Annual Report 2014
Annual Report 2014
OuR Fleet (AS At 29 OCtOBeR 2014)
Aircraft type
In Operation Ordered
Options
5
6
12
2
3
28
-
-
7
-
2
9
-
-
27
-
-
27
Fokker 100
AtR 72-500
AtR 72-600
Airbus A320-200
Airbus A321-200
total
2
Model
Fokker F100
Airbus A320-200
Model
Airbus A321-200
ATR 72-500
Model
ATR 72-600
3
Annual Report 2014
COMPANY INFORMAtION
DIRECTORS:
Robert Jeffries Chatfield
COMPANY SECRETARIES:
Bryant James McLarty (resigned on 6 December 2013)
Roderick Douglas Mahoney
Stephen John Fisher (appointed on 24 April 2014)
Siobhan Mary MacGroarty Cool
Duncan Gerard Stephen Scott
Jason Francis Gollogly
REGISTERED OFFICE:
5th Floor Cheyne House
Crown Court 61-63 Cheapside
London EC2V 6AX
United Kingdom
PRINCIPAL PLACE OF BUSINESS:
510 Thomson Road #12-04
AUDITORS:
SOLICITORS:
SLF Building
Singapore 298135
Kingston Smith LLP
Devonshire House
60 Goswell Road
London EC1M 7AD
United Kingdom
Speechly Bircham LLP
6 New Street Square
London EC4A 3LX
United Kingdom
CORPORATE ADVISER:
Loeb Aron & Company Ltd
Cheyne House
Crown Court 62-63 Cheapside
London EC2V 6AX
United Kingdom
REGISTRARS:
Computershare Investor Services LLC
The Pavilions
Bridgewater Road
Bristol BS99 6ZZ
United Kingdom
4
tABle OF CONteNtS
PAGe(S)
Company Information ................................................................................................................................. 4
Chairman’s Statement........................................................................................................................... 6 – 7
Board of Directors .........................................................................................................................................8
Strategic Report .................................................................................................................................... 9 – 11
Directors’ Report .................................................................................................................................. 12– 14
Directors’ Remuneration Report ........................................................................................................15–19
Statement of Directors’ Responsibilities .............................................................................................. 20
Auditors’ Report ......................................................................................................................................... 21
Consolidated Statement of Profit or loss and Other Comprehensive Income ............................... 22
Company Statement of Profit or loss and Other Comprehensive Income ...................................... 23
Consolidated Statement of Financial Position ...................................................................................... 24
Company Statement of Financial Position ............................................................................................. 25
Consolidated Statement of Changes in equity ............................................................................ 26 – 27
Company Statement of Changes in equity ............................................................................................ 28
Consolidated Statement of Cash Flows ......................................................................................... 29– 30
Company Statement of Cash Flows ........................................................................................................ 31
Notes to the Financial Statements .................................................................................................. 32– 93
5
ChAIRMAN’S StAteMeNt
Background and Outcome
Your Board is pleased to deliver
another strong result in respect of
the year ended 30 June 2014. the
net profit after tax (attributable
to equity holders) increased 27
per cent to uS$ 13,312,153 (2013:
uS$ 10,515,901) on total income
that also increased by 29 per cent
to uS$ 56,279,613 (2013: uS$ 43,763,642). this resulted
in earnings per share increasing by 18 per cent to 27.40 uS
cents (2013: 23.25 uS cents). total returns consist of income
from aircraft lease payments plus the net asset value (capital)
realisable from the sale of the aircraft after repayment of
associated debt obligations.
Avation’s fleet is diverse, comprising young AtR aircraft and
other aircraft including Airbus A321 and A320 along with a
small investment in older aircraft. Avation targets growth as
well as continual fleet renewal and financial management
to ensure the retention of asset values and maximisation of
earnings. the Avation fleet of 25 aircraft has an average age
of 9.0 years, which is likely to reduce as we add new aircraft
and dispose of old aircraft, and average lease term of 6.1
years with a current customer base of airlines in Australia,
europe, North America and the Asia-Pacific region.
Key Achievements
In the period to 30 June 2014, the Group:
•
Added two new AtR 72-600 aircraft to the fleet;
• Delivered two new AtR 72-600 aircraft direct to airlines;
•
•
•
•
•
Added new airline customers;
Re-financed two AtR 72-500 aircraft to significantly
lower the of cost of debt in respect of those aircraft;
Acquired one Airbus A320 through the conversion of
finance lease to operating lease;
lowered average cost of debt; and
extended leases on two A321 aircraft in the fleet to 2021.
As of 30 June 2014, the Company had increased net assets
by 13 per cent to uS$ 110,766,984 (2013: uS$ 98,236,359).
the Company has again been able to lower the average
cost of debt during the period and obtain funding from new
and existing lenders. Debt facilities on existing aircraft 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 has continued to generate strong earnings
with eBItDA increase of 27 per cent to uS$ 48,723,575
(2013 : uS$ 38,329,167). Purchasing aircraft typically requires
a mixture of senior debt, a junior debt tier and equity. the
equity may be self generated through internal cash flows. the
Company continues to evaluate the state of both debt and
equity markets in the context of its ongoing requirements.
the directors seek to minimise the cost of funds and have
successfully refinanced certain higher cost debt facilities
during the year. the underlying results for the Group were
extremely strong despite contributory profits from our 69
percent owned subsidiary Capital lease Aviation PlC during
the period being less robust than expected. Since the year
end we have increased our ownership of that subsidiary to
95.4% and we will be seeking to improve its performance
going forward.
Outlook
the Directors believe they have demonstrated a sustainable
business model and are committed to developing Avation
as a differentiated aircraft operating lessor that delivers
strong and predictable cash yields and attractive returns on
invested capital.
Growth in the business is set to accelerate in 2015. the
outlook for calendar year 2015 is 44 per cent growth in the
aircraft fleet by way of committed deliveries. Avation is
scheduled to deliver eight new AtR 72-600 aircraft before
the end of FY2015 and an additional three AtR 72-600 aircraft
in the second half of calendar year 2015. Avation is actively
evaluating additional aircraft acquisition opportunities.
6
Annual Report 2014 ChAIRMAN’S StAteMeNt
the Board and I are pleased to deliver another strong set
of results and remain committed to building your Company
into a respected, profitable, well diversified and strongly
cash generative aircraft leasing business. the Board would
like to thank the shareholders for their continued support
and goodwill and look forward to the future with confidence
in the successful development of Avation PlC.
Robert Jeffries Chatfield,
executive Chairman
Singapore
17 October 2014
the Company has made substantial progress towards
funding its 2015 deliveries and is developing formalised
capital programmes to provide a diversified base with access
to both debt and equity markets. 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 industry risks are also present
and include the creditworthiness of client airlines. Other risks
remain typical for an aircraft leasing industry that typically
uses leverage to build the fleet, along with the finance risks
and more particularly the residual value risk and impairment
in aircraft assets. the Company has significant balance
sheet exposure to Australian based aircraft. the Company is
seeking to actively diversify away from Australian economic
and geographic risk going forward by marketing to new
airline customers.
Whilst the business is focused on funding its continued strong
fleet growth, the Board overwhelmingly recognises the
importance of rewarding shareholders and is recommending
to shareholders to approve a final dividend payment of 2.01
uS cents per share (2013: 1.78 uS cents). the timetable for
this final dividend will be set out in the notice of annual
general meeting to be published in due course. the Company
aims to maintain a progressive dividend policy. the record
date for the final dividend will be announced in the meeting
materials for the upcoming annual general meeting.
7
Annual Report 2014
BOARD OF DIReCtORS
Stephen Fisher PhD
Non-Executive Director
In addition to his role at Avation
is Chairman,
PlC, Stephen
Principal and Chief
Investment
Officer of First Degree Global Asset
Management Pte. ltd., a privately
asset management
owned
company in Singapore founded
in 2011. First Degree Global Asset Management operates a
number of strategies for its clients including a Fixed Income
focused hedge fund.
investment professional with
twenty-two years experience as
Stephen has had
investment
leading
an
in the united States, Asia and
management groups
Australia. From 2000 to 2011 he was Managing Director
and head of Global Fixed Income Product – Asia Pacific at
JPMorgan Asset Management. Stephen held the positions
of Australian head of Capital Markets Research from 1992-
1996, and Asia Pacific Regional head of Capital Markets
Research at J.P. Morgan Investment Management, Inc. from
1996-1998.
Stephen’s particular areas of expertise are in quantitative
analysis of fixed income, equities, asset allocation and
derivatives. he has advised Central Banks and Sovereign
Wealth Funds on their reserves management practice, and
his research on investment management issues has been
widely published in academic and industry journals.
Stephen has a Master of Science (Finance) and a PhD
(Finance) from the We Simon Graduate School of Business
Administration, university of Rochester, New York and
a Bachelor of economics (First Class honours) from the
university of Sydney.
Jeff Chatfield
Chairman
successful
Mr Chatfield
is the executive
chairman of Avation PlC and has
been instrumental in establishing
and growing the Company. Mr
Chatfield has a track record of
leadership in a variety of profitable
businesses.
and
he is a qualified public company director and business
executive experienced in the fields of commercial airlines,
aviation, aircraft leasing and finance, electronic commerce,
investment management, radio and tV broadcasting. Mr
Chatfield holds both Bachelor’s and Master’s Degrees
in engineering from the university of Western Australia
where he graduated top of the class. he has been involved
in a number of successful businesses both private and
public, the majority of which have been strongly cash flow
generative. In the recent past Mr Chatfield was chairman of
Skywest Airlines ltd, a lSe-ASX dual-listed public company
recently sold to Virgin Australia ltd. he is a member of the
Australian Institute of Company Directors and a fellow of the
Singapore Institute of Directors. Mr Chatfield was born in
Perth, Australia and is a Permanent Resident of Singapore.
Rod Mahoney
Executive Director
Mr Mahoney is the Chief Operating
Officer and an executive Director of
the Company. Before this executive
fleet
appointment, he was a
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.
8
StRAteGIC RePORt
The Directors present their strategic report for the year ended
30 June 2014.
Business Overview
Avation PLC and its subsidiaries (“Avation”, the “Group”) is
a specialist commercial passenger aircraft leasing group
managing a fleet of 25 aircraft as at 30 June 2014 which it
leases to airlines across the world. Avation’s customers include
US Airways, Virgin Australia, Thomas Cook, Condor, Fiji Airways
and UNI Air. The Company’s fleet includes Airbus A320 family
and Fokker 100 jet and ATR 72 twin engine turboprop aircraft.
Avation operates from its headquarters in Singapore where it
is tax resident and since 17 April 2014 a beneficiary of the
Singapore Aircraft Leasing Scheme tax incentive.
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.
Coinciding with the expected future delivery of additional ATR
72s ordered from the manufacturer 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.
Avation is listed on the main list of the London Stock Exchange
under the ticker symbol LSE: AVAP.
Business model
Avation aims to generate growth in its fleet and build
shareholder value by focussing on 2 sectors being a) new
turbo-prop regional aircraft, principally the popular fuel efficient
ATR 72-600 model and b) second-hand narrow body jets in
particular the popular Airbus A320/A321 family and Boeing
737NG aircraft. Owning different types of aircraft provides a
benefit in terms of diversification of market and residual value
risk.
The Group finances the acquisition of new aircraft using
internally generated cash flows and a mixture of senior and
junior debt finance. Debt is re-financed on older aircraft when
there is an opportunity to reduce overall cost of debt funding
and also to release equity for acquiring new aircraft.
The Board applies prudent financial management principles to
manage risk when acquiring aircraft by seeking to match lease
and financing duration, using mostly fixed interest rate debt
and amortising debt aggressively over lease periods.
As the fleet grows the Group will also seek to diversify the
customer base as part of the overall credit risk management
policy.
The Avation fleet of 25 aircraft has an average age of 9.0
years, which is likely to reduce as the Group adds new aircraft
and disposes of old aircraft, and average remaining lease
term of 6.1 years with a current customer base of airlines in
Australia, Europe, North America and the Asia-Pacific region.
Markets and trends
Aircraft leasing is a growth industry with a growing market
share of the world’s total commercial passenger aircraft fleet.
Avation expects that the percentage of leased aircraft in the
world fleet will continue to grow over the coming years due to
the flexibility that the leasing model provides for airlines and
also due to increased access to financial capital for leasing
companies.
9
StRAteGIC RePORt
The aircraft leasing industry also benefits from good long-term
credit fundamentals supported by growth in air travel demand,
capital constraints amongst airlines and normal cycles of
aircraft replacement.
The world fleet of commercial passenger aircraft is predicted
to grow substantially with aircraft traffic expected to double
every 15 years. Forecast new aircraft deliveries over the next
20 years are 29,000 aircraft; of which 36% are expected to
be in Asia, 20% in Europe, 19% in North America and of the
total, 69% are expected to be single aisle.
Improved access to capital including unsecured debt and
low interest rates, is supporting the growth plans of both
established leasing companies and new entrants into the global
aircraft leasing market. Many stand-alone aircraft lessors have
improved their leverage profile over the last several years and
have been able to diversify funding sources.
Source: Airbus Global Market
Forecast 2013
Principal risks and uncertainties
The aircraft leasing sector is competitive and Avation is
exposed to a number of market related, operational and
financial risks. The Group is committed to mitigating risk
across the business through the application of prudent risk
management policies. The risks and uncertainties described
below are those that the Group has identified as the most
significant risks to the business. Avation’s Board of Directors
is responsible for managing risk and reviews risk management
policies regularly.
Market related risks
exposure to the airline industry
The Group’s customers are commercial airlines who are
financially exposed to the supply and demand for passenger
air travel. The financial condition of commercial airlines may
weaken due to a number of factors including but not limited to
local and global economic conditions, increased competition
between airlines, speculative ordering of new aircraft, war,
terrorism or natural disasters. If the financial condition of the
Group’s airline lessee customers weakens for any reason, the
Group may be exposed to increased risks of lessee default
and reduced lease rates for its aircraft.
10
Annual Report 2014 StRAteGIC RePORt
Asset value risk
Financial risks
Fluctuations in the supply and demand for aircraft and aircraft
travel may impact values and lease rates for the Group’s
aircraft. Market forces and prevailing economic conditions
may change over the economic lives of the Group’s aircraft
and could have a positive or negative impact on valuations.
Advances in aircraft technology may create obsolescence in
the fleet before the end of the current estimated useful life.
The Group regularly obtains independent third party valuations
the fleet and may dispose of aircraft in order to reduce its
exposure to certain aircraft types. Avation has a policy of
investing in popular aircraft types on the basis that asset
values and lease rates will be supported by continuing high
demand for these aircraft.
Operational risks
economic, legal and political risks
Avation leases aircraft to lessees in different jurisdictions. As
such the Group is exposed to economic, legal and political
risk in those jurisdictions. Avation’s aircraft are subject to
operational risks specific to the aviation sector resulting from
war, acts of terrorism or the threat of terrorism and natural
disasters. The Group mitigates against these risks by requiring
airline lessees to maintain adequate insurance over the aircraft.
Regulatory risks
Avation’s fleet operates in many jurisdictions and complies with
tax and other regulatory requirements in those jurisdictions.
There is a risk that changing tax and regulatory regimes may
have an impact on the business and financial results.
lessee risks
Avation’s airline lessees are responsible for all maintenance
and safety checks. The requirement for each airline lessee
to service and maintain the aircraft are set out in the lease
agreements. There is a risk that airlines may not properly
maintain aircraft which may lead to an impairment of the
aircraft’s value. In order to mitigate against this risk the
Group closely monitors each airline’s usage of aircraft and
their compliance with agreed maintenance schedules. Avation
can require lessees to pay additional maintenance reserve
payments in order to ensure that there is adequate funding at
all time for proper maintenance of the aircraft.
Avation’s financial risk management objectives and policies
are set out in note 7 to the financial statements and are as
follows:
Airline industry risks
•
• Credit risk
•
•
Interest rate risk
Foreign currency risk
Performance
An evaluation of Avation’s performance in the year ended 30
June 2014 is contained in the Chairman’s Statement.
Environment
Avation is committed to environmental responsibility as
part of its business strategy. This is achieved by investing
in technologically advanced designs of commercial aircraft
that offer improved fuel efficiency and lower emissions.
The majority of our fleet are modern regional turbo-prop
aircraft which provide significant environmental benefits over
comparable jet aircraft due to their more economical use of
fuel and consequently lower carbon dioxide emissions.
Employees
A breakdown by gender of the number of persons who
were Directors of the Company, senior managers and other
employees as at 30 June 2014 is set out below:
Male
Female
3
2
6
–
–
5
Directors of the Company
Senior managers
Other employees
On behalf of the board
Robert Jeffries Chatfield
Director
17 October 2014
11
Annual Report 2014
DIReCtORS’ RePORt
the directors have the pleasure in presenting their report and
financial statements for the financial year ended 30 June 2014.
Principal activities and business review
the principal activities of the Group is leasing of aircraft.
Details of activities carried out by subsidiary companies is set
out in Note 22 to these financial statements.
the principal risks and uncertainties affecting the Group’s
turnover are described in the Strategic Report on page 9.
the full business review including KPI’s can be found in the
Strategic Report on page 9 and in Note 7 to these financial
statements. the Group has reviewed the environmental
matters in the Strategic Report on page 11.
Results and dividends
the consolidated statement of profit or loss and other
comprehensive income for the year is set out on page 22. the
directors have proposed to pay a 2.01 uS cents final dividend.
Directors and their interests
the directors who served the Company during the year
together with their interests and deemed interests in the
shares of the Company and other Group companies at the
beginning (or subsequent date of appointment) and end of
the year, were as follows:
The Company
direct interest
deemed interest
Ordinary Shares of £0.01 each
(in name of director and nominee)
1 July 2013
30 June 2014
30 June 2014
1 July 2013
Robert Jeffries Chatfield
Bryant James Mclarty
1
N/A
1
10,135,365
8,855,365
117,300
N/A
Roderick Douglas Mahoney
240,000
158,138
Stephen John Fisher
5,000
-
-
-
12
-
-
-
DIReCtORS’ RePORt
Significant Shareholdings
ordinary
shares
Percentage
Vidacos Nominees Limited
10,635,732
21.64%
Chase Nominees Limited
9,331,140
18.98%
Fitel Nominees Limited
HSBC Global Custody Nominee
(UK) Limited
4,707,702
3,569,916
Chase Nominees Limited
2,870,000
HSBC Global Custody Nominee
(UK)
2,055,000
9.58%
7.26%
5.84%
4.18%
equal opportunities Policy
It is the Group’s policy to employ individuals with the
necessary qualifications without regard to sex, marital
status, race, creed, colour, nationality or religion. Full and
fair consideration is given to applications for employment
made by disabled persons having regard to their particular
aptitudes and abilities.
the great
recognises
importance of
the
the Group
contribution made by all employees and aims to keep
them informed of matters affecting them as employees
and developments within the Group. Communication and
consultation is achieved by a variety of means both within
individual companies or branches and on a group-wide basis.
directors’ Insurance
the Group maintains insurance policies on behalf of all the
directors against liability arising from negligence, breach of
duty and breach of trust in relation to the Group. .
Green House Gas emissions Statement
It is not practical for the Company to calculate its green house
gas emissions. usage of the Company’s aircraft is under the
control of lessees who are not required to provide emissions
data to the Company.
Capital Structure
Details of the issued share capital, together with details of the
movements in the Company’s issued share capital during the
financial year are shown in Note 30. the Company has one
class of ordinary shares which carry no right to fixed income.
each share carries the right to one vote at general meetings
of the Company.
By a resolution passed at the AGM held on 4 December 2012
the Company’s Directors are authorised to buy back shares
not exceeding 10 per cent of the total number of shares in
issue on that date. Share buy backs may be at market prices
but not under £0.50 and not above £3.00 per share, including
commissions and other related expenses.
there are no specific restrictions on the size of a holding
nor on the transfer of shares, which are both governed by
the general provisions of the Articles and Association and
prevailing legislation. the directors are not aware of any
agreements between holders of the Company’s shares that
may result in restrictions on the transfers of securities or on
voting rights.
Details of employees share option schemes are set out in
Note 31.
No person has any special rights of control over the
Company’s share capital and all issued shares are fully paid.
With regards to the appointment and replacement of directors,
the Company is governed by its Articles of Association, the
uK Corporate Governance Code, the Companies Act and
related legislation. the Articles themselves may be amended
by special resolution of the shareholders. the powers of
directors are described in the Main Board terms of Reference,
copies of which are available on request, and the Corporate
Governance Statement below.
Corporate Governance Statement
The Board is accountable to the shareholders for good
corporate governance of the group. The principles of corporate
governance and a code of best practice are set out in the UK
Corporate Governance Code issued in September 2012. The
company is not required to comply in full with the code nor
state any areas which it does not comply. The Board have
adopted policies that they consider to be appropriate for the
Company’s size and nature.
The Board acts as the administrative, management and
supervisory body overseeing the operation of the Group. The
Board consist of 2 executive directors (Robert Jeffries Chatfield
and Roderick Douglas Mahoney) and 1 non-executive director
(Stephen John Fisher), and the following senior personnel
(Richard Wolanski, Duncan Scott). The Board meets at least
six times a year, matters for discussion at formal meetings
are clearly laid down and decisions recorded. The board is
responsible for overall corporate strategy, the reviewing and
approval of acquisition and divestment opportunities, the
approval of significant capital expenditures, the review of
13
DIReCtORS’ RePORt
budgets, trading performances and all significant financial and
operational issues.
The Company operates the following committees whose
members are detailed below:
•
•
Audit Committee- Robert Jeffries Chatfield and Stephen
John Fisher
Risk Committee- Roderick Douglas Mahoney and Iain
Cawte
The Board is responsible for identifying and evaluating the major
business risks faced by the Company and for determining and
monitoring the appropriate course of action to manage these
risks. The key risks the Company faces are described in the
risk assessment section of this annual report and accounts.
The Board conducts a review of the effectiveness of the
Company’s systems of internal control and risk management
on an annual basis. Following this review it has concluded that
the Company’s financial, operational and compliance controls
and risk management procedures are appropriate and suitable
to enable the board to safeguard shareholders’ investments
and the Company’s assets.
The process and systems of internal control are designed to
manage, rather than eliminate, the risk of failure to achieve
the Company’s objectives, and can therefore only provide
reasonable and not absolute assurance against material
misstatement or loss.
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.
Purchase of own sharess
During the year, the Company purchased 300,000 shares
for uS$467,835. these were held as treasury shares and
presented within shareholders equity.
On behalf of the board
Robert Jeffries Chatfield
Director
17 October 2014
14
Annual Report 2014
DIReCtORS’ ReMuNeRAtION RePORt
Introduction
this report has been prepared in accordance with Part 15 Chapter 6 of the Companies Act 2006. As required a resolution to
approve the Directors’ remuneration will be proposed at the forthcoming Annual General Meeting of the Company at which
the financial statements will be approved. the vote will have advisory status, will be in respect of the remuneration policy and
overall remuneration packages and will not be specific to the individual levels of remuneration.
Remuneration (audited)
the components of remuneration are:
•
•
•
Basic salary and benefits determined by the Remuneration Committee which are included in employment agreements
and reviewed annually;
Bonuses based upon performance of the Company and the individual concerned; and
Share options.
Individual Director’s remuneration from the group was as follows:
Group
Executive directors
Salaries
and fees
Bonuses
expenses
allowances
Taxable
benefits
US$
US$
US$
US$
Total
2014
US$
Total
2013
US$
Robert Jeffries Chatfield
551,676
-
Roderick Douglas Mahoney
211,690
108,496
Non-executive directors
Stephen John Fisher
Andrew Baudinette (resigned
on 3 December 2012)
Bryant James Mclarty
(resigned 6 December 2013)
2,669
N/A
19,146
-
N/A
-
785,181
108,496
-
-
-
86,740
638,416
266,844
-
-
320,186
178,402
2,669
-
N/A
N/A
N/A
105,448
-
-
-
19,146
31,500
86,740
980,417
582,194
Taxable benefits mainly relate to housing expenses and children school fees.
Service contracts
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
Roderick Douglas Mahoney
16 December 2011
Bryant James Mclarty
28 November 2007
Indefinite
Indefinite
Indefinite
4 months
4 weeks
1 month
-
-
-
15
DIReCtORS’ ReMuNeRAtION RePORt
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 for those granted on 12 December 2011. there are no performance
conditions that need to be met before warrants can be exercised. the warrants granted on 4 November 2013 has a 3 years
vesting schedule and the details are as follows:
Vesting period
Proportion of total share options that are exercisable
Before 20 November 2014
0 per cent
On 20 November 2014 and before 20
November 2015
up to 33 per cent of the grant
On 20 November 2015 and before 20
November 2016
up to another 33 per cent of the grant
Or
up to 66 per cent of the grant if warrants were not exercised after the first
vesting year
On 20 November 2016
Balance
Or
100 per cent of the grant if warrants were not exercised after the first and
second vesting years
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
16
Annual Report 2014 DIReCtORS’ ReMuNeRAtION RePORt
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 *
12 Dec 2011
110.5 p
400,000
-
(400,000)
-
Robert Jeffries Chatfield *
4 Nov 2013
110.5 p
Roderick Douglas Mahoney**
4 Nov 2013
110.0 p
-
-
335,000
300,000
-
-
335,000
300,000
* Robert Jeffries Chatfield was granted the share warrants via epsom Assets limited.
** Roderick Douglas Mahoney was granted the share warrants via Douglas Aviation Pte ltd.
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.
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Nov 06
Mar 08
Aug 09
Dec 10
Apr 12
Sep 13
Avation
FTSE 100
Executive Chairman single figure
remuneration
Annual bonus pay-out (as % of
maximum)
Long term incentive vesting rates
against maximum opportunity %
2014
2013
2012
2011
2010
US$638,416
US$266,844
US$249,808
US$295,409
USA$208,430
–
NA
–
NA
–
NA
–
NA
–
NA
The above table shows the prescribed remuneration data for the Director, Robert Jeff Chatfield, the Executive Chairman
undertaking the role of Group Chief Executive Officer during each of the last five financial years.
Notes:
1) No bonus has been paid to the Executive Chairman
17
Annual Report 2014
DIReCtORS’ ReMuNeRAtION RePORt
Percentage change in remuneration of Chief executive officer
The table below sets out the percentage change in the remuneration of the Executive Chairman who is undertaking the role of
Group Chief Executive Officer compared to that of all employees of the Group.
% change in remuneration from 2013 to 2014
% change in base
salary
% change in annual
bonus
% change in taxable
benefits
Executive Chairman
All employees
107%
49%
–
320%
100%
100%
Relative importance of spend on pay
The Chart below displays the relative expenditure of the Company on various matters, as required (in the case of remuneration
for group employees and shareholder distributions) by the relevant remuneration regulations:
18
DIReCtORS’ ReMuNeRAtION RePORt
directors’ remuneration policy
The Company applies a policy for Directors’ remuneration which is designed to meet the following objectives:
•
•
•
•
Provide a fair and transparent remuneration policy that is in alignment with shareholders’ interests;
Provide both immediate and incentive remuneration that is sufficient to attract and retain executives;
Be consistent with best practice for governance of stock exchange listed companies;
Allow claw-back of incentives from executives should previous performance be found to have led to future adverse
circumstances for the Company; and
•
Always ensure an alignment between performance and compensation.
The Company’s targets the following outcomes in applying its policy to ensure alignment of Directors’ remuneration and
shareholders’ interests:
•
•
•
Share price appreciation;
Increase in the Company’s earnings per share;
Reliable and high quality financial reporting;
• Growth in asset value and profits; and
• Dividend growth.
Remuneration of the Company’s Executive Directors is comprised of the following components:
•
•
•
Base salary;
Short-term incentives in the form of a cash bonus for linked to performance against individual KPIs; and
Long-term incentives in the form of share warrants and/or performance shares.
Remuneration of the Company’s Non-Executive Directors is comprised of fixed Directors’ Fees.
The Board as a whole considers the remuneration of the directors and there has been no external advisers used. The remuneration
report was approved in the 2013 AGM on a show of hands.
On behalf of the Board
Robert Jeffries Chatfield
Director
17 October 2014
19
DIReCtORS’ ReSPONSIBIlItIeS
Photo: Airbus S.A.S.
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 that law the
Directors are required to prepare the Group financial
statements
International Financial
Reporting Standards (“IFRSs”) as adopted by the european
union (“eu”) and Article 4 of the IAS Regulation and have also
chosen to prepare the Parent Company financial statements
under IFRSs as adopted by the eu.
in accordance with
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;
prepare the accounts on the going concern basis unless
it is inappropriate to presume that the Company will
continue in business.
present information, including accounting policies, in a
manner that provides relevant reliable, comparable and
understandable information.
provide additional disclosures when compliance with
specific IFRSs are insufficient to enable the users to
understand the impact of particular transactions, other
events and conditions on the entity’s financial position
and financial performance.
responsible
the Directors are
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.
We confirm that to the best of our knowledge:
i. the financial statements, prepared in accordance with
IFRSs as adopted by the eu, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and of the Group; and
ii. the strategic report
includes a fair review of the
development and performance of the business and the
position of the Company and of the Group, together with
a description of the principal risks and uncertainties that
they face.
By order of the Board
Robert Jeffries Chatfield
Director
17 October 2014
20
Annual Report 2014 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 2014 which comprise the Consolidated
Statement of Profit or loss and other Comprehensive Income, the
Company Statement of Profit or loss and other Comprehensive
Income, the Consolidated Statement of Financial Position, the
Company Statement of Financial Position, 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
in the Directors’ Responsibilities
As explained more fully
Statement set out on page 20 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 and the Parent
Company’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 and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit.
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
2014 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;
• the information given in the Corporate Governance Statement
included in the Directors’ report with respect to internal
control and risk management systems in relation to financial
reporting processes and about share capital structures is
consistent with the financial statements; 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; and
• a Corporate Governance Statement has not been prepared by
the Company.
Mark Twum-Ampofo (Senior Statutory Auditor)
For and on behalf of Kingston Smith llP, Statutory Auditor
Devonshire house
60 Goswell Road
london
eC1M 7AD
17 October 2014
21
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Total income
Note
2014
US$
2013
US$
9
52,255,209
42,739,991
–
(822,887)
52,255,209
41,917,104
10
4,024,404
1,846,538
56,279,613
43,763,642
Other operating expenses
11
(15,857,335)
(13,236,614)
Expenses
- Administrative expenses
- Finance expense
Profit before taxation
Taxation
Profit for the financial year
12
13
15
16
(6,957,715)
(16,906,001)
(3,564,798)
(12,992,553)
16,558,562
13,969,677
(2,295,492)
(2,004,684)
14,263,070
11,964,993
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Revaluation loss 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, net of tax
–
–
(1,780,368)
(1,780,368)
2,045
2,045
2,045
603
603
(1,779,765)
Total comprehensive income for the financial year, all
attributable to equity holders of the Company
14,265,115
10,185,228
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
- Fully diluted
13,312,153
950,917
10,515,901
1,449,092
14,263,070
11,964,993
13,313,550
951,565
9,365,487
819,741
14,265,115
10,185,228
17
27.40 cents
23.25 cents
27.40 cents
23.25 cents
2222
AVATION PLC
COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
2014
US$
2013
US$
Profit for the financial year
1,121,282
2,328,931
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, net of tax
–
–
2,839,584
2,839,584
Total comprehensive income for the financial year
1,121,282
5,168,515
The Company is exempt from publishing its income statement pursuant to Section 408 of Companies
Act 2006.
2323
AVATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
Note
2014
US$
2013
US$
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
Total equity
18
19
20
21
19
20
23
24
25
26
27
28
25
26
27
29
30
30
23,394,739
2,804,086
2,156,478
-
28,355,303
19,623,244
6,337,909
1,094,380
438
27,055,971
11,268,750
6,295,123
367,325,131
2,384,008
387,273,012
9,300,261
8,442,671
347,200,389
2,384,008
367,327,329
415,628,315
394,383,300
12,641,301
273,110
1,098,664
55,673,186
-
69,686,261
12,088,802
207,132
986,556
24,243,718
3,757,081
41,283,289
8,188,983
1,579,332
218,984,900
6,421,855
235,175,070
9,088,610
1,381,260
239,205,865
5,187,917
254,863,652
891,301
(682,333)
31,424,215
10,158,496
11,564
-
3,856,141
1,146
50,446,477
96,107,007
14,659,977
110,766,984
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
Total liabilities and equity
415,628,315
394,383,300
Approved by the board and authorised for issue on 17 October 2014
………………………….
Robert Jeffries Chatfield
Director
2424
AVATION PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
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
Total equity
Total liabilities and equity
Note
2014
US$
2013
US$
18
19
20
22
23
25
27
25
27
29
30
30
1,974,783
31,578,274
33,553,057
3,406,322
19,096,712
22,503,034
11,268,750
6,968,639
19,131,160
37,368,549
9,264,244
5,239,692
20,171,641
34,675,577
70,921,606
57,178,611
18,492,456
3,840,760
-
1,415,411
19,907,867
-
1,415,411
5,256,171
958,091
10,639,398
623,548
12,221,037
2,071,487
12,054,807
366,533
14,492,827
891,301
(682,333)
31,424,215
2,873,147
11,564
-
4,274,808
38,792,702
878,137
(214,498)
29,809,334
2,873,147
11,564
103,565
3,968,364
37,429,613
70,921,606
57,178,611
Approved by the board and authorised for issue on 17 October 2014
……………………………….
Robert Jeffries Chatfield
Director
25
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2727
AVATION PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
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$
878,137
(214,498) 29,809,334
2,873,147
11,564
103,565
3,968,364
37,429,613
Company
Balance at 1 July 2013
Profit for the year
Other comprehensive
income
Total comprehensive income
Dividend relating to 2013 paid
–
–
–
–
–
–
–
–
–
–
–
–
–
Purchase of treasury shares
–
(467,835)
Increase of issued share
13,164
–
1,625,942
capital
Share issue expenses
Warrant expired
–
–
–
(11,061)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,121,282
–
1,121,282
–
1,121,282
1,121,282
–
(866,621)
(866,621)
–
–
(467,835)
–
(51,782)
–
1,587,324
–
–
–
(11,061)
–
(51,783)
51,783
–
Balance at 30 June 2014
891,301
(682,333) 31,424,215
2,873,147
11,564
–
4,274,808
38,792,702
Balance at 1 July 2012
In previous presentational
Currency (GBP)
423,745
–
14,192,267
22,158
7,000
120,779
2,031,677
16,797,626
Balance at 1 July 2012
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
The dividend paid during the year was for 1.78 US cents (2013: 1.04p) per share.
2828
AVATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Depreciation expense
Claim on maintenance reserve
Inventories written off
Impairment of property, plant and equipment
Amortisation of loan premium
Amortisation of interest expense on deposit collected
Interest expense
Profit on sale of property, plant and equipment
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 from disposal of a subsidiary
– See Note A
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of additional shares in a subsidiary from NCI
Repurchase of a subsidiary’s treasury shares
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 loans and borrowings
Repayment of loans and borrowings
Capital element of finance lease repayments
Net cash from financing activities
Effects of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
2014
US$
2013
US$
16,558,562
13,969,677
15,259,012
(114,927)
438
713,250
1,078,239
257,883
15,569,879
(3,322,468)
(273,113)
(23,378)
45,703,377
1,572,545
-
6,167
(261,355)
(3,642,154)
43,378,580
(14,882,539)
23,378
(949,446)
27,569,973
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
-
1,125,032
(71,775,621)
39,001,085
(880,917)
(247,728)
(33,903,181)
(134,087,044)
-
-
-
(132,962,012)
728,313
(866,621)
(467,835)
85,140,754
(27,581,259)
(46,850,992)
10,102,360
2,343
3,771,495
19,623,244
23,394,739
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
2929
AVATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
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
3030
AVATION PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Dividend income
Depreciation
Interest income
Interest expense
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables
Trade and other payables
Cash from (used in) operations
Interest received
Interest 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 (used in) from investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Dividends paid
Repurchase of treasury shares
Proceeds from loans and borrowings
Repayments of loans and borrowings
Capital element of finance lease repayments
Net cash from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
2014
US$
2013
US$
1,378,297
2,393,473
(1,500,000)
1,044,691
(610,928)
825,661
1,137,721
(13,477,949)
14,599,473
2,259,245
12,184
(796,209)
1,475,220
-
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)
-
(4,210)
(880,997)
(885,207)
6,978,357
(2,862,769)
(162)
4,115,426
728,313
(866,621)
(467,835)
12,888,179
(833,370)
(13,470,218)
(2,021,552)
(1,431,539)
3,406,322
1,974,783
6,836,498
(745,618)
(214,498)
-
-
(3,013,811)
2,862,571
2,224,017
1,182,305
3,406,322
3131
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
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 Group is leasing of aircraft.
Details of activities carried out by subsidiary companies is set out in Note 22 to these financial
statements.
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 1.7048.
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.
32
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(b)
BASIS OF CONSOLIDATION - The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 30 June 2014. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
• The contractual arrangement with the other vote holders of the investee
• Rights arising from other contractual arrangements
• The Group’s voting rights and potential voting rights
Whether or not the Group controls, an investee is re-assessed if facts and circumstances indicate
that there are changes to one or more of the three elements of control. Consolidation of a subsidiary
begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or
disposed of during the year are included in the statement of comprehensive income from the date
the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity
holders of the parent of the Group and to the non-controlling interests, even if this results in the non-
controlling interests having a deficit balance. When necessary, adjustments are made to the
financial statements of subsidiaries to bring their accounting policies into line with the Group’s
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on consolidation.
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 interests
• 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 OCI to profit or loss or
retained earnings, as appropriate, as would be required if the Group had directly disposed of the
related assets or liabilities.
In the Company’s separate financial statements investments in subsidiaries are stated at cost
less impairment.
33
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(c)
BUSINESS COMBINATIONS - 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 interests in the
acquiree. For each business combination, the Group elects whether to measure the non-controlling
interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net
assets. Acquisition-related costs are expensed as incurred 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 held by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is re-
measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or
loss. It is then considered in the determination of goodwill.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at
the acquisition date. Contingent consideration classified as an asset or liability that is a financial
instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement,
is measured at fair value with changes in fair value recognised either in either profit or loss or as
a change to OCI. If the contingent consideration is not within the scope of IAS 39, it is measured
in accordance with the appropriate IFRS. Contingent consideration that is classified as equity is
not re-measured and subsequent settlement is accounted for within equity.
(d) GOODWILL- Goodwill is initially measured at cost, being the excess of the aggregate of the
consideration transferred and the amount recognised for non-controlling interests, and any previous
interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the
net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be recognised at the acquisition date. If
the re-assessment still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For
the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit
from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned
to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that
unit is disposed of, the goodwill associated with the disposed operation is included in the carrying
amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the disposed operation and the portion
of the cash-generating unit retained.
34
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(e)
FAIR VALUE MEASUREMENT – The Group measures financial instruments, such as derivatives,
and non-financial assets such as aircraft, at fair values at each statement of reporting date. The fair
values of debt instruments are not considered to be materially different from their amortised cost.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:
•
•
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability
to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
In the case of aircraft, unless otherwise disclosed, the assets are valued using lease encumbered
value (“LEV”). Under such a valuation, which reflects highest and best use given the fact that the
aircraft are held for use in a leasing business, the income streams associated with the lease and
the expected future market value of the aircraft at the end of the lease are discounted to current
values. The valuers prepare their valuation report based on the market for second hand aircraft,
which is active, known and measurable.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 – Valuation techniques for which the lowest level input that is significant to the fair
value measurement is directly or indirectly observable
• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the
Group determines whether transfers have occurred between Levels in the hierarchy by re-
assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Group’s management determines the policies and procedures for both recurring fair value
measurement, such as aircraft and unquoted AFS financial assets, and for non-recurring
measurement, such as assets held for distribution in discontinued operations.
35
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
External valuers are involved for valuation of significant assets, such as aircraft and AFS financial
assets, and significant liabilities, such as contingent consideration.
At each reporting date, the management analyses the movements in the values of assets and
liabilities which are required to be re-measured or re-assessed as per the Group’s accounting
policies. For this analysis, the management verifies the major inputs applied in the latest valuation by
agreeing the information in the valuation computation to contracts and other relevant documents so
far as possible
The management, in conjunction with the Group’s external valuers, also compares the changes in the
fair value of each asset and liability with relevant external sources to determine whether the change is
reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair
value hierarchy as explained above.
(f)
(g)
INVENTORIES – Inventories of consumable spare parts are stated at the lower of cost or market
value determined on a portfolio basis.
PROPERTY, PLANT AND EQUIPMENT – All items of property, plant and equipment are initially
recorded at cost. Such cost include the cost of replacing part of the property. The cost of an item of
property, plant and equipment is recognised as an asset if, it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably.
Subsequent to recognition, the aircraft are stated in the statement of financial position at their fair
value. All items of property plant and equipment other than aircraft are measured at cost 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 reporting date. However, these aircraft have been reviewed
for impairment.
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.
36
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
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:
Jets
Turbo props
Furniture and equipment
-
-
-
30 years from date of manufacture
30 years from date of manufacture
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 NON-FINANCIAL ASSETS - The Group assesses at each reporting date whether
there is an indication that an asset may be impaired. If any indication exists, or when an annual
impairment testing for an asset is required, the Group makes an estimate of the asset's
recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less
costs of disposal and its value-in-use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those from other assets or group of
assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount. In
assessing value-in-use, the estimated future cash flows expected to be generated by the asset are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In determining fair
value less costs of disposal, recent market transactions are taken into account, if available. If no
such costs can be identified, an appropriate valuation model is used.
Impairment losses are recognised in profit or loss. An assessment is made at each reporting date
as to whether there is any indication that previously recognised impairment losses may no longer
exist or may have decreased. If such indication exists, the Group estimates the asset's or cash-
generating unit's recoverable amount. A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. If that is the case, the carrying amount of the asset is
increased to its recoverable amount. That increase cannot exceed the carrying amount that would
have been determined, net of depreciation, had no impairment loss been recognised previously.
Such reversal is recognised in profit or loss.
Impairment losses are recognised as an immediate expense. However, the impairment loss shall
be recognised in other comprehensive income to the extent of any credit balance existing in the
revaluation surplus in respect of that asset. The decrease recognised in other comprehensive
income reduces the amount accumulated in equity under the heading of revaluation surplus
(i)
JOINTLY CONTROLLED ASSETS – A jointly controlled asset involves joint control and ownership
by the Group and other venturers of assets contributed to or acquired. The Group accounts for its
share of the jointly controlled assets, any liabilities it has incurred, its share of any liabilities jointly
incurred with other ventures, income from the sale or used of its share of the joint venture’s output,
together with its share of the expense incurred by the joint venture, and any expenses it incurs in
relation to tits interest in the joint venture.
37
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(j)
(k)
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
reporting date, and are discounted to present value where the effect is material. In respect of
maintenance rent, a corresponding provision is made in accordance with the expected maintenance
costs that will be drawn in accordance with the lease conditions and lease term.
SHARE-BASED PAYMENTS – The cost of share based payment arrangements whereby employees
receive remuneration in the form of warrants, is recognised as an employee benefit expense in 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 reporting date. Fair value is measured by the use of the Black-Scholes method and
is based on a reasonable expectation of the extent to which performance criteria will be met.
(l)
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.
38
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(m) REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received
or receivable and represents amounts receivable for goods and services provided in the normal
course of business, net of discounts and sales related taxes.
(i)
Aircraft rental income is recognised in the profit or loss on a straight line basis over the terms
of the lease. Lease incentives granted are recognised as an integral part of the total rental
income.
(ii) Maintenance rental income recognised in the profit or loss is based on the number of flight
hours and cycles the Aircraft are operated during the term of the lease. Maintenance rents are
set at levels which are designed to equal or exceed expected expense.
Where a maintenance reserve claim against a component in excess of the component's
maintenance reserve balance is accepted by the company as being a payment of the
maintenance rent in advance for that component, that excess is also recognised as
maintenance rental income.
(iii)
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.
(iv) Sales of goods are recognised when goods are delivered and title has passed.
(v) Dividend income from investments is recognised when the shareholders’ right to receive
payment have been established.
(vi) Licence fees received are recognised over the life of the licence agreement. Ongoing
royalties/commissions pursuant to the licence agreement are recognised as earned.
(n)
BORROWING COSTS - Borrowing costs are capitalised as part of the cost of a qualifying asset if
they are directly attributable to the acquisition, construction or production of that asset.
Capitalisation of borrowing costs commences when the activities to prepare the asset for its
intended use or sale are in progress and the expenditures and borrowing costs are incurred.
Borrowing costs are capitalised until the assets are substantially completed for their intended use
or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection with the borrowing of funds.
(o) CONTINGENCIES – A contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only
by the occurrence or non-occurrence of one or more uncertain future events not wholly within
the control of the Group; or
(b) a present obligation that arises from past events but is not recognised because:
(i)
It is not probable that an outflow of resources embodying economic benefits will be required
to settle the obligation; or
(ii) The amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Group.
39
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(p)
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 reporting 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.
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 reporting 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.
40
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(q)
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.
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 reporting date, monetary items denominated in
foreign currencies are retranslated at the rates prevailing on the reporting 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 reporting 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.
41
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(r)
FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the
Group’s statement of financial position when the Group becomes a party to the contractual
provisions of the instrument.
(i)
(ii)
(iii)
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.
Cash and cash equivalents - Cash and cash equivalents comprise cash at bank and 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.
(iv) Borrowings - Interest-bearing loans from banks and financial institutions are initially
measured at fair value, and are subsequently measured at amortised cost, using the
effective interest rate method. Any difference between the proceeds (net of transaction
costs) and the settlement or redemption of borrowings is recognised over the term of the
borrowings in accordance with the Group’s accounting policy for borrowing costs (see
above). Insurance premiums paid to export credit agencies independent of the lending bank
or financial institution are not considered to constitute transaction costs and are accounted
for separately.
(v)
Trade and other payables - Trade payables are stated at their original invoiced value, as the
interest that would be recognised from discounting future cash payments over the short
payment period is not considered to be material.
(vi) Equity instruments - Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
42
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(s)
IMPAIRMENT OF FINANCIAL ASSETS - The Group assesses at each end of the reporting date
whether there is any objective evidence that a financial asset is impaired.
For financial assets carried at amortised cost, the Group first assesses individually whether
objective evidence of impairment exists individually for financial assets that are individually
significant, or collectively for financial assets that are not individually significant. If the Group
determines that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a group of financial assets with similar
credit risk characteristics and collectively assesses them for impairment. Assets that are
individually assessed for impairment and for which an impairment loss is, or continues to be
recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost
has incurred, the amount of the loss is measured as the difference between the asset's carrying
amount and the present value of estimated future cash flows discounted at the financial asset's
original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring
any impairment loss is the current effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account. The impairment loss is recognised in profit or
loss.
When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced
directly or if an amount was charged to the allowance account, the amounts charged to the
allowance account are written off against the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets has
incurred, the Group considers factors such as the probability of insolvency or significant financial
difficulties of the debtor and default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised, the previously
recognised impairment loss is reversed to the extent that the carrying amount of the asset does not
exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or
loss.
(t)
SEGMENTAL REPORTING - Operating segments are reported in a manner consistent with the
internal reporting provided to the executive chairman who is responsible for allocating resources
and assessing performance of operating segments.
43
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
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 reporting 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 or, a significant change in an aircraft’s physical condition or cash-flow
associated with the use of the aircraft. The Group continues to record positive cash flows
from its aircraft. The Group has identified impairment related to its existing aircraft fleet
during the financial year.
(ii)
Revaluation of property, plant and equipment – aircraft
The Group periodically revalues its aircraft using lease encumbered value (“LEV”). Under
such a valuation, which reflects highest and best use given the fact that the aircraft are held
for use in a leasing business, the income streams associated with the lease and the expected
future market value of the aircraft at the end of the lease are discounted to current values.
Critical assumptions made in determining LEV are the discount rate applied to cashflows
associated with the lease and the expected future value of aircraft at the end of the lease.
(iii)
Maintenance reserve claims and rent
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.
As disclosed in note 3(m)(ii) maintenance rental income recognised in the profit or loss is based
on the number of flight hours and cycles the Aircraft are operated during the term of the lease.
The Group considers that the lessee acts as agent for the Group in performing the repair and
therefore that it is appropriate to recognise income from maintenance rent as revenue and the
cost of performing those repairs in expenses.
There were no maintenance reserves at the year end.
44
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
(iv)
Impairment of loans and receivables
The Group assesses at the end of each reporting period whether there is any objective
evidence that a financial asset is impaired. To determine whether there is objective
evidence of impairment, the Company considers factors such as the probability of
insolvency or significant financial difficulties of the debtor and default or significant delay in
payments.
Where there is objective evidence of impairment, the amount and timing of future cash flows
are estimated based on historical loss experience for assets with similar risk characteristics.
(v)
Withholding taxes
During the current financial period, the Group’s Singapore subsidiaries have obtained
interest bearing loans from foreign lenders. Under the Singapore Income Tax Act, the
interest which is borne by the Group will be deemed to be derived from Singapore and the
Group is required to withhold tax on the interest payables to the foreign lenders.
Management is in the process of applying with the Ministry of Finance (“MOF”) for the
withholding tax exemption under Section 13 of the Income Tax Act. Based on the
management’s judgment, the Group is, more likely than not, to obtain the waiver from MOF
for the withholding tax on its interest payments made to the lenders. Accordingly, the Group
has not provided for the withholding tax payable as at the end of the reporting period.
Had the Group provided for the withholding tax payable as at the end of the reporting period,
profit for the period would be reduced by approximately US$223,000.
(vi)
Income taxes
a) During the current financial period, Avation Group (S) Pte Ltd (“AGS”) and its
subsidiaries has been awarded a 5-year Aircraft Leasing Scheme (“ALS”) incentive from
the Singapore Economic Development Board, where income from the leasing of aircraft
and aircraft engines and qualifying activities will be taxed at a concessionary rate of
10%. The effective date is 17 April 2014. Accordingly, qualifying income derived from
the period 17 April 2014 to 16 April 2019 will be taxed at the 10% concessionary rate
subject to meeting the terms and conditions of the incentive. The Group is currently in
the process of reorganising and planned to make Avation Eastern Fleet Pte Ltd and
Avation Eastern Fleet IV Pte. Ltd. subsidiaries of AGS to enjoy the ALS. The directors
are of the view that the Group’s reorganisation will be completed successfully and the
Avation Eastern Fleet Pte Ltd and Avation Eastern Fleet IV Pte. Ltd will qualify for the
ALS. Accordingly, in determining the carrying amount of the deferred tax liability as at
the end of the reporting period, these 2 subsidiaries have applied the concessionary tax
rate of 10%. Had these 2 subsidiaries applied the prevailing Singapore corporate tax
rate of 17%, the profit for the year would have decreased by approximately
US$1,056,000.
45
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
b) 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.
(vii)
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.
46
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
5.
NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN EFFECT IN
2014
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)
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 12 Disclosure of Interest with Other Entities
IAS 27 Separate Financial Statements
Effective Date
(accounting periods
commencing after)
1 January 2018
1 January 2014
1 January 2014
1 January 2014
Amendments to IAS32 Offsetting Financial Assets and Financial Liabilities
1 January 2014
IFRIC Interpretation 21 Levies
1 January 2014
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge
Accounting
1 January 2014
The Group, however, expects no impact from the adoption of the amendments on its financial position or
performance.
b) Standards in effect in 2014
The Group has adopted all the new standards that has come into effect during the financial year.
47
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
6.
FAIR VALUE MEASUREMENT
The fair value of a financial instrument is the amount at which the instrument could be exchanged or
settled between knowledgeable and willing parties in an arm’s length transaction, other than a forced or
liquidation sale.
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other
payables and loans and borrowings are a reasonable approximation of fair value either due to their short-
term nature or because the interest rate charged closely approximates market interest rates or that the
financial instruments have been discounted to their fair value at a current pre-tax interest rate.
Non-financial assets measured at fair value:
Date of
valuation
Fair value measurement using:
Quoted
prices in
active
markets
Level 1
US$
Significant
observable
inputs
Significant
unobservable
inputs
Level 2
US$
Level 3
US$
Total
US$
30 June 2014 367,264,931
–
–
367,264,931
30 June 2013 347,192,680
–
–
347,192,680
Group
2014
Aircraft
2013
Aircraft
Company
2014
Aircraft
30 June 2014 19,127,923
–
–
19,127,923
2013
Aircraft
30 June 2013 20,169,501
–
–
20,169,501
Refer to Note 23 for the details on the valuation technique and significant inputs into valuation used.
48
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
6.
FAIR VALUE MEASUREMENT (CONT’D)
Classification of financial instruments
Set out below is a comparison by category of carrying amounts of all the Group and Company's
financial instruments that are carried in the financial statements which are considered to equate to
fair value.
GROUP
2014
Assets
Cash and cash equivalents
Trade and other receivables
Liabilities
Trade and other payables
Loans and borrowings
2013
Assets
Cash and cash equivalents
Trade and other receivables
Liabilities
Trade and other payables
Loans and borrowings
Financial
liabilities
measured at
amortised
cost
US$
Total
US$
–
–
–
23,394,739
13,127,397
36,522,136
Loans and
receivables
US$
23,394,739
13,127,397
36,522,136
–
–
17,299,980
274,658,086
17,299,980
274,658,086
–
291,958,066
291,958,066
19,623,244
14,349,584
33,972,828
–
–
–
19,623,244
14,349,584
33,972,828
–
–
17,750,571
263,449,583
17,750,571
263,449,583
–
281,200,154
281,200,154
49
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
6.
FAIR VALUE MEASUREMENT (CONT’D)
Financial
liabilities
measured at
amortised
cost
US$
Loans and
receivables
US$
Total
US$
COMPANY
2014
Assets
Cash and cash equivalents
Trade and other receivables
1,974,783
42,784,692
44,759,475
–
–
–
1,974,783
42,784,692
44,759,475
Liabilities
Trade and other payables
Loans and borrowings
2013
Assets
Cash and cash equivalents
Trade and other receivables
Liabilities
Trade and other payables
Loans and borrowings
–
–
–
19,337,306
12,054,809
19,337,306
12,054,809
31,392,115
31,392,115
3,406,322
28,301,227
31,707,549
–
–
–
3,406,322
28,301,227
31,707,549
–
–
–
5,799,006
13,470,218
5,799,006
13,470,218
19,269,224
19,269,224
50
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
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 requirement for 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 adopted prudent credit policy in extending credit terms to customers and in
monitoring its credit terms.
The credit policy provides 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 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 statement of financial position. The Group’s
concentration of customers is disclosed in note 34. The risk is mitigated by the requirement that
customers pay a 3 month deposit by way of cash or letter of credit and the Group is entitled to
recover the aircraft and enter into a new lease with a third party if the customer defaults.
The maximum exposure to credit risk for trade receivables at the reporting date by geographical
area is:
Australia
Others
Group
2014
US$
2013
US$
1,311,548
222,810
3,945,275
588,975
1,534,358 4,534,250
51
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(a) 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$1,320,842
(2013: US$3,258,279).
(b) Financial assets that are past due and/or impaired
There is no class of financial assets that are past due and /or impaired except for trade
receivables.
The age analysis of trade receivables past due but not impaired is as follows:
Group
2014
US$
2013
US$
206
42,921
170,389
1,244,907
31,064
–
213,516
1,275,971
Past due < 3 months
Past due 3 to 6 months
Past due over 6 months
(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 utilise forward foreign currency contracts to hedge its exposure to specific
currency risks.
52
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
The Group’s foreign currency exposure is as follows:
Group
2014
Pounds
Sterling
US$
Australian
Dollars
US$
Euro
US$
Singapore
Dollars
US$
Total
US$
Cash and cash equivalents
Trade and other receivables
Other financial liabilities
Currency exposure
360,990
–
(135,884)
225,106
5,562
1,416
(6,256)
722
14,211
7,357
(81,382)
(59,814)
251,272
36,628
(91,604)
196,296
632,035
45,401
(315,126)
362,310
2013
Cash and cash equivalents
Trade and other receivables
Other financial liabilities
Currency exposure
2,898,583
35,027
(45,263)
2,888,347
19,708
18,630
(47,768)
(9,430)
10,992
6,735
(9,322)
8,405
141,414
182,795
(82,944)
241,265
3,070,697
243,187
(185,297)
3,128,587
Company
2014
Pounds
Sterling
US$
Australian
Dollars
US$
Euro
US$
Singapore
Dollars
US$
Cash and cash equivalents
Trade and other receivables
Other financial liabilities
Currency exposure
262,455
–
(91,379)
171,076
–
1,416
(6,256)
(4,840)
–
7,357
(75,979)
(68,622)
146,576
36,628
(16,125)
167,079
Total
US$
409,031
45,401
(189,739)
264,693
2013
Cash and cash equivalents
Trade and other receivables
Other financial liabilities
Currency exposure
2,788,225
838,120
(109,159)
3,517,186
–
4,573
(25,750)
(21,177)
–
88,767
(43,125)
45,642
1,520
60,963
(96,689)
(34,206)
2,789,745
992,423
(274,723)
3,507,445
53
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
If the foreign currencies changes against the United States Dollars by 10% (2013: 10%) with all other
variables including tax rate being held constant, the effects arising from the net financial liability/asset
position will be as follows:
Group
GBP against US$
- strengthen
- weakened
AUD against US$
- strengthen
- weakened
Euro against US$
- strengthen
- weakened
SGD against US$
- strengthen
- weakened
Company
GBP against US$
- strengthen
- weakened
AUD against US$
- strengthen
- weakened
Euro against US$
- strengthen
- weakened
SGD against US$
- strengthen
- weakened
Increase/(Decrease)
Increase/(Decrease)
2014
Profit after tax
US$
22,511
(22,511)
2014
Equity
US$
22,511
(22,511)
2013
Profit after tax
US$
2013
Equity
US$
288,835
(288,835)
288,835
(288,835)
72
(72)
72
(72)
(5,981)
5,981
(5,981)
5,981
(943)
943
840
(840)
(943)
943
840
(840)
19,630
(19,630)
19,630
(19,630)
24,126
(24,126)
24,126
(24,126)
Increase/(Decrease)
Increase/(Decrease)
2014
Profit after tax
US$
17,108
(17,108)
2014
Equity
US$
17,108
(17,108)
2013
Profit after tax
US$
2013
Equity
US$
351,719
(351,719)
351,719
(351,719)
(484)
484
(484)
484
(6,862)
6,862
(6,862)
6,862
16,708
(16,708)
16,708
(16,708)
(2,118)
2,118
4,564
(4,564)
(3,421)
3,421
(2,118)
2,118
4,564
(4,564)
(3,421)
3,421
54
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(v)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations
due to shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches
of the maturities of financial assets and liabilities. 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 loan
facilities.
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial assets and liabilities at
the end of the reporting period based on contractual undiscounted repayment obligations:
One year or
less
One to five
years
US$
US$
Over five
years
US$
Total
US$
Group
2014
Financial assets
Cash and cash equivalents
Trade and other receivables
23,394,739
2,804,086
–
11,268,750
– 23,394,739
– 14,072,836
Total undiscounted financial
assets
Financial liabilities
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
26,198,825
11,268,750
– 37,467,575
12,641,301
68,243,926
1,548,440
148,198,989
8,548,516
113,113,194
22,738,257
329,556,109
80,885,227
149,747,429
121,661,710
352,294,366
Total net undiscounted financial
liabilities
(54,686,402)
(138,478,679)
(121,661,710)
(314,826,791)
2013
Financial assets
Cash and cash equivalents
Trade and other receivables
19,623,244
6,337,909
–
9,300,261
– 19,623,244
– 15,638,170
Total undiscounted financial
assets
Financial liabilities
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
25,961,153
9,300,261
– 35,261,414
12,088,802
37,226,802
3,550,487
153,295,495
7,146,468
119,298,930
22,785,757
309,821,227
49,315,604
156,845,982
126,445,398
332,606,984
Total net undiscounted financial
liabilities
(23,354,451)
(147,545,721)
(126,445,398)
(297,345,570)
5555
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
One year or
less
One to five
years
Over five
years
US$
US$
US$
Total
US$
Company
2014
Financial assets
Cash and cash equivalents
Trade and other receivables
1,974,783
31,578,274
–
11,268,750
–
–
1,974,783
42,847,024
Total undiscounted financial
assets
Financial liabilities
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
33,553,057
11,268,750
–
44,821,807
18,492,456
1,992,615
978,440
11,645,734
– 19,470,896
– 13,638,349
20,485,071
12,624,174
– 33,109,245
Total net undiscounted financial
liabilities
13,067,986
(1,355,424)
– 11,712,562
2013
Financial assets
Cash and cash equivalents
Trade and other receivables
3,406,322
19,096,712
–
9,264,244
–
3,406,322
– 28,360,956
Total undiscounted financial
assets
Financial liabilities
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
22,503,034
9,264,244
– 31,767,278
3,840,760
1,992,615
2,071,487
13,638,357
–
5,912,247
– 15,630,972
5,833,375
15,709,844
– 21,543,219
Total net undiscounted financial
liabilities
16,669,659
(6,445,600)
– 10,224,059
56
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
7
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)
(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
2014
US$
2013
US$
2014
US$
2013
US$
Current
Net debt
Total equity
Total capital
272,093,631 265,003,751 29,530,573
39,568,496
111,766,984 98,236,359
15,976,143
37,429,613
382,860,615 363,240,110 69,099,069
53,405,756
Gearing ratio
71%
73%
43%
30%
The Group and the Company are in compliance with all externally imposed capital requirements
for the financial years ended 30 June 2014 and 30 June 2013.
(vii) Fair value of financial assets and financial liabilities
The fair values of financial assets and financial liabilities reported in the statement of financial
position approximate the carrying amount of those assets and liabilities.
57
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
8
RELATED PARTY TRANSACTIONS
In addition to the related party information disclosed elsewhere in the financial statements, the
following transactions took place between the Group and related parties at terms agreed between the
parties.
(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
2014
US$
2013
US$
2014
US$
2013
US$
Key management of the Group
- Directors’ fee paid to directors of
the Company
21,815
81,983
21,815
81,983
- Directors’ fee paid to directors of
subsidiaries
537,192
471,045
- Superannuation paid for a
director of a subsidiary
- Salaries paid to directors of the
18,430
20,600
–
–
–
–
Company
652,844
306,433
332,658
41,643
The amount above includes remuneration in respect of the highest paid director as follows:
Group
2014
US$
2013
US$
Aggregate emoluments
638,416
266,844
No contributions were made on behalf of any directors to money purchase pension schemes.
58
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
8
RELATED PARTY TRANSACTIONS (CONT’D)
(b) Significant related party transactions:
Entities controlled by key
management personnel
(including directors):
Sales of goods
Maintenance rent
Rental income
Service fee income
Interest income
Consulting fee paid
Expenses rebilled
Service fee paid
Interest expense paid
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
–
–
–
–
8,789
(177,728)
–
(10,790)
(810,889)
412,927
1,993,142
23,770,672
17,424
15,836
(309,058)
(147,516)
(7,048)
(230,230)
–
–
–
–
8,789
(177,728)
–
(10,790)
(200,000)
–
–
314,176
–
14,838
(231,120)
(35,365)
(7,048)
(199,939)
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
Ex-director of a subsidiary:
Interest expense paid
(19,854)
(58,094)
–
–
(c) Significant transactions between the Company and its subsidiaries:
Commission income
Dividend income
Interest income
Management and service fee income
Rental income
Sale of aircraft
Service fee expense
Company
2014
US$
1,036,140
1,500,000
598,745
–
2,088,000
–
–
2013
US$
–
–
9,955
655,720
1,674,356
6,978,357
(30,913)
5959
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
9
REVENUE
Rental income
Maintenance rent revenue
Management and service income
Sales of finished goods
There is no rental income that is contingent.
10
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
Profit from sale of property, plant and equipment
Others
11
OTHER OPERATING EXPENSES
(Reversal) Claim on maintenance reserve expense
Depreciation of property, plant and equipment
Impairment of property plant and equipment
Group
2014
US$
2013
US$
49,340,808
2,914,401
–
–
39,513,196
1,993,142
381,409
852,244
52,255,209
42,739,991
Group
2014
US$
2013
US$
23,378
202,179
28,727
34,079
–
1,075,420
273,113
3,322,468
203,266
582,844
–
125,468
4,024,404
1,846,538
Group
2014
US$
2013
US$
(114,927)
15,259,012
713,250
1,860,732
11,366,937
8,945
15,857,335
13,236,614
60
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
12
ADMIINISTRATIVE EXPENSE
Group
Note
2014
US$
2013
US$
Staff costs
Other administrative expenses
14
2,152,992
4,804,723
1,226,241
2,338,557
6,957,715
3,564,798
13
FINANCE EXPENSE
Interest expense on borrowings
Amortisation of loan insurance premium
Notional interest on deposit collected
14
STAFF COSTS
Directors’ fee paid to directors of the Company
Directors’ fee paid to directors of the subsidiaries
Salaries paid to directors of Company
Wages and salaries
Superannuation paid for a director of a subsidiary
Group
2014
US$
2013
US$
15,569,879
1,078,239
257,883
11,517,628
904,658
570,267
16,906,001
12,992,553
Group
2014
US$
21,815
537,192
652,844
922,711
18,430
2013
US$
81,983
471,045
306,433
346,180
20,600
2,152,992
1,226,241
The average number of directors of the Company for the financial year is 3 (2013: 3). The average
number of other employees for the financial year is 11 (2013: 4).
6161
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
15
PROFIT BEFORE TAXATION
Profit before taxation for the year is stated after charging / (crediting) the following:
(Reversal)/Claim on maintenance reserve expense
– Group
Depreciation of property, plant and equipment –
Group
Foreign currency exchange adjustment gain –
Group
Fees payable to the Company’s auditor and their
associates for the audit of the Company’s annual
accounts
Fees payable to the Company’s auditor and their
associates for other services to the Group
-
The audit of the Company’s subsidiaries
Total audit fees
Auditors’ remuneration for non-audit services:
Tax compliance services
Tax advisory services
-
-
- Other services
2014
US$
2013
US$
(114,927)
1,860,732
15,259,012
11,104,963
202,179
34,079
32,147
41,844
53,101
85,248
48,691
90,535
6,499
3,249
5,399
15,147
10,651
–
–
10,651
62
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
16
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
Other tax – overseas – current
Group
2014
US$
2013
US$
2,549
1,281,678
42,657
1,405,792
(228,875)
6,202
(201,827)
1,435,765
–
–
4,699
25,575
524,903
1,058
2,295,492
2,004,684
The income tax differs from amount of income tax expense determined by applying the Singapore
tax rate of 17% to profit before income tax as a result of the following differences:
Group
2014
US$
2013
US$
Profit before income tax
16,558,562
13,969,677
Tax calculated at tax rate of 17% (2013: 17%)
Effects of:
(Over)/Under provision in prior years tax expense
- United Kingdom
- Overseas
Non-deductible items
Income not subject to tax
Different tax rates of other countries
Effect of concessionary tax rate at 10%
Singapore statutory stepped tax exemption
Other tax – overseas – current
Others
2,814,956
2,374,845
(228,875)
6,202
1,413,418
(387,554)
2,817
(1,267,000)
(57,859)
–
(613)
–
4,699
341,183
(606,591)
(136,756)
–
–
1,058
26,246
Total income tax expense
2,295,492
2,004,684
63
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
17
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
2014
US$
2013
US$
Net profit attributable to equity holders of the
Company
13,312,153
10,515,901
Weighted average number of ordinary shares
48,583,353
45,236,493
Basic earnings per share
27.40 cents
23.25 cents
Subsequent to the year end the number of ordinary shares in issue has increased to 52,877,666,
of those 450,000 remain in treasury.
(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.
As detailed in note 31 there were 1,240,000 warrants exercisable at the reporting date which are
potentially dilutive. No further potentially dilutive issues have occurred prior to the issue of the
financial statements.
64
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
17
EARNINGS PER SHARE (CONT’D)
Diluted earnings per share attributable to equity holders of the Company is calculated as follows:
Group
2014
US$
2013
US$
Net profit attributable to equity holders of the
Company
13,312,153
10,515,901
Weighted average number of ordinary shares
48,583,353
45,236,493
Adjustment for:
- Warrants
–
–
Weighted average number of ordinary shares
48,583,353
45,236,493
Diluted earnings per share
27.40 cents
23.25 cents
18
CASH AND CASH EQUIVALENTS
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
Cash at bank and on hand
Short term bank deposits
19,626,881
3,767,858
19,623,244
–
1,974,783
–
3,406,322
–
23,394,739
19,623,244
1,974,783
3,406,322
The rate of interest for the cash on interest earning accounts is approximately 0.14% to 2.5%
(2013: 1.0% to 4.5%) per annum. These approximate the weighted average effective interest rate.
Cash and cash equivalents denominated in foreign currencies are as follows:
Pounds sterling
Australian dollars
Euro
Singapore dollars
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
360,990
5,562
14,211
251,272
2,898,583
19,708
10,992
141,414
262,455
–
–
146,576
2,788,225
–
–
1,520
65
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
19
TRADE AND OTHER RECEIVABLES
Current:
Trade receivables
Trade receivables - subsidiaries
Non-trade receivables
Non-trade receivables - subsidiaries
Non-trade receivables – related
parties
Interest bearing receivable -
subsidiaries (a) & (b)
Interest receivable – subsidiaries
Interest bearing receivable –
related party (c)
Interest receivable – related party
Deposits
Prepaid expense
Accrued income
Non-current:
Deposits for aircraft
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
1,534,358
–
120,144
–
4,534,250
–
99,743
–
591,762
–
44,094
30,277,045
195,965
455,720
35,343
18,036,838
455
–
–
–
–
–
–
–
416,298
19,336
35,000
11,218
124,273
43,134
36,283
945,439
–
232,554
34,345
–
1,288,586
148,431
124,273
43,134
–
62,332
–
232,554
34,345
–
59,729
–
2,804,086
6,337,909
31,578,274
19,096,712
11,268,750
9,300,261
11,268,750
9,264,244
11,268,750
9,300,261
11,268,750
9,264,244
(a) Interest bearing receivable of US$381,298 (2013: US$Nil) due from a subsidiary. The receivable
is unsecured, repayable upon demand. Interest is charged at 5.5% (2013 : Nil%) per annum.
(b) Interest bearing receivable of US$35,000 (2013: US$35,000) due from a subsidiary. The
receivable is unsecured, repayable upon demand. Interest is charged at 1% (2013 : 1%) per
annum.
(c) Interest bearing receivable of US$ US$124,273 (2013: US$232,544) is due from an entity
controlled by key management personnel. The receivable is unsecured, repayable upon demand.
Interest is charged at 5% (2013: 5%) per annum.
The amounts due from subsidiaries and related parties are unsecured, interest-free and payable on
demand unless otherwise stated.
The average credit period generally granted to non-related trade receivables customers is 30 to 60
days. In respect to leased aircraft, rent is due in advance in accordance with the leases.
66
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
19
TRADE AND OTHER RECEIVABLES (CONT’D)
The trade and other receivables denominated in foreign currencies are as follows:
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
Pounds sterling
Australian dollars
Euro
Singapore dollars
–
1,416
7,357
36,628
35,027
18,630
6,735
182,795
–
–
5,342
–
838,120
4,573
88,767
60,963
20
PREPAYMENTS
Prepayments represent loan insurance premiums on amounts due to outside parties and are
amortised over 10 years.
21
INVENTORIES
Group
2014
US$
2013
US$
Finished goods, at cost
–
438
The cost of inventories recognised as an expense and included in the cost of sales amounts to US$Nil
(2013: US$822,887).
67
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
22
INVESTMENT IN SUBSIDIARIES
Unquoted equity shares, at cost
Quoted equity shares, at cost
Company
2014
US$
2013
US$
2,505,399
2,505,319
4,463,240
2,734,373
6,968,639
5,239,692
Quoted equity shares, at market value
18,060,452
15,828,404
In the opinion of management, no impairment in the value of the investment in subsidiaries is
necessary.
Details of the subsidiaries are as follows:
Name
Held directly by the Company:
Avation.net Inc (a)
Capital Lease Aviation PLC
(b)
Country of
incorporation
Principal activities
Proportion (%) of
ownership
interest
2014
2013
United States of
America
Procurement
99.96
99.96
United Kingdom
Leasing of aircraft
68.85
62.07
F100 Pty Ltd (c)
Australia
Leasing of aircraft
100.00
100.00
Avation Eastern Fleet Pte.
Ltd. (e)
Avation Eastern Fleet (II)
Pte. Ltd. (a)
Avation Airframe Holding
Pte. Ltd. (e)
Avation Eastern Fleet (III)
Pte. Ltd. (e)
Avation Eastern Fleet (IV)
Pte. Ltd. (e)
Singapore
Leasing of aircraft
100.00
100.00
Singapore
Leasing of aircraft
Singapore
Leasing of aircraft
Singapore
Leasing of aircraft
-
-
-
100.00
-
100.00
Singapore
Leasing of aircraft
100.00
100.00
MSN1922 Pte. Ltd. (e)
Singapore
Leasing of aircraft
100.00
100.00
MSN429 Leaseco Limited (b) United Kingdom
Leasing of aircraft
100.00
100.00
68
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
22
INVESTMENT IN SUBSIDIARIES (CONT’D)
Name
Country of
incorporation
Principal activities
Proportion (%) of
ownership
interest
2014
2013
F100 Fleet Pte. Ltd. (e)
Singapore
Leasing of aircraft
100.00
100.00
AVAP Aircraft Trading Pte.
Ltd.(e)
Avation Group (S) Pte. Ltd.
(e)
Singapore
Procurement
100.00
Singapore
Leasing of aircraft
100.00
-
-
Held by Capital Lease Aviation PLC:
Capital Lease Malta Ltd (d)
Malta
Leasing of aircraft
68.85
62.07
Capital Lease (S) Pte Ltd (a)
Singapore
Leasing of aircraft
68.85
62.07
MSN 1607 Pte. Ltd. (e)
Singapore
Leasing of aircraft
68.85
62.07
Held by Avation Eastern Fleet Pte. Ltd.:
Airframe Leasing (S) Pte. Ltd.
(e)
Singapore
Held by Avation Eastern Fleet II Pte. Ltd.:
Airframe Leasing (S) II Pte.
Ltd. (a)
Singapore
Held by Avation Eastern Fleet III Pte. Ltd.:
Airframe Leasing (S) III Pte.
Ltd. (e)
Singapore
Held by Avation Eastern Fleet IV Pte. Ltd.:
Airframe Leasing (S) IV Pte.
Ltd. (e)
Singapore
Leasing of aircraft
100.00
100.00
Leasing of aircraft
100.00
100.00
Leasing of aircraft
100.00
100.00
Leasing of aircraft
100.00
100.00
Held by MSN 429 Leaseco Limited:
MSN 429 Limited (b)
United Kingdom
Leasing of aircraft
100.00
100.00
Held by F100 Fleet Pte. Ltd.:
F100 Leasing Pte. Ltd.(e)
Singapore
Leasing of aircraft
100.00
100.00
69
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
22
INVESTMENT IN SUBSIDIARIES (CONT’D)
Name
Country of
incorporation
Principal activities
Proportion (%)
of ownership
interest
2014
2013
Subsidiaries held by Avation Group (S) Pte. Ltd.:
Avation Eastern Fleet II
Pte. Ltd. (e)
Singapore
Leasing of aircraft
100.00
Avation Eastern Fleet III
Pte. Ltd. (e)
Avation Pacific Leasing
Pte. Ltd.(e)
Singapore
Leasing of aircraft
100.00
Singapore
Leasing of aircraft
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
70
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
23
PROPERTY, PLANT AND EQUIPMENT
Group
2014
Cost or valuation:
At beginning of year
Additions
Disposal
At end of year
Representing:
At cost
At valuation
Furniture
and
equipment
Jets
US$
Turbo Props
US$
Total
US$
20,120
113,031
–
177,595,796 217,015,882
71,662,590
(35,678,617)
394,631,798
71,775,621
(35,678,617)
133,151
177,595,796 252,999,855
430,728,802
133,151
–
–
–
177,595,796 252,999,855
133,151
430,595,651
133,151
177,595,796 252,999,855
430,728,802
Accumulated depreciation
and impairment:
At beginning of year
Depreciation charge
Impairment
12,411
60,540
–
39,646,096
7,769,869
713,250
7,772,902
7,428,603
–
47,431,409
15,259,012
713,250
At end of year
72,951
48,129,215
15,201,505
63,403,671
Net carrying amount:
At beginning of year
7,709
137,949,700 209,242,980
347,200,389
At end of year
60,200
129,466,581 237,798,350
367,325,131
No upwards change in the value of the aircraft was required to be recognised during the period as
there was no material difference between the lease encumbered value as determined by an
independent valuer and net book value at the year end.
Included in Jets is an aircraft in which the group holds 39.22% ownership and is accounted for in
accordance with the group’s policy for jointly controlled assets.
71
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
23
PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Group
2013
Cost or valuation:
At beginning of year
Additions
Revaluation surplus
At end of year
Representing:
At cost
At valuation
Furniture
and
equipment
Jets
US$
Turbo Props
US$
Total
US$
14,922
5,198
–
134,960,092 108,274,256
39,040,220 108,741,626
3,595,484
–
243,249,270
147,787,044
3,595,484
20,120
177,595,796 217,015,882
394,631,798
20,120
–
–
217,015,882
177,595,796
–
217,036,002
177,595,796
20,120
177,595,796 217,015,882
394,631,798
Accumulated depreciation
and impairment:
At beginning of year
Depreciation for the year
Increase of revaluation
Impairment loss
7,529
4,882
–
–
27,045,435
5,923,156
(26,646)
6,704,151
2,334,003
5,438,899
–
–
29,386,967
11,366,937
(26,646)
6,704,151
At end of year
12,411
39,646,096
7,772,902
47,431,409
Net carrying amount:
At beginning of year
7,393
107,914,657 105,940,253
213,862,303
At end of year
7,709
137,949,700 209,242,980
347,200,389
72
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
23
PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Company
2014
Cost or valuation:
At beginning of year
Additions
At end of year
Representing:
At cost
At valuation
Accumulated depreciation:
At beginning of year
Depreciation charge
At end of year
Net carrying amount:
At beginning of year
At end of year
Furniture
and
equipment
US$
Jets
US$
Total
US$
3,839
4,210
20,452,194
–
20,456,033
4,210
8,049
20,452,194
20,460,243
8,049
–
–
20,452,194
8,049
20,452,194
8,049
20,452,194
20,460,243
1,699
2,513
282,693
1,042,178
284,392
1,044,691
4,212
1,324,871
1,329,083
2,140
20,169,501
20,171,641
3,837
19,127,323
19,131,160
No change in the value of the company’s aircraft was required to be recognised during the period as
there was no material difference between the lease encumbered value as determined by an
independent valuer and net book value at the year end.
73
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
23
PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Furniture
and
equipment
US$
Jets
US$
Total
US$
1,886
9,077,560
1,953 16,560,816
(7,999,120)
2,812,938
–
–
9,079,446
16,562,769
(7,999,120)
2,812,938
3,839
20,452,194 20,456,033
3,839
–
3,839
20,452,194 20,452,194
–
3,839
20,452,194 20,456,033
419
1,280
–
–
887,357
442,745
(1,020,763)
(26,646)
887,776
444,025
(1,020,763)
(26,646)
1,699
282,693
284,392
1,467
8,190,203
8,191,670
2,140
20,169,501 20,171,641
Company
2013
Cost or valuation:
At beginning of year
Additions
Disposal
Revaluation surplus
At end of year
Representing:
At cost
At valuation
Accumulated depreciation:
At beginning of year
Depreciation charge
Disposal
Increase in revaluation surplus
At end of year
Net carrying amount:
At beginning of year
At end of year
Assets held on trust
On 25 March 2008, the subsidiary, Capital Lease Aviation PLC acquired the rights, 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.
74
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
23
PROPERTY, PLANT AND EQUIPMENT (CONT’D)
Assets held under finance lease
During the financial year, the Group acquired aircraft with an aggregated cost of US$Nil (2013:
US$16,560,816) and the Company acquired aircraft with an aggregated cost of US$Nil (2013:
US$16,560,816) by means of finance leases respectively.
The carrying amount of aircraft held under finance leases at the end of the reporting period was
US$Nil (2013: US$54,768,779).
Assets pledged as security
In addition to assets held under finance leases, the Group’s aircraft with carrying values of
US$359,577,400 (2013: US$261,655,019) are mortgaged to secure the Group’s borrowings (Note
27).
Valuation
The Group’s and Company’s aircraft were valued in June 2014 by independent valuers, on lease
encumbered basis (“LEV’). LEV takes into account the current lease arrangements entered into in
respect of the Group’s aircraft, utilising specific lease income streams and estimated residual values at
lease termination. These have been discounted to present value using discounted rate of 6.5%per
annum.
For one of the Group’s aircraft, the lease encumbered value was not considered a true reflection of the
aircraft’s fair value given the proximity to the end of the lease and the expected outcome. Under the
terms of the lease, the Group is entitled to compensation from the lessee at the end of the lease based
on the condition of the aircraft at that time. This compensation is material to the fair value of the asset
but is not taken into account in determining lease encumbered value. The Group has engaged
independent experts to assess best estimate of the lease compensation sum together with the
recoverable value of the aircraft has been used to determine fair value. An impairment of US$713,250
has been made during the financial year.
If the aircraft were measured using the cost model, the carrying amounts would be as follows:
Group
2014
2013
Jets
US$
Turbo-props
US$
Jets
US$
Turbo-props
US$
Cost
Accumulated depreciation
and impairment
157,190,077
252,999,855
157,188,424
217,015,882
(35,214,829)
(15,201,505)
(27,427,748)
(7,772,901)
Net book value
121,975,248
237,798,350
129,760,676
209,242,981
Company
2014
2013
Jets
US$
Turbo-props
US$
Jets
US$
Turbo-props
US$
Cost
Accumulated depreciation
and impairment
17,639,256
(1,152,667)
Net book value
16,486,589
-
-
-
17,639,256
(309,339)
17,329,917
-
-
-
75
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
24
GOODWILL
Cost:
Balance at beginning and at end of year
Impairment test of goodwill
Company
2014
US$
2013
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 CGU has been determined based on value-in-use calculations. Cash flow
projections used in the value-in-use calculations were based on financial budgets approved by
management covering a three-year period.
Key assumptions used for value-in-use calculations:
Average cash flow growth rate
Terminal growth rate
Discount rate
2014
2013
2%
2%
6.5%
2%
2%
6.5%
Management determined cash flow growth based on past performance and its expectations of the
market development. The terminal growth rate of 2% that was used to extrapolate cash flows beyond
the budget period did not exceed the long term average growth rate for the business in which the
CGU operates. Management has estimated that the recoverable amount of CGU is US$2,758,841.
Management believes that no reasonably possible change in any of the above key assumptions would
cause the carrying value of the CGU to materially exceed its recoverable amount.
76
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
25
TRADE AND OTHER PAYABLES
Current
Trade payables
Trade payables – subsidiaries
Non-trade payables
Non-trade payables - subsidiaries
Interest bearing loan – related
parties (a) to (e)
Interest payable – related parties
Deferred income
Deferred income – subsidiaries
Accrued expenses
Non-current
Deposits collected
Interest bearing loan – related
party (c)
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
1,268,587
–
109,744
–
1,532,786
–
334,138
–
1,213,313
–
–
1,467,964
55,258
–
15,030,014
2,111,843
6,500,000
27,917
3,530,305
6,000,000
35,265
3,426,841
–
–
1,204,748
759,772
2,000,000
9,863
14,641
98,600
126,025
–
9,863
14,641
98,600
82,591
12,641,301
12,088,802
18,492,456 3,840,760
8,188,983
7,088,610
958,091
71,487
–
2,000,000
–
2,000,000
8,188,893
9,088,610
958,091
2,071,487
(a) Interest bearing loan due to an entity over which key management personnel have significant
influence of US$NIL (2013: US$1,200,000). The loan is unsecured and repayable upon demand.
Interest is charged at 9.75% (2013: 9.75%) per annum.
(b) Interest bearing loan due an entity over which key management personnel have significant
influence of US$NIL (2013: US$1,000,000). The loan is unsecured and repayable upon demand.
Interest is charged at 10% (2013: 10%) per annum.
(c) Interest bearing loan due to an entity over which key management personnel have significant
influence of US$2,000,000 (2013: US$2,000,000). The loan is unsecured and repayable by
October 2014. Interest is charged at 10% (2013: 10%) per annum.
(d) Interest bearing loan due to an entity over which key management personnel have significant
influence of US$4,500,000 (2013: US$3,000,000). The loan is unsecured and repayable upon
demand. Interest is charged at 9.75% (2013: 9.75%) per annum.
(e) Interest bearing loan due to an ex-director of a subsidiary of US$Nil (2013: US$800,000). The
loan is unsecured and repayable upon demand. Interest is charge at 9.75% (2013: 9.75%) per
annum.
The amount due to subsidiaries and related parties are unsecured, interest free and without fixed
repayment terms unless otherwise stated.
The average credit period taken to settle non-related party trade payables is approximately 30 to 60
days.
The deposits collected were from customers in respect of aircraft lease commitments, and have been
discounted to their present value at a current pre-tax rate that reflect the risks specific to these
deposits. These deposits will be refunded at the end of the lease terms.
77
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
25
TRADE AND OTHER PAYABLES (CONT’D)
The trade and other payables denominated in foreign currencies are as follows:
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
Pounds sterling
Australian dollars
Euro
Singapore dollars
135,884
6,256
81,382
91,604
45,263
47,768
9,322
82,944
91,379
6,256
75,979
16,125
109,159
25,750
43,125
96,689
26
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.
78
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
27
LOANS AND BORROWINGS
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
Secured borrowings
Junior secured borrowings
Obligations under finance
lease
Total
Less: current portion of
borrowings
253,706,304
20,951,782
202,561,756
14,036,835
12,054,809
–
–
–
–
274,658,086
46,850,992
263,449,583
–
12,054,809
13,470,218
13,470,218
(55,673,186)
218,984,900
(24,243,718)
239,205,865
(1,415,411)
10,639,398
(1,415,411)
12,054,807
Maturity
2014
US$
2013
US$
Weighted average
interest rate per annum
2014
%
2013
%
Secured borrowings
Junior secured borrowings
Finance leases
Total
2014-2026
2020-2023
–
2013-2022
2021-2022
2018-2022
4.9
6.4
–
5.1
4.7
6.6
8.3
5.4
Secured borrowings are secured by first ranking aircraft mortgages in respect of the aircraft
purchased with the proceeds of the borrowings, security assignments of the Group’s right under the
leases and other contractual documents relating to the aircraft, charged over the bank accounts in
which lease payments relating to the aircraft are received and charged over the issued share capital
of certain subsidiaries.
Junior secured borrowings are secured by the second ranking aircraft mortgages, security
assignments and charges over bank accounts.
The carrying amounts of the borrowings approximate their fair values.
79
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
27
LOANS AND BORROWINGS (CONT’D)
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
Group
Company
2014
US$
2013
US$
2014
US$
2013
US$
–
6,468,612
–
1,992,612
– 31,542,346
– 33,001,700
– 13,638,346
–
–
– 71,012,658
– 15,630,958
– (24,161,666)
– (2,160,740)
– 46,850,992
– 13,470,218
–
2,694,958
–
1,415,411
– 18,635,952
– 25,520,082
– 12,054,807
–
–
Balance at end of year
– 46,850,992
– 13,470,218
80
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
28
SHORT-TERM PROVISIONS
Maintenance reserve claim
Movement in provision for maintenance provisions claim is as follows:
Balance at beginning of financial year
(Reversal) Provision made during the financial year
Excess provision written back to profit or loss
Provision used during the financial year
Balance at end of financial year
Group
2014
US$
2013
US$
–
3,757,081
Group
2014
US$
2013
US$
3,757,081
(114,927)
(2,914,401)
(727,753)
–
2,969,169
1,860,732
–
(1,072,820)
3,757,081
A provision of US$Nil (2013: US$1,860,732) was made during the year ended 30 June 2014. 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$727,753 (2013: US$1,072,820) on the reserves for the year ended
30 June 2014.
At the end of the financial year, there was no provision for maintenance claim as the Group has revised
the lease terms upon renewal of these leases during the year to exclude the collection of maintenance
rent and there will be no future claims against the maintenance reserve funds. Any unclaimed balance
as at the end of the lease is not refundable to the lessee and hence these were credited to the profit or
loss as maintenance rent income.
81
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
29
DEFERRED TAX LIABILITIES
Recognised deferred tax assets and liabilities are attributable to the following:
Group
Property, plant and equipment
Other items
Tax losses carried forward
Tax (assets)/ liabilities
Set off tax
Net tax (assets)/ liabilities
Property, plant and equipment
Other items
Tax losses carried forward
Tax assets
Set off tax
Net tax (assets)/ liabilities
Assets
2014
US$
Liabilities
2014
US$
Assets
2013
US$
–
–
–
–
–
–
–
–
–
–
–
–
6,463,743
(41,888)
–
6,421,855
–
6,421,855
Liabilities
2013
US$
5,197,011
(9,094)
–
5,187,917
–
5,187,917
Net
2014
US$
6,463,743
(41,888)
–
6,421,855
–
6,421,855
Net
2013
US$
5,197,011
(9,094)
–
5,187,917
–
5,187,917
Movement in temporary differences during the financial year:
Group
Property, plant and
equipment
Other items
Tax losses carried forward
Balance
1 July 2013
US$
Recognised
in profit or
loss
US$
Recognised
in equity
US$
Balance
30 June
2014
US$
5,197,011
(9,094)
–
5,187,917
1,266,732
(32,794)
–
1,233,938
–
–
–
–
6,463,743
(41,888)
–
6,421,855
Movement in temporary differences during the last financial year:
Group
Property, plant and
equipment
Other items
Tax losses carried forward
Balance
1 July 2012
US$
Recognised
in profit or
loss
US$
Recognised
in equity
US$
Exchange
adjustment
US$
Balance
30 June
2013
US$
5,268,872
644,964
29,364
5,943,200
1,233,900
(654,058)
(29,364)
550,478
(1,292,443)
–
–
(1,292,443)
(13,318) 5,197,011
–
–
(13,318)
(9,094)
–
5,187,917
82
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
29
DEFERRED TAX LIABILITIES (CONT’D)
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
2014
US$
Liabilities
2014
US$
Net
2014
US$
Assets
2013
US$
–
–
–
–
–
–
–
–
–
–
–
–
623,548
623,548
–
–
–
–
623,548
623,548
–
–
623,548
623,548
Liabilities
2013
US$
Net
2013
US$
366,533
366,533
–
–
–
–
366,533
366,533
–
–
366,533
366,533
Movement in temporary differences during the financial year:
Company
Balance
1 July 2013
US$
Recognised
in profit and
loss
US$
Recognised
in equity
US$
Balance
30 June
2014
US$
Property, plant and equipment
366,533
257,015
–
623,548
Movement in temporary differences during the last financial year:
Balance
1 July 2012
US$
Recognised
in profit or
loss
US$
Recognised
in equity
US$
Exchange
adjustment
US$
Balance
30 June
2013
US$
315,043
65,542
–
(13,318)
366,533
Company
Property, plant and
equipment
83
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
30
a)
SHARE CAPITAL AND TREASURY SHARES
Share capital
2014
2013
No of
shares
US$
No of
shares
US$
Allotted, called up and fully paid
Ordinary shares of 1 penny each
At 1 July
Issue of shares
48,822,960
781,679
878,519
12,782
42,374,463
6,448,497
779,618
98,519
At 30 June
49,604,639
891,301
48,822,960
878,137
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 3 March 2014, the Company issued 240,775 ordinary shares of 1 penny each at 110.5 pence
following the exercise of warrants by a warrant holder raising gross proceeds of US$445,724.
b) On 6 March 2014, the Company issued 159,225 ordinary shares of 1 penny each at 110.5 pence
following the exercise of warrants by warrant holders raising gross proceeds of US$293,650.
c) On 26 June 2014, the Company issued 381,679 ordinary shares of 1 penny at each 131 pence
each as consideration for the acquisition of 2,500,000 ordinary shares in its subsidiary, Capital
Lease Aviation PLC.
84
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
30
b)
SHARE CAPITAL AND TREASURY SHARES (CONT’D)
Treasury shares
2014
2013
No of
treasury
shares
No of
treasury
shares
US$
US$
At 1 July
Acquired during the year
150,000
300,000
214,498
467,835
–
150,000
–
214,498
At 30 June
450,000
682,333
150,000
214,498
a) On 19 September 2013, the Company acquired 150,000 of its shares at a price of 94 pence per
ordinary share presenting approximately 0.31% of the Company’s issued ordinary share capital at
that time. The total amount paid to acquire the shares was US$226,106 and this was presented as
a component within shareholders’ equity.
b) On 24 September 2013, the Company acquired 150,000 of its shares at a price of 100 pence per
ordinary share representing 0.31% of the Company’s issued ordinary share capital at that time.
The total amount paid to acquire the shares was US$241,729 and this was presented as a
component within shareholders’ equity.
31
SHARE BASED PAYMENTS
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 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
85
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
31 SHARE-BASED PAYMENTS (CONT’D)
Movement of warrants during the financial year
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of,
and movements in, warrants during the financial year:
2014
2013
No.
WAEP
No.
WAEP
Outstanding at 1 July
800,000
110.5 pence 1,275,000
94.5 pence
- Granted
1,240,000
110.0 pence
–
–
- Exercised
(400,000)
110.5 pence
(110,510)
67.5 pence
- Lapsed/Cancelled
(400,000)
–
(364,490)
–
Outstanding at 30 June
1,240,000
110.0 pence
800,000
110.5 pence
Exercisable at 30 June
–
–
800,000
110.5 pence
The weighted average fair value of the warrants granted during the financial year was 1.06 pence
(2013: 8.17 pence). The fair value of the warrants granted during the current financial year was
US$22,408 which has not been expensed in these accounts as it is not material. The charge
recognised in the profit and loss account in respect of share based payments is $nil (2013: $nil).
The weighted average share price at the date of exercise of the warrant exercised during the
financial year was 110.5 pence (2013: 67.5 pence).
All warrants are settled in equity.
Warrants outstanding at the end of the year have the following expiry date and exercise price:
No of warrants
2014
2013
800,000
–
Warrants series
signed on
Expiry date
Exercise price
(1) 14 Dec 2011
(2) 20 Nov 2013
11 Dec 2013
21 Nov 2016
110.5 p
110.0 p
–
1,240,000
86
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
31 SHARE-BASED PAYMENTS (CONT’D)
The warrants granted on 4 November 2013 and signed on 20 November 2013 has a 3 year vesting
schedule and the details are as follows:
Vesting period
Proportion of total share options that are
exercisable
Before 20 November 2014
0 per cent
On 20 November 2014 and before 20
November 2015
On 20 November 2015 and before 20
November 2016
On 20 November 2016
Up to 33 per cent of the grant
Up to another 33 per cent of the grant
Or
Up to 66 per cent of the grant if warrants
were not exercised after the first vesting year
Balance
Or
100 per cent of the grant if warrants were not
exercised after the first and second vesting
years
The warrants were priced using the Black-Scholes 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
20 November 2013
123.0 pence
110.0 pence
20%
3 years
1.01%
0.35%
The Company issued a total of 1,240,000 warrants during the financial year at 110.0 pence when
the then market price was 123.0 pence.
87
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
32
CAPITAL COMMITMENTS
Capital expenditure contracted for at the reporting date but not recognised in the financial statements
are as follows:
Group
2014
US$
2013
US$
Property, plant and equipment
201,841,915
175,229,908
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 statement of financial
position 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, 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.
33
OPERATING LEASE COMMITMENTS
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
2014
US$
2013
US$
Within one year
In the second to fifth years inclusive
More than five years
49,520,759
175,180,914
111,265,903
46,841,352
138,519,513
114,490,041
88
AVATION PLC
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
34
SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by the Executive
Chairman (“Chief Operating Decision Maker” or “CODM”) that are used to make strategic decisions.
The CODM considers the business from a business segment perspective. Management manages and
monitors the business in the 2 primary business areas: aircraft leasing and business procurement.
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 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)
Business segments
During the year ended 30 June 2014, 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.
89
AVATION PLC
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
34
SEGMENT INFORMATION (CON’T)
c)
Geographical analysis
2014
Europe
US$
North
America
US$
Australia
and
Oceania
US$
Asia
US$
Total
US$
Revenue
11,700,000
650,000
39,905,209
–
52,255,209
Capital expenditure and
valuation movements
–
–
36,095,859
35,679,762
71,775,621
Net book value - aircraft
79,215,923
6,841,366 281,207,642
– 367,264,931
Total assets
96,652,653
6,841,366 307,695,428
4,438,868 415,628,315
2013
Europe
US$
North
America
US$
Australia
and
Oceania
US$
Asia
US$
Total
US$
Revenue
9,321,466
1,560,000
31,464,032
394,493
42,739,991
Capital expenditure and
valuation movements
22,479,404
– 128,897,926
5,198 151,382,528
Net book value - aircraft
83,055,817
8,197,125 255,939,738
– 347,192,680
Total assets
105,139,334
8,197,159 258,760,998 22,285,809 394,383,300
During the year, certain customers accounted for greater than 10% of the Group’s total revenues.
There is one customer that accounts for US$39,722,478 (76%) of the Group’s total revenues from
continuing operations. These revenues were based in the Australia and Oceania geographical area.
There is one customer that accounts for US$8,400,000 (16%) of the Group’s total revenue. These
revenues were based in the European geographical area.
90
AVATION PLC
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
35
CONTINGENT LIABILITIES
i.
Lease-end/re-delivery adjustment compensation
The Company’s subsidiary, MSN 1607 Pte Ltd owns an aircraft where there may be 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/re-delivery at the end of the lease in
April 2018 in a condition which exceeds certain criteria agreed at the inception of the lease.
Management is of the view that the return condition of the aircraft will be such that a sum will be
due to the Group. Given that the lease continues until April 2018, the directors are of the
opinion that it is impossible to accurately estimate the return condition of the aircraft given the
number of variables such as aircraft usage and timing of maintenance events. The directors
have assessed several different outcomes and consider that the likely outcome would result in a
cash inflow from the lessee. On this basis, the directors have not recognised a contingent asset
or liability in this set of financial statements.
ii. Withholding tax on interest paid to lenders
During the current financial year, the Group’s Singapore subsidiaries have obtained interest
bearing loans from foreign lenders. Under the Singapore Income Tax Act, the Group is required
to withhold tax on the interest payments made to the lenders.
Management is in the process of applying to the Singapore Ministry of Finance (“MOF”) for a
withholding tax exemption under Section 13 of the Income Tax Act. As management is of the
view that the Group is, more likely than not, to obtain the withholding tax exemption from MOF
and that it is not probable that the Group will make the withholding tax payments, the Group has
not provided for the withholding tax payable at the end of the reporting period.
Had the Group provided for withholding tax profit for the period would be reduced by
approximately US$223,000.
iii. Guarantees
Group
2014
US$
2013
US$
Guarantees
274,658,086
216,598,591
The maximum estimated amount the Group could become liable is as shown above.
91
AVATION PLC
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
36
DIVIDEND
Declared and paid during the financial year
Dividends on ordinary shares
- Final exempt (one-tier) dividend for 2013:1.78
US cents (2012:1.04 pence ) per share
Proposed but not recognised as a liability
as at 30 June
Dividends on ordinary shares, subject to
shareholders’ approval at the Annual General
Meeting
- Final exempt (one-tier) dividend for 2014:
2.01 US cents (2013: 1.78 US cents) per
share
2014
US$
2013
US$
866,621
__________
__________
745,618
__________
__________
988,008
__________
__________
866,621
__________
__________
Dividends to Company’s shareholders are recognised when the dividends are approved for payments.
37
ULTIMATE HOLDING COMPANY
No party controls the Company.
92
AVATION PLC
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014
38
SUBSEQUENT EVENTS
On 3 July 2014, the Company issued 3,000,000 ordinary shares of 1 penny each at 140 pence
following a private placement exercise raising gross proceeds of £4.2 million (equivalent to
US$7,193,760).
On 22 September 2014, the Company has agreed to acquire 21,065,334 ordinary shares in its
subsidiary, Capital Lease Aviation PLC (“CLA”) at a price of 20.5 pence per share in cash,
increasing its holding of voting rights in CLA’s issued share capital to 90.59% (disregarding the
shares CLA holds in treasury). The transaction has been entered into with the second largest
shareholder in CLA after the Company itself and is expected to complete on or behalf 18 November
2014.
Between 24 September and 1 October 2014, the Company acquired 4,705,949 ordinary shares in
CLA. This increases the Company’s interest in the voting rights in CLA’s issued share capital to
95.44%. The consideration for the acquisition of 2,184,216 of the CLA shares acquired was the
allotment of 273,027 new ordinary shares in the Company, representing 0.52% of the Company’s
existing issued share capital. The balance of 2,521,733 CLA shares were acquired through the
market at a price of 20.5 pence in cash. Settlement for shares purchased with cash was on normal
market terms.
39
APPROVAL OF FINANCIAL STATEMENTS
The financial statements of the Company and the consolidated financial statements of the Group for
the financial year ended 30 June 2014 were authorised for issue by the Board of Directors on 17
October 2014.
93
ReGISteR OF tOP 20 ShARehOlDeRS
(As at 28 October 2014)
Name of Shareholder
Holding
(Number of shares)
Goldman Sachs Securities (Nominees) limited
12,058,140
Chase Nominees limited
Fitel Nominees limited
hSBC Global Custody Nominee (uK) limited
Chase Nominees limited
Vidacos Nominees limited
hSBC Global Custody Nominee (uK) limited
lynchwood Nominees limited
Smith & Williamson Nominees limited
Barclayshare Nominees limited
Vidacos Nominees limited
Fitel Nominees limited
Roy Nominees limited
hSBC Global Custody Nominee (uK) limited
W h Ireland Nominees
l R Nominees limited
the Corporation Of lloyds
tD Direct Investing Nominees limited
Vidacos Nominees limited
State Street Nominees limited
94
9,331,140
4,690,001
3,338,227
2,870,000
2,240,295
2,055,000
1,261,197
1,229,366
922,436
707,720
677,646
650,000
615,000
589,699
533,241
460,922
426,484
391,010
386,629
Airbus A320 aircraft at Final Assembly line (FAl). (Photo: Airbus S.A.S.)
Annual Report 2014
510 Thomson Road
#12-04 SLF Building
Singapore 298135
www.avation.net
L I S T E D
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