ANNUAL
REPORT
2024
AVATION PLC
DIRECTORS’ REPORT AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
REGISTERED NUMBER: 05872328 (ENGLAND & WALES)
AVATION PLC
CONTENTS
FOR THE YEAR ENDED 30 JUNE 2024
Company Information
.....................................................................................................................
1
Chairman’s Statement
...............................................................................................................
2 – 4
Strategic Report
......................................................................................................................
5 - 22
Directors’ Report
...................................................................................................................
23 – 27
Directors’ Remuneration Report
..............................................................................................
28 – 37
Directors’ Responsibilities Statement
.......................................................................................
38 - 39
Auditor’s Report
....................................................................................................................
40 - 49
Consolidated Statement of Profit or Loss
.........................................................................................
50
Consolidated Statement of Comprehensive Income
..........................................................................
51
Consolidated Statement of Financial Position
............................................................................
52 - 53
Company Statement of Financial Position
........................................................................................
54
Consolidated Statements of Changes in Equity
.........................................................................
55 – 56
Company Statements of Changes in Equity
...............................................................................
57 - 58
Consolidated Statement of Cash Flows
............................................................................................
59
Company Statement of Cash Flows
.................................................................................................
60
Notes to the Financial Statements……………………………………………………………………………………………………..61 - 138
AVATION PLC
COMPANY INFORMATION
FOR THE YEAR ENDED 30 JUNE 2024
1
DIRECTORS:
Robert Jeffries Chatfield
Roderick Douglas Mahoney
Stephen John Fisher
Derek Sharples
Mark Stephen Shelton
COMPANY SECRETARIES:
Duncan Gerard Stephen Scott
Jasmine Siow Fui San
REGISTERED OFFICE:
Fleet Place
London EC4M 7RD
PRINCIPAL PLACE OF BUSINESS:
AUDITOR:
Ernst & Young
EY Building
Harcourt Centre
Harcourt Street
2 Dublin
Ireland
SOLICITORS:
Charles Russell Speechlys LLP
5
Fleet Place
London EC4M 7RD
United Kingdom
REGISTRAR:
Computershare Investor Services PLC
The Pavilions
Bridgewater Road
Bristol BS99 6ZZ
United Kingdom
AVATION PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
2
Financial Highlights
Revenue for the year was $92.4 million (2023: $92.7 million);
Net asset value per share increased by 5.2% to $3.62 (2023: $3.44);
Fleet assets were $832.8 million (2023: $898.6 million) and total assets were $1,142.3 million
(2023: $1,179.6 million);
Net indebtedness reduced by 10.9% to $651.5 million (2023: $731.2 million);
Total cash and bank balances were $117.9 million (2023: $116.9 million);
Operating profit of $83.2 million (2023: $71.5 million);
Profit after tax was $19.7 million (2023: $12.9 million); and
Earnings per share were 27.9 cents (2023: 18.5 cents);
Operational Activity
The Company placed a firm order for ten new ATR 72-600 aircraft for delivery between the
fourth quarter of 2025 and the second quarter of 2028;
An ATR 72-500 and an ATR 72-600 turboprop aircraft were sold during the year;
The Company successfully transitioned an Airbus A320-200 aircraft to a new lessee in
December 2023;
A previously off-lease ATR 72-600 aircraft started a lease with a new airline customer in Papua
New Guinea in April 2024;
Two Airbus A320-200 aircraft, two ATR 72-600 aircraft and an ATR 72-500 aircraft were re-
financed with fixed rate long-term loans;
The Company entered into an agreement to sell two ATR 72-600 aircraft on delivery from the
manufacturer scheduled for October 2024 and March 2025; and
Subsequent to the year-end a lessee exercised purchase options and acquired two ATR 72-
600 aircraft from the Company.
Net indebtedness and fleet assets are non-GAAP financial measures provided to give investors and other
stakeholders an enhanced understanding of the Company’s financial position, cash flows and financial
performance.
Non-GAAP financial measures do not have standardised definitions and may not be
comparable with similar measures used by other entities.
Comparative amounts for the year ended 30 June 2023 presented in this annual report have been
restated as explained in the notes to the financial statements under “Change in accounting policy for
maintenance reserves”.
Business review
During the year ended 30 June 2024 Avation achieved 100% fleet utilisation for the first time since early
2020. Full utilisation was achieved by arranging a new lease for one aircraft and selling the other
remaining off-lease aircraft.
Avation’s next lease expiry is due in March 2025 and is for an ATR 72-600
aircraft.
There are no further scheduled lease expires in the 2025 financial year.
Avation has continued to reduced debt and de-lever its balance sheet, achieving a reduction to 57.0%
in the ratio of net debt to total assets as at 30 June 2024.
A significant portion of the cashflow generated
by the fleet is directed towards repayments of debt.
Scheduled loan repayments for the 2025 financial
year, amount to around US$49.7 million, which exceeds expected depreciation of the fleet over the same
period.
The Company is hedged against further interest rate changes on 96.4% of its loans and
borrowings.
AVATION PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
3
Avation repurchased US$18.0 million Avation Capital S.A. 8.25% October 2026 unsecured notes during
the year.
Following these repurchases there are US$331.6 million notes outstanding. The Company may
pursue additional repurchases or liability management exercises from time to time with the aim of further
reducing the outstanding amount of unsecured debt in issue.
Avation plans to grow its business in a prudent and strategic manner. To that end the Company has
placed an order for ten new ATR 72-600 aircraft to be delivered gradually over the period from Q4 2025
to Q2 2028.
Avation’s management believe that the contract price for this order is favourable compared
to forward valuations for the aircraft type. The order was placed by exercising ten of the Company’s
purchase rights for new ATR aircraft. On placement of the order Avation was granted an additional six
purchase rights and the expiry date for all purchase rights was extended to 2034.
Avation now holds 24
purchase rights for new ATR 72 aircraft. All of the ordered aircraft will be equipped with the new PW127-
XT engine variant, which the manufacturer expects will be approved for use with sustainable aviation
fuel in 2025.
ATR is the world’s number one regional aircraft manufacturer and offers the lowest-
emissions regional aircraft.
In order to partially fund the predelivery payments due for the ten aircraft order, the Company has
agreed to sell two ATR 72-600 aircraft which were ordered previously and are scheduled to be delivered
by the manufacturer in October 2024 and March 2025.
The sale of these two aircraft is expected to
release around US$10 million.
We are confident that the Company will be able to place the new aircraft ordered for delivery between
2025 and 2028.
Market Positioning
Avation’s long-term strategy is to target growth and diversification by adding new airline customers,
while maintaining a low average aircraft age and long remaining lease term metrics. Avation focuses on
new and relatively new commercial passenger aircraft on long-term leases. In the short term the
Company is considering further growth in its narrow body fleet.
Avation supports the transition of the aircraft industry towards aircraft capable of using SAF to produce
lower CO2 emissions on a net basis. Reducing CO2 emissions is key to providing a sustainable future for
the global aviation industry and in addressing climate-change risks.
The Company’s business model involves rigorous investment criteria that seeks to mitigate the risks
associated with the aircraft leasing sector. Avation will typically sell mid-life and older aircraft and
redeploy capital to newer assets. This approach is intended to mitigate technology change risk,
operational and financial risk, support sustained growth and deliver long-term shareholder value.
Avation will consider the acquisition or sale of individual or smaller portfolios of aircraft, based on
prevailing market opportunities and consideration of risk and revenue concentrations.
Funding for aircraft acquisitions is traditionally sourced from capital markets, asset-backed lending,
operational cash flows and disposals of aircraft. The ability to access acceptably priced funding is a key
profit driver in aircraft leasing.
Principal risks factors facing the aircraft leasing industry include, but are not limited to, exposure to the
airline industry and the risk of deterioration in the financial condition of airline customers, asset value
risk driven by changing patterns of supply and demand and technological change, operational risks
including risks resulting from war, acts of terrorism and natural disasters, regulatory risks from changes
to government regulations and tax laws and climate-change risks.
The Directors may seek to repurchase ordinary shares in the Company from time to time subject to the
terms of a share buy-back mandate which expires at the conclusion of the next Annual General Meeting.
AVATION PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
4
Outlook
The market for air travel has continued to perform strongly with IATA reporting record passenger
volumes in their latest air passenger market analysis report.
Industry RPKs grew 8.0% in the year to
July 2024 led by international travel with 10.1% growth followed by domestic travel with 4.8% growth.
Growth in passenger volumes was recorded in all regions in the year to July 2024.
Avation has recently focussed on transitioning or disposing of unutilised aircraft, maintaining liquidity,
managing costs and reducing leverage. The Company recently sold one of its last two remaining
unutilised aircraft and leased the other to a new customer airline. As a result, the Company’s fleet is now
fully utilised for the first time since early in 2020.
The Company’s focus will now shift towards growing the fleet and identifying opportunities to place the
ten new ATR aircraft recently ordered by exercising purchase rights.
Avation aims to gradually transition to a more sustainable, lower CO2 emissions aircraft fleet. Aircraft
delivered from Avation’s orderbook and exercised purchase rights will be fitted with the new Pratt and
Whitney Canada PW127XT engine. The PW127XT engine promises 20% lower maintenance costs,
extended time on wing, 3% lower fuel consumption and 5% more power compared with the current
engine variant. The manufacturer expects that the PW127XT engine will be certified to operate with
sustainable aviation fuel (“SAF”
1
) from 2025. Net emissions of CO2 are expected to be reduced when
using SAF.
We also anticipate gradually trading out of older aircraft types and focussing on aircraft types such as
the Airbus NEO and A220 series in addition to ATR turboprop aircraft. The Company’s portfolio already
includes a significant proportion of Airbus A220 and ATR 72 aircraft.
Robert Jeffries Chatfield
Executive Chairman
Singapore
25 October 2024
1
Sustainable aviation fuel or SAF is the main term used by the aviation industry (including IATA and the
International Civil Aviation Organization) to describe a non-conventional (non-fossil derived) aviation
fuel. SAF is the preferred IATA term for this type of fuel although when other terms such as
sustainable alternative fuel, sustainable alternative jet fuel, renewable jet fuel or biojet fuel are used, in
general, the same intent is meant.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
5
The Directors present their strategic report for the year ended 30 June 2024.
BUSINESS OVERVIEW
Avation PLC and its subsidiaries (“Avation”, the “Group”) is a commercial passenger aircraft leasing group
managing a fleet of 34 aircraft, as of 30 June 2024. Avation was founded in 2006 and has now been in
operation for 18 years.
Avation leases aircraft to 16 airline customers spread across 14 countries in
Europe and the Asia-Pacific region.
Major customers include Vietjet Air, airBaltic, EVA Air and Philippine
Airlines. The Group’s fleet includes 13 narrow-body jets, two twin-aisle jets and 19 ATR 72 twin-engine
turboprop aircraft. An analysis of the fleet is provided below under “Fleet Overview”.
Avation operates from its headquarters in Singapore where it is tax resident and, since 2014, a
beneficiary of the Singapore Aircraft Leasing Scheme (“ALS”) tax incentive. In August 2024 Avation was
granted a further five-year extension to its ALS tax incentive at a reduced 8% tax rate.
Avation’s management team has extensive experience in the aviation industry and has the expertise to
select, acquire and manage aircraft that have achieved strong operational performance for our customers
and generated stable returns for our shareholders.
The company maintains in-house commercial, legal,
technical and finance teams and operates as a full-service aircraft leasing platform.
Avation aims to grow its fleet and continue to diversify its customer base over the coming years.
The
Group has twelve ATR 72-600 aircraft on order from the manufacturer, which are currently scheduled to
be delivered between the fourth quarter of 2024 and the second quarter of 2028.
The Group also holds
purchase rights for a further 24 ATR aircraft. The Group may also acquire additional new and second-
hand jet aircraft on an ad-hoc basis.
Older aircraft are sold when opportunities arise with the aim of
maintaining a low average fleet age.
Avation’s ordinary shares are traded on the Main Market of the London Stock Exchange under the ticker
symbol LSE: AVAP.
BUSINESS MODEL
Avation aims to grow its fleet and build long-term shareholder value by focussing on a) new turboprop
regional aircraft, principally the popular and fuel-efficient ATR 72-600 model and b) new and second-
hand narrow-body jets, in particular the popular Airbus A320/A321, A220 and Boeing 737 aircraft
families.
The Group will also consider acquiring additional twin-aisle aircraft as part of its strategy to
build a diversified portfolio of aircraft. Owning a diversified portfolio of aircraft types is intended to
mitigate overall market and residual value risk. As the fleet grows, the Group seeks to continually
diversify its customer base as part of its overall credit risk management strategy.
Avation has developed a sustainable, low emissions aircraft growth strategy. This initiative was supported
by the recent release of the new lower emissions PW127XT engine and announcement that future
variants of the ATR 72 aircraft will include hybrid technology and use 100% Sustainable Aviation Fuel.
In addition, an ATR 72 aircraft has also completed the first 100% Sustainable Aviation Fuel commercial
flight.
The Company’s future business strategy will be to focus on leasing modern, low CO2 emissions, fuel-
efficient aircraft. We anticipate gradually trading out of older aircraft types and focussing on aircraft
types such as the Airbus NEO and A220 series in addition to ATR 72 aircraft with the recently announced
new generation engines. The Company’s portfolio already comprises a significant proportion of Airbus
A220 and ATR 72 aircraft showing our commitment to new technology, fuel-efficient aircraft types.
Future ATR 72 deliveries from Avation’s orderbook will be powered by the new Pratt and Whitney Canada
PW127XT engine which promises 20% lower maintenance costs, extended time on wing, 3% lower fuel
consumption and 5% more power compared with the current engine. The manufacturer expects that the
PW127XT engine will be certified to operate with 100% SAF from 2025. When using SAF net emissions
of CO2 will be reduced by 80%.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
6
Industry data suggests that airlines will require significant numbers of leased aircraft in the future to
replace older aircraft that will be retired and to satisfy projected growth in demand for air travel. Airlines’
balance sheets were negatively impacted during the COVID-19 pandemic, reducing their ability to
purchase aircraft directly. This supports the Company’s strategy of focussing on young and popular
commercial aircraft.
The Group finances the acquisition of new aircraft using internally generated cash flows, senior and junior
secured debt finance, the issuance of unsecured notes under its Global Medium-Term Note programme
and the issuance of new ordinary shares.
The Group manages debt issuance with the overall aim of
achieving the lowest possible overall cost of debt, while maintaining appropriate leverage ratios. Debt
on older aircraft may be re-financed when there is an opportunity to reduce the Group’s overall cost of
debt, and to release equity for investment in new aircraft.
The Board applies prudent financial management principles to manage risk when acquiring aircraft by
seeking to match lease and financing in both term and currency.
Interest rate risk is managed using
mostly fixed or hedged interest rate debt.
Secured loans are amortised to conservative balloon payments
over the terms of the underlying leases.
FLEET OVERVIEW
Aircraft Type
30 June 2024
30 June 2023
ATR 72-600
15
16
ATR 72-500
4
5
Airbus A220-300
5
5
Airbus A320-200
2
2
Airbus A321-200
6
6
Airbus A330-300
1
1
Boeing 777-300ER
1
1
Total
34
36
At 30 June 2024, Avation’s fleet comprised 34 aircraft, including five aircraft on finance lease. Avation
serves 16 customers in 14 countries. The weighted average age of the fleet is 7.3 years (30 June 2023:
6.4 years) and the weighted average remaining lease term is 4.1 years (30 June 2023: 5.0 years).
One ATR 72-500 and one ATR 72-600 aircraft were sold during the period. Turboprop and narrowbody
aircraft make up 82% of fleet assets as at 30 June 2024. Fleet assets have decreased 7.3% to US$832.8
million (30 June 2023: US$898.6 million) as a result of aircraft sales and depreciation. As at the date of
this report, Avation’s fleet is fully utilised.
Subsequent to the year-end two ATR 72-600 aircraft were
sold to the lessee pursuant to the exercise of purchase options.
Avation has orders for twelve new ATR 72-600 aircraft and purchase rights for a further 24 aircraft as at
30 June 2024. The first two ordered aircraft which are scheduled for delivery in October 2024 and March
2025 have been sold to a customer in the Caribbean. The order-book and purchase rights provide a
pathway to future fleet growth.
MARKET TRENDS AND FUTURE DEVELOPMENTS
Aircraft leasing is a growth industry which, historically, has taken an increasing share of ownership of
the commercial passenger aircraft fleet.
Avation expects that the percentage of leased aircraft in the
global fleet will remain high in future due to the flexibility that the leasing model provides for airlines
and also due to the ability of leasing companies to access financial capital.
The market for air travel has continued to perform strongly with IATA reporting record passenger
volumes in their latest air passenger market analysis report.
Industry RPKs grew 8.0% in the year to
July 2024 led by international travel with 10.1% growth followed by domestic travel with 4.8% growth.
Growth in passenger volumes was recorded in all regions in the year to July 2024.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
7
The aircraft leasing industry benefits from good long-term fundamentals including growth in global
demand for air travel, capital constraints amongst airlines and normal cycles of aircraft replacement.
Airbus estimates that the global commercial aircraft fleet will double from around 24,000 aircraft to
around 48,000 aircraft between 2024 and 2043.
Passenger traffic is expected to increase at a compounded annual growth rate of 3.6% between 2027
and 2043 which implies a doubling of demand over the next 20 years. Airbus forecasts that 42,430
aircraft (replacement and growth) will be required over the next 20 years, of which 46% are expected
to be in Asia-Pacific, 19% in Europe, 17% in North America, and of the total, 79% are expected to be
single aisle.
2
Around 30% of the current global commercial aircraft fleet are new generation more fuel-efficient types
such as the Airbus A220 and A320/A321 neo types.
Over the next 20-year period 95% of the global
fleet to expected to transition to new generation aircraft types.
Avation expects that this trend will support the company’s future strategy of gradually trading out of
older aircraft types and focussing on aircraft types such as the Airbus NEO and A220 series in addition
to ATR 72 aircraft with new generation PW127-XT engines.
2
Airbus Global Market Forecast 2024
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
8
PRINCIPAL RISKS AND UNCERTAINTIES
The aircraft leasing sector is highly competitive and Avation is exposed to a number of market related,
operational and financial risks. The Group is committed to mitigating business risk through the application
of prudent risk management policies. The risks and uncertainties described below are those that the
Group has identified as most significant to the business. Avation’s Board of Directors is responsible for
managing risk and reviews risk management policies regularly.
Market related risks:
Exposure to the airline industry
The Group’s customers are commercial airlines which are financially exposed to the demand for
passenger air travel.
The financial condition of commercial airlines may weaken due to several factors
including but not limited to local and global economic conditions, increased competition between airlines,
speculative ordering of new aircraft, war, terrorism, pandemics and natural disasters. If the financial
condition of the Group’s airline customers weakens for any reason, the Group may be exposed to
increased risks of lessee default and lower lease rates for its aircraft.
Asset value risk
Fluctuations in the supply and demand for aircraft and aircraft travel may impact values of and lease
rates for the Group’s aircraft. Market forces and prevailing economic conditions may change over the
economic lives of the Group’s aircraft and could have a positive or negative impact on aircraft valuations.
Advances in aircraft technology may create obsolescence in the fleet before the end of aircrafts’ current
estimated useful lives. The Group regularly obtains independent third-party valuations for its fleet and
may dispose of aircraft in order to reduce its exposure to certain aircraft types.
Avation has a policy of
investing in popular aircraft types on the basis that asset values and lease rates will be supported by
continuing high demand for these aircraft. Avation will consider acquiring additional twin-aisle aircraft,
in addition to narrow-body jets and turboprops, as part of its strategy to build a diversified portfolio of
aircraft. Twin-aisle aircraft have a risk profile which may be more exposed to technology change factors
and the introduction of new more fuel-efficient models.
Operational risks:
Economic, legal and political risks
Avation leases aircraft to lessees in many different jurisdictions.
As such the Group is exposed to
economic, legal and political risk in those jurisdictions.
Avation’s aircraft are subject to operational risks
specific to the aviation sector resulting from war, acts of terrorism or the threat of terrorism, and natural
disasters. The Group mitigates these risks by requiring airline lessees to maintain adequate insurance
over the aircraft.
Regulatory risks
Avation’s fleet operates in many jurisdictions and complies with tax and other regulatory requirements
in those jurisdictions.
There is a risk that changing tax and regulatory regimes may have an impact on
the business and the Group’s financial results.
Lessee risks
Avation’s airline lessees are responsible for all maintenance and safety checks.
The requirements for
each airline lessee to service and maintain the aircraft are set out in the lease agreements.
There is a
risk that airlines may not properly maintain aircraft which may lead to an impairment of the aircraft’s
value.
In order to mitigate this risk, the Group closely monitors each airline’s usage of aircraft and their
compliance with agreed maintenance schedules.
Avation requires that some lessees make maintenance
reserve payments to ensure that there is adequate funding at all times for proper maintenance of the
aircraft.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
9
Financial risks:
Avation’s financial risk management objectives and policies are set out in note 8 to the financial
statements and are as follows:
Airline industry risks
Credit risk
Interest rate risk
Foreign currency risk
Liquidity risk
Capital risk
FINANCIAL REVIEW
Comparative amounts as at and for the year ended 30 June 2023 have been restated for a change in
accounting policy for maintenance reserves.
US$ ‘000s
Year ended 30 June,
2024
2023
Revenue
92,397
92,691
Other income
3,575
7,389
95,972
100,080
Operating profit
83,218
71,463
Profit before tax
30,046
13,830
Profit after tax
19,735
12,944
EPS (basic)
27.85c
18.50c
US$ ‘000s
30 June,
2024
2023
Fleet assets
3
832,818
898,616
Total assets
1,142,321
1,179,596
Total cash and bank balances
4
117,940
116,905
Cash and cash equivalents
23,561
24,816
Net asset value per share (US$)
5
US$3.62
US$3.44
Net asset value per share (GBP)
6
£2.85
£2.71
3
Fleet assets are defined as property, plant and equipment plus assets held for sale plus finance lease receivables.
4
Total cash and bank balances as at 30 June 2024 comprise cash and cash equivalents of US$23.6 million (30 June
2023: US$24.8 million), investment in fixed deposits of US$nil (2023: US$1.2 million) and restricted cash balances
of US$94.4 million (30 June 2023: US$90.9 million).
5
Net asset value per share is total equity divided by the total number of shares in issue, excluding treasury shares.
6
Based on GBP:USD exchange rate as at 30 June 2024 of 1.27 (30 June 2023:1.27).
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
10
Financial Analysis
Revenue
US$ ‘000s
Year ended 30 June,
2024
2023
Lease rental revenue
87,749
85,936
Less: amortisation of lease incentive assets
(2,721)
(1,368)
85,028
84,568
Interest income from finance leases
2,018
2,230
Maintenance reserves income
5,351
5,893
End of lease compensation revenue
-
-
92,397
92,691
Lease rental revenue increased by 2.1% to US$87.7 million in the year ended 30 June 2024 from
US$85.9 million in the year ended 30 June 2023.
The increase was principally due to increased utilisation
of the fleet in the year ended 30 June 2024.
Interest income from finance leases decreased by 9.5% from US$2.2 million in the year ended 30 June
2023 to US$2.0 million in the year ended 30 June 2024.
The decrease was principally due to the
reduction in finance lease receivables resulting from principal repayments received during the year.
Other income
US$ ‘000s
Year ended 30 June,
2024
2023
Foreign currency exchange gain
807
3,154
Claim recovery
443
3,137
Fees for late payment
1,828
966
Deposit released
350
-
Others
147
132
3,575
7,389
Foreign currency exchange gains in the year ended 30 June 2023 arose principally from the release of
deferred hedged foreign currency exchange gains on two Euro loans that were refinanced during the
period.
Claim recoveries recognised in other income are the balance of distributions paid to creditors of Virgin
Australia in excess of amounts allocated to trade receivables.
Administrative expenses
US$ ‘000s
Year ended 30 June,
2024
2023
Staff costs
5,487
5,587
Other administrative expenses
3,305
3,173
8,792
8,760
Staff costs reduced by 1.8% from US$5.6 million in the year ended 30 June 2023 to US$5.5 million in
the year ended 30 June 2024 principally due to lower charges for employee share warrants offsetting
higher employee performance payments.
Other administrative expenses increased by 4.2% from US$3.2 million in the year ended 30 June 2023
to US$3.3 million in the year ended 30 June 2024 principally due to inflationary increases to audit and
accounting costs and general office overheads.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
11
Other operating income and expense items
US$ ‘000s
Year ended 30 June,
2024
2023
Depreciation
(37,251)
(38,566)
Gain on derecognition of a finance lease
-
2,792
Loss on disposal of aircraft
(2,915)
(1,000)
Unrealised gain on aircraft purchase rights
46,886
20,540
Unrealised (loss)/gain on equity investment
(490)
7,520
Impairment (loss)/reversal of impairment loss on aircraft
(5,573)
3,287
Aircraft transition expenses
(2,607)
(11,389)
Reversal of/(provision for) expected credit losses
239
(659)
Legal and professional fees
(2,251)
(2,382)
Depreciation reduced by 3.4% from US$38.6 million to US$37.3 million due to a reduction in the fleet.
A gain of US$2.8 million was recognised in the year ended 30 June 2023 on derecognition of a finance
lease for an aircraft repossessed from a defaulting airline in Myanmar.
The gain represents the positive
difference between the outstanding value of the finance lease receivable and the broker valuation of the
aircraft’s market value at the date of termination of the lease.
Avation terminated a lease of an ATR 72-500 aircraft to an Indian airline in the year ended 30 June 2024.
The aircraft was repossessed from the airline and subsequently sold, generating a loss on sale of US$2.9
million.
The Company’s 24 aircraft purchase rights were revalued at 30 June 2024 using a Black-Scholes option
pricing model.
The principal factors leading to the recognition of a gain of US$46.9 million (2023: US$
20.5 million) were increases in the appraised value of the ATR 72-600 aircraft and an agreed extension
of the expiry dates for the purchase rights to 2034.
The Company recorded an unrealised loss of US$0.5 million on its holding of shares in Philippine Airlines,
Inc. (2023: gain of US$7.5 million).
The Company received these shares as part of the settlement
awarded to creditors in the bankruptcy restructuring of the airline in December 2021.
Aircraft transition expenses of US$2.6 million (2023: US$11.4 million) represent repairs and
maintenance expenditure on aircraft repossessed following airline defaults resulting from the COVID-19
pandemic and expenditure incurred in the transition of an A320-200 aircraft during the year.
The
Company expects transition expenses to remain low in future periods as all aircraft in the fleet are
currently on lease.
The net reversal of expected credit losses of US$0.2 million (2023: US$0.7 million expense) primarily
relate to reduced rent arrears and amounts due under a payment plan agreement loan granted to an
airline in South-East Asia.
During the year ended 30 June 2024 the airline has reduced its total arrears
and loan balance by US$19.0 million.
Legal and professional fees reduced by 5.5% from US$2.4 million in the year ended 30 June 203 to
US$2.3 million in the year ended 30 June 2024 due to reduced transaction activity.
Finance income
US$ ‘000s
Year ended 30 June,
2024
2023
Interest income
6,009
3,129
Fair value gain on financial derivatives
-
1
Finance income from discounting non-current deposits
652
611
Gain on repurchase of unsecured notes
675
508
Gain on early full repayment of borrowings
2,507
1,657
9,843
5,906
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
12
Interest income increased in the year ended 30 June 2024 as excess cash was transferred into term
deposit accounts to take advantage of favourable deposit interest rates.
Interest income includes US$0.7 million (2023: US$1.2 million) interest on payment plan agreement
loans granted to a customer.
Avation generated a gain of US$0.7 million (2023: US$0.5 million) on the repurchase of US$18.0 million
of Avation Capital S.A. 8.25%/9.0% unsecured notes at a discount during the year.
Gains on early repayment of borrowings of US$2.5 million (2023: US$ 1.7 million) arose on termination
of interest rate swaps when five aircraft loans were refinanced and three aircraft loans were repaid in
full.
As at the date of this announcement the company has five unencumbered aircraft.
Finance expenses
US$ ‘000s
Year ended 30 June,
2024
2023
Interest expense on secured borrowings
20,047
21,170
Interest expense on unsecured notes
29,321
30,976
Interest expense on borrowings from related parties
-
271
Amortisation of loan transaction costs
1,571
1,057
Amortisation of IFRS 9 gain on debt modification
10,709
8,711
Fair value loss on financial derivatives
405
577
Amortisation of interest expense on non-current borrowings
635
571
Others
327
206
63,015
63,539
Interest expense on secured borrowings reduced by 5.3% to US$20.0 million in the year ended 30 June
2024 from US$21.2 million in the year ended 30 June 2023 as a result of net repayments of secured
loans.
Secured borrowings have been paid down by US$79.7 million from US$452.5 million at 30 June
2023 to US$372.8 million at 30 June 2024.
Interest expense on unsecured notes includes US$4.3 million (2023: US$8.6 million) of non-cash interest
paid in kind by increasing the face value of Avation Capital S.A. 8.25%/9.0% unsecured notes.
Amortisation of IFRS 9 gain on debt modification of US$10.7 million (2023: US$ 8.7 million) represents
the non-cash accretion in the book value of Avation Capital S.A. 8.25%/9.0% unsecured notes resulting
from the accounting treatment of the extension and changes to the terms of the notes agreed with
noteholders in March 2021.
The extension was accounted for as a substantial modification of a debt
instrument in accordance with IFRS 9.
The face value of Avation Capital S.A. 8.25%/9.0% unsecured
notes outstanding as of 30 June 2024 is US$331.6 million.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
13
DEBT SUMMARY
US$ ‘000s
30 June,
2024
2023
Current loans and borrowings
49,668
61,401
Non-current loans and borrowings
625,426
694,575
Total loans and borrowings
675,094
755,976
Cash and cash equivalents
23,561
24,816
Net indebtedness
7
651,533
731,160
Net debt to total assets
8
57.0%
62.0%
Weighted average cost of secured debt
9
4.8%
4.5%
Weighted average cost of total debt
10
6.4%
6.1%
During the period net indebtedness was reduced by 10.9% to US$651.5 million (30 June 2023: US$731.2
million). Five aircraft were re-financed with long-term fixed rate debt in the year.
The weighted average cost of total debt has increased to 6.4% as at 30 June 2024 (30 June 2023: 6.1%)
due to repayments of lower cost secured loans in the period. The weighted average cost of secured debt
also increased to 4.8% at 30 June 2024 (30 June 2023: 4.5%).
At the end of the financial period, Avation’s net debt to total assets ratio improved to 57.0% (30 June
2023: 62.0%).
As at 30 June 2024, 96.4% of total debt was at fixed or hedged interest rates (30 June
2023: 95.8%). The ratio of unsecured debt to total debt was 44.8% (30 June 2023: 40.1%).
The Company’s current credit rating is as follows:
Rating Agency
Corporate Credit Rating
Unsecured Notes Rating
Standard & Poor’s
B- (Stable outlook)
CCC+
Aircraft leasing is a capital-intensive industry. Avation manages interest rate risk as outlined in the risk
management section of the note 8 in the notes to the financial statements. Any potential future increases
in interest rates could impact the level of profitability of any new business the group undertakes although
this could be mitigated by higher lease rates reflecting the current interest rate environment.
7
Net indebtedness is defined as loans and borrowings less unrestricted cash and bank balances.
8
Net debt to assets is defined as net indebtedness divided by total assets.
9
Weighted average cost of secured debt is the weighted average interest rate for secured loans and borrowings at
period end.
10
Weighted average cost of total debt is the weighted average interest rate for total loans and borrowings at period
end.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
14
CHANGE IN ACCOUNTING POLICY FOR MAINTENANCE RESERVES
With effect from 1 July 2023, the Group changed its accounting policy for maintenance reserves.
Under
the previous accounting policy, the Group recognised any surplus or shortfall identified in maintenance
reserve liabilities for an aircraft as compared to the expected future reimbursement obligations to a
lessee in profit or loss at the end of lease or on sale of an aircraft.
The Group will recognise maintenance reserves as revenue over the term of a lease, to the extent that
collected maintenance reserves are not expected to be reimbursed to the lessee, on the occurrence of
specified maintenance events.
The Company projects it will collect a surplus of approximately US$163.4m (unaudited) cash
maintenance reserves in excess of maintenance reimbursements during the current lease terms.
The Group believes that the new accounting policy which provides for a timely release of maintenance
reserves to profit or loss over the lease term will ensure that financial statements reflect the Group's
financial performance more accurately. This change in accounting policy has been applied
retrospectively.
A summary of the quantitative impact of this change in accounting policy is included in note 3 to the
financial statements.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
15
CORPORATE SOCIAL RESPONSIBILITY
Avation is committed to the principles of being a good corporate citizen. For the 2024 financial year the
group did not have any material matters to report on
social, community and human rights issues.
Avation operates the following policies governing corporate ethics and behaviour:
Anti-bribery policy
Gifts and entertaining policy
Modern slavery policy
Whistleblowing policy
Policy for dealing with Company securities
Environmental, social and governance
Avation is committed to environmental responsibility as part of its business strategy. This is achieved by
investing in technologically advanced designs of commercial aircraft that offer improved fuel efficiency
and lower emissions. A substantial percentage of our fleet are modern regional turboprop aircraft which
provide significant environmental benefits over comparable jet aircraft due to their more economical use
of fuel and consequently lower carbon dioxide emissions.
The newest aircraft in our fleet include 5 new
technology A220-300 aircraft, which provide significantly reduced fuel consumption and emissions in
comparison to older aircraft.
As of 30 June 2024, 71% of our overall fleet by number are newer technology or lower carbon emission
ATR and Airbus A220 aircraft.
Avation is a member of the Aviation Working Group (AWG) which has developed the aviation industry
Aircraft Carbon Calculator, aimed at monitoring the carbon emissions of aircraft fleets.
The AWG Aircraft
Carbon Calculator provides an industry standard methodology for calculating and comparing aircraft
carbon dioxide emissions. Use of the Aircraft Carbon Calculator will provide meaningful information and
assist in monitoring and reporting of aircraft emissions.
As of 30 June 2024, Avation PLC has an MSCI ESG rating of BB (2023:BB).
Climate-related financial disclosures
The Risk Committee makes recommendations to the Board on the principal risks of relevance to the
business.
Climate-related risks are considered in terms of potential for contribution to these principal
risks.
The issues considered include both the risk of physical disruption to the business from climate
change, and the risks and opportunities as the global economy transitions to significantly lower carbon
emissions.
In the current period, the Risk Committee concluded that climate related risks did not give
rise to the level of a principal risk, except as part of Legal and Regulatory compliance.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
16
The following table presents the Task Force on Climate-Related Financial Disclosures (“TCFD”)
recommended disclosures on climate-change risks:
TCFD Recommendation
Compliance Status
Governance
Describe the Board’s oversight of climate-related risks
and opportunities.
The Board of Directors have accountability for the
management of climate related risks and opportunities.
The Executive Directors are responsible for the day-to-
day implementation, monitoring and management of
our climate policies. The Group’s Risk Committee
supports the Directors in ensuring material climate-
related narratives are identified and integrated into the
Group’s risk management processes, in addition to
reviewing and recommending policy proposals to the
Board.
At present the Risk Committee does not assess
climate-change risk to be a principal risk to the group,
except as part of Legal and Regulatory Compliance.
Describe management’s role in assessing and
managing climate-related risks and opportunities.
Identified climate-related risks and opportunities are
communicated to the Group’s management team in bi-
weekly meetings attended by the Group’s executive
Directors and senior members of the management
team.
Individuals tasked with particular climate-
related tasks to carry out or reports to prepare provide
regular updates on performance at these meetings.
Strategy
Describe the climate-related risks and opportunities
the organisation has identified over the short, medium,
and long term.
Physical risks
Avation’s fleet may be exposed to the risk of physical
damage or loss caused by climate-change related
extreme weather events such as severe storms, flooding
or fire.
Demand for and patterns of air travel may be
negatively impacted by long-term impacts of climate
change such as rising sea levels, should these occur.
Transition risks
Regulatory actions to impose controls on greenhouse
gas emissions are likely to result in additional legal and
compliance costs for aviation business models, including
aircraft lessors.
The gradual transition of airline fleets
away from older more-polluting aircraft types to latest-
technology more fuel-efficient types is likely to have a
negative impact on the secondary market and residual
values for older aircraft.
This risk is likely to increase
further as new aircraft types featuring low carbon
emissions propulsion systems such as SAF, hydrogen or
electric power are introduced. Regulatory actions,
consumer and market sentiment changes such as an
increasing preference for lower emissions aircraft are
likely to make it more difficult for businesses who
continue to own or operate older aircraft types to raise
capital or finance aircraft at competitive prices, or at all.
Owners and/or operators of older aircraft types may also
face reputational risk if not deemed to be transitioning
to a low carbon emissions business model quickly
enough.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
17
TCFD Recommendation
Compliance Status
Short, medium and long-term risks and
opportunities
Commercial aircraft are long-lived assets with estimated
useful lives of up to 25 years.
In assessing risks and
opportunities arising from climate change, Avation is
therefore principally concerned with exposure to long-
term risks and attaches less importance to short and
medium-term timeframes when assessing climate
change risks.
Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy and financial planning.
The Risk Committee makes recommendations to the
Directors on the principal risks of relevance to the
business.
Climate-related risks are considered in terms
of potential for contribution to these principal risks.
The
issues considered include both the risk of physical
disruption to the business from climate change, and the
risks and opportunities as the global economy
transitions to significantly lower carbon emissions.
In
the current period, the Risk Committee concluded that
climate related risks did not give rise to the level of a
principal risk, except as part of Legal and Regulatory
Compliance. The majority of the group’s assets are
commercial aircraft.
The useful lives and residual values
of commercial aircraft may be affected should any of the
physical or transition risks of climate change occur.
Avation has not seen any impacts on useful lives or
residual values resulting from climate change to date
but will continue to monitor and consider the impact of
climate-change risks on useful lives and residual values
in future.
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a 2°C or lower scenario.
Worst Case scenario (>3ºC)
Our Worst-Case Scenario is a theoretical construct and
narrative describing a world where climate action is
delayed by world governments failing to act on climate
change. Such delay may result in a world where physical
climate change risks are the greatest across our three
scenarios.
Under the Worst-Case scenario the Group may face
greater physical risks from climate-change related
weather events and greater transitional risks from
accelerated changing demand patterns.
Paris Alignment Scenario (2-3ºC)
This scenario involves a market-led transition to a lower
carbon future through global government commitments
to the Paris Agreement. This would result in increased
regulation of climate action and a reduction of the
physical impacts of climate change compared with our
Worst-Case scenario, where governments fail to
legislate in accordance with the Paris Agreement.
Under the Paris Alignment scenario the Group
expects that its strategy will mitigate the material
impacts of climate risk.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
18
TCFD Recommendation
Compliance Status
Transformation Scenario (<2ºC)
This scenario sees a rapid decarbonisation pathway,
where global emissions are close to zero in 2040, driven
by society. The speed of change required to limit global
warming to 1.5 degrees is likely to create instability in
our supply chain as suppliers try to keep pace with
decarbonisation demands and shifting preferences
towards localisation.
Under the Transformation Scenario the Group may
face reduced physical risks but additional financial
and transitional risks and additional opportunities
from a more rapid switch to lower carbon emission
propulsion systems for aircraft.
Under this
scenario there is a risk that ordinary aircraft
passengers may be priced out of the air travel
market. Hence, passenger numbers could fall.
Risk Management
Describe the organisation’s processes for identifying
and assessing climate-related risks.
Avation’s Risk Committee is responsible for identifying
and assessing climate change related risks and for
notifying the Board of any identified principal risks which
are deemed to be material to the Company.
Please refer
to “Principal Risks and Uncertainties” within the
Strategic Report for further information on Avation’s risk
management policies.
Describe the organisation’s processes for managing
climate-related risks.
The Directors are directly able to determine which risks
and opportunities could have a material impact on the
Group, as well as how to prioritise them.
With a flat
management structure and by taking a hands-on
approach, the risks are actively managed within all
aspects of the business.
Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organisation’s overall risk management.
Climate change related matters are monitored by the
Directors and Risk Committee to ensure that they are
embedded in our risk management and planning
process, in addition to our long-term strategic decision-
making.
Metrics and targets
Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process.
Please refer to the table below.
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related
risks.
Please refer to the table below.
As the majority of the
Company’s GHG emissions are derived from our
customers’ use of our fleet of aircraft, total emissions
may increase due to factors outside our control.
Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
The Board of Directors has not set particular goals and
targets related to climate-
change risks or opportunities.
The company is making available to the market upto 36
low carbon emissions ATR72 aircraft by way of its
purchase rights and order book.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
19
Greenhouse Gas Emissions
Direct emissions
Direct emissions are produced by sources which are owned or controlled by the reporting organisation
and include electricity use, burning oil or gas for heating, and fuel consumption because of business
travel or distribution.
The company does not directly generate greenhouse gas emissions from its business activities as it does
not control airlines’ usage of leased aircraft and Scope 1 CO2 emissions are immaterial.
Emissions from
leased aircraft are disclosed as Scope 3 emissions.
Indirect emissions
Indirect emissions result from a company’s upstream and downstream activities. These are typically from
outsourced activities, and products and the services offered by the organisation.
Scope
Activity
TCO2e
2024
TCO2e
2023
Scope 1
-
-
-
Scope 2
Consumption of
purchased electricity
16
16
Scope 3
Customers’ use of our
aircraft
527,400
525,100
Employee business travel
280
144
Total
527,696
525,260
Usage of the Company’s aircraft is under the control of lessees who are not required to provide emissions
data to the Company. The Company estimates carbon emissions from lessees’ usage of our aircraft using
the “AWG Carbon Calculator” tool provided by the Aircraft Working Group. The AWG Carbon Calculator
uses OEM source data to provide consistent and reliable estimates of aircraft carbon emissions.
Carbon emissions from consumption of purchased electricity are estimated by converting the Company's
energy usage in kilowatt hours (KWh) into kilograms (Kg) of carbon dioxide emitted using Singapore's
Grid Emission Factor (GEF), a measure of the amount of carbon dioxide emitted per kilowatt hour of
electrical energy generated in Singapore. Energy usage is based on electricity consumption at the
Company's sole office in Singapore.
Carbon emissions from employee business travel are estimated using UK Government Conversion Factors
for greenhouse gas reporting.
Scope 3 Emissions from Customers’ Use of Our Aircraft
2024
2023
Total emissions (TCO2e)
527,400
525,100
Aircraft flight hours
76,205
74,683
Seats
162
162
Average CO2 emissions per flight hour
6.9
7.0
Average CO2 emissions per seat per flight hour
42.8
43.5
Employees
It is the Group's policy to employ individuals with the necessary qualifications without regard to sex,
marital status, race, creed, colour, nationality or religion. Full and fair consideration is given to
applications for employment made by disabled persons having regard to their particular aptitudes and
abilities.
The Group recognises the great importance of the contribution made by all employees and aims to keep
them informed of matters affecting them as employees and developments within the Group.
Communication and consultation is achieved by a variety of means both within individual companies or
branches and on a group-wide basis.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
20
A breakdown by gender of the number of persons who were Directors of the Company, senior managers
and other employees as of 30 June 2024 is set out below:
Male
Female
Directors of the Company
5
-
Senior managers
4
2
Other employees
9
5
A breakdown by gender of the number of persons who were Directors of the Company or senior managers
as of 30 June 2024 is set out below:
Number of
board
members
Percentage of
the board
Number of
senior
positions on
the board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
Men
5
100%
2
4
67%
Women
-
-
-
2
33%
A breakdown by ethnic identity of the number of persons who were Directors of the Company or senior
managers as of 30 June 2024 is set out below:
Number of
board
members
Percentage of
the board
Number of
senior
positions on
the board
(CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
White British or
other white
(including minority-
white groups)
5
100%
2
3
50%
Asian/Asian British
-
-
-
3
50%
The Company collects data on gender and ethnic identity from employees and directors by means of
self-identification.
As at 30 June 2024 the Company does not meet targets for:
at least 40% of the individuals on its board of directors to be women;
at least one of the positions of the chair, the chief executive, the senior independent director or
the chief financial officer on its board of directors to be held by a woman; and
at least one individual on its board of directors to be from a minority ethnic background.
The Company engages directors on the basis of ability without discrimination and has no internal targets
for representation on the board on the basis of gender or ethnic identity.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
21
Section 172(1) statement
On the following pages we have set out how the Board has acted in a way that promotes the success of
the Company for the benefit of its members as a whole, in accordance with the requirements of the
Companies (Miscellaneous Reporting) Regulations 2018, whilst having regard to the following matters
set out in s.172(1) of the Act.
The likely consequences of any decision in the long term
The board is mindful that it should make decisions which are the best for the Company in the long term.
The nature of the business of aircraft leasing is long-term, with typical aircraft leases being for ten or
twelve years duration for new aircraft. The Company does undertake the trading of aircraft where they
have reached a certain age and when market conditions are favourable. However, the transfer of an
aircraft with a lease attached to it is transaction which would typically take three to five months to
complete and therefore such transactions are undertaken on strategic timeframes.
Equity released from
the sale of aircraft is typically re-invested in financing or re-financing the purchase of aircraft.
The interests of the Group’s employees
The board actively engages with employees to ensure that staff are kept up to date and informed. The
Company has regular management meetings at which typically two of the Company’s directors are
present and which are attended by the majority of the Company’s employees.
Staff have receive regular communications and updates from the Board to ensure that they are kept up
to date and informed in respect of business performance, with management meetings being held on a
bi-weekly basis.
The need to foster the Group’s business relationships with suppliers, customers and others
Suppliers
The Company has long-term relationships with its suppliers which are primarily comprised of commercial
lending organisations such banks and other financial institutions, as well as the manufacturers of aircraft
and aircraft engines.
Customers
The Company has sixteen airline customers and maintains close relationships with them, indeed this is
inherent in the nature of aircraft leasing. In particular, the Company needs to ensure that its customers
are looking after and maintaining the aircraft and are otherwise complying with the terms of the
respective aircraft leases.
The impact of the Group’s operations on the community and the environment
The board recognises the importance of managing the community impact of the business and minimising
any adverse impact of our operations on the environment. The Company is committed to investing in
the latest aircraft with the lowest environmental emissions in each aircraft model category.
The desirability of the Group maintaining a reputation for high standards of business conduct
The board expects the highest standards of conduct throughout the business, both in respect of
employees and in respect of its suppliers, advisers and agents. The board receives regular updates in
respect of matters of regulatory compliance, and the business has policies, procedures and processes in
place in respect of modern slavery, bribery and corruption.
AVATION PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 30 JUNE 2024
22
The need to act fairly as between members of the Company
The Company has a single class of ordinary shares, so all shareholders are treated equally. Details of
how we engage with shareholders can be found in our corporate governance statement in the Directors’
Report.
On behalf of the board
...............................
Robert Jeffries Chatfield
Executive Chairman
25 October 2024
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2024
23
The Directors present their report and financial statements for the year ended 30 June 2024.
Principal activities and business review
Avation PLC is a public limited company incorporated in England and Wales under the Companies Act
2006 (Registration Number 05872328).
Details of
activities carried out by subsidiary companies are set out in Note 23 to these financial statements.
The principal risks and uncertainties affecting the Group’s turnover are described in the Strategic Report.
The full business review including KPI’s can be found in the Strategic Report and in Note 8 to these
financial statements. The Group has reviewed environmental matters in the Strategic Report.
Results and dividends
The consolidated statement of profit or loss and the consolidated statement of other comprehensive
income for the year are set out on in these financial statements. The Company did not declare and pay
any dividend during the year.
Avation’s dividend policy is, subject to having the reserves to do so and within any restrictions imposed
by debt covenants, to declare a dividend if the Board considers that it is in the best long-term interests
of the Company and its shareholders. The dividend policy is progressive, in that if reserves are available
the dividend shall increase.
Directors and their interests
The Directors who served the Company during the year together with their interests and deemed interests
in the shares of the Company at the beginning and end of the year, were as follows:
Direct interest
Deemed interest
30 June
2024
1 July
2023
30 June
2024
1 July
2023
Ordinary shares of £0.01 each:
Robert Jeffries Chatfield
1
1
12,230,000
12,530,000
Roderick Douglas Mahoney
730,000
870,000
-
-
Stephen John Fisher
25,000
25,000
-
-
Derek Sharples
50,000
50,000
-
-
Mark Stephen Shelton
23,500
4,500
-
-
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2024
24
Significant shareholdings
Significant shareholdings as of 30 June 2024 were as follows:
Ordinary
shares
Percentage
Ordinary shares of £0.01 each:
Vidacos Nominees Limited
18,069,977
25.49%
Aurora Nominees Limited
5,733,710
8.09%
HSBC Global Custody Nominee (UK) Limited
5,350,000
7.55%
Luna Nominees Limited
5,030,000
7.10%
HSBC Global Custody Nominee (UK) Limited
5,013,635
7.07%
Interactive Brokers LLC
4,612,467
6.51%
James Capel (Nominees) Limited
2,413,200
3.40%
Interactive Investor Services Nominees Limited
1,573,084
2.22%
Future Developments
In accordance with s414C(11) of the Companies Act 2006, the Directors have chosen to include
information about future developments in the Chairman’s Statement and Strategic Report.
Financial Instruments
See Note 8 to these financial statements.
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2024
25
Going Concern
The Directors’ assessment of the Group’s ability to continue as a going concern is detailed in Note 4(e)
to the financial statements.
The Note in its entirety is deemed to be incorporated into and form part of
the Directors’ Report.
Greenhouse Gas Emissions Statement
Usage of the Company’s aircraft is under the control of lessees who are not required to provide emissions
data to the Company. The Company estimates carbon emissions from lessees’ usage of our aircraft using
the “AWG Carbon Calculator” tool provided by the Aircraft Working Group.
The AWG Carbon Calculator
uses OEM sources data to provide consistent and reliable estimates of aircraft carbon emissions.
Carbon emissions from consumption of purchased electricity are estimated by converting the Company's
energy usage in kilowatt hours (KWh) into kilograms (Kg) of carbon dioxide emitted using Singapore's
Grid Emission Factor (GEF), a measure of the amount of carbon dioxide emitted per kilowatt hour of
electrical energy generated in Singapore.
Energy usage is based on electricity consumption at the
Company's sole office in Singapore.
Carbon emissions from employee business travel are estimated using UK Government Conversions
Factors for greenhouse gas reporting.
Greenhouse gas emissions are disclosed in the Strategic Report.
Capital Structure
Details of the Company’s issued share capital, together with details of the movements therein during the
financial year are shown in Note 32.
The Company has one class of ordinary shares which carry no right
to fixed income.
Each share carries the right to one vote at general meetings of the Company.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both
governed by the general provisions of the Articles of Association and prevailing legislation.
The Directors
are not aware of any agreements between holders of the Company’s shares that may result in restrictions
on the transfers of securities or on voting rights.
Details of employees share option schemes are set out in Note 39.
No person has any special rights of control over the Company’s share capital and all issued shares are fully
paid.
With regards to the appointment and replacement of Directors, the Company is governed by its Articles of
Association, the Companies Act and related legislation.
The Articles themselves may be amended by special
resolution of the shareholders.
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2024
26
Corporate Governance Statement
The Board is accountable to the shareholders for the good corporate governance of the Group. The
principles of corporate governance and a code of best practice are set out in the UK Corporate
Governance Code issued in July 2018. Under the Financial Conduct Authority’s Listing Rules the Company
is not required to comply with the Code in full. The Board has adopted policies that it considers to be
appropriate for the Company’s size and nature.
The Board acts as the administrative, management and supervisory body overseeing the operation of
the Group. The Board consist of two Executive Directors (Robert Jeffries Chatfield and Mark Stephen
Shelton) and three Non-Executive Directors (Roderick Douglas Mahoney, Stephen John Fisher
(independent) and Derek Sharples (independent)). The Board meets at least six times a year; matters
for discussion at formal meetings are clearly laid down and decisions recorded. The Board is responsible
for overall corporate strategy; the reviewing and approval of acquisition and divestment opportunities;
the approval of significant capital expenditures; the review of budgets; trading performance; and all
significant financial and operational issues.
Information on how the Directors have had regard to the need to foster the Company’s business
relationships with suppliers, customers and other, and the effect of that regard, including on the principal
decisions taken by the Company during the financial year, is included in the Section 172(1) Statement
included in the Strategic Report.
The Company operates the following committees whose members are detailed below:
Audit Committee - Stephen John Fisher, Derek Sharples, Iain Cawte (non-Board member) and
Mark Stephen Shelton; and
Risk Committee – Derek Sharples, Stephen John Fisher, Iain Cawte (non-Board member) and
Duncan Scott (non-Board member); and
Remuneration Committee - Robert Jeffries Chatfield, Roderick Douglas Mahoney, Stephen John
Fisher and Derek Sharples
The Board is responsible for identifying and evaluating the major business risks faced by the Company
and for determining and monitoring the appropriate course of action to manage these risks.
The key
risks the Company faces are described in the risk assessment section of this annual report and accounts.
The Board conducts a review of the effectiveness of the Company’s systems of internal control and risk
management on an annual basis.
Following this review, it has concluded that the Company’s financial,
operational and compliance controls, and risk management procedures are appropriate and suitable to
enable the Board to safeguard shareholders’ investments and the Company’s assets.
The process and systems of internal control are designed to manage, rather than eliminate, the risk of
failure to achieve the Company’s objectives, and can therefore only provide reasonable and not absolute
assurance against material misstatement or loss.
Avation is an equal opportunities employer and its policy and statistics on employee gender and race are
included in the Strategic Report.
AVATION PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2024
27
Statement as to disclosure of information to auditors
So far as the Directors are aware, there is no relevant audit information of which the Company's
auditors are unaware, and
They have taken all the steps that they ought to have taken as Directors in order to make
themselves aware of any relevant audit information and to establish that the Company's auditors
are aware of that information.
Auditor
Ernst & Young have indicated their willingness to continue in office and in accordance with s489 of the
Companies Act 2006. A resolution proposing that they be reappointed as auditors of the Company will be
put to the Annual General Meeting.
Purchase of own shares
During the year ended 30 June 2024, the Company bought 65,000 (2023 : 100,000) treasury shares at a
market price ranging from 110 pence to 119 pence (2023 : 77.2 pence) per share and subsequently
cancelled 65,000 (2023: 2,310,000) treasury shares.
By a resolution passed at the Annual General Meeting held on 23 November 2023, the Company’s
Directors are authorised to buy back shares not exceeding 30 per cent of the total number of shares in
issue on that date. Share buy backs may be at market prices but not under £0.75 and not exceeding a
price equal to the higher of (i) 105% of the average of the middle market quotations for the share price
for the five business days preceding the buy-back date and (ii) the higher of the price for the last
independent share trade and the amount stipulated pursuant to Article 5(6) of the Market Abuse
Regulation (EU) No. 596/2014 (as in force in the United Kingdom pursuant to the European Union
(Withdrawal) Act 2018), and in any case, not exceeding £2.00 per share, excluding brokerage,
commissions and other related expenses.
Subsequent events
See Note 44 to these financial statements.
On behalf of the board
...............................
Robert Jeffries Chatfield
Executive Chairman
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
28
Introduction
This report has been prepared in accordance with Schedule 8 of the Large and Medium Companies and
Groups (Accounts and Reports) Regulations 2008 as amended in August 2013.
As required a resolution to
approve the Directors’ remuneration will be proposed at the forthcoming Annual General Meeting of the
Company at which the financial statements will be approved.
The vote will have advisory status, will be in
respect of the remuneration policy and overall remuneration packages and will not be specific to the
individual levels of remuneration.
The information in the Directors’ Remuneration Report is not audited, unless specifically stated that the
section is subject to audit.
Statement by the Chair of the Remuneration Committee
The Company’s remuneration policy remains substantially unchanged for the year ended 30 June 2024.
Key aspects of the policy are to attract and retain executives; be consistent with best practices and to
ensure alignment between performance and compensation.
Remuneration (audited)
The components of remuneration are:
basic salary and benefits determined by the Remuneration Committee which are included in
employment agreements and reviewed annually;
bonuses based upon performance of the Company and the individual concerned; and
share warrants.
Component
Purpose
Operation & framework used to assess performance
Salary and
benefits
To provide the core reward for the
role at a sufficient level to recruit
and retain individuals of the
necessary competence to execute
the company’s business strategy.
Operation
:
Salaries are typically set after considering salary levels in
companies of a similar size and complexity, the responsibilities
of each individual role, progression within the role, individual
performance and an individual’s experience. Our overall policy,
having had due regard to the factors noted, is normally to
target salaries at the market median level.
Salaries may be adjusted in line with the market and
adjustments out of line with the market may be awarded in
certain circumstances such as where there is a change in
responsibility, progression in the role, experience or a
significant increase in the scale of the role and/or size, value
and/or complexity of the Group. Salary levels for current
incumbents are set out elsewhere in this report.
Framework used to assess performance:
The remuneration committee considers individual salaries at
the appropriate committee meeting each year after having due
regard to the factors noted in operating the salary policy. No
recovery provisions apply to salary.
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
29
Bonuses
To
incentivise
and
recognise
execution of the business strategy
on a semi-annual basis.
Operation
:
Bonuses are paid in cash twice yearly to employees and
executive Directors based on a target percentage of the
employee’s basic salary. All bonus payments are at the
discretion of the Committee, as shown following this table.
Bonuses are awarded pro-rata to the achievement of up to five
individual goals established for each employee.
Individual
goals are established in alignment with the development of the
Company.
Framework used to assess performance:
The remuneration committee will assess company and
individual
performance
compared
to
prior
year
and
expectations for the current year. Individual performance will
also be assessed against individual goals established for each
executive. Metrics considered in awarding bonuses include
share price appreciation; increase in the Company’s earnings
per share; growth in asset value and profits; and dividend
growth.
The company awards bonuses pro-rata to the
achievement of up to five individual goals.
Share
Warrants
To
incentivise
and
recognise
execution of the business strategy
over the long-term.
Operation
:
Each year share warrants and/or performance shares awards
may be granted subject to the achievement of individual goals
and in order that long-term incentives are aligned with
shareholder returns. Awards normally vest over a three-year
period.
Framework used to assess performance:
Same as for bonus.
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
30
Individual Director’s remuneration was as follows:
Salaries
and fees
Bonuses
Taxable
Benefits
Share
warrants
Total
2024
Total
2023
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
Executive Director:
Robert Jeffries Chatfield
713
-
52
283
1,048
1,151
Mark Stephen Shelton
165
-
49
10
224
67
Non-Executive Directors:
-
Roderick Douglas Mahoney*
82
-
-
68
150
440
Stephen John Fisher
51
-
-
-
51
48
Derek Sharples
51
-
-
-
51
48
1,062
-
101
361
1,524
1,754
Fixed
Variable
Total
2024
Fixed
Variable
Total
2023
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
Executive Director:
Robert Jeffries Chatfield
765
283
1,048
767
384
1,151
Mark Stephen Shelton
214
10
224
58
9
67
Non-Executive Directors:
-
-
Roderick Douglas Mahoney*
51
99
150
271
169
440
Stephen John Fisher
51
-
51
48
-
48
Derek Sharples
51
-
51
48
-
48
1,132
392
1,524
1,192
562
1,754
*
Roderick Douglas Mahoney retired as an executive of the Company during the previous year and he will
continue to serve the shareholders as a non-executive director of the Company.
Taxable benefits mainly relate to housing expenses, medical expenses and private car expenses.
The information in this part of the Directors’ Remuneration Report is subject to audit.
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
31
Service contracts
The employment contracts of the Executive Directors with the Company are terminable by either party
with the notice in writing to the other detailed in the table below.
The Directors’ service contracts are as follows:
Date of contract
Unexpired
term
Notice
period
Compensation
payable on
early
termination
Robert Jeffries Chatfield
29 April 2013
Indefinite
4 months
-
Roderick Douglas Mahoney
21 February 2022
Indefinite
2 months
-
Stephen John Fisher
29 April 2014
Indefinite
1 month
-
Derek Sharples
15 November 2016
Indefinite
1 month
-
Mark Stephen Shelton
7 June 2024
Indefinite
1 month
-
Share warrants (audited)
The Group has an ownership-based compensation scheme for employees of the Group.
Warrants are granted to employees of the Group to promote:
Improvement in the Company’s earnings per share;
Reliable and high quality financial reporting;
Growth in asset value and profits; and
Growth in dividends.
Each share warrant converts into one ordinary share of Avation PLC on exercise. No amounts are paid
or are payable by the recipient on receipt of the warrant. The warrants carry neither rights to dividends
nor voting rights. There are no performance conditions that need to be met before warrants can be
exercised.
Warrants granted have a 3-year vesting schedule with details as follows:
Vesting period
Proportion of total share options that are
exercisable
Before year 1
0 per cent
On year 1 and before year 2
Up to 33 per cent of the grant
On year 2 and before year 3
Up to 33 per cent of the grant or up to 66 per cent of
the grant if warrants were not exercised after the
first vesting year
On year 3 to 2 months after year 3
Balance or 100 per cent of the grant if warrants were
not exercised after the first and second vesting years
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
32
The following share warrants issued to Directors were outstanding at the year-end:
Director
Date granted
Warrant
price
Balance
at
beginning
of year
Granted
during the
year
Exercised
during the
year
Expired
during
the year
Balance
at
end of
year
Robert Jeffries
Chatfield *
23 Dec 2020#
130.0p
1,200,000
-
-
-
1,200,000
Robert Jeffries
Chatfield *
29 Sept 2022
102.0p
1,000,000
-
-
-
1,000,000
Robert Jeffries
Chatfield *
2 Mar 2023
126.0p
230,000
-
-
-
230,000
Robert Jeffries
Chatfield *
1 Nov 2023
125.5p
-
300,000
-
-
300,000
Robert Jeffries
Chatfield *
13 Mar 2024
118.0p
-
495,000
-
-
495,000
Roderick Douglas
Mahoney
23 Dec 2020#
130.0p
750,000
-
-
-
750,000
Roderick Douglas
Mahoney
29 Sept 2022
102.0p
275,000
-
-
-
275,000
Roderick Douglas
Mahoney
2 Mar 2023
126.0p
25,000
-
-
-
25,000
Mark Stephen
Shelton
29 Sept 2022
102.0p
50,000
-
-
-
50,000
Mark Stephen
Shelton
2 Mar 2023
126.0p
18,000
-
-
-
18,000
Mark Stephen
Shelton**
1 Nov 2023
125.5p
-
25,000
-
-
25,000
Mark Stephen
Shelton**
13 Mar 2024
118.0p
-
25,000
-
-
25,000
* Robert Jeffries Chatfield was granted the share warrants and assigned these to Epsom Assets Limited.
** Mark Shephen Shelton was granted the share warrants and assigned these to PPT Consulting Pte. Ltd.
#
The expiry date for the warrants granted on 23 December 2020 is extended to one month after the
Company exits a restricted period related to a material refinancing transaction under consideration at
the date of signing this report.
The closing market price of the shares subject to warrants at the year-end was 140.0 pence. The highest
and lowest closing market prices during the year were 144.0 pence and 100.0 pence.
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
33
Company’s performance
The graph below shows the total shareholder return on a holding of shares in the Company as against
the average total shareholder return of the companies comprising the FTSE100 index. The FTSE 100
Index was selected because in the opinion of the Board it is the most appropriate for the Company for
the purposes of a benchmark.
Remuneration of Executive Chairman
2024
2023
2022
2021
2020
Executive Chairman single figure
remuneration (US$’000)
1,048
1,151
1,224
1,394
908
Annual bonus pay-out (as % of
maximum)
-
-
-
-
-
The table above shows the prescribed remuneration data for the Director, Robert Jeffries Chatfield,
Executive Chairman undertaking the role of Group Chief Executive Officer during each of the last five
financial years.
50.00
75.00
100.00
125.00
150.00
175.00
200.00
225.00
250.00
275.00
300.00
325.00
350.00
375.00
400.00
425.00
450.00
475.00
500.00
525.00
Jun 14
Jun 16
Jun 18
Jun 20
Jun 22
Jun 24
Return Index
AVAP
FTSE 100
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
34
Percentage change in remuneration of Chief Executive Officer and annual percentage
change in remuneration for directors and employees
The table below sets out the percentage change in the remuneration of the Executive Chairman who is
undertaking the role of Group Chief Executive Officer and directors compared to that of all employees of
the Group.
Change in remuneration
from 2023 to 2024
Base salary and
fees
Bonus
Taxable
benefits
Warrants
expense
Executive Chairman:
Robert Jeffries Chatfield
3%
0%
-29%
-26%
Executive Director:
Mark Stephen Shelton
185%
0%
0%
12%
Non-executive Director:
Douglas Roderick Mahoney
-70%
0%
0%
-60%
Non-executive Director:
Stephen John Fisher
7%
0%
0%
0%
Non-executive Director:
Derek Sharples
7%
0%
0%
0%
All employees
-2%
1,006%
38%
-36%
Change in remuneration
from 2022 to 2023
Base salary and
fees
Bonus
Taxable
benefits
Warrants
expense
Executive Chairman:
Robert Jeffries Chatfield
-2%
0%
4%
-13%
Executive Director:
Mark Stephen Shelton
NA
NA
NA
NA
Non-executive Director:
Douglas Roderick Mahoney
-30%
-100%
0%
-37%
Non-executive Director:
Stephen John Fisher
6%
0%
0%
0%
Non-executive Director:
Derek Sharples
6%
0%
0%
0%
All employees
-3%
-96%
4%
-20%
Change in remuneration
from 2021 to 2022
Base salary and
fees
Bonus
Taxable
benefits
Warrants
expense
Executive Chairman:
Robert Jeffries Chatfield
-1%
0%
-18%
-25%
Executive Director:
Douglas Roderick Mahoney
-15%
105%
0%
-22%
Non-executive Director:
Stephen John Fisher
0%
0%
0%
0%
Non-executive Director:
Derek Sharples
0%
0%
0%
0%
All employees
2%
254%
-18%
-17%
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
35
Relative importance of spend on pay
The Chart below displays the relative expenditure of the Company on various matters, as required (in
the case of remuneration for group employees and shareholder distributions) by the relevant
remuneration regulations. Revenue is included as this is a key element of company performance.
In
pervious years the company included debt repayments for comparison with employee remuneration.
Debt repayments has been replaced with revenue this year as revenue is more relevant to the
consideration of the relative importance of employee remuneration.
5,587
92,691
94
5,487
92,397
95
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
Total remuneration for group
employees
Revenue
Dividend paid & Share buybacks
2023 US$ '000
2024 US$ '000
0%
1%
-2%
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
36
Directors’ remuneration policy
The Company applies a policy for Directors’ remuneration which is designed to meet the following
objectives:
provide a fair and transparent remuneration policy that is in alignment with shareholders’
interests;
provide both immediate and incentive remuneration that is sufficient to attract and retain
executives;
be consistent with best practice for governance of stock exchange listed companies;
allow claw-back of incentives from executives should previous performance be found to have
led to future adverse circumstances for the Company; and
ensure alignment between performance and compensation.
The Company targets the following outcomes in applying its policy to ensure alignment of Directors’
remuneration and shareholders’ interests:
share price appreciation;
increase in the Company’s earnings per share;
reliable and high quality financial reporting;
growth in asset value and profits; and
dividend growth.
Remuneration of the Company’s Executive Directors is comprised of the following components:
base salary;
short-term incentives in the form of a cash bonus linked to performance against individual key
performance indicators; and
long-term incentives in the form of share warrants and/or performance shares.
Remuneration of the Company’s Non-Executive Directors is comprised of fixed Directors’ Fees.
Payments for loss of office
No provisions are made under the Directors’ service contracts for any payments beyond the applicable
notice period, except that Non-Executive Directors are entitled to receive payment of two years fees on
loss of office pursuant to a change of control.
AVATION PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 30 JUNE 2024
37
Statement of consideration of employment conditions elsewhere in the company
Pay and employment conditions of other employees in the company were taken into account when setting
the policy for Directors’ remuneration. Similar remuneration polices are in place for Directors and
employees of an equivalent level.
Shareholders' vote on remuneration
Share Count
% of
vote cast
Votes cast in favour
23,314,113
99.7%
Votes cast against
68,995
0.3%
Total votes cast in favour or against
23,383,108
100.00%
Votes withheld
14,670
-
Note:
The Board as a whole considers the remuneration of the Directors and has not engaged external advisers.
The remuneration report for the year ended 30 June 2023 was approved at the Annual General Meeting
held on 23 November 2023.
On behalf of the Board
...............................
Robert Jeffries Chatfield
Executive Chairman
AVATION PLC
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
38
The Directors are responsible for preparing the Annual Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that
law the Directors are required to prepare the Company and Group financial statements in accordance
with UK-adopted International Accounting Standards (“IFRSs”) in conformity with the requirements of
the Companies Act 2006.
Under company law the Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of the affairs of the Company and of the Group and the
financial performance and cash flows of the Group for that year.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the accounts on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
present information, including accounting policies, in a manner that provides relevant reliable,
comparable and understandable information.
provide additional disclosures when compliance with the specific requirements in IFRSs adopted
are insufficient to enable the users to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and financial performance.
properly select and apply accounting policies.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Company’s and the Group’s transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company's website. Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements may differ from legislation in other jurisdictions.
AVATION PLC
DIRECTORS’ RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
39
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with IFRSs inconformity with the Companies
Act 2006, give a true and fair view of the assets, liabilities and financial position of the Company
and of the Group and of the Group’s profit for the year;
the strategic report includes a fair review of the development and performance of the business
and the position of the Company and of the Group, together with a description of the principal
risks and uncertainties that they face; and
The annual report and financial statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for the shareholders to assess the Group’s
position, performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 25 October 2024 and is signed
on its behalf by Robert Jeffries Chatfield.
...............................
Robert Jeffries Chatfield
Executive Chairman
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC
40
Opinion
In our opinion:
•
Avation plc’s group financial statements and parent company financial statements (the “financial
statements”) give a true and fair view of the state of the group’s and of the parent company’s affairs
as at 30 June 2024 and of the group’s profit for the year then ended;
•
the group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
•
the parent company financial statements been properly prepared in accordance with UK adopted
international accounting standards as applied in accordance with section 408 of the Companies Act
2006; and
•
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Avation plc which comprise:
Group
Parent company
Consolidated statement of profit or loss for the
year then ended
Consolidated
statement
of
comprehensive
income for the year then ended
Consolidated statement of financial position as at
30 June 2024
Company statement of financial position as at 30
June 2024
Consolidated statement of changes in equity for
the year then ended
Company statement of changes in equity for the
year then ended
Consolidated statement of cash flows for the year
then ended
Company statement of cash flow for the year then
ended
Related notes 1 to 45 to the financial statements,
including material accounting policy information
Related notes 1 to 45 to the financial statements
including material accounting policy information
The financial reporting framework that has been applied in their preparation is applicable law and UK
adopted international accounting standards and as regards to the parent company financial statements,
as applied in accordance with section 408 of the Companies Act 2006.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
41
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report below. We are independent
of the group and parent company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion
.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the
directors’ assessment of the group and parent company’s ability to continue to adopt the going concern
basis of accounting included:
•
In conjunction with our walkthrough of the Group’s financial statements close process, we
confirmed our understanding of the going concern assessment process and engaged with
management to ensure all key factors were considered in their assessment.
•
We obtained management’s going concern assessment, including their covenant assessment and
cashflow analysis and forecast for a period of 12 months from the expected date of signing of the
financial statements.
•
We reviewed the sources of cash inflows available to the Group and the various scenario
analyses performed by management. We noted that in management’s most stressed scenario,
management’s forecast minimum cash requirement would still be generated by the G
roup.
•
We have considered the assumptions included in the cashflow analysis prepared and
considered the appropriateness of the methods used within the cashflow analysis and
determined through inspection and testing of the methodology and calculations that the methods
utilised were appropriate.
•
We have further stressed managements’ sensitivities to test the resilience of the Group’s
business under more pessimistic scenarios.
•
We have reviewed the appropriateness of the disclosures made by management as detailed
under Note 4(d) of the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group and parent
company’s ability to continue as a going concern for a period of 12 months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report. However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the group’s ability to continue as a going concern.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
42
Overview of our audit approach
Audit scope
•
We performed an audit of the complete financial information of Avation plc
in accordance with materiality thresholds as set out below.
Key audit
matters
•
Valuation of aircraft
•
Valuation of aircraft purchase rights
Materiality
•
Overall group materiality of US$2.5m which represents 1% of total equity as
of 30 June 2024.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality
determine our audit scope for each entity within the Group.
Taken together, this enables us to form an
opinion on the consolidated financial statements. We take into account size, risk profile, the organisation
of the group and effectiveness of group-wide controls, changes in the business environment, the
potential impact of climate change and other factors such as recent Internal audit results when assessing
the level of work to be performed at each entity.
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact Avation plc. The Group has
determined that the most significant future impacts from climate change on its operations will be from
the physical risks and the transition risks as the global economy transitions to lower carbon emissions.
These are explained on pages 15-19 in the Climate-related financial disclosures.
All of these disclosures
form part of the “Other information,” rather than the audited financial statements. Our procedures on
these unaudited disclosures therefore consisted solely of considering whether they are materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appear to be materially misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the
Group’s business and any consequential material impact on its financial statements.
As explained in Note 4(a) Basis of preparation and Note 5 Critical accounting estimates and judgements,
the governmental and societal responses to climate change risks are still developing and are
interdependent upon each other. Consequently, financial statements cannot capture all possible future
outcomes as these are not yet known. The degree of certainty of these changes may also mean that
they cannot be fully taken into account when determining asset and liability valuations and timing of
future cash flows under the requirements of UK adopted international accounting standards. As
explained in Note 4(a), management believe that reasonably possible changes arising from climate risk
would not have a material impact on the financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
43
Climate change (continued)
Our audit effort in considering the impact of climate change on the financial statements was focused on
evaluating management’s assessment of the impact of climate risk, physical and transition, their climate
commitments, the effects of material climate risks disclosed on pages 15-19 and the significant
judgements and estimates disclosed in Note 4(a) and whether these have been appropriately reflected
following the requirements of IFRS. As part of this evaluation, we performed our own risk assessment
supported by our climate change internal specialists to determine the risks of material misstatement in
the financial statements from climate change which needed to be considered in our audit.
Based on our work we have not identified the impact of climate change on the financial statements to
be a key audit matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
Risk
Our response to the risk
Key
observations
communicated to the
Audit Committee
Valuation of Aircraft (2024: $791.4
million, 2023: $845.5 million)
Refer to Note 4(f) of the ‘Material
Accounting Policy Information’ (page
69); Note 7 (page 88) and Note 19 of
the
Consolidated
Financial
Statements (page 108).
The carrying value of jet and turboprop
aircraft represent the most significant
asset in the financial statements of
Avation plc. As at 30 June 2024, the
carrying value of aircraft is US$791.4
million (2023: US$845.5 million) as
detailed in Note 19 of the financial
statements.
As set out on page 69 within Notes 4(f)
‘Material
Accounting
Policy
Information’, aircraft are measured at
fair value on a Lease Encumbered
Value basis (“LEV”). As detailed in
Note
5(b)
‘Critical
Accounting
We have assessed each aircraft as
they are deemed to be individually
material to the financial statements. In
obtaining sufficient audit evidence we:
•
Obtained an understanding of the
process
for
the
valuation
of
aircraft on an LEV basis and
performed a walkthrough of the
process, including controls over
the inputs and assumptions of
calculation, and evaluated the
design of controls in relation to the
identified risk.
•
Assessed
and
evaluated
the
appropriateness and accuracy of
the key assumptions used in the
LEV
calculation,
through
recalculation
and
scenario
analysis.
•
Involved
an
EY
Financial
Accounting and Advisory Services
Our
planned
audit
procedures
were
completed
without
material exception.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
44
Risk
Our response to the risk
Key
observations
communicated to the
Audit Committee
Estimates
and
Judgments’,
management applies estimation and
judgment as part of their fair value
assessment of aircraft.
LEV is determined by discounting the
lease income streams associated with
the lease and the expected future
residual value of the aircraft at the end
of the lease adjusted for return
conditions at lease termination using
an appropriate discount rate.
The nature and size of these balances
and their importance to the Group are
such that we have identified this as a
key audit matter.
team
to
assess
the
reasonableness of the discount
rates used in discounting the
future cash flows of aircraft in the
model. As part of our audit
procedures, we also evaluated the
appropriateness of credit premia
and
discounts
applied
by
management for each lessee by
analysing their respective credit
risks.
•
Evaluated the independence and
competence of experts engaged
by management in calculating the
LEV
in
accordance with the
requirements
of
auditing
standards.
•
Assessed the accuracy of data
inputs, such as lease income
streams,
by
reviewing
lease
agreements and amendments, as
necessary.
•
Assessed
the
calculations
underpinning the LEV model by
checking
that
the
data,
the
assumptions and inputs into the
model were in agreement with
those that we had evaluated in
other areas of the audit.
•
Assessed
the
appropriateness
and presentation of disclosures in
the
financial
statements
for
compliance
with
the
relevant
accounting standards.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
45
Risk
Our response to the risk
Key
observations
communicated to the
Audit Committee
Valuation
of
Aircraft
Purchase
Rights (2024: $112.8 million, 2023:
$85.8 million)
Refer to the Note 4(h) ‘Material
Accounting Policy Information’ (page
70); Note 7 (page 88) and Note 26 of
the
Consolidated
Financial
Statements (page 122).
We have determined that the valuation
of aircraft purchase rights represent a
significant risk. The fair value of
aircraft purchase rights may not be
correctly valued and recorded in
accordance with IFRS 13, Fair Value
Measurement.
As set out on page 85 within Note 5(e)
‘Critical Accounting Estimates and
Judgements’, aircraft purchase rights
are measured at fair value through
profit or loss. The Group values
aircraft purchase rights using the
Black-Scholes price model.
Critical
assumptions made in determining the
fair value of the aircraft purchase
rights
include
the
market
value
volatility rates used.
The nature and size of these balances
and their importance to the Group are
such that we have identified this as a
key audit matter.
In obtaining sufficient audit evidence
we:
•
Obtained an understanding of the
aircraft purchase rights valuation
process, performed a walkthrough
of the process and evaluated the
design effectiveness of controls
related to the risk identified.
•
Assessed the assumptions used
by management and evaluated
the appropriateness and accuracy
of
inputs
such
as
assumed
delivery dates, purchase right
exercise dates, the asset price
and
risk-free,
volatility
and
inflation rates.
•
Involved
an
EY
Financial
Accounting and Advisory Services
team to assist in assessing the
reasonableness of the valuation
model.
•
Evaluated the competence and
independence of the external
appraisers
as
management
experts for the external market
appraisals provided. We obtained
these external valuation reports to
validate the market inputs to the
valuation calculation.
•
Assessed
the
appropriateness
and presentation of disclosures in
the
financial
statements
for
compliance
with
the
relevant
accounting standards.
Our
planned
audit
procedures
were
completed
without
material exception.
In the prior year, our auditor’s report included a key audit matter in relation to Expected Credit Loss
(ECL) on Trade and Other Receivables due to a substantial amount of receivables and a history of lease
restructuring. However, this year, the Group has seen a significant reduction in trade and other
receivables, along with marked improvements in lessees' compliance with their lease payment
obligations. Consequently, we have concluded that ECL no longer constitutes a key audit matter.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
46
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of
identified misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably
be expected to influence the economic decisions of the users of the financial statements. Materiality
provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be $2.5 million (2023: $2.3 million), which is 1% (2023: 1%)
of Total Equity.
We believe that Total Equity provides us with the most reliable measure used by
investors and other stakeholders when assessing the performance of the Group.
We determined materiality for the Parent Company to be $1.8 million (2023: $1.5 million), which is 1%
of Total Equity (2023: 0.5% of Total Assets).
During the course of our audit, we reassessed initial materiality and there was no change in the
materiality basis from the original assessment at planning.
Performance materiality
The application of materiality at the individual account or balance level.
It is set at an amount to reduce
to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control
environment, our judgement was that performance materiality was 50% (2023: 50%) of our planning
materiality, namely $1.2m (2023: $1.2m).
We have set performance materiality at this percentage due
to our prior audit experience.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in
excess of $128,000 (2023: $121,000), which is set at 5% of planning materiality, as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality
discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report, including the Chairman’s
Statement (set out on pages 2-4), Strategic Report (set out on pages 5-22), Directors’ Report (set out
on pages 23-27), Directors’ Remuneration Report (set out on pages 28-37), and Directors’ Responsibility
Statement (set out on pages 38-39), other than the financial statements and our auditor’s report thereon.
The directors are responsible for the other information.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
47
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there
is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared
in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which
the financial statements are prepared is consistent with the financial statements; and
•
the strategic report and directors’ report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its
environment obtained in the course of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company,; or
•
the parent company financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
48
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement
(set out on pages 38-39), the directors
are responsible for the preparation of the financial statements and for being satisfied that they give a
true and fair view,
and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the group and parent
c
ompany’s
ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the company and management.
Our approach was as follows:
•
We obtained an understanding of the legal and regulatory frameworks that are applicable to the
group and determined that the most significant are:
o
Companies Act 2006
o
Tax Legislation (governed by HM Revenue and Customs and Inland Revenue Authority of
Singapore)
o
Financial Conduct Authority (FCA) Listing Rules
o
Disclosure Guidance and Transparency Rules (DTR) of the FCA
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVATION PLC (CONTINUED)
49
•
We understood how Avation plc is complying with those frameworks by holding discussions with
general counsel and service providers. We enquired as to any known instances of non-compliance
with laws and regulations
•
We assessed the susceptibility of the group’s financial statements to material misstatement,
including how fraud might occur by holding discussions with senior management
•
Based on this understanding we designed our audit procedures to identify non-compliance with such
laws and regulations. Our procedures involved inquiring of key management and reviewing key
policies.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required to address
•
We were appointed by the company on 20 December 2017 to audit the financial statements for the
year ending 30 June 2018 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is
7 years, covering the years ending 30 June 2018 to 30 June 2024.
•
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or
the parent company and we remain independent of the group and the parent company in
conducting the audit.
•
The audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Vincent Bergin (Senior statutory auditor)
for and on behalf of Ernst & Young, Chartered Accountants and Statutory Auditor
Dublin
25 October 2024
AVATION PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2024
50
Note
2024
2023
(Restated)
US$’000s
US$’000s
Continuing operations
Revenue
10
Other income
11
Depreciation
19
(37,251 )
(38,566 )
Gain on derecognition of finance lease
Loss on disposal of aircraft
19
(2,915 )
(1,000 )
Unrealised gain on aircraft purchase rights and deposits paid for
aircraft
25,26
Unrealised (loss)/gain on equity investments
27
(490 )
(Impairment loss)/reversal of impairment loss on aircraft
19
(5,573 )
Aircraft transition expenses
(2,607 )
(11,389 )
(Provision for)/reversal of expected credit losses
20,21
(659 )
Administrative expenses
12
(8,792 )
(8,760 )
Legal and professional fees
(2,251 )
(2,382 )
Operating profit
Finance income
13
Finance expenses
14
(63,015 )
(63,539 )
Profit before taxation
16
Taxation
17
(10,311 )
(886 )
Profit from continuing operations
Profit attributable to:
Shareholders of Avation PLC
Non-controlling interests
Earnings per share for profit
attributable to shareholders of Avation PLC
Basic earnings per share (US cents)
18
Diluted earnings per share (US cents)
18
AVATION PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2024
51
Note
2024
2023
(Restated)
US$’000s
US$’000s
Profit from continuing operations
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Net (loss)/gain on cash flow hedge, net of tax
24
(4,568 )
(4,568 )
Items that may not be reclassified subsequently to profit or loss:
Revaluation loss on property, plant and equipment, net of tax
33
(3,421 )
(966 )
Other comprehensive income, net of tax
(7,989 )
(556 )
Total comprehensive income for the year
Total comprehensive income attributable to:
Shareholders of Avation PLC
Non-controlling interests
AVATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF 30 JUNE 2024
52
Note
30 June 2024
30 June
2023
(Restated)
1 July2022
(Restated)
US$’000s
US$’000s
US$’000s
ASSETS
Non-current assets
Property, plant and equipment
19
Finance lease receivables
21
Trade and other receivables
20
Deposits paid for aircraft
25
Derivative financial assets
24
Aircraft purchase rights
26
Lease incentive assets
29
Goodwill
22
Current assets
Finance lease receivables
21
Trade and other receivables
20
Deposits paid for aircraft
25
Derivative financial assets
24
Investment in equity, fair value through profit or loss
27
Lease incentive assets
29
Restricted cash
30
Fixed deposits
30
Cash and cash equivalents
30
Assets held for sale
31
Total assets
AVATION PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF 30 JUNE 2024
53
Note
30 June 2024
30 June 2023
(Restated)
1 July 2022
(Restated)
US$’000s
US$’000s
US$’000s
EQUITY AND LIABILITIES
Equity
Share capital
32
Share premium
Treasury shares
32
(7,811 )
Merger reserve
Asset revaluation reserve
33
Capital reserve
Other reserves
34
Retained earnings
Equity attributable to shareholders of Avation PLC
Non-controlling interests
Total equity
Non-current liabilities
Loans and borrowings
35
Trade and other payables
36
Derivative
financial liabilities
24
Maintenance reserves
37
Deferred tax liabilities
38
Current liabilities
Loans and borrowings
35
Trade and other payables
36
Maintenance reserves
37
Income tax payable
Liabilities directly associated with assets held for sale
Total equity and liabilities
Approved by the board and authorised for issue on 25 October 2024
………………………….
Robert Jeffries Chatfield
Executive Chairman
AVATION PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS OF 30 JUNE 2024
54
Note
2024
2023
US$’000s
US$’000s
ASSETS
Non-current assets
Trade and other receivables
20
45,344
46,740
Deposits paid for aircraft
25
21,813
8,139
Derivative financial assets
24
2,176
3,399
Investment in debt instrument, fair value through profit or loss
28
16,335
-
Investment in subsidiaries
23
2,050
3,328
Aircraft purchase rights
26
112,780
85,820
200,498
147,426
Current assets
Trade and other receivables
20
132,362
161,463
Deposits paid for aircraft
25
8,520
-
Restricted cash
30
800
-
Cash and cash equivalents
30
7,381
671
149,063
162,134
Total assets
349,561
309,560
EQUITY AND LIABILITIES
Equity
Share capital
32
1,182
1,182
Share premium
70,120
70,024
Treasury shares
32
-
-
Merger reserve
6,715
6,715
Other reserves
34
3,026
3,333
Retained earnings
90,609
74,678
Total equity
171,652
155,932
Non-current liabilities
Loans and borrowings
35
45,734
59,535
Trade and other payables
36
57,123
55,749
Derivative financial liabilities
24
2,037
1,632
Deferred tax liabilities
38
20,411
13,102
125,305
130,018
Current liabilities
Loans and borrowings
35
8,652
13,207
Trade and other payables
36
43,952
10,403
52,604
23,610
Total equity and liabilities
349,561
309,560
The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 not to present the
Company statement of profit or loss and other comprehensive income.
The Company’s profit for the year was US$16.0
million (2023: US$11.5 million).
Approved by the board and authorised for issue on 25 October 2024
………………………….
Robert Jeffries Chatfield
Executive Chairman
AVATION PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
55
Capital reserve comprises acquisitions with non-controlling interests that do not result in a change of control.
Other reserves consists of capital redemption reserve, share warrant reserve, fair value reserve and foreign currency hedge reserve. See Note 34.
The merger reserve arose on acquisition of additional shares of the Company’s subsidiary Capital Lease Aviation Limited through the allotment of ordinary shares in the year ended
30 June 2015.
The merger reserve represents the difference between the fair value and the nominal value of the shares issued by the Company.
Attributable to shareholders of Avation PLC
Note
Share
capital
Share
premium
Treasury
Shares
Merger
reserve
Asset
revaluation
reserve
Capital
reserve
Other
reserves
Retained
earnings
Total
Non-
controlling
interest
Total
equity
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
Balance at 1 July 2023 as
previously reported
Effects of changes in
accounting policies
Balance at 1 July 2023 as
restated
Profit for the year
Other comprehensive income
(3,421 )
(4,568 )
(7,989 )
(7,989 )
Total comprehensive income
(3,421 )
(4,568 )
Issue of shares
32
(18 )
Purchase of treasury shares
32
(95 )
(95 )
(95 )
Cancellation of treasury shares
32
(1 )
(95 )
Share warrant expense
34
Total transactions with owners
recognised directly in equity
(95 )
Expiry of share warrants
34
(9 )
Total others
(9 )
Balance at 30 June 2024
AVATION PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
56
Attributable to shareholders of Avation PLC
Note
Share
capital
Share
premium
Treasury
Shares
Merger
reserve
Asset
revaluation
reserve
Capital
reserve
Other
reserves
Retained
earnings
Total
Non-
controlling
interest
Total
equity
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
Balance at 1 July 2022 as
previously reported
(7,811 )
Effects of changes in
accounting policies
Balance at 1 July 2022 as
restated
(7,811 )
Profit for the year
Other comprehensive income
(966 )
(556 )
(556 )
Total comprehensive income
(966 )
Issue of shares
32
(506 )
Purchase of treasury shares
32
(94 )
(94 )
(94 )
Cancellation of treasury shares
32
(39 )
(7,905 )
Share warrant expense
34
Total transactions with owners
recognised directly in equity
(21 )
(7,905 )
Expiry of share warrants
34
(190 )
Total others
(190 )
Balance at 30 June 2023
AVATION PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
57
Note
Share
capital
Share
Premium
Treasury
shares
Merger
reserve
Other
reserves
Retained
earnings
Total
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
Balance at 1 July 2023
1,182
70,024
-
6,715
3,333
74,678
155,932
Profit for the year
-
-
-
-
-
16,017
16,017
Other comprehensive income
-
-
-
-
(1,016)
-
(1,016)
Total comprehensive income
-
-
-
-
(1,016)
16,017
15,001
Issue of shares
32
1
96
-
-
(18)
-
79
Purchase of treasury shares
32
-
-
(95)
-
-
-
(95)
Cancellation of treasury shares
32
(1)
-
95
-
1
(95)
-
Share warrants expense
34
-
-
-
-
735
-
735
Total transactions with owners, recognised
directly in equity
-
96
-
-
718
(95)
719
Expiry of share warrants
34
-
-
-
-
(9)
9
-
Total others
-
-
-
-
(9)
9
-
Balance at 30 June 2024
1,182
70,120
-
6,715
3,026
90,609
171,652
Other reserves consists of capital redemption reserve, share warrant reserve and fair value reserve. See note 34.
AVATION PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
58
Note
Share
capital
Share
Premium
Treasury
shares
Merger
reserve
Other
reserves
Retained
earnings
Total
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
US$’000s
Balance at 1 July 2022
1,203
67,681
(7,811)
6,715
1,089
70,849
139,726
Profit for the year
-
-
-
-
-
11,544
11,544
Other comprehensive income
-
-
-
-
1,759
-
1,759
Total comprehensive income
-
-
-
-
1,759
11,544
13,303
Issue of shares
32
18
2,343
-
-
(506)
-
1,855
Purchase of treasury shares
32
-
-
(94)
-
-
-
(94)
Cancellation of treasury shares
32
(39)
-
7,905
-
39
(7,905)
-
Share warrants expense
34
-
-
-
-
1,142
-
1,142
Total transactions with owners, recognised
directly in equity
(21)
2,343
7,811
-
675
(7,905)
2,903
Expiry of share warrants
34
-
-
-
-
(190)
190
-
Total others
-
-
-
-
(190)
190
-
Balance at 30 June 2023
1,182
70,024
-
6,715
3,333
74,678
155,932
AVATION PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2024
59
Note
2024
2023
(Restated)
US$’000s
US$’000s
Cash flows from operating activities:
Profit before income tax
Adjustments for:
Amortisation of lease incentive asset
10
Depreciation expense
19
Depreciation of right-of-use assets
(Reversal of)/ provision for expected credit losses
20,21
(239 )
Finance income
13
(9,843 )
(5,906 )
Finance expense
14
Gain on derecognition of finance lease
(2,792 )
Loss on disposal of aircraft
Interest income from finance leases
10
(2,018 )
(2,230 )
Impairment loss/(reversal of) on aircraft
19,31
(3,287 )
Maintenance reserves income
37
(5,351 )
(830 )
Share warrants expense
15
Foreign currency exchange gain
(946 )
(3,107 )
Unrealised gain on aircraft purchase rights and deposits paid for
aircraft
25,26
(46,886 )
(20,540 )
Unrealised loss/(gain) on equity investments
27
(7,520 )
Operating cash flows before working capital changes
Movement in working capital:
Trade and other receivables and finance lease receivables
(2,906 )
Deposits paid for aircraft
(2,268 )
(390 )
Trade and other payables
Maintenance reserves
Cash from operations
Finance income received
Finance expense paid
(45,724 )
(44,091 )
Income tax paid
(916 )
(610 )
Net cash from operating activities
Cash flows from investing activities:
Investment in fixed term deposits
(1,225 )
Purchase of property, plant and equipment
19
(5 )
(6 )
Proceeds from disposal of aircraft
Net cash from investing activities
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
Purchase of treasury shares
(95 )
(94 )
Increase of restricted cash balances
(3,515 )
(6,960 )
Proceeds from loans and borrowings, net of transactions costs
35
Repayment of loans and borrowings
35
(121,600 )
(135,115 )
Net cash used in financing activities
(96,033 )
(97,356 )
Net decrease in cash and cash equivalents
(1,255 )
(10,451 )
Cash and cash equivalents at beginning of year
30
Cash and cash equivalents at end of year
30
AVATION PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2024
60
Note
2024
2023
US$’000s
US$’000s
Cash flows from operating activities:
Profit before taxation
23,534
14,691
Adjustments for:
Depreciation of right-of-use assets
91
79
Expected credit losses
20
15,533
-
Fair value gain on investment in debt instrument
28
(920)
(858)
Finance income
(3,077)
(2,868)
Finance expense
8,360
7,150
Impairment loss on investment in subsidiary
1,278
-
Share warrant expense
735
1,142
Unrealised gain on aircraft purchase rights and deposits paid for
aircraft
25,26
(46,886)
(20,540)
Operating cash flows before working capital changes
(1,352)
(1,204)
Movement in working capital:
Trade and other receivables
14,280
33,589
Deposits paid for aircraft
(2,268)
(390)
Trade and other payables
33,229
(6,906)
Cash generated from operations
43,889
25,089
Finance income received
3,669
6,920
Finance expense paid
(6,755)
(9,147)
Income tax paid
-
(84)
Net cash generated from operating activities
40,803
22,778
Cash flows from investing activities:
Investment in debt instrument, fair value through profit or loss
28
(15,415)
(3,305)
Net cash used in investing activities
(15,415)
(3,305)
Cash flows from financing activities:
Net proceeds from issuance of ordinary shares
79
1,855
Purchase of treasury shares
(95)
(94)
Increase of restricted cash balances
(800)
-
Proceeds from loans and borrowings
-
22,590
Repayment of loans and borrowings
(17,862)
(52,862)
Net cash used in financing activities
(18,678)
(28,511)
Net increase/(decrease) in cash and cash equivalents
6,710
(9,038)
Cash and cash equivalents at beginning of year
30
671
9,709
Cash and cash equivalents at end of year
30
7,381
671
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
61
GENERAL
Act 2006 (Registration Number 05872328) and its shares are traded on the Standard Segment of
the Main Market of the London Stock Exchange. The address of the registered office is given on
page 1.
As disclosed in the Directors’ Report, the Group’s principal activity is aircraft leasing.
Details of
the activities of subsidiary companies are set out in Note 23 to these financial statements
STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with UK-adopted International
CHANGE IN ACCOUNTING POLICY
Maintenance reserves
With effect from 1 July 2023, the Group changed its accounting policy for maintenance reserves.
Under the previous accounting policy, the Group recognised any surplus or shortfall identified in
maintenance reserve liabilities for an aircraft as compared to the expected future reimbursement
obligations to a lessee in profit or loss at the end of lease or on sale of an aircraft.
The Group will recognise maintenance reserves as revenue over the term of a lease, to the extent
that collected maintenance reserves are not expected to be reimbursed to the lessee, on the
occurrence of specified maintenance events.
The Group believes that the new accounting policy which provides for a timely release of
maintenance reserves to profit or loss over the lease term will ensure that financial statements
reflect the Group's financial performance more accurately. This change in accounting policy has
been applied retrospectively.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
3
CHANGE IN ACCOUNTING POLICY (continued)
62
Summary of quantitative impact
The following tables summarise the material impacts on the consolidated statement of profit or
loss, consolidated statement of comprehensive income and consolidated statement of financial
position resulting from the change in accounting policy.
30 June 2023 | Impact of change in accounting policy | ||
As | |||
previously | Adjustments | As restated | |
reported | |||
US$’000s | US$’000s | US$’000s | |
Revenue | 91,861 | 830 | 92,691 |
Operating profit | 70,633 | 830 | 71,463 |
Profit before taxation | 13,000 | 830 | 13,830 |
Taxation | (808) | (78) | (886) |
Profit from continuing operations | 12,192 | 752 | 12,944 |
30 June 2023 | Impact of change in accounting policy | ||
As | |||
previously | Adjustments | As restated | |
reported | |||
US$’000s | US$’000s | US$’000s | |
Profit attributable to: | |||
Shareholders of Avation PLC | 12,191 | 752 | 12,943 |
Non-controlling interest | 1 | - | 1 |
12,192 | 752 | 12,944 | |
Earnings per share for profit | |||
attributable to shareholders of Avation PLC | |||
Basic earnings per share (US cents) | 17.43 cents | 18.50 cents | |
Diluted earnings per share (US cents) | 17.38 cents | 18.46 cents | |
Total comprehensive income for the year | 11,636 | 752 | 12,388 |
Total comprehensive income attributable to: | |||
Shareholders of Avation PLC | 11,635 | 752 | 12,387 |
Non-controlling interest | 1 | - | 1 |
11,636 | 752 | 12,388 | |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
3
CHANGE IN ACCOUNTING POLICY (continued)
63
Consolidated statement of financial position
As at 1 July 2022 | Impact of change in accounting policy | ||
| As | |||
previously | Adjustments | As | |
| reported | restated | ||
US$’000s | US$’000s | US$’000s | |
Maintenance reserves – non-current | 75,131 | (1,377) | 73,754 |
Deferred tax liabilities | 25,437 | 176 | 25,613 |
Non-current liabilities | 884,127 | (1,201) | 882,926 |
Liabilities associated with assets held for sale | 15,146 | (347) | 14,799 |
Current liabilities | 105,800 | (347) | 105,453 |
Retained earnings | 84,519 | 1,548 | 86,067 |
Total equity | 227,093 | 1,548 | 228,641 |
As at 30 June 2023 | Impact of change in accounting policy | ||
As | |||
previously | Adjustments | As | |
| reported | restated | ||
US$’000s | US$’000s | US$’000s | |
Maintenance reserves – non-current | 54,587 | (2,554) | 52,033 |
Deferred tax liabilities | 26,440 | 254 | 26,694 |
Non-current liabilities | 797,419 | (2,300) | 795,119 |
Retained earnings | 88,995 | 2,300 | 91,295 |
Total equity | 241,632 | 2,300 | 243,932 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
64
MATERIAL ACCOUNTING POLICY INFORMATION
BASIS OF PREPARATION
– The financial statements have been prepared in accordance
with UK-adopted International Accounting Standards (“IFRSs”) in conformity with the
requirements of the Companies Act 2006.
The financial statements have been prepared on a going concern basis and have been
prepared in accordance with the historical cost convention, as modified by the revaluation
of certain assets and liabilities.
The financial statements are presented in United States Dollars and all values are rounded
to the nearest thousand (US$’000s) unless otherwise indicated. The year-end exchange rate
for Pounds Sterling to United States Dollars is 1.27 (2023: 1.27).
The preparation of financial statements in conformity with UK-adopted International
Accounting Standards (“IFRSs”) requires the use of significant accounting judgements,
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the financial period. Although these
estimates are based on management’s best knowledge of current events and actions, actual
results may ultimately differ from those estimates.
The accounting policies set out below have been applied consistently throughout the
financial period presented in these financial statements by the Company and its subsidiaries,
unless otherwise disclosed.
As the governmental and societal responses to climate change are still developing, it is not
possible to consider all future outcomes when determining the carrying amount of assets
and liabilities in the preparation of the financial statements.
The Group’s view is that the
possible changes arising from climate related risks would not have a material impact on the
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
65
BASIS OF CONSOLIDATION
- The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries, together the Group as at 30 June 2024.
Subsidiaries are all entities over which the Group has control. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the
relevant activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the
Group considers all
relevant facts and circumstances in assessing whether it has control over
an investee, including:
The contractual arrangement with the other vote holders of the investee
Rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights
Whether or not the Group controls an investee is re-assessed if facts and circumstances
indicate that there are
changes to one or more of the three elements of control. Consolidation
of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when
the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a
subsidiary acquired or disposed of during the year are included in the statement of
comprehensive income from the date the Group gains control until the date the Group ceases
to control the
subsidiary.
Profit or loss and each component of other comprehensive income (“OCI”) are attributed to
the shareholders of
Avation PLC and to the non-controlling interests, even if this results in
the non-controlling interests
having a deficit balance. When necessary, adjustments are
made to the financial statements of subsidiaries to bring their accounting policies into line
with the Group’s accounting policies. All intra-group assets and
liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group are
eliminated in full on consolidation.
Investments in subsidiaries are stated at cost less impairment in the Company’s separate
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
66
GOODWILL
- Goodwill is initially measured at cost, being the excess of the aggregate of the
consideration transferred and the
amount recognised for non-controlling interests, and any
previous interest held, over the net identifiable assets
acquired and liabilities assumed. If
the fair value of the net assets acquired is in excess of the aggregate
consideration
transferred, the Group re-assesses whether it has correctly identified all of the assets
acquired a n d all of the liabilities assumed and reviews the procedures used to measure the
amounts to be recognised at
the acquisition date. If the re-assessment still results in an
excess of the fair value of net assets acquired over
the aggregate consideration transferred,
then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the Group’s cash-generating units that are
expected to benefit from the combination, irrespective of whether other assets or
liabilities
of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within
that unit is disposed of, the goodwill associated with the disposed operation is included in
the carrying amount of the operation when determining the gain or loss on disposal. Goodwill
disposed in these circumstances is measured based on the relative values of the disposed
GOING CONCERN
These consolidated financial statements have been prepared on a going concern basis. As part
of the going concern assessment, management has considered all projected cash inflows and
outflows of the Company and its subsidiaries, over the coming year including:
Current unrestricted cash on hand balance available,
Projected collections of receivable balances and contracted assets sales,
Forecasted cash outflows for all contractual debt and lease obligations and selling,
general and administrative expenses for the next 12 months,
Forecasted cash outflows for capital expenditure for the next 12 months
Management has also conducted sensitivity analysis on projected cash flows for changes in
base assumptions around rent collection rates and other significant factors.
In addition, the Directors have considered the maturity profiles of all loans and borrowings
and have evaluated the Group’s compliance with financial and non-financial covenants.
Based
on this analysis and all information available at present, the Directors believe that the actions
that they have taken and intend to take will ensure that the Group has sufficient liquidity to
meet its obligations as they fall due and that it continues to be appropriate to prepare the
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
67
FAIR VALUE MEASUREMENT
– The Group measures financial instruments, such as
derivatives, investment in equity and non-financial assets, such as aircraft and aircraft
purchase rights in excess of the Group’s usage requirements at fair values at each reporting
date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date.
Fair value
measurement is based on the presumption that the transaction to sell the asset or transfer
the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset
or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
In the case of aircraft, unless otherwise disclosed, the assets are valued using lease
encumbered value (“LEV”).
Under such a valuation, which reflects highest and best use given
the fact that the aircraft are held for use in a leasing business, the income streams associated
with the lease and the expected future market value of the aircraft at the end of the lease are
discounted to current values. The valuers prepare their valuation report based on the market
for second hand aircraft, which is active, known and measurable.
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorised within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or
liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the
fair value measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the lowest level input that is significant to the
fair value measurement is unobservable
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(e)
FAIR VALUE MEASUREMENT (continued)
68
For assets and liabilities that are recognised in the financial statements on a recurring basis,
the Group determines whether transfers have occurred between Levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
measurement, such as aircraft, aircraft purchase rights and for non-recurring measurement,
External valuers are involved for valuation of significant assets, such as aircraft and aircraft
purchase rights.
At each reporting date, management analyses the movements in the values of assets and
liabilities which are required to be re-measured or re-assessed as per the Group’s
accounting policies. For this analysis, management verifies the major inputs applied in the
latest valuation by agreeing the information in the valuation computation to contracts and
other relevant documents so far as possible.
Management, in conjunction with the Group’s external valuers, also compares the changes
in the fair value of each asset and liability with relevant external sources to determine
whether the change is reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
69
PROPERTY, PLANT AND EQUIPMENT
– All items of property, plant and equipment are
initially recorded at cost.
The cost of an item of property, plant and equipment is recognised
as an asset if, it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably.
Subsequent to recognition, aircraft are stated in the statement of financial position at their
revalued amount.
All items of property plant and equipment other than aircraft are
measured at cost less any accumulated depreciation and accumulated impairment losses.
Revaluations are performed with sufficient regularity such that the carrying amount does
not differ materially from that which would be determined using fair values at the reporting
date. These aircraft have been reviewed for impairment.
Any revaluation increase arising on the revaluation of such aircraft is credited to the asset
revaluation reserve, except to the extent that it reverses a revaluation decrease for the
same asset previously recognised in profit or loss, in which case the increase is credited to
profit or loss to the extent of the decrease previously charged. A decrease in carrying
amount arising on the revaluation of such aircraft is charged to profit or loss to the extent
that it exceeds the balance, if any, held in the assets revaluation reserve relating to a
previous revaluation of that asset.
retirement of a revalued aircraft, the attributable revaluation surplus remaining in the asset
revaluation reserve is transferred directly to retained earnings.
Depreciation is charged so as to write off the cost or valuation of assets less residual values,
over their estimated useful lives, using the straight-line method, on the following bases:
Narrow-body jets and turboprops | 25 years from date of manufacture |
Twin-aisle jets | 23 years from date of manufacture |
Aircraft engines | 15 years from date of acquisition |
Furniture and equipment | 3 years |
Residual values, useful lives and depreciation methods are revised and adjusted if
appropriate, at each reporting date. Residual values are based on 15% of cost for new
aircraft, estimated scrap values for second hand aircraft and 33% of cost for new aircraft
engines.
Fully depreciated assets still in use are retained in the financial statements until they are
The gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
70
DEPOSITS PAID FOR AIRCRAFT
– Deposits paid to acquire aircraft which are over and
above the Group’s requirements for use in the leasing business will be dispose of.
The Group
values these deposits using the discounted cashflow model. These deposits paid are measured
AIRCRAFT PURCHASE RIGHTS –
Purchase rights to acquire aircraft which are over and
above the Group’s requirement for use in the leasing business will be disposed of. The Group
values these excess aircraft purchase rights using the Black Scholes model.
Aircraft purchase
NON-CURRENT ASSETS HELD FOR SALE
– Non-current assets (and disposal groups)
classified as held for sale are measured at the lower of carrying amount and fair value less
costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amount
will be recovered through a sale transaction rather than through continuing use.
This
condition is regarded as met only when the sale is highly probable and the asset (or disposal)
group is available for immediate sale in its present condition.
Management must be
committed to the sale which should be expected to qualify for recognition as a completed sale
within one year from the date of classification.
Property, plant and equipment are not depreciated or amortised once classified as held for
sale.
Assets and liabilities classified as held for sale are presented separately as current items in
IMPAIRMENT OF NON-FINANCIAL ASSETS
- At each reporting date the Group assesses
whether there is an indication that an asset may be impaired.
If any indication exists, or
when an annual impairment testing for an asset is required, the Group makes an estimate
of the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value
less costs of disposal and its value-in-use and is determined for an individual asset, unless
the asset does not generate cash inflows that are largely independent of those from other
assets or group of assets. Where the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, the asset is considered impaired and is written down to its
recoverable amount. In assessing value-in-use, the estimated future cash flows expected
to be generated by the asset are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs of disposal, recent market
transactions are taken into account, if available. If no such costs can be identified, an
appropriate valuation model is used.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(j)
IMPAIRMENT OF NON-FINANCIAL ASSETS
(continued)
71
Impairment losses are recognised in profit or loss to the extent that they do not reverse a
previous upwards revaluation.
An assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Group estimates the asset's or cash-
generating unit's recoverable amount. Any reversal of an impairment loss of a revalued
asset is treated as a revaluation increase. A reversal of an impairment loss on a revalued
asset is recognised in other comprehensive income and increases the revaluation surplus
for that asset. However, to the extent that an impairment loss on the same revalued asset
was previously recognised in profit or loss, a reversal of that impairment is also recognised
in profit or loss.
Impairment losses are recognised as an immediate expense. However, the impairment loss
shall be recognised in other comprehensive income to the extent of any credit balance
existing in the revaluation surplus in respect of that asset. The decrease recognised in other
comprehensive income reduces the amount accumulated in equity under the heading of
MAINTENANCE RESERVES
- Normal maintenance and repairs, airframe and engine
overhauls, and compliance with return conditions of the aircraft placed on operating leases
are provided by and paid for by the lessees. Certain lease agreements require the lessees
to make maintenance reserve contributions to the Group which subsequently can be drawn
on to pay for certain maintenance events carried out.
These maintenance reserve balances
are accounted for as liabilities.
The Group will recognise maintenance reserves as revenue over the term of a lease, to the
extent that collected maintenance reserves are not expected to be reimbursed to the lessee,
SHARE-BASED PAYMENTS
– The Group operates an equity-settled share-based
compensation plan. The value of the employee services received in exchange for the grant of
warrants is recognised as an expense in profit or loss with a corresponding increase in the
warrant reserve over the vesting period. The total amount to be recognised over the vesting
period is determined by reference to the fair value of the warrants granted on the date of the
grant using the binomial option pricing model method.
Non-market vesting conditions are
included in the estimation of the number of shares under warrants that are expected to
become exercisable on the vesting date.
At the end of each reporting period, the Group
revises its estimates of the number of shares under warrants that are expected to become
exercisable on the vesting date and recognises the impact of the revision of the estimates in
profit or loss, with a corresponding adjustment to the warrant reserve over the remaining
vesting period.
When the warrants are exercised, the proceeds received and the related balance previously
recognised in the warrant reserve are credited to share capital and share premium accounts
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
72
LEASES
Group as a lessor
The Group leases aircraft to airlines under operating leases. At lease inception or
modification date, the Group reviews all necessary criteria to determine proper lease
classification.
Leases of aircraft where the Group retains substantially all risks and rewards
incidental to ownership are classified as operating leases. Rental income from operating
leases (net of any incentives given to the lessees) is recognised in profit or loss on a straight-
line basis over the lease term.
The Group recognises contingent rents when they can be
reliably measured.
Where the Group transfers substantially all the risks and rewards of ownership of an asset,
the lease is classified as a finance lease. Lease receipts are apportioned between finance
income and reduction of the finance lease receivable so as to achieve a constant rate of
interest on the remaining balance of the asset. Finance income is credited to revenue.
For sales–type leases, the Group recognise the difference between the net book value of
the aircraft and the net finance lease receivables as a gain or loss on sale of aircraft, less
any initial direct costs.
The unearned income is recognised as finance lease interest income
within revenue over the lease term in a manner that produces a constant rate of return on
the finance lease receivables.
Under the terms of certain lease agreements, lessees are required to make maintenance
contributions to the Group. The Group will recognise maintenance reserves as revenue over
the term of a lease, to the extent that collected maintenance reserves are not expected to
be reimbursed to the lessee, on the occurrence of specified maintenance events.
End of lease compensation payments made to the Group are recognised as revenue when
a reliable estimate of the expected compensation amount can be determined. The Group
does not recognise end of lease compensation as revenue if there is a reasonable
expectation that the lessee will extend the existing lease agreement rather than returning
the aircraft at the end of the current lease period.
Lease maintenance contribution
Some of the Group’s leases contain provisions which may require the Company to pay a
portion of the lessee’s costs for heavy maintenance, overhaul, or replacement of certain
high-value components.
The Group records liabilities for contractual obligations to
contribute to the lessee’s cost of major maintenance events expected to occur during the
lease. The Group regularly reviews the level of these contractual obligations under current
lease contracts and makes adjustments as necessary.
Lessor maintenance contributions
represents a lease incentive and are recorded as a charge against lease rental income over
the life of the associated lease on a straight-line basis. When aircraft are sold the portion of
the accrued liability not specifically assigned to the buyer is derecognised from the
Consolidated Statement of Financial Position as part of the gain or loss on disposal of the
aircraft.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(m)
LEASES
(continued)
73
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Group recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying
assets.
i)
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease
(i.e., the date the underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement date less any lease incentives
received. Right-of-use assets are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Group at the end of the lease term
or the cost reflects the exercise of a purchase option, depreciation is calculated using
the estimated useful life of the asset.
Right-of-use assets are also subject to impairment.
The Group’s lease arrangements do not contain an obligation to dismantle and remove
the underlying asset, restore the site on which it is located or restore the underlying
asset to a specified condition.
The Group’s right-of-use assets are included in trade and other receivables.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(m)
LEASES
(continued)
74
ii)
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease term.
The lease payments include fixed payments (including in-substance fixed payments)
less any lease incentives receivable, variable lease payments that depend on an index
or a rate, and amounts expected to be paid under residual value guarantees. The
lease payments also include the exercise price of a purchase option reasonably certain
to be exercised by the Group and payments of penalties for terminating the lease, if
the lease term reflects the Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as
expenses in the period in which the event or condition that triggers the payment
occurs.
In calculating the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in
the lease is not readily determinable. After the commencement date, the amount of
lease liabilities is increased to reflect the accretion of interest and reduced for the
lease payments made. In addition, the carrying amount of lease liabilities is re-
measured if there is a modification, a change in the lease term, a change in the lease
payments (e.g., changes to future payments resulting from a change in an index or
rate used to determine such lease payments) or a change in the assessment of an
option to purchase the underlying asset.
The Group’s lease liabilities are included in trade and other payables.
iii)
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases
of equipment (i.e., those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease
of low-value assets recognition exemption to leases of office equipment that are
considered to be low-value.
Lease payments on short-term leases and leases of low value assets are recognised
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
75
REVENUE RECOGNITION
– The Group as lessor, leases aircraft principally under both
operating leases and finance leases. Revenue which is not derived from leases is measured
as follows:
Interest income is accrued on a time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to that
Dividend income from investments is recognised when the company’s right to receive
CONTINGENCIES
– A contingent liability is:
(i)
a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Group; or
(ii)
a present obligation that arises from past events but is not recognised because:
i.
It is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; or
ii.
TAXATION
- Taxation expense represents the sum of current tax and deferred tax.
Current tax is based on taxable profit for the financial period. Taxable profit differs from
profit as reported in profit or loss because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
liabilities in the financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(p)
TAXATION (continued)
76
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss,
except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its current tax assets
FOREIGN CURRENCIES
- The Group’s consolidated financial statements and Company
financial statements are presented in United States Dollars. The individual financial
statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency) and United States Dollars
In preparing the financial statements of the individual entities, transactions in currencies
other than the entity’s functional currency (foreign currencies) are recorded at rates of
exchange prevailing on the dates of the transactions. At each reporting date, monetary
items denominated in foreign currencies are retranslated at rates prevailing on the reporting
date. Non-monetary items carried at fair value that are denominated in foreign currencies
are retranslated at rates prevailing on the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation
of monetary items, are included in profit or loss for the period. Exchange differences arising
on the retranslation of non-monetary items carried at fair value are included in profit or loss
for the period except for differences arising on the retranslation of non-monetary items in
respect of which gains and losses are recognised directly in equity. For such non-monetary
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
77
FINANCIAL INSTRUMENTS
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised
cost, fair value through other comprehensive income (OCI), and fair value through profit or
loss.
Subsequent measurement
For the purposes of subsequent measurement, financial assets are classified in four
categories:
Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and
losses (debt instruments)
Financial assets designated at fair value through OCI with recycling of cumulative
gains and losses upon derecognition (equity instruments)
Financial assets at fair value through profit or loss
(i)
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group.
The Group measures financial
assets at amortised cost if both of the conditions are met:
The financial asset is held within a business model with the objective to hold
financial assets in order to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specific dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding
Financial assets at amortised cost are subsequently measured using the effective
interest (EIR) method and are subject to impairment.
Gains and losses are
recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group and Company’s financial assets at amortised cost are cash and bank
balances, trade and other receivables and finance lease receivables.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(r)
FINANCIAL INSTRUMENTS (continued)
78
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for
trading, financial assets designated upon initial recognition at fair value through
profit or loss, or financial assets mandatorily required to be measured at fair value.
Financial assets are classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term.
Derivatives, including separated
embedded derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets with cash flows that
are not solely payments of principal and interest are classified and measured at fair
value through profit or loss, irrespective of the business model.
Notwithstanding
the criteria for debt instruments to be classified at amortised cost or at fair value
through OCI, debt instruments may be designated at fair value though profit or loss
on initial recognition if doing so eliminates, or significantly reduces, an accounting
mismatch.
Financial assets at fair value through profit or loss are carried in the statement of
financial position at fair value with net changes in fair value recognised in the
statement of profit or loss.
The Group and Company’s financial assets at fair value through profit or loss are
options held for trading, investment in equity, investment in debt instrument and
A financial asset is derecognised where the contractual right to receive cash flows from the
asset has expired. On derecognition of a financial asset in its entirety, the difference
between the carrying amount and the sum of the consideration received and any cumulative
gain or loss that had been recognised in other comprehensive income for financial assets is
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the
contractual provisions of the financial instrument. The Group determines the classification
of its financial liabilities at initial recognition. Financial liabilities are recognised initially at
fair value, minus in the case of financial liabilities not at fair value through profit or loss,
directly attributable transaction costs.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(r)
FINANCIAL INSTRUMENTS (continued)
79
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition at fair
value. Financial liabilities are classified as held for trading if they are acquired for
the purpose of selling in the near term. Subsequent to initial recognition, financial
liabilities at fair value through profit or loss are measured at fair value. Any gains
or losses arising from changes in fair value of the financial liabilities are recognised
in profit or loss.
The Group and Company’s financial liabilities at fair value through profit or loss
(ii)
Financial liabilities at amortised cost
After initial recognition, financial liabilities that are not carried at fair value through
profit or loss are subsequently measured at amortised cost using the effective
interest method. Gains and losses are recognised in profit or loss when the
liabilities are derecognised, and through the amortisation process.
The Group and Company’s financial liabilities at amortised cost are trade and other
payables, loans and borrowings and maintenance reserves.
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a de-recognition of
the original liability and the recognition of a new liability, and the difference in the respective
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
80
IMPAIRMENT OF FINANCIAL ASSETS
- The Group recognises an allowance for expected
credit losses (“ECLs”) for all financial assets not held at fair value through profit or loss.
ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected cash flows will include
cash flows from the sale of collateral held or other credit enhancements that are integral to
the contractual terms.
Loss allowances of the Group are measured on either of the following bases:
12-month ECLs: these are ECLs that result from default events that are possible within
the 12 months after the reporting date (or for a shorter period if the expected life of
the instrument is less than 12 months); or
Lifetime ECLs: these are ECLs that result from all possible default events over the
expected life of a financial instrument.
(i)
Simplified approach
The Group applies the simplified approach to provide for ECLs for all trade and other
receivables. The simplified approach requires the loss allowance to be measured at an
amount equal to lifetime ECLs.
The Group established a credit risk matrix based on the Group’s historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
(ii)
General approach
The Group applies the general approach to provide for ECLs on finance lease receivables
and all other financial assets not held at fair value through profit or loss. Under the
general approach, the loss allowance is measured at an amount equal to 12-month
ECLs at initial recognition.
At each reporting date, the Group assesses whether the credit risk of a financial
instrument has increased significantly since initial recognition. When credit risk has
increased significantly since initial recognition, loss allowance is measured at an
amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly
since initial recognition and when estimating ECLs, the Group considers reasonable and
supportable information that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and analysis, based on the
Group’s historical experience and informed credit assessment and includes forward-
looking information.
If credit risk has not increased significantly since initial recognition or if the credit
quality of the financial instruments improves such that there is no longer a significant
increase in credit risk since initial recognition, loss allowance is measured at an amount
equal to 12-month ECLs.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(s)
IMPAIRMENT OF FINANCIAL ASSETS (continued)
81
For the purpose of recognition of an allowance for ECL, the Group considers a financial asset
to be in default:
When the lessee does not pay the amounts due under its lease agreements to the Group
in excess of the security deposit or the value of the collateral. The Group will recognise
an allowance for ECL based on the historical observed default rates, current credit rating
of the customers, forecasted economic conditions to assess the amount of ECL
allowance required
.
Financial assets are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others,
the failure of a debtor to engage in a repayment plan with the Group, and a failure to
make contractual payments for a period of greater than 90 days past due or where the
trade receivables were in excess of the security packages held by the Group.
in the case where the financial asset is not secured, when the financial asset is more
RESTRICTED CASH AND CASH AND CASH EQUIVALENTS
Restricted cash balances comprise bank balances which are pledged as security for
Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and
short-term, highly liquid investments that are readily convertible to known amount of
TRADE AND OTHER PAYABLES
– Liabilities for trade and other payables which are
normally settled within 30 to 60 days credit terms, are initially carried at cost which is the
fair value of the consideration to be paid in the future for goods and services received,
whether or not billed to the Group and subsequently measured at amortised cost using the
effective interest method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised as well
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
82
LOANS AND BORROWINGS
- Interest-bearing loans from banks and financial institutions
are initially measured at fair value, and are subsequently measured at amortised cost, using
the effective interest rate method. Any difference between the proceeds (net of transaction
costs) and the settlement or redemption of borrowings is recognised over the term of the
borrowings.
Modification of loans – The Group assesses whether the new terms of modified third
party loans results in a modification of contractual cash flows substantially different to
the original terms. In making this assessment, the Group considers, among others,
significant changes in the interest rate.
If the terms are substantially different, the
Group derecognises the original financial liability and recognises a new financial liability
at fair value and recalculates a new effective interest rate for the liability. If the terms
are not substantially different, the modification does not result in derecognition, and
the Group recalculates the gross carrying amount based on the revised cash flows of
the liability recalculated by discounting the modified cash flows at the original effective
interest rate and recognises a modification gain or loss in profit or loss. The present
value of the modified cash flow of the financial liability is subsequently measured at and
amortised using the effective interest rate method over the remaining life of the loan
SHARE CAPITAL, SHARE ISSUANCE EXPENSES AND TREASURY SHARES
- Proceeds
from issuance of ordinary shares in excess of the par value are recognised in share premium
in equity. Incremental costs directly attributable to the issuance of ordinary shares are
deducted from share premium.
Own equity instruments that are reacquired (treasury shares) are recognised at cost and
deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale,
issue or cancellation of the Group’s own equity instruments. Any difference between the
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
– The Group uses derivative
financial instruments such as interest rate swap contracts and cross currency swap contracts
to hedge its risks associated with interest rate fluctuations. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract
is entered into, and are subsequently re-measured at fair value.
Any gains or losses arising from changes in fair value on derivatives that do not qualify for
hedge accounting are taken directly into profit or loss.
At the inception of a hedge
relationship, the Group formally designates and documents the hedge relationship to which
the Group wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
4
MATERIAL ACCOUNTING POLICY INFORMATION (continued)
(x)
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING (continued)
83
The
documentation includes identification of the hedged item or transaction, the hedging instrument, the nature of the risk being hedged and how the Group will assess the hedging
instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s (or
transaction’s) cash flows attributable to the hedged risk. Such hedges are expected to be
highly effective in achieving offsetting changes in cash flows, and are assessed on an
ongoing basis to determine that they have been highly effective throughout the financial
reporting periods for which they are designated.
Cash flow hedges
Hedges are classified as cash flow hedges when hedging the exposure to variability in cash
flows that is either attributable to a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction and could affect profit or loss. The effective
portion of the gain or loss on the hedging instrument is recognised directly in the fair value
reserve, while the ineffective portion is recognised in profit or loss.
Amounts taken to the fair value reserve are transferred to profit or loss when the hedged
transaction affects profit or loss, such as when a forecast sale or purchase occurs. If the
hedged item is a non-financial asset or liability, the amounts taken to the fair value reserve
are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedged future cashflows are no longer expected to occur, amounts previously
recognised in hedging reserve are transferred to profit or loss. If the hedging instrument
expires or is sold, terminated or exercised without replacement or rollover, or if its
designation as a hedge is revoked, amounts previously recognised in hedging reserve
remain in other comprehensive income until the future cash flows occur, if the hedged future
SEGMENTAL REPORTING
- Operating segments are reported in a manner consistent with
the internal reporting provided to the Board of Directors who are responsible for allocating
resources and assessing performance of the operating segment. The Group’s principal
activity is aircraft leasing and therefore there is only one reportable segment.
The financial
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
84
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and assumptions concerning the future are made in the preparation of financial
statements.
They affect the application of the Group’s accounting policies, reported amounts of
assets, liabilities, income and expenses and disclosures made.
They are assessed on an ongoing
basis and are based on experience and relevant factors, including expectations of future events
that are believed to be reasonable under the circumstances.
judgements.
Many effects arising from climate change will be longer term in nature, with an
inherent level of uncertainty, and have been assessed as having limited effect on accounting
judgements and estimates for the current period.
Refer to page 15 on the climate related financial
disclosures in the strategic report.
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
(a)
Impairment and review of residual value of property, plant and equipment –
aircraft
The Group periodically evaluates its aircraft for impairment and also reviews the residual
value of the aircraft.
Management exercises significant judgement in determining whether
there is any indication that any aircraft may have been impaired or if there are any
indications of changes in residual value. This exercise involves management considering
both internal and external sources of information which include but are not limited to:
observable indications that the value of the aircraft has declined during the period
significantly more than would be expected as a result of the passage of time or normal use;
significant adverse changes in the expected usage of the aircraft, technological or aviation
environment that have taken place or will take place in the near future; significant increase
in market interest rates; evidence of obsolescence or physical damage of the aircraft and
worse than expected economic performance of the aircraft.
The carrying amount of property, plant and equipment at the end of the reporting period is
disclosed in Note 19.
(b)
Revaluation of property, plant and equipment – aircraft
The Group periodically revalues its aircraft using lease encumbered value (“LEV”).
Under
such a valuation, which reflects the highest and best use given the fact that the aircraft are
held for use in a leasing business, the income streams associated with the lease and the
expected future market value of the aircraft at the end of the lease are discounted to current
values.
Critical assumptions made in determining LEV are the discount rate applied to
cashflows associated with the lease and the expected future value of aircraft at the end of
the lease. The factors considered in estimating the undiscounted cash flows are impacted
by changes in future periods due to changes in projected lease rental and maintenance
payments, residual values, economic conditions, technology, airline demand for a particular
aircraft type and other factors.
The carrying amount of property, plant and equipment - aircraft at the end of the reporting
period is disclosed in Note 19.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
5
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
85
(c)
Impairment of financial assets
The Group follows the guidance of IFRS 9 Financial Instruments in determining when a
financial asset is impaired, and this requires judgement on the correlation between historical
observed default rates and ECLs. The Group’s methodology for calculating ECLs is set out
in Note 8.
The carrying amount of financial assets at the end of the reporting period is disclosed in
Note 7.
(d)
Fair value estimation for deposits paid for aircraft
The Group values the deposits paid for aircraft using the discounted cashflow model.
The carrying amount of deposits paid for aircraft at the end of the reporting period is
disclosed in Note 25.
(e)
Fair value estimation for aircraft purchase rights
The Group values aircraft purchase rights using the Black Scholes pricing model.
Critical
assumptions made in determining the fair value of the aircraft purchase rights include the
assumed volatility of market prices.
The carrying amount of aircraft purchase rights at the end of the reporting period is
disclosed in Note 26.
(f)
Recognition of maintenance reserves income
The Group applies estimation in the determination of total maintenance reserves collected
expected to be reimbursed to the lessee over the lease term.
The Group will recognise
maintenance reserves as revenue over the term of a lease, to the extent that collected
maintenance reserves are not expected to be reimbursed to the lessee, on the occurrence
of specified maintenance events
The carrying amount of maintenance reserves at the end of the reporting period is disclosed
in Note 37.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
5
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
86
Judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the following
judgements, apart from those involving estimations, which have the most significant effect on the
amounts recognised in the financial statements:
(a)
Income taxes and deferred income taxes
a.
Avation Group (S) Pte Ltd and its subsidiaries were awarded another 5-year Aircraft
Leasing Scheme Incentive by the Singapore Economic Development Board, where
income from operating leases for aircraft and aircraft engines and qualifying activities
will be taxed at a concessionary rate of 8%.
Accordingly, qualifying income derived
from the period 17 April 2024 to 16 April 2029 will be taxed at the 8% concessionary
rate subject to meeting the terms and conditions of the incentives. Management’s
judgement is required in the application of the concessionary tax rate of 8% in
determining the carrying amount of deferred tax assets and liabilities for temporary
differences that are expected to be realised or settled beyond 16 April 2029.
b.
Deferred tax assets are recognised for all unabsorbed capital allowances and
unutilised tax losses to the extent that it is probable that taxable profit will be
available against which the losses can be utilised.
Management judgement is required
to determine the amount of deferred tax assets that can be recognised, based upon
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
87
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Standards and interpretations adopted during the year
The Group has adopted all new standards that have come into effect during the year ended 30 June
2024. The adoption of these standards did not have any material effect on the financial performance
(b)
New standards and interpretations not yet adopted
The Group has not adopted the following new or amended standards and interpretations which
are relevant to the Group that have been issued but are not yet effective:
Description | Effective date |
(period beginning) | |
Amendments to IFRS 16 - Lease liability in a Sale and Leaseback | 1 January 2024 |
Amendments to IAS 7 and IFRS 7 – Disclosures: Supplier Finance | 1 January 2024 |
Arrangements | |
Amendments to IAS 1: Classification of Liabilities as Current or | 1 January 2024 |
Non-current and Non-current liabilities with Covenants | |
Amendments to IAS 21 - Lack of exchangeability | 1 January 2025 |
Amendments to IFRS 9 and IFRS 7 : Classification and | 1 January 2026 |
Measurement of Financial Instruments | |
IFRS 18 – Presentation and Disclosure in Financial Statements | 1 January 2027 |
Amendments to IAS 21 - Lack of exchangeability | 1 January 2025 |
Amendments to IFRS 10 and IAS 28: Sale or Contribution of | Postponed indefinitely |
Assets between an Investor and its Associate or joint venture |
Based on a preliminary assessment using currently available information, the Group does not
expect the adoption of the above standards to have a material impact on the financial statements
in the period of initial application. These preliminary assessments may be subject to changes
arising from ongoing analyses when the Group adopts the standards. The Group plans to adopt
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
88
FAIR VALUE MEASUREMENT
transfer a liability in an orderly transaction between market participants at the measurement date.
The carrying amounts of cash and bank balances, trade and other receivables, finance lease
receivables – current, trade and other payables, loans and borrowings – current and maintenance
reserves are a reasonable approximation of fair value either due to their short-term nature or
because the interest rate charged closely approximates market interest rates or that the financial
instruments have been discounted to their fair value at a current pre-tax interest rate.
Group | 2024 | 2023 | ||
Carrying | Carrying | |||
amount | Fair value | amount | Fair value | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Financial assets: | ||||
Finance lease receivables – non-current | 12,754 | 11,461 | 41,213 | 38,555 |
Deposits paid for aircraft | 30,333 | 30,333 | 8,139 | 8,139 |
Derivative financial assets | 8,096 | 8,096 | 13,496 | 13,496 |
Aircraft purchase rights | 112,780 | 112,780 | 85,820 | 85,820 |
Investment in equity, fair value | ||||
through profit or loss | 10,745 | 10,745 | 11,235 | 11,235 |
Financial liabilities: | ||||
Deposits collected – non-current | 14,967 | 11,936 | 15,907 | 13,502 |
Loans and borrowings other than | ||||
unsecured notes – non-current | 323,117 | 299,009 | 391,110 | 360,055 |
Unsecured notes | 302,309 | 300,887 | 303,465 | 300,539 |
Share warrants | 2,037 | 2,037 | 1,632 | 1,632 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
7
FAIR VALUE MEASUREMENT (continued)
89
Company | 2024 | 2023 | ||
Carrying | Carrying | |||
amount | Fair value | amount | Fair value | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Financial assets: | ||||
Deposits paid for aircraft | 30,333 | 30,333 | 8,139 | 8,139 |
Derivative financial assets | 2,176 | 2,176 | 3,399 | 3,399 |
Aircraft purchase rights | 112,780 | 112,780 | 85,820 | 85,820 |
Investment in debt instrument | 16,335 | 16,335 | - | - |
Financial liabilities: | ||||
Loans and borrowings - non-current | 45,734 | 49,782 | 59,535 | 56,738 |
Share warrants | 2,037 | 2,037 | 1,632 | 1,632 |
The fair values (other than for unsecured notes, investment in debt instrument, fair value through
profit and loss) above are estimated by discounting expected future cash flows at market
incremental lending rate for similar types of lending, borrowing or leasing arrangements at the end
of the reporting period, which is classified under level 2 of the fair value hierarchy.
The fair value of the unsecured notes and share warrants are based on level 1 quoted prices
(unadjusted) in an active market that the Group can access at the measurement date.
The fair value of deposits paid for aircraft are classified under level 2 of the fair value hierarchy for
which the inputs are observable for the determination of fair value using the discounted cashflow
model.
The fair value of the derivative financial instruments is determined by reference to marked-to-
market values provided by counterparties.
The fair value measurement of all derivative financial
instruments is classified under level 2 of the fair value hierarchy, for which inputs other than quoted
prices that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) are included as inputs for the determination of fair value.
The fair value of aircraft purchase rights classified under level 3 of the fair value hierarchy in prior
years has been reclassified to level 2 during the year for which the aircraft price volatility rates are
observable and included in the determination of fair value using the Black Scholes model.
Assets measured at fair value classified under level 3: | ||||
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Fair value measurement using | ||||
significant unobservable inputs: | ||||
Aircraft | 791,408 | 845,455 | - | - |
Aircraft purchase rights | - | 85,820 | - | 85,820 |
Investment in equity, fair value through | ||||
profit or loss | 10,745 | 11,235 | - | - |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
7
FAIR VALUE MEASUREMENT (continued)
90
Aircraft were revalued at 30 June 2024 and 30 June 2023.
Refer to Note 19 for the details on the
valuation technique and significant inputs used in the valuation.
Information about significant unobservable inputs used in level 3 fair value
measurements.
The following table provides the information about the fair value measurements using unobservable
inputs (level 3):
Range | Range | Sensitivity of the | |||
Description | Valuation | Unobservable | (weighted | (weighted | input to fair value |
techniques | inputs | average) | average) | ||
2024 | 2023 | ||||
Aircraft | Lease- | Discount rates | 5.50% to | 5.50% to | Jet |
encumbered | 7.00% for | 7.00% for | 5% (2023 : 5%) | ||
basis | Jets (6.08%) | Jets (6.08%) | increase in the | ||
discount rates will | |||||
5.50% to | 5.50% to | results in a decrease in | |||
8.00% for | 9.00% for | fair value by US$6.1 | |||
Turboprops | Turboprops | million (2023 : | |||
(6.21%) | (6.32%) | decrease of US$7.4 | |||
million) | |||||
5% (2023 : 5%) | |||||
increase in the inflation | |||||
Inflation rates | 2.17% to | 2.33% to | rate will result in an | ||
2.32% for | 4.52% for | increase in fair value | |||
Jets (2.23%) | Jets (2.62%) | by US$1.6 million | |||
(2023 : increase of | |||||
2.15% to | 2.30% to | US$2.0 million) | |||
2.45% for | 2.97% for | ||||
Turboprops | Turboprops | Turboprops | |||
(2.26%) | (2.59%) | 5% (2023 : 5%) | |||
increase in the | |||||
discount rates will | |||||
result in a decrease in | |||||
fair value by US$1.9 | |||||
million (2023 : | |||||
decrease of US$2.5 | |||||
million) | |||||
5% (2023 : 5%) | |||||
increase in the inflation | |||||
rate will result in an | |||||
increase in fair value | |||||
by US$0.5 million | |||||
(2023 : increase of | |||||
US$0.7 million) |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
7
FAIR VALUE MEASUREMENT (continued)
Information about significant unobservable inputs used in level 3 fair value
measurements (continued)
91
Range |
Range |
Sensitivity of the |
|||
Description |
Valuation |
Unobservable |
(weighted |
(weighted |
input to fair value |
techniques |
inputs |
average) |
average) |
||
2024 |
2023 |
||||
Investment |
Market |
Discount for |
6.00% |
6.00% |
5% (2023 : 5%) |
in equity, |
approach |
lack of |
increase in the |
||
fair value |
marketability |
discount for lack of |
|||
through |
marketability will result |
||||
profit or loss |
in a decrease in fair |
||||
value by US$0.03 |
|||||
million (2023:US$0.04 |
|||||
million) |
Group |
||||
1 July |
Cash flows |
Non-cash/ |
30 June |
|
2023 |
other |
2024 |
||
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Loans and borrowings: |
||||
Current |
61,401 |
(60,341) |
48,608 |
49,668 |
Non-current |
391,110 |
(16,746) |
(51,247) |
323,117 |
Unsecured notes: |
||||
Non-current |
303,465 |
(15,415) |
14,259 |
302,309 |
755,976 |
(92,502) |
11,620 |
675,094 |
Group |
||||
1 July |
Cash flows |
Non-cash/ |
30 June |
|
2022 |
other |
2023 |
||
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Loans and borrowings: |
||||
Current |
63,900 |
(64,863) |
62,364 |
61,401 |
Non-current |
468,030 |
(17,863) |
(59,057) |
391,110 |
Unsecured notes: |
||||
Non-current |
296,200 |
(9,431) |
16,696 |
303,465 |
828,130 |
(92,157) |
20,003 |
755,976 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
7
FAIR VALUE MEASUREMENT (continued)
92
Company |
||||
1 July |
Non-cash/ |
30 June |
||
2023 |
Cash flows |
other |
2024 |
|
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Loans and borrowings: |
||||
Current |
13,207 |
(12,229) |
7,674 |
8,652 |
Non-current |
59,535 |
(5,633) |
(8,168) |
45,734 |
Trade and other payables: |
||||
Interest bearing payable due to subsidiaries |
56,669 |
1,903 |
- |
58,572 |
129,411 |
(15,959) |
(494) |
112,958 |
Company |
||||
1 July |
Non-cash/ |
30 June |
||
2022 |
Cash flows |
other |
2023 |
|
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Loans and borrowings: |
||||
Current |
16,353 |
(16,287) |
13,141 |
13,207 |
Non-current |
113,086 |
(36,404) |
(17,147) |
59,535 |
Trade and other payables: |
||||
Interest bearing payable due to subsidiaries |
34,250 |
22,419 |
- |
56,669 |
163,689 |
(30,272) |
(4,006) |
129,411 |
The ‘other’ column includes the amortisation of transaction costs and reclassification of non-current
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s activities expose it to a number of market related, operational and financial risks.
Risk is mitigated through the application of prudent risk management policies. The risks described
below are those that the Group has identified as the most significant risks to the business. The
Directors are responsible for managing risk and review risk management policies regularly.
The Group utilises derivative financial instruments as part of its overall risk management strategy.
(a)
Airline Industry Risks
The Group faces risks specific to the aviation sector including war, terrorism, equipment failure
and pandemics. These exposures are managed through the requirement for the airlines that
lease the Group’s assets to maintain insurance, adequate maintenance policies and/or
contribute to a maintenance reserve for the major maintenance events for each aircraft.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
93
Credit risk
Credit risk refers to the risk that debtors will default on their obligations to repay amounts
owing to the Group.
The Group has adopted a prudent credit policy towards extending credit terms to customers
and in monitoring those credit terms.
This includes assessing customers’ credit standing and
periodic reviews of their financial status to determine appropriate credit limits. The Group
generally requires its customers to pay rentals in advance and provide collateral in the form
of cash or letters of credit as security deposits for leases.
See Note 36.
The maximum exposure to credit risk in the event that counterparties fail to perform their
obligations in relation to each class of financial assets is the carrying amount of those assets
as stated in the statement of financial position.
The maximum exposure to credit risk for trade receivables at the reporting date by
geographical area is:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Asia-Pacific | 7,850 | 15,977 | - | 151 |
Europe | - | 26 | - | 18 |
7,850 | 16,003 | - | 169 | |
For trade receivables, the Group has applied the simplified approach and has calculated
ECLs based on lifetime expected losses.
The Group has established a credit risk matrix
based on the Group’s historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment. The ECL calculations are based on
probability of defaults and loss given default rates of each customer. The Group uses
judgements in making these assumptions based on past events, current conditions and
forecasts of economic conditions.
There are no trade receivables that are neither past due nor impaired (2023: US$Nil
million).
Financial assets that are past due and/or impaired
There is no class of financial assets that are past due and/or impaired except for trade
receivables and interest bearing receivables. An allowance for expected credit losses of
US$0.3 million (2023: US$10.5 million) has been provided in relation to trade receivables
past due and impaired of US$3.9 million (2023: US$24.7 million). An allowance for expected
credit losses of US$0.3 million (2023: US$1.4 million) has been provided in relation to
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(b)
Credit risk (continued)
94
The age analysis of trade receivables past due but not impaired is as follows:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Past due less than 3 months | 1,776 | 1,163 |
Past due 3 to 6 months | 632 | 29 |
Past due over 6 months | 1,862 | 670 |
4,270 | 1,862 | |
Bank deposits that are neither past due or impaired are mainly deposits with banks with
strong credit–ratings from international credit-rating agencies.
While cash and bank
balances are also subject to the impairment requirements of IFRS 9, the identified
impairment loss was immaterial.
Other receivables from third parties which comprise interest bearing customer loans are
subject to credit risks similar to trade receivables.
Expected credit losses on other
receivables are calculated using the same methodology as for trade receivables.
Other receivables from subsidiaries are low in default credit risk as these subsidiaries are
financially sound and with good payment track records.
For finance lease receivables, the Group applied the general approach under the standard.
The Group’s finance lease receivables are considered to have low credit risk and the loss
allowance recognised during the period was therefore limited to 12 months expected credit
losses on non-secured amounts. The loss allowance for finance lease receivables are
recognised in profit or loss and reduce carrying amounts of the finance lease receivables.
As the value of aircraft that secures the Group’s finance lease receivables exceeds the value
of the finance lease receivables, the Group has reversed a loss allowance of US$5,000
(2023: US$13,000) in respect of its finance lease receivables during the year ended 30 June
(c)
Interest rate risk
The Group is exposed to interest rate risk through the impact of interest rate changes on
floating rate interest bearing liabilities and assets.
The Group seeks to reduce its exposure to interest rate risk by fixing interest rates on the
majority of its loans and borrowings.
As at 30 June 2024, 96.4% (2023: 95.8%) of the
Group’s loans and borrowings are at fixed or hedged interest rates. Interest rate risk is not
material and therefore no sensitivity analysis presented.
Interest rates and repayment terms for financial assets and financial liabilities are disclosed
in the respective notes to the financial statements as of 30 June 2024.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
95
Foreign currency risk
Foreign currency risk arises from transactions and cash balances that are not denominated in
the Group’s functional currency.
The Group aims to mitigate foreign currency risk by holding
the majority of its cash balances in United States Dollars.
From time to time the Group utilises
forward foreign currency contracts to hedge its exposure to specific currency risks.
The
Group’s foreign currency exposure is as follows:
Restricted | Other | Other | Net | |
cash, cash | financial | financial | currency | |
and cash | assets | liabilities | exposure | |
Group | equivalents | |||
US$’000s | US$’000s | US$’000s | US$’000s | |
2024: | ||||
Pound sterling | 49 | 100 | (108) | 41 |
Australian dollar | 6 | - | - | 6 |
Euro | 6,811 | 16,971 | (54,890) | (31,108) |
Singapore dollar | 93 | 91 | (621) | (437) |
6,959 | 17,162 | (55,619) | (31,498) | |
2023: | ||||
Pound sterling | 141 | 20 | (66) | 95 |
Australian dollar | 102 | 11 | (1,194) | (1,081) |
Euro | 7,446 | 19,699 | (62,138) | (34,993) |
Singapore dollar | 364 | 79 | (604) | (161) |
8,053 | 19,809 | (64,002) | (36,140) |
Restricted | Other | Other | Net | |
cash, cash | financial | financial | currency | |
and cash | assets | liabilities | exposure | |
Company | equivalents | |||
US$’000s | US$’000s | US$’000s | US$’000s | |
2024: | ||||
Pound sterling | 34 | 64 | (91) | 7 |
Australian dollar | 6 | - | - | 6 |
Euro | - | - | (279) | (279) |
Singapore dollar | 1 | 43 | (36) | 8 |
41 | 107 | (406) | (258) | |
2023: | ||||
Pound sterling | 81 | 20 | (48) | 53 |
Australian dollar | - | 2 | (16) | (14) |
Euro | - | - | (288) | (288) |
Singapore dollar | 171 | 39 | (24) | 186 |
252 | 61 | (376) | (63) |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(d)
Foreign currency risk (continued)
96
The table below illustrates the effect on total profit and total equity that would result from a
strengthening of foreign currencies against the United States Dollar by 10% (2023: 10%)
with all other variables including tax rate being held constant:
Group |
Company |
|||
2024 |
2023 |
2024 |
2023 |
|
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Foreign currency: |
||||
Pound sterling |
4 |
10 |
1 |
5 |
Australian dollar |
1 |
(108) |
1 |
(1) |
Euro |
(3,111) |
(3,499) |
(28) |
(29) |
Singapore dollar |
(44) |
(16) |
1 |
19 |
A weakening of the respective currencies by 10% against the United States Dollar would have
an equal and opposite effect.
The Group entered into Euro denominated lease agreements for aircraft and subsequently
arranged Euro denominated financing and cross-currency swap contracts in order to hedge
exposure to foreign exchange risk associated with Euro denominated lease revenue by
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations
due to shortage of funds. The Group’s exposure to liquidity risk arises primarily from
mismatches of the maturities of financial assets and liabilities. The Group monitors and
maintains a level of cash and cash equivalents that management deems adequate to finance
the Group’s operations and mitigate the effects of fluctuations in cash flows. Short-term
funding is obtained from loan facilities.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e)
Liquidity risk (continued)
97
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the Group’s financial liabilities at the
end of the reporting period based on contractual undiscounted repayment obligations:
One year or | One to five | Over five | Total | |
Group | less | years | years | |
US$’000s | US$’000s | US$’000s | US$’000s | |
2024: | ||||
Financial liabilities: | ||||
Trade and other payables | 4,412 | 7,384 | 11,119 | 22,915 |
Loans and borrowings* | 86,447 | 681,400 | 56,058 | 823,905 |
Maintenance reserves | 62,153 | 73,270 | - | 135,423 |
153,012 | 762,054 | 67,177 | 982,243 | |
2023 (Restated): | ||||
Financial liabilities: | ||||
Trade and other payables | 4,115 | 6,639 | 13,555 | 24,309 |
Loans and borrowings* | 104,338 | 787,791 | 92,216 | 984,345 |
Maintenance reserves | 61,456 | 52,033 | - | 113,489 |
169,909 | 846,463 | 105,771 | 1,122,143 |
* The maturity profile on loans and borrowings includes maturity analysis of derivative
financial liabilities.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
(e)
Liquidity risk (continued)
98
Analysis of financial liabilities by remaining contractual maturities
The table below summarises the maturity profile of the Company’s financial liabilities at the
end of the reporting period based on contractual undiscounted repayment obligations:
One year or | One to five | Over five | Total | |
Company | less | years | years | |
US$’000s | US$’000s | US$’000s | US$’000s | |
2024: | ||||
Financial liabilities: | ||||
Trade and other payables | 48,581 | 62,937 | - | 111,518 |
Loans and borrowings* | 11,401 | 48,437 | - | 59,838 |
59,982 | 111,374 | - | 171,356 | |
2023: | ||||
Financial liabilities: | ||||
Trade and other payables | 14,804 | 65,887 | - | 80,691 |
Loans and borrowings* | 17,168 | 65,592 | - | 82,760 |
31,972 | 131,479 | - | 163,451 |
* The maturity profile on loans and borrowings include maturity analysis of derivative
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
8
FINANCIAL INSTRUMENTS, RISK MANAGEMENT OBJECTIVES AND POLICIES
(continued)
99
Capital risk
For the purpose of the Group’s capital management, capital includes debt and equity items
such as issued capital, share premium and all other equity reserves attributable to the equity
holders of the parent.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern and to maintain a suitable capital structure so as to fund growth and
maximise shareholder value.
In order to maintain or achieve an optimal capital structure, the
Group may adjust the amount of dividend payments, return capital to shareholders, issue new
shares, buy back issued shares, incur new borrowings or sell assets to reduce borrowings.
Management monitors capital based on a gearing ratio.
The gearing ratio is calculated as net
indebtedness divided by total assets.
Net indebtedness is calculated as loans and borrowings
less cash and cash equivalents.
The Group calculates its gearing ratio on the basis of net indebtedness divided by total assets.
Group |
Company |
|||
2024 |
2023 |
2024 |
2023 |
|
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Net indebtedness |
651,533 |
731,160 |
47,005 |
72,071 |
Total assets |
1,142,321 |
1,179,596 |
349,561 |
309,560 |
Gearing ratio: |
57.0% |
61.2% |
13.4% |
23.3% |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
100
RELATED PARTY TRANSACTIONS
In addition to related party information disclosed elsewhere in these financial statements, the
following transactions took place between the Group and related parties at terms agreed between
the parties.
Remuneration of key management personnel
The remuneration of Directors and key management includes fees, salary, bonus, commission
and other emoluments (including benefits-in-kind) based on the cost incurred by the Company
and the Group, and where the Company or Group did not incur any costs, the value of the
benefits.
Group and Company key management personnel short-term employee benefits
includes $0.6 million (2023: $0.9 million) and $0.6 million (2023: $0.9 million) respectively
for share warrants expense. Key management remuneration is as follows:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Key management: | ||||
Short-term employee benefits | 3,315 | 3,494 | 1,392 | 1,735 |
The amount above includes remuneration in respect of the highest paid Director as follows:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Aggregate emoluments | 1,048 | 1,151 |
The Directors do not receive any pension contribution from the Company.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
9
RELATED PARTY TRANSACTIONS (continued)
101
(b)
Significant related party transactions:
Group |
Company |
|||
2024 |
2023 |
2024 |
2023 |
|
US$’000s |
US$’000s |
US$’000s |
US$’000s |
|
Entities controlled by key |
||||
management personnel |
||||
(including Directors): |
||||
Lease liability paid |
(311) |
(335) |
(103) |
(99) |
Consulting fee expense |
(370) |
(362) |
(370) |
(361) |
Maintenance services |
(9) |
(7) |
- |
- |
Interest expense |
- |
(374) |
- |
- |
Service fee income |
75 |
76 |
- |
- |
During the previous year, a director of the company sold his US$0.2 million in aggregate
nominal value of Avation Capital S.A. 8.25% senior notes due 2026 issued under the global
medium term note programme.
Refer to note 20 and note 36 for balances with related parties and subsidiaries.
(c)
Significant transactions between the Company and its subsidiaries:
Company |
||
2024 |
2023 |
|
US$’000s |
US$’000s |
|
Interest income |
3,029 |
2,832 |
Management fee income |
1,344 |
1,789 |
Sale of notes |
- |
10,088 |
Interest expense |
(4,749) |
(3,193) |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
102
REVENUE
Group | ||
2024 | 2023 | |
(Restated) | ||
US$’000s | US$’000s | |
Lease rental revenue | 87,749 | 85,936 |
Less: amortisation of lease incentive asset | (2,721) | (1,368) |
85,028 | 84,568 | |
Interest income on finance leases | 2,018 | 2,230 |
Maintenance reserves income | 5,351 | 5,893 |
92,397 | 92,691 | |
Maintenance reserves income relates to the recovery of maintenance reserve from airline customers
and upon sale of aircraft. See Notes 31 and 37.
Geographical analysis | ||
Group | ||
2024 | 2023 | |
(Restated) | ||
US$’000s | US$’000s | |
Europe | 20,726 | 24,122 |
Asia Pacific | 71,671 | 68,569 |
92,397 | 92,691 | |
During the year ended 30 June 2024, five customers individually represented more than 5% of
the Group’s total revenue (2023: five) of which four are based in Asia-Pacific (2023: four) and
one is based in Europe (2023: one).
The largest customer, who is based in Asia-Pacific, accounts
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
103
OTHER INCOME
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Deposit released | 350 | - |
Fees for late payment | 1,828 | 966 |
Foreign currency exchange gain | 807 | 3,154 |
Recovery of claims from customers | 443 | 3,137 |
Others | 147 | 132 |
3,575 | 7,389 | |
During the previous year, the claims recovery recognised in other income is the balance of a
ADMINISTRATIVE EXPENSES
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Staff costs (note 15) | 5,487 | 5,587 |
Other administrative expenses | 3,305 | 3,173 |
8,792 | 8,760 | |
FINANCE INCOME
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Interest income from financial institutions | 5,316 | 1,951 |
Interest income from non-financial institutions | 693 | 1,178 |
Fair value gain on financial derivatives | - | 1 |
Finance income from discounting non-current deposits | 652 | 611 |
Gain on repurchases of unsecured notes | 675 | 508 |
Gain on early full repayment of borrowings | 2,507 | 1,657 |
9,843 | 5,906 | |
A gain on early full repayment of borrowings arose when loans were refinanced.
During the year, the gain on repurchases of unsecured note arose when the Group repurchased its
unsecured notes through the market ranging from 85.50 cents per note to 85.75 cents per note.
During the previous year, the gain on repurchases of unsecured notes arose when the Group
repurchased its unsecured notes through the market at 75.25 cents per note and through tender
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
104
FINANCE EXPENSES
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Interest expense on borrowings | 20,047 | 21,170 |
Interest expense on borrowings from related parties | - | 271 |
Interest expense on unsecured notes | 29,321 | 30,976 |
Amortisation of loan transaction cost | 1,571 | 1,057 |
Amortisation of IFRS 9 gain on debt modification of the unsecured notes | 10,709 | 8,711 |
Amortisation of interest expense on non-current deposits | 635 | 571 |
Fair value loss on financial derivatives | 405 | 577 |
Others | 327 | 206 |
63,015 | 63,539 | |
Amortisation of IFRS 9 gain on debt modification of unsecured notes of US$10.7 million (2023:
US$8.7 million) relates to the gain on debt modification of the unsecured notes in 2021 which was
STAFF COSTS
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Salaries and fees | 4,090 | 4,220 |
Bonuses | 384 | 35 |
Defined contribution plans | 177 | 117 |
Benefits | 101 | 73 |
Warrants expense | 735 | 1,142 |
5,487 | 5,587 | |
of other employees for the year is 20 (2023: 18) and in the following departments:
Group | ||
2024 | 2023 | |
Administrative | 4 | 3 |
Commercial | 4 | 4 |
Finance | 5 | 5 |
Legal | 4 | 3 |
Technical | 3 | 3 |
20 | 18 | |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
105
PROFIT BEFORE TAXATION
Profit before taxation for the year is stated after charging/(crediting) the following:
Group |
||
2024 |
2023 |
|
US$’000s |
US$’000s |
|
Depreciation of property, plant and equipment |
37,251 |
38,566 |
Foreign currency exchange (gain) |
(807) |
(3,154) |
Audit fees: |
||
Fees payable to the Company’s auditor and their associates |
||
for the audit of the Company’s annual accounts |
330 |
303 |
Fees payable to the Company’s auditor and their associates |
||
for audits of the Company’s subsidiaries’ annual accounts |
308 |
312 |
Total audit fees |
638 |
615 |
Auditors’ remuneration for non-audit services: |
||
- Tax compliance services |
- |
- |
- All other assurance services |
- |
- |
Total fees for non-audit services |
- |
- |
TAXATION
Group |
||
2024 |
2023 |
|
(Restated) |
||
US$’000s |
US$’000s |
|
From continuing operations |
||
Current tax expense: |
||
- Singapore |
607 |
158 |
- Overseas |
1,345 |
243 |
Under/(over) provision in prior years current tax expense: |
||
- Singapore |
325 |
79 |
- Overseas |
(1) |
(7) |
Deferred tax expense/(benefit): |
||
- Singapore |
7,255 |
2,959 |
- Overseas |
642 |
(2,624) |
(Over)/under provision in prior years deferred tax expense: |
||
- Singapore |
138 |
(19) |
- Overseas |
- |
97 |
Income tax expense |
10,311 |
886 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
17
TAXATION (Continued)
106
Income tax differs from the amount of income tax expense determined by applying the Singapore
tax rate of 17% to profit before income tax as a result of the following differences:
Group | ||
2024 | 2023 | |
(Restated) | ||
US$’000s | US$’000s | |
Profit before income tax | 30,046 | 13,830 |
Tax calculated at 17% (2023: 17%) | 5,108 | 2,351 |
Effects of: | ||
Under/(over) provision in prior years current tax expense | ||
- Singapore | 325 | 79 |
- Overseas | (1) | (7) |
Under/(over) provision in prior years deferred tax expense: | ||
- Singapore | 138 | (19) |
- Overseas | 97 | |
Non-deductible items | 2,588 | 2,137 |
Income not subject to tax | (1,138) | (2,400) |
Different tax rates of other countries | 1,557 | 586 |
Deferred tax asset not recognised | 1,782 | 1,433 |
Utilisation of deferred tax asset not recognised | (818) | (2,714) |
Effect of concessionary tax rate at 8% | 770 | (178) |
Others | - | (479) |
Income tax expense | 10,311 | 886 |
The Group has unutilised tax losses of approximately US$39.2 million (2023: US$43.9 million) and
unabsorbed capital allowances of approximately US$86.5 million (2023: US$89.3 million) that are
available for offset against future taxable profits indefinitely, for which no deferred tax asset is
recognised due to uncertainty of its recoverability.
The use of these unutilised losses and capital
allowances is subject to the agreement of tax authorities and compliance with certain provisions of
tax legislation of the countries in which the Group operates.
On 23 May 2023, the International Accounting Standards Board (the Board) issued International
Tax Reform – Pillar Two Models Rules – Amendments to IAS 12 which clarify that IAS 12 applies to
income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two
model rules published by the OECD, including tax law that implements Qualified Domestic Minimum
Top-up Taxes.
The Group has adopted these amendments.
As the Group’s consolidated revenues
are less then EUR 750 million, it is not in the scope of the Pillar Two model rules, Therefore, neither
the mandatory recognition and disclosure exception in IAS 12.4A nor the disclosure requirements
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
107
EARNINGS PER SHARE
(a)
Basic earnings per share (“EPS”)
EPS is calculated by dividing total profit attributable to shareholders of Avation PLC by the
weighted average number of ordinary shares in issue during the year.
Group | ||
2024 | 2023 | |
(Restated) | ||
US$’000s | US$’000s | |
Net profit attributable to shareholders of Avation PLC | 19,735 | 12,943 |
Weighted average number of ordinary shares (‘000s) | 70,865 | 69,952 |
Basic earnings per share (US cents) | 27.85 | 18.50 |
(b)
Diluted earnings per share
For the purpose of calculating diluted earnings per share, total profit attributable to
shareholders of Avation PLC and the weighted average number of ordinary shares outstanding
are adjusted for the effects of all dilutive potential ordinary shares.
The Company has one
category of dilutive potential ordinary shares, being warrants.
For warrants, the weighted average number of shares on issue has been adjusted as if all
dilutive share options were exercised.
The number of shares that could have been issued
upon the exercise of all dilutive share option less the number of shares that could have been
issued at fair value (determined as the Company’s average share price for the year) for the
same total proceeds is added to the denominator as the number of shares issued for no
consideration.
Diluted earnings per share attributable to shareholders of Avation PLC is calculated as follows:
Group | ||
2024 | 2023 | |
(Restated) | ||
US$’000s | US$’000s | |
Net profit attributable to shareholders of Avation PLC | 19,735 | 12,943 |
Weighted average number of ordinary shares (‘000s) | 70,865 | 69,952 |
Adjustment for warrants (‘000s) | 367 | 178 |
Weighted average number of ordinary shares (‘000s) | 71,232 | 70,130 |
Diluted earnings per share (US cents) | 27.71 | 18.46 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
108
PROPERTY, PLANT AND EQUIPMENT
Furniture and | Jet | Turboprop | ||
Group | equipment | aircraft | aircraft | Total |
US$’000s | US$’000s | US$’000s | US$’000s | |
2024: | ||||
Cost or valuation: | ||||
At beginning of year | 97 | 851,435 | 310,169 | 1,161,701 |
Additions | 5 | - | - | 5 |
Disposals | - | - | (17,692) | (17,692) |
Revaluation recognised in equity | - | (680) | (3,066) | (3,746) |
At end of year | 102 | 850,755 | 289,411 | 1,140,268 |
Representing: | ||||
At cost | 102 | - | - | 102 |
At valuation | - | 850,755 | 289,411 | 1,140,166 |
102 | 850,755 | 289,411 | 1,140,268 | |
Accumulated depreciation and | ||||
impairment: | ||||
At beginning of year | 81 | 230,783 | 85,366 | 316,230 |
Depreciation expense | 10 | 27,794 | 9,447 | 37,251 |
Disposals | - | - | (10,206) | (10,206) |
(Reversal of)/impairment loss | - | 5,825 | (252) | 5,573 |
At end of year | 91 | 264,402 | 84,355 | 348,848 |
Net book value: | ||||
At beginning of year | 16 | 620,652 | 224,803 | 845,471 |
At end of year | 11 | 586,353 | 205,056 | 791,420 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
19
PROPERTY, PLANT AND EQUIPMENT (continued)
109
Furniture and | Jet | Turboprop | ||
Group | equipment | aircraft | aircraft | Total |
US$’000s | US$’000s | US$’000s | US$’000s | |
2023: | ||||
Cost or valuation: | ||||
At beginning of year | 91 | 771,859 | 305,923 | 1,077,873 |
Additions | 6 | - | - | 6 |
Reclassified from held under finance lease | - | - | 16,166 | 16,166 |
Reclassified from asset held for sale | - | 106,124 | - | 106,124 |
Reclassified as asset held for sale | - | (28,034) | (9,354) | (37,388) |
Revaluation recognised in equity | - | 1,486 | (2,566) | (1,080) |
At end of year | 97 | 851,435 | 310,169 | 1,161,701 |
Representing: | ||||
At cost | 97 | - | - | 97 |
At valuation | - | 851,435 | 310,169 | 1,161,604 |
97 | 851,435 | 310,169 | 1,161,701 | |
Accumulated depreciation and | ||||
impairment: | ||||
At beginning of year | 68 | 182,815 | 81,082 | 263,965 |
Depreciation expense | 13 | 28,615 | 9,938 | 38,566 |
Reclassified from asset held for sale | - | 28,124 | - | 28,124 |
Reclassified as asset held for sale | - | (9,784) | (1,354) | (11,138) |
(Reversal of)/impairment loss | - | 1,013 | (4,300) | (3,287) |
At end of year | 81 | 230,783 | 85,366 | 316,230 |
Net book value: | ||||
At beginning of year | 23 | 589,044 | 224,841 | 813,908 |
At end of year | 16 | 620,652 | 224,803 | 845,471 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
19
PROPERTY, PLANT AND EQUIPMENT (continued)
110
The Group’s aircraft and aircraft held under asset for sale with carrying values of US$638.0 million
(2023: US$838.5 million) are mortgaged to secure the Group’s borrowings (Note 35).
Additions and Disposals
During the year, the Group sold two turboprop aircraft. One turboprop aircraft sold was classified as
held for sale as of 30 June 2023.
During the previous year, the Group sold two turboprop aircraft and one jet aircraft. Two turboprop
aircraft sold were classified as held for sale as of 30 June 2022.
A loss of US$2.9 million (2023: US$1.0 million) on the sale of aircraft was included within the loss
on disposal of aircraft for the year ended 30 June 2024.
During the previous year,
the Group transferred in two jet aircraft from assets held for sale and one
turboprop aircraft from finance leases to property, plant and equipment. A gain on derecognition of
finance lease of US$2.8 million was recorded and included within the gain on derecognition of finance
lease.
During the previous year, one turboprop aircraft and one jet aircraft were reclassified as held for
Valuation
The Group’s aircraft were valued in June 2024 by independent valuers on a lease-encumbered value
basis (“LEV’).
LEV takes into account the current lease arrangements for the aircraft and estimated
residual values at the end of the lease. These amounts have been discounted to present value using
discount rates ranging from 5.50% to 7.00% (2023: 5.50% to 7.00%) per annum for jet aircraft
and 5.50% to 8.00% (2023: 5.50% to 9.00%) per annum for turboprop aircraft.
Different discount
rates are considered appropriate for different aircraft based on their respective risk profiles.
Significant airline customer failures and uncertainty created by the pandemic followed by rapid
recovery in global air travel and improvements in airline credit worthiness have led to impairment
losses and its reversals during the years ended 30 June 2023 and 30 June 2024 respectively.
the book values of one turboprop aircraft and one jet aircraft to their fair value prior to reclassification
as held for sale.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
19
PROPERTY, PLANT AND EQUIPMENT (continued)
111
During the year, a downward revaluation of US$3.7 million to equity and impairment losses of
US$5.6 million were recognised in the statement of profit or loss in relation to aircraft which remain
part of the fleet.
During the previous year, a downward revaluation of US$1.1 million to equity and a reversal of
impairment loss of US$2.0 million were recognised in the statement of profit or loss in relation to
If the aircraft were measured using the cost model, carrying amounts would be as follows:
2024 | 2023 | |||
Turbo | Turbo | |||
Group | Jets | props | Jets | props |
US$’000s | US$’000s | US$’000s | US$’000s | |
Cost | 801,559 | 276,103 | 801,559 | 293,795 |
Accumulated depreciation and impairment | (242,369) | (82,756) | (216,316) | (83,657) |
Net book value | 559,190 | 193,347 | 585,243 | 210,138 |
Geographical analysis | |||
Asia | |||
2024 | Europe | Pacific | Total |
US$’000s | US$’000s | US$’000s | |
Capital expenditure | - | 5 | 5 |
Net book value – aircraft | 217,480 | 573,929 | 791,409 |
Asia | |||
2023 | Europe | Pacific | Total |
US$’000s | US$’000s | US$’000s | |
Capital expenditure | - | 6 | 6 |
Net book value – aircraft and aircraft engines | 241,508 | 603,947 | 845,455 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
112
TRADE AND OTHER RECEIVABLES
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Current: | ||||
Trade receivables | 8,162 | 26,545 | 19 | 829 |
Less: | ||||
Allowance for expected credit losses | (312) | (10,542) | (19) | (660) |
7,850 | 16,003 | - | 169 | |
Accrued revenue | 1,939 | 3,375 | - | - |
Less: | ||||
Allowance for expected credit losses | (6) | (8) | - | - |
1,933 | 3,367 | - | - | |
Other receivables: | ||||
– subsidiaries | - | - | 147,539 | 160,749 |
– third parties | 5,533 | 12,012 | 81 | 1,009 |
Less: | ||||
Allowance for expected credit losses | (251) | (1,358) | (15,514) | (758) |
5,282 | 10,654 | 132,106 | 161,000 | |
Interest receivables: | ||||
– subsidiaries | - | 87 | 118 | |
– third parties | 518 | 752 | 3 | 28 |
Less: | ||||
Allowance for expected credit losses | (19) | (44) | - | (28) |
499 | 708 | 90 | 118 | |
Deposits | 49 | 48 | 25 | 25 |
Prepaid expenses | 263 | 255 | 141 | 151 |
15,876 | 31,035 | 132,362 | 161,463 | |
Non-current: | ||||
Other receivables: | ||||
– subsidiaries | - | - | 45,222 | 46,530 |
- third parties | 570 | 5,487 | - | - |
570 | 5,487 | 45,222 | 46,530 | |
Right of use assets | 369 | 632 | 122 | 210 |
939 | 6,119 | 45,344 | 46,740 | |
Non-current deposits paid for aircraft of US$8.1 million was included within trade and other
receivables in the consolidated statement of financial position and company statement of financial
position as at 30 June 2023.
Current deposits paid for aircraft of US$8.5 million and non-current deposits paid for aircraft of
US$21.8 million are disclosed as a separate line item in the consolidated statement of financial
position and company statement of financial position s at 30 June 2024 and the comparative figures
have been changed to conform presentation.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
20
TRADE AND OTHER RECEIVABLES (continued)
113
Accrued revenue represents deferred lease receivables from customers with whom the Group has
agreed to defer lease payments for a short-term period.
Other receivables from subsidiaries includes interest bearing receivables of US$51.9 million (2023:
US$71.3 million). Current receivables from subsidiaries are unsecured and repayable upon demand.
Interest is charged at 5.8% (2023: 4.0% to 6.0%) per annum. An allowance for expected credit
loss of US$15.5 million (2023: US$Nil) has been provided for other receivables from subsidiaries
during the year.
Other receivables from third parties at Group level include interest bearing receivables of US$5.8
million (2023: US$16.3 million).
Interest is charged at 5.0% to 11.0% (2023: 5.0% to 6.0%) per
annum.
The average credit period generally granted to customers is 30 to 60 days.
Rent for leased aircraft
is due in advance in accordance with the leases.
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
At beginning of year | 11,952 | 11,335 | 1,446 | 1,446 |
(Reversal of)/provision of expected | ||||
credit losses | (234) | 672 | 15,533 | - |
Written off | (11,130) | (1,920) | (1,446) | - |
Reclassified from financial lease | ||||
receivables | - | 1,819 | - | - |
Reclassified from/(to) assets held for | ||||
sale | - | 46 | - | - |
At end of year | 588 | 11,952 | 15,533 | 1,446 |
During the year, the Group and Company have written off US$11.1 million (2023: US$1.9 million)
and US$1.4 million (2023: US$Nil) of receivables mainly due to the finalisation of the liquidation
Trade and other receivables denominated in foreign currencies are as follows:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Pound sterling | 100 | 20 | 64 | 20 |
Australian dollar | - | 11 | - | 2 |
Euro | - | 43 | - | - |
Singapore dollar | 91 | 79 | 43 | 39 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
114
FINANCE LEASE RECEIVABLES
Finance lease receivables do not include any contingent rents or residual value guarantees.
Future minimum lease payments receivable under finance lease are as follows:
2024 | 2023 | |||
Minimum | Present | Minimum | Present | |
lease | value of | lease | value of | |
Group | payments | payments | payments | payments |
US$’000s | US$’000s | US$’000s | US$’000s | |
Within one year | 29,907 | 28,659 | 5,675 | 3,952 |
Less: | ||||
Allowance for expected credit losses | (15) | (15) | (20) | (20) |
29,892 | 28,644 | 5,655 | 3,932 | |
One to two years | 2,430 | 1,625 | 30,041 | 28,491 |
Two to three years | 11,405 | 11,129 | 2,430 | 1,627 |
Three to four years | - | - | 11,358 | 11,095 |
Four to five years | - | - | - | - |
Later than five years | - | - | - | - |
Total minimum lease payments | 43,727 | 41,398 | 49,484 | 45,145 |
Less: amounts representing interest | ||||
income | (2,329) | - | (4,339) | - |
Present value of minimum lease | ||||
payments | 41,398 | 41,398 | 45,145 | 45,145 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
21
FINANCE LEASE RECEIVABLES (continued)
115
The movements in finance lease receivables are set out below:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
At beginning of year | 45,145 | 60,832 |
Principal receipts | (3,822) | (4,310) |
Reclassified to property, plant and equipment | - | (12,522) |
Reclassified to trade receivables | - | (1,819) |
Interest receivable | 352 | 339 |
Foreign currency translation | (282) | 793 |
Reversal of expected credit losses | 5 | 13 |
Reclassified provision to trade and other receivables | - | 1,819 |
At end of year | 41,398 | 45,145 |
The movement in allowance for expected losses are set out below:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
At beginning of year | 20 | 1,852 |
Reversal of provision for expected credit losses | (5) | (13) |
Reclassified to trade and other receivables | - | (1,819) |
At end of year | 15 | 20 |
Finance lease receivables denominated in foreign currencies are as follows:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Euro | 16,971 | 19,656 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
116
GOODWILL
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Cost: | ||
At beginning and end of year | 2,384 | 2,384 |
Allowance for impairment: | ||
At beginning and end of year | 482 | 482 |
Net carrying amount: | ||
At beginning and end of year | 1,902 | 1,902 |
Goodwill is allocated to the cash generating unit ("CGU") of the Group which is the aircraft leasing
business.
The recoverable amount of the CGU has been determined based on value-in-use calculations. Cash
flow projections used in the value-in-use calculations were based on financial budgets approved
by management covering a five-year period.
Key assumptions used for value-in-use calculations:
2024 | 2023 | |
% | % | |
Average cash flow growth rate | 2.0 | 2.0 |
Terminal growth rate | 2.0 | 2.0 |
Discount rate | 6.0 | 6.0 |
Management determined cash flow growth based on past performance and its expectations of
market development. The terminal growth rate of 2% that was used to extrapolate cash flows
beyond the budget period did not exceed the long-term average growth rate for the business in
which the CGU operates. Management has estimated that the recoverable amount of the CGU is
US$465.8 million (2023: US$211.4 million).
Management believes that no reasonably possible change in any of the above key assumptions
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
117
INVESTMENT IN SUBSIDIARIES
Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Unquoted equity shares, at cost | ||
At beginning of year | 3,328 | 3,328 |
Less allowance for impairment loss | (1,278) | - |
At end of year | 2,050 | 3,328 |
The movement in allowance for impairment loss are set out below:
Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
At beginning of year | - | - |
Impairment loss | 1,278 | - |
At end of year | 1,278 | - |
At each reporting period, the Company reviews investment in subsidiaries for indicators of
impairment.
An impairment is recognised when the carrying amounts exceeds the recoverable
amount for that investment.
The recoverable amount is the higher of the investment’s fair value
less costs of disposal and value in use.
During the current year, an impairment loss was recognised
which is determined based on the fair value of the subsidiaries’ aircraft using the lease encumbered
basis under level 3 of the fair value hierarchy (see note 7 for information about the significant
unobservable inputs used) adjusted by payments for liabilities of the subsidiaries.
Details of subsidiaries are as follows:
Name of entity | Country of | Principal | Ownership interest | ||
incorporation | activities | ||||
2024 | 2023 | ||||
% | % | ||||
Held directly by the Company: | |||||
Avation Capital S.A. | (b) | Luxembourg | Financing | 100.00 | 100.00 |
Capital Lease Aviation Limited | United Kingdom | Aircraft leasing | 99.68 | 99.68 | |
Avation Group (S) Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Asia) Limited | Ireland | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Asia) II Limited | Ireland | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Asia) III Limited | Ireland | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Asia) IV Limited | Ireland | Aircraft leasing | 100.00 | 100.00 | |
Capital MSN 4033 II Limited | Ireland | Aircraft leasing | 100.00 | 100.00 | |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
23
INVESTMENT IN SUBSIDIARIES (continued)
118
Name of entity | Country of | Principal | Ownership | ||
incorporation | activities | interest | |||
2024 | 2023 | ||||
% | % | ||||
Held by Capital Lease Aviation Limited: | |||||
Capital Lease Malta Ltd. | (a) | Malta | Aircraft leasing | - | 99.68 |
Capital MSN 4033 Limited | Ireland | Aircraft leasing | 99.68 | 99.68 | |
Held by Avation Eastern Fleet Pte. Ltd.: | |||||
Airframe Leasing (S) Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Airframe Leasing (S) II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Held by Avation Eastern Fleet II Pte. Ltd.: | |||||
Airframe Leasing (S) II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Held by Avation Eastern Fleet III Pte. Ltd.: | |||||
Airframe Leasing (S) III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Held by Avation Group (S) Pte. Ltd.: | |||||
Avation Eastern Fleet Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Eastern Fleet II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Eastern Fleet III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Pacific Leasing Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Pacific Leasing II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Taiwan Leasing II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Taiwan Leasing III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Europe) II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Europe) III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Europe) VI Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Europe) VII Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Europe) VIII Pte. Ltd | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Europe) IX Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
F100 Fleet Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
MSN 1607 Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Trading Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Trading II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Trading III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Asia Fleet Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Asia Fleet II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Asia Fleet III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Denmark Leasing Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Capital II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Leasing (Asia) VI Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Leasing Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Leasing II Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Leasing III Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
AVAP Aircraft Leasing IV Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | 100.00 | |
Avation Airframe Holding Pte. Ltd. | Singapore | Aircraft leasing | 100.00 | - | |
(a)
Company struck off during the year.
All companies as at 30 June 2024 are audited by member firms of Ernst & Young except for:
(b)
Audited by Moore Audit S.A. for statutory financial statements purposes.
The registered office address of the companies incorporated in the following countries are as follows:
Ireland - 32 Molesworth Street, Dublin 2 D02 Y512, Ireland.
Luxembourg - 46A, Avenue J. F. Kennedy, L-1855 Luxembourg.
Singapore - 65 Kampong Bahru Road, Singapore 169370.
United Kingdom - 5 Fleet Place, London EC4M 7RD, United Kingdom.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
119
DERIVATIVE FINANCIAL ASSETS/LIABILITIES AND HEDGING
Contract/ | Fair value | |||
notional amount | ||||
Group | 2024 | 2023 | 2024 | 2023 |
US$’000s | US$’000s | US$’000s | US$’000s | |
Derivative financial assets -current | ||||
Interest rate swap – current | - | 3,531 | - | 54 |
Derivative financial assets -non- | ||||
current | ||||
Interest rate swap | 162,741 | 220,110 | 7,505 | 12,847 |
Cross-currency interest rate swap | 4,000 | 4,000 | 591 | 595 |
166,741 | 224,110 | 8,096 | 13,442 | |
Derivative financial liabilities | ||||
Warrants | - | - | 2,037 | 1,632 |
Contract/ | Fair value | |||
notional amount | ||||
Company | 2024 | 2023 | 2024 | 2023 |
US$’000s | US$’000s | US$’000s | US$’000s | |
Derivative financial assets – non- | ||||
current | ||||
Interest rate swap | 57,750 | 64,250 | 2,176 | 3,399 |
Derivative financial liabilities | ||||
Share warrants | - | - | 2,037 | 1,632 |
Hedge accounting has been applied for interest rate swap contracts and cross-currency interest rate
swap contracts which have been designated as cash flow hedges.
The Group determines the economic relationship between the finance lease income, loans and
borrowings and the derivative by matching the critical terms of the hedging instrument with the
terms of the hedged item. The hedge ratio (the ratio between notional amount of the derivative
financial instrument to the amount of the finance lease income and loans and borrowings being
hedged) is determined to be 1:1. There were no expected sources of ineffectiveness on the Group’s
hedges as the critical terms of the derivative match exactly with the terms of the hedged item.
The Group pays fixed rates of interest of 1.0% to 2.6% per annum and receives floating rate interest
equal to 1-month SOFR or 3-month EURIBOR under the interest rate swap contracts.
The Group pays fixed rates of interest of 3.1% to 4.9% per annum and receives floating interest
equal to 3-month SOFR under the cross-currency interest rate swap contracts.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
24
DERIVATIVE FINANCIAL ASSETS/LIABILITIES AND HEDGING (continued)
120
The swap contracts mature between 15 September 2026 and 21 November 2030.
Changes in the fair value of these interest rate swap and cross-currency interest rate swap contracts
are recognised in the fair value reserve. The net fair value loss net of tax of US$5.0 million (2023:
gain of US$6.8 million) on these derivative financial instruments was recognised in the fair value
reserve for the year.
The fair value of the derivative financial instruments is determined by reference to marked-to-
market values provided by counterparties.
The fair value measurement of all derivative financial
instruments is classified under level 2 of the fair value hierarchy, for which inputs other than quoted
prices that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) are included as inputs for the determination of fair value.
The Group entered into Euro denominated lease agreements which create exposure to variability in
cash flows due movements in the EUR:USD exchange rate.
To hedge its exposure to variable cash
flows resulting from changes in EUR:USD spot rates, the Group has arranged Euro denominated
financing which reduces overall exposure to variable cash flows to the extent that lease receipts and
debt service cashflows are matched. The Group is making use of a non-derivative hedging
instrument and has designated the cash flows with respect to the loan interest and principal
repayment (hedging instrument) against a specific portion of the lease receivable (hedged item).
Unrealised foreign exchange gains and losses arising on Euro denominated loans designated as
cash flow hedges are recognised in the foreign currency hedge reserve.
Unrealised foreign
exchange gains and losses recorded in the foreign currency hedging reserve are systematically
re-cycled through profit or loss over the remaining term of the related loan on a straight-line basis.
The Group determine the hedging relationship between the hedging instruments and the hedged
item on a number of criteria including the reference interest rates, tenors, repricing dates and
maturities and to notional or par amounts.
The Group assesses whether the derivative designated
in each hedging relationship is expected to be effective in offsetting changes in cash flows of the
hedged item using the hypothetical derivative method.
In these hedge relationships, the main
sources of ineffectiveness are:
Differences in the pricing dates between the swaps and the borrowings
Differences in the timing of the cash flows of the hedged items and the hedging requirements
The counterparties’ credit risk differently impacting the fair value movements of the hedging
instruments and the hedged items
Changes to the forecasted amount of cash flows of hedged items and hedging instruments
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
24
DERIVATIVE FINANCIAL ASSETS/LIABILITIES AND HEDGING (continued)
121
During the year 30 June 2024, the effect of the cash flow hedge in the consolidated statement of
profit or loss and consolidated statement of comprehensive income was as follows:
Total hedging | Amount | Line item | |
gain/(loss) | reclassified | in the | |
recognised in | from | statement of | |
OCI, net of | OCI to profit | profit or loss | |
tax | or (loss) | ||
Group | US$’000s | US$’000s | |
Interest rate swap | (4,883) | 6,680 | Finance expense |
Cross currency swap | (106) | (423) | Finance expense |
Foreign currency hedge | 421 | (382) | Other income |
(4,568) | 5,875 |
During the year 30 June 2023, the effect of the cash flow hedge in the consolidated statement of
profit or loss and consolidated statement of comprehensive income was as follows:
Total hedging | Amount | Line item | |
gain/(loss) | reclassified | in the | |
recognised in | from | statement of | |
OCI, net of | OCI to profit | profit or loss | |
tax | or (loss) | ||
Group | US$’000s | US$’000s | |
Interest rate swap | 6,649 | 2,995 | Finance expense |
Cross currency swap | 144 | (147) | Finance expense |
Foreign currency hedge | (6,383) | 6,281 | Other income |
410 | 9,129 |
The share warrants consist of 5,857,408 (2023: 5,857,408) share warrants granted to the holder
of the unsecured notes to subscribe for ordinary shares of the Company exercisable to 31 October
2026 at a price of 114.5 pence per share (including cashless exercise option).
The share warrants were valued based on level 1 quoted prices (unadjusted) in an active market
for the year ended 30 June 2024.
The share warrants were listed on the London Stock Exchange on 24 June 2022 and are valued
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
122
DEPOSITS PAID FOR AIRCRAFT
Group and Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Current | 8,520 | - |
Non-current | 21,813 | 8,139 |
30,333 | 8,139 | |
Deposits paid for aircraft, at fair value: | ||
At beginning of year | 8,139 | 7,749 |
Additions | 2,268 | 390 |
Transfer from aircraft purchase rights (note 26) | 28,500 | - |
Unrealised loss | (8,574) | - |
At end of year | 30,333 | 8,139 |
During the year, the Group exercised purchase rights for 10 aircraft and paid US$2.3 million deposits
to the manufacturer.
AIRCRAFT PURCHASE RIGHTS
Group and Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Aircraft purchase rights, at fair value: | ||
At beginning of year | 85,820 | 65,280 |
Unrealised gain | 55,460 | 20,540 |
Transfer to deposits paid for aircraft (note 25) | (28,500) | - |
At end of year | 112,780 | 85,820 |
During the year, the Group exercised purchase rights for ten additional ATR 72-600 aircraft for
delivery between the last quarter of 2025 and the first quarter of 2028.
The exercised purchase
rights are recorded as deposits paid for aircraft in Note 25.
The Group has been granted additional
purchase rights during the year and holds purchase rights for a further 24 ATR 72-600 aircraft
from the manufacturer with an extended expiry date of June 2034.
The Group has determined that it would seek to dispose of excess aircraft purchase rights over and
above its requirement to acquire additional aircraft for its fleet.
The Group accounts for aircraft
purchase rights at fair value through profit or loss. Disclosures about the fair value measurement of
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
123
INVESTMENT IN EQUITY, FAIR VALUE THROUGH PROFIT OR LOSS
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Non-listed equity, at fair value | ||
At beginning of year | 11,235 | 3,715 |
Unrealised (loss)/gain | (490) | 7,520 |
At end of year | 10,745 | 11,235 |
The Group received 8,014,602 ordinary shares from an airline customer as part of the airline’s
restructuring plan during the year ended 30 June 2022.
The Group entered into an agreement to exchange 8,014,602 ordinary shares in Philippine
Airlines, Inc. with 124,787,353 ordinary shares in PAL Holdings, Inc. during the previous year.
The exchange of shares is subject to approval by the Philippines SEC.
INVESTMENT IN DEBT INSTRUMENT, FAIR VALUE THROUGH PROFIT OR LOSS
Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Listed debt instrument, at fair value | ||
At beginning of year | - | 5,925 |
Additions | 15,415 | 3,305 |
Disposal | - | (10,088) |
Fair value gain | 920 | 858 |
At end of year | 16,335 | - |
As of 30 June 2024, the Company holds US$18.0 million par value of its subsidiary, Avation Capital
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
124
LEASE INCENTIVE ASSETS
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Current | 3,136 | 1,643 |
Non-current | 7,756 | 4,686 |
10,892 | 6,329 | |
At beginning of year | 6,329 | 447 |
Additions | 7,284 | 1,042 |
Transfer from asset held for sale | - | 6,208 |
Amortisation to profit or loss | (2,721) | (1,368) |
At end of year | 10,892 | 6,329 |
RESTRICTED CASH, CASH AND CASH EQUIVALENTS
Restricted cash of US$90.9 million, fixed deposits of US$1.2 million and cash and cash equivalents
of US$24.8 million were included within cash and bank balances in the consolidated statement of
financial position as at 30 June 2023.
Restricted cash of US$94.4 million and cash and cash equivalent of US$23.6 million are disclosed
as a separate line item in the consolidated statement of financial position as at 30 June 2024 and
the comparative figures have been changed to conform presentation.
The Group’s restricted cash has been pledged as security for certain loan obligations.
The rate of interest for cash on interest earning accounts is approximately 0.20% to 5.60% (2023:
0.20% to 5.46%) per annum.
Restricted cash, cash and cash equivalents denominated in foreign currencies are as follows:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Pound sterling | 49 | 141 | 34 | 81 |
Australian dollar | 6 | 102 | 6 | - |
Euro | 6,811 | 7,446 | - | - |
Singapore dollar | 93 | 364 | 1 | 171 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
125
ASSETS HELD FOR SALE AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS
HELD FOR SALE
The Group’s aircraft which met the criteria to be classified as assets held for sale were as follows:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Assets held for sale: | ||
Property, plant and equipment - aircraft | ||
At beginning of year | 8,000 | 100,500 |
Additions | - | 26,250 |
Disposal | (8,000) | (40,750) |
Transfer to property, plant and equipment | (78,000) | |
At end of year | - | 8,000 |
During the year, the Group sold two turboprop aircraft. One turboprop aircraft sold was classified as
held for sale as of 30 June 2023.
During the previous year, two jet aircraft were transferred to property plant and equipment when
the proposed sale of the aircraft was cancelled.
During the previous year, the board of directors decided to sell one turboprop aircraft. The sale of
aircraft is expected to be completed within a year from reporting date. The aircraft was measured
at fair value less cost to sell at the date of transfer to assets held for sale.
During the previous year, the Group sold two turboprop aircraft and one jet aircraft.
During the previous year, maintenance reserves of US$3.1 million were released to profit or loss as
SHARE CAPITAL AND TREASURY SHARES
Share capital
2024 | 2023 | |||
No of shares | US$’000s | No of shares | US$’000s | |
Allotted, called up and fully paid | ||||
Ordinary shares of 1 penny each: | ||||
At beginning of the year | 70,883,124 | 1,182 | 71,698,124 | 1,203 |
Issue of shares | 60,000 | 1 | 1,495,000 | 18 |
Cancellation | (65,000) | (1) | (2,310,000) | (39) |
At end of the year | 70,878,124 | 1,182 | 70,883,124 | 1,182 |
During the year, the Company issued 60,000 ordinary shares of 1 penny each at 102.0
pence following the exercise of warrants by warrant holders raising total gross proceeds of
US$0.1 million.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
32
SHARE CAPITAL AND TREASURY SHARES (continued)
126
During the previous year, the Company issued 1,495,000 ordinary shares of 1 penny each
at 101.25 pence following the exercise of warrants by warrant holders raising total gross
proceeds of US$1.9 million.
The holders of ordinary shares (except for treasury shares) are entitled to receive dividends
as and when declared by the Company.
All ordinary shares carry one vote per share without
Treasury shares
2024 | 2023 | |||
No of shares | US$’000s | No of shares | US$’000s | |
At beginning of the year | - | - | 2,210,000 | 7,811 |
Acquired during the year | 65,000 | 95 | 100,000 | 94 |
Cancellation | (65,000) | (95) | (2,310,000) | (7,905) |
At end of the year | - | - | - | - |
During the year, the Company bought 65,000 treasury shares at market price ranging from
110 pence to 119 pence per share and subsequently cancelled 65,000 treasury shares.
During the previous year, the Company bought 100,000 treasury shares at a market price
Net asset value per share
2023 | ||
2024 | (restated) | |
Net asset value per share (US$) (1) | $3.62 | $3.44 |
Net asset value per share (GBP) (2) | £2.85 | £2.71 |
(1)
Net asset value per share is total equity divided by the total number of shares in issue excluding
treasury shares at period end.
(2)
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
127
33
ASSET REVALUATION RESERVE
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
At beginning of year | 50,764 | 51,730 |
Revaluation loss | (3,746) | (1,080) |
Deferred tax credit | 325 | 114 |
At end of year | 47,343 | 50,764 |
OTHER RESERVES
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Capital redemption reserve | 52 | 51 | 52 | 51 |
Warrant reserve | 3,543 | 2,835 | 3,543 | 2,835 |
Fair value reserve | 4,745 | 9,734 | (569) | 447 |
Foreign currency hedge reserve | 2,870 | 2,449 | - | - |
11,210 | 15,069 | 3,026 | 3,333 | |
Capital redemption reserve comprises of the par value of the cancelled treasury shares.
Warrant reserve comprises the cumulative value of services received from employees recorded
on grant of equity-settled share warrants.
The expense for service received is recognised over
the vesting period.
Fair value reserve represents the portion of the fair value changes (net of tax) on derivative
financial instruments designated as hedging instruments in cash flow hedges that is determined
to be an effective hedge.
Foreign currency hedge reserve represents the unrealised foreign exchange gains and losses
arising on Euro denominated loans designated as cash flow hedges. Unrealised foreign exchange
gains and losses recorded in the foreign currency hedging reserve are systematically re-cycled
through profit or loss over the remaining term of the related loan on a straight-line basis.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
34
OTHER RESERVES (continued)
128
Movements in other reserves are as follows:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Capital redemption reserve: | ||||
At beginning of the year | 51 | 12 | 51 | 12 |
Cancellation of treasury shares | 1 | 39 | 1 | 39 |
At end of the year | 52 | 51 | 52 | 51 |
Warrant reserve: | ||||
At beginning of the year | 2,835 | 2,389 | 2,835 | 2,389 |
Employee share warrant scheme: | ||||
- Value of employee services | 735 | 1,142 | 735 | 1,142 |
- Issue of shares | (18) | (506) | (18) | (506) |
- Expired | (9) | (190) | (9) | (190) |
At end of the year | 3,543 | 2,835 | 3,543 | 2,835 |
Fair value reserve: | ||||
At beginning of the year | 9,734 | 2,941 | 447 | (1,312) |
Effective portion of changes in fair value | 1,268 | 9,641 | 689 | 2,634 |
Net change in fair value reclassified to | ||||
profit or loss | (6,257) | (2,848) | (1,705) | (875) |
At end of the year | 4,745 | 9,734 | (569) | 447 |
Foreign currency hedge reserve: | ||||
At beginning of the year | 2,449 | 8,832 | - | - |
Effective portion of changes in fair value | 803 | (102) | - | - |
Net change in fair value reclassified to | ||||
profit or loss | (382) | (6,281) | - | - |
At end of the year | 2,870 | 2,449 | - | - |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
129
LOANS AND BORROWINGS
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Secured borrowings | 372,785 | 452,511 | 54,386 | 72,742 |
Unsecured notes (a) | 302,309 | 303,465 | - | - |
675,094 | 755,976 | 54,386 | 72,742 | |
Less: current portion of borrowings | (49,668) | (61,401) | (8,652) | (13,207) |
625,426 | 694,575 | 45,734 | 59,535 | |
Weighted average | ||||
Maturity | interest rate per annum | |||
2024 | 2023 | 2024 | 2023 | |
% | % | |||
Secured borrowings | 2025-2031 | 2024-2031 | 4.80% | 4.52% |
Unsecured notes (a) | 2026 | 2026 | 8.25% | 8.25% |
Secured borrowings are secured by first ranking mortgages over the relevant aircraft, security
assignments of the Group’s rights under leases and other contractual agreements relating to the
aircraft, charges over bank accounts in which lease payments relating to the aircraft are received
and charges over the issued share capital of certain subsidiaries.
During the year, the Group increased its secured borrowings by US$30.0 million (2023: US$43.0
million) to fund its business operations.
During the year, the Group repaid its secured borrowings and repurchased its unsecured notes
amounting to US$121.6 million (2023: US$135.1 million).
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
35
LOANS AND BORROWINGS (continued)
130
Secured loans and borrowings denominated in foreign currencies are as follows:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Euro | 98,506 | 113,961 | - | - |
(a)
In May 2015, the Company through its wholly owned subsidiaries, Avation Capital S.A. and
Avation Group (S) Pte. Ltd. (together, "the Issuers") established a US$500 million global
medium term note programme (the "Programme") guaranteed by the Company.
Under the Programme, the Issuers may from time to time issue Notes (the “Notes")
denominated in any currency as agreed.
All Notes issued under the Programme are listed on
the Singapore Stock Exchange (“SGX”).
During the year, the Company repurchased US$18.0 million unsecured notes through the
market at prices ranging from 85.5 US cents to 85.8 US cents.
During the previous year, the Company repurchased US$4.4 million unsecured notes through
the market at a price of 75.25 US cents and US$7.1 million through a tender offer at a price
of 86.0 US cents.
During the year ended 30 June 2021, the Company reached agreement with the holders of
its unsecured notes for a maturity extension and the following are the key terms of the
extension:
Maturity extension of the notes from 15 May 2021 to 31 October 2026;
Cash coupon of 6.5% with, at the Company’s option, an additional 2.5% payment in kind
coupon or an additional 1.75% cash coupon;
Bondholders receive 6,000,000 warrants to subscribe for ordinary shares exercisable to
31 October 2026 at a price of 114.5 pence per share (including cashless exercise option);
The notes are callable at any time during their 2.3 year remaining duration, with the call
premium decreasing to par during year 5; and
The maturity extension of the unsecured note resulted in a gain on debt modification of US$50.3
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
131
TRADE AND OTHER PAYABLES
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Current: | ||||
Trade payables | 448 | 734 | 249 | 444 |
Other payables: | ||||
- subsidiaries | - | - | 40,729 | 9,054 |
- third parties | 1,029 | 137 | 98 | 91 |
Deposits collected | 3,605 | 864 | 2,360 | 316 |
Deferred lease income | 634 | 621 | - | - |
Lease liability | 306 | 280 | 100 | 93 |
Revenue received in advance | 6,006 | 6,310 | - | - |
Accrued expenses | 6,892 | 8,221 | 416 | 405 |
18,920 | 17,167 | 43,952 | 10,403 | |
Non-current: | ||||
Other payables: | ||||
- subsidiaries | - | - | 56,389 | 54,919 |
Deposits collected | 14,967 | 15,907 | - | - |
Deferred lease income | 2,716 | 3,179 | - | - |
Lease liability | 104 | 399 | 34 | 130 |
Accrued expenses | 700 | 700 | 700 | 700 |
18,487 | 20,185 | 57,123 | 55,749 | |
Other payables due to subsidiaries includes interest bearing payables of US$58.6 million (2023:
US$56.7 million) which are unsecured, with fixed repayment terms, and bear interest at 5.8% to
8.2% (2023: 5.8% to 8.2%) per annum. Amounts due to subsidiaries without fixed repayment
terms are payable on demand.
lease commitments and have been discounted to present value at a current pre-tax rate that reflects
the risks specific to these deposits.
Deposits will be refunded at the end of the respective lease
term. Current deposits collected included US$2 million for sales deposit of two aircraft as of 30 June
Trade and other payables denominated in foreign currencies are as follows:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
US$’000s | US$’000s | US$’000s | US$’000s | |
Pound sterling | 108 | 66 | 91 | 48 |
Australian dollar | - | 1,194 | - | 16 |
Euro | 4,415 | 3,725 | 276 | 288 |
Singapore dollar | 621 | 604 | 36 | 24 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
132
MAINTENANCE RESERVES
Group | ||
2023 | ||
2024 | (Restated) | |
US$’000s | US$’000s | |
Current: | ||
Maintenance reserves | 62,153 | 61,456 |
Non-current: | ||
Maintenance reserves | 53,817 | 41,639 |
Maintenance lease contribution | 19,453 | 10,394 |
73,270 | 52,033 | |
Total maintenance reserves | 135,423 | 113,489 |
Group | ||
2023 | ||
2024 | (Restated) | |
US$’000s | US$’000s | |
At beginning of year | 113,489 | 83,910 |
Contributions | 34,152 | 29,152 |
Utilisations | (6,285) | (7,544) |
Released to profit or loss | (5,933) | (2,773) |
Transfer from liabilities directly associated with assets held for sale | - | 10,744 |
At end of the year | 135,423 | 113,489 |
During the year, maintenance reserves of US$5.3 million (2023 : US$0.8 million) were released
to profit or loss as income following the change in accounting policy. See note 3 for the change in
accounting policy. The remaining US$0.6 million was the release of maintenance lease
contribution offset against loss on disposal of aircraft.
Maintenance lease contribution represents the contractual obligations of the Group to contribute to
the lessee’s costs for aircraft maintenance. During the year, the maintenance lease contribution was
US$7.3 million (2023: US$1.0 million).
The Group also holds letters of credit for US$12.0 million (2023: US$12.0 million) as security for
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
133
DEFERRED TAX LIABILITIES
Recognised deferred tax liabilities are attributable to the following:
Group | Company | |||
2024 | 2023 | 2024 | 2023 | |
(Restated) | ||||
US$’000s | US$’000s | US$’000s | US$’000s | |
Property, plant and equipment | 6,395 | 6,240 | - | - |
Aircraft purchase rights and deposits for | ||||
aircraft | 20,527 | 13,010 | 20,527 | 13,010 |
Gain on debt modification | 3,926 | 6,597 | - | - |
Tax losses | 2,709 | - | - | - |
Cash flow hedge | 490 | 847 | (116) | 92 |
34,047 | 26,694 | 20,411 | 13,102 | |
Movements in temporary differences are as follows:
Aircraft | |||||
purchase | |||||
Property, | rights and | ||||
plant and | deposits | Gain on debt | Cash flow | ||
Group | equipment | for aircraft | modification | hedge | Total |
US$’000s | US$’000s | US$’000s | US$’000s | US$’000s | |
2024 | |||||
At beginning of the year | 6,240 | 13,010 | 6,597 | 847 | 26,694 |
Recognised in profit or loss | 480 | 7,517 | 38 | - | 8,035 |
Recognised in equity | (325) | - | - | (357) | (682) |
At end of the year | 6,395 | 20,527 | 6,635 | 490 | 34,047 |
2023 (Restated) | |||||
At beginning of the year | 6,102 | 9,948 | 9,498 | 65 | 25,613 |
Recognised in profit or loss | 252 | 3,062 | (2,901) | - | 413 |
Recognised in equity | (114) | - | - | 782 | 668 |
At end of the year | 6,240 | 13,010 | 6,597 | 847 | 26,694 |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
38
DEFERRED TAX LIABILITIES (continued)
134
Aircraft | |||
purchase | |||
rights and | |||
deposits for | Cash flow | ||
Company | aircraft | hedge | Total |
US$’000s | US$’000s | US$’000s | |
2024 | |||
At beginning of the year | 13,010 | 92 | 13,102 |
- Recognised in profit or loss | 7,517 | - | 7,517 |
- Recognised in equity | - | (208) | (208) |
At end of the year | 20,527 | (116) | 20,411 |
2023 | |||
At beginning of the year | 9,948 | (268) | 9,680 |
- Recognised in profit or loss | 3,062 | - | 3,062 |
- Recognised in equity | - | 360 | 360 |
At end of the year | 13,010 | 92 | 13,102 |
SHARE BASED PAYMENTS
The Group has an ownership-based compensation scheme for all employees of the Group.
Each share warrant converts into one ordinary share of Avation PLC on exercise. No amounts are
paid or are payable by the recipient on receipt of the warrant. The warrants carry neither rights
to dividends nor voting rights.
Warrants are granted to employees of the Group to promote:
Improvement in share price;
Improvement in the Company’s earnings per share;
Reliable and high quality financial reporting;
Growth in asset value and profits; and
Growth in dividends.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
39
SHARE BASED PAYMENTS (continued)
135
Movement in warrants during the year
The following table illustrates the number (No.) and weighted average exercise prices in GBP
pence (WAEP) of, and movements in, warrants during the year:
2024 | 2023 | |||
No. | WAEP | No. | WAEP | |
Outstanding at beginning of the year | 7,050,000 | 118.7p | 5,480,000 | 120.8p* |
- Granted | 1,105,000 | 121.3p | 3,450,000 | 107.0p |
- Exercised | (60,000) | 102.0p | (1,495,000) | 101.3p |
- Expired | (25,000) | 106.8p | (385,000) | 110.6p |
Outstanding at end of the year | 8,070,000 | 119.1p | 7,050,000 | 118.7p |
Exercisable at end of the year | 4,681,667 | 124.7p | 2,411,677 | 130.0p |
*The beginning WAEP for the outstanding warrants is re-adjusted due to re-pricing of warrants on
14 October 2022 for warrants granted on 21 September 2019 and 21 November 2019 from
exercise price of 296 pence and 274.5 pence respectively to 101.25 pence.
The weighted average fair value of warrants granted during the year was 28.1 pence (2023: 33.5
pence). The charge recognised in profit or loss in respect of share based payments is US$0.7
million (2023: US$1.1 million).
During the year, 60,000 warrants were exercised (2023: 1,495,000 warrants).
Warrants outstanding at the end of the year have the following expiry date and exercise price:
Exercise | ||||
Warrant series granted on | Expiry date | price | Number of warrants | |
2024 | 2023 | |||
23 December 2020 | 23 Jan 2024* | 130.0p | 3,600,000 | 3,600,000 |
29 September 2022 | 29 Nov 2025 | 102.0p | 2,655,000 | 2,735,000 |
2 March 2023 | 2 May 2026 | 126.0p | 710,000 | 715,000 |
1 November 2023 | 1 January 2027 | 125.5p | 485,000 | - |
13 March 2024 | 13 May 2027 | 118.0p | 620,000 | - |
*
The expiry date for the warrants granted on 23 December 2020 is extended to one month after
the Company exits a restricted period related to a material refinancing transaction under
consideration at the date of signing this report.
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
39
SHARE BASED PAYMENTS (continued)
136
Warrants granted have a 3-year vesting schedule with details as follows:
Proportion of total share options that are | |
Vesting period | exercisable |
Before year 1 | 0 per cent |
On year 1 and before year 2 | Up to 33 per cent of the grant |
On year 2 and before year 3 | Up to 33 per cent of the grant or up to 66 per |
cent of the grant if warrants were not exercised | |
after the first vesting year | |
On year 3 to 2 months after year 3 | Balance or 100 per cent of the grant if warrants |
were not exercised after the first and second | |
vesting years |
The warrants were valued using a binomial option pricing model. Where relevant, the expected
life used in the model has been adjusted based on management’s best estimate for the effects of
non-transferability, exercise restrictions (including the probability of meeting market conditions
attached to the option), and behavioural considerations. Expected volatility is based on the
historical share price volatility over the previous twelve months.
Warrant series | Warrant series | Warrant series | |
granted on | granted on | granted on | |
13 March 2024 | 1 November 2023 | 2 March 2023 | |
Inputs into the model: | |||
Grant date share price | 118.0 pence | 125.5 pence | 126.0 pence |
Exercise price | 118.0 pence | 125.5 pence | 126.0 pence |
Expected volatility | 24.75% | 33.83% | 45.11% |
Warrant life | 3 years | 3 years | 3 years |
Dividend yield | 0.00% | 0.00% | 0.00% |
Risk free interest rate | 4.04% to 4.23% | 4.54% to 4.77% | 3.70% to 3.73% |
Warrant series | Warrant series | |
granted on | granted on | |
29 September 2022 | 23 December 2020 | |
Inputs into the model: | ||
Grant date share price | 102.0 pence | 132.5 pence |
Exercise price | 102.0 pence | 132.5 pence |
Expected volatility | 42.96% | 77% |
Warrant life | 3 years | 3 years |
Dividend yield | 0.00% | 0.90% |
Risk free interest rate | 4.36% to 4.44% | -0.08% to -0.06% |
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
137
CAPITAL COMMITMENTS
Capital expenditure contracted for at the reporting date but not recognised in the financial
statements is as follows:
Group and Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Property, plant and equipment | 249,481 | 32,761 |
Capital commitments represent amounts due under contracts entered into by the Group to
purchase aircraft. The company has paid deposits towards the cost of these aircraft which are
included in deposits paid for aircraft.
As at the year end, the Group has commitments to purchase twelve (2023: two) ATR 72-600
aircraft from the manufacturer with expected delivery dates ranging from 2024 to 2028.
41
OPERATING LEASE MATURITY ANALYSIS
The Group leases out aircraft under operating leases. The future minimum undiscounted lease
payments under non-cancellable leases are as follows:
Group | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Within one year | 91,510 | 92,461 |
One to two years | 82,240 | 88,630 |
Two to three years | 68,731 | 79,315 |
Three to four years | 54,215 | 65,948 |
Four to five years | 27,393 | 52,466 |
Later than five years | 38,095 | 63,977 |
362,184 | 442,797 | |
The Group holds cash deposits of US$20.1 million (2023: US$20.1 million) and letters of credit for
CONTINGENT LIABILITIES
| Company | ||
2024 | 2023 | |
US$’000s | US$’000s | |
Guarantees | 706,669 | 800,448 |
The maximum estimated amount that the Company could become liable for under guarantees for
AVATION PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
138
ULTIMATE HOLDING COMPANY
SUBSEQUENT EVENTS
Subsequent to the year-end two ATR 72-600 aircraft were sold to the lessee pursuant to the
APPROVAL OF FINANCIAL STATEMENTS
The financial statements of the Company and the consolidated financial statements of the Group for
the year ended 30 June 2024 were authorised for issue by the Board of Directors on 25 October
ANNUAL REPORT
2024
65 Kampong Bahru Road
Singapore 169370
www.avation.net
Reuters/BBG
AVAP.LN
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