REG - Gama Aviation PLC - Gama Aviation strengthens Special Mission offer

Gama AviationAnnouncement

31/01/2024 18:45

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RNS Number : 6058B  Gama Aviation PLC  31 January 2024

31 January 2024

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.

Gama Aviation Plc (AIM: GMAA)

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

Gama Aviation strengthens Special Mission offer.

 

Gama Aviation Plc (the "Company") today announces that it has agreed to
purchase (the "Purchase") the business of Specialist Aviation Services Limited
("Specialist"), a helicopter special mission business, as part of a pre-pack
acquisition from its appointed administrators.

 

Deal highlights

 

·    Adds further scale and strength to Gama's Special Mission strategic
business unit ("SBU") with some £27m of annual revenue, three significant UK
air ambulance charity contracts, six managed Leonardo AW169 aircraft and two
further national security contracts in the Middle East.

·    The additional capability is complementary to the Special Mission SBU
adding a Leonardo Service Centre in Staverton, Gloucestershire.

·    Operational synergies through combination of operations are
identified.

 

Marwan Khalek, Group Chief Executive, Gama Aviation Plc commented: "This
acquisition accelerates our growth in our Special Mission SBU, adding scale in
the UK, building on our recent contract wins with amongst other the Welsh Air
Ambulance and opening new international operations in the Middle East to
complement our established fixed wing aircraft management and MRO capability
in the region.

 

We believe that there is considerable potential within the trade and assets of
this business, that over the medium term will enhance the prospects of the
Special Mission SBU.  However, given the nature of the acquisition, our
immediate priority is to ensure continuity of service for the UK air ambulance
charities such that they are able to maintain their life-saving operations."

 

Background and rationale

 

Gama Aviation's Special Mission SBU was conceived following a strategic review
in 2020. As part of this review several potential acquisition targets were
identified which would be complementary to the SBU's growth.  Specialist was
identified as one of those businesses.

 

Specialist has a long history of operating helicopters in the UK with a focus
on special mission customers.  In recent years, it has expanded its
capabilities in maintenance and grew internationally, including winning
contracts in the Middle East, based on an excellent reputation for quality of
service and safety.

 

From 2021, the business has been through operational and financial
restructuring exercises, as part of which it has sold aircraft to pursue an
"asset light" business model.  Whilst these actions had improved the
underlying prospects of Specialist, the company determined that its capital
structure was unsustainable, and the underlying business outlook would be
improved through being part of a larger group with balance sheet strength.

 

Specialist financial profile

 

In the 12 months to 31 December 2022, Specialist reported turnover of £24.3m
(£24.7m in 2021) and a pre-tax profit of £2.7m (loss of £6.1m), including
exceptional accounting profits from financial restructuring.

 

Whilst the results for 2023 have not been published, the business would have
reported an underlying loss.  In December 2023, Specialist, through its
advisors, determined that it was in the interests of Specialist to seek an
accelerated acquisition process via pre-pack administration.

 

Acquisition details

 

The Group has acquired the trade and assets of Specialist from FRP, the
appointed administrator for a consideration of £280,000.

 

Considering the initial working capital requirements of the business at
completion, provisions for restructuring costs and transaction costs, the
Group anticipates the total cost of the acquisition will amount to c.£3.0m.

 

The net asset value, excluding lease obligations, is approximately £0. In the
following weeks, the Group will undertake a detailed review of the book value
of the net assets assumed as part of the Transaction, including appropriate
provisions. The Group will also assume lease obligations on helicopters and
property with customer contracts amounting to c.£8.7m.

 

As part of the transaction discussions, key customers and suppliers have
agreed to amend, extend and novate their contracts to the Company.

 

Amounts payable in connection with the Purchase will be funded from the
Group's existing financial resources.

 

Financial effects

 

Whilst Specialist has been loss-making historically, because of agreed changes
to customer contracts and certain identified cost savings in combination with
the Group, the business of Specialist under the Company is expected to deliver
underlying additional revenues of c.£27m per annum and be breakeven at the
profit before tax level in H1 2024.  The Group believes that further cost
savings can be delivered over time as the businesses are integrated, as well
as the strategic benefits to the Special Mission SBU.

 

Regulatory approval of the deal

 

The Civil Aviation Authority has assigned all of Specialist's regulatory
approvals to Gama Aviation such that an orderly and safe management of change
process may take place.

 

Dial Partners LLP is acting as Financial Adviser to the Company on the
Purchase.

 

ENDS

 

 

Contacts

Gama Aviation Plc

Marwan Khalek, Chief Executive Officer

Michael Williamson, Chief Financial Officer

Tel: +44 125 298 4515

 

Dial Partners LLP, Financial Adviser

Angus Russell, Partner

Sandor de Jasay, Managing Director

Tel: +44 207 098 7098

 

WH Ireland, Nominated Adviser and Broker

James Joyce, Director

Tel: +44 207 220 1666

 

Camarco, PR

Geoffrey Pelham-Lane

Ginny Pulbrook

Tel: +44 203 757 4992

 

FRP Advisory Trading Limited, Administrators of SAS

Andrew Marin Sheridan, Partner

Jonathan Dunn, Partner

Tel: +44 203 005 4000

 

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/)

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