TIDMGMAA
RNS Number : 1267N
Gama Aviation PLC
27 May 2022
This announcement contains inside information for the purposes
of Article 7 of the UK version of Regulation (EU) No 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018, as amended ("MAR"). Upon the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
27 May 2022
Gama Aviation Plc (AIM: GMAA)
("Gama Aviation" or the "Company" or "Group")
Audited Results for the year ended 31 December 2021
Improved financial performance following strategic refocus
The Company is pleased to present its results for the full year
ended 31 December 2021. A copy of the Annual Report and Financial
Statements will be available shortly on the Company's website at
https://www.gamaaviation.com/investors/reports-and-presentations/.
Financial Highlights
-- Revenues up 30% (25% at constant currency (2) ) to $235.9m (2020: $182.0m)
-- Gross Profit up 20% (16% at constant currency (2) ) to $44.7m (2020: $37.3m)
-- Gross Profit Margin slightly down by 1.5 percentage point
("ppt") (down 1.4ppts at constant currency) at 19.0% (2020:
20.5%)
-- Adjusted EBIT loss reduced by 11% to $4.3m (2020: $4.8m),
despite the prior year benefitting from COVID-19 related government
support of $5.8m
-- The Adjusted EBIT loss includes the Group's $1.5m share of
associate losses (2020: $3.3m), and $3.2m (2020: Nil) of start-up
costs relating to the strategic development, and commencement in
H2, of two US base maintenance facilities. Adding back the $4.7m
impact from these two items, the Group has delivered an Adjusted
EBIT profit of $0.4m (2020: loss of $1.5m) from its mature and
continuing operations
-- Net cash inflow from operating activities of $5.2m (2020:
$35.4m cash inflow). Reduction in the positive contribution from
underlying working capital, which is in part due to reduced
government support in the period, start-up losses following the
commencement of base maintenance operations at Millville and Las
Vegas and a repayment of deferred VAT from 2020 in 2021
-- Liquidity remains strong with $10.2m (2020: $16.1m) of cash
and $12.1m (2020: $24.7m) of its $50m revolving credit facilities
(RCF) undrawn as at 31 December 2021
-- The Group has commenced the process of refinancing and the
Directors are confident that the RCF and term loan will be renewed,
albeit at a higher finance cost
-- Net debt, inclusive of $48.0m (2020: $46.1m) of lease
obligations, increased to $104.9m (2020: $83.2m) resulting from the
acquisition of Jet East and subsequent organic strategic
investments
-- As at 30 April 2022 cash balances were $14.2m (2020: $12.1m)
in addition to RCF headroom of $20.3m (2020: $12.1m)
-- The Board of Directors does not recommend a dividend be paid
Financial Summary
Adjusted(1) $m Statutory $m
---------------- ----------------
Restated Restated
(3) (3)
Dec-21 Dec-20 Dec-21 Dec-20
----------------------- ------ -------- ------ --------
Revenue 235.9 182.0 235.9 197.5
----------------------- ------ -------- ------ --------
Gross Profit 44.7 37.3 44.7 52.8
----------------------- ------ -------- ------ --------
Gross Profit % 19.0% 20.5% 19.0% 26.7%
----------------------- ------ -------- ------ --------
EBIT (4.3) (4.8) (7.3) (5.9)
----------------------- ------ -------- ------ --------
Loss for the year (6.3) (8.6) (8.8) (14.6)
----------------------- ------ -------- ------ --------
Loss per share (cents) (8.7) (13.6) (12.7) (23.1)
----------------------- ------ -------- ------ --------
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. The Adjusted Revenue and Adjusted Gross
Profit APM are solely for the comparative
2 To aid comparability 2020 results have also been calculated on
a constant currency basis using a constant foreign exchange rate of
$1.38 to GBP1, being the cumulative average USD-GBP exchange rate
for 2021, instead of the reported exchange rate of $1.28 to GBP1
for 2020. On a constant currency basis, 2020 Adjusted revenue is
$189.3m, Adjusted Gross Profit is $38.7m, Gross Profit percentage
is 20.4% and Adjusted EBIT remains at a loss of $4.8m. Refer to
Note 6 of the notes to the financial statements for further
details
3 The restatements to the 2020 income statement comprise a
reclassification from cost of sales to administrative expenses, and
various IFRS 16 adjustments resulting from an extensive review of
Group lease commitments carried out in 2021. These result in a net
reduction in losses before and after tax of $0.1m. The restatement
also resulted in a $3.4m reduction in net debt at 31 December 2020.
Details are in Note 2 of the notes to the financial statements
Strategic Highlights:
-- Significant expansion of the Group's Business Aviation
maintenance and repaid operations in the US through the acquisition
of Jet East
-- Targeted development of two new base maintenance facilities
in the US to expand further the Group's maintenance operations in
the world's largest business aviation market
-- Secured term extensions on three key Special Mission contracts
-- Recommenced development project at the Business Aviation Centre in Sharjah, UAE
-- Secured successful tenderer status for the development of a
second hangar in Jersey to more than double our facility's capacity
ahead of increased demand
-- Disposed of our shareholding interest in our non-core
loss-making Hong Kong based associate, monetising $2.0m in cash
from the sale
-- Completed the re-alignment of our business operations along
focused Strategic Business Units (SBUs)
Outlook
The Group remains firmly focused on the execution of the growth
strategy that supported the financial improvement in 2021. We have
invested significantly, both organically and inorganically, in our
maintenance operations in the US, the world's largest private jet
market.
Since the beginning of 2022, we have seen continued revenue
momentum, particularly in the US, albeit offset by increased costs
due to supply chain pressures and energy price inflation aggravated
by the prolonged effects of the pandemic and the war in Ukraine. In
this context, the Board is adopting a cautious approach to the
remainder of the year, with a particular focus on delivering
continuing operational improvements.
Notwithstanding this, we will continue to focus on delivering
our growth strategy and consider that longer term, the Group is
well placed for the future.
Commenting on the full year results, Marwan Khalek, Chief
Executive said:
"Our 2021 results reflect the significant progress that the
Group has made over the last couple of years in the face of
unprecedented operational challenges and a difficult global
economic environment. The significant revenue growth and improved
financial performance delivered in 2021 serves to validate the
effectiveness of our strategy and management actions to improve our
operational and financial performance.
In 2022, our focus remains on delivering our growth strategy,
with a particular emphasis on continuing operational improvement to
help offset increased cost pressures resulting from the prolonged
effect of the pandemic and energy price inflation. While we remain
cautious about the immediate outlook in this environment, Gama
Aviation remains financially and operationally resilient. As a
result, I am confident that, beyond the current market challenges,
we are well placed for future success."
Gama Aviation Plc +44 (0) 1252 553 029
Marwan Khalek, Chief Executive
Michael Williamson, Interim CFO
Camarco +44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
WH Ireland +44 (0) 207 220 1666
James Joyce
Ben Good
Gama Aviation - Notes to Editors
Founded in 1983 with 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 global divisions: 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
Introduction
The Group has adjusted and adapted well to this prolonged period
of social and geopolitical uncertainty and the resulting economic
impact. Through the execution of our strategy and the greater focus
it promotes, I am pleased to report that the Group has delivered
significant revenue growth and improved financial performance
despite the many macro-economic challenges it continues to
face.
During this period of continued uncertainty and instability, the
response from our people has been nothing short of exemplary. They
have embraced organisational change and understood the need to
reduce costs, preserve cash and focus on excellent service and
delivery to our client base. Our people's unwavering commitment,
dedication and hard work are the foundations upon which we have
adapted and reshaped our business to the new economic realities. I
am very pleased to see evidence of their hard work, which has
driven our recovery and the improved financial performance.
There is more to do, but I remain firmly of the belief that by
maintaining our focus on the fundamentals critical to our business,
we will continue to drive improvements in operational and financial
performance. These fundamentals include focusing on; providing
relevant services to our clients that deliver a decisive advantage;
leveraging the Group's operational platform and cross selling
opportunities to improve margins; and fostering our peoples'
considerable energy, talent and skills; whilst contributing to
society through our commitment to equality, diversity and
sustainability.
Strategy overview
On 1 January 2021, the Group rolled out an evolved Group
strategy and re-organised the business into three Strategic
Business Units (SBUs); Business Aviation, Special Mission and
Technology & Outsourcing. In parallel, the Group reorganised
and strengthened its Leadership teams to support the execution of
the strategy, the delivery of its strategic imperatives and the
five-year business plan.
Business Aviation
In the Business Aviation SBU, the acquisition Jet East Aviation
was completed in January 2021 effectively doubling the Group's
maintenance and repair operations (MRO) in the USA (the world's
largest business aviation market by volume and value). This was
followed by organic investment in the development of two base
maintenance locations, which became operational in H2. These two
moves further cement our market position and provide a strong
platform for organic growth in this strategically important
market.
Alongside the development of the MRO network, Business
Aviation's growth strategy is focused on the development of
important business aviation airport infrastructure, such as Fixed
Base Operations (FBOs), whose footprint derives predictable
revenues and cross selling opportunities for maintenance, charter
and aircraft management services.
Central to this is the development of a state-of-the-art
Business Aviation Centre in Sharjah, UAE which was paused at the
start of the pandemic. Following a diligent re-evaluation of the
project's continuing viability, the Group has recommenced the
development of these facilities, which remain central to growing
our market share and leveraging the Group's operational scale in
the Middle East.
The Business Aviation SBU has also secured successful tenderer
status for the development of a second hangar in Jersey to more
than double our facility's capacity.
In December 2021, the Group disposed of its shareholding
interest in its non-core, loss-making, Hong Kong based associate,
China Aircraft Services Limited (CASL), monetising $2.0m in cash
from the sale.
Special Mission
The Special Mission SBU, has successfully secured term
extensions on three long-term government contracts and continues to
position the SBU for further organic growth in four defined market
sectors. With a strong track record in delivery and a visible
pipeline, coupled with a new Leadership team, the SBU is firmly
focused on converting new opportunities and enhancing relationships
with its existing client base.
The SBU also continues to deliver incremental improvements in
its operational and financial performance through the active
implementation of the Group's "Fix & Optimise" initiatives.
Technology & Outsource (T&O)
The T&O SBU made steady progress bringing a suite of world
class, aviation focused, enterprise resource planning software as a
service (SaaS) products to market. Notable successes have been
achieved in the US and Europe, having strengthened the sales team
and automated on-boarding processes. The products' native
automation and Artificial Intelligence are assisting T&O's
clients' removal of manual processes from their operations and
maximising their profit potential through higher definition
commercial data and greater situational awareness.
Aside of the SaaS services, the SBU continues to provide a
variety of specialist outsource services to the military, airlines,
lessors and business aviation operators. Critical to continued
growth has been the addition of EASA Part-CAMO (a post Brexit
requirement), achieved via the opening of a new operation in
Poland. In turn, the Polish operation, combined with existing
resources, has allowed T&O to secure third-party trip support
and flight planning service contracts.
T&O will continue to attract further investment from the
Group as it builds the data management infrastructure required to
manage the increasingly complex interface of regulatory compliance
and commercial situational awareness.
FY '21 Financial Performance
Through the execution of our strategy the Group grew its
revenues to $235.9m, up by 25% (2020 at constant currency (1) :
$189.3m; 2020: $182.0m). The revenue growth was driven by the
acquisition of Jet East in the US, the full year effect of various
Special Mission contract wins and the general recovery of activity
within the business aviation sector following the gradual easing of
travel restrictions.
Consequently, the Group delivered a gross profit of $44.7m, up
16%, in absolute terms up $6.0m (2020 at constant currency (1) :
$38.7m; 2020: $37.3m). Gross profit margins were down slightly by
1.4bbps to 19% (2020 at constant currency (1) : 20.4%; 2020:
20.5%).
The Adjusted EBIT loss for the year was reduced by 11% to $4.3m
(2020: $4.8m), despite the prior year benefitting from COVID-19
government support of some $5.8m.
The 2021 financial performance has been impacted by the
inclusion of the Group's $1.5m (2020: $3.3m) share of losses from
its Hong Kong based associate, CASL, which has now been sold, and
$3.2m (2020: nil) of start-up costs ($2.5m in costs of sale and
$0.7m in overheads) relating to the strategic development, and
commencement in H2 of two US base maintenance facilities.
Adding back the $2.5m impact on costs of sale associated with
the development of the US base maintenance facilities, the gross
profit for 2021 would increase by 22% to $47.2m (2020 at constant
currency (1) : $38.7m) in absolute terms, which equates to a gross
profit margin of 20%, only 0.4bbps down on prior year (2020 at
constant currency (1) : 20.4%).
Notwithstanding the total $4.7m impact from these two items, the
Group has delivered an Adjusted EBIT profit of $0.4m (2020: loss of
$1.5m) from its mature and continuing operations.
The Group generated a net cash inflow from operating activities
of $5.2m (2020: $35.4m). Whilst the 2021 cash inflows benefitted
from the receipt of the remaining branding fees following the
disposal of US Air Associate, working capital was absorbed into our
US MRO business associated with the acquisition of Jet East and the
development of the two base maintenance facilities referenced
above. In addition, there was reduced government support in the
period and a repayment of deferred VAT from 2020 in 2021.
(1) To aid comparability 2020 results have also been calculated
on a constant currency basis. Refer to Note 6 of the notes to the
financial statements for further details.
Credit Facilities
The Group currently benefits from two credit facilities provided
by HSBC, a $50m RCF and a GBP20m term loan which mature in November
2022 and January 2023 respectively. Following initial engagement,
HSBC have indicated their willingness to renew the facilities and
have provided indicative terms which are currently under
negotiation. Whilst the refinancing has not been concluded, the
Board is confident that it will secure the facilities necessary to
support its on-going
In parallel with its discussions with HSBC, the Company is
actively pursuing alternative and/or additional credit facilities
aimed specifically at meeting the Group's asset-based financing
needs relating to aircraft, real estate and infrastructure
projects.
Market updates will be provided when binding facilities are
secured.
Dividend
The Board does not recommend a dividend for 2021 (2020: nil
pence per share). The Company intends to restore the Company's
distributable reserves when practicable which may involve
extracting dividends from subsidiaries amongst other steps.
Social Value
I am particularly pleased with the progress that the Group is
making with regard to its Social Value commitments. The pandemic
years have created new challenges and we are responding to them by
introducing hybrid working and supporting our people with mental
health training as well as a range of advice via our WeCare support
programme. At a societal level, our People Teams are focused on
addressing the perennial issue of gender and ethnic diversity and
inclusion within the aviation sector. I'm pleased to say their
efforts are showing results, particularly in our UK apprentice
program.
Finally, the Group is making progress with our Carbon Reduction
Plan. Our 2021 Streamlined Energy and Carbon Report will show the
second consecutive reduction since 2019 in the Group's scope 1,2
and 3 (excluding downstream) Greenhouse Gas emissions.
In all cases we recognise this is the start of our journey and
that the Group has a long way still to go, but I am pleased with
our collective progress.
Outlook
The Group remains firmly focused on the execution of our five
year strategy that has supported the financial improvement seen in
2021. We have invested significantly, both organically and
inorganically, in our maintenance operations in the US, the world's
largest business aviation market.
Since the beginning of 2022, we have seen continued revenue
momentum, particularly in the US, albeit offset by increased costs
due to supply chain pressures and energy price inflation aggravated
by the prolonged effects of the pandemic and the war in Ukraine. In
this context, the Board is adopting a cautious approach to the
remainder of the year, with a particular focus on delivering
continuing operational improvements.
Notwithstanding this, we will continue to focus on delivering
our strategy and consider that longer term, the Group is well
placed for the future.
/ GROUP OPERATIONAL PERFORMANCE REVIEW
Revenue
Adjusted (1, 2) Statutory
USD'000s 2021 2020 2021 2020
------------------------- -------- ------- ------- -------
Business Aviation 170,146 125,312 170,146 125,312
Special Mission 56,716 47,918 56,716 47,918
Technology & Outsourcing 5,297 5,023 5,297 5,023
Branding fees 3,750 3,750 3,750 19,250
------------------------- -------- ------- ------- -------
Total 235,909 182,003 235,909 197,503
------------------------- -------- ------- ------- -------
Gross Profit
Adjusted (1, 2) Statutory
Restated(3) Restated(3)
USD'000s 2021 2020 2021 2020
------------------------- ------ ----------- ------ -----------
Business Aviation 19,702 17,425 19,702 17,425
Special Mission 17,075 12,534 17,075 12,534
Technology & Outsourcing 4,204 3,569 4,204 3,569
Branding fees 3,750 3,750 3,750 19,250
------------------------- ------ ----------- ------ -----------
Total 44,731 37,278 44,731 52,778
------------------------- ------ ----------- ------ -----------
EBIT
Adjusted
(1, 2) Statutory
Restated(3) Restated(3)
USD'000s 2021 2020 2021 2020
------------------------- -------- ----------- --------- -----------
Business Aviation (8,764) (3,702) (12,392) (16,322)
Special Mission 4,546 3,056 4,534 3,024
Technology & Outsourcing 47 605 (289) 256
Branding fees 3,691 3,733 3,691 19,233
Associates (1,491) (3,272) - (5,848)
Corporate(4) (2,303) (5,238) (2,796) (6,203)
------------------------- -------- ----------- --------- -----------
Total (4,274) (4,818) (7,252) (5,860)
------------------------- -------- ----------- --------- -----------
(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. The Adjusted Revenue and Adjusted Gross
Profit APM are solely for the comparative.
(2) To aid comparability 2020 results have also been calculated
on a constant currency basis using a constant foreign exchange rate
of $1.38 to GBP1, being the cumulative average USD-GBP exchange
rate for 2021 instead of the reported exchange rate of $1.28 to
GBP1 for 2020. On a constant currency basis, 2020 Adjusted revenue
is $189.3m, Adjusted Gross Profit is $38.7m, Gross Profit
percentage is 20.4% and Adjusted EBIT remains at a loss of $5.3m.
Refer to Note 6 of the notes to the financial statements for
further details.
(3) The restatements to the 2020 income statement comprise a
reclassification from cost of sales to administrative expenses and
various IFRS 16 adjustments resulting from an extensive review of
Group lease commitments carried out in 2021. These result in a net
increase in EBIT loss and adjusted EBIT loss of $26k and $495k
respectively as detailed in Note 2 of the notes to the financial
statements.
(4) Following the transitioning of the segmental reporting to
reflect the realignment of the business along its SBUs, the
Corporate cost recovery estimation methodology was also reviewed
resulting in a revised level of Corporate charges to overhead
within the SBUs in 2021. Accordingly, and as a result of this
change in estimate, Corporate costs were reduced by $3.7m with an
equivalent charge in the respective SBUs. Excluding this change in
estimate, there was a $0.5m increase in corporate costs, which is
primarily related to the adverse impact of foreign exchange of
$0.4m. This change of Corporate cost recovery estimation
methodology has not been applied to the 2020 comparators.
The SBU performance is explained in detail below.
/ BUSINESS AVIATION
Business Aviation is focused on the delivery of the following
lines of business to clients principally in the top three regional
business aviation markets: the US, Europe and the Middle East.
/ Management. The operational management of an aircraft (or
fleet), and its crew, that the owner wishes to place on one of the
Group's air operating certificates (AOCs)
/ Charter. The sale of available flight hours on aircraft to
charter brokers or to direct clients worldwide
/ FBO. The management of our strategically positioned fixed base
operations at airports in the UK, Channel Islands and Middle
East
/ Maintenance (MRO). The delivery of comprehensive maintenance,
repair and modification solutions that support business aviation
aircraft operators and owners.
Business Aviation MRO in the US has a dedicated management team
and is separately reviewed by the Group Chief Executive Officer who
acts as the Chief Operating Decision Maker (CODM). Therefore,
Business Aviation MRO US has been presented separately from
Business Aviation excluding MRO US which falls under a separate
management team and is separately reviewed by the CODM.
USD'000s BA MRO US(3) BA excluding MRO US Total
----------------- -------------------- --------------------- --------------------
Restated(1) Restated(1) Restated(1)
2021 2020 2021 2020 2021 2020
----------------- ------- ----------- ------- ------------ ------- -----------
Revenue 79,250 38,606 90,896 86,706 170,146 125,312
----------------- ------- ----------- ------- ------------ ------- -----------
Gross Profit 9,035 8,474 10,667 8,951 19,702 17,425
----------------- ------- ----------- ------- ------------ ------- -----------
GP % 11% 22% 12% 10% 12% 14%
----------------- ------- ----------- ------- ------------ ------- -----------
Adjusted EBIT(2) (7,971) 181 (793) (3,883) (8,764) (3,702)
----------------- ------- ----------- ------- ------------ ------- -----------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
(3) The Jet East business operations were merged with those of
the Groups US MRO operations immediately following the acquisition
on 15 January 2021. It is therefore not possible to assess and/or
segregate the actual impact of the acquisition on the combined
financial performance. Jet East's unaudited financial statement for
2020 shows annual revenues of $28.2m, Gross Profit of $0.2m and
Adjusted EBIT of $1.4m.
Due to the gradual easing of travel restrictions and quarantine
requirements in 2021 the Business Aviation SBU saw an increased
level of activity across all its business lines, the impact of
which can be summarised as follows:
In aircraft management, overall, we saw increased aircraft
utilisation by our clients. This increased activity translated to
some additional revenue but had little impact on gross profits due
to the pass-through nature of these revenues. The gross profit in
this business line was however negatively impacted by the loss of
management fee revenues following the disposal of several managed
aircraft by their owners. This impact was felt hardest in our Hong
Kong base where very strict 21 days quarantine isolation
requirements continued to severely limit travel appetite and there
are no longer four Hong Kong based aircraft. The impact has been
somewhat mitigated by gains elsewhere as well as some aircraft
sales commissions.
Charter saw modest increases in demand resulting in increased
activity and revenues, both in respect of in-fleet charter as well
as charter brokerage but margins remained under pressure due to
competitive pressures.
Increased activity resulted in significant increase in aircraft
movements at our Sharjah and Jersey FBOs resulting in strong growth
in revenues and gross profits during the year.
The US market saw a significant increase in aircraft activity
through the second half of the year which has fuelled very strong
demand for both our line maintenance and base maintenance services.
This, together with the acquisition of Jet East and the organic
development of two new base maintenance facilities, resulted in the
US MRO business line delivering significant revenue growth. Gross
profit was however, negatively impacted by the start-up costs that
were incurred at the two new bases.
MRO demand and activity at our Bournemouth and other non-US
bases, which are predominantly targeted at base maintenance,
remained steady.
Overall, the Business Aviation SBU grew its organic and constant
currency revenues by 8% to $170.1m (2020: $157.0m after rebasing
for $28.2m related to Jet East and $3.5m constant currency). Gross
profit was up 10% to $19.7m (2020: $18.0m after rebasing for $0.2m
related to Jet East and $0.3m constant currency), which includes
the near full year Gross Profit contribution from the acquired Jet
East business.
Adjusted EBIT fell by $5.1m to an adjusted EBIT loss of $8.8m
(2020: $3.7m loss) and on an organic and constant currency basis,
there was a decrease of $3.4m after rebasing for the adverse impact
of foreign exchange of $0.3m and rebasing the comparative for the
acquisition of Jet East which contributed a loss of $1.4m. Within
Business Aviation MRO US there was a $0.3m credit to the expected
credit loss within administrative expenses following the settlement
of a historic overdue receivable and within Business Aviation
excluding MRO US there was a $0.2m charge to increase the expected
credit loss allowance on receivables. Within Business Aviation MRO
US, overhead increased due to investment in start-up locations and
capability for increased activity levels as well as $2.3m of
increased corporate overhead allocations in part due to the
acquisition of Jet East and due to a revised estimate of corporate
overhead by SBU across the Group. Within Business Aviation
excluding MRO US, there was a $0.4m decrease in corporate overhead
allocations, partially offset by additional overhead due to
managerial changes following the introduction of the new reporting
structure.
USD'000s BA MRO US BA excluding MRO US Total
----------------------------------------------------- ------------------- --------------------- -------------------
Restated* Restated* Restated*
2021 2020 2021 2020 2021 2020
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Adjusted EBIT(1) (7,971) 181 (793) (3,883) (8,764) (3,702)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Exceptional items - transaction costs (558) (663) - (29) (558) (692)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Exceptional items - integration and business
re-organisation costs (413) - 1,901 (202) 1,488 (202)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Exceptional items - other items - - 79 709 79 709
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Exceptional items - Impairment of right-of-use assets - - (1,911) (6,544) (1,911) (6,544)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Exceptional items - Impairment of goodwill - - - (833) - (833)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Exceptional items - Impairment of assets under
construction - (4,609) (4,609)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Equity incentive plan (1,821) - - - (1,821) -
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Share-based payments 58 (61) (52) (88) 6 (149)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
Amortisation (710) - (201) (300) (911) (300)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
EBIT (11,415) (543) (977) (15,779) (12,392) (16,322)
----------------------------------------------------- -------- --------- --------- ---------- -------- ---------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
EBIT improved from a loss of $16.3m in 2020 to a loss of $12.4m
in 2021. In addition to the movements discussed above, there was
$1.9m impairment of right of use assets at Sharjah Airport
following a ten-year extension option which was exercised in the
current period. The continued uncertainties in funding the Business
Aviation Centre (BAC) mean that in our judgement the additional
right-of-use asset must be immediately impaired. In the event that
uncertainties in funding the project are resolved after the date of
the reporting, the entire right of use asset and an asset under
construction previously impaired, may be eligible for an impairment
reversal. Following the acquisition of Jet East, the amortisation
of acquired intangibles increased by $0.7m, Jet East severance
costs of $0.4m were incurred, and a $1.8m charge for a long-term
incentive plan has been recognised. The above were partially offset
by $1.9m income upon release of lease and other related obligations
at Fairoaks Airport, which had no equivalent right of use asset due
to a historic impairment.
/ SPECIAL MISSION
The Special Mission SBU provides the mission expertise to assist
governments and businesses in exploiting a variety of aviation
assets (principally fixed wing and helicopters) within the
following sectors:
/ Air Ambulance & Rescue. The delivery of fixed wing and
rotary mission solutions to the governments of Scotland, Jersey and
Guernsey as well as the circa 21 helicopter air ambulance charities
operating within the UK
/ National Security & Law Enforcement. Providing
"intelligence as a service" aviation platforms to the UK government
to protect the national interest
/ Infrastructure & Survey. The monitoring of critical
national infrastructure for the purposes of failure monitoring,
environmental controls, mapping or other such studies
Restated(1)
2021 2020
----------------- ------ -----------
Revenue 56,716 47,918
----------------- ------ -----------
Gross Profit 17,075 12,534
----------------- ------ -----------
GP % 30% 26%
----------------- ------ -----------
Adjusted EBIT(2) 4,546 3,056
----------------- ------ -----------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
The Special Mission SBU grew Revenue by 18% to $56.7m (2020:
$47.9m) and Gross Profit by $4.5m to $17.1m (2020: $12.5m). On a
constant currency basis, Revenue was 10% higher and Gross Profit
was $3.7m higher after rebasing for the favourable impact of
foreign exchange of $3.4m and $0.9m respectively. The growth in
revenue includes the impact of increased flying hours and the
related costs rechargeable to core customers, additional
non-recurring projects undertaken for core customers, incremental
work with core and ad-hoc customers and the full year effect of air
ambulance service contracts for the Government of Jersey and the
Government of Guernsey which were acquired in the middle of the
prior year, as shown in Note 6 of the notes to the financial
statements. Gross profit benefitted from the full year effect of
the contracts referred to above, a reduction in one-off charges,
insourcing of aviation assets, incremental work with core and
ad-hoc customers, a change in the estimate of costs to complete
contractual obligations and some changes in the mix of revenues
between labour and parts. In the current year, both revenue and
gross profit benefitted from modest improvements as a result of the
fix and optimise agenda adopted by management.
Adjusted EBIT increased by $1.5m to $4.5m (2020: $3.1m) due to
the growth in Gross Profit referred to above, albeit this growth
was partially offset by overhead growth of $3.0m, principally
comprising a $0.9m increase in depreciation due to the full year
effect of aircraft which entered into service at the middle of the
prior year, a $1.4m increase in the allocation of Corporate
overhead and $0.7m adverse impact of foreign exchange. Following
the transitioning of current year reporting to reflect the
realignment of the business along its SBUs a revised level of
Corporate overhead was charged to the Special Mission SBU.
Restated(1)
2021 2020
--------------------- ----- -----------
Adjusted EBIT(2) 4,546 3,056
--------------------- ----- -----------
Share-based payments (12) (32)
--------------------- ----- -----------
EBIT 4,534 3,024
--------------------- ----- -----------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) 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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
EBIT increased from a profit of $3.0m in 2020 to a profit of
$4.5m in 2021. In addition to the movements discussed above, EBIT
includes share-based payment charges.
/ TECHNOLOGY & OUTSOURCING
The Technology & Outsourcing SBU is focused on the delivery
of advisory, technology and outsource services to aviation
customers who seek to gain a decisive advantage using real and near
real time intelligence. The Technology & Outsourcing team
provide:
/ Technology products via myairops (R) . Flight and aircraft
management, maintenance tracking, ground operations and crew
scheduling and operations
/ Maintenance and Continuing Airworthiness Management (CAM).
Comprehensive range of services from full CAM and Airworthiness
Review Certificates (ARC) through to supplying the software for an
organisation to manage the through-the-life maintenance of its
aircraft
/ Trip planning & support. Providing third party services to
aircraft operators who are seeking to outsource their flight
operations tasks.
Restated(1)
2021 2020
----------------- ----- -----------
Revenue 5,297 5,023
----------------- ----- -----------
Gross Profit 4,204 3,569
----------------- ----- -----------
GP % 79% 71%
----------------- ----- -----------
Adjusted EBIT(1) 47 605
----------------- ----- -----------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
The Technology & Outsourcing segment grew Revenue by 5% to
$5.3m (2020: $5.0m) and Gross Profit by $0.6m to $4.2m (2020:
$3.6m). On a constant currency basis, revenue was 2% lower and
gross profit was $0.3m higher after rebasing for the favourable
impact of foreign exchange of $0.4m and $0.3m respectively, as
shown in Note 6 of the notes to the financial statements.
Maintenance and CAM traded in line with prior year revenue but with
a modest reduction in gross profit ($0.1m) due to inflationary
pressure on the cost of sales. Myairops (R) was broadly in line
with prior year revenue, with a modest reduction in revenue ($0.2m)
related to trading with the Group's former US Air Associate, which
benefitted the prior year and due to COVID effects on commercial
airline operators impacting one myairops(R) product. The revenue
shortfall was more than offset by cost savings which increased
gross profit by $0.2m. In addition, there was a $0.2m increase in
gross profit on Military Airworthiness Reviews.
Adjusted EBIT fell by $0.5m to $0.1m (2020: $0.6m) with $0.4m of
additional amortisation of the product development related to
product launches and $0.4m of increased Corporate overhead
offsetting improvements in gross profit. Following the
transitioning of current year reporting to reflect the realignment
of the business along its SBUs a revised level of Corporate
overhead was charged to Technology & Outsourcing.
Restated(1)
2021 2020
--------------------- ----- -----------
Adjusted EBIT(2) 47 605
--------------------- ----- -----------
Share-based payments (47) (35)
--------------------- ----- -----------
Amortisation (289) (314)
--------------------- ----- -----------
EBIT (289) 256
--------------------- ----- -----------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
EBIT fell from a profit of $0.2m in 2020 to a loss of $0.3m in
2021. In addition to the movements discussed above, EBIT included
amortisation of $0.3m in respect of acquired intangible assets and
$0.1m of share-based payment charges.
/ ASSOCIATE INVESTMENTS
US Air
Associate CASL Total
-------------------------------- ---------- ----- ------- -------- ------- -------
USD'000s 2021 2020 2021 2020 2021 2020
-------------------------------- ---------- ----- ------- -------- ------- -------
Adjusted EBIT(1) - 78 (1,491) (3,350) (1,491) (3,272)
-------------------------------- ---------- ----- ------- -------- ------- -------
Adjustments:
-------------------------------- ---------- ----- ------- -------- ------- -------
Exceptional items - Impairment
charge / (reversal) - - 1,491 (3,421) 1,491 (3,421)
-------------------------------- ---------- ----- ------- -------- ------- -------
Exceptional items - Impairments
on non-current assets within
share of results from equity
accounted investments - - - (6,433) - (6,433)
-------------------------------- ---------- ----- ------- -------- ------- -------
Exceptional items - Profit
on disposal of interest
in associates - 7,278 - - - 7,278
-------------------------------- ---------- ----- ------- -------- ------- -------
EBIT - 7,356 - (13,204) - (5,848)
-------------------------------- ---------- ----- ------- -------- ------- -------
(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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
As reported in the 2020 Annual Report and Accounts, the US Air
Associate was sold on 2 March 2020; see Note 17 of the notes to the
financial statements for further details. The $0.1m of Adjusted
EBIT in the prior period represents the Group's share of results
from the US Air Associate prior to disposal.
The Group's investment in China Aircraft Services Limited (CASL)
was reclassified as "held for sale" effective end of May 2021
following a Board decision on the receipt of a $2m offer for its
20% shareholding in CASL. Since reclassification the asset was held
at the fair value of $2m, until it was sold with full and final
cash settlement of $2m received on 31 December 2021. Prior to
reclassification as "held for sale", CASL suffered substantial
losses due to vastly reduced commercial aviation volumes at Hong
Kong airport, impacted by COVID-19. The Group's share of these
amounted to $1.5m at the Adjusted EBIT level.
In the prior year, the disposal of the Group's equity interest
in its US Air Associate resulted in a profit before taxation of
$7.3m.
In the prior year, impairment charges of $9.9m were made against
the equity accounted investment in CASL, reflecting the Group's
assessment of its recoverable amount. This assessment was made
based upon a credible offer of $2m received by another CASL
shareholder for their 20% equity interest in CASL. Following the
sale of the Group's equity interest in CASL, an impairment reversal
equivalent to the Group's share of losses of $1.5m has been
recognised in the current year.
Overall, all non-core associate investments have been sold and
result in associate statutory EBIT improving from a loss of $5.8m
in 2020 to nil in 2021.
/ Branding fees
Total
-------------
USD'000s 2021 2020
--------------------------------------------------------- ----- ------
Adjusted Revenue(1, 2) 3,750 3,750
--------------------------------------------------------- ----- ------
Adjusted Gross Profit(1, 2) 3,750 3,750
--------------------------------------------------------- ----- ------
GP % 100% 100%
--------------------------------------------------------- ----- ------
Adjusted EBIT(1, 2) 3,691 3,733
--------------------------------------------------------- ----- ------
Adjustments
--------------------------------------------------------- ----- ------
Exceptional items - Revenue and gross profit adjustments - 15,500
--------------------------------------------------------- ----- ------
EBIT 3,691 19,233
--------------------------------------------------------- ----- ------
(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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
(2) Adjusted Revenue and Adjusted Gross Profit were only used
for the comparative. 2021 Adjusted Revenue and Adjusted Gross
Profit were the same as Revenue and Gross Profit
Revenue and Gross Profit from branding fees are in line with the
prior year and ended on 2 March 2022. US Air statutory EBIT
decreased from $19.2m in 2020 to $3.7m in 2021 due to $15.5m of
accelerated branding fees on the disposal of the US Air Associate
being reflected in the prior year, which did not recur in 2021.
/ FINANCE REVIEW
Financial summary
Adjusted(1) $m Statutory $m
------------------- -------------------
Restated(1) Restated(1)
Dec-21 Dec-20 Dec-21 Dec-20
---------------------------------- ------ ----------- ------ -----------
Revenue 235.9 182.0 236.1 197.5
---------------------------------- ------ ----------- ------ -----------
Gross Profit 44.7 37.3 44.7 52.8
---------------------------------- ------ ----------- ------ -----------
Gross Profit % 19.0% 20.5% 19.0% 26.7%
---------------------------------- ------ ----------- ------ -----------
EBIT (4.3) (4.8) (7.3) (5.9)
---------------------------------- ------ ----------- ------ -----------
(Loss)/ profit for the year (6.3) (8.6) (8.8) (14.6)
---------------------------------- ------ ----------- ------ -----------
(Loss)/earnings per share (cents) (8.7) (13.6) (12.7) (23.1)
---------------------------------- ------ ----------- ------ -----------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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. APMs also include organic
and constant currency Revenue, Gross Profit and Adjusted EBIT
Restatement
The restatements to the 2020 income statement are limited to a
reclassification from cost of sales to administrative expenses of
$1.1m and various errors to the application of IFRS 16, Leases.
During 2021 a detailed review was conducted of Group leases. New
information came to light from this review indicating that errors
had been made on the implementation of IFRS 16 (1 January 2019) and
in subsequent recognition relating to the treatment of a number of
initial lease obligations at implementation (impacting subsequent
impairments), contractual rental increases, computational errors on
foreign exchange, identification of lease-related payments and the
length of lease used for ROU assets and liabilities and related
leasehold improvements. 2020 opening balances, results for the
year, other comprehensive income, balance sheet amounts and
cashflows have been restated to correct these errors. The
restatement has reduced the consolidated loss for 2020 by $0.1m,
increased consolidated net assets at 31 December 2020 by $2.5m and
resulted in a $1.7m increase in net cash generated by operations
with an equivalent reduction in lease payments on the consolidated
cash flow statement. Refer to Note 2 of the notes to the financial
statements for further details.
Revenue Bridge
$m
----------------------------------- ------
Revenue - 2020 197.5
Rebase for FX 7.3
----------------------------------- ------
Rebased Revenue - 2020 204.8
Branding fee (15.5)
Business Aviation MRO US 40.7
Business Aviation excluding MRO US 0.7
Special Mission 5.3
Technology & Outsourcing (0.1)
----------------------------------- ------
Revenue - 2021 235.9
----------------------------------- ------
-- One-off accelerated branding fees of $15.5m benefitted the prior year
-- Significant expansion of the Business Aviation's US
maintenance operations via the acquisition of Jet East as well as
revenue growth from new facilities and from the legacy US
maintenance operations
-- Business Aviation excluding MRO US benefits from a
significant improvement in FBO activity levels and increased
Charter activity which is partially offset by underperformance on
maintenance operations
-- Special Mission includes the impact of increased flying hours
and the related costs rechargeable to customers, increased work
with ad-hoc customers and the full year effect of air ambulance
service contracts for the Government of Jersey and the Government
of Guernsey which were acquired in the middle of the prior year, as
shown in Note 6 of the notes to the financial statements
Adjusted EBIT(2) Bridge
$m
---------------------------------------------------------------- ------
Adjusted EBIT - 2020 Restated(1) (4.8)
---------------------------------------------------------------- ------
Increase in gross profit 7.5
---------------------------------------------------------------- ------
Increase in other administrative expenses (10.3)
---------------------------------------------------------------- ------
Decrease in impairment of financial assets 3.8
---------------------------------------------------------------- ------
Increase in depreciation and amortisation (2.3)
---------------------------------------------------------------- ------
Increase due to reduced losses from equity accounted associates 1.8
---------------------------------------------------------------- ------
Adjusted EBIT - 2021 (4.3)
---------------------------------------------------------------- ------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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.
-- The impact of the movement in FX rates at an Adjusted EBIT
level is not significant; refer to Note 6 of the notes to the
financial statements for further details
-- The growth in Gross Profit is covered in further detail in
the operational performance review
-- Administrative expenses increased following the acquisition
of Jet East ($8.3m) together with net growth across other business
units and services lines
-- A significant loss allowance for impairment of financial
assets of $3.8m arose in the prior year and did not recur
-- Depreciation and amortisation increased primarily due to the
full year effect of aircraft bought in the middle of the prior year
($0.9m), higher year on year amortisation of the internally
developed software asset within T&O ($0.4m) and the acquisition
of Jet East ($0.5m)
-- Losses from associates are down following the disposal of the
US Air Associate and the investment in CASL
EBIT Bridge
$m
--------------------------------------------------------------------------- ------
EBIT - 2020 Restated(1) (5.9)
--------------------------------------------------------------------------- ------
Items impacting Adjusted EBIT 0.5
Adjusting items
-items in other administrative expenses comprising:
- Decrease in exceptional transaction costs 0.2
- Decrease in exceptional integration and business re-organisation costs 0.1
- Decrease in exceptional legal costs 0.4
- Decrease in equity-settled share-based payment expense 0.3
- Increase in other long-term employee benefits (1.8)
- Increase in other income 1.6
- Decrease in accelerated branding fees (15.5)
- Increase in acquired intangible amortisation (0.6)
- Decrease in profit on disposal of interest in associates (7.3)
- Decrease in impairment reversal of financial assets (0.6)
- Decrease in impairment of right-of-use asset 4.6
- Decrease in impairment of assets under construction 4.6
- Decrease in impairment of goodwill and intangible 0.8
- Decrease in impairment of non-current assets within associates 6.4
- Decrease in impairment of investment in associate 4.9
EBIT - 2021 (7.3)
--------------------------------------------------------------------------- ------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
-- Transaction cost of $0.5m (2020: $0.7m) relating to Jet East acquisition cost in both years
-- Integration and business re-organisation costs in the current
year included $0.4m of Jet East severance costs associated with
integration, partially offset by $0.3m income upon release of a
direct closure costs provision at Fairoaks Airport. In addition,
$0.2m of redundancy costs incurred in the prior year did not
recur.
-- Lower legal costs in 2021 compared to 2020 in respect of legacy litigation matters
-- $0.3m of reduced equity-settled shared-based payment charges
following forfeitures, leavers and re-issues
-- The $1.8m increase in other long-term employee benefits
driven by a 2021 charge relating to a long-term incentive plan as
part of the Jet East acquisition
-- $1.6m other income upon release of lease obligation at Fairoaks Airport in the current year
-- $15.5m of accelerated branding fees were recognised in the
prior period as an Adjusting item following the disposal of the US
Air Associate and the settlement of existing contractual
arrangements (see Note 17 for further details on the disposal)
-- Amortisation of acquired intangibles increased by $0.6m due to the acquisition of Jet East
-- $7.3m profit before taxation on disposal of the US Air
Associate was recognised in the prior year (see Note 17 for further
details on the disposal)
-- The prior year $0.6m impairment reversal of financial assets
previously impaired through exceptional items did not recur
-- In the current year, impairment of $1.9m to the additional
right of use asset in relation to Sharjah and $1.5m impairment
reversal of charges previous recognised in relation to CASL. Other
movements in impairment are due to prior year items that did not
recur and are shown in further detail in Note 6 of the notes to the
financial statements
Impairments
As previously reported, the Group had secured a 25-year ground
lease and had commenced the development of a Business Aviation
Centre (BAC) at Sharjah International airport in the UAE.
With the project having been placed on hold in 2020 pending a
review of the impact of the pandemic on its viability, the Group
recognised a total impairment charge of $11.2m in its 2020
financial statements, $6.6m in respect of the right of use asset
arising from the ground lease and $4.6m in respect of the carrying
value of the assets under construction.
Following its decision to recommence the development of the BAC,
the Company is now in the process of securing the necessary funding
for the project. Whilst the Group is in advanced discussions with
investors regarding the funding of this project, the Board
considers that it would be inappropriate to reverse these
impairments until the full funding has been contractually
secured.
In parallel with its decision to recommence the development, the
Group took the opportunity to negotiate a 10-year extension to the
term of the ground lease, which significantly enhances the
viability and value of the project. However, until the impairment
charge taken in respect of the original lease is reversed, the
Group is required to further impair the $1.9m asset in use value
created by this lease extension.
The Board remains confident that the Group is making progress in
securing the necessary funding, at which time all these
impairments, which amount to $13.1m, may reverse.
Other than the above and following a diligent review of the
carrying value of investments, I am pleased to report that the
Board does not believe there is any need for any other
impairments.
Finance expense
Net finance expense of $3.5m (2020 Restated: $2.3m) includes
$0.6m (2020: $1.5m) of finance income largely arising from
financial assets related to the disposal of the US Air Associate;
refer to Note 8 for further details. As a result of early
settlement of the deferred consideration on 20 July 2021 (refer to
Note 17 for more details), and the timing of the disposal in 2020,
finance income was lower in the current year. Foreign currency
movements were a net loss of $0.4m (2020: $0.2m net gain).
Taxation
There is a statutory taxation credit for the year of $2.0m
(2020: charge of $6.5m), which reflects the recognition of an
increased deferred tax asset in the current year based on projected
future taxable profits in a five-year Strategic Plan. Partially
offsetting this recognition, an uncertain tax provision of $0.3m
has been recognised based on a penalty issued. While the penalty
has been disputed by the Group, at the time of reporting a remedy
has not been granted. The adjusted taxation credit for the year is
$1.5m (2020: charge of $1.5m); refer to Note 10 for further
details.
EPS
Shares in issue increased to 63.7m (2020: 63.6m) following the
issue of shares in the year. The average share price for the year
ended 31 December 2021 was 39.2 pence, which is marginally higher
than the exercise price of some outstanding options, however;, the
effect of including these shares would reduce the loss per share
and adjusted loss per share and therefore no dilutive earnings per
share is shown. Basic Statutory EPS reflects reduced loss per share
of 12.7 cents (2020 Restated: 23.1 cents).
Net debt and cash flow movements
Restated(1)
December December
2021 2020
------------------------------------------------------------------------------ -------- -----------
Adjusted EBIT (2) (4.3) (4.8)
------------------------------------------------------------------------------ -------- -----------
Add: Adjusted depreciation & amortisation in cost of sales (Note 5) 6.5 11.1
------------------------------------------------------------------------------ -------- -----------
Add: Adjusted depreciation & amortisation in administrative expenses (Note 5) 9.6 7.3
------------------------------------------------------------------------------ -------- -----------
Adjusted EBITDA(2) 11.8 13.6
------------------------------------------------------------------------------ -------- -----------
Less: Loan forgiveness (Note 27) - (4.8)
------------------------------------------------------------------------------ -------- -----------
Less: non-cash lease credit recognised (Note 27) (0.1) (0.3)
------------------------------------------------------------------------------ -------- -----------
Less: Share of losses/profits of associates (Note 27) 1.5 3.3
------------------------------------------------------------------------------ -------- -----------
Adjusted EBITDA after excluding non-cash items(2) 13.2 11.8
------------------------------------------------------------------------------ -------- -----------
Working capital:
------------------------------------------------------------------------------ -------- -----------
Add: Working capital (22.2) 9.4
------------------------------------------------------------------------------ -------- -----------
Add: Capital portion of promissory note on disposal of US Air Associate 17.5 2.5
------------------------------------------------------------------------------ -------- -----------
Add: Accelerated branding fee not recognised in Adjusted EBIT - 15.5
------------------------------------------------------------------------------ -------- -----------
Add: Exceptional items (0.8) (0.7)
------------------------------------------------------------------------------ -------- -----------
Working capital (5.5) 26.7
------------------------------------------------------------------------------ -------- -----------
Cash generated by operations (Note 27) 7.7 38.5
------------------------------------------------------------------------------ -------- -----------
Add: Tax (Note 27) (2.5) (3.1)
------------------------------------------------------------------------------ -------- -----------
Net cash flow from operating activities (Note 27) 5.2 35.4
------------------------------------------------------------------------------ -------- -----------
Lease payments (9.6) (17.7)
------------------------------------------------------------------------------ -------- -----------
Capital expenditure (5.9) (27.8)
------------------------------------------------------------------------------ -------- -----------
Acquisition of business, net of cash acquired (8.2) (1.5)
------------------------------------------------------------------------------ -------- -----------
Proceeds on disposal of associate 2.0 9.9
------------------------------------------------------------------------------ -------- -----------
Net interest received/(paid) 0.4 (0.3)
------------------------------------------------------------------------------ -------- -----------
Net proceeds from borrowings 10.2 9.5
------------------------------------------------------------------------------ -------- -----------
Net cash used in investing and financing activities (11.1) (27.9)
------------------------------------------------------------------------------ -------- -----------
Increase/(decrease) in cash (5.9) 7.5
------------------------------------------------------------------------------ -------- -----------
Cash at the beginning of year 16.1 8.5
------------------------------------------------------------------------------ -------- -----------
Effect of foreign exchange rates - 0.1
------------------------------------------------------------------------------ -------- -----------
Cash at end of the period 10.2 16.1
------------------------------------------------------------------------------ -------- -----------
Borrowings (67.1) (53.2)
------------------------------------------------------------------------------ -------- -----------
Obligations under leases (48.0) (46.1)
------------------------------------------------------------------------------ -------- -----------
Net debt at the end of year(2) (104.9) (83.2)
------------------------------------------------------------------------------ -------- -----------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) 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 reduction in the net cash inflow from operating activities
has been driven by:
-- Adjusted EBITDA lower by $1.8m at $11.8m (2020: $13.6m),
offset by a net $3.2m reduction in non-cash income or expenses
-- $0.1m of additional spend on exceptional items, primarily
related to severance costs as part of the integration of Jet East
and the closure of operations in Saudi Arabia, partially offset by
reduced legal costs
-- $15.5m of accelerated branding fees in the prior period not
recognised within Adjusted EBIT but within working capital
-- $17.5m capital portion of promissory note on disposal of US
Air Associate received in the period
-- Reduction in the positive contribution from underlying
working capital, which is in part due to reduced government support
in the period, start-up losses following the commencement of base
maintenance operations at Millville and Las Vegas and a repayment
of deferred VAT from 2020 in 2021
-- Lease payments reduced by $8.1m on the prior period due to
timing of aircraft lease payments, partially offset by the addition
of Jet East lease payments of $0.8m
-- Capital expenditure includes $2.6m of internally developed
software arising from myairops software development and $3.3m
tangible capex, of which $1.0m is in Business Aviation US for base
maintenance expansion to fulfil demand from one of the world's
largest private jet operators, $0.7m is replacement capex in
Business Aviation US, and $0.6m is for an aircraft engine used as a
back-up on a Special Mission contract
-- Net cash payment on acquisition of Jet East of $8.2m, which
includes $7.7m initial consideration less $0.1m cash acquired on
acquisition and $0.6m of transaction costs
-- $2.0m proceeds on disposal of the associate investment in
CASL Associate. Refer to Note 17 for further details on the
disposal
-- Net interest received includes $0.65m interest received on
the $20.0m US Air Associate promissory note prior to the
accelerated repayment, $0.4m of interest received due to late
customer payments and $0.7m of interest paid on borrowings
-- Net proceeds from borrowings include $10m drawn on the RCF to
fund the acquisition of Jet East, of which $2.65m was used to repay
borrowing assumed on acquisition. The remaining net increase in the
RCF was to manage the net working capital cash outflow
-- Net debt increased by $20.5m to $105.8m (2020: $85.3m)
primarily due to the acquisition of Jet East and investment in the
further expansion of the Business Aviation US via start-up
locations for base maintenance facilities and capability for
anticipated increases in activity levels
Liquidity
The group liquidity remains with $10.2m (2020: $16.1m) of cash
and $12.1m (2020: $24.7m) of its $50m RCF undrawn as at 31 December
2021.
Net debt, inclusive of $48.0m (2020: $46.1m) of lease
obligations, increased to $104.9m (2020: $83.2m), resulting from
the acquisition and subsequent organic strategic investments.
As at 30 April 2022 cash balances were $14.2m (2020: $12.1m) in
addition to RCF headroom of $20.3m (2020: $12.1m).
Credit Facilities
The Group currently benefits from two credit facilities provided
by HSBC, a $50m RCF and a GBP20m term loan which mature in November
2022 and January 2023 respectively. Following initial engagement,
HSBC have indicated their willingness to renew the facilities and
have provided indicative terms which are currently under
negotiation. Whilst the refinancing has not been concluded, the
Board is confident that it will secure the facilities necessary to
support its on-going operations but recognises that this may be on
a higher debt servicing cost.
In parallel with its discussions with HSBC, the Company is
actively pursuing alternative and/or additional credit facilities
aimed specifically at meeting the Group's asset-based financing
needs relating to aircraft, real estate and infrastructure
projects.
Market updates will be provided when binding facilities are
secured.
Dividend
The Board does not recommend a dividend for 2021 (2020: nil
pence per share). The Company intends to restore the Company's
distributable reserves when practicable which may involve
extracting dividends from subsidiaries amongst other steps.
Litigation
Following the litigation update provided in the Company's 2020
Annual Report and 2021 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.
Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated that
they do not intend to stand for re-election at the forthcoming
Annual General Meeting and the Audit Committee has commenced a
process to appoint another audit firm in due course.
/ CONSOLIDATED INCOME STATEMENT
/ FOR THE YEARED 31 DECEMBER 2021
Year ended 31 December
Year ended 31 December 2020
2021 Restated(2)
----------------------------------- --------------------------------
Adjusting Adjusted Statutory Adjusting Adjusted
Statutory
result items(1) result(1) result items(1) result(1)
Note $'000 $'000 $'000 $'000 $'000 $'000
---------------------------------------------- ---- ---------- ---------- ----------- --------- --------- ----------
Continuing operations:
Revenue 4 235,909 - 235,909 197,503 (15,500) 182,003
Cost of sales (191,178) - (191,178) (144,725) - (144,725)
---------------------------------------------- ---- ---------- ---------- ----------- --------- --------- ----------
Gross profit 4 44,731 - 44,731 52,778 (15,500) 37,278
* Other administrative expenses (40,906) 3,047 (37,859) (29,753) 2,075 (27,678)
* Impairment of right-of-use assets 23 (1,911) 1,911 - (6,544) 6,544 -
* Impairment of acquired intangibles 6 - - - (833) 833 -
* Impairment of assets under construction 6 - - - (4,609) 4,609 -
* Depreciation and amortisation 5 (10,813) 1,200 (9,613) (7,968) 614 (7,354)
* Impairment of financial assets 19 21 (63) (42) (3,083) (709) (3,792)
Total administrative
expenses (53,609) 6,095 (47,514) (53,790) 13,966 (38,824)
Other income 6 1,626 (1,626) - - - -
---------------------------------------------- ---- ---------- ---------- ----------- --------- --------- ----------
Operating loss (7,252) 4,469 (2,783) (12) (1,534) (1,546)
Share of results
from equity accounted
investments 17 (1,491) - (1,491) (9,705) 6,433 (3,272)
Reversal/(impairment)
of equity accounted
investments 17 1,491 (1,491) - (3,421) 3,421 -
Profit on disposal
of interest in associates 17 - - - 7,278 (7,278) -
Earnings before
interest and taxation 4,5 (7,252) 2,978 (4,274) (5,860) 1,042 (4,818)
Finance income 8 617 - 617 1,535 - 1,535
Finance expense 9 (4,110) - (4,110) (3,817) - (3,817)
---------------------------------------------- ---- ---------- ---------- ----------- --------- --------- ----------
Loss before tax (10,745) 2,978 (7,767) (8,142) 1,042 (7,100)
Taxation 10 1,980 (471) 1,509 (6,496) 5,017 (1,479)
---------------------------------------------- ---- ---------- ---------- ----------- --------- --------- ----------
Loss for the year (8,765) 2,507 (6,258) (14,638) 6,059 (8,579)
Attributable to:
Owners of the Company (8,062) 2,507 (5,555) (15,123) 6,059 (8,624)
Non-controlling interests 26 (703) - (703) 45 - 45
EPS attributable
to the equity holders
of the parent
basic 11 (12.7c) 4.0c (8.7c) (23.1c) 9.5c (13.6c)
diluted 11 (12.7c) 4.0c (8.7c) (23.1c) 9.5c (13.6c)
---------------------------------------------- ---- ---------- ---------- ----------- --------- --------- ----------
(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.
(2) Restatements are detailed in Note 2 of the notes to the financial statements.
/ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
/ FOR THE YEARED 31 DECEMBER 2021
Year
Year ended
ended 2020
2021 Restated(1)
Note $'000 $'000
---------------------------------------------------------- ---- ------- -------------
Loss for the year (8,765) (14,638)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations (307) 1,184
Share of other comprehensive income of associates 17 - 92
Other comprehensive income/(loss) ( 307) 1,276
---------------------------------------------------------- ---- ------- -------------
Total comprehensive loss for the year (9,072) (13,362)
---------------------------------------------------------- ---- ------- -------------
Total comprehensive income/(loss) is attributable to:
Owners of the Company (8,369) (13,407)
Non-controlling interest (703) 45
---------------------------------------------------------- ---- ------- -------------
(9,072) (13,362)
---------------------------------------------------------- ---- ------- -------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements.
/ CONSOLIDATED BALANCE SHEET
/ COMPANY NUMBER 07264678
/ AS AT 31 DECEMBER 2021
2020 As at 1 January 2020 Restated(1) $'000
2021 Restated(1)
Note $'000 $'000
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Non-current assets
Goodwill 13 22,236 22,490 21,750
Other intangible assets 14 15,654 10,329 10,148
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Total intangible assets 37,890 32,819 31,898
Property, plant and equipment 15 53,489 54,669 35,324
Right-of-use assets 23 36,383 35,415 53,291
Investments accounted for using equity method 17 - 2,000 15,112
Trade and other receivables 19 291 13,030 4,221
Deferred tax asset 22 3,918 - 2,252
--------------------------------------------- ---- --------- ------------- ---------------------------------------
131,971 137,933 142,098
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Current assets
Assets held for sale 17 - - 2,598
Inventories 18 8,915 5,978 7,271
Trade and other receivables 19 63,808 49,359 76,078
Current tax receivable 10 27 1,280 1,146
Cash and cash equivalents 10,243 16,136 8,463
--------------------------------------------- ---- --------- ------------- ---------------------------------------
82,993 72,753 95,556
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Total assets 214,964 210,686 237,654
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Current liabilities
Trade and other payables 24 (39,342) (38,085) (51,624)
Current tax liabilities 10 (574) (15) -
Obligations under leases 23 (7,970) (8,566) (18,560)
Provisions 30 (772) (679) (521)
Borrowings 21 (40,175) (1,000) (848)
Deferred revenue 32 (8,880) (12,676) (2,707)
Deferred consideration 20 (290) - -
--------------------------------------------- ---- --------- ------------- ---------------------------------------
(98,003) (61,021) (74,260)
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Total assets less current liabilities 116,961 149,665 163,394
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Non-current liabilities
Borrowings 21 (26,979) (52,197) (45,394)
Deferred revenue 33 (2) (691) (4,382)
Provisions 30 (348) (774) (594)
Obligations under leases 23 (40,032) (37,573) (43,084)
Deferred tax liabilities 22 - (2,109) (819)
Trade and other payables 24 (1,821) - -
Deferred consideration 20 (256) - -
--------------------------------------------- ---- --------- ------------- ---------------------------------------
(69,438) (93,344) (94,273)
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Total liabilities (167,441) (154,365) (165,411)
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Net assets 47,523 56,321 69,121
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Shareholders' equity
Share capital 25 954 953 953
Share premium 25 63,502 63,473 63,473
Other reserves 25 34,997 35,360 34,798
Foreign exchange reserve (24,722) (24,415) (25,691)
Accumulated losses (27,301) (19,846) (5,163)
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Total shareholders' equity 47,430 55,525 68,370
Non-controlling interest 26 93 796 751
--------------------------------------------- ---- --------- ------------- ---------------------------------------
Total equity 47,523 56,321 69,121
--------------------------------------------- ---- --------- ------------- ---------------------------------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
The financial statements were approved by the Board of Directors
and authorised for issue on 27 May 2022 and are signed on their
behalf by:
Marwan Khalek
Director
/ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
/ FOR THE YEARED 31 DECEMBER 2021
Foreign
Share Other exchange Total Non-
Accumulated shareholders' controlling Total
premium reserves reserve profit/(losses) equity interest equity
Share
capital
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- ------- --------- ---------- ---------- --------------- --------------- ------------- --------
Balance at 1
January
2020, as
reported 953 63,473 34,798 (29,179) (5,062) 64,983 751 65,734
Restatement(1) - - - 3,488 (101) 3,387 - 3,387
--------------- ------- --------- ---------- ---------- --------------- --------------- ------------- --------
Balance at 1
January
2020, restated 953 63,473 34,798 (25,691) (5,163) 68,370 751 69,121
(Loss)/profit
for
the year,
restated - - - - (14,683) (14,683) 45 (14,638)
Other
comprehensive
income,
restated(1) - - - 1,276 - 1,276 - 1,276
--------------- ------- --------- ---------- ---------- --------------- --------------- ------------- --------
Total
comprehensive
(loss)/profit
for
the year,
restated(1) - - - 1,276 (14,683) (13,407) 45 (13,362)
Cost of
share-based
payments (Note
31) - - 562 - - 562 - 562
Balance at
31 December
2020,
restated(1) 953 63,473 35,360 (24,415) (19,846) 55,525 796 56,321
Loss for the
year - - - - (8,062) (8,062) (703) (8,765)
Other
comprehensive
expenditure - - - (307) - (307) - (307)
--------------- ------- --------- ---------- ---------- --------------- --------------- ------------- --------
Total
comprehensive
loss for the
year - - - (307) (8,062) (8,369) (703) (9,072)
Shares issued
in the
year 1 29 - - - 30 - 30
Cost of
share-based
payments (Note
31) - - 244 - - 244 - 244
Transfer for
lapsed
options(2) - - (607) - 607 - - -
--------------- ------- --------- ---------- ---------- --------------- --------------- ------------- --------
Balance at
31 December
2021 954 63,502 34,997 (24,722) (27,301) 47,430 93 47,523
--------------- ------- --------- ---------- ---------- --------------- --------------- ------------- --------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) Value of vested options forfeited by leavers as per Note 31
/ CONSOLIDATED CASH FLOW STATEMENT
/ FOR THE YEARED 31 DECEMBER 2021
Year
Year ended
ended 2020
2021 Restated(1)
Note $'000 $'000
------------------------------------------------------------- ---- -------- -------------
Net cash generated by operating activities 27 5,225 35,344
------------------------------------------------------------- ---- -------- -------------
Cash flows from investing activities
Purchases of property, plant and equipment 15 (3,379) (25,298)
Purchases of intangibles 14 (2,604) (2,521)
Proceeds on disposal of investments and assets held for sale 17 2,000 9,954
Interest received 1,061 430
Acquisition of business, net of cash acquired 12 (8,146) (1,544)
------------------------------------------------------------- ---- -------- -------------
Net cash used in investing activities (11,068) (18,979)
------------------------------------------------------------- ---- -------- -------------
Cash flows from financing activities
Lease payments 23 (9,567) (17,683)
Interest paid (709) (660)
Proceeds from borrowings 28 22,574 33,987
Repayment of borrowings 28 (12,361) (24,471)
Net cash used in from financing activities (63) (8,827)
------------------------------------------------------------- ---- -------- -------------
Net (decrease)/increase in cash and cash equivalents (5,906) 7,538
Cash and cash equivalents at the beginning of year 16,136 8,463
Effect of foreign exchange rates 13 135
------------------------------------------------------------- ---- -------- -------------
Cash and cash equivalents at the end of year 10,243 16,136
------------------------------------------------------------- ---- -------- -------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
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 YEARED 31 DECEMBER 2021
1. General information
Gama Aviation Plc (the "Company") is a public limited company
(company number 07264678) whose shares are listed on the
Alternative Investment Market ('AIM') of the London Stock Exchange
under the ticker symbol GMAA and is incorporated and domiciled in
England in the United Kingdom. The address of the registered office
is 1(st) Floor, 25 Templer Avenue, Farnborough, Hampshire, England,
GU14 6FE.
2. Basis of preparation and significant accounting policies
Statement of compliance
These financial statements 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.
Basis of preparation
The audited results are derived from the full financial
statements for the year ended 31 December 2021, 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 2021 and 31 December 2020.
The statutory accounts for the year ended 31 December 2021 will be
delivered to the Registrar of Companies shortly. The statutory
accounts for the year ended 31 December 2020 have been filed with
the Registrar of Companies. The auditor's reports on the Group's
statutory accounts for the years ended 31 December 2021 and 2020
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 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 nor the
long-term viability of the Group.
UK-adopted international accounting standards
On 31 December 2020 EU-adopted IFRS was brought into UK law and
became UK-adopted international accounting standards, with future
changes to IFRS being subject to endorsement by the UK Endorsement
Board. The consolidated financial statements have transitioned to
UK-adopted international accounting standards.
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable.
Adoption of new and amended standards adopted by the Group
The Group has applied the following standards and amendments for
the first time for its annual reporting period commencing 1 January
2021:
-- Amendments to IFRS 16 - COVID-19 Related Rent Concessions
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -
Interest Rate Benchmark Reform Phase 2
The amendments listed above have not have any impact on the
amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for
31 December 2021 reporting periods and have not been early
adopted by the Group. These amendments are
not expected to have a material impact.
Restatement
The 2020 figures have been restated to reflect the
following:
-- During 2021 a detailed review was conducted of Group leases.
New information came to light from this review indicating that
errors had been made on the implementation of IFRS 16 (1 January
2019) and in subsequent recognition relating to the treatment of a
number of initial lease obligations at implementation (impacting
subsequent impairments), contractual rental increases,
computational errors on foreign exchange, identification of
lease-related payments and the length of lease used for ROU assets
and liabilities and related leasehold improvements. 2020 opening
balances, results for the year, other comprehensive income, balance
sheet amounts and cashflows have been restated to correct these
errors.
-- A similar review and reconciliation was also conducted of
foreign exchange reserve balances and consolidation journals
relating to investments in subsidiaries and associated impairments.
An error was found in accounting for working capital and foreign
exchange reserve balances in 2018 as a result of which group
liabilities were overstated. This resulted in changes to 2020
opening balances and working capital movements.
-- Reclassify of compliance and assurance costs previously
included in cost of sales to administrative costs, aligning a
previous inconsistency.
In addition, a 2020 revenue disclosure in Note 4 has been
restated to reclassify revenue of $5,661k relating to the branding
fee and other contracts as recognised over time rather than at a
point in time following a review.
The above restatements have impacted the consolidated income
statements, consolidated statements of comprehensive income,
balance sheets and consolidated cash flow statements as
follows:
Investment
As previously and foreign Compliance
reported IFRS 16 exchange costs Restated
$'000 $'000 $'000 $'000 $'000
2020 consolidated
income statement:
Revenue 197,503 - - - 197,503
Cost of sales (145,468) (318) - 1,061 (144,725)
------------------------- -------------- -------- ------------- ----------- ----------
Gross Profit 52,035 (318) - 1,061 52,778
------------------------- -------------- -------- ------------- ----------- ----------
Adjusted administrative
expenses (37,586) (177) - (1,061) (38,824)
Adjusting items
in administrative
expenses(1) (14,435) 469 - - (13,966)
------------------------- -------------- -------- ------------- ----------- ----------
Administrative
expenses (52,021) 292 - (1,061) (52,790)
------------------------- -------------- -------- ------------- ----------- ----------
Operating profit/(loss) 14 (26) - - (12)
-------------- -------- ------------- ----------- ----------
Adjusted EBIT(1) (4,323) (495) - - (4,818)
EBIT (5,834) (26) - - (5,860)
Finance income 1,535 - - - 1,535
Finance expense (3,940) 123 - - (3,817)
------------------------- -------------- -------- ------------- ----------- ----------
Loss before tax (8,239) 97 - - (8,142)
Tax (6,496) - - - (6,496)
------------------------- -------------- -------- ------------- ----------- ----------
Loss after tax (14,735) 97 - - (14,638)
------------------------- -------------- -------- ------------- ----------- ----------
Attributable to
owners (14,780) 97 - - (14,683)
------------------------- -------------- -------- ------------- ----------- ----------
2020 consolidated
other comprehensive
income:
Loss for the year (14,735) 97 - - (14,638)
------------------------- -------------- -------- ------------- ----------- ----------
Exchange differences
on translation
of foreign operations 2,194 (1,010) - - 1,184
Share of other
comprehensive
income of associates 92 - - - 92
------------------------- -------------- -------- ------------- ----------- ----------
Other comprehensive
income 2,286 (1,010) - - 1,276
------------------------- -------------- -------- ------------- ----------- ----------
Total comprehensive
loss for the year (12,449) (913) - - (13,362)
------------------------- -------------- -------- ------------- ----------- ----------
Attributable to
owners (12,494) (913) - - (13,407)
------------------------- -------------- -------- ------------- ----------- ----------
Consolidated
balance sheet
1 January 2020:
------------------------- -------------- -------- ------------- ----------- ----------
Right-of-use assets 52,315 976 - - 53,291
------------------------- -------------- -------- ------------- ----------- ----------
Trade and other
receivables 72,956 - 3,122 - 76,078
------------------------- -------------- -------- ------------- ----------- ----------
Trade and other
payables (52,353) 729 - - (51,624)
------------------------- -------------- -------- ------------- ----------- ----------
Obligations under
leases (60,204) (1,440) - - (61,644)
------------------------- -------------- -------- ------------- ----------- ----------
Net assets and
Total equity 65,734 265 3,122 - 69,121
------------------------- -------------- -------- ------------- ----------- ----------
Accumulated profit
and loss reserve (5,062) (101) - - (5,163)
------------------------- -------------- -------- ------------- ----------- ----------
Foreign exchange
reserve (29,179) 366 3,122 - (25,691)
------------------------- -------------- -------- ------------- ----------- ----------
Total shareholders'
equity 64,983 265 3,122 - 68,370
------------------------- -------------- -------- ------------- ----------- ----------
Net debt(1) (97,983) (1,440) - - (99,423)
------------------------- -------------- -------- ------------- ----------- ----------
Consolidated
balance sheet
31 December 2020:
------------------------- -------------- -------- ------------- ----------- ----------
Property, plant
and equipment 54,974 (305) - - 54,669
------------------------- -------------- -------- ------------- ----------- ----------
Right-of-use assets 38,022 (2,607) - - 35,415
------------------------- -------------- -------- ------------- ----------- ----------
Trade and other
payables (40,074) (1,133) 3,122 - (38,085)
------------------------- -------------- -------- ------------- ----------- ----------
Obligations under
leases (49,492) 3,353 - - (46,139)
------------------------- -------------- -------- ------------- ----------- ----------
Provisions for
liabilities (1,497) 44 - - (1,453)
------------------------- -------------- -------- ------------- ----------- ----------
Net assets and
Total equity 53,847 (648) 3,122 - 56,321
------------------------- -------------- -------- ------------- ----------- ----------
Accumulated profit
and loss reserve (19,842) (4) - - (19,846)
------------------------- -------------- -------- ------------- ----------- ----------
Foreign exchange
reserve (26,893) (644) 3,122 - (24,415)
------------------------- -------------- -------- ------------- ----------- ----------
Total shareholders'
equity 53,051 (648) 3,122 - 55,525
------------------------- -------------- -------- ------------- ----------- ----------
Net debt(1) (86,553) 3,353 - - (83,200)
------------------------- -------------- -------- ------------- ----------- ----------
2020 consolidated
cash flow statement:
Net cash generated
by operations 33,683 1,661 - - 35,344
Lease payments (16,022) (1,661) - - (17,683)
------------------------- -------------- -------- ------------- ----------- ----------
Finance costs 3,940 (123) - - 3,817
Depreciation of
property, plant
and equipment 4,809 (36) - - 4,773
Depreciation of
right-of-use assets
in administrative
expenses 540 190 - - 730
Depreciation of
right-of-use assets
in cost of sales 10,708 394 - - 11,102
Impairment of
right-of-use asset 7,013 (469) - - 6,544
Rent free credit - (259) - - (259)
Decrease in payables (12,050) 1,867 - - (10,183)
(1) Refer to Note 6 of the notes to the financial statements for
details of alternative performance measures
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 Performance Review and Finance
Review.
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 30 June 2023. The Directors have also
considered the outlook for the business beyond 30 June 2023 based
upon its five-year Strategic Plan. The analysis takes account of
the following amongst other relevant considerations:
-- The $50.0m committed revolving credit facility (RCF), of
which $12.1m (2020: $24.7m) is undrawn at the reporting date and a
GBP20.0m (2020: GBP20.0m) term loan;
-- The one-off and non-recurring nature of the receipt in 2021
relating to the remaining balance of the US Air Associate disposal
proceeds of $17.5m and the related tax payment of $3.1m;
-- The acquisition of Jet East, which resulted in additional
working capital consumption in 2021 due to operational
inefficiencies at start-up locations;
-- Cash at 31 December 2021 of $10.2m (2020: $16.1m) and cash at
28 February 2022 of $16.6m; and
-- Working capital levels and the conversion of profits into cash flows
The borrowing facilities have no covenants and fall due for
repayment on 14 November 2022 and 31 January 2023 respectively. The
RCF is settled and drawn down on a cyclical basis. It falls due for
repayment within twelve months of the reporting date and has been
presented in current liabilities. The term loan falls due for
repayment over twelve months from the reporting date and has been
presented in non-current liabilities. The RCF and term loan are
held in the Company.
The Company and Group is well advanced in its negotiations with
HSBC regarding refinancing and the Directors are confident that
these facilities will be renewed at the same levels, albeit based
on draft term sheets at a higher finance cost. However, at the time
of approving the Annual Report, the renewal of the facilities has
not been concluded. Discussions with alternative potential lenders
remain at too early a stage to be considered.
The key assumptions in the Board approved base case projections
relate to revenue performance and working capital cash flows and
the Directors have included what they consider to be a cautious
level of revenue performance and working capital. A severe but
plausible downside scenario has also been assessed, which reflects
operating cash flows in the first half of 2022 remaining no better
than 2021 operating cash flows after excluding significant one-off
receipts and payments. In the Group's base case forecasts, the
Group maintains a minimum of $26.8m headroom against its cash and
available facilities (assuming renewal of existing facilities). In
the Group's downside scenario, the Group maintains a minimum of
$16.8m headroom against its cash and available facilities before
accounting for any significant management action to improve cash
flows via curtailing operating cost, deferring capital expenditure
and exploring other financing arrangements for some of its fixed
asset base.
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.
Therefore, after making appropriate enquiries and considering
the uncertainties described above, the Directors consider that it
is appropriate to adopt the going concern basis in preparing the
Company and Group financial statements. However, as the renewal of
borrowing facilities with HSBC has not been concluded at the time
of approving the financial statements there is a risk that, if
these facilities were not renewed at the proposed levels, and the
Company and Group were not be able to secure equivalent levels of
funding from alternative facilities, loans and asset-backed
financing, the Company and the Group may not be able to meet its
liabilities as they fall due.
As a result, there is a material uncertainty that may cast
significant doubt about the Company and the Group's ability to
continue as a going concern. The financial statements do not
include any adjustments that would result if the Company or Group
were unable to continue as a going concern.
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, segmental measures
are calculated in accordance with Group measures.
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 consider
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:
(a) 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 re-organisation - legal and
professional fees and non-recurring operating costs arising from
significant acquisition integration or business re-organisation
activities. Non-recurring operating costs means those costs that
are related to a specific integration or re-organisation 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 that are non-trading in nature
(b) 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.
(c) Equity-settled 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.
(d) Other long-term employee benefits
Other long-term employee benefits agreed as part of the Jet East
acquisition and contractually linked to ongoing employment as well
as business performance are accrued over the period in which the
related services are received and are recorded an Adjusting
item.
(e) 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.
Significant 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.
(a) Revenue from contracts with customers
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 following
sources:
-- Business Aviation:
o Managed aircraft contracts and specific air services
o Charter services
o Maintenance of aircraft
o Fixed base operations (FBO)
-- Special Mission:
o Mission solutions and expertise with aviation assets
-- Technology & Outsourcing (T&O):
o Airworthiness services
o Software solutions
-- Branding fees
Managed aircraft contracts and specific air services
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.
Charter services
Revenue from managed fleet and sub-contracted charter services
are recognised once the charter service has been performed (at a
point in time). The Group has considered whether it is acting as
agent or principal in the context of its sub-contracted charter
services and has concluded that it is the principal.
Maintenance of aircraft
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 does 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 ad-hoc maintenance revenues are recognised at a
point in time in line with the performance obligation.
Fixed base operation
Within Business Aviation, the Group also provides fixed base
operation activities in the US, Jersey, the UK and the Middle East.
This includes hangar parking and apron parking space to customers.
Revenue is recognised as the service is provided over time.
Mission solutions and expertise with aviation assets
Revenue includes fixed contract fees and variable fees such as
revenue earned with reference to flying hours or other support
services. Revenue is recognised primarily over time based on
contractual rates as the related services are performed.
The Group undertakes certain equipment design and modification
activities for some customers. 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
completed but not yet billed 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). The input method is considered to be the
best estimate of the transfer of services. A contract liability
(deferred revenue) is recognised on the balance sheet for revenues
received in advance from the customer until the performance
obligations are discharged.
Airworthiness services
T&O provides continuing airworthiness management (CAM) and
airworthiness review certification (ARC) services for business
aviation, military and commercial airline operators. Revenue
includes fixed contract fees and variable fees such as revenue
earned with reference to ad-hoc services. Revenue is recognised
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.
Software solutions
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.
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
earned. 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
The Group receives a branding fee from Gama Aviation LLC. The
Group recognises revenue over time as the customer simultaneously
receives and consumes the benefits provided by the Group.
(b) 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.
(c) Government grants
During the prior 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 2020
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 Notes 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 submitted
the loan forgiveness application on 1 September 2021 and the Group
awaits confirmation from the SBA. 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 continue
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
financial position given the impact of the global pandemic on its
operations.
Other forms of government grants have been received by the
Group, including under the UK Furlough scheme and under a Hong Kong
payroll scheme. 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 prospectively
through the income statement.
(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 hangars,
property, vehicles 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.
Previously the Group leased aircraft.
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. Low-value leases are determined to be those with an initial
discounted total obligation of less than $5k. Payments associated
with short-term leases and low-value leases are recognised on a
straight-line basis as an expense in the income statement.
Rent free concessions granted during the COVID-19 pandemic have
been credited to the income statement in the year they were
granted, with a resulting reduction in the lease obligation.
As a lessor
The Group leases out property included within its right-of-use
assets. 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. 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 also leases out aircraft included
within property, plant and equipment, on short leases. The Group
recognises these leases as operating leases, with income generated
included in revenue.
(e) 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.
(f) 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 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.
(g) 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 the income statement 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.
(h) 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. Costs associated with the configuration and customisation
of Software as a Service arrangements are capitalised as intangible
assets only where control of the software exists.
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
-- Brands 20% per annum, straight line method
-- Customer relations 10% per annum, straight line method
-- Software 20%-33% per annum, or life of licence if shorter,
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.
The amortisation of internally generated software commences at
the start of the year following.
Prior to the acquisition of Jet East, intangible assets relating
to brands were amortised at 10% per annum.
The useful life of intangible assets is reviewed each financial
year end and, if expectations differ from previous estimates, the
change is accounted for as a change in an accounting estimate. The
Group considered the impact of climate change and other factors
before concluding that there was no change in useful life of
intangible assets in the current year.
(i) 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 programme 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% to 33% 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.
The residual value and useful life of property, plant and
equipment is reviewed each financial year end and, if expectations
differ from previous estimates, the change is accounted for as a
change in an accounting estimate. The Group considered the impact
of climate change and other factors before concluding that there
was no change in residual value or useful life of property, plant
and equipment in the current year.
(j) 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.
(k) 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.
(l) 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
-- 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 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. 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.
(m) 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.
(n) 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 is 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 that is 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.
(o) 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.
(p) 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.
(q) 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.
(r) 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.
3. Critical accounting judgements 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 judgements
(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 judgements in applying the Group's accounting
policies
The following are the critical judgements, 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.
(a) Sharjah operations
During 2017, the Group entered into a 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. During 2020, the assets under
construction and right-of-use assets associated with this project
were impaired due to COVID-19 related delays, with $4,609k and
$6,445k charged to the income statement respectively.
During 2021, as a result of improving conditions, a 10-year
extension was signed to the agreement, and the Group contracted
with a third party to start development at the site in 2022. At the
date of signing the Annual Report and Accounts, the full funding
for the project has not been secured, and the Directors have taken
the decision to impair the new right-of-use asset relating to the
extension ($1,911k). Should funding for the project become
probable, then the Directors currently anticipate reversal of some
or all of these impairments.
(b) Paycheck Protection Program (PPP) qualifying expenditure
During the prior year, the Group received funds under the 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 were 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 as a result of submitting the loan forgiveness
application on 1 September 2021. 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 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, Note 21 and Note 35 for further
details.
(c) Presentation of consideration received from the sale of its
US Air Associate, Gama Aviation LLC
During the prior year, the Group 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).
(d) 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 in Note 2 to the notes to the financial statements,
Basis of preparation and significant accounting policies -
Significant accounting policies - Use of alternative performance
measures (APMs). This requires judgement as management and Group's
view of what qualifies as exceptional items may differ from similar
judgements 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.
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.
(a) Valuation review on non-current assets
The review of goodwill, other intangible assets, property, plant
and equipment and right-of-use assets requires 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
reviews performed and further details of the estimates inherent
within these reviews are set out in Notes 13, 14, 15 and 23.
(b) 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 19. A change in the
enforceability of these liens would materially change the loss
allowance on financial assets.
(c) Valuation of inventories
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 18. Inventory valuation is sensitive to
management's assessment of ageing and obsolescence of certain line
items. Refer to Note 18.
(d) Estimation of revenue and costs recognised in relation to
long-term contracts
In determining the revenue and costs to be recognised on
long-term contracts, management estimate costs to complete, the
outcome of commercial discussions at the time of contract
conclusions and during renegotiation periods, and the period over
which to recognise any expected changes in consideration or costs
on renegotiation.
(e) Other long-term employee benefits
The acquisition of Jet East also includes a long-term incentive
plan accounted for under IAS 19 with payments contractually linked
to the continuing employment of executives of Jet East as well as
business performance of the combined Business Aviation MRO US
business. A remuneration charge of $1,821k (2020: nil) has been
recognised within Adjusting items and an accrual of $1,821k (2020:
nil) is included within non-current trade and other payables. The
period over which the services are received is three years and the
incentive plan is estimated to result in a future cash outflow of
$6,024k (2020: nil) after this three-year period.
For the long-term incentive plan to result in future payments,
business performance must exceed a Board approved projection, the
acquisition case. Executives can earn up to a maximum of 9%
ownership in the Business Aviation MRO US equity subject to
business performance in the 2023 financial year and the level of
indebtedness of the combined Business Aviation MRO US business at
that time. The long-term incentive plan is accounted for as
remuneration for post-acquisition services and is not part of the
business combination.
A Board approved five-year Strategic Plan has been used to
estimate business performance in the 2023 financial year and the
level of indebtedness of the combined Business Aviation MRO US
business at that time.
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 the other long-term employee
benefit accrual or the associated remuneration charge within the
next financial year, relates to a change in forecast business
performance. The Directors consider that the carrying amount of the
other long-term employee benefit accrual at 31 December 2021 of
$1,821k (2020: nil) represents the present value of the service
cost.
A 10% increase in the business performance in 2023 would result
in an additional payment of around $602k in 2024, an additional
charge for the year ended 31 December 2021 of $182k and an
additional accrual at 31 December 2021 of $182k. Business
performance in Business Aviation MRO US is calculated as a multiple
of EBITDA less cash and cash equivalents and less borrowings.
(f) Valuation of deferred tax assets
The Group has recognised deferred tax assets on both timing
differences, principally acquisition intangibles, and on taxable
losses. Refer to Note 22 for further details.
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 Company has made significant progress in transitioning its
current year reporting to reflect the recent realignment of the
business along its Strategic Business Units (SBUs), which were
announced in the strategy section of the 2020 Annual Report. As a
result of the transition during the current year, the results were
reviewed by the Group Chief Executive Officer, who acts as the
Chief Operating Decision Maker (CODM) in the new SBU structure. 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.
The Group has three global 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). 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.
The IFRS 8 operating segments within these global divisions are
Special Mission, Business Aviation MRO US, Business Aviation
excluding MRO US, Technology & Outsourcing, Associates,
Corporate and Branding Fees. The operating segments, except
T&O, met the quantitative thresholds to report separately under
IFRS 8, however, T&O is presented separately as it is of
strategic importance.
Reconciliation of segmental to overall Group performance is
tabulated below:
2021 2020
$'000 $'000
Restated(1)
Revenue Gross Statutory Adjusted Adjusted Adjusted Adjusted Statutory Adjusted Adjusted
Profit EBIT EBIT EBIT Revenue Gross EBIT EBIT EBIT
pre-IFRS Profit pre-IFRS 16
16
BA MRO US 79,250 9,035 (11,415) (7,971) (8,599) 38,606 8,474 (543) 181 (250)
BA excluding MRO US (2) 90,896 10,667 (977) (793) (1,741) 86,706 8,951 (15,779) (3,883) (5,251)
Special Mission (2) 56,716 17,075 4,534 4,546 4,179 47,918 12,534 3,024 3,056 2,598
T&O (2) 5,297 4,204 (289) 47 41 5,023 3,569 256 605 490
Branding fee (2) 3,750 3,750 3,691 3,691 3,691 3,750 3,750 19,233 3,733 3,733
Associates - - - (1,491) (1,491) - - (5,848) (3,272) (3,272)
Corporate - - (2,796) (2,303) (2,229) - - (6,203) (5,238) (4,856)
----------------------- -------- ------- ---------- -------- -------- --------- --------- ---------- --------- -------------
Adjusted Result 235,909 44,731 (7,252) (4,274) (6,149) 182,003 37,278 (5,860) (4,818) (6,808)
----------------------- -------- ------- ---------- -------- -------- --------- --------- ---------- --------- -------------
Adjusting items (Note
6) - - - (2,978) (2,978) 15,500 15,500 - (1,042) (1,042)
Application of IFRS 16 - - - - 1,875 - - - - 1,990
(Note 23)
----------------------- -------- ------- ---------- -------- -------- --------- --------- ---------- --------- -------------
Statutory Result 235,909 44,731 (7,252) (7,252) (7,252) 197,503 52,778 (5,860) (5,860) (5,860)
----------------------- -------- ------- ---------- -------- -------- --------- --------- ---------- --------- -------------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) Special Mission and T&O operate in the Europe geography.
The Branding fee derives from the US. BA excluding MRO US operates
in Europe, Middle East and Asia.
An analysis of the Group's revenue is as follows:
Year ended Year ended
2021 2020
$'000 $'000
----------------------------------- ----------- ----------
Sale of business aviation services 232,159 178,253
Branding fees 3,750 3,750
----------------------------------- ----------- ----------
Total Adjusted Revenue 235,909 182,003
Accelerated branding fees - 15,500
----------------------------------- ----------- ----------
Statutory revenue 235,909 197,503
----------------------------------- ----------- ----------
2020
2021 Restated(1)
$'000 $'000
------------------------------------------------------------------ ------- -------------
BA MRO US 78,904 38,370
BA excluding MRO US 61,536 57,419
Special Mission 9,163 10,102
T&O 3,883 3,555
Branding fee - -
------------------------------------------------------------------ ------- -------------
Adjusted revenue recognised at a point in time 153,486 109,446
------------------------------------------------------------------ ------- -------------
BA MRO US 346 236
BA excluding MRO US 29,360 29,287
Special Mission 47,553 37,816
T&O 1,414 1,468
Branding fee 3,750 3,750
------------------------------------------------------------------ ------- -------------
Adjusted revenue recognised over time 82,423 72.557
Total Adjusted revenue 235,909 182,003
Accelerated branding fees (revenue recognised at a point in time) - 15,500
------------------------------------------------------------------ ------- -------------
Statutory revenue 235,909 197,503
------------------------------------------------------------------ ------- -------------
(1) Restatements re detailed in Note 2 of the notes to the
financial statements
Revenue recognised over time relates to the following operating
divisions:
-- Special Mission has contract revenue for the maintenance of
aircraft and provision of air ambulance services of $153,164k to be
earned over the next eight years, and $47,553k of revenue has been
recognised in the year
-- Business Aviation, MRO US during the year earned revenue of
$346k in relation to maintenance contracts with $346k contracted to
be earned over the next year
-- Within Technology & Outsourcing, myairops(R) has $1,414k
of contract revenue recognised during the year in relation to the
provision of software services with $1,162k due over the next three
years
-- The Branding Fee of $3,750k has been recognised during the
year, with the remaining $625k of Branding Fees recognised over the
next year
Revenue totalling $48,760k (2020: $16,660k), which is in excess
of 10% of Group revenue, has been recognised in 2021 in respect of
a single customer, included within the Business Aviation MRO US
reporting segment.
The Group has not separately disclosed revenue by destination
country because this is not tracked internally and because
management track revenue by SBU.
Geographic information
2020
2021 Restated(1)
$'000 $'000
------------------- ------- ------------
Non-current assets
US 16,804 11,044
Europe 71,096 75,810
Asia 58 230
Middle East 144 219
Group 1,769 2,781
------------------- ------- ------------
89,872 90,084
------------------- ------- ------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
Non-current assets for this purpose consist of property, plant
and equipment and right-of-use assets. Goodwill and Intangible
assets are shown by SBU and thereby geographic region in Note 13
and Note 14. Refer to Note 19 for non-current trade and other
receivables which relate solely to the Business Aviation MRO US
SBU.
5. EBIT for the year
EBIT for the year has been arrived at after
charging/(crediting):
Year
Year ended
ended 2020
2021 Restated(1)
$'000 $'000
----------------------------------------------------------------------------------------------- ------- ------------
Amortisation of intangibles in Adjusted result (Note 14) 2,155 1,581
Amortisation of intangibles in Adjusting items (Note 14) 1,200 614
Depreciation of property, plant and equipment (Note 15) 6,441 4,783
Depreciation of right-of-use assets in administrative expenses (Note 23) 1,017 730
Depreciation of right-of-use assets in cost of sales (Note 23) 6,528 11,102
Net foreign exchange (gain)/loss on trading monetary items (407) 350
Loss on disposal of property, plant and equipment (Note 15) 6 63
Impairment of other intangible assets (Note 14) - 833
Impairment of right-of-use assets (Note 23) 1,911 6,544
Impairment of assets under construction (Note 15) - 4,609
(Reversal)/impairment of equity accounted investments (Note 17) (1,491) 3,421
Impairment of non-current assets within share of results of equity accounted investments (Note
17) - 6,433
Profit on disposal of interest in associates (Note 17) - (7,278)
Accelerated branding fees (Note 6) - (15,500)
Cost of inventories recognised as an expense (Note 18) 16,071 14,682
Change in provision for inventory obsolescence (404) 1,520
Staff costs (Note 7) 102,256 63,506
Impairment losses recognised on trade receivables (Note 19) 42 3,083
Recovery of previously impaired trade receivables (Note 19) (63) -
Auditors' remuneration:
Audit of the Company's financial statements 770 198
Audit of the financial statements of subsidiaries 828 667
Other support services - 26
Other deal support services - 141
(1) Restatements are detailed in Note 2 of the notes to the financial statements
6. Adjusted performance measures
The Adjusted result has been arrived at after the following
Adjusting items:
Year
Year ended
ended 2020
2021 Restated(1)
$'000 $'000
---------------------------------------------------------------------------------------------- ------- -------------
Adjusting items in revenue and Gross Profit:
Accelerated branding fees - (15,500)
Exceptional items:
- Transaction costs 558 692
- Integration and business re-organisation costs 140 202
- Lease derecognition (Note 23) (1,626) -
- Legal costs 287 619
- Other items (79) (709)
- Impairment of assets under construction (Note 15) - 4,609
- Impairment of right-of-use assets (Note 23) 1,911 6,544
- Impairment of acquired intangibles (Note 14) - 833
---------------------------------------------------------------------------------------------- ------- -------------
Total exceptional items 1,191 (2,710)
Other Adjusting items:
Equity-settled share-based payments expense (Note 31) 257 562
Other long-term employee benefits expense (Note 32) 1,821 -
Amortisation of acquired intangible assets (Note 14) 1,200 614
---------------------------------------------------------------------------------------------- ------- -------------
Adjusting items in Operating (loss)/profit 4,469 (1,534)
(Reversal)/impairment of equity accounted investments (Note 17) (1,491) 3,421
Impairment of non-current assets within share of results of equity accounted investments (Note
17) - 6,433
Profit on disposal of interest in associates (Note 17) - (7,278)
---------------------------------------------------------------------------------------------- ------- -------------
Adjusting items in loss before tax 2,978 1,042
Tax related to Adjusting items (Note 10) (471) 5,017
---------------------------------------------------------------------------------------------- ------- -------------
Adjusting items in loss for the year 2,507 6,059
---------------------------------------------------------------------------------------------- ------- -------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
Accelerated branding fees
Adjusted Revenue and Adjusted Gross Profit exclude accelerated
branding fees of $nil (2020: $15,500k) and their presentation
improves comparability. This has been presented separately in the
segmental reporting. Refer to Note 17 for further details of
disposal of the US Air Associate.
2020
---------------------
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 $558k (2020: $662k)
in relation to the acquisition of Jet East (Note 12) and $nil
(2020: $30k) in relation to the acquisition of air ambulance
services to Jersey and Guernsey (Note 12).
Integration and business re-organisation costs
Integration and business re-organisation costs include:
-- Severance costs of $416k in relation to the acquisition of Jet East;
-- A net provision release of $276k relating to direct closure
costs at the Fairoaks facility (2020: cost of $16k) (Note 30);
-- In 2020, redundancy provision following the notice of closure
the Group's Saudi Arabian operations of $173k and other closure
related costs of $17k;
-- In 2020, income on receipt of a credit for costs previously
charged to exceptional integration and business re-organisation
costs $4k
Other income
-- A $1,626k credit (2020: $nil) for the derecognition of the
Fairoaks lease release (Note 23).
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, mainly relating to the Group's collection of trade
receivables acquired as part of the Hangar 8 reverse
acquisition.
Other items
In the current year, other items comprise a credit of $63k
relating to funds received from an overdue debtor against whom a
litigation case has been pursued, a credit for $16k received for
consultancy services for Sharjah Airport previously treated as an
exceptional item. In the prior year, other items comprise $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 exceptional costs.
Equity-settled share-based payments
Equity-settled share-based payment charges of $257k (2020:
$562k). See Note 31 for further details.
Other long-term employee benefits
Other long-term employee benefits remuneration charge of $1,821k
(2020: nil). This long-term benefit relates to an incentive plan
with payments contractually linked to the continuing employment of
executives of Jet East as well as the business performance of the
combined Business Aviation MRO US. See Note 32 for further
details.
Impairment of acquired intangibles
The impairment charge of $833k on acquired intangible assets in
the prior year originally recognised on acquisition of Gama
Aviation Hutchison Holdings Limited (GAHH) which were impaired to
nil. Refer to Note 14 for further details.
Impairment of assets under construction and right-of-use
asset
As previously reported, the Group had secured a 25-year ground
lease and had commenced the development of a BAC at Sharjah
International airport in the UAE.
With the project having been placed on hold in 2020 pending a
review of the impact of the pandemic on its viability, the Group
recognised a total impairment charge of $11,153k in its 2020
financial statements, $6,544k in respect of the right of use asset
arising from the ground lease and $4,609k in respect of the
carrying value of the assets under construction. The impairment
charge reduced the carrying amount to the recoverable amount of
nil. Refer to Note 15 and Note 23 for further details.
Following its decision to recommence the development of the BAC
the Company is now in the process of securing the necessary funding
for the project. Whilst the Group is in advanced discussions with
investors regarding the funding of this project, the Board
considers that it would be inappropriate to reverse these
impairments until the full funding has been contractually
secured.
In parallel with its decision to recommence the development, the
Group took the opportunity to negotiate a 10-year extension to the
term of the ground lease, which significantly enhances the
viability and value of the project. However, until the impairment
charge taken in respect of the original lease is reversed, the
Group is required to further impair the $1,911k asset in use value
created by this lease extension.
The Board remains confident that the Group is making progress in
securing the necessary funding, at which time all these
impairments, which amount to $13,064k, may reverse.
Impairment of investment in associate and non-current assets in
associate
In the current year, a credit of $1,491k has been recognised
offsetting prior year impairment charges to ensure that the
recoverable value of the CASL asset remained at the $2,000k
consideration received on its sale in December 2021. In the prior
year, impairment charges of $6,433k related to non-current assets
in CASL and the remaining $3,421k was to reduce the carrying amount
of the equity accounted investment to the recoverable amount of
$2,000k. Taken together, impairment charges of $9,854k were
recognised in the prior year in relation to associates. Refer to
Note 17 for further details.
Adjusted EBIT pre-IFRS16
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.
Tax related to Adjusting items
In the current year, the tax on Adjusting items reflects the
deferred tax on deductible items before any non-recognition of
deferred tax. In the prior year, a significant tax charge of
$5,017k was recognised for the tax consequences of the disposal of
the US Air Associate and the related accelerated branding fee.
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 the effect of foreign exchange
movements. Constant currency growth has been calculated using a
constant foreign exchange rate of $1.3756 to GBP1, being the
cumulative average USD-GBP exchange rate for 2021, which has been
used to restate Revenue, Gross Profit and EBIT for 2020. A
reconciliation to Rebased Revenue, Gross Profit and Adjusted EBIT,
the most directly comparable IFRS measures, which are used to
calculate organic and constant growth, is set out below.
The prior year has been adjusted to include full year results of
acquired businesses and no results for disposed businesses where
the results include only part-year results in either current or
prior periods. For 2020 this comprises the results of Jet East
acquired on 15 January 2021, whilst the Jersey and Guernsey Air
Ambulance business was acquired on 18 July 2020. The Jet East
business has been fully integrated into the US operations.
2020
$'000
Restated(1)
Adjusted Rebase Rebase Rebased Adjusted Rebase Rebase Rebased Adjusted Rebase Rebase Rebased
Revenue for for Adjusted Gross for for Adjusted EBIT for for Adjusted
FX organic Revenue Profit FX organic Gross FX organic EBIT
growth growth Profit growth
BA MRO
US 38,606 - 28,198 66,804 8,474 - 220 8,694 181 - (1,373) (1,632)
BA
excluding
MRO
US 86,706 3,496 - 90,202 8,951 316 - 9,267 (3,883) (292) - (4,175)
Special
Mission 47,918 3,439 3,544 54,901 12,534 869 956 14,359 3,056 185 642 3,883
T&O 5,023 361 - 5,384 3,569 257 - 3,826 605 35 - 640
Branding
fee 3,750 - - 3,750 3,750 - - 3,750 3,733 - - 3,733
Associates - - - - - - - - (3,272) - - (3,272)
( 5,238 ( 5,139
Corporate - - - - - - - - ) 99 - )
----------- --------- ------- -------- --------- --------- ------- -------- --------- --------- ------- -------- -------------
Adjusted
Result 182,003 7,296 31,742 221,041 37,278 1,442 1,176 39,896 (4,818) 27 (731) (5,522)
----------- --------- ------- -------- --------- --------- ------- -------- --------- --------- ------- -------- -------------
Net debt
A reconciliation of the IFRS financial statement line items that
represent the Net debt APM is tabulated below.
2020
2021 Restated(1)
$'000 $'000
------------------------- --------- -------------
Cash 10,243 16,136
Borrowings (67,154) (53,197)
------------------------- --------- -------------
Net debt pre IFRS 16 (56,911) (37,061)
Obligations under leases (48,002) (46,139)
------------------------- --------- -------------
Net debt (104,913) (83,200)
------------------------- --------- -------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
7. Staff costs
The average monthly number of employees (including Executive
Directors) was:
Year ended Year ended
2021 2020
Number Number
------------------------------ ---------- ----------
Operations and administration 440 357
Pilots and cabin crew 131 108
Aircraft engineering 556 298
------------------------------ ---------- ----------
1,127 763
------------------------------ ---------- ----------
Their aggregate remuneration comprised:
Year Year
ended ended
2021 2020
$'000 $'000
---------------------------------------------- ------- -------
Wages and salaries 91,184 56,614
Social security costs 5,894 4,506
Equity-settled share-based payments (Note 31) 257 562
Other long-term employee benefits (Note 32) 1,821 -
Pension costs 3,100 1,824
---------------------------------------------- ------- -------
102,256 63,506
---------------------------------------------- ------- -------
Aggregate remuneration is stated after netting off government
grants received including $41k (2020: $616k) under the UK Furlough
scheme and $nil (2020: $148k) under a Hong Kong payroll scheme.
Details of Directors' remuneration are given in the Remuneration
Report and refer to Note 31 for details of share option
transactions approved during the year. The share-based payment
costs relating to these Directors amounted to $150k (2020:
$260k).
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 2021, contributions of
$257k (2020: $261k) due in respect of the current reporting period
had not been paid over to the schemes.
8. Finance income
Year Year
ended ended
2021 2020
$'000 $'000
------------------------------------------------------ ------- -------
Foreign currency translation on intercompany balances - 405
Foreign currency translation on borrowings 56 -
Interest income on financial assets 561 1,130
Total finance income 617 1,535
------------------------------------------------------ ------- -------
Interest income on financial assets includes interest due to
late customer payments of $432k (2020: $nil), $92k (2020: $964k) in
respect of deferred consideration relating to the disposal of the
US Air Associate (Note 17) and $37k (2020: $166k) of other interest
on other financial assets. The decrease of $872k on the interest
received on the deferred consideration for the US associate is due
to an early repayment in July 2021.
9. Finance expense
Year
Year ended
ended 2020
2021 Restated(1)
$'000 $'000
------------------------------------------------------ ------- ------------
Foreign currency translation on intercompany balances 441 -
Foreign currency translation on borrowings - 178
Interest on borrowings before capitalised interest 791 878
Capitalised interest (Note 15) - (179)
Discounting on provisions (Note 30) 17 42
Discounting on deferred consideration (Note 30) 13 -
Interest on lease liabilities (Note 23) 2,624 2,606
Amortisation of loan arrangement fees 180 168
Other similar charges payable 44 124
------------------------------------------------------ ------- ------------
Total finance costs 4,110 3,817
------------------------------------------------------ ------- ------------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
10. Taxation
Year ended 2021 Year ended 2020
$'000 $'000
--------------------------------------- ------------------------------ ------------------------------
Statutory Adjusting Adjusted Statutory Adjusting Adjusted
result items result result items result
--------------------------------------- --------- --------- -------- --------- --------- --------
Corporation tax:
Current tax charge:
Current year (credit)/charge 4,292 (3,891) 401 3,016 (2,977) 39
Adjustment in respect of
prior years 75 - 75 - - -
--------------------------------------- --------- --------- -------- --------- --------- --------
4,367 (3,891) 476 3,016 (2,977) 39
Deferred tax charge:
Current year (credit)/charge (6,105) 4,362 (1,743) 3,136 (2,040) 1,096
Adjustment in respect of
prior years (242) - (242) 344 - 344
--------------------------------------- --------- --------- -------- --------- --------- --------
Deferred tax (credit)/charge
(Note 22) (6,347) 4,362 (1,985) 3,480 (2,040) 1,440
Total tax (credit)/charge for the year (1,980) 471 (1,509) 6,496 (5,017) 1,479
--------------------------------------- --------- --------- -------- --------- --------- --------
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 2021 Restated(1)
$'000 $'000
------------------------------- ------------------------------ ------------------------------------
Statutory Adjusting Adjusted Statutory Adjusted
result items result result Adjusting items result
------------------------------- --------- --------- -------- --------- --------------- --------
Loss before tax (10,745) 2,978 (7,767) (8,142) 1,042 (7,540)
------------------------------- --------- --------- -------- --------- --------------- --------
Tax at the corporation
tax rate of 19% (2020:
19%) (2,042) 566 (1,476) (1,547) 199 (1,348)
Effects of:
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 - - - 1,225 (1,225) -
Non-deductible - impairment
of assets under construction - - - 876 (876) -
Non-deductible - impairment
of acquired intangibles 4 (4) - 164 (164) -
Non-deductible - impairment/
(impairment reversal)
of equity accounted
investments (246) 246 - 1,872 (1,872) -
Non-deductible - share
of losses of CASL in
adjusted result 246 - 246 637 - 637
Non-deductible - share-based
payments 45 (45) - 107 (107) -
Other expenses not
deductible/income not
taxable 275 (60) 215 728 - 728
Fines for late filings(4) 328 - 328 - - -
Adjustment in respect
of prior years (167) - (167) 344 - 344
Tax rates in different
jurisdictions (371) (137) (508) 2,490 (842) 1,648
Deferred tax not recognised
in the year(3) (44) (103) (147) 32 (19) 13
De-recognition of deferred
tax - - - 667 (111) 556
Total tax (credit)/charge
for the year (1,980) 471 (1,509) 6,496 (5,017) 1,479
------------------------------- --------- --------- -------- --------- --------------- --------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The UK Finance Act 2021 enacted a change in the UK
corporation tax rate from 19% to 25% from 1 April 2023
(3) Prior year has been restated to include the effect of
amortisation of acquired intangibles
(4) Fines have been levied by some US states as a result of
management's decision to change the timing of payments of the 2020
US tax, which included the profit on the disposal of the US Air
Associate (see Note 17). Prior to the early receipt of the deferred
consideration from Wheels Up in 2021, an election had been made to
pay taxes in instalments. Once funds had been received, the
election was changed to pay immediately, which triggered punitive
late payment charges. Management have requested the US states
provide relief for these fines and have had external advice that
relief should be provided, but due to the backlog caused by
COVID-19, the timing on any decision by the state authorities is
uncertain. Management consider the penalty to be tax-geared and
have therefore presented it within the total tax charge for the
year
(5) The Adjusting items reflects the tax effect of Adjusting
items disclosed within the Adjusted Items column of the
consolidated income statement and explained in further detail in
Note 6
The adjustments in respect of prior year comprise an immaterial
$75k current tax charge for property taxation in Jersey, a $184k
deferred tax credit relating to the implementation of IFRS 16 in
the US and the offset of deferred tax assets against the $57k UK
deferred tax liability. In the prior year, the adjustment includes
a $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.
11. 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
2021 Restated(1)
$'000 $'000
------------------------------------------------------------ ---------- ------------
Numerator
Statutory earnings:
Loss attributable to ordinary equity holders of the parent (8,062) (14,683)
------------------------------------------------------------ ---------- ------------
Adjusted earnings:
Loss attributable to ordinary equity holders of the parent (5,555) (8,624)
------------------------------------------------------------ ---------- ------------
Denominator
Weighted average number of shares used in basic EPS 63,660,183 63,636,279
Effect of dilutive share options - -
------------------------------------------------------------ ---------- ------------
Weighted average number of shares used in diluted EPS 63,660,183 63,636,279
------------------------------------------------------------ ---------- ------------
Earnings per share (cents)
Statutory earnings per share
Basic (12.7) (23.1)
Diluted (12.7) (23.1)
Adjusted earnings per share
Basic (8.7) (13.6)
------------------------------------------------------------ ---------- ------------
Diluted (8.7) (13.6)
------------------------------------------------------------ ---------- ------------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
The average share price for the year ended 31 December 2021 was
39.2 pence, which is marginally higher than the exercise price of
some outstanding options, however, the effect of including these
shares would reduce the loss per share and adjusted loss per share
and therefore no dilutive effect is shown.
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.
12. Acquisitions
Jet East
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 533
Total consideration 8,233
----------------------- -----
Initial deferred consideration of $1.0m has been discounted at
2.5% to a present value of consideration and adjusted by $420k for
net assets acquired. Additionally, a post-closing adjustment was
made to increase trade receivables by $550k relating to an
insurance claim made before the acquisition that has subsequently
been received.
Recognised amounts of identifiable assets acquired and
liabilities assumed are as follows:
$'000
Fair value
---------------------------------------------------- -----------
Property, plant and equipment 2,560
Right-of-use assets 3,394
Trade and other receivables non-current 289
Inventories 1,410
Trade and other receivables current 5,910
Cash and cash equivalents 64
Trade and other payables (3,682)
Intangible assets - Brand 1,181
Intangible assets - Customer relationships 5,021
Deferred tax asset in entity books 1,418
Deferred tax liability on consolidation intangibles (1,736)
Enterprise value 15,829
Borrowings (4,202)
Obligations under leases (3,394)
---------------------------------------------------- -----------
Total consideration 8,233
---------------------------------------------------- -----------
The purchase price accounting has now been finalised following
the twelve month measurement period permitted under IFRS 3 Business
Combinations.
Acquisition costs of $558k were charged to the income statement
within administration expenses in 2021 (2020: $662k), with total
cash outflow relating to the acquisition as follows:
$'000
----------------------------------- ------
Acquisition of subsidiary, net of
cash acquired 7,588
Acquisition costs 558
----------------------------------- ------
Total cash paid 8,146
----------------------------------- ------
Of the $4,202k borrowings assumed on acquisition, $2,788k has
been settled to date and $1,414k remained outstanding at 31
December 2021.
The acquisition has been accounted for as an asset deal in at
the entity level and as a result the consideration over the tax
value of the assets is tax deductible, leading to the recognition
of a deferred tax asset in the local books.
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 acquisition of Jet East included a long-term incentive plan
which is accounted for as remuneration for post-acquisition
services and is not part of the business combination. See Note 32
for further details.
As the Jet East business has been integrated into the rest of
the Group's operations in the US, it is impracticable to disclose
the impact that the effect the acquisition had on the income
statement for the year.
Jersey and Guernsey Air Ambulance business
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 15 1,070
Other receivables 116
Customer relationships (included within intangibles) 14 390
Deferred tax liability 22 (62)
----------------------------------------------------- ---- -----
Total consideration 1,514
Acquisition costs 6 30
----------------------------------------------------- ---- -----
Acquisition of business, including acquisition costs 1,544
----------------------------------------------------- ---- -----
13. Goodwill
$'000
------------------------------ ------
Cost
At 1 January 2020 46,520
Exchange differences 1,514
------------------------------ ------
At 31 December 2020 48,034
Exchange differences (520)
------------------------------ ------
At 31 December 2021 47,514
------------------------------ ------
Accumulated impairment losses
At 1 January 2020 24,770
Exchange differences 774
------------------------------ ------
At 31 December 2020 25,544
Exchange differences (266)
------------------------------ ------
At 31 December 2021 25,278
------------------------------ ------
Carrying amount
At 31 December 2021 22,236
------------------------------ ------
At 31 December 2020 22,490
------------------------------ ------
The recoverable amount of goodwill is allocated to the following
cash-generating units (CGUs):
2020
2021 Restated(1)
$'000 $'000
--------------------------------------- ------- -------------
Carrying amount
Business Aviation, MRO US 787 787
Business Aviation, excluding MRO US(3) 8,043 8,138
Special Mission(2) 11,119 11,251
Technology & Outsourcing (2) 2,287 2,313
22,236 20,490
--------------------------------------- ------- -------------
(1) Restated following the change of organisational
structure
(2) Special Mission and T&O operate in the Europe
geography
(3) Business Aviation, excluding MRO US operates in the Europe,
Middle East and Asia geography however the goodwill relates
exclusively to the Europe geography
When testing for impairment, recoverable amounts for all of the
Group's CGUs are measured at their value in use (VIU) by
discounting the future expected cash flows from the assets in the
CGUs. The CGUs that have goodwill are Business Aviation MRO US;
Business Aviation excluding MRO US; Special Mission and Technology
& Outsourcing. The goodwill for 2020 has been restated to
reflect the new organisation structure, and, where not directly
attributable to a specific CGU, has been allocated based on the
relative gross profit of contracts in the CGU. 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
2022 through 2026 as approved by the Board. For cash flows beyond
the forecast period, a terminal growth rate has been applied to a
standardised terminal cash flow. CGU specific operating assumptions
are applicable to the forecast cash flows for the years through
2026 and relate to revenue forecasts, expected project outcomes,
cash conversion, levels of capital expenditure and forecast
operating margins in each of the operating units. The Group also
considered the impact of Climate change in determining operating
assumptions applicable to the forecast cash flows. The relative
value ascribed to each assumption will vary between CGUs as the
forecasts are built up from the underlying operating units within
each CGU.
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. In the prior year, the Group used the Real GDP Growth Rate as
a proxy for long-term terminal growth rate of Gama Aviation Plc. In
the current year, long-term CPI projections have been deemed a
better estimate because this measure appears to be more stable than
GDP growth rates and a better proxy for long-term terminal growth
rate of the Group. CPI has been sourced by jurisdiction of the
Group CGUs from 2020 to 2026. Using an average of 2021 through 2026
was not considered appropriate as all years are benefitting from an
assumed recovery from the COVID-19 pandemic. Terminal growth rates
are tabulated below.
2021 2020
% %
--------------- ----- ----
United Kingdom 2.3 2.3
European Union 3.5 n/a
United States 2.7 2.2
Asia n/a 2.1
Middle East 1.5 1.0
--------------- ----- ----
Weighted average cost of capital (WACC)
A pre-tax discount rate is calculated by reference to the
post-tax 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.
2020
2021 Restated(1)
% %
Business Aviation, MRO US 16.2 13.4
Business Aviation, excluding MRO US 11.4 11.5
Special Mission 9.8 10.5
Technology & Outsourcing 10.8 13.4
------------------------------------ ----- -------------
(1) Restated following the change of organisational
structure
The discount rates in the current year have increased in
Business Aviation MRO US due to the acquisition of Jet East,
remained stable in Business Aviation excluding MRO US and decreased
in T&O and Special Mission, which is driven by lower CGU
specific risk premiums.
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
long-term growth rates and pre-tax discount rates.
No reasonably possible change in assumptions would diminish the
recoverable amount below the carrying amount of assets in any CGU.
No impairment has been recognised in any CGU in the current
year.
14. Other intangible assets
Commence Licences
operations Part 145 approvals and brands(1) Customer relations(2) Computer software(3) Total
$'000 $'000 $'000 $'000 $'000 $'000
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
Cost
At 1 January
2020 1,481 3,442 1,605 15,479 7,334 29,341
Additions - - - - 2,521 2,521
Disposals (1,481) (3,442) (1,605) - - (6,528)
Recognised on
acquisition
(Note 12) - - - 390 - 390
Foreign
exchange
differences - - - - 417 417
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
At 31
December
2020 - - - 15,869 10,272 26,141
Additions - - - - 2,604 2,604
Recognised on
acquisition
(Note 12) - - 1,181 5,021 - 6,202
Foreign
exchange
differences - - - (52) (170) (222)
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
At 31
December
2021 - - 1,181 20,838 12,706 34,725
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
Amortisation and accumulated impairment losses
At 1 January
2020 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
Amortisation - - 227 973 2,155 3,355
Foreign
exchange
differences - - - (28) (68) (96)
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
At 31
December
2021 - - 227 14,542 4,302 19,071
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
Carrying
amount
At 31
December
2021 - - 954 6,296 8,404 15,654
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
At 31
December
2020 - - - 2,272 8,057 10,329
------------- ------------ ------------------ --------------- --------------------- -------------------- -------
(1) Relates to the US geography
(2) Relates to the US and Europe geography which is separately
disclosed below
(3) Relates to the Europe geography
The carrying amount of customer relationships relate to:
-- Technology & Outsourcing: $978k (2020: $1,276k);
-- Business Aviation excluding MRO US: $780k (2020: $996k); and
-- Business Aviation MRO US: $4,538k (2020: nil)
Licences and brands relate to Business Aviation US arising from
the Jet East acquisition.
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. The
carrying value of internally developed software within this balance
is $7,450k (2020: $6,729k).
In the prior year, the carrying amount of GAHH acquired
intangible assets in Business Aviation excluding MRO US 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.
Intangible assets are assessed for impairment in Note 13
together with other non-current assets.
Impairment review on internally developed computer software
costs in myairops(R)
In the current year, there were indicators of impairment on
internally developed computer software costs in myairops(R) , which
is considered to be a stand-alone CGU. When testing for impairment,
the recoverable amount of myairops(R) is measured at VIU by
discounting the future expected cash flows from myairops(R)
software. Refer to Note 13 for further details on the future
expected cash flows, terminal growth rate and pre-tax discount rate
used for the impairment review on myairops(R) .
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 a sensitivity analysis for myairops(R) using
reasonably possible changes in the long-term growth rates and
pre-tax discount rates.
The sensitivity analysis in myairops(R) showed the
following:
-- Operating cash flows would have to reduce by over $166k in
each year of the forecast period before an impairment would
arise
-- A 1% decrease in the terminal growth rate would reduce headroom by $665k to $1,246k
-- A 1% increase in the discount rate would reduce headroom by $2,213k to $303k
-- A 1% decrease in the terminal growth rate and a 1% increase
in the discount rate would result in an impairment of $200k
No impairment has been recognised in the current year because
there is $1,911k of headroom over the carrying value of assets in
the myairops(R) .
15. Property, plant and equipment
Leasehold Aircraft and Fixtures, Motor Asset under
Helicopters improvement refurbishments fittings and vehicles construction Total
$'000 $'000 $'000 equipment $'000 $'000 $'000 $'000
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
Cost
At 1 January 2020 - 15,302 9,142 9,516 2,735 12,914 49,609
Additions,
restated(1) 19,045 2,072 1,883 1,896 61 - 24,957
Acquisitions - - 819 251 - - 1,070
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
as restated(1) 29,088 17,918 12,161 11,861 2,773 4,609 78,410
Additions - 1,230 627 1,463 50 - 3,370
Acquisitions - 683 - 1,384 493 - 2,560
Disposals - (33) - (206) (94) - (333)
Reclassification(2) 117 - (117) - - - -
Exchange differences (342) (187) (153) (77) (2) - (761)
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
At 31 December 2021 28,863 19,611 12,518 14,425 3,220 4,609 83,246
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
Accumulated depreciation
At 1 January 2020 - 5,077 2,252 5,571 1,385 - 14,285
Charge for the year,
restated(1) 679 897 957 1,787 453 - 4,773
Impairment - - - - - 4,609 4,609
Disposals - (1,294) (35) (1,570) (11) - (2,910)
Exchange differences 43 1,048 80 1,810 3 - 2,984
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
At 31 December 2020
as restated(1) 722 5,728 3,254 7,598 1,830 4,609 23,741
Charge for the year 1,243 1,136 1,348 2,160 554 - 6,441
Disposals - (30) - (155) (83) - (268)
Reclassification(2) - (25) - 25 - - -
Exchange differences (33) 3 (64) (62) (1) - (157)
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
At 31 December 2021 1,932 6,812 4,538 9,566 2,300 4,609 29,757
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
Carrying amount
At 31 December 2021 26,931 12,799 7,980 4,859 920 - 53,489
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
At 31 December 2020
(restated) 28,483 12,224 8,790 4,238 943 - 54,669
-------------------- ----------- ------------ --------------- --------------- --------- --------------- -------
(1) Restatements are detailed in Note 2 to the notes to the
financial statements
(2) Reclassifications relate to immaterial corrections in the
categorisation of property, plant and equipment
During 2021, no borrowing costs were capitalised. During the
year ended 31 December 2020, before the helicopters were brought
into use, the Group capitalised borrowing costs of $179k.
Deployment of the helicopters occurred on 1 June 2020 in support
of a long-term contract. As a result, helicopters were transferred
from assets under construction into the helicopters asset class
within property, plant and equipment. They were brought into use
and depreciated from 1 June 2020 having not been previously
depreciated.
The assets under construction relating to the investment in the
Sharjah Business Aviation Centre project were fully impaired in the
year ended 31 December 2020. The impairment arose due to
uncertainties arising in part from the ongoing COVID-19 pandemic.
Total impairment costs of $4,609k were recognised during the prior
year.
The acquisition of Jet East in the year included property plant
and equipment valued at $2,560k. In the prior year the acquisition
of an air ambulance business in the prior year included property,
plant and equipment valued at $1,070k.
Critical management judgement
A critical management judgement at the reporting date relates to
the determination of the recoverable amount of nil for the Sharjah
BAC project. This is based on management's judgement that whilst
the Group is in advanced discussions with investors regarding the
funding of this project, the Board considers that it would be
inappropriate to reverse impairments relating to the BAC project
until the full funding has been contractually secured.
16. Subsidiaries and other related undertakings
Details of the Company's subsidiaries and other related
undertakings held directly or indirectly at 31 December 2021 are as
follows:
Proportion Proportion
of voting of voting
Place of and ownership and ownership
incorporation interest interest Nature of
Name and operation 2021 2020 business Registered address
------------------- -------------------- -------------- -------------- --------------- ------------------
Airops Software England and Aviation
Limited(1) Wales 100% 100% software Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
England and
Aravco Limited(1) Wales 100% 100% Non-trading Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
FlyerTech England and Airworthiness
Limited(1) Wales 100% 100% management Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation
(Asset 2) England and
Limited(1) Wales 100% 100% Non-trading Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation Aviation
(Engineering) England and design and
Limited(1) Wales 100% 100% engineering Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation England and Aviation
(UK) Limited(1) Wales 100% 100% management Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama (Engineering) England and
Limited(1) Wales 100% 100% Dormant Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Group England and
Limited Wales 100% 100% Holding company Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Support England and
Services Limited(1) Wales 100% 100% Dormant Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Hangar 8 Management England and
Limited Wales 100% 100% Non-trading Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
International England and
JetClub Limited Wales 100% 100% Non-trading Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Ronaldson
Airmotive England and
Limited(1) Wales 100% 100% Dormant Head Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation
(Beauport) Aviation
Limited(1) Jersey 100% 100% management Jersey Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Aviation
Gama Aviation design and
(Engineering) engineering
Jersey Limited(1) Jersey 100% 100% and FBO Jersey Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
SAIF Free Zone, SAIF Suite Z-21.
Gama Aviation United Arab Aviation P.O. Box 122389,
FZC(1,4) Emirates 49% 49% management Sharjah, UAE
-------------------- --------------------- -------------- -------------- --------------- ------------------
SAIF Office
Q1-09-067/C,
Gama Group United Arab P.O. Box 122464,
Mena FZE Emirates 100% 100% Holding company Sharjah, UAE
-------------------- --------------------- -------------- -------------- --------------- ------------------
SAIF Lounge P.O.
Box 121954,
Gama Holdings United Arab Sharjah,
FZC Emirates 100% 100% Dormant UAE
-------------------- --------------------- -------------- -------------- --------------- ------------------
Aviation SAIF Desk
design and Q1-05-123/B,
Gama Support United Arab engineering P.O. Box 122553,
Services FZE(1) Emirates 100% 100% and FBO Sharjah, UAE
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama International Kingdom of nil (3) nil (3) Aviation 6646 Abi Haitham
Saudi Arabia(3) Saudi Arabia management Al Ansari, al
Madina
Square Center -
Office 2 & 3,
Muhammadiyah
District, Jeddah
23624-3270, KSA
------------------- -------------------- -------------- -------------- --------------- ------------------
2428 Res Co-work
03 Level 24, Al
Sila Tower, Abu
Dhabi Global
Market
Gama Aviation Square, Al Maryah
SPV Limited United Arab Aviation Island, Abu Dhabi,
(Plc)(5) Emirates 100% 10% management UAE
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation Aviation
(Engineering) design and
Inc.(1) Delaware, USA 100% 100% engineering Delaware Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation
(Management)
Inc.(1) Delaware, USA 100% 100% Non-trading Delaware Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Group
Inc. Delaware, USA 100% 100% Holding company Delaware Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Aviation
Jet East Aviation design and
Corporation, Pennsylvania, engineering
LLC(1) USA 100% - and FBO Trenton Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Lynk LLC(1) Ohio, USA 100% - Dormant Trenton Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation Aviation
Engineering design and
(HK) Limited(1) Hong Kong 100% 100% engineering Hong Kong Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation
Hutchison
Holdings Limited(1) Hong Kong 100% 100% Holding company Hong Kong Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Aviation Aviation
(HK) Limited(1) Hong Kong 100% 100% management Hong Kong Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Gama Group
(Asia) Limited Hong Kong 100% 100% Holding company Hong Kong Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Star-Gate
Aviation Holder of 151 Monument Road,
(Proprietary) South African Aston Manor 1619
Limited South Africa 100% 100% AOC South Africa
-------------------- --------------------- -------------- -------------- --------------- ------------------
Applicant
Hangar 8 Nigeria of Nigerian
Limited(2) Nigeria 100% 100% AOC (7)
-------------------- --------------------- -------------- -------------- --------------- ------------------
Maples Corporate
Services Limited,
PO Box 309, Ugland
House, Grand
Cayman,
Gama Aviation Aviation KY1-1104, Cayman
(Cayman) SEZC Cayman Islands 100% 100% Management Islands
-------------------- --------------------- -------------- -------------- --------------- ------------------
ul. Komitetu
Obrony
Robotnikow 62,
FlyerTech 2nd Floor, 02-146
Europe Sp. Airworthiness Warsaw, Poland,
Z.o.o. Poland 100% - management NIP: 7831827059
-------------------- --------------------- -------------- -------------- --------------- ------------------
Joint Venture
- Holding
company for
aviation
management
GB Aviation and charter
Holdings LLC(6) Delaware, USA 50% 50% company Delaware Office
-------------------- --------------------- -------------- -------------- --------------- ------------------
Room 250, 2nd
Floor,
Building 1, No.
56, Zhaoquanying
Gama Hutchison Section, Changjin
Aviation Technical Road, Shunyi
Service (Beijing) District,
Limited(1) China 100% 100% Non-trading Beijing
-------------------- --------------------- -------------- -------------- --------------- ------------------
The addresses for the specified offices are:
Head Office: 1st Floor 25 Templer Avenue, Farnborough,
Hampshire, England, GU14 6FE
Jersey Office: Beauport House, L'Avenue De La Commune, St Peter,
Jersey, JE3 7BY
Hong Kong Office: 7th Floor, 81 South Perimeter Road, Hong Kong
International Airport, Lantau, Hong Kong
Delaware Office: Corporation Service Company, 251 Little Falls
Drive, Wilmington, Delaware 19808, USA
Trenton Office: 18 West Piper Ave, Trenton, New Jersey 08628,
USA
(1) Indicates indirect holding.
(2) The consolidated financial statements include amounts
relating to Hangar 8 Nigeria Limited, a company established in
Lagos, Nigeria. The Group holds 11% of the share capital. Whilst
the Group therefore does not have legal control of this entity, the
Directors and officers comprise only 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.
(3) No non-controlling interest has been recognised as the Group
has the full beneficial interest
(4) 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.
(5) Gama Group Mena FZE acquired 90% of the issued share capital on 17 February 2020.
(6) 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 in the prior year (refer to Note 17). The
Group's ownership interest in Gama Aviation LLC was? 24.5%.
(7) The registered office address of this company is available
upon request at the Company's Head Office at the above address.
During the year ended 31 December 2021 the Company disposed of
the following undertakings held directly or indirectly at 31
December 2020:
Name Place of Proportion Proportion Method of Registered address
incorporation of voting of voting disposal
and operation and ownership and ownership
interest interest
2021 2020
--------------------- --------------------- -------------- -------------- ---------- --------------------
Aerstream England and
Limited(1) Wales - 100% Dissolved Head Office
---------------------- ---------------------- -------------- -------------- ---------- --------------------
Avialogistics England and - 100% Dissolved Head Office
Limited(1) Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Aviation Crewing England and - 100% Dissolved Head Office
Limited Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Gama Aviation England and - 100% Dissolved Head Office
Group Limited(1) Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Gama Aviation England and - 100% Dissolved Head Office
(Training) Wales
Limited(1)
--------------------- --------------------- -------------- -------------- ---------- --------------------
GA 259034 England and - 100% Dissolved Head Office
Limited(1) Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
GA FM54 Limited(1) England and - 100% Dissolved Head Office
Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Gama Leasing England and - 100% Dissolved Head Office
Limited(1) Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Hangar 8 AOC England and - 100% Dissolved Head Office
Limited Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Hangar 8 Engineering England and - 100% Dissolved Head Office
Limited Wales
--------------------- --------------------- -------------- -------------- ---------- --------------------
Infinity Flight England and - 100% Dissolved Head Office
Crew Academy Wales
Limited
--------------------- --------------------- -------------- -------------- ---------- --------------------
Aviation Beauport Jersey - 100% Dissolved Jersey Office
Holdings Limited(1)
--------------------- --------------------- -------------- -------------- ---------- --------------------
Ferron Trading Jersey - 100% Dissolved Jersey Office
Limited(1)
--------------------- --------------------- -------------- -------------- ---------- --------------------
Gama Aviation Switzerland - 100% Liquidated Boulevard
SA(1) Georges-Favon
43, 1204
Genève,
Switzerland
--------------------- --------------------- -------------- -------------- ---------- --------------------
Hangar 8 Mauritius
Limited Mauritius - 100% Struck off (2)
---------------------- ---------------------- -------------- -------------- ---------- --------------------
China Aircraft Hong Kong - 20% Sold 8th Floor, Main
Services Limited Building,
(CASL) Hangar and Workshop
Complex, 81 South
Perimeter Road, Hong
Kong International
Airport, Lantau,
Hong Kong
---------------------- ---------------------- -------------- -------------- ---------- --------------------
(1) Indicates indirect holding.
(2) The registered office address of this company is available
upon request at the Company's Head Office at the above address.
17. Investments accounted for using the equity method and
disposal of investments
Details of the Group's investments accounted for using the
equity method at 31 December 2021 are as follows:
Place of
incorporation and Proportion of Proportion of
Name Investment operation ownership interest voting power held
----------------------------- ----------- -------------------- -------------------- ------------------
GB Aviation Holdings LLC(1) Associate USA 50% 50%
Details of the Group's investments accounted for using the
equity method at 31 December 2020 were as follows:
Place of
incorporation and Proportion of Proportion of
Name Investment operation ownership interest voting power held
-------------------------------- ----------- ------------------- ------------------- ------------------
GB Aviation Holdings LLC(1) Associate USA 50% 50%
China Aircraft Services Limited Associate Hong Kong 20.0% 20.0%
-------------------------------- ----------- ------------------- ------------------- ------------------
(1) GB Aviation Holdings LLC is the entity jointly held with
Signature Aviation Limited (previously 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 prior year,
refer to Note 17. 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.
The results of the equity accounted investments are as
follows:
Gama Aviation LLC China Aircraft Services Limited
------------------------------------------- -------------------------------------- ---------------------------------
Year ended
Year ended 2021 Year ended 2020 Year ended 2021 2020
$'000 $'000 $'000 $'000
------------------------------------------- ------------------- ----------------- -------------------- -----------
Revenue - 75,053 8,524 33,389
Expenditure - (74,732) (16,079) (50,432)
Impairment of property, plant and equipment - - - (16,433)
Impairment of right-of-use assets - - - (15,732)
------------------------------------------- ------------------- ----------------- -------------------- -----------
Profit/(loss) before tax - 321 (7,555) (49,208)
Income tax (charge)/credit - (2) 99 292
------------------------------------------- ------------------- ----------------- -------------------- -----------
Profit/(loss) after tax - 319 (7,456) (48,916)
------------------------------------------- ------------------- ----------------- -------------------- -----------
Statutory result: Group's share of net
profit/(loss) - 78 (1,491) (9,783)
Statutory result: Share of results from
equity accounting - 78 (1,491) (9,783)
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 (1,491) (3,350)
------------------------------------------- ------------------- ----------------- -------------------- -----------
Reversal of/(impairment) of equity
accounted investments - - 1,491 (3,421)
------------------------------------------- ------------------- ----------------- -------------------- -----------
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.
China Aircraft Services Limited
In 2021, the share of results from the equity accounted
investment in China Aircraft Services Limited represents the period
ending 31 May 2021, this being the date the Board accepted in
principle an offer of $2m for its 20% shareholding, and
subsequently recognised the asset as held for sale at fair value.
Adjusting items includes an impairment reversal, recognised in line
with IAS 36, to the extent of the Group's share of losses of $1.5m
such that the carrying amount of the investment directly before the
sale was held at $2m. On 31 December 2021, the sale of the
investment was agreed and $2m cash consideration received in full.
As a result, assets held for sale at 31 December 2021 were nil.
In 2020, 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. Impairment charges of $9,854k were recognised in
Adjusting items. $6,433k related to an impairment on non-current
assets in CASL which were presented outside Adjusted EBIT due to
their size and irregular occurrence, and to enable better
comparability year on year. The remaining impairment charge of
$3,421k was to reduce the equity accounted investment in CASL from
the carrying amount to its recoverable amount of $2,000k. Costs to
sell are estimated to be nil.
The investments' values are as follows:
China Aircraft Services Limited Gama Aviation LLC
--------------------------------- ------------------------
Year ended Year ended Year ended Year ended
2021 2020 2021 2020
$'000 $'000 $'000 $'000
--------------------------- ---------------- --------------- ------------ ----------
At 1 January 2,000 15,112 - -
Other comprehensive income - 92 - -
Share of net profit/(loss) (1,491) (9,783) - 78
Dividends declared - - - -
Prior year dividend - - - -
Reversal of/(impairment) 1,491 (3,421) - -
Transfer to profit on sale - - - (78)
Disposal of investment (2,000) - - -
--------------------------- ---------------- --------------- ------------ ----------
At 31 December - 2,000 - -
--------------------------- ---------------- --------------- ------------ ----------
The summary financial positions of the equity accounted
investments are as follows:
China Aircraft Services Limited
----------------------------------
Year ended
2020
$'000
---------------------------- ---- ----------------------------
Total assets 63,284
Total liabilities (46,014)
---------------------------------- ----------------------------
Net assets 17,270
Group's share of net assets 3,454
Goodwill 1,320
Impairment (2,774)
At 31 December 2,000
---------------------------------- ----------------------------
At 31 December 2021, the equity accounted investment in China
Aircraft Services Limited was disposed following the board's
receipt of a $2m offer for its 20% share. The Group received the
$2m cash consideration in full on the 31 December 2021.
Year ended
2021
$'000
--------------------------------------------- -----------
Proceeds on disposal 2,000
Less: Carrying amount of net assets sold (2,000)
--------------------------------------------- -----------
Profit on disposal of interest in associates -
--------------------------------------------- -----------
Gama Aviation LLC
On 2 March 2020, the Group announced the sale of its US Air
Associate, Gama Aviation LLC (doing business as "Gama Aviation
Signature") to Wheels Up Partners Holdings LLC ("Wheels Up"). Gama
Aviation Signature was owned 49% by GB Aviation Holdings LLC, a
joint venture between the Group and Signature Aviation plc, with
the remaining 51% held by the Group's US partners.
Gama Aviation received consideration of $10.0m in return for its
24.5% equity interest. In addition, an amount of $23.0m was agreed
related to licensing and other trading related considerations.
$13.0m of the total agreed was received in cash at closing
(including the full $10m associated to the equity sale), with the
remaining $20.0m to be paid in cash, with interest of $2,774k, in
eight equal six-month instalments over four years. At 31 December
2021 $nil (2020: $18,034k) deferred consideration was included
within trade and other receivables.
On 14 July 2021, Wheels Up listed on the New York Stock
Exchange, triggering a mandatory prepayment provision under the
terms of the promissory note. On 20 July 2021, the Company received
a combined payment of $15,250k, in cash from Wheels Up,
representing the remaining amount due to the Company under the
promissory note.
As a result of the early settlement of the deferred
consideration, finance income recognised for the prior period to
full settlement was reduced to $90k. Total interest of GBP1,054k
was paid on the deferred consideration.
Included within deferred revenue at 31 December 2021 is
licensing and other trading related considerations of $625k in
current liabilities.
As part of the transaction, GB Aviation Holdings LLC licensed
the continued use of the Gama Aviation Signature brand for up to
two years, for which $7.5m of consideration has been allocated and
is being recognised as revenue over the two-year period. In 2021,
$3,750k (2020: $3,125k) has been recognised as revenue for this
licensing component in the year ended 31 December 2021, in line
with the $3.75m annual licence fee prior to disposal. In addition,
an accelerated branding fee of $15,500k was recognised in Adjusting
items in the prior year.
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(1) 78
----------------------------------------------------------------------- --------
Carrying amount of net assets sold 2,676
Profit on disposal of interest in associates, before taxation 7,278
----------------------------------------------------------------------- --------
(1) 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.
18. Inventories
2021 2020
$'000 $'000
------------------------------ ------- -------
Raw materials and consumables 8,911 5,922
Work in progress 4 56
------------------------------ ------- -------
8,915 5,978
------------------------------ ------- -------
The Directors consider that the carrying value of inventories is
approximately equal to their fair value. The cost of inventories
recognised as an expense in the year was $16,071k (2020: $14,682k).
Included within inventories is an inventory obsolescence allowance
of $5,896k (2020: $5,048k) to measure inventories at the lower of
cost or net realisable value.
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 2021, the Board considers its assessment of
net realisable value to be appropriate based on best information
available. If the usage of inventory aged between two and six years
decreased by 10%, thus increasing each respective provision by 10%,
the loss for the year would increase by $528k.
19. Trade and other receivables
2021 2020
$'000 $'000
-------------------------------------------- ------- -------
Financial assets
Amounts receivable for the sale of services 40,559 30,792
Loss allowance (5,682) (6,954)
-------------------------------------------- ------- -------
34,877 23,838
Amounts due from associates - 970
Financial asset at amortised cost - 18,034
Accrued income(1) 18,453 14,475
-------------------------------------------- ------- -------
Financial assets 53,330 57,317
Non-financial assets
Prepayments(1) 3,667 3,763
Other debtors 7,102 1,309
-------------------------------------------- ------- -------
Total trade and other receivables 64,099 62,389
-------------------------------------------- ------- -------
Current 63,808 49,359
Non-current 291 13,030
-------------------------------------------- ------- -------
Total trade and other receivables 64,099 62,389
-------------------------------------------- ------- -------
(1) 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 (2020: 62
days). 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. Interest of $432k (2020: $nil) was charged on a
late customer payment in the Middle East.
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 $5,682k (2020: $6,954k).
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 other debtors.
Ageing of impaired amounts receivable for the sale of
services
2021 2020
$'000 $'000
---------------------- ------- -------
Not yet due 11,062 8,590
Less than 30 days 10,558 3,676
30-60 days 2,558 2,448
61-90 days 2,236 1,467
91-120 days 2,565 2,104
Greater than 120 days 5,898 5,553
---------------------- ------- -------
Total 34,877 23,838
---------------------- ------- -------
Movement in the loss allowance
2021 2020
$'000 $'000
------------------------------------------------------------------------------- ------- -------
At 1 January 6,954 3,896
Impairment (reversal)/losses recognised in income statement in Adjusted result (21) 3,792
Impairment losses recognised in income statement in Adjusting items - (709)
Amounts written off as uncollectible (1,197) (171)
Foreign exchange translation gains and losses (54) 146
------------------------------------------------------------------------------- ------- -------
At 31 December 5,682 6,954
------------------------------------------------------------------------------- ------- -------
The $1,197k write-off in the current year relates to the
settlement of historic overdue receivables in Business Aviation.
The impairment reversal in 2021 includes a settlement within
Business Aviation MRO US, which resulted in a $269k credit to the
impairment losses recognised in Adjusted EBIT, and a settlement
within Business Aviation excluding MRO US, which resulted in a
$233k charge to the impairment losses recognised in Adjusted
EBIT.
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 impairments on amounts receivable for the sale of
services
2021 2020
$'000 $'000
---------------------- ------- -------
Not yet due 97 54
Less than 30 days 29 43
30-60 days 8 9
61-90 days 11 63
91-120 days 6 73
Greater than 120 days 5,531 6,712
---------------------- ------- -------
Total 5,682 6,954
---------------------- ------- -------
The Directors consider that the carrying amount of trade and
other receivables is approximately equal to their fair value.
In the Business Aviation excluding MRO US SBU, the Group
commonly obtains security in the form of contractual lien, parent
company guarantee or a bank guarantee to support the trade
receivables arising from aircraft management agreements. A similar
contractual right of lien is contained within the General Terms and
Conditions for MRO (Maintenance, Repair & Overhaul) services
and is also commonly contained within the terms and conditions of
individual MRO services proposals where for higher value work
programmes stage payments are the norm, and where considered
appropriate a requirement for full up-front payment is imposed. At
the year end, trade receivables within the Business Aviation
excluding MRO US SBU that are secured by contractual liens total
$4,339k (2020: $3,452k). Additionally, in the US, liens can be
filed to protect past due unpaid balances.
Refer to Note 35 regarding the receipt of a historic receivable
after the balance sheet date.
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 $5,682k 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 $7,224k 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. If all remaining
gross receivable balances were impaired by an additional 1% of the
gross receivables balance, the expected credit loss would be
increased by $406k.
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 2021, the carrying amount
is $nil (2020: $18,034k).
Accrued income
Accrued income is expected to be billed within the next twelve
months. The large increase year on year is primarily due to the
acquisition of Jet East in the US at the start of 2021 and specific
contracts in the UK.
Contract assets
As part of a Fleet Maintenance programme in the UK on a
long-term contract, contract assets of $269k (2020: $579k) have
been recognised in prepayments.
Contract assets arising from design and modification projects of
$993k (2020: $1,419k) in the UK 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 $1,065k (2020: $1,692k) are included within accrued
income.
Total contract assets are $2,327k (2020: $3,690k).
20. Deferred consideration
The acquisition of Jet East included deferred consideration as
described in Note 12.
2021 2020
$'000 $'000
--------------------------------------------------------------------------- ------- -------
Deferred consideration recognised on acquisition, adjusted for discounting 533 -
Discount unwind on deferred consideration 13 -
546 -
--------------------------------------------------------------------------- ------- -------
Due within one year 290 -
Due after more than one year 256 -
--------------------------------------------------------------------------- ------- -------
546 -
--------------------------------------------------------------------------- ------- -------
21. Borrowings
2021 2020
$'000 $'000
------------------------------------------------- ------- ------
Secured borrowings at amortised cost
Bank borrowings 64,739 52,197
Unsecured borrowing at amortised cost
Repayable element of Paycheck Protection Program 1,000 1,000
Other loans 1, 415 -
67,154 53,197
------------------------------------------------- ------- ------
Total borrowings
Repayable element of Paycheck Protection Program 1,000 1,000
Bank borrowings 37,760 -
Other loans 1, 415 -
------------------------------------------------- ------- ------
Amount due for settlement within 12 months 40,175 1,000
------------------------------------------------- ------- ------
Bank borrowings 26,979 52,197
------------------------------------------------- ------- ------
Amount due for settlement after 12 months 26,979 52,197
------------------------------------------------- ------- ------
Analysis of borrowings by currency:
Sterling US Dollars Total
$'000 $'000 $'000
------------------------------------------------- -------- ---------- ------
31 December 2021
Repayable element of Paycheck Protection Program - 1,000 1,000
Bank borrowings 49,739 15,000 64,739
Other loans - 1, 415 1,415
------------------------------------------------- -------- ---------- ------
49,739 17,415 67,154
------------------------------------------------- -------- ---------- ------
31 December 2020
Repayable element of Paycheck Protection Program - 1,000 1,000
Bank borrowings 52,197 - 52,197
------------------------------------------------- -------- ---------- ------
52,197 1,000 53,197
------------------------------------------------- -------- ---------- ------
During the prior year, the Group received funds under the
Paycheck Protection Program in the form of a loan arrangement from
Citibank guaranteed by the US Government, which was 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 were
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 were therefore
recognised in 2020 as income against the related expenses in the
income statement, reducing the amount of borrowings at the period
end to a repayable element of $1,000k. Confirmation of partial loan
forgiveness is expected within 12 months from the balance sheet
date. Refer to Note 2 (c), Note 3 (b) and Note 35 for further
details.
On other unsecured loans of $1,415k (2020: $nil), interest arose
at an average of 6.6% during 2021 (2020: nil). Previously the Group
held secured loans which were settled during 2020 that accrued
interest at an average rate of 5.4% before settlement.
The other principal features of the Group's bank borrowings are
as follows:
-- Bank borrowings in 2021 of $64,666k (2020: $52,197k) comprise
drawdowns from an RCF and a term loan (the "Loan"), both secured
with HSBC
-- The RCF, which is presented in current liabilities, is
settled and drawn down on a cyclical basis. The facility matures on
14 November 2022
-- A letter of awareness has been provided by CK Hutchison
Holdings Ltd (CKHH) to HSBC, 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. In addition, on 20 April 2022 an updated letter
confirms that CKHH has no current intention to withdraw the current
letter of awareness before the facilities are due for renewal; and
that CKHH currently has no intention not to facilitate renewal of
the Group's facilities with HSBC through a comparable arrangement,
provided the Group continues to meet its ongoing reporting
obligations and such other conditions as may be agreed between the
parties
-- The RCF is $50,000k, and $12,068k (2020: $24,749k) was
undrawn at the end of the reporting period
-- During 2020, the Group completed the purchase of three Airbus
H145 helicopters, which came into use on 1 June 2020 in support of
a long-term contract. The purchase was funded through a GBP20m term
loan which matures in January 2023
-- The Loan and the RCF (collectively the "Facilities") are
subject to customary banking security arrangements
-- During the prior year, the Group issued a debenture as security against the Loan and RCF
Drawn
(Local Drawn
Facility currency) (Presentation currency)
2021 Interest Maturity '000 '000 $'000
--------------------------------- ---------- ----------------- ----------- ------------ -------------------------
RCF See below 14 November 2022 USD 50,000 GBP 17,000 22,932
USD 15,000 15,000
Term loan See below 31 January 2023 GBP 20,000 GBP 20,000 26,979
--------------------------------- ---------- ----------------- ----------- ------------ -------------------------
Bank borrowing before arrangement fees 64,911
Capitalised loan arrangement fees (175)
------------------------------------------------------------------------------------------- -------------------------
Bank borrowings 64,739
------------------------------------------------------------------------------------------- -------------------------
Drawn
(Local Drawn
Facility currency) (Presentation currency)
2020 Interest Maturity '000 '000 $'000
----------------------------- -------------- ----------------- ----------- ------------ -------------------------
RCF LIBOR + 0.94% 14 November 2022 USD 50,000 GBP 18,500 25,251
Term loan LIBOR + 1.12% 31 January 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
------------------------------------------------------------------------------------------- -------------------------
Following the global financial crisis in 2008, the reform and
replacement of benchmark interest rates such as GBP LIBOR and other
inter-bank offered rates (IBORs) became a priority for global
regulators. As a result, LIBOR was wound down during 2021, and the
lender for the RCF and term loans removed the reference to LIBOR,
with interest instead being derived from SONIA, the Bank of England
Bank Rate and a spread adjustment.
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.
Fixed asset Deferred consideration on
Acquired and other US air associate temporary
intangibles temporary differences differences Tax losses Total
$'000 $'000 $'000 $'000 $'000
----------------------------- ------------ ---------------------- ---------------------------- ---------- -------
At 1 January 2020 - (157) - 1,590 1,433
Acquisitions (62) - - - (62)
Credit/(charge) in year (Note
10) 5 62 (2,986) (561) (3,480)
Exchange differences - (23) - 23 -
----------------------------- ------------ ---------------------- ---------------------------- ---------- -------
At 31 December 2020 (57) (118) (2,986) 1,052 (2,109)
Acquisitions (1,736) 1,418 - - (318)
Charge/(credit) in year (Note
10) 203 (1,261) 3,147 4,258 6,347
Exchange differences - (2) - - (2)
----------------------------- ------------ ---------------------- ---------------------------- ---------- -------
At 31 December 2021 (1,590) 37 161 5,310 3,918
----------------------------- ------------ ---------------------- ---------------------------- ---------- -------
Acquired intangibles represent the value of the deferred tax
liability which arises on the fair value of acquired intangibles.
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:
2021 2020
$'000 $'000
------------------------------------------------ ------- -------
Deferred tax asset due after more than one year 3,918 -
Deferred tax liability - (2,109)
------------------------------------------------ ------- -------
Net deferred tax asset/(liability) 3,918 (2,109)
------------------------------------------------ ------- -------
Estimation uncertainty
The Group has recognised deferred tax assets on both timing
differences, principally acquisition intangibles, and on taxable
losses. In recognising these assets, management have reviewed the
future expected profitability of the business in each tax
jurisdiction and the ability to utilise existing taxable
losses.
The deferred tax asset at 31 December 2021 includes an amount of
$1,328k arising on the acquisition of Jet East during the year. The
initial valuation of the asset on acquisition ($1,418k) equated to
the tax value of the consideration paid in excess of the fair value
of assets acquired, which is tax deductible in the US over 15 years
and adjusts future taxable profits and losses.
The Group has the following tax losses:
2021 2020 2021 2020 2021 2020
Recognised Recognised Unrecognised Unrecognised Total Total
$'000 $'000 $'000 $'000 $'000 $'000
----------- ----------- ----------- ------------- ------------- ------ ------
UK(1) 2,222 2,321 27,059 29,184 29,281 31,505
US federal 16,806 1,464 - - 16,806 1,464
US state 20,418 5,064 - - 20,418 5,064
Poland - - 75 - 75 -
HK - - 5,139 5,095 5,139 5,095
----------- ----------- ----------- ------------- ------------- ------ ------
Tax losses 39,446 8,849 32,273 34,279 71,719 43,128
----------- ----------- ----------- ------------- ------------- ------ ------
(1) Tax losses relating to dissolved companies have been
surrendered in the year (see Note 16)
The above losses represent the following value at tax rates
applicable at the balance sheet date:
2021 2020 2021 2020 2021 2020
Recognised Recognised Unrecognised Unrecognised Total Total
$'000 $'000 $'000 $'000 $'000 $'000
------------------------------------ ----------- ----------- ------------- ------------- ------ ------
UK 555 441 6,765 5,545 7,320 5,986
US 4,754 611 - - 4,754 611
Poland - - 14 - 14 -
HK - - 848 968 848 968
------------------------------------ ----------- ----------- ------------- ------------- ------ ------
Potential tax benefit of tax losses 5,310 1,052 7,627 6,513 12,937 7,565
------------------------------------ ----------- ----------- ------------- ------------- ------ ------
Losses in the UK, US and Hong Kong can be carried forward
indefinitely. Tax losses in Poland can be carried forward for 5
years.
In the UK, expected changes to borrowing rates reduce future
taxable profits, reducing the value of taxable losses that have
been recognised. In the US, management have concluded that the
losses, including those relating to unwinding of the asset on the
Jet East acquisition, are recoverable against expected future
taxable income. In Poland the entity is a start up and until the
business is established, future profits are uncertain hence the
asset has not been recognised. In Hong Kong, management have not
recognised deferred tax assets on losses as the current business is
not operating.
Temporary differences of $26,291k (2020: $26,233k) 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.
At 31 December 2020, future profitable projections were impacted
by the ongoing COVID-19 pandemic and as a result deferred tax
balances of $485k were written off during 2020.
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.
Restatement
During 2021, a review was conducted on Group leases. This found
errors on the implementation of IFRS 16 (1 January 2019) and
subsequent recognition relating to the treatment of contractual
rental increases, initial balances held at implementation
(impacting subsequent impairments), completeness, computational
errors on foreign exchange, identification of payments and the
length of lease used. 2020 figures have been restated to correct
these errors.
The restatement has impacted the consolidated income statements,
consolidated statements of comprehensive income, balance sheets and
consolidated cash flow statements, as shown in Note 2.
Right-of-use assets
Leasehold property Fixtures, fittings and equipment Aircraft Vehicles Total
$'000 $'000 $'000 $'000 $'000
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Cost
At 1 January 2020 as reported 51,596 72 19,118 205 70,991
Restatement(1) 940 - - 9 949
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 1 January 2020 as restated 52,536 72 19,118 214 71,940
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Additions as reported 6,846 - - - 6,846
Restatement(1) (3,399) - - 113 (3,286)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Additions as restated 3,447 - - 113 3,560
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Derecognition as reported (2,539) - (19,417) - (21,956)
Restatement(1) 1,592 (55) - (23) 1,514
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Derecognition as restated (947) (55) (19,417) (23) (20,442)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Exchange differences as reported 1,595 2 299 8 1,904
Restatement(1) (193) (3) - 5 (191)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Exchange differences restated 1,402 (1) 299 13 1, 713
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 31 December 2020 restated 56,438 16 - 317 56,771
Additions 7,265 123 - 164 7,552
Disposals (2,862) (10) - (161) (3,033)
Acquisition 3,387 7 - - 3,394
Exchange differences (385) - - (1) (386)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 31 December 2021 63,843 136 - 319 64,298
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Accumulated depreciation and
impairment
At 1 January 2020 as reported 8,270 46 10,285 75 18,676
Restatement(1) 10 2 (37) (2) (27)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 1 January 2020 as restated 8,280 48 10,248 73 18,649
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Charge for the year - admin
expenses as reported 521 19 - - 540
Restatement(1) 190 - - - 190
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Charge for the year - admin
expenses as restated 711 19 - - 730
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Charge for the year - cost of
sales as reported 5,582 - 5,052 74 10,708
Restatement(1) 368 - - 26 394
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Charge for the year - cost of
sales as restated 5,950 - 5,052 100 11,102
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Impairment as reported 7,013 - - - 7,013
Restatement(1) (469) - - - (469)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Impairment as restated 6,544 - - - 6,544
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Derecognition as reported (2,539) - (15,574) - (18,113)
Restatement(1) 1,775 (55) 1 (23) 1,628
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Derecognition as restated (764) (55) (15,573) (23) (16,415)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Exchange differences as reported 691 4 237 7 939
Restatement(1) (224) (5) 36 - (193)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Exchange differences as restated 467 (1) 273 7 746
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 31 December 2020 as restated 21,188 11 - 157 21,356
Charge for the year - admin
expenses 955 15 - 47 1,017
Charge for the year - cost of
sales 6,426 2 - 79 6,507
Impairment 1,911 - - - 1,911
Disposals (2,603) (10) - (161) (2,774)
Exchange differences (101) - - (1) (102)
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 31 December 2021 27,776 18 - 121 27,915
---------------------------------- ------------------ -------------------------------- -------- -------- --------
Carrying amount
At 31 December 2021 36,067 118 - 198 36,383
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 31 December 2020 restated(1) 35,250 5 - 160 35,415
---------------------------------- ------------------ -------------------------------- -------- -------- --------
At 1 January 2020 restated(1) 44,256 24 8,870 141 53,291
---------------------------------- ------------------ -------------------------------- -------- -------- --------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
Obligations under leases
Leasehold Fixtures, fittings
property and equipment Aircraft Vehicles Total
$'000 $'000 $'000 $'000 $'000
--------------------------------- --------- ------------------ -------- -------- --------
At 1 January 2020 as reported 47,817 20 12,228 139 60,204
Restatement(1) 1,599 4 (207) 44 1,440
--------------------------------- --------- ------------------ -------- -------- --------
At 1 January 2020 as restated 49,416 24 12,021 183 61,644
--------------------------------- --------- ------------------ -------- -------- --------
Additions as reported 6,846 - - - 6,846
Restatement(1) (3,656) - - 113 (3,543)
--------------------------------- --------- ------------------ -------- -------- --------
Additions as restated 3,190 - - 113 3,303
--------------------------------- --------- ------------------ -------- -------- --------
Finance expense as reported 2,592 - 147 4 2,743
Restatement(1) (139) - - 2 (137)
--------------------------------- --------- ------------------ -------- -------- --------
Finance expense as restated 2,453 - 147 6 2,606
--------------------------------- --------- ------------------ -------- -------- --------
Lease payments as reported (8,094) (13) (7,878) (44) (16,029)
Restatement(1) (1,616) (8) - (30) (1,654)
--------------------------------- --------- ------------------ -------- -------- --------
Lease payments as restated (9,710) (21) (7,878) (74) (17,683)
--------------------------------- --------- ------------------ -------- -------- --------
Derecognition as reported - - (4,083) - (4,083)
Restatement(1) (184) - - - (184)
--------------------------------- --------- ------------------ -------- -------- --------
Derecognition as restated (184) - (4,083) - (4,267)
--------------------------------- --------- ------------------ -------- -------- --------
Rent free credit as restated (259) - - - (259)
--------------------------------- --------- ------------------ -------- -------- --------
Exchange differences as reported 264 (9) (414) (37) (196)
Restatement(1) 729 9 207 46 991
--------------------------------- --------- ------------------ -------- -------- --------
Exchange differences as restated 993 - (207) 9 795
--------------------------------- --------- ------------------ -------- -------- --------
At 31 December 2020 restated 45,899 3 - 237 46,139
Additions 7,265 123 - 164 7,552
Disposals (259) - - - (259)
Acquisitions 3,387 7 - - 3,394
Finance expense 2,614 3 - 7 2,624
Derecognition (1,626) - - - (1,626)
Lease payments (9,447) (19) - (107) (9,573)
Rent free credit (110) - - - (110)
Exchange differences (144) - - 5 (139)
--------------------------------- --------- ------------------ -------- -------- --------
At 31 December 2021 47,579 117 - 306 48,002
--------------------------------- --------- ------------------ -------- -------- --------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
Following the surrender of the lease at Fairoaks airport a
$1,626k profit has been recognised in derecognition of remaining
lease liabilities. This amount is recognised within other
income.
2020
2021 Restated(1)
$'000 $'000
---------------------------------------------------------------------------------- ------- ------------
Maturity analysis - contractual undiscounted cash flows:
Less than one year 8,101 8,762
One to five years 22,307 22,030
More than five years 56,760 37,030
---------------------------------------------------------------------------------- ------- ------------
Total undiscounted lease liabilities at 31 December 87,168 67,822
---------------------------------------------------------------------------------- ------- ------------
Lease liabilities included in the statement of financial position at 31 December:
Current 7,970 8,566
Non-current 40,032 37,573
---------------------------------------------------------------------------------- ------- ------------
Total lease liabilities at 31 December 48,002 46,139
---------------------------------------------------------------------------------- ------- ------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements.
Amounts recognised in income statement
The consolidated income statement shows the following amounts
relating to leases:
2020
2021 Restated(1)
$'000 $'000
---------------------------------------------------------------- ------- ------------
Depreciation charge of right-of-use assets
Leasehold property 7,381 6,661
Fixtures, fittings and equipment 17 19
Aircraft - 5,052
Vehicles 126 100
---------------------------------------------------------------- ------- ------------
Total depreciation charge of right-of-use-assets 7,524 11,832
---------------------------------------------------------------- ------- ------------
Interest expense (included in finance cost) 2,624 2,606
Expenses relating to short-term leases of twelve months or less 1,370 740
Impairment of right-of-use assets 1,911 6,544
Profit on derecognition of leases (1,626) (240)
Rent free credit(2) (110) (259)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The rent free credit arose on the Sharjah lease as the
landlord gave the Group Covid-19 related concessions. No other
concessions have been received by the Group.
There are no expenses relating to low value assets or expenses
relating to variable lease payments. An impairment loss of $1,911k
has been recognised in 2021 in relation to the right-of-use leased
asset at Sharjah Airport (2020: impairment of $6,544k restated) as
the lease was extended in 2021 but funding for the project has not
yet been finalised.
Average incremental borrowing rates applied across the Group
were:
2021 2020
% %
--------------------------------- ----- ----
Leasehold property 5.7 5.5
Vehicles 4.9 3.9
Fixtures, fittings and equipment 6.8 4.6
--------------------------------- ----- ----
Property leases with a remaining lease term of more than ten
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 BAC at Sharjah Airport. The agreement now runs from
June 2017 until June 2052 following the exercise of the ten-year
extension option during the year. The lease liability has been
discounted at an incremental borrowing rate of 7.3% (2020: 7.3%).
The Sharjah BAC includes a $9,850k (2020: $7,964k restated)
obligation under leases at 31 December 2021 following the
formalisation of the ten year lease extension.
Critical management judgement
A critical management judgement at the reporting date, relates
to the determination of the recoverable amount of nil for the
Sharjah BAC project. This is based on the Management's judgement
that whilst the Group is in advanced discussions with investors
regarding the funding of this project, the Board considers that it
would be inappropriate to reverse impairments relating to the BAC
project until the full funding has been contractually secured.
24. Trade and other payables
2020
2021 Restated(1)
$'000 $'000
------------------------------------------ ------- ------------
Financial liabilities
Trade and other payables 15,470 11,484
Accruals 15,482 10,864
Amounts due to associates - 1,046
------------------------------------------ ------- ------------
30,952 23,394
Non-financial liabilities
Other long-term employee benefits accrual 1,821 -
Other taxation and social security 1,591 5,002
Income received in advance 6,799 6,689
------------------------------------------ ------- ------------
10,211 11,691
Total trade and other payables 41,163 35,085
------------------------------------------ ------- ------------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
Current 39,342 35,085
Non-current 1,821 -
------------------------------- ------ ------
Total trade and other payables 41,163 35,085
------------------------------- ------ ------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The average Days
Payables Outstanding (DPO) is 30 days (2020: 29 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 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.
See Note 32 for further details on the other long-term employee
benefits accrual.
25. Issued capital and reserves
Number GBP'000 $'000
--------------------------------------------------- ---------- ------- -----
Ordinary shares: authorised, issued and fully paid
--------------------------------------------------- ---------- ------- -----
At 1 January 2020 63,636,279 636 953
--------------------------------------------------- ---------- ------- -----
At 31 December 2020 63,636,279 636 953
Shares issued 50,000 1 1
At 31 December 2021 63,686,279 637 954
--------------------------------------------------- ---------- ------- -----
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 2020 63,473
-------------------- ------
At 31 December 2020 63,473
Shares issued 29
-------------------- ------
At 31 December 2020 63,502
-------------------- ------
Share premium represents the amount subscribed for share capital
in excess of nominal value, net of historic placement fees of
GBP1,526k or $1,987k (2020: GBP1,526k or $1,987k).
Other reserves
Merger
relief Reverse takeover Other Share-based
reserve reserve reserve payment reserve Total
$'000 $'000 $'000 $'000 $'000
------------------------------------------------------ -------- ---------------- -------- ---------------- ------
At 1 January 2020 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
Share-based payment expense for share options (Note
31) - - - 244 244
Transfer for lapsed options - - - (607) (607)
Balance at 31 December 2021 108,595 (95,828) 20,336 1,894 34,997
------------------------------------------------------ -------- ---------------- -------- ---------------- ------
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 (2020: 219,310) shares which are held in the employee
benefit trust. The fair value of these shares at 31 December 2021
was GBP95k (2020: GBP84k).
26. Non-controlling interest
$'000
-------------------------------------------------------------- -----
Balance at 1 January 2020 751
Total comprehensive income attributable to minority interests 45
-------------------------------------------------------------- -----
Balance at 31 December 2020 796
Total comprehensive income attributable to minority interests (703)
-------------------------------------------------------------- -----
Balance at 31 December 2021 93
-------------------------------------------------------------- -----
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.
Set out below is summarised financial information for Gama
Aviation FZC, before intercompany eliminations:
2021 2020
$'000 $'000
-------------------- --------- --------
Current assets 14,454 14,362
Current liabilities (14,022) (10,416)
-------------------- --------- --------
Current net assets 432 3,946
Non-current assets 32 32
Net assets 464 3,978
-------------------- --------- --------
Accumulated NCI 93 796
-------------------- --------- --------
2021 2020
$'000 $'000
--------------------------- -------- ------
Revenue 28,081 18,418
--------------------------- -------- ------
(Loss)/profit for the year (3,514) 227
--------------------------- -------- ------
Other comprehensive income - -
--------------------------- -------- ------
Total comprehensive income (3,514) 227
--------------------------- -------- ------
27. Net cash generated by operating activities
2020
2021 Restated(1)
$'000 $'000
------------------------------------------------------------------------------------------- -------- -------------
Loss before tax (10,745) (8,142)
Adjustments for:
Finance income (Note 8) (617) (1,535)
Finance costs (Note 9) 4,110 3,817
Depreciation of property, plant and equipment (Note 15) 6,441 4,773
Depreciation of right-of-use assets in administrative expenses (Note 23) 1,017 730
Depreciation of right-of-use assets in cost of sales (Note 23) 6,507 11,102
Amortisation of intangible assets (Note 14) 3,355 2,195
Impairment of right-of-use assets (Note 23) 1,911 6,544
Impairment of property, plant and equipment (Note 6) - 4,609
Impairment of non-current assets within share of results from equity accounted investments
(Note 6) - 6,433
Impairment of other intangible assets (Note 14) - 833
Lease credit recognised (Note 23) (110) (259)
Non-cash lease settlement (Note 23) (1,626) -
Loss on disposal of property, plant and equipment (Note 15) 6 63
Share of loss/(profit) of associates (Note 17) 1,491 3,272
Profit on disposal of interest in associate (Note 17) - (7,278)
(Reversal)/impairment of equity accounted investment in associate (Note 6) (1,491) 3,421
Utilisation of PPP loan (Note 28) - (4,753)
Share-based payment (Note 31) 257 562
------------------------------------------------------------------------------------------- -------- -------------
Operating cash inflow before movements in working capital 10,506 26,387
Unrealised foreign exchange movements (656) 843
Increase in gross inventories (1,567) (80)
Increase in inventory obsolescence (Note 18) 18 1,520
Decrease in gross receivables(3) 6,229 10,161
(Decrease)/increase in loss allowance for receivables (Note 19) (1,255) 3,083
Decrease in payables and deferred consideration (19) (10,183)
(Decrease)/increase in deferred revenue (4,847) 6,365
(Decrease)/increase in provisions (685) 333
------------------------------------------------------------------------------------------- -------- -------------
Working capital movements (2,782) 12,042
Cash generated by operations(2) 7,724 38,429
Taxes paid on operating activities(4) (3,289) (3,085)
Tax refunds received 790 -
Net cash generated by operating activities 5,225 35,344
------------------------------------------------------------------------------------------- -------- -------------
(1) Restatements are detailed in Note 2 of the notes to the financial statements
(2) Included within cash generated by operations is cash
outflows on exceptional items of $832k in the year (2020:
$0.7m)
(3) Included within decrease in gross receivables is $17,500k
(2020: $2,500k) relating to branding fees agreed on the sale of the
US Air Associate
(4) Taxes paid on operating activities includes $3,129k (2020:
$3,067k) relating to the sale of the US Air Associate
28. Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are
tabulated below.
Borrowings Obligations under leases
--------------------- --------------------------
Long-term Short-term Long-term Short-term Total
$'000 $'000 $'000 $'000 $'000
--------- ---------- ------------ ------------
At 1 January 2020, as reported 45,394 848 43,838 16,366 106,446
Restatement(1) - - (754) 2,194 1,440
----------------------------------------------------- --------- ---------- ------------ ------------ --------
At 1 January 2020, as restated 45,394 848 43,084 18,560 107,886
Cash flows:
Repayments (23,623) (848) - - (24,471)
Proceeds 28,234 5,753 - - 33,987
Lease payments - - - (17,683) (17,683)
Non-cash:
Rent free credit - - - (259) (259)
Lease additions(1) - - 2,717 586 3,303
Assumed loan forgiveness - (4,753) - - (4,753)
Interest on lease liabilities - - 2,307 299 2,606
Foreign currency translation on borrowings in profit
or loss (Note 9) 178 - - - 178
Derecognition - - (2,517) (1,750) (4,267)
Exchange differences(1) 1,872 - 549 246 2,667
Arrangement fee movement on new facility (26) - - - (26)
Amortisation of arrangement fees 168 - - - 168
Reclassification - - (8,566) 8,566 -
----------------------------------------------------- --------- ---------- ------------ ------------ --------
At 31 December 2020, as restated 52,197 1,000 37,573 8,566 99,336
Cash flows:
Repayments (9,573) (2,788) - - (12,361)
Proceeds - 22,574 - - 22,574
Lease payments - - - (9,573) (9,573)
Non-cash:
Rent free credit - - - (110) (110)
Disposal - - (259) - (259)
Acquisition - 4,202 1,818 1,576 7,596
Interest on lease liabilities - - 2,373 251 2,624
Lease additions - - 6,978 574 7,552
Derecognition - - (1,060) (566) (1,626)
Foreign currency translation on borrowings in profit
or loss (Note 9) (24) - - - (24)
Exchange differences (531) (83) (114) (25) (753)
Arrangement fee movement 180 - - - 180
Reclassification (15,270) 15,270 (7,285) 7,285 -
----------------------------------------------------- --------- ---------- ------------ ------------ --------
At 31 December 2021 26,979 40,175 40,032 7,970 115,156
----------------------------------------------------- --------- ---------- ------------ ------------ --------
(1) Restatements are detailed in Note 2 of the notes to the financial statements.
29. Contingent liabilities
The Group had a material contingent liability at 31 December
2021 in respect ofa subsidiary of the Group, Gama Support Services
FZE (GSSF), which 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 BAC 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 prospects for which were initially
frustrated by the COVID-19 pandemic and financing of the BAC, which
resulted in related assets under construction and right-of-use
assets being impaired in the prior year. A 10-year extension to the
Sharjah lease was signed in June 2021 and the related right-of-use
asset has been impaired in the current year. Whilst the Group is in
advanced discussions with investors regarding the funding of this
project, the Board considers that it would be inappropriate to
reverse impairments relating to the BAC project until the full
funding has been contractually secured.
GSSF has until June 2023 to complete and satisfy its
construction obligations. 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 right to seek
compensation for any damage or loss it sustains. It is not possible
to estimate the potential contingent liability.
30. Provisions for liabilities
Employees' End of
Dilapidations Service provision
Provision $'000 Integration
Closure Provision $'000 provision Total
$'000 $'000 $'000
---------------------- ----------------- --------------------- --------------------- --------------------- ------
At 1 January 2021 665 332 500 - 1,497
Restatement(1) - (44) - - (44)
---------------------- ----------------- --------------------- --------------------- --------------------- ------
At 1 January 2021, as
restated 665 288 500 - 1,453
(Credit)/charge to the
income statement
during the year (276) 14 348 416 502
Utilised during the
year (384) - (110) (358) (852)
Foreign exchange 4 (4) - - -
Discounting (Note 9) - 17 - - 17
At 31 December 9 315 738 58 1,120
---------------------- ----------------- --------------------- --------------------- --------------------- ------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
2020
2021 Restated(1)
$'000 $'000
------------ ------- ------------
Current 772 679
Non-current 348 774
Total 1,120 1,453
------------ ------- ------------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
The dilapidations provision relates to leases entered into
during 2020.
The closure provision at 31 December 2021 comprises $9k relating
to the reduction of business activities in Saudi Arabia. At 31
December 2020, the closure provision included $486k relating to the
cessation of the Group's business activities at Fairoaks Airport
and $173k in redundancy provisions relating to the reduction of
business activities in Saudi Arabia. Actual closure costs incurred
relating to the cessation of the Group's activities at Fairoaks
Airport amounted to $276k (Note 6).
Provision for employees' end of service indemnity is made in
accordance with the UAE labour laws and is based on current
remuneration and cumulative years of service at the reporting
date.
The integration provision, of which $58k remains at 31 December
2021 (2020: $nil), relates to severance costs following the
acquisition of Jet East during the year. This is expected to be
paid in 2022.
31. Share-based payments
Equity-settled share option schemes
Share options are awarded to employees under three plans:
-- Gama Aviation Plc Company Share Option Plan 2018 (CSOP)
-- Gama Aviation Plc Additional Share Option Plan 2018 (ASOP)
-- Gama Aviation Plc Long-Term Incentive Plan 2021 (LTIP)
The plans are designed to provide long-term incentives for
employees to deliver long-term shareholder returns. Participation
in the plan is at the Board's discretion, and no individual has a
contractual right to participate in the plan or to receive any
guaranteed benefits.
Performance conditions may be specified under any of the
schemes. No options granted to date under the CSOP and ASOP have
performance conditions. Under the LTIP, options that have been
awarded 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.
However, these conditions may be varied or waived.
Options are granted under the plans for no consideration and
carry no dividend or voting rights.
The normal vesting period for all schemes is three years,
however, options were granted to Directors over 155,000 shares on
29 March 2021 where they vested immediately (the "Director ASOP
Awards"). If options remain unexercised after a period of ten years
from the grant date, the options expire. If an employee leaves
employment of the Group due to injury, ill health, disability,
retirement, redundancy or where the employee's employer ceases to
be part of the Group, a proportion of options are forfeited 90 days
after leaving, being the proportion of the original shares granted
that relate to the period after leaving and prior to vesting, with
the remaining options being forfeited six months after leaving.
Options are forfeited 90 days after leaving if the employee leaves
the Group before the options vest for any other reason.
When exercisable, each option is convertible into one ordinary
share at most 30 days after the valid exercise of an option.
Under the CSOP and ASOP, the exercise price of options is based
on the weighted average price at which the Company's shares are
traded on the Alternative Investment Market of the London Stock
Exchange during the week up to and including the date of the grant.
Under the LTIP, the exercise price is 1.0 pence.
Set out below are summaries of options granted under the
plans:
2021 2020
Average exercise price Average exercise price
per share option Number of options per share option Number of options
(pence) '000 (pence) '000
------------------------ ----------------------- -------------------- ----------------------- --------------------
At 1 January 165.3 3,301 161.6 3,747
Granted during the year 29.1 4,136 - -
Exercised during the
year(1) 1.0 (25) - -
Surrendered during the
year 164.9 (2,276) - -
Forfeited during the
year 135.4 (1,119) 134.3 (446)
------------------------ ----------------------- -------------------- ----------------------- --------------------
At 31 December 34.6 4,017 165.3 3,301
------------------------ ----------------------- -------------------- ----------------------- --------------------
Vested and exercisable
at 31 December 87.9 226 183.1 1,503
------------------------ ----------------------- -------------------- ----------------------- --------------------
(1) The weighted average share price at the date of exercise of
options exercised during the year was 40.5 pence (2020: not
applicable).
Included in the above, on 29 March 2021 options over a total of
2,276,000 shares previously granted to Directors and other
employees were agreed to be surrendered by those employees (the
"Surrendered Awards"). In their place, the Company agreed to grant
options over a total of 1,138,000 shares, at 68.8 pence, to
Directors and other employees on 29 March 2021 (the "Replacement
Awards").
No options expired during 2020 or 2021.
Share options outstanding at the end of the year have the
following expiry dates and exercise prices:
Share options 31 December Share options 31 December
Exercise price 2021 2020
Grant date Expiry date (pence) '000 '000
--------------------------- -------------- ----------------- -------------------------- --------------------------
9 August 2016 8 August 2026 155.0 - 670
22 June 2018 21 June 2028 205.5 33 843
22 June 2018 21 June 2028 205.5 63 921
17 June 2019 16 June 2029 91.5 86 867
26 March 2021 25 March 2031 39.0 965 -
29 March 2021 28 March 2031 68.8 1,046 -
29 March 2021 28 March 2031 1.0 1,694 -
29 March 2021 28 March 2031 1.0 130 -
--------------------------- -------------- ----------------- -------------------------- --------------------------
TOTAL 4,017 3,301
------------------------------------------- ----------------- -------------------------- --------------------------
Weighted average remaining contractual life
of options outstanding at end of period 9.14 years 7.36 years
------------------------------------------- ----------------- -------------------------- --------------------------
The estimated fair values of the awards under the CSOP and ASOP
have been established using a Black Scholes model. This model uses
a number of inputs, including expected dividends, expected share
price volatility and the expected period to exercise.
The estimated fair values of the awards under the LTIP have been
established using a Monte Carlo model. This model uses a number of
inputs, including expected dividends, expected share price
volatility and the expected period to exercise, and it factors the
likelihood of the market-based performance condition being met at
the grant date.
The inputs into the models and assessed fair value at grant date
of options granted during the year ended 31 December 2021 are as
follows:
CSOP/ASOP Awards Replacement Awards LTIP Awards Director ASOP Awards
26 March 2021 29 March 2021 29 March 2021
29 March 2021
--------------------------------------- ----------------- ------------------- --------------- --------------------
Share price, pence(1) 39.0 39.0 39.0 39.0
Exercise price, pence(2) 39.0 68.8 1.0 1.0
Expected share price volatility 47.2% 47.2% 56.2% N/A
Expected life, years 6.5 years 6.5 years 3 years 0 years
Risk-free rate 0.46% 0.52% 0.13% N/A
Expected dividend yields 0% 0% 0% 0%
Fair value per share granted, pence(2) 18.0 12.0 11.0 38.0
Total fair value at date of grant
(GBP'000) 184 See below 200 59
Total fair value at date of grant
($'000)(1) 256 See below 277 82
--------------------------------------- ----------------- ------------------- --------------- --------------------
(1) Previous period disclosures have been represented from USD
cents to GBP pence throughout.
(2) The GBP expense has been translated to USD based on the
exchange rate prevailing at the time of grant.
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 for the ASOP and CSOP, with the exception of
the Director ASOP Awards.
The Replacement Awards have been accounted for under
modification accounting, whereby the original fair value expense
for the Surrendered Awards has continued to be recognised over the
original vesting period and an additional incremental expense has
been recognised over the vesting period of the Replacement
Awards.
Shares issued to Director
On 19 January 2021, Daniel Ruback, an Executive Director of the
Company, was issued a total of 25,000 ordinary shares of 1 penny
each in the capital of the Company at nil cost, in accordance with
the terms of his Service Agreement. The shares had a grant date
fair value of 44.5 pence based on the open market price at that
date.
Expenses arising from equity-settled share-based payment
transactions
Total expenses arising from share-based payment transactions
recognised during the year as part of employee benefit expense were
as follows:
2021 2020
$'000 $'000
----------------------------------------------------------------------- ------- -------
Options issued under equity-settled share employee option schemes plan 244 562
Shares issued to Director 13 -
257 562
----------------------------------------------------------------------- ------- -------
Refer to Note 35 regarding the effect of a Director resigning
after 31 December 2021.
32. Other long-term employee benefits
The acquisition of Jet East also includes a long-term incentive
plan, accounted for in accordance with IAS 19, with payments
contractually linked to the continuing employment of executives of
Jet East as well as the business performance of the combined
Business Aviation MRO US business. A remuneration charge of $1,821k
(2020: $nil) has been recognised within Adjusting items and an
accrual of $1,821k (2020: $nil) is included within non-current
trade and other payables. The period over which the services are
received is three years and the incentive plan is estimated to
result in a future cash outflow of $6,024k (2020: $nil) after this
three-year period.
For the long-term incentive plan to result in future payments,
business performance must exceed a Board approved projection, the
acquisition case. Executives can earn up to a maximum of 9%
ownership in the Business Aviation MRO US equity subject to
business performance in the 2023 financial year and the level of
indebtedness of the combined Business Aviation MRO US business at
that time. The long-term incentive plan is accounted for as
remuneration for post-acquisition services and is not part of the
business combination.
A Board approved five-year Strategic Plan has been used to
estimate business performance in the 2023 financial year and the
level of indebtedness of the combined Business Aviation MRO US
business at that time.
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 the other long-term employee
benefit accrual or the associated remuneration charge within the
next financial year, relates to a change in forecast business
performance. The Directors consider that the carrying amount of the
other long-term employee benefit accrual at 31 December 2021 of
$1,821k (2020: nil) approximates the present value of the service
cost.
A 10% increase in the business performance in 2023 would result
in an additional payment of around $602k in 2024, an additional
charge for year ended 31 December 2021 of $182k and an additional
accrual at 31 December 2021 of $182k. Business performance in
Business Aviation MRO US is calculated as a multiple of EBITDA less
cash and cash equivalents and less borrowings.
33. Deferred revenue
2021 2020
$'000 $'000
----------------- ------- -------
Deferred revenue 8,882 13,367
----------------- ------- -------
Current 8,880 12,676
Non-current 2 691
----------------- ------- -------
Total 8,882 13,367
----------------- ------- -------
The deferred revenue arises in respect of management fees,
maintenance contracts and SaaS contracts invoiced in advance,
nearly all of which are expected to be settled in the next twelve
months. Deferred revenue also arises on licensing revenue connected
to the disposal of the US Air Associate, with $nil (2020: $625k)
recognised as non-current and $625k (2020: $3,750k) recognised as
current. See Note 17 for further details on licensing revenue.
Deferred revenue represents a contract liability.
Deferred revenue has decreased year on year, primarily due to
$3,750k of US Air Associate licensing revenue being unwound as
noted above.
Contract liabilities
Deferred revenue of $8,882k (2020: $13,367k) is a contract
liability and so too is income received in advance, as shown in
Note 24, of $6,799k (2020: $6,689k). Total contract liabilities are
$15,681k (2020: $20,056k).
34. Financial instruments
Financial assets and liabilities as defined by IFRS 9 and their
estimated fair values are as follows:
Financial
assets at Financial Book Fair
amortised liabilities value value
cost at amortised cost total total
At 31 December 2021 $'000 $'000 $'000 $'000
-------------------------------------- ---------- ------------------ -------- --------
Financial assets
Cash and cash equivalents 10,243 - 10,243 10,243
Trade and other receivables (Note 19) 53,330 - 53,330 53,330
Financial liabilities
Trade and other payables (Note 24) - (30,952) (30,952) (30,952)
Borrowing (Note 21) - (67,154) (67,154) (67,154)
Lease obligation (Note 23) - (48,002) (48,002) (48,002)
-------------------------------------- ---------- ------------------ -------- --------
Net financial assets/(liabilities) 63,573 (146,108) (82,535) (82,535)
-------------------------------------- ---------- ------------------ -------- --------
Financial
Financial liabilities
assets at at Book Fair
amortised amortised value value
cost cost total total
At 31 December 2020 (restated(1) ) $'000 $'000 $'000 $'000
-------------------------------------- ---------- ------------ -------- --------
Financial assets
Cash and cash equivalents 16,136 - 16,136 16,136
Trade and other receivables (Note 19) 57,317 - 57,317 57,317
Financial liabilities
Trade and other payables (Note 24) - (23,394) (23,394) (23,394)
Borrowings (Note 21) - (53,197) (53,197) (53,197)
Lease obligation (Note 23) - (46,139) (46,139) (46,139)
-------------------------------------- ---------- ------------ -------- --------
Net financial assets/(liabilities) 73,453 (122,730) (49,277) (49,277)
-------------------------------------- ---------- ------------ -------- --------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
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 is 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;
-- Liquidity risk; and
-- Credit 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 ongoing 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 each group's presentational currency:
GBP USD EUR AED(3) HKD Other Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
At 31 December 2021
Borrowings
Entities with functional currency USD - (2,414) - - - - (2,414)
Entities with functional currency GBP (49,666) (15,074) - - - - (64,740)
Entities with functional currency PLN(4) - - - - - - -
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
Total borrowings (49,666) (17,488) - - - - (67,154)
Obligations under leases
Entities with functional currency USD - (12,284) - (9,850) - - (22,134)
Entities with functional currency GBP (25,809) - - - - - (25,809)
Entities with functional currency PLN - - - - - (59) (59)
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
Total obligations under leases (25,809) (12,284) - (9,850) - (59) (48,002)
Cash
Entities with functional currency USD 2 5,148 - 67 1 23 5,241
Entities with functional currency GBP 3,861 988 132 1 - 3 4,985
Entities with functional currency PLN - - - - - 17 17
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
Total cash 3,863 6,136 132 68 1 43 10,243
Net trade financial assets (1)
Entities with functional currency USD (182) 13,848 100 (789) (14) (66) 12,897
Entities with functional currency GBP 3,115 4,657 1,756 - - (22) 9,506
Entities with functional currency PLN - - - - - (25) (25)
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
Total net trade financial assets 2,933 18,505 1,856 (789) (14) (113) 22,378
Net exposure
Net monetary in USD entities (181) - 100 (731) (12) (42) (866)
Net monetary in GBP entities - (9,428) 1,887 1 - (19) (7,559)
Net monetary in PLN entities - - - - - - -
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
Total net exposure (181) (9,428) 1,987 (730) (12) (61) (8,425)
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
At 31 December 2020, restated(2)
Net monetary in USD entities (71) - (6) (8) 385 (10) 290
Net monetary in GBP entities - 8,075 468 - - 42 8,585
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
(71) 8,075 462 (8) 385 32 8,875
----------------------------------------- -------- --------- ------- -------- ------ ------ --------
(1) Net trade financial assets per Note 19 of $53,330k and
financial liabilities per Note 24 of $30,952k
(2) Restatements are detailed in Note 2 of the notes to the
financial statements
(3) United Arab Emirates Dirham
(4) Polish Zloty
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 AED HKD Other Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
------------------------------------------------ -------- -------- -------- -------- -------- -------- --------
At 31 December 2021
Total effect on profit/(loss) of depreciation
in foreign currency exchange rates 18 943 (199) 73 1 6 842
At 31 December 2020 Restated(1)
Total effect on profit/(loss) of depreciation
in foreign currency exchange rates 7 (808) (46) 1 (39) (3) (888)
------------------------------------------------ -------- -------- -------- -------- -------- -------- --------
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
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 2021 would increase by $647k (2020: $522k). 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 2020 figures have been restated to remove income
received in advance since there are no cash out flows associated
with this balance. 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
effective After
interest Less than more than
rate 1 year 2-5 years 5 years Total
% $'000 $'000 $'000 $'000
---------------------------------------- ------------ ----------- ----------- ------------ --------
At 31 December 2021
Trade and other payables n/a 30,952 - - 30,952
Lease liabilities (Note 23) (1) 8,101 22,307 56,760 87,168
Bank borrowings 1.1% 40,175 26,979 - 67,154
---------------------------------------- ------------ ----------- ----------- ------------ --------
At 31 December 2020, restated(2)
Trade and other payables (Note 24)(2) n/a 23,394 - - 23,394
Lease liabilities (Note 23)(2) (1) 8,762 22,030 37,030 67,822
Bank borrowings 1.1% 1,000 52,197 - 53,197
---------------------------------------- ------------ ----------- ----------- ------------ --------
(1) Refer to Note 23, which provides the incremental borrowing rate for each category of lease
(2) 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 creditworthy
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.
Ongoing review of the financial condition of the counterparty and
ageing of financial assets is performed. Further details are in
Note 19.
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 events occurred after the reporting date:
Resignation of Director
On 10 January 2022, the Group announced that Daniel Ruback,
Group CFO, tendered his resignation as Director of the Group in
order to pursue other opportunities outside the Group. Daniel
remained with the business until 8 April 2022. The Board has
appointed Michael Williamson as interim CFO pending the appointment
of a permanent replacement.
The cost of Daniel Ruback's unvested share options outstanding
has been reversed during 2021, as this event is an adjusting
event.
Paycheck Protection Program qualifying expenditure
On 11 April 2022, the SBA requested further information for its
review of the forgiveness application on qualifying expenditure
under the PPP loan arrangement. The Board has since 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 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, Note 3 and Note 21 for further
details. This event is a non-adjusting event.
Receipt of long-standing accounts receivable balance
On 21 April 2022, the Group received $3,448k cash in settlement
of part of a long-standing accounts receivable balance that had
been secured under a lien. The expected credit loss allowance at 31
December 2021 is not impacted by this part settlement. This event
is a non-adjusting event.
Adjustments to deferred consideration
The Group agreed a further adjustment to the deferred
consideration payable in respect of the acquisition of Jet East
with seller after the reporting date. The adjustment is valued at
$230k and will reduce the deferred consideration balance
outstanding and result in income in the income statement as an
Adjusting item. This event is a non-adjusting event.
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 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;
-- Gladwall Limited - is a company where Mr M A Khalek is the sole Director;
-- Mr M A Khalek - has significant influence over the Company
through his position as Chief Executive Officer and his ownership
interest >20%;
-- EBAA - is the European trade association in which Mr M A
Khalek serves on the Board of Governors;
-- 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 16). 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 Company; and
-- CK Hutchison Holdings - has an indirect shareholding of 29.8% in the Company
Associates
-- GB Aviation Holdings LLC - is a joint venture in which the
Group owns a 50% membership interest;
-- Gama Aviation LLC - was an associate in which GB Aviation
Holdings LLC owned a 49% member interest before disposal in March
2020 (Note 17); and
-- China Aircraft Services Limited - was an associate in which
the Group owned a 20% equity interest prior to sale in 2021
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
------------------ ----------------------
2021 2020 2021 2020
$'000 $'000 $'000 $'000
---------------------------------------------- --------- ------- ----------- ---------
China Aircraft Services Limited 564 1,993 1,377 2,950
Air Arabia/Felix Trading Company LLC 198 25 158 151
Gama Aviation LLC (branding fee)(1) - 625 - -
Gama Aviation LLC (other trading balances)(2) - 1,552 - 561
Mr Canning Fok 1,275 1,646 - -
M Khalek 37 23 - -
---------------------------------------------- --------- ------- ----------- ---------
(1) In the prior year branding fees are for the two months prior to disposal
(2) For ease of understanding, the branding fee and other
trading balances have been separated in the summary table above
The following amounts were outstanding at the balance sheet date
for related parties at that date:
Amounts owed by Amounts owed to
related parties related parties
------------------ ------------------
2021 2020 2021 2020
$'000 $'000 $'000 $'000
------------------------------------- --------- ------- --------- -------
Air Arabia/Felix Trading Company LLC 198 204 127 182
China Aircraft Services Limited - 970 - 1,046
Mr Canning Fok 12 138 101 -
GB Aviation Holdings LLC - 40 - -
------------------------------------- --------- ------- --------- -------
Material transactions with related parties
Gama Aviation LLC
During the prior 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 17).
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 prior year, the Group received cash consideration of
$1.0m to settle the full amount due.
Mr Canning Fok
During the year, within the Business Aviation SBU, sales of
services of $1,275k (2020: $1,646k) 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.
2021 2020
GBP'000 GBP'000
----------------------------- -------- --------
Short-term employee benefits 1,229 1,410
Post-employment benefits 168 181
----------------------------- -------- --------
Total 1,397 1,591
----------------------------- -------- --------
Details of Directors' remuneration are given in the Remuneration
Report in the full Annual Report and Accounts.
Ultimate controlling party
The Company's ordinary shares are publicly traded on the 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 2021 the Group had other
outstanding contracted commitments of nil (2020: $nil).
As part of the commitment to voluntary carbon offsetting, the
Group has the intention to purchase verified emission reductions
for 2,723 tonnes of CO(2) e during 2022 (2021: 3,210 tonnes). At
the reporting date this has not been contracted.
38. Dividends
The Board does not recommend a dividend for 2021 (2020:
nil).
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END
FR BXGDURGDDGDR
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May 27, 2022 09:11 ET (13:11 GMT)
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