TIDMGMAA
RNS Number : 9558Z
Gama Aviation PLC
27 May 2021
This Announcement contains inside information
Date: 27 May 2021
Gama Aviation Plc (AIM: GMAA)
("Gama", "the Company" or "the Group")
Audited results for the year ended 31 December 2020
Full year results impacted by COVID-19; improved cash
position
Highlights
-- Financial performance across the Group during the year
reflects the impact of the global pandemic on the aviation sector
but Group's liquidity remains strong with $16.1m (2019: $8.5m) cash
and $24.7m (2019: $5.0m) of its $50m revolving credit facilities
undrawn as at 31 December 2020. As at 23 May 2021 cash is $16.0m
and $16.6m of the RCF is undrawn
-- Multiple new major contracts won and commenced in 2020:
o In the Global Services Division, myairops(R) secured a $2.5m
Software as a Service contract in March, with one of the world's
largest business aviation operators
o Together with Atkins, the Group was reappointed in May to
continue delivering Military Airworthiness Reviews (MARs) to the
RAF's HQ Command and the British Army's Joint Helicopter
Command
o The Group commenced all Helicopter Emergency Medical Services
(HEMS) on behalf of the Scottish Ambulance Service on 1 June using
its fleet of three Airbus H145 helicopters
o The Group was awarded two five-year contracts to provide air
ambulance services for the Government of Jersey and the Government
of Guernsey, which commenced in July 2020
-- During the pandemic the Group received COVID-19 related
government support. $5.8m has been recognised in these accounts
-- Vastly reduced commercial aviation volumes at Hong Kong
airport, due to COVID-19, resulted in the Group's associate China
Aircraft Services Limited (CASL) suffering substantial losses, of
which the Group's 20% share amounted to $3.4m. Excluding CASL,
Adjusted EBIT is a loss of $0.9m
-- On 2(nd) March 2020 the Group announced the sale of the US
Air associate, for a total consideration of $33m, of which $3.1m is
included within Adjusted EBIT, $4.4m is deferred revenue at the
reporting date and $25.5m is included within Adjusting items
-- Statutory loss of $14.7m (2019: loss of $11.5m) includes a
net loss on Adjusting items of $6.5m (2019: loss of $12.0m). The
net loss on Adjusting items is largely due to impairments of
non-current assets which are partially offset by income and gains
associated with the disposal accounting for the US Air Associate,
and net of taxation
-- Net Debt, inclusive of $49.5m (2019: $60.2m) of obligations
under leases, decreased to $86.6m from $98.0m at 31 December
2019
-- No dividend recommended
-- Since year end, the Group announced the strategically
significant expansion of the Group's US Ground operations via the
acquisition of Jet East, to act as a growth accelerator in the
world's largest aviation market
-- 5 year strategic review undertaken to focus on delivering
value for all its stakeholders
-- A copy of the Annual Report and Accounts is available on the
Company's website at www.gamaaviation.com and will be posted to
shareholders shortly
Financial summary
Adjusted(1) $m Statutory $m
----------------- --------------
Dec-20 Dec-19 Dec-20 Dec-19
---------------------------- ------- ------- ------ ------
Revenue 182.0 246.8 197.5 246.8
----------------------------- ------- ------- ------ ------
Gross Profit 36.5 39.5 52.0 39.5
----------------------------- ------- ------- ------ ------
Gross Profit % 20.1% 16.0% 26.3% 16.0%
----------------------------- ------- ------- ------ ------
EBIT (4.3) 5.6 (5.8) (7.0)
----------------------------- ------- ------- ------ ------
(Loss)/ profit for the year (8.2) 0.5 (14.7) (11.5)
----------------------------- ------- ------- ------ ------
Earnings per share (cents) (13.0) 0.7 (23.2) (18.2)
----------------------------- ------- ------- ------ ------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest International Financial Reporting Standards (IFRS)
measure. APMs include Adjusted Revenue, Adjusted Gross Profit,
Adjusted EBIT and Net debt. As set out in Note 6, the average
USD-GBP exchange rate for the year of $1.28 to GBP1 is the same for
both 2020 and 2019, and therefore constant currency growth is not
presented. The Directors believe that the presentation of the
Group's results in this way is relevant to an understanding of the
Group's financial performance and provides a fair review of the
Group's business
Outlook
Although the macro impact of the pandemic on the aviation sector
has been severe, management has ensured the long-term stability of
the Group. By realigning its go to market and delivery structure to
align to the current and future needs of its customer base, we have
evolved an already robust & resilient business to address
evident short term challenges, while readying ourselves for renewed
growth once the current pandemic has subsided.
Commenting on the full year results, Marwan Khalek, Chief
Executive said:
"Our 2020 results reflect the full impact of COVID19 on the
Group. However, what we have proven this last year is the
robustness of our business model as we have continued to win
business and generate cash despite the challenging pandemic. With a
strong liquidity position, a modest Adjusted EBIT loss and positive
operating cashflows the Group is well placed to weather the
remainder of this crisis and is very well positioned to recapture
the growth opportunities that will accompany the inevitable
recovery in the private aviation market."
-S-
For more information contact:
Gama Aviation Plc +44 (0) 1252 553000
Marwan Khalek, Chief Executive Officer
Daniel Ruback, Chief Financial Officer
Camarco +44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
WH Ireland +44 (0) 207 220 1666
James Joyce
James Sinclair-Ford
Gama Aviation - Notes to Editors
Founded in 1983 on the simple purpose of providing aviation
services that equip its customers with decisive advantage, Gama
Aviation Plc (LSE AIM: GMAA) is a highly valued global partner to
blue chip corporations, government agencies, healthcare trusts and
private individuals.
The Group has three strategic business units: Business Aviation
(Aircraft Management, Charter, FBO & Maintenance), Special
Mission (Air Ambulance & Rescue, National Security &
Policing, Infrastructure & Survey, Energy & Offshore); and
Technology & Outsourcing (Flight Operations, FBO, CAM software,
Flight Planning, CAM & ARC services)
More details can be found at: http://www.gamaaviation.com/
/ Chief executive officer's statement
In what was an extremely challenging economic environment,
particularly for the aviation sector, every aspect of our 2020
business, operational and financial performance was overshadowed
and severely impacted by the rapid global spread of the coronavirus
pandemic.
Against this backdrop of significant disruption and
unprecedented challenges, the Group has delivered a creditable
performance. These results demonstrate the effectiveness of the
decisive and proactive measures we took to protect our people, and
our business. It also endorses the robustness of our business model
and the resilience of our operating platform.
I am extremely proud of how our people have responded to the
unique challenges we have faced during the year. Through their
unwavering efforts, commitment, dedication, and perseverance, all
our bases across the world remained operational throughout,
delivering services in support of our client's essential missions.
We continue to operate strictly under the enhanced preventative and
protective measures advised by the World Health Organization, and
by national governments to meet our overriding priority which is
the safety and security of our global workforce and of our
clients.
We have safeguarded the stability and financial performance of
our business by acting swiftly and decisively to reduce costs and
preserve cash, which is reflected in the full year results and the
healthy liquidity position that the Group has maintained throughout
this crisis. We remain vigilant to the economic, social and human
effects of this pandemic and we will continue to take the necessary
and proportionate actions to safeguard the interests of our
shareholders, our customers and our people.
In parallel of our efforts to mitigate the pandemic's impact, we
have also remained focused on the evolution of our strategy and
business, particularly in strategically important markets. In this
extraordinary year we have successfully delivered strong growth in
our special missions' business through the successful launch of the
Group's rotary capability in support of our long-standing Scottish
Ambulance Service contract. In terms of new contracts, we were
awarded and successfully launched two five-year contracts for the
provision of air ambulance services for the Jersey and Guernsey
governments as well as the renewal of an MoD contract, in
partnership with Atkins, for the provision of critical
airworthiness review services. Our efforts to grow our US
maintenance business culminated in the completion of the Jet East
Aviation Corporation, LLC ("Jet East") acquisition, announced on
the 15th January 2021, which delivers immediate growth as well as
strengthening our position in this strategically important
market.
The transitions in Scotland and the Channel Islands were
delivered on time and are operating as planned, as is the
integration with Jet East in the US. These were significant
achievements in the current environment, which serve to showcase
the skills, expertise and dedication of our people.
The contract transitions in Scotland and the Channel Islands
were delivered on time and are operating as planned, as is the
integration with Jet East in the US. These are significant
achievements in the current environment, which serve to showcase
the skills, expertise and dedication of our people.
The strengthening of our finance and control functions continues
under the leadership of our Chief Financial Officer Daniel Ruback
with tangible improvements evident in the systems and processes,
that are necessary to support and inform the business in its next
phase of growth.
FY20 Financial Performance
Due to the fall in activity as a result of the pandemic and
associated lockdowns, adjusted revenues were down by 26% to $182.0m
for the period (FY19, $246.8m). Despite the significant drop in
revenues, adjusted gross profits were modestly down by $3.0m to
$36.5m (FY19, $39.5m). Adjusted gross profit margins were up by 4.1
ppts to 20.1% (FY19, 16.0%). As well as reflecting both the
effectiveness of the operational cost reduction measures and the
appropriate use of government support initiatives, this also
demonstrates the robustness of the business model where a
significant proportion of our gross profits are derived from
availability based (rather than use based) contracted revenues.
Adjusted revenue and gross profit excludes $15.5m (2019: nil) of
accelerated branding fees which are presented within the statutory
result.
Efforts to streamline and reduce the overhead cost structure of
the Group at both divisional and central level, including the
appropriate use of government support initiatives, resulted in a
reduction of $3.3m in Adjusted other administrative costs to $26.9m
(FY19, $30.2m). However, this was offset by an increase of $2.7m in
Adjusted depreciation and amortisation of intangibles in the year
to $6.9m (FY19, $4.2m).
The Adjusted EBIT loss of $4.3m for the year includes a $3.4m
share of associate losses relating to our 20% equity investment
holding in China Aircraft Services Limited (CASL). The loss has no
cash impact to the Group. CASL provides maintenance and ramp
services to airline customers at Hong Kong airport, where its
revenues have been severely impacted by the significant drop in
movements at the airport. Notwithstanding this share of associate
losses, the Group has delivered a modest Adjusted EBIT loss from
performance of its core operations and activities, over which it
exercises management and operational control.
The Group generated a net cash inflow from operating activities
in the period of $33.7m (FY19: $1.7m) which helped fund investment
capital expenditure and other relatively small levels of essential
maintenance capital expenditure, whilst maintaining a strong
liquidity position. As at 31 (st) December 2020 the Group had
$16.1m (2019: $8.5m) of cash and $24.7m (2019: $5.0m) of its $50m
revolving credit facilities undrawn.
Sale of US Air Associate
On 2 (nd) March 2020, the Group announced the sale of its US Air
associate, Gama Aviation LLC, in which the Group had a 24.5% equity
interest, for a total consideration of $33m. The accounting
treatment applied to the sale proceeds, which was also disclosed in
our interim results for the first half of 2020, is detailed further
in Note 7 of notes to the financial statements.
The strategic rationale for the sale was compelling; it enabled
the Group to monetise, at an attractive value, its investment in an
associate over which it exercised no control, and which had grown
increasingly dependent on a major customer who had an interest in
purchasing the business. Additionally, this sale now enables the
Group to focus its efforts and resources on driving and growing the
US (home to the world's largest business aviation fleet)
maintenance businesses, which are wholly owned. This was
illustrated by the strategically important acquisition, in January
2021, of Jet East.
Impairment of Investments
The Board continues to closely monitor the carrying values of
certain investments in view of the prevailing pandemic and
uncertainness surrounding the pace and timing of any eventual
recovery.
The financial performance of CASL has been very severely
impacted by the pandemic. With revenues running at some 85% below
pre pandemic levels, the Group's share of loses for the year
running at some $3.4m and with no prospects of a return to
profitability in the near term, the Board has impaired the carrying
value of its investment in CASL. In May 2021 the Group received an
offer for its 20 percent shareholding in CASL. The Board is
currently considering the terms of the offer and is in negotiations
with the counterparty.
Similarly, in view of the pandemic related delays in the
construction of the Sharjah Business Aviation Centre, the Board has
also impaired the 'assets under construction' and right of use
asset associated with this project.
Given the one-off and non-recurring nature of these impairment
costs, they have been treated as adjusting items.
Full details of these and other impairment judgments are
provided in Note 6 of the notes to the financial statements.
Notwithstanding these impairments management continues to work
diligently to maximise value from these investments in the
circumstances.
Streamlined Energy and Carbon reporting ("SECR")
As with all industries, aviation and the service companies that
support aviation, have an obligation to recognise and reduce their
impact on the environment, and notably, their carbon footprint. The
Group is now in its second year of SECR and is reporting scope 1
& 2 direct worldwide emissions, as well as scope 3 indirect
worldwide emissions under the ISO 14064-1:2018 methodology.
Further to the conclusion of the report, the Group, at the
Board's direction, will be offsetting 3,210 CO(2) e tonnes of its
2020 footprint through a verified carbon offset scheme. The Group
has also initiated a programme (Project Element Six) to further
reduce the business's direct and indirect CO(2) emissions from 2021
onwards as well as supporting its customers to adopt CO(2)
reductive technologies and offset programmes. Full details of this
initiative, the methodology and results of the SECR are contained
within the corporate and social responsibility section of this
document.
Strategic Review
The Group has undertaken a dispassionate review of the company's
strategy and performance since listing, concluding that in order to
restore earnings per share growth, its activities must focus on
gaining market share in markets where it has an established
competitive advantage and full operational control.
This evolution of the Group's corporate strategy has resulted in
a new market facing organisational structure, with two strategic
business units; Business Aviation, Special Mission and Technology
& Outsourcing, operating primarily within the three most mature
aviation markets, those being the US, Europe and the Middle East.
Furthermore, the evolved strategy is aiding the Group to focus its
resources towards distinct organic growth opportunities as well as
determining M&A priorities through which it will aim to
accelerate market share and margin improvement.
As evidence of the strategic change at work, the Group has
successfully delivered two Special Mission air ambulance contracts,
has significantly grown the size of its Business Aviation
maintenance capability and is growing a strong pipeline of
government related Special Mission opportunities. Having secured a
$2.5m Software as a Service contract in March, with one of the
world's largest business aviation operators , the Technology &
Outsourcing business continues to grow its presence and is primed
for growth as flight activity starts to recover to pre-2020
levels.
The changes will be reflected in future segmental reporting,
starting from the interim results covering the period to June 30th
2021. The Board believes this will provide greater clarity for
shareholders, assisting them to evaluate the opportunities,
investment requirements and performance of each facet of the
Group.
A fuller account of the review and changes follows within the
five-year strategic review section.
Outlook
Although the macro impact of the pandemic on the aviation sector
has been severe, management has ensured the long-term stability of
the Group. By realigning its go to market and delivery structure to
align to the current and future needs of its customer base, we have
evolved an already robust and resilient business to address evident
short term challenges, while readying ourselves for renewed growth
once the current pandemic has subsided.
Marwan Khalek
Chief Executive Officer
/ Group Operational Performance
Revenue
Adjusted (1) Statutory
USD'000s 2020 2019 2020 2019
------------------------- ------- ------- ------- -------
Air Division 98,430 140,623 113,930 140,623
------------------------- ------- ------- ------- -------
Ground Division 79,928 102,967 79,928 102,967
------------------------- ------- ------- ------- -------
Global Services Division 3,645 3,223 3,645 3,223
------------------------- ------- ------- ------- -------
Total 182,003 246,813 197,503 246,813
------------------------- ------- ------- ------- -------
Gross Profit
Adjusted (1) Statutory
USD'000s 2020 2019 2020 2019
------------------------- ------ ------ ------ ------
Air Division 12,073 12,947 27,573 12,947
------------------------- ------ ------ ------ ------
Ground Division 21,539 24,131 21,539 24,131
------------------------- ------ ------ ------ ------
Global Services Division 2,923 2,395 2,923 2,395
------------------------- ------ ------ ------ ------
Total 36,535 39,473 52,035 39,473
------------------------- ------ ------ ------ ------
EBIT
Adjusted (1) Statutory
USD'000s 2020 2019 2020 2019
------------------------- ------- ------- -------- --------
Air Division 3,348 4,482 18,109 2,278
------------------------- ------- ------- -------- --------
Ground Division 705 6,862 (11,676) 748
------------------------- ------- ------- -------- --------
Global Services Division (22) 686 (371) 325
------------------------- ------- ------- -------- --------
Associates Division (3,272) 918 (5,848) 918
------------------------- ------- ------- -------- --------
Central Costs (5,082) (7,383) (6,048) (11,271)
------------------------- ------- ------- -------- --------
Total (4,323) 5,565 (5,834) (7,002)
------------------------- ------- ------- -------- --------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt. As set out in Note 6, the
average USD-GBP exchange rate for the year of $1.28 to GBP1 is the
same for both 2020 and 2019, and therefore constant currency growth
is not presented
Operational highlights:
-- Multiple new major contracts won and commenced in 2020:
o In the Global Services Division, myairops(R) secured a $2.5m
Software as a Service contract in March, with one of the world's
largest business aviation operators
o Together with Atkins, Gama Aviation was reappointed in May to
continue delivering Military Airworthiness Reviews (MARs) to the
RAF's HQ Command and the British Army's Joint Helicopter
Command
o Gama commenced all Helicopter Emergency Medical Services
(HEMS) on behalf of the Scottish Ambulance Service on 1 June using
its fleet of three Airbus H145 helicopters
o The Group was awarded two five-year contracts to provide air
ambulance services for the Government of Jersey and the Government
of Guernsey, which commenced in July
-- Air Division profitability impacted by a pandemic-related
reduction in activity contributing to Gross Profit shortfalls
-- Ground Division's profitability impacted by a
pandemic-related reduction in FBO and MRO revenues and an absence
of the one-off gains that benefitted the prior year comparative in
Europe
-- $5.8m of COVID-19 related government support within Adjusted
EBIT which comprises $4.75m assumed US Government Paycheck
Protection Program loan forgiveness, $0.6m UK Furlough scheme,
$0.2m Hong Kong payroll scheme and $0.3m rent rebate in the Middle
East
-- Vastly reduced commercial aviation volumes at Hong Kong
airport, due to COVID-19, resulted in CASL suffering substantial
losses, of which the Group's 20% share amounted to $3.4m
-- Since year end, the Group announced the strategically
significant expansion of the Group's US Ground operations via the
acquisition of Jet East
The above Group results are explained in detail below
/ Air Division
The Air Division supports customers using business aviation as
an integral part of their mission, including corporations and
public services such as air ambulance and aerial survey. It
provides aircraft management, crewing, charter services,
airworthiness and engineering oversight both to single aircraft
operations and fleets, and delivers substantial special mission
contracts for complex, time critical services. Going forward, the
capabilities and resources from the Air Division now form core
elements of the Special Mission, Business Aviation and Technology
& Outsourcing business units.
Adjusted (1)
US Europe Middle East Asia Total
------------ -------------- -------------- -------------- ---------------
USD'000s 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
------------- ----- ----- ------ ------ ------ ------ ------ ------ ------ -------
Revenue 3,750 4,050 62,707 99,145 18,603 16,778 13,370 20,650 98,430 140,623
------------- ----- ----- ------ ------ ------ ------ ------ ------ ------ -------
Gross Profit 3,750 4,050 6,060 6,160 1,501 1,519 762 1,218 12,073 12,947
------------- ----- ----- ------ ------ ------ ------ ------ ------ ------ -------
GP % 100% 100% 10% 6% 8% 9% 6% 6% 12% 9%
------------- ----- ----- ------ ------ ------ ------ ------ ------ ------ -------
EBIT 3,817 3,898 138 1,018 (296) (571) (311) 137 3,348 4,482
------------- ----- ----- ------ ------ ------ ------ ------ ------ ------ -------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt. In addition, the
presentation of the impact on application of IFRS 16 in the prior
year has changed to aid year-on-year comparability, refer to Note 2
of the notes to the financial statements for further details
The Air Division revenue fell on an adjusted basis by 30% to
$98.4m. Reduced recharges as a result of lower flying activity due
to the COVID-19 pandemic was the primary driver for revenue
reductions in both Europe (down 37%) and Asia (down 35%), whereas
higher recharges relating to maintenance events increased revenues
in the Middle East (up 11%). The changes in recharge revenues had
minimal effect on profits, but smaller pandemic-related reductions
in revenues from management fees, charter sales and flight planning
services did flow through to gross profit. Gross profit in the US
includes $3.75m (2019: $3.75m) of branding fees and a $0.3m one-off
contribution in the prior year. Revenues and gross profits
benefited from the new air ambulance service contracts for the
Government of Jersey and the Government of Guernsey, along with a
commission on sale of aircraft in Europe.
The Air Division adjusted EBIT reduced by $1.1m to $3.4m (2019:
$4.5m). In Europe, gross profit was stable however additional
depreciation following the investment in rotary and fixed wing
aircraft contributed to increased overhead. Adjusted EBIT remained
stable in the US. Reduced activity in Asia led to Gross profit
shortfalls and there was a $0.5m increase in the loss allowance for
doubtful debtors, both of which were partially offset by cost
control measures. The Middle East improved due to reduced levels of
funding of the business in Saudi Arabia, which is now in the
process of being exited.
The in-sourcing by Europe Air of the helicopter emergency
medical services (HEMS) for the Scottish Ambulance Service was
delivered on schedule, leading to the successful go-live of this
operation on 1st June 2020. Additionally, in July the Group
commenced new special mission contracts to provide fixed wing air
ambulance services to the governments of Guernsey and Jersey for an
initial term of 5 years plus options to extend by up to 5
years.
Adjustments
US Europe Middle East Asia Total
------------- -------------- ------------- ----------- ---------------
USD'000s 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
----------------------- ------ ----- ----- ------- ------- ---- ----- ---- ------ -------
Accelerated
branding fees 15,500 - - - - - - - 15,500 -
----------------------- ------ ----- ----- ------- ------- ---- ----- ---- ------ -------
Total revenue
and gross profit
adjustments 15,500 - - - - - - - 15,500 -
Exceptional
items - (250) 606 (2,072) (178) 134 (34) (16) 394 (2,204)
Amortisation - - (192) - - - (108) - (300) -
Impairment on
intangibles - - - - - - (833) - (833) -
----------------------- ------ ----- ----- ------- ------- ---- ----- ---- ------ -------
Total EBIT adjustments 15,500 (250) 414 (2,072) (178) 134 (975) (16) 14,761 (2,204)
----------------------- ------ ----- ----- ------- ------- ---- ----- ---- ------ -------
Statutory
US Europe Middle East Asia Total
------------- ------------- ------------- ------------- -------------
USD'000s 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
--------- ------ ----- ---- ------- ------ ----- ------- ---- ------ -----
EBIT 19,317 3,648 552 (1,054) (474) (437) (1,286) 121 18,109 2,278
--------- ------ ----- ---- ------- ------ ----- ------- ---- ------ -----
Adjusted revenue and adjusted gross profit exclude $15.5m of
accelerated branding fees which are included in statutory revenue
and gross profit. Air Division Statutory EBIT increased from a
profit of $2.3m in 2019 to a profit of $18.1m in 2020, primarily
due to $15.5m of accelerated branding fees on the disposal of the
US Air Associate, see Note 7 for further details. Exceptional items
reduced to a credit of $0.4m (2019: charge of $2.2m) and comprise
$0.7m credit from settlements on legacy receivables under legal
proceedings, partially offset by $0.1m share-based payment charges
and $0.2m redundancy provision in the Middle East. Amortisation of
the remaining acquired intangibles in line with policy and in the
current year a $0.8m impairment of the carrying amount of Gama
Aviation Hutchinson Holdings Limited ("GAHH") acquired intangibles
in Asia Air to the recoverable amount was recognised, see Note 15
for further details.
/ Ground Division
The Ground Division provides support to the business aviation,
air ambulance, law enforcement and military sectors, deploying a
service mix that is designed to deliver new capability and maintain
availability of the aircraft to the operator. With an extensive
network and increasingly rare independence from manufacturer
ownership, the Division maintains all the necessary approvals to
maintain aircraft from Gulfstream, Dassault Falcon, Bombardier,
Embraer and Textron, providing heavy, ad-hoc and emergency
maintenance as well as modifications and refurbishments.
US Europe Middle East Asia Total
-------------- -------------- ------------- ------------ ---------------
USD'000s 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
-------------- ------ ------ ------ ------ ------ ----- ----- ----- ------ -------
Revenue 38,605 48,943 35,243 48,176 3,766 4,372 2,314 1,476 79,928 102,967
-------------- ------ ------ ------ ------ ------ ----- ----- ----- ------ -------
Gross Profit 9,097 6,396 10,384 15,650 674 1,453 1,384 632 21,539 24,131
-------------- ------ ------ ------ ------ ------ ----- ----- ----- ------ -------
GP % 24% 13% 30% 32% 18% 33% 60% 43% 27% 23%
-------------- ------ ------ ------ ------ ------ ----- ----- ----- ------ -------
Adjusted EBIT
(1) 720 270 301 7,416 (236) (273) (80) (551) 705 6,862
-------------- ------ ------ ------ ------ ------ ----- ----- ----- ------ -------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt. In addition, the
presentation of the impact on application of IFRS 16 in the prior
year has changed to aid year-on-year comparability, refer to Note 2
of the notes to the financial statements for further details
The Ground Division revenues fell 22% to $79.9m (2019: $103.0m).
All regions experienced reductions in revenue except Asia where
there was growth despite regional challenges. In Europe, the fall
in revenue was $12.9m, driven by the prior year comparative
benefitting from one-off equipment sales of $5.5m, closure of the
loss-making Fairoaks maintenance business (reduction of $2.4m), and
reduced demand for FBO and design services following the start of
the COVID-19 pandemic (reduction of $4.4m). Nevertheless, due to
the focus of the European Ground business on base maintenance,
which is not driven by flying activity, maintenance hours at the
core Bournemouth facility grew by 11% over the prior year, offset
by reductions in the other areas mentioned. In the US, where the
majority of current business relates to line maintenance which
depends on flying activity, the fall in revenue of $10.3m was
materially driven by the COVID-19 pandemic, with maintenance hours
falling by 24% compared to the prior year. In the Middle East,
revenue fell due to lower FBO movements, lower parking from planes
being grounded elsewhere, and a knock-on effect of reduced activity
on MRO revenues.
Adjusted EBIT fell by $6.2m to $0.7m, due largely to Europe
($7.1m down to $0.3m) and partially offset by US ($0.4m up to $0.7m
profit) and Asia ($0.5m up to a loss of $0.1m). In Europe, gross
profit in the prior period benefited compared to the current period
by $2.9m from one-off equipment sales and cost credits which
dropped down into adjusted EBIT, and 2020 was impacted by the
COVID-related services revenue reductions. Despite the impact of
COVID-19 on revenues and a $1.0m increase in the expected loss
allowance for doubtful debtors, Adjusted EBIT in the US improved
albeit with the support of PPP loan forgiveness of $4.75m, which
supported gross profit by $3.68m and administrative expenses by
$1.07m. Asia's adjusted EBIT improved by $0.5m due to a combination
of improved mix within gross profit and reduced overheads,
partially offset by a $0.5m loss allowance. In the Middle East,
reduced FBO activity resulted in an adjusted EBIT loss with fixed
cost savings unable to offset gross profit shortfalls.
Adjustments
US Europe Middle East Asia Total
-------------- ---------------- -------------- ---------- --------------------
2019 2019
USD'000s 2020 2019 2020 Restated* 2020 2019 2020 2019 2020 Restated*
----------------------- ----- ------- ---- ---------- -------- ---- ---- ---- -------- ----------
Exceptional
items (663) (657) (90) (2,550) (6) - - (26) (759) (3,233)
Impairment of
right-of-use
asset - - - (2,341) (7,013) - - - (7,013) (2,341)
Impairment of
assets under
construction - - - - (4,609) - - - (4,609) -
Impairment of
intangibles - (540) - - - - - - - (540)
----------------------- ----- ------- ---- ---------- -------- ---- ---- ---- -------- ----------
Total EBIT adjustments (663) (1,197) (90) (4,891) (11,628) - - (26) (12,381) (6,114)
----------------------- ----- ------- ---- ---------- -------- ---- ---- ---- -------- ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements. The only income statement restatement was a
presentational change within adjusting items of an impairment of
right of use assets.
Statutory
US Europe Middle East Asia Total
----------- ----------- --------------- ----------- --------------
USD'000s 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
--------- ---- ----- ---- ----- -------- ----- ---- ----- -------- ----
EBIT 57 (927) 211 2,525 (11,864) (273) (80) (577) (11,676) 748
--------- ---- ----- ---- ----- -------- ----- ---- ----- -------- ----
Adjusted revenue and Adjusted gross profit are the same as
statutory revenue and gross profit. Ground Division Statutory EBIT
fell from a profit of $0.7m in 2019 to a loss of $11.7m in 2020. In
addition to the movements discussed above, e xceptional items
reduced to $0.8m (2019: $3.2m) and comprise share-based payment
charges and $0.6m of Jet East acquisition costs in the US Ground.
In the current year an impairment charge of $4.6m has been
recognised relating to the Business Aviation Centre ("BAC") at
Sharjah Airport following uncertainties related to the project,
significantly impacted by the ongoing COVID-19 pandemic (2019:
nil). In addition, a related impairment charge of $7.0m has been
recognised on the right-of-use asset associated with the lease at
Sharjah Airport to reduce the carrying amount to the recoverable
amount (Refer to Note 6 for further details). Impairment charges in
the US in 2019 of $0.5m did not recur in 2020. A $2.3m impairment
of the right-of-use asset associated with the lease at Fairoaks
airport in Europe did not recur in 2020.
/ Global Services
The Global Services Division comprises two businesses, FlyerTech
and myairops(R). FlyerTech provides continuing airworthiness
management (CAM) and airworthiness review certification (ARC)
services for business aviation and commercial airline operators.
myairops(R) has developed a suite of business aviation products
deployed as "Software as a Service" (SaaS) and mobile app solutions
for business aviation operators, flight support companies, FBOs and
regional airports.
Total
------------
USD'000s 2020 2019
------------------ ----- -----
Revenue 3,645 3,223
------------------ ----- -----
Gross Profit 2,923 2,395
------------------ ----- -----
GP % 80% 74%
------------------ ----- -----
Adjusted EBIT (1) (22) 686
------------------ ----- -----
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt. In addition, the
presentation of the impact on application of IFRS 16 in the prior
year has changed to aid year-on-year comparability, refer to Note 2
of the notes to the financial statements for further details
The Global Services Divisions grew revenues by 13% to $3.6m
(2019: $3.2m) however EBIT fell to nil (2019: $0.7m). Growth in
revenue and gross profit was driven by performance in myairops(R)
following the launch of three new products and associated product
sales in the first half of the year, including a $2.5m three-year
contract with a large business aviation operator. Associated with
the product launches, amortisation of the product development
commenced, impacting Adjusted EBIT by $1.0m. Sales performance was
significantly impacted in the second half of the year by COVID
effects, with many prospective customers deferring expenditure.
FlyerTech traded broadly in line with prior year, with a modest
reduction in revenue offset by enhanced margin performance.
Adjustments
Total
------------
USD'000s 2020 2019
----------------------- ----- -----
Exceptional items (35) (45)
Amortisation (314) (316)
----------------------- ----- -----
Total EBIT adjustments (349) (361)
----------------------- ----- -----
Statutory
Total
-----------
USD'000s 2020 2019
--------- ----- ----
EBIT (371) 325
--------- ----- ----
Adjusted revenue and adjusted gross profit are the same as
statutory revenue and gross profit. Global services Statutory EBIT
fell from a profit of $0.3m in 2019 to a loss of $0.4m in 2020. In
addition to the movements discussed above, statutory EBIT included
amortisation of $0.3m in respect of acquired FlyerTech intangibles
assets.
/ Associate Investments
As reported in our 2019 Annual Report and Accounts, the US Air
associate was sold on 2 (nd) March 2020, see Note 7 of the notes to
the financial statements for further details. The $0.1m of Adjusted
EBIT represents the Group's share of results from the US Air
associate prior to disposal.
China Aircraft Services Limited (CASL) suffered substantial
losses, the Group's share of which amounted to $3.4m of adjusted
EBIT due to vastly reduced commercial aviation volumes at Hong Kong
airport, impacted by COVID-19.
Adjusted (1)
US Air China Aircraft
Associate Services Limited Total
------------ ------------------- -------------
USD'000s 2020 2019 2020 2019 2020 2019
------------------ ----- ----- ----------- ------ ------- ----
Adjusted EBIT (1) 78 518 (3,350) 400 (3,272) 918
------------------ ----- ----- ----------- ------ ------- ----
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt
Adjustments
US Air China Aircraft
Associate Services Limited Total
------------ ------------------- -------------
USD'000s 2020 2019 2020 2019 2020 2019
------------------------------------------- ------ ---- ----------- ------ ------- ----
Impairment of equity accounted investments - - (3,421) - (3,421) -
Impairments on non-current assets
within share of results from equity
accounted investments - - (6,433) - (6,433) -
Profit on disposal of interest in
associates 7,278 - - - 7,278 -
------------------------------------------- ------ ---- ----------- ------ ------- ----
Total EBIT adjustments 7,278 - (9,854) - (2,576) -
------------------------------------------- ------ ---- ----------- ------ ------- ----
Statutory
US Air China Aircraft
Associate Services Limited Total
------------ ------------------- -------------
USD'000s 2020 2019 2020 2019 2020 2019
--------- ------ ---- ------------ ----- ------- ----
EBIT 7,356 518 (13,204) 400 (5,848) 918
--------- ------ ---- ------------ ----- ------- ----
Impairment charges of $9.9m (2019: nil) has been made against
the equity accounted investment in CASL, reflecting the Group's
assessment of it's recoverable amount, driven by its' significant
decline in performance and outlook caused by the COVID-19 pandemic,
and impairments of non-current assets in CASL, see Note 18 for
further details. The disposal of the US Air Associate resulted in a
profit before taxation on disposal of the Group's equity interest
of $7.3m. Overall, associate Statutory EBIT decreased from a profit
of $0.9m in 2019 to a loss of $5.8m in 2020.
/ Financial review
Financial summary
Adjusted(1) $m Statutory $m
----------------- --------------
Dec-20 Dec-19 Dec-20 Dec-19
---------------------------- ------- ------- ------ ------
Revenue 182.0 246.8 197.5 246.8
----------------------------- ------- ------- ------ ------
Gross Profit 36.5 39.5 52.0 39.5
----------------------------- ------- ------- ------ ------
Gross Profit % 20.1% 16.0% 26.3% 16.0%
----------------------------- ------- ------- ------ ------
EBIT (4.3) 5.6 (5.8) (7.0)
----------------------------- ------- ------- ------ ------
(Loss)/ profit for the year (8.2) 0.5 (14.7) (11.5)
----------------------------- ------- ------- ------ ------
Earnings per share (cents) (13.0) 0.7 (23.2) (18.2)
----------------------------- ------- ------- ------ ------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt
Revenue Bridge
$m
------------------------- ------
Revenue - 2019 246.8
Accelerated branding fee 15.5
Air Division (42.2)
Ground Division (23.0)
Global Services Division 0.4
------------------------- ------
Revenue - 2020 197.5
------------------------- ------
-- The Air Division had reduced opportunity to recharge costs
due to reduced flying hours as a result of the ongoing COVID-19
pandemic
-- Ground Division revenue reduced primarily in Europe (a
reduction of $12.9m) with the prior year benefiting from one-off
equipment sales of $5.5m whilst in the US aircraft maintenance was
materially impacted by the ongoing COVID-19 pandemic with a $10.3m
reduction in US Ground revenues
-- Global Services Division growth driven by performance in
myairops(R) following the launch of three new products and
associated product sales, despite COVID-19 related impacts on sales
in the second half of the year
Adjusted EBIT (1) Bridge
$m
Adjusted EBIT - 2019 5.6
Decrease in gross profit (2.9)
Decrease in other administrative expenses 3.3
Increase in impairment of financial assets (3.4)
Increase in depreciation and amortisation (2.7)
Decrease due to losses from equity accounted associates (4.2)
-------------------------------------------------------- -----
Adjusted EBIT - 2020 (4.3)
-------------------------------------------------------- -----
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt
-- Reduced Gross Profit driven by Europe and Middle East Ground,
and Air Division reductions partially offset by Gross Profit growth
in US Ground and Asia Ground
-- Contributions from associates are down following substantial
losses in CASL and the disposal of the US Air associate
-- The loss allowance for impairment of financial assets
increased by $3.4m to $3.8m (2019: $0.4m)
-- Depreciation and amortisation of $6.9m is up by $2.7m from
the $4.2m reported in the prior year. This includes $0.7m
depreciation on helicopters which were brought into use in the year
and $1.1m of increased depreciation across fixed wing aircraft,
leasehold improvements and fixtures, fittings and equipment related
to office moves. The increased depreciation was partially offset by
$0.3m decrease in depreciation of right of use assets. $1.0m
increased amortisation of software on internally developed software
costs arising in myairops(R) as well as $0.2m increased
amortisation of purchased software, relating to operational and
financial systems
-- Other administrative expenses decreased as a result of
government support received, cost control measures and a $0.4m
decrease in the inventory obsolescence allowance to $5.0m (2019:
$5.4m) in line with the accounting policy set out in Note 2 of the
financial statements for the Group
Statutory EBIT Bridge
$m
Statutory EBIT - 2019 (7.0)
Items impacting Adjusted EBIT (9.9)
Adjusting items
-Exceptional items comprising:
- Increase in exceptional transaction costs (0.6)
- Decrease in exceptional integration and business re-organisation
costs 2.7
- Decrease in exceptional legal costs 1.6
- Decrease in other exceptionals 3.4
- Impairment of right-of-use asset (4.7)
- Impairment of investment in associate (3.4)
- Impairment of non-current assets within associates (6.5)
- Impairment of assets under construction (4.6)
- Accelerated branding fees 15.5
- Profit on disposal of interest in associates 7.3
- Decrease in share-based payment expense 0.3
- Decrease in acquired intangible amortisation 0.4
- Increase in goodwill and intangible impairment (0.3)
--------------------------------------------------------------------- -----
Statutory EBIT - 2020 (5.8)
--------------------------------------------------------------------- -----
-- $15.5m of accelerated branding fees have been recognised in
adjusting items following the disposal of the US Air Associate and
the settlement of existing contractual arrangements (see Note 7 for
further details on the disposal)
-- Impacted by the ongoing COVID-19 pandemic, impairment charges
relate to $4.6m and $7.0m both in relation to Sharjah and $9.9m in
relation to investment in associate CASL. The prior period included
a $2.3m impairment of the right-of-use asset associated with the
Fairoaks lease within other exceptionals (see Note 6 for further
details)
-- $7.3m profit before taxation on disposal of the US Air
Associate (see Note 7 for further details on the disposal)
-- The following integration and business re-organisation costs
did not recur in 2020; $1.0m of direct closure costs at Fairoaks,
$1.0m of non-recurring property and facility reorganisation costs
and $1.0m of various other non-recurring costs
-- A reduction of $1.6m in legal costs following the conclusion
of various legacy litigation in the prior year
-- Increased transaction cost of $0.6m relating to the Jet East
transaction completed in January 2021
Finance charges
Net finance cost of $2.4m (2019: $4.0m), include $1.1m (2019:
nil) of finance income arising from financial assets. In particular
$1.0m of interest arises on the deferred consideration relating to
the disposal of the US Air associate (Note 7). A net foreign
exchange gain of $0.2m (2019: gain $0.6m) relating to financing
activities is included within net finance costs. In addition, in
the prior year $0.4m of loan arrangement fees upon refinancing were
written off, which did not recur in 2020.
Taxation
There is a statutory taxation charge for the period of $6.5m
(2019: charge of $0.5m), which reflects a significant increase as a
result of the US Air Associate disposal. The adjusted taxation
charge for the year is $1.5m (2019: charge of $1.1m) and includes
one-off charges of $1.5m, refer to Note 11 for further details.
An increased deferred tax asset for additional losses incurred
has not been recognised due to the uncertainty of future available
taxable profits to utilise the losses.
EPS
Shares in issue remain unchanged and the average share price for
the year was lower than the exercise price of outstanding options
and therefore there is no dilutive effect for diluted earnings per
share. Basic Statutory EPS reflects an increase loss per share of
23.2 cents (2019: 18.2c).
Net debt and cash flow movements
Dec-20 Dec-19
$m $m
------------------------------------------------------------ ------ ------
Adjusted EBIT (1) (4.3) 5.6
Add: Adjusted depreciation & amortisation in cost of
sales (Note 5) 10.7 15.2
Add: Adjusted depreciation & amortisation in administrative
expenses (Note 5) 6.9 4.2
Adjusted EBITDA (1) 13.3 25.0
Less: loan forgiveness (Note 27) (4.8) -
Less: share of losses/ profits of associates (Note 27) 3.3 (0.9)
Adjusted EBITDA after excluding non-cash items (1) 11.8 24.1
Working capital;
Add: Working capital inclusive of promissory note on
disposal of US Air Associate (Note 27) 10.2 (13.6)
Add: accelerated branding fee not recognised in Adjusted
EBIT 15.5 -
Add: Exceptional items (0.7) (7.8)
------------------------------------------------------------ ------ ------
Working capital 25.0 (21.4)
Cash generated by operations (Note 27) 36.8 2.7
Add: Tax (Note 27) (3.1) (1.0)
Net cash flow from operating activities (Note 27) 33.7 1.7
Lease payments (16.0) (14.0)
Capital expenditure (27.8) (18.2)
Acquisition of business (1.5) (1.3)
Proceeds on disposal of associate 9.9 -
Net interest paid (0.3) (0.9)
Net proceeds from borrowings 9.5 32.7
Dividend paid to equity holders of the parent - (1.6)
------------------------------------------------------------ ------ ------
Net cash used in investing and financing activities (26.2) (3.4)
Increase/ (decrease) in cash 7.5 (1.7)
Cash at the beginning of year 8.5 10.0
Effect of foreign exchange rates 0.1 0.1
------------------------------------------------------------ ------ ------
Cash at end of the period 16.1 8.4
Borrowings (53.2) (46.2)
Obligations under leases (49.5) (60.2)
------------------------------------------------------------ ------ ------
Net debt at the end of year (86.6) (98.0)
------------------------------------------------------------ ------ ------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure. APMs include Adjusted Revenue, Adjusted
Gross Profit, Adjusted EBIT and Net debt. In reconciling from
Adjusted EBIT to the net cash flow from operating activities,
Adjusted EBITDA and Adjusted EBITDA excluding non-cash items are
shown to aid understanding
-- The net cash inflow on operating activities of $33.7m (2019:
$1.7m) which has been driven by;
o Adjusted EBITDA of $13.3m (2019: $25.0m)
o Non-cash items in Adjusted EBITDA including loan forgiveness
of $4.75m (2019: nil) and partially offset by losses on associates
of $3.3m (2019: profit of $0.9m)
o 2020 benefitted from a $7.1m reduction in exceptional cash
flows in the year as there was a significant reduction in both
litigation costs and integration and re-organisation costs, see
Note 6 for further details
o Overall, working capital net inflow of $25.0m, which is up
from the $21.4m net cash outflow in the prior year
-- $15.5m of accelerated branding fees not recognised within
Adjusted EBIT but within working capital movements have been shown
separately, see Note 7 for further details
-- $3.0m US Air Associate consideration, which was in addition
to the $9.9m for the disposal of the investment, relating to
trading related matters (see Note 7 for further details on the
disposal). In addition, the capital element of the first instalment
of the $20.0m promissory note was received and the $2.5m receipt is
reflected with receivables
-- As part of COVID-19 support in the UK, VAT payments of $3.2m
have been deferred to 2021
-- Government support, excluding the $5.75m from a Payment
Protection Program Loan, of $1.0m was received
-- General improvement in working capital, including a $4.6m
receipt in relation to a long outstanding receivable
-- $27.8m capital expenditure includes the purchase, for $19.1m
of two new helicopters by Europe Air as part of the helicopter
emergency medical services which went live on 1(st) June 2020,
leasehold property improvements of $2.4m, Fixtures & Fittings
of $1.9m following office moves, a fixed wing aircraft to support
air ambulance services of $1.1m, $0.8m of aircraft hull and
refurbishments and computer software, primarily relating to
internally developed software arising from myairops(R) software
development of $2.5m
-- $9.9m proceeds on disposal of the US Air Associate, net of
transaction costs. Refer to Note 7 for further details on the
disposal
-- Proceeds from borrowings include $25.7m in relation to the
GBP20m Term loan for helicopters, $2.6m draw down on the RCF and
$5.75m from a Payment Protection Program Loan
-- Repayment of borrowing includes a $22.8m repayment on
revolving credit facility borrowings as a result of financing the
helicopters via the Term loan and repayment of other loans
-- On 18 (th) July 2020, the Group acquired a business to
provide air ambulance services for the Government of Jersey and the
Government of Guernsey. $1.5m of cash consideration was paid
-- Net Debt reduced by $11.4m to $86.6m (2019: $98.0m)
/ Dividend
The Board does not recommend a dividend for 2020 (2019: nil
pence per share).
Litigation
Following the litigation update provided in the Company's 2019
Annual Report and 2020 Interim release, the Company continues to
pursue the recovery of its long-standing trade receivables both
through enforcement actions in the UK and in other jurisdictions.
The Company has made progress through court proceedings in the UK.
It remains the Board's expectation that other than the provisions
already made by the Company against these claims, no further
provisions will be required.
Daniel Ruback
Chief Financial Officer
/ Consolidated income statement
/ For the year ended 31 December 2020
Year ended 31 December
Year ended 31 December 2019
2020 Restated*
---- ------------------------------- -------------------------------
Adjusting Adjusted Adjusting Adjusted
Statutory items result Statutory items result
result (1) (1) result (1) (1)
Note $'000 $'000 $'000 $'000 $'000 $'000
-------------------------------- ---- --------- --------- --------- --------- --------- ---------
Continuing operations:
Revenue 4 197,503 (15,500) 182,003 246,813 - 246,813
Cost of sales (145,468) - (145,468) (207,340) - (207,340)
-------------------------------- ---- --------- --------- --------- --------- --------- ---------
Gross profit 4 52,035 (15,500) 36,535 39,473 - 39,473
- Other administrative
expenses (28,939) 2,075 (26,864) (36,927) 6,692 (30,235)
- Impairment of right-of-use
assets 23 (7,013) 7,013 - (2,341) 2,341 -
- Impairment of goodwill
and acquired intangibles 6 (833) 833 - (540) 540 -
- Impairment of assets
under construction 6 (4,609) 4,609 - - - -
- Depreciation and amortisation 5 (7,544) 614 (6,930) (5,198) 984 (4,214)
- Impairment of financial
assets 20 (3,083) (709) (3,792) (2,387) 2,010 (377)
Total administrative expenses (52,021) 14,435 (37,586) (47,393) 12,567 (34,826)
-------------------------------- ---- --------- --------- --------- --------- --------- ---------
Operating profit/ (loss) 14 (1,065) (1,051) (7,920) 12,567 4,647
Share of results from
equity accounted investments 18 (9,705) 6,433 (3,272) 918 - 918
Impairment of equity accounted
investments 18 (3,421) 3,421 -
Profit on disposal of
interest in associates 7 7,278 (7,278) - - - -
Earnings before interest
and taxation 4,5 (5,834) 1,511 (4,323) (7,002) 12,567 5,565
Finance income 9 1,535 - 1,535 695 - 695
Finance expense 10 (3,940) - (3,940) (4,657) - (4,657)
-------------------------------- ---- --------- --------- --------- --------- --------- ---------
(Loss)/profit before tax (8,239) 1,511 (6,728) (10,964) 12,567 1,603
Taxation 11 (6,496) 5,017 (1,479) (495) (577) (1,072)
-------------------------------- ---- --------- --------- --------- --------- --------- ---------
(Loss)/profit for the
year (14,735) 6,528 (8,207) (11,459) 11,990 531
Attributable to:
Owners of the Company (14,780) 6,528 (8,252) (11,554) 11,990 436
Non-controlling interests 26 45 - 45 95 - 95
EPS attributable to the
equity holders of the
parent
basic 12 (23.2c) 10.2c (13.0c) (18.2c) 18.9c 0.7c
diluted 12 (23.2c) 10.2c (13.0c) (18.2c) 18.9c 0.7c
-------------------------------- ---- --------- --------- --------- --------- --------- ---------
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to
the nearest IFRS measure.
* Restatements are detailed in Note 2 of the notes to the
financial statements. The only income statement restatement was a
presentational change within adjusting items of an impairment of
right of use assets.
/ Consolidated statement of comprehensive income
/ For the year ended 31 December 2020
Year Year
ended ended
2020 2019
Note $'000 $'000
--------------------------------------------------- ---- -------- --------
Loss for the year (14,735) (11,459)
Items that may be reclassified to profit or
loss:
Exchange differences on translation of foreign
operations 2,194 (1,160)
Share of other comprehensive income of associates 18 92 36
Tax charge on items in other comprehensive income 11 - -
--------------------------------------------------- ---- -------- --------
Other comprehensive income/ (loss) 2,286 (1,124)
--------------------------------------------------- ---- -------- --------
Total comprehensive loss for the year (12,449) (12,583)
--------------------------------------------------- ---- -------- --------
Total comprehensive income/ (loss) is attributable
to:
Owners of the Company (12,494) (12,678)
Non-controlling interest 45 95
--------------------------------------------------- ---- -------- --------
(12,449) (12,583)
--------------------------------------------------- ---- -------- --------
/ Consolidated balance sheet
/ Company number 07264678
/ As at 31 December 2020
2019
2020 Restated*
Note $'000 $'000
---------------------------------------------- ---- --------- ----------
Non-current assets
Goodwill 14 22,490 21,750
Other intangible assets 15 10,329 10,148
---------------------------------------------- ---- --------- ----------
Total intangible assets 32,819 31,898
Property, plant and equipment 16 54,974 35,324
Right-of-use assets 23 38,022 52,315
Investments accounted for using equity method 18 2,000 15,112
Trade and other receivables 20 13,030 4,221
Deferred tax asset 22 - 2,252
---------------------------------------------- ---- --------- ----------
140,845 141,122
---------------------------------------------- ---- --------- ----------
Current assets
Assets held for sale 18 - 2,598
Inventories 19 5,978 7,271
Trade and other receivables 20 49,359 72,956
Current tax receivable 11 1,280 1,146
Cash and cash equivalents 16,136 8,463
---------------------------------------------- ---- --------- ----------
72,753 92,434
---------------------------------------------- ---- --------- ----------
Total assets 213,598 233,556
---------------------------------------------- ---- --------- ----------
Current liabilities
Trade and other payables 24 (40,074) (52,353)
Current tax liabilities 11 (15) -
Obligations under leases 23 (5,848) (16,366)
Provisions 30 (679) (521)
Borrowings 21 (1,000) (848)
Deferred revenue 33 (12,676) (2,707)
---------------------------------------------- ---- --------- ----------
(60,292) (72,795)
---------------------------------------------- ---- --------- ----------
Total assets less current liabilities 153,306 160,761
---------------------------------------------- ---- --------- ----------
Non-current liabilities
Borrowings 21 (52,197) (45,394)
Deferred revenue 33 (691) (4,382)
Provisions 30 (818) (594)
Obligations under leases 23 (43,644) (43,838)
Deferred tax liabilities 22 (2,109) (819)
---------------------------------------------- ---- --------- ----------
(99,459) (95,027)
---------------------------------------------- ---- --------- ----------
Total liabilities (159,751) (167,822)
---------------------------------------------- ---- --------- ----------
Net assets 53,847 65,734
---------------------------------------------- ---- --------- ----------
Shareholders' equity
Share capital 25 953 953
Share premium 25 63,473 63,473
Other reserves 25 35,360 34,798
Foreign exchange reserve (26,893) (29,179)
Accumulated losses (19,842) (5,062)
---------------------------------------------- ---- --------- ----------
Total shareholders' equity 53,051 64,983
---------------------------------------------- ---- --------- ----------
Non-controlling interest 26 796 751
---------------------------------------------- ---- --------- ----------
Total equity 53,847 65,734
---------------------------------------------- ---- --------- ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
/ Consolidated statement of changes in equity
/ for the year ended 31 DECEMBER 2020
Foreign
Share Other exchange Accu- Non-
mulated Total
profit/ shareholders' controlling Total
premium reserves reserve (losses) equity interest equity
Share
capital
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------------- -------- --------- --------- --------- ---------- -------------- ------------ --------
Balance at 1 January
2019 953 63,473 33,937 (28,055) 8,112 78,420 656 79,076
(Loss)/ profit
for the year - - - - (11,554) (11,554) 95 (11,459)
Other comprehensive
loss - - - (1,124) - (1,124) - (1,124)
----------------------- -------- --------- --------- --------- ---------- -------------- ------------ --------
Total comprehensive
(loss)/ profit
for the year - - - (1,124) (11,554) (12,678) 95 (12,583)
Cost of share-based
payments (Note
31) - - 861 - - 861 - 861
Dividend paid (Note
38) - - - - (1,620) (1,620) - (1,620)
----------------------- -------- --------- --------- --------- ---------- -------------- ------------ --------
Balance at 31 December
2019 953 63,473 34,798 (29,179) (5,062) 64,983 751 65,734
(Loss)/ profit
for the year - - - - (14,780) (14,780) 45 (14,735)
Other comprehensive
income - - - 2,286 - 2,286 - 2,286
----------------------- -------- --------- --------- --------- ---------- -------------- ------------ --------
Total comprehensive
(loss)/ profit
for the year - - - 2,286 (14,780) (12,494) 45 (12,449)
Cost of share-based
payments (Note
31) - - 562 - - 562 - 562
Balance at 31 December
2020 953 63,473 35,360 (26,893) (19,842) 53,051 796 53,847
----------------------- -------- --------- --------- --------- ---------- -------------- ------------ --------
/ Consolidated cash flow statement
/ for the year ended 31 DECEMBER 2020
Year Year
ended ended
2020 2019
Note $'000 $'000
-------------------------------------------------------- ---- -------- --------
Net cash generated by operating activities 27 33,683 1,695
-------------------------------------------------------- ---- -------- --------
Cash flows from investing activities
Purchases of property, plant and equipment 16 (25,298) (15,053)
Purchases of intangibles 15 (2,521) (3,093)
Proceeds on disposal of assets held for sale 7 9,954 -
Interest received 430 -
Acquisition of business, net of cash acquired 13 (1,544) (1,310)
-------------------------------------------------------- ---- -------- --------
Net cash used in investing activities (18,979) (19,456)
-------------------------------------------------------- ---- -------- --------
Cash flows from financing activities
Lease payments 23 (16,022) (14,062)
Interest received - 2
Interest paid (660) (901)
Proceeds from borrowings 28 33,987 65,563
Repayment of borrowings 28 (24,471) (32,915)
Dividend paid to equity holders of the parent 38 - (1,620)
-------------------------------------------------------- ---- -------- --------
Net cash (used in)/ generated from financing activities (7,166) 16,067
-------------------------------------------------------- ---- -------- --------
Net increase/(decrease) in cash and cash equivalents 7,538 (1,694)
Cash and cash equivalents at the beginning of year 8,463 10,045
Effect of foreign exchange rates 135 112
-------------------------------------------------------- ---- -------- --------
Cash and cash equivalents at the end of year 16,136 8,463
-------------------------------------------------------- ---- -------- --------
Cash and cash equivalents comprise cash and bank balances. The
carrying amount of these assets is approximately equal to their
fair value.
/ Notes to the financial statements
/ For the year ended 31 December 2020
1. General information
Gama Aviation Plc (the "Company") is a public company limited by
shares incorporated under the Companies Act 2006 and domiciled in
England in the United Kingdom. The address of the registered office
is 1st Floor, 25 Templer Avenue, Farnborough, Hampshire, England,
GU14 6FE. The nature of the Group's operations and its principal
activities are set out in the Directors' report (which is included
as part of the full Annual Report).
Basis of preparation
The audited results are derived from the full financial
statements for the year ended 31 December 2020, which have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 ('IFRS')
and the applicable legal requirements of the Companies Act
2006.
The audited results presented here are not the Group's statutory
accounts for the years ended 31 December 2020 and 31 December 2019.
The statutory accounts for the year ended 31 December 2020 will be
delivered to the Registrar of Companies shortly. The statutory
accounts for the year ended 31 December 2019 have been filed with
the Registrar of Companies. The auditor's reports on the Group's
statutory accounts for the years ended 31 December 2020 and 2019
are unqualified and do not contain statements under Section 498 of
the Companies Act 2006.
The financial statements are prepared on a going concern basis
under the historical cost convention. The preparation of
Consolidated Financial Statements requires management to make
judgements and estimates that affect the reported amounts of assets
and liabilities at the date of the Consolidated Financial
Statements and the reported amounts of revenue and expenses during
the reporting period. Actual future outcomes could differ from
those estimates.
Climate Change
In preparing the Consolidated Financial Statements the Group has
informally considered the impact of climate change, particularly in
the context of the disclosures included in our Corporate Social
Responsibility report and our Project Element Six ambitions, both
of which are included as part of the full Annual Report. These
considerations did not have a material impact on the financial
reporting judgements and estimates, consistent with the assessment
that climate change is not expected to have a significant impact on
the Group's going concern assessment to 31 December 2022 nor the
long-term viability of the Group.
2. Accounting policies
The Group's significant accounting policies are set out below.
These accounting policies have been applied consistently to all
periods presented in these Consolidated Financial Statements. The
comparative amounts for the year ended 31 December 2019 have been
restated for three presentational items which are discussed in more
detail below.
(a) Restatements
The balance sheet as at 31 December 2019 has been restated for
three items;
I. to reclassify $389k of current tax receivable out of trade
and other receivables and into a current tax receivable line item
on the face of balance sheet. In addition, there was a
reclassification from other taxation and social security, within
trade and other payables, resulting in $757k increase in the year
end trade and other payables and a corresponding increase to
current tax receivable
II. to net contract assets and liabilities associated with a
long-term contract where it would have been more appropriate to
offset. Prepayments within trade and other receivables decreased by
$160k in current and $171k in non-current. Current and non-current
deferred revenue decreased by $160k and $171k respectively. The net
impact on total asset was a decrease of $331k, with an equivalent
decrease in total liabilities
III. Prior year bank borrowings on the revolving credit facility
(the "RCF") of $44,767k have been reclassified from current
liabilities to non-current liabilities. While the RCF is settled
and drawdown on a cyclical basis there is no right from the bank to
demand full repayment within the next twelve months and on that
basis, presentation within non-current liabilities is
appropriate
A third balance sheet, being the balance sheet at 31 December
2018 with the above restatements, has not been presented. While
some of the misstatement are quantitatively material, qualitatively
these misstatements are not considered material particularly given
the disclosures in Note 21, limited number of restatement and
nature of these restatements being discrete reclassifications.
Following a significant impairment of right-of-use assets in the
current year, a $2,341k impairment of the right-of-use assets at
Fairoaks in the prior year has been represented within adjusting
items from integration and business re-organisation costs into a
separate financial statement line item.
Goodwill at 31 December 2019 has not been restated however in
Note 14 the allocation of Goodwill between cash generating units
("CGUs") has been restated for a disclosure error between Europe
Ground and Flyertech. The carrying amount of goodwill allocated to
Europe Ground has been reduced by $1,194k and an equivalent amount
has been allocated to Flyertech. Refer to Note 14 for further
details.
Deferred tax assets at 31 December 2019 has not been restated
however in Note 22 tax losses have been restated for disclosure
difference between tax losses and other temporary differences. Tax
losses have decreased by $662k and other temporary differences have
increased by an equivalent amount. Refer to Note 22 for further
details.
(b) Adoption of new and amended standards adopted by the
group
The group has applied the following standards and amendments for
the first time for their annual reporting period commencing 1
January 2020:
-- Definition of Material - amendments to IAS 1 and IAS 8
-- Definition of a Business - amendments to IFRS 3
-- Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 39
and IFRS 7
-- Revised Conceptual Framework for Financial Reporting
The group will also adopt the following amendments:
-- Annual Improvements to IFRS Standards 2018-2020 Cycle
-- COVID-19-Related Rent Concessions - amendments to IFRS 16
The amendments listed above will not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
(c) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the group. These
amendments are not expected to have a material impact.
(d) Leases
Definition of a lease
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains, a
lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group assesses
whether:
-- The contract involves the use of an identified asset - this
may be specified explicitly or implicitly, and should be physically
distinct or represent substantially all of the capacity of a
physically distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;
-- The Group has the right to obtain substantially all of the
economic benefits from use of the asset throughout the period of
use; and
-- The Group has the right to direct the use of the asset. The
Group has this right when it has the decision-making rights that
are most relevant to changing how and for what purpose the asset is
used. In rare cases where the decision about how and for what
purpose the asset is used is predetermined, the Group has the right
to direct the use of the asset if either:
-- The Group has the right to operate the asset; or
-- The Group designed the asset in a way that predetermines how
and for what purpose it will be used.
At inception or on reassessment of a contract that contains a
lease component, the Group allocates the consideration in the
contract to each lease component on the basis of their relative
stand-alone prices. However, for the leases of land and buildings
in which it is a lessee, the Group has elected not to separate
non-lease components and account for the lease and non-lease
components as a single lease component.
As a lessee
As a lessee, the Group leases many assets including aircraft,
hangars, property, cars and IT equipment. The Group recognises
right-of-use assets and lease liabilities for most of these leases
- i.e. these leases are on-balance sheet.
Lease liabilities are measured at the present value of the
remaining lease payments. Where leases commenced after the initial
transition date, the lease payments are discounted using the
interest rate implicit in the lease. If that rate cannot be
determined, the Group's incremental borrowing rate is used, being
the rate that the Group would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions. Where appropriate,
lease liabilities are revalued at each reporting date using the
spot exchange rate.
Right-of-use assets are measured at an amount equal to the lease
liability, adjusted by the amount of any prepaid or accrued lease
payments.
The Group has tested its right-of-use assets for impairment at
the reporting date and further details on impairments are shown in
Note 23.
The Group depreciates right-of-use assets over the over the
shorter of its useful economic life and the lease term on a
straight-line basis unless the lease is expected to transfer
ownership of the underlying asset to the Group, in which case the
asset is depreciated to the end of the useful life of the
asset.
Short-term leases are leases with a lease term of 12 months or
less. Payments associated with short-term leases and low-value
leases are recognised on a straight-line basis as an expense in the
income statement.
As a lessor
The Group leases out property included within its right-of-use
assets. The Group has classified these leases as operating leases.
The right-of-use assets recognised from the head leases are
presented in leasehold property and depreciated over the life of
the lease. The Group assessed the classification of the sub-lease
contracts with reference to the right-of-use asset rather than the
underlying asset, and concluded that they are operating leases
under IFRS 16.
(e) Use of Alternative performance measures (APMs)
The performance of the Group is assessed and discussed on an
'adjusted' basis, using a variety of APMs, including Adjusted
Revenue, Adjusted Gross Profit, Adjusted Earnings before interest
and tax (EBIT), Organic Revenue Growth and Net Debt. The term
'adjusted' refers to the relevant measure being reported for
continuing operations excluding 'adjusting items'.
The Directors believe that adjusted profit and earnings per
share measures provide additional and more consistent measures of
underlying performance to shareholders by removing certain trading
and non-trading items that are either not closely related to the
Group's operating cash flows or non-recurring in nature. These and
other APMs are used by the Directors for internal performance
analysis and incentive compensation arrangements for employees. The
term 'adjusted' is not defined under IFRS and may therefore not be
comparable with similarly titled measures reported by other
companies. They are not intended to be a substitute for, or
superior to, GAAP measures. Where applicable, divisional measures
are calculated in accordance with Group measures.
The impact on application of IFRS 16 was presented in the prior
year and no restatements to the impact previously reported have
been made. However, the presentation of the impact on application
of IFRS 16 within Note 4 has changed to aid year-on-year
comparability. The impact on application of IFRS 16 in the prior
year was a credit of $2,301k to Adjusted EBIT of which the credit
to Gross Profit was $191k. The presentation of the impact on
application of IFRS 16 was aggregated into one line item in the
prior year and in the current year this has been disaggregated
across the respective divisions resulting in the following to
Adjusted EBIT, $396k credit in Europe Air, $14k credit in Asia Air,
$538k credit in US Ground, $1,169k credit in Europe Ground, $193k
credit in Middle East Ground, $6k charge in Central Costs and $3k
charge in Global Services Division. In addition, earnings per share
(EPS) presented in the highlights of the annual report was shown
before and after the application of IFRS 16. In the current year
EPS is presented after the application of IFRS 16.
APMs have been defined and reconciled to the nearest IFRS
measure in Note 6 and below, along with the rationale behind using
the measures.
Adjusting items
The Group's Income Statement and segmental analysis separately
identify trading results before Adjusting items. The Directors
believe that presentation of the Group's results in this way is
relevant to an understanding of the Group's financial performance,
as adjusting items are identified by virtue of their size, nature
or incidence. This presentation is consistent with the way that
financial performance is measured by management and reported to the
Board and assists in providing a meaningful analysis of the trading
results of the Group. In determining whether an event or
transaction is treated as an Adjusting item, management considers
quantitative as well as qualitative factors such as the frequency
or predictability of occurrence.
The income statement items that are excluded from the Statutory
results are referred to as Adjusting items. Adjusting items include
exceptional items, amortisation of acquired intangibles,
share-based payment charges and tax related to adjusting items.
These items are defined and explained in more detail as
follows:
Exceptional items
Within adjusting items, exceptional items are items of income or
expenditure that are not considered to reflect in year operational
performance of the continuing business. These are recorded in
accordance with the policy set out below:
-- Transaction costs - arising on acquisitions, disposals, and
debt refinancing.
-- Integration and business reorganisation - legal and
professional fees and non-recurring operating costs arising from
significant acquisition integration or business reorganisation
activities. Non-recurring operating costs means those costs that
are related to a specific integration or reorganisation event that
will not be repeated because they are unique to the event and which
are not expected to follow a consistent level of expense from one
accounting period to the next.
-- Litigation - legal costs (which may be incurred in more than
one accounting period) are treated as exceptional if they relate to
specific commercial legal events that are not in the normal course
of trading activity in respect of one-off or related series of
cases and are not expected to follow a consistent level of expense
from one accounting period to the next.
-- Impairment - arising from significant losses identified from
impairment reviews.
-- Other items - other significant non-recurring items.
Amortisation of acquired intangible assets
Exclusion of amortisation of acquired intangibles accounted for
under IFRS 3 from the Group's results assists with the
comparability of the Group's profitability with peer companies. In
addition, charges for amortisation of acquired intangibles arise
from the purchase consideration of a number of separate
acquisitions. These acquisitions are portfolio investment decisions
that took place at different times over several years, and so the
associated amortisation does not reflect current operational
performance.
Share-based payments
The Group treats share-based payments as an adjusting item
because share-based payments are a significant non-cash charge
driven by a valuation model that references Gama's share price and
each new share award is subject to volatility when it is measured
at the grant date. No grants were made in the year and after the
reporting date new schemes were announced, refer to Note 31 and
Note 35 for further details. Share-based payments have not been
routinely issued in the prior years and the level of the charge is
expected to be significantly different following the changes
announced.
Tax related to adjusting items
The elements of the overall Group tax charge relating to the
above Adjusting items are also treated as Adjusting. These elements
of the tax charge are calculated with reference to the specific tax
treatment of each individual Adjusting item, taking into account
its tax deductibility, the tax jurisdiction concerned, and any
previously recognised tax assets or liabilities.
(f) Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Operational Review and Chief Financial Officer's
report.
The emergence of COVID-19 during 2020 has increased uncertainty
surrounding the future trading environment for the Group. To
support their assessment of going concern the Directors have
performed a detailed analysis of cash flow projections for the
Group covering the period from the date of approval of the annual
financial statements to 31 December 2022. The analysis takes
account of the following amongst other relevant considerations:
-- the $50.0m committed revolving credit facility ("RCF"), of
which $24.7m (2019: $5.0m) is undrawn at the reporting date and a
GBP 20.0m (2019: nil) term loan
-- receipt of the remaining balance of the US Air associate
disposal proceeds of $18.0m at the reporting date but not the
accelerated receipt of these cash flows as explained in Note 35
-- the absence of the $16.0m of disposal consideration received
in 2020 from future cash projections
-- the acquisition of Jet East, which resulted in $10.0m drawn
down on the RCF, $7.7m of initial consideration paid and $2.65m of
acquired borrowings repaid
-- cash at the reporting date of $16.1m (2019: $8.5m)
-- working capital levels and a cautious conversion of profits
into cash flows at circa 60 percent
The borrowing facilities have no covenants and fall due for
repayment on 14 November 2022 and 31 January 2023 respectively. The
Group has no reason to believe these facilities would not be
renewed on comparable terms. The RCF, which is presented in
non-current liabilities, is settled and drawdown on a cyclical
basis with no right from the bank to demand full repayment within
the next twelve months. The key assumption in these projections
relates to revenue performance and the Directors have included what
they consider to be a cautious recovery in revenue performance from
the first quarter of FY21. Downside sensitivities have also been
assessed, which reflect no further recovery in revenues and a
continuation of the COVID-19 impacted trading performance in Q1
FY21 extending to the remainder of FY21. In both the Group's base
case forecasts and downside scenarios the Group maintains
significant headroom against its cash and available facilities.
Accordingly, the Directors have, at the time of approving the
financial statements, a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt
the going concern basis of accounting in preparing the financial
statements.
(g) Business combinations
Business combinations are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured at fair value, which is 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 and
the equity issued by the Group. 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. 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.
(h) Goodwill
Goodwill arising on consolidation represents the excess of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and acquisition date fair value of any
previous equity interest in the acquiree over the fair value of the
net identifiable assets acquired. 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, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
(i) 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. The Group has no indefinite life
Intangible assets.
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 computer
software.
A summary of the policies applied to the Group's acquired
intangible assets is as follows:
-- Part 145 approvals 20% per annum, straight line method.
-- Licences 10% per annum, straight line method.
-- Brand 10% per annum, straight line method.
-- Customer relations 10% per annum, straight line method.
-- Software 20%-33% per annum, straight line method.
Amortisation rates shown above are the maximum for these
intangible assets and in the current year there were no intangibles
that had a shorter useful life.
(j) 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 improvements Life of lease and no residual value
-- Right-of-use assets Life of lease and no residual value
-- Aircraft and refurbishments
The higher of 20 years (5% per annum) less the age of aircraft
at purchase and 5 years (20% per annum). A 25% residual value (on
the original cost) is in place where engines are on an engine
maintenance program as this is considered to support a residual
value.
-- Helicopters 5% per annum and 25% residual value (on the
original cost)
-- Furniture, fixtures and equipment 20% per annum and no residual value
-- Motor vehicles 20% per annum and no residual value
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.
(k) 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.
(l) 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 associates and joint venture are
accounted for using the equity method of accounting. The investment
is carried in the balance sheet at cost as adjusted 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.
(m) 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:
-- Raw materials and consumables: purchase cost on a first in,
first out basis.
-- 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.
Inventories include Rotable stock. Rotable stock are inventory
items that can be repeatedly and economically restored to their
fully serviced condition, in which already-repaired equipment is
exchanged for defective equipment, which in turn is repaired and
kept for future exchange. These items have extensive life
expectancy through repetitive overhaul process.
The Rotable stock could either be recognised as property, plant
and equipment ("PPE") or inventory. In line with industry practice,
the Group policy recognises Rotable stock as inventory. In
addition, the cost of any refurbishment of Rotable stock is
recognised in inventory.
The Group policy on recognising inventory at the lower of cost
and net realisable value does this by providing for aged
inventories on a sliding scale over the preceding eight years
(2019: four years on the "core" component). As a result, inventory
older than eight years is written off in full.
The significant estimation uncertainty to the valuation of
inventory arises out of the wide range and nature of inventory
held, each with different demand, inventory days and opportunity to
utilise. While no specific inventory line has material estimation
uncertainty in its valuation, there is risk across all lines in
aggregation.
(n) 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.
(o) 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 subsequently
measured at amortised cost less an expected credit loss allowance,
determined as set out below in "impairment of financial assets".
Any write-down of these assets is expensed to the income
statement.
Where there are sub participation arrangements, sub
participation proceeds are offset against the financial asset
provided that the sub participation meets all pass through
conditions, namely, there is no recourse to the transferor, and the
transferor does not retain any significant risks and rewards of
ownership of the financial asset.
Impairment of financial assets
It is not necessary for a credit event to have occurred before
credit losses are recognised. Instead, the Group accounts for
expected credit losses and changes in those expected credit losses.
The amount of expected credit losses are updated at each reporting
date.
The impairment model applies to the Group's financial assets
that are debt instruments measured at amortised costs as well as
the Group's lease receivables, contract assets and issued financial
guarantee contracts. The Group has applied the simplified approach
to recognise lifetime expected credit losses for its trade
receivables, accrued income and contracts assets as permitted by
IFRS 9.
Expected credit losses are calculated with reference to average
loss rates actually incurred in the three most recent reporting
periods to which a country risk premium is added, based on the
location of each business. The combined loss rate represents the
maximum expected credit default risk, which is expressed as a
percentage. The Group average combined loss rate is approximately
1%.
This percentage rate is then applied to the economic exposure
which comprises of trade receivables, contract assets and accrued
income, all of which is then reduced by any specific loss
allowances, and any related trade and other payables with the
debtor. A probability risk spread is used to apportion the loss
rate across the ageing categories as follows:
-- 80% of debt not yet due (i.e. the Group's average combined
loss rate of 1% is discounted by 20%, meaning a 0.8% loss allowance
would be made to debt not yet due)
-- 85% of debt that is <30 days overdue
-- 90% of debt that is 30-60 days overdue
-- 95% of debt that is 60-90 days overdue
-- 100% of debt that is >90 days overdue
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.
(p) Provisions and contingent liabilities
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.
A contingent liability is disclosed where the existence of the
obligation will only be confirmed by future events, or where the
amount of the obligation cannot be measured reliably.
(q) Segmental reporting
An operating segment is a distinguishable component of the Group
that is engaged in business activities from which it may earn
revenues and incur expenses, and whose operating results are
reviewed regularly by the Chief Operating Decision Maker (the Group
Chief Executive) to make decisions about resources to be allocated
to the segment and assess its performance, and for which discrete
financial information is available.
Reportable segments are operating segments that either meet the
thresholds and conditions set out in IFRS 8 or are considered by
the Board to be appropriately designated as reportable segments
under IFRS 8.
(r) Supplier volume rebates
The Group has supplier contracts for the provision of certain
services, which attract volume rebates, the credit for which is
initially recognised centrally and together with other central
income and expenses allocated to the respective divisions as
appropriate. The anticipated rebate receivable is accrued
throughout the year based on the agreement terms.
(s) Revenue recognition
Revenue is measured based on the performance obligations and
consideration specified in a contract with a customer and excludes
amounts collected on behalf of third parties. The Group recognises
revenue when it transfers control of a product or service to a
customer or when it meets the performance obligations specified or
implied in the contract. The Group has revenue from the sale of
business aviation services and branding fees, each of which is
covered in further detail below.
-- Sale of business aviation services revenue from the following major sources:
o Managed aircraft contracts and specific air services
o Maintenance of aircraft
o Design and modification projects
o Fixed base operations ("FBO")
o Global services
-- Branding fees generated from utilisation of the Gama brand
Managed aircraft contracts and specific air services
These activities are provided by the Group's Air Division.
Services provided under managed aircraft contracts include flight
training, cost management, flight planning and scheduling, crew
management, maintenance oversight and regulatory compliance as
separate performance obligations falling into one or more of the
contract components identified below.
The services are contract based with costs such as fuel,
insurance, crew and maintenance being recharged to the client.
Specific air services provided under this heading include a variety
of specific contracts with customers where one or more elements of
fully managed services are provided.
The managed aircraft contracts have three components:
1. Pre-delivery services and services prior to aircraft's entry into service (if appropriate)
2. Management services
3. Variable fees based on flying hours and related rechargeable costs
Most specific services provided arise in components 1 and 3,
whilst management services relate to overarching administrative
services relating to ongoing regulatory compliance requirements,
billed on a regular basis over the life of the contract. These
components are distinct as the customer can benefit from the
services on their own and the Group's promise to provide the
service is separately identifiable from other promises in the
contract. The three components are therefore deemed to be separate
performance obligations and revenue is recognised based on the
above performance obligations as follows:
1. Revenue is recognised once the service has been performed (at a point in time)
2. The customer simultaneously receives and consumes the
benefits provided by the Group, therefore revenue is recognised
over time
3. Variable flying hours revenue is recognised monthly based
upon actual flight information and other relevant information held
on the internal billing system (at a point in time). Rechargeable
costs are recognised gross, as revenue and related cost of sales
and are recognised at a point in time (for example, monthly) based
upon either actual rechargeable costs or estimated costs to be
recharged
The Group has considered whether it is acting as agent or
principal in the context of its managed aircraft contracts and has
concluded that it is the principal in relation to the entirety of
these contracts. Rechargeable costs are recognised gross because
the Group controls the services before they are transferred to
customers and because they are linked to wider management services.
For practical purposes management services and rechargeable costs
(and other variable fees based on flying hours) are itemised
separately in billing to customers, but for the purposes of revenue
recognition there is an allocation of management fee revenue to
rechargeable costs to reflect the standalone selling price of that
revenue stream.
Maintenance of aircraft
These activities are provided by the Group's Ground Division.
The Group provides both base and line maintenance services. Base
maintenance relates to the planned maintenance that is required by
the aircraft manufacturer or component supplier. This work is
complex, highly regulated and location specific. Line maintenance
covers irregular maintenance activities, component failure or
simple wear and tear. Both types of services are provided on a fee
or contract basis.
Maintenance revenue is recognised over time in line with the
performance of the related maintenance work as the Group's
performance of maintenance services do not create assets with an
alternative use and the Group has an enforceable right to payment
for performance completed to date. In most cases work is carried
out and billed to the customer in the same accounting period.
However, for work ongoing at the end of an accounting period an
assessment of the extent to which contracted work is completed is
made and a corresponding amount of revenue is accrued. This
assessment is made using the input method of labour hours expended
and costs incurred.
Shorter duration adhoc maintenance revenues are recognised at a
point in time in line with the performance obligation.
Design and modification projects
The Group undertakes certain equipment design and modification
activities for some customers. These activities are provided by
both Air and Ground Divisions of the Group. Revenue is recognised
over time in line with the performance of the related design and
modification work for design projects because the Group's
performance of its contractual obligations creates or enhances an
asset that the customer controls as the asset is created or
enhanced. Work that is outstanding under design and modification
contracts at the end of an accounting period is accrued and a
contract asset (accrued income) is recognised on the balance sheet,
based upon the input method of measuring progress (cost and labour
hours expended to date). A contract liability (deferred revenue) is
recognised on the balance sheet for revenues deferred until the
performance obligations are discharged.
Fixed Base Operation
The Group also provides fixed base operation activities in US,
Jersey, Scotland and Middle East through the Ground Division. This
includes hangar parking and apron parking space to customers.
Revenue is recognised as the service is provided over time.
Global services
The Global Services Division comprises two businesses, FlyerTech
and myairops(R). FlyerTech provides continuing airworthiness
management (CAM) and airworthiness review certification (ARC)
services for business aviation and commercial airline operators.
myairops(R) has developed a suite of business aviation products
deployed as "Software as a Service" (SaaS) and mobile app solutions
for business aviation operators, flight support companies, FBOs and
regional airports.
FlyerTech revenue from services is primarily derived from the
provision of airworthiness services. Revenue includes fixed
contract fees and variable fees such as revenue earned with
reference to ad hoc services. Flyertech 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.
myairops(R) revenue represents the value of services provided
under contracts to the extent that there is a right to
consideration and is recorded at the value of the consideration
due. Where a contract has only been partially completed at the
balance sheet date, revenue represents the value of the service
provided to date based on a proportion of the total contract value.
Where payments are received from customers in advance of services
provided, the amounts are recorded as deferred revenue.
Branding fees from associates
The Group receives a branding fee from Gama Aviation LLC in
addition to the equity accounted share of profit from the US Air
associate prior to disposal (refer to Note 7 for further details).
The branding fee was payable quarterly in arrears and the Group
recognises revenue over time as the customer simultaneously
receives and consumes the benefits provided by the Group.
(t) 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 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. The Company's functional currency is
determined to be Pounds Sterling because this is the currency of
the primary economic environment in which the Company 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. Foreign currency
fluctuations on monetary items that are financing in nature, being
foreign currency borrowings, are presented in finance income or
expenses. All other foreign currency fluctuations on monetary items
are presented within Adjusted EBIT.
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.
(u) 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.
(v) 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.
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 to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
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.
(w) Government grants
During the year the Group received a potentially forgivable loan
under the Paycheck Protection Program ("PPP"), managed by the US
Small Business Administration (SBA) under the auspices of the US
government Coronavirus Aid, Relief, and Economic Security Act
(CARES Act). Under IAS 20 a forgivable loan from government is
treated as a government grant when there is reasonable assurance
that the entity will meet the terms for forgiveness of the loan.
The Group has adopted the income approach in relation to this loan
which provides that government grants should be recognised in
profit or loss on a systematic basis over the periods in which the
entity recognises as expenses the related costs for which the grant
is intended to compensate.
The Group applied to Citibank for a loan under the PPP in order
to avoid significant pandemic-driven headcount reductions in its US
workforce. $5,753k was received from Citibank on 12 May 2020 and
was initially recognised as borrowings in current liabilities.
$4,753k of these funds are considered by the Company to be eligible
for forgiveness within the terms of the PPP and have therefore been
recognised as income against the related expenses in the income
statement, reducing the amount of borrowings at the period end to
$1,000k. The utilisation of the grant is reflected against the
related expenses in cost of sales and administrative expenses.
Refer to Note 3 and 21 for further details.
Although the CARES Act suspends the ordinary requirement that
borrowers must be unable to obtain credit elsewhere (as defined in
section 3(h) of the Small Business Act), borrowers still must
certify in good faith that their PPP loan request is necessary.
Specifically, before submitting a PPP application, borrowers are
required to consider the required certification that "current
economic uncertainty makes this loan request necessary to support
the ongoing operations of the Applicant." Borrowers must make this
certification in good faith, taking into account their current
business activity and their ability to access other sources of
liquidity sufficient to support their ongoing operations in a
manner that is not significantly detrimental to the business.
Conscious of the significant uncertainty regarding the extent and
duration of the global pandemic and its potential impact on the
Group's activities and financial resources, the Group applied for
the loan in good faith on the above basis, and the proceeds have
been used to defray qualifying expenditures. The Group has to date
been unable to submit a loan forgiveness application as the portal
managed by Citibank on behalf of the SBA has only recently opened.
The Board has consulted with its outside legal advisers as to the
eligibility for forgiveness of the loan. The Board believes it is
appropriate under IAS 20 to recognise the receipt of the loan and
its anticipated partial forgiveness and that such treatment is
necessary for these accounts to show a true, fair and balanced view
of the Group's 2020 results given the impact of the global pandemic
on its operations.
Other forms of government grants were received by the Group in
the year including $616k under the UK Furlough scheme, $148k under
a Hong Kong payroll scheme and a $267k rent rebate in the Middle
East. As noted elsewhere in these accounts the nature of the
Group's operations in the UK, and the long-term nature of its
special mission contracts, provided a greater degree of resilience
to the pandemic with a consequently lower need for government
support. All other forms of government grants have been recognised
on the income approach, reducing the costs for which the grant is
intended to compensate.
In accordance with IAS 20, in the event that a government grant
becomes repayable, this would be accounted for as a change in
accounting estimate and therefore prospectively through the income
statement.
3. Critical accounting judgments and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in Note 2, the Directors are required to make judgments
(other than those involving estimations) that have a significant
impact on the amounts recognised and to make estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors, including anticipated future events and market conditions,
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgments in applying the Group's accounting
policies
The following are the critical judgments, apart from those
involving estimations (which are dealt with separately below), that
management have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in financial statements.
Paycheck Protection Program (PPP)
During the year the Group received funds under the Paycheck
Protection Program (PPP) in the form of a loan arrangement from
Citibank guaranteed by the US government, which is specifically
intended to help businesses maintain their US workforce during the
COVID-19 pandemic. The Group made the application in good faith and
in the belief that the PPP loan request was necessary and otherwise
in accordance with the then applicable rules, to support its
ongoing operations given the economic uncertainty caused by the
pandemic. $5,753k funds were received on 12 May 2020 and was
initially recognised as borrowings in current liabilities. $4,753k
of these funds are considered by the Company to be eligible for
forgiveness within the terms of the PPP and have therefore been
recognised as income against the related expenses in the income
statement, reducing the amount of borrowings at the period end to
$1,000k. Confirmation of partial loan forgiveness is expected
within 12 months from the balance sheet date. The Board has
consulted with its outside legal advisors as to the eligibility for
forgiveness of the loan. The Board believes it is appropriate under
IAS 20 to recognise the receipt of the loan and its anticipated
partial forgiveness and that such treatment is necessary for these
accounts to show a true, fair and balanced view of the Group's 2020
results given the impact of the global pandemic on its operations.
The total balance is material and, while a different outcome is
considered highly unlikely, this balance is sensitive to a material
change in judgement in the event the US government assessed the
forgiveness differently. Refer to Note 2 (w) and Note 21 for
further details.
Presentation of consideration received from the sale of its US
Air associate, Gama Aviation LLC
Gama Aviation Plc received consideration of $33.0m for the sale
of its US Air associate, Gama Aviation LLC. Management exercised
judgement in determining the allocation of consideration between
the 24.5% equity interest considered to be $10.0m, the $15.5m
settlement of the existing branding contract (accelerated branding
fees) and the $7.5m of consideration allocated for the continued
use of the Gama Aviation brand for up to two years after the date
of disposal, which is consistent with the pre-existing level of
branding fee of $3.75m per year (total $7.5m).
Classification of items of cost or income as "Exceptional"
(exclusion of items from Adjusted EBIT)
Management consider exceptional items to be those that do not
contribute to the underlying performance of the Group as set out in
the policy. This requires judgment as the management and Group's
view of what qualifies as exceptional items may differ from similar
judgments made by others. Exceptional items are treated as
adjusting items to enable more relevant and reliable financial
information to be presented. The exceptional items recorded in the
income statement relate to accelerated branding fees, transaction
costs; business integration and re-organisation costs; legal costs
arising primarily from historical Hangar 8 activity; and other
non-recurring items that management judge to be exceptional.
Recoverable amount for CASL
Impairment is assessed by the recoverable amount which is the
higher of the fair value less costs to sell and the value-in-use
("VIU"). The recoverable amount of CASL has been determined on the
fair value less cost to sell based on an arm's length offer another
CASL shareholder received for their 20 percent shareholding in 2021
and is therefore an appropriate basis upon which to measure the
fair value of the Group's 20 percent shareholding in CASL.
Impairment charges of $3,421k (2019: nil) have been recognised to
reduce the equity accounted investment in CASL from the carrying
amount to its recoverable amount of $2,000k. Refer to Note 18 for
further details. In May 2021, the Group also received a similar
offer for its 20 percent shareholding in CASL. The Board is
currently considering the terms of the offer and is in negotiations
with the counterparty. CASL was not held for sale at 31 December
2020 and this event is a non-adjusting event after the reporting
date.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting period, that may have a
significant risk of causing a materially different outcome to the
carrying amounts of assets and liabilities within the next
financial year, are discussed below.
Impairment review on non-current assets
The goodwill, investment in associates, right of use assets and
assets under construction require the use of estimates related to
future profitability and the cash generating ability of the related
businesses or in the case of the investment in associates, the fair
value less costs to sell. The estimates used may differ from the
actual outcome. Details of the impairment review performed are set
out in Notes 14, 16 and 18.
Loss allowances on financial assets
The loss allowance is calculated based on management's best
estimate of the amounts which will be recovered from trade
receivables. A proportion of the trade receivables balance is with
individuals and overseas groups, for whom it is more difficult to
establish a credit rating. Management are in regular communication
with aged debtors and assess the likelihood of recoverability on a
regular basis. The estimate of the loss allowance may vary from the
actual amounts recovered if an individual becomes unable to pay. An
analysis of the trade receivables balance and indications of credit
concentration are provided in Note 20. Management's critical
estimate relating to unimpaired receivables relates to the
enforceability of liens over an aircraft to ensure settlement of a
balance of $4.6m aging over 120 days. A change in the
enforceability of this liens would materially change the loss
allowance on financial assets.
Valuation of inventories
Management exercise judgment in measuring inventory at the lower
of cost and net realisable values. The estimate of the net
realisable value represents management's best estimate and it may
vary from the actual realisation, notwithstanding the regular
review and monitoring. An analysis of the inventories and an
inventory obsolescence allowance is provided in Note 19. Inventory
valuation is sensitive to management's assessment of aging and
obsolescence of certain line items. Management assess inventory
aging over eight years to be fully impaired. A change in this
assumption of a lesser or greater usage from years 2-6 would lead
to a material change in inventory valuation.
Estimation of amounts owed and receivable in relation to
long-term contracts - Europe Ground Division
Management exercise judgment in determining the costs to
complete and the revenue recognised in relation to long-term
contracts. Judgment is required specifically around the estimated
outcome of commercial discussions at the time of contract
conclusions and during renegotiation periods. Some contracts enable
the customer to conduct a retrospective review of costs incurred
which could result in revision to the estimates made at this point
in time. In addition, management exercised judgment in determining
the period over which incremental consideration was received on
re-negotiation of a long-term contract in the prior year. For
example, on one material contract, the estimated period to the next
major engine overhaul, which reflects the flying hours to which the
incremental consideration relates, was determined to be a
three-year period. This estimate is determined to be reflective of
the fulfilment of the related performance obligations in lieu of
the contract duration which spans 11 years and relates to other
performance obligations.
4. Segment information
Reportable segments are operating segments that either meet the
thresholds and conditions set out in IFRS 8 for separate reporting
or are considered by the Board to be appropriately aggregated into
reportable segments under IFRS 8.
The Group has eleven reportable segments (Air Division - four
regional operating segments; Ground Division - four regional
operating segments; Global Services Division - comprising two
operating segments combined as one reportable segment; the
Associates Division - two operating segments combined as one
reportable segment; and Central Costs), which are defined by
markets rather than product type. Each segment includes businesses
with similar operating and marketing characteristics. The operating
segments that have been aggregated into reportable segments have
similar economic characteristics or provide similar services. The
two operating segments within the Global Services Division provide
similar Technology and Outsourcing services to the group's
customers. The two operating segments within the Associates
Division provide a similar range of Air services. None of these
four operating segments meet the quantitative thresholds to report
separately under IFRS 8.
These segments are consistent with the internal reporting
reviewed each month by the Group Chief Executive Officer who acts
as the Chief Operating Decision Maker ('CODM'). The CODM reviews
monthly internal reporting on a pre-IFRS 16 basis at the operating
segment level. The impact on application of IFRS 16 is reviewed
separately ahead of statutory reporting.
As noted in the Strategic report (which is included as part of
the full Annual Report), three new market facing SBUs have been
created after the reporting date in lieu of the eleven reportable
segments. Future segmental reporting, from the interim results
covering the period to June 30(th) 2021, will be presented to
reflect this structure. The Group believes this will provide a
direct line of sight for shareholders such that the SBU's
activities in each market, its investment requirements and
performance can be more easily assessed and understood. For the
year ending 31 December 2020, internal reporting on the new SBUs
was not available or reviewed by the CODM.
Reconciliation of divisional to overall Group performance is
tabulated below:
2020
$'000
------------------------------------------------------------
Adjusted
Adjusted Adjusted Statutory Adjusted EBIT pre-IFRS
Revenue Gross profit EBIT EBIT 16
------------------------------ -------- ------------- --------- -------- --------------
US Air* 3,750 3,750 19,317 3,817 3,817
Europe Air 62,707 6,060 552 138 (43)
Middle East Air 18,603 1,501 (474) (296) (296)
Asia Air 13,370 762 (1,286) (311) (362)
------------------------------ -------- ------------- --------- -------- --------------
Air Division 98,430 12,073 18,109 3,348 3,116
------------------------------ -------- ------------- --------- -------- --------------
US Ground 38,605 9,097 57 720 (333)
Europe Ground 35,243 10,384 211 301 (851)
Middle East Ground 3,766 674 (11,864) (236) (427)
Asia Ground 2,314 1,384 (80) (80) (80)
------------------------------ -------- ------------- --------- -------- --------------
Ground Division 79,928 21,539 (11,676) 705 (1,691)
------------------------------ -------- ------------- --------- -------- --------------
Global services 3,645 2,923 (371) (22) (137)
Associates - - (5,848) (3,272) (3,272)
Central Costs - - (6,048) (5,082) (4,824)
------------------------------ -------- ------------- --------- -------- --------------
Adjusted Result 182,003 36,535 (5,834) (4,323) (6,808)
------------------------------ -------- ------------- --------- -------- --------------
Adjusting Items (Note 6) 15,500 15,500 - (1,511) (1,511)
Application of IFRS 16 (Note
23) - - - - 2,485
------------------------------ -------- ------------- --------- -------- --------------
Statutory Result 197,503 52,035 (5,834) (5,834) (5,834)
------------------------------ -------- ------------- --------- -------- --------------
*Adjusted Revenue and Adjusted Gross Profit, which relate solely
to the US Air Division, have been presented in the current year to
exclude accelerated branding fees of $15,500k (2019: nil) and
thereby improve comparability. Refer to Note 6 for further details
of Alternative Performance Measures.
2019
$'000
----------------------------------------------------------
Adjusted
Statutory Adjusted EBIT pre-IFRS
Revenue Gross profit EBIT EBIT 16
---------------------- ------- ------------ --------- -------- --------------
US Air 4,050 4,050 3,648 3,898 3,898
Europe Air 99,145 6,160 (1,054) 1,018 622
Middle East Air 16,778 1,519 (437) (571) (571)
Asia Air 20,650 1,218 121 137 123
---------------------- ------- ------------ --------- -------- --------------
Air Division 140,623 12,947 2,278 4,482 4,072
---------------------- ------- ------------ --------- -------- --------------
US Ground 48,943 6,396 (927) 270 (268)
Europe Ground 48,176 15,650 2,525 7,416 6,247
Middle East Ground 4,372 1,453 (273) (273) (466)
Asia Ground 1,476 632 (577) (551) (551)
---------------------- ------- ------------ --------- -------- --------------
Ground Division 102,967 24,131 748 6,862 4,962
---------------------- ------- ------------ --------- -------- --------------
Global services 3,223 2,395 325 686 689
Associates - - 918 918 918
Central Costs - - (11,271) (7,383) (7,377)
---------------------- ------- ------------ --------- -------- --------------
Adjusted Result 246,813 39,473 (7,002) 5,565 3,264
---------------------- ------- ------------ --------- -------- --------------
Adjusting Items (Note
6) - - - (12,567) (12,567)
Application of IFRS
16 (Note 23) - - - - 2,301
---------------------- ------- ------------ --------- -------- --------------
Statutory Result 246,813 39,473 (7,002) (7,002) (7,002)
---------------------- ------- ------------ --------- -------- --------------
An analysis of the Group's total assets and liabilities by
segment is as follows:
2019
2020 Restated*
-------------------- --------------------
$'000 Assets Liabilities Assets Liabilities
------------------- ------- ----------- ------- -----------
US Air 22,033 (9,174) 4,172 (125)
US Ground 18,454 (10,066) 27,423 (15,342)
Europe Air 57,013 (20,849) 59,812 (36,786)
Europe Ground 53,626 (38,245) 55,401 (39,403)
Middle East Air 4,133 (5,662) 5,518 (5,650)
Middle East Ground 1,421 (8,907) 12,922 (9,658)
Asia Air 6,381 (4,044) 10,951 (8,184)
Asia Ground 425 (23) 1,080 (94)
Global Services 13,734 (1,952) 11,543 (924)
Associates 2,000 - 17,710 -
Central Costs 34,378 (60,829) 27,024 (51,656)
------------------- ------- ----------- ------- -----------
Total 213,598 (159,751) 233,556 (167,822)
------------------- ------- ----------- ------- -----------
*Restatements are detailed in Note 2 of the notes to the
financial statements
An analysis of the Group's revenue is as follows:
Year Year
ended ended
2020 2019
$'000 $'000
----------------------------------- ------- -------
Sale of business aviation services 178,253 242,763
Branding fees 3,750 4,050
----------------------------------- ------- -------
Total adjusted Revenue 182,003 246,813
Accelerated branding fees 15,500 -
----------------------------------- ------- -------
Statutory revenue 197,503 246,813
----------------------------------- ------- -------
Year
ended
2020
$'000
--------------------------------------------------------- -------
Revenue recognised at a point in time 115,107
Europe Ground 12,736
US Ground 236
Europe Air 52,806
myairops(R) 1,118
--------------------------------------------------------- -------
Revenue recognised over time 66,896
Total adjusted Revenue 182,003
Accelerated branding fees (revenue recognised at a point
in time) 15,500
--------------------------------------------------------- -------
Statutory revenue 197,503
--------------------------------------------------------- -------
Comparatives for revenue recognised at a point in time versus
over time are impracticable to disclose as this was not tracked
internally. Revenue recognised over time relates to the following
operating divisions:
-- Europe Ground has contract revenue for the maintenance of
aircraft of $52,869k to be earned over the next four years, and
$12,736k of revenue has been recognised in the year.
-- US Ground during the year earned revenue of $236k in relation
to maintenance contracts with $346k contracted to be earned over
the next year.
-- Within Europe Air $52,806k of contract revenue has been
earned during the year in relation to the provision of air
ambulance services and other specific air services. Over the next 5
years there is $83,328k to be earned in remaining contracted
revenue.
-- Within the Global Service Division, myairops(R) has $1,118k
of contract revenue recognised during the year in relation to the
provision of software services with $2,278k due over the next 5
years.
Revenue of $18,301k (2019: $18,965k) has been recognised in
respect of a single customer within the Europe Air reporting
segment. This represents 9% of Revenue (2019: 10%).
The Group has not separately disclosed revenue by country
because this is not tracked internally and because management
believe that the Group's operating segments align very closely to
country reporting by origin with European divisions representing
the UK and Channel Islands; the US divisions representing the
United States; the Asia divisions representing Hong-Kong and the
Middle East divisions mainly representing the U.A.E.
Geographic information
2020 2019
$'000 $'000
------------------- --- ------ ------
Non-current assets
US 9,250 13,540
Europe 76,205 61,687
Asia 230 482
Middle East 219 11,825
Group 7,092 105
------------------------ ------ ------
92,996 87,639
----------------------- ------ ------
Non-current assets for this purpose consist of property, plant
and equipment and right-of-use assets. Goodwill and Intangibles
assets are shown by Division and thereby geographic region in Note
14 and Note 15. Refer to Note 20 for non-current trade and other
receivables which relate solely to the US Air Division.
5. EBIT for the year
EBIT for the year has been arrived at after
charging/(crediting):
Year Year
ended ended
2020 2019
$'000 $'000
--------------------------------------------------------- -------- ------
Amortisation of intangibles in adjusted result (Note
15) 1,581 441
Amortisation of intangibles in adjusting items (Note
15) 614 984
--------------------------------------------------------- -------- ------
Amortisation of intangibles (Note 15) 2,195 1,425
Depreciation of property, plant and equipment (Note
16) 4,809 3,019
Depreciation of right-of-use assets in administrative
expenses (Note 23) 540 754
--------------------------------------------------------- -------- ------
Depreciation within administrative expenses 5,349 3,773
Depreciation of right-of-use assets in cost of sales
(Note 23) 10,708 15,152
Net foreign exchange loss on trading monetary items 350 188
Loss on disposal of property, plant and equipment (Note
16) 63 82
Impairment of goodwill and other intangible assets (Note
14 and 15) 833 540
Impairment of right-of-use assets (Note 23) 7,013 2,341
Impairment of assets under construction (Note 16) 4,609 -
Impairment of equity accounted investments (Note 18) 3,421 -
Impairment of non-current assets within share of results
of equity accounted investments (Note 18) 6,433 -
Profit on disposal of interest in associates (Note 7) (7,278)
Accelerated branding fees (Note 6) (15,500) -
Cost of inventories recognised as an expense including
changes in inventory obsolescence (Note 19) 16,202 30,706
Change in provision for inventory obsolescence (Note
19) 1,520 2,364
Staff costs (Note 8) 63,506 70,982
Impairment losses recognised on trade receivables (Note
20) 3,083 2,387
Auditors' remuneration:
Audit of the company's financial statements 198 278
Audit of the financial statements of subsidiaries 667 610
Other support services 26 -
Other deal support services 141 77
--------------------------------------------------------- -------- ------
6. Adjusted performance measures
The Adjusted result has been arrived at after the following
Adjusting items:
Year
Year ended
ended 2019
2020 Restated*
$'000 $'000
--------------------------------------------------------- -------- ----------
Adjusting items in revenue and gross profit:
Accelerated branding fees (15,500) -
Exceptional items:
- Transaction costs 692 88
- Integration and business re-organisation costs 202 2,905
- Legal costs 619 2,212
- Other items (709) 2,636
- Impairment of assets under construction (Note 16) 4,609 -
- Impairment of right-of-use assets (Note 23) 7,013 2,341
- Impairment of goodwill and acquired intangibles (Note
15) 833 540
--------------------------------------------------------- -------- ----------
Total exceptional items (2,241) 10,722
Other adjusting items:
Share-based payments expense (Note 31) 562 861
Amortisation of acquired intangible assets (Note 15) 614 984
Adjusting items in Operating (loss)/ profit (1,065) 12,567
Impairment of equity accounted investments (Note 18) 3,421 -
Impairment of non-current assets within share of results
of equity accounted investments (Note 18) 6,433 -
Profit on disposal of interest in associates (Note 7) (7,278) -
--------------------------------------------------------- -------- ----------
Adjusting items in EBIT 1,511 12,567
Tax related to Adjusting items (Note 11) 5,017 (577)
--------------------------------------------------------- -------- ----------
Adjusting items in profit 6,528 11,990
--------------------------------------------------------- -------- ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
Accelerated branding fees
Adjusted Revenue and Adjusted Gross Profit, which relate solely
to the US Air Division, have been presented in the current year to
exclude accelerated branding fees of $15,500k (2019: nil) and
thereby improve comparability. Refer to Note 7 for further details
of disposal of the US Air Associate.
2020
Adjusted Adjusted
Revenue Gross profit
$'000 $'000
--------------------------- -------- -------------
Adjusted Result 182,003 37,250
Accelerated branding fees 15,500 15,500
--------------------------- -------- -------------
Statutory Result 197,503 52,750
--------------------------- -------- -------------
Transaction costs
Transaction costs during the year comprise $662k in relation to
the acquisition of Jet East (Note 35) and $30k in relation to the
acquisition of air ambulance services to Jersey & Guernsey
(Note 13).
Integration and business re-organisation costs
Integration and business re-organisation costs include:
-- Fairoaks direct closure costs of $16k (2019: $1,012k) (Note
30);
-- Gama International Saudi Arabia ("GISA") redundancy provision
following the notice of closure of $173k (2019: nil) and other
closure related costs of $17k (2019: nil)
-- Accounting support, compliance and control reviews and other
group re-organisation costs of nil (2019: $960k); and
-- Non-recurring costs related to property and facility
re-organisation at Bournemouth, Farnborough and Florida of nil
(2019: $933k).
-- Income on receipt of a credit for costs previously charged to
exceptional integration and business re-organisation costs $4k
(2019: nil)
Legal costs
Legal costs in the current and prior year principally relate to
professional fees in relation to ongoing litigation in respect of
legacy cases going back many years.
Other items
In the current year other items comprise of $499k in income
relating to part settlements on a legacy case, and a $210k release
of an impairment allowance on trade receivables under the legal
proceedings that had been provided for in full in the prior year
through exceptionals. In the prior year other items comprise a
$2,010k impairment allowance on trade receivables under legal
proceedings and a $626k impairment of inventories, both of which
relate to legacy matters.
Impairment of acquired intangibles
The impairment charge of $833k (2019: $540k) in the current year
on acquired intangible assets originally recognised on acquisition
of Gama Aviation Hutchison Holdings Limited ("GAHH") which were
impaired to nil. In the prior year, intangible assets recognised on
acquisition of the Florida Paint-Shop of $540k were allocated to
the US Ground CGU, and subsequently impaired. Refer to Note 15 for
further details.
Impairment of assets under construction
In the current year an impairment charge of $4,609k has been
recognised relating to the Business Aviation Centre ("BAC") at
Sharjah Airport following material uncertainties related to the
project, the prospects for which have been significantly impacted
by the ongoing COVID-19 pandemic (2019: nil). The impairment charge
reduced the carrying amount to the recoverable amount of nil. Refer
to Note 16 for further details.
Impairment of right-of-use asset
An impairment charge of $7,013k has also been recognised to
reduce the carrying amount of the right-of-use asset at Sharjah to
the recoverable amount of nil (2019: $2,341k impairment on the
Fairoaks right-of-use asset) for the reasons noted above. Refer to
Note 23 for further details.
Impairment of investment in associate and non-current assets in
associate
Impairment charges of $6,433k (2019: nil) relate to non-current
assets in CASL and the remaining $3,421k (2019: nil) is to reduce
the carrying amount of the equity accounted investment to the
recoverable amount of $2,000k. Taken together, impairment charges
of $9,854k (2019: nil) have been recognised in relation to
associates. Refer to Note 18 for further details.
Tax related to adjusting items
A significant tax charge of $5,017k (2019: $577k credit) was
recognised for the tax consequences of the disposal of the US Air
Associate and the related accelerated branding fee. Other adjusting
items that are expected to be deductible.
Organic and constant currency growth
Organic and constant currency growth in Revenue, Gross Profit
and EBIT is a measure which seeks to reflect the performance of the
Group that will contribute to long-term sustainable growth. As
such, organic and constant currency growth excludes the impact of
acquisitions or disposals, and effect of foreign exchange
translation. As the average USD-GBP exchange rate for the year of
$1.28 to GBP1 is the same for both 2020 and 2019, constant currency
growth is not presented.
Results of acquired and disposed businesses are excluded where
the results include only part-year results in either current or
prior periods. In the prior year, the paint and interior business
acquired on 10 January 2019 ("Paint-Shop") was excluded in
calculating organic growth. In the current year, the Paint-Shop is
in all material respects comparable year on year and not adjusted
for the purpose of organic growth. The US Air associate was sold on
2 March 2020 resulting in $78k of Adjusted EBIT in 2020 prior to
disposal and $518k Adjusted EBIT in the prior year. The impact of
associates is separately covered because both the US Air associate
and CASL are not comparable year on year. On 18 July 2020, the
Group acquired the trade and assets to provide air ambulance
services for the Government of Jersey and the Government of
Guernsey , however the impact on Adjusted EBIT is not material to
present separately. Organic growth is therefore not presented.
Further details on acquisitions and disposals year on year are
shown in Note 13 and 7 respectively.
Net Debt
A reconciliation of the IFRS financial statement line items that
represent the Net Debt APM is tabulated below.
2020 2019
$'000 $'000
------------------------- -------- --------
Cash 16,136 8,463
Borrowings (53,197) (46,242)
------------------------- -------- --------
Net Debt pre IFRS 16 (37,061) (37,779)
Obligations under leases (49,492) (60,204)
------------------------- -------- --------
Net Debt (86,553) (97,983)
------------------------- -------- --------
7. Disposal of assets held for sale
On 2 March 2020 the Group announced the sale of its US Air
associate, Gama Aviation LLC (doing business as "Gama Aviation
Signature") to Wheels Up Partners Holdings LLC ("Wheels Up"). Gama
Aviation Signature was owned 49% by GB Aviation Holdings LLC, a
joint venture between the Group and Signature Aviation Plc, with
the remaining 51% held by the Group's US partners (Merritt Property
LLC and Puritan Aviation LLC).
Gama Aviation received consideration of $33.0m, comprising
$10.0m in return for its 24.5% equity interest and $23.0m for
licencing and other trading related considerations. $13.0m of the
consideration was received in cash on 2 March 2020, with the
remaining $20.0m to be paid in cash, with interest of $2,774k, in
eight equal six-month instalments over the next four years. The
first instalment was received in September 2020 and the second
instalment was received in March 2021, both instalments were
received in full and when contractually due. Refer to Note 35 for
details of a non-adjusting event that may give rise to some or all
of the deferred consideration outstanding being settled in cash
shortly after the reporting date.
The $20.0m of deferred consideration is recognised as a
financial asset at fair value and then subsequently at amortised
cost. The effective interest rate of this financial asset is 6.0%,
which results in the recognition of finance income of $964k in the
income statement for the year ended 31 December 2020. The first
instalment of $2,500k capital and $430k interest was received in
September 2020.
Included within trade and other receivables at 31 December 2020
is deferred consideration of $18,034k, with $5,004k in current
assets and $13,030k in non-current assets. Included within deferred
revenue at 31 December 2020 is licencing and other trading related
considerations of $4,375k, with $3,750k in current liabilities and
$625k in non-current liabilities.
As part of the transaction, Gama Group Inc has licensed the
continued use of the Gama Aviation brand for up to two years, for
which $7.5m of consideration has been allocated and will be
recognised as revenue over the two year period. Post disposal,
$3.125m has been recognised as revenue for this licencing component
in the 10 month period to 31 December 2020, in line with the $3.75m
annual licence fee prior to disposal. In addition, an accelerated
branding fee of $15.5m has been recognised in adjusting items.
Year
ended
2020
$'000
------------------------------------------------------------------- --------
Cash received 13,000
Fair value of deferred consideration 20,000
------------------------------------------------------------------- --------
Total discounted consideration receivable at the transaction
date 33,000
Less: Branding fees and other trading related considerations (23,000)
------------------------------------------------------------------- --------
Gross proceeds on disposal 10,000
Add: Closing working capital, cash and indebtedness adjustments 592
Add: Post closing adjustment 254
Less: Transaction costs (892)
------------------------------------------------------------------- --------
Proceeds on disposal of assets held for sale, net of transaction
costs 9,954
Assets held for sale at 31 December 2019 2,598
Share of profit of equity accounted investments prior to disposal* 78
------------------------------------------------------------------- --------
Carrying amount of net assets sold 2,676
Profit on disposal of interest in associates, before taxation 7,278
------------------------------------------------------------------- --------
*The equity accounting of Gama Aviation LLC was not discontinued
after Gama Aviation LLC was held for sale at 31 December 2019 and
prior to disposal on 2 March 2020. Had this been the case there
would have been a $78k increase in share of losses of associates
and a $78k increase in the profit on disposal of interest in
associates. The impact of this reclassification, which has no
impact on the statutory loss for the year, is considered
immaterial.
8. Staff costs
The average monthly number of employees (including executive
Directors) was:
Year Year
ended ended
2020 2019
Number Number
------------------------------ ------- -------
Operations and administration 357 411
Pilots and cabin crew 108 115
Aircraft engineering 298 254
------------------------------ ------- -------
763 780
------------------------------ ------- -------
Their aggregate remuneration comprised:
Year Year
ended ended
2020 2019
$'000 $'000
------------------------------- ------- -------
Wages and salaries 56,614 60,878
Social security costs 4,506 7,796
Share-based payments (Note 31) 562 861
Other pension costs (Note 32) 1,824 1,447
------------------------------- ------- -------
63,506 70,982
------------------------------- ------- -------
Aggregate remuneration is stated after netting off government
grants received in the year. Refer to Note 2 for further
details.
Details of Directors' remuneration are given in the Remuneration
Report (which is included as part of the full Annual Report) and
refer to Note 35 for details of share option transactions approved
after the reporting date. The share option costs relating to these
Directors amounted to $152k (2019: $208k).
9. Finance income
Year Year
ended ended
2020 2019
$'000 $'000
------------------------------------------------------ ------- -------
Foreign currency translation on intercompany balances 405 -
Foreign currency translation on borrowings - 693
Interest income on financial assets 1,130 -
Interest income on bank deposits - 2
------------------------------------------------------ ------- -------
Total finance income 1,535 695
------------------------------------------------------ ------- -------
Interest income on financial assets comprises $964k of interest
on deferred consideration relating to the disposal of the US Air
associate (Note 7), and $166k interest on other financial assets in
the year.
10. Finance expense
Year Year
ended ended
2020 2019
$'000 $'000
------------------------------------------------------ ------ -------
Foreign currency translation on intercompany balances - 136
Foreign currency translation on borrowings 178 -
Interest on borrowings before capitalised interest 878 965
Capitalised interest (Note 16) (179) (122)
Discounting on provisions (Note 30) 28 35
Interest on lease liabilities (Note 23) 2,743 3,061
Write off loan arrangement fees (Note 21) - 398
Amortisation of loan arrangement fees 168 172
Other similar charges payable 124 12
------------------------------------------------------ ------ -------
Total finance costs 3,940 4,657
------------------------------------------------------ ------ -------
11. Taxation
Year ended 2020 Year ended 2019
$'000 $'000
------------------------------- ------------------------------ ------------------------------
Statutory Adjusting Adjusted Statutory Adjusting Adjusted
result items result result items result
------------------------------- --------- --------- -------- --------- --------- --------
Corporation tax:
Current year charge 3,016 (2,977) 39 729 - 729
Deferred tax charge:
Current year charge 3,136 (2,040) 1,096 (30) 577 547
Adjustment in respect of prior
years 344 - 344 (204) - (204)
------------------------------- --------- --------- -------- --------- --------- --------
Deferred tax charge/(credit)
(Note 22) 3,480 (2,040) 1,440 (234) 577 343
Total tax charge for the year 6,496 (5,017) 1,479 495 577 1,072
------------------------------- --------- --------- -------- --------- --------- --------
The tax charge for the year, based on the tax rate in the United
Kingdom, can be reconciled to the profit per the income statement
as follows:
Year ended 2020 Year ended 2019
$'000 $'000
-------------------------------------- ------------------------------ ------------------------------
Statutory Adjusting Adjusted Statutory Adjusting Adjusted
result items result result items result
-------------------------------------- --------- --------- -------- --------- --------- --------
(Loss)/Profit before tax (8,239) 1,511 (6,728) (10,964) 12,567 1,603
Tax at the corporation tax rate
of 19% (2019: 19%) (1,565) 287 (1,278) (2,083) 2,387 304
Effects of:
Other expenses not deductible/income
not taxable 728 - 728 1,810 (1,810) -
Income not taxable - other forms
of government support (196) - (196) - - -
Income not taxable - PPP loan
forgiveness (903) - (903) - - -
Non-deductible - impairment of
right-of-use asset 1,332 (1,332) - - - -
Non-deductible - impairment of
assets under construction 876 (876) - - - -
Non-deductible - impairment of
goodwill and acquired intangibles 164 (164) - - - -
Non-deductible - impairment of
equity accounted investments 1,872 (1,872) - - - -
Non-deductible - share of losses
of CASL in adjusted result 637 - 637 - - -
Non-deductible - share based
payments 107 (107) - - - -
Non-deductible - amortisation
of acquired intangibles 111 (111) - - - -
Adjustment in respect of prior
years 344 - 344 (204) - (204)
Effect of tax rates in different
jurisdictions 2,490 (842) 1,648 338 - 338
Tax losses in the year not recognised
in deferred tax 14 - 14 124 - 124
De-recognition of deferred tax 485 - 485 468 - 468
Other timing differences - - - 42 - 42
-------------------------------------- --------- --------- -------- --------- --------- --------
Total tax charge for the year 6,496 (5,017) 1,479 495 577 1,072
-------------------------------------- --------- --------- -------- --------- --------- --------
Adjustment in respect of prior years includes $293k decrease in
deferred tax asset relating to temporary timing differences on the
assets held for sale in the prior year. This is an immaterial
change to the prior year recognised in advance of the disposal in
March 2020.
Refer to Note 35 for future changes in the tax rate and the
impact on deferred tax.
No deferred tax asset has been recognised on share-based payment
transactions because the options are currently out of the money. As
a result, no tax relating to share based payment is recognised
directly in equity.
Temporary differences of $26,233k (2019: $29,179k) have arisen
as a result of the translation of the financial statements of the
group's subsidiaries. However, a deferred tax liability has not
been recognised as the liability will only crystallise in the event
of disposal of the subsidiary, and no such disposal is expected in
the foreseeable future. As a result, there is no deferred tax
charge in other comprehensive income in relation to the translation
of the group's subsidiaries into the presentation currency of US
dollars.
Deferred tax assets in prior periods were pre-COVID and
recognised where the expected utilisation in future periods was
estimated by pre-COVID forecasts. Future profitable projections
were impacted by the ongoing COVID-19 pandemic and as a result
deferred tax balances of $485k were written off.
12. 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 Year
ended ended
2020 2019
$'000 $'000
------------------------------------------------------- ---------- ----------
Numerator
Statutory earnings:
Loss attributable to ordinary equity holders of the
parent (14,780) (11,554)
Adjusted earnings:
(Loss)/ profit attributable to ordinary equity holders
of the parent (8,252) 436
Denominator
Weighted average number of shares used in basic EPS 63,636,279 63,636,279
Effect of dilutive share options - -
------------------------------------------------------- ---------- ----------
Weighted average number of shares used in diluted EPS 63,636,279 63,636,279
------------------------------------------------------- ---------- ----------
Earnings per share (cents)
Statutory earnings per share
Basic (23.2c) (18.2c)
Diluted (23.2c) (18.2c)
Adjusted earnings per share
Basic (13.0c) 0.7c
Diluted (13.0c) 0.7c
------------------------------------------------------- ---------- ----------
The average share price for the year ended 31 December 2020 was
54 cents, which is lower than the exercise price of outstanding
options and therefore there is no dilutive effect.
The effect of dilutive share options on Diluted EPS does not
reduce the loss per share, but would reduce the earnings per
share.
The weighted average number of shares used in basic EPS has not
been reduced by any shares held by the employee benefit trust.
Refer to Note 25 for further details on the employee benefit
trust.
13. Acquisitions
On 18 July 2020, the Group acquired a business to provide air
ambulance services for the Government of Jersey and the Government
of Guernsey. Cash consideration of $1.5m was paid. The Group
determined the acquisition to be a business as defined by IFRS 3
and the transaction has been accounted for as a business
combination. The following table summarises the fair value of
assets acquired, and the liabilities assumed at the acquisition
date.
Recognised amounts of identifiable assets acquired and
liabilities assumed.
Note $'000
----------------------------------------------------- ---- -----
Property, plant and equipment 16 1,070
Other receivables 116
Customer relationships (included within intangibles) 15 390
Deferred tax liability 22 (62)
Total consideration 1,514
Acquisition costs 6 30
----------------------------------------------------- ---- -----
Acquisition of business, including acquisition costs 1,544
----------------------------------------------------- ---- -----
From the date of acquisition, the air ambulance services
contributed $2.0m revenue, and $0.3m gross profit. It is
impracticable to quantify the period prior to acquisition and
therefore disclose the impact if the air ambulance services had
taken place at the beginning of the year.
Refer to Note 35, for further details on the acquisition of Jet
East after the reporting date.
14. Goodwill
$'000
------------------------------ ------
Cost
At 1 January 2019 44,884
Recognised on acquisition 787
Exchange differences 849
------------------------------ ------
At 31 December 2019 46,520
Exchange differences 1,514
------------------------------ ------
At 31 December 2020 48,034
------------------------------ ------
Accumulated impairment losses
At 1 January 2019 24,770
------------------------------ ------
At 31 December 2019 24,770
Exchange differences 774
------------------------------ ------
At 31 December 2020 25,544
------------------------------ ------
Carrying amount
At 31 December 2020 22,490
------------------------------ ------
At 31 December 2019 21,750
------------------------------ ------
The recoverable amount of goodwill is allocated to the following
cash generating units ("CGUs"):
2019
2020 Restated*
$'000 $'000
--------------------------- ------- ----------
Carrying amount
US: Ground 787 787
Europe: Ground 20,467 19,769
Global Services: FlyerTech 1,236 1,194
22,490 21,750
--------------------------- ------- ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements
When testing for impairment, recoverable amounts for all of the
Group's CGUs are measured at their VIU by discounting the future
expected cash flows from the assets in the CGUs. The CGUs that have
goodwill are Europe Ground, FlyerTech and US Ground (2019: Europe
Ground, FlyerTech and US Ground). The key assumptions and estimates
used for VIU calculations are as follows:
Future expected cash flows
VIU calculations are based on estimated post-tax cash flows for
2021 as approved by the Board. Recognising the inherent uncertainty
in the ongoing COVID-19 pandemic:
-- for cash flows beyond the current year forecast period, a
terminal growth rate has been applied
-- CGU specific operating assumptions are applicable to the
forecast cash flows for the year to 31 December 2021 and relate to
revenue forecasts, expected project outcomes, cash conversion,
levels of capital expenditure and forecast operating margins in
each of the operating companies. The relative value ascribed to
each assumption will vary between CGUs as the forecasts are built
up from the underlying operating companies within each CGU
Group.
-- The post-tax cash flows for 2021 forecast that the first
quarter of 2021 was COVID impacted, and thereafter a progressive
recovery was reflected
Terminal growth rate
Beyond the current year forecast period, a long-term terminal
growth rate has been applied to calculate terminal values for all
CGUs. The Group has used the Real GDP Growth Rate as a proxy for
long-term terminal growth rate of Gama Aviation Plc. The average
Real GDP Growth Rate for the world per the IMF World Economic
Outlook published in April 2021 from 2020 to 2022 was 2.4%.
Considering regional variations in terminal growth rates in these
outlooks as well as other outlooks from the Organisation from
Economic Cooperation and Development ("OECD"), Bank of England in
the UK and Federal Reserve in the US, the terminal growth rates
applied are as tabulated below. The Group has used the Real GDP
Growth Rate as a proxy for long-term terminal growth rate of Gama
Aviation Plc.
2020 2019
% %
--------------- ---- ----
United Kingdom 2.3 1.9
United States 2.2 1.9
Asia 2.1 1.9
Middle East 1.0 1.9
--------------- ---- ----
Weighted average cost of capital ("WACC")
A pre-tax discount rate is calculated by reference to the WACC
of each CGU, adjusted to reflect the market and other systemic
risks specific to each CGU and the territories in which they
operate.
A pre-tax discount rate is calculated for each CGU. For the CGUs
that have goodwill, the discount rates are tabulated below. For the
CGUs with no goodwill the pre-tax discount rates vary from 9.8% to
13.7%.
2020 2019
% %
--------------------------- ---- ----
Europe Ground 11.1 10.1
Global Services: FlyerTech 13.1 10.1
US Ground 13.4 10.1
--------------------------- ---- ----
The discount rates in the current year have increased across all
CGUs, which is driven by increases in market-based inputs into the
WACC contributing to a higher return on both equity and debt.
Sensitivity to changes in assumptions
The calculation of VIU is most sensitive to the discount rate,
long-term growth rate and future expected cash flows used. The
Group has performed sensitivity analyses across all CGUs which have
goodwill, acquired intangible assets, right of use assets,
property, plant and equipment, computer software and an allocation
of corporate assets, using reasonably possible changes in the
already conservative long-term growth rates and pre-tax discount
rates.
No reasonably possible change in assumptions would diminish the
US Ground or Flyertech recoverable amount below the carrying amount
of assets in this CGU. The CGU which is most sensitive to changes
in assumptions is Europe Ground.
The sensitivity analysis in Europe Ground showed:
-- The recoverable amount was $2,958k higher than the carrying
value of all assets, including Goodwill, in the CGU
-- A 1% decrease in the terminal growth rate, would result in an impairment of $6,901k
-- A 1% increase in the discount rate would result in an impairment of $6,991k
-- The terminal rate growth rate of 2.3% would have to decrease to 2.0% for an impairment
The limited headroom in Europe Ground is in part due to a
long-term terminal growth rate being applied after the 2021
forecast cash flows and the 2021 forecast being COVID impacted for
the first quarter of 2021.
A reasonably possible change in assumptions would result in the
Europe Ground recoverable amount being below the carrying amount of
assets in this CGU. Any potential impairment would be limited to
the Goodwill within Europe Ground and no reasonably possible change
in assumptions would result in other assets in this CGU being
impaired.
No impairment has been recognised in the current year.
15. Other intangible assets
Commence Part 145 Licences Customer Computer
operations approvals and brands relationships software Total
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------- ----------- ---------- ----------- -------------- --------- -------
Cost
At 1 January 2019 1,481 3,444 1,306 15,690 4,000 25,921
Additions - - - - 3,093 3,093
Recognised on acquisition - - 345 195 - 540
Disposals - (2) - - - (2)
Foreign exchange differences - - (46) (406) 241 (211)
----------------------------- ----------- ---------- ----------- -------------- --------- -------
At 31 December 2019 1,481 3,442 1,605 15,479 7,334 29,341
Additions - - - - 2,521 2,521
Disposals (1,481) (3,442) (1,605) - - (6,528)
Recognised on acquisition - - - 390 - 390
Foreign exchange differences - - - - 417 417
----------------------------- ----------- ---------- ----------- -------------- --------- -------
At 31 December 2020 - - - 15,869 10,272 26,141
----------------------------- ----------- ---------- ----------- -------------- --------- -------
Amortisation and accumulated impairment
losses
At 1 January 2019 1,481 3,077 1,230 11,720 58 17,566
Amortisation - 367 18 599 441 1,425
Impairment loss - - 345 195 - 540
Eliminated on disposals - (2) - - - (2)
Foreign exchange differences - - (44) (310) 18 (336)
At 31 December 2019 1,481 3,442 1,549 12,204 517 19,193
Amortisation - - 55 559 1,581 2,195
Disposals (1,481) (3,442) (1,605) - - (6,528)
Impairment loss - - - 833 - 833
Foreign exchange differences - - 1 1 117 119
----------------------------- ----------- ---------- ----------- -------------- --------- -------
At 31 December 2020 - - - 13,597 2,215 15,812
----------------------------- ----------- ---------- ----------- -------------- --------- -------
Carrying amount
At 31 December 2020 - - - 2,272 8,057 10,329
----------------------------- ----------- ---------- ----------- -------------- --------- -------
At 31 December 2019 - - 56 3,275 6,817 10,148
----------------------------- ----------- ---------- ----------- -------------- --------- -------
The carrying amount of customer relationships relate to:
-- FlyerTech: $1,276k (2019: $1,591k);
-- Europe Ground: $638k (2019: $743k); and
-- Gama Aviation Hutchison Holdings Ltd ("GAHH"): nil (2019:
$941k).
-- Europe Air $358k (2019: nil)
Licences and brands (which include protected intellectual
property) have been fully amortised and written off during the
year.
Commence operations and Part 145 approvals are legacy intangible
balances comprising internally generated costs which were fully
amortised in the prior year, and have been written-off during the
year.
Computer software costs comprise internally developed software
costs arising in the Group's myairops(R) business as well as
purchased software, such as operational and financial systems. All
costs are amortised over their useful economic lives estimated to
be between three and five years. The carrying value of internally
developed software within this balance is $6,729k (2019:
$5,310k).
The carrying amount of GAHH acquired intangible assets in Asia
Air exceeded the recoverable amount due to uncertainties arising
from the COVID-19 pandemic that resulted in the customer
relationship no longer being active. An impairment charge of $833k
was recognised in the year to impair the GAHH customer relationship
intangible to the recoverable amount of nil.
Impairment charges on other acquired intangibles in 2019 of
$540k, which related to customer relationships and brand
intangibles in the US Ground CGU.
16. Property, plant and equipment
Aircraft Fixtures, Asset
Leasehold and fittings Motor under
Helicopters improvement refurbishments and equipment vehicles construction Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
Cost
At 1 January 2019 - 14,258 7,745 7,617 2,550 1,815 33,985
Additions - 752 1,098 2,323 177 10,703 15,053
Acquisitions - - - 120 - - 120
Capitalised interest - - - - - 122 122
Disposals - (191) - (722) - - (913)
Exchange differences - 483 299 178 8 274 1,242
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
At 31 December
2019 - 15,302 9,142 9,516 2,735 12,914 49,609
Additions 19,045 2,413 1,883 1,896 61 - 25,298
Acquisitions - - 819 251 - - 1,070
Impairment - - - - - (4,609) (4,609)
Capitalised interest - - - - - 179 179
Transfers 8,484 - - - - (8,484) -
Disposals - (1,294) (35) (1,633) (11) - (2,973)
Exchange differences 1,559 1,838 352 1,831 (12) - 5,568
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
At 31 December
2020 29,088 18,259 12,161 11,861 2,773 - 74,142
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
Accumulated
depreciation
At 1 January 2019 - 4,321 1,762 4,753 901 - 11,737
Charge for the
year - 745 416 1,380 478 - 3,019
Disposals - (148) - (683) - - (831)
Exchange differences - 159 74 121 6 - 360
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
At 31 December
2019 - 5,077 2,252 5,571 1,385 - 14,285
Charge for the
year 679 933 957 1,787 453 - 4,809
Disposals - (1,294) (35) (1,570) (11) - (2,910)
Exchange differences 43 1,048 80 1,810 3 - 2,984
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
At 31 December
2020 722 5,764 3,254 7,598 1,830 - 19,168
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
Carrying amount
At 31 December
2020 28,366 12,495 8,907 4,263 943 - 54,974
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
At 31 December
2019 - 10,225 6,890 3,945 1,350 12,914 35,324
----------------------- ----------- ------------ --------------- -------------- --------- ------------- -------
During the year and before the helicopters were brought into
use, the Group capitalised borrowing costs of $179k (2019:
$122k).
As previously reported, deployment of the helicopters occurred
on 1 June 2020 in support of a long-term contract. As a result,
helicopters have been transferred from assets under construction
into the helicopters asset class within property, plant and
equipment. They have been brought into use and depreciated from 1
June 2020.
The assets under construction relating to the investment in the
Sharjah Business Aviation Centre project were fully impaired. The
impairment arose due to uncertainties arising in part from the
ongoing COVID-19 pandemic. Total impairment costs of $4,609k (2019:
nil) have been recognised during the year.
An acquisition of an air ambulance business in the year included
the purchase of aircraft for $819k, included in Aircraft and
refurbishments, and medical equipment for $251k, included in
Fixtures, fittings and equipment.
Estimation uncertainty
The key source of estimation uncertainty at the reporting date,
relates to the determination of the recoverable amount of nil for
the Sharjah Business Aviation Centre project.
This is based on the Group's judgement that whilst discussions
with the Sharjah Airport Authority concerning the project, the
prospects for which have been frustrated by the COVID-19 pandemic,
are on-going there is currently no clear agreed plan to secure
other funding or contract restructure that will enable completion
of the project or release Gama from the head lease.
Refer to Note 14 for further details on a sensitivity analyses
across all CGUs which have goodwill, acquired intangible assets,
right-of-use assets, property, plant and equipment, computer
software and an allocation of corporate assets, using reasonably
possible changes in the already conservative long-term growth rates
and pre-tax discount rates.
17. Subsidiaries and other related undertakings
Details of the Company's subsidiaries and other related
undertakings held directly or indirectly at 31 December 2020 are as
follows:
Proportion Proportion
of voting of voting
Place of and ownership and ownership
incorporation interest interest Nature of
Name and operation 2020 2019 business Registered Address
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
Aerstream struck off Avenue,
Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
Airops Software England Aviation Farnborough, Hampshire,
Limited(1) and Wales 100% 100% software England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
Aravco Limited(1) England Farnborough, Hampshire,
(2) and Wales 100% 100% Non-trading England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
Avialogistics struck off Avenue,
Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
Aviation Crewing England Farnborough, Hampshire,
Limited and Wales 100% 100% Dormant England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
FlyerTech England Airworthiness Farnborough, Hampshire,
Limited(1) and Wales 100% 100% management England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Gama Aviation 1st Floor 25 Templer
(Asset 2) Avenue,
Limited(1) England Farnborough, Hampshire,
(2) and Wales 100% 100% Non-trading England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Gama Aviation Aviation Avenue,
(Engineering) England design and Farnborough, Hampshire,
Limited(1) and Wales 100% 100% engineering England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
Gama Aviation struck off Avenue,
Group Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Gama Aviation Dormant and 1st Floor 25 Templer
(Training) struck off Avenue,
Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
Gama Aviation England Aviation Farnborough, Hampshire,
(UK) Limited(1) and Wales 100% 100% management England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
GA 259034 struck off Avenue,
Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Gama (Engineering) Avenue,
Limited(1) England Farnborough, Hampshire,
(2) and Wales 100% 100% Dormant England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
struck off Avenue,
GA FM54 Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
Gama Group England Farnborough, Hampshire,
Limited and Wales 100% 100% Holding company England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
Gama Leasing struck off Avenue,
Limited(1) England after reporting Farnborough, Hampshire,
(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Gama Support Avenue,
Services Limited(1) England Farnborough, Hampshire,
(2) and Wales 100% 100% Dormant England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
struck off Avenue,
Hangar 8 AOC England after reporting Farnborough, Hampshire,
Limited (8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
struck off Avenue,
Hangar 8 Engineering England after reporting Farnborough, Hampshire,
Limited(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
Hangar 8 Management England Farnborough, Hampshire,
Limited and Wales 100% 100% Non-trading England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and 1st Floor 25 Templer
Infinity Flight struck off Avenue,
Crew Academy England after reporting Farnborough, Hampshire,
Limited(8) and Wales 100% 100% date England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
1st Floor 25 Templer
Avenue,
International England Farnborough, Hampshire,
JetClub Limited(2) and Wales 100% 100% Non-trading England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Ronaldson 1st Floor 25 Templer
Airmotive Avenue,
Limited(1) England Farnborough, Hampshire,
(2) and Wales 100% 100% Dormant England, GU14 6FE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and
Aviation Beauport struck off Beauport House L'Avenue
Holdings Limited(1) after reporting De La Commune St Peter
(7) Jersey 100% 100% date Jersey JE3 7BY
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Dormant and
Ferron Trading struck off Beauport House L'Avenue
Limited(1) after reporting De La Commune St Peter
(7) Jersey 100% 100% date Jersey JE3 7BY
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Gama Aviation Beauport House L'Avenue
(Beauport) Aviation De La Commune St Peter
Limited(1) Jersey 100% 100% management Jersey JE3 7BY
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Aviation
Gama Aviation design and Beauport House L'Avenue
(Engineering) engineering De La Commune St Peter
Jersey Limited(1) Jersey 100% 100% and FBO Jersey JE3 7BY
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Boulevard Georges-Favon
Gama Aviation Aviation 43, 1204 Genève,
SA(1) Switzerland 100% 100% management Switzerland
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Gama Aviation SAIF Free Aviation SAIF Suite Z-21. P.O.
FZC* (1) (5) Zone, UAE 49% 49% management Box 122389, Sharjah, UAE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
United Arab SAIF Office Q1-09-067/C,
Gama Group Emirates P.O. Box 122464, Sharjah,
Mena FZE* ("UAE") 100% 100% Holding company UAE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
SAIF Lounge P.O. Box
Gama Holdings 121954,
FZC* UAE 100% 100% Dormant Sharjah, UAE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Aviation
Gama Support design and SAIF Desk Q1-05-123/B,
Services FZE* engineering P.O. Box 122553, Sharjah,
(1) UAE 100% 100% and FBO UAE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
6646 Abi Haitham Al
Ansari,
al Madina Square Center
- Office 2 & 3,
Muhammadiyah
Kingdom District, Jeddah
Gama International of Saudi Aviation 23624-3270,
Saudi Arabia(4) Arabia 49% 49% management KSA
------------------------ --------------- -------------- -------------- ---------------- -------------------------
2428 Res Co-work 03 Level
24, Al Sila Tower, Abu
Dhabi Global Market
Gama Aviation Square,
SPV Limited Aviation Al Maryah Island, Abu
(Plc) (6) UAE 100% 10% management Dhabi, UAE
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Corporation Service
Company,
251 Little Falls Drive,
Wilmington, Delaware
19808,
USA and Two Corporate
Gama Aviation Aviation Drive, Suite 1050,
(Engineering) Delaware, design and Shelton,
Inc.(1) USA 100% 100% engineering CT 06484
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Corporation Service
Company,
251 Little Falls Drive,
Wilmington, Delaware
Gama Aviation 19808,
(Management) Delaware, Aviation USA and 480 LORSGIP BLVD,
Inc.(1) USA 100% 100% management STRATFORD, CT 06615
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Corporation Service
Company,
251 Little Falls Drive,
Wilmington, Delaware
Gama Group Delaware, 19808,
Inc. USA 100% 100% Holding company USA
------------------------ --------------- -------------- -------------- ---------------- -------------------------
7th Floor, 81 South
Perimeter
Road, Hong Kong
Gama Aviation Aviation International
Engineering design and Airport, Lantau, Hong
(HK) Limited(1) Hong Kong 100% 100% engineering Kong
------------------------ --------------- -------------- -------------- ---------------- -------------------------
7th Floor, 81 South
Perimeter
Road, Hong Kong
Gama Aviation International
Hutchison Airport, Lantau, Hong
Holdings Limited(1) Hong Kong 100% 100% Holding company Kong
------------------------ --------------- -------------- -------------- ---------------- -------------------------
7th Floor, 81 South
Perimeter
Gama Aviation Road, Hong Kong
Hutchison International
(Hong Kong) Aviation Airport, Lantau, Hong
Limited(1) Hong Kong 100% 100% management Kong
------------------------ --------------- -------------- -------------- ---------------- -------------------------
7th Floor, 81 South
Perimeter
Road, Hong Kong
International
Gama Group Airport, Lantau, Hong
(Asia) Limited Hong Kong 100% 100% Holding company Kong
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Star-Gate Holder of
Aviation (Proprietary) South African 151 Monument Road, Aston
Limited South Africa 100% 100% AOC Manor 1619 South Africa
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Applicant
Hangar 8 Nigeria of Nigerian
Limited(3) Nigeria 100% 100% AOC *
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Hangar 8 Mauritius
Limited Mauritius 100% 100% Holding company *
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Joint Venture
- Holding Corporation Service
company for Company,
aviation 251 Little Falls Drive,
management Wilmington, Delaware
GB Aviation Delaware, and charter 19808,
Holdings LLC(9) USA 50% 50% company USA
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Gama Aviation Delaware, - 24.5% Associate Two corporate drive suite
LLC USA 1050, Shelton,
Connecticut,
06484, USA
------------------------ --------------- -------------- -------------- ---------------- -------------------------
8th Floor, Main Building,
Hangar and Workshop
Complex,
81 South Perimeter Road,
China Aircraft Hong Kong International
Services Limited Airport, Lantau, Hong
('CASL') Hong Kong 20% 20% Associate Kong
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Room 250, 2nd Floor,
Gama Hutchison Building
Aviation Technical 1, No. 56, Zhaoquanying
Service (Beijing) Section, Changjin Road,
Limited(1) China 100% 100% Non-trading Shunyi District, Beijing
------------------------ --------------- -------------- -------------- ---------------- -------------------------
Maples Corporate Services
Limited, PO Box 309,
Ugland
House, Grand Cayman,
Gama Aviation Aviation KY1-1104,
(Cayman) SEZC Cayman Islands 100% 100% Management Cayman Islands
------------------------ --------------- -------------- -------------- ---------------- -------------------------
(1) Indicates indirect holding.
(2) For the year ending 31 December 2020, the below companies
were exempt from the requirements to obtain an audit under section
479A of the Companies Act 2006 relating to the audit of individual
financial statements by parental guarantee. Gama Aviation Plc has
indirect holdings in these subsidiaries undertaken:
- Aravco Limited, company number 01316174
- Gama Aviation (Asset 2) Limited, company number 08586412
- International JetClub Limited, company number 03538780
- Ronaldson Airmotive Limited , company number 06391499
- Gama (Engineering) Limited, company number 03745678
- Gama Support Services Limited, company number 02784991
(3) The consolidated financial statements include amounts
relating to Hangar8 Nigeria Limited, a company established in
Lagos, Nigeria. The Group holds 11% of the share capital, of which
7% is owned through a wholly owned subsidiary, Hangar8 Mauritius
Limited. Whilst the Group therefore does not have legal control of
this entity, the directors and officers comprise only of management
from the Group who have the ability to adopt, amend and control the
operating and financial policies of the entity. Local regulations
prevent the Group holding a legally controlling shareholding and
therefore 89% of the share capital is held on behalf of the Group
by Tinubu Investment Company Limited. Accordingly, the entity has
been treated as a wholly owned subsidiary in these financial
statements.
(4) No non-controlling interest has been recognised on the
remaining 51%, as the Group has the full beneficial interest.
(5) Gama Aviation Plc holds a 49% shareholding in Gama Aviation
FZC. The results of Gama Aviation FZC are fully consolidated within
the financial statements because Gama Aviation Plc is exposed to
variable returns from its involvement and has the ability to affect
the returns through its power over these companies. Refer to Note
26 for further details.
(6) Gama Group Mena FZE acquired 90% of the issued share capital on 17 February 2020.
(7) Struck off after the reporting date
(8) Application for strike-off filed with Companies House and
strike-off expected to complete in the first half of 2021
(9) GB Aviation Holdings LLC is the entity jointly held with
Signature Aviation plc. The company's sole asset was its 49%
investment in Gama Aviation LLC, the Group's US Air associate,
which was disposed of the year, refer to Note 7. The Group's
ownership interest in Gama Aviation LLC is 24.5%.
* The registered office of these companies are available upon
request at the Company's head office located at 1st Floor 25
Templer Avenue, Farnborough, Hampshire, England, GU14 6FE.
18. Investments accounted for using the equity method
Details of the Group's investments accounted for using the
equity method at 31 December 2020 are as follows:
Place of Proportion Proportion
incorporation of ownership of voting
Name Investment and operation interest power held
-------------------------- -------------- --------------- ------------- -----------
China Aircraft Services
Limited ('CASL') Associate Hong Kong 20.0% 20.0%
GB Aviation Holdings LLC* Joint Venture USA 50.0% 50.0%
-------------------------- -------------- --------------- ------------- -----------
*GB Aviation Holdings LLC is the entity jointly held with
Signature Aviation plc. The company's sole asset was its 49%
investment in Gama Aviation LLC, the Group's US Air associate,
which was disposed in the year, refer to Note 7. At GB Aviation
Holdings LLC direction proceeds from the disposal were in favour of
Gama Group Inc and Signature Aviation plc according to their
respective interests. The Group's ownership interest in Gama
Aviation LLC is nil after the disposal (2019: 24.5%) and the
carrying value of the investment in GB Aviation Holdings LLC is
nil.
Details of the Group's investments accounted for using the
equity method at 31 December 2019 were as follows:
Place of Proportion Proportion
incorporation of ownership of voting
Name Investment and operation interest power held
-------------------------- -------------- --------------- ------------- -----------
Gama Aviation LLC Associate USA 24.5% 25.0%
GB Aviation Holdings LLC* Joint Venture USA 50.0% 50.0%
China Aircraft Services
Limited Associate Hong Kong 20.0% 20.0%
-------------------------- -------------- --------------- ------------- -----------
*GB Aviation Holdings LLC is the entity jointly held with
Signature Aviation plc. The company's sole asset was its 49%
investment in Gama Aviation LLC, the Group's US Air associate,
which was disposed in the year, refer to Note 7. The Group's
ownership interest in Gama Aviation LLC is 24.5%. The Group equity
accounted for the consolidated results of GB Aviation Holdings LLC,
which included its' sole undertaking and trading entity, Gama
Aviation LLC.
On the balance sheet at 31 December 2019, the equity accounted
investment in Gama Aviation LLC was presented in current assets, as
assets held for sale, as completion of the transaction was
considered highly probable at 31 December 2019. Refer to Note 7 for
further details on the disposal.
The results of the equity accounted investments are as
follows:
Gama Aviation
LLC* CASL
---------------------- ----------------------
Year ended Year ended Year ended Year ended
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------------------- ---------- ---------- ---------- ----------
Revenue 75,053 436,520 33,389 62,985
Expenditure (74,732) (434,323) (50,432) (61,033)
Impairment of property, plant and equipment - - (16,433) -
Impairment of right-of-use assets - - (15,732) -
-------------------------------------------- ---------- ---------- ---------- ----------
Profit/ (loss) before tax 321 2,197 (49,208) 1,952
Income tax (charge)/ credit (2) (84) 292 (282)
-------------------------------------------- ---------- ---------- ---------- ----------
Profit/ (loss) after tax 319 2,113 (48,916) 1,670
-------------------------------------------- ---------- ---------- ---------- ----------
Statutory result: Group's share of net
profit/ (loss) 78 518 (9,783) 334
Finalisation and reversal of prior year
pre-acquisition loss - - - 66
Statutory result: Share of results from
equity accounting 78 518 (9,783) 400
Less adjusting items:
Group's share of impairment of property,
plant and equipment - - 3,287 -
Group's share of impairment of right-of-use
assets - - 3,146 -
-------------------------------------------- ---------- ---------- ---------- ----------
Adjusted result: Share of results from
equity accounting 78 518 (3,350) 400
Impairment of equity accounted investments - - (3,421) -
-------------------------------------------- ---------- ---------- ---------- ----------
*The equity accounting of Gama Aviation LLC was not discontinued
after Gama Aviation LLC was held for sale at 31 December 2019 and
prior to disposal on 2 March 2020. Had this been the case there
would have been a $78k increase in share of losses of associates
and a $78k increase in the profit on disposal of interest in
associates. The impact of this reclassification, which has no
impact on the statutory loss for the year, is considered
immaterial. In the prior year, equity accounting of Gama Aviation
LLC was for the full year.
Impairment is assessed by the recoverable amount which is the
higher of the fair value less costs to sell and the VIU. The
recoverable amount has been determined on the fair value less cost
to sell.
CASL suffered substantial losses, the Group's share of which
amounted to $3,350k of Adjusted EBIT, due to vastly reduced
commercial aviation volumes at Hong Kong airport, impacted by
COVID-19. CASL is in the process of seeking funding to continue as
a going concern and at the time of reporting the funding hasn't
been secured. Impairment charges of $9,854k (2019: nil) have been
recognised in adjusting items. $6,433k (2019: nil) relates to an
impairment on non-current assets in CASL which have been presented
outside Adjusted EBIT due to their size, irregular occurrence and
to enable better comparability year on year. The remaining
impairment charge of $3,421k (2019: nil) to reduce the equity
accounted investment in CASL from the carrying amount to its
recoverable amount of $2,000k. The fair value of $2,000k represents
a credible offer another CASL shareholder received for their 20
percent shareholding in 2021 and is therefore an appropriate basis
upon which to measure the fair value of the Group's 20 percent
shareholding in CASL. Costs to sell are estimated to be nil. In May
2021, the Group also received a similar offer for its 20 percent
shareholding in CASL. The Board is currently considering the offer
and is in negotiations with the counterparty.
Estimation uncertainty
The key source of estimation uncertainty at the reporting date,
that may have a significant risk of causing a materially different
outcome to the carrying amounts of assets and liabilities within
the next financial year, relates to the determination of the
recoverable amount on fair value less cost to sell. Changes in the
financial performance and outlook for CASL will inevitably impact
the fair value of the investment to a market participant.
The summary financial positions of the equity accounted
investments are as follows:
Gama Aviation
LLC CASL
---------------------- ----------------------
Year ended Year ended Year ended Year ended
2020 2019 2020 2019
$'000 $'000 $'000 $'000
--------------------------------- ---------- ---------- ---------- ----------
At 1 January - 2,080 15,112 16,207
Other comprehensive income - - 92 36
Share of net profit/(loss)* 78 518 (9,783) 400
Dividends declared - - - (1,276)
Prior year dividend - - - (255)
Impairment - - (3,421) -
Transfer to profit on sale* (78) - - -
Transfer to assets held for sale - (2,598) - -
--------------------------------- ---------- ---------- ---------- ----------
At 31 December - - 2,000 15,112
--------------------------------- ---------- ---------- ---------- ----------
*The equity accounting of Gama Aviation LLC was not discontinued
after Gama Aviation LLC was held for sale at 31 December 2019 and
prior to disposal on 2 March 2020. Had this been the case there
would have been a $78k increase in share of losses of associates
and a $78k increase in the profit on disposal of interest in
associates. The impact of this reclassification, which has no
impact on the statutory loss for the year, is considered
immaterial.
The summary financial positions of the equity accounted
investments are as follows:
Gama Aviation
LLC CASL
---------------------- ----------------------
Year ended Year ended Year ended Year ended
2020 2019 2020 2019
$'000 $'000 $'000 $'000
------------------------------------------ ---------- ---------- ---------- ----------
Total assets - 38,175 63,284 87,216
Total liabilities - (26,948) (46,014) (18,257)
------------------------------------------ ---------- ---------- ---------- ----------
Net assets/(liabilities) - 11,227 17,270 68,959
Group's share of net assets/(liabilities) - 2,751 3,454 13,792
Goodwill - 751 1,320 1,320
Impairment* - (904) (2,774) -
Transfer to assets held for sale - (2,598) - -
------------------------------------------ ---------- ---------- ---------- ----------
At 31 December - - 2,000 15,112
------------------------------------------ ---------- ---------- ---------- ----------
*The impairment of $2,774k excludes an adjustment of $647k from
the preceding table, which has an impairment of $3,421k. The
adjustment is in respect of the impact of IFRS 16 on CASL in 2019
and this was due to the timing of final signed accounts being made
available in 2019. Comparative disclosures have not been restated
due to the significant impairment charge taken in the current year,
on this investment, which make the restatement to 2019 immaterial
to the users of the accounts.
19. Inventories
2020 2019
$'000 $'000
------------------------------ ------ ------
Raw materials and consumables 5,922 7,182
Work in progress 56 89
------------------------------ ------ ------
5,978 7,271
------------------------------ ------ ------
The Directors consider that the carrying value of inventories is
approximately equal to their fair value. The cost of inventories
recognised as an expense was $16,202k (2019: $30,706k). This
includes an amount of $1,520k resulting from a write down of
inventories (2019: $2,364).
Nil (2019: $626k) of the write down of inventories is shown in
Note 6 as an exceptional item. The remaining write down comprises
$1,492k in Europe Ground and $28k in US Ground to measure
inventories at the lower of cost or net realisable value. Included
within inventories is an inventory obsolescence allowance of
$5,048k (2019: $5,413k).
Estimation uncertainty
The key source of estimation uncertainty at the reporting date,
that may have a significant risk of causing a materially different
outcome to the carrying amounts of inventories within the next
financial year, relates to a change in the net realisable value due
to change in customer demand or obsolescence of certain inventory
lines. At 31 December 2020, the Board consider their assessment of
net realisable value to be appropriate based on best information
available.
20. Trade and other receivables
2019
2020 Restated*
$'000 $'000
-------------------------------------------- ------- ----------
Financial assets
Amounts receivable for the sale of services 30,792 36,044
Loss allowance (6,954) (3,896)
-------------------------------------------- ------- ----------
23,838 32,148
Amounts due from associates 970 4,265
Financial asset at amortised cost 18,034 -
Accrued income** 14,475 28,387
Financial assets 57,317 64,800
Non-financial assets
Prepayments** 3,763 12,053
Other debtors 1,309 324
-------------------------------------------- ------- ----------
Total trade and other receivables 62,389 77,177
-------------------------------------------- ------- ----------
Current 49,359 72,956
Non-current 13,030 4,221
-------------------------------------------- ------- ----------
Total trade and other receivables 62,389 77,177
-------------------------------------------- ------- ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements
** Includes contract assets which are described in further
detail below
Amounts receivable for the sale of services
The average Days Sales Outstanding ('DSO') is 62 days (2019: 55
days) due to receivables past due over 120 days increasing year on
year by $1,427k. Credit controls prior to granting credit and DSO
are being actively monitored by management. Where appropriate, the
Group assesses the potential customer's credit quality and requests
payments on account, as a means of mitigating the risk of financial
loss from defaults. No interest has been charged on overdue
receivables (2019: nil). The Group recognises a loss allowance on a
customer by customer basis, based on an analysis of the
counterparty's current financial position against its current
overdue debt.
As there is no significant financing component to amounts
receivable for the sale of services, a provision matrix has been
used to calculate the expected credit losses for amounts receivable
for the sale of services, contract assets and accrued income, which
is permitted by IFRS 9. The Group carries an expected credit loss
allowance of $6,954k (2019: $3,896k).
Amounts receivable for the sale of services include amounts (see
below for aged analysis) which are past due at the reporting date
but against which the Group has not recognised a specific loss
allowance because there has not been a significant change in credit
quality and the amounts are still considered recoverable. No loss
allowance is carried for other debtors.
Ageing of unimpaired amounts receivable for the sale of
services
2020 2019
$'000 $'000
---------------------- ------ -------
Not yet due 8,590 12,747
Less than 30 days 3,676 5,283
30-60 days 2,448 7,271
61-90 days 1,467 1,985
91-120 days 2,104 736
Greater than 120 days 5,553 4,126
---------------------- ------ -------
Total 23,838 32,148
---------------------- ------ -------
Movement in the loss allowance
2020 2019
$'000 $'000
---------------------------------------------------- ------ -------
At 1 January 3,896 3,198
Impairment losses recognised in income statement in
Adjusted result 3,792 377
Impairment losses recognised in income statement in
Adjusting items (709) 2,010
Amounts written off as uncollectible (171) (1,835)
Foreign exchange translation gains and losses 146 146
---------------------------------------------------- ------ -------
At 31 December 6,954 3,896
---------------------------------------------------- ------ -------
In determining the recoverability of a trade receivable, the
Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date.
Ageing of impaired amounts receivable for the sale of
services
2020 2019
$'000 $'000
------------ ------ -------
Not yet due 54 -
< 30 days 43 663
30-60 days 9 30
61-90 days 63 30
91-120 days 73 356
121+ days 6,712 2,817
------------ ------ -------
Total 6,954 3,896
------------ ------ -------
The Directors consider that the carrying amount of trade and
other receivables is approximately equal to their fair value.
No general security is normally taken on trade receivables, but
may be sought once receivables become past due or the financial
circumstances of a customer are known or expected to change.
However, for trade receivables of $3,452k (2019: $2,128m) in Europe
Air the Group have liens over the aircraft and the aircraft is
currently in our possession which provides security while recovery
is pursued. In US Ground, for trade receivables of $1,148k (2019:
$1,095k) we have claims of lien registered with local authorities
as well as the FAA on each of the aircraft.
Sensitivity analysis on loss allowance
The estimate of the loss allowance may vary from the actual
amounts recovered if an individual becomes unable to pay or able to
pay. There is a $6,954k loss allowance and if a portion of the
impaired receivable balance was recovered there may be material
credit to the income statement. Similarly, if the unimpaired
receivable balance over 120 days of $5,553k was unable to be
recovered, there may be a material charge to the income statement.
However, as noted earlier, there are liens over the aircraft
relating to unimpaired receivables over 120 days, amounting to
$4,600k.
Amounts due from associates
Amounts due from associates of $970k (2019: $4,265k) represent
balances arising in the ordinary course of business between the
Group and its associate companies, China Aircraft Services Limited
and Gama Aviation LLC before its disposal in 2020 (Note 7). Amounts
due to associates of $1,046k (2019: $4,363k) (see Note 24) also
arise in the ordinary course of business between the Group and the
same associate companies. The net payable to associates of $76k is
expected to be settled in the next twelve months and
represents:
-- A receivable due to the Group of $970k from China Aircraft
Services Limited ; and
-- A payable due from the Group of $1,046k to China Aircraft
Services Limited.
These amounts are disclosed as related party transactions in
Note 36.
Amounts due from associates do not include a loss allowance
(2019: nil loss allowance). The $1,046k payable due from the Group
is expected to mitigate any credit losses on the $970k receivable
due to the Group.
Financial asset at amortised cost
Following the disposal of the US Air associate a financial asset
measured at amortised cost was recognised for deferred
consideration on the sale. At 31 December 2020 the carrying amount
is $18,034k (2019: nil), with $5,004k in current asset and $13,030k
in non-current assets. Refer to Note 7 for further details. No
expected credit loss allowance has been recognised on this
financial asset. Refer to Note 35 for further details on the
expected receipt of this receivable.
Accrued income
Accrued income is expected to be billed within the next twelve
months. The reduction in accrued income year on year is largely
driven by managed aircraft revenue, which has reduced due to lower
flying activity as a result of the COVID-19 pandemic.
Contract assets
As part of a Fleet Maintenance Program on a long-term contract,
contract assets of $579k (2019: $2,112k) have been recognised in
prepayments.
Contract assets arising from design and modification projects of
$1,419k (2019: $2,575k) have been included within the accrued
income.
As previously reported, the Group commenced all Helicopter
Emergency Medical Services (HEMS) on behalf of the Scottish
Ambulance Service on 1 June 2020 using its fleet of three Airbus
H145 helicopters. In support of this long-term contract, contract
assets of $1,692k (2019: $456k) are included within
prepayments.
Total contract assets are $3,690k (2019: $5,143k).
21. Borrowings
2019
2020 *Restated
$'000 $'000
------------------------------------------- ------ ----------
Secured borrowings at amortised cost
Other loans - 1,475
Bank borrowings 52,197 44,767
Unsecured borrowings at amortised cost
Paycheck Protection Program 1,000 -
------------------------------------------- ------ ----------
53,197 46,242
------------------------------------------- ------ ----------
Total borrowings
Other loans - 848
Paycheck Protection Program 1,000 -
Bank borrowings - -
------------------------------------------- ------ ----------
Amount due for settlement within 12 months 1,000 848
------------------------------------------- ------ ----------
Other loans - 627
Bank borrowings 52,197 44,767
------------------------------------------- ------ ----------
Amount due for settlement after 12 months 52,197 45,394
------------------------------------------- ------ ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
Analysis of borrowings by currency:
Sterling US Dollars Euros Total
$'000 $'000 $'000 $'000
---------------------------- -------- ---------- ------ ------
31 December 2020
Paycheck Protection Program - 1,000 - 1,000
Bank borrowings 52,197 - - 52,197
---------------------------- -------- ---------- ------ ------
52,197 1,000 - 53,197
---------------------------- -------- ---------- ------ ------
31 December 2019
Other loans - 1,475 - 1,475
Bank borrowings 23,072 8,235 13,460 44,767
---------------------------- -------- ---------- ------ ------
23,072 9,710 13,460 46,242
---------------------------- -------- ---------- ------ ------
During the year the Group received funds under the Paycheck
Protection Program (PPP) in the form of a loan arrangement from
Citibank guaranteed by the US government, which is specifically
intended to help businesses maintain their US workforce during the
COVID-19 pandemic. The Group made the application in good faith and
in the belief that the PPP loan request was necessary and otherwise
in accordance with the then applicable rules, to support its
ongoing operations given the economic uncertainty caused by the
pandemic. $5,753k funds were received on 12 May 2020 and was
initially recognised as borrowings in current liabilities. $4,753k
of these funds are considered by the Company to be eligible for
forgiveness within the terms of the PPP and have therefore been
recognised as income against the related expenses in the income
statement, reducing the amount of borrowings at the period end to
$1,000k. Confirmation of partial loan forgiveness is expected
within 12 months from the balance sheet date. Refer to Note 2 (w)
and Note 3 for further details.
Other loans were secured by assets and settled in full at the
reporting date. Interest arose at an average of 5.4% (2019:
6.1%).
The other principal features of the Group's bank borrowings are
as follows.
I. Bank borrowings in 2020 of $52,197k (2019: $44,767k) comprise
drawdowns from a revolving credit facility (the "RCF") and a term
loan (the "Loan") both secured with HSBC.
II. The RCF, which is presented in non-current liabilities, is
settled and drawdown on a cyclical basis with no right from the
bank to demand full repayment within the next twelve months.
III. A letter of awareness has been provided by CK Hutchison
Holdings Ltd (CKHH), which has an indirect shareholding of 29.8% in
the Group, that CKHH's current intention, while any amount is
outstanding under the facility, is not to reduce its shareholding
in the Group below 25.0% without consent from the lender or
discharge of the facility. No legal implications are imposed on
CKHH.
IV. The revolving credit facility is $50,000k, and $24,749k
(2019: $5,233k) was undrawn at the end of the reporting period.
V. During 2020 the Group completed the purchase of three Airbus
H145 helicopters, which came into use on 1st June 2020 in support
of a long-term contract. The purchase was funded through a GBP20m
Loan. The Loan is separate from the RCF which was transferred from
RBS to HSBC on improved terms in November 2019.
VI. The Loan and the RCF (collectively the "Facilities") are
subject to customary banking security arrangements.
VII. During the year the Group issued a debenture as security
against the Loan and RCF.
Drawn Drawn
(Presentation
Facility (Local currency) currency)
2020 Interest Maturity '000 '000 $'000
----------- -------------- ------------- ------------ ----------------------- -----------------------------------
14 November
RCF LIBOR + 0.94% 2022 USD 50,000 GBP 18,500 25,251
31 January
Term loan LIBOR + 1.12% 2023 GBP 20,000 GBP 20,000 27,298
----------- -------------- ------------- ------------ ----------------------- -----------------------------------
Bank borrowing before arrangement
fees 52,549
Capitalised loan arrangement fees (352)
------------------------------------------ ------------ ----------------------- -----------------------------------
Bank borrowings 52,197
------------------------------------------ ------------ ----------------------- -----------------------------------
Drawn Drawn
(Presentation
Facility (Local currency) currency)
2019 Interest Maturity '000 '000 $'000
----------- -------------- ------------- ------------ ----------------------- -----------------------------------
14 November
RCF LIBOR + 0.94% 2022 USD 50,000 GBP 17,500 23,072
USD
8,500 8,500
EUR 12,000 13,460
----------------------------------------------------- ----------------------- -----------------------------------
Bank borrowing before arrangement
fees 45,032
Capitalised loan arrangement fees (265)
------------------------------------------ ------------ ----------------------- -----------------------------------
Bank borrowings 44,767
------------------------------------------ ------------ ----------------------- -----------------------------------
22. Deferred tax
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
Deferred
Fixed consideration
asset on US
Non-deductible and other air associate
acquired temporary temporary
intangibles differences differences Tax losses Total
$'000 $'000 $'000 $'000 $'000
--------------------------------- -------------- ------------ -------------- ---------- -------
At 1 January 2019 (232) (389) - 1,926 1,305
Acquisitions (139) - - - (139)
Credit/(charge) in year (Note
11) 371 (440) - 303 234
Exchange differences - 10 - 23 33
--------------------------------- -------------- ------------ -------------- ---------- -------
At 31 December 2019, as reported - (819) - 2,252 1,433
Restatement* - 662 - (662) -
--------------------------------- -------------- ------------ -------------- ---------- -------
At 31 December 2019, as restated - (157) - 1,590 1,433
Acquisitions (62) - - - (62)
Credit/(charge) in year (Note
11) 5 62 (2,986) (561) (3,480)
Exchange differences - (23) - 23 -
--------------------------------- -------------- ------------ -------------- ---------- -------
At 31 December 2020 (57) (118) (2,986) 1,052 (2,109)
--------------------------------- -------------- ------------ -------------- ---------- -------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
Non-deductible acquired intangibles represent the value of the
deferred tax liability which arises on the fair value of acquired
intangibles which are not deductible for tax purposes. The
liability is valued at the tax rate applicable to the jurisdiction
where the intangibles are located.
Deferred tax assets and liabilities are offset where the Group
has a legally enforceable right to do so. The following is the
analysis of the deferred tax balances for financial reporting
purposes:
2020 2019
$'000 $'000
------------------------------------ ------- ------
Deferred tax asset - 2,252
Deferred tax liability (2,109) (819)
------------------------------------ ------- ------
Net deferred tax (liability)/ asset (2,109) 1,433
------------------------------------ ------- ------
The Group has the following tax losses:
2020 2019 2020 2019 2020 2019
Recognised Recognised Unrecognised Unrecognised Total Total
$'000 $'000 $'000 $'000 $'000 $'000
----------- ------------ ----------- ------------- ------------- ------ ------
UK 2,321 3,389 29,184 19,595 31,505 22,984
US 6,528 4,516 - - 6,528 4,516
KSA - 1,511 - 695 - 2,206
HK - 588 5,095 6,175 5,095 6,763
----------- ------------ ----------- ------------- ------------- ------ ------
Tax losses 8,849 10,004 34,279 26,465 43,128 36,469
----------- ------------ ----------- ------------- ------------- ------ ------
The above losses represent the following value at tax rates
applicable at the balance sheet date:
2019
2020 Recognised 2020 2019 2020 2019
Recognised Restated* Unrecognised Unrecognised Total Total
$'000 $'000 $'000 $'000 $'000 $'000
---------------------- ------------ ----------- ------------- ------------- ------ ------
UK 441 644 5,545 3,723 5,986 4,367
US 611 565 - - 611 565
KSA - 287 - 132 - 419
HK - 94 968 988 968 1,082
Potential tax benefit
of tax losses 1,052 1,590 6,513 4,843 7,565 6,433
---------------------- ------------ ----------- ------------- ------------- ------ ------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
The Group has not recognised a deferred tax asset in respect of
losses brought forward of $6,513k (2019: $4,843k) because the
future recoverability of the asset is uncertain. Recognising the
inherent uncertainty in the ongoing COVID-19 pandemic future
profitable projections beyond the current year forecast period are
uncertain and therefore these deferred tax assets have not been
recognised, see Note 15 for further details on projections.
Losses in the UK and Hong Kong can be carried forward
indefinitely. US losses can be carried forward for up to 7
years.
The Group is able to recognise the deferred tax asset on tax
losses of $1,052k (2019: $1,590k) and its expected utilisation in
future periods based on future profitable projections for that
entity in which the deferred tax asset arose.
No deferred tax liabilities have been recognised for temporary
differences associated with investment in associates.
23. Obligations under leases
The Group leases many assets including property, aircraft,
vehicles, fixtures, fittings and equipment. Information about
leases for which the Group is a lessee is presented below.
Right-of-use Assets
Fixtures,
Leasehold fittings
property and equipment Aircraft Vehicles Total
$'000 $'000 $'000 $'000 $'000
------------------------------------- --------- -------------- -------- -------- --------
Cost
At 1 January 2019 50,621 70 18.465 126 69,282
Additions - - - 73 73
Exchange differences 975 2 653 6 1,636
------------------------------------- --------- -------------- -------- -------- --------
At 31 December 2019 51,596 72 19,118 205 70,991
Additions 6,846 - - - 6,846
Derecognition (2,539) - (19,417) - (21,956)
Exchange differences 1,595 2 299 8 1,904
------------------------------------- --------- -------------- -------- -------- --------
At 31 December 2020 57,498 74 - 213 57,785
------------------------------------- --------- -------------- -------- -------- --------
Accumulated Depreciation
At 1 January 2019 - - - - -
Charge for the year - admin expenses 671 46 - 37 754
Charge for the year - cost of
sales 5,189 - 9,927 36 15,152
Impairment 2,341 - - - 2,341
Exchange differences 69 - 358 2 429
------------------------------------- --------- -------------- -------- -------- --------
At 31 December 2019 8,270 46 10,285 75 18,676
Charge for the year - admin expenses 521 19 - - 540
Charge for the year - cost of
sales 5,582 - 5,052 74 10,708
Derecognition (2,539) - (15,574) - (18,113)
Impairment 7,013 - - - 7,013
Exchange differences 691 4 237 7 939
------------------------------------- --------- -------------- -------- -------- --------
At 31 December 2020 19,538 69 - 156 19,763
------------------------------------- --------- -------------- -------- -------- --------
Net Book Value at 31 December
2020 37,960 5 - 57 38,022
------------------------------------- --------- -------------- -------- -------- --------
Net Book Value at 31 December
2019 43,326 26 8,833 130 52,315
------------------------------------- --------- -------------- -------- -------- --------
Lease liabilities
Maturity analysis - contractual undiscounted cash flows
2020 2019
$'000 $'000
----------------------------------------------------------- ----------------- ------
Less than one year 8,404 19,811
One to five years 21,172 23,835
More than five years 45,776 38,173
----------------------------------------------------------- ----------------- ------
Total undiscounted lease liabilities at 31 December 75,352 81,819
----------------------------------------------------------- ----------------- ------
Lease liabilities included in the statement of financial
position at 31 December
Discounted lease liabilities 5,531 12,527
Accruals for lease payments 317 3,839
----------------------------------------------------------- ----------------- ------
Current 5,848 16,366
Non-current 43,644 43,838
----------------------------------------------------------- ----------------- ------
Total lease liabilities at 31 December 49,492 60,204
----------------------------------------------------------- ----------------- ------
Lease Liability
Fixtures,
Leasehold fittings
property and equipment Aircraft Vehicles Total
$'000 $'000 $'000 $'000 $'000
--------------------- --------- -------------- -------- -------- --------
At 1 January 2019 50,621 70 18,466 125 69,282
Additions - - - 73 73
Finance expense 2,524 2 529 6 3,061
Lease payments (6,610) (6) (7,421) (25) (14,062)
Exchange differences 1,282 (46) 654 (40) 1,850
--------------------- --------- -------------- -------- -------- --------
At 31 December 2019 47,817 20 12,228 139 60,204
Additions 6,846 - - - 6,846
Finance expense 2,592 - 147 4 2,743
Derecognition - - (4,083) - (4,083)
Lease payments (8,094) (6) (7,878) (44) (16,022)
Exchange differences 264 (9) (414) (37) (196)
--------------------- --------- -------------- -------- -------- --------
At 31 December 2020 49,425 5 - 62 49,492
--------------------- --------- -------------- -------- -------- --------
Following the settlement of all aircraft leases in the year a
$240k profit has been recognised in derecognition of the related
right-of-use assets and lease liabilities.
Amounts recognised in profit and loss
Depreciation charge of right of use assets
2020 2019
$'000 $'000
--------------------------------- ------ ------
Leasehold Property 6,103 5,860
Fixtures, fittings and equipment 19 46
Aircraft 5,052 9,927
Vehicles 74 73
--------------------------------- ------ ------
Total 11,248 15,906
--------------------------------- ------ ------
Expenses relating to short term leases of twelve months or less
total $740k (2019: $1,681k). There are no expenses relating to low
value assets or expenses relating to variable lease payments.
Impact of IFRS 16 adjustments to the income statement
The following table reflects the impact of IFRS 16 adjustments
on Gross Profit, Adjusted EBIT and Profit before tax. The CODM
reviews monthly internal reporting on a pre-IFRS 16 basis and
pre-IFRS 16 adjusted EBIT by reportable segment is presented in
Note 4.
2020 2019
$'000 $'000
------------------------------------------------------------ -------- --------
Operating lease expense reversal in cost of sales 11,671 15,343
Depreciation charge on right of use assets (10,708) (15,152)
------------------------------------------------------------ -------- --------
Impact on Gross Profit 963 191
Operating lease expense reversal in administrative expenses 2,062 2,864
------------------------------------------------------------ -------- --------
Impact on EBITDA 3,025 3,055
Depreciation charge on right of use assets (540) (754)
------------------------------------------------------------ -------- --------
Impact on Adjusted EBIT (Note 4) 2,485 2,301
Impairment losses (7,013) (2,341)
------------------------------------------------------------ -------- --------
Impact on EBIT (4,528) (40)
Interest expense on lease liabilities (Note 10) (2,743) (3,061)
------------------------------------------------------------ -------- --------
Total amount recognised in the income statement (7,271) (3,101)
------------------------------------------------------------ -------- --------
An impairment loss of $7,013k has been recognised in relation to
the right-of-use leased asset at Sharjah airport (2019: $2,341k at
Fairoaks airport).
Average incremental borrowing rates applied across the group
were:
2020 2019
% %
--------------------------------- ---- ----
Leasehold property 5.5 5.5
Vehicles 3.9 3.9
Fixtures, fittings and equipment 4.6 4.6
Aircraft 3.9 3.9
--------------------------------- ---- ----
Property leases with a remaining lease term of more than 10
years have been adjusted to reflect the additional security
afforded by the leased asset on the cost of borrowing. An asset
specific adjustment of 0.69% has been applied to the rates of these
leases.
In June 2017 the Group entered into a non-cancellable
Build-Operate-Transfer and Service Concession agreement with
Sharjah Airport Authority under which the Group is committed to
construct a Business Aviation Centre ("BAC") at Sharjah Airport.
The agreement runs from June 2017 until June 2042 with a ten-year
extension option to June 2052. The 10-year extension has not been
formalised at the date of signing the financial statements. The
lease term for IFRS 16 accounting purposes has not included the
10-year extension because the option to extend is not reasonably
certain. The lease liability has been discounted at an incremental
borrowing rate of 7.3% (2019: 7.3%). The Sharjah BAC includes a nil
(2019: $7,339k) right-of-use asset and $7,441k (2019: $7,681k)
obligation under leases at 31 December 2020.
24. Trade and other payables
2019
2020 Restated*
$'000 $'000
----------------------------------- ------ ----------
Financial liabilities
Trade and other payables 11,484 22,209
Accruals 15,853 15,958
Amounts due to associates 1,046 4,363
----------------------------------- ------ ----------
28,383 42,530
Non-financial liabilities
Other taxation and social security 5,002 2,000
Income received in advance 6,689 7,823
----------------------------------- ------ ----------
11,691 9,823
Total trade and other payables 40,074 52,353
----------------------------------- ------ ----------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average Days
Payables Outstanding ('DPO') is 29 days (2019: 39 days).
No interest is charged on the trade payables. The Group has
financial risk management policies in place that target settlement
within agreed credit terms. The Directors consider that the
carrying amount of trade payables approximates to their fair
value.
Income received in advance relates to advance payments for
operating expenses incurred by the Group on managed aircraft in the
Air Division prior to these expenses being billed to the customer.
The outstanding performance obligations are expected to be
fulfilled within the next twelve months. Income received in advance
represents a contract liability, see Note 33 for other contract
liabilities. Income received in advance decreased year on year due
to less managed aircraft in the current year.
Amounts due to associates of $1,046k (2019: $4,363k) represent
balances arising in the ordinary course of business between the
Group and its associate company, China Aircraft Services Limited.
These amounts are disclosed as related party transactions in Note
36.
25. Issued capital and reserves
Number GBP $'000
---------------------------------------------- ---------- ------- -----
Ordinary shares: authorised, issued and fully
paid
---------------------------------------------- ---------- ------- -----
At 1 January 2019 63,636,279 635,862 953
At 31 December 2019 63,636,279 635,862 953
At 31 December 2020 63,636,279 635,862 953
---------------------------------------------- ---------- ------- -----
Share capital represents the amount subscribed for share capital
at nominal value. The Company has one class of ordinary shares with
a nominal value of GBP0.01 and no right to fixed income.
$'000
---------------------------- ------
Share premium
At 1 January 2019 63,473
At 31 December 2019 63,473
Balance at 31 December 2020 63,473
---------------------------- ------
Share premium represents the amount subscribed for share capital
in excess of nominal value, net of placement
fees of GBP1,526k or $1,987k (2019: GBP1,526k or $1 , 987k ).
Other reserves
Merger Reverse Share-based
relief takeover Other payment
reserve reserve reserve reserve Total
$'000 $'000 $'000 $'000 $'000
---------------------------------- -------- --------- -------- ----------- ------
At 1 January 2019 108,595 (95,828) 20,336 834 33,937
Share-based payment expense (Note
31) - - - 861 861
Balance at 31 December 2019 108,595 (95,828) 20,336 1,695 34,798
Share-based payment expense (Note
31) - - - 562 562
Balance at 31 December 2020 108,595 (95,828) 20,336 2,257 35,360
---------------------------------- -------- --------- -------- ----------- ------
The merger relief reserve represents differences between the
fair value of the consideration transferred and the nominal value
of the shares. In 2015, this occurred as a result of the reverse
takeover. The reserve was increased in 2016 upon the acquisition of
Aviation Beauport Limited when shares were included as part of the
consideration.
The reverse takeover reserve represents the balance of the
amount attributable to equity after adjusting the accounting
acquirer's capital to reflect the capital structure of the legal
parent in a reverse takeover.
Other reserve is the result of the application of merger
accounting to reflect the combination of the results of Gama
Aviation (Holdings) Jersey Limited with those of Gama Holding FZC,
following the share for share exchange transacted on 16 December
2014.
The share-based payment reserve is used to recognise the value
of equity-settled share-based payments provided to employees,
including key management personnel, as part of their remuneration.
Refer to Note 31 for further details of these plans.
There is an employee benefit trust that is affiliated with the
Group, however the Group does not have control of this trust and as
a result, the trust is not consolidated and no own share reserve is
recognised. At the end of the reporting period, there are 219,310
(2019: 219,310) shares which are held in the employee benefit
trust. The fair value of these shares at 31 December 2020 was
GBP84k (2019: GBP138k).
26. Non-controlling interest
$'000
-------------------------------------------------------------- -----
Balance at 1 January 2019 656
Total comprehensive income attributable to minority interests 95
-------------------------------------------------------------- -----
Balance at 31 December 2019 751
Total comprehensive income attributable to minority interests 45
-------------------------------------------------------------- -----
Balance at 31 December 2020 796
-------------------------------------------------------------- -----
The non-controlling interest in the current and prior year
relates to a 49% shareholding in Gama Aviation FZC, which is
consolidated as there is an 80% profit sharing ratio attributable
to the Group. As a result, a 20% non-controlling interest has been
recognised in the current and prior year. In addition, the Group
has a call option on the remaining shareholding.
27. Net cash generated by operating activities
2019
2020 Restated**
$'000 $'000
---------------------------------------------------------- -------- -----------
Loss before tax (8,239) (10,964)
Adjustments for:
Finance income (Note 9) (1,535) (695)
Finance costs (Note 10) 3,940 4,657
Depreciation of property, plant and equipment (Note
16) 4,809 3,019
Depreciation of right-of-use assets in administrative
expenses (Note 23) 540 754
Depreciation of right-of-use assets in cost of sales
(Note 23) 10,708 15,152
Amortisation of intangible assets (Note 15) 2,195 1,425
Impairment of right-of-use assets (Note 23) 7,013 2,341
Impairment of property, plant and equipment 4,609 -
Impairment of equity accounted investment in associate 3,421 -
Impairment of non-current assets within share of results
from equity accounted investments 6,433 -
Impairment of goodwill and other intangible assets (Note
15) 833 540
Loss on disposal of property, plant and equipment 63 82
Share of loss/ (profit) of associates (Note 18) 3,272 (918)
Profit on disposal of interest in associate (7,278) -
Utilisation of PPP loan (4,753) -
Share-based payment (Note 31) 562 861
---------------------------------------------------------- -------- -----------
Operating cash inflow before movements in working capital 26,593 16,254
Unrealised foreign exchange movements 843 226
Increase in gross inventories (80) (2,397)
Increase in inventory obsolescence (Note 19) 1,520 2,364
Decrease/ (increase) in gross receivables 10,161 (22,208)
Increase in loss allowance for receivables (Note 20) 3,083 2,387
(Decrease)/ increase in payables (12,050) 3,757
Increase in deferred revenue 6,365 1,189
Increase in provisions 333 1,115
---------------------------------------------------------- -------- -----------
Working capital movements 10,175 (13,567)
Cash generated by operations* 36,768 2,687
Taxes paid (3,085) (992)
---------------------------------------------------------- -------- -----------
Net cash generated by operating activities 33,683 1,695
---------------------------------------------------------- -------- -----------
*Included within cash generated by operations is cash outflows
on exceptional items of $0.7m in the year (2019: $7.8m)
** Restatements are detailed in Note 2 of the notes to the
financial statements
28. Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are
tabulated below.
Obligations under
Borrowings leases
--------------------- --------------------- --------
Long-term Short-term Long-term Short-term Total
$'000 $'000 $'000 $'000 $'000
--------------------------------- --------- ---------- --------- ---------- --------
At 1 January 2019, as reported - 12,522 - - 12,522
Restatement* 10,853 (10,853) - - -
At 1 January 2019, as restated 10,853 1,669 - - 12,522
Cash flows:
Repayments (32,094) (821) - - (32,915)
Proceeds 65,563 - - - 65,563
Lease payments - - - (14,062) (14,062)
Non-cash:
Initial application of IFRS 16 - - 43,838 25,444 69,282
Lease additions* - - - 73 73
Interest on lease liabilities - - - 3,061 3,061
Foreign currency translation
on borrowings in profit or loss
(Note 9) (693) - - - (693)
Exchange differences* 1,411 - - 1,850 3,261
Arrangement fee on old facility
written off 398 - - - 398
Arrangement fee movement on new
facility (93) - - - (93)
Other non-cash movements 49 - - - 49
--------------------------------- --------- ---------- --------- ---------- --------
At 31 December 2019, as restated 45,394 848 43,838 16,366 106,446
Cash flows:
Repayments (23,623) (848) - - (24,471)
Proceeds 28,234 5,753 - - 33,987
Lease payments - - - (1 6,022) (16,022)
Non-cash:
Interest on lease liabilities - - - 2,7 43 2,743
Lease additions - - 6,158 688 6,846
Derecognition - - (2,110) (1,973) (4,083)
Loan forgiveness - (4,753) - - (4,753)
Foreign currency translation
on borrowings in profit or loss
(Note 9) 178 - - - 178
Exchange differences 1,872 - - (196) 1,676
Amortisation of arrangement fees
(Note 10) 168 - - - 168
Arrangement fee movement on new
facility (26) - - - (26)
Reclassification - - (4,242) 4,242 -
At 31 December 2020 52,197 1,000 43,644 5,848 102,689
--------------------------------- --------- ---------- --------- ---------- --------
* Restatements are detailed in Note 2 of the notes to the
financial statements.
-- The changes in obligations under leases has been restated for
$73k of lease additions which were presented within Exchange
differences in the prior year
29. Contingent assets and liabilities
The Group had no contingent assets at 31 December 2020 (2019:
nil). The Group had material contingent liabilities at 31 December
2020 in respect of:
A claim for unspecified damages was lodged against the Group's
US subsidiary Gama Aviation (Engineering) Inc. ("GAEI") in May 2020
in relation to alleged negligent maintenance and paintwork
undertaken on an aircraft. The case has been dormant so far as it
relates to GAEI since the case is predominantly progressing between
the primary defendant and the claimant. In the interim GAEI's
application for motion to strike the case is pending hearing. It is
not practical to estimate the potential effect of this claim, but
legal advice indicates that GAEI has strong merits in defending the
claim.
A subsidiary of the Group, Gama Support Services FZE ("GSSF"),
entered into a Build Operate & Transfer Agreement ("BOT") and a
Concession Agreement with Sharjah Airport Authority ("SAA") on 1
July 2017. Under the BOT GSSF agreed to procure the design and
construction of the buildings and other structures comprising a
Business Aviation Centre and hangars at Sharjah Airport, UAE and to
use reasonable endeavours to ensure that the completion of the
construction occurs by the construction completion date as
envisaged under the BOT. The Group is in discussion with SAA
concerning these agreements, the prospects for which have been
frustrated by the COVID-19 pandemic. This has resulted in related
assets under construction and right-of-use assets being impaired as
described in Note 6 above. SAA may terminate the BOT if there is a
breach of any material obligations under the BOT which remain
unremedied. In the event GSSF fails to comply with its construction
obligations under the BOT, SAA will have the rights to seek
compensation for any damage or loss it sustains. Pending conclusion
of the on-going discussions with SAA, it is not possible to
estimate the potential contingent liability.
30. Provisions for liabilities
2020 2019
$'000 $'000
------------------------------------------------ ------ -------
At 1 January 1,115 -
Charged to the income statement during the year 471 1,067
Utilised during the year (462) (503)
Additions for dilapidations on new leases 312 -
Foreign Exchange 33 24
Discounting (Note 10) 28 35
Transferred from accruals - 492
------------------------------------------------ ------ -------
At 31 December 1,497 1,115
------------------------------------------------ ------ -------
Amount due for settlement within 12 months 679 521
Amount due for settlement after 12 months 818 594
------------------------------------------------ ------ -------
Total provisions 1,497 1,115
------------------------------------------------ ------ -------
Provisions as at 31 December 2020 include a closure provision of
$665k (2019: $620k), a dilapidations provision of $332k (2019:
$50k) and an employees end of service indemnity provision of $500k
(2019: $443k).
The dilapidations provision increased due to a lease entered
into during 2020 for the new Head office building in Farnborough
with a dilapidation provision recognised of $312k (2019: nil). In
the prior year, dilapidation obligations were in place on various
other property leases.
The closure provision includes $486k relating to the cessation
of the Groups business activities at Fairoaks airport and the
associated unavoidable costs. The obligation under leases, contains
the related lease liability at Fairoaks (see Note 23). Refer to
Note 35 for non-adjusting events after the reporting date related
to the business activities at Fairoaks airport. During the year the
Group recognised redundancy provisions of $173k. This provision
relates to the reduction of business activities in Saudi Arabia,
reported within the Middle East Air division. In addition, there
was $6k of other closure provisions.
Provision for employees' end of service indemnity is made in
accordance with the U.A.E. labour laws and is based on current
remuneration and cumulative years of service at the reporting
date.
2020 2019
$'000 $'000
------------------------------ -------------------- --------------
Dilapidations provision 332 50
Employee indemnity provision 500 443
Closure provision 665 620
------------------------------ -------------------- --------------
1,497 1,115
------------------------------ -------------------- --------------
31. Share-based payments
Equity-settled share option scheme
No options were granted during 2020. Options were granted on 17
June 2019 to certain employees of the Group. Options are
exercisable at a price equal to GBP0.92. The vesting period is 3
years. If options remain unexercised after a period of 10 years
from the grant date, the options expire. Options are forfeited if
the employee leaves the Group before the options vest and is a 'bad
leaver'. If the employee is a 'good leaver', the only shares
forfeited are the proportion of the original shares granted that
relate to the period after resignation and prior to vesting.
Details of the options outstanding during the year are:
2020 2019
'000 '000
--------------------------- ----- -----
At 1 January 3,747 2,731
Granted during the year - 1,226
Forfeited during the year (446) (210)
----------------------------- ----- -----
At 31 December 3,301 3,747
----------------------------- ----- -----
Exercisable at 31 December 1,503 670
----------------------------- ----- -----
The estimated fair values of the options granted in 2019 is
$465,880.
The inputs into the Black-Scholes model are as follows:
2019
-------------------------- ------
Share price, US$ cents 92.50
Exercise price, US$ cents 91.50
Expected volatility 41.19%
Expected life, years 6.5
Risk-free rate 0.72%
Expected dividend yields 2.16%
----------------------------- ------
Expected volatility was determined by calculating the historical
volatility of the Group's share price over a historical 6.5 year
period prior to grant. The Group recognises total expenses of $562k
(2019: $861k) related to equity settled share-based payment
transactions in the year.
Refer to Note 35 for details of share option transactions
approved after the reporting date.
32. Retirement benefit schemes
The Group operates defined contribution retirement benefit
schemes for all qualifying employees. The assets of the schemes are
held separately from those of the Group in funds under the control
of independent trustees. As at 31 December 2020, contributions of
$261k (2019: $259k) due in respect of the current reporting period
had not been paid over to the schemes.
33. Deferred revenue
2019
2020 Restated*
$'000 $'000
----------------- ------ ----------
Deferred revenue 13,367 7,089
----------------- ------ ----------
Current 12,676 2,707
Non-current 691 4,382
----------------- ------ ----------
Total 13,367 7,089
----------------- ------ ----------
*Restatements are detailed in Note 2 of the notes to the
financial statements.
The deferred revenue arises in respect of management fee,
maintenance contracts and "software as a service" (SaaS) contracts
invoiced in advance, all of which are expected to be settled in the
next twelve months, with the exception of non-current balances
which are expected to be recognised in twelve to fifteen months.
Deferred revenue also arises on licencing revenue connected to the
disposal of the US Air associate with $625k recognised as
non-current and $3,750k recognised as current. See Note 7 for
further details on licencing revenue. Deferred revenue represents a
contract liability.
Deferred revenue has increased year on year primarily due to
$4,375k of US Air associate licencing revenue as noted above, a new
SaaS contract in myairops(R) with $667k deferred, and the
acquisition of the trade and assets to provide air ambulance
services for the Government of Jersey and the Government of
Guernsey in the year.
Contract liabilities
Deferred revenue of $13,367k (2019: $7,089k) is a contract
liability and so too is income received in advance, as shown in
Note 24, of $6,689k (2019: $7,823k). Total contract liabilities are
$20,056k (2019: $14,912k).
34. Financial instruments
Financial assets and liabilities as defined by IFRS 9 and their
estimated fair values are as follows:
Financial
assets Financial
at liabilities Book Fair
amortised at amortised value value
cost cost total total
At 31 December 2020 $'000 $'000 $'000 $'000
-------------------------------------- ---------- ------------- -------- --------
Financial assets
Cash and cash equivalents 16,136 - 16,136 16,136
Trade and other receivables (Note 20) 57,317 - 57,317 57,317
Financial liabilities
Trade and other payables (Note 24) - (28,383) (28,383) (28,383)
Lease obligation (Note 23) - (49,492) (49,492) (49,492)
Borrowings (Note 21) - (53,197) (53,197) (53,197)
Net financial assets/(liabilities) 73,453 (131,072) (57,619) (57,619)
-------------------------------------- ---------- ------------- -------- --------
Financial Financial
assets liabilities Book Fair
at amortised at amortised value value
cost cost total total
At 31 December 2019 $'000 $'000 $'000 $'000
-------------------------------------- ------------- ------------- -------- --------
Financial assets
Cash and cash equivalents 8,463 - 8,463 8,463
Trade and other receivables (Note 20) 64,800 - 64,800 64,800
Financial liabilities
Trade and other payables (Note 24) - (42,530) (42,530) (42,530)
Borrowings (Note 21) - (46,242) (46,242) (46,242)
Lease obligation (Note 23) - (60,204) (60,204) (60,204)
-------------------------------------- ------------- ------------- -------- --------
Net financial assets/(liabilities) 73,263 (148,976) (75,713) (75,713)
-------------------------------------- ------------- ------------- -------- --------
The fair value of cash and cash equivalents, trade and other
receivables and trade and other payables approximate their carrying
amounts due to the short-term maturities of these instruments. The
fair value of lease obligations are calculated using the
incremental borrowing rate.
Financial risk management objectives
The Group is exposed to financial risks in respect of:
-- Capital risk;
-- Foreign currency;
-- Interest rates;
-- Credit risk; and
-- Liquidity risk.
A description of each risk, together with the policy for
managing risk, is given below.
34.1 Capital risk management
The Group manages its capital to ensure that the company and its
subsidiaries will be able to continue as going concerns while
maximising the return to stakeholders through the optimisation of
the debt and equity balances.
The capital structure of the Group consists of debt, which
includes the borrowings disclosed in Note 21 and obligations under
leases disclosed in Note 23, cash and cash equivalents and equity,
comprising issued capital, reserves and accumulated profit as
disclosed in the consolidated statement of changes in equity and in
Note 25.
The Board of Directors reviews the capital structure on a
regular basis. As part of this review, the committee considers the
cost of capital and the risks associated with each class of
capital, against the purpose for which the debt is intended.
A combination of leases and borrowing are taken out to fund
assets utilised by the Group. Borrowings are also secured to
support the on-going operations and future growth of the Group.
34.2 Market risk
The Group's activities expose it primarily to the financial
risks of changes in foreign currency exchange rates and interest
rates. There has been no change to the Group's exposure to market
risks or the manner in which these risks are managed and
measured.
34.2.1 Foreign currency risk management
The Group undertakes transactions denominated in foreign
currencies; consequently, exposures to exchange rate fluctuations
arise. In particular, the Group is exposed to sterling and euro
exchange rate fluctuations. The Group seeks to reduce foreign
exchange exposures arising from transactions in various currencies
through a policy of matching, as far as possible, receipts and
payments across the Group in each individual currency.
The table below summarises the FX exposure on the net monetary
position of entities against their respective functional currency,
expressed in group's presentational currency:
GBP USD EUR HKD Other Total
$'000 $'000 $'000 $'000 $'000 $'000
----------------------------- -------- -------- ------- ------ ------ --------
At 31 December 2020
Borrowings
Entities with functional
currency USD - (1,000) - - - (1,000)
Entities with functional
currency GBP (52,197) - - - - (52,197)
----------------------------- -------- -------- ------- ------ ------ --------
Total borrowings (52,197) (1,000) - - - (53,197)
Obligations under leases
Entities with functional
currency USD - (14,390) - - - (14,390)
Entities with functional
currency GBP (35,102) - - - - (35,102)
----------------------------- -------- -------- ------- ------ ------ --------
Total obligation under
leases (35,102) (14,390) - - - (49,492)
Cash
Entities with functional
currency USD 13 6,017 - 51 272 6,353
Entities with functional
currency GBP 4,022 5,309 345 - 107 9,783
Total cash 4,035 11,326 345 51 379 16,136
Net trade financial assets
Entities with functional
currency USD (84) 20,829 (6) 334 (282) 20,791
Entities with functional
currency GBP 5,319 2,766 123 - (65) 8,143
Total net trade financial
assets* 5,235 23,595 117 334 (347) 28,934
----------------------------- -------- -------- ------- ------ ------ --------
Net exposure
Net monetary in USD entities (71) - (6) 385 (10) 298
Net monetary in GBP entities - 8,075 468 - 42 8,585
Total net exposure (71) 8,075 462 385 32 8,883
----------------------------- -------- -------- ------- ------ ------ --------
*Working capital comprises financial assets per Note 20 of $57,317k
and financial liabilities per Note 24 of $28,383k
At 31 December 2019
Net exposure
Net monetary items in
USD entities (45) - (65) 931 294 1,115
Net monetary items in
GBP entities - (2,100) (2,220) - 645 (3,675)
Net monetary items in
CHF entities (3) (2) - - - (5)
Total net exposure (48) (2,102) (2,285) 931 939 (2,565)
----------------------------- -------- -------- ------- ------ ------ --------
Foreign currency sensitivity analysis
The following table details the Group's sensitivity to a 10 per
cent change in the relevant foreign currencies. This percentage has
been determined based on the average market volatility in exchange
rates in the previous 24 months. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and
adjusts their translation at the year-end for a 10 per cent change
in foreign currency:
GBP USD EUR HKD Other Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------------------ ------ ------ ------ ------ ------ ------
At 31 December 2020
Total effect on profit/(loss)
of depreciation in foreign
currency exchange rates 7 (808) (46) (39) (3) (889)
At 31 December 2019
Total effect on profit/(loss)
of depreciation in foreign
currency exchange rates 5 210 229 (93) (94) 257
------------------------------ ------ ------ ------ ------ ------ ------
34.2.2 Interest rate risk management
The Group is exposed to interest rate risk as it finances fixed
asset purchases using floating interest rates.
The Group's exposure to interest rates on financial liabilities
is detailed in section 34.3 Liquidity risk management section. The
Group's exposure to interest rates on financial assets has been
assessed by management as insignificant.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the
exposure to interest rates for non-derivative instruments at the
balance sheet date. For floating rate liabilities, the analysis is
prepared based on the average liability held by the Group over the
year. A 1 per cent increase or decrease represents management's
assessment of the reasonably possible change in interest rates.
If interest rates had been 1% basis points higher and all other
variables were held constant, the Group's loss for the year ended
31 December 2020 would increase by $522k (2019: $448k). The
Company's sensitivity to interest rates has increased during the
current year due to the increase in the value of loans held.
34.3 Liquidity risk management
Ultimate responsibility for liquidity risk management rests with
the Board of Directors. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities, by
continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities
wherever possible. There has been no change to the Group's exposure
to liquidity risks or the manner in which these risks are managed
and measured during the year. Further details are provided in the
Strategic Report.
The maturity profile of the financial liabilities is summarised
below. The table has been drawn up based on the undiscounted cash
flows of financial liabilities based on the earliest date on which
the Group can be required to pay.
Weighted
average After
effective Less than more than
interest 1 year 2-5 years 5 years Total
rate % $'000 $'000 $'000 $'000
------------------------------ ---------- --------- --------- ---------- ------
At 31 December 2020
Trade & other payables (Note
24) n/a 40,074 - - 40,074
Lease liabilities (Note 23) * 8,404 21,172 45,776 75,352
Bank borrowings 1.1% - 52,197 - 52,197
------------------------------ ---------- --------- --------- ---------- ------
At 31 December 2019
Trade & other payables (Note
24)*** n/a 52,353 - - 52,353
Lease liabilities (Note 23)** * 19,811 23,835 38,173 81,819
Other loans 6.1% 848 627 - 1,475
Bank borrowings*** 1.7% - 44,767 - 44,767
------------------------------ ---------- --------- --------- ---------- ------
* Refer to Note 23 which provides the incremental borrowing rate
for each category of lease.
** Restated to reconcile with Note 23
***Restatements are detailed in Note 2 of the notes to the
financial statements.
34.4 Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The Group endeavours to only deal with credit worthy
counterparties and requesting payments on account, where
appropriate, as a means of mitigating the risk of financial loss
from defaults. The Group's exposure is continuously monitored.
Financial assets, including trade receivables, consist of many
customers, coming from diverse backgrounds and geographical areas.
On-going review of the financial condition of the counterparty and
ageing and of financial assets is performed. Further details are in
Note 20.
The carrying amount of financial assets recorded in the
financial statements represents the Group's maximum exposure to
credit risk. There has been no change to the manner in which credit
risks are managed and measured during the year.
35. Events after the balance sheet date
The following non-adjusting events occurred after the reporting
date:
Jet East
As announced on 15 January 2021, the Group acquired 100% of the
issued share capital of Jet East from East Coast Aviation, LLC
which will significantly expand its existing US aircraft
maintenance operations.
The acquisition of Jet East has been transacted by the Group's
wholly owned US subsidiary Gama Aviation Engineering Inc ("GAEI")
for $7.7m in cash, with a further $1.0m in deferred cash payable
over two years and the assumption of Jet East debt. The transaction
has been entirely funded from the Group's existing resources.
Details of the purchase consideration, the net assets acquired,
and goodwill are as follows:
$'000
----------------------- -----
Cash paid 7,700
Deferred consideration 953
------------------------- -----
Total consideration 8,653
------------------------- -----
Deferred consideration of $1.0m has been discounted at 2.5% to a
present value of consideration.
A post-closing consideration adjustment for net assets acquired
has not been recognised as part of the total consideration shown
above. The post-closing adjustment is in process of being agreed
and will be confirmed in the interim reporting for the first half
of 2021.
A provisional calculation of purchase price accounting has been
performed. The purchase price accounting will be finalised once all
facts and circumstances at acquisition date are established but
within the twelve month measurement period permitted under IFRS 3
Business Combinations. Recognised amounts of identifiable assets
acquired and liabilities assumed are as follows:
$'000
Provisional
purchase
price
accounting
------------------------------------------- ------------
Property, plant and equipment 2,559
Trade and other receivables non-current 289
Inventories 1,165
Trade and other receivables current 5,361
Cash and cash equivalents 64
Trade and other payables (3,682)
Intangible assets - Brand 1,181
Intangible assets - Customer relationships 5,021
Deferred tax liability (1,736)
Goodwill 2,633
--------------------------------------------- ------------
Enterprise value 12,855
Borrowings (4,202)
--------------------------------------------- ------------
Total consideration 8,653
--------------------------------------------- ------------
Acquisition costs of $662k were incurred in 2020, and further
acquisition costs of $466k are expected to be incurred in 2021
following the execution of the deal. As the latter these costs were
contingent on the deal completing no accrual has been recognised at
the reporting date.
Of the $4.2m borrowings assumed on acquisition, $2.65m has been
settled to date and $1.55m remains outstanding.
Two significant identifiable intangible assets were identified
separate from Goodwill. An identifiable intangible asset relating
to the brand of Jet East (and related trademarks, logos and domain
names) has been identified as acquired as part of the transaction.
The brand (including related trademarks, logos and domain names etc
associated with the brand) is valued using the "relief from
royalty" valuation method. There was also an identifiable
intangible asset identified relating to the customer relationships
acquired as part of the transaction. This intangible asset is
valued using a "multi period excess earnings" valuation method.
The goodwill is attributable to the workforce in place and
growth through extension of services and the acquisition of new
customers. It will not be deductible for tax purposes.
In 2020, Jet East's performance was negatively impacted by
COVID-19. In 2020, it reported revenues of $28.2m (2019: $29.5m)
and an underlying EBIT of $1.8m (2019: $1.2m) inclusive of a
depreciation charge of $0.5m (2019: $0.3m). The net assets of Jet
East as at 31st December 2020 were $4.6m (2019: $6.7m).
Wheels Up plans to list in Q2 2021 via merger with Aspirational
Consumer Lifestyle Corporation
Following the disposal of the US Air associate to Wheels Up, a
financial asset measured at amortised cost was recognised for
deferred consideration on the sale (refer to Note 7 for further
details). At 31 December 2020 the carrying amount of the financial
asset is $18,034k (2019: nil), with $5,004k in current assets and
$13,030k in non-current assets.
On 1 February 2021 Wheels Up announced plans to list in Q2 2021
via merger with Aspirational Consumer Lifestyle Corporation. The
transaction values Wheels Up at an enterprise value of $2.1 billion
and is expected to provide up to $790 million in cash proceeds.
A consequence of a mandatory prepayment clause in the promissory
note with Wheels Up stipulates that Wheels Up listing is a capital
raise acceleration event. Within 10 business days after the
consummation of the capital raise, depending on certain parameters
of the capital raise, some or all of the deferred consideration
outstanding will be due to be settled in cash. This event has been
treated as a non-adjusting event at the reporting date but does
support the nil expected credit loss allowance on this financial
asset at 31 December 2020.
Grant and Surrender of Share Options
The following transactions in relation to Ordinary Shares of 1
pence each ("Shares") occurred after the reporting date:
1. The Company granted options over a total of 1,025,000 Shares,
at 39.0p, to Directors and other employees on 26 March 2021. These
options vest in 3 years and have no performance conditions.
2. Options over a total of 2,276,000 Shares previously granted
to Directors and other employees were agreed to be surrendered by
those employees on 29 March 2021.
3. The Company agreed to grant options over a total of 1,138,000
Shares, at 68.8p, to Directors and other employees on 29 March
2021. These options vest in 3 years and have no performance
conditions.
4. The Company agreed to grant options over a total of 1,817,805
Shares, at 1p, to Directors and other employees on 29 March 2021.
These options vest in 2024 and are subject to a performance
condition based on the Company's average share price over the 30
days following release of the Company's results for the year ending
31 December 2023.
5. The Company granted options over a total of 155,000 Shares,
at 1p, to Directors on 29 March 2021. These options vest
immediately and have no performance conditions. Of these, an option
for 25,000 Shares was granted to Neil Medley in fulfilment of the
final tranche of sign on shares due under his employment
contract.
The grant date and surrender date of the above transactions are
as set out above. The company and the respective employees agreed
to the share-based payment arrangement on these dates, and this was
the date that there was a shared understanding of the terms and
conditions of the arrangement. In addition, the above listed
transactions were subject to an approval process and the
Remuneration Committee approved those transactions on 19 March
2021.
Change in UK tax rate
In the Spring Budget 2021, the UK Government announced that from
1 April 2023 the corporation tax rate will increase to 25%. Since
the proposal to increase the rate to 25% had not been substantively
enacted at the balance sheet date, its effects are not included in
these financial statements. However, it is likely that the overall
effect of the change, had it been substantively enacted by the
balance sheet date, would be to increase the deferred tax asset and
the related deferred tax liability, with no significant change in
the tax charge.
Surrender of the remainder of a lease at Fairoaks airport
Gama Aviation (Engineering) Limited (GAEL), a subsidiary of the
Group, is a lessee of property at Fairoaks airport. On 27 April
2021, GAEL and the lessor released each other and their
predecessors in title from all past, present and future claims,
demands, liabilities and obligations in respect of the rights
contained in a lease and of the lease covenants and from all
liability for any subsisting breach of any of them and from all
damages, actions, proceedings costs, claims, demands, expenses and
from any liability for dilapidations and wants of repair,
decoration or re-instatement at the property arising under the
lease. At the reporting date, there was an obligation under leases
of $1,758k and a right-of-use asset of nil. In addition, there was
a closure provision of $486k for the unavoidable costs of closure.
As a result of the surrender, a significant portion of these
liabilities are expected to be released to the income statement in
the 2021 financial year.
CASL
In May 2021, the Group received an offer for its 20 percent
shareholding in CASL. The Board is currently considering the terms
of the offer and is in negotiations with the counterparty. CASL was
not held for sale at 31 December 2020 and this event is a
non-adjusting event after the reporting date.
36. Related party transactions
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.
The Company and its subsidiaries have a policy requiring full
disclosure to, and pre-approval by, the Board of transactions
contemplated with related parties.
List of related parties, including associates:
The following list is presented in accordance with the
objectives of International Accounting Standard (IAS) 24 Related
party disclosures and all relationships are disclosed according to
their substance rather than their legal form.
-- Oneti Lebanon Sarl - is a Company that is majority owned and
controlled by Mr G A Khalek, brother of Mr M A Khalek (Chief
Executive Officer). Mr M A Khalek holds 30% of the shares in Oneti
Lebanon Sarl according to the corporate register in Lebanon,
however the beneficial ownership of these shares was transferred to
Mr G Khalek in 2008;
-- Mr G Khalek - the brother of Mr M A Khalek;
-- Cedar Trading Investment Corporation - is a Company
beneficially owned by Mr G A Khalek;
-- Oneti SAL - a Company that is majority owned and controlled
by Mr G A Khalek;
-- Mr M A Khalek - has significant influence over the Company
through his position as Chief Executive Officer and his ownership
interest >20%;
-- BBGA Ltd - is the national trade association in which Mr M A
Khalek served as a director and Chairman until March 2019;
-- EBAA - is the European trade association in which Mr M A
Khalek serves on the Board of Governors;
-- Merritt Property LLC - owns a 39% membership interest in Gama
Aviation LLC and is owned by Thomas Connelly and John Tesei, who
control Gama Aviation LLC;
-- Valentia Properties Limited - is owned by Mr M Peagram, a
non-executive director of the Group, which invoices the Group for
professional services. Mr M Peagram ceased to be a director of the
Company during the prior year;
-- Golconda Investments Ltd - is owned by Mr R Steeves, a
non-executive director of the Group until January 2019, which
invoices the Group for professional services. Mr R Steeves ceased
to be a director during the prior year;
-- Air Arabia/Felix Trading Company LLC - Felix Trading Company
LLC ("Felix") has a significant ownership interest in Gama Aviation
FZE, which is controlled by the Group (see Note 17). The principals
of Felix also have significant ownership interest in Air Arabia,
which is a client of the Group;
-- Gama Aviation SPV - is a Company registered in Abu Dhabi
Global Market - a related party through potential ownership and
control rights via the terms of a loan agreement and because the
Group has significant influence over its operations (but not
control);
-- Mr Canning Fok - is an Executive Director of CK Hutchison
Holdings, a Company which has an indirect shareholding of 29.8% in
the Group; and
-- C K Hutchison Holdings - has an indirect shareholding of
29.8% in the Group.
Associates
-- GB Aviation Holdings LLC - is a joint venture in which the
Group owns a 50% membership interest;
-- Gama Aviation LLC - an associate in which GB Aviation
Holdings LLC owned a 49% member interest before disposal in March
2020 (Note 7); and
-- China Aircraft Services Limited - is an associate in which
the Group owns a 20% equity interest.
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
------------------ ----------------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------------------- -------- -------- ---------- ----------
Gama Aviation LLC (branding fee)** 625 4,050 - -
Gama Aviation LLC (other trading balances)* 1,552 7,579 561 857
China Aircraft Services Limited 1,993 747 2,950 3,271
Valentia Properties Limited - - - 11
Golconda Investments Ltd 11 2 - 5
Air Arabia/Felix Trading Company LLC 25 644 151 150
BBGA Ltd - - - 3
Oneti Lebanon Sarl - - - 4,922
Oneti SAL - - - 112
Mr Canning Fok 1,646 1,016 - -
M Khalek 23 48 - -
-------------------------------------------- -------- -------- ---------- ----------
* For ease of understanding the branding fee and other trading
balances have been separated in the summary table above.
** In the current year branding fees are for the two month prior
to disposal
The following amounts were outstanding at the balance sheet
date:
Amounts owed by Amounts owed to
related parties related parties
------------------ ------------------
2020 2019 2020 2019
$'000 $'000 $'000 $'000
-------------------------------- --------- ------- --------- -------
Gama Aviation LLC 23 921 17 139
China Aircraft Services Limited 970 3,344 1,046 4,224
Oneti SAL - - - 36
Merritt Property LLC - 1,000 - -
Air Arabia 204 211 182 25
Mr Canning Fok 138 39 - -
GB Aviation Holdings LLC 40 40 - -
-------------------------------- --------- ------- --------- -------
Material Transactions with Related Parties
Gama Aviation LLC
During the year Gama Aviation LLC paid $3.75m (of which $0.625m
was prior to disposal and $3.125m was post disposal) in cash to the
Group in accordance with the branding agreement and a further
$15.5m accelerated branding fee as part of the disposal of the
associate (Note 7).
Merritt Property LLC
As reported in the 2018 Annual Report, in January 2017 the Group
entered into a Termination Agreement (the "Agreement") with Gama
Aviation LLC. The Agreement brought the previous branding agreement
between the Group and Gama Aviation LLC to a close at the same time
as the Group entered into a new branding agreement with GB Aviation
Holdings LLC.
The Termination Agreement made provision for a final payment
from Merritt Property LLC (which was a 39% owner of Gama Aviation
LLC at the time) to the Group of $1.0m in lieu of branding fees
forgone.
During the year the Group received cash consideration of $1.0m
to settle the full amount due.
Oneti Lebanon Sarl
During 2019 the Group terminated a contract with Oneti Lebanon
Sarl. Under the terms of the contract a termination payment of
$2.9m was paid to Oneti. In addition, inventory previously held by
Oneti was repurchased by the Group for a further payment of
$2.1m.
Of the total payments of $5.1m, $2.7m was paid directly to a
business associate of Mr G Khalek and of the Group, and $2.4m was
paid to Mr G Khalek. These payments were instructed by Mr G Khalek
on behalf of Oneti Lebanon Sarl.
Mr Canning Fok
During the year, within the Asia Air Division, sales of services
of $1,646k (2019: $1,016k) were made to Mr Canning Fok.
Remuneration of key management personnel
The remuneration of the executive Directors of the Group, who
are also the key management personnel of the Group, are set out
below in aggregate for each of the categories specified in IAS 24
Related party disclosures. As all the key management personnel are
remunerated in Pounds Sterling, the disclosure has been presented
in that currency.
2020 2019
GBP'000 GBP'000
----------------------------- -------- --------
Short-term employee benefits 1,410 1,262
Post-employment benefits 181 144
----------------------------- -------- --------
Total 1,591 1,406
----------------------------- -------- --------
Details of Directors' remuneration are given in the Remuneration
Report which is included as part of the full Annual Report.
Ultimate controlling party
The Company's ordinary shares are publicly traded on the
Alternative Investment Market (AIM) of the London Stock Exchange.
There is no single controlling party.
37. Capital Commitments
In June 2017, as described in Note 29 above, a subsidiary
company entered into a non-cancellable Build-Operate-Transfer and
Service Concession agreement with Sharjah Airport Authority under
which it is committed to construct a Business Aviation Centre
("BAC") at Sharjah Airport. At 31 December 2020 the Group had other
outstanding contracted commitments of nil (2019: $114k)
As part of the commitment to voluntary carbon offsetting, the
Group has the intention to purchase verified emission reductions
for 3,210 tonnes of CO(2) e during 2021. At the reporting date this
has not been contracted.
38. Dividends
The Board does not recommend a dividend for 2020 (2019: 2.0
pence per share).
2020 2019
$'000 $'000
---------------------------------------- ------- -------
Final dividend paid of nil (2019: 2.0p) - 1,620
---------------------------------------- ------- -------
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END
FR FLFSDEVIRFIL
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