Annual Report
2011
ANNUAL REPORT 2011
Our Fleet
(AS AT OCTOBER 2011)
Model
Details
Date of acquisition
Airbus A321-200
MSN 1921
30 June 2008
Lessee
Thomas Cook (OY-VKB)
Operational area
Europe, Scandinavia
Airbus A321-200
MSN 1881
30 June 2008
Thomas Cook (OY-VKA)
Europe, Scandinavia
Model
Details
Date of acquisition
Airbus A320-200
MSN 429
2 April 2010
Airbus A320-200
MSN 052
25 March 2008
Lessee
Skywest Airlines (VH-FNP)
US Airways Inc (N620AW)
Operational area
Australia
North America
Model
Details
Date of acquisition
Fokker 100
MSN 11461
25 September 2007
Fokker 100
MSN 11391
31 July 2008
Lessee
Skywest Airlines (VH-FNT)
Skywest Airlines (VH-FSW)
Operational area
Western Australia
Western Australia
2
Fokker 100
MSN 11373
31 July 2007
Fokker 100
MSN 11334
Fokker 100
MSN 11326
28 February 2008
28 September 2007
Skywest Airlines (VH-FNU)
Skywest Airlines (VH-FNC)
Skywest Airlines (VH-FNN)
Western Australia,
Northern Territory, Bali
Western Australia, Charter
Operations
Western Australia
Fokker 100
MSN 11489
15 November 2006
Fokker 100
MSN 11484
11 April 2007
Fokker 100
MSN 11488
15 November 2006
Skywest Airlines (VH-FNJ)
Skywest Airlines (VH-FNY)
Skywest Airlines (VH-FNR)
Western Australia,
Northern Territory, Bali
Western Australia,
Northern Territory, Bali
Western Australia,
Northern Territory, Bali
ATR 72-500
MSN 954
11 August 2011
ATR 72-500
MSN 955
18 August 2011
ATR 72-500
MSN 974
13 October 2011
Virgin Australia (VH-FVH)
Victoria, New South Wales,
Queensland
Virgin Australia (VH-FVI)
Virgin Australia (VH-FVL)
Victoria, New South Wales,
Queensland
Victoria, New South Wales,
Queensland
MSN denotes Manufacturer’s
Serial Number
3
ANNUAL REPORT 2011
Contents
Chairman’s Statement
Company Overview
Board of Directors
Report of the Directors
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
PAGE
5
6
7
8
10
13
14
Financial Statements
Consolidated Income Statement
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Cash Flow Statement
Company Cash Flow Statement
Notes to the Consolidated Financial Statements
Top 20 Shareholders
PAGE
15
16
17
18
19
20
21
22
23
56
4
Chairman’s Statement
Your Board overwhelmingly recognises the importance
of rewarding shareholders and is recommending to
shareholders a fi nal dividend payment of 1 pence per
share and the Company hopes to maintain a progressive
dividend policy going forward. The record date for this fi nal
dividend will be announced in the meeting materials for the
upcoming annual general meeting.
The Company is registered in England and Wales,
however, the group is operationally headquartered
in Singapore. Therefore during 2011 the Company
successfully made an application to migrate its tax resident
to Singapore. With eff ect from 1 April 2011 the Company
became a Singaporean Corporate Taxpayer. The current
corporation tax rate in Singapore is 17%.
The Company and its subsidiaries have secured the bulk
of its debt funding at a cost of around 6% per annum.
Whilst the Company believes that it can obtain access
to further funds for the purchase of aircraft, access to
funding nevertheless remains a risk, this risk is common
to all businesses that are capital intensive, such as your
business. Specifi c aviation based industry risks are also
present and include the creditworthiness of client airlines.
My colleagues and I are committed to continue to work
tirelessly to build your Company into a respected,
profi table, diversifi ed and cash generative aircraft
leasing business. The Board would like to thank you –
the shareholders and all other stakeholders - for your
continued support and goodwill and look forward to the
future with confi dence in the successful development of
Avation PLC.
Robert Jeff ries Chatfi eld,
Chairman
Singapore
28 October 2011
On behalf of your Board of
Directors, I present to you the
audited fi nancial statements for
Avation PLC and its subsidiaries
for the year ended 30th June
2011 and inform you of the
progress that the Avation Group
has made.
The highlights are:
• Record net after tax profi ts, increased by 120% to:
GBP 3,627,293;
• Record earnings per share increased by 87% to 11.95
pence; and
• Dividends increased by 66% to: 1.00 pence per share.
Your Board is pleased to report that in respect of the year
ending 30th June 2011 the consolidated net profi t after tax
was GBP 3,627,293 on revenues of GBP 16,291,428 with
earnings per share of 11.95 pence.
The operating businesses had a good year with the signing
of a major strategic growth initiative with Virgin Australia in
respect to the delivery of between 8 and 18 new Aircraft.
Operationally there were excellent cash fl ows being
recorded across the Group. The business has continued
to grow and we have increased the net profi t after tax for
the Group by 120%. As of June 30th, the net assets of
the Group have increased from GBP 36,031,926 to GBP
49,460,598 by 37%. The Board of Directors believe that
they have demonstrated that the Group has a sustainable
business model which demonstrates consistent
performance.
The Group has entered into 10-year loan facility
agreements for up to US$152.2m, principally under a
mandate to Credit Agricole Corporate and Investment
Bank. The loan facilities can be drawn down progressively
by an aircraft by aircraft basis for the purpose of
purchasing eight new ATR72 Aircraft for operation in
Australia. The aircraft are being leased by the Company
to Australian carrier Skywest Airlines, who in turn operate
the aircraft on behalf of Virgin Australia, under the Virgin
Australia brand, pursuant to 10 year wet-leases.
As at the balance sheet date of June 30th 2011, Avation
Plc had not delivered any of the ATR72 aircraft to be
operated for Virgin Australia. Therefore the fi nancial
performance presented in these results does not include
any revenues from these aircraft. All deliveries and
revenues commence after the balance date. The fi rst
Virgin Australia aircraft was delivered on the 11th of
August 2011, the second on the 18th of August 2011 and
the third on the 13th of October 2011. It is anticipated that
the 4th aircraft will be delivered during November 2011 and
four deliveries are planned to occur during mid 2012.
5
ANNUAL REPORT 2011
Company Overview
Group Structure
AVATION PLC
UK Co. No. 5872328
REGISTERED OFFICE:
Georgian House, 63 Coleman Street, London EC2R 5BB
DATE OF INCORPORATION: England & Wales, 11 July 2006, admitted on LSE, UK on 6 October 2010
100%
51.18%
99.96%
100%
F100 PTY LTD
CAPITAL LEASE
AVIATION PLC
AVATION.NET INC
MSN 429 LIMITED
REGISTERED OFFICE:
REGISTERED OFFICE:
REGISTERED OFFICE:
REGISTERED OFFICE:
“Barringtons House”
283 Rokeby Road
Subiaco WA 6008
Georgian House
63 Coleman Street
London EC2R 5BB
Corporation Trust Center
1209 Orange Street
Wimington USA
Georgian House
63 Coleman Street
London EC2R 5BB
DATE OF INCORPORATION:
DATE OF INCORPORATION:
DATE OF INCORPORATION:
DATE OF INCORPORATION:
Australia, 15 November 2006
England & Wales, 6 June 2007
Delaware, USA, 18 January 2000
England & Wales, 24 March 2010
100%
100%
100%
CAPITAL LEASE
MALTA LIMITED
CAPITAL LEASE AUSTRALIAN
PORTFOLIO ONE PTY LTD
AVATION.NET INC
SINGAPORE BRANCH
REGISTERED OFFICE:
REGISTERED OFFICE:
REGISTERED OFFICE:
Suite 2, Towers Business Centre
“Barringtons House”
Tower Street
Swatar, Birkirkara BK 4013
Malta
283 Rokeby Road
Subiace WA 6008
510 Thomson Road
#12-04 SLF Building
Singapore 298135
DATE OF INCORPORATION:
DATE OF INCORPORATION:
DATE OF INCORPORATION:
Victoria, Australia, 11 September 2007
Singapore, 2 October 2007
Malta, 20 June 2008
6
Board of Directors
Jeff Chatfi eld
Chairman
Mr Chatfi eld is the
Chairman of Avation
PLC and has been
instrumental in
establishing and growing
the Company. He is also
the Group Executive
Andrew Baudinette
Non-Executive Director
Mr Baudinette has been a
director of the Company
since incorporation on
11 July 2006. He is an
Australian citizen and a
resident of the Republic
of Singapore. A skilled
Chairman of Skywest Airlines Ltd and Chairman of
Skywest Airlines (Australia) Pty Ltd. Mr Chatfi eld
has managed and been a director of a number of
companies involved in the airline industry, data
distribution, electronics, investment, broadcasting
and manufacturing sectors. He has worked in a
number of successful start-up companies and
is the author and registered holder of a variety
of patents. He has a Bachelor of Engineering
and a Master of Engineering Science from the
University of Western Australia. He is a member
of the Australian Institute of Company Directors
and the Singapore Institute of Directors.
He was born in Perth, Australia and is a
Permanent Resident of Singapore.
marketer and manager, he has a 25 year history in
media, having held management positions in the
Australian radio and newspaper industries.
Prior to this, he was a broadcaster and radio
programmer in regional Australian radio. He was
appointed as CEO of the Company’s subsidiary
Avation.net Inc in 2003 and became its Managing
Director in 2005.
As well as having signifi cant management level
experience in all facets of commercial media and
emerging technology, Mr Baudinette has had
practical exposure to corporate re-structuring.
He has been involved with and driven start-up
businesses in the advertising, travel, technology
and entertainment industries.
Bryant McLarty
Non-Executive Director
Appointed as a Director
of the Company in 2007,
Mr McLarty has extensive
experience in corporate
strategy and management
with a practical
working knowledge
of securities and equity markets. He currently
is Executive Chairman of the Australian
pharmaceutical company PharmAust Limited
and has been the Managing Director of
several ASX listed companies and is currently
a director of a number of listed and unlisted
companies. He is also a member of the
Australian Institute of Company Directors.
7
ANNUAL REPORT 2011
Report of the Directors
The directors have pleasure in presenting their report and
fi nancial statements for the fi nancial year ended 30 June
2011.
The full business review can be found in the Chairman’s
statement on page 5. The Group has not sought to review
environmental matters nor social and community issues.
Principal activities and business review
Results and dividends
The principal activities of the group are the holding of
investments, involved in the owning and leasing of aircraft.
The Company also owns and leases aircraft in its own
right.
The principal risks and uncertainties aff ecting the Group’s
turnover are described in note 6.
The consolidated statement of comprehensive income
for the period is set out on page 16. The directors have
proposed to pay a 1p (2010: 0.6p) fi nal dividend.
Directors and their interests
The directors who served the Company during the period
together with their interests (including family interests) in
the shares of the Company and other group companies
at the beginning (or subsequent date of appointment) and
end of the period, were as follows:
The Company
Direct interest
Deemed interest
Robert Jeff ries Chatfi eld
Andrew Baudinette
Bryant James McLarty
30 June 2011 1 July 2010 30 June 2011 1 July 2010
1
1
1
1
6,863,210
4,400,000
620,000
620,000
50,000
57,300
7,300
-
8
Report of the Directors (cont’d)
Signifi cant Shareholdings
Creditors Payment Policy
Ordinary
Shares of
£0.01 each Percentage
Fitel Nominees Limited
6,553,210
17%
Fitel Nominees Limited
2,700,000
Fitel Nominees Limited
2,314,156
Apollo Nominees Ltd
1,913,000
Credit Suisse Securities
(Europe) Limited
1,583,244
Equal Opportunities Policy
7%
6%
5%
4%
It is the group’s policy to employ individuals with the
necessary qualifi cations without regard to sex, marital
status, race, creed, colour, nationality or religion. Full and
fair consideration is given to applications for employment
made by disabled persons having regard to their particular
aptitudes and abilities.
The group recognises the great importance of the
contribution made by all employees and aims to keep
them informed of matters aff ecting them as employees
and developments within the group. Communication and
consultation is achieved by a variety of means both within
individual companies or branches and on a group-wide
basis.
Directors’ Insurance
The group maintains insurance policies on behalf of all the
directors against liability arising from negligence, breach of
duty and breach of trust in relation to the group.
Combined code
The group’s current policy concerning the payment of trade
creditors is to:
- settle the terms of payment with suppliers when
agreeing the terms of each transaction;
- ensure that suppliers are made aware of the terms of
payment by inclusion of the relevant terms in contracts;
and
- pay in accordance with the group’s contractual and
other legal obligations.
On average, trade creditors at the year end represented 60
days’ purchases.
Statement as to disclosure of information to auditors
(a) so far as the directors are aware, there is no relevant
audit information of which the Company’s auditors are
unaware, and
(b) they have taken all the steps that they ought to have
taken as directors in order to make themselves aware
of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
Auditors
Kingston Smith LLP have indicated their willingness to
continue in off ice and in accordance with s489 of the
Companies Act 2006, a resolution proposing that they be
reappointed as auditors of the Company will be put to the
Annual General Meeting.
On behalf of the board
Robert Jeff ries Chatfi eld
Director
The company has no requirement to comply with the
Combined Code.
28 October 2011
9
ANNUAL REPORT 2010
Directors Remuneration Report
Introduction
Share options and warrants
The Group has an ownership-based compensation
scheme for directors and senior management of the
Group.
Each share warrant converts into one ordinary share of
Avation PLC on exercise. No amounts are paid or are
payable by the recipient on receipt of the warrant. The
warrants carry neither rights to dividends nor voting rights.
Warrants may be exercised at any time from the date of
vesting to the date of their expiry.
Warrants are granted to the directors and senior
management of the Group to gain:
•
•
•
Improvement in share price
Improvement in net profi t
Improvement in return to shareholders
This report has been prepared in accordance with Part
15 Chapter 6 of the Companies Act 2006. As required
a resolution to approve the Directors’ remuneration will
be proposed at the forthcoming Annual General Meeting
of the Company at which the fi nancial statements will
be approved. The vote will have advisory status, will
be in respect of the remuneration policy and overall
remuneration packages and will not be specifi c to the
individual levels of remuneration.
Remuneration policy
The Group aims to ensure that the executive remuneration
arrangements are in line with the Group’s overall practice
on pay and benefi ts and having regards to the size and
nature of the business, are competitive and designed to
attract, retain motivate directors of high calibre. Each
director is employed by the Company under a written
contract of employment.
Remuneration (audited)
Individual Director’s remuneration was as follows
Year ended
30 June 2011
£
Year ended
30 June 2011
£
Percentage
Executive
Robert Jeff ries Chatfi eld
185,680
131,725
Non-executive
Andrew Baudinette
109,073
82,022
Bryant James McLarty
12,500
10,831
307,253
224,578
10
Directors Remuneration Report (cont’d)
The following share warrants issued to directors existed at the year end:
Director’s name
Date
granted
Warrant
price
Balance at
beginning
of year
Granted
during
the year
Exercised/
expired during
the year
Balance at
end of year
Robert Jeff ries Chatfi eld *
30 Oct 2006
4 p
2,889,490
Robert Jeff ries Chatfi eld *
21 Dec 2009
Robert Jeff ries Chatfi eld *
2 Dec 2010
Andrew Baudinette **
21 Dec 2009
Andrew Baudinette **
2 Dec 2010
Bryant James McLarty
21 Dec 2009
Bryant James McLarty
2 Dec 2010
35.5 p
67.5 p
35.5 p
67.5 p
35.5 p
67.5 p
200,000
-
-
(2,889,490)
-
(23,720)
176,280
-
200,000
-
200,000
75,000
-
(75,000)
-
75,000
50,000
-
-
50,000
-
-
-
-
75,000
50,000
50,000
* Robert Jeff ries Chatfi eld was granted the share warrants via Epsom Assets Limited.
** Andrew Baudinette was granted the share warrants via Giant Mix Investments Limited.
On 26 October 2010, Robert Jeff ries Chatfi eld via Epsom Assets Limited exercised 2,313,210 warrants at the exercise
price of 4p and 35.5p, the market price on that day of exercise was 65p. On 11 April 2011, Andrew Baudinette via
Giant Mix Investments Limited exercised 75,000 warrants at the exercise price of 35.5p, the market value on that day of
exercise was £1.17.
11
ANNUAL REPORT 2011
Directors Remuneration Report
Company’s performance
The graph below shows the total shareholder return on a holding of shares in the company as against the average total
shareholder return of the companies comprising the FTSE 100 Index over the last fi ve years. The FTSE 100 Index was
selected because in the opinion of the Board it is the most appropriate for the company for the purposes of a benchmark.
24/04/08
21/10/08
19/04/09
16/10/09
14/04/10
11/10/10
09/04/11
06/10/11
Avation
FTSE 100
3500
3000
2500
2000
1500
1000
500
0
01/11/06
30/04/07
27/10/07
On behalf of the board
Robert Jeff ries Chatfi eld
Director
28 October 2011
12
Directors’ Responsibilities
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Directors’
Report and the fi nancial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare fi nancial
statements for each fi nancial year.
Under Company Law the Directors must not approve the
fi nancial statements unless they are satisfi ed that they give
a true and fair view of the state of aff airs of the Company
and of the Group and the fi nancial performance and
cash fl ows of the Group for that year. In preparing these
fi nancial statements, the Directors are required to:
•
select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
•
•
•
state whether in preparation of the Company and the
Group fi nancial statements, the Company and
the Group has complied with IFRS as adopted by the
European Union as applied in accordance with the
provisions of the Companies Act 2006, subject to any
material departures disclosed and explained in the
Group fi nancial statements;
the Directors are required under the Standard Rules
of the London Stock Exchange to prepare Group
fi nancial statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted
by the European Union (“EU”) and have elected
to prepare the Company fi nancial statements
in accordance with IFRS as adopted by the EU
as applied in accordance with the provisions of
Companies Act 2006.
•
prepare the accounts on the going concern basis
unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are suff icient to show and explain
the Company and the Group’s transactions and disclose
with reasonable accuracy at any time the fi nancial position
of the Company and the Group and enable them to ensure
that the fi nancial statements comply with the Companies
Act 2006. They are also responsible for safeguarding
the assets of the Company and the Group and hence for
taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and fi nancial information included
on the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
the fi nancial statements may diff er from legislation in other
jurisdictions.
13
ANNUAL REPORT 2011
Report of the Auditors
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AVATION PLC
We have audited the fi nancial statements of Avation
PLC for the year ended 30 June 2011 which comprise
the Consolidated Statement of Comprehensive Income,
the Company Statement of Comprehensive Income, the
Consolidated Balance Sheet, the Company Balance
Sheet, the Consolidated Statement of Changes in Equity,
the Company Statement of Changes in Equity, the
Consolidated Statement of Cash Flows, the Company
Statement of Cash Flows and the related notes. The
fi nancial reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and as regards the Parent Company fi nancial
statements, as applied in accordance with the provisions of
the Companies Act 2006.
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
for no purpose other than to draw to the attention of the
Company’s members those matters which we are required
to include in an auditors’ report addressed to them. To
the fullest extent permitted by law, we do not accept or
assume responsibility to any party other than the Company
and Company’s members as a body, for our work, for this
report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 10 the directors are responsible
for the preparation of the fi nancial statements and for
being satisfi ed that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
fi nancial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the fi nancial statements
An audit involves obtaining evidence about the amounts
and disclosures in the fi nancial statements suff icient to
give reasonable assurance that the fi nancial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s
circumstances and have been consistently applied and
adequately disclosed; the reasonableness of signifi cant
accounting estimates made by the directors; and the
overall presentation of the fi nancial statements. In addition,
we read all the fi nancial and non-fi nancial information in
the fi nancial statements to identify material inconsistencies
with the audited fi nancial statements. If we became aware
of any apparent material misstatements or inconsistencies
we consider the implications in our report.
Opinion on the fi nancial statements
In our opinion the group fi nancial statements:
•
•
•
•
the fi nancial statements give a true and fair view of the
state of the Group’s and of the parent company’s aff airs
as at 30 June 2011 and of the Group’s profi t for the year
then ended;
the Group’s fi nancial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company fi nancial statements have been
prepared properly in accordance with IFRS as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006, and
the fi nancial statements have been prepared in
accordance with the requirements of the Companies Act
2006 and, as regards the Group fi nancial statements,
Article 4 of the IAS Regulation.
Opinion on other matter prescribed by the Companies
Act 2006
In our opinion:
•
•
the part of the Directors Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006; and
the information given in the Directors’ Report for the
fi nancial year for which the fi nancial statements are
prepared is consistent with the fi nancial statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company fi nancial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specifi ed
•
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Matthew Meadows (Senior Statutory Auditor)
for and on behalf of Kingston Smith LLP, Statutory Auditor
Devonshire House
60 Goswell Road
London
EC1M 7AD
28 October 2011
14
Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
REGISTERED NUMBER: 5872328 (ENGLAND & WALES)
15
ANNUAL REPORT 2011
Consolidated Statement of Comprehensive Income
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
Continuing operations
Revenue
Cost of sales
Gross profi t
Other income
Other operating expenses
Expenses
- Administrative expenses
- Finance expenses
Profi t before taxation
Taxation
Note
2011
£
2010
£
8
16,291,428
17,552,513
(739,278)
(983,879)
15,552,150
16,568,634
297,792
5,948
(6,207,042)
(8,864,955)
(1,255,756)
(841,892)
(2,755,498)
(3,319,635)
5,631,646
3,548,100
(574,920)
(729,517)
9
10
11
13
14
Profi t from continuing operations for the year
5,056,726
2,818,583
Other comprehensive income
Gain on dilution of interest in subsidiary
Currency translation diff erences arising on consolidation
Revaluation gains on property, plant and equipment, gross of tax
Deferred tax on revaluation gains on property, plant and equipment
Other comprehensive income for the year, (net of tax)
Total comprehensive income for the year
Profi t attributable to:
Equity holders of the parent
Non-controlling interest
Total comprehensive income attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share
15
- Basic – continuing and total operations
- Fully Diluted – continuing and total operations
COMPANY STATEMENT OF COMPREHENSIVE INCOME
Profi t for the year
Other comprehensive income:
Revaluation gains on property, plant and equipment, gross of tax
Deferred tax on revaluation gains on property, plant and equipment
Other comprehensive income for the year, (net of tax)
–
1,733
(1,809,245)
4,076,569
1,341,951
(482,322)
(949,616)
–
–
4,078,302
4,107,110
6,896,885
3,627,293
1,429,433
5,056,726
3,128,808
978,302
4,107,110
1,653,027
1,165,556
2,818,583
4,069,879
2,827,006
6,896,885
11.95 pence
6.39 pence
11.84 pence
6.30 pence
2011
£
2010
£
1,288,382
262,668
26,696
(4,538)
22,158
–
–
–
Total comprehensive income for the year
1,310,540
262,668
16
Consolidated Balance Sheet
AS AT 30 JUNE 2011
ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets:
Property, plant and equipment
Goodwill
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables
Provision for taxation
Loans and borrowings
Short-term provisions
Total current liabilities
Non-current liabilities:
Trade and other payables
Loans and borrowings
Deferred tax liabilities
Total non-current liabilities
Equity attributable to shareholders:
Share capital
Share premium
Assets revaluation reserve
Capital redemption reserve
Warrant reserve
Foreign currency translation reserve
Retained earnings
Non-controlling interest
Total liabilities and equity
Note
2011
£
2010
£
16
17
19
20
21
22
23
21
22
24
5,626,771
7,542,395
1,946
13,171,112
1,227,881
1,195,859
707
2,424,447
84,896,190
92,520,577
1,324,541
1,324,541
86,220,731
93,845,118
99,391,843
96,269,565
3,331,862
3,818,692
38,748
18,368
9,865,455
9,602,462
2,849,839
2,047,185
16,085,904
15,486,707
942,009
1,379,641
28,091,394
39,123,267
4,811,938
4,248,024
33,845,341
44,750,932
25
386,072
10,543,750
7,436,517
7,000
74,381
262,190
1,249,258
6,760,372
7,000
-
2,388,729
3,563,359
14,890,326
11,434,226
35,726,775
23,276,405
13,733,823
12,755,521
49,460,598
36,031,926
99,391,843
96,269,565
Approved by the board and authorised for issue on 28 October 2011.
Robert Jeff ries Chatfi eld
Director
17
Note
2011
£
2010
£
16
18
19
21
22
22
24
3,310,383
5,961,754
9,272,137
1,440,336
5,654,618
7,094,954
214,497
348,492
562,989
1,440,287
4,952,825
6,393,112
16,367,091
6,956,101
719,896
642,679
–
1,252,377
1,972,273
1,738,069
138,340
1,876,409
72
1,163,482
1,806,233
3,070,295
193,266
3,263,561
25
386,072
262,190
10,543,750
1,249,258
22,158
7,000
74,381
–
7,000
–
1,485,048
12,518,409
367,859
1,886,307
16,367,091
6,956,101
ANNUAL REPORT 2011
Company Balance Sheet
AS AT 30 JUNE 2011
ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets:
Investment in subsidiaries
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables
Provision for taxation
Loans and borrowings
Total current liabilities
Non-current liabilities:
Loan and borrowings
Deferred tax liabilities
Total non-current liabilities
Capital and reserves:
Share capital
Share premium
Assets revaluation reserve
Capital redemption reserve
Warrant reserve
Retained earnings
Net equity
Total liabilities and equity
Approved by the board and authorised for issue on 28 October 2011.
Robert Jeff ries Chatfi eld
Director
18
Consolidated Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
Assets
Capital
currency
Share
Non-
Share
Share
Revaluation Redemption Warrant Translation Option
Retained
Controlling
Total
Capital Premium
Reserve
Reserve Reserve Reserve Reserve Earnings
Total
Interest
Equity
£
£
£
£
£
£
£
£
£
£
£
Foreign
Group
Balance at
1 July 2010
Profi t for the year
Other
comprehensive
income
Total
comprehensive
income
Dividend related
to 2010 paid
Increase in
issued share
capital
Share issue
expenses
Warrant
expenses
Balance at
30 June 2011
Balance at
1 July 2009
Profi t for the year
Other
comprehensive
income
Total
comprehensive
income
Transfer between
reserve
Dividend related
to 2009 paid
Increase in
issued share
capital
Balance at
30 June 2010
262,190
1,249,258
6,760,372
7,000
–
–
–
–
–
–
–
676,145
–
–
676,145
–
–
–
–
–
–
–
–
–
–
–
–
–
–
74,381
123,882 10,002,743
–
(708,251)
–
–
–
–
3,563,359
– 11,434,226 23,276,405 12,755,521 36,031,926
–
–
3,627,293
3,627,293
1,429,433
5,056,726
–
(1,174,630)
–
–
(498,485)
(451,131)
(949,616)
–
(1,174,630)
–
3,627,293
3,128,808
978,302
4,107,110
–
–
–
–
–
(171,193)
(171,193)
–
(171,193)
–
–
–
– 10,126,625
– 10,126,625
–
(708,251)
–
(708,251)
–
74,381
–
74,381
386,072 10,543,750
7,436,517
7,000
74,381
2,388,729
– 14,890,326 35,726,775 13,733,823 49,460,598
255,555
1,216,336
6,760,372
7,000
–
–
–
–
–
–
–
–
–
–
6,635
32,922
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,148,240
12,788
9,897,773 19,298,064
9,928,515 29,226,579
-
–
1,653,027
1,653,027
1,165,556
2,818,583
–
2,415,119
–
1,733
2,416,852
1,661,450
4,078,302
–
2,415,119
–
1,654,760
4,069,879
2,827,006
6,896,885
–
–
–
– (12,788)
12,788
–
–
–
–
–
–
(131,095)
(131,095)
–
(131,095)
–
–
39,557
–
39,557
262,190
1,249,258
6,760,372
7,000
–
3,563,359
– 11,434,226 23,276,405 12,755,521 36,031,926
During the prior fi nancial year, the Company diluted the interest in its subsidiary, Capital Lease Aviation PLC from 51.22%
to 51.18% shareholding through the issue of 663,500 new ordinary shares of £0.001 each at £0.24 per ordinary share.
The 2011 dividend paid during the year was for 0.6p (2010: 0.6p) per share.
19
ANNUAL REPORT 2011
Company Statement of Changes in Equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
Asset
Capital
Share
Share
Revaluation Redemption Warrant
Retained
Capital
Premium
Reserve
Reserve
Reserve
Earnings
Total
£
£
£
£
£
£
£
Company
Balance at 1 July 2010
262,190
1,249,258
Profi t for the year
Other comprehensive
income
Total comprehensive
income
Dividend relating
to 2010 paid
Increase of issued
share capital
–
–
–
–
–
–
–
–
123,882
10,002,743
Share issue expenses
–
(708,251)
Warrant expenses
–
–
Balance at
–
–
22,158
22,158
–
–
–
–
7,000
–
–
–
–
–
–
–
–
–
–
–
367,859
1,886,307
1,288,382
1,288,382
–
22,158
1,288,382
1,310,540
–
(171,193)
(171,193)
–
–
– 10,126,625
–
(708,251)
74,381
–
74,381
30 June 2011
386,072
10,543,750
22,158
7,000
74,381
1,485,048 12,518,409
Balance at
1 July 2009
Profi t for the year
Other comprehensive
income
Total comprehensive
income
Dividend relating to
2009 paid
Increase of issued
share capital
Balance at
30 June 2010
255,555
1,216,336
–
–
–
–
–
–
–
–
6,635
32,922
262,190
1,249,258
–
–
–
–
–
–
–
7,000
–
–
–
–
–
7,000
–
–
–
–
236,286
1,715,177
262,668
262,668
–
–
262,668
262,668
–
(131,095)
(131,095)
–
–
–
39,557
367,859
1,886,307
The 2011 dividend paid during the year was for 0.6p (2010: 0.6p) per share.
20
Consolidated Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
Cash fl ows from operating activities:
Profi t before taxation
Adjustments for:
Depreciation expense
Claim on maintenance reserve
Warrant expense
Interest expense
Interest income
Operating profi t before working capital changes
Movement in working capital:
Trade and other receivables
Inventories
Trade and other payables
Short-term provisions
Cash from operations
Interest paid
Interest received
Corporation tax paid
Net cash from operating activities
Cash fl ows from investing activities:
Purchase of property, plant and equipment
Loan to related parties
Net cash used in investing activities
Cash fl ows from fi nancing activities:
Net proceeds from issuance of ordinary shares
Net proceeds from issuance of subsidiary’s shares to minority
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Capital element of fi nance lease repayments
Net cash from (used in) fi nancing activities
Eff ects of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of fi nancial year
Cash and cash equivalents at end of fi nancial year
2011
£
2010
£
5,631,646
3,548,100
4,964,453
1,242,589
74,381
2,680,231
(3,607)
14,589,693
(5,157,029)
(1,239)
(972,482)
(311,597)
8,147,346
(2,809,256)
3,607
(440,543)
4,901,154
(19,233)
(1,579,860)
(1,599,093)
9,418,374
–
(171,193)
1,257,800
(8,192,846)
(1,355,278)
956,857
139,972
4,398,890
1,227,881
5,626,771
4,704,804
4,102,127
–
3,156,229
(5,948)
15,505,312
379,919
(214)
796,367
(3,143,497)
13,537,887
(3,156,229)
5,948
(204,574)
10,183,032
(1,237)
–
(1,237)
39,557
22,972
(131,095)
–
(4,283,186)
(781,036)
(5,132,788)
(4,860,447)
188,560
1,039,321
1,227,881
Cash and cash equivalents in the consolidated cash fl ow statement are not restricted in use and are denominated in the
following currencies:
Pounds Sterling
United States Dollars
Australian Dollars
Euro
Singapore Dollars
Interest earning balances
2011
£
2,878,890
2,686,475
11,089
1,198
49,119
5,626,771
5,577,652
2010
£
120,956
1,011,459
49,119
441
45,906
1,227,881
1,181,975
The rate of interest for the cash on interest earning accounts is at 1.0% to 4.5% (2010:1.0% to 4.5%) per annum. These
approximate the weighted eff ective interest rate.
21
ANNUAL REPORT 2011
Company Statement of Cash Flows
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
Cash fl ows from operating activities:
Profi t before taxation
Adjustments for:
Depreciation
Warrant expense
Interest expense
Operating profi t before working capital changes
Movement in working capital:
Trade and other receivables
Trade and other payables
Cash (used in) from operations
Interest paid
Corporation tax paid
Net cash from operating activities
Cash fl ows from investing activities:
Loan to related parties
Investment in subsidiaries
Net cash used in investing activities
Cash fl ows used in fi nancing activities:
Net proceeds from issuance of ordinary shares
Dividends paid
Capital element of fi nance lease repayments
Net cash used in fi nancing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of fi nancial year
Cash and cash equivalents at end of fi nancial year
2011
£
2010
£
1,228,848
474,695
226,093
74,381
154,744
1,684,066
(4,645,598)
29,195
61,989
-
88,413
625,097
8,034
588,714
(2,932,337)
1,221,845
(283,769)
-
(88,413)
(94,474)
(3,216,106)
1,038,958
(1,579,860)
(49)
(1,579,909)
9,418,374
(171,193)
(1,355,280)
7,891,901
3,095,886
214,497
3,310,383
-
(1)
(1)
39,557
(131,095)
(781,036)
(872,574)
166,383
48,114
214,497
Cash and cash equivalents in the cash fl ow statement are not restricted in use and are denominated in the following
currencies:
Pounds Sterling
United States dollars
2011
£
2,824,927
485,456
3,310,383
2010
£
60,390
154,107
214,497
The rate of interest for the cash on interest earning accounts is at 1.0% (2010:1.0%) per annum. These approximate the
weighted eff ective interest rate.
22
Notes to Financial Statements
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011
1 GENERAL
Avation PLC is a public limited company incorporated in England and Wales under the Companies Act 2006
(Registration Number 05872328) and is listed as a Standard Listing on the London Stock Exchange. The address of
the registered off ice is given on page 1.
As disclosed in the Report of the Directors, the principal activities of the Company and its subsidiaries are the holding
of investments involved in owning and leasing of aircraft. The Company also owns and leases aircraft in its own right.
2 STATEMENT OF COMPLIANCE
These fi nancial statements have been prepared in accordance with International Financial Reporting Standards,
International Accounting Standards and their interpretations issued or adopted by the International Accounting
Standards Board as adopted by use in the European Union (“IFRS”).
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PREPARATION – The fi nancial statements have been prepared in accordance with IFRS including
standards and interpretations issued by the International Accounting Standards Board (“IASB”), and have been
prepared in accordance with the historical cost convention, as modifi ed by the revaluation of aircraft.
The fi nancial statements are presented in Pounds Sterling, rounded to the nearest Pound.
The preparation of fi nancial statements in conformity with IFRS requires the use of estimates and assumptions
that aff ect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the fi nancial statements and the reported amounts of revenues and expenses during the fi nancial period.
Although these estimates are based on management’s best knowledge of current events and actions, actual
results may ultimately diff er from those estimates.
The accounting policies set out below have been applied consistently throughout the fi nancial period presented
in these fi nancial statements and the accounting policies have been applied consistently by the Company and its
subsidiaries.
b) BASIS OF CONSOLIDATION - The consolidated fi nancial statements comprise the fi nancial statements of Avation
PLC and its subsidiaries as at 30 June 2011.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control,
and continue to be consolidated until the date that such control ceases.
The fi nancial statements of the subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group
transactions are eliminated in full.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a defi cit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary, it:
•
•
•
•
•
•
•
Derecognises the assets (including goodwill) and liabilities of the subsidiary
Derecognises the carrying amount of any non-controlling interest
Derecognises the cumulative translation diff erences, recorded in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or defi cit in profi t or loss
Reclassifi es the parent’s share of components previously recognised in other comprehensive income to profi t
or loss.
23
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
c) BUSINESS COMBINATIONS
Business combinations from 1 July 2009
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any
non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling
interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifi able net assets.
Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the fi nancial assets and liabilities assumed for appropriate
classifi cation and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by
the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date through profi t or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or
liability, will be recognised in accordance with IAS 39 either in profi t or loss or as a change to other comprehensive
income. If the contingent consideration is classifi ed as equity, it is not remeasured until it is fi nally settled within
equity.
Business combinations prior to 1 July 2009
In comparison to the above-mentioned requirements, the following diff erences applied:
Business combinations were accounted for using the purchase method. Transaction costs directly attributable
to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority
interest) was measured at the proportionate share of the acquiree’s identifi able net assets.
Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share
of interest did not aff ect previously recognised goodwill.
When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree
were not reassessed on acquisition unless the business combination resulted in a change in the terms of the
contract that signifi cantly modifi ed the cash fl ows that otherwise would have been required under the contract.
Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outfl ow
was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent
consideration were recognised as part of goodwill.
d) INTEREST IN JOINT VENTURE – A Joint venture is a contractual arrangement whereby the group and other
parties undertake an economic activity that is subject to joint control (ie when the strategic fi nancial and operating
policy decision relating to the activities of the joint venture require the unanimous consent of the parties sharing
control).
When a group undertakes its activities under joint venture arrangements directly, the group’s share of jointly
controlled assets and any liabilities incurred jointly with other ventures are recognised in the fi nancial statements
of the relevant entity and classifi ed according to their nature. Liabilities and expenses incurred directly in respect
of interests in jointly controlled assets are accounted for on an accruals basis. Income from the sale or use of the
group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised
when it is probable that the economic benefi ts associated with the transactions will fl ow to/from the group and
their amount can be measured reliably.
e) GOODWILL - Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition
over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities of
the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is
subsequently measured at cost less any accumulated impairment losses.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the
24
24
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities
and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the
acquiree’s identifi able assets, liabilities and contingent liabilities exceeds the cost of the business combination, the
excess is recognised immediately in the profi t or loss.
The interest of signifi cant minority shareholders in the acquiree is initially measured at the non-controlling
interest’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected
to benefi t from the synergies of the combination. Cash-generating units to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss
is allocated fi rst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of
the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for
goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profi t or loss
on disposal.
f) INVENTORIES – Inventories of consumable spare parts are stated at the lower of cost or market value
determined on a portfolio basis.
g) PROPERTY, PLANT AND EQUIPMENT – Aircraft held for use in the supply or rental service, are stated in the
balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any accumulated
depreciation and accumulated impairment losses. Revaluations are performed with suff icient regularity such
that the carrying amount does not diff er materially from that which would be determined using fair values at the
balance sheet date.
Any revaluation increase arising on the revaluation of such aircraft is credited to the assets revaluation reserve,
except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profi t or
loss, in which case the increase is credited to profi t or loss to the extent of the decrease previously charged. A
decrease in carrying amount arising on the revaluation of such aircraft is charged to profi t or loss to the extent
that it exceeds the balance, if any, held in the assets revaluation reserve relating to a previous revaluation of that
asset.
Depreciation on revalued aircraft is charged to profi t or loss. On the subsequent sale or retirement of a revalued
aircraft, the attributable revaluation surplus remaining in the asset revaluation reserve is transferred directly to
retained earnings.
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment
losses.
Depreciation is charged so as to write off the cost or valuation of assets less residual values, over their estimated
useful lives, using the straight-line method, on the following bases:
Aircraft
Furniture and equipment
-
-
30 years
3 years
Fully depreciated assets still in use are retained in the fi nancial statements.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as
the diff erence between the sales proceeds and the carrying amount of the asset and is recognised in profi t or loss.
During the fi nancial year, the following accounting estimates in relation to items of property, plant and equipment
have been reviewed and adjusted at the last reporting date with eff ect from 1 July 2010:
Useful life has been changed from 25 years to 30 years
The residual value has been changed from directors estimates to estimates based on information from
independent valuers.
The impact of these changes on the current year was to increase the depreciation expense by £276,831.
25
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
h) IMPAIRMENT OF ASSETS - At each balance sheet date, the Group reviews the carrying amounts of its tangible
assets to determine whether there is any indication that those assets have suff ered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset,
the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the
recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Impairment losses
are recognised as an expense immediately.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised
as income immediately.
i) PROVISIONS - Provisions are recognised when the Group has a present obligation as a result of a past event,
and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’
best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to
present value where the eff ect is material. In respect of maintenance rent, a corresponding provision is made in
accordance with the expected maintenance costs that will be drawn in accordance with the lease conditions and
lease term.
j) SHARE-BASED PAYMENTS – The cost of share based payment arrangement whereby employees receive
remuneration in the form of warrants, is recognised as an employee benefi t expense in the profi t or loss. The total
expense to be apportioned over the vesting period of the benefi t is determined by reference to the fair value at
date of grant. The assumption underlying the number of warrants expected to vest are subsequently adjusted for
the eff ects of non market-based vesting conditions prevailing at the balance sheet date. Fair value is measured
by the use of the Binomial option pricing model and is based on a reasonable expectation of the extent to which
performance criteria will be met.
k) LEASES – The Group leases aircraft to airlines under operating leases. Leases of aircraft where the Group
retains substantially all risks and rewards incidental to ownership are classifi ed as operating leases. Rental
income from operating leases (net of any incentives given to the lessees) is recognised in the profi t or loss on a
straight-line basis over the lease term.
The Group leases aircraft for use in the business. Where the Group bears substantially all the risk and rewards of
ownership of the item, the lease is classifi ed as a fi nance lease and the item is capitalised within the appropriate
class of property, plant and equipment at the lower of the fair value of the leased item and the minimum lease
payments. Each lease payment is allocated between the liability and fi nance charges so as to obtain a constant
rate on the fi nance balance outstanding. The outstanding capital element of the lease payments are included
within current and long-term payables as appropriate; the interest element of the lease payments is charged to
profi t or loss over the period of the lease so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
l) REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received or receivable
and represents amounts receivable for goods and services provided in the normal course of business, net of
discounts and sales related taxes.
(i) Aircraft rental income is recognised in the profi t or loss on a straight line basis over the terms of the lease.
Lease incentives granted are recognised as an integral part of the total rental income.
(ii) Interest income is accrued on a time basis, by reference to the principal outstanding and at the eff ective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the fi nancial asset to that asset’s net carrying amount.
(iii) Sales of goods are recognised when goods are delivered and title has passed.
26
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
(iv) Dividend income from investments is recognised when the shareholders’ right to receive payment have been
established.
(v) Licence fees received are recognised over the life of the licence agreement. Ongoing royalties/commissions
pursuant to the licence agreement are recognised as earned.
m) BORROWING COSTS - Borrowing costs directly attributable to the acquisition of property, plant and equipment
are added to the cost of the assets and amortised over the life of the assets.
The loan facility fees added to the cost of the assets are amortised between 5 years to 25 years, which is the life
of the assets.
All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.
During the fi nancial year, the Company revised the fi nance lease interest rate from 8% to 5% based on current
economic conditions. This resulted in the capitalisation of an additional borrowing cost of £240,973 and a
reduction in the interest expensed to the profi t or loss by £88,638.
n) TAXATION - Taxation expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profi t for the fi nancial period. Taxable profi t diff ers from profi t as
reported in profi t or loss because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on diff erences between the carrying amounts of assets and liabilities in the fi nancial
statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
diff erences and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be
available against which deductible temporary diff erences can be utilised. Such assets and liabilities are not
recognised if the temporary diff erence arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that aff ects neither the taxable profi t nor the accounting
profi t.
Deferred tax liabilities are recognised for taxable temporary diff erences arising on investments in subsidiaries,
except where the Group is able to control the reversal of the temporary diff erence and it is probable that the
temporary diff erence will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that suff icient taxable profi ts will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset realised. Deferred tax is charged or credited to profi t or loss, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are off set when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
With eff ect from 1 April 2011 the Company migrated its business to become Singapore resident for tax purposes.
o) FOREIGN CURRENCIES - The Group’s consolidated fi nancial statements and Company fi nancial statements are
presented in Pound Sterling, which is the presentational currency. Sterling has been retained as the presentational
currency of the Company as it was UK resident for tax purposes for part of the year. The Company will consider
its presentational currency for the coming year. The individual fi nancial statements of each Group entity are
presented in the currency of the primary economic environment in which the entity operates (its functional
currency) and United States Dollars is the functional currency of the each of the Group entity, including the parent
company.
27
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
In preparing the fi nancial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at
the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange diff erences arising on the settlement of monetary items, and on the retranslation of monetary items,
are included in the profi t or loss for the period. Exchange diff erences arising on the retranslation of non-monetary
items carried at fair value are included in the profi t or loss for the period except for diff erences arising on the
retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For
such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting consolidated fi nancial statements, the assets and liabilities of the Group’s foreign
operations are expressed in Pound Sterling using exchange rates prevailing on the balance sheet date. Income
and expense items are translated at the average exchange rates for the period, unless exchange rates fl uctuated
signifi cantly during that period, in which case the exchange rates at the dates of the transactions are used.
Exchange diff erences arising, if any, are classifi ed as equity and transferred to the Group’s translation reserve.
Such translation diff erences are recognised in profi t or loss in the period in which the foreign operation is disposed
of.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the closing rate.
(p) FINANCIAL INSTRUMENTS - Financial assets and fi nancial liabilities are recognised on the Group’s balance
sheet when the Group becomes a party to the contractual provisions of the instrument.
(i) Trade and other receivables – Trade and other receivables are measured at initial recognition at fair value,
and are subsequently measured at amortised cost using the eff ective interest rate method. Appropriate
allowances for estimated irrecoverable amounts are recognised in profi t or loss when there is objective
evidence that the asset is impaired. The allowance recognised is measured as the diff erence between the
asset’s carrying amount and the present value of estimated future cash fl ows discounted at the eff ective
interest rate computed at initial recognition.
(ii) Cash and cash equivalents - Cash and cash equivalents comprise cash on hand and call deposits which are
subject to an insignifi cant risk of changes in value.
(iii) Financial liabilities and equity - Financial liabilities and equity instruments issued by the Group are classifi ed
according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial
liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities. The accounting policies adopted for specifi c fi nancial
liabilities and equity instruments are set out below.
(iv) Borrowings - Interest-bearing loans from banks and fi nancial institutions are initially measured at fair
value, and are subsequently measured at amortised cost, using the eff ective interest rate method. Any
diff erence between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is
recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing
costs (see above).
(v) Trade and other payables - Trade payables are stated at their original invoiced value, as the interest that
would be recognised from discounting future cash payments over the short payment period is not considered
to be material.
(vi) Trade receivables - Trade receivables are stated at their original value, as the interest that would be
recognised from discounting future cash receipts over the short credit period is not considered to be material.
Trade receivables are reduced by appropriate allowances for estimated irrecoverable amounts. Interest on
overdue trade receivables is recognised as it accrues.
(vii) Equity instruments - Equity instruments issued by the Company are recorded at the proceeds received, net of
direct issue costs.
28
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and assumptions concerning the future are made in the preparation of the fi nancial statements. They
aff ect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses
and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The key assumptions concerning the future estimation uncertainty at the balance sheet date, that have a signifi cant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are
discussed below.
(i) Impairment of property, plant and equipment – aircraft
The Group periodically evaluates its aircraft for impairment. Factors that would indicate potential impairment
would include, but not be limited to, signifi cant decreases in the market value of aircraft, a signifi cant change in
an aircraft’s physical condition or cash-fl ow associated with the use of the aircraft. The Group continues to record
positive cash fl ows from its aircraft. The Group has not identifi ed any impairment related to its existing aircraft
fl eet during the fi nancial year.
(ii) Revaluation of property, plant and equipment – aircraft
The Group regularly revalues its aircraft using valuations prepared by independent specialist valuers. During the
fi nancial year, the Group revalued its aircraft using independent valuers valuations. During the fi nancial year, the
Group revalued all its aircraft and the revaluation gains were transferred to the asset revaluation reserve.
(iii) Maintenance reserve claim
The Group provides for maintenance reserve claims for certain aircraft. Management has relied on industry
experience and information from aircraft manufacturers and airlines to estimate the provision for the maintenance
reserve claims. These estimates can be subject to revisions depending on a number of factors such as the timing
of the planned maintenance, the utilisation of the aircraft, changes to the manufacturer’s maintenance program
or a change in the estimated costs. Management evaluates its estimates and assumptions and, when warranted,
adjusts these assumptions which may impact the maintenance reserve claim expense in the profi t or loss.
(iv) Income taxes
Signifi cant judgment is required in determining the capital allowances and deductibility of certain expenses during
the estimation of the provision for income taxes. There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for
anticipated tax issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of
these matters is diff erent from the amounts that were initially recorded, such diff erences will impact the income tax
and deferred income tax provisions in the period in which the determination is made.
5 NEW STANDARDS AND INTERPRETATIONS NOT APPLIED
IASB and IFRIC have issued the following standards and interpretations with an eff ective date after the date of these
fi nancial statements:
The Group intends to apply these standards and interpretations when they become eff ective.
Eff ective Date
International Accounting Standards (IAS/IFRS)
IAS 24 – Revised defi nition of related parties
1 January 2011
IFRS 9 – Financial Instruments: Classifi cation and Measurement 1 January 2013
IAS 1 – Presentation of Financial Statements (Amendments)
IAS 19 – Employee Benefi ts (Amendments)
IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements
IFRS 12 – Disclosure of Interest with Other Entities
IFRS 13 – Fair Value Measurement
Improvements to IFRS (issued in May 2010)
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
The Group, however, expects no impact from the adoption of the amendments on its fi nancial position or
performance.
29
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
6 FINANCIAL RISK MANAGEMENT
The main risks arising from the Group’s fi nancial assets and liabilities are airline industry risks, credit risk, interest rate
risk, foreign exchange risk and liquidity risks.
i) Airline Industry Risks
The Group faces risks specifi c to the aviation sector, war, terrorism, equipment failure and risks specifi c to the
aviation business. These exposures are managed through the equipment of the airlines that lease the Group’s
assets to maintain insurance, adequate maintenance policies and/or contribute to a maintenance reserve for the
major maintenance on each aircraft.
ii) Credit risk
Credit risk refers to the risk that debtors will default on their obligations to repay the amounts owing to the Group,
resulting in a loss to the Group.
The Group has no signifi cant concentrations of credit risk. The Group has adopted relevant credit policy in
extending credit terms to customers and in monitoring its credit terms.
The credit policy spelt out clearly the guidelines on extending credit terms to customers, including monitoring
the process. This includes assessing customers’ credit standing and periodic review of their fi nancial status to
determine the credit limits to be granted. The Company performs ongoing credit evaluation of its customers’
fi nancial condition and generally, requires no collateral from its customers.
The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as at the
end of the fi nancial period in relation to each class of fi nancial assets is the carrying amount of those assets as
stated in the balance sheet.
The Group currently has exposure to three airline customers across three continents with regards to its aircraft
leasing business and diversifi cation will continue as the Company grows its asset base.
The maximum exposure to credit risk for trade receivables at the reporting date by geographical area is:
Australia
United Kingdom
Others
Group
2011
£
2010
£
1,137,182
723,582
74,916
18,167
–
2,103
1,230,265
725,685
1) Financial assets that are neither past due nor impaired
Bank deposits that are neither past due or impaired are mainly deposits with banks with high credit–ratings
assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are
substantially companies with a good collection track record with the Group.
The Group’s trade receivable not past due include receivables amounting to £1,129,826 (2010: £560,150).
2) Financial assets that are past due and/or impaired
There is no class of fi nancial assets that are past due and /or impaired except for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
Past due < 3 months
Past due 3 to 6 months
Past due over 6 months
30
Group
2011
£
49,216
51,223
2010
£
163,415
2,120
–
–
100,439
165,535
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
iii) Interest rate risk
The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and
assets.
The Group further seeks to reduce this risk by fi xing interest rates on loans to match the term of the underlying
lease term of the asset.
The interest rate and terms of repayment of fi nancial assets and fi nancial liabilities are disclosed in the respective
notes to the fi nancial statements.
iv) Foreign currency risk
Foreign currency risk occurs as a result of the Group’s transactions that are not denominated in its functional
currencies. The Group’s foreign currency exposures arose mainly from the exchange rate movements of the
Pound Sterling and United States dollar. These exposures are managed primarily by using natural hedges that
arise from off setting assets and liabilities that are denominated in foreign currencies.
The Group does not utilise forward foreign currency contracts to hedge its exposure to specifi c currency risks.
The Group’s currency exposure based on the information provided to key management is as follows:
Group
2011
Pounds
Sterling
£
United
States
dollars
£
Australian
Dollars
Euro
Singapore
Dollars
£
£
£
Total
£
Cash and cash equivalents
2,878,890
2,686,475
11,089
1,198
49,119
5,626,771
Trade and other receivables
6,841
7,124,170
402,672
Loans and borrowings
–
(37,956,849)
–
42
–
8,670
7,542,395
–
(37,956,849)
Other fi nancial liabilities
(76,503)
(4,027,341)
(18,308)
(5,815)
(145,904)
(4,273,871)
Currency exposure
2,809,228
(32,173,545)
395,453
(4,575)
(88,115)
(29,061,554)
2010
Cash and cash equivalents
120,956
1,011,459
49,119
Trade and other receivables
44,122
921,865
218,952
Loans and borrowings
–
(48,725,729)
–
441
299
–
45,906
10,621
1,227,881
1,195,859
–
(48,725,729)
Other fi nancial liabilities
(68,591)
(5,013,463)
(6,302)
(5,022)
(104,955)
(5,198,333)
Currency exposure
96,487
(51,805,868)
261,769
(4,282)
(48,428)
(51,500,322)
Company
2011
Pounds
Sterling
£
United
States
dollars
£
Australian
Dollars
Singapore
Dollars
£
£
Total
£
Cash and cash equivalents
2,824,927
485,456
Trade and other receivables
6,786
5,947,153
-
(2,990,446)
–
–
–
–
3,310,383
7,815
5,961,754
–
(2,990,446)
Loans and borrowings
Other fi nancial liabilities
Currency exposure
Cash and cash equivalents
Trade and other receivables
Loans and borrowings
Other fi nancial liabilities
Currency exposure
(51,180)
(604,003)
2,780,533
2,838,160
(4,385)
(4,385)
(60,326)
(52,511)
(719,896)
5,561,795
60,390
49,638
154,107
298,664
-
(4,233,777)
(34,778)
(576,046)
75,250
(4,357,052)
–
–
–
–
–
–
190
214,497
348,492
–
(4,233,777)
(31,855)
(642,679)
(31,665)
(4,313,467)
31
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
If the foreign currencies changes against the Pound Sterling by 10% (2010: 10%) with all other variables including
tax rate being held constant, the eff ects arising from the net fi nancial liability/asset position will be as follows:
Group
USD against £
- strengthen
- weakened
AUD against £
- strengthen
- weakened
Euro against £
- strengthen
- weakened
SGD against £
- strengthen
- weakened
Company
USD against £
- strengthen
- weakened
AUD against £
- strengthen
- weakened
SGD against £
- strengthen
- weakened
v) Liquidity risk
Increase/(Decrease)
Increase/(Decrease)
2011
Profi t after tax
2011
Equity
2010
Profi t after tax
2010
Equity
£
(3,217,355)
3,217,355
39,545
(39,545)
(458)
458
(8,812)
8,812
£
–
–
–
–
–
–
–
–
£
(5,180,587)
5,180,587
26,177
(26,177)
(428)
428
(4,843)
4,843
£
–
–
–
–
–
–
–
–
Increase/(Decrease)
Increase/(Decrease)
2011
Profi t after tax
2011
Equity
2010
Profi t after tax
2010
Equity
£
283,816
(283,816)
(439)
439
(5,251)
5,251
£
–
–
–
–
–
–
£
(435,705)
435,705
–
–
(3,167)
3,167
£
–
–
–
–
–
–
In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents
deemed adequate by management to fi nance the Group’s operations and mitigate the eff ects of fl uctuations in
cash fl ows. Short-term funding is obtained from bank loan facilities.
32
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
The table below analyses the maturity profi le of the fi nancial liabilities of the Group and the Company based on
contractual undiscounted cash fl ows.
Group
2011
Trade and other payables
Loans and borrowings
2010
Trade and other payables
Loans and borrowings
Company
2011
Trade and other payables
Loans and borrowings
2010
Trade and other payables
Loans and borrowings
vi) Capital risk
Less than 1
year
Between 1 and
2 years
Between 2 and
5 years
Over 5 years
£
£
£
3,331,862
2,437
939,572
11,953,758
12,017,462
19,182,962
15,285,620
12,019,899
20,122,534
3,818,692
2,274
1,377,367
12,488,015
16,514,404
28,165,653
16,306,707
16,516,678
29,543,020
£
-
-
-
–
–
–
Less than 1
year
Between 1 and
2 years
Between 2 and
5 years
Over 5 years
719,896
1,373,458
2,093,354
642,679
1,460,137
2,102,816
-
1,779,253
1,779,253
-
3,351,680
3,351,680
–
–
–
–
–
–
–
–
–
–
–
–
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve
an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders,
issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
Management monitors capital based on a gearing ratio. The gearing ratio is calculated as net debt divided by
total capital. Net debt is calculated as borrowings plus trade and other payables less cash and cash equivalents.
Net debt
Total equity
Total capital
Gearing ratio
Group
Company
2011
£
2010
£
2011
£
2010
£
36,603,949
52,696,181
399,959
49,460,598
36,031,926
12,518,409
86,064,547
88,728,107
12,918,368
4,661,959
1,886,307
6,548,266
42%
59%
3%
71%
The Group and the Company are in compliance with all externally imposed capital requirements for the fi nancial
years ended 30 June 2011 and 30 June 2010.
vii) Fair value of fi nancial assets and fi nancial liabilities
The fair values of fi nancial assets and fi nancial liabilities reported in the balance sheet approximate the carrying
amount of those assets and liabilities.
33
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
7 RELATED PARTY TRANSACTIONS
Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to
be related if one party has the ability to control the other party or exercise signifi cant infl uence over the other party in
making fi nancial and operating decisions.
Some of the Company and Group’s transactions and arrangements are with related parties and the eff ect
of these on the basis determined between the parties is refl ected in these fi nancial statements. The balances are
unsecured, interest-free and without fi xed repayment terms.
(a) Compensation of directors and key management personnel
The remuneration of directors and key management’s remuneration includes fees, salary, bonus, commission
and other emoluments (including benefi ts-in-kind) based on the cost incurred by the Company and the Group, and
where the Company or Group did not incur any costs, the value of the benefi ts. The key management’s remuneration
is as follows:
Group
Company
2011
£
2010
£
2011
£
2010
£
Key management of the Group
- Directors’ fee paid to directors of the Company
92,500
34,831
92,500
34,831
- Directors’ fee paid to directors of subsidiaries
- Superannuation paid for a director of subsidiaries
- Salary paid to a director of the Company
313,942
304,127
21,949
94,073
20,780
70,022
–
–
–
–
–
–
The amount above includes remuneration in respect of the highest paid director as follows:
Aggregate emoluments
Group
2011
£
2010
£
185,680
131,725
No contributions were made on behalf of any directors to money purchase pension schemes.
34
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
(b) Signifi cant related party transactions:
Sales of goods to a related party 1
Service rendered to a related party 2
Maintenance rent received from a related party 5
Rental income received from a related party 5
Service fee income from a related party 5
Expenses rebilled to a related party 5
Interest income received from a related party 7
Service fee paid to Loeb Aron & Company Ltd 3
Guarantee and commitment fee paid to a related party 4
Expenses rebilled from a related party 6
Arrangement fee paid to a related party 8
Interest expense paid to a related party 8
Interest expense paid to a related party 9
Interest expense paid to a related party 4
Interest expense paid to a related party 10
Group
Company
2011
£
659,547
109,352
2010
£
303,137
661,103
1,274,280
3,320,157
6,996,229
5,975,334
2011
£
2010
£
–
–
–
–
19,586
29,873
433
8,501
75,267
32,124
15,723
33,017
13,757
15,597
–
–
–
19,586
–
–
5,000
8,501
163,406
–
–
–
–
–
–
16,947
–
–
–
–
–
–
498
Purchase of aircraft from a related party 11
660,217
–
660,217
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 - Sales of goods to Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a director of Skywest Airlines
(Australia) Pty Ltd.
2 - Services rendered to Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a director of Skywest
Airlines (Australia) Pty Ltd.
3 - Paid to Loeb Aron & Company Ltd in which a director of a subsidiary is a director of Loeb Aron & Company Ltd.
4 - Paid to CaptiveVision Capital Ltd in which a director of the Company is a director of CaptiveVision Capital Ltd.
5 - Received from Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a director of Skywest Airlines
(Australia) Pty Ltd.
6 - Paid to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a director of Skywest Airlines
(Singapore) Pte Ltd.
7 - Received from Giant Mix Investments Ltd in which a director of the Company is a director of Giant Mix Investments Ltd.
8 - Paid to Lovelie Investment & Asset Holding Pte Ltd in which a director of the Company is also a director of Lovelie Investment
& Asset Holding Pte Ltd.
9 - Paid to Fleet Solution Consulting Pte Ltd in which a director of a subsidiary is also a director of Fleet Solution Consulting Pte
Ltd.
10 - Interest expense paid to Australian Historical Investments Pty Ltd in which a director of the Company is also a director of
Australian Historical Investments Pty Ltd.
11 - Purchase of an aircraft from Skywest Airlines (S) Pte Ltd in which a director of the Company is also a director of Skywest
Airlines (Singapore) Pte Ltd. During the year, Avation PLC made a loan of US$2.55m to Skywest Airlines (Singapore) Pte
Ltd for the purposes of acquiring an aircraft. A 39.216% interest in the aircraft was subsequently sold by Skywest Airlines
(Singapore) Pte Ltd to Avation PLC for US$1M. The remaining loan was assigned by Skywest Airlines (Singapore) Pte Ltd to
CaptiveVision Capital Limited and Takeoff Services Pte Ltd in exchange for the remaining parts of the aircraft.
35
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
8 REVENUE
Rental income
Maintenance rent revenue
Management and service income
Sales of fi nished goods
9 OTHER INCOME
Interest income
Foreign currency exchange adjustment gain
Others
10 OTHER OPERATING EXPENSES
Group
2011
£
2010
£
14,052,487
13,082,643
1,274,280
3,320,157
128,940
835,721
483,343
666,370
16,291,428
17,552,513
Group
2011
£
3,608
293,565
619
297,792
2010
£
5,948
–
–
5,948
Group
2011
£
2010
£
Claim on maintenance reserve expense charged directly to profi t or loss
–
1,241,148
Claim on maintenance reserve expense
Depreciation of property, plant and equipment
Foreign currency exchange adjustment loss
11 FINANCE EXPENSES
Interest expense on secured borrowings
Guarantee and commitment fee
12 STAFF COSTS
1,242,589
2,860,979
4,964,453
4,704,804
–
58,024
6,207,042
8,864,955
Group
2011
£
2010
£
2,680,231
3,156,229
75,267
163,406
2,755,498
3,319,635
There were no staff costs during the fi nancial year ended 30 June 2010 and 30 June 2009 except for fees and
salaries paid to directors. See Note 7 for details.
Directors’ fees paid to directors of the Company
Directors’ fee paid to directors of the subsidiaries
Wages and salaries
Employer’s contribution to defi ned contribution plans including superannuation
Warrant expense
36
Group
2011
£
92,500
313,942
120,859
21,949
57,912
2010
£
34,831
304,127
70,022
20,780
-
607,162
429,760
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
13 PROFIT BEFORE TAXATION
Profi t before taxation for the year is stated after charging / (crediting) the following:
Claim on maintenance reserve expense charged directly to profi t or loss
-
1,241,148
Group
2011
£
2010
£
Claim on maintenance reserve expense
Depreciation of property, plant and equipment
Foreign currency exchange adjustment (gain)/loss
Auditors’ remuneration for audit services
Auditors’ remuneration for non-audit services
- Corporate taxation
14 TAXATION
Current tax expense
- United Kingdom (in relation to prior years)
- Overseas
Deferred tax expense – United Kingdom
Deferred tax expense – overseas
Other tax – overseas – current
Other tax – overseas – prior years
1,242,589
2,860,979
4,964,453
4,704,804
(293,565)
19,000
58,024
37,500
1,000
4,250
Group
2011
£
2010
£
23,494
194,862
(142,724)
478,564
20,724
-
18,761
19,722
308,870
324,560
19,779
37,825
574,920
729,517
The standard rate of current tax for the period based on the UK standard rate of corporation tax is 27.5% (2010:
28%). The current tax expense for the period is less than 27.5% (2010: 28%) for the reasons set out in the following
reconciliation:
Profi t before income tax
Tax calculated at tax rate of 27.5%
Eff ects of:
Non-taxable items
Capital allowances and other temporary diff erences
Diff erent tax rates of other countries
Adjustment to tax charge in respect of previous periods
Total income tax expense
Group
2011
£
2010
£
5,631,646
3,548,100
1,548,703
993,468
(411,527)
(1,018,857)
(411,016)
(553,908)
100,109
(72)
218,356
9,378
561
38,483
37
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
15 EARNINGS PER SHARE
a) Basic earnings per share (“EPS”)
EPS is calculated by dividing the net profi t attributable to members of the Company by the weighted average number of
ordinary shares in issue during the fi nancial year.
Group
2011
£
2010
£
Net profi t attributable to equity holders of the Company
3,627,293
1,653,027
Weighted average number of ordinary shares
Basic earnings per share
b) Diluted earnings per share
30,355,109
25,878,072
11.95 pence
6.39 pence
For the purpose of calculating diluted earnings per share, profi t attributable to equity holders of the Company and the
weighted average number of ordinary shares outstanding are adjusted for the eff ects of all dilutive potential ordinary
shares. The Company has one category of dilutive potential ordinary shares; warrants.
For warrants, the weighted average number of shares on issue has been adjusted as if all dilutive share options were
exercised. The number of shares that could have been issued upon the exercise of all dilutive share option less the
number of shares that could have been issued at fair value (determined as the Company’s average share price for
the fi nancial year) for the same total proceeds is added to the denominator as the number of shares issued for no
consideration. No adjustment is made to the net profi t.
Diluted earnings per share attributable to equity holders of the Company is calculated as follows:
Group
2011
£
2010
£
Net profi t attributable to equity holders of the Company
3,627,293
1,653,027
Weighted average number of ordinary shares
30,355,109
25,878,072
Adjustment for:
- Warrants
Weighted average number of ordinary shares
Diluted earnings per share
286,238
346,452
30,641,347
26,224,524
11.84 pence
6.30 pence
38
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
16 TRADE AND OTHER RECEIVABLES
Subsidiaries
Non-trade receivables – related parties
Trade receivables – related party
Trade receivables
Other receivables
Prepayments
Tax recoverable
Advances – related party
Accrued income – related party
Deposit for aircraft
Group
Company
2011
£
2010
£
–
–
988,380
1,134,033
96,232
23,463
30,454
440,795
10,782
178,271
8,327
716,988
8,697
23,237
27,780
218,952
5,099
186,779
2011
£
309,156
987,250
–
–
15,990
9,373
–
–
–
4,639,985
–
4,639,985
2010
£
322,854
8,225
–
–
7,250
10,163
–
–
–
–
7,542,395
1,195,859
5,961,754
348,492
In respect of the Company, the current amounts due from subsidiaries include the followings:
a) £279,520 (2010: £297,160) from F100 Pty Ltd. Management and service income of £175,000 (2010: £312,232)
and dividend income of £Nil (2010: £76,900) were received from F100 Pty Ltd.
b) £10,421 (2010: £25,504) from MSN 429 Limited. Management and service income of £Nil (2010: £24,000) and
rental income of £1,422,565 (2010: £372,654) were received from MSN 429 Limited.
c) £202 (2010: £190) from Capital Lease Australian Portfolio One Pty Ltd.
d) £18,053 (2010: £Nil) from Avation.net Inc. Management and service income of £22,475 (2010: £24,000)
e) £960 (2010: £Nil) from Avation Eastern Fleet Pte. Ltd
In respect of the Company, the current amounts due from related parties include the followings:
a) £19,586 (2010: £8,225) from Skywest Airlines (Australia) Pty Ltd in which a director of the Company is a director
of Skywest Airlines (Australia) Pty Ltd. Arrangement fee of £19,586 (2010:£Nil) were paid to Skywest Airlines
(Australia) Pty Ltd. Expense of £Nil (2010: 8,225) were paid by the Company on behalf of Skywest Airlines
(Australia) Pty Ltd.
b) £686,730 (2010: £Nil) from CaptiveVision Capital Ltd in which a director of the Company is a director of
CaptiveVision Capital Ltd.
c) £280,934 (2010: £Nil) from Takeoff Services Pte. Ltd. in which a director of the Company is a director of Takeoff
Services Pte. Ltd.
39
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
In respect of the group, the current amounts due from related parties include the followings:
a) Trade receivables of £1,134,033 (2010: £716,988) from Skywest Airlines (Australia) Pty Ltd, in which a director
of the Company is a director. Rental income of £6,996,229 (2010: £5,975,334), maintenance rent revenue of
£1,274,280 (2010: £3,320,157), sales of fi nished goods of £659,547 (2010: £303,137) and management and
service income of 109,352 (2010: 661,103) were received from Skywest Airlines (Australia) Pty Ltd
b) £19,586 (2010: £8,225) from Skywest Airlines (Australia) Pty Ltd in which a director of the Company is a director
of Skywest Airlines (Australia) Pty Ltd.
c) £686,838 (2010: £102) from CaptiveVision Capital Ltd in which a director of the Company is a director of
CaptiveVision Capital Ltd.
d) £280,934 (2010: £Nil) from Takeoff Services Pte. Ltd. in which a director of the Company is a director of Takeoff
Services Pte. Ltd.
e) £1,022 (2010: £Nil) from Skywest Airlines (S) Pte. Ltd. in which a director of the Company is a director of the
Skywest Airlines (S) Pte. Ltd.
f) £10,782 (2010: £Nil) due Giant Mix Investments Ltd in which a director of the Company is a director of Giant Mix
Investments Ltd. The advance is unsecured, at interest rate at 5% per annum and payable upon demand.
g) Accrued income of £178,271 (2010: £186,779) from Skywest Airlines (Australia) Pty Ltd in which a director of the
Company is a director.
The amounts due from subsidiaries and related parties are unsecured, interest-free and payable on demand unless
otherwise stated.
The average credit period generally granted to non-related trade receivables customers is 30 to 60 days. In respect to
leased aircraft, rent is due in advance in accordance with the leases.
The trade and other receivables are denominated in the following currencies:
Pounds Sterling
United States Dollars
Australian Dollars
Euro
Singapore Dollars
17 INVENTORIES
Group
Company
2011
£
6,841
7,124,170
402,672
42
8,670
2010
£
44,122
921,865
218,952
299
10,621
2011
£
6,786
5,947,153
–
–
7,815
2010
£
49,638
298,664
–
–
190
7,542,395
1,195,859
5,961,754
348,492
Group
Company
2011
£
2010
£
2011
£
2010
£
Finished goods, at cost
1,946
707
–
–
The cost of inventories recognised as an expense and included in the cost of sales amounts to £739,278 (2010:
£983,879).
40
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
18 INVESTMENT IN SUBSIDIARIES
Unquoted equity shares, at cost
Quoted equity shares, at cost
Quoted equity shares, at market value
Company
2011
£
2010
£
1,390,236
1,390,187
50,100
50,100
1,440,336
1,440,287
7,515,000
7,765,500
In the opinion of management, no impairment in the value of the investment in subsidiaries is necessary.
Details of the subsidiaries are as follows:
Name of Company
Principal
activities
Country of
Incorporation/
operations
Company’s cost
of investment
Group’s eff ective
equity interest
2011
2010
2011
2010
£
£
%
%
The subsidiaries held directly by the Company:
Avation.net Inc (a)
Procurement
United States of
America
1,390,181 1,390,181
99.96
Capital Lease Aviation PLC (b) Leasing of aircraft United Kingdom
50,100
50,100
51.18
99.96
51.18
F100 Pty Ltd (c)
MSN 429 Ltd (b)
Avation Eastern Fleet
Pte Ltd (e)
Leasing of aircraft Australia
Leasing of aircraft United Kingdom
Leasing of aircraft Singapore
The subsidiaries held by Capital Lease Aviation PLC :
Capital Lease Australian
Portfolio One Pty Ltd (c)
Leasing of aircraft Australia
Capital Lease Malta Ltd (d)
Leasing of aircraft Malta
The subsidiary held by Avation Eastern Fleet Pte Ltd :
Airframe Leasing Pte Ltd (f)
Leasing of aircraft Singapore
(a) Audited by Jasmine Chua and Associates, Singapore
(b) Audited by Kingston Smith LLP, London, UK
(c) Audited by Moore Stephens, Perth, Australia
(d) Audited by Nexia BT, Malta
(e) Audited by Ernst & Young LLP, Singapore
5
1
49
–
–
–
5 100.00
100.00
1 100.00
100.00
- 100.00
100.00
– 51.18
51.18
– 51.18
51.18
– 100.00
–
(f) Company was incorporated during the year, the company was dormant and therefore did not require an audit.
Signifi cant transactions with subsidiaries are as follows:
Company
Rental income
Management and service fee income
Dividend income
Service fee expense
2011
£
1,422,565
197,475
–
–
2010
£
372,654
360,232
76,900
66,820
41
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
19 PROPERTY, PLANT AND EQUIPMENT
Group
2011
Cost or valuation:
At beginning of year
Additions
Revaluation surplus
Currency realignment
At end of year
Representing:
Cost
Valuation
Accumulated depreciation:
At beginning of year
Depreciation for the year
Increase on revaluation
Currency realignment
At end of year
Net book value:
At beginning of year
At end of year
2010
Cost or valuation:
At beginning of year
Additions
Disposal/written off
Reclassifi cation
Currency realignment
At end of year
Representing:
Cost
Valuation
Accumulated depreciation:
At beginning of year
Depreciation for the year
Disposal/written off
Reclassifi cation
Currency realignment
At end of year
Net book value:
At beginning of year
At end of year
42
Furniture and
equipment
Aircraft
£
£
Total
£
995
6,652
–
(108)
7,539
7,539
–
7,539
995
1,295
–
(70)
2,220
–
5,319
101,640,622
101,641,617
913,768
1,112,985
(5,613,834)
98,053,541
–
98,053,541
98,053,541
9,120,044
4,963,158
(229,056)
(691,476)
920,420
1,112,985
(5,613,942)
98,061,080
7,539
98,053,541
98,061,080
9,121,039
4,964,453
(229,056)
(691,546)
13,162,670
13,164,890
92,520,577
84,890,871
92,520,577
84,896,190
Furniture and
equipment
£
Aircraft
£
Total
£
4,367
-
(3,620)
–
248
995
995
-
995
4,140
238
(3,620)
–
237
995
227
-
88,883,092
5,016,050
-
(2,301,383)
10,042,862
88,887,459
5,016,050
(3,620)
(2,301,383)
10,043,110
101,640,621
101,641,616
5,014,813
96,625,808
5,015,808
96,625,808
101,640,621
101,641,616
5,829,393
4,704,566
-
5,833,533
4,704,804
(3,620)
(2,301,383)
(2,301,383)
887,468
9,120,044
887,705
9,121,039
83,053,699
92,520,577
83,053,926
92,520,577
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Company
2010
Cost or valuation:
At beginning of year
Additions
At end of year
Representing:
Cost
Accumulated depreciation:
At beginning of year
Depreciation for the year
At end of year
Net book value:
At beginning of year
At end of year
Aircraft
£
Total
£
–
–
5,014,814
5,014,814
5,014,814
5,014,814
5,014,814
5,014,814
–
61,989
61,989
–
61,989
61,989
–
–
4,952,825
4,952,825
On 25 March 2008, the subsidiary, Capital Lease Aviation PLC acquired the right, title and interest in the aircraft held
on trust by Wilmington Trust Company (“Wilmington”), a US trust company. As the aircraft is registered in the US,
legal title to the aircraft is held by Wilmington and Capital Lease Aviation PLC is the benefi cial owner. The aircraft is
leased by Wilmington to a US airline.
The Group’s property, plant and equipment include borrowing costs from bank loans specifi cally used for purchase of
aircraft. During the fi nancial year, the borrowing costs capitalised as cost of property, plant and equipment amount to
£12,578 (2010: £Nil).
The carrying value of the Group and Company’s property, plant and equipment held under fi nance lease at 30 June
2011 was £4,994,400 (2010 : £4,952,825). The lease asset is pledged as security for the related fi nance lease.
Depreciation relating to property plant and equipment held under fi nance lease at 30 June 2011 was £226,093 (2010:
£61,989)
On 30 June 2011, the Group acquired a 39.216% interest in an aircraft with a cost of £660,217.
The Group’s aircraft were revalued in June 2011 by independent valuers, on the basis of lease encumbered value as
of 30 June 2011. The revaluation surplus net of applicable deferred income taxes was credited to an asset revaluation
reserve in shareholders equity.
At 30 June 2010 the Group reviewed its classifi cation of assets giving rise to reclassifi cation of £2,301,383 between
cost and accumulated depreciation. This reclassifi cation has had no impact on either the income statement or the
balance sheet.
If the aircraft were measured using the cost model, the carrying amounts would be as follows:
Cost
Accumulated depreciation
Net carrying value
Group
2011
£
2010
£
92,899,707
84,360,409
(11,904,413)
(8,080,345)
80,995,294
76,280,064
43
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
20 GOODWILL ON CONSOLIDATION
Group
2011
£
2010
£
Cost:
Balance at beginning and at end of year
1,324,541
1,324,541
Impairment test of goodwill
Goodwill is allocated to the cash generating unit (“CGU”) Avation.net Inc which is in the procurement business.
The recoverable amount of Avation.net Inc has been determined based on a value-in-use calculation using cash fl ow
projections from fi nancial budgets approved by management covering the next fi nancial year.
Management believes that no reasonably possible change in any of the above key assumptions would cause the
recoverable amount of the CGU to fall materially below its carrying amount as shown in the fi nancial statements.
21 TRADE AND OTHER PAYABLES
Current
Subsidiaries
Related parties
Director
Trade payables
Deferred income
Other payables
Accrued expenses
Non-current
Group
Company
2011
£
–
622,860
62
462,376
996,320
404,821
845,423
3,331,862
2010
£
–
390,818
–
1,826,774
1,059,199
2011
£
85,093
52,878
–
31,257
2010
£
448,979
25,290
–
9,112
114,089
127,067
–
404,821
–
541,901
3,818,692
31,760
32,231
719,897
642,679
Group
Company
2011
£
2010
£
2011
£
2010
£
Related parties
942,009
1,379,641
–
–
In respect of the Company, the current amounts due to subsidiaries include the followings:
a) £74,275 (2010: £54,266) due to F100 Pty Ltd.
b) £10,818 (2010: £730) due to Capital Lease Aviation PLC.
c) £Nil (2010: £15,674) due to Avation.net Inc.
d) £Nil (2010: £378,309) due to MSN 429 Limited.
e) Deferred income of £114,089 (2010: £127,067) from MSN 429 Limited.
In respect of the Company, the current amounts due to related parties include the followings:
a) 16,807 (2010: £7,853) due to Skywest Airlines Ltd in which a director of the Company is also a director.
b) £36,071 (2010: £17,437) due to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a
director.
44
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
In respect of the Group, the current amounts due to related parties include the followings:
a) £61,680 (2010: £65,753) due to Skywest Airlines Ltd in which a director of the Company is also a director.
b) £74,005 (2010: £38,385) due to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a
director.
c) £341,414 (2010: £NIL) due to Fleet Solution Consulting Pte Ltd in which a director of the subsidiary is also a
director and includes accrued interest on this loan amount to £13,656 (2010: NIL).
d) £140,830 (2010: £263,415) due to CaptiveVision Capital Ltd in which a director of the subsidiary is also a director
and includes accrued interest on this payable amount to £1,602 (2010: NIL).
e) £4,931 (2010: £23,265) due to Skywest Airlines (Australia) Pty Ltd in which a director of the subsidiary is also a
director.
The amount due to subsidiaries and related parties are unsecured, interest free and without fi xed repayment terms
unless otherwise stated.
The average credit period taken to settle non-related party trade payables is approximately 60 days.
The trade and other payables are denominated in the following currencies:
Pounds Sterling
United States dollars
Australian dollars
Euro
Singapore dollars
22 LOAN AND BORROWINGS
Secured borrowing I
Secured borrowing II
Secured borrowing III
Secured borrowings IV
Secured borrowings V
Secured borrowings VI
Secured borrowings VII
Secured borrowings VIII
Secured borrowings IX
Secured borrowings X
Group
Company
2011
£
2010
£
76,503
68,591
4,027,341
5,013,463
18,308
5,815
145,904
6,302
5,022
104,955
4,273,871
5,198,333
2011
£
51,179
604,003
4,385
–
60,329
719,896
2010
£
34,778
576,046
–
–
31,855
642,679
Group
Company
2011
£
2010
£
2011
£
2010
£
1,750,076
2,937,994
707,461
904,671
1,274,693
1,377,163
2,525,577
3,698,619
11,379,987
13,695,982
11,949,492
14,321,402
1,584,762
2,719,338
1,594,715
2,185,895
1,053,687
–
1,515,975
2,280,866
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Obligations under fi nance lease
2,990,446
4,233,777
2,990,446
4,233,777
Total
37,956,849
48,725,729
2,990,446
4,233,777
Less: current portion of loan borrowings
(9,865,455)
(9,602,462)
(1,252,377)
(1,163,482)
28,091,394
39,123,267
1,738,069
3,070,295
45
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Obligations under fi nance leases:
Future minimum payments due:
Within one year
After more than one year but within 5 years
Less: Finance charges
Present value of minimum lease payments
The present value of minimum lease payments is analysed as follows:
Within one year
After more than one year but within 5 years
Balance at end of year
Group & Company
2011
£
2010
£
1,373,266
1,787,175
3,160,441
(169,995)
2,990,446
1,460,137
3,352,277
4,812,414
(578,637)
4,233,777
1,252,377
1,738,069
2,990,446
1,163,482
3,070,295
4,233,777
Secured borrowing III is for a fi ve year period and maturing in 2013, repayable monthly. The loan is secured by fi xed
and fl oating charges over all aircraft purchased by its subsidiary, F100.
Secured borrowing IV is for a fi ve year period to January 2013, repayable monthly. The loan is secured by the aircraft
of the its subsidiary, Capital Lease Aviation PLC (“CLA”).
Secured borrowing V is for a seven year period to March 2015, repayable monthly. The loan is secured by the aircraft
of its subsidiary, Capital Lease Malta Ltd (“CLM”) and a charge over the shares in CLM.
Secured borrowing VI is for a seven year period to February 2015, repayable monthly. The loan is secured by the
aircraft of its subsidiary, CLM and a charge over the shares in CLM.
Secured borrowing VII is for a fi ve year period and maturing 2012 repayable monthly. The loan is secured by the
aircraft of its subsidiary, Capital Lease Australian Portfolio One Pty Ltd.
Secured borrowing VIII is for a fi ve year period and maturing 2013 repayable monthly. The loan is secured by the
aircraft of its subsidiary, Capital Lease Australian Portfolio One Pty Ltd.
Secured borrowing IX is for a three year period to December 2013 repayable monthly. The loan is secured by the
aircraft of its subsidiary, Capital Lease Australian Portfolio One Pty Ltd.
Secured borrowing X is for a four year period and maturing in 2013, repayable monthly. The loan is secured by fi xed
and fl oating charges over all aircraft purchased by its subsidiary, F100.
The Group had a facility with a related party, CaptiveVision Capital Ltd, in which the related party granted a lender of
the secured borrowings of the Group a charge over its assets for US$2,000,000 and this facility has expired during
the fi nancial year. CaptiveVision Capital Ltd charged the Group interest at 14% per annum based on the committed
asset amount of A$2,089,967 until November 2010 and interest charged at 14 % on the outstanding balance due to
CaptiveVision Capital Ltd.
The average interest rates for the outside party borrowings range from 5.00% to 6.50% per annum (2010: 6% to 11%
per annum).
All the loans are denominated in United States Dollars. The carrying amounts of the borrowings approximate their fair
values.
23 SHORT-TERM PROVISIONS
Maintenance reserve claim
46
Group
2011
£
2010
£
2,849,839
2,047,185
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Movement in provision for maintenance provisions claim is as follows:
Balance at beginning of fi nancial year
Provision made during the fi nancial year
Provision used during the fi nancial year
Currency realignment
Balance at end of fi nancial year
Group
2011
£
2010
£
2,047,185
1,242,589
1,088,555
2,860,979
(311,597)
(2,045,903)
(128,338)
143,554
2,849,839
2,047,185
A provision of £1,242,589 (2010: £2,860,979) was made during the year ended 30 June 2011. This provision is based
on maintaining a suff icient balance to match expected drawdowns of reserves over the lease period of the aircraft.
There were drawdowns totalling £311,597 (2010: £2,045,903) on the reserves for the year ended 30 June 2011.
24 DEFERRED TAX LIABILITIES
Recognised deferred tax assets and liabilities are attributable to the following:
Group
Property, plant and equipment
Other items
Tax losses carried forward
Tax assets
Set off tax
Net tax (assets)/ liabilities
Property, plant and equipment
Other items
Tax losses carried forward
Tax assets
Set off tax
Net tax (assets)/ liabilities
Assets
Liabilities
2011
£
2011
£
Net
2011
£
–
4,385,283
4,385,283
(641,782)
1,163,387
(94,950)
–
521,605
(94,950)
(736,732)
5,548,670
4,811,938
736,732
(736,732)
–
–
4,811,938
4,811,938
Assets
Liabilities
2010
£
2010
£
Net
2010
£
–
4,112,643
4,112,643
(614,415)
(190,856)
940,652
326,237
–
(190,856)
(805,271)
5,053,295
4,248,024
805,271
(805,271)
–
–
4,248,024
4,248,024
Movement in temporary diff erences during the fi nancial year:
Recognised
Group
Balance
in profi t
1 July 2010
and loss
Recognised in
equity
Currency
realignment
Balance
30 June 2011
£
£
£
£
£
Property, plant and equipment
4,379,440
(218,483)
482,322
(257,996)
4,385,283
Other items
Tax losses carried forward
59,441
(190,857)
469,124
85,199
–
–
(6,960)
10,708
521,605
(94,950)
4,248,024
335,840
482,322
(254,248)
4,811,938
47
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Movement in temporary diff erences during the last fi nancial year:
Recognised
Group
Balance
in profi t
1 July 2009
and loss
Recognised in
equity
Currency
realignment
Balance
30 June 2010
£
£
£
£
£
Property, plant and equipment
3,533,023
Other items
(324,025)
419,873
395,714
Tax losses carried forward
–
(182,157)
3,208,998
633,430
–
–
–
–
426544
(12,248)
(8,700)
405,596
4,379,440
59,441
(190,857)
4,248,024
Recognised deferred tax assets and liabilities are attributable to the following:
Company
Property, plant and equipment
Other items
Tax losses carried forward
Tax assets
Set off tax
Net tax (assets)/ liabilities
Property, plant and equipment
Other items
Tax losses carried forward
Tax assets
Set off tax
Net tax (assets)/ liabilities
Assets
2011
£
Liabilities
2011
£
Net
2011
£
Assets
2010
£
–
–
–
–
–
–
–
–
–
–
–
–
138,340
138,340
–
–
–
–
138,340
138,340
–
–
138,340
138,340
Liabilities
2010
£
Net
2010
£
193,266
193,266
–
–
–
–
193,266
193,266
–
–
193,266
193,266
Movement in temporary diff erences during the fi nancial year:
Company
Property, plant and equipment
Balance
1 July 2010
Recognised in
profi t and loss
Recognised in
equity
Balance
30 June 2011
£
193,266
£
(59,464)
£
4,538
£
138,340
Movement in temporary diff erences during the last fi nancial year:
Company
Balance
1 July 2009
Recognised in
profi t and loss
Recognised in
equity
Balance
30 June 2010
£
£
£
£
Property, plant and equipment
–
193,266
–
193,266
48
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
25 SHARE CAPITAL
Company
2011
£
2010
£
Allotted, called up and fully paid:
38,607,220 (2010: 26,219,010) ordinary shares of 1 penny each
386,072
262,190
a) On 26 October 2010, the Company issued 2,313,210 ordinary shares of 1 penny each following the exercise of
warrants by a warrant holder for £100,000.
b) On 30 March 2011, the Company issued 10,000,000 ordinary shares of 1 penny each following a private
placement exercise for £10,000,000.
c) On 11 April 2011, the Company issued 75,000 ordinary shares of 1 penny each following the exercise of warrants
by a warrant holder for £26,625.
26 SHARE-BASED PAYMENTS
a) Share options and warrants
The Group has an ownership-based compensation scheme for directors and senior management of the Group.
Each share warrant converts into one ordinary share of Avation PLC on exercise. No amounts are paid or are payable
by the recipient on receipt of the warrant. The warrants carry neither rights to dividends nor voting rights. Warrants
may be exercised at any time from the date of vesting to the date of their expiry.
Warrants are granted to the directors and senior management of the Group to gain:
•
•
•
Improvement in share price
Improvement in net profi t
Improvement in return to shareholders
The following share-based payment arrangements were in existence during the current reporting period:
Balance at Granted Exercised
Balance at
Fair value
Warrant series
beginning
during
during
Expired/
end of
Expiry
Exercise at grant
signed on
of year
the year
the year
Cancelled
year
date
price
date
(1) 30 Oct 2006
2,289,490 – (2,289,490)
(2) 21 Dec 2009
425,000
–
(98,720)
(3) 2 Dec 2010
–
425,000
–
–
–
–
– 29 Oct 2010
4.0 p
0.3 p
326,280
21 Dec 2011
35.5 p
3.88 p
425,000
2 Dec 2012
67.5p
13.63p
The weighted average fair value of the warrants granted during the fi nancial year is 13.63 pence (2010:3.88 pence).
The value of the warrants granted during the year is £57,912 (2010: £16,490).
The warrants were priced using the Binomial option pricing model. Where relevant, the expected life used in the
model has been adjusted based on the management’s best estimate for the eff ects of non-transferability, exercise
restrictions (including the probability of meeting market conditions attached to the option), and behavioural
considerations. Expected volatility is based on the historical share price volatility over the past four months.
Inputs into the model
Grant date share price
Exercise price
Expected volatility
Warrant life
Dividend yield
Risk free interest rate
Warrant series signed on
2 December 2010
Warrant series signed on
21 December 2009
67.5 pence
67.5 pence
50%
2 years
0.88%
3.23%
35.5 pence
35.5 pence
30%
2 years
1.42%
0.50%
The Company issued a total of 425,000 warrants during the fi nancial year at 67.5 pence when the then market price
was 67.5 pence.
49
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
27 CAPITAL COMMITMENTS
Capital expenditures contracted for at the balance sheet date but not recognised in the fi nancial statements are as
follows:
Group
2011
£
2010
£
Property, plant and equipment
87,921,230
–
28 OPERATING LEASES
a) Leases as Lessor
The Group and the Company lease out their aircraft held under operating leases. The future minimum lease
payments under non-cancellable leases are as follows:
In the second to fi fth years inclusive
More than fi ve years
b) Contingencies
Group
2011
£
2010
£
22,668,333
38,841,715
–
–
The Company’s subsidiaries, Capital Lease Australian Portfolio One Pty Ltd and F100 Pty Ltd receive maintenance
rent from the lease of its aircraft in addition to the base rent. Lessees may be entitled to be reimbursed for specifi c
long term maintenance items (“maintenance rent activities”) that they may incur during the term of the lease. The
lessees must not be in default of the lease and must satisfy certain conditions before they can claim. Furthermore,
the lessees must provide invoices and supporting documentation as satisfactory evidence to Capital Lease Australian
Portfolio One Pty Ltd and F100 Pty Ltd that the maintenance rent activity has been carried out necessarily.
The amount of the claim for any one maintenance rent activity is limited to the total amount of the maintenance rent
received for that specifi c maintenance rent activity to date under the lease for that aircraft.
The carrying out of each specifi c maintenance activity is dependant on the number of cycles and fl ying hours
conducted by the aircraft.
Consequently, Capital Lease Australian Portfolio One Pty Ltd and F100 Pty Ltd have a contingent liability which is
conditional on the volume of cycles and fl ying hours of the aircraft, upon the actual cost of maintenance rent activity,
the lessee making a valid claim with the required documents in the required time frame, and there being an unclaimed
balance against the specifi c maintenance rent activity for that aircraft.
Any unclaimed balance that Capital Lease Australian Portfolio One Pty Ltd and F100 Pty Ltd hold at the end of the
lease is not refundable to the lessees.
During the fi nancial year ended 30 June 2011, Capital Lease Australian Portfolio One Pty Ltd and F100 Pty Ltd had
received £1,274,280 (2010: £3,320,157) in maintenance rent.
The future claims against the maintenance reserves funds can be estimated according to manufacturers’
recommendations and typical aircraft usage. Unforeseen events may occur however, which creates some uncertainty
for the Company in calculating the fi nal future claimable amount and the timing of such claims from the maintenance
reserve funds.
50
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
29 SEGMENT INFORMATION
a) Segment reporting policy
A segment is a distinguishable component of the Group within a particular economic environment (geographical
segment) and to a particular industry (business segment) which is subject to risks and rewards that are diff erent
from those of other segments.
The primary format, business segments, is based on the Group’s management and internal reporting structure,
as reported to the chief operating decision maker. In presenting information on the basis of business segments,
segment revenue and segment assets are based on the nature of the products or services provided by the Group,
information for geographical segments is based on the geographical areas where the customers are located.
Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items
directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items
comprise mainly of corporate assets and liabilities or profi t or losses items that are not directly attributable to a
segment or those that cannot be allocated on a reasonable basis. Common expenses were allocated based on
revenue from the Group.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are
expected to be used for more than one year.
b) Primary reporting segment – business segments
During the year ended 30 June 2011, the Group was organised into two main business segments which are
aircraft leasing and business procurement.
Other operations of the Group mainly comprise investment holding which does not constitute a separate
reportable segment. There are no inter-segment transactions recorded during the fi nancial period.
Group
Financial year ended 30 June 2011
Revenue & other operating income
- Sales
- Other income
Total of all segments
Less: elimination of inter-segment revenue
Consolidated revenue
Group
Financial year ended 30 June 2011
Results
Segment results
Finance income
Finance expense
Unallocated corporate expenses
Profi t before taxation
Taxation
Profi t after taxation
Other segment items
Capital expenditure & valuation movement
- property, plant and equipment
Depreciation
Aircraft
leasing
£
Business
procurement
£
Total
£
16,976,513
945,074
17,921,587
289,745
(401)
289,344
18,210,931
(1,621,711)
16,589,220
Aircraft
leasing
£
Business
procurement
£
Total
£
15,346,354
205,796
15,552,150
3,068
(2,755,498)
(7,168,073)
5,631,646
(574,920)
5,056,726
2,027,526
4,963,394
5,879
1,059
2,033,405
4,964,453
51
51
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Group
Financial year ended 30 June 2011
Segment assets
Unallocated assets
Consolidated total assets
Segment liabilities
Trade and other payables
Provisions of taxation
Short term provisions
Loans and borrowings
Deferred tax liabilities
Unallocated liabilities
Consolidated total liabilities
Group
Financial year ended 30 June 2010
Revenue & other operating income
- Sales
- Other income
Total of all segments
Less: elimination of inter-segment revenue
Consolidated revenue
Group
Financial year ended 30 June 2010
Results
Segment results
Finance income
Finance expense
Unallocated corporate expenses
Profi t before taxation
Taxation
Profi t after taxation
Other segment items
Capital expenditure & valuation movement
- property, plant and equipment
Depreciation
Aircraft
leasing
£
Business
procurement
£
Total
£
97,440,829
626,473
98,067,302
-
-
-
98,067,302
3,653,046
620,825
4,273,871
38,748
2,849,839
37,956,849
4,811,938
-
-
-
-
38,748
2,849,839
37,956,849
4,811,938
–
49,931,245
Aircraft
leasing
£
Business
procurement
£
Total
£
17,275,930
1,149,713
18,425,643
63,649
18,489,292
(929,098)
17,560,194
Aircraft
leasing
£
Business
procurement
£
Total
£
6,854,574
7,213
6,861,787
5,948
(3,319,635)
-
3,548,100
(729,517)
2,818,583
5,016,050
4,704,566
–
238
5,016,050
4,704,804
52
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Group
Financial year ended 30 June 2010
Segment assets
Unallocated assets
Consolidated total assets
Segment liabilities
Trade and other payables
Provisions of taxation
Short term provisions
Loans and borrowings
Deferred tax liabilities
Unallocated liabilities
Consolidated total liabilities
Aircraft
leasing
£
Business
procurement
£
Total
£
94,685,198
259,826
94,945,024
-
94,945,024
4,902,278
296,055
5,198,333
14,532
2,047,185
48,725,729
4,248,024
3,836
18,368
–
–
–
2,047,185
48,725,729
4,248,024
–
60,237,639
c) Second reporting segment – geographical segments
The following table provides an analysis of the revenues by geographical market, irrespective of the origin of the
goods:
Group
Financial year ended 30 June 2011
Revenue
movements
£
£
Capital
expenditure
and valuation
Total
assets
£
Australia
United States
Denmark
Malta
United Kingdom
Other
9,185,359
1,396,158
5,660,100
–
–
49,811
1,232,461
35,628,465
487,625
306,667
–
773
5,879
7,074,476
42,619,016
925,606
9,949,037
1,870,702
16,291,428
2,033,405
98,067,302
Group
Financial year ended 30 June 2010
Revenue
movements
£
£
Capital
expenditure
and valuation
Total
Assets
£
Australia
United States
Denmark
Nigeria
Malta
United Kingdom
Other
9,418,881
2,200,000
5,764,395
89,294
–
–
79,943
5,016,050
38,795,211
–
–
–
–
–
–
7,649,047
47,368,403
–
534,235
338,302
259,826
17,552,513
5,016,050
94,945,024
53
ANNUAL REPORT 2011
Notes to Financial Statements
FOR THE YEAR ENDED 30 JUNE 2011
Group
Financial year ended 30 June 2011
Australia
United States
Denmark
Group
Financial year ended 30 June 2010
Australia
United States
Denmark
Net book value
Aircraft
£
35,197,379
7,074,476
42,619,016
84,890,871
Net book value
Aircraft
£
37,503,127
7,649,047
47,368,403
92,520,577
During the year, certain customers accounted for greater than 10% of the Group’s total revenues. There is one
customer that accounts for £9,185,359 (56%) of the Group’s total revenues. These revenues were based in the
Australia operating segment. There is one customer that accounts for £5,660,100 (35%) of the Group’s total
revenue. These revenues were based in the Denmark segment.
30 CONTINGENT LIABILITIES
Group
2011
£
2010
£
Guarantees
32,440,826
40,793,333
The maximum estimated amount the Group could become liable is as shown above.
The Group has guaranteed the loans of its subsidiaries, Capital Lease Portfolio Australian One Pty Ltd, Capital Lease
Malta Ltd and F100 Pty Ltd.
30 SUBSEQUENT EVENTS
Subsequent to the end of the reporting period, the following events have occurred:
a) The Group has entered into 10-year loan facility agreements for up to US$152.2m (in aggregate), principally
provided under a mandate to Credit Agricole Corporate and Investment Bank. The loan facilities can be drawn
down progressively by the Group on an aircraft by aircraft basis for the purpose of purchasing a fl eet of eight new
ATR72 Aircraft for operation in Australia.
b) The eight aircraft are being leased by the Group to Australian Carrier, Skywest Airlines (Australia) Pty Ltd, who
in turn operate the aircraft on behalf of Virgin Australia, under the Virgin Australia brand, pursuant to 10-year wet
leases. The Group has delivered three aircraft to Skywest Airlines (Australia) Pty Ltd.
31 ULTIMATE HOLDING COMPANY
No party controls the Company.
32 APPROVAL OF FINANCIAL STATEMENTS
The fi nancial statements of the Company and the consolidated fi nancial statements of the Group for the fi nancial
period ended 30 June 2011 were authorised for issue by the Board of Directors on 28 October 2011.
54
Register of Top 20 Shareholders
(AS AT 30 JUNE 2011)
Name of Shareholder
FITEL NOMINEES LIMITED
FITEL NOMINEES LIMITED
FITEL NOMINEES LIMITED
APOLLO NOMINEES LTD
CREDIT SUISSE SECURITIES (EUROPE) LIMITED
VIDACOS NOMINEES LIMITED
CHASE NOMINEES LIMITED
LYNCHWOOD NOMINEES LIMITED
LOEB ARON & COMPANY LTD
HSBC GLOBAL CUSTODY NOMINEE (UK) LIMITED
SMITH & WILLIAMSON NOMINEES LIMITED
FITEL NOMINEES LIMITED
FITEL NOMINEES LIMITED
VIDACOS NOMINEES LIMITED
HARGREAVE HALE NOMINEES LIMITED
FITEL NOMINEES LIMITED
HSBC GLOBAL CUSTODY NOMINEE (UK) LIMITED
FITEL NOMINEES LIMITED
THE CORPORATION OF LLOYDS
HSBC CLIENT HOLDINGS NOMINEE (UK) LIMITED
Holding
(Number of shares)
6,553,210
2,700,000
2,314,156
1,913,000
1,583,244
1,525,000
1,500,000
1,123,092
920,000
900,000
853,000
750,000
750,000
749,972
665,000
600,000
500,000
430,000
400,000
383,110
55
DIRECTORS:
Robert Jeffries Chatfield
Andrew Baudinette
Bryant James McLarty
COMPANY SECRETARIES:
Siobhan Mary Macgroarty Cool
REGISTERED OFFICE:
Georgian House
63 Coleman Street
London
EC2R 5BB
AUDITORS:
Kingston Smith LLP
Devonshire House
60 Goswell Road
London
EC1M 7AD
REGISTRARS:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Reuters/BBG
Index:
LSE
AVAP.PZ
AVAP
FTSE Sector:
Industrial Transportation
FTSE Sub Sector:
Transportation Services