ANNUAL REPORT
2015
ANNUAL REPORT 2015
OUR FLEET
(AS AT 15 OCTOBER 2015)
Aircraft Type
In Operation
Ordered
Options
Fokker 100
ATR 72-500
ATR 72-600
Airbus A320-200
Airbus A321-200
5
6
14
3
3
-
-
8
-
2
-
-
22
-
-
Total
31
10
22
2
MODEL
Fokker F100
Airbus A320-200
MODEL
Airbus A321-200
ATR 72-500
MODEL
ATR 72-600*
*Photo above and all photos page 9-23: Viktoria Dorosevits, unless noted otherwise.
3
ANNUAL REPORT 2015
COMPANY INFORMATION
DIRECTORS:
Robert Jeff ries Chatfi eld
Roderick Douglas Mahoney
Stephen John Fisher
COMPANY SECRETARIES:
Duncan Gerard Stephen Scott
Jason Francis Gollogly
REGISTERED OFFICE:
5th Floor Cheyne House
Crown Court 62-63 Cheapside
London EC2V 6AX
United Kingdom
PRINCIPAL PLACE OF BUSINESS:
65 Kampong Bahru Road
AUDITORS:
Singapore 169370
Kingston Smith LLP
Devonshire House
60 Goswell Road
London EC1M 7AD
United Kingdom
SOLICITORS:
Charles Russell Speechlys LLP
6 New Street Square
London EC4A 3LX
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
Chairmanʼs Statement ................................................................................................................ 6 ‒ 7
Board of Directors ........................................................................................................................... 8
Strategic Report .......................................................................................................................9 ‒ 14
Directorsʼ Report .................................................................................................................... 15 ‒ 18
Directorsʼ Remuneration Report ............................................................................................... 19 ‒ 23
Statement of Directorsʼ Responsibilities ........................................................................................... 24
Auditorsʼ Report ........................................................................................................................... 25
Consolidated Statement of Profi t or Loss and Other Comprehensive Income ......................................... 26
Company Statement of Profi t or Loss and Other Comprehensive Income .............................................. 27
Consolidated Statement of Financial Position ..................................................................................... 28
Company Statement of Financial Position ......................................................................................... 29
Consolidated Statement of Changes in Equity ............................................................................ 30 ‒ 31
Company Statement of Changes in Equity ........................................................................................ 32
Consolidated Statement of Cash Flows ...................................................................................... 33 ‒ 34
Company Statement of Cash Flows .................................................................................................. 35
Notes to the Financial Statements ............................................................................................ 36 ‒ 91
5
ANNUAL REPORT 2015
CHAIRMANʼS STATEMENT
OVERVIEW
For the year ended 30 June 2015:
• Aircraft lease revenue increased by 17 per cent to $56.9 million (2014: $48.7 million);
• The number of aircraft in the fl eet increased to 29 aircraft (2014: 25 aircraft);
• Dividend increase of 49 per cent to 3.00 US cents per share (2014: 2.01 US cents per
share);
• Underlying pre-tax profi t from leasing business (which excludes gains or losses on the
disposal of aircraft, a loss on the part-out disposal of an aircraft and the recovery of a lessee
security deposit) increased to $14.8 million (2014: $13.2 million);
• Net profi t for the year decreased by 7 per cent to $13.3 million (2014: $14.3 million);
• Net cash fl ow from operating activities increased to $43.5 million (2014: $27.6 million);
• Successful issue of fi rst $100 million unsecured tranche and establishment of a $500 million
Global Medium Term Note programme; and
• Cash and cash equivalents as at 30 June 2015 of $108.6 million (2014: $23.4 million).
BACKGROUND AND
OUTCOME
Avation has enjoyed remarkable
growth and is positioned for further
revenue and fl eet expansion in the
coming year. Lease revenues have
increased by 17 per cent during
the year, while yield remains at
an industry leading 13.1 per cent.
The average age of the aircraft fl eet has decreased to
5.3 years in 2015.
Avation has substantially increased lease revenue, cash
operating margin, fl eet assets and now has signifi cant
cash resources which can be deployed to fund additional
growth.
Group profi ts are slightly lower in 2015 compared to
2014. This small reduction was primarily due to the
variability in aircraft trading gains and losses between
the respective fi nancial periods. The one off gains from
the sales of two aircraft in 2014 were not replicated in
2015. Furthermore, Avationʼs subsidiary, Capital Lease
Aviation (“CLA”), incurred a loss of $1.2 million net of
tax from the cessation of operations in North America
and part out of an aircraft which was at the end of its
useful life. As a result the Group generated a loss from
aircraft trading and discontinued operations in 2015
compared to profi t in 2014.
The issue of the fi rst $100 million unsecured tranche of the
$500 million Global Medium Term Note programme (the
“GMTN”) is transformative as the programme provides
greater opportunities for the Group to address the key
challenge of fi nancing future aircraft acquisitions. The
Groupʼs improved access to capital markets and stronger
business fundamentals allow the Directors to propose a
signifi cant increase in dividends to shareholders.
The key objectives for 2016 are to improve profi tability
through fl eet growth, increase customer diversifi cation
and add scale to the business.
6
CHAIRMANʼS STATEMENT
operator customer base to mitigate both concentration
and geographic risks.
The Board of Directors is pleased to deliver a
fundamentally strong set of results from a core business
in which the fundamentals continued to improve, in a
year in which the business was signifi cantly transformed.
We remain committed to building growth, diversifi cation
and scale to the business.
Robert Jeff ries Chatfi eld,
Executive Chairman
Singapore
15 October 2015
DIVIDEND
The underlying profi tability of the leasing business
has improved. The Board would like to thank the
shareholders for their continued support as it continues
in the successful development of Avation. The Board
understands the importance of recognising shareholder
ownership and has approved a dividend increase of 49
per cent to 3.00 US cents per share (2014: 2.01 US
cents) in respect to the period ending 30 June 2015. The
Company aims to continue to maintain a progressive
dividend policy.
OUTLOOK
Avation has four aircraft contracted for delivery in the six
months to 31 December 2015 and a further six aircraft
for delivery in the six months to 30 June 2016, with a
further two contracted for delivery in the second half
2016.
Overall the 10 aircraft to be delivered in the current
fi nancial year have a purchase value of approximately
$280 million. The funds raised from the issuance of
unsecured notes under the GMTN support a portion of
the funding of these aircraft and provide further capacity
to acquire additional aircraft, beyond new aircraft
orders, such as the Airbus A320 on lease to Air France
announced August 2015.
Committed future revenue from unexpired leases on the
current fl eet of 29 aircraft totals $369.2 million. Avation
has also entered into leases of eight of the aircraft due
to be delivered before 30 June 2016. These leases are
scheduled to generate additional committed revenue
of approximately $196.2 million over the terms of
the leases. The total of future lease revenue from the
existing fl eet and contracted deliveries is $565.4 million.
Management believes that the Company can obtain
access to the required debt funding for future fl eet
growth. However, access to funding does remain a risk,
which is common to all capital intensive business models.
Specifi c risks, which are inherent in the aircraft leasing
industry, include the creditworthiness of client airlines,
residual value risk and the risk of impairment of aircraft
assets. The Company is seeking to diversify its airline
7
ANNUAL REPORT 2015
BOARD OF DIRECTORS
Jeff Chatfi eld
Chairman
Stephen Fisher PhD
Non-Executive Director
In addition to his role at Avation
is Chairman,
PLC, Stephen
Principal and Chief Investment
Offi cer of First Degree Global
Asset Management Pte. Ltd.,
asset
privately
a
in
management
Singapore founded in 2011. First Degree Global Asset
Management operates a number of strategies for its
clients including a Fixed Income focused hedge fund.
owned
company
Stephen has had twenty-two years experience as
an investment professional with leading investment
management groups in the United States, Asia and
Australia. From 2000 to 2011 he was Managing Director
and Head of Global Fixed Income Product ‒ Asia Pacifi c
at JPMorgan Asset Management. Stephen held the
positions of Australian Head of Capital Markets Research
from 1992- 1996, and Asia Pacifi c Regional Head of
Capital Markets Research at J.P. Morgan Investment
Management, Inc. from 1996-1998.
Stephenʼs particular areas of expertise are in quantitative
analysis of fi xed 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.
Mr Chatfi eld is the executive
chairman of Avation PLC and has
been instrumental in establishing
and growing the Company. Mr
Chatfi eld has a track record of
leadership in a variety of profi table
and successful businesses. He is a
qualifi ed public company director and business executive
experienced in the fi elds of commercial airlines, aviation,
aircraft leasing and fi nance, electronic commerce,
investment management, radio and TV broadcasting.
Mr Chatfi eld holds both Bachelorʼs and Masterʼs 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 fl ow generative. In the recent past Mr
Chatfi eld 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 Chatfi eld was born in Perth,
Australia and is a Permanent Resident of Singapore.
Rod Mahoney
Executive Director
Mr Mahoney is the Chief Operating
Offi cer and an Executive Director
of the Company. Before this
executive appointment, he was
a fl eet planning and aircraft
procurement consultant to the
Company. He has previously been
a project advisor to a variety of Asia-Pacifi c 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 Pacifi c. 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 2015.
a) new turbo-prop regional aircraft, principally the
popular fuel effi cient ATR 72-600 model; and
BUSINESS OVERVIEW
Avation PLC and its subsidiaries (“Avation”, the “Group”) is
a specialist commercial passenger aircraft leasing group
managing a fl eet of 29 aircraft as at 30 June 2015 which
it leases to airlines across the world. Avationʼs customers
include Virgin Australia, Thomas Cook, Condor, Fiji
Airways, UNI Air and Air India Regional. The Companyʼs
fl eet includes Airbus A320 family, 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
benefi ciary of the Singapore Aircraft Leasing Scheme tax
incentive.
Avationʼs management team has extensive experience in
the aviation industry and has the expertise to select and
acquire aircraft that will deliver value to the company,
performance to its customers and generate returns to its
shareholders.
Avation will continue to grow its fl eet and earnings in
the coming year with ATR 72-600s ordered from the
manufacturer, Airbus A321-200s to be acquired under
sale and leaseback transactions and additional second
hand aircraft.
Avation is listed on the Standard segment of the UK
offi cial list and traded on the Main Market of the London
Stock Exchange under the ticker symbol LSE: AVAP.
BUSINESS MODEL
Avation aims to generate growth in its fl eet and build
shareholder value by focussing on sectors being:
9
b) new and second-hand narrow body jets, in particular
the popular Airbus A320/A321 family and Boeing
737NG aircraft.
Owning diff erent types of aircraft provides a benefi t in
terms of diversifi cation of market and residual value risk.
The Group fi nances the acquisition of new aircraft using
internally generated cash fl ows and a mixture of senior
and junior secured debt fi nance and unsecured notes.
Debt is re-fi nanced on older aircraft when there is an
opportunity to reduce the overall cost of debt funding
and also to release equity which may be used to acquire
new aircraft.
The Board applies prudent fi nancial management
principles to manage risk when acquiring aircraft by
seeking to match the terms of leases to the tenor of the
relevant fi nancing, using mostly fi xed interest rate debt
and by amortising debt aggressively.
As the fl eet grows the Group will also seek to diversify
its customer base as part of its overall credit risk
management policy.
The Avation fl eet of 29 aircraft has a weighted average
age of 5.3 years, which is likely to reduce as the Group
adds new aircraft and disposes of old aircraft. The
weighted average remaining lease term of the fl eet is 6.5
years. The Groupʼs current customer base of airlines is
located in Australia, Europe and the Asia-Pacifi c region.
ANNUAL REPORT 2015
STRATEGIC REPORT
Source: ICAO, Airbus Global Market Forecast 2015
PRINCIPAL RISKS AND UNCERTAINTIES
The aircraft leasing sector is competitive and Avation is
exposed to a number of market related, operational and
fi nancial 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 identifi ed
as the most signifi cant risks to the business. Avationʼs
Board of Directors is responsible for managing risk and
reviews risk management policies regularly.
Exposure to the airline industry
The Groupʼs customers are commercial airlines who
are fi nancially exposed to the supply and demand
for passenger air travel. The fi nancial 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 fi nancial condition
of the Groupʼs 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.
MARKETS AND TRENDS
Aircraft leasing is a growth industry with an increasing
share of the worldʼs total commercial passenger aircraft
fl eet owned by leasing companies. Avation expects that
the percentage of leased aircraft in the world fl eet will
continue to grow over the coming years due to the
fl exibility that the leasing model provides for airlines and
leasing companiesʼ increased access to fi nancial capital.
The aircraft leasing industry also benefi ts 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 fl eet of commercial passenger aircraft is
predicted to grow substantially with aircraft traffi c
expected to double every 15 years. Forecast new aircraft
deliveries over the next 20 years are 32,600 aircraft; of
which 36% are expected to be in Asia-Pacifi c, 21% in
Europe, 17% in North America and of the total, 70% are
expected to be single aisle. 1
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 profi le over
the last several years and have been able to diversify
funding sources.
1 Airbus Global Market Forecast 2015
10
STRATEGIC REPORT
Asset value risk
Fluctuations in the supply and demand for aircraft and
aircraft travel may impact values and lease rates for the
Groupʼs aircraft. Market forces and prevailing economic
conditions may change over the economic lives of the
Groupʼs aircraft and could have a positive or negative
impact on valuations. Advances in aircraft technology
may create obsolescence in the fl eet before the end of
the current estimated useful life. The Group regularly
obtains independent third party valuations the fl eet 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. From time to time the Group
may place speculative orders for new aircraft for future
delivery. There is uncertainty around the Groupʼs ability
to lease those aircraft to airlines on terms which are
economically favourable, or at all.
Economic, legal and political risks
Avation leases aircraft to lessees in diff erent jurisdictions.
As such the Group is exposed to economic, legal and
political risk in those jurisdictions. Avationʼs aircraft
are subject to operational risks specifi c 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
Avationʼs fl eet operates in many jurisdictions and
complies with tax and other regulatory requirements in
those jurisdictions. There is a risk that changing tax and
11
regulatory regimes may have an impact on the business
and fi nancial results. Not all jurisdictions that the Group
operates in have reliable aircraft repossession regimes
and not all may be members of or signatories to the
Cape Town Convention.
responsible
lessees are
Lessee risks
for all
Avationʼs airline
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 aircraftʼs value. In order
to mitigate against this risk the Group closely monitors
each airlineʼs 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
times for proper maintenance of the aircraft.
Financial risks
Avationʼs fi nancial risks, and management objectives
and policies to mitigate those risks, are set out in note 7
to the fi nancial statements and are as follows:
• Airline industry risks
• Credit risk
Interest rate risk
•
• Foreign currency risk
•
• Capital risk
Liquidity risk
Annual Report 2015
STRATEGIC REPORT
FINANCIAL REVIEW
Income
Lease revenue
Total profi t
Net cash from operating activities
Total assets
Total equity
Basic earnings per share
Dividend per share
2015
2014
US$ʼ000s
US$ʼ000s
60,134
56,932
13,285
43,451
586,182
128,204
52,126
48,691
14,263
27,571
415,628
110,767
24.12 cents
27.40 cents
3.00 cents
2.01 cents
Income increased by 15 per cent to $60.1 million for the year ended 30 June 2015 (2014: $52.1 million). Lease
revenue increased by 17 per cent to $56.9 million (2014: $48.7 million) as a result of continued fl eet growth, whilst
lease yields remain at an industry leading level of 13.1 per cent.
Other income was $3.2 million for the year ended 30 June 2015 (2014: $3.4 million). Other income was primarily
made up of the recovery of a security deposit from a lessee defaulting on a lease and a one-off gain from the early
retirement of various junior loans. Other income for the prior year ended 30 June 2014 included a $2.9 million write
back of excess maintenance reserve accruals.
Avationʼs subsidiary CLA has reported a $1.2 million loss, net of a tax write-back, on the part-out disposal of a 25 year
old aircraft. This loss is classifi ed within discontinued operations as it represented the Groupʼs only aircraft operating
in North America. Avation incurred a loss on the sale of an aircraft of $0.7 million in the year ended 30 June 2015.
This loss resulted from the disposal of an aircraft that was repossessed following the lesseeʼs default on the lease. The
loss was off set by the security deposit which has been recorded in other income. In 2014, the Group generated gains
on sale of aircraft totalling $3.3 million, primarily from the sale of delivery positions of two new aircraft. As Avation
continued to build its leasing business in 2015 the Company has preferred to add new ordered aircraft to the leasing
fl eet for long term returns rather than to sell aircraft for one off gains, as occurred in 2014. Excluding the eff ect of
aircraft trading, the pre-tax profi t (ex-trading) from the underlying leasing business increased 11.6 per cent to $14.8
million (2014: $13.2 million).
Depreciation on continuing activities increased by 22 per cent to $17.8 million in the year ended 30 June 2015 (2014:
$14.6 million). The increase was due to adoption of a new depreciation policy and increased fl eet size and value.
Administrative expenses increased 3 per cent to $7.2 million for the year ended 30 June 2015 (2014: $7.0 million).
12
STRATEGIC REPORT
Administrative expenses as a percentage of leasing revenue decreased to 12.6 per cent in the year ended 30 June
2015 (2014: 14.3 per cent). As Avation continues to deliver economies of scale it is expected that this trend will
continue.
Other expenses of $0.8 million include foreign exchange losses and a bad debt associated with a lesseeʼs default on
a lease, as noted above, that was off set by the forfeited deposit.
Finance expenses increased by 12 per cent to $18.9 million in 2015 (2014: $16.9 million). Interest expenses included
within fi nance expenses increased by 11 per cent to $17.3 million (2014: $15.6 million). This increase compares
favourably to the increase in lease revenues of 17 per cent and resulted from debt raised to fi nance new aircraft
together with interest incurred on the GMTN issued in May 2015. The ratio of interest expense to lease revenue
improved to 30.4 per cent (2014: 32.0 per cent). Finance income was $0.8 million (2014: $0.3 million).
Taxation for the 2015 year was $1.0 million (2014: $2.5 million). The majority of the Groupʼs operations are now
headquartered in Singapore, are included in the Republic of Singaporeʼs Aircraft Leasing Scheme and benefi t from a
10 per cent concessionary tax rate.
Profi t for the year ended 30 June 2015 decreased by 7 per cent to $13.3 million (2014: $14.3 million) as a result of
the above factors.
The Company has amended the presentation of its fi nancial statements in the current period to provide greater clarity.
Comparative amounts have been reclassifi ed to conform to the current presentation. Certain comparative amounts
have been reclassifi ed as discontinued operations, due to North American operations ceasing during the period.
FLEET OVERVIEW
Type
1 July 2014
Additions
Disposals
ATR 72-500
ATR 72-600
A320-200
A321-200
Fokker 100
Total
6
8
3
3
5
25
-
6
-
-
-
6
30 June 2015 On order (at
31 Aug 2015)
Options
-
1
1
-
-
2
6
13
2
3
5
29
-
9
1
2
-
12
-
22
-
-
-
22
Six new aircraft were added to the fl eet during the period, with one used aircraft sold and one parted out. As at
30 June 2015 the weighted average age of the fl eet was 5.3 years (2014: 6.1 years) and the weighted average
remaining lease term was 6.5 years (2014: 7.1 years). As at 30 June 2015, the fl eet was 100 per cent utilised.
13
ANNUAL REPORT 2015
STRATEGIC REPORT
DEBT SUMMARY
Loans and borrowings
Cash and cash equivalents
Net indebtedness
Loan to value ratio
Weighted average cost of secured debt
Weighted average cost of total debt
2015
2014
US$ʼ000s
US$ʼ000s
428,095
108,647
319,448
73.0%
4.4%
5.1%
281,158
23,395
257,763
67.6%
5.0%
5.2%
Net indebtedness increased due to additional debt being raised to fund fl eet additions during the year.
The weighted average cost of debt reduced to 5.1 per cent, as at 30 June 2015 (2014: 5.2 per cent). This was
primarily due to a signifi cant reduction in the weighted average cost of the Groupʼs secured debt facilities to 4.4 per
cent, as at 30 June 2015 (2014: 5.0 per cent). This reduction was partially off set by interest costs associated with
the GMTN established during the period.
The issuance of the fi rst tranche of the GMTN represents a signifi cant achievement, as it marks the introduction
of global debt capital markets as a new source of funding for the Company. This will support planned fl eet growth
in 2016 and provides the opportunity to raise further funds in the short to medium term. Future tranches will be
priced based on market conditions and Avationʼs credit rating. The Companyʼs credit rating is expected to improve as
increased scale and customer diversifi cation are achieved.
As at 30 June 2015 the majority of the funds raised from the issue of unsecured notes under the GMTN were held
as cash. It is intended that these funds will be combined with secured senior debt and deployed to fund aircraft
acquisitions during the fi nancial year ending 30 June 2016. At current interest rates, this may result in a decline in
the weighted average cost of debt across the fl eet.
The Groupʼs loan to value ratio increased to 72.7% as a result of the issue of the $100 million unsecured notes, in
May 2015. As at 30 June 2015, 88.8 per cent of total Group debt has fi xed interest rates.
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 off er improved fuel effi ciency and lower emissions. The
majority of our fl eet are modern regional turboprop aircraft which provide signifi cant environmental benefi ts 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 2015 is set out below:
Male
Female
3
3
6
-
-
5
Directors of the Company
Senior managers
Other employees
On behalf of the board
Robert Jeff ries Chatfi eld
Director
14
DIRECTORSʼ REPORT
The directors present their report and fi nancial statements for the fi nancial year ended 30 June 2015.
Principal activities and business review
The principal activity of the Group is leasing aircraft. Details of activities carried out by subsidiary companies are set
out in Note 22 to these fi nancial statements.
The principal risks and uncertainties aff ecting the Groupʼs turnover are described in the Strategic Report.
The full business review including KPIʼs can be found in the Strategic Report and in Note 7 to these fi nancial statements.
The Group has reviewed the environmental matters in the Strategic Report.
Results and dividends
The consolidated statement of profi t or loss and other comprehensive income for the year is set out on page 23. The
directors have resolved to pay a 3.00 US cents interim 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 at the beginning (or subsequent date of appointment) and end of the year, were as follows:
Ordinary shares of £0.01 each:
Robert Jeff ries Chatfi eld
Roderick Douglas Mahoney
Stephen John Fisher
Signifi cant shareholdings
Ordinary shares of £0.01 each:
Direct interest
Deemed interest
30 June
2015
1 July
2014
30 June
2015
1 July
2014
1
1
10,215,365
10,135,365
240,000
240,000
5,000
5,000
-
-
-
-
Ordinary shares
Percentage
Goldman Sachs Securities (Nominees) Limited
12,083,140
21.71%
Chase Nominees Limited
Lynchwood Nominees Limited
Fitel Nominees Limited
HSBC Global Custody Nominee (UK) Limited
HSBC Global Custody Nominee (UK) Limited
5,331,140
5,189,197
4,996,318
3,338,227
2,850,000
9.58%
9.32%
8.98%
6.00%
5.12%
15
ANNUAL REPORT 2015
DIRECTORSʼ REPORT
Equal Opportunities Policy
It is the Groupʼs policy to employ individuals with the necessary qualifi cations without regard to sex, marital status,
race, creed, colour, nationality or religion. Full and fair consideration is given to applications for employment made by
disabled persons having regard to their particular aptitudes and abilities.
The Group recognises the great importance of the contribution made by all employees and aims to keep them informed
of matters aff ecting them as employees and developments within the Group. Communication and consultation is
achieved by a variety of means both within individual companies or branches and on a group-wide basis.
Directorsʼ 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.
Future Developments
In accordance with s414C(11) of the Companies Act 2006, the directors have chosen to include information about
future developments in the Chairmanʼs Statement and Strategic Report.
Financial Instruments
See note 7 to these fi nancial statements.
Going Concern
After making appropriate enquiries and taking into account the matters set out in the principal risks and uncertainties
in the Strategic Report, the directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the fi nancial statements.
Greenhouse Gas Emissions Statement
It is not practical for the Company to calculate its greenhouse gas emissions. Usage of the Companyʼs aircraft is under
the control of lessees who are not required to provide emissions data to the Company.
Capital Structure
Details of the Companyʼs issued share capital, together with details of the movements therein during the fi nancial
year are shown in Note 30. The Company has one class of ordinary shares which carry no right to fi xed income. Each
share carries the right to one vote at general meetings of the Company.
By a resolution passed at the AGM held on 24 November 2014 the Companyʼs Directors are authorised to buy back
shares not exceeding 15 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.
16
DIRECTORSʼ REPORT
There are no specifi c restrictions on the size of a holding nor on the transfer of shares, which are both governed by
the general provisions of the Articles of Association and prevailing legislation. The directors are not aware of any
agreements between holders of the Companyʼs 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 Companyʼs 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 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 set out below.
Corporate Governance Statement
The Board is accountable to the shareholders for the 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 2014. The Company is not required to comply in full with the Code nor state any areas with which it does
not comply. The Board has adopted policies that it considers to be appropriate for the Companyʼs size and nature.
The Board acts as the administrative, management and supervisory body overseeing the operation of the Group.
The Board consist of two executive directors (Robert Jeff ries Chatfi eld and Roderick Douglas Mahoney) and one non-
executive director (Stephen John Fisher). 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 signifi cant capital expenditures;
the review of budgets, trading performance, and all signifi cant fi nancial and operational issues.
The Company operates the following committees whose members are detailed below:
• Audit Committee - Robert Jeff ries Chatfi eld and Stephen John Fisher; and
• Risk Committee - Roderick Douglas Mahoney, Iain Cawte (non-Board member) and Ashley Nicholas (non-Board
member)
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 eff ectiveness of the Companyʼs systems of internal control and risk management
on an annual basis. Following this review it has concluded that the Companyʼs fi nancial, operational and compliance
controls and risk management procedures are appropriate and suitable to enable the Board to safeguard shareholdersʼ
investments and the Companyʼs assets.
17
Annual Report 2015
DIRECTORSʼ REPORT
The process and systems of internal control are designed to manage, rather than eliminate, the risk of failure to
achieve the Companyʼs objectives, and can therefore only provide reasonable and not absolute assurance against
material misstatement or loss.
Statement as to disclosure of information to auditors
• So far as the directors are aware, there is no relevant audit information of which the Companyʼs auditors are
unaware, and
• 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 Companyʼs auditors are aware of that information.
Auditors
Kingston Smith LLP have indicated their willingness to continue in offi ce and in accordance with s489 of the Companies
Act 2006. A resolution proposing that they be reappointed as auditors of the Company will be put to the Annual
General Meeting.
On behalf of the board
Robert Jeff ries Chatfi eld
Director
18
DIRECTORSʼ REMUNERATION REPORT
Introduction
This report has been prepared in accordance with Schedule 8 of the Large and Medium Companies and Groups
(Accounts and Reports) Regulations 2008 as amended in August 2013. As required a resolution to approve the
Directorsʼ remuneration will be proposed at the forthcoming Annual General Meeting of the Company at which the
fi nancial statements will be approved. The vote will have advisory status, will be in respect of the remuneration policy
and overall remuneration packages and will not be specifi c to the individual levels of remuneration.
The information in the Directorsʼ Remuneration Report is not audited, unless specifi cally stated that the section is
subject to audit.
Remuneration (audited)
The components of remuneration are:
• basic salary and benefi ts 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
•
Individual Directorʼs remuneration from the group was as follows:
share options.
Executive Directors:
Robert Jeff ries Chatfi eld
Roderick Douglas Mahoney
Non-executive Directors:
Stephen John Fisher
Bryant James McLarty
(resigned 6 December 2013)
Salaries
and fees
US$ʼ000s
Bonuses
US$ʼ000s
Taxable
benefi ts
US$ʼ000s
Total
2015
US$ʼ000s
Total
2014
US$ʼ000s
587
207
-
101
30
-
-
-
124
-
-
-
711
308
30
-
638
320
3
19
824
101
124
1,049
980
Taxable benefi ts mainly relate to housing expenses and school fees.
The information in this part of the Directorsʼ Remuneration Report is subject to audit.
19
ANNUAL REPORT 2015
DIRECTORSʼ REMUNERATION REPORT
Service contracts
The employment contracts of the executive directors with the Company are terminable by either party with no less
than four weeksʼ notice in writing to the other.
The directorsʼ service contracts are as follows:
Date of contract
Unexpired
term
Notice
period
Compensation
payable
on early
termination
Robert Jeff ries Chatfi eld
29 April 2013
Roderick Douglas Mahoney
16 December 2011
Stephen John Fisher
29 April 2014
Indefi nite
Indefi nite
Indefi nite
4 months
4 weeks
1 month
-
-
-
Share options and warrants (audited)
The Group has an ownership-based compensation scheme for directors and senior management of the Group.
Warrants are granted to directors and senior management of the Group to promote:
•
•
•
improvement in share price;
improvement in net profi t; and
improvement in return to shareholders.
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. There are
no performance conditions that need to be met before warrants can be exercised.
Warrants granted to directors on 20 November 2013 have a 3 year vesting schedule with details 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 33 per cent of the grant or up to 66 per cent of the
grant if warrants were not exercised after the fi rst vesting
year
On 20 November 2016
Balance or 100 per cent of the grant if warrants were not
exercised after the fi rst and second vesting years
Warrants granted to directors on 8 December 2014 have a 3 year vesting schedule with details as follows:
Vesting period
Proportion of total share options that are exercisable
Before 8 December 2015
0 per cent
On 8 December 2015 and before 8 December 2016
Up to 33 per cent of the grant
On 8 December 2016 and before 8 December 2017
On 8 December 2017
Up to 33 per cent of the grant or up to 66 per cent of the
grant if warrants were not exercised after the fi rst vesting
year
Balance or 100 per cent of the grant if warrants were not
exercised after the fi rst and second vesting years
20
DIRECTORSʼ REMUNERATION REPORT
The following share warrants issued to directors were outstanding at the year-end:
Director
Date
granted
Warrant
price
Balance at
beginning
of year
Granted
during the
year
Exercised/
expired
during the
year
Balance at
end of year
Robert Jeff ries Chatfi eld *
20 Nov 2013
Robert Jeff ries Chatfi eld *
8 Dec 2014
Roderick Douglas
Mahoney**
20 Nov 2013
110.0p
153.0p
110.0p
335,000
-
-
450,000
300,000
-
Roderick Douglas Mahoney
8 Dec 2014
153.0p
-
400,000
-
-
-
-
335,000
450,000
300,000
400,000
* Robert Jeff ries Chatfi eld was granted the share warrants via Epsom Assets Limited.
** Roderick Douglas Mahoney was granted the share warrants via Douglas Aviation Pte Ltd.
The closing market price of the shares subject to option at the year-end was £1.45. The highest and lowest closing
market prices during the year were £1.78 and £1.23.
Companyʼs 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 since the Companyʼs shares were fi rst
publicly traded in November 2006. 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.
(cid:91)
(cid:72)
(cid:71)
(cid:81)
(cid:76)
(cid:3)
(cid:81)
(cid:85)
(cid:88)
(cid:87)
(cid:72)
(cid:53)
(cid:3)(cid:23)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:3)(cid:22)(cid:15)(cid:24)(cid:19)(cid:19)
(cid:3)(cid:22)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:3)(cid:21)(cid:15)(cid:24)(cid:19)(cid:19)
(cid:3)(cid:21)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:3)(cid:20)(cid:15)(cid:24)(cid:19)(cid:19)
(cid:3)(cid:20)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:3)(cid:24)(cid:19)(cid:19)
-
(cid:49)(cid:82)(cid:89)(cid:3)(cid:19)(cid:25)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:19)(cid:26)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:19)(cid:27)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:19)(cid:28)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:20)(cid:19)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:20)(cid:20)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:20)(cid:21)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:20)(cid:22)
(cid:49)(cid:82)(cid:89)(cid:3)(cid:20)(cid:23)
(cid:36)(cid:89)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:70)
(cid:41)(cid:55)(cid:54)(cid:40)(cid:20)(cid:19)(cid:19)
21
ANNUAL REPORT 2015
DIRECTORSʼ REMUNERATION REPORT
Remuneration of Executive Chairman
2015
2014
2013
2012
2011
US$ʼ000s
US$ʼ000s
US$ʼ000s
US$ʼ000s
US$ʼ000s
Executive Chairman single fi gure remuneration
Annual bonus pay-out (as % of maximum)
Long term incentive vesting rates against
maximum opportunity %
711
-
N/A
638
-
N/A
267
-
N/A
250
-
N/A
295
-
N/A
The table above shows the prescribed remuneration data for the Director, Robert Jeff ries Chatfi eld, Executive Chairman
undertaking the role of Group Chief Executive Offi cer during each of the last fi ve fi nancial years. No bonus has been
paid to the Executive Chairman.
Percentage change in remuneration of Chief Executive Offi cer
The table below sets out the percentage change in the remuneration of the Executive Chairman who is undertaking
the role of Group Chief Executive Offi cer compared to that of all employees of the Group.
Executive Chairman
All employees
Relative importance of spend on pay
Change in remuneration
from 2014 to 2015
% change
in base
salary
% change
in annual
bonus
% change
in taxable
benefi ts
6%
60%
-
75%
43%
134%
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:
(cid:20)(cid:23)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:20)(cid:21)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:20)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:27)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:25)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:23)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:21)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:19)
(cid:21)(cid:8)
(cid:20)(cid:22)(cid:15)(cid:22)(cid:20)(cid:21)
(cid:20)(cid:22)(cid:15)(cid:19)(cid:22)(cid:25)
(cid:23)(cid:25)(cid:8)
(cid:22)(cid:15)(cid:20)(cid:23)(cid:19)
(cid:21)(cid:15)(cid:20)(cid:24)(cid:22)
(cid:23)(cid:27)(cid:8)
(cid:20)(cid:15)(cid:25)(cid:24)(cid:25)
(cid:20)(cid:15)(cid:20)(cid:20)(cid:28)
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)
(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)
(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)
(cid:39)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)
(cid:21)(cid:19)(cid:20)(cid:23)(cid:3)(cid:56)(cid:54)(cid:7)(cid:3)(cid:10)(cid:19)(cid:19)(cid:19)
(cid:21)(cid:19)(cid:20)(cid:24)(cid:3)(cid:56)(cid:54)(cid:7)(cid:3)(cid:10)(cid:19)(cid:19)(cid:19)
22
DIRECTORSʼ REMUNERATION REPORT
Directorsʼ remuneration policy
The Company applies a policy for Directorsʼ remuneration which is designed to meet the following objectives:
• provide a fair and transparent remuneration policy that is in alignment with shareholdersʼ interests;
• provide both immediate and incentive remuneration that is suffi cient 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 targets the following outcomes in applying its policy to ensure alignment of Directorsʼ remuneration
and shareholdersʼ interests:
•
•
•
share price appreciation;
increase in the Companyʼs earnings per share;
reliable and high quality fi nancial reporting;
• growth in asset value and profi ts; and
• dividend growth.
Remuneration of the Companyʼs 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 Companyʼs Non-Executive Directors is comprised of fi xed Directorsʼ Fees.
The Board as a whole considers the remuneration of the Directors and has not engaged external advisers. The
remuneration report for the year ended 30 June 2014 was approved at the Annual General Meeting held on 24
November 2014.
On behalf of the Board
Robert Jeff ries Chatfi eld
Director
23
ANNUAL REPORT 2015
DIRECTORSʼ RESPONSIBILITIES
Statement of Directorsʼ responsibilities
The Directors are responsible for preparing the Directorsʼ
Report and the fi nancial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare fi nancial
statements for each fi nancial year. Under that law the
Directors are required to prepare the Group fi nancial
statements in accordance with 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
fi nancial statements under IFRSs as adopted by the EU.
Under Company Law the Directors must not approve the
fi nancial statements unless they are satisfi ed that they
give a true and fair view of the state of aff airs of the
Company and of the Group and the fi nancial performance
and cash fl ows of the Group for that year. In preparing
these fi nancial statements, the Directors are required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
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.
The Directors are responsible for keeping adequate
accounting records that are suffi cient to show and explain
the Company and the Groupʼs transactions and disclose
with reasonable accuracy at any time the fi nancial
position of the Company and the Group and enable them
to ensure that the fi nancial statements comply with
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and the Group
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and fi nancial information
included on the Companyʼs website. Legislation in
the United Kingdom governing the preparation and
dissemination of the fi nancial statements may diff er from
legislation in other jurisdictions.
We confi rm that to the best of our knowledge:
i. the fi nancial statements, prepared in accordance with
IFRSs as adopted by the EU, give a true and fair view
of the assets, liabilities, fi nancial position and profi t 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.
provide additional disclosures when compliance with
specifi c IFRSs are insuffi cient to enable the users to
understand the impact of particular transactions, other
events and conditions on the entityʼs fi nancial position
and fi nancial performance.
By order of the Board
Robert Jeff ries Chatfi eld
Director
15 October 2015
24
REPORT OF THE AUDITORS
INDEPENDENT AUDITORSʼ REPORT TO THE MEMBERS OF AVATION PLC
We have audited the fi nancial statements of Avation
PLC for the year ended 30 June 2015 which comprise
the Consolidated Statement of Profi t or Loss and other
Comprehensive Income, the Company Statement of Profi t
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 fi nancial reporting framework that has been applied
in their preparation is applicable law and International
Financial Reporting Standards (“IFRSs”) as adopted by
the European Union and as regards the Parent Company
fi nancial statements, as applied in accordance with the
provisions of the Companies Act 2006.
This report is made solely to the Companyʼs 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
Companyʼs members those matters which we are required
to include in an auditorsʼ 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 Companyʼs members as a body, for our work, for this
report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directorsʼ Responsibilities
Statement set out on page 24 the directors are responsible
for the preparation of the fi nancial statements and for
being satisfi ed that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
fi nancial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Boardʼs (APBʼs) Ethical Standards for Auditors.
Scope of the audit of the fi nancial statements
An audit involves obtaining evidence about the amounts
and disclosures in the fi nancial statements suffi cient to
give reasonable assurance that the fi nancial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the Groupʼs
and the Parent Companyʼs circumstances and have
been consistently applied and adequately disclosed;
the reasonableness of signifi cant accounting estimates
made by the directors; and the overall presentation
of the fi nancial statements. In addition, we read all the
fi nancial and non-fi nancial information in the Annual
Report to identify material inconsistencies with the audited
fi nancial 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 fi nancial statements
In our opinion:
the fi nancial statements give a true and fair view of the
state of the Groupʼs and of the Parent Companyʼs aff airs
25
as at 30 June 2015 and of the Groupʼs profi t for the year
then ended;
the Groupʼs fi nancial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
the parent company fi nancial statements have been
prepared properly in accordance with IFRS as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006, and
the fi nancial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the Group fi nancial statements, Article 4 of the IAS
Regulation.
Opinion on other 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 Directorsʼ report with respect to
internal control and risk management systems in relation
to fi nancial reporting processes and about share capital
structures is consistent with the fi nancial statements; and
the information given in the Directorsʼ Report for the
fi nancial year for which the fi nancial statements are
prepared is consistent with the fi nancial statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
the Parent Company fi nancial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directorsʼ remuneration specifi ed 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
15 October 2015
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Continuing operations
Lease revenue
Other income
Depreciation
(Loss)/gain on disposal of aircraft
Administrative expenses
Other expenses
Operating profit
Finance income
Finance expenses
Profit before taxation
Taxation
Profit from continuing operations
Discontinued operations
Loss from discontinued operations
Total profit
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Currency translation differences arising on consolidation
Fair value loss on derivative financial instruments
Other comprehensive income, net of tax
Note
2015
2014
US$’000s
US$’000s
(Restated)
9
23
10
11
12
13
15
16
56,932
3,202
60,134
48,691
3,435
52,126
(17,775)
(14,615)
(729)
(7,199)
(823)
33,608
3,322
(6,958)
-
33,875
807
296
(18,895)
(16,906)
15,520
17,265
(1,039)
(2,504)
14,481
14,761
17
(1,196)
(498)
13,285
14,263
(23)
(229)
(252)
2
-
2
Total comprehensive income for the year
13,033
14,265
Profit attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income attributable to:
Equity holders of the Company
Non-controlling interests
13,036
249
13,285
12,786
247
13,033
13,312
951
14,263
13,313
952
14,265
26
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Earnings per share for profit from continuing and discontinued
operations attributable to equity holders of the Company
Basic earnings per share:
From continuing operations
From total operations
Diluted earnings per share:
From continuing operations
From total operations
2015
2014
US$’000s
US$’000s
(Restated)
18
26.29 cents
28.36 cents
24.12 cents
27.40 cents
18
26.13 cents
28.36 cents
23.97 cents
27.40 cents
The Company has taken advantage of the exemption of section 408 of the Companies Act 2006 not to
present the Company statement of profit or loss and other comprehensive income. The Company’s profit
for the year was US$12.42 million (2014: US$1.12 million).
27
AVATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Note
2015
2014
US$’000s
US$’000s
19
20
21
20
23
24
25
26
27
25
26
28
29
30
30
32
33
108,647
3,284
19,600
1,078
30
23,395
2,804
-
2,156
-
132,639
28,355
10,794
6,286
11,269
6,295
434,079
367,325
2,384
2,384
453,543
387,273
586,182
415,628
10,280
431
51,584
825
63,120
11,271
376,511
229
6,847
6,414
1,099
62,173
-
69,686
9,768
218,985
-
6,422
394,858
235,175
991
(682)
38,692
6,715
10,159
8,459
50
62,363
126,747
1,457
891
(682)
31,424
-
10,159
3,856
12
50,446
96,106
14,661
128,204
110,767
586,182
415,628
ASSETS:
Current assets:
Cash and cash equivalents
Trade and other receivables
Loan receivable
Prepaid loan premium
Assets held for sale
Total current assets
Non-current assets:
Trade and other receivables
Prepaid loan premium
Property, plant and equipment
Goodwill
Total non-current assets
Total assets
LIABILITIES AND EQUITY:
Current liabilities:
Trade and other payables
Provision for taxation
Loans and borrowings
Maintenance reserves
Total current liabilities
Non-current liabilities:
Trade and other payables
Loans and borrowings
Derivative financial instruments
Deferred tax liabilities
Total non-current liabilities
Equity attributable to shareholders:
Share capital
Treasury shares
Share premium
Merger reserve
Asset revaluation reserve
Capital reserve
Other reserves
Retained earnings
Non-controlling interest
Total equity
Total liabilities and equity
Approved by the board and authorised for issue on 15 October 2015
………………………….
Robert Jeffries Chatfield
Director
28
Note
2015
2014
US$’000s
US$’000s
19
20
20
22
23
25
26
25
26
29
30
30
32
1,490
48,647
50,137
9,053
15,353
17,436
41,842
1,975
31,578
33,553
11,269
6,969
19,131
37,369
91,979
70,922
13,355
3,546
16,901
1,163
8,954
493
10,610
16,492
3,416
19,908
958
10,639
624
12,221
991
(682)
891
(682)
38,692
31,424
6,715
2,873
300
15,579
64,468
-
2,873
12
4,275
38,793
91,979
70,922
AVATION PLC
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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
Loans and borrowings
Total current liabilities
Non-current liabilities:
Trade and other payables
Loans and borrowings
Deferred tax liabilities
Total non-current liabilities
Equity attributable to shareholders:
Share capital
Treasury shares
Share premium
Merger reserve
Asset revaluation reserve
Other reserves
Retained earnings
Total equity
Total liabilities and equity
Approved by the board and authorised for issue on 15 October 2015
………………………….
Robert Jeffries Chatfield
29
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33
AVATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Cash flows from operating activities:
Profit before taxation from continuing operations
Loss before taxation from discontinued operations
Profit before income tax
Adjustments for:
Depreciation expense
Warrants expense
Claim on maintenance reserves
Discount on early settlement of loans
Impairment loss on aircraft
Impairment loss on trade receivables
Amortisation of loan premium
Amortisation of interest expense on non-current deposits
Loss/(gain) on disposal of aircraft
Loss on disposal of assets held for sale
Finance income from discounting non-current deposits to fair value
Interest income
Interest expense
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables and prepaid loan premium
Trade and other payables
Maintenance reserves
Cash from operations
Interest received
Interest paid
Income tax paid
Net cash from operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from disposal of aircraft
Proceeds from disposal of assets held for sale
Investment in loans receivable
Purchase of additional shares in a subsidiary
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, net of transactions costs
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
34
Note
2015
2014
US$’000s
US$’000s
15,520
(1,625)
13,895
17,265
(707)
16,558
17,925
15,259
14
9
9
11
13
13
12
12
13
288
-
(1,160)
3,850
145
1,078
317
729
1,600
(309)
(498)
17,295
55,155
(141)
4,194
825
60,033
498
-
(115)
-
713
-
1,078
258
(3,322)
-
(273)
(23)
15,570
45,703
1,573
(255)
(3,642)
43,379
23
(16,228)
(14,882)
(852)
(949)
43,451
27,571
(110,173)
(71,775)
18,074
1,210
(19,600)
(843)
(413)
39,001
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-
(881)
(248)
(111,745)
(33,903)
6,591
(1,119)
-
212,410
(64,313)
-
153,569
(23)
85,252
23,395
108,647
728
(867)
(468)
85,141
(27,581)
(46,851)
10,102
2
3,772
19,623
23,395
AVATION PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Dividend income
Depreciation expense
Interest income
Interest expense
Gain on disposal of aircraft
Warrant expense
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables and prepayments
Trade and other payables
Cash (used in) from operations
Interest received
Interest paid
2015
2014
US$’000s
US$’000s
12,292
1,378
(12,915)
1,072
(803)
1,090
(42)
288
982
(12,622)
(3,128)
(14,768)
488
(894)
(1,500)
1,045
(611)
826
-
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1,138
(13,478)
14,599
2,259
12
(795)
Net cash (used in) from operating activities
(15,174)
1,476
Cash flows from investing activities:
Dividend received
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Investment in subsidiaries
Net cash from (used in) investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Dividends paid
Repurchase of treasury shares
Proceeds from loans and borrowings
Repayment of loans and borrowings
Capital element of finance lease repayments
Net cash from (used in) financing activities
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
11,000
(158)
823
(893)
10,772
6,591
(1,119)
-
2,500
(4,055)
-
3,917
(485)
1,975
1,490
-
(4)
-
(881)
(885)
728
(867)
(468)
12,888
(833)
(13,470)
(2,022)
(1,431)
3,406
1,975
35
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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 Directors’ Report, the Group’s principal activity is aircraft leasing. Details of
the activities of subsidiary companies are 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 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”).
The financial statements have been prepared on a going concern basis and have been
prepared in accordance with the historical cost convention, as modified by the
revaluation of certain assets and liabilities.
The financial statements are presented in United States Dollars and all values are
rounded to the nearest thousand (US$’000s). The year-end exchange rate for Pounds
Sterling to United States Dollars is 1.572.
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 have been applied
consistently by the Company and its subsidiaries, unless otherwise disclosed.
36
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) BASIS OF CONSOLIDATION - The consolidated financial statements comprise the
financial statements of the Company and its subsidiaries as at 30 June 2015. Subsidiaries
are all entities over which the Group has control. 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.
Investments in subsidiaries are stated at cost less impairment in the Company’s separate
financial statements.
For all non-controlling interests voting rights not controlled by the Group are equivalent to
ownership interests.
37
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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.
(e) GOING CONCERN – The financial statements have been prepared on a going concern
basis. The directors have reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the financial
statements.
38
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
FAIR VALUE MEASUREMENT – The Group measures financial instruments, such as
derivatives, and non-financial assets such as aircraft, at fair values at each 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. 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.
39
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
FAIR VALUE MEASUREMENT (continued)
The Group’s management determines the policies and procedures for both recurring fair
value measurement, such as aircraft and unquoted available for sale (“AFS”) financial
assets, and for non-recurring measurement, such as assets held for distribution in
discontinued operations.
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, 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.
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.
(g) 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, 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.
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
25 years from date of manufacture
25 years from date of manufacture
3 years
40
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) PROPERTY, PLANT AND EQUIPMENT (continued)
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.
Changes in accounting estimates of useful lives of aircraft
The Group revised the estimated useful lives of its aircraft from 30 years to 25 years
with effect from 1 July 2014. The effect of this change is an increase in depreciation
expense of US$0.35 million for the financial year ended 30 June 2015 and a decrease in
the net book value of the aircraft as of 30 June 2015 of the same amount. It is not
practical to estimate the impact on future periods.
(h) NON-CURRENT ASSETS HELD FOR SALE – Non-current assets (and disposal groups)
classified as held for sale are measured at the lower of carrying amount and fair value less
costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly probable and the asset (or
disposal) group is available for immediate sale in its present condition. Management must
be committed to the sale which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
(i)
IMPAIRMENT OF NON-FINANCIAL ASSETS - At each reporting date the Group
assesses 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.
41
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
IMPAIRMENT OF NON-FINANCIAL ASSETS (continued)
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.
(j)
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.
(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.
(l) MAINTENANCE RESERVES - Normal maintenance and repairs, airframe and engine
overhauls, and compliance with return conditions of the aircraft placed on operating
leases are provided by and paid for by the lessees. Certain lease agreements require the
lessees to make maintenance reserve contributions to the Group which subsequently can
be drawn on to pay for certain maintenance events carried out. These maintenance
reserve balances are accounted for as liabilities. Upon termination of the lease, any
unutilised maintenance reserve balance will be released to profit and loss or continued to
be retained as reserves for drawdown by the follow-on operator. Upon sale of the
aircraft, any unutilised maintenance reserve balance held in respect of historic operation
of the aircraft that are required to maintain the aircraft to the required standards by a
follow-on operator are provided as a charge to profit and loss.
There has been a change in accounting policy with regards to the treatment of
maintenance contributions and reserves whereby in prior years 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 in prior years
considered that the lessee acts as agent for the Group in performing the repair and
therefore that it was appropriate to recognise income from maintenance rent as revenue
and the cost of performing those repairs in expense.
There is no impact to the profit or loss or balance sheet due to this change of the
accounting policy as there were no maintenance reserves in existence at 30 June 2014.
42
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) 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.
(n)
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.
(o) PREPAID LOAN PREMIUM – Prepaid loan premiums represent loan insurance premiums
securing amounts due to third parties and are amortised over 10 years.
(p) 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.
43
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods and services
provided in the normal course of business, net of discounts and sales related taxes.
(i)
(ii)
Aircraft lease revenue is recognised in the profit or loss on a straight line basis
over the terms of the lease. Lease incentives granted are recognised as an integral
part of the total rental income.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount.
(iii) Sales of goods are recognised when goods are delivered and title has passed.
(iv) Dividend income from investments is recognised when the shareholders’ right to
receive payment have been established.
(v)
Licence fees received are recognised over the life of the licence agreement.
Ongoing royalties and commissions pursuant to the licence agreement are
recognised as earned.
(r)
CONTINGENCIES – A contingent liability is:
(i)
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
(ii)
a present obligation that arises from past events but is not recognised because:
i.
ii.
It is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; or
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.
44
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(s)
TAXATION - Taxation expense represents the sum of current tax and deferred tax.
Current tax 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.
The Company is Singapore resident for tax purposes.
45
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
FOREIGN CURRENCIES - The Group’s consolidated financial statements and Company
financial statements are presented in United States dollars. 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 most Group entities, 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 rates of
exchange prevailing on the dates of the transactions. At each reporting date, monetary
items denominated in foreign currencies are retranslated at rates prevailing on the
reporting date. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at 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 profit or loss for the period. Exchange
differences arising on the retranslation of non-monetary items carried at fair value are
included in 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.
(u)
FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised in
the Group’s statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
(i)
Trade and other receivables – Trade and other receivables are measured at fair
value upon initial recognition, 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.
46
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(u) FINANCIAL INSTRUMENTS (continued)
(ii) 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.
(iii) Financial liabilities and equity - Financial liabilities and equity instruments
issued by the Group are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity
instrument. An equity instrument is any contract that evidences a residual interest
in the assets of the Group after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and equity instruments are set out
below.
(iv) Borrowings - Interest-bearing loans from banks and financial institutions are
initially measured at fair value, and are subsequently measured at amortised cost,
using the effective interest rate method. Any difference between the proceeds (net
of transaction costs) and the settlement or redemption of borrowings is recognised
over the term of the borrowings in accordance with the Group’s accounting policy
for borrowing costs (see above). 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.
(v) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING – The Group uses
derivative financial instruments such as interest rate swap contracts to hedge its risks
associated with interest rate fluctuations. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative contract is entered
into, and are subsequently re-measured at fair value.
Any gains or losses arising from changes in fair value on derivatives that do not qualify
for hedge accounting are taken directly into profit or loss. At the inception of a hedge
relationship, the Group formally designates and documents the hedge relationship to
which the Group wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge.
The documentation includes identification of the hedged item or transaction, the hedging
instrument, the nature of the risk being hedged and how the Group will assess the
hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged
item’s (or transaction’s) cash flows attributable to the hedge risk. Such hedges are
expected to be highly effective in achieving offsetting changes in cash flows, and are
assessed on an ongoing basis to determine that they have been highly effective
throughout the financial reporting periods for which they are designated.
47
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(v) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (continued)
Derivatives are classified as fair value through profit or loss unless they qualify for hedge
accounting. Derivatives which meet the criteria for hedge accounting are accounted for
as cash flow hedges.
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument
is recognised directly in the fair value reserve, while the ineffective portion is recognised
in profit or loss.
Amounts taken to the fair value reserve are transferred to profit or loss when the hedged
transaction affects profit or loss, such as when a forecast sale or purchase occurs. If the
hedged item is a non-financial asset or liability, the amounts taken to the fair value
reserve are transferred to the initial carrying amount of the non-financial asset or
liability.
(w)
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.
(x) 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.
48
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and assumptions concerning the future are made in the preparation of 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 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.
(a)
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 has not identified any
impairment related to its existing aircraft fleet during the financial year.
(b) 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.
(c)
Impairment of loans and receivables
At the end of each reporting period the Group assesses whether there is any objective
evidence that a financial asset is impaired. The Company considers factors such as the
probability of insolvency or significant financial difficulties of the debtor and default or
significant delay in payments to determine whether there is objective evidence of
impairment.
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.
(d)
Income taxes
(i)
Commencing 17 April 2014, Avation Group (S) Pte Ltd (“AGS”) and its subsidiaries
were awarded a 5-year Aircraft Leasing Scheme incentive (“ALS”) by the
Singapore Economic Development Board, whereby income from the leasing of
aircraft and aircraft engines and qualifying activities will be taxed at a
concessionary rate of 10%. Qualifying income during the period 17 April 2014 to
16 April 2019 will be taxed at the concessionary rate subject to meeting the terms
and conditions of the incentive.
(ii)
The Group is subject to income taxes in different jurisdictions where it operates.
Significant judgment is required in determining capital allowances and the
deductibility of certain expenses relevant to the estimation of the provision for
income taxes.
49
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(e) Consolidation of special purpose entity (“SPE”) – Avation Airframe Holdings Pte. Ltd.
Although the ultimate shareholder of the SPE is a trust, the directors of Avation PLC
consider that they have the power to, and in practice, control the day to day activities of
the SPE. Furthermore, Avation PLC is entitled to the benefits and is exposed to the risks
of the activities of the SPE, which are consistent with the operations of the Group, and
are conducted on behalf of the Group according to the Group’s specific business needs.
Accordingly the SPE is consolidated as a subsidiary in these financial statements.
The Group would cease to control the SPE in the event of a “Relevant Event” as defined
in the financing agreement, for example, a delay in payment of interest. Were this to
occur consolidation would cease at that point although the Group has no intention, or
anticipation, that any such event will occur.
5
NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN
EFFECT IN 2015
(a) New standards and interpretations not applied
The IASB and IFRIC have issued the following standards and interpretations with an
effective date after the date of these financial statements.
The Group intends to apply these standards and interpretations when they become
effective.
International Accounting Standards (IAS/IFRS)
Effective Date
(accounting periods
commencing after)
Amendments to IFRS 11 Joint arrangements
1 January 2016
Amendments to IAS 16 Property plant and equipment
1 January 2016
Amendments to IAS 38 Intangible assets
Amendments to IFRS 10 and IAS 28
1 January 2016
1 January 2016
Amendments to IAS 27 Separate financial statements
1 January 2016
IFRS 14 Regulatory deferral accounts
Annual improvements 2014
1 January 2016
1 July 2016
IFRS 15 Revenue from contracts with customers
1 January 2018
IFRS 9 Financial Instruments
1 January 2018
The directors of the Group have not fully considered the impact on its financial position or
performance on the adoption of these standards and interpretations.
(b) Standards in effect in 2015
The Group has adopted all new standards that have come into effect during the financial
year.
50
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
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:
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Fair value measurement using
significant unobservable inputs:
Aircraft
433,810
367,265
17,305
19,127
Aircraft were valued at 30 June 2015 and 30 June 2014. Refer to Note 23 for the details on the
valuation technique and significant inputs used in the valuation.
Classification of financial instruments:
A comparison by category of carrying amounts of all the Group and Company's financial
instruments that are carried in the financial statements which are considered to equate to fair
value is set out below.
Loans and receivables:
Cash and cash equivalents
Trade and other receivables
Loan receivables
Financial liabilities measured at
amortised cost:
Trade and other payables
Loans and borrowings
Maintenance reserves
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
108,647
13,133
19,600
23,395
13,128
-
1,490
57,594
-
1,975
42,784
-
141,380
36,523
59,084
44,759
15,282
428,095
825
10,800
281,158
-
14,419
12,500
-
17,337
14,055
-
444,202
291,958
26,919
31,392
Fair value through profit or loss:
Derivative financial instruments
229
-
-
-
51
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s activities expose it to a number of market related, operational and financial risks.
Risk is mitigated through the application of prudent risk management policies. The risks
described below are those that the Group has identified as the most significant risks to the
business. The directors are responsible for managing risk and review risk management policies
regularly.
The Group utilises derivative financial instruments as part of its overall risk management
strategy.
(a) Airline Industry Risks
The Group faces risks specific to the aviation sector including 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.
(b) Credit risk
Credit risk refers to the risk that debtors will default on their obligations to repay amounts
owing to the Group.
The Group has adopted a prudent credit policy towards extending credit terms to
customers and in monitoring those credit terms. This includes assessing customers’ credit
standing and periodic reviews of their financial status to determine appropriate credit
limits. The Group generally requires its customers to provide collateral in the form of cash
or letters of credit as security deposits for leases.
The maximum exposure to credit risk in the event that counterparties fail to perform their
obligations in relation to each class of financial assets is the carrying amount of those
assets as stated in the statement of financial position.
The maximum exposure to credit risk for trade receivables at the reporting date by
geographical area is:
Australia
India
Others
Group
2015
2014
US$’000s
US$’000s
1,552
1,024
311
2,887
1,311
-
223
1,534
The Group’s concentration of customers is disclosed in Note 36.
52
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(b) Credit risk (continued)
(i)
Financial assets that are neither past due nor impaired
Financial assets that are neither past due nor impaired are comprised of bank
deposits and trade receivables. Bank deposits that are neither past due or
impaired are mainly deposits with banks with strong credit–ratings from
international credit-rating agencies. Trade receivables that are neither past due
nor impaired amounting to US$1.75 million (2014: US$1.32 million) are
substantially due from companies with a good payment track record.
(ii)
Financial assets that are past due and/or impaired
There is no class of financial assets that are past due and/or impaired except for
trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
Past due less than 3 months
Past due 3 to 6 months
Past due over 6 months
(c)
Interest rate risk
Group
2015
2014
US$’000s
US$’000s
927
-
59
-
43
170
986
213
The Group is exposed to interest rate risk through the impact of interest rate changes on
floating rate interest bearing liabilities and assets.
The Group seeks to reduce its exposure to interest rate risk by fixing interest rates on the
majority of its loans and borrowings. As at 30 June 2015 89% (2014: 100%) of the
Group’s loans and borrowings are at fixed rates.
The interest rates and repayment terms for financial assets and financial liabilities are
disclosed in the respective notes to the financial statements.
(d)
Foreign currency risk
Foreign currency risk arises from transactions and cash balances that are not denominated
in the Group’s functional currency. The Group’s foreign currency exposures arose mainly
from movements in the exchange rate for British Pounds against the United States Dollar.
The Group aims to mitigate foreign currency risk by holding the majority of its cash
balances in United States Dollars. From time to time the Group utilises forward foreign
currency contracts to hedge its exposure to specific currency risks.
53
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d) Foreign currency risk (continued)
The Group’s foreign currency exposure is as follows:
Group
equivalents
receivables
liabilities
exposure
US$’000s
US$’000s
US$’000s
US$’000s
Cash and
Trade and
Other
Net
cash
other
financial
currency
2015:
Pound sterling
Australian dollar
Euro
Singapore dollar
2014:
Pound sterling
Australian dollar
Euro
Singapore dollar
160
12
20
307
499
361
6
14
251
632
-
-
2
3
5
-
1
7
37
45
(130)
(13)
(14)
(504)
30
(1)
8
(194)
(661)
(157)
(136)
(6)
(81)
(92)
225
1
(60)
196
(315)
362
Company
equivalents
receivables
liabilities
exposure
US$’000s
US$’000s
US$’000s
US$’000s
Cash and
Trade and
Other
Net
cash
other
financial
currency
2015:
Pound sterling
Australian dollar
Euro
Singapore dollar
2014:
Pound sterling
Australian dollar
Euro
Singapore dollar
-
-
-
-
-
-
-
5
-
5
(102)
(13)
-
(136)
(251)
(91)
(6)
(76)
(16)
(89)
(13)
-
16
(86)
171
(6)
(71)
131
(189)
225
13
-
-
152
165
262
-
-
147
409
54
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d) Foreign currency risk (continued)
The table below illustrates the effect on total profit and total equity that would result from
a strengthening of foreign currencies against the United States Dollar by 10% (2014:
10%) with all other variables including tax rate being held constant:
Foreign currency:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
3
-
-
(20)
23
-
(6)
20
(9)
(1)
-
2
17
-
(7)
13
A weakening of the respective currencies by 10% against the United States Dollar would
have an equal and opposite effect.
(e)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial
obligations due to shortage of funds. The Group’s exposure to liquidity risk arises primarily
from mismatches of the maturities of financial assets and liabilities. The Group monitors
and maintains a level of cash and cash equivalents that management deems adequate to
finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Short-
term funding is obtained from loan facilities.
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial assets and non-
derivative liabilities at the end of the reporting period based on contractual undiscounted
repayment obligations:
55
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e) Liquidity risk (continued)
Group
less
years
years
One year or
One to five
Over five
Total
US$’000s
US$’000s
US$’000s
US$’000s
2015:
Financial assets:
Cash and cash equivalents
Trade and other receivables
Loan receivable
108,647
2,955
19,600
-
9,053
-
-
108,647
5,597
-
17,605
19,600
Total undiscounted financial assets
131,202
9,053
5,597
145,852
Financial liabilities:
Trade and other payables
Loans and borrowings
Maintenance reserves
5,507
68,556
825
2,833
328,249
-
8,804
116,322
-
17,144
513,127
825
Total undiscounted financial
74,888
331,082
125,126
531,096
liabilities
Total net undiscounted financial
liabilities
56,314
(322,029)
(119,529)
(385,244)
2014:
Financial assets:
Cash and cash equivalents
Trade and other receivables
23,395
1,859
-
11,269
Total undiscounted financial assets
25,254
11,269
-
-
-
23,395
13,128
36,523
Financial liabilities:
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
2,611
74,744
1,548
148,199
8,549
113,113
12,708
336,056
77,355
149,747
121,662
348,764
Total net undiscounted financial
liabilities
(52,101)
(138,478)
(121,662)
(312,241)
56
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e) Liquidity risk (continued)
Company
less
years
years
One year or
One to five
Over five
Total
US$’000s
US$’000s
US$’000s
US$’000s
2015:
Financial assets:
Cash and cash equivalents
Trade and other receivables
1,490
48,541
-
9,053
Total undiscounted financial assets
50,031
9,053
Financial liabilities:
Trade and other payables
Loans and borrowings
13,256
4,073
1,163
9,653
Total undiscounted financial
17,329
10,816
liabilities
-
-
-
-
-
-
1,490
57,594
59,084
14,419
13,726
28,145
Total net undiscounted financial
assets/(liabilities)
32,702
(1,763)
-
30,939
2014:
Financial assets:
Cash and cash equivalents
Trade and other receivables
1,975
31,515
-
11,269
Total undiscounted financial assets
33,490
11,269
Financial liabilities:
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
16,379
3,993
978
11,646
20,372
12,624
Total net undiscounted financial
assets/(liabilities)
13,118
(1,355)
-
-
-
-
-
-
-
1,975
42,784
44,759
17,357
15,639
32,996
11,763
57
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(f)
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to
continue as a going concern and to maintain a suitable capital structure so as to fund
growth and maximise shareholder value. In order to maintain or achieve an optimal
capital structure, the Group may adjust the amount of dividend payments, return capital to
shareholders, issue new shares, buy back issued shares, incur new borrowings or sell
assets to reduce borrowings.
Management monitors capital based on a gearing ratio. The gearing ratio is calculated as
net debt divided by total capital. Net debt is calculated as borrowings plus trade and other
payables less cash and cash equivalents.
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Current:
Net debt
Total equity
340,999
128,204
273,945
110,767
25,528
64,468
29,530
38,793
Total capital
469,203
384,712
89,996
68,323
Gearing ratio:
73%
71%
28%
43%
The Group is in compliance with all externally imposed capital requirements for the
financial years ended 30 June 2015 and 30 June 2014.
(g)
Fair value of financial assets and financial liabilities
The fair values of financial assets and financial liabilities reported in the statement of
financial position approximate the carrying amounts of those assets and liabilities.
58
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
8
RELATED PARTY TRANSACTIONS
In addition to related party information disclosed elsewhere in these financial statements, the
following transactions took place between the Group and related parties at terms agreed
between the parties.
(a) Remuneration of key management personnel
The remuneration of directors and key management includes fees, salary, bonus,
commission and other emoluments (including benefits-in-kind) based on the cost incurred
by the Company and the Group, and where the Company or Group did not incur any costs,
the value of the benefits. Key management remuneration is as follows:
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Key management:
Short-term employee benefits
1,633
1,127
361
333
The amount above includes remuneration in respect of the highest paid director as follows:
Aggregate emoluments
711
638
Group
2015
2014
US$’000s
US$’000s
No contributions were made on behalf of any directors to money purchase pension
schemes.
59
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
8
RELATED PARTY TRANSACTIONS (continued)
(b) Significant related party transactions:
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Entities controlled by key
management personnel
(including directors):
Interest income
Rental expenses paid
Consulting fee paid
Service fee paid
Interest expense paid
3
(111)
(202)
(10)
(615)
9
-
(178)
(11)
(811)
3
(55)
(202)
(10)
(399)
9
-
(178)
(11)
(200)
Ex-director of a subsidiary:
Interest expense paid
-
(20)
-
-
(c)
Significant transactions between the Company and its subsidiaries:
Commission income
Dividend income
Interest income
Management and service fee income
Rental income
Interest expense
Company
2015
2014
US$’000s
US$’000s
589
12,915
638
199
2,088
(216)
1,036
1,500
599
-
2,088
-
60
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
9
OTHER INCOME
Reversal of maintenance reserve expense
Foreign currency exchange gain
Discount on early settlement of loans
Reversal of excess maintenance reserve accruals
Fees for cancellation of aircraft
Other
10
ADMINISTRATIVE EXPENSES
Staff costs (note 14)
Other administrative expenses
11
OTHER EXPENSES
Foreign currency exchange loss
Impairment of trade receivables
Other
Group
2015
2014
US$’000s
US$’000s
-
-
1,160
-
300
1,742
115
202
-
2,914
-
204
3,202
3,435
Group
2015
2014
US$’000s
US$’000s
3,140
4,059
2,153
4,805
7,199
6,958
Group
2015
2014
US$’000s
US$’000s
535
145
143
823
-
-
-
-
61
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
12
FINANCE INCOME
Interest income
Finance income from discounting non-current deposits to fair value
13
FINANCE EXPENSES
Interest expense on borrowings
Amortisation of loan insurance premium
Notional interest on deposit collected
Other
14
STAFF COSTS
Wages and salaries
Warrant expense
Group
2015
2014
US$’000s
US$’000s
498
309
23
273
807
296
Group
2015
2014
US$’000s
US$’000s
17,295
1,078
317
205
15,570
1,078
258
-
18,895
16,906
Group
2015
2014
US$’000s
US$’000s
2,852
288
2,153
-
3,140
2,153
The average number of directors of the Company for the financial year is 3 (2014: 3). The
average number of other employees for the financial year is 15 (2014: 11).
62
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
15
PROFIT BEFORE TAXATION
Profit before taxation for the year is stated after charging / (crediting) the following:
Reversal of maintenance reserve expense
Depreciation of property, plant and equipment
Foreign currency exchange loss/(gain)
Audit fees:
Fees payable to the Company’s auditor and their associates
for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and their associates
for audits of the Company’s subsidiaries’ annual accounts
Total audit fees
Auditors’ remuneration for non-audit services:
- Tax compliance services
- Tax advisory services
- Other services
Group
2015
2014
US$’000s
US$’000s
-
17,775
535
(115)
14,615
(202)
37
51
88
7
-
41
48
32
53
85
7
3
5
15
63
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
16
TAXATION
From continuing operations
Current tax expense:
- Singapore
- Overseas
(Over)/under provision in prior years:
- Singapore
- Overseas
Deferred tax expense:
- Singapore
- Overseas
Withholding tax - Singapore
From discontinued operations
Deferred tax expense:
- Overseas
Tax expense attributable to:
- continuing operations
- discontinued operations (Note 17)
Group
2015
2014
US$’000s
US$’000s
313
35
(32)
(144)
737
117
13
1,039
(429)
610
1,039
(429)
610
256
1,028
6
(229)
1,260
183
-
2,504
(209)
2,295
2,504
(209)
2,295
Income tax differs from the amount of income tax expense determined by applying the
Singapore tax rate of 17% to profit before income tax as a result of the following differences:
Group
2015
2014
US$’000s
US$’000s
15,520
(1,625)
13,895
17,265
(707)
16,558
2,362
2,815
(32)
(144)
1,625
(1,411)
(245)
(1,516)
(23)
13
(19)
610
6
(229)
1,413
(387)
3
(1,267)
(58)
-
(1)
2,295
Profit before income tax
- continuing operations
- discontinued operations (Note 17)
Tax calculated at 17% (2014: 17%)
Effects of:
(Over)/under provision in prior years:
- Singapore
- 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
Withholding tax - Singapore
Others
64
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
17
DISCONTINUED OPERATIONS
The Company’s subsidiary Capital Lease Aviation PLC has reported a US$1.2 million loss, net of
a tax write-back, on the part-out disposal of a 25 year old aircraft. This loss is classified within
discontinued operations as it represents the Group’s only aircraft operating in North America.
Comparative amounts for the Group’s North America operations have been reclassified as
discontinued operations to conform to the current presentation as required by IFRS5.
(a) Results of discontinued operations
Revenue
Expenses
Loss before tax from discontinued operations
Taxation
Loss after tax from discontinued operations
(b) Cash flows from discontinued operations
Operating cash inflows
Investing cash inflows
Total cash inflows
(c)
Earnings per share from discontinued operations
Group
2015
2014
US$’000s
US$’000s
3,997
(5,622)
(1,625)
429
(1,196)
650
(1,357)
(707)
209
(498)
Group
2015
2014
US$’000s
US$’000s
3,975
1,210
5,185
650
-
650
Group
2015
2014
US$’000s
US$’000s
Loss per share from discontinued operation attributable to
equity owners of the Company (cents per share)
Basic
Diluted
(2.17) cents
(0.96) cents
(2.16) cents
(0.96) cents
65
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
18
EARNINGS PER SHARE
(a) Basic earnings per share (“EPS”)
EPS is calculated by dividing total profit attributable to members of the Company by the
weighted average number of ordinary shares in issue during the financial year.
Total profit attributable to equity holders of the company
- Continuing operations
- Discontinued operations
Company
2015
2014
US$’000s
US$’000s
14,210
(1,174)
13,036
13,777
(465)
13,312
Weighted average number of ordinary shares (‘000s)
54,050
48,583
Basic earnings per share:
- Continuing operations
- Discontinued operations
(b) Diluted earnings per share
26.29 cents
28.36 cents
(2.17) cents
(0.96) cents
24.12 cents
27.40 cents
For the purpose of calculating diluted earnings per share, total profit attributable to equity
holders of the Company and the weighted average number of ordinary shares outstanding
are adjusted for the effects of all dilutive potential ordinary shares. The Company has one
category of dilutive potential ordinary shares; warrants.
For warrants, the weighted average number of shares on issue has been adjusted as if all
dilutive share options were exercised. The number of shares that could have been issued
upon the exercise of all dilutive share option less the number of shares that could have
been issued at fair value (determined as the Company’s average share price for the
financial year) for the same total proceeds is added to the denominator as the number of
shares issued for no consideration.
66
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
18
EARNINGS PER SHARE (continued)
(b) Diluted earnings per share (continued)
Diluted earnings per share attributable to equity holders of the Company is calculated as
follows:
Total profit attributable to equity holders of the company
- Continuing operations
- Discontinued operations
- Total operations
Company
2015
2014
US$’000s
US$’000s
14,210
(1,174)
13,036
13,777
(465)
13,312
Weighted average number of ordinary shares (‘000s)
Adjustment for Warrants (‘000s)
54,050
335
48,583
-
Weighted average number of ordinary shares (‘000s)
54,385
48,583
Diluted earnings per share:
- Continuing operations
- Discontinued operations
- Total operations
26.13 cents
28.36 cents
(2.16) cents
(0.96) cents
23.97 cents
27.40 cents
19
CASH AND CASH EQUIVALENTS
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Cash at bank and on hand
Short term bank deposits
108,647
-
19,627
3,768
1,490
-
1,975
-
108,647
23,395
1,490
1,975
The rate of interest for cash on interest earning accounts is approximately 0.01% to 0.10%
(2014: 0.14% to 2.50%) per annum.
Cash and cash equivalents denominated in foreign currencies are as follows:
Pounds sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
160
12
20
307
361
6
14
251
13
-
-
152
262
-
-
147
67
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
20
TRADE AND OTHER RECEIVABLES
Current:
Trade receivables
Other receivables:
– subsidiaries (a)
– related parties (b)
– third parties
Accrued interest
Deposits
Prepaid expenses
Dividend receivable
Non-current:
Deposits for aircraft
Prepaid expenses
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
2,742
1,535
6
592
-
-
155
-
58
329
-
-
124
121
43
36
945
-
45,229
-
46
322
24
106
2,914
30,693
124
44
62
-
63
-
3,284
2,804
48,647
31,578
10,178
616
10,794
11,269
-
11,269
9,053
-
9,053
11,269
-
11,269
(a) Other receivables from subsidiaries includes interest bearing receivables of US$6.89 million
(2014: US$0.42 million). The receivables are unsecured and repayable upon demand.
Interest is charged at 5.5% to 6.0% (2014: 1.0% to 5.5%) per annum.
(b) Interest bearing receivable of US$NIL (2014: US$0.12 million) is due from an entity
controlled by a director. The receivable is unsecured and repayable upon demand. Interest
is charged at 5.0% (2014: 5.0%) per annum. The receivable was fully repaid during the
financial year.
The average credit period generally granted to customers is 30 to 60 days. Rent for leased
aircraft is due in advance in accordance with the leases.
Trade and other receivables denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
-
-
2
3
-
1
7
37
-
-
-
-
-
-
5
-
68
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
21
LOAN RECEIVABLE
Loan receivable
Group
2015
2014
US$’000s
US$’000s
19,600
-
The Group has granted a loan facility of up to US$24 million to a third party for the purpose of
financing the acquisition of two new aircraft.
The third party is obliged to sell these aircraft to the Group in the next financial year, and the
Group will in turn will lease these aircraft back to the third party under operating leases.
As of 30 June 2015, the third party has drawn down US$19.6 million. The loan receivable is
repayable within 12 month and interest is charged at LIBOR + 3.95% per annum.
22
INVESTMENT IN SUBSIDIARIES
Unquoted equity shares, at cost
Quoted equity shares, at cost
Company
2015
2014
US$’000s
US$’000s
2,556
12,797
2,506
4,463
Balance at beginning and end of the year
15,353
6,969
Quoted equity shares, at market value
25,660
18,600
In the opinion of management there is no impairment of the value of investments in subsidiaries.
Details of subsidiaries are as follows:
Name of entity
Country of
incorporation
Principal
activities
Ownership interest
2015
%
2014
%
Held directly by the Company:
Avation.net Inc
Avation Capital S.A.
Capital Lease Aviation PLC
Avation Eastern Fleet Pte. Ltd.
Avation Airframe Holding Pte. Ltd.
Avation Eastern Fleet (IV) Pte. Ltd.
MSN1922 Pte. Ltd.
MSN429 Leaseco Limited
F100 Fleet Pte. Ltd.
AVAP Aircraft Trading Pte. Ltd.
Avation Group (S) Pte. Ltd.
F100 Pty Ltd.
AVAP Leasing (Europe) Limited
AVAP Leasing (Asia) Limited
United States
Luxembourg
Singapore
Singapore
Singapore
Singapore
(a)
(g)
(b) United Kingdom
(e)
(e)
(e)
(e)
(b) United Kingdom
(e)
(e)
(e)
(c)
(f)
(f)
Singapore
Singapore
Singapore
Australia
Ireland
Ireland
Procurement
Financing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Procurement
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
99.96
100.00
96.71
100.00
-
-
100.00
100.00
-
100.00
100.00
100.00
100.00
100.00
99.96
-
68.85
100.00
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
-
69
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
22
INVESTMENT IN SUBSIDIARIES (continued)
Name of entity
Country of
incorporation
Principal
activities
Ownership
interest
2015
%
2014
%
(e)
(d)
(a)
(e)
Held by Capital Lease Aviation PLC:
Capital Lease Malta Ltd.
Capital Lease Aviation (S) Pte. Ltd.
MSN 1607 Pte. Ltd.
Held by Avation Eastern Fleet Pte. Ltd.:
Airframe Leasing (S) Pte. Ltd.
Held by Avation Eastern Fleet II Pte. Ltd.:
Airframe Leasing (S) II Pte. Ltd.
(a)
Held by Avation Eastern Fleet III Pte. Ltd.:
Airframe Leasing (S) III Pte. Ltd.
(e)
Held by Avation Eastern Fleet IV Pte. Ltd.:
Airframe Leasing (S) IV Pte. Ltd.
Held by MSN 429 Leaseco Limited:
MSN 429 Limited
Held by F100 Fleet Pte. Ltd.:
F100 Leasing Pte. Ltd.
Held by Avation Group (S) Pte. Ltd.:
Avation Eastern Fleet II Pte. Ltd.
Avation Eastern Fleet III Pte. Ltd.
Avation Eastern Fleet IV Pte. Ltd.
Avation Pacific Leasing Pte. Ltd.
Avation Taiwan Leasing Pte. Ltd.
AVAP Leasing (Europe) II Pte. Ltd.
AVAP Leasing (Europe) III Pte. Ltd.
MSN 429 (S) Pte. Ltd.
F100 Fleet Pte. Ltd.
(e)
(e)
(e)
(e)
(e)
(e)
(g)
(e)
(e)
(e)
(e)
Malta
Singapore
Singapore
Aircraft leasing
Aircraft leasing
Aircraft leasing
96.71
96.71
96.71
68.85
68.85
68.85
Singapore
Aircraft leasing
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
(b) United Kingdom Aircraft leasing
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
-
-
-
-
-
(a) Audited by Jasmine Chua and Associates, Singapore
(b) Audited by Kingston Smith LLP, London, United Kingdom
(c) Audited by Moore Stephens, Perth, Australia
(d) Audited by Nexia BT, Malta
(e) Audited by Ernst & Young LLP, Singapore
(f) Audited by KSi Faulkner Orr, Dublin, Ireland
(g) Audited by Kingston Smith LLP, London, United Kingdom for consolidation purposes.
For all non-controlling interests, voting rights not controlled by group are equivalent to
ownership interests
70
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
23
PROPERTY, PLANT AND EQUIPMENT
Group
equipment
Jets
Furniture
and
Turbo-
props
Total
US$’000s
US$’000s
US$’000s
US$’000s
2015:
Cost or valuation:
At beginning of year
Additions
Disposals/written-off
Reclassified to assets held for sale
133
311
(87)
-
-
177,596
-
(1,078)
(13,478)
-
253,000
109,862
(18,370)
-
-
430,729
110,173
(19,535)
(13,478)
-
At end of the year
357
163,040
344,492
507,889
Representing:
At cost
At valuation
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense
- Continuing operations
- Discontinued operations
Impairment loss – discontinued operations
Disposals/written-off
Reclassified to assets held for sale
357
-
-
-
357
163,040
344,492
507,532
357
163,040
344,492
507,889
73
90
-
90
-
48,129
15,202
63,404
6,680
150
6,830
3,850
11,005
-
11,005
-
(360)
17,775
150
17,925
3,850
(731)
-
(10,638)
(75)
-
(296)
(10,638)
At end of the year
88
47,875
25,847
73,810
Net book value:
At beginning of the year
At end of the year
60
269
129,467
237,798
367,325
115,165
318,645
434,079
71
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
23
PROPERTY, PLANT AND EQUIPMENT (continued)
Group
equipment
Jets
Furniture
and
Turbo-
props
Total
US$’000s
US$’000s
US$’000s
US$’000s
2014:
Cost or valuation:
At beginning of year
Additions
Disposals
20
113
-
177,596
-
-
217,016
71,663
394,632
71,776
(35,679)
(35,679)
At end of the year
133
177,596
253,000
430,729
Representing:
At cost
At valuation
133
-
-
-
133
177,596
253,000
430,596
133
177,596
253,000
430,729
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense
- Continuing operations
- Discontinued operations
Impairment loss – discontinued operations
12
61
-
61
-
39,647
7,773
47,432
7,125
644
7,769
713
7,429
-
7,429
-
14,615
644
15,259
713
At end of the year
73
48,129
15,202
63,404
Net book value:
At beginning of the year
At end of the year
8
60
137,949
209,243
347,200
129,467
237,798
367,325
72
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
23
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
2015:
Cost or valuation:
At beginning of year
Additions
Disposals
At end of the year
Representing:
At cost
At valuation
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense
Disposals
At end of the year
Net book value:
At beginning of the year
At end of the year
Furniture
and
equipment
Jets
Total
US$’000s
US$’000s
US$’000s
8
158
-
20,452
-
(1,078)
20,460
158
(1,078)
166
19,374
19,540
166
-
-
19,374
166
19,374
166
19,374
19,540
4
31
-
35
1,325
1,041
(297)
1,329
1,072
(297)
2,069
2,104
4
131
19,127
17,305
19,131
17,436
73
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
23
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
2014:
Cost or valuation:
At beginning of year
Additions
At end of the year
Representing:
At cost
At valuation
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense
At end of the year
Net book value:
At beginning of the year
At end of the year
Furniture
and
equipment
Jets
Total
US$’000s
US$’000s
US$’000s
4
4
8
8
-
8
1
3
4
3
4
20,452
20,456
-
4
20,452
20,460
-
8
20,452
20,452
20,452
20,460
283
1,042
284
1,045
1,325
1,329
20,169
19,127
20,172
19,131
74
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
23
PROPERTY, PLANT AND EQUIPMENT (continued)
Assets pledged as security
The Group’s aircraft with carrying values of US$433.81 million (2014: US$359.58 million) are
mortgaged to secure the Group’s borrowings (Note 26).
Valuation
The Group’s aircraft were valued in June 2015 by independent valuers on lease-encumbered
basis (“LEV’). LEV takes into account the current lease arrangements for the aircraft and
estimated residual values at the end of the lease. These amounts have been discounted to
present value using discount rates of 6.5% and 8.5% per annum. Different discount rates are
considered appropriate for different aircraft based on their respective risk profiles. Management
estimates that a change of 1% in the discount rate used would increase/decrease the total LEV of
the fleet by US$1.16 million.
An impairment loss of US$3.85 million (2014: US$0.71 million) has been made during the year to
An impairment loss of US$3.85 million (2014: 0.71 million) has been made during the year to
write down the aircraft to its fair value less costs to sell prior to the aircraft being reclassified to
asset for sale. This is a non-recurring fair value which has been measured using observable
inputs, being the prices for recent sales of similar aircraft parts, and is therefore within Level 2
of the fair value hierarchy.
If the aircraft were measured using the cost model, the carrying amounts would be as follows:
Group
Cost
Accumulated depreciation and impairment
2015
2014
Jets
Turbo-
props
Jets
Turbo-
props
US$’000s
US$’000s
US$’000s
US$’000s
144,058
(38,878)
344,366
(25,846)
157,190
253,000
(35,215)
(15,202)
Net book value
105,180
318,520
121,975
237,798
Company
Cost
Accumulated depreciation and impairment
Net book value
2015
2014
Jets
Turbo-
props
Jets
Turbo-
props
US$’000s
US$’000s
US$’000s
US$’000s
16,561
(1,905)
14,656
-
-
-
17,639
(1,152)
16,487
-
-
-
75
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
24
GOODWILL
Group
2015
2014
US$’000s
US$’000s
Cost:
Balance at beginning and end of the year
2,384
2,384
Impairment test of goodwill
Goodwill is allocated to the cash generating unit ("CGU") Avation.net Inc. which is in the
procurement business.
The recoverable amount of the 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
2015
%
2014
%
2.0
2.0
6.5
2.0
2.0
6.5
Management determined cash flow growth based on past performance and its expectations of
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$3.27 million (2014: US$2.76million).
Management believes that no reasonably possible change in any of the above key assumptions
would cause the carrying value of the CGU to materially exceed its recoverable amount.
76
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
25
TRADE AND OTHER PAYABLES
Current:
Trade payables
Other payables:
- subsidiaries
- third parties
Accrued interest
Deferred income
Deposits collected
Accrued expenses
Non-current:
Deposits collected
Deferred lease income
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
2,001
1,268
615
1,213
-
99
7
4,773
1,000
2,400
-
110
28
3,803
-
1,205
11,510
15,030
-
7
99
1,000
124
-
10
113
-
126
10,280
6,414
13,355
16,492
9,775
1,496
8,189
1,579
1,163
-
958
-
11,271
9,768
1,163
958
Amounts due to subsidiaries are unsecured, interest free and without fixed repayment terms
unless otherwise stated.
Other payables due to subsidiaries includes interest bearing payables of $3.48 million (2014: $Nil
million) which are unsecured, payable upon demand and bear interest at 5.5% to 6.0% per
annum.
The average credit period taken to settle non-related party trade payables is approximately 30 to
60 days.
Deposits collected are security deposits collected from customers in respect of aircraft lease
commitments, and have been discounted to present value at a current pre-tax rate that reflect
the risks specific to these deposits. Deposits will be refunded at the end of the respective lease
term.
Trade and other payables denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
130
13
14
504
136
6
81
92
102
13
-
136
91
6
76
16
77
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
26
LOANS AND BORROWINGS
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Secured borrowings
Junior secured borrowings
Related party borrowings (a), (b)
Unsecured 7.5% notes due 2020
324,671
253,706
4,928
2,000
96,496
20,952
6,500
-
10,500
-
2,000
-
12,055
-
2,000
-
Less: current portion of borrowings
(51,584)
(62,173)
(3,546)
(3,416)
428,095
281,158
12,500
14,055
376,511
218,985
8,954
10,639
Weighted average
Maturity
interest rate per annum
2015
2014
US$’000s
US$’000s
2015
%
2014
%
Secured borrowings
Junior secured borrowings
Related party borrowings (a)
Unsecured 7.5% notes due 2020 (b)
2015-2027
2014-2026
2020-2024
2020-2023
2015
2020
-
-
4.3%
6.3%
8.0%
7.5%
4.9%
6.4%
9.8%
-
Secured borrowings are secured by first ranking mortgages over the aircraft financed by the
related borrowings, security assignments of the Group’s rights under leases and other
contractual agreements relating to the aircraft, charges over bank accounts in which lease
payments relating to the aircraft are received and charges over the issued share capital of
certain subsidiaries.
Junior secured borrowings are secured by second ranking aircraft mortgages, security
assignments and charges over bank accounts.
(a) Borrowings from related parties are as follows:
i.
ii.
Interest bearing unsecured loan due to an entity over which a director has significant
influence of US$2 million (2014: US$2 million). The loan is repayable by December
2015. Interest is charged at 8% (2014: 10%) per annum.
Interest bearing unsecured loan due to an entity over which a director has significant
influence of US$ NIL (2014: US$4.5 million). The loan was repaid during the year.
Interest was charged at 9.75% (2014: 9.75%) per annum.
78
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
26
LOANS AND BORROWINGS (continued)
(b) In May 2015, the Company through its wholly-owned subsidiaries, Avation Capital S.A. and
Avation Group (S) Pte Ltd (together, "the Issuers") established a US$500 million global
medium term note programme (the "Programme") guaranteed by the Company.
Under the Programme, the Issuers may from time to time issue Notes (the “Notes")
denominated in any currency as agreed.
In May 2015, the Issuers issued US$100 million unsecured Notes with a fixed coupon rate
of 7.5% per annum and a tenor of 5 years repayable in May 2020 under the Programme.
The Notes are listed on the Singapore Exchange (SGX).
An entity over which a director has significant influence has subscribed to US$5 million of
the May 2015 series of the unsecured Notes.
The carrying amounts of borrowings approximate fair value.
27 MAINTENANCE RESERVES
Balance at 1 July
Contributions
Balance at 30 June
Group
2015
2014
US$’000s
US$’000s
-
825
825
-
-
–
The Group also holds letters of credit for $7.3 million (2014: $3.0 million) as security for lessees’
obligations under operating leases for the maintenance of aircraft.
28
DERIVATIVE FINANCIAL INSTRUMENTS
Group
Contract/
notional amount
Fair value
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Interest rate swap
15,031
-
229
-
The Group pays a fixed rate of interest of 2.3% per annum and receives floating rate interest
equal to 3-month LIBOR under the interest rate swap contract. The swap contract matures on 30
May 2026.
79
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
29
DEFERRED TAX LIABILITIES
Recognised deferred tax liabilities are attributable to the following:
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
Property, plant and equipment
Other items
6,847
-
6,464
(42)
493
-
624
-
6,847
6,422
493
624
Movements in temporary differences are as follows:
Group
Balance at 1 July 2014
Recognised in profit or loss
- Continuing operations
- Discontinued operations
Balance at 30 June 2015
Balance at 1 July 2013
Recognised in profit or loss
- Continuing operations
- Discontinued operations
Property,
plant and
equipment Other items
US$’000s
US$’000s
Total
US$’000s
6,464
(42)
6,422
812
(429)
6,847
5,197
1,476
(209)
42
-
-
854
(429)
6,847
(9)
5,188
(33)
-
1,443
(209)
Balance at 30 June 2014
6,464
(42)
6,422
Company
Balance at 1 July 2014
- Recognised in profit or loss
Balance at 30 June 2015
Balance at 1 July 2013
- Recognised in profit or loss
Balance at 30 June 2014
Property,
plant and
equipment Other items
US$’000s
US$’000s
Total
US$’000s
624
(131)
493
367
257
624
-
-
-
-
-
-
624
(131)
493
367
257
624
80
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
30
SHARE CAPITAL AND TREASURY SHARES
(a) Share capital
2015
2014
No of shares
US$’000s
No of shares
US$’000s
Allotted, called up and fully paid
Ordinary shares of 1 penny each:
At 1 July
Issue of shares
49,604,639
6,059,088
891
100
48,822,960
781,679
878
13
At 30 June
55,663,727
991
49,604,639
891
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.
(i)
On 3 July 2014, the Company issued 3,000,000 ordinary shares of 1 penny each at
140 pence each following a private placement exercise raising gross proceeds of
GBP4.2 million (equivalent to US$7.19 million).
(ii) On 24 September 2014, the Company issued 273,027 ordinary shares of 1 penny
each at 164 pence each as consideration for the acquisition of 2,184,216 ordinary
shares in its subsidiary, Capital Lease Aviation PLC.
(iii) On 20 November 2014, the Company issued 2,786,061 ordinary shares of 1 penny
each at 164 pence each as consideration for the acquisition of 21,065,334 ordinary
shares in its subsidiary, Capital Lease Aviation PLC.
155
(b)
Treasury shares
2015
2014
No of
treasury
shares
450,000
-
No of
treasury
shares
US$’000s
US$’000s
682
-
150,000
300,000
214
468
At 1 July
Acquired during the financial year
At 30 June
450,000
682
450,000
682
81
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
31
SHARE BASED PAYMENTS
The Group has an ownership-based compensation scheme
management.
for directors and senior
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 promote:
•
•
•
Improvement in share price
Improvement in net profit
Improvement in return to shareholders
Movement in 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:
Outstanding at 1 July
- Granted
- Exercised
- Lapsed/cancelled
2015
2014
No.
WAEP
No.
WAEP
1,240,000
2,180,000
-
-
110.0p
150.0p
-
-
800,000
1,240,000
(400,000)
(400,000)
110.5p
110.0p
110.5p
-
Outstanding at 30 June
3,420,000
136.0p
1,240,000
110.0p
Exercisable at 30 June
414,000
110.0p
-
-
The weighted average fair value of warrants granted during the financial year was 14.96 pence
(2014: 1.06 pence). The charge recognised in profit or loss in respect of share based payments
is $0.3 million (2014: $NIL).
No warrants were exercised in the year ended 2015. The weighted average share price at the
date of exercise of the warrants exercised during 2014 was 110.5 pence.(cid:1)
All warrants are settled in cash.
Warrants outstanding at the end of the year have the following expiry date and exercise price:
Warrant series granted on
Expiry date
Exercise
price
Number of warrants
2014
2015
20 November 2013
8 December 2014
21 Nov 2016
9 Dec 2017
110.0p
153.0p
1,370,000
2,050,000
1,240,000
-
82
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
31
SHARE-BASED PAYMENTS (continued)
The warrants granted on 20 November 2013 have a 3 year vesting schedule and the details are
as follows:
Vesting period
Warrant series signed on 20 November 2013
Before 20 November 2014
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 33 per cent of the grant or up to 66 per
0 per cent
On 20 November 2016
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 granted on 8 December 2014 have a 3 year vesting schedule and the details are
as follows:
Vesting period
Warrant series signed on 8 December 2014
Before 8 December 2015
On 8 December 2015 and before 8 December 2016
On 8 December 2016 and before 8 December 2017
On 8 December 2017
0 per cent
Up to 33 per cent of the grant
Up to 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
83
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
31
SHARE-BASED PAYMENTS (continued)
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 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
Warrant series
granted on
granted on
8 December 2014
20 November 2013
153.5 pence
153.0 pence
20%
3 years
0.73%
0.35%
123.0 pence
110.0 pence
20%
3 years
1.01%
0.35%
84
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
32
OTHER RESERVES
Capital redemption reserve
Warrant reserve
Fair value reserve
Foreign currency translation reserve
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
12
288
(229)
(21)
50
12
-
-
-
12
12
288
-
-
300
12
-
-
-
12
Movements in other reserves are as follows:
Warrant reserve:
Beginning of the financial year
Employee share warrant scheme:
- Value of employee services
- Issue of shares
- Warrants expired
End of the financial year
Fair value reserve:
Beginning of the financial year
Fair value loss
End of the financial year
Foreign currency translation reserve:
Beginning of the financial year
Currency translation differences arising
from consolidation of foreign subsidiaries
Less: non-controlling interests
End of the financial year
Group
Company
2015
2014
2015
2014
US$’000s
US$’000s
US$’000s
US$’000s
-
104
-
104
288
-
-
288
-
(229)
(229)
-
(23)
2
(21)
-
(52)
(52)
-
-
-
-
(1)
2
(1)
-
288
-
-
288
-
-
-
-
-
-
-
-
(52)
(52)
-
-
-
-
-
-
-
-
85
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
33
NON-CONTROLLING INTERESTS
Summarised financial information in respect of the Group’s subsidiary Capital Lease Aviation PLC,
which has material non-controlling interests, is set out below. No other non-controlling interests
are material.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to the Company
Non-controlling interests
Revenue
Expenses
Taxation
Profit from continuing operations
Loss from discontinued operations
Total profit
Profit attributable to owners of the Company
Profit attributable to the non-controlling interests
Total profit
Total comprehensive income attributable to owners of the Company
Total comprehensive income attributable to non-controlling interests
Total comprehensive income for the year
Net cash inflow from operating activities
Net cash inflow (outflow) from investing activities
Net cash outflow from financing activities
Net cash inflow
Group
2015
2014
US$’000s
US$’000s
15,347
74,848
10,538
35,377
42,823
1,457
11,164
(9,080)
(220)
1,864
(1,196)
668
419
249
668
398
247
645
6,784
1,108
(1,598)
6,294
6,229
86,058
31,695
13,530
32,401
14,661
11,711
(8,751)
(2)
2,958
(498)
2,460
1,509
951
2,460
1,510
952
2,462
8,348
(2)
(7,941)
405
86
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
34
CAPITAL COMMITMENTS
Capital expenditure contracted for at the reporting date but not recognised in the financial
statements are as follows:
Group
2015
2014
US$’000s
US$’000s
Property, plant and equipment
292,232
201,842
The above capital commitments represent amounts due under contracts entered into by the
group to purchase aircraft. The company has paid deposits towards the cost of these aircraft
which are included in trade and other receivables.
In addition to the aircraft which the group has committed to purchasing, the group holds
options to purchase an additional 5 aircraft at agreed prices. The options are held in the
statement of financial position at cost as it is not possible to place a reliable estimate on their
fair values. Uncertainties exist over the finance to exercise the options and the market price of
the aircraft at the time of delivery, given aircraft are non-financial assets with no indexed
market and long lead times. There is no open market on which to trade the options,
accordingly it is not considered appropriate to recognise any potential gain on these options
arising from potential increases in aircraft values over and above the option price.
35
OPERATING LEASE COMMITMENTS
The Group leases out aircraft under operating leases. The future minimum lease payments
receivable under non-cancellable leases are as follows:
Within one year
In the second to fifth years inclusive
More than five years
Group
2015
2014
US$’000s
US$’000s
58,154
193,946
115,926
49,521
175,181
111,266
The Group holds cash deposits of $10.4 million (2014: $9.1 million) and letters of credit for $2.3
million (2014: $1.3 million) as security for lessees’ obligations under operating leases.
87
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
36
SEGMENT INFORMATION
Management has determined the operating segments based on 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 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.
Business segments are 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 while information for geographical segments is based on the geographical areas
where 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 are mostly comprised 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.
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 2015, the Group was organised into two main business
segments which are aircraft leasing and business procurement.
Other Group operations 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.
88
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
36
SEGMENT INFORMATION (continued)
(c) Geographical analysis
2015
Europe
US$’000s
North
America
US$’000s
Australia
and
Oceania
US$’000s
Asia
US$’000s
Total
US$’000s
Lease income from
continuing activities
Capital expenditure and
valuation movements
Net book value - aircraft
Total assets
11,682
18,371
74,764
127,040
-
-
-
-
40,405
4,845
56,932
18,009
287,050
291,028
73,793
71,996
168,114
110,173
433,810
586,182
2014
Europe
US$’000s
North
America
US$’000s
Australia
and
Oceania
US$’000s
Asia
US$’000s
Total
US$’000s
Lease income from
continuing activities
Capital expenditure and
valuation movements
Net book value -
aircraft
Total assets
11,700
-
79,216
96,653
-
-
36,991
-
48,691
36,096
35,680
71,776
6,841
6,841
281,208
307,695
-
4,439
367,265
415,628
During the year, certain customers accounted for more than 10% of the Group’s total
revenues. There is one customer based in the Australia and Oceania geographical area
that accounts for US$38.3 million (67%) of the Group’s total revenues from continuing
operations. There is one customer based in the European geographical area accounts for
US$7.5 million (13%) of the Group’s total revenue.
89
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
37
CONTINGENT LIABILITIES
(a)
Lease-end/re-delivery adjustment compensation
The Company’s subsidiary MSN 1607 Pte Ltd owns an aircraft where there is a contingent
liability to pay amounts to the lessee dependent upon the return condition of the aircraft at
the end of the lease term. A liability would only become payable in the event that the
aircraft is returned at the end of the lease in April 2018 in a condition which exceeds
certain criteria agreed at the inception of the lease. Given that the lease continues until
April 2018, the directors are of the opinion that it is impossible to accurately estimate the
return condition of the aircraft given the number of variables such as aircraft usage and
timing of future maintenance events. The directors have assessed several different
outcomes and consider that the likely outcome would result in a cash inflow from the
lessee. On this basis, the directors have not recognised a contingent asset or liability in
this set of financial statements.
(b) Guarantees
Group
2015
2014
US$’000s
US$’000s
Guarantees
426,095
274,658
The maximum estimated amount that the Group could become liable for under guarantees
is as shown above.
38
DIVIDEND
2015
2014
US$’000s
US$’000s
Declared and paid during the financial year
Dividends on ordinary shares
- Final exempt (one-tier) dividend for 2014: 2.01 US cents (2013: 1.78
US cents) per share
1,119
867
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 2015: Nil US cents (2014: 2.01 US
cents) per share
-
988
Dividends to the Company’s shareholders are recognised when the dividends are approved for
payment.
90
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
39
ULTIMATE HOLDING COMPANY
No party controls the Company.
40
SUBSEQUENT EVENTS
Subsequent to the financial year end, the directors of the Company declared a 3 US cents interim
dividend for the financial year ending 30 June 2015. The interim dividend was paid to the
shareholders of the Company on 28 September 2015.
41
COMPARATIVE INFORMATION
The Company has amended the presentation of its financial statements in the current financial
year to provide greater clarity. Certain comparatives amounts have been reclassified to conform
to the current year presentation. The comparative statement of profit or loss and other
comprehensive income has been re-presented to show the discontinued operations separately
from continuing operations.
42
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 2015 were authorised for issue by the Board of Directors on
15 October 2015.
91
THIS PAGE INTENTIONALLY LEFT BLANK.
THIS PAGE INTENTIONALLY LEFT BLANK.
ATR 72-600 aircraft at production facility
ANNUAL REPORT 2015
65 Kampong Bahru Road
Singapore 169370
www.avation.net
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