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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Air Partner Plc | LSE:AIR | London | Ordinary Share | GB00BD736828 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 124.50 | 124.50 | 125.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAIR
RNS Number : 5133A
Air Partner PLC
30 September 2020
LEI: 213800JLR6YIRMSCUS98
30 September 2020
Air Partner plc
("Air Partner", "Group" or "Company")
Half year results for the six months ended 31 July 2020
Record half year profits, driven by Group Charter and Freight performance
Air Partner, the global aviation services group, today reports unaudited results for the six months to 31 July 2020.
Financial highlights:
Hot Features
Premium
July 2020 July 2019 Change (%)
Gross profit GBP27.7m GBP17.2m 61%
---------- ---------- -----------
Underlying(--) profit before
tax GBP10.5m GBP3.0m 250%
---------- ---------- -----------
Statutory profit before
tax GBP8.9m GBP2.8m 218%
---------- ---------- -----------
Net cash (non-JetCard cash
less debt) GBP18.0m GBP4.3m 319%
---------- ---------- -----------
JetCard Cash GBP17.6m GBP18.5m (5%)
---------- ---------- -----------
Underlying(--) basic EPS
(pence) 12.8p 4.3p 198
---------- ---------- -----------
Basic EPS (pence) 10.1p 4.1p 146%
---------- ---------- -----------
Interim dividend (pence) 0.80p 1.80p (56%)
---------- ---------- -----------
-- - Underlying results are stated before exceptional and other items (see notes 1 & 3)
-- Gross profit up GBP10.5m (61%) to GBP27.7m due to exceptional levels of trading from COVID-19 related work
-- Underlying(--) profit before tax of GBP10.5m, a year-on-year increase of GBP7.5m, driven by strong trading and swift cost saving measures in the early stages of pandemic
-- Statutory profit before tax of GBP8.9m after reorganisation costs and amortisation of acquired intangibles
-- Basic EPS up 146.3% to 10.1p; underlying(--) EPS of 12.8p, up 197.7% on the prior year
-- Net cash (excluding JetCard cash) increased to GBP18.0m from net debt of GBP6.9m at 31 January 2020
-- Recommended interim dividend of 0.80p per share (H1 2019: 1.80p)
Strategic highlights:
-- Record results as portfolio diversity enables Group to support COVID-19 evacuations and PPE transportation
-- Successful share placing raised gross proceeds of GBP7.5m to pay down debt which was used to fund the Redline acquisition (acquired 12 December 2019) and to make further working capital available for organic growth opportunities
-- Entry into Australian market through Redline contract with ISS Australia and New Zealand
Operational highlights:
-- Excellent performance in Group Charter and Freight divisions
-- Extremely difficult trading period for Private Jets and areas of Safety & Security due to COVID-19 impact
-- Number of new JetCards sold up 50% on prior period -- Redline secured a number of new business wins with a diverse range of customers
Current trading and outlook:
-- Gross profit for the first two months of Q3 is down year-on-year, although this has been offset by a reduced cost base and governmental support across our various markets, where available
-- Private Jet enquiries continue to increase from the low levels seen in Q2
-- COVID-19 related activity in Group Charter and Freight has now stabilised, albeit against a rapidly changing market environment
-- Visibility in Charter remains limited, however we are seeing some green shoots of recovery within the Safety & Security division
Mark Briffa, CEO of Air Partner, commented: "This has been the busiest time we have ever encountered as a business, and this is reflected in our record half year trading performance. We have always prided ourselves on our ability to provide quick, reliable and effective support to our customers in times of crisis, and we are pleased that we could play an important role during this very challenging time, particularly with regards to emergency evacuations and PPE flying. Group Charter and Freight have been the standout performers, while other areas, such as Private Jets and some parts of Safety & Security, have been severely impacted by the pandemic, although activity levels in our core business are gradually starting to return. This mixed performance has served to reinforce the importance and value of our diversification strategy, which ensures that we are not reliant on any one revenue stream.
We were pleased to be oversubscribed in our fundraising in June 2020, through which we raised GBP7.5m. This, in addition to the numerous cost saving measures that we implemented in the early stages of the pandemic, means we entered the second half of the year with no debt and good working capital to invest in new organic growth initiatives. While there is undoubtedly much uncertainty ahead for us all, and our visibility for H2 remains unsurprisingly limited, the Board is confident that the business is well placed to weather the ongoing economic storm and take advantage of any suitable opportunities that arise."
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
Enquiries: Air Partner 01293 844 788 Mark Briffa, CEO Joanne Estell, CFO TB Cardew (Financial PR advisor) 020 7930 0777 Tom Allison 07789 998 020 Alycia MacAskill 07876 222 703
About Air Partner:
Founded in 1961, Air Partner is a global aviation services group providing aircraft charter and aviation safety & security solutions to industry, commerce, governments and private individuals, across civil and military organisations. The Group has two divisions: Air Partner Charter, comprising Group Charter, Private Jets, Freight and Specialist Services; and Air Partner Safety & Security (formerly Consulting & Training), which comprises Baines Simmons, Redline Assured Security and Managed Services.
Group Charter charters large airliners to move groups of any size. Private Jets offers the Company's unique pre-paid JetCard scheme and on-demand charter for up to 19 people. Freight charters aircraft of every size to fly almost any cargo anywhere, at any time. Specialist Services comprises Air Partner's other aviation services that complement its Charter business: Remarketing, ACMI, scheduled group travel, tour operations, air evacuation and flight operations.
Baines Simmons offers aviation safety management and fatigue risk management. Redline Assured Security delivers government-standard security training, consultancy and solutions to regulated, high value and high threat environments. Managed Services offers wildlife hazard management and aircraft registry services.
Air Partner has 16 locations globally, with its headquarters located alongside Gatwick airport in the UK. The group employs over 400 aviation professionals globally and operates 24/7. Air Partner is listed on the London Stock Exchange (AIR) and is the only publicly listed air charter broker and aviation safety & security consultancy. It is ISO 9001:2015 compliant for commercial airline and private jet solutions worldwide. More information is available on the Company's website ( www.airpartner.com ).
CHAIR'S STATEMENT
While Air Partner and the whole aviation industry worldwide have been severely impacted by the COVID-19 pandemic, I am pleased to be able to report that Air Partner has produced record profits in the six months to 31 July 2020. The make-up of these results is very varied across our different divisions, with Group Charter and Freight driving the Group's underlying profit before tax of GBP10.5m (H1 2019: GBP3.0m) and statutory profit before tax of GBP8.9m (H1 2019: GBP2.8m).
The pandemic has affected our business divisions in very different ways, reinforcing the importance of our diversification strategy to mitigate against unforeseen circumstances. It has been greatly encouraging to see the Group's resilience during this challenging time. Group Charter and Freight both reported record performances, with the former carrying out significant evacuation and corporate shuttle work, and the latter seeing high demand for the transportation of emergency protective personal equipment (PPE). By contrast, activities in Private Jets and some areas of our Safety & Security division were adversely affected by COVID-19. However, we have recently seen some positive signs of recovery in both of these areas while, as expected, Group Charter and Freight activity has decreased relative to the strong first half performance.
Our customer service orientated portfolio enabled us to swiftly respond to customer needs during the COVID-19 crisis by launching a new product, Air Partner Protect. This combines the capabilities and services of our Charter and Safety & Security divisions into one dedicated project team to mobilise and support customers. Examples of Air Partner Protect in action include projects undertaken repatriating over 300 British and EU nationals from Wuhan and thereafter repatriating 32 passengers from a cruise ship off the coast of Yokohama in Japan.
The value of our strategy to diversify the business in order to broaden our customer offering and increase the predictability of our earnings has never been clearer. While Charter performed extremely well in the period under review, it remains a volatile market sector and so we continue to assess targeted acquisition opportunities, particularly in Safety & Security, where revenues are more visible and recurring.
Fundraise
On 12 June 2020, we announced the successful completion of a placing of new ordinary shares in the capital of the Company. The oversubscribed placing raised gross proceeds of approximately GBP7.5m from new and existing shareholders. This enabled us to enter the second half of the year with no debt and good working capital to support large customer programmes and invest in new organic opportunities to drive growth.
Board Changes
In March 2020, we were greatly saddened by the passing of Richard Jackson, Air Partner's Senior Independent Director, after a short illness. Richard provided a significant contribution to the Group's strategy. He was a highly valued colleague and is greatly missed. Given the constraints of the COVID-19 crisis, the Board has decided not to appoint a replacement Non-Executive Director in the short term and Amanda Wills was appointed as Senior Independent Director, with effect from 21 May 2020.
In total, the Board now holds 1.8% of the ordinary shares in the Company, demonstrating a clear alignment with Air Partner's other shareholders.
Dividend
Early in the pandemic, the Board decided to suspend the declaration of dividends to shareholders to reflect the uncertain operating climate. Although that uncertainty persists, the Board considers it appropriate to recommence some payment now to recognise the importance of dividends to Air Partner's shareholders, many of whom are private investors. However, we believe it prudent to maintain the strength of the Group's balance sheet and to ensure that there are sufficient resources to fund future growth. Accordingly, the Board is recommending an interim dividend of 0.80p per share, down 55.6% from last year's 1.80p. The Board's objective is to establish a level of dividends that is sustainable, well covered by the Group's earnings, and that can be increased over time. The level of this interim dividend is consistent with this policy.
The interim dividend is expected to be paid on 20 November 2020 to those shareholders registered at close of business on 16 October 2020. The ex-dividend date will be 15 October 2020.
Prospects
We are now seeing significantly lower levels of activity as the underlying Charter business begins to return to pre-pandemic levels. While visibility for the remainder of the year remains limited, we do expect to see reduced demand for our standout performers of the first half, Group Charter and Freight. Conversely, Private Jets enquiries and activity have been steadily returning and we anticipate this will continue. In addition, future profitability will be underpinned by management's early, decisive action to reorganise some of the Group's operations to reflect the dramatic changes in demand and in our operating climate.
While there can be no doubt that these are still uncertain times for us all, we are confident that the Group is well positioned to handle the current economic and operational environment. We are debt free with a solid cash position, a streamlined business and a sound strategy that mitigates against product or market volatility.
In addition to this, so many of Air Partner's fantastic teams across the globe have worked incredibly hard throughout this unprecedented and difficult period, and I would like to thank them for their ongoing commitment to the Group and our customers. My thanks also go to our shareholders, new and old, for their support as we continue to build a world-leading aviation services group.
Ed Warner
Non-Executive Chair
CHIEF EXECUTIVE'S REVIEW
The start of our financial year coincided with the outbreak of COVID-19, which significantly impacted the operations of companies globally, not least of those in our industry. However, Air Partner was able to demonstrate that its business model enables it to succeed in a challenging trading environment. The Company is asset light, owning no aircraft, which offers flexibility and supports the operational agility that is so essential when navigating a crisis. As a result, we are reporting record results for the half year, reflecting our role carrying out emergency evacuations and transporting PPE supplies during the pandemic. However, despite the success of our Group Charter and Freight divisions, it is important to note that many parts of our business were also negatively impacted by COVID-19.
Given the extraordinary global circumstances of the first half of the financial year, and the vital role some of our divisions were performing with little notice or visibility, we published regular market updates throughout the COVID-19 crisis to keep shareholders informed of our performance. In order to preserve cash and maintain our working capital, we implemented a number of cost management initiatives. These included minimising discretionary spend, reducing salary costs, subject to local legal requirements, and rightsizing departments to reflect the likely future demand patterns for our aviation services. In addition, the UK workforce and all of our Board directors took a voluntary pay reduction for April, May and June, and we made use of available government grants and benefits across the Group to further reduce our cost base, as parts of our business literally stopped overnight.
Overall, the Charter division delivered GBP25.5m (H1 2019: GBP15.0m) of gross profit for the six months to 31 July 2020, driven by Group Charter and Freight. Our performance was mixed across geographies, with the US performing exceptionally well, while others, such as Europe, have struggled and remain subdued post lockdown. The strong performance also masked a significant downturn in Scheduled Group Travel and Tour Operations, which have been severely impacted by COVID-19 travel restrictions.
Group Charter made gross profit of GBP12.3m (H1 2019: GBP7.2m), which was a record for the division. In the immediate aftermath of the outbreak, the team carried out significant repatriation and evacuation work, including working to assist British citizens overseas. For one project, Redline, Group Charter and Freight all worked closely together to deliver a fully-integrated solution for the evacuation of UK and Irish nationals aboard a cruise ship off the coast of Japan, in a great example of our successful cross-selling efforts.
Throughout the period, we also supported a number of businesses, such as major cruise lines and oil companies, to repatriate employees and customers, flew agricultural workers into the UK from elsewhere in Europe, and operated several large corporate programmes. In addition, we also received a large number of bookings for corporate shuttles, as companies in the UK and US sought to safeguard their employees in the COVID environment.
Freight also reported a record first half, with gross profit of GBP8.6m (H1 2019: GBP1.9m), as it saw increased demand for the movement of goods to keep global supply chains operating. In particular, the team were busy flying significant volumes of PPE from Asia to the UK, Europe and US, with the strongest demand coming from the US.
Private Jets was down 23.3%, delivering gross profit of GBP4.6m (H1 2019: GBP6.0m), as it was affected by border closures, travel restrictions, national lockdowns and quarantines. The US, where there is a more developed private aviation market, fared better than the UK and European private jet markets, where we saw a number of cancellations or postponements at the beginning of the year as our customers significantly reduced travel. Pre COVID-19, these markets had begun to show signs of recovery at the turn of the year, post the UK general election. As the world emerges from lockdown, we have started to see signs of recovery, as private aviation offers a safe solution to those needing to travel. Pleasingly, the US business had double the level of enquiries in May compared to April, and JetCard enquiries in Europe also increased. JetCard delivered strong sales for the month of June, to the degree that more cards were sold globally in the first half of this year than in the entirety of our last financial year.
Safety & Security gross profit was slightly up year-on-year to GBP2.3m (H1 2019: GBP2.1m), reflecting reduced demand for these services during the COVID-19 lockdown, despite the added contribution of Redline. Performance has been mixed, with Baines Simmons seeing reduced levels of demand during the period under review, as struggling airlines cut all discretionary spending. As previously reported in the 2020 Annual Report, SafeSkys Limited is in the process of exiting its Air Traffic Control operations in the UK, enabling it to focus solely on Wildlife Hazard Management. Pleasingly, Clockwork Research Limited's fatigue risk management offering has experienced good demand during the COVID-19 environment and is performing well, carrying out work for airlines and oil companies, among others.
We have been particularly encouraged by Redline's performance as it has continued to secure business wins throughout the period, including those with Aéroport Nice Côte d'Azur, international facilities management company OCS Group UK, the UK Civil Aviation Authority (CAA), private aviation company Jet Edge and Align JV to support on an HS2 project. Furthermore, in July it was appointed to develop and deliver a robust Security Management System for ISS Australia and New Zealand, marking Air Partner's entry into the Australian market.
Strategy
Since 2015, our strategy has been to extend and enhance our service offering, which serves the dual purpose of better meeting our customers' needs, while also reducing the Group's exposure to the volatility of the charter market and improving the overall quality of our earnings.
Our diverse range of services enables us to offer our customers bespoke products in unique circumstances, such as when we launched Air Partner Protect in March in response to the emergence and spread of COVID-19. This also supports our efforts in cross-selling, another key component of our strategy. We continue to focus on identifying and maximising cross-selling opportunities across the Group, both within the Charter division and between Charter and Safety & Security.
The impact of COVID-19 has further proven the rationale for diversifying the business, as we have seen unusually high demand for some of our services and reduced activity in others. This demonstrates the importance of deriving our earnings from diverse revenue streams, as demand for the different parts of our business fluctuates in relation to the operating environment.
The Board has been encouraged by this strong half year trading performance, and believe the Company is well placed to continue capturing new business opportunities resulting from the impact of COVID-19. Accordingly, in June we successfully raised gross funds of GBP7.5m through the placing of new ordinary shares in the capital of the Company in order to strengthen our balance sheet, repay the debt taken on at the time of the acquisition of Redline, and enable the Group to capitalise on new organic growth opportunities. This includes hiring key talent and expanding into new geographies where the market fundamentals are strong. We were pleased to enter the Australian market via a new Redline contract in June and we are monitoring further expansion opportunities.
Alongside our organic growth initiatives, while remaining mindful of the current economic climate, we will continue to assess targeted acquisition opportunities that meet our strict acquisition criteria. We seek businesses that complement our existing services and have strong forward order books that will improve the visibility of our earnings.
Our people
This year has been the most extraordinary time we have ever encountered as a business, as has been the case for many. While there have been significant challenges along the way, the commitment and hard work of so many of our people and suppliers has been unwavering. Many of our team have worked around the clock in difficult circumstances and they have my continued gratitude.
Current trading and outlook
Our first half performance leaves the business well positioned to navigate the continued uncertainty expected in the second half of the year, although the continual, and often sudden, changes in the COVID-19 operating environment make it very difficult to predict the remainder of the financial year with any degree of certainty. As a result, we will not be reinstating market guidance beyond the end of this financial year, although we do expect to report a modest profit for the second half of the year.
We entered H2 with no debt and good working capital to invest in new organic growth initiatives. For instance, we have recently established a presence in Johannesburg, our first in South Africa, and we continue to look for other such opportunities.
Group Charter and Freight activity is no longer at the levels seen in the first half of the year, although we remain prepared for any spikes in demand as a result of dealing with the impact of COVID-19. We do not foresee the same level of demand for repatriation flights as we saw in the first half of the year, however we anticipate Freight activity could return depending on the required response to the ongoing pandemic.
Despite the weak start to the year, enquiries for Private Jets are up, particularly in the US, where corporates and high net worth individuals are looking to private aviation solutions to enable more effective social distancing, and we expect this to continue.
Our sports activity at the beginning of the year was significantly reduced as numerous large sporting events, including the UEFA European Football Championships and Olympic Games, were postponed or cancelled, but we are now seeing some sport related demand in Europe as sporting events have started to resume and secure bubbles have been required to make travel possible.
While it has undoubtedly been a challenging period for aspects of our Safety & Security business, we are starting to see some green shoots of recovery here.
There is undoubtedly still much uncertainty ahead for us all, but against this backdrop we will manage the business for the long term, in the best interests of all our stakeholders. While we anticipate that profits in the second half of the year will be modest, I am nevertheless confident that the Group is well placed to weather the ongoing economic storm and take advantage of any suitable opportunities that may arise.
Mark Briffa,
Chief Executive Officer
FINANCIAL REVIEW
Gross transactional value and revenue
Air Partner uses gross profit as its key indicator of business performance. This is due to the potential for revenue, as determined under IFRS, to fluctuate depending on the number of contracts enacted in the year where the Company acts as principal as opposed to an agent. For the sake of completeness, commentary below is given on gross transaction value (GTV) and revenues.
GTV of GBP182.6m (H1 2019: GBP124.1m) was up 47.1%, which is principally due to the exceptional COVID-19 related activity as described in more detail in the gross profit section below. GTV represents the total value invoiced to customers and is stated exclusive of value added tax.
Revenue of GBP36.6m (H1 2019: GBP31.7m) was an increase of 15.5 % year-on-year. The lower increase in revenue is due to a smaller percentage of sales coming from Private Jets, Safety & Security and government contracts, where the Group is more likely to act as principal.
Gross profit
Gross profit of GBP27.7m (H1 2019: GBP17.2m) increased 61.0% year-on-year. This increase is driven almost exclusively by the Charter division, which grew 70.0% year-on-year from GBP15.0m to GBP25.5m. Adjusting for the gross profit of GBP1.0m attributable to Redline, which was acquired in December 2019, the underlying gross profit increased year-on-year by GBP9.5m (55.2%).
Charter's growth was driven by the exceptional activity relating to COVID-19 repatriations and PPE supply, resulting in Group Charter and Freight gross profit increasing by GBP5.1m and GBP6.7m (up 70.8% and 352.6%) respectively. Conversely, the Group's core business has seen a decline as a result of the pandemic, as demonstrated by Private Jets gross profit decreasing by 23.3% to GBP4.6m (H1 2019: GBP6.0m). In addition, Scheduled Group Travel and Tours Operations both saw significant downturns as a result of COVID-19 travel restrictions.
Considering gross profit by geographical segments, the US is now the largest contributor of the total gross profit at 45.1% (H1 2019: 21.5%). The US had an exceptional trading period, yielding GBP12.5m of gross profit, up 237.8% on the prior period (H1 2019: GBP3.7m), driven by COVID-19 related activities and a number of large corporate programmes. The UK also saw high levels of activity from COVID-19 flights, resulting in gross profit of GBP11.2m (H1 2019: GBP8.4m), an increase of 33.3%. The Rest of World Charter gross profit of GBP1.3m (H1 2019: GBP0.1m) reflects a combination of COVID-19 business and the first contributions from the Singapore and Dubai offices. Conversely, Charter in Europe has seen gross profit fall by 42.9% to GBP2.8m (H1 2019: GBP4.9m) as its business from Private Jets, Tour Operations and government contracts have all reduced as a result of the pandemic.
The Safety & Security division has been the most adversely impacted by the ongoing economic uncertainty. Although there is a year-on-year increase in gross profit of 9.5% (H1 2020: GBP2.3m; H1 2019: GBP2.1m), this is entirely attributable to Redline, which was acquired in H2 2019. If the gross profit from Redline were to be excluded from the current year, Safety & Security's gross profit would be GBP1.2m, a decrease of 42.9%.
Administrative expenses
Costs included in administrative expenses in the consolidated income statement are the Charter personnel costs, sales and marketing, finance, information systems, human resource management, legal and compliance, and other administrative costs.
Underlying administrative costs, excluding net impairment losses on financial assets, increased year-on-year by 15.1% to GBP16.0m (H1 2019: GBP13.9m). The increase is driven in the main by higher commission payments and other remuneration effects relating to the strong trading performance, as well as overheads for Redline and Dubai which are not included in the prior year. Adjusting for these effects and a positive foreign exchange translational impact in the prior period, administrative costs have decreased by GBP1.4m, which is supported by the savings from the reduced working week and government support.
Net impairment losses of GBP1.0m (HY 2019: GBP0.0m) represent provisions for irrecoverable balances made during the period. The Group has entered legal proceedings against a customer with a balance due of GBP0.5m. The Group expects to recover some of the balance but has provided for the whole amount until the outcome is clearer. As a result of the impact of COVID-19, the Group has provided for GBP0.4m of balances which are no longer considered recoverable and has opted to increase its credit loss provision by a further GBP0.1m.
The Group is in the process of streamlining business operations and has incurred restructuring costs of GBP0.4m in the period, which are included in exceptional items (see Exceptional and other items). Further restructuring costs are expected in the second half of the year.
Finance costs
The net interest charge for the period of GBP0.3m was in line with the prior period (H1 2019: GBP0.3m). Finance costs are expected to decline in the second half of the year following the repayment of all outstanding debt.
Underlying profit before tax
The above results translated to an underlying* profit before tax of GBP10.5m, an increase of GBP7.5m (250%) on the prior year (H1 2019: GBP3.0m). Adjusting for the profit of GBP0.4m attributable to Redline, which was acquired in December 2019, the underlying gross profit increased year-on-year by GBP7.1m (236.7%).
*Underlying profit before tax is stated before exceptional and other items.
Exceptional and other items
Exceptional items are excluded from underlying performance measures by virtue of their size and nature, in order to better reflect management's view of the performance of the Group. In the year under review, the net effect of exceptional and other items on operating profit was a charge of GBP1.6m (H1 2019: GBP0.2m).
Exceptional and other items excluded from underlying profits in the period are broken down as follows:
July July FY January
2020 2019 2020
GBPm's GBPm's GBPm's
Underlying profit before tax 10.5 3.0 4.2
-------- -------- -----------
Change in operating board composition - - (0.2)
-------- -------- -----------
Restructuring costs (0.4) - -
-------- -------- -----------
Amortisation of intangibles arising
on acquisition (1.2) (0.2) (0.7)
-------- -------- -----------
Acquisition costs - - (0.6)
-------- -------- -----------
Costs incurred and provision for outflows
resulting from French tax investigation - (0.3) (0.6)
-------- -------- -----------
Impairment of goodwill - - (1.9)
-------- -------- -----------
Settlement of historical legal disputes - - 0.4
-------- -------- -----------
Adjustments to deferred consideration - 0.3 0.3
-------- -------- -----------
Statutory reported profit before tax
(GBPm) 8.9 2.8 0.9
-------- -------- -----------
The increase on amortisation of intangibles arising on acquisition to GBP1.2m (H1 2019: GBP0.2m) is as a result of the intangibles recognised on the acquisition of Redline Worldwide Limited. Restructuring costs are comprised of the amounts paid, or due to be paid at period end, to employees made redundant as part of the restructuring process, including statutory redundancy, payment in lieu of notice, and employers' national insurance on these amounts.
A provision of GBP0.3m was made in the prior period in respect of indirect tax charges relating to a tax reassessment in France. The provision is based on management's best estimate of the reassessment liability after taking expert legal advice. There have been no further developments following the end of the prior financial year and as a result there has been no change to the provision held.
Statutory reported profit before tax
After the above exceptional and other items, statutory reported profit before tax was GBP8.9m, up 217.9% on the prior year (H1 2019: GBP2.8m).
Taxation
The Group seeks to manage the cost of taxation in a responsible manner to enhance its competitive position on a global basis while managing its relationships with tax authorities on the basis of full disclosure and legal compliance.
The underlying tax charge* of GBP3.3m (H1 2019: GBP0.7m) represents an effective rate of 31.5% (H1 2019: 23.4%) on the underlying profits before tax. The higher tax rate reflects the greater share of profits in countries with higher tax rates, in particular the US, and net losses in other tax jurisdictions. On a statutory reported profit basis, the effective rate of taxation was 35.9% (H1 2019: 23.3%) due to the impact of the change in the UK tax rate used for the calculation of the deferred tax liabilities on the acquired intangibles.
* Adjusting for exceptional and other items.
Earnings per share
Basic underlying* earnings per share from continuing operations was 12.8p (H1 2019: 4.3p), an increase of 197.7% on the prior year. On a statutory basis, earnings per share from continuing operations was 10.1p (H1 2019: 4.1p), up by 146.3%.
*Underlying earnings are stated before exceptional and other items, see note 3.
Dividends
Early in the pandemic, the Board decided to suspend the declaration of dividends to shareholders to reflect the uncertain operating climate. Although that uncertainty persists, the Board considers it appropriate to recommence some payment now to recognise the importance of dividends to Air Partner's shareholders, many of whom are private investors. However, we believe it prudent to maintain the balance sheet strength of the Group and to ensure that there are sufficient resources to fund future growth. Accordingly, the Board is recommending an interim dividend of 0.80p per share, down 55.6% from last year's 1.80p. The Board's objective is to establish a level of dividends that is sustainable, well covered by the Group's earnings, and that can be increased over time. The level of this interim dividend is consistent with this policy.
The interim dividend is expected to be paid on 20 November 2020 to those shareholders registered at close of business on 16 October 2020. The ex-dividend date will be 15 October 2020.
Statement of financial position
Shareholders' funds
After considering the profit for the period, exchange rate differences and the share issue (see below), overall shareholders' funds at 31 July 2020 are GBP21.8m, representing an increase of GBP9.8m on the position at 31 July 2019 (GBP12.0m) and an increase of GBP12.6m on 31 January 2020 (GBP9.2m).
In June 2020, the Group completed a cash box placing for 10 million new shares in the capital of the Company. The placing price was 75p per share. The placing raised gross funds of GBP7.5m and incurred fees approaching GBP0.5m, resulting in a net increase in equity of GBP7.1m. In accordance with Section 612 of the Companies Act 2006, merger relief has been applied, resulting in an increase to retained earnings of GBP6.9m with the remainder going to share capital and share premium. Share premium was only recognised on shares issued as part of an offer through PrimaryBid, which did not qualify for merger relief.
Goodwill and intangibles
Under IFRS, goodwill is subject to annual impairment tests. Impairment tests were completed for period end to assess the impact of COVID-19. No impairments were identified. Goodwill in the statement of financial position is carried at GBP8.7m (31 January 2020: GBP8.6m). The increase from year end is due to changes in exchange rates. Intangible assets arising from business combinations are assessed at the time of acquisition in accordance with IFRS 3 and are amortised over their expected useful life. This amortisation is excluded from underlying profits.
Other intangible assets comprise software development costs. In the period, the Group spent GBP0.2m (H1 2019: GBP0.1m) on the development of the Group's CRM and Booking tool, which is in the process of being rolled out across the Group.
Other balances
Movements in other balances within the statement of financial position reflect the trading results of the period.
Excluding the right of use assets recognised under IFRS 16, the Group has property, plant and equipment totalling GBP1.0m (H1 2019: GBP0.9m). Capital expenditure in the period was GBP0.1m (H1 2019: GBP0.3m). The reduced spending is in line with our cost saving efforts during H1 2020.
Overall, there was a positive working capital movement of GBP8.8m in the period (H1 2019: GBP2.0m) excluding the movement on the JetCard cash. This was related to a significant reduction in receivables of GBP9.6m from the year end position, offset by an outflow of GBP0.8m in payables.
The positive change in receivables was driven by two main factors, being that COVID-19 related activity did not attract customer credit and the parts of the business that typically give credit did not have high levels of trading. This resulted in a positive rewinding of the receivable position in the first half of the year. This trend is considered one-off and symptomatic of the COVID-19 trading environment we have experienced, and we fully expect the need to invest in working capital in the second half of the year.
Cash generation and net debt
The Group generated GBP18.7m (H1 2019: GBP8.4m) of net cash from operating activities after investing in capital expenditure and software development as a result of the high levels of trading and a favourable movement in working capital. The issue of shares in the period generated net additional funds of GBP7.1m, which, combined with the funds from operating activities, were used to repay the revolving credit facility of GBP11.5m in full.
Net cash excluding JetCard cash was GBP18.0m (31 January 2020: net debt of GBP6.9m). Including JetCard cash of GBP17.6m (31 January 2020: GBP16.7m), net cash was GBP35.6m (31 January 2020: GBP9.9m). JetCard cash is held in separate segregated bank accounts and is not used for the Group's working capital needs.
The Directors began to use normalised cash (Non-JetCard cash less client deposits and similar balances) as the best assessment of available funds in the business due to the expectation at the advent of the pandemic that customers would cancel bookings and pursue refunds. Although this did not occur at the levels expected, the Directors have continued to use this measure as a more prudent approach to cash management. The normalised cash balance after adjusting for GBP2.8m of customer deposits at 31 July 2020 was GBP15.2m.
The only borrowing remaining in the Group relates to the leases recognised under IFRS 16, which include property leases, motor vehicles, office equipment and the right of use of an Italian aircraft under a Charter agreement that is due to expire in the next financial year. The total lease liabilities in current and non-current liabilities is GBP7.0m (H1 2019: GBP9.3m).
The cash position at the interim period end is at a particularly high point in the cycle. There are some material cash outlays expected in the second half of the year, namely US corporation tax relating to the strong trading period in the first half of the year, Redline deferred consideration (GBP1.0m), further anticipated restructuring activities to streamline the business in the current trading environment, and investment in working capital and organic growth initiatives.
Bank facilities
The Group has total debt facilities with NatWest of GBP14.5m. GBP13.0m of this is a revolving credit facility, none of which was drawn down at 31 July 2020. To support short-term liquidity, the Group has access to a GBP1.5m overdraft facility. This was not utilised at 31 July 2020. The Group has complied with all the financial covenants relating to these facilities.
Exchange rates
The results of overseas operations are translated into Sterling at average exchange rates. The net assets are translated at period-end rates. The principle exchange rates, expressed in terms of the value of Sterling, are shown in the following table.
Average rates Period-end rates
31 July 31 July 31 July 31 July
2020 2019 2020 2019
-------- -------- ----------------- -------- -------- ----------------
USD strengthened USD weakened by
USD 1.26 1.29 by 2.3% 1.31 1.22 7.4%
-------- -------- ----------------- -------- -------- ----------------
EUR strengthened EUR weakened by
EUR 1.14 1.15 by 0.9% 1.11 1.09 1.8%
-------- -------- ----------------- -------- -------- ----------------
If the exchange rates in the prior period were consistent with the current period, H1 2019 gross profit would have been GBP17.3m (increase of GBP0.1m) and underlying administrative expenses including net impairment loss on financial assets would have been GBP14.0m (increase of GBP0.1m). As a result, the net impact on underlying profit before tax is negligible.
Accounting policies and recent accounting developments
The accounts in this report are prepared under International Financial Reporting Standards (IFRSs), as adopted by the European Union (EU). The accounting policies used in preparing these accounts are set out in note 1.
Treasury and risk management
Foreign currency effects
Where possible, the Group uses natural hedges to minimise its foreign exchange exposure, for example matching JetCard deposits denominated in Euro or US Dollar with the respective liability. In addition, the Group uses derivatives to hedge certain transactions in accordance with its internal policies.
Financial risks
The main financial risks faced by the Group are credit risk, foreign currency risk, interest rate risk and liquidity risk. The Directors regularly review and agree policies for managing these risks.
Credit risk is managed by monitoring limits and payment performance of counterparties. The Directors consider the level of general credit risk in current market conditions to be higher than normal. Where a customer is deemed to represent a level of credit risk, terms of trade are modified to limit the Group's exposure.
Foreign currency risk is managed by matching payments and receipts in foreign currency to minimise exposure.
Interest rate risk is managed by holding a mixture of cash and borrowings in Sterling, US Dollar and Euro at fixed and floating rates of interest.
Liquidity risk is managed by the Group having access to a revolving credit facility, which can be used for working capital means, and a moderate overdraft facility to provide short-term flexibility.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Chair's Statement and Chief Executive's Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition, the Group's objectives, policies and processes for managing its capital risk, details of its financial instruments and hedging activities, and its exposures to interest rate risk, credit risk, liquidity risk and foreign currency risk, are laid out in the section 'Principal Risks and Uncertainties' in the financial statements for the year ending 31 January 2020.
COVID-19 has increased uncertainty surrounding the future trading environment for the Group. Whilst performance in the first half of the current financial year has been very strong, driven by pandemic-related repatriation and freight activity in the Charter division, there remains uncertainty over the trading performance for the rest of the year. Accordingly, the Directors have undertaken a thorough assessment in evaluating Going Concern. This has been assessed by reference to cash forecasts through to October 2021, which reflect a cautious view of trading activity across our divisions, and further prudence has then been applied to reflect a slower recovery in underlying performance from the COVID-19 pandemic. The cautious forecasts used are seen as the lowest outcome of likely outturns and include a number of cash mitigation actions that could be undertaken if necessary.
Following the strong half year of trading and the share placing, the Directors have repaid all the bank facilities available. Forecasts show that the Group is not expected to require access to these facilities during the next 12 months.
The Directors have taken the steps necessary to equip the Group to deal with the economic impact of the COVID-19 pandemic. These include reviewing credit terms, cost cutting measures and utilising government support where appropriate. The Directors believe the steps detailed above and the strong cash position at the end of August 2020 mean the Group is well placed to manage its business and meet its liabilities as they fall due.
Based on current financial projections, The Directors are satisfied to a material level of certainty that the Group has sufficient resources to continue in operation for the foreseeable future, that is, a period of at least 12 months from the date of this report.
Joanne Estell
Chief Financial Officer
Forward-looking statements
Announcements issued by Air Partner plc may contain forward looking statements, indicated by words such as "aims, " "believes," "expects," "intends," and similar expressions. These statements reflect current views and expectations up to the date of approval of this statement and are made in good faith by the directors. Unless otherwise required by laws, regulations or changes in accounting standards, Air Partner accepts no obligation to update these statements as a result of future events or new information subsequently obtained. New announcements will be made to the market as required under the Disclosure and Transparency Rules.
Trends and factors affecting the business
The COVID-19 pandemic has had a severe impact on the aviation industry globally, characterised by extensive travel restrictions, and the operating environment remains extremely challenging. As referenced in the Chair's Statement and Chief Executive's Review, COVID-19 has disrupted the Air Partner business in several ways, although the organisation has reacted quickly through its emergency response process and put in place several measures to protect staff and business operations. While we have enjoyed a strong start to the current financial year, these circumstances are unprecedented, and we have very limited visibility for the months ahead. We therefore continue to monitor the situation closely so that we can take any necessary action as we manage the business for the long term and in the best interests of all stakeholders.
The United Kingdom is in the process of withdrawing from the European Union. There may be significant regulatory change depending on the terms of this withdrawal, currently being negotiated by the UK Government and the European Union. We are closely following events as they develop; we comply with all relevant regulations and are confident that we will continue to do so post-Brexit. While Brexit does present challenges to the Group, within Charter only a small percentage of current business would be impacted by any change in permission to fly. The strong relationships the Group has across airline operators should enable it to source alternatives to best meet our customers' needs. Within Consulting and Training, changes to rules and regulations tend to create business for the Group, providing balance against perceived risks.
Economic uncertainty affects corporate, government and individual customers and affects the quality of supply of aircraft as operators consolidate or leave the market. These trends are outside the Group's control, but the strategy remains to diversify the addressable market and broaden the customer mix.
Principal risks and uncertainties facing the Group
In addition to the COVID-19 and Brexit risks as highlighted above, the Group continues to operate in a highly competitive market where there are number of inherent risks including operational aviation related risks (such as quality and quantity of supply, adverse weather conditions, competitive pricing pressure and regulatory changes) and financial risks (such as foreign exchange and interest rate fluctuations, credit risk and liquidity and cash flow management).
In order to counteract the market challenges, the organisation continues to diversify and acquire businesses that provide good economic and operational synergies. Whilst this will have a positive impact, there is also a risk involving integration within the Group.
The Board reviews risks which may have a significant impact on the Group. The principal risks and uncertainties of the Group are detailed in the relevant section in the annual report. There have been no material changes other than those highlighted above since the signing of the most recent annual report.
Related party transactions
There has been no significant change in the level of transactions between Air Partner plc and its subsidiaries since that disclosed in the annual report for the year ended 31 January 2020. Such transactions did not materially affect the financial position or performance of the Group in the period under review. There are no other related party transactions which are required to be disclosed under DTR 4.2.8R.
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge, the extracts from the consolidated financial statements included in this report, which has been prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole, and that the management report contained in this report includes a fair view of the development and performance of the business.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The unaudited condensed consolidated financial statements included in this interim report have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Mark Briffa Joanne Estell
Chief Executive Officer Chief Financial
Officer
2 9 September 2020 2 9 September
2020
The directors of Air Partner plc are listed in the Group's Annual Report and Accounts for the year ended 31
January 2020 and on our website at https://airpartnergroup.com/ .
See more at: https://airpartnergroup.com/investors/ .
Consolidated income statement
for the half year ended 31 July 2020
Year
ended
31 January
2020
Half Half
year year
ended ended
31 July 31 July
2020 2019 (audited)
(unaudited) (unaudited)
Continuing operations Note GBP'000 GBP'000 GBP'000
=========================================== ==== ============ ============ ===========
Gross transaction value (GTV) 2 182,585 124,143 236,816
=========================================== ==== ============ ============ ===========
Revenue 2 36,581 31,668 66,664
Cost of sales 2 (8,836) (14,502) (32,506)
Gross profit 2 27,745 17,166 34,158
Administrative expenses before exceptional
and other items (15,964) (13,902) (29,180)
Exceptional and other items 3 (1,638) (155) (3,296)
=========================================== ==== ============ ============ ===========
Total administrative expenses (17,602) (14,057) (32,476)
Net impairment losses on financial assets 11 (982) (1) (205)
Operating profit 2 9,161 3,108 1,477
------------------------------------------- ---- ------------ ------------ -----------
Operating profit before exceptional and
other items 10,799 3,263 4,773
------------------------------------------- ---- ------------ ------------ -----------
Finance income 26 33 71
Finance expense (291) (329) (612)
=========================================== ==== ============ ============ ===========
Profit before income tax 8,896 2,812 936
Profit before income tax and exceptional
and other items 10,534 2,967 4,232
Income tax expense 8 (3,196) (654) (633)
=========================================== ==== ============ ============ ===========
Profit for the period 5,700 2,158 303
=========================================== ==== ============ ============ ===========
Attributable to:
Owners of the parent company 5,700 2,158 303
=========================================== ==== ============ ============ ===========
Earnings per share:
Continuing operations
Basic 5 10.1p 4.1p 0.6p
Diluted 5 10.0p 4.0p 0.6p
=========================================== ==== ============ ============ ===========
Consolidated statement of comprehensive income
for the half year ended 31 July 2020
Half
year
ended
Half
31 July year Year
2020 ended ended
31 July 31 January
2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
========================================================= ============ ============= ============
Profit for the period 5,700 2,158 303
Other comprehensive income - items that may subsequently
be reclassified to profit or loss:
Adoption of IFRS 16 - (166) (167)
Exchange differences on translation of foreign
operations (267) 182 (403)
Total comprehensive income / (expense) for the
period 5,433 2,174 (267)
========================================================= ============ ============= ============
Attributable to:
Owners of the parent company 5,433 2,174 (267)
========================================================= ============ ============= ============
Consolidated statement of changes in equity
for the half year ended 31 July 2020 (unaudited)
Share
Share premium Merger Own Translation Retained Total
capital account reserve shares reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ========= ======== ======== ========= ============= ========= =========
Opening equity as at
1 February 2019 522 4,814 295 (326) 1,064 5,312 11,681
Adoption of IFRS 16 (166) (166)
Profit for the period - - - - - 2,158 2,158
Exchange differences
on translation of foreign
operations - - - - 182 - 182
=========================== ========= ======== ======== ========= ============= ========= =========
Total comprehensive
income for the period - - - - 182 1,992 2,174
Issue of shares 7 486 - - - (435) 58
Share option movement
for the period - - - - - 101 101
Share options exercised
in the period - - - 168 - (146) 22
Dividends paid (note
4) - - - - - (2,011) (2,011)
=========================== ========= ======== ======== ========= ============= ========= =========
Closing equity as at
31 July 2019 529 5,300 295 (158) 1,246 4,813 12,025
=========================== ========= ======== ======== ========= ============= ========= =========
Share
Share premium Merger Own Translation Retained Total
capital account reserve shares reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ========= ======== ======== ========= ============= ========== =========
Opening equity as at
1 February 2020 535 5,895 295 (158) 661 1,965 9,193
Profit for the period - - - - - 5,700 5,700
Exchange differences
on translation of foreign
operations - - - - (267) - (267)
=========================== ========= ======== ======== ========= ============= ========== =========
Total comprehensive
income for the period - - - - (267) 5,700 5,433
Issue of shares (note
10) 100 56 6,896 - - - 7,052
Redemption of shares
(note 10) - - (6,896) - - 6,896 -
Share option movement
for the period - - - - - 132 132
Share options exercised
in the period - - - 91 - (86) 5
Dividends paid (note - - - - - - -
4)
=========================== ========= ======== ======== ========= ============= ========== =========
Closing equity as at
31 July 2020 635 5,951 295 (67) 394 14,607 21,815
=========================== ========= ======== ======== ========= ============= ========== =========
Consolidated statement of financial position
as at 31 July 2020
31 July 31 July 31 January
2020 2019 2020
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
===================================== ==== ============ ============ ==========
Assets
Non-current assets
Goodwill 6 8,711 6,794 8,641
Other intangible assets 10,619 4,581 11,872
Property, plant and equipment 7,268 9,927 7,698
Deferred tax assets 669 311 284
===================================== ==== ============ ============ ==========
Total non-current assets 27,267 21,613 28,495
===================================== ==== ============ ============ ==========
Current assets
Trade and other receivables 10,483 25,703 18,801
Current tax assets 270 158 318
------------ ------------ ----------
JetCard bank balances 17,579 18,535 16,742
Other cash and cash equivalents 17,982 9,822 4,633
------------ ------------ ----------
Total cash and cash equivalents 35,561 28,357 21,375
Derivative financial instruments - 24 -
===================================== ==== ============ ============ ==========
Total current assets 46,314 54,242 40,494
===================================== ==== ============ ============ ==========
Total assets 73,581 75,855 68,989
===================================== ==== ============ ============ ==========
Liabilities
Current liabilities
Trade and other payables (7,035) (7,967) (5,669)
Current tax liabilities (3,116) (480) (627)
Other liabilities (7,765) (6,875) (5,014)
Lease liabilities (4,278) (5,800) (5,448)
Deferred income and JetCard deposits (22,216) (32,217) (24,658)
Deferred consideration (1,045) - (1,318)
Provisions (381) (718) (469)
Derivative financial instruments (5) - (39)
===================================== ==== ============ ============ ==========
Total current liabilities (45,841) (54,057) (43,242)
===================================== ==== ============ ============ ==========
Net current assets / (liabilities) 473 185 (2,748)
===================================== ==== ============ ============ ==========
Non-current liabilities
Borrowings - (5,500) (11,500)
Lease liabilities (2,683) (3,530) (1,860)
Deferred consideration (986) - (982)
Deferred tax liability (1,860) (650) (1,819)
Provisions (396) (93) (393)
Total non-current liabilities (5,925) (9,773) (16,554)
===================================== ==== ============ ============ ==========
Total liabilities (51,766) (63,830) (59,796)
===================================== ==== ============ ============ ==========
Net assets 21,815 12,025 9,193
===================================== ==== ============ ============ ==========
Equity
Share capital 635 529 535
Share premium account 5,951 5,300 5,895
Merger reserve 295 295 295
Own shares (67) (158) (158)
Translation reserve 394 1,246 661
Retained earnings 14,607 4,813 1,965
===================================== ==== ============ ============ ==========
Total equity 21,815 12,025 9,193
===================================== ==== ============ ============ ==========
Consolidated statement of cash flows
for the half year ended 31 July 2020
31 July 31 July 31 January
2020 2019 2020
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
================================================== ==== ============ ============ ==========
Cash generated from operations 7 20,306 9,733 9,109
================================================== ==== ============ ============ ==========
- Interest received 26 33 71
- Interest paid (325) (329) (578)
- Income tax paid (1,050) (593) (898)
Net cash inflow from operating
activities 18,957 8,844 7,704
Investing activities
* Purchases of property, plant and equipment (64) (300) (549)
* Purchases of intangible assets (195) (121) (376)
* Acquisition of subsidiaries (278) (430) (7,446)
Net cash used in investing
activities (537) (851) (8,371)
================================================== ==== ============ ============ ==========
Financing activities
* Repayment of finance lease liabilities (869) (2,718) (5,414)
* Dividends paid to the company shareholders - (2,011) (2,961)
* Proceeds on issue of new shares 7,052 - -
* Proceeds on exercise of share options 5 22 22 * (Decrease) / increase in borrowings (11,500) - 6,000 ================================================== ==== ============ ============ ========== Net cash (used in) / generated from financing activities (5,312) (4,707) (2,353) ================================================== ==== ============ ============ ========== Net increase in cash and cash equivalents 13,108 3,286 (3,020) Opening cash and cash equivalents 21,375 25,154 25,154 Effect of foreign exchange rate changes 1,078 (83) (759) ================================================== ==== ============ ============ ========== Closing cash and cash equivalents 35,561 28,357 21,375 ================================================== ==== ============ ============ ==========
JetCard cash
The closing cash and cash equivalents balance can be further analysed into 'JetCard cash' received by the Group in respect of its JetCard product and 'non-JetCard cash' as follows:
31 July 31 July 31 January
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
========================== ============ ============ ==========
Total JetCard cash 17,579 18,535 16,742
Non-JetCard cash 17,982 9,822 4,633
========================== ============ ============ ==========
Cash and cash equivalents 35,561 28,357 21,375
========================== ============ ============ ==========
1 GENERAL INFORMATION, BASIS OF PREPARATION AND ACCOUNTING POLICIES
General information
The Directors of Air Partner plc (the "Company") present their interim report and the unaudited condensed consolidated financial statements for the six months ended 31 July 2020.
The Company is a public listed company incorporated and domiciled in England and Wales under registration number 00980675. The address of its registered office is 2 City Place, Beehive Ring Road, Gatwick, West Sussex, RH6 0PA. The Company is listed on the London Stock Exchange.
These condensed consolidated interim financial statements ("Interim Financial Statements") were approved for issue on 29 September 2020.
These interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 January 2020 were approved by the Board of Directors on 22 May 2020 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
The interim financial statements have been reviewed, but not audited, by PricewaterhouseCoopers LLP.
Forward-looking statements
Certain statements in these interim financial statements are forward looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. As these interim financial statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Basis of preparation
This condensed financial information for the half year ended 31 July 2020 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and International Accounting Standard ("IAS") 34 "Interim Financial Reporting" as adopted by the European Union. These interim condensed financial statements are unaudited and should be read in conjunction with the annual financial statements for the year ended 31 January 2020, which have been prepared in accordance with IFRSs as adopted by the European Union.
Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 January 2020.
-- Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.
Copies of these financial statements can be found either on Companies House or the Air Partner website ( https://airpartnergroup.com/investors/reports-results-and-presentations/ ).
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Chair's Statement and Chief Executive's Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition, the Group's objectives, policies and processes for managing its capital risk; details of its financial instruments and hedging activities; and its exposures to interest rate risk, credit risk, liquidity risk and foreign currency risk, are laid out in the financial statements for the year ended 31 January 2020.
The COVID-19 pandemic has increased uncertainty surrounding the future trading environment for the Group. Whilst performance in the first half of FY21 has been very strong, supported by additional Group Charter activity of repatriation flights and freight, there remains uncertainty over the trading performance for the rest of the year. Accordingly, the Directors have undertaken a thorough assessment in evaluating Going Concern. This has been assessed by reference to cash forecasts through to October 2021, which reflect a cautious view of trading activity across our divisions, and further sensitivities have then been applied to reflect a slower recovery in underlying performance from the COVID-19 pandemic. The forecasts include severe but plausible downsides and are seen as the lowest outcome of likely outruns. The forecasts include a number of cash mitigation actions that could be undertaken if necessary.
Following the strong half year of trading and the share placing which took place in June 2020, the Directors have repaid all the bank facilities available. Forecasts show that the Group is not expected to require access to these facilities during the next 12 months however it retains access to them.
The Directors have taken steps to equip the Group to deal with the economic impact of the COVID-19 pandemic. These include reviewing credit terms, cost cutting measures and utilising government support for staff costs where appropriate. The Directors believe the steps detailed above and the strong cash position at the end of August 2020 mean that the Group is well placed to manage its business and meet its liabilities as they fall due.
The Directors are, based on current financial projections, satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, that is a period of at least 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Interim Financial Statements.
Gross transaction value
Gross transaction value (GTV) represents the total value invoiced to customers and is stated exclusive of value added tax. GTV is a non-statutory measure but is more applicable to the Group than revenue as it gives a fairer impression of the scale of the business the Group attracts.
Exceptional and other items
The Directors believe that the underlying profit and earnings per share measures provide additional useful information for shareholders on the underlying performance of the business. These measures are consistent with how underlying business performance is measured internally and management are remunerated. The underlying profit before tax measure is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. The adjustments made to reported profit before tax are to exclude the following:
-- significant one-off restructuring costs
-- significant and one-off impairment charges and provisions that distort underlying trading
-- costs relating to strategy changes that are not considered normal operating costs of the underlying business
-- acquisition costs
-- amortisation of intangible assets recognised on acquisition
-- acquisition consideration classified as an employee cost under IFRS 3 Business Combinations.
The Directors consider exceptional items to be one-off expenses that are unlikely to reoccur and are not in part of the usual course of business. Other items are expenses that are incurred as a result of accounting adjustments required on consolidation. These are regular expenses but are not considered to be part of the underlying group performance.
Key accounting estimates and judgments
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates. These underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or future periods.
In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 January 2020, with the exception of changes in estimates that are required in determining the provision for income taxes.
2 SEGMENTAL ANALYSIS
The services provided by the Group consist of chartering different types of aircraft and related aviation services.
The Group has four operating segments: Group Charter, Private Jets and Freight (comprising Charter) and Safety & Security. Overheads, with the exception of Corporate costs, are allocated to the Group's operating segments in relation to operating activities.
Sales transactions between operating segments are carried out on an arm's length basis. All results, assets and liabilities reviewed by the Board (which is the chief operating decision maker) are prepared on a basis consistent with those that are reported in the financial statements.
The Board does not review assets or liabilities at segmental level, therefore these items are not disclosed.
The segmental information, as provided to the Board on a monthly basis, is as follows:
Half year ended 31 July 2020 Group Private Safety Corporate (unaudited) Charter Jets Freight & Security costs Total Continuing operations GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 =========================================== ========= ========= ========= =========== ========= ========== Gross transactional value 55,389 26,326 94,972 5,898 - 182,585 =========================================== ========= ========= ========= =========== ========= ========== Revenue 14,929 6,316 9,438 5,898 - 36,581 =========================================== ========= ========= ========= =========== ========= ========== Cost of Sales (2,615) (1,760) (826) (3,635) - (8,836) =========================================== ========= ========= ========= =========== ========= ========== Segmental gross profit 12,314 4,556 8,612 2,263 - 27,745 =========================================== ========= ========= ========= =========== ========= ========== Administrative expenses and net impairment losses on financial assets (6,184) (3,895) (3,446) (2,152) (1,269) (16,946) =========================================== ========= ========= ========= =========== ========= ========== Depreciation and amortisation of non-acquired assets (included within cost of sales & administrative expenses) (641) (141) (268) (200) - (1,250) =========================================== ========= ========= ========= =========== ========= ========== Operating profit before exceptional and other items 6,130 661 5,166 111 (1,269) 10,799 =========================================== ========= ========= ========= =========== ========= ========== Exceptional and other items (see note 3) (86) (122) - (1,445) 15 (1,638) =========================================== ========= ========= ========= =========== ========= ========== Segment result 6,044 539 5,166 (1,334) (1,254) 9,161 =========================================== ========= ========= ========= =========== ========= ========== Finance income 26 Finance expense (291) =========================================== ========= ========= ========= =========== ========= ========== Profit before tax 8,896 Income tax expense (3,196) =========================================== ========= ========= ========= =========== ========= ========== Profit for the year 5,700 =========================================== ========= ========= ========= =========== ========= ========== Half year ended 31 July 2019 Group Private Safety Corporate (unaudited) Charter Jets Freight & Security costs Total Continuing operations GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 =========================================== ========= ========= ========= =========== ========= ========== Gross transactional value 73,025 35,755 10,703 4,660 - 124,143 =========================================== ========= ========= ========= =========== ========= ========== Revenue 12,260 12,814 1,934 4,660 - 31,668 =========================================== ========= ========= ========= =========== ========= ========== Cost of Sales (5,073) (6,833) (70) (2,526) - (14,502) =========================================== ========= ========= ========= =========== ========= ========== Segmental gross profit 7,187 5,981 1,864 2,134 - 17,166 =========================================== ========= ========= ========= =========== ========= ========== Administrative expenses and net impairment losses on financial assets (5,154) (4,257) (1,435) (1,850) (1,207) (13,903) =========================================== ========= ========= ========= =========== ========= ========== Depreciation and amortisation of non-acquired assets (included within cost of sales & administrative expenses) (2,969) (163) (51) (59) - (3,242) =========================================== ========= ========= ========= =========== ========= ========== Operating profit before exceptional and other items 2,033 1,724 429 284 (1,207) 3,263 =========================================== ========= ========= ========= =========== ========= ========== Exceptional and other items (see note 3) - - - 128 (283) (155) =========================================== ========= ========= ========= =========== ========= ========== Segment result 2,033 1,724 429 412 (1,490) 3,108 =========================================== ========= ========= ========= =========== ========= ========== Finance income 33 Finance expense (329) =========================================== ========= ========= ========= =========== ========= ========== Profit before tax 2,812 Income tax expense (654) =========================================== ========= ========= ========= =========== ========= ========== Profit for the year 2,158 =========================================== ========= ========= ========= =========== ========= ==========
Air Partner plc, the Company, is domiciled in the UK but due to the nature of the Group's operations a significant amount of gross profit is derived from overseas countries. The Group reviews gross profit based upon location of the assets used to generate that gross profit.
The Board also reviews information on a geographical basis based on parts of the world which are considered to be key to operational activities. As a result, the following additional information is provided showing a geographical split of the United Kingdom, Europe, the United States of America and the Rest of the World:
United Rest
United States of the
Kingdom Europe of America World Total
Continuing operations GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================================= ======== ========= =========== ======== =========
Half year ended 31 July 2020 (unaudited)
Gross profit 11,172 2,807 12,497 1,269 27,745
Non-current assets (excluding deferred
tax assets) 20,721 5,633 223 21 26,598
========================================= ======== ========= =========== ======== =========
Half year ended 31 July 2019 (unaudited)
Gross profit 8,434 4,911 3,738 83 17,166
Non-current assets (excluding deferred
tax assets) 12,520 8,707 75 - 21,302 ========================================= ======== ========= =========== ======== =========
Europe can be further analysed as:
France Germany Italy Other Total
Continuing operations GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================================= ======== ======== ======== ======== ========
Half year ended 31 July 2020 (unaudited)
Gross profit (1) (16) 2,135 341 347 2,807
========================================= ======== ======== ======== ======== ========
Half year ended 31 July 2019 (unaudited)
Gross profit 1,678 1,900 577 756 4,911
========================================= ======== ======== ======== ======== ========
1 France has posted negative gross profit for the period due to negligible trading in the period and higher than forecast finalisation costs on prior year tour ops business.
3 EXCEPTIONAL AND OTHER ITEMS
Year
ended
Half Half
year year
ended ended 31 January
31 July 31 July
2020 2019 2020
(unaudited) (unaudited) (audited)
Continuing operations GBP'000 GBP'000 GBP'000
Change in operating board composition (1) - - (195)
Restructuring costs (2) (419) - -
Amortisation of intangibles arising on acquisition (1,233) (187) (656)
Acquisition costs (3) - - (604)
Disposal of subsidiary (4) 23 - (4)
Costs incurred and provision for outflows resulting
from French tax investigation (5) - (283) (657)
Impairment of goodwill (6) - - (1,885)
Settlement of historical legal disputes (7) - - 389
Adjustments to deferred consideration (8) (9) 315 316
(1,638) (155) (3,296)
Tax effect of other items (9) 118 37 233
==================================================== ============ ============ ===========
Exceptional and other items after taxation (1,520) (118) (3,063)
==================================================== ============ ============ ===========
1 Following the accounting review in FY19 the Directors undertook an internal review of the Group Operating Board and determined that several roles were excess to requirements. The employees in these roles left during the year and have not been replaced. The level of Board changes and associated costs in both years were considered highly unusual and are not expected to recur in future periods.
2 As a result of the negative impact of the COVID-19 pandemic on certain areas of the business the Directors undertook a review of the business and identified savings through reductions in headcount where revenue was not forecast to recover for the foreseeable future. Exceptional costs are comprised of the amounts paid, or due to be paid at period end, to employees as part of the redundancies, including statutory redundancy, payment in lieu of notice and employers national insurance on these amounts.
3 The acquisition costs incurred in the prior year were in respect of the acquisition of Redline Worldwide Limited.
4 The Group disposed of Air Partner (Switzerland) AG during the current year and Air Partner Nordic AB during the prior year.
5 A provision of GBP283,000 was made in the prior period in respect of indirect tax charges for a tax reassessment in France. The provision is based on Management's best estimate of the reassessment liability after taking expert legal advice. Legal fees and expense directly attributable to the tax investigation of GBP374,000 were incurred in the prior year in connection with this matter. There have been no further developments following the end of the prior financial year and it is unclear when the matter is likely to be resolved.
6 The impairment of goodwill in the prior year is in relation to SafeSkys Limited.
7 The Group successfully closed two historical legal disputes in the prior year resulting in the receipt of cash settlements in both cases. The income recognised is net of associated legal expenses.
8 The adjustment to deferred consideration in the current year relates to the fair valuing of the deferred consideration relating to Redline Worldwide Limited. The prior year is in relation to SafeSkys Limited, where a settlement was reached for less than the amount provided for in the prior year's financial statements.
9 A tax credit has been included in the current year in respect of the restructuring costs and amortisation of purchased intangibles. The tax credit on the purchased intangibles is offset by the change in tax rate used to calculate the deferred tax liability for these assets from 17% to 19%. At 31 January 2020, a reduction in the UK corporation tax rate on 1 April 2020 to 17% as a result legislation enacted on 16 October 2016 was in effect. The Spring Budget 2020 announced that the corporation tax would remain at 19%.
4 DIVIDS
Half Year
Half year year ended
ended ended 31 January
31 July 2020
31 July 2020 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
=============================================== ============= ================== ===========
Amounts recognised as distributions to owners
of the parent company
Final dividend for the year ended 31 January
2019 of 3.85 pence - 2,011 2,011
Interim dividend for the year ended 31 January
2020 of 1.80 pence - - 950
----------------------------------------------- ------------- ------------------ -----------
- 2,011 2,961
----------------------------------------------- ------------- ------------------ -----------
5 EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Half Year
Half year year ended
ended ended 31 January
31 July
31 July 2020 2019 2020
(unaudited) (unaudited) (audited)
Earnings per share Pence Pence Pence
====================== ============= ============ ===========
Continuing operations
Basic 10.1 4.1 0.6
Diluted 10.0 4.0 0.6
====================== ============= ============ ===========
Half Year
Half year year ended
ended ended 31 January
31 July
31 July 2020 2019 2020
(unaudited) (unaudited) (audited)
Earnings per share Pence Pence Pence
====================================== ============= ============= ===========
Excluding exceptional and other items
Basic 12.8 4.3 6.4
Diluted 12.7 4.2 6.3
====================================== ============= ============= ===========
Half Year
Half year year ended
ended ended 31 January
31 July
31 July 2020 2019 2020
(unaudited) (unaudited) (audited)
From continuing operations GBP'000 GBP'000 GBP'000
================================================ ============= ============ =========== Earnings Profit attributable to the owners of the parent company 5,700 2,158 303 Adjustment to exclude exceptional and other items 1 1,520 118 3,063 ================================================ ============= ============ =========== Underlying earnings for the calculation of basic and diluted earnings per share 7,220 2,276 3,366 ================================================ ============= ============ ===========
(1) The calculation of underlying earnings per share (before exceptional and other items) is included as the Directors believe it provides a better understanding of the underlying performance of the Group. Exceptional and other items are disclosed in note 3.
Half year Half year Year ended
ended ended 31 January
31 July 31 July
2020 2019 2020
(unaudited) (unaudited) (audited)
Weighted average number of ordinary shares Number Number Number
================================================ ============ ============= ===========
Issued and fully paid 56,649,205 52,464,730 52,756,188
Less those held by the Air Partner Employee
Benefit Trust (56,654) (102,241) (85,952)
================================================ ============ ============= ===========
Number for the calculation of basic earnings
per share 56,592,551 52,362,489 52,670,236
================================================ ============ ============= ===========
Effect of dilutive potential ordinary shares:
share options 419,248 1,204,501 844,022
================================================ ============ ============= ===========
Number for the calculation of dilutive earnings
per share 57,011,799 53,566,990 53,514,258
================================================ ============ ============= ===========
6 GOODWILL
GBP'000
==================================== =======
Cost
At 1 February 2019 6,750
Foreign currency adjustments 44
==================================== =======
At 31 July 2019 6,794
At 1 February 2020 10,526
Foreign currency adjustments 70
==================================== =======
At 31 July 2020 10,596
Provision for impairment
At 1 February 2019 and 31 July 2019 -
At 1 February 2020 and 31 July 2020 (1,885)
==================================== =======
Net book value
At 31 July 2020 8,711
==================================== =======
At 31 July 2019 6,794
==================================== =======
At 31 January 2020 8,641
==================================== =======
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs), or group of units that are expected to benefit from that business combination. After recognition of impairment losses, the carrying amount of goodwill has been allocated as follows:
31 July 31 July 31 January
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
========================================== ============ =============== ==========
Air Partner International S.A.S. (France) 1,006 1,018 936
Baines Simmons Limited 1,711 1,711 1,711
Cabot Aviation Services Limited 787 787 787
Clockwork Research Limited 396 396 396
Redline Worldwide Limited 3,644 - 3,644
SafeSkys Limited 1,167 2,882 1,167
========================================== ============ =============== ==========
8,711 6,794 8,641
========================================== ============ =============== ==========
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. Given the economic impact of COVID-19, impairment calculations were undertaken for all holdings for the period end and no impairment was identified in respect of any of the CGUs. The Directors do not believe that there are any reasonably possible changes to the key assumptions that would result in a material impairment of goodwill during the period, with the exception of SafeSkys Limited. SafeSkys Limited was impaired in the previous financial year. There are no material differences to the assumptions used in the calculation for the year ended 31 January 2020 and the current period end.
Details of the impairment recognised on SafeSkys Limited in the previous financial year can be seen in the annual financial statements for the year ended 31 January 2020.
7 NET CASH INFLOW FROM OPERATING ACTIVITIES
Half year Half year Year ended
ended ended 31 January
31 July 31 July
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
================================================ ============ ============= ===========
Profit for the period 5,700 2,158 303
Adjustments for:
Finance income (26) (33) ( 71 )
Finance expense 300 329 613
Income tax expense 3,196 654 633
Depreciation, amortisation and (profit) /
loss on disposal 2,440 3,429 6,830
Impairments - - 1,885
Fair value (gains) / (losses) on derivative
financial instruments (34) (8) 31
Share option cost for period 352 101 59
Share based payments - - 58
( 643
Decrease in provisions / deferred consideration (88) (466) )
Foreign exchange differences (1,150) 698 88
================================================ ============ ============= ===========
Operating cash inflows before movements in
working capital 10,690 6,862 9,786
Decrease / (increase) in receivables 9,638 (5,625) 1,582
Increase / (decrease) in payables (22) 8,496 (2,259)
================================================ ============ ============= ===========
Cash generated from operations 20,306 9,733 9,109
================================================ ============ ============= ===========
8 INCOME TAX EXPENSE
Half year Half year Year ended
ended ended 31 January
31 July 2020 31 July
2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
===================================== ============= ============= ===========
Current tax:
UK corporation tax 648 370 620
Foreign tax 2,706 265 408
Current tax adjustments in respect
of prior years (UK) (40) - (200)
Current tax adjustments in respect
of prior years (overseas) 286 - (208)
3,600 635 620
Deferred tax (404) 19 13
===================================== ============= ============= ===========
Total tax 3,196 654 633
===================================== ============= ============= ===========
Of which:
Tax on underlying profit 3,314 691 866
Tax on other items (see note 3) (118) (37) (233)
===================================== ============= ============= ===========
3,196 654 633
=================================== ============= ============= ===========
The underlying effective tax rate for the period was 31.5% (2019: 23.4%). The higher effective rate is due to a greater proportion of the profits being incurred in countries with higher corporate tax rates and losses being made in other tax jurisdictions.
In the Spring Budget 2020, the government announced that from 1 April 2020 the corporation tax rate would remain at 19.0% (rather than reducing to 17.0%, as previously enacted). This new law was substantively enacted on 17 March 2020. The Group recognised a deferred tax charge of GBP196,000 due to the change in rates.
9 RELATED PARTY TRANSACTIONS
There were no material related party transactions requiring disclosure for the periods ended 31 July 2020 and 31 July 2019.
10 ISSUE OF SHARES
In June 2020, the Group completed a cash box placing for 10,037,308 new ordinary shares of 1 pence each in the capital of the Air Partner plc, the Company. The placing price was 75p per share. The placing raised gross funds of GBP7,527,981 incurring fees of GBP475,789 resulting in a net increase in equity of GBP7,052,192.
In accordance with s612 of the Companies Act 2006, merger relief has been applied resulting in an increase to retained earnings of GBP6,895,576. The remainder of the increase in Equity comes from:
-- share capital of GBP100,373
-- share premium of GBP56,243, which relates to an offer through PrimaryBid as part of the placing. Share issued through this offer did not qualify for merger relief.
11 FINANCIAL INSTRUMENTS
Fair value estimation
To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table. The following table presents the Group's financial assets and financial liabilities measured and recognised at fair value:
Level 1 Level 2 Level 3 Total
31 July 2020 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- --------- --------
Assets
Forward exchange contracts - - - -
---------------------------- -------- -------- --------- --------
Total assets - - - -
---------------------------- -------- -------- --------- --------
Liabilities
Forward exchange contracts (5) - - (5)
---------------------------- -------- -------- --------- --------
Total liabilities (5) - - (5)
---------------------------- -------- -------- --------- --------
Level 1 Level 2 Level 3 Total
31 July 2019 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- --------- --------
Assets
Forward exchange contracts 24 - - 24
---------------------------- -------- -------- --------- --------
Total assets 24 - - 24
---------------------------- -------- -------- --------- --------
Liabilities
Forward exchange contracts - - - -
---------------------------- -------- -------- --------- --------
Total liabilities - - - -
---------------------------- -------- -------- --------- --------
The forward exchange contracts have been fair valued using forward exchange rates that are quoted in an active market.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted (unadjusted) market prices at the end of the reporting period. The quoted marked price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.
Group's valuation process
Derivatives financial instruments are valued using NatWest mid-market rates at the statement of financial position date. The Group's finance department performs the valuation of forward exchange contracts required for financial reporting purposes.
The results of the valuation processes are included in the Group's monthly reporting to the Directors, which includes all members of the Audit Committee.
Fair value of other financial instruments
The Group also has a number of financial instruments which are not measured at fair value in the statement of financial position. For the majority of these instruments, the fair values are not materially different to their carrying amounts, since the interest receivable/payable is either close to current market rates or the instruments are short term in nature. The fair value of the following financial assets and liabilities approximate to their carrying amount:
- Trade and other receivables - Cash and cash equivalents - Trade and other payables - Lease liabilities - Borrowings
Net impairment losses on financial assets
Net impairment losses on financial assets in the period were GBP982,000 (2019: GBP1,000). The high losses in the current year are comprised of the following:
GBP'000
=========================================================== =======
A balance with a customer the Group are due to enter legal
proceedings against. The Director's believe it is prudent
to provide for the whole balance until the outcome of the
proceedings are clearer. 506
Provision for customer deposit due to cashflow problems
as a result of COVID-19 135
Balances written off upon exit of an Air Traffic Control
contract 96
Specific trade receivable balances provided for 145
Additional credit loss provision 100
=========================================================== =======
At 31 July 2019 982
The Directors have included the additional credit loss provision considering the current economic uncertainty resulting from COVID-19. Reductions to debtor balances through stricter credit control has reduced the Group's exposure, but the Director's consider it prudent to expect a higher than usual level of defaults in the second half of the year.
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END
IR SELEFUESSEDU
(END) Dow Jones Newswires
September 30, 2020 02:00 ET (06:00 GMT)
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