AnnuAl RepoRt
AnnuAl RepoRt 2023
65 Kampong Bahru Road
Singapore 169370
www.avation.net
Reuters/BBG
Index:
lSe
AVAp.ln
AVAp
FtSe Sector:
Industrial transportation
FtSe Sub Sector: transportation Services
2023
AVATION PLC
DIRECTORS’ REPORT AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2023
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
AVATION PLC
CONTENTS
FOR THE YEAR ENDED 30 JUNE 2023
Company Information ..................................................................................................................... 1
Chairman’s Statement ............................................................................................................... 2 – 4
Strategic Report ...................................................................................................................... 5 - 22
Directors’ Report ................................................................................................................... 23 – 28
Directors’ Remuneration Report .............................................................................................. 29 – 38
Directors’ Responsibilities Statement ....................................................................................... 39 - 40
Auditor’s Report .................................................................................................................... 41 - 51
Consolidated Statement of Profit or Loss ......................................................................................... 52
Consolidated Statement of Comprehensive Income .......................................................................... 53
Consolidated Statement of Financial Position ................................................................................... 54
Company Statement of Financial Position ........................................................................................ 55
Consolidated Statements of Changes in Equity ......................................................................... 56 – 57
Company Statements of Changes in Equity............................................................................... 58 - 59
Consolidated Statement of Cash Flows ............................................................................................ 60
Company Statement of Cash Flows ................................................................................................. 61
Notes to the Financial Statements ......................................................................................... 62 - 136
AVATION PLC
COMPANY INFORMATION
FOR THE YEAR ENDED 30 JUNE 2023
DIRECTORS:
Robert Jeffries Chatfield
Roderick Douglas Mahoney
Stephen John Fisher
Derek Sharples
Mark Stephen Shelton (appointed on 14 December
2022)
COMPANY SECRETARIES:
Duncan Gerard Stephen Scott
Jasmine Siow Fui San
REGISTERED OFFICE:
PRINCIPAL PLACE OF BUSINESS:
AUDITOR:
SOLICITORS:
REGISTRAR:
5 Fleet Place
London EC4M 7RD
United Kingdom
65 Kampong Bahru Road
Singapore 169370
Ernst & Young
EY Building
Harcourt Centre
Harcourt Street
2 Dublin
Ireland
Charles Russell Speechlys LLP
5 Fleet Place
London EC4M 7RD
United Kingdom
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS99 6ZZ
United Kingdom
1
AVATION PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
Financial Highlights
(cid:120) Revenue and other income for the year was US$99.3 million, fleet assets1 were US$898.6
million and total assets were US$1,179.6 million;
Total cash and bank balances of US$116.9 million (2022: US$119.2 million);
(cid:120) Net indebtedness2 reduced by 7.8% to US$731.2 million (2022: US$792.9 million);
(cid:120)
(cid:120) Operating profit of US$70.6 million (2022: US$90.2 million);
(cid:120)
(cid:120)
Profit after tax of US$12.2 million (2022: US$17.1 million);
Earnings per share of 17.4 US cents (2022: 24.7 US cents); and
Operational Activity
(cid:120)
Two ATR 72-600 turboprop aircraft and a Boeing 737-800 aircraft were sold during the
year;
(cid:120) One ATR 72-600 aircraft was repossessed from an airline in Myanmar and subsequently
commenced a new lease with an airline in Tahiti;
(cid:120) One off-lease ATR 72-500 started a lease with a new airline customer in Nepal;
(cid:120) Avation received a creditors distribution of $3.4 million from Virgin Australia;
(cid:120)
Two Airbus A220-300 aircraft were re-financed with fixed rate long-term loans, reducing
Avation’s exposure to interest rate changes;
The Company entered into an agreement to sell an eleven-year-old off-lease ATR 72-600;
and
The Company entered into a lease agreement for a second eleven-year-old off-lease ATR
72-600 which is expected to commence in November 2023.
(cid:120)
(cid:120)
Business review
During the year ended 30 June 2023 Avation reduced the number of off-lease aircraft in the fleet from
six to two by transitioning or selling off-lease aircraft. Avation has agreed to sell or lease both remaining
off-lease aircraft and on completion of these transactions will have a fully utilised fleet.
Avation has continued to de-lever its balance sheet, achieving a reduction to 62.0% in the ratio of net
debt to total assets as at 30 June 2023. A significant portion of the cashflow generated by the fleet is
directed towards repayments of debt. Scheduled loan repayments for the 2024 financial year, amounting
to around US$62 million, exceeding expected depreciation of the fleet over the same period. The
Company is hedged against further interest rate changes on 95.8% of its loans and borrowings.
A bond repurchase tender was concluded in February, resulting in the repurchase and retirement of
US$7.1m of Avation Capital S.A. 8.25%/9.0% unsecured notes. The Company may pursue other liability
management exercises from time to time with the aim of further reducing the cost and/or outstanding
amount of unsecured debt in issue.
1 Fleet assets is defined as property, plant and equipment plus assets held for sale plus finance lease receivables.
2 Net indebtedness is defined as loans and borrowings less unrestricted cash and bank balances.
2
AVATION PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
After the recovery from the COVID-19 pandemic, Avation plans to re-grow its business in a prudent and
sensible manner. We will target organic growth, which includes leasing the two ATR aircraft we have on
order for delivery in 2024. We have paid all pre-delivery payments for the two ordered aircraft and
believe that the balance due on delivery can be funded with senior secured debt. Avation has a significant
purchase rights position on a stream of new ATR 72 aircraft. The manufacturer expects that, with a new
engine variant, these aircraft will be approved for use with sustainable aviation fuel in 2025. The
Company believes that the ATR 72 aircraft is the most sustainable commercial aircraft type currently
available.
The Company has significantly lowered overheads by reducing headcount and actively managing legal
expenses and other expenditure.
Few aircraft were built during the COVID-19 pandemic so lessors that own them have seen positive
developments in valuations. As a result, Avation has been able to reverse around US$3.3 million of
previously recognised impairment charges and has seen a positive impact on the valuation of our 28
purchase rights for ATR aircraft.
We are reasonably confident that the Company will be able to arrange leases for the two new aircraft
ordered for delivery in 2024.
Market Positioning
Avation’s long-term strategy is to target growth and diversification by adding new airline customers,
while maintaining a low average aircraft age and long remaining lease term metrics. Avation focuses on
new and relatively new commercial passenger aircraft on long-term leases.
Avation supports the transition of the aircraft industry towards aircraft capable of using sustainable
aviation fuel to produce lower CO2 emissions on a net basis. Reducing CO2 emissions is key to providing
a sustainable future for the global aviation industry and in addressing climate-change risks.
The Company’s business model involves rigorous investment criteria that seeks to mitigate the risks
associated with the aircraft leasing sector. Avation will typically sell mid-life and older aircraft and
redeploy capital to newer assets. This approach is intended to mitigate technology change risk,
operational and financial risk, support sustained growth and deliver long-term shareholder value.
Avation will consider the acquisition or sale of individual or smaller portfolios of aircraft, based on
prevailing market opportunities and consideration of risk and revenue concentrations.
Funding for aircraft acquisitions is traditionally sourced from capital markets, asset-backed lending,
operational cash flows and disposals of aircraft. The ability to access acceptably priced funding is key
profit driver in aircraft leasing.
Principal risks factors facing the aircraft leasing industry include, but are not limited to, exposure to the
airline industry and the risk of deterioration in the financial condition of airline customers, asset value
risk driven by changing patterns of supply and demand and technological change, operational risks
including risks resulting from war, acts of terrorism and natural disasters, regulatory risks from changes
to government regulations and tax laws and climate-change risks.
3
AVATION PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
Outlook
The global aviation industry has continued to recover strongly from the pandemic in 2023. In its latest
update IATA reported that industry-wide revenue passenger-kilometres (RPKs) increased 26.2% year-
on-year in July, reaching 95.6% of the traffic numbers seen in 2019. IATA also reports that domestic
air travel, a driving force in the recovery of global passenger demand since the onset of the pandemic,
reached a new all-time RPK high in July 2023 surpassing the previous record set in July 2019.
Avation has primarily focussed on transitioning or disposing of unutilised aircraft, maintaining liquidity,
and reducing leverage in the year ended 30 June 2023. The Company recently agreed to sell one of its
last two remaining unutilised aircraft and to lease the other to a new customer airline. On completion
of these two transactions the Company’s fleet will be fully utilised for the first time since early in 2020.
The company’s focus will now shift towards leasing two ATR 72-600 aircraft from its orderbook, which
are currently scheduled for delivery in April and May 2024, and identifying opportunities to lease, finance
and deliver additional ATR aircraft by exercising purchase rights.
Avation aims to gradually transition to a more sustainable, lower CO2 emissions aircraft fleet. Aircraft
delivered from Avation’s orderbook and exercised purchase rights will be fitted with the new Pratt &
Whitney PW127XT engine. The PW127XT engine promises 20% lower maintenance costs, extended time
on wing, 3% lower fuel consumption and 5% more power compared with the current engine variant. The
manufacturer expects that the PW127XT engine will be certified to operate with 100% sustainable
aviation fuel from 2025. Net emissions of CO2 will be reduced by 80% when using sustainable aviation
fuel.
We also anticipate gradually trading out of older aircraft types and focussing on aircraft types such as
the Airbus NEO and A220 series in addition to ATR turboprop aircraft. The Company’s portfolio already
includes a significant proportion of Airbus A220 and ATR 72 aircraft.
Robert Jeffries Chatfield
Executive Chairman
Singapore
26 October 2023
4
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The Directors present their strategic report for the year ended 30 June 2023.
BUSINESS OVERVIEW
Avation PLC and its subsidiaries (“Avation”, the “Group”) is a commercial passenger aircraft leasing group
managing a fleet of 36 aircraft, as of 30 June 2023. Avation was founded in 2006 and has now been in
operation for 17 years. Avation leases aircraft to 17 airline customers spread across 14 countries in
Europe and the Asia-Pacific region. Major customers include Vietjet Air, airBaltic, EVA Air and Philippine
Airlines. The Group’s fleet includes 13 narrow-body jets, two twin-aisle jets and 21 ATR 72 twin-engine
turboprop aircraft. An analysis of the fleet is provided below under “Fleet Overview”.
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 (“ALS”) tax incentive. On 17 April 2019 Avation
was granted a five-year extension to its ALS tax incentive at a reduced 8% tax rate.
Avation’s management team has extensive experience in the aviation industry and has the expertise to
select, acquire and manage aircraft that have achieved strong operational performance for our customers
and generated stable returns for our shareholders. The company maintains in-house commercial, legal,
technical and finance teams and operates as a full-service aircraft leasing platform.
Avation aims to grow its fleet and continue to diversify its customer base over the coming years. The
Group has two ATR 72-600 aircraft on order from the manufacturer, which are currently scheduled to be
delivered in April and May 2024. The Group also holds purchase rights for a further 28 aircraft. The
Group may also acquire additional new and second-hand jet aircraft on an ad-hoc basis. Older aircraft
are sold when opportunities arise with the aim of maintaining a low average fleet age.
Avation’s shares are traded on the Standard Segment of the Main Market 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 turboprop
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, A220 and Boeing 737 aircraft
families. The Group will also consider acquiring additional twin-aisle aircraft 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. As the fleet grows, the Group seeks to continually
diversify its customer base as part of its overall credit risk management strategy.
Avation has developed a sustainable, low emissions aircraft growth strategy. This initiative was supported
by the recent release of the new lower emissions PW127XT engine and announcement that future
variants of the ATR 72 aircraft will include hybrid technology and use 100% Sustainable Aviation Fuel.
In addition, an ATR 72 aircraft has also completed the first 100% Sustainable Aviation Fuel commercial
flight.
5
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The Company’s future business strategy will be to focus on leasing modern, low CO2 emissions, fuel-
efficient aircraft. We anticipate gradually trading out of older aircraft types and focussing on aircraft
types such as the Airbus NEO and A220 series in addition to ATR 72 aircraft with the recently announced
new generation engines. The Company’s portfolio already comprises a significant proportion of Airbus
A220 and ATR 72 aircraft showing our commitment to new technology, fuel-efficient aircraft types.
Future ATR 72 deliveries from Avation’s orderbook will be powered by the new Pratt & Whitney PW127XT
engine which promises 20% lower maintenance costs, extended time on wing, 3% lower fuel
consumption and 5% more power compared with the current engine. The manufacturer expects that the
PW127XT engine will be certified to operate with 100% SAF from 2025. When using SAF net emissions
of CO2 will be reduced by 80%.
Industry data suggests that airlines will require significant numbers of leased aircraft in the future to
replace older aircraft that will be retired and to satisfy projected growth in demand for air travel. Airlines’
balance sheets were negatively impacted during the COVID-19 pandemic, reducing their ability to
purchase aircraft directly. This supports the Company’s strategy of focussing on young and popular
commercial aircraft.
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. The Group manages debt issuance with the overall aim of
achieving the lowest possible overall cost of debt, while maintaining appropriate leverage ratios. Debt
on older aircraft may be re-financed when there is an opportunity to reduce the Group’s overall cost of
debt, and to release equity for investment in new aircraft.
The Board applies prudent financial management principles to manage risk when acquiring aircraft by
seeking to match lease and financing in both term and currency. Interest rate risk is managed using
mostly fixed or hedged interest rate debt. Secured loans are amortised to conservative balloon payments
over the terms of the underlying leases.
The Avation fleet of 36 aircraft (as of 30 June 2023) has a weighted average age of 6.4 years and
weighted average remaining lease term of 5.0 years, serving a diversified customer base of airlines in
Europe and the Asia-Pacific region.
6
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
MARKET TRENDS AND FUTURE DEVELOPMENTS
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 the ability of leasing companies to access financial capital.
The global aviation industry has continued to recover from the COVID-19 pandemic. Global domestic
travel capacity in May 2023 was estimated to be at 108% of 2019 levels and international travel capacity
at 89% of 2019 levels. International travel will further benefit from the continued reopening of the
Chinese travel market which is expected to fully recover to pre-COVID levels in 2024.
The aircraft leasing industry benefits from good long-term fundamentals including growth in global
demand for air travel, capital constraints amongst airlines and normal cycles of aircraft replacement.
Airbus estimates that the global commercial aircraft fleet will more than double from around 23,000
aircraft to over 46,000 aircraft between 2023 and 2042.
Passenger traffic is expected to increase at a compounded annual growth rate of 3.6% which implies a
doubling of demand over the next 20 years. Airbus forecasts that 40,850 aircraft (replacement and
growth) will be required over the next 20 years, of which 46% are expected to be in Asia-Pacific, 20%
in Europe, 17% in North America, and of the total, 80% are expected to be single aisle. 3
Around 25% of the current global commercial aircraft fleet are new generation more fuel-efficient types
such as the Airbus A220 and A320/A321 neo types. Over the next 20-year period 95% of the global
fleet to expected to transition to new generation aircraft types.
Avation expects that this trend will support the company’s future strategy of gradually trading out of
older aircraft types and focussing on aircraft types such as the Airbus NEO and A220 series in addition
to ATR 72 aircraft with the new generation engines.
3 Airbus Global Market Forecast 2023
7
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
PRINCIPAL RISKS AND UNCERTAINTIES
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 several factors
including but not limited to local and global economic conditions, increased competition between airlines,
speculative ordering of new aircraft, war, terrorism, pandemics 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.
Asset value risk
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.
Advances in aircraft technology may 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 additional twin-aisle aircraft,
in addition to narrow-body jets and turboprops, as part of its strategy to build a diversified portfolio of
aircraft. Twin-aisle aircraft have a risk profile which may be more exposed to technology change factors
and the introduction of new more fuel-efficient models.
Operational risks:
Economic, legal and political risks
Avation leases aircraft to lessees in many different jurisdictions. As such the Group is exposed to
economic, legal and political risk in those jurisdictions. Avation’s aircraft are subject to operational risks
specific to the aviation sector resulting from war, acts of terrorism or the threat of terrorism, and natural
disasters. The Group mitigates these risks by requiring airline lessees to maintain adequate insurance
over the aircraft.
Regulatory risks
Avation’s fleet operates in many jurisdictions and complies with tax and other regulatory requirements
in those jurisdictions. There is a risk that changing tax and regulatory regimes may have an impact on
the business and the Group’s financial results.
Lessee risks
Avation’s airline lessees are responsible for all maintenance and safety checks. The requirements 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 this risk, the Group closely monitors each airline’s usage of aircraft and their
compliance with agreed maintenance schedules. Avation requires that some lessees make maintenance
reserve payments to ensure that there is adequate funding at all times for proper maintenance of the
aircraft.
8
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Climate-related risks:
Physical risks
Avation’s fleet may be exposed to the risk of physical damage or loss caused by climate-change related
extreme weather events such as severe storms, flooding or fire. Demand for and patterns of air travel
may be negatively impacted by long-term impacts of climate change such as rising sea levels.
Transition risks
Regulatory actions to control greenhouse gas emissions are likely to impose additional legal and
compliance costs on aviation business models, including aircraft lessors. The gradual transition of airline
fleets away from older more polluting aircraft types to latest technology more fuel-efficient types is likely
to have a negative impact on the secondary market and residual values for older aircraft. This risk is
likely to increase further as new aircraft types featuring low carbon emissions propulsion systems such
as hydrogen or electric power are introduced. Consumer and market sentiment changes such as an
increasing preference for lower emissions aircraft are likely to make it more difficult for businesses who
continue to own or operate older aircraft types to raise capital or finance aircraft at competitive prices,
or at all. Owners and/or operators of older aircraft types may also face reputational risk if not deemed
to be transitioning to a low carbon emissions business model quickly enough.
Financial risks:
Avation’s financial risk management objectives and policies are set out in note 7 to the financial
statements and are as follows:
(cid:120) Airline industry risks
(cid:120) Credit risk
(cid:120)
(cid:120)
(cid:120)
(cid:120) Capital risk
Interest rate risk
Foreign currency risk
Liquidity risk
FINANCIAL REVIEW
Revenue
US$ ‘000s
Lease rental revenue
Less: amortisation of lease incentive assets
Interest income from finance leases
Maintenance reserves revenue
End of lease compensation revenue
Year ended 30 June,
2023
2022
85,936
(1,368)
84,568
2,230
5,063
-
93,352
(1,383)
91,969
2,918
13,207
4,138
91,861
112,232
Lease rental revenue decreased by 7.9% from US$93.4 million in the year ended 30 June 2022 to
US$85.9 million in the year ended 30 June 2023. The decrease was principally due to the reduction in
the number of aircraft in the fleet from 39 at 30 June 2022 to 36 at 30 June 2023.
Interest income from finance leases decreased by 23.6% from US$2.9 million in the year ended 30 June
2022 to US$2.2 million in the year ended 30 June 2023. The decrease was principally due to the
reduction in the number of aircraft leased on finance leases from 6 at 30 June 2022 2021 to 5 at 30 June
2023.
9
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Other income
US$ ‘000s
Foreign currency exchange gain
Claim recovery
Fees for late payment
Aircraft late delivery compensation
Deposit released
Others
Year ended 30 June,
2023
2022
3,154
3,137
966
-
-
132
7,389
1,018
-
1,940
540
200
454
4,152
Foreign currency exchange gains in the year ended 30 June 2023 arose principally from the release of
deferred hedged foreign currency exchange gains on two Euro loans that were refinanced during the
period.
The claim recovery recognised in other income is the balance of a distribution paid to creditors of Virgin
Australia in excess of amounts allocated to trade receivables.
Administrative expenses
US$ ‘000s
Staff costs
Other administrative expenses
Year ended 30 June,
2023
2022
5,587
3,173
8,760
6,771
2,694
9,465
Staff costs reduced by 17.5% from US$6.8 million in the year ended 30 June 2022 to US$5.6 million in
the year ended 30 June 2023 principally due to a reduced average headcount, lower bonus payments
and lower charges for employee share warrants.
Other administrative expenses increased by 17.8% from US$2.7 million in the year ended 30 June 2022
to US$3.2 million in the year ended 30 June 2023 principally due to increased marketing related travel
expenses.
10
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Other operating income and expense items
US$ ‘000s
Depreciation
Gain on derecognition of a finance lease
Loss on disposal of aircraft and aircraft engine
Unrealised gain on aircraft purchase rights
Unrealised gain on equity investment
Reversal of/impairment (loss) on aircraft
Aircraft transition expenses
Expected credit losses
Legal and professional fees
Year ended 30 June,
2023
2022
(38,566)
(39,304)
2,792
(1,000)
20,540
7,520
3,287
(11,389)
(659)
(2,382)
-
(2,396)
38,320
-
(6,158)
(5,479)
(1,980)
(3,698)
Depreciation reduced by 1.9% from US$39.3 million to US$38.6 million due to a reduction in the fleet.
A gain of US$2.8 million was recognised on derecognition of a finance lease for an aircraft repossessed
from a defaulting airline in Myanmar. The gain represents the positive difference between the
outstanding value of the finance lease receivable and the broker valuation of the aircraft’s market value
at the date of termination of the lease.
A loss of US$1.0 million was recognised on the sale of two ATR 72-600 aircraft during the year. A loss
of US$ 2.4 million was recognised in the year ended 30 June 2022 on the sales of an Airbus A220-300,
an Airbus A321-200 and three ATR 72-600 aircraft.
The Company’s 28 aircraft purchase rights were revalued at 30 June 2023 using a Black-Scholes option
pricing model. The principal factors leading to the recognition of a gain of US$20.5 million (2022: US$
38.2 million) were increases in the appraised value of the ATR 72-600 aircraft and increases in risk-free
interest rates.
The Company recorded an unrealised gain of US$7.5 million on its holding of shares in Philippine Airlines,
Inc. The Company received these shares as part of the settlement awarded to creditors in the bankruptcy
restructuring of the airline in December 2021.
Aircraft transition expenses of US$11.4 million (2022: US$5.5 million) represent repairs and
maintenance expenditure on aircraft repossessed following airline defaults resulting from the COVID-19
pandemic. The Company expects transition expenses to be substantially reduced in future periods as
most aircraft which were repossessed as a result of the COVID-19 pandemic have now been transitioned
to new lessees or sold.
Expected credit losses of US$0.7 million primarily relate to rent arrears and a payment plan agreement
loan granted to an airline in South-East Asia.
Legal and professional fees reduced by 35.6% from US$3.7 million in the year ended 30 June 2022 to
US$ 2.4 million in the year ended 30 June 2023 due to a reduction in transaction activity.
11
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Finance income
US$ ‘000s
Interest income
Fair value gain on financial derivatives
Finance income from discounting non-current deposits to fair value
Gain on repurchase of unsecured notes
Gain on early full repayment of borrowings
Year ended 30 June,
2023
2022
3,129
1
611
508
1,657
5,906
281
2,492
571
-
-
3,344
Interest income increased in the year ended 30 June 2023 due to an improved interest rate environment
for depositors. The group has proactively transferred funds into term deposit accounts to take advantage
of increased deposit interest rates.
Interest income includes US$1.1 million interest on payment plan agreement loans granted to a
customer.
Avation generated a gain of US$0.5 million on the repurchase of US$11.4 million of Avation Capital S.A.
8.25%/9.0% unsecured notes at a discount during the year.
A gain of US$1.7 million on early full repayment of borrowings arose when two loans were refinanced in
November 2022.
Finance expenses
US$ ‘000s
Interest expense on secured borrowings
Interest expense on unsecured notes
Interest expense on borrowings from related parties
Amortisation of loan transaction costs
Amortisation of IFRS 9 gain on debt modification
Fair value loss on financial derivatives
Amortisation of interest expense on non-current borrowings
Finance charges on early full repayment of borrowings
Others
Year ended 30 June,
2023
2022
21,170
30,976
271
1,057
8,711
577
571
-
206
63,539
24,062
29,913
-
2,226
8,805
-
539
731
1,205
67,481
Interest expense on secured borrowings reduced by 12.0% to US$21.2 million in the year ended 30 June
2023 from US$24.1 million in the year ended 30 June 2022 as a result of net repayments of secured
loans. Secured borrowings have been paid down by US$79.4 million from US$531.9 million at 30 June
2022 to US$452.5 million at 30 June 2023.
Interest expense on unsecured notes includes US$8.6 million (2022: US$4.3 million) of non-cash interest
paid in kind by increasing the face value of Avation Capital S.A. 8.25%/9.0% unsecured notes.
12
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Amortisation of IFRS 9 gain on debt modification of US$8.7 million (2022: US$ 8.8 million) represents
the non-cash accretion in the book value of Avation Capital S.A. 8.25%/9.0% unsecured notes resulting
from the accounting treatment of the extension and changes to the terms of the notes agreed with
noteholders in March 2021. The extension was accounted for as a substantial modification of a debt
instrument in accordance with IFRS 9. The face value of Avation Capital S.A. 8.25%/9.0% unsecured
notes outstanding as of 30 June 2023 is US$345.2 million.
The Company confirms that there have been no changes to its accounting policies other than the adoption
of new IFRS standards and interpretations as set out in the notes to the financial statements.
FLEET OVERVIEW
Type
1 July 2022
Additions
Disposals
30 June 2023
On order
Purchase
rights
ATR 72-500
ATR 72-600
A220-300
A320-200
A321-200
A330-300
B737-800
B777-300ER
Total
5
18
5
2
6
1
1
1
39
-
-
-
-
-
-
-
-
-
-
2
-
-
-
-
1
-
3
5
16
5
2
6
1
-
1
36
-
2
-
-
-
-
-
2
-
28
-
-
-
-
-
28
At 30 June 2023, Avation’s fleet comprised 36 aircraft, including five aircraft on finance lease. Avation
serves 17 customers in 14 countries. The weighted average age of the fleet is 6.4 years (30 June 2022:
5.6 years) and the weighted average remaining lease term is 5.0 years (30 June 2022: 5.7 years).
Two ATR 72-600 and one Boeing 737-800 aircraft were sold during the period. Turboprop and
narrowbody aircraft make up 82% of fleet assets as at 30 June 2023. Fleet assets have decreased 9.0%
to US$898.6 million (30 June 2022: US$988.0 million) as a result of aircraft sales and depreciation. As
at the date of this report, Avation has two off-lease aircraft. One of these aircraft is expected to
commence a new lease in November 2023 and the remaining aircraft is subject to an agreed sale which
is expected to complete shortly.
Avation has orders for two new ATR 72-600 aircraft and purchase rights for a further 28 aircraft as at
30 June 2023. The order-book and purchase rights provide a pathway to organic fleet growth.
13
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
DEBT SUMMARY
Current loans and borrowings
Non-current loans and borrowings
Total loans and borrowings
Unrestricted cash and bank balances
Net indebtedness4
Net debt to total assets5
Weighted average cost of secured debt6
Weighted average cost of total debt7
2023
US$’000s
2022
US$’000s
61,401
694,575
755,976
24,816
731,160
62.0%
4.5%
6.1%
63,900
764,230
828,130
35,267
792,863
65.1%
4.0%
5.7%
During the period net indebtedness was reduced by 7.8% to US$731.2 million (30 June 2022: US$792.9
million). Two aircraft previously financed under the Group’s floating rate warehouse loan facility were
re-financed with long-term fixed rate debt, reducing exposure to changes in interest rates.
The weighted average cost of total debt has increased to 6.1% as at 30 June 2023 (30 June 2022: 5.7%)
due to repayments of lower cost secured loans in the period. The weighted average cost of secured debt
also increased to 4.5% at 30 June 2023 (30 June 2022: 4.0%).
At the end of the financial period, Avation’s net debt to total assets ratio improved to 62.0% (30 June
2022: 65.1%). As at 30 June 2023, 95.8% of total debt was at fixed or hedged interest rates (30 June
2022: 90.0%). The ratio of unsecured debt to total debt was 40.1% (30 June 2022: 35.8%).
In August 2022, S&P Global Ratings revised Avation’s issuer rating to B- (CCC+ for unsecured notes) on
improving capital structure and liquidity.
The Company’s current credit ratings are as follows:
Rating Agency
Corporate Credit Rating
Unsecured Notes Rating
Standard & Poor’s
B- (Stable outlook)
CCC+
Aircraft leasing is a capital-intensive industry. Avation manages interest rate risk 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 higher lease rates reflecting the current interest rate environment.
4 Net indebtedness is defined as loans and borrowings less unrestricted cash and bank balances.
5 Net debt to assets is defined as net indebtedness divided by total assets.
6 Weighted average cost of secured debt is the weighted average interest rate for secured loans and borrowings at
period end.
7 Weighted average cost of total debt is the weighted average interest rate for total loans and borrowings at period
end.
14
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
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. A substantial percentage of our fleet are modern regional turboprop aircraft which
provide significant environmental benefits over comparable jet aircraft due to their more economical use
of fuel and consequently lower carbon dioxide emissions. The most recent additions to the fleet have
included 6 latest technology A220-300 aircraft, which provide significantly reduced fuel consumption and
emissions in comparison to older aircraft.
As of 30 June 2023, 72% of our overall fleet by number are newer technology or lower carbon emission
ATR and Airbus A220 aircraft.
Avation is a member of the Aviation Working Group (AWG) which has developed the aviation industry
Aircraft Carbon Calculator, aimed at monitoring the carbon emissions of aircraft fleets. The AWG Aircraft
Carbon Calculator provides an industry standard methodology for calculating and comparing aircraft
carbon dioxide emissions. Use of the Aircraft Carbon Calculator will provide meaningful information and
assist in monitoring and reporting of aircraft emissions.
Avation notes the Singapore Government’s commitment to achieve net-zero carbon emissions by 2050.
While Avation supports this initiative it is not currently realistic for Avation to make a matching
commitment given that the technology for achieving commercially viable zero emissions mass air travel
is not yet available. Avation intends to develop a net-zero strategy when the technological advances
required to make zero emissions commercial air travel viable have been achieved. Additionally, the
Company will comply with all carbon emissions laws and regulations as and when they are enacted in
jurisdictions in which the Company operates.
Avation’s Environmental, Social and Governance report is published on the Company’s website at:
https://www.avation.net/ESG.html.
As of 30 June 2023, Avation PLC has an MSCI ESG rating of BB (2022:BB).
Climate-Related Financial Disclosures
The Risk Committee makes recommendations to the Board on the principal risks of relevance to the
business. Climate-related risks are considered in terms of potential for contribution to these principal
risks. The issues considered include both the risk of physical disruption to the business from climate
change, and the risks and opportunities as the global economy transitions to significantly lower carbon
emissions. In the current period, the Risk Committee concluded that climate related risks did not give
rise to the level of a principal risk, except as part of Legal and Regulatory Compliance.
15
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The following table is consistent with the Task Force on Climate-Related Financial Disclosures (“TCFD”)
recommended disclosures on climate-change risks:
TCFD Recommended Disclosure
Compliance Status
Governance
Describe the Board’s oversight of climate-related risks
and opportunities.
Describe management’s role in assessing and
managing climate-related risks and opportunities.
Strategy
Describe the climate-related risks and opportunities
the organisation has identified over the short, medium,
and long term.
The Board of Directors has accountability for the
management of climate related risks and opportunities.
The Executive Directors are responsible for the day-to-
day implementation, monitoring and management of
our climate policies. The Group’s Risk Committee
supports the Directors in ensuring material climate-
related narratives are identified and integrated into the
Group’s risk management processes, in addition to
reviewing and recommending policy proposals to the
Board.
Identified climate-related risks and opportunities are
communicated to the Group’s management team in bi-
weekly meetings attended by the Group’s executive
Directors and senior members of the management
team. Individuals tasked with particular climate-
related tasks to carry out or reports to prepare provide
regular updates on performance at these meetings.
Physical risks
Avation’s fleet may be exposed to the risk of physical
damage or loss caused by climate-change related
extreme weather events such as severe storms, flooding
or fire. Demand for and patterns of air travel may be
negatively impacted by long-term impacts of climate
change such as rising sea levels, should these occur.
Transition risks
Regulatory actions to impose controls on greenhouse
gas emissions are likely to result in additional legal and
compliance costs for aviation business models, including
aircraft lessors. The gradual transition of airline fleets
away from older more-polluting aircraft types to latest-
technology more fuel-efficient types is likely to have a
negative impact on the secondary market and residual
values for older aircraft. This risk is likely to increase
further as new aircraft types featuring low carbon
emissions propulsion systems such as SAF, hydrogen or
electric power are introduced. Regulatory actions,
consumer and market sentiment changes such as an
increasing preference for lower emissions aircraft are
likely to make it more difficult for businesses who
continue to own or operate older aircraft types to raise
capital or finance aircraft at competitive prices, or at all.
Owners and/or operators of older aircraft types may also
face reputational risk if not deemed to be transitioning
to a low carbon emissions business model quickly
enough.
16
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
The Risk Committee makes recommendations to the
Directors on the principal risks of relevance to the
business. Climate-related risks are considered in terms
of potential for contribution to these principal risks. The
issues considered include both the risk of physical
disruption to the business from climate change, and the
risks and opportunities as
the global economy
transitions to significantly lower carbon emissions. In
the current period, the Risk Committee concluded that
climate related risks did not give rise to the level of a
principal risk, except as part of Legal and Regulatory
Compliance.
Worst Case scenario (>3ºC)
Our Worst-Case Scenario is a theoretical construct and
narrative describing a world where climate action is
delayed by world governments failing to act on climate
change. Such delay may result in a world where physical
climate change risks are the greatest across our three
scenarios.
Under the Worst-Case scenario the Group may face
greater physical risks from climate-change related
weather events and greater transitional risks from
accelerated changing demand patterns.
Paris Alignment Scenario (2-3ºC)
This scenario involves a market-led transition to a lower
carbon future through global government commitments
to the Paris Agreement. This would result in increased
regulation of climate action and a reduction of the
physical impacts of climate change compared with our
Worst-Case scenario, where governments
fail to
legislate in accordance with the Paris Agreement.
Under the Paris Alignment scenario the Group
expects that its strategy will mitigate the material
impacts of climate risk.
Transformation Scenario (<2ºC)
This scenario sees a rapid decarbonisation pathway,
where global emissions are close to zero in 2040, driven
by society. The speed of change required to limit global
warming to 1.5 degrees is likely to create instability in
our supply chain as suppliers try to keep pace with
decarbonisation demands and shifting preferences
towards localisation.
Under the Transformation Scenario the Group may
face reduced physical risks but additional financial
and transitional risks and additional opportunities
from a more rapid switch to lower carbon emission
Under this
propulsion systems for aircraft.
scenario there is a risk that ordinary aircraft
passengers may be priced out of the air travel
market. Hence, passenger numbers could fall.
17
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Risk Management
Describe the organisation’s processes for identifying
and assessing climate-related risks.
Describe the organisation’s processes for managing
climate-related risks.
Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management.
Metrics and targets
Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process.
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related
risks.
Avation’s Risk Committee is responsible for identifying
and assessing climate change related risks and for
notifying the Board of any identified principal risks which
are deemed to be material to the Company.
The Directors are directly able to determine which risks
and opportunities could have a material impact on the
Group, as well as how to prioritise them. With a flat
management structure and by taking a hands-on
approach, the risks are actively managed within all
aspects of the business.
Climate change related matters are monitored by the
Directors and Risk Committee to ensure that they are
embedded in our risk management and planning
process, in addition to our long-term strategic decision-
making.
Please refer to the table below.
Please refer to the table below. As the majority of the
Company’s GHG emissions are derived from our
customers’ use of our fleet of aircraft, total emissions
may increase due to factors outside our control.
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
The company is making available to the market up to
30 low carbon emissions ATR72 aircraft by way of its
purchase rights and order book.
Greenhouse Gas Emissions
Direct emissions
Direct emissions are produced by sources which are owned or controlled by the reporting organisation
and include electricity use, burning oil or gas for heating, and fuel consumption because of business
travel or distribution.
Indirect emissions
Indirect emissions result from a company’s upstream and downstream activities. These are typically from
outsourced activities, and products and the services offered by the organisation.
Scope
Scope 1
Scope 2
Scope 3
Total
Activity
-
Consumption of
purchased electricity
Customers’ use of our
aircraft
Employee business travel
TCO2e
2023
-
16
525,100
144
525,260
TCO2e
2022
-
13
418,900
28
418,941
Usage of the Company’s aircraft is under the control of lessees who are not required to provide emissions
data to the Company. The Company estimates carbon emissions from lessees’ usage of our aircraft using
the “AWG Carbon Calculator” tool provided by the Aircraft Working Group. The AWG Carbon Calculator
uses OEM source data to provide consistent and reliable estimates of aircraft carbon emissions.
18
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Carbon emissions from consumption of purchased electricity are estimated by converting the Company's
energy usage in kilowatt hours (KWh) into kilograms (Kg) of carbon dioxide emitted using Singapore's
Grid Emission Factor (GEF), a measure of the amount of carbon dioxide emitted per kilowatt hour of
electrical energy generated in Singapore. Energy usage is based on electricity consumption at the
Company's sole office in Singapore.
Carbon emissions from employee business travel are estimated using UK Government Conversion Factors
for greenhouse gas reporting.
Scope 3 Emissions from Customers’ Use of Our Aircraft
Total emissions (TCO2e)
Aircraft flight hours
Average seats per aircraft
Average CO2 emissions per flight hour (TCO2e)
Average CO2 emissions per seat per flight hour
(kgCO2e)
CORPORATE SOCIAL RESPONSIBILITY
2023
2022
525,100
74,683
162
7.0
43.5
418,900
61,450
158
6.8
43.0
Avation is committed to the principles of being a good corporate citizen. For the 2023 financial year the
group did not have any material matters to report on social, community and human rights issues.
CORPORATE ETHICS AND BEHAVIOUR
Avation operates the following policies governing corporate ethics and behaviour:
(cid:120) Anti-bribery policy
(cid:120) Gifts and entertaining policy
(cid:120) Modern slavery policy
(cid:120) Whistleblowing policy
(cid:120)
Policy for dealing with Company securities
EMPLOYEES
A breakdown by gender of the number of persons who were Directors of the Company, senior managers
and other employees as of 30 June 2023 is set out below:
Directors of the Company
Senior managers
Other employees
Male
Female
5
4
7
-
2
5
19
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
A breakdown by gender of the number of persons who were Directors of the Company or senior managers
as of 30 June 2023 is set out below:
Number of
board
members
Percentage of
the board
Number of
senior
positions on
the board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
Men
Women
5
-
100%
-
2
-
4
2
67%
33%
A breakdown by ethnic identity of the number of persons who were Directors of the Company or senior
managers as of 30 June 2023 is set out below:
Number of
board
members
Percentage of
the board
Number of
senior
positions on
the board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
White British or
other white
(including minority-
white groups)
Asian/Asian British
5
-
100%
-
2
-
3
3
50%
50%
The Company collects data on gender and ethnic identity from employees and directors by means of
self-identification.
As at 30 June 2023 the Company does not meet targets for:
(cid:120)
(cid:120)
(cid:120)
at least 40% of the individuals on its board of directors to be women;
at least one of the positions of the chair, the chief executive, the senior independent director or
the chief financial officer on its board of directors to be held by a woman; and
at least one individual on its board of directors to be from a minority ethnic background.
The Company engages directors on the basis of ability without discrimination and has no internal targets
for representation on the board on the basis of gender or ethnic identity.
20
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
SECTION 172(1) STATEMENT
On the following pages we have set out how the Board has acted in a way that promotes the success of
the Company for the benefit of its members as a whole, in accordance with the requirements of the
Companies (Miscellaneous Reporting) Regulations 2018, whilst having regard to the following matters
set out in s.172(1) of the Act.
The likely consequences of any decision in the long term
The board is mindful that it should make decisions which are the best for the Company in the long term.
The nature of the business of aircraft leasing is long-term, with typical aircraft leases being for ten or
twelve years duration for new aircraft. The Company does undertake the trading of aircraft where they
have reached a certain age and when market conditions are favourable. However, the transfer of an
aircraft with a lease attached to it is transaction which would typically take three to five months to
complete and therefore such transactions are undertaken on strategic timeframes. Equity released from
the sale of aircraft is typically re-invested in financing or re-financing the purchase of aircraft.
The interests of the Group’s employees
The board actively engages with employees to ensure that staff are kept up to date and informed. The
Company has regular management meetings at which typically two of the Company’s directors are
present and which are attended by the majority of the Company’s employees.
Throughout the COVID-19 pandemic, staff have received regular communications and updates from the
Board to ensure that they are kept up to date and informed in respect of action being taken by the
business, and of the impact of the situation on business performance, with management meetings being
held on a daily basis.
The need to foster the Group’s business relationships with suppliers, customers and others
Suppliers
The Company has long-term relationships with its suppliers which are primarily comprised of commercial
lending organisations such banks and other financial institutions, as well as the manufacturers of aircraft
and aircraft engines.
Customers
The Company has seventeen airline customers and maintains close relationships with them, indeed this
is inherent in the nature of aircraft leasing. In particular, the Company needs to ensure that its customers
are looking after and maintaining the aircraft and are otherwise complying with the terms of the
respective aircraft leases.
21
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The impact of the Group’s operations on the community and the environment
The board recognises the importance of managing the community impact of the business and minimising
any adverse impact of our operations on the environment. The Company carried out a review of its
environmental, social and governance (ESG) performance and a copy of this report can be found on the
Company’s website at: www.avation.net/ESG.html
The desirability of the Group maintaining a reputation for high standards of business conduct
The board expects the highest standards of conduct throughout the business, both in respect of
employees and in respect of its suppliers, advisers and agents. The board receives regular updates in
respect of matters of regulatory compliance, and the business has policies, procedures and processes in
place in respect of modern slavery, bribery and corruption.
The need to act fairly as between members of the Company
The Company has a single class of ordinary shares, so all shareholders are treated equally. Details of
how we engage with shareholders can be found in our corporate governance statement in the Directors’
Report.
On behalf of the board
Robert Jeffries Chatfield
Executive Chairman
26 October 2023
22
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2023
The Directors present their report and financial statements for the year ended 30 June 2023.
Principal activities and business review
The principal activity of the Group is aircraft leasing. Details of activities carried out by subsidiary
companies are set out in Note 22 to these financial statements.
The principal risks and uncertainties affecting the Group’s turnover are described in the Strategic Report.
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 environmental matters in the Strategic Report.
Results and dividends
The consolidated statement of profit or loss and the consolidated statement of other comprehensive
income for the year are set out on in these financial statements. The Company did not declare and pay
any dividend during the year.
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 Company and its shareholders. The dividend policy is progressive, 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 and end of the year, were as follows:
Direct interest
Deemed interest
1 July
2022/
Appointment
date
30 June
2023
30 June
2023
1 July
2022/
Appointment
date
Ordinary shares of £0.01 each:
Robert Jeffries Chatfield
Roderick Douglas Mahoney
Stephen John Fisher
Derek Sharples
Mark Stephen Shelton
1
870,000
25,000
50,000
4,500
1
856,667
25,000
50,000
4,500
12,530,000
-
11,995,000
-
-
-
-
-
-
-
23
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Significant shareholdings
Ordinary shares of £0.01 each:
Vidacos Nominees Limited
Goldman Sachs Securities (Nominees) Limited
HSBC Global Custody Nominee (UK) Limited
Luna Nominees Limited
HSBC Global Custody Nominee (UK) Limited
Vidacos Nominees Limited
Pershing Nominees Limited
Lynchwood Nominees Limited
Equal Opportunities Policy
Ordinary
shares
Percentage
16,065,318
22.66%
5,456,860
5,350,000
5,030,000
5,013,635
3,505,478
2,371,725
2,239,800
7.70%
7.55%
7.10%
7.07%
4.95%
3.35%
3.16%
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.
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.
24
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Going Concern
The Directors’ assessment of the Group’s ability to continue as a going concern is detailed in Note 3(e)
to the financial statements. The Note in its entirety is deemed to be incorporated into and form part of
the Directors’ Report.
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. The Company estimates carbon emissions from lessees’ usage of our aircraft using
the “AWG Carbon Calculator” tool provided by the Aircraft Working Group. The AWG Carbon Calculator
uses OEM sources data to provide consistent and reliable estimates of aircraft carbon emissions.
Carbon emissions from consumption of purchased electricity are estimated by converting the Company's
energy usage in kilowatt hours (KWh) into kilograms (Kg) of carbon dioxide emitted using Singapore's
Grid Emission Factor (GEF), a measure of the amount of carbon dioxide emitted per kilowatt hour of
electrical energy generated in Singapore. Energy usage is based on electricity consumption at the
Company's sole office in Singapore.
In the year ended 30 June 2023 the Company used 39,016 KWh of energy (2022: 32,496 KWh) which
was converted to estimated carbon emissions of15,829 Kg (2022: 13,258 Kg) using a GEF of 0.4057
(2022: 0.4080).
Carbon emissions from employee business travel are estimated using UK Government Conversions
Factors for greenhouse gas reporting.
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 30. The Company has one class of ordinary shares which carry no right
to fixed income. Each share carries the right to one vote at general meetings of the Company.
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 37.
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.
25
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2023
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 July 2018. The Company is not required to comply with the Code in full 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 consist of two Executive Directors (Robert Jeffries Chatfield and Mark Stephen
Shelton) and three Non-Executive Directors (Roderick Douglas Mahoney, Stephen John Fisher
(independent) and Derek Sharples (independent)). 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.
Information on how the Directors have had regard to the need to foster the Company’s business
relationships with suppliers, customers and other, and the effect of that regard, including on the principal
decisions taken by the Company during the financial year, is included in the Section 172(1) Statement
included in the Strategic Report.
The Company operates the following committees whose members are detailed below:
(cid:120) Audit Committee - Stephen John Fisher, Derek Sharples Iain Cawte (non-Board member) and
Mark Stephen Shelton; and
(cid:120) Risk Committee – Derek Sharples, Stephen John Fisher, Iain Cawte (non-Board member) and
Duncan Scott (non-Board member); and
(cid:120) 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.
The process and systems of internal control are designed to manage, rather than eliminate, the risk of
failure to achieve the Company’s objectives, and can therefore only provide reasonable and not absolute
assurance against material misstatement or loss.
26
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Statement as to disclosure of information to auditors
(cid:120) So far as the Directors are aware, there is no relevant audit information of which the Company's
auditors are unaware, and
(cid:120)
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
Ernst & Young 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 year ended 30 June 2023, the Company bought 100,000 treasury shares at a market price of
77.2 pence per share and subsequently cancelled 2,310,000 treasury shares.
During the financial year ended 30 June 2022, the Company did not buy any treasury shares.
By a resolution passed at the Annual General Meeting held on 1 December 2021, 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 £0.75 and not exceeding a price equal
to the higher of (i) 105% of the average of the middle market quotations for the share price for the five
business days preceding the buy-back date and (ii) the higher of the price for the last independent share
trade and the amount stipulated pursuant to Article 5(6) of the Market Abuse Regulation (EU) No.
596/2014 (as in force in the United Kingdom pursuant to the European Union (Withdrawal) Act 2018),
and in any case, not exceeding £3.00 per share, excluding brokerage, commissions and other related
expenses.
27
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Subsequent events
See Note 42 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 37 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.
On behalf of the board
Notes to the Financial Statements – Note 8, Related
Party Transactions
Robert Jeffries Chatfield
Executive Chairman
28
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
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 substantially unchanged for the year ended 30 June 2023.
Key aspects of the policy are to attract and retain executives; be consistent with best practices and to
ensure alignment between performance and compensation.
Remuneration (audited)
The components of remuneration are:
(cid:120)
(cid:120)
(cid:120)
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.
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
the
necessary competence to execute
the company’s business strategy.
individuals of
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.
29
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Bonuses
incentivise and
To
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
incentivise and
recognise
To
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.
Individual Director’s remuneration was as follows:
Executive Director:
Robert Jeffries Chatfield
Mark Stephen Shelton
Non-Executive Directors:
Roderick Douglas Mahoney*
Stephen John Fisher
Derek Sharples
Salaries
and fees
US$’000s
Bonuses
Taxable
benefits
US$’000s US$’000s
Share
warrants
US$’000s
Total
2023
US$’000s
Total
2022
US$’000s
694
58
271
48
48
1,119
-
-
-
-
-
-
73
-
-
-
-
384
9
169
-
-
1,151
67
1,224
-
440
48
48
877
45
45
73
562
1,754
2,191
*Roderick Douglas Mahoney retired as an executive of the Company during the year and he will continue
to serve the shareholders as a non-executive director of the Company
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, medical expenses and private car expenses.
The information in this part of the Directors’ Remuneration Report is subject to audit.
30
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Service contracts
The employment contracts of the Executive Directors with the Company are terminable by either party
with the notice in writing to the other detailed in the table below.
The Directors’ service contracts are as follows:
Date of contract
term
Unexpired
Robert Jeffries Chatfield
Roderick Douglas Mahoney
Stephen John Fisher
Derek Sharples
Mark Stephen Shelton
29 April 2013
21 February 2022
29 April 2014
15 November 2016
15 September 2023
Indefinite
Indefinite
Indefinite
Indefinite
Indefinite
Compensation
payable on
early
termination
-
-
-
-
-
Notice
period
4 months
2 months
1 month
1 month
2 weeks
Share warrants (audited)
The Group has an ownership-based compensation scheme for employees of the Group.
Warrants are granted to employees of the Group to promote:
Improvement in the Company’s earnings per share;
(cid:120)
(cid:120) Reliable and high quality financial reporting;
(cid:120) Growth in asset value and profits; and
(cid:120) Growth in dividends.
Each share warrant converts into one ordinary share of Avation PLC on exercise. No amounts are paid
or are payable by the recipient on receipt of the warrant. The warrants carry neither rights to dividends
nor voting rights. There are no performance conditions that need to be met before warrants can be
exercised.
Warrants granted to Directors on 20 September 2019 have a 3-year vesting schedule with details as
follows:
Vesting period
Before 21 September 2020
On 21 September 2020 and before 21 September 2021
On 21 September 2021 and before 21 September 2022
On 21 September 2022 to 21 October 2022
Proportion of total share options that are
exercisable
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
The exercise price for the warrants granted on 20 September 2019 was re-priced on 14 October 2022
from 296.0 pence to 101.25 pence. The warrant expiry date extended to 21 January 2023.
31
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Warrants granted to Directors on 21 November 2019 have a 3-year vesting schedule with details as
follows:
Vesting period
Before 22 November 2020
On 22 November 2020 and before 22 November 2021
On 22 November 2021 and before 22 November 2022
On 22 November 2022 to 22 December 2022
Proportion of total share options that are
exercisable
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
The exercise price for the warrants granted on 21 November 2019 was re-priced on 14 October 2022
from 274.5 pence to 101.25 pence. The warrant expiry date extended to 22 March 2023.
Warrants granted to Directors on 23 December 2020 have a 3-year vesting schedule with details as
follows:
Vesting period
Before 23 December 2021
On 23 December 2021 and before 23 December 2022
On 23 December 2022 and before 23 December 2023
On 23 December 2023 to 23 January 2024
Proportion of total share options that are
exercisable
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
Warrants granted to Directors on 29 September 2022 have a 3-year vesting schedule with details as
follows:
Vesting period
Before 29 September 2023
On 29 September 2023 and before 29 September 2024
On 29 September 2024 and before 29 September 2025
On 29 September 2025 to 29 November 2025
Proportion of total share options that are
exercisable
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
32
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Warrants granted to Directors on 2 March 2023 have a 3-year vesting schedule with details as follows:
Vesting period
Before 2 March 2024
On 2 March 2024 and before 2 March 2025
On 2 March 2025 and before 2 March 2026
On 2 March 2026 to 2 May 2026
Proportion of total share options that are
exercisable
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
The following share warrants issued to Directors were outstanding at the year-end:
Granted
during the
year
Exercised
during the
year
Expired
during
the year
Date granted
(re-priced)
Warrant
price
(re-priced)
20 Sep 2019
(14 Oct 2022)
21 Nov 2019
(14 Oct 2022)
296.0p
(101.25p)
274.5p
(101.25p)
Balance
at
beginning
of year
450,000
300,000
23 Dec 2020
130.0p
1,200,000
29 Sept 2022
102.0p
2 Mar 2023
126.0p
20 Sep 2019
(14 Oct 2022)
21 Nov 2019
(14 Oct 2022)
296.0p
(101.25p)
274.5p
(101.25p)
-
-
1,000,000
230,000
180,000
120,000
23 Dec 2020
130.0p
750,000
29 Sept 2022
102.0p
2 Mar 2023
126.0p
29 Sept 2022
102.0p
2 Mar 2023
126.0p
-
-
-
-
275,000
25,000
50,000
18,000
-
-
-
-
-
-
(235,000)
(215,000)
(300,000)
-
-
-
(180,000)
(120,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
at
end of
year
-
-
1,200,000
1,000,000
230,000
-
-
750,000
275,000
25,000
50,000
18,000
Director
Robert Jeffries
Chatfield *
Robert Jeffries
Chatfield *
Robert Jeffries
Chatfield *
Robert Jeffries
Chatfield *
Robert Jeffries
Chatfield *
Roderick Douglas
Mahoney
Roderick Douglas
Mahoney
Roderick Douglas
Mahoney
Roderick Douglas
Mahoney
Roderick Douglas
Mahoney
Mark Stephen
Shelton
Mark Stephen
Shelton
* Robert Jeffries Chatfield was granted the share warrants and assigned these to Epsom Assets Limited.
The closing market price of the shares subject to warrants at the year-end was 123.0 pence. The highest
and lowest closing market prices during the year were 142.0 pence and 68.0 pence.
33
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
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.
34
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Remuneration of Executive Chairman
2023
2022
2021
2020
2019
Executive Chairman single figure
remuneration (US$’000)
Annual bonus pay-out (as % of
maximum)
1,151
1,224
1,394
-
-
-
908
-
803
-
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.
Percentage change in remuneration of Chief Executive Officer and annual percentage
change in remuneration for directors and employees
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 and directors compared to that of all employees of
the Group.
Change in remuneration
from 2022 to 2023
Base salary and
fees
Bonus
Taxable
benefits
Warrants
expense
Executive Chairman:
Robert Jeffries Chatfield
Executive Director:
Mark Stephen Shelton
Non-executive Director:
Douglas Roderick Mahoney
Non-executive Director:
Stephen John Fisher
Non-executive Director:
Derek Sharples
All employees
-2%
NA
0%
NA
-30%
-100%
6%
6%
-3%
0%
0%
-96%
4%
NA
0%
0%
0%
4%
-13%
NA
-37%
0%
0%
-20%
Change in remuneration
from 2021 to 2022
Base salary and
fees
Bonus
Taxable
benefits
Warrants
expense
Executive Chairman:
Robert Jeffries Chatfield
Executive Director:
Douglas Roderick Mahoney
Non-executive Director:
Stephen John Fisher
Non-executive Director:
Derek Sharples
All employees
-1%
0%
-18%
-25%
0%
0%
0%
-22%
0%
0%
254%
-18%
-17%
-15%
105%
0%
0%
0%
0%
2%
35
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Percentage change in remuneration of Chief Executive Officer and annual
percentage change in remuneration for directors and employees (continued)
Change in remuneration
from 2020 to 2021
Base salary and
fees
Bonus
Taxable
benefits
Warrants
expense
Executive Chairman:
Robert Jeffries Chatfield
Executive Director:
Douglas Roderick Mahoney
Non-executive Director:
Stephen John Fisher
Non-executive Director:
Derek Sharples
All employees
10%
12%
0%
0%
-2%
Relative importance of spend on pay
0%
69%
192%
-52%
0%
0%
0%
0%
0%
229%
0%
0%
-71%
69%
191%
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:
36
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
Directors’ remuneration policy
The Company applies a policy for Directors’ remuneration which is designed to meet the following
objectives:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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
(cid:120)
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:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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:
(cid:120)
(cid:120)
base salary;
short-term incentives in the form of a cash bonus linked to performance against individual key
performance indicators; and
(cid:120)
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, except that Non-Executive Directors are entitled to receive payment of two years fees on
loss of office pursuant to a change of control.
37
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2023
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
Note:
Share Count
23,650,489
17,723
23,668,212
9,593
% of
vote cast
99.93%
0.07%
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 2022 was approved at the Annual General Meeting
held on 13 December 2022.
On behalf of the Board
Robert Jeffries Chatfield
Executive Chairman
38
AVATION PLC
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
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 Company and Group financial statements in accordance
with UK-adopted International Accounting Standards (“IFRSs”) in conformity with the requirements of
the Companies Act 2006.
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 the 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;
(cid:120)
(cid:120) make judgements and accounting estimates that are reasonable and prudent;
(cid:120)
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 the specific requirements in IFRSs adopted
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.
(cid:120)
(cid:120)
(cid:120)
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.
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.
39
AVATION PLC
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
We confirm that to the best of our knowledge:
(cid:120)
(cid:120)
(cid:120)
the financial statements, prepared in accordance with IFRSs inconformity with the Companies
Act 2006, give a true and fair view of the assets, liabilities and financial position of the Company
and of the Group and of the Group’s profit for the year;
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 26 October 2023 and is signed
on its behalf by Robert Jeffries Chatfield.
Robert Jeffries Chatfield
Executive Chairman
40
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC
Opinion
In our opinion:
•
•
•
•
Avation plc’s group financial statements and parent company financial statements (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 2023 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
the parent company financial statements been properly prepared in accordance with UK adopted
international accounting standards as applied in accordance with section 408 of the Companies Act
2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Avation plc which comprise:
Group
Parent company
Consolidated statement of profit and loss for the
year then ended
Consolidated statement of comprehensive income
for the year then ended
Consolidated statement of financial position as at 30
June 2023
Company statement of financial position as at 30
June 2023
Consolidated statement of changes in equity for the
year then ended
Company statement of changes in equity for the
year then ended
Consolidated statement of cash flows for the year
then ended
Company statement of cash flows for the year
then ended
Related notes 1 to 43 to the financial statements,
including a summary of significant accounting
policies
Related notes 1 to 43 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 UK
adopted international accounting standards and as regards to the parent company financial statements,
as applied in accordance with section 408 of the Companies Act 2006.
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 the financial statements section of our report below. We are independent
of the group and parent company in accordance with the ethical requirements that are
41
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
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
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the
directors’ assessment of the group and parent company’s ability to continue to adopt the going concern
basis of accounting included:
•
In conjunction with our walkthrough of the Group’s financial statements close process, we
confirmed our understanding of the going concern assessment process and engaged with
management to ensure all key factors were considered in their assessment.
• We obtained management’s going concern assessment, including their covenant assessment and
cashflow analysis and forecast for a period of 13 months from the expected date of signing of the
financial statements.
• We reviewed the sources of cash inflows available to the Group and the various scenario
analyses performed by management. We noted that in management’s most stressed scenario,
management’s forecasted minimum cash requirement would still be generated by the Group.
• We have considered the assumptions included in the cashflow analysis prepared and
considered the appropriateness of the methods used within the cashflow analysis and
determined through inspection and testing of the methodology and calculations that the methods
utilised were appropriate.
• We have further stressed managements’ sensitivities to test the resilience of the Group’s
business under more pessimistic scenarios.
• We have reviewed the appropriateness of the disclosures made by management as detailed
under Note 3 (e) of the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group and
parent company’s ability to continue as a going concern for a period of 12 months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the group’s ability to continue as a going
concern.
42
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of Avation plc
in accordance with the materiality thresholds as set out below.
Key
matters
audit
• Valuation of aircraft
• Valuation of aircraft purchase rights
• Expected credit loss (ECL) on trade and other receivables
Materiality
• Overall group materiality of US$2.4m which represents 1% of total equity as
of 30 June 2023.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each entity within the Group. Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account size, risk profile, the organisation
of the group and effectiveness of group wide controls, changes in the business environment, the
potential impact of climate change and other factors such as recent Internal audit results when assessing
the level of work to be performed at each entity.
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact Avation plc. The Group has
determined that the most significant future impacts from climate change on its operations will be the
physical risks and the transition risks as the global economy transitions to lower carbon emissions.
These are explained on page 9 in the principal risks and uncertainties and pages 15-17 for climate
related financial disclosures in the strategic report. All of these disclosures form part of the “Other
information,” rather than the audited financial statements. Our procedures on these unaudited
disclosures therefore consisted solely of considering whether they are materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit or otherwise appear to be
materially misstated, in line with our responsibilities on “Other information”.
As explained in the Note 3 (a) Basis of preparation and Note 4 Critical accounting estimates and
judgements, the governmental and societal responses to climate change risks are still developing and
are interdependent upon each other. Consequently, financial statements cannot capture all possible
future outcomes as these are not yet known. The degree of certainty of these changes may also mean
that they cannot be fully taken into account when determining asset and liability valuations and timing
of future cash flows under the requirements of UK adopted international accounting standards. As
explained in Note 3 (a), management believe that reasonably possible changes arising from climate risk
would not have a material impact on the financial statements.
43
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC
(CONTINUED)
As part of our audit, we have made enquiries of management to understand the extent of the potential
impact of climate change risk on the Group’s financial statements, including how climate is considered
as part of the investment making and monitoring processes. We have performed a risk assessment \as
to how the impact of climate change may affect the financial statements, including reading board minutes
and applying our knowledge of the Group and sector in which it operates to understand the extent of the
potential impact of climate change risk on the Group’s financial statement. Based on our work we have
not identified the impact of climate change on the financial statements to be a key audit matter or to
impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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) that we identified. These matters included 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 our opinion thereon, and we do not provide a separate
opinion on these matters.
44
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
Key observations
to
communicated
the
Audit
Committee
Our planned audit
procedures
were
completed without
material exception.
Risk
Our response to the risk
Valuation of Aircraft (2023: US$845.5
million,2022:US$813.9 million)
Refer to Note 3 (g) of the Accounting
policies (page 66); Note 6 (page 87) and
Note 18 of the Consolidated Financial
Statements (page 104).
The carrying value of jet and turboprop
aircraft represent the most significant
asset in the financial statements of
Avation plc. As at 30 June 2023, the
carrying value of aircraft reported is
(2022: US$813.9
US$845.5 million
million) as detailed in Note 18 of the
financial statements.
aircraft
As set out within on pages 64-66 Notes
3 (f) and 3 (g) ‘Summary of Significant
Accounting Policies’,
are
measured at fair value on a Lease
Encumbered Value basis (“LEV”). As
detailed in Note 4 (b) ‘Critical Accounting
Estimates
Judgments’,
and
management applies estimation and
judgment as part of their fair value
assessment of aircraft.
to
turboprop
is compared
For the purposes of determining the
valuation, the carrying value of each jet
the
and
computed LEV. LEV is determined by
discounting the lease income streams
associated with
the
the
expected future residual value of the
aircraft at the end of the lease adjusted
for return conditions at lease termination
using an appropriate discount rate.
lease and
The nature and size of these balances
and their importance to the Group are
such that we have identified this as a key
audit matter.
We have assessed each aircraft as they are
deemed to be individually material to the
financial statements. In obtaining sufficient
audit evidence we:
• Obtained an understanding of
the
process for the valuation of aircraft on an
LEV basis and performed a walkthrough
of the process, including controls over
of
the
calculation, and evaluated the design of
controls in relation to the identified risk.
assumptions
inputs
and
• Assessed
in
the
and
used
evaluated
the
appropriateness and accuracy of the key
LEV
assumptions
calculation, through recalculation and
scenario analysis.
Involved specialists from our valuations
and business modelling team to assess
the reasonableness of the discount rates
used in discounting the future cash flows
of aircraft in the model. As part of our
audit procedures, we also evaluated the
appropriateness of credit premia and
discounts applied by management for
each
their
lessee by analysing
respective credit risks.
•
• Evaluated
the
independence and
competence of experts engaged by
management in valuing the LEV in
accordance with the requirements of
auditing standards.
• Assessed the accuracy of factual inputs,
such as lease income streams, by
reviewing
and
amendments, as necessary.
agreements
lease
• Assessed the calculations underpinning
the LEV model by checking that the data,
the assumptions and inputs into the
model were in agreement with those that
we had evaluated in other areas of the
audit.
• Assessed
the appropriateness and
presentation of disclosures
the
financial statements for compliance with
the relevant accounting standards.
in
45
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
Key observations
communicated
to
the
Audit
Committee
Our procedures were
completed without
material exception.
Risk
Our response to the risk
Valuation of Aircraft Purchase
Rights (2023: US$85.82 million,
2022: US$65.28 million)
Refer to the Note 3(h) Accounting
policies (page 67); Note 6 (page 87)
and Note 24 of the Consolidated
Financial Statements (page 118).
that
We have determined
the
valuation of aircraft purchase rights
represent a significant risk. The fair
value of aircraft purchase rights may
not be correctly valued and recorded
in accordance with IFRS 13, Fair
Value Measurement.
As set out on page 82 within Note 4
(d) ‘Critical accounting estimates
and judgements’, aircraft purchase
rights are measured at fair value
through profit or loss. The Group
values aircraft purchase rights using
the Black Scholes price model.
Critical assumptions made
in
determining the fair value of the
aircraft purchase rights include the
market value volatility rates used.
The nature and size of
these
balances and their importance to the
Group are such
that we have
identified this as a key audit matter.
In obtaining sufficient audit evidence we:
• Obtained an understanding of the
aircraft purchase rights valuation
process, performed a walkthrough of
the process and evaluated the design
effectiveness of controls related to
the risk identified.
•
• Assessed the assumptions used by
management and evaluated
the
appropriateness and accuracy of
inputs such as assumed delivery
dates, purchase right exercise dates,
the asset price and risk-free, volatility
and inflation rates.
Involved
valuation
reasonableness of
model.
• Evaluated
our
the
the valuation
from
to assess
specialists
team
the competence and
external
of
independence
the
appraisers as management experts
for the external market appraisals
provided. We obtained these external
the
valuation reports
market
the valuation
calculation.
to validate
inputs
to
• Assessed the appropriateness and
presentation of disclosures in the
financial statements for compliance
with
accounting
relevant
the
standards.
46
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
Risk
Our response to the risk
Expected credit loss (ECL) on
Trade and Other Receivables
(2023: US$11.95 million, 2022:
US$11.34 million)
In obtaining sufficient audit evidence we:
• Obtained an understanding of the
the credit
process
for assessing
profile of airlines and the expected
credit loss model.
Key observations
communicated
to
the
Audit
Committee
Our procedures were
completed without
material exception.
Refer to the Note 3 (u) Accounting
policies (page 77); and Note 19 of
the
Financial
Statements (page 109)
Consolidated
loss on
We have determined that expected
credit
trade and other
receivables represents a significant
risk because there is high level of
receivables and historical
lease
restructurings. The allowance for
expected credit losses may not be
adequately recognised during the
financial year.
As set out on page 90 within Note 7
(b) Credit risk, the Group applies the
simplified approach to provide for
ECLs for all trade receivables. The
simplified approach requires the loss
allowance to be measured at an
amount equal to lifetime ECL.
these
The nature and size of
balances and their importance to the
Group are such
that we have
identified this as a key audit matter.
• Performed a walkthrough of
the
process and evaluated the design
effectiveness of controls identified.
• Obtained management’s assessment
of the ECL and their evaluation of the
risks associated with each airline
customer and
the
exposure at default and loss given
default.
recalculated
• Evaluated the appropriateness and
accuracy of key assumptions, such
as probability of default and loss
given default
•
• Evaluated the accuracy of factual
inputs, such as security deposits and
letters of credit held for each lessee,
which were
treated as credit
enhancements in determining the net
exposure
Independently checked
the credit
rating of similar airlines in the same
region and of a similar size and
validated management’s inputs.
• Evaluated management’s overall
approach in conjunction with the
guidance
for
reasonableness.
IFRS
of
9
• Assessed the appropriateness and
presentation of disclosure
in the
financial statements for compliance
with
accounting
relevant
the
standards.
In the prior year our auditor’s report included a key audit matter in relation to going concern. In the
current year we did not identify going concern as a key audit matter due to the recovery of the aviation
sector post-Covid.
47
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably
be expected to influence the economic decisions of the users of the financial statements. Materiality
provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be US$2.4 million (2022: US$2.3million), which is 1% (2022:
1%) of total equity. We believe that total equity provides us with the most relevant measure used by
investors and other stakeholders when assessing the performance of the Group.
We determined materiality for the Parent Company to be US$1.5 million (2022: US$1.7 million), which
is 0.5% (2022: 0.5%) of total assets.
During the course of our audit, we reassessed initial materiality and no change in final materiality from
original assessment at planning.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce
to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control
environment, our judgement was that performance materiality was 50% (2022: 50%) of our planning
materiality, namely US$1.2m (2022: US$1.1m). We have set performance materiality at this percentage
due to a higher likelihood of misstatements in the current year.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in
excess of US$121,000 (2022: US$113,000), which is set at 5% of planning materiality, as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, including the Chairman’s
Statement (set out on page 2-4), Strategic Report (set out on pages 5-21), Directors’ Report (set out on
pages 22-26), Directors’ Remuneration Report (set out on pages 27–36) and Directors’ Responsibilities
Statement (set out on page 37-38) other than the financial statements and our auditor’s report thereon.
The directors are responsible for the other information.
48
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this 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 this gives rise to 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 the 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 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 in relation to which 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
•
the parent company financial statements and the part of the Directors’ Remuneration Report to be
audited 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
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement (set out on page 37-38), 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
49
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
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 and 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 the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the
group and determined that the most significant are:
o Companies Act 2006
o Tax Legislation (governed by HM Revenue and Customs and Inland Revenue Authority
of Singapore)
o Financial Conduct Authority (FCA) Listing Rules
o Disclosure Guidance and Transparency Rules (DTR) of the FCA
• We understood how Avation plc is complying with those frameworks holding discussions with
general counsel, external counsel and service providers. We inquired as to any known instances
of non-compliance or suspected non-compliance with laws and regulations.
• We assessed the susceptibility of the group’s financial statements to material misstatement,
including how fraud might occur by holding discussions with senior management, including the
Chief Executive Officer, Chief Financial Officer, Audit Committee members and General
Counsel.
50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
• Based on this understanding we designed our audit procedures to identify non-compliance with
such laws and regulations. Our procedures involved inquiring of key management and reviewing
key policies.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required to address
• We were appointed by the company on 20 December 2017 to audit the financial statements for the
year ending 30 June 2018 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is
6 years, covering the years ending 30 June 2018 to 30 June 2023.
•
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 the audit.
•
The audit opinion is consistent with the additional report to the audit committee.
Use of our report
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 so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Vincent Bergin (Senior statutory auditor)
for and on behalf of Ernst & Young, Chartered Accountants and Statutory Auditor
Dublin
26 October 2023
Notes:
The maintenance and integrity of the Avation plc web site is the responsibility of the directors;
1.
the work carried out by the auditors does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may have occurred to the financial statements
since they were initially presented on the web site.
2.
statements may differ from legislation in other jurisdictions.
Legislation in the United Kingdom governing the preparation and dissemination of financial
51
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2023
Continuing operations
Revenue
Other income
Depreciation
Gain on derecognition of finance lease
Loss on disposal of aircraft and aircraft engine
Unrealised gain on aircraft purchase rights
Unrealised gain on equity investments
Reversal of/impairment (loss) on aircraft
Aircraft transition expenses
(Provision for)/reversal of expected credit losses
Administrative expenses
Legal and professional fees
Operating profit
Loss on debt modification
Finance income
Finance expenses
Profit before taxation
Taxation
Profit from continuing operations
Profit attributable to:
Shareholders of Avation PLC
Non-controlling interests
Note
2023
US$’000s
2022
US$’000s
9
10
18
18
24
25
18,29
19,20
11
33
12
13
15
16
91,861
7,389
99,250
(38,566)
2,792
(1,000)
20,540
7,520
3,287
(11,389)
(659)
(8,760)
(2,382)
112,232
4,152
116,384
(39,304)
-
(2,396)
38,320
-
(6,158)
(5,479)
1,980
(9,465)
(3,698)
70,633
90,184
-
5,906
(63,539)
13,000
(808)
12,192
(3,545)
3,344
(67,481)
22,502
(5,375)
17,127
12,191
1
17,126
1
12,192
17,127
Earnings per share for profit
attributable to shareholders of Avation PLC
Basic earnings per share (US cents)
Diluted earnings per share (US cents)
17
17
17.43
17.38
24.65
24.65
52
AVATION PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
Note
2023
US$’000s
2022
US$’000s
Profit from continuing operations
12,192
17,127
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Net gain on cash flow hedge, net of tax
23
Items that may not be reclassified subsequently to profit or loss:
Revaluation (loss)/gain on property, plant and equipment, net of tax
31
Other comprehensive income, net of tax
410
410
(966)
(556)
35,387
35,387
16,209
51,596
Total comprehensive income for the year
11,636
68,723
Total comprehensive income attributable to:
Shareholders of Avation PLC
Non-controlling interests
11,635
1
11,636
68,722
1
68,723
53
AVATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF 30 JUNE 2023
ASSETS
Non-current assets
Property, plant and equipment
Finance lease receivables
Trade and other receivables
Derivative financial assets
Aircraft purchase rights
Lease incentive assets
Goodwill
Current assets
Finance lease receivables
Trade and other receivables
Derivative financial assets
Investment in equity, fair value through profit or loss
Lease incentive assets
Cash and bank balances
Assets held for sale
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Treasury shares
Merger reserve
Asset revaluation reserve
Capital reserve
Other reserves
Retained earnings
Equity attributable to shareholders of Avation PLC
Non-controlling interests
Total equity
Non-current liabilities
Loans and borrowings
Trade and other payables
Derivative financial liabilities
Maintenance reserves
Deferred tax liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Maintenance reserves
Income tax payable
Liabilities directly associated with assets held for sale
Total equity and liabilities
Approved by the board and authorised for issue on 26 October 2023
Robert Jeffries Chatfield - Executive Chairman
54
Note
2023
2022
US$’000s
US$’000s
18
20
19
23
24
27
21
20
19
23
25
27
28
29
30
30
31
32
33
34
23
35
36
33
34
35
29
845,471
813,908
41,213
14,258
13,442
85,820
4,686
1,902
55,208
19,388
5,920
65,280
310
1,902
1,006,792
961,916
3,932
31,035
54
11,235
1,643
116,905
164,804
8,000
172,804
5,624
13,202
-
3,715
137
119,171
141,849
113,255
255,104
1,179,596
1,217,020
1,182
70,024
-
6,715
50,764
8,876
15,069
88,995
241,625
7
241,632
1,203
67,681
(7,811)
6,715
51,730
8,876
14,174
84,519
227,087
6
227,093
694,575
764,230
20,185
1,632
54,587
26,440
18,274
1,055
75,131
25,437
797,419
884,127
61,401
17,167
61,456
521
140,545
-
140,545
63,900
15,940
10,156
658
90,654
15,146
105,800
1,179,596
1,217,020
AVATION PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS OF 30 JUNE 2023
ASSETS
Non-current assets
Trade and other receivables
Derivative financial assets
Investment in debt instrument, fair value through profit or loss
Investment in subsidiaries
Aircraft purchase rights
Current assets
Trade and other receivables
Cash and bank balances
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Treasury shares
Merger reserve
Other reserves
Retained earnings
Total equity
Non-current liabilities
Loans and borrowings
Trade and other payables
Derivative financial liabilities
Deferred tax liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Note
2023
US$’000s
2022
US$’000s
19
23
26
22
24
19
28
30
30
32
33
34
23
36
33
34
54,879
3,399
-
3,328
85,820
147,426
161,463
671
162,134
100,238
1,281
5,925
3,328
65,280
176,052
145,491
9,709
155,200
309,560
331,252
1,182
70,024
-
6,715
3,333
74,678
1,203
67,681
(7,811)
6,715
1,089
70,849
155,932
139,726
59,535
55,749
1,632
13,102
130,018
13,207
10,403
23,610
113,086
33,061
1,055
9,680
156,882
16,353
18,291
34,644
Total equity and liabilities
309,560
331,252
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$11.5
million (2022: US$36.5 million).
Approved by the board and authorised for issue on 26 October 2023
Robert Jeffries Chatfield
Executive Chairman
55
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AVATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
Cash flows from operating activities:
Profit before income tax
Adjustments for:
Amortisation of lease incentive asset
Depreciation expense
Depreciation of right-of-use assets
Provision for/(reversal of) expected credit losses
Finance income
Finance expense
Gain on derecognition of finance lease
Loss on debt modification
Loss on disposal of aircraft and aircraft engine
Interest income from finance leases
(Reversal of)/impairment loss on aircraft
Share warrants expense
Foreign currency exchange gain
Unrealised gain on aircraft purchase rights
Unrealised gain on equity investments
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables and finance lease receivables
Trade and other payables
Maintenance reserves
Cash from operations
Finance income received
Finance expense paid
Income tax paid
Net cash from operating activities
Cash flows from investing activities:
Investment in fixed term deposits
Purchase of property, plant and equipment
Proceeds from disposal of aircraft and aircraft engine
Net cash from investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Purchase of treasury shares
Dividend paid to non-controlling interest of a subsidiary
(Increase)/decrease of restricted cash balances
Proceeds from loans and borrowings, net of transactions costs
Repayment of loans and borrowings
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
60
Note
2023
US$’000s
2022
US$’000s
13,000
22,502
9
18
19,20
12
13
33
9
18,29
14
24
25
18
33
33
28
28
1,368
38,566
233
659
(5,906)
63,539
(2,792)
-
1,000
(2,230)
(3,287)
1,142
(3,107)
(20,540)
(7,520)
74,125
(3,296)
2,042
15,503
88,374
4,713
(44,091)
(610)
48,386
(1,225)
(6)
39,750
38,519
1,855
(94)
-
(6,960)
42,958
1,383
39,304
218
(1,980)
(3,344)
67,481
-
3,545
2,396
(2,918)
6,158
1,423
-
(38,320)
-
97,848
12,923
1,562
(7,124)
105,209
1,581
(51,700)
(610)
54,480
-
(17)
65,636
65,619
-
(63)
13,500
17,060
(135,115)
(140,396)
(97,356)
(109,899)
(10,451)
35,267
24,816
10,200
25,067
35,267
AVATION PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
Cash flows from operating activities:
Profit before taxation
Adjustments for:
Dividend income
Depreciation expense
Depreciation of right-of-use assets
Expected credit losses
Fair value (gain)/loss on investment in debt instrument
Finance income
Finance expense
Gain on receivables modification
Loss on debt modification
Loss on disposal of aircraft and aircraft engine
Share warrant expense
Unrealised gain on aircraft purchase rights
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables
Trade and other payables
Cash generated from/(used in) operations
Finance income received
Finance expense paid
Income tax paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities:
Dividends received
Return of capital from a subsidiary
Investment in debt instrument, fair value through profit or loss
Proceeds from disposal of aircraft and aircraft engine
Net cash (used in)/generated from investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Purchase of treasury shares
Proceeds from loans and borrowings
Repayment of loans and borrowings
Net cash 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
61
Note
2023
US$’000s
2022
US$’000s
14,691
42,476
18
19
26
24
26
28
28
-
-
79
-
(858)
(2,868)
7,150
-
-
-
1,142
(20,540)
(1,204)
33,199
(6,906)
25,089
6,920
(9,147)
(84)
22,778
-
-
(3,305)
-
(3,305)
1,855
(94)
22,590
(52,862)
(28,511)
(9,038)
9,709
671
(8,941)
87
74
354
164
(10,719)
11,224
(3,517)
3,545
452
1,423
(38,320)
(1,698)
(8,429)
2,420
(7,707)
7,644
(10,961)
-
(11,024)
8,941
10,819
-
1,275
21,035
-
-
41,268
(47,083)
(5,815)
4,196
5,513
9,709
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
1
GENERAL
Avation PLC is a public limited company incorporated in England and Wales under the Companies
Act 2006 (Registration Number 05872328) and its shares are traded on the Standard Segment of
the Main Market of the London Stock Exchange. The address of the registered office is given on
page 1.
As disclosed in the Directors’ Report, the Group’s principal activity is aircraft leasing. Details of
the activities of subsidiary companies are set out in Note 22 to these financial statements.
2
STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with UK-adopted International
Accounting Standards (“IFRSs”) in conformity with the requirements of the Companies Act 2006.
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PREPARATION – The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards (“IFRSs”) in conformity with the requirements of
the Companies Act 2006.
(a)
The financial statements have been prepared on a going concern basis and have been
prepared in accordance with the historical cost convention, as modified by the revaluation
of certain assets and liabilities.
The financial statements are presented in United States Dollars and all values are rounded
to the nearest thousand (US$’000s) unless otherwise indicated. The year-end exchange rate
for Pounds Sterling to United States Dollars is 1.27 (2022: 1.22).
The preparation of financial statements in conformity with UK-adopted International
Accounting Standards (“IFRSs”) requires the use of significant accounting judgements,
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 by the Company and its subsidiaries,
unless otherwise disclosed.
As the governmental and societal responses to climate change are still developing, it is not
possible to consider all future outcomes when determining the carrying amount of assets
and liabilities in the preparation of the financial statements. The Group’s view is that the
possible changes arising from climate related risks would not have a material impact on the
financial statements.
62
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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, together the Group as at 30 June 2023.
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:
(cid:120)
(cid:120)
(cid:120)
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 control over
an investee, including:
The contractual arrangement with the other vote holders of the investee
(cid:120)
(cid:120) Rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights
(cid:120)
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 shareholders of Avation PLC 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:
(cid:120) Derecognises the assets (including goodwill) and liabilities of the subsidiary
(cid:120) Derecognises the carrying amount of any non-controlling interests
(cid:120) Derecognises the cumulative translation differences recorded in equity
(cid:120) Recognises the fair value of the consideration received
(cid:120) Recognises the fair value of any investment retained
(cid:120) Recognises any surplus or deficit in profit or loss
(cid:120) 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.
63
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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, which is 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 identifiable 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.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value
at the acquisition date. Contingent consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity. Contingent consideration classified as an
asset or liability that is a financial instrument and within the scope of IFRS 9 Financial
Instruments is measured at fair value with the changes in fair value recognised in profit or
loss. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair
value at each reporting date with changes in fair value recognised in profit or loss.
(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 a n d 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.
64
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) GOING CONCERN
These consolidated financial statements have been prepared on a going concern basis. As part
of the going concern assessment, management has considered all projected cash inflows and
outflows of the Company and its subsidiaries, over the coming year including:
(cid:120) Current unrestricted cash on hand balance available,
(cid:120)
(cid:120)
Projected collections of receivable balances and contracted assets sales,
Forecasted cash outflows for all contractual debt and lease obligations and selling,
general and administrative expenses for the next 12 months,
Forecasted cash outflows for capital expenditure for the next 12 months
(cid:120)
Management has also conducted sensitivity analysis on projected cash flows for changes in
base assumptions around rent collection rates and other significant factors.
In addition, the Directors have considered the maturity profiles of all loans and borrowings
and have evaluated the Group’s compliance with financial and non-financial covenants. Based
on this analysis and all information available at present, the Directors believe that the actions
that they have taken and intend to take will ensure that the Group has sufficient liquidity to
meet its obligations as they fall due and that it continues to be appropriate to prepare the
financial statements on a going concern basis of preparation.
(f)
FAIR VALUE MEASUREMENT – The Group measures financial instruments, such as
derivatives, investment in equity and non-financial assets, such as aircraft and aircraft
purchase rights in excess of the Group’s usage requirements at fair values at each reporting
date.
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:
(cid:120)
(cid:120)
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.
65
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
FAIR VALUE MEASUREMENT (continued)
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:
(cid:120)
(cid:120)
(cid:120)
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or
liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the
fair value measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis,
the Group determines whether transfers have occurred between Levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Group’s management determines the policies and procedures for both recurring fair value
measurement, such as aircraft, aircraft purchase rights and for non-recurring measurement,
such as assets held for sale in discontinued operations.
External valuers are involved for valuation of significant assets, such as aircraft, aircraft
purchase rights 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, 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.
66
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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
revalued amount. 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. These aircraft have been reviewed for impairment.
Any revaluation increase arising on the revaluation of such aircraft is credited to the asset
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:
Narrow-body jets and turboprops
Twin-aisle jets
Aircraft engines
Furniture and equipment
25 years from date of manufacture
23 years from date of manufacture
15 years from date of acquisition
3 years
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, estimated scrap values for second hand aircraft and 33% of cost for new aircraft
engines.
Fully depreciated assets still in use are retained in the financial statements until they are
disposed of or retired.
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.
67
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) AIRCRAFT PURCHASE RIGHTS – Purchase rights to acquire aircraft which are over and
above the Group’s requirement for use in the leasing business will be disposed of. The Group
values these excess aircraft purchase rights using the Black Scholes model. Aircraft purchase
rights are measured at fair value through profit or loss.
(i) 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.
Property, plant and equipment are not depreciated or amortised once classified as held for
sale.
Assets and liabilities classified as held for sale are presented separately as current items in
the statement of financial position.
(j)
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.
68
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
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. Any reversal of an impairment loss of a revalued
asset is treated as a revaluation increase. A reversal of an impairment loss on a revalued
asset is recognised in other comprehensive income and increases the revaluation surplus
for that asset. However, to the extent that an impairment loss on the same revalued asset
was previously recognised in profit or loss, a reversal of that impairment is also 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.
(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 expiry of a lease, any shortfall that is identified in the
maintenance reserve liabilities for an aircraft as compared to the expected future
reimbursement obligations to a lessee, or any surplus, will be charged or released to profit
or loss. Upon sale of an aircraft, the maintenance reserve liability for that aircraft which is
not transferred to the buyer will be released to profit or loss.
69
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) SHARE-BASED PAYMENTS – The Group operates an equity-settled share-based
compensation plan. The value of the employee services received in exchange for the grant of
warrants is recognised as an expense in profit or loss with a corresponding increase in the
warrant reserve over the vesting period. The total amount to be recognised over the vesting
period is determined by reference to the fair value of the warrants granted on the date of the
grant using the binomial option pricing model method. Non-market vesting conditions are
included in the estimation of the number of shares under warrants that are expected to
become exercisable on the vesting date. At the end of each reporting period, the Group
revises its estimates of the number of shares under warrants that are expected to become
exercisable on the vesting date and recognises the impact of the revision of the estimates in
profit or loss, with a corresponding adjustment to the warrant reserve over the remaining
vesting period.
When the warrants are exercised, the proceeds received and the related balance previously
recognised in the warrant reserve are credited to share capital and share premium accounts
when new shares are issued to the employees.
(n) LEASES
Group as a lessor
The Group leases aircraft to airlines under operating leases. At lease inception or
modification date, the Group reviews all necessary criteria to determine proper lease
classification. 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 profit or loss on a straight-
line basis over the lease term. The Group recognises contingent rents when they can be
reliably measured.
Where the Group transfers substantially all the risks and rewards of ownership of an asset,
the lease is classified as a finance lease. Lease receipts are apportioned between finance
income and reduction of the finance lease receivable so as to achieve a constant rate of
interest on the remaining balance of the asset. Finance income is credited to revenue.
For sales–type leases, the Group recognise the difference between the net book value of
the aircraft and the net finance lease receivables as a gain or loss on sale of aircraft, less
any initial direct costs. The unearned income is recognised as finance lease interest income
within revenue over the lease term in a manner that produces a constant rate of return on
the finance lease receivables.
Under the terms of certain lease agreements, lessees are required to make maintenance
contributions to the Group. At the end of a lease, when we are able to determine the
amount, if any, by which maintenance contributions received exceed the amount we are
required under the lease to reimburse to the lessee for heavy maintenance, overhaul or
parts replacement, the excess is recognised as maintenance revenue. End of lease
compensation payments made to the Group are recognised as revenue when a reliable
estimate of the expected compensation amount can be determined. The Group does not
recognise end of lease compensation as revenue if there is a reasonable expectation that
the lessee will extend the existing lease agreement rather than returning the aircraft at the
end of the current lease period.
70
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) LEASES (continued)
Lease maintenance contribution
Some of the Group’s leases contain provisions which may require the Company to pay a
portion of the lessee’s costs for heavy maintenance, overhaul, or replacement of certain
high-value components. The Group records liabilities for contractual obligations to
contribute to the lessee’s cost of major maintenance events expected to occur during the
lease. The Group regularly reviews the level of these contractual obligations under current
lease contracts and makes adjustments as necessary. Lessor maintenance contributions
represents a lease incentive and are recorded as a charge against lease rental income over
the life of the associated lease on a straight-line basis. When aircraft are sold the portion of
the accrued liability not specifically assigned to the buyer is derecognised from the
Consolidated Statement of Financial Position as part of the gain or loss on disposal of the
aircraft.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Group recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying
assets.
i)
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease
(i.e., the date the underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement date less any lease incentives
received. Right-of-use assets are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term
or the cost reflects the exercise of a purchase option, depreciation is calculated using
the estimated useful life of the asset.
Right-of-use assets are also subject to impairment.
The Group’s lease arrangements do not contain an obligation to dismantle and remove
the underlying asset, restore the site on which it is located or restore the underlying
asset to a specified condition.
The Group’s right-of-use assets are included in trade and other receivables.
71
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) LEASES (continued)
ii)
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease term.
The lease payments include fixed payments (including in-substance fixed payments)
less any lease incentives receivable, variable lease payments that depend on an index
or a rate, and amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option reasonably certain
to be exercised by the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as
expenses in the period in which the event or condition that triggers the payment
occurs.
In calculating the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in
the lease is not readily determinable. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest and reduced for the
lease payments made. In addition, the carrying amount of lease liabilities is re-
measured if there is a modification, a change in the lease term, a change in the lease
payments (e.g., changes to future payments resulting from a change in an index or
rate used to determine such lease payments) or a change in the assessment of an
option to purchase the underlying asset.
The Group’s lease liabilities are included in trade and other payables.
iii)
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases
of equipment (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease
of low-value assets recognition exemption to leases of office equipment that are
considered to be low-value.
Lease payments on short-term leases and leases of low value assets are recognised
as expense on a straight-line basis over the lease term.
(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 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. 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.
72
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) REVENUE RECOGNITION – The Group as lessor, leases aircraft principally under both
operating leases and finance leases. Revenue which is not derived from leases is measured
as follows:
(i)
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.
(ii) Dividend income from investments is recognised when the company’s right to receive
payment has been established.
(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.
(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.
73
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(r)
TAXATION (continued)
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 tax resident in Singapore.
(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 Avation PLC.
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.
74
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
FINANCIAL INSTRUMENTS
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised
cost, fair value through other comprehensive income (OCI), and fair value through profit or
loss.
The classification of financial assets at initial recognition depends on the financial asset’s
contractual cash flow characteristics and the Group’s business model for managing them.
With the exception of trade receivables that do not contain a significant financing component
or for which the Group has applied the practical expedient, the Group initially measures a
financial asset at its fair value plus, in the case of a financial asset not at fair value thought
profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost or fair value
thought OCI, it needs to give rise to cash flows that are solely payments of principal and
interest (‘SPPI’) on the principal amount outstanding. This assessment is referred to as the
SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its
financial assets in order to generate cash flows. The business model determines whether
cash flows will result from collecting contractual cash flow, selling the financial assets or
both.
All purchases and sales of financial assets are recognised or derecognised on the trade date
which is the date that the Group commits to purchase or sell the asset.
Subsequent measurement
For the purposes of subsequent measurement, financial assets are classified in four
categories:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and
losses (debt instruments)
Financial assets designated at fair value through OCI with recycling of cumulative
gains and losses upon derecognition (equity instruments)
Financial assets at fair value through profit or loss
75
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
FINANCIAL INSTRUMENTS (continued)
(i)
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial
assets at amortised cost if both of the conditions are met:
(cid:120)
(cid:120)
The financial asset is held within a business model with the objective to hold
financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specific dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding
Financial assets at amortised cost are subsequently measured using the effective
interest (EIR) method and are subject to impairment. Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group and Company’s financial assets at amortised cost are cash and bank
balances, trade and other receivables and finance lease receivables.
(ii)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for
trading, financial assets designated upon initial recognition at fair value through
profit or loss, or financial assets mandatorily required to be measured at fair value.
Financial assets are classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term. Derivatives, including separated
embedded derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets with cash flows that
are not solely payments of principal and interest are classified and measured at fair
value through profit or loss, irrespective of the business model. Notwithstanding
the criteria for debt instruments to be classified at amortised cost or at fair value
through OCI, debt instruments may be designated at fair value though profit or loss
on initial recognition if doing so eliminates, or significantly reduces, an accounting
mismatch.
Financial assets at fair value through profit or loss are carried in the statement of
financial position at fair value with net changes in fair value recognised in the
statement of profit or loss.
The Group and Company’s financial assets at fair value through profit or loss are
options held for trading, investment in equity, investment in debt instrument and
derivative financial assets.
Derecognition
A financial asset is derecognised where the contractual right to receive cash flows from
the asset has expired. On derecognition of a financial asset in its entirety, the difference
between the carrying amount and the sum of the consideration received and any
cumulative gain or loss that had been recognised in other comprehensive income for
financial assets is recognised in profit or loss.
76
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
FINANCIAL INSTRUMENTS (continued)
Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the
contractual provisions of the financial instrument. The Group determines the classification
of its financial liabilities at initial recognition. Financial liabilities are recognised initially at
fair value, minus in the case of financial liabilities not at fair value through profit or loss,
directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
(i)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition at fair
value. Financial liabilities are classified as held for trading if they are acquired for
the purpose of selling in the near term. Subsequent to initial recognition, financial
liabilities at fair value through profit or loss are measured at fair value. Any gains
or losses arising from changes in fair value of the financial liabilities are recognised
in profit or loss.
The Group and Company’s financial liabilities at fair value through profit or loss
are derivative financial liabilities, including share warrants.
(ii)
Financial liabilities at amortised cost
After initial recognition, financial liabilities that are not carried at fair value through
profit or loss are subsequently measured at amortised cost using the effective
interest method. Gains and losses are recognised in profit or loss when the
liabilities are derecognised, and through the amortisation process.
The Group and Company’s financial liabilities at amortised cost are trade and other
payables, loans and borrowings and maintenance reserves.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a de-recognition of
the original liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognised in profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is presented in the
statement of financial position, when and only when, there is a currently enforceable legal
right to set off the recognised amounts and there is an intention to settle on a net basis,
or to realise the assets and settle the liabilities simultaneously.
77
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(u)
IMPAIRMENT OF FINANCIAL ASSETS - The Group recognises an allowance for expected
credit losses (“ECLs”) for all financial assets not held at fair value through profit or loss.
ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected cash flows will include
cash flows from the sale of collateral held or other credit enhancements that are integral to
the contractual terms.
Loss allowances of the Group are measured on either of the following bases:
(cid:120) 12-month ECLs: these are ECLs that result from default events that are possible within
the 12 months after the reporting date (or for a shorter period if the expected life of
the instrument is less than 12 months); or
(cid:120)
Lifetime ECLs: these are ECLs that result from all possible default events over the
expected life of a financial instrument.
(i) Simplified approach
The Group applies the simplified approach to provide for ECLs for all trade receivables.
The simplified approach requires the loss allowance to be measured at an amount equal
to lifetime ECLs.
The Group established a credit risk matrix based on the Group’s historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
(ii) General approach
The Group applies the general approach to provide for ECLs on finance lease receivables
and all other financial assets not held at fair value through profit or loss. Under the
general approach, the loss allowance is measured at an amount equal to 12-month
ECLs at initial recognition.
At each reporting date, the Group assesses whether the credit risk of a financial
instrument has increased significantly since initial recognition. When credit risk has
increased significantly since initial recognition, loss allowance is measured at an
amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly
since initial recognition and when estimating ECLs, the Group considers reasonable and
supportable information that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and analysis, based on the
Group’s historical experience and informed credit assessment and includes forward-
looking information.
If credit risk has not increased significantly since initial recognition or if the credit
quality of the financial instruments improves such that there is no longer a significant
increase in credit risk since initial recognition, loss allowance is measured at an amount
equal to 12-month ECLs.
78
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For the purpose of recognition of an allowance for ECL, the Group considers a financial asset
to be in default:
(cid:120) When the lessee does not pay the amounts due under its lease agreements to the Group
in excess of the security deposit or the value of the collateral. The Group will recognise
an allowance for ECL based on the historical observed default rates, current credit rating
of the customers, forecasted economic conditions to assess the amount of ECL
allowance required
.
Financial assets are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others,
the failure of a debtor to engage in a repayment plan with the Group, and a failure to
make contractual payments for a period of greater than 90 days past due or where the
trade receivables were in excess of the security packages held by the Group.
(cid:120)
(cid:120)
in the case where the financial asset is not secured, when the financial asset is more
than 90 days past due.
(v) CASH AND BANK BALANCES - Cash and bank balances comprise cash and cash
equivalents and restricted cash.
(cid:120) Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and
short-term, highly liquid investments that are readily convertible to known amount of
cash and which are subject to insignificant risk of changes in value.
(cid:120) Restricted cash balances comprise bank balances which are pledged as security for
certain loan obligations.
(w) TRADE AND OTHER PAYABLES – Liabilities for trade and other payables which are
normally settled within 30 to 60 days credit terms, are initially carried at cost which is the
fair value of the consideration to be paid in the future for goods and services received,
whether or not billed to the Group and subsequently measured at amortised cost using the
effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised as well
as through the amortisation process.
79
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(x)
LOANS AND 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).
(cid:120) Modification of loans – The Group assesses whether the new terms of modified third
party loans results in a modification of contractual cash flows substantially different to
the original terms. In making this assessment, the Group considers, among others,
significant changes in the interest rate. If the terms are substantially different, the
Group derecognises the original financial liability and recognises a new financial liability
at fair value and recalculates a new effective interest rate for the liability. If the terms
are not substantially different, the modification does not result in derecognition, and
the Group recalculates the gross carrying amount based on the revised cash flows of
the liability recalculated by discounting the modified cash flows at the original effective
interest rate and recognises a modification gain or loss in profit or loss. The present
value of the modified cash flow of the financial liability is subsequently measured at and
amortised using the effective interest rate method over the remaining life of the loan
and recorded as part of finance expense in the consolidated statement of profit or loss.
(y) SHARE CAPITAL, SHARE ISSUANCE EXPENSES AND TREASURY SHARES - Proceeds
from issuance of ordinary shares in excess of the par value are recognised in share premium
in equity. Incremental costs directly attributable to the issuance of ordinary shares are
deducted from share premium.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and
deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale,
issue or cancellation of the Group’s own equity instruments. Any difference between the
carrying amount and the consideration, if reissued, is recognised in share premium.
(z) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING – The Group uses derivative
financial instruments such as interest rate swap contracts and cross currency 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.
80
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(z) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (continued)
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 hedged 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.
Cash flow hedges
Hedges are classified as cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction and could affect profit or loss. 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.
If the hedged future cashflows are no longer expected to occur, amounts previously
recognised in hedging reserve are transferred to profit or loss. If the hedging instrument
expires or is sold, terminated or exercised without replacement or rollover, or if its
designation as a hedge is revoked, amounts previously recognised in hedging reserve
remain in other comprehensive income until the future cash flows occur, if the hedged future
cash flows are still expected to occur.
(aa) SEGMENTAL REPORTING - Operating segments are reported in a manner consistent with
the internal reporting provided to the Board of Directors who are responsible for allocating
resources and assessing performance of the operating segment. The Group’s principal
activity is aircraft leasing and therefore there is only one reportable segment. The financial
results from this segment are equivalent to the financial statements of the Group as a whole.
81
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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 Group has considered the impact of climate change on the accounting estimates and
judgements. Many effects arising from climate change will be longer term in nature, with an
inherent level of uncertainty, and have been assessed as having limited effect on accounting
judgements and estimates for the current period. Refer to page 15 on the climate related financial
disclosures in the strategic report.
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 and review of residual value of property, plant and equipment –
aircraft
The Group periodically evaluates its aircraft for impairment and also reviews the residual
value of the aircraft. Management exercises significant judgement in determining whether
there is any indication that any aircraft may have been impaired or if there are any
indications of changes in residual value. This exercise involves management considering
both internal and external sources of information which include but are not limited to:
observable indications that the value of the aircraft has declined during the period
significantly more than would be expected as a result of the passage of time or normal use;
significant adverse changes in the expected usage of the aircraft, technological or aviation
environment that have taken place or will take place in the near future; significant increase
in market interest rates; evidence of obsolescence or physical damage of the aircraft and
worse than expected economic performance of the aircraft.
The carrying amount of property, plant and equipment at the end of the reporting period is
disclosed in Note 18.
(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 the 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. The factors considered in estimating the undiscounted cash flows are impacted
by changes in future periods due to changes in projected lease rental and maintenance
payments, residual values, economic conditions, technology, airline demand for a particular
aircraft type and other factors.
The carrying amount of property, plant and equipment - aircraft at the end of the reporting
period is disclosed in Note 18.
82
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(c)
Impairment of financial assets
The Group follows the guidance of IFRS 9 Financial Instruments in determining when a
financial asset is impaired, and this requires judgement on the correlation between historical
observed default rates and ECLs. The Group’s methodology for calculating ECLs is set out
in Note 7.
The carrying amount of financial assets at the end of the reporting period is disclosed in
Note 6.
(d) Fair value estimation for aircraft purchase rights
The Group values aircraft purchase rights using the Black Scholes pricing model. Critical
assumptions made in determining the fair value of the aircraft purchase rights include the
assumed volatility of market prices.
The carrying amount of aircraft purchase rights at the end of the reporting period is
disclosed in Note 24.
(e)
Income taxes and deferred income taxes
a.
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 was taxed at a concessionary rate of 10%.
Qualifying income during the period 17 April 2014 to 16 April 2019 was taxed at the
concessionary rate subject to meeting the terms and conditions of the incentive.
On 26 April 2019, Avation Group (S) Pte. Ltd. and its subsidiaries were awarded
another 5-year Aircraft Leasing Scheme incentive, where income from the leasing of
aircraft and aircraft engines and qualifying activities will be taxed at a concessionary
rate of 8%. The effective date is 17 April 2019. Accordingly, qualifying income derived
from the period 17 April 2019 to 16 April 2024 will be taxed at the 8% concessionary
rate subject to meeting the terms and conditions of the incentive. Management’s
judgement is required in the application of the concessionary tax rate of 8% in
determining the carrying amount of deferred tax assets and liabilities for temporary
differences that are expected to be realised or settled beyond 16 April 2024.
b.
Deferred tax assets are recognised for all unabsorbed capital allowances and
unutilised tax losses to the extent that it is probable that taxable profit will be
available against which the losses can be utilised. Management judgement is required
to determine the amount of deferred tax assets that can be recognised, based upon
the likely timing and level of future taxable profits.
83
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
4
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(f)
Consolidation of special purpose entity (“SPE”) – Avation Airframe Holding Pte. Ltd.
Although the ultimate shareholder of the SPE is a trust, the Directors of Avation PLC consider
that they have the power to, and in practice, control the day to day activities of the SPE.
Furthermore, Avation PLC is entitled to the benefits and is exposed to the risks of the
activities of the SPE, which are consistent with the operations of the Group, and are
conducted on behalf of the Group according to the Group’s specific business needs.
Accordingly the SPE is consolidated as a subsidiary in these financial statements.
The Group would cease to control the SPE in the event of a “Relevant Event” as defined in
the financing agreement, for example, a delay in payment of interest. Were this to occur
consolidation would cease at that point although the Group has no intention, or anticipation,
that any such event will occur.
5
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
(a)
Standards and interpretations adopted during the year
The Group has adopted all new standards that have come into effect during the year ended 30 June
2023. The adoption of these standards did not have any material effect on the financial performance
or position of the Group and the Company.
(b)
New standards and interpretations not yet adopted
The Group has not adopted the following new or amended standards and interpretations which
are relevant to the Group that have been issued but are not yet effective:
Description
Effective date
(period beginning)
Amendment to IAS 8 – Definition of Accounting Estimates
1 January 2023
Amendment to IAS 1 and IFRS Practise statement 2 - Disclosure
of accounting policies
Amendment to IAS 12 -Deferred tax related to assets and
liabilities arising from single transaction
1 January 2023
1 January 2023
Amendments to IFRS 16 - Lease liability in a Sale and Leaseback
1 January 2024
Amendments to IAS 7 and IFRS 7 – Disclosures : Supplier
Finance Arrangements
Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
Non-current liabilities with Covenants
Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or joint venture
1 January 2024
1 January 2024
Postponed indefinitely
Based on a preliminary assessment using currently available information, the Group does not
expect the adoption of the above standards to have a material impact on the financial statements
in the period of initial application. These preliminary assessments may be subject to changes
arising from ongoing analyses when the Group adopts the standards. The Group plans to adopt
the above standards on the effective date.
84
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
6
FAIR VALUE MEASUREMENT
The fair value of a financial instrument is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
The carrying amounts of cash and bank balances, trade and other receivables, finance lease
receivables – current, trade and other payables and loans and borrowings – current 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.
The fair value of maintenance reserves is not disclosed in the table below as the timing and cost of
the settlement of maintenance reserves cannot be determined with certainty in advance and hence
the fair value of maintenance reserves cannot be accurately measured.
Group
2023
2022
Carrying
amount
US$’000s
Fair value
US$’000s
Carrying
amount
US$’000s
Fair value
US$’000s
Financial assets:
Finance lease receivables – non-current
Derivative financial assets
Investment in equity, fair value
through profit or loss
Financial liabilities:
Deposits collected – non-current
Loans and borrowings other than
unsecured notes – non-current
Unsecured notes
Share warrants
41,213
13,496
38,555
13,496
55,208
5,920
53,979
5,920
11,235
11,235
3,715
3,715
15,907
13,502
13,692
12,893
391,110
303,465
1,632
360,055
300,539
1,632
468,030
296,200
1,055
436,864
275,893
1,055
85
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
6
FAIR VALUE MEASUREMENT (continued)
Company
2023
2022
Carrying
amount
US$’000s
Fair value
US$’000s
Carrying
amount
US$’000s
Fair value
US$’000s
Financial assets:
Derivative financial assets
Investment in debt instrument
Financial liabilities:
Loans and borrowings - non-current
Share warrants
3,399
-
3,399
-
1,281
5,925
1,281
5,925
59,535
1,632
56,738
1,632
113,086
1,055
105,161
1,055
The fair values (other than for unsecured notes, investment in debt instrument, fair value through
profit and loss) above are estimated by discounting expected future cash flows at market
incremental lending rate for similar types of lending, borrowing or leasing arrangements at the end
of the reporting period, which is classified under level 2 of the fair value hierarchy.
The fair value of the unsecured notes and share warrants are based on level 1 quoted prices
(unadjusted) in an active market that the Group can access at the measurement date.
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 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.
Assets measured at fair value classified under level 3:
Group
Company
2023
2022
US$’000s
US$’000s
2023
US$’000s
2022
US$’000s
845,455
85,820
813,885
65,280
-
85,820
-
65,280
Fair value measurement using
significant unobservable inputs:
Aircraft
Aircraft purchase rights
Investment in equity, fair value through
profit or loss
11,235
3,715
-
-
Aircraft were revalued at 30 June 2023 and 30 June 2022. Refer to Note 18 for the details on the
valuation technique and significant inputs used in the valuation.
86
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
6
FAIR VALUE MEASUREMENT (continued)
Information about significant unobservable
measurements.
inputs used
in
level 3 fair value
The following table provides the information about the fair value measurements using unobservable
inputs (level 3):
Sensitivity of the
input to fair value
Jet
5% (2022 : 5%)
increase in the
discount rates will
results in a decrease in
fair value by US$7.4
million (2022 :
decrease of US$8.6
million)
5% (2022 : 5%)
increase in the inflation
rate will result in an
increase in fair value
by US$2.0 million
(2022 : increase of
US$2.7 million)
Turboprops
5% (2022 : 5%)
increase in the
discount rates will
result in a decrease in
fair value by US$2.5
million (2022 :
decrease of US$2.8
million)
5% (2022 : 5%)
increase in the inflation
rate will result in an
increase in fair value
by US$0.7 million
(2022 : increase of
US$0.8 million)
5% (2022 : 5%)
increase in the
volatility rates will
result in no change to
the fair value (2022:
increase of US$0.1
million)
Description
Valuation
techniques
Unobservable
inputs
Aircraft
Lease-
encumbered
basis
Discount rates
Range
(weighted
average)
2023
5.50% to
7.00% for
Jets (6.08%)
Range
(weighted
average)
2022
5.50% to
7.00% for
Jets (6.04%)
5.50% to
9.00% for
Turboprops
(6.32%)
5.50% to
8.00% for
Turboprops
(6.31%)
Aircraft
purchase
rights
Black
Scholes
model
Volatility rates
2.72%
2.91%
87
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
6
FAIR VALUE MEASUREMENT (continued)
Information about significant unobservable
measurements. (continued)
inputs used
in
level 3 fair value
Description
Valuation
techniques
Unobservable
inputs
Investment
in equity,
fair value
through
profit or loss
Market
approach
Discount for
lack of
marketability
Range
(weighted
average)
2023
6.00%
Range
(weighted
average)
2022
25.00%
Sensitivity of the
input to fair value
5% (2022 : 5%)
increase in the
discount for lack of
marketability will result
in a decrease in fair
value by US$0.04
million (2022:US$0.06
million)
A reconciliation of liabilities arising from financing activities is as follows:
Group
Loans and borrowings:
Current
Non-current
Unsecured notes:
Non-current
Group
Loans and borrowings:
Current
Non-current
Unsecured notes:
Non-current
1 July
2022
US$’000s
Cash flows
US$’000s
Non-cash/
other
US$’000s
30 June
2023
US$’000s
63,900
468,030
(64,863)
(17,863)
62,364
(59,057)
61,401
391,110
296,200
828,130
(9,431)
(92,157)
16,696
20,003
303,465
755,976
1 July
2021
US$’000s
Cash flows
*
US$’000s
Non-cash/
other
US$’000s
30 June
2022
US$’000s
442,622
221,765
(97,292)
(26,044)
(281,430)
272,309
63,900
468,030
283,253
947,640
-
(123,336)
12,947
3,826
296,200
828,130
* includes the transaction costs for modification of unsecured notes
88
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
6
FAIR VALUE MEASUREMENT (continued)
Company
1 July
2022
Cash flows
Non-cash/
other
30 June
2023
US$’000s
US$’000s
US$’000s
US$’000s
Loans and borrowings (Note 33):
Current
Non-current
16,353
113,086
(16,287)
(36,404)
13,141
(17,147)
13,207
59,535
Trade and other payables (Note 34):
Interest bearing payable due to subsidiaries
34,250
22,419
-
56,669
Company
Loans and borrowings (Note 33):
Current
Non-current
Trade and other payables (Note 34):
Interest bearing payable due to
163,689
(30,272)
(4,006)
129,411
1 July
2021
US$’000s
Cash flows
US$’000s
Non-cash/
other
US$’000s
30 June
2022
US$’000s
143,600
-
(11,918)
-
(115,329)
113,086
16,353
113,086
subsidiaries
28,147
6,103
-
34,250
171,747
(5,815)
(2,243)
163,689
The ‘other’ column includes the amortisation of transaction costs and reclassification of non-current
portion of loans and borrowings due to passage of time.
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, equipment failure
and the Covid-19 pandemic. 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 events for each
aircraft.
89
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(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. See Note 34.
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
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
15,977
26
16,003
3,663
13
3,676
151
18
169
18
4
22
For trade receivables, the Group has applied the simplified approach and has calculated
ECLs based on lifetime expected losses. The Group has established a credit risk matrix
based on the Group’s historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment. The ECL calculations are based on
probability of defaults and loss given default rates of each customer. The Group uses
judgements in making these assumptions based on past events, current conditions and
forecasts of economic conditions.
There are no trade receivables that are neither past due nor impaired (2022: US$0.2
million).
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 and interest bearing receivables. An allowance for expected credit losses of
US$10.5 million (2022: US$8.7 million) has been provided in relation to trade receivables
past due and impaired of US$24.7 million (2022: US$9.9 million). An allowance for expected
credit losses of US$1.4 million (2022: US$2.8 million) has been provided in relation to
interest bearing receivables.
90
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(b) Credit risk (continued)
The age analysis of trade receivables past due but not impaired is as follows:
Past due less than 3 months
Past due 3 to 6 months
Past due over 6 months
Group
2023
US$’000s
2022
US$’000s
1,163
29
670
1,503
594
237
1,862
2,334
Bank deposits that are neither past due or impaired are mainly deposits with banks with
strong credit–ratings from international credit-rating agencies. While cash and bank
balances are also subject to the impairment requirements of IFRS 9, the identified
impairment loss was immaterial.
Other receivables from third parties which comprise interest bearing customer loans are
subject to credit risks similar to trade receivables. Expected credit losses on other
receivables are calculated using the same methodology as for trade receivables.
Other receivables from subsidiaries are low in default credit risk as these subsidiaries are
financially sound and with good payment track records.
For finance lease receivables, the Group applied the general approach under the standard.
The Group’s finance lease receivables are considered to have low credit risk and the loss
allowance recognised during the period was therefore limited to 12 months expected credit
losses on non-secured amounts. The loss allowance for finance lease receivables are
recognised in profit or loss and reduce carrying amounts of the finance lease receivables.
As the value of aircraft that secures the Group’s finance lease receivables exceeds the value
of the finance lease receivables, the Group has reversed a loss allowance of US$0.1 million
in respect of its finance lease receivables during the year ended 30 June 2023 (2022:
recognised a loss allowance of US$1.9 million).
(c) Interest rate risk
The Group is exposed to interest rate risk through the impact of interest rate changes on
floating rate interest bearing liabilities and assets.
The Group seeks to reduce its exposure to interest rate risk by fixing interest rates on the
majority of its loans and borrowings. As at 30 June 2023, 95.8% (2022: 90.0%) of the
Group’s loans and borrowings are at fixed or hedged interest rates. Interest rate risk is not
material and therefore no sensitivity analysis presented.
Interest rates and repayment terms for financial assets and financial liabilities are disclosed
in the respective notes to the financial statements as of 30 June 2023.
91
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d) Foreign currency risk
Foreign currency risk arises from transactions and cash balances that are not denominated in
the Group’s functional currency. The Group’s foreign currency exposures arose mainly from
movements in the exchange rate for Singapore Dollars and Euros against the United States
Dollar.
The Group aims to mitigate foreign currency risk by holding the majority of its cash balances
in United States Dollars. From time to time the Group utilises forward foreign currency
contracts to hedge its exposure to specific currency risks.
The Group’s foreign currency exposure is as follows:
Group
2023:
Pound sterling
Australian dollar
Euro
Singapore dollar
2022:
Pound sterling
Australian dollar
Euro
Singapore dollar
Company
2023:
Pound sterling
Australian dollar
Euro
Singapore dollar
2022:
Pound sterling
Australian dollar
Euro
Singapore dollar
Cash and
bank
balances
US$’000s
Other
financial
assets
US$’000s
Other
financial
liabilities
US$’000s
Net
currency
exposure
US$’000s
141
102
7,446
364
20
11
19,699
79
(66)
(1,194)
(62,138)
(604)
95
(1,081)
(34,993)
(161)
8,053
19,809
(64,002)
(36,140)
150
12
6,298
278
20
132
21,657
126
(208)
(1,059)
(37,581)
(570)
(38)
(915)
(9,626)
(166)
6,738
21,935
(39,418)
(10,745)
Cash and
bank
balances
US$’000s
Other
financial
assets
US$’000s
Other
financial
liabilities
US$’000s
Net
currency
exposure
US$’000s
81
-
-
171
252
97
-
-
47
20
2
-
39
61
20
2
43,210
53
(48)
(16)
(288)
(24)
53
(14)
(288)
186
(376)
(63)
(159)
(7)
(43,124)
(20)
(42)
(5)
86
80
119
144
43,285
(43,310)
92
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d) Foreign currency risk (continued)
The table below illustrates the effect on total profit and total equity that would result from a
strengthening of foreign currencies against the United States Dollar by 10% (2022: 10%)
with all other variables including tax rate being held constant:
Foreign currency:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
10
(108)
(3,499)
(16)
(4)
(92)
(963)
(17)
5
(1)
(29)
19
(4)
(1)
9
8
A weakening of the respective currencies by 10% against the United States Dollar would have
an equal and opposite effect.
The Group entered into Euro denominated lease agreements for aircraft and subsequently
arranged Euro denominated financing and cross-currency swap contracts in order to hedge
exposure to foreign exchange risk associated with Euro denominated lease revenue by
offsetting Euro cash inflows and outflows over the lease term. See note 23.
(e)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations
due to shortage of funds. The Group’s exposure to liquidity risk arises primarily from
mismatches of the maturities of financial assets and liabilities. The Group monitors and
maintains a level of cash and cash equivalents that management deems adequate to finance
the Group’s operations and mitigate the effects of fluctuations in cash flows. Short-term
funding is obtained from loan facilities.
93
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e)
Liquidity risk (continued)
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial liabilities at the
end of the reporting period based on contractual undiscounted repayment obligations:
Group
2023:
Financial liabilities:
Trade and other payables
Loans and borrowings*
Maintenance reserves
2022:
Financial liabilities:
Trade and other payables
Loans and borrowings*
Maintenance reserves
One year or
One to five
Over five years
Total
less
US$’000s
years
US$’000s
US$’000s
US$’000s
4,115
104,338
61,456
6,639
787,791
54,587
13,555
92,216
-
24,309
984,345
116,043
169,909
849,017
105,771
1,124,697
3,814
107,263
10,156
3,163
862,571
75,131
14,752
136,867
-
21,729
1,106,701
85,287
121,233
940,865
151,619
1,213,717
* The maturity profile on loans and borrowings include maturity analysis of derivative
financial liabilities.
94
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e)
Liquidity risk (continued)
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the Company’s financial liabilities at the
end of the reporting period based on contractual undiscounted repayment obligations:
Company
2023:
Financial liabilities:
Trade and other payables
Loans and borrowings*
2022:
Financial liabilities:
Trade and other payables
Loans and borrowings*
One year or
less
US$’000s
One to five
years
US$’000s
Over five
years
US$’000s
Total
US$’000s
14,804
17,168
65,887
65,592
31,972
131,479
20,786
21,340
41,677
124,472
42,126
166,149
-
-
-
-
-
-
80,691
82,760
163,451
62,463
145,812
208,275
* The maturity profile on loans and borrowings include maturity analysis of derivative
financial liabilities.
95
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
7
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(f)
Capital risk
For the purpose of the Group’s capital management, capital includes debt and equity items
such as issued capital, share premium and all other equity reserves attributable to the equity
holders of the parent.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern and to maintain a suitable capital structure so as to fund growth and
maximise shareholder value. In order to maintain or achieve an optimal capital structure, the
Group may adjust the amount of dividend payments, return capital to shareholders, issue new
shares, buy back issued shares, incur new borrowings or sell assets to reduce borrowings.
Management monitors capital based on a gearing ratio. The gearing ratio is calculated as net
indebtedness divided by total assets. Net indebtedness is calculated as loans and borrowings
less unrestricted cash and bank balances.
The Group calculates its gearing ratio on the basis of net indebtedness divided by total assets.
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Net indebtedness
Total assets
731,160
1,179,596
792,863
1,217,020
72,071
309,560
119,730
331,252
Gearing ratio:
61.2%
65.1%
23.3%
36.1%
96
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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. Group and Company key management personnel short-term employee benefits
includes $0.9 million (2022: $1.2 million) and $0.9 million (2022: $0.4 million) respectively
for share warrants expense. Key management remuneration is as follows:
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Key management:
Short-term employee benefits
3,494
4,172
1,735
1,074
The amount above includes remuneration in respect of the highest paid Director as follows:
Group
2023
2022
US$’000s
US$’000s
Aggregate emoluments
1,151
1,224
The Directors do not receive any pension contribution from the Company.
Refer to Directors’ remuneration report for details.
97
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
8
RELATED PARTY TRANSACTIONS (continued)
(b) Significant related party transactions:
Group
Company
2023
2022
2023
2022
US$’000s
US$’000s
US$’000s
US$’000s
Entities controlled by key
management personnel
(including Directors):
Lease liability paid
Consulting fee expense
Maintenance services
Interest expense
Service fee income
(335)
(362)
(7)
(374)
76
(290)
(223)
(376)
-
106
(99)
(361)
-
-
-
(97)
(223)
-
-
-
During the year, a director of the company sold his US$0.2 million in aggregate nominal value
of Avation Capital S.A. 8.25% senior notes due 2026 issued under the global medium term
note programme.
(c)
Significant transactions between the Company and its subsidiaries:
Dividend income
Interest income
Gain on receivables modification
Management fee income
Sale of notes
Return of capital
Interest expense
Company
2023
US$’000s
2022
US$’000s
-
2,832
-
1,789
10,088
-
(3,193)
8,941
8,210
3,517
1,457
-
10,819
(3,060)
98
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
9
REVENUE
Lease rental revenue
Less: amortisation of lease incentive asset
Interest income on finance leases
Maintenance reserves revenue
End of lease return compensation revenue
Group
2023
US$’000s
2022
US$’000s
85,936
(1,368)
84,568
2,230
5,063
-
93,352
(1,383)
91,969
2,918
13,207
4,138
91,861
112,232
Maintenance reserves revenue relates to the recovery of maintenance reserve from airline customers
and upon sale of aircraft. See Notes 29 and 35.
End of lease return compensation was recognised as set out in the Leases- Group as a lessor
accounting policy.
Geographical analysis
Europe
Asia Pacific
Group
2023
US$’000s
2022
US$’000s
23,941
67,920
35,341
76,891
91,861
112,232
During the year ended 30 June 2023, five customers individually represented more than 5% of
the Group’s total revenue (2022: five) of which four are based in Asia-Pacific (2022: four) and
one is based in Europe (2022: one). The largest customer, who is based in Asia-Pacific, accounts
for US$25.5 million or 27.7% of the Group’s total revenue (2022: US$25.4 million or 22.6%).
99
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
10
OTHER INCOME
Aircraft late delivery compensation
Deposit released
Fees for late payment
Foreign currency exchange gain
Recovery of claims from customer
Others
Group
2023
US$’000s
2022
US$’000s
-
-
966
3,154
3,137
132
540
200
1,940
1,018
-
454
7,389
4,152
During the year, the claims recovery recognised in other income is the balance of a distribution paid
to creditors of Virgin Australia in excess of amounts allocated to trade receivables.
During the previous year, the Group recognised US$0.2 million of deposit released due to forfeiture
of reservation deposits for aircraft lease as other income.
11
ADMINISTRATIVE EXPENSES
Staff costs (note 14)
Other administrative expenses
12
FINANCE INCOME
Interest income from financial institutions
Interest income from non-financial institutions
Fair value gain on financial derivatives
Finance income from discounting non-current deposits to fair value
Gain on repurchases of unsecured note
Gain on early full repayment of borrowings
Group
2023
US$’000s
2022
US$’000s
5,587
3,173
6,771
2,694
8,760
9,465
Group
2023
US$’000s
2022
US$’000s
1,951
1,178
1
611
508
1,657
-
281
2,492
571
-
-
5,906
3,344
A gain on early full repayment of borrowings arose when two loans were refinanced during the year.
During the year, the gain on repurchases of unsecured note arose when the Group repurchased its
unsecured notes through the market at 75.25 cents and through tender offer at 86.0 cents
100
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
13
FINANCE EXPENSES
Interest expense on borrowings
Interest expense on borrowings from related parties
Interest expense on unsecured notes
Amortisation of loan transaction cost
Amortisation of IFRS 9 gain on debt modification of the unsecured notes
Amortisation of interest expense on non-current deposits
Fair value loss on financial derivatives
Finance charges on early full repayment of borrowings
Others
Group
2023
US$’000s
2022
US$’000s
21,170
271
30,976
1,057
8,711
571
577
-
206
24,062
-
29,913
2,226
8,805
539
-
731
1,205
63,539
67,481
Amortisation of IFRS 9 gain on debt modification of unsecured notes of US$8.7 million (2022:
US$8.8 million) relates to the gain on debt modification of the unsecured notes in 2022 which was
amortised as part of the effective interest rate method.
14
STAFF COSTS
Salaries and fees
Bonuses
Defined contribution plans
Benefits
Warrants expense
Group
2023
US$’000s
2022
US$’000s
4,220
35
117
73
1,142
4,320
814
144
70
1,423
5,587
6,771
The average number of Directors of the Company for the year is 5 (2022: 4). The average number
of other employees for the year is 18 (2022: 19) and in the following departments:
Group
2023
2022
3
4
5
3
3
3
4
5
4
3
18
19
Administrative
Commercial
Finance
Legal
Technical
101
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
15
PROFIT BEFORE TAXATION
Profit before taxation for the year is stated after charging/(crediting) the following:
Group
2023
US$’000s
2022
US$’000s
38,566
(3,154)
39,304
(1,018)
303
312
615
-
-
-
281
285
566
-
-
-
Group
2023
US$’000s
2022
US$’000s
158
243
79
(7)
-
892
(3)
(287)
2,912
(2,655)
7,985
(2,805)
(19)
97
(435)
28
808
5,375
Depreciation of property, plant and equipment
Foreign currency exchange (gain)
Audit fees:
Fees payable to the Company’s auditor and their associates
for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and their associates
for audits of the Company’s subsidiaries’ annual accounts
Total audit fees
Auditors’ remuneration for non-audit services:
- Tax compliance services
- All other assurance services
Total fees for non-audit services
16
TAXATION
From continuing operations
Current tax expense:
- Singapore
- Overseas
Under/(over) provision in prior years current tax expense:
- Singapore
- Overseas
Deferred tax expense/(benefit):
- Singapore
- Overseas
(Over)/under provision in prior years deferred tax expense:
- Singapore
- Overseas
Income tax expense
102
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
16
TAXATION (Continued)
Income tax differs from the amount of income tax expense determined by applying the Singapore
tax rate of 17% to profit before income tax as a result of the following differences:
Profit before income tax
Tax calculated at 17% (2022: 17%)
Effects of:
Under/(over) provision in prior years current tax expense
- Singapore
- Overseas
Under/(over) provision in prior years deferred tax expense:
- Singapore
- Overseas
Non-deductible items
Income not subject to tax
Different tax rates of other countries
Deferred tax asset not recognised
Utilisation of deferred tax asset not recognised
Effect of concessionary tax rate at 8%
Others
Group
2023
US$’000s
2022
US$’000s
13,000
22,502
2,210
3,825
79
(7)
(19)
97
2,137
(2,400)
586
1,433
(2,714)
(115)
(479)
(3)
(287)
(435)
28
3,818
(2,214)
1,603
1,081
(1,033)
(968)
(40)
Income tax expense
808
5,375
The Group has unutilised tax losses of approximately US$43.9 million (2022: US$15.6 million) and
unabsorbed capital allowances of approximately US$89.3 million (2022: US$114.6 million) that are
available for offset against future taxable profits, for which no deferred tax asset is recognised due
to uncertainty of its recoverability. The use of these unutilised losses and capital allowances is
subject to the agreement of tax authorities and compliance with certain provisions of tax legislation
of the countries in which the Group operates.
103
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
17
EARNINGS PER SHARE
(a) Basic earnings per share (“EPS”)
EPS is calculated by dividing total profit attributable to shareholders of Avation PLC by the
weighted average number of ordinary shares in issue during the year.
Company
2023
US$’000s
2022
US$’000s
Net profit attributable to shareholders of Avation PLC
12,191
17,126
Weighted average number of ordinary shares (‘000s)
69,952
69,488
Basic earnings per share (US cents)
17.43
24.65
(b) Diluted earnings per share
For the purpose of calculating diluted earnings per share, total profit attributable to
shareholders of Avation PLC and the weighted average number of ordinary shares outstanding
are adjusted for the effects of all dilutive potential ordinary shares. The Company has one
category of dilutive potential ordinary shares, being warrants.
For warrants, the weighted average number of shares on issue has been adjusted as if all
dilutive share options were exercised. The number of shares that could have been issued
upon the exercise of all dilutive share option less the number of shares that could have been
issued at fair value (determined as the Company’s average share price for the year) for the
same total proceeds is added to the denominator as the number of shares issued for no
consideration.
Diluted earnings per share attributable to shareholders of Avation PLC is calculated as follows:
Company
2023
US$’000s
2022
US$’000s
Net profit attributable to shareholders of Avation PLC
12,191
17,126
Weighted average number of ordinary shares (‘000s)
Adjustment for warrants (‘000s)
69,952
178
69,488
-
Weighted average number of ordinary shares (‘000s)
70,130
69,488
Diluted earnings per share (US cents)
17.38
24.65
The warrants were anti-dilutive for the year ended 30 June 2022.
104
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
18
PROPERTY, PLANT AND EQUIPMENT
Group
Furniture and
equipment
US$’000s
Aircraft
engine
US$’000
Jet
aircraft
US$’000s
Turboprop
aircraft
US$’000s
Total
US$’000s
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
771,859
305,923
1,077,873
-
-
-
6
16,166
16,166
106,124
(28,034)
-
(9,354)
106,124
(37,388)
1,486
(2,566)
(1,080)
851,435
310,169
1,161,701
-
-
97
851,435
310,169
1,161,604
851,435
310,169
1,161,701
182,815
28,615
81,082
9,938
263,965
38,566
28,124
(9,784)
-
(1,354)
28,124
(11,138)
1,013
(4,300)
(3,287)
230,783
85,366
316,230
589,044
224,841
813,908
620,652
224,803
845,471
2023:
Cost or valuation:
At beginning of year
Additions
Reclassified from held under
finance lease
Reclassified from asset held for
sale
Reclassified as asset held for
sale
Revaluation recognised in equity
At end of year
Representing:
At cost
At valuation
Accumulated depreciation and
impairment:
At beginning of year
Depreciation expense
Reclassified from asset held
for sale
Reclassified as asset held for
sale
(Reversal of)/impairment loss
At end of year
Net book value:
At beginning of year
At end of year
91
6
-
-
-
-
97
97
-
97
68
13
-
-
-
81
23
16
105
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
18
PROPERTY, PLANT AND EQUIPMENT (continued)
Group
2022:
Cost or valuation:
At beginning of year
Additions
Disposal
Reclassified as held under finance
lease
Reclassified as asset held for sale
Revaluation recognised in equity
At end of year
Representing:
At cost
At valuation
Accumulated depreciation and
impairment:
At beginning of year
Depreciation expense
Disposal
Reclassified as held under finance
lease
Reclassified as asset held for
sale
Impairment loss
At end of year
Net book value:
At beginning of year
At end of year
Furniture
and
equipment
US$’000s
Aircraft
engine
US$’000
Jet
aircraft
US$’000s
Turboprop
aircraft
US$’000s
Total
US$’000s
74
17
-
-
-
-
91
91
-
91
56
12
-
-
-
-
68
18
23
1,940
-
(1,940)
868,253
-
-
390,322
-
-
1,260,589
17
(1,940)
-
-
-
-
-
-
-
-
(106,124)
9,730
(53,344)
(38,874)
7,819
(53,344)
(144,998)
17,549
771,859
305,923
1,077,873
-
771,859
-
305,923
91
1,077,782
771,859
305,923
1,077,873
128
85
(213)
179,219
28,956
-
117,882
10,251
-
297,285
39,304
(213)
-
-
-
-
-
(33,071)
(33,071)
(28,124)
2,764
(16,374)
2,394
(44,498)
5,158
182,815
81,082
263,965
1,812
689,034
272,440
963,304
-
589,044
224,841
813,908
106
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
18
PROPERTY, PLANT AND EQUIPMENT (continued)
Assets pledged as security
The Group’s aircraft and aircraft held under asset for sale with carrying values of US$838.5 million
(2022: US$879.5 million) are mortgaged to secure the Group’s borrowings (Note 33).
Additions and Disposals
During the year, the Group sold two turboprop aircraft and one jet aircraft. Two turboprop aircraft
sold were classified as held for sale as of 30 June 2022.
During the previous year, the Group sold one aircraft engine, three turboprop aircraft and two jet
aircraft.
A loss of US$1.0 million (2022: US$1.4 million) on the sale of aircraft was recorded included within
the loss on disposal of aircraft of aircraft and aircraft engine for the year ended 30 June 2023.
During the previous year, three turboprop aircraft were reclassified to assets held under finance
leases. A loss on transfer of the aircraft to finance leases of US$1.0 million was recorded and included
within the loss on disposal of aircraft and aircraft engine.
During the year, the Group transferred in two jet aircraft from assets held for sale and one turboprop
aircraft from finance leases to property, plant and equipment. A gain on derecognition of finance
lease of US$2.8 million was recorded and included within the gain on derecognition of finance lease.
During the year, one turboprop aircraft and 1 jet aircraft were reclassified as held for sale.
During the previous year, two turboprop aircraft and two jet aircraft were reclassified as held for
sale.
Valuation
The Group’s aircraft were valued in June 2023 by independent valuers on a lease-encumbered value
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 ranging from 5.50% to 7.00% (2022: 5.5% to 7.0%) per annum for jet aircraft and
5.50% to 9.00% (2022: 5.5% to 8.0%) per annum for turboprop aircraft. Different discount rates
are considered appropriate for different aircraft based on their respective risk profiles. Significant
airline customer failures and uncertainty created by the pandemic followed by rapid recovery in
global air travel and improvements in airline credit worthiness have led to impairment losses and its
reversals during the years ended 30 June 2022 and 30 June 2023 respectively.
During the year, a reversal of impairment losses of US$0.8 million was recognised to adjust the
book values of one turboprop aircraft and one jet aircraft to their fair value prior to reclassification
as held for sale.
107
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
18
PROPERTY, PLANT AND EQUIPMENT (continued)
During the previous year, a reversal of impairment losses of US$2.0 million was recognised to adjust
the book values of two turboprop aircraft and two jet aircraft to their fair value prior to reclassification
as held for sale.
During the year, a downward revaluation of US$1.1 million to equity and a reversal of impairment
loss of US$2.0 million were recognised in the statement of profit or loss in relation to aircraft which
remain part of the fleet.
During the previous year, an upward revaluation of US$17.5 million was recorded in equity and
impairment losses of US$7.2 million were recognised in the statement of profit or loss in relation to
aircraft which remain part of the fleet.
If the aircraft were measured using the cost model, carrying amounts would be as follows:
Group
2023
2022
Jets
US$’000s
Turbo
props
US$’000s
Jets
US$’000s
Turbo
props
US$’000s
Cost
Accumulated depreciation and impairment
801,559
(216,316)
293,795
(83,657)
723,469
(170,115)
286,983
(78,974)
Net book value
585,243
210,138
553,354
208,009
Geographical analysis
2023
Capital expenditure
Net book value – aircraft
2022
Europe
US$’000s
Asia
Pacific
US$’000s
Total
US$’000s
-
241,508
6
603,947
6
845,455
Europe
US$’000s
Asia
Pacific
US$’000s
Total
US$’000s
Capital expenditure
Net book value – aircraft and aircraft engines
-
250,659
17
563,226
17
813,885
108
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
19
TRADE AND OTHER RECEIVABLES
Current:
Trade receivables
Less:
Allowance for expected credit losses
Accrued revenue
Less:
Allowance for expected credit losses
Other receivables:
– subsidiaries
– third parties
Less:
Allowance for expected credit losses
Interest receivables:
– subsidiaries
– third parties
Less:
Allowance for expected credit losses
Deposits
Prepaid expenses
Non-current:
Other receivables:
– subsidiaries
- third parties
Deposits for aircraft
Right of use assets
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
26,545
12,354
829
628
(10,542)
16,003
(8,678)
3,676
(660)
169
(606)
22
3,375
3,491
(8)
3,367
-
12,012
(1,358)
10,654
-
752
(44)
708
48
255
(374)
3,117
-
6,335
(910)
5,425
-
1,759
(1,373)
386
48
550
-
-
-
-
-
-
160,749
1,009
142,453
1,440
(758)
(815)
161,000
143,078
118
28
(28)
118
25
151
2,228
29
(25)
2,232
25
134
31,035
13,202
161,463
145,491
-
5,487
5,487
8,139
632
-
11,343
11,343
7,749
296
46,530
-
46,530
8,139
210
92,389
-
92,389
7,749
100
14,258
19,388
54,879
100,238
109
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
19
TRADE AND OTHER RECEIVABLES (continued)
Accrued revenue represents deferred lease receivables from customers with whom the Group has
agreed to defer lease payments for a short term period in view of Covid-19 pandemic.
Other receivables from subsidiaries includes interest bearing receivables of US$71.3 million (2022:
US$127.5 million). Current receivables from subsidiaries are unsecured and repayable upon
demand. Interest is charged at 4.0% to 6.0% (2022: 4.0% to 6.0%) per annum.
Other receivables from third parties include interest bearing receivables of US$16.3 million (2022:
US$16.3 million). Interest is charged at 5.0% to 6.0% (2022: 5.0% to 6.0%) per annum.
The average credit period generally granted to customers is 30 to 60 days. Rent for leased aircraft
is due in advance in accordance with the leases.
The movement in allowance for expected losses are set out below:
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
11,335
25,911
1,446
1,092
672
(1,920)
(3,742)
(10,788)
1,819
46
11,952
-
(46)
-
-
-
-
354
-
-
-
11,335
1,446
1,446
At beginning of year
Provision for/(reversal of) expected
credit losses
Written off
Reclassified from financial lease
receivables
Reclassified from/(to) assets held for
sale
At end of year
During the year, the Group has written off US$1.9 million of receivables mainly due to the finalisation
of the liquidation process of an insolvent customer.
During the previous year, the Group has written off US$10.8 million of receivables mainly due to
reaching agreements with customers on debt restructuring plans.
Trade and other receivables denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
20
11
43
79
20
132
356
126
20
2
-
39
20
2
43,210
53
110
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
20
FINANCE LEASE RECEIVABLES
Finance lease receivables do not include any contingent rents or residual value guarantees.
Future minimum lease payments receivable under finance lease are as follows:
Group
Within one year
Less:
Allowance for expected credit losses
One to two years
Two to three years
Three to four years
Four to five years
Later than five years
2023
2022
Minimum
lease
payments
US$’000s
Present
value of
payments
US$’000s
Minimum
lease
payments
US$’000s
Present
value of
payments
US$’000s
5,675
3,952
11,729
7,476
(20)
(20)
(1,852)
(1,852)
5,655
30,041
2,430
11,358
-
-
3,932
28,491
1,627
11,095
-
-
9,877
7,695
31,565
10,615
11,357
-
5,624
5,306
29,044
9,763
11,095
-
Total minimum lease payments
49,484
45,145
71,109
60,832
Less: amounts representing interest
income
Present value of minimum lease
(4,339)
-
(10,277)
-
payments
45,145
45,145
60,832
60,832
The movement in finance lease receivables are set out below:
At beginning of year
Additions
Principal receipts
Reclassified to property, plant and equipment
Reclassified to trade receivables
Interest receivable
Foreign currency translation
Reversal of/(provision for) expected credit losses
Reclassified provision to trade and other receivables
Group
2023
US$’000s
2022
US$’000s
60,832
-
(4,310)
(12,522)
(1,819)
339
793
13
1,819
49,990
19,267
(3,960)
-
-
327
(3,030)
(1,762)
-
At end of year
45,145
60,832
111
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
20
FINANCE LEASE RECEIVABLES (continued)
The movement in allowance for expected losses are set out below:
At beginning of year
(Reversal of)/provision for expected credit losses
Reclassified to trade and other receivables
Group
2023
US$’000s
2022
US$’000s
1,852
(13)
(1,819)
90
1,762
-
20
1,852
Finance lease receivables denominated in foreign currencies are as follows:
Euro
Group
2023
US$’000s
2022
US$’000s
19,656
21,301
112
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
21
GOODWILL
Cost:
At beginning and end of year
Allowance for impairment:
At beginning and end of year
Net carrying amount:
At beginning and end of year
Impairment test of goodwill
Group
2023
US$’000s
2022
US$’000s
2,384
2,384
482
482
1,902
1,902
Goodwill is allocated to the cash generating unit ("CGU") of the Group which is the aircraft leasing
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 five-year period.
Key assumptions used for value-in-use calculations:
Average cash flow growth rate
Terminal growth rate
Discount rate
2023
%
2022
%
2.0
2.0
6.0
2.0
2.0
6.0
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 the CGU is
US$211.4 million (2022: US$207.2 million).
Management believes that no reasonably possible change in any of the above key assumptions
would cause the carrying value of the CGU to materially exceed its recoverable amount.
113
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
22
INVESTMENT IN SUBSIDIARIES
Unquoted equity shares, at cost
At beginning of year
Return of capital
At end of year
Company
2023
US$’000s
2022
US$’000s
3,328
-
14,147
(10,819)
3,328
3,328
During the previous year, the Company’s subsidiary, Capital Lease Aviation Limited, distributed a
dividend and returned US$10.8 million to the Company.
Details of subsidiaries are as follows:
Name of entity
Country of
incorporation
Principal
activities
Ownership interest
2023
%
2022
%
Held directly by the Company:
Avation Capital S.A.
Capital Lease Aviation Limited
Avation Group (S) Pte. Ltd.
AVAP Leasing (Asia) Limited
AVAP Leasing (Asia) II Limited
AVAP Leasing (Asia) III Limited
AVAP Leasing (Asia) IV Limited
Capital MSN 4033 II Limited
Luxembourg
Financing
United Kingdom Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Aircraft leasing
Singapore
Ireland
Ireland
Ireland
Ireland
Ireland
100.00
99.68
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.68
100.00
100.00
100.00
100.00
100.00
100.00
Held by Capital Lease Aviation Limited:
Capital Lease Malta Ltd.
Capital MSN 4033 Limited
(a)
Held by Avation Eastern Fleet Pte. Ltd.:
Airframe Leasing (S) Pte. Ltd.
Airframe Leasing (S) II Pte. Ltd.
(b)
Held by Avation Eastern Fleet II Pte. Ltd.:
Airframe Leasing (S) II Pte. Ltd.
Held by Avation Eastern Fleet III Pte. Ltd.:
Airframe Leasing (S) III Pte. Ltd.
Malta
Ireland
Aircraft leasing
Aircraft leasing
99.68
99.68
99.68
99.68
Singapore
Singapore
Aircraft leasing
Aircraft leasing
100.00
100.00
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
Singapore
Aircraft leasing
100.00
100.00
114
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
22
INVESTMENT IN SUBSIDIARIES (continued)
Name of entity
Country of
incorporation
Principal
activities
Ownership
interest
2023
2022
%
%
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 Pacific Leasing Pte. Ltd.
Avation Pacific Leasing II Pte. Ltd.
Avation Taiwan Leasing II Pte. Ltd.
Avation Taiwan Leasing III Pte. Ltd.
AVAP Leasing (Europe) II Pte. Ltd.
AVAP Leasing (Europe) III Pte. Ltd.
AVAP Leasing (Europe) VI Pte. Ltd.
AVAP Leasing (Europe) VII Pte. Ltd.
AVAP Leasing (Europe) VIII Pte. Ltd
AVAP Leasing (Europe) IX Pte. Ltd.
F100 Fleet Pte. Ltd.
MSN 1607 Pte. Ltd.
AVAP Aircraft Trading Pte. Ltd.
AVAP Aircraft Trading II Pte. Ltd.
AVAP Aircraft Trading III Pte. Ltd.
Avation Asia Fleet Pte. Ltd.
Avation Asia Fleet II Pte. Ltd.
Avation Asia Fleet III Pte. Ltd.
Avation Denmark Leasing Pte. Ltd.
Avation Capital II Pte. Ltd.
AVAP Leasing (Asia) VI Pte. Ltd.
AVAP Aircraft Leasing Pte. Ltd.
AVAP Aircraft Leasing II Pte. Ltd.
AVAP Aircraft Leasing III Pte. Ltd.
AVAP Aircraft Leasing IV Pte. Ltd.
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
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
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
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) In the process of being struck off
(b) During the previous year, Airframe Leasing (S) II Pte. Ltd. issued shares to Avation Eastern
Fleet Pte. Ltd. The share issuance resulted in Avation Eastern Fleet Pte. Ltd. becoming the
immediate holding company.
All companies as at 30 June 2023 are audited by member firms of Ernst & Young except for the
following:
(a) Audited by Moore, Malta
The registered office address of the companies incorporated in the following countries are as follows:
Ireland - 32 Molesworth Street, Dublin 2 D02 Y512, Ireland.
Luxembourg - 46A, Avenue J. F. Kennedy, L-1855 Luxembourg.
Malta – 15, Level 2 Corporate Suites, Naxxar, Birkirkara, BKR 9048, Malta.
Singapore - 65 Kampong Bahru Road, Singapore 169370.
United Kingdom - 5 Fleet Place, London EC4M 7RD, United Kingdom.
For all non-controlling interests, voting rights not controlled by the group are equivalent to
ownership interests.
115
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
23
DERIVATIVE FINANCIAL ASSETS/LIABILITIES AND HEDGING
Group
Contract/
notional amount
Fair value
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Derivative financial assets -current
Interest rate swap – current
3,531
-
54
-
Derivative financial assets -non-
current
Interest rate swap
Cross-currency interest rate swap
220,110
4,000
248,384
4,000
224,110
252,384
12,847
595
13,442
5,470
450
5,920
Derivative financial liabilities
Warrants
-
-
1,632
1,055
Company
Derivative financial assets – non-
current
Interest rate swap
Derivative financial liabilities
Share warrants
Contract/
notional amount
Fair value
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
64,250
70,750
3,399
1,281
-
-
1,632
1,055
Hedge accounting has been applied for interest rate swap contracts and cross-currency interest rate
swap contracts which have been designated as cash flow hedges.
The Group determines the economic relationship between the finance lease income, loans and
borrowings and the derivative by matching the critical terms of the hedging instrument with the
terms of the hedged item. The hedge ratio (the ratio between notional amount of the derivative
financial instrument to the amount of the finance lease income and loans and borrowings being
hedged) is determined to be 1:1. There were no expected sources of ineffectiveness on the Group’s
hedges as the critical terms of the derivative match exactly with the terms of the hedged item.
The Group pays fixed rates of interest of 1.0% to 2.6% per annum and receives floating rate interest
equal to 1-month to 3-month LIBOR or 1-month SOFR or 3-month EURIBOR under the interest rate
swap contracts.
The Group pays fixed rates of interest of 3.1% to 4.9% per annum and receives floating interest
equal to 3-month LIBOR under the cross-currency interest rate swap contracts.
116
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
23
DERIVATIVE FINANCIAL ASSETS/LIABILITIES AND HEDGING (continued)
The swap contracts mature between 27 December 2023 and 21 November 2030.
Changes in the fair value of these interest rate swap and cross-currency interest rate swap contracts
are recognised in the fair value reserve. The net fair value gain net of tax of US$6.8 million (2022:
gain of US$20.5 million) on these derivative financial instruments was recognised in the fair value
reserve for the year.
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 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.
The Group entered into Euro denominated lease agreements which create exposure to variability in
cash flows due movements in the EUR:USD exchange rate. To hedge its exposure to variable cash
flows resulting from changes in EUR:USD spot rates, the Group has arranged Euro denominated
financing which reduces overall exposure to variable cash flows to the extent that lease receipts and
debt service cashflows are matched. The Group is making use of a non-derivative hedging
instrument and has designated the cash flows with respect to the loan interest and principal
repayment (hedging instrument) against a specific portion of the lease receivable (hedged item).
Unrealised foreign exchange gains and losses arising on Euro denominated loans designated as
cash flow hedges are recognised in the foreign currency hedge reserve. Unrealised foreign
exchange gains and losses recorded in the foreign currency hedging reserve are systematically
re-cycled through profit or loss over the remaining term of the related loan on a straight-line basis.
The Group determine the hedging relationship between the hedging instruments and the hedged
item on a number of criteria including the reference interest rates, tenors, repricing dates and
maturities and to notional or par amounts. The Group assesses whether the derivative designated
in each hedging relationship is expected to be effective in offsetting changes in cash flows of the
hedged item using the hypothetical derivative method. In these hedge relationships, the main
sources of ineffectiveness are:
(cid:120) Differences in the pricing dates between the swaps and the borrowings
(cid:120) Differences in the timing of the cash flows of the hedged items and the hedging requirements
(cid:120)
The counterparties’ credit risk differently impacting the fair value movements of the hedging
instruments and the hedged items
(cid:120) Changes to the forecasted amount of cash flows of hedged items and hedging instruments
117
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
23
DERIVATIVE FINANCIAL ASSETS/LIABILITIES AND HEDGING (continued)
During the year 30 June 2023, the effect of the cash flow hedge in the consolidated statement of
profit or loss and consolidated statement of other comprehensive income was as follows:
Group
Interest rate swap
Cross currency swap
Foreign currency hedge
Total hedging
gain/(loss)
recognised in
OCI, net of
tax
US$’000s
Amount
reclassified
from
OCI to profit
or (loss)
US$’000s
Line item
in the
statement of
profit or loss
6,649
144
(6,383)
Finance expense
Finance expense
2,995
(147)
6,281 Other income
410
9,129
During the year 30 June 2022, the effect of the cash flow hedge in the consolidated statement of
profit or loss and consolidated statement of other comprehensive income was as follows:
Group
Interest rate swap
Cross currency swap
Foreign currency hedge
Total hedging
gain/(loss)
recognised in
OCI, net of
tax
US$’000s
Amount
reclassified
from
OCI to profit
or (loss)
US$’000s
Line item
in the
statement of
profit or loss
19,804
691
14,892
(5,371)
(159)
Finance expense
Finance expense
140 Other income
35,387
(5,390)
The share warrants consist of 5,857,408 (2022: 5,857,408) share warrants granted to the holder
of the unsecured notes to subscribe for ordinary shares of the Company exercisable to 31 October
2026 at a price of 114.5 pence per share (including cashless exercise option).
The share warrants were valued based on level 1 quoted prices (unadjusted) in an active market
for the year ended 30 June 2023.
The share warrants were valued using a binomial option pricing model for the year ended 30 June
2022. Expected volatility is based on the historical share price volatility over the previous twelve
months.
The share warrants were listed on the London Stock Exchange on 24 June 2022 and are valued
based on the quoted prices as of 30 June 2023.
118
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
24
AIRCRAFT PURCHASE RIGHTS
Aircraft purchase rights, at fair value:
At beginning of year
Unrealised gain
At end of year
Group and Company
2022
2023
US$’000s
US$’000s
65,280
20,540
85,820
26,960
38,320
65,280
The Group holds 28 purchase rights to acquire additional ATR 72-600 aircraft from the manufacturer.
The purchase rights are available for aircraft to be delivered on or before the end of June 2027.
The Group has determined that it would seek to dispose of excess aircraft purchase rights over and
above its requirement to acquire additional aircraft for its fleet. The Group accounts for aircraft
purchase rights at fair value through profit or loss. Disclosures about the fair value measurement of
aircraft purchase rights at fair value are included in Note 6.
25
INVESTMENT IN EQUITY, FAIR VALUE THROUGH PROFIT OR LOSS
Non-listed equity, at fair value
At beginning of year
Additions
Unrealised gain
At end of year
Group
2023
US$’000s
2022
US$’000s
3,715
-
7,520
11,235
-
3,715
-
3,715
During the previous year, the Group received 8,014,602 ordinary shares from an airline customer
as part of the airline’s restructuring plan.
The Group entered into an agreement to exchange 8,014,602 ordinary shares in Philippine
Airlines, Inc. with 124,787,353 ordinary shares in PAL Holdings, Inc. during the year. The
exchange of shares is expected to be completed in the first quarter of 2024.
119
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
26
INVESTMENT IN DEBT INSTRUMENT, FAIR VALUE THROUGH PROFIT OR LOSS
Listed debt instrument, at fair value
At beginning of year
Additions
Disposal
Fair value gain/(loss)
At end of year
Company
2023
US$’000s
2022
US$’000s
5,925
3,305
(10,088)
858
-
6,089
-
-
(164)
5,925
As of 30 June 2023, the Company did not hold any unit of its subsidiary, Avation Capital SA’s
8.25% unsecured notes (2022: 7,475,842 units).
27
LEASE INCENTIVE ASSETS
Current
Non-current
At beginning of year
Additions
Transfer from/(to)asset held for sale
Amortisation to profit or loss
At end of year
Group
2023
2022
US$’000s
US$’000s
1,643
4,686
6,329
447
1,042
6,208
(1,368)
6,329
137
310
447
8,038
-
(6,208)
(1,383)
447
120
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
28
CASH AND BANK BALANCES
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Fixed term deposits
Other cash and bank balances
Total cash bank balances
Less : restricted
Less : investment in fixed term deposits
Cash and cash equivalents
62,306
54,599
116,905
(90,864)
(1,225)
24,816
-
119,171
119,171
(83,904)
-
35,267
-
671
671
-
-
-
9,709
9,709
-
-
671
9,709
The Group’s restricted cash and bank balances have been pledged as security for certain loan
obligations.
The rate of interest for cash on interest earning accounts is approximately 0.20% to 5.46% (2022:
0.01% to 0.25%) per annum.
Cash and bank balances denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
141
102
7,446
364
150
12
6,298
278
81
-
-
171
97
-
-
47
121
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
29
ASSETS HELD FOR SALE AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS
HELD FOR SALE
The Group’s aircraft which met the criteria to be classified as assets held for sale and the
associated liabilities were as follows:
Assets held for sale:
Property, plant and equipment - aircraft
At beginning of year
Additions
Impairment loss
Disposal
Transfer to property, plant and equipment
At end of year
Other receivables
Lease incentive asset
Liabilities directly associated with assets
held for sale:
Deposit collected
Lessor maintenance contribution
Maintenance reserves
Group
2023
US$’000
2022
US$’000s
100,500
26,250
-
(40,750)
(78,000)
66,300
100,500
(1,000)
(65,300)
-
8,000
100,500
-
-
-
-
-
-
-
6,547
6,208
113,255
935
8,769
5,442
15,146
During the year, two jet aircraft were transferred to property plant and equipment when the
proposed sale of the aircraft was cancelled.
During the year, the board of directors decided to sell one turboprop aircraft. The sale of aircraft
is expected to be completed within a year from reporting date. The aircraft was measured at fair
value less cost to sell at the date of transfer to assets held for sale.
During the year, the Group sold two turboprop aircraft and one jet aircraft.
During the previous year, an impairment loss of US$1.0 million was recognised to write down the
book value of 3 turboprop aircraft classified as held for sale in year ended 30 June 2021 to current
market value prior to the sale.
During the year, maintenance reserves of US$3.1 million (2022: US$1.8 million) were released to
profit or loss as revenue following the sale of the aircraft.
Other receivables of US$6.5 million was interest bearing as of 30 June 2022. Interest was charged
at 5.5% per annum.
122
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
30
SHARE CAPITAL AND TREASURY SHARES
(a) Share capital
2023
2022
No of shares
US$’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
Cancellation
71,698,124
1,495,000
(2,310,000)
1,203
18
(39)
71,698,124
-
-
1,203
-
-
At end of the year
70,883,124
1,182 71,698,124
1,203
During the year, the Company issued 1,495,000 ordinary shares of 1 penny each at 101.25
pence following the exercise of warrants by warrant holders raising total gross proceeds of
US$1.9 million.
The holders of ordinary shares (except for treasury shares) are entitled to receive dividends
as and when declared by the Company. All ordinary shares carry one vote per share without
restrictions.
(b)
Treasury shares
2023
2022
No of shares
US$’000s
No of shares
US$’000s
At beginning of the year
Acquired during the year
Cancellation
2,210,000
100,000
(2,310,000)
7,811
2,210,000
7,811
94
(7,905)
-
-
-
-
At end of the year
-
-
2,210,000
7,811
During the year, the Company bought 100,000 treasury shares at a market price of 77.2
pence per share and subsequently cancelled 2,310,000 treasury shares.
(c) Net asset value per share
Net asset value per share (US$)(1)
Net asset value per share (GBP) (2)
2023
2022
$3.41
£2.69
$3.27
£2.68
(1) Net asset value per share is total equity divided by the total number of shares in issue excluding
treasury shares at period end.
(2) Based on GBP:US$ exchange rate as at 30 June 2023 of 1.27 (30 June 2022 : 1.22)
123
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
31
ASSET REVALUATION RESERVE
At beginning of year
Revaluation (loss)/gain
Deferred tax credit/(charge)
Release of revaluation reserve upon sale of aircraft
At end of year
32
OTHER RESERVES
Group
2023
US$’000s
2022
US$’000s
51,730
(1,080)
114
-
37,602
17,549
(1,340)
(2,081)
50,764
51,730
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Capital redemption reserve
Warrant reserve
Fair value reserve
Foreign currency hedge reserve
51
2,835
9,734
2,449
12
2,389
2,941
8,832
51
2,835
447
-
12
2,389
(1,312)
-
15,069
14,174
3,333
1,089
Capital redemption reserve comprises of the par value of the cancelled treasury shares.
Warrant reserve comprises the cumulative value of services received from employees recorded
on grant of equity-settled share warrants. The expense for service received is recognised over
the vesting period.
Fair value reserve represents the portion of the fair value changes (net of tax) on derivative
financial instruments designated as hedging instruments in cash flow hedges that is determined
to be an effective hedge.
Foreign currency hedge reserve represents the unrealised foreign exchange gains and losses
arising on Euro denominated loans designated as cash flow hedges. Unrealised foreign exchange
gains and losses recorded in the foreign currency hedging reserve are systematically re-cycled
through profit or loss over the remaining term of the related loan on a straight-line basis.
124
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
32
OTHER RESERVES (continued)
Movements in other reserves are as follows:
Capital redemption reserve:
At beginning the year
Cancellation of treasury shares
At end of the year
Warrant reserve:
At beginning the year
Employee share warrant scheme:
- Value of employee services
- Issue of shares
- Expired
Group
Company
2023
2022
2023
2022
US$’000s
US$’000s
US$’000s
US$’000s
12
39
51
12
-
12
12
39
51
12
-
12
2,389
2,220
2,389
2,220
1,142
(506)
(190)
1,423
-
(1,254)
1,142
(506)
(190)
1,423
-
(1,254)
At end of the year
2,835
2,389
2,835
2,389
Fair value reserve:
At beginning the year
Effective portion of changes in fair value
Net change in fair value reclassified to
profit or loss
2,941
9,641
(17,554)
14,965
(1,312)
2,634
(6,282)
3,380
(2,848)
5,530
(875)
1,590
At end of the year
9,734
2,941
447
(1,312)
Foreign currency hedge reserve:
At beginning the year
Effective portion of changes in fair value
Net change in fair value reclassified to
profit or loss
8,832
(102)
(6,060)
15,032
(6,281)
(140)
At end of the year
2,449
8,832
-
-
-
-
-
-
-
-
125
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
33
LOANS AND BORROWINGS
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Secured borrowings
Unsecured notes (a)
452,511
303,465
531,930
296,200
72,742
129,439
-
-
Less: current portion of borrowings
(61,401)
(63,900)
(13,207)
(16,353)
755,976
828,130
72,742
129,439
694,575
764,230
59,535
113,086
Maturity
interest rate per annum
Weighted average
2023
2022
2023
%
Secured borrowings
Unsecured notes (a)
2024-2031
2026
2023-2031
2026
4.52%
8.25%
2022
%
4.0%
8.25%
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.
The Group incurred transaction costs and upfront fees of US$0.7 million during the year (2022:
US$0.4 million) that are capitalised into loans and borrowings.
During the year, the Group increased its secured borrowings by US$43.0 million (2022: US$17.1
million) to fund its business operations.
During the year, the Group repaid its secured borrowings and repurchased its unsecured notes
amounting to US$135.1 million (2022: US$140.4 million).
During the previous year, the Group extended the maturity date of the loans due on August 2022
to September 2026. A loss on debt modification of US$3.5 million was recognised in the statement
of profit or loss during the previous year.
126
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
33
LOANS AND BORROWINGS (continued)
Secured loans and borrowings denominated in foreign currencies are as follows:
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Euro
113,961
136,469
-
42,854
(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. All Notes issued under the Programme are listed on
the Singapore Stock Exchange (“SGX”).
During the year, the Company repurchased US$4.4 million unsecured notes through the
market at a price of 75.25 US cents and US$7.1 million through a tender offer at a price of
86.0 US cents.
During the year ended 30 June 2021, the Company reached agreement with the holders of
its unsecured notes for a maturity extension and the following are the key terms of the
extension:
(cid:120) Maturity extension of the notes from 15 May 2021 to 31 October 2026;
(cid:120) Cash coupon of 6.5% with, at the Company’s option, an additional 2.5% payment in kind
coupon or an additional 1.75% cash coupon;
Early bird consent fee of up to 75bps; late consent fee of 25bps
(cid:120)
(cid:120) Bondholders receive 6,000,000 warrants to subscribe for ordinary shares exercisable to
31 October 2026 at a price of 114.5 pence per share (including cashless exercise option);
The notes are callable at any time during their 5.5 year remaining duration, with the call
premium decreasing to par during year 5; and
(cid:120)
(cid:120) A general strengthening of the Notes’ covenants and the granting of additional guarantees
and security.
The maturity extension of the unsecured note resulted in a gain on debt modification of US$50.3
million during the year ended 30 June 2021.
127
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
34
TRADE AND OTHER PAYABLES
Current:
Trade payables
Other payables:
- subsidiaries
- third parties
Deposits collected
Deferred lease income
Lease liability
Revenue received in advance
Accrued expenses
Non-current:
Other payables:
- subsidiaries
Deposits collected
Deferred lease income
Lease liability
Accrued expenses
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
734
-
137
864
621
280
6,310
8,221
2,218
444
191
-
276
1,120
607
284
4,584
6,851
9,054
91
316
-
93
-
405
17,354
251
120
-
94
-
281
17,167
15,940
10,403
18,291
-
15,907
3,179
399
700
-
13,692
3,776
106
700
54,919
-
-
130
700
32,329
-
-
32
700
20,185
18,274
55,749
33,061
Other payables due to subsidiaries includes interest bearing payables of US$56.7 million (2022:
US$34.3 million) which are unsecured, with fixed repayment terms, and bear interest at 5.8% to
8.2% (2022: 5.8% to 8.2%) per annum. Amounts due to subsidiaries without fixed repayment
terms are payable on demand.
The average credit period taken to settle non-related party trade payables is approximately 30 to
60 days.
Deposits collected are security deposits collected from customers in respect of aircraft lease
commitments, and have been discounted to present value at a current pre-tax rate that reflect the
risks specific to these deposits. Deposits will be refunded at the end of the respective lease term.
Trade and other payables denominated in foreign currencies are as follows:
Pound sterling
Australian dollar
Euro
Singapore dollar
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
66
1,194
3,725
604
208
1,059
3,621
570
48
16
288
24
159
7
270
20
128
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
35 MAINTENANCE RESERVES
Current:
Maintenance reserves
Non-current:
Maintenance reserves
Maintenance lease contribution
Group
2023
US$’000s
2022
US$’000s
61,456
10,156
44,193
10,394
54,587
72,607
2,524
75,131
Total maintenance reserves
116,043
85,287
At beginning of year
Contributions
Utilisations
Released to profit or loss
Transfer from liabilities directly associated with assets held for sale
Transfer to liabilities directly associated with assets held for sale
Group
2023
US$’000s
2022
US$’000s
85,287
29,152
(7,544)
(1,943)
11,091
-
101,481
13,109
(3,730)
(11,362)
-
(14,211)
At end of the year
116,043
85,287
During the year, maintenance reserves of US$1.9 million (2022: US$11.4 million) were released to
profit or loss as revenue following recovery from airline customers.
Maintenance lease contribution represents the contractual obligations of the Group to contribute to
the lessee’s costs for aircraft maintenance.
The Group also holds letters of credit for US$12.0 million (2022: US$13.7 million) as security for
lessees’ obligations under operating leases for the maintenance of aircraft.
129
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
36
DEFERRED TAX LIABILITIES
Recognised deferred tax liabilities are attributable to the following:
Group
Company
2023
US$’000s
2022
US$’000s
2023
US$’000s
2022
US$’000s
Property, plant and equipment
Aircraft purchase rights
Gain on debt modification
Cash flow hedge
5,986
13,010
6,597
847
5,926
9,948
9,498
65
-
13,010
-
92
-
9,948
-
(268)
26,440
25,437
13,102
9,680
Movements in temporary differences are as follows:
Group
2023
At beginning of the year
Recognised in profit or loss
Recognised in equity
Property,
plant and
equipment
US$’000s
Aircraft
purchase
rights
US$’000s
Gain on debt
modification
US$’000s
Cash flow
hedge
US$’000s
Total
US$’000s
5,926
174
(114)
9,948
3,062
-
9,498
(2,901)
-
65
-
782
25,437
335
668
At end of the year
5,986
13,010
6,597
847
26,440
2022
At beginning of the year
Recognised in profit or loss
Recognised in equity
2,750
1,836
1,340
4,006
5,942
-
12,503
(3,005)
-
(2,121)
-
2,186
17,138
4,773
3,526
At end of the year
5,926
9,948
9,498
65
25,437
Company
2023
At beginning of the year
- Recognised in profit or loss
- Recognised in equity
Aircraft
purchase
rights
US$’000s
Cash flow
hedge
US$’000s
Total
US$’000s
9,948
3,062
-
(268)
-
360
9,680
3,062
360
At end of the year
13,010
92
13,102
2022
At beginning of the year
- Recognised in profit or loss
- Recognised in equity
4,006
5,942
-
(1,286)
-
1,018
2,720
5,942
1,018
At end of the year
9,948
(268)
9,680
130
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
37
SHARE BASED PAYMENTS
The Group has an ownership-based compensation scheme for all employees of the Group.
Each share warrant converts into one ordinary share of Avation PLC on exercise. No amounts are
paid or are payable by the recipient on receipt of the warrant. The warrants carry neither rights
to dividends nor voting rights.
Warrants are granted to employees of the Group to promote:
Improvement in share price;
Improvement in the Company’s earnings per share;
(cid:120)
(cid:120)
(cid:120) Reliable and high quality financial reporting;
(cid:120) Growth in asset value and profits; and
(cid:120) Growth in dividends.
Movement in warrants during the year
The following table illustrates the number (No.) and weighted average exercise prices in GBP
pence (WAEP) of, and movements in, warrants during the year:
2023
2022
No.
WAEP
No.
WAEP
Outstanding at beginning of the year
- Granted
- Exercised
- Expired
5,480,000
3,450,000
(1,495,000)
(385,000)
120.8p*
107.0p
101.3p
110.6p
8,086,665
-
-
(2,606,665)
179.4p
-
-
177.3p
Outstanding at end of the year
7,050,000
118.7p
5,480,000
180.4p
Exercisable at end of the year
2,400,003
130.0p
2,411,677
206.4p
*The beginning WAEP for the outstanding warrants is re-adjusted due to re-pricing of warrants on
14 October 2022 for warrants granted on 21 September 2019 and 21 November 2019 from
exercise price of 296 pence and 274.5 pence respectively to 101.25 pence.
The weighted average fair value of warrants granted during the year was 33.5 pence (2022: Nil
pence). The charge recognised in profit or loss in respect of share based payments is US$1.1
million (2022: US$1.4 million).
During the year, 1,495,000 warrants were exercised (2022: Nil).
Warrants outstanding at the end of the year have the following expiry date and exercise price:
Warrant series granted on
20 September 2019
21 November 2019
23 December 2020
29 September 2022
2 March 2023
Exercise
price
(re-priced)
Number of warrants
2022
2023
296.0p
(101.25p)
274.5p
(101.25)
130.0p
102.0p
126.0p
-
-
3,600,000
2,735,000
715,000
1,053,000
702,000
3,725,000
-
-
Expiry date
(extended
expiry date)
21 Oct 2022
(21 Jan 2023)
22 Dec 2022
(22 Mar 2023)
23 Jan 2024
29 Nov 2025
2 May 2026
131
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
37
SHARE BASED PAYMENTS (continued)
Warrants granted on 20 September 2019 have a 3-year vesting schedule with details as follows:
Vesting period
Proportion of total share options that are
exercisable
Before 21 September 2020
On 21 September 2020 and before 21 September 2021 Up to 33 per cent of the grant
On 21 September 2021 and before 21 September 2022 Up to 33 per cent of the grant or up to 66 per
0 per cent
On 21 September 2022 to 21 October 2022
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 exercise price for the warrants granted on 20 September 2019 was re-priced on 14 October
2022 from 296.0 pence to 101.25 pence. The warrant expiry date extended to 21 January 2023.
Warrants granted on 21 November 2019 have a 3-year vesting schedule with details as follows:
Vesting period
Proportion of total share options that are
exercisable
Before 22 November 2020
On 22 November 2020 and before 22 November 2021 Up to 33 per cent of the grant
On 22 November 2021 and before 22 November 2022 Up to 33 per cent of the grant or up to 66 per
0 per cent
On 22 November 2022 to 22 December 2022
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 exercise price for the warrants granted on 21 November 2019 was re-priced on 14 October
2022 from 274.5 pence to 101.25 pence. The warrant expiry date extended to 22 March 2023.
Warrants granted on 23 December 2020 have a 3-year vesting schedule with details as follows:
Vesting period
Proportion of total share options that are
exercisable
Before 23 December 2021
On 23 December 2021 and before 23 December 2022 Up to 33 per cent of the grant
On 23 December 2022 and before 23 December 2023 Up to 33 per cent of the grant or up to 66 per
0 per cent
On 23 December 2023 to 23 January 2024
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
132
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
37
SHARE-BASED PAYMENTS (continued)
Warrants granted on 29 September 2022 have a 3-year vesting schedule with details as follows:
Vesting period
Proportion of total share options that are
exercisable
Before 29 September 2023
On 29 September 2023 and before 29 September 2024 Up to 33 per cent of the grant
On 29 September 2024 and before 29 September 2025 Up to 33 per cent of the grant or up to 66 per
0 per cent
On 29 September 2025 to 29 November 2025
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
Warrants granted on 2 March 2023 have a 3-year vesting schedule with details as follows:
Vesting period
Before 2 March 2024
On 2 March 2024 and before 2 March 2025
On 2 March 2025 and before 2 March 2026
On 2 March 2026 to 2 May 2026
Proportion of total share options that are
exercisable
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
The warrants were valued using a binomial 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 twelve months.
133
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
37
SHARE-BASED PAYMENTS (continued)
Warrant series
granted on
2 March 2023
Warrant series
granted on
29 September 2022
Warrant series
granted on
23 December 2020
Inputs into the model:
Grant date share price
Exercise price
Expected volatility
Warrant life
Dividend yield
Risk free interest rate
126.0 pence
126.0 pence
45.11%
3 years
0.00%
3.70% to 3.73%
102.0 pence
102.0 pence
42.96%
3 years
0.00%
4.36% to 4.44%
132.5 pence
130.0 pence
77%
3 years
0.90%
-0.08% to -0.06%
Inputs into the model:
Grant date share price
Re-priced date share price
Exercise price
Expected volatility
Warrant life
Dividend yield
Risk free interest rate
Warrant series
Warrant series
granted on
21 November 2019
(Repriced on 14
October 2022)
granted on
20 September 2019
(Repriced on 14
October 2022)
274.5 pence
97.5 pence
101.25 pence
44.27%
0.43 years
0.00%
2.83% to 3.02%
296.0 pence
97.5 pence
101.25 pence
44.27%
0.26 years
0.00%
2.48%
38
CAPITAL COMMITMENTS
Capital expenditure contracted for at the reporting date but not recognised in the financial
statements is as follows:
Group and Company
2022
2023
US$’000s
US$’000s
Property, plant and equipment
32,761
31,230
Capital commitments represent amounts due under contracts entered into by the Group to
purchase aircraft. The company has paid deposits towards the cost of these aircraft which are
included in trade and other receivables.
As at the year end, the Group has commitments to purchase two ATR 72-600 aircraft from the
manufacturer with expected delivery dates in 2024.
134
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
39
OPERATING LEASE COMMITMENTS
The Group leases out aircraft under operating leases. The future minimum undiscounted lease
payments under non-cancellable leases are as follows:
Within one year
One to two years
Two to three years
Three to four years
Four to five years
Later than five years
Group
2023
US$’000s
2022
US$’000s
92,461
88,630
79,315
65,948
52,466
63,977
86,929
88,669
86,070
77,313
64,371
112,713
442,797
516,065
The Group holds cash deposits of US$20.1 million (2022: US$19.9 million) and letters of credit for
US$3.5 million (2022: US$3.0 million) as security for lessees’ obligations under operating leases.
40
CONTINGENT LIABILITIES
Company
2023
2022
US$’000s
US$’000s
Guarantees
800,448
881,256
The maximum estimated amount that the Company could become liable for under guarantees for
loans and borrowings is as shown above.
135
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
41
ULTIMATE HOLDING COMPANY
No party controls the Company.
42
SUBSEQUENT EVENTS
On 5 October 2023 the Company terminated a lease agreement for a 12-year old ATR 72-500
aircraft by agreement with the lessee.
On 9 October 2023 the Company entered into an agreement to sell the aircraft referred to above.
43
APPROVAL OF FINANCIAL STATEMENTS
The financial statements of the Company and the consolidated financial statements of the Group for
the year ended 30 June 2023 were authorised for issue by the Board of Directors on 26 October
2023.
136
AnnuAl RepoRt
AnnuAl RepoRt 2023
65 Kampong Bahru Road
Singapore 169370
www.avation.net
Reuters/BBG
Index:
lSe
AVAp.ln
AVAp
FtSe Sector:
Industrial transportation
FtSe Sub Sector: transportation Services
2023