Final results for the year ended 31 December 2016

RNS Number : 5364A
Gama Aviation PLC
27 March 2017
 

Gama Aviation plc (AIM: GMAA)

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

Final results for the year ended 31 December 2016

 

Gama Aviation Plc, one of the world's largest business aviation service providers is pleased to announce the results for the year ended 31 December 2016.

 

Financial Highlights

·      Record Total Group revenues of $432.4m, up 12.6% (2015: $383.9m)

·      Underlying profit before tax of $13.7m, up 3.8% (2015: $13.2m)

·      Net debt of $19.4m (2015: $9.0m) reflecting acquisitions and Aberdeen hangar development

·      Cash generation from operations improved to an inflow of $2.2m compared to an outflow of $14.1m in 2015

·      Dividend per share up 4% to 2.6p per share (2015: 2.5p)

·      2017 trading in line with management expectations

 

Financial Summary

USD millions (unless otherwise stated)

Underlying results1

Reported results

 

Dec-16

Dec-15

Constant Currency2 Dec-15

Dec-16

Dec-15

Revenue - Total Group3

432.4

403.8

383.9

 

 

Associate & JV revenue

(247.8)

(183.2)

(183.2)

 

 

Inter-group revenue (including branding fee)

18.4

15.4

15.3

 

 

Revenue

203.0

236.0

216.0

203.0

236.0

Gross profit

44.2

51.6

47.4

44.2

51.6

Gross profit %

21.7%

21.9%

21.9%

21.7%

21.9%

EBITDA

17.3

20.4

18.7

 

 

Total operating profit4

15.1

16.9

15.3

10.9

8.1

Profit before tax

13.7

14.6

13.2

19.3

6.9

 

 

 

 

 

 

Earnings per share (cents)

30.1

39.3

37.1

42.9

21.3

 

 

 

 

 

 

 

 

Operational Highlights

·      Aircraft under management up 12.2% to 165 (2015: 147)

·      US Air revenue up 30% driven by contract wins

·      Transformative deal signed on 1 January 2017 with BBA Aviation Plc in the US Air division  

·      Europe Air revenue down 5% due to exiting underperforming contracts

·      Europe Air restructuring successfully completed 

·      US Ground revenue up 15% driven by 3 new line maintenance bases

·      Europe Ground revenue down 20% due to lower levels of discretionary spend 

·      Europe Ground delivered 20% operating margin despite challenging market

·      Acquisitions fully integrated into the Air and Ground divisions in Europe

·      Recent multi-year contract wins in the Air and Ground divisions in Europe

·      Strong progress establishing Middle East and Asia platforms

·      Simplified corporate structure and strengthened management team  

 

 

 

1 - Underlying results exclude exceptional items, amortisation, and unrealised foreign exchange movements included in finance costs, where applicable.

2 - Calculated at a constant foreign exchange rate of $1.36 to £1, being the rate that represented the average for the 2016 financial year.

3 - Include 100% of the results of Gama Aviation's associate in the US and its joint venture in Hong Kong.

4 - Total operating profit includes the share of results of equity accounted investments.

 

 

Marwan Khalek, Chief Executive of Gama Aviation said:

"2016 has been an exceptionally busy year. We have delivered a robust financial performance, reflecting strong markets in the US and more challenging conditions in Europe.

Our merger with BBA Aviation Plc in US Air has created a powerful market leader with strong growth potential. It also offers significant cross-selling opportunities into our US Ground division. We feel very confident about the prospects for our US business as we leverage our customer relationships across our national network.

We have successfully restructured our Europe Air business, which is now well positioned for sustainable growth. In Europe Ground we expect a return to modest growth in 2017, encouraged by some early signs of a pick-up in discretionary spend.

We have strengthened our operational management team and, together with the progress made in 2016, we are confident of delivering sustainable growth in 2017 and beyond."

 

-ENDS-

 

 

 

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

A presentation for sell-side analysts is being held today at 09:30am at the offices of Camarco, 107 Cheapside, London EC 2V 6DN.

 

 

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

Gama Aviation Plc

+44 (0) 1252 553029

Marwan Khalek, Chief Executive Officer

 

Kevin Godley, Chief Financial Officer

 

Camarco

+44 (0) 20 3757 4992

Ginny Pulbrook

 

Geoffrey Pelham-Lane

 

Jefferies International

+44 (0) 207 029 8000

Simon Hardy

 

Harry Nicholas

 

 

 

 

Gama Aviation - Notes to Editors

Gama Aviation Plc (AIM:GMAA) is a global business aviation services group that specialises in providing support for individuals, corporations and government agencies; allowing them to deliver on the promises they make.  

The Group's services are split into two divisions: Air and Ground. Air services include aircraft management, special mission support and charter.  Ground services cover aircraft maintenance services, aircraft modification design and installation, and Fixed Base Operations (FBO).

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

 

 

 

 

Chief Executive Report

 

2016 Performance

I am pleased to report on a busy year of strong progress. We delivered a robust financial performance reflecting strong markets in the US and more challenging conditions in Europe.

Cash generation has also improved significantly through 2016 to deliver an inflow of $2.2m compared to an outflow of $14.1m in 2015. Our Air and Ground divisions have, as expected, faced different opportunities and challenges regionally. By taking advantage of the opportunities and decisively addressing the challenges, we have delivered a credible performance.

The US remains our most buoyant region delivering the majority of the Group's revenue growth as well as improved EBITDA margins across both the Air and Ground divisions. 

In Europe Air, the remedial actions taken early in the year to exit underperforming contracts and right size the cost base were successfully completed and delivered an improved performance through the second half of the year.   Whilst the decline in revenues within Europe Ground, caused by lower levels of discretionary spend on aircraft improvement projects, was disappointing, the division continues to deliver healthy margins and remains the most profitable division within the Group.

The "bolt on" acquisitions during the year of Aviation Beauport in Jersey and of FlyerTech have been integrated and are delivering on their strategic objectives. 

Margin improvements in the Middle East region during 2016 saw both the Air and Ground divisions deliver their maiden EBITDA profit.  We also saw good progress within our Asia start-up based in Hong Kong.

 

Growth strategy

Our growth strategy remains a simple one. By increasing the depth of our capability and expertise, we bring more products and service offerings to market across more locations, which together serve to increase the scale of our operations and presence.  We leverage this to deliver benefits to our customers, enhancing our value proposition and maximising our cross selling opportunities.  The combination of our scale presence and the benefits we provide to our customers enables us to deliver sustainable and profitable organic growth, which we supplement by strategic acquisitions that are value accretive. Strategically we are now positioned as a market leader and consolidator in the highly fragmented business aviation services sector.

2016 has seen us continue to deliver on this strategy with 10.3% organic Total Group revenue growth. We made two "bolt-on" acquisitions that added to the depth of our capability and breadth of our service offering and geographical coverage in Europe Air and Ground.  At the start of 2017 we announced two further strategic developments. The merger of our US aircraft management and charter business with that of BBA Aviation Plc creates a market leading platform in the US that is transformational for our US business. The collaboration with CASL in Hong Kong is a significant first step in developing our ground business in the region. These transactions represent significant progress towards our stated objective of doubling the scale of our business.

 

Leadership team

We have made a number of appointments over the last year across all regions and divisions in a variety of roles including finance, operations, engineering and sales to strengthen our team and support our growth.  In particular, Neil Medley joined in September as Chief Operating Officer to drive operational excellence worldwide. Neil brings a wealth of experience having previously fulfilled a similar role within a division of BAe Systems.  We are also in the process of recruiting an additional non-executive director.  

 

Outlook

2017 has started well and our expectations for the year remain unchanged.

The US market remains very buoyant and with our enlarged US Air platform, as well as the contracted growth from Wheels Up, we expect the division to continue to grow strongly. Similarly, the roll out of new maintenance bases, coupled with the significant cross selling opportunities that arise from the enlarged fleet within US Air, give us confidence that the US Ground division should also continue to grow strongly.

In Europe, we expect to see a return to modest growth in Air and Ground. We are encouraged by the recent contract wins across both divisions and some early signs of a pick-up in discretionary spend in Europe Ground.

We expect the progress within our Asia and Middle East divisions to continue as these operations develop.

Overall, the Group is well positioned to deliver growth and performance in 2017 in line with our expectations.

 

 

 

Marwan Khalek

Chief Executive Officer

 

 

 

Operational Performance Review

 

Basis of presentation of financials

The analysis of Gama Aviation's operational performance by division and geography, is shown on a Total Division basis (for revenue, gross profit, underlying EBITDA and underlying total operating profit) reflecting 100% of the performance of associates and joint ventures.  The analysis also includes inter-segment revenues, which represent the revenues that arise between divisions, in order to present the underlying performance of each division.

Gama Aviation receives a fee in return for allowing its associates and joint ventures the use of the Gama Aviation brand.  Such branding fees are excluded from the results on a Total Division basis but are recognised within Gama Aviation's Group reported performance.

Under IFRS, the trading results of associates are not consolidated and are instead shown as a single line in the profit and loss account under 'share of results from equity accounted investments'.

 

Air division

Our Air division specialises in the provision of complex, high touch, time critical, solutions for individuals, corporations and government agencies.

Aircraft management: A high touch, outsource solution for individual aircraft or commercial fleet owners looking to receive impeccable service, financial transparency and an unrelenting approach to safety. Services are comprised of flight training, cost management, flight planning and scheduling, crew management, maintenance oversight and regulatory compliance. Services are contract based with costs such as fuel, insurance, crew and maintenance being recharged to the client.

Special mission: A turnkey, outsource solution for Government agencies looking to cost effectively manage aviation operations for a variety of complex, time critical services such as air ambulance provision and infrastructure monitoring. Our services include cost management, flight planning and scheduling, crew management, maintenance oversight and regulatory compliance. Services are provided on a contract basis.

Aircraft charter and contract charter: A time critical, high touch solution aimed at individuals and corporations wishing to maximise the productive time of their aircraft and/or executives. Services include long term charter contracts, provision of charter within the managed fleet and sub-charter on audited operators. Services are provided on a commission or contract basis.

 

The Air division had a good year overall with strong revenue growth in the US offsetting a decline in Europe. Total Division revenue was up 16.8% to $387.5m (2015: $331.8m). The conversion to EBITDA improved in every region with a total EBITDA margin of 2.2% (2015: 1.2%) which delivered an increase in EBITDA of 123.6% to $8.5m (2015: $3.8m).

 

 

 

 

 

 

 

 

 

Constant Currency

December

 

2016

 

2015

 

Change

 

 

2015

 

Change

 

USD thousands

 

Air

 

Air

 

Air

 

 

Air

 

Air

 

Total Division Revenue

 

387,513

 

346,886

 

11.7%

 

 

331,768

 

16.8%

 

Total Division Gross Profit

 

25,407

 

24,521

 

3.5%

 

 

23,199

 

9.5%

 

Gross Profit  %

 

6.6%

 

7.1%

 

0.5ppt

 

 

7.1%

 

0.5ppt

 

Total Division Underlying EBITDA

 

8,505

 

4,070

 

>100%

 

 

3,836

 

>100%

 

Underlying EBITDA  %

 

2.2%

 

1.2%

 

1.0ppt

 

 

1.2%

 

1.0ppt

 

Total Division Underlying Total Operating Profit

 

7,545

 

2,806

 

>100%

 

 

2,662

 

>100%

 

Underlying Total Operating Profit %

 

1.9%

 

0.8%

 

(1.1ppt)

 

 

0.8%

 

(1.1ppt)

 

 

 

 

US Air (Associate)

December

 

2016

 

2015

 

Change

USD thousands

 

Air

 

Air

 

Air

Revenue

 

233,721

 

179,525

 

30.2%

Gross Profit

 

14,114

 

9,301

 

51.7%

Gross Profit  %

 

6.0%

 

5.2%

 

0.8ppt

Underlying EBITDA

 

6,407

 

2,990

 

>100%

Underlying EBITDA  %

 

2.7%

 

1.7%

 

1.0ppt

Underlying Total Operating Profit

 

6,089

 

2,693

 

>100%

Underlying Total Operating Profit %

 

2.6%

 

1.5%

 

1.1ppt

 

US Air division performance reconciliation to reported performance

USD thousands

 

Revenue

 

Gross Profit

 

Underlying EBITDA

Underlying Total Operating Profit

December 2016

 

 

 

 

 

 

 

 

US Air division

 

233,721

 

14,114

 

6,407

 

6,089

Associate

 

(231,560)

 

(13,742)

 

(6,268)

 

(5,904)

Branding fee

 

5,788

 

5,788

 

5,788

 

5,788

Reported

 

7,949

 

6,160

 

5,927

 

5,973

 

 

 

 

 

 

 

 

 

December 2015

 

 

 

 

 

 

 

 

US Air division

 

179,525

 

9,301

 

2,990

 

2,693

Associate

 

(176,630)

 

(8,846)

 

(2,725)

 

(3,438)

Branding fee

 

4,920

 

4,920

 

4,920

 

4,920

Reported

 

7,815

 

5,375

 

5,185

 

4,175

 

 

 

 

 

 

 

 

 

 

The US Air division have continued to perform strongly in 2016, delivering both significant top line revenue growth, up 30.2% to $234.7m (2015: $179.5m) and margin improvement at gross profit, EBITDA and total operating profit level.

The strength of this performance reflects a high contract win rate in our core management business adding a number of significant contracts. In addition, the growth in aircraft which we operate under our Wheels Up contract continued to progress well. US Air had 116 aircraft under management as at December 2016, up from 93 in December 2015, an increase of 24.7%.

Tender activity within our core management business remains high. Subject to the successful outcome of these tenders, together with the contracted growth under the Wheels Up contract, which will add a further 12 aircraft a year for the next two years, the division's growth prospects are strong.

US Air Total Group underlying EBITDA was $6.4m (2015: $3.0), an increase of 113.3%, with the underlying EBITDA margin of 2.7% (2015: 1.7%).  The US Air underlying EBITDA margins are expected to increase towards our target of 5.0% as the benefits of scale and operational gearing continue.  

The reported underlying total operating profit (which includes the contribution of the associate) of the US Air Business for Gama Aviation is derived as follows:

USD thousands

December 2016

 

December 2015

Branding Fee

5,788

 

4,920

Other

193

 

182

Line of Associate

(8)

 

(927)

Reported Underlying Total Operating Profit

5,973

 

4,175

 

On 3 January 2017, we announced the merger of our US Air division with that of BBA Aviation Plc creating the US's largest aircraft management business. The merger took place on 1 January 2017 and we will provide a detailed operational review of its performance with the half year numbers later in the year.  

 

Europe Air

Europe is the only region in the Group that is affected by any material foreign exchange movements, primarily between GBP and USD. The 2015 performance has been restated at the same average rate for USD to GBP as the reported 2016 financials.  The average rate for 2016 was USD1.36 to GBP1.00.  The commentary below is based on constant currency performance unless otherwise stated.

 

 

 

 

 

 

 

 

 

Constant Currency

December

 

2016

 

2015

 

Change

 

 

2015

 

Change

 

USD thousands

 

Air

 

Air

 

Air

 

 

Air

 

Air

 

Revenue

 

117,736

 

139,224

 

(15.4%)

 

 

124,106

 

(5.1%)

 

Gross Profit

 

9,568

 

13,542

 

(29.3%)

 

 

12,200

 

(21.6%)

 

Gross Profit  %

 

8.1%

 

9.7%

 

(1.6ppt)

 

 

9.7%

 

(1.7ppt)

 

Underlying EBITDA

 

2,607

 

2,124

 

22.7%

 

 

1,890

 

37.9%

 

Underlying EBITDA  %

 

2.2%

 

1.5%

 

0.7ppt

 

 

1.5%

 

0.7ppt

 

Underlying Total Operating Profit

 

2,095

 

1,254

 

67.1%

 

 

1,110

 

88.7%

 

Underlying Total Operating Profit %

 

1.8%

 

0.9%

 

0.9ppt

 

 

0.9%

 

0.9ppt

 

 

Europe Air delivered a credible performance in 2016 despite the challenging market conditions. Revenue and gross profit were down 5.1% and 21.6% on a constant currency basis as the business exited underperforming contracts. These contracts on a fully-costed basis were loss-making at EBITDA level and presented an unattractive credit profile.

The EBITDA performance showed significant improvement in the year, up 37.9% to $2.6m (2015: $1.9m) due to exiting the underperforming contracts and the right-sizing of the cost base during the year.

The division also incurred trading foreign exchange losses of approximately $1m, as a result of currency volatility, which is included in EBITDA. Adjusting for this, the underlying business delivered an EBITDA of approximately $3.6m, an increase of 90.5%.

We are now confident that the division is well positioned to deliver modest growth and improve EBITDA margins towards our 5.0% target.

 

Middle East Air

December

 

2016

 

2015

 

Change

USD thousands

 

Air

 

Air

 

Air

Revenue

 

19,531

 

21,598

 

(9.6%)

Gross Profit

 

1,345

 

1,431

 

(6.0%)

Gross Profit  %

 

6.9%

 

6.6%

 

0.3ppt

Underlying EBITDA

 

15

 

(160)

 

>100%

Underlying EBITDA  %

 

0.1%

 

(0.7%)

 

0.8ppt

Underlying Total Operating Profit

 

(95)

 

(247)

 

61.5%

Underlying Total Operating Profit %

 

(0.5%)

 

(1.1%)

 

0.6ppt

 

Both gross profit and EBITDA margins have slightly improved despite the decline in top line revenue, which was largely pass through in nature. The division signed up three new aircraft in the final quarter of 2016 and, together with a healthy pipeline, we are optimistic about the division's prospects.  

 

 

 

Asia Air

December

 

2016

 

2015

 

Change

USD thousands

 

Air

 

Air

 

Air

Revenue

 

16,525

 

6,539

 

>100%

Gross Profit

 

380

 

267

 

42.3%

Gross Profit  %

 

2.3%

 

4.1%

 

(1.8ppt)

Underlying EBITDA

 

(524)

 

(884)

 

40.7%

Underlying EBITDA  %

 

(3.2%)

 

(13.5%)

 

10.3ppt

Underlying Total Operating Profit

 

(544)

 

(894)

 

39.2%

Underlying Total Operating Profit %

 

(3.3%)

 

(13.7%)

 

10.4ppt

 

Asia Air division performance reconciliation to reported performance

USD thousands

 

Revenue

 

Gross Profit

 

Underlying EBITDA

Underlying Total Operating Profit

December 2016

 

 

 

 

 

 

 

 

Asia Air division

 

16,525

 

380

 

(524)

 

(544)

Joint venture

 

(16,525)

 

(380)

 

524

 

222

Branding fee

 

80

 

80

 

80

 

80

Reported

 

80

 

80

 

80

 

(242)

 

 

 

 

 

 

 

 

 

December 2015

 

 

 

 

 

 

 

 

Asia Air division

 

6,539

 

267

 

(884)

 

(894)

Joint venture

 

(6,539)

 

(267)

 

884

 

497

Branding fee

 

36

 

36

 

36

 

36

Reported

 

36

 

36

 

36

 

(361)

 

 

 

 

 

 

 

 

 

 

Asia continues to develop albeit from a low base. The division is still in a start-up phase but has a promising pipeline of managed aircraft contracts. We are expecting this division to steadily build towards making a positive contribution to the Group over the medium term.

The reported underlying total operating profit (which includes the profit contribution of the joint venture) of the Asia Air division for Gama Aviation is derived as follows:

USD thousands

December 2016

 

December 2015

Branding Fee

80

 

36

Line of Joint Venture

(322)

 

(397)

Reported Underlying Total Operating Profit

(242)

 

(361)

 

 

 

Ground division

Our Ground division provides solutions to maximise the availability of aircraft and uphold their airworthiness on behalf of individuals, corporations and Government agencies.

Base maintenance: 'Base' refers to the planned maintenance required by the aircraft manufacturer or component supplier. This work is complex, highly regulated and location specific, requiring investment in tooling and training. Our centres of excellence cover a range of aircraft including business jets, helicopters, turbo-prop and piston engine aircraft. Services are provided on a fee or contract basis.

Line maintenance: Our line solutions assist owners with irregular maintenance activities, component failure or simple wear and tear. Depending on the fault, this may be sufficient to ground the aircraft. For private clients, this can be an inconvenience whilst for military or air ambulance clients, the aircraft's re-entry into service is time critical.  In all cases it needs to be dealt with efficiently so the aircraft can complete its commitments.  Services are provided on a fee or contract basis.

Design and modifications: Our design and modifications team provides solutions to civilian and military aircraft owners to increase the operating life of an aircraft. Typical services include: avionics updates, role or mission changes and cockpit upgrades. Services are provided on a fee or contract basis.

Fixed base operations (FBO): Our FBO's provide infrastructure at airports that are underserved with business / special mission facilities. The business has three dedicated FBOs: Glasgow, Jersey and Sharjah, catering for parking, hangarage, line maintenance and other related ground handling tasks such as the fuelling of aircraft. Services are provided on a fee basis.

 

The Ground division has delivered solid gross profit, EBITDA and operating profit margins despite some challenging market conditions.  Significant progress made in the Ground division in both the US and the Middle East helped offset a significant decline in Europe, following a very strong year in 2015 and a reduction in discretionary spend in 2016.

 

 

 

 

 

 

 

 

 

Constant Currency

December

 

2016

 

2015

 

Change

 

 

2015

 

Change

 

USD thousands

 

Ground

 

Ground

 

Ground

 

 

Ground

 

Ground

 

Total Division Revenue

 

67,621

 

79,629

 

(15.1%)

 

 

73,521

 

(8.0%)

 

Total Division Gross Profit

 

24,872

 

30,447

 

(18.3%)

 

 

27,697

 

(10.2%)

 

Gross Profit  %

 

36.8%

 

38.2%

 

(1.4ppt)

 

 

37.7%

 

(0.9ppt)

 

Total Division Underlying EBITDA

 

11,434

 

16,512

 

(30.8%)

 

 

14,878

 

(23.1%)

 

Underlying EBITDA  %

 

16.9%

 

20.7%

 

3.8ppt

 

 

20.2%

 

3.3ppt

 

Total Division Underlying Total Operating Profit

 

10,093

 

15,354

 

(34.3%)

 

 

13,787

 

(26.8%)

 

Underlying Total Operating Profit %

 

14.9%

 

19.3%

 

(4.4ppt)

 

 

18.8%

 

(3.9ppt)

 

 

US Ground

December

 

2016

 

2015

 

Change

USD thousands

 

Ground

 

Ground

 

Ground

Revenue

 

24,130

 

20,661

 

16.8%

Gross Profit

 

5,560

 

4,947

 

12.4%

Gross Profit  %

 

23.0%

 

23.9%

 

(0.9ppt)

Underlying EBITDA

 

2,778

 

2,226

 

24.8%

Underlying EBITDA  %

 

11.5%

 

10.8%

 

0.7ppt

Underlying Total Operating Profit

 

2,401

 

1,986

 

20.9%

Underlying Total Operating Profit %

 

10.0%

 

9.6%

 

0.4ppt

 

US Ground delivered a good performance with revenue up 16.8% to $24.1m (2015: $20.7m). As expected, the opening of new bases during the year marginally impacted gross profit margins but the benefits of operational leverage delivered improved EBITDA margin of 11.5% (2015: 10.8%). 

US Ground has a network of nine regional bases which act as hubs from which 30 mobile units can provide extended coverage. US Ground is now able to service its customers' line maintenance requirements on a national basis.

The US Air merger with the aircraft management and charter business of BBA Aviation Plc has brought a material increase in the number of aircraft into the US Air division which can be cross sold US Ground services. 

 

 

 

Europe Ground

Europe is the only region in the group that is affected by any material foreign exchange movements, primarily between GBP and USD. The commentary below is based on constant currency performance unless otherwise stated.

 

 

 

 

 

 

 

 

 

Constant Currency

December

 

2016

 

2015

 

Change

 

 

2015

 

Change

 

USD thousands

 

Ground

 

Ground

 

Ground

 

 

Ground

 

Ground

 

Revenue

 

38,321

 

54,003

 

(29.0%)

 

 

47,895

 

(20.0%)

 

Gross Profit

 

17,615

 

24,312

 

(27.5%)

 

 

21,562

 

(18.3%)

 

Gross Profit  %

 

46.0%

 

45.0%

 

1.0ppt

 

 

45.0%

 

1.0ppt

 

Underlying EBITDA

 

8,383

 

14,449

 

(42.0%)

 

 

12,815

 

(34.6%)

 

Underlying EBITDA  %

 

21.9%

 

26.8%

 

(4.9ppt)

 

 

26.8%

 

(4.9ppt)

 

Underlying Total Operating Profit

 

7,660

 

13,847

 

(44.7%)

 

 

12,280

 

(37.6%)

 

Underlying Total Operating Profit %

 

20.0%

 

25.6%

 

(5.6ppt)

 

 

25.6%

 

(5.6ppt)

 

 

There was a material decline in performance in 2016 after a very strong year in 2015. Europe Ground revenue decreased by 20.0% whilst gross profit decreased by 18.3% on a constant currency basis. The decline in revenue and associated gross profit was the result of lower levels of discretionary spend on modifications, improvements and refurbishment works. However, the division delivered robust gross profit and EBITDA margins of 46.0% and 21.9% respectively, despite this decline in revenues and remains the Group's most profitable division.

2017 has started well with the award of a new multi-year government contract and, together with some early signs of a pick-up in discretionary spend, we are now expecting Europe Ground to return to modest growth.

 

Middle East Ground

December

 

2016

 

2015

 

Change

USD thousands

 

Ground

 

Ground

 

Ground

Revenue

 

5,170

 

4,965

 

4.1%

Gross Profit

 

1,697

 

1,188

 

42.9%

Gross Profit  %

 

32.8%

 

23.9%

 

8.9ppt

Underlying EBITDA

 

273

 

(163)

 

>100%

Underlying EBITDA  %

 

5.3%

 

(3.3%)

 

8.6ppt

Underlying Total Operating Profit

 

32

 

(479)

 

>100%

Underlying Total Operating Profit %

 

0.6%

 

(9.6%)

 

10.2ppt

 

Middle East Ground has performed well in 2016. Revenue was up 4.1% to $5.2m (2015: $5.0m), gross profit up 42.8% to $1.7m (2015: $1.2m), and the gross profit margin up 8.9 basis points to 32.8% (2015: 23.9%).

Importantly, the division made a small first time EBITDA profit. Although the division is still in its infancy, new parking and hangarage contracts are coming on stream, and with movements through the FBO increasing, we are confident in the long-term prospects for this division.

 

 

 

Financial Review

 

Total Group performance

During the year the Total Group performance, which included 100% of the results of the associate and joint venture, delivered revenues of $432.4m. This excludes the divisional inter-segment revenue which is removed on a Total Group consolidated basis.

The Operational Performance Review illustrates the divisions and regions on an unconsolidated basis and therefore includes the divisional inter-segment revenue treating each division as a stand-alone business for comparative purposes in order to assess the underlying performance of each division.

The table below reconciles the Total Divisional performance to the Total Group performance.

 

 

 

 

 

 

 

 

Constant Currency

 

December

 

2016

 

2015

 

Change

 

2015

 

Change

 

USD thousands

 

Total

 

Total

 

Total

 

Total

 

Total

 

   Air

 

387,513

 

346,886

 

11.7%

 

 

331,768

 

16.8%

 

   Ground

 

67,621

 

79,629

 

(15.1%)

 

 

73,521

 

(8.0%)

 

   Other

 

2,327

 

935

 

>100%

 

 

829

 

>100%

 

   Inter-segment eliminations

 

(25,036)

 

(23,615)

 

6.0%

 

 

(22,236)

 

12.6%

 

Total Group Revenue

 

432,425

 

403,835

 

7.1%

 

 

383,882

 

12.6%

 

Total Group Gross Profit

 

52,405

 

55,732

 

(6.0%)

 

 

51,544

 

1.7%

 

Gross Profit  %

 

12.1%

 

13.8%

 

(1.7ppt)

 

 

13.4%

 

(1.3ppt)

 

Total Group Underlying EBITDA

 

17,170

 

17,286

 

(0.7%)

 

 

15,550

 

10.4%

 

Underlying EBITDA  %

 

4.0%

 

4.3%

 

(0.3ppt)

 

 

4.1%

 

(0.1ppt)

 

Total Group Underlying Total Operating Profit

 

14,871

 

14,874

 

-

 

 

13,266

 

12.1%

 

Underlying Total Operating Profit %

 

3.4%

 

3.7%

 

(0.3ppt)

 

 

3.5%

 

(0.1ppt)

 

 

The table below reconciles the Total Group performance to the reported results.

USD thousands

 

Revenue

 

Gross Profit

 

Underlying EBITDA

Underlying Total Operating Profit

December 2016

 

 

 

 

 

 

 

 

Total Group

 

432,425

 

52,405

 

17,170

 

14,871

Associate & joint venture

 

(247,770)

 

(14,122)

 

(5,744)

 

(5,682)

Branding fee & other intra-group revenue

 

18,382

 

5,868

 

5,868

 

5,868

Reported

 

203,037

 

44,151

 

17,294

 

15,057

 

 

 

 

 

 

 

 

 

December 2015

 

 

 

 

 

 

 

 

Total Group

 

403,835

 

55,732

 

17,286

 

14,874

Associate & joint venture

 

(183,170)

 

(9,113)

 

(1,841)

 

(2,941)

Branding fee & other intra-group revenue

 

15,351

 

4,956

 

4,955

 

4,955

Reported

 

236,016

 

51,575

 

20,400

 

16,888

 

 

 

 

 

 

 

 

 

 

 

 

Basis of presentation of financials

In order to aid understanding of Gama Aviation's underlying business performance, all financial commentary below is provided on a constant currency basis unless otherwise stated. The 2015 performance has been restated to the same average rate for USD to GBP as the reported 2016 financials. The average rate for 2016 was USD1.36 to GBP1.00.

 

Revenue

The business delivered record Total Group revenues in 2016, up 12.6% to $432.4m (2015: $383.9m). The bolt on acquisitions of Aviation Beauport and Flyertech contributed revenues of $8.9m following completion.

Reported revenue is down 6% on a constant currency basis to $203.0m (2015: $216.0m) predominantly as a result of Europe Air and Ground where trading has been muted and certain underperforming contracts have been exited.  

 

Pre- acquisitions

 

Acquisitions

 

Reported

Associates & JV

Total Group

Group Revenue (USD'000)

194,102

8,935

203,037

229,388

432,425

 

Gross profit and EBITDA

Total Group gross profit is up 1.8% to $52.4m (2015: $51.5m), although the margin has slipped from 13.4% to 12.1% in 2016, a trend that has continued from the half year results. This is primarily as a result of the change of business mix with a greater proportion of the growth coming from the US Air business which attracts a lower gross profit margin of 6%.

Total Group underlying EBITDA is up 10.4% to $17.2m (2015: $15.6m) with the significant improvement in our Air and Ground divisions in the US helping to compensate for the decrease in performance in Europe Ground.  

Reported gross profit is down 6.8% to $44.2m (2015: $47.4m). Pleasingly, our Air and Ground divisions in the regions outside Europe showed an upturn in gross profit. The decrease has come in Europe Air and Ground with the decrease in discretionary spend in Europe Ground and the exit of underperforming contracts in Europe Air.

Reported underlying EBITDA has dropped 7.5% to $17.3m (2015: $18.7m). Included within our Europe Air is $1m of trading foreign exchange losses borne in the year as a result of the volatile currency movements in the year, particularly the strengthening of USD to GBP. The reported EBITDA would be similar to the prior year if this were added back as part of the underlying performance.  

 

Pre- acquisitions

 

Acquisitions

 

Reported

Associates & JV

Total Group

Group Underlying EBITDA (USD'000)

15,650

1,644

17,294

(124)

17,170

 

Exceptional costs

Underlying EBITDA is stated before exceptional costs of $2.5m, details of which are included within note 4. Of the total $2.5m exceptional costs, $1.4m are transaction costs with the remainder being the one-off costs associated with the subsequent integration and re-organisation of these transactions.

 

Discontinued operations

The operating losses incurred on the Group's owned aircraft that are deployed on ad-hoc charter are also separated from the underlying EBITDA as this is a legacy element of the business model that the Group has classified as discontinued. The discontinued operations loss for the year was $2.1m, of which $1.8m were impairments to their residual values. During the course of the year, an owned aircraft that was not of the right specifications and therefore operationally inefficient, was classified as held for sale. After the year end, Gama Aviation sold one of the three remaining aircraft that was held for sale for $0.75m. The book value of the two remaining assets held for sale is $6.5m.

 

 

Total operating profit

Reported underlying total operating profit, which includes the operating profit attributable to Gama Aviation of the 100% owned group companies together with the results attributable to Gama Aviation from its associate and joint venture is in line with 2015 at $15.1m (2015: $15.3m).

 

Pre- acquisitions

 

Acquisitions

 

Total

Associates & JV

Total Group

Underlying Total Operating Profit (USD'000)

13,918

 

1,469

 

15,387

(330)

15,057

 

Profit before tax and earnings per share

The reported profit before tax of $19.3m (2015: $6.9m) and earnings per share of (EPS) of 42.9p (2015: 21.3p) both benefitted significantly from a material foreign exchange credit in the year which is explained in more detail in the foreign exchange section below. This credit is excluded from our profit before tax and EPS numbers below to give a better understanding of the underlying performance of the Group.

Underlying profit before tax is up 3.8% at $13.7m (2015: $13.2m).

Underlying EPS is down 18.9% to 30.1 cents (2015: 37.1 cents). However, the EPS in 2015 benefitted from a tax credit of $2.5m against a tax charge of $0.6m in 2016. On a like-for-like basis, the underlying business produced an EPS of 31.5 cents in 2016 compared to 31.2 cents in 2015.

 

Taxation

There is a total tax charge for the year of $0.6m made up of a tax charge of $1.6m offset by a deferred tax credit of $1.0m. In 2015, there was a tax credit of $2.5m as a result of deferred tax movements in the US business.

 

Foreign exchange

Within our global services business, we operate and manage geographically mobile assets. As a result, Gama Aviation is exposed to a number of currencies. With the exception of Europe, the rest of the regions trade in USD which is the same as our Group reporting currency, leaving little or no foreign exchange exposure.

The material currency exposure for Gama Aviation is within our Europe operations in GBP to USD. Gama Aviation experiences both realised and unrealised trading gains and losses on these exchange rate movements. These impact our operating performance, and finance income and costs.

As the GBP weakens against the USD, the UK businesses suffer both trading and translational losses at EBITDA level.  However, the intercompany loan structure within the Group works in the opposite direction and Gama Aviation experiences foreign exchange gains within finance income as the GBP weakens against the USD.

Given the volatility of the GBP to USD exchange rates over the year, Gama Aviation experienced sizeable losses of over $1m within its underlying EBITDA and material gains within its finance income of $9.7m.

Gama Aviation has not adjusted for the operating losses experienced in the year due to the foreign exchange impact despite the unusual volatility in the rates over the year but it has adjusted out the material foreign exchange credit within profit before tax and EPS.

The use of the constant currency reporting helps to illustrate the underlying performance of the business in the absence of these foreign exchange movements.    

An independent foreign exchange review has been carried out which identified a number of small but effective improvements that can be made and these are being put in place. The review concluded that Gama Aviation is managing its foreign exchange exposure in an appropriate way given the size and nature of the business.

 

 

Cash

Cash increased by $2.7m to $11.2m (2015: $8.5m).

Operating cash inflow before movements in working capital increased 33.6% to $16.3m (2015: $12.2m) and the working capital movement improved by 46.3% to an outflow of $14.1m (2015: $26.3m outflow).

Cash generated by operations was $2.2m for the year compared with an outflow of $14.1m in 2015. The Group is focused on improving its working capital management and we expect the business to generate significantly higher cash conversion in the future.

Net debt at the year-end was $19.4m, up from $9.0m in 2015 as the Group drew on debt facilities to fund the acquisitions and related costs in the year.

Net debt to underlying EBITDA was 1.1x (2015: 0.4x).

 

Dividend

The Directors are recommending a dividend of 2.6p per share, an increase of 4.0% (2015: 2.5p per share).

 

 

 

Kevin Godley

Chief Financial Officer
 

Segmental analysis

(USD thousands)

 

Total Group1 and Constant Currency2

Year ended 31 December 2016

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

233,721

24,130

117,736

38,321

19,531

5,170

16,525

2,327

(25,036)

432,425

Gross Profit

14,114

5,560

9,568

17,615

1,345

1,697

380

2,126

 

52,405

Gross Profit  %

6.0%

23.0%

8.1%

46.0%

6.9%

32.8%

2.3%

91.4%

 

12.1%

EBITDA3

6,407

2,778

2,607

8,383

15

273

(524)

(2,769)

 

17,170

EBITDA3  %

2.7%

11.5%

2.2%

21.9%

0.1%

5.3%

(3.2%)

(>100%)

 

4.0%

Total Operating Profit4

6,089

2,401

2,095

7,660

(95)

32

(544)

(2,767)

 

14,871

Total Operating Profit4 %

2.6%

10.0%

1.8%

20.0%

(0.5%)

0.6%

(3.3%)

(>100%)

 

3.4%

 

Year ended 31 December 2015

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

179,525

20,661

124,106

47,895

21,598

4,965

6,539

829

(22,236)

383,882

Gross Profit

9,301

4,947

12,200

21,562

1,431

1,188

267

648

 

51,544

Gross Profit  %

5.2%

23.9%

9.8%

45.0%

6.6%

23.9%

4.1%

78.2%

 

13.4%

EBITDA3

2,990

2,226

1,890

12,815

(160)

(163)

(884)

(3,164)

 

15,550

EBITDA3  %

1.7%

10.8%

1.5%

26.8%

(0.7%)

(3.3%)

(13.5%)

(>100%)

 

4.1%

Total Operating Profit4

2,693

1,986

1,110

12,280

(247)

(479)

(894)

(3,183)

 

13,266

Total Operating Profit4 %

1.5%

9.6%

0.9%

25.6%

(1.1%)

(9.6%)

(13.7%)

(>100%)

 

3.5%

 

 

Total Group1

Year ended 31 December 2016

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

233,721

24,130

117,736

38,321

19,531

5,170

16,525

2,327

(25,036)

432,424

Gross Profit

14,114

5,560

9,568

17,615

1,345

1,697

380

2,126

 

52,405

Gross Profit  %

6.0%

23.0%

8.1%

46.0%

6.9%

32.8%

2.3%

91.4%

 

12.1%

EBITDA3

6,407

2,778

2,607

8,383

15

273

(524)

(2,769)

 

17,170

EBITDA3  %

2.7%

11.5%

2.2%

21.9%

0.1%

5.3%

(3.2%)

(>100%)

 

4.0%

Total Operating Profit4

6,089

2,401

2,095

7,660

(95)

32

(544)

(2,767)

 

14,871

Total Operating Profit4 %

2.6%

10.0%

1.8%

20.0%

(0.5%)

0.6%

(3.3%)

(>100%)

 

3.4%

 

Year ended 31 December 2015

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

179,525

20,661

139,224

54,003

21,598

4,965

6,539

935

(23,615)

403,834

Gross Profit

9,301

4,947

13,542

24,312

1,431

1,188

267

744

 

55,732

Gross Profit  %

5.2%

23.9%

9.7%

45.0%

6.6%

23.9%

4.1%

79.6%

 

13.8%

EBITDA3

2,990

2,226

2,124

14,449

(160)

(163)

(884)

(3,296)

 

17,286

EBITDA3  %

1.7%

10.8%

1.5%

26.8%

(0.7%)

(3.3%)

(13.5%)

(>100%)

 

4.3%

Total Operating Profit4

2,693

1,986

1,254

13,847

(247)

(479)

(894)

(3,286)

 

14,874

Total Operating Profit4 %

1.5%

9.6%

0.9%

25.6%

(1.1%)

(9.6%)

(13.7%)

(>100%)

 

3.7%

 

 

1 - Including 100% of the results of Gama Aviation's Associate in the US and Joint Venture in Hong Kong.

2 - Calculated at a constant foreign exchange rate of $1.36 to £1.

3 - Underlying EBITDA is arrived at by taking operating profit before depreciation, amortisation and exceptional items.

4 - Underlying total operating profit is arrived at by taking operating profit before amortisation and exceptional items and including the share of results of equity accounted investments.

5 - 'Elims' represents the elimination of inter-segment revenue.

 

 

 

Segmental analysis (continued)

(USD thousands)

 

Reported and Constant Currency2

Year ended 31 December 2016

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

7,949

24,130

117,736

38,321

19,531

5,170

80

2,327

(12,207)

203,037

Gross Profit

6,160

5,560

9,568

17,615

1,345

1,697

80

2,126

 

44,151

Gross Profit  %

77.5%

23.0%

8.1%

46.0%

6.9%

32.8%

100%

91.4%

 

21.7%

EBITDA3

5,927

2,778

2,607

8,383

15

273

80

(2,769)

 

17,294

EBITDA3  %

74.6%

11.5%

2.2%

21.9%

0.1%

5.3%

100%

(>100%)

 

8.5%

Total Operating Profit4

5,973

2,401

2,095

7,660

(95)

32

(242)

(2,767)

 

15,057

Total Operating Profit4 %

75.1%

10.0%

1.8%

20.0%

(0.5%)

0.6%

(>100%)

(>100%)

 

7.4%

 

Year ended 31 December 2015

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

7,815

20,661

124,106

47,895

21,598

4,965

36

829

(11,888)

216,017

Gross Profit

5,375

4,947

12,200

21,562

1,431

1,188

36

648

 

47.387

Gross Profit  %

68.8%

23.9%

9.8%

45.0%

6.6%

23.9%

100%

78.2%

 

21.9%

EBITDA3

5,185

2,226

1,890

12,815

(160)

(163)

36

(3,164)

 

18,665

EBITDA3  %

66.3%

10.8%

1.5%

26.8%

(0.7%)

(3.3%)

100%

(>100%)

 

8.6%

Total Operating Profit4

4,175

1,986

1,110

12,280

(247)

(479)

(361)

(3,183)

 

15,281

Total Operating Profit4 %

53.4%

9.6%

0.9%

25.6%

(1.1%)

(9.6%)

(>100%)

(>100%)

 

7.1%

 

Reported

Year ended 31 December 2016

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

7,949

24,130

117,736

38,321

19,531

5,170

80

2,327

(12,207)

203,037

Gross Profit

6,160

5,560

9,568

17,615

1,345

1,697

80

2,126

 

44,151

Gross Profit  %

77.5%

23.0%

8.1%

46.0%

6.9%

32.8%

100%

91.4%

 

21.7%

EBITDA3

5,927

2,778

2,607

8,383

15

273

80

(2,769)

 

17,294

EBITDA3  %

74.6%

11.5%

2.2%

21.9%

0.1%

5.3%

100%

(>100%)

 

8.5%

Total Operating Profit4

5,973

2,401

2,095

7,660

(95)

32

(242)

(2,767)

 

15,057

Total Operating Profit4 %

75.1%

10.0%

1.8%

20.0%

(0.5%)

0.6%

(>100%)

(>100%)

 

7.4%

 

Year ended 31 December 2015

 

US

Europe

MENA

Asia

Other

Elims5

Totals

 

Air

Ground

Air

Ground

Air

Ground

Air

 

 

 

Revenue

7,815

20,661

139,224

54,003

21,598

4,965

36

935

(13,220)

236,017

Gross Profit

5,375

4,947

13,542

24,312

1,431

1,188

36

744

 

51,575

Gross Profit  %

68.8%

23.9%

9.7%

45.0%

6.6%

23.9%

100%

79.6%

 

21.9%

EBITDA3

5,185

2,226

2,124

14,449

(160)

(163)

36

(3,297)

 

20,400

EBITDA3  %

66.3%

10.8%

1.5%

26.8%

(0.7%)

(3.3%)

100%

(>100%)

 

8.6%

Total Operating Profit4

4,175

1,986

1,254

13,847

(247)

(479)

(361)

(3,286)

 

16,889

Total Operating Profit4 %

53.4%

9.6%

0.9%

25.6%

(1.1%)

(9.6%)

(>100%)

(>100%)

 

7.2%

 

 

1 - Including 100% of the results of Gama Aviation's Associate in the US and Joint Venture in Hong Kong.

2 - Calculated at a constant foreign exchange rate of $1.36 to £1.

3 - Underlying EBITDA is arrived at by taking operating profit before depreciation, amortisation and exceptional items.

4 - Underlying total operating profit is arrived at by taking operating profit before amortisation and exceptional items and including the share of results of equity accounted investments.

5 - 'Elims' represents the elimination of inter-segment revenue.

 

 

Consolidated income statement for the year ended 31 December 2016

 

 

 

 

 

Year

ended

2016

 

Year

ended

2015

 

Note

 

$'000

 

$'000

 

 

 

 

 

 

 

 

 

 

 

3

 

203,037

 

236,017

Cost of sales

 

 

(158,886)

 

(184,443)

 

 

44,151

 

51,574

 

 

(32,884)

 

(42,162)

 

 

 

 

 

 

 

 

17,294

 

20,400

Exceptional Items

4

 

(2,548)

 

(7,123)

Depreciation and amortisation

 

 

(3,479)

 

(3,865)

 

 

 

 

 

 

 

 

11,267

 

9,412

Share of results from equity accounted investments

 

 

(330)

 

(1,324)

 

 

 

 

 

 

Total operating profit

 

 

10,937

 

8,088

 

 

9,750

 

1,044

Finance costs

 

 

(1,379)

 

(2,256)

 

 

 

 

 

 

 

 

19,308

 

6,876

 

 

(615)

 

2,513

 

 

 

 

 

 

 

 

18,693

 

9,389

 

 

 

 

 

Loss after tax for the year from discontinued operations

4

 

(2,127)

 

(1,102)

 

 

16,565

 

8,287

 

 

 

 

 

  Owners of the Company:

 

 

16,676

 

8,049

  Non-controlling interests

 

 

(110)

 

238

 

 

 

16,566

 

8,287

 

 

 

 

 

 

 

Consolidated statement of comprehensive income as at 31 December 2016

 

 

 

 

Year

ended

2016

 

Year

ended

2015

 

Note

 

$'000

 

$'000

 

 

 

 

 

 

 

 

16,566

 

8,287

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

(18,440)

 

(4,186)

 

 

(1,874)

 

4,101

Non-controlling interest

 

 

110

 

(238)

 

 

(1,764)

 

3,863

 

 

 

5

 

 

 

 

-       basic (cents)

 

 

38.05c

 

18.72c

-       diluted (cents)

 

 

38.05c

 

18.72c

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-       basic (cents)

 

 

42.90c

 

21.28c

-       diluted (cents)

 

 

42.90c

 

21.28c

 

 

  Consolidated balance sheet as at 31 December 2016

 

 

 

2016

 

 2015

 

Note

 

$'000

 

$'000

Non-current assets

 

 

 

 

 

Goodwill

6

 

37,631

 

39,869

Other intangible assets

7

 

9,987

 

8,396

 

 

47,618

 

48,265

Property, plant and equipment

 

 

12,215

 

14,806

Deferred tax asset

 

 

4,557

 

3,407

 

 

 

64,390

 

66,478

 

 

 

 

 

Assets held for resale

 

 

7,200

 

3,126

Inventories

 

 

8,410

 

7,353

Trade and other receivables

 

 

46,473

 

49,608

Cash and cash equivalents

 

 

11,174

 

8,457

 

 

 

73,257

 

68,544

 

 

137,647

 

135,022

 

 

 

 

 

Trade and other payables

 

 

(41,682)

 

(53,956)

Obligations under finance leases

 

 

(1,644)

 

(1,586)

Provisions for liabilities

 

 

(2,416)

 

(2,000)

Borrowings

 

 

(24,018)

 

(8,851)

Deferred revenue

 

 

(4,315)

 

(4,538)

 

 

 

(74,075)

 

(70,931)

 

 

63,572

 

64,091

 

 

 

 

 

Borrowings

 

 

(923)

 

(1,110)

Obligations under finance leases

 

 

(3,976)

 

(5,932)

Provisions for liabilities

 

 

(492)

 

-

Deferred tax liabilities

 

 

(1,649)

 

(1,395)

 

 

 

(7,040)

 

(8,437)

 

 

(81,116)

 

(79,368)

 

 

56,532

 

55,654

 

Consolidated balance sheet as at 31 December 2016 (continued)

 

 

 

 

2016

 

2015

 

Note

 

$'000

 

$'000

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

684

 

670

Share premium

 

 

-

 

35,458

Other reserves

 

 

61,377

 

57,228

Foreign exchange reserve

 

 

(23,529)

 

(5,089)

Accumulated profit/(losses)

 

 

17,419

 

(33,304)

 

 

 

55,951

 

54,963

 

 

581

 

691

 

 

 

 

 

 

 

 

56,532

 

55,654

 

 

 

The financial statements were approved and authorised for issue on 24 March 2016 on behalf of the Board of Directors by:

 

 

 

 

 

 

K Godley

Director

 

 

 

Consolidated statement of changes in equity

 

 

 

Share Capital

 

 

 

Share Premium

 

 

 

Other reserves

 

 

Foreign exchange reserve

 

 

Accumulated profit / (losses)

 

Total equity attributable to owners of the Company

 

 

Non-controlling interest

 

 

Total

(deficit)/

equity

 

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2015

426

 

8,846

 

10,937

 

(903)

 

(40,999)

 

(21,693)

 

99

 

(21,594)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares

244

 

26,612

 

-

 

-

 

-

 

26,856

 

-

 

26,856

Acquisition of Gama Aviation

-

 

-

 

46,291

 

-

 

-

 

46,291

 

-

 

46,291

Non-controlling interest acquisition

-

 

-

 

-

 

-

 

1,146

 

1,146

 

(1,146)

 

-

Non-controlling interest disposal

-

 

-

 

-

 

-

 

(1,500)

 

(1,500)

 

1,500

 

-

244

 

26,612

 

46,291

 

-

 

(354)

 

72,793

 

354

 

73,147

Profit for the year

-

 

-

 

-

 

-

 

8,049

 

8,049

 

238

 

8,287

Other comprehensive income

-

 

-

 

-

 

(4,186)

 

-

 

(4,186)

 

-

 

(4,186)

-

 

-

 

-

 

(4,186)

 

8,049

 

3,863

 

238

 

4,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

670

 

35,458

 

57,228

 

(5,089)

 

(33,304)

 

54,963

 

691

 

55,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares

14

 

-

 

4,149

 

-

 

-

 

4,163

 

-

 

4,163

Cancellation of share premium

-

 

(35,458)

 

-

 

-

 

35,458

 

-

 

-

 

-

14

 

(35,458)

 

4,149

 

-

 

35,458

 

4,163

 

-

 

4,163

Profit for the year

-

 

-

 

-

 

-

 

16,676

 

16,676

 

(110)

 

16,566

Dividend paid

-

 

-

 

-

 

 

 

(1,411)

 

(1,411)

 

-

 

(1,411)

Other comprehensive income

-

 

-

 

-

 

(18,440)

 

-

 

(18,440)

 

-

 

(18,440)

-

 

-

 

-

 

(18,440)

 

15,265

 

(3,175)

 

(110)

 

(3,285)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

684

 

-

 

61,377

 

(23,529)

 

17,419

 

55,951

 

581

 

56,532

 

 

Consolidated cash flow statement for the year ended 31 December 2016

 

 

 

Year

ended

2016

 

Year

ended

2015

 

Note

 

$'000

 

$'000

 

 

 

 

 

 

Net cash generated by/(expended on) operating activities

9

 

725

 

(16,619)

 

 

 

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(3,697)

 

(1,685)

Purchases of intangibles

 

 

(400)

 

(30)

Purchases of assets held for sale

 

 

(266)

 

-

Proceeds on disposal of property, plant and equipment

 

 

-

 

436

Proceeds on disposal of assets held for sale

 

 

-

 

2,037

Investment in joint venture

 

 

-

 

(50)

Acquisition of subsidiary, net of cash acquired

 

 

(6,239)

 

3,213

 

 

(10,602)

 

3,921

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares (net of share issue costs)

 

 

-

 

26,856

Consideration for disposal of non-controlling interest

 

 

-

 

(1,142)

Repayments of obligations under finance leases

 

 

(1,900)

 

(1,390)

Proceeds from borrowings

 

 

17,798

 

7,725

Repayment of  borrowings

 

 

(40)

 

(15,767)

Dividend paid to equity holders of the parent

 

 

(1,411)

 

-

 

 

14,447

 

16,282

 

 

 

 

 

 

 

 

4,570

 

3,584

 

 

8,457

 

4,985

 

 

(1,853)

 

(112)

 

 

11,174

 

8,457

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

2016

 

2015

 

 

 

$'000

 

$'000

 

 

 

 

 

 

Cash and bank balances

 

 

11,174

 

8,457

 

 

 

 

 

 

Cash and cash equivalents comprise cash and bank balances. The carrying amount of these assets is approximately equal to their fair value.

 

Notes to the condensed consolidated financial statements as at 31 December 2016


1.
       General information

Gama Aviation Plc (previously Hangar8 Plc) is incorporated in the United Kingdom. The address of the registered office is the Business Aviation Centre, Farnborough Airport, Hampshire, GU14 6XA.

 

2.       Significant accounting policies

Non statutory financial statements

The financial information set out in this preliminary results announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2016 or 2015 but is derived from those financial statements. Statutory financial statements for 2015 have been delivered to the Registrar of Companies. Those for 2016 will be delivered following the Company's Annual General Meeting, which will be convened on 25 May 2017. The auditors have reported on those accounts: their reports on those financial statements were unqualified and did not contain statements under Section 498 of the Companies Act 2006.

The financial statements, and this preliminary statement, of the Group for the year ended 31 December 2016 were authorised for issue by the board of Directors on 24 March 2017 and the balance sheet was signed on behalf of the Board by Kevin Godley, Director.

 

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the E.U.

The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for the assets acquired. The principal accounting policies adopted are set out below.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Group is exposed, or has rights to, variable returns from its involvement in the entity and has the ability to affect those returns through its power over the entity.

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the total of the acquisition date fair values of the assets transferred by the Group, the liabilities incurred by the Group to former owners, the equity issued by the Group and the amount of any non-controlling interest in the acquiree either at fair value or at the proportional share of the acquiree's identifiable net assets. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the minority's share of changes in equity since the date of the combination. Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control is accounted for as an equity transaction, being a disposal or acquisition of non-controlling interest.

 

2. Significant accounting policies (continued)

 

Going concern

The directors have performed a detailed analysis of the cash flow projections for the Group as a whole covering the period through to the financial year ended 31 December 2016 and beyond. The key assumptions in this forecast include the profitable growth of the trading businesses and the knowledge that the group has material headroom in its debt covenants.

The directors are therefore of the opinion that in all reasonably foreseeable circumstances the company will remain a going concern for at least twelve months from the date on which these financial statements have been approved. Accordingly, the going concern basis has been adopted in the preparation of these financial statements.

 

Cash and cash equivalents

The Group's cash and cash equivalents in the statements of financial position comprise cash at bank and on hand and short-term deposits with a maturity of three months or less from inception, which are subject to an insignificant risk of changes in value.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.

 

Assets held for sale

The Group classifies assets as held for sale if their carrying value will be recovered principally through sale rather than through continuing use. Such assets are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding finance costs and income tax expense. The criteria for assets held for sale is regarded as only met when the sale is highly probable and the asset is available for immediate sale in its present condition. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

 

Events or circumstances may extend the period to complete the sale beyond one year.  An extension of the period required to complete a sale does not preclude an asset from being classified as held for sale if the delay is caused by events or circumstances beyond the entity's control and there is sufficient evidence that the entity remains committed to its plan to sell the asset

 

Business combinations

On 5 January 2015 Hangar8 Plc (now Gama Aviation Plc) became the legal parent of Gama Aviation Holdings (Jersey) Limited via a share-for-share exchange transaction. To acquire 100% of Gama Aviation Holdings (Jersey) Limited 's issued share capital, Hangar8 Plc (now Gama Aviation Plc) issued 27,341,960 shares in exchange for each ordinary shares of Gama Aviation Holdings (Jersey) Limited. The newly combined entity is now owned by shareholders of Gama Aviation Holdings (Jersey) Limited and Hangar8 Plc (now Gama Aviation Plc), with each ordinary share holding equal share of the profits and returns from the newly combined entity. However, due to the relative values of the companies, the shareholders of Gama Aviation Holdings (Jersey) Limited became the majority shareholder with 60% of the combined share capital following the share for share transaction. The allocation of the key roles and the Board composition has been driven by Gama Aviation Holdings (Jersey) Limited and the majority of the company's continuing operations and executive management are those of Gama Aviation Holdings (Jersey) Limited. It was therefore concluded that Gama Aviation Holdings (Jersey) Limited obtained control of Gama Aviation Plc. Accordingly, the transaction has been accounted for in accordance with IFRS 3 as a reverse takeover. The consolidated financial statements present the substance of the transaction with Hangar8 Plc as the legal parent but Gama Aviation Holdings (Jersey) Limited as the accounting acquirer.

 

2. Significant accounting policies (continued)

 

Investments in associate and joint venture

An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

The Group's investments in its associate and joint venture are accounted for using the equity method of accounting. The investment is carried in the balance sheet at cost as underlying by post-acquisition changes in the Group's share of the net assets of the investment, less any impairment in the value of the investment. Losses in excess of the Group's interest in the investment (which includes any long-term interests that, in substance, form part of the Group's net investment) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investment.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment. The Group's share of the changes in the carrying value of the investments in associates is recognised in the income statement.

 

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the amount of any non-controlling interests in the acquiree and the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in profit or loss and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

Revenue recognition

The Group measures revenue as the fair value of consideration received or receivable and represents amounts received for goods and services provided in the normal course of business, net of discounts, estimated customer returns, VAT and other sales-related taxes.

Revenue is recognised when the amount can be reliably estimated, collection is probable, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control of the goods sold, and the inherent risks and rewards of ownership of the goods have been transferred to the other party.

Where contracts include provisions for adjustments, including yearly increases based on external benchmarks, these are not taken into consideration until they are known.

 

Rendering of services

Revenue from services is primarily derived from the management or provision of aircraft which includes the revenues generated by special mission support, logistics support and charter. These services are referred to within the group as "Air". Revenue includes fixed contract fees and variable fees such as revenue earned with reference to flying hours. Revenue also includes the recharges for costs incurred relating to the management or provision of the aircraft. We record revenue relating to services rendered using an accrual method and in accordance with the terms of the contracts pursuant to which such services are rendered. Revenue from aircraft services is recognised based on contractual rates as the related services are performed.

 

2. Significant accounting policies (continued)

 

Rendering of services (continued)

"Ground" Revenues are materially associated with engineering activity which represents amounts derived from the provision of services to customers during the year, including aircraft maintenance and overhauls. The amount of profit attributable to the stage of completion of an engine and maintenance overhaul contract is recognised when the outcome of the contract can be foreseen with reasonable certainty. Revenue for such contracts is stated at the cost appropriate to the stage of completion plus attributable profits, less amounts recognised in previous years. The stage of completion is measured by reference to costs (mainly hours and materials) incurred to date as a percentage of total estimated costs for each contract. Provision is made for any losses as soon as they are foreseen. Other services within "ground" include design and modification work with revenue recognised on the same basis as that of the engineering and FBO operations and software. Revenues for FBO operations and software are recognised at the point of service delivery.

Sale of goods                                                                                                                                        

Revenues associated with the sale of goods represent amounts derived from sales activity whereby the Group procures aircraft, parts or components on behalf of customers for their use. Revenue is recognised when all the following conditions are satisfied:

·       the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

·       the amount of revenue can be measured reliably;

·       it is probable that the economic benefits associated with the transaction will flow to the entity;

·       the costs incurred or to be in incurred in respect of the transaction can be measured reliably; and

·     the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.

Interest revenue

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

 

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis.

 

Foreign currencies

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in US Dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. These financial statements are presented in US dollars because that is the currency of the primary economic environment in which the Group operates.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

 

2. Significant accounting policies (continued)

 

Foreign currencies (continued)

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognised in other comprehensive income and accumulated in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate for each year end.

 

Operating profit

Operating profit is stated after the share of results of associates but before investment income and finance costs.

 

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered the service entitling them to the contributions. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group's obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

 

Intangible assets

Internally generated intangible assets are recognised only if they satisfy the IAS 38 criteria in that a separately identifiable asset is created from which future economic benefits are expected to flow and the cost can be measured reliably. The life of each asset is assessed individually. Where the life is considered to be indefinite no amortisation is charged. Included in intangible assets are internally generated assets relating to the costs incurred to commence operations in the United Arab Emirates in the process of gaining an AOC (Air Operators Certificate). The certificate has an indefinite life and without the certificate the operation cannot perform legally and as such amortisation is not charged.

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Included in intangible assets acquired are Part 145 approvals, licences and brand, customer relations and workforce, and computer software.

·      Part 145 Approvals - These relate to the recognised regulatory approvals required by a business to perform maintenance in the EU Ground business.

·      Licence and brand, customer relations and software - recognised on acquisitions

 

A summary of the policies applied to the Group's acquired intangible assets is as follows:

Part 145 approvals

indefinite useful life, no amortisation charged, annual impairment review

Licences

10% per annum, straight line method

Brand

amortised over 18 months, straight line method

Customer relations

10% per annum, straight line method

Software

33% per annum, straight line method

 

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

 

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

 

2. Significant accounting policies (continued)

 

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply in the period when the liability is settled or the asset is realised.

Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Inventories

Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows:

a)   Raw materials and consumables: purchase cost on a first in, first out basis

b)   Work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

 

Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives, using the straight-line method, on the following bases:

Leasehold property

Life of lease

Aircraft hull and refurbishments

Remaining life of the aircraft, various rates between 5% and 20% per annum

Furniture, fixtures and equipment

20% per annum

Motor vehicles

20% per annum

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

 

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

 

2. Significant accounting policies (continued)

 

Impairment of tangible and intangible assets excluding goodwill (continued)

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

 

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets

Trade receivables and other receivables are measured at amortised cost less provision for doubtful debts, determined as set out below in "impairment of financial assets". Any write-down of these assets is expensed to the income statement.

 

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

 

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

 

Other financial liabilities

Other financial liabilities, including borrowings and payables, are initially measured at fair value and subsequently at amortised cost, net of transaction costs.

 

Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

 

Exceptional items

Exceptional items relate to items which do not contribute to the underlying performance of the Group, and as a result are presented separately in the consolidated income statement. Their determination is made after consideration of their nature and materiality and is applied consistently from period to period. 

 

 

 

 

 

3.       Segment information

 

For management purposes, the Group is organised into business units, based on line of business and geographical location.

 

Reported

 

An analysis of the Group's revenue, gross profit, underlying EBITDA and underlying operating profit for the year ended 31 December 2016 is as follows:

 

 

 

 

Total

Revenue

Gross profit

Gross profit

Underlying EBITDA

Underlying EBITDA
 

Underlying operating profit

Underlying operating profit

 

 

 

$'000

$'000

%

$'000

%

$'000

%

 

 

 

 

 

 

 

 

 

 

US: Air

 

 

7,949

6,160

77.5

5,927

74.6

5,973

75.1

US: Ground

 

 

24,130

5,560

23.0

2,778

11.5

2,401

10.0

Europe: Air

 

 

117,736

9,568

8.1

2,607

2.2

2,095

1.8

Europe: Ground

 

 

38,321

17,615

46.0

8,383

21.9

7,660

20.0

MENA: Air

 

 

19,531

1,345

6.9

15

0.1

(95)

(0.5)

MENA: Ground

 

 

5,170

1,697

32.8

273

5.3

32

0.6

Asia: Air

 

 

80

80

100.0

80

100

(242)

(>100)

Other

 

 

2,327

2,126

91.3

(2,769)

(>100)

(2,767)

(>100)

Eliminations

 

 

(12,207)

-

-

-

-

-

-

 

 

 

 

 

 

 

 

 

 

Totals

 

 

203,037

44,151

21.7

17,294

8.5

15,057

7.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying operating profit

15,057

 

Amortisation

(1,438)

 

Exceptional items (including share of associate's exceptional items)

(2,682)

 

Finance income

9,750

 

Finance costs

(1,379)

 

 

 

 

Profit before tax from continuing operations

19,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.       Segment information (continued)

 

Reported

 

An analysis of the Group's revenue, gross profit, underlying EBITDA and underlying operating profit for the year ended 31 December 2015 is as follows:

 

 

 

 

 

Total

Revenue

Gross profit

Gross profit

Underlying EBITDA

Underlying EBITDA
 

Underlying operating profit

Underlying operating profit

 

 

 

$'000

$'000

%

$'000

%

$'000

%

 

 

 

 

 

 

 

 

 

 

US: Air

 

 

7,815

5,375

68.8

5,185

66.3

4,175

53.4

US: Ground

 

 

20,661

4,947

23.9

2,226

10.8

1,986

9.6

Europe: Air

 

 

139,224

13,542

9.7

2,124

1.5

1,254

0.9

Europe: Ground

 

 

54,003

24,312

45.0

14,449

26.8

13,847

25.6

MENA: Air

 

 

21,598

1,431

6.6

(160)

(0.7)

(247)

(1.1)

MENA: Ground

 

 

4,965

1,188

23.9

(163)

(3.3)

(479)

(9.7)

Asia: Air

 

 

36

36

100.0

36

100

(361)

(>100)

Other

 

 

935

744

79.6

(3,296)

(>100)

(3,286)

(>100)

Eliminations

 

 

(13,220)

-

-

-

-

-

-

 

 

 

 

 

 

 

 

 

 

Totals

 

 

236,017

51,574

21.9

20,400

8.6

16,888

7.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underlying operating profit

16,888

 

Amortisation

(1,677)

 

Exceptional items (including share of associate's exceptional items)

(7,123)

 

Finance income

1,044

 

Finance costs

(2,256)

 

 

 

 

Profit before tax from continuing operations

6,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.       Segment information (continued)

 

An analysis of the Group's assets and liabilities by segment is as follows:

 

 

Assets

Liabilities

 

2016

$'000

2015

$'000

2016

$'000

2015

$'000

 

 

 

 

 

US: Air

16,674

16,937

(1,866)

(1,491)

US: Ground

8,407

7,541

(1,168)

(1,882)

Europe: Air

44,000

42,515

(37,254)

(53,716)

Europe: Ground

32,145

16,705

(8,715)

(9,579)

MENA: Air

5,165

5,568

(4,878)

(5,529)

MENA: Ground

1,040

1,244

(4,655)

(921)

Asia: Air

263

198

(18)

(17)

Other

143,686

151,705

(21,977)

(13,070)

Investment eliminations

(110,963)

(94,735)

-

-

Other Group adjustments and eliminations

(2,770)

(12,656)

(584)

6,837

 

 

137,647

135,022

(81,115)

(79,368)

 

 

 

 

An analysis of the Group's revenue is as follows:

 

Year ended

2016

$'000

Year ended

2015

$'000

Continuing operations

 

 

 

 

 

Sale of business aviation services

197,169

230,292

Sale of goods (engines and parts)

-

1,289

Branding fees

5,868

4,436

 

 

203,037

236,017

 

 

There is no revenue arising from any one customer accounting for more than 10% of revenue.

 

 

 

 

 

Geographic information

 

2016

$'000

2015

$'000

Non-current assets

 

 

 

 

 

US

2,217

2,121

Europe

9,577

12,134

MENA

421

551

 

 

12,215

14,806

 

 

 

 

Non-current assets for this purpose consist of property, plant and equipment.
 

4.       Exceptional items and discontinued operations

 

Continuing operating profit is stated after exceptional items.

Exceptional items

 

Year

ended

2016

$'000

Year

ended

2015

$'000

Transaction costs

 

1,355

3,585

Integration and business re-organisation costs

 

1,193

3,538

 

 

 

 

2,548

7,123

 

 

 

Transactions costs represent expenses incurred in respect of the acquisitions completed in the year (Aviation Beauport Group, and Flyertech Limited and Aerstream Limited), as well as costs associated with seeking out new potential investment opportunities. Integration and business re-organisation costs represent the subsequent third party and internal costs associated with the acquisitions.

Discontinued operations relate to the losses generated by the owned aircraft within the group that are held for sale as part of the group strategy to exit the business model of owned aircraft that are deployed solely for the purposes of ad-hoc charter. The results of these discontinued operations are presented below:

Discontinued operations

 

Year

ended

2016

$'000

Year

ended

2015

$'000

Revenue

 

Expenses (including depreciation charge of $7,000 in 2015)

 

 

 

Operating loss

 

(2,226)

(1,169)

Finance income

 

Finance costs

 

 

 

Loss before tax from discontinued operations

 

(2,127)

(1,102)

Taxation

 

-

-

 

 

Loss after tax for the year from discontinued operations

 

(2,127)

(1,102)

 

 

Earnings per share

 

 

 

 

 

    Basic - cents

 

 

(4.85c)

(2.56c)

 

    Diluted - cents

 

(4.85c)

(2.56c)

 

               

 

The weighted average number of ordinary shares is included in Note 5.

 

The net cash flows incurred by discontinued operations are as follows:

Operating activities

 

234

(1,731)

Investing activities

 

(266)

2,070

 

 

Net cash outflow

 

(31)

(339)

 

 

 

 

5.       Earnings per share ("EPS")

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

 

 

 

Year

ended

2016
$'000

Year

ended

2015
$'000

 

 

 

 

 

 

 

 

 

Profit / (loss) attributable to ordinary equity holders of the parent:

 

 

 

 

Continuing operations

 

 

18,803

9,151

Discontinued operations

 

 

(2,127)

(1,102)

 

 

 

Profit attributable to ordinary equity holders of the parent for basic earnings

 

 

16,676

8,049

 

 

 

Add amortisation

 

 

1,438

1,677

Add exceptional items (including share of associate's exceptional items)

 

2,682

7,123

 

 

 

Profit attributable to ordinary shareholders for underlying earnings

 

 

20,796

16,849

 

 

 

Denominator

 

 

 

 

Weighted average number of shares used in basic EPS

 

 

43,827,775

42,994,442

Weighted average number of shares used in diluted EPS

 

43,827,775

42,994,442

 

 

 

 

 

Earnings per share

 

 

 

 

    Basic - cents

 

 

38.05c

18.72c

    Diluted - cents

 

38.05c

18.72c

    Underlying Basic - cents

 

47.45c

39.19c

    Underlying Diluted - cents

 

47.45c

39.19c

 

 

 

To calculate the EPS for discontinued operations (note 4), the weighted average number of ordinary shares for both the basic and the diluted EPS is as per the table above. The following table provides the loss amount used.

 

 

 

Year

ended

2016
$'000

 

 

 

Loss from discontinued operations for the basic and diluted

 

 

EPS calculations

 

(2,127)

 

 

 

 

6.       Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

 

 

 

 

 

At 31 December 2015

 

 

 

 

 

 

The recoverable amount of goodwill is allocated to the following cash generating units:

 

 

2016

$'000

 

 

EU Air

17,792

EU Ground

19,839

 

 

37,631

 

 

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of each business are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to direct costs during the period.

At the year end, the directors carried out an impairment review of the carrying value of the goodwill recorded in the Balance Sheet. Discounted cash flows over a 5 year period based on approved budgets and forecasts, were carried out using a discount factor of 11.5% (independently calculated by a third party), revenue growth of 5% with direct costs growing at between 3-5% and overheads growing at 2%. The results showed that the carrying values could be supported by the future cash flows. Accordingly, the directors have not recorded impairment in the year.

7.       Other intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

Addition due to reverse takeover

Recognised upon reverse takeover

Additions

Disposals

Foreign exchange differences

 

At 31 December 2015

Recognised upon acquisition

Additions

Foreign exchange differences

 

At 31 December 2016

 

 

Amortisation and accumulated impairment losses

At 1 January 2015

Amortisation

Disposals

Foreign exchange differences

 

At 31 December 2015

Amortisation

Foreign exchange differences

 

At 31 December 2016

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

At 31 December 2016

 

At 31 December 2015

 

 

The intangible assets relating to the commencement of operations were incurred in gaining an AOC (Air Operators Certificate) in the United Arab Emirates. These commencement costs meet the capitalisation requirements of IAS 38. This asset, the AOC, has not been amortised because the directors believe it has an indefinite life. In addition, there are other intangible assets that meet the capitalisation requirements within IAS 38 which were acquired with the purchase of Hangar8 Plc in 2015 and Aviation Beauport Group, FlyerTech Limited and Aerstream Limited in 2016. These include licences and brands, customer relations and workforce and computer software.

The recoverable amounts of each business are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to direct costs during the period. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years. The rate used to discount the forecast cash flows is 11.5% (2015: 11.5%). The directors have determined that no such impairments are required in the years ended 31 December 2015 and 2016.

 

 

8.       Acquisitions

 

On 1 March 2016, Gama Aviation (Engineering) Limited (a subsidiary of Gama Aviation Plc) acquired Aviation Beauport Group; a privately owned Jersey based business offering a range of business aviation services, including aircraft charter, FBO services (handling, parking and hangarage services) as well as having four aircraft currently under management.

 

From the date of the acquisition, the Aviation Beauport Group contributed $7,622,000 of revenue and $1,006,000 to profit before tax from continuing operations of the Group. If the acquisition had taken place at the beginning of 2016, the contribution would have been $8,616,000 of revenue and $994,000 to profit before tax from continuing operations of the Group.

 

Goodwill of $3,253,000 and identifiable intangible assets of $1,326,000 arose on acquisition.  The goodwill comprises the fair value of expected synergies arising from the acquisition.

 

 The following table summarises the consideration paid for Aviation Beauport Group, the fair value of the assets acquired and the liabilities assumed at the acquisition date.

 

Consideration at 1 March 2016

 

 

 

$'000

 

 

 

 

 

Equity instruments (1,000,000 ordinary shares)

 

 

 

4,163

Cash

 

 

 

3,608

Total consideration transferred

 

 

 

7,771

 

 

 

 

 

           

 

Recognised amounts of identifiable assets acquired and liabilities assumed

 

 

 

$'000

 

 

 

 

 

Property, plant and equipment

 

 

 

2,967

Licences (included within intangibles)

 

 

 

14

Brand (included within intangibles)

 

 

 

153

Customer relationships (included within intangibles)

 

 

 

1,159

Inventories

 

 

 

5

Trade and other receivables

 

 

 

401

Trade and other payables

 

 

 

(464)

Deferred revenue

 

 

 

(797)

Goodwill

 

 

 

3,253

 

 

 

 

6,691

Cash

 

 

 

1,080

Total

 

 

 

7,771

 

 

 

 

 

 

Following an independent valuation, the provisional fair values at acquisition date were confirmed. Consequently the book values are the same as the fair values.

 

 

 

 

 

 

 

8.       Acquisitions (continued)

 

On 1 July 2016, Gama Aviation Limited (a subsidiary of Gama Aviation Plc) acquired FlyerTech Limited and sister company Aerstream Limited, a privately owned airworthiness management firm based in the UK. 

 

From the date of the acquisition, FlyerTech Limited and Aerstream Limited contributed $1,313,000 of revenue and $463,000 to profit before tax from continuing operations of the Group. If the acquisition had taken place at the beginning of 2016, the contribution would have been $2,390,000 of revenue and $935,000 to profit before tax from continuing operations of the Group.

 

Goodwill of $1,762,000 and identifiable intangible assets of $2,935,000 arose on acquisition.  The goodwill comprises the fair value of expected synergies arising from the acquisition.

 

The following table summarises the consideration paid for FlyerTech Limited and Aerstream Limited, the fair value of the assets acquired and the liabilities assumed at the acquisition date.

 

Consideration at 1 July 2016

 

 

 

$'000

 

 

 

 

 

Cash

 

 

 

4,759

Deferred consideration

 

 

 

803

Total consideration transferred

 

 

 

5,562

 

 

 

 

 

           

 

Recognised amounts of identifiable assets acquired and liabilities assumed - provisional

$'000

 

 

 

 

 

Property, plant and equipment

 

 

 

11

Computer software (included within intangibles)

 

 

 

11

Brand (included within intangibles)

 

 

 

59

Customer relationships (included within intangibles)

 

 

 

2,865

Trade and other receivables

 

 

 

343

Trade and other payables

 

 

 

(333)

Deferred revenue

 

 

 

(204)

Goodwill

 

 

 

1,762

 

 

 

 

4,514

Cash

 

 

 

1,048

Total

 

 

 

5,562

 

The fair values as identified at acquisition date are provisional pending receipt of the final valuations for those assets.

 

 

9.       Net cash generated by/(expended on) operating activities

 

 

 

 

Profit before tax from continuing operations

 

Loss before tax from discontinued operations

 

 

 

Profit before tax

 

 

 

Adjustments for:

 

Finance income

 

Finance costs

 

Depreciation of property, plant and equipment

 

Amortisation of intangible assets

 

Impairment of assets held for sale

 

Loss on disposal of property, plant and equipment

 

Loss on disposal of intangibles

 

Unrealised foreign exchange movements

 

Share of loss from equity accounted investments

 

 

 

Operating cash inflow before movements in working capital

 

 

 

Increase in inventories

 

(Increase)/decrease in receivables

 

Decrease in payables

 

Decrease in deferred revenue

 

Decrease in provisions

 

 

 

Cash generated by/(expended on) operations

 

 

 

 

 

Taxes paid

 

Interest received

 

Interest paid

 

 

 

Net cash generated by/(expended on) operating activities

 

 

 

 

 

 

10.     Events after the balance sheet date

On 1 January 2017, Gama Aviation LLC (an associate of Gama Aviation Plc) merged its aircraft management and charter operations with Landmark Aviation LLC (a wholly owned subsidiary of BBA Aviation Plc). The newly combined business will be called Gama Aviation Signature Aircraft Management and will manage a fleet of over 200 aircraft.

 

11.     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. 

 

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

 

 

 

 

 

Gama Charters LLC

Saudi Bin Laddin

Crescent Investment LLC

Air Arabia, UAE

Gama Aviation Hutchison Holdings

Zulu X-Ray Services Limited

Offshore Jets Ltd

Skye Holdings Limited

Harrier Trust

Volare Aviation Ltd

Oxfordshire Estates Ltd

G Khalek

Valentia Properties Limited

Merlin Financial Advisors

Merlin Consultancy Limited

Gebu Partners Limited

Growthgate Capital Corporation

 

 

 

 

 

 

 

 

 

11.     Related party transactions (continued)

 

The following amounts were outstanding at the balance sheet date:

 

 

 

 

 

 

 

Gama Charters LLC

Gama Aviation Hutchison Holdings

Oneti Ltd

Crescent Investment LLC

Saudi Bin Laddin

Offshore Jets Ltd

Oxfordshire Estates limited

Harrier Trust

Valentia Properties Limited

Zulu X-Ray Services Limited

 

 

Mr M A Khalek, a director and shareholder of the company, controls 24% of the voting rights of Zulu X-Ray Services Limited.

The Group controls 25% of the voting rights of Gama Charters LLC, a company registered in the USA, indirectly through Operator Holdings LLC.

The Group controls 50% of the voting rights of Gama Aviation Hutchison Holdings, a company registered in Hong Kong.

Crescent Investment LLC is an investor in Growthgate Capital, a director and shareholder of the company.

The majority shareholder of Oneti Ltd is Mr G Khalek, a related party to Mr M A Khalek, a shareholder of the company.

King Salman, Saudi Bin Laddin, Air Arabia and M Sukkar and Co are entities under common management and control with the Group.

Merlin Financial Advisors and Merlin Consultancy Limited are owned by Mr N Payne, a non-executive director of the Group up to 4 November 2016.

Gebu Partners Limited is owned by Mr G Rolls, a non-executive director of the Group up to 3 June 2016.

Valentia Limited is owned by Mr M Peagram, a non-executive director of the Group.

Offshore Jets Ltd, Skye Holdings Limited, Harrier Trust, Volare Aviation Ltd and Oxfordshire Estates Limited are owned by and or associated with Mr D Dryden, a former executive director of the Group. Mr D Dryden was an executive director until 30 September 2015.

All sales and purchases of services are made at market price.

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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