TIDMAA4
RNS Number : 9013F
Amedeo Air Four Plus Limited
17 July 2019
17 July 2019
AMEDEO AIR FOUR PLUS LIMITED (the "Company")
Annual Financial Report
The Board of the Company is pleased to announce its results for
the year ended 31 March 2019
To view the Company's Annual Financial Report please follow the
link below:
http://www.rns-pdf.londonstockexchange.com/rns/9013F_1-2019-7-17.pdf
In addition, to comply with DTR 4.1 please find below the full
text of the annual financial report. The report will also shortly
be available on the Company's website,
http://www.aa4plus.com/category/news/.
For further information, please contact:
Administrative Enquiries:
JTC Fund Solutions (Guernsey) Limited
Tel: +44 (0) 1481 702400
Nimrod Capital LLP
Richard Bolchover
Marc Gordon
+44 (0) 207 382 4565
info@nimrodcapital.com
OF ANNOUNCEMENT
E&OE - in transmission
Amedeo Air Four Plus Limited
Consolidated
Annual Financial
Report (audited)
For the year ended 31 March 2019
Summary Information
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Trading The Specialist Fund Segment of the
London Stock Exchange's Main Market
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Ticker AA4
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SEDOL BWC53H4
ISIN GG00BWC53H48
LEI 21380056PDNOTWERG107
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Reporting Currency Sterling
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Launch Date / Share Price 13 May 2015 / 100p
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Share Price 91.50p (as at 31 March 2019)
91.25p (as at 16 July 2019)
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Market Capitalisation GBP588 million (as at 31 March 2019)
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Target Dividend Current dividends are 2.0625p per
Share per quarter (8.25p per annum)
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Dividend Payment Dates January, April, July, October
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Year End 31 March
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Stocks & Shares ISA Eligible
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Aircraft Registration Numbers A6-EEY, A6-EOB, A6-EOM, A6-EOQ, A6-EOV,
A6-EOX, A6-EPO, A6-EPQ, A6-API, A6-APJ,
HS-THF, HS-THG, HS-THH, HS-THJ
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Website www.aa4plus.com
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Key Advisers and Contact Information
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Directors Registered Office of the Company
Robin Hallam (Chairman) Ground Floor
David Gelber Dorey Court
John Le Prevost Admiral Park
Laurence Barron St Peter Port
Guernsey GY1 2HT
Telephone: +44 (0)1481 702400
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Administrator and Secretary Corporate and Shareholder Adviser
JTC Fund Solutions (Guernsey) Nimrod Capital LLP
Limited 3 St Helen's Place
Ground Floor London
Dorey Court England EC3A 6AB
Admiral Park
St Peter Port
Guernsey GY1 2HT
Telephone: +44 (0)20 7382 4565
Telephone: +44 (0)1481 702400
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Asset Manager Liaison and Administration Oversight
Amedeo Limited Agent
The Oval Amedeo Services (UK) Limited
Shelbourne Road 29-30 Cornhill
Ballsbridge London
Dublin 4 England EC3V 3NF
Ireland
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Registrar, Paying Agent and Transfer UK Transfer Agent
Agent Anson Registrars (UK) Limited
Anson Registrars Limited 3500 Parkway
Anson House Whiteley
Havilland Street Fareham
St Peter Port Hampshire
Guernsey GY1 2QE England PO15 7AL
Telephone: +44 (0)1481 711301
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Auditor Advocates to the Company (as
KPMG (appointed 24 October 2018) to Guernsey
1 Harbourmaster Place law)
IFSC Carey Olsen
Dublin 1 Carey House
D01 F6F5 Les Banques
Ireland St Peter Port
Guernsey GY1 4BZ
Deloitte LLP (resigned 24 October
2018)
PO Box 137
Regency Court,
Glategny Esplanade
St Peter Port
Guernsey GY1 3HW
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Solicitors to the Company (as Solicitors to the Company (as
to English law) to asset acquisition, financing
Herbert Smith Freehills LLP and leasing documentation)
Exchange House Clifford Chance LLP
Primrose Street 10 Upper Bank Street
London London
England England
EC2A 2EG E14 5JJ
Norton Rose Fulbright LLP
3 More London Riverside
London
England
SE1 2AQ
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COMPANY OVERVIEW
Amedeo Air Four Plus Limited ("AA4" or the "Company") is a
Guernsey company incorporated on 16 January 2015. The Company
operates under the Companies (Guernsey) Law, 2008, as amended (the
"Law") and the Disclosure Guidance and Transparency Rules (the
"DGTRs") of the UK's Financial Conduct Authority (the "FCA").
The Company's shares were first admitted to trading on the
Specialist Fund Segment ("SFS") of the London Stock Exchange's Main
Market on 13 May 2015 upon the admission of 202,000,000 redeemable
ordinary shares ("Shares") at an issue price of 100 pence per
Share. Subsequently, the Company has conducted six additional
placings, resulting in the issue and admission to trading on the
SFS of an additional 440,250,000 Shares at issue prices in the
range of 100 pence to 104 pence.
As at 16 July 2019, the last practicable date prior to the
publication of this report, the Company's total issued share
capital was 642,250,000 Shares trading at 91.25 pence per
Share.
Investment Objective and Policy
The Company's investment objective is to obtain income returns
and a capital return for its shareholders by acquiring, leasing and
then selling aircraft (each an "Asset" and together "Assets").
To pursue its investment objective, the Company seeks to use the
net proceeds of placings and/or other equity capital raisings,
together with debt facilities (or instruments), to acquire aircraft
which will be leased to one or more major airlines.
The Company's Articles of Incorporation (the "Articles") provide
that the Company may only acquire further aircraft with the
approval of the Company's shareholders by ordinary resolution in
relation to each proposed acquisition. Where such approval for a
new acquisition is obtained, it is the current intention of the
Board of directors of the Company (the "Board") to offer
shareholders the opportunity to participate in any equity financing
of such further acquisitions on a broadly pre-emptive basis,
although other approaches to the equity financing may also be
considered and pursued if the Board consider it appropriate to do
so in order to diversify the funding sources of the Company.
In accordance with the investment policy, it is the Board's
intention that, subject to finding suitable deals and obtaining
subsequent shareholder approval, the Company be grown into a larger
vehicle owning a range of aircraft leased to more major airlines.
The aim of such a strategy is to diversify the risk profile of the
Company's portfolio of Assets and lease credits whilst maintaining
its target investor returns of a quarterly dividend of 2.0625 pence
per share and a double digit total return.
The Board regularly discusses with its advisors, Amedeo Limited
("Amedeo" or the "Asset Manager") and Nimrod Capital LLP ("Nimrod"
or the "Corporate and Shareholder Adviser"), the scope for further
acquisitions of aircraft in the future.
Investment Portfolio
As at the financial reporting date the Company had sixteen
wholly-owned subsidiaries, see note 1 for further details. Together
the Company and its subsidiaries are known as the "Group".
The table below details the Assets held by the Group at the
reporting date:
Manufacturer Aircraft Manufacturer's Date of Acquisition Lessee* Initial Lease
Type Serial Number / Lease Duration
("MSN") and
Registration
Airbus A380-800 157 - A6-EEY 19-May-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 164 - A6-EOB 19-May-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 187 - A6-EOM 03-Aug-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 201 - A6-EOQ 27-Nov-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 206 - A6-EOV 19-Feb-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 208 - A6-EOX 13-Apr-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Boeing 777-300ER 42334 - A6-EPO 28-Jul-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Boeing 777-300ER 42336 - A6-EPQ 19-Aug-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 233 - A6-API 24-Mar-17 Etihad 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 237 - A6-APJ 24-May-17 Etihad 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 123 - HS-THF 13-Jul-17 Thai 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 130 - HS-THG 31-Aug-17 Thai 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 142 - HS-THH 22-Sep-17 Thai 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 177 - HS-THJ 26-Jan-18 Thai 12 years
---------- --------------- -------------------- --------- --------------
* "Emirates" means Emirates Airline;
"Etihad" means Etihad Airways PJSC;
"Thai" means Thai Airways International Public Company
Limited.
Distribution Policy
The Company aims to provide shareholders with an attractive
total return comprising income from distributions through the
period of the Group's ownership of the Assets and a capital gain
upon the sale, or other disposition of the Assets.
The Group receives income in the form of lease payments. Income
distributions are made to shareholders quarterly, subject to
compliance with applicable laws and regulations. The Company
currently targets and has achieved to date a distribution to
shareholders of 2.0625 pence per Share per quarter.
There can be no guarantee that dividends will be paid to
shareholders and, if dividends are paid, as to the timing and
amount of any such dividend. There can also be no guarantee that
the Company will, at all times, satisfy the statutory solvency test
(the "Solvency Test") required to be satisfied pursuant to section
304 of the Law prior to any declaration of a dividend by the
Board.
In the event that the Company is wound-up, shareholders may also
receive a capital return from the net proceeds of a sale of the
Assets.
Performance Overview
All payments by the Lessees have to date been made in accordance
with the terms of the respective leases.
In accordance with the Distribution Policy, the Company declared
four dividends of 2.0625 pence per Share during the year under
review and two dividends of 2.0625 pence per Share were declared
after the end of the reporting period. Further details of dividends
declared and paid can be found on page 19.
Return of Capital
Following the sale of an Asset the Board may, as it deems
appropriate at its absolute discretion, either return to
shareholders all or part of the net capital proceeds of such sale
(subject to satisfaction of the Solvency Test), or re-invest the
proceeds in accordance with the Company's investment policy,
subject to shareholder approval.
The Asset Manager regularly monitors the market valuations of
the Assets and, subject to any lease obligations, will consider the
most appropriate time for the sale of any one or more of the
Assets. The Board will consider any recommendation from the Asset
Manager as to the sale of any Asset and proceed as the Board
considers appropriate.
Liquidation Resolution
Although the Company does not have a fixed life, the Articles
require that the Board convenes a Liquidation Proposal Meeting in
2029 or such other date as shareholders may approve by ordinary
resolution.
CHAIRMAN'S STATEMENT
I am pleased to present shareholders with the Group's full year
financial report covering the period from 1 April 2018 to 31 March
2019.
The key development during the period was the announcement on 14
February 2019 that Airbus will close production of the A380 in
2021. This development means that the total production run for the
aircraft will be around 250 units, almost half of which will be
operated by Emirates (with whom the Company has six A380s on
fixed-term leases). The A380 remains a unique double-decker
aircraft in that it has the capability to carry over 500 passengers
on two decks and this can help facilitate growth at
slot-constrained airports around the world. The announcement by
Airbus has no direct impact on the Company's leases nor its ability
to pay targeted distributions. The Company's first lease expiry
does not fall due until 2026. While the A380 forms approximately
two-thirds of the Group's portfolio by appraised value, the
portfolio is complemented and diversified by two additional
aircraft models, namely the B777-300ER and A350-900. The Company's
share price fell sharply on the day of the Airbus announcement,
having demonstrated little volatility since launch in 2015 and
currently resides at 91.25 pence at the time of writing. Further
details on the cessation of the A380 programme and the Company's
portfolio can be found in the Asset Manager's report. However,
during the year the Company has continued to declare quarterly
dividends of 2.0625 pence per share, representing a yearly
distribution of 8.25 pence per share and your Board is hopeful of
continuing to pay such dividends for the foreseeable future.
With respect to new transactions the landscape remains much as I
described in my statement accompanying the most recent half-yearly
report. It is pleasing to consider that aircraft investment is
gaining traction with investors as a more traditional asset class,
but the challenge of securing high-quality transactions that will
maintain the Company's existing sterling denominated dividend
target and double digit total return target mean your Board has not
been able to recommend any new transactions for shareholders to
consider. Having discussed the recent pace of growth with
shareholders and the Company's advisors I continue to believe that
we should be patient and exercise discipline with regard to future
growth. I continue to encourage Amedeo to source potential future
transactions and to work with Nimrod in evaluating their
suitability for shareholders. During the period each of our lessees
has continued to meet its obligations and so dividends have been
maintained at the targeted level.
If, in the view of the Board, it is in the interests of the
Company to acquire any further aircraft, taking into account the
maintenance of the Company's target income distributions,
opportunities for capital growth, the diversification of the
Company's portfolio and risk profile, the Board will seek
shareholders' approval of those proposed acquisitions.
On 31 March 2019 the Company had 642,250,000 shares in issue
which, at the then market price of 91.5 pence equated to a market
capitalisation of approximately GBP588 million. However, as
mentioned above, the current share price of 91.25 pence equates to
a market capitalisation in excess of GBP586 million.
The Company's Asset Manager, Amedeo, continues to monitor the
leases and reports regularly to the Board. Nimrod, the Company's
Corporate and Shareholder Adviser, continues to liaise between the
Board and shareholders.
Our underlying leases with respect to Emirates and Etihad
include monthly lease rentals paid in US Dollars (matched in
currency and amount to interest and regular principal loan
repayments) and Sterling (to cover operating costs and dividend
payments). In the case of Thai, the entire monthly lease rental is
denominated in US Dollars.
Following a review of recent activity levels and transactions in
the subsidiaries of the Company, their Boards have seen fit to
re-designate their functional currency to US Dollars from 1 April
2018 and the subsequent accounting for the year ended 31 March
2019. This is reflective of the most recent economic environment of
these subsidiaries, as their rental income and sources of financing
are primarily US Dollar based.
US Dollar lease rentals and loan repayments (with the exception
of the four Thai aircraft) are closely matched as to amount and
timing so that during the life of a lease the lease payments cover
all loan repayments as to interest and principal save for the
repayment of bullet repayments of principal due on the final
maturity of a loan. The Thai leases' floating lease rental payments
are matched to floating rate loan repayments so as to closely match
the loan interest and capital repayments save for the bullet
capital repayments due on the final maturity of such loans. The
Board monitors the foreign exchange exposure as well as the
interest rate risk resulting from the Thai transaction and may if
it considers it appropriate undertake hedging transactions.
Rental income receivable is credited evenly to the profit or
loss in the Consolidated Statement of Comprehensive Income over the
planned life of each lease. Conversely, the methodology for
accounting for interest costs means that the proportion of the loan
repayments which is treated as interest and is debited to the
Consolidated Statement of Comprehensive Income varies over the
course of the loan - so that the differential between rental income
and interest cost (as reported in the Consolidated Statement of
Comprehensive Income) reduces over the course of each twelve year
lease.
Finally, the Board is always keen to meet with shareholders, as
indeed I have done during the last year, and we welcome the
opportunity to meet more shareholders in the future as your Board
very much welcomes an open dialogue. Please do not hesitate to
contact Nimrod to request a meeting.
On behalf of the Board, I would like to thank our service
providers for all their help and all shareholders for their
continuing support of the Company.
Robin Hallam
Chairman
Date: 17 July 2019
Asset Manager's Report
On the invitation of the Directors of the Company, the following
commentary has been provided by Amedeo as Asset Manager of the
Company and is provided without any warranty as to its accuracy and
without any liability incurred on the part of the Company, its
Directors and officers and service providers. The commentary is not
intended to constitute, and should not be construed as, investment
advice. Potential investors in the Company should seek their own
independent financial advice and may not rely on this communication
in evaluating the merits of an investment in the Company. The
commentary is provided as a source of information for shareholders
of the Company but is not attributable to the Company.
THE ASSETS
Lessee Model MSN REG Delivery Date Lease Expiry Date Flight Hours Flight Cycles
----------- ------ ------- -------------- ------------------ -------------
Emirates A380-800 157 A6-EEY 19/05/2015 04/09/2026 19,509 3,107
A380-800 164 A6-EOB 19/05/2015 03/11/2026 19,464 3,076
A380-800 187 A6-EOM 03/08/2015 03/08/2027 19,128 1,764
A380-800 201 A6-EOQ 27/11/2015 27/11/2027 13,889 2,190
A380-800 206 A6-EOV 19/02/2016 19/02/2028 13,541 2,141
A380-800 208 A6-EOX 13/04/2016 13/04/2028 12,459 1,973
777-300ER 42334 A6-EPO 28/07/2016 28/07/2028 11,804 2,972
777-300ER 42336 A6-EPQ 19/08/2016 19/08/2028 12,058 2,716
---------------------- ------ ------- -------------- ------------------ ------------- --------------
Etihad A380-800 233 A6-API 24/03/2017 24/03/2029 10,820 1,152
A380-800 237 A6-APJ 24/05/2017 24/05/2029 10,050 1,036
---------------------- ------ ------- -------------- ------------------ ------------- --------------
Thai A350-900 123 HS-THF 13/07/2017 13/07/2029 8,157 1,369
A350-900 130 HS-THG 31/08/2017 31/08/2029 7,689 1,218
A350-900 142 HS-THH 22/09/2017 22/09/2029 7,492 1,203
A350-900 177 HS-THJ 26/01/2018 26/01/2030 5,785 966
---------------------- ------ ------- -------------- ------------------ ------------- --------------
As of 31 March 2019
RECENT EVENTS
On 14 February, Airbus announced that it will stop production of
the A380 aircraft in 2021. Emirates will take an additional 14 A380
units, all Rolls Royce powered, bringing its current total of 109
A380s to 123.
All other outstanding orders, including Amedeo's, were
terminated by mutual agreement. Emirates stated that the A380 will
remain a pillar in their fleet well into the 2030s. The Asset
Manager of the Company estimates that the long-term core Emirates
A380 fleet will comprise in excess of 100 A380 units, which the
Asset Manager expects will continue to be operated by Emirates for
the entirety of their useful economic lives.
In the Emirates A380 fleet, 90 units are Engine Alliance
powered, and 33 units will have Rolls Royce engines, including 19
aircraft already in service and 14 on order.
In addition, Emirates agreed to acquire a further 40 A330-900s
and 30 A350-900s.
It has been reported that Air France plans to reduce its A380s
fleet from 10 to 5 aircraft. The carrier plans to return the first
two to the lessor when their contract expires in 2019. The carrier
will continue to operate the remaining 3 aircraft until their lease
expiration.
Lufthansa is reported to have concluded a new purchase agreement
with Airbus for 20 A350-900 aircraft (and 20 787s with Boeing). As
part of the order Airbus has agreed to buy back from Lufthansa 6 of
its A380s in 2022 and 2023.
Dr. Peters, the asset manager for ex-Singapore Airlines A380s,
reported that MSNs 3 and 5 will be parted out for sale by VAS Aero
Services. Dr. Peters estimates US$45 million in parts proceeds over
a two-year period, in addition to maintaining a lease agreement
with Rolls Royce for the engines until 2020, with Rolls Royce
paying rent of $480,000 per month for each four engine sets, after
which time it plans to sell the engines. Dr. Peters has stated that
this will produce US$80 million per aircraft and an investment
return of 145-155%.
Hi Fly, a wet lease operator who provides capacity with its own
flight and cabin crew to airlines like Norwegian and Air New
Zealand continues using ex Singapore Airlines MSN 6, on lease from
a Doric managed fund and contemplates taking additional A380s.
The Japan based airline ANA received its first A380 on 21 March,
the first of its 3 A380s on order that will ultimately operate on
the Tokyo - Honolulu route.
In February, Malaysia Airlines launched a new brand called Amal
that will run Malaysia A380 flights from South East Asia to Saudi
Arabia for Islamic Pilgrimage flights.
Furthermore, Boeing postponed the roll out of the new B777X
aircraft. It is unclear if the certification of this new large jet
will be delayed by the certification process review after the
grounding of the 737 Max aircraft.
It is fair to say that the reporting about A380s during this
quarter has been negative, culminating in the Airbus announcement
of the termination of the program in 2021.
The Asset Manager continues to engage with the airlines
regarding future A380 fleet planning. Considering that the
Company's earliest A380 lease termination is in 2026, this process
does not need to be rushed.
IATA ECONOMIC ANALYSIS
Annual growth in industry-wide revenue passenger kilometres
(RPKs) started 2019 positively, rising by 6.5% y-o-y in January,
its fastest pace over the past six months. The seasonally adjusted
upward trend in RPKs accelerated in January but it is too soon to
think that this represents a change in trend.
Available Seat Kilometres (ASK) grew by 6.4% y-o-y in January,
very similar to the RPK growth pace. Load factors remained at 79.8%
from last year. The Latin American region recorded the highest
passenger load factors during January (82.5%), followed by Asia
Pacific (81.0%).
European airlines showed the fastest growth in International
passenger demand in January: 7.7% y-o-y. European RPKs show a
slower pace than in previous months due to the uncertainty of its
economic growth caused by Brexit. Asia Pacific airlines follow
closely, showing a 7.1% y-o-y increase in January for international
RPKs, a considerable improvement from 5.0% in December 2018. The
region's upward trend slowed down over the third quarter of 2018
mainly due to natural disasters that had an impact on air traffic.
However, demand recovered rapidly. The characteristic strong demand
in the region has been backed by the recent increase in connecting
airport pairs and the rise in household income across the middle
class.
Middle-East RPK growth became positive again in January, as
carriers based in the region flew 1.5% more international RPKs than
a year ago, recovering from flat growth seen during the end of
2018.
IATA shows cautious optimism for 2019 due to lower oil prices
and a solid but slower economic growth. IATA forecasts that 2019
will be the tenth consecutive year of profit and the fifth year
that airlines deliver a return on capital that exceeds the
industry's cost of capital, creating value for its investors.
International Air Transport Association, 2019. Air Passenger
Market Analysis (January 2019) (c) All Rights Reserved.
International Air Transport Association, 2018. Cautious Optimism
Extends into 2019 - Airlines Heading for a Decade in the Black
(December 2018) (c) All Rights Reserved.
EMIRATES GROUP
Emirates fleet consisted of 270 aircraft as of March 2019. In
February, Airbus and Emirates reached an agreement on its A380
contract, bringing its total A380 orderbook to 123, with 14 more
A380s to be received from 2019 until the end of 2021. Emirates
announced an order for 40x A330-900s and 30x A350-900s, that will
deliver between 2021 and 2024.
Emirates financial year 2018/19 produced the thirty first
consecutive year of profit. The airline posted a net result of
AED871 million (USD237 million), down by 69% y-o-y. This drop came
despite the increase of 6% in total revenue to AED97.9 billion
(USD26.7 billion) and was mainly due to higher fuel prices,
unfavourable foreign exchange movements and increasing competition
in its major markets.
During the financial year, total operating costs increased by 8%
y-o-y. Fuel was the largest of the airline's expenses (32% of the
total). The average price of jet fuel increased 22% plus a 3%
higher uplift in line with capacity increases, which meant a fuel
bill increase of 25% y-o-y. Additionally, the relative
strengthening of the US dollar against currencies in many of the
airline's key markets had an AED572 million (USD156 million)
negative impact compared to the positive currency impact of AED661
million (USD180 million) the year before.
The airline's overall passenger numbers during the year remained
flat carrying 58.6 million passengers, with a share of 41% flying
on an A380. Passenger traffic, measured in RPKs, increased by 2.7%,
while capacity, measured in ASKs, grew by 3.6%. Passenger load
factor was 76.8% compared to last year's 77.5%.
Emirates launched three new passenger destinations during the
year: London Stansted, Santiago (Chile) and Edinburgh, and also
reinstated services to Sabiha Gokcen (Turkey). Furthermore, it
added flight capacity to 14 existing destinations and upgraded
capacity to six cities by offering a higher frequency with more
onward connections.
Due to the closure of Dubai International's southern runway for
refurbishment work between 16 April and 30 May 2019, Emirates has
temporarily grounded 48 aircraft and cut its flight schedule by
25%. Some services have been cancelled; others re-timed or operated
with different aircraft to reduce the impact on customers. However,
a negative impact on the current year's financial results is
expected. Emirates also intend to make other changes to its network
later in the year, including deploying the A380 on services to
Boston and Glasgow in the summer.
Emirates entered into a memorandum of understanding with China
Southern Airlines to begin codesharing on 18 routes in China, the
Middle East and Africa. Emirates has also continued to develop its
partnership with Flydubai, optimising flight schedules and offering
new city-pair connections through Dubai. The codeshare and network
optimisation scheme is set to cover 240 destinations by 2022, of
which 67 were already available as of 31 March. The two airlines
have also combined their loyalty programmes under Emirates
Skywards.
In February 2019, Emirates provided an update on its fleet
planning: Months of discussions with Airbus and engine manufacturer
Rolls-Royce resulted in an agreement to reduce the number of
unfilled A380 orders from 53 to 14. The remaining deliveries shall
take place by 2021. In parallel the lessee signed a heads of
agreement to order 40 A330-900 and 30 A350-900 with deliveries
starting from 2021 and 2024 respectively. Notwithstanding the new
order, His Highness Sheikh Ahmed bin Saeed Al Maktoum emphasized
that "the A380 will remain a pillar of our fleet well into the
2030s" and that the operator continues to invest in this
product.
The Emirates Group. (c) 2018 All Rights Reserved. Emirates Group
announces half-year performance for 2018-19
The Emirates Group. (c) 2019 All Rights Reserved. Emirates signs
deal for 40 A330-900s, 30 A350-900s.
ETIHAD AIRWAYS
As of March 2019, Etihad had a majority widebody fleet of 110
aircraft in service. Its orderbook was reduced during the quarter,
having cancelled 40x A350-900, 2x A350-1000 and 19x B777-9.
Etihad entered into a codeshare agreement with Royal Jordanian
in February and Gulf Air in March. Etihad will codeshare on Royal
Jordanian's Abu Dhabi-Larnaca and Abu Dhabi Berlin services.
Services to Algiers, Tunis, Vienna and Montreal are set to be added
to this agreement. Under its agreement with Gulf Air, Etihad will
place its code on Gulf Air services from Bahrain to Abu Dhabi,
Baghdad, Casablanca, Dhaka, Faisalabad, Larnaca, Malaga, Multan,
Najaf, Peshawar, Sialkot and Tbilisi.
Etihad improved core performance in 2018 as its transformation
continues. The airline announced in March an improvement in core
operating performance of 15% over the year, 7% higher than
expected. Passenger yields increased by 4% due to capacity
discipline, fleet and network optimisation and growing market share
in premium as well as point to point markets. Results show a 3%
decrease in unit costs over the year, despite fuel prices being 31%
higher. Over the year, the airline has carried 17.8 million
passengers and 682,100 leg tonnes of cargo. Etihad reported total
revenue of USD5.9 billion (3% lower than in 2017) and a net loss of
USD1.28 billion (16% improvement y-o-y).
Centre for Aviation, 2019. Etihad Airways and Royal Jordanian
announce new codeshare partnership (February 2019) (c) All Rights
Reserved.
Centre for Aviation, 2019. Etihad Airways Improves Core
Performance In 2018 As Transformation Continues (March 2019) (c)
All Rights Reserved.
THAI AIRWAYS INTERNATIONAL
Thai Airways International's fleet is composed of 79 widebody
aircraft as of March 2019, of which 8x B747s, 32x B777s, 6x B787s,
15x A330s, 12x A350s & 6x A380s. The majority of its fleet is
owned by the airline (72%) and 28% is leased from various lessors.
Thai is set to formalise a five-year aircraft acquisition plan to
replace its older fleet, although no details were shared with the
release of its results. During the FY 2018, Thai took delivery of
3x A350-900s & 2x A330-300s and decommissioned 2x
B747-400s.
The group reported its 1Q 2019 results, with a total revenue of
THB 49,791 million, 6.9% less than the same period last year, due
to appreciation of THB against major revenue currencies and intense
competition. In addition, total expenses increased by THB 989
million or 2% resulting from the change of estimated residual
values and higher leases of aircraft. The group reported a profit
of THB 456 million. Passenger load factor was 80.3% during the
quarter, lower than previous year's 80.6%, having carried 6.29
million passengers, a 0.6% increase compared to the previous year.
The airline is expecting stronger passenger numbers and load
factors this year as the government boosts tourism promotion and
the airline is expecting fuel prices to fall.
Thai Airways is expecting to improve its financial situation
with the Montra Project, a short-term plan with a main goal of
stopping the airline's losses and strengthening its financial
position. This plan will include more leases instead of
acquisitions of aircraft, improving service efficiency, increasing
revenue and reducing costs.
Thai Airways International Public Company Limited. Thai
Announces First Quarter Results 2019
DIRECTORS
Robin Hallam (age 65) (Chairman) (independent non-executive)
Until 31 December 2015, Robin Hallam was a partner and co-head
of Asset Finance at international law firm Hogan Lovells LLP, where
he was a partner since 1995 specialising in aircraft finance,
particularly leasing, export credit and structured financing.
Between January and December 2016, Robin was a consultant at Hogan
Lovells LLP. He has represented financial institutions, operating
lessors, investors, airlines and export credit agencies. Robin
holds a degree in law from Trinity College, Cambridge, is a member
of International Society of Transport Aircraft Trading ("ISTAT")
and was ranked Band 1 for Asset Finance in Chambers UK 2015.
David Gelber (age 71) (independent non-executive)
David Gelber began his career with Citibank in London in 1974.
Over the course of the next twenty years he held a variety of
trading roles in foreign exchange, fixed income and derivatives at
Citibank, Chemical Bank and HSBC where he was Chief Operating
Officer of HSBC Global Markets. In 1994 he joined ICAP, an
inter-dealer broker, as COO and oversaw two mergers and a number of
acquisitions. He is currently the non-executive Chairman of Walker
Crips PLC, a stock broker and wealth manager; and a non-executive
director of IPGL, a holding company with investments in numerous
companies on several of which he serves as a director. He recently
joined the Board of Singapore Life Ltd, a newly formed online
insurance company. David holds a BSc in Statistics and Law from the
University of Jerusalem and an MSc in Computer Science from the
University of London.
John Le Prevost (age 67) (independent non-executive)
John Le Prevost is the Chief Executive Officer of Anson Group
Limited and Chairman of Anson Registrars Limited (the Company's
Registrar). He has spent over forty years working in offshore fund,
trust and investment businesses during which time he has been a
managing director of subsidiaries in Guernsey for County NatWest
Investment Management, The Royal Bank of Canada and for Republic
National Bank of New York. He is a Full Member of the Society of
Trust and Estate Practitioners. He is a director of a number of
other companies associated with Anson Group's business as well as
being a trustee of the Guernsey Sailing Trust. John is currently
also a non-executive director of Doric Nimrod Air One Limited,
Doric Nimrod Air Two Limited and Doric Nimrod Air Three Limited
(each of which is an aircraft leasing investment vehicle). He is
resident in Guernsey.
Laurence Barron (age 67) (independent non-executive)
Having begun his career as a commercial lawyer in Paris and then
in Tokyo, where he first became involved in aircraft financing
transactions, Laurence joined Airbus in 1982 as an in-house lawyer
specialising in aircraft finance. He subsequently moved to the
business side when, in 1984, he was appointed Sales Finance
Director North America, becoming Head of Sales Finance in 1985, and
then, in 1987, Vice President of Customer Finance. In 1994, he was
asked to set up the Asset Management Organisation within Airbus and
that year became Vice President and Head of Asset Management.
Airbus Asset Management has full responsibility for all used
aircraft transactions at Airbus and acts as an in-house leasing
company for the used Airbus aircraft owned or controlled by the
Airbus group of companies. In 2001 he was promoted to Senior Vice
President of Airbus before assuming the role of President of Airbus
China in 2004, with responsibility for Airbus' overall activities
in the People's Republic of China. In January, 2013, Laurence was
appointed Chairman of EADS China, now rebranded Airbus China.
Laurence retired from salaried Airbus employment at the end of
April 2016 and was non-executive Chairman of Airbus China until the
end of 2017. He holds an LLB from Bristol University Law
Faculty.
MANAGEMENT AND THE DELEGATION OF FUNCTIONS
The Directors, whose details are set out on page 15, are
responsible for managing the business affairs of the Group in
accordance with the Articles and have overall responsibility for
the Group's activities, including investment activity and
performance. Each of the Directors is a non-executive director and
is independent. The Group has delegated management of the Assets to
Amedeo, which is a company incorporated in Ireland. The Directors
delegate secretarial and administrative functions to JTC Fund
Solutions (Guernsey) Limited ("JTCFSL" or the "Secretary" or the
"Administrator") which is a company incorporated in Guernsey and
licensed by the Guernsey Financial Services Commission for the
provision of administration services. The Company has appointed
Nimrod as the Company's Corporate and Shareholder Adviser and Anson
Registrars Limited ("Anson") as the Company's Registrar, Transfer
Agent and Payment Agent.
Asset Manager, Agency Services and Liaison Agent
Amedeo has been appointed by the Company to provide asset
management services to the Group. Pursuant to the Asset Management
Agreement dated 30 April 2015, Amedeo will: (i) monitor and, to the
extent required pursuant to the terms and conditions set out in
each lease, administer each relevant lessee's performance of its
obligations under the relevant lease (including such lessee's
obligations relating to the insurance of the Assets); (ii) as the
Group's exclusive remarketing agent in respect of the Assets, use
all reasonable endeavours to solicit offers to lease or sell each
of the Assets on the best terms reasonably obtainable having due
regard to the then current market conditions (including current
industry and market practice); (iii) carry out mid-lease
inspections of the Assets; (iv) provide the Group with information
and analysis with respect to each Asset, including a quarterly
asset monitoring report which will include recent developments and
a forward looking statement including inspection results, events,
any material information, significant changes, decisions which have
been or need to be made, events affecting distributions, and other
major or pending events, issues or outcomes as far as known to
Amedeo; and (v) if requested by the Group, acting reasonably,
provide a financial model that would allow the Board to prepare or
re-assess target distributions based on the Asset Manager's view of
projected cash flows and liabilities.
Amedeo has further undertaken that it will dedicate sufficient
time and resources as they reasonably believe is sufficient from
time to time to fulfil any contractual arrangements it enters into
with the Group.
Amedeo has also been appointed as Agency Services provider by
the Company, pursuant to the Agency Agreement dated 30 April 2015,
to assist the Group, and act as the Group's agent, in relation to
the arrangement, negotiation, review, and, following the approval
and execution by the Group, the management of the acquisition of
Assets, the borrowings of the Group relating to the acquisition of
the Assets (including any Financing Documentation), each lease and
ensuring that Material Agreements are consistent with market
practice in the aviation industry.
Amedeo Services (UK) Limited has been appointed as Liaison and
Administration Oversight Agent by the Company, pursuant to the
Liaison and Administration Oversight Agreement dated 30 April 2015,
to: (i) co-ordinate the provision of services by service providers
to the Group under the Asset Management Agreement, the Agency
Agreement and the Administration Agreement; (ii) facilitate
communication between the Group and its service providers in
relation to the services provided under the Administration
Agreement, Asset Management Agreement and Agency Agreement; (iii)
in relation to the acquisition of any Asset, monitor and review the
timing or payments and any currency exchanges to be effected in
order to ensure payments are made in a timely maker; (iv) monitor
the on-going budget of the Group and the payment of recurring and
certain non-recurring costs, fees and expenses, and (v) assist the
Administrator in monitoring the balances in the bank accounts of
the Group and, where appropriate, provide the Administrator with
any assistance it might reasonably require with respect to making
payments, transferring balances or entering into currency exchanges
as appropriate. Amedeo Services (UK) Limited is authorised and
regulated by the Financial Conduct Authority.
The Amedeo group is primarily involved in the operating lease
and management of wide-body aircraft. The aircraft portfolio
currently managed by the Amedeo group, includes forty-two aircraft
under management and an additional 8 aircraft under oversight. The
volume of assets under management is c. US$7.5 billion, which
include commercial airliners including A380, A350, A330, A321 and
B777 and B747-F. Amedeo is a member of ISTAT, the International
Society of Transport Aircraft Trading, and is a Strategic Partner
of the International Air Transport Association ("IATA").
Corporate and Shareholder Adviser
Nimrod, which is authorised by the FCA, has been appointed as
the Corporate and Shareholder Adviser by the Company pursuant to
the Corporate and Shareholder Advisory Agreement dated 30 April
2015. In such a capacity Nimrod maintains a regular dialogue with
shareholders in order to ensure that any significant developments
in relation to the Group are communicated appropriately to
shareholders.
Nimrod was founded in 2008 as an entirely independent
organisation which specialises in generating and sourcing
interesting investment funds, themes and solutions managed by
experts in their fields for the professional investor marketplace.
Nimrod has launched nine listed investment companies since its
formation and it also provides investment, marketing, distribution
and advisory services to investment companies and their board of
directors and managers.
Secretary and Administrator
JTCFSL is an independent provider of institutional and private
client services to clients in numerous jurisdictions and is a
member of the JTC Group. See the JTC Group's website at
www.jtcgroup.com.
JTCFSL is a Guernsey incorporated company, which is licensed by
the Guernsey Financial Services Commission. JTCFSL provides
administration and secretarial services to the Group pursuant to
the Administration Agreement dated 30 April 2015, as amended. In
such capacity, JTCFSL is responsible for the general secretarial
functions required by the Law and assists the Group in its
compliance with its continuing legal and regulatory obligations, as
well as providing advice on good corporate governance and best
practice for a publicly traded company.
The Administrator is also responsible for the Group's general
administrative functions and for the preparation of unaudited
half-yearly and audited annual financial reports, subject to the
direction and oversight of the Company's Board of directors.
Registrar
Anson has been appointed as registrar, transfer agent and paying
agent by the Company pursuant to a Registrar's Agreement dated 30
April 2015. Anson performs all the usual duties of a registrar,
transfer agent and paying agent in relation to the Shares and the
maintenance of the Company's Share register.
Review
The Board keeps under review the performance of the Asset
Manager, Corporate and Shareholder Adviser, the Secretary and
Administrator and the Registrar and the powers delegated to each
service provider. In the opinion of the Board the continuing
appointments of the current service providers on the terms agreed
is in the interest of the Company and its shareholders as a
whole.
A full list of the Group's service providers is set out on pages
4 and 5.
MANAGEMENT REPORT
A description of important events that have occurred during the
financial year, their impact on the financial statements and a
description of the principal risks and uncertainties facing the
Group, together with an indication of important events that have
occurred since the end of the financial year and are likely to
affect the Group's future development are included in the Company
Overview, the Chairman's Statement, Asset Manager's Report, the
Directors Report, Statement of Principal Risks and Uncertainties,
Audit Committee Report and the notes to the consolidated financial
statements contained on pages 47 to 81 and are incorporated herein
by reference.
There were no events or changes in the related parties during
the financial year which had or could have had a material impact on
the financial position of the Group, other than those disclosed in
this consolidated annual financial report.
Responsibility Statement
The Directors jointly and severally confirm that to the best of
their knowledge:
(a) the consolidated financial statements, prepared in
accordance with International Financial Reporting Standards, as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group; and
(b) this management report (including the information
incorporated by reference) includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that the Group faces.
Robin Hallam
Director
DIRECTORS' REPORT
The Directors present their consolidated annual financial report
of the Group for the financial year ended 31 March 2019.
Principal Activities and Business Review
The principal activity of the Group is to acquire, lease and
then sell aircraft. The Directors do not envisage any change in
these activities for the foreseeable future. A description of the
activities of the Group in the year under review is given in the
Chairman's Statement on pages 9 to 10.
Status
The Company is a Guernsey domiciled company with registered
number 59675, the shares of which have been admitted to trading on
the Specialist Funds Segment of the London Stock Exchange's Main
Market.
Results and Dividends
The financial results of the Group for the financial year are
set out on pages 43 to 46.
The Company declared and paid the following dividends during the
financial year:
Announcement Payment Date Dividend per Share
Date (pence)
12 April 2018 30 April 2018 2.0625
11 July 2018 31 July 2018 2.0625
10 October 2018 31 October 2018 2.0625
17 January 2019 31 January 2019 2.0625
The Company declared and paid the following dividend after the
financial year end:
Announcement Payment Date Dividend per Share
Date (pence)
11 April 2019 30 April 2019 2.0625
31 July 2019*
(*expected payment
11 July 2019 date) 2.0625
The Company aims to continue for the time being to pay quarterly
dividends of 2.0625 pence per Share in accordance with the
Distribution Policy subject on each occasion to the Company's
satisfaction of the statutory solvency test. There is no guarantee
that any future dividends will be paid.
Directors
The Directors in office are shown on page 15 and all Directors
remain in office as at the date of approval of this consolidated
annual financial report. Further details of the Directors'
responsibilities are given on page 26.
At each annual general meeting of the Company, all the directors
who held office at the two preceding annual general meetings and
did not retire shall be eligible for re-election at the same
meeting.
Anson is the Company's Registrar, Transfer Agent and Paying
Agent. John Le Prevost is a director and controlling shareholder of
Anson Group Limited, the holding company of Anson.
Other than the above, no Director has a contract of service with
the Group, nor are any such contracts proposed.
The interests in Shares of the Company held by persons
discharging managerial responsibility and their persons closely
associated are shown below:
Number of Shares held Number of Shares
as at 31 March 2019 held as at the date
of this report
Robin Hallam 44,669 44,669
Amanda Hallam 44,669 44,669
John Le Prevost 50,000 50,000
David Gelber 332,518 332,518
Vivienne Gelber 33,945 33,945
Laurence Barron - -
Other than the above shareholdings and Mr Le Prevost's interest
in Anson, none of the Directors nor any persons connected with them
had a material interest in any of the Company's transactions,
arrangements or agreements during the year and none of the
Directors has or has had any interest in any transaction which is
or was unusual in its nature or conditions or significant to the
business of the Group and which was effected by the Group during
the reporting year.
As at the year end and as at the date of this report, there were
no outstanding loans or guarantees between the Group and any
Director.
There were no material related party transactions which took
place in the year, other than those disclosed in this Directors'
Report and in note 25 to this consolidated annual financial
report.
Substantial Shareholdings
As of the date of this report, the following shareholders had
notified the Company that they held or controlled 5% or more of the
total voting rights of the Company in issue:
Holder % of Total Voting Number of Shares
Rights
Legal & General Investment
Management Limited 5.01% 32,200,000
Newton Investment Management
Limited 6.21% 39,909,866
Disclosure of information to the auditor
The Directors who held office at the date of approval of this
Directors' Report confirm in accordance with the provisions of
Section 249 of the Law that, so far as they are each aware, there
is no relevant audit information of which the Group's auditor is
unaware; and each Director has taken all the steps that he ought to
have taken as a Director to make himself aware of any relevant
audit information and to establish that the Company's auditor is
aware of that information.
Auditor
KPMG has expressed its willingness to continue in office as
auditor and the Audit Committee has recommended their
reappointment. A resolution proposing its reappointment will be
submitted at the forthcoming annual general meeting to be held
pursuant to section 199 of the Law.
Corporate Governance
Statement of Compliance with The UK Corporate Governance Code
April 2016, as published in June 2016 (the "Code")
The Company is committed to complying with the corporate
governance obligations which apply to Guernsey registered
companies. As a Guernsey incorporated company and under the DGTRs,
the Company was not, for the year under review, required to comply
with the Code. However, the Directors place a high degree of
importance on ensuring that high standards of corporate governance
are maintained and have therefore chosen voluntarily to comply with
the provisions of the Code to the extent that they are considered
relevant to the Group.
Having reviewed the Code the Board considers that it has
maintained procedures during the year to ensure that it has
complied with the Code, other than the following exceptions:
-- There is no chief executive position within the Company,
which is not in accordance with provision A.1.2 of the Code. The
Company has no requirement for a chief executive as all directors
are non-executive and each share responsibilities for running the
business of the Group.
-- There is no senior independent director, which "position" is
recommended in provision A.4.1 of the Code. Taking into account the
nature of the Company and the fact that all directors are
non-executive and independent this position is not seen as
necessary.
-- There is no remuneration committee, which is not in
accordance with provision D.2.1 of the Code. The Company has no
requirement for a remuneration committee given the small size of
the exclusively non-executive and independent Board, and instead,
the full Board performs this function.
-- There is no nomination committee, which is not in accordance
with provision B.2.1 of the Code. The Company has no requirement
for a nomination committee given the small size of the exclusively
non-executive and independent Board, and instead, the full Board
performs this function.
-- There is no internal audit function within the Group. Under
provision C.3.6 of the Code the Audit Committee considers that, as
all of the Group's administrative functions have been delegated to
independent third parties, there is no need for the Group to have
an internal audit facility.
Subject to the areas of non-compliance explained above, the
Company complied with the other recommendations of the Code during
the year. The Code is available on the UK Financial Reporting
Council's website: www.frc.org.uk
Board Evaluation
The Board has conducted a performance evaluation of itself, its
committees and each of the Directors, as required by Provision
B.6.1 of the Code. The process was led by the Board and consisted
of each Director completing questionnaires regarding the
performance of the Board as a whole, the Chairman and the
committees. Each Director also completed a self assessment
questionnaire.
The completed questionnaires were sent to, reviewed and
discussed by the entire Board, which agreed that the Board was
effectively constituted and that each committee and individual
Director was contributing effectively to the Group's ongoing
operations and governance, such that no changes to the Board's
composition or that of any of its committees was considered
necessary or desirable at this juncture.
The Board does not believe external facilitation of its annual
self-evaluation will add benefit to the Group at this juncture but
will keep such suggestion under annual review.
Board Responsibilities
The Board comprises four Directors and their biographies appear
on page 15 demonstrating the wide range of skills and experience
they each bring to the Board. All the Directors are non-executive
and independent, with Robin Hallam acting as Chairman.
To date no director of the Company has resigned and the Board is
not seeking additional or new members to its complement but, should
such a need arise, it will consider advertising and/or using an
external agency to source suitable candidates and, once a candidate
is identified and co-opted, they will be onboarded by a series of
meetings with each Director and each key service provider. Due to
the prescribed life of the Company it is the Board's intention that
they each remain Directors for the duration.
Directors are able and encouraged to provide statements to the
Board of their concerns and ensure that any items of concern are
recorded in the Board minutes.
All Directors receive an annual fee, payable quarterly in
arrears, and there are no share options or other performance
related benefits available to them. During the financial year the
Board performed a review of its remuneration and concluded that the
remuneration of the directors should be revised with effect from 1
January 2019 as set out in the next paragraph.
Until 31 December 2018, the Chairman was paid GBP75,000 per
annum and each director paid GBP60,000 per annum with the Chairman
of the Audit Committee receiving an extra GBP7,500. With effect
from 1 January 2019, the Chairman's fee was increased to GBP76,875
per annum, the directors fees were increased to GBP61,500 per annum
and the Chairman of the Audit Committee's fee was increased to
GBP7,687.50 per annum.
The Board meets in Guernsey at least four times per year to
consider the business and affairs of the Group for the previous
quarter and the outlook for the coming quarter and beyond, at which
meetings the Directors review the Group's Assets and all other
important issues to ensure control is maintained. At two of these
meetings the Board considers and, if deemed appropriate, approves
the Group's financial statements.
In the past financial year the Directors held five Board
meetings and two Audit Committee meetings in order to carry out
their duties. As the Company's own business issues coupled with
many external influences continue to grow, it is likely that the
Directors will need to devote more time to the Company's
affairs.
Between these regular meetings the Board keeps in contact by
email and telephone as well as meeting to consider specific matters
of a transactional nature. Additionally, the Directors hold
strategy meetings with relevant advisors as appropriate.
The Directors are kept fully informed by the Asset Manager of
all matters concerning the Assets and their financial arrangements
and by the Secretary of all matters that are relevant to the
business of the Group and which should be brought to the attention
of the Directors and/or shareholders. All Directors have direct
access to the Secretary who is responsible for ensuring that Board
procedures are followed and that there are effective information
flows both within the Board and between the Board and its Asset
Manager.
The Directors also have access to the advice and services of the
Corporate and Shareholder Adviser as required. The Directors may
also, in the furtherance of their duties, take independent
professional advice at the Group's expense.
The other significant commitments of the current Chairman are
detailed in his biography on page 15. The Board was satisfied
during the year and remains satisfied that the Chairman's other
commitments do not interfere with his day-to-day performance of his
duties to the Group and that he had the commitment and time to make
himself available at short notice should the need arise.
During the year under review the number of full Board meetings
and committee meetings attended by the Directors were as
follows:
Director Full Board Committee of Audit Committee Dividend
Meetings the Board Meetings Committee
Robin Hallam 5 of 5 0 of 2 2 of 2 0 of 4
David Gelber 5 of 5 0 of 2 2 of 2 0 of 4
John Le Prevost 5 of 5 2 of 2 2 of 2 4 of 4
Laurence Barron 5 of 5 0 of 2 2 of 2 0 of 4
Board Committees:
Audit Committee
All Directors are members of the Audit Committee, with John Le
Prevost acting as Chairman. The Audit Committee has regard to the
Guidance on Audit Committees published by the Financial Reporting
Council in September 2012 and most recently updated in April 2016.
The Audit Committee examines the effectiveness of the Group's and
its service providers' internal control systems as appropriate, the
annual and half-yearly reports and financial statements, the
auditor's remuneration and engagement, as well as the auditor's
independence and any non-audit services provided by them.
The Audit Committee considers the nature, scope and results of
the auditor's work and reviews it annually prior to providing a
recommendation to the Board on the reappointment or removal of the
auditor. When evaluating the external auditor, the Audit Committee
has regard to a variety of criteria including industry experience,
independence, reasonableness of audit plan, ability to deliver
constructive criticism, effectiveness of communication with Board
and the Group 's service providers, quality control procedures,
effectiveness of audit process and added value beyond assurance in
audit opinion.
Auditor independence is maintained through limiting non-audit
services to specific audit-related work that falls within defined
categories; for example, the provision of advice on the application
of International Financial Reporting Standards or formal reports
for any Stock Exchange purposes. All engagements with the auditor
are subject to pre-approval from the Audit Committee and fully
disclosed within the consolidated annual financial report for the
relevant period. A new lead audit partner will be appointed every
five years and the Audit Committee ensures the auditor has
appropriate internal mechanisms in place to ensure its
independence.
During the financial year under review the Audit Committee
undertook a review of the audit function and recommended to the
Board the appointment of a new external auditor, KPMG of Dublin,
Ireland, which the Board accepted. Deloitte LLP of Guernsey
resigned and KPMG Dublin was appointed as external auditor to the
Company on 24 October 2018. Subsequently, the appointment of KPMG
as the Company's auditor was approved by shareholders at the annual
general meeting held on 12 December 2018.
The Audit Committee will, if appropriate, consider arranging for
the external audit contract to be tendered in 2028 (being 10 years
from the initial appointment) with the aim of ensuring a high
quality and effective audit.
The Audit Committee meets in Guernsey at least twice a year,
shortly before the Board meets to consider the Group's half-yearly
and annual financial reports, and reports to the Board with its
deliberations and recommendations and also holds an annual audit
planning discussion with the auditor. The ultimate responsibility
for reviewing and approving the half-yearly and the annual
financial report remains with the Board.
The Audit Committee also operates within clearly defined terms
of reference based on the Institute of Chartered Secretaries and
Administrators recommended terms and provides a forum through which
the Group's external auditor reports to the Board. The Audit
Committee can request information from the Company's service
providers with the majority of information being directly sourced
from the Asset Manager, Secretary and Administrator and the
external auditor. The terms of reference of the Audit Committee are
available on the Company's website and on request from the
Secretary.
Although the membership is identical, each year, for good
governance, the Board examines the Audit Committee's performance
and effectiveness, and ensures that its tasks and processes remain
appropriate. Key areas covered include the clarity of the
committee's role and responsibilities, the balance of skills among
its members and the effectiveness of reporting its work to the
Board. The Board is satisfied that all members of the Audit
Committee have relevant financial experience and knowledge and
ensure that such knowledge remains up to date. Overall the Board
considers that the Audit Committee has the right composition in
terms of expertise and has effectively undertaken its activities
and reported them to the Board during the year.
During the financial year the Audit Committee met to consider
the annual financial report for the year ended 31 March 2018 and
the half-yearly financial report for the period ended 30 September
2018.
Dividend Committee
The Dividend Committee consists of any one Director, who has
been given full power and authority to consider and, if thought
suitable, declare and approve the payment of a dividend in
accordance with the Company's Distribution Policy; subject to no
other director having raised an objection to the declaration of
such a dividend.
Internal Control and Financial Reporting
The Board is responsible for establishing and maintaining the
Group's system of risk management and internal controls, which is
reviewed fully for effectiveness on an annual basis. Internal
controls are designed to meet the particular needs of the Group and
the risks to which it is exposed. Accordingly, the internal control
systems are designed to manage rather than eliminate the risk of
failure to achieve business objectives and by their nature can only
provide reasonable and not absolute assurance against misstatement
and loss.
The key procedures which have been established to provide
effective internal controls are as follows:
-- The Board is responsible for the Group's systems of risk
management and internal controls and for reviewing their
effectiveness. The Board confirms that there is an on-going process
for identifying, evaluating and monitoring the significant risks
faced by the Group. The internal controls, which are delegated to
the applicable service providers as appropriate, are designed to
meet the Group's particular needs and the risks to which it is
exposed.
-- The Board clearly defines the duties and responsibilities of
their service providers. The appointment of agents and advisers is
conducted by the Board after consideration of the quality of the
parties involved and the Board monitors their on-going performance
and contractual arrangements.
-- The Board regularly reviews the performance of, and the
contractual arrangements with, the Group's agents, advisers and
service providers.
-- Asset management services are provided to the Group by Amedeo.
-- Corporate and shareholder advisory services are provided to the Company by Nimrod.
-- Administration and secretarial services are provided to the Group by JTCFSL.
-- Cash investment transactions and expense payments are
approved by the Board in accordance with delegated authorities
approved in advance by the Board.
-- The Board reviews financial information produced by the Administrator on a regular basis.
-- The Board also specifies which matters are reserved for a
decision by the Board and which matters may be delegated to its
service providers.
Bribery
The Directors have undertaken to operate the business in an
honest and ethical manner and accordingly take a zero-tolerance
approach to bribery and corruption. The key components of this
approach are implemented as follows:
-- the Board is committed to acting professionally, fairly and
with integrity in all its business dealings and relationships;
-- the Group will implement and enforce effective procedures to counter bribery; and
-- the Group requires all its service providers and advisors to
adopt equivalent or similar principles.
Data Protection
The Group has implemented measures designed to ensure its
compliance with the EU General Data Protection Regulation (EU)
2016/679 and associated legislation in Guernsey and in other
jurisdictions. The Company has also issued a privacy notice
explaining the data it holds, how the data is processed and its
procedures etcetera. This notice is available for review and
download at the Company's website.
Dialogue with Shareholders
All shareholders have the right to receive notice of, and
attend, general meetings of the Company, at which one or more
members of the Board will be available to discuss issues affecting
the Group.
The primary responsibility for shareholder relations lies with
the Company's Corporate and Shareholder Adviser. In addition, the
Directors are always available to enter into dialogue with
shareholders and the Chairman is always willing to meet
shareholders, as the Company believes such communication to be
important. Shareholders also have the opportunity to address
questions to the Chairman and the Committees of the Board at the
Company's annual general meeting. The Directors can be contacted
via correspondence sent to the Group's registered office or via the
Secretary.
Going Concern
The Group's principal activities are set out within the Company
Overview on pages 6 to 8. The financial position of the Group is
set out on page 44. In addition, note 17 to the consolidated
financial statements includes the Group's objectives, policies and
processes for managing its capital, its financial risk management
objectives and its exposures to credit risk and liquidity risk.
The fixed rental income under the relevant operating leases
means that the rents received should be sufficient to repay the
senior debts and provide surplus income to pay for the Group's
expenses and permit payment of dividends. The bullet repayment of
junior debt and senior debt as appropriate is expected to be
financed out of the disposal proceeds of the relevant aircraft. The
declaration of dividends may need to be suspended if the Board
considers that the Company will not be able to repay the junior
debt through the sale, refinancing or other disposition of the
Assets.
After making reasonable enquiries, and as described above the
Directors have a reasonable expectation that the Group has adequate
resources to continue in its operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis of accounting in preparing the consolidated financial
statements.
Viability Statement
As required by provision C.2.1 of the Code, the Directors
confirm that they have carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten its business model, future performance, solvency or
liquidity, and that are reported elsewhere in the consolidated
annual financial report.
Provision C.2.2 of the Code recommends that companies publish a
viability statement and this statement is intended to meet that
requirement.
The Directors regularly consider the viability of the Company
and the Group and are required by the Law to do so on every
occasion that any distribution is to be declared. When the
Directors consider the declaration of a distribution to
shareholders and under the Law they are required to consider the
Company's future solvency and the Directors consider future cash
flows for at least the next three years on the assumption that
lease income will continue to flow throughout that time. Likewise
for the purposes of this annual financial report, the Directors
have considered the prospects of the Company and the Group over a
three year period to March 2022.
The Directors, in assessing the viability of the Group, have
paid particular attention to the principal risks faced by the Group
as disclosed in the Audit Committee Report, the Statement of
Principal Risks and Uncertainties and the notes to the consolidated
financial statements, reviewing the risks faced and ensuring that
any mitigation measures in place are functioning correctly.
In addition, the Directors have considered a detailed cash flow
forecast for the running costs of the Group, which is updated
regularly, and have assumed that Emirates, Etihad and Thai are each
a going concern and will continue to remain going concerns for the
foreseeable future. Based on all financial and other information
available, including the cash flow forecast, the Directors believe
that unencumbered cash held and forecast cash receipts will be
sufficient to cover all forecast operating costs of the Group for
the period up to at least March 2022 and that the Group will
therefore be able to meet its debts as they fall due during that
period.
The Directors believe that their assessment of the viability of
the Group over the period chosen was sufficiently robust and as a
result of their review, the Directors have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations. The Companies (Guernsey) Law, 2008, as amended
(the "Law") requires Directors to prepare financial statements for
each financial year. Under the Law, they have elected to prepare
the Group's financial statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union.
The financial statements are required by Law to give a true and
fair view of the state of affairs of the Group and of the profit or
loss of the Group for that period.
In preparing these financial statements, International
Accounting Standard 1 requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Group's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
financial statements comply with the Law. They are also responsible
for safeguarding the assets of the Company and Group and for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge:
-- the financial statements, prepared in accordance with IFRS,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group and the undertakings
included in the consolidation taken as a whole; and
-- the consolidated annual financial report, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's performance,
business model and strategy.
Signed on behalf of the Board on 17 July 2019
Robin Hallam
Director
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
Summary
The Board has undertaken a robust assessment of the principal
risks facing the Group and has undertaken a detailed review of the
effectiveness of the risk management and internal control systems.
The Board is comfortable that the risks are being appropriately
monitored and the documentation to support these processes
undergoes review and enhancement with each new acquisition.
The risks set out below are those which are considered by the
Board to be the material risks relating to the Company and the
Group. Additional risks and uncertainties of which the Group is
presently unaware or that the Group currently believes are
immaterial may also adversely affect its business, financial
condition, results of operations or the value of Shares.
Risk Explanation/Mitigation
Operational There is a risk that the Group will not achieve
risk its investment objective and that the value of
a shareholder's investment could decline substantially
or entirely as a consequence.
The Board is ultimately responsible for all operational
aspects of performance, including cash management,
asset management and legal and regulatory obligations.
The Group has no employees and so the Company enters
into legal agreements with service providers to
ensure that all operational functions are fulfilled.
Failure by any service provider to carry out its
obligations to the Company in accordance with the
terms of its appointment could have a materially
detrimental impact on the operation of the Group
and could adversely affect the ability of the Company
to meet its investment objective.
This risk has been mitigated by the Company using
well established, reputable and experienced service
providers. The Board assess service providers'
continued performance on an annual basis.
Key Personnel The ability of the Company to achieve its investment
at Asset Manager objective is significantly dependent upon the expertise
of certain key personnel at Amedeo. The exact impact
of the departure of a key individual from Amedeo
on the ability of the Company to achieve its investment
objective cannot be determined and may depend on
the ability of Amedeo to recruit a new individual
of a similar level of experience and calibre. There
can be no guarantee that Amedeo would be able to
do so and this could adversely affect the ability
of the Company to meet its investment objective.
The service provision agreements in place seek
to ensure that the level of service remains continuous.
Investment The Group will only enter into leases on terms
risk which stipulate that the cost of repair and maintenance
of the Assets will be borne by the lessee. However,
upon expiry or termination of leases, the cost
of repair and maintenance will fall upon the Group.
Upon expiry of leases, the Group may therefore
bear higher costs and the terms of any subsequent
leasing arrangements may be adversely affected,
which may reduce the distributions paid to the
shareholders from such point. Repair and maintenance
issues may adversely affect the price of the Assets
upon sale. Further, if the Group were to dispose
of the Assets at the end of the lease terms, there
is a risk that indicative values may not be realised
on disposal. This could affect the ability of the
Company to meet its investment objective.
Insurance risks The lease for each Asset requires that the Lessee
insures the Asset and this is monitored by the
Asset Manager. However, inflation, changes in ordinances,
environmental consideration and other factors may
make the insurance proceeds insufficient to repair
or replace the Assets if they are damaged or destroyed.
If the insurance proceeds are insufficient to repair
or replace the Assets if they are damaged or destroyed,
this may affect the ability of the Company to meet
its investment objective. If a lease is terminated,
the Group will have to insure the relevant Asset
directly which will cause additional expenses to
be incurred.
Return of the At the end of each of the leases, the relevant
Assets at the Asset must, subject to certain conditions, be redelivered
end of the in accordance with the relevant terms of the lease.
Leases Any redelivery of an Asset in a condition other
than contracted condition may impact upon the amount
that can be realised upon any subsequent sale or
re-lease of such Asset, including that it may create
additional, unforeseen expenses, such as re-fitting,
storage and insurance costs, for the Group at that
time.
The Asset Manager performs regular checks of the
Assets and updates the Board of any material developments.
Airline industry The airline industry is particularly sensitive
related risks to changes in economic conditions. Unfavourable
economic conditions can also impact the ability
of airlines to raise fares to counteract increase
in fuel, labour and other costs.
The airline industry is also subject to other risks
including competition between airlines, dependency
on rapidly evolving technology, inability to obtain
additional equipment or support for aircraft and
engine suppliers, availability and price of fuel,
staff and employee related issued (including employee
strikes), security concerns and the threat of terrorism,
airport capacity constraints, air traffic control
inefficiencies, changes in or additional governmental
regulations relating to air travel and acts of
God (including adverse weather and natural disasters).
There is also a risk that the behaviour of airline
competitors could restrict the lessees' activities
in certain jurisdictions. Any of these risks could
materially affect the ability of the lessees to
comply with payment obligations. Furthermore, a
general downturn in the airline industry would
have an impact on attainable leasing rates in the
event of any termination or at expiry of the leases
as well as on attainable sales revenue for the
Assets.
Valuation of The Group's net asset value for accounting purposes
Assets is calculated in accordance with IFRS and may not
properly reflect the actual realisable value of
the Assets at any particular point of time.
Valuations of the Assets by Independent Expert
Valuers ("IEV") will be considered in any valuation
of the Group's Assets. The Board will consider
these valuations and shall, if there are indicators
that would suggest a permanent diminution in book
value of one or more of the Assets, determined
in consultation with the Administrator, the auditor
and the Asset Manager, there will be an appropriate
adjustment for accounting purposes to the Net Asset
Value and Net Asset Value per Share of the Group.
Valuations (including valuations provided by any
IEV), and in particular valuations of assets for
which market quotations are not readily available,
are inherently uncertain. Valuations may therefore
fluctuate over short periods of time and may be
based on estimates.
Valuations of an Asset (including valuations provided
by any IEV) will not constitute a guarantee of
value and may not necessarily reflect the prices
at which that Asset could be, or could have been,
purchased or sold at any given time, which may
be subject to significant volatility and uncertainty,
and depend on various factors beyond the control
of the Group, Amedeo and the IEV. Therefore, there
can be no guarantee that the Assets could ultimately
be realised at the Group's valuation. The "highest
and best use" value has been used for accounting
purposes given that the aircraft are held for use
in a leasing business.
The Group has a robust audit process to ensure
that valuations accurately reflect the requirements
of IFRS. The IEV will be engaged to report on fair
value on an annual basis.
Borrowings There is a risk that the Group is exposed to fluctuations
and financing in market interest rates and foreign exchange rates.
risk This risk has been partially mitigated by ensuring
that loan repayments are made from lease rental
revenues received in the matching currency and
by fixing the interest rate on loans and lease
rentals. In the case of the four Thai aircraft,
the floating rate lease rentals are closely matched
to floating rate loan repayments.
Should the lessees default on the rental payments
it is unlikely the Company will be able to meet
its targeted dividends or, in the case of ongoing
default, continue as a going concern. Should an
Asset not be sold at the end of the lease, steps
would need to be taken to refinance the Asset or
the Company.
The Asset Manager provides the Board with a report
on the performance of the lessees and of the Assets
which is considered by the Board on a quarterly
basis.
An expense budget is also reviewed on a quarterly
basis to ensure that adequate reserves are maintained
to meet operational expenses.
Lessee risk The Group's airline lessees are responsible for
all maintenance and safety checks. The requirement
for each airline lessee to service and maintain
the aircraft are set out in the lease agreements.
There is a risk that airlines may not properly
maintain aircraft which may lead to an impairment
of the aircraft's value. In order to mitigate against
this risk the Group closely monitors each airline's
usage of aircraft and their compliance with agreed
maintenance schedules.
In certain cases, the Group requires lessees to
pay maintenance reserve payments in order to ensure
that there is adequate funding at all times for
proper maintenance of the aircraft.
The credit quality and risk of lease transactions
with counterparty airlines is evaluated upon conception
of the transaction. In addition, ongoing updates
as to the operational and financial stability of
the airlines are provided by the Company's Asset
Manager in its quarterly reports to the Company.
Given the full or partial sovereign ownership status
of all underlying lessees, the credit quality of
these airlines would be regarded as some of the
highest ranked in the world. Downturns in the aviation
industry on a systemic level could weaken the financial
stability of the Group's lessees and result in
the increased risk that they could default on lease
obligations. If a significant number of lessees
are not able to meet their obligations to the Group,
the Company's own cash flows and financial results
could be adversely affected.
Regulatory The Group is required to comply with the Law, the
risk obligations of a listing on the Specialist Funds
Segment of the London Stock Exchange's Main Market,
the DGTRs and various European Union regulations
and directives. Any failure to comply with applicable
laws and regulations or to respond in a timely
manner to changes could lead to criminal or civil
proceedings.
The Company is a member of The Association of Investment
Companies (the "AIC") which is the trade body for
closed-ended investment companies. Amongst other
things, the AIC keeps its member companies up-to-date
with legal and regulatory changes and provides
guidance and advice on how to comply with them.
The Board receives periodic updates from the Company's
external auditor, legal advisers and other professionals.
Although responsibility ultimately lies with the
Board, the Secretary also monitors and assists
the Board with compliance with its legal and regulatory
obligations.
Impact of the Brexit is one of the most significant economic
United Kingdom events for the United Kingdom and at the date of
leaving the this report its effects are subject to unprecedented
European Union levels of uncertainty of outcomes, with the full
range of possible effects unknown.
The Board is mindful of the fact that aviation
is a global business and the aircraft owned by
the Group are active all over Europe. However,
as the Group has no business with companies based
in the European Union, and the aircraft owned by
the Group are leased to airlines based in the Middle
East and Thailand, the Board expects that the Group
is unlikely to be significantly impacted by the
departure of the United Kingdom from the European
Union.
A380 Aircraft On 14 February 2019 Airbus announced that it will
Production be closing production of the A380 aircraft in 2021.
This development means that the total production
run for the aircraft will be around 250 units,
almost half of which will be operated by Emirates
(with whom the Group has six A380s on fixed-term
leases). The Group also has two A380s on fixed
term lease to Etihad.
The A380 remains a unique double-decker aircraft
in that it has the capability to carry over 500
passengers on two decks and this can help facilitate
growth at slot-constrained airports around the
world. The announcement by Airbus has no direct
impact on the Group's leases nor its ability to
pay targeted distributions. The Group's first lease
expiry does not fall due until 2026. While the
A380 forms approximately two-thirds of the Group's
portfolio by appraised value, the portfolio is
complemented and diversified by two additional
aircraft models, namely the B777-300ER and A350-900.
The Asset Manager continues to engage with the
airlines regarding further A380 fleet planning.
AUDIT COMMITTEE REPORT
Membership
John Le Prevost - Chairman of the Audit Committee
Robin Hallam - Chairman of the Board
David Gelber - Non-executive Director
Laurence Barron - Non-executive Director
Key Duties
The Audit Committee's key duties are as follows:
-- reviewing and monitoring the integrity of the Group's
financial statements and financial results announcements and
monitoring compliance with relevant statutory and listing
requirements;
-- reporting to the Board on the appropriateness of the Group's
accounting policies and practices including critical accounting
policies and practices;
-- advising the Board on whether the annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
performance, business model and strategy;
-- overseeing the relationship with the external auditor and
reviewing the effectiveness of the external audit process;
-- make recommendations to the Board, for it to put to the
shareholders for their approval in general meeting, in relation to
the appointment, reappointment and removal of the external auditor
and to approve the remuneration and terms of engagement of the
external auditor;
-- monitoring the systems of internal controls and risk
management operated by the Group and by the Group's principal
service providers;
-- monitoring and reviewing the effectiveness of the Group's internal audit function;
-- developing and implementing policy on the engagement of the
external auditor to supply non-audit services, taking into account
relevant ethical guidance regarding the provision of non-audit
services by the external auditor; and to report to the Board,
identifying any matters in respect of which it considers that
action or improvement is needed and making recommendations as to
the steps to be taken; and
-- reporting to the Board on how it has discharged its responsibilities.
Audit Committee Meetings
The Audit Committee (the "Committee") meets in Guernsey at least
twice a year. The Committee reports to the Board on its activities
and on matters of particular relevance to the Board in the conduct
of its work.
Main Activities of the Committee during the Year
The Committee assisted the Board in carrying out its
responsibilities in relation to financial reporting requirements,
compliance and the assessment of internal controls. The Committee
also managed the Group's relationship with the external
auditor.
Fair, Balanced and Understandable
In order to comply with the Code, the Board has requested that
the Committee advise them on whether it believes that the Group's
annual financial report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group's performance, business model and
strategy.
Financial Reporting and Significant Issues
The Committee's primary role in relation to financial reporting
is to review, with its service providers and the external auditor,
the appropriateness of the half-yearly and annual financial
reports, the significant financial reporting issues and accounting
policies and disclosures in the financial statements. The Committee
has considered the key risks identified as being significant to
this consolidated annual financial report and the most appropriate
treatment and disclosure of any new significant issues identified
during the audit, as well as any recommendations or observations
made by the external auditor, KPMG. To aid its review, the
Committee considered reports prepared by external service providers
and reports from KPMG on the outcome of their annual audit.
The significant issues considered by the Committee in relation
to this consolidated annual financial report and how these were
addressed were as follows:
Significant issues for How the Committee addressed these significant
the year issues
Residual value of aircraft
Assets At the time of purchase of each Asset,
The Assets of the Group the Group engaged three internationally
comprise eight A380-800 recognised expert appraisers to provide
aircraft, two B777-300ER the Group with third party consultancy
aircraft and four A350-900 valuation services. All appraisers have
aircraft (the "Assets"). used similar methodologies to derive
An annual review is required their opinions on the current market
of the residual value values and future values. In the absence
of the Assets as per of used sales data for similar assets,
IAS 16 Property, Plant appraisers are heavily reliant on databases
and Equipment, which containing historical data points of
defines residual value aircraft sales relating to large commercial
as "the estimated amount aircraft. Interpretation of historical
that an entity would data is the basis for the current market
currently obtain from value and provides, together with the
disposal of the asset, expected developments in the future,
after deducting the estimated the foundation for their opinions on
costs of disposal, if future values. Furthermore, the appraisers'
the asset were already valuations take into account specific
of an age and in the technical and economic developments
condition expected at as well as general future trends in
the end of its useful the aviation industry and the macro-economic
life". The Group's estimation outlook.
technique is to make
reference to the current The Group believes that the use of forecast
forecast market value market values excluding inflation best
(excluding inflation) approximates residual value as required
which the Group believes per IAS 16 Property, Plant and Equipment.
is a reasonable application The effect of re-designating the functional
of the IAS 16 definition. currency of the subsidiaries to USD
This approach has been (see "Functional currency and foreign
taken because current exchange movements" below) as well as
market values in today's the opposite effect of a small increase
prices for twelve year in USD terms in the aggregate residual
old A380 and A350's do values of the aircraft from the prior
not exist at the reporting year, has resulted in an adjustment
date. It should be noted made to depreciation in the current
that in relation to B777-300 year, details of which have been disclosed
ERs residual values, in Note 9.
there is minimal to no
public secondary market As updated investment valuations of
trading data available. all Assets as at the year end were commissioned
As such the Group has and received from third party professional
made reference to current valuers and analysed by Amedeo and the
forecast market values directors, the Committee believes that
(excluding inflation) those valuations are appropriate for
in determining residual use in preparing the financial statements.
values for the B777-ERs. Therefore, the average residual value
excluding inflation used in the accounts
is based on these appraisals.
Upon review of the advice they have
received from Amedeo and the appraisers,
the Committee is of the opinion that,
the current estimates of the residual
values excluding inflation of the Assets
are reasonable approximations of the
residual values of the aircraft within
the IAS 16 definition.
Functional currency and Following a review of recent activity
foreign exchange movements levels and transactions in the subsidiaries
of the Company, the Boards have seen
IFRS require that all fit to re-designate the functional currency
entities have a functional of the subsidiaries to US Dollars from
currency, representing 1 April 2018. This is reflective of
the currency of the primary the economic environment of these subsidiaries,
economic environment as their rental income and sources of
in which such an entity financing are primarily US Dollar based.
operates. The functional
currency of the Company This will seek to more closely align
is Sterling. However, the results of the Group with the economic
functional currency must activities of the Group over time. The
be assessed at an individual subsidiaries are now classified as foreign
entity level. operations in accordance with IAS 21,
and translation movements in such entities
The functional currency will be recognised through Other Comprehensive
of entities can change Income as appropriate.
the accounting treatment
for exchange gains or The Committee reviewed the decision
losses and for the re-translation to re-designate the functional currency
of monetary items. In of the subsidiaries and the subsequent
particular o consolidation, accounting for the year ended 31 March
the treatment of re-translations 2019.
of a foreign operation
will differ from that The Committee has carefully considered
of a subsidiary with the disclosure in notes 2(g) and 17(b)
a matching functional to the financial statements to ensure
currency to that of its that the change of the functional currency
parent. of the subsidiaries to US Dollars from
1 April 2018 as well as the reality
of the Group's foreign exchange risk
exposure, is properly explained.
Risk of default by Lessee
on lease rentals receivable The Committee receives quarterly reports
from Amedeo which comment on the economic
Should the Lessees default performance of the Lessees. Amedeo has
on the rental payments, advised that economically, Emirates,
it is unlikely the Company Etihad and Thai have continued to perform
will be able to meet well.
its targeted dividends
or, in the case of ongoing The Committee concluded that it wishes
default, continue as to continue to receive quarterly reports
a going concern. from Amedeo on the performance of the
Lessees and would continue to monitor
the Lessees' overall performance.
The Committee has carefully considered
the disclosure in note 17(c) to the
financial statements to ensure that
this concentration of credit risk is
properly reflected.
Consideration of any The Committee considered the issue at
triggers for impairment length and were of the opinion that,
an impairment review be undertaken in
IAS 36 Impairment of the current year.
Assets requires that
a review for impairment As detailed in note 3, the Committee
be carried out by the has considered various factors such
Group when there is an as: a lack of conclusive comparable
indication of impairment current market data for the A380 and
of an asset and if events A350 aircraft, the lack of publically
or changes in circumstances available secondary market data for
indicate that the carrying the B777-300ER aircraft, the nature
amount of an asset may of the operations of the Group being
not be recoverable. The aircraft leasing as opposed to an airline
review will compare the operating business, as well as other
carrying amount of the mitigating factors such as the close
asset with its recoverable monitoring by the Group of each airline's
amount, which is the usage of aircraft and their compliance
higher of its value if with agreed maintenance schedules.
sold (if known) and its
value in use.
Recognition of the derivative In assessing the accounting recognition
financial instruments of the interest rate swaps prevailing
in respect of the interest during the year, the Committee has considered
rate swaps the issue at length and are of the opinion
that, on an on-going basis, the variable
IFRS 9 Financial Instruments: loan and corresponding interest rate
Recognition and Measurement swap will gives rise to cash flows which,
requires that separately in combination will match the lease
identifiable derivative income.
financial instruments
such as interest rate The fair value of the interest rate
swaps are carried at swaps on a mark-to-market basis represents
fair value at the reporting the net present value of the estimated
date and are accounted differential between the fixed and variable
for separately in the interest rates that will arise given
financial statements. the market "assessment" of interest
These derivative financial rates over the balance of the interest
instruments are recorded rate swap contracts. This financial
at mark-to-market fair instrument will have a zero value at
values as either a financial the end of the swap contracts.
asset or a financial
liability.
Interaction with the
Financial Reporting Council During the year, the FRC's Audit Quality
("FRC") Review ("AQR") team selected Deloitte's
Paragraph 81 of Section audit of the Group's 2018 financial
4: Communication with statements as part of their 2018-2019
shareholders of the FRC's annual review of audit firms which was
Guidance on Audit Committees concluded on 5 March 2019. The AQR identified
dated April 2016 states, limited improvements were needed. The
amongst other matters, Committee subsequently reviewed the
that the audit committee FRC's report, discussing it with Deloitte
section in a company's and scrutinising Deloitte's response
annual report should on how it would address the FRC's limited
disclose: findings in future audits of similar
companies. The Committee invited the
* the nature and extent of interaction (if any) with successor auditor, KPMG, to ensure that
the FRC's Corporate Reporting Review team; and they also follow similar procedures
for the future audits of the Company.
The Committee note that the decision
* where a company's audit has been reviewed by the to change auditor was made prior to
FRC's Audit Quality Review team, the Committee should the FRC's review so had no bearing on
discuss the findings with their auditors and consider the decision to change auditors and
whether any of those findings are significant and, if that there was nothing included in the
so, make disclosures about the findings and the report which would have impacted on
actions they and the auditors plan to take. this decision.
Going Concern
After making enquiries, the Committee has a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, being the next
three financial years. The Committee believes the Group is well
placed to manage its business risks successfully as the interest on
the Group's loans has been fixed, and the fixed rental income under
the operating leases ensures rents should be sufficient to repay
the senior loans, but not the junior loans, and provide surplus
income to pay for the Group's expenses and permit payment of
dividends.
Accordingly, the Committee has adopted the going concern basis
in preparing the financial information. As regards the USD18.5
million to USD40 million of junior debt per aircraft to be bullet
repaid, the Board is comfortable for the time being that the
residual disposable value of each aircraft will be sufficient to
cover such debt.
Internal Controls
The Committee has made due enquiry of the internal controls of
the Administrator. The Committee is satisfied with the controls
currently implemented by the Administrator and will continue to
review them regularly. The Committee has also requested the
Secretary keeps the Group informed of any in-house developments and
improved internal control procedures effected.
Internal audit
The Group has no employees and operates no systems of its own,
relying instead on the employees and systems of its external
service providers. The Board has therefore taken the decision that
it would not be of any material benefit for the Group to appoint an
internal auditor.
External Audit
The effectiveness of the external audit process is dependent on
appropriate audit risk identification at the start of the audit
cycle. The Committee received from KPMG, a detailed audit plan,
identifying their assessment of the key risks. For the year the
primary risks identified were in respect of valuation of the
aircraft Assets, depreciation and management override of
controls.
Using its collective skills, the Committee evaluated the
effectiveness of the audit process in addressing the matters raised
through the reporting it received from KPMG at the conclusion of
the audit.
In particular the Committee formally appraise KPMG against the
following criteria:
-- Independence
-- Ethics and conflicts
-- Knowledge and experience
-- Challenge
-- Promptness
-- Cost
-- Overall quality of service
In addition the Committee sought feedback from the Administrator
on the effectiveness of the audit process.
For the year, the Committee were satisfied that there had been
appropriate focus on the primary areas of audit risk and assessed
the quality of the audit process to be good. The Committee
discussed their findings with KPMG and will consider if future
external audits could be improved.
The Committee holds meetings with the external auditor to
provide additional opportunity for open dialogue and feedback from
the auditor. If felt necessary, Committee members meet with the
external auditor without the Administrator and Asset Manager being
present. Matters discussed include the residual valuation of
aircraft, the auditor's assessment of business risks and management
activity thereon, the transparency and openness of interactions
with the Administrator, confirmation that there has been no
obstruction of the auditor by the Administrator or undue influence
on the independence of their audit and how they have exercised
professional scepticism.
Appointment and Independence
The Committee considers the reappointment of the external
auditor, including the rotation of the audit partner, each year and
also evaluate their independence on an on-going basis.
Deloitte LLP had been the Group's external auditor since January
2015. During the financial year under review the Audit Committee
undertook a review of the audit function and recommended to the
Board the appointment of a new external auditor, KPMG of Dublin,
Ireland, which the Board accepted. Deloitte LLP of Guernsey
resigned and KPMG Dublin was appointed as external auditor to the
Company on 24 October 2018. Subsequently, the re-appointment of
KPMG as the Company's auditor was approved by shareholders at the
annual general meeting held on 12 December 2018.
The Audit Committee has recommended to the Board the
re-appointment of KPMG as the Group's external auditor be proposed
for the year ending 31 March 2020. Accordingly a resolution
proposing the re-appointment of KPMG as the Group's auditor will be
put to shareholders at the Company's 2019 annual general
meeting.
The Audit Committee will, if appropriate, consider arranging for
the external audit contract to be tendered in 2028 (being ten years
from the initial appointment) with the aim of ensuring a high
quality and effective audit.
There are no contractual obligations restricting the Committee's
choice of external auditor. The Committee continues to consider the
audit tendering provisions outlined in the Code, of which it is
supportive.
The external auditor is required to rotate the audit partner
responsible for the audit every five years. The current lead audit
partner has been in place since October 2018.
Non-Audit Services
To further safeguard the objectivity and independence of the
external auditor, the Committee has a formal policy governing the
engagement of the external auditor to provide non-audit services.
No changes have been made to this policy during the year. This
policy specifies that KPMG should only be engaged for non-audit
services where there is considered to be no material threat to the
auditor's independence and such services cannot be provided by
another existing service provider.
Committee Evaluation
Our activities formed part of the review of Board effectiveness
performed in January 2018.
An internal evaluation of our effectiveness will be carried out
in 2019.
John Le Prevost
Chairman of the Audit Committee
Independent Auditor's Report To The Members Of Amedeo Air Four
Plus Limited
1 Our opinion is unmodified
We have audited the financial statements of Amedeo Air Four Plus
Limited ("the Company") for the year ended 31 March 2019 which
comprise the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated
Statement of Cash Flows, the Consolidated Statement of Changes in
Equity, and the related notes, including the accounting policies in
note 2. The financial reporting framework that has been applied in
their preparation is Guernsey Law and International Financial
Reporting Standards (IFRS) as adopted by the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of affairs of the
group as at 31 March 2019 and of its loss for the year then
ended;
-- have been properly prepared in accordance with IFRS as adopted by the EU; and
-- have been properly prepared in accordance with the
requirements of the Companies (Guernsey) Law 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Company
in accordance with ethical requirements that are relevant to our
audit of financial statements in the UK, including the Financial
Reporting Council (FRC)'s Ethical Standard as applied to a listed
entity, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
2 Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed, and our results are based on procedures undertaken, in
the context of, and solely for the purpose of, our audit of the
financial statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters.
In arriving at our audit opinion above, there were two key audit
matters as follows;
Valuation of Aircraft GBP2.2bn (31 March 2018 - GBP2.2bn)
Refer to page 51 (accounting policy) and 55 (critical accounting
judgements) and pages 58-60 (financial statement disclosures)
The key audit matter How the matter was addressed in our
The Group's aircraft portfolio audit
makes up 94.8% of its total The procedures we undertook included
assets by value. Aircraft valuation but were not limited to:
is a subjective exercise requiring * obtaining and documenting our understanding of the
significant judgement and estimation, design and implementation of controls over the
particularly for certain of valuation of aircraft;
the aircraft owned by the Group.
Appropriate consideration needs
to be given to the market for * obtaining the Board of Directors' impairment
the Group's aircraft both at assessment model and:
present and at the end of their
current leases. The secondary
market for certain of the Company's (i) evaluating and challenging the
aircraft is still nascent and indicators used to determine that
as such valuation can be challenging. an aircraft may be impaired based
on available external and internal
sources of information; and
(ii) assessing whether the methodology
and assumptions used for determining
recoverable amounts for aircraft
were applied consistently across
the portfolio;
* testing the accuracy of the impairment assessment
model via re-performance and testing the completeness
of the inputs;
* evaluating and challenging the Board of Directors'
key judgements and assumptions in determining the
recoverable amounts by:
(i) comparing them to evidence obtained
through external sources where possible,
our industry knowledge and market
experience;
(ii) performing scenario analysis
and stress-testing of the key judgements
and assumptions and comparing results
to those used by the Group; and
(iii) holding discussions with management's
experts and challenging the basis
for their estimates;
* challenging the assumptions applied by the servicer
with regard to the commercial outlook and resultant
impairment assessment for the aircraft;
* evaluating the competence, capabilities and
objectivity of the external independent aircraft
appraisers appointed by the Group. The information
provided by the independent appraisers is used by the
Group to assist in determining the fair value of the
aircraft; and
* assessing the adequacy of the disclosures made by the
Group in relation to their description of the
judgements, assumptions and estimates made.
Based on procedures performed, we
found that judgements relating to
the valuation of aircraft and the
related disclosures are reasonable.
Functional Currency
Refer to page 49 (accounting policy)
The key audit matter How the matter was addressed in our
The Company's primary activity audit
represents the financing of The procedures we undertook included
its subsidiaries, which own but were not limited to:
and lease aircraft. The Company * obtaining and documenting our understanding of the
obtains funds from the issuance primary economic environments of the parent and
of equity in Great British subsidiary entities;
Pounds (GBP) which it uses
to invest in its subsidiaries
in order to part-finance the * evaluating and challenging the Board of Directors'
acquisition of their aircraft. key judgements and assumptions in determining the
The subsidiary entities earn functional currencies of the Company and its
lease revenue, primarily in subsidiaries based on our understanding of the
US Dollars (USD) which they activities in each entity;
use to repay their external
financing in USD and to pay
dividends to the parent. * testing the accuracy of the USD balances in the
The functional currency of subsidiary accounts by agreeing to underlying
the subsidiaries has been changed transaction documents and recalculating the
to USD as at 1 April 2018 following translation of balances where applicable;
a review of their activities
and the primary economic environment
in which they operate. This * testing the accuracy of the calculation of the
matter has involved a certain amounts recognised in other comprehensive income in
level of judgement by the Board relation to the translation of the subsidiaries of
and significant consideration the Company as foreign operations;
as part of our audit and therefore
represents a key audit matter.
* testing the appropriateness of the foreign exchange
rates used in order to translate the foreign
operations against observable market data; and
* assessing the adequacy of the disclosures made by the
Group in relation to their description of the
judgements and decisions made in order to change the
functional currency of the relevant subsidiaries and
to calculate the foreign currency translation
reserve.
Based on procedures performed, we
found that judgements relating to
the change of functional currency
and the related disclosures are reasonable.
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the group financial statements as a whole was
set at GBP11.8m, determined with reference to a benchmark of Total
Assets, of which it represents 0.5%.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP558,000, in
addition to other identified misstatements that warranted reporting
on qualitative grounds
Our audit of the Group was undertaken to the materiality
specified above and was all performed by one engagement team in
Ireland.
4 We have nothing to report on going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group or
to cease their operations, and as they have concluded that the
Group's financial position means that this is realistic. They have
also concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
We are required to report to you if:
-- we have anything material to add or draw attention to in
relation to the directors' statement in note 2 (j) to the financial
statements on the use of the going concern basis of accounting with
no material uncertainties that may cast significant doubt over the
Group's use of that basis for a period of at least twelve months
from the date of approval of the financial statements; or
-- if the related statement under the Disclosure Guidance and
Transparency Rules (the "DGTRs") set out on pages 24 to 25 is
materially inconsistent with our audit knowledge.
We have nothing to report in these respects.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Group will
continue in operation.
5 We have nothing to report on the other information in the
annual report
The directors are responsible for the other information
presented in the annual report together with the financial
statements. The other information comprises the information
included in the annual report but excluding the financial
statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except as
explicitly stated below, any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
-- the Principal Risks disclosures describing these risks and
explaining how they are being managed and mitigated;
-- the directors' confirmation within the viability statement on
page 25 that they have carried out a robust assessment of the
principal risks facing the Group, including those that would
threaten its business model, future performance, solvency and
liquidity; and
-- the directors' explanation in the viability statement of how
they have assessed the prospects of the Group, over what period
they have done so and why they considered that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Under the DGTRs we are required to review the viability
statement. We have nothing to report in this respect.
Other Corporate governance disclosures
We are required to address the following items and report to you
in the following circumstances:
-- Fair, balanced and understandable: if we have identified
material inconsistencies between the knowledge we acquired during
our financial statements audit and the directors' statement that
they consider that the annual report and financial statements taken
as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group's
position and performance, business model and strategy; or
-- Report of the Audit Committee: if the section of the annual
report describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit
Committee; or
-- Statement of compliance with UK Corporate Governance Code: if
the directors' statement does not properly disclose a departure
from provisions of the UK Corporate Governance Code specified by
the DGTRs for our review.
We have nothing to report in these respects.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the eleven
provisions of the UK Corporate Governance Code specified by DGTRs
for our review.
We have nothing to report in these respects.
7 We have nothing to report on the other matters on which we are
required to report by exception
Under the Companies (Guernsey) Law, 2008 we are required to
report to you if, in our opinion:
-- we have not received all the information and explanations we require for our audit; or
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records.
We have nothing to report in these respects.
8 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page
19-25, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error;
assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
9 The purpose of our audit work and to whom we owe our
responsibilities
Our report is made solely to the Company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
17 July 2019
Ian Nelson
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Harbour Master Place,
IFSC,
Dublin 1,
Ireland
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2019
1 Apr 2018 to 1 Apr 2017 to
31 Mar 2019 31 Mar 2018
Notes GBP GBP
INCOME
US Dollar based rent income 4 209,281,106 174,262,912
British Pound based rent
income 4 45,367,662 44,622,657
Bank interest received 92,295 310,754
-------------- --------------
254,741,063 219,196,323
EXPENSES
Operating expenses 5 (6,774,131) (6,409,953)
Depreciation of aircraft 9 (156,592,877) (118,829,217)
-------------- --------------
(163,367,008) (125,239,170)
Net profit for the year before
finance costs
and foreign exchange gains 91,374,055 93,957,153
FINANCE COSTS
Finance costs 10 (84,789,684) (50,222,982)
Foreign exchange gains 17b 1,897,122 184,771,192
Profit before tax 8,481,493 228,505,363
Income tax expense 23 (64,220) (35,959)
Profit for the year after
tax 8,417,273 228,469,404
-------------- --------------
OTHER COMPREHENSIVE INCOME
Translation adjustment on
foreign operations 2g 45,399,079 (96,119)
Total comprehensive income
for the year 53,816,352 228,373,285
============== ==============
Pence Pence
Earnings per Share for the
year - Basic and Diluted 8 1.31 39.08
-------------- --------------
In arriving at the results for the financial year, all amounts
above relate to continuing operations.
The notes on pages 47 to 81 form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2019
Notes 31 Mar 2019 31 Mar 2018
GBP GBP
NON-CURRENT ASSETS
Aircraft 9 2,247,415,403 2,236,341,901
Financial assets at fair value
through profit and loss 16 13,712,492 26,913,163
-------------- --------------
2,261,127,895 2,263,255,064
CURRENT ASSETS
Accrued income 24 13,589,107 12,815,841
Receivables 12 5,231,516 3,096,630
Cash and cash equivalents 19 91,070,150 58,848,615
-------------- --------------
109,890,773 74,761,086
TOTAL ASSETS 2,371,018,668 2,338,016,150
============== ==============
CURRENT LIABILITIES
Payables 13 179,449 182,424
Deferred income 24 37,972,435 35,309,651
Borrowings and Ijarah financing 14 118,654,871 107,044,378
156,806,755 142,536,453
NON-CURRENT LIABILITIES
Security deposits 20 13,482,669 12,537,207
Maintenance reserves 21 32,365,575 8,567,078
Borrowings and Ijarah financing 14 1,455,457,619 1,461,065,080
Deferred income 24 8,327,595 9,562,608
-------------- --------------
1,509,633,458 1,491,731,973
TOTAL LIABILITIES 1,666,440,213 1,634,268,426
============== ==============
TOTAL NET ASSETS 704,578,455 703,747,724
-------------- --------------
EQUITY
Share capital 15 647,638,697 647,638,697
Foreign currency translation
reserve 45,302,960 (96,119)
Retained earnings 11,636,798 56,205,146
-------------- --------------
704,578,455 703,747,724
============== ==============
Pence Pence
-------------- --------------
Net Asset Value Per Share based
on 109.70 109.58
-------------- --------------
642,250,000 (2018: 642,250,000)
shares in issue
The financial statements were approved by the Board of Directors
and authorised for issue on 17 July 2019 and are signed on its
behalf by:
_____________________________
John Le Prevost, Director
The notes on pages 47 to 81 form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year from 1 April 2018 to 31 March 2019
1 Apr 2018 1 Apr 2017
to to
Notes 31 Mar 2019 31 Mar 2018
GBP GBP
OPERATING ACTIVITIES
Profit for the year after tax 8,417,273 228,469,404
Decrease in accrued and deferred income (6,653,527) (1,334,965)
Interest received (92,295) (310,754)
Depreciation of aircraft 9 156,592,877 118,829,217
Taxation expense 23 64,220 35,959
Loan and Ijarah financing interest
payable and fair value adjustments
on financial assets 10 82,786,314 48,655,936
Decrease in payables (2,975) (1,115,376)
Security deposits received - 13,712,719
Maintenance reserves received 23,480,248 8,378,751
Decrease in receivables 3,622 934,297
Foreign exchange movement (1,897,122) (184,771,192)
Amortisation of debt arrangement costs 10 2,003,370 1,567,046
NET CASH FROM OPERATING ACTIVITIES 264,702,005 233,051,042
---------------- --------------
INVESTING ACTIVITIES
Acquisition costs/purchase of Aircraft 9 (11,195) (787,286,750)
Interest received 92,295 310,754
NET CASH FROM / (USED IN) INVESTING
ACTIVITIES 81,100 (786,975,996)
---------------- --------------
FINANCING ACTIVITIES
Dividends paid 7 (52,985,621) (47,711,811)
Repayments of capital on senior loans
and Ijarah financing 22 (114,824,566) (93,189,603)
Payments of interest on senior loans
and Ijarah financing 22 (54,843,611) (47,516,327)
Payments of interest on junior loans 22 (12,903,161) (11,216,557)
Security trustee and agency fees 10 (243,897) (232,591)
Share issue proceeds 15 - 182,000,000
Share issue costs 15 - (2,250,483)
New debt raised on senior loans and
Ijarah financing 22 - 559,385,492
Costs associated with debt issued - (7,713,807)
NET CASH (USED IN) / FROM FINANCING
ACTIVITIES (235,800,856) 531,554,313
---------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 58,848,615 82,685,031
Increase / (decrease) in cash and
cash equivalents 28,982,249 (22,370,641)
Exchange rate adjustment 3,239,286 (1,465,775)
CASH AND CASH EQUIVALENTS AT OF
YEAR 19 91,070,150 58,848,615
---------------- --------------
The notes on pages 47 to 81 form an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2019
Notes Share capital Retained Foreign Total
earnings currency
translation
reserve
GBP GBP GBP GBP
Balance as at 1
April 2018 647,638,697 56,205,146 (96,119) 703,747,724
Total comprehensive
income for the
year - 8,417,273 45,399,079 53,816,352
Dividends paid 7 - (52,985,621) - (52,985,621)
-------------- ------------- ------------- -------------
Balance as at 31
March 2019 647,638,697 11,636,798 45,302,960 704,578,455
-------------- ------------- ------------- -------------
Notes Share capital Retained Foreign Total
earnings currency
/(deficit) translation
reserve
GBP GBP GBP GBP
Balance as at 1
April 2017 467,889,180 (124,552,447) - 343,336,733
Total comprehensive
income / (loss)
for the year - 228,469,404 (96,119) 228,373,285
Share issue proceeds 15 182,000,000 - - 182,000,000
Share issue costs 15 (2,250,483) - - (2,250,483)
Dividends paid 7 - (47,711,811) - (47,711,811)
-------------- -------------- ------------- -------------
Balance as at 31
March 2018 647,638,697 56,205,146 (96,119) 703,747,724
-------------- -------------- ------------- -------------
The notes on pages 47 to 81 form an integral part of these
consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2019
1. GENERAL INFORMATION
The consolidated financial information incorporates the results
of Amedeo Air Four Plus Limited (the "Company"), AA4P Alpha
Limited, AA4P Beta Limited, AA4P Gamma Limited, AA4P Delta Limited,
AA4P Epsilon Limited, AA4P Zeta Limited, AA4P Eta Limited, AA4P
Theta Limited, AA4P Iota Limited, AA4P Kappa Limited, AA4P Lambda
Limited, AA4P Mu Limited, AA4P Nu Limited, AA4P Leasing Ireland
Limited, AA4P Leasing Ireland 2 Limited and AA4P Xi Limited (each a
"Subsidiary" and together the "Subsidiaries") (together the Company
and the Subsidiaries are known as the "Group").
The Company was incorporated in Guernsey on 16 January 2015 with
registered number 59675. Its share capital consists of one class of
redeemable ordinary shares ("Shares"). The Shares are admitted to
trading on the SFS of the London Stock Exchange's Main Market.
The Company's investment objective is to obtain income returns
and a capital return for its Shareholders by acquiring, leasing and
then selling aircraft.
Since the completion of its initial public offering on 13 May
2015, the Company has acquired eight Airbus A380, two Boeing
777-300ER and four Airbus A350-900 aircraft. Eight of these
aircraft are leased to Emirates, two aircraft are leased to Etihad
and four aircraft are leased to Thai Airways. All aircraft are
leased for a period of 12 years from each respective delivery date.
In order to complete the purchase of these aircraft, subsidiaries
of the Company entered into debt financing arrangements which
together with the equity proceeds were used to finance the
acquisition of the fourteen aircraft.
Rental income received in US Dollars is used to pay loan
interest and regular capital repayments of debt (but excluding any
bullet or balloon repayment of principal), which are likewise
denominated in US Dollars. US Dollar lease rentals and loan
repayments, with the exception of the four Thai aircraft which
incorporate floating rate lease rentals, are furthermore fixed at
the outset of the Company's acquisition of an aircraft and are very
similar in amount and timing save for the repayment of bullet and
balloon repayments of principal due on the final maturity of a loan
to be paid out of the proceeds of the sale, refinancing or other
disposition of the relevant aircraft.
2. ACCOUNTING POLICIES
The significant accounting policies adopted by the Group are as
follows:
(a) Basis of preparation
The consolidated financial information has been prepared in
conformity with IFRS as adopted by the European Union, which
comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB") and International
Financial Reporting Interpretations Committee ("IFRIC") and
applicable Guernsey law. The financial information has been
prepared on a historical cost basis.
The accounting policies adopted are consistent with those of the
previous financial year, except for the adoption of the new and
amended standards set out below.
Changes in accounting policies and disclosure
The following Standards or Interpretations have been adopted in
the current year. Their adoption has not had a material impact on
the amounts reported in these consolidated financial statements and
is not expected to have any impact on future financial periods
except where stated otherwise.
IFRS 9, 'Financial Instruments'. Effective for accounting
periods commencing on or after 1 January 2018 and is endorsed by
the EU.
IFRS 15 and amendments to IFRS 15 Revenue from contracts with
customers - The standard and amendments are effective for annual
periods beginning on or after 1 January 2018 and are endorsed by
the EU.
The impact of the adoption of the above standards and the new
accounting policies are disclosed in note 26.
IFRIC 22 'Foreign currency transactions and advance
consideration' - this IFRIC addresses foreign currency transactions
or parts of transactions where there is consideration that is
denominated or priced in a foreign currency. The interpretation
provides guidance for when a single payment/receipt is made as well
as for situations where multiple payments/receipts are made. The
guidance aims to reduce diversity in practice, is effective for
annual periods beginning on or after 1 January 2018 and is endorsed
by the EU. The adoption of this interpretation has not had a
material impact on the amounts reported in these consolidated
financial statements and is not expected to have any impact on
future financial periods.
The following Standards or Interpretations that are expected to
affect the Group have been issued but not yet adopted by the Group.
Other Standards or Interpretations issued by the IASB and IFRIC are
not expected to affect the Group.
IFRS 16 Leases - specifies how an IFRS reporter will recognise,
measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise
assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value. Lessors
continue to classify leases as operating or finance, with IFRS 16's
approach to lessor accounting substantially unchanged from its
predecessor, IAS 17. This standard is effective for annual periods
beginning on or after 1 January 2019 and is endorsed by the EU.
IFRIC 23 Uncertainty over Income Tax Treatments - clarifies the
accounting for uncertainties in income taxes. This standard is
effective for annual periods beginning on or after 1 January 2019
and is endorsed by the EU. Guernsey has a 0% tax rate. The Irish
entities adopt commonly utilised tax structures which do not
contain inherent uncertainty.
The Directors have considered the above and are of the opinion
that the above Standards and Interpretations are not expected to
have a material impact on the Group's financial statements except
for the presentation of additional disclosures and changes to the
presentation of components of the financial statements. These items
will be applied in the first financial period for which they are
required.
(b) Basis of consolidation
The consolidated financial information incorporates the results
of the Company and the Subsidiaries. The Company owns 100% of all
the shares in the Subsidiaries which grants it exposure to variable
returns from the entities and the power to affect those returns,
granting it control in accordance with IFRS 10.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial information.
(c) Taxation
The Company and the Guernsey Subsidiaries have been assessed for
tax at the Guernsey standard rate of 0%. Since AA4P Leasing Ireland
Limited and AA4P Leasing Ireland 2 Limited are Irish tax resident
trading companies, they will not be subject to Guernsey tax, but
their net lease rental income earned (after tax deductible
expenditure) will be taxable as trading income at 12.5% under Irish
tax regulations. Please refer to note 23 for more information.
(d) Share capital
Shares are classified as equity. Incremental costs directly
attributable to the issue of Shares are recognised as a deduction
from equity.
(e) Expenses
All expenses, other than interest expenses are accounted for on
an accruals basis.
(f) Interest income and expenses
Interest income and expenses are accounted for on an effective
interest rate basis.
(g) Foreign currency translation
The currency of the primary economic environment in which the
Company operates (the functional currency) is Great British Pounds
("GBP") which is also the presentation currency.
Transactions denominated in foreign currencies are translated
into GBP at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into the functional
currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
Consolidated Statement of Comprehensive Income.
At the 31 March 2018 year end, the Group had two foreign
subsidiaries, being AA4P Leasing Ireland Limited and AA4P Leasing
Ireland 2 Limited, each with a functional currency of US Dollars
("USD").
During the year, on 1 April 2018, the activities and
transactions of certain of the subsidiaries were reviewed by the
Board and were noted to be carried out substantially in USD. The
Board noted that the currency of the primary economic environment
of these entities was now more closely aligned with USD. As such,
the decision was made to re-designate the functional currency of
these entities to USD and to classify them as foreign
operations.
All assets and liabilities in the subsidiaries were translated
into the functional currency of USD using the USD/GBP exchange rate
prospectively from the date of change, being 1 April 2018. All
monetary assets and liabilities in the subsidiaries denominated in
currencies other than USD were translated to USD using the closing
exchange rate at 31 March 2019, with all items of income and
expenses in currencies other than USD in the subsidiaries to USD
using the exchange rate at the date of transaction. For
non-monetary items in the subsidiaries (including Aircraft assets),
the translated amount into USD at 1 April 2018 will be the item's
new historical cost.
On consolidation the financial statements of foreign
subsidiaries whose functional currency is not GBP are translated
into GBP as follows: statement of financial position items are
translated into GBP at the period end exchange rate; statement of
income items are translated into GBP at the exchange rates
applicable at the transaction dates, as long as this is not
rendered inappropriate as a basis for translation by major
fluctuations in the exchange rate during the period; unrealized
gains and losses arising from the translation of the financial
statements of foreign subsidiaries are recorded under "Translation
adjustment on foreign operations" in other comprehensive income to
be recycled to income.
(h) Cash and cash equivalents
Cash at bank and short term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits with a term of no more than three
months from the start of the deposit and highly liquid investments
readily convertible to known amounts of cash and subject to
insignificant risk of changes in value.
(i) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being acquiring, leasing and selling
aircraft (together the "Assets" and each an "Asset"). For more
information on segmental information please refer to note 27.
(j) Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. While the Group
is in a current net liability position, the Group continues to make
profits as reflected and generate strong positive operating cash
flows. The Directors believe the Group is well placed to manage its
business risks successfully despite the current economic climate as
the loans have been largely fixed and the fixed rental income under
the operating leases means that the rents should be sufficient to
repay the debt and provide surplus income to pay for the Group's
expenses and permit payment of dividends. In addition the variable
rate loans are either hedged with an associated interest rate swap
contract issued by the lender to fix the loan interest over the
term of the loans, or are unhedged with related rentals which are
also floating rate to match. Accordingly, the Directors have
adopted the going concern basis in preparing the consolidated
financial information. The Board is not aware of any material
uncertainty that may cast significant doubt upon the Company's
ability to continue as a going concern.
(k) Leasing and rental income
The leases relating to the Assets have been classified as
operating leases as the terms of the leases do not transfer
substantially all the risks and rewards of ownership to the lessee.
The Assets are shown as non-current assets in the Consolidated
Statement of Financial Position. Further details of the leases are
given in note 11.
Rental income and advance lease payments from operating leases
are 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 amortised on a straight-line basis over the
lease term. The four A350-900 aircraft have variable lease rentals,
the variable portion of which is treated as contingent rent.
Contingent rent is recognised in the period in which it is
earned.
The deferred income liability represents the difference between
actual payments received in respect of the lease income (including
some received in full upfront) and the amount to be accounted for
in the accounting records on a straight line basis over the lease
terms. This liability will reduce over time as the leases continue
and approach the end of the lease terms. In addition to the timing
of receipt of the various rental income streams, the liability is
impacted by the USD/GBP exchange rate at the year end and any new
leases entered into from new aircraft acquisitions during the
period.
(l) Maintenance reserve and security deposits liabilities
In many aircraft operating lease contracts, the lessee has the
obligation to make periodic payments which are calculated with
reference to utilisation of airframes, engines and other major
life-limited components during the lease. In most lease contracts,
upon presentation by the lessee of the invoices evidencing the
completion of qualifying work on the aircraft, the Group reimburses
the lessee for the work, up to a maximum of the advances received
with respect to such work.
The Group records such amounts as maintenance advances.
Maintenance advances not expected to be utilised within one year
are classified as non-current liabilities. Amounts not refunded
during the lease are recorded as lease revenue at lease
termination. Further details are given in note 21.
Security deposits represent amounts paid by the lessee as
security in accordance with the lease agreements. The deposits are
repayable to the lessees on the expiration of the lease agreements
subject to satisfactory compliance of the lease agreements by the
lessees. Further details are given in note 20.
(m) Property, plant and equipment - Aircraft
In line with IAS 16 Property Plant and Equipment, each Asset is
initially recorded at cost, being the fair value of the
consideration paid. The cost of the Asset is made up of the
purchase price of the Assets plus any costs directly attributable
to bringing it into working condition for its intended use. Costs
incurred by the lessee in maintaining, repairing or enhancing the
aircraft are not recognised as they do not form part of the costs
to the Group. Accumulated depreciation and any recognised
impairment losses are deducted from cost to calculate the carrying
amount of the Asset.
Depreciation is recognised so as to write off the cost of each
Asset less the estimated residual value over the lease term of the
Asset of twelve years, using the straight line method. Residual
values have been arrived at by taking the average amount of three
independent external valuers and after taking into account
disposition fees. The Directors consider that the use of forecast
market values excluding inflation best approximates residual value
as required by IAS 16 Property, Plant and Equipment.
The depreciation method reflects the pattern of benefit
consumption. The residual value is reviewed annually in March and
is an estimate of the amount the entity would receive today if the
Asset were already of the age and condition they will be in at the
end of the lease. Due to a change in functional currency of the
subsidiaries to USD as explained in note 2(g) as well as a change
in estimate of residual value for all aircraft in the current year
and acceleration of the pattern of consumption in certain aircraft,
there has been a GBP21,994,079 increase in the annual depreciation
charge for the current year. Further details of the change in
estimate of residual values and the impact on depreciation for the
current year as a result are given in note 9.
Depreciation starts when the Asset is available for use.
At each audited reporting date, the Group reviews the carrying
amounts of its 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). Further
details are given in note 3.
Recoverable amount is the higher of fair value less costs to
sell and the value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-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.
If the recoverable amount of an Asset is estimated to be less
than its carrying amount, the carrying amount of the Asset 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 is
increased to the revised estimate of its recoverable amount, but so
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 in prior years. A reversal of an
impairment loss is recognised immediately in profit or loss.
(n) Financial assets and financial liabilities
(a) Classification
The Group classifies its derivatives i.e. the interest rate
swaps, as financial assets or financial liabilities at fair value
through profit or loss. These financial assets and financial
liabilities are classified at fair value through profit or loss at
inception. The Group does not classify any derivatives as hedges in
a hedging relationship.
Trade and other receivables are classified as financials assets
at amortised cost. Financial assets measured at amortised cost are
initially recognised at fair value and are subsequently measured at
amortised cost using the effective interest rate methodology.
(b) Recognition/derecognition
Financial assets or liabilities are recognised on the trade date
- the date on which the Group commits to enter into the
transactions. Financial assets or liabilities are derecognised when
the rights to receive cash flows from the investments have expired
or the Group has transferred substantially all risks and rewards of
ownership.
(c) Measurement
Financial assets and financial liabilities at fair value through
profit or loss are initially recognised at fair value. Transaction
costs are expensed in profit or loss in the Consolidated Statement
of Comprehensive Income. Subsequent to initial recognition, all
financial assets and financial liabilities at fair value through
profit or loss are measured at fair value. Gains and losses arising
from changes in the fair value of the 'financial assets or
financial liabilities at fair value through profit or loss'
category are presented in the Consolidated Statement of
Comprehensive Income in profit or loss in the period in which they
arise.
(d) Impairment
The Group assesses on a forward looking basis the expected
credit losses associated with its receivables or accrued income
carried at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in credit
risk.
For trade and other receivables, the Group applies the
simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of the
receivables.
(o) Non-derivative financial liabilities
Financial liabilities consist of security deposits, payables and
borrowings. The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics. All financial
liabilities are initially measured at fair value, net of
transaction costs. All financial liabilities are recorded on the
date on which the Group becomes party to the contractual
requirements of the financial liability. Financial liabilities are
subsequently measured at amortised cost using the effective
interest method, with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the
amortised cost of the 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, to
the net carrying amount on initial recognition.
Associated costs are subsequently amortised on an effective
interest rate basis over the life of the loan and are shown net on
the face of the Consolidated Statement of Financial Position over
the life of the lease.
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
(p) Ijarah financing
Ijarah financing, a type of Islamic finance where the Group has
substantially all the risks and rewards of ownership of the
aircraft, are included within Borrowings and Ijarah financing
(notes 14 and 22). The Ijarah finance is capitalised at inception
at the fair value of the aircraft or, if lower, the present value
of the minimum payments. The corresponding rental obligations, net
of finance charges, are included in short-term and long-term
borrowings and Ijarah financing. Each payment is allocated between
the liability and finance cost. The finance cost is charged to the
profit or loss over the period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each
period. The Asset acquired under Ijarah financing is depreciated
over the Asset's useful life or over the shorter of the Asset's
useful life and the finance term if there is no reasonable
certainty that the Group will obtain ownership at the end of the
finance term.
(q) Net Asset Value
Due to the change in functional currency of the subsidiaries to
USD as explained in note 2(g), the net asset value ("NAV") of the
Group is GBP704,578,455 and the NAV per Share is 109.70p as at 31
March 2019 as reflected in the Statement of Financial Position.
However in circumstances where the Directors are of the opinion
that the NAV or NAV per Share, as calculated under prevailing
accounting standards, is not appropriate or could give rise to a
misleading calculation, the Directors, in consultation with the
Administrator may determine, at their discretion, an alternative
method for calculating a more useful value of the Group and shares
in the capital of the Company, which they consider more accurately
reflects the value of the Group.
3. SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the application of the Group's accounting policies, which are
described in note 2, the Directors are required to make judgements,
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 that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the Group's accounting
policies
The following are the critical judgements and estimates 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 information.
KEY SOURCES OF ESTIMATION UNCERTAINTY
Residual value of Aircraft
As described in note 2 (m), the Group depreciates the Assets on
a straight line basis over the term of the lease after taking into
consideration the estimated residual value. IAS 16 Property, Plant
and Equipment requires residual value to be determined as an
estimate of the amount that the Group would currently obtain from
disposal of the Asset, after deducting the estimated costs of
disposal, if it were of the age and condition expected at the end
of the lease.
There are currently no A380 or A350 aircraft of a similar type
of sufficient age for the Directors to make a direct market
comparison in making this estimation. After consulting with the
Asset Manager, the Directors have concluded that a forecast market
value using base values (determined annually) for the A380 and A350
aircraft at the end of the lease (excluding inflationary effects)
best approximates residual value. In relation to the Boeing
777-300ER aircraft residual values, there is minimum to no public
secondary market trading data available. In estimating residual
value at the 31 March 2019 audited annual year end, the Directors
have made reference to forecast market values using base values
(excluding inflationary effects) for the aircraft obtained from
three independent expert aircraft valuers.
Base value is the appraiser's opinion of the underlying economic
value of an aircraft, in an open, unrestricted, stable market
environment with a reasonable balance of supply and demand. Full
consideration is assumed of its "highest and best use" given the
fact that the aircraft are held for use in a leasing business. An
asset's base value is determined using the historical trend of
values and in the projection of value trends and presumes an
arm's-length, cash transaction between willing, able, and
knowledgeable parties, acting prudently, with an absence of duress
and with a reasonable period of time available for marketing. In
the appraisers' valuations, the base value of an aircraft excludes
reconfiguration costs and assumes the physical condition is average
for an asset of its type and age and that all maintenance
requirements and schedules have been met.
The estimation of residual value remains subject to uncertainty.
If the estimate of residual value in USD terms, had for instance,
decreased by 20% with effect from the beginning of this period, the
net profit for the period and closing shareholders' equity would
have been decreased by approximately GBP18.27 million (31 March
2018: GBP13.08 million). An increase in residual value by 20% would
have had an equal but opposite effect. This reflects the range of
estimates of residual value that the Directors believe would be
reasonable at this time. Estimates of forecast market values have
been made on the assumption that a relatively liquid secondary
lease market exists at the end of the lease based on management's
current intentions for the fleet and their judgments.
CRITICAL ACCOUNTING JUDGEMENTS
Operating lease commitments - Group as lessor
The Group had entered into operating leases on fourteen Assets
as at the year end (see note 11). The Group has determined, based
on an evaluation of the terms and conditions of the arrangements,
that it retains all the significant risks and rewards of ownership
of these Assets and accounts for the contracts as operating
leases.
The operating leases on the Assets have been determined by the
Group to be for 12 years.
Impairment
Factors that are considered important which could trigger an
impairment review include, but are not limited to, significant
decline in the market value beyond that which would be expected
from the passage of time or normal use, significant changes in the
technology and regulatory environments, evidence from internal
reporting which indicates that the economic performance of the
asset is, or will be, worse than expected. The Directors considered
the issue at length and are of the opinion that an impairment
review be undertaken.
As described in note 2(m), an impairment loss exists when the
carrying value of an asset or cash generating unit exceeds its
recoverable amount, which is the higher of its fair value less
costs to sell and its value in use. The Directors review the
carrying amounts of the Assets at each audited reporting date and
monitor the Assets for any indications of impairment as required by
IAS 16 Property, Plant and Equipment and IAS 36 Impairment of
Assets.
In assessing value-in-use, the estimated future cash flows
expected to be generated by the asset (ie the income streams
associated with the lease and the expected future market value of
the aircraft at the end of the lease) are discounted to their
present value using a pretax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset and the credit risk profile of the
lessees.
In determining fair value less costs of disposal, recent market
transactions are taken into account, if available. If no such costs
can be identified, an appropriate valuation model is used. Such a
valuation reflects highest and best use given the fact that the
aircraft are held for use in a leasing business.
The Board together with the Asset Manager believes that it would
be prudent to conduct an impairment test in the current year, as
the below items may result in pricing changes for the current
portfolio of aircraft:
1. As further Airbus A380 and A350 aircraft reach comparable 12
year ages and exit their first lease agreements, further market
data is available to Amedeo and the asset valuers.
2. Lack of publically available secondary market data for the B777-300ER aircraft.
3. Changing technologies, market innovation and changes to key
production programs as well as the success and / or failure as well
as the timing of new aircraft model launches.
4. Information regarding Airbus cancellation of the A380
programme, creating uncertainty as to the liquidity of the future
market for sale or re-lease.
The assessment was performed by comparing the net book value of
each aircraft to the higher of its respective fair value less costs
to sell and value-in-use. Rental cash flows to the end of the
contracts have been used in the calculation of value-in-use as the
cash flows are contractual. Any assumptions with regards issues in
counterparty credit risk would be reflected in the discount rate
used to calculate the net present value of future cash flows. There
are no indications at this time that either Emirates, Etihad or
Thai will default or that any of the aircraft will not be
marketable post lease.
The Asset Manager considered the following in their
determination of the most appropriate discounting rate;
1. The discount rate should be a rate commensurate with what a
normal market participant would consider to be the risk inherent in
the assets.
2. All of the aircraft are with Emirates, Etihad and Thai, who
are considered to have low credit risk profiles.
Impairment
The fair value and the future sales value of the aircraft have
been estimated with reference to the average of current market and
future base values from three independent appraisers.
Based on the impairment review performed, the Directors are of
the opinion that no impairment loss is required to be recognised in
the current year.
4. RENTAL INCOME
1 Apr 2018 1 Apr 2017
to to
31 Mar 2019 31 Mar 2018
GBP GBP
US Dollar based rent income 202,554,650 172,527,166
Revenue earned but not yet received 6,861,748 3,651,430
Revenue received but not yet earned (4,233,212) (5,669,398)
------------ ------------
205,183,186 170,509,198
Amortisation of advance rental income
(US Dollar) 4,097,920 3,753,714
------------ ------------
209,281,106 174,262,912
British Pound based rent income 45,440,590 45,023,438
Revenue earned but not yet received 150,005 150,004
Revenue received but not yet earned (222,933) (550,785)
------------ ------------
45,367,662 44,622,657
Total rental income 254,648,768 218,885,569
------------ ------------
Rental income is derived from the leasing of the Assets. US
Dollar based rent represents rent received in USD and British Pound
based rent represents rent received in "GBP". Rental income
received in USD is earned by the subsidiaries and is consolidated
by translating it into the functional currency (GBP) at the average
rate for the year.
An adjustment has been made to spread the actual total income
receivable over the term of the lease on an annual basis. In
addition, advance rentals received have also been spread over the
full term of the leases. The four A350-900 aircraft have variable
lease rentals, the variable portion of which is treated as
contingent rent. Contingent rent is recognised in the period in
which it is earned.
The contingent rent for the year ended 31 March 2019 is
GBP7,449,539 per annum (31 March 2018: GBP2,292,048).
5. OPERATING EXPENSES
1 April
1 April 2018 2017
to to
31 Mar 2019 31 Mar 2018
GBP GBP
Corporate and shareholder adviser
fee 2,341,151 2,156,442
Asset management fee 3,340,323 3,122,102
Administration fees 409,728 322,909
Bank charges 11,550 8,568
Accountancy fees 17,581 39,325
Registrar's fee 17,803 20,407
Audit fee 68,702 122,252
Directors' remuneration 264,141 252,375
Directors' and Officers' insurance 44,776 46,470
Legal and professional expenses 93,973 225,449
Annual regulatory fees 30,152 15,859
Travel costs - (251)
Sundry costs 120,119 61,247
Other operating expenses 14,132 16,799
6,774,131 6,409,953
============= ============
6. DIRECTORS' REMUNERATION
Until 31 December 2018, the Chairman was paid GBP75,000 per
annum and each director paid GBP60,000 per annum with the Chairman
of the Audit Committee receiving an extra GBP7,500. With effect
from 1 January 2019, the Chairman's fee was increased to GBP76,875
per annum, the directors fees were increased to GBP61,500 per annum
and the Chairman of the Audit Committee's fee was increased to
GBP76,875 per annum.
In the prior year, each Director was also paid a documentation
and diligence fee in relation to the admission of the new shares
issued in June 2017 (as per note 15) of GBP10,000 as well as a fee
of GBP2,500 pursuant to the Second Placing in November 2017 (as per
note 15) with respect to the acquisition, financing and leasing of
the Assets acquired.
7. DIVIDS IN RESPECT OF SHARES
1 Apr 2018 to
31 Mar 2019
GBP Pence
per
Share
First dividend 13,246,405 2.0625
Second dividend 13,246,405 2.0625
Third dividend 13,246,405 2.0625
Fourth dividend 13,246,406 2.0625
----------- -------
52,985,621 8.2500
=========== =======
1 Apr 2017 to
31 Mar 2018
GBP Pence
per
Share
First dividend 9,637,030 2.0625
Second dividend 12,414,188 2.0625
Third dividend 12,414,188 2.0625
Fourth dividend 13,246,405 2.0625
----------- -------
47,711,811 8.2500
=========== =======
8. EARNINGS PER SHARE
Earnings per Share ("EPS") is based on the profit for the year
of GBP8,417,273 (2018: GBP228,469,404) and 642,250,000 shares
(2018: 584,620,000 shares) being the weighted average number of
Shares in issue during the year.
There are no dilutive instruments and therefore basic and
diluted Earnings per Share are identical.
9. PROPERTY, PLANT AND EQUIPMENT - AIRCRAFT
Aircraft Aircraft
31 Mar 2019 31 Mar 2018
GBP GBP
COST
Aircraft purchases - opening
balance 2,414,868,310 1,631,681,713
Acquisition costs - opening
balance 10,265,805 6,165,652
Additions- aircraft - 783,186,597
Additions- acquisition costs 11,195 4,100,153
Translation adjustment on foreign
operations* 182,885,262 -
-------------- --------------
Cost as at year end 2,608,030,572 2,425,134,115
-------------- --------------
Aircraft Aircraft
31 Mar 2019 31 Mar 2018
GBP GBP
ACCUMULATED DEPRECIATION AND AMORTISATION
Opening balance 188,792,214 69,962,997
-------------- --------------
Depreciation for the current year
based on previous year residual
values and functional currency of
GBP for the subsidiaries 133,680,456 66,213,155
Amortisation of acquisition costs
on aircraft 918,342 204,405
Depreciation charge for the year
on aircraft acquired - 26,699,478
Adjustment due to movement in USD
residual values** - 19,373,723
FX movement on residual values** - 6,338,456
Adjustment due to change in functional
currency of the subsidiaries to
USD and movement in USD residual
values* 21,994,079 -
Net depreciation charge on all aircraft
for the year 156,592,877 118,829,217
Translation adjustment on foreign
operations* 15,230,078 -
-------------- --------------
Accumulated depreciation as at year
end 360,615,169 188,792,214
-------------- --------------
Carrying amount - opening balance 2,236,341,901 1,567,884,368
============== ==============
Carrying amount as at year end 2,247,415,403 2,236,341,901
============== ==============
* The Group believes that the use of forecast market values
excluding inflation best approximates residual value as required
per IAS 16 Property, Plant and Equipment (refer to note 3). As
explained in note 2(g), the decision was made by the Board to
re-designate the functional currency of the subsidiaries to USD and
to classify them as foreign operations. Therefore the carrying
values of the aircraft in the subsidiaries in USD have been
re-translated at the closing Sterling / US Dollar exchange rate at
31 March 2019 for consolidation purposes through "Translation
adjustment on foreign operations". The combined effect of
re-designating the functional currency of the subsidiaries to USD,
together with the opposite effect of a 1.7 per cent increase in
average appraised residual values in USD terms (when comparing
uninflated residual values at March 2019 with uninflated values at
March 2018), resulted in a GBP21,994,079 increase in the annual
depreciation charge for the current year. Included in the
depreciation charge for the period is
additional depreciation in respect of certain aircraft which
recognised an acceleration in the pattern of consumption of
benefits expected from these aircraft based on the redelivery
conditions of the aircraft and their residual values.
**In the prior year, where the functional currency of the
subsidiaries was designated as GBP, the combined effect of
translating residual values at the Sterling / US Dollar exchange
rate prevailing at 31 March 2018 of 1.4018 and a 24 per cent
reduction in average appraised residual values in USD terms (when
comparing uninflated residual values at March 2018 with inflated
values at March 2017), resulted in a GBP25,712,179 increase in the
annual depreciation charge for the year.
In order to complete purchases of the aircraft, subsidiaries of
the Company have entered into debt financing agreements with a
senior fully amortising loan and junior balloon loan (see note 14).
The Company used the equity proceeds (see note 15) in addition to
the finance agreements to finance the acquisition of the aircraft.
Subject to the below, rentals under each lease are sufficient to
pay the senior loan payment (being capital and interest including
the Kappa Ijarah finance as detailed in note 14 and junior loan
payments due (being interest only), also in USD.
Exceptions to the above include senior loans with an outstanding
balance of GBP335,394,305 (31 March 2018: GBP330,670,423) at year
end, which have balloon capital payments on maturity, and a junior
loan, with a balance of GBP20,178,224 (31 March 2018:
GBP20,130,387) at year end which has capital and interest. Any
junior loan principal and senior loan capital due at maturity, is
expected to be repaid at lease expiry out of the proceeds of the
sale, re-lease, refinancing or other disposition of the relevant
Asset.
The Group can sell the Assets during the term of the leases
(with the lease attached and in accordance with the terms of the
transfer provisions contained therein). Under IAS 17 the direct
costs
attributed in negotiating and arranging the operating leases
have been added to the carrying amount of the leased Asset and
recognised as an expense over the lease term.
The Group's aircraft with carrying values of GBP2,247,415,403
(31 March 2018: GBP2,236,341,901) are pledged as security for the
Group's borrowings (see note 14).
Refer to note 3 for details of impairment test conducted by the
Group.
10. FINANCE COSTS
1 April 1 April
2018 to 2017 to
31 Mar 2019 31 Mar 2018
GBP GBP
Amortisation of debt arrangements costs 2,003,370* 1,567,046*
Interest payable on loan and costs
of Ijarah financing** 69,341,747* 60,081,508*
Security trustee and agency fees 243,897 232,591
Fair value adjustment on financial
assets at fair value through profit
and loss (see note 16) 13,200,670 (11,658,163)
84,789,684 50,222,982
------------- -------------
*Included in Finance costs is interest on amortised cost
liability for the year of LIR71,345,117 (31 March 2018: LIR
61,648,554).
** This amount includes LIR 94,223 interest income (31 March
2018: LIR 169,252 interest expense) from the interest rate
swaps.
11. OPERATING LEASES
The amounts of minimum lease receipts at the reporting date
under non cancellable operating leases are detailed below:
31 March 2019 Next 12 2 to 5 After 5
Months Years Years Total
GBP GBP GBP GBP
US Dollar based
rent income 205,478,042 819,174,990 919,263,192 1,943,916,224
British Pound
based rent income 45,446,952 181,787,808 172,705,533 399,940,293
------------ -------------- -------------- --------------
250,924,994 1,000,962,798 1,091,968,725 2,343,856,517
------------ -------------- -------------- --------------
31 March 2018 Next 12 2 to 5 After 5
Months Years Years Total
GBP GBP GBP GBP
US Dollar based
rent income 187,802,884 749,640,959 947,945,267 1,885,389,110
British Pound
based rent income 41,540,192 186,086,781 224,678,960 452,305,933
------------ ------------ -------------- --------------
229,343,076 935,727,740 1,172,624,227 2,337,695,043
------------ ------------ -------------- --------------
The fourteen assets all have an initial lease term of twelve
years with lease end dates ranging from September 2026 to January
2030.
At the end of each lease the lessee has the right to exercise an
option to purchase the Asset at the discretion of the Company. If a
purchase option event occurs the Company and the lessee will be
required to arrange for a current market value appraisal of the
Asset to be carried out by three independent appraisers. The
purchase price will be equal to the average valuation of those
three appraisals.
12. RECEIVABLES
31 Mar 2019 31 Mar 2018
GBP GBP
Prepayments 162,026 158,167
Accrued rental income 5,069,490 2,930,982
Vat receivable - 7,481
------------ ------------
5,231,516 3,096,630
============ ============
The above carrying value of receivables is equivalent to the
fair value.
13. PAYABLES
31 Mar 2019 31 Mar 2018
GBP GBP
Accrued administration fees 34,816 31,525
Accrued audit fee 74,237 77,000
Accrued registrar fee 1,653 762
Other accrued expenses 249 38,479
Taxation payable 68,494 34,658
179,449 182,424
============ ============
The above carrying value of payables is equivalent to the fair
value due to their short term maturity period and nature as
repayable on demand.
14. BORROWINGS AND IJARAH FINANCING
31 Mar 2019 31 Mar 2018
Borrowings GBP GBP
Bank loans 1,438,601,158 1,432,888,319
Ijarah financing
Finance liability 154,343,895 154,422,796
Total borrowings and Ijarah
financing 1,592,945,053 1,587,311,115
Total associated costs (18,832,563) (19,201,657)
-------------- --------------
1,574,112,490 1,568,109,458
============== ==============
Consisting of:
Senior loans ($1,537,683,285
at 31 March 2019, $1,666,818,905
at 31 March 2018 ) 1,178,512,116 1,189,056,145
Ijarah finance ($199,032,505
at 31 March 2019, $ 213,924,455
at 31 March 2018 ) 152,566,175 152,606,973
Junior loans ($316,795,078
at 31 March 2019, $317,432,479
at 31 March 2018) 243,034,199 226,446,340
1,574,112,490 1,568,109,458
============== ==============
Borrowings
Non-current portion 1,315,143,488 1,319,371,167
Current portion (senior loans
only) 106,402,827 96,131,318
-------------- --------------
1,421,546,315 1,415,502,485
============== ==============
Ijarah financing
Non-current portion 140,314,131 141,693,913
Current portion (senior loans
only) 12,252,044 10,913,060
-------------- --------------
152,566,175 152,606,973
============== ==============
Total Borrowings and Ijarah
financing
Non-current portion 1,455,457,619 1,461,065,080
Current portion (senior loans
only) 118,654,871 107,044,378
-------------- --------------
1,574,112,490 1,568,109,458
============== ==============
The tables below detail the future contractual undiscounted cash
flows in respect of the senior and junior loans and the Ijarah
financing, including both the principal and interest payments, and
will not agree directly to the amounts recognised in the
Consolidated Statement of Financial Position.
31 Mar 2019 31 Mar 2018
GBP GBP
Borrowings: Amount due for settlement
within 12 months 166,347,249 152,183,645
Ijarah finance: Amount due for
settlement within 12 months 18,928,466 17,601,124
-------------- --------------
185,275,715 169,784,769
============== ==============
Consisting of:
Senior loans covered by lease rental
receipts (capital
and interest) 151,868,268 138,738,044
Ijarah finance covered by lease rental
receipts (capital
and interest) 18,928,466 17,601,124
Repayments of junior debt covered by
lease rental receipts (interest only
except for B1 Junior loan) 14,478,981 13,445,601
-------------- -------------
185,275,715 169,784,769
============== =============
Borrowings: Amount due for settlement
after 12 months and before 60 months 664,378,065 609,470,306
Ijarah finance: Amount due for settlement
after 12 months and before 60 months 75,713,863 70,404,495
-------------- -------------
740,091,928 679,874,801
============== =============
Consisting of:
Senior loans covered by lease rental
receipts (capital and interest) 606,416,522 555,567,118
Ijarah finance covered by lease rental
receipts (capital and interest) before
60 months 75,713,863 70,404,495
Repayments of junior debt covered by
lease rental receipts (interest only
except for B1 Junior loan) 57,961,543 53,903,188
-------------- -------------
740,091,928 679,874,801
============== =============
31 March 31 March
2019 2018
GBP GBP
Borrowings: Amount due for settlement
after 60 months 988,276,743 1,052,687,506
Ijarah finance: Amount due for settlement
after 60 months 97,797,073 108,540,263
---------------- ----------------
1,086,073,816 1,161,227,769
================ ================
Consisting of:
Senior loans covered by lease rental
receipts (capital and interest) and
uncovered senior loans (for balloon
payment at maturity) 670,246,490 779,609,577
Ijarah finance covered by lease rental
receipts (capital and interest) 97,797,073 108,540,263
Repayments of junior debt covered by
lease rental receipts (interest only
except for one of the junior loans)
and uncovered (capital repaid at maturity) 318,030,253 273,077,929
--------------------
1,086,073,816 1,161,227,769
==================== ====================
No breaches or defaults occurred in the current or prior year.
Loans with an outstanding balance of GBP1,238,718,185 (31 March
2018: GBP1,237,439,035) have fixed interest rates over the term of
the loans. Of this total, loans with an outstanding balance of
GBP632,020,018 (31 March 2018: GBP629,400,541), although having
variable rate interest, also have associated interest rate hedging
contracts issued by the lenders in effect fixing the loan interest
over the terms of the loans. Loans with an outstanding amount of
GBP335,394,305 (31 March 2018: GBP330,670,423) at year end are
variable rate with no associated hedge of the interest exposure,
although the related lease rentals are also floating rate to match,
and each senior loan has a USD 15,000,000 balloon capital payment
on maturity. Senior loans have both interest and capital repayments
whereas junior loans only have interest repayments with the capital
to be repaid on maturity (except for a junior loan with a balance
of GBP20,178,224 (31 March 2018: GBP20,130,387) at year end that
has both interest and capital repayments).
Transaction costs of arranging the loans have been deducted from
the carrying amount of the loans and will be amortised over their
respective lives. In the Directors' opinion, the above carrying
values of the bank loans are approximate to their fair value due to
the interest rates charged closely approximating market interest
rates.
15. SHARE CAPITAL
The Share Capital of the Company is represented by an unlimited
number of redeemable ordinary shares of no par value.
31 March
Issued 31 March 2019 2018
Ordinary Ordinary
Shares Shares
Opening balance 642,250,000 467,250,000
Shares issued - 175,000,000
Total number of shares as at year
end 642,250,000 642,250,000
============== ==============
31 March
Issued 31 March 2019 2018
Ordinary Ordinary
Shares Shares
GBP GBP
Ordinary Shares
Opening balance 655,585,000 473,585,000
Shares issued - 182,000,000
Share issue costs-cumulative (7,946,303) (7,946,303)
Total share capital 647,638,697 647,638,697
============== ============
The Company's total issued Share capital at 31 March 2019 was
642,250,000 Shares, none of which were held in treasury.
On 20 June 2017 the Company issued an additional 134,650,000
redeemable ordinary shares of no par value at an issue price of 104
pence per new share.
Pursuant to the Supplementary Prospectus issued on 17 November
2017, the Company issued 40,350,000 new shares on 27 November 2017
under the Second Placing at an issue price of 104 pence per Share.
Following this transaction, the Company's total issued Share
capital at 31 March 2018 was 642,250,000 Shares, none of which were
held in treasury.
Therefore the total number of voting rights in issue was
642,250,000.
Members holding Shares are entitled to receive, and participate
in the following: any dividends out of income attributable to the
Shares; other distributions of the Company available for such
purposes and resolved to be distributed in respect of any
accounting period; or other income or right to participate
therein.
On winding up of the Company, shareholders are entitled to the
surplus assets attributable to the Share class remaining after
payment of all the creditors of the Company.
16. FINANCIAL INSTRUMENTS
The Group's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Group's operations; and
(b) Debt secured on non-current assets.
(c) Interest rate swaps.
(d) Security deposits.
The Group's objective is to obtain income returns and a capital
return for its Shareholders by acquiring, leasing and then selling
aircraft.
The following table details the categories of financial assets
and liabilities (and the Ijarah financing included in note 14) held
by the Group at the reporting date:
31 Mar 2019 31 Mar 2018
GBP GBP
Financial assets
Cash and cash equivalents 91,070,150 58,848,615
Financial assets at fair
value through profit and
loss 13,712,492 26,913,163
Accrued rental income* 5,069,490 2,930,982
------------ ------------
109,852,132 88,692,760
============ ============
*This amount represents rent due but not yet received and is
included within Receivables on the Statement of Financial
Position.
Financial liabilities
Payables and security deposits 13,662,118 12,719,631
Debt payable (including
Ijarah financing and excluding
associated costs) 1,592,945,053 1,587,311,115
1,606,607,171 1,600,030,746
============== ==============
Fair value of financial instruments
The Company has adopted IFRS 13, 'Fair value measurement' and
this standard requires the Company to price its financial assets
and liabilities using the price in the bid-ask spread that is most
representative of fair value for both financial assets and
financial liabilities. An active market is a market in which
transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
The level of the fair value hierarchy of an instrument is
determined considering the inputs that are significant to the
entire measurement of such instrument and the level of the fair
value hierarchy within those inputs are categorised.
The hierarchy is broken down into three levels based on the
observability of inputs as follows:
Level 1: Quoted price (unadjusted) in an active market for an
identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
Level 3: Valuation techniques using significant unobservable
inputs.
The interest rate swaps are considered to be level 2 in the Fair
Value Hierarchy. The following tables show the Company's financial
assets and liabilities as at 31 March 2019 based on the hierarchy
set out in IFRS:
31 March 2019 Quoted Prices Significant
in active unobservable
markets for Significant inputs
identical other observable
assets inputs
(Level 1) (Level 2) (Level 3) Total
2019 2019 2019 2019
Assets GBP GBP GBP GBP
Financial assets at
fair value through
profit and loss
Interest rate swaps - 13,712,492 - 13,712,492
=============== ================== ============== =============
31 March 2018 Quoted Prices Significant
in active unobservable
markets for Significant inputs
identical other observable
assets inputs
(Level 1) (Level 2) (Level 3) Total
2018 2018 2018 2018
Assets GBP GBP GBP GBP
Financial assets at
fair value through
profit and loss
Interest rate swaps - 26,913,163 - 26,913,163
Derivative financial instruments
The following table shows the Company's derivative position as
at 31 March 2019 with a comparative table as at 31 March 2018:
31 March 2019 31 March 2018
Financial assets at fair
value (GBP) 13,712,492 26,913,163
Notional amount (USD) 827,919,177 875,953,879
Notional amount (GBP) 635,150,884 624,877,928
The maturity dates range from 13 April 2028 to 24 May 2029 (31
March 2018: 13 April 2028 to 24 May 2029).
The decrease in the fair value of the Interest Rate Swaps for
the year of GBP13,200,670 (31 March 2018: decrease of
GBP11,658,163) is reflected in Finance Costs in note 10. The
notional amount amortises in line with the underlying
liability.
17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Group's financial instruments
are capital management risk, foreign currency risk, credit risk,
liquidity risk and interest rate risk. The Board regularly reviews
and agrees policies for managing each of these risks and these are
summarised below:
(a) Capital management
The Group manages its capital to ensure its ability to continue
as a going concern while maximising return to Shareholders through
the optimisation of debt and equity balances.
The capital structure of the Group consists of debt, which
includes borrowings disclosed in note 14, cash and cash equivalents
and equity attributable to equity holders, comprising issued
capital and retained earnings.
The Group's Board of Directors reviews the capital structure on
a bi-annual basis.
Equity includes all capital and reserves of the Company that are
managed as capital.
(b) Foreign currency risk
The Group has economically mitigated the risk of foreign
currency movements by matching its USD rentals with USD debt to the
extent necessary. The USD lease rentals should offset the USD
payables on amortising debt on the loans (including the Kappa
Ijarah finance), apart from the loans with an outstanding balance
of GBP335,394,305 (31 March 2018: GBP330,670,423) as at year end
which have balloon capital payments on maturity (refer to note 14).
The foreign exchange exposure in relation to the bank loans
(capital and interest) and the Kappa Ijarah finance is thus largely
hedged, apart from the foreign exchange exposure unhedged in
respect of the balloon capital portion of the loans with an
outstanding balance of GBP335,394,305 (31 March 2018:
GBP330,670,423) as at year end and the principal bullet repayment
of the junior loans at maturity.
The potential future value or the potential sale proceeds of the
aircraft upon maturity of the junior loans and senior loans with an
outstanding balance of GBP335,394,305 (31 March 2018:
GBP330,670,423) as at year end (all of which are in USD), should,
however, reduce this foreign exchange risk.
Lease rentals (as detailed in notes 4 and 11) are received in
USD and GBP. Rental income received in USD is used to pay loan
interest and regular capital repayments of debt (but excluding any
bullet or balloon repayment of principal), which are likewise
denominated in US Dollars. USD lease rentals and loan repayments
are furthermore fixed at the outset of the Company's life and are
very similar in amount and timing save for the repayment of bullet
and balloon repayments of principal due on the final maturity of a
loan to be paid out of the proceeds of the sale, re-lease,
refinancing or other disposition of the relevant aircraft. In
addition the variable rate loans are either hedged with an
associated interest rate swap contract issued by the lender to fix
the loan interest over the term of the loans, or are unhedged with
related rentals which are also floating rate to match.
The matching of lease rentals to settle these loan repayments
therefore mitigates risks caused by foreign exchange
fluctuations.
The carrying amounts of the Group's foreign currency denominated
monetary assets and liabilities at the reporting date are as
follows:
31 Mar 2019 31 Mar 2018
GBP GBP
Debt (USD) - Liabilities (1,592,945,053) (1,587,311,115)
Security deposits (USD) - Liabilities (13,482,669) (12,537,207)
Financial assets at fair value
through profit and loss (USD)
- Asset 13,712,492 26,913,163
Cash and cash equivalents (USD)
- Asset 65,350,662 37,700,978
Accrued rental income
(USD) - Asset 5,069,490 2,930,982
The USD/GBP exchange rate was 1.3035 at 31 March 2019 (1.4018 at
31 March 2018).
The following table details the Group's sensitivity to a 25% (31
March 2018: 25%) appreciation in GBP against the US dollar. 25% (31
March 2018: 25%) represents the Directors' assessment of the
reasonably possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the
year end for a 25% (31 March 2018: 25%) change in foreign currency
rates. A positive number below indicates an increase in profit and
other equity where GBP strengthens 25% (31 March 2018: 25%) against
the USD. For a 25% weakening of the GBP against the USD, there
would be a comparable but opposite impact on the profit and other
equity;
31 Mar 2019 31 Mar 2018
GBP GBP
Profit or loss 304,459,016 306,460,639
Change in value of assets (16,826,528) (13,509,025)
Change in value of liabilities 321,285,544 319,969,664
Excluding junior loans:
Profit or loss 258,450,098 263,332,490
Change in value of assets (14,228,607) (11,347,906)
Change in value of liabilities 272,678,705 274,680,396
On the eventual sale of the Assets, the Group may be subject to
foreign currency risk if the sale was made in a currency other than
sterling. Transactions in similar assets are typically priced in
USD.
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group.
The credit risk on cash transactions are mitigated by
transacting with counterparties that are regulated entities subject
to prudential supervision, or with high credit ratings assigned by
international credit rating agencies.
The Group's financial assets exposed to credit risk are as
follows:
31 Mar 2019 31 Mar 2018
GBP GBP
Cash and cash equivalents 91,070,150 58,848,615
Financial assets at fair value
through profit and loss 13,712,492 26,913,163
Accrued rental income 5,069,490 2,930,982
109,852,132 88,692,760
============ ------------
Surplus cash in the Group is held with Barclays, HSBC, Lloyds,
RBSI and Bank of Ireland, which have credit ratings given by
Moody's of A2, Aa2, Aa2, Baa2 and A3 (31 March 2018: A1, Aa2, A1,
Ba1 and A3) respectively. Surplus cash in the Subsidiaries is held
in accounts with RBSI and Westpac, which have credit ratings given
by Moody's of Baa2 and Aa3 (31 March 2018: Ba1 and Aa2)
respectively.
The credit quality and risk of lease transactions with
counterparty airlines is evaluated upon conception of the
transaction. In addition, ongoing updates as to the operational and
financial stability of the airlines are provided by the Company's
Asset Manager in its quarterly reports to the Company. Given the
full or partial sovereign ownership status of all underlying
lessees, the credit quality of these airlines would be regarded as
some of the highest ranked in the world as the Group selected
lessees with strong statements of financial position and financial
outlook which have no history of defaulting on any rental
payments.
There is a potential credit risk arising from the possibility
that the lessee may default on the lease payments. This risk is
mitigated, as under the terms of the lease agreements between the
lessee and the Group, any non payment of the lease rentals
constitutes a Special Termination Event, under which the lease
terminates and the Company may either choose to sell the Asset or
lease the Asset to another party. Lessees also have strong credit
ratings with Emirates being rated AA and Etihad and Thai being
rated A by Fitch Ratings Inc.
At the inception of each lease, the Company selected a lessee
with a strong Statement of Financial Position and financial
outlook. The financial strength of Emirates, Etihad and Thai
Airways is regularly reviewed by the Directors and the Asset
Manager. The Group generally requires its customers to pay rentals
in advance and provide collateral in the form of cash or letters of
credit as security deposits for leases. Security deposits and
Maintenance reserve liabilities are held in relation to funds
received at the year end for the timely and faithful performance of
the lessees' obligations under the lease agreements for the four
A350-900 aircraft. Refer to note 2(l) for further details on the
maintenance reserves and security deposits.
The Group assesses on a forward looking basis the expected
credit losses associated with its accrued rental income carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk. The
Group has chosen to apply the simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. Any accrued rental income and
receivables at amortised cost are short-term (i.e. no longer than
12 months) and considered to be of high credit quality as the Group
selected lessees with strong balance sheet and financial outlook
which have no history of defaulting on any rental payments. The
Group generally requires its customers to pay rentals in advance
and provide collateral in the form of cash or letters of credit as
security deposits for leases. Accordingly, any identified
impairment losses on such assets are expected to be small.
(d) Liquidity Risk
Liquidity risk is the risk that the Group will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments such as capital repayments of junior and
senior debt at the end of the lease. The Group's main financial
commitments are its ongoing operating expenses and repayments on
loans.
The fixed rental income under the relevant leases means that the
rents received should be sufficient to meet the loan interest and
regular capital repayments of debt scheduled during the life of
each loan and provide surplus income to pay for the Group's
expenses and finance payments of dividends. Where balloon and
bullet repayments of debt exist, these are expected to be financed
out of the disposal proceeds of the relevant aircraft. Declarations
of dividends may need to be suspended if the Board considers that
the Company will not be able to repay any balloon and bullet
repayments of debt falling due through the sale, refinancing or
other disposition of an Asset.
Ultimate responsibility for liquidity risk management rests with
the Board of Directors.
The Group manages liquidity risk through the timings of lease
rentals and debt repayments, by maintaining adequate reserves,
banking facilities and borrowing facilities, by monitoring forecast
and actual cash flows, and by matching profiles of financial assets
and liabilities.
The table below details the residual contractual maturities of
financial liabilities (and the Ijarah financing included in note
14). The amounts below are contractual undiscounted cash flows,
including both the principal and interest payments, and will not
agree directly to the amounts recognised in the Statement of
Financial Position:
1-3 3-12 1-2 2-5 Over 5 Total
31 March
2019 Months Months Years Years Years
GBP GBP GBP GBP GBP GBP
Financial
liabilities
Payables 179,449 - - - - 179,449
Security
deposit
liability - - - - 13,482,669 13,482,669
Borrowings
and Ijarah
financing 46,313,307 138,962,408 185,151,572 554,940,356 1,054,071,264 1,979,438,907
----------- ------------ ------------ ------------ -------------- ----------------
46,492,756 138,962,408 185,151,572 554,940,356 1,067,553,933 1,993,101,025
=========== ============ ============ ============ ============== ================
1-3 3-12 1-2 2-5 Over 5 Total
31 March
2018 Months Months Years Years Years
GBP GBP GBP GBP GBP GBP
Financial
liabilities
Payables 182,424 - - - - 182,424
Security
deposit
liability - - - - 12,537,207 12,537,207
Borrowings
and Ijarah
financing 42,426,235 127,358,534 169,855,723 510,019,078 1,161,227,769 2,010,887,339
----------- ------------ ------------ ------------ -------------- ----------------
42,608,659 127,358,534 169,855,723 510,019,078 1,173,764,976 2,023,606,970
=========== ============ ============ ============ ============== ================
(e) Interest Rate Risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows. It is the risk that
fluctuations in market interest rates will result in a variation in
deposit interest earned on bank deposits held by the Group or on
debt repayments.
The loans with an outstanding balance of GBP335,394,305 (31
March 2018: GBP330,670,423) as at year end entered into in the
current year are variable rate (with no associated interest rate
swap contract issued by the lender to fix the loan interest over
the term of the loans) although the related rentals are also
floating rate to match.
With the exception of loans with an outstanding balance of
GBP335,394,305 (31 March 2018: GBP330,670,423) as at year end, as
mentioned above, the Group mitigates interest rate risk by fixing
the interest rate on the bank loans (as well as in respect of loans
with an outstanding balance of GBP632,020,018 (31 March 2018:
GBP629,400,541) as at year end, which have an associated interest
rate swap to fix the loan interest).
The following table details the Group's exposure to interest
rate risks:
31 March 2019 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial
Assets
Cash and cash
equivalents 91,070,150 - 5,069,490 96,139,640
-------------- -------------- ------------- ------------
Total Financial
Assets 91,070,150 - 5,069,490 96,139,640
============== ============== ============= ============
Financial
Liabilities
Accrued expenses
and reserves - - 179,449 179,449
Security deposit
liability - - 13,482,669 13,482,669
Borrowings
and Ijarah
financing 335,394,305 606,698,167 - 942,092,472
-------------- -------------- ------------- ------------
Total Financial
Liabilities 335,394,305 606,698,167 13,662,118 955,754,590
============== ============== ============= ============
Effective
of derivatives
held for risk
management 632,020,018
Total interest
sensitivity
gap (876,344,173) (606,698,167)
============== ==============
31 March 2018 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial
Assets
Cash and cash
equivalents 58,848,615 - 2,930,982 61,779,597
-------------- -------------- ------------- ------------
Total Financial
Assets 58,848,615 - 2,930,982 61,779,597
============== ============== ============= ============
31 March 2018 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial Liabilities
Accrued expenses
and reserves - - 182,424 182,424
Security deposit
liability - - 12,537,207 12,537,207
Borrowings
and Ijarah
financing 330,670,423 608,038,494 - 938,708,917
Total Financial
Liabilities 330,670,423 608,038,494 12,719,631 951,428,548
============== ============== ============= ============
Effective of
derivatives
held for risk
management 629,400,541
Total interest
sensitivity
gap (901,222,349) (608,038,494)
============== ==============
If interest rates had been 25 basis points higher throughout the
period and all other variables were held constant, the Group's net
assets attributable to shareholders as at 31 March 2019 would have
been GBP227,674 (31 March 2018: GBP147,122) greater due to a
increase in the amount of interest receivable on the bank
balances.
If interest rates had been 25 basis points lower throughout the
period and all other variables were held constant, the Group's net
assets attributable to shareholders as at 31 March 2019 would have
been GBP227,674 (31 March 2018: GBP147,122) lower due to a decrease
in the amount of interest receivable on the bank balances.
Capital repayments are unchanged in respect of the variable
interest loans with an outstanding balance of GBP335,394,305 (31
March 2018: GBP330,670,423) as at year end (only the interest
payments vary) when there is a change in rates. This will affect
future cash flows as explained above.
18. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, the Company has no ultimate
controlling party as the Company does not have any shareholder
which holds greater than 10% of the issued share capital of the
Company.
19. CASH AND CASH EQUIVALENTS
31 March 2019 31 March 2018
GBP GBP
Bank balances 91,070,150 58,848,615
91,070,150 58,848,615
============== ==============
Included in the cash and cash equivalents are secured cash
deposits of GBP45,848,244 (31 March 2018: GBP21,104,285) in respect
of security deposits and maintenance reserves. Refer to notes 20
and 21 for more information on security deposits and maintenance
reserve liabilities.
20. SECURITY DEPOSITS
31 March 31 March
2019 2018
GBP GBP
Security deposit liability 13,482,669 12,537,207
13,482,669 12,537,207
=========== ===========
The Security deposit is held in relation to funds received at
the year end for the timely and faithful performance of the
lessees' obligations under the lease agreements for the four
A350-900 aircraft. Security deposits are contractually bound to be
repaid if not utilised. Refer to note 2(l) for accounting policies
adopted on the security deposits.
21. MAINTENANCE RESERVES
31 March 31 March
2019 2018
GBP GBP
Balance at 1 April 8,567,078 -
Movements for the year 23,798,497 8,567,078
Balance at 31 March 32,365,575 8,567,078
=========== ==========
The Maintenance reserve liabilities are held in relation to
funds received at the year end for the timely and faithful
performance of the lessees' obligations under the lease agreements
for the four A350-900 aircraft. Amounts accumulated in the
maintenance reserve will be repaid only as re-imbursements for
actual maintenance expenses incurred by the lessee. Refer to note
2(l) for accounting policies adopted on the maintenance
reserves.
The table below details the expected utilisation of maintenance
reserves.
1-3 3-12 1-2 2-5 Over 5 Total
Months Months Years Years Years
GBP GBP GBP GBP GBP GBP
31 March
2019 - - - 26,168,148 6,197,427 32,365,575
31 March
2018 - - - 7,053,367 1,513,711 8,567,078
======= ======= ====== =========== ========== =============
22. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
Borrowings and Ijarah
31 March 2019 finance
GBP
Balance at 1 April 2018 1,568,109,458
Cash flows (182,571,338)
Add back payments of interest on loans
and Ijarah financing 67,746,772
Movement in interest accruals 609,947
Translation adjustment on foreign operations 120,217,651
----------------------
Balance at 31 March 2019 1,574,112,490
======================
Borrowings and Ijarah
31 March 2018 finance
GBP
Balance at 1 April 2017 1,294,109,180
Cash flows (151,922,487)
Add back payments of interest on loans
and Ijarah financing 58,732,884
New debt raised on loans and Ijarah
financing 559,385,492
Movement in interest accruals 1,181,090
Translation adjustment on foreign operations (193,376,701)
----------------------
Balance at 31 March 2018 1,568,109,458
======================
23. TAX
31 March 2019 31 March 2018
USD USD
Profit before tax 674,543 389,003
-------------- --------------
Irish tax at 12.5% 84,318 48,625
============== ==============
GBP GBP
Tax expense (converted into GBP) 64,220 35,959
============== ==============
Irish tax is charged at 12.5% on each of the AA4P Leasing
Ireland Limited and AA4P Leasing Ireland 2 Limited subsidiaries.
The Company and the Guernsey Subsidiaries have been assessed for
tax at the Guernsey standard rate of 0%. Since AA4P Leasing Ireland
Limited and AA4P Leasing Ireland 2 Limited are Irish tax resident
trading companies, they will not be subject to Guernsey tax, but
their net lease rental income earned (after tax deductible
expenditure) will be taxable as trading income at 12.5% under Irish
tax regulations.
24. ACCRUED AND DEFERRED INCOME
The deferred and accrued income represents the difference
between actual payments received in respect of the lease income
(including some received in full upfront) and the amount to be
accounted for in the accounting records on a straight line basis
over the lease terms. The accrued and deferred income consists of
the following:
31 March 2019 31 March 2018
USD USD
Accrued income 13,589,107 12,815,841
Deferred income (46,300,030) (44,872,259)
============== ==============
25. RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTS
Amedeo Limited ("Amedeo") was appointed as the Group's Asset
Manager and Agent (the agent is appointed to assist with the
purchase of the aircraft, the arrangement of suitable equity and
debt finance and the negotiation and documentation of the lease and
financing contracts).
During the current year, the Group paid Amedeo GBP3,340,323 in
total (31 March 2018: GBP6,505,102), split as follows:
(i) an upfront lease and upfront transaction costs of GBPNil (31
March 2018: GBP3,383,000) (the "Upfront Fee") for the assets
purchased during the year. These fees were capitalised to the
aircraft as acquisition costs and will be depreciated over the life
of the leases.
In consideration for providing the services pursuant to the
Agency Agreement, the Company (itself and on behalf of each
Lessor), upon each "Admission" (being the admission to trading on
the SFS becoming effective in accordance with the London Stock
Exchange Admission Standard), paid to Amedeo during the year an
upfront lease and debt arrangement fee of GBPNil (31 March 2018:
GBP845,000 for the tenth asset and GBP634,500 each for the
eleventh, twelfth, thirteenth and fourteenth assets).
(ii) In addition, Amedeo receives, in consideration for
providing services to the Group, a management and advisory fee
(included under "asset management fee" in note 5).
All fees are payable monthly in arrears (the "Annual Fee").
Following the disposal of the "IPO Assets" (being collectively
the first four assets purchased), the Company shall pay to Amedeo
disposition fees calculated as detailed in the prospectus, which
can be found on the Group's website. Fees range from 2.5% to 4% of
the sale value. The fee for the remaining ten aircraft is 3%.
During the year, the Group incurred GBP3,340,323 (31 March 2018:
GBP3,122,102) of expenses with Amedeo, of which GBP Nil (31 March
2018: GBPNil) was outstanding to this related party at 31 March
2019.
(iii) Amedeo Services (UK) Limited ("Amedeo Services") was
appointed as Liaison and Administration Oversight Agent to the
Group. In consideration for this service, the Group paid Amedeo
Services GBP10,769 during the year (31 March 2018: GBP10,506). As
at 31 March 2019 GBPNil (31 March 2018: GBPNil) was outstanding.
This fee is included under "Asset management fee" in note 5.
Nimrod Capital LLP ("Nimrod") is the Company's Corporate and
Shareholder Adviser.
During the year, the Group incurred GBP2,341,151 (31 March 2018:
GBP3,938,442) of fees due to Nimrod. GBPNil (31 March 2018:
GBP1,782,000) of these expenses related to share placing fees in
the prior year and were deducted from equity. GBP2,341,151 (31
March 2018: GBP2,156,442) of these expenses related to corporate
and shareholder advisory fees as shown in note 5. GBP Nil (31 March
2018: GBPNil) was outstanding to this related party at 31 March
2019.
John Le Prevost is a director of Anson Registrars Limited
("ARL"), the Company's registrar, transfer agent and paying agent.
During the year the Group incurred GBP17,094 (31 March 2018:
GBP20,407) of costs with ARL, of which GBP1,215 (31 March 2018:
GBP762) was outstanding as at 31 March 2019.
26. CHANGE IN ACCOUNTING POLICIES
This note explains the impact of the adoption of IFRS 9
'Financial Instruments' and IFRS 15 'Revenue from Contracts with
Customers' on the Group's financial statements and also discloses
the new accounting policies that have been applied from 1 January
2018, where they are different to those applied in prior
periods.
a) IFRS 9 'Financial Instruments '- Impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the
recognition, classification and measurement of financial assets and
financial liabilities, impairment of financial assets and hedge
accounting.
The adoption of IFRS 9 'Financial Instruments' from 1 April 2018
only resulted in changes in accounting policies. The new accounting
policies are set out in note 26 (b) below. No adjustments were
deemed necessary to the amounts recognised in the financial
statements and accordingly there was no material impact on the
retained earnings as at 1 April 2018.
Classification of Financial Assets and Financial Liabilities
IFRS 9 contains three principal classification categories for
financial assets and liabilities: measured at amortised cost, fair
value through other comprehensive income ("FVOCI") and fair value
through profit or loss ("FVTPL"). IFRS 9 classification is
generally based on the business model in which a financial asset is
managed and its contractual cash flows.
Based on the Group's assessment, this standard does not have a
material impact on the classification of financial assets and
financial liabilities of the Group. This is because:
-the interest rate swaps in the Group are currently measured at
FVTPL as required by IFRS9. The interest rate swaps do not meet the
SPPI criterion (solely payments of principal and interest) and
accordingly it will be mandatorily measured at FVTPL under IFRS 9.
Interest rate swaps were previously held FVTPL under IAS 39;
and
-financial instruments currently measured at amortised cost are
cash and cash equivalents and receivables,. These instruments meet
the solely principal and interest criterion and are held in a
held-to-collect business model. Accordingly, they will continue to
be measured at amortised cost under IFRS 9 resulting in no change
from IAS 39.
Impairment of Financial Assets
IFRS 9 replaces the "incurred loss' model in IAS 39 with an
'expected credit loss' model. The new impairment model also applies
to certain loan commitments and financial guarantee contracts but
not to equity investments. Under IFRS 9, credit losses are
recognised earlier than under IAS 39.
The Group assesses on a forward looking basis the expected
credit losses associated with its accrued rental income carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk. The
Group has chosen to apply the simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
Based on the Group's assessment, changes to the impairment model
do not have a material impact on the financial assets of the Group.
This is because
- the interest rate swaps are measured at FVTPL and the
impairment requirements do not apply to such instruments;
- any accrued rental income and receivables at amortised cost
are short-term (i.e. no longer than 12 months) and considered to be
of high credit quality as the Group selected lessees with strong
balance sheet and financial outlook which have no history of
defaulting on any rental payments. The Group generally requires its
customers to pay rentals in advance and provide collateral in the
form of cash or letters of credit as security deposits for leases.
Under the terms of the lease agreements between the lessee and the
Group, any non-payment of the lease rentals constitutes a Special
Termination Event, under which the lease terminates and the Group
may either choose to sell the Assets or lease the Assets to another
party. Accordingly, any identified impairment losses on such assets
are expected to be small; and
- while cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, the identified impairment loss
is expected to be small as the instruments are held with regulated
entities subject to prudential supervision, or with high credit
ratings assigned by international credit rating agencies.
b) IFRS 9 'Financial Instruments' - Accounting policies applied from 1 January 2018
Investments and other financial assets
(i) Classification
From 1 January 2018, the Group classifies its financial assets
in the following measurement categories:
- those to be measured subsequently at fair value (either
through other comprehensive income ("OCI"), or through profit or
loss), and
- those to be measured at amortised cost.
The classification depends on the Group's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses will be
recorded in profit or loss.
The interest rate swaps in the Group are currently measured at
FVTPL due to it being designated into this category as it is
managed on a fair value basis in accordance with a documented
investment strategy. The interest rate swaps do not meet the SPPI
criterion (solely payments of principal and interest) and
accordingly it will be mandatorily measured at FVTPL under IFRS
9.
(ii) Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets
carried at FVTPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in
their entirety when determining whether their cash flows are solely
payment of principal and interest.
Financial assets
Subsequent measurement of financial assets depends on the
Group's business model for managing the asset and the cash flow
characteristics of the asset. The Group classifies its financial
assets into the following measurement category:
-Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss
and presented in other gains / (losses), together with foreign
exchange gains and losses. Impairment losses are presented as
separate line item in the statement of profit or loss.
Financial assets currently measured at amortised cost are cash
and cash equivalents and receivables. These instruments meet the
solely principal and interest criterion and are held in a
held-to-collect business model. Accordingly, they will continue to
be measured at amortised cost under IFRS 9.
Derivative instruments
Changes in the fair value of financial assets at FVPL are
recognised in the statement of profit or loss as applicable. Refer
to note 2 (n).
Impairment
From 1 January 2018, the Group assesses on a forward looking
basis the expected credit losses associated with its accrued rental
income carried at amortised cost. The impairment methodology
applied depends on whether there has been a significant increase in
credit risk.
For trade and other receivables, the Group applies the
simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of the
receivables Refer to note 2(n).
Financial Liabilities
Financial liabilities consist of payables, security deposits and
borrowings. The classification of financial liabilities at initial
recognition will be at amortised cost to the extent it is not
classified at FVTPL. All financial liabilities are initially
measured at fair value, net of transaction costs. All financial
liabilities are recorded on the date on which the Group becomes
party to the contractual requirements of the financial
liability.
Amortised cost: Interest expenses from financial liabilities is
included in finance costs using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly in
profit or loss and presented in other gains / (losses), together
with foreign exchange gains and losses. Refer to note 2(o).
Subsequent measurement of debt instruments depends on the
Group's business model for managing the liability and the cash flow
characteristics of the liability.
c) IFRS 15 'Revenue from Contracts with Customers' - Impact of adoption
IFRS 15 deals with revenue recognition and establishes
principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity's contracts with
customers. Revenue is recognised when a customer obtains control of
a good or service and thus has the ability to direct the use and
obtain the benefits from the good or service. The standard replaces
IAS 18 'Revenue' and IAS 11 'Construction contracts', related
interpretations. The only contractual receipts which the Group
currently has are rental income from Emirates, Etihad and Thai
leasing its Aircraft. Rental income is currently recognised in
accordance with IAS 17 (which will be replaced by IFRS 16) which is
specifically excluded from IFRS 15. The adoption of IFRS 15
'Revenue from Contracts with Customers' from 1 April 2018 does thus
not materially impact the financial statements.
27. SEGMENT INFORMATION
The Directors are of the opinion that the Group is engaged in a
single segment of business, being acquiring, leasing and selling
aircraft.
Geographical analysis
31 March 2019 Middle East Asia Pacific Total
GBP GBP GBP
Rental income 197,939,462 56,709,306 254,648,768
============== ============= ==============
Net book value - aircraft 1,707,975,123 539,440,280 2,247,415,403
============== ============= ==============
31 March 2018 Middle East Asia Pacific Total
GBP GBP GBP
Rental income 192,346,297 26,539,272 218,885,569
============== ============= ==============
Net book value - aircraft 1,707,739,744 528,602,157 2,236,341,901
============== ============= ==============
28. SUBSEQUENT EVENTS
On 11 April 2019 the Directors of the Company declared an
interim dividend of 2.0625 pence per Share in respect of the 31
March 2020 financial year. This dividend of GBP13,246,406.25 was
paid on 30 April 2019 to holders on record 23 April 2019.
On 11 July 2019 the Directors of the Company declared an interim
dividend of 2.0625 pence per Share in respect of the 31 March 2020
financial year. This dividend of GBP13,246,406.25 will be paid on
or around 31 July 2019 to holders on record 19 July 2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFWFWWFUSEFW
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