TIDMGMAA
RNS Number : 6682B
Gama Aviation PLC
24 September 2018
24 September 2018
Gama Aviation Plc (AIM: GMAA)
("Gama Aviation", "the Company" or "the Group")
Interim results for six months to 30 June 2018
Gama Aviation Plc, one of the world's largest business aviation
service providers, is pleased to announce the results for the six
months to 30 June 2018.
Financial Highlights
-- Revenue $104.6m (2017: $108.1m)
-- Gross profit $22.1m (2017: $22.7m)
-- Gross profit margin of 21.1% (2017: 21.0%)
-- EBITDA $8.1m (2017: $8.4m)
-- Underlying total operating profit $7.1m (2017: $8.1m)
-- Net cash $21.1m compared to net debt at 31 December 2017
$13.0m (net debt 30 June 2017: $14.3m)
-- Group's expectations for the full year remain unchanged
Financial Summary
USD millions (unless otherwise Underlying results(1) Reported results
stated)
Constant
Currency(2)
Jun-18 Jun-17 Jun-17 Jun-18 Jun-17
-------- --------- --------
Revenue 104.6 101.6 108.1 104.6 101.6
Gross profit 22.1 21.3 22.7 22.1 21.3
Gross profit % 21.1% 21.0% 21.0% 21.1% 21.0%
EBITDA 8.1 8.0 8.4 3.7 7.4
Total operating profit(3) 7.1 7.7 8.1 2.9 9.6
Profit before tax 6.6 7.0 7.3 3.2 8.7
Basic earnings per share
(cents) 11.0 12.2 12.8 5.0 16.0
1 - Underlying results exclude exceptional items, share-based payment
expense, amortisation, reversal of losses of associate and joint venture
from prior years, profit on disposal of interest in associate, and unrealised
foreign exchange movements included in finance costs, where applicable.
2 - Calculated at a constant foreign exchange rate of $1.38 to GBP1,
being the rate that represented the average for the 2018 financial period.
3 - Total operating profit includes the share of results from Gama Aviation's
associate in the US and joint venture in Hong Kong.
Operational Highlights
-- US Ground delivered strong organic growth
-- Europe Ground delivered a flat performance in difficult market conditions
-- US Air continued to grow, benefiting from growth in the Wheels Up fleet
-- Europe Air delivering improved operating profit margins
-- Middle East and Asia continue to develop and scale
Strategic Highlights
-- Successful equity placing raised GBP48m in March 2018, to
accelerate the Group's vision of becoming the leading global
business aviation services group
-- Invested in Asia, acquiring remaining 50% interest in
Hutchinson's Hong Kong interest and 25% interest in CASL
-- Secured a new modern facility at Bournemouth Airport, UK for our Europe Ground operations
-- New bases on the East and West coasts for US Ground operations identified and progressing
-- Pipeline of acquisition targets under consideration, subject
to disciplined acquisition criteria
-- Refinancing completed with NatWest and Barclays in August
2018, providing $70m revolving credit facility with four-year
term
Marwan Khalek, Chief Executive of Gama Aviation said:
"The first half of the year has been a busy period with the
equity placing and refinancing completed, and progress across our
operations. We continue to scale up across all geographies and
service lines and develop our pipeline of value enhancing
acquisitions. We remain confident in delivering our future growth
plans and strategic objectives."
-S-
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
A presentation for sell-side analysts is being held today at
09:00am at the offices of Camarco, 107 Cheapside, London EC 2V
6DN.
For further information please visit www.gamaaviation.com or
contact:
Gama Aviation Plc +44 (0) 1252 553029
Marwan Khalek, Chief Executive Officer
Camarco +44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
Jefferies International +44 (0) 207 029 8000
Simon Hardy
Will Soutar
Gama Aviation - Notes to Editors
Gama Aviation Plc (AIM: GMAA) is a global business aviation
services group that specialises in providing support for
individuals, corporations and government agencies; allowing them to
deliver on the promises they make.
The Group's services are split into two divisions: Air and
Ground. Air services include aircraft management, special mission
support and charter. Ground services cover aircraft maintenance
services, aircraft modification design and installation, and Fixed
Base Operations (FBO).
More details can be found at: http://www.gamaaviation.com/
Basis of presentation
The analysis of Gama Aviation's operational performance by
division and geography, is shown on a Total Division basis (for
revenue, gross profit and underlying total operating profit)
reflecting 100% of the performance of the division including its
associates and joint ventures. The analysis also includes
inter-segment revenues, which represent the revenues that arise
between divisions to present the underlying performance of each
division.
Gama Aviation receives a fee in return for allowing its
associates and joint ventures the use of the Gama Aviation brand.
Such branding fees are excluded from the results on a Total
Division basis but are recognised within Gama Aviation's Group
reported performance.
Under IFRS, the trading results of associates are not
consolidated and are instead shown as a single line in the profit
and loss account under 'share of results from equity accounted
investments'.
Europe is the only region in the Group that is affected by any
material currency changes, primarily between GBP and USD. The 2017
performance has been restated at the same average rate for USD to
GBP as the 2018 interim results. The average rate for 2018 was
USD1.38 to GBP1.00. The commentary below is based on constant
currency performance unless otherwise stated.
The Group operates through eight divisions with clear lines of
management responsibility. This represents the four geographies and
two business lines. Key financial indicators are measured and
monitored on a continuous basis. In summary the key financial
indicators by division are:
-- Revenue - growth and performance versus plan
-- Gross profit - growth and performance versus plan
-- Gross profit percentage
-- Total operating profit - growth and performance versus plan
The Group also measures and monitors internal non-financial key
performance indicators to control and develop operating
performance. These are reviewed regularly alongside the key
financial indicators reported externally.
Chief Executive Report
The first half of the year has been a busy period. We completed
a capital raise of GBP48m on 2 March 2018; made major strategic
investments in Asia through our collaborations with Hutchison
Whampoa; secured a new modern facility at Bournemouth Airport, UK
for our Europe Ground operations; and commenced investments in a
new Business Aviation Centre at Sharjah Airport in the Middle East;
and into new base maintenance facilities on the East and West
coasts in the US. Following the end of the reporting period, we
have also agreed a revolving credit facility of $70m with National
Westminster Bank Plc ("NatWest") and Barclays Bank Plc ("Barclays")
to secure our funding needs.
H1 2018 Performance
On 18 July 2018 we reported that trading conditions in the US
continued to support strong growth, but that European trading
conditions were somewhat challenging.
The Group is reporting revenue of $104.6m (2017: $108.1m). We
continue to see strong revenue growth in the US Ground division and
Air associate, but performance elsewhere is somewhat mixed.
EBITDA was reported at $8.1m and is essentially flat (2017:
$8.4m), with the positive revenue growth in the USA being offset by
more challenging trading in Europe. Underlying total operating
profit in the first six months was $7.1m (2017: $8.1m). The
decrease reflects the effects of higher depreciation, following
capital investments in 2017, and a lower than expected contribution
from our associates.
The Group paid down all its borrowings apart from leases on the
back of the equity placing and has a net cash position of $21.1m as
at 30 June 2018.
New financing
On 9 February 2018 the Group announced a capital raise through
the placing of shares. The admission of the placing shares became
effective on 2 March 2018. The Group raised GBP48m (approximately
US$67m) to accelerate our growth strategy in this highly fragmented
market.
Hutchison Whampoa (China) Limited ("Hutchison") subscribed for
shares in the placing and now holds approximately 21% of the
Company's issued share capital. $19.8m of the proceeds were used to
acquire Hutchison's Hong Kong aviation interests: its 50% stake in
our Asia division, Gama Aviation Hutchison Holdings Ltd, and its
20% stake in China Aircraft Services Limited.
Hutchison's investment in the Company provides a strong
endorsement of our stated strategy and our readiness to execute
against that strategy. We welcome them as a strategic partner who
shares our ambition of becoming the leading global aviation
services business.
After the period end, the Company completed a $70m refinancing
with NatWest and Barclays, including a $50m Revolving Credit
Facility Agreement with a $20m accordion option. This is a
committed facility for 4 years.
2018 Corporate Development
The Group remains on track to deploy the proceeds of the recent
equity placing and deliver on its strategic growth plans for
2018.
The Group has an active pipeline of acquisition opportunities
under consideration, subject to its disciplined acquisition
criteria. A number are in advanced stages of discussions.
Investment in the US
In the US, the ground division's strategy is to enhance and
extend its client service offering to both broaden its client base
and capture more of its clients' total maintenance expenditure. At
the time of the equity placing, the Group set out its plans to add
base maintenance capacity in the Western and Eastern corridors to
complement its successful and fast-growing pan-US line maintenance
network. Accordingly, the division will expand capacity at its
current line maintenance operation in Las Vegas to develop a base
maintenance capability to serve the Western US market. The division
is also in advanced discussions to secure hangar capacity in south
Florida to develop its base maintenance capability to serve the
Eastern US market.
In addition to developing these two base maintenance centres,
which will be capable of delivering the full range of base
maintenance services, the division will also be expanding its base
maintenance capabilities at five of its other line maintenance
centres (New York Teterboro, New York White Plains, Palm Beach
International, Dallas Love Field and Los Angeles Van Nuys). These
facilities will provide a limited range of base maintenance
services which will, we believe, be very attractive to clients
seeking quick turnaround times from proximate locations. The
division is also continuing to expand the reach of its line
maintenance network with the recent addition of facilities at
Chicago and Miami Opa Locka airports.
All these facilities remain on track to be operational before
the year end and will, therefore, be revenue generating as planned
in 2019.
Investment in UK maintenance facilities
On 24 May 2018 the Group announced the transfer of its primary
turboprop and jet maintenance facilities from its 25,000 sq. ft
facility at Farnborough Airport and its 48,000 sq. ft facility at
London Oxford Airport into a flagship 135,000 sq. ft secure
facility at Bournemouth International Airport during the second
half of 2018. The move will provide necessary capacity for the
expansion of our company's European Ground business, which grew by
20% in 2017, while delivering immediate efficiency savings.
The move to Bournemouth Airport has been well planned and
executed and is on schedule to be completed during Q4. There has
been minimal disruption to operations, with good staff retention in
key positions.
Restructuring costs of c.$2m will be incurred largely in 2018
and treated as either exceptional items or capital expenditure,
with no impact on underlying profitability of the Group. The cash
costs related to the restructuring will be offset by the end of the
first half of 2019 through capital contributions by the new
landlord and a rent-free period. The transfer will deliver
near-term efficiency savings and revenue synergies which are
expected to more than offset the costs of additional space from
2019 onwards, while also laying the foundations for further
growth.
Investment in the Middle East
In Sharjah, the development of the Business Aviation Centre
continues as planned with the recent award of a contract for the
earthworks which commenced in September. A contract for the
detailed design and construction is expected to be awarded in the
near future. Overall, the development remains on track for
completion in Q4 of 2019.
Investment in people
The Company has continued to strengthen its Board and the
Group's regional leadership and functional management teams to
ensure it can execute its strategy and continue to grow profitably
and sustainably.
There have been several recent hires to supplement the already
strong regional operational management teams. In addition, the
Group has also enhanced its capabilities across a number of key
business functions including: legal, finance, IT, business process,
risk management and marketing.
Neil Medley, the Group's Chief Operating Officer, who joined the
Company in September 2016, was appointed to the Board in January
2018. Neil has a strong track record of managing change and
business integration as well as implementing business systems,
having previously been COO at BAE Systems Applied Intelligence
(formerly Detica Group Plc until its acquisition by BAE Systems
Plc).
Dr Richard Steeves was also appointed to the Board as an
independent Non-Executive Director and brings to the Group valuable
experience in growing a business organically and through
acquisitions, having founded and built Synergy Health Plc from a
market capitalisation of GBP12m in 2001 to GBP1.4b when it was sold
in 2015.
Simon To was appointed as a Non-Executive Director in line with
the terms of the relationship agreement agreed with Hutchison as
part of their strategic partnership and investment. His experience
of doing business in Asia and as an AIM Director will be a valuable
addition to the business. Simon is the Managing Director of
Hutchison and Chairman and Executive Director of Hutchison China
MediTech Limited, a company listed on AIM and Nasdaq with a market
capitalisation of approximately US$4 billion. Simon joined
Hutchison in 1980 and has helped build it from a relatively small
trading company into a multi-billion dollar investment and
distribution group.
On 1 February 2018, Kevin Godley resigned as a board director
and as Chief Financial Officer ("CFO"). Since late December 2017
Michael Williamson had been interim CFO. On 30 May 2018 the Group
announced the appointment of David Stickland to the post of CFO
following an extensive search process. David's appointment was
effective from 1 September 2018. David was CFO at services company
Addison Lee Group during its international expansion, has extensive
financial and international operational experience from within the
transport and service sector including roles at Serco Plc, Avis
Europe Plc, Eversholt Rail Group and LeasePlan UK Limited. He
qualified as a chartered accountant with Price Waterhouse.
On 8 March 2018, following the successful completion of the
Group's equity placing, the Group appointed Richard Kearsey as
Director of Corporate Development. Richard is a chartered
accountant by profession and for the last 27 years has worked as a
Managing Director of Close Brothers' Aviation & Marine Finance
Division. Richard has deep experience of the business aviation
sector and his appointment will enhance the Executive team's
capacity to pursue it's growth strategy.
Outlook
The Group's expectations for the full year remain unchanged. The
US continues to grow strongly, market conditions in Europe remain
challenging but stable with new business wins in Europe ground
flowing through in the second half of the year. In the Middle East
and Asia, the divisions continue to make steady progress in scaling
up their operations.
Marwan Khalek
Chief Executive Officer
Operational Performance Review
Ground division
The Ground division provides base and line maintenance, repair
and overhaul, design and modification (MRO) and fixed base
operations (FBO). Base maintenance refers to the planned
maintenance required by the aircraft manufacturer or component
supplier. Line maintenance is irregular maintenance activity often
because of component failure or wear and tear and both services are
offered on either a fee or contract basis. The design and
modification services provided by the Group increase the operating
life and/or capability of an aircraft through services such as
avionics or cabin system upgrades and incorporation of special
mission capability. The Ground division provides FBO facilities at
Glasgow, Aberdeen, Jersey and Sharjah airports offering parking,
hangarage, line maintenance and other related ground handling tasks
such as the fuelling of aircraft.
The Ground division revenue was reported at $47.2m (2017:
$51.8m). The division delivered a total operating profit of $5.2m
(2017: $5.6m). The reduction is largely due to poor performance at
the Europe ground's facilities.
June US Europe Middle East Asia Total
USD 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
thousands
----------- ------- ------- -------- --------- ------- ------ -------- ----- --------- ----------
Revenue -
reported 17,248 14,219 26,708 34,566 2,751 3,003 505 - 47,212 51,788
Equipment
sales - - (4,430) (11,438) - - - - (4,430) (11,438)
Revenue 17,248 14,219 22,278 23,128 2,751 3,003 505 - 42,782 40,350
Gross
profit 3,748 2,648 8,872 9,991 491 974 90 - 13,201 13,613
Gross
profit
% 21.7% 18.6% 39.8% 43.2% 17.8% 32.4% 17.8% - 30.8% 33.7%
Total
operating
profit 968 817 4,465 4,581 (68) 210 (179) - 5,186 5,608
Total
operating
profit % 5.6% 5.7% 16.7% 19.8% (2.5%) 7.0% (35.4%) - 11.0% 13.9%
------------ ------- ------- -------- --------- ------- ------ -------- ----- --------- ----------
US Ground
The US Ground division delivered strong organic growth in the
first six months of 2018, with revenue up 21.3% to $17.2m (2017:
$14.2m), which reflects the buoyant US market and investment in new
capacity in the prior year.
During the period we have focussed on improving operational
efficiency and investing in strengthening the organisation
capability of the business to enable sustainable growth. As a
result, total operating profit was $1.0m (2017: $0.8m) with a flat
margin of 5.6%.
Europe Ground
The Europe Ground division revenue was $26.7m (2017: $34.6m).
The division's revenues, excluding equipment sales of $4.4m (2017:
$11.4m), were relatively flat at $22.3m (2017: $23.1m).
During the period, the division performance was negatively
impacted by underperformance at the Oxford facility, which will be
addressed by the move to the new Bournemouth facility and by the
drop-in revenues at the Fairoaks facility, caused by the
uncertainties over the future of that airport.
The division delivered a total operating profit of $4.5m (2017:
$4.6m). The negative impact of the underperforming facilities was
mitigated by the write back of the bad debt provision related to
settlement of the Dryden litigation.
In May 2018 the move to Bournemouth International Airport was
announced, bringing together the operations in Farnborough and
Oxford. This will remove operational inefficiencies in the UK and
allow for scalable growth in the future by doubling the divisions
engineering capacity, improving flexibility and extending the
service offering. The transfer of these operations remains on track
for completion, as planned, in Q4.
Middle East Ground
The Middle East Ground division delivered reduced revenues in
the first six months of $2.7m (2017: $3.0m), due to political
events in the region.
The tensions which have affected operations are easing across
the region and more normalised trading is expected in the second
half. The development of the Business Aviation Centre in Sharjah
continues as planned with earthworks commencing in August and a
contract for design and construction to be awarded soon.
The division delivered a total operating loss of $0.1m (2017:
$0.2m operating profit) but with plans in place to return to full
year profitability.
Asia Ground
The 20% investment in China Aircraft Services Limited ("CASL")
was completed on 2 March 2018 and the wholly owned Gama Aviation
operations in Hong Kong are developing as planned. This operation
remains in early start-up phase having produced its first revenues
in the fourth quarter 2017 and is an exciting opportunity for
future growth.
Air division
The Air division provides aircraft management, special mission
and charter services. It offers a comprehensive fleet management
service to business jet owners including the provision of
management services, crew personnel, fuel, airworthiness,
engineering oversight, insurance management, hangar space, valeting
and all travel arrangements. It also works with public agencies
providing outsourced solutions to manage aviation operations for a
variety of complex, time critical services such as air ambulance
provision and aerial survey. The Group also acts as a charter
broker for its managed aircraft with revenue shared between the
Group and the underlying aircraft owner.
The Air division revenue was reported at $269.8m (2017:
$254.9m), up 5.8% principally due to revenue growth in its US
associate. The division delivered a total operating profit of $4.1m
(2017: $4.3m), despite the difficult trading conditions in
Europe.
June US Associate Europe Middle East Asia Total
USD 2018 2017* 2018 2017 2018 2017 2018 2017 2018 2017
thousands
------------- -------- -------- ------- ------- ------- ------- ------- ------- -------- --------
Revenue -
reported 1,875 2,000 45,004 47,135 10,122 11,629 6,203 32 63,204 60,796
Associate 206,251 189,446 - - - - 2,209 6,732 208,460 196,178
Branding fee (1,875) (2,000) - - - - (11) (32) (1,886) (2,032)
-------- -------- ------- ------- ------- ------- ------- ------- -------- --------
Revenue 206,251 189,446 45,004 47,135 10,122 11,629 8,401 6,732 269,778 254,942
Gross profit 11,819 11,399 4,808 4,819 1,074 821 466 190 18,167 17,229
Gross profit
% 5.7% 6.0% 10.7% 10.2% 10.6% 7.1% 5.5% 2.8% 6.7% 6.8%
Total
operating
profit 3,399 4,260 1,646 1,631 359 130 (96) (362) 5,308 5,659
Total
operating
profit % 1.6% 2.2% 3.7% 3.5% 3.5% 1.1% (1.1%) (5.4%) 2.0% 2.2%
Associate (3,250) (3,714) - - - - 197 362 (3,053) (3,352)
Branding fee 1,875 2,000 - - - - 11 32 1,886 2,032
Total
operating
profit -
reported 2,024 2,546 1,646 1,631 359 130 112 32 4,141 4,339
-------------- -------- -------- ------- ------- ------- ------- ------- ------- -------- --------
*The US 2017 figures have been restated to reflect treatment of
branding costs in line with 2018.
US Air (Associate)
The US Air associate delivered strong revenue growth, up 8.9% to
$206.3m (2017: $189.4m).
The BBA business merger in 2017 is delivering the envisaged
benefits with complementary West Coast coverage to the US Air
associate's existing East Coast business, a more diversified client
base, the cross selling of maintenance services into Gama
Aviation's wholly owned US ground business and potential future
cost synergies. The operations continue to benefit from the growth
of the Wheel Up fleet. The business is branded as Gama Aviation
Signature and it is one of the largest aircraft management
businesses in the US.
Total operating profit was $3.4m (2017: $4.3m), with a total
operating profit margin of 1.6% (2017: 2.2%). In the last quarter
of 2017 there was large scale investment in the US sales force and
this investment has impacted the operating margin in the first half
of 2018. This was made to enhance the future growth of the managed
fleet. As a result, operating margins are expected to resume their
steady improvement towards the business model target of 4% to 5%,
as the benefits of scale and operational gearing continue.
Europe Air
The Europe Air division reported revenue of $45.0m (2017:
47.1m), which was relatively stable in difficult trading conditions
across Europe.
The general political and economic uncertainties across Europe
persist and will continue to impact performance during Brexit.
However, some benefits are being seen from previously implemented
operational efficiencies.
Total operating profit was flat at $1.6m (2017: $1.6m) with a
profit margins improving slightly to 3.7% (2017: 3.5%). This level
of performance is expected to continue during the second half year
and into 2019, as the political uncertainties persist.
Middle East Air
The Middle East Air division delivered revenue of $10.1m (2017:
$11.6m), down by 13.9% due to uncertainty and political turmoil in
the region.
Investment in the Sharjah Business Centre is laying the
foundations for scalable growth in the future.
Total operating profit was $0.4m (2017: $0.1m) and margins
improved to 3.5% (2017: 1.1%), despite the challenging trading
conditions. As the political position improves, we expect the
division to make steady progress.
Asia Air
Asia Air is now a wholly owned entity following the acquisition
of 50% of the joint venture interest of Hutchison on 2 March 2018,
as part of the placing and fund raise.
However, the operation has made encouraging progress, having
added new contracts and increased volume of activity. The division
is trading profitably monthly, with the reversal of losses from the
first quarter.
Financial Review
Basis of presentation of financials
All financial commentary below is provided on a constant
currency basis unless otherwise stated. The 2017 performance has
been restated to the same average rate for USD to GBP as the
reported 2018 financials. The average rate for 2018 was USD1.38 to
GBP1.00.
Group financial performance
Key financial indicators across the group are reported
below.
Constant Currency
June 2018 2017 Change 2017 Change
USD thousands Total Total Total Total Total
-------- -------- --------- --------- ---------
Revenue 104,629 101,628 3.0% 108,104 (3.2%)
Gross Profit 22,088 21,331 3.5% 22,679 (2.6%)
Gross Profit % 21.1% 21.0% 0.1ppt 21.0% 0.1ppt
Underlying EBITDA 8,108 8,028 1.0% 8,433 (3.9%)
Underlying EBITDA % 7.7% 7.9% (0.2ppt) 7.8% (0.1ppt)
Underlying Operating
Profit 7,078 7,718 (8.3%) 8,080 (12.4%)
Underlying Operating
Profit % 6.8% 7.6% (0.8ppt) 7.5% (0.7ppt)
Underlying Profit before
tax 6,609 7,012 (5.7%) 7,314 (9.6%)
Underlying Profit before
tax % 6.3% 6.9% (0.4ppt) 6.8% (0.6ppt)
Underlying Basic Earnings
Per Share (cents) 11.0c 12.2c (1.2c) 12.8c (1.8c)
-------- -------- --------- --------- ---------
Revenue
The Group reported revenue at $104.6m (2017: $108.1m), with
revenue in 2017 including $11.4m of aircraft sales. Revenue
excluding aircraft sales grew by 3.6% to $100.2m (2017: $96.7m). We
have seen growth in revenue in both Air and Ground divisions
principally coming out of the US and European geographies.
Gross profit
The gross profit reported is $22.1m (2017: $22.7m) and there has
been an increase in the gross profit margin percentage by 0.1% to
21.1% (2017: 21.0%).
Underlying EBITDA
Underlying EBITDA reported is $8.1m (2017: $8.4m). This
represents an EBITDA margin of 7.7% broadly in line with 7.9% in
2017.
Reconciliation of underlying total operating profit to
EBITDA
Constant Currency
USD thousands June 2018 June 2017 June 2017
---------- ----------
Underlying total operating
profit 7,076 7,718 8,080
Depreciation 1,196 867 910
Share of associate's results (166) (401) (401)
Share of associate's exceptional
items - (156) (156)
Underlying EBITDA 8,108 8,028 8,433
----------------------------------- ---------- ----------
Depreciation
Depreciation which is set out in note 11 includes depreciation
on property, plant and equipment of $1.2m (2017: $0.9m).
Share of associate's results
The share of associate's results represents the share of
operating profit as reported in Gama Aviation LLC from the Group's
24.5% interest in Gama Aviation LLC and the share of operating
profit as reported in CASL from the Group's 20% interest in CASL
from 2 March 2018.
Share of associate's exceptional items
The share of associate's exceptional items in 2017 represents
the share of exceptional items as reported in Gama Aviation LLC
from the Group's 24.5% interest in Gama Aviation LLC. These reflect
transaction, integration and legal costs associated with the the
merger of the US Air associate with the BBA aircraft management
business in the six months to 30 June 2017.
Total operating profit
The underlying total operating profit, which includes the
operating profit attributable to Gama Aviation of the 100% owned
group companies together with the results attributable to Gama
Aviation from its associate and joint venture is $7.1m (2017:
$8.1m).
Underlying total operating profit is arrived at by taking
operating profit before amortisation, exceptional items, share
based payment expense and including the share of profits but
excluding accumulated losses of equity accounted investments and
any gain on disposal or acquisition of associate.
Constant Currency
USD thousands June 2018 June 2017 June 2017
------------ ------------
Continuing total operating
profit 2,889 9,647 9,888
Amortisation 774 755 826
Exceptional items 4,303 567 609
Share of associate's exceptional
items - 156 156
Share-based payment expense 98 98 106
Release of provisions in
respect of losses of associate
and joint venture from prior
years - (1,322) (1,322)
Gain on acquisition/disposal
of interest in associate (986) (2,183) (2,183)
------------ ------------ ------------------
Underlying total operating
profit 7,078 7,718 8,080
----------------------------------- ------------ ------------ ------------------
Amortisation
Amortisation which is set out in note 11 includes amortisation
of intangible assets of $0.8m (2017: $0.8m), which relate to
intangible assets recognised on acquisition.
Exceptional items
Exceptional items amounted to $4.3m (2017: $0.6m), which are set
out in note 4 and represent transaction costs $2.1m (2017: $0.2m),
integration and restructuring costs $0.5m (2017: $0.4m), and legal
costs $1.8m (2017: $nil). Exceptional items include travel expenses
and costs for executive management incurred in undertaking
transactions, integration and restructuring together with the
salary costs of certain permanent employees who are employed in
place of external professional services.
Share-based payment expense
On 22 June 2018, 2,132,000 share options were awarded, under the
Group's Share Option Plan to senior executives and managers across
the Company. The assumptions on which the charge for these share
options are based are set out in note 9.
Associates and joint ventures
The release of the provision for our share of associate and
joint venture losses from prior years of $nil (2017: $1.3m) and the
profit from the disposal/acquisition of the interest in associates
and joint ventures of $1.0m (2017: $2.2m) are excluded from the
underlying total operating profit.
US Air losses of associate from prior years
During previous years, the US Air associate had been
loss-making, and the Group had been provisioning amounts in
anticipation of additional resourcing requirements. With the
strength of the Associate's performance, its profit-making position
and positive net assets position, together with a re-organised
branding fee structure, the provisions of $1.5m at 30 June 2017
were no longer required and were released. The provision release
has not been included in the Group's underlying results in this
period.
Asia Air losses of joint venture
The losses of the Asia joint venture were $0.2m at 30 June
2017.
Profit on disposal of interest in associate
On 1 January 2017 the Group and BBA Aviation Plc merged their US
aircraft management and charter businesses. This merger resulted in
the Group's 49% interest in its associated company Gama Aviation
LLC, being reduced to 24.5% and a profit of $2.2m being recorded on
the disposal of the other 24.5% interest.
Profit on acquisition of interest in associate
On 2 March 2018 the Group acquired 50% of the shares in Gama
Aviation Hutchison Holdings Limited. The Group already held 50% of
the of the shares in Gama Aviation Hutchison Holdings Limited and
the acquisition of the remaining 50% is treated as a step
acquisition under IFRS 3 'Business combinations' resulting in a
gain on step acquisition of $1.0m.
The share of results from equity accounted investments derived
by the Group's associates and joint ventures is set out below:
USD thousands June 2018 June 2017
----------
US associate share of results 136 401
Release of provisions in
respect of losses of associate
and joint venture from
prior years - 1,322
HK associate share of results 30 -
Share of results from equity
accounted investments 166 1,723
----------
Profit before tax
Constant Currency
USD thousands June 2018 June 2017 June 2017
------------ ------------
Continuing profit before
tax 3,190 8,694 8,851
Amortisation 774 755 826
Exceptional items 4,303 567 609
Share of associate's exceptional
items - 156 156
Share-based payment expense 98 98 106
Release of provisions in
respect of losses of associate
and joint venture from prior
years - (1,322) (1,322)
Profit on disposal of interest
in associate (986) (2,183) (2,183)
Unrealised FX movements in
finance costs (768) 247 271
------------ ------------ ------------------
Underlying profit before
tax 6,611 7,012 7,314
----------------------------------- ------------ ------------ ------------------
Unrealised FX movements within finance costs
Within our global services business, we operate and manage
geographically mobile assets. As a result, Gama Aviation is exposed
to several currencies. Except for Europe, the rest of the regions
trade in USD which is the same as our Group reporting currency,
leaving little or no foreign exchange exposure.
The material currency exposure for Gama Aviation is within our
Europe operations between GBP and USD. Gama Aviation experiences
both realized and unrealized trading gains and losses on these
exchange rate movements. These impact our operating performance,
and finance income and costs. The unrealized FX movement in the
period was a gain of $0.8m (2017: loss of $0.3m).
Earnings per share (EPS)
Constant
USD thousands June 2018 June 2017 Currency
June 2017
------------ ------------
Profit attributable to ordinary
equity holders of the parent:
Continuing operations 2,843 7,037 7,153
Add back:
Amortisation 774 755 826
Exceptional items 4,303 567 609
Share of associate's exceptional
items - 156 156
Share-based payment expense 98 98 106
Release of provisions in respect
of losses of associate and joint
venture from prior years - (1,322) (1,322)
Profit on disposal of interest
in associate (986) (2,183) (2,183)
Unrealised FX movements in finance
costs (768) 247 271
Deferred tax charge - - -
------------ ------------ -----------
Profit attributable to ordinary
shareholders for adjusted earnings 6,264 5,355 5,616
Denominator
Weighted average number of shares
used in basic EPS 56,739,000 43,994,442 43,994,442
Underlying basic earnings per
share (cents) 11.0c 12.2c 12.8c
-------------------------------------- ------------ ------------ -----------
Taxation
There is a total tax charge for the period of $0.3m (2017:
$1.5m) and an effective tax rate of 20% on continuing activities.
The group operates across several jurisdictions and the effective
rate of tax reflects the blended rate of operating in different
countries.
Balance sheet
The summarised balance sheet at 30 June 2018 reflects the impact
of the share issuance and acquisition of a 20% stake in China
Airline Services Limited for $16.0m and the acquisition of the
remaining shares in the group's Hong Kong joint venture.
USD thousands June 2018 December
2017
------------
Goodwill 41,908 40,716
Other non-current assets 56,972 36,025
------------ -----------
Non- current assets 98,880 76,741
------------ -----------
Cash and cash equivalents 24,294 22,349
Other current assets 66,444 58,923
------------ -----------
Current assets 90,738 81,272
------------ -----------
Current borrowings (excluding
leases) - (30,642)
Other current liabilities (65,334) (61,092)
------------ -----------
Current liabilities (65,334) (91,734)
------------ -----------
Non-current borrowings (excluding
leases) - (1,012)
Non-current liabilities excluding
borrowings (3,506) (3,562)
------------ -----------
Non-current liabilities (3,506) (4,574)
------------ -----------
Net assets 120,778 61,705
------------------------------------ ------------ -----------
Following the share issuance on 2 March 2018 the Group repaid
its existing borrowings.
Net debt and cash flow movements
The table below highlights the change in the net debt position,
showing a $34.0m improvement in 2018. This is mainly due to the
issuance of new shares for a net consideration of $63.7m offset by
acquisition outflows of $22.2m. The acquisitions include the Gama
Hutchison acquisition ($2.6m net of cash acquired), the acquisition
of a 20% stake in China Aircraft Services Limited ($16.0m) on 2
March 2018 and a capital contribution to our US associate Gama
Aviation LLC of $3.6m.
Over the last few years management has been focused upon
improving its working capital management to reverse the sizeable
outflows experienced in prior years. In 2018 the Group saw a
working capital outflow of $5.2m largely due to the reduction in
client deposits as these unwind in 2018 as previously reported.
USD thousands June 2018 June 2017
------------
Underlying EBITDA 8,108 8,028
Working capital movement (5,202) 335
Items not included in underlying
EBITDA (4,401) (665)
Other (801) (2,029)
------------ ------------
Cash flow from operations (2,296) 5,669
Capex movement (2,927) 708
Net interest & tax paid (1,314) (702)
------------ ------------
Free cash flow (6,537) 5,675
Issuance of shares 63,742 -
Acquisitions (22,194) -
Net debt foreign exchange
movements (975) (618)
------------ ------------
Change in net debt 34,036 5,057
------------ ------------
Net debt 21,064 (14,330)
Cash and cash equivalents 24,294 15,186
Borrowings - (27,446)
Obligations under finance
leases (3,230) (2,070)
------------------------------------ ------------ ------------
Items not included in underlying EBITDA
Exceptional items in the cash flow movements are as set out in
note 4 and represent transaction costs $2.1m, integration and
restructuring costs $0.5m, and legal costs relating to litigation
$1.8m.
Other Items
Other items in the cash flow movements primarily relate to
losses from discontinued activities $1.3m (2017: losses of $1.0m)
as set out in note 6 and unrealized foreign exchange movements of
$0.4m gain (2017: $1.3m loss).
Discontinued operations
In the six months to 30 June 2017, the losses from discontinued
operations were generated by the owned aircraft within the group
that were held for sale as part of the group strategy to exit the
business model of owned aircraft that are deployed solely for the
purposes of ad-hoc charter. The Group continued to operate the
aircraft whilst they were held for sale to reduce the losses borne
in discontinued operations and to help maintain their
airworthiness, assisting the sale process. Two aircraft that were
held for sale at 31 December 2016 were sold in 2017. The remaining
aircraft was operated in the period ended 30 June 2018 and the sale
of this aircraft was completed on 12 July 2018 (see note 12).
At the end of 2017 the Group discontinued its stand-alone
aircraft management operation in Switzerland and the run-down costs
of this operation have been included in the period to 30 June
2018.
In May 2018 the Group announced the closure of its Oxford ground
engineering operation and the results of this operation are
considered as discontinued from 1 June 2018.
Capex movement
Capital expenditure includes the purchase of property, plant and
equipment of $1.6m (2017: $3.3m) and intangibles of $1.3m (2017:
$0.2m). The expenditure on intangibles mostly relates to the
development of the next generation MyAirops software for resale to
customers.
Net interest and tax paid
The Group paid tax on profits of $1.0m (2017: $nil) in the UK
and US which includes advance payments for 2018. Net interest paid
in 2018 was $0.4m (2017: $0.7m) with the reduction due to the
repayment of the RBS credit facilities and other debt following the
issuance of new shares in March 2018.
Dividend
As usual and in accordance with the Group's dividend policy, the
Directors do not propose an interim dividend to be paid for the six
months to 30 June 2018. The Group will continue to maintain its
progressive dividend policy.
The final dividend of 2.75p per share for the year ended 31
December 2017 was approved at the Annual General Meeting on 5 June
2018 and was paid on 25 July 2018.
Litigation and associated exceptional items
The Group has been involved in a number of legal proceedings,
most of which arise from historic Hangar 8 trading activity, prior
to the merger completed in January 2015, and those relating to
disputes with Dustin Dryden (a former non-executive director of the
Company and of Hangar 8 who resigned in September 2015) and
affiliated entities. On 19 June 2018, the Company reached an
agreement with the Dryden Parties (Dustin Dryden and associated
entities) to settle the legal proceedings between the parties.
The Company has incurred legal costs of US$1.8m associated with
these proceedings (including Dustin Dryden and associated entities
related litigation) in the period ended 30 June 2018, which are
treated as an exceptional item. The Board believes a lower amount
will be incurred for future legal costs, through to the conclusion
of the various ongoing proceedings, which will also be treated as
exceptional.
The current ongoing proceedings fall into two categories, the
first involves proceedings by the Company to recover long-standing
trade receivables that amount to approximately $4.4m. The Company
has made adequate provisions or holds security against these claims
and as a result the Board does not expect any further provisions
will be required. In addition, based on legal advice, the Board
considers the proceedings to recover these receivables are likely
to be successful.
The second involves a number of proceedings brought against the
Company in which the claimants seek to recover damages for alleged
contractual breaches which amount to approximately $6.0m. Based on
a detailed analysis of the claims and legal advice, the Board
believes that these claims are speculative and/or overlapping and
the Company continues to vigorously defend them and therefore no
provision has been made in the accounts.
By the time all these proceedings, some of which are with the
same counterparties, are determined or settled, the Board expects
the overall awards and settlements to result in a cash inflow to
the Company.
David Stickland
Chief Financial Officer
Gama Aviation plc
Unaudited Condensed Consolidated Interim Financial
Statements
Six months ended 30 June 2018
Consolidated income statement (unaudited)
Six months Six months
ended ended
30 June 30 June
2018 2017
Note $'000 $'000
---------------------------------------------- ----- ----------- -----------
Continuing operations
Revenue 3 104,629 101,628
Cost of sales (82,541) (80,297)
---------------------------------------------- ----- ----------- -----------
Gross profit 22,088 21,331
---------------------------------------------- ----- ----------- -----------
Administrative expenses (20,351) (15,590)
Underlying EBITDA 8,108 8,028
Items not included in underlying EBITDA 4 (4,401) (665)
Depreciation and amortisation (1,970) (1,622)
-----------
Operating profit 1,737 5,741
Share of results from equity accounted
investments 166 1,723
Profit on step acquisition/disposal
of interest in associate 5 986 2,183
Total operating profit 2,889 9,647
---------------------------------------------- ----- ----------- -----------
Finance income 773 -
Finance costs (472) (953)
---------------------------------------------- ----- ----------- -----------
Profit before tax from continuing operations 3,190 8,694
Taxation 7 (267) (1,519)
---------------------------------------------- ----- ----------- -----------
Profit from continuing operations 2,923 7,175
---------------------------------------------- ----- ----------- -----------
Discontinued operations
Loss before and after tax from discontinued
operations 6 (1,276) (1,012)
---------------------------------------------- ----- ----------- -----------
Profit for the period 1,647 6,163
---------------------------------------------- ----- ----------- -----------
Attributable to:
Owners of the Company 1,567 6,025
Non-controlling interests 80 138
---------------------------------------------- ----- ----------- -----------
Totals 1,647 6,163
---------------------------------------------- ----- ----------- -----------
Earnings per share attributable to the
equity holders of the parent 8
Basic (cents) 2.76c 13.69c
Diluted (cents) 2.74c 13.58c
Basic - continuing operations (cents) 5.01c 16.00c
Diluted - continuing operations (cents) 4.97c 15.86c
---------------------------------------------- ----- ----------- -----------
Consolidated statement of comprehensive income (unaudited)
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
--------------------------------------------------- ----------- -----------
Profit for the period 1,647 6,163
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations (2,791) 1,733
Gains/(losses) on cash flow hedges (19) -
--------------------------------------------------- ----------- -----------
Total comprehensive (loss)/income for the
period (1,163) 7,896
----------------------------------------------------- ----------- -----------
Total comprehensive (loss)/income is attributable
to:
Owners of the Company (1,083) 7,758
Non-controlling interests (80) 138
----------------------------------------------------- ----------- -----------
Totals (1,163) 7,896
----------------------------------------------------- ----------- -----------
Consolidated statement of changes in equity (unaudited)
For the six months to 30 June 2018
Share Share Other Foreign Accumulated Total Non-controlling Total
capital premium reserves exchange profit/ shareholders' interest equity
reserve (losses) equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Balance at 1
January
2018 684 - 61,699 (20,797) 18,595 60,181 1,524 61,705
Issuance of
shares 269 63,473 - - - 63,742 - 63,742
Share-based
payments - - 98 - - 98 - 98
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Transactions
with
owners 269 63,473 98 - - 63,840 - 63,840
Profit for the
period - - - - 1,567 1,567 80 1,647
Other
comprehensive
loss - - (19) (2,791) - (2,810) - (2,810)
Capital
contribution
to associate - - (3,604) - - (3,604) (3,604)
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Total
comprehensive
(loss)/income - - (3,623) (2,791) 1,567 (4,847) 80 (4,767)
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Balance at 30
June
2018 953 63,473 58,174 (23,588) 20,162 119,174 1,604 120,778
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
For the six months to 30 June 2017
Share Share Other Foreign Accumulated Total Non-controlling Total
capital premium reserves exchange profit shareholders' interest equity
reserve equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Balance at 1
January
2017 684 - 61,377 (23,529) 17,419 55,951 581 56,532
Share-based
payments - - 98 - - 98 - 98
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Transactions
with
owners - - 98 - - 98 - 98
Profit for the
period - - - - 6,025 6,025 138 6,163
Other
comprehensive
income - - - 1,733 - 1,733 - 1,733
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Total
comprehensive
income - - - 1,733 6,025 7,758 138 7,896
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Balance at 30
June
2017 684 - 61,475 (21,796) 23,444 63,807 719 64,526
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Consolidated balance sheet
30 June 31 December
2018 2017
(unaudited)
$'000 $'000
--------------------------------------- --- ------------ ------------
Non-current assets
Goodwill 41,908 40,716
Other intangible assets 16,050 11,564
--------------------------------------- --- ------------ ------------
Total intangible assets 11 57,958 52,280
Property, plant and equipment 11 20,355 20,051
Investments accounted for using
the equity method 17,887 1,721
Deferred tax asset 2,680 2,689
--------------------------------------- --- ------------ ------------
98,880 76,741
--------------------------------------- --- ------------ ------------
Current assets
Assets held for resale 12 1,500 1,500
Inventories 10,241 9,705
Trade and other receivables 54,703 47,718
Cash and cash equivalents 24,294 22,349
--------------------------------------- --- ------------ ------------
90,738 81,272
--------------------------------------- --- ------------ ------------
Total assets 189,618 158,013
--------------------------------------- --- ------------ ------------
Current liabilities
Trade and other payables (54,387) (54,510)
Obligations under finance leases (1,265) (1,654)
Provisions for liabilities - (540)
Borrowings - (30,642)
Deferred revenue (9,682) (4,388)
--------------------------------------- --- ------------ ------------
(65,334) (91,734)
--------------------------------------- --- ------------ ------------
Total assets less current liabilities 124,284 66,279
--------------------------------------- --- ------------ ------------
Non-current liabilities
Borrowings - (1,012)
Obligations under finance leases (1,965) (2,013)
Provisions for liabilities - -
Deferred tax liabilities (1,541) (1,549)
--------------------------------------- --- ------------ ------------
(3,506) (4,574)
--------------------------------------- --- ------------ ------------
Total liabilities (68,840) (96,308)
--------------------------------------- --- ------------ ------------
Net assets 120,778 61,705
--------------------------------------- --- ------------ ------------
Shareholders' equity
Share capital 14 953 684
Share premium 14 63,473 -
Other reserves 58,174 61,699
Foreign exchange reserve (23,588) (20,797)
Accumulated profit 20,162 18,595
--------------------------------------- --- ------------ ------------
Total shareholders' equity 119,174 60,181
--------------------------------------- --- ------------ ------------
Non-controlling interest 1,604 1,524
Total equity 120,778 61,705
--------------------------------------- --- ------------ ------------
Consolidated cash flow statement (unaudited)
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
---------------------------------------------------- ----------- -----------
Cash flows from operating activities
Profit before tax from continuing operations 3,190 8,694
Loss before tax from discontinued operations (1,276) (1,012)
---------------------------------------------------- ----------- -----------
Profit before tax 1,914 7,682
Adjustments for:
Depreciation and amortisation 1,970 1,622
Finance income (768) -
Finance costs 395 949
Loss on disposal of assets held for sale - 150
(Profit) on acquisition/disposal of interest
in associate (986) (2,183)
Share-based payment expense 98 98
Unrealised foreign exchange movements 449 (1,261)
Share of results from equity accounted investments (166) (1,723)
---------------------------------------------------- ----------- -----------
Operating cash flows before movements in working
capital 2,906 5,334
Increase in inventories (784) (2,065)
Increase in receivables (2,429) (5,266)
Increase/(decrease) in payables (6,858) 1,918
Increase in deferred revenue 5,429 5,997
Decrease in provisions (560) (249)
---------------------------------------------------- ----------- -----------
Cash generated from operations (2,296) 5,669
Taxes paid (959) -
Interest received - -
Interest paid (355) (702)
---------------------------------------------------- ----------- -----------
Net cash flows from operating activities (3,610) 4,967
---------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchases of property, plant and equipment (1,602) (3,253)
Purchases of intangibles (1,325) (200)
Proceeds on disposal of assets held for sale - 4,161
Acquisition of subsidiary, net of cash acquired (22,194) -
---------------------------------------------------- ----------- -----------
Net cash flows from investing activities (25,121) 708
---------------------------------------------------- ----------- -----------
Cash flows from financing activities
Issuance of shares (net of issue costs) 63,742 -
Repayments of obligations under finance leases (437) (3,550)
Proceeds from borrowings - 1,143
Repayment of borrowings (31,969) -
Net cash flows from financing activities 31,336 (2,407)
---------------------------------------------------- ----------- -----------
Net increase in cash and cash equivalents 2,605 3,268
Effect of foreign exchange rates (660) 744
Cash and cash equivalents at 1 January 22,349 11,174
---------------------------------------------------- ----------- -----------
Cash and cash equivalents at the end of period 24,294 15,186
---------------------------------------------------- ----------- -----------
1. Corporate information and basis of preparation
The financial information for the year ended 31 December 2017
set out in this interim report does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The
Group's statutory financial statements for the year ended 31
December 2017 have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and
did not contain statements under Section 498 of the Companies Act
2006. The interim results are unaudited. Gama Aviation plc is a
publicly limited company incorporated and domiciled in England and
Wales. The Company's shares are publicly traded on the AIM market
of the London Stock Exchange.
These interim consolidated financial statements (the interim
financial statements) are for the six months ended 30 June 2018.
They have been prepared in accordance with IFRSs as adopted by the
European Union and IAS 34 "Interim Financial Reporting". They do
not include all the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 31 December
2017.
2. Accounting policies
The accounting policies set out in the Group's statutory
financial statements for the year ended 31 December 2017 have been
applied in the preparation of the interim financial statements,
except for the application of IFRS 15.
On 1 January 2018 the group adopted IFRS 15 'Revenue from
Contracts with Customer' which supersedes IAS 18 'Revenue.' The
group has adopted the 'Modified retrospective application' which
means there is no restatement of the comparative period, but there
is a requirement to make an opening adjustment to retained earnings
as at 1 January 2018 to account for any earnings taken in 2017 that
need to be reclassified to 2018.
Following a review all revenue streams it has been determined
that no opening adjustments with respect to the adoption of IFRS 15
are required.
There have been no changes to any of the Group's critical
accounting estimates and judgements of its principal financial
risks. The Directors consider that the Group has adequate resources
to remain in operation for the foreseeable future and have
therefore continued to adopt the going concern basis in preparing
the interim financial statements.
3. Segment information
For management purposes, the Group is organised into business
units, based on line of business and geographical location.
An analysis of the Group's revenue, gross profit, underlying
EBITDA and underlying total operating profit for the period ended
30 June 2018 is as follows:
Total Gross profit Gross profit Underlying Underlying Underlying Underlying
Revenue EBITDA EBITDA total total
operating operating
profit profit
$'000 $'000 % $'000 % $'000 %
--------------- --- --- -------- ------------ ------------ ---------- ---------- ------------- --------------
US: Air 1,875 1,913 >100 1,926 >100 2,024 >100
Europe: Air 45,004 4,808 10.7 1,956 4.3 1,646 3.7
MENA: Air 10,122 1,074 10.6 369 3.6 359 3.5
Asia: Air 6,203 409 6.6 118 1.9 142 2.3
-------- ------------ ------------ ---------- ---------- ------------- --------------
63,204 8,204 13.0 4,369 6.9 4,171 6.6
US: Ground 17,248 3,748 21.7 1,321 7.7 968 5.6
Europe: Ground 26,706 8,872 33.2 4,886 18.3 4,465 16.7
MENA: Ground 2,751 491 17.8 (28) (1.0) (68) (2.5)
505
Asia: Ground 505 90 17.8 (160) (31.7) (179) (35.5)
-------- ------------ ------------ ---------- ---------- ------------- --------------
47,210 13,201 28.0 6,019 12.7 5,186 11.0
Other 1,851 683 36.9 (2,280) (>100) (2,279) (>100)
Eliminations (7,636) - - - - - -
------------------------- -------- ------------ ------------ ---------- ---------- ------------- --------------
104,629 22,088 21.1 8,108 7.7 7,078 6.8
----------------------- -------- ------------ ------------ ---------- ---------- ------------- --------------
Underlying total operating profit 7,078
Amortisation (774)
Exceptional items (4,303)
Share-based payment expense (98)
Profit on step acquisition 986
Finance costs (net) 301
--------------------------------------------------------------------------------------- -------------
Profit before tax from continuing operations 3,190
--------------------------------------------------------------------------------------- -------------
3. Segment information (continued)
An analysis of the Group's revenue, gross profit, underlying
EBITDA and underlying total operating profit for the period ended
30 June 2017 is as follows:
Total Gross profit Gross profit Underlying Underlying Underlying Underlying
Revenue EBITDA EBITDA total operating total operating
profit profit
$'000 $'000 % $'000 % $'000 %
---------------- -------- ------------ ------------ ---------- ---------- --------------- ---------------
US: Air 2,000 2,038 >100 2,028 >100 2,546 >100
Europe: Air 43,054 4,414 10.3 1,723 4.0 1,493 3.5
MENA: Air 11,629 821 7.1 167 1.4 130 1.1
Asia: Air 32 32 100.0 32 100.0 32 100.0
-------- ------------ ------------ ---------- ---------- --------------- ---------------
56,715 7,305 12.9 3,950 7.0 4,201 7.4
US: Ground 14,219 2,648 18.6 1,060 7.5 817 5.7
Europe: Ground 31,488 9,075 28.8 4,400 14.0 4,161 13.2
MENA: Ground 3,003 974 32.4 289 9.6 210 7.0
-------- ------------ ------------ ---------- ---------- --------------- ---------------
48,710 12,697 26.1 5,749 11.8 5,188 10.7
Other 875 1,329 >100 (1,671) (>100) (1,671) (>100)
Eliminations (4,672) - - - - - -
------------------ -------- ------------ ------------ ---------- ---------- --------------- ---------------
101,628 21,331 21.0 8,028 7.9 7,718 7.6
---------------- -------- ------------ ------------ ---------- ---------- --------------- ---------------
Underlying total operating profit 7,718
Amortisation (755)
Exceptional items (567)
Share of associate's exceptional items (156)
Share-based payment expense (98)
Losses of associate and joint venture 1,322
Profit on disposal of interest in associate 2,183
Finance costs (953)
-------------------------------------------------------------------------------- ---------------
Profit before tax from continuing operations 8,694
-------------------------------------------------------------------------------- ---------------
An analysis of the Group's revenue is as follows:
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
----------------------------------- ---------- ----------
Continuing operations
Sale of business aviation services 102,743 89,136
Sale of aircraft - 10,460
Branding fees 1,886 2,032
----------------------------------- ---------- ----------
Totals 104,629 101,628
----------------------------------- ---------- ----------
4. Items not included in underlying EBITDA
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
Exceptional items
Transaction costs 2,074 189
Integration and business re-organisation costs 477 378
Litigation costs 1,752 -
--------------------------------------------------- ---------- ----------
4,303 567
Share-based payment expense 98 98
--------------------------------------------------- ---------- ----------
Totals 4,401 665
--------------------------------------------------- ---------- ----------
Transaction costs represent expenses incurred in respect of the
transactions completed in the period, as well as costs associated
with seeking out new potential investment opportunities and certain
costs relating to the issuance of shares. Integration and business
re-organisation costs represent the subsequent third party and
internal costs associated with the acquisitions and other
re-organisation costs.
5. Acquisitions and investments
On 2 March 2018, the Group acquired Hutchison Whampoa (China)
Limited's 50% stake in Gama Aviation Hutchison Holdings Ltd for
$3.1m.
The following table summarises the consideration paid for Gama
Aviation Hutchison Holdings Ltd, the preliminary fair value of the
assets acquired, and the liabilities assumed at the acquisition
date.
Consideration at 2 March
2018 $'000
Cash consideration 3,050
-----
Total consideration transferred 3,050
=====
Recognised amounts of identifiable assets acquired
and liabilities assumed $'000
Property, plant and equipment 249
Customer relationships (included within intangibles) 4,202
Trade and other receivables 5,069
Cash 460
Trade and other payables (7,842)
Deferred revenue (165)
Goodwill 2,063
-------
4,036
Profit recognised on acquisition in respect of pre-existing
shareholding (see below) (986)
-------
Total consideration 3,050
=======
The Group already held 50% of the of the shares in Gama Aviation
Hutchison Holdings Limited and the acquisition of the remaining 50%
is treated as a step acquisition under IFRS 3 resulting in a profit
on acquisition of $1.0m.
In the period to 30 June 2017, the Group disposed of a 24.5%
interest in its associate Gama Aviation LLC and recognised a profit
on disposal of interest in an associate of $2,183,000. The Group
has retained the remaining holding of 24.5% and continues to
account for the investment as an associate.
Investments
On 2 March 2018 the Group acquired Hutchison Whampoa (China)
Limited's 20% stake in China Aircraft Services Limited for $16.0m,
which is recorded under investments accounted for using the equity
method in the consolidated balance sheet.
The Group also made a capital contribution to its associate Gama
Aviation LLC of $3.6m during the period ended 30 June 2018.
6. Discontinued operations
In the six months to 30 June 2017, the losses from discontinued
operations were generated by the owned aircraft within the group
that were held for sale as part of the group strategy to exit the
business model of owned aircraft that are deployed solely for the
purposes of ad-hoc charter. The Group continued to operate the
aircraft whilst they were held for sale to reduce the losses borne
in discontinued operations and to help maintain their
airworthiness, assisting the sale process. Two aircraft that were
held for sale at 31 December 2016 were sold in 2017. The remaining
aircraft was operated in the period ended 30 June 2018 and the sale
of this aircraft was completed on 12 July 2018 (see note 12).
At the end of 2017 the Group discontinued its stand-alone
aircraft management operation in Switzerland and the run-down costs
of this operation have been included in the period to 30 June
2018.
In May 2018 the Group announced the closure of its Oxford ground
engineering operation and the results of this operation are
considered as discontinued from 1 June 2018.
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
-------------------------------------------- ---------- ----------
Discontinued operations
Revenue 314 278
Expenses (1,613) (1,294)
--------------------------------------------- ---------- ----------
Operating loss (1,299) (1,016)
Net finance income 23 4
--------------------------------------------- ---------- ----------
Loss before and after tax from discontinued
operations (1,276) (1,012)
--------------------------------------------- ---------- ----------
Earnings per share
Basic - cents (2.51c) (2.30c)
Diluted - cents (2.23c) (2.28c)
--------------------------------------------- ---------- ----------
The weighted average number of ordinary shares is included in
Note 8.
7. Taxation
The taxation charge for the six months to 30 June 2018 is
accrued based on the estimated average annual effective income tax
rate of 20% (6 months ended 30 June 2017: 20%).
8. Earnings per share ("EPS")
The calculation of earnings per share is based on the earnings
attributable to the ordinary shareholders divided by the weighted
average number of shares in issue during the period.
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
-------------------------------------------------- ---------- ----------
Numerator
Profit attributable to ordinary equity holders
of the parent:
Continuing operations 2,843 7,037
Discontinued operations (1,276) (1,012)
---------------------------------------------------- ---------- ----------
Profit attributable to ordinary equity holders
of the parent for basic earnings 1,567 6,025
---------------------------------------------------- ---------- ----------
Denominator
Weighted average number of shares used in
basic EPS 56,739,000 43,994,442
Effect of dilutive share options 458,697 372,795
--------------------------------------------------- ---------- ----------
Weighted average number of shares used in diluted
EPS 57,197,697 44,367,237
Earnings per share
Basic (cents) 2.76c 13.69c
Diluted (cents) 2.74c 13.58c
Basic - continuing operations (cents) 5.01c 16.00c
Diluted - continuing operations (cents) 4.97c 15.86c
--------------------------------------------------- ---------- ----------
9. Share-based payments
On 22 June 2018, 2,132,000 share options were awarded, under the
Group's Share Option Plan to senior executives and managers across
the Company. The vesting period of 961,000 of these options is two
years and the options will be exercisable between two and ten years
following grant. The vesting period of the remaining 1,171,000
options is three years and the options will be exercisable between
three and ten years following grant. There are no cash settlement
alternatives. The grant does not have performance conditions but is
subject to the employees remaining in employment.
The fair value of the share options is estimated at the grant
date using a Black-Scholes model, considering the terms and
conditions upon which the options were awarded. The inputs to the
model for these new options are shown below:
Option grant date 22 June 22 June
2018 2018
Number of share options awarded 961,000 1,171,000
Share price on date of grant (pence) 207.5 207.5
Exercise price (pence) 205.5 205.5
Vesting period (years) 2 3
Expected life of share options (years) 10 10
Expected volatility (%) 37.49% 37.49%
Risk-free interest rate (%) 1.26% 1.26%
Expected dividend yield (%) 1.3% 1.3%
---------------------------------------- -------- ----------
10. Dividends
The Directors do not propose a dividend to be paid for the six
months to 30 June 2018 (30 June 2017: nil). The final dividend of
2.75p per share for the year ended 31 December 2017 was approved at
the Annual General Meeting on 5 June 2018 and was paid on 25 July
2018.
11. Property, plant and equipment and intangible assets
Property, Intangible
plant and assets
equipment
$'000 $'000
---------------------------------- ----------- -----------
Net book value at 1 January 2018 20,051 52,280
Additions 1,602 1,325
Acquisitions 250 6,265
Disposals (7) -
Depreciation and amortisation (1,196) (774)
Exchange movements (345) (1,138)
----------------------------------- ----------- -----------
Net book value at 30 June 2018 20,355 57,958
----------------------------------- ----------- -----------
Property, Intangible
plant and assets
equipment
$'000 $'000
------------------------------------ ----------- -----------
Net book value at 1 January 2017 12,215 47,618
Additions 8,507 1,573
Disposals (9) -
Depreciation and amortisation (1,845) (1,441)
Exchange movements 1,183 4,530
------------------------------------- ----------- -----------
Net book value at 31 December 2017 20,051 52,280
------------------------------------- ----------- -----------
12. Assets held for resale
Two aircraft that were held for sale at 31 December 2016 with a
book value of $5.7 million were sold in the first half of 2017. As
at 31 December 2017, there was only one aircraft classified as held
for sale.
An agreement to sell the remaining aircraft for $1.5 million was
reached on 29 June 2018, with a deposit in advance of $0.15 million
paid on the same date. On 12 July 2018 the sale was completed, and
the remaining funds were received from the purchaser. As the sale
was completed after the period end the asset is shown as held for
sale at the balance sheet date. The deposit paid by the purchaser
is shown as a customer deposit in the balance sheet at 30 June
2018.
Assets held
for resale
$'000
---------------------------------- ------------
Net book value at 1 January 2018 1,500
Disposals -
Net book value at 30 June 2018 1,500
----------------------------------- ------------
Assets held
for resale
$'000
------------------------------------ ------------
Net book value at 1 January 2017 7,200
Disposals (5,700)
Net book value at 31 December 2017 1,500
------------------------------------- ------------
13. Legal claims
The Company reached an agreement with the Dryden Parties (Dustin
Dryden and associated entities) to settle the legal proceedings
between the parties. Under the terms of the agreement, which was in
full and final settlement of the court proceedings between the
parties, the Dryden Parties undertook to withdraw their various
damages claims against the Company, and to transfer value to the
Company by a cash payment and transfer of certain assets; and the
Company undertook to withdraw its debt recovery claims against the
Dryden Parties.
14. Share placement
On 2 March 2018, 19,591,837 new ordinary shares of one pence
each in Gama Aviation plc were admitted for trading on AIM. The
Company raised gross proceeds of GBP48 million pursuant to the
Placing. Hutchison Whampoa (China) Limited ("Hutchison") subscribed
for shares in the placing and held 21.17% of the issued share
capital at 30 June 2018.
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
IR SEUSILFASEIU
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