Final Results

RNS Number : 1584S

Hangar 8 Plc

28 November 2012

 



28 November 2012

Hangar 8 plc

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

Final results for the year ended 30 June 2012

Hangar8, one of Europe's largest operators of privately owned passenger jet aircraft, today announces its financial results for the year ended 30 June 2012. All of the comparative information shown below for 2011 represents the audited results for the 14 month period to 30 June 2011.

Financial highlights:

·     Gross profit up 32% to £4.9m (2011: £3.7m)

·     Gross margin percentage up 9% points to 29% (2011: 20%)

·     Earnings used in Adjusted EPS up 37% to £1.1m (2011: £0.8m)

·     Adjusted EPS up 21% to 16.9p (2011: 14.0p)

·     Operating profit up by £1.0m to £0.5m (2011: loss of £0.5m)

·     Basic and diluted EPS of 4.9p and 4.8p (2011: loss of 8.7p)

Operational highlights:

·    Contracted revenue up by 210% to £10.8m (2011: £3.5m)

·    Contracted revenues now 68% of total (2011: 22.5%)

·    Investment in overseas Air Operator's Certificates £0.7m (2011: NIL)

·    Number of heavy jets under management up by 5 to 13 (2011: 8)

·    Number of hours flown up 10% to 7,734 (2011: 7,055)

·    Part 145 maintenance developed into new territories such as Nigeria (Lagos and Abuja), Congo (Pointe Noir) and Kazakhstan (Almaty)

·    Joint venture with Maltese partner and acquisition of Star-Gate increasing our scale and global platform

Nigel Payne, Chairman, commented:

"It has been a year of significant progress at Hangar8, with the company materially advancing its position against each of its strategic priorities. We have increased the scale of our business by winning new aircraft management mandates, expanded the breadth of our geographic offering by establishing new, global operating bases and broadened the depth of our service provision by internalising previously outsourced core functions. While the results underscore the substantial progress we have made there is a real belief within the business that this is merely the start of our journey. We look to the future with confidence and optimism."

Dustin Dryden, Chief Executive, commented:

"As recently announced, we have enjoyed a very strong start to the new financial year with earnings before interest, tax, depreciation and amortisation for the three months ended 30 September 2012 up 331 per cent to £461,000 (Q1 2011: £107,000). This increase has been driven, in part, by improvements in our profit margins as a result of the significant increase in long-term contracted management and charter revenue that we have achieved.

"I continue to see a consistent level of growth in this business and anticipate that the results for the year ended 30 June 2013 will be materially above market expectations."

Enquiries

Hangar 8 plc                                                               [phone]

Dustin Dryden, Chief Executive

Philip Brady, Chief Financial Officer

Blythe Weigh Communications                                + 44 (0) 20 7138 3204

Paul Weigh                                                                  [phone]

Natalie Raper                                                              [phone]

Robert Kellner                                                             [phone]

Seymour Pierce                                                         [phone]

Mark Percy/Julian Erleigh (Corporate Finance)

David Banks/Katie Ratner (Corporate Broking)

Introduction

I am pleased to report that Hangar8 has delivered a strong financial performance in the 12 months to 30 June 2012, a year that has seen significant progress and change for the business.

Against a backdrop of challenging macro-economic conditions, Hangar8 has performed well by maintaining a strong and clear focus on delivering the core strategic objectives the Board outlined at the time of Hangar8's admission to AIM in November 2010.  We have focused on increased the scale of our business, we have expanded the breadth of our geographical offering, and we have broadened the depth of our services through internalising previously outsourced core functions. 

Growth in scale: increased aircraft under management with specific focus on heavier jets and longer-term charter contracts, aimed at improving earnings visibility and profitability

The aviation industry is highly regulated, with the cost of compliance increasing disproportionately. This encourages consolidation and globalisation to gain economies of scale, increase competition, and broaden the product offering to clients. The Board considers scale critical to a healthy future for Hangar8, as these effects polarise the market more acutely over time. I am therefore pleased to report a growth of five aircraft under management in the heavy-jet class bringing the fleet total to 13 (2011: 8), where revenues and margins are traditionally stronger.

In addition to increasing the number of aircraft under management, we have sought to de-risk the business and increase the forward visibility and quality of our earnings through a deliberate focus on longer-term contracts, as opposed to spot market charter contracts. These longer term contracts, which can range from one year to five years in duration, not only provide Hangar8 with enhanced earnings visibility, enabling better long-term planning and cash management, but also yield superior margins. Together with contracted management fees, contracted revenues now account for approximately 68% (2011: 22%) of revenue for the business.

Increased breadth of the business: geographic expansion to capture growth opportunities and reduce dependence on any single market

Hangar8 has made impressive progress towards its goal of expanding its geographical footprint. Here, the Board has not only sought to offer its existing clients services across a wider geographic footprint, but also to capture growth opportunities presented in regions displaying demonstrable economic growth and an appetite for private aviation travel.

During the course of the year, as well as establishing six new operating bases in strategic locations around the world (now 12 in total), we have also acquired, Aircraft Operator's Certificates in Malta and South Africa. Strategically, these were important moves, as they provided us with bases and a physical and regulatory platform into the African, Central Asian and Middle Eastern markets. The Board believes that these markets, which display strong GDP growth and economic development characteristics, offer exciting growth potential for Hangar8.

Internalised maintenance function: reduces cost, improves service to our clients and provides a new revenue stream

During the course of the financial year we were awarded a Part 145 Approval from the European Aviation Safety Association (EASA), which allowed us to internalise our engineering and maintenance operations. Following this award, we have invested in expanding our maintenance capabilities in Oxford, where we can now maintain and service over 12 different type of aircraft for the major business jet manufacturers, and globally, with Hangar8 maintenance operations now open in Nigeria (Lagos and Abuja), Congo (Pointe Noir) and Kazakhstan (Almaty).

As a result, not only do we now offer a materially better localised service for our global client base but our engineering revenues increased by 80% to £0.9m (2011: 14 months £0.5m). In addition to the organic growth that internalising and expanding our maintenance offering brings, we also anticipate aircraft management opportunities from undertaking ad-hoc maintenance on non-client aircraft at our global maintenance bases.

Board and Management

The Board continues to place great emphasis on its management capabilities and seeks to develop a management team more than capable of supporting the business through its high growth phase.

During the year Hangar8 has continued to invest substantially in talent and infrastructure. We have strengthened our finance function, improving our financial systems and controls, and adding a strong Financial Controller to support our Finance Director. We have enhanced our treasury function in response to increased exposure to currency fluctuations stemming from international long-term contracts. Operationally we have also brought in a new Operations Director and we have recruited many engineers to support our maintenance offering and international expansion.

With regard to the plc Board, as previously announced, David Savile, the former Chief Executive of Air Partner, joined the Board on 6 February 2012. John Blower and Keiron Blay stood down from the Board on 24 October 2011.  David Cowham stands down from the Board on 28 November 2012 and Michael Peagram is appointed to the Board on the same date.

Outlook and Future Prospects

Hangar8 has grown at a rapid pace since it commenced life as a public company in late 2010. So far, we have followed the exact path we set out at the time of our listing and delivered on all our objectives, within the most restrictive market conditions for decades.

There is a real belief within the business that this is merely the start of our journey. While macro-economic conditions remain challenging, there are tentative signs of improvement. We believe this, combined with the rapid progress we have made in recent times, has created a very exciting platform on which we can leverage the scale, breadth and depth of our business for the benefit of all stakeholders.

We have made an encouraging start to the current financial year and continue to explore the global market for the right opportunities to grow our business, whether organically or through acquisition. We have an experienced, committed and dynamic team at the helm, supported by a robust balance sheet, and believe that the enhancements we have made during the past financial year leave us well placed to meet future challenges and opportunities presented by the market.

We look to the future with confidence and optimism.

Nigel Payne

Chairman

28 November 2012

Chief Executive's Statement

Financial review

Total revenue for the year was £17.0m (2011: 14 months £18.2m), yielding a gross profit of £4.9m (2011: 14 months £3.8m). The quality and visibility of our revenue stream has been enhanced by focussing on long-term contracts as opposed to spot market charter transactions. Leveraging off the scale of the business, our long term contracts deliver robust margins and provide for a significant increase in visibility of our earnings.

Contracted revenues represented 68% of total revenues in the current financial year (2011: 22.5%). 

Earnings used in Adjusted EPS increased 37% to £1.1m (2011: 14 months £0.8m).

Adjusted earnings per share was 16.9p (2011: 14 months 14.0p), an increase of 20% on the prior period.

While it is the Board's intention to initiate a progressive dividend policy in the medium-term, given the rapid growth the Group has achieved and the funding this has required, the Board feels that it is prudent to maintain a healthy balance sheet and as such has decided not to pay a dividend at the current time.

Review of Operations

Using a fast growing fleet of 31 business jets, Hangar8 is an asset management and logistics business managed through 21 bases around the world. In the current financial year Hangar8 flew to 402 different destinations across 66 different countries, an activity level considerably higher than many major airlines. As part of this global reach and footprint, Hangar8's bases in the UK, Malta, Nigeria, Kazakhstan and South Africa also now have in-house maintenance and crew training facilities which have significantly enhanced our overall service offering.

We entered into a joint venture in Malta during the year which has increased our profile amongst the fast growing North African market and also given us better access to the high net worth individuals who tend to populate this area of the world.  Malta has historically had long standing links to the Central Asian region which is an area of interest to the Group given its current economic growth and demographics.

We also acquired Star-Gate during the year giving us access to a South African Air Operator's Certificate which consolidates our position on the African continent and enables us to operate in the region with increased confidence and credibility.  This has proven to be a success and has enabled us to develop our business in Africa much more quickly than on our own. 

Both of these acquisitions have been funded out of existing cash reserves, the issue of shares or deferred cash consideration.

An additional benefit of our international expansion is a natural de-risking of the business away from the economic cycle of any single individual market. Europe remains a strategically important market for our business and whilst conditions across the region remain stable, better growth opportunities are presently available elsewhere. Therefore, we will continue to look to grow our business in regions that offer exciting growth potential, while ensuring we maintain an exceptional customer offering in our 'home' markets.

Broadening our operational capabilities in this way during the year, however, has not simply been about increasing the financial rewards we earn. We have invested heavily in our infrastructure and have taken every effort to ensure that as we have expanded our operations, we have retained the highest standards of safety and customer service.  Outstanding service is what we expect to deliver to our customers as standard at all times and we have focused on ensuring that this runs through the very fabric of the organisation. This mantra is designed to continuously improve the standards and enhance our position within the industry and this pervades everything we have done during the year.

The clear objectives we set ourselves when we were admitted to AIM of increasing the quantum and quality of our managed aircraft, focusing on better revenue opportunities in broader geographical areas and internalising our previously outsourced maintenance function, have continued to reap rewards during the year for Hangar8, its customers and its stakeholders.

Aircraft under management

Hangar8 currently has 31 aircraft in its managed fleet, 13 of which are heavy jets. During the year we have seen a significant shift in demand towards the heavier end of the market. The demands of large corporates in particular who today travel across continents or over large distances within a continent has fuelled this change. Hangar8's growth in the heavier, longer range aircraft numbers from eight to 13 jets in the financial year has therefore been a significant factor in securing additional long term contract revenues for the business together with assisting our overall aim of strategic expansion into wider geographical regions. As we further gain critical mass across the world and continue to internalise more functions and expertise, all stakeholders are benefitting through the enhanced scale of the business.

Today Hangar8 not only has experience in managing the largest Hawker fleet of private jet aircraft in Europe but also now of much larger-range heavier jets such as the Challenger 604. This additional string to the offering of the business has cemented our reputation in the market and the Board has every confidence that we will continue to see good growth in this area of our business.

Future

Hangar8 is now in a leading position in its marketplace and the Board is confident that it can leverage significant operational gearing over the forthcoming year to deliver better and more cost effective services for our customers as well as increased returns for our shareholders.

On behalf of the board

Dustin Dryden

Chief Executive Officer

28 November 2012

Consolidated statement of comprehensive income for the year ended 30 June 2012

				Year ended			14 month period ended
		Before exceptional	Exceptional	30 June 2012	Before exceptional	Exceptional items	30 June 2011
		Items	Items (note 7)	Total	Items	(note 7)	Total
		2012	2012	2012	2011	2011	2011
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	4	17,000	-	17,000	18,155	-	18,155
Cost of sales		(12,063)	-	(12,063)	(14,361)	(118)	(14,479)
		_______	_______	_______	_______	_______	_______
Gross profit		4,937	-	4,937	3,794	(118)	3,676
Other operating income	5	235	-	235	-	-	-
Administrative expenses		(4,550)	(100)	(4,650)	(3,158)	(1,018)	(4,176)
Operating profit/(loss) before depreciation and amortisation, foreign exchange loss and loss on acquisition		1,075	(100)	975	802	(1,136)	(334)
Operating loss relating to Star-Gate subsidiary		(87)	-	(87)	-	-	-
Foreign exchange loss on operations		(239)	-	(239)	(71)	-	(71)
Depreciation and amortisation		(127)	-	(127)	(95)	-	(95)
		_______	_______	_______	_______	_______	_______
Operating profit/(loss)	6	622	(100)	522	636	(1,136)	(500)
Share of post-tax profit/(loss) of joint venture	14	-	-	-	-	-	-
		_______	_______	_______	_______	_______	_______
Profit/(loss) before tax				522	636	(1,136)	(500)
Taxation	10			(211)			-
				_______			_______
Profit after tax				311			(500)
Other comprehensive income
Exchange gains arising on translation of foreign operations				28			-
				_______			_______
Total comprehensive profit/(loss) for the year attributable to the owners of the parent				339			(500)
				_______			_______
Earnings/(loss) per share attributable to the equity holders of the parent
-     basic (pence)	11			4.9 p			(8.7p)
-     diluted (pence)	11			4.8 p			(8.7p)
				_______			_______

Consolidated statement of financial position as at 30 June 2012

	Note	2012	2012	2011	2011
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	12	113		97
Intangible assets	13	885		180
Investment in equity accounted joint venture	14	48		-
Deferred tax asset	19	127		218
		_______		_______
Total non-current assets			1,173		495
Current assets
Inventory	16	121		-
Trade and other receivables	17	9,035		6,963
Cash and cash equivalents	27	790		2,221
		_______		_______
Total current assets			9,946		9,184
			_______		_______
Total assets			11,119		9,679
			_______		_______
Liabilities
Current liabilities
Trade and other payables	18	10,406		9,570
Corporation tax liability		120		-
		_______		_______
Total current liabilities			10,526		9,570
			_______		_______
Total liabilities			10,526		9,570
			_______		_______
Total net assets			593		109
			_______		_______
Capital and reserves attributable to equity holders of the company
Share capital	20	64		63
Share premium	22	1,653		1,653
Merger reserve		129		-
Retained earnings	22	(1,296)		(1,607)
Foreign exchange reserve	22	28		-
Share based payment reserve	22	15		-
		_______		_______
			_______		_______
Total equity			593		109
			_______		_______

Consolidated statement of cash flows for the year ended 30 June 2012

				14 month	14 month
		Year ended	Year ended	period ended	period ended
		30 June	30 June	30 June	30 June
	Note	2012	2012	2011	2011
		£'000	£'000	£'000	£'000
Cash flows from operating activities
Profit/(loss) for the year/period before taxation		522		(500)
Adjustments for:
Share based payments		15
Movement in impairment provision		16		-
Amortisation of negative goodwill		(43)
Depreciation and amortisation	6	127		95
		_______		_______
Cash flows from operating activities before changes in working capital and provisions			637		(405)
Increase in trade and other receivables		(2,076)		(4,210)
Increase in inventory		(121)		-
Increase in trade and other payables		321		4,307
		_______		_______
Cash generated from operations			(1,876)		97
			_______		_______
Net cash flows from operating activities			(1,239)		(308)
Investing activities
Interest in JV acquired	14	(5)		-
Purchases of property,
plant & equipment	12	(46)		(105)
Purchase of subsidiary undertaking net of cash acquired	25	3		-
Purchase of intangibles	13	(144)		(125)
		_______		_______
Net cash used in investing activities			(192)		(230)
Financing activities
Issue of ordinary shares	20	-		2,048
Share issue costs	20	-		(334)
		_______		_______
Net cash from financing activities			-		1,714
			________		________
Net increase in cash and cash equivalents			(1,431)		1,176
Cash and cash equivalents at beginning of year	27		2,221		1,045
			________		________
Cash and cash equivalents at end of year	27		790		2,221
			________		________

Consolidated statement of changes in equity for the year ended 30 June 2012

									Total equity
									attributable
		Share		Share	Foreign exchange	Share based payment	Merger	Retained	to owners of
		capital		premium	reserve	reserve	reserve	earnings	the parent
		£'000		£'000	£'000	£'000	£'000	£'000	£'000
At 30 April 2010			2	-	-	-	-	(1,107)	(1,105)
Issue of shares - 12 November 2011			48	-	-	-	-	-	48
Issue of shares - placing 10 November 2011			13	1,987	-	-	-	-	2,000
Costs associated with the issue of shares			-	(334)	-	-	-	-	(334)
Total comprehensive loss for the period			-	-	-	-	-	(500)	(500)
			_____	______	______	______	______	________	________
At 30 June 2011			63	1,653	-	-	-	(1,607)	109
Issue of shares - 1 March 2012			1	-	-	-	-	-	1
Share based payments						15	-	-	15
Merger relief taken on acquisition of Star-Gate			-	-	-	-	129	-	129
Total comprehensive income for the year			-	-	28	-	-	311	339
			_____	_____	_____	_____	_____	________	________
At 30 June 2012			64	1,653	28	15	129	(1,296)	593
			_____	______	______	______	______	________	________

Notes forming part of the financial results for the year ended 30 June 2012

1	Accounting policies

Basis of preparation

The financial information set out in this release does not constitute the Company's full statutory accounts for the year ended 30 June 2012 for the purposes of section 435 of the Companies Act 2006, but it is derived from those accounts that have been audited. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered after the forthcoming AGM. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006 in either 2012 or 2011.

While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements for the year ended 30 June 2012 that comply with IFRS in December 2012. 

The accounting policies set out below have been applied to all periods presented in these Group financial results and are in accordance with IFRS, as adopted by the European Union, and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that were applicable for the year ended 30 June 2012.

The policies have been consistently applied to all the periods presented.

Changes in accounting policies

(a) New standards, amendments to published standards and interpretations to existing standards effective in 2012 adopted by the group

·    IAS24 Related Party Disclosures - Revised definition of related parties - effective from annual periods beginning on or after 1 January 2011 *

·    IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets (November 2011) - 1 July 2011 *

The adoption of the above standards has not had a material impact on the financial results of the group.

(b) Standards, amendments and interpretations to published standards not yet effective

Certain new standards, amendments and interpretations to existing standards have been published that are not yet effective and which the group has decided not to adopt early. Those considered having a potential effect on the company are:

·    IAS 1 Presentation of Financial Statements - amendments to revise the way other comprehensive income is presented - 1 July 2012 *

·    IAS 12 Income Taxes - Limited scope amendment (recovery of underlying assets) (December 2010) - 1 January 2012

·    IAS 27 Consolidated and Separate Financial Statements - Reissued as IAS 27 Separate Financial Statements (as amended in May 2012) - 1 January 2013

·    IAS 28 Investments in Associates and Joint Ventures - 1 January 2013

·    IFRS 9 Financial Instruments - Classification and Measurement - 1 January 2015

·    IFRS 10 Consolidated Financial Statements - update to the definition of control - effective 1 January 2013

·    IFRS 11 Joint Arrangements - removal of option to use proportional consolidation - 1 January 2013

·    IFRS 12 Disclosure of Interests in Other Entities - 1 January 2013

·    IFRS 13 Fair Value Measurement - 1 January 2013

Although potentially applicable to Hangar 8 plc, management do not consider the above would have a material impact on the financial results if adopted early.

The IASB have also issued a variety of IFRIC amendments and interpretations that are considered to have no impact on the Group's reporting.   * Standard endorsed by the EU - all others are yet to be confirmed.

Basis of consolidation

Where the company has the power, directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.  The consolidated financial results present the results of the company and its subsidiaries (the "Group") as if they formed a single entity.  Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial results in relation to the Group consist of the results of the following units:

Companies	Summary description
Hangar 8 plc	Holding company
Hangar 8 AOC Limited	Trading company
Hangar 8 Management Limited	Trading company
Star-Gate Aviation (Proprietary) Limited*	Trading company
Infinity Training Academy Limited**	Trading company
Aviation Crewing Limited**	Trading company
Hangar 8 Engineering Limited	Trading company

* since date of acquisition 1 March 2012

** since date of incorporation

Joint ventures

Jointly controlled entities are included in the financial statements using the equity method of consolidation. The share of each of the jointly controlled entity's assets, liabilities, income and expenses are combined on a one-line basis on the statement of consolidated income and the statement of financial position of the Group. Where non-monetary contributions to a jointly controlled entity give rise to an unrealised gain or loss, it is eliminated against the carrying value of the investment and is only released once it becomes realised

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Revenue is recognised for major categories as follows:

·         Aircraft charter - on the provision of the service;

·         Contract fee income - over the period of the contract;

·         Minimum guaranteed hours - the higher of the hours used or the guaranteed hours;

·         Maintenance - on the provision of the service;

·         Insurance commissions - from the date that the group has fulfilled its obligations in full;

·         Miscellaneous - on the provision of the service.

Foreign currencies

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency).  For the purpose of the consolidated financial information, the results and financial position of each company are expressed in Sterling (£), which is the presentation currency for the consolidated financial information.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions.  At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences arising on settlement of foreign currency monetary items and on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the statement of comprehensive income.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date.  Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

Exchange differences recognising profit or loss in Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Employee benefits

Defined contribution plans

The group provides retirement benefits to all employees and Directors. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to the statement of comprehensive income in the period in which they become payable.

Share-based payment transactions

The Group operates an equity-settled, share-based compensation plan. Vesting conditions are service conditions and performance conditions only. Where share options are awarded to employees and others providing similar services, the fair value of the options at the date of grant is charged to statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options when granted. As long as all other vesting conditions are satisfied, a change is made irrespective of whether the market vesting conditions are satisfied.

The cumulative charge is not adjusted for failure to achieve a market vesting condition. If market related terms and conditions of options are modified before they vest, the change in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period. If non-market related terms and conditions of options are modified before they vest, the number of instruments expected to vest at each balance sheet date and therefore the cumulative charge, is therefore amended accordingly. Where equity instruments are granted to persons other than employees and others providing similar services, the statement of comprehensive income is charged with the fair value of goods and services received.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the Board.

Financial instruments

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

Financial assets

Loans and receivables:  These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.  For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income.  On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Trade receivables denominated in a foreign currency are translated into sterling using the exchange rate at the reporting date.  Foreign exchange gains or losses are included in other comprehensive income.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history.  Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts, the effect of discounting is considered to be insignificant.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.

Cash and cash equivalents include cash in hand and deposits held at call with banks.

Financial liabilities

Financial liabilities include the following:

Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Trade payables denominated in a foreign currency are translated into sterling using the exchange rate at the reporting date.  Foreign exchange gains or losses are included in other comprehensive income.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group.  All other leases are classified as operating leases.  Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

Rights to assets held under finance leases are recognised as assets of the Group at the fair value of the leased property (or, if lower, the present value of the minimum lease payments) at the inception of the lease.  The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.  Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.  Finance charges are deducted in measuring profit or loss.  Assets held under finance leases are included in their own line in the statement of financial position.

Contracts with customers to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the customer; all other contracts with customers to lease assets are classified as operating leases.

To the extent that finance lease receivables are not matched by back to back finance lease payables, where cashflows arising are direct between, sub-lessee and head lessor, they are included in the balance sheet, at the amount of the net investment in the lease being the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease.

Impairment of non financial assets

Assets that are subject to amortisation and depreciation are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The impairment review comprises a comparison of the carrying values of the fixed asset with its recoverable amount, which is the higher of fair value less costs to sell and value in use.

Fair value less costs to sell is calculated by reference to the amount at which the asset could be disposed of.  Value in use is calculated by discounting the expected future cash flows obtainable as a result of the assets continued use, including those resulting from its ultimate disposal, at a market based discount rate on a pre tax basis.

An impairment loss is recognised in the Statement of Comprehensive Income whenever the carrying amount of an asset exceeds its recoverable amount.  The carrying amount will only be increased where an impairment loss recognised in the previous period for an asset either no longer exists or has decreased, up to the amount that it would have been had the original impairment not occurred.

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

Taxation

Income tax expense included in the consolidated statement of comprehensive income represents the sum of current tax and deferred tax.

Current tax

The tax charge/(credit) payable is based on taxable profit/(loss) for the year.  Taxable profit differs from profit reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable in other years and items that are never taxable or deductible.  The Group's liability/asset for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred taxation

Deferred tax is recognised on temporary 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.  Deferred tax liabilities are recognised for all temporary differences expected to increase taxable profit in the future.  Deferred tax assets are recognised for all temporary differences that are expected to reduce taxable profit in the future, and unused tax losses or tax credits.  Deferred tax assets are measured at the highest amount that, on the basis of current or estimated future taxable profit, is more likely than not to be recovered.  The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits.

Any adjustments are recognised in profit or loss.  Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit/(tax loss) of the periods in which it expects the deferred tax asset to be realised or the deferred tax liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period.

Current and deferred tax for the year

Current and deferred tax are recognised as an expense or income in the statement of comprehensive income, except when they relate to items that are recognised outside profit or loss, in which case the tax is also recognised outside profit or loss.

Inventories

Inventories are stated at the lower cost and net realisable value. Cost is calculated as follows:

·    Raw materials - cost of purchase on first in, first out basis;

·    Consumables - all costs of purchase, costs of conversion and other costs incurred in bringing the consumables to their present location and condition;

·    Work in progress and finished goods - cost of raw materials and labour, together with attributable overheads based on the normal level of activity.

Net realisable value is based on estimated selling price less further costs to completion and disposal. A charge is made to the statement of comprehensive income for slow moving inventories. The charge is reviewed at each balance sheet date.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below). The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Intangible asset                                                  Period

AOC	20 years straight line
Software	4 years straight line

Intangible assets

Air Operator's Certificate ("AOC")

This is the certificate from the relevant country's aviation regulatory regime which allows an operator to operate third party passenger transport for reward in their air space.  Without the AOC the operator cannot operate in that country.  The Group has one AOC in the UK which is not capitalised.  In addition the Group has one AOC in South Africa and is in investing significant resource into the application process for one in Nigeria.  The South African AOC and the costs of application in respect of the Nigerian AOC have been capitalised as separately identifiable intangibles arising on acquisition.

The South African AOC which has been issued and is owned by Star-Gate is being amortised over 20 year to reflect the long term nature of the AOC.  It has been amortised from the date of acquisition of Star-Gate being 2 March 2012.

Costs associated with the maintenance of the AOC, which are minimal, are recognised as an administrative expense as incurred.

Computer software

Computer software is recognised on the basis of the costs incurred to acquire and bring to use the specific software.  Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.  Costs are amortised, once commissioned, over their estimated useful lives of four years on a straight line basis.  Computer software is valued on an estimated replacement cost basis.

Costs associated with maintenance of computer software are recognised as an administrative expense as incurred.

Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.  Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives, using the straight line method.  The following annual rates are used for the depreciation of property, plant and equipment:

Plant, machinery & equipment                Straight line over 3 - 8 years

Motor vehicles                                         Straight line over 4 years

2	Critical accounting estimates and judgements

The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

a)    Revenue recognition

The Group incurs certain expenditure on behalf of owners that is recharged directly with no mark up. For such expenditure, management have determined that the Group is acting as an agent and as such it is set-off against the associated income and, therefore, neither income nor expense is shown in the Combined Statement of Comprehensive Income.  Expenditure recharged in this manner is not recognised as revenue because the Group does not bear the ultimate risk of the transaction.

b)    Bad debts

The Directors have assessed the recoverability of the Group's trade receivables at each period end based on the information available to them at the time.  Consequently, judgements have been made in making a provision for doubtful debts.  Accordingly, due to the size of trade receivables and related provisions, future results could be significantly impacted by subsequent events, such as the eventual recovery of previously impaired debts.

        c)    Useful lives of and property, plant and equipment, AOC's and software

Property, plant and equipment, AOCs and software are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the combined statement of comprehensive income in specific periods. More details including carrying values are included in notes 12 and 13.

        d)   Deferred taxation

A deferred tax asset is recognised in relation to the tax losses carried forward when future taxable profits are anticipated.  However, future trading may not allow for the utilisation of these losses and therefore the future tax charge may be increased.

        e)   Accruals

Flight costs vary according to where and when the flight takes place.  As such, certain costs in relation to flights cannot be accurately determined in advance of those flights.  Costs are accordingly accrued to a level which management considers appropriate, having taken into account the nature and destinations of these flights, based on the average flight costs over the period.  The overall level of accruals in relation to these flights is considered globally, and has been assessed by management as adequate in relation to the revenues recognised at year end.

        f)    Impairment of intangible assets

The Group is required to test, on an annual basis, whether its intangibles have suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. More information including carrying values is included in the note 13.

g)     Determination of fair values of intangible assets acquired in business combinations

The fair values of AOCs acquired in a business combination are based on the discounted estimated payments that would have been incurred to obtain the AOC. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the asset.

3	Financial instruments - Risk management

The group is exposed through its operations to the following financial risks:

·     Market risk

·     Foreign exchange risk

·     Credit risk

·     Liquidity risk

In common with all other businesses, the group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect of these risks is presented throughout these financial results.

A summary of the financial instruments held by category is provided below:

		2012	2011
		£'000	£'000
	Financial assets
	Loans and receivables
	Trade and other receivables (note 17)	6,513	4,389
	Cash available on demand	790	2,221
		_____	_____
		7,303	6,610
		_____	_____
	Financial liabilities
	Measured at amortised cost
	Trade and other payables (note 18)	7,945	6,191
		_____	_____
		7,945	6,191
		_____	_____

Fair values of material financial instruments

There are no material differences between the book and fair values of the Group's financial instruments.

Market risk

The Group has minimal exposure to interest rate risk as it has no borrowings.  With regards to fuel price rises or other associated aviation costs then the Group is largely insulated as most of these variable costs are passed on to the aircraft owners.

The Group has little visibility over future bookings and as such has no commitments to fly at set rates that may move against the Group.  It constantly checks the charter market to ensure its rates are set commercially and has no obligation to fly a charter beyond a modest amount of pre-booked blocks of hours.

Foreign exchange risk

The group is exposed to currency risk on purchases made from suppliers based around the world as well as through its investment in overseas subsidiaries.  Purchases are made on a central basis and are offset where possible by sales invoices denominated in the same currency.  During the year the rise in the level of minimum guaranteed hours contracts, which are denominated in Euros and US Dollars, has increased this exposure.  The majority of overseas purchases are made using credit cards, and this effectively fixes the currency risk at the date of purchase.  At the balance sheet date the Group had trade payables of £2,848k (2011: £2,136k) denominated in Euro and US Dollars.

Credit risk

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a financial loss from defaults.

Charter Income

The Group has adopted a policy of receiving money in advance of undertaking the charter to mitigate the risk of default.  Where a customer of the Group is unable to make the necessary payment in advance the Directors have the discretion to provide credit terms.

Management contract income

The Group manage the aircraft on behalf of its owners and charges a fee.  The owners are entitled to a rental recharge for the use of the aircraft and inevitably the Group will owe more than it is due at the end of the accounting period.  The risk of the customer therefore being in default is mitigated through the costs owed to the customer as well as through the deposits received from aircraft owners.

Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 17.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long term funding and liquidity management requirements.  The Group managed liquidity risk by maintaining adequate reserves, banking facilities and borrowing facilities.

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:

		Up to 3 months	Between 3 and 12 months
		£000	£000
	At 30 June 2011
	Trade and other payables	5,104	1,087
		_______	_______
	At 30 June 2012
	Trade and other payables	4,170	3,775
		_______	_______

Capital disclosures

The capital structure of the Group consists of cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, share premium and retained earnings as disclosed in note 22.

The Group is not exposed to any externally imposed capital requirements.

4	Revenue	Year ended	14 month period ended
		30 June	30 June
		2012	2011
		£'000	£'000
	Revenue arises from:
	Aircraft Charter	6,164	14,064
	Aircraft Management	9,660	3,076
	Engineering	887	521
	Miscellaneous	289	494
		_______	______
		17,000	18,155
		_______	_______

5     Other operating income

This amount represents the commission, net of legal fees, arising on the arrangement of the purchase and sale of an aircraft.  The purchase and sale has been financed via back to back head and sub leases between a client upstream, Hangar8 and a client downstream.  The nature of the leases are such that consideration is settled through a lump sum up front payment (including the commission payable to Hangar8), followed by a number of equal monthly instalments and a final option to purchase payment prior to ownership formally passing through to the sub-lessee.  The final option to purchase fee is substantially below the anticipated market value of the plane at the time of payment.  This results in the arrangements being classified as finance leases and as such the outstanding payments and receipts at the year end, which are identical, are disclosed on the statement of financial position as a finance lease receivable and finance lease payable.  Due to the nature of the arrangement and the fact that the sub-lessee payments are made directly to the head lessor, the finance lease payments receivable and payable have been set off to show no net balance due/owed at the year end.

Further disclosure of the impact on the financial results of this arrangement is set out below:

		Year ended	14 month period ended
	Income statement	30 June	30 June
		2012	2011
		£'000	£'000
	Commission on arrangement of aircraft leases	319	-
	Legal fees directly incurred in arranging the leases	(84)	-
		____	____
	Other operating income	235	-
		____	_____
	Statement of financial position:	2012	2011
		£'000	£'000
	Finance lease receivable	1,897	-
	Finance lease payable	(1,897)	-
		------	------
	Net finance lease receivable/payable	-	-
		____	_____

6	Operating profit/(loss)	Year ended	14 month period ended
		30 June	30 June
		2012	2011
		£'000	£'000
	This has been arrived at after charging/(crediting):
	Depreciation of property, plant and equipment	50	36
	Amortisation of intangible fixed assets	77	59
	Foreign exchange differences	239	71
	Operating lease expense - property	230	254
	Auditors: remuneration
	- Statutory audit services (Company - £30,000)	78	73
	- Tax compliance	11	10
	- Tax advisory	30	-
	- Other non-audit services	-	5
		_______	_______

7	Exceptional items	Year ended	14 month period ended
		30 June	30 June
		2012	2011
		£'000	£'000
	Onerous lease contract in cost of sales	-	118
		_______	_______
	Legal costs	-	80
	IPO costs	-	368
	Restructuring costs	100	570
		_______	_______
	Exceptional items in administrative expenses	100	1,018
		_______	_______
	Total exceptional items	100	1,136
		_______	_______

Exceptional items represent non-recurring costs that are deemed by the Directors to be of a nature not typically incurred in carrying out the principal activities of the business.

The onerous contract charge in 2011 represents the close out of an aircraft management contract, the terms of which were substantially revised in September 2011. This contract expired in November 2011.

Legal costs were incurred in the prior period for the settlement of outstanding cases both for and against the Group which was an integral part of the reorganisation process. 

IPO costs are that portion of float costs that relate to the listing of existing (as opposed to newly issued) shares. The balance of these costs (i.e. relating to the issue and listing of new shares), along with costs that related directly to the issue of new shares, were taken direct to Share Premium.

Restructuring costs in 2011 were incurred in reorganising the previously commonly controlled companies into a single group headed by the Company in anticipation of the flotation on AIM. 

Restructuring costs in 2012 represent the cost, including redundancy, of re-aligning our crew roster and fleet with the new revenue stream of minimum guaranteed hours contracts and geographical spread of flying.

8	Staff costs	Year ended	14 month period ended
		30 June	30 June
		2012	2011
		£'000	£'000
	Staff costs (including Directors) comprise:
	Wages and salaries and fees	2,291	1,807
	Employer's pension contributions	24	-
	Employer's national insurance contributions and similar taxes	216	184
		_______	_______
		2,531	1,991
		_______	_______

The Group started an employers' contribution pension scheme during the year.

Directors and key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the Directors of the Company.

			Year ended	14 month period ended
			30 June	30 June
			2012	2011
			£'000	£'000
	Salary and fees		607	577
	Employer's national insurance contributions and similar taxes		52	65
	Employer pension contributions		19	-
	Share based payment		15	-
			_______	_______
	Total		693	642
			_______	_______

The average monthly number of employees (including Directors) during the year was made up as follows:

		Year ended	14 month period ended
		30 June	30 June
		2012	2011
		No.	No.
	Staff numbers
	Administration	38	34
	Engineering	10	-
	Key management and personnel	4	3
		_______	_______
		52	37
		_______	_______

9	Segment information

In accordance with IFRS 8, 'Operating Segments', the Group has derived the information for its operating segments using the information used by the Chief Operating Decision Maker.  The Group has identified the Board of Directors of Hangar 8 plc ("the Board") as the Chief Operating Decision Makers as it is responsible for the allocation of resources to operating segments and assessing their performance.  Operating segments are consistent with those used in internal management reporting and the profit measure used by the Board is the profit/(loss) before tax as set out below.

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

·        Charter - the chartering of aircraft to third parties;

·        Management - the insurance, operational support, crewing of aircraft and minimum guaranteed hours contracts; and

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

		Charter		Management	Engineering	Unallocated	Total
	Year ended 30 June	2012		2012	2012	2012	2012
		£'000		£'000	£'000	£'000	£'000
	Revenue	6,164		9,661	887	288	17,000
	Profit/(loss) before income tax	(22)		654	272	(382)	522
	Total assets	821	7,361		2,026	911	11,119
	Total liabilities	(275)	(8,396)		(1,131)	(724)	(10,526)

	14 month period ended 30 June	Charter	Management	Engineering	Unallocated	Total
		2011	2011	2011	2011	2011
		£'000	£'000	£'000	£'000	£'000
	Revenue	14,064	3,570	521	-	18,155
	Profit before income tax	1,146	(72)	(123)	(1,451)	(500)
	Total assets	1,423	7,281	186	789	9,679
	Total liabilities	(1,223)	(8,024)	(309)	(14)	(9,570)

No other form of segmental analysis has been presented, as no other form is used by management.  Geographical analysis is not considered appropriate due to the fact that many flights are between geographical segments, and therefore geographical analysis is not a relevant measure of business performance.

10	Taxation	Year ended	Year ended	14 month period ended	14 month period ended
		30 June	30 June	30 June	30 June
		2012	2012	2011	2011
		£'000	£'000	£'000	£'000
	Current tax expense
	UK corporation tax on profits/(losses) for the year/period	120		-
	Adjustment for under provision in prior periods	- _______		25 _______
			120		25
	Deferred tax expense
	Origination and reversal of temporary differences	52		- (25)
	Adjustment in respect of prior periods	39		-
		_______		_______
			91		(25)
			_______		_______
	Total income tax credit		211		-
			_______		_______

The reasons for the difference between the actual tax charge for the year/period and the standard rate of corporation tax in the UK applied to the losses for the year/period are as follows:

		Year ended	14 month period ended
		30 June	30 June
		2012	2011
		£'000	£'000
	Profit/(loss) for the year/period	522	(500)
	Expected tax charge/(credit) based on the standard rate of corporation tax in the UK of 25.75% (2011: 20%)	134	(100)
	Expenses not deductible for tax purposes	73	75
	Adjustment to tax charge in respect of prior year current tax	2	25
	Adjustment to tax charge in respect of prior year deferred tax	39	-
	Effect of tax rate change	(4)	-
	Income not taxable for tax purposes	(33)	-
		_______	_______
	Total tax credit	211	-
		_______	_______

11		Earnings/(loss) per share
			Year ended 30 June 2012 £'000	14 month period ended 30 June 2011 £'000
	Numerator
	Profit/(loss) for the year/period after taxation		311	(500)
			_______	_______
	Earnings used in basic EPS for the year/period		311	(500)
	Taxation		211	-
	Loss on period of ownership of subsidiary Star-Gate		87	-
	Foreign exchange loss on operations		239	-
	Depreciation and amortisation		127	95
	Exceptional items		100	1,136
			_______	_______
	Earnings used in adjusted EPS for the year/period		1,075	802
			_______	_______
	Denominator
	Weighted average number of shares used in basic EPS		6,373,423	5,741,784
	Effects of:
	Employee share options		106,082	-
	Contingent share consideration on business combinations		55,442	-
			_______	_______
	Weighted average number of shares used in diluted EPS		6,534,947	5,741,784
			_______	_______
	Basic earnings/(loss) per share - pence		4.9	(8.7)
	Adjusted basic earnings per share - pence		16.9	14.0
	Diluted earnings/(loss) per share - pence		4.8	(8.7)
	Adjusted diluted earnings per share - pence		16.5	14.0

12	Property, plant & equipment
		Property, plant
		& equipment
		£'000
	Cost
	Balance at 1 May 2010	72
	Additions	105
	Disposals	-
		_______
	Balance at 1 July 2011	177
	Acquired on purchase of subsidiary	20
	Additions	46
		_______
	Balance at 30 June 2012	243
		_______
	Accumulated depreciation
	Balance at 1 May 2010	44
	Depreciation charge for the period	36
		_______
	Balance at 1 July 2011	80
	Depreciation charge for the year	50
		_______
	Balance at 30 June 2012	130
		_______
	Net book value
	At 30 July 2011	97
		_______
	At 30 June 2012	113
		_______

There were no capital commitments in respect of property, plant & equipment at 30 June 2012 (2011: £nil).  No fixed assets were pledged as security in either of the periods.

13		Intangible assets
			AOC	Software	Total
			£'000	£'000	£'000
	Cost
	Balance at 1 May 2010		-	152	152
	Additions		-	125	125
			_______	_______	_______
	Balance at 1 July 2011		-	277	277
	Acquired through business combination		638	-	638
	Additions		82	62	144
			_______	_______	_______
	Balance at 30 June 2012		720	339	1,059
			_______	_______	_______
	Accumulated amortisation
	Balance at 1 May 2010		-	38	38
	Amortisation charge for the period		-	59	59
			_______	_______	_______
	Balance at 1 July 2011		-	97	97
	Amortisation charge for the year		8	69	77
			_______	_______	_______
	Balance at 30 June 2012		8	166	174
			_______	_______	_______
	Net book value
	At 30 June 2011		-	180	180
			_______	_______	_______
	At 30th June 2012		712	173	885
			_______	_______	_______

14        Joint ventures

The Group acquired a 49% interest in a jointly controlled entity, Hangar 8 (AOC) Malta Limited (incorporated in Malta) which has been accounted for using the equity method of consolidation.  This interest was acquired on 2 February 2012 for a cash investment of £5k.  Hangar 8 will be contributing its expertise and brand to enable the joint venture to grow more rapidly.  As a result, the negative goodwill that has arisen from this non-monetary contribution is not treated as a realised gain and is set against the carrying value of the equity accounted investment. It will be released over the period that Hangar 8 believes it to become realised as the joint venture benefits from its expertise and brand.

The following amounts have been used to calculate the amount recognised in the Group's consolidated statement of financial position and consolidated statement of comprehensive income relating to this joint venture:

			2012
			£'000
Fixed assets			20
Current assets			394
Current liabilities			(261)
			____
Share of net assets			153
Unamortised negative goodwill			(105)
			____
Total investment in joint-venture			48
			____
Profit after tax			-
Amortisation of negative goodwill relating to non-monetary asset contribution			43
			____
			43
			____

15	Subsidiaries

The principal subsidiaries of Hangar 8 plc, which are all directly owned, all of which have been included in these consolidated financial results, are as follows:

	Name	Nature of business	Country of	Proportion of ownership interest at 30 June 2012
			incorporation
	Hangar 8 Management Limited	Management & provision of minimum guaranteed hours leases	Great Britain	100%
	Hangar 8 AOC Limited	Charter	Great Britain	100%
	Star-Gate Aviation (Proprietary) Limited	Holder of South African AOC	South Africa	100%
	Infinity Flight Crew Academy Limited	Provision of training services	Great Britain	100%
	Aviation Crewing Limited	Provision of crewing services	Great Britain	100%
	Hangar 8 Engineering Limited	Provision of maintenance services	Great Britain	100%

16    Inventory

		2012	2011
		£'000	£'000
	Raw materials and consumables	121	-
		______	______
		121	-
		______	______

17	Trade and other receivables
		2012	2011
		£'000	£'000
	Trade receivables	5,771	3,876
	Less: provision for impairment of trade receivables	(16)	-
		_______	_______
	Trade receivables - net	5,755	3,876
	Receivables from related parties	-	48
	Other receivables - tax	230	106
	Other	528	359
		______	_______
	Total financial assets other than cash and cash equivalents classified as loans and receivables	6,513	4,389
	Prepayments and accrued income	2,522	2,574
		______	______
	Total trade and other receivables	9,035	6,963
		______	______

There are no other financial assets except cash and cash equivalents classified as loans and receivables.  The Directors consider that there is no material difference between the fair values of trade and other receivables and their book values.  The Group does not hold any collateral as security, however it does hold deposits from owners which have been accounted for under trade and other payables in note 18.

	As at 30 June 2012 trade receivables of £3,345k (2011: £1,192k) were past due but not impaired. They relate to customers with no default history. The ageing analysis of these receivables is as follows:
		2012	2011
		£'000	£'000
	Up to 3 months	1,976	566
	3 to 6 months	844	160
	6 to 12 months	271	466
	More than 12 months	254	-
		_______	_______
		3,345	1,192
		_______	_______

Movements on the group provision for impairment of trade receivables are as follows:

		2012	2011
		£'000	£'000
	At beginning of the year/period	-	274
	Provided during the year/period	(16)	-
	Receivable written off during the year/period as uncollectable	-	(274)
		_______	_______
	At end of the year/period	(16)	-
		_______	_______

The movement on the provision for impaired receivables has been included within administration expenses in the statement of comprehensive income.  Other classes of financial assets included within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable set out above.

18	Trade and other payables
		2012	2011
		£'000	£'000
	Trade payables	5,536	4,542
	Owner deposits held	2,409	1,649
		_______	_______
	Total financial liabilities	7,945	6,191
	Accruals	990	1,802
	Other payables including tax and social security costs	683	305
	Deferred income	788	1,272
		_______	_______
	Total trade and other payables	10,406	9,570
		_______	_______

The Directors consider that the carrying value of trade and other payables approximate to their fair value.  Deferred income arises as the result of deposits received in the period for charter flights which occur after the year end.

Owner deposits relate to amounts paid to the Group by the owners or lessees, of the aircraft in accordance with their individual contractual arrangements.

19	Deferred tax asset

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25.75% (2011: 20%).  The movement on the deferred tax account is as shown below:

		2012	2011
		£'000	£'000
	At beginning of year/period	218	193
	Profit and loss (debit)/credit	(91)	25
		_______	_______
	At end of year/period	127	218
		_______	_______

 Deferred tax assets have been recognised in respect of all such tax losses and other temporary differences giving rise to deferred tax assets where the Directors believe it is probable that these assets will be recovered.

All deferred tax related to other temporary timing differences and all other movements were charged to the income statement. The deferred tax assets and liabilities are shown below:

		2012	2011
		£'000	£'000
	Other temporary and deductible differences	(127)	(218)
		_______	_______

Unrecognised deferred tax as at 30 June 2012 and 30 June 2011 is not material to the financial results.

20	Share capital
		Nominal	2012	2012	2011	2011
		Value	Number	£'000	Number	£'000
	Authorised ordinary shares
	At beginning and end of the year/period	1p	7,633,500	76	7,633,500	76
			________	________	________	________
		Nominal	2012	2012	2011	2011
		Value	Number	£'000	Number	£'000
	Issued and fully paid ordinary shares
	At beginning of the year/period	1p	6,333,334 63	63	6,333,334	63
	1 March 2012 issued in settlement of an acquisition	1p	120,930	1	-	-
			_______	___	_______	____
	At the end of the year/period		6,454,264	64	6,333,334	63
			_______	___	______	____

On 1 March 2012 the Company issued shares under a signed sale and purchase to purchase the entire issued shareholding in Star-Gate Aviation (Proprietary) Limited.  The Company has an obligation to issue a further £25,000 worth of shares on each of the first and second anniversaries of the acquisition.  The price at which these shares are to be issued is the prevailing market price in the five days prior to the date of the relevant anniversary.

21 Share options

In November 2011 the Company adopted a new equity settled share option scheme for employees ("the Hangar8 EMI share option scheme").  Under the scheme, options to purchase ordinary shares are granted by the Board of Directors, subject to the exercise price of the option not being less than the market value at the grant date. The options typically vest after a period of 2 years and the vesting schedule is subject to predetermined overall company selection criteria. In the event that the option holder's employment is terminated, the option may not be exercised unless the Board of Directors so permits. The options expire 12 years from the date of grant.

On 1 December 2011 the Company announced that the Company's Remuneration Committee had approved the grant of options over 260,000 ordinary shares of 1p each to certain Directors and employees of the Company. Subsequently 100,000 of these options were cancelled.

At 30 June 2012 the number of ordinary shares subject to options granted over the EMI option scheme was:

EMI options
				30 June 2012
			Weighted average exercise price (pence)		Weighted average share price at date of exercise (pence)			Number
	Outstanding at the beginning of the year		-		-			-
	Granted during the year		109		109			260,000
	Cancelled during the year		109		109			(100,000)
	Outstanding at the end of the year		109		109			160,000

The exercise price of EMI options outstanding at the end of the year was 109 pence and their weighted average contractual life was 1.5 years.  Of the total number of EMI options outstanding at the end of the year, nil had vested and were exercisable at the end of the year.

Grant of options

The fair values of the options have been estimated at the date of grant using a Black-Scholes model, using the following assumptions

Tranche	Date of grant	Exercise price	Number of options	Share price at grant date	Expected volatility	Risk free rate	Expected life	Fair value per share under option
		Pence		Pence			Years	Pence
1	01/12/2011	109	160,000	109.5	53%	0.41	2	32.49

An expected dividend yield of 0% has been used in all the above valuations.

The expected life of the options is based on historical data and is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome.

Due to Hangar 8 being admitted to trading on AIM in November 2010 the share price history only covers thirteen months before the date of grant. Therefore, we have used an appropriate comparator to base the share volatility on using three years of data up to the date of grant.

The total charge for the year relating to employee share-based payment plans was £15,076 (2011:  £Nil) all of which related to equity settled share-based payment transactions.

22	Reserves	Share	Share	Forex	Merger	Share based payment	Retained	Total
		capital	premium	reserve	reserve	reserve	earnings	equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
	At 1 July 2011	63	1,653	-	-	-	(1,607)	109
	Issue of ordinary shares	1	-	-	-	-	-	1
	Merger relief on Star-Gate acquisition	-	-	-	129	-	-	129
	Share based payment	-	-	-	-	15	-	15
	Exchange gain on translation of foreign operations	-	-	28	-	-	-	28
	Retained profit for the year	-	-	-	-	-	311	311
		_______	_______	_______	_______	_______	_______	_______
	At 30 June 2012	64	1,653	28	129	15	(1,296)	593
		_______	_______	_______	_______	_______	_______	_______

The following describes the nature and purpose of each reserve within owners' equity:

	Reserve	Description and purpose
	Share capital	Amount subscribed for share capital at nominal value;
	Share premium	Amount subscribed for share capital in excess of nominal value;
	Merger	Represents the difference between the fair value and nominal value of shares issued on the acquisition of subsidiary companies where the company has elected to take advantage of merger relief.
	Foreign exchange	Gains/losses arising on the translation of net assets of overseas operations into sterling
	Share based payment	Represents the amount taken through the statement of comprehensive income in relation to the outstanding share options
	Retained earnings	Cumulative net gains and losses recognised in the consolidated statement of financial position.
23	Controlling party

By virtue of his shareholding through Rysaffe Trustee Company, Dustin Dryden is the controlling party of the Group.

24

Leases

Operating leases - lessee

The operating leases relate to the lease on the head office and the hangar at Oxford Airport. 

The total future value of minimum lease payments are due as follows:

			14 month
		Year ended	period ended
		30 June	30 June
		2012	2011
		£'000	£'000
	Not later than one year	230	213
	Later than one year and not later than five years	476	646
		_______	_______
		706	859
		_______	_______

25. Acquisition

As part of the Group's strategy to grow through acquisition, on 1 March 2012 the Group acquired 100% of the share capital of Star-Gate Aviation (Proprietary) Limited, a South African based business which holds a South African AOC.  The principle reason for this acquisition is that it provides immediate revenue and cash flow to the Group, as the Group is able to operate across Africa, and diversifies the Group's business model.

The purchase has been accounted for under the acquisition method of accounting.

The Group has identified the fair values of the assets acquired and liabilities assumed, including the separate identification of intangible assets in accordance with IFRS 3 'Business Combinations'. This formal process involves an assessment of the assets acquired and liabilities assumed with assistance provided by external valuation specialists where appropriate. The assessment period remains open up to a maximum of 12 months from the relevant acquisition date. As at 30 June 2012, the assessment was not complete and accordingly the fair values presented are provisional.

Adjustments are made to the assets acquired and liabilities assumed during the assessment period to the extent that further information and knowledge come to light that more accurately reflect conditions at the acquisition date.

The consideration paid or payable in respect of the acquisition comprises the amount paid on completion, plus an estimate of an amount due in the future and has been allocated against the identified net assets, with the balance recorded as goodwill. Transaction costs and expenses such as professional fees are charged to the Statement of Comprehensive Income.

A summary of the effect of the acquisition is detailed below.

	Book value at acquisition	Provisional fair value adjustments	Fair value
	£'000	£'000	£'000
Air Operators' Certificates	-	638	638
Property, plant & equipment	20	-	20
Trade and other receivables	12	-	12
Net cash	3	-	3
Trade and other payables	(30)	-	(30)
Payables to related parties	(259)	-	(259)
Shareholders' loan account	(74)	-	(74)
	_______	_______	_______
Net assets acquired	(328)	638	310
	_______	_______	_______
Consideration Satisfied by:
Shares issued upon completion			130
Deferred shares			50
Deferred cash consideration due within 12 months of completion			130
			_______
			310
			_______

	Fair value £'000
The net cash outflow in the year in respect of acquisitions comprised:
Net cash acquired	3
Acquisition related costs recognised as an administrative expense	(13)
Total cash outflow in respect of acquisitions	(10)

The acquisition made during the year to 30 June 2012 contributed £Nil to the Group's revenue and an operating loss of £87k to the Group's profit from operations.  This is due to the fact that all of the acquisition's efforts were on assisting the Group gain a Nigerian AOC.

26	Related party transactions

Related party transactions are as follows:

Year ended 30 June 2012 14 month period ended 30 June 2011 Related party Purchases Outstanding 30 June Expense a/c Purchases Outstanding 30 June Loans £'000 £'000 £'000 £'000 £'000 £'000 Sale of charter flights to: Offshore Jets - - - 108 13 - Four Seasons - - - 117 117 - ______ ______ ____ ____ ______ ____ Purchase of consultancy services from: Merlin Financial 49 18 - 40 4 - George Rolls 57 1 - 40 5 - Invincible Moose 10 7 - - - - Offshore Jets 191 74 - 105 - - ______ ______ ____ ____ ______ ____ Other accounts: Four Seasons - - - (456) (164) - Offshore Jets 127 (127) (48) - 47 - Rowan Irving - - (11) - - - Hangar8 Malta (AOC) Limited 89 24 - - - - ______ ______ ____ ____ ______ ____

The Group has not made any provision for bad or doubtful debts in respect of related party debtors nor has any guarantee been given or received during 2012 or 2011 regarding related party transactions. 

Other accounts relate to the amount outstanding due to Four Seasons under the onerous lease disclosed in note 7, amounts due from individuals for the use of aircraft for private use and transactions with the Group's joint venture party Hangar8 Malta (AOC) Limited.

·    Offshore Jets is an entity controlled by Dustin Dryden the Company's Chief Executive Officer;

·    Four Seasons is an entity controlled by John Blower one of the Company's former non-executive Directors;

·    Invincible Moose is an entity controlled by David Savile one of the Company's current non-executive Directors;

·    Merlin Financial is an entity controlled by Nigel Payne the Company's non-executive Chairman.

27	Notes supporting the cash flow statement

Cash and cash equivalents for the purposes of the cash flow statement comprises:

		2012	2011
		£'000	£'000
	Cash available on demand	790	2,221
		_______	_______

 

END

 

 

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