AnnuAl RepoRt
2017
Annual Report 2017
OUR FLEET
Aircraft type
In operation ordered options
AtR 72-500
AtR 72-600
Airbus A320-200
Airbus A321-200
Fokker 100
Total
6
13
3
8
5
35
-
8
-
-
-
8
-
27
-
-
-
27
2
MOdEL
AtR 72-500
AtR 72-600
MOdEL
Airbus A320-200
Airbus A321-200
MOdEL
Fokker F100
3
Annual Report 2017
COMpany InFORMaTIOn
dIRECTORs:
Robert Jeffries Chatfield
Roderick Douglas Mahoney
Stephen John Fisher
Derek Sharples (appointed on 15 november 2016)
COMpany sECRETaRy:
Duncan Gerard Stephen Scott
REgIsTEREd OFFICE:
5 Fleet place
london eC4M 7RD
united Kingdom
pRInCIpaL pLaCE OF bUsInEss:
65 Kampong Bahru Road
aUdITOR:
Singapore 169370
Kingston Smith llp
Devonshire House
60 Goswell Road
london eC1M 7AD
united Kingdom
sOLICITORs:
Charles Russell Speechlys llp
5 Fleet place
london eC4M 7RD
united Kingdom
REgIsTRaR:
Computershare Investor Services llC
the pavilions
Bridgewater Road
Bristol BS99 6ZZ
united Kingdom
4
TabLE OF COnTEnTs
pAGe(S)
Company Information .......................................................................................................... 4
Chairman’s Statement .................................................................................................... 6 - 7
Board of Directors ............................................................................................................... 8
Strategic Report ........................................................................................................... 9 - 14
Directors’ Report ........................................................................................................ 15 - 18
Directors’ Remuneration Report .................................................................................... 19 - 27
Statement of Directors’ Responsibilities ............................................................................... 28
Auditor’s Report ........................................................................................................ 29 - 35
Consolidated Statement of Profit or Loss and Other Comprehensive Income ....................... 36 - 37
Consolidated Statement of Financial position ......................................................................... 38
Company Statement of Financial position .............................................................................. 39
Consolidated Statement of Changes in equity ................................................................. 40 - 41
Company Statement of Changes in equity ...................................................................... 42 - 43
Consolidated Statement of Cash Flows ................................................................................. 44
Company Statement of Cash Flows ...................................................................................... 45
notes to the Financial Statements ............................................................................... 46 - 101
5
Annual Report 2017
ChaIRMan’s sTaTEMEnT
OvERvIEw
• lease revenue increased by 32% to $94.2 million;
• Earnings before interest and tax (“EBIT” or “Operating Profit”) grew 32% to $60.2 million;
• Profit before taxation increased by 18% to $21.4 million;
• Total profit after tax increased 16% to $21.3 million;
• Operating cash flows increased 20% to $63.0 million;
• Dividend per share increased by 85% to 6.00 uS cents; and
• Earnings per share (“EPS”) increased by 6% to 36.3 US cents.
baCkgROUnd and
OUTCOME
We are pleased to report record
revenue, profit and operating
cashflow in the year to 30 June
2017. Avation continues
to
diversify its aircraft fleet while
adding balance sheet scale.
Fleet metrics have improved
with lease yield rising to 12.8% (2016: 12.3%) while
the average age of the fleet has reduced and the
average remaining lease term for the aircraft portfolio
has increased.
the Company has ended the year with a substantial
cash balance, lower leverage and has an improved
credit rating, which are features that support the
funding of further fleet expansion. Avation aims to
grow the aircraft portfolio materially during the coming
Financial Year and is currently assessing a number of
aircraft for acquisition.
As at 30 June 2017 Avation’s fleet comprised 35 aircraft,
including seven aircraft on finance leases. Fleet metrics
have continued to improve, the weighted average age
of the operating fleet (excluding finance leases) is 3.3
years (2016: 4.2 years) and the weighted average
remaining lease term is 7.5 years (2016: 6.8 years).
Avation has signed a letter of intent to lease three AtR
72 turboprop aircraft for delivery to Mandarin Airlines,
one of which is included in the above fleet numbers
with two additional aircraft on order for delivery in the
latter part of 2017.
Increased scale and containment of costs resulted in
increased profitability, with operating profit margin
holding steady at 63.9% and total profit after tax
increasing 16.3%. Avation is well positioned for
continued growth.
InTERIM dIvIdEnd
Earnings and profitability of Avation’s leasing business
have improved. the Board would like to reward
ownership and recognise shareholder support as it
continues the successful development of the business.
Accordingly, the Board has approved an interim
dividend increase to 6.00 uS cents per share (2016:
3.25 uS cents) in respect of the Financial Year. the
Company confirms its aim to maintain a progressive
dividend policy.
6
ChaIRMan’s sTaTEMEnT
Avation’s Board of Directors is pleased to deliver
another record set of financial results from its aircraft
leasing business while executing its strategy of fleet
growth and risk mitigation. Avation is in a strong
position to deliver diversification during the current
Financial Year and to rebuild its fleet after the disposal
of six ATR 72 aircraft.
Robert Jeffries Chatfield,
Executive Chairman
Singapore
25 September 2017
OUTLOOk
Avation continues to grow its fleet and lease revenue
year on year. Avation has demonstrated the liquidity
of key aircraft types at a premium to book value and
reduced the concentration of assets with individual
airlines. new aircraft have been acquired since the
commencement of the 2017 Financial Year while older
aircraft have been sold or converted to finance leases.
This has resulted in improved fleet age and average
remaining lease term metrics.
Avation is an active trader of aircraft and from time to
time will also consider the sale of individual or smaller
portfolios of aircraft based on prevailing market
opportunities and considerations of risk and airline
concentrations.
Avation’s strategy continues to target growth and
diversification of aircraft assets, maintenance of strong
average lease age and term metrics and adding new
airline customers. Avation will consider acquiring
twin aisle aircraft, in addition to single aisle jets and
turboprops as part of a strategy to build a diversified
portfolio of aircraft. This expanded portfolio allows for
the potential to accelerate fleet growth in the future.
Twin aisle aircraft may have a risk profile which is more
exposed to technology change factors. The Company
will seek to mitigate this risk.
Following the completion of the sale of six ATR 72
aircraft during the financial period, Avation has
cash reserves and improved leverage to support the
acquisition of additional aircraft, including the three
AtR 72 aircraft to be delivered to Mandarin Airlines in
the latter part of 2017.
7
Annual Report 2017
bOaRd OF dIRECTORs
Jeff Chatfield
Executive Chairman
stephen Fisher phd
non-Executive director
Mr Chatfield
the Executive
is
Chairman of Avation plC and has
been instrumental in establishing
and growing the Company. Mr
Chatfield has a track record of
leadership in a variety of profitable
and successful businesses. He is a qualified public
company director and business executive experienced
in the fields of commercial airlines, aircraft leasing
and finance, electronic commerce,
investment
management, radio and TV broadcasting. Mr Chatfield
holds both Bachelor’s and Master’s Degrees in
engineering from the university of Western Australia
where he graduated top of the class. He has been
involved in a number of successful businesses both
private and public, the majority of which have been
strongly cash flow generative. In the recent past Mr
Chatfield was chairman of Skywest Airlines Ltd, a
lSe-ASX dual-listed public company recently sold to
Virgin Australia Holdings ltd. He is a member of the
Australian Institute of Company Directors and a fellow
of the Singapore Institute of Directors. Mr Chatfield
was born in perth, Australia and is a permanent
resident of Singapore.
Rod Mahoney
Executive director
Mr Mahoney is the Chief operating
Officer and an Executive Director of
the Company. Before this executive
appointment, he was a fleet
planning and aircraft procurement
consultant to the Company. He
has previously been a project advisor to a variety
of Asia-Pacific airlines, suppliers and other aviation
businesses, including Virgin Blue and Virgin Australia
and also held various senior executive positions at
Airbus for 23 years, largely within the sales divisions
covering Europe and Africa, China and the Pacific. He
holds a Bachelor of Science Degree in Aeronautical
engineering (BSc. Hons), a Masters in Air transport
(MSc.) and a Masters of Applied Finance (MAppFin).
Mr Mahoney holds dual citizenship of the united
Kingdom and Australia and resides in Singapore. Mr
Mahoney is a graduate member of the Australian
Institute of Company Directors and a member of the
Singapore Institute of Directors.
In addition to his role at Avation
plC, Stephen is Chairman, principal
and Chief Investment Officer of First
Degree Global Asset Management
pte. ltd., a privately owned
in
asset management company
Singapore. First Degree Global Asset Management
operates a number of strategies for its clients including
a fixed income focused hedge fund.
Stephen has had twenty-three 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 Pacific at JPMorgan Asset Management. Stephen
held the positions of Australian Head of Capital Markets
Research from 1992 - 1996, and Asia Pacific Regional
Head of Capital Markets Research at J.p. Morgan
Investment Management, Inc. from 1996-1998.
in
Stephen’s particular areas of expertise are
quantitative analysis of fixed income, equities, asset
allocation and derivatives. He has advised Central
Banks and Sovereign Wealth Funds on their reserves
management practice, and his research on investment
management issues has been widely published in
academic and industry journals.
Stephen has a Master of Science (Finance) and a
phD (Finance) from the We Simon Graduate School
of Business Administration, university of Rochester,
new York and a Bachelor of economics (First Class
Honours) from the university of Sydney.
derek sharples
non-Executive director
Mr Sharples recently retired as the
Chief Executive Officer of Airbus
Helicopters Southeast Asia. Mr
Sharples was formerly Corporate
Secretary and Head of legal Affairs
at Airbus in toulouse, France. He
has experience as a Director of a Toronto Listed public
company and companies in thailand, Singapore and
Indonesia.
Mr Sharples has a Bachelor of engineering and a
Master of Business Administration from the Cranfield
School of Management. He is a Fellow of the Royal
Aeronautical Society (FRAeS) and holds the military
rank of Commander, Royal navy.
Mr Sharples is a Singapore resident and is a member
of the Singapore Institute of Directors. He holds dual
British and French nationalities.
8
sTRaTEgIC REpORT
photo: Viktoria Dorosevits
the Directors present their strategic report for the year
ended 30 June 2017.
bUsInEss OvERvIEw
Avation PLC and its subsidiaries (“Avation”, the
“Group”) is a commercial passenger aircraft leasing
group managing a fleet of 35 aircraft, as at 30 June
2017, which are leased to airlines globally. Avation’s
customers include Virgin Australia, thomas Cook,
Condor, Fiji Airways, unI Air, Air India Regional, Flybe,
Air France, Air Berlin and Vietjet Air. The Group’s fleet
includes Airbus A320 and A321 narrow body jets, AtR
72 twin engine turboprop aircraft and five older Fokker
100 jets.
Avation operates from its headquarters in Singapore
where it is tax resident and, since 17 April 2014, a
beneficiary of the Singapore Aircraft Leasing Scheme
tax incentive.
Avation’s management team has extensive experience
in the aviation industry and has the expertise to select
and acquire aircraft that will achieve strong operational
performance for our customers and generate stable
returns for our shareholders.
Avation aims to grow its fleet and continue to diversify
its customer base in the coming year. the Group has 8
AtR 72-600s on order from the manufacturer and holds
options for a further 27 aircraft. the Group may also
acquire further new and second hand jet aircraft on an
ad-hoc basis. older aircraft are sold when opportunities
arise in order to maintain a low average fleet age.
Avation is listed on the main list of the london Stock
Exchange under the ticker symbol LSE: AVAP.
bUsInEss MOdEL
Avation aims to grow its fleet and build long-term
shareholder value by focussing on a) new turbo-
prop regional aircraft, principally the popular and fuel
efficient ATR 72-600 model and b) new and second-
hand narrow body jets in particular the popular Airbus
A320/A321 family and Boeing 737nG aircraft. the
Group will also consider acquiring twin-aisle aircraft
in future as part of its strategy to build a diversified
portfolio of aircraft. Owning a diversified portfolio of
aircraft types is intended to mitigate overall market and
residual value risk.
The Group finances the acquisition of new aircraft
using internally generated cash flows, senior and junior
secured debt finance, the issuance of unsecured notes
under its Global Medium term note programme and the
issuance of new ordinary shares. Debt on older aircraft
is re-financed when there is an opportunity to reduce
the Group’s overall cost of debt and also to release
equity for acquiring new aircraft.
The Board applies prudent financial management
principles to manage risk when acquiring aircraft by
seeking to match lease and financing duration, using
mostly fixed interest rate debt and amortising debt to
conservative balloon payments over the terms of the
underlying leases.
As the fleet grows, the Group seeks to diversify
its customer base as part of its overall credit risk
management strategy.
The Avation fleet of 35 aircraft (as at 30 June 2017)
has a weighted average age of 3.3 years and weighted
average remaining lease term of 7.5 years with a
current customer base of airlines in Australia, europe
and the Asia-Pacific region.
9
sTRaTEgIC REpORT
*RPK = Revenue Passenger Kilometres
| Source: ICAO, Airbus GMF 2017
MaRkETs TREnds and FUTURE dEvELOpMEnTs
pRInCIpaL RIsks and UnCERTaInTIEs
Aircraft leasing is a growth industry which, historically,
has taken an increasing share of ownership of the
commercial passenger aircraft fleet. Avation expects
that the percentage of leased aircraft in the global
fleet will remain high in future due to the flexibility
that the leasing model provides for airlines and also
due to increased access to financial capital for leasing
companies.
The aircraft leasing industry also benefits from good
long-term fundamentals including growth in global
demand for air travel, capital constraints amongst
airlines and normal cycles of aircraft replacement.
The world fleet of commercial passenger aircraft is
predicted to grow substantially with aircraft traffic
expected to double every 15 years. Airbus forecasts
that over 41,000 new aircraft are required over the
next 20 years; of which 39% are expected to be in
Asia-Pacific, 21% in North America, 18% in Europe,
and of the total, 72% are expected to be single aisle.1
low interest rates and improved access to capital,
including unsecured debt, are supporting the growth
plans of established leasing companies and new
entrants into the global aircraft leasing market. Many
stand-alone aircraft lessors have improved their
leverage profile over the last several years and have
been able to diversify funding sources.
1 Airbus Global Market Forecast 2017
the aircraft leasing sector is highly competitive and
Avation is exposed to a number of market related,
operational and financial risks. The Group is committed
to mitigating business risk through the application
of prudent risk management policies. the risks and
uncertainties described below are those that the Group
has identified as most significant to the business.
Avation’s Board of Directors is responsible for managing
risk and reviews risk management policies regularly.
Market related risks:
Exposure to the airline industry
the Group’s customers are commercial airlines which
are financially exposed to the demand for passenger air
travel. The financial condition of commercial airlines
may weaken due to a number of factors including but
not limited to local and global economic conditions,
increased competition between airlines, speculative
ordering of new aircraft, war, terrorism and natural
disasters. If the financial condition of the Group’s
airline customers weakens for any reason, the Group
may be exposed to increased risks of lessee default
and lower lease rates for its aircraft.
Avation has one Airbus A320 aircraft on lease to Air
Berlin, which announced insolvency on 15 August 2017
and subsequently defaulted under its lease. Avation
holds security deposits and substantial maintenance
reserves as security for Air Berlin’s lease obligations.
Avation is liaising with Air Berlin and various third
10
Annual Report 2017 sTRaTEgIC REpORT
photo: Viktoria Dorosevits
parties that have expressed interest in acquiring parts
of the Air Berlin business and/or leasing this aircraft.
Asset value risk
Group mitigates against these risks by requiring airline
lessees to maintain adequate insurance over the
aircraft.
Fluctuations in the supply and demand for aircraft and
aircraft travel may impact values of and lease rates
for the Group’s aircraft. Market forces and prevailing
economic conditions may change over the economic
lives of the Group’s aircraft and could have a positive
or negative impact on aircraft valuations.
Regulatory risks
Avation’s fleet operates in many jurisdictions and
complies with tax and other regulatory requirements
in those jurisdictions. There is a risk that changing tax
and regulatory regimes may have an impact on the
business and financial results.
in aircraft
technology may
Advances
create
obsolescence in the fleet before the end of aircrafts’
current estimated useful lives. the Group regularly
obtains independent third party valuations for its
fleet and may dispose of aircraft in order to reduce
its exposure to certain aircraft types. Avation has a
policy of investing in popular aircraft types on the basis
that asset values and lease rates will be supported by
continuing high demand for these aircraft. Avation will
consider acquiring twin aisle aircraft, in addition to
single aisle jets and turboprops, as part of a strategy
to build a diversified portfolio of aircraft. Twin aisle
aircraft may have a risk profile which is more exposed
to technology change factors. the Company will seek
to mitigate this risk.
Operational risks:
Economic, legal and political risks
to
lessees
leases aircraft
in different
Avation
jurisdictions. As such the Group is exposed to economic,
legal and political risk in those jurisdictions. Avation’s
aircraft are subject to operational risks specific to the
aviation sector resulting from war, acts of terrorism
or the threat of terrorism, and natural disasters. the
Lessee risks
lessees are responsible
Avation’s airline
for all
maintenance and safety checks. the requirement for
each airline lessee to service and maintain the aircraft
are set out in the lease agreements. there is a risk that
airlines may not properly maintain aircraft which may
lead to an impairment of the aircraft’s value. In order
to mitigate against this risk the Group closely monitors
each airline’s usage of aircraft and their compliance
with agreed maintenance schedules. Avation can
require lessees to pay maintenance reserve payments
in order to ensure that there is adequate funding at all
times for proper maintenance of the aircraft.
Financial risks:
Avation’s financial risk management objectives and
policies are set out in note 7 to the financial statements
and are as follows:
• Airline industry risks
• Credit risk
•
Interest rate risk
• Foreign currency risk
• liquidity risk
• Capital risk
11
Annual Report 2017
sTRaTEgIC REpORT
FInanCIaL REvIEw
lease revenue
Operating profit
Total profit
net cash from operating activities
total assets
total equity
Basic earnings per share
Dividend per share
2017
uS$’000s
2016
uS$’000s
94,173
60,199
21,257
63,020
901,135
195,924
71,190
45,573
18,280
52,547
831,785
173,608
36.27 cents 34.35 cents
6.00 cents
3.25 cents
lease revenue increased by 32.3% to uS$94.2 million (2016: uS$71.2 million) as a result of changes in the
aircraft fleet.
Operating profit increased 32.1% to US$60.2 million (2016: US$45.6 million).
Depreciation increased by 39.2% to uS$32.3 million (2016: uS$23.2 million) as a consequence of changes in the
fleet.
Gains on sales of aircraft during the period were uS$5.4 million (2016: uS$3.7 million) and impairment losses
were nil (2016: US$ 0.9 million). The Group sold three Airbus A321 aircraft and six ATR 72-600 aircraft during
the year and also converted operating leases for five Fokker 100 aircraft to finance leases.
Administrative expenses increased 6.6% to US$8.0 million (2016: US$7.6 million). As a percentage of lease
revenue administrative expenses decreased to 8.5% (2016: 10.6%). Other expenses were US$0.1 million (2016:
uS$0.7 million).
Finance expenses increased by 41.5% to US$40.6 million (2016: US$28.7 million) and total interest expense
within finance expenses increased to US$37.4 million (2016: US$26.8 million). The increases in finance expenses
and total interest expense were primarily attributable to new debt incurred to finance aircraft acquisitions during
the year. Interest on the unsecured notes issued under the Company’s Global Medium term note programme
(“GMTN”) was US$8.3 million (2016: US$8.3 million). Finance income was US$1.8 million (2016: US$1.2 million).
the majority of the Group’s operations are based in Singapore and are included in Singapore’s Aircraft leasing
Scheme, benefitting from a concessionary tax rate. Taxation for the year was US$0.1 million (2016: a credit of
US$0.2 million). The tax charge for the year was impacted by a reduction in deferred tax provisions resulting
from the announcement of a reduction in the concessionary tax rate payable under the Aircraft Leasing Scheme
from 10% to 8% effective in 2019. The tax charge in 2016 was impacted by the reversal of an over-provision for
deferred taxation.
12
sTRaTEgIC REpORT
Operating cash flows increased by 20.0% to US$63.0 million (2016: US$52.5 million). EBITDA, defined as the
sum of pre-tax profit from continuing operations, finance expenses and depreciation increased by 34.7% to
uS$94.3 million (2016: uS$70.0 million).
Total profit after tax for the Financial Year increased 16.3% to US$21.3 million (2016: US$18.3 million).
Basic earnings per share increased by 5.6% to 36.3 uS cents (2016: 34.4 uS cents).
The Company confirms that there have been no changes to its accounting policies.
FLEET OvERvIEw
Type
1 July 2016
Additions
disposals
30 June 2017
On order
Options
AtR 72-500
AtR 72-600
A320-200
A321-200
Fokker 100
total
6
18
3
6
5
38
-
1
-
5
-
6
-
6
-
3
-
9
6
13
3
8
5
35
-
8
-
-
-
8
-
27
-
-
-
27
Four new Airbus A321 and one ATR 72-600 aircraft were added to the fleet during the period, with one new Airbus
A321 aircraft acquired and sold immediately after delivery. Two mid-life Airbus A321 and six ATR 72-600 aircraft
were sold during the year. As at 30 June 2017 the weighted average age of the fleet was 3.3 years (2016: 4.2
years) and the weighted average remaining lease term was 7.5 years (2016: 6.8 years). As at 30 June 2017, 34
aircraft were utilised on leases to airlines and one aircraft was undergoing modification work prior to its expected
delivery to a new airline customer in november 2017.
Five Fokker 100 aircraft with a total net book value of uS$12.2 million were removed from property, plant and
equipment in the year as a result of converting operating leases to finance leases.
The aircraft fleet was valued as at 30 June 2017 by a third party valuer using lease encumbered basis in accordance
with the Group’s accounting policy. As the carrying values of the aircraft were found not to differ significantly from
lease encumbered values, no revaluation of the fleet was required.
dEbT sUMMaRy
loans and borrowings
Cash and cash equivalents
net indebtedness
loan to value ratio
Weighted average cost of secured debt
Weighted average cost of total debt
2017
2016
uS$’000s
uS$’000s
648,813
615,724
87,692
48,267
561,121
567,457
72.0%
74.0%
4.5%
5.1%
4.3%
4.8%
Loans and borrowings increased due to additional secured debt issued to fund fleet acquisitions. Net indebtedness
decreased marginally due to an increases in cash balances more than offsetting the increase in loans and
borrowings.
the weighted average cost of total debt increased to 5.1% as at 30 June 2017 (2016: 4.8%). the weighted
average cost of the Group’s secured debt facilities increased to 4.5% as at 30 June 2017 (2016: 4.3%). the
overall increase in the Group’s cost of debt was principally due to junior secured debt issued to partially fund the
acquisition of four Airbus A321 aircraft during the year.
13
sTRaTEgIC REpORT
In December 2016, Standard & poor’s Global Ratings advised that Avation’s corporate credit rating has been
upgraded to ‘B+’, outlook Stable from ‘B’; the Senior unsecured notes rating was raised to ‘B’ from ‘B-’. During
the period Japan Credit Rating Agency, ltd assigned a Foreign Currency long-term Issuer Rating for Avation of
‘BB’, outlook Stable. the Company’s current credit ratings are as follows:
Rating Agency
Corporate Credit Rating
Senior Unsecured Notes Rating
Standard and poor’s
Fitch Ratings
B+ outlook stable
B+ outlook stable
egan-Jones Ratings Company
BB
Japan Credit Rating Agency
BB outlook stable
B
B+
nR
nR
Avation issued an additional uS$20.0 million Senior unsecured notes under the GMtn at a premium to par value
in June 2017. the Board is pleased to report achieving both a ratings upgrade and an improvement in pricing for
unsecured debt issued in the year.
At the end of the financial period, Avation’s overall loan to value ratio was 72.0% (2016: 74.0%) and 95.1% of
total debt was at fixed or hedged interest rates (2016: 91.6%). At the end of the financial period, there was no
related party debt other than pursuant to participation in Senior unsecured notes issued under the Global Medium
term note programme.
The leasing industry in general and Avation in particular operate in a capital-intensive industry benefiting from
the current low interest rate environment resulting in low funding costs. In Avation’s current portfolio of debt,
interest rate risk is managed as outlined in the risk management section of the note 7 in the notes to the financial
statements. Any potential future increases in interest rates could impact the level of profitability of any new
business the Group undertakes although this could be mitigated by new revenues reflecting the current interest
rate environment.
EnvIROnMEnT
Avation is committed to environmental responsibility as part of its business strategy. this is achieved by investing
in technologically advanced designs of commercial aircraft that offer improved fuel efficiency and lower emissions.
The majority of our fleet are modern regional turbo-prop aircraft which provide significant environmental benefits
over comparable jet aircraft due to their more economical use of fuel and consequently lower carbon dioxide
emissions.
CORpORaTE sOCIaL REspOnsIbILITy
Avation is committed to the principles of being a good corporate citizen. For the Financial Year 2017 the Group did
not have any material matters to report on social, community and human rights issues.
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 2017 is set out below:
Directors of the Company
Senior managers
other employees
on behalf of the board
Robert Jeffries Chatfield
Executive Chairman
25 September 2017
14
Male
Female
4
5
5
-
-
6
Annual Report 2017 dIRECTORs’ REpORT
The Directors present their report and financial statements for the year ended 30 June 2017.
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 24 to these financial statements.
the principal risks and uncertainties affecting the Group’s turnover are described in the Strategic Report.
The full business review including KPI’s can be found in the Strategic Report and in Note 7 to these financial
statements. the Group has reviewed the environmental matters in the Strategic Report.
Results and dividends
The consolidated statement of profit or loss and other comprehensive income for the year is set out on pages 36
and 38. the Company paid a 6.00 uS cents interim dividend on 10 August 2017 and a dividend of 3.25 uS cents
on 13 october 2016.
Avation’s dividend policy is, subject to having the reserves to do so and within any restrictions imposed by debt
covenants, to declare a dividend if the Board considers that it is in the best long-term interests of the Guarantor
and its shareholders. the policy is a progressive dividend policy, in that if reserves are available the dividend shall
increase.
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:
direct interest
Deemed interest
30 June
2017
1 July
2016
or date of
appointment
30 June
2017
1 July
2016
or date of
appointment
Ordinary shares of £0.01 each:
Robert Jeffries Chatfield
Roderick Douglas Mahoney
Stephen John Fisher
Derek Sharples (appointed on 15 november 2016)
1
1
10,705,000
10,405,000
300,000
300,000
5,000
10,000
5,000
-
-
-
-
-
-
-
15
dIRECTORs’ REpORT
Significant shareholdings
photo: Viktoria Dorosevits
Ordinary
shares
percentage
Ordinary shares of £0.01 each:
Goldman Sachs Securities (nominees) limited
16,318,788
26.72%
State Street nominees limited
Chase nominees limited
lynchwood nominees limited
HSBC Global Custody nominee (uK) limited
Equal Opportunities Policy
5,812,903
5,666,140
5,258,085
3,775,000
9.52%
9.28%
8.61%
6.18%
It is the Group’s policy to employ individuals with the necessary qualifications without regard to sex, marital status,
race, creed, colour, nationality or religion. Full and fair consideration is given to applications for employment made
by disabled persons having regard to their particular aptitudes and abilities.
the Group recognises the great importance of the contribution made by all employees and aims to keep them
informed of matters affecting them as employees and developments within the Group. Communication and
consultation is achieved by a variety of means both within individual companies or branches and on a group-wide
basis.
directors’ Insurance
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 Chairman’s Statement and Strategic Report.
Financial Instruments
See Note 7 to these financial statements.
going Concern
After making appropriate enquiries and taking into account the matters set out in the principal Risks and
Uncertainties paragraph/section 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.
16
Annual Report 2017 dIRECTORs’ REpORT
For this reason, they continue to adopt the going concern basis in preparing the financial statements.
greenhouse gas Emissions statement
usage of the Company’s aircraft is under the control of lessees who are not required to provide emissions data to
the Company. estimated direct carbon emissions by the Company totalled 11,527 kilograms for the year ended
30 June 2017.
Capital structure
Details of the Company’s issued share capital, together with details of the movements therein during the financial
year are shown in Note 32. The Company has one class of ordinary shares which carry no right to fixed income.
each share carries the right to one vote at general meetings of the Company.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed
by the general provisions of the Articles of Association and prevailing legislation. the Directors are not aware
of any agreements between holders of the Company’s shares that may result in restrictions on the transfers of
securities or on voting rights.
Details of employees share option schemes are set out in note 33.
no person has any special rights of control over the Company’s share capital and all issued shares are fully paid.
With regards to the appointment and replacement of Directors, the Company is governed by its Articles of
Association, the Companies Act and related legislation. the Articles themselves may be amended by special
resolution of the shareholders.
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 Company’s size and
nature.
the Board acts as the administrative, management and supervisory body overseeing the operation of the Group.
The Board consists of two Executive Directors (Robert Jeffries Chatfield and Roderick Douglas Mahoney) and two
Non-Executive Directors (Stephen John Fisher and Derek Sharples). The Board meets at least six times a year;
matters for discussion at formal meetings are clearly laid down and decisions recorded. the Board is responsible for
overall corporate strategy; the reviewing and approval of acquisition and divestment opportunities; the approval
of significant capital expenditures; the review of budgets; trading performance; and all significant financial and
operational issues.
the Company operates the following committees whose members are detailed below:
• Audit Committee - Robert Jeffries Chatfield, Stephen John Fisher, Derek Sharples and Robert Heese (non-
Board member); and
• Risk Committee – Derek Sharples, Stephen John Fisher, Iain Cawte (non-Board member), Duncan Scott (non-
Board member), Richard Wolanski (non-Board member) and Robert Heese (non-Board member); and
• Remuneration Committee - Robert Jeffries Chatfield, Roderick Douglas Mahoney, Stephen John Fisher and
Derek Sharples
the Board is responsible for identifying and evaluating the major business risks faced by the Company and for
determining and monitoring the appropriate course of action to manage these risks. the key risks the Company
faces are described in the risk assessment section of this annual report and accounts.
the Board conducts a review of the effectiveness of the Company’s systems of internal control and risk
management on an annual basis. Following this review it has concluded that the Company’s financial, operational
and compliance controls, and risk management procedures are appropriate and suitable to enable the Board to
safeguard shareholders’ investments and the Company’s assets.
17
Annual Report 2017
dIRECTORs’ REpORT
the processes and systems of internal control are designed to manage, rather than eliminate, the risk of failure to
achieve the Company’s objectives, and can therefore only provide reasonable and not absolute assurance against
material misstatement or loss.
Statement as to disclosure of information to auditors
So far as the Directors are aware, there is no relevant audit information of which the Company’s 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 Company’s auditors are aware of that information.
Auditor
Kingston Smith LLP have indicated their willingness to continue in office and in accordance with s489 of the
Companies Act 2006. A resolution proposing that they be reappointed as auditors of the Company will be put to
the Annual General Meeting.
Purchase of own shares
During the Financial Year, the Company sold 600 shares held in the treasury. Following the sale the Company no
longer owns any of its own shares.
By a resolution passed at the Annual General Meeting held on 15 november 2016 the Company’s Directors are
authorised to buy back shares not exceeding 30 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 £2.50 per share, excluding commissions
and other related expenses.
Subsequent events
See Note 41 to these financial statements.
Information to be included in annual report
In accordance with the uK Financial Conduct Authority’s listing Rules (lR 9.8.4C), the following table provides
references to where the information to be included in the annual report and accounts, where applicable, under
lR 9.8.4, is set out.
Listing Rule requirement
Reference
Details of any long-term incentive schemes as required
by lR 9.4.3 R.
Directors’ Remuneration report and notes to the
Financial Statements – Note 33, Share Based Payments
Details of any contract of significance subsisting during
the period under review to which the listed company,
or one of its subsidiary undertakings, is a party and
in which a Director of the listed company is or was
materially interested.
Notes to the Financial Statements – Note 8, Related
party transactions
on behalf of the board
Robert Jeffries Chatfield
Executive Chairman
18
dIRECTORs’ REMUnERaTIOn REpORT
photo: Viktoria Dorosevits
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
Directors’ remuneration will be proposed at the forthcoming Annual General Meeting of the Company at which the
financial statements will be approved. The vote will have advisory status, will be in respect of the remuneration
policy and overall remuneration packages and will not be specific to the individual levels of remuneration.
The information in the Directors’ Remuneration Report is not audited, unless specifically stated that the section
is subject to audit.
Statement by the Chair of the Remuneration Committee
the Company’s remuneration policy remains substantiality unchanged for 2016. Key aspects of the policy are to
attract and retain executives; be consistent with best practices and to ensure alignment between performance
and compensation. The Company’s performance in the current year was in line with expectations with revenue
increasing 32%, total profit increasing 16% and EPS increasing 6%. After adjusting for exchange rates,
remuneration was commensurate with this performance.
Remuneration (audited)
the components of remuneration are:
• basic salary and benefits determined by the Remuneration Committee which are included in employment
agreements and reviewed annually;
• bonuses based upon performance of the Company and the individual concerned; and
•
share warrants.
19
Annual Report 2017
dIRECTORs’ REMUnERaTIOn REpORT
Component
purpose
Operation & framework used to assess performance
Salary and
benefits
to provide the core reward
for the role at a sufficient
level to recruit and retain
individuals of the necessary
to
competence
execute
company’s business
the
strategy.
Operation:
Salaries are typically set after considering salary levels in
companies of a similar size and complexity, the responsibilities
of each individual role, progression within the role, individual
performance and an individual’s experience. Our overall policy,
having had due regard to the factors noted, is normally to
target salaries at the market median level.
Salaries may be adjusted in line with the market and adjustments
out of line with the market may be awarded in certain
circumstances such as where there is a change in responsibility,
progression in the role, experience or a significant increase in
the scale of the role and/or size, value and/or complexity of
the Group. Salary levels for current incumbents are set out
elsewhere in this report.
Framework used to assess performance:
the Remuneration Committee considers individual salaries at
the appropriate committee meeting each year after having due
regard to the factors noted in operating the salary policy. no
recovery provisions apply to salary.
bonuses
to incentivise and recognise
execution of the business
strategy on a semi-annual
basis.
Operation:
Bonuses are paid in cash twice yearly to Directors based on
a target percentage of the employee’s basic salary. All bonus
payments are at the discretion of the Committee, as shown
following this table.
Framework used to assess performance:
the Remuneration Committee will assess company and
individual performance compared to prior year and expectations
for the current year. Individual performance will also be
assessed against key performance metrics established for each
executive. Metrics considered in awarding bonuses include
share price appreciation; increase in the Company’s earnings
per share; reliable and high quality financial reporting; growth
in asset value and profits; and dividend growth.
share warrants to incentivise and recognise
execution of the business
strategy over the long-term.
Operation:
each year share warrants and/or performance shares awards
may be granted subject to the achievement of performance
targets. Awards normally vest over a three-year period.
Framework used to assess performance:
Same as for bonus.
20
dIRECTORs’ REMUnERaTIOn REpORT
Individual Director’s remuneration was as follows:
Executive directors:
Robert Jeffries Chatfield
Roderick Douglas Mahoney
non-Executive directors:
Stephen John Fisher
Derek Sharples
salaries
and fees
uS$’000s
bonuses
Taxable
benefits
Total
2017
Total
2016
uS$’000s
uS$’000s
uS$’000s
uS$’000s
496
292
29
19
-
106
-
-
45
-
-
-
541
398
29
19
699
428
30
-
836
106
45
987
1,157
Bonuses are subject to the discretion of the Remuneration Committee and are awarded after assessing company
and individual performance compared to prior years and expectations for the current year. Individual performance
is also assessed against key performance metrics established for each executive.
Taxable benefits mainly relate to housing expenses.
the information in this part of the Directors’ Remuneration Report is subject to audit.
service contracts
The employment contracts of the Executive Directors with the Company are terminable by either party with no
less than four weeks’ notice in writing to the other.
the Directors’ service contracts are as follows:
date of contract
Unexpired
term
Notice period
Compensation
payable on early
termination
Robert Jeffries Chatfield
29 April 2013
Indefinite
Roderick Douglas Mahoney
16 December 2011
Indefinite
Stephen John Fisher
Derek Sharples
29 April 2014
Indefinite
15 november 2016
Indefinite
4 months
3 months
1 month
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 profit; and
improvement in returns 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.
21
Annual Report 2017
dIRECTORs’ REMUnERaTIOn REpORT
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 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
on 8 December 2017
Balance or 100 per cent of the grant if warrants were not
exercised after the first and second vesting years
Warrants granted to Directors on 16 november 2015 have a 3 year vesting schedule with details as follows:
Vesting period
proportion of total share options that are
exercisable
Before 16 november 2016
0 per cent
on 16 november 2016 and before 16 november
2017
on 16 november 2017 and before 16 november
2018
on 16 november 2018
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
22
dIRECTORs’ 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
Exercise
during the
year
balance
at
end of
year
Robert Jeffries Chatfield *
20 nov2013
Robert Jeffries Chatfield *
8 Dec 2014
Robert Jeffries Chatfield *
16 nov2015
Roderick Douglas
Mahoney**
20 nov 2013
110.0p
153.0p
130.0p
110.0p
300,000
450,000
450,000
300,000
Roderick Douglas Mahoney
8 Dec 2014
Roderick Douglas Mahoney
16 nov 2015
153.0p
130.0p
400,000
400,000
-
-
-
-
-
-
(300,000)
-
-
-
450,000
450,000
(300,000)
-
(267,000)
133,000
-
400,000
* Robert Jeffries Chatfield was granted the share warrants via Epsom Assets Limited. For warrants exercised
during the year the market price was 210.0p at the date of exercise.
** Roderick Douglas Mahoney was granted the share warrants via Douglas Aviation Pte Ltd. For warrants exercised
during the year, the market price was 214.0p at the date of exercise.
the closing market price of the shares subject to warrants at the year-end was 223.5p. the highest and lowest
closing market prices during the year were 228.5p and 134.5p.
23
Annual Report 2017
dIRECTORs’ REMUnERaTIOn REpORT
Company’s performance
the graph below shows the total shareholder return on a holding of shares in the Company as against the average
total shareholder return of the companies comprising the FTSE100 index. 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.
Remuneration of Executive Chairman
Executive Chairman single figure
remuneration (uS$’000)
Annual bonus pay-out (as % of maximum)
long term incentive vesting rates against
maximum opportunity %
2017
2016
2015
2014
2013
541
-
n/A
699
15%
n/A
711
-
n/A
638
-
n/A
267
-
n/A
The table above shows the prescribed remuneration data for the Director, Robert Jeffries Chatfield, Executive
Chairman undertaking the role of Group Chief Executive Officer during each of the last five Financial Years.
24
dIRECTORs’ REMUnERaTIOn REpORT
Percentage change in remuneration of Chief Executive Officer
The table below sets out the percentage change in the remuneration of the Executive Chairman who is undertaking
the role of Group Chief Executive Officer compared to that of all employees of the Group.
Executive Chairman
All employees
Relative importance of spend on pay
Change in remuneration
from 2016 to 2017
% change
in base
salary
% change
in annual
bonus
% change
in taxable
benefits
(6%)
9%
(100%)
(35%)
(55%)
(40%)
The Chart below displays the relative expenditure of the Company on various matters, as required (in the case
of remuneration for group employees and shareholder distributions) by the relevant remuneration regulations:
2016 US$ '000
2017 US$ '000
25
Annual Report 2017
dIRECTORs’ REMUnERaTIOn REpORT
Directors’ remuneration policy
the Company applies a policy for Directors’ remuneration which is designed to meet the following objectives:
• provide a fair and transparent remuneration policy that is in alignment with shareholders’ interests;
• provide both immediate and incentive remuneration that is sufficient to attract and retain executives;
• be consistent with best practice for governance of stock exchange listed companies;
• allow claw-back of incentives from executives should previous performance be found to have led to future
adverse circumstances for the Company; and
• ensure alignment between performance and compensation.
the Company targets the following outcomes in applying its policy to ensure alignment of Directors’ remuneration
and shareholders’ interests:
•
•
•
share price appreciation;
increase in the Company’s earnings per share;
reliable and high quality financial reporting;
• growth in asset value and profits; and
• dividend growth.
Remuneration of the Company’s Executive Directors is comprised of the following components:
• base salary;
•
•
short-term incentives in the form of a cash bonus for linked to performance against individual KpIs; and
long-term incentives in the form of share warrants and/or performance shares.
• Remuneration of the Company’s Non-Executive Directors is comprised of fixed Directors’ Fees.
Payments for loss of office
no provisions are made under the Directors’ service contracts for any payments beyond the applicable notice
period.
Remuneration for the appointment of a new Executive Director
Base salary levels are set in accordance with the Company’s remuneration policy, taking into account the experience
and calibre of the individual. Benefits are provided in line with those offered to other employees, with relocation
expenses/arrangements provided if necessary. The Company may offer a cash amount on recruitment, payment
of which may be deferred, as compensation for the value of benefits a new employee would have received from
a former employer.
26
dIRECTORs’ REMUnERaTIOn REpORT
Statement of consideration of employment conditions elsewhere in the company
pay and employment conditions of other employees in the company were taken into account when setting the
policy for Directors’ remuneration. Similar remuneration polices are in place for Directors and employees of an
equivalent level.
Shareholders’ vote on remuneration
Votes cast in favour
Votes cast against
total votes cast in favour or against
Votes withheld
share Count
% of Total
31,380,797
0
31,380,797
5,812,903
100.00%
0.00%
100.00%
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 2016 was approved at the Annual General Meeting held on 15
november 2016.
on behalf of the Board
Robert Jeffries Chatfield
Executive Chairman
27
Annual Report 2017
dIRECTORs’ REspOnsIbILITIEs
the Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. legislation in
the united Kingdom governing the preparation and
dissemination of the financial statements may differ
from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
•
•
the financial statements, prepared in accordance
with IFRSs as adopted by the eu, give a true and
fair view of the assets, liabilities, financial position
and profit or loss of the Company and of the Group;
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; and
• The annual report and financial statements, taken
as a whole, are fair, balanced and understandable
and provide the information necessary for the
shareholders to assess the Group’s position,
performance, business model and strategy.
this responsibility statement was approved by the
Board of directors on 25 September 2017 and is signed
on its behalf by Robert Jeffries Chatfield.
Robert Jeffries Chatfield
Executive Chairman
Statement of Directors’ responsibilities
the Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each Financial Year. Under that
law the Directors are required to prepare the Group
financial statements 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 financial statements under IFRSs as adopted
by the eu.
under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs
of the Company and of the Group and the financial
performance and cash flows of the Group for that year.
In preparing these financial statements, the Directors
are required to:
•
select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• prepare the accounts on the going concern basis
unless it is inappropriate to presume that the
Company will continue in business.
• present information, including accounting policies,
in a manner that provides relevant reliable,
comparable and understandable information.
• provide additional disclosures when compliance with
specific IFRSs are insufficient to enable the users to
understand the impact of particular transactions,
other events and conditions on the entity’s financial
position and financial performance.
• properly select and apply accounting policies.
the Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s and the Group’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and
enable them to ensure that the financial statements
comply with the Companies Act 2006. they are also
responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
28
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC
Opinion
We have audited the financial statements of Avation Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 June 2017 which comprise the Group Statement of Comprehensive
Income, the Group and Parent Company Statements of Financial Position, the Group and Parent
Company Statements of Cash Flows, the Group and Parent Company Statements of Changes in Equity
and notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent
company’s affairs as at 30 June 2017 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with
IFRSs as adopted by the European Union and as applied in accordance with the provisions of
the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS
Regulation.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw
to the attention of the company’s members those matters which we are required to include in an
auditor’s report addressed to them. To the fullest extent permitted by law, we do not accept or assume
responsibility to any party other than the company and company’s members as a body, for our work,
for this report, or for the opinions we have formed.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the audit of financial statements section of our report. We are independent of the
group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material
uncertainties that may cast significant doubt about the group’s or the parent company’s ability
to continue to adopt the going concern basis of accounting for a period of at least twelve
months from the date when the financial statements are authorised for issue.
26
29
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) we identified, including those which had
the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
Key audit matter
Aircraft Valuation
How the scope of our audit responded to the
matter
The carrying value of aircraft is the most significant
figure in the financial statements. The total carrying
value of aircraft as set out in note 25 to the financial
statements is $744.6m (2016: $724.8m); aircraft
carrying value is therefore highly significant as fleet size
and age and condition of aircraft influence the group’s
revenue and borrowings. Carrying value also impacts
our audit approach, because, as explained elsewhere in
our audit report, materiality is derived from group net
assets.
As explained in the group’s accounting policies (note
3.g) aircraft are measured at fair value. Fair value is
determined on a lease encumbered value basis (‘LEV’)
as this is considered to represent the highest and best
use for the leased aircraft. As detailed in note 4, LEV
involves significant judgement in respect of the key
inputs that determine the value, as follows:
Each aircraft is individually material to the financial
statements, creating a potential significant risk of
material misstatement. Therefore our audit work
included critically examining the value of each aircraft.
The group engage a firm of independent experts to
provide an LEV for each aircraft that wasn’t purchased in
the period. We assessed the valuer as independent and
competent, given their experience and reputation. The
valuations were critically examined which included, but
was not limited to, considering the following:
o Does LEV represent the highest and best use?
We concluded that as the group’s principal
activity was leasing and this is how the group
will generate returns from the asset that LEV
was an appropriate basis of valuation.
o
End of lease residual value; and
o
Are residual values appropriate?
o Discount rates.
Significant judgements compared to prior year
o Residual values – Residual values are
determined by observing current market prices
and inflating these using a market expectation.
The inflation rate applied to calculate residual
values was 1% (2016: 0%).
o Discount rates – Discount rates are unchanged
from the prior year; 8.1% for turbo-props and
6.5% for narrow body jets.
The
independent valuer observes current
market transactions for used aircraft and these
prices are inflated at 1% p.a. We discussed
market outlook with the valuer and the valuer’s
own view of inflation and consider that the rate
applied by the group is reasonable.
o
Is the discount rate appropriate?
rate
discount
compared
The
appeared
appropriate compared with the group’s cost of
capital. The independent valuers confirmed that
narrow body aircraft were lower risk than turbo
props.
Key observations
No aircraft were revalued upwards in the year. Two
older narrow body jets sold by the group during the
year were impaired prior to sale, reversing previously
recognised upwards revaluations.
We also reviewed market values achieved on disposals
of aircraft with a lease in situ in order to provide further
evidence of LEV being an appropriate measure of fair
value.
Details of historic cost can be found in note 25.
27
30
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Key audit matter
How the scope of our audit responded to the
matter
Aircraft options held for trading
The fair value of purchase options is material to the
financial statements and the valuation is impacted by
management intentions and future market trends about
which we cannot be certain, therefore creating a
potential significant risk of material misstatement.
The group engage a firm of independent experts to
provide estimated market values for each aircraft at the
delivery date. We assessed the valuer as independent
and competent, given their experience and reputation.
The key assumptions were critically examined which
included, but was not limited to, considering the
following:
o Will the two options be taken into the fleet
when delivered?
Based on documented board decisions and
management representations we concluded
that the intention of the group is not to bring
these option aircraft into the fleet.
o
Are residual values appropriate?
The
independent valuer observes current
market transactions for new aircraft and these
prices are inflated at 1.5% p.a. We discussed
market outlook with the valuer and the valuer’s
own view of inflation and consider that the rate
applied by the group is reasonable
o
Is the discount rate appropriate?
rate
discount
compared
The
appeared
appropriate compared with the group’s cost of
capital. The discount rate used for the options
was the same as that used to calculate LEVs for
the same type of aircraft.
The Group holds purchase options in respect of 27 ATR
72-600s from the manufacturer. In the previous year
management determined that two of these options were
clearly in excess of the business’s usage requirements
and the aircraft acquired under the options would not be
taken into the lease fleet and would instead be sold. On
that basis management determined
it was
appropriate to measure the excess options as fair value
through profit and
in
accordance with IAS 39.
instruments
financial
that
loss
The carrying value of these options is $3.6m (2016:
$3.0m). Any change in either the fair value of the
option or management’s intentions on the exercise of
the option impacts on the income statement directly.
Fair value is determined as the present value of the
expected market value of a new unencumbered aircraft
at the delivery date less the present value of the
contracted purchase price. As detailed in note 4, this
involves significant judgement in respect of the key
inputs that determine the value, as follows:
o Market value on delivery; and
o Discount rates.
Significant judgements compared to prior year
o Market values on delivery – Delivery values are
determined by observing current market prices
and inflating these using a market expectation.
The inflation rate applied to calculate residual
values was 1.5% (2016: 1.5%).
o Discount rates – Discount rates are unchanged
from the prior year and consistent with the
discount rates used for LEVs; 8.1%.
o Options in excess of usage requirements – The
same two option aircraft are considered to
exceed the group’s usage requirements. No
new options have been acquired in the year.
Key observations
A $0.6m increase in the fair value of the purchase
options has been recognised in the income statement.
28
31
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Our application of materiality
Calculating materiality for the financial statements is a vital part of the audit process as it is risks of
material misstatement that our audit planning needs to identify. We then plan our audit fieldwork to
identify material misstatements, whether caused by fraud or error, in order to determine whether the
financial statements show a true and fair view.
Misstatements, including omissions or non-disclosure, are considered material to the financial
statements if they, individually or in aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Based on our professional judgement we
determined materiality for the group financial statements as a whole to be $1,828,000.
In determining materiality we applied a multiple of 1% to group net assets. The nature of the business
is such that the both revenues and profits are derived directly from the group’s physical assets and the
majority of the key measures used by shareholders in assessing the performance of the entity relate to
its asset base. We therefore considered it appropriate to calculate materiality on a consistent basis. We
applied this level of materiality when planning our audit procedures including the level of work to be
performed on individual balances and classes of transactions.
An overview of the scope of our audit
Our engagement was for the audit of the group and parent company financial statements of Avation
PLC for the year ended 30 June 2017. We tailored the scope of our audit to ensure that we performed
sufficient work to enable us to express an opinion on the financial statements as a whole.
The Group’s parent company is registered in the United Kingdom but the majority of the operating
subsidiaries are located overseas. These subsidiaries are mainly special purpose vehicles set up either
to hold aircraft or to lease them externally. The nature of the Group’s business, with a relatively small
number of high value income generating assets, is such that most of the subsidiaries are material to
the group and constitute significant components. All significant components were subject to audit.
We performed group level analytical review procedures on those entities which were not significant
components and not subject to audit to identify any indications that further evidence or specific audit
work might be required in order to enable us to express our opinion on the group financial statements.
While the audit report on the consolidated financial statements of Avation PLC remains the
responsibility of Kingston Smith LLP alone we placed reliance on the work performed by component
auditors in relation to certain overseas subsidiaries.
In order that we were able to place reliance on the work performed by the component auditors we
were in regular contact with those firms at each stage of the audit – planning, performance and
completion.
We held planning discussions with each firm to direct their audit approach to ensure that their work
would address key risk issues identified by the primary audit team at group and also entity level and to
understand whether there were any additional risk areas identified by the component auditors at entity
level. We also advised component auditors of maximum materiality thresholds to be used at entity
level. Detailed planning documentation was submitted by each component auditor to the primary
team on a consistent basis defined by the primary team.
During the performance of the audit we communicated regularly with component auditors to monitor
their progress and to ensure that we were informed of any difficulty or area of concern, disagreement
or subjectivity as soon as it was identified. We also visited the component auditors in Singapore based
on the financial significance of the Singapore based entities to the group as a whole.
Our approach in respect of key audit matters is set out above.
29
32
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its
environment obtained in the course of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires
us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate
for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
30
33
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 24, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no realistic alternative but
to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purposes of expressing
an opinion on the effectiveness of the group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
•
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the group’s or the parent company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the group or the parent company to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
31
34
AVATION PLC
AUDITOR’S REPORT
FOR THE YEAR ENDED 30 JUNE 2017
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Other matters which we are required to address
We were first appointed by the board to audit the financial statements for the group on 7 November
2007 when the group listed on the PLUS market. The group subsequently listed on the standard list of
the London Stock Exchange for in the year ended 30 June 2010. We were most recently reappointed as
auditors to the group on 15 November 2016. Our total uninterrupted period of engagement is 10
years, covering the period from 7 November 2007 to the present.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the
parent company and we remain independent of the group and the parent company in conducting our
audit.
Our audit opinion is consistent with the additional report to the audit committee.
Mark Twum-Ampofo (Senior Statutory Auditor)
For and on behalf of Kingston Smith LLP, Statutory Auditor
25 September 2017
Devonshire House
60 Goswell Road
London
EC1M 7AD
32
35
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Continuing operations
Revenue
Other income
Depreciation
Gain on disposal of aircraft
Impairment loss on aircraft
Administrative expenses
Other expenses
Operating profit
Finance income
Finance expenses
Profit before taxation
Taxation
Profit from continuing operations
Discontinued operations
Profit 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 gain/(loss) on derivative financial instruments
Items that may not be reclassified subsequently to profit or loss:
Impairment/revaluation gain on property, plant and equipment, net of tax
Other comprehensive income, net of tax
Note
2017
2016
US$’000s
US$’000s
9
10
94,173
1,086
95,259
71,190
3,045
74,235
25
(32,300)
(23,201)
11
12
13
14
16
17
18
5,357
-
(8,046)
(71)
60,199
3,660
(902)
(7,550)
(669)
45,573
1,790
1,202
(40,626)
(28,706)
21,363
18,069
(106)
202
21,257
18,271
-
9
21,257
18,280
-
2,804
2,804
(6)
(2,158)
(2,164)
(5,568)
(2,764)
30,987
28,823
Total comprehensive income for the year
18,493
47,103
Profit attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income attributable to:
Equity holders of the Company
Non-controlling interests
21,262
18,279
(5)
1
21,257
18,280
18,509
47,098
(16)
5
18,493
47,103
36
36
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Earnings per share for profit from continuing and discontinued
operations attributable to equity holders of the Company
Basic earnings per share:
From continuing operations
From total operations
Diluted earnings per share:
From continuing operations
From total operations
2017
2016
US$’000s
US$’000s
19
36.27 cents
34.33 cents
36.27 cents
34.35 cents
19
35.68 cents
34.13 cents
35.68 cents
34.15 cents
37
37
AVATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
ASSETS:
Current assets:
Cash and cash equivalents
Trade and other receivables
Finance lease receivables
Options held for trading
Total current assets
Non-current assets:
Trade and other receivables
Finance lease receivables
Property, plant and equipment
Goodwill
Derivative financial instruments
Total non-current assets
Total assets
LIABILITIES AND EQUITY:
Current liabilities:
Trade and other payables
Provision for taxation
Loans and borrowings
Maintenance reserves
Total current liabilities
Non-current liabilities:
Trade and other payables
Loans and borrowings
Derivative financial instruments
Deferred tax liabilities
Maintenance reserves
Total non-current liabilities
Equity attributable to shareholders:
Share capital
Treasury shares
Share premium
Merger reserve
Asset revaluation reserve
Capital reserve
Other reserves
Retained earnings
Non-controlling interest
Total equity
Total liabilities and equity
Note
2017
2016
US$’000s
US$’000s
20
21
22
23
21
22
25
26
30
27
28
29
27
28
30
31
29
32
32
34
87,692
6,109
36,641
3,640
48,267
5,631
3,032
3,040
134,082
59,970
9,320
8,728
11,304
33,627
744,731
724,982
1,902
2,372
1,902
-
767,053
771,815
901,135
831,785
14,920
3,515
94,122
451
113,008
11,480
554,691
1,901
3,318
20,813
592,203
1,058
-
48,365
6,715
24,492
8,876
801
105,556
195,863
61
10,065
1,029
72,423
7,440
90,957
13,471
543,301
2,387
4,738
3,323
567,220
993
(1)
38,925
6,715
41,142
8,876
(1,814)
78,679
173,515
93
195,924
173,608
901,135
831,785
Approved by the board and authorised for issue on 25 September 2017
………………………….
Robert Jeffries Chatfield
Executive Chairman
38
38
AVATION PLC
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2017
ASSETS:
Current assets:
Cash and cash equivalents
Trade and other receivables
Options held for trading
Total current assets
Non-current assets:
Trade and other receivables
Investment in subsidiaries
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES AND EQUITY:
Current liabilities:
Trade and other payables
Loans and borrowings
Total current liabilities
Non-current liabilities:
Trade and other payables
Loans and borrowings
Deferred tax liabilities
Total non-current liabilities
Equity attributable to shareholders:
Share capital
Treasury shares
Share premium
Merger reserve
Asset revaluation reserve
Other reserves
Retained earnings
Total equity
Note
2017
2016
US$’000s
US$’000s
20
21
23
21
24
25
27
28
27
28
31
32
32
34
3,046
82,734
3,640
89,420
4,698
15,375
15,919
35,992
7,666
52,476
3,040
63,182
5,567
15,375
17,000
37,942
125,412
101,124
25,678
7,362
33,040
9,359
1,592
10,951
250
-
1,814
2,064
1,058
-
48,365
6,715
2,862
411
30,897
90,308
1,406
7,362
432
9,200
993
(1)
38,925
6,715
3,448
600
30,293
80,973
Total liabilities and equity
125,412
101,124
The Company has taken advantage of the exemption under 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$6.08 million (2016: US$16.68 million).
Approved by the board and authorised for issue on 25 September 2017
Robert Jeffries Chatfield
Executive Chairman
39
39
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4
AVATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities:
Profit before taxation from continuing operations
Profit before taxation from discontinued operations
Profit before income tax
Adjustments for:
Depreciation expense
Warrants expense
Impairment loss on aircraft
Impairment loss on trade receivables
Impairment loss on goodwill
Amortisation of loan insurance premium
Amortisation of interest expense on non-current deposits
Non-trade receivables written off
Gain on disposal of aircraft
Gain on disposal of assets held for sale
Fair value gain on options held for trading
Fair value gain on derivatives
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 finance lease receivables
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
Purchase of options held for trading
Proceeds from disposal of aircraft
Proceeds from disposal of assets held for sale
Purchase of additional shares in a subsidiary from non-controlling interest
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 to shareholders
Repurchase of treasury shares
Proceeds from sale of treasury shares
Dividend paid to non-controlling interest of a subsidiary
Proceeds from loans and borrowings, net of transactions costs
Repayment of loans and borrowings
Net cash from financing activities
Effects of exchange rates on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
44
44
Note
2017
2016
US$’000s
US$’000s
21,363
18,069
-
9
21,363
18,078
15
12
12
14
14
12
10
10
13
13
14
32,300
220
-
41
-
1,078
924
30
(5,357)
-
(600)
(54)
(929)
(861)
37,396
85,551
5,034
(1,269)
10,501
99,817
846
23,201
339
902
7
482
1,078
376
-
(3,660)
(25)
(2,940)
-
(393)
(809)
26,811
63,447
3,798
1,226
9,938
78,409
809
(36,922)
(26,034)
(721)
(637)
63,020
52,547
(275,665)
(323,222)
-
211,714
-
-
-
(100)
24,755
55
(22)
(884)
(63,951)
(299,418)
9,102
(1,820)
-
1
(16)
196
(1,656)
(7,936)
8,310
(46)
236,243
233,869
(203,154)
(46,240)
40,356
186,497
-
39,425
48,267
87,692
(6)
(60,380)
108,647
48,267
AVATION PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Dividend income
Depreciation expense
Interest income
Interest expense
Fair value gain on options held for trading
Warrant expense
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables and prepayments
Trade and other payables
Cash used in operations
Interest received
Interest paid
2017
2016
US$’000s
US$’000s
6,878
16,618
(6,584)
1,088
(1,568)
1,410
(600)
220
844
(28,205)
(7,027)
(34,388)
384
(792)
(14,810)
1,034
(1,087)
1,115
(2,940)
339
269
(2,529)
(7,869)
(10,129)
358
(1,081)
Net cash used in operating activities
(34,796)
(10,852)
Cash flows from investing activities:
Dividends received
Purchase of property, plant and equipment
Purchase of options held for trading
Investment in subsidiaries
Net cash from investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Dividends paid to owner of company
Repurchase of treasury shares
Re-issue of treasury shares
Proceeds from loans and borrowings
Repayment of loans and borrowings
Net cash from/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
6,584
17,724
(7)
-
-
(23)
(100)
(22)
6,577
17,579
9,102
(1,820)
-
1
17,908
(1,592)
23,599
(4,620)
7,666
3,046
196
(1,656)
(7,936)
8,310
4,081
(3,546)
(551)
6,176
1,490
7,666
45
45
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 4.
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 24 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 1.300.
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.
46
46
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 2017. 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.
47
47
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 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.
48
48
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 and aircraft purchase options in
excess of the Group’s usage requirements 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.
49
49
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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, aircraft purchase options 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, aircraft
purchase options 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. 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
50
50
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 values are based on 15% of cost for new
aircraft and estimated scrap values for second hand aircraft.
Fully depreciated assets still in use are retained in the financial statements.
The gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
(h) 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.
51
51
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
IMPAIRMENT OF NON-FINANCIAL ASSETS (continued)
Impairment losses are recognised in profit or loss to the extent that they do not reverse
a previous upwards revaluation. 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 its 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.
52
52
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 recognises contingent rents when they can be reliably measured.
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) 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.
53
53
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) 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 rental 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.
The Group recognises revenue for estimated end of lease compensation payments
receivable in future periods only when it is able to make a reliable estimate of the
expected compensation amount. The Group does not recognise end of lease
compensation as revenue if there is reasonable expectation that the lessee will
extend the existing lease agreement rather than returning the aircraft at the end
of the current lease period.
(iii)
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the
financial asset to that asset’s net carrying amount.
(iv) Sales of goods are recognised when goods are delivered and title has passed.
(v) Dividend income from investments is recognised when the shareholders’ right to
receive payment have been established.
(vi)
Licence fees received are recognised over the life of the licence agreement.
Ongoing royalties and commissions pursuant to the licence agreement are
recognised as earned.
(q) 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.
54
54
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r)
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.
55
55
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(s)
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.
(t)
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.
56
56
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
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.
(u) 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.
57
57
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(u) 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.
(v)
IMPAIRMENT OF FINANCIAL ASSETS - The Group assesses at each 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.
(w) 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.
58
58
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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.
(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)
Fair value estimation on options held for trading
The Group holds options to acquire aircraft. Management periodically assesses the
Group’s future fleet requirements and will identify options in excess of requirements as
held for trading. The Group values options held for trading as the expected market value
of the relevant aircraft based on its estimated delivery date less the Group’s estimated
contract price to acquire the aircraft, discounted to present value. Critical assumptions
made in determining the fair value of these options include the discount rate of 8.1%, an
inflation rate of 1.5% per annum used to estimate the future contract price for the
aircraft and the expected open market future value of the aircraft at delivery.
59
59
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(e)
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.
It was announced in Singapore Budget 2017 that the concessionary tax rate on
income tax under the ALS incentive will be streamlined to a single rate of 8% for
new or renewal incentive awards approved on or after 1 April 2017. As
management is of the view that the ALS will be renewed beyond 16 April 2019,
management has applied the concessionary tax rate of 8% in determining the
carrying amount of deferred tax asset and liability for temporary differences that
are expected to be realised or settled beyond 16 April 2019.
(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.
(f)
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.
60
60
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
5
NEW STANDARDS AND INTERPRETATIONS NOT APPLIED AND STANDARDS IN
EFFECT IN 2017
(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 IAS 7 Statement of cash flows
1 January 2017
Amendments to IAS 12 Recognition of deferred tax assets for
unrealised losses
1 January 2017
IFRS 15 Revenue from contracts with customers
1 January 2018
IFRS 9 Financial Instruments
1 January 2018
Amendments to IFRS 2 Classification and measurements of share-
Based payment transactions
1 January 2018
IFRS 16 Leases
1 January 2019
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets
between an investor and its associates or joint venture
To be determined
The Directors do not expect that the adoption of the Standards listed above will have a
material impact on the Group in future periods. IFRS 16 does not substantially change
the accounting for lessors whilst the Group’s operating lease commitments (as set out in
note 36) are immaterial. IFRS 9 is not expected to change the accounting treatment for
the financial instruments that the Group holds. IFRS 15 is not expected to cause any
material change to the Group financial statements as currently all of the Group’s income
is outside the scope of that standard. Beyond this, it is not practicable to provide a
reasonable estimate of the effect of IFRS 9 until a detailed review has been completed. It
is anticipated that the other IFRS and IFRIC interpretations are not relevant for the
Group’s activities.
(b) Standards in effect in 2017
The Group has adopted all new standards that have come into effect during the year.
61
61
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Fair value measurement using
significant unobservable inputs:
Aircraft
744,624
724,800
15,879
16,904
Aircraft were valued at 30 June 2017 and 30 June 2016. Refer to Note 25 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
Finance lease receivables
Financial liabilities measured at
amortised cost:
Trade and other payables
Loans and borrowings
Maintenance reserves
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
87,692
9,261
45,369
48,267
9,647
36,659
3,046
87,281
-
7,666
57,907
-
142,322
94,573
90,327
65,573
17,938
648,813
21,264
15,219
615,724
10,763
25,829
7,362
-
10,666
8,954
-
688,015
641,706
33,191
19,620
Derivative used for hedging:
Derivative financial instruments- asset
Derivative financial instruments- (liability)
2,372
(1,901)
-
(2,387)
-
-
-
-
Fair value through profit or loss:
Options held for trading
3,640
3,040
3,640
3,040
62
62
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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 pay rentals in advance and 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:
Asia Pacific
Europe
Group
2017
2016
US$’000s
US$’000s
1,669
1,010
2,679
2,355
1,304
3,659
The Group’s concentration of customers is disclosed in Note 37.
63
63
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
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$1.76 million (2016: US$2.76 million) are
substantially due from companies with a good payment track record.
(ii)
Financial assets that are past due and/or impaired
There is no class of financial assets that are past due and/or impaired except for
trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
Past due less than 3 months
Past due 3 to 6 months
Past due over 6 months
(c)
Interest rate risk
Group
2017
2016
US$’000s
US$’000s
816
59
46
828
-
69
921
897
The Group is exposed to interest rate risk through the impact of interest rate changes on
floating rate interest bearing liabilities and assets.
The Group seeks to reduce its exposure to interest rate risk by fixing interest rates on the
majority of its loans and borrowings. As at 30 June 2017, 95% (2016: 92%) of the
Group’s loans and borrowings are at fixed rates.
The interest rates and repayment terms for financial assets and financial liabilities are
disclosed in the respective notes to the financial statements.
(d)
Foreign currency risk
Foreign currency risk arises from transactions and cash balances that are not denominated
in the Group’s functional currency. The Group’s foreign currency exposures arose mainly
from movements in the exchange rate for Singapore Dollars against the United States
dollar.
The Group aims to mitigate foreign currency risk by holding the majority of its cash
balances in United States dollars. From time to time the Group utilises forward foreign
currency contracts to hedge its exposure to specific currency risks.
64
64
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d) Foreign currency risk (continued)
The Group’s foreign currency exposure is as follows:
Group
equivalents
receivables
liabilities
exposure
US$’000s
US$’000s
US$’000s
US$’000s
Cash and
Trade and
Other
Net
cash
other
financial
currency
2017:
Pound sterling
Australian dollar
Euro
Swiss Franc
Singapore dollar
2016:
Pound sterling
Australian dollar
Euro
Swiss Franc
Singapore dollar
43
-
49
-
354
23
-
31
5
60
(114)
(5)
(63)
-
(493)
(48)
(5)
17
5
(79)
446
119
(675)
(110)
245
16
23
-
335
2
91
23
6
1
(86)
(101)
(91)
(16)
(432)
161
6
(45)
(10)
(96)
619
123
(726)
16
Company
equivalents
receivables
liabilities
exposure
US$’000s
US$’000s
US$’000s
US$’000s
Cash and
Trade and
Other
Net
cash
other
financial
currency
2017:
Pound sterling
Australian dollar
Euro
Singapore dollar
2016:
Pound sterling
Australian dollar
Euro
Singapore dollar
21
-
-
25
46
1
-
-
-
1
(95)
(5)
-
(22)
(58)
(5)
-
192
(122)
129
(60)
(10)
-
(19)
124
(10)
-
36
(89)
150
16
-
-
189
205
183
-
-
55
238
65
65
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d) Foreign currency risk (continued)
The table below illustrates the effect on total profit and total equity that would result from
a strengthening of foreign currencies against the United States dollar by 10% (2016: 10%)
with all other variables including tax rate being held constant:
Foreign currency:
Pound sterling
Australian dollar
Euro
Swiss Franc
Singapore dollar
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
(5)
-
2
-
(8)
16
-
(5)
(1)
(10)
(6)
-
-
-
19
12
(1)
-
-
4
A weakening of the respective currencies by 10% against the United States dollar would
have an equal and opposite effect.
(e)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial
obligations due to shortage of funds. The Group’s exposure to liquidity risk arises primarily
from mismatches of the maturities of financial assets and liabilities. The Group monitors
and maintains a level of cash and cash equivalents that management deems adequate to
finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Short-
term funding is obtained from loan facilities.
Analysis of financial instruments by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial assets and non-
derivative liabilities at the end of the reporting period based on contractual undiscounted
repayment obligations:
66
66
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e) Liquidity risk (continued)
Group
less
years
years
One year or
One to five
Over five
Total
US$’000s
US$’000s
US$’000s
US$’000s
2017:
Financial assets:
Cash and cash equivalents
Trade and other receivables
Finance lease receivable
87,692
4,563
37,386
-
4,698
9,344
Total undiscounted financial assets
129,641
14,042
-
-
-
-
87,692
9,261
46,730
143,683
Financial liabilities:
Trade and other payables
Loans and borrowings
Maintenance reserves
Total undiscounted financial
8,623
124,084
451
4,302
416,487
13,133
7,588
256,528
7,680
20,513
797,099
21,264
liabilities
133,158
433,922
271,796
838,876
Total net undiscounted financial
liabilities
(3,517)
(419,880)
(271,796)
(695,193)
2016:
Financial assets:
Cash and cash equivalents
Trade and other receivables
Finance lease receivable
48,267
4,080
3,600
-
5,567
33,600
Total undiscounted financial assets
55,947
39,167
-
-
-
-
48,267
9,647
37,200
95,114
Financial liabilities:
Trade and other payables
Loans and borrowings
Maintenance reserves
Total undiscounted financial
3,497
98,203
7,440
2,831
405,312
3,323
11,061
182,402
-
17,389
685,917
10,763
liabilities
109,140
411,466
193,463
714,069
Total net undiscounted financial
liabilities
(53,193)
(372,299)
(193,463)
(618,955)
67
67
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e) Liquidity risk (continued)
Company
less
years
years
One year or
One to five
Over five
Total
US$’000s
US$’000s
US$’000s
US$’000s
2017:
Financial assets:
Cash and cash equivalents
Trade and other receivables
3,046
82,583
-
4,698
Total undiscounted financial assets
85,629
4,698
Financial liabilities:
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
25,579
7,362
250
-
32,941
250
Total net undiscounted financial
assets/(liabilities)
52,688
4,448
2016:
Financial assets:
Cash and cash equivalents
Trade and other receivables
7,666
52,340
-
5,567
Total undiscounted financial assets
60,006
5,567
Financial liabilities:
Trade and other payables
Loans and borrowings
Total undiscounted financial
liabilities
9,260
1,993
1,406
7,660
11,253
9,066
Total net undiscounted financial
assets/(liabilities)
48,753
(3,499)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,046
87,281
90,327
25,829
7,362
33,191
57,136
7,666
57,907
65,573
10,666
9,653
20,319
45,254
68
68
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
7
FINANCIAL INSTRUMENTS RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(f)
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to
continue as a going concern and to maintain a suitable capital structure so as to fund
growth and maximise shareholder value. In order to maintain or achieve an optimal
capital structure, the Group may adjust the amount of dividend payments, return capital to
shareholders, issue new shares, buy back issued shares, incur new borrowings or sell
assets to reduce borrowings.
Management monitors capital based on a gearing ratio. The gearing ratio is calculated as
net debt divided by total capital. Net debt is calculated as borrowings less cash and cash
equivalents.
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Current:
Net debt
Total equity
561,121
195,924
567,457
173,608
4,316
90,308
1,288
80,973
Total capital
757,045
741,065
94,624
82,261
Gearing ratio:
74%
77%
5%
2%
The Group is in compliance with all externally imposed capital requirements for the years
ended 30 June 2017 and 30 June 2016.
(g)
Fair value of financial assets and financial liabilities
The fair values of financial assets and financial liabilities reported in the statement of
financial position approximate the carrying amounts of those assets and liabilities.
69
69
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
8
RELATED PARTY TRANSACTIONS
In addition to related party information disclosed elsewhere in these financial statements, the
following transactions took place between the Group and related parties at terms agreed
between the parties.
(a) Remuneration of key management personnel
The remuneration of Directors and key management includes fees, salary, bonus,
commission and other emoluments (including benefits-in-kind) based on the cost incurred
by the Company and the Group, and where the Company or Group did not incur any costs,
the value of the benefits. Key management remuneration is as follows:
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Key management:
Short-term employee benefits
2,007
1,985
381
439
The amount above includes remuneration in respect of the highest paid Director as follows:
Aggregate emoluments
541
699
Group
2017
2016
US$’000s
US$’000s
No contributions were made on behalf of any Directors to money purchase pension
schemes.
70
70
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
8
RELATED PARTY TRANSACTIONS (continued)
(b) Significant related party transactions:
Entities controlled by key
management personnel
(including Directors):
Rental expenses paid
Consulting fee paid
Service fee paid
Interest expense
Directors
Interest expense
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
(213)
(193)
-
(424)
(217)
(107)
(15)
(506)
(119)
(163)
-
(15)
(119)
(107)
(15)
(74)
(44)
(9)
(29)
-
(c)
Significant transactions between the Company and its subsidiaries:
Commission income
Dividend income
Interest income
Management and service fee income
Rental income
Interest expense
Company
2017
2016
US$’000s
US$’000s
960
6,584
1,568
44
2,088
(997)
105
14,428
1,087
759
2,088
(596)
71
71
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
9
REVENUE
Lease rental revenue
End of lease return compensation
Group
2017
2016
US$’000s
US$’000s
92,414
1,759
71,190
-
94,173
71,190
End of lease return compensation represents contingent rents as set out in the revenue
recognition accounting policy.
10
OTHER INCOME
Finance lease conversion fee
Fair value gain on options held for trading
Fair value gain on derivatives
Foreign currency exchange gain
Others
11
ADMINISTRATIVE EXPENSES
Staff costs (note 15)
Other administrative expenses
Group
2017
2016
US$’000s
US$’000s
325
600
54
35
72
-
2,940
-
-
105
1,086
3,045
Group
2017
2016
US$’000s
US$’000s
3,716
4,330
3,841
3,709
8,046
7,550
72
72
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
12
OTHER EXPENSES
Foreign currency exchange loss
Impairment loss on trade receivables
Impairment loss on goodwill
Non-trade receivables written off
Others
13
FINANCE INCOME
Interest income
Finance income from discounting non-current deposits to fair value
14
FINANCE EXPENSES
Interest expense on borrowings
Interest expense on unsecured 7.5% notes
Amortisation of loan insurance premium
Amortisation of interest expense on non-current deposits
Finance charges on early full repayment on borrowings
Others
Group
2017
2016
US$’000s
US$’000s
-
41
-
30
-
71
47
7
482
-
133
669
Group
2017
2016
US$’000s
US$’000s
861
929
809
393
1,790
1,202
Group
2017
2016
US$’000s
US$’000s
29,079
8,317
1,078
924
914
314
18,546
8,265
1,078
376
-
441
40,626
28,706
73
73
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
15
STAFF COSTS
Wages and salaries
Warrants expense
Group
2017
2016
US$’000s
US$’000s
3,496
220
3,502
339
3,716
3,841
The average number of Directors of the Company for the year is 4 (2016: 3). The average
number of other employees for the year is 16 (2016: 16).
16
PROFIT BEFORE TAXATION
Profit before taxation for the year is stated after charging/(crediting) the following:
Depreciation of property, plant and equipment
Foreign currency exchange (gain)/loss
Audit fees:
Fees payable to the Company’s auditor and their associates
for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and their associates
for audits of the Company’s subsidiaries’ annual accounts
Total audit fees
Auditors’ remuneration for non-audit services:
- Tax compliance services
Total fees for non-audit services
Group
2017
2016
US$’000s
US$’000s
32,300
23,201
(35)
47
85
13
98
-
-
65
34
99
5
5
74
74
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
17
TAXATION
From continuing operations
Current tax expense:
- Singapore
- Overseas
(Over)/Under provision in prior years current tax expense:
- Singapore
- Overseas
Deferred tax expense:
- Singapore
- Overseas
Over provision in prior years deferred tax expense:
- Singapore
Withholding tax
Group
2017
2016
US$’000s
US$’000s
1,350
1,810
(2)
8
(686)
(936)
(1,479)
41
106
1,018
188
(31)
56
(349)
(466)
(622)
4
(202)
Income tax differs from the amount of income tax expense determined by applying the
Singapore tax rate of 17% to profit before income tax as a result of the following differences:
Group
2017
2016
US$’000s
US$’000s
21,363
18,069
-
9
21,363
18,078
3,632
3,073
(2)
8
(1,479)
2,593
(1,511)
113
(2,005)
(1,234)
(52)
41
2
106
(31)
56
(622)
1,492
(1,971)
223
(2,417)
-
(89)
4
80
(202)
Profit before income tax
- continuing operations
- discontinued operations (Note 18)
Tax calculated at 17% (2016: 17%)
Effects of:
(Over)/under provision in prior years current tax expense
- Singapore
- Overseas
Over provision in prior years deferred tax expense:
- Singapore
Non-deductible items
Income not subject to tax
Different tax rates of other countries
Effect of concessionary tax rate at 10%
Effect of concessionary tax rate at 8%
Effect of tax exemption and tax relief
Withholding tax
Others
75
75
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
18
DISCONTINUED OPERATIONS
Discontinued operations are derived from the cessation of the Group’s leasing operations in
North America in 2015.
(a) Results of discontinued operations
Revenue
Expenses
Profit before tax from discontinued operations
Taxation
Profit after tax from discontinued operations
(b) Cash flows from discontinued operations
Operating cash/(outflow) inflows
Investing cash inflows
Total cash inflows
(c)
Earnings per share from discontinued operations
Group
2017
2016
US$’000s
US$’000s
-
-
-
-
-
25
(16)
9
-
9
Group
2017
2016
US$’000s
US$’000s
-
-
-
(16)
55
39
Group
2017
2016
Profit per share from discontinued operation attributable to
equity owners of the Company (cents per share)
Basic
Diluted
-
-
0.02 cents
0.02 cents
76
76
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
19
EARNINGS PER SHARE
(a) Basic earnings per share (“EPS”)
EPS is calculated by dividing total profit attributable to members of the Company by the
weighted average number of ordinary shares in issue during the year.
Total profit attributable to equity holders of the company
- Continuing operations
- Discontinued operations
Company
2017
2016
US$’000s
US$’000s
21,262
18,270
-
9
21,262
18,279
Weighted average number of ordinary shares (‘000s)
58,626
53,208
Basic earnings per share:
- Continuing operations
- Discontinued operations
(b) Diluted earnings per share
36.27 cents
34.33 cents
-
0.02 cents
36.27 cents
34.35 cents
For the purpose of calculating diluted earnings per share, total profit attributable to equity
holders of the Company and the weighted average number of ordinary shares outstanding
are adjusted for the effects of all dilutive potential ordinary shares. The Company has one
category of dilutive potential ordinary shares; warrants.
For warrants, the weighted average number of shares on issue has been adjusted as if all
dilutive share options were exercised. The number of shares that could have been issued
upon the exercise of all dilutive share option less the number of shares that could have
been issued at fair value (determined as the Company’s average share price for the year)
for the same total proceeds is added to the denominator as the number of shares issued
for no consideration.
77
77
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
19
EARNINGS PER SHARE (continued)
(b) Diluted earnings per share (continued)
Diluted earnings per share attributable to equity holders of the Company is calculated as
follows:
Total profit attributable to equity holders of the company
- Continuing operations
- Discontinued operations
- Total operations
Company
2017
2016
US$’000s
US$’000s
21,262
18,270
-
9
21,262
18,279
Weighted average number of ordinary shares (‘000s)
Adjustment for warrants (‘000s)
58,626
966
53,208
314
Weighted average number of ordinary shares (‘000s)
59,592
53,522
Diluted earnings per share:
- Continuing operations
- Discontinued operations
- Total operations
35.68 cents
34.13 cents
-
0.02 cents
35.68 cents
34.15 cents
20
CASH AND CASH EQUIVALENTS
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Cash at bank and on hand
87,692
48,267
3,046
7,666
The rate of interest for cash on interest earning accounts is approximately 0.01% to 1.08%
(2016: 0.01% to 0.10%) per annum.
Cash and cash equivalents denominated in foreign currencies are as follows:
Pounds sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
43
-
49
354
245
16
23
335
16
-
-
189
183
-
-
55
78
78
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
21
TRADE AND OTHER RECEIVABLES
Current:
Trade receivables
Less:
Impairment loss on trade receivables
Other receivables:
– subsidiaries
– third parties
Interest receivables:
– subsidiaries
– third parties
Deposits
Prepaid expenses
Prepaid loan premiums
Non-current:
Deposits for aircraft
Prepaid expenses
Prepaid loan premiums
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
2,720
3,666
(41)
2,679
(7)
3,659
175
-
175
15
-
15
-
1,813
-
16
55
468
1,078
-
391
-
-
30
469
1,082
80,126
21
51,019
255
2,236
1,051
-
25
151
-
-
-
136
-
6,109
5,631
82,734
52,476
4,698
492
4,130
5,567
529
5,208
4,698
5,567
-
-
-
-
9,320
11,304
4,698
5,567
Other receivables from subsidiaries includes interest bearing receivables of US$23.40 million
(2016: US$24.96 million). The receivables are unsecured and repayable upon demand. Interest
is charged at 5.5% to 6.0% (2016: 5.5% to 6.0%) per annum.
The average credit period generally granted to customers is 30 to 60 days. Rent for leased
aircraft is due in advance in accordance with the leases.
Trade and other receivables denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Swiss Franc
Singapore dollar
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
23
-
31
5
60
2
91
23
6
1
21
-
-
-
25
1
-
-
-
-
79
79
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
22
FINANCE LEASE RECEIVABLES
During the year, a third party who leases 5 aircraft from the Group agreed to acquire the aircraft
at the end of their lease terms. As a result the leases for these aircraft have been reclassified as
finance leases. The leases have a remaining term of approximately 2.5 to 3.5 years.
Finance lease receivables also include amounts from leases reclassified in the previous year with
an approximate remaining term of 0.5 years. Finance lease receivables do not include any
contingent rents or residual value guarantees.
Future minimum lease payments receivable under finance are as follows:
Group
2017
2016
Minimum
lease
Present
value of
Minimum
lease
Present
value of
payments
payments
payments
payments
US$’000s
US$’000s
US$’000s
US$’000s
Within one year
37,386
36,641
3,600
3,032
Later than one year but not more than five
years
9,344
8,728
33,600
33,627
Total minimum lease payments
46,730
45,369
37,200
36,659
Less: amounts representing interest
income
(1,361)
-
(541)
-
Present value of minimum lease
payments
45,369
45,369
36,659
36,659
23
OPTIONS HELD FOR TRADING
Options to purchase aircraft, at fair value
3,640
3,040
Group and Company
2017
2016
US$’000s
US$’000s
80
80
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
24
INVESTMENT IN SUBSIDIARIES
Company
2017
2016
US$’000s
US$’000s
Unquoted equity shares, at cost
15,375
15,375
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
Held directly by the Company:
Avation.net Inc
Avation Capital S.A.
Capital Lease Aviation Limited
MSN429 Leaseco Limited
Avation Group (S) Pte. Ltd.
AVAP Leasing (Europe) Limited
AVAP Leasing (Asia) Limited
AVAP Leasing (Asia) II Limited
AVAP Leasing (Asia) III Limited
AVAP Leasing (Asia) IV Limited
United States
Luxembourg
(f)
(b)
(a) United Kingdom
(f) United Kingdom
(d)
(f)
(e)
(e)
(e)
(e)
Singapore
Ireland
Ireland
Ireland
Ireland
Ireland
2017
%
2016
%
Procurement
Financing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
99.96
100.00
99.68
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.96
100.00
99.68
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Held by Capital Lease Aviation Limited:
Capital Lease Malta Ltd.
Capital Lease Aviation (S) Pte. Ltd.
Capital MSN 4033 Limited
(c)
(f)
(e)
Malta
Singapore
Ireland
Aircraft leasing
Aircraft leasing
Aircraft leasing
99.68
99.68
99.68
99.68
99.68
99.68
(d)
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.
(d)
Held by Avation Eastern Fleet III Pte. Ltd.:
(d)
Airframe Leasing (S) III Pte. Ltd.
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.
(d)
(d)
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
(f) United Kingdom Aircraft leasing
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
81
81
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
24
INVESTMENT IN SUBSIDIARIES (continued)
Name of entity
Country of
incorporation
Principal
activities
Ownership
interest
2017
%
2016
%
Held by Avation Group (S) Pte. Ltd.:
Avation Eastern Fleet 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.
MSN 1607 Pte. Ltd.
AVAP Aircraft Trading Pte. Ltd.
AVAP Leasing (Europe) IV Pte. Ltd.
Avation Leasing (China) Pte. Ltd.
AVAP Leasing Holding Pte. Ltd.
Avation Asia Fleet Pte. Ltd.
Avation Asia Fleet II Pte. Ltd.
Avation Asia Fleet III Pte. Ltd.
MSN 1922 Pte. Ltd.
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(d)
(f)
(d)
(d)
(d)
(d)
(g)
(g)
(d)
(d)
(d)
(d)
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
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
Aircraft leasing
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
100.00
-
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
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 Kingston Smith LLP, London, United Kingdom
(b) Audited by Artemis Audit and Advisory, Luxembourg
(c) Audited by Nexia BT, Malta
(d) Audited by Ernst & Young LLP, Singapore
(e) Audited by KSi Faulkner Orr, Dublin, Ireland
(f) Audited by Kingston Smith LLP, London, United Kingdom for consolidation purposes.
(g) Dissolved during the year.
For all non-controlling interests, voting rights not controlled by group are equivalent to
ownership interests.
82
82
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25
PROPERTY, PLANT AND EQUIPMENT
Group
equipment
Jets
Furniture
and
Turbo-
props
Total
US$’000s
US$’000s
US$’000s
US$’000s
2017:
Cost or valuation:
At beginning of year
Additions
Disposals/written-off
Reclassified as held under finance leases
Impairment recognised in equity
388
47
(3)
-
-
382,565
256,791
435,215
18,827
818,168
275,665
(126,916)
(117,448)
(244,367)
(32,383)
(3,887)
-
-
(32,383)
(3,887)
At end of the year
432
476,170
336,594
813,196
Representing:
At cost
At valuation
432
-
-
-
432
476,170
336,594
812,764
432
476,170
336,594
813,196
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense
Disposals/written-off
Reclassified as held under finance leases
206
122
(3)
-
55,845
17,008
(27,609)
(20,156)
37,135
15,170
(9,253)
-
93,186
32,300
(36,865)
(20,156)
At end of the year
325
25,088
43,052
68,465
Net book value:
At beginning of the year
At end of the year
182
107
326,720
398,080
724,982
451,082
293,542
744,731
83
83
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25
PROPERTY, PLANT AND EQUIPMENT (continued)
Group
equipment
Jets
Furniture
and
Turbo-
props
Total
US$’000s
US$’000s
US$’000s
US$’000s
2016:
Cost or valuation:
At beginning of year
Additions
Disposals/written-off
Reclassified as held under finance leases
Revaluations
At end of the year
Representing:
At cost
At valuation
357
31
-
-
-
163,040
226,914
(7,999)
-
610
344,492
115,877
(19,258)
(35,601)
29,705
507,889
342,822
(27,257)
(35,601)
30,315
388
382,565
435,215
818,168
388
-
-
-
388
382,565
435,215
817,780
388
382,565
435,215
818,168
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense – continuing
operations
Disposals/written-off
Reclassified as held under finance leases
Impairment loss
88
47,875
25,847
73,810
118
-
-
-
9,704
(2,636)
-
902
13,379
-
(2,091)
-
23,201
(2,636)
(2,091)
902
At end of the year
206
55,845
37,135
93,186
Net book value:
At beginning of the year
At end of the year
269
182
115,165
318,645
434,079
326,720
398,080
724,982
84
84
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
2017:
Cost or valuation:
At beginning of year
Additions
At end of the year
Representing:
At cost
At valuation
Accumulated depreciation and impairment:
At beginning of year
Depreciation expense
At end of the year
Net book value:
At beginning of the year
At end of the year
Furniture
and
equipment
Jets
Total
US$’000s
US$’000s
US$’000s
189
7
19,949
20,138
-
7
196
19,949
20,145
196
-
-
19,949
196
19,949
196
19,949
20,145
93
63
3,045
1,025
3,138
1,088
156
4,070
4,226
96
40
16,904
15,879
17,000
15,919
85
85
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25
PROPERTY, PLANT AND EQUIPMENT (continued)
Company
2016:
Cost or valuation:
At beginning of year
Additions
Revaluations
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
166
23
-
19,374
19,540
-
575
23
575
189
19,949
20,138
189
-
-
19,949
189
19,949
189
19,949
20,138
35
58
93
2,069
976
2,104
1,034
3,045
3,138
131
96
17,305
16,904
17,436
17,000
86
86
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
25
PROPERTY, PLANT AND EQUIPMENT (continued)
Assets pledged as security
The Group’s aircraft with carrying values of US$725.86 million (2016: US$724.80 million) are
mortgaged to secure the Group’s borrowings (Note 28).
Valuation
The Group’s aircraft were valued in June 2017 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 8.1% 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$23.7 million.
During the year, two aircraft were revalued downward prior to the sale of the aircraft using
discounted cash flow methodology based on the value specified in the sales agreement and the
present value of the remaining lease payments.
An impairment loss of US$0.9 million was recognised during the previous year to write down
the book value of a 24 year old aircraft to LEV.
If the aircraft were measured using the cost model, the carrying amounts would be as follows:
Group
Cost
Accumulated depreciation and impairment
2017
2016
Jets
Turbo-
props
Jets
Turbo-
props
US$’000s
US$’000s
US$’000s
US$’000s
471,487
(25,903)
313,665
(42,041)
363,011
(44,031)
405,510
(37,135)
Net book value
445,584
271,624
318,980
368,375
Company
Cost
Accumulated depreciation and impairment
Net book value
2017
2016
Jets
Turbo-
props
Jets
Turbo-
props
US$’000s
US$’000s
US$’000s
US$’000s
16,561
(3,257)
13,304
-
-
-
16,561
(2,479)
14,082
-
-
-
87
87
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
26
GOODWILL
Cost:
At beginning and end of the year
2,384
2,384
Group
2017
2016
US$’000s
US$’000s
Accumulated amortisation and impairment:
At beginning of the year
Impairment loss
At end of the year
Net carrying amount:
At beginning of the year
At end of the year
Impairment test of goodwill
482
-
-
482
482
482
1,902
1,902
2,384
1,902
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 two-year period.
Key assumptions used for value-in-use calculations:
Average cash flow growth rate
Terminal growth rate
Discount rate
2017
%
2016
%
2.0
2.0
7.0
2.0
2.0
7.0
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$1.90 million (2016: US$1.90 million).
Management believes that no reasonably possible change in any of the above key assumptions
would cause the carrying value of the CGU to materially exceed its recoverable amount.
88
88
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
27
TRADE AND OTHER PAYABLES
Current:
Trade payables
Other payables:
- subsidiaries
- third parties
Dividend payable
Deposits collected
Deferred lease income
Revenue received in advance
Accrued expenses
Non-current:
Deposits collected
Deferred lease income
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
372
535
18
167
-
33
3,664
1,094
356
5,947
3,454
-
31
-
-
365
6,203
2,931
20,892
31
3,664
-
-
99
974
8,714
31
-
-
-
99
348
14,920
10,065
25,678
9,359
9,321
2,159
11,722
1,749
250
-
1,406
-
11,480
13,471
250
1,406
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 US$17.91 million (2016:
US$4.08 million) which are unsecured, payable upon demand and bear interest at 9.3% (2016:
5.5% to 6.0%) per annum. Accrued expenses includes interest payable to subsidiaries of
US$0.86 million (2016: US$0.26 million).
The average credit period taken to settle non-related party trade payables is approximately 30 to
60 days.
Deposits collected are security deposits collected from customers in respect of aircraft lease
commitments, and have been discounted to present value at a current pre-tax rate that reflect
the risks specific to these deposits. Deposits will be refunded at the end of the respective lease
term.
Trade and other payables denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Swiss Franc
Singapore dollar
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
114
5
63
-
493
86
101
91
16
432
95
5
-
-
22
60
10
-
-
19
89
89
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28
LOANS AND BORROWINGS
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Secured borrowings
Junior secured borrowings
Unsecured 7.5% notes due 2020 (a)
507,509
23,415
117,889
510,640
8,017
97,067
7,362
8,954
-
-
-
-
Less: current portion of borrowings
(94,122)
(72,423)
(7,362)
(1,592)
648,813
615,724
7,362
8,954
554,691
543,301
-
7,362
Weighted average
Maturity
interest rate per annum
2017
2016
US$’000s
US$’000s
2017
%
2016
%
Secured borrowings
Junior secured borrowings
2017-2028
2016-2028
2020-2023
2020-2024
Unsecured 7.5% notes due 2020 (a)
2020
2020
4.5%
6.7%
7.5%
4.3%
6.3%
7.5%
Secured borrowings are secured by first ranking mortgages over the relevant aircraft, 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.
90
90
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
28
LOANS AND BORROWINGS (continue)
(a) 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).
In May 2017, the Issuers issued US$20 million unsecured Notes with a fixed coupon rate
of 7.5% per annum and a tenor of 3 years repayable in May 2020 under the Programme.
The Notes are listed on the Singapore Exchange (SGX).
Entities over which a Director has significant influence hold US$5.45 million (2016:
US$5.45 million) of the May 2015 series of the Unsecured Notes as at 30 June 2017.
A Director of the Company holds US$0.2 million (2016: US$0.2 million) of the May 2015
series of the Unsecured Notes as at 30 June 2017.
The carrying amounts of borrowings approximate fair value.
29 MAINTENANCE RESERVES
Current
Non-current
Group
2017
2016
US$’000s
US$’000s
451
20,813
7,440
3,323
Total maintenance reserves
21,264
10,763
At beginning of year
Transfer from sellers
Contributions
Utilisations
At end of the year
Group
2017
2016
US$’000s
US$’000s
10,763
-
10,668
(167)
825
8,552
1,386
-
21,264
10,763
The Group also holds letters of credit for US$16.82 million (2016: US$14.10 million) as security
for lessees’ obligations under operating leases for the maintenance of aircraft.
91
91
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
30
DERIVATIVE FINANCIAL INSTRUMENTS
Group
Contract/
notional amount
Fair value
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Interest rate swap – non-current asset
Interest rate swap – non-current liability
96,829
87,014
-
54,010
2,372
1,901
-
2,387
The Group pays fixed rates of interest of 1.73% to 2.63% per annum and receives floating rate
interest equal to 3-month LIBOR under the interest rate swap contracts. The swap contracts
mature between 23 September 2021 and 22 December 2028.
The fair value of the derivative financial instruments is determined by reference to marked-to-
market values provided by counterparties. The fair value measurement of all derivative financial
instruments under the Group is classified under Level 2 of the fair value hierarchy, for which
inputs other than quoted prices that are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) are included as inputs for the
determination of fair value.
31
DEFERRED TAX LIABILITIES
Recognised deferred tax liabilities are attributable to the following:
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Property, plant and equipment
Tax losses carried forward
4,168
(850)
5,700
(962)
1,814
-
432
-
3,318
4,738
1,814
432
Movements in temporary differences are as follows:
Group
2017
At beginning of the year
Recognised in profit or loss
Recognised in equity
Property,
plant and
equipment
US$’000s
Tax losses
carried
forward
US$’000s
Total
US$’000s
5,700
(3,213)
1,681
(962)
112
-
4,738
(3,101)
1,681
At end of the year
4,168
(850)
3,318
2016
At beginning of the year
Recognised in profit or loss
Recognised in equity
6,847
(475)
(672)
-
(962)
-
6,847
(1,437)
(672)
At end of the year
5,700
(962)
4,738
92
92
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
31
DEFERRED TAX LIABILITIES (continued)
Company
2017
At beginning of the year
- Recognised in profit or loss
- Recognised in equity
At end of the year
2016
At beginning of the year
- Recognised in profit or loss
At end of the year
Property,
plant and
equipment Other items
US$’000s
US$’000s
Total
US$’000s
432
796
586
1,814
493
(61)
432
-
-
-
-
-
-
-
432
796
586
1,814
493
(61)
432
32
SHARE CAPITAL AND TREASURY SHARES
(a) Share capital
2017
2016
No of shares
US$’000s
No of shares
US$’000s
Allotted, called up and fully paid
Ordinary shares of 1 penny each:
At beginning of the year
Issue of shares
55,785,227
5,286,019
993
65
55,663,727
121,500
991
2
At end of the year
61,071,246
1,058 55,785,227
993
During the year, the Company issued 2,943,709 ordinary shares of 1 penny each at a price
of 155p through private placement and 2,342,310 ordinary shares of 1 penny at prices
ranging 110p to 153p following the exercise of warrants by warrant holders raising total
gross proceeds of US$9.39m.
The holders of ordinary shares (except for treasury shares) are entitled to receive
dividends as and when declared by the Company. All ordinary shares carry one vote per
share without restrictions.
93
93
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
32
SHARE CAPITAL AND TREASURY SHARES (continued)
(b)
Treasury shares
2017
2016
No of
treasury
shares
No of
treasury
shares
US$’000s
US$’000s
At beginning of the year
Acquired during the year
Re-issued during the year
At end of the year
600
-
(600)
-
1
-
450,000
3,750,600
682
7,936
(1)
(4,200,000)
(8,617)
-
600
1
During the year, the Company re-issued 600 treasury shares for 205p.
33
SHARE BASED PAYMENTS
The Group has an ownership-based compensation scheme for Directors and senior
management.
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 profit
Improvement in returns to shareholders
Movement in warrants during the year
The following table illustrates the number (No.) and weighted average exercise prices (WAEP)
of, and movements in, warrants during the year:
2017
2016
No.
WAEP
No.
WAEP
Outstanding at beginning of the year
- Granted
- Exercised
- Lapsed/cancelled
5,948,500
-
(2,342,310)
(25,000)
133.9p
-
129.0p
153.0p
3,420,000
3,000,000
(121,500)
(350,000)
136.0p
130.0p
110.0p
130.0p
Outstanding at end of the year
3,581,190
136.3p
5,948,500
133.9p
Exercisable at end of the year
1,138,690
136.1p
1,433,500
130.5p
94
94
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
33
SHARE BASED PAYMENTS (continued)
The weighted average fair value of warrants granted during the year was NIL (2016: 11.82
pence). The charge recognised in profit or loss in respect of share based payments is US$0.2
million (2016: US$0.3 million).
During the year, 2,342,310 warrants were exercised (2016: 121,500).
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
2016
2017
20 November 2013
8 December 2014
16 November 2015
21 Nov 2016
9 Dec 2017
16 Nov 2018
110.0p
153.0p
130.0p
-
982,500
2,598,690
1,248,500
2,050,000
2,650,000
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
95
95
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
33
SHARE-BASED PAYMENTS (continued)
The warrants granted on 16 November 2015 have a 3 year vesting schedule and the details are
as follows:
Vesting period
Warrant series signed on 16 November 2015
Before 16 November 2016
On 16 November 2016 and before 16 November 2017 Up to 33 per cent of the grant
On 16 November 2017 and before 16 November 2018 Up to 33 per cent of the grant or up to 66 per
0 per cent
On 16 November 2018
cent of the grant if warrants were not exercised
after the first vesting year
Balance or 100 per cent of the grant if warrants
were not exercised after the first and second
vesting years
The warrants were priced using the Black-Scholes option pricing model. Where relevant, the
expected life used in the model has been adjusted based on 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 previous nine months.
Warrant series
Warrant series
Warrant series
granted on
granted on
granted on
16 November 2015
8 December 2014
20 November 2013
Inputs into the model:
Grant date share price
Exercise price
Expected volatility
Warrant life
Dividend yield
Risk free interest rate
130.0 pence
130.0 pence
20%
3 years
1.01%
0.35%
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%
96
96
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
34
OTHER RESERVES
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Capital redemption reserve
Warrant reserve
Fair value reserve
Foreign currency translation reserve
12
399
417
(27)
12
588
(2,387)
(27)
12
399
-
-
12
588
-
-
801
(1,814)
411
600
Movements in other reserves are as follows:
Group
Company
2017
2016
2017
2016
US$’000s
US$’000s
US$’000s
US$’000s
Warrant reserve:
At the beginning the year
Employee share warrant scheme:
- Value of employee services
- Issue of shares
- Expired
588
288
588
288
220
(403)
(6)
339
(39)
-
220
(403)
(6)
339
(39)
-
At end of the year
399
588
399
588
Fair value reserve:
At the beginning the year
Fair value gain/(loss)
(2,387)
2,804
(229)
(2,158)
At end of the year
417
(2,387)
Foreign currency translation reserve:
At the beginning the year
(27)
(21)
Currency translation differences arising
from consolidation of foreign subsidiaries
-
(6)
At end of the year
(27)
(27)
-
-
-
-
-
-
-
-
-
-
-
-
97
97
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
35
CAPITAL COMMITMENTS
Capital expenditure contracted for at the reporting date but not recognised in the financial
statements is as follows:
Group
2017
2016
US$’000s
US$’000s
Property, plant and equipment
147,890
327,955
The above capital commitments represent amounts due under contracts entered into by the
Group to purchase aircraft. The company has paid deposits towards the cost of these aircraft
which are included in trade and other receivables.
Included in the above are commitments to purchase eight ATR 72-600 aircraft from the
manufacturer with expected delivery dates over a three-year period ending in June 2019. Two
of these aircraft are due to be delivered before the end of the calendar year 2017. Subsequent
to the date of this report, the Group has signed lease agreements for these aircraft. See note
41.
36
OPERATING LEASE COMMITMENTS
The Group leases out aircraft under operating leases. The future minimum lease payments
receivable under non-cancellable leases are as follows:
Within one year
In the second to fifth years inclusive
More than five years
Group
2017
2016
US$’000s
US$’000s
81,161
289,033
245,822
84,182
313,268
240,947
The Group holds cash deposits of US$12.74 million (2016: US$12.80 million) and letters of credit
for US$4.05 million (2016: US$4.70 million) as security for lessees’ obligations under operating
leases.
98
98
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
37
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 2017, 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.
99
99
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
37
SEGMENT INFORMATION (continued)
(c) Geographical analysis
2017
Revenue from continuing activities
Capital expenditure
Net book value - aircraft
Total assets
2016
Revenue from continuing activities
Capital expenditure and valuation
movements
Net book value - aircraft
Total assets
Europe
US$’000s
Asia
Pacific
US$’000s
33,620
-
222,039
358,580
60,553
275,665
522,585
542,555
Total
US$’000s
94,173
275,665
744,624
901,135
Europe
US$’000s
Asia
Pacific
US$’000s
Total
US$’000s
22,030
49,160
71,190
293,912
341,765
370,708
79,225
383,035
461,077
373,137
724,800
831,785
During the year, certain customers accounted for more than 10% of the Group’s total
revenues. There is one customer based in the Asia Pacific geographical area that
accounts for US$34.8 million (2016: US$37.7 million), 37% (2016: 53%) of the Group’s
total revenues from continuing operations.
38
CONTINGENT LIABILITIES
Guarantees
Group
2017
2016
US$’000s
US$’000s
Guarantees
648,813
615,724
The maximum estimated amount that the Group could become liable for under guarantees is as
shown above.
100
100
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2017
39
DIVIDENDS
2017
2016
US$’000s
US$’000s
Declared/paid during the year:
Dividends on ordinary shares
- Interim exempt (one-tier) dividend for 3.25 US cents (2016: 3.00 US
1,820
1,656
cents) per share paid during the year
- Interim exempt (one-tier) dividend for 6.00 US cents per share
3,664
-
declared
Dividends to the Company’s shareholders are recognised when the dividends are approved for
payment.
40
ULTIMATE HOLDING COMPANY
No party controls the Company.
41
SUBSEQUENT EVENTS
On 17 July 2017 the Group announced the allotment of 357,000 fully paid new ordinary shares
represent 0.58 per cent of the enlarged share capital of the Company pursuant to the exercise of
2015 series employee share warrants at a price of 130 pence per share.
On 22 August 2017, the Group signed a new lease for a mid life Airbus A321 which will
commence on expiry of its existing lease in mid 2018. The aircraft will transition to another
European Airline for a term of 72 months at typical commercial rates for a mid life aircraft.
On 11 September 2017, the Group entered into an agreement to lease three ATR 72-600 on a
long term basis aircraft to an Asian Airline.
The Group has one Airbus A320 aircraft on lease to Air Berlin, which announced insolvency on
15 August 2017 and subsequently defaulted under its lease. The Group holds security deposits
and substantial maintenance reserves as security for Air Berlin’s lease obligations. The Group is
liaising with Air Berlin and various third parties that have expressed interest in acquiring parts
of the Air Berlin business and/or leasing this aircraft.
42
APPROVAL OF FINANCIAL STATEMENTS
The financial statements of the Company and the consolidated financial statements of the Group
for the year ended 30 June 2017 were authorised for issue by the Board of Directors on 25
September 2017.
101
101
Annual Report 2017
AtR 72-600 aircraft at production facility
AnnuAl RepoRt 2017
65 Kampong Bahru Road
Singapore 169370
www.avation.net
L I S T E D
S T A N D A R D
SHARES
Reuters/BBG
Index:
lSe
AVAp.ln
AVAp
FtSe Sector:
Industrial transportation
FtSe Sub Sector: transportation Services