AnnuAl RepoRt
2012
ANNUAL REPORT 2012
ouR Fleet
(AS AT OCTOBER 2012)
Model
MSN
Lessee
Airbus A321-200
1921
Thomas Cook (OY-VKB)
Operational area
Europe, Scandinavia
Airbus A321-200
1881
Thomas Cook (OY-VKA)
Europe, Scandinavia
Model
MSN
Lessee
Airbus A320-200
429
Airbus A320-200
052
Skywest Airlines (VH-FNP)
US Airways Inc (N620AW)
Operational area
Australia
North America
Model
MSN
Lessee
Fokker 100
11373
Fokker 100
11391
Skywest Airlines (VH-FNU)
Skywest Airlines (VH-FSW)
Operational area
Western Australia, Northern Territory,
Western Australia, Victoria
Bali (Indonesia)
Model
MSN
Lessee
Fokker 100
11484
Fokker 100
11488
Skywest Airlines (VH-FNY)
Skywest Airlines (VH-FNR)
Operational area
Western Australia, Northern Territory,
Western Australia, Northern Territory,
Bali (Indonesia)
Bali (Indonesia)
2
ouR Fleet
Fokker 100
11489
ATR 72-500
954
ATR 72-500
955
Skywest Airlines (VH-FNJ)
Virgin Australia (VH-FVH)
Virgin Australia (VH-FVI)
Western Australia
Eastern Australia
Eastern Australia
ATR 72-500
974
ATR 72-500
978
ATR 72-500
979
Virgin Australia (VH-FVL)
Virgin Australia (VH-FVU)
Virgin Australia (VH-FVM)
Eastern Australia
Eastern Australia
Eastern Australia
ATR 72-500
986
ATR 72-600
1025
ATR 72-600
1039
Virgin Australia (VH-FVX)
Virgin Australia (VH-FVP)
Virgin Australia (VH-FVN)
Eastern Australia
Eastern Australia
Eastern Australia
MSN denotes Manufacturer’s Serial Number
Image credits:
This Page: VH-FVH: Damian Freiberg.
Pages 5, 8, 13, 14, 19: V Doroshevitch.
Page 16: Mickael Cavaco
3
ANNUAL REPORT 2012
4
Tail of Virgin Australia Airlines ATR 72 aircraft
Contents
Chairman’s Statement
About Avation PLC
Sale of Australian Subsidiary
Company Overview
Board of Directors
Current Aircraft in Fleet
Future Strategy
Report of the Directors
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditors’ Report
PAGE
PAGE
Financial Statements
Statement of Comprehensive Income
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
Top 20 Shareholders
23
24
25
26
27
28
29
31
32
66
6
8
9
10
11
12
14
16
18
21
22
5
ANNUAL REPORT 2012
ChaiRman’s statement
On behalf of your Board of
Directors, I present to you the
audited financial statements
for Avation PLC and
its
subsidiaries
the year
for
ended 30th June 2012 and
to inform you of the progress
that the Avation Group has
made.
The highlights are:
•
Increased number of aircraft from 12 to 15 with a fleet
value of GBP 137 Million (US$ 214 Million);
• Net after tax profits of GBP 3,307,126;
•
Basic Earnings per share of 8.16 pence;
• Dividends increased by 4% to: 1.04 pence per share;
• Delivered first six new ATR 72 aircraft into the Australian
Regional Airline Network Alliance (“ARAN”) to Virgin
Australia;
•
Arranged commercial funding of US$180 million for the
initial 10 ATR aircraft;
• Cumulative Fleet growth of 25% p.a. with planned fleet
expansion under the ARAN of a minimum 5 aircraft per
year for the next 5 years; and
•
Progressing dual listing on the Singapore Stock
Exchange.
Your Board is pleased to report that in respect of the year
ended 30th June 2012 the consolidated net profit after tax
was GBP 3,307,126 on revenues of GBP 22,098,019 with
earnings per share of 8.16 pence. Returns comprise cash
yield (income) from the lease payments plus the net asset
value (capital) realisable from the sale of the aircraft after
repayment of associated debt obligations.
The ARAN alliance between Avation, Skywest Airlines and
Virgin Australia is a unique long term aircraft operating
lease arrangement and delivers a solid operating platform
for the continued asset and earnings growth of the Avation
business. The ARAN Fleet commenced with the order of 15
ATR 72 aircraft and 25 options and purchase rights to enable
a fleet expansion of 40 aircraft to service Virgin Australia’s
regional airline network on the east coast of Australia with a
potential value of up to US$800 million.
In the period to 30th June 2012, Avation successfully; (i)
delivered 6 new ATR 72-500 aircraft with a further 4 new
ATR 72-600’s to be delivered by end December 2012; (ii)
converted 5 options to firm delivery for aircraft delivery in
2013 and January 2014; and (iii) ordered 8 more option ATR
72-600 aircraft for delivery in 2014 and 2015.
The Avation fleet of 15 aircraft has an average age and
lease term of 10.6 years and 7.8 years respectively and
generates a rental yield of 14.6% from a current customer
base of 4 airlines in Australia, Europe and North America.
Avation’s fleet is diverse, comprising the new ATR aircraft
and other aircraft including the Fokker 100s and A320
aircraft which are used for core transport services to the
mining and resources sector in Australia. Avation continues
to provide active fleet and financial management to ensure
the retention of asset values and maximisation of earnings.
In accordance with this policy the Group sold its Australian
leasing subsidiary Capital Lease Australian Portfolio One
Pty Ltd (“C1”) on 28th June 2012 to Skywest Airlines.This
C1 sale delivered a higher cash return on ageing and end of
lease aircraft. Whilst increasing the overall cash reserves of
the Avation Group, earnings were impacted by a fall of 1.0
penny per share on a fully diluted basis.
Revenue growth to GBP 22,098,019 was consistent with
the build-out and significant investment in the ATR fleet and
reflected lease income commencing in August 2011 from
the delivery of the 6 ATR’s. Lease revenues are forecast
to grow by GBP 4.6 million in 2013 and GBP 2.9 million in
2014 respectively from the proposed ATR fleet expansion.
As of June 30th, total assets increased by GBP 58,740,060
to GBP 158,131,903. Corresponding liabilities increased
to GBP 105,610,847 resulting in a moderate net asset
increase of 6.2% to GBP 52,521,056.
The Company secured committed funding of US$180
million covering all aircraft deliveries for the period ending
31st December 2012 from traditional aircraft financing
banks. Debt facilities are primarily asset based and limited
recourse financings and matched to the leases in terms
of currency, term and loan servicing ensuring there is no
“through lease term” re-financing risk.
The Company believes that it can obtain access to the
necessary debt for the purchase of aircraft. Access to
funding nevertheless remains a risk, which is common to
all businesses that are capital intensive. Specific aviation
based industry risks are also present and include the
creditworthiness of client airlines.
6
ChaiRman’s statement
My colleagues and I are committed to continue to work
tirelessly to build your Company into a respected, profitable,
diversified and cash generative aircraft leasing business.
The Board would like to thank you, the shareholders, for
your continued support and goodwill and look forward to
the future with confidence in the successful development of
Avation PLC.
Robert Jeffries Chatfield,
Chairman
Singapore
30 October 2012
Directors believe that they have demonstrated that the
Group has a sustainable business model and are committed
to develop the Avation business as a differentiated aircraft
operating lease business to provide constant and defined
IRR’s, cash yields and predictive capital returns from
investment in the narrow body aircraft market and more
particularly in the Australian and South East Asian regional
airline sector.
Our business provides for continued and sustainable growth
in 2013 and beyond. Our fleet procurement and investment
policies are robust and we will only acquire aircraft with
leases attached, ensuring there is no “ramp-up” phase or
speculation.
The outlook for 2013 is positive with scheduled ATR aircraft
investment in FY 2013 of US$ 111 million and US$ 74
million for 2014. Net Profit after Tax is expected to increase
proportionately with these increased revenues.
Avation continues to actively evaluate further preferred
aircraft acquisition investment opportunities. As a result,
the Company is well advanced with respect to funding of its
2013 deliveries and is developing formalised capital funding
programs to provide a diversified funding base with access
to both debt and equity markets. Our Singapore Stock
Exchange listing remains a priority and core feature of our
capital strategy going forward.
Whilst the business is engaged in funding the significant
asset growth of the fleet, your Board overwhelmingly
recognises the importance of rewarding shareholders and
is recommending to shareholders a final dividend payment
of 1.04 pence per share. Accordingly, the Company hopes
to maintain a progressive dividend policy going forward.
The record date for this final dividend will be announced
in the meeting materials for the upcoming annual general
meeting.
7
ANNUAL REPORT 2012
aBout aVation plC
Avation PLC is a public company incorporated in England and
Wales (11 July 2006) with its headquarters and operations
now based in Singapore. The shares of the Company are
traded on the Official List (Standard Listing) on the London
Stock Exchange’s main market for listed securities and have
been since 2010. Prior to that, the Company was listed on
the PLUS Markets exchange since November 2006.
Under the Australian Regional Airline Network (“ARAN”)
the Company, Skywest Airlines
agreement between
(Australia) Pty. Ltd. (“Skywest Airlines”) and Virgin Australia
Airlines Pty. Ltd. (“Virgin Australia”), the Company has
agreed to supply a fleet of a minimum of 18 ATR 72 aircraft
for use by Virgin Australia under a wet lease arrangement
operated by Skywest Airlines.
The Company is principally an aircraft leasing company,
which directly and through its subsidiaries either owns or
leases seventeen (as of 30 October 2012) commercial
passenger jet and turboprop aircraft that are leased to
various airlines in Europe, the United States and Australia.
The Company has a 62 per cent holding in Capital Lease
Aviation PLC (“CLA”) whose shares are admitted to trading
on AIM. CLA is an aircraft leasing company whose focus is
on a different customer base to the Company.
The Company also owns 99.96 per cent of Avation.net
Inc., a subsidiary incorporated in Delaware, through which
the Company offers a procurement service to purchase
technical spare parts and consumables.
Under this ARAN agreement, the Company has so far
delivered 8 new ATR72 aircraft, (as of 30 Oct 2012). It will
deliver 2 more ATR72 aircraft before the end of 2012 and
it has firm commitments to deliver a minimum of 4 ATR72
aircraft in 2013 and a minimum of a further 4 ATR72 aircraft
in 2014. The ATR72 aircraft are leased on terms of ten
years, which provides the Company with a stable cash flow.
The Company believes that its services will become
increasingly in demand as airlines look to reduce capital
expenditure by leasing, rather than purchasing, aircraft.
8
sale oF austRalian suBsidiaRy
In 2012 Avation subsidary Capital Lease Aviation Plc (“CLA”)
sought to reduce exposure to some older aircraft assets in
its portfolio. CLA therefore sold its wholly owned subsidiary
Capital Lease Australian Portfolio One Pty Ltd (“C1”) to
Skywest Airlines (S) Pte Ltd (“SKWS”) on 28 June.
C1 owned three Fokker F100 aircraft which were on lease
to Skywest Airlines (Australia) Pty Ltd. The leases for these
aircraft were to expire on 26 September 2012, 28 September
2012 and 28 February 2013. Given the approaching lease
expiries and a preference to complete transactions on
newer aircraft, CLA took the opportunity to dispose of all
the aircraft.
The gross sale price for the company and associated CLA
loan assets was $9,300,000 USD. After adjustments for
obligations of the company, the net cash settlement received
on 2 July 2012 by CLA was $4,319,753. CLA has improved
its cash position considerably and has a relatively low level
of gearing placing it in a good position to acquire some
newer aircraft assets and return the company to growth.
On 28 June CLA announced an interim dividend of 0.45
pence per share, expected to be be paid in the third quarter
of 2012. In the year ended 30 June 2011, C1 had revenues
of US$4.6m and profit before tax of US $1.57m. and had net
assets of $7.5m.
9
ANNUAL REPORT 2012
Company oVeRVieW
GRoup stRuCtuRe
AVATIOn PlC
uK Co. no. 5872328
Registered Office:
Cheyne house, Crown Court, 61-63 Cheapside, london eC2V 6aX
Date Of Incorporation: england & Wales, 11 July 2006, admitted on lse, on 6 october 2010
100%
62.07%
99.96%
100%
100%
100%
F100 PTY lTD
CAPITAl lEASE
AVIATIOn PlC
AVATIOn.nET InC
MSn 429 lIMITED
AVATIOn EASTERn
FlEET PTE lTD
AVATIOn EASTERn
FlEET II PTE lTD
Registered Office:
Registered Office:
Barringtons house
283 Rokeby Road
subiaco Wa 6008
Date of Incorporation:
Cheyne house,
Crown Court,
62-63 Cheapside,
london eC2V 6aX
Registered Office:
Corporation trust
Center
Registered Office:
Registered Office:
Registered Office:
Cheyne house,
Crown Court,
510 thomson Road
510 thomson Road
#12-04 slF Building
#12-04 slF Building
1209 orange street
61-63 Cheapside,
singapore 298135
singapore 298135
Wimington usa
london eC2V 6aX
Date Of Incorporation:
Date Of Incorporation:
Victoria, australia,
Date Of Incorporation:
Date Of Incorporation:
Date Of Incorporation:
singapore,
15 november 2006
england & Wales,
6 June 2007
delaware, usa,
18 January 2000
england & Wales,
8 February 2011
24 march 2010
singapore,
12 January 2012
100%
100%
100%
100%
100%
CAPITAl lEASE
MAlTA lIMITED
CAPITAl lEASE
AVIATIOn (S)
PTE lTD
AVATIOn.nET InC
SInGAPORE
BRAnCH
Registered Office:
Registered Office:
Registered Office:
suite 2, tower Business
510 thomson Road
510 thomson Road
Centre
#12-04 slF Building
#12-04 slF Building
Ground Floor, tower
singapore 298135
singapore 298135
AIRFRAME
lEASInG (S)
PTE lTD
AIRFRAME
lEASInG (S) II
PTE lTD
Registered Office:
Registered Office:
510 thomson Road
510 thomson Road
#12-04 slF Building
#12-04 slF Building
singapore 298135
singapore 298135
Date Of Incorporation:
Date Of Incorporation:
Date Of Incorporation:
Date Of Incorporation:
singapore,
30 november 2011
singapore,
2 october 2007
singapore,
12 may 2011
singapore,
13 January 2012
street, swatar
Birkirkara BKR 4013
malta
Date Of Incorporation:
malta,
20 June 2008
10
BoaRd oF diReCtoRs
Jeff Chatfield
Chairman
Andrew Baudinette
Non-Executive Director
Mr Chatfield is the Chairman
of Avation PLC and has been
instrumental
establishing
in
and growing the Company. He
is also
the Group Executive
Chairman of Skywest Airlines
Ltd and Chairman of Skywest
Airlines (Australia) Pty Ltd. Mr Chatfield 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 of a variety of patents. He has Bachelor of
Engineering and Master of Engineering Science degrees
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.
Rod Mahoney
Executive Director
Mr Mahoney is the Chief Operating
Officer and an Executive Director
of
this
the Company. Before
executive appointment, he was
a fleet planning and aircraft
procurement consultant to the
Company. He has previously
been a project advisor to a variety of Asia-Pacific airlines,
suppliers and other aviation businesses, including Virgin
Blue and V Australia and also held various senior executive
positions at Airbus for 23 years, largely within the sales
divisions covering Europe and Africa, China and the Pacific.
He holds a Bachelor of Science Degree in Aeronautical
Engineering (BSc. Hons), a Masters in Air Transport
(MSc.) and a Masters of Applied Finance (MAppFin). Mr
Mahoney holds dual citizenship of the United Kingdom
and Australia and resides in Singapore. Mr Mahoney is
a graduate member of the Australian Institute of Company
Directors.
is a
Mr Baudinette
founding
director of the Company and long-
serving executive of the Group.
In 2003, Mr Baudinette was
appointed CEO of the Company’s
subsidiary Avation.net Inc and
has been its Managing Director
since 2005, not only growing the existing business but
also conceiving and developing its activities as the major
procurement arm of the Group.
A skilled marketer and manager, he has a 25 year history in
media, having held management positions in the Australian
radio and newspaper industries and previously worked as
a broadcaster and radio programmer in regional Australian
radio. Mr Baudinette has also been involved with and driven
start-up businesses in the advertising, travel, technology
and entertainment industries. Mr Baudinette has assisted
the Group with corporate re-structuring, transactional
projects and asset acquisition.
He is also a director of a number of unlisted companies.
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. He is also a director of a number of
listed and unlisted companies and is also a member of the
Australian Institute of Company Directors.
11
ANNUAL REPORT 2012
CuRRent aiRCRaFt in Fleet
(AS AT OCTOBER 2012)
MSN Registration
Aircraft
Type
11484
(VH-FNY)
Fokker 100
11489
(VH-FNJ)
Fokker 100
11488
(VH-FNR)
Fokker 100
11373
(VH-FNU)
Fokker 100
11391
(VH-FSW)
Fokker 100
52
(N620AW)
1881
(OY-VKA)
1921
(OY-VKB)
429
(VH-FNP)
Airbus A320-
200
Airbus A321-
200
Airbus A321-
200
Airbus A320-
200
Commencement
Date
(Original Date)
Lease
term
(months)
3 April 2007
114
24 April 2004
117
3 August 2004
117
8 August 2008
72
Areas of Operation
Western Australia,
Northern Territory, Bali
(Indonesia)
Western Australia,
Northern Territory, Bali
(Indonesia)
Western Australia,
Northern Territory, Bali
(Indonesia)
Western Australia,
Northern Territory, Bali
(Indonesia)
19 August 2008
64
Western Australia, Victoria
Airline Lessee
Skywest Airlines
(Australia) Pty
Ltd
Skywest Airlines
(Australia) Pty
Ltd
Skywest Airlines
(Australia) Pty
Ltd
Skywest Airlines
(Australia) Pty
Ltd
Skywest Airlines
(Australia) Pty
Ltd
US Airways Inc 28 September
275
North America
1990
Thomas
Cook Airlines
Scandinavia A/S
Thomas
Cook Airlines
Scandinavia A/S
Skywest Airlines
(Australia) Pty
Ltd
1 April 2003
144
Europe, Scandinavia
28 February 2003
144
Europe, Scandinavia
4 April 2010
36
Western Australia, Victoria
954
(VH-FVH)
ATR
Virgin Australia
11 August 2011
120
Eastern Australia
72-500
955
(VH-FVI)
ATR
Virgin Australia
18 August 2011
120
Eastern Australia
72-500
974
(VH-FVL)
ATR
Virgin Australia
13 October 2011
120
Eastern Australia
72-500
979
(VH-FVM)
ATR
Virgin Australia
29 November 2011
120
Eastern Australia
72-500
978
(VH-FVU)
ATR
Virgin Australia
26 January 2012
120
Eastern Australia
72-500
986
(VH-FVX)
ATR
Virgin Australia
1 February 2012
120
Eastern Australia
72-500
1025
(VH-FVP)
ATR
Virgin Australia
3 August 2012
120
Eastern Australia
72-600
1039
(VH-FVN)
ATR
Virgin Australia
6 September 2012
120
Eastern Australia
72-600
12
atR deliVeRy sChedule
(AS AT OCTOBER 2012)
Delivered Aircraft
Type
Delivery Date
Aircraft 1
Aircraft 2
Aircraft 3
Aircraft 4
Aircraft 5
Aircraft 6
Aircraft 7
Aircraft 8
Scheduled Future Deliveries as part of firm options
Aircraft 9
Aircraft 10
Aircraft 11
Aircraft 12
Aircraft 13
Aircraft 14
Aircraft 15
ATR 72-500
August 2011
ATR 72-500
August 2011
ATR 72-500
October 2011
ATR 72-500
November 2011
ATR 72-500
January 2012
ATR 72-500
February 2012
ATR 72-600
August 2012
ATR 72-600
September 2012
ATR 72-600
November 2012
ATR 72-600
December 2012
ATR 72-600
February 2013
ATR 72-600
ATR 72-600
April 2013
July 2013
ATR 72-600
October 2013
ATR 72-600
January 2014
13
ANNUAL REPORT 2012
FutuRe stRateGy
The Company’s strategy is to continue to expand the
Group’s aircraft leasing business by:
ongoing aircraft leasing requirements, in particular, with
the ATR aircraft used by Virgin Australia in the ARAN.
•
•
•
•
“Capitalising on continued growth in the aircraft leasing
market by acquiring additional aircraft:” the Company
intends to exploit the current growth in the aircraft
leasing market by acquiring additional aircraft. The
Company will adopt a flexible approach to the type of
aircraft it purchases and this will depend principally
on the requirements of its growing customer base.
The Company is continuously evaluating potential
opportunities for growth in line with its strategy,
notably growing its portfolio of aircraft, in particular by
maintaining communications with aircraft owners and
manufacturers.
“Leasing aircraft to both regional and international
airlines:” the Directors expect the Group’s customer
base to comprise both regional and global airline
companies. The Group’s customer base will not be
restricted to a particular geography or type of customer.
“Efficiently raising capital to execute its growth strategy:”
the Company expects to fund its growth strategy
through a mix of retained cashflow, debt and equity
financing. The Company may utilize a broad range of
funding options to support its growth strategy.
“Continuing to support Skywest Airlines:” the Company
was originally incorporated in order to support Skywest
Airlines by providing aircraft leasing facilities. While
the Group now provides aircraft leasing facilities to
larger airlines, Skywest Airlines will continue to be an
important customer of the Group and it is intended that
Avation will continue to assist Skywest Airlines with its
Aircraft Demand and the Global Commercial Aircraft
Fleet
Demand for new aircraft is derived from both traffic growth
and replacement of older equipment. Historically, demand
for growth has been driven by economic growth and market
maturity, market liberalization and the adoption of new
business models. Aircraft replacement is related to the
relative operating economics of old and new aircraft, fuel
prices, technological improvements and the demand for
conversions of passenger aircraft to freighters.
Growth Drivers
The world fleet is expected to grow steadily as airlines
continue to develop service offerings to accommodate the
world’s rapidly growing demand for air travel. Key elements
that are currently driving growth in demand for both new and
used aircraft include:
• High rates of economic growth and
increasing
propensity to travel in emerging markets;
•
•
Liberalisation of air service between and within
countries; and
Stimulation of traffic from growing Low Cost Carriers
offering lower fares.
Replacement Drivers
The requirement to replace older aircraft that are retired or
converted to freighter configuration also forms a substantial
driver of aircraft demand, particularly in large mature
regions. Replacement demand is driven by a number of
factors including:
14
FutuRe stRateGy
• Relative operating economics,
environmental considerations;
reliability, and
•
•
•
Technological advancement, including the introduction
of new aircraft and engines;
Aircraft reaching their economic useful lives, driving
retirement demand; and
Freighter conversion demand, driving replacement
demand of passenger aircraft.
Overall, the size of the global commercial aircraft fleet
is expected to double over the next two decades. Airbus
forecasts growth to 31,424 total aircraft by 2030, of which
26,931 will be mainline passenger jets (with more than 100
seats). In addition, Airbus predicts that the world’s airlines
will require more than 5,000 smaller aircraft, either jet or
turboprop, to serve regional demand, especially in Europe
and the United States. Boeing predicts that the world fleet
will reach 39,530 aircraft in 2030, of which the vast majority
- 36,030 - will be mainline passenger jets (with more than
90 seats) of which 33,500 units will be delivered new
between 2011 and 2030, 60% being for growth and 40%
for replacement.
Aircraft Financing and Leasing Markets
Few airlines have the internal cash available to self-finance
acquisitions of new or used aircraft, and most airlines seek
financing from a variety of sources, including traditional
bank debt, export credit guarantees, tax leases, capital
markets, and operating leases.
An aircraft operating lease is a lease wherein the lessor
retains ownership of the aircraft and where the aircraft
will be returned to the lessor at the end of the lease. Such
leases do not impact the balance sheet of the lessee.
Aircraft operating leasing has evolved over the last 40 years
to become highly sophisticated and attractive to airlines, in
effect becoming a source of capital that carriers utilise along
with debt and equity to finance their equipment acquisitions.
Airlines are attracted to operating leasing for a variety of
reasons, including low capital outlay requirements, fleet
planning flexibility, delivery date availability and residual
value risk avoidance. Furthermore, operating leases are
often preferred by start-up carriers because they lower the
capital costs for market entry.
Aircraft lessors have an intermediary role attractive to both
the aircraft manufacturers and airlines. They provide an
added distribution channel and an important alternative
source of funding. Aircraft lessors command a sizeable
position in the order books of Airbus and Boeing in particular.
the past 20 years,
Over
the world’s airlines have
increasingly turned to operating leases for their aircraft
financing requirements: the percentage of the global active
commercial aircraft fleet under operating lease by non-
airline affiliated entities has increased from 20% in 1996 to
nearly 40% in 2012.
AIRCRAFT
14000
12000
10000
8000
6000
4000
2000
0
36.8%
NEW AIRCRAFT DELIVERIES 2012-31
(Source: Boeing - Curret Market Outlook 2012)
22.4%
22.5%
7.5%
7.7%
3.2%
2.4%
Asia
Pacific
North America Europe
Middle East Latin America
CIS
Africa
REGIONS
15
ANNUAL REPORT 2012
RepoRt oF the diReCtoRs
The directors have pleasure in presenting their report and
financial statements for the financial year ended 30 June
2012.
Principal activities and business review
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 affecting the Group’s
turnover are described in note 6.
The full business review including KPI’s can be found in the
Chairman’s statement on page 6. The Group has not sought
to review environmental matters nor social and community
issues.
Results and dividends
The consolidated statement of comprehensive income
for the period is set out on page 24. The directors have
proposed to pay a 1.04 pence final 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
(in name of director and nominee)
Deemed interest
Ordinary Shares of £0.01 each
30 June 2012
1 July 2011
30 June 2012
1 July 2011
Robert Jeffries Chatfield
Andrew Baudinette
1
1
1
1
7,039,490
6,863,210
670,000
620,000
Bryant James Mclarty
117,300
57,300
Roderick Douglas Mahoney
110,000
-
-
-
-
-
16
RepoRt oF the diReCtoRs
Significant Shareholdings
Creditors Payment Policy
Ordinary
shares
Percentage
The group’s current policy concerning the payment of trade
creditors is to:
Fitel Nominees Limited
6,729,490
15.17%
HSBC Client Holdings
Nominee (UK) Limited
Lynchwood Nominees
Limited
5,173,463
11.66%
3,404,972
7.67%
Fitel Nominees Limited
2,700,000
6.08%
Fitel Nominees Limited
2,269,156
5.11%
Equal Opportunities Policy
It is the group’s policy to employ individuals with the
necessary qualifications 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 great
importance of
The group recognises
the
contribution made by all employees and aims to keep
them informed of matters affecting 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
• 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 office 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 Jeffries Chatfield
Director
The company has no requirement to comply with the
Combined Code.
30 October 2012
17
ANNUAL REPORT 2012
diReCtoRs RemuneRation RepoRt
Introduction
Share options and warrants
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 financial 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 specific to the individual levels of
remuneration.
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
management of the Group to gain:
to
the directors and senior
•
•
•
Improvement in share price
Improvement in net profit
Improvement in return to shareholders
Remuneration (audited)
Individual Director’s remuneration was as follows
Year ended
30 June 2012
£
Year ended
30 June 2011
£
Group
Executive
Robert Jeffries Chatfield
157,716
185,680
Roderick Douglas Mahoney
72,384
-
Non-executive
Andrew Baudinette
140,746
109,073
Bryant James Mclarty
21,273
12,500
392,119
307,253
18
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 Jeffries Chatfield *
21 Dec 2009
Robert Jeffries Chatfield *
2 Dec 2010
35.5 p
67.5 p
176,280
200,000
-
-
Robert Jeffries Chatfield *
12 Dec 2011
110.5 p
-
400,000
(176,280)
-
-
-
200,000
400,000
Andrew Baudinette **
2 Dec 2010
67.5 p
200,000
-
(75,000)
125,000
Andrew Baudinette **
12 Dec 2011
110.5 p
-
200,000
-
200,000
Bryant James Mclarty
21 Dec 2009
Bryant James Mclarty
2 Dec 2010
35.5 p
67.5 p
50,000
50,000
-
-
Bryant James Mclarty
12 Dec 2011
110.5 p
-
200,000
(50,000)
-
-
-
50,000
200,000
* Robert Jeffries Chatfield was granted the share warrants via Epsom Assets Limited.
** Andrew Baudinette was granted the share warrants via Giant Mix Investments Limited.
On 12 December 2011, Robert Jeffries Chatfield via Epsom Assets Limited exercised 176,280 warrants, Andrew Baudinette
via Giant Mix Investments Limited exercised 75,000 warrants and Bryant James Mclarty exercised 50,000 warrants, at the
exercise price of 35.5p and 67.5p. The market price on that day of exercise was 109.5p.
The weighted average fair value of the warrants granted during the financial year is 8.17 pence.
19
ANNUAL REPORT 2012
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 FTSE100 index over the last five 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.
On behalf of the board
Robert Jeffries Chatfield
Director
30 October 2012
20
AvationFTSE 100Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-12 Mar-12 Jun-12 Sep-12200180160140120100806040200 diReCtoRs’ ResponsiBilities
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Directors’
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year.
Under Company Law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and of the Group and the financial performance and cash
flows of the Group for that year. In preparing these financial
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 financial statements, the Company and the Group
has complied with IFRS as adopted by the European
Union, and, in respect of the Company as applied in
accordance with the provisions of the Companies Act
2006, subject to any material departures disclosed and
explained in the Group financial statements;
•
•
the Directors are required under the Standard Rules
of the London Stock Exchange to prepare Group
financial statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by
the European Union (“EU”) and have elected to prepare
the Company financial 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.
for keeping adequate
The Directors are responsible
accounting records that are sufficient to show and explain
the Company and the Group’s transactions and disclose
with reasonable accuracy at any time the financial position
of the Company and the Group and enable them to ensure
that the financial 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 financial information included
on the Company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
the financial statements may differ from legislation in other
jurisdictions.
21
ANNUAL REPORT 2012
RepoRt oF the auditoRs
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AVATION PLC
We have audited the financial statements of Avation
PLC for the year ended 30 June 2012 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 financial 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 financial 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 financial statements and for
being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial 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 financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial 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 significant
accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read
all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited
financial statements. If we became aware of any apparent
material misstatements or inconsistencies we consider the
implications in our report.
Opinion on the financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the
state of the Group’s and of the parent company’s affairs
as at 30 June 2012 and of the Group’s profit for the year
then ended;
the Group’s financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial 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
in
the financial statements have been prepared
accordance with the requirements of the Companies Act
2006 and, as regards the Group financial 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
financial year for which the financial statements are
prepared is consistent with the financial 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
the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
•
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
30 October 2012
22
FinanCial statements
For the financial year ended 30 June 2012
Registered number: 5872328 (england & Wales)
23
ANNUAL REPORT 2012
Consolidated statement oF CompRehensiVe inCome
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Other operating expenses
Expenses
- Administrative expenses
- Finance expenses
Profit before taxation
Taxation
Note
2012
£
2011
£
8
22,098,019
16,291,428
(713,126)
(739,278)
21,384,893
15,552,150
160,549
297,792
(9,159,965)
(6,207,042)
(2,193,520)
(1,255,756)
(4,951,087)
(2,755,498)
5,240,870
(1,079,660)
5,631,646
(574,920)
9
10
11
13
14
Profit from continuing operations for the year
4,161,210
5,056,726
Other comprehensive income
Currency translation differences arising on consolidation
528,268
(1,809,245)
Revaluation (loss) / gain on property, plant and equipment, net of tax
(3,081,286)
859,629
Other comprehensive income for the year, (net of tax)
(2,553,018)
(949,616)
Total comprehensive income for the year
1,608,192
4,107,110
Profit 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
- Basic – continuing and total operations
- Fully Diluted – continuing and total operations
COMPANY STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive income:
Revaluation gains on property, plant and equipment, net of tax
Other comprehensive income for the year, (net of tax)
Total comprehensive income for the year
3,307,126
854,084
4,161,210
3,627,293
1,429,433
5,056,726
1,462,520
3,128,808
145,672
978,302
1,608,192
4,107,110
15
8.16 pence
11.95 pence
8.13 pence
11.84 pence
2012
£
2011
£
953,896
1,288,382
–
–
22,158
22,158
953,896
1,310,540
24
Consolidated BalanCe sheet
AS AT 30 JUNE 2012
ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Total current assets
Non-current assets:
Trade and other receivables
Prepayments
Property, plant and equipment
Goodwill
Total non-current assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Trade and other payables
Deferred lease income
Provision for taxation
Loans and borrowings
Short-term provisions
Total current liabilities
Non-current liabilities:
Trade and other payables
Deferred lease income
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
Capital reserve
Foreign currency translation reserve
Retained earnings
Non-controlling interest
Note
2012
£
2011
£
16
17
18
16
17
20
21
22
23
24
25
22
23
24
26
27
5,824,099
5,770,332
297,904
9,168
11,901,503
5,403,585
2,452,619
137,049,655
1,324,541
146,230,400
5,626,771
7,542,395
–
1,946
13,171,112
–
–
84,896,190
1,324,541
86,220,731
158,131,903
99,391,843
3,242,101
58,519
332,421
12,522,177
1,901,456
18,056,674
3,883,863
468,156
79,402,426
3,799,728
87,554,173
423,745
14,192,267
5,465,206
7,000
120,779
1,636,511
2,515,434
17,790,185
42,151,127
10,369,929
52,521,056
3,331,862
–
38,748
9,865,455
2,849,839
16,085,904
942,009
–
28,091,394
4,811,938
33,845,341
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
Total liabilities and equity
158,131,903
99,391,843
Approved by the board and authorised for issue on 30 October 2012
Robert Jeffries Chatfield
Director
25
ANNUAL REPORT 2012
Company BalanCe sheet
AS AT 30 JUNE 2012
ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets:
Trade and other receivables
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:
Trade and other payables
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 30 October 2012
Robert Jeffries Chatfield
Director
26
Note
2012
£
2011
£
16
16
19
20
22
24
22
24
26
757,149
6,632,083
7,389,232
5,403,585
3,145,790
5,356,415
13,905,790
3,310,383
5,961,754
9,272,137
–
1,440,336
5,654,618
7,094,954
21,295,022
16,367,091
815,303
719,896
–
1,350,401
2,165,704
1,697,447
432,491
201,754
–
1,252,377
1,972,273
–
1,738,069
138,340
2,331,692
1,876,409
27
423,745
386,072
14,192,267
10,543,750
22,158
7,000
120,779
22,158
7,000
74,381
2,031,677
1,485,048
16,797,626
12,518,409
21,295,022
16,367,091
Consolidated statement oF ChanGes in equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012
Assets
Capital
Foreign
currency
Non-
Share
Share
revaluation Redemption Warrant Capital
translation Retained
Controlling
Total
capital
premium
reserve
reserve
Reserve
reserve
reserve
earnings
Total
Interest
Equity
£
£
£
£
£
£
£
£
£
£
£
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
Group
Balance at 1 July
2011
Profit for the year
Other
comprehensive
income
Total
comprehensive
income
Dividend related to
2011 paid
Dividend of
subsidiary paid
to minority
shareholders
Increase in issued
share capital
Acquisition of
ordinary shares in
subsidiary
Share issue
expenses
Capital expenses
Warrant expenses
Balance at 30
June 2012
Balance at 1 July
2010
Profit 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
–
–
–
–
–
–
–
–
–
37,673
3,817,724
–
–
–
–
–
(169,207)
–
–
123,882
10,002,743
–
–
(708,251)
–
–
–
– (1,971,311)
– (1,971,311)
–
–
–
–
–
676,145
–
676,145
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(18,988)
–
–
–
–
–
–
–
– 1,636,511
65,386
–
–
– 3,307,126
3,307,126
854,084
4,161,210
–
126,705
– (1,844,606)
(708,412)
(2,553,018)
–
126,705
3,307,126
1,462,520
145,672
1,608,192
–
(407,267)
(407,267)
–
(407,267)
–
–
–
–
–
–
–
–
(167,603)
(167,603)
–
3,836,409
– 3,836,409
–
–
–
–
– (3,341,963)
(3,341,963)
(169,207)
1,636,511
65,386
–
(169,207)
– 1,636,511
–
65,386
–
–
–
–
–
–
–
74,381
– 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)
74,381
–
–
(708,251)
74,381
–
–
–
–
–
–
–
–
–
–
–
423,745
14,192,267
5,465,206
7,000
120,779 1,636,511 2,515,434 17,790,185 42,151,127 10,369,929 52,521,056
262,190
1,249,258
6,760,372
7,000
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
During the financial year, the Company increased its share holding in its subsidiary, Capital Lease Aviation PLC from 51.18%
to 62.07%. The consideration for the acquisition of the CLA shares is through the allotment of 1,647,781 new ordinary shares.
The dividend paid during the year was for 1p (2011: 0.6p) per share.
27
ANNUAL REPORT 2012
Company statement oF ChanGes in equity
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012
Asset
Capital
Share
Share
Revaluation redemption Warrant
Retained
capital
premium
Reserve
Reserve
Reserve
earnings
Total
£
£
£
£
£
£
£
Company
Balance at 1 July 2011
386,072 10,543,750
22,158
7,000
74,381
1,485,048 12,518,409
Profit for the year
Other comprehensive
income
Total comprehensive
income
Dividend relating to 2011
paid
Increase of issued share
capital
Share issue expenses
Warrant expenses
–
–
–
–
–
–
–
–
37,673
3,817,724
–
–
(169,207)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
953,896
953,896
–
–
953,896
953,896
–
(407,267)
(407,267)
(18,988)
–
65,386
–
–
–
3,836,409
(169,207)
65,386
Balance at 30 June 2012
423,745 14,192,267
22,158
7,000
120,779
2,031,677 16,797,626
Balance at 1 July 2010
262,190
1,249,258
Profit for the year
Other comprehensive
income
Total comprehensive
income
Dividend relating to 2010
paid
Increase of issued share
capital
Share issue expenses
Warrant expenses
–
–
–
–
–
–
–
–
123,882 10,002,743
–
–
(708,251)
–
–
–
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
–
–
–
74,381
(171,193)
(171,193)
– 10,126,625
–
–
(708,251)
74,381
Balance at 30 June 2011
386,072 10,543,750
22,158
7,000
74,381
1,485,048 12,518,409
The dividend paid during the year was for 1p (2011: 0.6p) per share.
28
Consolidated statement oF Cash FloWs
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Depreciation expense
Claim on maintenance reserve
Impairment loss on property plant and equipment
Amortisation of loan premium
Amortisation of deferred lease expense
Loss on disposal of subsidiary
Warrant expense
Interest expense
Interest income
Operating profit before working capital changes
Movement in working capital:
2012
£
2011
£
5,240,870
5,631,646
6,515,334
1,257,494
4,964,453
1,242,589
990,924
225,283
4,207
396,213
65,386
–
–
–
–
74,381
4,721,597
2,680,231
(59,643)
(3,607)
19,357,665
14,589,693
Trade and other receivables and prepayments
(4,099,516)
(5,157,029)
Inventories
Deferred lease income
Trade and other payables
Short-term provisions
Cash from operations
Interest paid
Interest received
Corporation tax paid
Net cash from operating activities
Cash flows from investing activities:
Cash outflow from disposal of subsidiary – See Note A
Purchase of property, plant and equipment
Loan to related parties
Net cash (used in) investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Capital element of finance lease repayments
Net cash (used in) from financing activities
Effects of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
(7,222)
526,675
5,416,497
(571,189)
(1,239)
–
(972,482)
(311,597)
20,622,910
8,147,346
(4,721,597)
(2,809,256)
59,643
(298,554)
15,662,402
3,607
(440,543)
4,901,154
(127,977)
–
(4,884,565)
(19,233)
–
(1,579,860)
(5,012,542)
(1,599,093)
1,961,749
(407,266)
–
9,418,374
(171,193)
1,257,800
(10,960,417)
(8,192,846)
(1,497,535)
(1,355,278)
(10,903,469)
450,937
197,328
5,626,771
5,824,099
956,857
139,972
4,398,890
1,227,881
5,626,771
29
ANNUAL REPORT 2012
Consolidated statement oF Cash FloWs
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012
Note A – Disposal of a subsidiary, Capital Lease Australian Portfolio One Pty Ltd:
The aggregate cash inflows arising from the disposal of Capital Lease Australian Portfolio One Pty Ltd were:
Cash
Trade and other receivables
Property, plant and equipment
Trade and other payables
Borrowings
Provisions
Income tax payable
Identifiable net assets disposed
Loss on disposal
Cash proceeds from disposal
Less: cash and cash equivalents in subsidiary disposed
Net cash inflow on disposal, receivable after year end
£
127,977
1,194,144
6,849,275
(2,564,404)
(2,392,449)
(1,634,688)
(329,515)
1,250,340
(396,213)
854,127
(127,977)
726,150
Cash and cash equivalents in the consolidated cash flow 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
2012
£
36,680
5,663,893
10,734
1,060
111,732
2011
£
2,878,890
2,686,475
11,089
1,198
49,119
5,824,099
5,626,771
5,712,367
5,577,652
The rate of interest for the cash on interest earning accounts is at 1.0% to 4.5% (2011:1.0% to 4.5%) per annum. These
approximate the weighted effective interest rate.
30
Company statement oF Cash FloWs
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2012
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Dividend income
Depreciation
Warrant expense
Interest expense
2012
£
2011
£
1,017,381
1,228,848
(274,272)
299,376
65,386
56,375
-
226,093
74,381
154,744
Operating profit before working capital changes
1,164,246
1,684,066
Movement in working capital:
Trade and other receivables
Trade and other payables
Cash (used in) from operations
Interest paid
Corporation tax paid
Net cash (used in) operating activities
Cash flows from investing activities:
Loan to related parties
Purchase of property, plant and equipment
Investment in subsidiaries
Net cash (used in) investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Dividends paid
Capital element of finance lease repayments
Net cash from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
(5,799,642)
(4,645,598)
1,792,854
29,195
(2,842,542)
(2,932,337)
(56,375)
(283,769)
(72)
-
(2,898,989)
(3,216,106)
-
(1,579,860)
(1,173)
(1)
-
(49)
(1,174)
(1,579,909)
1,961,749
(407,266)
9,418,374
(171,193)
(1,207,554)
(1,355,280)
346,929
7,891,901
(2,553,234)
3,095,886
3,310,383
214,497
757,149
3,310,383
Cash and cash equivalents in the cash flow statement are not restricted in use and are denominated in the following
currencies:
Pounds Sterling
United States dollars
Singapore dollars
2012
£
27,399
726,622
3,128
2011
£
2,824,927
485,456
-
757,149
3,310,383
The rate of interest for the cash on interest earning accounts is at 1.0% (2011:1.0%) per annum. These approximate the
weighted effective interest rate.
31
1 GENERAL
Avation PLC is a public limited company incorporated in England and Wales under the Companies Act 2006 (Registration
Number 5872328) and is listed as a Standard Listing on the London Stock Exchange. The address of the registered
office 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 financial 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 financial 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 modified by the revaluation of aircraft.
The financial statements are presented in Pounds Sterling, rounded to the nearest Pound.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the financial period. Although
these estimates are based on management’s best knowledge of current events and actions, actual results may
ultimately differ from those estimates.
The accounting policies set out below have been applied consistently throughout the financial period presented
in these financial statements and the accounting policies have been applied consistently by the Company and its
subsidiaries.
b) BASIS OF CONSOLIDATION - The consolidated financial statements comprise the financial statements of Avation
PLC and its subsidiaries as at 30 June 2012.
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 financial 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 deficit 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 differences, recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit
or loss.
3232
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012
notes to FinanCial statements
FOR THE YEAR ENDED 30 JUNE 2012
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 identifiable net assets.
Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification 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 profit 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 profit or loss or as a change to other comprehensive income. If
the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.
Business combinations prior to 1 July 2009
In comparison to the above-mentioned requirements, the following differences 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 identifiable net assets.
Business combinations achieved in stages were accounted for as separate steps. Any additional acquired share of
interest did not affect 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
significantly modified the cash flows 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 outflow
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 financial 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 financial statements
of the relevant entity and classified 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 benefits associated with the transactions will flow 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 identifiable 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 cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
33
recognised immediately in the profit or loss.
The interest of significant 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 benefit 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 first 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 profit 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 sufficient regularity such that
the carrying amount does not differ 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 profit or loss,
in which case the increase is credited to profit 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 profit 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 profit 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
The residual values, useful lives and depreciation methods are revised and adjusted if appropriate, at each reporting
date.
Fully depreciated assets still in use are retained in the financial statements.
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or
loss.
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 suffered 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.
34
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012
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 effect 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 benefit expense in the profit and loss. The
total expense to be apportioned over the vesting period of the benefit 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 effects 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 classified as operating leases. Rental income from
operating leases (net of any incentives given to the lessees) is recognised in the profit 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 classified as a finance 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 finance charges so as to obtain a constant
rate on the finance 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 profit 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.d.
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 profit 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 effective interest
rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset’s net carrying amount.
(iii) Sales of goods are recognised when goods are delivered and title has passed.
(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 profit or loss in the period in which they are incurred.
35
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012
n) TAXATION - Taxation expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the financial period. Taxable profit differs from profit as
reported in profit 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 differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries,
except where the Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference 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 sufficient taxable profits 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 profit 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 offset 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 effect from 1 April 2011 the Company migrated its business to become Singapore resident for tax purposes.
o) FOREIGN CURRENCIES - The Group’s consolidated financial statements and Company financial 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 a UK incorporated Company. The individual financial 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.
In preparing the financial 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 differences arising on the settlement of monetary items, and on the retranslation of monetary items, are
included in the profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items
carried at fair value are included in the profit or loss for the period except for differences 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 financial statements, the assets and liabilities of the Group’s foreign
operations are expressed in Pounds 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 fluctuated
significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation
differences are recognised in profit 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.
36
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 (p) FINANCIAL INSTRUMENTS - Financial assets and financial 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 effective interest rate method. Appropriate allowances
for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that
the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted at the effective 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 insignificant risk of changes in value.
(iii) Financial liabilities and equity - Financial liabilities and equity instruments issued by the Group are classified
according to the substance of the contractual arrangements entered into and the definitions of a financial
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 specific financial
liabilities and equity instruments are set out below.
(iv) Borrowings - Interest-bearing loans from banks and financial institutions are initially measured at fair value, and
are subsequently measured at amortised cost, using the effective interest rate method. Any difference 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 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 - 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.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and assumptions concerning the future are made in the preparation of the financial statements. They affect
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 significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial 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, significant decreases in the market value of aircraft, a significant adverse change in
an aircraft’s physical condition or a significant adverse change in cash-flow associated with the use of the aircraft.
The Group continues to record positive cash flows from its aircraft.
(ii) Revaluation of property, plant and equipment – aircraft
The Group regularly revalues its aircraft using independent valuers valuations. During the financial year, the Group
revalued its older aircraft using independent valuers valuations and the carrying amount of the aircraft is reduced to
its recoverable value. Impairment losses were recognised as an expense immediately.
(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
37
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012
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 profit or loss.
(iv) Income taxes
Significant 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 final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the income tax and deferred
income tax provisions in the period in which the determination is made.
(v) Consolidation of special purpose entity (“SPE”) – Avation Airframe Holdings Pte. Ltd.
The directors have considered whether this company, which was set up during the year and which forms part of
a financing structure to facilitate the acquisition of certain new aircraft, should be consolidated as a subsidiary
undertaking. Although the ultimate shareholder of the SPE is a trust, the directors consider that Avation PLC has
the power to control the day to day activities of the SPE and indeed does so in practice through one of its wholly
owned subsidiary undertakings. Furthermore, Avation PLC is entitled to the benefits and exposed to the risks of
the activities of the SPE, which are entirely consistent with the ongoing major operations of the Avation Group,
and are conducted on behalf of the Group according to the Group’s specific business needs. Accordingly the
directors consider that the SPE is controlled by the Group and have consolidated it as a subsidiary in these financial
statements.
The Group would cease to control the SPE in the event of a “Relevant Event” as defined in the financing agreement,
for example, a delay in payment of interest. Were this to occur consolidation would cease at that point although the
Group has no intention, or anticipation, that any such event will occur.
5 NEW STANDARDS AND INTERPRETATIONS NOT APPLIED
The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of
these financial statements:
The Group intends to apply these standards and interpretations when they become effective.
International Accounting Standards (IAS/IFRS)
Effective Date
IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1
1 July 2012
IAS 12 Income Taxes (Amendment) – Deferred Taxes : Recovery of Underlying Assets
1 January 2013
IAS 19 Employee Benefits (Revised)
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IFRS 9 Financial Instruments – Classification and Measurement
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interest with Other Entities
IFRS 13 Fair Value Measurement
1 January 2013
1 January 2013
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 financial position or performance.
6 FINANCIAL RISK MANAGEMENT
The main risks arising from the Group’s financial 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 specific to the aviation sector, war, terrorism, and equipment failure.. 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.
38
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012
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 significant 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 financial status to determine
the credit limits to be granted. The Company performs ongoing credit evaluation of its customers’ financial 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 financial period in relation to each class of financial 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 diversification 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
2012
£
580,392
119,755
1,531,609
2,231,756
2011
£
1,137,182
74,916
18,167
1,230,265
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
£1,129,826).
trade receivable not past due
include receivables amounting
to £1,391,251 (2011:
2) Financial assets that are past due and/or impaired
There is no class of financial 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
iii) Interest rate risk
Group
2012
£
163,133
654,448
22,925
840,506
2011
£
49,216
51,223
–
100,439
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 fixing interest rates on loans to match the term of the underlying lease
term of the asset.
The interest rate and terms of repayment of financial assets and financial liabilities are disclosed in the respective
notes to the financial statements.
39
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012
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
offsetting assets and liabilities that are denominated in foreign currencies.
The Group does not utilise forward foreign currency contracts to hedge its exposure to specific currency risks.
The Group’s currency exposure based on the information provided to key management is as follows:
Group
2012
Pounds
Sterling
£
United
States
Dollars
£
Australian
Dollars
£
Euro
£
Singapore
Dollars
£
Total
£
Cash and cash equivalents
36,680
5,663,893
10,734
1,060
111,732
5,824,099
Trade and other receivables
246,943
10,833,491
3,711
52,172
37,600
11,173,917
Prepayments
Loans and borrowings
Deferred lease income
–
–
–
2,801,896
(91,924,603)
(526,675)
–
–
–
–
–
–
–
–
–
2,801,896
(91,924,603)
(526,675)
Other financial liabilities
(121,108)
(6,539,685)
(7,221)
(5,228)
(452,723)
(7,125,965)
Currency exposure
162,515
(79,691,683)
7,224
48,004
(303,391)
(79,777,331)
2011
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 financial 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)
Company
2012
Pounds
Sterling
£
United
States
dollars
£
Australian
Dollars
£
Euro
£
Singapore
Dollars
£
Total
£
Cash and cash equivalents
27,399
726,622
–
–
Trade and other receivables
241,772
11,733,016
3,711
51,795
3,128
5,374
757,149
12,035,668
Loans and borrowings
–
(1,782,892)
–
–
–
(1,782,892)
Other financial liabilities
(72,097)
(2,322,201)
(4,312)
(1,394)
(112,746)
(2,512,750)
Currency exposure
197,074
8,354,545
(601)
50,401
(104,244)
8,497,175
2011
Cash and cash equivalents
2,824,927
485,456
Trade and other receivables
6,786
5,947,153
Loans and borrowings
–
(2,990,446)
Other financial liabilities
(51,179)
(604,003)
Currency exposure
2,780,534
2,838,160
–
–
–
(4,385)
(4,385)
–
–
–
–
–
–
3,310,383
7,815
5,961,754
–
(2,990,446)
(60,329)
(52,514)
(719,896)
5,561,795
40
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 If the foreign currencies changes against the Pound Sterling by 10% (2011: 10%) with all other variables including
tax rate being held constant, the effects arising from the net financial 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
Euro against £
- strengthen
- weakened
SGD against £
- strengthen
- weakened
Increase/(Decrease)
Increase/(Decrease)
2012
Profit after tax
2012
Equity
2011
Profit after tax
2011
Equity
£
(7,969,168)
7,969,168
722
(722)
4,800
(4,800)
(30,339)
30,339
£
–
–
–
–
–
–
–
–
£
(3,217,355)
3,217,355
39,545
(39,545)
(458)
458
(8,812)
8,812
£
–
–
–
–
–
–
–
–
Increase/(Decrease)
Increase/(Decrease)
2012
Profit after tax
2012
Equity
2011
Profit after tax
2011
Equity
£
835,455
(835,455)
(60)
60
5,040
(5,040)
(10,424)
10,424
£
–
–
–
–
–
–
–
–
£
283,816
(283,816)
(439)
439
–
–
(5,251)
5,251
£
–
–
–
–
–
–
–
–
41
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 v) Liquidity risk
In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed
adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.
Short-term funding is obtained from bank loan facilities.
The table below analyses the maturity profile of the financial liabilities of the Group and the Company based on
contractual undiscounted cash flows.
Group
2012
Trade and other payables
Deferred lease income
Loans and borrowings
2011
Trade and other payables
Deferred lease income
Loans and borrowings
Company
2012
Trade and other payables
Loans and borrowings
2011
Trade and other payables
Loans and borrowings
vi) Capital risk
Less than 1
year
Between 1and
2 years
Between 2 and
5 years
Over 5 years
£
£
£
£
3,242,101
58,519
-
-
3,883,863
62,727
188,181
217,248
15,900,805
10,244,405
27,929,755
53,288,663
19,201,425
10,307,132
28,117,936
57,389,774
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
-
-
-
-
Less than 1
year
Between 1and
2 years
Between 2 and
5 years
Over 5 years
£
£
£
£
815,303
1,697,447
1,825,138
2,640,441
–
1,697,447
719,896
1,373,458
2,093,354
-
1,779,253
1,779,253
–
–
–
–
–
–
–
–
–
–
–
–
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
and to maintain a suitable capital structure so as to fund growth and 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.
42
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 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
2012
£
2011
£
2012
£
2011
£
93,226,468
36,603,949
3,538,493
399,959
52,521,056
49,460,598
16,797,626
12,518,409
145,747,524
86,064,547
20,336,119
12,918,368
64%
42%
17%
3%
The Group and the Company are in compliance with all externally imposed capital requirements for the financial
years ended 30 June 2012 and 30 June 2011.
vii) Fair value of financial assets and financial liabilities
The fair values of financial assets and financial liabilities reported in the balance sheet approximate the carrying
amount of those assets and liabilities.
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 significant influence over the other party in
making financial and operating decisions.
Some of the Company and Group’s transactions and arrangements are with related parties and the effect of these
on the basis determined between the parties is reflected in these financial statements. The balances are unsecured,
interest-free and without fixed 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 benefits-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 benefits. The key management’s remuneration is as follows:
Key management of the Group
- Directors’ fee paid to directors of the Company
- Directors’ fee paid to directors of subsidiaries
- Superannuation paid for a director of subsidiaries
- Salary paid to a director of the Company
Group
Company
2012
£
2011
£
2012
£
2011
£
151,657
323,368
25,560
116,746
92,500
79,273
92,500
313,942
21,949
94,073
–
–
–
–
–
–
The amount above includes remuneration in respect of the highest paid director as follows:
Aggregate emoluments
No contributions were made on behalf of any directors to money purchase pension schemes.
Group
2012
£
2011
£
157,716
185,680
43
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 (b) Significant Related party transactions:
Group
Company
2012
£
2011
£
2012
£
2011
£
Sales of goods to a related party 1
Sales of goods to a related party 2
Sales of goods to a related party 3
Sales of goods to a related party 4
Service fee income from a related party 6
Service rendered to a related party 5
198,070
659,547
4,652
933
9,470
75,235
36,219
–
–
–
–
109,352
Maintenance rent received from a related party 7
1,264,655
1,274,280
Rental income received from a related party 7
12,485,232
6,996,229
–
–
–
–
–
–
–
–
Rental income received from a related party 8
228,235
–
228,235
Service fee income from a related party 7
Sale of a subsidiary to a related party 6
Expenses rebilled to a related party 7
Interest income received from a related party 9
Interest income received from a related party 10
Interest income received from a related party 11
Service fee paid to Loeb Aron & Company Ltd 12
Service fee paid to Giant Mix Investment Ltd 13
Service fee paid to Takeoff Services Pte Ltd 14
Service fee paid to a related party 15
Consulting fee paid to a related party 15
Guarantee and commitment fee paid to a related party 16
Expenses rebilled from a related party 15
Arrangement fee paid to a related party 17
Advance fee paid to a related party 18
Interest expense paid to a related party 17
Interest expense paid to a related party 18
Interest expense paid to a related party 16
Purchase of aircraft from a related party 19
–
19,586
854,127
–
–
29,873
12,293
484
42,895
12,189
10,164
161,260
2,033
235,614
–
32,873
–
48,214
–
89,269
2,835
–
433
–
8,501
–
–
–
–
75,267
32,124
15,723
33,017
13,757
15,597
–
660,217
–
–
–
12,293
–
42,895
12,189
10,164
161,260
2,033
19,171
–
–
–
69,934
–
–
–
–
–
–
–
–
–
–
–
19,586
–
–
–
–
–
8,501
–
–
–
–
–
–
–
–
–
–
660,217
16,306
16,947
–
32,430
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 - Sales of goods to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a director of
Skywest Airlines (Singapore) Pte Ltd.
3 - Sales of goods to Takeoff Services Pte Ltd in which a director of the Company is also a director of Takeoff Services
Pte Ltd.
4 - Sales of goods to F11305 Pte Ltd in which a director of the Company is also a director of F11305 Pte Ltd.
5 - 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.
6 - On 28 June 2012, the Group disposed of its 100% interest in Capital Lease Australian Portfolio One Pty Ltd 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 Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a director of Skywest
Airlines (Australia) Pty Ltd.
8 - Received from F11305 Pte Ltd in which a director of the Company is also a director of F11305 Pte Ltd.
9 - Received from Takeoff Services Pte Ltd in which a director of the Company is also a director of Takeoff Services
Pte Ltd.
44
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 (b) Significant Related party transactions (cont‘d):
10 - Received from Giant Mix Investments Ltd in which a director of the Company is a director of Giant Mix Investments
Ltd.
11 - Received from CaptiveVision Capital Ltd in which a director of the Company is a director of CaptiveVision Capital
Ltd.
12 - Paid to Loeb Aron & Company Ltd in which a director of a subsidiary is a director of Loeb Aron & Company Ltd.
13 - Paid to Giant Mix Investment Ltd in which a director of a subsidiary is a director of Giant Mix Investment Ltd.
14 - Paid to Takeoff Services Pte Ltd in which a director of a subsidiary is a director of Takeoff Services Pte Ltd.
15 - Paid to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a director of Skywest
Airlines (Singapore) Pte Ltd.
16 - Paid to CaptiveVision Capital Ltd in which a director of the Company is a director of CaptiveVision Capital Ltd.
17 - 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.
18 - Paid to Fleet Solution Consulting Pte Ltd in which a director of a subsidiary is also a director of Fleet Solution
Consulting Pte Ltd.
19 - 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 last financial 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.
8 REVENUE
Rental income
Maintenance rent revenue
Management and service income
Sales of finished goods
9 OTHER INCOME
Interest income
Foreign currency exchange adjustment gain
Others
10 OTHER OPERATING EXPENSES
Claim on maintenance reserve expense
Depreciation of property, plant and equipment
Impairment loss on property plant and equipment
Loss on disposal of a subsidiary (1)
Group
2012
£
2011
£
19,797,214
14,052,487
1,264,655
1,274,280
205,514
830,636
128,940
835,721
22,098,019
16,291,428
Group
2012
£
59,643
84,738
16,168
2011
£
3,608
293,565
619
160,549
297,792
Group
2012
£
2011
£
1,257,494
1,242,589
6,515,334
4,964,453
990,924
396,213
–
–
9,159,965
6,207,042
(1) On 28 June 2012, the Company disposed of its 100% interest in Capital Lease Australian Portfolio One Pty Ltd for
a cash consideration of £854,127. The carrying amounts of identifiable net assets disposed of were £1,250,340 at
28 June 2012, resulting in a loss on disposal of £396,213.
45
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 11 FINANCE EXPENSES
Interest expense on secured borrowings
Guarantee and commitment fee
Amortisation of loan premium
Amortisation of deferred lease expense
12 STAFF COSTS
Directors’ fees paid to directors of the Company
Directors’ fee paid to directors of the subsidiaries
Wages and salaries
Employer’s contribution to defined contribution plans including superannuation
Warrant expense
13 PROFIT BEFORE TAXATION
Profit before taxation for the year is stated after charging / (crediting) the following:
Claim on maintenance reserve expense
Depreciation of property, plant and equipment
Foreign currency exchange adjustment gain
Auditors’ remuneration for audit services
Auditors’ remuneration for non-audit services
- Corporate taxation
14 TAXATION
Current tax expense
- United Kingdom
- Overseas
(Over)/Under provision in prior years tax expense
- United Kingdom
- Overseas
Deferred tax expense – United Kingdom
Deferred tax expense – overseas
Under provision in prior years deferred tax expense - overseas
Other tax – overseas – current
46
Group
2012
£
2011
£
4,721,597
2,680,231
–
75,267
225,283
4,207
–
–
4,951,087
2,755,498
Group
2012
£
151,657
323,368
116,746
25,560
65,386
2011
£
92,500
313,942
120,859
21,949
57,912
682,717
607,162
Group
2012
£
2011
£
1,257,493
1,242,589
6,515,334
4,964,453
(81,216)
(293,565)
21,750
19,000
2,250
1,000
Group
2012
£
2011
£
58,004
834,034
1,318
(6,140)
6,908
166,234
7,690
11,612
1,079,660
23,494
194,862
-
-
(142,724)
478,564
-
20,724
574,920
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 The standard rate of current tax for the period based on the Singapore standard rate of corporation tax is 17% (2011:
27.5%). The current tax expense for the period is less than 17% (2011: 27.5%) for the reasons set out in the following
reconciliation:
Profit before income tax
Tax calculated at tax rate of 17% (2011: 27.5%)
Effects of:
Non-taxable items
Capital allowances and other temporary differences
Different tax rates of other countries
Adjustment to tax charge in respect of previous periods
Total income tax expense
15 EARNINGS PER SHARE
a) Basic earnings per share (“EPS”)
Group
2012
£
2011
£
5,240,870
5,631,646
890,948
1,548,703
(83,792)
(411,527)
(552,436)
(1,018,857)
637,318
(4,822)
887,216
100,109
(72)
218,356
EPS is calculated by dividing the net profit attributable to members of the Company by the weighted average
number of ordinary shares in issue during the financial year.
Group
2012
£
2011
£
Net profit attributable to equity holders of the Company
3,307,126
3,627,293
Weighted average number of ordinary shares
Basic earnings per share
b) Diluted earnings per share
40,515,436
30,355,109
8.16 pence
11.95 pence
For the purpose of calculating diluted earnings per share, profit attributable to equity holders of the Company and
the weighted average number of ordinary shares outstanding are adjusted for the effects 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 financial 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 profit.
Diluted earnings per share attributable to equity holders of the Company is calculated as follows:
Group
2012
£
2011
£
Net profit attributable to equity holders of the Company
3,307,126
3,627,293
Weighted average number of ordinary shares
40,515,436
30,355,109
Adjustment for:
- Warrants
Weighted average number of ordinary shares
Diluted earnings per share
165,337
286,238
40,680,773
30,641,347
8.13 pence
11.84 pence
47
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 16 TRADE AND OTHER RECEIVABLES
Current
Group
Company
2012
£
2011
£
2012
£
2011
£
Non-trade receivables -subsidiaries
Trade receivables - subsidiaries
–
–
–
–
Non-trade receivables – related parties
3,027,831
988,380
Trade receivables – related party
1,832,212
1,134,033
6,139,552
309,156
119,755
333,283
20,091
–
10,053
9,349
–
–
–
–
987,250
–
–
15,990
9,373
–
–
–
399,544
17,557
369,925
–
19,749
103,514
96,232
23,463
30,454
440,795
10,782
178,271
–
4,639,985
4,639,985
5,770,332
7,542,395
6,632,083
5,961,754
Group
Company
2012
£
2011
£
2012
£
2011
£
Trade receivables
Other receivables
Prepaid expense
Tax recoverable
Advances – related party
Accrued income – related party
Deposit for aircraft
Non-current
Deposit for aircraft
5,403,585
–
5,403,585
–
In respect of the Company, the current amounts due from subsidiaries include the following:
a) £222,251 (2011: £279,520) from F100 Pty Ltd. Management and service income of £200,000 (2011: £175,000).
b) £89 (2011: £10,421) and trade receivables of £119,755 (2011: £Nil) from MSN 429 Limited. Rental income of
£1,408,297 (2011: £1,422,565) were received from MSN 429 Limited.
c) £Nil (2011: £202) from Capital Lease Australian Portfolio One Pty Ltd.
d) £274,272 (2011: £Nil) from Capital Lease Aviation Plc. Dividend income of £274,272 (2011: £Nil) were received
from Capital Lease Aviation Plc.
e) £197,090 (2011: £18,053) from Avation.net Inc. Management and service income of £Nil (2011: £22,475) and
interest income of £800 (2011: £Nil).
f) £681,095 (2011: £960) from Avation Eastern Fleet Pte. Ltd
g) £259,395 (2011: £Nil) from Avation Eastern Fleet II Pte. Ltd
h) £1,007 (2011: £Nil) from Airframe Leasing (S) Pte. Ltd
i) £4,504,353 (2011: £Nil) from Avation Airframe Holding Pte. Ltd
In respect of the Company, the current amounts due from related parties include the following:
a) £Nil (2011: £19,586) 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 £Nil (2011:£19,586) were paid to Skywest Airlines
(Australia) Pty Ltd.
b) £107,839 (2011: £686,730) from CaptiveVision Capital Ltd in which a director of the Company is a director of
CaptiveVision Capital Ltd.
c) £225,242 (2011: £280,934) from Takeoff Services Pte. Ltd. in which a director of the Company is a director of
Takeoff Services Pte. Ltd.
d) £202 (2011: £Nil) from Capital Lease Australian Portfolio One Pty Ltd. in which a director of the Company is a
director of Capital Lease Australian Portfolio One Pty Ltd.
e) Trade receivables of £20,091 (2011: £Nil) from F11305 Pte Ltd. in which a director of the Company is a director of
F11305 Pte Ltd. Rental income of £228,235 (2011: £Nil) was received from F11305 Pte Ltd.
48
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 In respect of the group, the current amounts due from related parties include the following:
a) Trade receivables of £1,812,121 (2011: £1,134,033) from Skywest Airlines (Australia) Pty Ltd, in which a director
of the Company is a director. Rental income of £12,485,232 (2011: £6,996,229), maintenance rent revenue of
£1,264,655 (2011: £1,274,280), sales of finished goods of £783,292 (2011: £659,547) and management and
service income of £45,688 (2011: £109,352) were received from Skywest Airlines (Australia) Pty Ltd.
b) Trade receivables of £20,091 (2011: £Nil) from F11305 Pte Ltd. in which a director of the Company is a director of
F11305 Pte Ltd. Rental income of £228,235 (2011: £Nil) were received from F11305 Pte Ltd.
c) £Nil (2011: £19,586) from Skywest Airlines (Australia) Pty Ltd in which a director of the Company is a director of
Skywest Airlines (Australia) Pty Ltd.
d) £107,839 (2011: £686,838) from CaptiveVision Capital Ltd in which a director of the Company is a director of
CaptiveVision Capital Ltd.
e) £225,242 (2011: £280,934) from Takeoff Services Pte. Ltd. in which a director of the Company is a director of
Takeoff Services Pte. Ltd.
f) £202 (2011: £Nil) from Capital Lease Australian Portfolio One Pty Ltd. in which a director of the Company is a
director of Capital Lease Australian Portfolio One Pty Ltd.
g) £2,694,548 (2011: £1,022) from Skywest Airlines (S) Pte. Ltd. in which a director of the Company is a director of the
Skywest Airlines (S) Pte. Ltd.
h) £19,749 (2011: £10,782) due from 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.
i) Accrued income of £103,514 (2011: £178,271) 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 PREPAYMENTS
Group
Company
2012
£
2011
£
2012
£
2011
£
246,943
6,841
241,772
6,786
10,833,492
7,124,170
11,733,016
5,947,153
3,711
52,171
37,600
402,672
42
8,670
3,711
51,795
5,374
–
–
7,815
11,173,917
7,542,395
12,035,668
5,961,754
Prepayments represent loan premiums on amount due to outside parties and are amortised over 10 years.
18 INVENTORIES
Group
Company
2012
£
2011
£
2012
£
2011
£
Finished goods, at cost
9,168
1,946
–
–
The cost of inventories recognised as an expense and included in the cost of sales amounts to £713,126 (2011:
£739,278).
49
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 19 INVESTMENT IN SUBSIDIARIES
Unquoted equity shares, at cost
Quoted equity shares, at cost
Quoted equity shares, at market value
Company
2012
£
2011
£
1,390,237
1,390,236
1,755,553
50,100
3,145,790
1,440,336
10,256,645
7,515,000
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 effective
equity interest
2012
2011
2012
2011
£
£
%
%
The subsidiaries held directly by the Company:
Avation.net Inc (a)
Procurement
United States of
America
1,390,181 1,390,181
99.96
99.96
Capital Lease Aviation PLC (b)
Leasing of aircraft United Kingdom 1,755,553
50,100
F100 Pty Ltd (c)
MSN 429 Ltd (b)
Leasing of aircraft Australia
Leasing of aircraft United Kingdom
Avation Eastern Fleet Pte Ltd (e)
Leasing of aircraft Singapore
Avation Eastern Fleet II Pte Ltd (a) Leasing of aircraft Singapore
Avation Airframe Holding Pte Ltd
(e)
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
Capital Lease Aviation (S) Pte Ltd
(a)
Leasing of aircraft Singapore
The subsidiary held by Avation Eastern Fleet Pte Ltd:
5
1
49
1
–
–
–
–
62.07
51.18
5
1
100.00
100.00
100.00
100.00
49
100.00
100.00
–
–
–
–
–
100.00
–
–
–
–
51.18
62.07
62.07
51.18
–
Airframe Leasing (S) Pte Ltd (e)
Leasing of aircraft Singapore
–
– 100.00
100.00
The subsidiary held by Avation
Eastern Fleet II Pte Ltd:
Airframe Leasing (S) II Pte Ltd (a) Leasing of aircraft Singapore
–
– 100.00
–
(a) Audited by Jasmine Chua and Associates, Singapore
(b) Audited by Kingston Smith LLP, London, United Kingdom
(c) Audited by Moore Stephens, Perth, Australia
(d) Audited by Nexia BT, Malta
(e) Audited by Ernst & Young LLP, Singapore
50
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 Significant transactions with subsidiaries are as follows:
Rental income
Management and service fee income
Dividend income
20 PROPERTY, PLANT AND EQUIPMENT
Group
2012
Cost or valuation:
At beginning of year
Additions
Disposal of subsidiary
Currency realignment
At end of year
Representing:
Cost
Valuation
Accumulated depreciation:
At beginning of year
Depreciation for the year
Impairment loss
Disposal of subsidiary
Currency realignment
At end of year
Net book value:
At beginning of year
At end of year
Company
2012
£
2011
£
1,408,297
1,422,565
200,000
274,272
197,475
–
Furniture
and
equipment
£
Aircraft
£
Total
£
7,539
1,789
98,053,541
98,061,080
69,338,834
69,340,623
–
(13,904,233)
(13,904,233)
193
2,384,128
2,384,321
9,521
155,872,270
155,881,791
9,521
–
9,521
–
155,872,270
155,872,270
9,521
155,872,270
155,881,791
2,220
2,505
–
–
90
13,162,670
13,164,890
6,512,830
6,515,335
5,551,385
5,551,385
(6,798,079)
(6,798,079)
398,515
398,605
4,815
18,827,321
18,832,136
5,319
84,890,871
84,896,190
4,706
137,044,949
137,049,655
51
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 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
Company
2012
Cost or valuation:
At beginning of year
Additions
At end of year
Representing:
Cost
Valuation
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
52
Furniture
and
equipment
£
Aircraft
£
Total
£
995
101,640,622
101,641,617
6,652
913,768
920,420
–
1,112,985
1,112,985
(108)
7,539
(5,613,834)
(5,613,942)
98,053,541
98,061,080
7,539
–
7,539
–
98,053,541
98,053,541
7,539
98,053,541
98,061,080
995
1,295
–
(70)
9,120,044
9,121,039
4,963,158
4,964,453
(229,056)
(691,476)
(229,056)
(691,546)
2,220
13,162,670
13,164,890
–
92,520,577
92,520,577
5,319
84,890,871
84,896,190
Furniture
and
equipment
£
Aircraft
£
Total
£
–
5,941,237
5,941,237
1,173
1,173
1,173
–
1,173
5,941,237
5,942,410
–
1,173
–
5,941,237
5,941,237
1,173
5,941,237
5,942,410
–
260
260
286,619
299,116
585,735
286,619
299,376
585,995
–
5,654,618
5,654,618
913
5,355,502
5,356,415
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 Company
2011
Cost or valuation:
At beginning of year
Additions
Revaluation surplus
At end of year
Representing:
Valuation
Accumulated depreciation:
At beginning of year
Depreciation for the year
Increase on revaluation
At end of year
Net book value:
At beginning of year
At end of year
Assets held on trust
Furniture
and
equipment
Aircraft
£
£
Total
£
–
–
–
–
–
–
–
–
–
–
–
5,014,814
5,014,814
901,190
25,233
901,190
25,233
5,941,237
5,941,237
5,941,237
5,941,237
61,989
226,093
(1,463)
286,619
61,989
226,093
(1,463)
286,619
4,952,825
4,952,825
5,654,618
5,654,618
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 beneficial owner. The aircraft is leased
by Wilmington to a US airline.
Assets held under finance lease
During the financial year, the Group and Company acquired aircraft with an aggregated cost of £23,694,800 (2011: £Nil)
and by means of finance leases respectively.
The carrying amount of the Group and Company’s aircraft held under finance leases at the end of the reporting period
were £28,105,337 and £4,746,001 (2011: £4,994,400) respectively.
Assets pledged as security
In addition to assets held under finance leases, the Group’s aircraft with carrying values of £108,330,111 (2011:
£79,236,253) are mortgaged to secure the Group’s borrowings (Note 24).
The Group’s property, plant and equipment include borrowing costs from bank loans specifically used for purchase of
aircraft. During the financial year, the borrowing costs capitalised as cost of property, plant and equipment amount to
£Nil (2011: £12,578).
The Group’s older aircraft were revalued in June 2012 by independent valuers, on the basis of lease encumbered value
as of 30 June 2012 and the carrying value of the aircraft is reduced to its recoverable value. Impairment losses were
recognised as an expense immediately.
If the aircraft were measured using the cost model, the carrying amounts would be as follows:
Cost
Accumulated depreciation
Net carrying value
Group
2012
£
2011
£
145,106,979
92,899,707
(14,187,391)
(11,904,413)
130,919,588
80,995,294
53
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 21 GOODWILL ON CONSOLIDATION
Group
2012
£
2011
£
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 flow
projections from financial budgets approved by management covering the next financial year.
Management believes that no reasonably possible change in any of the above key assumptions would cause the
carrying value of the CGU to materially exceed its recoverable amount.
22 TRADE AND OTHER PAYABLES
Current
Trade payables - subsidiaries
Non-trade payables - subsidiaries
Related parties
Director
Trade payables
Deferred income – subsidiaries
Deferred income – related parties
Deferred income
Other payables
Accrued expenses
Non-current
Subsidiaries
Related parties
Group
Company
2012
£
2011
£
–
–
–
–
333,143
622,860
–
62
422,825
462,376
–
891,460
480,300
312,084
802,289
–
–
996,320
404,821
845,423
3,242,101
3,331,862
2012
£
35,259
255,153
73,874
–
284,647
119,756
9,375
–
–
37,239
815,303
2011
£
–
85,093
52,878
–
31,257
114,089
–
–
404,821
31,758
719,896
Group
Company
2012
£
2011
£
2012
£
2011
£
–
–
365,028
3,883,863
3,883,863
942,009
942,009
1,332,419
1,697,447
–
–
–
In respect of the Company, the current and non-current amounts due to subsidiaries include the following:
Trade payables of £35,259 (2011: £Nil) due to Capital Lease Aviation (S) Pte Ltd.
a) £Nil (2011: £74,275) due to F100 Pty Ltd.
b) £Nil (2011: £10,818) due to Capital Lease Aviation PLC.
c) £255,153 (2011: £Nil) due to Airframe Leasing (S) II Pte Ltd.
d) Deferred income of £119,756 (2011: £114,089) from MSN 429 Limited.
e) Deposit collected of £365,028 (2011: £Nil) from MSN 429 Limited.
In respect of the Company, the current and non-current amounts due to related parties include the following:
a) £412 (2011: £16,807) due to Skywest Airlines Ltd in which a director of the Company is also a director.
b) £73,462 (2011: £36,071) due to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a
director.
54
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 c) Deferred income of £9,375 (2011: £Nil) from F11305 Pte Ltd in which a director of the Company is also a director.
d) Deposit collected of £45,303 (2011: £Nil) from F11305 Pte Ltd in which a director of the Company is also a director.
e) £1,287,116 (2011: £Nil) due to Fleet Solution Consulting Pte Ltd in which a director of the Company is also a
director.
In respect of the Group, the current and non-current amounts due to related parties include the following:
a) £40,801 (2011: £61,680) due to Skywest Airlines Ltd in which a director of the Company is also a director.
b) £292,342 (2011: £74,005) due to Skywest Airlines (Singapore) Pte Ltd in which a director of the Company is also a
director.
c) £Nil (2011: £341,414) due to Fleet Solution Consulting Pte Ltd in which a director of the Company is also a director
and includes accrued interest on this loan amount to £Nil (2011: £13,656).
d) £Nil (2011: £140,830) due to CaptiveVision Capital Ltd in which a director of the Company is also a director and a)
includes accrued interest on this payable amount to £Nil (2011: £1,602).
e) £Nil (2011: £4,931) due to Skywest Airlines (Australia) Pty Ltd in which a director of the Company is also a director.
f) Deferred income of £9,375 (2011: £Nil) from F11305 Pte Ltd in which a director of the Company is also a director.
g) Deferred income of £882,085 (2011: £Nil) from Skywest Airlines (Australia) Pty Ltd in which a director of the
subsidiary is also a director.
h) £1,287,116 (2011: £Nil) due to Fleet Solution Consulting Pte Ltd in which a director of the Company is also a
director.
i) Deposit collected of £45,303 (2011: £Nil) from F11305 Pte Ltd in which a director of the Company is also a director.
j) Deposit collected of £2,551,444 (2011: £942,009) from Skywest Airlines (Australia) Pty Ltd in which a director of the
Company is also a director.
The amount due to subsidiaries and related parties are unsecured, interest free and without fixed 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:
Pound Sterling
United States Dollars
Australian Dollars
Euro
Singapore Dollars
23 DEFERRED LEASE INCOME
Group
Company
2012
£
2011
£
2012
£
121,108
76,503
72,097
6,539,685
4,027,341
2,322,201
7,221
5,228
18,308
5,815
4,312
1,394
452,722
145,904
112,746
7,125,964
4,273,871
2,512,750
2011
£
51,179
604,003
4,385
–
60,329
719,896
The deferred lease income is the difference between the present value and the principal amount of the deposits received
from a related party. The deferred lease income is amortised through the statement of comprehensive income on a
straight line basis over the lease period of 9 years.
55
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 24 LOAN AND BORROWINGS
Group
Company
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
Secured borrowings XI
Secured borrowings XII
Secured borrowings XIII
Secured borrowings XIV
2012
£
683,619
187,398
498,959
2011
£
1,750,076
707,461
904,671
1,612,644
2,525,577
10,131,761
11,379,987
10,696,681
11,949,492
–
–
–
1,584,762
1,594,715
1,053,687
865,206
1,515,975
10,687,725
10,682,730
11,026,363
10,948,763
–
–
–
–
2012
£
2011
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Obligations under finance lease
23,902,754
2,990,446
1,782,892
2,990,446
Total
91,924,603
37,956,849
1,782,892
2,990,446
Less: current portion of loan borrowings
(12,522,177)
(9,865,455)
(1,350,401)
(1,252,377)
79,402,426
28,091,394
432,491
1,738,069
Obligations under finance lease
Group
Company
2012
£
2011
£
2012
£
2011
£
Future minimum lease payments due:
Within one year
4,275,308
1,373,266
1,408,877
1,373,266
After more than one year but within 5 years
11,902,172
1,787,175
436,450
1,787,175
More than 5 years
24,000,719
–
–
–
40,178,199
3,160,441
1,845,327
3,160,441
Less: Finance charges
(16,275,445)
(169,995)
(62,435)
(169,995)
Present value of minimum lease payments
23,902,754
2,990,446
1,782,892
2,990,446
The present value of minimum lease payments is
analysed as follows:
Within one year
2,093,215
1,252,377
1,350,401
1,252,377
After more than one year but within 5 years
4,301,301
1,738,069
432,491
1,738,069
More than 5 years
Balance at end of year
17,508,238
–
–
–
23,902,754
2,990,446
1,782,892
2,990,446
Secured borrowing I is for a five year period and maturing in 2013, repayable monthly. The loan is secured by fixed and
floating charges over all aircraft purchased by its subsidiary, F100 Pty Ltd (“F100”).
Secured borrowing II is for a four year period and maturing in 2012, repayable monthly. The loan is secured by fixed and
floating charges over all aircraft purchased by its subsidiary, F100.
Secured borrowing III is for a five year period and maturing in 2013, repayable monthly. The loan is secured by fixed
and floating charges over all aircraft purchased by its subsidiary, F100.
Secured borrowing IV is for a five year period to January 2013, repayable monthly. The loan is secured by the aircraft
of the its subsidiary, Capital Lease Aviation PLC (“CLA”).
56
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 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 five 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 five 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 fixed
and floating charges over all aircraft purchased by its subsidiary, F100.
Secured borrowing XI – XIV, the Group entered into loan agreements (“ECA Loan Facilities”) with a bank to partially
finance the purchase of aircraft. These aircraft have been leased to other related parties. The loans are secured by the
following:
(a) Aircraft mortgages in respect of the aircraft purchased with the proceeds of ECA Loan Facilities (the “Aircraft”)
(b) Security assignments of the Group’s right under the leases and other contractual documents relating to the Aircraft
(c) A charge over its bank accounts into which lease payments relating to the Aircraft are received;
(d) A charge over the entire issued share capital of Avation Eastern Fleet Pte Ltd (a subsidiary)
Each advance under a ECA Loan Facility is a separate 10 year loan whose term matches the term of the lease of the
Aircraft purchased with the proceeds of such loan. The security given by the Group in respect of each such loan is for
a term also matching the term of the loan and lease of the corresponding Aircraft.
The Group may not deal with any Aircraft nor the associated assets and rights relating to each such Aircraft without the
consent of the bank under the ECA Loan Facility, save to the extent that such transaction would enable the Group to
repay the loan relating to the Aircraft.
The average interest rates for the outside party borrowings range from 4.00% to 9.90% per annum (2011: 5% to 6%
per annum).
All the loans are denominated in United States Dollars. The carrying amounts of the borrowings approximate their fair
values.
25 SHORT-TERM PROVISIONS
Maintenance reserve claim
Movement in provision for maintenance provisions claim is as follows:
Balance at beginning of financial year
Provision made during the financial year
Provision used during the financial year
Disposal of a subsidiary
Currency realignment
Balance at end of financial year
Group
2012
£
2011
£
1,901,456
2,849,839
Group
2012
£
2011
£
2,849,839
2,047,185
1,879,254
1,242,589
(1,275,104)
(311,597)
(1,611,587)
–
59,054
(128,338)
1,901,456
2,849,839
A provision of £1,879,254 (2011: £1,242,589) was made during the year ended 30 June 2012. This provision is based
on maintaining a sufficient balance to match expected drawdowns of reserves over the lease period of the aircraft.
There were drawdowns totalling £1,275,104 (2011: £311,597) on the reserves for the year ended 30 June 2012.
57
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 26 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)/ liabilities
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
2012
£
2012
£
Net
2012
£
–
–
–
–
–
–
3,367,889
3,367,889
413,034
18,805
413,034
18,805
3,799,728
3,799,728
–
–
3,799,728
3,799,728
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
Movement in temporary differences during the financial year:
Group
Balance
1 July
2011
£
Recognised
in profit
and loss
£
Recognised
in equity
£
Currency
realignment
£
Balance
30 June 2012
£
Property, plant and equipment
4,385,283
89,569
(267,538)
(839,425)
3,367,889
Other items
Tax losses carried forward
521,605
(94,950)
4,811,938
(274,084)
114,562
(69,953)
–
–
165,513
(807)
413,034
18,805
(267,538)
(674,719)
3,799,728
Movement in temporary differences during the last financial year:
Group
Balance
1 July
2010
£
Recognised
in profit
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)
4,248,024
469,124
85,199
335,840
–
–
(6,960)
10,708
521,605
(94,950)
482,322
(254,248)
4,811,938
58
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 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
Liabilities
2012
£
2012
£
Net
2012
£
Assets
2011
£
–
–
–
–
–
–
–
–
–
–
–
–
201,754
201,754
–
–
–
–
201,754
201,754
–
–
201,754
201,754
Liabilities
2011
£
Net
2011
£
138,340
138,340
–
–
–
–
138,340
138,340
–
–
138,340
138,340
Movement in temporary differences during the financial year:
Company
Balance
1 July 2011
Recognised
in profit and
loss
Recognised
in equity
Balance
30 June 2012
£
£
£
£
Property, plant and equipment
138,340
63,414
–
201,754
Movement in temporary differences during the last financial year:
Company
Balance
1 July 2010
Recognised
in profit and
loss
Recognised
in equity
Balance
30 June 2011
£
£
£
£
Property, plant and equipment
193,266
(59,464)
4,538
138,340
27 SHARE CAPITAL
Company
2012
£
2011
£
Allotted, called up and fully paid:
42,374,463 (2011: 38,607,220) ordinary shares of 1 penny each
423,745
386,072
a) On 9 December 2011, the Company issued 1,818,182 ordinary shares of 1 penny each following a private placement
exercise for £2,000,000.
b) On 12 December 2011, the Company issued 301,280 ordinary shares of 1 penny each following the exercise of
warrants by 3 warrant holders for £130,954.
c) On 20 January 2012, the Company issued 1,647,781 ordinary shares of 1 penny each in consideration for the
additional 10.89% of the shares acquired in Capital Lease Aviation PLC for £1,705,453.
5959
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 28 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 profit
Improvement in return to shareholders
The following share-based payment arrangements were in existence during the current reporting period:
Warrant series beginning
signed on
Balance at Granted Exercised
during
the year
during
the year
of year
Expired/
Cancelled
Balance at
end of
year
Expiry
date
Fair value
Exercise at grant
price
Date
(1) 21 Dec 2009
326,280 –
(226,280)
(100,000)
– 21 Dec 2011
35.5 p
3.88 p
(2) 02 Dec 2010
550,000
–
(75,000)
(3) 14 Dec 2011
–
800,000
–
–
–
475,000 01 Dec 2012
67.5 p
13.63 p
800,000 11 Dec 2013
110.5 p
8.17 p
The weighted average fair value of the warrants granted during the financial year is 8.17 pence (2011:13.63 pence). The
value of the warrants granted during the year is £65,386 (2011: £57,912).
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 effects 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
14 December 2011
Warrant series signed on
21 December 2010
110.5 pence
110.5 pence
20%
2 years
0.91%
0.35%
67.5 pence
67.5 pence
50%
2 years
0.88%
3.23%
The Company issued a total of 800,000 warrants during the financial year at 110.5 pence when the then market price
was 110.5 pence.
29 CAPITAL COMMITMENTS
Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements are as
follows:
Group
2012
£
2011
£
Property, plant and equipment
99,410,201
87,921,230
60
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 30 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:
Within one year
In the second to fifth years inclusive
More than five years
b) Contingencies
Group
2012
£
2011
£
18,907,095
13,867,576
45,838,254
22,668,333
37,207,115
–
The Company’s subsidiary, F100 Pty Ltd receives maintenance rent from the lease of its aircraft in addition to the
base rent. Lessees may be entitled to be reimbursed for specific 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 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 specific maintenance rent activity to date under the lease for that aircraft.
The carrying out of each specific maintenance activity is dependent on the number of cycles and flying hours
conducted by the aircraft.
Consequently, F100 Pty Ltd have a contingent liability which is conditional on the volume of cycles and flying 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 specific maintenance rent
activity for that aircraft.
Any unclaimed balance that F100 Pty Ltd holds at the end of the lease is not refundable to the lessees.
During the financial year ended 30 June 2012, the Group had received £1,264,655 (2011: £1,274,280) 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 Group in calculating the final future claimable amount and the timing of such claims from the
maintenance reserve funds.
31 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 different
from those of other segments.
The primary format, business segments, is based on the Group’s management and internal reporting structure. 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 profit 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.
61
Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 b) Primary reporting segment – business segments
During the year ended 30 June 2012, 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 financial period.
Group
Financial year ended 30 June 2012
Revenue & other operating income
- External sales
- Other income
Total of all segments
Less: elimination
Consolidated revenue
Group
Financial year ended 30 June 2012
Results
Segment results
Finance income
Finance expense
Unallocated corporate expenses
Profit before taxation
Taxation
Profit after taxation
Other segment items
Capital expenditure & valuation movement
- property, plant and equipment
Depreciation
Group
Financial year ended 30 June 2012
Segment assets
Unallocated assets
Consolidated total assets
Segment liabilities
Trade and other payables
Deferred lease income
Provisions of taxation
Short term provisions
Loans and borrowings
Deferred tax liabilities
Unallocated liabilities
Consolidated total liabilities
62
Aircraft
leasing
£
Business
procurement
£
Total
£
29,786,084
876,325
30,662,409
830,727
(7,862)
822,865
31,485,274
(9,226,706)
22,258,568
Aircraft
leasing
£
Business
procurement
£
Total
£
21,221,694
163,199
21,384,893
84,737
(4,951,087)
(11,277,673)
5,240,870
(1,079,660)
4,161,210
69,340,007
6,513,349
615
69,340,622
1,985
6,515,334
Aircraft
leasing
£
Business
procurement
£
Total
£
157,335,380
796,523
158,131,903
–
158,131,903
6,243,980
881,984
7,125,964
526,675
332,421
1,901,456
91,924,603
3,799,728
–
–
–
–
–
–
–
526,675
332,421
1,901,456
91,924,603
3,799,728
–
105,610,847
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 notes to FinanCial statements
FOR THE YEAR ENDED 30 JUNE 2012
Group
Financial year ended 30 June 2011
Revenue & other operating income
- External sales
- Other income
Total of all segments
Less: elimination
Consolidated revenue
Group
Financial year ended 30 June 2011
Results
Segment results
Finance income
Finance expense
Unallocated corporate expenses
Profit before taxation
Taxation
Profit after taxation
Other segment items
Capital expenditure & valuation movement
- property, plant and equipment
Depreciation
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
Aircraft
Business
leasing
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
Business
leasing
procurement
Total
£
£
£
15,346,354
205,796
15,552,150
3,067
(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
Aircraft
Business
leasing
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
63
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 2012
Revenue
£
Capital
expenditure
and valuation
movements
£
Total
assets
£
Australia
United States
Denmark
Malta
United Kingdom
Other
Group
Financial year ended 30 June 2011
Australia
United States
Denmark
Malta
United Kingdom
Other
Group
Financial year ended 30 June 2012
Australia
United States
Denmark
Group
Financial year ended 30 June 2011
Australia
United States
Denmark
14,317,892
69,338,833
90,946,768
1,404,541
5,682,150
–
89,482
603,954
–
–
–
–
5,662,061
41,684,917
599,386
11,514,454
1,789
7,724,317
22,098,019
69,340,622
158,131,903
Capital
expenditure
and valuation
movements
£
Total
assets
£
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
Revenue
£
9,185,359
1,396,158
5,660,100
–
–
49,811
16,291,428
2,033,405
98,067,302
Net book value
Aircraft
£
89,698,256
5,661,776
41,684,917
137,044,949
Net book value
Aircraft
£
35,197,379
7,074,476
42,619,016
84,890,871
During the year, certain customers accounted for greater than 10% of the Group’s total revenues. There is one
customer that accounts for £14,317,892 (65%) of the Group’s total revenues. These revenues were based in
the Australia operating segment. There is one customer that accounts for £5,682,150 (26%) of the Group’s total
revenue. These revenues were based in the Denmark segment.
64
ANNUAL REPORT 2012Notes to FiNaNcial statemeNtsFOR THE YEAR ENDED 30 JUNE 2012 notes to FinanCial statements
FOR THE YEAR ENDED 30 JUNE 2012
32 CONTINGENT LIABILITIES
Guarantees
Group
2012
£
2011
£
23,063,624
32,440,826
The maximum estimated amount the Group could become liable is as shown above.
The Group has guaranteed the loans of its subsidiaries, Capital Lease Malta Ltd and F100 Pty Ltd.
33 SUBSEQUENT EVENTS
Subsequent to the end of the reporting period, the following events have occurred:
1) On 5 July 2012, the Company issued 2,000,000 ordinary shares of 1 penny each following a private placement
exercise for £2,000,000.
2) The Group took delivery of 2 ATR 72-600 series aircraft on 3 August 2012 and 6 September 2012.
3) Following a confirmation from Virgin Australia in October 2012 of its desire for an additional three ATR 72-600
aircraft to be made available to it throughout the course of 2014, the Group will exercise aircraft purchase options
to acquire three new additional ATR 72-600 aircraft for this purpose.
34 ULTIMATE HOLDING COMPANY
No party controls the Company.
35 APPROVAL OF FINANCIAL STATEMENTS
The financial statements of the Company and the consolidated financial statements of the Group for the financial period
ended 30 June 2012 were authorised for issue by the Board of Directors on 30 October 2012.
65
ANNUAL REPORT 2012
ReGisteR oF top 20 shaReholdeRs
(AS AT 30 OCTOBER 2012)
Name of Shareholder
FITEL NOMINEES LIMITED
HSBC CLIENT HOLDINGS NOMINEE (UK) LIMITED
LYNCHWOOD NOMINEES LIMITED
FITEL NOMINEES LIMITED
FITEL NOMINEES LIMITED
CHASE NOMINEES LIMITED
APOLLO NOMINEES LTD
CREDIT SUISSE SECURITIES (EUROPE) LIMITED
HSBC GLOBAL CUSTODY NOMINEE (UK) LIMITED
VIDACOS NOMINEES LIMITED
LOEB ARON & COMPANY LTD
FITEL NOMINEES LIMITED
HARGREAVE HALE NOMINEES LIMITED
HSBC GLOBAL CUSTODY NOMINEE (UK) LIMITED
FITEL NOMINEES LIMITED
FITEL NOMINEES LIMITED
FITEL NOMINEES LIMITED
THE CORPORATION OF LLOYDS
SMITH & WILLIAMSON NOMINEES LIMITED
W H IRELAND NOMINEES LIMITED
Holding
(Number of shares)
6,729,490
5,173,463
3,404,972
2,900,000
2,369,156
2,250,000
2,011,879
1,583,244
1,437,500
1,363,549
920,000
750,000
715,000
531,079
500,000
500,000
490,000
480,922
394,000
392,100
66
ATR-72 aircraft under construction for Avation
at the Avions de Transport Régional plant
at Toulouse Airport at Blagnac, France
DIRECTORS:
Robert Jeffries Chatfield
andrew Baudinette
Roderick mahoney
Bryant mclarty
COMPAnY SECRETARIES:
siobhan Cool
duncan scott
Jason Gollogly
REGISTERED OFFICE:
5th Floor Cheyne house
Crown Court 61-63 Cheapside
london
eC2V 6aX
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:ln
aVap
Ftse sector:
industrial transportation
Ftse sub sector:
transportation services