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Gama Aviation PLC (GMAA)

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Monday 23 September, 2019

Gama Aviation PLC

Interim results for six months to 30 June 2019

RNS Number : 2029N
Gama Aviation PLC
23 September 2019
 

Date: 23 September 2019

 

 

 

Gama Aviation Plc (AIM: GMAA)

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

 

Interim results for six months to 30 June 2019

 

Gama Aviation Plc, one of the world's largest business aviation service providers, is pleased to announce the results for the six months to 30 June 2019.

Financial Highlights (comparatives on a pre IFRS 16 and constant currency basis)

Ø Revenue $121.8m (H1 2018: $99.4m), up 22.5%.

Ø Gross Profit $23.5m (H1 2018: $19.6m), up 19.9%.

Ø Adjusted EBIT $4.1m (H1 2018: $4.7m), down by 12.7%.

Ø Net Debt, stated on a pre IFRS 16 basis, increased to $24.9m from $2.9m at 31 December 2018.

Ø The outlook for the full year 2019 remains in line with the Group's previous guidance.

 

 

 

Adjusted1 $m

 

Statutory $m

 

Jun-19

Jun-19 (pre-IFRS 16)

Jun-18

(restated)3

Constant

 Currency2

Jun-18

Jun-19

Jun-19 (pre-IFRS 16)

Jun-18

(restated) 3

Continuing operations:

 

 

 

 

 

 

 

Revenue

121.8

121.8

103.9

99.4

121.8

121.8

103.9

Gross profit

24.1

23.5

20.4

19.6

24.1

23.5

20.4

Gross Profit %

19.8%

19.3%

19.6%

19.7%

19.8%

19.3%

19.6%

EBITDA4

6.4

5.6

5.9

5.6

N/A

N/A

N/A

EBIT

4.9

4.1

4.9

4.7

0.2

(0.7)

(2.7)

Profit / (Loss) Before Tax

2.9

3.5

4.4

4.2

(1.8)

(1.3)

(2.4)

Earnings per share (cents)

4.6

4.6

8.6

8.3

(3.5)

(3.5)

(4.6)

1      Adjusted EBIT is stated after removing impairment losses, share based payment charges; acquisition related and accelerated amortisation; and exceptional costs, which comprise: transaction costs; legal, integration and business re-organisation costs and contribution to associate.

Adjusted EBITDA is adjusted EBIT with share or results from equity accounting investments and remaining amortisation and all the depreciation added back.

2       Change calculated at a constant foreign exchange rate of $1.29 to £1, being the cumulative average USD-GBP exchange rate for the period ending 30 June 2019.

3      The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.

4       EBITDA is a non-statutory measure and has been shown as adjusted only.  

   

 

Operational Highlights

Ø Air Division stable with modest profitability improvement

Ø Strong growth in Europe Ground and improved profit margins from new Bournemouth facility

Ø US Ground organic growth continuing but profits  impacted by start-up costs at Florida Paint Shop

Ø Middle East region challenging but robust demand for hangarage supports the Business Aviation Centre project

Ø FlyerTech business impacted by reduced revenues partly due to Brexit concerns among European clients

Ø Executive team will be strengthened by the appointment of Daniel Ruback as CFO effective 16th December 2019

 

 

Marwan Khalek, Chief Executive of Gama Aviation said:

 

The results for the half year demonstrate the initial positive impact of the changes we have undertaken to strengthen our operational platform. The macro economic climate remains challenging but given the resilience of our business and the steps we have undertaken to bring the business back on track, we are pleased to report that the outlook for the full year 2019 remains in line with the Group's previous guidance of Adjusted EBIT (pre-IFRS16) in the range of $10.5m to $11.5m.

 

 

Simon To, Chairman of Gama Aviation said:

 

We are pleased to announce the results for the half year ending 30 June 2019. The Board will continue to oversee the reforms the Company is implementing in terms of corporate governance and financial discipline, whilst supporting the Company's organic and acquisitive growth strategy, with the aim of delivering stronger future shareholder returns.

 

 

-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

 

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

 

I am pleased to report that the first half of 2019 has seen us make steady progress in getting the business back on track after a turbulent and disappointing 2018.  By focusing on our core business, and by continuing to offer a suite of services that are relevant to our customers' needs, we were able to deliver strong revenue growth of 22.5%.  Underpinned by our sound and solid operational platform revenue growth was matched by a 19.9% increase in Gross Profits, all of which was achieved against a challenging market environment reflecting the strong fundamentals of our business.

 

Against this growth in revenues and gross profit, adjusted EBIT was down by 12.7%.  Planned investment in people, systems and the infrastructure necessary to underpin our growth objectives has resulted in increased administrative costs both at divisional and central level. Management remains very focused on controlling costs across the business whilst ensuring that we have the platform necessary for the next phase of our growth strategy.  

 

 

H1/19 Performance

 

The overall growth in revenues and gross profit were largely driven by the performance of our Ground division where both revenues and gross profits grew by some 31.1% and 28.5% respectively. This is in turn due to the progress we are making in executing our organic growth strategy in the US Ground division and the improvements in revenues and efficiencies following our decision to consolidate our UK maintenance activities at our Bournemouth facility.

 

As previously guided the performance of our Air division remains stable in a very challenging market environment.  The performance of our Global services division was significantly impacted by a reduction in FlyerTech revenues partly due to Brexit concerns in a flat marketplace, along with increased investment in our Myairops Business.

 

 

An overview of the performance of each of the divisions is provided in the Operational Performance Review that follows.

 

 

Strategy

 

Our strategy remains unchanged.  The Group remains focused on building its depth of capabilities and expertise, broadening its geographical reach and range of service offerings, thus increasing the scale of its operations in its chosen markets thus driving revenue and margin growth while enhancing cross selling opportunities.

 

We will execute this through focused organic growth and investment and through targeted strategic acquisitions whilst maintaining a strong focus on our core mature business.  Collectively this will allow us to increase our share in this highly fragmented sector thereby improving our financial performance.

 

Litigation Update

 

As previously reported, the Group is involved in a small number of legacy litigation cases which we are working to resolve.  We remain committed to settling these cases on reasonable terms but in parallel with our efforts to do so, we continue diligently and robustly to pursue and/or defend these cases through the legal process, which is progressing well.  We have obtained three summary judgments with awards totaling some $1.7m.

 

Despite this positive progress, we anticipate that it may be some time before this translates into an inflow of cash into the business.  In the meantime, we continue to incur litigation costs which are excluded from our underlying profits but clearly impact our operating cash flows.  The Board believes that the provisions we are carrying in respect of these matters are adequate.

 

Overdue Receivables Update

 

There have been some delays in the collection of a handful of large and overdue trade receivables across our Asia, Middle East and European divisions, totaling some $3.8m, which had previously impacted our working capital and operational cash flows.  Progress is being made towards resolving these delays and management's view on recoverability remains unchanged. The Board regularly reviews the recoverability of these receivables and provisions is made if deemed appropriate. 

 

Outlook

 

Whether it is the highly competitive nature of the US market, the Brexit uncertainties affecting the European market or the geo-political issues in the Middle East and more recently, in Hong Kong, market conditions across all of our operating regions remain highly challenging.

 

Against this market backdrop, the Group's ability to deliver a first half performance in line with expectations reflects our strong business fundamentals and robust business model. Major contract wins at the end of 2018 are now being delivered, underpinning strong performance in our Ground business.  Finally, our organic investments in our US Ground network, airport infrastructure in the Middle East with the Business Aviation Centre and technology platforms in our Global Services division show promising potential for growth and add to the depth, breadth and scale of our capability.

 

The Board's outlook for the full year remains in line with its previous guidance of Adjusted EBIT (pre-IFRS 16) in the range of $10.5m to $11.5m.

 

Marwan Khalek

Chief Executive Officer

 

 

 

Group Operational Performance on a Pre-IFRS 16 basis

 

Revenue

$'000

 

2019

2018*

Air Division

65,398

59,644

Ground Division

54,879

41,846

Global Services Division

1,508

2,389

Total

121,785

103,879

 

 

Gross Profit

$'000

 

2019

2018*

Air Division

5,486

5,641

Ground Division

16,919

13,165

Global Services Division

1,082

1,637

IFRS 16 Impact

582

-

Total

24,069

20,443

 

 

 

Adjusted EBIT

$'000

 

2019

2018*

Air Division

1,087

987

Ground Division

6,010

4,326

Global Services Division

221

1,009

Associates Division

252

166

Central Costs

(3,499)

(1,633)

IFRS 16 Impact

870

-

Total

4,941

4,855

 

 

 

Statutory EBIT

$'000

 

2019

2018*

Air Division

869

(2,029)

Ground Division

3,189

2,718

Global Services Division

95

802

Associates Division

252

166

Central Costs

(5,060)

(4,366)

IFRS 16 Impact

870

-

Total

215

(2,709)

 

 

*           The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.

 

The above Group results are explained in detail below.

 

Air Division

The Air Division provides global outsource services to 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.

 

Total Air Division revenue was $65.4m, representing growth of $5.8m (+10%) on last years $59.6m. This was mainly driven by the consolidation of the full revenues for Asia in H1 this year following the acquisition of the outstanding 50% interest in Gama Aviation Hutchison Holding Limited (compared to the inclusion of Q2 results only last year), which contributed $4.0m of the increase. A further $1.8m of growth arose from a strong top-line performance in Europe Air, which increased by $4.5m, offset by weaker Middle East Air revenue, which fell by $2.7m though these changes primarily related to pass-through revenues.

 

Total EBIT increased slightly to $1.1m (2018: $1.0m), driven by tighter management of costs and improved charter yields in Europe (particularly Jersey), offset by increased losses in the Middle East, where the region as a whole remains challenging and our organic investment in a startup operation in the Kingdom of Saudi Arabia has not yet delivered a return. Elsewhere a slight gain in Asia was largely balanced by a slight reduction in the US.

 

Overall, the Group's global managed fleet has remained stable from H1 2018 to H1 2019 and there were no significant changes in major contract performance. Flying operations for the new five-year UK special mission contract won in H2 2018 commence in H2 2019, and preparations went according to plan during H1 2019.

 

Adjusted

USD'000s

 

US

Europe

Middle East

Asia

Total

 

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Revenue

1,875

1,875

46,314

41,833

7,030

9,755

10,179

6,181

65,398

59,644

Gross Profit

1,875

1,913

2,268

2,539

746

824

597

365

5,486

5,641

GP %

100%

102%

5%

6%

11%

8%

6%

6%

8%

9%

EBIT

1,815

1,888

(202)

(528)

(601)

(391)

75

18

1,087

987

EBIT %

97%

101%

0%

(1%)

(9%)

(4%)

1%

0%

2%

2%

 

Adjustments to EBIT

USD'000s

 

 

 

US

Europe

Middle East

Asia

Total

 

 

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Exceptional items

 

-

(3,600)

(105)

(90)

-

-

-

-

(105)

(3,690)

Profit arising on step acquisition

 

-

-

-

-

-

-

-

986

-

986

Amortisation

 

-

-

(54)

(172)

-

-

(59)

(140)

(113)

(312)

Total adjustments

 

-

(3,600)

(159)

(262)

-

-

(59)

846

(218)

(3,016)

Discontinued operations*

 

-

-

-

(160)

-

-

-

-

-

(160)

*  The effects of discontinued operations are shown on a single line on the face of the consolidated income statement. This effect is included already within the statutory result shown below and is split out in the table above to aid understanding.

 

Statutory

USD'000s

 

 

US

Europe

Middle East

Asia

Total

 

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

EBIT

1,815

(1,712)

(361)

(790)

(601)

(391)

16

864

869

(2,029)

EBIT %

97%

(91%)

(1%)

(2%)

(9%)

(4%)

0%

14%

1%

(3%)

 

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 to the operator. With a global network and increasingly rare independence from manufacturer ownership, the Division maintains all the necessary 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.

 

The Ground Division grew revenues by 31% to $54.9m (2018: $41.8m), driven primarily by continued organic growth in the US and growth in engineering activity in Europe, where significant design and production work was completed on the new government special mission contract won in H2 2018, with further phases of this project continuing into H2 2019 and beyond.

The Division achieved an adjusted EBIT of $6.0m (2018: $4.3m), benefiting from stronger productivity in all regions and especially in Europe where efficiency gains continued to be delivered from combining the jet and turboprop maintenance businesses in the new Bournemouth facility that opened in H2 2018. Europe also benefited from one-off equipment sales, while being impacted by losses from the maintenance business in Fairoaks which is being run down following a decision to close that business at the start of the year.

 

The reduction in EBIT in the US was largely due to start-up losses from the new Florida Paint Shop opened in Q1 following a trade and assets purchase plus investments in the US management team. Strong parking and hangarage and an improved maintenance performance in the Middle East helped offset the costs of the Business Aviation Centre project, for which the detailed design is complete and the construction tender process is underway. Increased gross profit generation in Asia funded investment in the local management team and infrastructure with further growth expected from the maintenance collaboration with China Aircraft Services Limited ("CASL").

 

Adjusted

USD'000s

 

US

Europe

Middle East

Asia

Total

 

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

Revenue

24,296

17,248

27,321

22,191

2,266

1,902

996

505

54,879

41,846

Gross Profit

3,557

3,748

12,045

8,836

878

491

439

90

16,919

13,165

GP %

15%

22%

44%

40%

39%

26%

44%

18%

31%

32%

EBIT

368

1,099

5,861

3,774

(56)

(368)

(163)

(179)

6,010

4,326

EBIT %

2%

6%

21%

17%

(2%)

(19%)

(16%)

(35%)

11%

10%

 

Adjustments to EBIT

USD'000s

 

 

 

US

Europe

Middle East

Asia

Total

 

 

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

 

Exceptional items

 

-

-

(1,364)

(1,271)

-

-

-

-

(1,364)

(1,271)

 

Amortisation

 

(228)

(279)

(96)

(58)

-

-

-

-

(324)

(337)

 

Impairment charge

 

-

-

(1,133)

-

-

-

-

-

(1,133)

-

 

Total adjustments

 

(228)

(279)

(2,593)

(1,329)

-

-

-

-

(2,821)

(1,608)

 

                               

 

Statutory

USD'000s

 

 

US

Europe

Middle East

Asia

Total

 

2019

2018

2019

2018

2019

2018

2019

2018

2019

2018

EBIT

140

820

3,268

2,445

(56)

(368)

(163)

(179)

3,189

2,718

EBIT %

1%

5%

12%

11%

(2%)

(19%)

(16%)

(35%)

6%

6%

 

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 Software 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.

 

FlyerTech continues to generate healthy profits but results have been impacted by the loss of CAM and ARC revenues from two airline customers who have ceased operations and by the loss of CAM work from other existing and prospective European customers. A number of these customers have cited Brexit risks in relation to European Aviation Safety Agency (EASA) accreditations in their decision-making despite the preparations that have been made by FlyerTech to avoid any interruption to their services.

 

Myairops revenues and gross profits have grown as sales of the new SaaS products have outstripped the phasing out of enhancement and support work on legacy "on premise" installations. However, the business remains in its investment phase which has impacted EBIT as expected. Market interest and early sales in the new products have been encouraging in demonstrating the demand for and differentiation of the Myairops products.

 

Overall the Division has seen first half revenue reduce by 37% to $1.5m (2018: $2.4m) and EBIT by 78% to $0.2m (2018: $1.0m).

 

 

Adjusted

USD'000s

 

Total

 

2019

2018

Revenue

1,508

2,389

Gross Profit

1,082

1,637

GP %

72%

69%

EBIT

221

1,009

EBIT %

15%

42%

 

Adjustments to EBIT

USD'000s

 

Total

 

2019

2018

Exceptional items

-

(81)

Amortisation

(126)

(126)

Total adjustments

(126)

(207)

 

Statutory

USD'000s

 

Total

 

2018

2017

EBIT

95

802

EBIT %

6%

34%

 

Associate Investments

Overall, associate Adjusted EBIT has increased from $0.2m in H1 2018 to $0.3m in H1 2019, with an improvement in the operational performance of China Aircraft Services Limited (CASL) more than offsetting a reduction in profit from the US Air Associate, where the investment in sales and operational infrastructure has resulted in business growth but has not yet yielded a positive return in EBIT. CASL was newly acquired in 2018.

 

Adjusted

USD'000s

 

US Air
Associate

China Aircraft
Services Limited

Total

 

2019

2018

2019

2018

2019

2018

EBIT

29

136

223

30

252

166

 

Adjustments to EBIT

USD'000s

 

US Air
Associate

China Aircraft
Services Limited

Total

 

2019

2018

2019

2018

2019

2018

Total adjustments

-

-

-

-

-

-

 

Statutory

USD'000s

 

US Air
Associate

China Aircraft
Services Limited

Total

 

2019

2018

2019

2018

2019

2018

EBIT

29

136

223

30

252

166

Financial Review

 

 

 

Adjusted1 $m

 

Statutory $m

 

Jun-19

Jun-19 (pre-IFRS 16)

Jun-18

(restated)3

Constant

 Currency2

Jun-18

Jun-19

Jun-19 (pre-IFRS 16)

Jun-18

(restated) 3

Continuing operations:

 

 

 

 

 

 

 

Revenue

121.8

121.8

103.9

99.4

121.8

121.8

103.9

Gross profit

24.1

23.5

20.4

19.6

24.1

23.5

20.4

Gross Profit %

19.8%

19.3%

19.6%

19.7%

19.8%

19.3%

19.6%

 EBITDA4

6.4

5.6

5.9

5.6

N/A

N/A

N/A

EBIT

4.9

4.1

4.9

4.7

0.2

(0.7)

(2.7)

Profit / (Loss) Before Tax

2.9

3.5

4.4

4.2

(1.8)

(1.3)

(2.4)

Earnings per share (cents)

4.6

4.6

8.6

8.3

(3.5)

(3.5)

(4.6)

1      Adjusted EBIT is stated after removing impairment losses, share based payment charges; acquisition related and accelerated amortisation; and exceptional costs, which comprise: transaction costs; legal, integration and business re-organisation costs and contribution to associate.

Adjusted EBITDA is adjusted EBIT with share or results from equity accounting investments and remaining amortisation and all the depreciation added back.

2       Change calculated at a constant foreign exchange rate of $1.29 to £1, being the cumulative average USD-GBP exchange rate for the period ending 30 June 2019.

3      The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.  

4       EBITDA is a non-statutory measure and has been shown as adjusted only.  

 

 

Revenue Bridge

$m

 

Revenue - 2018*

103.9

Step-acquisition of Gama Aviation Hutchison Holdings Limited

4.0

Air Division (excluding step-acquisition)

1.8

Ground Division (including $1m of acquired revenue from the Paint-Shop)

13.0

Global Services Division

(0.9)

Revenue - 2019

121.8

*Restated to remove $0.3m of intra-Group revenue with Gama International Saudi Arabia, which the Group has consolidated in its results for the first time this year.

 

·   There was a $4.0m year-on-year revenue increase as a result of the Group obtaining control of Gama Aviation Hutchison Holdings Limited in March 2018. This resulted in the Group consolidating results for the company in full instead of recording only the Group's share of profits from the associate.

·   Air Division revenue increased by $1.8m, mainly due to increased pass through costs in Europe Air, which offset weaker performance in Middle East Air.

·   Ground Division revenue growth was $13.0m in the year, due primarily to a combination of the expansion of the US Ground business and strong performance in the Europe Ground business driven by recent contract wins and enhanced capacity at the new Bournemouth facility.

·   Global Services revenue fell by $0.9m, mainly due to the impact of Brexit uncertainty on the division's CAM business.

 

Statutory EBIT Bridge

$m

 

Statutory EBIT - 2018 (restated)*

(2.7)

Contribution to associate

3.6

Increase in gross profit

1.6

Impact of IFRS 16

0.9

Increase in share of profit from associates

0.1

Increase in share-based payment expense

(0.2)

Increase in depreciation and amortisation

(0.4)

Decrease in exceptional profit from one-off associate transactions

(1.0)

Impairment of right-of-use asset

(1.1)

Increase in administrative expenses

(0.6)

Statutory EBIT - 2019

0.2

*  The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time. The contribution to the Group's US Associate was a one-off transaction last year.

·   Gross profit rose by $1.6m as detailed in the Operational Review.

·   The impact of IFRS 16 is discussed in more detail below. The overall impact of IFRS 16 on Statutory EBIT was an increase in profit of $0.9m.

·   The share based payment expense increased due to new share option grants in the prior year.

·   Depreciation and amortisation increased primarily due to the effects of capital investment in the prior year, particularly in the US Ground business.

·   The exceptional profit arose on the step acquisition transaction in the Asia business last year which was a non-recurring item. The exceptional profit arising on the step acquisition of $1.0m last year relates to the Group's acquisition of control over Gama Aviation Hutchison Holdings. The profit arose as a result of re-valuing the associate interest held at cost, to fair value, immediately prior to the transaction in which control was obtained.

·   Administration costs increased significantly in the period (see Adjusted EBIT bridge below).

Adjusted EBIT Bridge $m

 

Adjusted EBIT - 2018 (restated)*

4.9

Increase in gross profit

1.6

Impact of IFRS 16

0.9

Increase in share of profit from associates

0.1

Increase in administrative expenses:

 

- Step acquisition of Gama Aviation Hutchison Holdings Limited

(0.3)

- Paint Shop overhead acquired

(0.2)

- Investment in organic expansion

(0.4)

- Litigation settlement impact in prior year

(0.7)

- Central costs

(0.6)

Increase in depreciation and amortisation

(0.4)

Adjusted EBIT - 2019

4.9

The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.

 

·   The gross profit impact of $1.6m discussed in the statutory EBIT bridge falls straight through to the Adjusted EBIT result as there are no adjusting items at the gross profit level.

·   The impact of IFRS 16 is discussed in more detail below. The overall impact of IFRS 16 on Adjusted EBIT was an increase in profit of $0.9m.

·   Administrative expenses increased due to a range of factors:

·    The step acquisition of Gama Aviation Hutchison Holdings Limited, which completed at the end of Q1 in 2018 has contributed additional gross revenue and costs, as noted previously. The effect in comparing H1 2019 to H1 2018 for this item is $0.3m.

·    The Group acquired $0.2m of overhead when it bought the Paint Shop in January 2019.

·    Continued investment in the Group's growing and scaling businesses has led to increased operating costs of $0.4m across Europe Ground, US Ground and Global Services business in line with strategic plans.

·    In the prior year a provision was released in Europe Ground related to the Group's legacy litigation of $0.7m. This benefit did not recur in the current year and was based on the progress of related cases at the time of preparing the results in 2018.

·    Central costs are in line with the Group's plan for 2019 and represent increased investment in Group functions of $0.1m and a doubtful debt provision  of $0.5m in respect of the overdue receivables; and

·    Depreciation and amortisation increased primarily due to the effects of capital investment in the prior year, particularly in the US Ground business and in the new Bournemouth facility.

Adjustments (including exceptional costs) $m

 

Adjusting items

Jun-19

Jun-18

Transaction costs

0.1

1.8

Integration and business re-organisation costs

0.9

0.5

Legal costs

1.7

1.8

Cash contribution to associate

-

3.6

Share based payment charge

0.4

0.1

Acquisition related intangible amortization

0.5

0.8

Impairment of right-of=use asset

1.1

-

Profit arising on step acquisition/disposal of interest in associate

-

(1.0)

Total adjusting items

4.7

7.6

 

 

·   Transaction costs of $0.1m arose in relation to the acquisition of the Paint Shop in January 2019 and some one-off professional fees relating to 2018 activities.

·   Integration and business re-organisation costs of $0.9m arose in relation to the completion of the Europe Ground move to Bournemouth ($0.2m).  These costs are expected to be finalised by the end of September 2019; and on the recording of an onerous contract and restructuring provision in relation to the closure of maintenance operations at our Fairaoks premises in the Europe Ground business ($0.7m).

·   Legal costs of $1.7m arose in relation to the Group's legacy litigation and other one-off professional fees

·   The cash contribution to associate was a one-off transaction last year.

·   Acquisition related intangible amortisation relates to acquired intangible assets (customer lists and brands) recognised as part of the accounting for business combinations ($0.3m) and amortisation arising on internally generated intangible assets associated with organic investments, such as setting up new bases of operations in the US Ground business ($0.2m). The reduction of $0.3m compared to 2018 is due to the impairment that was charged at the end of 2018, which had the effect of accelerating a significant intangible asset amortisation and therefore reducing the future charge.

·   An impairment of $1.1m was recorded on the right-of-use asset recognised in relation to our Fairaoks  premises within Europe Ground business. This impairment and the related onerous contract and restructuring provision totals $1.8m. Loss making activities associated with these premises reduced profit for the Europe Ground segment by $0.9m in total in H1, of which $0.7m of the reduction is shown within adjusted profit as it does not meet the Group's policy for inclusion within exceptional items.

·   The profit arising on the step acquisition of $1.0m in the prior year relates to the Group's acquisition of control over Gama Aviation Hutchison Holdings Limited. The profit arose as a result of re-valuing the associate interest held at cost, to fair value, immediately prior to the transaction in which control was obtained.

Impact of IFRS 16 Adoption

The adoption of IFRS 16 has no impact on the economic prospects, strategy, cash generative nature of our business, dividend policy or capital allocation policy. The impact on the Consolidated Income Statement and Consolidated Balance Sheet is show below.

 

IFRS 16 requires lessees to account for most contracts under an on-balance sheet model, with the distinction between operating and finance leases removed. The practical effect of this is that operating lease expenses are removed from the income statement and replaced with depreciation and finance expenses relating to the newly recognised on-balance sheet right of use assets.

 

IFRS 16 Impact on Consolidated Income Statement $m

 

 

Statutory & Adjusted Profit After Tax Impact

 

Decrease in cost of sales

4.2

Increase in gross profit

4.2

Decrease in administrative expenses

2.1

Increase in EBITDA

6.3

Increase in depreciation and amortisation

(5.5)

Increase in EBIT

0.8

Increase in finance expenses

(1.4)

Decrease in profit before tax from continuing operations

(0.6)

Decrease in taxation

0.2

Decrease in Statutory & Adjusted Profit After Tax - 2019

(0.4)

 

·   The $4.2m reduction in cost of sales represents the reversal of pre-IFRS 16 operating lease costs, which were recorded within cost of sales. The Group classified operating lease costs according to whether those costs were directly attributable to sales or were general overhead costs. For example, hangar lease costs would be classified as costs of sale whereas administrative office lease costs would be classified as administrative costs. There is a reduction of administrative costs of $2.1m accordingly.

·   Depreciation has increased by $5.5m, representing the additional depreciation of newly recognised right of use assets.

·   Finance expenses have increased by $1.4m, representing the finance charge arising as a result of the deemed incremental borrowing rate applicable to the portfolio of right of use assets recognised. Determination of the incremental borrowing rate applicable to each lease requires judgment and estimation. Third party advice was obtained to assist in these calculations.

·   The decrease in taxation relates to a change in deferred tax only on the timing difference between the accounting depreciation and liability unwind on the newly recognised balance sheet items. There is no cash impact of IFRS 16.

 

IFRS 16 Impact on Consolidated Balance Sheet $m

 

 

Statutory Net Assets Impact

 

Increase in property, plant and equipment

54.9

Decrease in trade and other payables

0.6

Obligations under leases less than one year

(9.9)

Obligations under leases greater than one year

(46.1)

Decrease in deferred tax liabilities

0.2

Statutory Net Assets Impact - 2019

(0.3)

 

·   The difference between the closing net assets at 31 December 2018 on a pre-IFRS 16 basis and the opening net assets at 1 January 2019 was immaterial, consequently there is no adjustment to the opening balance sheet.

·   Right-of-use assets of $54.9m were recognised at 1 January 2019.

·   Trade and other payables were adjusted by $0.6m as part of the recognition of the full lease liabilities under IFRS 16.

·   Lease obligations of $56.0m were recognised overall.

·   Net deferred tax liabilities reduced as a result of the above changes by $0.2m.

 

Earnings per share (EPS) and adjusted earnings per share

Earnings $m

Jun-19

Jun-18 (restated)*

Constant

Currency2

Jun-18

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

(2.2)

(2.7)

(2.6)

Add back:

 

 

 

Acquisition related amortisation and impairment of right-of-use assets

1.7

0.8

0.8

Exceptional items

2.6

7.7

7.4

Share-based payment expense

0.4

0.1

0.1

Profit on disposal of interest in associate

-

(1.0)

(1.0)

Effects of IFRS 16

0.4

-

-

Profit attributable to ordinary shareholders for adjusted earnings

2.9

4.9

4.7

Denominator:

 

 

 

Weighted average number of shares used in basic EPS

63,636,279

56,739,000

56,739,000

Effect of dilutive share options

-

458,697

458,697

Weighted average number of shares used in diluted EPS

63,636,279

57,197,697

57,197,697

Adjusted Earnings per share (cents)

 

 

 

Basic

(3.5)

(4.8)

(4.6)

Diluted

(3.5)

(4.8)

(4.6)

Adjusted - Basic

4.6

8.6

8.3

Adjusted - Diluted

4.6

8.6

8.2

*  The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.

On 2 March 2018, 19,591,837 new ordinary shares of one pence each in Gama Aviation plc were admitted for trading on AIM.
The Company raised gross proceeds of £48,000,000 ($65,460,000) pursuant to the placing. Hutchison Whampoa (China) Limited ("Hutchison") subscribed for shares in the placing and held 21.17% of the issued share capital at 31 December 2018.

Taxation

There is a total tax charge for the period of $0.4m (2018: charge of $1.5m). The Group operates across a number of jurisdictions and the effective rate of tax reflects the blended rate of operating in different countries.

Net debt and cash flow movements

 

Jun-19

$m

Jun-18 (restated)*

$m

 

 

 

Statutory EBIT (continuing and discontinued operations)

0.2

(2.7)

Non-cash components of EBIT

2.8

0.5

Net movement in working capital excluding Contribution to US Air Associate

(5.9)

(1.6)

Contribution to US Air Associate

-

(3.6)

Taxes paid

(0.6)

(1.0)

Interest paid

(0.6)

(0.4)

Net cash expended on operating activities

(4.1)

(8.8)

 

 

 

Capital expenditure net of disposals

(14.4)

(2.9)

Investment in China Aircraft Services Limited

-

(16.0)

Step-acquisition of Gama Aviation Hutchison Holdings Limited

-

(2.6)

Acquisition of Florida Paint-Shop

(1.4)

-

Issuance of shares (net of share issue costs)

-

63.7

Net cash (used in) / from investing and financing activities

(15.8)

42.2

 

 

 

(Increase) / decrease in net debt

(19.9)

33.4

Net debt at the beginning of the period

(2.9)

(18.0)

Effect of foreign exchange rates and other non-cash movements

(2.1)

(0.1)

Net (debt) / cash at the end of the period

(24.9)

15.3

 

Analysis of net debt

Jun-19

$m

Jun-18 (restated)*

$m

Cash

2.0

18.5

Covenant defined lease indebtedness

(2.3)

(3.2)

Borrowings

(24.6)

-

Net debt at the end of the period

(24.9)

15.3

*  The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.

·    Working capital increased by $5.9m, excluding associates. The adverse movement was driven partly by slow recovery of certain trade receivables and partly by changes to the billing profile of two long-term contracts, the negative effects of which are expected to be short term only.

·    Capital expenditure of $14.4m comprises:

·    Down-payments on rotary aircraft, $8.5m

·    Investment in the Sharjah BAC, $2.1m

·    Investment in Myairops product, $1.2m

·    Other, including replacement capital expenditure, $2.6m

·    The Group's revolving credit facility defines finance lease indebtedness with reference to IAS I7. Consequently, the Group's IFRS 16 lease liabilities have been excluded from its definition of net debt.

 

Litigation

The legal proceedings currently involving the Company, or its subsidiaries fall into two categories.

1.     Proceedings by the Company or its subsidiary companies to recover long-standing trade receivables that amount to approximately $3.1m.  Based on legal advice, the Board considers the proceedings to recover these receivables are likely to be successful, noting that the Company has already obtained summary judgments for a portion of these claims in the sum of $1.7m for which the Company is in the process of undertaking enforcement action.

2.     Two proceedings brought against the Company or its subsidiary companies in which the claimants seek to recover damages for alleged contractual breaches or alleged unpaid flight charges which amount to approximately $4.1m. Based on a detailed analysis of the claims and legal advice, the Board believes that these claims are speculative and/or overlapping and the Company continues to defend them vigorously.  The Company is also pursuing a counterclaim against one claimant for an amount of approximately $1m in respect of a trade receivable balance due to the Company by the claimant.

Management has made provisions against these claims which it believes will be adequate to meet any potential net liability

 

Gama Aviation plc

Unaudited Consolidated Financial Statements

For the six months ended 30 June 2019

 

 

 Consolidated Income Statement (unaudited)

Period ended 30 June 2019

Period ended 30 June 2018 (restated)*

 

Statutory result
$'000

Adjustments
$'000

Adjusted result
$,000

Statutory result
$'000

Adjustments
$'000

Adjusted result
$,000

Continuing operations:

 

 

 

 

 

 

Revenue

121,785

-

121,785

103,879

-

103,879

Cost of sales

(97,716)

-

(97,716)

(83,436)

-

(83,436)

Gross profit

24,069

-

24,069

20,443

-

20,443

 

 

 

 

 

 

 

Administrative expenses

(20,672)

3,032

(17,640)

(22,334)

7,776

(14,558)

- depreciation and amortisation

(3,434)

1,694

(1,740)

(1,970)

774

(1,196)

Total administrative expenses

(24,106)

4,726

(19,380)

(24,304)

8,550

(15,754)

 

 

 

 

 

 

 

Operating profit

(37)

4,726

4,689

(3,861)

8,550

4,689

 

 

 

 

 

 

 

Share of results from equity
accounted investments

252

-

252

166

-

166

Profit on step acquisition /profit on
disposal of interest in associates

-

-

-

986

(986)

-

 

 

 

 

 

 

 

Earnings before interest and taxation

215

4,726

4,941

(2,709)

7,564

4,855

 

 

 

 

 

 

 

Finance income

-

-

-

773

(768)

5

Finance expense

(2,049)

-

(2,049)

(472)

-

(472)

 

 

 

 

 

 

 

(Loss)/profit before tax from
continuing operations

(1,834)

4,726

2,892

(2,408)

6,796

4,388

 

 

 

 

 

 

 

Taxation

(412)

-

(412)

(267)

-

(267)

 

 

 

 

 

 

 

(Loss)/profit after tax from continuing operations

(2,246)

4,726

2,480

(2,675)

6,796

4,121

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

Loss after tax for the year from discontinued operations

-

-

-

(1,060)

-

(1,060)

(Loss)/profit for the year

(2,246)

4,726

2,480

(3,735)

6,796

3,061

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Owners of the Company

(2,128)

4,726

2,598

(3,815)

6,796

2,981

Non-controlling interests

(118)

-

(118)

80

-

80

 

 

 Gama Aviation Plc

Consolidated statement of comprehensive income

For the period ended 30 June 2019

 

Period
ended 30 June
2019
$'000

Period
ended
30 June 2018 (restated)*
$'000

Loss for the period

(2,246)

(3,735)

Items that may be reclassified to profit or loss:

 

 

Exchange differences on translation of foreign operations

(1,660)

(2,791)

Gains on cash flow hedges

-

(19)

Total comprehensive loss for the period

(3,906)

(6,545)

 

 

 

Total comprehensive loss is attributable to:

 

 

Owners of the Company

(3,788)

(6,625)

Non-controlling interest

(118)

80

 

(3,906)

(6,545)

 

 

 

Earnings per share attributable to the equity holders of the parent

 

 

basic (cents)

(3.5)c

(4.8)c

diluted (cents)

(3.5)c

(4.8)c

 

 

 

basic - continuing operations (cents)

(3.5)c

(4.8)c

diluted - continuing operations (cents)

(3.5)c

(4.8)c

 

 

 

Gama Aviation Plc

Consolidated balance sheet

As at 30 June 2019 and 31 December 2018

 

2019
$'000

2018 (restated)*
$'000

Non-current assets

 

 

Goodwill

21,025

20,114

Other intangible assets

9,762

8,355

Total intangible assets

30,787

28,469

Property, plant and equipment

32,775

22,248

Right of use assets

54,862

-

Investments accounted for using equity method

18,533

18,287

Deferred tax asset

2,664

2,665

 

139,621

71,669

Current assets

 

 

Inventories

13,912

10,680

Trade and other receivables

63,008

57,550

Cash and cash equivalents

2,036

10,020

 

78,956

78,250

Total assets

218,577

149,919

Current liabilities

 

 

Trade and other payables

(42,293)

(50,160)

Lease liabilities

(11,824)

(1,669)

Borrowings

(24,633)

(9,850)

Deferred revenue

(14,557)

(4,300)

 

(93,307)

(65,979)

Total assets less current liabilities

125,270

83,940

Non-current liabilities

 

 

Borrowings

-

-

Lease liabilities

(46,505)

(1,387)

Deferred tax liabilities

(1,421)

(1,639)

 

(47,926)

(3,026)

Total liabilities

(141,233)

(69,005)

Net assets

77,344

80,914

 

 

Gama Aviation Plc

Consolidated balance sheet (continued)

As at 30 June 2019 and 31 December 2018

 

 

2019
$'000

2018 (restated)*
$'000

Shareholders' equity

 

 

Share capital

953

953

Share premium

63,473

63,473

Other reserves

62,705

62,369

Foreign exchange reserve

(29,675)

(28,015)

Accumulated loss

(21,532)

(19,404)

Total shareholders' equity

75,924

79,376

Non-controlling interest

1,420

1,538

 

 

 

Total equity

77,344

80,914

 

 

Gama Aviation Plc

Consolidated statement of changes in equity

For the period ended 30 June 2019

 

Share capital

$'000

Share premium

$'000

Other reserves

$'000

Foreign exchange reserve

$'000

Accumulated profit/

(losses)

$'000

Total shareholders' equity
$'000

Non-controlling interest

$'000

Total equity
$'000

Balance at
31 December 2017

684

-

61,699

(20,797)

18,595

60,181

1,524

61,705

IFRS 9 adjustment

-

-

-

-

(327)

(327)

-

(327)

IFRS 15 adjustment

-

-

-

-

(1,534)

(1,534)

-

(1,534)

Balance at
31 December 2017 (restated)

684

-

61,699

(20,797)

16,734

58,320

1,524

59,844

Loss for the year

-

-

-

-

(33,082)

(33,082)

14

(33,068)

Other comprehensive loss

-

-

-

(7,218)

-

(7,218)

-

(7,218)

Total comprehensive loss for the year

-

-

-

(7,218)

(33,082)

(40,300)

14

(40,286)

Issuance of shares

269

63,473

-

-

-

63,742

-

63,742

Cost of share-based payments

-

-

670

-

-

670

-

670

Dividend paid

-

-

-

-

(2,306)

(2,306)

-

(2,306)

Balance at
31 December 2018

953

63,473

62,369

(28,015)

(18,654)

80,126

1,538

81,664

Prior year restatement*

-

-

-

-

(750)

(750)

-

(750)

Balance at
31 December 2018 (restated)

953

63,473

62,369

(28,015)

(19,404)

79,376

1,538

80,914

Loss for the period

-

-

-

-

(2,128)

(2,128)

(118)

(2,246)

Other comprehensive loss

-

-

-

(1,660)

-

(1,660)

-

(1,660)

Total comprehensive loss for the period

-

-

-

(1,660)

(2,128)

(3,788)

(118)

(3,906)

Cost of share-based payments

-

-

336

-

-

336

-

336

Balance at
30 June 2019

953

63,473

62,705

(29,675)

(21,532)

75,924

1,420

77,344

*  The 31 December 2018 balance sheet has been restated following the consolidation of Gama International Saudi Arabia in the Group results for the first time. This change arises from an accounting assessment under IFRS 10 only and does not represent any change to the legal status of that entity.

 

Period

Ended 30 June

2019

$'000

 

Period ended

30 June 2018 (restated)*

$'000

Net cash expended on operating activities

(4,073)

(9,410)

 

 

 

Cash flows from investing activities

 

 

Purchases of property, plant and equipment

(12,792)

(1,602)

Purchases of intangibles

(1,656)

(1,325)

Purchase of interest in associate

-

-

Acquisition of subsidiary, net of cash acquired

(1,365)

(22,194)

Net cash used in investing activities

(15,813)

(25,121)

 

 

 

Cash flows from financing activities

 

 

Issue of shares (net of share issue costs)

-

63,742

Repayments of obligations under finance leases

-

(1,953)

Proceeds from borrowings

15,107

-

Repayment of borrowings

-

(31,969)

Net cash from financing activities

15,107

31,366

 

 

 

Net decrease in cash and cash equivalents

(4,779)

(3,195)

Cash and cash equivalents at the beginning of the period

10,020

22,349

Effect of foreign exchange rates

(3,205)

(660)

Cash and cash equivalents at the end of the period

2,036

18,494

 

 

 

 

Cash and cash equivalents

2019

$'000

2018

$'000

Cash and bank balances

2,036

18,494

 

* The results for 2018 have been restated for the interim effect of restatement items identified in the 2018 full-year results and to include the effects of consolidating Gama International Saudi Arabia, the results of which have been included in the period ending 30 June 2019 for the first time.

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

 

1.     Corporate information and basis of preparation

The financial information for the year ended 31 December 2018 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2018 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. Gama Aviation plc is a publicly limited company incorporated and domiciled in England and Wales.  The Company's shares are publicly traded on the AIM market of the London Stock Exchange.

These interim consolidated financial statements (the interim financial statements) are for the six months ended 30 June 2019.  They have been prepared in accordance with IFRSs as adopted by the European Union and 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 2018.

 

2.     Accounting policies

The accounting policies set out in the Group's statutory financial statements for the year ended 31 December 2018 have been applied in the preparation of the interim financial statements, except for the adoption of IFRS 16.

On 1 January 2019 the Group adopted IFRS 16 'Leases' which supersedes IAS 17 'Leases.'  The Group has adopted the 'Modified retrospective application' which means there is no restatement of the comparative period, but there is a requirement to make an opening adjustment to retained earnings as at 1 January 2019 if required. Following a review of all lease arrangements it has been determined that no opening adjustments with respect to the adoption of IFRS 16 are required.

There have been no changes to any of the Group's critical accounting estimates and judgements of its principal financial risks, except for the decision to consolidate, for the first time, the results of Gama International Saudi Arabia, following an accounting assessment under IFRS 10. There has been no change to the legal status or ownership of that entity. 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.

 

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.

 

Reconciliation of divisional to overall Group performance:

 

$'000

2019

2018

 

Revenue

EBIT

Revenue

EBIT

US Air

1,875

1,815

1,875

1,888

US Ground

24,296

368

17,248

1,099

Europe Air

46,314

(202)

41,833

(528)

Europe Ground

27,321

5,861

22,191

3,774

Middle East Air

7,030

(601)

9,755

(391)

Middle East Ground

2,266

(56)

1,902

(368)

Asia Air

10,179

75

6,181

18

Asia Ground

996

(163)

505

(179)

Global Services

1,508

221

2,389

1,009

Associates

-

252

-

166

Central Costs

-

(3,499)

-

(1,633)

Effects of IFRS 16

-

870

-

-

Adjusted

121,785

4,941

103,879

4,855

 

 

 

 

 

Exceptional costs

 

(2,696)

 

(7,678)

Share based payment charge

 

(336)

 

(98)

Impairment charges

 

(1,133)

 

-

Acquisition related amortisation

(561)

 

(774)

Profit on step acquisition

 

-

 

986

 

 

 

 

 

Statutory

215

 

(2,709)

 

 

4.     Adjusted performance measures

 

EBITDA:

Period
ended
June 30 2019
$'000

Period
ended
June 30 2018
$'000

Gross profit

24,069

20,443

Administrative expenses

(20,672)

(22,334)

EBITDA

3,397

(1,891)

Exceptional items

2,696

7,678

Share-based payments expense

336

98

Adjusted EBITDA

6,429

5,885

 

 

 

Right of use asset depreciation recognised under IFRS 16 has not been removed from our measure of Adjusted EBITDA

 

 

Adjustments to EBIT within administrative expenses:

 

Period
ended
June 30 2019
$'000

Period
ended
June 30 2018
$'000

Exceptional items:

 

 

- Transaction costs

100

1,881

- Integration and business re-organisation costs

906

441

- Legal costs

1,690

1,756

-

3,600

2,696

7,678

336

98

3,032

7,776

Analysis of exceptional costs by type

 

Period
ended
June 30 2019
$'000

Other litigation

1,690

Fairoaks closure provision

684

Bournemouth move and setup costs

222

Acquisition related fees

100

Total exceptional items

2,696

     

Bournemouth move and setup costs

In June 2018 the Group commenced the relocation of its Ground business from Oxford and Farnborough to Bournemouth. Costs included as exceptional in relation to this move included:

 

·    Redundancy and relocation costs;

·    Provision for exiting certain contracts at the Group's Oxford site;

·    Expenses associated with planning and execution of the move;

·    Expenses associated with setting up the new site and bringing it to a state of readiness; and

·    Initial facilities costs of the sites whilst the Group was operating both Oxford and Bournemouth locations.

 

Costs associated with these activities are expected to be completely incurred by the end of September 2019.

 

Professional Fees

The Group incurred $1,690,000 in professional fees in relation to ongoing litigation and other one-off professional fees.

 

Acquisition related fees

Costs of $100,000 were incurred in relation to aborted acquisitions in the period ending June 2019.

 

 

Fairoaks closure provision

The Group has recorded a restructuring provision for the committed property and establishment costs associated with part of its Fairoaks facility. A related right of use asset was impaired, with the impairment loss recorded as an adjustment to depreciation.

 

Adjustments to EBIT within depreciation and amortisation:

Period
ended
June 30 2019
$'000

Period
ended
June 30 2018
$'000

Acquisition related and accelerated intangible amortisation

561

774

1,133

-

1,694

774

 

 

Adjustments to EBIT relating to investments in associates:

 

 

Period
ended
June 30 2019
$'000

Period
ended
June 30 2018
$'000

-

986

 

 

5.     Acquisitions

 

On 10 January 2019, the Group acquired the trade and assets of a paint and interior completion business currently operated by Lotus Aviation Group at Fort Lauderdale Executive Airport ("Paint-Shop"). The Group determined the acquisition to be of a business as defined by IFRS 3 and the transaction has therefore been accounted for as a business combination.

 

The following table summarises the consideration paid for the Paint-Shop, the provisional fair value of assets acquired, and the liabilities assumed at the acquisition date. At the time of publishing the determination of the fair value of customer relationships (acquired intangibles) was still under review. The purchase price allocation exercise is expected to be completed by 31 December 2019.

 

Consideration at 10 January 2019

 

$'000

Cash consideration

1,000

Deferred consideration

365

Total consideration transferred

1,365

     

 

Recognised amounts of identifiable assets acquired and liabilities assumed

 

$'000

Property, plant and equipment

120

Customer relationships (included within intangibles)

540

Deferred taxation

(139)

Inventories

2

Goodwill

842

 

1,365

     

6.     Tangible and intangible fixed assets

 

 

Property, plant and equipment $'000

Right of use assets

$'000

Intangible assets

$'000

Net book value at 31 December 2018

30,778

-

8,355

Net book value at 1 January 2019

30,778

60,318

8,355

Additions

4,143

-

1,656

Acquired in business combinations

120

-

540

Disposals

-

-

-

Depreciation and amortisation

(1,572)

(5,456)

(729)

Impairment charges

-

(1,133)

-

Exchange movements

(61)

-

(60)

Net book value at 30 June 2019

33,408

53,729

9,762

 

Right of use assets with a value of $60,318,000 were recognised in the opening balance sheet as a result of the adoption of IFRS 16 'Leases'. These assets arise mainly on recognition of the Group's former property leases, which were accounted for as operating leases under IAS 17, as right of use assets.

 

7.     Share-based payments

 

Equity-settled share option scheme

On 17 June 2019, 1,226,000 share options were awarded, under the Group's Share Option Plan to senior executives and managers across the Company.  The vesting period of these options is three years and the options will be exercisable between three and ten years following grant. There are no cash settlement alternatives.  The grant does not have performance conditions but is subject to the employees remaining in employment. The fair value of the share options is estimated at the grant date using a Black-Scholes model, considering the terms and conditions upon which the options were awarded.  The inputs to the model for these new options are shown below:

 

Option grant date

17 June 2019

Number of share options awarded

1,226,000

Share price on date of grant (pence)

92.5

Exercise price (pence)

91.5

Vesting period (years)

3

Expected life of share options (years)

6.5

Expected volatility (%)

41.19

Risk-free interest rate (%)

0.72

Expected dividend yield (%)

2.16

 

 

8.     Dividends

 

The Directors do not propose a dividend to be paid for the six months to 30 June 2019 (30 June 2018: nil). The final dividend of 2.00p per share for the year ended 31 December 2018 was approved at the Annual General Meeting on 27 June 2019 and was paid on 25 July 2019.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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