Unaudited interim results

RNS Number : 5169A
Gama Aviation PLC
30 September 2020
 

Date: 30 September 2020

 

 

 

Gama Aviation Plc (AIM: GMAA)

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

Unaudited interim results for six months to 30 June 2020

 

H1 results impacted by COVID-19, as expected; improved cash position

 

 

Financial Highlights (post IFRS 16 basis, 2019 comparatives restated)

 

· Adjusted Revenue $93.7m (H1 2019: $121.8m), down 23%, at constant currency down 22%.

· Adjusted Gross Profit $16.7m (H1 2019: $23.1m), down 28%, at constant currency down 27%.

· Adjusted Gross Profit Margin 17.8% (H1 2019: 19.0%), down 1.2ppts, at constant currency down 1.2ppts.

· Adjusted EBIT loss of $2.2m (H1 2019: profit of $5.2m), down 141%, at constant currency down 142%.

· Adjusting items of $0.2m profit (H1 2019: loss of $4.2m), up 105% largely due to disposal accounting of the US Air Associate partially offset by impairments and net of taxation.

· Net Debt, inclusive of obligations under leases, decreased to $87.9m from $98.0m at 31 December 2019.

 

Financial Summary

 

Adjusted1 $m

Statutory $m

 

Jun-20

Jun-19

Restated2

Jun-20

Jun-19

Restated2

Revenue

93.7

121.8

109.2

121.8

Gross Profit

16.7

23.1

32.2

23.1

Gross Profit %

17.8%

19.0%

29.5%

19.0%

EBIT

(2.2)

5.2

4.0

0.5

(Loss)/ Profit Before Tax

(4.0)

3.2

2.2

(1.6)

(Loss)/ Profit After Tax

(4.4)

2.3

(4.2)

(2.0)

Earnings per share (cents)

(6.9)

3.7

(6.6)

(2.9)

1 The Alternative Performance Measures (APMs) are defined in Note 4 of the notes to the interim financial statements and reconciled to the nearest IFRS measure. APMs include Adjusted EBIT as well as organic and constant currency Revenue, Gross Profit and Adjusted EBIT.

2 The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

· Financial performance across the Group during the period reflects the impact of the global pandemic on the aviation sector.

· Group supported during the pandemic by US Government Paycheck Protection Program loan of $5.75m, of which $3.8m loan forgiveness has been reflected within Adjusted EBIT in the first half of 2020.

· On 2nd March 2020 the Group announced the sale of the US Air associate, for total consideration of $33m.

· Group's liquidity remains strong with $18.1m cash and $29.9m of its $50m revolving credit facilities undrawn as at 30 June 2020.

 

Operational Highlights:

 

· Multiple new major contracts won and commenced in special missions and technology & outsourcing:

In the Global Services Division, myairops secured a $2.5m Software as a Service contract in March, with one of the world's largest business aviation operators.

Together with Atkins, Gama was reappointed in May to continue delivering Military Airworthiness Reviews (MARs) to the RAF's HQ Command and the British Army's Joint Helicopter Command.

Gama commenced all Helicopter Emergency Medical Services (HEMS) on behalf of for the Scottish Ambulance Service on 1 June 2020 using its fleet of three Airbus H145 helicopters.

Since period end, the Group was awarded two contracts to provide air ambulance services to Guernsey and Jersey, for an initial 5 years from July 2020 with options to extend by up to 5 years.

 

· Air Division profitability stable supported by reduced start-up funding in the Middle East.

Ground Division's profitability impacted by a pandemic-related reduction in FBO and MRO revenues and an absence of the one-off gains that benefitted the prior year comparator in Europe.

China Aircraft Services Limited (CASL) suffered substantial losses due to vastly reduced commercial aviation volumes at Hong Kong airport, impacted by COVID-19 resulting in the Group taking $2.0m of losses in respect of its 20% holding during the period.  

 

Current trading & outlook

 

· Q3 trading to end September was stable and in line with management expectations.

· Encouraging pipeline for special missions contracts and improved demand levels at the Bournemouth UK facility for jet and turboprop engineering activities.

· Recognising the uncertainty inherent in the ongoing pandemic, underlying performance in the second half is expected to be broadly similar to the first half, however results will be impacted by reduced government support.

· Continued focus on cash generation and conservation with c$30m RCF undrawn and cash of c$18m as at 28 September 2020.

 

Commenting on the half year results, Marwan Khalek, Chief Executive said:

 

"Over the years we have strategically evolved resilience into our business and robustness into our business model to ensure that we can overcome the challenges of an inevitable periodic downturn.  This pandemic and the significantly detrimental economic consequences that flow from it will continue to test us.

 

The H1/20 results we are announcing today show that the Group is fairing relatively well in this very difficult business and operating environment.  Notwithstanding the share of associate investment loss of $2.0m, the Group has delivered a near breakeven Adjusted EBIT performance from its core operations and the activities where it can exercise full management and operation control.  The Group has also preserved its healthy liquidity position throughout this crisis. We have, however, recognised the potential consequences of these challenging times in considering the future prospects for our investments and have also re-assessed the allocation of income from the sale of the US Air Associate and the carrying value of other investments.

 

The Group's ability to deliver such a performance, both in terms of profits and cash generation, in the most challenging market, economic and operating environment it has ever faced is reflective of the prompt actions of management, the support and confidence of our clients and the dedication and commitment of our people, of whom I am very proud.

 

I am also very pleased that, despite the challenges and focus on the pandemic and its impact, we have continued to drive our business forward with pleasing and long term contract wins in the special mission division and sizeable maintenance inputs into our Bournemouth maintenance facility.

 

I have no doubt that our resilience will continue to be severely tested by this evolving pandemic and the resulting uncertainty that it generates.  However, I believe that with good control of the cost base and a healthy liquidity, the Group is well placed to navigate through this crisis and emerge stronger."

 

-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.

 

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

 

Gama Aviation Plc   +44 (0) 1252 553029

Marwan Khalek, Chief Executive Officer

Daniel Ruback, Chief Financial Officer

 

Camarco   +44 (0) 20 3757 4992

Ginny Pulbrook

Geoffrey Pelham-Lane

 

Jefferies International    +44 (0) 20 7029 8000

Simon Hardy

Will Soutar

 

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 core 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).  Other products and services are included in the Global Services Division.

 

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

 

Chief Executive Officer's Report

 

The onset and rapid global spread of the COVID-19 pandemic since the start of 2020 and the resulting global economic crisis has understandably overshadowed and impacted every aspect of our business, operational and financial performance during the first half of 2020.

 

We took prompt, decisive and pro-active action to protect and safeguard our business.  Our first and over-riding priority was and remains the safety and security of our global workforce and our clients.  By continuing to operate under the enhanced preventative and protective measures advised by the World Health Organization and by National Governments all our divisions have remained operational throughout the period delivering services in support of our clients' missions across all our operational bases and geographies.

 

I am very proud of how our people and our teams across the world have responded to and dealt with the challenges presented to us by this pandemic.  By maintaining business continuity across our operation, we have been able to support our clients throughout this period, particularly for those providing critical services such as NHS Scotland, the Ministry of Defence and other key industries.

 

Our other priority is to safeguard the financial performance and stability of our business and we acted swiftly and decisively by immediately implementing a raft of measures to reduce costs and preserve cash as reported in our announcement of 25th March 2020. The sale of our US Air Associate, Gama Aviation LLC, on March 2nd, represented good value and proved very timely. We have also re-assessed the prospects for Group investments not fully under our control, given the level of uncertainty remaining in those markets. Further details are provided in this report and in the finance review.

 

These results, delivered during a period of significant disruption and uncertainty, demonstrate the effectiveness of the actions and measures we have taken as well as the resilience of our business and robustness of our business model.  We continue to monitor the development and on-going impact of this pandemic on a daily basis and we will continue to take the necessary and proportionate actions to safeguard our business both in respect of its current performance and future prospects.

 

Alongside our focused effort to mitigate the impact of the pandemic on our business, we have also maintained the necessary and appropriate focus on continuing to grow the business and implement our strategy.  The period saw the successful launch of our rotary services to the Scottish Ambulance Service following a major transition programme involving three new aircraft and the construction of a new operating base.  We are also very pleased to have won other special mission contracts such as the Jersey and Guernsey air ambulance services and the renewal of our contract providing critical airworthiness review services to the MoD in partnership with Atkins.  The transitions in Scotland and the Channel Islands were delivered on time and operating as planned, a significant achievement in current environment which showcases the skills expertise and dedication of our people.

 

Our new CFO Daniel Ruback is continuing his diligent and detailed efforts to strengthen our finance function by continuous improvement process for people, system and processes. Much work remains to be done but I am confident we are on the right path in this critical area that has previously held back and impacted our financial performance.

 

H1/20 Financial Performance

 

Adjusted revenues were down by 23% to $93.7m for the period (H1 2019, $121.8m) due to the fall in activity resulting from the pandemic and associated lockdowns.  Despite this drop in revenues, Adjusted Gross Profit margins were modestly impacted, down 1.2 ppts to 17.8% (H1 2019, 19.0%), reflecting both the effectiveness of the operational cost reduction measures as well the reality of the trading environment and was coupled with the appropriate use of government support initiatives.  However, in absolute terms, Adjusted Gross Profits were down $6.4m to $16.7m (H1 2019, $23.1m).

 

Initiatives to streamline and reduce the overhead cost structure of the Group at both divisional and central level were already underway pre the pandemic and these, with the additional pandemic related cost saving measures, have helped ensure that Adjusted EBIT was not more adversely affected, despite significant increases in adjusted depreciation and amortisation of intangibles in the period.

 

The Adjusted EBIT loss of $2.2m for the period includes a $2.0m share of associate losses relating to our 20% equity investment holding in China Aircraft Services Limited (CASL), the loss has no cash impact to the Group.  CASL provides maintenance and ramp services to airline customers at Hong Kong airport where its revenues have been very severely impacted by the significant drop in movements at the airport.  Notwithstanding this share of associate losses, the Group has delivered a near breakeven Adjusted EBIT performance from its core operations and activities over which it exercises management and operational control. 

 

The group generated a net cash inflow from operating activities in the period of $21.8m (2019: $2.2m) which helped fund investment capital expenditure and other relatively small levels of maintenance capital expenditure whilst maintaining a strong liquidity position.  As at 30th June 2020 the Group had $18.1m of cash and $29.9m of its $50m revolving credit facilities undrawn.

 

Sale of US Air Associate

 

On 2nd March 2020 the Group announced the sale of its US Air associate, Gama Aviation LLC, in which the Group had a 24.5% equity interest, for a total consideration of $33m. The finance review section and Note 7 provide detailed commentary on the final accounting treatment that we have applied to the sale proceeds and the reasons for the differences from our original judgment.  The economic substance of the transaction remains unchanged.  

 

The strategic rationale was to enable the Group to monetise, at an attractive value, its investment in an associate over which it exercises no control, and which had grown increasingly dependent on a major customer who had an interest in purchasing the business.  This sale will allow the Group to focus its US activities on its 100% owned Ground Division which is capable of continuing to deliver significant growth.

 

Impairment of Investments

 

The Board has undertaken a review of the carrying values of certain investments with a view to determine the level of impairments that may be necessary with COVID-19 uncertainties prevailing globally.

 

As stated above and as is evident from the financial statements, the performance of CASL (the Groups' Hong Kong based associate) has been very severely impacted by the pandemic.  With revenues running at some 85% below pre pandemic levels, CASL has suffered significant losses during the first half of 2020 resulting in the Group recognising a $2m share of associate loss in its interim results.  Despite the cost saving measures implemented by CASL management, losses will continue through the remainder of 2020 and into 2021, and a return to profitability is not expected until there is a significant upturn in activity.  Given the continuing uncertainty surrounding the pandemic and the timing of any eventual recovery, the Board has decided to take an impairment write-down in the carrying value of its investment in CASL.

 

Similarly, the Board has also decided to impair the 'asset under construction' carrying value of its investment in the Sharjah Business Aviation Center project.

 

Given the one-off and non-recurring nature of these impairment costs, they have been treated as adjusting items.  It is however the intention of management to work closely with CASL management, and our partners in Sharjah, to maximise value from these investments.

 

Strategy

 

In our FY19 results announced on July 31st, 2020 we notified the market that we are conducting a strategic review of the business to ensure that, going forward, we are focused on the things that we do best.  This review is progressing well and has identified the following primary areas of market focus:

 

· Special Missions, building on the Group's proven strength in delivering high availability aviation services for defence, law enforcement, healthcare and critical infrastructure.

· Business Aviation, involving the global delivery of the Group's core offerings of aircraft management, charter and engineering to high value customers, with clear priority placed on key markets, especially the United States.

· Technology and Outsourcing, where the Group will leverage its investment in the myairops software platform, FlyerTech and its industry-leading capabilities in core aviation managed service components to offer compelling outsource solutions.

 

The review will of course take into account the evolving impact of the pandemic and we will make further announcements in due course, including any changes to our future segmental reporting.

 

Outlook

 

The Q3 trading to end September was stable and in line with management expectations. We are encouraged by our development of a strong pipeline for special mission opportunities and improved demand levels at the Bournemouth UK facility for jet and turboprop engineering activities.

 

Recognising the uncertainty inherent in the ongoing pandemic, underlying performance in the second half is expected to be broadly similar to the first half, however results will be impacted by reduced government support as the US PPP scheme ends, and UK and other schemes are reduced.

 

The Group is expected to maintain its healthy liquidity position. As at 28 September 2020, the Group has cash of c$18m and c$30m RCF borrowing facilities undrawn.

 

 

 

 

 

Marwan Khalek

Chief Executive Officer

 

 

 

 

 

Group Operational Performance

 

Revenue

$'000

 

Adjusted

Statutory

 

2020

2019

2020

2019

Air Division

50,501

65,398

66,001

65,398

Ground Division

41,461

54,879

41,461

54,879

Global Services Division

1,768

1,508

1,768

1,508

Total

93,730

121,785

109,230

121,785

 

Gross Profit

$'000

 

Adjusted

Statutory

 

2020

2019*

2020

2019*

Air Division

5,287

5,559

20,787

5,559

Ground Division

10,000

16,509

10,000

16,509

Global Services Division

1,405

1,081

1,405

1,081

Total

16,692

23,149

32,192

23,149

 

EBIT

$'000

 

Adjusted

Statutory

 

2020

2019*

2020

2019*

Air Division

1,516

1,197

16,897

979

Ground Division

650

6,764

(3,790)

3,943

Global Services Division

(6)

219

(160)

93

Associates Division

(1,957)

252

(5,567)

252

Central Costs

(2,366)

(3,217)

(3,390)

(4,778)

Total

(2,163)

5,215

3,990

489

*  The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

The above Group results are explained in detail below.

 

 

 

Air Division

The Air Division supports customers using business aviation as an integral part of their mission, including corporations and public services such as air ambulance and aerial survey. It provides aircraft management, crewing, charter services, airworthiness and engineering oversight both to single aircraft operations and fleets, and delivers substantial special mission contracts for complex, time critical services.

 

Adjusted

$'000

 

US

Europe

Middle East

Asia

Total

 

2020

2019*

2020

2019*

2020

2019*

2020

2019*

2020

2019*

Revenue

1,875

1,875

31,284

46,314

8,574

7,030

8,768

10,179

50,501

65,398

Gross Profit

1,875

1,875

2,062

2,336

731

746

619

602

5,287

5,559

GP %

100%

100%

7%

5%

9%

11%

7%

6%

10%

8%

EBIT

1,854

1,815

(127)

(100)

(36)

(601)

(175)

83

1,516

1,197

EBIT %

99%

97%

0%

0%

0%

(9%)

(2%)

1%

3%

2%

 

The Air Division revenues fell on reported basis by 23% to $50.5m (2019: $65.4m). On a constant currency basis, the fall was 21% after rebasing for the impact of foreign exchange of $1.2m, as shown in Note 4 of the notes to the financial statements. Reduced recharges as a result of lower flying activity due to the COVID-19 pandemic was the primary driver for revenue reductions in both Europe (down 31% ) and Asia (down 14%), whereas higher recharges relating to maintenance boosted revenues in the Middle East (up 22%). The changes in recharge revenues had no effect on profits, but smaller pandemic-related reductions in revenues from management fees, charter sales and flight planning services did flow through to gross profits. The size of the global managed aircraft fleet increased by one in the first half of 2020 compared to the prior half comparative period.

 

Total Air Division Adjusted EBIT improved by $0.3m to $1.5m (2019: $1.2m), with the above gross profit shortfalls compensated for by overhead reductions.  Adjusted EBIT remained stable in the US and Europe. The Middle East improved due to reduced levels of funding of the start-up business in Saudi Arabia. Cost control in Asia was offset by $0.5m of loss allowances for doubtful debtors.

 

The in-sourcing by Europe Air of the helicopter emergency medical services (HEMS) for the Scottish Ambulance Service progressed according to plan, leading to the successful go-live of this operation on 1st June 2020. Additionally, in July the Group was awarded new special mission contracts to provide fixed wing air ambulance services to the governments of Guernsey and Jersey for an initial term of 5 years plus options to extend by up to 5 years.

 

Adjustments to EBIT

$'000

 

 

US

Europe

Middle East

Asia

Total

 

2020

2019*

2020

2019*

2020

2019*

2020

2019*

2020

2019*

Exceptional items

-

-

-

(105)

-

-

-

-

-

(105)

Amortisation

-

-

(60)

(54)

-

-

(59)

(59)

(119)

(113)

Accelerated branding fees

15,500

-

-

-

-

-

-

-

15,500

-

Total adjustments

15,500

-

(60)

(159)

-

-

(59)

(59)

15,381

(218)

 

Statutory

$'000

 

 

US

Europe

Middle East

Asia

Total

 

2020

2019*

2020

2019*

2020

2019*

2020

2019*

2020

2019*

EBIT

17,354

1,815

(187)

(259)

(36)

(601)

(234)

24

16,897

979

EBIT %

100%

97%

(1%)

(1%)

0%

(9%)

(3%)

0%

25%

1%

*The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

Air Division Statutory EBIT increased from $1.0m in 2019 to $16.9m in 2020 due to accelerated branding fees on the disposal of the US Air associate, see Note 7 for further details on the disposal. Exceptional items did not recur in the current period and amortisation of the remaining acquired intangibles continues in line with policy.

 

Ground Division

The Ground Division provides global support to the business aviation, air ambulance, law enforcement and military sectors, deploying a service mix that is designed to deliver new capability and maintain availability of the aircraft for the operator. With a global network and increasingly rare independence from manufacturer ownership, the Division has approvals to maintain aircraft from Gulfstream, Dassault Falcon, Bombardier, Embraer and Textron, providing heavy, ad-hoc and emergency maintenance as well as modifications and refurbishments.

 

Adjusted

$'000

 

 

US

Europe

Middle East

Asia

Total

 

2020

2019*

2020

2019*

2020

2019*

2020

2019*

2020

2019*

Revenue

20,578

24,296

18,490

27,321

1,476

2,266

917

996

41,461

54,879

Gross Profit

4,403

3,748

4,844

11,359

262

963

491

439

10,000

16,509

GP %

21%

15%

26%

42%

18%

42%

54%

44%

24%

30%

EBIT

1,146

653

(41)

6,203

(442)

71

(13)

(163)

650

6,764

EBIT %

6%

3%

(0%)

23%

(30%)

3%

(1%)

(16%)

2%

12%

 

The Ground Division revenues fell on reported basis by 24% to $41.5m (2019: $54.9m). On a constant currency basis, the fall was 23% after rebasing for the impact of foreign exchange of $0.7m, as shown in Note 4 of the notes to the financial statements. All divisions experienced reductions in revenue: Europe by 31%, Middle East by 35%, US by 15% and Asia by 8%. In Europe, the fall in revenue is $8.8m, or $8.1m on a constant currency basis, with significant variances due to the prior year comparative benefitting from one-off equipment sales of $5.5m, closure of the loss-making Fairoaks maintenance business, and reduced demand for FBO, MRO and design services following the start of the COVID-19 pandemic. In the US, the fall in revenue of $3.7m was materially driven by the COVID-19 pandemic however the impact was partially offset by growth in the Florida Paint-Shop of $1.1m to $1.8m (2019: $0.7m). In the Middle East, revenue fell due to lower FBO movements, lower parking from planes being grounded elsewhere, and a knock-on effect of reduced activity on MRO revenues. Asia also experienced a COVID-related reduction in maintenance revenues of $0.1m to $0.9m (2019: $1.0m).

 

Adjusted EBIT fell by $6.1m to $0.7m, due to Europe ($6.2m down, on a constant currency basis $6.0m down) and Middle East (down $0.5m to a loss of $0.4m), partially offset by US ($0.5m up to $1.1m) and Asia ($0.2m reduction in losses). In Europe, Gross Profit in the prior period benefited compared to the current period by $2.9m from one-off equipment sales and cost credits which dropped down into Adjusted EBIT, and 2020 was impacted by the COVID-related services revenue reductions. In the Middle East, reduced FBO activity resulted in an Adjusted EBIT loss with fixed cost savings unable to offset gross profit shortfalls.  Despite the impact of COVID-19 on revenues and a $0.2m increase in doubtful debts provisions, Adjusted EBIT in the US improved as a result of reduced losses in the first half of 2020 from the Florida Paint-Shop and was supported by PPP loan forgiveness of $3.8m.  Asia's Adjusted EBIT improved by $0.2m to a breakeven position (2019: $0.2m loss) due to a combination of improved mix within gross profit plus reduced overheads.

 

Adjustments to EBIT

$'000

 

 

US

Europe

Middle East

Asia

Total

 

2020

2019*

2020

2019*

2020

2019*

2020

2019*

2020

2019*

Exceptional items

-

-

-

(1,364)

  -

-

-

-

-

(1,364)

Amortisation

-

(228)

-

(96)

-

-

-

-

-

(324)

Impairment charge

-

-

-

(1,133)

(4,440)

-

-

-

(4,440)

(1,133)

Total adjustments

-

(228)

-

(2,593)

(4,440)

 -

 -

 -

(4,440)

(2,821)

            

 

Statutory

$'000

 

 

US

Europe

Middle East

Asia

Total

 

2020

2019*

2020

2019*

2020

2019*

2020

2019*

2020

2019*

EBIT

1,146

425

(41)

3,610

(4,882)

71

(13)

(163)

(3,790)

3,943

EBIT %

6%

2%

(1%)

13%

(331%)

3%

(1%)

(16%)

(9%)

7%

*The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

Ground division Statutory EBIT fell from a profit of $3.9m in 2019 to a loss of $3.8m in 2020 as a result of the impairment of assets under the course of construction at Sharjah airport of $4.4m in addition to the fall in Adjusted EBIT. Exceptional items did not recur in the current period.

 

Global Services Division

The Global Services Division comprises two businesses, FlyerTech and myairops. FlyerTech provides continuing airworthiness management (CAM) and airworthiness review certification (ARC) services for business aviation and commercial airline operators. myairops has developed a suite of business aviation products deployed as "Software as a Service" (SaaS) and mobile app solutions for business aviation operators, flight support companies, FBOs and regional airports.

 

Adjusted

$'000

 

Total

 

2020

2019

Restated*

Revenue

1,768

1,508

Gross Profit

1,405

1,081

GP %

79%

72%

EBIT

(6)

219

EBIT %

(0%)

15%

 

The Global Services Divisions grew revenues by 17% to $1.8m (2019: $1.5m) however EBIT fell to nil (2019: $0.2m). Growth in revenue and gross profit was driven by performance in myairops following the launch of three new products and associated product sales including a $2.5m three-year contract with a large business aviation operator. Associated with the product launches, amortisation of the product development commenced, impacting Adjusted EBIT in the first half by $0.5m. FlyerTech traded broadly in line with prior half, with a modest reduction in revenue offset by enhanced margin performance.

 

Adjustments to EBIT

$'000

 

Total

 

2020

2019

Amortisation

(154)

(126)

Total adjustments

(154)

(126)

 

Statutory

$'000

 

Total

 

2020

2019

Restated*

EBIT

(160)

93

EBIT %

(9%)

6%

*Restated to show the impact of IFRS 16 within Adjusted EBIT, divisionally for year on year comparability. Refer to Note 2 of the notes to the interim financial statements.

 

Adjustments to EBIT relate to amortisation of acquired Customer Relationship intangibles of $0.2m (2019: $0.1m). Overall, Global Services Division Statutory EBIT fell to a loss of $0.2m in the first half from a profit of $0.1m in 2019.

 

 

Associate Investments

 

Adjusted

$'000

 

US Air
Associate

China Aircraft
Services Limited

Total

 

2020

2019

2020

2019

2020

2019

EBIT

78

29

(2,035)

223

(1,957)

252

 

The US Air associate was sold on 2 March 2020, see Note 7 of the notes to the interim financial statements for further details. The $78k of Adjusted EBIT represents the Group's share of results from the US Air associate prior to disposal.

 

China Aircraft Services Limited (CASL) suffered substantial losses of $2.0m due to vastly reduced commercial aviation volumes at Hong Kong airport, impacted by COVID-19.

 

Adjustments to EBIT

$'000

 

US Air
Associate

China Aircraft
Services Limited

Total

 

2020

2019

2020

2019

2020

2019

Impairment charge

-

-

(10,633)

-

(10,633)

-

Profit on disposal of interest in associates

7,023

-

-

-

7,023

-

Total adjustments

7,023

-

(10,633)

-

(3,610)

-

Statutory

$'000

 

US Air
Associate

China Aircraft
Services Limited

Total

 

2020

2019

2020

2019

2020

2019

EBIT

7,101

 29

(12,668)

 223

(5,567)

 252

 

In view of the ongoing COVID-19 pandemic and the related uncertainties, an impairment charge of $10.6m (2019: nil) has been made against the equity accounted investment in CASL, see Note 4 for further details. The disposal of the US Air Associate resulted in a profit before taxation on disposal of the Group's equity interest of $7.0m. Overall, associate Statutory EBIT decreased from a profit of $0.3m in 2019 to a loss of $5.6m in 2020.

 

Financial Review

 

 

 

 

Adjusted1 $m

Statutory $m

 

Jun-20

Jun-19

Restated2

Jun-20

Jun-19

Restated2

Revenue

93.7

121.8

109.2

121.8

Gross Profit

16.7

23.1

32.2

23.1

Gross Profit %

17.8%

19.0%

29.5%

19.0%

EBIT

(2.2)

5.2

4.0

0.5

(Loss)/ Profit Before Tax

(4.0)

3.2

2.2

(1.6)

(Loss)/ Profit After Tax

(4.4)

2.3

(4.2)

(2.0)

Earnings per share (cents)

(6.9)

3.7

(6.6)

(2.9)

1 The Alternative Performance Measures (APMs) are defined in Note 4 of the notes to the interim financial statements and reconciled to the nearest IFRS measure. APMs include Adjusted EBIT as well as organic and constant currency Revenue, Gross Profit and Adjusted EBIT.

2 The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

Adjusted Revenue Bridge

$m

 

Revenue - 2019

121.8

Impact of foreign exchange movement

(1.9)

Revenue - 2019 at 2020 exchange rate

119.9

Air Division

(13.7)

Ground Division

(12.8)

Global Services Division

0.3

Revenue - 2020

93.7

 

 

· The Air Division had reduced recharges of costs due to reduced flying hours as a result of the ongoing COVID-19 pandemic.

· Ground Division revenue reduced primarily in Europe (a reduction of $8.8m) with the prior year benefiting from one-off equipment sales of $5.5m whilst in the US aircraft maintenance was materially impacted by the ongoing COVID-19 pandemic with a $3.7m reduction in US Ground revenues.

 

Adjusted EBIT Bridge $m

 

Adjusted EBIT - 2019 (restated)*

5.2

Impact of foreign exchange movement

(0.1)

Adjusted EBIT - 2019 at 2020 exchange rate

5.1

Gross Profit

(6.1)

Share of loss from associates

(2.3)

Decrease in administrative expenses:

1.1

Adjusted EBIT - 2020

(2.2)

*  The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

· Reduced Gross Profit driven by Europe Ground reductions partially offset by gross profit growth in US Ground and the Air Division.

· China Aircraft Services Limited (CASL) suffered substantial losses of $2.0m due to vastly reduced commercial aviation volumes at Hong Kong airport, impacted by COVID-19.

 

 

 

Disposal of US Air Associate

 

On 2nd March 2020 the Group disposed of its shareholding in its US Air associate for a total consideration of $33m, of which $13m cash was received at closing with the balance due to be received, with interest, at six monthly intervals over the following four years. Following on from the judgement communicated at the time of announcing the disposal, Note 35 to the Group's 2019 Annual Report and Accounts stated that this transaction was expected to be accretive to underlying earnings to FY2020 and FY2021 as well as resulting in a one-off profit on disposal of the Group's equity interest. The Board has now concluded, after consultation with the Group's external auditors PwC, that it is more appropriate only to recognise in Adjusted EBIT for 2020 and 2021 the pre-existing level of branding fee of $3.75m per year (total $7.5m), and to treat the remaining $15.5m relating to accelerated branding fees and other trading items as an adjusting revenue item in the 2020 first half results given its material one-off and non-recurring nature. Adjusted EBIT will continue to reflect branding fee for a two year period. Given the nature of the agreement and the continuing operational and financial uncertainties resulting from the COVID-19 pandemic it is now extremely difficult to assess whether or not the transaction will be accretive to earnings in FY20 and FY21. Notwithstanding the above, the economic substance and the cashflows of the transaction remain unchanged. Refer to Note 7 for further details on the disposal.

 

Impairments of Investment

 

The COVID-19 pandemic has also required the Board to consider whether other investment focused assets show signs of impairment. The Board has concluded that the value of the Group's 20% equity interest in its Asia associate, China Aircraft Services Limited, has been adversely impacted by significantly reduced levels of commercial aviation activity at Hong Kong airport. Accordingly, the Group has taken a $10.6m impairment as an exceptional item in the first half of 2020 in respect of this investment.  Similarly, the Group's $4.4m asset under construction, representing investment at Sharjah in the Middle East Ground division, has been impaired in full as an exceptional item, due to uncertainties regarding the recoverability of the initial project development costs incurred to date.

 

The Board considers that treating all three material amounts as exceptional items presents the most fair, balanced and understandable view of the accounting consequences for shareholders. 

 

 

Statutory EBIT Bridge

$m

 

Statutory EBIT - 2019 (restated)*

0.5

Items impacting Adjusted EBIT

(7.4)

Adjusting items:

10.9

- Accelerated branding fees

15.5

- Impairment of assets under construction

(4.4)

- Impairment of CASL

(10.6)

-  prior year impairment of Fairoaks right-of-use asset

1.1

- Profit on disposal

7.0

- Depreciation and amortisation

0.3

- Integration and business recognition costs

0.9

- Litigation costs

1.4

- Transaction costs

(0.2)

- Other

(0.1)

Statutory EBIT - 2020

4.0

*The results for 2019 have been restated for the interim effect of restatement items identified in the 2019 full-year results. Restatements are detailed in Note 2 of the notes to the financial statements.

 

· $15.5m of accelerated branding fees have been recognised in adjusting items following the disposal of the US Air Associate and the settlement of existing contractual arrangements (see Note 7 for further details on the disposal).

· Impacted by the ongoing COVID-19 pandemic, impairment charges relate to $4.4m in relation to Sharjah and $10.6m in relation to CASL. The prior period included an impairment of the right-of-use asset associated with the Fairoaks lease.

· $7.0m profit before taxation on disposal of the US Air Associate (see Note 7 for further details on the disposal).

· Adjusting items only include amortisation of acquired intangibles. The prior period included amortisation of internally generated intangibles.

· Integration and business re-organisation costs at Fairoaks and Bournemouth did not recur in the first half of 2020.

· Significant reduction on litigation costs following progress on legacy matters.

· Increased transaction cost of $0.2m relating to potential acquisition opportunities.

 

Interest

 

Net finance cost of $1.8m (2019: $2.0m), include $0.4m (2019: nil) of finance income on deferred consideration following the disposal of the US Air Associate.

 

Taxation

 

There is an adjusted taxation charge for the period of $0.4m (2019: charge of $0.9m) arising from profits in the US where the group has an effective tax rate of 28%. An increased deferred tax asset for additional losses incurred in other jurisdictions has not been recognised due to the uncertainty of future available taxable profits to utilise the losses.

 

On disposal of the US Air Associate there was a corporation taxation charge of $7.7m, which is included within the Corporation tax liability at 30 June 2020. In addition, a deferred taxation credit of $1.5m has been recognised on deferred revenue on the disposal, and this will be charged to deferred tax in future periods as the revenue is recognised. There is a statutory taxation charge for the period of $6.3m (2019: charge of $0.4m), which reflects a significant increase as a result of the US Air Associate disposal.

 

EPS

 

Shares in issue remain unchanged and the average share price for the six months ended was lower than the exercise price of outstanding options and therefore there is no dilutive effect for diluted earnings per share. Basic Statutory EPS reflects an increase loss per share of 6.6 cents (2019: 2.9c).

 

Net debt and cash flow movements

 

Jun-20

$m

Jun-19

Restated*

$m

Net cash inflow on operating activities

21.8

2.2

 

 

 

Capital expenditure

(23.0)

(14.4)

Lease payments

(5.0)

(5.7)

Interest paid

(0.6)

(0.6)

Proceeds on disposal of US Air Associate, net of transaction costs

9.7

-

Proceeds from borrowings

30.4

15.1

Repayment of borrowings

(23.4)

-

Acquisition of Florida Paint-Shop

-

(1.4)

Net cash used in investing and financing activities

(11.9)

(7.0)

 

 

 

Increase / (decrease) in cash

9.9

(4.8)

Cash at the beginning of the period

8.5

10.0

Effect of foreign exchange rates

(0.3)

(3.2)

Cash at the end of the period*

18.1

2.0

Borrowings

(46.7)

(24.6)

Obligation under leases

(59.3)

(58.3)

Net (debt)

(87.9)

(80.9)

*Restatements are detailed in Note 2 of the notes to the financial statements.

**Net (debt) at 30 June 2019 excluded obligations under leases that weren't covenant defined. For comparability, Net (debt) with all Obligations under leases is shown above and reconciled in further detail in Note 4.

 

· The improvement in the net cash inflow on operating activities has been driven by general improvements in working capital and;

$3.3m US Air Associate consideration, which was in addition to the $9.7m for the disposal of the investment, relating to trading related matters (see Note 7 for further details on the disposal)

As part of COVID-19 support in the UK, VAT payment of $4.0m have been deferred

Net receipts on long term contracts in the first half of the year were $5.4m higher than the prior half of the year

· Capital expenditure includes the purchase, for $18.3m of two new helicopters by Europe Air as part of the helicopter emergency medical services which went live on 1st June 2020, leasehold property improvements of $1.7m, Fixtures & Fittings of $1.4m and internally developed software arising from myairops software development of $1.3m.

· Lease payments reduced by $0.7m on the prior period due to timing of aircraft lease payments.

· $9.7m proceeds on disposal of the US Air Associate, net of transaction costs. Refer to Note 7 for further details on the disposal.

· Proceeds from borrowings include $24.7m in relation to the £20m Term loan for Helicopters and $5.7m from a Payment Protection Program Loan. $23.4m repayment of revolving credit facility borrowings as a result of financing the Helicopters via the Term loan.

 

Litigation

 

Following the litigation update provided in the Company's 2019 Annual Report, the Company continues to pursue the recovery of its long-standing trade receivables that amount to approximately $3m both through enforcement actions in the UK and in other jurisdictions. Since the announcement of 2019 Annual Report, the Company has made progress through court proceedings in the UK. It remains the Board's expectation that other than the provisions already made by the Company against these claims, no further provisions will be required.

 

Responsibility Statements

 

The Directors confirm that to the best of their knowledge:

a) the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

b) the interim financial report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and,

c) the interim financial report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

The basis of preparation of the consolidated financial statements is shown in Note 1 and Note 2, and related party transactions are shown in Note 13. The principal risks and uncertainties for the remaining six months of the year remain the same as set out in the Group's recently published statutory financial statements for the year ended 31 December 2019 and shown below.

 

The directors consider the principal risks to the business are:

/ Poor operational performance or air accident damaging the Group's reputation.

/ Changes in economic climate that make air transport less attractive such as the ongoing COVID-19 pandemic.

/ Following the UK departure from the EU any changes to the open skies arrangement that may impact air travel, and a slow-down in customs processes that may lead to delays in the cross-border flow of fuel, materials and engines, both for Gama Aviation, our suppliers and their upstream supply chains, and customers shipping engines for repair and overhaul.

/ Increasing regulatory burden and costs of compliance.

/ Foreign exchange risk.

 

 

Signed on behalf of the Board,

 

 

 

 

Marwan Khalek

Chief Executive Officer

 

Gama Aviation Plc

Consolidated income statement

For the period ended 30 June 2020

 

 

 

Period ended 30 June 2020

Period ended 30 June 2019 Restated*

 

Statutory result
$'000

Adjustments
$'000

Adjusted result
$'000

Statutory result
$'000

Adjustments
$'000

Adjusted

result
$'000

Revenue

109,230

(15,500)

93,730

121,785

-

121,785

Cost of sales

(77,038)

-

(77,038)

(98,636)

-

(98,636)

Gross profit

32,192

(15,500)

16,692

23,149

-

23,149

- administrative expenses

(14,188)

1,024

(13,164)

(18,733)

3,032

(15,701)

- depreciation and amortisation

(3,191)

273

(2,918)

(3,434)

1,694

(1,740)

- impairment loss

(4,440)

4,440

-

-

-

-

- impairment of financial assets

(816)

-

(816)

(745)

-

(745)

Total administrative expenses

(22,635)

5,737

(16,898)

(22,912)

4,726

(18,186)

Operating profit/(loss)

9,557

(9,763)

(206)

237

4,726

4,963

Share of results from equity
accounted investments

(12,590)

10,633

(1,957)

252

-

252

Profit on disposal of interest in associates (note 7)

7,023

(7,023)

_

 

-

 

-

 

-

Earnings before interest and taxation

3,990

(6,153)

(2,163)

489

4,726

5,215

Finance income

407

-

407

-

-

-

Finance expense

(2,246)

-

(2,246)

(2,049)

-

(2,049)

Profit/(loss) before tax

2,151

(6,153)

(4,002)

(1,560)

4,726

3,166

Taxation

(6,302)

5,945

(357)

(412)

(493)

(905)

(Loss)/profit after tax

(4,151)

(208)

(4,359)

(1,972)

4,233

2,261

Attributable to:

 

 

 

 

 

 

Owners of the Company

(4,180)

(208)

(4,388)

(1,854)

4,233

2,379

Non-controlling interests

29

0

29

(118)

-

(118)

 

 

 

 

 

 

 

* Restatements are detailed in Note 2.

 

Earnings per share attributable to the equity holders of the parent

Basic and diluted (cents)

(6.6)c

(0.3)c

(6.9)c

(2.9)c

6.6c

3.7c

 

 

Gama Aviation Plc

Consolidated statement of comprehensive income

For the period ended 30 June 2020

 

Period
ended 30 June
2020
$'000

Period
ended
30 June 2019 Restated*
$'000

Loss for the period

(4,151)

(1,972)

Items that may be reclassified to profit or loss:

 

 

Exchange differences on translation of foreign operations

(1,106)

(1,660)

Total comprehensive loss for the period

(5,257)

(3,632)

 

 

 

Total comprehensive loss is attributable to:

 

 

Owners of the Company

(5,286)

(3,514)

Non-controlling interest

29

(118)

 

(5,257)

(3,632)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gama Aviation Plc

Consolidated balance sheet

As at 30 June 2020 and 31 December 2019

 

2020
$'000

2019

Restated*
$'000

Non-current assets

 

 

Goodwill (note 8)

20,395

21,750

Other intangible assets (note 9)

9,903

10,148

Total intangible assets

30,298

31,898

Property, plant and equipment (note 10)

48,390

35,324

Right-of-use assets (note 11)

49,236

52,315

Investments accounted for using equity method

2,413

15,112

Trade and other receivables

20,040

4,392

Deferred tax asset

3,774

2,252

Total Non-current assets

154,151

141,293

 

 

 

Current assets

 

 

Assets held for sale (note 7)

-

2,598

Inventories

7,282

7,271

Trade and other receivables

52,261

73,167

Current tax receivable

338

338

Cash and cash equivalents

18,088

8,463

 

77,969

91,837

Total assets

232,120

233,130

Current liabilities

 

 

Trade and other payables

(35,765)

(51,596)

Current tax liabilities

(8,099)

-

Obligations under leases (note 11)

(15,328)

(16,366)

Provisions

(513)

(521)

Borrowings (note 12)

(46,689)

(45,615)

Deferred revenue

(12,130)

(2,867)

 

(118,524)

(116,965)

 

 

 

Total assets less current liabilities

113,596

116,165

Non-current liabilities

 

 

Borrowings (note 12)

-

(627)

Deferred revenue

(7,053)

(4,553)

Obligations under leases (note 11)

(44,012)

(43,838)

Provisions

(894)

(594)

Deferred tax liabilities

(753)

(819)

 

(52,712)

(50,431)

Total liabilities

(171,236)

(167,396)

Net assets

60,884

65,734

* Restatements are detailed in Note 2.

 

 

 

Gama Aviation Plc

Consolidated balance sheet (continued)

As at 30 June 2020 and 31 December 2019

 

2020
$'000

2019

Restated*
$'000

Shareholders' equity

 

 

Share capital

953

953

Share premium

63,473

63,473

Other reserves

35,205

34,798

Foreign exchange reserve

(30,285)

(29,179)

Accumulated loss

(9,242)

(5,062)

Total shareholders' equity

60,104

64,983

Non-controlling interest

780

751

Total equity

60,884

65,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gama Aviation Plc

Consolidated statement of changes in equity

For the period ended 30 June 2020

 

 

Share capital

Share premium

Other reserves

Foreign exchange reserve

Accumulated profit/(losses)

Total shareholders' equity

Non-controlling interest

Total equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Balance at 31 December 2018, as restated**

  953

  63,473

  33,937

  (28,055)

  8,112

  78,420

  656

  79,076

Loss for the period, as reported  

  - 

  - 

  - 

  - 

(2,128)

  (2,128)

  (118)

  (2,246)

Restatement*

-

-

-

-

274

274

-

274

Loss for the period, as restated

-

-

-

-

(1,854)

(1,854)

(118)

(1,972)

Other comprehensive income, as reported

  - 

  - 

  - 

  (1,660)

  - 

  (1,660)

  - 

  (1,660)

Total comprehensive loss for the period

  - 

  - 

  - 

  (1,660)

  (1,854)

  (3,514)

  (118)

  (3,632)

Cost of share-based payments

  - 

  - 

  336

  - 

  - 

  336

  - 

  336

Balance at 30 June 2019

  953

  63,473

  34,273

  (29,715)

  6,258

  75,242

  538

  75,780

Loss for the period

  - 

  - 

  - 

  - 

  (9,700)

  (9,700)

  213

  (9,487)

Other comprehensive income

  - 

  - 

  - 

536

  - 

536 

  - 

  536

Total comprehensive loss for the period

  - 

  - 

  - 

  536

  (9,700)

  (9,164)

  213

(8,951) 

Cost of share-based payments

  - 

  - 

  525

  - 

  - 

  525

  - 

  525

Dividend paid

 

 

 

 

(1,620)

(1,620)

-

(1,620)

Balance at 31 December 2019

  953

  63,473

  34,798

  (29,179)

  (5,062)

  64,983

  751

  65,734

Profit for the period

-

-

-

-

(4,180)

(4,180)

29

(4,151)

Other comprehensive income

-

-

-

(1,106)

-

(1,106)

-

Total comprehensive loss for the period

-

-

-

(1,106)

(4,180)

(5,286)

29

(5,257)

Cost of share-based payments

-

-

407

-

-

407

-

407

Balance at 30 June 2020

953

63,473

35,205

(30,285)

(9,242)

60,104

780

* Restatements are detailed in Note 2.

**   Balance at 31 December 2018 as restated in the 2019 audited annual report.

 

 

 

Gama Aviation Plc

Consolidated cash flow statement

For the period ended 30 June 2020

 

Period

ended 30 June

2020

$'000

 

Period ended

30 June 2019 Restated*

$'000

Net cash inflow on operating activities (note 6)

21,808

2,207

 

 

 

Cash flows from investing activities

 

 

Purchases of property, plant and equipment (note 10)

(21,678)

(12,792)

Purchases of intangibles (note 9)

(1,262)

(1,656)

Acquisition of subsidiary, net of cash acquired

-

(1,365)

Proceeds from disposal of assets held for sale (note 7)

9,699

-

Net cash used in investing activities

(13,241)

(15,813)

 

 

 

Cash flows from financing activities

 

 

Interest paid

(573)

(608)

Lease payments (note 11)

(5,037)

(5,672)

Proceeds from borrowings

30,405

15,107

Repayment of borrowings

(23,426)

-

Net cash from financing activities

1,369

8,827

 

 

 

Net increase/(decrease) in cash and cash equivalents

9,936

(4,779)

Cash and cash equivalents at the beginning of the period

8,463

10,020

Effect of foreign exchange rates

(311)

(3,205)

Cash and cash equivalents at the end of the period

18,088

2,036

* Restatements are detailed in Note 2.

 

 

 

Notes to the interim financial statements

For the period ended 30 June 2020

 

1.  Corporate information and basis of preparation

Gama Aviation Plc is a public company limited by shares, incorporated in the United Kingdom. The address of the registered office has changed from "Business Aviation Centre, Farnborough Airport, Hampshire, GU14 6XA" to "1st Floor, 25 Templer Avenue, Farnborough, Hampshire, England, GU14 6FE" in the first half of 2020. The Company's shares are publicly traded on the AIM market of the London Stock Exchange.

 

The financial information for the period end 30 June 2020 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. Following the Group's recent Annual General Meeting (AGM), the Group's statutory financial statements for the year ended 31 December 2019 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 of the Companies Act 2006.  The interim results are unaudited.

 

These interim consolidated financial statements (the interim financial statements) are for the six months ended 30 June 2020.  They have been prepared in accordance with IAS 34 "Interim Financial Reporting".  They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2019.

 

2.  Accounting policies

The accounting policies set out in the Group's statutory financial statements for the year ended 31 December 2019 have been applied in the preparation of the interim financial statements. The Directors consider that the Group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the interim financial statements.

 

During the period there has been the adoption of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance.

 

In the period to 30 June 2020 the Group received a forgivable loan under the US government Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under IAS 20 a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan. The Group has adopted the income approach where government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate.

 

$5,750k was received on 12 May 2020 and is recognised as borrowings in current liabilities.  During the period to 30 June 2020 $3,778k has been offset against what the company has deemed to be qualifying expenditure reducing the amount of borrowings at the period end to $1,970k. The utilisation of the grant is reflected against the related expenses in cost of sales and administrative expenses.

 

Restatements

 

The comparatives have been restated for several items following the restatements made to 2018 in the 2019 financial statements. The impact of restatements on the interim financial statements, where items included in the income statement or statement of cash flows for the six month comparative period ended 30 June 2019 or items presented in the statement of financial position as at 31 December 2019 have been restated, are detailed below:

 

i. Interest paid of $608k has been restated from operating cash flows to financing cash flows. This is a change in accounting   policy to be consistent with the treatment of interest on lease obligations in 2019. The impact of foreign currency movements on borrowings and intercompany loans, which was restated from administrative expenses to finance cost in the 2019 financial statements was not material in the six months ended 30 June 2019, and as a result has not been restated.

 

ii.  The impact of IFRS 16 in the prior year was a credit of $870k to Statutory and Adjusted EBIT of which the credit to gross profit was $582k. The presentation of the impact of IFRS 16 was aggregated into one line item in the prior year and in the current year this has been disaggregated across the respective divisions for year on year comparability. In addition, on the statement of cash flows, lease payments of $5,672k, which were included within operating activities, have been reclassified into financing activities.

 

iii. Following the disposal of the US Air associate (see Note 7), the presentation of the current tax payable and receivable is material at 30 June 2020 and has been presented separately on the face of balance sheet. As a result, balance sheet reclassifications on current tax receivable ($338k increase),Trade and other receivables ($338k decrease), current tax liabilities ($9k increase) and Trade and other payables ($9k decrease) have been reflected to the balance sheet at 31 December 2019. 

 

v. Tax on Adjusting Items has been restated from nil to $493k, with no impact on the statutory tax charge.

 

vi. Following a review of mapping to financial statement line items in the prior year, an income statement reclassification between administrative expenses ($920k decrease) and cost of sales ($920k increase) has been reflected.

 

vii. As communicated in the 2019 financial statements, full year 2018 was restated for errors on accruing for administrative expenses, resulting in a charge to administrative expenses of $274k and an equivalent increase in accruals. These costs were accrued in the six months ending 30 June 2019 and as a result administrative expenses and retained earnings have been restated by an equivalent amount. The reported statutory loss for the six months ending 30 June 2019 of $2,246k has been restated by $274k to $1,972k.

 

3.  Segment information

The Group has eleven reportable segments (Air Division - four regional businesses; Ground Division - four regional businesses; Global Services Division - two businesses combined as one reportable segment; the Associates Division - two businesses; and Central Costs), which are defined by markets rather than product type. Each segment includes businesses with similar operating and marketing characteristics. These segments are consistent with the internal reporting reviewed each month by the Group Chief Executive. Segment information is contained in full in the operational performance review and has not been reproduced here. Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 for separate reporting or are considered by the Board to be appropriately aggregated into reportable segments under IFRS 8.

 

Reconciliation of divisional to overall Group performance is tabulated below:  

 

 

2020

2019

 

 

Adjusted Revenue

Adjusted Gross profit

Statutory EBIT

Adjusted EBIT

Revenue

Gross profit (Restated*)

Statutory EBIT
(Restated*)

Adjusted EBIT
(Restated*)

US Air

1,875

1,875

17,354

1,854

1,875

1,875

1,815

1,815

Europe Air

31,284

2,062

(187)

(127)

46,314

2,336

(259)

(100)

Middle East Air

8,574

731

(36)

(36)

7,030

746

(601)

(601)

Asia Air

8,768

619

(234)

(175)

10,179

602

24

83

Air Division

50,501

5,287

16,897

1,516

65,398

5,559

979

1,197

US Ground

20,578

4,403

1,146

1,146

24,296

3,748

425

653

Europe Ground

18,490

4,844

(41)

(41)

27,321

11,359

3,610

6,203

Middle East Ground

1,476

262

(4,882)

(442)

2,266

963

71

71

Asia Ground

917

491

(13)

(13)

996

439

(163)

(163)

Ground Division

41,461

10,000

(3,790)

650

54,879

16,509

3,943

6,764

Global Services

1,768

1,405

(160)

(6)

1,508

1,081

93

219

Associates

-

-

(5,567)

(1,957)

-

-

252

252

Central Costs

-

-

(3,390)

(2,366)

-

-

(4,778)

(3,217)

Adjusted Result

93,730

 16,692

3,990

(2,163)

121,785

23,149

489

5,215

Adjusting items

-

-

-

6,153

-

-

-

(4,726)

Statutory result

93,730

 16,692

3,990

3,990

121,785

 23,149

489

489

                       

*Restatements are detailed in Note 2 of the notes to the interim financial statements.

 

4.  Alternative performance measures

 

The Adjusted result has been arrived at after the following Adjusting items:

 

 

Period ended 30 June 2020

Period ended 30 June 2019

Restated*

 

$'000

$'000

Exceptional items

 

 

Transaction costs

296

  100

Integration and business re-organisation

(3)

  906

Legal costs

324

  1,690

Total exceptional items

617

  2,696

Share-based payments expense

407

  336

Amortisation of intangible assets

273

  561

Impairment of right-of-use assets

-

  1,133

Impairment of assets under construction

4,440

-

Impairment of investment in associate

10,633

-

Accelerated branding fees

(15,500)

-

Profit on disposal of interest in associates

(7,023)

-

Adjusting items in EBIT

(6,153)

  4,726

Tax related to adjusting items

5,945

(493)

Adjusting items in profit

(208)

  4,233

 

Transaction costs

Transaction costs in the current year of $296k relate to prospective acquisitions. In the prior year, $100k was incurred in relation to aborted acquisitions.

 

Integration and business re-organisation costs

Integration and business re-organisation costs include:

· Fairoaks direct closure costs of nil (2019: $684k);

· Non-recurring expenditure related to property and facility re-organisation at Bournemouth and Farnborough of nil (2019: $222k)

 

Amortisation of intangible assets

Acquisition related intangible amortisation relates to acquired intangible assets (customer lists and brands) recognised as part of the accounting for business combinations $273k (2019: $375k) and amortisation arising on internally generated intangible assets, such as setting up new bases of operations in the US Ground business nil (2019: $186k).

 

Legal costs

Legal cost in the current and prior year principally relate to professional fees in relation to ongoing litigation in respect of legacy cases going back many years.

 

Impairment

Impairments comprise:

· An impairment charge of $10,633k has been recognised to reduce the equity accounted investment in CASL from the carrying amount of $13,046k to its recoverable amount of $2,413k. (2019: nil).

· An impairment charge of $4,440k has been recognised to reduce the Business Aviation Centre ("BAC") at Sharjah Airport to its recoverable amount following uncertainties related to the ongoing COVID-19 pandemic (2019: nil).  

· Fairoaks impairment of the right-of-use asset associated with the lease of nil (2019: $1,113k).

 

Accelerated branding fees and profit on disposal of interest in associates

See Note 7 for further details on the profit on disposal.

 

Tax related to adjusting items

On disposal of the US Air Associate there was a corporation taxation charge of $7,721k, which is included within the Corporation tax liability at 30 June 2020. In addition, a deferred taxation credit of $1,462k has been recognised on deferred revenue on the disposal, and this will be charged to deferred tax in future periods as the revenue is recognised.

 

 

Organic and constant currency growth

Organic and constant currency growth in Revenue, Gross Profit and EBIT is a measure which seeks to reflect the performance of the Group that will contribute to long-term sustainable growth. As such, organic and constant currency growth excludes the impact of acquisitions or disposals, and foreign exchange movements. Constant currency growth has been calculated using a constant foreign exchange rate of $1.26 to £1, being the cumulative average USD-GBP exchange rate for the first half of 2020 instead of the reported exchange rate of $1.29 to £1 for the first half of 2019. A reconciliation from the growth in reported revenue, gross profit and EBIT the most directly comparable IFRS measures, to the organic and constant currency growth is set out below.

 

Results of acquired and disposed businesses are excluded where the results include only part-year results in either current or prior periods. In the prior year, the paint and interior business acquired on 10 January 2019 ("Paint-Shop") was excluded in calculating organic growth. In the current year, the Paint-Shop is in all material respects comparable half on half and not adjusted for the purpose of organic growth. The US Air associate was sold on 2 March 2020 resulting in $78k of Adjusted EBIT in the current half prior to disposal and $29k Adjusted EBIT in the prior half, which in all material respects is comparable half on half and not adjusted for the purpose of organic growth.

 

 

 

 

2020

2019

 

Adjusted Revenue

% Constant currency growth

Revenue, as restated*

Rebase for FX

Rebased comparative revenue

US Air

  1,875

  - 

 1,875

  - 

 1,875

Europe Air

  31,284

  (31%) 

  46,314

  (1,176) 

45,138

Middle East Air

  8,574

  22% 

  7,030

  - 

  7,030

Asia Air

  8,768

  (14%) 

  10,179

  - 

  10,179

Air

  50,501

  (21%) 

  65,398

  (1,176) 

64,222

US Ground

  20,578

  (15%) 

  24,296

  24,296

Europe Ground

  18,490

  (31%) 

  27,321

  (694) 

26,627

Middle East Ground

  1,476

  (35%) 

  2,266

  - 

  2,266

Asia Ground

  917

  (8%) 

  996

  - 

  996

Ground

  41,461

  (23%) 

  54,879

  (694) 

54,185 

Global Services

  1,768

  20% 

  1,508

  (38) 

1,470

Total

  93,730

  (22%) 

  121,785

  (1,908) 

119,877

        

 

 

 

2020

2019

 

Adjusted Gross Profit

% Constant currency growth

Gross Profit, as restated*

Rebase for FX

Rebased comparative Gross Profit

US Air

  1,875 

  - 

  1,875 

  - 

  1,875 

Europe Air

  2,062 

  (9%) 

  2,336 

  (60) 

  2,276 

Middle East Air

  731 

  (2%) 

  746 

  - 

  746 

Asia Air

  619 

  3% 

  602 

  - 

  602 

Air

  5,287 

  (4%) 

  5,559 

  (60) 

  5,499 

US Ground

  4,403 

  17% 

  3,748 

  - 

  3,748 

Europe Ground

  4,844 

  (56%) 

  11,359

  (271) 

  11,088 

Middle East Ground

  262 

  (73%) 

  963 

  - 

  963 

Asia Ground

  491 

  12% 

  439 

  - 

  439 

Ground

  10,000 

  (38%) 

  16,509 

  (271) 

  16,238 

Global Services

  1,405 

  33% 

  1,081 

  (27) 

  1,054 

Total

  16,692 

  (27%) 

  23,149 

  (358) 

  22,791 

        

 

 

 

2020

2019

 

Adjusted EBIT

% Constant currency growth

Adjusted EBIT as restated*

Rebase for FX

Rebased comparative Adjusted EBIT

US Air

  1,854 

  2% 

  1,815 

  - 

  1,815 

Europe Air

  (127) 

  36% 

  (100) 

  3 

  (97) 

Middle East Air

  (36) 

  94% 

  (601) 

  - 

  (601) 

Asia Air

  (175) 

  (311%) 

  83 

  - 

  83 

 

 

 

 

 

 

Air

  1,516 

  26% 

  1,197 

  3 

  1,200 

US Ground

  1,146 

  75% 

  653 

  - 

  653 

Europe Ground

  (41) 

  (99%) 

  6,203 

  (158) 

  6,045 

Middle East Ground

  (442) 

  (722%) 

  71 

  - 

  71 

Asia Ground

  (13) 

  (92%) 

  (163) 

  - 

  (163) 

Ground

  650 

  (90%) 

  6,764 

  (158) 

  6,606 

Associates

  (1,957) 

  (876%) 

  252 

  - 

  252 

Central costs

  (2,366) 

  25% 

  (3,217) 

  82 

  (3,135) 

Global Services

  (6) 

(103%) 

  219 

  (6) 

  213 

Total

  (2,163) 

  (142%) 

  5,215 

  (79) 

  5,136 

        

 

 

Net Debt

A reconciliation of the IFRS financial statement line items that represent the Net Debt APM is tabulated below.

 

 

Jun-20

Dec-19

 

$'000

$'000

Cash

  18,088

8,463

Borrowings

(46,689)

(46,242)

Net Debt pre IFRS 16

(28,601)

(37,779)

Obligations under leases

(59,340)

(60,204)

Net Debt

(87,941)

(97,983)

 

 

 

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.

 

 

Earnings $m

Jun-20

Jun-19

Restated*

Numerator

Loss attributable to ordinary equity holders of the parent for basic earnings:

(4,180)

(1,854)

Adjusting items

(208)

4,233

Profit attributable to ordinary shareholders for Adjusted earnings

(4,388)

2,379

 

 

 

Denominator

 

 

Weighted average number of shares used in basic and diluted EPS

63,636,279

63,636,279

 

 

 

Earnings per share (cents)

 

 

Statutory - Basic and diluted

(6.6)

(2.9)

Adjusted - Basic and diluted

(6.9)

3.7

 

The average share price for the six months ended was lower than the exercise price of outstanding options and therefore there is no dilutive effect.

 

6.  Net cash generated by operating activities

 

 

Jun-20

Jun-19

 

$'000

$'000

Profit/ (loss) before tax

2,151

(1,560)

Adjustments for:

 

 

Finance income

(407)

-

Finance costs

  2,246

2,049

Depreciation - wholly owned assets

  1,793

1,572

Depreciation - ROU assets in admin expense

327

-

Depreciation - ROU assets in COS

7,127 

5,456

Amortisation of acquired intangible assets

273

561

Amortisation of other intangible assets

798

168

Impairment of right-of-use assets

  - 

1,133

Impairment loss

4,440

-

Utilisation of PPP Loan

(3,778)

-

Share of loss/(profit) of associates

  12,590

(252)

Profit on disposal of interest in associates

(7,023)

-

Share based payment expense

  407

336

Operating cash inflow before movements in working capital

  20,944

  9,463

Unrealised foreign exchange movements

(589)

(323)

Increase in inventories

(11)

(3,232)

Decrease/(increase) in receivables

4,442

(6,203)

Non-cash doubtful debt provision expense

  816

745

Decrease in payables

(15,831)

(7,867)

Increase in deferred revenue

  11,763

10,257

Increase in provisions

292

-

Cash generated by operations

  21,826

  2,840

Taxes paid

(18)

(633)

Net cash flows from operating activities

  21,808

  2,207

 

 

7.  Disposal of assets held for sale

 

On 2 March 2020 the Group announced the sale of its US Air associate, Gama Aviation LLC (doing business as "Gama Aviation Signature") to Wheels Up Partners Holdings LLC ("Wheels Up"). Gama Aviation Signature was owned 49% by GB Aviation Holdings LLC, a joint venture between the Group and Signature Aviation Plc, with the remaining 51% held by the Group's US partners.

 

Gama Aviation received consideration of $33.0m, comprising $10.0m in return for its 24.5% equity interest and $23.0m for licencing and other trading related considerations. $13.0m of the consideration was received in cash at closing, with the remaining $20.0m to be paid in cash, with interest of $2,774k, in eight equal six-month instalments over the next four years.

 

The $20.0m of deferred consideration is recognised as a financial asset and is measured at amortised cost. The effective interest rate of this financial asset is 6.0%, which results in the recognition of finance income of $403k in the income statement for the 6 months ending 30 June 2020.

 

Included within trade & other receivables at 30 June 2020 is deferred consideration of $20,403k, with $4,755k in current asset and $15,648k in non-current assets. Included within deferred revenue at 30 June 2020 is licencing and other trading related considerations of $6,250k, with $3,750k in current liabilities and $2,500k in non-current liabilities.

 

As part of the transaction, GB Aviation Holdings LLC has licensed the continued use of the Gama Aviation Signature brand for up to two years, for which $7.5m of consideration has been allocated and will be recognised as revenue over the two year period. Post disposal, $1.25m has been recognised as revenue for this licencing component in the first half of 2020, in line with the $3.75m annual licence fee prior to disposal. In addition, an accelerated branding fee of $15.5m has been recognised in adjusting items.

 

 

Period
ended
June 30 2020
$'000

Cash received

13,000

Fair value of deferred consideration

20,000

Total discounted consideration receivable at the transaction date

33,000

Less:  Branding fees and other trading related considerations

23,000

Gross proceeds on disposal

10,000

Add: Closing working capital, cash and indebtedness adjustments

591

Less: Transaction costs

(892)

Proceeds on disposal of assets held for sale, net of transaction costs

9,699

 

 

Assets held for sale at 31 December 2019

2,598

Share of profit of equity accounted investments prior to disposal

78

Carrying amount of net assets sold

2,676

 

 

Gain on sale before taxation

7,023

 

Following on from the judgement communicated at the time of announcing the disposal, Note 35 to the Group's 2019 Annual Report and Accounts stated that this transaction was expected to be accretive to underlying earnings to FY2020 and FY2021 as well as resulting in a one-off profit on disposal of the Group's equity interest. The Board has now concluded, after consultation with the Group's external auditors PwC, that it is more appropriate only to recognise in Adjusted EBIT for 2020 and 2021 the pre-existing level of branding fee of $3.75m per year (total $7.5m), and to treat the remaining $15.5m relating to accelerated branding fees and other trading items as an adjusting revenue item in the 2020 first half results given its material one-off and non-recurring nature. Adjusted EBIT will continue to reflect branding fee for a two year period. Given the nature of the agreement and the continuing operational and financial uncertainties resulting from the COVID-19 pandemic it is now extremely difficult to assess whether or not the transaction will be accretive to earnings in FY20 and FY21. Notwithstanding the above, the economic substance and the cashflows of the transaction remain unchanged. Refer to Note 7 for further details on the disposal.

 

 

 

 

 

 

8.  Goodwill 

 

 

$'000

Cost

 

At 31 December 2019

  46,520

Exchange differences

(2,590)

At 30 June 2020

  43,930

 

 

Accumulated impairment losses

 

At 31 December 2019

(24,770)

Exchange differences

  1,235

At 30 June 2020

(23,535)

 

 

Carrying amount

 

At 30 June 2020

20,395

At 31 December 2019

21,750

 

 

 

The recoverable amount of goodwill is allocated to the following cash generating units ("CGUs"):

 

 

Jun-2020
$'000

Dec-2019
$'000

US: Ground

  787

  787

Europe: Ground

  19,608

  20,963

 

  20,395

  21,750

 

 

As a result of the ongoing COVID-19 pandemic in first half of 2020, the Group performed an impairment review to determine whether recoverable amounts of the two CGUs above exceeded the carrying amount.

 

Considering the sensitivity to changes in assumptions and noting that the recoverable amount of all CGUs exceed the carrying amount, no impairment has been recognised.

 

 

 

 

 

 

9.  Intangible fixed assets

 

Commence operations

Part 145 approvals

Licence and brands

 Customer relationships

 Computer software

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

Cost

 

 

 

 

 

 

At 1 January 2020

 1,481

 3,442

 1,605

 15,479

 7,334

 29,341

Additions

    -

 -

-

-

 1,262

 1,262

Write off

(1,481)

(3,442)

-

-

-

(4,923)

Foreign exchange differences

-

-

(4)

(40)

(515)

(559)

At 30 June 2020

-

  -

  1,601

  15,439

  8,081

  25,121

 

 

 

 

 

 

 

Amortisation and accumulated impairment losses

 

 

 

 

 

 

At 1 January 2020

  (1,481)

  (3,442)

  (1,549)

  (12,204)

  (517)

  (19,193)

Charge through adjusting items

-

-

(118)

(155)

-

(273)

Charge through adjusted result

-

-

-

-

(798)

(798)

Write off

 1,481

 3,442

-

-

-

4,923

FX

 -

-

113

(88)

98

123

At 30 June 2020

-

  -

  (1,554)

  (12,447)

  (1,217)

  (15,218)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Amount

 

 

 

 

 

 

At 30 June 2020

  - 

  - 

  47

  2,992

  6,864

  9,903

At 31 December 2019

-

-

56

3,275

6,817

10,148

 

 

 

Customer relationship assets are amortised over their useful economic lives estimated to be ten years.

 

Licences and brands (which include protected intellectual property) are amortised over their useful economic lives estimated

to be ten years. There are no individually material items within this balance.

 

Commence operations and part 145 approvals are legacy intangible balances comprising internally generated costs which are fully amortised and have been written-off in the current period.

 

Computer software costs comprise internally developed software costs arising in the Group's myairops business as well as purchased software, such as operational and financial systems. All costs are amortised over their useful economic lives estimated to be between three and five years. The carrying value of internally developed software within this balance is $5,550k (31 December 2019: $5,310k).

 

 

 

 

10.  Property, plant and equipment

 

 

Leasehold property

Aircraft hull and refurbishments

Fixtures, fittings and equipment

Motor vehicles

 

 

 

Helicopters

Asset under construction

Total

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Cost

 

 

 

 

 

 

 

Balance at 1 January 2020

15,302

9,142

9,516

2,735

 

-

12,914

49,609

Additions

1,659

1,384

19

18,343

273

21,678

Capitalised interest

-

-

-

-

 

176

-

176

Transfer

-

-

-

-

8,194

(8,194)

-

Foreign Exchange Difference

  352

(858)

1,293

(36)

 

(446)

(553)

(248)

At 30 June 2020

17,313

 8,284

12,193

2,718

26,267

4,440

71,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Depreciation & impairment

 

 

 

 

 

 

 

Balance at 1 January 2020

(5,077)

(2,252)

(5,571)

(1,385)

 

-

  - 

(14,285)

Charge for the year

(462)

(239)

(770)

(248)

 

(74)

  - 

(1,793)

Impairment

  -

  -

  -

  -

  -

(4,440)

(4,440)

Foreign Exchange Difference

(761)

206

(1,784)

32

 

-

 - 

(2,307)

At 30 June 2020

(6,300)

(2,285)

(8,125)

(1,601)

 

(74)

(4,440) 

(22,825)

 

 

Carrying amount

At 30 June 2020

  11,013

  5,999

  4,068

  1,117

  26,193

  -

   48,390

At 31 December 2019

10,225

6,890

  3,945

 1,350

  - 

12,914

 35,324

         

 

Helicopters

As previously reported deployment of the helicopters occurred on 1st June 2020 in support of a long-term contract. As a result, helicopters have been transferred from assets under construction into the helicopters asset class within property, plant and equipment.  They have been brought into use and depreciated from 1 June 2020.

 

 

 

 

11.  Obligations under leases

 

The Group leases many assets including property, aircraft, vehicles, fixtures, fittings and equipment. Information about leases for which the Group is a lessee is presented below.

 

 

Leasehold property

Aircraft

Fixtures, fittings and equipment

Total

 Right-of-use assets

$'000

$'000

$'000

$'000

$'000

Cost

 

 

 

 

 

Balance at 1 January 2020

51,596

19,118

72

 

205

70,991

Additions

6,727

-

-

-

6,727

Foreign Exchange Difference

 

(2,077)

 

(1,245)

 

(4)

 

(13)

 

(3,339)

At 30 June 2020

56,246

17,873

68

192

74,379

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Depreciation

 

 

 

 

 

Balance at 1 January 2020

 (8,270)

 (10,285)

 (46)

 (75)

(18,676)

Charge for the year-admin

(290)

-

(16)

(21)

(327)

Charge for the year-cost of sales

(2,638)

 (4,469)

 - 

(20)

(7,127)

Foreign Exchange Difference

173

805

2

7

987

At 30 June 2020

(11,025)

(13,949)

(60)

(109)

(25,143)

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

At 30 June 2020

45,221

3,924

8

83

49,236

At 31 December 2019

43,326

8,833

26

130

52,315

 

 

 

Leasehold property

Aircraft

Fixtures, fittings and equipment

Total

 Obligations under leases

$'000

$'000

$'000

 

$'000

$'000

Cost

 

 

 

 

 

Balance at 1 January 2020

47,817

12,228

20

139

60,204

Additions

6,727

 - 

 - 

 - 

6,727

Finance expense

1,250

124

-

2

1,376

Lease payments

(3,056)

(1,972)

(3)

(6)

(5,037)

Foreign Exchange Difference

(2,342)

(1,577)

34

(45)

(3,930)

At 30 June 2020

50,396

8,803

51

90

59,340

 

 

 

 

 

 

At 30 June 2020

 

 

 

 

 

Accruals for lease payments

1,376

4,739

44

-

6,159

Lease liabilities

5,648

3,451

5

65

9,169

Current

7,024

8,190

49

65

15,328

Non-current

43,372

613

2

25

44,012

Total

50,396

8,803

51

90

59,340

 

 

Additions relate to two new property leases;

· A land lease at Inverness airport which commenced on 1 January 2020, for a 23 year lease term. Construction of a helipad, office building and hangar building at the airport has commenced to service the Group's SAS contract.

· The Group entered into an additional property lease which serves as the new UK headquarters.

 

In June 2017 the Group entered into a non-cancellable Build-Operate-Transfer and Service Concession agreement with Sharjah Airport Authority under which the Group is committed to construct a Business Aviation Centre ("BAC") at Sharjah Airport. The agreement runs from June 2017 until June 2042 with a ten-year extension option to June 2052. The 10-year extension has not been formalised at the date of signing the financial statements. The lease term for IFRS 16 accounting purposes has not included the 10-year extension because the option to extend is not reasonably certain. The lease liability has been discounted at an incremental borrowing rate of 7.3%. The Sharjah BAC includes a $7,209k right-of-use asset and $7,636k obligation under leases at 30 June 2020.

 

12.  Borrowings

 

June-2020
$'000

Dec-2019
Restated*
$'000

Secured borrowing at amortised cost

 

 

Other loans

112

  1,475

Bank borrowings

  44,605

44,767

Paycheck Protection Program Loan

  1,972

  - 

 

  46,689

  46,242

 

 

 

Total borrowings

 

 

Other loans

112

  848

Bank borrowings

  44,605

  44,767

Payment Protection Program Loan

  1,972

-

Amount due for settlement within 12 months

  46,689

  45,615

Other loans

-

627

Amount due for settlement after 12 months

-

627

* Restatements are detailed in Note 2.

 

The Paycheck Protection Program (PPP) loan is a loan arrangement from Citi bank guaranteed by the US government for COVID-19 support. $5,750k funds were received on 12 May 2020 and during the period to 30 June 2020 $3,778k has been used against what the company has deemed to be qualifying expenditure reducing the amount of borrowings at the period end to $1,972k. The loan is forgivable if used for payroll costs and other qualifying expenditure within a 24-week period from the date funds were received.  Any amounts unused or that do not meet the definition of qualifying expenditure within the 24-week period will need to be repaid along with any incurred interest which accrues from the date the funds are received. The loan matures on 8th May 2022 and has been presented as current on the basis that settlement, via forgiveness, is expected within 12 months from the balance sheet date.

 

13.  Related party transactions

 

China Aircraft Services Limited

 

China Aircraft Services Limited (CASL) is an associate in which the Group owns a 20% equity interest. As at 30 June 2020 there were amounts owed to CASL of $2,340k (2019: $3,344k) and amounts due of $1,248k (2019: $4,224k).

 

Merritt Property LLC

 

As reported in the 2018 Annual Report, in January 2017 the Group entered into a Termination Agreement (the "Agreement") with Gama Aviation LLC. The Agreement brought the previous branding agreement between the Group and Gama Aviation LLC to a close at the same time as the Group entered into a new branding agreement with GB Aviation Holdings LLC. The Termination Agreement made provision for a final payment from Merritt Property LLC (which was a 39% owner of Gama Aviation LLC at the time) to the Group of $1.0m in lieu of branding fees forgone. On 2 March 2020, the Group received cash consideration of $1m to settle the full amount due.

 

14.  Dividends

 

The Directors do not propose a dividend to be paid for the six months to 30 June 2020 (30 June 2019: nil).

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