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Trading Update & Pre-merger Interim Results

Tue, 31st Mar 2015 07:00

RNS Number : 9236I
Gama Aviation PLC
31 March 2015

31 March2015

Gama Aviation plc (AIM: GMAA)

("Gama Aviation", "the Company" or "the Group")

Update on the post-merger integration with Hangar 8 plc (Hangar8) and on current trading

Interim results of the former Hangar 8 plc business for the six months to 31 December 2014

Gama Aviation, one of the world's largest business aviation service providers, today announces an update on its post-merger integration with Hangar8, its progress on achieving its targeted synergies and a brief 2015 trading update.

Also announced today are the unaudited half-year results of the pre-merger business for the six months trading period to 31 December 2014 of what was formerly Hangar 8 plc. The unaudited results to 31 December 2014 and the comparatives for the previous year solely relate to those businesses carried on by Hangar8 and do not include the results of Gama Aviation Holdings (Jersey) Limited, which merged with Hanger8 post the period end on 5 January 2015.

Chief Executive's Statement

Post-merger Integration Update

I am very pleased to report that the integration of the two businesses is moving ahead very well and in some areas the progress is better than management's original expectation. The synergies from the integration are also being fully realized as we move through the process and we are confident that these will be achieved in line with expectations. The integration remains firmly on track and will be largely complete by the end of June. We continue to expect the integration synergies to flow through the trading performance in the second half of the current year.

I can also report that during the course of the integration, we have taken the opportunity to review our organizational structure and we have made a number of subtle but important changes which will serve to enhance and strengthen the organization going forward as well as make it much more easily scalable in anticipation of the expected continued growth.

I am also delighted to report that, with very few exceptions, management and staff at all levels have positively embraced the integration process as they are fully bought into the vision and the rational of the merger, where it positions the Group and the opportunities it brings.

Given its importance, the Executive Management Team will of course continue to give the integration process the appropriate level of attention and oversight. However, with the strong Project Management team that we have put in place, we are able to maintain our focus on delivering our near term business objectives and mid-term strategy.

Current Trading Update

The Company has enjoyed a good first quarter trading and overall revenues across the Group are in line with Management expectations. The anticipated organic growth is being realized across all sectors and regions, particularly in the US given their strong economy.

A total of six aircraft have been added to our managed fleet since January, four in the US, one in Europe and one in the Middle East. We have a promising pipeline for new managed aircraft opportunities across all our core regions so we are confident the rate of organic growth will be maintained through the year.

In terms of new markets we are delighted to report that our recently announced Asian joint venture with Hutchison Whampoa (China) Limited is progressing as planned. We are in advance contract negotiations for the management of two aircraft based out of Hong Kong so we still expect to be fully operational in this new and significant growth market during the course of Q2. This venture is not expected to add significantly to our cost base during the start-up phase as we will utilize our existing infrastructure in the region and leverage off existing Group resources and capability.

The anticipated organic growth is also on track in our engineering business. Our Oxford maintenance base is now attracting a significant number of third-party aircraft from outside our managed aircraft fleet. Our US line maintenance operations continue to grow and perform in line with expectations with the new line station in Texas now fully operational. Our FBOs at both Glasgow and Sharjah (UAE) are seeing positive signs of sustained increased levels of business thanks to a concerted marketing effort to raise awareness and promote the benefits of using these facilities.

We continue to enjoy a high percentage of contracted revenue and we remain focused on developing and growing our key special mission and logistics contracts as they provide sustainable contracted revenues and margins. We are actively engaged in tendering for a number of additional long term contracts in various global locations.

Our commitment to divest the Group from the ownership of aircraft that were deployed in the ad-hoc charter market is also on track. One aircraft has already been disposed of, another is under contract, deposit paid and the sale is scheduled to be completed in the next month or so. A third aircraft is under offer and is due to go into contract imminently leaving just one aircraft on the market. We expect to have sold all four aircraft by the end of Q2.

Outlook - building on a strong platform

The new Group has entered its first financial year from January 2015 in a strong position underpinned by the breadth of high quality revenue streams across a broad range of geographical territories and aviation services. With integration proceeding as planned, with synergies expected to flow through the second half of the year and with current trading remaining in line with Management expectations, we remain confident about the outcome for the current financial year.

The rational for the deal was a simple but compelling one; merging the two businesses will create a global leader in the private aviation sector, one with a unique blend of scale, breadth and depth of service offering to our valued clients. It also provided a strong platform for organic and consolidation growth in a growing market.

We continue to look forward to an exciting full first year for the Group and one in which we are confident we will consolidate our position as one of the world's leading provider of private aviation services.

Interim Results - Hangar 8, six month trading period to 31 December 2014

The six month period to 31 December 2014 has been a transformational one for Hangar8 culminating in the merger post period end on 5 January 2015 with Gama Aviation Holdings (Jersey) Limited. During the six month period to 31 December 2014, the Hangar8 executive management team were faced with the challenge of working on the merger deal, an onerous and time consuming task in its own right, whilst at the same time managing the day to day business to deliver the expected operational and financial performance for the period.

To their credit, they managed the balance well with only a marginal reduction in the underlying trading performance against our phased budget, which was noted in the final two months of the period when attention was inevitably diverted to closing the deal with Gama Aviation. The variance in trading performance was also compounded by significant planned downtime for heavy maintenance during the period on multiple aircraft simultaneously having the double effect of reducing charter capacity and increasing the cost base on certain contracts whilst substitute aircraft had to be used. The effect is clearly visible in financial summary below in the reduction in net revenues and the erosion of a few percent in the gross profit margin. These factors were obviously temporary.

Financial Summary:

· Total Revenues £36.3m (2013: £30.2m)

· Net revenue before disbursements £10.8m (2013: £12.5m)

· Gross profit £4.0m (2013: £4.9m)

· Gross margin percentage on net revenue before disbursements of 37% (2013: 39%)

· Underlying EBITDA* £0.8m (2013: £1.2m)

· Loss before tax £3.4m (2013: Profit of £0.4m)

* Underlying EBITDA is arrived at by taking operating profit before depreciation, amortisation, other material one- off items and exceptional items.

We are however aware that notwithstanding our continued good performance, the six month results to 31 December 2014 as reported contain a significant number of items which serve to create an unusual profile to the profit and loss account. These items include, transaction costs of merging the two businesses, marking the closing Hangar 8 plc Balance Sheet to market with regard to US Dollar and Euro foreign exchange rates, together with a complete review of the Hangar 8 plc Balance Sheet at 31 December 2014 in order to update the Hangar 8 plc accounting judgements and estimates to the more conservative approach typically taken by Gama Aviation Holdings (Jersey) Limited. This has resulted in a large number of one-off items in the six month results, primarily relating to doubtful debt provisions, which serve to distort the underlying trading performance of the business.

Summary - Delivering on our Promises

Three months into the merger, we are pleased to have delivered on many of the promises:

· Post-merger integration - On target to be largely completed by the end of June

· Integration Synergies - Expected to flow though in H2/2015 as planned

· Organic growth - being delivered in line with expectations

· New markets - Promised Asia JV with Hutchinson delivered

· Two aircraft under management in Hong Kong by Q2 - On target

· Current Trading - In line with management expectations

· Outlook - Positive, with full year performance expected to be in line with management expectations

Marwan Khalek

Chief Executive Officer

31 March 2015

Sir Ralph Robins, Chairman, commented:

"We are pleased that the new Group enters its first financial year in 2015 in strong health and the reverse merger with Gama Aviation Holdings (Jersey) Limitedhas served to strengthen the breadth and depth of our operations. We now have a comprehensive line of services available to our clients with an enhanced geographical coverage that allows us to be a true global player. We retain our core values and focus on sustainable contracted revenues but now with our global strength we can explore these opportunities more fully than before leveraging off our established expertise.

Gama Aviation is one of the leaders in our sector and we are confident that we have the platform for a sustainable and scalable business we look to the future with confidence."

For further information please visit www.gamaaviation.com or contact:

Gama Aviation plc +44 (0) 1252 553000

Marwan Khalek, Chief Executive Officer

Kevin Godley, Finance Director

Citigate Dewe Rogerson +44 (0) 20 7638 9571

Phil Anderson, Director +44 (0) 20 7282 1031

Chris Jarvis, Associate Director +44 (0) 20 7282 1088

Cantor Fitzgerald Europe +44 (0) 20 7894 7000

Mark Percy/Catherine Leftley (Corporate Finance)

David Banks/Tessa Sillars (Corporate Broking)

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

Six months

Six months

Year

ended

ended

Ended

31 December

31 December

30 June

2014

2013

2014

(unaudited)

(unaudited)

(audited)

Note

£'000

£'000

£'000

Revenue

10,814

12,495

28,325

Disbursed revenue

25,522

17,746

36,627

Total revenue

36,336

30,241

64,952

Cost of sales

(32,386)

(25,349)

(54,608)

Gross Profit

3,950

4,892

10,344

Gross profit percentage

11%

16%

16%

Administrative expenses

(7,375)

(4,223)

(8,852)

Other operating income

-

-

-

Underlying EBITDA

768

1,176

2,657

Other material one off items

3

(2,924)

-

-

Exceptional items

4

(916)

(54)

(487)

Depreciation and amortisation

(353)

(453)

(678)

Operating (loss) / profit

(3,425)

669

1,492

(Loss) / profit before tax

(3,425)

669

1,492

Taxation

5

-

(250)

(512)

(Loss) / profit after tax

(3,425)

419

980

Other comprehensive income

Items that may be reclassified to profit and loss:

Exchange (losses)/gains arising on translation of foreign operations

(16)

(33)

(70)

(Loss) / profit and total comprehensive income for the period attributable to the owners of the Company

(3,441)

386

910

Earnings per share attributable to the equity holders of the parent

- basic (pence)

7

(36.2) p

4.5p

10.4 p

- diluted (pence)

(36.1) p

4.4p

10.3 p

- Adjusted basic (pence)

(23.2) p

9.4p

22.0p

- Adjusted diluted (pence)

(23.1) p

9.3p

21.9p

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

31 December

31 December

30 June

Note

2014

2013

2014

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Non-current assets

Goodwill

285

82

285

Brand

708

950

829

Customer relationships

731

1,024

877

Software

154

100

126

AOCs

1,026

941

1,035

Intangible assets

2,904

3,097

3,152

Property, plant and equipment

187

187

194

Deferred tax asset

38

104

38

3,129

3,388

3,384

Current assets

Inventories

614

450

459

Trade and other receivables

28,640

23,317

28,233

Cash and cash equivalents

2,272

2,953

4,640

31,526

26,720

33,332

Current liabilities

Trade and other payables

(29,140)

(21,798)

(27,754)

Corporation tax liability

(1,084)

(906)

(1,091)

(30,224)

(22,704)

(28,845)

Net current assets

1,302

4,016

4,487

Non-current liabilities

Deferred tax liability

(391)

(535)

(391)

Net assets

4,040

6,869

7,480

Capital and reserves attributable to equity holders of the company

Share capital

95

94

95

Share premium

5,680

5,594

5,680

Shares to be issued

25

-

Merger reserve

1,199

1,174

1,199

Share based payment reserve

-

21

-

Foreign exchange reserve

3

56

19

Retained earnings

(2,937)

(95)

487

4,040

6,869

7,480

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASHFLOWS

Six months

Six months

Year

ended

ended

ended

31 December

31 December

30 June

2014

2013

2014

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Cash flows from operating activities

(Loss) / profit before taxation

(3,425)

669

1,492

Depreciation and amortisation

353

453

678

Movement in receivables impairment provision

1,800

42

1

Foreign exchange loss/ (gain)

(16)

1

145

Increase in inventories

(155)

(74)

(82)

Increase in trade and other receivables

(2,207)

(4,968)

(10,074)

Increase in trade and other payables

1,386

3,370

9,157

Net cash flows used in/from operating activities

(2,264)

(507)

1,317

Cash flows from Investing activities

Purchases of property, plant and equipment

(26)

(14)

(61)

Purchase of intangibles

(66)

(22)

(174)

Net cash used in investing activities

(92)

(36)

(235)

Income taxes paid

(7)

(249)

(172)

Financing activities

Issue of ordinary shares

-

-

88

Net cash from financing activities

-

-

88

Net (decrease)/increase in cash and cash equivalents

(2,363)

(792)

998

Cash and cash equivalents at beginning of year

4,640

3,829

3,829

Effect of exchange rate fluctuations on cash held

(5)

(84)

(187)

Cash and cash equivalents at end of year

2,272

2,953

4,640

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Share

Shares

based

Foreign

Share

Share

to be

Merger

payment

exchange

Retained

capital

premium

issued

reserve

reserve

reserve

Earnings

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 July 2014

95

5,680

-

1,199

-

19

487

7,480

Transactions with owners:

Issue of shares

-

-

-

-

-

-

-

-

Share based payments

-

-

-

-

-

-

-

-

Total comprehensive income for the period

-

-

-

-

-

(16)

(3,425)

(3,441)

At 31 December 2014

95

5,680

-

1,199

-

3

(2,937)

4,040

At 1 July 2013

94

5,593

25

1,174

21

89

(514)

6,482

Transactions with owners:

Issue of shares on acquisition of Star gate

-

-

(25)

25

-

-

-

-

Share options exercised

1

87

(21)

-

21

88

Other comprehensive income

-

-

-

-

-

(70)

-

(70)

Profit for the year

-

-

-

-

-

-

980

980

At 30 June 2014

95

5,680

-

1,199

-

19

487

7,480

The accompanying notes are an integral part of this interim financial information.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM STATEMENTS

1. Basis of preparation

Gama Aviation plc, formerly Hangar 8 plc, (the "Company"), is a company domiciled in England. The basis of preparation of this financial information is consistent with the basis that will be adopted for the full period accounts which will be prepared in accordance with IFRS as adopted by the European Union.

While the financial figures included in this half-yearly report have been computed in accordance with IFRS applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

This interim financial information has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board and the financial information contained in this report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The 30 June 2014 figures have been extracted from the audited financial statements for that period.

2. Accounting policies

The condensed consolidated interim financial information has been prepared following the recognition and measurement principles of IFRS as adopted by the European Union and on the basis of the accounting policies set out in the audited financial statements for the year ended 30 June 2014. These accounting policies have been applied consistently to all periods presented in this Financial Information.

Critical accounting estimates & judgements and principal risks & uncertainties

There have been no changes to any of the Group's critical accounting estimates and judgements of its principal financial risks.

Going concern

The Directors are of the opinion that as at 31 December 2014, the Group and Company's liquidity and capital resources are adequate to deliver the current strategic objectives and business plan and that both the Group and the Company remain a going concern.

3. Other material one off items in the trading period of Hangar8 to 31 December 2014

Change in Accounting Estimate (1)

( 478)

Increase in provision for doubtful debts (2)

( 1,956)

Forex movement (3)

( 490)

Total other material one- offs

( 2,924)

(1) Management has assessed the stage of completion at 31 December 2014 of certain contracts under the contractual terms of those contracts and has determined it appropriate to defer certain revenues to reflect the stage of completion at that date. This has had a one-off impact on the period result.

(2) Management has performed a detailed review of the recoverability of certain debts at 31 December 2014 based on a review of payment history and current arrangements and determined it appropriate to increase the provision for doubtful debts. This has had a one-off impact on the period result.

(3) Foreign exchange loss as a result of strengthening US dollar in the period.

4. Exceptional Items

Operating profit is stated after Exceptional items relating to the transaction costs incurred in the current period that related to the commercial transaction with Gama Aviation Holdings (Jersey) limited and re-organization costs in the prior year.

5. Taxation

The tax charge for the half year is calculated on the basis of the estimated full year effective tax rate and therefore an estimated corporation tax charge for the period of £Nil (2013: £250,472).

6. Segmental Analysis

Six months ended 31 December 2014 (unaudited)

Charter

Management

Engineering

Unallocated

Group

Revenue

4,198

4,679

1,775

162

10,814

Disbursed revenue

60

25,215

94

153

25,522

Gross profit

577

1,722

1,101

550

3,950

Six months ended 31 December 2013 (unaudited)

Charter

Management

Engineering

Unallocated

Group

Revenue

2,044

8,323

1,966

162

12,495

Disbursed revenue

55

17,530

85

76

17,746

Gross profit

339

3,529

874

150

4,892

Year Ended 30 June 2014 (Audited)

Charter

Management

Engineering

Unallocated

Group

Revenue

5,971

17,455

4,226

673

28,325

Disbursed revenue

68

36,293

112

154

36,627

Gross profit

918

6,656

2,294

476

10,344

7. (Loss)/Earnings per share ("EPS")

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.

Six months

Six months

Year

ended

ended

ended

31 December

31 December

30 June

2014

2013

2014

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

(Loss)/ Profit attributable to ordinary shareholders

(3,425)

419

980

Add Amortisation

314

409

614

Add Exceptional Items

916

54

487

Add Impairment

-

-

-

Adjusted Earnings

(2,195 )

882

2,081

Denominator

Weighted average number of shares used in basic EPS

9,457,284

9,433,609

9,457,284

Effects of:

Employee share options

30,365

80,000

30,365

Deferred share consideration on business combinations

6,696

10,571

6,696

Weighted average number of shares used in diluted EPS

9,494,345

9,524,180

9,494,345

Basic earnings per share - pence

(36.2)

4.5

10.4

Diluted earnings per share - pence

(36.1)

4.4

10.3

Adjusted Basic earnings per share - pence

(23.2)

9.4

22.0

Adjusted Diluted earnings per share - pence

(23.1)

9.3

21.9

8. Copies of the interim statement

Further copies will be available from the Company's registered office at The Farmhouse, Oxford Airport, Oxford OX5 1RA, and from the Company's website: www.gamaaviation.com

9. Post Balance Sheet Events

Hangar8, one of Europe's largest operators of privately owned passenger jet aircraft, acquired by way of a reverse takeover the entire issued share capital of Gama Aviation Holdings (Jersey) Limited, a privately owned global business aviation services group that focuses on air and ground operations. This acquisition resulted in the admission of 27,314,960 consideration shares and completed on 5 January 2015.

10. Director Interest

Further to the announcement of 5 January 2015, the Company wishes to correct an error in the announced shareholding of Mr. Dustin Dryden, Executive Director, which should note he has an interest in 2,159,886 ordinary shares (not 2,519,886 ordinary shares) in the Company. As announced previously, this continues to represent 5.02 per cent. of the issued ordinary share capital of the Company. To confirm, there has been no change in Mr. Dryden's shareholding.

This information is provided by RNS
The company news service from the London Stock Exchange
END
IR JMMLTMBBJBRA

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