Last checked at 19 Jan 2018 07:00
This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014
19 January 2018
Gama Aviation Plc (AIM: GMAA)
Full Year Trading Update
Gama Aviation reports continued progress in line with expectations
In advance of the publication of its full year results, Gama Aviation Plc ("Gama Aviation" or the "Company"), the global business aviation services provider, today provides an update on trading for the full year ended 31 December 2017.
Gama Aviation will release its full year results on 19th March 2018.
Trading for year ended 31 December 20171
Underlying earnings for the full year are in line with the Company's expectations and consistent with the trading outlook provided at the time of the interim results published in September 2017.
The Company has continued the solid progress it made during the first half of the year in improving its cash conversion, resulting in cash and cash equivalents as at 31 December 2017 of US$22m (2016: US$11m). After funding the acquisition of 51% of Gama Group Mena FZC, which closed in October 2017, and securing a further US$2m of finance leases in July 2017 for the purchase of a support aircraft under the Scottish Air Ambulance contract, net debt was US$13m as at 31 December 2017 (2016: US$19m).
Air Division
The US Air associate, which includes the Landmark acquisition from the start of the year, has delivered significant revenue growth over the period. The "Wheels Up" programme continues to support contracted growth in the US. In the final quarter of 2017, the US business invested heavily in its sales force to enhance the growth of the managed fleet and charter. The EU Air division has continued to build on the operational efficiencies implemented in 2016, with significant margin improvements being realised over the year. The Middle East and Asia Air divisions had a stable year and both begin 2018 with solid platforms for growth.
Ground Division
The US Ground division enjoyed strong organic revenue growth over the year. As planned, the operating margin and profit achieved in 2017 reflects the Company's focus on scaling up the business, recruiting line maintenance engineers ahead of revenue growth and significant investment in training. Having made this investment, the division is now poised to return to more normalised margins in 2018. The EU Ground division grew modestly over the year, with an improvement in levels of discretionary spend and increased base maintenance activity at the Oxford facility.
The Middle East Ground division had a stable year with the number of aircraft movements through the FBO facilities showing an improving trend. The Asia Ground division delivered its first revenues during the final quarter of 2017 through its commercial collaboration with China Aircraft Services Limited.
1 This section of the announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No 596/2014
Exceptionals and prior year adjustment
The Company is involved in a number of legal proceedings, most of which arise from historic Hangar 8 trading activity, prior to the merger completed in January 2015, and those relating to disputes with Dustin Dryden (a former non-executive director of the Company who resigned in September 2015) and affiliated entities. Taking account of the circumstances of each set of proceedings, legal advice received in relation to them and the Company's views as to the merits of such proceedings, the Company intends to continue to vigorously pursue/defend such proceedings.
Exceptional items
The Company has incurred legal costs of US$1.0m associated with these proceedings in the year ended 31 December 2017, which will be treated as an exceptional item. The Board believes a similar amount will be incurred for future legal costs, through to the conclusion of the various proceedings, which will also be treated as exceptional.
Additionally, US$0.6m of exceptional charges for transaction costs and business and re-organisation costs were taken in the first half of the year; a similar charge has been incurred in the second half.
Prior year adjustment
In respect of one of the proceedings against the Company, amounting to US$1.9m, arising as a result of historic unrecorded liabilities in the Hangar 8 business, the Board has decided to make a US$1.3m provision in the form of a prior year adjustment.
Litigation
The remaining proceedings fall into two categories, the first involves proceedings by the Company to recover long-standing trade receivables that amount to approximately US$5.5m. The Company has made adequate provisions or holds security against these claims and as a result the Board does not expect any further provisions will be required. In addition, based on legal advice, the Board considers the proceedings to recover these receivables are likely to be successful.
The second involves a number of proceedings brought against the Company in which the claimants seek to recover damages for alleged contractual breaches which amount to approximately US$15.3m. Based on a detailed analysis of the claims and legal advice, the Board believes that these claims are speculative and/or overlapping and the Company continues to vigorously defend them.
By the time all these proceedings, some of which are with the same counterparties, are determined or settled, the Board expects the overall awards and settlements to result in a cash inflow to the Company.
Marwan Khalek, Chief Executive of Gama Aviation Plc said:
"We are pleased to affirm that our underlying earnings for the year ended 31 December 2017 have been delivered in line with our expectations whilst continuing to improve cash conversion. Both our Air and Ground divisions are performing well and we continue to invest across both divisions and all of our geographies in line with our strategy of becoming the market leader in business aviation services. We enter 2018 confident in the strength of the Company's operations and its growth potential."
For more information contact:
Gama Aviation Plc +44 (0) 1252 553000
Marwan Khalek, Chief Executive Officer
Kevin Godley, Chief Financial Officer
Camarco +44 (0) 20 3757 4992
Ginny Pulbrook
Geoffrey Pelham-Lane
Jefferies International +44 (0) 207 029 8000
Simon Hardy
Will Soutar
Gama Aviation - Notes to Editors
Gama Aviation Plc (LSE AIM:GMAA) is a global business aviation services company that specialises in providing support for individuals, corporations and government agencies; allowing them to deliver on the promises they make.
The Company has two divisions: Air and Ground. Air services include: aircraft management, special mission support and charter; with Ground services covering: base & line aircraft maintenance services, aircraft modification design and installation and Fixed Base Operations (FBO).
More details can be found at: http://www.gamaaviation.com/