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Avation PLC (AVAP)

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Monday 29 June, 2020

Avation PLC

Third Quarter Report

RNS Number : 2900R
Avation PLC
29 June 2020
 

AVATION PLC

("Avation" or "the Company")

 

Financial Results for the Nine MONTHS ended 31 March 2020

 

Avation PLC (LSE: AVAP), the commercial passenger aircraft leasing company, announces unaudited financial results for the nine months ended 31 March 2020.

Key Financial Results

· Revenue increased by 14% to $99.6 million;

· Profit before tax increased by 173% to $46.6 million;

· Profit after tax increased by 151% to $38.3 million;

· Earnings per share increased by 152% to 60.6 cents; and

· Net asset value per share increased by 10% to £3.24.

 

Executive Chairman, Jeff Chatfield, said:

"Avation is pleased to present its unaudited financial results for the nine months ended 31 March 2020. Revenue from the aircraft leasing business grew steadily throughout the first nine months of the year and the Company is in a strong financial position.

"The Company is releasing these unaudited interim accounts to provide investors with an up to date report on the business as we progress through the COVID-19 pandemic. This one-off presentation was undertaken to provide updated information about Avation's position at a time of uncertainty in financial markets.

"Immediately at the outset of the COVID-19 pandemic Avation instituted a programme of support for some of its airline customers to defer for later payment certain portions of their rent in the short term. The cashflow impact of this support programme has been mitigated by adjusting the amortisation profiles of the relevant financings with the agreement of lenders. Since the outbreak of COVID-19 the Company has also reduced administration costs and has instituted a pause on capital expenditure with the goal of maximising cashflow.

"Avation has a strong cash balance of $131.6 million as at 31 March 2020. The Company is fortunate that some of its largest customers are in countries where there has been comparatively lower impact from the pandemic. We are now observing a gradual return to service of certain customers including VietJet, airBaltic, EVA Air and Mandarin Airlines which presently represent over 60% of Avation's future unearned contracted leasing revenue.

"Avation is optimistic about the long term opportunity for airline travel particularly the turboprop and narrow-body aircraft sectors. "

  Aircraft Fleet

Aircraft Type

31 March 2020

Boeing 777-300ER

1

Airbus A330-300

1

Airbus A321-200

7

Boeing 737-800NG

1

Airbus A320-200

2

Airbus A220-300

6

Fokker 100

2

ATR 72-600

22

ATR 72-500

6

Total

48

 

 

9 mths to
31 Mar 2020
US$ 000's

9 mths to
31 Mar 2019
US$ 000's

 

Change

 

Revenue

99,595

87,191

14%

Depreciation

(35,502)

(29,963)

18%

 

Administrative expense

(9,551)

(8,226)

16%

%

Other income and expenses (net)

(395)

(20)

 

Operating Profit excluding Unrealised gain on purchase rights, Gains on disposal and impairment loss on aircraft

54,147

48,982

11%

Finance expenses (net of finance income)

41,823

38,437

9%

Profit before tax excluding Unrealised gain on purchase rights, Gains on disposal of aircraft and Impairment loss on aircraft

12,324

10,545

17%

Unrealised gain on aircraft purchase rights

40,990

-

 

Gains on disposal of aircraft

3,530

6,543

 

Impairment loss on aircraft

(10,223)

-

 

Profit before taxation

46,621

17,088

173%

Taxation

(8,294)

(1,814)

 

Total profit after tax

38,327

15,274

151%

EPS

60.6 cents

24.0 cents

152%

Dividends per share

2.1 cents

2.0 cents

5%

 

 

 

 

 

As at
31 Mar 2020
US$ 000's

As at
30 June 2019
US$ 000's

 

Fleet assets (1)

1,279,586

1,269,682

1%

Total assets

1,475,190

1,392,750

6%

Cash and bank balances

131,610

107,448

22%

 

 

 

 

Net asset value per share (US$) (2)

$4.01

$3.74

7%

Net asset value per share (GBP) (3)

£3.24

£2.95

10%

 

 

1.  Fleet assets are defined as property, plant and equipment plus assets held for sale plus finance lease receivables.

2.  Net asset value per share is total equity divided by the total number of shares in issue, excluding treasury shares, at period end.

3.  Based on GBP:USD exchange rate as at 31 March 2020 of 1.24 (30 June 2019 : 1.27)

 

 

Forward Looking Statements

This release contains certain "forward looking statements". Forward looking statements may be identified by words such as "expects," "intends," "anticipates," "plans," "believes," "seeks," "estimates," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for Avation's future business and financial performance. Forward looking statements are based on management's current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks. Further information on the factors and risks that may affect Avation's business is included in Avation's regulatory announcements from time to time, including its Annual Report, Full Year Financial Results and Half Year Results announcements. Avation expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.

 

-ENDS -

Enquiries:

Avation PLC - Jeff Chatfield, Executive Chairman  +65 6252 2077

 

Avation welcomes shareholder questions and comments and advises the email address is: [email protected]

 

More information on Avation is available at www.avation.net.

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE NINE MONTHS ENDED 31 MARCH 2020

 

Note

31 Mar

2020

 

31 Mar

2019

 

 

 

US$'000s

US$'000s

Continuing operations

 

 

 

Revenue

5

99,595

87,191

Other income

6

1,014

212

 

 

100,609

87,403

 

 

 

 

Depreciation

11

(35,502)

(29,963)

Gain on disposal of aircraft

11

3,530

6,543

Unrealised gain on aircraft purchase rights

16

40,990

-

Impairment loss on aircraft

11,18

(10,223)

-

Administrative expenses

 

(9,551)

(8,226)

Other expenses

7

(1,409)

(232)

Operating profit

 

88,444

55,525

 

 

 

 

Finance income

8

929

3,024

Finance expenses

9

(42,752)

(41,461)

Profit before taxation

 

46,621

17,088

 

 

 

 

Taxation

 

(8,294)

(1,814)

Profit from continuing operations

 

38,327

15,274

 

 

 

 

Profit attributable to:

 

 

 

Equity holders of the Company

 

38,326

15,273

Non-controlling interests

 

1

1

 

 

38,327

15,274

Earnings per share for profit

attributable to equity holders of the Company

 

 

 

Basic earnings per share

 

60.58 cents

24.00 cents

Diluted earnings per share

 

60.21 cents

23.93 cents

 

 

 

 

 

 

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED 31 MARCH 2020

 

Note

31 Mar

2020

31 Mar

2019

 

 

US$'000s

US$'000s

 

Profit from continuing operations

 

38,327

15,274

 

 

 

 

Other comprehensive income:

 

 

 

Items may be reclassified subsequently to profit or loss:

 

 

 

Net loss on cash flow hedge

 

(10,979)

(7,695)

 

 

(10,979)

(7,695)

Items may not be reclassified subsequently to profit or loss:

 

 

 

Revaluation loss on property, plant and equipment, net of tax

 

(3,924)

-

Other comprehensive income, net of tax

 

(14,903)

(7,695)

 

 

 

 

Total comprehensive income for the period

 

23,424

7,579

 

 

 

 

Total comprehensive income attributable to:

 

 

 

Equity holders of the Company

 

23,423

7,578

Non-controlling interests

 

1

1

 

 

23,424

7,579

 

 

 

 

 

 

 

 

 

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2020

 

Note

31 Mar

2020

30 June

2019

 

 

US$'000s

US$'000s

ASSETS:

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

11

1,089,513

1,225,324

Trade and other receivables

12

11,710

8,930

Finance lease receivables

13

85,400

37,137

Goodwill

14

1,902

1,902

Derivative financial assets

15

-

363

Aircraft purchase rights

16

40,990

-

 

 

1,229,515

1,273,656

Current assets

 

 

 

Trade and other receivables

12

9,392

4,425

Finance lease receivables

13

7,315

7,221

Cash and bank balances

17

131,610

107,448

 

 

148,317

119,094

Assets held for sale

18

97,358

-

 

 

245,675

119,094

Total assets

 

1,475,190

1,392,750

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

Equity

 

 

 

Share capital

19

1,108

1,104

Share premium

 

57,747

56,912

Treasury shares

19

(7,811)

(1,147)

Merger reserve

 

6,715

6,715

Asset revaluation reserve

 

30,468

34,392

Capital reserve

 

8,876

8,876

Other reserves

 

(22,560)

(11,809)

Retained earnings

 

177,000

145,644

Equity attributable to equity holders of the parent

 

251,543

240,687

Non-controlling interest

 

71

70

Total equity

 

251,614

240,757

 

 

 

 

Non-current liabilities

 

 

 

Loans and borrowings

20

1,004,184

1,005,693

Trade and other payables

 

18,870

16,091

Derivative financial liabilities

15

25,939

10,174

Maintenance reserves

21

52,939

31,325

Deferred tax liabilities

 

7,832

179

 

 

1,109,764

1,063,462

Current liabilities

 

 

 

Loans and borrowings

20

78,078

72,595

Trade and other payables

 

17,902

11,964

Maintenance reserves

21

6,234

1,166

Income tax payables

 

1,315

2,806

 

 

103,529

88,531

Liabilities directly associated with assets held for sale

18

10,283

-

 

 

113,812

88,531

Total equity and liabilities

 

1,475,190

1,392,750

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to shareholders of the parent

 

Note

Share capital

Share

premium

Treasury

Shares

Merger reserve

Asset revaluation reserve

Capital reserve

Other

reserves

Retained earnings

Total

Non-controlling interest

Total

equity

 

 

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2019

 

1,104

56,912

(1,147)

6,715

34,392

8,876

(11,809)

145,644

240,687

70

240,757

Effect of adoption of IFRS 16 Leases

 

3b

 

-

 

-

 

-

 

 

 

-

 

-

 

-

 

(199)

 

(199)

 

-

 

(199)

As at 1 July 2019 (adjusted)

 

1,104

56,912

(1,147)

6,715

34,392

8,876

(11,809)

145,445

240,488

70

240,558

Profit for the period

 

-

-

-

-

-

-

-

38,326

38,326

1

38,327

Other comprehensive income

 

-

-

-

-

(3,924)

-

(10,979)

-

(14,903)

-

(14,903)

Total comprehensive income

 

-

-

-

-

(3,924)

-

(10,979)

38,326

23,423

1

23,424

Dividends paid

24

-

-

-

-

-

-

-

(6,773)

(6,773)

-

(6,773)

Issue of new shares

19

4

835

-

-

-

-

(69)

-

770

-

770

Purchase of treasury shares

19

-

-

(6,664)

-

-

-

-

-

(6,664)

-

(6,664)

Share warrant expense

 

-

-

-

-

-

-

299

-

299

-

299

Total transactions with owners recognised directly in equity

 

 

4

 

835

 

(6,664)

 

-

 

-

 

-

 

230

 

(6,773)

 

(12,368)

 

-

 

(12,368)

Expiry of share warrants

 

-

-

-

-

-

-

(2)

2

-

-

-

Total others

 

-

-

-

-

-

-

(2)

2

-

-

-

Balance at 31 March 2020

 

1,108

57,747

(7,811)

6,715

30,468

8,876

(22,560)

177,000

251,543

71

251,614

 

 

 

 

 

 

 

 

 

 

 

 

 

                               

AVATION PLC

CONDENSED   CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED 31 MARCH 2020

 

Other reserves consist of capital redemption reserve, warrant reserve, fair value reserve and foreign currency translation reserve.

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE NINE MONTHS ENDED 31 MARCH 2019

 

 

 

 

 

 

 

 

 

 

 

Attributable to shareholders of the parent

 

Note

Share capital

Share

premium

Treasury

Shares

Merger reserve

Asset revaluation reserve

Capital reserve

Other

reserves

Retained earnings

Total

Non-controlling interest

Total

equity

 

 

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2018

 

1,080

53,083

-

6,715

27,847

8,876

6,389

124,119

228,109

69

228,178

Profit for the period

 

-

-

-

-

-

-

-

15,273

15,273

1

15,274

Other comprehensive income

 

-

-

-

-

-

-

(7,695)

-

(7,695)

-

(7,695)

Total comprehensive income

 

-

-

-

-

-

-

(7,695)

15,273

7,578

1

7,579

Dividends paid

24

-

-

-

-

-

-

-

(5,840)

(5,840)

-

(5,840)

Issue of new shares

19

24

3,829

-

-

-

-

(628)

-

3,225

-

3,225

Purchase of treasury shares

19

-

-

(380)

-

-

-

-

-

(380)

-

(380)

Share warrant expense

 

-

-

-

-

-

-

206

-

206

-

206

Total transactions with owners recognised directly in equity

 

 

24

 

3,829

 

(380)

 

-

 

-

 

-

 

(422)

 

(5,840)

 

(2,789)

 

-

 

(2,789)

Expiry of share warrants

 

-

-

-

-

-

-

(31)

31

-

-

-

Total others

 

-

-

-

-

-

-

(31)

31

-

-

-

Balance at 31 March 2019

 

1,104

56,912

(380)

6,715

27,847

8,876

(1,759)

133,583

232,898

70

232,968

                

 

 

AVATION PLC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED 31 MARCH 2020

 

Note

31 Mar

2020

31 Mar

2019

 

 

 

 

 

 

US$'000s

US$'000s

Cash flows from operating activities:

 

 

 

Profit before taxation

 

46,621

17,088

Adjustments for:

 

 

 

  Depreciation expense

11

35,502

29,963

  Depreciation of right-of-use assets

 

163

-

  Share warrants expense

 

299

206

  Impairment loss on aircraft

11,18

10,223

-

  Expected credit loss on trade receivables

 

162

-

  Fair value gain on investments

 

-

(104)

  Gain on disposal of aircraft

 

(3,530)

(6,543)

  Unrealised gain on aircraft purchase rights

 

(40,990)

-

  Interest income on finance leases

5

(2,290)

(948)

  Finance income

8

(929)

(3,024)

  Finance expense

9

42,752

41,461

  Operating cash flows before working capital changes

 

87,983

78,099

Movement in working capital:

 

 

 

  Trade and other receivables and finance lease receivables

 

4,367

(8,922)

  Trade and other payables

 

3,530

1,021

  Maintenance reserves

 

26,817

5,195

  Cash from operations

 

122,697

75,393

Interest income received

 

2,591

2,182

Interest expense paid

 

(33,076)

(31,542)

Income tax paid

 

(1,792)

(2,782)

Net cash from operating activities

 

90,420

43,251

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchase of property, plant and equipment

 

(58,592)

(169,110)

Proceeds from disposal of aircraft

 

-

54,274

Purchase of investment

 

-

(10,000)

Net cash used in investing activities

 

(58,592)

(124,836)

 

 

 

 

Cash flows from financing activities:

 

 

 

Net proceeds from issuance of ordinary shares

 

770

3,225

Dividends paid to shareholders

24

(6,773)

(5,840)

Purchase of treasury shares

 

(6,664)

(380)

Placement of restricted cash balances

 

(26,118)

(7,240)

Proceeds from loans and borrowings, net of transactions costs

 

76,530

210,805

Repayment of loans and borrowings

 

(71,529)

(79,976)

Net cash (used in)/from financing activities

 

(33,784)

120,594

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(1,956)

39,009

Cash and cash equivalents at beginning of financial period

 

61,689

57,950

Cash and cash equivalents at end of financial period

17

59,733

96,959

 

 

AVATION PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED 31 MARCH 2020

 

This interim condensed consolidated financial statements for Avation PLC for the nine months ended 31 March 2020 were authorised for issue in accordance with a resolution of the Directors on 26 June 2020.

 

1  CORPORATE INFORMATION

 

Avation PLC is a public limited company incorporated in England and Wales under the Companies Act 2006 (Registration Number 05872328) and is listed as a Standard Listing on the London Stock Exchange.

 

The Group's principal activity is aircraft leasing. 

 

 

2  BASIS OF PREPARATION AND ACCOUNTING POLICIES

 

These interim condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Conduct Authority and in accordance with International Accounting Standard (IAS) 34 'Interim Reporting'.

 

The interim condensed consolidated financial statements do not include all the notes of the type normally included within the annual report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financial and investing activities of the consolidated entity as the annual report.

 

It is recommended that the interim condensed consolidated financial statements be read in conjunction with the annual report for the year ended 30 June 2019 and considered together with any public announcements made by Avation PLC during the nine months ended 31 March 2020.

 

The accounting policies and methods of computation are the same as those adopted in the annual report for the year ended 30 June 2019 except for the changes in accounting estimates of residual values of aircraft (see note 11) and the adoption of new accounting standards effective as of 1 July 2019. 

 

The Group has applied IFRS 16 Leases for the first time in these interim condensed consolidated financial statements.  As required by IAS 34, the nature and effect of these changes are disclosed in Note 3b.

 

Several other amendments and interpretations which apply for the first time in the nine months ended 31 March 2020 do not have an impact on the Group's interim condensed consolidated financial statements.

 

The preparation of the interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported income and expenses, assets and liabilities and disclosure of contingencies at the date of the Interim Report, actual results may differ from these estimates.

 

The statutory financial statements of Avation PLC for the year ended 30 June 2019, which carried an unqualified audit report, have been delivered to the Registrar of Companies and did not contain any statements under section 498 of the Companies Act 2006.

 

The interim condensed consolidated financial statements are unaudited.

 

The interim condensed consolidated financial statements do not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

 

 

 

3         NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2019

 

(a) New standards and interpretations not applied

 

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements.

 

The Group intends to apply these standards and interpretations when they become effective.

 

International Accounting Standards (IAS/IFRS)  Effective Date

   (accounting periods

 commencing after)

 

Amendments to IAS 1 : Classification of liabilities as Current or

  Non-current                                                                                      1 January 2022

 

IFRS 17 Insurance contracts                                                                 1 January 2021

 

Amendments to References to the Conceptual Framework in

  IFRS Standards   1 January 2020

 

Amendments to IFRS 9, IAS 39 and IFRS 7 : Interest Rate

  Benchmark Reform                                                                            1 January 2020

 

Amendments to IFRS 3 : Definition of a Business                                   1 January 2020

 

Amendments to IAS 1 and IAS 8 : Definition of Material                         1 January 2020

 

Amendments to IFRS 10 and IAS 28 Sale or contribution of assets

between an investor and its associates or joint venture                           To be determined

 

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the Group in future periods.

 

(b)  Standard in effect in 2019

 

The Group has adopted all new standards that have come into effect during the nine months ended 31 March 2020.

 

IFRS 16 Leases

 

The Group adopted IFRS 16 Leases on 1 July 2019.  The changes in accounting policies are as follows:

 

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet.

 

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.

 

 

 

NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2019 (continued) 

 

(b)  Standard in effect in 2019 (continued)

 

The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 July 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application as an adjustment to the opening balance of retained earnings and the comparative figures are not re-stated.  The Group elected to use the transition practical expedient to not reassess whether a contract is, or contains a lease at 1 July 2019.  Instead, the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application.

 

The effect of adoption IFRS 16 as at 1 July 2019 (increase/(decrease) is, as follows:

 

 

US$'000s

Assets:

 

Right-of-use assets

945

Total assets

945

Liabilities:

 

Lease liabilities

1,144

Total liabilities

1,144

Total adjustment on equity:

 

Retained earnings

(199)

 

(199)

 

 

The Group has lease contracts for offices. Before the adoption of IFRS 16, the Group classified these leases (as lessee) as operating leases.  The Group did not have short-term leases and leases of low-value assets before the adoption of IFRS 16.

 

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases.  The standard provides specific transition requirements and practical expedients, which have been applied by the Group.

 

Leases previously accounted for as operating leases

The Group recognised right-of-use assets and lease liabilities for lease contracts for offices previously classified as operating leases. The right-of-use assets for most leases were recognised based on the carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. In some leases, the right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the weighted average of cost of debt of the Group of 4.6% at the date of initial application

 

The Group also applied the available practical expedients wherein it:

· Used a single discount rate to a portfolio of leases with reasonably similar characteristics

· Relied on its assessment of whether leases are onerous immediately before the date of initial application

·Applied the short-term leases exemptions to leases with lease term that ends within 12 months of the date of initial application

·   Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application

·    Used hindsight in determining the lease term where the contract contained options to extend or terminate the lease

 

 

NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2019 (continued) 

 

(b)  Standard in effect in 2019 (continued)

 

The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019, as follows:

 

US$'000s

 

 

Operating lease commitments as at 30 June 2019

1,278

Weighted average of cost of debt as at 1 July 2019

4.6%

Discounted operating lease commitments and lease liabilities as

at 1 July 2019

1,144

 

 

 

Amendments to IAS 28: Long-term interests in associates and joint ventures

 

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests. 

 

The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28 Investments in Associates and Joint Ventures.

 

These amendments had no impact on the consolidated financial statements as the Group does not have long term interests in its associate and joint venture.

 

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

 

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:

 

Whether an entity considers uncertain tax treatments separately

The assumptions an entity makes about the examination of tax treatments by taxation authorities

How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

How an entity considers changes in facts and circumstances

 

The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.

 

The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements.

 

Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company's and the subsidiaries' tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The Interpretation did not have an impact on the consolidated financial statements of the Group.

 

 

NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2019 (continued) 

 

(b)  Standard in effect in 2019 (continued)

 

Annual Improvements 2015-2017 Cycle

 

IFRS 3 Business Combinations

 

The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation.

 

An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted.

 

These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained.

 

IFRS 11 Joint Arrangements

 

An entity that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined in IFRS 3.

 

The amendments clarify that the previously held interests in that joint operation are not remeasured.

 

An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early application permitted.

 

These amendments had no impact on the consolidated financial statements of the Group as there is no transaction where joint control is obtained.

 

IAS 12 Income Taxes

 

The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity recognises the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where it originally recognised those past transactions or events.

 

An entity applies the amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted. When the entity first applies those amendments, it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.

 

Since the Group's current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

 

 

 

NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2019 (continued)

 

(b)  Standard in effect in 2019 (continued)

 

Annual Improvements 2015-2017 Cycle (continued)

 

IAS 23 Borrowing Costs

 

The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete.

 

The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 January 2019, with early application permitted.

 

Since the Group's current practice is in line with these amendments, they had no impact on the consolidated financial statements of the Group.

 

(c)  New accounting policies

 

These accounting policies are applied on and after the initial application date of IFRS 16:

 

Group as a lessee

 

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

 

i)  Right-of-use assets

 

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

 

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

 

The right-of-use assets are also subject to impairment.

 

The Group's lease arrangements do not contain an obligation to dismantle and remove the underlying asset, restore the site on which it is located or restore the underlying asset to a specified condition.

 

The Group's right-of-use assets are included in trade and other receivables.

 

 

NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2019 (continued)

 

(c)  New accounting policies (continued)

 

ii)  Lease liabilities

 

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.

 

Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs.

 

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

 

The Group's lease liabilities are included in trade and other payables.

 

iii)  Short-term leases and leases of low-value assets

 

The Group applies the short-term lease recognition exemption to its short-term leases of equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value.

 

Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term.

 

 

 

4  FAIR VALUE MEASUREMENT

 

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

The carrying amounts of cash and cash equivalents, trade and other receivables, finance lease receivables - current, trade and other payables - current, loans and borrowings - current and lease liabilities- current are a reasonable approximation of fair value either due to their short-term nature or because the interest rate charged closely approximates market interest rates or that the financial instruments have been discounted to their fair value at a current pre-tax interest rate.

 

 

31 Mar 2020

30 Jun 2019

 

Carrying amount

Fair value

Carrying amount

Fair value

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Financial assets:

 

 

 

 

Finance lease receivables - non-current

85,400

82,602

37,137

35,661

Aircraft purchase rights

40,990

40,990

-

-

 

 

 

 

 

Financial liabilities:

 

 

 

 

Deposits collected - non-current

16,119

15,176

13,979

13,273

Loans and borrowings other than unsecured note- non-current

657,197

628,549

660,727

644,726

Unsecured notes

346,987

325,840

344,966

358,327

 

 

 

 

 

 

 

 

 

 

The fair values (other than aircraft purchase rights and the unsecured notes) above are estimated by discounting expected future cash flows using a market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the end of the reporting period, classified as level 2.

 

The fair value of the unsecured notes is based on level 1 quoted prices (unadjusted) in active market that the Group can access at measurement date.

 

The fair values of aircraft purchase rights are classified as level 3 and are estimated by discounting expected future cash flows using the Group's weighted average cost of capital (WACC) at the end of the reporting period. Expected future cash flows include an assumed sale of the relevant aircraft at delivery.  Assumed aircraft sales values are based on independent third party valuations of the relevant type at estimated future delivery dates.  The assumed sales values of aircraft less the assumed purchase price presents the fair value recorded for the aircraft purchase rights.

 

 

 

4  FAIR VALUE MEASUREMENT (continued)

 

Non-financial assets measured at fair value:

 

 

 

 

 

 

 

 

31 Mar

2020

30 Jun

2019

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Fair value measurement using significant unobservable inputs

 

 

 

 

Aircraft

 

 

1,087,572

1,225,285

 

 

 

 

 

 

 

 

 

 

Aircraft were valued at 30 June 2019. Refer to Note 11 for the details on the valuation technique and significant inputs used in the valuation.

 

Classification of financial instruments:

 

 

 

 

 

 

 

 

 

 

 

31 Mar

2020

30 Jun 2019

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Financial assets measured at

amortised cost:

 

 

 

 

Cash and cash balances

 

 

131,610

107,448

Trade and other receivables

 

 

19,276

12,616

Finance lease receivables

 

 

92,715

44,358

 

 

 

243,601

164,422

 

 

 

 

 

Financial liabilities measured at amortised cost:

 

 

 

 

Trade and other payables

 

 

28,142

19,324

Loans and borrowings

 

 

1,082,262

1,078,288

Maintenance reserves

 

 

59,173

32,491

 

 

 

1,169,567

1,130,103

 

 

 

 

 

Derivative used for hedging:

 

 

 

 

Derivative financial assets

 

 

-

363

Derivative financial liabilities

 

 

(25,939)

(10,174)

 

 

 

 

 

Financial assets fair value through profit or loss:

 

 

 

 

Aircraft purchase rights

 

 

40,990

-

 

 

 

 

 

 

 

 

5  REVENUE

 

 

 

 

31 Mar

2020

 

31 Mar

2019

 

 

US$'000s

US$'000s

 

 

 

Lease rental revenue

97,107

86,243

Interest income on finance leases

2,290

948

Maintenance reserves released

198

-

 

 

 

 

99,595

87,191

 

 

 

The maintenance reserves revenue relates to the recovery of maintenance reserve from an insolvent airline customer that defaulted on its lease payments.  See Note 21.

 

Geographical analysis

 

 

 

Europe

Asia Pacific

Total

 

 

 

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

31 Mar 2020

 

28,166

71,429

99,595

 

31 Mar 2019

 

21,527

65,664

87,191

 

 

 

 

 

 

 

           

 

Operating lease commitments

 

The Group leases out aircraft under operating leases. The maturity analysis of the undiscounted lease payments to be received under operating leases are as follows:

 

 

 

 

31 Mar

2020

31 Mar

2019

 

US$'000s

US$'000s

 

 

 

Within one year

128,860

122,870

In the second to fifth years inclusive

398,832

421,810

More than five years

263,588

337,700

 

 

 

 

 

 

6  OTHER INCOME

 

 

 

 

31 Mar

2020

31 Mar

2019

 

US$'000s

US$'000s

 

 

 

Foreign currency exchange gain

55

-

Fair value gain on investment

-

104

Deposit released

718

-

Others

241

108

 

 

 

 

1,014

212

 

 

 

 

7  OTHER EXPENSES

 

 

 

 

31 Mar

2020

31 Mar

2019

 

US$'000s

US$'000s

 

 

 

 

 

 

Aircraft repossession expenses

1,244

-

Expected credit loss on trade receivables

162

-

Foreign currency exchange loss

-

232

Others

3

-

 

 

 

 

1,409

232

 

 

 

The aircraft repossession expenses relate to the repossession of the 2 aircraft previously leased to an insolvent airline customer.

 

8  FINANCE INCOME

 

 

 

 

31 Mar

2020

31 Mar

2019

 

US$'000s

US$'000s

 

 

 

Interest income from financial institutions

664

781

Interest income from non-financial institutions

-

228

Fair value gain on derivatives

12

811

Finance income from discounting non-current deposits to fair value

253

470

Interest rate swap break gain

-

174

Loan modification gain

-

370

Others

-

190

 

 

 

 

929

3,024

 

 

 

 

 

 

9  FINANCE EXPENSES

 

 

 

 

31 Mar

2020

31 Mar

2019

 

US$'000s

US$'000s

 

 

 

Interest expense on borrowings

20,909

19,546

Interest expense on unsecured notes

17,063

16,151

Amortisation of loan transaction costs

3,915

4,418

Interest expense on non-current deposits

263

488

Finance charges on early full repayment on borrowings

357

166

Others

245

692

 

 

 

 

42,752

41,461

 

 

 

 

10  RELATED PARTY TRANSACTIONS

 

Significant related party transactions:

 

 

 

 

31 Mar

2020

31 Mar

2019

 

US$'000s

US$'000s

 

 

 

Entities controlled by key management personnel

(including directors):

 

 

 

 

 

Rental expenses

(217)

(222)

Consulting fee expenses

(376)

(417)

Service fee income

80

-

 

 

 

 

 

 

11  PROPERTY, PLANT AND EQUIPMENT

 

Furniture and equipment

 

Aircraft engine

Jet

aircraft

Turboprop aircraft

Total

 

 

US$'000s

US$'000

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

 

 

31 March 2020:

 

 

 

 

 

Cost or valuation:

 

 

 

 

 

At 1 July 2019

80

-

916,534

450,439

1,367,053

Additions

12

1,925

-

57,605

59,542

Reclassified as held under finance leases

-

-

-

(56,913)

(56,913)

Reclassified as asset held for sale

-

-

(106,124)

-

(106,124)

Revaluation recognised in equity

-

-

(4,265)

-

(4,265)

 

 

 

 

 

 

At 31 March 2020

92

1,925

806,145

451,131

1,259,293

 

 

 

 

 

 

Representing:

 

 

 

 

 

At cost

92

1,925

-

-

2,017

At valuation

-

-

806,145

451,131

1,259,076

 

 

 

 

 

 

 

92

1,925

806,145

451,131

1,259,293

 

 

 

 

 

 

Accumulated depreciation and impairment loss:

 

 

 

 

 

 

At 1 July 2019

41

-

73,065

68,623

141,729

 

Depreciation expense

15

20

24,488

10,979

35,502

 

Reclassified as asset held for sale

-

-

(16,189)

-

(16,189)

 

Impairment loss

-

-

8,738

-

8,738

 

 

 

 

 

 

 

 

At 31 March 2020

56

20

90,102

79,602

169,780

 

 

 

 

 

 

 

 

Net book value:

 

 

 

 

 

 

At 1 July 2019

39

-

843,469

381,816

1,225,324

 

At 31 March 2020

36

1,905

716,043

371,529

1,089,513

 

 

 

 

 

 

 

 

                   

 

 

 

11  PROPERTY, PLANT AND EQUIPMENT (continued)

 

 

Furniture and equipment

Jet

aircraft

Turboprop aircraft

Total

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

30 June 2019:

 

 

 

 

Cost or valuation:

 

 

 

 

At 1 July 2018

346

713,142

374,876

1,088,364

Additions

8

211,548

117,014

328,570

Disposals/written-off

(274)

(18,624)

-

(18,898)

Reclassified as held under finance leases

-

-

(39,631)

(39,631)

Revaluation recognised in equity  

-

10,468

(1,820)

8,648

 

 

 

 

 

At 30 June 2019

80

916,534

450,439

1,367,053

 

 

 

 

 

Representing:

 

 

 

 

At cost

80

-

-

80

At valuation

-

916,534

450,439

1,366,973

 

 

 

 

 

 

80

916,534

450,439

1,367,053

 

 

 

 

 

Accumulated depreciation and impairment:

 

 

 

 

At 1 July 2018

292

51,341

55,555

107,188

Depreciation expense

23

27,920

13,068

41,011

Disposals/written-off

(274)

(6,196)

-

(6,470)

 

 

 

 

 

At 30 June 2019

41

73,065

68,623

141,729

 

 

 

 

 

Net book value:

 

 

 

 

At 1 July 2018

54

661,801

319,321

981,176

At 30 June 2019

39

843,469

381,816

1,225,324

 

Assets pledged as security

 

The Group's aircraft including those classified as assets held for sale with carrying values of US$1,120.4 million (30 June 2019 : US$1,122.0 million) are mortgaged to secure the Group's borrowings (Note 20).

 

Additions and Disposals

 

During the nine months ended 31 March 2020, the Group acquired 3 turboprop aircraft and 1 aircraft engine.  3 turboprop aircraft were reclassified as held under finance leases. A gain on transfer of the aircraft to finance lease of US$3.5 million was recorded and included within the gain on disposal of aircraft.

 

During the nine months ended 31 March 2020, 2 jet aircraft were reclassified as held for sale.

 

 

11  PROPERTY, PLANT AND EQUIPMENT (continued)

 

Valuation

 

The Group's aircraft were valued in June 2019 by independent valuers on lease-encumbered basis ("LEV').  LEV takes into account the current lease arrangements for the aircraft and estimated residual values at the end of the lease. These amounts have been discounted to present value using discount rates ranging from 5.75% to 7.75% per annum for jet aircraft and 6.00% to 9.25% per annum for turboprop aircraft.  Different discount rates are considered appropriate for different aircraft based on their respective risk profiles.

 

During the nine months ended 31 March 2020, a downward revaluation of US$0.9 million to equity and an impairment loss of US$2.5 million was recognised to write down the book value of 2 jet aircraft to its fair value prior to reclassify as held for sale.

 

During the nine months ended 31 March 2020, a downward revaluation of US$3.4 million to equity and an impairment loss of US$6.2 million was recognised to write down the book value of 2 old technology widebody aircraft.

 

Changes in accounting estimates of residual values of aircraft

 

During the nine months ended 31 March 2020, the Group revised the residual values of its old technology widebody aircraft to reflect the likely decrease in future residual values for old technology widebody aircraft with effect from 1 July 2019.  The effect of this change is an increase in depreciation expense of approximately US$1.3 million for the nine months ended 31 March 2020.

 

The table below outline the effect of these changes in estimate on the current financial year depreciation charge and subsequent years:

 

 

30 Jun

2020

30 Jun

2021

30 Jun

2022

30 Jun

2023

30 Jun 2024 onwards

 

US$'000s

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

 

Increase in depreciation charge

1,781

1,781

1,781

1,781

28,068

 

 

 

 

 

 

 

If the aircraft were measured using the cost model, carrying amounts would be as follows:

 

 

31 Mar 2020

30 Jun 2019

 

Jets

Turbo

props

Jets

Turbo

props

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Cost

792,891

430,551

776,330

552,544

Accumulated depreciation and impairment

(90,064)

(75,967)

(58,706)

(81,504)

Net book value

702,827

354,584

717,624

471,040

 

 

11  PROPERTY, PLANT AND EQUIPMENT (continued)

 

Geographical analysis

 

31 Mar 2020

 

Europe

Asia Pacific

Total

 

 

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Capital expenditure

 

21,922

37,620

59,542

Net book value - aircraft and engine

 

331,999

757,478

1,089,477

 

 

 

 

 

 

30 Jun 2019

 

Europe

Asia Pacific

Total

 

 

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Capital expenditure

 

223,058

105,512

328,570

Net book value - aircraft

 

415,139

810,146

1,225,285

 

 

 

 

 

 

 

           

 

12  TRADE AND OTHER RECEIVABLES

 

 

 

 

31 Mar

2020

30 Jun

2019

 

US$'000s

US$'000s

 

 

 

Current

 

 

Trade receivables

8,585

3,954

Less:

 

 

Allowance for estimated credit loss

(369)

(207)

 

8,216

3,747

Other receivables:

 

 

-Third parties

275

106

Interest receivables

21

12

Deposits

165

47

Prepaid expenses

715

513

 

9,392

4,425

 

Non-current

 

 

Deposits for aircraft

10,599

8,704

Prepaid expenses

334

226

Right-of-use assets

777

-

 

11,710

8,930

 

 

 

13  FINANCE LEASE RECEIVABLES

 

Future minimum lease payments receivable under finance leases are as follows:

 

 

31 Mar 2020

30 Jun 2019

 

Minimum lease payments

Present value of payments

Minimum lease payments

Present value of payments

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Within one year

10,243

7,315

8,440

7,221

Later than one year but not more than five years

89,556

76,857

13,848

10,566

More than five years

8,740

8,543

28,534

26,571

 

 

 

 

 

Total minimum lease payments

108,539

92,715

50,822

44,358

 

 

 

 

 

Less: amounts representing interest income

(15,824)

-

(6,464)

-

 

 

 

 

 

Present value of minimum lease payments

92,715

92,715

44,358

44,358

 

 

14  GOODWILL

 

The Group performs its annual impairment test in June and when circumstances indicate the carrying value may be impaired. For the purpose of these financial statements there was no indication of impairment. The key assumptions used to determine the recoverable amount for the different cash generating units were disclosed in the annual consolidated financial statements for the year ended 30 June 2019.

 

 

15  DERIVATIVE FINANCIAL ASSETS/LIABILITIES

 

 

Contract/

notional amount

Fair value

 

31 Mar

2020

30 Jun 2019

31 Mar

2020

30 Jun 2019

 

US$'000s

US$'000s

US$'000s

US$'000s

 

 

 

 

 

Non-current asset

 

 

 

 

Interest rate swap

-

63,185

-

363

 

 

 

 

 

Non-current liability

 

 

 

 

Interest rate swap

310,359

267,118

(25,541)

(10,117)

Cross-currency interest rate swap

4,000

4,000

(398)

(57)

 

 

 

 

 

 

314,359

271,118

(25,939)

(10,174)

 

 

 

 

 

Hedge accounting has been applied for interest rate swap contracts and cross-currency interest rate swap contracts which have been designated as cash flow hedges.

 

15  DERIVATIVE FINANCIAL ASSETS/LIABILITIES (continued)

 

The Group pays fixed rates of interest of 1.0% to 2.6% per annum and receives floating rate interest equal to 1-month to 3-month LIBOR under the interest rate swap contracts. 

 

The Group pays fixed rates of interest of 3.1% to 4.9% per annum and receives floating interest equal to 3-month LIBOR under the cross-currency interest rate swap contracts.

 

The swap contracts mature between 23 September 2021 and 21 November 2030.

 

Changes in the fair value of these interest rate swap and cross-currency interest rate swap contracts are recognised in the fair value reserve. The net fair value loss of US$16.1 million
(31 March 2019: loss of US$10.5 million) on these derivative financial instruments was recognised in the fair value reserve for the nine month period ended 31 March 2020.

 

The fair value of the derivative financial instruments is determined by reference to marked-to-market values provided by counterparties.  The fair value measurement of all derivative financial instruments for the Group is classified under Level 2 of the fair value hierarchy, for which inputs other than quoted prices that are observable for the asset or liability, either directly as prices or indirectly derived from prices are included as inputs for the determination of fair value.

 

 

16  AIRCRAFT PURCHASE RIGHTS

 

 

 

 

31 Mar

2020

30 Jun

2019

 

US$'000s

US$'000s

 

 

 

Aircraft purchase rights, at fair value

40,990

-

 

 

 

Prior to the six months period ended 31 December 2019, the Group held aircraft purchase rights for the purpose of acquiring aircraft to its fleet.  Aircraft purchase rights were accounted for as non-financial assets at amortised cost. 

 

The Group adopted a new business model for aircraft purchase rights and determined that it would seek to dispose of excess aircraft purchase rights over and above its requirement to acquire additional aircraft for its fleet.  To reflect this change, the Group now accounts for aircraft purchase rights through profit or loss. Disclosures about the fair value measurement of aircraft purchase rights are included in Note 4.

 

 

17  CASH AND BANK BALANCES

 

 

 

 

31 Mar

2020

30 Jun

2019

 

US$'000s

US$'000s

 

 

 

Fixed deposits

30,405

6,700

Other cash and bank balances

101,205

100,748

Total cash and bank balances

131,610

107,448

Less: restricted

(71,877)

(45,759)

Cash and cash equivalents

59,733

61,689

 

 

 

The Group's restricted cash and bank balances have been pledged as security for certain loan obligations.

 

In the consolidated statement of cash flows, cash and cash equivalents comprises unrestricted cash and bank balances.

 

 

18  ASSETS HELD FOR SALE

 

As at 31 March 2020, the Group's aircraft which met the criteria to be classified as assets held for sale are as follows:

 

 

 

31 Mar

2020

30 Jun

2019

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Assets held for sale:

 

 

 

 

Property, plant and equipment - aircraft

 

 

 

 

At 1 July 2019/ 1 July 2018

 

 

-

48,745

Additions

 

 

89,935

-

Impairment loss

 

 

(1,485)

-

Disposals

 

 

-

(48,745)

At 31 March 2020/30 June 2019

 

 

88,450

-

 

 

 

 

 

Lease incentive asset

 

 

8,908

-

 

 

 

97,358

-

 

 

 

 

 

Liabilities directly associated with assets held for sale:

 

 

 

 

Deposit collected

 

 

1,240

-

Lessor maintenance contribution

 

 

8,908

-

Maintenance reserves

 

 

135

-

 

 

 

10,283

-

 

 

 

 

 

An impairment loss of US$1.5 million was recognised to write down the book value of 2 jet aircraft to current market value during the nine months ended 31 March 2020.

 

19  SHARE CAPITAL AND TREASURY SHARES

 

(a)  Share capital

 

 

31 Mar 2020

30 Jun 2019

 

No of shares

US$'000s

No of shares

US$'000s

 

 

 

 

 

 

Allotted, called up and fully paid

Ordinary shares of 1 penny each:

 

 

 

 

 

At 1 July 2019/ 1 July 2018

64,609,939

1,104

62,760,246

1,080

 

Issue of shares

270,003

4

1,849,693

24

 

 

 

 

 

 

 

At 31 March 2020 /30 Jun e2019

64,879,942

1,108

64,609,939

1,104

 

 

 

 

 

 

        

During the nine months period ended 31 March 2020, the Company issued 270,003 ordinary shares of 1 penny each at 2.15p to 2.32p following the exercise of warrants by warrant holders raising total gross proceeds of US$0.8 million.

 

The holders of ordinary shares (except for treasury shares) are entitled to receive dividends as and when declared by the Company.  All ordinary shares carry one vote per share without restrictions.

 

(b)  Treasury shares

 

 

31 Mar 2020

30 Jun 2019

 

No of treasury shares

US$'000s

No of treasury shares

US$'000s

 

 

 

 

 

At 1 July 2019/ 1 July 2018

300,000

1,147

-

-

Acquired during the period

1,910,000

6,664

300,000

1,147

At 31 Mar 2020 /30 Jun 2019

2,210,000

7,811

300,000

1,147

 

 

 

 

 

(c)  Net asset value per share

 

 

 

 

 

 

 

31 Mar 2020

30 Jun

2019

 

 

 

 

 

Net asset value per share (US$)(1)

 

 

$4.01

$3.74

Net asset value per share (GBP)(2)

 

 

£3.24

£2.95

 

 

 

 

 

(1)  Net asset value per share is total equity divided by the total number of shares issued and    outstanding at period end.

(2)  Based on GBP:US$ exchange rate as at 31 Mar 2020 of 1.24 (30 June 2019 : 1.27).

 

 

20  LOANS AND BORROWINGS

 

 

 

 

31 Mar

2020

30 Jun

2019

 

 

 

US$'000s

US$'000s

 

 

 

 

 

Secured borrowings

 

 

735,275

733,322

Unsecured notes

 

 

346,987

344,966

 

 

 

 

 

Total loans and borrowings

 

 

1,082,262

1,078,288

 

 

 

 

 

Less: current portion

 

 

(78,078)

(72,595)

 

 

 

 

 

Non-current loans and borrowings

 

 

1,004,184

1,005,693

 

 

 

 

 

 

 

Maturity

Weighted average interest rate per annum

 

31 Mar

2020

30 Jun 2019

31 Mar

2020

30 Jun 2019

 

 

 

%

%

 

 

 

 

 

Secured borrowings

2020-2031

2019-2031

3.6%

3.7%

Unsecured notes

2021

2021

6.5%

6.5%

 

 

 

 

 

 

Secured borrowings are secured by first ranking mortgages over the relevant aircraft, security assignments of the Group's rights under leases and other contractual agreements relating to the aircraft, charges over bank accounts in which lease payments relating to the aircraft are received and charges over the issued share capital of certain subsidiaries.

 

 

 

21  MAINTENANCE RESERVES

 

 

31 Mar

2020

30 Jun

2019

 

US$'000s

US$'000s

 

 

 

Current

6,234

1,166

Non-current

52,939

31,325

 

 

 

Total maintenance reserves

59,173

32,491

 

 

 

 

 

 

31 Mar

2020

30 Jun

2019

 

US$'000s

US$'000s

 

 

 

At 1 July 2019/ 1 July 2018

32,491

23,544

Contributions

31,102

15,413

Utilisations

(4,222)

(1,558)

Released to profit or loss

(198)

-

Transferred to buyer upon sale of aircraft

-

(4,908)

 

 

 

At 31 March 2020 /30 June 2019

59,173

32,491

 

 

 

During the nine months ended 31 March 2020, maintenance reserve of US$0.2 million were released to profit or loss as revenue due to the recovery of maintenance reserves from an insolvent airline customer that defaulted on its lease payments. See Note 5.

 

 

22  CAPITAL COMMITMENTS

 

  Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follows:

 

 

31 Mar

2020

30 Jun

2019

 

US$'000s

US$'000s

 

 

 

Property, plant and equipment

147,685

169,034

 

 

 

Capital commitments represent amounts due under contracts entered into by the group to purchase aircraft. The company has paid deposits towards the cost of these aircraft which are included in trade and other receivables.

 

As at 31 March 2020, the Group has commitments to purchase eight ATR 72-600 aircraft from the manufacturers with expected delivery dates from April 2020 to April 2022. 

 

 

23  CONTINGENT LIABILITIES

 

  There were no material changes in contingent liabilities since 30 June 2019.

 

 

 

24  DIVIDENDS

 

 

31 Mar

31 Mar

 

2020

2019

 

US$'000s

US$'000s

 

 

 

Dividends declared and/or paid during the nine months ended 31 March 2020

 

 

Dividends on ordinary shares

 

 

- First interim exempt (one-tier) dividend for 8.50 US cents (31 Mar 2019 : 7.25 US cents) per share

5,454

4,550

- Second interim exempt (one-tier) dividend for 2.10 US cents (31 Mar 2019 : 2.00 US cents) per share

1,319

1,290

 

6,773

5,840

 

 

 

Dividends are recorded directly in equity when they are paid.

 

No dividends have been declared subsequent to 31 March 2020.

 

 

25  SUBSEQUENT EVENTS

 

On 6 April 2020, Braathens Regional Airways AB ("Braathens") entered into voluntary administration.  The Group has two ATR72-600 aircraft on finance lease to Braathens. At the time of its entry into administration Braathens represented around 3% of the group's total monthly run-rate lease revenue.  We are currently in discussion with the administrator of Braathens and expect to enter into revised operating leases for the two aircraft shortly.

 

On 20 April 2020, Virgin Australia Holdings Limited ("Virgin Australia") entered into voluntary administration. Avation has two Fokker 100 aircraft on finance lease and 11 ATR 72 aircraft on operating lease to Virgin Australia two of which are subleased to, and operated by, another airline. At the date of entry into administration, Virgin Australia represented around 19% of the group's total monthly run-rate lease revenue. We have subsequently signed new short-term finance leases for the two Fokker 100 aircraft and have signed new short-term operating leases for two ATR 72 aircraft with another operator which are expected to commence shortly.

 

On 15 May 2020, Avation entered into an agreement to extend the lease of a Boeing 737-800 aircraft by six years from its original lease termination date until June 2028.  The lease extension rent is at a market rate.

 

On 2 and 3 June 2020, the Company repurchased US$1,000,000 Avation Capital S.A. 6.5% senior notes due 2021 issued under the Avation global medium term note programme. The notes were acquired through the market at a price of 76.25 per cent and will be cancelled.

 

On 13 June 2020, the Company entered into finance leases over the period to September 2020 for the sale two Fokker 100 aircraft.

 

On 17 June 2020 Avation entered into agreements to lease two ATR 72- 500 aircraft formerly leased to Virgin Australia to another commercial airline in Australia, until the end of 2021, at current market lease rates.

 

 

25  SUBSEQUENT EVENTS (continued)

 

Between 24 March and 18 June 2020 Avation entered into a series of short-term rent deferral agreements with its airline customers in response to requests made following the onset of the COVID-19 pandemic.  The agreements allow airlines to defer a portion of rent payments for a short-term period, with the deferred amounts to be repaid to the company in the form of additional rent following the end of the deferral period.  The company has entered into 13 rent deferral agreements with a total value of deferred rent of $16.3 million.  The average deferral amount is 57% of monthly rent, the average deferral period is 3.4 months and the deferred rents are repayable in equal instalments over three to nine month periods following the end of the relevant deferral period.

 

Between 21 May and 18 June 2020 Avation entered into a series of short-term loan principal deferral agreements with its lenders in order to mitigate the impact on cashflow of granting rent deferrals to its customers following the onset of the COVID-19 pandemic. The agreements allow the company to defer up to 100% of loan principal payments on certain loans for periods of three to six months.  The deferred loan principal payments have a total value of $9.2 million.  The deferred loan principal payments are repayable to lenders in equal instalments over four to 12 month periods following the end of the relevant deferral period.


 

PRINCIPAL RISKS 

 

The Group's risk management processes bring greater judgement to decision making as they allow management to make better, more informed and more consistent decisions based on a clear understanding of risk involved.  We regularly review the risk assessment and monitoring process as part of our commitment to continually improve the quality of decision-making across the Group.

 

The principal risks and uncertainties which may affect the Group in the remaining three months of the financial year will include the typical risks associated with the aviation business, including but not limited to any downturn in the global aviation industry, fuel costs, finance costs, war and terrorism and the like which may affect our airline customers' ability to fulfil their lease obligations.

 

The business also relies on its ability to source finance on favourable terms.  Should this supply of finance contract, it would limit our fleet expansion and therefore growth.

 

 

GOING CONCERN

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the financial statements.  The financial risk management objectives and policies of the Group and the exposure of the Group to credit risk and liquidity risk are discussed in the annual report for the Group for the year ended 30 June 2019.

 

 

DIRECTORS

 

The directors of Avation PLC are listed in its Annual Report for the year ended 30 June 2019.  A list of the current directors is maintained on the Avation PLC website: www.avation.net

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors confirm that, to the best of their knowledge, this condensed consolidated interim financial information have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 namely

 

· an indication of important events that have occurred during the first nine months and their impact on the Interim Report, and a description required by the principal risks and uncertainties for the remaining three months of the financial year; and

 

· material related party transactions in the first nine months and any material changes in the related party transactions described in the last annual report.

 

 

 

By order of the Board

 

 

 

 

 

 

Jeff Chatfield

Executive Chairman

Singapore, 26 June 2020

 

 

 

 

 

 

 


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