Notes to the financial statements

For the year ended 31 December 2022

1. General information

Gama Aviation Plc (the "Company") is a public limited company (company number 07264678) whose shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange under the ticker symbol GMAA and is incorporated and domiciled in England in the United Kingdom. The address of the registered office is 1^st Floor, 25 Templer Avenue, Farnborough, Hampshire, England, GU14 6FE.

The Company, together with its subsidiaries and other related undertakings (the "Group"), is involved in the provision of aviation services, including aviation design, maintenance, operational management, charter, software and facilities expertise.

2. Subsidiaries and other related undertakings

Details of the Company's subsidiaries and other related undertakings held directly or indirectly at 31 December 2022 are as follows:

Name	Place of incorporation and operation	Proportion of voting and ownership interest 2022	Proportion of voting and ownership interest 2021	Nature of business	Registered address
Airops Software Limited1	England and Wales	100%	100%	Aviation software	Head Office
Aravco Limited1	England and Wales	100%	100%	Dormant	Head Office
FlyerTech Limited1	England and Wales	100%	100%	Airworthiness management	Head Office
Gama Aviation (Asset 2) Limited1	England and Wales	100%	100%	Dormant	Head Office
Gama Aviation (Engineering) Limited1	England and Wales	100%	100%	Aviation design and engineering	Head Office
Gama Aviation (UK) Limited1	England and Wales	100%	100%	Aviation management	Head Office
Gama (Engineering) Limited1	England and Wales	100%	100%	Dormant	Head Office
Gama Group Limited	England and Wales	100%	100%	Holding company	Head Office
Gama Support Services Limited1	England and Wales	100%	100%	Dormant	Head Office
Hangar 8 Management Limited	England and Wales	100%	100%	Dormant	Head Office
International JetClub Limited	England and Wales	100%	100%	Dormant	Head Office
Ronaldson Airmotive Limited1	England and Wales	100%	100%	Dormant	Head Office
Gama Aviation (Beauport) Limited1	Jersey	100%	100%	Aviation management	Jersey Office
Gama Aviation (Engineering) Jersey Limited1	Jersey	100%	100%	Aviation design and engineering and FBO	Jersey Office
Gama Aviation FZC1,2	SAIF Free Zone, United Arab Emirates	49%	49%	Aviation management	SAIF Suite Z-21, P.O. Box 122389, Sharjah, UAE
Gama Group Mena FZE	United Arab Emirates	100%	100%	Holding company	SAIF Office Q1-09-067/C, P.O. Box 122464, Sharjah, UAE
Gama Holdings FZC	United Arab Emirates	100%	100%	Dormant	SAIF Lounge P.O. Box 121954, Sharjah, UAE
Gama Support Services FZE1	United Arab Emirates	100%	100%	Aviation design and engineering and FBO	SAIF Desk Q1-05-123/B, P.O. Box 122553, Sharjah, UAE
Gama Aviation SPV Limited (Plc)1	United Arab Emirates	100%	100%	Aviation management	2428 Res Co-work 03 Level 24, Al Sila Tower, Abu Dhabi Global Market Square, Al Maryah Island, Abu Dhabi, UAE
Gama Aviation (Engineering) Inc.1	Delaware, USA	100%	100%	Aviation design and engineering	Delaware Office
Gama Aviation (Management) Inc.1	Delaware, USA	100%	100%	Non-trading	Delaware Office
Gama Group Inc.	Delaware, USA	100%	100%	Holding company	Delaware Office
Jet East Aviation Corporation, LLC1	Pennsylvania, USA	100%	100%	Aviation design and engineering and FBO	Trenton Office
Gama Aviation Engineering (HK) Limited1	Hong Kong	100%	100%	Aviation design and engineering	Hong Kong Office
Gama Aviation Hutchison Holdings Limited1	Hong Kong	100%	100%	Holding company	Hong Kong Office
Gama Aviation (HK) Limited1	Hong Kong	100%	100%	Aviation management	Hong Kong Office
Gama Group (Asia) Limited	Hong Kong	100%	100%	Holding company	Hong Kong Office
Star-Gate Aviation (Proprietary) Limited	South Africa	100%	100%	Holder of South African AOC	151 Monument Road, Aston Manor 1619 South Africa
Hangar 8 Nigeria Limited3	Nigeria	100%	100%	Applicant of Nigerian AOC	8
Gama Aviation (Cayman) SEZC	Cayman Islands	100%	100%	Aviation Management	Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
FlyerTech Europe Sp. Z.o.o.	Poland	100%	100%	Airworthiness management	ul. Komitetu Obrony Robotnikow 62, 2nd Floor, 02-146 Warsaw, Poland, NIP: 7831827059
GB Aviation Holdings LLC6	Delaware, USA	50%	50%	Joint venture - non-trading	Delaware Office
Gama Aviation Hutchison Technical Service (Beijing) Limited1	China	100%	100%	Non-trading	Room 250, 2nd Floor, Building 1, No. 56, Zhaoquanying Section, Changjin Road, Shunyi District, Beijing
Bond Helicopters Limited1,7	England and Wales	50%	-	Joint venture - non-trading	Compass House, Lypiatt Road, Cheltenham, England, GL50 2QJ

¹       Indicates indirect holding.

²       Gama Aviation Plc holds a 49% shareholding in Gama Aviation FZC. The results of Gama Aviation FZC are fully consolidated within the financial statements because Gama Aviation Plc is exposed to variable returns from its involvement and has the ability to affect the returns through its power over these companies. Refer to Note 38 for further details.

³       Gama Aviation Plc holds 11% of the share capital in Hangar 8 Nigeria Limited, a company established in Lagos, Nigeria. Whilst the Group does not have legal control of this entity, the Directors and officers comprise only management from the Group who have the ability to adopt, amend and control the operating and financial policies of the entity. Local regulations prevent the Group holding a legally controlling shareholding and therefore 89% of the share capital is held on behalf of the Group by Tinubu Investment Company Limited. Accordingly, the entity has been treated as a wholly owned subsidiary in these financial statements.

⁶       GB Aviation Holdings LLC is the entity jointly held with Signature Aviation plc.

⁷       Bond Helicopters Limited is the entity jointly held with Peter Bond.

⁸       The registered office address of this company is available upon request at the Company's Head Office at the above address.

 

The addresses for the specified offices are:

Head Office: 1^st Floor 25 Templer Avenue, Farnborough, Hampshire, England, GU14 6FE

Jersey Office: Beauport House, L'Avenue De La Commune, St Peter, Jersey, JE3 7BY

Delaware Office: Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware 19808, USA

Trenton Office: 18 West Piper Ave, Trenton, New Jersey 08628, USA

Hong Kong Office: 7^th Floor, 81 South Perimeter Road, Hong Kong International Airport, Lantau, Hong Kong

 

 

 

During the year ended 31 December 2022, the Company disposed of the following undertakings held directly or indirectly at 31 December 2021:

Name	Place of incorporation and operation	Proportion of voting and ownership interest 2022	Proportion of voting and ownership interest 2021	Method of disposal	Registered address
Gama International Saudi Arabia1	Kingdom of Saudi Arabia	-	nil2	Sold	6646 Abi Haitham Al Ansari, al Madina Square Center - Office 2 & 3, Muhammadiyah District, Jeddah 23624-3270, KSA
Lynk Aero LLC1	Ohio, USA	-	100%	Dissolved	Trenton Office

¹       Indicates indirect holding.

²       No non-controlling interest was recognised as the Group had the full beneficial interest.

3. Accounting policies

Basis of preparation

The Consolidated Financial Statements of the Group have been prepared in accordance with UK adopted International Accounting Standards, in conformity with the requirements of the Companies Act 2006.

The Consolidated Financial Statements have been prepared on a going concern basis and under the historical cost convention, except as disclosed in the accounting policies below.

The financial statements are presented in United States Dollars (USD), rounded to the nearest thousand (USD000) unless otherwise stated.

Climate Change

In preparing the Consolidated Financial Statements the Group has informally considered the impact of climate change, particularly in the context of the disclosures included in our Corporate Social Responsibility report. These considerations did not have a material impact on the financial reporting judgements and estimates, consistent with the assessment that climate change is not expected to have a significant impact on the Group's going concern assessment.

Going concern

To support their assessment of going concern, the Directors have performed a detailed analysis of cash flow projections for the Group covering the period from the date of approval of the annual financial statements to 31 December 2024. The Directors have also considered the outlook for the business beyond 31 December 2024 based upon its updated five-year strategic plan.

The analysis takes account of the following, amongst other, relevant considerations:

·                  Working capital levels and the conversion of profits into cash flows,The recovery of legacy debtor balances,

·                  The planned sale and/or sale and lease back of Group assets

·                  The £20.0m HSBC Term Loan which was repaid on 25 January 2023,

·                  The $5.0m Great Rock Capital Term Loan and a delayed $1.5m Delayed Term which is currently undrawn.

·                  The Revolving Credit Facility ("RCF") of up to initially $15.0m with the potential to increase to $20m (the amount available to be drawn down is subject to various restrictions both in value and use outside the US) from Great Rock Capital of which $9.0m was undrawn as of 31 December 2022 and $7.2m was undrawn as of 30 April 2023.

·                  The £9.4m ($11.1m) loan from Close Brothers that completed on 3 March 2023, and which is secured on owned aircraft,

·                  Cash of $22.5m as of 31 December 2022 and $6.1m as of 30 April 2023.

The credit facilities with Great Rock Capital are held in the Company's US subsidiary and are subject to financial covenants and expire in December 2026.

The RCF is settled and drawn down on a cyclical basis and has been presented in current liabilities.

The term loan with Great Rock Capital falls due for repayment over twelve months from the reporting date and has been presented in non-current liabilities.

The key assumptions in the Board approved base case projections relate to revenue, profit performance and working capital cash flows. Additionally, the detailed cashflow projections consider planned future events within 2023 and 2024, including the Directors' assessment of:

·                  The likelihood of recovery of legacy debtor balances and

·                  The likelihood of completing the planned sale and/or sale and lease back of Group assets

The Directors have also considered a severe but plausible downside scenario that takes account of the rapid increase in inflation that the western world is experiencing and assumes that this will principally be felt from the start of 2023 due to the longevity of supply contracts.

The severe but plausible downside scenario assumes the following:

·                  EBITDA is 20% lower than the Board approved base case projections

·                  Working capital outflows are 25% higher than the Board approved base case projections

·                  Funding costs will be 2% higher than current rates

·                  Corporation tax rates will be 5% higher than current rates

In both the base case scenario and the severe but plausible downside scenario, the Directors are satisfied that the Group has sufficient headroom and potential further mitigation to ensure that the Group will remain solvent and able to pay its debts as they fall due during a period of at least 12 months from the date of approval of these annual financial statements.

Accordingly, after making appropriate enquiries and considering the uncertainties described above, the Directors have, at the time of approving these annual financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, consequently, consider that it is appropriate to adopt the going concern basis in preparing these annual financial statements.

However, certain assumptions within the cash flow forecasts relating to receipt of legacy debtor balances , and the planned sale and/or sale and lease back of Group assets which have not been concluded at the time of approving the financial statements and there is a risk that these events may not be completed in the time scales planned as they are not fully under the control of the Group. Consequently, there is a material uncertainty that may cast significant doubt about the Group's ability to continue as a going concern.

If one or more of these events do not occur, the Directors anticipate undertaking additional fundraising and asset realisation alongside cost and cash savings to ensure that the Group is able to meet its liabilities as they fall due.

 The financial statements do not include any adjustments that would result if the Group were unable to continue as a going concern.

Changes in accounting policies and practices

In the preparation of these Consolidated Financial Statements, the Group followed the same accounting policies and methods of computation as compared to those applied in the previous period, except for:

·      the reclassification of depreciation charges relating to aircraft and refurbishment, and leasehold property improvements from administrative expenses to cost of sales, and

·      the adoption of new standards and interpretations and revision of the existing standards noted below.

New and amended standards adopted by the Group in 2022

The following amendments to existing standards and interpretations were effective in the year ended 31 December 2022, but were either not applicable or did not have a material impact on the Group:

·      Amendments to IAS 16 Property, Plant and Equipment

·      Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets

·      Amendments to IFRS 3 Business Combinations

·      Annual Improvements to IFRS Standards 2018-2020 Cycle - minor amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41

New and amended standards not applied

The following standards and interpretations in issue are not yet effective for the Group and have not been adopted by the Group:

	Effective dates1
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current	1 January 2023
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting Policies	1 January 2023
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates	1 January 2023
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction	1 January 2023
IFRS 17 Insurance Contracts	1 January 2023
Amendments to IFRS 17 Insurance Contracts	1 January 2023
Amendments to IAS 1 Presentation of Financial Statements: Non-current Liabilities with Covenants	1 January 2024
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback	1 January 2024

¹ The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares its financial statements in accordance with International Accounting Standards, in conformity with the requirements of the Companies Act 2006, the application of new standards and interpretations will be subject to there having been endorsed for use in the UK. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation, but the need for endorsement restricts the Group's discretion to early adopt standards.

The Directors do not expect the adoption of these standards and interpretations to have a material impact on the Consolidated financial statements.

Significant accounting policies

The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below.

Basis of consolidation

The Consolidated Financial Statements incorporate the financial statements of the Company and the subsidiaries controlled by the Company for the years ended 31 December 2022 and 31 December 2021. The Group controls an investee if, and only if, the Group has all of the following:

·      Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

·      Exposure, or rights, to variable returns from its involvement with the investee, and

·    The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·      The contractual arrangement with the other vote holders of the investee

·      Rights arising from other contractual arrangements

·    The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the Consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the Consolidated Financial Statements from the date on which control commences until the date on which control ceases.

The subsidiary financial statements are prepared for the same reporting period as the Parent Company and are based on consistent accounting policies. All intra-group balances and transactions, including unrealised profit arising from them are eliminated in full.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction. If the Group loses control of a subsidiary it:

·      Derecognises the assets (including goodwill) and liabilities of the subsidiary,

·      Derecognises the carrying amount of any non-controlling interest,

·      Derecognises the cumulative translation differences recorded in equity,

·      Recognises the fair value of the consideration received,

·      Recognises the fair value of any investment retained,

·      Recognises any surplus or deficit in profit or loss, and

·      Recognises the parent's share of any components previously recognised in other comprehensive income, to profit or loss or retained earnings, as appropriate.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of any acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquirer's identifiable net assets. Acquisition costs incurred are expensed and included within adjusting items.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances, and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Goodwill is initially recognised at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest, over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units ("CGUs") that are expected to benefit from the combination, irrespective of whether assets or liabilities of the acquisition are assigned to those units.

Where goodwill forms part of a CGU, and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained.

Associates

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the Consolidated Balance Sheet at cost. Subsequently, associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income (except for losses in excess of the Group's investment in the associate, unless there is an obligation to make good those losses).

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The Group's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value if the associate.

Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired, is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

Joint ventures

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The considerations made in determining joint control is similar to those necessary to determine control over subsidiaries.

The Group's investments in its joint ventures are initially recognised in the Consolidated Balance Sheet at cost. Subsequently, joint ventures are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Consolidated Income Statement and Consolidated Statement of Comprehensive Income (except for losses in excess of the Group's investment in the joint venture, unless there is an obligation to make good those losses).

Revenue from contracts with customers

The Group recognises revenue from the following major sources:

·      Business Aviation:

o  Managed aircraft contracts and specific air services

o  Charter services

o  Maintenance of aircraft

o  Fixed base operations

·      Special Mission:

o  Mission solutions and expertise with aviation assets

·      Technology & Outsourcing (T&O):

o  Airworthiness services

o  Software solutions

·      Branding fees

Revenue is measured based on the fair value of the consideration received or receivable, taking into account contractually-defined terms of payment in relation to when the performance obligation is met, and excludes amounts collected on behalf of third parties.

The transaction price represents the price to which the Group expects to be entitled, consistent with contractually defined terms, in return for delivering goods and/or services to its customers. Revenue from contracts with customers is recognised when the Group transfers control of a product or service to a customer or when it meets the performance obligations specified or implied in the contract.

Managed aircraft contracts and specific air services

Services provided by the Group under managed aircraft contracts include flight training, cost management, flight planning and scheduling, crew management, maintenance oversight and regulatory compliance. Services under managed aircraft contracts fall into one or more of the following contract components:

·      Pre-delivery services and services prior to aircraft's entry into service

·      Management services

·      Variable fees based on flying hours and related rechargeable costs

These services are distinct services as the customer can benefit from each service on its own and the Group's promise to provide the service is separately identifiable from other promises in the contract. The three contract components are therefore deemed to be separate performance obligations.

Revenue for the provision of pre-delivery services and services prior to aircraft's entry into service are recognised at a point in time when control of the services has transferred to the customer, being at the point the services have been performed. Payment for the provision of pre-delivery services and services prior to aircraft's entry into service are not due from the customer until the activities are complete.

Revenue relating to management services are recognised over time on a straight-line basis over the term of the contract, as the customer simultaneously receives and consumes the benefits provided by the Group.

Payment for management services is mostly in the form of quarterly or monthly advance payments from customers. A contract liability is recognised for revenue relating to management services at the time of receipt of the funds from the customer. The contract liability represents the Group's obligation for services still to be performed.

Revenue relating to variable flying hours revenue is recognised monthly at a point in time based upon actual flight information and other relevant information held on the internal billing system. Payment for revenue related to variable flying hours is not due from the customer until the activities are complete.

Rechargeable costs are recognised gross, as revenue and related cost of sales, at a point in time based upon either actual rechargeable costs or estimated costs to be recharged. Payment for revenue arising from rechargeable costs is not due from the customer until the activities are complete.

The Group has considered whether it is acting as agent or principal in the context of its managed aircraft contracts and has concluded that it is the principal in relation to the entirety of these contracts. Rechargeable costs are recognised gross because the Group controls the services before they are transferred to customers and they are linked to wider management services.

Charter services

The Group provides both managed fleet and sub-contracted charter services. Revenue relating to charter services is recognised over time based on the stage of completion of the service. The stage of completion is determined as the proportion of the total duration of the charter that has elapsed at the end of the reporting period. Payment for charter services is not due from the customer until the charter services are complete. Consequently, a contract asset is recognised over the period in which the charter services are performed, representing the Group's right to consideration for the services performed to date.

The Group has considered whether it is acting as agent or principal in the context of its sub-contracted charter services and has concluded that it is the principal.

Maintenance of aircraft

The Group provides both base and line maintenance services. Base maintenance relates to the planned maintenance that is required by the aircraft manufacturer or component supplier. This work is complex, highly regulated and location specific. Line maintenance covers irregular maintenance activities, component failure or simple wear and tear. Both types of services are provided on a fee or contract basis.

Revenue relating to maintenance services is recognised over time based on the stage of completion of the contract. The stage of completion is determined as the proportion of the total labour hours expected to perform the service that have been expended at the end of the reporting period. Payment for higher value base maintenance services is mostly in the form of stage payments from customers. To the extent that the value of the stage payment exceeds the revenue recognised at the end of the reporting period based on the stage of completion, a contract liability is recognised. The contract liability represents the Group's obligation for services still to be performed.

As part of the maintenance activities, the Group sells parts to customers. Revenue from the sale of parts is recognised at a point in time when control of the goods has transferred to the customer, being at the point the goods are delivered to the customer.

Fixed base operation

The Group provides fixed base operation activities in the US, Jersey, the UK, and the Middle East. These activities include hangar parking, apron parking, provision of fuel, and handling activities.

Revenue for the provision of fuel is recognised at a point in time when control of the goods has transferred to the customer, being at the point the goods are delivered to the customer. Revenue for all other fixed base operation activities is recognised over time as the service is provided.

Mission solutions and expertise with aviation assets

Revenue includes fixed contract fees and variable fees such as revenue earned with reference to flying hours or other support services. In addition, the Group undertakes certain equipment design and modification activities for some customers.

Revenue relating to fixed contract fees are recognised over time on a straight-line basis over the term of the contract. Payment for fixed contract fees is mostly in the form of annual or quarterly advance payments from customers. A contract liability is recognised for revenue relating to fixed contract fees at the time of receipt of the funds from the customer. The contract liability represents the Group's obligation for services still to be performed.

Revenue relating to variable fees is recognised over time based on the stage of completion of the contract. The stage of completion is determined as the proportion of the total hours expected to perform the service that have been expended at the end of the reporting period. Payment for variable fees is not due from the customer until the activities are complete. Consequently, a contract asset is recognised over the period in which the activities are performed, representing the Group's right to consideration for the services performed to date.

Revenue relating to equipment design and modification activities is recognised over time based on the stage of completion of the related design and modification work. The stage of completion is determined as the proportion of the total labour hours expected to perform the service that have been expended at the end of the reporting period. Payment for equipment design and modification activities are not due from the customer until the activities are complete. Consequently, a contract asset is recognised over the period in which the activities are performed, representing the Group's right to consideration for the services performed to date.

Payment for some higher value equipment design and modification activities is in the form of stage payments from customers. To the extent that the value of the stage payment exceeds the revenue recognised at the end of the reporting period based on the stage of completion, a contract liability is recognised. The contract liability represents the Group's obligation for services still to be performed.

Airworthiness services

The Group provides continuing airworthiness management and airworthiness review certification services for business aviation, military, and commercial airline operators. Revenue from these activities includes fixed contract fees and variable fees, such as revenue earned with reference to ad-hoc services.

Revenue relating to fixed contract fees are recognised over time on a straight-line basis over the term of the contract. Payment for fixed contract fees is mostly in the form of monthly advance payments from customers. A contract liability is recognised for revenue relating to fixed contract fees at the time of receipt of the funds from the customer. The contract liability represents the Group's obligation for services still to be performed.

Revenue relating to variable fees is recognised over time based on the stage of completion of the contract. The stage of completion is determined as the proportion of the total hours expected to perform the service that have been expended at the end of the reporting period. Payment for variable fees is not due from the customer until the activities are complete. Consequently, a contract asset is recognised over the period in which the activities are performed, representing the Group's right to consideration for the services performed to date.

Software solutions

The Group has developed a suite of business aviation products deployed as "Software as a Service" and mobile application solutions for flight and aircraft management, maintenance tracking, ground operations and crew scheduling and operations.

Revenue relating to the use of these software products are recognised over time on a straight-line basis over the term of the contract. Payment for use of the software products is mostly in the form of annual or monthly advance payments from customers. A contract liability is recognised for revenue relating to the use of the software products at the time of receipt of the funds from the customer. The contract liability represents the Group's obligation for services still to be performed.

Branding fees

The Group received a branding fee from Gama Aviation LLC for the continued use of the Gama Aviation Signature brand. Revenue relating to the branding fee is recognised over time (as the customer simultaneously receives and consumes the benefits provided by the Group) on a straight-line basis over the remaining term of the contract.

Payment for use of the brand was received in March 2020. A contract liability was recognised for revenue relating to the use of the brand at the time of receipt of the funds. The remaining balance of the contract liability was fully derecognised in February 2022.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets (including property, plant and equipment) are recognised as deferred income in the Consolidated Balance Sheet and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

Foreign currencies

The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the Consolidated Financial Statements, the results and financial position of each Group company are reported in US Dollars, which is the presentation currency for the Consolidated Financial Statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. All resulting differences are taken to the Consolidated Income Statement. Foreign currency fluctuations on monetary items that are financing in nature, being foreign currency borrowings, are presented in finance income or expenses. All other foreign currency fluctuations on monetary items are presented within earnings before interest and taxation.

For the purpose of presenting Consolidated Financial Statements, the assets and liabilities of the Group's foreign operations are expressed in US Dollars using the exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as other comprehensive income and transferred to the Group's translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Supplier volume rebates

The Group has supplier contracts for the provision of certain services, which attract volume rebates, the credit for which is initially recognised centrally and together with other central income and expenses allocated to the respective divisions as appropriate. The anticipated rebate receivable is accrued throughout the year based on the agreement terms.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered the service entitling them to the contributions. Payments made to state-managed retirement benefit plans are accounted for as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

Short-term and other long-term employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.

Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date.

Leases

The Group as lessee

The Group assesses whether a contract is, or contains, a lease at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (determined to be those with an initial discounted total obligation of less than $5,000). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If that rate cannot be readily determined, the Group uses its incremental borrowing rate.

The incremental borrowing rate depends on the term, currency and start date of the lease and is determined based on a series of inputs including: the risk-free rate based on government bond rates; a country-specific risk adjustment; a credit risk adjustment based on bond yields; and an entity-specific adjustment when the risk profile of the entity that enters into the lease is different to that of the Group and the lease does not benefit from a guarantee from the Group.

Lease payments included in the measurement of the lease liability comprise:

·      Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable,

·      Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date,

·      The amount expected to be payable by the lessee under residual value guarantees,

·      The exercise price of purchase options, if the lessee is reasonably certain to exercise the options,

·      Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease

The lease liability is presented as a separate line in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

·      The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate,

·      The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used),

·      A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are presented as a separate line in the Consolidated Balance Sheet.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the "Impairment of property, plant and equipment and intangible assets excluding goodwill" policy.

Variable rents that do not depend on an index or rate are not included in the measurement the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line "Administrative expenses" in profit or loss (see Note 10).

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

Rent free concessions granted during the COVID-19 pandemic have been credited to the income statement in the year they were granted, with a resulting reduction in the lease obligation.

The Group as lessor

The Group enters into lease agreements as a lessor for some of its property included within its right-of-use assets.

Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

When the Group is an intermediate lessor, it accounts for the head lease and the sub-lease as two separate contracts. The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

Rental income from operating leases is 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 recognised on a straight-line basis over the lease term.

Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. Finance lease income is allocated to accounting periods to reflect a constant periodic rate of return on the Group's net investment outstanding in respect of the leases.

Subsequent to initial recognition, the Group regularly reviews the estimated unguaranteed residual value and applies the impairment requirements of IFRS 9, recognising an allowance for expected credit losses on the lease receivables.

Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except for credit-impaired financial assets for which interest income is calculated with reference to their amortised cost (i.e. after a deduction of the loss allowance).

When a contract includes both lease and non-lease components, the Group applies IFRS 15 to allocate the consideration under the contract to each component.

Finance income

Finance income is recognised as interest accrues using the effective interest method. The effective rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to its net carrying amount.

Finance income also includes foreign currency exchange gains on the retranslation of loans.

Taxation

The income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profits or losses for the year. Taxable profit or loss differs from net profit or loss as reported in the Consolidated Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, a deferred tax liability is not recognised if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group can control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the reporting date.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current tax and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Use of alternative performance measures (APMs)

The performance of the Group is assessed and discussed on an "adjusted" basis, using a variety of APMs, including  Adjusted Gross Profit, Adjusted Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA), Adjusted Earnings Before Interest and Tax (EBIT), Organic Revenue Growth and Net debt. The term "Adjusted" refers to the relevant measure being reported for continuing operations before "Adjusting items".

"Adjusting items" are the income statement items that are excluded from the Statutory results. Adjusting items include exceptional items, amortisation of acquired intangibles, equity-settled share-based payment charges, other long-term employee benefits, and tax related to Adjusting items. These items are defined and explained in more detail as follows:

Exceptional items

Exceptional items are items of income or expenditure that are not considered to reflect in-year operational performance of the continuing business. These are recorded in accordance with the policy set out below:

·      Transaction costs - arising on acquisitions, disposals, and debt refinancing,

·      Integration and business re-organisation - legal and professional fees and non-recurring operating costs arising from significant acquisition integration or business re-organisation activities. Non-recurring operating costs means those costs that are related to a specific integration or re-organisation event that will not be repeated because they are unique to the event and which are not expected to follow a consistent level of expense from one accounting period to the next,

·      Litigation - legal costs (which may be incurred in more than one accounting period) are treated as exceptional if they relate to specific commercial legal events that are not in the normal course of trading activity in respect of one-off or related series of cases and are not expected to follow a consistent level of expense from one accounting period to the next,

·      Impairment - arising from significant losses identified from impairment reviews,

·      Other items - other non-recurring items that are non-trading in nature.

Amortisation of acquired intangible assets

Exclusion of amortisation of acquired intangibles accounted for under IFRS 3 from the Group's results assists with the comparability of the Group's profitability with peer companies. In addition, charges for amortisation of acquired intangibles arise from the purchase consideration of separate acquisitions. These acquisitions are portfolio investment decisions that took place at different times over several years, and so the associated amortisation does not reflect current operational performance.

Equity-settled share-based payments

The Group treats share-based payments as an Adjusting item because share-based payments are a significant non-cash charge driven by a valuation model that references Gama's share price and each new share award is subject to volatility when it is measured at the grant date.  

Other long-term employee benefits

Other long-term employee benefits agreed as part of the Jet East acquisition and contractually linked to ongoing employment as well as business performance are accrued over the period in which the related services are received and are recorded as an Adjusting item.

Tax related to Adjusting items

The elements of the overall Group tax charge relating to the above Adjusting items are also treated as Adjusting. These elements of the tax charge are calculated with reference to the specific tax treatment of each individual Adjusting item, taking into account its tax deductibility, the tax jurisdiction concerned, and any previously recognised tax assets or liabilities.

The Directors believe that adjusted profit and earnings per share measures provide additional and more consistent measures of underlying performance to shareholders by removing certain trading and non-trading items that are either not closely related to the Group's operating cash flows or non-recurring in nature. These and other APMs are used by the Directors for internal performance analysis and incentive compensation arrangements for employees. The term "Adjusted" is not defined under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures. Where applicable, segmental measures are calculated in accordance with Group measures.

The Group's Consolidated Income Statement and segmental analysis separately identify trading results before Adjusting items. The Directors believe that presentation of the Group's results in this way is relevant to an understanding of the Group's financial performance, as Adjusting items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a meaningful analysis of the trading results of the Group. In determining whether an event or transaction is treated as an Adjusting item, management consider quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

Segmental reporting

An operating segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses, and whose operating results are reviewed regularly by the Chief Operating Decision Maker (the Group Chief Executive) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 or are considered by the Board to be appropriately designated as reportable segments under IFRS 8.

Goodwill

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment at annually or more frequently if there is an indication of impairment. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units ("CGUs) expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units.

Impairment of goodwill is determined by assessing the recoverable amount of the CGU to which the goodwill relates. If the recoverable amount of the CGU is less than the carrying value of the CGU to which the goodwill has been allocated, an impairment loss is recognised. The impairment loss is allocated first to reduce the carrying value of any goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying value of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Other intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Intangible assets acquired in a business combination and recognised separately from goodwill are recognised initially at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Internally generated intangible assets arising from development (or from the development phase of an internal

project) is recognised if, and only if, all of the following conditions have been demonstrated:

·      The technical feasibility of completing the intangible asset so that it will be available for use or sale,

·      The intention to complete the intangible asset and use or sell it,

·      The ability to use or sell the intangible asset,

·      How the intangible asset will generate probable future economic benefits,

·      The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset,

·      The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Costs associated with the configuration and customisation of Software as a Service arrangements are capitalised as intangible assets only where control of the software exists.

The Group has no indefinite life intangible assets.

A summary of the amortisation policies applied to the Group's other intangible assets is as follows:

·      Licences                       10% per annum, straight line method

·      Brands                          20% per annum, straight line method

·      Customer relations        10% per annum, straight line method

·      Computer software        20%-33% per annum, or life of licence if shorter, straight-line method

·      The life of each internally generated intangible asset is assessed individually.

The amortisation of internally generated software commences at the start of the year following.

The useful life of intangible assets is reviewed at each reporting date and, if expectations differ from previous estimates, the change is accounted for as a change in an accounting estimate.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Assets under construction for production, supply, or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets commences when the assets are ready for their intended use.

Depreciation is recognised to write-off the cost of assets less their residual values over their useful lives, using the straight-line method, on the following bases:

·    Helicopters                                           5% per annum and 25% residual value (on the original cost)

·    Leasehold improvements                      Life of lease and no residual value

·    Aircraft and refurbishments                   The higher of 20 years less the age of aircraft at purchase, and 5 years (20% per annum). A 25% residual value (on the original cost) is in place where engines are on an engine maintenance programme as this is considered to support a residual value

·    Furniture, fixtures and equipment           20% to 33% per annum and no residual value

·    Motor vehicles                                      20% per annum and no residual value

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Consolidated Income Statement.

Impairment of property, plant and equipment and intangible assets excluding goodwill

At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible 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). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with an indefinite useful life are tested for impairment at least annually and whenever there is an indication at the end of a reporting period that the asset may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-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. As most rates which are observable in the market, including inputs into the weighted average cost of capital formula, are on a post-tax basis, a post-tax discount rate is used to discount estimated future cash flows.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) 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 (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent 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 (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss to the extent that it eliminates part or all of the impairment loss which has been recognised for the asset in prior years.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost for each class of inventory is determined as follows:

·      Raw materials and consumables: purchase cost calculated using the first-in-first-out basis

·      Work in progress: cost of direct materials and labour

Net realisable value represents the estimated selling price in the ordinary course of business, less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. In addition, the Company provides for inventories on a sliding scale over the preceding eight years. As a result, inventory older than eight years is written off in full.

 

In line with industry practice, the Group recognises rotable stock as inventory. Rotable stock are inventory items that can be repeatedly and economically restored to their fully serviced condition, in which already-repaired equipment is exchanged for defective equipment, which in turn is repaired and kept for future exchange. These items have extensive life expectancy through repetitive overhaul process. The cost associated with refurbishing rotable stock is recognised in inventory.

Cash and cash equivalents

The Group's cash and cash equivalents in the Consolidated Balance Sheet comprise cash on hand, cash at bank, and short-term, highly liquid investments with original maturity of three months or less that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts which are repayable on demand and form an integral part of the Group's cash management.

Assets and liabilities classified as held for sale

Assets (and disposal groups) and liabilities classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding finance costs and income tax expense.

Assets, liabilities, and disposal groups are classified as held for sale if it is highly probably that their carrying value will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

When the Group is committed to a sale plan involving disposal of an investment in an associate or, a portion of an investment in an associate, the investment, or the portion of the investment in the associate, that will be disposed of is classified as held for sale when the criteria described above are met. The Group then ceases to apply the equity method in relation to the portion that is classified as held for sale. Any retained portion of an investment in an associate that has not been classified as held for sale continues to be accounted for using the equity method.

Property, plant and equipment, and intangible assets are not depreciated or amortised once classified as held
for sale.

Provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows when the effect of the time value of money is material.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.

A contingent liability is disclosed where the existence of the obligation will only be confirmed by future events, or where the amount of the obligation cannot be measured reliably.

From time to time the Group receives claims and threats of claims against it. Appropriate disclosures are made except where the Board concludes that the likelihood of any such claim being successful is remote, immaterial or where disclosure would be prejudicial. Appropriate provisions are made unless the Board concludes that the claims are not likely to have a material impact on the Group's financial position.

Financial instruments

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

Financial assets and financial liabilities are initially measured at fair value, except for trade receivables that do not have a significant financing component which are measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Trade and other receivables

Trade and other receivables are initially recognised at fair value, which is generally the same as invoiced amount, and subsequently measured at amortised cost, or their recoverable amount. Trade receivables are predominantly short-term and so the effects of the time-value of money are not considered material.

Where there are sub-participation arrangements, sub-participation proceeds are offset against the financial asset provided that the sub-participation meets all pass-through conditions, namely, there is no recourse to the transferor, and the transferor does not retain any significant risks and rewards of ownership of the financial asset.

Impairment of financial assets

The impairment model applies to the Group's financial assets that are debt instruments measured at amortised costs as well as the Group's lease receivables, contract assets and issued financial guarantee contracts. The Group applies the simplified approach for measuring expected credit losses for its trade receivables, accrued income and contracts assets as permitted by IFRS 9.

Expected credit losses are calculated based on the historical credit loss experience and adjusted for forward looking factors specific to the receivables and economic environment.

The amount of expected credit losses is updated at each reporting date.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Financial liabilities

All financial liabilities are measured subsequently at amortised cost using the effective interest method or at fair value through profit or loss.

The effective interest method is a method of calculating the amortised cost of a 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, or, where appropriate, a shorter period.

Borrowings and other financial liabilities, including loans, are initially measured at fair value, net of transaction costs.

Deferred consideration is recognised at amortised cost at acquisition date within the cost of investment, with a corresponding entry to other financial liabilities. Changes to the value of the financial liability resulting from the unwinding of discount at each subsequent reporting date are recognised in the Consolidated Income Statement.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled, or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cost based on the original award terms continues to be recognised over the original vesting period and an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification.

The financial effect of awards by the Parent Company of options over its equity shares to employees of subsidiary undertakings is recognised by the Parent Company in its individual financial statements as an increase in its investment in subsidiaries with a credit to equity equivalent to the IFRS 2 cost in subsidiary undertakings. The subsidiary, in turn, recognises the IFRS 2 cost in its income statement with a credit to equity to reflect the deemed capital contribution from the Parent Company.

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in Note 3, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make 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, including anticipated future events and market conditions, that are relevant and available when the Consolidated Financial Statements were prepared. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

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, apart from those involving estimations (which are dealt with separately below), 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 statements:

Sharjah Business Aviation Centre

In June 2017, the Group entered into a non-cancellable Build Operate & Transfer Agreement and a Concession Agreement with Sharjah Airport Authority under which it is committed to construct a Business Aviation Centre ("BAC") at Sharjah Airport. The agreement runs from June 2017 until June 2052 following the exercise of the ten-year extension option during the prior year.

As of 31 December 2021, assets under construction ($4,609,000) and right-of-use assets associated with this project ($8,329,000) were fully impaired. The impairment initially arose due to uncertainties arising in part from the COVID-19 pandemic, and subsequently due to the uncertainty about securing funding to continue the project.

During the current year, additional expenditure of $2,103,000 on the project has also been impaired. This is based on the Directors' judgement that whilst the Group is in advanced discussions with investors regarding the funding of this project, the Board considers that it would be inappropriate to reverse impairments relating to the BAC project until the profits associated with this project can be forecast with greater certainty.

Should the full funding for the project be contractually secured, then the Directors currently anticipate that some or all these impairments will be reversed.

Paycheck Protection Program qualifying expenditure

In 2020, the Group received funds under the Paycheck Protection Program ("PPP") in the form of a loan arrangement from Citibank guaranteed by the US Government, which was specifically intended to help businesses maintain their US workforce during the COVID-19 pandemic. On 12 May 2020, funds of $5,753,000 were received and initially recognised as borrowings in current liabilities. Subsequently in 2020, the Group considered $4,753,000 of these funds to be eligible for forgiveness within the terms of the PPP and were therefore recognised as income against the related expenses in the income statement, reducing the amount of potentially repayable borrowings to $1,000,000 as of 31 December 2020.

On 19 May 2022, the Group received confirmation that the full balance of the original loan, including the $1,000,000, was to be forgiven and was therefore no longer repayable. The balance of $1,000,000 has been derecognised during the year with the associated credit being recognised against employment costs within cost of sales and administrative expenses in the Consolidated Income Statement, consistent with the treatment adopted for other such pandemic-related support.

Assessment of lease term under sale and leaseback transaction

On 27 September 2022, the Group completed the sale and leaseback of its helicopter assets. Under the terms of this arrangement the Group was obligated to deliver three helicopters in exchange for   consideration from the counterparty. Having reviewed the terms of this agreement, management has concluded that they meet to five steps revenue recognition requirements defined by IFRS15. Accordingly, these transactions have been recognised as sales in the financial statements for the year ended 31 December 2022.

Following the sale of the helicopters the Company entered into a lease agreement with the same counterparty. These lease agreements contain a First Extension Option and a Second Extension Option, whereby the Group can extend the term of the lease by 84 months and 36 months, respectively.

In assessing whether the Group is reasonably certain, at the lease commencement date, to exercise an option to extend the lease, the Group has considered the following factors and circumstances that create an economic incentive for the Group to exercise the option to extend the lease:

(a)  contractual terms and conditions for the optional periods compared with market rates, including:

(i)    the amount of payments for the lease in the optional period;

(ii)    the amount of any variable payments for the lease or other contingent payments;

(iii)   the terms and conditions of the options that are exercisable after the initial optional periods;

(b)  significant leasehold improvements undertaken (or expected to be undertaken) over the term of the contract that are expected to have significant economic benefit for the Group when the option to extend the lease becomes exercisable;

(c)  costs relating to the termination of the lease, including the costs of identifying another underlying asset suitable for the Group's needs and the costs associated with returning the helicopters in a contractually specified condition or to a contractually specified location;

(d)  the importance of the helicopters to the Group's operations; and

(e)  conditionality associated with exercising the option and the likelihood that those conditions will exist.

The term "reasonably certain" is not defined in IFRS, but it is considered a high probability (i.e., almost certain).

Having considered the above factors and circumstances, the Directors have concluded that, at the lease commencement date, it is not reasonably certain that the Group will exercise either the First Extension Option or the Second Extension Option to extend the lease. Consequently, the initial lease term has been assessed as 28 months.

Classification of items of cost or income as exceptional items

Exceptional items are items of income or expenditure that are not considered to reflect in-year operational performance of the continuing business. Classification of costs and income as exceptional items requires judgement as the Group's view of what qualifies as an exceptional item may differ from similar judgements made by others. Exceptional items are treated as Adjusting items to enable more relevant and reliable financial information to be presented. Note 14 describes the exceptional items that have been recorded in the Consolidated Income Statement.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period, that may have a significant risk of causing a materially different outcome to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment of property, plant and equipment and intangible assets excluding goodwill

Where there are indicators of impairment, or on an annual basis, management performs an impairment test. Recoverable amounts for a CGU is the higher of value-in-use and fair value less cost of disposal.

Value-in-use is calculated using a discounted cash flow model from cash flow projections based on the Group's 2023 updated Strategic Plan approved by the Board of Directors in January 2023.

In measuring value-in-use, management have:

·      Based cash flow projections on reasonable and supportable assumptions that represent management's best estimate of the range of economic conditions that will exist over the remaining useful life of goodwill, intangible assets, property, plant and equipment, and right-of-use assets

·      Based cash flow projections on the Group's 2023 updated Strategic Plan approved by the Board of Directors in January 2023. These forecasts cover a period of four years.

·      Estimated cash flow projections beyond the period the period of four years by extrapolating the projections based on the forecasts using an estimate of long-term growth rates for subsequent years. This rate reflects the average of the long‑term growth rate for the countries in which the CGU operates.

In estimating cash flow projections for each CGU, management have used the "single most likely cash flow" approach to estimate the cash flows associated with a range of economic conditions that may exist over the next four years. The "single most likely cash flow" approach differs from the "expected cash flow" approach in that it does not use all expectations about possible cash flows.

In estimating the single most likely cash flow for each CGU, management have used the cash flow forecasts contained in the Group's four-year plan approved by the Board of Directors as the base case scenario.

Several other reasonably plausible scenarios have been considered but have not been adjusted for. Instead, the impact of these scenarios has been evaluated through the sensitivity analysis.

Estimated future cash flows reflect assumptions that are consistent with the way the discount rate is determined. Consequently, estimates of future cash flows include income tax receipts or payments as the discount rate is determined on a post‑tax basis.

The discount rate for each CGU is estimated from the Group's weighted average cost of capital using the Capital Asset Pricing Model, after considering the risk-free rate, beta, equity market risk premium, country risk premium, small stock premium, pre-tax cost of debt, tax rates, and the debt to capital ratio applicable to the CGU.

The terminal value for each CGU has been estimated by applying the Gordon Growth formula to the forecasted cash flows using the respective discount rate and long-term growth rate.

The recoverable amount is most sensitive to the discount rate, the expected future cash inflows, and the growth rate used for extrapolation purposes.

The carrying amount of each CGU is determined on a basis consistent with the way the recoverable amount of the CGU is determined. Consequently, the carrying amount of each CGU includes goodwill allocated to each CGU at inception, other intangible assets (including deferred tax related to the uplift to fair value recognised on acquisition), property, plant and equipment, right-of-use assets, working capital balances, corporate income taxes, obligations under leases, and corporate assets allocated to each CGU.

The key assumptions and estimates used to determine the recoverable amount for different CGUs, together with sensitivities, are disclosed in Note 20.

Valuation of inventories

In measuring the net realisable value of inventory, the Group uses reasonable and supportable forward-looking information, which is based on assumptions regarding the change in customer demand or obsolescence of certain inventory lines.

Inventory valuation is sensitive to management's assessment of obsolescence of certain line items. The significant estimation uncertainty arises from the wide range and nature of inventory held, each with different demand and opportunity to utilise. Whilst no specific inventory line has material estimation uncertainty in its valuation, there is risk across all lines in aggregation.

An analysis of the inventories and inventory obsolescence allowance is provided in Note 24.

Calculation of expected credit loss allowance

When measuring expected credit loss, the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other.

Probability of default constitutes a key input in measuring expected credit loss. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data including experience of recovering overdue amounts, assumptions and expectations of future conditions.

An analysis of the amounts receivable for the sale of services, together with sensitivities, is provided in Note 25.

Other long-term employee benefits

The acquisition of Jet East included a long-term incentive plan accounted for under IAS 19 with the value of payments linked to the continuing employment of executives of Jet East as well as business performance and the level of indebtedness of the combined Business Aviation MRO US business at that time.

The long-term incentive plan is accounted for as remuneration for post-acquisition services and is not part of the business combination. The period over which the services are received is three years.

Management has undertaken a review of anticipated future performance of the Business Aviation MRO US business and based on that review has estimated the charge for the year ended 2022 and the associated provision at the balance sheet date.

An analysis of other long-term employee benefits, together with sensitivities, is provided in Note 27.

Taxation

Recoverability of the Group's deferred tax assets, including timing, applicable corporate income tax rates and availability of future taxable profits against which deferred tax assets could be utilised, is the most critical estimate which may have a material impact on the financial statements.

The estimation uncertainty arises because the Group operates in a complex national and international tax environment. The areas of uncertainty can include, inter alia, transfer pricing arrangements relating to the Group's operating activities and the deductibility of management recharges.

Further uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income available against which deferred tax assets could be utilised. The carrying value of tax assets and liabilities could therefore be impacted by changes in tax legislation and availability of future taxable profits for which the impact can be significant.

5. Revenue

An analysis of the Group's revenue is as follows:

	Year ended 2022 $'000	Year ended 2021 $'000
Sale of business aviation services	285,017	232,159
Branding fees	625	3,750
Statutory revenue	285,642	235,909

 

	Year ended 2022	Year ended 2021
	$'000	$'000
BA MRO US	81,423	78,904
BA excluding MRO US	82,855	61,536
Special Mission	3,743	9,163
Revenue recognised at a point in time	168,021	149,603
BA MRO US	36,826	346
BA excluding MRO US	23,197	29,360
Special Mission	51,759	47,553
T&O1	5,214	5,297
Branding fee	625	3,750
Revenue recognised over time	117,621	86,306
Statutory revenue	285,642	235,909

1.     Prior year T&O revenue has been reclassified as recognised over time following review of nature of services provided.

Revenue recognised over time relates to the following operating divisions:

·      Special Mission has contract revenue for the maintenance of aircraft and provision of air ambulance services of $87,465,000 to be earned over the next four years, with $50,636,000 (2021: $47,553,000) of revenue having been recognised in the year

·      Business Aviation MRO US earned revenue of $100,647,000 during the year in relation to maintenance contracts

·      Within Technology & Outsourcing, myairops^® recognised contract revenue of $1,722,000 (2021: $1,414,000) during the year in relation to the provision of software services, with $798,000 due over the next three years

Revenue totalling $80,091,000 (2021: $48,760,000), which is greater than 10% of Group revenue, has been recognised in 2022 in respect of a single customer and is included within the Business Aviation MRO US reporting segment.  Revenue received at a point in time was $29,909,000 and revenue received over time was $255,733,000.

The Group has not separately disclosed revenue by destination country because this is not tracked internally and because management track revenue by SBU.

6. Other operating income

	Year ended 2022 $'000	Year ended 2021 $'000
Foreign currency translation on trading monetary items	3,086	−
Gain on disposal of subsidiary (Note 14)	126	−
Gain on disposal of property, plant and equipment (Note 21)	1,741	−
Profit on derecognition of leases (Note 30)	−	1,626
Total other operating income	4,953	1,626

 

7. Earnings before interest and taxation

Earnings before interest and taxation has been arrived at after charging/(crediting):

	Year ended 2022 $'000	Year ended 2021 $'000
		1
Amortisation of intangibles in administrative expenses (Note 19)	3,396	3,355
Depreciation of property, plant and equipment in administrative expenses1 (Note 21)	3,171	3,245
Depreciation of property, plant and equipment in cost of sales1 (Note 21)	2,699	3,196
Depreciation of right-of-use assets in administrative expenses (Note 22)	666	1,017
Depreciation of right-of-use assets in cost of sales (Note 22)	5,335	6,507
Net foreign exchange gain on trading monetary items	(3,086)	(407)
(Gain)/loss on disposal of property, plant and equipment (Note 21)	(1,741)	6
Impairment of goodwill (Note 18)	787	−
Impairment of property, plant and equipment (Note 21)	2,640	−
Impairment of right-of-use assets (Note 22)	−	1,911
Reversal of impairment of equity accounted investments (Note 23)	−	(1,491)
Cost of inventories recognised as an expense	19,306	16,071
Change in provision for inventory obsolescence	(503)	(404)
Staff costs (Note 8)	110,324	102,256
Impairment losses recognised on trade receivables (Note 25)	278	42
Recovery of previously impaired trade receivables (Note 25)	(53)	(63)
Auditors' remuneration (Note 9)	1,102	1,598

¹     Depreciation charges of $3,196,000 in the prior year relating to aircraft and refurbishment, and leasehold property improvements have been reclassified from administrative expenses to cost of sales to conform with the current year presentation.