REG - Gama Aviation PLC - Final Results
08/06/2023 07:00
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RNS Number : 0251C Gama Aviation PLC 08 June 2023
The information contained within this announcement is deemed to constitute
inside information as stipulated under Article 7 of the Market Abuse
Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018. Upon the publication of this
announcement, this inside information is now considered to be in the public
domain.
8 June 2023
Gama Aviation Plc (AIM: GMAA)
("Gama", "the Company" or "the Group")
Audited results for the year ended 31 December 2022
Significantly improved performance delivered across core business lines
Gama Aviation Plc, the business aviation services company, is pleased to
announce its audited results for the year ended 31 December 2022. The Company
will hold its Annual General Meeting ("AGM") on 30 June 2023 at 10.00 a.m. at
the offices of the Company, 1st Floor, 25 Templer Avenue, Farnborough,
Hampshire GU14 6FE. A copy of the notice of the AGM, which was sent to the
shareholders on 7 June 2023 by post and/or email, is available on the
Company's website: www.gamaaviation.com (http://www.gamaaviation.com) . 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/
(https://www.gamaaviation.com/investors/reports-and-presentations/) and will
also be sent to the shareholders.
Financial summary
Adjusted(1) $m Statutory $m
Dec-22 Dec-21(3) Dec-22 Dec-21(3)
Revenue 285.6 235.9 285.6 235.9
Gross Profit(3) 55.1 41.5 55.0 41.5
Gross Profit %(3) 19.3% 17.6% 19.3% 17.6%
EBITDA(4) 22.9 11.8 19.1 10.1
EBIT 8.8 (4.3) 0.4 (7.3)
Loss for the year (1.4) (6.3) (8.6) (8.8)
Loss per share (cents) (2.6) (8.7) (13.9) (12.7)
(1 ) The Adjusted Performance Measures (APMs) are defined in Note
15 to the financial statements and reconciled to the nearest International
Financial Reporting Standards (IFRS) measure. APMs include Adjusted Gross
Profit, Adjusted EBIT and Net Debt.
(2 ) To aid comparability, a further version of the 2021 results
has also been calculated on a constant currency basis using a constant foreign
exchange rate of $1.24 to £1, being the cumulative average USD/GBP exchange
rate for 2022, instead of the reported exchange rate of $1.38 to £1 for 2021.
On a constant currency basis 2021 Revenue is $224.5. Gross Profit is $39.1m,
Gross Profit percentage is 17.4%, and Adjusted EBIT is a loss of $4.3m.
Refer to Note 15 of the notes to the financial statements for further details.
(3 ) Depreciation charges of $3.2m in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reviewed and reclassified from administrative expenses to cost of sales to be
consistent with the current year presentation and to show depreciation of
assets used in the delivery of revenues in cost of sales. There has been no
change in loss for the year in respect of the prior year.
(4 ) EBITDA represents earnings before interest, tax,
depreciation, and amortisation. Adjusted EBITDA is Statutory EBITDA before
adjusting items.
Financial highlights
· Revenue up 21% (27% at constant currency(2)) to $285.6m (2021:
$235.9m)
· Gross Profit up 33% (41% at constant currency(2)) to $55.1m
(2021(3): $41.5m)
· Gross Profit Margin up by 1.7ppts (up 2.7ppts at constant
currency) at 19.3% (2021(3): 17.6%)
· Adjusted EBITDA profit up $11.1m to $22.9m (2021: $11.8m)
· Adjusted EBIT profit up $13.1m to $8.8m (2021: $4.3m loss)
· Net cash inflow from operating activities of $31.4m (2021: $5.2m
cash inflow). Improvement of $26.2m with $7.7m improvement in EBIT and $14.7m
positive contribution from working capital
· Group cash balances were $22.4m (2021: $10.2m) of cash and $9.0m
of the Group's US $15.0m revolving credit facilities (RCF) (2021: $12.1m of
Group $50m revolving credit facilities) was undrawn as of 31 December 2022
· Net debt, inclusive of $52.7m (2021: $48.0m) of lease
obligations, decreased to $66.4m (2021: $104.9m).
· As at 7 June 2023 cash balances were $12.5m.
· The Board of Directors does not recommend a dividend to be paid.
Strategic highlights
· Significant growth and improved profitability in the Group's US
Business Aviation maintenance and repair operations ("MRO") business, Jet East
· The award of a seven-year five aircraft Wales Air Ambulance
Charity contract, finalised in February 2023, represents a significant
contract win for the group's Special Mission Strategic Business Unit ("SBU")
in line with its organic growth plans
· The award of a five-year, multi aircraft, North Sea offshore
contract to Bond Helicopters, the Group's newly created joint venture with
Peter Bond to specifically target niche opportunities within the UK offshore
energy market
· Continued investment in strategically important airport
infrastructure with the acquisition of a hangar in Statesville, North
Carolina, to provide additional capacity and fuel further organic growth of
our US MRO business
· Successful restructuring of the Group's debt facility allowing
for the timely and full repayment of legacy expiring facilities.
· Continued programme of optimisation of the Group's core lines of
business.
Outlook
The significant progress the Group has made over the last two years in
delivering strong growth and improved profitability is very encouraging. The
Board remains confident that progress could be sustained through the coming
year. However, we remain understandably circumspect in our outlook for 2023
given the backdrop of high inflation, high interest rates and the
uncertainties that come from a protracted conflict in Europe.
Notwithstanding this, the Group remains firmly focused on the execution of our
strategy, capturing organic growth opportunities through its SBUs and
continuing to optimise the operational performance of the business and is well
positioned for continued success.
Commenting on the full year results, Marwan Khalek, Chief Executive said:
"Our 2022 results showed the continued improvement that the Group is making in
revenue and EBITDA performance in its core markets. It is particularly
pleasing to see the transformative effect the addition of Jet East has had to
our US MRO business and how the additional focus we've placed on the Special
Mission sector will deliver future financial performance through the capture
of attractive multi-year contracts.
Despite the progress we have made there remains more work to do in what is
likely to become an increasingly challenging environment. However, I am firmly
of the belief that given our strategic direction, the commitment and
dedication of our people and the actions we are taking to improve our
performance, we will continue to build positive momentum in 2023."
-ENDS-
For more information and persons responsible for arranging the release of this
announcement on behalf of the Company contact:
Gama Aviation Plc
+44 (0)
1252 553029
Marwan Khalek, Chief Executive Officer
Michael Williamson, Chief Financial Officer
Camarco
+44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
WH Ireland
+44 (0) 20 7220 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
Overview
I am very pleased to report that the Group delivered a much-improved
performance underpinned by our focus of the growth strategy and optimisation
initiatives. It is particularly encouraging to see the significant
improvement in the financial performance of core lines of business such as
Business Aviation's US MRO, the FBOs and our Charter offer as well as
improvements in Special Mission's capture rate of new, long-term, contracts.
These financial performance improvements are a consequence of our continued
strategic focus on organic growth opportunities, combined with a programme of
'Fix & Optimise' initiatives within the Strategic Business Units ("SBU's")
to ensure the organisation remains resilient to external factors.
This improved financial performance provided a platform from which the Group
has been able to restructure its debt facilities and secure the funding it
needed, discharging its maturing legacy credit facilities in full, in a timely
manner. This was achieved through a combination of a new targeted RCF and loan
facility to support the execution of the US MRO strategic plan and aircraft
specific related financing; allowing us to unlock the value of our aircraft
assets to raise the necessary funding. This was achieved despite the
significant tightening of the worldwide debt markets experienced from Q4 2022.
Continued organic investment in our SBU's remains a strategic priority.
During 2022, investments were made in myairops (the Group's leading SaaS
aircraft and airport operations software product) and strategically important
airport infrastructures. These include our hangar development projects in
Sharjah and Jersey and the acquisition of facilities in Statesville, North
Carolina which will provide additional capacity and capability for our FBO
business and our US MRO business respectively. Whilst the absorption of cash
into these investments is not reflected with immediate improvement in
profitability, they are the seed investments necessary to deliver future
organic growth in revenues, and profitability, in line with our strategic
objectives.
As a service business, strong performances cannot be achieved without our
people. The Board and I recognise our peoples' resilience and unwavering
support as we have navigated the last three years of uncertainty. As we enter
a new fiscal era of higher interest rates and inflation, we recognise new
pressures on cost of living and in turn wage inflation. We will act to support
our people, doing so responsibly to protect the quality of our service
delivery and the interests of shareholders. Additionally, we will continue to
provide all employees with appropriate support such as those we deliver
through our innovative and industry leading 'We care' programme.
Similarly, within wider society we continue to make progress with the Group's
Social Value commitments particularly in areas such as Women in Aviation, the
Armed Forces Covenant, and the Scottish Business Pledge. However, in all areas
of social value, the Board recognises that we are on a journey and have much
still to do in partnership with our clients and suppliers.
SBU Performance
Business Aviation
The solid growth in our Business Aviation SBU continues to be driven largely
by the strong US market (the world's largest business aviation market by
volume and value) resulting in strong growth and significant improvement in
the financial performance of our US MRO business, which we operate under the
Jet East brand. The purchase of a hangar in Statesville, North Carolina, which
became operation in April 2023, will provide additional maintenance capacity
for our network positively enhancing both growth prospects and business mix.
The same market dynamics that are serving Jet East well, have negatively
influenced our Aircraft Management line of business in the UK Europe and the
Middle East where many business jet owners have capitalised on robust
pre-owned aircraft values in the US and the strong US dollar and have sold
aircraft assets. This has resulted in a fall in aircraft ownership amongst our
customer base and a subsequent reduction in the Group's activities in this
business line over the period.
That said, both Charter and the FBO lines of business have performed well. The
FBO business particularly benefited from increased flight volumes into Jersey,
Glasgow, and Sharjah, with Sharjah being enhanced by the World Cup hosted by
Qatar.
Outside of the US, the rest of the world ("ROW") MRO business had a mixed year
and was hindered by a delayed start to the maintenance operations of a major
fleet client. A reorganisation of this line of business occurred in Q4 2022,
with a greater focus being placed on business development and capture in 2023.
Special Mission
The Special Mission SBU achieved two notable contract awards in Q4, 2022.
The contracts are strategically valuable, one extending the Group's coverage
of the UK Air Ambulance market and the other allowing market entry into the
offshore energy market. The latter, which is operated through Bond
helicopters, our strategic join venture partnership with Peter Bond, provides
the Group with considerable future opportunity particularly when considering
other transportation contracts, future decommissioning work and the potential
offered by offshore wind.
With a focus on organic growth within its four defined market sectors, a
stable leadership team, a strong track record in delivery and a visible
pipeline, the SBU is firmly focused on optimising the delivery of its
contracts, and the conversion of new opportunities.
Technology & Outsource (T&O)
The T&O SBU continues to make progress with its suite of aviation focused,
enterprise resource planning software products. Activity in the US, the
world's largest business aviation market by volume and value, continues to
drive sales activity for the software as a service (SaaS) product.
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. T&O's FlyerTech brand is seeing increased transaction
volume in the helicopter, business jet and airline sectors.
Financial Performance
Revenue growth has been principally driven by the Business Aviation SBU and
more specifically the US MRO line of business which includes the impact of the
first full year effect of the acquisition of Jet East. Likewise, the
improvement in gross profit arose principally due to Business Aviation's
revenue performance.
Most pleasingly, improvements in revenue and gross profit have translated into
a much-improved Adjusted EBITDA and EBIT performance reflecting our continuing
and increasing focus on optimising business delivery.
Outlook
The significant progress the Group has made over the last two years in
delivering strong growth and improved profitability is very encouraging. The
Board remains confident that progress could be sustained through the coming
year. However, we remain understandably circumspect in our outlook for 2023
given the backdrop of high inflation, high interest rates and the
uncertainties that come from a protracted conflict in Europe.
Notwithstanding this, the Group remains firmly focused on the execution of our
strategy, capturing organic growth opportunities through its SBUs and
continuing to optimise the operational performance of the business and is well
positioned for continued success.
Marwan Khalek
Chief Executive Officer
7 June 2023
GROUP OPERATIONAL PERFORMANCE REVIEW
Revenue
Adjusted(1, 2) Statutory
$'000 2022 2021 2022 2021
Business Aviation 224,300 170,146 224,300 170,146
Special Mission 55,503 56,716 55,503 56,716
Technology & Outsourcing 5,214 5,297 5,214 5,297
Branding fees 625 3,750 625 3,750
Total 285,642 235,909 285,642 235,909
Gross profit(3)
Adjusted(2) Statutory
$'000 2022 2021(3) 2022 2021(3)
Business Aviation(3) 37,318 19,100 37,157 19,100
Special Mission(3) 13,753 14,481 13,753 14,481
Technology & Outsourcing 3,452 4,204 3,452 4,204
Branding fees 625 3,750 625 3,750
Total 55,148 41,535 54,987 41,535
EBIT
Adjusted(1, 2) Statutory
$'000 2022 2021 2022 2021
Business Aviation (8) (8,764) (7,094) (12,392)
Special Mission 5,439 4,546 5,357 4,534
Technology & Outsourcing (914) 47 (1,191) (289)
Branding fees 625 3,691 625 3,691
Associates - (1,491) - -
Corporate(2) 3,665 (2,303) 2,675 (2,796)
Total 8,807 (4,274) 372 (7,252)
(1) APMs are defined in Note 15 to the financial statements and
reconciled to the nearest IFRS measure. APMs include Adjusted Gross Profit,
Adjusted EBIT and Net Debt.
(2) Corporate activities generated a credit during the year
reflecting gain on sale of helicopters, foreign exchange gains on working
capital, partially offset by corporate costs not allocated to SBU's.
(3) Depreciation charges of $3,196,000 in the prior year relating
to aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation and to show depreciation of assets used in the
delivery of revenues in cost of sales. This has resulted in a reduction of
$3,196,000 in gross profit and is attributable to Business Aviation ($602,000)
and Special Mission ($2,594,000).
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
Fixed Based Operations (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 and repair
operations 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. Therefore, Business Aviation MRO US has been
presented separately from Business Aviation excluding MRO US.
BA MRO US(1) BA excluding MRO US Total
$'000 2022 2021(2) Constant currency growth(2) 2022 2021(2) Constant currency Constant currency growth(4) 2022 2021(2) Constant currency Constant currency growth(4)
2021(4) 2021(4)
Revenue 118,250 79,250 49% 106,050 90,896 85,668 24% 224,300 170,146 164,918 36%
Gross profit (23) 25,894 9,035 186% 11,424 10,065 9,634 19% 37,318 19,100 18,669 100%
Gross profit %(2) 22% 11% - 11% 11% 11% - 17% 11% 11% -
Adjusted EBIT(3) 1,332 (7,971) - (1,340) (793) (676) - (8) (8,764) (8,647) -
(1) The Jet East business operations were merged with those of the
Group's 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.
(2) Depreciation charges of $602,000 in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation. This has resulted in a reduction of $602,000 in
gross profit and is attributable to BA excluding MRO US.
(3) APMs are defined in Note 15 to the financial statements and
reconciled to the nearest IFRS measure. APMs include Adjusted Gross Profit,
Adjusted EBIT and Net debt. APMs also include organic and constant currency
Revenue, Gross Profit and Adjusted EBIT.
(4) To aid comparability 2021 results have been calculated on a
constant currency basis.
Overall, the Business Aviation SBU grew its revenues by 36% on a constant
currency basis to $224.3m. Gross profit was up 100% on a constant currency
basis to $37.3m.
The US market continued to benefit from an increase in aircraft activity
leading to continued strong demand for base and line maintenance services.
Furthermore, organic investment in the development of the base maintenance
facilities, contributed to revenue growth of 49% in the BA MRO US business
line. In addition, gross profit was much improved on the prior year, up 186%
to $25.9m (2021: $9.0m) reflecting the aforementioned investment and market
conditions, together with a full year of trading following the acquisition of
Jet East in 2021.
Outside the US, revenues increased by 24% to $106.1m and gross profit improved
by 19% to $11.4m, both on a constant currency basis.
The rest of the world Charter and the FBO lines of business both performed
well. Charter saw strong growth 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 competition. The FBO business
particularly benefited from increased flight volume into Jersey and Sharjah,
with Sharjah being enhanced by the World Cup in Qatar.
The rest of the world MRO business has had a mixed year and was hindered by a
delayed start to the maintenance operations of a major UK fleet client. A
reorganisation of this line of business occurred in Q4 2022, with a greater
focus being placed on business development in 2023. MRO demand and activity at
our Bournemouth and other non-US bases, which are predominantly targeted at
base maintenance, remained steady.
The SBU's airport infrastructure development projects in Jersey and Sharjah
remain a priority for the Group, however, volatility in the financial markets
during the latter half of 2022, has required the Board to take a more cautious
approach to these investments.
Adjusted EBIT for the SBU grew by $8.8m to a break-even level (2021: $8.8m
loss). The US business improved from a negative adjusted EBIT of $8.0m in 2021
to a positive $1.3m in 2022 reflecting the improved gross profit levels noted
above of $16.9m, partially offset by higher overheads of $7.6m reflecting
investment in capability for increased activity levels. Adjusted EBIT for BA
excluding MRO US fell from a negative $0.8m in 2021 to a negative $1.3m in
2022 as improved gross profits noted above of $1.5m, were more than offset by
higher overheads of $1.9m largely due to higher recharges from the Special
Mission SBU ($1.1m).
$'000 BA MRO US BA excluding MRO US Total
2022 2021 2022 2021 2022 2021
Adjusted EBIT 1,332 (7,971) (1,340) (793) (8) (8,764)
Exceptional items - transaction costs 258 (558) 126 - 384 (558)
Exceptional items - integration and business re-organisation costs (265) (413) - 1,901 (265) 1,488
Exceptional items - other items - - - 79 - 79
Exceptional items - Impairment of right-of-use assets - - - (1,911) - (1,911)
Exceptional items - Impairment of goodwill (787) - - - (787) -
Exceptional items - Impairment of property, plant and equipment (124) - - - (124) -
Exceptional items - Impairment of assets under construction - - (2,516) - (2,516) -
Exceptional items-onerous contract provision - - (900) - (900) -
Long-term incentive plan (1,821) (1,821) - - (1,821) (1,821)
Share-based payments (197) 58 (17) (52) (214) 6
Amortisation (738) (710) (105) (201) (843) (911)
EBIT (2,342) (11,415) (4,752) (977) (7,094) (12,392)
EBIT improved from a loss of $12.4m in 2021 to a loss of $7.1m in 2022. In
addition to the movements discussed above, there was a $2.5m impairment of
assets under construction that relates to the impairment of further
development costs incurred during the period in respect of the Business
Aviation Centre at Sharjah International Airport in the UAE ($2.1m) and
impairment of development costs in Jersey ($0.4m).
The non-cash impairment of goodwill ($0.8m) and the impairment of property,
plant and equipment ($0.1m) relate to the impairment of the goodwill and
leasehold improvements respectively, associated with the closure of the paint
and interior completion operations at Fort Lauderdale Executive Airport.
The amortisation of acquired intangibles of $0.8m and the $1.8m charge for the
long-term incentive plan relate to the acquisition of Jet East in the prior
year.
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 in 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
$'000 2022 2021(1) Constant currency Constant currency growth(3)
2021(3)
Revenue 55,503 56,716 51,037 9%
Gross profit 13,753 14,481 12,772 8%
Gross profit % 25% 26% 25%
Adjusted EBIT(2) 5,438 4,546 4,096 32%
(1) Depreciation charges of $2,594,000 in the prior year relating
to aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation. This has resulted in a reduction of $2,594,000 in
gross profit.
(2) APMs are defined in Note 15 of the notes to the financial
statements and reconciled to the nearest IFRS measure. APMs include Adjusted
Gross Profit, Adjusted EBIT and Net Debt. APMs also include organic and
constant currency Revenue, Gross Profit and Adjusted EBIT.
(3) To aid comparability 2021 results have been calculated on a
constant currency basis.
Special Mission has delivered 9% revenue growth on a constant currency basis,
reflecting strong demand for services on its core contracts and result of the
fix and optimise agenda.
Gross profit has improved year on year reflecting the improved revenue
generation noted above, partially offset by inflationary cost pressures and
foreign exchange movements. Gross profit margins have remained consistent at
25% on a constant currency basis.
Adjusted EBIT improved to $5.4m (2021: $4.5m) reflecting the impact of
internal cost allocations.
$'000 2022 2021
Adjusted EBIT 5,439 4,546
Share-based payments (10) (12)
Amortisation (72) -
EBIT 5,357 4,534
EBIT increased from a profit of $4.5m in 2021 to $5.3m in 2022. In addition to
the movements discussed above, EBIT includes amortisation charges in respect
of acquired customer relations.
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 SBU comprises four lines of business which trade as Gama
Aviation, and two further brands, FlyerTech and myairops(®).
Software and data services via myairops(®). myairops(®) has developed a
suite of business aviation products deployed as "Software as a Service" (SaaS)
and mobile app solutions for flight and aircraft management, maintenance
tracking, ground operations and crew scheduling and operations.
Maintenance management and advisory services. Comprehensive range of services
from full Continuing Airworthiness Management and Airworthiness Review
Certificates through to supplying the software for an organisation to manage
the through-the-life maintenance of its aircraft.
Ground operations. Providing third party trip support services, including
flight planning and the arrangement of services such as permits, slots and
fuel, to aircraft operators who are seeking to outsource their flight
operations tasks.
$'000s 2022 2021(1) Constant currency Constant currency growth(3)
2021(3)
Revenue 5,214 5,297 4,834 8%
Gross profit 3,452 4,204 3,901 (12%)
Gross profit % 66% 79% 80% -
Adjusted EBIT(2) (914) 47 121 -
(1 ) Depreciation charges of $2,594,000 in the prior year
relating to aircraft and refurbishment, and leasehold property improvements
have been reclassified from administrative expenses to cost of sales to
conform with the current year presentation and to show depreciation of assets
used in the delivery of revenues in cost of sales. This has resulted in a
reduction of $2,594,000 in gross profit.
(2 ) APMs are defined in Note 15 to the financial statements
and reconciled to the nearest IFRS measure. APMs include Adjusted Gross
Profit, Adjusted EBIT and Net Debt. APMs also include organic and constant
currency Revenue, Gross Profit and Adjusted EBIT.
(3 ) To aid comparability 2021 results have been calculated
on a constant currency basis.
Technology and Outsourcing revenue increased on a constant currency basis by
8% reflecting a shift in the long-term strategy in sales and marketing to
North America and is concentrating on raising awareness within the US and
Canadian markets. Gross profit decreased by $0.4m on a constant currency basis
due to a $0.4m increase in direct payroll related costs. Adjusted EBIT
decreased by $1.0m to a loss of $0.9m (2021: $0m) due to the decline in gross
profit, foreign exchange and an increase in overheads.
$'000 2022 2021
Adjusted EBIT (914) 47
Share-based payments (17) (47)
Amortisation (260) (289)
EBIT (1,191) (289)
EBIT fell from a loss of $0.3m in 2021 to a loss of $1.2m in 2022. In addition
to the movements discussed above, EBIT included lower amortisation charges in
respect of acquired intangible assets and lower share-based payment charges.
ASSOCIATE INVESTMENTS
CASL
$'000 2022 2021
Adjusted EBIT(1) - (1,491)
Adjustments:
Exceptional items - Impairment reversal - 1,491
EBIT - -
(1. ) APMs are defined in Note 15 to the financial
statements and reconciled to the nearest IFRS measure. APMs include Adjusted
Gross Profit, Adjusted EBIT and Net Debt. APMs also include organic and
constant currency Revenue, Gross Profit and Adjusted EBIT.
The Group's investment in China Aircraft Services Limited ("CASL") was
reclassified as "held for sale" effective the end of May 2021 following a
Board decision on the receipt of a $2.0m offer for its 20% shareholding in
CASL. Since reclassification the asset was held at the fair value of $2.0m,
until it was sold with full and final cash settlement of $2.0m 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 the COVID-19 pandemic. In 2021, the Group's share of
these losses amounted to $1.5m at the Adjusted EBIT level.
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 was recognised in
2021.
Overall, all non-core associate investments have been sold and result in
associate statutory EBIT showing a $nil result in both 2022 and 2021.
BRANDING FEES
Total
$'000 2022 2021
Revenue 625 3,750
Gross profit 625 3,750
GP % 100% 100%
EBIT 625 3,691
Revenue and gross profit from branding fees ended on 2 March 2022. Branding
fees EBIT decreased from $3.7m in 2021 to $0.6m in 2022. The current year
includes two months of branding fees, whereas the prior year includes twelve
months' of branding fees.
FINANCE REVIEW
We report a significant improvement in the Group's reported results, with an
improvement in Revenue and Adjusted EBIT, a significant positive movement in
working capital and the successful refinancing of debt facilities previously
held with HSBC. The facilities with HSBC comprised a $50m RCF and £20m term
loan and were replaced by new facilities with Great Rock Capital in the US in
December 2022 and with Close Brothers Aviation and Marine in the UK in March
2023. The Company also completed the sale and lease-back of three helicopters
with LCI in September 2022. During 2023, management has continued to work to
optimise the Company's capital structure via further sale and leaseback and
asset sale activities so as to further improve the Group's capital structure
and to assist its liquidity requirements and to finance its development
projects.
Performance
Revenue
The Group reported an increase in revenue of 21%, which came principally from
the Business Aviation MRO US operation in its second year as part of the
Group, having been acquired in January 2021. We have an experienced management
team in the Business Aviation MRO US operation and a significant contract with
a major private jet provider. The Group made an investment in October 2022 in
a new facility in Statesville, North Carolina, which will widen services and
support more growth. Our Business Aviation Rest of the World ("ROW") operation
also reported increased revenues at $106.1m (2021: $90.9m).
EBITDA
The Group delivered an improvement in EBITDA to $19.1m (2021: $10.1m). The
improved profitability came principally from growth in our Business Aviation
MRO US acquisition. This business was loss making in 2021 and made an EBITDA
profit of $4.3m in 2022. Management executed the strategic plan resulting in
improved performance and effectively completed the integration programme. The
operation absorbed closure costs of $1.6m for its Florida executive jet
centre.
Business Aviation excluding MRO US delivered an EBITDA loss of $1.7m in very
difficult trading conditions. We experienced a decline in demand for aircraft
management services, offset by significant growth in charter and FBO
activities.
The Special Mission contracts business delivered EBITDA of $8.4m (2021:
$7.6m). Technology & Outsourcing held EBITDA profits in line with 2021, as
investments were made to support growth prospects in future years.
The Group also benefitted from $3.1m of foreign exchange gains and a $1.7m
gain on the sale of three helicopters, which also improved EBIT.
Adjusted EBIT
On the back of improved trading the Group reported Adjusted EBIT of $8.8m,
which is a return to profit since before the Covid-19 pandemic. This reflects
the integration of the Business Aviation MRO US acquisition and the effect of
recurring revenue from the Special Mission contracts.
Adjusting items
The Board refinanced its bank debt as the three-year term on its two HSBC
facilities were expiring in November 2022 and January 2023. The refinancing
resulted in advisory fees and transaction fees of $0.7m. Conditions for
refinancing in 2022 were challenging with rising interest rates and bank
caution to new lending. Other significant adjusting items represent accrued
costs for equity incentive plans, amortisation of intangible assets and
impairment of goodwill and assets under course of construction.
Financial summary
Adjusted(1) $m Statutory $m
2022 2021(2) 2022 2021(2)
Revenue 285.6 235.9 285.6 235.9
Gross profit 55.1 41.5 55.0 41.5
Gross profit % 19.3% 17.6% 19.3% 17.6%
EBITDA(3) 22.9 11.8 19.1 10.1
EBIT 8.8 (4.3) 0.4 (7.3)
Loss for the year (1.4) (6.3) (8.6) (8.8)
Basic and diluted loss per share (cents) (2.6) (8.7) (13.9) (12.7)
(1) APMs are defined in Note 15 to the financial statements and reconciled
to the nearest IFRS measure. APMs include Adjusted Gross Profit, Adjusted EBIT
and Net Debt. APMs also include organic and constant currency Revenue, Gross
Profit and Adjusted EBIT.
(2) Depreciation charges of $3,196,000 in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation and to show depreciation of assets used in the
delivery of revenues in cost of sales. This has resulted in a reduction of
$3,196,000 in gross profit and is attributable to Business Aviation ($602,000)
and Special Mission ($2,594,000).
(3) EBITDA represents earnings before interest, tax, depreciation and
amortisation. Adjusted EBITDA is Statutory EBITDA before adjusting items.
Revenue and gross profit bridges
Revenue $m Gross profit(1) $m
Revenue and gross profit - 2021 235.9 41.5
Impact of foreign exchange movements (11.4) (2.4)
Rebased revenue and gross profit - 2021 at 2022 exchange rates 224.5 39.1
Impact of organic growth (1.5) (2.8)
Rebased revenue and gross profit 223.0 36.3
Business Aviation MRO US 37.4 16.4
Business Aviation excluding MRO US 20.4 1.8
Special Mission 4.4 1.0
Technology & Outsourcing 0.4 (0.5)
Revenue and gross profit - 2022 285.6 55.0
(1) Depreciation charges of $3,196,000 in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation. This has resulted in a reduction of $3,196,000 in
gross profit and is attributable to BA excluding MRO US ($602,000) and Special
Mission ($2,594,000).
Business Aviation MRO US growth reflects the continued expansion of the
Business Aviation's US maintenance operations on the back of the acquisition
of Jet East and revenue growth from new facilities and from 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 in aircraft management.
Special Mission growth includes the impact of increased flying hours and the
related costs rechargeable to customers across major contracts.
Impairments
As previously reported, the Group has 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 had
a cumulative impairment charge of $13.1m in its financial statements at the
start of the financial year. This increased by a further $2.1m during the year
reflecting further expenditure on this asset.
Following its decision to recommence the development of the BAC, the Company
is in the process of securing the necessary funding for the project. Whilst
the Group is in discussions with investors regarding funding, the Board
considers that it would be inappropriate to reverse these impairments until
profits can be forecast with greater certainty.
The Board remains confident that the Group is making progress in securing the
necessary funding, at which time all these impairments, may reverse.
Expenditure of $0.4m incurred during the year on the Jersey FBO project has
been impaired. Whilst the Group is in discussions with investors to secure the
necessary funding for the project, the Board considers that it is appropriate
to recognise an impairment loss in respect of this expenditure until profits
can be forecast with greater certainty.
Finally, an impairment loss against leasehold improvements of $0.1m and
against goodwill of $0.8m has been recognised associated with the closure of
the paint and interior completion operations at Fort Lauderdale Executive
Airport.
Other than the above and following a diligent review of the carrying value of
investments, the Board does not believe there is any need for any other
impairments.
Finance expense
Net finance expense was $9.8m (2021: $3.5m). Foreign currency translation
movements resulted in a net loss of $5.9m (2021: $0.4m).
Taxation
There is a statutory taxation credit for the year of $0.9m (2021: credit of
$2.0m), 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. The adjusted taxation charge for the year is $0.4m (2021:
credit of $1.5m); refer to Note 13 for further details.
Earnings per share (EPS)
Shares in issue increased to 64.0m (2021: 63.7m) following the issue of shares
in the year. The average share price for the year ended 31 December 2022 was
59.4 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 a loss per
share of 13.9 cents (2021: 12.7 cents).
Dividend
The Board does not recommend a dividend for 2022 (2021: nil pence per share).
The Board intends to restore the Company's distributable reserves when
practicable.
Net debt and cash flow movements
The Group has reported a significant increase in the net cash inflow from
operating activities of $31.4m (2021: $5.2m). This reflects improved trading
as seen in the EBITDA of $19.1m (2021: $10.1m) and better working capital with
a positive inflow of $14.7m compared with an outflow in 2021 of $2.8m.
The proceeds from the sale and leaseback of three helicopters of $27.0m and
the utilisation of $11.0m of new credit facilities in the US were used to pay
down the RCF during the year and, subsequently, a term loan in January 2023,
both debt items with HSBC.
Liquidity
The Group liquidity comprises $22.4m (2021: $10.2m) of cash and $9.0m of its
$15.0m RCF with Great Rock Capital was undrawn as at 31 December 2022.
Net debt, inclusive of $52.7m (2021: $48.0m) of lease obligations, decreased
to $66.4m (2021: $104.9m), largely due to the $31.4m net cash inflow from
operating activities.
Financing
The Company paid back its bank debt as the three-year term on its two HSBC
facilities was expiring in November 2022 and January 2023.
Sale and lease back transaction
On 27 September 2022, the Group completed the sale and leaseback of its
helicopter assets resulting in a cash inflow of $27.0m and a gain on disposal
of $1.7m.
Credit facilities
During 2022, the Group benefitted from two credit facilities provided by HSBC,
a $50m RCF and a £20m term loan. The HSBC RCF matured on 14 November 2022 and
the outstanding balance of $32m was repaid in full utilising the proceeds of
$27m from the sale and leaseback of three helicopters, together with cash at
hand.
On 30 December 2022, new credit facilities were secured by the Group's wholly
owned US operating subsidiary, Gama Aviation (Engineering) Inc. ("GAEI"), from
a US lender Great Rock Capital LLC. The $25.0m facilities are for a term of
four years and comprise a combination of a RCF and up to $6.5m of term loans.
A total of $20.0m was available immediately, with a further $5.0m available
contingent on future trading performance. The facilities are subject to
customary financial covenants.
$11.0m of the facility was drawn down to repay GAEI's intercompany loan from
the Company. The balance of the facility is available to fund the investment
capital expenditure and other working capital requirements of the US business
in the execution of the Group's organic growth strategy in the US.
On 25 January 2023, the Group repaid its £20m term loan from HSBC (which had
a maturity date of 31 January 2023) in full utilising the $11.0m received from
the repayment of the Company's intercompany loan with GAEI, together with cash
at hand.
On 3 March 2023, the Group received £9.4m ($11.1m) from Close Brothers
Aviation and Marine by way of a loan secured by a mortgage over the Group's
owned aircraft. The loan will be used to fund the investment capital
expenditure and other working capital requirements of the non-US business.
During 2023, management has continued to work to optimise the Company's
capital structure via further sale and leaseback and asset sale activities to
ensure that the group is fully capitalised to meet its liquidity requirements
and to finance its development projects.
Collection of receivables
Following the litigation update provided in the Company's 2021 Annual Report
and 2022 Interim release, the Group continues to pursue the recovery of its
long-standing trade receivables through enforcement actions both in the UK and
in other jurisdictions. The Group has made progress through court proceedings
in the UK, which has resulted in material collections in 2023. It remains the
Board's expectation that other than the provisions already made against these
claims, no further provisions will be required.
Gama Aviation Plc
Consolidated income statement
For the year ended 31 December 2022
Year ended 2022 Year ended 2021(2)
Note Statutory result Adjusting items(1) Adjusted Statutory result Adjusting Adjusted
$'000 $'000 result(1) $'000 items(1) result(1)
$'000 $'000 $'000
Continuing operations:
Revenue 5 285,642 − 285,642 235,909 − 235,909
Cost of sales(2) (230,655) 161 (230,494) (194,374) − (194,374)
Gross profit 54,987 161 55,148 41,535 − 41,535
Administrative expenses(2) (59,568) 8,400 (51,168) (50,413) 6,095 (44,318)
Other operating income 6 4,953 (126) 4,827 1,626 (1,626) −
Operating profit / (loss) 372 8,435 8,807 (7,252) 4,469 (2,783)
Share of results of associates 23 − − − (1,491) − (1,491)
Reversal of impairment of equity accounted investments 23 − − − 1,491 (1,491) −
Earnings before interest and taxation 7 372 8,435 8,807 (7,252) 2,978 (4,274)
Finance income 11 108 − 108 617 − 617
Finance expense 12 (9,945) 75 (9,870) (4,110) − (4,110)
Loss before taxation (9,465) 8,510 (955) (10,745) 2,978 (7,767)
Taxation 13 885 (1,297) (412) 1,980 (471) 1,509
Loss for the year (8,580) 7,213 (1,367) (8,765) 2,507 (6,258)
Attributable to:
Owners of the Company (8,859) 7,211 (1,648) (8,062) 2,507 (5,555)
Non-controlling interests 38 279 2 281 (703) − (703)
(8,580) 7,213 (1,367) (8,765) 2,507 (6,258)
Earnings per share (EPS) attributable to the equity holders of the parent
(cents)
Basic 17 (13.9) 11.3 (2.6) (12.7) 4.0 (8.7)
Diluted 17 (13.9) 11.3 (2.6) (12.7) 4.0 (8.7)
(1) APMs are defined in Note 15 of the notes to the financial
statements and reconciled to the nearest IFRS measure.
(2 ) Depreciation charges of $3,196,000 in the prior year
relating to aircraft and refurbishment, and leasehold property improvements
have been reclassified from administrative expenses to cost of sales to
conform with the current year presentation and to show depreciation of assets
used in the delivery of revenues in cost of sales. There has been no change in
operating loss or loss for the year in respect of the prior year.
Gama Aviation Plc
Consolidated statement of comprehensive income
For the year ended 31 December 2022
Note Year ended 2022 Year ended 2021
$'000
$'000
Loss for the year (8,580) (8,765)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on translation of foreign operations (5,158) (307)
Other comprehensive loss for the year, net of income tax (5,158) (307)
Total comprehensive loss for the year (13,738) (9,072)
Total comprehensive loss is attributable to:
Owners of the Company (14,017) (8,369)
Non-controlling interest 38 279 (703)
(13,738) (9,072)
Gama Aviation Plc
Consolidated balance sheet
As at 31 December 2022
Note 2022 2021
$'000
$'000
Non-current assets
Goodwill 18 19,176 22,236
Other intangible assets 19 13,170 15,654
Total intangible assets 32,346 37,890
Property, plant and equipment 21 21,794 53,489
Right-of-use assets 22 38,194 36,383
Trade and other receivables 25 1,413 291
Deferred tax asset 35 6,100 3,918
Total non-current assets 99,847 131,971
Current assets
Inventories 24 7,278 8,915
Trade and other receivables 25 58,271 63,808
Current tax receivable 28 - 27
Cash and cash equivalents 26 22,406 10,243
Total current assets 87,955 82,993
Total assets 187,802 214,964
Current liabilities
Trade and other payables 27 (46,770) (39,342)
Current tax liabilities 28 (533) (574)
Obligations under leases 30 (11,053) (7,970)
Provisions 33 (2,250) (772)
Borrowings 31 (31,225) (40,175)
Deferred revenue 34 (9,214) (8,880)
Other financial liabilities 32 (335) (290)
Total current liabilities (101,380) (98,003)
Total assets less current liabilities 86,422 116,961
Non-current liabilities
Borrowings 31 (4,883) (26,979)
Deferred revenue 34 - (2)
Provisions 33 (885) (348)
Obligations under leases 30 (41,628) (40,032)
Trade and other payables 27 (3,663) (1,821)
Deferred tax liabilities 35 (1,206) -
Other financial liabilities 32 - (256)
Total non-current liabilities (52,265) (69,438)
Total liabilities (153,645) (167,441)
Net assets 34,157 47,523
Shareholders' equity
Share capital 36 958 954
Share premium 36 63,712 63,502
Other reserves 36 34,987 34,997
Foreign exchange reserve (29,880) (24,722)
Accumulated losses (35,992) (27,301)
Total shareholders' equity 33,785 47,430
Non-controlling interest 38 372 93
Total equity 34,157 47,523
The financial statements were approved by the Board of Directors and
authorised for issue on 7 June 2023 and are signed on their behalf by:
Michael Williamson
Director
Gama Aviation Plc
Consolidated statement of changes in equity
For the year ended 31 December 2022
Share capital Share Other Foreign Accumulated profit/(losses) Total Non- Total equity
premium
reserves
exchange
$'000
shareholders' equity
controlling interest
$'000
$'000
$'000
$'000
reserve
$'000
$'000
$'000
Balance at 1 January 2021 953 63,473 35,360 (24,415) (19,846) 55,525 796 56,321
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 40) - - 244 - - 244 - 244
Transfer for lapsed options - - (607) - 607 - - -
Balance at 31 December 2021 954 63,502 34,997 (24,722) (27,301) 47,430 93 47,523
Loss for the year - - - - (8,859) (8,859) 279 (8,580)
Other comprehensive expenditure - - - (5,158) - (5,158) - (5,158)
Total comprehensive loss for the year - - - (5,158) (8,859) (14,017) 279 (13,738)
Shares issued in the year 4 210 - - - 214 - 214
Cost of share-based payments (Note 40) - - 158 - - 158 - 158
Transfer for lapsed options - - (168) - 168 - - -
Balance at 31 December 2022 958 63,712 34,987 (29,880) (35,992) 33,785 372 34,157
Gama Aviation Plc
Consolidated cash flow statement
For the year ended 31 December 2022
Note Year ended 2022 Year ended 2021
$'000
$'000
Cash flows from operating activities
Loss for the year (8,580) (8,765)
Adjustments for:
Tax credit 13 (885) (1,980)
Finance income 11 (108) (617)
Finance costs 12 9,945 4,110
Amortisation of intangible assets 19 3,396 3,355
Depreciation of property, plant and equipment 21 5,870 6,441
Depreciation of right-of-use assets 22 6,001 7,524
Impairment of goodwill 18 787 −
Impairment of property, plant and equipment 21 2,640 −
Impairment of right-of-use assets 22 − 1,911
Lease credit recognised 10 − (110)
Loss/(profit) on derecognition of leases 10 - (1,626)
(Gain)/loss on disposal of property, plant and equipment 21 (1,741) 6
Share of loss of associates 23 − 1,491
Reversal of impairment of equity accounted investment in associate 23 − (1,491)
Forgiveness of PPP loan 31 (1,000) −
Share-based payments 40 372 257
Operating cash inflow before movements in working capital 16,697 10,506
Unrealised foreign exchange movements (2,107) (656)
Decrease/(increase) in gross inventories 1,063 (1,567)
Increase in inventory obsolescence 65 18
Decrease in gross receivables 2,083 6,229
Decrease in loss allowance for receivables (299) (1,255)
Increase/(decrease) in payables and deferred consideration 11,615 (19)
Increase/(decrease) in deferred revenue 1,190 (4,847)
Increase/(decrease) in provisions 1,164 (685)
Working capital movements 14,774 (2,782)
Cash generated by operations 31,471 7,724
Tax paid on operating activities (96) (3,289)
Tax refunds received − 790
Net cash generated by operating activities 31,375 5,225
Note Year ended 2022 Year ended 2021
$'000
$'000
Cash flows from investing activities
Purchases of property, plant and equipment (4,011) (3,379)
Purchases of intangibles (1,829) (2,604)
Proceeds on disposal of property, plant and equipment 21 27,079 −
Proceeds on disposal of assets held for sale 23 − 2,000
Interest received − 1,061
Acquisition of business, net of cash acquired − (8,146)
Net cash received/(used) in investing activities 21,239 (11,068)
Cash flows from financing activities
Lease payments (11,832) (9,567)
Interest paid (1,272) (709)
Proceeds from borrowings, net of loan arrangement fees 31 18,690 22,574
Repayment of borrowings 31 (46,525) (12,361)
Lease payment received 91 −
Interest paid 70 −
Net cash used in financing activities (40,778) (63)
Net increase/(decrease) in cash and cash equivalents 11,836 (5,906)
Cash and cash equivalents at the beginning of year 10,243 16,136
Effect of foreign exchange rates 327 13
Cash and cash equivalents at the end of year 26 22,406 10,243
Notes to the financial statements
For the year ended 31 December 2022
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.
The Company, together with its subsidiaries and other related undertakings
(the "Group"), is involved in the provision of aviation services, including
aviation design, maintenance, operational management, charter, software and
facilities expertise.
2. Subsidiaries and other related undertakings
Details of the Company's subsidiaries and other related undertakings held
directly or indirectly at 31 December 2022 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 2022
interest 2021
Airops Software Limited(1) England and Wales 100% 100% Aviation software Head Office
Aravco Limited(1) England and Wales 100% 100% Dormant 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% Dormant 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% Dormant Head Office
International JetClub Limited England and Wales 100% 100% Dormant 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(1,2) 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 Aviation SPV Limited (Plc)(1) United Arab Emirates 100% 100% 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% 100% Aviation design and engineering and FBO 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(3) Nigeria 100% 100% Applicant of Nigerian AOC (8)
Gama Aviation (Cayman) Cayman Islands 100% 100% Aviation Management Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands
SEZC
FlyerTech Europe Sp. Z.o.o. Poland 100% 100% Airworthiness management ul. Komitetu Obrony Robotnikow 62, 2(nd) Floor, 02-146 Warsaw, Poland, NIP:
7831827059
GB Aviation Holdings LLC(6) Delaware, USA 50% 50% Joint venture - non-trading Delaware Office
Gama Aviation Hutchison Technical Service (Beijing) Limited(1) China 100% 100% Non-trading Room 250, 2(nd) Floor, Building 1, No. 56, Zhaoquanying Section, Changjin
Road, Shunyi District, Beijing
Bond Helicopters Limited(1,7) England and Wales 50% - Joint venture - non-trading Compass House, Lypiatt Road, Cheltenham, England, GL50 2QJ
(1) Indicates indirect holding.
(2) 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 38 for further details.
(3) Gama Aviation Plc holds 11% of the share capital in Hangar 8
Nigeria Limited, a company established in Lagos, Nigeria. Whilst the Group
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.
(6) GB Aviation Holdings LLC is the entity jointly held with
Signature Aviation plc.
(7) Bond Helicopters Limited is the entity jointly held with Peter
Bond.
(8) The registered office address of this company is available
upon request at the Company's Head Office at the above address.
The addresses for the specified offices are:
Head Office: 1(st) Floor 25 Templer Avenue, Farnborough, Hampshire, England,
GU14 6FE
Jersey Office: Beauport House, L'Avenue De La Commune, St Peter, Jersey, JE3
7BY
Delaware Office: Corporation Service Company, 251 Little Falls Drive,
Wilmington, Delaware 19808, USA
Trenton Office: 18 West Piper Ave, Trenton, New Jersey 08628, USA
Hong Kong Office: 7(th) Floor, 81 South Perimeter Road, Hong Kong
International Airport, Lantau, Hong Kong
During the year ended 31 December 2022, the Company disposed of the following
undertakings held directly or indirectly at 31 December 2021:
Name Place of incorporation Proportion of voting and ownership Proportion of voting and ownership Method of disposal Registered address
and operation interest 2022
interest 2021
Gama International Saudi Arabia(1) Kingdom of Saudi Arabia - nil(2) Sold 6646 Abi Haitham Al Ansari, al Madina Square Center - Office 2 & 3,
Muhammadiyah District, Jeddah 23624-3270, KSA
Lynk Aero LLC(1) Ohio, USA - 100% Dissolved Trenton Office
(1) Indicates indirect holding.
(2) No non-controlling interest was recognised as the Group had
the full beneficial interest.
3. Accounting policies
Basis of preparation
The Consolidated Financial Statements of the Group have been prepared in
accordance with UK adopted International Accounting Standards, in conformity
with the requirements of the Companies Act 2006.
The Consolidated Financial Statements have been prepared on a going concern
basis and under the historical cost convention, except as disclosed in the
accounting policies below.
The financial statements are presented in United States Dollars (USD), rounded
to the nearest thousand (USD000) unless otherwise stated.
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. 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.
Going concern
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 31 December
2024. The Directors have also considered the outlook for the business beyond
31 December 2024 based upon its updated five-year strategic plan.
The analysis takes account of the following, amongst other, relevant
considerations:
· Working capital levels and the conversion
of profits into cash flows,The recovery of legacy debtor balances,
· The planned sale and/or sale and lease
back of Group assets
· The £20.0m HSBC Term Loan which was
repaid on 25 January 2023,
· The $5.0m Great Rock Capital Term Loan and
a delayed $1.5m Delayed Term which is currently undrawn.
· The Revolving Credit Facility ("RCF") of
up to initially $15.0m with the potential to increase to $20m (the amount
available to be drawn down is subject to various restrictions both in value
and use outside the US) from Great Rock Capital of which $9.0m was undrawn as
of 31 December 2022 and $7.2m was undrawn as of 30 April 2023.
· The £9.4m ($11.1m) loan from Close
Brothers that completed on 3 March 2023, and which is secured on owned
aircraft,
· Cash of $22.5m as of 31 December 2022 and
$6.1m as of 30 April 2023.
The credit facilities with Great Rock Capital are held in the Company's US
subsidiary and are subject to financial covenants and expire in December 2026.
The RCF is settled and drawn down on a cyclical basis and has been presented
in current liabilities.
The term loan with Great Rock Capital falls due for repayment over twelve
months from the reporting date and has been presented in non-current
liabilities.
The key assumptions in the Board approved base case projections relate to
revenue, profit performance and working capital cash flows. Additionally, the
detailed cashflow projections consider planned future events within 2023 and
2024, including the Directors' assessment of:
· The likelihood of recovery of legacy
debtor balances and
· The likelihood of completing the planned
sale and/or sale and lease back of Group assets
The Directors have also considered a severe but plausible downside scenario
that takes account of the rapid increase in inflation that the western world
is experiencing and assumes that this will principally be felt from the start
of 2023 due to the longevity of supply contracts.
The severe but plausible downside scenario assumes the following:
· EBITDA is 20% lower than the Board
approved base case projections
· Working capital outflows are 25% higher
than the Board approved base case projections
· Funding costs will be 2% higher than
current rates
· Corporation tax rates will be 5% higher
than current rates
In both the base case scenario and the severe but plausible downside scenario,
the Directors are satisfied that the Group has sufficient headroom and
potential further mitigation to ensure that the Group will remain solvent and
able to pay its debts as they fall due during a period of at least 12 months
from the date of approval of these annual financial statements.
Accordingly, after making appropriate enquiries and considering the
uncertainties described above, the Directors have, at the time of approving
these annual financial statements, a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future and, consequently, consider that it is appropriate to adopt the going
concern basis in preparing these annual financial statements.
However, certain assumptions within the cash flow forecasts relating to
receipt of legacy debtor balances , and the planned sale and/or sale and lease
back of Group assets which have not been concluded at the time of approving
the financial statements and there is a risk that these events may not be
completed in the time scales planned as they are not fully under the control
of the Group. Consequently, there is a material uncertainty that may cast
significant doubt about the Group's ability to continue as a going concern.
If one or more of these events do not occur, the Directors anticipate
undertaking additional fundraising and asset realisation alongside cost and
cash savings to ensure that the Group is able to meet its liabilities as they
fall due.
The financial statements do not include any adjustments that would result if
the Group were unable to continue as a going concern.
Changes in accounting policies and practices
In the preparation of these Consolidated Financial Statements, the Group
followed the same accounting policies and methods of computation as compared
to those applied in the previous period, except for:
· the reclassification of depreciation charges relating to aircraft
and refurbishment, and leasehold property improvements from administrative
expenses to cost of sales, and
· the adoption of new standards and interpretations and revision of
the existing standards noted below.
New and amended standards adopted by the Group in 2022
The following amendments to existing standards and interpretations were
effective in the year ended 31 December 2022, but were either not applicable
or did not have a material impact on the Group:
· Amendments to IAS 16 Property, Plant and Equipment
· Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets
· Amendments to IFRS 3 Business Combinations
· Annual Improvements to IFRS Standards 2018-2020 Cycle - minor
amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41
New and amended standards not applied
The following standards and interpretations in issue are not yet effective for
the Group and have not been adopted by the Group:
Effective dates(1)
Amendments to IAS 1 Presentation of Financial Statements: Classification of 1 January 2023
Liabilities as Current or Non-current
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice 1 January 2023
Statement 2: Disclosure of Accounting Policies
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and 1 January 2023
Errors: Definition of Accounting Estimates
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and 1 January 2023
Liabilities arising from a Single Transaction
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IFRS 17 Insurance Contracts 1 January 2023
Amendments to IAS 1 Presentation of Financial Statements: Non-current 1 January 2024
Liabilities with Covenants
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback 1 January 2024
(1) The effective dates stated above are those given in the original
IASB/IFRIC standards and interpretations. As the Group prepares its financial
statements in accordance with International Accounting Standards, in
conformity with the requirements of the Companies Act 2006, the application of
new standards and interpretations will be subject to there having been
endorsed for use in the UK. In the majority of cases this will result in an
effective date consistent with that given in the original standard or
interpretation, but the need for endorsement restricts the Group's discretion
to early adopt standards.
The Directors do not expect the adoption of these standards and
interpretations to have a material impact on the Consolidated financial
statements.
Significant accounting policies
The principal accounting policies adopted in the preparation of these
Consolidated Financial Statements are set out below.
Basis of consolidation
The Consolidated Financial Statements incorporate the financial statements of
the Company and the subsidiaries controlled by the Company for the years ended
31 December 2022 and 31 December 2021. The Group controls an investee if, and
only if, the Group has all of the following:
· Power over the investee (i.e. existing rights that give it the
current ability to direct the relevant activities of the investee)
· Exposure, or rights, to variable returns from its involvement
with the investee, and
· The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights result in
control. To support this presumption and when the Group has less than a
majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an
investee, including:
· The contractual arrangement with the other vote holders of the
investee
· Rights arising from other contractual arrangements
· The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the period are included in the Consolidated
Financial Statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of
subsidiaries are included in the Consolidated Financial Statements from the
date on which control commences until the date on which control ceases.
The subsidiary financial statements are prepared for the same reporting period
as the Parent Company and are based on consistent accounting policies. All
intra-group balances and transactions, including unrealised profit arising
from them are eliminated in full.
A change in the ownership interest of a subsidiary, without loss of control,
is accounted for as an equity transaction. If the Group loses control of a
subsidiary it:
· Derecognises the assets (including goodwill) and liabilities of
the subsidiary,
· Derecognises the carrying amount of any non-controlling interest,
· Derecognises the cumulative translation differences recorded in
equity,
· Recognises the fair value of the consideration received,
· Recognises the fair value of any investment retained,
· Recognises any surplus or deficit in profit or loss, and
· Recognises the parent's share of any components previously
recognised in other comprehensive income, to profit or loss or retained
earnings, as appropriate.
Business combinations
Business combinations are accounted for using the acquisition method. The cost
of any acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value, and the amount of any
non-controlling interest in the acquiree. For each business combination, the
acquirer measures the non-controlling interest in the acquiree either at fair
value or at the proportionate share of the acquirer's identifiable net assets.
Acquisition costs incurred are expensed and included within adjusting items.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances, and pertinent
conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
Goodwill is initially recognised at cost, being the excess of the aggregate of
the consideration transferred and the amount recognised for non-controlling
interest, over the net identifiable assets acquired and liabilities assumed.
If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated to each of the Group's
cash-generating units ("CGUs") that are expected to benefit from the
combination, irrespective of whether assets or liabilities of the acquisition
are assigned to those units.
Where goodwill forms part of a CGU, and part of the operation within that unit
is disposed of, the goodwill associated with the operation disposed of is
included in the carrying amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of in this circumstance
is measured based on the relative values of the operation disposed of and the
portion of the CGU retained.
Associates
Where the Group has the power to participate in (but not control) the
financial and operating policy decisions of another entity, it is classified
as an associate. Associates are initially recognised in the Consolidated
Balance Sheet at cost. Subsequently, associates are accounted for using the
equity method, where the Group's share of post-acquisition profits and losses
and other comprehensive income is recognised in the Consolidated Income
Statement and Consolidated Statement of Comprehensive Income (except for
losses in excess of the Group's investment in the associate, unless there is
an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its
associates are recognised only to the extent of unrelated investors' interests
in the associate. The Group's share in the associate's profits and losses
resulting from these transactions is eliminated against the carrying value if
the associate.
Any premium paid for an associate above the fair value of the Group's share of
the identifiable assets, liabilities and contingent liabilities acquired, is
capitalised and included in the carrying amount of the associate. Where there
is objective evidence that the investment in an associate has been impaired,
the carrying amount of the investment is tested for impairment in the same way
as other non-financial assets.
Joint ventures
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 joint control is similar to those
necessary to determine control over subsidiaries.
The Group's investments in its joint ventures are initially recognised in the
Consolidated Balance Sheet at cost. Subsequently, joint ventures are accounted
for using the equity method, where the Group's share of post-acquisition
profits and losses and other comprehensive income is recognised in the
Consolidated Income Statement and Consolidated Statement of Comprehensive
Income (except for losses in excess of the Group's investment in the joint
venture, unless there is an obligation to make good those losses).
Revenue from contracts with customers
The Group recognises revenue from the following major sources:
· Business Aviation:
o Managed aircraft contracts and specific air services
o Charter services
o Maintenance of aircraft
o Fixed base operations
· Special Mission:
o Mission solutions and expertise with aviation assets
· Technology & Outsourcing (T&O):
o Airworthiness services
o Software solutions
· Branding fees
Revenue is measured based on the fair value of the consideration received or
receivable, taking into account contractually-defined terms of payment in
relation to when the performance obligation is met, and excludes amounts
collected on behalf of third parties.
The transaction price represents the price to which the Group expects to be
entitled, consistent with contractually defined terms, in return for
delivering goods and/or services to its customers. Revenue from contracts with
customers is recognised when the Group transfers control of a product
or service to a customer or when it meets the performance obligations
specified or implied in the contract.
Managed aircraft contracts and specific air services
Services provided by the Group under managed aircraft contracts include flight
training, cost management, flight planning and scheduling, crew management,
maintenance oversight and regulatory compliance. Services under managed
aircraft contracts fall into one or more of the following contract components:
· Pre-delivery services and services prior to aircraft's entry into
service
· Management services
· Variable fees based on flying hours and related rechargeable
costs
These services are distinct services as the customer can benefit from each
service on its own and the Group's promise to provide the service is
separately identifiable from other promises in the contract. The three
contract components are therefore deemed to be separate performance
obligations.
Revenue for the provision of pre-delivery services and services prior to
aircraft's entry into service are recognised at a point in time when control
of the services has transferred to the customer, being at the point the
services have been performed. Payment for the provision of pre-delivery
services and services prior to aircraft's entry into service are not due from
the customer until the activities are complete.
Revenue relating to management services are recognised over time on a
straight-line basis over the term of the contract, as the customer
simultaneously receives and consumes the benefits provided by the Group.
Payment for management services is mostly in the form of quarterly or monthly
advance payments from customers. A contract liability is recognised for
revenue relating to management services at the time of receipt of the funds
from the customer. The contract liability represents the Group's obligation
for services still to be performed.
Revenue relating to variable flying hours revenue is recognised monthly at a
point in time based upon actual flight information and other relevant
information held on the internal billing system. Payment for revenue related
to variable flying hours is not due from the customer until the activities are
complete.
Rechargeable costs are recognised gross, as revenue and related cost of sales,
at a point in time based upon either actual rechargeable costs or estimated
costs to be recharged. Payment for revenue arising from rechargeable costs is
not due from the customer until the activities are complete.
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 they are linked to wider management services.
Charter services
The Group provides both managed fleet and sub-contracted charter services.
Revenue relating to charter services is recognised over time based on the
stage of completion of the service. The stage of completion is determined as
the proportion of the total duration of the charter that has elapsed at the
end of the reporting period. Payment for charter services is not due from the
customer until the charter services are complete. Consequently, a contract
asset is recognised over the period in which the charter services are
performed, representing the Group's right to consideration for the services
performed to date.
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.
Revenue relating to maintenance services is recognised over time based on the
stage of completion of the contract. The stage of completion is determined as
the proportion of the total labour hours expected to perform the service that
have been expended at the end of the reporting period. Payment for higher
value base maintenance services is mostly in the form of stage payments from
customers. To the extent that the value of the stage payment exceeds the
revenue recognised at the end of the reporting period based on the stage of
completion, a contract liability is recognised. The contract liability
represents the Group's obligation for services still to be performed.
As part of the maintenance activities, the Group sells parts to customers.
Revenue from the sale of parts is recognised at a point in time when control
of the goods has transferred to the customer, being at the point the goods are
delivered to the customer.
Fixed base operation
The Group provides fixed base operation activities in the US, Jersey, the UK,
and the Middle East. These activities include hangar parking, apron parking,
provision of fuel, and handling activities.
Revenue for the provision of fuel is recognised at a point in time when
control of the goods has transferred to the customer, being at the point the
goods are delivered to the customer. Revenue for all other fixed base
operation activities is recognised over time as the service is provided.
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. In addition, the
Group undertakes certain equipment design and modification activities for some
customers.
Revenue relating to fixed contract fees are recognised over time on a
straight-line basis over the term of the contract. Payment for fixed contract
fees is mostly in the form of annual or quarterly advance payments from
customers. A contract liability is recognised for revenue relating to fixed
contract fees at the time of receipt of the funds from the customer. The
contract liability represents the Group's obligation for services still to be
performed.
Revenue relating to variable fees is recognised over time based on the stage
of completion of the contract. The stage of completion is determined as the
proportion of the total hours expected to perform the service that have been
expended at the end of the reporting period. Payment for variable fees is not
due from the customer until the activities are complete. Consequently, a
contract asset is recognised over the period in which the activities are
performed, representing the Group's right to consideration for the services
performed to date.
Revenue relating to equipment design and modification activities is recognised
over time based on the stage of completion of the related design and
modification work. The stage of completion is determined as the proportion of
the total labour hours expected to perform the service that have been expended
at the end of the reporting period. Payment for equipment design and
modification activities are not due from the customer until the activities are
complete. Consequently, a contract asset is recognised over the period in
which the activities are performed, representing the Group's right to
consideration for the services performed to date.
Payment for some higher value equipment design and modification activities is
in the form of stage payments from customers. To the extent that the value of
the stage payment exceeds the revenue recognised at the end of the reporting
period based on the stage of completion, a contract liability is recognised.
The contract liability represents the Group's obligation for services still to
be performed.
Airworthiness services
The Group provides continuing airworthiness management and airworthiness
review certification services for business aviation, military, and commercial
airline operators. Revenue from these activities includes fixed contract fees
and variable fees, such as revenue earned with reference to ad-hoc services.
Revenue relating to fixed contract fees are recognised over time on a
straight-line basis over the term of the contract. Payment for fixed contract
fees is mostly in the form of monthly advance payments from customers. A
contract liability is recognised for revenue relating to fixed contract fees
at the time of receipt of the funds from the customer. The contract liability
represents the Group's obligation for services still to be performed.
Revenue relating to variable fees is recognised over time based on the stage
of completion of the contract. The stage of completion is determined as the
proportion of the total hours expected to perform the service that have been
expended at the end of the reporting period. Payment for variable fees is not
due from the customer until the activities are complete. Consequently, a
contract asset is recognised over the period in which the activities are
performed, representing the Group's right to consideration for the services
performed to date.
Software solutions
The Group has developed a suite of business aviation products deployed as
"Software as a Service" and mobile application solutions for flight and
aircraft management, maintenance tracking, ground operations and crew
scheduling and operations.
Revenue relating to the use of these software products are recognised over
time on a straight-line basis over the term of the contract. Payment for use
of the software products is mostly in the form of annual or monthly advance
payments from customers. A contract liability is recognised for revenue
relating to the use of the software products at the time of receipt of the
funds from the customer. The contract liability represents the Group's
obligation for services still to be performed.
Branding fees
The Group received a branding fee from Gama Aviation LLC for the continued use
of the Gama Aviation Signature brand. Revenue relating to the branding fee is
recognised over time (as the customer simultaneously receives and consumes the
benefits provided by the Group) on a straight-line basis over the remaining
term of the contract.
Payment for use of the brand was received in March 2020. A contract liability
was recognised for revenue relating to the use of the brand at the time of
receipt of the funds. The remaining balance of the contract liability was
fully derecognised in February 2022.
Government grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the
grants will be received.
Government grants are recognised in profit or loss on a systematic basis over
the periods in which the Group recognises as expenses the related costs for
which the grants are intended to compensate. Specifically, government grants
whose primary condition is that the Group should purchase, construct or
otherwise acquire non-current assets (including property, plant and equipment)
are recognised as deferred income in the Consolidated Balance Sheet and
transferred to profit or loss on a systematic and rational basis over the
useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses
already incurred or for the purpose of giving immediate financial support to
the Group with no future related costs are recognised in profit or loss in the
period in which they become receivable.
The benefit of a government loan at a below-market rate of interest is treated
as a government grant, measured as the difference between proceeds received
and the fair value of the loan based on prevailing market interest rates.
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
reported in US Dollars, which is the presentation currency for the
Consolidated Financial Statements.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing at 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 that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair
value was determined. All resulting differences are taken to the Consolidated
Income Statement. 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 earnings before interest and taxation.
For the purpose of presenting Consolidated Financial Statements, the assets
and liabilities of the Group's foreign operations are expressed in US Dollars
using the exchange rates prevailing at the end of the reporting period. Income
and expense items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are classified as other comprehensive
income and transferred to the Group's translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign operation and
translated at the closing rate.
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.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognised as an
expense when employees have rendered the service entitling them to the
contributions. Payments made to state-managed retirement benefit plans are
accounted for as payments to defined contribution plans where the Group's
obligations under the plans are equivalent to those arising in a defined
contribution retirement benefit plan.
Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees in respect of
wages and salaries, annual leave and sick leave in the period the related
service is rendered at the undiscounted amount of the benefits expected to be
paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured
at the undiscounted amount of the benefits expected to be paid in exchange for
the related service.
Liabilities recognised in respect of other long-term employee benefits are
measured at the present value of the estimated future cash outflows expected
to be made by the Group in respect of services provided by employees up to the
reporting date.
Leases
The Group as lessee
The Group assesses whether a contract is, or contains, a lease at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (determined to be those with
an initial discounted total obligation of less than $5,000). For these leases,
the Group recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic benefits from the
leased assets are consumed.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If that rate cannot be readily determined, the
Group uses its incremental borrowing rate.
The incremental borrowing rate depends on the term, currency and start date of
the lease and is determined based on a series of inputs including: the
risk-free rate based on government bond rates; a country-specific risk
adjustment; a credit risk adjustment based on bond yields; and an
entity-specific adjustment when the risk profile of the entity that enters
into the lease is different to that of the Group and the lease does not
benefit from a guarantee from the Group.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable,
· Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date,
· The amount expected to be payable by the lessee under residual
value guarantees,
· The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options,
· Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease
The lease liability is presented as a separate line in the consolidated
statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
The Group remeasures the lease liability (and makes a corresponding adjustment
to the related right-of-use asset) whenever:
· The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of exercise of
a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate,
· The lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments
using an unchanged discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is
used),
· A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of
the modification.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the
related right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the right-of-use asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
The right-of-use assets are presented as a separate line in the Consolidated
Balance Sheet.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired
and accounts for any identified impairment loss as described in the
"Impairment of property, plant and equipment and intangible assets excluding
goodwill" policy.
Variable rents that do not depend on an index or rate are not included in the
measurement the lease liability and the right-of-use asset. The related
payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included in the line
"Administrative expenses" in profit or loss (see Note 10).
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical
expedient. For contracts that contain a lease component and one or more
additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
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.
The Group as lessor
The Group enters into lease agreements as a lessor for some of its property
included within its right-of-use assets.
Leases for which the Group is a lessor are classified as finance or operating
leases. Whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and
the sub-lease as two separate contracts. The sub-lease is classified as a
finance or operating lease by reference to the right-of-use asset arising from
the head lease.
Rental income from operating leases is recognised on a straight-line basis
over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount
of the leased asset and recognised on a straight-line basis over the lease
term.
Amounts due from lessees under finance leases are recognised as receivables at
the amount of the Group's net investment in the leases. Finance lease income
is allocated to accounting periods to reflect a constant periodic rate of
return on the Group's net investment outstanding in respect of the leases.
Subsequent to initial recognition, the Group regularly reviews the estimated
unguaranteed residual value and applies the impairment requirements of IFRS 9,
recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount
of the lease receivables, except for credit-impaired financial assets for
which interest income is calculated with reference to their amortised cost
(i.e. after a deduction of the loss allowance).
When a contract includes both lease and non-lease components, the Group
applies IFRS 15 to allocate the consideration under the contract to each
component.
Finance income
Finance income is recognised as interest accrues using the effective interest
method. The effective rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial instrument to its net
carrying amount.
Finance income also includes foreign currency exchange gains on the
retranslation of loans.
Taxation
The income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profits or losses for the year.
Taxable profit or loss differs from net profit or loss as reported in the
Consolidated 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 end of the reporting period.
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 (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit. In addition, a
deferred tax liability is not recognised if the temporary difference arises
from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group can control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse
in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be sufficient
taxable profits against which to utilise the benefits of the temporary
differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting 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 that are expected to apply in the
period when the liability is settled, or the asset is realised based on tax
laws and rates that have been enacted or substantively enacted at the
reporting date.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at
the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
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.
Current tax and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they
relate to items that are recognised in other comprehensive income or directly
in equity, in which case the current and deferred tax are also recognised in
other comprehensive income or directly in equity respectively. Where current
tax or deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for the business
combination.
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 Gross Profit, Adjusted Earnings
Before Interest, Taxation, Depreciation and Amortisation (EBITDA), 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 before "Adjusting items".
"Adjusting items" are the income statement items that are excluded from the
Statutory results. Adjusting items include exceptional items, amortisation of
acquired intangibles, equity-settled share-based payment charges, other
long-term employee benefits, and tax related to Adjusting items. These items
are defined and explained in more detail as follows:
Exceptional 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 non-recurring items that are non-trading in
nature.
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 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.
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.
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 as an Adjusting item.
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.
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 Consolidated 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.
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.
Goodwill
Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill is reviewed
for impairment at annually or more frequently if there is an indication of
impairment. 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 ("CGUs) expected to benefit from the synergies
of the combination, irrespective of whether other assets or liabilities of the
Group are assigned to those units.
Impairment of goodwill is determined by assessing the recoverable amount of
the CGU to which the goodwill relates. If the recoverable amount of the CGU is
less than the carrying value of the CGU to which the goodwill has been
allocated, an impairment loss is recognised. The impairment loss is allocated
first to reduce the carrying value of any goodwill allocated to the CGU and
then to the other assets of the CGU pro-rata on the basis of the carrying
value of each asset in the CGU. 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.
Other intangible assets
Intangible assets with finite useful lives that are acquired separately are
carried at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their
estimated useful lives. The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate being accounted for on a prospective basis.
Intangible assets acquired in a business combination and recognised separately
from goodwill are recognised initially at their fair value at the acquisition
date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business
combination are reported at cost less accumulated amortisation and accumulated
impairment losses, on the same basis as intangible assets that are acquired
separately.
Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
Internally generated intangible assets arising from development (or from the
development phase of an internal
project) is recognised if, and only if, all of the following conditions have
been demonstrated:
· The technical feasibility of completing the intangible asset so
that it will be available for use or sale,
· The intention to complete the intangible asset and use or sell
it,
· The ability to use or sell the intangible asset,
· How the intangible asset will generate probable future economic
benefits,
· The availability of adequate technical, financial and other
resources to complete the development and to use or sell the intangible asset,
· The ability to measure reliably the expenditure attributable to
the intangible asset during its development.
The amount initially recognised for internally generated intangible assets is
the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above. Where no internally
generated intangible asset can be recognised, development expenditure is
recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired separately.
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.
The Group has no indefinite life intangible assets.
A summary of the amortisation policies applied to the Group's other intangible
assets is as follows:
· Licences 10% per
annum, straight line method
· Brands 20% per
annum, straight line method
· Customer relations 10% per annum, straight line
method
· Computer software 20%-33% per annum, or life of
licence if shorter, straight-line method
· The life of each internally generated intangible asset is
assessed individually.
The amortisation of internally generated software commences at the start of
the year following.
The useful life of intangible assets is reviewed at each reporting date and,
if expectations differ from previous estimates, the change is accounted for as
a change in an accounting estimate.
An intangible asset is derecognised on disposal, or when no future economic
benefits are expected from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured as the difference between the
net disposal proceeds and the carrying amount of the asset, are recognised in
profit or loss when the asset is derecognised.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any recognised impairment loss.
Assets under construction for production, supply, or administrative purposes,
or for purposes not yet determined, are carried at cost, less any recognised
impairment loss. Cost includes professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Group's accounting policy.
Depreciation of these assets commences when the assets are ready for their
intended use.
Depreciation is recognised to write-off the cost of assets less their residual
values over their useful lives, using the straight-line method, on the
following bases:
· Helicopters
5% per annum and 25% residual value (on the original cost)
· Leasehold improvements Life
of lease and no residual value
· Aircraft and refurbishments The
higher of 20 years 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
· Furniture, fixtures and equipment 20% to 33% per
annum and no residual value
· Motor
vehicles
20% per annum and no residual value
The estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. 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 Consolidated Income Statement.
Impairment of property, plant and equipment and intangible assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its
property, plant and equipment and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated to
determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual cash-generating
units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis
can be identified.
Intangible assets with an indefinite useful life are tested for impairment at
least annually and whenever there is an indication at the end of a reporting
period that the asset may be impaired.
Recoverable amount is the higher of fair value less costs of disposal and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted. As most rates which are observable in the market, including inputs
into the weighted average cost of capital formula, are on a post-tax basis, a
post-tax discount rate is used to discount estimated future cash flows.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but only to the extent that the increased carrying amount
does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset (or cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in
profit or loss to the extent that it eliminates part or all of the impairment
loss which has been recognised for the asset in prior years.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and
those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost for each class of inventory is determined
as follows:
· Raw materials and consumables: purchase cost calculated using the
first-in-first-out basis
· Work in progress: cost of direct materials and labour
Net realisable value represents the estimated selling price in the ordinary
course of business, less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution. In addition, the Company
provides for inventories on a sliding scale over the preceding eight years. As
a result, inventory older than eight years is written off in full.
In line with industry practice, the Group recognises rotable stock as
inventory. 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 cost associated with
refurbishing rotable stock is recognised in inventory.
Cash and cash equivalents
The Group's cash and cash equivalents in the Consolidated Balance Sheet
comprise cash on hand, cash at bank, and short-term, highly liquid investments
with original maturity of three months or less that are readily convertible to
a known amount of cash and which are subject to an insignificant risk of
changes in value.
For the purposes of the Consolidated Cash Flow Statement, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts which are repayable on demand and form an integral
part of the Group's cash management.
Assets and liabilities classified as held for sale
Assets (and disposal groups) and liabilities classified as held for sale are
measured at the lower of 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.
Assets, liabilities, and disposal groups are classified as held for sale if it
is highly probably that their carrying value will be recovered through a sale
transaction rather than through continuing use. This condition is regarded as
met only when the sale is highly probable, and the asset (or disposal group)
is available for immediate sale in its present condition. Management must be
committed to the sale which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a
subsidiary, all of the assets and liabilities of that subsidiary are
classified as held for sale when the criteria described above are met,
regardless of whether the Group will retain a non-controlling interest in its
former subsidiary after the sale.
When the Group is committed to a sale plan involving disposal of an investment
in an associate or, a portion of an investment in an associate, the
investment, or the portion of the investment in the associate, that will be
disposed of is classified as held for sale when the criteria described above
are met. The Group then ceases to apply the equity method in relation to the
portion that is classified as held for sale. Any retained portion of an
investment in an associate that has not been classified as held for sale
continues to be accounted for using the equity method.
Property, plant and equipment, and intangible assets are not depreciated or
amortised once classified as held
for sale.
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 reporting 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 when
the effect of the time value of money is material.
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable is recognised as an
asset if it is virtually certain that reimbursement will be received, and the
amount of the receivable can be measured reliably.
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.
From time to time the Group receives claims and threats of claims against it.
Appropriate disclosures are made except where the Board concludes that the
likelihood of any such claim being successful is remote, immaterial or where
disclosure would be prejudicial. Appropriate provisions are made unless the
Board concludes that the claims are not likely to have a material impact on
the Group's financial position.
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 and financial liabilities are initially measured at fair
value, except for trade receivables that do not have a significant financing
component which are measured at transaction price. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets
All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
All recognised financial assets are measured subsequently in their entirety at
either amortised cost or fair value, depending on the classification of the
financial assets.
Trade and other receivables
Trade and other receivables are initially recognised at fair value, which is
generally the same as invoiced amount, and subsequently measured at amortised
cost, or their recoverable amount. Trade receivables are predominantly
short-term and so the effects of the time-value of money are not considered
material.
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
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 applies the simplified approach for measuring expected credit losses for
its trade receivables, accrued income and contracts assets as permitted by
IFRS 9.
Expected credit losses are calculated based on the historical credit loss
experience and adjusted for forward looking factors specific to the
receivables and economic environment.
The amount of expected credit losses is updated at each reporting date.
Derecognition of financial assets
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. If the Group neither transfers nor retains substantially all
the risks and rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
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.
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 and
the definitions of a financial liability and an equity instrument.
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.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using
the effective interest method or at fair value through profit or loss.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period.
Borrowings and other financial liabilities, including loans, are initially
measured at fair value, net of transaction costs.
Deferred consideration is recognised at amortised cost at acquisition date
within the cost of investment, with a corresponding entry to other financial
liabilities. Changes to the value of the financial liability resulting from
the unwinding of discount at each subsequent reporting date are recognised in
the Consolidated Income Statement.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group's
obligations are discharged, cancelled, or have expired. The difference between
the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
Share-based payments
Equity-settled share-based payments to employees and others providing similar
services are measured at the fair value of the equity instruments at the grant
date. The fair value excludes the effect of non-market-based vesting
conditions.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of the number of equity instruments that will
eventually vest. At each reporting date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding
adjustment to reserves.
Equity-settled share-based payment transactions with parties other than
employees are measured at the fair value of the goods or services received,
except where that fair value cannot be estimated reliably, in which case they
are measured at the fair value of the equity instruments granted, measured at
the date the entity obtains the goods or the counterparty renders the service.
Where the terms of an equity-settled transaction award are modified, the
minimum expense recognised is the expense as if the terms had not been
modified if the original terms of the award are met. An additional expense is
recognised for any modification that increases the total fair value of the
share-based payment transaction or is otherwise beneficial to the employee as
measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it vested on
the date of cancellation, and any expense not yet recognised for the award is
recognised immediately. This includes any award where non-vesting conditions
within the control of either the Group or the employee are not met. However,
if a new award is substituted for the cancelled award and designated as a
replacement award on the date that it is granted, the cost based on the
original award terms continues to be recognised over the original vesting
period and an expense is recognised over the remainder of the new vesting
period for the incremental fair value of any modification.
The financial effect of awards by the Parent Company of options over its
equity shares to employees of subsidiary undertakings is recognised by the
Parent Company in its individual financial statements as an increase in its
investment in subsidiaries with a credit to equity equivalent to the IFRS 2
cost in subsidiary undertakings. The subsidiary, in turn, recognises the IFRS
2 cost in its income statement with a credit to equity to reflect the deemed
capital contribution from the Parent Company.
For cash-settled share-based payments, a liability is recognised for the goods
or services acquired, measured initially at the fair value of the liability.
At each reporting date until the liability is settled, and at the date of
settlement, the fair value of the liability is remeasured, with any changes in
fair value recognised in profit or loss for the year.
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in
Note 3, 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 relevant and available when the Consolidated Financial Statements were
prepared. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets
or liabilities affected in future periods.
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 the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements:
Sharjah Business Aviation Centre
In June 2017, the Group entered into a non-cancellable Build Operate &
Transfer Agreement and a Concession Agreement with Sharjah Airport Authority
under which it is committed to construct a Business Aviation Centre ("BAC") at
Sharjah Airport. The agreement runs from June 2017 until June 2052 following
the exercise of the ten-year extension option during the prior year.
As of 31 December 2021, assets under construction ($4,609,000) and
right-of-use assets associated with this project ($8,329,000) were fully
impaired. The impairment initially arose due to uncertainties arising in part
from the COVID-19 pandemic, and subsequently due to the uncertainty about
securing funding to continue the project.
During the current year, additional expenditure of $2,103,000 on the project
has also been impaired. This is based on the Directors' 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 profits associated with this
project can be forecast with greater certainty.
Should the full funding for the project be contractually secured, then the
Directors currently anticipate that some or all these impairments will be
reversed.
Paycheck Protection Program qualifying expenditure
In 2020, the Group received funds under the Paycheck Protection Program
("PPP") 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. On 12 May 2020, funds of $5,753,000
were received and initially recognised as borrowings in current liabilities.
Subsequently in 2020, the Group considered $4,753,000 of these funds to be
eligible for forgiveness within the terms of the PPP and were therefore
recognised as income against the related expenses in the income statement,
reducing the amount of potentially repayable borrowings to $1,000,000 as of 31
December 2020.
On 19 May 2022, the Group received confirmation that the full balance of the
original loan, including the $1,000,000, was to be forgiven and was therefore
no longer repayable. The balance of $1,000,000 has been derecognised during
the year with the associated credit being recognised against employment costs
within cost of sales and administrative expenses in the Consolidated Income
Statement, consistent with the treatment adopted for other such
pandemic-related support.
Assessment of lease term under sale and leaseback transaction
On 27 September 2022, the Group completed the sale and leaseback of its
helicopter assets. Under the terms of this arrangement the Group was obligated
to deliver three helicopters in exchange for consideration from the
counterparty. Having reviewed the terms of this agreement, management has
concluded that they meet to five steps revenue recognition requirements
defined by IFRS15. Accordingly, these transactions have been recognised as
sales in the financial statements for the year ended 31 December 2022.
Following the sale of the helicopters the Company entered into a lease
agreement with the same counterparty. These lease agreements contain a First
Extension Option and a Second Extension Option, whereby the Group can extend
the term of the lease by 84 months and 36 months, respectively.
In assessing whether the Group is reasonably certain, at the lease
commencement date, to exercise an option to extend the lease, the Group has
considered the following factors and circumstances that create an economic
incentive for the Group to exercise the option to extend the lease:
(a) contractual terms and conditions for the optional periods compared with
market rates, including:
(i) the amount of payments for the lease in the optional period;
(ii) the amount of any variable payments for the lease or other
contingent payments;
(iii) the terms and conditions of the options that are exercisable after
the initial optional periods;
(b) significant leasehold improvements undertaken (or expected to be
undertaken) over the term of the contract that are expected to have
significant economic benefit for the Group when the option to extend the lease
becomes exercisable;
(c) costs relating to the termination of the lease, including the costs of
identifying another underlying asset suitable for the Group's needs and the
costs associated with returning the helicopters in a contractually specified
condition or to a contractually specified location;
(d) the importance of the helicopters to the Group's operations; and
(e) conditionality associated with exercising the option and the likelihood
that those conditions will exist.
The term "reasonably certain" is not defined in IFRS, but it is considered a
high probability (i.e., almost certain).
Having considered the above factors and circumstances, the Directors have
concluded that, at the lease commencement date, it is not reasonably certain
that the Group will exercise either the First Extension Option or the Second
Extension Option to extend the lease. Consequently, the initial lease term has
been assessed as 28 months.
Classification of items of cost or income as exceptional items
Exceptional items are items of income or expenditure that are not considered
to reflect in-year operational performance of the continuing business.
Classification of costs and income as exceptional items requires judgement as
the Group's view of what qualifies as an exceptional item 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. Note 14 describes the exceptional items that have been recorded in
the Consolidated Income Statement.
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.
Impairment of property, plant and equipment and intangible assets excluding goodwill
Where there are indicators of impairment, or on an annual basis, management
performs an impairment test. Recoverable amounts for a CGU is the higher of
value-in-use and fair value less cost of disposal.
Value-in-use is calculated using a discounted cash flow model from cash flow
projections based on the Group's 2023 updated Strategic Plan approved by the
Board of Directors in January 2023.
In measuring value-in-use, management have:
· Based cash flow projections on reasonable and supportable assumptions that represent management's best estimate of the range of economic conditions that will exist over the remaining useful life of goodwill, intangible assets, property, plant and equipment, and right-of-use assets
· Based cash flow projections on the Group's 2023 updated Strategic
Plan approved by the Board of Directors in January 2023. These forecasts cover
a period of four years.
· Estimated cash flow projections beyond the period the period of
four years by extrapolating the projections based on the forecasts using an
estimate of long-term growth rates for subsequent years. This rate reflects
the average of the long‑term growth rate for the countries in which the CGU
operates.
In estimating cash flow projections for each CGU, management have used the "single most likely cash flow" approach to estimate the cash flows associated with a range of economic conditions that may exist over the next four years. The "single most likely cash flow" approach differs from the "expected cash flow" approach in that it does not use all expectations about possible cash flows.
In estimating the single most likely cash flow for each CGU, management have
used the cash flow forecasts contained in the Group's four-year plan approved
by the Board of Directors as the base case scenario.
Several other reasonably plausible scenarios have been considered but have not been adjusted for. Instead, the impact of these scenarios has been evaluated through the sensitivity analysis.
Estimated future cash flows reflect assumptions that are consistent with the way the discount rate is determined. Consequently, estimates of future cash flows include income tax receipts or payments as the discount rate is determined on a post‑tax basis.
The discount rate for each CGU is estimated from the Group's weighted average cost of capital using the Capital Asset Pricing Model, after considering the risk-free rate, beta, equity market risk premium, country risk premium, small stock premium, pre-tax cost of debt, tax rates, and the debt to capital ratio applicable to the CGU.
The terminal value for each CGU has been estimated by applying the Gordon
Growth formula to the forecasted cash flows using the respective discount rate
and long-term growth rate.
The recoverable amount is most sensitive to the discount rate, the expected
future cash inflows, and the growth rate used for extrapolation purposes.
The carrying amount of each CGU is determined on a basis consistent with the
way the recoverable amount of the CGU is determined. Consequently, the
carrying amount of each CGU includes goodwill allocated to each CGU at
inception, other intangible assets (including deferred tax related to the
uplift to fair value recognised on acquisition), property, plant and
equipment, right-of-use assets, working capital balances, corporate income
taxes, obligations under leases, and corporate assets allocated to each CGU.
The key assumptions and estimates used to determine the recoverable amount for
different CGUs, together with sensitivities, are disclosed in Note 20.
Valuation of inventories
In measuring the net realisable value of inventory, the Group uses reasonable
and supportable forward-looking information, which is based on assumptions
regarding the change in customer demand or obsolescence of certain inventory
lines.
Inventory valuation is sensitive to management's assessment of obsolescence of
certain line items. The significant estimation uncertainty arises from the
wide range and nature of inventory held, each with different demand and
opportunity to utilise. Whilst no specific inventory line has material
estimation uncertainty in its valuation, there is risk across all lines in
aggregation.
An analysis of the inventories and inventory obsolescence allowance is
provided in Note 24.
Calculation of expected credit loss allowance
When measuring expected credit loss, the Group uses reasonable and supportable
forward-looking information, which is based on assumptions for the future
movement of different economic drivers and how these drivers will affect each
other.
Probability of default constitutes a key input in measuring expected credit
loss. Probability of default is an estimate of the likelihood of default over
a given time horizon, the calculation of which includes historical data
including experience of recovering overdue amounts, assumptions and
expectations of future conditions.
An analysis of the amounts receivable for the sale of services, together with
sensitivities, is provided in Note 25.
Other long-term employee benefits
The acquisition of Jet East included a long-term incentive plan accounted for
under IAS 19 with the value of payments linked to the continuing employment of
executives of Jet East as well as business performance 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. The
period over which the services are received is three years.
Management has undertaken a review of anticipated future performance of the
Business Aviation MRO US business and based on that review has estimated the
charge for the year ended 2022 and the associated provision at the balance
sheet date.
An analysis of other long-term employee benefits, together with sensitivities,
is provided in Note 27.
Taxation
Recoverability of the Group's deferred tax assets, including timing,
applicable corporate income tax rates and availability of future taxable
profits against which deferred tax assets could be utilised, is the most
critical estimate which may have a material impact on the financial
statements.
The estimation uncertainty arises because the Group operates in a complex
national and international tax environment. The areas of uncertainty can
include, inter alia, transfer pricing arrangements relating to the Group's
operating activities and the deductibility of management recharges.
Further uncertainties exist with respect to the interpretation of complex tax
regulations, changes in tax laws, and the amount and timing of future taxable
income available against which deferred tax assets could be utilised. The
carrying value of tax assets and liabilities could therefore be impacted by
changes in tax legislation and availability of future taxable profits for
which the impact can be significant.
5. Revenue
An analysis of the Group's revenue is as follows:
Year ended 2022 Year ended 2021
$'000
$'000
Sale of business aviation services 285,017 232,159
Branding fees 625 3,750
Statutory revenue 285,642 235,909
Year ended 2022 Year ended 2021
$'000 $'000
BA MRO US 81,423 78,904
BA excluding MRO US 82,855 61,536
Special Mission 3,743 9,163
Revenue recognised at a point in time 168,021 149,603
BA MRO US 36,826 346
BA excluding MRO US 23,197 29,360
Special Mission 51,759 47,553
T&O(1) 5,214 5,297
Branding fee 625 3,750
Revenue recognised over time 117,621 86,306
Statutory revenue 285,642 235,909
1. Prior year T&O revenue has been reclassified as recognised over
time following review of nature of services provided.
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 $87,465,000 to be earned
over the next four years, with $50,636,000 (2021: $47,553,000) of revenue
having been recognised in the year
· Business Aviation MRO US earned revenue of $100,647,000 during
the year in relation to maintenance contracts
· Within Technology & Outsourcing, myairops(®) recognised
contract revenue of $1,722,000 (2021: $1,414,000) during the year in relation
to the provision of software services, with $798,000 due over the next three
years
Revenue totalling $80,091,000 (2021: $48,760,000), which is greater than 10%
of Group revenue, has been recognised in 2022 in respect of a single customer
and is included within the Business Aviation MRO US reporting segment.
Revenue received at a point in time was $29,909,000 and revenue received over
time was $255,733,000.
The Group has not separately disclosed revenue by destination country because
this is not tracked internally and because management track revenue by SBU.
6. Other operating income
Year ended 2022 Year ended 2021
$'000
$'000
Foreign currency translation on trading monetary items 3,086 −
Gain on disposal of subsidiary (Note 14) 126 −
Gain on disposal of property, plant and equipment (Note 21) 1,741 −
Profit on derecognition of leases (Note 30) − 1,626
Total other operating income 4,953 1,626
7. Earnings before interest and taxation
Earnings before interest and taxation has been arrived at after
charging/(crediting):
Year ended 2022 Year ended 2021
$'000
$'000
(1)
Amortisation of intangibles in administrative expenses (Note 19) 3,396 3,355
Depreciation of property, plant and equipment in administrative expenses(1) 3,171 3,245
(Note 21)
Depreciation of property, plant and equipment in cost of sales(1) (Note 21) 2,699 3,196
Depreciation of right-of-use assets in administrative expenses (Note 22) 666 1,017
Depreciation of right-of-use assets in cost of sales (Note 22) 5,335 6,507
Net foreign exchange gain on trading monetary items (3,086) (407)
(Gain)/loss on disposal of property, plant and equipment (Note 21) (1,741) 6
Impairment of goodwill (Note 18) 787 −
Impairment of property, plant and equipment (Note 21) 2,640 −
Impairment of right-of-use assets (Note 22) − 1,911
Reversal of impairment of equity accounted investments (Note 23) − (1,491)
Cost of inventories recognised as an expense 19,306 16,071
Change in provision for inventory obsolescence (503) (404)
Staff costs (Note 8) 110,324 102,256
Impairment losses recognised on trade receivables (Note 25) 278 42
Recovery of previously impaired trade receivables (Note 25) (53) (63)
Auditors' remuneration (Note 9) 1,102 1,598
(1) Depreciation charges of $3,196,000 in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation.
(
)
8. Staff costs
The average monthly number of employees (including Executive Directors) was:
Year ended Year ended
2022
2021
Number
Number
Operations and administration 435 440
Pilots and cabin crew 149 131
Aircraft engineering 647 556
1,231 1,127
Their aggregate remuneration comprised:
Year ended 2022 Year ended 2021
$'000
$'000
Wages and salaries 96,384 91,184
Social security costs 8,857 5,894
Equity-settled share-based payments (Note 40) 372 257
Other long-term employee benefits (Note 27) 1,821 1,821
Pension costs 2,890 3,100
110,324 102,256
Aggregate remuneration is stated after netting off government grants received
including $nil (2021: $41,000) under the UK Furlough scheme. No adjustment has
been made for the US Paycheck Protection Program as this is a loan rather than
a direct payment of salaries. Details of this are available in note 31.
Details of Directors' remuneration are given in the Remuneration Report. The
share-based payment costs relating to these Directors amounted to $65,000
(2021: $150,000). No share option transactions were approved during the year.
Details of prior year share awards are included in note 40.
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 2022, contributions of $273,000 (2021: $257,000) due in respect of
the current reporting period had not been paid over to the schemes. Details of
the other long-term employee benefits accrual, relating to the Jet East
long-term incentive plan, are contained in note 27.
9. Auditor's remuneration
Year ended 2022 Year ended 2021
$'000
$'000
Audit of the Group's and Company's financial statements 765 770
Audit of the financial statements of subsidiaries 337 828
1,102 1,598
The 2022 charges include $229,000 of charges relating to the close out of the 2021 audit, by the previous auditors (PwC).
10. Leases
Amounts recognised in income statement
The consolidated income statement shows the following amounts relating to
leases:
Year ended 2022 Year ended 2021
$'000
$'000
Depreciation charge of right-of-use assets
Leasehold property 5,417 7,381
Fixtures, fittings and equipment 52 17
Aircraft 426 -
Vehicles 106 126
Total depreciation charge of right-of-use-assets 6,001 7,524
Interest expense (included in finance cost) 2,543 2,624
Expenses relating to short-term leases of twelve months or less 1,617 1,370
Impairment of right-of-use assets - 1,911
Loss/(profit) on derecognition of leases 37 (1,626)
Rent free credit(1) - (110)
(1)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.
An impairment loss of $1,911,000 was recognised in 2021 in relation to the
right-of-use asset at Sharjah Airport as the lease was extended in 2021 but
funding for the project has not yet been finalised.
11. Finance income
Year ended 2022 Year ended 2021
$'000
$'000
Discounting on finance lease receivables 17 −
Foreign currency translation on borrowings − 56
Interest income on financial assets 91 561
Total finance income 108 617
In the current year, interest income on financial assets includes $74,000 of
interest received on the recovery of previously written-off receivables, and
$17,000 of interest due from late customer payments.
In the prior year, interest income on financial assets includes $432,000 of
interest due to late customer payments, $92,000 in respect of deferred
consideration relating to the disposal of the US Air Associate, and $37,000 of
other interest on other financial assets.
12. Finance expense
Year ended 2022 Year ended 2021
$'000
$'000
Foreign currency translation on intercompany balances 2,306 441
Foreign currency translation on borrowings 3,604 −
Interest on borrowings before capitalised interest 1,308 791
Discounting on provisions (Note 33) 16 17
Discounting on deferred consideration (Note 32) 14 13
Interest on lease liabilities (Note 30) 2,543 2,624
Amortisation of loan arrangement fees 151 180
Other similar charges payable 3 44
Total finance costs 9,945 4,110
13. Taxation
Year ended 2022 Year ended 2021
$'000
$'000
Statutory Adjusting Adjusted Statutory Adjusting Adjusted
result
items
result
result
items
result
Corporation tax:
Current tax charge:
Current year charge/(credit) 154 - 154 4,292 (3,891) 401
Adjustment in respect of (63) − (63) 75 − 75
prior years
Current tax charge/(credit) 91 - 91 4,367 (3,891) 476
Deferred tax charge:
Current year charge/(credit) (556) 1,099 543 (6,105) 4,362 (1,743)
Adjustment in respect of (420) 198 (222) (242) − (242)
prior years
Deferred tax (credit)/charge (976) 1,297 321 (6,347) 4,362 (1,985)
(Note 35)
Total tax (credit)/charge for the year (885) 1,297 412 (1,980) 471 (1,509)
The tax charge for the year, based on the tax rate in the United Kingdom, can
be reconciled to the loss per the income statement as follows:
Year ended 2022 Year ended 2021
$'000
$'000
Statutory result Adjusting items(3) Adjusted result Statutory Adjusting items(3) Adjusted result
result
Loss before tax (9,465) 8,510 (955) (10,745) 2,978 (7,767)
Tax at the corporation tax rate of 19% (2021: 19%) (1,798) 1,617 (181) (2,042) 566 (1,476)
Effects of:
Other expenses not deductible/income not taxable 356 (86) 270 275 (60) 215
Profits exempt from tax in overseas jurisdiction (290) (83) (373) (228) - (228)
Non-deductible - impairment of acquired intangibles - - - (4) 4 -
Non-deductible - (reversal)/impairment of equity accounted investments - - - (246) 246 -
Non-deductible - share of losses of CASL in adjusted result - - - 246 - 246
Non-deductible - share-based payments (55) - (55) 45 (45) -
Fines for late filings(2) - - - 328 - 328
Adjustment in respect of prior years (481) 199 (282) (167) - (167)
Effect of tax rates in different jurisdictions 463 (471) (8) (143) (137) (280)
Effects of change in tax rate(1) (181) 180 (1) - - -
Tax losses in the year not recognised in deferred 1,101 (59) 1,042 (44) (103) (147)
Total tax (credit)/charge for the year (885) 1,297 412 (1,980) 471 (1,509)
(1 ) The UK Finance Act 2021 enacted a change in the UK
corporation tax rate from 19% to 25% from 1 April 2023.
(2) Fines have been levied by some US states in the prior year because
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
23.). 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. In the current year the US states have provided
relief for these fines. Management considers the penalty in the prior year to
be tax-geared and have therefore presented it within the total tax charge for
the year.
(3) 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 14.
The adjustment in respect of prior years comprises $422,000 relating to US
deferred tax balances partially offset by a $38,000 current tax credit for
property taxation in Jersey, the offset of deferred tax assets against the
$89,000 UK deferred tax liability.
In the prior year, the adjustments in respect of prior years comprise a
$75,000 current tax charge for property taxation in Jersey, a $184,000
deferred tax credit relating to the implementation of IFRS 16 in the US, and
the offset of deferred tax assets against the $57,000 UK deferred tax
liability.
14. Adjusting items
The Adjusted result has been arrived at after the following Adjusting items:
Year ended 2022 Year ended 2021
$'000
$'000
Exceptional items:
- Transaction income (384) −
- Transaction costs 654 558
- Integration 264 140
and business re-organisation costs
- Lease derecognition (Note 30) − (1,626)
- Legal costs 207 287
- Other prior year items - (79)
- Onerous contract provision (Note 33) 900 -
- Impairment of assets under construction (Note 21) 2,516 −
- Impairment of property, plant and equipment (Note 21)(1) 124 −
- Impairment of right-of-use assets (Note 22) − 1,911
- Impairment of goodwill (Note 18) 787 −
Total exceptional items 5,068 1,191
Other Adjusting items:
Equity-settled share-based payments expense (Note 40) 372 257
Other long-term employee benefits expense (Note 27) 1,821 1,821
Amortisation of acquired intangible assets (Note 19) 1,174 1,200
Reversal of impairment of equity accounted investments (Note 23) − (1,491)
Adjusting items in loss before interest and taxation 8,435 2,978
Exchange differences on forgiveness of loans 75 -
Adjusting items in loss before interest and taxation 8,510 2,978
Tax related to Adjusting items (Note 13) (1,297) (471)
Adjusting items in loss for the year 7,213 2,507
Transaction income
Transaction income during the year comprises $258,000 (2021: costs of
$558,000) in relation to the acquisition of Jet East and $126,000 (2021: $nil)
in relation to the gain on disposal of Gama International Saudi Arabia.
Transaction costs
Transaction costs during the prior year of $558,000 relate to the acquisition
of Jet East. Transaction costs during the year of $654,000 (2021: $nil) relate
to corporate activity of the Group.
Integration and business re-organisation costs
Integration and business re-organisation costs include severance costs of
$227,000 (2021: $416,000) in relation to the acquisition of Jet East and a
loss of $37,000 (2021: $nil) relating to the early termination of the Fort
Lauderdale Executive Airport lease. Prior year figure also includes a net
provision release of $276,000 relating to direct closure costs at the Fairoaks
facility.
Lease derecognition
In the prior year, the credit of $1,626,000 relates to the release of the
Fairoaks lease obligation.
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 prior year items
In the prior year, other items comprise a credit of $63,000 relating to funds
received from an overdue debtor against whom a litigation case has been
pursued, a credit for $16,000 received for consultancy services for Sharjah
Airport previously treated as an exceptional item.
Onerous contract provision
The provision for onerous relates to potential penalty payments under certain
long-term arrangements.
Impairment of assets under construction
The impairment loss in the current year relates to the impairment of further
development costs incurred during the period in respect of the Business
Aviation Centre at Sharjah International Airport in the UAE ($2,103,000) and
impairment of development costs in Jersey ($413,000).
The impairment loss in the prior year relates to the impairment of further
development costs incurred during the period in respect of the Business
Aviation Centre at Sharjah International Airport in the UAE.
Impairment of property, plant and equipment
The impairment loss relates to the impairment of leasehold improvements
associated with the closure of the paint and interior completion operations at
Fort Lauderdale Executive Airport.
Impairment of right-of-use assets
The impairment loss in the prior year relates to the impairment of the additional right-of-use asset recognised following the 10-year extension to the term of the ground lease in respect of the Business Aviation Centre at Sharjah International Airport in the UAE.
Impairment of goodwill
The impairment loss relates to the impairment of the goodwill associated with
the closure of the paint and interior completion operations at Fort Lauderdale
Executive Airport.
Equity-settled share-based payments
Equity-settled share-based payment charges of $372,000 (2021: $257,000). See
Note 40 for further details.
Other long-term employee benefits
The other long-term employee benefits remuneration charge of 1,821,000 (2021:
$1,821,000) 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.
Amortisation of acquired intangible assets
Amortisation charges in respect of acquired intangible assets of $1,174,000
(2021: $1,200,000). See Note 19 for further details.
Reversal of impairment of equity-accounted investment
In the prior year, a $1,491,000 reversal of prior period impairment charges
was recognised to ensure that the recoverable value of the China Aircraft
services Limited asset remained at the $2,000k consideration received on its
sale in December 2021.
Exchange differences on forgiveness of loans
This comprises $75,000 of foreign exchange losses arising on forgiveness of
intercompany loans and the impairment of intercompany loans.
Tax related to Adjusting items
The tax on Adjusting items reflects the deferred tax on deductible items
before any non-recognition of deferred tax.
15. Adjusted performance measures
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 $1.2379 to £1, being the
cumulative average USD-GBP exchange rate for 2022, which has been used to
restate Revenue, Gross Profit and Adjusted EBIT for 2021. A reconciliation to
Revenue, Gross Profit and Adjusted EBIT, the most directly comparable IFRS
measures, which are used to calculate organic and constant growth, is set out
below.
The prior year has been adjusted to include full year results of acquired
businesses and no results for disposed businesses where the results include
only part-year results in either current or prior periods. For 2021 this
comprises the results of Jet East acquired on 15 January 2021, whilst Gama
Aviation Saudi Arabia was disposed of during March 2022, China Aircraft
Services Limited was disposed of on 31 December 2021, and Gama Aviation SA was
disposed of during 2021. The Jet East business has been fully integrated into
the US operations.
Year ended 2021 ($'000)
Revenue Rebase for FX Rebase for organic growth Rebased Revenue Gross Rebase for FX Rebase for organic growth Rebased Adjusted Rebase for FX Rebase for organic growth Rebased Adjusted
Profit(1)
EBIT
EBIT
Gross Profit
BA MRO US 79,250 - 1,590 80,840 9,035 - 346 9,381 (7,971) - 92 (7,879)
BA excluding MRO US(1) 90,896 (5,228) (2) 85,666 10,065 (431) 32 9,666 (793) 117 38 (638)
Special Mission(1) 56,716 (5,679) - 51,037 14,481 (1,709) - 12,772 4,546 (450) - 4,096
T&O 5,297 (463) - 4,834 4,204 (303) - 3,901 47 74 - 121
Branding fee 3,750 - (3,125) 625 3,750 - (3,125) 625 3,691 - (3,076) 615
Associates - - - - - - - - (1,491) - 1,491 -
Corporate - - - - - - - - (2,303) 138 (132) (2,297)
Adjusted Result 235,909 (11,370) (1,537) 223,002 41,535 (2,443) (2,747) 36,345 (4,274) (121) (1,587) (5,982)
(1) Depreciation charges of $3,196,000 in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation. This has resulted in a reduction of $3,196,000 in
gross profit and is attributable to BA excluding MRO US ($602,000) and Special
Mission ($2,594,000).
Net Debt
A reconciliation of the IFRS financial statement line items that represent the
Net Debt APM is tabulated below.
2022 2021
$'000
$'000
Cash 22,406 10,243
Borrowings (36,108) (67,154)
Net debt pre IFRS 16 (13,702) (56,911)
Obligations under leases (52,681) (48,002)
Net debt (66,383) (104,913)
16. Segment information
The Group has three global strategic business units, being Business Aviation,
Special Mission, and Technology & Outsourcing. The IFRS 8 operating
segments within these global strategic business units are Business Aviation
MRO US, Business Aviation excluding MRO US, Special Mission, Technology &
Outsourcing, Associates, Corporate, and Branding fees. Corporate consists of
income and expenses incurred by non-trading Group entities.
Each revenue generating operating segment is managed separately, as each of
these segments requires different marketing approaches. All inter-segment
transfers, including the recharge of centrally incurred costs from Corporate
to other operating segments, are carried out at arm's length prices. The
measure of revenue and gross profit reported to the Chief Operating Decision
Maker to assess the performance is based on external revenue and gross profit
for each operating segment and excludes intra-group revenues and gross profit.
The measure of earnings before interest and taxation ("EBIT") reported to the
Chief Operating Decision Maker to assess the performance is based on operating
profit and share of results of associates for each operating segment and
excludes intra-group profits.
The Chief Operating Decision Maker 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.
Reconciliation of segmental to overall Group performance is tabulated below:
Year ended 2022 Year ended 2021
$'000 $'000
Revenue Gross Statutory Adjusted Adjusted EBIT Revenue Gross Statutory Adjusted Adjusted EBIT
Profit
EBIT
EBIT
pre-IFRS 16
Profit(1)
EBIT
EBIT
pre-IFRS 16
BA MRO US 118,250 25,894 (2,342) 1,332 633 79,250 9,035 (11,415) (7,971) (8,599)
BA excluding MRO US(1) 106,050 11,424 (4,752) (1,340) (1,896) 90,896 10,065 (977) (793) (1,741)
Special Mission(1) 55,503 13,753 5,357 5,439 3,277 56,716 14,481 4,534 4,546 4,179
T&O 5,214 3,452 (1,191) (914) (922) 5,297 4,204 (289) 47 41
Branding fee 625 625 625 625 625 3,750 3,750 3,691 3,691 3,691
Associates - - - - - - - - (1,491) (1,491)
Corporate - - 2,675 3,665 2,999 - - (2,796) (2,303) (2,229)
Adjusted Result 285,642 55,148 372 8,807 4,716 235,909 41,535 (7,252) (4,274) (6,149)
Adjusting items (Note 14) - (161) - (8,435) (8,435) - - - (2,978) (2,978)
Application of IFRS 16 - - - - 4,091 - - - - 1,875
(Note 30)
Statutory Result 285,642 54,987 372 372 372 235,909 41,535 (7,252) (7,252) (7,252)
(1) Depreciation charges of $3,196,000 in the prior year relating to
aircraft and refurbishment, and leasehold property improvements have been
reclassified from administrative expenses to cost of sales to conform with the
current year presentation. This has resulted in a reduction of $3,196,000 in
gross profit for the prior year and is attributable to BA excluding MRO US
($602,000) and Special Mission ($2,594,000).
Geographic location of non-current assets
The geographic location of non-current assets is as follows:
Year ended 2022 Year ended 2021
$'000
$'000
Non-current assets
US 25,077 23,413
Europe 68,563 104,438
Asia 14 58
Middle East 93 144
93,747 128,053
Non-current assets for this purpose consist of goodwill, other intangible
assets, property, plant and equipment, right-of-use assets, and trade and
other receivables.
17. Earnings per share
The calculation of earnings per share ("EPS") is based on the earnings
attributable to the ordinary shareholders divided by the weighted average
number of shares in issue during the period.
Year ended 2022 Year ended 2021
$'000
$'000
Numerator
Statutory earnings:
Loss attributable to ordinary equity holders of the parent (8,859) (8,062)
Adjusted earnings:
Loss attributable to ordinary equity holders of the parent (1,648) (5,555)
Denominator
Weighted average number of shares used in basic EPS 63,964,745 63,660,183
Effect of dilutive share options - −
Weighted average number of shares used in diluted EPS 63,964,745 63,660,183
Earnings per share (cents)
Statutory earnings per share
Basic (13.9) (12.7)
Diluted (13.9) (12.7)
Adjusted earnings per share
Basic (2.6) (8.7)
Diluted (2.6) (8.7)
Reconciliation of basic to diluted ordinary shares Year ended 2022 Year ended 2021
'000
'000
Issued ordinary shares at 1 January 63,686,279 63,636,279
Effect of issuance of shares 164,247 23,904
Effect of vesting of share options 130,000 −
Effect of forfeiture of share options (15,781) −
Basis weighted average number of ordinary shares 63,964,745 63,660,183
Effect of share options - −
Diluted weighted average number of ordinary shares 63,964,745 63,660,183
The average share price for the year ended 31 December 2022 was 59.4 pence,
which is higher than the exercise price of the share options granted under
the 2021 Company Share Option Plan, the 2021 Additional Share Options Plan,
and the 2021 Long-Term Incentive Plan. 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 36 for further
details on the employee benefit trust.
There have no material transactions involving the Group's ordinary shares
between the reporting date and the date of authorisation of these financial
statements.
18. Goodwill
$'000
Cost
At 1 January 2021 48,034
Exchange differences (520)
At 31 December 2021 47,514
Exchange differences (4,417)
At 31 December 2022 43,097
Accumulated impairment losses
At 1 January 2021 25,544
Exchange differences (266)
At 31 December 2021 25,278
Impairment loss 787
Exchange differences (2,144)
At 31 December 2022 23,921
Carrying amount
At 31 December 2022 19,176
At 31 December 2021 22,236
The impairment loss of $787,000 relates to the goodwill associated with the paint and interior completion operation at Fort Lauderdale Executive Airport that was closed during the year-ended 31 December 2022.
The recoverable amount of goodwill is allocated to the following
cash-generating units (CGUs):
2022 2021
$'000
$'000
Carrying amount
Business Aviation MRO US − 787
Business Aviation excluding MRO US 7,191 8,043
Special Mission 9,941 11,119
Technology & Outsourcing 2,044 2,287
19,176 22,236
Impairment review
Goodwill, together with other non-current assets, is assessed for impairment
in Note 20.
19. Other intangible assets
Licences Customer relations Computer software Total
and brands
$'000
$'000
$'000
$'000
Cost
At 1 January 2021 - 15,869 10,272 26,141
Additions - - 2,604 2,604
Recognised on acquisition 1,181 5,021 - 6,202
Foreign exchange differences - (52) (170) (222)
At 31 December 2021 1,181 20,838 12,706 34,725
Additions - - 1,974 1,974
Foreign exchange differences - (463) (1,399) (1,862)
At 31 December 2022 1,181 20,375 13,281 34,837
Amortisation and accumulated impairment losses
At 1 January 2021 - 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
Amortisation 236 938 2,222 3,396
Foreign exchange differences - (288) (512) (800)
At 31 December 2022 463 15,192 6,012 21,667
Carrying amount
At 31 December 2022 718 5,183 7,269 13,170
At 31 December 2021 954 6,296 8,404 15,654
Licences and brands relate to brands arising from the Jet East acquisition.
The carrying amount of customer relationships relate to:
· Business Aviation MRO US: $4,036,000 (2021: $4,538,000),
· Business Aviation excluding MRO US: $525,000 (2021: $780k),
· Technology & Outsourcing: $622,000 (2021: $978,000).
Computer software costs comprise purchased software, such as operational and
financial systems and the costs of configuration and customisation of Software
as a Service arrangements where control of the software exists.
Other intangible assets with a definite useful life are amortised on a
straight-line basis as follows:
· Brands are amortised over 5 years, with 3 years remaining,
· Customer relations are amortised over 10 years, with between 2
and 8 years remaining,
· Computer software is amortised over 3-5 years.
Impairment review
In the current year there is an indication that other intangible assets may be impaired.
Other intangible assets do not generate cash inflows from continuing use that are largely independent of those from other assets or groups of assets. Consequently, recoverable amount for these assets is determined for the CGU to which they belong.
Other intangible assets, together with other non-current assets, are assessed
for impairment in Note 20.
20. Impairment of non-current assets
In the current year there is an indication that the Group's non-current assets, including goodwill, may be impaired.
Goodwill acquired in a business combination is allocated to each of the CGUs
that are expected to benefit from the synergies of the combination based on
the ownership of intellectual property. This represents the lowest level
within the Group at which goodwill is monitored for internal management
purposes.
Other intangible assets and other non-current assets do not generate cash inflows from continuing use that are largely independent of those from other assets or groups of assets. Consequently, recoverable amount for these assets is determined for the CGU to which they belong.
Cash-generating units
For impairment testing, the carrying value of goodwill, other intangible
assets, property, plant and equipment, and right-of-use assets have been
allocated to the Group's CGUs as follows:
31 December 2022 Business Aviation MRO US Business Aviation excluding Special Technology & Outsourcing Corporate Total
$'000
$'000
$'000
$'000
MRO US Mission
$'000
$'000
Goodwill - 7,191 9,941 2,044 - 19,176
Other intangible assets 4,754 295 268 7,267 586 13,170
Property, plant and equipment 4,507 9,899 7,059 12 317 21,794
Right-of-use assets 15,200 12,275 10,117 87 515 38,194
Allocation of Corporate assets 222 319 136 275 (952) -
Value-in-use headroom 102,098 2,673 41,536 -
31 December 2021 Business Aviation MRO US Business Aviation excluding Special Technology & Outsourcing Corporate Total
$'000
$'000
$'000
$'000
MRO US Mission
$'000
$'000
Goodwill 787 8,043 11,119 2,287 - 22,236
Other intangible assets 5,492 200 552 8,455 955 15,654
Property, plant and equipment 5,276 5,374 42,067 38 734 53,489
Right-of-use assets 11,617 13,187 11,270 189 120 36,383
Allocation of Corporate assets 1,332 976 511 76 (2,895) -
Value-in-use headroom 34,857 51,790 11,358 31,226
The carrying amount of each CGU includes goodwill allocated to each CGU at
inception, other intangible assets (including deferred tax related to the
uplift to fair value recognised on acquisition), property, plant and
equipment, right-of-use assets, working capital balances, corporate income
taxes, obligations under leases, and corporate assets allocated to each CGU.
Key assumptions used in the value-in-use calculations
The key assumptions and estimates used in the value-in-use calculations are as
follows:
· Cash flow projections are based on the most recent financial
forecasts, being the Group's 2023 updated Strategic Plan approved by the Board
of Directors in January 2023. These forecasts cover a period of four years.
· The Group also considered the impact of Climate Change in
determining operating assumptions applicable to the forecast cash flows.
· The discount rate reflects the current market assessment of the
risks specific to each CGU and is estimated from the weighted average cost of
capital using the Capital Asset Pricing Model, after considering the risk-free
rate, equity market risk, beta, country risk, small stock premium, pre-tax
cost of debt, tax rates, and the debt to capital ratio applicable to each CGU.
· The terminal value for each CGU is estimated by applying the
Gordon Growth formula to the forecast cash flows using the respective discount
rate and long-term growth rate. The long-term growth rate reflects the average
of the long‑term growth rate for the countries in which the CGU operates.
The values assigned to the key assumptions represent management's assessment of future trends in the industry and have been based on historical data from both external and internal sources.
Impairment review outcome
Business Aviation MRO US
The Business Aviation MRO US CGU represents maintenance and repair operations
in the United States.
The recoverable amount of the Business Aviation MRO US CGU was determined
based on its value-in-use using discounted cash flow projections from the
Group's four-year internal forecasts approved by the Board of Directors. At 31
December 2022, the recoverable amount of the Business Aviation MRO US CGU is
$127.2m (2021: $61.0m).
The post-tax discount rate applied to the cash flow projections is 11.1%
(2021: 15.8%) and cash flows beyond the four-year period are extrapolated
using a 1.3% (2021: 2.7%) growth rate. The equivalent pre-tax discount rate
would be 13.7% (2021: 16.2%).
The recoverable amount calculated indicates very significant headroom over the
carrying value. There are no reasonably possible changes in the key
assumptions that will result in an impairment.
Business Aviation excluding MRO US
The Business Aviation excluding MRO US CGU represents services provided to our
private and corporate clients to safely enable their private jet travel
requirements.
The recoverable amount of the Business Aviation excluding MRO US CGU was
determined based on its value-in-use using discounted cash flow projections
from the Group's four-year internal forecasts approved by the Board of
Directors. At 31 December 2022, the recoverable amount of the Business
Aviation excluding MRO US CGU is $4.1m (2021: $79.6m). The reduction in the
years reflects managements revised expectation of lower anticipated cash flows
from these operations during the strategic horizon combined with lower long
term growth assumptions.
The post-tax discount rate applied to the cash flow projections is 12.0%
(2021: 10.9%) and cash flows beyond the four-year period are extrapolated
using a 1.6% (2021: 2.3%) growth rate. The equivalent pre-tax discount rate
would be 14.9% (2021: 11.4%).
Reasonably possible changes in key assumptions could cause the carrying amount
to exceed the recoverable amount for the BA ROW CGU. The following sensitivity
analysis shows the impact on the headroom of different post-tax discount rates
and EBITDA delivery in the cash flow projections used in the impairment review
model.
USD'000
EBITDA deviation compared to projections
-10.0% -5.0% 0.0% 5.0% 10.0%
Post-tax discount rate 11.0% 1,320 2,570 3,819 5,069 6,318
11.5% 869 2,042 3,215 4,388 5,561
12.0% 466 1,570 2,673 3,777 4,881
12.5% 102 1,143 2,185 3,226 4,268
13.0% (227) 758 1,742 2,727 3,711
Special Mission
The Special Mission CGU represents services provided to governments and
corporations which rely on aviation assets to perform a specialised, often
time critical, mission.
The recoverable amount of the Special Mission CGU was determined based on its
value-in-use using discounted cash flow projections from the Group's four-year
internal forecasts approved by the Board of Directors. At 31 December 2022,
the recoverable amount of the Special Mission CGU is $55.1m (2021: $76.9m).
The post-tax discount rate applied to the cash flow projections is 11.3%
(2021: 9.8%) and cash flows beyond the four-year period are extrapolated using
a 0.8% (2021: 2.3%) growth rate. The equivalent pre-tax discount rate would be
14.7% (2021: 9.8%).
The recoverable amount calculated indicates significant headroom over the
carrying value. There are no reasonably possible changes in the key
assumptions that will result in an impairment.
Technology & Outsourcing
The Technology & Outsourcing CGU represents advisory, technology, and
outsourcing services to aviation clients who seek to gain a decisive advantage
using real and near real time intelligence.
The recoverable amount of the Technology & Outsourcing CGU was determined
based on its fair value less cost of disposal. At 31 December 2022, the
recoverable amount of the Technology & Outsourcing CGU is $9.3m (2021:
$42.3m).
21. 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 2021 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(1) 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
Additions - 155 - 2,172 348 2,516 5,191
Disposals (23,025) - - (96) (126) - (23,247)
Exchange differences (5,838) (1,718) (1,328) (677) (29) - (9,590)
At 31 December 2022 - 18,048 11,190 15,824 3,413 7,125 55,600
Accumulated depreciation
and impairment
At 1 January 2021 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(1) - (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
Charge for the year 840 1,122 1,342 2,097 469 - 5,870
Disposals (2,272) - - (75) (116) - (2,463)
Impairment - 124 - - - 2,516 2,640
Reclassification(1) - (29) - 29 - - -
Exchange differences (500) (539) (516) (427) (16) - (1,998)
At 31 December 2022 - 7,490 5,364 11,190 2,637 7,125 33,806
Carrying amount
At 31 December 2022 - 10,558 5,826 4,634 776 - 21,794
At 31 December 2021 26,931 12,799 7,980 4,859 920 - 53,489
(1) Reclassifications relate to corrections in the categorisation of property,
plant and equipment.
No borrowing costs were capitalised during the current and prior year.
On 27 September 2022, the Group completed the sale and leaseback of its
helicopter assets resulting in cash proceeds of $27.0m and a gain on disposal
of $1.7m. The cash proceeds of $27.0m included $4.2m of additional financing
raised in the transaction.
The assets under construction relate to the investment in the Sharjah Business
Aviation Centre ("BAC") project and the Jersey Fixed Based Operations ("FBO")
project.
The Sharjah BAC project was fully impaired in the beginning of the financial
year and additional expenditure of $2,103,000, which was incurred on the
project during the current year, has also been impaired. The impairment
initially arose due to uncertainties arising in part from the COVID-19
pandemic, and subsequently due to the uncertainty about securing funding to
continue the project.
Expenditure of $413,000 incurred during the year on the Jersey FBO project has
been impaired due to the uncertainty about securing the necessary funding for
the project.
Total impairment costs of assets under construction of $2,516,000 (2021: $nil)
were recognised in the year.
Impairment review
In the current year there is an indication that the other classes of property, plant and equipment may be impaired.
The other classes of property, plant and equipment do not generate cash inflows from continuing use that are largely independent of those from other assets or groups of assets. Consequently, recoverable amount for these assets is determined for the CGU to which they belong.
Property, plant and equipment, together with other non-current assets, is
assessed for impairment in Note 20.
22. Right-of-use assets
Leasehold property Fixtures, fittings and equipment Aircraft Vehicles Total
$'000
$'000
$'000
$'000
$'000
Cost
At 1 January 2021 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
Additions 8,056 224 3,341 198 11,819
Disposals (9,205) (5) - (101) (9,311)
Exchange differences (3,484) (8) 403 (15) (3,104)
At 31 December 2022 59,210 347 3,744 401 63,702
Accumulated depreciation and impairment
At 1 January 2021 21,188 11 - 157 21,356
Charge for the year 7,381 17 - 126 7,524
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
Charge for the year - admin expenses 638 25 - 3 666
Charge for the year - cost of sales 4,779 27 426 103 5,335
Disposals (7,374) (5) - (73) (7,452)
Exchange differences (937) (2) (11) (6) (956)
At 31 December 2022 24,882 63 415 148 25,508
Carrying amount
At 31 December 2022 34,328 284 3,329 253 38,194
At 31 December 2021 36,067 118 - 198 36,383
The aircraft additions during the current year relate to the
sale-and-leaseback transaction involving the Group's helicopters which is
further described in Note 21 to the financial statements.
Impairment review
In the current year there is an indication that right-of-use assets may be impaired.
Right-of-use assets do not generate cash inflows from continuing use that are largely independent of those from other assets or groups of assets. Consequently, recoverable amount for these assets is determined for the CGU to which they belong.
Right-of-use assets, together with other non-current assets, are assessed for
impairment in Note 20.
23. Investments accounted for using the equity method
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.
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 2022, $625,000 (2021: $3,750,000) has been recognised
as revenue for this licensing component.
Included within deferred revenue (in current liabilities) as of 31 December
2021, is licensing and other trading related considerations of $625,000.
China Aircraft Services Limited
In 2021, the share of results from the equity accounted investment in China
Aircraft Services Limited represents the period ended 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 was received in full. Consequently, assets held for sale as of
31 December 2021 were $nil.
The investments' values are as follows:
China Aircraft Services Limited
2022 2021
$'000
$'000
At 1 January - 2,000
Share of net loss - (1,491)
Reversal of impairment - 1,491
Disposal of investment - (2,000)
At 31 December - -
The results of the equity accounted investments are as follows:
China Aircraft Services Limited
2022 2021
$'000 $'000
Revenue − 8,524
Expenditure − (16,079)
Loss before tax − (7,555)
Income tax credit − 99
Loss after tax − (7,456)
Statutory result: Group's share of net loss − (1,491)
Statutory result: Share of results from equity accounting − (1,491)
Adjusted result: Share of results from equity accounting − (1,491)
Reversal of impairment of equity accounted investments − 1,491
The reversal of impairment was recognised based on a recoverable amount, (the
higher of the fair value less costs to sell and the value in use) which in
this case was determined based on the fair value less cost to sell.
24. Inventories
2022 2021
$'000
$'000
Raw materials and consumables 12,667 14,807
Work in progress 4 4
Provision for obsolescence (5,393) (5,896)
7,278 8,915
The Directors consider that the carrying value of inventories is approximately
equal to their fair 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. The Company provides for inventories on a sliding
scale over the preceding eight years. As a result, inventory older than eight
years is written off in full. At 31 December 2022, the Board considers its
assessment of net realisable value to be appropriate based on best information
available. If the provision rates applied to inventory aged between one and
seven years increased by 10ppts, the loss for the year would increase by
$435,000.
25. Trade and other receivables
2022 2021
$'000
$'000
Financial assets
Amounts receivable for the sale of services 35,987 40,559
Loss allowance for expected credit losses (4,045) (5,682)
31,942 34,877
Accrued income(1) 21,320 18,953
Loss allowance for expected credit losses (595) (500)
20,725 18,453
Financial lease receivable 916 -
Total financial assets 53,583 53,330
Non-financial assets
Prepayments(1) 4,056 3,667
Other debtors 2,045 7,102
Total non-financial assets 6,101 10,769
Total trade and other receivables 59,684 64,099
Current 58,271 63,808
Non-current 1,413 291
Total trade and other receivables 59,684 64,099
(1) Includes contract assets which are described in further detail
below.
The Directors consider that the carrying amount of trade and other receivables
is approximately equal to their
fair value.
Amounts receivable for the sale of services
Amounts receivable for the sale of services are non-interest bearing and are
generally on credit terms usual for the markets in which the Group operates.
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.
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 services and is also commonly contained
within the terms and conditions of individual MRO services proposals where
stage payments for higher value work programmes are the norm. Where considered
appropriate, a requirement for full up-front payment is imposed.
Additionally, in the US, liens can be filed to protect past due unpaid
balances.
At the year end, trade receivables within the Business Aviation excluding MRO
US SBU that are secured by contractual liens total $5,712,000 (2021:
$4,339,000).
In the prior year, interest of $432,000 was charged on a late customer payment
in the Middle East.
Amounts receivable for the sale of services include amounts which are past due
at the reporting date but against which the Group has not recognised a
specific loss allowance for expected credit losses because there has not been
a significant change in credit quality and the amounts are still considered
recoverable.
Ageing of amounts receivable for the sale of services, net of loss allowance for expected credit losses
2022 2021
$'000
$'000
Not yet due 14,228 11,062
Less than 30 days 7,358 10,558
30-60 days 2,165 2,558
61-90 days 2,269 2,236
91-120 days 438 2,565
Greater than 120 days 5,484 5,898
Total 31,942 34,877
Loss allowance for expected credit losses
As there is no significant financing component to amounts receivable for the
sale of services, the Group has elected to apply the IFRS 9 simplified
approach to measuring expected credit losses, using a lifetime expected credit
loss provision for amounts receivable for the sale of services, contract
assets and accrued income. In arriving at the loss allowance for expected
credit losses, the gross receivable amount is analysed according to risk and
including a consideration of any credit insurance in place. 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. The loss rates applied to each ageing
bracket also reference historical credit loss experience, as well as current
and future expected economic conditions.
No loss allowance for expected credit losses is recognised in respect of other debtors.
The Group carries an expected credit loss allowance of $4,640,000 (2021:
$6,182,000), which relates to amounts receivable for the sale of services and
accrued income.
Ageing of impairments on amounts receivable for the sale of services
2022 2021
$'000
$'000
Not yet due 107 97
Less than 30 days 58 29
30-60 days 6 8
61-90 days 31 11
91-120 days 3 6
Greater than 120 days 4,435 6,031
Total 4,640 6,182
Movement in the loss allowance for expected credit losses
2022 2021
$'000
$'000
At 1 January 6,182 7,454
Impairment losses recognised in income statement 278 -
Impairment reversal recognised in income statement (53) (21)
Recovery of previously written-off receivables (1,015) -
Amounts written off as uncollectible (390) (1,197)
Foreign exchange translation gains and losses (362) (54)
At 31 December 4,640 6,182
The $1,015,000 (2021: $nil) recovery of previously written-off receivables in
the current year relates to the recovery of amounts written-off in Business
Aviation excluding MRO US ($1,013,000) and Technology & Outsourcing
($2,000).
The $390,000 (2021: $1,197,000) write-off in the current year relates to the
settlement of overdue receivables in Business Aviation MRO US ($238,000),
Business Aviation excluding MRO US ($139,000), and Technology &
Outsourcing ($13,000).
Sensitivity analysis on loss allowance for expected credit losses
The estimate of the loss allowance may vary from the actual amounts recovered
if an individual becomes unable to pay or able to pay. If a portion of the
impaired receivable balance for the sale of services was recovered there may
be material credit to the income statement. Similarly, if the unimpaired
receivable balance over 120 days of $5,484,000 was unable to be recovered,
there may be a material charge to the income statement. However, as noted
above, there are liens over the aircraft relating to certain unimpaired
receivables over 120 days. If all remaining gross receivable balances relating
to the sale of services were impaired by an additional 1% of the gross
receivables balance, the loss allowance for expected credit losses would be
increased by $358,000.
Accrued income
Accrued income is expected to be billed within the next twelve months,
together with contract assets of $5,099,000 (2021: $2,327,000) comprising:
· Costs associated with a Fleet Maintenance programme in the UK on
a long-term contract, contract assets of $798,000 (2021: $269,000)
· Contract assets arising from design and modification projects of
$1,634,000 (2021: $993,000) in the UK.
· Cost associated with commencement of Helicopter Emergency Medical
Services (HEMS) on behalf of the Scottish Ambulance Service on 1 June 2020
using its fleet of three Airbus H145 helicopters of $588,000 (2021:
$1,065,000).
· Costs incurred to start up a maintenance contract at Luton
Airport of $2,079,000 (2021: $Nil)
Financial lease receivable
The Group sub-leases a proportion of its hangar and office facility at the
Trenton-Mercer airport in New Jersey, USA. The Group has designated the
sub-lease as a finance lease because the sub-lease is for the whole of the
remaining term of the head lease.
The table below sets out the maturity analysis of the financial lease
receivables:
2022 2021
$'000
$'000
Less than one year 306 -
One to two years 636 -
Two to three years 54 -
Total undiscounted lease payments receivable 996 -
Unearned finance income (80) -
Net investment in the lease 916 -
No operating profit or loss is made on the sub-lease of this facility.
26. Cash and cash equivalents
For the purposes of the Consolidated Cash Flow Statement, cash and cash
equivalents include cash on hand and in banks, net of outstanding bank
overdrafts. Cash and cash equivalents at the end of the financial year as
shown in the Consolidated Cash Flow Statement can be reconciled to the related
items in the Consolidated Balance Sheet as follows:
2022 2021
$'000
$'000
Cash and bank balances in the Consolidated Balance Sheet 22,406 10,243
Cash and cash equivalents are denominated in the following currencies:
2022 2021
$'000
$'000
United States Dollar 19,449 6,136
Sterling 2,622 3,863
Euro 130 132
United Arab Emirates Dirham 192 68
Other currencies 13 44
22,406 10,243
27. Trade and other payables
2022 2021
$'000
$'000
Financial liabilities
Trade and other payables 15,118 15,470
Accruals 17,492 15,482
32,610 30,952
Non-financial liabilities
Other long-term employee benefits accrual 3,642 1,821
Other taxation and social security 5,750 1,591
Income received in advance 8,431 6,799
17,823 10,211
Total trade and other payables 50,433 41,163
Current 46,770 39,342
Non-current 3,663 1,821
Total trade and other payables 50,433 41,163
Trade payables
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. Trade and other payables are non-interest bearing
and are generally on credit terms usual for the markets in which the Group
operates. 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 is
approximately equal to their fair value.
Other long-term employee benefits accrual
Other long-term employee benefits accrual relates to the Jet East 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 $1,821,000 (2021: $1,821,000) has been
recognised within Adjusting items. 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 $6,024,000(2021: $6,024,000) after this three-year
period.
Awards associated with the long-term incentive plan are linked with business
performance and the level of indebtedness of the combined Business Aviation
MRO US business. The long-term incentive plan is accounted for as remuneration
for post-acquisition services and is not part of the business combination.
Income received in advance
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 34 for other contract liabilities.
Estimation uncertainty
A key source of estimation uncertainty at the reporting date, that may have a
significant risk of causing a materially different outcome relate to the
carrying amounts of the other long-term employee benefit accrual and the
associated remuneration charge within the next financial year. This is
dependent on future business performance Business performance in Business
Aviation MRO US and is calculated as a multiple of EBITDA plus cash and cash
equivalents and less borrowings. The Directors consider that the carrying
amount of the other long-term employee benefit accrual as of 31 December 2022
of $3,642,000 (2021: $1,821,000) approximates the present value of the service
cost.
28. Current tax payable
2022 2021
$'000
$'000
Tax prepayments as of 1 January 27 1,280
Current tax liability as of 1 January (574) (15)
Net current tax (liability)/prepayment as of 1 January (547) 1,265
Tax credit/(charge) relating to prior periods 63 (75)
Current tax expense (154) (4,292)
Fines included in tax expense but recognised in trade and other payables - 328
Payments during the year 66 3,104
Refunds received during the year - (792)
Other taxes 21 (95)
Foreign exchange differences 18 10
Net current tax liability as of 31 December (533) (547)
Analysed as:
Tax prepayments as of 31 December - 27
Current tax liability as of 31 December (533) (574)
Net current tax liability as of 31 December (533) (547)
29. Indirect tax payable
2022 2021
$'000
$'000
Value added tax 4,991 (122)
Sales taxes (111) (20)
Italian luxury taxes 112 120
Net indirect tax payable/(receivable) 4,992 (22)
30. Obligations under leases
Leasehold Fixtures, fittings Aircraft Vehicles Total
and equipment
$'000
$'000
$'000
property
$'000
$'000
At 1 January 2021 45,899 3 - 237 46,139
Additions 7,265 123 - 164 7,552
Acquisitions 3,387 7 - - 3,394
Finance expense 2,614 3 - 7 2,624
Modifications and disposals (1,885) - - - (1,885)
Lease payments (9,447) (19) - (107) (9,573)
Rent free credit (110) - - - (110)
Exchange differences and other (144) - - 5 (139)
At 31 December 2021 47,579 117 - 306 48,002
Additions 4,662 224 7,894 198 12,978
Finance expense 2,400 12 113 18 2,543
Modifications and disposals (810) - - - (810)
Lease payments (6,874) (64) (1,377) (123) (8,438)
Exchange differences and other (2,441) (3) 984 (134) (1,594)
At 31 December 2022 44,516 286 7,614 265 52,681
Following the surrender of the lease at Fairoaks Airport in 2021, a $1,626,000
profit has been recognised in the prior year in derecognition of remaining
lease liabilities. This amount has been recognised within other income.
The aircraft additions during the current year relate to the
sale-and-leaseback transaction involving the Group's helicopters which is
further described in Note 21 to the financial statements.
2022 2021
$'000
$'000
Maturity analysis - contractual undiscounted cash flows:
Less than one year 10,787 8,101
One to five years 23,368 22,307
More than five years 53,035 56,760
Total undiscounted lease liabilities at 31 December 87,190 87,168
Lease liabilities included in the consolidated balance sheet at 31 December:
Current 11,053 7,970
Non-current 41,628 40,032
Total lease liabilities at 31 December 52,681 48,002
Average incremental borrowing rates applied across the Group were:
2022 2021
%
%
Leasehold property 5.8 5.7
Vehicles 4.9 4.9
Aircraft 5.5 -
Fixtures, fittings and equipment 6.1 6.8
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
runs from June 2017 until June 2052 following the exercise of the ten-year
extension option during the prior year. The lease liability has been
discounted at an incremental borrowing rate of 7.3% (2021: 7.3%). The Sharjah
BAC includes a $9,885,000 (2021: $9,850,000) obligation under leases at 31
December 2022 following the formalisation of the ten year lease extension.
31. Borrowings 2022 2021
$'000
$'000
Secured borrowings at amortised cost
Bank borrowings 34,818 64,739
34,818
Unsecured borrowing at amortised cost
Repayable element of Paycheck Protection Program - 1,000
Other loans 1,290 1,415
Total borrowings 36,108 67,154
Repayable element of Paycheck Protection Program - 1,000
Bank borrowings 30,811 37,760
Other loans 414 1,415
Amount due for settlement within 12 months 31,225 40,175
Bank borrowings 4,007 26,979
Other loans 876 -
Amount due for settlement after 12 months 4,883 26,979
Changes in borrowings are tabulated below: Total
$'000
Long-term Short-term
$'000
$'000
At 1 January 2021 52,197 1,000 53,197
Cash flows:
Repayments (9,573) (2,788) (12,361)
Proceeds - 22,574 22,574
Non-cash:
Acquisition - 4,202 4,202
Foreign currency translation on borrowings in profit or loss (24) - (24)
Exchange differences (531) (83) (614)
Arrangement fee movement 180 - 180
Reclassification (15,270) 15,270 -
At 31 December 2021 26,979 40,175 67,154
Cash flows:
Repayments - (46,525) (46,525)
Proceeds 4,313 14,377 18,690
Non-cash:
Foreign currency translation on borrowings in profit or loss (Note 12) - 3,604 3,604
Exchange differences - (5,965) (5,965)
Forgiveness of Paycheck Protection Program loan - (1,000) (1,000)
Arrangement fee movement - 150 150
Reclassification (26,409) 26,409 -
At 31 December 2022 4,883 31,225 36,108
Analysis of borrowings by currency:
Sterling US Dollars Total
$'000
$'000
$'000
31 December 2022
Repayable element of Paycheck Protection Program - - -
Bank borrowings 24,110 10,708 34,818
Other loans - 1,290 1,290
24,110 11,998 36,108
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
Repayable element of Paycheck Protection Program
During 2020, 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. As of 31 December 2021, the Group considered $1m
of the funds received to be potentially repayable and recognised this amount
as borrowings in current liabilities. On 19 May 2022, the Group received
confirmation that the full balance of the original loan, including the $1m,
was to be forgiven and was therefore no longer repayable. The balance of $1m
has been derecognised during the year with the associated credit being
recognised against employment costs within cost of sales and administrative
expenses in the Consolidated Income Statement, consistent with the treatment
adopted for other such pandemic-related support.
Bank borrowings
On 31 December 2021, the Group had facilities agreements for a £20m term loan
and a $50m revolving credit facility ("RCF") secured with HSBC. Bank
borrowings of $64.7m as of 31 December 2021 comprised drawdowns under both the
HSBC term loan and RCF.
A letter of awareness had been provided by CK Hutchison Holdings Limited
("CKHH"), which has an indirect shareholding of 29.8% in the Group, to HSBC
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. On consideration, the Board concluded that the loan
advanced by HSBC materially represented a market value arm's length
transaction and therefore no adjustment has been made for any differential
between the fair value and the nominal value of this loan.
In August 2022, CKHH notified the Board that, while it would continue to
provide support (in the form of the existing letter of awareness) for the
current facilities until they are due for renewal, CKHH believes that it is
more appropriate for the Group to secure facilities on a standalone basis,
rather than relying on the unilateral support of one minority shareholder.
Consequently, it advised the Group that it will not provide such support
beyond the expiry dates of the current HSBC facilities.
On 14 November 2022, the HSBC RCF matured and was repaid in full.
On 28 December 2022, the Group secured a new credit facility with Great Rock
Capital Partners Management LLC ("Great Rock"). The facility totals $25m and
comprises a term loan of $6.5m and a RCF of $18.5m. $20m of this facility was
available immediately, with a further $5m available contingent on future
trading performance.
On 28 December, the Group drew down $5m under the term loan and $6m under the
RCF.
Bank borrowings of $34.8m as of 31 December 2022 comprised drawdowns under the
HSBC term loan and drawdowns under both the Great Rock term loan and RCF.
2022 Interest Maturity Facility Drawn Drawn
'000
(Local
(Presentation currency)
currency)
$'000
'000
HSBC RCF See below 14 November 2022 - - -
HSBC Term loan See below 31 January 2023 GBP 20,000 GBP 20,000 24,124
Great Rock RCF SOFR + 6.25% 28 December 2026 USD 15,000 USD 6,000 6,000
Great Rock Term loan SOFR + 6.75% 28 December 2026 USD 5,000 USD 5,000 5,000
Bank borrowing before arrangement fees 35,124
Capitalised loan arrangement fees (306)
Bank borrowings 34,818
2021 Interest Maturity Facility Drawn Drawn
'000
(Local
(Presentation currency)
currency)
$'000
'000
HSBC RCF SONIA + 0.94% 14 November 2022 USD 50,000 GBP 17,000 22,932
USD 15,000 15,000
HSBC Term loan SONIA + 1.12% 31 January 2023 GBP 20,000 GBP 20,000 26,979
Bank borrowing before arrangement fees 64,911
Capitalised loan arrangement fees (172)
Bank borrowings 64,739
The HSBC term loan, Great Rock term loan, and Great Rock RCF are subject to
customary banking security arrangements.
The Great Rock term loan is repayable in 47 monthly instalments from February
2023 to December 2026, with the residual balance repayable on 28 December
2026.
Interest rates in respect of the Great Rock term loan and RCF are subject to
reductions if certain performance conditions are met.
Other loans
Other loans as of 31 December 2022 comprise:
· A $1m unsecured loan with the Group's primary customer in the US
that bears no interest and is repayable in 60 monthly instalments from January
2023 to December 2027.
· Other unsecured loans totalling $0.3m repayable during 2023.
32. Other financial liabilities
2022 2021
$'000
$'000
Deferred consideration recognised on acquisition, adjusted for discounting 533 533
Reduction in deferred consideration recognised on acquisition, adjusted for (212) -
discounting
Unwind of discount on deferred consideration 14 13
335 546
Due within one year 335 290
Due after more than one year - 256
335 546
On the acquisition of Jet East Aviation Corporation LLC, the fair value of deferred consideration was estimated at $533,000. The value has decreased to $335,000 as of 31 December 2022 (2021: $546,000) following an adjustment of $212,000 to the amount recognised on acquisition. The adjustment of $212,000 represents legal costs agreed to be borne by the seller. The remaining movement of $14,000 represents cumulative unwinding of discount, which has been recognised as finance expenses in the Consolidated Income Statement.
33. Provisions for liabilities
Closure provision Onerous contract provisions Dilapidations provision Employees' end of service provision Integration provision Obligations associated with construction projects Total
$'000
$000 $'000 $'000 $'000 $'000
At 1 January 2022 9 - 315 738 58 - 1,120
(Credit)/charge to the income statement during the year (9) 900 - 214 155 863 2,123
Utilised during the year - - - (50) (41) - (91)
Foreign exchange - - (33) - - - (33)
Discounting (Note 12) - - 16 - - 16
At 31 December 2022 - 900 298 902 172 863 3,135
2022 2021
$'000
$'000
Current 2,250 772
Non-current 885 348
Total 3,135 1,120
The closure provision at 31 December 2021 related to the reduction of business
activities in Saudi Arabia.
The provision for onerous contracts relates to potential penalty payments
under certain long-term arrangements.
The dilapidations provision relates to leases entered into during 2020.
Provision for employees' end of service indemnity relates to operations in the
UAE ($802,000) and the US ($100,000). The provision in relation to the UAE
operations 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 relates to severance costs following the acquisition
of Jet East during the prior year. This is expected to be paid in 2023.
The obligations associated with construction projects relates to obligations
associated with the construction of the Sharjah hangar.
34. Deferred revenue
2022 2021
$'000
$'000
Deferred revenue 9,214 8,882
Current 9,214 8,880
Non-current - 2
Total 9,214 8,882
The deferred revenue arises in respect of management fees, maintenance
contracts and SaaS contracts invoiced in advance, 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
(2021: $625,000) recognised as current. Deferred revenue represents a contract
liability.
Contract liabilities
Deferred revenue of $9,214,000 (2021: $8,882,000) is a contract liability and
as is income received in advance, as shown in Note 27, of $8,431,000 (2021:
$6,799,000). Total contract liabilities are $17,645,000 (2021: $15,681,000).
35. 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
(Liabilities)/assets at 1 January 2021 (57) (118) (2,986) 1,052 (2,109)
Acquisitions (1,736) 1,418 - - (318)
Credit/(charge) in year (Note 13) 203 (1,261) 3,147 4,258 6,347
Exchange differences - (2) - - (2)
(Liabilities)/assets at 31 December 2021 (1,590) 37 161 5,310 3,918
Credit/(charge) in year (Note 13) 384 590 (161) 163 976
(Liabilities)/assets at 31 December 2022 (1,206) 627 - 5,473 4,894
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:
2022 2021
$'000
$'000
Deferred tax asset due after more than one year 6,100 3,918
Deferred tax liability (1,206) -
Net deferred tax asset 4,894 3,918
Estimation uncertainty
The Group has recognised deferred tax assets on both timing differences 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 Group has the following tax losses, which are subject to relevant
regulatory review and approval as applicable to the relevant jurisdiction:
2022 2021 2022 2021 2022 2021
Recognised
Recognised
Unrecognised
Unrecognised
Total
Total
$'000
$'000
$'000
$'000
$'000
$'000
UK 2,124 2,222 26,863 27,059 28,987 29,281
US federal 18,466 16,806 16,240 − 34,706 16,806
US state 17,444 20,418 − − 17,444 20,418
Poland − − 262 75 262 75
HK − − 5,684 5,139 5,684 5,139
Tax losses 38,034 39,446 49,049 32,273 87,083 71,719
The above losses represent the following value at tax rates applicable at the
balance sheet date:
2022 2021 2022 2021 2022 2021
Recognised
Recognised
Unrecognised
Unrecognised
Total
Total
$'000
$'000
$'000
$'000
$'000
$'000
UK 531 555 6,716 6,765 7,247 7,320
US 4,942 4,755 3,410 − 8,352 4,755
Poland − − 50 14 50 14
HK − − 938 848 938 848
Potential tax benefit of tax losses 5,473 5,310 11,114 7,627 16,587 12,937
Losses in the UK carried forward indefinitely. Tax losses in Poland can be
carried forward for 5 years. Carry forward of losses in the US are subject to
local state level rules.
A deferred tax asset in respect of tax losses has been recognised in the UK to
the extent that it offsets deferred tax liabilities in other UK entities. A
deferred tax asset has not been recognised in respect of the remaining UK tax
losses due to uncertainty with regards to timing and amount of future taxable
profits against which the tax losses could be utilised.
In the US, management have concluded that, based on forecast future cash
flows, 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.
36. Issued capital and reserves
Number £'000 $'000
Ordinary shares: authorised, issued and fully paid
At 1 January 2021 63,636,279 636 953
Shares issued 50,000 1 1
At 31 December 2021 63,686,279 637 954
Shares issued 275,000 3 4
At 31 December 2022 63,961,279 640 958
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 2021 63,473
Shares issued 29
At 31 December 2021 63,502
Shares issued 210
At 31 December 2022 63,712
Share premium represents the amount subscribed for share capital in excess of
its nominal value, net of historic placement fees of $1,987,000 (2021:
$1,987,000).
Merger relief reserve Reverse takeover reserve Other reserve Share-based payment reserve Total
$'000
$'000
$'000
$'000
$'000
Other reserves
At 1 January 2021 108,595 (95,828) 20,336 2,257 35,360
Share-based payment expense (Note 40) - - - 244 244
Transfer for lapsed options - - - (607) (607)
At 31 December 2021 108,595 (95,828) 20,336 1,894 34,997
Share-based payment expense (Note 40) - - - 158 158
Transfer for lapsed options - - - (168) (168)
At 31 December 2022 108,595 (95,828) 20,336 1,884 34,987
The merger relief reserve represents differences between the fair value of the
consideration transferred and the nominal value of the shares. The merger
relief reserve arose in 2015 due to reverse takeover. The reserve was
increased in 2016 following 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 represents the credit to equity to recognise
the value of equity-settled share-based payments. Refer to Note 40 for further
details of these plans. Following the lapse of options during the year under
the ASOP, CSOP, and LTIP plans, $168,000 (2021: $607,000) was transferred from
other reserves to accumulated losses.
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. Consequently, no own share reserve is recognised. At the end
of the reporting period, the employee benefit trust held 219,310 (2021:
219,310) shares. The fair value of these shares at 31 December 2022 was
$155,000 (2021: $131,000).
37. Distributions made and proposed
The Company did not pay an ordinary dividend during the year (2021: $nil) to
shareholders.
The Board does not recommend a dividend for 2022 (2021: $nil).
38. Non-controlling interest
$'000
At 1 January 2021 795
Total comprehensive loss attributable to minority interests (702)
At 31 December 2021 93
Total comprehensive income attributable to minority interests 279
At 31 December 2022 372
The non-controlling interest in the current and prior year relates to a 49%
shareholding in Gama Aviation FZC, which is consolidated as the Company is
exposed to variable returns from its involvement and can affect the returns
through its power over this company. In addition, the Group has a call option
on the remaining shareholding. 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.
Set out below is summarised financial information for Gama Aviation FZC,
before intercompany eliminations:
2022 2021
$'000 $'000
Current assets 9,045 14,454
Current liabilities (7,195) (14,022)
Net current assets 1,850 432
Non-current assets 25 32
Net assets 1,875 464
Accumulated non-controlling interest 372 93
2022 2021
$'000 $'000
Revenue 28,050 28,081
Profit/(loss) for the year 1,396 (3,514)
Other comprehensive income − −
Total comprehensive income 1,396 (3,514)
39. 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:
· 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 2). The principals of Felix also have
significant ownership interest in Air Arabia, which is a client of the Group.
· Mr Canning Fok - is an Executive Director of CK Hutchison Holdings
which has an indirect shareholding of 29.6% in the Company
Associates
· GB Aviation Holdings LLC - is a joint venture in which the Group owns
a 50% membership interest; 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:
The following amounts were outstanding at the balance sheet date for related
parties at that date:
Sale of services Purchase of services
2022 2021 2022 2021
$'000 $'000 $'000 $'000
EBACE - - 11 14
China Aircraft Services Limited - 564 - 1,377
Air Arabia/Felix Trading Company LLC 181 198 175 158
Mr Canning Fok 1,585 1,275 - -
Mr M Khalek 25 37 - -
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
2022 2021 2022 2021
$'000
$'000
$'000
$'000
EBACE - - - -
Air Arabia/Felix Trading Company LLC 154 198 129 127
Mr Canning Fok - 12 - 101
Mr M Khalek - - - -
Material transactions with related parties
During the year, within the Business Aviation SBU, sales of services of
$1,585,000 (2021: $1,275,000) 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.
2022 2021
£'000
£'000
Short-term employee benefits 1,224 1,229
Post-employment benefits 136 168
Total 1,125 1,397
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.
40. Share-based compensation
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, the number of options which vest 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
over 155,000 shares were granted to Directors on 29 March 2021 and these
vested immediately (the "Director ASOP Awards").
Under the CSOP and ASOP, the exercise price of options is calculated 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.
When exercised, each option is convertible into one ordinary share at the
exercise price.
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 (being the proportion of
the original shares granted that relate to the period after leaving and prior
to vesting) of options are forfeited 90 days after leaving, 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.
Set out below are summaries of options granted under the plans:
2022 2021
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 34.6 4,017 165.3 3,301
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 25.4 (936) 135.4 (1,119)
At 31 December 37.4 3,081 34.6 4,017
Vested and exercisable at 31 December 97.6 194 87.9 226
(1) The weighted average share price at the date of exercise of options
exercised during the year was nil pence (2021: 40.5 pence)
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 (the "Replacement Awards").
No options expired during 2022 (2021: none).
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 2022 Share options 31 December 2021
Exercise price '000 '000
(pence)
9 August 2016 8 August 2026 155.0 - -
22 June 2018 21 June 2028 205.5 23 33
22 June 2018 21 June 2028 205.5 43 63
17 June 2019 16 June 2029 91.5 58 86
26 March 2021 25 March 2031 39.0 705 965
29 March 2021 28 March 2031 68.8 983 1,046
29 March 2021 28 March 2031 1.0 1,199 1,694
29 March 2021 28 March 2031 1.0 70 130
TOTAL 3,081 4,017
Weighted average remaining contractual life of options outstanding at end of 8.15 years 9.14 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 various 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 various inputs, including expected
dividends, expected share price volatility and the expected period to
exercise, and the likelihood of the market-based performance condition being
met at the grant date.
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.
No options were granted during the year ended 31 December 2022 (2021:
4,136,000).
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
The compensation expense recognised in relation to the awards is based on the
fair value of the awards at the grant date.
Total expenses arising from share-based payment transactions recognised during
the year as part of employee benefit expense were as follows:
2022 2021
$'000
$'000
Options issued under equity-settled share employee option schemes plan 158 244
Shares issued to Director - 13
Shares issued to former employees 214 -
372 257
41. Financial instruments and risk management
Financial assets and liabilities as defined by IFRS 9 and their estimated fair
values are as follows:
At 31 December 2022 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 (Note 26) 22,406 - 22,406 22,406
Trade and other receivables (Note 25) 53,583 - 53,583 53,583
Financial liabilities
Trade and other payables (Note 27) - (32,610) (32,610) (32,610)
Borrowing (Note 31) - (36,108) (36,108) (36,108)
Lease obligation (Note 30) - (52,681) (52,681) (52,681)
Net financial assets/(liabilities) 75,989 (121,399) (45,410) (45,410)
At 31 December 2021 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 (Note 26) 10,243 - 10,243 10,243
Trade and other receivables (Note 25) 53,330 - 53,330 53,330
Financial liabilities
Trade and other payables (Note 27) - (30,952) (30,952) (30,952)
Borrowings (Note 31) - (67,154) (67,154) (67,154)
Lease obligation (Note 30) - (48,002) (48,002) (48,002)
Net financial assets/(liabilities) 63,573 (146,108) (82,535) (82,535)
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.
41.1 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 31 and various obligations under leases disclosed
in Note 30, cash and cash equivalents and equity (comprising issued capital,
reserves and accumulated profit as disclosed in the consolidated statement of
changes in equity.
The Board of Directors reviews the capital structure on a regular basis. As
part of this review, the Board of Directors considers the cost of capital and
the risks associated with each class of capital, against the purpose for which
the capital 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.
41.2 Market risk
Market risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market prices. 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 way
these risks are managed and measured.
41.2.1 Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies and is
consequently exposed to exchange rate fluctuations, in particular, 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 foreign exchange exposure on the net monetary
position of entities against their respective functional currency, expressed
in each entity's presentational currency. These currencies have been
considered as they are the most significant denominations of the Group.
GBP USD EUR AED(2) HKD Other Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 31 December 2022
Borrowings
Entities with functional currency USD - (11,998) - - - - (11,998)
Entities with functional currency GBP (24,110) - - - - - (24,110)
Entities with functional currency PLN(3) - - - - - - -
Total borrowings (24,110) (11,998) - - - - (36,108)
Obligations under leases
Entities with functional currency USD - (14,011) - (9,885) - - (23,896)
Entities with functional currency GBP (28,774) - - - - - (28,774)
Entities with functional currency PLN - - - - - (11) (11)
Total obligations under leases (28,774) (14,011) - (9,885) - (11) (52,681)
Cash
Entities with functional currency USD - 18,141 64 191 4 - 18,400
Entities with functional currency GBP 2,621 1,309 66 1 - 4 4,001
Entities with functional currency PLN - - - - - 5 5
Total cash 2,621 19,450 130 192 4 9 22,406
Net trade financial assets(1)
Entities with functional currency USD (32) 13,631 25 (731) - (63) 12,830
Entities with functional currency GBP 2,520 6,252 (559) - - (19) 8,194
Entities with functional currency PLN - - - - - (51) (51)
Total net trade financial assets 2,488 19,883 (534) (731) - (133)
20,973
Net exposure
Net monetary in USD entities (32) - 89 (10,425) 4 (63) (10,427)
Net monetary in GBP entities - 2,803 (493) 1 - (15) 2,296
Net monetary in PLN entities - - - - - - -
Total net exposure (32) 2,803 (404) (10,424) 4 (78) (8,131)
At 31 December 2021
Net monetary in USD entities (181) - 100 (731) (12) (42) (866)
Net monetary in GBP entities - (9,428) 1,887 1 - (19) (7,559)
(181) (9,428) 1,987 (730) (12) (61) (8,425)
(1) Net trade financial assets per Note 25 of $53,583,000 and financial
liabilities per Note 27 of $32,610,000
(2) United Arab Emirates Dirham
(3) Polish Zloty
Foreign currency sensitivity analysis
The following table details the Group's sensitivity to a 10% 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 reporting date for a 10%
change in foreign currency:
GBP USD EUR AED HKD Other Total
$'000
$'000
$'000
$'000
$'000
$'000
$'000
At 31 December 2022
Total effect on profit/(loss) of depreciation in foreign currency exchange 3 (280) 40 1,043 -- 8 814
rates
At 31 December 2021
Total effect on profit/(loss) of depreciation in foreign currency exchange 18 943 (199) 73 1 6 842
rates
41.2.2 Interest rate risk management
The Group is exposed to interest rate risk as its bank borrowings are subject
to variable interest rates based on SOFR and SONIA, as per the HSBC and Great
Rock credit facility agreements.
The Group recognises that movements in interest rates might affect the amounts
recorded in its profit and loss for the year. Therefore, the Group has
assessed:
· Reasonably possible changes in interest rates at the end of the
reporting period; and
· The effects on profit or loss if such changes in interest rates
were to occur.
Interest rate sensitivity analysis
The sensitivity analysis below has been based on the exposure to interest
rates for non-derivative instruments at the reporting date. For floating rate
liabilities, the analysis is prepared based on the average liability held by
the Group over the year. A 1% increase or decrease in interest rates
represents management's assessment of the reasonably possible changes
in interest rates at the reporting date.
If interest rates had been 1% higher and all other variables were held
constant, the Group's loss for the year ended 31 December 2022 would increase
by $498,000 (2021: $647,000). The Company's sensitivity to interest rates
has increased during the current year due to the increase in the value of
loans held.
The Group's cash balances are held in current bank accounts and earn
immaterial levels of interest. The Board of Directors has concluded that any
changes in the SOFR and SONIA rates will have an immaterial impact on interest
income earned on the Group's cash balances. No interest rate sensitivity has
therefore been included in relation to the Group's cash balances.
41.3 Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
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 risk or the way 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
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 2022
Trade and other payables (Note 27) n/a 32,131 - - 32,131
Lease liabilities (Note 30) (1) 10,787 23,368 53,035 87,190
Bank borrowings (Note 31) 3.0% 31,225 4,883 - 36,108
At 31 December 2021
Trade and other payables (Note 27) n/a 30,952 - - 30,952
Lease liabilities (Note 30) (1) 8,101 22,307 56,760 87,168
Bank borrowings (Note 31) 1.1% 40,175 26,979 - 67,154
(1) Refer to Note 30, which provides the incremental borrowing rate for each
category of lease
41.4 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 is
exposed to credit risk from its operating activities (primarily from trade
receivables) and from its financing activities, including cash balances with
banks (see Note 26), and other financial instruments.
Amounts receivable for sale of services
Customer credit risk is managed by each business unit subject to the Group's
established policy, procedures, and controls relating to customer credit risk
management. The Group endeavours to only deal with creditworthy counterparties
and requests payments on account, where appropriate, as a means of mitigating
the risk of financial loss from defaults. Outstanding customer receivables and
the Group's exposure to credit risk is regularly monitored.
Assets receivable for sale of services 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 25.
The carrying amount of financial assets recorded in the financial statements
at the reporting date represents the Group's maximum exposure to credit risk.
There has been no change to the way credit risks are managed and measured
during the year.
42. Commitments for capital expenditure
In June 2017, a subsidiary of the Group, Gama Support Services FZE, entered
into a Build Operate & Transfer Agreement and a Concession Agreement
with Sharjah Airport Authority under which it is committed to construct a
Business Aviation Centre at Sharjah Airport. As of 31 December 2022, the Group
had contracted commitments of $585,000 (2021: $nil) in relation to phase 1 of
the Business Aviation Centre. These have been accrued for and subsequently
impaired in the 31 December 2022 financial statements.
The Group had no other outstanding contracted commitments as of 31 December
2022 (2021: $nil).
43. Contingent liabilities
The Company has very recently received a letter before action in respect of a
possible legal claim against it for alleged damages in the sum of circa
£2.3m. At this very early stage, the Board has insufficient information to
properly assess the merits or likely quantum of such potential claim.
Accordingly, there is considerable uncertainty as to the amount or timing of
any associated economic outflow or whether there will be any such outflow
44. Events after the balance sheet date
The following events occurred after the reporting date:
Repayment of HSBC £20m Term Loan
On 25 January 2023, the Group repaid its £20m Term Loan with HSBC in full.
Consequently, all the Group's obligations in respect of the Term Loan have
been fully discharged and the associated securities have been released. This
event is a non-adjusting event.
Award of major contract by Wales Air Ambulance Charity
On 22 February 2023, the Group announced that it had been awarded a seven-year
contract by the Wales Air Ambulance Charity for the provision of Helicopter
Medical Emergency Services. The contract, which commences on 1 January 2024,
is expected to deliver overall revenues of approximately £65m over its
seven-year term, with margins consistent with those derived from the Group's
other Special Mission activities.
This event is a non-adjusting event.
New loan from Close Brothers Aviation and Marine
On 3 March 2023, the Group received a loan of £9.4m ($11.1m) from Close
Brothers Aviation and Marine. The loan is secured by a mortgage over the
Group's owned aircraft.
Receipt of long-standing accounts receivable balances
On 31 March 2023, the Group received $2.1m cash, followed by a further $0.8m
on 5 June 2023 in settlement of part of long-standing account receivable
balances. The expected credit loss allowance as of 31 December 2022 is not
impacted by these part settlements. These are non-adjusting events.
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