REG - Gama Aviation PLC - Audited Results for the year ended 31 December 21
27/05/2022 14:15
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RNS Number : 1267N Gama Aviation PLC 27 May 2022
This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
27 May 2022
Gama Aviation Plc (AIM: GMAA)
("Gama Aviation" or the "Company" or "Group")
Audited Results for the year ended 31 December 2021
Improved financial performance following strategic refocus
The Company is pleased to present its results for the full year ended 31
December 2021. A copy of the Annual Report and Financial Statements will be
available shortly on the Company's website at
https://www.gamaaviation.com/investors/reports-and-presentations/.
Financial Highlights
· Revenues up 30% (25% at constant currency(2)) to $235.9m (2020:
$182.0m)
· Gross Profit up 20% (16% at constant currency(2)) to $44.7m
(2020: $37.3m)
· Gross Profit Margin slightly down by 1.5 percentage point ("ppt")
(down 1.4ppts at constant currency) at 19.0% (2020: 20.5%)
· Adjusted EBIT loss reduced by 11% to $4.3m (2020: $4.8m), despite
the prior year benefitting from COVID-19 related government support of $5.8m
· The Adjusted EBIT loss includes the Group's $1.5m share of
associate losses (2020: $3.3m), and $3.2m (2020: Nil) of start-up costs
relating to the strategic development, and commencement in H2, of two US base
maintenance facilities. Adding back the $4.7m impact from these two items, the
Group has delivered an Adjusted EBIT profit of $0.4m (2020: loss of $1.5m)
from its mature and continuing operations
· Net cash inflow from operating activities of $5.2m (2020: $35.4m
cash inflow). Reduction in the positive contribution from underlying working
capital, which is in part due to reduced government support in the period,
start-up losses following the commencement of base maintenance operations at
Millville and Las Vegas and a repayment of deferred VAT from 2020 in 2021
· Liquidity remains strong with $10.2m (2020: $16.1m) of cash and
$12.1m (2020: $24.7m) of its $50m revolving credit facilities (RCF) undrawn as
at 31 December 2021
· The Group has commenced the process of refinancing and the
Directors are confident that the RCF and term loan will be renewed, albeit at
a higher finance cost
· Net debt, inclusive of $48.0m (2020: $46.1m) of lease
obligations, increased to $104.9m (2020: $83.2m) resulting from the
acquisition of Jet East and subsequent organic strategic investments
· As at 30 April 2022 cash balances were $14.2m (2020: $12.1m) in
addition to RCF headroom of $20.3m (2020: $12.1m)
· The Board of Directors does not recommend a dividend be paid
Financial Summary
Adjusted(1) $m Statutory $m
Dec-21 Restated(3) Dec-21 Restated(3)
Dec-20 Dec-20
Revenue 235.9 182.0 235.9 197.5
Gross Profit 44.7 37.3 44.7 52.8
Gross Profit % 19.0% 20.5% 19.0% 26.7%
EBIT (4.3) (4.8) (7.3) (5.9)
Loss for the year (6.3) (8.6) (8.8) (14.6)
Loss per share (cents) (8.7) (13.6) (12.7) (23.1)
1 The Alternative Performance Measures (APMs) are defined in Note 6
of the notes to the financial statements and reconciled to the nearest
International Financial Reporting Standards (IFRS) measure. APMs include
Adjusted Revenue, Adjusted Gross Profit, Adjusted EBIT and Net debt. The
Adjusted Revenue and Adjusted Gross Profit APM are solely for the comparative
2 To aid comparability 2020 results have also been calculated on a
constant currency basis using a constant foreign exchange rate of $1.38 to
£1, being the cumulative average USD-GBP exchange rate for 2021, instead of
the reported exchange rate of $1.28 to £1 for 2020. On a constant currency
basis, 2020 Adjusted revenue is $189.3m, Adjusted Gross Profit is $38.7m,
Gross Profit percentage is 20.4% and Adjusted EBIT remains at a loss of $4.8m.
Refer to Note 6 of the notes to the financial statements for further details
3 The restatements to the 2020 income statement comprise a
reclassification from cost of sales to administrative expenses, and various
IFRS 16 adjustments resulting from an extensive review of Group lease
commitments carried out in 2021. These result in a net reduction in losses
before and after tax of $0.1m. The restatement also resulted in a $3.4m
reduction in net debt at 31 December 2020. Details are in Note 2 of the notes
to the financial statements
Strategic Highlights:
· Significant expansion of the Group's Business Aviation
maintenance and repaid operations in the US through the acquisition of Jet
East
· Targeted development of two new base maintenance facilities in
the US to expand further the Group's maintenance operations in the world's
largest business aviation market
· Secured term extensions on three key Special Mission contracts
· Recommenced development project at the Business Aviation Centre
in Sharjah, UAE
· Secured successful tenderer status for the development of a
second hangar in Jersey to more than double our facility's capacity ahead of
increased demand
· Disposed of our shareholding interest in our non-core loss-making
Hong Kong based associate, monetising $2.0m in cash from the sale
· Completed the re-alignment of our business operations along
focused Strategic Business Units (SBUs)
Outlook
The Group remains firmly focused on the execution of the growth strategy that
supported the financial improvement in 2021. We have invested significantly,
both organically and inorganically, in our maintenance operations in the US,
the world's largest private jet market.
Since the beginning of 2022, we have seen continued revenue momentum,
particularly in the US, albeit offset by increased costs due to supply chain
pressures and energy price inflation aggravated by the prolonged effects of
the pandemic and the war in Ukraine. In this context, the Board is
adopting a cautious approach to the remainder of the year, with a particular
focus on delivering continuing operational improvements.
Notwithstanding this, we will continue to focus on delivering our growth
strategy and consider that longer term, the Group is well placed for the
future.
Commenting on the full year results, Marwan Khalek, Chief Executive said:
"Our 2021 results reflect the significant progress that the Group has made
over the last couple of years in the face of unprecedented operational
challenges and a difficult global economic environment. The significant
revenue growth and improved financial performance delivered in 2021 serves to
validate the effectiveness of our strategy and management actions to improve
our operational and financial performance.
In 2022, our focus remains on delivering our growth strategy, with a
particular emphasis on continuing operational improvement to help offset
increased cost pressures resulting from the prolonged effect of the pandemic
and energy price inflation. While we remain cautious about the immediate
outlook in this environment, Gama Aviation remains financially and
operationally resilient. As a result, I am confident that, beyond the
current market challenges, we are well placed for future success."
END
Gama Aviation
Plc
+44 (0) 1252 553 029
Marwan Khalek, Chief Executive
Michael Williamson, Interim CFO
Camarco
+44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
WH
Ireland
+44 (0) 207 220 1666
James Joyce
Ben Good
Gama Aviation - Notes to Editors
Founded in 1983 with the simple purpose of providing aviation services that
equip its customers with decisive advantage, Gama Aviation Plc (LSE AIM: GMAA)
is a highly valued global partner to blue chip corporations, government
agencies, healthcare trusts and private individuals.
The Group has three global divisions: Business Aviation (Aircraft Management,
Charter, FBO & Maintenance), Special Mission (Air Ambulance & Rescue,
National Security & Policing, Infrastructure & Survey, Energy &
Offshore); and Technology & Outsourcing (Flight Operations, FBO, CAM
software, Flight Planning, CAM & ARC services)
More details can be found at: http://www.gamaaviation.com/
(http://www.gamaaviation.com/)
Chief Executive Officer's statement
Introduction
The Group has adjusted and adapted well to this prolonged period of social and
geopolitical uncertainty and the resulting economic impact. Through the
execution of our strategy and the greater focus it promotes, I am pleased to
report that the Group has delivered significant revenue growth and improved
financial performance despite the many macro-economic challenges it continues
to face.
During this period of continued uncertainty and instability, the response from
our people has been nothing short of exemplary. They have embraced
organisational change and understood the need to reduce costs, preserve cash
and focus on excellent service and delivery to our client base. Our people's
unwavering commitment, dedication and hard work are the foundations upon which
we have adapted and reshaped our business to the new economic realities. I
am very pleased to see evidence of their hard work, which has driven our
recovery and the improved financial performance.
There is more to do, but I remain firmly of the belief that by maintaining our
focus on the fundamentals critical to our business, we will continue to drive
improvements in operational and financial performance. These fundamentals
include focusing on; providing relevant services to our clients that deliver a
decisive advantage; leveraging the Group's operational platform and cross
selling opportunities to improve margins; and fostering our peoples'
considerable energy, talent and skills; whilst contributing to society through
our commitment to equality, diversity and sustainability.
Strategy overview
On 1 January 2021, the Group rolled out an evolved Group strategy and
re-organised the business into three Strategic Business Units (SBUs); Business
Aviation, Special Mission and Technology & Outsourcing. In parallel, the
Group reorganised and strengthened its Leadership teams to support the
execution of the strategy, the delivery of its strategic imperatives and the
five-year business plan.
Business Aviation
In the Business Aviation SBU, the acquisition Jet East Aviation was completed
in January 2021 effectively doubling the Group's maintenance and repair
operations (MRO) in the USA (the world's largest business aviation market by
volume and value). This was followed by organic investment in the
development of two base maintenance locations, which became operational in H2.
These two moves further cement our market position and provide a strong
platform for organic growth in this strategically important market.
Alongside the development of the MRO network, Business Aviation's growth
strategy is focused on the development of important business aviation airport
infrastructure, such as Fixed Base Operations (FBOs), whose footprint derives
predictable revenues and cross selling opportunities for maintenance, charter
and aircraft management services.
Central to this is the development of a state-of-the-art Business Aviation
Centre in Sharjah, UAE which was paused at the start of the pandemic.
Following a diligent re-evaluation of the project's continuing viability, the
Group has recommenced the development of these facilities, which remain
central to growing our market share and leveraging the Group's operational
scale in the Middle East.
The Business Aviation SBU has also secured successful tenderer status for the
development of a second hangar in Jersey to more than double our facility's
capacity.
In December 2021, the Group disposed of its shareholding interest in its
non-core, loss-making, Hong Kong based associate, China Aircraft Services
Limited (CASL), monetising $2.0m in cash from the sale.
Special Mission
The Special Mission SBU, has successfully secured term extensions on three
long-term government contracts and continues to position the SBU for further
organic growth in four defined market sectors. With a strong track record in
delivery and a visible pipeline, coupled with a new Leadership team, the SBU
is firmly focused on converting new opportunities and enhancing relationships
with its existing client base.
The SBU also continues to deliver incremental improvements in its operational
and financial performance through the active implementation of the Group's
"Fix & Optimise" initiatives.
Technology & Outsource (T&O)
The T&O SBU made steady progress bringing a suite of world class, aviation
focused, enterprise resource planning software as a service (SaaS) products to
market. Notable successes have been achieved in the US and Europe, having
strengthened the sales team and automated on-boarding processes. The products'
native automation and Artificial Intelligence are assisting T&O's clients'
removal of manual processes from their operations and maximising their profit
potential through higher definition commercial data and greater situational
awareness.
Aside of the SaaS services, the SBU continues to provide a variety of
specialist outsource services to the military, airlines, lessors and business
aviation operators. Critical to continued growth has been the addition of EASA
Part-CAMO (a post Brexit requirement), achieved via the opening of a new
operation in Poland. In turn, the Polish operation, combined with existing
resources, has allowed T&O to secure third-party trip support and flight
planning service contracts.
T&O will continue to attract further investment from the Group as it
builds the data management infrastructure required to manage the increasingly
complex interface of regulatory compliance and commercial situational
awareness.
FY '21 Financial Performance
Through the execution of our strategy the Group grew its revenues to $235.9m,
up by 25% (2020 at constant currency(1): $189.3m; 2020: $182.0m). The
revenue growth was driven by the acquisition of Jet East in the US, the full
year effect of various Special Mission contract wins and the general recovery
of activity within the business aviation sector following the gradual easing
of travel restrictions.
Consequently, the Group delivered a gross profit of $44.7m, up 16%, in
absolute terms up $6.0m (2020 at constant currency(1): $38.7m; 2020:
$37.3m). Gross profit margins were down slightly by 1.4bbps to 19% (2020 at
constant currency(1): 20.4%; 2020: 20.5%).
The Adjusted EBIT loss for the year was reduced by 11% to $4.3m (2020: $4.8m),
despite the prior year benefitting from COVID-19 government support of some
$5.8m.
The 2021 financial performance has been impacted by the inclusion of the
Group's $1.5m (2020: $3.3m) share of losses from its Hong Kong based
associate, CASL, which has now been sold, and $3.2m (2020: nil) of start-up
costs ($2.5m in costs of sale and $0.7m in overheads) relating to the
strategic development, and commencement in H2 of two US base maintenance
facilities.
Adding back the $2.5m impact on costs of sale associated with the development
of the US base maintenance facilities, the gross profit for 2021 would
increase by 22% to $47.2m (2020 at constant currency(1): $38.7m) in absolute
terms, which equates to a gross profit margin of 20%, only 0.4bbps down on
prior year (2020 at constant currency(1): 20.4%).
Notwithstanding the total $4.7m impact from these two items, the Group has
delivered an Adjusted EBIT profit of $0.4m (2020: loss of $1.5m) from its
mature and continuing operations.
The Group generated a net cash inflow from operating activities of $5.2m
(2020: $35.4m). Whilst the 2021 cash inflows benefitted from the receipt of
the remaining branding fees following the disposal of US Air Associate,
working capital was absorbed into our US MRO business associated with the
acquisition of Jet East and the development of the two base maintenance
facilities referenced above. In addition, there was reduced government support
in the period and a repayment of deferred VAT from 2020 in 2021.
(1 ) To aid comparability 2020 results have also been calculated on a
constant currency basis. Refer to Note 6 of the notes to the financial
statements for further details.
Credit Facilities
The Group currently benefits from two credit facilities provided by HSBC, a
$50m RCF and a £20m term loan which mature in November 2022 and January 2023
respectively. Following initial engagement, HSBC have indicated their
willingness to renew the facilities and have provided indicative terms which
are currently under negotiation. Whilst the refinancing has not been
concluded, the Board is confident that it will secure the facilities necessary
to support its on-going
In parallel with its discussions with HSBC, the Company is actively pursuing
alternative and/or additional credit facilities aimed specifically at meeting
the Group's asset-based financing needs relating to aircraft, real estate and
infrastructure projects.
Market updates will be provided when binding facilities are secured.
Dividend
The Board does not recommend a dividend for 2021 (2020: nil pence per share).
The Company intends to restore the Company's distributable reserves when
practicable which may involve extracting dividends from subsidiaries amongst
other steps.
Social Value
I am particularly pleased with the progress that the Group is making with
regard to its Social Value commitments. The pandemic years have created new
challenges and we are responding to them by introducing hybrid working and
supporting our people with mental health training as well as a range of advice
via our WeCare support programme. At a societal level, our People Teams are
focused on addressing the perennial issue of gender and ethnic diversity and
inclusion within the aviation sector. I'm pleased to say their efforts are
showing results, particularly in our UK apprentice program.
Finally, the Group is making progress with our Carbon Reduction Plan. Our 2021
Streamlined Energy and Carbon Report will show the second consecutive
reduction since 2019 in the Group's scope 1,2 and 3 (excluding downstream)
Greenhouse Gas emissions.
In all cases we recognise this is the start of our journey and that the Group
has a long way still to go, but I am pleased with our collective progress.
Outlook
The Group remains firmly focused on the execution of our five year strategy
that has supported the financial improvement seen in 2021. We have invested
significantly, both organically and inorganically, in our maintenance
operations in the US, the world's largest business aviation market.
Since the beginning of 2022, we have seen continued revenue momentum,
particularly in the US, albeit offset by increased costs due to supply chain
pressures and energy price inflation aggravated by the prolonged effects of
the pandemic and the war in Ukraine. In this context, the Board is
adopting a cautious approach to the remainder of the year, with a particular
focus on delivering continuing operational improvements.
Notwithstanding this, we will continue to focus on delivering our strategy and
consider that longer term, the Group is well placed for the future.
/ GROUP OPERATIONAL PERFORMANCE REVIEW
Revenue
Adjusted(1, 2) Statutory
USD'000s 2021 2020 2021 2020
Business Aviation 170,146 125,312 170,146 125,312
Special Mission 56,716 47,918 56,716 47,918
Technology & Outsourcing 5,297 5,023 5,297 5,023
Branding fees 3,750 3,750 3,750 19,250
Total 235,909 182,003 235,909 197,503
Gross Profit
Adjusted(1, 2) Statutory
USD'000s 2021 Restated(3) 2021 Restated(3)
2020 2020
Business Aviation 19,702 17,425 19,702 17,425
Special Mission 17,075 12,534 17,075 12,534
Technology & Outsourcing 4,204 3,569 4,204 3,569
Branding fees 3,750 3,750 3,750 19,250
Total 44,731 37,278 44,731 52,778
EBIT
Adjusted(1, 2) Statutory
USD'000s 2021 Restated(3) 2021 Restated(3)
2020 2020
Business Aviation (8,764) (3,702) (12,392) (16,322)
Special Mission 4,546 3,056 4,534 3,024
Technology & Outsourcing 47 605 (289) 256
Branding fees 3,691 3,733 3,691 19,233
Associates (1,491) (3,272) - (5,848)
Corporate(4) (2,303) (5,238) (2,796) (6,203)
Total (4,274) (4,818) (7,252) (5,860)
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
International Financial Reporting Standards (IFRS) measure. APMs include
Adjusted Revenue, Adjusted Gross Profit, Adjusted EBIT and Net debt. The
Adjusted Revenue and Adjusted Gross Profit APM are solely for the comparative.
(2) To aid comparability 2020 results have also been calculated on
a constant currency basis using a constant foreign exchange rate of $1.38 to
£1, being the cumulative average USD-GBP exchange rate for 2021 instead of
the reported exchange rate of $1.28 to £1 for 2020. On a constant currency
basis, 2020 Adjusted revenue is $189.3m, Adjusted Gross Profit is $38.7m,
Gross Profit percentage is 20.4% and Adjusted EBIT remains at a loss of $5.3m.
Refer to Note 6 of the notes to the financial statements for further
details.
(3) The restatements to the 2020 income statement comprise a
reclassification from cost of sales to administrative expenses and various
IFRS 16 adjustments resulting from an extensive review of Group lease
commitments carried out in 2021. These result in a net increase in EBIT loss
and adjusted EBIT loss of $26k and $495k respectively as detailed in Note 2 of
the notes to the financial statements.
(4) Following the transitioning of the segmental reporting to
reflect the realignment of the business along its SBUs, the Corporate cost
recovery estimation methodology was also reviewed resulting in a revised level
of Corporate charges to overhead within the SBUs in 2021. Accordingly, and
as a result of this change in estimate, Corporate costs were reduced by $3.7m
with an equivalent charge in the respective SBUs. Excluding this change in
estimate, there was a $0.5m increase in corporate costs, which is primarily
related to the adverse impact of foreign exchange of $0.4m. This change of
Corporate cost recovery estimation methodology has not been applied to the
2020 comparators.
The SBU performance is explained in detail below.
/ BUSINESS AVIATION
Business Aviation is focused on the delivery of the following lines of
business to clients principally in the top three regional business aviation
markets: the US, Europe and the Middle East.
/ Management. The operational management of an aircraft (or fleet), and its
crew, that the owner wishes to place on one of the Group's air operating
certificates (AOCs)
/ Charter. The sale of available flight hours on aircraft to charter brokers
or to direct clients worldwide
/ FBO. The management of our strategically positioned fixed base operations at
airports in the UK, Channel Islands and Middle East
/ Maintenance (MRO). The delivery of comprehensive maintenance, repair and
modification solutions that support business aviation aircraft operators and
owners.
Business Aviation MRO in the US has a dedicated management team and is
separately reviewed by the Group Chief Executive Officer who acts as the Chief
Operating Decision Maker (CODM). Therefore, Business Aviation MRO US has been
presented separately from Business Aviation excluding MRO US which falls under
a separate management team and is separately reviewed by the CODM.
USD'000s BA MRO US(3) BA excluding MRO US Total
2021 Restated(1) 2021 Restated(1) 2021 Restated(1)
2020 2020 2020
Revenue 79,250 38,606 90,896 86,706 170,146 125,312
Gross Profit 9,035 8,474 10,667 8,951 19,702 17,425
GP % 11% 22% 12% 10% 12% 14%
Adjusted EBIT(2) (7,971) 181 (793) (3,883) (8,764) (3,702)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. APMs also include organic and constant currency Revenue,
Gross Profit and Adjusted EBIT
(3) The Jet East business operations were merged with those of the
Groups US MRO operations immediately following the acquisition on 15 January
2021. It is therefore not possible to assess and/or segregate the actual
impact of the acquisition on the combined financial performance. Jet East's
unaudited financial statement for 2020 shows annual revenues of $28.2m, Gross
Profit of $0.2m and Adjusted EBIT of $1.4m.
Due to the gradual easing of travel restrictions and quarantine requirements
in 2021 the Business Aviation SBU saw an increased level of activity across
all its business lines, the impact of which can be summarised as follows:
In aircraft management, overall, we saw increased aircraft utilisation by our
clients. This increased activity translated to some additional revenue but had
little impact on gross profits due to the pass-through nature of these
revenues. The gross profit in this business line was however negatively
impacted by the loss of management fee revenues following the disposal of
several managed aircraft by their owners. This impact was felt hardest in
our Hong Kong base where very strict 21 days quarantine isolation requirements
continued to severely limit travel appetite and there are no longer four Hong
Kong based aircraft. The impact has been somewhat mitigated by gains
elsewhere as well as some aircraft sales commissions.
Charter saw modest increases in demand resulting in increased activity and
revenues, both in respect of in-fleet charter as well as charter brokerage but
margins remained under pressure due to competitive pressures.
Increased activity resulted in significant increase in aircraft movements at
our Sharjah and Jersey FBOs resulting in strong growth in revenues and gross
profits during the year.
The US market saw a significant increase in aircraft activity through the
second half of the year which has fuelled very strong demand for both our line
maintenance and base maintenance services. This, together with the
acquisition of Jet East and the organic development of two new base
maintenance facilities, resulted in the US MRO business line delivering
significant revenue growth. Gross profit was however, negatively impacted by
the start-up costs that were incurred at the two new bases.
MRO demand and activity at our Bournemouth and other non-US bases, which are
predominantly targeted at base maintenance, remained steady.
Overall, the Business Aviation SBU grew its organic and constant currency
revenues by 8% to $170.1m (2020: $157.0m after rebasing for $28.2m related to
Jet East and $3.5m constant currency). Gross profit was up 10% to $19.7m
(2020: $18.0m after rebasing for $0.2m related to Jet East and $0.3m constant
currency), which includes the near full year Gross Profit contribution from
the acquired Jet East business.
Adjusted EBIT fell by $5.1m to an adjusted EBIT loss of $8.8m (2020: $3.7m
loss) and on an organic and constant currency basis, there was a decrease of
$3.4m after rebasing for the adverse impact of foreign exchange of $0.3m and
rebasing the comparative for the acquisition of Jet East which contributed a
loss of $1.4m. Within Business Aviation MRO US there was a $0.3m credit to the
expected credit loss within administrative expenses following the settlement
of a historic overdue receivable and within Business Aviation excluding MRO US
there was a $0.2m charge to increase the expected credit loss allowance on
receivables. Within Business Aviation MRO US, overhead increased due to
investment in start-up locations and capability for increased activity levels
as well as $2.3m of increased corporate overhead allocations in part due to
the acquisition of Jet East and due to a revised estimate of corporate
overhead by SBU across the Group. Within Business Aviation excluding MRO US,
there was a $0.4m decrease in corporate overhead allocations, partially offset
by additional overhead due to managerial changes following the introduction of
the new reporting structure.
USD'000s BA MRO US BA excluding MRO US Total
2021 Restated* 2021 Restated* 2021 Restated*
2020 2020 2020
Adjusted EBIT(1) (7,971) 181 (793) (3,883) (8,764) (3,702)
Exceptional items - transaction costs (558) (663) - (29) (558) (692)
Exceptional items - integration and business re-organisation costs (413) - 1,901 (202) 1,488 (202)
Exceptional items - other items - - 79 709 79 709
Exceptional items - Impairment of right-of-use assets - - (1,911) (6,544) (1,911) (6,544)
Exceptional items - Impairment of goodwill - - - (833) - (833)
Exceptional items - Impairment of assets under construction - (4,609) (4,609)
Equity incentive plan (1,821) - - - (1,821) -
Share-based payments 58 (61) (52) (88) 6 (149)
Amortisation (710) - (201) (300) (911) (300)
EBIT (11,415) (543) (977) (15,779) (12,392) (16,322)
(1) Restatements are detailed in Note 2 of the notes to the financial
statements
EBIT improved from a loss of $16.3m in 2020 to a loss of $12.4m in 2021. In
addition to the movements discussed above, there was $1.9m impairment of right
of use assets at Sharjah Airport following a ten-year extension option which
was exercised in the current period. The continued uncertainties in funding
the Business Aviation Centre (BAC) mean that in our judgement the additional
right-of-use asset must be immediately impaired. In the event that
uncertainties in funding the project are resolved after the date of the
reporting, the entire right of use asset and an asset under construction
previously impaired, may be eligible for an impairment reversal. Following the
acquisition of Jet East, the amortisation of acquired intangibles increased by
$0.7m, Jet East severance costs of $0.4m were incurred, and a $1.8m charge for
a long-term incentive plan has been recognised. The above were partially
offset by $1.9m income upon release of lease and other related obligations at
Fairoaks Airport, which had no equivalent right of use asset due to a historic
impairment.
/ SPECIAL MISSION
The Special Mission SBU provides the mission expertise to assist governments
and businesses in exploiting a variety of aviation assets (principally fixed
wing and helicopters) within the following sectors:
/ Air Ambulance & Rescue. The delivery of fixed wing and rotary mission
solutions to the governments of Scotland, Jersey and Guernsey as well as the
circa 21 helicopter air ambulance charities operating within the UK
/ National Security & Law Enforcement. Providing "intelligence as a
service" aviation platforms to the UK government to protect the national
interest
/ Infrastructure & Survey. The monitoring of critical national
infrastructure for the purposes of failure monitoring, environmental controls,
mapping or other such studies
2021 Restated(1)
2020
Revenue 56,716 47,918
Gross Profit 17,075 12,534
GP % 30% 26%
Adjusted EBIT(2) 4,546 3,056
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. APMs also include organic and constant currency Revenue,
Gross Profit and Adjusted EBIT
The Special Mission SBU grew Revenue by 18% to $56.7m (2020: $47.9m) and Gross
Profit by $4.5m to $17.1m (2020: $12.5m). On a constant currency basis,
Revenue was 10% higher and Gross Profit was $3.7m higher after rebasing for
the favourable impact of foreign exchange of $3.4m and $0.9m respectively. The
growth in revenue includes the impact of increased flying hours and the
related costs rechargeable to core customers, additional non-recurring
projects undertaken for core customers, incremental work with core and ad-hoc
customers and the full year effect of air ambulance service contracts for the
Government of Jersey and the Government of Guernsey which were acquired in the
middle of the prior year, as shown in Note 6 of the notes to the financial
statements. Gross profit benefitted from the full year effect of the contracts
referred to above, a reduction in one-off charges, insourcing of aviation
assets, incremental work with core and ad-hoc customers, a change in the
estimate of costs to complete contractual obligations and some changes in the
mix of revenues between labour and parts. In the current year, both revenue
and gross profit benefitted from modest improvements as a result of the fix
and optimise agenda adopted by management.
Adjusted EBIT increased by $1.5m to $4.5m (2020: $3.1m) due to the growth in
Gross Profit referred to above, albeit this growth was partially offset by
overhead growth of $3.0m, principally comprising a $0.9m increase in
depreciation due to the full year effect of aircraft which entered into
service at the middle of the prior year, a $1.4m increase in the allocation of
Corporate overhead and $0.7m adverse impact of foreign exchange. Following the
transitioning of current year reporting to reflect the realignment of the
business along its SBUs a revised level of Corporate overhead was charged to
the Special Mission SBU.
2021 Restated(1)
2020
Adjusted EBIT(2) 4,546 3,056
Share-based payments (12) (32)
EBIT 4,534 3,024
(1 )Restatements are detailed in Note 2 of the notes to the financial
statements
(2 )The Alternative Performance Measures (APMs) are defined in Note 6 of the
notes to the financial statements and reconciled to the nearest IFRS measure.
APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted EBIT and Net
debt. APMs also include organic and constant currency Revenue, Gross Profit
and Adjusted EBIT
EBIT increased from a profit of $3.0m in 2020 to a profit of $4.5m in 2021. In
addition to the movements discussed above, EBIT includes share-based payment
charges.
/ TECHNOLOGY & OUTSOURCING
The Technology & Outsourcing SBU is focused on the delivery of advisory,
technology and outsource services to aviation customers who seek to gain a
decisive advantage using real and near real time intelligence. The Technology
& Outsourcing team provide:
/ Technology products via myairops(®). Flight and aircraft management,
maintenance tracking, ground operations and crew scheduling and operations
/ Maintenance and Continuing Airworthiness Management (CAM). Comprehensive
range of services from full CAM and Airworthiness Review Certificates (ARC)
through to supplying the software for an organisation to manage the
through-the-life maintenance of its aircraft
/ Trip planning & support. Providing third party services to aircraft
operators who are seeking to outsource their flight operations tasks.
2021 Restated(1)
2020
Revenue 5,297 5,023
Gross Profit 4,204 3,569
GP % 79% 71%
Adjusted EBIT(1) 47 605
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. APMs also include organic and constant currency Revenue,
Gross Profit and Adjusted EBIT
The Technology & Outsourcing segment grew Revenue by 5% to $5.3m (2020:
$5.0m) and Gross Profit by $0.6m to $4.2m (2020: $3.6m). On a constant
currency basis, revenue was 2% lower and gross profit was $0.3m higher after
rebasing for the favourable impact of foreign exchange of $0.4m and $0.3m
respectively, as shown in Note 6 of the notes to the financial statements.
Maintenance and CAM traded in line with prior year revenue but with a modest
reduction in gross profit ($0.1m) due to inflationary pressure on the cost of
sales. Myairops(®) was broadly in line with prior year revenue, with a modest
reduction in revenue ($0.2m) related to trading with the Group's former US Air
Associate, which benefitted the prior year and due to COVID effects on
commercial airline operators impacting one myairops(®) product. The revenue
shortfall was more than offset by cost savings which increased gross profit by
$0.2m. In addition, there was a $0.2m increase in gross profit on Military
Airworthiness Reviews.
Adjusted EBIT fell by $0.5m to $0.1m (2020: $0.6m) with $0.4m of additional
amortisation of the product development related to product launches and $0.4m
of increased Corporate overhead offsetting improvements in gross profit.
Following the transitioning of current year reporting to reflect the
realignment of the business along its SBUs a revised level of Corporate
overhead was charged to Technology & Outsourcing.
2021 Restated(1)
2020
Adjusted EBIT(2) 47 605
Share-based payments (47) (35)
Amortisation (289) (314)
EBIT (289) 256
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2 ) The Alternative Performance Measures (APMs) are defined
in Note 6 of the notes to the financial statements and reconciled to the
nearest IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit,
Adjusted EBIT and Net debt. APMs also include organic and constant currency
Revenue, Gross Profit and Adjusted EBIT
EBIT fell from a profit of $0.2m in 2020 to a loss of $0.3m in 2021. In
addition to the movements discussed above, EBIT included amortisation of $0.3m
in respect of acquired intangible assets and $0.1m of share-based payment
charges.
/ ASSOCIATE INVESTMENTS
US Air CASL Total
Associate
USD'000s 2021 2020 2021 2020 2021 2020
Adjusted EBIT(1) - 78 (1,491) (3,350) (1,491) (3,272)
Adjustments:
Exceptional items - Impairment charge / (reversal) - - 1,491 (3,421) 1,491 (3,421)
Exceptional items - Impairments on non-current assets within share of results - - - (6,433) - (6,433)
from equity accounted investments
Exceptional items - Profit on disposal of interest in associates - 7,278 - - - 7,278
EBIT - 7,356 - (13,204) - (5,848)
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. APMs also include organic and constant currency Revenue,
Gross Profit and Adjusted EBIT
As reported in the 2020 Annual Report and Accounts, the US Air Associate was
sold on 2 March 2020; see Note 17 of the notes to the financial statements for
further details. The $0.1m of Adjusted EBIT in the prior period represents the
Group's share of results from the US Air Associate prior to disposal.
The Group's investment in China Aircraft Services Limited (CASL) was
reclassified as "held for sale" effective end of May 2021 following a Board
decision on the receipt of a $2m offer for its 20% shareholding in CASL. Since
reclassification the asset was held at the fair value of $2m, until it was
sold with full and final cash settlement of $2m received on 31 December 2021.
Prior to reclassification as "held for sale", CASL suffered substantial losses
due to vastly reduced commercial aviation volumes at Hong Kong airport,
impacted by COVID-19. The Group's share of these amounted to $1.5m at the
Adjusted EBIT level.
In the prior year, the disposal of the Group's equity interest in its US Air
Associate resulted in a profit before taxation of $7.3m.
In the prior year, impairment charges of $9.9m were made against the equity
accounted investment in CASL, reflecting the Group's assessment of its
recoverable amount. This assessment was made based upon a credible offer of
$2m received by another CASL shareholder for their 20% equity interest in
CASL. Following the sale of the Group's equity interest in CASL, an impairment
reversal equivalent to the Group's share of losses of $1.5m has been
recognised in the current year.
Overall, all non-core associate investments have been sold and result in
associate statutory EBIT improving from a loss of $5.8m in 2020 to nil in
2021.
/ Branding fees
Total
USD'000s 2021 2020
Adjusted Revenue(1, 2) 3,750 3,750
Adjusted Gross Profit(1, 2) 3,750 3,750
GP % 100% 100%
Adjusted EBIT(1, 2) 3,691 3,733
Adjustments
Exceptional items - Revenue and gross profit adjustments - 15,500
EBIT 3,691 19,233
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. APMs also include organic and constant currency Revenue,
Gross Profit and Adjusted EBIT
(2) Adjusted Revenue and Adjusted Gross Profit were only used for
the comparative. 2021 Adjusted Revenue and Adjusted Gross Profit were the same
as Revenue and Gross Profit
Revenue and Gross Profit from branding fees are in line with the prior year
and ended on 2 March 2022. US Air statutory EBIT decreased from $19.2m in 2020
to $3.7m in 2021 due to $15.5m of accelerated branding fees on the disposal of
the US Air Associate being reflected in the prior year, which did not recur in
2021.
/ FINANCE REVIEW
Financial summary
Adjusted(1) $m Statutory $m
Dec-21 Restated(1) Dec-21 Restated(1)
Dec-20 Dec-20
Revenue 235.9 182.0 236.1 197.5
Gross Profit 44.7 37.3 44.7 52.8
Gross Profit % 19.0% 20.5% 19.0% 26.7%
EBIT (4.3) (4.8) (7.3) (5.9)
(Loss)/ profit for the year (6.3) (8.6) (8.8) (14.6)
(Loss)/earnings per share (cents) (8.7) (13.6) (12.7) (23.1)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. APMs also include organic and constant currency Revenue,
Gross Profit and Adjusted EBIT
Restatement
The restatements to the 2020 income statement are limited to a
reclassification from cost of sales to administrative expenses of $1.1m and
various errors to the application of IFRS 16, Leases. During 2021 a detailed
review was conducted of Group leases. New information came to light from
this review indicating that errors had been made on the implementation of IFRS
16 (1 January 2019) and in subsequent recognition relating to the treatment of
a number of initial lease obligations at implementation (impacting subsequent
impairments), contractual rental increases, computational errors on foreign
exchange, identification of lease-related payments and the length of lease
used for ROU assets and liabilities and related leasehold improvements. 2020
opening balances, results for the year, other comprehensive income, balance
sheet amounts and cashflows have been restated to correct these errors. The
restatement has reduced the consolidated loss for 2020 by $0.1m, increased
consolidated net assets at 31 December 2020 by $2.5m and resulted in a $1.7m
increase in net cash generated by operations with an equivalent reduction in
lease payments on the consolidated cash flow statement. Refer to Note 2 of the
notes to the financial statements for further details.
Revenue Bridge
$m
Revenue - 2020 197.5
Rebase for FX 7.3
Rebased Revenue - 2020 204.8
Branding fee (15.5)
Business Aviation MRO US 40.7
Business Aviation excluding MRO US 0.7
Special Mission 5.3
Technology & Outsourcing (0.1)
Revenue - 2021 235.9
· One-off accelerated branding fees of $15.5m benefitted the prior
year
· Significant expansion of the Business Aviation's US maintenance
operations via the acquisition of Jet East as well as revenue growth from new
facilities and from the legacy US maintenance operations
· Business Aviation excluding MRO US benefits from a significant
improvement in FBO activity levels and increased Charter activity which is
partially offset by underperformance on maintenance operations
· Special Mission includes the impact of increased flying hours and
the related costs rechargeable to customers, increased work with ad-hoc
customers and the full year effect of air ambulance service contracts for the
Government of Jersey and the Government of Guernsey which were acquired in the
middle of the prior year, as shown in Note 6 of the notes to the financial
statements
Adjusted EBIT(2) Bridge
$m
Adjusted EBIT - 2020 Restated(1) (4.8)
Increase in gross profit 7.5
Increase in other administrative expenses (10.3)
Decrease in impairment of financial assets 3.8
Increase in depreciation and amortisation (2.3)
Increase due to reduced losses from equity accounted associates 1.8
Adjusted EBIT - 2021 (4.3)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt.
· The impact of the movement in FX rates at an Adjusted EBIT level
is not significant; refer to Note 6 of the notes to the financial statements
for further details
· The growth in Gross Profit is covered in further detail in the
operational performance review
· Administrative expenses increased following the acquisition of
Jet East ($8.3m) together with net growth across other business units and
services lines
· A significant loss allowance for impairment of financial assets
of $3.8m arose in the prior year and did not recur
· Depreciation and amortisation increased primarily due to the full
year effect of aircraft bought in the middle of the prior year ($0.9m), higher
year on year amortisation of the internally developed software asset within
T&O ($0.4m) and the acquisition of Jet East ($0.5m)
· Losses from associates are down following the disposal of the US
Air Associate and the investment in CASL
EBIT Bridge
$m
EBIT - 2020 Restated(1) (5.9)
Items impacting Adjusted EBIT 0.5
Adjusting items
-items in other administrative expenses comprising:
- Decrease in exceptional transaction costs 0.2
- Decrease in exceptional integration and business re-organisation costs 0.1
- Decrease in exceptional legal costs 0.4
- Decrease in equity-settled share-based payment expense 0.3
- Increase in other long-term employee benefits (1.8)
- Increase in other income 1.6
- Decrease in accelerated branding fees (15.5)
- Increase in acquired intangible amortisation (0.6)
- Decrease in profit on disposal of interest in associates (7.3)
- Decrease in impairment reversal of financial assets (0.6)
- Decrease in impairment of right-of-use asset 4.6
- Decrease in impairment of assets under construction 4.6
- Decrease in impairment of goodwill and intangible 0.8
- Decrease in impairment of non-current assets within associates 6.4
- Decrease in impairment of investment in associate 4.9
EBIT - 2021 (7.3)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
· Transaction cost of $0.5m (2020: $0.7m) relating to Jet East
acquisition cost in both years
· Integration and business re-organisation costs in the current
year included $0.4m of Jet East severance costs associated with integration,
partially offset by $0.3m income upon release of a direct closure costs
provision at Fairoaks Airport. In addition, $0.2m of redundancy costs incurred
in the prior year did not recur.
· Lower legal costs in 2021 compared to 2020 in respect of legacy
litigation matters
· $0.3m of reduced equity-settled shared-based payment charges
following forfeitures, leavers and re-issues
· The $1.8m increase in other long-term employee benefits driven by
a 2021 charge relating to a long-term incentive plan as part of the Jet East
acquisition
· $1.6m other income upon release of lease obligation at Fairoaks
Airport in the current year
· $15.5m of accelerated branding fees were recognised in the prior
period as an Adjusting item following the disposal of the US Air Associate and
the settlement of existing contractual arrangements (see Note 17 for further
details on the disposal)
· Amortisation of acquired intangibles increased by $0.6m due to
the acquisition of Jet East
· $7.3m profit before taxation on disposal of the US Air Associate
was recognised in the prior year (see Note 17 for further details on the
disposal)
· The prior year $0.6m impairment reversal of financial assets
previously impaired through exceptional items did not recur
· In the current year, impairment of $1.9m to the additional right
of use asset in relation to Sharjah and $1.5m impairment reversal of charges
previous recognised in relation to CASL. Other movements in impairment are due
to prior year items that did not recur and are shown in further detail in Note
6 of the notes to the financial statements
Impairments
As previously reported, the Group had secured a 25-year ground lease and had
commenced the development of a Business Aviation Centre (BAC) at Sharjah
International airport in the UAE.
With the project having been placed on hold in 2020 pending a review of the
impact of the pandemic on its viability, the Group recognised a total
impairment charge of $11.2m in its 2020 financial statements, $6.6m in respect
of the right of use asset arising from the ground lease and $4.6m in respect
of the carrying value of the assets under construction.
Following its decision to recommence the development of the BAC, the Company
is now in the process of securing the necessary funding for the project.
Whilst the Group is in advanced discussions with investors regarding the
funding of this project, the Board considers that it would be inappropriate to
reverse these impairments until the full funding has been contractually
secured.
In parallel with its decision to recommence the development, the Group took
the opportunity to negotiate a 10-year extension to the term of the ground
lease, which significantly enhances the viability and value of the project.
However, until the impairment charge taken in respect of the original lease is
reversed, the Group is required to further impair the $1.9m asset in use value
created by this lease extension.
The Board remains confident that the Group is making progress in securing the
necessary funding, at which time all these impairments, which amount to
$13.1m, may reverse.
Other than the above and following a diligent review of the carrying value of
investments, I am pleased to report that the Board does not believe there is
any need for any other impairments.
Finance expense
Net finance expense of $3.5m (2020 Restated: $2.3m) includes $0.6m (2020:
$1.5m) of finance income largely arising from financial assets related to the
disposal of the US Air Associate; refer to Note 8 for further details. As a
result of early settlement of the deferred consideration on 20 July 2021
(refer to Note 17 for more details), and the timing of the disposal in 2020,
finance income was lower in the current year. Foreign currency movements were
a net loss of $0.4m (2020: $0.2m net gain).
Taxation
There is a statutory taxation credit for the year of $2.0m (2020: charge of
$6.5m), which reflects the recognition of an increased deferred tax asset in
the current year based on projected future taxable profits in a five-year
Strategic Plan. Partially offsetting this recognition, an uncertain tax
provision of $0.3m has been recognised based on a penalty issued. While the
penalty has been disputed by the Group, at the time of reporting a remedy has
not been granted. The adjusted taxation credit for the year is $1.5m (2020:
charge of $1.5m); refer to Note 10 for further details.
EPS
Shares in issue increased to 63.7m (2020: 63.6m) following the issue of shares
in the year. The average share price for the year ended 31 December 2021 was
39.2 pence, which is marginally higher than the exercise price of some
outstanding options, however;, the effect of including these shares would
reduce the loss per share and adjusted loss per share and therefore no
dilutive earnings per share is shown. Basic Statutory EPS reflects reduced
loss per share of 12.7 cents (2020 Restated: 23.1 cents).
Net debt and cash flow movements
December Restated(1)
2021
December
2020
Adjusted EBIT(2) (4.3) (4.8)
Add: Adjusted depreciation & amortisation in cost of sales (Note 5) 6.5 11.1
Add: Adjusted depreciation & amortisation in administrative expenses (Note 9.6 7.3
5)
Adjusted EBITDA(2) 11.8 13.6
Less: Loan forgiveness (Note 27) - (4.8)
Less: non-cash lease credit recognised (Note 27) (0.1) (0.3)
Less: Share of losses/profits of associates (Note 27) 1.5 3.3
Adjusted EBITDA after excluding non-cash items(2) 13.2 11.8
Working capital:
Add: Working capital (22.2) 9.4
Add: Capital portion of promissory note on disposal of US Air Associate 17.5 2.5
Add: Accelerated branding fee not recognised in Adjusted EBIT - 15.5
Add: Exceptional items (0.8) (0.7)
Working capital (5.5) 26.7
Cash generated by operations (Note 27) 7.7 38.5
Add: Tax (Note 27) (2.5) (3.1)
Net cash flow from operating activities (Note 27) 5.2 35.4
Lease payments (9.6) (17.7)
Capital expenditure (5.9) (27.8)
Acquisition of business, net of cash acquired (8.2) (1.5)
Proceeds on disposal of associate 2.0 9.9
Net interest received/(paid) 0.4 (0.3)
Net proceeds from borrowings 10.2 9.5
Net cash used in investing and financing activities (11.1) (27.9)
Increase/(decrease) in cash (5.9) 7.5
Cash at the beginning of year 16.1 8.5
Effect of foreign exchange rates - 0.1
Cash at end of the period 10.2 16.1
Borrowings (67.1) (53.2)
Obligations under leases (48.0) (46.1)
Net debt at the end of year(2) (104.9) (83.2)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure. APMs include Adjusted Revenue, Adjusted Gross Profit, Adjusted
EBIT and Net debt. In reconciling from Adjusted EBIT to the net cash flow
from operating activities, Adjusted EBITDA and Adjusted EBITDA excluding
non-cash items are shown to aid understanding.
The reduction in the net cash inflow from operating activities has been driven
by:
· Adjusted EBITDA lower by $1.8m at $11.8m (2020: $13.6m), offset
by a net $3.2m reduction in non-cash income or expenses
· $0.1m of additional spend on exceptional items, primarily related
to severance costs as part of the integration of Jet East and the closure of
operations in Saudi Arabia, partially offset by reduced legal costs
· $15.5m of accelerated branding fees in the prior period not
recognised within Adjusted EBIT but within working capital
· $17.5m capital portion of promissory note on disposal of US Air
Associate received in the period
· Reduction in the positive contribution from underlying working
capital, which is in part due to reduced government support in the period,
start-up losses following the commencement of base maintenance operations at
Millville and Las Vegas and a repayment of deferred VAT from 2020 in 2021
· Lease payments reduced by $8.1m on the prior period due to timing
of aircraft lease payments, partially offset by the addition of Jet East lease
payments of $0.8m
· Capital expenditure includes $2.6m of internally developed
software arising from myairops software development and $3.3m tangible capex,
of which $1.0m is in Business Aviation US for base maintenance expansion to
fulfil demand from one of the world's largest private jet operators, $0.7m is
replacement capex in Business Aviation US, and $0.6m is for an aircraft engine
used as a back-up on a Special Mission contract
· Net cash payment on acquisition of Jet East of $8.2m, which
includes $7.7m initial consideration less $0.1m cash acquired on acquisition
and $0.6m of transaction costs
· $2.0m proceeds on disposal of the associate investment in CASL
Associate. Refer to Note 17 for further details on the disposal
· Net interest received includes $0.65m interest received on the
$20.0m US Air Associate promissory note prior to the accelerated repayment,
$0.4m of interest received due to late customer payments and $0.7m of interest
paid on borrowings
· Net proceeds from borrowings include $10m drawn on the RCF to
fund the acquisition of Jet East, of which $2.65m was used to repay borrowing
assumed on acquisition. The remaining net increase in the RCF was to manage
the net working capital cash outflow
· Net debt increased by $20.5m to $105.8m (2020: $85.3m) primarily
due to the acquisition of Jet East and investment in the further expansion of
the Business Aviation US via start-up locations for base maintenance
facilities and capability for anticipated increases in activity levels
Liquidity
The group liquidity remains with $10.2m (2020: $16.1m) of cash and $12.1m
(2020: $24.7m) of its $50m RCF undrawn as at 31 December 2021.
Net debt, inclusive of $48.0m (2020: $46.1m) of lease obligations, increased
to $104.9m (2020: $83.2m), resulting from the acquisition and subsequent
organic strategic investments.
As at 30 April 2022 cash balances were $14.2m (2020: $12.1m) in addition to
RCF headroom of $20.3m (2020: $12.1m).
Credit Facilities
The Group currently benefits from two credit facilities provided by HSBC, a
$50m RCF and a £20m term loan which mature in November 2022 and January 2023
respectively. Following initial engagement, HSBC have indicated their
willingness to renew the facilities and have provided indicative terms which
are currently under negotiation. Whilst the refinancing has not been
concluded, the Board is confident that it will secure the facilities necessary
to support its on-going operations but recognises that this may be on a higher
debt servicing cost.
In parallel with its discussions with HSBC, the Company is actively pursuing
alternative and/or additional credit facilities aimed specifically at meeting
the Group's asset-based financing needs relating to aircraft, real estate and
infrastructure projects.
Market updates will be provided when binding facilities are secured.
Dividend
The Board does not recommend a dividend for 2021 (2020: nil pence per share).
The Company intends to restore the Company's distributable reserves when
practicable which may involve extracting dividends from subsidiaries amongst
other steps.
Litigation
Following the litigation update provided in the Company's 2020 Annual Report
and 2021 Interim release, the Company continues to pursue the recovery of its
long-standing trade receivables both through enforcement actions in the UK and
in other jurisdictions. The Company has made progress through court
proceedings in the UK. It remains the Board's expectation that other than the
provisions already made by the Company against these claims, no further
provisions will be required.
Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated that they do not
intend to stand for re-election at the forthcoming Annual General Meeting and
the Audit Committee has commenced a process to appoint another audit firm in
due course.
/ CONSOLIDATED INCOME STATEMENT
/ FOR THE YEAR ENDED 31 DECEMBER 2021
Year ended 31 December 2021 Year ended 31 December 2020
Restated(2)
Note Statutory result Adjusting Adjusted Statutory Adjusting Adjusted
result
$'000 items(1) result(1)
items(1) result(1)
$'000
$'000 $'000 $'000 $'000
Continuing operations:
Revenue 4 235,909 − 235,909 197,503 (15,500) 182,003
Cost of sales (191,178) − (191,178) (144,725) - (144,725)
Gross profit 4 44,731 − 44,731 52,778 (15,500) 37,278
- Other administrative expenses (40,906) 3,047 (37,859) (29,753) 2,075 (27,678)
- Impairment of right-of-use assets 23 (1,911) 1,911 − (6,544) 6,544 -
- Impairment of acquired intangibles 6 − − − (833) 833 -
- Impairment of assets under construction 6 − − − (4,609) 4,609 -
- Depreciation and amortisation 5 (10,813) 1,200 (9,613) (7,968) 614 (7,354)
- Impairment of financial assets 19 21 (63) (42) (3,083) (709) (3,792)
Total administrative expenses (53,609) 6,095 (47,514) (53,790) 13,966 (38,824)
Other income 6 1,626 (1,626) − - - -
Operating loss (7,252) 4,469 (2,783) (12) (1,534) (1,546)
Share of results from equity accounted investments 17 (1,491) − (1,491) (9,705) 6,433 (3,272)
Reversal/(impairment) of equity accounted investments 17 1,491 (1,491) − (3,421) 3,421 -
Profit on disposal of interest in associates 17 − − − 7,278 (7,278) -
Earnings before interest and taxation 4,5 (7,252) 2,978 (4,274) (5,860) 1,042 (4,818)
Finance income 8 617 − 617 1,535 - 1,535
Finance expense 9 (4,110) − (4,110) (3,817) - (3,817)
Loss before tax (10,745) 2,978 (7,767) (8,142) 1,042 (7,100)
Taxation 10 1,980 (471) 1,509 (6,496) 5,017 (1,479)
Loss for the year (8,765) 2,507 (6,258) (14,638) 6,059 (8,579)
Attributable to:
Owners of the Company (8,062) 2,507 (5,555) (15,123) 6,059 (8,624)
Non-controlling interests 26 (703) − (703) 45 - 45
EPS attributable to the equity holders of the parent
basic 11 (12.7c) 4.0c (8.7c) (23.1c) 9.5c (13.6c)
diluted 11 (12.7c) 4.0c (8.7c) (23.1c) 9.5c (13.6c)
(1) The Alternative Performance Measures (APMs) are defined in
Note 6 of the notes to the financial statements and reconciled to the nearest
IFRS measure.
(2) Restatements are detailed in Note 2 of the notes to the
financial statements.
/ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
/ FOR THE YEAR ENDED 31 DECEMBER 2021
Note Year Year
ended
ended
2021
2020
$'000
Restated(1)
$'000
Loss for the year (8,765) (14,638)
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations (307) 1,184
Share of other comprehensive income of associates 17 − 92
Other comprehensive income/(loss) (307) 1,276
Total comprehensive loss for the year (9,072) (13,362)
Total comprehensive income/(loss) is attributable to:
Owners of the Company (8,369) (13,407)
Non-controlling interest (703) 45
(9,072) (13,362)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements.
/ CONSOLIDATED BALANCE SHEET
/ COMPANY NUMBER 07264678
/ AS AT 31 DECEMBER 2021
Note 2021 2020 As at 1 January 2020 Restated(1) $'000
$'000
Restated(1)
$'000
Non-current assets
Goodwill 13 22,236 22,490 21,750
Other intangible assets 14 15,654 10,329 10,148
Total intangible assets 37,890 32,819 31,898
Property, plant and equipment 15 53,489 54,669 35,324
Right-of-use assets 23 36,383 35,415 53,291
Investments accounted for using equity method 17 − 2,000 15,112
Trade and other receivables 19 291 13,030 4,221
Deferred tax asset 22 3,918 - 2,252
131,971 137,933 142,098
Current assets
Assets held for sale 17 - - 2,598
Inventories 18 8,915 5,978 7,271
Trade and other receivables 19 63,808 49,359 76,078
Current tax receivable 10 27 1,280 1,146
Cash and cash equivalents 10,243 16,136 8,463
82,993 72,753 95,556
Total assets 214,964 210,686 237,654
Current liabilities
Trade and other payables 24 (39,342) (38,085) (51,624)
Current tax liabilities 10 (574) (15) −
Obligations under leases 23 (7,970) (8,566) (18,560)
Provisions 30 (772) (679) (521)
Borrowings 21 (40,175) (1,000) (848)
Deferred revenue 32 (8,880) (12,676) (2,707)
Deferred consideration 20 (290) - -
(98,003) (61,021) (74,260)
Total assets less current liabilities 116,961 149,665 163,394
Non-current liabilities
Borrowings 21 (26,979) (52,197) (45,394)
Deferred revenue 33 (2) (691) (4,382)
Provisions 30 (348) (774) (594)
Obligations under leases 23 (40,032) (37,573) (43,084)
Deferred tax liabilities 22 − (2,109) (819)
Trade and other payables 24 (1,821) - -
Deferred consideration 20 (256) - -
(69,438) (93,344) (94,273)
Total liabilities (167,441) (154,365) (165,411)
Net assets 47,523 56,321 69,121
Shareholders' equity
Share capital 25 954 953 953
Share premium 25 63,502 63,473 63,473
Other reserves 25 34,997 35,360 34,798
Foreign exchange reserve (24,722) (24,415) (25,691)
Accumulated losses (27,301) (19,846) (5,163)
Total shareholders' equity 47,430 55,525 68,370
Non-controlling interest 26 93 796 751
Total equity 47,523 56,321 69,121
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
The financial statements were approved by the Board of Directors and
authorised for issue on 27 May 2022 and are signed on their behalf by:
Marwan Khalek
Director
/ CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
/ FOR THE YEAR ENDED 31 DECEMBER 2021
Share capital $'000 Share Other Foreign Accumulated profit/(losses) Total Non- Total equity
premium
reserves
exchange
$'000
shareholders' equity
controlling interest
$'000
$'000
$'000
reserve
$'000
$'000
$'000
Balance at 1 January 2020, as reported 953 63,473 34,798 (29,179) (5,062) 64,983 751 65,734
Restatement(1) - - - 3,488 (101) 3,387 - 3,387
Balance at 1 January 2020, restated 953 63,473 34,798 (25,691) (5,163) 68,370 751 69,121
(Loss)/profit for the year, restated - - - - (14,683) (14,683) 45 (14,638)
Other comprehensive income, restated(1) - - - 1,276 - 1,276 - 1,276
Total comprehensive (loss)/profit for the year, restated(1) - - - 1,276 (14,683) (13,407) 45 (13,362)
Cost of share-based payments (Note 31) - - 562 - - 562 - 562
Balance at 953 63,473 35,360 (24,415) (19,846) 55,525 796 56,321
31 December 2020, restated(1)
Loss for the year - - - - (8,062) (8,062) (703) (8,765)
Other comprehensive expenditure - - - (307) - (307) - (307)
Total comprehensive loss for the year - - - (307) (8,062) (8,369) (703) (9,072)
Shares issued in the year 1 29 - - - 30 - 30
Cost of share-based payments (Note 31) - - 244 - - 244 - 244
Transfer for lapsed options(2) - - (607) - 607 - - -
Balance at 954 63,502 34,997 (24,722) (27,301) 47,430 93 47,523
31 December 2021
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) Value of vested options forfeited by leavers as per Note 31
/ CONSOLIDATED CASH FLOW STATEMENT
/ FOR THE YEAR ENDED 31 DECEMBER 2021
Note Year Year
ended
ended
2021
2020
$'000
Restated(1)
$'000
Net cash generated by operating activities 27 5,225 35,344
Cash flows from investing activities
Purchases of property, plant and equipment 15 (3,379) (25,298)
Purchases of intangibles 14 (2,604) (2,521)
Proceeds on disposal of investments and assets held for sale 17 2,000 9,954
Interest received 1,061 430
Acquisition of business, net of cash acquired 12 (8,146) (1,544)
Net cash used in investing activities (11,068) (18,979)
Cash flows from financing activities
Lease payments 23 (9,567) (17,683)
Interest paid (709) (660)
Proceeds from borrowings 28 22,574 33,987
Repayment of borrowings 28 (12,361) (24,471)
Net cash used in from financing activities (63) (8,827)
Net (decrease)/increase in cash and cash equivalents (5,906) 7,538
Cash and cash equivalents at the beginning of year 16,136 8,463
Effect of foreign exchange rates 13 135
Cash and cash equivalents at the end of year 10,243 16,136
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
Cash and cash equivalents comprise cash and bank balances. The carrying amount
of these assets is approximately equal to their fair value.
/ NOTES TO THE FINANCIAL STATEMENTS
/ FOR THE YEAR ENDED 31 DECEMBER 2021
1. General information
Gama Aviation Plc (the "Company") is a public limited company (company number
07264678) whose shares are listed on the Alternative Investment Market ('AIM')
of the London Stock Exchange under the ticker symbol GMAA and is incorporated
and domiciled in England in the United Kingdom. The address of the registered
office is 1(st) Floor, 25 Templer Avenue, Farnborough, Hampshire, England,
GU14 6FE.
2. Basis of preparation and significant accounting policies
Statement of compliance
These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 ("IFRS") and the applicable legal requirements of the Companies Act 2006.
Basis of preparation
The audited results are derived from the full financial statements for the
year ended 31 December 2021, which have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006 ('IFRS') and the applicable legal requirements of the
Companies Act 2006.
The audited results presented here are not the Group's statutory accounts for
the years ended 31 December 2021 and 31 December 2020. The statutory accounts
for the year ended 31 December 2021 will be delivered to the Registrar of
Companies shortly. The statutory accounts for the year ended 31 December 2020
have been filed with the Registrar of Companies. The auditor's reports on the
Group's statutory accounts for the years ended 31 December 2021 and 2020 are
unqualified and do not contain statements under Section 498 of the Companies
Act 2006.
The financial statements are prepared on a going concern basis under the
historical cost convention. The preparation of Consolidated Financial
Statements requires management to make judgements and estimates that affect
the reported amounts of assets and liabilities at the date of the Consolidated
Financial Statements and the reported amounts of revenue and expenses during
the reporting period. Actual future outcomes could differ from those
estimates.
Climate Change
In preparing the Consolidated Financial Statements the Group has informally
considered the impact of climate change, particularly in the context of the
disclosures included in our Corporate Social Responsibility report which
are included as part of the full Annual Report. These considerations did
not have a material impact on the financial reporting judgements and
estimates, consistent with the assessment that climate change is not expected
to have a significant impact on the Group's going concern assessment nor the
long-term viability of the Group.
UK-adopted international accounting standards
On 31 December 2020 EU-adopted IFRS was brought into UK law and became
UK-adopted international accounting standards, with future changes to IFRS
being subject to endorsement by the UK Endorsement Board. The consolidated
financial statements have transitioned to UK-adopted international accounting
standards.
The financial statements have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies
Act 2006 as applicable.
Adoption of new and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2021:
· Amendments to IFRS 16 - COVID-19 Related Rent Concessions
· Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -
Interest Rate Benchmark Reform Phase 2
The amendments listed above have not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for
31 December 2021 reporting periods and have not been early adopted by the
Group. These amendments are
not expected to have a material impact.
Restatement
The 2020 figures have been restated to reflect the following:
· During 2021 a detailed review was conducted of Group leases.
New information came to light from this review indicating that errors had been
made on the implementation of IFRS 16 (1 January 2019) and in subsequent
recognition relating to the treatment of a number of initial lease obligations
at implementation (impacting subsequent impairments), contractual rental
increases, computational errors on foreign exchange, identification of
lease-related payments and the length of lease used for ROU assets and
liabilities and related leasehold improvements. 2020 opening balances,
results for the year, other comprehensive income, balance sheet amounts and
cashflows have been restated to correct these errors.
· A similar review and reconciliation was also conducted of foreign
exchange reserve balances and consolidation journals relating to investments
in subsidiaries and associated impairments. An error was found in accounting
for working capital and foreign exchange reserve balances in 2018 as a result
of which group liabilities were overstated. This resulted in changes to 2020
opening balances and working capital movements.
· Reclassify of compliance and assurance costs previously included
in cost of sales to administrative costs, aligning a previous inconsistency.
In addition, a 2020 revenue disclosure in Note 4 has been restated to
reclassify revenue of $5,661k relating to the branding fee and other contracts
as recognised over time rather than at a point in time following a review.
The above restatements have impacted the consolidated income statements,
consolidated statements of comprehensive income, balance sheets and
consolidated cash flow statements as follows:
As previously reported IFRS 16 Investment and foreign exchange Compliance costs Restated
$'000 $'000 $'000 $'000 $'000
2020 consolidated income statement:
Revenue 197,503 − − − 197,503
Cost of sales (145,468) (318) − 1,061 (144,725)
Gross Profit 52,035 (318) − 1,061 52,778
Adjusted administrative expenses (37,586) (177) (1,061) (38,824)
−
Adjusting items in administrative expenses(1) (14,435) 469 − (13,966)
−
Administrative expenses (52,021) 292 − (1,061) (52,790)
Operating profit/(loss) 14 (26) − − (12)
Adjusted EBIT(1) (4,323) (495) − − (4,818)
EBIT (5,834) (26) − − (5,860)
Finance income 1,535 − − − 1,535
Finance expense (3,940) 123 − − (3,817)
Loss before tax (8,239) 97 − − (8,142)
Tax (6,496) − − − (6,496)
Loss after tax (14,735) 97 − − (14,638)
Attributable to owners (14,780) 97 − − (14,683)
2020 consolidated other comprehensive income:
Loss for the year (14,735) 97 − − (14,638)
Exchange differences on translation of foreign operations 2,194 (1,010) − 1,184
−
Share of other comprehensive income of associates 92 − − 92
−
Other comprehensive income 2,286 (1,010) − − 1,276
Total comprehensive loss for the year (12,449) (913) − (13,362)
−
Attributable to owners (12,494) (913) − − (13,407)
Consolidated balance sheet 1 January 2020:
Right-of-use assets 52,315 976 − − 53,291
Trade and other receivables 72,956 − 3,122 − 76,078
Trade and other payables (52,353) 729 − − (51,624)
Obligations under leases (60,204) (1,440) − − (61,644)
Net assets and Total equity 65,734 265 3,122 − 69,121
Accumulated profit and loss reserve (5,062) (101) − (5,163)
−
Foreign exchange reserve (29,179) 366 3,122 − (25,691)
Total shareholders' equity 64,983 265 3,122 − 68,370
Net debt(1) (97,983) (1,440) − − (99,423)
Consolidated balance sheet 31 December 2020:
Property, plant and equipment 54,974 (305) − − 54,669
Right-of-use assets 38,022 (2,607) − − 35,415
Trade and other payables (40,074) (1,133) 3,122 − (38,085)
Obligations under leases (49,492) 3,353 − − (46,139)
Provisions for liabilities (1,497) 44 − − (1,453)
Net assets and Total equity 53,847 (648) 3,122 − 56,321
Accumulated profit and loss reserve (19,842) (4) − (19,846)
−
Foreign exchange reserve (26,893) (644) 3,122 − (24,415)
Total shareholders' equity 53,051 (648) 3,122 − 55,525
Net debt(1) (86,553) 3,353 − − (83,200)
2020 consolidated cash flow statement:
Net cash generated by operations 33,683 1,661 − 35,344
−
Lease payments (16,022) (1,661) − − (17,683)
Finance costs 3,940 (123) − − 3,817
Depreciation of property, plant and equipment 4,809 (36) − 4,773
−
Depreciation of right-of-use assets in administrative expenses 540 190 730
−
−
Depreciation of right-of-use assets in cost of sales 10,708 394 − 11,102
−
Impairment of right-of-use asset 7,013 (469) − 6,544
−
Rent free credit − (259) − − (259)
Decrease in payables (12,050) 1,867 − − (10,183)
(1) Refer to Note 6 of the notes to the financial statements for details of
alternative performance measures
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Operational Performance Review and Finance Review.
To support their assessment of going concern, the Directors have performed a
detailed analysis of cash flow projections for the Group covering the period
from the date of approval of the annual financial statements to 30 June 2023.
The Directors have also considered the outlook for the business beyond 30 June
2023 based upon its five-year Strategic Plan. The analysis takes account of
the following amongst other relevant considerations:
• The $50.0m committed revolving credit facility (RCF),
of which $12.1m (2020: $24.7m) is undrawn at the reporting date and a £20.0m
(2020: £20.0m) term loan;
• The one-off and non-recurring nature of the receipt in
2021 relating to the remaining balance of the US Air Associate disposal
proceeds of $17.5m and the related tax payment of $3.1m;
• The acquisition of Jet East, which resulted in
additional working capital consumption in 2021 due to operational
inefficiencies at start-up locations;
• Cash at 31 December 2021 of $10.2m (2020: $16.1m) and
cash at 28 February 2022 of $16.6m; and
• Working capital levels and the conversion of profits
into cash flows
The borrowing facilities have no covenants and fall due for repayment on 14
November 2022 and 31 January 2023 respectively. The RCF is settled and drawn
down on a cyclical basis. It falls due for repayment within twelve months of
the reporting date and has been presented in current liabilities. The term
loan falls due for repayment over twelve months from the reporting date and
has been presented in non-current liabilities. The RCF and term loan are held
in the Company.
The Company and Group is well advanced in its negotiations with HSBC regarding
refinancing and the Directors are confident that these facilities will be
renewed at the same levels, albeit based on draft term sheets at a higher
finance cost. However, at the time of approving the Annual Report, the renewal
of the facilities has not been concluded. Discussions with alternative
potential lenders remain at too early a stage to be considered.
The key assumptions in the Board approved base case projections relate to
revenue performance and working capital cash flows and the Directors have
included what they consider to be a cautious level of revenue performance and
working capital. A severe but plausible downside scenario has also been
assessed, which reflects operating cash flows in the first half of 2022
remaining no better than 2021 operating cash flows after excluding significant
one-off receipts and payments. In the Group's base case forecasts, the Group
maintains a minimum of $26.8m headroom against its cash and available
facilities (assuming renewal of existing facilities). In the Group's downside
scenario, the Group maintains a minimum of $16.8m headroom against its cash
and available facilities before accounting for any significant management
action to improve cash flows via curtailing operating cost, deferring capital
expenditure and exploring other financing arrangements for some of its fixed
asset base.
Accordingly, the Directors have, at the time of approving the financial
statements, a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future.
Therefore, after making appropriate enquiries and considering the
uncertainties described above, the Directors consider that it is appropriate
to adopt the going concern basis in preparing the Company and Group financial
statements. However, as the renewal of borrowing facilities with HSBC has not
been concluded at the time of approving the financial statements there is a
risk that, if these facilities were not renewed at the proposed levels, and
the Company and Group were not be able to secure equivalent levels of funding
from alternative facilities, loans and asset-backed financing, the Company and
the Group may not be able to meet its liabilities as they fall due.
As a result, there is a material uncertainty that may cast significant doubt
about the Company and the Group's ability to continue as a going concern. The
financial statements do not include any adjustments that would result if the
Company or Group were unable to continue as a going concern.
Use of alternative performance measures (APMs)
The performance of the Group is assessed and discussed on an "adjusted" basis,
using a variety of APMs, including Adjusted Revenue, Adjusted Gross Profit,
Adjusted Earnings Before Interest and Tax (EBIT), Organic Revenue Growth and
Net debt. The term "Adjusted" refers to the relevant measure being reported
for continuing operations excluding "Adjusting items".
The Directors believe that adjusted profit and earnings per share measures
provide additional and more consistent measures of underlying performance to
shareholders by removing certain trading and non-trading items that are either
not closely related to the Group's operating cash flows or non-recurring in
nature. These and other APMs are used by the Directors for internal
performance analysis and incentive compensation arrangements for employees.
The term "Adjusted" is not defined under IFRS and may therefore not be
comparable with similarly titled measures reported by other companies. They
are not intended to be a substitute for, or superior to, GAAP measures.
Where applicable, segmental measures are calculated in accordance with Group
measures.
The Group's Income Statement and segmental analysis separately identify
trading results before Adjusting items. The Directors believe that
presentation of the Group's results in this way is relevant to an
understanding of the Group's financial performance, as Adjusting items are
identified by virtue of their size, nature or incidence. This presentation is
consistent with the way that financial performance is measured by management
and reported to the Board and assists in providing a meaningful analysis
of the trading results of the Group. In determining whether an event or
transaction is treated as an Adjusting item, management consider quantitative
as well as qualitative factors such as the frequency or predictability of
occurrence.
The income statement items that are excluded from the Statutory results are
referred to as Adjusting items. Adjusting items include exceptional items,
amortisation of acquired intangibles, share-based payment charges and tax
related to Adjusting items. These items are defined and explained in more
detail as follows:
(a) Exceptional items
Within Adjusting items, exceptional items are items of income or expenditure
that are not considered to reflect in year operational performance of the
continuing business. These are recorded in accordance with the policy set out
below:
· Transaction costs - arising on acquisitions, disposals, and debt
refinancing
· Integration and business re-organisation - legal and professional
fees and non-recurring operating costs arising from significant acquisition
integration or business re-organisation activities. Non-recurring operating
costs means those costs that are related to a specific integration or
re-organisation event that will not be repeated because they are unique to the
event and which are not expected to follow a consistent level of expense from
one accounting period to the next
· Litigation - legal costs (which may be incurred in more than one
accounting period) are treated as exceptional if they relate to specific
commercial legal events that are not in the normal course of trading activity
in respect of one-off or related series of cases and are not expected to
follow a consistent level of expense from one accounting period to the next
· Impairment - arising from significant losses identified from
impairment reviews
· Other items - other significant non-recurring items that are
non-trading in nature
(b) Amortisation of acquired intangible assets
Exclusion of amortisation of acquired intangibles accounted for under IFRS 3
from the Group's results assists with the comparability of the Group's
profitability with peer companies. In addition, charges for amortisation of
acquired intangibles arise from the purchase consideration of a number of
separate acquisitions. These acquisitions are portfolio investment decisions
that took place at different times over several years, and so the associated
amortisation does not reflect current operational performance.
(c) Equity-settled share-based payments
The Group treats share-based payments as an Adjusting item because share-based
payments are a significant non-cash charge driven by a valuation model that
references Gama's share price and each new share award is subject to
volatility when it is measured at the grant date.
(d) Other long-term employee benefits
Other long-term employee benefits agreed as part of the Jet East acquisition
and contractually linked to ongoing employment as well as business performance
are accrued over the period in which the related services are received and are
recorded an Adjusting item.
(e) Tax related to Adjusting items
The elements of the overall Group tax charge relating to the above Adjusting
items are also treated as Adjusting. These elements of the tax charge are
calculated with reference to the specific tax treatment of each individual
Adjusting item, taking into account its tax deductibility, the tax
jurisdiction concerned, and any previously recognised tax assets or
liabilities.
Significant accounting policies
The Group's significant accounting policies are set out below. These
accounting policies have been applied consistently to all periods presented in
these Consolidated Financial Statements.
(a) Revenue from contracts with customers
Revenue is measured based on the performance obligations and consideration
specified in a contract with a customer and excludes amounts collected on
behalf of third parties. The Group recognises revenue when it transfers
control of a product or service to a customer or when it meets the
performance obligations specified or implied in the contract. The Group has
revenue from the following sources:
· Business Aviation:
o Managed aircraft contracts and specific air services
o Charter services
o Maintenance of aircraft
o Fixed base operations (FBO)
· Special Mission:
o Mission solutions and expertise with aviation assets
· Technology & Outsourcing (T&O):
o Airworthiness services
o Software solutions
· Branding fees
Managed aircraft contracts and specific air services
Services provided under managed aircraft contracts include flight training,
cost management, flight planning and scheduling, crew management, maintenance
oversight and regulatory compliance as separate performance obligations
falling into one or more of the contract components identified below.
The services are contract based with costs such as fuel, insurance, crew and
maintenance being recharged to the client. Specific air services provided
under this heading include a variety of specific contracts with customers
where one or more elements of fully managed services are provided.
The managed aircraft contracts have three components:
1. Pre-delivery services and services prior to aircraft's entry into
service (if appropriate)
2. Management services
3. Variable fees based on flying hours and related rechargeable costs
Most specific services provided arise in components 1 and 3, whilst management
services relate to overarching administrative services relating to ongoing
regulatory compliance requirements, billed on a regular basis over the life of
the contract. These components are distinct as the customer can benefit from
the services on their own and the Group's promise to provide the service is
separately identifiable from other promises in the contract. The three
components are therefore deemed to be separate performance obligations and
revenue is recognised based on the above performance obligations as follows:
1. Revenue is recognised once the service has been performed (at a point
in time)
2. The customer simultaneously receives and consumes the benefits provided
by the Group, therefore revenue is recognised over time
3. Variable flying hours revenue is recognised monthly based upon actual
flight information and other relevant information held on the internal billing
system (at a point in time). Rechargeable costs are recognised gross, as
revenue and related cost of sales and are recognised at a point in time (for
example, monthly) based upon either actual rechargeable costs or estimated
costs to be recharged
The Group has considered whether it is acting as agent or principal in the
context of its managed aircraft contracts and has concluded that it is the
principal in relation to the entirety of these contracts. Rechargeable costs
are recognised gross because the Group controls the services before they are
transferred to customers and because they are linked to wider management
services. For practical purposes, management services and rechargeable costs
(and other variable fees based on flying hours) are itemised separately in
billing to customers.
Charter services
Revenue from managed fleet and sub-contracted charter services are recognised
once the charter service has been performed (at a point in time). The Group
has considered whether it is acting as agent or principal in the context of
its sub-contracted charter services and has concluded that it is the
principal.
Maintenance of aircraft
The Group provides both base and line maintenance services. Base maintenance
relates to the planned maintenance that is required by the aircraft
manufacturer or component supplier. This work is complex, highly regulated and
location specific. Line maintenance covers irregular maintenance activities,
component failure or simple wear and tear. Both types of services are provided
on a fee or contract basis.
Maintenance revenue is recognised over time in line with the performance of
the related maintenance work as the Group's performance of maintenance
services does not create assets with an alternative use and the Group has an
enforceable right to payment for performance completed to date. In most cases
work is carried out and billed to the customer in the same accounting period.
However, for work ongoing at the end of an accounting period an assessment of
the extent to which contracted work is completed is made and a corresponding
amount of revenue is accrued. This assessment is made using the input method
of labour hours expended and costs incurred.
Shorter duration ad-hoc maintenance revenues are recognised at a point in time
in line with the performance obligation.
Fixed base operation
Within Business Aviation, the Group also provides fixed base operation
activities in the US, Jersey, the UK and the Middle East. This includes hangar
parking and apron parking space to customers. Revenue is recognised as the
service is provided over time.
Mission solutions and expertise with aviation assets
Revenue includes fixed contract fees and variable fees such as revenue earned
with reference to flying hours or other support services. Revenue is
recognised primarily over time based on contractual rates as the related
services are performed.
The Group undertakes certain equipment design and modification activities for
some customers. Revenue is recognised over time in line with the performance
of the related design and modification work for design projects because the
Group's performance of its contractual obligations creates or enhances an
asset that the customer controls as the asset is created or enhanced. Work
that is completed but not yet billed under design and modification contracts
at the end of an accounting period is accrued and a contract asset (accrued
income) is recognised on the balance sheet, based upon the input method of
measuring progress (cost and labour hours expended to date). The input method
is considered to be the best estimate of the transfer of services. A contract
liability (deferred revenue) is recognised on the balance sheet for revenues
received in advance from the customer until the performance obligations are
discharged.
Airworthiness services
T&O provides continuing airworthiness management (CAM) and airworthiness
review certification (ARC) services for business aviation, military and
commercial airline operators. Revenue includes fixed contract fees and
variable fees such as revenue earned with reference to ad-hoc services.
Revenue is recognised relating to services rendered using an accrual method
and in accordance with the terms of the contracts pursuant to which such
services are rendered. Revenue from aircraft services is recognised based on
contractual rates as the related services are performed.
Software solutions
myairops(®) has developed a suite of business aviation products deployed as
"Software as a Service" (SaaS) and mobile app solutions for business aviation
operators, flight support companies, FBOs and regional airports.
myairops(®) revenue represents the value of services provided under contracts
to the extent that there is a right to consideration and is recorded at the
value of the consideration earned. Where a contract has only been partially
completed at the balance sheet date, revenue represents the value of the
service provided to date based on a proportion of the total contract value.
Where payments are received from customers in advance of services provided,
the amounts are recorded as deferred revenue.
Branding fees
The Group receives a branding fee from Gama Aviation LLC. The Group recognises
revenue over time as the customer simultaneously receives and consumes the
benefits provided by the Group.
(b) Segmental reporting
An operating segment is a distinguishable component of the Group that is
engaged in business activities from which it may earn revenues and incur
expenses, and whose operating results are reviewed regularly by the Chief
Operating Decision Maker (the Group Chief Executive) to make decisions about
resources to be allocated to the segment and assess its performance, and for
which discrete financial information is available.
Reportable segments are operating segments that either meet the thresholds and
conditions set out in IFRS 8 or are considered by the Board to be
appropriately designated as reportable segments under IFRS 8.
(c) Government grants
During the prior year the Group received a potentially forgivable loan under
the Paycheck Protection Program (PPP), managed by the US Small Business
Administration (SBA) under the auspices of the US Government Coronavirus Aid,
Relief, and Economic Security Act (CARES Act). Under IAS 20, a forgivable loan
from government is treated as a government grant when there is reasonable
assurance that the entity will meet the terms for forgiveness of the loan. The
Group has adopted the income approach in relation to this loan which provides
that government grants should be recognised in profit or loss on a systematic
basis over the periods in which the entity recognises as expenses the related
costs for which the grant is intended to compensate.
The Group applied to Citibank for a loan under the PPP in order to avoid
significant pandemic-driven headcount reductions in its US workforce.
$5,753k was received from Citibank on 12 May 2020 and was initially recognised
as borrowings in current liabilities. $4,753k of these funds are considered by
the Company to be eligible for forgiveness within the terms of the PPP and
have therefore been recognised as income against the related expenses in the
2020 income statement, reducing the amount of borrowings at the period end to
$1,000k. The utilisation of the grant is reflected against the related
expenses in cost of sales and administrative expenses. Refer to Notes 3 and 21
for further details.
Although the CARES Act suspends the ordinary requirement that borrowers must
be unable to obtain credit elsewhere (as defined in Section 3(h) of the Small
Business Act), borrowers still must certify in good faith that their PPP loan
request is necessary. Specifically, before submitting a PPP application,
borrowers are required to consider the required certification that "current
economic uncertainty makes this loan request necessary to support the ongoing
operations of the Applicant." Borrowers must make this certification in good
faith, taking into account their current business activity and their ability
to access other sources of liquidity sufficient to support their ongoing
operations in a manner that is not significantly detrimental to the business.
Conscious of the significant uncertainty regarding the extent and duration of
the global pandemic and its potential impact on the Group's activities and
financial resources, the Group applied for the loan in good faith on the above
basis, and the proceeds have been used to defray qualifying expenditures. The
Group submitted the loan forgiveness application on 1 September 2021 and the
Group awaits confirmation from the SBA. The Board has consulted with its
outside legal advisors as to the eligibility for forgiveness of the loan. The
Board believes it is appropriate under IAS 20 to continue to recognise the
receipt of the loan and its anticipated partial forgiveness and that such
treatment is necessary for these accounts to show a true, fair and balanced
view of the Group's 2020 financial position given the impact of the global
pandemic on its operations.
Other forms of government grants have been received by the Group, including
under the UK Furlough scheme and under a Hong Kong payroll scheme. As noted
elsewhere in these accounts, the nature of the Group's operations in the UK,
and the long-term nature of its Special Mission contracts, provided a greater
degree of resilience to the pandemic with a consequently lower need for
government support. All other forms of government grants have been recognised
on the income approach, reducing the costs for which the grant is intended to
compensate.
In accordance with IAS 20, in the event that a government grant becomes
repayable, this would be accounted for prospectively through the income
statement.
(d) Leases
Definition of a lease
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group assesses whether:
· The contract involves the use of an identified asset - this may
be specified explicitly or implicitly and should be physically distinct or
represent substantially all of the capacity of a physically distinct asset. If
the supplier has a substantive substitution right, then the asset is not
identified;
· The Group has the right to obtain substantially all of the
economic benefits from use of the asset throughout the period of use; and
· The Group has the right to direct the use of the asset. The Group
has this right when it has the decision-making rights that are most relevant
to changing how and for what purpose the asset is used. In rare cases where
the decision about how and for what purpose the asset is used is
predetermined, the Group has the right to direct the use of the asset if
either:
· The Group has the right to operate the asset; or
· The Group designed the asset in a way that predetermines how and
for what purpose it will be used
At inception or on reassessment of a contract that contains a lease component,
the Group allocates the consideration in the contract to each lease component
on the basis of their relative stand-alone prices. However, for the leases of
land and buildings in which it is a lessee, the Group has elected not to
separate non-lease components and account for the lease and non-lease
components as a single lease component.
As a lessee
As a lessee, the Group leases many assets, including hangars, property,
vehicles and IT equipment.
The Group recognises right-of-use assets and lease liabilities for most of
these leases - i.e. these leases are on-balance sheet. Previously the Group
leased aircraft.
Lease liabilities are measured at the present value of the remaining lease
payments. Where leases commenced after the initial transition date, the lease
payments are discounted using the interest rate implicit in the lease.
If that rate cannot be determined, the Group's incremental borrowing rate is
used, being the rate that the Group would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions. Where appropriate, lease
liabilities are revalued at each reporting date using the spot exchange rate.
Right-of-use assets are measured at an amount equal to the lease liability,
adjusted by the amount of any prepaid or accrued lease payments.
The Group has tested its right-of-use assets for impairment at the reporting
date and further details on impairments are shown in Note 23.
The Group depreciates right-of-use assets over the over the shorter of its
useful economic life and the lease term on a straight-line basis unless the
lease is expected to transfer ownership of the underlying asset to the Group,
in which case the asset is depreciated to the end of the useful life of the
asset.
Short-term leases are leases with a lease term of 12 months or less. Low-value
leases are determined to be those with an initial discounted total obligation
of less than $5k. Payments associated with short-term leases and low-value
leases are recognised on a straight-line basis as an expense in the income
statement.
Rent free concessions granted during the COVID-19 pandemic have been credited
to the income statement in the year they were granted, with a resulting
reduction in the lease obligation.
As a lessor
The Group leases out property included within its right-of-use assets. The
Group assessed the classification of the sub-lease contracts with reference to
the right-of-use asset rather than the underlying asset, and concluded that
they are operating leases under IFRS 16. The right-of-use assets recognised
from the head leases are presented in leasehold property and depreciated over
the life of the lease. The Group also leases out aircraft included within
property, plant and equipment, on short leases. The Group recognises these
leases as operating leases, with income generated included in revenue.
(e) Supplier volume rebates
The Group has supplier contracts for the provision of certain services, which
attract volume rebates, the credit for which is initially recognised centrally
and together with other central income and expenses allocated to the
respective divisions as appropriate. The anticipated rebate receivable is
accrued throughout the year based on the agreement terms.
(f) Business combinations
Business combinations are accounted for using the acquisition method. The
consideration transferred in a business combination is measured at fair value,
which is calculated as the total of the acquisition date fair values of the
assets transferred by the Group, the liabilities incurred by the Group to
former owners and the equity issued by the Group.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used in line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein. Non-controlling
interests consist of the amount of those interests at the date of the original
business combination and the minority's share of changes in equity since the
date of the combination. Profit or loss and each component of other
comprehensive income are attributed to the equity holders of the parent of the
Group and to the non-controlling interests, even if this results in the
non-controlling interests having a deficit balance. A change in the ownership
interest of a subsidiary, without a loss of control is accounted for as an
equity transaction, being a disposal or acquisition of non-controlling
interest.
(g) Goodwill
Goodwill arising on consolidation represents the excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and
acquisition date fair value of any previous equity interest in the acquiree
over the fair value of the net identifiable assets acquired. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill which is recognised as an
asset is reviewed for impairment at least annually. Any impairment is
recognised immediately in the income statement and is not subsequently
reversed.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication
that the unit may be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying amount of the unit, the
impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a subsequent
period.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
(h) Intangible assets
Internally generated intangible assets are recognised only if they satisfy the
IAS 38 criteria in that a separately identifiable asset is created from which
future economic benefits are expected to flow and the cost can be measured
reliably. The life of each asset is assessed individually. The Group has no
indefinite life intangible assets.
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses. Included in intangible assets acquired are part
145 approvals, licences and brand, customer relations, and computer software.
Costs associated with the configuration and customisation of Software as a
Service arrangements are capitalised as intangible assets only where control
of the software exists.
A summary of the policies applied to the Group's acquired intangible assets is
as follows:
· Part 145 approvals 20% per annum, straight line
method
· Licences 10% per
annum, straight line method
· Brands 20% per
annum, straight line method
· Customer relations 10% per annum, straight line
method
· Software 20%-33% per
annum, or life of licence if shorter, straight line method
Amortisation rates shown above are the maximum for these intangible assets and
in the current year there were no intangibles that had a shorter useful life.
The amortisation of internally generated software commences at the start of
the year following.
Prior to the acquisition of Jet East, intangible assets relating to brands
were amortised at 10% per annum.
The useful life of intangible assets is reviewed each financial year end and,
if expectations differ from previous estimates, the change is accounted for as
a change in an accounting estimate. The Group considered the impact of climate
change and other factors before concluding that there was no change in useful
life of intangible assets in the current year.
(i) Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is recognised so as to write-off the cost of assets less their
residual values over their useful lives, using the straight line method, on
the following bases:
· Leasehold improvements Life of lease and no
residual value
· Right-of-use assets Life of
lease and no residual value
· Aircraft and refurbishments The higher of 20 years
(5% per annum) less the age of aircraft at
purchase and 5 years (20% per annum). A 25% residual value (on the
original cost) is in place where engines are on an engine maintenance
programme as this is considered to support a residual value
· Helicopters
5% per annum and 25% residual
value (on the original cost)
· Furniture, fixtures and equipment 20% to 33%
per annum and no residual value
· Motor vehicles
20% per annum and no residual value
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in the income statement.
The residual value and useful life of property, plant and equipment is
reviewed each financial year end and, if expectations differ from previous
estimates, the change is accounted for as a change in an accounting estimate.
The Group considered the impact of climate change and other factors before
concluding that there was no change in residual value or useful life of
property, plant and equipment in the current year.
(j) Assets held for sale
The Group classifies assets as held for sale if their carrying value will be
recovered principally through sale rather than through continuing use. Such
assets are measured at the lower of their carrying amount and fair value less
costs to sell. Costs to sell are the incremental costs directly attributable
to the sale, excluding finance costs and income tax expense.
The criteria for assets held for sale is regarded as only met when the sale is
highly probable, and the asset is available for immediate sale in its present
condition.
Property, plant and equipment, and intangible assets are not depreciated or
amortised once classified as held for sale.
(k) Investments in associate and joint venture
An associate is an entity over which the Group is in a position to exercise
significant influence, but not control or joint control, through participation
in the financial and operating policy decisions of the investee.
A joint venture is a type of joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control
are similar to those necessary to determine control over subsidiaries.
The Group's investments in its associates and joint venture are accounted for
using the equity method of accounting. The investment is carried in the
balance sheet at cost as adjusted by post-acquisition changes in the Group's
share of the net assets of the investment, less any impairment in the value of
the investment. Losses in excess of the Group's interest in the investment
(which includes any long-term interests that, in substance, form part of the
Group's net investment) are recognised only to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of the
investment.
Where a Group company transacts with an associate of the Group, profits and
losses are eliminated to the extent of the Group's interest in the relevant
associate. Losses may provide evidence of an impairment of the asset
transferred in which case appropriate provision is made for impairment. The
Group's share of the changes in the carrying value of the investments in
associates is recognised in the income statement.
(l) Inventories
Inventories are valued at the lower of cost and net realisable value. Costs
incurred in bringing each product to its present location and condition are
accounted for as follows:
· Raw materials and consumables: purchase cost on a first in, first
out basis
· Work in progress: cost of direct materials and labour
· Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale
Inventories include Rotable stock. Rotable stock are inventory items that can
be repeatedly and economically restored to their fully serviced condition, in
which already-repaired equipment is exchanged for defective equipment, which
in turn is repaired and kept for future exchange. These items have extensive
life expectancy through repetitive overhaul process.
The Rotable stock could either be recognised as property, plant and equipment
or inventory. In line with industry practice, the Group policy recognises
Rotable stock as inventory. In addition, the cost of any refurbishment of
Rotable stock is recognised in inventory.
The Group policy on recognising inventory at the lower of cost and net
realisable value does this by providing for aged inventories on a sliding
scale over the preceding eight years. As a result, inventory older than eight
years is written off in full.
The significant estimation uncertainty to the valuation of inventory arises
out of the wide range and nature of inventory held, each with different
demand, inventory days and opportunity to utilise. While no specific inventory
line has material estimation uncertainty in its valuation, there is risk
across all lines in aggregation.
(m) Cash and cash equivalents
The Group's cash and cash equivalents in the statements of financial position
comprise cash at bank and on hand and short-term deposits with a maturity of
three months or less from inception, which are subject to an insignificant
risk of changes in value.
For the purpose of the consolidated cash flow statement, cash and cash
equivalents consist of cash and short-term deposits, as defined above, net of
outstanding bank overdrafts as they are considered an integral part of the
Group's cash management.
(n) Financial instruments
Financial assets and financial liabilities are recognised in the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Financial assets
Trade receivables and other receivables are subsequently measured at amortised
cost less an expected credit loss allowance, determined as set out below in
"Impairment of financial assets". Any write-down of these assets is expensed
to the income statement.
Where there are sub-participation arrangements, sub-participation proceeds are
offset against the financial asset provided that the sub-participation meets
all pass-through conditions, namely, there is no recourse to the transferor,
and the transferor does not retain any significant risks and rewards of
ownership of the financial asset.
Impairment of financial assets
It is not necessary for a credit event to have occurred before credit losses
are recognised. Instead, the Group accounts for expected credit losses and
changes in those expected credit losses. The amount of expected credit losses
is updated at each reporting date.
The impairment model applies to the Group's financial assets that are debt
instruments measured at amortised costs as well as the Group's lease
receivables, contract assets and issued financial guarantee contracts. The
Group has applied the simplified approach to recognise lifetime expected
credit losses for its trade receivables, accrued income and contracts assets
as permitted by IFRS 9.
Expected credit losses are calculated with reference to average loss rates
actually incurred in the three most recent reporting periods to which a
country risk premium is added, based on the location of each business. The
combined loss rate represents the maximum expected credit default risk, which
is expressed as a percentage. The Group average combined loss rate is
approximately 1%.
This percentage rate is then applied to the economic exposure which comprises
of trade receivables, contract assets and accrued income, all of which is then
reduced by any specific loss allowances, and any related trade and other
payables with the debtor. A probability risk spread is used to apportion the
loss rate across the ageing categories as follows:
· 80% of debt that is not yet due (i.e. the Group's average
combined loss rate of 1% is discounted by 20%, meaning a 0.8% loss allowance
would be made to debt not yet due)
· 85% of debt that is <30 days overdue
· 90% of debt that is 30-60 days overdue
· 95% of debt that is 60-90 days overdue
· 100% of debt that is >90 days overdue
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recognised at the proceeds received, net of direct
issue costs.
Other financial liabilities
Other financial liabilities, including borrowings and payables, are initially
measured at fair value and subsequently at amortised cost, net of transaction
costs.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to
another entity.
On derecognition of a financial asset measured at amortised cost, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled or they expire. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.
(o) Provisions and contingent liabilities
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group will
be required to settle that obligation and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best
estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present
value of those cash flows.
A contingent liability is disclosed where the existence of the obligation will
only be confirmed by future events, or where the amount of the obligation
cannot be measured reliably.
(p) Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group company are
expressed in US Dollars, which is the presentation currency for the
consolidated financial statements. These financial statements are presented in
US Dollars because that is the currency of the primary economic environment in
which the Group operates. The Company's functional currency is determined to
be Pounds Sterling because this is the currency of the primary economic
environment in which the Company operates.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity's functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the
dates of the transactions. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the
rates prevailing at that date. Non-monetary items carried at fair value that
are denominated in foreign currencies are translated at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
retranslated. Foreign currency fluctuations on monetary items that are
financing in nature, being foreign currency borrowings, are presented in
finance income or expenses. All other foreign currency fluctuations on
monetary items are presented within Adjusted EBIT.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rates for the period. Exchange differences
arising are recognised in other comprehensive income and accumulated
in equity. Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate for each year end.
(q) Retirement benefit costs
Payments to defined contribution retirement benefit schemes are charged as an
expense when employees have rendered the service entitling them to the
contributions. Payments made to state-managed retirement benefit schemes are
dealt with as payments to defined contribution schemes where the Group's
obligations under the schemes are equivalent to those arising in a defined
contribution retirement benefit scheme.
(r) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates and laws that
have been enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, except where the Group
is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date that are expected to apply in
the period when the liability is settled, or the asset is realised.
Deferred tax is charged or credited in the income statement, except to the
extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and
liabilities on a net basis.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
Note 2, the Directors are required to make judgements (other than those
involving estimations) that have a significant impact on the amounts
recognised and to make estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience and
other factors, including anticipated future events and market conditions, that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Critical judgements in applying the Group's accounting policies
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately below), that management have made
in the process of applying the Group's accounting policies and that have the
most significant effect on the amounts recognised in financial statements.
(a) Sharjah operations
During 2017, the Group entered into a Build-Operate-Transfer and Service
Concession agreement with Sharjah Airport Authority under which the Group is
committed to construct a Business Aviation Centre (BAC) at Sharjah Airport.
During 2020, the assets under construction and right-of-use assets associated
with this project were impaired due to COVID-19 related delays, with $4,609k
and $6,445k charged to the income statement respectively.
During 2021, as a result of improving conditions, a 10-year extension was
signed to the agreement, and the Group contracted with a third party to start
development at the site in 2022. At the date of signing the Annual Report
and Accounts, the full funding for the project has not been secured, and the
Directors have taken the decision to impair the new right-of-use asset
relating to the extension ($1,911k). Should funding for the project become
probable, then the Directors currently anticipate reversal of some or all of
these impairments.
(b) Paycheck Protection Program (PPP) qualifying expenditure
During the prior year, the Group received funds under the PPP in the form of a
loan arrangement from Citibank guaranteed by the US Government, which is
specifically intended to help businesses maintain their US workforce during
the COVID-19 pandemic. The Group made the application in good faith and in the
belief that the PPP loan request was necessary and otherwise in accordance
with the then applicable rules, to support its ongoing operations given the
economic uncertainty caused by the pandemic. $5,753k funds were received on 12
May 2020 and were initially recognised as borrowings in current liabilities.
$4,753k of these funds are considered by the Company to be eligible for
forgiveness within the terms of the PPP and have therefore been recognised as
income against the related expenses in the income statement, reducing the
amount of borrowings at the period end to $1,000k. Confirmation of partial
loan forgiveness is expected within 12 months from the balance sheet date as
a result of submitting the loan forgiveness application on 1 September 2021.
The Board has consulted with its outside legal advisors as to the eligibility
for forgiveness of the loan. The Board believes it is appropriate under IAS 20
to recognise the receipt of the loan and its anticipated partial forgiveness
and that such treatment is necessary for these accounts to show a true, fair
and balanced view of the Group's results given the impact of the global
pandemic on its operations. The total balance is material and, while a
different outcome is considered highly unlikely, this balance is sensitive to
a material change in judgement in the event the US Government assessed the
forgiveness differently. Refer to Note 2, Note 21 and Note 35 for further
details.
(c) Presentation of consideration received from the sale of its US Air Associate, Gama Aviation LLC
During the prior year, the Group received consideration of $33.0m for the sale
of its US Air Associate, Gama Aviation LLC. Management exercised judgement in
determining the allocation of consideration between the 24.5% equity interest
considered to be $10.0m, the $15.5m settlement of the existing branding
contract (accelerated branding fees) and the $7.5m of consideration allocated
for the continued use of the Gama Aviation brand for up to two years after the
date of disposal, which is consistent with the pre-existing level of branding
fee of $3.75m per year (total $7.5m).
(d) Classification of items of cost or income as "Exceptional" (exclusion of items from Adjusted EBIT)
Management consider exceptional items to be those that do not contribute to
the underlying performance of the Group as set out in the policy in Note 2 to
the notes to the financial statements, Basis of preparation and significant
accounting policies - Significant accounting policies - Use of alternative
performance measures (APMs). This requires judgement as management and Group's
view of what qualifies as exceptional items may differ from similar judgements
made by others. Exceptional items are treated as Adjusting items to enable
more relevant and reliable financial information to be presented. The
exceptional items recorded in the income statement relate to accelerated
branding fees, transaction costs; business integration and re-organisation
costs; legal costs arising primarily from historical Hangar 8 activity; and
other non-recurring items that management judge to be exceptional.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting period, that may have a significant risk of
causing a materially different outcome to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
(a) Valuation review on non-current assets
The review of goodwill, other intangible assets, property, plant and equipment
and right-of-use assets requires the use of estimates related to future
profitability and the cash-generating ability of the related businesses or in
the case of the investment in associates, the fair value less costs to sell.
The estimates used may differ from the actual outcome. Details of the
impairment reviews performed and further details of the estimates inherent
within these reviews are set out in Notes 13, 14, 15 and 23.
(b) Loss allowances on financial assets
The loss allowance is calculated based on management's best estimate of the
amounts which will be recovered from trade receivables. A proportion of the
trade receivables balance is with individuals and overseas groups, for whom it
is more difficult to establish a credit rating. Management are in regular
communication with aged debtors and assess the likelihood of recoverability on
a regular basis. The estimate of the loss allowance may vary from the actual
amounts recovered if an individual becomes unable to pay. An analysis of the
trade receivables balance and indications of credit concentration are provided
in Note 19. A change in the enforceability of these liens would materially
change the loss allowance on financial assets.
(c) Valuation of inventories
In measuring inventory at the lower of cost and net realisable values, the
estimate of the net realisable value represents management's best estimate and
it may vary from the actual realisation, notwithstanding the regular review
and monitoring. An analysis of the inventories and an inventory obsolescence
allowance is provided in Note 18. Inventory valuation is sensitive to
management's assessment of ageing and obsolescence of certain line items.
Refer to Note 18.
(d) Estimation of revenue and costs recognised in relation to long-term contracts
In determining the revenue and costs to be recognised on long-term contracts,
management estimate costs to complete, the outcome of commercial discussions
at the time of contract conclusions and during renegotiation periods, and the
period over which to recognise any expected changes in consideration or costs
on renegotiation.
(e) Other long-term employee benefits
The acquisition of Jet East also includes a long-term incentive plan accounted
for under IAS 19 with payments contractually linked to the continuing
employment of executives of Jet East as well as business performance of the
combined Business Aviation MRO US business. A remuneration charge of $1,821k
(2020: nil) has been recognised within Adjusting items and an accrual of
$1,821k (2020: nil) is included within non-current trade and other payables.
The period over which the services are received is three years and the
incentive plan is estimated to result in a future cash outflow of $6,024k
(2020: nil) after this three-year period.
For the long-term incentive plan to result in future payments, business
performance must exceed a Board approved projection, the acquisition case.
Executives can earn up to a maximum of 9% ownership in the Business Aviation
MRO US equity subject to business performance in the 2023 financial year and
the level of indebtedness of the combined Business Aviation MRO US business at
that time. The long-term incentive plan is accounted for as remuneration for
post-acquisition services and is not part of the business combination.
A Board approved five-year Strategic Plan has been used to estimate business
performance in the 2023 financial year and the level of indebtedness of the
combined Business Aviation MRO US business at that time.
The key source of estimation uncertainty at the reporting date, that may have
a significant risk of causing a materially different outcome to the carrying
amounts of the other long-term employee benefit accrual or the associated
remuneration charge within the next financial year, relates to a change in
forecast business performance. The Directors consider that the carrying amount
of the other long-term employee benefit accrual at 31 December 2021 of $1,821k
(2020: nil) represents the present value of the service cost.
A 10% increase in the business performance in 2023 would result in an
additional payment of around $602k in 2024, an additional charge for the year
ended 31 December 2021 of $182k and an additional accrual at 31 December 2021
of $182k. Business performance in Business Aviation MRO US is calculated as a
multiple of EBITDA less cash and cash equivalents and less borrowings.
(f) Valuation of deferred tax assets
The Group has recognised deferred tax assets on both timing differences,
principally acquisition intangibles, and on taxable losses. Refer to Note 22
for further details.
4. Segment information
Reportable segments are operating segments that either meet the thresholds and
conditions set out in IFRS 8 for separate reporting or are considered by the
Board to be appropriately aggregated into reportable segments under IFRS 8.
The Company has made significant progress in transitioning its current year
reporting to reflect the recent realignment of the business along its
Strategic Business Units (SBUs), which were announced in the strategy section
of the 2020 Annual Report. As a result of the transition during the current
year, the results were reviewed by the Group Chief Executive Officer, who acts
as the Chief Operating Decision Maker (CODM) in the new SBU structure. The
CODM reviews monthly internal reporting on a pre-IFRS 16 basis at the
operating segment level. The impact on application of IFRS 16 is reviewed
separately ahead of statutory reporting.
The Group has three global business units: Business Aviation (Aircraft
Management, Charter, FBO & Maintenance), Special Mission (Air Ambulance
& Rescue, National Security & Policing, Infrastructure & Survey,
Energy & Offshore); and Technology & Outsourcing (Flight Operations,
FBO, CAM software, Flight Planning, CAM & ARC services). The Group
believes this will provide a direct line of sight for shareholders such that
the SBU's activities in each market, its investment requirements and
performance can be more easily assessed and understood.
The IFRS 8 operating segments within these global divisions are Special
Mission, Business Aviation MRO US, Business Aviation excluding MRO US,
Technology & Outsourcing, Associates, Corporate and Branding Fees. The
operating segments, except T&O, met the quantitative thresholds to report
separately under IFRS 8, however, T&O is presented separately as it is of
strategic importance.
Reconciliation of segmental to overall Group performance is tabulated below:
2021 2020
$'000 $'000
Restated(1)
Revenue Gross Statutory Adjusted Adjusted EBIT Adjusted Adjusted Statutory Adjusted Adjusted EBIT
Profit
EBIT
EBIT
pre-IFRS 16
EBIT
EBIT
pre-IFRS 16
Revenue Gross
Profit
BA MRO US 79,250 9,035 (11,415) (7,971) (8,599) 38,606 8,474 (543) 181 (250)
BA excluding MRO US(2) 90,896 10,667 (977) (793) (1,741) 86,706 8,951 (15,779) (3,883) (5,251)
Special Mission(2) 56,716 17,075 4,534 4,546 4,179 47,918 12,534 3,024 3,056 2,598
T&O(2) 5,297 4,204 (289) 47 41 5,023 3,569 256 605 490
Branding fee(2) 3,750 3,750 3,691 3,691 3,691 3,750 3,750 19,233 3,733 3,733
Associates - - - (1,491) (1,491) - - (5,848) (3,272) (3,272)
Corporate - - (2,796) (2,303) (2,229) - - (6,203) (5,238) (4,856)
Adjusted Result 235,909 44,731 (7,252) (4,274) (6,149) 182,003 37,278 (5,860) (4,818) (6,808)
Adjusting items (Note 6) - - - (2,978) (2,978) 15,500 15,500 - (1,042) (1,042)
Application of IFRS 16 - - - - 1,875 - - - - 1,990
(Note 23)
Statutory Result 235,909 44,731 (7,252) (7,252) (7,252) 197,503 52,778 (5,860) (5,860) (5,860)
(1) Restatements are detailed in Note 2 of the notes to the financial
statements
(2) Special Mission and T&O operate in the Europe geography. The
Branding fee derives from the US. BA excluding MRO US operates in Europe,
Middle East and Asia.
An analysis of the Group's revenue is as follows:
Year ended Year ended
2021
2020
$'000
$'000
Sale of business aviation services 232,159 178,253
Branding fees 3,750 3,750
Total Adjusted Revenue 235,909 182,003
Accelerated branding fees − 15,500
Statutory revenue 235,909 197,503
2021 2020
$'000
Restated(1)
$'000
BA MRO US 78,904 38,370
BA excluding MRO US 61,536 57,419
Special Mission 9,163 10,102
T&O 3,883 3,555
Branding fee − −
Adjusted revenue recognised at a point in time 153,486 109,446
BA MRO US 346 236
BA excluding MRO US 29,360 29,287
Special Mission 47,553 37,816
T&O 1,414 1,468
Branding fee 3,750 3,750
Adjusted revenue recognised over time 82,423 72.557
Total Adjusted revenue 235,909 182,003
Accelerated branding fees (revenue recognised at a point in time) − 15,500
Statutory revenue 235,909 197,503
(1) Restatements re detailed in Note 2 of the notes to the financial
statements
Revenue recognised over time relates to the following operating divisions:
· Special Mission has contract revenue for the maintenance of
aircraft and provision of air ambulance services of $153,164k to be earned
over the next eight years, and $47,553k of revenue has been recognised in the
year
· Business Aviation, MRO US during the year earned revenue of $346k
in relation to maintenance contracts with $346k contracted to be earned over
the next year
· Within Technology & Outsourcing, myairops(®) has $1,414k of
contract revenue recognised during the year in relation to the provision of
software services with $1,162k due over the next three years
· The Branding Fee of $3,750k has been recognised during the year,
with the remaining $625k of Branding Fees recognised over the next year
Revenue totalling $48,760k (2020: $16,660k), which is in excess of 10% of
Group revenue, has been recognised in 2021 in respect of a single customer,
included within the Business Aviation MRO US reporting segment.
The Group has not separately disclosed revenue by destination country because
this is not tracked internally and because management track revenue by SBU.
Geographic information
2021 2020
$'000
Restated(1)
$'000
Non-current assets
US 16,804 11,044
Europe 71,096 75,810
Asia 58 230
Middle East 144 219
Group 1,769 2,781
89,872 90,084
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
Non-current assets for this purpose consist of property, plant and equipment
and right-of-use assets. Goodwill and Intangible assets are shown by SBU and
thereby geographic region in Note 13 and Note 14. Refer to Note 19 for
non-current trade and other receivables which relate solely to the Business
Aviation MRO US SBU.
5. EBIT for the year
EBIT for the year has been arrived at after charging/(crediting):
Year Year
ended
ended
2021
2020
$'000
Restated(1)
$'000
Amortisation of intangibles in Adjusted result (Note 14) 2,155 1,581
Amortisation of intangibles in Adjusting items (Note 14) 1,200 614
Depreciation of property, plant and equipment (Note 15) 6,441 4,783
Depreciation of right-of-use assets in administrative expenses (Note 23) 1,017 730
Depreciation of right-of-use assets in cost of sales (Note 23) 6,528 11,102
Net foreign exchange (gain)/loss on trading monetary items (407) 350
Loss on disposal of property, plant and equipment (Note 15) 6 63
Impairment of other intangible assets (Note 14) − 833
Impairment of right-of-use assets (Note 23) 1,911 6,544
Impairment of assets under construction (Note 15) − 4,609
(Reversal)/impairment of equity accounted investments (Note 17) (1,491) 3,421
Impairment of non-current assets within share of results of equity accounted − 6,433
investments (Note 17)
Profit on disposal of interest in associates (Note 17) − (7,278)
Accelerated branding fees (Note 6) − (15,500)
Cost of inventories recognised as an expense (Note 18) 16,071 14,682
Change in provision for inventory obsolescence (404) 1,520
Staff costs (Note 7) 102,256 63,506
Impairment losses recognised on trade receivables (Note 19) 42 3,083
Recovery of previously impaired trade receivables (Note 19) (63) −
Auditors' remuneration:
Audit of the Company's financial statements 770 198
Audit of the financial statements of subsidiaries 828 667
Other support services − 26
Other deal support services − 141
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
6. Adjusted performance measures
The Adjusted result has been arrived at after the following Adjusting items:
Year Year
ended
ended
2021
2020
$'000
Restated(1)
$'000
Adjusting items in revenue and Gross Profit:
Accelerated branding fees − (15,500)
Exceptional items:
- Transaction costs 558 692
- Integration and business re-organisation costs 140 202
- Lease derecognition (Note 23) (1,626) −
- Legal costs 287 619
- Other items (79) (709)
- Impairment of assets under construction (Note 15) − 4,609
- Impairment of right-of-use assets (Note 23) 1,911 6,544
- Impairment of acquired intangibles (Note 14) − 833
Total exceptional items 1,191 (2,710)
Other Adjusting items:
Equity-settled share-based payments expense (Note 31) 257 562
Other long-term employee benefits expense (Note 32) 1,821 −
Amortisation of acquired intangible assets (Note 14) 1,200 614
Adjusting items in Operating (loss)/profit 4,469 (1,534)
(Reversal)/impairment of equity accounted investments (Note 17) (1,491) 3,421
Impairment of non-current assets within share of results of equity accounted − 6,433
investments (Note 17)
Profit on disposal of interest in associates (Note 17) − (7,278)
Adjusting items in loss before tax 2,978 1,042
Tax related to Adjusting items (Note 10) (471) 5,017
Adjusting items in loss for the year 2,507 6,059
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
Accelerated branding fees
Adjusted Revenue and Adjusted Gross Profit exclude accelerated branding fees
of $nil (2020: $15,500k) and their presentation improves comparability. This
has been presented separately in the segmental reporting. Refer to Note 17 for
further details of disposal of the US Air Associate.
2020
Revenue Gross profit
$'000 $'000
Adjusted Result 182,003 37,250
Accelerated branding fees 15,500 15,500
Statutory Result 197,503 52,750
Transaction costs
Transaction costs during the year comprise $558k (2020: $662k) in relation to
the acquisition of Jet East (Note 12) and $nil (2020: $30k) in relation to the
acquisition of air ambulance services to Jersey and Guernsey (Note 12).
Integration and business re-organisation costs
Integration and business re-organisation costs include:
· Severance costs of $416k in relation to the acquisition of Jet
East;
· A net provision release of $276k relating to direct closure costs
at the Fairoaks facility (2020: cost of $16k) (Note 30);
· In 2020, redundancy provision following the notice of closure the
Group's Saudi Arabian operations of $173k and other closure related costs of
$17k;
· In 2020, income on receipt of a credit for costs previously
charged to exceptional integration and business re-organisation costs $4k
Other income
· A $1,626k credit (2020: $nil) for the derecognition of the
Fairoaks lease release (Note 23).
Legal costs
Legal costs in the current and prior year principally relate to professional
fees in relation to ongoing litigation in respect of legacy cases, mainly
relating to the Group's collection of trade receivables acquired as part of
the Hangar 8 reverse acquisition.
Other items
In the current year, other items comprise a credit of $63k relating to funds
received from an overdue debtor against whom a litigation case has been
pursued, a credit for $16k received for consultancy services for Sharjah
Airport previously treated as an exceptional item. In the prior year, other
items comprise $499k in income relating to part settlements on a legacy case,
and a $210k release of an impairment allowance on trade receivables under the
legal proceedings that had been provided for in full in the prior year through
exceptional costs.
Equity-settled share-based payments
Equity-settled share-based payment charges of $257k (2020: $562k). See Note 31
for further details.
Other long-term employee benefits
Other long-term employee benefits remuneration charge of $1,821k (2020: nil).
This long-term benefit relates to an incentive plan with payments
contractually linked to the continuing employment of executives of Jet East as
well as the business performance of the combined Business Aviation MRO US. See
Note 32 for further details.
Impairment of acquired intangibles
The impairment charge of $833k on acquired intangible assets in the prior year
originally recognised on acquisition of Gama Aviation Hutchison Holdings
Limited (GAHH) which were impaired to nil. Refer to Note 14 for further
details.
Impairment of assets under construction and right-of-use asset
As previously reported, the Group had secured a 25-year ground lease and had
commenced the development of a BAC at Sharjah International airport in the
UAE.
With the project having been placed on hold in 2020 pending a review of the
impact of the pandemic on its viability, the Group recognised a total
impairment charge of $11,153k in its 2020 financial statements, $6,544k in
respect of the right of use asset arising from the ground lease and $4,609k in
respect of the carrying value of the assets under construction. The impairment
charge reduced the carrying amount to the recoverable amount of nil. Refer to
Note 15 and Note 23 for further details.
Following its decision to recommence the development of the BAC the Company is
now in the process of securing the necessary funding for the project. Whilst
the Group is in advanced discussions with investors regarding the funding of
this project, the Board considers that it would be inappropriate to reverse
these impairments until the full funding has been contractually secured.
In parallel with its decision to recommence the development, the Group took
the opportunity to negotiate a 10-year extension to the term of the ground
lease, which significantly enhances the viability and value of the project.
However, until the impairment charge taken in respect of the original lease is
reversed, the Group is required to further impair the $1,911k asset in use
value created by this lease extension.
The Board remains confident that the Group is making progress in securing the
necessary funding, at which time all these impairments, which amount to
$13,064k, may reverse.
Impairment of investment in associate and non-current assets in associate
In the current year, a credit of $1,491k has been recognised offsetting prior
year impairment charges to ensure that the recoverable value of the CASL asset
remained at the $2,000k consideration received on its sale in December 2021.
In the prior year, impairment charges of $6,433k related to non-current assets
in CASL and the remaining $3,421k was to reduce the carrying amount of the
equity accounted investment to the recoverable amount of $2,000k. Taken
together, impairment charges of $9,854k were recognised in the prior year in
relation to associates. Refer to Note 17 for further details.
Adjusted EBIT pre-IFRS16
The CODM reviews monthly internal reporting on a pre-IFRS 16 basis at the
operating segment level. The impact on application of IFRS 16 is reviewed
separately ahead of statutory reporting.
Tax related to Adjusting items
In the current year, the tax on Adjusting items reflects the deferred tax on
deductible items before any non-recognition of deferred tax. In the prior
year, a significant tax charge of $5,017k was recognised for the tax
consequences of the disposal of the US Air Associate and the related
accelerated branding fee.
Organic and constant currency growth
Organic and constant currency growth in Revenue, Gross Profit and EBIT is a
measure which seeks to reflect the performance of the Group that will
contribute to long-term sustainable growth. As such, organic and constant
currency growth excludes the impact of acquisitions or disposals, and the
effect of foreign exchange movements. Constant currency growth has been
calculated using a constant foreign exchange rate of $1.3756 to £1, being the
cumulative average USD-GBP exchange rate for 2021, which has been used to
restate Revenue, Gross Profit and EBIT for 2020. A reconciliation to Rebased
Revenue, Gross Profit and Adjusted EBIT, the most directly comparable IFRS
measures, which are used to calculate organic and constant growth, is set out
below.
The prior year has been adjusted to include full year results of acquired
businesses and no results for disposed businesses where the results include
only part-year results in either current or prior periods. For 2020 this
comprises the results of Jet East acquired on 15 January 2021, whilst the
Jersey and Guernsey Air Ambulance business was acquired on 18 July 2020. The
Jet East business has been fully integrated into the US operations.
2020
$'000
Restated(1)
Adjusted Rebase for FX Rebase for organic growth Rebased Adjusted Revenue Adjusted Rebase for FX Rebase for organic growth Rebased Adjusted Adjusted Rebase for FX Rebase for organic growth Rebased Adjusted
EBIT
EBIT
Revenue Gross Gross Profit
Profit
BA MRO US 38,606 - 28,198 66,804 8,474 - 220 8,694 181 - (1,373) (1,632)
BA excluding MRO US 86,706 3,496 - 90,202 8,951 316 - 9,267 (3,883) (292) - (4,175)
Special Mission 47,918 3,439 3,544 54,901 12,534 869 956 14,359 3,056 185 642 3,883
T&O 5,023 361 - 5,384 3,569 257 - 3,826 605 35 - 640
Branding fee 3,750 - - 3,750 3,750 - - 3,750 3,733 - - 3,733
Associates - - - - - - - - (3,272) - - (3,272)
Corporate - - - - - - - - (5,238) 99 - (5,139)
Adjusted Result 182,003 7,296 31,742 221,041 37,278 1,442 1,176 39,896 (4,818) 27 (731) (5,522)
Net debt
A reconciliation of the IFRS financial statement line items that represent the
Net debt APM is tabulated below.
2021 2020
$'000
Restated(1)
$'000
Cash 10,243 16,136
Borrowings (67,154) (53,197)
Net debt pre IFRS 16 (56,911) (37,061)
Obligations under leases (48,002) (46,139)
Net debt (104,913) (83,200)
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
7. Staff costs
The average monthly number of employees (including Executive Directors) was:
Year ended Year ended
2021
2020
Number
Number
Operations and administration 440 357
Pilots and cabin crew 131 108
Aircraft engineering 556 298
1,127 763
Their aggregate remuneration comprised:
Year Year
ended
ended
2021
2020
$'000
$'000
Wages and salaries 91,184 56,614
Social security costs 5,894 4,506
Equity-settled share-based payments (Note 31) 257 562
Other long-term employee benefits (Note 32) 1,821 −
Pension costs 3,100 1,824
102,256 63,506
Aggregate remuneration is stated after netting off government grants received
including $41k (2020: $616k) under the UK Furlough scheme and $nil (2020:
$148k) under a Hong Kong payroll scheme.
Details of Directors' remuneration are given in the Remuneration Report and
refer to Note 31 for details of share option transactions approved during the
year. The share-based payment costs relating to these Directors amounted to
$150k (2020: $260k).
Retirement benefit schemes
The Group operates defined contribution retirement benefit schemes for all
qualifying employees. The assets of the schemes are held separately from those
of the Group in funds under the control of independent trustees. As at 31
December 2021, contributions of $257k (2020: $261k) due in respect of the
current reporting period had not been paid over to the schemes.
8. Finance income
Year Year
ended
ended
2021
2020
$'000
$'000
Foreign currency translation on intercompany balances − 405
Foreign currency translation on borrowings 56 -
Interest income on financial assets 561 1,130
Total finance income 617 1,535
Interest income on financial assets includes interest due to late customer
payments of $432k (2020: $nil), $92k (2020: $964k) in respect of deferred
consideration relating to the disposal of the US Air Associate (Note 17) and
$37k (2020: $166k) of other interest on other financial assets. The decrease
of $872k on the interest received on the deferred consideration for the US
associate is due to an early repayment in July 2021.
9. Finance expense
Year Year
ended
ended
2021
2020
$'000
Restated(1)
$'000
Foreign currency translation on intercompany balances 441 −
Foreign currency translation on borrowings − 178
Interest on borrowings before capitalised interest 791 878
Capitalised interest (Note 15) − (179)
Discounting on provisions (Note 30) 17 42
Discounting on deferred consideration (Note 30) 13 -
Interest on lease liabilities (Note 23) 2,624 2,606
Amortisation of loan arrangement fees 180 168
Other similar charges payable 44 124
Total finance costs 4,110 3,817
(1) Restatements are detailed in Note 2 of the notes to the financial statements
10. Taxation
Year ended 2021 Year ended 2020
$'000
$'000
Statutory Adjusting Adjusted Statutory Adjusting Adjusted
result
items
result
result
items
result
Corporation tax:
Current tax charge:
Current year (credit)/charge 4,292 (3,891) 401 3,016 (2,977) 39
Adjustment in respect of 75 − 75 − − −
prior years
4,367 (3,891) 476 3,016 (2,977) 39
Deferred tax charge:
Current year (credit)/charge (6,105) 4,362 (1,743) 3,136 (2,040) 1,096
Adjustment in respect of (242) − (242) 344 - 344
prior years
Deferred tax (credit)/charge (6,347) 4,362 (1,985) 3,480 (2,040) 1,440
(Note 22)
Total tax (credit)/charge for the year (1,980) 471 (1,509) 6,496 (5,017) 1,479
The tax charge for the year, based on the tax rate in the United Kingdom, can
be reconciled to the profit per the income statement as follows:
Year ended 2021 Year ended 2020
$'000
Restated(1)
$'000
Statutory result Adjusting items Adjusted result Statutory Adjusting items Adjusted result
result
Loss before tax (10,745) 2,978 (7,767) (8,142) 1,042 (7,540)
Tax at the corporation tax rate of 19% (2020: 19%) (2,042) 566 (1,476) (1,547) 199 (1,348)
Effects of:
Income not taxable - other forms of government support - - - (196) - (196)
Income not taxable - PPP loan forgiveness - - - (903) - (903)
Non-deductible - impairment of right-of-use asset - - - 1,225 (1,225) -
Non-deductible - impairment of assets under construction - - - 876 (876) -
Non-deductible - impairment of acquired intangibles 4 (4) - 164 (164) -
Non-deductible - impairment/ (impairment reversal) of equity (246) 246 - 1,872 (1,872) -
accounted investments
Non-deductible - share of losses of CASL in adjusted result 246 - 246 637 - 637
Non-deductible - share-based payments 45 (45) - 107 (107) -
Other expenses not deductible/income not taxable 275 (60) 215 728 - 728
Fines for late filings(4) 328 - 328 - - -
Adjustment in respect of prior years (167) - (167) 344 - 344
Tax rates in different jurisdictions (371) (137) (508) 2,490 (842) 1,648
Deferred tax not recognised in the year(3) (44) (103) (147) 32 (19) 13
De-recognition of deferred tax - - - 667 (111) 556
Total tax (credit)/charge for the year (1,980) 471 (1,509) 6,496 (5,017) 1,479
(1) Restatements are detailed in Note 2 of the notes to the financial
statements
(2) The UK Finance Act 2021 enacted a change in the UK corporation tax rate
from 19% to 25% from 1 April 2023
(3) Prior year has been restated to include the effect of amortisation of
acquired intangibles
(4) Fines have been levied by some US states as a result of management's
decision to change the timing of payments of the 2020 US tax, which included
the profit on the disposal of the US Air Associate (see Note 17). Prior to
the early receipt of the deferred consideration from Wheels Up in 2021, an
election had been made to pay taxes in instalments. Once funds had been
received, the election was changed to pay immediately, which triggered
punitive late payment charges. Management have requested the US states provide
relief for these fines and have had external advice that relief should be
provided, but due to the backlog caused by COVID-19, the timing on any
decision by the state authorities is uncertain. Management consider the
penalty to be tax-geared and have therefore presented it within the total tax
charge for the year
(5) The Adjusting items reflects the tax effect of Adjusting items disclosed
within the Adjusted Items column of the consolidated income statement and
explained in further detail in Note 6
The adjustments in respect of prior year comprise an immaterial $75k current
tax charge for property taxation in Jersey, a $184k deferred tax credit
relating to the implementation of IFRS 16 in the US and the offset of deferred
tax assets against the $57k UK deferred tax liability. In the prior year,
the adjustment includes a $293k decrease in deferred tax asset relating to
temporary timing differences on the assets held for sale in the prior year.
This is an immaterial change to the prior year recognised in advance of the
disposal in March 2020.
11. Earnings per share (EPS)
The calculation of earnings per share is based on the earnings attributable to
the ordinary shareholders divided by the weighted average number of shares in
issue during the period.
Year Year
ended
ended
2021
2020
$'000
Restated(1)
$'000
Numerator
Statutory earnings:
Loss attributable to ordinary equity holders of the parent (8,062) (14,683)
Adjusted earnings:
Loss attributable to ordinary equity holders of the parent (5,555) (8,624)
Denominator
Weighted average number of shares used in basic EPS 63,660,183 63,636,279
Effect of dilutive share options − -
Weighted average number of shares used in diluted EPS 63,660,183 63,636,279
Earnings per share (cents)
Statutory earnings per share
Basic (12.7) (23.1)
Diluted (12.7) (23.1)
Adjusted earnings per share
Basic (8.7) (13.6)
Diluted (8.7) (13.6)
(1) Restatements are detailed in Note 2 of the notes to the financial
statements
The average share price for the year ended 31 December 2021 was 39.2 pence,
which is marginally higher than the exercise price of some outstanding
options, however, the effect of including these shares would reduce the loss
per share and adjusted loss per share and therefore no dilutive effect is
shown.
The weighted average number of shares used in basic EPS has not been reduced
by any shares held by the employee benefit trust. Refer to Note 25 for further
details on the employee benefit trust.
12. Acquisitions
Jet East
On 15 January 2021, the Group acquired 100% of the issued share capital of Jet
East from East Coast Aviation, LLC which will significantly expand its
existing US aircraft maintenance operations.
The acquisition of Jet East has been transacted by the Group's wholly owned US
subsidiary Gama Aviation Engineering Inc (GAEI) for $7.7m in cash, with a
further $1.0m in deferred cash payable over two years and the assumption of
Jet East debt. The transaction has been entirely funded from the Group's
existing resources.
Details of the purchase consideration, the net assets acquired, and goodwill
are as follows:
$'000
Cash paid 7,700
Deferred consideration 533
Total consideration 8,233
Initial deferred consideration of $1.0m has been discounted at 2.5% to a
present value of consideration and adjusted by $420k for net assets acquired.
Additionally, a post-closing adjustment was made to increase trade receivables
by $550k relating to an insurance claim made before the acquisition that has
subsequently been received.
Recognised amounts of identifiable assets acquired and liabilities assumed are
as follows:
$'000
Fair value
Property, plant and equipment 2,560
Right-of-use assets 3,394
Trade and other receivables non-current 289
Inventories 1,410
Trade and other receivables current 5,910
Cash and cash equivalents 64
Trade and other payables (3,682)
Intangible assets - Brand 1,181
Intangible assets - Customer relationships 5,021
Deferred tax asset in entity books 1,418
Deferred tax liability on consolidation intangibles (1,736)
Enterprise value 15,829
Borrowings (4,202)
Obligations under leases (3,394)
Total consideration 8,233
The purchase price accounting has now been finalised following the twelve
month measurement period permitted under IFRS 3 Business Combinations.
Acquisition costs of $558k were charged to the income statement within
administration expenses in 2021 (2020: $662k), with total cash outflow
relating to the acquisition as follows:
$'000
Acquisition of subsidiary, net of cash acquired 7,588
Acquisition costs 558
Total cash paid 8,146
Of the $4,202k borrowings assumed on acquisition, $2,788k has been settled to
date and $1,414k remained outstanding at 31 December 2021.
The acquisition has been accounted for as an asset deal in at the entity level
and as a result the consideration over the tax value of the assets is tax
deductible, leading to the recognition of a deferred tax asset in the local
books.
Two significant identifiable intangible assets were identified separate from
goodwill. An identifiable intangible asset relating to the brand of Jet East
(and related trademarks, logos and domain names) has been identified as
acquired as part of the transaction. The brand (including related trademarks,
logos and domain names etc associated with the brand) is valued using the
"relief from royalty" valuation method. There was also an identifiable
intangible asset identified relating to the customer relationships acquired as
part of the transaction. This intangible asset is valued using a "multi-period
excess earnings" valuation method.
The acquisition of Jet East included a long-term incentive plan which is
accounted for as remuneration for post-acquisition services and is not part of
the business combination. See Note 32 for further details.
As the Jet East business has been integrated into the rest of the Group's
operations in the US, it is impracticable to disclose the impact that the
effect the acquisition had on the income statement for the year.
Jersey and Guernsey Air Ambulance business
On 18 July 2020, the Group acquired a business to provide air ambulance
services for the Government of Jersey and the Government of Guernsey. Cash
consideration of $1.5m was paid. The Group determined the acquisition to be a
business as defined by IFRS 3 and the transaction has been accounted for as a
business combination. The following table summarises the fair value of assets
acquired, and the liabilities assumed at the acquisition date.
Recognised amounts of identifiable assets acquired and liabilities assumed.
Note $'000
Property, plant and equipment 15 1,070
Other receivables 116
Customer relationships (included within intangibles) 14 390
Deferred tax liability 22 (62)
Total consideration 1,514
Acquisition costs 6 30
Acquisition of business, including acquisition costs 1,544
13. Goodwill
$'000
Cost
At 1 January 2020 46,520
Exchange differences 1,514
At 31 December 2020 48,034
Exchange differences (520)
At 31 December 2021 47,514
Accumulated impairment losses
At 1 January 2020 24,770
Exchange differences 774
At 31 December 2020 25,544
Exchange differences (266)
At 31 December 2021 25,278
Carrying amount
At 31 December 2021 22,236
At 31 December 2020 22,490
The recoverable amount of goodwill is allocated to the following
cash-generating units (CGUs):
2021 2020
$'000
Restated(1)
$'000
Carrying amount
Business Aviation, MRO US 787 787
Business Aviation, excluding MRO US(3) 8,043 8,138
Special Mission(2) 11,119 11,251
Technology & Outsourcing(2) 2,287 2,313
22,236 20,490
(1)Restated following the change of organisational structure
(2) Special Mission and T&O operate in the Europe geography
(3) Business Aviation, excluding MRO US operates in the Europe, Middle East
and Asia geography however the goodwill relates exclusively to the Europe
geography
When testing for impairment, recoverable amounts for all of the Group's CGUs
are measured at their value in use (VIU) by discounting the future expected
cash flows from the assets in the CGUs. The CGUs that have goodwill are
Business Aviation MRO US; Business Aviation excluding MRO US; Special Mission
and Technology & Outsourcing. The goodwill for 2020 has been restated to
reflect the new organisation structure, and, where not directly attributable
to a specific CGU, has been allocated based on the relative gross profit of
contracts in the CGU. The key assumptions and estimates used for VIU
calculations are as follows:
Future expected cash flows
VIU calculations are based on estimated post-tax cash flows for 2022 through
2026 as approved by the Board. For cash flows beyond the forecast period, a
terminal growth rate has been applied to a standardised terminal cash flow.
CGU specific operating assumptions are applicable to the forecast cash flows
for the years through 2026 and relate to revenue forecasts, expected project
outcomes, cash conversion, levels of capital expenditure and forecast
operating margins in each of the operating units. The Group also considered
the impact of Climate change in determining operating assumptions applicable
to the forecast cash flows. The relative value ascribed to each assumption
will vary between CGUs as the forecasts are built up from the underlying
operating units within each CGU.
Terminal growth rate
Beyond the current year forecast period, a long-term terminal growth rate has
been applied to calculate terminal values for all CGUs. In the prior year, the
Group used the Real GDP Growth Rate as a proxy for long-term terminal growth
rate of Gama Aviation Plc. In the current year, long-term CPI projections have
been deemed a better estimate because this measure appears to be more stable
than GDP growth rates and a better proxy for long-term terminal growth rate of
the Group. CPI has been sourced by jurisdiction of the Group CGUs from 2020 to
2026. Using an average of 2021 through 2026 was not considered appropriate as
all years are benefitting from an assumed recovery from the COVID-19 pandemic.
Terminal growth rates are tabulated below.
2021 2020
%
%
United Kingdom 2.3 2.3
European Union 3.5 n/a
United States 2.7 2.2
Asia n/a 2.1
Middle East 1.5 1.0
Weighted average cost of capital (WACC)
A pre-tax discount rate is calculated by reference to the post-tax WACC of
each CGU, adjusted to reflect the market and other systemic risks specific to
each CGU and the territories in which they operate.
A pre-tax discount rate is calculated for each CGU. For the CGUs that have
goodwill, the discount rates are tabulated below.
2021 2020
Restated(1)
%
%
Business Aviation, MRO US 16.2 13.4
Business Aviation, excluding MRO US 11.4 11.5
Special Mission 9.8 10.5
Technology & Outsourcing 10.8 13.4
(1)Restated following the change of organisational structure
The discount rates in the current year have increased in Business Aviation MRO
US due to the acquisition of Jet East, remained stable in Business Aviation
excluding MRO US and decreased in T&O and Special Mission, which is driven
by lower CGU specific risk premiums.
Sensitivity to changes in assumptions
The calculation of VIU is most sensitive to the discount rate, long-term
growth rate and future expected cash flows used. The Group has performed
sensitivity analyses across all CGUs which have goodwill, acquired intangible
assets, right-of-use assets, property, plant and equipment, computer software
and an allocation of corporate assets, using reasonably possible changes in
the long-term growth rates and pre-tax discount rates.
No reasonably possible change in assumptions would diminish the recoverable
amount below the carrying amount of assets in any CGU. No impairment has been
recognised in any CGU in the current year.
14. Other intangible assets
Commence Part 145 approvals Licences Customer relations(2) Computer software(3) Total
operations
$'000
and brands(1)
$'000
$'000
$'000
$'000
$'000
Cost
At 1 January 2020 1,481 3,442 1,605 15,479 7,334 29,341
Additions - - - - 2,521 2,521
Disposals (1,481) (3,442) (1,605) - - (6,528)
Recognised on acquisition (Note 12) - - - 390 - 390
Foreign exchange differences - - - - 417 417
At 31 December 2020 - - - 15,869 10,272 26,141
Additions - - - - 2,604 2,604
Recognised on acquisition (Note 12) - - 1,181 5,021 - 6,202
Foreign exchange differences - - - (52) (170) (222)
At 31 December 2021 - - 1,181 20,838 12,706 34,725
Amortisation and accumulated impairment losses
At 1 January 2020 1,481 3,442 1,549 12,204 517 19,193
Amortisation - - 55 559 1,581 2,195
Disposals (1,481) (3,442) (1,605) - - (6,528)
Impairment loss - - - 833 - 833
Foreign exchange differences - - 1 1 117 119
At 31 December 2020 - - - 13,597 2,215 15,812
Amortisation - - 227 973 2,155 3,355
Foreign exchange differences - - - (28) (68) (96)
At 31 December 2021 - - 227 14,542 4,302 19,071
Carrying amount
At 31 December 2021 - - 954 6,296 8,404 15,654
At 31 December 2020 - - - 2,272 8,057 10,329
(1) Relates to the US geography
(2) Relates to the US and Europe geography which is separately disclosed below
(3) Relates to the Europe geography
The carrying amount of customer relationships relate to:
· Technology & Outsourcing: $978k (2020: $1,276k);
· Business Aviation excluding MRO US: $780k (2020: $996k); and
· Business Aviation MRO US: $4,538k (2020: nil)
Licences and brands relate to Business Aviation US arising from the Jet East
acquisition.
Computer software costs comprise internally developed software costs arising
in the Group's myairops(®) business as well as purchased software, such as
operational and financial systems. The carrying value of internally developed
software within this balance is $7,450k (2020: $6,729k).
In the prior year, the carrying amount of GAHH acquired intangible assets in
Business Aviation excluding MRO US exceeded the recoverable amount due to
uncertainties arising from the COVID-19 pandemic that resulted in the customer
relationship no longer being active. An impairment charge of $833k was
recognised in the year to impair the GAHH customer relationship intangible to
the recoverable amount of nil.
Intangible assets are assessed for impairment in Note 13 together with other
non-current assets.
Impairment review on internally developed computer software costs in
myairops(®)
In the current year, there were indicators of impairment on internally
developed computer software costs in myairops(®), which is considered to be a
stand-alone CGU. When testing for impairment, the recoverable amount of
myairops(®) is measured at VIU by discounting the future expected cash flows
from myairops(®) software. Refer to Note 13 for further details on the future
expected cash flows, terminal growth rate and pre-tax discount rate used for
the impairment review on myairops(®).
Sensitivity to changes in assumptions
The calculation of VIU is most sensitive to the discount rate, long-term
growth rate and future expected cash flows used. The Group has performed a
sensitivity analysis for myairops(®) using reasonably possible changes in the
long-term growth rates and pre-tax discount rates.
The sensitivity analysis in myairops(®) showed the following:
• Operating cash flows would have to reduce by over
$166k in each year of the forecast period before an impairment would arise
• A 1% decrease in the terminal growth rate would reduce
headroom by $665k to $1,246k
• A 1% increase in the discount rate would reduce
headroom by $2,213k to $303k
• A 1% decrease in the terminal growth rate and a 1%
increase in the discount rate would result in an impairment of $200k
No impairment has been recognised in the current year because there is $1,911k
of headroom over the carrying value of assets in the myairops(®).
15. Property, plant and equipment
Helicopters Leasehold Aircraft and Fixtures, Motor Asset under construction Total
$'000
improvement
refurbishments
fittings and
vehicles
$'000
$'000
$'000
$'000
equipment $'000
$'000
Cost
At 1 January 2020 - 15,302 9,142 9,516 2,735 12,914 49,609
Additions, restated(1) 19,045 2,072 1,883 1,896 61 - 24,957
Acquisitions - - 819 251 - - 1,070
Capitalised interest - - - - - 179 179
Transfers 8,484 - - - - (8,484) -
Disposals - (1,294) (35) (1,633) (11) - (2,973)
Exchange differences 1,559 1,838 352 1,831 (12) - 5,568
At 31 December 2020 as restated(1) 29,088 17,918 12,161 11,861 2,773 4,609 78,410
Additions - 1,230 627 1,463 50 - 3,370
Acquisitions - 683 - 1,384 493 - 2,560
Disposals - (33) - (206) (94) - (333)
Reclassification(2) 117 − (117) − − − −
Exchange differences (342) (187) (153) (77) (2) - (761)
At 31 December 2021 28,863 19,611 12,518 14,425 3,220 4,609 83,246
Accumulated depreciation
At 1 January 2020 - 5,077 2,252 5,571 1,385 - 14,285
Charge for the year, restated(1) 679 897 957 1,787 453 - 4,773
Impairment - - - - - 4,609 4,609
Disposals - (1,294) (35) (1,570) (11) - (2,910)
Exchange differences 43 1,048 80 1,810 3 - 2,984
At 31 December 2020 as restated(1) 722 5,728 3,254 7,598 1,830 4,609 23,741
Charge for the year 1,243 1,136 1,348 2,160 554 - 6,441
Disposals - (30) - (155) (83) - (268)
Reclassification(2) - (25) - 25 - - -
Exchange differences (33) 3 (64) (62) (1) - (157)
At 31 December 2021 1,932 6,812 4,538 9,566 2,300 4,609 29,757
Carrying amount
At 31 December 2021 26,931 12,799 7,980 4,859 920 - 53,489
At 31 December 2020 (restated) 28,483 12,224 8,790 4,238 943 - 54,669
(1) Restatements are detailed in Note 2 to the notes to the financial
statements
(2) Reclassifications relate to immaterial corrections in the categorisation
of property, plant and equipment
During 2021, no borrowing costs were capitalised. During the year ended 31
December 2020, before the helicopters were brought into use, the Group
capitalised borrowing costs of $179k.
Deployment of the helicopters occurred on 1 June 2020 in support of a
long-term contract. As a result, helicopters were transferred from assets
under construction into the helicopters asset class within property, plant and
equipment. They were brought into use and depreciated from 1 June 2020 having
not been previously depreciated.
The assets under construction relating to the investment in the Sharjah
Business Aviation Centre project were fully impaired in the year ended 31
December 2020. The impairment arose due to uncertainties arising in part from
the ongoing COVID-19 pandemic. Total impairment costs of $4,609k were
recognised during the prior year.
The acquisition of Jet East in the year included property plant and equipment
valued at $2,560k. In the prior year the acquisition of an air ambulance
business in the prior year included property, plant and equipment valued at
$1,070k.
Critical management judgement
A critical management judgement at the reporting date relates to the
determination of the recoverable amount of nil for the Sharjah BAC project.
This is based on management's judgement that whilst the Group is in advanced
discussions with investors regarding the funding of this project, the Board
considers that it would be inappropriate to reverse impairments relating to
the BAC project until the full funding has been contractually secured.
16. Subsidiaries and other related undertakings
Details of the Company's subsidiaries and other related undertakings held
directly or indirectly at 31 December 2021 are as follows:
Name Place of incorporation Proportion of voting and ownership Proportion of voting and ownership Nature of business Registered address
and operation
interest 2021
interest 2020
Airops Software Limited(1) England and Wales 100% 100% Aviation software Head Office
Aravco Limited(1) England and Wales 100% 100% Non-trading Head Office
FlyerTech Limited(1) England and Wales 100% 100% Airworthiness management Head Office
Gama Aviation (Asset 2) Limited(1) England and Wales 100% 100% Non-trading Head Office
Gama Aviation (Engineering) Limited(1) England and Wales 100% 100% Aviation design and engineering Head Office
Gama Aviation (UK) Limited(1) England and Wales 100% 100% Aviation management Head Office
Gama (Engineering) Limited(1) England and Wales 100% 100% Dormant Head Office
Gama Group Limited England and Wales 100% 100% Holding company Head Office
Gama Support Services Limited(1) England and Wales 100% 100% Dormant Head Office
Hangar 8 Management Limited England and Wales 100% 100% Non-trading Head Office
International JetClub Limited England and Wales 100% 100% Non-trading Head Office
Ronaldson Airmotive Limited(1) England and Wales 100% 100% Dormant Head Office
Gama Aviation (Beauport) Limited(1) Jersey 100% 100% Aviation management Jersey Office
Gama Aviation (Engineering) Jersey Limited(1) Jersey 100% 100% Aviation design and engineering and FBO Jersey Office
Gama Aviation FZC(1,4) SAIF Free Zone, 49% 49% Aviation management SAIF Suite Z-21. P.O. Box 122389, Sharjah, UAE
United Arab Emirates
Gama Group Mena FZE United Arab Emirates 100% 100% Holding company SAIF Office Q1-09-067/C, P.O. Box 122464, Sharjah, UAE
Gama Holdings FZC United Arab Emirates 100% 100% Dormant SAIF Lounge P.O. Box 121954, Sharjah, UAE
Gama Support Services FZE(1) United Arab Emirates 100% 100% Aviation design and engineering and FBO SAIF Desk Q1-05-123/B, P.O. Box 122553, Sharjah, UAE
Gama International Saudi Arabia(3) Kingdom of Saudi Arabia nil(3) nil(3) Aviation management 6646 Abi Haitham Al Ansari, al Madina Square Center - Office 2 & 3,
Muhammadiyah District, Jeddah 23624-3270, KSA
Gama Aviation SPV Limited (Plc)(5) United Arab Emirates 100% 10% Aviation management 2428 Res Co-work 03 Level 24, Al Sila Tower, Abu Dhabi Global Market Square,
Al Maryah Island, Abu Dhabi, UAE
Gama Aviation (Engineering) Inc.(1) Delaware, USA 100% 100% Aviation design and engineering Delaware Office
Gama Aviation (Management) Inc.(1) Delaware, USA 100% 100% Non-trading Delaware Office
Gama Group Inc. Delaware, USA 100% 100% Holding company Delaware Office
Jet East Aviation Corporation, LLC(1) Pennsylvania, USA 100% - Aviation design and engineering and FBO Trenton Office
Lynk LLC(1) Ohio, USA 100% - Dormant Trenton Office
Gama Aviation Engineering (HK) Limited(1) Hong Kong 100% 100% Aviation design and engineering Hong Kong Office
Gama Aviation Hutchison Holdings Limited(1) Hong Kong 100% 100% Holding company Hong Kong Office
Gama Aviation (HK) Limited(1) Hong Kong 100% 100% Aviation management Hong Kong Office
Gama Group (Asia) Limited Hong Kong 100% 100% Holding company Hong Kong Office
Star-Gate Aviation (Proprietary) Limited South Africa 100% 100% Holder of South African AOC 151 Monument Road, Aston Manor 1619
South Africa
Hangar 8 Nigeria Limited(2) Nigeria 100% 100% Applicant of Nigerian AOC (7)
Gama Aviation (Cayman) SEZC Cayman Islands 100% 100% Aviation Management Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands
FlyerTech Europe Sp. Z.o.o. Poland 100% - Airworthiness management ul. Komitetu Obrony Robotnikow 62, 2nd Floor, 02-146 Warsaw, Poland, NIP:
7831827059
GB Aviation Holdings LLC(6) Delaware, USA 50% 50% Joint Venture - Holding company for aviation management and charter company Delaware Office
Gama Hutchison Aviation Technical Service (Beijing) Limited(1) China 100% 100% Non-trading Room 250, 2nd Floor, Building 1, No. 56, Zhaoquanying Section, Changjin Road,
Shunyi District, Beijing
The addresses for the specified offices are:
Head Office: 1st Floor 25 Templer Avenue, Farnborough, Hampshire, England,
GU14 6FE
Jersey Office: Beauport House, L'Avenue De La Commune, St Peter, Jersey, JE3
7BY
Hong Kong Office: 7th Floor, 81 South Perimeter Road, Hong Kong International
Airport, Lantau, Hong Kong
Delaware Office: Corporation Service Company, 251 Little Falls Drive,
Wilmington, Delaware 19808, USA
Trenton Office: 18 West Piper Ave, Trenton, New Jersey 08628, USA
( )
(1) Indicates indirect holding.
(2) The consolidated financial statements include amounts relating
to Hangar 8 Nigeria Limited, a company established in Lagos, Nigeria. The
Group holds 11% of the share capital. Whilst the Group therefore does not have
legal control of this entity, the Directors and officers comprise only
management from the Group who have the ability to adopt, amend and control the
operating and financial policies of the entity. Local regulations prevent the
Group holding a legally controlling shareholding and therefore 89% of the
share capital is held on behalf of the Group by Tinubu Investment Company
Limited. Accordingly, the entity has been treated as a wholly owned subsidiary
in these financial statements.
(3) No non-controlling interest has been recognised as the Group
has the full beneficial interest
(4) Gama Aviation Plc holds a 49% shareholding in Gama Aviation
FZC. The results of Gama Aviation FZC are fully consolidated within the
financial statements because Gama Aviation Plc is exposed to variable returns
from its involvement and has the ability to affect the returns through its
power over these companies. Refer to Note 26 for further details.
(5) Gama Group Mena FZE acquired 90% of the issued share capital
on 17 February 2020.
(6) GB Aviation Holdings LLC is the entity jointly held with
Signature Aviation plc. The Company's sole asset was its 49% investment in
Gama Aviation LLC, the Group's US Air Associate, which was disposed of in the
prior year (refer to Note 17). The Group's ownership interest in Gama Aviation
LLC was? 24.5%.
(7) The registered office address of this company is available
upon request at the Company's Head Office at the above address.
During the year ended 31 December 2021 the Company disposed of the following
undertakings held directly or indirectly at 31 December 2020:
Name Place of incorporation Proportion of voting and ownership Proportion of voting and ownership Method of disposal Registered address
and operation
interest 2021
interest 2020
Aerstream England and Wales - 100% Dissolved Head Office
Limited(1)
Avialogistics Limited(1) England and Wales - 100% Dissolved Head Office
Aviation Crewing Limited England and Wales - 100% Dissolved Head Office
Gama Aviation Group Limited(1) England and Wales - 100% Dissolved Head Office
Gama Aviation (Training) Limited(1) England and Wales - 100% Dissolved Head Office
GA 259034 Limited(1) England and Wales - 100% Dissolved Head Office
GA FM54 Limited(1) England and Wales - 100% Dissolved Head Office
Gama Leasing Limited(1) England and Wales - 100% Dissolved Head Office
Hangar 8 AOC Limited England and Wales - 100% Dissolved Head Office
Hangar 8 Engineering Limited England and Wales - 100% Dissolved Head Office
Infinity Flight Crew Academy Limited England and Wales - 100% Dissolved Head Office
Aviation Beauport Holdings Limited(1) Jersey - 100% Dissolved Jersey Office
Ferron Trading Limited(1) Jersey - 100% Dissolved Jersey Office
Gama Aviation SA(1) Switzerland - 100% Liquidated Boulevard Georges-Favon 43, 1204 Genève, Switzerland
Hangar 8 Mauritius Limited Mauritius - 100% Struck off (2)
China Aircraft Services Limited (CASL) Hong Kong - 20% Sold 8th Floor, Main Building, Hangar and Workshop Complex, 81 South Perimeter
Road, Hong Kong International Airport, Lantau, Hong Kong
(1) Indicates indirect holding.
(2) The registered office address of this company is available
upon request at the Company's Head Office at the above address.
17. Investments accounted for using the equity method and disposal of investments
Details of the Group's investments accounted for using the equity method at 31
December 2021 are as follows:
Name Investment Place of Proportion of Proportion of
incorporation and
ownership interest
voting power held
operation
GB Aviation Holdings LLC(1) Associate USA 50% 50%
Details of the Group's investments accounted for using the equity method at 31
December 2020 were as follows:
Name Investment Place of Proportion of Proportion of
incorporation and
ownership interest
voting power held
operation
GB Aviation Holdings LLC(1) Associate USA 50% 50%
China Aircraft Services Limited Associate Hong Kong 20.0% 20.0%
(1) GB Aviation Holdings LLC is the entity jointly held with Signature
Aviation Limited (previously Signature Aviation plc). The company's sole asset
was its 49% investment in Gama Aviation LLC, the Group's US Air associate,
which was disposed in the prior year, refer to Note 17. The Group's ownership
interest in Gama Aviation LLC is 24.5%. The Group equity accounted for the
consolidated results of GB Aviation Holdings LLC, which included its' sole
undertaking and trading entity, Gama Aviation LLC.
The results of the equity accounted investments are as follows:
China Aircraft Services Limited
Gama Aviation LLC
Year ended 2021 Year ended
Year ended 2021 Year ended 2020 $'000 2020
$'000 $'000 $'000
Revenue − 75,053 8,524 33,389
Expenditure − (74,732) (16,079) (50,432)
Impairment of property, plant and equipment − − − (16,433)
Impairment of right-of-use assets − − − (15,732)
Profit/(loss) before tax − 321 (7,555) (49,208)
Income tax (charge)/credit − (2) 99 292
Profit/(loss) after tax − 319 (7,456) (48,916)
Statutory result: Group's share of net profit/(loss) − 78 (1,491) (9,783)
Statutory result: Share of results from equity accounting − 78 (1,491) (9,783)
Less Adjusting items:
Group's share of impairment of property, plant and equipment − − − 3,287
Group's share of impairment of right-of-use assets − − − 3,146
Adjusted result: Share of results from equity accounting − 78 (1,491) (3,350)
Reversal of/(impairment) of equity accounted investments − − 1,491 (3,421)
Impairment is assessed by the recoverable amount which is the higher of the
fair value less costs to sell and the VIU. The recoverable amount has been
determined on the fair value less cost to sell.
China Aircraft Services Limited
In 2021, the share of results from the equity accounted investment in China
Aircraft Services Limited represents the period ending 31 May 2021, this being
the date the Board accepted in principle an offer of $2m for its 20%
shareholding, and subsequently recognised the asset as held for sale at fair
value. Adjusting items includes an impairment reversal, recognised in line
with IAS 36, to the extent of the Group's share of losses of $1.5m such that
the carrying amount of the investment directly before the sale was held at
$2m. On 31 December 2021, the sale of the investment was agreed and $2m cash
consideration received in full. As a result, assets held for sale at 31
December 2021 were nil.
In 2020, CASL suffered substantial losses, the Group's share of which amounted
to $3,350k of Adjusted EBIT, due to vastly reduced commercial aviation volumes
at Hong Kong airport, impacted by COVID-19. Impairment charges of $9,854k were
recognised in Adjusting items. $6,433k related to an impairment on non-current
assets in CASL which were presented outside Adjusted EBIT due to their size
and irregular occurrence, and to enable better comparability year on year. The
remaining impairment charge of $3,421k was to reduce the equity accounted
investment in CASL from the carrying amount to its recoverable amount of
$2,000k. Costs to sell are estimated to be nil.
The investments' values are as follows:
China Aircraft Services Limited Gama Aviation LLC
Year ended Year ended Year ended Year ended
2021 2020 2021 2020
$'000
$'000
$'000
$'000
At 1 January 2,000 15,112 - -
Other comprehensive income - 92 - -
Share of net profit/(loss) (1,491) (9,783) - 78
Dividends declared - - - -
Prior year dividend - - - -
Reversal of/(impairment) 1,491 (3,421) - -
Transfer to profit on sale - - - (78)
Disposal of investment (2,000) - - -
At 31 December - 2,000 - -
The summary financial positions of the equity accounted investments are as
follows:
China Aircraft Services Limited
Year ended
2020
$'000
Total assets 63,284
Total liabilities (46,014)
Net assets 17,270
Group's share of net assets 3,454
Goodwill 1,320
Impairment (2,774)
At 31 December 2,000
At 31 December 2021, the equity accounted investment in China Aircraft
Services Limited was disposed following the board's receipt of a $2m offer for
its 20% share. The Group received the $2m cash consideration in full on the 31
December 2021.
Year ended
2021
$'000
Proceeds on disposal 2,000
Less: Carrying amount of net assets sold (2,000)
Profit on disposal of interest in associates −
Gama Aviation LLC
On 2 March 2020, the Group announced the sale of its US Air Associate, Gama
Aviation LLC (doing business as "Gama Aviation Signature") to Wheels Up
Partners Holdings LLC ("Wheels Up"). Gama Aviation Signature was owned 49% by
GB Aviation Holdings LLC, a joint venture between the Group and Signature
Aviation plc, with the remaining 51% held by the Group's US partners.
Gama Aviation received consideration of $10.0m in return for its 24.5% equity
interest. In addition, an amount of $23.0m was agreed related to licensing and
other trading related considerations. $13.0m of the total agreed was received
in cash at closing (including the full $10m associated to the equity sale),
with the remaining $20.0m to be paid in cash, with interest of $2,774k, in
eight equal six-month instalments over four years. At 31 December 2021 $nil
(2020: $18,034k) deferred consideration was included within trade and other
receivables.
On 14 July 2021, Wheels Up listed on the New York Stock Exchange, triggering a
mandatory prepayment provision under the terms of the promissory note. On 20
July 2021, the Company received a combined payment of $15,250k, in cash from
Wheels Up, representing the remaining amount due to the Company under the
promissory note.
As a result of the early settlement of the deferred consideration, finance
income recognised for the prior period to full settlement was reduced to $90k.
Total interest of £1,054k was paid on the deferred consideration.
Included within deferred revenue at 31 December 2021 is licensing and other
trading related considerations of $625k in current liabilities.
As part of the transaction, GB Aviation Holdings LLC licensed the continued
use of the Gama Aviation Signature brand for up to two years, for which $7.5m
of consideration has been allocated and is being recognised as revenue over
the two-year period. In 2021, $3,750k (2020: $3,125k) has been recognised as
revenue for this licensing component in the year ended 31 December 2021, in
line with the $3.75m annual licence fee prior to disposal. In addition, an
accelerated branding fee of $15,500k was recognised in Adjusting items in the
prior year.
Year
ended
2020
$'000
Cash received 13,000
Fair value of deferred consideration 20,000
Total discounted consideration receivable at the transaction date 33,000
Less: Branding fees and other trading related considerations (23,000)
Gross proceeds on disposal 10,000
Add: Closing working capital, cash and indebtedness adjustments 592
Add: Post closing adjustment 254
Less: Transaction costs (892)
Proceeds on disposal of assets held for sale, net of transaction costs 9,954
Assets held for sale at 31 December 2019 2,598
Share of profit of equity accounted investments prior to disposal(1) 78
Carrying amount of net assets sold 2,676
Profit on disposal of interest in associates, before taxation 7,278
(1) The equity accounting of Gama Aviation LLC was not discontinued
after Gama Aviation LLC was held for sale at 31 December 2019 and prior
to disposal on 2 March 2020. Had this been the case there would have been a
$78k increase in share of losses of associates and a $78k increase in the
profit on disposal of interest in associates. The impact of this
reclassification, which has no impact on the statutory loss for the year,
is considered immaterial.
18. Inventories
2021 2020
$'000
$'000
Raw materials and consumables 8,911 5,922
Work in progress 4 56
8,915 5,978
The Directors consider that the carrying value of inventories is approximately
equal to their fair value. The cost of inventories recognised as an expense in
the year was $16,071k (2020: $14,682k). Included within inventories is an
inventory obsolescence allowance of $5,896k (2020: $5,048k) to measure
inventories at the lower of cost or net realisable value.
Estimation uncertainty
The key source of estimation uncertainty at the reporting date, that may have
a significant risk of causing a materially different outcome to the carrying
amounts of inventories within the next financial year, relates to a change in
the net realisable value due to change in customer demand or obsolescence of
certain inventory lines. At 31 December 2021, the Board considers its
assessment of net realisable value to be appropriate based on best information
available. If the usage of inventory aged between two and six years decreased
by 10%, thus increasing each respective provision by 10%, the loss for the
year would increase by $528k.
19. Trade and other receivables
2021 2020
$'000
$'000
Financial assets
Amounts receivable for the sale of services 40,559 30,792
Loss allowance (5,682) (6,954)
34,877 23,838
Amounts due from associates − 970
Financial asset at amortised cost - 18,034
Accrued income(1) 18,453 14,475
Financial assets 53,330 57,317
Non-financial assets
Prepayments(1) 3,667 3,763
Other debtors 7,102 1,309
Total trade and other receivables 64,099 62,389
Current 63,808 49,359
Non-current 291 13,030
Total trade and other receivables 64,099 62,389
(1) Includes contract assets which are described in further detail
below.
Amounts receivable for the sale of services
The average Days Sales Outstanding (DSO) is 62 days (2020: 62 days). Credit
controls prior to granting credit and DSO are being actively monitored by
management. Where appropriate, the Group assesses the potential customer's
credit quality and requests payments on account, as a means of mitigating the
risk of financial loss from defaults. Interest of $432k (2020: $nil) was
charged on a late customer payment in the Middle East.
As there is no significant financing component to amounts receivable for the
sale of services, a provision matrix has been used to calculate the expected
credit losses for amounts receivable for the sale of services, contract assets
and accrued income, which is permitted by IFRS 9. The Group carries an
expected credit loss allowance of $5,682k (2020: $6,954k).
Amounts receivable for the sale of services include amounts (see below for
aged analysis) which are past due at the reporting date but against which the
Group has not recognised a specific loss allowance because there has not been
a significant change in credit quality and the amounts are still considered
recoverable. No loss allowance is carried other debtors.
Ageing of impaired amounts receivable for the sale of services
2021 2020
$'000
$'000
Not yet due 11,062 8,590
Less than 30 days 10,558 3,676
30-60 days 2,558 2,448
61-90 days 2,236 1,467
91-120 days 2,565 2,104
Greater than 120 days 5,898 5,553
Total 34,877 23,838
Movement in the loss allowance
2021 2020
$'000
$'000
At 1 January 6,954 3,896
Impairment (reversal)/losses recognised in income statement in Adjusted result (21) 3,792
Impairment losses recognised in income statement in Adjusting items - (709)
Amounts written off as uncollectible (1,197) (171)
Foreign exchange translation gains and losses (54) 146
At 31 December 5,682 6,954
The $1,197k write-off in the current year relates to the settlement of
historic overdue receivables in Business Aviation. The impairment reversal in
2021 includes a settlement within Business Aviation MRO US, which resulted in
a $269k credit to the impairment losses recognised in Adjusted EBIT, and a
settlement within Business Aviation excluding MRO US, which resulted in a
$233k charge to the impairment losses recognised in Adjusted EBIT.
In determining the recoverability of a trade receivable, the Group considers
any change in the credit quality of the trade receivable from the date credit
was initially granted up to the reporting date.
Ageing of impairments on amounts receivable for the sale of services
2021 2020
$'000
$'000
Not yet due 97 54
Less than 30 days 29 43
30-60 days 8 9
61-90 days 11 63
91-120 days 6 73
Greater than 120 days 5,531 6,712
Total 5,682 6,954
The Directors consider that the carrying amount of trade and other receivables
is approximately equal to their fair value.
In the Business Aviation excluding MRO US SBU, the Group commonly obtains
security in the form of contractual lien, parent company guarantee or a bank
guarantee to support the trade receivables arising from aircraft management
agreements. A similar contractual right of lien is contained within the
General Terms and Conditions for MRO (Maintenance, Repair & Overhaul)
services and is also commonly contained within the terms and conditions of
individual MRO services proposals where for higher value work programmes stage
payments are the norm, and where considered appropriate a requirement for full
up-front payment is imposed. At the year end, trade receivables within the
Business Aviation excluding MRO US SBU that are secured by contractual liens
total $4,339k (2020: $3,452k). Additionally, in the US, liens can be filed to
protect past due unpaid balances.
Refer to Note 35 regarding the receipt of a historic receivable after the
balance sheet date.
Sensitivity analysis on loss allowance
The estimate of the loss allowance may vary from the actual amounts recovered
if an individual becomes unable to pay or able to pay. There is a $5,682k loss
allowance and if a portion of the impaired receivable balance was recovered
there may be material credit to the income statement. Similarly, if the
unimpaired receivable balance over 120 days of $7,224k was unable to be
recovered, there may be a material charge to the income statement. However, as
noted earlier, there are liens over the aircraft relating to unimpaired
receivables over 120 days. If all remaining gross receivable balances were
impaired by an additional 1% of the gross receivables balance, the expected
credit loss would be increased by $406k.
Financial asset at amortised cost
Following the disposal of the US Air Associate, a financial asset measured at
amortised cost was recognised for deferred consideration on the sale. At 31
December 2021, the carrying amount is $nil (2020: $18,034k).
Accrued income
Accrued income is expected to be billed within the next twelve months. The
large increase year on year is primarily due to the acquisition of Jet East in
the US at the start of 2021 and specific contracts in the UK.
Contract assets
As part of a Fleet Maintenance programme in the UK on a long-term contract,
contract assets of $269k (2020: $579k) have been recognised in prepayments.
Contract assets arising from design and modification projects of $993k (2020:
$1,419k) in the UK have been included within the accrued income.
As previously reported, the Group commenced all Helicopter Emergency Medical
Services (HEMS) on behalf of the Scottish Ambulance Service on 1 June 2020
using its fleet of three Airbus H145 helicopters. In support of this long-term
contract, contract assets of $1,065k (2020: $1,692k) are included within
accrued income.
Total contract assets are $2,327k (2020: $3,690k).
20. Deferred consideration
The acquisition of Jet East included deferred consideration as described in
Note 12.
2021 2020
$'000
$'000
Deferred consideration recognised on acquisition, adjusted for discounting 533 −
Discount unwind on deferred consideration 13 −
546 −
Due within one year 290 −
Due after more than one year 256 −
546 −
21. Borrowings
2021 2020
$'000
$'000
Secured borrowings at amortised cost
Bank borrowings 64,739 52,197
Unsecured borrowing at amortised cost
Repayable element of Paycheck Protection Program 1,000 1,000
Other loans 1,415 -
67,154 53,197
Total borrowings
Repayable element of Paycheck Protection Program 1,000 1,000
Bank borrowings 37,760 -
Other loans 1,415 -
Amount due for settlement within 12 months 40,175 1,000
Bank borrowings 26,979 52,197
Amount due for settlement after 12 months 26,979 52,197
Analysis of borrowings by currency:
Sterling US Dollars Total
$'000
$'000
$'000
31 December 2021
Repayable element of Paycheck Protection Program - 1,000 1,000
Bank borrowings 49,739 15,000 64,739
Other loans - 1,415 1,415
49,739 17,415 67,154
31 December 2020
Repayable element of Paycheck Protection Program - 1,000 1,000
Bank borrowings 52,197 - 52,197
52,197 1,000 53,197
During the prior year, the Group received funds under the Paycheck Protection
Program in the form of a loan arrangement from Citibank guaranteed by the US
Government, which was specifically intended to help businesses maintain their
US workforce during the COVID-19 pandemic. The Group made the application in
good faith and in the belief that the PPP loan request was necessary and
otherwise in accordance with the then applicable rules, to support its ongoing
operations given the economic uncertainty caused by the pandemic. $5,753k
funds were received on 12 May 2020 and were initially recognised as borrowings
in current liabilities. $4,753k of these funds are considered by the Company
to be eligible for forgiveness within the terms of the PPP and were therefore
recognised in 2020 as income against the related expenses in the income
statement, reducing the amount of borrowings at the period end to a repayable
element of $1,000k. Confirmation of partial loan forgiveness is expected
within 12 months from the balance sheet date. Refer to Note 2 (c), Note 3 (b)
and Note 35 for further details.
On other unsecured loans of $1,415k (2020: $nil), interest arose at an average
of 6.6% during 2021 (2020: nil). Previously the Group held secured loans
which were settled during 2020 that accrued interest at an average rate of
5.4% before settlement.
The other principal features of the Group's bank borrowings are as follows:
· Bank borrowings in 2021 of $64,666k (2020: $52,197k) comprise
drawdowns from an RCF and a term loan (the "Loan"), both secured with HSBC
· The RCF, which is presented in current liabilities, is settled
and drawn down on a cyclical basis. The facility matures on 14 November 2022
· A letter of awareness has been provided by CK Hutchison Holdings
Ltd (CKHH) to HSBC, which has an indirect shareholding of 29.8% in the Group,
that CKHH's current intention, while any amount is outstanding under the
facility, is not to reduce its shareholding in the Group below 25.0% without
consent from the lender or discharge of the facility. No legal implications
are imposed on CKHH. In addition, on 20 April 2022 an updated letter confirms
that CKHH has no current intention to withdraw the current letter of awareness
before the facilities are due for renewal; and that CKHH currently has no
intention not to facilitate renewal of the Group's facilities with HSBC
through a comparable arrangement, provided the Group continues to meet its
ongoing reporting obligations and such other conditions as may be agreed
between the parties
· The RCF is $50,000k, and $12,068k (2020: $24,749k) was undrawn at
the end of the reporting period
· During 2020, the Group completed the purchase of three Airbus
H145 helicopters, which came into use on 1 June 2020 in support of a
long-term contract. The purchase was funded through a £20m term loan which
matures in January 2023
· The Loan and the RCF (collectively the "Facilities") are subject
to customary banking security arrangements
· During the prior year, the Group issued a debenture as security
against the Loan and RCF
2021 Interest Maturity Facility Drawn Drawn
'000
(Local
(Presentation currency)
currency)
$'000
'000
RCF See below 14 November 2022 USD 50,000 GBP 17,000 22,932
USD 15,000 15,000
Term loan See below 31 January 2023 GBP 20,000 GBP 20,000 26,979
Bank borrowing before arrangement fees 64,911
Capitalised loan arrangement fees (175)
Bank borrowings 64,739
2020 Interest Maturity Facility Drawn Drawn
'000
(Local
(Presentation currency)
currency)
$'000
'000
RCF LIBOR + 0.94% 14 November 2022 USD 50,000 GBP 18,500 25,251
Term loan LIBOR + 1.12% 31 January 2023 GBP 20,000 GBP 20,000 27,298
Bank borrowing before arrangement fees 52,549
Capitalised loan arrangement fees (352)
Bank borrowings 52,197
Following the global financial crisis in 2008, the reform and replacement of
benchmark interest rates such as GBP LIBOR and other inter-bank offered rates
(IBORs) became a priority for global regulators. As a result, LIBOR was wound
down during 2021, and the lender for the RCF and term loans removed the
reference to LIBOR, with interest instead being derived from SONIA, the Bank
of England Bank Rate and a spread adjustment.
22. Deferred tax
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period.
Acquired Fixed asset Deferred consideration on Tax losses Total
intangibles
and other
US air associate temporary differences
$'000
$'000
$'000
temporary differences
$'000
$'000
At 1 January 2020 - (157) - 1,590 1,433
Acquisitions (62) - - - (62)
Credit/(charge) in year (Note 10) 5 62 (2,986) (561) (3,480)
Exchange differences - (23) - 23 -
At 31 December 2020 (57) (118) (2,986) 1,052 (2,109)
Acquisitions (1,736) 1,418 - - (318)
Charge/(credit) in year (Note 10) 203 (1,261) 3,147 4,258 6,347
Exchange differences - (2) - - (2)
At 31 December 2021 (1,590) 37 161 5,310 3,918
Acquired intangibles represent the value of the deferred tax liability which
arises on the fair value of acquired intangibles. The liability is valued at
the tax rate applicable to the jurisdiction where the intangibles are located.
Deferred tax assets and liabilities are offset where the Group has a legally
enforceable right to do so. The following is the analysis of the deferred tax
balances for financial reporting purposes:
2021 2020
$'000
$'000
Deferred tax asset due after more than one year 3,918 -
Deferred tax liability - (2,109)
Net deferred tax asset/(liability) 3,918 (2,109)
Estimation uncertainty
The Group has recognised deferred tax assets on both timing differences,
principally acquisition intangibles, and on taxable losses. In recognising
these assets, management have reviewed the future expected profitability of
the business in each tax jurisdiction and the ability to utilise existing
taxable losses.
The deferred tax asset at 31 December 2021 includes an amount of $1,328k
arising on the acquisition of Jet East during the year. The initial valuation
of the asset on acquisition ($1,418k) equated to the tax value of the
consideration paid in excess of the fair value of assets acquired, which is
tax deductible in the US over 15 years and adjusts future taxable profits and
losses.
The Group has the following tax losses:
2021 2020 2021 2020 2021 2020
Recognised
Recognised
Unrecognised
Unrecognised
Total
Total
$'000
$'000
$'000
$'000
$'000
$'000
UK(1) 2,222 2,321 27,059 29,184 29,281 31,505
US federal 16,806 1,464 − - 16,806 1,464
US state 20,418 5,064 − - 20,418 5,064
Poland − - 75 - 75 -
HK − - 5,139 5,095 5,139 5,095
Tax losses 39,446 8,849 32,273 34,279 71,719 43,128
(1) Tax losses relating to dissolved companies have been surrendered in the
year (see Note 16)
The above losses represent the following value at tax rates applicable at the
balance sheet date:
2021 2020 2021 2020 2021 2020
Recognised
Recognised
Unrecognised
Unrecognised
Total
Total
$'000
$'000
$'000
$'000
$'000
$'000
UK 555 441 6,765 5,545 7,320 5,986
US 4,754 611 − - 4,754 611
Poland − - 14 - 14 -
HK − - 848 968 848 968
Potential tax benefit of tax losses 5,310 1,052 7,627 6,513 12,937 7,565
Losses in the UK, US and Hong Kong can be carried forward indefinitely. Tax
losses in Poland can be carried forward for 5 years.
In the UK, expected changes to borrowing rates reduce future taxable profits,
reducing the value of taxable losses that have been recognised. In the US,
management have concluded that the losses, including those relating to
unwinding of the asset on the Jet East acquisition, are recoverable against
expected future taxable income. In Poland the entity is a start up and until
the business is established, future profits are uncertain hence the asset has
not been recognised. In Hong Kong, management have not recognised deferred
tax assets on losses as the current business is not operating.
Temporary differences of $26,291k (2020: $26,233k) have arisen as a result of
the translation of the financial statements of the Group's subsidiaries.
However, a deferred tax liability has not been recognised as the liability
will only crystallise in the event of disposal of the subsidiary, and no such
disposal is expected in the foreseeable future. As a result, there is no
deferred tax charge in other comprehensive income in relation to the
translation of the Group's subsidiaries into the presentation currency of US
Dollars.
At 31 December 2020, future profitable projections were impacted by the
ongoing COVID-19 pandemic and as a result deferred tax balances of $485k were
written off during 2020.
23. Obligations under leases
The Group leases many assets including property, aircraft, vehicles, fixtures,
fittings and equipment. Information about leases for which the Group is a
lessee is presented below.
Restatement
During 2021, a review was conducted on Group leases. This found errors on
the implementation of IFRS 16 (1 January 2019) and subsequent recognition
relating to the treatment of contractual rental increases, initial balances
held at implementation (impacting subsequent impairments), completeness,
computational errors on foreign exchange, identification of payments and the
length of lease used. 2020 figures have been restated to correct these
errors.
The restatement has impacted the consolidated income statements, consolidated
statements of comprehensive income, balance sheets and consolidated cash flow
statements, as shown in Note 2.
Right-of-use assets
Leasehold property Fixtures, fittings and equipment Aircraft Vehicles Total
$'000
$'000
$'000
$'000
$'000
Cost
At 1 January 2020 as reported 51,596 72 19,118 205 70,991
Restatement(1) 940 - - 9 949
At 1 January 2020 as restated 52,536 72 19,118 214 71,940
Additions as reported 6,846 - - - 6,846
Restatement(1) (3,399) - - 113 (3,286)
Additions as restated 3,447 - - 113 3,560
Derecognition as reported (2,539) - (19,417) - (21,956)
Restatement(1) 1,592 (55) - (23) 1,514
Derecognition as restated (947) (55) (19,417) (23) (20,442)
Exchange differences as reported 1,595 2 299 8 1,904
Restatement(1) (193) (3) - 5 (191)
Exchange differences restated 1,402 (1) 299 13 1, 713
At 31 December 2020 restated 56,438 16 - 317 56,771
Additions 7,265 123 - 164 7,552
Disposals (2,862) (10) - (161) (3,033)
Acquisition 3,387 7 - - 3,394
Exchange differences (385) - - (1) (386)
At 31 December 2021 63,843 136 - 319 64,298
Accumulated depreciation and impairment
At 1 January 2020 as reported 8,270 46 10,285 75 18,676
Restatement(1) 10 2 (37) (2) (27)
At 1 January 2020 as restated 8,280 48 10,248 73 18,649
Charge for the year - admin expenses as reported 521 19 - - 540
Restatement(1) 190 - - - 190
Charge for the year - admin expenses as restated 711 19 - - 730
Charge for the year - cost of sales as reported 5,582 - 5,052 74 10,708
Restatement(1) 368 - - 26 394
Charge for the year - cost of sales as restated 5,950 - 5,052 100 11,102
Impairment as reported 7,013 - - - 7,013
Restatement(1) (469) - - - (469)
Impairment as restated 6,544 - - - 6,544
Derecognition as reported (2,539) - (15,574) - (18,113)
Restatement(1) 1,775 (55) 1 (23) 1,628
Derecognition as restated (764) (55) (15,573) (23) (16,415)
Exchange differences as reported 691 4 237 7 939
Restatement(1) (224) (5) 36 - (193)
Exchange differences as restated 467 (1) 273 7 746
At 31 December 2020 as restated 21,188 11 - 157 21,356
Charge for the year - admin expenses 955 15 - 47 1,017
Charge for the year - cost of sales 6,426 2 - 79 6,507
Impairment 1,911 - - - 1,911
Disposals (2,603) (10) - (161) (2,774)
Exchange differences (101) - - (1) (102)
At 31 December 2021 27,776 18 - 121 27,915
( )
Carrying amount
At 31 December 2021 36,067 118 - 198 36,383
At 31 December 2020 restated(1) 35,250 5 - 160 35,415
At 1 January 2020 restated(1) 44,256 24 8,870 141 53,291
(1) Restatements are detailed in Note 2 of the notes to the financial statements
Obligations under leases
Leasehold Fixtures, fittings Aircraft Vehicles Total
and equipment
$'000
$'000
$'000
property
$'000
$'000
At 1 January 2020 as reported 47,817 20 12,228 139 60,204
Restatement(1) 1,599 4 (207) 44 1,440
At 1 January 2020 as restated 49,416 24 12,021 183 61,644
Additions as reported 6,846 - - - 6,846
Restatement(1) (3,656) - - 113 (3,543)
Additions as restated 3,190 - - 113 3,303
Finance expense as reported 2,592 - 147 4 2,743
Restatement(1) (139) - - 2 (137)
Finance expense as restated 2,453 - 147 6 2,606
Lease payments as reported (8,094) (13) (7,878) (44) (16,029)
Restatement(1) (1,616) (8) - (30) (1,654)
Lease payments as restated (9,710) (21) (7,878) (74) (17,683)
Derecognition as reported - - (4,083) - (4,083)
Restatement(1) (184) - - - (184)
Derecognition as restated (184) - (4,083) - (4,267)
Rent free credit as restated (259) - - - (259)
Exchange differences as reported 264 (9) (414) (37) (196)
Restatement(1) 729 9 207 46 991
Exchange differences as restated 993 - (207) 9 795
At 31 December 2020 restated 45,899 3 - 237 46,139
Additions 7,265 123 - 164 7,552
Disposals (259) - - - (259)
Acquisitions 3,387 7 - - 3,394
Finance expense 2,614 3 - 7 2,624
Derecognition (1,626) - - - (1,626)
Lease payments (9,447) (19) - (107) (9,573)
Rent free credit (110) - - - (110)
Exchange differences (144) - - 5 (139)
At 31 December 2021 47,579 117 - 306 48,002
(1) Restatements are detailed in Note 2 of the notes to the financial
statements
Following the surrender of the lease at Fairoaks airport a $1,626k profit has
been recognised in derecognition of remaining lease liabilities. This amount
is recognised within other income.
2021 2020
$'000
Restated(1)
$'000
Maturity analysis - contractual undiscounted cash flows:
Less than one year 8,101 8,762
One to five years 22,307 22,030
More than five years 56,760 37,030
Total undiscounted lease liabilities at 31 December 87,168 67,822
Lease liabilities included in the statement of financial position at 31
December:
Current 7,970 8,566
Non-current 40,032 37,573
Total lease liabilities at 31 December 48,002 46,139
(1) Restatements are detailed in Note 2 of the notes to the financial
statements.
Amounts recognised in income statement
The consolidated income statement shows the following amounts relating to
leases:
2021 2020
$'000
Restated(1)
$'000
Depreciation charge of right-of-use assets
Leasehold property 7,381 6,661
Fixtures, fittings and equipment 17 19
Aircraft - 5,052
Vehicles 126 100
Total depreciation charge of right-of-use-assets 7,524 11,832
Interest expense (included in finance cost) 2,624 2,606
Expenses relating to short-term leases of twelve months or less 1,370 740
Impairment of right-of-use assets 1,911 6,544
Profit on derecognition of leases (1,626) (240)
Rent free credit(2) (110) (259)
(1)Restatements are detailed in Note 2 of the notes to the financial
statements
(2)The rent free credit arose on the Sharjah lease as the landlord gave the
Group Covid-19 related concessions. No other concessions have been received
by the Group.
There are no expenses relating to low value assets or expenses relating to
variable lease payments. An impairment loss of $1,911k has been recognised in
2021 in relation to the right-of-use leased asset at Sharjah Airport (2020:
impairment of $6,544k restated) as the lease was extended in 2021 but funding
for the project has not yet been finalised.
Average incremental borrowing rates applied across the Group were:
2021 2020
%
%
Leasehold property 5.7 5.5
Vehicles 4.9 3.9
Fixtures, fittings and equipment 6.8 4.6
Property leases with a remaining lease term of more than ten years have been
adjusted to reflect the additional security afforded by the leased asset on
the cost of borrowing. An asset specific adjustment of 0.69% has been applied
to the rates of these leases.
In June 2017, the Group entered into a non-cancellable Build-Operate-Transfer
and Service Concession agreement with Sharjah Airport Authority under which
the Group is committed to construct a BAC at Sharjah Airport. The agreement
now runs from June 2017 until June 2052 following the exercise of the ten-year
extension option during the year. The lease liability has been discounted at
an incremental borrowing rate of 7.3% (2020: 7.3%). The Sharjah BAC includes a
$9,850k (2020: $7,964k restated) obligation under leases at 31 December 2021
following the formalisation of the ten year lease extension.
Critical management judgement
A critical management judgement at the reporting date, relates to the
determination of the recoverable amount of nil for the Sharjah BAC project.
This is based on the Management's judgement that whilst the Group is in
advanced discussions with investors regarding the funding of this project, the
Board considers that it would be inappropriate to reverse impairments relating
to the BAC project until the full funding has been contractually secured.
24. Trade and other payables
2021 2020
$'000
Restated(1)
$'000
Financial liabilities
Trade and other payables 15,470 11,484
Accruals 15,482 10,864
Amounts due to associates − 1,046
30,952 23,394
Non-financial liabilities
Other long-term employee benefits accrual 1,821 −
Other taxation and social security 1,591 5,002
Income received in advance 6,799 6,689
10,211 11,691
Total trade and other payables 41,163 35,085
(1) Restatements are detailed in Note 2 of the notes to the financial
statements
Current 39,342 35,085
Non-current 1,821 −
Total trade and other payables 41,163 35,085
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average Days Payables Outstanding (DPO) is 30
days (2020: 29 days).
No interest is charged on the trade payables. The Group has financial risk
management policies in place that target settlement within agreed credit
terms. The Directors consider that the carrying amount of trade payables
approximates to their fair value.
Income received in advance relates to advance payments for operating expenses
incurred by the Group on managed aircraft prior to these expenses being billed
to the customer. The outstanding performance obligations are expected to be
fulfilled within the next twelve months. Income received in advance represents
a contract liability. See Note 33 for other contract liabilities.
See Note 32 for further details on the other long-term employee benefits accrual.
25. Issued capital and reserves
Number £'000 $'000
Ordinary shares: authorised, issued and fully paid
At 1 January 2020 63,636,279 636 953
At 31 December 2020 63,636,279 636 953
Shares issued 50,000 1 1
At 31 December 2021 63,686,279 637 954
Share capital represents the amount subscribed for share capital at nominal
value. The Company has one class of ordinary shares with a nominal value of
£0.01 and no right to fixed income.
$'000
Share premium
At 1 January 2020 63,473
At 31 December 2020 63,473
Shares issued 29
At 31 December 2020 63,502
Share premium represents the amount subscribed for share capital in excess of
nominal value, net of historic placement fees of £1,526k or $1,987k (2020:
£1,526k or $1,987k).
Other reserves
Merger Reverse takeover reserve Other Share-based payment reserve Total
relief
$'000
reserve
$'000
$'000
reserve
$'000
$'000
At 1 January 2020 108,595 (95,828) 20,336 1,695 34,798
Share-based payment expense (Note 31) - - - 562 562
Balance at 31 December 2020 108,595 (95,828) 20,336 2,257 35,360
Share-based payment expense for share options (Note 31) - - - 244 244
Transfer for lapsed options - - - (607) (607)
Balance at 31 December 2021 108,595 (95,828) 20,336 1,894 34,997
The merger relief reserve represents differences between the fair value of the
consideration transferred and the nominal value of the shares. In 2015, this
occurred as a result of the reverse takeover. The reserve was increased in
2016 upon the acquisition of Aviation Beauport Limited when shares were
included as part of the consideration.
The reverse takeover reserve represents the balance of the amount attributable
to equity after adjusting the accounting acquirer's capital to reflect the
capital structure of the legal parent in a reverse takeover.
Other reserve is the result of the application of merger accounting to reflect
the combination of the results of Gama Aviation (Holdings) Jersey Limited
with those of Gama Holding FZC, following the share for share exchange
transacted on 16 December 2014.
The share-based payment reserve is used to recognise the value of
equity-settled share-based payments provided to employees, including key
management personnel, as part of their remuneration. Refer to Note 31 for
further details of these plans.
There is an employee benefit trust that is affiliated with the Group. However,
the Group does not have control of this trust and, as a result, the trust is
not consolidated and no own share reserve is recognised. At the end of the
reporting period, there are 219,310 (2020: 219,310) shares which are held in
the employee benefit trust. The fair value of these shares at 31 December 2021
was £95k (2020: £84k).
26. Non-controlling interest
$'000
Balance at 1 January 2020 751
Total comprehensive income attributable to minority interests 45
Balance at 31 December 2020 796
Total comprehensive income attributable to minority interests (703)
Balance at 31 December 2021 93
The non-controlling interest in the current and prior year relates to a 49%
shareholding in Gama Aviation FZC, which is consolidated as there is an 80%
profit sharing ratio attributable to the Group. As a result, a 20%
non‑controlling interest has been recognised in the current and prior year.
In addition, the Group has a call option on the remaining shareholding.
Set out below is summarised financial information for Gama Aviation FZC,
before intercompany eliminations:
2021 2020
$'000 $'000
Current assets 14,454 14,362
Current liabilities (14,022) (10,416)
Current net assets 432 3,946
Non-current assets 32 32
Net assets 464 3,978
Accumulated NCI 93 796
2021 2020
$'000 $'000
Revenue 28,081 18,418
(Loss)/profit for the year (3,514) 227
Other comprehensive income − −
Total comprehensive income (3,514) 227
27. Net cash generated by operating activities
2021 2020
$'000
Restated(1)
$'000
Loss before tax (10,745) (8,142)
Adjustments for:
Finance income (Note 8) (617) (1,535)
Finance costs (Note 9) 4,110 3,817
Depreciation of property, plant and equipment (Note 15) 6,441 4,773
Depreciation of right-of-use assets in administrative expenses (Note 23) 1,017 730
Depreciation of right-of-use assets in cost of sales (Note 23) 6,507 11,102
Amortisation of intangible assets (Note 14) 3,355 2,195
Impairment of right-of-use assets (Note 23) 1,911 6,544
Impairment of property, plant and equipment (Note 6) − 4,609
Impairment of non-current assets within share of results from equity accounted − 6,433
investments (Note 6)
Impairment of other intangible assets (Note 14) − 833
Lease credit recognised (Note 23) (110) (259)
Non-cash lease settlement (Note 23) (1,626) −
Loss on disposal of property, plant and equipment (Note 15) 6 63
Share of loss/(profit) of associates (Note 17) 1,491 3,272
Profit on disposal of interest in associate (Note 17) − (7,278)
(Reversal)/impairment of equity accounted investment in associate (Note 6) (1,491) 3,421
Utilisation of PPP loan (Note 28) − (4,753)
Share-based payment (Note 31) 257 562
Operating cash inflow before movements in working capital 10,506 26,387
Unrealised foreign exchange movements (656) 843
Increase in gross inventories (1,567) (80)
Increase in inventory obsolescence (Note 18) 18 1,520
Decrease in gross receivables(3) 6,229 10,161
(Decrease)/increase in loss allowance for receivables (Note 19) (1,255) 3,083
Decrease in payables and deferred consideration (19) (10,183)
(Decrease)/increase in deferred revenue (4,847) 6,365
(Decrease)/increase in provisions (685) 333
Working capital movements (2,782) 12,042
Cash generated by operations(2) 7,724 38,429
Taxes paid on operating activities(4) (3,289) (3,085)
Tax refunds received 790 −
Net cash generated by operating activities 5,225 35,344
(1) Restatements are detailed in Note 2 of the notes to the
financial statements
(2) Included within cash generated by operations is cash outflows on
exceptional items of $832k in the year (2020: $0.7m)
(3) Included within decrease in gross receivables is $17,500k (2020: $2,500k)
relating to branding fees agreed on the sale of the US Air Associate
(4) Taxes paid on operating activities includes $3,129k (2020: $3,067k)
relating to the sale of the US Air Associate
28. Changes in liabilities arising from financing activities
Changes in liabilities arising from financing activities are tabulated below.
Borrowings Obligations under leases Total
$'000
Long-term Short-term Long-term Short-term
$'000
$'000
$'000
$'000
At 1 January 2020, as reported 45,394 848 43,838 16,366 106,446
Restatement(1) - - (754) 2,194 1,440
At 1 January 2020, as restated 45,394 848 43,084 18,560 107,886
Cash flows:
Repayments (23,623) (848) - - (24,471)
Proceeds 28,234 5,753 - - 33,987
Lease payments - - - (17,683) (17,683)
Non-cash:
Rent free credit - - - (259) (259)
Lease additions(1) - - 2,717 586 3,303
Assumed loan forgiveness - (4,753) - - (4,753)
Interest on lease liabilities - - 2,307 299 2,606
Foreign currency translation on borrowings in profit or loss (Note 9) 178 - - - 178
Derecognition - - (2,517) (1,750) (4,267)
Exchange differences(1) 1,872 - 549 246 2,667
Arrangement fee movement on new facility (26) - - - (26)
Amortisation of arrangement fees 168 - - - 168
Reclassification - - (8,566) 8,566 -
At 31 December 2020, as restated 52,197 1,000 37,573 8,566 99,336
Cash flows:
Repayments (9,573) (2,788) - - (12,361)
Proceeds - 22,574 - - 22,574
Lease payments - - - (9,573) (9,573)
Non-cash:
Rent free credit - - - (110) (110)
Disposal - - (259) - (259)
Acquisition - 4,202 1,818 1,576 7,596
Interest on lease liabilities - - 2,373 251 2,624
Lease additions - - 6,978 574 7,552
Derecognition - - (1,060) (566) (1,626)
Foreign currency translation on borrowings in profit or loss (Note 9) (24) - - - (24)
Exchange differences (531) (83) (114) (25) (753)
Arrangement fee movement 180 - - - 180
Reclassification (15,270) 15,270 (7,285) 7,285 -
At 31 December 2021 26,979 40,175 40,032 7,970 115,156
(1) Restatements are detailed in Note 2 of the notes to the
financial statements.
29. Contingent liabilities
The Group had a material contingent liability at 31 December 2021 in respect
ofa subsidiary of the Group, Gama Support Services FZE (GSSF), which entered
into a Build Operate & Transfer Agreement ("BOT") and a Concession
Agreement with Sharjah Airport Authority (SAA) on 1 July 2017. Under the BOT,
GSSF agreed to procure the design and construction of the buildings and other
structures comprising a BAC and hangars at Sharjah Airport, UAE and to use
reasonable endeavours to ensure that the completion of the construction occurs
by the construction completion date as envisaged under the BOT. The prospects
for which were initially frustrated by the COVID-19 pandemic and financing of
the BAC, which resulted in related assets under construction and right-of-use
assets being impaired in the prior year. A 10-year extension to the Sharjah
lease was signed in June 2021 and the related right-of-use asset has been
impaired in the current year. Whilst the Group is in advanced discussions with
investors regarding the funding of this project, the Board considers that it
would be inappropriate to reverse impairments relating to the BAC project
until the full funding has been contractually secured.
GSSF has until June 2023 to complete and satisfy its construction obligations.
SAA may terminate the BOT if there is a breach of any material obligations
under the BOT which remain unremedied. In the event GSSF fails to comply with
its construction obligations under the BOT, SAA will have the right to seek
compensation for any damage or loss it sustains. It is not possible to
estimate the potential contingent liability.
30. Provisions for liabilities
Closure Provision Total
$'000
$'000
Employees' End of Service provision
Dilapidations Provision $'000
$'000 Integration provision
$'000
At 1 January 2021 665 332 500 - 1,497
Restatement(1) - (44) - - (44)
At 1 January 2021, as restated 665 288 500 - 1,453
(Credit)/charge to the income statement during the year (276) 14 348 416 502
Utilised during the year (384) - (110) (358) (852)
Foreign exchange 4 (4) - - -
Discounting (Note 9) - 17 - - 17
At 31 December 9 315 738 58 1,120
(1)Restatements are detailed in Note 2 of the notes to the financial
statements
2021 2020
$'000
Restated(1)
$'000
Current 772 679
Non-current 348 774
Total 1,120 1,453
(1)Restatements are detailed in Note 2 of the notes to the financial
statements
The dilapidations provision relates to leases entered into during 2020.
The closure provision at 31 December 2021 comprises $9k relating to the
reduction of business activities in Saudi Arabia. At 31 December 2020, the
closure provision included $486k relating to the cessation of the Group's
business activities at Fairoaks Airport and $173k in redundancy provisions
relating to the reduction of business activities in Saudi Arabia. Actual
closure costs incurred relating to the cessation of the Group's activities at
Fairoaks Airport amounted to $276k (Note 6).
Provision for employees' end of service indemnity is made in accordance with
the UAE labour laws and is based on current remuneration and cumulative years
of service at the reporting date.
The integration provision, of which $58k remains at 31 December 2021 (2020:
$nil), relates to severance costs following the acquisition of Jet East during
the year. This is expected to be paid in 2022.
31. Share-based payments
Equity-settled share option schemes
Share options are awarded to employees under three plans:
· Gama Aviation Plc Company Share Option Plan 2018 (CSOP)
· Gama Aviation Plc Additional Share Option Plan 2018 (ASOP)
· Gama Aviation Plc Long-Term Incentive Plan 2021 (LTIP)
The plans are designed to provide long-term incentives for employees to
deliver long-term shareholder returns. Participation in the plan is at the
Board's discretion, and no individual has a contractual right to participate
in the plan or to receive any guaranteed benefits.
Performance conditions may be specified under any of the schemes. No options
granted to date under the CSOP and ASOP have performance conditions. Under
the LTIP, options that have been awarded are subject to a performance
condition based on the Company's average share price over the 30 days
following release of the Company's results for the year ending 31 December
2023. However, these conditions may be varied or waived.
Options are granted under the plans for no consideration and carry no dividend
or voting rights.
The normal vesting period for all schemes is three years, however, options
were granted to Directors over 155,000 shares on 29 March 2021 where they
vested immediately (the "Director ASOP Awards"). If options remain unexercised
after a period of ten years from the grant date, the options expire. If an
employee leaves employment of the Group due to injury, ill health, disability,
retirement, redundancy or where the employee's employer ceases to be part of
the Group, a proportion of options are forfeited 90 days after leaving, being
the proportion of the original shares granted that relate to the period after
leaving and prior to vesting, with the remaining options being forfeited six
months after leaving. Options are forfeited 90 days after leaving if the
employee leaves the Group before the options vest for any other reason.
When exercisable, each option is convertible into one ordinary share at most
30 days after the valid exercise of an option.
Under the CSOP and ASOP, the exercise price of options is based on the
weighted average price at which the Company's shares are traded on the
Alternative Investment Market of the London Stock Exchange during the week up
to and including the date of the grant. Under the LTIP, the exercise price is
1.0 pence.
Set out below are summaries of options granted under the plans:
2021 2020
Average exercise price per share option Average exercise price per share option
(pence) Number of options (pence) Number of options
'000 '000
At 1 January 165.3 3,301 161.6 3,747
Granted during the year 29.1 4,136 - -
Exercised during the year(1) 1.0 (25) - -
Surrendered during the year 164.9 (2,276) - -
Forfeited during the year 135.4 (1,119) 134.3 (446)
At 31 December 34.6 4,017 165.3 3,301
Vested and exercisable at 31 December 87.9 226 183.1 1,503
(1) The weighted average share price at the date of exercise of options
exercised during the year was 40.5 pence (2020: not applicable).
Included in the above, on 29 March 2021 options over a total of 2,276,000
shares previously granted to Directors and other employees were agreed to be
surrendered by those employees (the "Surrendered Awards"). In their place, the
Company agreed to grant options over a total of 1,138,000 shares, at 68.8
pence, to Directors and other employees on 29 March 2021 (the "Replacement
Awards").
No options expired during 2020 or 2021.
Share options outstanding at the end of the year have the following expiry
dates and exercise prices:
Grant date Expiry date Share options 31 December 2021 Share options 31 December 2020
Exercise price '000 '000
(pence)
9 August 2016 8 August 2026 155.0 - 670
22 June 2018 21 June 2028 205.5 33 843
22 June 2018 21 June 2028 205.5 63 921
17 June 2019 16 June 2029 91.5 86 867
26 March 2021 25 March 2031 39.0 965 -
29 March 2021 28 March 2031 68.8 1,046 -
29 March 2021 28 March 2031 1.0 1,694 -
29 March 2021 28 March 2031 1.0 130 -
TOTAL 4,017 3,301
Weighted average remaining contractual life of options outstanding at end of 9.14 years 7.36 years
period
The estimated fair values of the awards under the CSOP and ASOP have been
established using a Black Scholes model. This model uses a number of inputs,
including expected dividends, expected share price volatility and the expected
period to exercise.
The estimated fair values of the awards under the LTIP have been established
using a Monte Carlo model. This model uses a number of inputs, including
expected dividends, expected share price volatility and the expected period to
exercise, and it factors the likelihood of the market-based performance
condition being met at the grant date.
The inputs into the models and assessed fair value at grant date of options
granted during the year ended 31 December 2021 are as follows:
CSOP/ASOP Awards Replacement Awards LTIP Awards Director ASOP Awards
26 March 2021 29 March 2021 29 March 2021
29 March 2021
Share price, pence(1) 39.0 39.0 39.0 39.0
Exercise price, pence(2) 39.0 68.8 1.0 1.0
Expected share price volatility 47.2% 47.2% 56.2% N/A
Expected life, years 6.5 years 6.5 years 3 years 0 years
Risk-free rate 0.46% 0.52% 0.13% N/A
Expected dividend yields 0% 0% 0% 0%
Fair value per share granted, pence(2) 18.0 12.0 11.0 38.0
Total fair value at date of grant (£'000) 184 See below 200 59
Total fair value at date of grant ($'000)(1) 256 See below 277 82
(1)Previous period disclosures have been represented from USD cents to GBP
pence throughout.
(2)The GBP expense has been translated to USD based on the exchange rate
prevailing at the time of grant.
Expected volatility was determined by calculating the historical volatility of
the Group's share price over a historical 6.5-year period prior to grant for
the ASOP and CSOP, with the exception of the Director ASOP Awards.
The Replacement Awards have been accounted for under modification accounting,
whereby the original fair value expense for the Surrendered Awards has
continued to be recognised over the original vesting period and an additional
incremental expense has been recognised over the vesting period of the
Replacement Awards.
Shares issued to Director
On 19 January 2021, Daniel Ruback, an Executive Director of the Company, was
issued a total of 25,000 ordinary shares of 1 penny each in the capital of the
Company at nil cost, in accordance with the terms of his Service Agreement.
The shares had a grant date fair value of 44.5 pence based on the open market
price at that date.
Expenses arising from equity-settled share-based payment transactions
Total expenses arising from share-based payment transactions recognised during
the year as part of employee benefit expense were as follows:
2021 2020
$'000
$'000
Options issued under equity-settled share employee option schemes plan 244 562
Shares issued to Director 13 -
257 562
Refer to Note 35 regarding the effect of a Director resigning after 31
December 2021.
32. Other long-term employee benefits
The acquisition of Jet East also includes a long-term incentive plan,
accounted for in accordance with IAS 19, with payments contractually linked to
the continuing employment of executives of Jet East as well as the business
performance of the combined Business Aviation MRO US business. A remuneration
charge of $1,821k (2020: $nil) has been recognised within Adjusting items and
an accrual of $1,821k (2020: $nil) is included within non-current trade and
other payables. The period over which the services are received is three years
and the incentive plan is estimated to result in a future cash outflow of
$6,024k (2020: $nil) after this three-year period.
For the long-term incentive plan to result in future payments, business
performance must exceed a Board approved projection, the acquisition case.
Executives can earn up to a maximum of 9% ownership in the Business Aviation
MRO US equity subject to business performance in the 2023 financial year and
the level of indebtedness of the combined Business Aviation MRO US business at
that time. The long-term incentive plan is accounted for as remuneration for
post-acquisition services and is not part of the business combination.
A Board approved five-year Strategic Plan has been used to estimate business
performance in the 2023 financial year and the level of indebtedness of the
combined Business Aviation MRO US business at that time.
Estimation uncertainty
The key source of estimation uncertainty at the reporting date, that may have
a significant risk of causing a materially different outcome to the carrying
amounts of the other long-term employee benefit accrual or the associated
remuneration charge within the next financial year, relates to a change in
forecast business performance. The Directors consider that the carrying amount
of the other long-term employee benefit accrual at 31 December 2021 of $1,821k
(2020: nil) approximates the present value of the service cost.
A 10% increase in the business performance in 2023 would result in an
additional payment of around $602k in 2024, an additional charge for year
ended 31 December 2021 of $182k and an additional accrual at 31 December 2021
of $182k. Business performance in Business Aviation MRO US is calculated as a
multiple of EBITDA less cash and cash equivalents and less borrowings.
33. Deferred revenue
2021 2020
$'000
$'000
Deferred revenue 8,882 13,367
Current 8,880 12,676
Non-current 2 691
Total 8,882 13,367
The deferred revenue arises in respect of management fees, maintenance
contracts and SaaS contracts invoiced in advance, nearly all of which are
expected to be settled in the next twelve months. Deferred revenue also arises
on licensing revenue connected to the disposal of the US Air Associate, with
$nil (2020: $625k) recognised as non-current and $625k (2020: $3,750k)
recognised as current. See Note 17 for further details on licensing revenue.
Deferred revenue represents a contract liability.
Deferred revenue has decreased year on year, primarily due to $3,750k of US
Air Associate licensing revenue being unwound as noted above.
Contract liabilities
Deferred revenue of $8,882k (2020: $13,367k) is a contract liability and so
too is income received in advance, as shown in Note 24, of $6,799k (2020:
$6,689k). Total contract liabilities are $15,681k (2020: $20,056k).
34. Financial instruments
Financial assets and liabilities as defined by IFRS 9 and their estimated fair
values are as follows:
At 31 December 2021 Financial Financial Book Fair
assets at
liabilities
value
value
amortised
at amortised cost
total
total
cost
$'000
$'000
$'000
$'000
Financial assets
Cash and cash equivalents 10,243 - 10,243 10,243
Trade and other receivables (Note 19) 53,330 - 53,330 53,330
Financial liabilities
Trade and other payables (Note 24) - (30,952) (30,952) (30,952)
Borrowing (Note 21) - (67,154) (67,154) (67,154)
Lease obligation (Note 23) - (48,002) (48,002) (48,002)
Net financial assets/(liabilities) 63,573 (146,108) (82,535) (82,535)
At 31 December 2020 (restated(1)) Financial Financial Book Fair
assets at
liabilities at
value
value
amortised
amortised
total
total
cost
$'000
$'000
$'000 cost
$'000
Financial assets
Cash and cash equivalents 16,136 - 16,136 16,136
Trade and other receivables (Note 19) 57,317 - 57,317 57,317
Financial liabilities
Trade and other payables (Note 24) - (23,394) (23,394) (23,394)
Borrowings (Note 21) - (53,197) (53,197) (53,197)
Lease obligation (Note 23) - (46,139) (46,139) (46,139)
Net financial assets/(liabilities) 73,453 (122,730) (49,277) (49,277)
(1)Restatements are detailed in Note 2 of the notes to the financial
statements
The fair value of cash and cash equivalents, trade and other receivables, and
trade and other payables approximate their carrying amounts due to the
short-term maturities of these instruments. The fair value of lease
obligations is calculated using the incremental borrowing rate.
Financial risk management objectives
The Group is exposed to financial risks in respect of:
· Capital risk;
· Foreign currency;
· Interest rates;
· Liquidity risk; and
· Credit risk
A description of each risk, together with the policy for managing risk, is
given below.
34.1 Capital risk management
The Group manages its capital to ensure that the Company and its subsidiaries
will be able to continue as going concerns while maximising the return to
stakeholders through the optimisation of the debt and equity balances.
The capital structure of the Group consists of debt, which includes the
borrowings disclosed in Note 21 and obligations under leases disclosed in Note
23, cash and cash equivalents and equity, comprising issued capital, reserves
and accumulated profit as disclosed in the consolidated statement of changes
in equity and in Note 25.
The Board of Directors reviews the capital structure on a regular basis. As
part of this review, the Committee considers the cost of capital and the risks
associated with each class of capital, against the purpose for which the debt
is intended.
A combination of leases and borrowing are taken out to fund assets utilised by
the Group. Borrowings are also secured to support the ongoing operations and
future growth of the Group.
34.2 Market risk
The Group's activities expose it primarily to the financial risks of changes
in foreign currency exchange rates and interest rates. There has been no
change to the Group's exposure to market risks or the manner in which these
risks are managed and measured.
34.2.1 Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies;
consequently, exposures to exchange rate fluctuations arise. In particular,
the Group is exposed to Sterling and Euro exchange rate fluctuations. The
Group seeks to reduce foreign exchange exposures arising from transactions in
various currencies through a policy of matching, as far as possible, receipts
and payments across the Group in each individual currency.
The table below summarises the FX exposure on the net monetary position of
entities against their respective functional currency, expressed in each
group's presentational currency:
GBP USD EUR AED(3) HKD Other Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 31 December 2021
Borrowings
Entities with functional currency USD − (2,414) − − − − (2,414)
Entities with functional currency GBP (49,666) (15,074) − − − − (64,740)
Entities with functional currency PLN(4) − − − − − − −
Total borrowings (49,666) (17,488) − − − − (67,154)
Obligations under leases
Entities with functional currency USD − (12,284) − (9,850) − − (22,134)
Entities with functional currency GBP (25,809) − − − − − (25,809)
Entities with functional currency PLN − − − − − (59) (59)
Total obligations under leases (25,809) (12,284) − (9,850) − (59) (48,002)
Cash
Entities with functional currency USD 2 5,148 − 67 1 23 5,241
Entities with functional currency GBP 3,861 988 132 1 − 3 4,985
Entities with functional currency PLN − − − − − 17 17
Total cash 3,863 6,136 132 68 1 43 10,243
Net trade financial assets(1)
Entities with functional currency USD (182) 13,848 100 (789) (14) (66) 12,897
Entities with functional currency GBP 3,115 4,657 1,756 - - (22) 9,506
Entities with functional currency PLN - - - - - (25) (25)
Total net trade financial assets 2,933 18,505 1,856 (789) (14) (113) 22,378
Net exposure
Net monetary in USD entities (181) - 100 (731) (12) (42) (866)
Net monetary in GBP entities - (9,428) 1,887 1 - (19) (7,559)
Net monetary in PLN entities - - - - - - -
Total net exposure (181) (9,428) 1,987 (730) (12) (61) (8,425)
At 31 December 2020, restated(2)
Net monetary in USD entities (71) − (6) (8) 385 (10) 290
Net monetary in GBP entities − 8,075 468 − − 42 8,585
(71) 8,075 462 (8) 385 32 8,875
(1) Net trade financial assets per Note 19 of $53,330k and financial
liabilities per Note 24 of $30,952k
(2) Restatements are detailed in Note 2 of the notes to the financial
statements
(3) United Arab Emirates Dirham
(4) Polish Zloty
Foreign currency sensitivity analysis
The following table details the Group's sensitivity to a 10 per cent change in
the relevant foreign currencies. This percentage has been determined based on
the average market volatility in exchange rates in the previous 24 months.
The sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the year end for a
10 per cent change in foreign currency:
GBP USD EUR AED HKD Other Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
At 31 December 2021
Total effect on profit/(loss) of depreciation in foreign currency exchange 18 943 (199) 73 1 6 842
rates
At 31 December 2020 Restated(1)
Total effect on profit/(loss) of depreciation in foreign currency exchange 7 (808) (46) 1 (39) (3) (888)
rates
(1)Restatements are detailed in Note 2 of the notes to the financial statements
34.2.2 Interest rate risk management
The Group is exposed to interest rate risk as it finances fixed asset
purchases using floating interest rates.
The Group's exposure to interest rates on financial liabilities is detailed in
section 34.3 Liquidity risk management section. The Group's exposure to
interest rates on financial assets has been assessed by management as
insignificant.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to
interest rates for non-derivative instruments at the balance sheet date. For
floating rate liabilities, the analysis is prepared based on the average
liability held by the Group over the year. A 1 per cent increase or decrease
represents management's assessment of the reasonably possible change
in interest rates.
If interest rates had been 1% basis points higher and all other variables were
held constant, the Group's loss for the year ended 31 December 2021 would
increase by $647k (2020: $522k). The Company's sensitivity to interest rates
has increased during the current year due to the increase in the value of
loans held.
34.3 Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors. The Group manages liquidity risk by maintaining adequate reserves
and banking facilities, by continuously monitoring forecast and actual cash
flows, and by matching the maturity profiles of financial assets and
liabilities wherever possible. There has been no change to the Group's
exposure to liquidity risks or the manner in which these risks are managed and
measured during the year. Further details are provided in the Strategic
Report.
The maturity profile of the financial liabilities is summarised below. The
2020 figures have been restated to remove income received in advance since
there are no cash out flows associated with this balance. The table has been
drawn up based on the undiscounted cash flows of financial liabilities based
on the earliest date on which the Group can be required to pay.
Weighted Less than 2-5 years After Total
average
1 year
$'000
more than
$'000
effective
$'000
5 years
interest
$'000
rate
%
At 31 December 2021
Trade and other payables n/a 30,952 - - 30,952
Lease liabilities (Note 23) (1) 8,101 22,307 56,760 87,168
Bank borrowings 1.1% 40,175 26,979 - 67,154
At 31 December 2020, restated(2)
Trade and other payables (Note 24)(2) n/a 23,394 - - 23,394
Lease liabilities (Note 23)(2) (1) 8,762 22,030 37,030 67,822
Bank borrowings 1.1% 1,000 52,197 - 53,197
(1) Refer to Note 23, which provides the incremental borrowing rate for each
category of lease
(2) Restatements are detailed in Note 2 of the notes to the financial
statements
34.4 Credit risk management
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group
endeavours to only deal with creditworthy counterparties and requesting
payments on account, where appropriate, as a means of mitigating the risk of
financial loss from defaults. The Group's exposure is continuously monitored.
Financial assets, including trade receivables, consist of many customers,
coming from diverse backgrounds and geographical areas. Ongoing review of the
financial condition of the counterparty and ageing of financial assets is
performed. Further details are in Note 19.
The carrying amount of financial assets recorded in the financial statements
represents the Group's maximum exposure to credit risk. There has been no
change to the manner in which credit risks are managed and measured during the
year.
35. Events after the balance sheet date
The following events occurred after the reporting date:
Resignation of Director
On 10 January 2022, the Group announced that Daniel Ruback, Group CFO,
tendered his resignation as Director of the Group in order to pursue other
opportunities outside the Group. Daniel remained with the business until 8
April 2022. The Board has appointed Michael Williamson as interim CFO
pending the appointment of a permanent replacement.
The cost of Daniel Ruback's unvested share options outstanding has been
reversed during 2021, as this event is an adjusting event.
Paycheck Protection Program qualifying expenditure
On 11 April 2022, the SBA requested further information for its review of the
forgiveness application on qualifying expenditure under the PPP loan
arrangement. The Board has since consulted with its outside legal advisors as
to the eligibility for forgiveness of the loan. The Board believes it is
appropriate under IAS 20 to recognise the receipt of the loan and its
anticipated partial forgiveness and that such treatment is necessary for these
accounts to show a true, fair and balanced view of the Group's results given
the impact of the global pandemic on its operations. The total balance is
material and, while a different outcome is considered highly unlikely, this
balance is sensitive to a material change in judgement in the event the US
Government assessed the forgiveness differently. Refer to Note 2, Note 3 and
Note 21 for further details. This event is a non-adjusting event.
Receipt of long-standing accounts receivable balance
On 21 April 2022, the Group received $3,448k cash in settlement of part of a
long-standing accounts receivable balance that had been secured under a lien.
The expected credit loss allowance at 31 December 2021 is not impacted by this
part settlement. This event is a non-adjusting event.
Adjustments to deferred consideration
The Group agreed a further adjustment to the deferred consideration payable in
respect of the acquisition of Jet East with seller after the reporting date.
The adjustment is valued at $230k and will reduce the deferred consideration
balance outstanding and result in income in the income statement as an
Adjusting item. This event is a non-adjusting event.
36. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and its associates are disclosed
below.
The Company and its subsidiaries have a policy requiring full disclosure to,
and pre-approval by, the Board of transactions contemplated with related
parties.
List of related parties, including associates:
The following list is presented in accordance with the objectives of IAS
24 Related Party Disclosures and all relationships are disclosed according to
their substance rather than their legal form.
· Oneti Lebanon Sarl - is a company that is majority owned and
controlled by Mr G A Khalek, brother of
Mr M A Khalek (Chief Executive Officer). Mr M A Khalek holds 30% of the shares
in Oneti Lebanon Sarl according to the corporate register in Lebanon, however
the beneficial ownership of these shares was transferred to Mr G Khalek in
2008;
· Mr G Khalek - the brother of Mr M A Khalek;
· Cedar Trading Investment Corporation - is a company beneficially
owned by Mr G A Khalek;
· Oneti SAL - a company that is majority owned and controlled by Mr
G A Khalek;
· Gladwall Limited - is a company where Mr M A Khalek is the sole
Director;
· Mr M A Khalek - has significant influence over the Company
through his position as Chief Executive Officer and his ownership interest
>20%;
· EBAA - is the European trade association in which Mr M A Khalek
serves on the Board of Governors;
· Air Arabia/Felix Trading Company LLC - Felix Trading Company LLC
("Felix") has a significant ownership interest in Gama Aviation FZE, which is
controlled by the Group (see Note 16). The principals of Felix also have
significant ownership interest in Air Arabia, which is a client of the Group;
· Gama Aviation SPV - is a company registered in Abu Dhabi Global
Market - a related party through potential ownership and control rights via
the terms of a loan agreement and because the Group has significant influence
over its operations (but not control);
· Mr Canning Fok- is an Executive Director of CK Hutchison
Holdings, a company which has an indirect shareholding of 29.8% in the
Company; and
· CK Hutchison Holdings - has an indirect shareholding of 29.8% in
the Company
Associates
· GB Aviation Holdings LLC - is a joint venture in which the Group
owns a 50% membership interest;
· Gama Aviation LLC - was an associate in which GB Aviation
Holdings LLC owned a 49% member interest before disposal in March 2020 (Note
17); and
· China Aircraft Services Limited - was an associate in which the
Group owned a 20% equity interest prior to sale in 2021
Trading transactions
During the year, Group companies entered into the following transactions with
related parties who are not members of the Group:
Sale of services Purchase of services
2021 2020 2021 2020
$'000 $'000 $'000 $'000
China Aircraft Services Limited 564 1,993 1,377 2,950
Air Arabia/Felix Trading Company LLC 198 25 158 151
Gama Aviation LLC (branding fee)(1) - 625 - -
Gama Aviation LLC (other trading balances)(2) - 1,552 - 561
Mr Canning Fok 1,275 1,646 - -
M Khalek 37 23 - -
(1) In the prior year branding fees are for the two months prior
to disposal
(2) For ease of understanding, the branding fee and other trading
balances have been separated in the summary table above
The following amounts were outstanding at the balance sheet date for related
parties at that date:
Amounts owed by Amounts owed to
related parties
related parties
2021 2020 2021 2020
$'000
$'000
$'000 $'000
Air Arabia/Felix Trading Company LLC 198 204 127 182
China Aircraft Services Limited - 970 - 1,046
Mr Canning Fok 12 138 101 -
GB Aviation Holdings LLC - 40 - -
Material transactions with related parties
Gama Aviation LLC
During the prior year, Gama Aviation LLC paid $3.75m (of which $0.625m was
prior to disposal and $3.125m was post disposal) in cash to the Group in
accordance with the branding agreement and a further $15.5m accelerated
branding fee as part of the disposal of the associate (Note 17).
Merritt Property LLC
As reported in the 2018 Annual Report, in January 2017 the Group entered into
a Termination Agreement (the "Agreement") with Gama Aviation LLC. The
Agreement brought the previous branding agreement between the Group and Gama
Aviation LLC to a close at the same time as the Group entered into a new
branding agreement with GB Aviation Holdings LLC.
The Termination Agreement made provision for a final payment from Merritt
Property LLC (which was a 39% owner of Gama Aviation LLC at the time) to the
Group of $1.0m in lieu of branding fees forgone.
During the prior year, the Group received cash consideration of $1.0m to
settle the full amount due.
Mr Canning Fok
During the year, within the Business Aviation SBU, sales of services of
$1,275k (2020: $1,646k) were made to Mr Canning Fok.
Remuneration of key management personnel
The remuneration of the Executive Directors of the Group, who are also the key
management personnel of the Group, are set out below in aggregate for each of
the categories specified in IAS 24 Related Party Disclosures. As all the key
management personnel are remunerated in Pounds Sterling, the disclosure has
been presented in that currency.
2021 2020
£'000
£'000
Short-term employee benefits 1,229 1,410
Post-employment benefits 168 181
Total 1,397 1,591
Details of Directors' remuneration are given in the Remuneration Report in the
full Annual Report and Accounts.
Ultimate controlling party
The Company's ordinary shares are publicly traded on the AIM of the London
Stock Exchange. There is no single controlling party.
37. Capital Commitments
In June 2017, as described in Note 29 above, a subsidiary company entered into
a non-cancellable Build Operate-Transfer and Service Concession agreement with
Sharjah Airport Authority under which it is committed to construct a Business
Aviation Centre ("BAC") at Sharjah Airport. At 31 December 2021 the Group had
other outstanding contracted commitments of nil (2020: $nil).
As part of the commitment to voluntary carbon offsetting, the Group has the
intention to purchase verified emission reductions for 2,723 tonnes of CO(2)e
during 2022 (2021: 3,210 tonnes). At the reporting date this has not been
contracted.
38. Dividends
The Board does not recommend a dividend for 2021 (2020: nil).
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