Half year report
AVATION PLC
CONSOLIDATED UNAUDITED RESULTS FOR THE
SIX MONTHS ENDED 31 DECEMBER 2010
Avation PLC, the aircraft leasing company, presents its interim results for the six months to 31 December
2010.
The highlights presented in the results are:
* The consolidated net profit after tax attributable to shareholders of Avation PLC increased by 98% to
£1,584,826 for the 6 month period
* Revenues increased by 10% to £8,282,327
* An 87% increase in basic earnings per share to 5.86 pence per share
* A major business endeavour with Virgin Blue Airlines Pty Ltd has been established
* A move from PLUS to a standard listing on the main market of the London Stock Exchange
ENQUIRES:
Avation PLC
Jeff Chatfield, Chairman +44 7783 942 553
W H IRELAND
Harry Ansell, Stockbroker +44 20 7220 1670
Financial Public Relations
Bishopsgate Communications +44 207 562 3350
Laura Stevens/Giang Nguyen
Websites
www.avation.net
AVATION PLC (the "Company")
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
CHAIRMAN'S STATEMENT AND INTERIM MANAGEMENT REPORT
The highlights in the results are:
* Consolidated net profit after tax attributable to shareholders of Avation PLC increased by 98% to
£1,584,826 for the 6 month period
* Revenues increased by 10% to £8,282,327
* An 87% increase in basic earnings per share to 5.86 pence per share
* A major business endeavour with Virgin Blue Airlines Pty Ltd has been established
* A move from PLUS to a standard listing on the main market of the London Stock Exchange
I am pleased to present the Company's interim results for the six months ended 31 December 2010 (the "Period").
The total consolidated revenue for the six month period was £8.3 million which is an increase of 10 per cent on the
comparative period (31 Dec 2009: £7.6 million) as a result of higher lease rental income received during this
period derived from the leasing of an additional Airbus A320-200 aircraft from April 2010.
The Avation Group net profit after income tax attributable to the shareholders was recorded as £1.6 million, a 98
per cent increase on the comparative period (31 Dec 2009: £0.8 million). In line with an expansion of the scale of
the Group's operations, profits have increased.
Basic earnings per share for the Period were 5.86 pence, an increase of 87 per cent (31 Dec 2009: 3.14 pence).
Net cash inflow from operating activities was £5.2 million (31 December 2009: £4.8 million). There was no major
material capital expenditure during this six month period. Other operating expenses were reduced by £0.4 million
mainly due to a reduction in claims on maintenance reserves.
In October 2010, the Company moved from the PLUS-quoted market to the Main Market of the London Stock Exchange
("LSE") as a standard listing, to facilitate growth and raise the profile of Avation.
On 10 January 2011, the Company entered into an agreement with Skywest Airlines (Australia) Pty Ltd ("Skywest") and
Virgin Blue Airlines Pty Ltd ("Virgin Blue") to provide a fleet of up to 18 new aircraft which will operate
primarily across the East Coast of Australia. Skywest proposes to provide "wet-lease" services to Virgin Blue. Some
financial impact of this contract may be enjoyed in the period which ends June 30th 2011, however, it is
anticipated that the first 8 aircraft will, in practice, commence service during the 2011-2012 financial year. Each
aircraft will be operated under wet lease by Skywest on behalf of Virgin Blue for a fixed period of 10 years.
Following the introduction of the first 8 aircraft, a further 10 or more aircraft may be deployed under option at
Virgin Blue's request.
The aircraft will be owned by, and leased by the Company to Virgin Blue on 10 year operating leases with other
commercial terms as typically entered into by the Company and its lessee customers. The arrangements with Virgin
Blue are subject to final negotiation. The Directors believe that given the calibre of the lessee and the wet-
lessee, the length of the fixed terms and the fact the aircraft will be new, the Company is well placed to utilise
Government-backed Export Credit Agency style Financing ("ECA Financing"). The Company intends to make an
application for ECA Financing forthwith.
Current trading conditions are satisfactory with the cost of finance being reduced and the Avation group
successfully reducing or repaying higher cost debt facilities. Approximately £5m in long term debt was repaid
during the period. The Company anticipates that the operations of the second half period of the 2010-2011
financial year will be in line with the first half, albeit that in terms of current trading the financial impact of
the Virgin Blue leases will commence in the second half period to 30th June 2011
The Group is subject to 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 for finance on favourable terms. Should this supply of finance contract, it would limit our fleet expansion
and therefore growth.
I would like to take this opportunity of thanking you, the owners of this enterprise, for your support over this
busy period and look forward to updating you on the progress of the Virgin Blue initiative.
Jeff Chatfield,
Chairman
Singapore 1 Feb 2011
AVATION PLC
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
6 months to 6 months to
31 December 31 December
Note 2010 2009
Continuing operations £ £
Revenue 4 8,282,327 7,556,268
Cost of sales (362,361) (593,826)
Gross profit 7,919,966 6,962,442
Other income 5 67,582 2,686
Other operating expenses 6 (3,049,001) (3,419,063)
Expenses
- Administrative expenses (601,387) (408,296)
- Finance expenses 7 (1,548,472) (1,607,074)
Profit before taxation 2,788,688 1,530,695
Taxation (531,147) (187,155)
Profit from continuing operations for the year 2,257,541 1,343,540
Other comprehensive income
Currency translation differences arising on consolidation (874,418) 2,339,896
Revaluation gains on property, plant and equipment, net of tax - 339,982
Other comprehensive income for the year (net of tax) (874,418) 2,679,878
Total comprehensive income 1,383,123 4,023,418
Profit attributable to:
Equity holders of the parent 1,584,826 801,941
Non-controlling interest 672,715 541,599
2,257,541 1,343,540
Total comprehensive income attributable to:
Equity holders of the parent 1,033,096 2,458,990
Non-controlling interest 350,027 1,564,428
1,383,123 4,023,418
Earnings per share
- Basic - continuing and total operations 5.86 pence 3.14 pence
- Fully Diluted - continuing and total operations 5.69 pence 2.78 pence
AVATION PLC
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT 31 DECEMBER 2010
31 December 30 June
Note 2010 2010
£ £
ASSETS
Current assets:
Cash and cash equivalents 3,054,403 1,227,881
Trade and other receivables 1,332,490 1,195,859
Inventories 1,109 707
Total current assets 4,388,002 2,424,447
Non-current assets:
Property, plant and equipment 8 87,841,992 92,520,577
Goodwill 1,324,541 1,324,541
Total non-current assets 89,166,533 93,845,118
Total assets 93,554,535 96,269,565
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables 4,002,778 3,818,692
Provision for taxation 369,176 18,368
Loans and borrowings 9,841,422 9,602,462
Short-term provisions 2,524,884 2,047,185
Total current liabilities 16,738,260 15,486,707
Non-current liabilities:
Trade and other payables 973,183 1,379,641
Loans and borrowings 34,283,291 39,123,267
Deferred tax liabilities 4,215,945 4,248,024
Total non-current liabilities 39,472,419 44,750,932
Equity attributable to shareholders:
Share capital 9 285,322 262,190
Share premium 1,326,126 1,249,258
Assets revaluation reserve 6,760,372 6,760,372
Capital redemption reserve 7,000 7,000
Foreign currency translation reserve 3,011,629 3,563,359
Retained earnings 12,847,859 11,434,226
Parent interests 24,238,308 23,276,405
Non-controlling interests 13,105,548 12,755,521
37,343,856 36,031,926
Total liabilities and equity 93,554,535 96,269,565
AVATION PLC
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
Foreign
Assets Capital currency Share Non-
Share Share revaluation Redemption translation option Retained Controlling Total
capital premium reserve reserve reserve reserve earnings Total Interest Equity
£ £ £ £ £ £ £ £ £ £
Group
Balance at 1 July 2010 262,190 1,249,258 6,760,372 7,000 3,563,359 - 11,434,226 23,276,405 12,755,521 36,031,926
Profit for the year - - - - - - 1,584,826 1,584,826 672,715 2,257,541
Other comprehensive income - - - - (551,730) - - (551,730) (322,688) (874,418)
Total comprehensive income - - - - (551,730) - 1,584,826 1,033,096 350,027 1,383,123
Dividend related to 2010 paid - - - - - - (171,193) (171,193) -
(171,193)
Increase in issued share capital 23,132 76,868 - - - - - 100,000 -
100,000
Balance at 31 December 2010 285,322 1,326,126 6,760,372 7,000 3,011,629 - 12,847,859 24,238,308 13,105,548 37,343,856
Balance at 1 July 2009 255,555 1,216,336 6,760,372 7,000 1,148,240 12,788 9,897,773 19,298,064 9,928,515 29,226,579
Profit for the year - - - - - - 801,941 801,941 541,599 1,343,540
Other comprehensive income - - 339,982 - 1,317,067 - - 1,657,049 1,022,829 2,679,878
Total comprehensive income - - 339,982 - 1,317,067 - 801,941 2,458,990 1,564,428 4,023,418
Increase in issued share capital 635 14,922 - - - - - 15,557 21,800 37,357
Balance at 31 December 2009 256,190 1,231,258 7,100,354 7,000 2,465,307 12,788 10,699,714 21,772,611 11,514,743 33,287,354
AVATION PLC
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
31 December 31 December
2010 2009
£ £
Cash flows from operating activities:
Profit before taxation 2,788,688 1,530,695
Adjustments for:
Depreciation expense 2,387,116 2,244,704
Claim on maintenance reserve 661,885 1,053,876
Interest expense 1,468,697 1,498,315
Interest income (1,242) (2,686)
Operating profit before working capital changes 7,305,144 6,324,904
Movement in working capital:
Trade and other receivables (136,631) (115,208)
Inventories (402) (19)
Trade and other payables (222,372) 776,927
Short-term provisions (137,248) (501,976)
Cash from operations 6,808,491 6,484,628
Interest paid (1,468,697) (1,498,315)
Interest received 1,242 2,686
Corporation tax paid (96,776) (130,155)
Net cash from operating activities 5,244,260 4,858,844
Cash flows used in investing activities:
Purchase of property, plant and equipment (17,504) (1,171)
Net cash used in investing activities (17,504) (1,171)
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares 100,000 15,557
Net proceeds from issuance of subsidiary's shares to minority - 21,800
Dividends paid (171,193) -
Proceeds from borrowings 1,278,100 -
Repayment of borrowings (4,028,934) (4,195,171)
Capital element of finance lease repayments (665,090) -
Net cash used in financing activities (3,487,117) (4,157,814)
Effects of exchange rates on cash & cash equivalents 86,883 (2,079)
Net increase in cash and cash equivalents 1,826,522 697,780
Cash and cash equivalents at beginning of financial period 1,227,881 1,039,321
Cash and cash equivalents at end of financial period 3,054,403 1,737,101
AVATION PLC
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
NOTES TO THE FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
The Interim Report for Avation PLC for the six months ended 31 December 2010 was approved by the Directors on 1
February 2011.
1 CORPORATE INFORMATION
Avation PLC (the Company) is a public limited company incorporated in England and Wales under the
Companies Act 2006 (Registration Number 05872328).
2 BASIS OF PREPARATION AND ACCOUNTING POLICIES
This Interim Report has been prepared in accordance with the Disclosure and Transparency Rules (DTR)
of the Financial Services Authority and in accordance with International Accounting Standard (IAS) 34
'Interim Reporting'.
The Interim Report does 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 full financial report.
It is recommended that the Interim Report be read in conjunction with the annual report for the year
ended 30 June 2010 and considered together with any public announcements made by Avation PLC during
the six months ended 31 December 2010.
The accounting policies and methods of computation are the same as those adopted in the annual report
for the year ended 30 June 2010.
The preparation of the Interim Report requires management to make estimates and assumptions that
affect the reported income and expense, 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 2010, which carried an
unqualified audit report, have been delivered to the Registrar of Companies and did not contain a
statement under section 498 of the Companies Act 2006.
The Interim Report is unaudited and not reviewed by the auditors.
The Interim Report does not constitute statutory financial statements within the meaning of section
434 of the Companies Act 2006.
3 SEGMENT INFORMATION
a) Segment reporting policy
A segment is a distinguishable component of the Group within a particular economic environment
(geographical segment) and to a particular industry (business segment) which is subject to risks and
rewards that are different from those of other segments.
The primary format, business segments, is based on the Group's management and internal reporting
structure. In presenting information on the basis of business segments, segment revenue and segment
assets are based on the nature of the products or services provided by the Group, information for
geographical segments is based on the geographical areas where the customers are located.
Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities
include items directly attributable to a segment as well as those that can be allocated on a reasonable
basis. Unallocated items comprise mainly of corporate assets and liabilities or profit or losses items
that are not directly attributable to a segment or those that cannot be allocated on a reasonable basis.
Common expenses were allocated based on revenue from the Group.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that
are expected to be used for more than one year.
b) Primary reporting segment - business segments
During the six months ended 31 December 2010, the Group was organised into two main business segments
which are aircraft leasing and business procurement.
Other operations of the Group mainly comprise investment holding which does not constitute a separate
reportable segment. There are no inter-segment transactions recorded during the financial period.
Aircraft Business
leasing procurement Total
31 December 2010 £ £ £
Revenue & other income
- External sales 8,586,668 424,176 9,010,844
- Other income 69,931
Total of all segments 9,080,775
Less: elimination (730,866)
Consolidated revenue & other income 8,349,909
Aircraft Business
leasing procurement Total
31 December 2010 £ £ £
Results
Segment results 4,349,853 (13,935) 4,335,918
Finance income 1,242
Finance expense (1,548,472)
Unallocated corporate expenses -
Profit before taxation 2,788,688
Taxation (531,147)
Profit after taxation 2,257,541
Other segment items
Capital expenditure & valuation movement
- property, plant and equipment 13,566 3,938 17,504
Depreciation 2,386,739 378 2,387,117
Aircraft Business
31 December 2010 leasing procurement Total
£ £ £
Segment assets 93,324,495 230,040 93,554,535
Unallocated assets -
Consolidated total assets 93,554,535
Segment liabilities
Trade and other payables 4,698,266 277,695 4,975,961
Provisions of taxation 363,461 5,715 369,176
Short term provisions 2,524,884 - 2,524,884
Loans and borrowings 44,124,713 - 44,124,713
Deferred tax liabilities 4,215,945 - 4,215,945
Unallocated liabilities -
Consolidated total liabilities 55,927,269 283,410 56,210,679
Aircraft Business
leasing procurement Total
31 December 2009 £ £ £
Revenue & other income
- External sales 7,109,469 660,931 7,770,400
- Other income 49,547
Total of all segments 7,819,947
Less: elimination (260,993)
Consolidated revenue & other income 7,558,954
Aircraft Business
leasing procurement Total
£ £ £
31 December 2009
Results
Segment results 3,139,248 (4,165) 3,135,083
Finance income 2,686
Finance expense (1,607,074)
Unallocated corporate expenses -
Profit before taxation 1,530,695
Taxation (187,155)
Profit after taxation 1,343,540
Other segment items
Capital expenditure & valuation movement
- property, plant and equipment 341,153 - 341,153
Depreciation 2,244,551 153 2,244,704
Aircraft Business
30 June 2010 Leasing procurement Total
£ £ £
Segment assets 96,009,739 259,826 96,269,565
Unallocated assets -
Consolidated total assets 96,269,565
Segment liabilities
Trade and other payables 4,902,278 296,055 5,198,333
Provisions of taxation 14,532 3,836 18,368
Short term provisions 2,047,185 - 2,047,185
Loans and borrowings 48,725,729 - 48,725,729
Deferred tax liabilities 4,248,024 - 4,248,024
Unallocated liabilities -
Consolidated total liabilities 59,937,748 299,891 60,237,639
c) Second reporting segment - geographical segments
The following table provides an analysis of the revenues by geographical market, irrespective of the
origin of the goods:
31 December 31 December
2010 2009
Revenue £ £
Australia 4,671,720 4,067,553
United States 709,346 678,332
Denmark 2,875,725 2,749,995
Nigeria 14,288 23,876
Other 11,248 36,512
8,282,327 7,556,268
Total Net Book Value
assets Aircraft
31 December 2010 £ £
Australia 38,995,810 35,462,871
United States 7,241,434 7,241,434
Denmark 45,137,687 45,137,687
Nigeria 8,111 -
Malta 523,309 -
United Kingdom 168,869 -
Other 1,479,715 -
93,554,935 87,841,992
Total Net Book Value
assets Aircraft
30 June 2010 £ £
Australia 40,119,752 37,503,127
United States 7,649,047 7,649,047
Denmark 47,368,403 47,368,403
Malta 534,235 -
United Kingdom 338,302 -
Other 259,826 -
96,269,565 92,520,577
4 REVENUE
31 December 31 December
2010 2009
£ £
Rental income 7,149,482 6,151,577
Maintenance rent revenue 708,669 743,760
Management and service income 45,755 560,282
Sales of finished goods 378,421 100,649
8,282,327 7,556,268
5 OTHER INCOME
31 December 31 December
2010 2009
£ £
Interest income 1,242 2,686
Foreign currency exchange adjustment gain 66,340 -
67,582 2,686
6 OTHER OPERATING EXPENSES
31 December 31 December
2010 2009
£ £
Claim on maintenance reserve expense 661,885 1,053,876
Depreciation of property, plant and equipment 2,387,116 2,244,704
Foreign currency exchange adjustment loss - 120,483
3,049,001 3,419,063
7 FINANCE EXPENSES
31 December 31 December
2010 2009
£ £
Interest expense on secured borrowings 1,468,697 1,498,315
Guarantee and commitment fee 79,775 108,749
1,548,472 1,607,064
8 PROPERTY, PLANT AND EQUIPMENT
Furniture and
equipment Aircraft Total
31 December 2010 £ £ £
Cost or valuation:
At 1 July 2010 995 103,942,004 103,942,999
Additions 3,938 13,566 17,504
Currency realignment 20 (2,577,032) (2,577,012)
At 31 December 2010 4,953 101,378,538 101,383,491
Representing:
Cost 4,953 5,014,813 5,019,766
Valuation - 96,363,725 96,363,725
4,953 101,378,538 101,383,491
Accumulated depreciation:
At 1 July 2010 995 11,421,427 11,422,422
Depreciation for the period 378 2,386,739 2,387,117
Currency realignment (23) (268,017) (268,040)
At 31 December 2010 1,350 13,540,149 13,541,499
Net book value:
At 1 July 2010 - 92,520,577 92,520,577
At 31 December 2010 3,603 87,838,389 87,841,992
Furniture and
equipment Aircraft Total
30 June 2010 £ £ £
Cost or valuation:
At 1 July 2009 4,367 88,883,092 88,887,459
Additions - 5,016,050 5,016,050
Disposal/written off (3,620) - (3,620)
Currency realignment 248 10,042,862 10,043,110
At 30 June 2010 995 103,942,004 103,942,999
Representing:
Cost 995 5,014,813 5,015,808
Valuation - 98,927,191 98,927,191
995 103,942,004 103,942,999
Accumulated depreciation:
At 1 July 2009 4,140 5,829,393 5,833,533
Depreciation for the year 238 4,704,566 4,704,804
Disposal/written off (3,620) - (3,620)
Currency realignment 237 887,468 887,705
At 30 June 2010 995 11,421,427 11,422,422
Net book value:
At 1 July 2009 227 83,053,699 83,053,926
At 30 June 2010 - 92,520,577 92,520,577
9 SHARE CAPITAL
31 December 30 June
2010 2010
£ £
Authorised:
100,000,000 ordinary shares of 1 penny each 1,000,000 1,000,000
Allotted, called up and fully paid:
28,532,220 (30 June 2010: 26,219,010) ordinary shares of 1 penny each 285,322 262,190
On 26 October 2010, the Company issued 2,313,210 ordinary shares of 1 penny each following the exercise
of warrants by the warrant holders for £100,000.
10 DIVIDENDS PAID
31 December 31 December
2010 2009
£ £
Dividend paid during the 6 months ended 31 December:
Final dividend of 0.6p (2009: NIL) 171,193 -
No dividends have been declared subsequent to 31 December 2010.
11 EARNINGS PER SHARE
(a) Basic earnings per share ("EPS")
EPS is calculated by dividing the net profit attributable to members of the Company by the
weighted average number of ordinary shares in issue during the financial year.
31 December 31 December
2010 2009
£ £
Net profit attributable to equity holders
of the Company 1,584,826 801,941
Weighted average number of ordinary shares 27,061,320 25,565,173
Basic earnings per share 5.86 pence 3.14 pence
(b) Diluted earnings per share
For the purpose of calculating diluted earnings per share, profit attributable to equity holders
of the Company and the weighted average number of ordinary shares outstanding are adjusted for
the effects of all dilutive potential ordinary shares. The Company has one category of dilutive
potential ordinary shares; warrants.
For warrants, the weighted average number of shares on issue has been adjusted as if all dilutive
share options were exercised. The number of shares that could have been issued upon the exercise
of all dilutive share option less the number of shares that could have been issued at fair value
(determined as the Company's average share price for the financial year) for the same total
proceeds is added to the denominator as the number of shares issued for no consideration. No
adjustment is made to the net profit.
Diluted earnings per share attributable to equity holders of the Company is calculated as
follows:
31 December 31 December
2010 2009
£ £
Net profit attributable to equity holders
of the Company 1,584,826 801,941
Weighted average number of ordinary shares 27,061,320 25,565,173
Adjustment for:
- Warrants 787,348 3,304,827
27,848,668 28,870,000
Diluted earnings per share 5.69 pence 2.78 pence
12 CONTINGENT LIABILITIES
There were no material changes in contingent liabilities since 30 June 2010.
13 TRANSACTIONS WITH RELATED PARTIES
Significant related party transactions:
31 December 31 December
2010 2009
£ £
Sales of goods to a related party(1) 306,428 54,542
Services rendered to a related party(2) 43,344 541,638
Guarantee and commitment fee paid to a related party(3) 79,775 108,749
Maintenance rent received from a related party(4) 708,669 743,760
Rental income received from a related party(5) 3,569,349 2,723,250
1 - Sales of goods to Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a
director of Skywest Airlines (Australia) Pty Ltd.
2 - Services rendered to Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also
a director of Skywest Airlines (Australia) Pty Ltd.
3.- Paid to CaptiveVision Capital Ltd in which a director of the Company is a director of CaptiveVision
Capital Ltd.
4 - Received from Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a
director of Skywest Airlines (Australia) Pty Ltd.
5 - Received from Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a
director of Skywest Airlines (Australia) Pty Ltd.
The nature and contractual terms of key management compensation and inter-company transactions during the
period are consistent with the disclosures in the Annual Report for the year ended 30 June 2010.
14 EVENTS AFTER THE BALANCE SHEET DATE
On 10 January 2011, the Company entered into an agreement with Skywest Airlines Pty Ltd ("Skywest") and
Virgin Blue Airlines Pty Ltd ("Virgin Blue") to provide a fleet of up to 18 new aircraft which will
operate in Australia.
Each aircraft will be operated by Skywest under wet lease to Virgin Blue for a fixed period of 10 years.
The 2 airlines and the Company are making arrangements to take delivery of new aircraft during 2011 and
2012.
The aircraft will be owned by, and leased by the Company on 10 year operating leases with other
commercial terms in line with those typically entered into by the Company and its lessee customers. The
Directors believe that given the quality of the lessee, the fixed term and the fact the aircraft are new,
the Company is well placed to utilise Government-backed Export Credit Agency Financing ("ECA Financing").
The Company intends to make an application for ECA Financing forthwith.
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 risks 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 Group's principal risks and uncertainties are consistent with those set put in the Prospectus submitted to
the London Stock Exchange.
The principal risks and uncertainties which may affect the Group in the second half 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 for 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 2010.
DIRECTORS
The directors of Avation PLC are listed in its Annual Report for the year ended 30 June 2010. 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 has 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 six months and their impact on
the Interim Report, and a description of the principal risks and uncertainties for the remaining six months of
the financial year; and
* material related party transactions in the first six months and any material changes in the related
party transactions described in the last annual report.
By order of the Board of Directors,
Jeff Chatfield
Chairman
Singapore, 2 Feb 2011
Avation plc
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