TIDMAA4
RNS Number : 2704W
Amedeo Air Four Plus Limited
09 December 2019
AMEDEO AIR FOUR PLUS LIMITED (the "Company")
Legal Entity Identifier: 21380056PDNOTWERG107
HALF-YEARLY FINANCIAL REPORT
The Board of the Company is pleased to announce its results for
the period from 1 April 2019 to 30 September 2019.
To view the Company's half-yearly financial report please follow
the link below:
http://www.rns-pdf.londonstockexchange.com/rns/2704W_1-2019-12-9.pdf
The half-yearly financial report will also shortly be available
on the Company's website http://www.aa4plus.com.
In addition, to comply with DTR 6.3.5(1) please find below the
full text of the half yearly financial report.
For further information, please contact:
Administrative Enquiries:
JTC Fund Solutions (Guernsey) Limited
Tel: +44 (0) 1481 702400
Shareholder Enquiries:
Nimrod Capital LLP
Richard Bolchover
Marc Gordon
+44 (0) 207 382 4565
info@nimrodcapital.com
OF ANNOUNCEMENT
E&OE - in transmission
Amedeo Air Four Plus Limited
Consolidated
Half-Yearly Financial
Report (Unaudited)
From 1 April 2019 to 30 September 2019
Summary Information
----------------------------------------------------------------------------
Trading The Specialist Fund Segment of
the London Stock Exchange's Main
Market
-------------------------------------
Ticker AA4
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SEDOL BWC53H4
ISIN GG00BWC53H48
LEI 21380056PDNOTWERG107
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Reporting Currency British Pound
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Launch Date / Share Price 13 May 2015 / 100p
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Share Price 83.5p (as at 30 September 2019)
78.5p (as at 6 December 2019)
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Market Capitalisation GBP 504 million (as at 6 December
2019)
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Target Dividend Current dividends are 2.0625p
per share per quarter (8.25p
per annum)
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Dividend Payment Dates January, April, July, October
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Year End 31 March
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Stocks & Shares ISA Eligible
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Aircraft Registration Numbers A6-EEY, A6-EOB, A6-EOM, A6-EOQ,
A6-EOV,
A6-EOX, A6-EPO, A6-EPQ, A6-API,
A6-APJ,
HS-THF, HS-THG, HS-THH, HS-THJ
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Website www.aa4plus.com
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Key Advisers and Contact Information
----------------------------------------------------------------------------
Directors Registered Office of the Company
Robin Hallam (Chairman) Ground Floor
David Gelber (Senior Independent Dorey Court
Director effective from 23 October Admiral Park
2019) St Peter Port
John Le Prevost Guernsey GY1 2HT
Laurence Barron
Telephone: +44 (0)1481 702400
-------------------------------------
Administrator and Secretary Corporate and Shareholder Adviser
JTC Fund Solutions (Guernsey) Nimrod Capital LLP
Limited 3 St Helen's Place
Ground Floor London
Dorey Court England EC3A 6AB
Admiral Park
St Peter Port
Guernsey GY1 2HT
Telephone: +44 (0)20 7382 4565
Telephone: +44 (0)1481 702400
-------------------------------------
Asset Manager Liaison and Administration Oversight
Amedeo Limited Agent
The Oval Amedeo Services (UK) Limited
Shelbourne Road 29-30 Cornhill
Ballsbridge London
Dublin England EC3V 3NF
Ireland D04 T8F2
-------------------------------------
Registrar, Paying Agent and Transfer UK Transfer Agent
Agent
Anson Registrars Limited Anson Registrars (UK) Limited
Ground Floor 3500 Parkway
Dorey Court Whiteley
Admiral Park Fareham
St Peter Port Hampshire
Guernsey GY1 2HT England PO15 7AL
Telephone: +44 (0)1481 702 400
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Auditor Advocates to the Company (as
to Guernsey
KPMG law)
1 Harbourmaster Place Carey Olsen
IFSC Carey House
Dublin 1 Les Banques
DO1 F6F5 St Peter Port
Ireland Guernsey GY1 4BZ
-------------------------------------
Solicitors to the Company (as Solicitors to the Company (as
to English law) to asset acquisition, financing
and leasing documentation)
Herbert Smith Freehills LLP Clifford Chance LLP
Exchange House 10 Upper Bank Street
Primrose Street London
London England
England E14 5JJ
EC2A 2EG
Norton Rose Fulbright LLP
3 More London Riverside
London
England
SE1 2AQ
-------------------------------------
COMPANY OVERVIEW
Amedeo Air Four Plus Limited ("AA4" or the "Company") is a
Guernsey company incorporated on 16 January 2015. The Company
operates under The Companies (Guernsey) Law, 2008, as amended (the
"Law") and the Disclosure Guidance and Transparency Rules (the
"DGTRs") of the UK's Financial Conduct Authority (the "FCA").
The Company's shares were first admitted to trading on the
Specialist Fund Segment ("SFS") of the London Stock Exchange's Main
Market on 13 May 2015 upon the admission of 202,000,000 redeemable
ordinary shares ("Shares") at an issue price of 100 pence per
share. Subsequently, the Company has conducted six additional
placings, resulting in the issue and admission to trading on the
SFS of an additional 440,250,000 Shares at issue prices in the
range of 100 pence to 104 pence.
As at 6 December 2019, the last practicable date prior to the
publication of this report, the Company's total issued share
capital was 642,250,000 Shares trading at 78.5 pence per share.
Investment Objective and Policy
The Company's investment objective is to obtain income returns
and a capital return for its shareholders by acquiring, leasing and
then selling aircraft (each an "Asset" and together "Assets").
To pursue its investment objective, the Company seeks to use the
net proceeds of placings and/or other equity capital raisings,
together with debt facilities (or instruments), to acquire aircraft
which will be leased to one or more major airlines.
The Company's Articles of Incorporation (the "Articles") provide
that the Company may only acquire further aircraft with the
approval of the Company's shareholders by ordinary resolution in
relation to each proposed acquisition. Where such approval for a
new acquisition is obtained, it is the current intention of the
Board of directors of the Company (the "Board") to offer
shareholders the opportunity to participate in any equity financing
of such further acquisitions on a broadly pre-emptive basis,
although other approaches to the equity financing may also be
considered and pursued if the Board consider it appropriate to do
so in order to diversify the funding sources of the Company.
In accordance with the investment policy, it is the Board's
intention that, subject to finding suitable deals and obtaining
subsequent shareholder approval, the Company be grown into a larger
vehicle owning a range of aircraft leased to more airlines. The aim
of such a strategy is to diversify the risk profile of the
Company's portfolio of Assets and lease credits whilst maintaining
its target investor returns of a quarterly dividend of 2.0625 pence
per share and a double digit total return.
Amedeo Limited ("Amedeo" or the "Asset Manager") continues to
monitor the market for transactions to present to the Board that
would contribute positively to the Company's overall risk-return
profile.
Investment Portfolio
As at the financial reporting date the Company had sixteen
wholly-owned subsidiaries, see note 1 for further details. Together
the Company and its subsidiaries are known as the "Group".
The table below details the Assets held by the Group at the
reporting date:
Manufacturer Aircraft Manufacturer's Date of Acquisition Lessee* Initial Lease
Type Serial Number Duration
("MSN") and
Registration
Airbus A380-800 157 - A6-EEY 19-May-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 164 - A6-EOB 19-May-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 187 - A6-EOM 03-Aug-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 201 - A6-EOQ 27-Nov-15 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 206 - A6-EOV 19-Feb-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 208 - A6-EOX 13-Apr-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Boeing 777-300ER 42334 - A6-EPO 28-Jul-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Boeing 777-300ER 42336 - A6-EPQ 19-Aug-16 Emirates 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 233 - A6-API 24-Mar-17 Etihad 12 years
---------- --------------- -------------------- --------- --------------
Airbus A380-800 237 - A6-APJ 24-May-17 Etihad 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 123 - HS-THF 13-Jul-17 Thai 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 130 - HS-THG 31-Aug-17 Thai 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 142 - HS-THH 22-Sep-17 Thai 12 years
---------- --------------- -------------------- --------- --------------
Airbus A350-900 177 - HS-THJ 26-Jan-18 Thai 12 years
---------- --------------- -------------------- --------- --------------
* "Emirates" means Emirates Airline;
"Etihad" means Etihad Airways PJSC;
"Thai" means Thai Airways International Public Company
Limited.
Distribution Policy
The Company aims to provide shareholders with an attractive
total return comprising income from distributions through the
period of the Group's ownership of the Assets and a capital gain
upon the sale, or other disposition of the Assets.
The Group receives income in the form of lease payments. Income
distributions are made to shareholders quarterly, subject to
compliance with applicable laws and regulations. The Company
currently targets and has achieved to date a distribution to
shareholders of 2.0625 pence per share per quarter.
There can be no guarantee that dividends will be paid to
shareholders and, if dividends are paid, as to the timing and
amount of any such dividend. There can also be no guarantee that
the Company will, at all times, satisfy the statutory solvency test
(the "Solvency Test") required to be satisfied pursuant to section
304 of the Law prior to any declaration of a dividend by the
Board.
In the event that the Company is wound-up, shareholders may also
receive a capital return from the net proceeds of a sale of the
Assets.
Performance Overview
All payments by the Lessees have to date been made in accordance
with the terms of the respective leases.
In accordance with the Distribution Policy, the Company declared
two dividends of 2.0625 pence per share during the period under
review and one dividend of 2.0625 pence per share was declared
after the end of the reporting period. Further details of dividends
declared and paid can be found on pages 32 and 33.
Return of Capital
Following the sale of an Asset the Board may, as it deems
appropriate at its absolute discretion, either return to
shareholders all or part of the net capital proceeds of such sale
(subject to satisfaction of the Solvency Test), or re-invest the
proceeds in accordance with the Company's investment policy,
subject to shareholder approval.
The Asset Manager regularly monitors the market valuations of
the Assets and, subject to any lease obligations, will consider the
most appropriate time for the sale of any one or more of the
Assets. The Board will consider any recommendation from the Asset
Manager as to the sale of any Asset and proceed as the Board
considers appropriate.
Liquidation Resolution
Although the Company does not have a fixed life, the Articles
require that the Board convenes a Liquidation Proposal Meeting in
2029 or such other date as shareholders may approve by ordinary
resolution.
CHAIRMAN'S STATEMENT
Whilst I am mindful of reporting a decline in the Company's
share price over the period and year-to-date, shareholders should
be reassured that the Company's Assets continue to be well utilised
and their lessees are meeting all financial obligations on-time and
in full. However, sentiment and recent news flow relating to the
A380 appears to be persisting as a headwind. As reported in my
statement accompanying the most recent annual financial report the
announcement by Airbus of the cessation of the A380 has no direct
impact on the Company's leases nor its ability to pay targeted
distributions. Moreover, the Company's first lease expiry does not
fall due until 2026 and the portfolio is complemented and
diversified by two additional aircraft models, namely the 777-300ER
and A350-900. Recent comments by Emirates with regard to the A380
continue to be supportive in many respects but, in the absence of
concrete evidence, the Company and its Asset Manager are somewhat
constrained in their ability to report more positive developments
at this time. The Board will carry out an impairment review for the
financial year ending 30 March 2020 on the basis that there is an
absence of a secondary market for the A380. Further details on
Emirates and the A380, along with the rest of the Company's
portfolio can be found in the Asset Manager's report. During the
period, and as targeted, the Company has continued to declare
quarterly dividends of 2.0625 pence per share, representing a
yearly distribution of 8.25 pence per share and your Board is
hopeful of continuing to pay such dividends for the foreseeable
future.
Your Board is also mindful of the increasing importance to
shareholders of Environment, Social and Governance ("ESG") factors
and is taking action to increase its reporting in this regard.
On 30 September 2019 the Company had 642,250,000 shares in issue
which, at the then market price of 83.5 pence equated to a market
capitalisation of approximately GBP536 million.
The Company's Asset Manager, Amedeo, continues to monitor the
leases and reports regularly to the Board. Nimrod Capital LLP
("Nimrod" or the "Corporate and Shareholder Adviser") continues to
liaise between the Board and shareholders.
I continue to encourage Amedeo to source potential future
transactions and to work with Nimrod in evaluating their
suitability for shareholders but remain conscious that we should be
patient and exercise discipline with regard to future growth. If,
in the view of the Board, it is in the interests of the Company to
acquire any further aircraft, taking into account the maintenance
of the Company's target income distributions, opportunities for
capital growth, the diversification of the Company's portfolio and
risk profile, the Board will seek shareholders' approval of those
proposed acquisitions.
Shareholders should note that, as per the most recent 2019
annual financial report, the subsidiaries of the Company
re-designated their functional currency to US Dollars with effect
from 1 April 2018. This is reflective of the most recent economic
environment of these subsidiaries, as their rental income and
sources of financing are primarily US Dollar based, and better
represent the Company's financial performance for comparative
periods going forward.
US Dollar lease rentals and loan repayments (with the exception
of the four Thai aircraft) are closely matched as to amount and
timing so that during the life of each lease the lease rentals
cover loan repayments as to interest and principal save for the
repayment of bullet repayments of principal due on the final
maturity of a loan. The Thai leases' floating lease rental payments
are in US Dollars and are matched to floating rate loan repayments
so as to closely match the loan interest and capital repayments
save for the bullet capital repayments due on the final maturity of
such loans. The Board monitors the foreign exchange exposure as
well as the interest rate risk resulting from the Thai aircraft and
may if it considers it appropriate undertake hedging
transactions.
Rental income receivable is credited evenly to the profit or
loss in the Consolidated Statement of Comprehensive Income over the
planned life of each lease. Conversely, the methodology for
accounting for interest costs means that the proportion of the loan
repayments which is treated as interest and is debited to the
Consolidated Statement of Comprehensive Income varies over the
course of the loan - so that the differential between rental income
and interest cost (as reported in the Consolidated Statement of
Comprehensive Income) reduces over the course of each twelve year
lease.
David Gelber, independent non-executive director of the Company,
has been appointed senior independent director ('SID') with effect
from 23 October 2019. The Board is pleased that Mr Gelber has
agreed to the appointment. Mr Gelber will provide a sounding board
to the Chairman and serve as an intermediary for the other
directors and shareholders. Mr Gelber will also lead on the
evaluation of the performance of the Chairman.
Finally, the Board is always keen to meet with shareholders and
welcomes their feedback. We welcome the opportunity to hear from
more shareholders in the future as your Board very much welcomes an
open dialogue. Please do not hesitate to contact Nimrod to request
a meeting.
On behalf of the Board, I would like to thank our service
providers for all their help and, most importantly, all
shareholders for their continuing support of the Company.
Robin Hallam
Chairman
Date: 9 December 2019
Asset Manager's Report
On the invitation of the Directors of the Company, the following
commentary has been provided by Amedeo as Asset Manager of the
Company and is provided without any warranty as to its accuracy and
without any liability incurred on the part of the Company, its
Directors and officers and service providers. The commentary is not
intended to constitute, and should not be construed as, investment
advice. Potential investors in the Company should seek their own
independent financial advice and may not rely on this communication
in evaluating the merits of an investment in the Company. The
commentary is provided as a source of information for shareholders
of the Company but is not attributable to the Company.
THE ASSETS
Lessee Model MSN REG Delivery Lease Expiry Flight Flight Cycles
Date Date Hours
------------- ------- ---------- -------------- -------------- ----------
Emirates A380-800 157 A6-EEY 19/05/2015 04/09/2026 21,474 3,421
A380-800 164 A6-EOB 19/05/2015 03/11/2026 21,335 3,435
A380-800 187 A6-EOM 03/08/2015 03/08/2027 21,653 1,996
A380-800 201 A6-EOQ 27/11/2015 27/11/2027 15,872 2,501
A380-800 206 A6-EOV 19/02/2016 19/02/2028 15,785 2,487
A380-800 208 A6-EOX 13/04/2016 13/04/2028 14,568 2,285
777-300ER 42334 A6-EPO 28/07/2016 28/07/2028 13,352 3,330
777-300ER 42336 A6-EPQ 19/08/2016 19/08/2028 14,365 3,239
-------------------------- ------- ---------- -------------- -------------- ---------- ---------------
Etihad A380-800 233 A6-API 24/03/2017 24/03/2029 13,410 1,446
A380-800 237 A6-APJ 24/05/2017 24/05/2029 12,459 1,305
-------------------------- ------- ---------- -------------- -------------- ---------- ---------------
Thai A350-900 123 HS-THF 13/07/2017 13/07/2029 10,390 1,776
A350-900 130 HS-THG 31/08/2017 31/08/2029 10,183 1,637
A350-900 142 HS-THH 22/09/2017 22/09/2029 9,889 1,644
A350-900 177 HS-THJ 26/01/2018 26/01/2030 8,376 1,399
-------------------------- ------- ---------- -------------- -------------- ---------- ---------------
As of 30 September 2019
Industry Update: Original Equipment Manufacturer ("OEM")
Production Dynamics and Related Effects
In an update to what was reported in Q3 2019, Boeing continues
to work towards re-certification of the 737 MAX aircraft. In
mid-September at a Morgan Stanley investor conference, Boeing
Chairman and CEO Dennis Muilenburg reiterated his projection that
the 737 MAX would be certified to return to service in November
2019. However, EASA continues to question Boeing's plan with regard
to Angle of Attack "integrity" issues, will send its own test
pilots, and has indicated that it may not fall in step with an FAA
approval timeline. Major operators are also hedging their bets with
their fleet planning. American Airlines has removed the MAX from
its schedule through December 3, 2019. Southwest Airlines has done
the same through January 5, 2020. We now think that recertification
may be a Q1 2020 event, but actual re-entry of the parked and
undelivered fleet will take all of 2020. The relevance of the 737
MAX issues raises questions as to how Boeing will handle the
production of other aircraft types, particularly the 777X. In
August, Boeing announced that it would delay the entry into service
of the -8 variant, which was previously slated for 2022. And in
September, the -9 variant suffered a setback when the static test
airframe failed at 1.48 times the expected maximum forces bending
the wings, nearly at the 1.5x target, but still a shortcoming that
will not inspire confidence at the FAA. In combination with still
unresolved GE-9X engine issues, the -9 entry into service will be
delayed. Boeing is still hoping to deliver the first aircraft to
Emirates in 2020, but does now say that there are risks to that
scenario. We think that the FAA, fresh off the 737 MAX controversy,
will be inclined to review the 777X certification project with a
more watchful eye. Our view is that the 777X will certainly be
delivered, but there is no visibility as to when, and that makes
forward fleet planning for airlines that ordered it, like Emirates,
a challenge. If any of these factors cause entry-into-service
delays, other widebody aircraft residuals may benefit and the
appraisal community should be more confident in regard to the
777-300ER. It also remains to be seen how the ongoing work with 737
MAX and 777X programs will affect Boeing's progress on the New
Midsized Aircraft ("NMA").
While its difficulties have received less attention, Airbus has
not escaped issues either. Reports indicate that Lufthansa and
British Airways have been blocking the last row(s) of their A320neo
aircraft as a result of recently discovered center-of-gravity
issues. Such actions obviously reduce the profitability of
operating these aircraft on an absolute basis, as well as relative
to the 737 family.
Emirates President Tim Clark recently skewered all the OEMs,
engine manufacturers included, for general reliability issues.
While he expressed complete confidence in aviation safety, he
bemoaned the reliability of the Rolls-Royce engine family and
criticized GE for the GE-9x engine issues mentioned above with
respect to the 777-9X.
Industry Update: Emissions Reduction Dynamics
With the increased focus on climate change and greenhouse gas
emissions, further focus has landed on the aviation industry and
its emissions profile. The Air Transit Action Group ("ATAG")
reports that aircraft flights produced an estimated 895 million
tons of carbon dioxide on an annual basis, or 2% of total
"human-induced" carbon dioxide emissions. Among transport sources
of carbon dioxide, aviation is responsible for just 12%, with road
emissions comprising the vast majority at 74%.
ATAG aims for net carbon emissions neutrality from 2020 onwards
and for net carbon emissions to be 50% of 2005 levels by the year
2050. Airframe and engine manufacturers can contribute
significantly to this effort.
Airbus offers the following claims with respect to its product
line:
1) A350 XWB - 25% fewer carbon dioxide emissions relative to
"the previous generation of aircraft";
2) A320neo - 20% fewer carbon dioxide emissions relative to the A320ceo;
3) A220 - 20% fewer carbon dioxide emissions relative to "aircraft...in their class";
4) A330neo - 14% fewer carbon dioxide emissions relative to the A330ceo; and
5) A380 - 33% fewer carbon dioxide emissions relative to "its nearest competitor".
Boeing, in turn reports:
1) 737 MAX - 20% reduction in carbon dioxide emissions relative
to original Next Generation 737;
2) 787 - 20 to 25% reduction in carbon dioxide emissions as compared to the 767-300ER;
3) 777X - 20% reduction in carbon dioxide emissions relative to the 777-300ER; and
4) 747-8 - 18% reduction in carbon dioxide emissions as compared to the 747-400.
These are impressive accomplishments, and when compounded by
better airline management, fleet utilization, and higher load
factors, jet aircraft are, according to ATAG, 80% more fuel
efficient per seat kilometre than they were at the advent of jet
engines.
We at Amedeo believe that aviation brings people together to
solve problems like climate change, and without bringing people
together we will fail in resolving this issue. Yes, there is an
environmental cost to aviation, but the benefits to humanity, now
and in the future, well outweigh the costs. This simple story has
not been sufficiently articulated by the industry's leadership.
IATA efforts to date have been laudable, but more visible
individual advocacy action, particularly by airline CEOs, is
needed.
IATA ECONOMIC ANALYSIS
Growth in industry-wide Revenue Passenger Kilometres ("RPKs")
continues to be positive for 2019 thus far, though somewhat below
long-term trend. RPKs have risen by 4.7% on a year-to-date basis
through the end of July. This increase represents a slower growth
pace relative to a long-run average pace of approximately 5.5% and
IATA 2019 estimates of 5%. July RPK growth was 3.6%, down from 5.1%
in June. This soft start to the peak travel period is additional
evidence of a trend toward slowing growth.
Available Seat Kilometres ("ASKs") grew by 4.1% on a
year-to-date basis through July, somewhat below RPK growth pace. As
a result, load factors hit monthly and all-time highs in July at
85.7%. Load factors stand at 82.6% over the first seven months of
2019. North American load factors lead the world at 85.2%
year-to-date through July, with Africa lagging behind at 71.4%. All
regions outside of Africa and the Middle East experienced all-time
high load factors during July.
European airlines continue to be the fastest growing overall
relative to their peers in other regions - year-to-date growth hit
5.6% through July. The Middle East region was the clear laggard of
the group, with year-to-date RPK growth of just 1.5%. Domestic
Brazilian RPKs fell 6.1% on a year-over-year basis in July, and are
down 0.4% year-to-date, reflecting the exit of Avianca Brasil. ASKs
decreased a commensurate 6.9% in July, as the passenger market
begins to recalibrate. Despite the Avianca Brasil failure, Latin
America RPKs are up 5.2% on a year-to-date basis.
International Air Transport Association, 2019. Air Passenger
Market Analysis (July 2019) (c) All Rights Reserved.
EMIRATES GROUP
Emirates fleet consisted of 268 aircraft as of September 2019,
including 110 A380s. 13 more A380s are yet to be delivered from
Airbus by 2021. Emirates also has an unfilled order for 6 777-300ER
aircraft and 150 777X aircraft. Of those 150, Cirium lists 35 as -8
variants. With the -8 variant delay announced by Boeing, unresolved
GE engine issues, and the previously mentioned 777X certification
challenges, it is unclear when the 777X will join the fleet,
perhaps in 2021.
In addition, Emirates agreed to acquire 40 A330-900 and 30 A350
aircraft from Airbus. We would expect clarity on the timing of the
A330 stream in the near future. Reading between the lines, matters
are delayed by the reliability issues Tim Clark has been vocal
about. The A330 fleet will allow Emirates to expand into markets
and airports too small for 777 or A380 operations.
Additionally, Emirates now has much greater cooperation and
connectivity with FlyDubai, a successful low cost carrier also
owned by the Government of Dubai. The regional focus of and narrow
body connectivity with FlyDubai will be accretive to the Emirates
long-haul network and it is in the space between the Emirates
business model and that of FlyDubai that the nexus exists for the
smaller widebodies that Emirates has on order, acting as route
expansion and route development aircraft for the future.
This FlyDubai cooperation and uncertainty about the timing of
new fleet additions provide the backdrop to the key question for
us: what are Emirates plans for its A380s, in particular those
leased by AA4?
Emirates has publicly stated that it will fly A380s well into
2030s, and we previously estimated that a fleet of about 100
aircraft will be the long-term hold. Emirates currently estimates
its A380 fleet will ultimately stabilise at 80 to 100 aircraft.
In the most recent Emirates World podcast
(https://cdn.ek.aero/downloads/ek/trailers/920191352-sir-tim-clark.mp3),
Tim Clark articulates a vision of an Emirates fleet with over 500
aircraft by 2030, including medium twin engine widebodies, not just
the largest aircraft.
Emirates is going through a review of which MSNs to keep long
term, complicated by the aforementioned fleet uncertainties
elsewhere, and we look forward to engaging with them on the future
of these aircraft once the review is completed.
With respect to fleet and network changes, Emirates announced
two daily flights from Dubai to Muscat, Oman with A380 aircraft in
early July. At approximately 340 kilometers, these are the shortest
A380 flights in the world. The flights last approximately 40
minutes. In addition, the airline announced resumption of service
to Khartoum and that it would launch daily service to Mexico City
via Barcelona in December 2019, using the 777-200LR.
Emirates also experienced a number of developments during the
quarter with respect to its passenger services. In mid-September,
the airline announced that its loyalty program, Emirates Skywards,
had passed the milestone of 25 million members. In addition,
Emirates announced that it has become the first airline outside of
the United States to receive approval for biometric boarding from
the U.S. Customs and Border Patrol. Customers at any of the
airline's 12 U.S. destinations can elect to use facial recognition
technology at its departure gates to complete identity
verification.
Finally, Emirates announced several new executive leadership
appointments during the quarter. Adel Al Redha was appointed Chief
Operating Officer, Adnan Kazim was appointed Chief Commercial
Officer and Sheikh Majid Al Mualla was appointed Divisional Senior
Vice President, International Affairs. Al Redha has been with the
airline for 31 years.
Emirates reports full financial data on a yearly basis. Further
financial analysis will accompany the November release of partial
half year data and then the release of the 2020 annual report.
The Emirates Group. (c) 2019 All Rights Reserved.
ETIHAD AIRWAYS
As of September 2019, Etihad had a majority widebody fleet of
109 aircraft in service, including 10 A380s and 19 aircraft in the
777 family. As per Boeing data at the end of August 2019, the
airline has a remaining orderbook of 37 787s and 25 777X aircraft
with Boeing. Cirium lists the 777X aircraft as being of the -8
variant. Boeing's delay in producing this variant leaves an open
question as to whether these aircraft will ultimately be delivered
or not. From Airbus, Etihad will take delivery of 17 incremental
A350-1000 aircraft and 26 A321neos.
With respect to fleet and network developments, Etihad announced
in early July that it would begin a daily service to Shanghai using
the 787-10 Dreamliner. Also in July, the airline announced that it
was adding a fourth daily, year-round flight to London Heathrow.
This flight will begin in October 2019.
In July 2019, Etihad took delivery of its second and third
A350-1000 aircraft from Airbus. These aircraft, in addition to an
incremental A350-1000 delivered in May, are currently in storage
and not in revenue service. As previously mentioned, 17 incremental
A350-1000s remain scheduled for delivery to the airline.
With respect to the passenger experience, Etihad announced two
developments. Beginning August 1st, the airline entered into a
rewards partnership with Booking.com. Etihad Guest members can now
earn Guest miles when booking accommodations through the new
co-branded website. Finally, in mid-September Etihad announced the
relaunch of its website, Etihad.com. The new website is designed to
be more accessible to mobile phone users as well as to make booking
flights easier.
Etihad Airways. (c) 2019 All Rights Reserved.
THAI AIRWAYS INTERNATIONAL
Thai Airways International's fleet comprised 103 in-service
aircraft as of the end of Q2 2019 (inclusive of Thai Smile units).
The airline currently has no firm orderbook with either Boeing or
Airbus but a 2019 - 2026 fleet acquisition plan calling for 38
aircraft has been approved by the airline's Board of Directors and
was approved by the Transport Minister in August. Of the 38
aircraft, 31 would be for replacement of the existing fleet, with
an incremental 7 growth aircraft. However, following the September
24th Board meeting, the airline was directed to revise its fleet
plan. Further, recent headlines suggest that the Transport Minister
may be considering replacing the airline's Board of Directors on
account of alleged underperformance. Both of these potential
developments are likely to have a significant impact, yet to be
determined, on the airline's fleet growth and renewal plan.
The group reported Q2 2019 headline loss of Bt6.878 billion,
more than double the Q2 2018 loss of Bt3.086 billion. Revenues
decreased 10.0% year-over-year, falling to Bt42.5 billion from
Bt47.2 billion in Q2 2018. The decrease in revenue was driven
primarily by a 6.1% decrease in passenger revenue, itself a result
of a 5.4% decline in RPKs and a 1.4% decrease in average passenger
yield. Passenger load factor decreased from 75.8% to 74.7%, and the
airline carried slightly fewer passengers during Q2 2019 than it
did during Q2 2018 - 5.72 million as compared to 5.90 million.
Freight revenue fell 18.8% year-over-year, though it represents
just a small portion of total revenue.
Total expenses decreased by Bt425 million, or 0.8%, from Bt50.0
billion to Bt49.6 billion. Fuel expenses were the largest
contributor to the decrease, declining 2.0% relative to Q2 2018.
Non-fuel operating expenses also declined slightly, falling 0.4%.
Net finance cost decreased by 0.9%. The airline recorded an
impairment of Bt172 million for the quarter, a 33.1% smaller
impairment than the Bt257 million recorded in Q2 2018. Finally, the
Q2 2019 bottom line was benefitted by Bt522 million in foreign
exchange gains, as compared to Bt431 million in foreign exchange
losses during Q2 2018.
The airline had 18 aircraft classified as held-for-sale at the
end of Q2 2019, and the airline sold 3 A330-300 aircraft during the
quarter. Long term liabilities decreased 4.3% during the first half
of 2019, with a total balance of Bt141.9 billion at June 30th. The
airline's reported leverage and coverage metrics showed meaningful
deterioration as measured at the end of H1 2019 relative to H1
2018.
Thai Airways continues to implement its business transformation
plan, the Montra Project. In 2019, the airline intends to continue
to sell decommissioned aircraft, increase ancillary revenue, and
increase network efficiencies between Thai Airways and Thai Smile,
the latter of which is set to become a Star Alliance connecting
partner by the end of 2019. The airline also expressed the
expectation that Thailand would receive a country upgrade to
Category 1 from the FAA by the end of 2019.
Thai Airways International Public Company Limited. Management's
Discussion and Analysis for three months ended June 30, 2019.
DIRECTORS
Robin Hallam (age 66) (Chairman) (independent non-executive)
Until 31 December 2015, Robin Hallam was a partner and co-head
of Asset Finance at international law firm Hogan Lovells LLP, where
he was a partner since 1995 specialising in aircraft finance,
particularly leasing, export credit and structured financing.
Between January and December 2016, Robin was a consultant at Hogan
Lovells LLP. He has represented financial institutions, operating
lessors, investors, airlines and export credit agencies. Robin
holds a degree in law from Trinity College, Cambridge, is a member
of International Society of Transport Aircraft Trading ("ISTAT")
and was ranked Band 1 for Asset Finance in Chambers UK 2015.
David Gelber (age 72) (Senior Independent non-executive)
David Gelber began his career with Citibank in London in 1974.
Over the course of the next twenty years he held a variety of
trading roles in foreign exchange, fixed income and derivatives at
Citibank, Chemical Bank and HSBC where he was Chief Operating
Officer of HSBC Global Markets. In 1994 he joined ICAP, an
inter-dealer broker, as COO and oversaw two mergers and a number of
acquisitions. He is currently the non-executive Chairman of Walker
Crips PLC, a stock broker and wealth manager; and a non-executive
director of IPGL, a holding company with investments in numerous
companies on several of which he serves as a director. He recently
joined the Board of Singapore Life Ltd, a newly formed online
insurance company. David holds a BSc in Statistics and Law from the
University of Jerusalem and an MSc in Computer Science from the
University of London.
John Le Prevost (age 68) (independent non-executive)
John Le Prevost is the Chief Executive Officer of Anson Group
Limited and Chairman of Anson Registrars Limited (the Company's
Registrar). He has spent over forty years working in offshore fund,
trust and investment businesses during which time he has been a
managing director of subsidiaries in Guernsey for County NatWest
Investment Management, The Royal Bank of Canada and for Republic
National Bank of New York. He is a Full Member of the Society of
Trust and Estate Practitioners. He is a director of a number of
other companies associated with Anson Group's business as well as
being a trustee of the Guernsey Sailing Trust. John is currently
also a non-executive director of Doric Nimrod Air One Limited,
Doric Nimrod Air Two Limited and Doric Nimrod Air Three Limited
(each of which is an aircraft leasing investment vehicle). He is
resident in Guernsey.
Laurence Barron (age 68) (independent non-executive)
Having begun his career as a commercial lawyer in Paris and then
in Tokyo, where he first became involved in aircraft financing
transactions, Laurence joined Airbus in 1982 as an in-house lawyer
specialising in aircraft finance. He subsequently moved to the
business side when, in 1984, he was appointed Sales Finance
Director North America, becoming Head of Sales Finance in 1985, and
then, in 1987, Vice President of Customer Finance. In 1994, he was
asked to set up the Asset Management Organisation within Airbus and
that year became Vice President and Head of Asset Management.
Airbus Asset Management has full responsibility for all used
aircraft transactions at Airbus and acts as an in-house leasing
company for the used Airbus aircraft owned or controlled by the
Airbus group of companies. In 2001 he was promoted to Senior Vice
President of Airbus before assuming the role of President of Airbus
China in 2004, with responsibility for Airbus' overall activities
in the People's Republic of China. In January, 2013, Laurence was
appointed Chairman of EADS China, now rebranded Airbus China.
Laurence retired from salaried Airbus employment at the end of
April 2016 and was non-executive Chairman of Airbus China until the
end of 2017. He holds an LLB from Bristol University Law
Faculty.
interim management report
A description of important events that have occurred during the
period under review, their impact on the financial statements and a
description of the principal risks and uncertainties facing the
Group, together with an indication of important events that have
occurred since the end of the period under review and are likely to
affect the Group's likely future development are included in the
Company Overview, the Chairman's Statement, the Asset Manager's
Report and the Notes to the consolidated financial statements
contained on pages 22 to 53 and are incorporated herein by
reference.
There were no events or changes in the related parties and
transactions with those parties during the period under review
which had or could have had a material impact on the financial
position and performance of the Group, other than those disclosed
in this consolidated half-yearly financial report.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Group are
unchanged from those disclosed in the Group's annual financial
report for the year ended 31 March 2019.
Going Concern
The Group's principal activities are set out within the Company
Overview on pages 6 to 8. The financial position of the Group is
set out on page 19. In addition, note 17 to the consolidated
financial statements includes the Group's objectives, policies and
processes for managing its capital, its financial risk management
objectives and its exposures to credit risk and liquidity risk.
The rental income under the relevant operating leases should be
sufficient to repay the senior debts and provide surplus income to
pay for the Group's expenses and permit payment of dividends. The
bullet repayment of junior debt and senior debt as appropriate is
expected to be financed out of the disposal proceeds of the
relevant aircraft. The declaration of dividends may need to be
suspended if the Board considers that the Company will not be able
to repay the junior debt through the sale, refinancing or other
disposition of the Assets.
After making reasonable enquiries, and as described above the
Directors have a reasonable expectation that the Group has adequate
resources to continue in its operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis of accounting in preparing the consolidated financial
statements.
Responsibility Statement
The Directors jointly and severally confirm that to the best of
their knowledge:
(a) the consolidated financial statements, prepared in
accordance with International Financial Reporting Standards, as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group; and
(b) this interim management report (including the information
incorporated by reference) includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that the Group faces.
Signed on behalf of the Board of directors of the Company on 9
December 2019.
John Le Prevost
Director
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 April 2019 to 30 September 2019
1 Apr 2019 to 1 Apr 2018 to
30 Sep 2019 30 Sep 2018*
Notes GBP GBP
INCOME
US Dollar based rent income 4 109,536,552 102,996,829
British Pound based rent
income 4 22,758,325 22,733,781
Bank interest received 58,680 67,442
-------------- --------------
132,353,557 125,798,052
EXPENSES
Operating expenses 5 (3,502,169) (3,386,911)
Depreciation of Aircraft 9 (73,573,585) (77,440,734)
-------------- --------------
(77,075,754) (80,827,645)
Net profit for the period before
finance costs
and foreign exchange gains 55,277,803 44,970,407
FINANCE COSTS
Finance costs 10 (49,405,288) (21,467,078)
Foreign exchange gains 17b 22,329 1,587,152
Profit before tax 5,894,844 25,090,481
Income tax expense 23 (30,899) (32,810)
Profit for the period after
tax 5,863,945 25,057,671
-------------- --------------
OTHER COMPREHENSIVE INCOME
Translation adjustment on
foreign operations 2g 40,259,905 45,696,763
Total Comprehensive income
for the period 46,123,850 70,754,434
============== ==============
Pence Pence
Earnings per Share for the
period - Basic and Diluted 8 0.91 3.90
-------------- --------------
In arriving at the results for the financial period, all amounts
above relate to continuing operations.
*Restated, refer to note 2(g)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2019
Notes 30 Sep 2019 31 Mar 2019
GBP GBP
NON-CURRENT ASSETS
Aircraft 9 2,308,434,300 2,247,415,403
Financial assets at fair value
through profit and loss 16 27,562 13,712,492
-------------- --------------
2,308,461,862 2,261,127,895
CURRENT ASSETS
Accrued income 24 14,520,768 13,589,107
Receivables 12 6,567,258 5,231,516
Cash and cash equivalents 19 110,814,899 91,070,150
-------------- --------------
131,902,925 109,890,773
TOTAL ASSETS 2,440,364,787 2,371,018,668
============== ==============
CURRENT LIABILITIES
Payables 13 186,055 179,449
Deferred income 24 40,277,540 37,972,435
Borrowings and Ijarah financing 14 128,267,282 118,654,871
-------------- --------------
168,730,877 156,806,755
NON-CURRENT LIABILITIES
Security deposits 20 14,301,130 13,482,669
Maintenance reserves 21 47,202,382 32,365,575
Borrowings and Ijarah financing 14 1,479,756,281 1,455,457,619
Deferred income 24 6,164,624 8,327,595
-------------- --------------
1,547,424,417 1,509,633,458
TOTAL LIABILITIES 1,716,155,294 1,666,440,213
============== ==============
TOTAL NET ASSETS 724,209,493 704,578,455
-------------- --------------
EQUITY
Share capital 15 647,638,697 647,638,697
Foreign currency translation
reserve 85,562,865 45,302,960
Retained earnings (8,992,069) 11,636,798
-------------- --------------
724,209,493 704,578,455
-------------- --------------
Pence Pence
-------------- --------------
Net Asset Value Per Share based
on 642,250,000 (31 March 2019:
642,250,000) shares in issue 112.76 109.70
-------------- --------------
The financial statements were approved by the Board and
authorised for issue on 9 December 2019 and are signed on its
behalf by:
John Le Prevost, Director
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period from 1 April 2019 to 30 September 2019
1 Apr 2019 1 Apr 2018
to to
Notes 30 Sep 2019 30 Sep 2018*
GBP GBP
OPERATING ACTIVITIES
Profit for the period after tax 5,863,945 25,057,671
Decrease in accrued and deferred income (8,953,009) (3,945,671)
Interest received (58,680) (67,442)
Depreciation of Aircraft 9 73,573,585 77,440,734
Taxation expense 23 30,899 32,810
Loan and Ijarah financing interest
payable and fair value adjustments
on financial assets 10 48,356,236 20,476,745
Increase /(decrease) in payables 13 6,606 (10,197)
Maintenance reserves received 12,601,804 11,741,599
Decrease /(increase) in prepayments 12 1,385 (8,815)
Foreign exchange movement 17b (22,329) (1,587,152)
Amortisation of debt arrangement costs 10 1,049,052 990,333
NET CASH FROM OPERATING ACTIVITIES 132,449,494 130,120,615
-------------- --------------
INVESTING ACTIVITIES
Acquisition costs/purchase of Aircraft 9 - (11,195)
Interest received 58,680 67,442
NET CASH RECEIVED FROM INVESTING ACTIVITIES 58,680 56,247
-------------- --------------
FINANCING ACTIVITIES
Dividends paid 7 (26,492,812) (26,492,812)
Repayments of capital on senior loans
and Ijarah financing 22 (55,392,920) (56,092,363)
Payments of interest on senior loans
and Ijarah financing 22 (27,772,899) (27,347,153)
Payments of interest on junior loans 22 (6,241,552) (6,362,158)
Security trustee and agency fees 10 (143,642) (120,776)
NET CASH USED IN FINANCING ACTIVITIES (116,043,825) (116,415,262)
-------------- --------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 91,070,150 58,848,615
Increase in cash and cash equivalents 16,464,349 13,761,600
Exchange rate adjustment 3,280,400 3,622,483
CASH AND CASH EQUIVALENTS AT OF
PERIOD 19 110,814,899 76,232,698
-------------- --------------
*Restated, refer to note 2(g)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from 1 April 2019 to 30 September 2019
Notes Share Capital Retained Foreign Total
Earnings Currency
Translation
Reserve
GBP GBP GBP GBP
Balance as at 1
April 2019 647,638,697 11,636,798 43,302,960 704,578,455
Total Comprehensive
income for the
period - 5,863,945 40,259,905 46,123,850
Dividends paid 7 - (26,492,812) - (26,492,812)
-------------- ------------- ------------- -------------
Balance as at 30
September 2019 647,638,697 (8,992,069) 85,562,865 724,209,493
-------------- ------------- ------------- -------------
Notes Share Capital Retained Foreign Total
Earnings Currency
Translation
Reserve
GBP GBP GBP GBP
Balance as at 1
April 2018 647,638,697 56,205,146 (96,119) 703,747,724
Total Comprehensive
Income for the
period* - 25,057,671 45,696,763 70,754,434
Dividends paid 7 - (26,492,812) - (26,492,812)
-------------- ------------- ------------- -------------
Balance as at 30
September 2018 647,638,697 54,770,005 45,600,644 748,009,346
-------------- ------------- ------------- -------------
*Restated, refer to note 2(g)
Notes to the Consolidated Financial Statements
For the period ended 30 September 2019
1. GENERAL INFORMATION
The consolidated financial information incorporates the results
of Amedeo Air Four Plus Limited (the "Company"), AA4P Alpha
Limited, AA4P Beta Limited, AA4P Gamma Limited, AA4P Delta Limited,
AA4P Epsilon Limited, AA4P Zeta Limited, AA4P Eta Limited, AA4P
Theta Limited, AA4P Iota Limited, AA4P Kappa Limited, AA4P Lambda
Limited, AA4P Mu Limited, AA4P Nu Limited, AA4P Leasing Ireland
Limited, AA4P Leasing Ireland 2 Limited and AA4P Xi Limited (each a
"Subsidiary" and together the "Subsidiaries") (together the Company
and the Subsidiaries are known as the "Group").
The Company was incorporated in Guernsey on 16 January 2015 with
registered number 59675. Its share capital consists of one class of
redeemable ordinary shares ("Shares"). The Shares are admitted to
trading on the SFS of the London Stock Exchange's Main Market.
The Company's investment objective is to obtain income returns
and a capital return for its Shareholders by acquiring, leasing and
then selling aircraft.
Since the completion of its initial public offering on 13 May
2015, the Company has acquired eight Airbus A380, two Boeing
777-300ER and four Airbus A350-900 aircraft. Eight of these
aircraft are leased to Emirates, two aircraft are leased to Etihad
and four aircraft are leased to Thai Airways. All aircraft are
leased for a period of 12 years from each respective delivery date.
In order to complete the purchase of these aircraft, subsidiaries
of the Company entered into debt financing arrangements which
together with the equity proceeds were used to finance the
acquisition of the fourteen aircraft.
Rental income received in US Dollars is used to pay loan
interest and regular capital repayments of debt (but excluding any
bullet or balloon repayment of principal), which are likewise
denominated in US Dollars. US Dollar lease rentals and loan
repayments, with the exception of the four Thai aircraft which
incorporate floating rate lease rentals, are furthermore fixed at
the outset of the Company's acquisition of an aircraft and are very
similar in amount and timing save for the repayment of bullet and
balloon repayments of principal due on the final maturity of a loan
to be paid out of the proceeds of the sale, refinancing or other
disposition of the relevant aircraft.
2. ACCOUNTING POLICIES
The significant accounting policies adopted by the Group are as
follows:
(a) Basis of preparation
The consolidated financial statements have been prepared in
conformity with the International Accounting Standard 34 Interim
Financial Reporting as adopted by the European Union ("EU"), and
applicable Guernsey law. The financial statements have been
prepared on a historical cost basis under International Financial
Reporting Standards.
This report is to be read in conjunction with the annual report
for the year ended 31 March 2019 which is prepared in accordance
with the International Financial Reporting Standards as adopted by
the EU and any public announcements made by the Company during the
interim reporting period.
The comparative period for the Consolidated Statement of
Comprehensive Income, Consolidated Statement of Cash Flows,
Consolidated Statement of Changes in Equity and the related notes
was from 1 April 2018 to 30 September 2018. The financial
information in the comparative period has been restated as
mentioned in 2(g). The accounting policies adopted are consistent
with those of the previous financial year, except for the adoption
of new and amended standards as set out overleaf:
Changes in accounting policies and disclosure
The following Standards or Interpretations have been adopted in
the current period. Their adoption has not had a material impact on
the amounts reported in these consolidated financial statements and
is not expected to have any impact on future financial periods
except where stated otherwise.
IFRS 16 Leases - specifies how an IFRS reporter will recognise,
measure, present and disclose leases. The standard provides a
single lessee accounting model, requiring lessees to recognise
assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value. Lessors
continue to classify leases as operating or finance, with IFRS 16's
approach to lessor accounting substantially unchanged from its
predecessor, IAS 17. This standard is effective for annual periods
beginning on or after 1 January 2019 and is endorsed by the EU.
IFRIC 23 Uncertainty over Income Tax Treatments - clarifies the
accounting for uncertainties in income taxes. This standard is
effective for annual periods beginning on or after 1 January 2019
and is endorsed by the EU. Guernsey has a 0% tax rate. The Irish
entities adopt commonly utilised tax structures which do not
contain inherent uncertainty.
At the date of approval of these financial statements there were
no standards and interpretations in issue but not yet effective,
which were considered to be material to the Group.
(b) Basis of consolidation
The consolidated financial information incorporates the results
of the Company and the Subsidiaries. The Company owns 100% of all
the shares in the Subsidiaries which grants it exposure to variable
returns from the entities and the power to affect those returns,
granting it control in accordance with IFRS 10.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial information.
(c) Taxation
The Company and the Guernsey Subsidiaries have been assessed for
tax at the Guernsey standard rate of 0%. Since AA4P Leasing Ireland
Limited and AA4P Leasing Ireland 2 Limited are Irish tax resident
trading Companies, they will not be subject to Guernsey tax, but
their net lease rental income earned (after tax deductible
expenditure) will be taxable as trading income at 12.5% under Irish
tax regulations. Please refer to Note 23 for more information.
(d) Share capital
Shares are classified as equity. Incremental costs directly
attributable to the issue of Shares are recognised as a deduction
from equity.
(e) Expenses
All expenses, other than interest expenses are accounted for on
an accruals basis.
(f) Interest Income
Interest income and expenses are accounted for on an effective
interest rate basis.
(g) Foreign currency translation
The currency of the primary economic environment in which the
Group operates (the functional currency) is Great British Pounds
("GBP") which is also the presentation currency.
Transactions denominated in foreign currencies are translated
into GBP at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into the functional
currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
Consolidated Statement of Comprehensive Income.
During the prior year, on 1 April 2018, the activities and
transactions of certain of the subsidiaries were reviewed by the
Board and were noted to be carried out substantially in USD. The
Board noted that the currency of the primary economic environment
of these entities was now more closely aligned with USD. As such,
the decision was made to re-designate the functional currency of
these entities to USD and to classify them as foreign
operations.
All assets and liabilities in the subsidiaries were translated
into the functional currency of USD using the USD/GBP exchange rate
prospectively from the date of change, being 1 April 2018. All
monetary assets and liabilities in the subsidiaries denominated in
currencies other than USD were translated to USD using the closing
exchange rate at 31 March 2019, with all items of income and
expenses in currencies other than USD in the subsidiaries to USD
using the exchange rate at the date of transaction. For
non-monetary items in the subsidiaries (including Aircraft assets),
the translated amount into USD at 1 April 2018 will be the item's
new historical cost.
As a result, the comparative information in the Consolidated
Statement of Comprehensive Income, Consolidated Statement of Cash
Flows, Consolidated Statement of Changes in Equity and the related
notes has been restated.
On consolidation the financial statements of foreign
subsidiaries whose functional currency is not GBP are translated
into GBP as follows: statement of financial position items are
translated into GBP at the period end exchange rate; statement of
income items are translated into GBP at the exchange rates
applicable at the transaction dates, as long as this is not
rendered inappropriate as a basis for translation by major
fluctuations in the exchange rate during the period; unrealized
gains and losses arising from the translation of the financial
statements of foreign subsidiaries are recorded under "Translation
adjustment on foreign operations" in other comprehensive income to
be recycled to income.
(h) Cash and cash equivalents
Cash at bank and short term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits with a term of no more than three
months from the start of the deposit and highly liquid investments
readily convertible to known amounts of cash and subject to
insignificant risk of changes in value.
(i) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being acquiring, leasing and selling
aircraft (together the "Assets" and each an "Asset"). For more
information on segmental information please refer to note 26.
(j) Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. While the Group
is in a current net liability position, the Group continues to make
profits as reflected and generate strong positive operating cash
flows. The Directors believe the Group is well placed to manage its
business risks successfully despite the current economic climate as
the loans have been largely fixed and the fixed rental income under
the operating leases means that the rents should be sufficient to
repay the debt and provide surplus income to pay for the Group's
expenses and permit payment of dividends. In addition the variable
rate loans are either hedged with an associated interest rate swap
contract issued by the lender to fix the loan interest over the
term of the loans, or are unhedged with related rentals which are
also floating rate to match. Accordingly, the Directors have
adopted the going concern basis in preparing the consolidated
financial information. The Board is not aware of any material
uncertainty that may cast significant doubt upon the Company's
ability to continue as a going concern.
(k) Leasing and rental income
The leases relating to the Assets have been classified as
operating leases as the terms of the leases do not transfer
substantially all the risks and rewards of ownership to the lessee.
The Assets are shown as non-current assets in the Consolidated
Statement of Financial Position. Further details of the leases are
given in Note 11.
Rental income and advance lease payments from operating leases
are recognised on a straight-line basis over the term of the
relevant lease. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying amount of
the leased Asset and amortised on a straight-line basis over the
lease term. The four A350-900 aircraft have variable lease rentals,
the variable portion of which is treated as contingent rent.
Contingent rent is recognised in the period in which it is
earned.
The deferred income liability represents the difference between
actual payments received in respect of the lease income (including
some received in full upfront) and the amount to be accounted for
in the accounting records on a straight line basis over the lease
terms. This liability will reduce over time as the leases continue
and approach the end of the lease terms. In addition to the timing
of receipt of the various rental income streams, the liability is
impacted by the USD/GBP exchange rate at the period end and any new
leases entered into from new aircraft acquisitions during the
period.
(l) Maintenance reserve and security deposits liabilities
In many aircraft operating lease contracts, the lessee has the
obligation to make periodic payments which are calculated with
reference to utilisation of airframes, engines and other major
life-limited components during the lease. In most lease contracts,
upon presentation by the lessee of the invoices evidencing the
completion of qualifying work on the aircraft, the Group reimburses
the lessee for the work, up to a maximum of the advances received
with respect to such work.
The Group records such amounts as maintenance advances.
Maintenance advances not expected to be utilised within one year
are classified as non-current liabilities. Amounts not refunded
during the lease are recorded as lease revenue at lease
termination. Further details are given in note 21.
Security deposits represent amounts paid by the lessee as
security in accordance with the lease agreements. The deposits are
repayable to the lessees on the expiration of the lease agreements
subject to satisfactory compliance of the lease agreements by the
lessees. Further details are given in note 20.
(m) Property, plant and equipment - Aircraft
In line with IAS 16 Property Plant and Equipment, each Asset is
initially recorded at cost, being the fair value of the
consideration paid. The cost of the Asset is made up of the
purchase price of the Assets plus any costs directly attributable
to bringing it into working condition for its intended use. Costs
incurred by the lessee in maintaining, repairing or enhancing the
aircraft are not recognised as they do not form part of the costs
to the Group. Accumulated depreciation and any recognised
impairment losses are deducted from cost to calculate the carrying
amount of the Asset.
Depreciation is recognised so as to write off the cost of each
Asset less the estimated residual value over the lease term of the
Asset of twelve years, using the straight line method. Residual
values have been arrived at by taking the average amount of three
independent external valuers and after taking into account
disposition fees. The Directors consider that the use of forecast
market values excluding inflation best approximates residual value
as required by IAS 16 Property, Plant and Equipment.
The depreciation method reflects the pattern of benefit
consumption. The residual value is reviewed annually in March and
is an estimate of the amount the entity would receive today if the
Asset were already of the age and condition they will be in at the
end of the lease.
Depreciation starts when the Asset is available for use.
At each audited reporting date, the Group reviews the carrying
amounts of its Assets to determine whether there is any indication
that those Assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the Asset is estimated
to determine the extent of the impairment loss (if any). Further
details are given in note 3.
Recoverable amount is the higher of fair value less costs to
sell and the value in use. In assessing value in use, the estimated
future cash flows 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 for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an Asset is estimated to be less
than its carrying amount, the carrying amount of the Asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss. Where an impairment loss
subsequently reverses, the carrying amount of the Asset is
increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the Asset in prior years. A reversal of an
impairment loss is recognised immediately in profit or loss.
(n) Financial assets and financial liabilities at fair value
through profit or loss
(a) Classification
The Group classifies its derivatives i.e. the interest rate
swaps, as financial assets or financial liabilities at fair value
through profit or loss. These financial assets and financial
liabilities are designated by the Board at fair value through
profit or loss at inception. The Group does not classify any
derivatives as hedges in a hedging relationship.
Trade and other receivables are classified as financials assets
at amortised cost. Financial assets measured at amortised cost are
initially recognised at fair value and are subsequently measured at
amortised cost using the effective interest rate methodology.
(b) Recognition/derecognition
Financial assets or liabilities are recognised on the trade date
- the date on which the Group commits to enter into the
transactions. Financial assets or liabilities are derecognised when
the rights to receive cash flows from the investments have expired
or the Group has transferred substantially all risks and rewards of
ownership.
(c) Measurement
Financial assets and financial liabilities at fair value through
profit or loss are initially recognised at fair value. Transaction
costs are expensed in profit or loss in the Consolidated Statement
of Comprehensive Income. Subsequent to initial recognition, all
financial assets and financial liabilities at fair value through
profit or loss are measured at fair value. Gains and losses arising
from changes in the fair value of the 'financial assets or
financial liabilities at fair value through profit or loss'
category are presented in the Consolidated Statement of
Comprehensive Income in profit or loss in the period in which they
arise.
(d) Impairment
The Group assesses on a forward looking basis the expected
credit losses associated with its receivables or accrued income
carried at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in credit
risk.
For trade and other receivables, the Group applies the
simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of the
receivables.
(o) Non-derivative financial liabilities
Financial liabilities consist of security deposits, payables and
borrowings. The classification of financial liabilities at initial
recognition depends on the purpose for which the financial
liability was issued and its characteristics. All financial
liabilities are initially measured at fair value, net of
transaction costs. All financial liabilities are recorded on the
date on which the Group becomes party to the contractual
requirements of the financial liability.
Financial liabilities are subsequently measured at amortised
cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the
amortised cost of the financial liability and of allocating
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability, to
the net carrying amount on initial recognition.
Associated costs are subsequently amortised on an effective
interest rate basis over the life of the loan and are shown net on
the face of the Consolidated Statement of Financial Position over
the life of the lease.
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
(p) Ijarah financing
Ijarah financing, a type of Islamic finance, where the Group has
substantially all the risks and rewards of ownership, are included
within Borrowings and Ijarah financing (Notes 14 and 22). The
Ijarah finance is capitalised at inception at the fair value of the
aircraft or, if lower, the present value of the minimum payments.
The corresponding rental obligations, net of finance charges, are
included in short-term and long-term borrowings and Ijarah
financing. Each payment is allocated between the liability and
finance cost. The finance cost is charged to the profit or loss
over the period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
The Asset acquired under Ijarah financing is depreciated over the
Asset's useful life or over the shorter of the Asset's useful life
and the term if there is no reasonable certainty that the Group
will obtain ownership at the end of the finance term.
(q) Net Asset Value
In circumstances where the Directors are of the opinion that the
NAV or NAV per Share, as calculated under prevailing accounting
standards, is not appropriate or could give rise to a misleading
calculation, the Directors, in consultation with the Administrator
may determine, at their discretion, an alternative method for
calculating a more useful value of the Group and shares in the
capital of the Company, which they consider more accurately
reflects the value of the Group.
3. SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the application of the Group's accounting policies, which are
described in Note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the Group's accounting
policies
The following are the critical judgements and estimates that the
Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial information.
KEY SOURCES OF ESTIMATION UNCERTAINTY
Residual value of Aircraft
As described in Note 2 (m), the Group depreciates the Assets on
a straight line basis over the term of the lease after taking into
consideration the estimated residual value. IAS 16 Property, Plant
and Equipment requires residual value to be determined as an
estimate of the amount that the Group would currently obtain from
disposal of the Asset, after deducting the estimated costs of
disposal, if it were of the age and condition expected at the end
of the lease.
There are currently no A380 or A350 aircraft of a similar type
of sufficient age for the Directors to make a direct market
comparison in making this estimation. After consulting with the
Asset Manager, the Directors have concluded that a forecast market
value (determined annually) for the A380 and A350 aircraft at the
end of the lease (excluding inflationary effects) best approximates
residual value. In relation to the Boeing 777-300ER aircraft
residual values, there is minimum to no public secondary market
trading data available. In estimating residual value at the 31
March 2019 audited annual year end, the Directors have made
reference to forecast market values (excluding inflationary
effects) for the aircraft obtained from three independent expert
aircraft valuers.
Base value is the appraiser's opinion of the underlying economic
value of an aircraft, in an open, unrestricted, stable market
environment with a reasonable balance of supply and demand. Full
consideration is assumed of its "highest and best use" given the
fact that the aircraft are held for use in a leasing business. An
asset's base value is determined using the historical trend of
values and in the projection of value trends and presumes an
arm's-length, cash transaction between willing, able, and
knowledgeable parties, acting prudently, with an absence of duress
and with a reasonable period of time available for marketing. In
the appraisers' valuations, the base value of an aircraft excludes
reconfiguration costs and assumes the physical condition is average
for an asset of its type and age and that all maintenance
requirements and schedules have been met.
The estimation of residual value remains subject to uncertainty.
If the estimate of residual value in USD terms, had for instance,
decreased by 20% with effect from the beginning of this period, the
net profit for the period and closing shareholders' equity would
have been decreased by approximately GBP9.76 million (30 September
2018: GBP11.45 million). An increase in residual value by 20% would
have had an equal but opposite effect. This reflects the range of
estimates of residual value that the Directors believe would be
reasonable at this time. Estimates of forecast market values have
been made on the assumption that a relatively liquid secondary
lease market exists at the end of the lease based on management's
current intentions for the fleet and their judgements.
CRITICAL ACCOUNTING JUDGEMENTS
Operating lease commitments - Group as lessor
The Group had entered into operating leases on fourteen Assets
as at the period end (see Note 11). The Group has determined, based
on an evaluation of the terms and conditions of the arrangements,
that it retains all the significant risks and rewards of ownership
of these Assets and accounts for the contracts as operating
leases.
The operating leases on the Assets have been determined by the
Group to be for 12 years.
Impairment
Factors that are considered important which could trigger an
impairment review include, but are not limited to, significant
decline in the market value beyond that which would be expected
from the passage of time or normal use, significant changes in the
technology and regulatory environments, evidence from internal
reporting which indicates that the economic performance of the
asset is, or will be, worse than expected. The Directors considered
the issue at length and are of the opinion that an impairment
review be undertaken.
As described in note 2(m), an impairment loss exists when the
carrying value of an asset or cash generating unit exceeds its
recoverable amount, which is the higher of its fair value less
costs to sell and its value in use. The Directors review the
carrying amounts of the Assets at each audited reporting date and
monitor the Assets for any indications of impairment as required by
IAS 16 Property, Plant and Equipment and IAS 36 Impairment of
Assets.
In assessing value-in-use, the estimated future cash flows
expected to be generated by the asset (ie 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 their
present value using a pretax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset and the credit risk profile of the
lessees.
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. Such a
valuation reflects highest and best use given the fact that the
aircraft are held for use in a leasing business.
The Board together with the Asset Manager believed that it would
be prudent to conduct an impairment test in the year ended 31 March
2019, as the below items may have resulted in pricing changes for
the current portfolio of aircraft:
1. As further Airbus A380 and A350 aircraft reach comparable 12
year ages and exit their first lease agreements, further market
data is available to Amedeo and the asset valuers.
2. Lack of publically available secondary market data for the B777-300ER aircraft.
3. Changing technologies, market innovation and changes to key
production programs as well as the success and / or failure as well
as the timing of new aircraft model launches.
4. Information regarding Airbus cancellation of the A380
programme, creating uncertainty as to the liquidity of the future
market for sale or re-lease.
The assessment was performed by comparing the net book value of
each aircraft to the higher of its respective fair value less costs
to sell and value-in-use. Rental cash flows to the end of the
contracts have been used in the calculation of value-in-use as the
cash flows are contractual. Any assumptions with regards issues in
counterparty credit risk would be reflected in the discount rate
used to calculate the net present value of future cash flows. There
are no indications at this time that either Emirates, Etihad or
Thai will default or that any of the aircraft will not be
marketable post lease.
The Asset Manager considered the following in their
determination of the most appropriate discounting rate;
1. The discount rate should be a rate commensurate with what a
normal market participant would consider to be the risk inherent in
the assets.
2. All of the aircraft are with Emirates, Etihad and Thai, who
are considered to have low credit risk profiles.
The fair value and the future sales value of the aircraft was
estimated with reference to the average of current market and
future base values from three independent appraisers.
Based on the impairment review performed, the Directors were of
the opinion that no impairment loss was required to be recognised
in the year ended 31 March 2019.
For the current period 1 April 2019 to 30 September 2019, the
Group has considered if there are any further impairment triggers
as set out under IAS 36 Impairment of Assets. The Board has
concluded that an interim impairment review at the 30 September
2019 period end was not practicable.
4. RENTAL INCOME
1 Apr 2019 1 Apr 2018
to to
30 Sep 2019 30 Sep 2018*
GBP GBP
US Dollar based rent income 100,609,235 99,076,850
Revenue earned but not yet received 6,838,671 5,319,876
Revenue received but not yet earned (133,411) (3,446,415)
------------ -------------
107,314,495 100,950,311
Amortisation of advance rental income
(US Dollar) 2,222,057 2,046,518
------------ -------------
109,536,552 102,996,829
British Pound based rent income 22,732,633 22,708,089
Revenue earned but not yet received 75,002 75,002
Revenue received but not yet earned (49,310) (49,310)
------------ -------------
22,758,325 22,733,781
Total rental income 132,294,877 125,730,610
------------ -------------
*Restated, refer to note 2(g)
Rental income is derived from the leasing of the Assets. US
Dollar based rent represents rent received in USD and British Pound
based rent represents rent received in "GBP". Rental income
received in USD is earned by the subsidiaries and is consolidated
by translating it into the functional currency (GBP) at the average
rate for the period.
An adjustment has been made to spread the actual total income
receivable over the term of the lease on an annual basis. In
addition, advance rentals received have also been spread over the
full term of the leases. The four A350-900 aircraft have variable
lease rentals, the variable portion of which is treated as
contingent rent. Contingent rent is recognised in the period in
which it is earned.
The contingent rent for the period ended 30 September 2019 is
GBP3,793,974 per annum (30 September 2018 as restated:
GBP3,480,586).
5. OPERATING EXPENSES
1 Apr 2019 1 Apr 2018
to to
30 Sep 2019 30 Sep 2018*
GBP GBP
Corporate and shareholder adviser
fee 1,206,969 1,160,307
Asset management fee 1,719,076 1,658,255
Administration fees 241,715 218,676
Bank charges 4,852 5,327
Registrar's fee 8,783 8,177
Audit fee 27,457 53,411
Directors' remuneration 134,532 131,250
Directors' and Officers' insurance 20,046 22,632
Legal and professional expenses 55,952 57,220
Annual regulatory fees 10,924 12,600
Sundry costs 71,863 51,940
Other operating expenses - 7,116
3,502,169 3,386,911
============ =============
*Restated, refer to note 2(g)
6. DIRECTORS' REMUNERATION
With effect from 1 January 2019, the Chairman's fee was
increased to GBP76,875 per annum, the directors fees were increased
to GBP61,500 per annum and the Chairman of the Audit Committee's
fee was increased to GBP69,188 per annum.
7. DIVIDS IN RESPECT OF SHARES
1 Apr 2019 to
30 Sep 2019
GBP Pence
per
Share
First dividend 13,246,406 2.0625
Second dividend 13,246,406 2.0625
26,492,812 4.1250
=========== =======
1 Apr 2018 to
30 Sep 2018
GBP Pence
per
Share
First dividend 13,246,406 2.0625
Second dividend 13,246,406 2.0625
26,492,812 4.1250
=========== =======
8. EARNINGS PER SHARE
Earnings per Share ("EPS") is based on the profit for the period
of GBP5,863,945 and 642,250,000 shares (30 September 2018 as
restated: profit of GBP25,057,671 and 642,250,000 Shares) being the
weighted average number of Shares in issue during the period.
There are no dilutive instruments and therefore basic and
diluted EPS are identical.
9. PROPERTY, PLANT AND EQUIPMENT - AIRCRAFT
Aircraft
GBP
COST
Aircraft purchases as at 1 April 2019 2,597,753,572
Acquisition costs as at 1 April 2019 10,277,000
Translation adjustment on foreign
operations* 158,319,702
--------------
Cost as at 30 September 2019 2,766,350,274
--------------
Aircraft
GBP
ACCUMULATED DEPRECIATION AND AMORTISATION
As at 1 April 2019 360,615,169
Amortisation of acquisition costs
on aircraft acquired 459,171
Depreciation charge on all aircraft
for the period 73,114,414
Net depreciation charge on all aircraft
for the period 73,573,585
Translation adjustment on foreign
operations* 23,727,220
--------------
Accumulated depreciation as at 30
September 2019 457,915,974
--------------
Carrying amount as at 31 March 2019 2,247,415,403
==============
Carrying amount as at 30 September
2019 2,308,434,300
==============
* The Group believes that the use of forecast market values
excluding inflation best approximates residual value as required
per IAS 16 Property, Plant and Equipment (refer to note 3). As
explained in note 2(g), the decision was made by the Board to
re-designate the functional currency of the subsidiaries to USD and
to classify them as foreign operations. Therefore the carrying
values of the aircraft in the subsidiaries in USD have been
re-translated at the closing British Pound / US Dollar exchange
rate at 31 March 2019 and 30 September 2019 with the movement for
consolidation purposes for the current period through "Translation
adjustment on foreign operations" as per the table above.
In order to complete purchases of the aircraft, subsidiaries of
the Company have entered into debt financing agreements with a
senior fully amortising loan and junior balloon loan (see note 14).
The Company used the equity proceeds (see note 15) in addition to
the finance agreements to finance the acquisition of the aircraft.
Subject to the below, rentals under each lease are sufficient to
pay the senior loan payment (being capital and interest including
the Kappa Ijarah finance as detailed in note 14 and junior loan
payments due (being interest only), also in USD. Exceptions to the
above include senior loans with an outstanding balance of
GBP344,345,499 (31 March 2019: GBP335,394,305) at period end, which
have balloon capital payments on maturity, and a junior loan, with
a balance of GBP20,591,984 (31 March 2019: GBP20,178,224) at period
end which has capital and interest. Any junior loan principal and
senior loan capital due at maturity, is expected to be repaid at
lease expiry out of the proceeds of the sale, re-lease, refinancing
or other disposition of the relevant Asset.
The Group can sell the Assets during the term of the leases
(with the lease attached and in accordance with the terms of the
transfer provisions contained therein). Under IAS 17 the direct
costs
attributed in negotiating and arranging the operating leases
have been added to the carrying amount of the leased Asset and
recognised as an expense over the lease term.
The Group's aircraft with carrying values of GBP2,308,434,300
(31 March 2019: GBP2,247,415,403) are pledged as security for the
Group's borrowings (see note 14).
Refer to note 3 for details of impairment test conducted by the
Group.
10. FINANCE COSTS
1 Apr 2019 1 Apr 2018
to to
30 Sep 2019 30 Sep 2018*
GBP GBP
Amortisation of debt arrangements
costs 1,049,052** 990,333**
Interest payable on loan and costs
of Ijarah financing*** 34,527,664** 34,539,810**
Security trustee and agency fees 143,642 120,776
Fair value adjustment on financial
assets at fair value through profit
and loss (see Note 16) 13,684,930 (14,183,841)
49,405,288 21,467,078
------------- --------------
*Restated, refer to note 2(g)
**Included in Finance costs is interest on amortised cost
liability for the period of GBP35,576,716 (30 September 2018 as
restated: GBP35,530,143)
*** This amount includes GBP87,907 interest income (30 September
2018 as restated: GBP5,106 interest income) from the interest rate
swaps.
11. OPERATING LEASES
The amounts of minimum lease receipts at the reporting date
under non cancellable operating leases are detailed below:
30 Sep 2019 Next 12 2 to 5 After 5
Months Years Years Total
GBP GBP GBP GBP
US Dollar
based rent
income 201,600,025 798,848,659 766,596,539 1,767,045,223
British Pound
based rent
income 45,446,952 181,787,808 149,982,057 377,216,817
------------ ------------ ------------ --------------
247,046,977 980,636,467 916,578,596 2,144,262,040
------------ ------------ ------------ --------------
30 Sep 2018* Next 12 2 to 5 After 5
Months Years Years Total
GBP GBP GBP GBP
US Dollar
based rent
income 205,589,607 815,418,608 994,401,970 2,015,410,185
British Pound
based rent
income 45,446,952 181,787,808 195,429,009 422,663,769
------------ ------------ -------------- --------------
251,036,559 997,206,416 1,189,830,979 2,438,073,954
------------ ------------ -------------- --------------
*Restated, refer to note 2(g)
The fourteen assets all have a lease term of twelve years with
lease end dates ranging from September 2026 to January 2030.
At the end of each lease the lessee has the right to exercise an
option to purchase the Asset at the discretion of the Company. If a
purchase option event occurs the Company and the lessee will be
required to arrange for a current market value appraisal of the
Asset to be carried out by three independent appraisers. The
purchase price will be equal to the average valuation of those
three appraisals.
12. RECEIVABLES
30 Sep 2019 31 Mar 2019
GBP GBP
Prepayments 160,641 162,026
Accrued rental income 6,396,955 5,069,490
Interest receivable 9,662 -
------------ ------------
6,567,258 5,231,516
============ ============
The above carrying value of receivables is equivalent to the
fair value.
13. PAYABLES
30 Sep 2019 31 Mar 2019
GBP GBP
Accrued administration
fees 34,893 34,816
Accrued audit fee 41,015 74,237
Accrued registrar fee 1,217 1,653
Other accrued expenses 264 249
Taxation payable 108,666 68,494
186,055 179,449
============ ============
The above carrying value of payables is equivalent to the fair
value due to their short term maturity period and nature as
repayable on demand.
14. BORROWINGS AND IJARAH FINANCING
30 Sep 2019 31 Mar 2019
Borrowings GBP GBP
Bank loans 1,469,632,791 1,438,601,158
Ijarah financing
Finance liability 157,292,865 154,343,895
Total borrowings and Ijarah
financing 1,626,925,656 1,592,945,053
Total associated costs (18,902,093) (18,832,563)
-------------- --------------
1,608,023,563 1,574,112,490
============== ==============
30 Sep 2019 31 Mar 2019
GBP GBP
Consisting
of:
Senior loans ($1,469,158,820
at 30 September 2019, $1,537,683,285
at 31 March 2019 ) 1,195,507,218 1,178,512,116
Ijarah finance ($191,094,338
at 30 September 2019, $199,032,505
at 31 March 2019) 155,500,316 152,566,175
Junior loans ($315,846,999
at 30 September 2019, $316,795,078
at 31 March 2019) 257,016,030 243,034,199
1,608,023,564 1,574,112,490
============== ==============
Borrowings
Non-current portion 1,337,527,732 1,315,143,488
Current portion (senior
loans only) 114,995,515 106,402,827
-------------- --------------
1,452,523,247 1,421,546,315
============== ==============
Ijarah financing
Non-current portion 142,228,549 140,314,131
Current portion (senior
loans only) 13,271,767 12,252,044
-------------- --------------
155,500,316 152,566,175
============== ==============
Total Borrowings and Ijarah
financing
Non-current portion 1,479,756,281 1,455,457,619
Current portion (senior
loans only) 128,267,282 118,654,871
-------------- --------------
1,608,023,563 1,574,112,490
============== ==============
The tables below detail the future contractual undiscounted cash
flows in respect of the senior and junior loans and the Ijarah
financing, including both the principal and interest payments, and
will not agree directly to the amounts recognised in the
Consolidated Statement of Financial Position.
30 Sep 2019 31 Mar 2019
GBP GBP
Borrowings: Amount due for
settlement within 12 months 174,700,252 166,347,249
Ijarah finance: Amount due
for settlement within 12 months 20,077,513 18,928,466
---------------- ----------------
194,777,765 185,275,715
================ ================
30 Sep 2019 31 Mar 2019
GBP GBP
Consisting
of:
Senior loans covered by lease rental
receipts (capital
and interest) 159,328,641 151,868,268
Ijarah finance covered by lease rental
receipts (capital
and interest) 20,077,513 18,928,466
Repayments of junior debt covered
by lease
rental receipts (interest only except
for B1 Junior loan) 15,371,611 14,478,981
---------------- ----------------
194,777,765 185,275,715
================ ================
Borrowings: Amount due for settlement
after 12 months and before 60 months 697,871,987 664,378,065
Ijarah finance: Amount due for settlement
after 12 months and before 60 months 80,310,050 75,713,863
---------------- ----------------
778,182,037 740,091,928
================ ================
Consisting of:
Senior loans covered by lease rental
receipts (capital and interest) 637,564,905 606,416,522
Ijarah finance covered by lease rental
receipts (capital and interest) 80,310,050 75,713,863
Repayments of junior debt covered
by lease
rental receipts (interest only except
for B1 Junior loan) 60,307,082 57,961,543
---------------- ----------------
778,182,037 740,091,928
================ ================
Borrowings: Amount due for settlement
after 60 months 960,608,983 988,276,743
Ijarah finance: Amount due for settlement
after 60 months 93,695,059 97,797,073
----------------
1,054,304,042 1,086,073,816
==================== ================
Consisting
of:
Senior loans covered by lease rental
receipts (capital and interest) and
uncovered senior loans (for balloon
payment at maturity) 653,472,944 670,246,490
Ijarah finance covered by lease rental
receipts (capital and interest) 93,695,059 97,797,073
Repayments of junior debt covered
by lease rental receipts (interest
only except for one of the junior
loans) and uncovered (capital repaid
at maturity) 307,136,039 318,030,253
--------------------
1,054,304,042 1,086,073,816
==================== ================
No breaches or defaults occurred in the current or prior period.
Loans with an outstanding balance of GBP1,263,678,064 (31 March
2019: GBP1,238,718,185) have fixed interest rates over the term of
the loans. Of this total loans with an outstanding balance of
GBP643,414,216 (31 March 2019: GBP632,020,018), although having
variable rate interest, also have associated interest rate hedging
contracts issued by the lenders in effect fixing the loan interest
over the terms of the loans. Loans with an outstanding amount of
GBP344,345,499 (31 March 2019: GBP335,394,305) at period end are
variable rate with no associated hedge of the interest exposure,
although the related lease rentals are also floating rate to match,
and each senior loan has a USD 15,000,000 balloon capital payment
on maturity. Senior loans have both interest and capital repayments
whereas junior loans only have interest repayments with the capital
to be repaid on maturity (except for a junior loan with a balance
of GBP20,591,984 (31 March 2019: GBP20,178,224) at period end that
has both interest and capital repayments) due to interest rates
charged closely approximating market interest rates.
Transaction costs of arranging the loans have been deducted from
the carrying amount of the loans and will be amortised over their
respective lives. In the Directors' opinion, the above carrying
values of the bank loans are approximate to their fair value.
15. SHARE CAPITAL
The Share Capital of the Company is represented by an unlimited
number of redeemable ordinary shares of no par value.
Issued 30 Sep 2019 31 Mar 2019
Ordinary Ordinary
Shares Shares
Opening balance 642,250,000 642,250,000
Shares issued - -
Total number of shares as at period/year
end 642,250,000 642,250,000
============ ==============
Issued 30 Sep 2019 31 Mar 2019
Ordinary Ordinary
Shares Shares
GBP GBP
Ordinary Shares
Opening balance 655,585,000 655,585,000
Shares issued - -
Share issue costs (7,946,303) (7,946,303)
Total share capital as at period/year
end 647,638,697 647,638,697
============ ============
The Company's total issued Share capital at 30 September 2019
was 642,250,000 Shares, none of which were held in treasury.
Therefore the total number of voting rights in issue was
642,250,000.
Members holding Shares are entitled to receive, and participate
in the following: any dividends out of income attributable to the
Shares; other distributions of the Company available for such
purposes and resolved to be distributed in respect of any
accounting period; or other income or right to participate
therein.
On a winding up of the Company, shareholders are entitled to the
surplus assets attributable to the Share class remaining after
payment of all the creditors of the Company.
16. FINANCIAL INSTRUMENTS
The Group's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Group's operations; and
(b) Debt secured on non-current assets.
(c) Interest rate swaps.
(d) Security deposits.
The Group's objective is to obtain income returns and a capital
return for its Shareholders by acquiring, leasing and then selling
aircraft.
The following table details the categories of financial assets
and liabilities (and the Ijarah financing included in Note 14) held
by the Group at the reporting date:
30 Sep 2019 31 Mar 2019
GBP GBP
Financial assets
Cash and cash equivalents 110,814,899 91,070,150
Financial assets at fair
value through profit and
loss 27,562 13,712,492
Accrued rental income* 6,396,955 5,069,490
117,239,416 109,852,132
============ ============
*This amount represents rent due but not yet received and is
included within Receivables on the Statement of Financial
Position.
30 Sep 2019 31 Mar 2019
GBP GBP
Financial liabilities
Payables and security deposits 14,487,185 13,662,118
Debt payable (including
Ijarah financing and excluding
associated costs) 1,626,925,656 1,592,945,053
1,641,412,841 1,606,607,171
============== ==============
Fair value of financial instruments
The Company has adopted IFRS 13, 'Fair value measurement' and
this standard requires the Company to price its financial assets
and liabilities using the price in the bid-ask spread that is most
representative of fair value for both financial assets and
financial liabilities. An active market is a market in which
transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing
basis.
The level of the fair value hierarchy of an instrument is
determined considering the inputs that are significant to the
entire measurement of such instrument and the level of the fair
value hierarchy within those inputs are categorised.
The hierarchy is broken down into three levels based on the
observability of inputs as follows:
Level 1: Quoted price (unadjusted) in an active market for an
identical instrument.
Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
Level 3: Valuation techniques using significant unobservable
inputs.
The interest rate swaps are considered to be level 2 in the Fair
Value Hierarchy. The following tables show the Company's financial
assets and liabilities as at 30 September 2019 with comparatives as
at 31 March 2019 based on the hierarchy set out in IFRS:
30 September 2019 Quoted Prices Significant
in active unobservable
markets for Significant inputs
identical other observable
assets inputs
(Level 1) (Level 2) (Level 3) Total
2019 2019 2019 2019
Assets GBP GBP GBP GBP
Financial assets at
fair value through
profit and loss
Interest rate swaps - 27,562 - 27,562
=============== ================== ============== =========
31 March 2019 Quoted Prices Significant
in active unobservable
markets for Significant inputs
identical other observable
assets inputs
(Level 1) (Level 2) (Level 3) Total
2019 2019 2019 2019
Assets GBP GBP GBP GBP
Financial assets at
fair value through
profit and loss
Interest rate swaps - 13,712,492 - 13,712,492
=============== ================== ============== =============
Derivative financial instruments
The following table shows the Company's derivative position as
at 30 September 2019 with a comparative table as at 31 March
2019:
30 Sep 2019 31 Mar 2019
Financial assets at fair
value (GBP) 27,562 13,712,492
Notional amount (USD) 827,919,177 827,919,177
Notional amount (GBP) 673,707,524 635,150,884
The maturity dates range from 13 April 2028 to 24 May 2029 (31
March 2019: 13 April 2028 to 24 May 2029).
The decrease in the fair value of the Interest Rate Swaps for
the period of GBP13,684,930 (30 September 2018 as restated:
increase of GBP14,183,841) is reflected in Finance Costs in Note
10. The notional amount amortises in line with the underlying
liability.
17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Group's financial instruments
are capital management risk, foreign currency risk, credit risk,
liquidity risk and interest rate risk. The Board regularly review
and agrees policies for managing each of these risks and these are
summarised below:
(a) Capital management
The Group manages its capital to ensure ability to continue as a
going concern while maximising return to Shareholders through the
optimisation of debt and equity balances.
The capital structure of the Group consists of debt, which
includes borrowings disclosed in Note 14, cash and cash equivalents
and equity attributable to equity holders, comprising issued
capital and retained earnings.
The Group's Board of Directors reviews the capital structure on
a bi-annual basis.
Equity includes all capital and reserves of the Company that are
managed as capital.
(b) Foreign currency risk
The Group has economically mitigated the risk of foreign
currency movements by matching its USD rentals with USD debt to the
extent necessary. The USD lease rentals should offset the USD
payables on amortising debt on the loans (including the Kappa
Ijarah finance), apart from the loans with an outstanding balance
of GBP344,345,499 (31 March 2019: GBP335,394,305) as at period end
which have balloon capital payments on maturity (refer to note 14).
The foreign exchange exposure in relation to the bank loans
(capital and interest) and the Kappa Ijarah finance is thus largely
hedged, apart from the foreign exchange exposure unhedged in
respect of the balloon capital portion of the loans with an
outstanding balance of GBP344,345,499 (31 March 2019:
GBP335,394,305) as at period end and the principal bullet repayment
of the junior loans at maturity.
The potential future value or the potential sale proceeds of the
aircraft upon maturity of the junior loans and senior loans with an
outstanding balance of GBP344,345,499 (31 March 2019:
GBP335,394,305) as at period end (all of which are in USD), should,
however, reduce this foreign exchange risk.
Lease rentals (as detailed in Notes 4 and 11) are received in
USD and GBP. Rental income received in USD is used to pay loan
interest and regular capital repayments of debt (but excluding any
bullet or balloon repayment of principal), which are likewise
denominated in US Dollars. USD lease rentals and loan repayments
are furthermore fixed at the outset of the Company's life and are
very similar in amount and timing save for the repayment of bullet
and balloon repayments of principal due on the final maturity of a
loan to be paid out of the proceeds of the sale, re-lease,
refinancing or other disposition of the relevant aircraft. In
addition the variable rate loans are either hedged with an
associated interest rate swap contract issued by the lender to fix
the loan interest over the term of the loans, or are unhedged with
related rentals which are also floating rate to match.
The matching of lease rentals to settle these loan repayments
therefore mitigates risks caused by foreign exchange
fluctuations.
The carrying amounts of the Group's foreign currency denominated
monetary assets and liabilities at the reporting date are as
follows:
30 Sep 2019 31 Mar 2019
GBP GBP
Debt (USD) - Liabilities (1,626,925,656) (1,592,945,053)
Security deposits (USD) - Liabilities (14,301,130) (13,482,669)
Financial assets at fair value
through profit and loss (USD)
- Asset 27,562 13,712,492
Cash and cash equivalents (USD)
- Asset 82,586,795 65,350,662
Accrued rental income (USD) -
Asset 6,396,955 5,069,490
================ ================
The USD/GBP exchange rate was 1.2289 at 30 September 2019
(1.3035 at 31 March 2019).
The following table details the Group's sensitivity to a 25% (31
March 2019: 25%) appreciation in GBP against the US dollar. 25% (31
March 2019: 25 %) represents the Directors' assessment of the
reasonably possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at the
period end for a 25% (31 March 2019: 25%) change in foreign
currency rates. A positive number below indicates an increase in
profit and other equity where GBP strengthens 25% (31 March 2019:
25%) against the USD. For a 25% weakening of the GBP against the
USD, there would be a comparable but opposite impact on the profit
and other equity;
30 Sep 2019 31 Mar 2019
GBP GBP
Profit or loss 310,443,095 304,459,016
Change in value of assets (17,802,262) (16,826,528)
Change in value of liabilities 328,245,357 321,285,544
============= =============
Excluding junior loans:
Profit or loss 261,885,287 258,450,098
Change in value of assets (14,956,865) (14,288,607)
Change in value of liabilities 276,842,151 278,678,705
============= =============
On the eventual sale of the Assets, the Group may be subject to
foreign currency risk if the sale was made in a currency other than
British Pound. Transactions in similar assets are typically priced
in USD.
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group.
The credit risk on cash transactions are mitigated by
transacting with counterparties that are regulated entities subject
to prudential supervision, or with high credit ratings assigned by
international credit rating agencies.
The Group's financial assets exposed to credit risk are as
follows:
30 Sep 2019 31 Mar 2019
GBP GBP
Cash and cash equivalents 110,814,899 91,070,150
Financial assets at fair
value through profit and
loss 27,562 13,712,492
Accrued rental income 6,396,955 5,069,490
------------ ------------
117,239,416 109,852,132
============ ------------
Surplus cash in the Group is held with Barclays, HSBC, Lloyds,
RBSI and Bank of Ireland, which have credit ratings given by
Moody's of A2, Aa3, Aa3, A1 and A2 (31 March 2019: A2, Aa2, Aa2,
Baa2 and A3) respectively. Surplus cash in the Subsidiaries is held
in accounts with RBSI and Westpac, which have credit ratings given
by Moody's of A1 and Aa3 (31 March 2019: Baa2 and Aa3)
respectively.
The credit quality and risk of lease transactions with
counterparty airlines is evaluated upon conception of the
transaction. In addition, ongoing updates as to the operational and
financial stability of the airlines are provided by the Company's
Asset Manager in its quarterly reports to the Company. Given the
full or partial sovereign ownership status of all underlying
lessees, the credit quality of these airlines would be regarded as
some of the highest ranked in the world as the Group selected
lessees with strong statements of financial position and financial
outlook which have no history of defaulting on any rental
payments.
There is a potential credit risk arising from the possibility
that the lessee may default on the lease payments. This risk is
mitigated, as under the terms of the lease agreements between the
lessee and the Group, any non payment of the lease rentals
constitutes a Special Termination Event, under which the lease
terminates and the Company may either choose to sell the Asset or
lease the Asset to another party. Lessees also have strong credit
ratings with Emirates being rated AA and Etihad and Thai being
rated A by Fitch Ratings Inc.
At the inception of each lease, the Company selected a lessee
with a strong Statement of Financial Position and financial
outlook. The financial strength of Emirates, Etihad and Thai
Airways is regularly reviewed by the Directors and the Asset
Manager. 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. Security deposits and
Maintenance reserve liabilities are held in relation to funds
received at the period end for the timely and faithful performance
of the lessees' obligations under the lease agreements for the four
A350-900 aircraft. Refer to note 2(l) for further details on the
maintenance reserves and security deposits.
The Group assesses on a forward looking basis the expected
credit losses associated with its accrued rental income carried at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk. The
Group has chosen to apply the simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. Any accrued rental income and
receivables at amortised cost are short-term (i.e. no longer than
12 months) and considered to be of high credit quality as the Group
selected lessees with strong balance sheet and financial outlook
which have no history of defaulting on any rental payments.
Accordingly, any identified impairment losses on such assets are
expected to be small.
(d) Liquidity Risk
Liquidity risk is the risk that the Group will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments such as capital repayments of junior debt at
the end of the lease. The Group's main financial commitments are
its ongoing operating expenses and repayments on loans.
The fixed rental income under the relevant leases means that the
rents received should be sufficient to meet the loan interest and
regular capital repayments of debt scheduled during the life of
each loan and provide surplus income to pay for the Group's
expenses and finance payments of dividends. Where balloon and
bullet repayments of debt exist, these are expected to be financed
out of the disposal proceeds of the relevant aircraft. Dividends
may need to be reduced or suspended if the Board considers that the
Company will not be able to repay any balloon and bullet repayments
of debt falling due through the sale, refinancing or other
disposition of an Asset.
Ultimate responsibility for liquidity risk management rests with
the Board of Directors.
The Group manages liquidity risk through the timings of lease
rentals and debt repayments, by maintaining adequate reserves,
banking facilities and borrowing facilities, by monitoring forecast
and actual cash flows, and by matching profiles of financial assets
and liabilities.
The table below details the residual contractual maturities of
financial liabilities (and the Ijarah financing included in Note
14). The amounts below are contractual undiscounted cash flows,
including both the principal and interest payments, and will not
agree directly to the amounts recognised in the Statement of
Financial Position:
1-3 3-12 1-2 2-5 Over 5 Total
30 Sep 2019 Months Months Years Years Years
GBP GBP GBP GBP GBP GBP
Financial
liabilities
Payables 186,055 - - - - 186,055
Security
deposit
liability - - - - 14,301,130 14,301,130
Borrowings
and Ijarah
financing 48,740,939 146,036,826 194,847,141 583,334,896 1,054,304,042 2,027,263,844
----------- ------------ ------------ ------------ -------------- ----------------
48,926,994 146,036,826 194,847,141 583,334,896 1,068,605,172 2,041,751,029
=========== ============ ============ ============ ============== ================
1-3 3-12 1-2 2-5 Over 5 Total
31 Mar 2019 Months Months Years Years Years
GBP GBP GBP GBP GBP GBP
Financial
liabilities
Payables 179,449 - - - - 179,449
Security
deposit
liability - - - - 13,482,669 13,482,669
Borrowings
and Ijarah
financing 46,313,307 138,962,408 185,151,572 554,940,356 1,054,071,264 1,979,438,907
----------- ------------ ------------ ------------ -------------- ----------------
46,492,756 138,962,408 185,151,572 554,940,356 1,067,553,933 1,993,101,025
=========== ============ ============ ============ ============== ================
(e) Interest Rate Risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows. It is the risk that
fluctuations in market interest rates will result in a variation in
deposit interest earned on bank deposits held by the Group or on
debt repayments.
The loans with an outstanding balance of GBP344,345,499 (31
March 2019: GBP335,394,305) as at period end entered into in prior
years are variable rate (with no associated interest rate swap
contract issued by the lender to fix the loan interest over the
term of the loans) although the related rentals are also floating
rate to match.
With the exception of loans with an outstanding balance of
GBP344,345,499 (31 March 2019: GBP335,394,305) as at period end, as
mentioned above, the Group mitigates interest rate risk by fixing
the interest rate on the bank loans (as well as in respect of loans
with an outstanding balance of GBP643,414,216 (31 March 2019:
GBP632,020,018) as at period end, which have an associated interest
rate swap to fix the loan interest).
The following table details the Group's exposure to interest
rate risks:
30 Sep 2019 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial Assets
Cash and cash
equivalents 110,814,899 - 6,396,955 117,211,854
-------------- -------------- ------------- ------------
Total Financial
Assets 110,814,899 - 6,396,955 117,211,854
============== ============== ============= ============
Financial Liabilities
Accrued expenses
and reserves - - 186,055 186,055
Security deposit
liability - - 14,301,130 14,301,130
Borrowings
and Ijarah
financing 344,345,499 620,263,849 - 964,609,348
-------------- -------------- ------------- ------------
Total Financial
Liabilities 344,345,499 620,263,849 14,487,185 979,096,533
============== ============== ============= ============
Effective of
derivatives
held for risk
management 643,414,216 -
-------------- --------------
Total interest
sensitivity
gap (876,944,816) (620,263,849)
============== ==============
31 Mar 2019 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial Assets
Cash and cash
equivalents 91,070,150 - 5,069,490 96,139,640
-------------- -------------- ------------- ------------
Total Financial
Assets 91,070,150 - 5,069,490 96,139,640
============== ============== ============= ============
Financial Liabilities
Accrued expenses
and reserves - - 179,449 179,449
Security deposit
liability - - 13,482,669 13,482,669
Borrowings and
Ijarah financing 335,394,305 606,698,167 - 942,092,472
============== ============== ============= ============
Total Financial
Liabilities 335,394,305 606,698,167 13,662,118 955,754,590
============== ============== ============= ============
Effective of
derivatives
held for risk
management 632,020,018 -
Total interest
sensitivity
gap (876,344,173) (606,698,167)
============== ==============
If interest rates had been 25 basis points higher throughout the
period and all other variables were held constant, the Group's net
assets attributable to shareholders as at 30 September 2019 would
have been GBP277,037 (31 March 2019: GBP227,674) greater due to a
increase in the amount of interest receivable on the bank
balances.
If interest rates had been 25 basis points lower throughout the
period and all other variables were held constant, the Group's net
assets attributable to shareholders as at 30 September 2019 would
have been GBP277,037 (31 March 2019: GBP227,674) lower due to a
decrease in the amount of interest receivable on the bank
balances.
Since the capital repayments are unchanged in respect of the
variable interest loans with an outstanding balance of
GBP344,345,499 (31 March 2019: GBP335,394,305) as at period end
(only the interest payments vary) when there is a change in rates.
This will affect future cash flows as explained above.
18. ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, the Company has no ultimate
controlling party as the Company does not have any shareholder
which holds greater than 10% of the issued share capital of the
Company.
19. CASH AND CASH EQUIVALENTS
30 Sep 2019 31 Mar 2019
GBP GBP
Bank balances 110,814,899 91,070,150
110,814,899 91,070,150
============ ============
Included in the cash and cash equivalents are secured cash
deposits of GBP61,503,512 (31 March 2019: GBP45,848,244) in respect
of security deposits and maintenance reserves. Refer to notes 20
and 21 for more information on security deposits and maintenance
reserve liabilities.
20. SECURITY DEPOSITS
30 Sep 2019 31 Mar 2019
GBP GBP
Security deposit liability 14,301,130 13,482,669
14,301,130 13,482,669
============ ============
The Security deposit is held in relation to funds received at
the period end for the timely and faithful performance of the
lessees' obligations under the lease agreements for the four
A350-900 aircraft. Security deposits are contractually bound to be
repaid if not utilised. Refer to note 2(l) for accounting policies
adopted on the security deposits.
21. MAINTENANCE RESERVES
30 Sep 2019 31 Mar 2019
GBP GBP
Balance at 1 April 32,365,575 8,567,078
Movements for the period/year 14,836,807 23,798,497
Balance at period end 47,202,382 32,365,575
------------ ------------
The Maintenance reserve liabilities are held in relation to
funds received at the period end for the timely and faithful
performance of the lessees' obligations under the lease agreements
for the four A350-900 aircraft. Amounts accumulated in the
maintenance reserve will be repaid only as re-imbursements for
actual maintenance expenses incurred by the lessee. Refer to note
2(l) for accounting policies adopted on the maintenance
reserves.
The table below details the expected utilisation of maintenance
reserves.
1-3 3-12 1-2 2-5 Over 5 Total
Months Months Years Years Years
GBP GBP GBP GBP GBP GBP
30 Sep 2019 - - 29,749,987 8,277,614 9,174,781 47,202,382
31 Mar 2019 - - - 26,168,148 6,197,427 32,365,575
======= ======= =========== =========== ========== =============
22. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
Borrowings and Ijarah
30 Sep 2019 finance
GBP
Balance at 1 April 2019 1,574,112,490
Cash flows (89,407,371)
Add back payments of interest on loans
and Ijarah financing 34,014,451
Movement in interest accruals 136,033
Translation adjustment on foreign operations 89,167,960
----------------------
Balance at 30 September 2019 1,608,023,563
======================
Borrowings and Ijarah
30 Sep 2018 finance*
GBP
Balance at 1 April 2018 1,568,109,458
Cash flows (89,801,674)
Add back payments of interest on loans
and Ijarah financing 33,709,311
Movement in interest accruals (21,720)
Translation adjustment on foreign operations 119,364,681
----------------------
Balance at 30 September 2018 1,631,360,056
======================
*Restated, refer to note 2(g)
23. TAX
30 Sep 2019 30 Sep 2018
USD USD
Profit before tax of AA4P Leasing Ireland Limited and AA4P Leasing Ireland 2 Limited 352,383 349,292
------------ ------------
Irish tax at 12.5% 44,048 43,661
============ ============
GBP GBP
Tax expense (converted into GBP) 30,899 32,810
============ ============
Irish tax is charged at 12.5% on each of the AA4P Leasing
Ireland Limited and AA4P Leasing Ireland 2 Limited subsidiaries.
The Company and the Guernsey Subsidiaries have been assessed for
tax at the Guernsey standard rate of 0%. Since AA4P Leasing Ireland
Limited and AA4P Leasing Ireland 2 Limited are Irish tax resident
trading Companies, they will not be subject to Guernsey tax, but
their net lease rental income earned (after tax deductible
expenditure) will be taxable as trading income at 12.5% under Irish
tax regulations.
24. ACCRUED AND DEFERRED INCOME
The deferred and accrued income represents the difference
between actual payments received in respect of the lease income
(including some received in full upfront) and the amount to be
accounted for in the accounting records on a straight line basis
over the lease terms. The accrued and deferred income consists of
the following:
30 Sep 2019 31 Mar 2019
GBP GBP
Accrued income 14,520,768 13,589,107
Deferred income (46,442,164) (46,300,030)
============= ==============
25. RELATED PARTY TRANSACTIONS
Amedeo Limited was appointed as the Group's Asset Manager.
During the period, the Group incurred GBP1,713,584 (30 September
2018 as restated: GBP1,658,255) of fees with Amedeo, of which GBP
Nil (31 March 2019: GBPNil) was outstanding to this related party
at 30 September 2019. This fee is included under "Asset management
fee" in note 5.
During the period Amedeo had a recharge invoice of GBP34,858 (30
September 2018: GBP38,694).
Following the disposal of the "IPO Assets" (being collectively
the first four assets purchased), the Company shall pay to Amedeo
disposition fees calculated as detailed in the prospectus, which
can be found on the Group's website. Fees range from 2.5% to 4% of
the sale value. The fee for the remaining ten aircraft is 3%.
Amedeo Services (UK) Limited ("Amedeo Services") was appointed
as Liaison and Administration Oversight Agent (the agent is
appointed to assist with the purchase of the aircraft, the
arrangement of suitable equity and debt finance and the negotiation
and documentation of the lease and financing contracts) to the
Group.
During the period, the Group incurred GBP5,492 (30 September
2018 as restated: GBP5,370) of fees with Amedeo Services. As at 30
September 2019 GBPNil (31 March 2019: GBPNil) was outstanding. This
fee is included under "Asset management fee" in note 5.
Nimrod Capital LLP is the Company's Corporate and Shareholder
Adviser.
During the period, the Group incurred GBP1,206,969 (30 September
2018 as restated: GBP1,160,307) of fees due to Nimrod. GBP1,206,969
(31 March 2019: GBP2,341,151) of these fees related to corporate
and shareholder advisory fees as shown in note 5. GBP Nil (31 March
2019: GBPNil) was outstanding to this related party at 30 September
2019.
During the period Nimrod had recharge invoices amounting to
GBP3,079 (30 September 2018: GBP8,588).
John Le Prevost is a director of Anson Registrars Limited
("ARL"), the Company's Registrar, Paying Agent and Transfer
Agent.
During the period the Group incurred GBP8,783 (30 September
2018) as restated: GBP8,177 of costs with ARL, of which GBP1,217
(31 March 2019: GBP1,653) was outstanding as at 30 September
2019.
26. SEGMENT INFORMATION
The Directors are of the opinion that the Group is engaged in a
single segment of business, being acquiring, leasing and selling
aircraft.
Geographical analysis
30 Sep 2019 Middle East Asia Pacific Total
GBP GBP GBP
Rental income 102,666,394 29,628,483 132,294,877
============== ============= ==============
Net book value - aircraft 1,751,689,172 556,745,128 2,308,434,300
============== ============= ==============
31 Mar 2019 Middle East Asia Pacific Total
GBP GBP GBP
Rental income 197,939,462 56,709,306 254,648,768
============== ============= ==============
Net book value - aircraft 1,707,975,123 539,440,280 2,247,415,403
============== ============= ==============
27. SUBSEQUENT EVENTS
On 10 October 2019 the Directors of the Company declared an
interim dividend of 2.0625 pence per Share in respect of the 31
March 2020 financial year. This dividend of GBP13,246,406.25 was
paid on 31 October 2019 to holders on record 18 October 2019.
On 31 October 2019 the Board of directors of the Company
announced that independent non-executive director, David Gelber has
been appointed senior independent director ('SID') with effect from
23 October 2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BRBDDDXGBGCC
(END) Dow Jones Newswires
December 09, 2019 12:41 ET (17:41 GMT)
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