Gama Aviation Regulatory News (GMAA)

Hangar 8 plc

("Hangar 8", "the Company" or "the Group")

Final results for the year ended 30 June 2014

Hangar 8, one of Europe's largest operators of privately owned passenger jet aircraft, today announces its financial results for the year ended 30 June 2014. All of the comparative information shown below represents the audited results for the year ended 30 June 2013.

Financial highlights:

· Total Revenues up 26% to £65.0m (2013: £51.4m)

· Gross profit up 25% to £10.3m (2013: £8.3m)

· Gross margin percentage consistent for both years at 16%

· Adjusted EBITDA up 32% to £2.66m (2013: £2.02m)*

· Operating profit up 29% to £1.5m (2013: £1.2m)

· Cash balances ended the year at £4.64m (2013: £3.83m)

· Earnings used in Adjusted EPS up 34% to £2.1m (2013: £1.5m) (see note 10)**

· Adjusted basic EPS up 15% to 22.0p (2013: 19.1p) (see note 10)

· Basic and diluted EPS of 10.4p and 10.3p (2013: 9.7 and 9.5p) (see note 10)

· Maiden dividend of 2.3p per share

Operational highlights:

· Contracted gross margin up by 22% to £9.0m (2013: £7.4m)

· Contracted gross margin 87% of total (2013: 89%)

· Number of heavy jets under management up by 4 to 27 (2013: 23) of which 15 (2013: 12) are deemed super heavy i.e. greater than 20 tonnes

· Total aircraft flight hours operated up by 9% to 9,743 (2013: 8,942)

· Total charter flight hours operated up by 51% to 1,483 (2013: 979)

* Adjusted EBITDA is arrived at by taking operating profit before depreciation, amortisation and exceptional items.

 ** Earnings used in the adjusted EPS calculation is the profit after taxation adjusted for exceptional items and amortisation.

Nigel Payne, Hangar 8 Non Executive Chairman said:

"I am delighted to report that the Group has enjoyed an excellent year delivering significant organic growth. Our controlled growth strategy has gained further momentum as we continue to focus our efforts on increasing the number of our long-term fixed contracts, diversifying the services we offer and expanding the geographical breadth and depth of the business. It is also the first year in which we have seen the full benefit of the acquisition of International Jet Club which has continued to surpass our expectations. I am delighted to report a very positive set of results and the Board will accordingly be proposing the payment of a maiden dividend of 2.3 pence per share."

Enquiries

Hangar 8 plc +44 (0) 1865 372215

Dustin Dryden, Chief Executive Officer

Kevin Callan, Chief Financial Officer

Citigate Dewe Rogerson +44 (0) 20 7638 9571

Chris Jarvis, Associate Director +44 (0) 7720 084307

Jonathan Smith, Director +44 (0)7595 106 280

Cantor Fitzgerald Europe +44 (0) 20 7894 7000

Mark Percy / Catherine Leftly (Corporate Finance)

David Banks / Paul Jewell (Corporate Broking)

Chairman's statement

I am delighted to report that the Group has enjoyed an excellent year delivering significant organic growth. Our controlled growth strategy has gained further momentum as we continue to focus our efforts on increasing the number of our long-term fixed contracts, diversifying the services we offer and expanding the geographical breadth and depth of the business. It is also the first year in which we have seen the full benefit of the acquisition of International Jet Club which has continued to surpass our expectations. I am delighted to report a very positive set of results and the Board will accordingly be proposing the payment of a maiden dividend of 2.3 pence per share.

Markets and strategy

We operate in an exciting and highly regulated market. In the last few years, as the demand for our service offering has increased we have seen a clear move in market demand away from small-cabin private aircraft towards heavier long-range jets. Although smaller aircraft will always have a place in our business both for shorter journeys and as often the first aircraft acquired by new owners, to reflect the change in market demand we have been changing the mix of our fleet so that we can offer a full range of intercontinental business air travel. We now have twenty seven long range heavy and super-heavy aircraft out of a fleet of forty seven revenue generating aircraft overall.

The heavy aircraft we are focusing on means that we are expanding our geographical presence. We are broadening and diversifying our service offering to meet our clients', and prospective clients', requirements. Services, such as engineering, that were traditionally outsourced, are being successfully internalised. These services are also being offered to other private aircraft operators, thereby not only increasing the service offering to our customers but also extending the Group's revenue streams. Our growing size and scale is also improving our buying power and is enabling Hangar8 and its clients to benefit from considerable economies of scale.

These strategic changes in the business are being met through continued investment in our infrastructure, internal training and development and key supplier partnerships.

Acquisition

During the year Hangar8 acquired 100% ownership of Oasis Flight Malta Limited for a nominal consideration. This acquisition provided an important additional Air Operators Certificate and enhanced our foothold across Europe.

Towards the end of 2013 the Group entered into discussions to acquire, via a reverse takeover, a privately owned air charter business. As reported at the time this led to the shares in Hangar 8 being temporarily suspended from AIM in February 2014.

While initial discussions on the proposed transaction went well, it became evident, as negotiations progressed, that although the target acquisition provided a number of synergies, the cultures of the two businesses were very distinct. The Board came to the conclusion that integrating the businesses would prove too difficult and possibly have an adverse effect on the existing Group's operations. Talks between the two businesses were therefore terminated by mutual consent in early March 2014.

All potential acquisitions carry a risk of non-completion. However, we believe that in order to fulfil our vision of becoming the world's leading provider of private aviation services, in addition to growing organically, we should continue to target strategic acquisitions. We therefore continue to explore opportunities that meet our strategic requirements as well as providing the right 'fit' for the Group.

Board changes

In March 2014, Murray Law stood down from the Board as a Non-Executive Vice-Chairman. Murray Law joined the Board following the acquisition of International Jet Club in November 2012 and remains a consultant to the business.

The Board has no immediate plans to appoint a new non-Executive Director as it believes that the current mix of Executive and non-Executive Directors provides the skills and checks and balances appropriate to the size and current operations of the Group.

Maiden Dividend

In light of the past year's performance and our continued optimism for the future, the Directors are pleased to recommend the payment of a final dividend of 2.3p per ordinary share for the financial year ended 30 June 2014, which can only be paid after the shareholders have approved it at the forthcoming Annual General Meeting of the Company. If approved at the AGM, the final dividend will be paid on a date to be announced.

The Board intends to pursue an annual dividend policy. The payment of dividends in the future will be determined by the Group's performance, the net cash balance, and investment plans for the development of the Group.

Positive outlook

We entered the current financial year with a great deal of optimism. The decision to move away from our more traditional, but volatile, spot-charter business and the implementation of our strategy to focus on heavy jets and diversify our service offering now has real momentum. We have continued to grow the quality and visibility of our future earnings by focusing on long-term contracts while benefiting from a more positive economic and market outlook. This leads us to look forward to the current financial year with confidence.

Finally, on behalf of the Board, I would like to thank everyone across the Group for their commitment and passion during a year that marks a major step in our development.

Nigel Payne

Non-Executive Chairman

5 November 2014

Group Strategic Report

Our industry

The market the company is operating in is a steadily growing market being fuelled by a substantial growth of the global business aviation fleet. The US market, a precursor for the European business aviation market, shows substantial increase of charter usage and an increased utilisation of younger and larger aircraft; the previously slightly subdued European spot charter market is now showing clear signs of positive growth, tracking its US counterpart. We are thus expecting strong and improved market conditions.

Our strategy

It is within these market conditions that we are aiming to become the world's leading provider of private aviation services. In order to achieve this goal we have a clearly defined strategy to diversify and expand our service offerings, underpinned by four pillars: scale, reach, breadth and depth.

Scale; we aim to increase our scale by expanding the number of aircraft under management through organic growth as well as acquisition and continue to shift from smaller to heavier aircraft in order to meet market demand for long range capabilities. This growth in scale allows us to benefit from increased buying power, widened geographic reach and sector diversification. All of these benefits translate into attractiveness to current and potential customers who wish to enjoy the enhanced service, increased safety and financial advantages associated with a large service provider.

Reach is our second pillar of our growth strategy; we tailor our services to meet specific client needs and build relationships based on quality of service and reputation, leading to referrals from key clients and their professional advisory team. We also aim to raise our profile through strategic partnerships in key growth geographical markets and sectors.

Breadth is a further way for us to expand our offerings. The company is able to offer long term customer contracts that better support our clients' needs and at the same time provide the group with more balanced and diversified sources of revenue. A larger geographical footprint will also allow us to serve our customers better and operate our aircraft more efficiently, increasing the percentage of revenue generating flights.

Depth is the final and fourth pillar of our growth strategy. The company is continuing to internalise previously outsourced functions in order to shorten turnaround times and enhance quality of services provided. We continue to expand the Group's engineering capabilities and provide maintenance repair workshops; we also carry out training of both aircrew and engineers. This internalisation allows us to provide an overall better service, as well as strengthen relationships with our customers who wish to have their aircraft operated and maintained by the same service provider.

Operational review of our business

2014 was a strong and successful year for the Company as the outcomes arising from our focused strategy enabled the Group to produce another year of strong organic growth. Our growth in the year was not only assisted by our increase in the breadth and depth of the services we offer and the sheer scale of our operations, but also from improving economic and market conditions as well as continued disruption to schedule services by political instability and epidemics.

Hangar8's enhanced full-service management operation has served to improve the quality and breadth of our offering. We have focused on increasing the number of heavy and super-heavy jets, enhanced our supply chain management and expanded our internal capabilities. This has served to increase margins and reduce costs. Former cost centres such as engineering, training and crewing are now profitable individual business units in their own right and these, and indeed other in-house services have expanded such that they are now being offered externally.

Our growing fleet allows us to benefit from greater economies in scale particularly in territories where we already have an established infrastructure. This in turn is enabling us to be more competitive in our tendering process and is helping us to secure new long-term contracts. Our growing geographical presence and ability to fly greater distances without stopping is also helping us to improve our service offering and meet the needs of our clients.

We continue to pursue our strategy to align our offering with market demand and to be increasingly self-sufficient. As a result, forward earnings visibility, with contracted gross margin of £9.0m (2013: £7.4m) representing an increase of 22%, has improved and we continue to grow the business profitably.

Financial review

Revenue Reporting

Management has reviewed its judgement on the method of reporting of revenues, based upon the contractual relationships with both customers and suppliers. Historically the judgement had been to report recharges of flight cost expenses incurred on behalf of a customer and disbursed as a pass through cost and so not report this as revenue. With the introduction of several larger higher value aircraft during the year, which involve differing types of contractual arrangements, Management now considers that it should treat these rechargeable expenses incurred on a customer's behalf as part of Revenue, but which do not impact upon gross profit. Management had always reported charter; engineering and recurring fixed fee income sources as revenue, but now with the inclusion of rechargeable expenses shall refer to Total Revenues unless otherwise stated, and the prior year comparison figures are now reported on that same basis.

The total gross revenue for the year was £65m (2013: £51.4m), an increase of 26%, yielding a gross profit of £10.3m (2013: £8.3m), an increase of 24%. Adjusted EBITDA generated was up 32% to £2.7m (2013: £2.0m), which was before exceptional costs of £487k (2013: £295k), details of which are included in note 10, and also before depreciation and amortisation of £678k (2013: £567k). These results generated an improved operating profit up £0.3m to £1.5m (2013: £1.2m).

Overhead costs were £8.9m (2013: £7.1m) reflecting the inclusion of IJC for a full year compared with a 7 month period in 2013, as well as the investment in a strengthened management team.

Cash increased to £4.6m (2013: £3.8m) and the net assets of the Group amounted to £7.5m (2013: £6.5m).

Earnings used in the calculation of EPS have increased by 25% to £980k (2013: £782k). Basic EPS was 10.4p (2013: 9.7p), an increase of 7% on the prior year.

Segmental Reviews

Aircraft Management & Logistics

Gross Revenues from aircraft management, which includes rechargeable flight cost expenses, together with crewing and logistics contracts, represents 83% (2013: 83%) of total revenues, increased by 26% to £53.8m (2013: £42.7m), from which a gross profit of £6.7m (2013: £5.5m) was generated, representing an increase of 20%.

The number of revenue generating aircraft now totals 47 (2013: 44). In line with our strategy and to meet the needs of the segment in our market which is seeing the highest level of growth, we grew the number of long range heavy jets by 4 to 27 aircraft. Of these 15 are deemed super-heavy and have the capability for intercontinental travel, and 14 of those can fly up to 9,000 km without refuelling. Smaller aircraft in our fleet remain an important part of our offering, and will continue to do so, as they are more suited to shorter journeys.

The logistics business which offers private aviation solutions for large corporate clients, including the oil and gas and mineral markets, has benefited from our ability to offer greater aircraft capacity. This is particularly true in emerging markets as well as geographically and politically challenging territories where we can provide a complete go-anywhere aviation service.

We expect this segment to continue to grow and new business opportunities are being presented on the back of recent global events. Our ambition to take on even larger super-heavy jets with fifty to one-hundred seat capacity, as well as adding smaller short-haul light aircraft to service local and regional travel, makes for a compelling business rationale for large corporates to consider private aviation as a cost effective, flexible and efficient solution to accessing remote regions.

Aircraft charter

With an expanding selection of aircraft types, sizes and operational range this revenue stream continues to form an increasing in-fill opportunity to the business and will continue to do so. Aircraft charter represents 9% (2013: 9%) of total revenues, but increased by 35% to £6m (2013: £4.5m) producing gross profits of £0.9m (2013: £0.7m).

Market conditions have recently led to a marked improvement in demand for this segment. This is as a result of both improved general economic conditions and also the addition of high quality long-range jets that are available for charter. In order to capitalise on this opportunity, but without compromising the quality of earnings of the business, we have looked externally to source owners who are interested in offering their aircraft for charter to increase our supply. We have also re-organised our charter sales team with revised incentive schemes and new sales tools to further capitalise on the resurgent demand.

Engineering & maintenance services

Engineering and related services grew significantly over the year, reflecting our initiative to internalise as many service functions as possible. Revenues in this segment represent 7% (2013: 6%) and increased by 35% to £4.3m (2013: £3.2m) generating gross profit of £2.3m (2013: £1.8m).

We are now able to provide engineering services, which includes maintenance and airworthiness monitoring and planning, to more aircraft types, systems and parts, and in more territories, than ever before. We are now very close to obtaining our FAA Part 145 certification which will give us operating flexibility and penetration into the potentially lucrative US charter market as well as achieving FAA engineering approvals.

Additional services that were introduced during the year included an aircraft paint facility, in-cabin upgrade service and avionic modifications. All our services are now offered externally and consequently provide more opportunity to grow the engineering division.

Other - Aero medical & training of aircrew and engineers

Revenues in this remaining segment represent 1% (2013: 2%) with revenues of £0.8m (2013: £0.9m) although saw an improving gross profit of £0.5m (2013: £0.2m).

Our aero medical service is now gathering momentum. During the year we added an aeromedical-equipped Bombardier Challenger to the fleet and now have plans to add a long-range twin stretcher aircraft capable of full Biological protection for the carriage of Ebola patients. This will provide a long needed service and fill a gap in the mission profile in the African aeromedical market.

Our training capability has been extended to now extend to include aircraft engineers as well as aircrew. Type-rating pilot and engineering courses and EASA type-specific courses, as well as ground and simulator training are now offered to both internal and external candidates. With the range of courses being expanded and more candidates taking part, our training buying power is improving margins further.

Key Performance Indicators

The Board reviews key performance indicators which it uses to monitor and measure the Group's performance. These fall into three principal categories: financial, marketing and service delivery.

Key financial performance indicators included within the monthly management information include:

- Adjusted EBITDA and gross margin analysis;

- Aeroplane numbers, hours operated and contracted revenue;

and

- Cash flow information and a review of turnover by client.

These are all compared to the annual budget set at the beginning of the financial year. The budgets and financial information are prepared and reviewed monthly.

Another key indicator for the Group is to monitor itself against its competitors in the aviation sector and to ensure that its returns are at least in line with these competitors. The Board is satisfied with the net return achieved in the current financial year given the difficulties experienced by the Group's competitors.

The quality of the services the Group provides is monitored by customer and client satisfaction surveys. The Group differentiates its service offerings based on the quality of its services and the Board is satisfied that the results of these surveys confirm that these high standards are being maintained.

During the year, the Group showed strong improvement of its KPIs:

*Adjusted EBITDA is arrived at by taking operating profit before depreciation, amortisation and exceptional items. Adjusted EBITDA margin is then arrived at by dividing Adjusted EBITDA by turnover.

Other KPIs are obtained from the Group's proprietary Information Technology systems which provide qualitative information regarding internal and external delivery as well as the marketing and service delivery information referred to above. The Directors are satisfied with the performance of these KPIs.

Principal risks and uncertainties

The principal financial risks the Group is exposed to are discussed in note 3 of the attached Financial Statements. These include market, foreign exchange, credit and liquidity risks.

The Board continues to implement its medium term objective to build and broaden the business activities of the Group within the aviation sector. The Board will continue to focus on the Group's costs in order to improve profitability. The Directors believe that there are a number of trends and factors which could affect the development, performance and position of the business. Future economic uncertainty or significant increases in jet related costs (e.g. fuel costs) could result in a reduction in the demand for private jets in the future and/or a reduction in the profitability of the Group. However, given the repositioning of the business to increase the exposure to fast growing economies such as Africa and Central Asia the Directors have taken steps to mitigate these risks.

The Group has continued to develop its range of services including maintenance and training alongside the core products of the management and operation of private jets. The risks associated with maintenance are mitigated by the need for engineers to hold licences to maintain certain types of aircraft. These are hugely valuable to them and as such ensure extreme diligence over their operations as any failure to reach the required standards can result in the loss of their licence and their livelihood. The Group also has sufficient insurance in place should any unforeseen event arise which prejudices the value of an aircraft. Currently the training undertaken by the Group is only to do with the basic ground skills courses and as such the impact of any failure in this area is minimal.

The Group operates in markets which are price competitive. The Group mitigates this risk by ensuring that the services it offers are of the highest quality and controlling its variable cost base to ensure that work is tendered for at a level which is price competitive while maintaining an acceptable margin for the Group.

As with any company, senior management are the Group's key asset and losing key staff is a risk to the business. This risk is reduced by ensuring staff are competitively incentivised through basic pay, bonuses and share options.

The aviation industry is highly regulated. The Directors believe that the Group is compliant with its regulatory regimes; however there may be future reforms or changes in other legislation which may affect the Group's operations going forward. Non-compliance could have a negative impact upon the Group's ability to continue to operate profitably and therefore, there is a regime of constant dialogue with the regulatory authorities to keep abreast of any changes and internally a focus upon training of staff to best position the Group to deal with any such changes.

The Group's operations are reliant upon companies within the Group holding AOC's (Air Operator's Certificates) of both Type A and B and engineering Part 145 Licences granted by the Civil Aviation Authority and each continuing to comply with the relevant conditions. The Group has stringent internal controls in order to comply with the relevant conditions and has a Quality Department dedicated to liaising with the regulatory authorities to monitor any changes in the conditions and ensure continuing compliance with the existing and new conditions.

Planning for growth

Hangar8's brand profile among large corporates and high-net-worth-individuals is maturing as we refine our marketing and grow our client base. A concerted effort is being made to foster important relationships with governments, multi-national corporations and world recognised brands through attendance and participation at key conferences and summits.

The momentum we have gained in the last twelve months has meant that we have been required to future-proof the business by introducing new systems and processes that enables us to add services seamlessly and provide further capacity for potential acquisitions.

Outlook

The Group has entered the current financial year in a strong position underpinned by the strategic decisions we have made in previous years. We now have a breadth of high quality revenue streams across a broad range of geographical territories and aviation services.

We are fortunate that the spot-charter market has improved and this will provide additional earnings potential. Opportunities in the logistics market, that are being helped by the development of our heavy-jet fleet, are particularly exciting and we see this as an area of significant growth.

All the above, combined with an improved market and economic outlook, are aligning to increase shareholder value. Our future growth will continue to involve some strategic acquisitions which will expedite our expansion and penetration into new territories and services.

Against this backdrop we look forward with confidence and excitement as we continue to fulfil our vision of becoming the world's leading provider of private aviation services.

The board believes that the strong market combined with our internal capabilities and our growth strategy will allow us to reinforce our position as a global private aviation services provider.

Dustin Dryden

Chief Executive Officer

5 November 2014

Consolidated statement of comprehensive income for the year ended 30 June 2014

* International Financial Reporting Standards (IFRS), under which the Group reports its financial performance, require that reported revenue includes both fees for services provided and disbursements that the Group recharges, at cost, to its clients. Revenue before rechargeable expenses is the means by which management have historically assessed the activity level in the business. Please see Note 1 for the Group's revenue recognition policy and Note 2 for key judgements applied.

Consolidated statement of financial position for the year ended 30 June 2014

Consolidated statement of cash flows for the year ended 30 June 2014

Consolidated statement of changes in equity for the year ended 30 June 2014

Notes forming part of the Financial Statements for the year ended 30 June 2014

1 Accounting policies

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union ("adopted IFRSs"), and are in accordance with IFRS as issued by the IASB, and are presented in £'000's Sterling.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented.

Prior year restatement

Following a review by management of the way in which revenue was presented in the Financial Statements, the Financial Statements now include rechargeable expenses which are billed to clients at cost as part of total revenue as management consider the Group to be acting as principal rather than agent due to the Group having exposure to the significant risks and rewards of these transactions. In previous years rechargeable expenses had been deducted from cost of sales. The 2013 comparatives have been restated. This has no impact to profit.

Changes in accounting policies

(a) New standards, amendments to published standards and interpretations to existing standards effective in 2013 adopted by the Group are:

· IAS 1 Presentation of Financial Statements - amendments to revise the way other comprehensive income is presented - 1 July 2012 *

· IAS 12 Income Taxes - Limited scope amendment (recovery of underlying assets) (December 2010) - 1 January 2012

The adoption of the above standards has not had a material impact on the financial statements of the Group.

(b) Standards, amendments and interpretations to published standards not yet effective

New standards and interpretations currently in issue but not effective are:

· IFRS 9 Financial Instruments - (IASB effective date 1 January 2018) ^^

· IFRS 14 Regulatory Deferral Accounts (effective 1 January 2016) ^^

· IFRS 15 Revenue from Contracts with Customers (effective 1 January 2017) ^^

· Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 (effective 1 January 2014)

· Offsetting Financial Assets and Financial Liabilities - Amendment to IAS 32 (effective 1 January 2014)

· IFRIC Interpretation 21 Levies (IASB effective 1 January 2014) ##

· Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (effective 1 January 2014) Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective 1 January 2014)

· Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (IASB effective date 1 July 2014) ^^

· Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date 1 January 2016) ^^

· Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 (IASB effective date 1 January 2016) ^^

· Annual Improvements to IFRSs 2010-2012 Cycle (effective 1 July 2014) ^^

· Annual Improvements to IFRSs 2011-2013 Cycle (effective 1 July 2014) ^^

· Annual Improvements to IFRSs 2012-2014 Cycle (effective 1 January 2016) ^^

· Amendments to IAS 16 and IAS 41: Bearer Plants (effective 1 January 2016) ^^

· Amendments to IAS 27: Equity Method in Separate Financial Statements (effective 1 January 2016) ^^

· Sale or Contribution of Assets between an Investor and its Associates or Joint Venture - Amendments to IFRS 10 and IAS 28 (effective 1 January 2016) ^^

** EU mandatory effective date is 1 January 2014 not 2013. Hence, where an entity follows the EU effective date, it will include these standards in its list of standards in issue not yet effective in its 2013 accounts.

## EU mandatory effective date is financial years starting on or after 17 June 2014.

^^ Not adopted by the EU (as at 5 November 2014).

Basis of consolidation

Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.

The consolidated financial statements in relation to the Group consist of the results of the following subsidiaries:

* since date of acquisition 1 December 2012

** since date of acquisition 20 September 2013

Goodwill

Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss. Direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Joint ventures

Jointly controlled entities are included in the financial statements using the equity method of consolidation. The share of each of the jointly controlled entity's assets, liabilities, income and expenses are combined on a one-line basis on the statement of consolidated income and the statement of financial position of the Group. Where non-monetary contributions to a jointly controlled entity give rise to an unrealised gain or loss, it is eliminated against the carrying value of the investment and is only released once it becomes realised.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

Revenue is recognised for major categories as follows:

· Aircraft management - Fixed monthly fees in respect of management and maintenance supervision of a customer's aircraft. Revenue is recognised straight line over the period of the contract.

· Aircraft Charter - The ad-hoc chartering of an aircraft on behalf of existing owners or third party customers on a fully inclusive basis. Revenue is recognised when the charter flight commences.

· Minimum guaranteed hours contracts - The exclusive provision of an aircraft for a fixed period with a monthly minimum amount of flying for corporate clients, typically in the Oil & Gas sector. Revenue is recognised based on the higher of the hours used or the guaranteed hours on a monthly basis.

· Provision of Aircrew - The contracted supply of experienced pilots and flight attendants. Revenue is recognised at the time the aircrew is supplied to the client.

· Training - The provision of the required training of both aircrew and engineers. Revenue is recognised at the time the training takes place.

· Maintenance - The performance of all necessary aircraft engineering and support services. Revenue is recognised on the provision of the service.

· Rechargeable expenses - flight costs, such as fuel and airport charges which are incurred on behalf of a customer, and are disbursed to the customer at cost. Rechargeable expenses are recognised in both Revenue and Cost of Sales at the time the goods or services are supplied.

Foreign currencies

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). For the purpose of the consolidated financial information, the results and financial position of each company are expressed in Sterling (£), which is the presentation currency for the consolidated financial information.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange differences arising on settlement of foreign currency monetary items and on the retranslation of unsettled monetary assets and liabilities are recognised immediately in Profit or Loss.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

Exchange differences recognised in profit or loss in Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Exceptional items

Exceptional items are those items that, in the judgement of the directors, need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information.

Employee benefits

Defined contribution plans

The Group provides retirement benefits to all employees and Directors. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions made by the Group are charged to Profit or Loss in the period in which they become payable.

Share-based payment transaction

The Group operates an equity-settled, share-based compensation plan. Vesting conditions are service conditions and performance conditions only. Where share options are awarded to employees and others providing similar services, the fair value of the options at the date of grant is charged to Profit or Loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options when granted. As long as all other vesting conditions are satisfied, a change is made irrespective of whether the market vesting conditions are satisfied.

The cumulative charge is not adjusted for failure to achieve a market vesting condition. If market related terms and conditions of options are modified before they vest, the change in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period. If non-market related terms and conditions of options are modified before they vest, the number of instruments expected to vest at each balance sheet date and therefore the cumulative charge, is therefore amended accordingly. Where equity instruments are granted to persons other than employees and others providing similar services, Profit or Loss is charged with the fair value of goods and services received.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the Board.

Financial instruments

Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provision of the instrument.

Financial assets

Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income.

On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Trade receivables denominated in a foreign currency are translated into sterling using the exchange rate at the reporting date. Foreign exchange gains or losses are included in other comprehensive income.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts, the effect of discounting is considered to be insignificant.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.

Cash and cash equivalents include cash in hand and deposits held at call with banks.

Financial liabilities

Financial liabilities include trade payables and other short-term money liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Leases

The Group as Lessee

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group. All other leases are classified as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

The Group as Lessor

Contracts with customers to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the customer; all other contracts with customers to lease assets are classified as operating leases.

To the extent that finance lease receivables are not matched by back to back finance lease payables, where cashflows arising are direct between, sub-lessee and head lessor, they are included in the balance sheet, at the amount of the net investment in the lease being the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Back to back leases are disclosed on a net basis where the risks of the finance lease arrangements do not reside within the Group.

Impairment of non financial assets

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Assets that are subject to amortisation and depreciation are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be fully recoverable. The impairment review comprises a comparison of the carrying values of the fixed asset with its recoverable amount, which is the higher of fair value less costs to sell and value in use.

Fair value less costs to sell is calculated by reference to the amount at which the asset could be disposed of. Value in use is calculated by discounting the expected future cash flows obtainable as a result of the assets continued use, including those resulting from its ultimate disposal, at a market based discount rate on a pre tax basis.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill.

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The nature and purpose of each component of equity is set out in note. 21 of the attached Financial Statements

The Group's ordinary shares are classified as equity instruments.

Taxation

Income tax expense included in the consolidated statement of comprehensive income represents the sum of current tax and deferred tax.

Current tax

The tax charge/(credit) payable is based on taxable profit/(loss) for the year. Taxable profit differs from profit reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable in other years and items that are never taxable or deductible. The Group's liability/asset for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred taxation

Deferred tax is recognised on temporary 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 recognised for all temporary differences expected to increase taxable profit in the future. Deferred tax assets are recognised for all temporary differences that are expected to reduce taxable profit in the future, and unused tax losses or tax credits. Deferred tax assets are measured at the highest amount that, on the basis of current or estimated future taxable profit, is more likely than not to be recovered. The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect the current assessment of future taxable profits.

Deferred tax adjustments are recognised in profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit/(tax loss) of the periods in which it expects the deferred tax asset to be realised or the deferred tax liability to be settled, on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting period.

Current and deferred tax for the year

Current and deferred tax are recognised as an expense or income in the statement of comprehensive income, except when they relate to items that are recognised in Other Comprehensive Income or Equity, in which case the tax is also recognised in Other Comprehensive Income or Equity respectively.

Inventories

· Inventories are stated at the lower cost and net realisable value. Cost is calculated as follows:

· Raw materials - cost of purchase on first in, first out basis;

· Consumables & Rotables - all costs of purchase, costs of conversion or overhaul, and other costs incurred in bringing the aircraft spares to their present location and condition;

· Work in progress - cost of raw materials and labour fitted or allocated to an aircraft, prior to completion.

Net realisable value is based on estimated selling price less further costs to completion and disposal. A charge is made to the statement of comprehensive income for slow moving inventories. The charge is reviewed at each balance sheet date.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives through administrative expenses. Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below). The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Intangible assets

Air Operator's Certificate ("AOC")

This is the certificate from the relevant country's aviation regulatory regime which allows an operator to operate third party passenger transport for reward in their air space. Without the AOC the operator cannot operate in that country. The Group has two AOCs in the UK which are not capitalised. In addition the Group has one AOC in South Africa and one in Malta. The South African AOC arising on acquisition and the costs of application in respect of the Nigerian AOC have been capitalised as separately identifiable intangibles.

Costs associated with the maintenance of an AOC, which are minimal, are recognised as an administrative expense as incurred.

Computer software

Computer software is recognised on the basis of the costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs are amortised, once commissioned, over their estimated useful lives of four years on a straight line basis. Computer software is valued on an estimated replacement cost basis.

Costs associated with maintenance of computer software are recognised as an administrative expense as incurred.

Brand

This is in relation to the brand name "Jet Club" and was separately identified as part of the acquisition of International Jet Club Limited (IJC). The fair value of this has been calculated based upon additional revenue that this brand name is expected to generate for the Group. This brand name will define the high-end sector of the private jet elite and is expected to bring larger long range aircraft into the management and charter sectors of the Group which previously the Group did not have access to.

Customer relationships

The fair value of the customer contracts has been calculated based on the expected discounted cash flows from contractual agreements IJC had in place with its customers at the date of acquisition.

Property, plant and equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives, using the straight line method. The following annual rates are used for the depreciation of property, plant and equipment:

Plant, machinery & equipment Straight line over 3 - 8 years

2 Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions 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) Revenue recognition

The Group incurs certain expenditure on behalf of owners that is recharged directly with no mark up. Expenditure recharged in this manner is included in revenue but shown separately as Management consider the Group to be acting as principal rather than agent due to the Group having exposure to significant risks and rewards in respect of rechargeable expenditure.

b) Bad debts

The Directors have assessed the recoverability of the Group's trade receivables at each year end based on the information available to them at the time. Consequently, judgements have been made in making a provision for doubtful debts. Accordingly, due to the size of trade receivables and related provisions, future results could be significantly impacted by subsequent events, such as the eventual recovery of previously impaired debts.

c) Useful lives of property, plant and equipment, AOCs, software, brand and customer relationships

Property, plant and equipment, AOCs, software, brand and customer relationships are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the combined statement of comprehensive income in specific periods. More details including carrying values are included in notes 11 and 13.

d) Deferred taxation

A deferred tax asset is recognised in relation to the tax losses carried forward when future taxable profits are anticipated. However, future trading may not allow for the utilisation of these losses and therefore the future tax charge may be increased.

e) Accruals

Flight costs vary according to where and when the flight takes place. As such, certain costs in relation to flights cannot be accurately determined in advance of those flights. Costs are accordingly accrued to a level which management considers appropriate, having taken into account the nature and destinations of these flights, based on the average flight costs over the period. The overall level of accruals in relation to these flights is considered globally, and has been assessed by management as adequate in relation to the level of activity undertaken at year end.

f) Impairment of intangible assets

The Group is required to test, on an annual basis, whether its intangibles have suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. More information including carrying values is included in note 13.

g) Determination of fair values of intangible assets acquired in business combinations

The fair values of identifiable intangible assets are valued on a basis appropriate to the asset. Acquired AOC's are based on the discounted cash flows associated with the acquisition and maintenance of an AOC. The fair value of the acquired brand is based on the discounted cash flows expected to be derived from the use of the asset. Customer relationships represent the discounted value expected to be derived by the contracts

3 Financial instruments - Risk management

The Group is exposed through its operations to the following financial risks:

· Market risk

· Foreign exchange risk

· Credit risk

· Liquidity risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

A summary of the financial instruments held by category is provided below:

Fair values of material financial instruments

There are no material differences between the book and fair values of the Group's financial instruments

Market risk

The Group has minimal exposure to interest rate risk as it has no borrowings. With regards to fuel price rises or other associated aviation costs then the Group is largely insulated as most of these variable costs are passed on to the aircraft owners.

The Group has little visibility over future charter bookings and as such has no commitments to fly at set rates that may move against the Group. It constantly checks the charter market to ensure its rates are set commercially and has no obligation to fly a charter beyond a modest amount of pre-booked blocks of hours.

Foreign exchange risk

The Group is exposed to currency risk on purchases made from suppliers based around the world as well as through its investment in overseas subsidiaries. Purchases are made on a central basis and are offset where possible by sales invoices denominated in the same currency. During the year the rise in the level of minimum guaranteed hours contracts, which are denominated in Euros and US Dollars, has increased this exposure. The majority of overseas purchases are made using credit cards, and this effectively fixes the currency risk at the date of purchase. At the balance sheet date the Group had trade payables of £10,436k (2013: £8,789k) denominated in Euro and US Dollars.

As at 30 June 2014 the Group's financial assets and financial liabilities were denominated in the following currencies:

The effect of a 10% strengthening of the Euro against Sterling at the balance sheet date on the Euro-denominated net assets carried at that date would, all other variables held constant, have resulted in an increase in post-tax profit for the year and an increase of net assets by £109k (2013: £1k). A 10% weakening in the exchange rate would, on the same basis, have reduced the post-tax profit and reduced net assets by £99k (2013: £1k).

The effect of a 10% strengthening of the US Dollar against Sterling at the balance sheet date on the US Dollar denominated net assets carried at that date would, all other variables held constant, have resulted in a reduction in post-tax profit for the year and a reduction of net assets by £22k (2013: £-53k). A 10% weakening in the exchange rate would, on the same basis, have increased the post-tax profit and increased net assets by £20k (2013: £-59k).

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss from defaults.

Charter income

The Group has adopted a policy of receiving money in advance of undertaking the charter to mitigate the risk of default. Where a customer of the Group is unable to make the necessary payment in advance the Directors have the discretion to provide credit terms.

Management contract income

The Group manage the aircraft on behalf of its owners and charges a fee. If applicable, the owners are entitled to a rental recharge for the use of the aircraft, which depending upon rental utilisation, will reduce the debt owing to the Group, or may even result in the Group owing more than it is due at the end of the accounting period. The risk of the customer therefore being in default is mitigated through the costs owed to the customer as well as through the deposits received from aircraft owners. In the case of minimum guaranteed hours contracts, the monthly minimum hours charge is payable in advance of the operation.

Engineering income

The Group is entitled, in the event of non-payment, to a Lien over critical aircraft records that the Group has in its possession.

Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 16

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of Directors, which has established an appropriate liquidity risk management framework for the management of the Group's short, medium and long term funding and liquidity management requirements. The Group managed liquidity risk by maintaining adequate reserves, banking facilities and borrowing facilities.

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows of financial liabilities:

Capital disclosures

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued capital, share premium and retained earnings as disclosed in note 21.

The Group's capital management objectives are to ensure its ability to continue as a going concern and to provide an adequate return to shareholders. The group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the consolidated balance sheet.

The Group is not exposed to any externally imposed capital requirements.

4 Revenue

5 Operating profit

6 Exceptional items

Exceptional items represent non-recurring costs that are deemed by the Directors to be of a nature not typically incurred in carrying out the principal activities of the business.

During 2014 the Company was involved in discussions to acquire a business, however the Company withdrew from those discussions. The associated fees in relation to that transaction have been treated as exceptional.

Restructuring costs in 2014 represent the restructuring and redundancy costs in connection with the previous year's acquisition of International Jet Club Limited.

Acquisition costs in 2013 represent the consultancy, legal fees and other contractual amounts required to be paid following the acquisition of International Jet Club Limited during the year. Furthermore, a bonus was paid to IJC staff following the acquisition.

Restructuring costs in 2013 represent the cost, including redundancy, of re-organising the Group management accounting department.

7 Staff costs

The Group started an employers' defined contribution pension scheme during 2012.

Directors and key management personnel remuneration

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the Directors of the Company.

The average monthly number of employees (including Directors) during the year was made up as follows:

8 Segment information

In accordance with IFRS 8, 'Operating Segments', the Group has derived the information for its operating segments using the information used by the Chief Operating Decision Maker. The Group has identified the Board of Directors of Hangar 8 plc ("the Board") as the Chief Operating Decision Makers as it is responsible for the allocation of resources to operating segments and assessing their performance. Operating segments are consistent with those used in internal management reporting and the profit measure used by the Board is the profit/(loss) before tax as set out below.

The Group considers operating segments as determined by reference to the markets in which they operate, which also follows the legal entity structure of the Group. Information in respect of the Group's three operating segments is as follows:

· Charter - the chartering of aircraft to third parties;

· Management - the insurance, operational support, crewing of aircraft and minimum guaranteed hours contracts; and

· Engineering- the engineering, maintenance and airworthiness of aircraft.

· Unallocated- this includes training, commissions and Plc related activities

No other form of segmental analysis has been presented, as no other form is used by management. Geographical analysis is not considered appropriate due to the fact that many flights are between geographical segments, and therefore geographical analysis is not a relevant measure of business performance.

9 Taxation

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to the profit for the year are as follows: