Interim Results

RNS Number : 4397Y

Hangar 8 Plc

01 March 2012

 



1 March 2012

HANGAR 8 PLC (AIM: HGR8)

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

Interim results for the six months to 31 December 2011 and acquisition of Star-Gate Aviation

Hangar8, one of Europe's leading operators of private jets and now the world's largest charter operator of Hawker aircraft, announces half-year results for the six month period to 31 December 2011. 

Highlights

Financial

·     Group revenue up 39% to £9.3m (2010: £6.7m)

·     Management fees up 118% to £3.7m(2010: £1.7m)

·     Charter revenues up by 4% to £5.1m (2010:£4.9m)

·     Gross margin up to 26% from 19%

·     Strong cash position at period end of £1.2m (2010:£1.3m)

·     *Adjusted operating profit up 86% to £518,000 (2010: £279,000)

·     Profit before tax of £464,000 (2010: Loss of £621,000)

·     Basic and diluted EPS of 5.1p per share (2010: Loss of 11.5p) (see note 5)

Operational

·     Number of aircraft under management up by 8 to 30(2010: 22)

·     Average size of aircraft increasing - 11 heavy jets at period end (2010: 6)

·     Increased visibility of revenues from longer term contracts constituting 20% of revenues for the current period

·     Continued increase in geographical reach:

o  Number of destinations flown to up 14% to 305(2010: 267)

o  Award of AOC in Malta in addition to the UK in February 2012 

o  Acquisition of 100% of Star-Gate Aviation in March 2012

*Adjusted operating profit is defined as operating profit before depreciation, amortisation and exceptional costs.

Commenting, Nigel Payne, Chairman, said, "I am delighted with the performance of Hangar8 in the first six months of the current financial year. Through focused management, strong organic growth and a carefully selected strategic acquisition our business model is performing very well indeed and we are delivering exactly what we said we would do at the time of our IPO in late 2010. Notwithstanding the difficult economic background in Europe, the strength of the business model, the scale of the business and its expanded geographical reach enables the Board to continue to look forward to the balance of the financial year with confidence."

Dustin Dryden, Chief Executive, added, "Hangar8 has continued to perform well in the first half of the year and I am very pleased with the overall progress of the business. We have grown our fleet, improved the quantum, quality and certainty of our revenue base, expanded our geographical reach, invested still further in human resources and laid the foundations for further growth in future periods.  Our focus over the forthcoming months will be to invest in our maintenance offering, our people and further expanding our scale and geographic footprint through organic growth and acquisitions."

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

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

Chief Executive's Statement

I am pleased to report to shareholders that the Group and its management have successfully pursued the growth strategy stated at the time of our IPO in late 2010.  This strategy comprised:

·     growing our fleet of aircraft under management so as to increase revenues and operating efficiencies leading to reduced costs;

·     capturing additional margins and revenues by internalising Hangar8's previously outsourced maintenance function; and

·     spreading our larger fleet across a wider geographical base in order to capture additional charter business and reduce dependence on any one region or territory.

We have again made good progress on all of these goals during the half-year under review.

Operations

Our fleet now comprises 30 aircraft under management with an increasing proportion of the larger aircraft such as Challengers that command higher charter rates.  We now have six Challengers in the fleet compared to just one a year ago.  The continued strong growth in the number of larger jets in our fleet is a direct reflection of the increasing demand from both new and existing charter customers for such aircraft.

One of our goals over the past 12 months has been to increase the forward visibility of income.  We have made a good start through the use of longer term (typically one year) contracts for guaranteed blocks of charter hours payable per month for particular aircraft types.  In the half year, some 20% of total revenues were accounted for through the use of these contracts compared to zero in the comparative period.  We hope to grow this percentage further in the second half of this financial year.

Since the award of a Part 145 Approval from the CAA to allow us to undertake in-house line-maintenance for permitted aircraft, we have been investing in the qualified engineers necessary.  To date, we have made 4 senior appointments and expect to increase this headcount as we continue to gear up to undertake line-maintenance ourselves.

Finally, in February of this year we significantly increased our geographic footprint with the award of a new Aircraft Operating Certificate ("AOC") - in Malta.  Africa has become an important market for the Group and gaining the new AOCs in Malta and South Africa will allow us to further penetrate this growing market as the economic climate in this region stabilises. 

Results

Total Group revenue for the six month period to 31 December 2011 was up 39% at £9.3m (2010: £6.7m).  Charter revenue increased by 4% to £5.1m (2010: £4.9m) but management fees increased by 118% to £3.7m (2010: £1.7m).  This is as a result of the business refocusing upon longer term contracts rather than the spot charter market and thereby increasing the forward visibility of income and therefore the quality of its earnings.

Adjusted operating profit before depreciation, amortisation and exceptional costs was £518,000 (2010: £279,000).  Basic earnings per share were 5.1p (2010: Loss of 11.5p).

At the half-year end on 31 December 2011, the Group had cash balances of £1.2m (2010: £1.3m).

We have seen a very strong financial performance since flotation with our overall gross margin increasing to 26% and we are pleased that this growth is coming through in our EBITDA line.  All of this against a backdrop of an increased cost base from being a publicly listed company and the necessary investment to fuel the excellent top-line growth.

Acquisitions

We have continued to review strategic acquisitions as they arise in our fragmented industry as well as extending our strategy of partnering with individuals in new targeted jurisdictions.  Shortly after the half-year we acquired an initial 49% interest, with an option to gain 51% control, in a new business ("the Joint-Venture") established in Malta.  The Joint-Venture is with two private investors who will provide working capital while Hangar8 will contribute its marketing and proven management expertise.  We already have one aircraft based in Malta and will be seeking to expand operations there in due course.

Further, we are delighted to announce that today we have completed the acquisition of 100% of Star-Gate Aviation, an AOC holder in South Africa, for a consideration of £330,000 settled in £130,000 cash, £130,000 shares in Hangar 8 plc and a vendor loan of £70,000.  This acquisition consolidates our position on the African continent and enables us to operate in the region with increased confidence and credibility.  

Board

As reported at the time of our full period results in October, John Blower and Keiron Blay stood down from the Board, although Keiron remains with the Group.  On 6 February 2012, we announced the appointment of David Savile to the Board as a Non-Executive Director, with immediate effect.  David has over 30 years of invaluable global aviation experience.  As Chief Executive Officer of Air Partner plc from 1993 to 2010, he oversaw significant growth in sales, market penetration, global expansion, profitability and value. 

Outlook

Our focus for growing the business is twofold: firstly to take full advantage of organic growth opportunities created by leveraging off the scale and geographically reach of our business model and secondly, to continue to make carefully selected acquisitions as we seek to take advantage of the fragmented industry in which we operate.

Whilst some of our markets are not immune to the economic downturn, our scale, geographical reach and our ability to grow the business by leveraging off a wide range of economic areas of the world gives us some shelter. 

Overall, the Board believes that the business is in good shape and continues to look to the future with confidence.

Dustin Dryden

Chief Executive Officer

1 March 2012

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

			Six months ended 31 December 2011		Six months ended  31 December 2010		14 months ended  30 June 2011
			(unaudited)		(unaudited)		(audited)
	Note		£'000		£'000		£'000
Revenue		3		9,260		6,696	18,155
Cost of sales				(6,860)		(5,423)	(14,361)
Gross profit				2,400		1,273	3,794
Administrative expenses			(1,936)		(1,894)		(4,294)
Adjusted operating profit			518		279		731
Exceptional items			-		(859)		(1,136)
Depreciation and amortisation			(54)		(41)		(95)
Operating profit/(loss) before taxation		3	464		(621)		(500)
Taxation		4		(141)		-	-
Profit/(loss) and total comprehensive income for the period attributable to the owners of the Company			323		(621)		(500)
Basic & diluted earnings/(loss) per ordinary share		5		5.1p	(11.5p)		(8.7p)

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

		31 December 2011	31 December 2010	30 June 2011
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Non-current assets
Property, plant and equipment		122	61	97
Intangible asset		151	156	180
Deferred tax asset		194	218	218
		467	435	495
Current assets
Stock		146	-	-
Trade and other receivables		7,313	4,994	6,963
Cash and cash equivalents		1,231	1,332	2,221
		8,690	6,326	9,184
Current liabilities
Trade and other payables		(8,725)	(6,974)	(9,570)
Net current/(liabilities)		(35)	(648)	(386)
Net assets/(liabilities)		432	(213)	109
Equity attributable to the owners of the Company
Share capital	6	63	63	63
Share premium		1,653	1,653	1,653
Retained earnings		(1,284)	(1,929)	(1,607)
Total equity		432	(213)	109

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASHFLOWS

	Six months ended 31 December 2011	Six months ended 31 December 2010	14 months ended 30 June 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation	464	(621)	(500)
Depreciation and amortisation	54	41	95
(Increase) in stock	(146)	-	-
(Increase)/decrease in receivables	(350)	3,587	(4,210)
(Decrease)/increase in payables	(962)	(3,722)	4,307
Net cash flows from operating activities	(940)	(715)	(308)
Cash flows from investing activities
Purchase of intangibles	-	-	(105)
Purchase of property, plant and equipment	(50)	(119)	(125)
Net cash (used) in investing activities	(50)	(119)	(230)
Cash flows from financing activities
Share issue costs	-	(334)	(334)
Issue of ordinary shares	-	2,048	2,048
Net cash from financing activities	-	1,714	1,714
Net (decrease) / increase in cash and cash equivalents	(990)	880	1,176
Cash and cash equivalents at beginning of the period	2,221	452	1,045
Cash and cash equivalents at end of the period	1,231	1,332	2,221

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Retained earnings	Total
	£'000	£'000	£'000	£'000
Balance as at 1 July 2011	63	1,653	(1,607)	109
Total comprehensive income for the period	-	-	323	323
Balance as at 31 December 2011	63	1,653	(1,284)	432
Balance as at 1 July 2010	2	-	(1,308)	(1,306)
Transactions with owners:
Issue of shares - 12 October 2010	48	-	-	48
Issue of shares - placing 5 November 2010	13	1,987	-	2,000
Costs associated with the issue of shares	-	(334)	-	(334)
Total comprehensive loss for the period	-	-	(621)	(621)
Balance as at 31 December 2010	63	1,653	(1,929)	(213)
Balance as at 1 May 2010	2	-	(1,107)	(1,105)
Transactions with owners:
Issue of shares - 12 October 2010	48	-	-	48
Issue of shares - placing 5 November 2010	13	1,987	-	2,000
Costs associated with the issue of shares	-	(334)	-	(334)
Total comprehensive loss for the period	-	-	(500)	(500)
Balance as at 30 June 2011	63	1,653	(1,607)	109

The accompanying notes are an integral part of this interim financial information.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM STATEMENTS

1.   Basis of preparation

Hangar 8 plc (the "Company") is a company domiciled in England.  The basis of preparation of this financial information is consistent with the basis that will be adopted for the full year accounts which were prepared in accordance with IFRS as adopted by the EU.

While the financial figures included in this half-yearly report have been computed in accordance with IFRS applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

This interim financial information has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board and the financial information contained in this report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

Comparatives for the 6 months to 31 December 2010 have not previously been published, as in the previous year the interim statement covered the 6 month period ending 31 October 2010. 

The directors have included comparatives for the equivalent period last year as they believe that this information is more relevant and useful to readers of this statement. 

2.   Accounting policies

The condensed consolidated interim financial information has been prepared using accounting policies consistent with those set out in the audited financial statements for the period ended 30 June 2011  on pages 24 to 29, except as set out below.  These accounting policies have been applied consistently to all periods presented in this Financial Information. 

The Group has adopted the following new accounting policies during the period:

a)    Share based payments

The Group operates an equity-settled, share-based compensation plan. Vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions. Where share options are awarded to employees and others providing similar services, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.

Market vesting conditions are factored into the fair value of the options when granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative charge is not adjusted for failure to achieve a market vesting condition. If market related terms and conditions of options are modified before they vest, the change in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period.

If non-market related terms and conditions of options are modified before they vest, the number of instruments expected to vest at each balance sheet date, and therefore the cumulative charge, is thereforeamended accordingly.  

The proceeds received when options are exercised, net of any directly attributable transaction costs, are credited to share capital (nominal value) and the remaining balance to share premium.

b)    Stock

During the period the Group was awarded a Part 145 meaning it has started to undertake third party maintenance and as such will need to hold stocks to satisfy this demand. 

Stock is held at the lower of cost and net realisable value.  Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Critical accounting estimates & judgements and principal risks & uncertainties

There have been no changes to any of the group's critical accounting estimates and judgements of its principal financial risks.

Going concern

The Directors are of the opinion that at 1 March 2012, given the Group and Company's liquidity and capital resources are adequate to deliver the current strategic objectives and business plan and that both the Group and the Company remain a going concern.

3.   Segmental reporting

Operating segments are consistent with those used in internal management reporting and the profit measure used by the Board is the earnings before depreciation, amortisation and exceptional costs ("EBITDA") as set out below.

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

·       Charter - the chartering of aircraft to third parties;

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

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

Six months ended 31 December 2011 (unaudited)
	Charter			Management	Engineering	Unallocated	Group
	£'000		£'000		£'000	£'000	£'000
Revenue		5,085	3,741		434	-	9,260
Gross profit		604	1,639		157	-	2,400
Overheads		(168)	(788)		(224)	(702)	(1,882)
Adjusted operating profit		436	851		(67)	(702)	518
Depreciation/amortisation		-	(54)		-	-	(54)
Profit/(loss) before taxation		436	797		(67)	(702)	464

Six months ended 31 December 2010 (unaudited)
	Charter			Management	Engineering	Unallocated	Group
	£'000			£'000	£'000	£'000	£'000
Revenue			4,856	1,653	187	-	6,696
Gross profit			486	713	74	-	1,273
Overheads			(265)	(623)	(140)	34	(994)
Adjusted operating profit			221	90	(66)	34	279
Exceptional costs			-	-	-	(859)	(859)
Depreciation/amortisation			-	(41)	-	-	(41)
Profit/(loss) before taxation			221	49	(66)	(825)	(621)

14 months period ended 30 June 2011 (audited)
	Charter		Management		Engineering		Unallocated		Group
	£'000		£'000		£'000		£'000		£'000
Revenue		14,064		3,570		521		-		18,155
Gross profit		2,267		1,262		265		-		3,794
Overheads		(1,121)		(1,239)		(388)		(315)		(3,063)
Adjusted operating profit		1,146		23		(123)		(315)		731
Exceptional costs		-		-		-		(1,136)		(1,136)
Depreciation/amortisation		-		(95)		-		-		(95)
Profit/(loss) before taxation		1,146		(72)		(123)		(1,451)		(500)

4.   Taxation

The tax charge for the half year is calculated on the basis of the estimated full year effective tax rate and consists of a deferred tax release of £24,000 and an estimated corporation tax charge for the year of £117,000.

5.   Earnings per share ("EPS")

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. 

	Six months ended 31 December 2011	Six months ended 31 December 2010	14  months ended 30 June 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000)
Profit/(loss) attributable to ordinary shareholders	323	(621)	(500)
Weighted average number of ordinary shares for the purpose of basic earnings per share	6,333,334	5,444,445	5,741,784
Basic and diluted earnings/(loss) per share (pence)*	5.1	(11.5)	(8.7)

* there are 260,000 share options in issue that are currently anti-dilutive and have therefore been excluded from the calculation of the diluted earnings per share.

6.   Share options

During the period the company issued 260,000 share options in total to a number of its employees, under an Employee Management Incentive Scheme, at an exercise price of 109 pence.

7.   Post balance sheet events

David Savile was appointed to the board on 6 February 2012 and on 2 February 2012 the Company acquired an initial 49% interest, with an option to gain 51% control, in a new business established in Malta. 

On 1 March 2012 the Company acquired 100% of the share capital of Star-Gate aviation for a consideration of £330,000 settled in £130,000 cash, £130,000 shares in Hangar 8 plc and a vendor loan of £70,000. 

8.   Copies of the interim statement

Copies of the interim statement will be sent to shareholders.  Further copies will be available from the Company's registered office at The Farmhouse, Oxford Airport, Oxford OX5 1RA, and from the Company's website: www.hangar8.co.uk

 

END

 

 

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