AnnuAl RepoRt 2013 Annual Report 2013 our Fleet (AS AT 30 JUNE 2013) Aircraft type In operation ordered options Fokker 100 AtR 72-500 AtR 72-600 Airbus A320-200 Airbus A321-200 5 6 6 3 3 - - - - 10 10 - - - - total 23 10 10 2 Contents Chairman’s Statement About Avation PLC Company Overview Board of Directors Strategy Report of the Directors Directors’ Remuneration Report Directors’ Responsibilities Report of the Auditors page 4 6 8 10 11 12 14 17 18 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 page 19 20 22 23 24 26 27 29 30 86 3 Chairman’s Statement On behalf of your Board of Directors, I present to you the audited financial statements for Avation PLC and its subsidiaries for the year ended 30th June 2013 and to inform you of the progress that the Avation Group has made. The highlights are: • • • • Earnings per share increased by 88% to 23.25 US cents; Fleet value increased to US$347 million; EBITDA increased by 46% to US$38.3 million; Revenue increased by 22% to US$42.7 million; • Dividends increased by 10% to 1.78 US cents per share; • Consolidated net profit after tax increased by 110% to US$10.5 million; • Delivery of six new ATR 72-600 aircraft, an Airbus A321 and an Airbus A320; • Number of aircraft in fleet increased to 23 from 15; Your Board is pleased to report that in respect of the year ended 30 June 2013 the consolidated net profit after tax was US$10,515,901 (2012: US$5,009,457) on revenues of US$42,739,991 (2012: US$35,001,218) with earnings per share of 23.25 US cents (2012: 12.36 US cents). Total returns comprise income from cash yield from aircraft lease payments plus the net asset value (capital) realisable from the sale of the aircraft after repayment of associated debt obligations. In the period to 30 June 2013, the Group delivered six new ATR 72-600 aircraft, acquired an Airbus A321 and, pursuant to a finance lease, an Airbus A320. Avation is scheduled to deliver eight ATR 72-600 before the end of FY2014 and an additional two ATR 72-600 in the second half of calendar year 2014. The Avation fleet of 23 aircraft has an average age and lease term of 8.7 years and 5.7 years respectively with a current customer base of airlines in Australia, Europe and North America. The Company has also recently announced the securing of Fiji Airways as a new airline customer for a new aircraft in 2014. Avation’s fleet is diverse, comprising the new ATR aircraft and other aircraft including Airbus A321 and A320 along with a small number of older aircraft. Avation targets continual fleet renewal and financial management to ensure the retention of asset values and maximisation of earnings. As of June 30th, total assets increased by US$147,274,204 to US$394,383,300. Corresponding liabilities increased by US$131,212,593 to US$296,146,941 resulting in net assets at year end of US$98,236,359. In the period to 30 June 2013, the Company secured committed debt funding of over US$100 million covering aircraft deliveries to January 2014 from traditional aircraft financing banks and other institutional lenders. Debt facilities are primarily asset based 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 future 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. 4 Annual Report 2013 Chairman’s Statement The Company has been significantly cash generative this financial year. The EBITDA increased by 46% to US$38,329,167. Purchasing aircraft typically requires a mixture of senior debt, a junior debt tier and equity which may be self generated. The directors seek to minimize the cost of funds and hence may seek to refinance existing debt facilities. The Company continues to evaluate the state of both debt and equity along with choice of market for equity capital, in the context of its ongoing requirements. The Directors believe 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 internal rates of return, cash yields and predictive capital returns from investment in the narrow body and regional aircraft market and more particularly in the Australian and South East Asian sector. Our business provides for continued and sustainable growth in 2014 and beyond. The outlook for calendar year 2014 is 43% growth in the fleet contracted by way of committed deliveries. to actively evaluate Avation continues further aircraft acquisition investment opportunities. As a result, the Company is well advanced with respect the funding of its 2014 deliveries and is developing formalised capital funding programmes to provide a diversified funding base with access to both debt and equity markets. Whilst the business is engaged in funding the continued aggressive asset growth of the fleet, your Board overwhelmingly recognises the importance of rewarding shareholders and is recommending to shareholders a final dividend payment of 1.78 US cents 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. My colleagues and I are committed to continue working 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 27th of August 2013 5 About Avation plC Photo: Tom Bukowski COMMERCIAL PASSENGER AIRCRAFT LEASING SPECIALISTS Avation PLC is a commercial passenger aircraft leasing company that was incorporated in England and Wales in 2006 listed on the Main List of the London Stock Exchange (LSE: AVAP). Avation manages a fleet of 23 aircraft which it leases, through its subsidiaries, to airlines including US Airways in the United States, Thomas Cook in the UK and Virgin Australia. The company’s fleet includes Airbus 320 family aircraft as well as Fokker 100s and ATR 72s. SPECIALIST MANAGEMENT TEAM Avation’s management team has extensive experience in all areas of the aviation industry and has the expertise to select aircraft to bring under Avation’s management that will deliver value to the company, performance to its customers and returns to its shareholders. STRONG GROWTH PLATFORM Under (ARAN) the Australian Regional Airline Network agreement, Avation has agreed to supply up to 20 ATR 72 aircraft to Virgin Australia Regional Airlines who will operate the aircraft in eastern Australia. As of June 2013, Avation is leasing 12 aircraft to Virgin Australia under the ARAN agreement, giving the company room to expand its fleet with guaranteed custom for its aircraft. Ten further ATR 72 aircraft have been ordered, with three expected to be delivered in 2013 and a further seven to be delivered in 2014. Avation’s management is also continuing to look to expand the company’s fleet beyond the acquisition of ATR 72 aircraft and will select aircraft that provide both customer satisfaction and financial growth for the company. FINANCIAL GROWTH Coinciding with the expected delivery of the ATR 72s and potential acquisitions of other aircraft, Avation will continue to grow in terms of the size and quality of its managed fleet and the financial returns it generates. 6 Annual Report 2013 7 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% 100% 100% 100% 100% F100 PTY LTD CAPITAL LEASE AVIATION PLC AVATION.NET INC MSN 429 LEASECO LIMITED AVATION EASTERN FLEET PTE LTD Registered Office: Barringtons House 283 Rokeby Road Subiaco WA 6008 Date of Incorporation: Victoria, Australia, 15 november 2006 Registered Office: Cheyne House, Crown Court, 61-63 Cheapside, london eC2V 6AX Registered Office: Corporation trust Center Registered Office: Registered Office: Cheyne House, Crown Court, 510 thomson Road #12-04 SlF Building 1209 orange Street 61-63 Cheapside, Singapore 298135 Wimington uSA london eC2V 6AX Date Of Incorporation: Date Of Incorporation: Date Of Incorporation: Date Of Incorporation: Singapore, england & Wales, 6 June 2007 Delaware, uSA, 18 January 2000 england & Wales, 11 December 2012 8 February 2011 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% MSN 1607 PTE LTD CAPITAL LEASE MALTA LIMITED CAPITAL LEASE AVIATION (S) PTE LTD AVATION.NET INC SINGAPORE BRANCH Registered Office: Registered Office: Registered Office: Registered Office: 510 thomson Road Suite 2, tower Business 510 thomson Road 510 thomson Road #12-04 SlF Building Centre #12-04 SlF Building #12-04 SlF Building Singapore 298135 Ground Floor, tower Singapore 298135 Singapore 298135 Date Of Incorporation: Singapore, 22 May 2013 Street, Swatar Birkirkara BKR 4013 Malta Date Of Incorporation: Malta, 20 June 2008 Date Of Incorporation: Date Of Incorporation: Singapore, Singapore, 30 november 2011 2 october 2007 MSN 429 LIMITED Registered Office: Cheyne House, Crown Court, 61-63 Cheapside, london eC2V 6AX Date Of Incorporation: england & Wales, 24 March 2010 AIRFRAME LEASING (S) PTE LTD Registered Office: 510 thomson Road #12-04 SlF Building Singapore 298135 Date Of Incorporation: Singapore, 12 May 2011 8 Annual Report 2013 100% 62.07% 99.96% 100% 100% 100% 100% 100% 100% 100% AVATION EASTERN FLEET II PTE LTD AVATION EASTERN FLEET III PTE LTD AVATION EASTERN FLEET IV PTE LTD MSN 1922 PTE LTD F100 FLEET PTE LTD Registered Office: Registered Office: Registered Office: Registered Office: Registered Office: 510 thomson Road 510 thomson Road 510 thomson Road 510 thomson Road 510 thomson Road #12-04 SlF Building #12-04 SlF Building #12-04 SlF Building #12-04 SlF Building #12-04 SlF Building Singapore 298135 Singapore 298135 Singapore 298135 Singapore 298135 Singapore 298135 Date Of Incorporation: Date Of Incorporation: Date Of Incorporation: Date Of Incorporation: Date Of Incorporation: Singapore, 12 January 2012 Singapore, 18 February 2013 Singapore, 18 April 2013 Singapore, 26 March 2013 Singapore, 18 June 2013 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% AIRFRAME LEASING (S) II PTE LTD AIRFRAME LEASING (S) III PTE LTD AIRFRAME LEASING (S) IV PTE LTD Registered Office: Registered Office: Registered Office: 510 thomson Road 510 thomson Road 510 thomson Road #12-04 SlF Building #12-04 SlF Building #12-04 SlF Building Singapore 298135 Singapore 298135 Singapore 298135 Date Of Incorporation: Date Of Incorporation: Date Of Incorporation: Singapore, 13 January 2012 Singapore, 19 February 2013 Singapore, 18 April 2013 F100 LEASING PTE LTD Registered Office: 510 thomson Road #12-04 SlF Building Singapore 298135 Date Of Incorporation: Singapore, 18 June 2013 9 Annual Report 2013 Board of Directors Jeff Chatfield Chairman Bryant Mclarty Non-Executive Director Mr Chatfield the Chairman is of Avation PLC and has been establishing in instrumental and growing the Company. 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. of Mr Mclarty was appointed a Director of the company in 2007. He has extensive managerial experience in corporate strategy and management, with a practical the knowledge working securities and equity markets. He currently is Chairman of ASX listed, Australian biotechnology company, PharmAust Limited. Mr Mclarty is also the Managing Director of Mac Equity Partners, an Australian based company providing specialised expertise in the areas of stockbroking and strategic corporate services to wholesale clients. He has held numerous managerial, executive and non-executive director roles in private, public unlisted and listed companies. Mr Mclarty is a member of the Australian Institute of Company Directors and has also completed the AICD Company Directors course. Rod Mahoney Executive Director Mr Mahoney is the Chief Operating Officer and an Executive Director of the Company. Before this 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 and a member of the Singapore Institute of Directors. 10 Strategy Photo: Jean-Guy Aldegon The Company’s strategy is to continue to expand the Group’s aircraft leasing business by: • • “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 age and 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 its portfolio of aircraft, in particular by maintaining communications with airlines, 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. 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. 11 Report of the Directors Photo: Peer Johnson The directors have the pleasure in presenting their report and financial statements for the financial year ended 30 June 2013. 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 4. 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 20. The directors have proposed to pay a 1.78 US cents 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 2013 1 July 2012 30 June 2013 1 July 2012 Robert Jeffries Chatfield Andrew Baudinette (resigned on 3 December 2012) 1 1 1 1 8,855,365 7,039,490 670,000 670,000 Bryant James Mclarty Roderick Douglas Mahoney 117,300 158,138 117,300 110,000 - - - - 12 Annual Report 2013 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 8,009,352 16.40% HSBC Client Holdings Nominee (UK) Limited 6,034,384 12.36% State Street Nominees Limited 3,188,237 Chase Nominees Limited 3,120,000 Lynchwood Nominees Limited 2,678,748 6.53% 6.39% 5.49% 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 group recognises the great importance of 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 • 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 50 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. 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. On behalf of the board Combined code The company has no requirement to comply with the Combined Code. Robert Jeffries Chatfield Director 27th of August 2013 13 Directors’ Remuneration Report Introduction 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. Remuneration (audited) The components of remuneration are: • Basic salary and benefits determined by the Remuneration Committee which are included in employment agreements and reviewed annually; • Bonuses based upon performance of the Company and the individual concerned; and • Share options. Individual Director’s remuneration from the group was as follows: Group Salaries and fees Bonuses Expenses allowances Taxable benefits US$ US$ US$ US$ Total 2013 US$ Total 2012 US$ Executive directors Robert Jeffries Chatfield Roderick Douglas Mahoney Non-executive directors 266,185 146,906 - 31,496 Andrew Baudinette (resigned on 3 December 2012) 102,538 Bryant James Mclarty 31,500 - - 547,129 31,496 Service contracts - - - - - 659 - 266,844 178,402 249,808 114,650 2,910 105,448 222,929 - 31,500 33,694 3,569 582,194 621,081 The employment contracts of the executive directors with the Company are terminated by either party with no less than four weeks’ notice in writing to the other. The service contracts of the directors are as follows: Date of contract Unexpired term Notice period Compensation payable on early termination Robert Jeffries Chatfield 29 April 2013 4 months 4 months Roderick Douglas Mahoney 16 December 2011 Bryant James Mclarty 28 November 2007 4 weeks 1 month 4 weeks 1 month - - - 14 Annual Report 2013 Directors’ Remuneration Report Photo: Oliver Koslowski 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. There are no performance conditions that need to be met before warrants can be exercised. 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 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 * 2 Dec 2010 67.5 p Robert Jeffries Chatfield * 12 Dec 2011 110.5 p Bryant James Mclarty 2 Dec 2010 67.5 p Bryant James Mclarty 12 Dec 2011 110.5 p 200,000 400,000 50,000 200,000 - - - - (200,000) - - 400,000 (50,000) - - 200,000 * Robert Jeffries Chatfield was granted the share warrants via Epsom Assets Limited. On 21 February 2013, Robert Jeffries Chatfield via Epsom Assets Limited exercised 60,510 warrants at the exercise price of 67.5p. The market price on that day of exercise was 86.0p. On 11 March 2013, Bryant James Mclarty exercised 50,000 warrants, at the exercise price of 67.5p. The market price on that day of exercise was 84.5p. 15 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 27th August 2013 16 Annual Report 2013AvationFTSE 100Aug 08 Mar 09 Sep 09 Apr 10 Nov 10 May 11 Dec 11 Jun 12 Jan 13 Jul 13350300250200150100500 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. The Directors are responsible for keeping adequate 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. 17 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 2013 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 17 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 2013 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 • the financial statements have been prepared in 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 matters 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 3rd September 2013 18 Annual Report 2013 Financial Statements For the financial year ended 30 June 2013 Registered number: 5872328 (england & Wales) 19 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Continuing operations Revenue Cost of sales Gross profit Other income Other operating expenses Expenses - Administrative expenses - Finance expenses Profit before taxation Taxation Note 2013 US$ 2012 US$ 8 42,739,991 35,001,218 (822,887) (1,129,525) 41,917,104 33,871,693 9 1,846,538 120,079 10 (13,236,614) (14,601,919) (3,564,798) (12,992,553) (3,474,177) (7,842,062) 13,969,677 8,073,614 (2,004,684) (1,710,080) 11 13 14 Profit from continuing operations for the year 11,964,993 6,363,534 Other comprehensive income: Items that will not be reclassified to profit or loss: Revaluation (loss) / gain on property, plant and equipment, net of tax Items that may be reclassified subsequently to profit or loss: Currency translation differences arising on consolidation Other comprehensive income for the year, net of tax Total comprehensive income for the year 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 (1,780,368) (1,780,368) (5,569,535) (5,569,535) 603 603 (1,779,765) (1,007) (1,007) (5,570,542) 10,185,228 792,992 10,515,901 1,449,092 11,964,993 5,009,457 1,354,077 6,363,534 15 9,365,487 819,741 10,185,228 1,172,549 (379,557) 792,992 23.25 cents 23.25 cents 12.36 cents 12.31 cents 2020 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 COMPANY STATEMENT OF COMPREHENSIVE INCOME Profit for the year Other comprehensive income: Items that will not be reclassified to profit or loss: 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 2013 US$ 2012 US$ 2,328,931 1,277,309 2,839,584 2,839,584 - - 5,168,515 1,277,309 2121 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2013 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 Treasury shares Share premium Assets revaluation reserve Capital redemption reserve Warrant reserve Capital reserve Foreign currency translation reserve Retained earnings Non-controlling interest Note 30 June 2013 US$ 30 June 2012 US$ 1 July 2011 US$ 16 17 18 16 17 20 21 22 23 24 25 22 23 24 26 27 27 19,623,244 6,337,909 1,094,380 438 27,055,971 9,094,470 9,021,165 465,183 14,316 18,595,134 9,012,916 12,116,192 - 3,117 21,132,225 9,300,261 8,442,671 347,200,389 2,384,008 367,327,329 8,437,828 3,829,823 213,862,303 2,384,008 228,513,962 - - 135,621,485 2,384,008 138,005,493 394,383,300 247,109,096 159,137,718 12,088,802 207,132 986,556 24,243,718 3,757,081 41,283,289 5,073,257 91,379 519,083 19,553,681 2,969,169 28,206,569 9,088,610 1,381,260 239,205,865 5,187,917 254,863,652 6,064,744 731,037 123,988,798 5,943,200 136,727,779 878,137 (214,498) 29,809,334 10,158,496 11,564 103,565 2,530,212 (251) 37,949,162 81,225,721 17,010,638 98,236,359 779,618 - 23,047,234 11,309,284 11,564 192,946 2,530,212 (625) 28,113,618 65,983,851 16,190,897 82,174,748 5,376,057 - 62,067 15,802,427 4,564,855 25,805,406 1,508,902 - 44,996,626 7,724,794 54,230,322 720,917 - 17,365,391 15,145,567 11,564 119,143 - - 23,742,715 57,105,297 21,996,693 79,101,990 Total liabilities and equity 394,383,300 247,109,096 159,137,718 Approved by the board and authorised for issue on 27th of August 2013 …………………………. Robert Jeffries Chatfield Director 2222 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) COMPANY BALANCE SHEET AS AT 30 JUNE 2013 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 Treasury shares Share premium Assets revaluation reserve Capital redemption reserve Warrant reserve Retained earnings Net equity Total liabilities and equity Note 30 June 2013 US$ 30 June 2012 US$ 1 July 2011 US$ 16 16 19 20 22 24 22 24 26 27 27 3,406,322 19,096,712 22,503,034 1,182,305 10,356,165 11,538,470 5,302,540 9,549,503 14,852,043 9,264,244 5,239,692 20,171,641 34,675,577 8,437,828 5,239,530 8,191,670 21,869,028 - 2,605,218 8,643,420 11,248,638 57,178,611 33,407,498 26,100,681 3,840,760 - 1,415,411 5,256,171 1,273,107 - 2,108,683 3,381,790 1,157,398 - 2,006,050 3,163,448 2,071,487 12,054,807 366,533 14,492,827 2,650,604 675,346 315,043 3,640,993 - 2,784,028 221,592 3,005,620 878,137 (214,498) 29,809,334 2,873,147 11,564 103,565 3,968,364 37,429,613 779,618 - 23,047,234 33,563 11,564 192,946 2,319,790 26,384,715 720,917 - 17,365,391 33,563 11,564 119,143 1,681,035 19,931,613 57,178,611 33,407,498 26,100,681 Approved by the board and authorised for issue on 27th of August 2013 ………………………………. Robert Jeffries Chatfield Director 2323 l a t o T y t i u q E $ S U - n o N g n i l l o r t n o C t s e r e t n I $ S U l a t o T $ S U d e n i a t e R i s g n n r a e $ S U n g i e r o F y c n e r r u c n o i t a l s n a r t e v r e s e r $ S U l a t i p a C e v r e s e r $ S U t n a r r a W e v r e s e R $ S U l a t i p a C s t e s s A n o i t p m e d e R n o i t a u a v e r l e v r e s e r $ S U e v r e s e r $ S U e r a h S i m u m e r p $ S U y r u s a e r T e r a h s $ S U e r a h S l a t i p a c $ S U 6 5 0 , 1 2 5 , 2 5 9 2 9 , 9 6 3 , 0 1 7 2 1 , 1 5 1 , 2 4 5 8 1 , 0 9 7 , 7 1 4 3 4 , 5 1 5 , 2 1 1 5 , 6 3 6 , 1 9 7 7 , 0 2 1 0 0 0 , 7 6 0 2 , 5 6 4 , 5 7 6 2 , 2 9 1 , 4 1 - 5 4 7 , 3 2 4 l a n o i t a t n e s e r p i s u o v e r p n I - 2 1 0 2 - y u J l 1 t a e c n a a B l p u o r G 3 1 0 2 E N U J 0 3 D E D N E R A E Y L A C N A N F E H T R O F I I I Y T U Q E N I S E G N A H C F O T N E M E T A T S D E T A D L O S N O C I ) S E L A W & D N A L G N E ( 8 2 3 2 7 8 5 0 : R E B M U N D E R E T S G E R I C L P N O T A V A I 2424 8 4 7 , 4 7 1 , 2 8 7 9 8 , 0 9 1 , 6 1 1 5 8 , 3 8 9 , 5 6 8 1 6 , 3 1 1 , 8 2 ) 5 2 6 ( 2 1 2 , 0 3 5 , 2 6 4 9 , 2 9 1 4 6 5 , 1 1 4 8 2 , 9 0 3 , 1 1 4 3 2 , 7 4 0 , 3 2 3 9 9 , 4 6 9 , 1 1 ) 5 6 7 , 9 7 7 , 1 ( 8 2 2 , 5 8 1 , 0 1 1 4 7 , 9 1 8 2 9 0 , 9 4 4 , 1 ) 1 5 3 , 9 2 6 ( 1 0 9 , 5 1 5 , 0 1 ) 4 1 4 , 0 5 1 , 1 ( 7 8 4 , 5 6 3 , 9 - 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n o N g n i l l o r t n o C t s e r e t n I $ S U l a t o T $ S U d e n i a t e R i s g n n r a e $ S U n g i e r o F y c n e r r u c n o i t a l s n a r t e v r e s e r $ S U l a t i p a C e v r e s e r $ S U t n a r r a W e v r e s e R $ S U l a t i p a C s t e s s A n o i t p m e d e R n o i t a u a v e r l e v r e s e r $ S U e v r e s e r $ S U e r a h S i m u m e r p $ S U e r a h S l a t i p a c $ S U I Y T U Q E N I S E G N A H C F O T N E M E T A T S D E T A D L O S N O C I ) S E L A W & D N A L G N E ( 8 2 3 2 7 8 5 0 : R E B M U N D E R E T S G E R I C L P N O T A V A I 3 1 0 2 E N U J 0 3 D E D N E R A E Y L A C N A N F E H T R O F I I ) 3 2 5 , 4 6 1 , 5 ( ) 3 2 5 , 4 6 1 , 5 ( – ) 6 1 7 , 1 6 2 ( ) 6 1 7 , 1 6 2 ( – 2 0 5 , 7 7 9 , 5 – 2 0 5 , 7 7 9 , 5 ) 0 2 7 , 6 6 2 ( 2 1 2 , 0 3 5 , 2 5 6 5 , 3 0 1 – – – 5 6 5 , 3 0 1 ) 0 2 7 , 6 6 2 ( 2 1 2 , 0 3 5 , 2 – – – – – – 2 9 9 , 2 9 7 4 3 5 , 3 6 3 , 6 ) 2 4 5 , 0 7 5 , 5 ( ) 7 5 5 , 9 7 3 ( 7 7 0 , 4 5 3 , 1 ) 4 3 6 , 3 3 7 , 1 ( 7 5 4 , 9 0 0 , 5 ) 8 0 9 , 6 3 8 , 3 ( 9 4 5 , 2 7 1 , 1 – 7 5 4 , 9 0 0 , 5 7 5 4 , 9 0 0 , 5 ) 4 5 5 , 8 3 6 ( – ) 4 5 5 , 8 3 6 ( ) 4 5 5 , 8 3 6 ( 0 9 9 , 1 0 1 , 9 7 3 9 6 , 6 9 9 , 1 2 7 9 2 , 5 0 1 , 7 5 5 1 7 , 2 4 7 , 3 2 _ – ) 5 2 6 ( ) 5 2 6 ( – – – – – – – – – – – – – – – – – 2 1 2 , 0 3 5 , 2 3 4 1 , 9 1 1 4 6 5 , 1 1 7 6 5 , 5 4 1 , 5 1 1 9 3 , 5 6 3 , 7 1 7 1 9 , 0 2 7 1 1 0 2 l y u J 1 t a e c n a a B l p u o r G – – – – – ) 2 6 7 , 9 2 ( – – – 5 6 5 , 3 0 1 – – – – – – – – – – – – – – – – – – ) 3 8 2 , 6 3 8 , 3 ( ) 3 8 2 , 6 3 8 , 3 ( – – – – – – – – – – e m o c n i i e v s n e h e r p m o c r e h t O e m o c n i i e v s n e h e r p m o c l a t o T r a e y e h t r o f t i f o r P i d a p 1 1 0 2 o t d e t a e r l d n e d v D i i o t i d a p i y r a d s b u s i f o d n e d v D i i l s r e d o h e r a h s y t i r o n m i 3 6 5 , 8 4 9 , 5 1 0 7 , 8 5 l a t i p a c e r a h s d e u s s i n i e s a e r c n I – – – ) 0 2 7 , 6 6 2 ( – – – – n i s e r a h s y r a n d r o i f o n o i t i s u q c A i s e s n e p x e e u s s i e r a h S s e s n e p x e t n a r r a W s e s n e p x e l a t i p a C i y r a d s b u s i 8 4 7 , 4 7 1 , 2 8 7 9 8 , 0 9 1 , 6 1 1 5 8 , 3 8 9 , 5 6 8 1 6 , 3 1 1 , 8 2 ) 5 2 6 ( 2 1 2 , 0 3 5 , 2 6 4 9 , 2 9 1 4 6 5 , 1 1 4 8 2 , 9 0 3 , 1 1 4 3 2 , 7 4 0 , 3 2 8 1 6 , 9 7 7 2 1 0 2 e n u J 0 3 t a e c n a a B l e h t r o f n o i t i a r e d s n o c e h T . % 7 0 2 6 o . t . % 8 1 1 5 m o r f C L P n o i t a v A e s a e L i l a t i p a C i , y r a d s b u s i s t i n i l i g n d o h e r a h s s t i d e s a e r c n i y n a p m o C e h t , r a e y l i a c n a n i f t s a l e h t g n i r u D . s e r a h s i y r a n d r o w e n 1 8 7 , 7 4 6 , 1 f o t n e m t o l l a e h t h g u o r h t s i s e r a h s A L C e h t f o n o i i t i s u q c a . e r a h s r e p ) p 1 : 2 1 0 2 ( p 4 0 . 1 r o f s a w r a e y e h t g n i r u d d a p d n e d v d e h T i i i 2525 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Share capital US$ Treasury Share US$ Share premium US$ Asset Revaluation Reserve US$ Capital redemption Warrant Reserve US$ Reserve US$ Retained earnings US$ Total US$ Company Balance at 1 July 2012- In previous presentational currency (GBP) Balance at 1 July 2012 - In current presentational currency (US$) 423,745 – 14,192,267 22,158 7,000 120,779 2,031,677 16,797,626 779,618 – 23,047,234 33,563 11,564 192,946 2,319,790 26,384,715 Profit for the year Other comprehensive income Total comprehensive income Dividend relating to 2012 paid – – – – – – – – Purchase of treasury shares – (214,498) – – – – – Increase of issued share capital Share issue expenses Warrant expenses 98,519 7,100,985 – – – (338,885) – – – 2,839,584 2,839,584 – – – – – – – – – – – – 2,328,931 – 2,328,931 2,839,584 – 2,328,931 5,168,515 – (745,618) (745,618) – – (214,498) – (24,120) – 7,175,384 – – – (338,885) – (65,261) 65,261 – Balance at 30 June 2013 878,137 (214,498) 29,809,334 2,873,147 11,564 103,565 3,968,364 37,429,613 Balance at 1 July 2011 720,917 – 17,365,391 33,563 11,564 119,143 1,681,035 19,931,613 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 – – – – – – – – – – – – 58,701 – 5,948,563 – – – (266,720) – – – – – – – – – – – – – – – 1,277,309 – 1,277,309 – – 1,277,309 1,277,309 – (638,554) (638,554) – (29,762) – 5,977,502 – – – (266,720) – 103,565 – 103,565 Balance at 30 June 2012 779,618 – 23,047,234 33,563 11,564 192,946 2,319,790 26,384,715 The dividend paid during the year was for 1.04p (2012: 1p) per share. 2626 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 interest expense on deposit collected Loss on disposal of subsidiary Warrant expense Interest expense Finance income Interest income Operating profit before working capital changes Movement in working capital: Trade and other receivables and prepayments 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 inflow/(outflow) from disposal of a subsidiary – See Note A Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities: Net proceeds from issuance of ordinary shares Dividends paid Repurchase of treasury shares Proceeds from borrowings Repayment of borrowings Capital element of finance lease repayments Net cash used in 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 2013 US$ 2012 US$ 13,969,677 8,073,614 11,366,937 1,860,732 8,945 904,658 570,267 - - 11,517,628 (582,844) (28,727) 39,587,273 (4,868,068) 13,878 765,976 3,044,789 (1,072,820) 37,471,028 (11,093,273) 28,727 (999,556) 25,406,926 10,299,139 1,991,753 1,569,532 356,827 6,663 627,565 103,535 7,478,572 (21,137) (94,470) 30,391,593 (7,183,814) (11,199) 822,416 8,250,757 (1,034,835) 31,234,918 (7,478,572) 94,470 (472,882) 23,377,934 1,125,032 (199,839) (134,087,044) (132,962,012) (73,277,102) (73,476,941) 6,836,498 (745,618) (214,498) 140,263,472 (23,882,635) (4,173,733) 118,083,486 374 10,528,774 9,094,470 19,623,244 3,076,471 (638,554) - 67,569,065 (17,360,286) (2,465,353) 50,181,343 (782) 81,554 9,012,916 9,094,470 2727 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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. during the previous year 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, received during the year ended 30 June 2013 US$ 199,839 1,864,684 10,695,308 (4,004,378) (3,735,866) (2,552,604) (514,547) 1,952,436 (627,565) 1,324,871 (199,839) 1,125,032 Cash and cash equivalents in the consolidated cash flow statement are denominated in the following currencies: Pounds Sterling United States Dollars Australian Dollars Euro Singapore Dollars 2013 US$ 2,898,583 16,552,547 19,708 10,992 141,414 19,623,244 2012 US$ 57,276 8,844,306 16,761 1,656 174,471 9,094,470 Interest earning balances 17,881,829 8,119,998 The rate of interest for the cash on interest earning accounts is at 1.0% to 4.5% (2012:1.0% to 4.5%) per annum. These approximate the weighted effective interest rate. 2828 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) COMPANY STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Cash flows from operating activities: Profit before taxation Adjustments for: Dividend income Depreciation Warrant expense Interest income Interest expense Operating cash flows before working capital changes Movement in working capital: Trade and other receivables Trade and other payables Cash used in operations Interest received Interest paid Corporation tax paid Net cash used in operating activities Cash flows from investing activities: Proceeds from disposal of property, plant and equipment Purchase of property, plant and equipment Investment in subsidiaries Net cash from (used in) investing activities Cash flows from financing activities: Net proceeds from issuance of ordinary shares Dividends paid Repurchase of treasury shares Capital element of finance lease repayments Net cash from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 2013 US$ 2012 US$ 2,393,473 1,377,865 - 444,025 - (24,793) 339,434 3,152,139 (9,566,963) 1,965,622 (4,449,202) 24,793 (329,571) - (4,753,980) 6,978,357 (2,862,769) (162) 4,115,426 6,836,498 (745,618) (214,498) (3,013,811) 2,862,571 2,224,017 1,182,305 3,406,322 (428,283) 453,636 103,565 (89,293) 303,293 1,720,783 (8,816,207) 2,749,459 (4,345,965) 89,293 (293,430) (114) (4,550,216) - (1,886) (1) (1,887) 3,076,471 (638,554) - (2,006,049) 431,868 (4,120,235) 5,302,540 1,182,305 Cash and cash equivalents in the cash flow statement are denominated in the following currencies: Pounds Sterling United States dollars Singapore dollars 2013 US$ 2,788,225 616,577 1,520 3,406,322 2012 US$ 42,784 1,134,638 4,883 1,182,305 The rate of interest for the cash on interest earning accounts is at 1.0% (2012:1.0%) per annum. These approximate the weighted effective interest rate. 2929 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 1 GENERAL Avation PLC is a public limited company incorporated in England and Wales under the Companies Act 2006 (Registration Number 05872328) and is listed as a Standard Listing on the London Stock Exchange. The address of the registered 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 United States Dollars, rounded to the nearest Dollar. The year end exchange rate for Pounds Sterling to United States Dollars is 1.5216. There has been a change in accounting policy regarding the change in presentational currency from Pounds Sterling to United States Dollars which has been applied as disclosed in Note 34. 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. 30 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (b) BASIS OF CONSOLIDATION - The consolidated financial statements comprise the financial statements of Avation PLC and its subsidiaries as at 30 June 2013. 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. (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. AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS 31 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 GENERAL 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 Avation PLC is a public limited company incorporated in England and Wales under the in accordance with IAS 39 either in profit or loss or as a change to other Companies Act 2006 (Registration Number 05872328) and is listed as a Standard Listing comprehensive income. If the contingent consideration is classified as equity, it is not on the London Stock Exchange. The address of the registered office is given on page 1. remeasured until it is finally settled within equity. Business combinations prior to 1 July 2009 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. In comparison to the above-mentioned requirements, the following differences applied: STATEMENT OF COMPLIANCE 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. 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 Business combinations achieved in stages were accounted for as separate steps. Any European Union (“IFRS”). additional acquired share of interest did not affect previously recognised goodwill. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 (a) BASIS OF PREPARATION – The financial statements have been prepared in the cash flows that otherwise would have been required under the contract. accordance with IFRS including standards and interpretations issued by the International Accounting Standards Board (“IASB”), and have been prepared in Contingent consideration was recognised if, and only if, the Group had a present accordance with the historical cost convention, as modified by the revaluation of obligation, the economic outflow was more likely than not and a reliable estimate was aircraft. determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill The financial statements are presented in United States Dollars, rounded to the nearest Dollar. The year end exchange rate for Pounds Sterling to United States (d) INTEREST IN JOINT VENTURE – A Joint venture is a contractual arrangement Dollars is 1.5216. There has been a change in accounting policy regarding the whereby the group and other parties undertake an economic activity that is subject to change in presentational currency from Pounds Sterling to United States Dollars joint control (ie when the strategic financial and operating policy decision relating to which has been applied as disclosed in Note 34. the activities of the joint venture require the unanimous consent of the parties sharing control). 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 When a group undertakes its activities under joint venture arrangements directly, the disclosure of contingent assets and liabilities at the date of the financial statements and group’s share of jointly controlled assets and any liabilities incurred jointly with other the reported amounts of revenues and expenses during the financial period. Although ventures are recognised in the financial statements of the relevant entity and these estimates are based on management’s best knowledge of current events and classified according to their nature. Liabilities and expenses incurred directly in actions, actual results may ultimately differ from those estimates. 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 The accounting policies set out below have been applied consistently throughout the assets, and its share of joint venture expenses, are recognised when it is probable financial period presented in these financial statements and the accounting policies that the economic benefits associated with the transactions will flow to/from the group have been applied consistently by the Company and its subsidiaries. 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 recognised immediately in the profit or loss. 1 2 3 32 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 – All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, Aircraft 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. However, these aircraft have been reviewed for impairment. Revaluations have not been carried out in the period on the ATR fleet which is less than two years old. 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. 33 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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. Residual value of aircraft are based on their estimated scrap value. 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. 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 the expected maintenance costs that will be drawn in accordance with the lease conditions and lease term. in accordance with is made (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 or 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. 34 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (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. (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) (ii) 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. 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 over 30 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 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (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. 36 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (o) FOREIGN CURRENCIES - The Group’s consolidated financial statements and Company financial statements are presented in United States dollars, which is the presentational currency. 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. There has been a change in accounting policy and has been applied as disclosed in Note 34.in Note 34. 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 United States dollars 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. (p) FINANCIAL INSTRUMENTS - Financial assets and liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. financial (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. 37 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (ii) (iii) (iv) (vi) 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. 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. 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). 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. (vii) Equity instruments - Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. 38 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 financial year, The Group regularly revalues its aircraft using independent valuers valuations. During 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. the Group revalued (iii) Maintenance reserve claim The Group provides for maintenance reserve claims for certain aircraft. Management has relied on industry experience and information from aircraft manufacturers and airlines to estimate the provision for the maintenance reserve claims. These estimates can be subject to revisions depending on a number of factors such as the timing of the planned maintenance, the utilisation of the aircraft, changes to the manufacturer’s maintenance program or a change in the estimated costs. Management evaluates its estimates and assumptions and, when warranted, adjusts these assumptions which may impact the maintenance reserve claim expense in the profit or loss. 39 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (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 previous 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. 40 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 5. NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN 2013 a) 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 (accounting periods commencing after) 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 1 January 2013 1 January 2013 1 January 2013 IFRS 9 Financial Instruments – Classification and Measurement 1 January 2013 IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interest with Other Entities IFRS 13 Fair Value Measurement Annual improvements to IFRS (2009-2011) cycle 1 January 2013 1 January 2013 1 January 2013 1 January 2013 Various The Group, however, expects no impact from the adoption of the amendments on its financial position or performance. b) Standards in effect in 2013 The following new and amended standards, and interpretations are mandatory for the first time for the financial year beginning 1 July 2012 and have been implemented by the group, but not currently relevant to the group (although they may affect the accounting for future transactions and events): • Amendment to IAS 1, Financial statement presentation’ regarding other comprehensive income, effective date 1 July 2012 The following are mandatory for the first time for this financial year but not currently relevant to the group (although they may affect the accounting for future transactions and events): • Amendment to IAS 12, ‘Income taxes’ on deferred tax, effective date 1 January 2012 34 41 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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. (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. 42 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 The maximum exposure to credit risk for trade receivables at the reporting date by geographical area is: Australia United Kingdom Others Group 2013 US$ 2012 US$ 3,945,275 - 588,975 4,534,250 906,297 187,000 2,391,644 3,484,941 (1) Financial assets that are neither past due nor impaired Bank deposits that are neither past due or impaired are mainly deposits with banks with high credit–ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group. The Group’s trade receivable not past due include receivables amounting to US$3,258,279 (2012: US$2,172,471). (2) Financial assets that are past due and/or impaired There is no class of financial assets that are past due and /or impaired except for trade receivables. The age analysis of trade receivables past due but not impaired is as follows: Past due < 3 months Past due 3 to 6 months Past due over 6 months Group 2013 US$ 2012 US$ 1,244,907 31,064 - 1,275,971 254,736 1,021,936 35,798 1,312,470 43 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (iii) Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. The Group further seeks to reduce this risk by 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. (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 2013 Pounds Sterling US$ United States dollars US$ Australian Dollars US$ Euro US$ Singapore Dollars US$ Total US$ Cash and cash equivalents Trade and other receivables Prepayments Loans and borrowings Deferred lease income Other financial liabilities Currency exposure 2,898,583 35,027 16,552,547 15,394,983 9,537,051 – – (263,449,583) – (1,588,392) (45,263) (20,992,115) 2,888,347 (244,545,509) 19,708 18,630 – – – (47,768) (9,430) 10,992 6,735 – – – (9,322) 8,405 141,414 182,795 – – – (82,944) 241,265 19,623,244 15,638,170 9,537,051 (263,449,583) (1,588,392) (21,177,412) (241,416,922) 57,276 385,611 8,844,306 16,927,409 – 4,295,006 – (143,542,479) (822,416) – (10,222,396) 253,773 (124,520,570) (189,114) 16,761 5,795 – – – (11,279) 11,277 1,656 81,466 – – – (8,194) 74,928 9,094,470 174,471 17,458,993 58,712 4,295,006 – (143,542,479) – (822,416) – (707,018) (11,138,001) (473,835) (124,654,427) 2012 Cash and cash equivalents Trade and other receivables Prepayments Loans and borrowings Deferred lease income Other financial liabilities Currency exposure 44 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Company 2013 Pounds Sterling US$ United States dollars US$ Cash and cash equivalents Trade and other receivables Loans and borrowings Other financial liabilities Currency exposure 2012 Cash and cash equivalents Trade and other receivables Loans and borrowings Other financial liabilities Currency exposure 2,788,225 616,577 838,120 27,368,533 – (13,470,218) (5,637,524) 8,877,368 (109,159) 3,517,186 42,784 1,134,638 377,537 18,321,392 – (2,784,029) (3,626,172) 307,739 13,045,829 (112,582) Australian Dollars US$ – 4,573 – (25,750) (21,177) Euro US$ Singapore Dollars US$ Total US$ – 88,767 – (43,125) 45,642 1,520 60,963 – (96,689) (34,206) 3,406,322 28,360,956 (13,470,218) (5,912,247) 12,384,813 – 5,795 – (6,734) (939) – 80,878 – 4,883 8,391 – (2,177) (176,046) 78,701 (162,772) 1,182,305 18,793,993 (2,784,029) (3,923,711) 13,268,558 If the foreign currencies changes against the United States Dollars by 10% (2012: 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: Increase/(Decrease) Increase/(Decrease) Group GBP against US$ - strengthen - weakened AUD against US$ - strengthen - weakened Euro against US$ - strengthen - weakened SGD against US$ - strengthen - weakened 2013 Profit after tax US$ 288,835 (288,835) (943) 943 840 (840) 24,126 (24,126) 2013 Equity US$ – – – – – – – – 2012 Profit after tax US$ 25,377 (25,377) 1,128 (1,128) 7,493 (7,493) (47,383) 47,383 2012 Equity US$ – – – – – – – – 45 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Company Company GBP against US$ - strengthen - weakened GBP against US$ - strengthen - weakened AUD against US$ - strengthen - weakened AUD against US$ - strengthen - weakened Euro against US$ - strengthen - weakened Euro against US$ - strengthen - weakened SGD against US$ - strengthen - weakened SGD against US$ - strengthen - weakened Increase/(Decrease) Increase/(Decrease) 2013 2013 Profit after tax Profit after tax US$ US$ 2013 Equity US$ 2013 Equity US$ Increase/(Decrease) Increase/(Decrease) Profit after tax Profit after tax 2012 2012 US$ US$ 2012 Equity US$ 2012 Equity US$ 351,719 (351,719) 351,719 (351,719) (2,118) 2,118 (2,118) 2,118 4,564 (4,564) 4,564 (4,564) (3,421) 3,421 (3,421) 3,421 – – – – – – – – – – – – – – – – 30,774 (30,774) 30,774 (30,774) (94) 94 (94) 94 7,870 (7,870) 7,870 (7,870) (16,277) 16,277 (16,277) 16,277 – – – – – – – – – – – – – – – – (v) Liquidity risk (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. 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. The table below analyses the maturity profile of the financial liabilities of the Group and the Company based on contractual undiscounted cash flows. Less than 1 year US$ Less than 1 year US$ Between 1 and 2 years US$ Between 1 and 2 years US$ Between 2 and 5 years US$ Between 2 and 5 years US$ Over 5 years Over 5 years US$ US$ Group 2013 Group 2013 Trade and other Trade and other payables payables Deferred lease income Deferred lease income Loans and borrowings Loans and borrowings 12,088,802 207,132 37,226,802 49,522,736 12,088,802 207,132 37,226,802 49,522,736 – 207,132 76,988,555 77,195,687 – 207,132 76,988,555 77,195,687 – 569,836 76,306,940 76,876,776 – 569,836 76,306,940 76,876,776 9,088,610 604,292 119,298,930 128,991,832 9,088,610 604,292 119,298,930 128,991,832 2012 2012 Trade and other Trade and other payables payables Deferred lease income Deferred lease income Loans and borrowings Loans and borrowings 5,073,257 91,379 24,829,489 29,994,125 5,073,257 91,379 24,829,489 29,994,125 – 97,950 15,996,884 16,094,834 – 97,950 15,996,884 16,094,834 – 293,844 43,612,984 43,906,828 – 293,844 43,612,984 43,906,828 6,064,744 339,243 83,211,529 89,615,516 6,064,744 339,243 83,211,529 89,615,516 46 39 39 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Less than 1 year US$ Between 1 and 2 years US$ Between 2 and 5 years US$ Over 5 years US$ 3,840,760 1,992,615 5,833,375 – 1,992,615 1,992,615 2,071,487 11,645,742 13,717,229 1,273,107 2,849,997 4,123,104 2,650,604 – 2,650,604 – – – – – – – – – Company 2013 Trade and other payables Loans and borrowings 2012 Trade and other payables Loans and borrowings (vi) Capital risk 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. 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. Group Company 2013 US$ 2012 US$ 2013 US$ 2012 US$ Net debt Total equity Total capital 265,003,751 145,586,010 15,976,143 82,174,748 37,429,613 227,760,758 53,405,756 98,236,359 363,240,110 5,525,435 26,384,715 31,910,150 Gearing ratio 73% 64% 30% 17% The Group and the Company are in compliance with all externally imposed capital requirements for the financial years ended 30 June 2013 and 30 June 2012. (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. 40 47 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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: Group Company 2013 US$ 2012 US$ 2013 US$ 2012 US$ 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 - Salaries paid to directors of the Company 81,983 471,045 20,600 306,433 240,211 512,185 40,484 184,915 81,983 – – 41,643 125,561 – – – The amount above includes remuneration in respect of the highest paid director as follows: Aggregate emoluments Group 2013 US$ 2012 US$ 266,844 249,808 No contributions were made on behalf of any directors to money purchase pension schemes. 48 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (b) Significant related party transactions: Related Party Nature of Relationship Description of Transaction Group Income/ (Expense) US$ Company Income/ (Expense) US$ Sales of goods 2013 2012 411,403 313,724 Maintenance rent Rental income Service fee income Interest income Interest expense paid Sales of goods Interest income 2013 2012 1,993,142 2,003,097 2013 23,456,496 2012 19,775,453 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 12,510 57,367 526 67,942 – (4,491) – 1,477 14,312 19,471 – – – – – – – – 526 67,942 – – – – 14,312 19,471 Virgin Australia Regional Airlines Pty. Ltd. (formerly known as Skywest Airlines (Australia) Pty. Ltd.) A director of the Company was also a director of Virgin Australia Regional Airlines Pty. Ltd. CaptiveVision Capital Limited A director of the Company was also a director of CaptiveVision Capital Limited Takeoff Asset Management Pte. Ltd. (formerly known Takeoff Services Pte. Ltd.) F11305 Pte. Ltd. A director of the Company is also a director of Takeoff Asset Management Pte. Ltd. A director of the Company was also a director of F11305 Pte. Ltd. Service fee paid 2013 2012 – (255,421) – (255,421) Sales of goods 2013 2012 – 15,000 – – Rental income 2013 2012 314,176 361,503 314,176 361,503 49 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Related Party Nature of Relationship Description of Transaction Group Company Income/(Expense) Income/(Expense) US$ US$ Skywest Airlines (Singapore) Pte. Ltd. A director of the Company was also a director of Skywest Airlines (Singapore) Pte. Ltd. Sales of goods 2013 2012 Service fee income 2013 2012 1,524 7,369 4,914 119,165 2013 – Disposed of 100% interest in Capital Lease Australian Portfolio One Pty. Ltd. Service fee paid 2012 2013 2012 Consulting fee paid 2013 2012 Expenses rebilled paid Interest income Service fee paid 2013 2012 2013 2012 2013 2012 1,324,871 – (3,220) (309,058) (373,191) (147,516) (52,068) 998 767 – (16,099) – (16,099) Service fee paid 2013 (7,048) (7,048) Advance fee paid Interest expense paid Interest expense paid 2012 2013 2012 2013 2012 2013 2012 (19,306) (19,306) – (76,366) – (51,366) (205,388) (199,939) (141,394) (110,769) (24,842) – – – – – – – – (3,220) (231,120) (30,365) (35,365) (25,827) – – – – – – Giant Mix Investments Ltd. Loeb Aron & Company Ltd. Fleet Solution Consulting Pte. Ltd. An ex-director of the Company is a director of Giant Mix Investments Ltd. A director of a subsidiary company is a director of Loeb Aron & Company Ltd. A director of a subsidiary company is a director of Fleet Solution Consulting Pte. Ltd. Epsom Assets Limited A director of the Company is also a director of Epsom Assets Limited Director Director of a subsidiary company Interest expense paid 2013 2012 (58,094) – 50 43 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (c) Significant related party balances: Related Party Nature of Relationship Description of Transaction Group Amount owed by related parties/(to related parties) US$ Company Amount owed by related parties/(to related parties) US$ Virgin Australia Regional Airlines Pty. Ltd. (formerly known as Skywest Airlines (Australia) Pty. Ltd.) A director of the Company was also a director of Virgin Australia Regional Airlines Pty. Ltd. CaptiveVision Capital Limited Capital Lease Australian Portfolio One Pty. Ltd. A director of the Company was also a director of CaptiveVision Capital Limited A director of the Company was also a director of Capital Lease Australian Portfolio One Pty. Ltd. Trade Receivables 2013 2012 – 2,829,670 Accrued income Deferred income 2013 2012 2013 2012 Deposit collected - non-current 2013 2012 – 161,640 – (1,377,395) – (3,984,140) – – – – – – – – Non-trade receivables 2013 2012 – 168,393 – 168,393 Non-trade receivables 2013 2012 – 315 – 315 Takeoff Asset Management Pte. Ltd. (formerly known Takeoff Services Pte. Ltd.) A director of the Company is also a director of Takeoff Asset Management Pte. Ltd. Interest bearing loan receivables. The loan is unsecured, repayable upon demand. Interest is charged at 5% per annum. 2013 2012 232,554 331,686 232,554 331,686 F11305 Pte. Ltd. A director of the Company was also a director of F11305 Pte. Ltd. Interest receivables 2013 2012 Trade Receivables 2013 2012 Deferred income Deposit collected - non-current 2013 2012 2013 2012 34,345 20,036 – 31,373 – (14,641) – (70,741) 34,345 20,036 – 31,373 – (14,641) – (70,741) 51 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Related Party Nature of Relationship Description of Transaction Group Amount owed by related parties/(to related parties) Company Amount owed by related parties/(to related parties) US$ – – US$ – 4,207,602 – (456,497) – (114,707) Skywest Airlines (Singapore) Pte. Ltd. A director of the Company was also a director of Skywest Airlines (Singapore) Pte. Ltd. Non-trade receivables Non-trade payables 2013 2012 2013 2012 Skywest Airlines Pte. Ltd. (formerly known as Skywest Airlines Ltd) A director of the Company was also a director of Skywest Airlines Pte. Ltd. Giant Mix Investments Ltd. An ex-director of the Company is a director of Giant Mix Investments Ltd. Non-trade payables 2013 2012 – (63,707) – (643) Advances 2013 2012 – 30,839 Fleet Solution Consulting Pte. Ltd. A director of a subsidiary company is a director of Fleet Solution Consulting Pte. Ltd. Interest bearing loan. The loan is unsecured, repayable upon demand. Interest is charged at 9.75% per annum. 2013 2012 (1,200,000) – 2013 2012 (1,000,000) – Interest bearing loan. The loan is unsecured, repayable upon demand. Interest is charged at 10% per annum. – – – – – – Interest payables 2013 2012 (17,194) – (9,863) – 2013 2012 (2,000,000) (2,009,863) (2,000,000) (2,009,863) Interest bearing loan - non- current The loan is unsecured, repayable by October 2014. Interest is charged at 10% per annum. 52 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Group Amount owed by related parties/(to related parties) US$ Company Amount owed by related parties/(to related parties) US$ 2013 2012 (3,000,000) – Related Party Nature of Relationship Description of Transaction Epsom Assets Limited A director of the Company is also a director of Epsom Assets Limited Interest bearing loan. The loan is unsecured, repayable upon demand. Interest is charged at 9.75% per annum. Director Director of a subsidiary company (12,021) – (800,000) – Interest payables 2013 2012 2013 2012 Interest bearing loan. The loan is unsecured, repayable upon demand. Interest is charged at 9.75% per annum. Interest payables 2013 2012 (6,050) – – – – – – – – – 5353 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 (d) Significant transactions and balances between the Company and its subsidiaries: Subsidiaries Description of Transaction US$ Income/(Expense) Amount owed by subsidiaries/(to subsidiaries) US$ F100 Pty. Ltd. Trade receivables Non-trade receivables Non-trade payables Management and service fee income MSN 429 Leaseco Limited. Non-trade receivables Sale of aircraft MSN 429 Limited Trade receivables Non-trade receivables Non-trade payables Deferred income 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 Deposit collected - non-current 2013 2012 Rental income Capital Lease Aviation PLC Non-trade receivables Dividend income Capital Lease Aviation (S) Pte. Ltd. Trade payables 2013 2012 2013 2012 2013 2012 2013 2012 – – – – – – 455,720 – – 347,057 (243,785) – 655,720 316,782 – – – – 695,484 – 6,978,357 – – – – – – – – – – – 1,250,956 2,230,612 – – – 187,000 – 138 (803,033) – – (187,000) – (570,000) – – – – 1,626 428,281 – 428,281 – – – – (55,258) (55,055) 54 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Subsidiaries Description of Transaction US$ Income/(Expense) Amount owed by subsidiaries/(to subsidiaries) US$ Avation.net Inc Non-trade receivables Interest bearing loan receivables. The loan is unsecured, repayable upon demand. Interest is charged at 1% per month. Interest receivables Non-trade payables Interest income Service fee expense Avation Airframe Holding Pte. Ltd. Non-trade receivables Avation Eastern Fleet Pte. Ltd. Non-trade receivables Non-trade payables Avation Eastern Fleet II Pte. Ltd. Non-trade receivables Avation Eastern Fleet III Pte. Ltd. Non-trade receivables Avation Eastern Fleet IV Pte. Ltd. Non-trade receivables Airframe Leasing (S) Pte. Ltd. Non-trade receivables Airframe Leasing (S) II Pte. Ltd. Non-trade payables 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 – – — — – – – – – – 9,955 1,250 (30,913) – – – – – – – – – – – – – – – – – 239,524 106,512 35,000 200,000 35,000 200,000 11,218 1,250 (9,118) – – – – – 13,825,510 7,033,657 – 1,063,546 (33,803) – 675,130 405,053 1,476,862 – 1,115,542 – 4,704 1,572 (695,737) (398,427) 55 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Subsidiaries Description of Transaction US$ Income/(Expense) Amount owed by subsidiaries/(to subsidiaries) US$ Airframe Leasing (S) III Pte. Ltd. Non-trade receivables Airframe Leasing (S) IV Pte. Ltd. Non-trade receivables MSN 1922 Pte. Ltd. Non-trade payables Deferred income Rental income MSN 1607 Pte. Ltd. Non-trade receivables 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 – – – – – – – – 423,400 – – – 1,666 – 316 – (326,367) – (98,600) – – – 474 – 56 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 Software licence repurchase by aircraft manufacturer Finance income from the discounting of non-current deposits to present value 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) Foreign currency exchange adjustment loss Group 2013 US$ 2012 US$ 39,513,196 31,356,956 2,003,097 325,515 1,315,650 42,739,991 35,001,218 1,993,142 381,409 852,244 Group 2013 US$ 2012 US$ 28,727 34,079 1,075,420 582,844 125,468 1,846,538 94,470 - - 21,137 4,472 120,079 Group 2013 US$ 2012 US$ 1,860,732 1,991,753 11,366,937 10,299,139 1,569,532 627,565 113,930 13,236,614 14,601,919 8,945 - - (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 US$1,324,871. The carrying amounts of identifiable net assets disposed of were US$1,952,436 at 28 June 2012, resulting in a loss on disposal of US$627,565. 11 FINANCE EXPENSES Interest expense on borrowings Amortisation of loan premium Amortisation of deferred lease expense Group 2013 US$ 2012 US$ 11,517,628 904,658 570,267 12,992,553 7,478,572 356,827 6,663 7,842,062 50 5757 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 12 STAFF COSTS Directors’ fee paid to directors of the Company Directors’ fee paid to directors of the subsidiaries Wages and salaries Employer’s contribution superannuation superannuation Warrant expense to defined contribution plans including Group 2013 US$ 2012 US$ 81,983 471,045 652,613 240,211 512,185 184,915 20,600 - 1,226,241 40,484 103,565 1,081,360 13 PROFIT BEFORE TAXATION Profit before taxation for the year is stated after charging / (crediting) the following: 2013 US$ 2012 US$ 1,860,732 1,991,753 11,104,963 10,299,139 - 34,079 41,844 48,691 - 10,651 31,678 44,349 3,564 10,454 Claim on maintenance reserve expense – Group Depreciation of property, plant and equipment – Group Foreign currency exchange adjustment gain – Group Auditors’ remuneration for audit services - Company - Subsidiaries Auditors’ remuneration for non-audit services - Corporate taxation – Company - Corporate taxation – Subsidiaries 58 51 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 Group 2013 US$ 2012 US$ 42,657 1,405,792 91,873 1,321,033 - 4,699 25,575 524,903 - 1,058 2,004,684 2,088 (9,725) 10,942 263,297 12,180 18,392 1,710,080 The standard rate of current tax for the period based on the Singapore standard rate of corporation tax is 17% (2012: 17%). The current tax expense for the period is less than 17% (2012: 17%) for the reasons set out in the following reconciliation: Profit before income tax Tax calculated at tax rate of 17% (2012: 17%) Effects of: Under provision in prior years tax expense – Overseas 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 Group 2013 US$ 2012 US$ 13,969,677 2,374,845 8,073,614 1,372,514 5,517 151,862 (1,462,506) 383,430 - 1,453,148 - (139,999) (829,062) 1,009,453 (7,637) 1,405,269 52 5959 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 15 EARNINGS PER SHARE (a) Basic earnings per share (“EPS”) 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 2013 US$ 2012 US$ Net profit attributable to equity holders of the Company 10,515,901 5,009,457 Weighted average number of ordinary shares 45,236,493 40,515,436 Basic earnings per share 23.25 cents 12.36 cents (b) Diluted earnings per share 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. None of the warrants in existence are dilutive as their exercise price is greater that the weighted average share price. No adjustment is made to the net profit. Diluted earnings per share attributable to equity holders of the Company is calculated as follows: Group 2013 US$ 2012 US$ Net profit attributable to equity holders of the Company 10,515,901 5,009,457 Weighted average number of ordinary shares Adjustment for: - Warrants Weighted average number of ordinary shares 45,236,493 40,515,436 165,337 45,236,493 40,680,773 - Diluted earnings per share 23.25 cents 12.31 cents 60 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 16 TRADE AND OTHER RECEIVABLES Current Trade receivables Trade receivables - subsidiaries (See Note 7d) Trade receivables – related party (See Note 7c) Non-trade receivables Non-trade receivables -subsidiaries (See Note 7d) Non-trade receivables – related parties (See Note 7c) Interest bearing loan receivable - subsidiaries (See Note 7d) Interest receivable – subsidiaries (See Note 7d) Interest bearing loan receivable – related party (See Note 7c) Interest receivable – related party (See Note 7c) Prepaid expense Advances – related party (See Note 7c) Accrued income Accrued income – related party (See Note 7c) Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ 4,534,250 623,898 195,965 – – – 455,720 187,000 – 99,743 2,861,043 27,414 – 35,343 31,373 15,698 – – – – – 18,036,838 9,385,816 4,376,310 – 168,708 – – 35,000 200,000 11,218 1,250 232,554 331,686 232,554 331,686 34,345 1,288,586 – 148,431 20,036 588,299 30,839 – – 6,337,909 161,640 9,021,165 – 19,096,712 34,345 59,729 20,036 14,598 – – – – – 10,356,165 Non-current Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ Deposit for aircraft 9,300,261 8,437,828 9,264,244 8,437,828 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. 54 61 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 The trade and other receivables are denominated in the following currencies: Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ Pounds Sterling United States dollars Australian dollars Euro Singapore dollars 35,027 15,394,983 18,630 6,735 182,795 15,638,170 385,611 377,537 838,120 16,927,409 27,368,533 18,321,392 5,795 80,878 8,391 17,458,993 28,360,956 18,793,993 5,795 81,466 58,712 4,573 88,767 60,963 17 PREPAYMENTS Prepayments represent loan premiums on amounts due to outside parties and are amortised over 10 years. 18 INVENTORIES Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ Finished goods, at cost 438 14,316 – – The cost of inventories recognised as an expense and included in the cost of sales amounts to US$822,887 (2012: US$1,129,526). 19 INVESTMENT IN SUBSIDIARIES Unquoted equity shares, at cost Quoted equity shares, at cost Company 2013 US$ 2012 US$ 2,505,319 2,734,373 5,239,692 2,505,157 2,734,373 5,239,530 Quoted equity shares, at market value 15,828,404 16,015,998 In the opinion of management, no impairment in the value of the investment in subsidiaries is necessary. 62 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Details of the subsidiaries are as follows: Name of Company Principal activities Country of Incorporation/ operations The subsidiaries held directly by the Company: Company’s cost of investment 2012 2013 US$ US$ Group’s effective equity interest 2013 % 2012 % Avation.net Inc (a) Procurement United States 2,505,066 2,505,066 99.96 99.96 of America Capital Lease Aviation PLC (b) Leasing of aircraft United Kingdom 2,734,373 2,734,373 62.07 62.07 F100 Pty. Ltd. (c) MSN 429 Limited (b) Leasing of aircraft Leasing of aircraft Australia 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 Avation Eastern Fleet III Pte. Ltd. (e) Leasing of aircraft Singapore Avation Eastern Fleet IV Pte. Ltd. (e) Leasing of aircraft Singapore MSN 1922 Pte. Ltd. (e) Leasing of aircraft Singapore MSN 429 Leaseco Limited (b) Leasing of aircraft United Kingdom/ Singapore F100 Fleet Pte. Ltd. (f) Leasing of aircraft Singapore 10 (g) 78 1 - 1 1 1 160 1 10 100.00 100.00 2 (g) 100.00 78 100.00 100.00 1 100.00 100.00 - - - - - - - - 100.00 100.00 100.00 100.00 100.00 - - - - - 56 63 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Name of Company Principal activities Country of Incorporation/ operations Company’s cost of investment 2013 US$ 2012 US$ Group’s effective equity interest 2012 2013 % % The subsidiaries held by Capital Lease Aviation PLC: Capital Lease Malta Ltd (d) Leasing of aircraft Malta – – 62.07 62.07 Capital Lease (S) Pte. Ltd. (a) Leasing of aircraft MSN 1607 Pte. Ltd. (f) Leasing of aircraft Singapore – – 62.07 62.07 Singapore – – 62.07 -- The subsidiary held by Avation Eastern Fleet Pte. Ltd.: 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 – – 100.00 100.00 The subsidiary held by Avation Eastern Fleet III Pte. Ltd.: Airframe Leasing (S) III Pte. Ltd. (e) Leasing of aircraft Singapore – – 100.00 The subsidiary held by Avation Eastern Fleet IV Pte. Ltd.: Airframe Leasing (S) IV Pte. Ltd. (e) Leasing of aircraft Singapore – – 100.00 -- -- The subsidiary held by MSN 429 Leaseco Limited: MSN 429 Limited (b) Leasing of aircraft United Kingdom – (g) 100.00 -- The subsidiary held by F100 Fleet Pte. Ltd.: F100 Leasing Pte. Ltd. (f) 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 (f) Audited by Kingston Smith LLP, London, United Kingdom for consolidation purposes (g) MSN 429 Limited was held directly by Avation PLC in 2012 and the shareholding was transferred to MSN 429 Leaseco Limited in 2013. 64 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 20 PROPERTY, PLANT AND EQUIPMENT Group 2013 Cost or valuation: At beginning of year Additions Revaluation surplus At end of year Representing: Cost Valuation Accumulated depreciation: At beginning of year Depreciation for the year Increase in revaluation Impairment loss At end of year Net book value: At beginning of year At end of year Furniture and equipment US$ 14,922 5,198 - 20,120 20,120 - 20,120 7,529 4,882 - - 12,411 Aircraft US$ 243,234,348 147,781,846 3,595,484 394,611,678 Total US$ 243,249,270 147,787,044 3,595,484 394,631,798 217,015,882 177,595,796 394,611,678 217,036,002 177,595,796 394,631,798 29,379,438 11,362,055 (26,646) 6,704,151 47,418,998 29,386,967 11,366,937 (26,646) 6,704,151 47,431,409 7,393 7,709 213,854,910 347,192,680 213,862,303 347,200,389 65 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Group 2012 Cost or valuation: At beginning of year Additions Disposal of subsidiary At end of year Representing: Cost Valuation Accumulated depreciation: At beginning of year Depreciation for the year Impairment loss Disposal of subsidiary At end of year Net book value: At beginning of year At end of year Company 2013 Cost or valuation: At beginning of year Additions Disposal Revaluation surplus At end of year Representing: Cost Valuation Accumulated depreciation: At beginning of year Depreciation for the year Disposal Increase in revaluation surplus At end of year Net book value: At beginning of year At end of year Furniture and equipment US$ 12,076 2,846 – 14,922 14,922 – 14,922 3,557 3,972 – – 7,529 Aircraft US$ Total US$ 156,671,886 108,274,256 (21,711,794) 243,234,348 156,683,962 108,277,102 (21,711,794) 243,249,270 108,274,256 134,960,092 243,234,348 108,289,178 134,960,092 243,249,270 21,058,920 10,295,167 8,792,880 (10,767,529) 29,379,438 21,062,477 10,299,139 8,792,880 (10,767,529) 29,386,967 8,519 7,393 135,612,966 213,854,910 135,621,485 213,862,303 Furniture and equipment US$ 1,886 1,953 - - 3,839 3,839 - 3,839 419 1,280 - - 1,699 1,467 2,140 Aircraft US$ Total US$ 9,077,560 16,560,816 (7,999,120) 2,812,938 20,452,194 9,079,446 16,562,769 (7,999,120) 2,812,938 20,456,033 - 20,452,194 20,452,194 3,839 20,452,194 20,456,033 887,357 442,745 (1,020,763) (26,646) 282,693 887,776 444,025 (1,020,763) (26,646) 284,392 8,190,203 20,169,501 8,191,670 20,171,641 66 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 Assets held on trust Furniture and equipment US$ – 1,886 1,886 1,886 – 1,886 – 419 419 Aircraft US$ 9,077,560 – 9,077,560 Total US$ 9,077,560 1,886 9,079,446 – 9,077,560 9,077,560 1,886 9,077,560 9,079,446 434,140 453,217 887,357 434,140 453,636 887,776 – 1,467 8,643,420 8,190,203 8,643,420 8,191,670 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 acquired aircraft with an aggregated cost of US$16,560,816 (2012: US$37,000,000) and the Company acquired aircraft with an aggregated cost of US$16,560,816 (2012: US$Nil) by means of finance leases respectively. The carrying amount of aircraft held under finance leases at the end of the reporting period was US$54,768,779 (2012: US$43,664,897). Assets pledged as security In addition to assets held under finance leases, the Group’s aircraft with carrying values of US$ 261,655,019 (2012: US$170,972,560) 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 US$210,000 (2012: US$Nil). The Group’s older aircraft were revalued either at January 2013 or June 2013 by independent valuers, on the basis of lease encumbered value and the carrying value of the aircraft is reduced to its recoverable value. Impairment losses were recognised as an expense immediately. 67 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 If the aircraft were measured using the cost model, the carrying amounts would be as follows: Cost Accumulated depreciation Net carrying value 21 GOODWILL ON CONSOLIDATION Cost: Balance at beginning and at end of year Impairment test of goodwill Group 2013 US$ 2012 US$ 374,204,306 (35,200,649) 339,003,657 226,422,460 (22,219,075) 204,203,385 Group 2013 US$ 2012 US$ 2,384,008 2,384,008 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. 68 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 22 TRADE AND OTHER PAYABLES Current Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ Trade payables Trade payables – subsidiaries (See Note 7d) Non-trade payables Non-trade payables - subsidiaries (See Note 7d) Non-trade payables - related parties (See Note 7c) Interest bearing loan – related parties (See Note 7c) Interest payable – related parties (See Note 7c) Deferred income Deferred income – subsidiaries (See Note 7d) Deferred income – related parties (See Note 7c) Accrued expenses 1,532,786 660,252 1,467,964 444,484 – 334,138 – 487,326 55,258 – 55,055 – – – 6,000,000 35,265 3,426,841 – 2,111,843 398,427 520,204 – – 750,000 – – 9,863 14,641 115,350 – – – – – 98,600 187,000 – 759,772 12,088,802 1,392,036 1,263,439 5,073,257 – 82,591 3,840,760 14,641 58,150 1,273,107 Non-current Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ Deposits collected Deposit collected – subsidiary (See Note 7d) Deposit collected - related party (See Note 7c) Interest bearing loan – related party (See Note 7c) 7,088,610 – – – – 4,054,881 71,487 – – – 570,000 70,741 2,000,000 9,088,610 2,009,863 6,064,744 2,000,000 2,071,487 2,009,863 2,650,604 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 deposits collected were from customers in respect of aircraft lease commitments, and have been discounted to their present value at a current pre-tax rate that reflect the risks specific to these deposits. These deposits will be refunded at the end of the lease terms. 62 69 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 The trade and other payables are denominated in the following currencies: Pound sterling United states dollars Australian dollars Euro Singapore dollars Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ 45,263 20,992,115 47,768 9,322 82,944 21,177,412 189,114 10,222,396 11,279 8,194 707,018 11,138,001 109,159 5,637,524 25,750 43,125 96,689 5,912,247 112,582 3,626,172 6,734 2,177 176,046 3,923,711 23 DEFERRED LEASE INCOME The deferred lease income is the difference between the present value and the principal amount of the deposits received from a customer. The deferred lease income is amortised through the statement of comprehensive income on a straight line basis over the lease term. 70 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 24 LOAN AND BORROWINGS Secured borrowing I Secured borrowing II Secured borrowing III Secured borrowings IV Secured borrowings V Secured borrowings VI Secured borrowings VII Secured borrowings VIII Junior Secured borrowings VIII Secured borrowings IX Junior Secured borrowings IX Secured borrowings X Junior Secured borrowings X Secured borrowings XI Junior Secured borrowings XI Secured borrowings XII Junior Secured borrowings XII Secured borrowings XIII Junior Secured borrowings XIII Secured borrowings XIV Junior Secured borrowings XIV Secured borrowings XV Junior Secured borrowings XV Secured borrowings XVI Junior Secured borrowings XVI Secured borrowings XVII Junior Secured borrowings XVII Secured borrowings XVIII Secured borrowings XIX Obligations under finance lease Total Less: current portion of loan borrowings Maturity Group Company 2013 US$ 2012 US$ 2013 US$ 2012 US$ 2013 2012 2013 2013 2015 2015 2013 2021 2021 2021 2021 2021 2021 2021 2021 2022 2022 2022 2022 2022 2022 2022 2022 2023 2023 2023 2023 2014 2018 – – 61,994 – 13,413,580 14,265,625 199,488 13,992,973 1,452,374 13,971,988 1,466,544 14,465,556 1,485,223 14,375,678 1,461,781 16,113,572 1,389,385 16,059,469 1,381,587 16,461,482 1,383,914 16,370,627 1,373,429 14,719,145 1,311,076 15,090,579 1,331,522 6,000,000 17,000,000 46,850,992 263,449,583 1,067,487 292,627 779,136 2,518,182 15,820,988 16,703,125 1,351,040 15,341,083 1,348,056 15,318,230 1,363,111 15,834,975 1,382,958 15,736,579 1,360,177 – – – – – – – – – – – – – – 37,324,725 143,542,479 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 13,470,218 13,470,218 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 2,784,029 2,784,029 (24,243,718) 239,205,865 (19,553,681) 123,988,798 (1,415,411) 12,054,807 (2,108,683) 675,346 64 71 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 Obligations under finance lease Future minimum lease payments due: Within one year After more than one year but within 5 years More than 5 years Less: Finance charges Present value of minimum lease payments The present value of minimum lease payments is analysed as follows: Within one year After more than one year but within 5 years More than 5 years Balance at end of year Group 2013 US$ 2012 US$ Company 2013 US$ 2012 US$ 6,468,612 6,675,996 1,992,612 2,199,996 31,542,346 33,001,700 71,012,658 (24,161,666 ) 46,850,992 18,585,528 37,477,700 62,739,224 (25,414,499) 13,638,346 – 15,630,958 (2,160,740) 681,528 – 2,881,524 (97,495) 37,324,725 13,470,218 2,784,029 2,694,958 3,268,605 1,415,411 2,108,683 18,635,952 25,520,082 46,850,992 6,716,586 27,339,534 37,324,725 12,054,807 – 13,470,218 675,346 – 2,784,029 72 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 1) Secured borrowing I is secured by fixed and floating charges over all aircraft purchased by its subsidiary, F100 Pty. Ltd. (“F100”). The borrowing has been repaid during the year. 2) Secured borrowing II is secured by fixed and floating charges over all aircraft purchased by its subsidiary, F100 Pty. Ltd. The borrowing has been repaid during the year. 3) Secured borrowing III is secured by fixed and floating charges over all aircraft purchased by its subsidiary, F100 Pty. Ltd. 4) Secured borrowing IV is secured by the aircraft of its subsidiary, Capital Lease Aviation PLC (“CLA”) and a charge over CLA’s bank account into which lease payments relating to the aircraft are received. The borrowing has been repaid during the year. 5) Secured borrowing V is secured by the aircraft of its subsidiary, Capital Lease Malta Ltd (“CLM”), a charge over the shares in CLM and a charge over CLM’s bank accounts into which lease payments relating to the aircraft are received. 6) Secured borrowing VI is secured by the aircraft of its subsidiary, CLM, a charge over the shares in CLM and a charge over the shares in CLM and a charge over CLM’s bank accounts into which lease payments relating to the aircraft are received. 7) Secured borrowing VII is secured by fixed and floating charges over all aircraft purchased by its subsidiary, F100 Pty. Ltd. 8) Secured borrowing VIII – XV, the Group entered into Type A loan facilities with an institution to partially finance the purchase of aircraft. The loans are secured by the following: (a) Aircraft mortgages in respect of the aircraft purchased with the proceeds of Type A loan 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 the 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 Type A 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 institution under the Type A Loan Facility, save to the extent that such transaction would enable the Group to repay the loan relating to the Aircraft. The above charges also apply to junior secured borrowing VIII – XV but such lenders’ rights under the security are sub-ordinated to and rank behind those of the lender under the Type A Loan Facility. 73 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 1) Secured borrowing XVI, the Group entered into Type B Loan Facilities with a financial institution to partially finance the purchase of aircraft. The loans are secured by the following: (a) Aircraft mortgages in respect of the aircraft purchased with the proceeds of Type B 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 Airframe Leasing (S) III Pte. Ltd. (a subsidiary) Each advance under the Type B 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 financial institution under the Type B Loan Facility, save to the extent that such transaction would enable the Group to repay the loan relating to the Aircraft. The above charges also the junior secured borrowing XVI but such lenders’ rights under the security are sub-ordinated to and rank behind those of the lender under the Type B Loan Facility. 10) The Group entered into Type C Loan Facilities with an institution to partially finance the purchase of aircraft. Secured borrowing XVII is secured by the following: (a) Aircraft mortgages in respect of the aircraft purchased with the proceeds of Type C 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 Airframe Leasing (S) IV Pte. Ltd. (a subsidiary) Each advance under the Type C 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 institution under the Type C Loan Facility, save to the extent that such transaction would enable the Group to repay the loan relating to the Aircraft. The above charges also apply to junior secured borrowing XVII but such lenders’ rights under the security are sub-ordinated to and rank behind those of the lender under the Type C Loan Facility. 11) Secured borrowing XVIII is secured by a first priority mortgage on the aircraft of its subsidiary, MSN 429 Leaseco Limited, security assignments of the subsidiary’s rights under the leases and other contractual documents relating to the aircraft. 74 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 12) Secured borrowing XIX is secured by a first ranking mortgage on the aircraft of its subsidiary, MSN 1607 Pte. Ltd., security assignments in favour of the lender of the subsidiary’ rights under the leases and other contractual documents relating to the aircraft and a charge over its bank accounts into which lease payments relating to the Aircraft are received. The average interest rates for the outside party borrowings range from 3.24% to 8.25% per annum (2012: 4% to 9.90% 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 Group 2013 US$ 2012 US$ Maintenance reserve claim 3,757,081 2,969,169 Group 2013 US$ 2012 US$ 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 Balance at end of financial year 2,969,169 1,860,732 (1,072,820) – 3,757,081 4,564,855 2,976,564 (2,019,646) (2,552,604) 2,969,169 A provision of US$1,860,732 (2012: US$2,976,564) was made during the year ended 30 June 2013. 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 US$1,072,820 (2012: US$2,019,646) on the reserves for the year ended 30 June 2013. 75 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 26 DEFERRED TAX LIABILITIES Recognised deferred tax assets and liabilities are attributable to the following: Group Property, plant and equipment Other items Tax losses carried forward Tax (assets)/ liabilities Set off tax Net tax (assets)/ liabilities Property, plant and equipment Other items Tax losses carried forward Tax assets Set off tax Net tax (assets)/ liabilities Assets 2013 US$ Liabilities 2013 US$ Assets 2012 US$ – – – – – – – – – – – – 5,197,011 (9,094) – 5,187,917 – 5,187,917 Liabilities 2012 US$ 5,268,872 644,964 29,364 5,943,200 – 5,943,200 Net 2013 US$ 5,197,011 (9,094) – 5,187,917 – 5,187,917 Net 2012 US$ 5,268,872 644,964 29,364 5,943,200 – 5,943,200 Movement in temporary differences during the financial year: Group Balance 1 July 2012 US$ Recognised in profit and loss US$ Recognised in equity US$ Balance 30 June 2013 US$ Property, plant and equipment Other items Tax losses carried forward 5,268,872 644,964 29,364 5,943,200 1,220,582 (654,058) (29,364) 537,160 (1,292,443) – – (1,292,443) 5,197,011 (9,094) – 5,187,917 Movement in temporary differences during the last financial year: Group Balance 1 July 2011 US$ Recognised in profit and loss US$ Recognised in equity US$ Balance 30 June 2012 US$ Property, plant and equipment 5,562,765 1,080,785 Other items (152,091) Tax losses carried forward 6,491,459 134,648 (435,821) 181,455 (119,718) (428,541) – – (428,541) 5,268,872 644,964 29,364 5,943,200 76 69 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 2013 US$ Liabilities 2013 US$ Net 2013 US$ Assets 2012 US$ – – – – – – – – – – – – 366,533 366,533 – – – – 366,533 366,533 – – 366,533 366,533 Liabilities 2012 US$ Net 2012 US$ 315,043 315,043 – – – – 315,043 315,043 – – 315,043 315,043 Movement in temporary differences during the financial year: Company Balance 1 July 2012 US$ Recognised in profit and loss US$ Recognised in equity US$ Balance 30 June 2013 US$ Property, plant and equipment 315,043 51,490 -- 366,533 Movement in temporary differences during the last financial year: Company Balance 1 July 2011 US$ Recognised in profit and loss US$ Recognised in equity US$ Balance 30 June 2012 US$ Property, plant and equipment 221,592 93,451 – 315,043 70 77 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 27 SHARE CAPITAL AND TREASURY SHARES a) Share capital Allotted, called up and fully paid ordinary shares of 1 penny each: At 1 July Issue of shares At 30 June 2013 2012 No of shares US$ No of shares US$ 42,374,463 6,448,497 48,822,960 779,618 38,607,220 3,767,243 878,137 42,374,463 98,519 720,917 58,701 779,618 The holders of ordinary shares (except for treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. a) On 5 July 2012, the Company issued 2,000,000 ordinary shares of 1 penny each at 100 pence following a private placement exercise raising gross proceeds of US$3,129,200. b) On 21 February 2013, the Company issued 60,510 ordinary shares of 1 penny each at 67.50 pence following the exercise of warrants by a warrant holder raising gross proceeds of US$62,769. c) On 11 March 2013, the Company issued 50,000 ordinary shares of 1 penny each at 67.50 pence following the exercise of warrants by a warrant holder raising gross proceeds of US$50,335. d) On 24 May 2013, the company issued 4,337,987 ordinary share of 1 penny each at 60 pence following an open offer raising gross proceeds of US$3,933,079. b) Treasury shares 2013 2012 No of treasury shares No of treasury shares US$ US$ At 1 July Acquired during the year At 30 June – 150,000 150,000 – 214,498 214,498 – – – – – – On 9 January 2013, the Company acquired 150,000 of its shares at a price of 88 pence per ordinary share representing approximately 0.34% of the Company’s issued ordinary share capital at that time. The total amount paid to acquire the shares was US$214,498 and this was presented as a component within shareholders’ equity. 78 71 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 28 SHARE-BASED PAYMENTS 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 signed on Balance at Granted Exercised during beginning the year of year during the year Expired/ Cancelled Balance at end of year Expiry date Exercise price Fair value at grant date (1) 02 Dec 2010 (2) 14 Dec 2011 475,000 – – 800,000 (110,510) – (364,490) – – 1 Dec 2012 67.5 p 800,000 11 Dec 2013 110.5 p 13.63 p 8.17 p The weighted average fair value of the warrants granted during the last financial year was 8.17 pence. The value of the warrants granted during the last financial year was US$103,565. The warrants were priced using the Binomial option pricing model. Where relevant, the expected life used in the model has been adjusted based on the management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on the historical share price volatility over the past four months. Inputs into the model Grant date share price Exercise price Expected volatility Warrant life Dividend yield Risk free interest rate Warrant series signed on 14 December 2011 110.5 pence 110.5 pence 20% 2 years 0.91% 0.35% The Company issued a total of 800,000 warrants during the last financial year at 110.5 pence when the then market price was 110.5 pence. 72 79 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 29 CAPITAL COMMITMENTS Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements are as follows: Group 2013 US$ 2012 US$ Property, plant and equipment 175,229,908 155,231,420 The above capital commitments represent amounts due under contracts entered into by the group to purchase aircraft after exercising options. The company has paid deposits towards the cost of these aircraft which are included in trade and other receivables. In addition to the aircraft which the group has committed to purchasing, the group holds options to purchase an additional 10 aircraft at agreed prices. The options are held in the balance sheet at cost as it is not possible to place a reliable estimate on their fair values. Uncertainties exist over the finance to exercise the options and the market price of the aircraft at the time of delivery, given aircraft are non-financial assets with no indexed market and long lead times. There is no open market on which to trade the options and the Group has no history of exercising options and selling the asset shortly after, accordingly it is not considered appropriate to recognise any potential gain on these options arising from potential increases in aircraft values over and above the option price. 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: Group 2013 US$ 2012 US$ Within one year In the second to fifth years inclusive More than five years 46,841,352 138,519,513 114,490,041 29,523,884 71,577,536 58,099,805 80 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 b) Contingencies 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 2013, the Group had received US$1,993,142 (2012: US$2,003,097) in maintenance rent. to manufacturers’ The future claims against the maintenance reserves funds can be estimated according 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. recommendations and The Company’s subsidiary, MSN 1607 Pte. Ltd. has acquired an aircraft during the year together with a contingent liability to pay amounts to the lessee dependent upon the return condition of the aircraft at the end of the lease term. It would only become payable by the subsidiary to the lessee in the event that the aircraft is returned at lease- end/redelivery at the end of the lease in April 2018 in a full life condition. Management is of the view that the return condition of the aircraft will be at half life condition. A reliable estimate of the future payment obligation at half life condition cannot be made and hence a provision not made. 81 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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. b) Primary reporting segment – business segments During the year ended 30 June 2013, 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. The business procurement segment does not meet the quantitative thresholds and is not separately disclosed. 82 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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: Revenue US$ 31,464,032 1,560,000 9,000,000 275,000 – 46,466 394,493 42,739,991 Revenue US$ 22,678,216 2,224,663 9,000,000 – 141,731 956,608 35,001,218 Group Financial year ended 30 June 2013 Australia United States Denmark Germany Malta United Kingdom Other Group Financial year ended 30 June 2012 Australia United States Denmark Malta United Kingdom Other Group Financial year ended 30 June 2013 Australia Denmark Germany United States Group Financial year ended 30 June 2012 Australia Denmark United States Capital expenditure and valuation movements US$ 128,897,926 22,479,404 5,198 151,382,528 Capital expenditure and valuation movements US$ 108,274,256 Total assets US$ – – – – 258,760,998 8,197,159 60,667,000 23,194,344 1,163,056 20,114,934 22,285,809 394,383,300 Total assets US$ – – – – 141,951,757 8,841,444 65,092,000 935,955 18,295,803 11,992,137 247,109,096 2,846 108,277,102 Net book value Aircraft US$ 255,939,738 60,667,000 22,388,817 8,197,125 347,192,680 Net book value Aircraft US$ 139,921,910 65,092,000 8,841,000 213,854,910 83 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 During the year, certain customers accounted for greater than 10% of the Group’s total revenues. There is one customer that accounts for US$31,411,894 (73%) of the Group’s total revenues. These revenues were based in the Australia operating segment. There is one customer that accounts for US$9,000,000 (21%) of the Group’s total revenue. These revenues were based in the Denmark segment. 32 CONTINGENT LIABILITIES Group 2013 US$ 2012 US$ Guarantees 216,598,591 106,217,754 The maximum estimated amount the Group could become liable is as shown above. 33 ULTIMATE HOLDING COMPANY No party controls the Company. 34 CHANGES IN ACCOUNTING POLICIES Items included in the financial statements of the Company for the financial period ended 30 June 2012 were measured and presented using the Pound Sterling (£). During the current financial period ended 30 June 2013, United States Dollars (US$) was adopted as the Company’s presentational currency. The Company determined that using US$ as its presentational currency best reflected the economic substance of the underlying events and circumstances relevant to the Company as it is the functional currency of the Group. This change of accounting policy requires items in the financial statements, including comparative figures to be measured and presented in US$. In year 2012, the foreign translation reserve was £2.5m arose from translating subsidiaries whose presentational currency was US$ in to £, and now the Group accounts are presented in US$ that this reserve has been eliminated. 84 77 AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 financial effects arising The re-measurement process are adjusted retrospectively against the accumulated profits of an earlier period reported in the financial statements. A summary of the significant accounts for the year ended 30 June 2012 and 1 July 2011 financial statements before and after restatement is as follows: from the Group As reported As re-stated 30 June 2012 30 June 2012 1 July 2011 £ US$ US$ Group As re-stated As reported 1 July 2011 £ Current assets Non-current assets Total assets 18,595,134 228,513,962 247,109,096 11,901,503 146,230,400 158,131,903 21,132,225 138,005,493 159,137,718 13,171,112 86,220,731 99,391,843 Current liabilities Non-current liabilities Capital and reserves 28,206,569 136,727,779 82,174,748 247,109,096 18,056,674 87,554,173 52,521,056 158,131,903 25,805,406 54,230,322 79,101,990 159,137,718 16,085,904 33,845,341 49,460,598 99,391,843 Total profits 6,363,534 4,161,210 7,362,878 5,056,726 Earnings per share - Basic - Fully diluted 12.36 cents 8.16 pence 8.13 pence 12.31 cents 16.77 cents 11.95 pence 16,61 cents 11.84 pence Company As re-stated As reported 30 June 2012 30 June 2012 1 July 2011 £ US$ US$ Company As re-stated As reported 1 July 2011 £ Current assets Non-current assets Total assets 11,538,470 21,869,028 33,407,498 7,389,232 13,905,790 21,295,022 14,852,043 11,248,638 26,100,681 9,272,137 7,094,954 16,367,091 Current liabilities Non-current liabilities Capital and reserves 3,381,790 3,640,993 26,384,715 33,407,498 2,165,704 2,331,692 16,797,626 21,295,022 3,163,448 3,005,620 19,931,613 26,100,681 1,972,273 1,876,409 12,518,409 16,367,091 Total profits 1,277,309 963,896 1,370,916 1,288,382 As required by IAS1, the Company and the Group have disclosed the changes in their balance sheet arising from the prior year adjustments due to the change in accounting policy. AVATION PLC REGISTERED NUMBER: 05872328 (ENGLAND & WALES) NOTES TO FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013 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 2013 were authorised for issue by the Board of Directors on 23 August 2013. 85 Register of top 20 Shareholders (AS AT 05 SEPTEMBER 2013) Name of Shareholder Fitel Nominees Limited HSBC Client Holdings Nominee (UK) Limited State Street Nominees Limited Chase Nominees Limited Apollo Nominees Ltd HSBC Global Custody Nominee (UK) Limited Credit Suisse Securities (Europe) Limited Fitel Nominees Limited Lynchwood Nominees Limited Loeb Aron & Company Ltd Fitel Nominees Limited Fitel Nominees Limited HSBC Global Custody Nominee (UK) Limited W H Ireland Nominees Limited The Corporation Of Lloyds Barclayshare Nominees Limited Hargreave Hale Nominees Limited L R Nominees Limited Jim Nominees Limited HSBC Client Holdings Nominee (UK) Limited Holding (Number of shares) 9,009,352 8,788,140 3,188,237 3,120,000 2,036,756 1,646,250 1,583,244 1,356,967 1,305,772 920,000 824,450 676,519 582,859 541,836 480,922 478,957 440,000 404,682 367,210 362,700 86 ATR-72 aircraft under construction at the Avions de Transport Régional plant at Toulouse Airport at Blagnac, France AnnuAl RepoRt 2013 DIRECTORS: Robert Jeffries Chatfield AUDITORS: Kingston Smith LLP Andrew Baudinette (resigned on 3 December 2012) Devonshire House Bryant James Mclarty Roderick Douglas Mahoney 60 Goswell Road London EC1M 7AD COMPANy SECRETARIES: REGISTRARS: Siobhan Mary Macgroarty Cool Computershare Investor Services PLC Duncan Gerard Stephen Scott Jason Francis Gollogly REGISTERED OFFICE: 5th Floor Cheyne House The Pavilions Bridgwater Road Bristol BS99 6ZZ SOLICITORS: Speechly Bircham LLP Crown Court 61-63 Cheapside 6 New Street Square London EC2V 6AX PRINCIPAL PLACE OF BUSINESS: 510 Thomson Road #12-04 SLF Building Singapore 298135 London EC4A 3LX United Kingdom BANKERS: Citibank NA 8 Marina View #17-00 Asia Square Tower 1 Singapore 018960 Reuters/BBG L I S T E D S T A N D A R D SHARES Index: LSE FTSE Sector: Industrial Transportation FTSE Sub Sector: Transportation Services AVAP.LN AVAP
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