Group's investments in its associate and joint venture are accounted for using the equity method of accounting. The investment is carried in the balance sheet at cost as underlying by post-acquisition changes in the Group's share of the net assets of the investment, less any impairment in the value of the investment. Losses in excess of the Group's interest in the investment (which includes any long-term interests that, in substance, form part of the Group's net investment) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investment.
Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment. The Group's share of the changes in the carrying value of the investments in associates is recognised in the income statement.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the amount of any non-controlling interests in the acquiree and the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Revenue recognition
The Group measures revenue as the fair value of consideration received or receivable and represents amounts received for goods and services provided in the normal course of business, net of discounts, estimated customer returns, VAT and other sales-related taxes.
Revenue is recognised when the amount can be reliably estimated, collection is probable, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control of the goods sold, and the inherent risks and rewards of ownership of the goods have been transferred to the other party.
Where contracts include provisions for adjustments, including yearly increases based on external benchmarks, these are not taken into consideration until they are known.
Rendering of services
Revenue from services is primarily derived from the management or provision of aircraft which includes the revenues generated by special mission support, logistics support and charter. These services are referred to within the group as "Air". Revenue includes fixed contract fees and variable fees such as revenue earned with reference to flying hours. Revenue also includes the recharges for costs incurred relating to the management or provision of the aircraft. We record revenue relating to services rendered using an accrual method and in accordance with the terms of the contracts pursuant to which such services are rendered. Revenue from aircraft services is recognised based on contractual rates as the related services are performed.
2. Significant accounting policies (continued)
Rendering of services (continued)
"Ground" Revenues are materially associated with engineering activity which represents amounts derived from the provision of services to customers during the year, including aircraft maintenance and overhauls. The amount of profit attributable to the stage of completion of an engine and maintenance overhaul contract is recognised when the outcome of the contract can be foreseen with reasonable certainty. Revenue for such contracts is stated at the cost appropriate to the stage of completion plus attributable profits, less amounts recognised in previous years. The stage of completion is measured by reference to costs (mainly hours and materials) incurred to date as a percentage of total estimated costs for each contract. Provision is made for any losses as soon as they are foreseen. Other services within "ground" include design and modification work with revenue recognised on the same basis as that of the engineering and FBO operations and software. Revenues for FBO operations and software are recognised at the point of service delivery.
Sale of goods
Revenues associated with the sale of goods represent amounts derived from sales activity whereby the Group procures aircraft, parts or components on behalf of customers for their use. Revenue is recognised when all the following conditions are satisfied:
· the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
· the amount of revenue can be measured reliably;
· it is probable that the economic benefits associated with the transaction will flow to the entity;
· the costs incurred or to be in incurred in respect of the transaction can be measured reliably; and
· the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.
Interest revenue
Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in US Dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. These financial statements are presented in US dollars because that is the currency of the primary economic environment in which the Group operates.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
2. Significant accounting policies (continued)
Foreign currencies (continued)
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognised in other comprehensive income and accumulated in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate for each year end.
Operating profit
Operating profit is stated after the share of results of associates but before investment income and finance costs.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered the service entitling them to the contributions. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
Intangible assets
Internally generated intangible assets are recognised only if they satisfy the IAS 38 criteria in that a separately identifiable asset is created from which future economic benefits are expected to flow and the cost can be measured reliably. The life of each asset is assessed individually. Where the life is considered to be indefinite no amortisation is charged. Included in intangible assets are internally generated assets relating to the costs incurred to commence operations in the United Arab Emirates in the process of gaining an AOC (Air Operators Certificate). The certificate has an indefinite life and without the certificate the operation cannot perform legally and as such amortisation is not charged.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Included in intangible assets acquired are Part 145 approvals, licences and brand, customer relations and workforce, and computer software.
· Part 145 Approvals - These relate to the recognised regulatory approvals required by a business to perform maintenance in the EU Ground business.
· Licence and brand, customer relations and software - recognised on acquisitions
A summary of the policies applied to the Group's acquired intangible assets is as follows:
Part 145 approvals |
indefinite useful life, no amortisation charged, annual impairment review |
Licences |
10% per annum, straight line method |
Brand |
amortised over 18 months, straight line method |
Customer relations |
10% per annum, straight line method |
Software |
33% per annum, straight line method |
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
2. Significant accounting policies (continued)
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:
a) Raw materials and consumables: purchase cost on a first in, first out basis
b) Work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives, using the straight-line method, on the following bases:
Leasehold property |
Life of lease |
Aircraft hull and refurbishments |
Remaining life of the aircraft, various rates between 5% and 20% per annum |
Furniture, fixtures and equipment |
20% per annum |
Motor vehicles |
20% per annum |
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.
2. Significant accounting policies (continued)
Impairment of tangible and intangible assets excluding goodwill (continued)
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
Trade receivables and other receivables are measured at amortised cost less provision for doubtful debts, determined as set out below in "impairment of financial assets". Any write-down of these assets is expensed to the income statement.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Other financial liabilities
Other financial liabilities, including borrowings and payables, are initially measured at fair value and subsequently at amortised cost, net of transaction costs.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
Exceptional items
Exceptional items relate to items which do not contribute to the underlying performance of the Group, and as a result are presented separately in the consolidated income statement. Their determination is made after consideration of their nature and materiality and is applied consistently from period to period.
For management purposes, the Group is organised into business units, based on line of business and geographical location.
Reported
An analysis of the Group's revenue, gross profit, underlying EBITDA and underlying operating profit for the year ended 31 December 2016 is as follows:
|
|
|
Total Revenue |
Gross profit |
Gross profit |
Underlying EBITDA |
Underlying EBITDA |
Underlying operating profit |
Underlying operating profit |
|
|
|
$'000 |
$'000 |
% |
$'000 |
% |
$'000 |
% |
|
|
|
|
|
|
|
|
|
|
US: Air |
|
|
7,949 |
6,160 |
77.5 |
5,927 |
74.6 |
5,973 |
75.1 |
US: Ground |
|
|
24,130 |
5,560 |
23.0 |
2,778 |
11.5 |
2,401 |
10.0 |
Europe: Air |
|
|
117,736 |
9,568 |
8.1 |
2,607 |
2.2 |
2,095 |
1.8 |
Europe: Ground |
|
|
38,321 |
17,615 |
46.0 |
8,383 |
21.9 |
7,660 |
20.0 |
MENA: Air |
|
|
19,531 |
1,345 |
6.9 |
15 |
0.1 |
(95) |
(0.5) |
MENA: Ground |
|
|
5,170 |
1,697 |
32.8 |
273 |
5.3 |
32 |
0.6 |
Asia: Air |
|
|
80 |
80 |
100.0 |
80 |
100 |
(242) |
(>100) |
Other |
|
|
2,327 |
2,126 |
91.3 |
(2,769) |
(>100) |
(2,767) |
(>100) |
Eliminations |
|
|
(12,207) |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
203,037 |
44,151 |
21.7 |
17,294 |
8.5 |
15,057 |
7.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying operating profit |
15,057 |
|
|||||||
Amortisation |
(1,438) |
|
|||||||
Exceptional items (including share of associate's exceptional items) |
(2,682) |
|
|||||||
Finance income |
9,750 |
|
|||||||
Finance costs |
(1,379) |
|
|||||||
|
|
|
|||||||
Profit before tax from continuing operations |
19,308 |
|
|||||||
|
|
|
|||||||
|
|
|
Reported
An analysis of the Group's revenue, gross profit, underlying EBITDA and underlying operating profit for the year ended 31 December 2015 is as follows:
|
|
|
Total Revenue |
Gross profit |
Gross profit |
Underlying EBITDA |
Underlying EBITDA |
Underlying operating profit |
Underlying operating profit |
|
|
|
$'000 |
$'000 |
% |
$'000 |
% |
$'000 |
% |
|
|
|
|
|
|
|
|
|
|
US: Air |
|
|
7,815 |
5,375 |
68.8 |
5,185 |
66.3 |
4,175 |
53.4 |
US: Ground |
|
|
20,661 |
4,947 |
23.9 |
2,226 |
10.8 |
1,986 |
9.6 |
Europe: Air |
|
|
139,224 |
13,542 |
9.7 |
2,124 |
1.5 |
1,254 |
0.9 |
Europe: Ground |
|
|
54,003 |
24,312 |
45.0 |
14,449 |
26.8 |
13,847 |
25.6 |
MENA: Air |
|
|
21,598 |
1,431 |
6.6 |
(160) |
(0.7) |
(247) |
(1.1) |
MENA: Ground |
|
|
4,965 |
1,188 |
23.9 |
(163) |
(3.3) |
(479) |
(9.7) |
Asia: Air |
|
|
36 |
36 |
100.0 |
36 |
100 |
(361) |
(>100) |
Other |
|
|
935 |
744 |
79.6 |
(3,296) |
(>100) |
(3,286) |
(>100) |
Eliminations |
|
|
(13,220) |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
236,017 |
51,574 |
21.9 |
20,400 |
8.6 |
16,888 |
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying operating profit |
16,888 |
|
|||||||
Amortisation |
(1,677) |
|
|||||||
Exceptional items (including share of associate's exceptional items) |
(7,123) |
|
|||||||
Finance income |
1,044 |
|
|||||||
Finance costs |
(2,256) |
|
|||||||
|
|
|
|||||||
Profit before tax from continuing operations |
6,876 |
|
|||||||
|
|
|
|||||||
|
|
|
An analysis of the Group's assets and liabilities by segment is as follows:
|
Assets |
Liabilities |
||
|
2016 $'000 |
2015 $'000 |
2016 $'000 |
2015 $'000 |
|
|
|
|
|
US: Air |
16,674 |
16,937 |
(1,866) |
(1,491) |
US: Ground |
8,407 |
7,541 |
(1,168) |
(1,882) |
Europe: Air |
44,000 |
42,515 |
(37,254) |
(53,716) |
Europe: Ground |
32,145 |
16,705 |
(8,715) |
(9,579) |
MENA: Air |
5,165 |
5,568 |
(4,878) |
(5,529) |
MENA: Ground |
1,040 |
1,244 |
(4,655) |
(921) |
Asia: Air |
263 |
198 |
(18) |
(17) |
Other |
143,686 |
151,705 |
(21,977) |
(13,070) |
Investment eliminations |
(110,963) |
(94,735) |
- |
- |
Other Group adjustments and eliminations |
(2,770) |
(12,656) |
(584) |
6,837 |
|
|
|
|
|
|
137,647 |
135,022 |
(81,115) |
(79,368) |
|
|
|
|
|
An analysis of the Group's revenue is as follows:
|
Year ended 2016 $'000 |
Year ended 2015 $'000 |
Continuing operations |
|
|
|
|
|
Sale of business aviation services |
197,169 |
230,292 |
Sale of goods (engines and parts) |
- |
1,289 |
Branding fees |
5,868 |
4,436 |
|
|
|
|
203,037 |
236,017 |
|
|
|
There is no revenue arising from any one customer accounting for more than 10% of revenue.
|
||
|
|
|
Geographic information
|
2016 $'000 |
2015 $'000 |
Non-current assets |
|
|
|
|
|
US |
2,217 |
2,121 |
Europe |
9,577 |
12,134 |
MENA |
421 |
551 |
|
|
|
|
12,215 |
14,806 |
|
|
|
|
|
|
Non-current assets for this purpose consist of property, plant and equipment.
Continuing operating profit is stated after exceptional items.
Exceptional items |
|
Year ended 2016 $'000 |
Year ended 2015 $'000 |
Transaction costs |
|
1,355 |
3,585 |
Integration and business re-organisation costs |
|
1,193 |
3,538 |
|
|
|
|
|
|
2,548 |
7,123 |
|
|
|
|
Transactions costs represent expenses incurred in respect of the acquisitions completed in the year (Aviation Beauport Group, and Flyertech Limited and Aerstream Limited), as well as costs associated with seeking out new potential investment opportunities. Integration and business re-organisation costs represent the subsequent third party and internal costs associated with the acquisitions.
Discontinued operations relate to the losses generated by the owned aircraft within the group that are held for sale as part of the group strategy to exit the business model of owned aircraft that are deployed solely for the purposes of ad-hoc charter. The results of these discontinued operations are presented below:
Discontinued operations |
|
Year ended 2016 $'000 |
Year ended 2015 $'000 |
||||
Revenue |
|
690 |
875 |
||||
Expenses (including depreciation charge of $7,000 in 2015) |
|
(2,916) |
(2,044) |
||||
|
|
|
|
||||
Operating loss |
|
(2,226) |
(1,169) |
||||
Finance income |
|
178 |
67 |
||||
Finance costs |
|
(79) |
- |
||||
|
|
|
|
||||
Loss before tax from discontinued operations |
|
(2,127) |
(1,102) |
||||
Taxation |
|
- |
- |
||||
|
|
|
|
||||
Loss after tax for the year from discontinued operations |
|
(2,127) |
(1,102) |
||||
|
|
|
|
||||
Earnings per share |
|
|
|
|
|
||
Basic - cents |
|
|
(4.85c) |
(2.56c) |
|
||
Diluted - cents |
|
(4.85c) |
(2.56c) |
|
|||
The weighted average number of ordinary shares is included in Note 5.
The net cash flows incurred by discontinued operations are as follows:
Operating activities |
|
234 |
(1,731) |
Investing activities |
|
(266) |
2,070 |
|
|
|
|
Net cash outflow |
|
(31) |
(339) |
|
|
|
|
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.
|
|
|
Year ended 2016 |
Year ended 2015 |
|
|
|
|
|
Numerator |
|
|
|
|
Profit / (loss) attributable to ordinary equity holders of the parent: |
|
|
|
|
Continuing operations |
|
|
18,803 |
9,151 |
Discontinued operations |
|
|
(2,127) |
(1,102) |
|
|
|
|
|
Profit attributable to ordinary equity holders of the parent for basic earnings |
|
|
16,676 |
8,049 |
|
|
|
|
|
Add amortisation |
|
|
1,438 |
1,677 |
Add exceptional items (including share of associate's exceptional items) |
|
2,682 |
7,123 |
|
|
|
|
|
|
Profit attributable to ordinary shareholders for underlying earnings |
|
|
20,796 |
16,849 |
|
|
|
|
|
Denominator |
|
|
|
|
Weighted average number of shares used in basic EPS |
|
|
43,827,775 |
42,994,442 |
Weighted average number of shares used in diluted EPS |
|
43,827,775 |
42,994,442 |
|
|
|
|
|
|
Earnings per share |
|
|
|
|
Basic - cents |
|
|
38.05c |
18.72c |
Diluted - cents |
|
38.05c |
18.72c |
|
Underlying Basic - cents |
|
47.45c |
39.19c |
|
Underlying Diluted - cents |
|
47.45c |
39.19c |
To calculate the EPS for discontinued operations (note 4), the weighted average number of ordinary shares for both the basic and the diluted EPS is as per the table above. The following table provides the loss amount used.
|
|
Year ended 2016 |
Year ended 2015 |
|
|
|
|
Loss from discontinued operations for the basic and diluted |
|
|
|
EPS calculations |
|
(2,127) |
(1,102) |
|
|
|
|
|
|
|
$'000 |
Cost |
|
|
|
At 1 January 2015 |
|
|
4,430 |
Created upon reverse takeover |
|
|
41,204 |
Exchange differences |
|
|
(2,068) |
|
|
|
|
At 31 December 2015 |
|
|
43,566 |
Recognised upon acquisition |
|
|
5,015 |
Exchange differences |
|
|
(7,253) |
|
|
|
|
At 31 December 2016 |
|
|
41,328 |
|
|
|
|
|
|
|
|
Accumulated impairment losses |
|
|
|
At 1 January 2015, 31 December 2015 and 31 December 2016 |
|
|
3,697 |
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
At 31 December 2016 |
|
|
37,631 |
|
|
|
|
At 31 December 2015 |
|
|
39,869 |
|
|
|
|
The recoverable amount of goodwill is allocated to the following cash generating units:
|
2016 $'000 |
2015 $'000 |
|
|
|
EU Air |
17,792 |
19,492 |
EU Ground |
19,839 |
20,377 |
|
|
|
|
37,631 |
39,869 |
|
|
|
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of each business are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to direct costs during the period.
At the year end, the directors carried out an impairment review of the carrying value of the goodwill recorded in the Balance Sheet. Discounted cash flows over a 5 year period based on approved budgets and forecasts, were carried out using a discount factor of 11.5% (independently calculated by a third party), revenue growth of 5% with direct costs growing at between 3-5% and overheads growing at 2%. The results showed that the carrying values could be supported by the future cash flows. Accordingly, the directors have not recorded impairment in the year.
|
|
|
|
|
|
|
|
Commence operations $'000 |
Part 145 approvals $'000 |
Licences and Brand $'000 |
Customer relations $'000 |
Computer Software $'000 |
Total $'000 |
Cost |
|
|
|
|
|
|
At 1 January 2015 |
1,488 |
2,990 |
- |
- |
- |
4,478 |
Addition due to reverse takeover |
- |
- |
- |
- |
243 |
243 |
Recognised upon reverse takeover |
- |
- |
1,194 |
8,937 |
- |
10,131 |
Additions |
- |
- |
- |
- |
30 |
30 |
Disposals |
- |
- |
- |
- |
(251) |
(251) |
Foreign exchange differences |
(14) |
(148) |
(58) |
(440) |
(13) |
(673) |
|
|
|
|
|
|
|
At 31 December 2015 |
1,474 |
2,842 |
1,136 |
8,497 |
9 |
13,958 |
Recognised upon acquisition |
- |
- |
226 |
4,024 |
11 |
4,261 |
Additions |
- |
400 |
- |
- |
- |
400 |
Foreign exchange differences |
(21) |
(481) |
(216) |
(1,801) |
(3) |
(2,522) |
|
|
|
|
|
|
|
At 31 December 2016 |
1,453 |
2,761 |
1,146 |
10,720 |
17 |
16,097 |
|
|
|
|
|
|
|
|
||||||
Amortisation and accumulated impairment losses |
||||||
At 1 January 2015 |
1,215 |
2,990 |
- |
- |
- |
4,205 |
Amortisation |
- |
- |
686 |
878 |
113 |
1,677 |
Disposals |
- |
- |
- |
- |
(106) |
(106) |
Foreign exchange differences |
(14) |
(148) |
(22) |
(26) |
(4) |
(214) |
|
|
|
|
|
|
|
At 31 December 2015 |
1,201 |
2,842 |
664 |
852 |
3 |
5,562 |
Amortisation |
- |
- |
416 |
1,016 |
6 |
1,438 |
Foreign exchange differences |
(21) |
(481) |
(151) |
(236) |
(1) |
(890) |
|
|
|
|
|
|
|
At 31 December 2016 |
1,180 |
2,361 |
929 |
1,632 |
8 |
6,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
At 31 December 2016 |
273 |
400 |
217 |
9,088 |
9 |
9,987 |
|
|
|
|
|
|
|
At 31 December 2015 |
273 |
- |
472 |
7,645 |
6 |
8,396 |
|
|
|
|
|
|
|
The intangible assets relating to the commencement of operations were incurred in gaining an AOC (Air Operators Certificate) in the United Arab Emirates. These commencement costs meet the capitalisation requirements of IAS 38. This asset, the AOC, has not been amortised because the directors believe it has an indefinite life. In addition, there are other intangible assets that meet the capitalisation requirements within IAS 38 which were acquired with the purchase of Hangar8 Plc in 2015 and Aviation Beauport Group, FlyerTech Limited and Aerstream Limited in 2016. These include licences and brands, customer relations and workforce and computer software.
The recoverable amounts of each business are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to direct costs during the period. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years. The rate used to discount the forecast cash flows is 11.5% (2015: 11.5%). The directors have determined that no such impairments are required in the years ended 31 December 2015 and 2016.
On 1 March 2016, Gama Aviation (Engineering) Limited (a subsidiary of Gama Aviation Plc) acquired Aviation Beauport Group; a privately owned Jersey based business offering a range of business aviation services, including aircraft charter, FBO services (handling, parking and hangarage services) as well as having four aircraft currently under management.
From the date of the acquisition, the Aviation Beauport Group contributed $7,622,000 of revenue and $1,006,000 to profit before tax from continuing operations of the Group. If the acquisition had taken place at the beginning of 2016, the contribution would have been $8,616,000 of revenue and $994,000 to profit before tax from continuing operations of the Group.
Goodwill of $3,253,000 and identifiable intangible assets of $1,326,000 arose on acquisition. The goodwill comprises the fair value of expected synergies arising from the acquisition.
The following table summarises the consideration paid for Aviation Beauport Group, the fair value of the assets acquired and the liabilities assumed at the acquisition date.
Consideration at 1 March 2016 |
|
|
|
$'000 |
|
|
|
|
|
|
|
Equity instruments (1,000,000 ordinary shares) |
|
|
|
4,163 |
|
Cash |
|
|
|
3,608 |
|
Total consideration transferred |
|
|
|
7,771 |
|
|
|
|
|
|
|
Recognised amounts of identifiable assets acquired and liabilities assumed |
|
|
|
$'000 |
|
|
|
|
|
Property, plant and equipment |
|
|
|
2,967 |
Licences (included within intangibles) |
|
|
|
14 |
Brand (included within intangibles) |
|
|
|
153 |
Customer relationships (included within intangibles) |
|
|
|
1,159 |
Inventories |
|
|
|
5 |
Trade and other receivables |
|
|
|
401 |
Trade and other payables |
|
|
|
(464) |
Deferred revenue |
|
|
|
(797) |
Goodwill |
|
|
|
3,253 |
|
|
|
|
6,691 |
Cash |
|
|
|
1,080 |
Total |
|
|
|
7,771 |
|
|
|
|
|
Following an independent valuation, the provisional fair values at acquisition date were confirmed. Consequently the book values are the same as the fair values.
On 1 July 2016, Gama Aviation Limited (a subsidiary of Gama Aviation Plc) acquired FlyerTech Limited and sister company Aerstream Limited, a privately owned airworthiness management firm based in the UK.
From the date of the acquisition, FlyerTech Limited and Aerstream Limited contributed $1,313,000 of revenue and $463,000 to profit before tax from continuing operations of the Group. If the acquisition had taken place at the beginning of 2016, the contribution would have been $2,390,000 of revenue and $935,000 to profit before tax from continuing operations of the Group.
Goodwill of $1,762,000 and identifiable intangible assets of $2,935,000 arose on acquisition. The goodwill comprises the fair value of expected synergies arising from the acquisition.
The following table summarises the consideration paid for FlyerTech Limited and Aerstream Limited, the fair value of the assets acquired and the liabilities assumed at the acquisition date.
Consideration at 1 July 2016 |
|
|
|
$'000 |
|
|
|
|
|
|
|
Cash |
|
|
|
4,759 |
|
Deferred consideration |
|
|
|
803 |
|
Total consideration transferred |
|
|
|
5,562 |
|
|
|
|
|
|
|
Recognised amounts of identifiable assets acquired and liabilities assumed - provisional |
$'000 |
|||
|
|
|
|
|
Property, plant and equipment |
|
|
|
11 |
Computer software (included within intangibles) |
|
|
|
11 |
Brand (included within intangibles) |
|
|
|
59 |
Customer relationships (included within intangibles) |
|
|
|
2,865 |
Trade and other receivables |
|
|
|
343 |
Trade and other payables |
|
|
|
(333) |
Deferred revenue |
|
|
|
(204) |
Goodwill |
|
|
|
1,762 |
|
|
|
|
4,514 |
Cash |
|
|
|
1,048 |
Total |
|
|
|
5,562 |
The fair values as identified at acquisition date are provisional pending receipt of the final valuations for those assets.
|
|
2016 |
2015 |
|
|
|
|
Profit before tax from continuing operations |
|
19,308 |
6,876 |
Loss before tax from discontinued operations |
|
(2,127) |
(1,102) |
|
|
|
|
Profit before tax |
|
17,181 |
5,774 |
|
|
|
|
Adjustments for: |
|
|
|
Finance income |
|
(9,928) |
(1,044) |
Finance costs |
|
1,458 |
2,256 |
Depreciation of property, plant and equipment |
|
2,041 |
2,195 |
Amortisation of intangible assets |
|
1,438 |
1,677 |
Impairment of assets held for sale |
|
1,828 |
- |
Loss on disposal of property, plant and equipment |
|
8 |
132 |
Loss on disposal of intangibles |
|
- |
150 |
Unrealised foreign exchange movements |
|
1,911 |
(256) |
Share of loss from equity accounted investments |
|
330 |
1,324 |
|
|
|
|
Operating cash inflow before movements in working capital |
|
16,267 |
12,208 |
|
|
|
|
Increase in inventories |
|
(2,432) |
(1,128) |
(Increase)/decrease in receivables |
|
(462) |
31,568 |
Decrease in payables |
|
(9,624) |
(41,896) |
Decrease in deferred revenue |
|
(1,407) |
(14,558) |
Decrease in provisions |
|
(159) |
(309) |
|
|
|
|
Cash generated by/(expended on) operations |
|
2,183 |
(14,115) |
|
|
|
|
|
|
|
|
Taxes paid |
|
- |
(253) |
Interest received |
|
- |
5 |
Interest paid |
|
(1,458) |
(2,256) |
|
|
|
|
Net cash generated by/(expended on) operating activities |
|
725 |
(16,619) |
|
|
|
|
On 1 January 2017, Gama Aviation LLC (an associate of Gama Aviation Plc) merged its aircraft management and charter operations with Landmark Aviation LLC (a wholly owned subsidiary of BBA Aviation Plc). The newly combined business will be called Gama Aviation Signature Aircraft Management and will manage a fleet of over 200 aircraft.
Balances and transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below.
Trading transactions
During the year, Group companies entered into the following transactions with related parties who are not members of
The Group:
|
Sale of services |
Purchase of services |
||
|
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
Gama Charters LLC |
17,954 |
15,190 |
316 |
184 |
Saudi Bin Laddin |
5,397 |
8,012 |
- |
- |
Crescent Investment LLC |
2,990 |
2,918 |
859 |
805 |
Air Arabia, UAE |
199 |
280 |
- |
- |
Gama Aviation Hutchison Holdings |
427 |
162 |
- |
- |
Zulu X-Ray Services Limited |
298 |
- |
- |
338 |
Offshore Jets Ltd |
- |
3,875 |
- |
18 |
Skye Holdings Limited |
- |
3,270 |
- |
- |
Harrier Trust |
- |
1,083 |
- |
- |
Volare Aviation Ltd |
- |
633 |
- |
- |
Oxfordshire Estates Ltd |
- |
52 |
- |
- |
G Khalek |
36 |
- |
- |
- |
Valentia Properties Limited |
- |
- |
17 |
19 |
Merlin Financial Advisors |
- |
- |
85 |
16 |
Merlin Consultancy Limited |
- |
- |
- |
18 |
Gebu Partners Limited |
- |
- |
31 |
44 |
Growthgate Capital Corporation |
- |
- |
- |
6 |
|
|
|
|
|
The following amounts were outstanding at the balance sheet date:
|
Amounts owed by related parties |
Amounts owed to related parties |
||
|
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
Gama Charters LLC |
- |
- |
31 |
1,392 |
Gama Aviation Hutchison Holdings |
1,388 |
1,247 |
- |
- |
Oneti Ltd |
- |
- |
4,000 |
4,040 |
Crescent Investment LLC |
- |
- |
165 |
466 |
Saudi Bin Laddin |
371 |
232 |
300 |
300 |
Offshore Jets Ltd |
- |
219 |
- |
- |
Oxfordshire Estates limited |
- |
77 |
- |
7 |
Harrier Trust |
- |
155 |
- |
- |
Valentia Properties Limited |
- |
- |
15 |
- |
Zulu X-Ray Services Limited |
- |
- |
113 |
- |
|
|
|
|
|
Mr M A Khalek, a director and shareholder of the company, controls 24% of the voting rights of Zulu X-Ray Services Limited.
The Group controls 25% of the voting rights of Gama Charters LLC, a company registered in the USA, indirectly through Operator Holdings LLC.
The Group controls 50% of the voting rights of Gama Aviation Hutchison Holdings, a company registered in Hong Kong.
Crescent Investment LLC is an investor in Growthgate Capital, a director and shareholder of the company.
The majority shareholder of Oneti Ltd is Mr G Khalek, a related party to Mr M A Khalek, a shareholder of the company.
King Salman, Saudi Bin Laddin, Air Arabia and M Sukkar and Co are entities under common management and control with the Group.
Merlin Financial Advisors and Merlin Consultancy Limited are owned by Mr N Payne, a non-executive director of the Group up to 4 November 2016.
Gebu Partners Limited is owned by Mr G Rolls, a non-executive director of the Group up to 3 June 2016.
Valentia Limited is owned by Mr M Peagram, a non-executive director of the Group.
Offshore Jets Ltd, Skye Holdings Limited, Harrier Trust, Volare Aviation Ltd and Oxfordshire Estates Limited are owned by and or associated with Mr D Dryden, a former executive director of the Group. Mr D Dryden was an executive director until 30 September 2015.
All sales and purchases of services are made at market price.