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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gama Aviation Plc | LSE:GMAA | London | Ordinary Share | GB00B3ZP1526 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.00 | 2.20% | 93.00 | 91.00 | 95.00 | 93.00 | 92.75 | 93.00 | 0.00 | 08:00:26 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Air Transport, Scheduled | 285.64M | -8.86M | -0.1385 | -6.71 | 59.48M |
From Apr 2019 to Apr 2024
TIDMGMAA
RNS Number : 6682B
Gama Aviation PLC
24 September 2018
24 September 2018
Gama Aviation Plc (AIM: GMAA)
("Gama Aviation", "the Company" or "the Group")
Interim results for six months to 30 June 2018
Gama Aviation Plc, one of the world's largest business aviation service providers, is pleased to announce the results for the six months to 30 June 2018.
Financial Highlights
-- Revenue $104.6m (2017: $108.1m) -- Gross profit $22.1m (2017: $22.7m) -- Gross profit margin of 21.1% (2017: 21.0%) -- EBITDA $8.1m (2017: $8.4m) -- Underlying total operating profit $7.1m (2017: $8.1m)
-- Net cash $21.1m compared to net debt at 31 December 2017 $13.0m (net debt 30 June 2017: $14.3m)
-- Group's expectations for the full year remain unchanged
Financial Summary
Hot Features
Premium
USD millions (unless otherwise Underlying results(1) Reported results
stated)
Constant
Currency(2)
Jun-18 Jun-17 Jun-17 Jun-18 Jun-17
-------- --------- --------
Revenue 104.6 101.6 108.1 104.6 101.6
Gross profit 22.1 21.3 22.7 22.1 21.3
Gross profit % 21.1% 21.0% 21.0% 21.1% 21.0%
EBITDA 8.1 8.0 8.4 3.7 7.4
Total operating profit(3) 7.1 7.7 8.1 2.9 9.6
Profit before tax 6.6 7.0 7.3 3.2 8.7
Basic earnings per share
(cents) 11.0 12.2 12.8 5.0 16.0
1 - Underlying results exclude exceptional items, share-based payment
expense, amortisation, reversal of losses of associate and joint venture
from prior years, profit on disposal of interest in associate, and unrealised
foreign exchange movements included in finance costs, where applicable.
2 - Calculated at a constant foreign exchange rate of $1.38 to GBP1,
being the rate that represented the average for the 2018 financial period.
3 - Total operating profit includes the share of results from Gama Aviation's
associate in the US and joint venture in Hong Kong.
Operational Highlights
-- US Ground delivered strong organic growth -- Europe Ground delivered a flat performance in difficult market conditions -- US Air continued to grow, benefiting from growth in the Wheels Up fleet -- Europe Air delivering improved operating profit margins -- Middle East and Asia continue to develop and scale
Strategic Highlights
-- Successful equity placing raised GBP48m in March 2018, to accelerate the Group's vision of becoming the leading global business aviation services group
-- Invested in Asia, acquiring remaining 50% interest in Hutchinson's Hong Kong interest and 25% interest in CASL
-- Secured a new modern facility at Bournemouth Airport, UK for our Europe Ground operations -- New bases on the East and West coasts for US Ground operations identified and progressing
-- Pipeline of acquisition targets under consideration, subject to disciplined acquisition criteria
-- Refinancing completed with NatWest and Barclays in August 2018, providing $70m revolving credit facility with four-year term
Marwan Khalek, Chief Executive of Gama Aviation said:
"The first half of the year has been a busy period with the equity placing and refinancing completed, and progress across our operations. We continue to scale up across all geographies and service lines and develop our pipeline of value enhancing acquisitions. We remain confident in delivering our future growth plans and strategic objectives."
-S-
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
A presentation for sell-side analysts is being held today at 09:00am at the offices of Camarco, 107 Cheapside, London EC 2V 6DN.
For further information please visit www.gamaaviation.com or contact:
Gama Aviation Plc +44 (0) 1252 553029
Marwan Khalek, Chief Executive Officer
Camarco +44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
Jefferies International +44 (0) 207 029 8000
Simon Hardy
Will Soutar
Gama Aviation - Notes to Editors
Gama Aviation Plc (AIM: GMAA) is a global business aviation services group that specialises in providing support for individuals, corporations and government agencies; allowing them to deliver on the promises they make.
The Group's services are split into two divisions: Air and Ground. Air services include aircraft management, special mission support and charter. Ground services cover aircraft maintenance services, aircraft modification design and installation, and Fixed Base Operations (FBO).
More details can be found at: http://www.gamaaviation.com/
Basis of presentation
The analysis of Gama Aviation's operational performance by division and geography, is shown on a Total Division basis (for revenue, gross profit and underlying total operating profit) reflecting 100% of the performance of the division including its associates and joint ventures. The analysis also includes inter-segment revenues, which represent the revenues that arise between divisions to present the underlying performance of each division.
Gama Aviation receives a fee in return for allowing its associates and joint ventures the use of the Gama Aviation brand. Such branding fees are excluded from the results on a Total Division basis but are recognised within Gama Aviation's Group reported performance.
Under IFRS, the trading results of associates are not consolidated and are instead shown as a single line in the profit and loss account under 'share of results from equity accounted investments'.
Europe is the only region in the Group that is affected by any material currency changes, primarily between GBP and USD. The 2017 performance has been restated at the same average rate for USD to GBP as the 2018 interim results. The average rate for 2018 was USD1.38 to GBP1.00. The commentary below is based on constant currency performance unless otherwise stated.
The Group operates through eight divisions with clear lines of management responsibility. This represents the four geographies and two business lines. Key financial indicators are measured and monitored on a continuous basis. In summary the key financial indicators by division are:
-- Revenue - growth and performance versus plan -- Gross profit - growth and performance versus plan -- Gross profit percentage -- Total operating profit - growth and performance versus plan
The Group also measures and monitors internal non-financial key performance indicators to control and develop operating performance. These are reviewed regularly alongside the key financial indicators reported externally.
Chief Executive Report
The first half of the year has been a busy period. We completed a capital raise of GBP48m on 2 March 2018; made major strategic investments in Asia through our collaborations with Hutchison Whampoa; secured a new modern facility at Bournemouth Airport, UK for our Europe Ground operations; and commenced investments in a new Business Aviation Centre at Sharjah Airport in the Middle East; and into new base maintenance facilities on the East and West coasts in the US. Following the end of the reporting period, we have also agreed a revolving credit facility of $70m with National Westminster Bank Plc ("NatWest") and Barclays Bank Plc ("Barclays") to secure our funding needs.
H1 2018 Performance
On 18 July 2018 we reported that trading conditions in the US continued to support strong growth, but that European trading conditions were somewhat challenging.
The Group is reporting revenue of $104.6m (2017: $108.1m). We continue to see strong revenue growth in the US Ground division and Air associate, but performance elsewhere is somewhat mixed.
EBITDA was reported at $8.1m and is essentially flat (2017: $8.4m), with the positive revenue growth in the USA being offset by more challenging trading in Europe. Underlying total operating profit in the first six months was $7.1m (2017: $8.1m). The decrease reflects the effects of higher depreciation, following capital investments in 2017, and a lower than expected contribution from our associates.
The Group paid down all its borrowings apart from leases on the back of the equity placing and has a net cash position of $21.1m as at 30 June 2018.
New financing
On 9 February 2018 the Group announced a capital raise through the placing of shares. The admission of the placing shares became effective on 2 March 2018. The Group raised GBP48m (approximately US$67m) to accelerate our growth strategy in this highly fragmented market.
Hutchison Whampoa (China) Limited ("Hutchison") subscribed for shares in the placing and now holds approximately 21% of the Company's issued share capital. $19.8m of the proceeds were used to acquire Hutchison's Hong Kong aviation interests: its 50% stake in our Asia division, Gama Aviation Hutchison Holdings Ltd, and its 20% stake in China Aircraft Services Limited.
Hutchison's investment in the Company provides a strong endorsement of our stated strategy and our readiness to execute against that strategy. We welcome them as a strategic partner who shares our ambition of becoming the leading global aviation services business.
After the period end, the Company completed a $70m refinancing with NatWest and Barclays, including a $50m Revolving Credit Facility Agreement with a $20m accordion option. This is a committed facility for 4 years.
2018 Corporate Development
The Group remains on track to deploy the proceeds of the recent equity placing and deliver on its strategic growth plans for 2018.
The Group has an active pipeline of acquisition opportunities under consideration, subject to its disciplined acquisition criteria. A number are in advanced stages of discussions.
Investment in the US
In the US, the ground division's strategy is to enhance and extend its client service offering to both broaden its client base and capture more of its clients' total maintenance expenditure. At the time of the equity placing, the Group set out its plans to add base maintenance capacity in the Western and Eastern corridors to complement its successful and fast-growing pan-US line maintenance network. Accordingly, the division will expand capacity at its current line maintenance operation in Las Vegas to develop a base maintenance capability to serve the Western US market. The division is also in advanced discussions to secure hangar capacity in south Florida to develop its base maintenance capability to serve the Eastern US market.
In addition to developing these two base maintenance centres, which will be capable of delivering the full range of base maintenance services, the division will also be expanding its base maintenance capabilities at five of its other line maintenance centres (New York Teterboro, New York White Plains, Palm Beach International, Dallas Love Field and Los Angeles Van Nuys). These facilities will provide a limited range of base maintenance services which will, we believe, be very attractive to clients seeking quick turnaround times from proximate locations. The division is also continuing to expand the reach of its line maintenance network with the recent addition of facilities at Chicago and Miami Opa Locka airports.
All these facilities remain on track to be operational before the year end and will, therefore, be revenue generating as planned in 2019.
Investment in UK maintenance facilities
On 24 May 2018 the Group announced the transfer of its primary turboprop and jet maintenance facilities from its 25,000 sq. ft facility at Farnborough Airport and its 48,000 sq. ft facility at London Oxford Airport into a flagship 135,000 sq. ft secure facility at Bournemouth International Airport during the second half of 2018. The move will provide necessary capacity for the expansion of our company's European Ground business, which grew by 20% in 2017, while delivering immediate efficiency savings.
The move to Bournemouth Airport has been well planned and executed and is on schedule to be completed during Q4. There has been minimal disruption to operations, with good staff retention in key positions.
Restructuring costs of c.$2m will be incurred largely in 2018 and treated as either exceptional items or capital expenditure, with no impact on underlying profitability of the Group. The cash costs related to the restructuring will be offset by the end of the first half of 2019 through capital contributions by the new landlord and a rent-free period. The transfer will deliver near-term efficiency savings and revenue synergies which are expected to more than offset the costs of additional space from 2019 onwards, while also laying the foundations for further growth.
Investment in the Middle East
In Sharjah, the development of the Business Aviation Centre continues as planned with the recent award of a contract for the earthworks which commenced in September. A contract for the detailed design and construction is expected to be awarded in the near future. Overall, the development remains on track for completion in Q4 of 2019.
Investment in people
The Company has continued to strengthen its Board and the Group's regional leadership and functional management teams to ensure it can execute its strategy and continue to grow profitably and sustainably.
There have been several recent hires to supplement the already strong regional operational management teams. In addition, the Group has also enhanced its capabilities across a number of key business functions including: legal, finance, IT, business process, risk management and marketing.
Neil Medley, the Group's Chief Operating Officer, who joined the Company in September 2016, was appointed to the Board in January 2018. Neil has a strong track record of managing change and business integration as well as implementing business systems, having previously been COO at BAE Systems Applied Intelligence (formerly Detica Group Plc until its acquisition by BAE Systems Plc).
Dr Richard Steeves was also appointed to the Board as an independent Non-Executive Director and brings to the Group valuable experience in growing a business organically and through acquisitions, having founded and built Synergy Health Plc from a market capitalisation of GBP12m in 2001 to GBP1.4b when it was sold in 2015.
Simon To was appointed as a Non-Executive Director in line with the terms of the relationship agreement agreed with Hutchison as part of their strategic partnership and investment. His experience of doing business in Asia and as an AIM Director will be a valuable addition to the business. Simon is the Managing Director of Hutchison and Chairman and Executive Director of Hutchison China MediTech Limited, a company listed on AIM and Nasdaq with a market capitalisation of approximately US$4 billion. Simon joined Hutchison in 1980 and has helped build it from a relatively small trading company into a multi-billion dollar investment and distribution group.
On 1 February 2018, Kevin Godley resigned as a board director and as Chief Financial Officer ("CFO"). Since late December 2017 Michael Williamson had been interim CFO. On 30 May 2018 the Group announced the appointment of David Stickland to the post of CFO following an extensive search process. David's appointment was effective from 1 September 2018. David was CFO at services company Addison Lee Group during its international expansion, has extensive financial and international operational experience from within the transport and service sector including roles at Serco Plc, Avis Europe Plc, Eversholt Rail Group and LeasePlan UK Limited. He qualified as a chartered accountant with Price Waterhouse.
On 8 March 2018, following the successful completion of the Group's equity placing, the Group appointed Richard Kearsey as Director of Corporate Development. Richard is a chartered accountant by profession and for the last 27 years has worked as a Managing Director of Close Brothers' Aviation & Marine Finance Division. Richard has deep experience of the business aviation sector and his appointment will enhance the Executive team's capacity to pursue it's growth strategy.
Outlook
The Group's expectations for the full year remain unchanged. The US continues to grow strongly, market conditions in Europe remain challenging but stable with new business wins in Europe ground flowing through in the second half of the year. In the Middle East and Asia, the divisions continue to make steady progress in scaling up their operations.
Marwan Khalek
Chief Executive Officer
Operational Performance Review
Ground division
The Ground division provides base and line maintenance, repair and overhaul, design and modification (MRO) and fixed base operations (FBO). Base maintenance refers to the planned maintenance required by the aircraft manufacturer or component supplier. Line maintenance is irregular maintenance activity often because of component failure or wear and tear and both services are offered on either a fee or contract basis. The design and modification services provided by the Group increase the operating life and/or capability of an aircraft through services such as avionics or cabin system upgrades and incorporation of special mission capability. The Ground division provides FBO facilities at Glasgow, Aberdeen, Jersey and Sharjah airports offering parking, hangarage, line maintenance and other related ground handling tasks such as the fuelling of aircraft.
The Ground division revenue was reported at $47.2m (2017: $51.8m). The division delivered a total operating profit of $5.2m (2017: $5.6m). The reduction is largely due to poor performance at the Europe ground's facilities.
June US Europe Middle East Asia Total USD 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 thousands ----------- ------- ------- -------- --------- ------- ------ -------- ----- --------- ---------- Revenue - reported 17,248 14,219 26,708 34,566 2,751 3,003 505 - 47,212 51,788 Equipment sales - - (4,430) (11,438) - - - - (4,430) (11,438) Revenue 17,248 14,219 22,278 23,128 2,751 3,003 505 - 42,782 40,350 Gross profit 3,748 2,648 8,872 9,991 491 974 90 - 13,201 13,613 Gross profit % 21.7% 18.6% 39.8% 43.2% 17.8% 32.4% 17.8% - 30.8% 33.7% Total operating profit 968 817 4,465 4,581 (68) 210 (179) - 5,186 5,608 Total operating profit % 5.6% 5.7% 16.7% 19.8% (2.5%) 7.0% (35.4%) - 11.0% 13.9% ------------ ------- ------- -------- --------- ------- ------ -------- ----- --------- ----------
US Ground
The US Ground division delivered strong organic growth in the first six months of 2018, with revenue up 21.3% to $17.2m (2017: $14.2m), which reflects the buoyant US market and investment in new capacity in the prior year.
During the period we have focussed on improving operational efficiency and investing in strengthening the organisation capability of the business to enable sustainable growth. As a result, total operating profit was $1.0m (2017: $0.8m) with a flat margin of 5.6%.
Europe Ground
The Europe Ground division revenue was $26.7m (2017: $34.6m). The division's revenues, excluding equipment sales of $4.4m (2017: $11.4m), were relatively flat at $22.3m (2017: $23.1m).
During the period, the division performance was negatively impacted by underperformance at the Oxford facility, which will be addressed by the move to the new Bournemouth facility and by the drop-in revenues at the Fairoaks facility, caused by the uncertainties over the future of that airport.
The division delivered a total operating profit of $4.5m (2017: $4.6m). The negative impact of the underperforming facilities was mitigated by the write back of the bad debt provision related to settlement of the Dryden litigation.
In May 2018 the move to Bournemouth International Airport was announced, bringing together the operations in Farnborough and Oxford. This will remove operational inefficiencies in the UK and allow for scalable growth in the future by doubling the divisions engineering capacity, improving flexibility and extending the service offering. The transfer of these operations remains on track for completion, as planned, in Q4.
Middle East Ground
The Middle East Ground division delivered reduced revenues in the first six months of $2.7m (2017: $3.0m), due to political events in the region.
The tensions which have affected operations are easing across the region and more normalised trading is expected in the second half. The development of the Business Aviation Centre in Sharjah continues as planned with earthworks commencing in August and a contract for design and construction to be awarded soon.
The division delivered a total operating loss of $0.1m (2017: $0.2m operating profit) but with plans in place to return to full year profitability.
Asia Ground
The 20% investment in China Aircraft Services Limited ("CASL") was completed on 2 March 2018 and the wholly owned Gama Aviation operations in Hong Kong are developing as planned. This operation remains in early start-up phase having produced its first revenues in the fourth quarter 2017 and is an exciting opportunity for future growth.
Air division
The Air division provides aircraft management, special mission and charter services. It offers a comprehensive fleet management service to business jet owners including the provision of management services, crew personnel, fuel, airworthiness, engineering oversight, insurance management, hangar space, valeting and all travel arrangements. It also works with public agencies providing outsourced solutions to manage aviation operations for a variety of complex, time critical services such as air ambulance provision and aerial survey. The Group also acts as a charter broker for its managed aircraft with revenue shared between the Group and the underlying aircraft owner.
The Air division revenue was reported at $269.8m (2017: $254.9m), up 5.8% principally due to revenue growth in its US associate. The division delivered a total operating profit of $4.1m (2017: $4.3m), despite the difficult trading conditions in Europe.
June US Associate Europe Middle East Asia Total
USD 2018 2017* 2018 2017 2018 2017 2018 2017 2018 2017
thousands
------------- -------- -------- ------- ------- ------- ------- ------- ------- -------- --------
Revenue -
reported 1,875 2,000 45,004 47,135 10,122 11,629 6,203 32 63,204 60,796
Associate 206,251 189,446 - - - - 2,209 6,732 208,460 196,178
Branding fee (1,875) (2,000) - - - - (11) (32) (1,886) (2,032)
-------- -------- ------- ------- ------- ------- ------- ------- -------- --------
Revenue 206,251 189,446 45,004 47,135 10,122 11,629 8,401 6,732 269,778 254,942
Gross profit 11,819 11,399 4,808 4,819 1,074 821 466 190 18,167 17,229
Gross profit
% 5.7% 6.0% 10.7% 10.2% 10.6% 7.1% 5.5% 2.8% 6.7% 6.8%
Total
operating
profit 3,399 4,260 1,646 1,631 359 130 (96) (362) 5,308 5,659
Total
operating
profit % 1.6% 2.2% 3.7% 3.5% 3.5% 1.1% (1.1%) (5.4%) 2.0% 2.2%
Associate (3,250) (3,714) - - - - 197 362 (3,053) (3,352)
Branding fee 1,875 2,000 - - - - 11 32 1,886 2,032
Total
operating
profit -
reported 2,024 2,546 1,646 1,631 359 130 112 32 4,141 4,339
-------------- -------- -------- ------- ------- ------- ------- ------- ------- -------- --------
*The US 2017 figures have been restated to reflect treatment of branding costs in line with 2018.
US Air (Associate)
The US Air associate delivered strong revenue growth, up 8.9% to $206.3m (2017: $189.4m).
The BBA business merger in 2017 is delivering the envisaged benefits with complementary West Coast coverage to the US Air associate's existing East Coast business, a more diversified client base, the cross selling of maintenance services into Gama Aviation's wholly owned US ground business and potential future cost synergies. The operations continue to benefit from the growth of the Wheel Up fleet. The business is branded as Gama Aviation Signature and it is one of the largest aircraft management businesses in the US.
Total operating profit was $3.4m (2017: $4.3m), with a total operating profit margin of 1.6% (2017: 2.2%). In the last quarter of 2017 there was large scale investment in the US sales force and this investment has impacted the operating margin in the first half of 2018. This was made to enhance the future growth of the managed fleet. As a result, operating margins are expected to resume their steady improvement towards the business model target of 4% to 5%, as the benefits of scale and operational gearing continue.
Europe Air
The Europe Air division reported revenue of $45.0m (2017: 47.1m), which was relatively stable in difficult trading conditions across Europe.
The general political and economic uncertainties across Europe persist and will continue to impact performance during Brexit. However, some benefits are being seen from previously implemented operational efficiencies.
Total operating profit was flat at $1.6m (2017: $1.6m) with a profit margins improving slightly to 3.7% (2017: 3.5%). This level of performance is expected to continue during the second half year and into 2019, as the political uncertainties persist.
Middle East Air
The Middle East Air division delivered revenue of $10.1m (2017: $11.6m), down by 13.9% due to uncertainty and political turmoil in the region.
Investment in the Sharjah Business Centre is laying the foundations for scalable growth in the future.
Total operating profit was $0.4m (2017: $0.1m) and margins improved to 3.5% (2017: 1.1%), despite the challenging trading conditions. As the political position improves, we expect the division to make steady progress.
Asia Air
Asia Air is now a wholly owned entity following the acquisition of 50% of the joint venture interest of Hutchison on 2 March 2018, as part of the placing and fund raise.
However, the operation has made encouraging progress, having added new contracts and increased volume of activity. The division is trading profitably monthly, with the reversal of losses from the first quarter.
Financial Review
Basis of presentation of financials
All financial commentary below is provided on a constant currency basis unless otherwise stated. The 2017 performance has been restated to the same average rate for USD to GBP as the reported 2018 financials. The average rate for 2018 was USD1.38 to GBP1.00.
Group financial performance
Key financial indicators across the group are reported below.
Constant Currency
June 2018 2017 Change 2017 Change
USD thousands Total Total Total Total Total
-------- -------- --------- --------- ---------
Revenue 104,629 101,628 3.0% 108,104 (3.2%)
Gross Profit 22,088 21,331 3.5% 22,679 (2.6%)
Gross Profit % 21.1% 21.0% 0.1ppt 21.0% 0.1ppt
Underlying EBITDA 8,108 8,028 1.0% 8,433 (3.9%)
Underlying EBITDA % 7.7% 7.9% (0.2ppt) 7.8% (0.1ppt)
Underlying Operating
Profit 7,078 7,718 (8.3%) 8,080 (12.4%)
Underlying Operating
Profit % 6.8% 7.6% (0.8ppt) 7.5% (0.7ppt)
Underlying Profit before
tax 6,609 7,012 (5.7%) 7,314 (9.6%)
Underlying Profit before
tax % 6.3% 6.9% (0.4ppt) 6.8% (0.6ppt)
Underlying Basic Earnings
Per Share (cents) 11.0c 12.2c (1.2c) 12.8c (1.8c)
-------- -------- --------- --------- ---------
Revenue
The Group reported revenue at $104.6m (2017: $108.1m), with revenue in 2017 including $11.4m of aircraft sales. Revenue excluding aircraft sales grew by 3.6% to $100.2m (2017: $96.7m). We have seen growth in revenue in both Air and Ground divisions principally coming out of the US and European geographies.
Gross profit
The gross profit reported is $22.1m (2017: $22.7m) and there has been an increase in the gross profit margin percentage by 0.1% to 21.1% (2017: 21.0%).
Underlying EBITDA
Underlying EBITDA reported is $8.1m (2017: $8.4m). This represents an EBITDA margin of 7.7% broadly in line with 7.9% in 2017.
Reconciliation of underlying total operating profit to EBITDA
Constant Currency
USD thousands June 2018 June 2017 June 2017
---------- ----------
Underlying total operating
profit 7,076 7,718 8,080
Depreciation 1,196 867 910
Share of associate's results (166) (401) (401)
Share of associate's exceptional
items - (156) (156)
Underlying EBITDA 8,108 8,028 8,433
----------------------------------- ---------- ----------
Depreciation
Depreciation which is set out in note 11 includes depreciation on property, plant and equipment of $1.2m (2017: $0.9m).
Share of associate's results
The share of associate's results represents the share of operating profit as reported in Gama Aviation LLC from the Group's 24.5% interest in Gama Aviation LLC and the share of operating profit as reported in CASL from the Group's 20% interest in CASL from 2 March 2018.
Share of associate's exceptional items
The share of associate's exceptional items in 2017 represents the share of exceptional items as reported in Gama Aviation LLC from the Group's 24.5% interest in Gama Aviation LLC. These reflect transaction, integration and legal costs associated with the the merger of the US Air associate with the BBA aircraft management business in the six months to 30 June 2017.
Total operating profit
The underlying total operating profit, which includes the operating profit attributable to Gama Aviation of the 100% owned group companies together with the results attributable to Gama Aviation from its associate and joint venture is $7.1m (2017: $8.1m).
Underlying total operating profit is arrived at by taking operating profit before amortisation, exceptional items, share based payment expense and including the share of profits but excluding accumulated losses of equity accounted investments and any gain on disposal or acquisition of associate.
Constant Currency
USD thousands June 2018 June 2017 June 2017
------------ ------------
Continuing total operating
profit 2,889 9,647 9,888
Amortisation 774 755 826
Exceptional items 4,303 567 609
Share of associate's exceptional
items - 156 156
Share-based payment expense 98 98 106
Release of provisions in
respect of losses of associate
and joint venture from prior
years - (1,322) (1,322)
Gain on acquisition/disposal
of interest in associate (986) (2,183) (2,183)
------------ ------------ ------------------
Underlying total operating
profit 7,078 7,718 8,080
----------------------------------- ------------ ------------ ------------------
Amortisation
Amortisation which is set out in note 11 includes amortisation of intangible assets of $0.8m (2017: $0.8m), which relate to intangible assets recognised on acquisition.
Exceptional items
Exceptional items amounted to $4.3m (2017: $0.6m), which are set out in note 4 and represent transaction costs $2.1m (2017: $0.2m), integration and restructuring costs $0.5m (2017: $0.4m), and legal costs $1.8m (2017: $nil). Exceptional items include travel expenses and costs for executive management incurred in undertaking transactions, integration and restructuring together with the salary costs of certain permanent employees who are employed in place of external professional services.
Share-based payment expense
On 22 June 2018, 2,132,000 share options were awarded, under the Group's Share Option Plan to senior executives and managers across the Company. The assumptions on which the charge for these share options are based are set out in note 9.
Associates and joint ventures
The release of the provision for our share of associate and joint venture losses from prior years of $nil (2017: $1.3m) and the profit from the disposal/acquisition of the interest in associates and joint ventures of $1.0m (2017: $2.2m) are excluded from the underlying total operating profit.
US Air losses of associate from prior years
During previous years, the US Air associate had been loss-making, and the Group had been provisioning amounts in anticipation of additional resourcing requirements. With the strength of the Associate's performance, its profit-making position and positive net assets position, together with a re-organised branding fee structure, the provisions of $1.5m at 30 June 2017 were no longer required and were released. The provision release has not been included in the Group's underlying results in this period.
Asia Air losses of joint venture
The losses of the Asia joint venture were $0.2m at 30 June 2017.
Profit on disposal of interest in associate
On 1 January 2017 the Group and BBA Aviation Plc merged their US aircraft management and charter businesses. This merger resulted in the Group's 49% interest in its associated company Gama Aviation LLC, being reduced to 24.5% and a profit of $2.2m being recorded on the disposal of the other 24.5% interest.
Profit on acquisition of interest in associate
On 2 March 2018 the Group acquired 50% of the shares in Gama Aviation Hutchison Holdings Limited. The Group already held 50% of the of the shares in Gama Aviation Hutchison Holdings Limited and the acquisition of the remaining 50% is treated as a step acquisition under IFRS 3 'Business combinations' resulting in a gain on step acquisition of $1.0m.
The share of results from equity accounted investments derived by the Group's associates and joint ventures is set out below:
USD thousands June 2018 June 2017
----------
US associate share of results 136 401
Release of provisions in
respect of losses of associate
and joint venture from
prior years - 1,322
HK associate share of results 30 -
Share of results from equity
accounted investments 166 1,723
----------
Profit before tax
Constant Currency
USD thousands June 2018 June 2017 June 2017
------------ ------------
Continuing profit before
tax 3,190 8,694 8,851
Amortisation 774 755 826
Exceptional items 4,303 567 609
Share of associate's exceptional
items - 156 156
Share-based payment expense 98 98 106
Release of provisions in
respect of losses of associate
and joint venture from prior
years - (1,322) (1,322)
Profit on disposal of interest
in associate (986) (2,183) (2,183)
Unrealised FX movements in
finance costs (768) 247 271
------------ ------------ ------------------
Underlying profit before
tax 6,611 7,012 7,314
----------------------------------- ------------ ------------ ------------------
Unrealised FX movements within finance costs
Within our global services business, we operate and manage geographically mobile assets. As a result, Gama Aviation is exposed to several currencies. Except for Europe, the rest of the regions trade in USD which is the same as our Group reporting currency, leaving little or no foreign exchange exposure.
The material currency exposure for Gama Aviation is within our Europe operations between GBP and USD. Gama Aviation experiences both realized and unrealized trading gains and losses on these exchange rate movements. These impact our operating performance, and finance income and costs. The unrealized FX movement in the period was a gain of $0.8m (2017: loss of $0.3m).
Earnings per share (EPS)
Constant
USD thousands June 2018 June 2017 Currency
June 2017
------------ ------------
Profit attributable to ordinary
equity holders of the parent:
Continuing operations 2,843 7,037 7,153
Add back:
Amortisation 774 755 826
Exceptional items 4,303 567 609
Share of associate's exceptional
items - 156 156
Share-based payment expense 98 98 106
Release of provisions in respect
of losses of associate and joint
venture from prior years - (1,322) (1,322)
Profit on disposal of interest
in associate (986) (2,183) (2,183)
Unrealised FX movements in finance
costs (768) 247 271
Deferred tax charge - - -
------------ ------------ -----------
Profit attributable to ordinary
shareholders for adjusted earnings 6,264 5,355 5,616
Denominator
Weighted average number of shares
used in basic EPS 56,739,000 43,994,442 43,994,442
Underlying basic earnings per
share (cents) 11.0c 12.2c 12.8c
-------------------------------------- ------------ ------------ -----------
Taxation
There is a total tax charge for the period of $0.3m (2017: $1.5m) and an effective tax rate of 20% on continuing activities. The group operates across several jurisdictions and the effective rate of tax reflects the blended rate of operating in different countries.
Balance sheet
The summarised balance sheet at 30 June 2018 reflects the impact of the share issuance and acquisition of a 20% stake in China Airline Services Limited for $16.0m and the acquisition of the remaining shares in the group's Hong Kong joint venture.
USD thousands June 2018 December
2017
------------
Goodwill 41,908 40,716
Other non-current assets 56,972 36,025
------------ -----------
Non- current assets 98,880 76,741
------------ -----------
Cash and cash equivalents 24,294 22,349
Other current assets 66,444 58,923
------------ -----------
Current assets 90,738 81,272
------------ -----------
Current borrowings (excluding
leases) - (30,642)
Other current liabilities (65,334) (61,092)
------------ -----------
Current liabilities (65,334) (91,734)
------------ -----------
Non-current borrowings (excluding
leases) - (1,012)
Non-current liabilities excluding
borrowings (3,506) (3,562)
------------ -----------
Non-current liabilities (3,506) (4,574)
------------ -----------
Net assets 120,778 61,705
------------------------------------ ------------ -----------
Following the share issuance on 2 March 2018 the Group repaid its existing borrowings.
Net debt and cash flow movements
The table below highlights the change in the net debt position, showing a $34.0m improvement in 2018. This is mainly due to the issuance of new shares for a net consideration of $63.7m offset by acquisition outflows of $22.2m. The acquisitions include the Gama Hutchison acquisition ($2.6m net of cash acquired), the acquisition of a 20% stake in China Aircraft Services Limited ($16.0m) on 2 March 2018 and a capital contribution to our US associate Gama Aviation LLC of $3.6m.
Over the last few years management has been focused upon improving its working capital management to reverse the sizeable outflows experienced in prior years. In 2018 the Group saw a working capital outflow of $5.2m largely due to the reduction in client deposits as these unwind in 2018 as previously reported.
USD thousands June 2018 June 2017
------------
Underlying EBITDA 8,108 8,028
Working capital movement (5,202) 335
Items not included in underlying
EBITDA (4,401) (665)
Other (801) (2,029)
------------ ------------
Cash flow from operations (2,296) 5,669
Capex movement (2,927) 708
Net interest & tax paid (1,314) (702)
------------ ------------
Free cash flow (6,537) 5,675
Issuance of shares 63,742 -
Acquisitions (22,194) -
Net debt foreign exchange
movements (975) (618)
------------ ------------
Change in net debt 34,036 5,057
------------ ------------
Net debt 21,064 (14,330)
Cash and cash equivalents 24,294 15,186
Borrowings - (27,446)
Obligations under finance
leases (3,230) (2,070)
------------------------------------ ------------ ------------
Items not included in underlying EBITDA
Exceptional items in the cash flow movements are as set out in note 4 and represent transaction costs $2.1m, integration and restructuring costs $0.5m, and legal costs relating to litigation $1.8m.
Other Items
Other items in the cash flow movements primarily relate to losses from discontinued activities $1.3m (2017: losses of $1.0m) as set out in note 6 and unrealized foreign exchange movements of $0.4m gain (2017: $1.3m loss).
Discontinued operations
In the six months to 30 June 2017, the losses from discontinued operations were generated by the owned aircraft within the group that were held for sale as part of the group strategy to exit the business model of owned aircraft that are deployed solely for the purposes of ad-hoc charter. The Group continued to operate the aircraft whilst they were held for sale to reduce the losses borne in discontinued operations and to help maintain their airworthiness, assisting the sale process. Two aircraft that were held for sale at 31 December 2016 were sold in 2017. The remaining aircraft was operated in the period ended 30 June 2018 and the sale of this aircraft was completed on 12 July 2018 (see note 12).
At the end of 2017 the Group discontinued its stand-alone aircraft management operation in Switzerland and the run-down costs of this operation have been included in the period to 30 June 2018.
In May 2018 the Group announced the closure of its Oxford ground engineering operation and the results of this operation are considered as discontinued from 1 June 2018.
Capex movement
Capital expenditure includes the purchase of property, plant and equipment of $1.6m (2017: $3.3m) and intangibles of $1.3m (2017: $0.2m). The expenditure on intangibles mostly relates to the development of the next generation MyAirops software for resale to customers.
Net interest and tax paid
The Group paid tax on profits of $1.0m (2017: $nil) in the UK and US which includes advance payments for 2018. Net interest paid in 2018 was $0.4m (2017: $0.7m) with the reduction due to the repayment of the RBS credit facilities and other debt following the issuance of new shares in March 2018.
Dividend
As usual and in accordance with the Group's dividend policy, the Directors do not propose an interim dividend to be paid for the six months to 30 June 2018. The Group will continue to maintain its progressive dividend policy.
The final dividend of 2.75p per share for the year ended 31 December 2017 was approved at the Annual General Meeting on 5 June 2018 and was paid on 25 July 2018.
Litigation and associated exceptional items
The Group has been involved in a number of legal proceedings, most of which arise from historic Hangar 8 trading activity, prior to the merger completed in January 2015, and those relating to disputes with Dustin Dryden (a former non-executive director of the Company and of Hangar 8 who resigned in September 2015) and affiliated entities. On 19 June 2018, the Company reached an agreement with the Dryden Parties (Dustin Dryden and associated entities) to settle the legal proceedings between the parties.
The Company has incurred legal costs of US$1.8m associated with these proceedings (including Dustin Dryden and associated entities related litigation) in the period ended 30 June 2018, which are treated as an exceptional item. The Board believes a lower amount will be incurred for future legal costs, through to the conclusion of the various ongoing proceedings, which will also be treated as exceptional.
The current ongoing proceedings fall into two categories, the first involves proceedings by the Company to recover long-standing trade receivables that amount to approximately $4.4m. The Company has made adequate provisions or holds security against these claims and as a result the Board does not expect any further provisions will be required. In addition, based on legal advice, the Board considers the proceedings to recover these receivables are likely to be successful.
The second involves a number of proceedings brought against the Company in which the claimants seek to recover damages for alleged contractual breaches which amount to approximately $6.0m. Based on a detailed analysis of the claims and legal advice, the Board believes that these claims are speculative and/or overlapping and the Company continues to vigorously defend them and therefore no provision has been made in the accounts.
By the time all these proceedings, some of which are with the same counterparties, are determined or settled, the Board expects the overall awards and settlements to result in a cash inflow to the Company.
David Stickland
Chief Financial Officer
Gama Aviation plc
Unaudited Condensed Consolidated Interim Financial Statements
Six months ended 30 June 2018
Consolidated income statement (unaudited)
Six months Six months
ended ended
30 June 30 June
2018 2017
Note $'000 $'000
---------------------------------------------- ----- ----------- -----------
Continuing operations
Revenue 3 104,629 101,628
Cost of sales (82,541) (80,297)
---------------------------------------------- ----- ----------- -----------
Gross profit 22,088 21,331
---------------------------------------------- ----- ----------- -----------
Administrative expenses (20,351) (15,590)
Underlying EBITDA 8,108 8,028
Items not included in underlying EBITDA 4 (4,401) (665)
Depreciation and amortisation (1,970) (1,622)
-----------
Operating profit 1,737 5,741
Share of results from equity accounted
investments 166 1,723
Profit on step acquisition/disposal
of interest in associate 5 986 2,183
Total operating profit 2,889 9,647
---------------------------------------------- ----- ----------- -----------
Finance income 773 -
Finance costs (472) (953)
---------------------------------------------- ----- ----------- -----------
Profit before tax from continuing operations 3,190 8,694
Taxation 7 (267) (1,519)
---------------------------------------------- ----- ----------- -----------
Profit from continuing operations 2,923 7,175
---------------------------------------------- ----- ----------- -----------
Discontinued operations
Loss before and after tax from discontinued
operations 6 (1,276) (1,012)
---------------------------------------------- ----- ----------- -----------
Profit for the period 1,647 6,163
---------------------------------------------- ----- ----------- -----------
Attributable to:
Owners of the Company 1,567 6,025
Non-controlling interests 80 138
---------------------------------------------- ----- ----------- -----------
Totals 1,647 6,163
---------------------------------------------- ----- ----------- -----------
Earnings per share attributable to the
equity holders of the parent 8
Basic (cents) 2.76c 13.69c
Diluted (cents) 2.74c 13.58c
Basic - continuing operations (cents) 5.01c 16.00c
Diluted - continuing operations (cents) 4.97c 15.86c
---------------------------------------------- ----- ----------- -----------
Consolidated statement of comprehensive income (unaudited)
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
--------------------------------------------------- ----------- -----------
Profit for the period 1,647 6,163
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations (2,791) 1,733
Gains/(losses) on cash flow hedges (19) -
--------------------------------------------------- ----------- -----------
Total comprehensive (loss)/income for the
period (1,163) 7,896
----------------------------------------------------- ----------- -----------
Total comprehensive (loss)/income is attributable
to:
Owners of the Company (1,083) 7,758
Non-controlling interests (80) 138
----------------------------------------------------- ----------- -----------
Totals (1,163) 7,896
----------------------------------------------------- ----------- -----------
Consolidated statement of changes in equity (unaudited)
For the six months to 30 June 2018
Share Share Other Foreign Accumulated Total Non-controlling Total
capital premium reserves exchange profit/ shareholders' interest equity
reserve (losses) equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Balance at 1
January
2018 684 - 61,699 (20,797) 18,595 60,181 1,524 61,705
Issuance of
shares 269 63,473 - - - 63,742 - 63,742
Share-based
payments - - 98 - - 98 - 98
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Transactions
with
owners 269 63,473 98 - - 63,840 - 63,840
Profit for the
period - - - - 1,567 1,567 80 1,647
Other
comprehensive
loss - - (19) (2,791) - (2,810) - (2,810)
Capital
contribution
to associate - - (3,604) - - (3,604) (3,604)
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Total
comprehensive
(loss)/income - - (3,623) (2,791) 1,567 (4,847) 80 (4,767)
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Balance at 30
June
2018 953 63,473 58,174 (23,588) 20,162 119,174 1,604 120,778
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
For the six months to 30 June 2017
Share Share Other Foreign Accumulated Total Non-controlling Total
capital premium reserves exchange profit shareholders' interest equity
reserve equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
---------------- --------- --------- --------- --------- ------------ -------------- ---------------- -------- Balance at 1 January 2017 684 - 61,377 (23,529) 17,419 55,951 581 56,532 Share-based payments - - 98 - - 98 - 98 ---------------- --------- --------- --------- --------- ------------ -------------- ---------------- -------- Transactions with owners - - 98 - - 98 - 98 Profit for the period - - - - 6,025 6,025 138 6,163 Other comprehensive income - - - 1,733 - 1,733 - 1,733 ---------------- --------- --------- --------- --------- ------------ -------------- ---------------- -------- Total comprehensive income - - - 1,733 6,025 7,758 138 7,896 ---------------- --------- --------- --------- --------- ------------ -------------- ---------------- -------- Balance at 30 June 2017 684 - 61,475 (21,796) 23,444 63,807 719 64,526 ---------------- --------- --------- --------- --------- ------------ -------------- ---------------- --------
Consolidated balance sheet
30 June 31 December
2018 2017
(unaudited)
$'000 $'000
--------------------------------------- --- ------------ ------------
Non-current assets
Goodwill 41,908 40,716
Other intangible assets 16,050 11,564
--------------------------------------- --- ------------ ------------
Total intangible assets 11 57,958 52,280
Property, plant and equipment 11 20,355 20,051
Investments accounted for using
the equity method 17,887 1,721
Deferred tax asset 2,680 2,689
--------------------------------------- --- ------------ ------------
98,880 76,741
--------------------------------------- --- ------------ ------------
Current assets
Assets held for resale 12 1,500 1,500
Inventories 10,241 9,705
Trade and other receivables 54,703 47,718
Cash and cash equivalents 24,294 22,349
--------------------------------------- --- ------------ ------------
90,738 81,272
--------------------------------------- --- ------------ ------------
Total assets 189,618 158,013
--------------------------------------- --- ------------ ------------
Current liabilities
Trade and other payables (54,387) (54,510)
Obligations under finance leases (1,265) (1,654)
Provisions for liabilities - (540)
Borrowings - (30,642)
Deferred revenue (9,682) (4,388)
--------------------------------------- --- ------------ ------------
(65,334) (91,734)
--------------------------------------- --- ------------ ------------
Total assets less current liabilities 124,284 66,279
--------------------------------------- --- ------------ ------------
Non-current liabilities
Borrowings - (1,012)
Obligations under finance leases (1,965) (2,013)
Provisions for liabilities - -
Deferred tax liabilities (1,541) (1,549)
--------------------------------------- --- ------------ ------------
(3,506) (4,574)
--------------------------------------- --- ------------ ------------
Total liabilities (68,840) (96,308)
--------------------------------------- --- ------------ ------------
Net assets 120,778 61,705
--------------------------------------- --- ------------ ------------
Shareholders' equity
Share capital 14 953 684
Share premium 14 63,473 -
Other reserves 58,174 61,699
Foreign exchange reserve (23,588) (20,797)
Accumulated profit 20,162 18,595
--------------------------------------- --- ------------ ------------
Total shareholders' equity 119,174 60,181
--------------------------------------- --- ------------ ------------
Non-controlling interest 1,604 1,524
Total equity 120,778 61,705
--------------------------------------- --- ------------ ------------
Consolidated cash flow statement (unaudited)
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
---------------------------------------------------- ----------- -----------
Cash flows from operating activities
Profit before tax from continuing operations 3,190 8,694
Loss before tax from discontinued operations (1,276) (1,012)
---------------------------------------------------- ----------- -----------
Profit before tax 1,914 7,682
Adjustments for:
Depreciation and amortisation 1,970 1,622
Finance income (768) -
Finance costs 395 949
Loss on disposal of assets held for sale - 150
(Profit) on acquisition/disposal of interest
in associate (986) (2,183)
Share-based payment expense 98 98
Unrealised foreign exchange movements 449 (1,261)
Share of results from equity accounted investments (166) (1,723)
---------------------------------------------------- ----------- -----------
Operating cash flows before movements in working
capital 2,906 5,334
Increase in inventories (784) (2,065)
Increase in receivables (2,429) (5,266)
Increase/(decrease) in payables (6,858) 1,918
Increase in deferred revenue 5,429 5,997
Decrease in provisions (560) (249)
---------------------------------------------------- ----------- -----------
Cash generated from operations (2,296) 5,669
Taxes paid (959) -
Interest received - -
Interest paid (355) (702)
---------------------------------------------------- ----------- -----------
Net cash flows from operating activities (3,610) 4,967
---------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchases of property, plant and equipment (1,602) (3,253)
Purchases of intangibles (1,325) (200)
Proceeds on disposal of assets held for sale - 4,161
Acquisition of subsidiary, net of cash acquired (22,194) -
---------------------------------------------------- ----------- -----------
Net cash flows from investing activities (25,121) 708
---------------------------------------------------- ----------- -----------
Cash flows from financing activities
Issuance of shares (net of issue costs) 63,742 -
Repayments of obligations under finance leases (437) (3,550)
Proceeds from borrowings - 1,143
Repayment of borrowings (31,969) -
Net cash flows from financing activities 31,336 (2,407)
---------------------------------------------------- ----------- -----------
Net increase in cash and cash equivalents 2,605 3,268
Effect of foreign exchange rates (660) 744
Cash and cash equivalents at 1 January 22,349 11,174
---------------------------------------------------- ----------- ----------- Cash and cash equivalents at the end of period 24,294 15,186 ---------------------------------------------------- ----------- ----------- 1. Corporate information and basis of preparation
The financial information for the year ended 31 December 2017 set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2017 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 of the Companies Act 2006. The interim results are unaudited. Gama Aviation plc is a publicly limited company incorporated and domiciled in England and Wales. The Company's shares are publicly traded on the AIM market of the London Stock Exchange.
These interim consolidated financial statements (the interim financial statements) are for the six months ended 30 June 2018. They have been prepared in accordance with IFRSs as adopted by the European Union and IAS 34 "Interim Financial Reporting". They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2017.
2. Accounting policies
The accounting policies set out in the Group's statutory financial statements for the year ended 31 December 2017 have been applied in the preparation of the interim financial statements, except for the application of IFRS 15.
On 1 January 2018 the group adopted IFRS 15 'Revenue from Contracts with Customer' which supersedes IAS 18 'Revenue.' The group has adopted the 'Modified retrospective application' which means there is no restatement of the comparative period, but there is a requirement to make an opening adjustment to retained earnings as at 1 January 2018 to account for any earnings taken in 2017 that need to be reclassified to 2018.
Following a review all revenue streams it has been determined that no opening adjustments with respect to the adoption of IFRS 15 are required.
There have been no changes to any of the Group's critical accounting estimates and judgements of its principal financial risks. The Directors consider that the Group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the interim financial statements.
3. Segment information
For management purposes, the Group is organised into business units, based on line of business and geographical location.
An analysis of the Group's revenue, gross profit, underlying EBITDA and underlying total operating profit for the period ended 30 June 2018 is as follows:
Total Gross profit Gross profit Underlying Underlying Underlying Underlying
Revenue EBITDA EBITDA total total
operating operating
profit profit
$'000 $'000 % $'000 % $'000 %
--------------- --- --- -------- ------------ ------------ ---------- ---------- ------------- --------------
US: Air 1,875 1,913 >100 1,926 >100 2,024 >100
Europe: Air 45,004 4,808 10.7 1,956 4.3 1,646 3.7
MENA: Air 10,122 1,074 10.6 369 3.6 359 3.5
Asia: Air 6,203 409 6.6 118 1.9 142 2.3
-------- ------------ ------------ ---------- ---------- ------------- --------------
63,204 8,204 13.0 4,369 6.9 4,171 6.6
US: Ground 17,248 3,748 21.7 1,321 7.7 968 5.6
Europe: Ground 26,706 8,872 33.2 4,886 18.3 4,465 16.7
MENA: Ground 2,751 491 17.8 (28) (1.0) (68) (2.5)
505
Asia: Ground 505 90 17.8 (160) (31.7) (179) (35.5)
-------- ------------ ------------ ---------- ---------- ------------- --------------
47,210 13,201 28.0 6,019 12.7 5,186 11.0
Other 1,851 683 36.9 (2,280) (>100) (2,279) (>100)
Eliminations (7,636) - - - - - -
------------------------- -------- ------------ ------------ ---------- ---------- ------------- --------------
104,629 22,088 21.1 8,108 7.7 7,078 6.8
----------------------- -------- ------------ ------------ ---------- ---------- ------------- --------------
Underlying total operating profit 7,078
Amortisation (774)
Exceptional items (4,303)
Share-based payment expense (98)
Profit on step acquisition 986
Finance costs (net) 301
--------------------------------------------------------------------------------------- -------------
Profit before tax from continuing operations 3,190
--------------------------------------------------------------------------------------- -------------
3. Segment information (continued)
An analysis of the Group's revenue, gross profit, underlying EBITDA and underlying total operating profit for the period ended 30 June 2017 is as follows:
Total Gross profit Gross profit Underlying Underlying Underlying Underlying
Revenue EBITDA EBITDA total operating total operating
profit profit
$'000 $'000 % $'000 % $'000 %
---------------- -------- ------------ ------------ ---------- ---------- --------------- ---------------
US: Air 2,000 2,038 >100 2,028 >100 2,546 >100
Europe: Air 43,054 4,414 10.3 1,723 4.0 1,493 3.5
MENA: Air 11,629 821 7.1 167 1.4 130 1.1
Asia: Air 32 32 100.0 32 100.0 32 100.0
-------- ------------ ------------ ---------- ---------- --------------- ---------------
56,715 7,305 12.9 3,950 7.0 4,201 7.4
US: Ground 14,219 2,648 18.6 1,060 7.5 817 5.7
Europe: Ground 31,488 9,075 28.8 4,400 14.0 4,161 13.2
MENA: Ground 3,003 974 32.4 289 9.6 210 7.0
-------- ------------ ------------ ---------- ---------- --------------- ---------------
48,710 12,697 26.1 5,749 11.8 5,188 10.7
Other 875 1,329 >100 (1,671) (>100) (1,671) (>100)
Eliminations (4,672) - - - - - -
------------------ -------- ------------ ------------ ---------- ---------- --------------- ---------------
101,628 21,331 21.0 8,028 7.9 7,718 7.6
---------------- -------- ------------ ------------ ---------- ---------- --------------- ---------------
Underlying total operating profit 7,718
Amortisation (755)
Exceptional items (567)
Share of associate's exceptional items (156)
Share-based payment expense (98)
Losses of associate and joint venture 1,322
Profit on disposal of interest in associate 2,183
Finance costs (953)
-------------------------------------------------------------------------------- --------------- Profit before tax from continuing operations 8,694 -------------------------------------------------------------------------------- ---------------
An analysis of the Group's revenue is as follows:
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
----------------------------------- ---------- ----------
Continuing operations
Sale of business aviation services 102,743 89,136
Sale of aircraft - 10,460
Branding fees 1,886 2,032
----------------------------------- ---------- ----------
Totals 104,629 101,628
----------------------------------- ---------- ----------
4. Items not included in underlying EBITDA
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
Exceptional items
Transaction costs 2,074 189
Integration and business re-organisation costs 477 378
Litigation costs 1,752 -
--------------------------------------------------- ---------- ----------
4,303 567
Share-based payment expense 98 98
--------------------------------------------------- ---------- ----------
Totals 4,401 665
--------------------------------------------------- ---------- ----------
Transaction costs represent expenses incurred in respect of the transactions completed in the period, as well as costs associated with seeking out new potential investment opportunities and certain costs relating to the issuance of shares. Integration and business re-organisation costs represent the subsequent third party and internal costs associated with the acquisitions and other re-organisation costs.
5. Acquisitions and investments
On 2 March 2018, the Group acquired Hutchison Whampoa (China) Limited's 50% stake in Gama Aviation Hutchison Holdings Ltd for $3.1m.
The following table summarises the consideration paid for Gama Aviation Hutchison Holdings Ltd, the preliminary fair value of the assets acquired, and the liabilities assumed at the acquisition date.
Consideration at 2 March
2018 $'000
Cash consideration 3,050
-----
Total consideration transferred 3,050
=====
Recognised amounts of identifiable assets acquired
and liabilities assumed $'000
Property, plant and equipment 249
Customer relationships (included within intangibles) 4,202
Trade and other receivables 5,069
Cash 460
Trade and other payables (7,842)
Deferred revenue (165)
Goodwill 2,063
-------
4,036
Profit recognised on acquisition in respect of pre-existing
shareholding (see below) (986)
-------
Total consideration 3,050
=======
The Group already held 50% of the of the shares in Gama Aviation Hutchison Holdings Limited and the acquisition of the remaining 50% is treated as a step acquisition under IFRS 3 resulting in a profit on acquisition of $1.0m.
In the period to 30 June 2017, the Group disposed of a 24.5% interest in its associate Gama Aviation LLC and recognised a profit on disposal of interest in an associate of $2,183,000. The Group has retained the remaining holding of 24.5% and continues to account for the investment as an associate.
Investments
On 2 March 2018 the Group acquired Hutchison Whampoa (China) Limited's 20% stake in China Aircraft Services Limited for $16.0m, which is recorded under investments accounted for using the equity method in the consolidated balance sheet.
The Group also made a capital contribution to its associate Gama Aviation LLC of $3.6m during the period ended 30 June 2018.
6. Discontinued operations
In the six months to 30 June 2017, the losses from discontinued operations were generated by the owned aircraft within the group that were held for sale as part of the group strategy to exit the business model of owned aircraft that are deployed solely for the purposes of ad-hoc charter. The Group continued to operate the aircraft whilst they were held for sale to reduce the losses borne in discontinued operations and to help maintain their airworthiness, assisting the sale process. Two aircraft that were held for sale at 31 December 2016 were sold in 2017. The remaining aircraft was operated in the period ended 30 June 2018 and the sale of this aircraft was completed on 12 July 2018 (see note 12).
At the end of 2017 the Group discontinued its stand-alone aircraft management operation in Switzerland and the run-down costs of this operation have been included in the period to 30 June 2018.
In May 2018 the Group announced the closure of its Oxford ground engineering operation and the results of this operation are considered as discontinued from 1 June 2018.
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
-------------------------------------------- ---------- ----------
Discontinued operations
Revenue 314 278
Expenses (1,613) (1,294)
--------------------------------------------- ---------- ----------
Operating loss (1,299) (1,016)
Net finance income 23 4
--------------------------------------------- ---------- ----------
Loss before and after tax from discontinued
operations (1,276) (1,012)
--------------------------------------------- ---------- ----------
Earnings per share
Basic - cents (2.51c) (2.30c)
Diluted - cents (2.23c) (2.28c)
--------------------------------------------- ---------- ----------
The weighted average number of ordinary shares is included in Note 8.
7. Taxation
The taxation charge for the six months to 30 June 2018 is accrued based on the estimated average annual effective income tax rate of 20% (6 months ended 30 June 2017: 20%).
8. Earnings per share ("EPS")
The calculation of earnings per share is based on the earnings attributable to the ordinary shareholders divided by the weighted average number of shares in issue during the period.
Six months Six months
ended ended
30 June 30 June
2018 2017
$'000 $'000
-------------------------------------------------- ---------- ----------
Numerator
Profit attributable to ordinary equity holders
of the parent:
Continuing operations 2,843 7,037
Discontinued operations (1,276) (1,012)
---------------------------------------------------- ---------- ----------
Profit attributable to ordinary equity holders
of the parent for basic earnings 1,567 6,025
---------------------------------------------------- ---------- ----------
Denominator
Weighted average number of shares used in
basic EPS 56,739,000 43,994,442
Effect of dilutive share options 458,697 372,795
--------------------------------------------------- ---------- ----------
Weighted average number of shares used in diluted
EPS 57,197,697 44,367,237
Earnings per share
Basic (cents) 2.76c 13.69c
Diluted (cents) 2.74c 13.58c
Basic - continuing operations (cents) 5.01c 16.00c
Diluted - continuing operations (cents) 4.97c 15.86c
--------------------------------------------------- ---------- ----------
9. Share-based payments
On 22 June 2018, 2,132,000 share options were awarded, under the Group's Share Option Plan to senior executives and managers across the Company. The vesting period of 961,000 of these options is two years and the options will be exercisable between two and ten years following grant. The vesting period of the remaining 1,171,000 options is three years and the options will be exercisable between three and ten years following grant. There are no cash settlement alternatives. The grant does not have performance conditions but is subject to the employees remaining in employment.
The fair value of the share options is estimated at the grant date using a Black-Scholes model, considering the terms and conditions upon which the options were awarded. The inputs to the model for these new options are shown below:
Option grant date 22 June 22 June
2018 2018
Number of share options awarded 961,000 1,171,000
Share price on date of grant (pence) 207.5 207.5
Exercise price (pence) 205.5 205.5
Vesting period (years) 2 3
Expected life of share options (years) 10 10
Expected volatility (%) 37.49% 37.49%
Risk-free interest rate (%) 1.26% 1.26%
Expected dividend yield (%) 1.3% 1.3%
---------------------------------------- -------- ----------
10. Dividends
The Directors do not propose a dividend to be paid for the six months to 30 June 2018 (30 June 2017: nil). The final dividend of 2.75p per share for the year ended 31 December 2017 was approved at the Annual General Meeting on 5 June 2018 and was paid on 25 July 2018.
11. Property, plant and equipment and intangible assets
Property, Intangible
plant and assets
equipment
$'000 $'000
---------------------------------- ----------- -----------
Net book value at 1 January 2018 20,051 52,280
Additions 1,602 1,325
Acquisitions 250 6,265
Disposals (7) -
Depreciation and amortisation (1,196) (774)
Exchange movements (345) (1,138)
----------------------------------- ----------- -----------
Net book value at 30 June 2018 20,355 57,958
----------------------------------- ----------- -----------
Property, Intangible
plant and assets
equipment
$'000 $'000
------------------------------------ ----------- -----------
Net book value at 1 January 2017 12,215 47,618
Additions 8,507 1,573
Disposals (9) -
Depreciation and amortisation (1,845) (1,441)
Exchange movements 1,183 4,530
------------------------------------- ----------- -----------
Net book value at 31 December 2017 20,051 52,280
------------------------------------- ----------- -----------
12. Assets held for resale
Two aircraft that were held for sale at 31 December 2016 with a book value of $5.7 million were sold in the first half of 2017. As at 31 December 2017, there was only one aircraft classified as held for sale.
An agreement to sell the remaining aircraft for $1.5 million was reached on 29 June 2018, with a deposit in advance of $0.15 million paid on the same date. On 12 July 2018 the sale was completed, and the remaining funds were received from the purchaser. As the sale was completed after the period end the asset is shown as held for sale at the balance sheet date. The deposit paid by the purchaser is shown as a customer deposit in the balance sheet at 30 June 2018.
Assets held
for resale
$'000
---------------------------------- ------------
Net book value at 1 January 2018 1,500
Disposals -
Net book value at 30 June 2018 1,500
----------------------------------- ------------
Assets held
for resale
$'000
------------------------------------ ------------
Net book value at 1 January 2017 7,200
Disposals (5,700)
Net book value at 31 December 2017 1,500
------------------------------------- ------------
13. Legal claims
The Company reached an agreement with the Dryden Parties (Dustin Dryden and associated entities) to settle the legal proceedings between the parties. Under the terms of the agreement, which was in full and final settlement of the court proceedings between the parties, the Dryden Parties undertook to withdraw their various damages claims against the Company, and to transfer value to the Company by a cash payment and transfer of certain assets; and the Company undertook to withdraw its debt recovery claims against the Dryden Parties.
14. Share placement
On 2 March 2018, 19,591,837 new ordinary shares of one pence each in Gama Aviation plc were admitted for trading on AIM. The Company raised gross proceeds of GBP48 million pursuant to the Placing. Hutchison Whampoa (China) Limited ("Hutchison") subscribed for shares in the placing and held 21.17% of the issued share capital at 30 June 2018.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR SEUSILFASEIU
(END) Dow Jones Newswires
September 24, 2018 02:08 ET (06:08 GMT)
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