air partner annual report and accounts onsulting c & training division delivered 10% of group...
TRANSCRIPT
Performance highlights
Acquisitions support long-term growth plans
• Underlyingprofitbeforetaxof£5.1m,anincreaseof17.2%
• CommercialJetsperformedstronglyinEuropeandUS
• RecordJetCardperformancewithutilisationup41%
• Consulting&Trainingdivisiondelivered10%ofGroupunderlyingprofitbeforetax
• Clearlong-termstrategyinplace
Gross transaction value
2.4%2017: £215.8m2016: £210.8m
Gross profit
16.3%2017: £31.7m2016: £27.3m
Underlying profit before tax
17.2%2017: £5.1m2016: £4.3m
Statutory profit before tax
38.6%2017: £4.3m2016: £3.1m
Underlying basic EPS
10.2%2017: 6.5p2016: 5.9p
Basic EPS
45.9%2017: 5.4p2016: 3.7p
Final dividend
6.0%2017: 3.6p2016: 3.4p
Total dividend
7.2%2017: 5.2p2016: 4.9p
Contents
Strategic report
01 Overview
04 Chairman’sstatement
05 Explaining our business
06 Groupataglance
08 Marketoverview
10 Businessmodelandstrategy
12 People
14 Technology
15 Expandingourservices
18 Principalrisksanduncertainties
23 2017 performance
24 ChiefExecutive’sreview
28 Financialreview
30 Keyperformanceindicators
32 Divisionalreviews
32 CommercialJets
34 PrivateJets
36 Freight
38 Consulting&Training
Corporate governance
42 Boardofdirectorsandseniormanagement
44 Chairman’sintroductiontogovernance
45 Corporategovernancereport
50 NominationCommitteereport
51 AuditandRiskCommitteereport
54 Directors’remunerationreport
66 Directors’report
69 Directors’responsibilitystatement
Financial statements
72 Independentauditor’sreport
80 Financialstatements
86 Notestothefinancialstatements
Strategic reportCorporate governance
Financial statements
1Air Partner plc | Annual Report and Accounts 2017
Wehaveexpandedbeyondourcorebusinessofbrokeringcharteredflightsforprivateandcommercialjetsandfreight.WehaveincorporatedaircraftremarketingandsafetyconsultancyandtrainingthroughouracquisitionsofCabotAviationandBainesSimmons,andhaverecentlyaddedthedynamicskillsofClockworkResearchwithitsinnovativeapproachtofatiguemanagement.TheGroupremainscommittedtoexpandingtherangeofservicesweoffertoourcustomersasweaimtofulfilourlong-termaims.Alongsidethis,wearereconfiguringandreinvigoratingourbrandaswellasinvestinginourinfrastructuretofacilitatethischange.
Attheheartofthisarepeople:ourcustomersandourstaff.Wecontinuetoattractandretainthebestpeople–thosecapableof,anddedicatedto,providingourcustomerswiththehighestlevelsofknowledge,expertiseandcustomerservice.Thiscreatesvaluebothforourshareholdersandourstakeholdersandgivespurposeanddistinctivenesstoourbrand.
Movinginto2017andbeyond,wearecreatingtheplatformsandtheinfrastructurethatareleadingtheGroupsteadilytowardsgreatervisibility,higherearningscapacityandtheabilitytocreatelong-termvalue.
AirPartnerisonajourney:anexcitingjourneyoftransformationtobecomeaworld-classaviationservicesgroup.Somethingtobereckonedwithintheworldofaviation.
Overview
2 Air Partner plc |AnnualReportandAccounts2017
Overview
Transforming the skies
Seldom,sinceourfoundationin1961,hastherebeenayearwithmorepoliticalupheavalandensuingeconomicuncertaintythan2016.Buttheskiesareincreasinglybusy,andourbalanceofservicesmeanswehavemuchtooffer.
2016certainlyqualifiesforthedescription‘interestingtimes’.Thechallengeswehaveallfacedthisyeararesufficientlywellknownnottohavetoitemisethemhere.YettheGrouphassteadfastlyprogressedinsuch‘interestingtimes’andissettocontinuetodoso.
AirPartner,withourbalanceofaircraftcharterandconsultingandtrainingservices,isinmanywaysconfiguredtocounter
theupsanddownsofworldevents.Economicuncertaintymayposechallengestoourstandardbrokingbusiness,butwecanbalancethatbymeetingout-of-the-ordinarycommercialrequirements,helpingsupportdisasterreliefand,ofcourse,offeringthesafetymanagementserviceswithoutwhichaeroplanescouldnotfly.Ourfocusonofferingcustomersarangeofservices,allovertheworld,ishelpingensurethatingoodtimesandbad,AirPartnerisindemand.
“�We’ve�had�a�great�year�–�being�part�of�a�plc�gives�us�greater�credibility.”��TONY WHITTY, Managing Director, Air Partner Remarketing (formerly Cabot Aviation)
“�2016�has�been�a�year�of�delivering�a�profitable�first�full�year�with�the�Group.”��JUSTIN SCARBOROUGH, Interim Managing Director, Baines Simmons
“�Most�of�our�people’s�raison�d’être�is�to�save�lives.”���BOB SIMMONS, Founder, Baines Simmons
“�We’re�developing�new�ways�of�delivering�excellent�experience�for�our�customers�–�and�repositioning�our�brand�to�highlight�our�strengths.”���JULIA TIMMS, Group Marketing Director
“�We’re�succeeding�in�maintaining�our�unique�culture�–�always�a�challenge�when�you’re�integrating�new�businesses,�but�essential�for�our�long-term�success.”��RACHEL THRIPP, Group Head of Human Resources
“�We�have�really�strengthened�the�IT�infrastructure�of�Air�Partner�this�year.”���LEE PYLE, Group Head of Technology
Strategic reportCorporate governance
Financial statements
3Air Partner plc | Annual Report and Accounts 2017 3Air Partner plc |AnnualReportandAccounts2017
“�It’s�been�a�good�year,�and�the�strength�of�the�financial�contribution�from�our�newly�acquired�businesses�is�proving�our�strategy.”���MARK BRIFFA, Chief Executive Officer
“�A�highlight�of�2016,�was�flying�the�Hillary�Clinton�campaign�and�building�our�presence�in�the�US.”���RICHARD SMITH, Head of Product, Air Partner Broking
“�Our�broking�business�has�done�really�well�in�a�challenging�market�and�against�a�challenging�political�backdrop.”���NEIL MORRIS, Chief Financial Officer
4 Air Partner plc | Annual Report and Accounts 2017
Overview
Chairman’s statement
TheGrouphasaclearlong-termstrategytobecomeaworld-classglobalaviationservicesgroup.Greatprogresshasbeenmadesincewebeganthistransformationin2014,andtheperiodunderreviewhasbeennoexception.Indeed,ithasperhapsbeenthemostactiveandsuccessfulperiodwehaveexperiencedduringmy12yearsatAirPartner.
Iampleasedtoreportastrongperformancefortheyearended31January2017.Grossprofitroseby16.3%to£31.7m,underlyingprofitbeforetaxincreasedby17.2%to£5.1mandreportedprofitbeforetaxby38.6%to£4.3m.
AsIhavementionedinpriorreports,in2014wetookathoughtfulandcriticallookatourindustrytoevaluatenotonlyourownmarketposition,butthechallengesandopportunitiesthatlieahead.Aspartofthatprocess,weundertookanextensiveprogrammeofengagementwithourstaffandcustomerstounderstandnotonlytheirneeds,buttheirexpectationsofus.Nostonewasleftunturnedandwelookedfarintothefuturetoassesswhatwewantedtobe,wherewewantedtobe,andjustasimportantly,wherewedidnotwanttobe.
Weformedalong-termstrategythatplacesthecustomerfirstandhasthepowertotransformourbusinessmodel,reducingvolatilityandimprovingtheoverallqualityofourearnings.Thisyear,theresultsofthislong-termstrategyarebeginningtoemerge.
Maintaining a progressive dividendWeareproposingafinaldividendof3.6p,takingthefullyeardividendto5.2p,anincreaseof7.2%andequivalentto1.3timesdividendcover.Ourpolicyistotargetcoverbetween1.5and2.0timesunderlyingearningspershare.Coverthisyearisbelowthatrange,duetoa£0.4mprioryear,one-offadjustmentfortax.SubjecttoapprovalattheAGMon28June2017,weexpecttopaythefinaldividendon5Julytothoseshareholdersontheregisteratcloseofbusinesson9June.
Board changesDuringtheperiod,wecompletedthealignmentofourBoardtoreflectthedirectionofourlong-termstrategy.Accordingly,wewelcomedAmandaWillsCBE,ShaunSmithandRichardJacksontotheBoard,effective20April,1Mayand8September2016respectively.Havingoverseenthesechanges,weannouncedon2February2017thatIwouldbestandingdownasChairmanatthenextAGMon28June2017after12yearsasanon-executivedirector.Iamdelightedthat,followingaformalselectionprocess,PeterSaunders,ourcurrentSeniorIndependentDirector,willreplacemeasChairmaneffectivefromthatdate,subjecttohisre-electionattheAGM.PeterhasplayedanimportantroleinourtransformationandItrustwillcontinuetobothsupportandchallengetheExecutiveteamintheyearsahead.
Thank youAirPartnerisauniquecompany.Ourplcstatusisakeystrength:itofferscustomers,employeesandshareholders–indeed,allourstakeholders–reassurancethatweoperatetothehigheststandardsofgovernanceandethics,andaretransparentinallourfinancesandbusinessdealings.OverthepastfiveyearssinceIbecameChairman,ithasbeenmyprivilegetowitnessthedevelopmentofAirPartnerfromapurebrokingbusiness,tothevibrant,diverseaviationservicescompanyitistoday.Peopleareattheheartofourbusiness,anditremainsformetothankmycolleaguesontheBoardandacrossthewholeGroupfortheirsupportandhardwork,notonlyindeliveringagreatsetofresultsforourshareholdersthisyear,butalsoincreatingastrongplatformforgrowth.Iwishyoualleverysuccessinto2017andbeyond.
Richard Everitt Chairman
Strategic reportCorporate governance
Financial statements
5Air Partner plc |AnnualReportandAccounts2017
Explainingour business
6 Air Partner plc |AnnualReportandAccounts2017
Explaining our business
Group at a glance
AirPartnerisaglobalaviationcharterspecialistandanexpertinsafetyconsultingandtraining.Ontheaircraftcharterside,clientsincludecorporatecustomers(suchassportsteamsandtouroperators),governmentsandhighnetworthindividuals,whorequireourskillsandexpertisetosolveoftencomplexaviationrequirements.
ForourConsulting&Trainingbusiness,clientsincludeairlines,defenceorganisationsandaviationauthoritiesglobally.
257 aviationprofessionals
24/7 service
20 countries
55 yearsofavaitionexperience
4 continents
Onlypubliclylistedaircharterbrokerandsafetyconsultancy
Strategic reportCorporate governance
Financial statements
7Air Partner plc | Annual Report and Accounts 2017
B ROK I NG 82%
CON S U LTI N G & TRAI N I NG 18%
COMMERCIAL JETS
PRIVATE JETSFR
EIGH
T
CLOCKW
ORK
RES
EAR
CH
57%
BA
INE
S S
IMM
ON
S100%
4%
39%
Broking
Commercial Jets 57%Aircraftcharter(20-500passengers)forgovernments,corporates,sportsandentertainmentteams,industrial,manufacturingcustomersandtouroperators.AlsoincludesAirPartnerRemarketingandshort-termaircraftleasingservices.
Private Jets 39%Smallaircraftandjetscharter(upto19passengers)forcorporates,highnetworthindividualsandgovernments,forbothbusinessandleisure.BespokeserviceandprepaidJetCardproductforaccesstoprivatejets.
Freight 4%Cargotransportaircraftcharterandpart-charterfromLearjetstothegiantAntonov225forregularandbespokerequirements,egemergencyaiddrops,time-criticaldoor-to-doorfreightdeliveryandon-boardcouriers.
Consulting & Training
Baines Simmons 100%World-leadingaviationsafetyconsultingandtrainingservicesinregulation,complianceandsafetymanagementforcivilanddefenceaviationorganisations.
Clockwork Research(acquired December 2016)Fatigueriskmanagementconsultingservicesprincipallyforaviationcustomers,aswellasothersafety-criticaloperatingenvironments,suchastheoilandgasandminingsectors.
Percentagesrepresentthatcompany’sorproduct’sproportionofthedivision’soverallgrossproft.ClockworkResearchwasacquiredjustbeforetheyearend,soitscontributionwasnegligible.
8 Air Partner plc | Annual Report and Accounts 2017
Explaining our business
Market overview
Wehavebeeninaviationservicesformorethan55years.Themarket–bothaviationandthewidermarket–haschangedsignificantlyduringthattime.WithahistoryinaircraftbrokingcentredontheUK,ourvisionistobecomeaworld-classaviationservicesgroup.
A steadily growing global aviation marketIntheshortterm,theglobalaviationmarketcanbeadverselyaffectedbygeo-politicalissuesor‘actsofGod’,butthelonger-termtrendispositive.TheInternationalAirTransportAssociation(IATA)predictspassengertraffictoincreaseto7.2billionpassengersin2035,aneardoublingofthe3.8billionairtravellersin20161.
Whilethisassumptionisbasedontradeliberalisationgatheringpace,evenamorepessimisticassumptionbasedonincreasedprotectionismpredicts5.8billionpassengersin2035.Themessageisclear:theaviationmarketisgrowingandasitdoesso,thedemandforaviationserviceswillalsoincrease.Wearethereforeaddingnewservicelinestocomplementourcorebrokingoffering,strengtheningourcustomerpropositionandextendingourglobalreach.
Our unique position in the marketInanindustrywhereassetownershipiscommonplace,AirPartner’sstrategyisdifferent.Wedon’townaircraft–rather,ourmainassetsareourpeople,brandsandreputation(seeourbusinessmodelonpages10-11),andweaimtogrowonthisbasis.
Meetingourclients’needsisattheheartofeverythingwedo.Byofferingmoreservicesinthetwobroadcategoriesofbrokingandconsulting/training,notonlydoweincreasethechanceofretainingourcustomers,wehavetheopportunitytocross-sellservicestostrengthenourrelationshipsfurther.
EnvironmentOurowndirectcarbonfootprintisnegligible,howeverweareinvolvedinanindustrythatmakesasmallbutsignificantcontributiontoman-madecarbondioxideemissions.Accordingly,wehaveinvestigatedtheenvironmentalperformanceoftheaircrafttypesweofferand,uniquelyamongourcompetitors,wesharethisdatawithourcustomers,rightfromthestart,sotheycanfactorthisintotheirchoices.Unlikeotherproviderswhomay,oroftenmaynot,offerjustastandardcarbonoffsetschemebasedontheirownlimitedfleet(whichcouldbeill-suitedtothemissioninanycase),AirPartneroffersatotallybespokesolutioneverytime.Thenweoffertoneutralisethecalculatedimpactoftheseemissions.
The market for brokingAtAirPartner,brokingencompassescommercialjets,privatejets,freight,emergencyplanning(ourbespokedisasterresponseservice)andaircraftremarketing.Theglobalairchartermarketishighlyfragmented,withlowbarrierstoentryandlittleornoregulation.Otherthandirectcompetitors,therearealsocompetitorsofferingsimilarserviceswithadifferentbusinessmodel,particularlyintheprivatejetsector(egfractionalownership,charteroftheirownaircraftorcharterofaircraftundertheirmanagement).Othercompetitorsaimtousetechnologytocreateaseamlessend-to-endbookingprocess,seeingthisasanadvantage.
02
03
04
05
06
07
08
09
10
11
bn
2015
Optimistic
2020 2025 2030 2035
Base case
Pessimistic
Passenger traffic growth scenarios (Paxbillion)
1.Source:IATA.
Strategic reportCorporate governance
Financial statements
9Air Partner plc | Annual Report and Accounts 2017
Weaimtodifferentiateourselvesasfollows:• service:weofferourcustomersanunrivalledservice,
whetherthisbeaproductthatprovidesbetterservicelevels,suchasJetCard,oracompleteservicethatourcompetitorscannotoffer,suchasacharterservicewithasafetyauditofthecarrier
• reputation:inamarketwherecompetitorscomeandgo,our55-yearheritagedemonstratesstability,safety,qualityandfinancialperformance
• our people:inourexperience,technologycannotreplacepeople.Weinvestintechnologytoimprovethecustomerexperienceanddriveefficiencies,butthekeytooursuccessisagenuine24/7/365servicebyouraviationexpertsforcustomerswhowantabespoke,personalservice.
Materialgeopoliticaleventsand/ornaturaldisasterscancauseshort-termdownturnsindemandforaircraftcharter(forexample,9/11ortheEyjafjallajökullvolcaniceruption),althoughourEmergencyPlanningDivisionisoftencalledonatsuchtimes,forexample,providingaidtoadisasterzone,orarrangingtrooptransfersorevacuationsintimesofwar.Moreover,ourvisiontosupplyagreaterrangeofservicesacrossabroadergeographicareashouldhelpmitigatelocalchallenges.
The market for consulting and trainingThepaceofgrowthoftheaviationindustry,busierskies,morecompetition,demandsforhigherfleetutilisationandgreateroperationalcapabilityareoccurringagainstabackdropofzerotoleranceofaccidents.Thisisincreasingpressureonsafetyresultsandmanagement.Furthermore,theaviationsafetyworldhasevolvedoverthepastfiveyearsfromonewhereitseekstounderstandhowsafetymanagementsystems(SMS)worktosecuringeffectiveperformance.
Unlikebroking,consultingandtrainingservicesexistinahighlyregulatedenvironment,andoneinwhichregulationsareconstantlychanging.Indeed,itisthischangeandconstantdesiretoimprovestandardsthatunderpinsthebusinessmodelsofbothBainesSimmonsandClockworkResearch(seepage10).
Civil aviationIn2013,globalregulatorsbegantomovetowardsperformance-basedregulation(PBR).ThisisnowstandardpracticefortheInternationalCivilAviationOrganization(ICAO)andtheEuropeanAviationSafetyAgency(EASA).BymovingtoaPBRapproach,regulatorsareaimingtoembedarisk-basedapproachtosafety,whetherthisbeSMSorfatigueriskmanagement.ThismoveisprovidingopportunitiesforbothBainesSimmonsandClockworkResearchtotaketheirservicesbeyondtheUKandEuropetoAsia,AustraliaandNorthAmerica.
DefenceInthedefencemarket,bodiessuchastheEuropeanDefenceAgency(EDA)havecommittedtotheprinciplesofharmonisationofairworthinessrequirements.Throughitslong-termrelationshipwithvariousmilitaryauthoritiesaroundtheworld,BainesSimmonsiswellpositionedtobenefitfromtheopportunitiesthatwillarise.
Forecast of numbers and value of aircraft in operation2
Aeroplanes in service2015 to 2035
Demand by size2016 to2035
2015 2035New
aeroplanesValue($bn)
Largewidebody 740 700 530 220Mediumwidebody 1,640 3,690 3,470 1,250Smallwidebody 2,660 6,060 5,100 1,350Singleaisle 14,870 32,280 28,140 3,000Regionaljets 2,600 2,510 2,380 110Total 22,510 45,240 39,620 5,930
2.Source:Boeing.
10 Air Partner plc | Annual Report and Accounts 2017
Explaining our business
Business model and strategy
Tocreatelong-term,sustainablevalueforshareholders,wearedevelopingatotalofferforcustomersintheairchartermarketwhowillchooseusbecauseweprovidethebestinquality,safetyandservice.Growthbyacquisitioniscoretoourstrategy.
What we offer Our customers
Aircraft charterAtthecoreofourbusinessmodel,providingtailoredservicesformanyyears,leveragingourrelationshipswiththemajorityofaircraftoperatorsandenablingustoselecttheaircraftappropriateforourcustomers’needs.Profitislargelygeneratedthroughcommissions,althoughsomefeeincomeisgeneratedthroughtheprovisionofprofessionalservicesor,inthecaseofourEmergencyPlanningDivision,subscriptions.
Charter customersCorporatecustomers(includingsportsteamsandtouroperators),governments,andhighnetworthindividuals,whorequireourskillsandexpertisetosolveoftencomplexaviationrequirements.Projectsrangefromone-offcharterstomuchlongerormorecomplicatedprojectsspanningmanymonthsormultiplerotations.
Aircraft remarketingAir Partner Remarketing(formerlyCabotAviation)providescomprehensiveremarketingprogrammesacrosstheglobeforalltypesofcommercialandcorporateaircraft.Projectsinvolvesellingorleasingaircraft;sellingaircraftwithleasesattachedorarrangingsaleandleasebacks;acquisitionmandatesforlessorsandairlines;wetleasing;consultancyandaircrafttechnicalservices.Profitislargelygeneratedthroughcommissionsattachedtomandatesaswellasthroughretainers.
Remarketing customersAwiderangeofinternationalcustomersdrawnfromtheairlineandfinancialservicessectors,includingbanks,lessorsandliquidators.
Consulting and trainingBaines Simmonsisaworldleaderinaviationsafetyconsulting,specialisinginaviationregulation,complianceandsafetymanagementandpartnering.Throughourbespokeconsultancyprogrammesandpracticaltrainingservices,wehelptobridgegapsofknowledge,competence,skillsandunderstandingbetweenregulatedorganisationsandtheiremployees,andregulatoryauthoritiesandtheirinspectors.OuroutsourcingoperationsaremostlycoveredbytheserviceweprovidetosupporttheIsleofManAircraftRegistry.
Clockwork ResearchacquiredinDecember2016,isaworld-leadingfatigueriskmanagementconsultancythatdeliversinnovativesolutionsforclientsacrossvarioussectorsoftheaviationindustry.ClockworkResearch’sapproachisbasedonascientificunderstandingoffatigueonsafety-criticaloperations.
Consulting and training customersCorecustomersincludedefence,commercialairlines,privatejetoperatorsandancillaryserviceproviderstotheaviationindustry(forexampleOEMs).
Strategic priorities > Readmoreonpage30
• Optimise our core Thissummarisesouraimtoachievemorewiththeresourceswecurrentlyemploy,whetherthisbetoincreaseefficienciesatanoperatinglevelortogrowgrossprofitthroughour‘CustomerFirst’initiative,asdescribedtotheright.
• Enhance and extend our offer AirPartner’saimistobecomeaglobalaviationservicesprovider.Tomitigatetheinherentrisksinourcorebrokingbusiness,wethereforehaveembarkedonastrategyofincreasingtherangeofservicestheGroupprovides.
• Creating value by putting our customers first During2015,webeganourCustomerFirstprogramme.Ultimately,itwillenableustoprovideanunrivalledcustomerexperience,enhancingourbrandanddifferentiatingus.Ourbrand,andpeoplestrategiesaimtoensurethatCustomerFirstisdeeplyembeddedineverythingwedo,whileourtechnologystrategywillprovidetheinfrastructuretorolloutthisapproachquicklytonewservices.
Strategic reportCorporate governance
Financial statements
11Air Partner plc | Annual Report and Accounts 2017
What differentiates us
Our peopleWhicheverpartofthebusinesstheyworkin,ourpeoplearetheoneswhodeliverthehigh-qualityexperienceourcustomersexpect.Sourcing,retainingandmotivatingourpeopleisthereforecriticaltomaintainingtheservicelevelsourcustomersdemand.Ourcommitmenttotraining,remunerationandclarityofrolesisessentialforoursuccess.
Our brandTheglobalaviationservicesmarketisbroad,fragmentedandcompetitive.Differentiatingourbrandsisthereforeessentialforourcurrentandfuturesuccess.Maintainingandenhancingbrandidentityrequiresaconsistentlyexcellentcustomerexperience–and,inthelongrun,weaimtobuildanunrivalledpropositionbyofferingthefullrangeofaviationservicesourcustomerswant.
Our technologyTechnologyiscoretoprovidinganenhancedcustomerexperienceandbuildingaglobalaviationservicesgroup.TofulfilourCustomerFirstethos,wemustinvestininfrastructurethatenablesustounderstandourcustomersandcross-sellourservices.And,asweincreasethenumberofservicesweprovide,thatinfrastructuremustbescalabletomanagecosts.
Our capital resourcesThestrengthofourbalancesheetdifferentiatesAirPartnerfromourcompetitors.Ithelpsussupportandretainkeycustomersbyprovidingcreditterms,whileenablingustoofferadditionalaviationservicesthroughjudiciousacquisitions.
Our plc statusAirPartneristheonlylistedcompanyinitssectorandthis,coupledwiththefactthebusinesshasexistedforover55years,providesourcustomerswithaleveloffinancialtransparencyandassurancethatourcompetitorscannotoffer.
>Readmoreonpage12 >Readmoreonpage14 >Readmoreonpage28
• Developing and retaining our people Teamworkisthecornerstoneofourbusiness.Weinvestinourpeopleandgivethemanenvironmentinwhichtheyfeelincluded,valued,empoweredandabletoreachtheirfullpotential.Havingateamofskilledandmotivatedbrokers,trainersandconsultantswiththeexperiencetodelivertheservicerequiredbyCustomerFirstiscriticaltoourongoingsuccess.Werecognisetheirdedicationbylinkingremunerationtoperformanceandactivelyencouragingpersonaldevelopmentbyofferingtrainingtobuildcapabilitiesandencouragetherightbehaviours.
• Maintain and enhance our brand identityWithatrackrecordofover55years,AirPartneriswell-knownintheaviationindustry.OurtransformationaljourneyfromabrokingbusinesstoanaviationservicesgrouphasmeanttheGrouphasextendedbeyondtheoriginalAirPartnerbrand.BainesSimmonsandClockworkResearcharebothwellrespectedbusinessesintheirownsector,andcollectivelyourbrandisstrongerthroughtheadditionofthesebusinesses.
12 Air Partner plc | Annual Report and Accounts 2017
Explaining our business: business model and strategy continued
People: the fuel of our business
Wearearelationship-basedbusinessandoursuccessdependsonourpeople.Wehavealwaysbeenaleanorganisationabletoadaptquicklytoreflectchangesintheindustry,andhavinganexperienced,motivatedandengagedteamiscritical.Aswegrowandofferourcustomersnewaviationservices,thisonlybecomesmoreimportant.
An open, progressive cultureAirPartnerisadevelopingbusiness.PartofthechallengeaswegrowandtakeonpeoplefromnewacquisitionsistointegrateeveryonesothattheyfeelpartoftheAirPartnerGroup.Keytothisisourpeople-centredculture.Ouraimistorunabusinessthatisequitableforall,regardlessofgender,race,nationality,disabilityoranyotherdifference,andtotreateveryonefairlyandwithrespect.Anumberofkeyelementsmakeourculturepeople-centred.Wehaveaflatstructure,enhancedbyagenuine‘open-door’policy.Proofofthisisthefactthatourheadquartersisentirelyopen-plan,withtheexceptionofourCEO’sandCFO’soffices.Andevenourmostseniorleadersmakesuretheyconnectwithemployeesonaday-to-daybasis.Weencouragetwo-wayconversation,supportedbyinitiativeslikeourengagementsurvey,ouremployeeforum,andtheCEO’sbreakfaststhroughouttheyear,opentoallemployees,which,whilenon-obligatory,areoftenwellattended.Weofferflexibleworkingandadvocateahealthylifestyle,throughinitiativessuchasprovidingfreshfruitandhealthysnacksforourteamandsubsidisinggymmemberships.
Recruitment and retentionPeopletendtostaywithAirPartnerforagoodlengthoftime.Theaveragestayisfiveyearsandsomeofourstaffhavebeenwithus,10,15or20yearsplus.Wehaveinitiativestoensurewearesuccessfulatretainingourkeypeople.Withourrecentacquisitions,wewanttoensurethatthiscontinues.
Wearekeentoensurethatpeopleremainengagedandchallengedintheirrolesandaimtoreachtheirfullpotential.Tounderscoretheimportanceofthis,weareworkingtowards‘engagement’asakeyperformanceindicator(KPI),measuredthroughourEmployeeEngagementsurvey,whichwecarryouteverytwoyears.ThemostrecentsurveywaslaunchedinFebruary2017,andwewillreportonourengagementscoreinnextyear’sannualreport.
Integrating new businessesSuccessfulintegrationisakeyandnecessaryobjectiveofanyacquisitionormerger.Integratingsmall,similarbusinessestendstobeeasier,becausethereisalreadyacommonwayofworking,andthisisreflectedinthesmoothintegrationofCabotAviation,nowAirPartnerRemarketing.Bringingonboardanentirelynewtypeofbusiness,aswedidwithBainesSimmons,ismorechallenging,but,asshownbytheprofitabilityofthebusinessthisyear,wearewellonthewaytosucceedinginwinningheartsandminds.Ourmostrecentacquisition,ClockworkResearch,has,likeCabotAviation,beenverystraightforward,andwelookforwardtoworkingmorecloselywithandlearningfromournewbusinessesastheyintegrateintotheGroup.
Equal opportunities and human rightsWearecommittedtoprovidingequalopportunitiesandensuringourstaffcanworkwithoutdiscrimination.Fullconsiderationisgiventoemployeeswithadisabilityandshouldanemployeebecomedisabledwhileworkingforus,wewouldmakeeveryefforttoenablethemtocontinuetoworkfortheGroup.Asat26April2017,AirPartnerhadsevendirectors,includingonewoman.Ofour257employees,138weremenand119women,andthreeofournineseniormanagerswerewomen.AirPartnerhasaresponsibilitytoconductbusinessinanethicalwayandaccordinglyhasinplaceinternalpoliciestosupportrecognisedhumanrightsprinciples.Theseincludepoliciesonnon-discrimination,healthandsafety,environmentalissues,andbriberyandcorruption.WemaintainazerotoleranceapproachtobriberyandcorruptionandaprogrammeofinternaltrainingisinplacetoensurethatallstaffareawareoftheGroup’spolicies.
“�I�have�been�with�Air�Partner�10�years,�and�the�business�has�grown�in�many�ways�but�we�have�maintained�the�core�values�that�have�always�been�central�to�Air�Partner.”
RACHEL THRIPP, Group HR Director
Strategic reportCorporate governance
Financial statements
13Air Partner plc | Annual Report and Accounts 2017
Employees by gender
Men
Women
2017:54%men,46%women2016:56%men,44%women
Thecomparativedifferstothatdisclosedinnote8,whichdisclosestheaveragenumberofFTEsfortheyear,ratherthanthenumberofemployeesattheyearendasdisclosedhere.
Employees by division
Broking
Consulting & Training
Employee turnover
CalculatedasthepercentageofemployeeswholeavetheGroupduringthefinancialyearandarereplacedbynewemployees.
25%
54%46%
82%
18%
14 Air Partner plc | Annual Report and Accounts 2017
Explaining our business: business model and strategy continued
Getting technology right
Havingthebestpossibletechnicalinfrastructureiskeytosupportingourambitiontoofferafullrangeofservicestoourcustomers,whilemaintaininganefficient,cost-effectivebusiness.
Ramping up our investment2016hasseenAirPartnerinvestingsignificantlyintechnologyasanecessarycounterparttoefficient,long-termgrowth.Duringtheyear,weappointedanewGroupHeadofTechnology,LeePyle,toleadanexpandedITteamtodeliverthetechnicalplatformweneedtounderpinthebusiness.
AcentralpartofthisworkwastoenhanceourcoreGroupITsystems,andduringtheyearweintroducedanupgradedfinancialsystemwhichwillmakethegatheringandreportingofdatafasterandmoreefficient.Wealsobeganthedevelopmentofanewcustomerrelationshipmanagement(CRM)system,settogolivelaterin2017.Thisisessentialtoenableustounderstandourcustomerbasebetteracrossthedivisions,especiallynowthatourCustomerFirstprogrammeiswellunderway.
Itisalsoakeyplatformforgrowth:weneedtobeabletointegrateouracquisitionseasilyintooursystems,andalsobeabletogetapictureofourcustomersacrossthewholeGroup.Thiswillenableustoidentifyopportunitiesforcross-selling,whichareanintegralpartofourstrategy.
Looking aheadWehavetwokeyaimsfor2017.First,weaimtointroduceCloudtechnologythatwill,amongotherfunctions,helpourcustomerserviceteamworkmoreflexibly,includingspendingmoretimeoutontheroadworkingmorecloselywithcustomers.Second,wearesignificantlyenhancingourdigitalcommunicationsplatformsinpartnershipwiththemarketingteam,whoseremithasbeentorefreshourbrandandraisetheprofileoftheGroup.Technologyisessentialtothesedevelopments,andbothteamshavebeenworkingcloselytogetheroverthepastyeartowardsthesharedgoalofastand-outbrandwithanagileandresponsivedigitalcapability.
“�Technology�is�a�key�platform�for�growth:�we�need�to�be�able�to�integrate�our�acquisitions�easily�into�our�systems.”
LEE PYLE, Group Head of Technology
Strategic reportCorporate governance
Financial statements
15Air Partner plc | Annual Report and Accounts 2017
Expanding our services
Inpursuitofourvisiontobecomeaglobalaviationservicescompany,we’rebroadeningouroffertoencompassafullrangeofaviationservices,andexpandingwhereweoperatetobecometrulyglobal.Indoingso,weaimtotakeourexistingcustomerswithus.
Weareextendingourproductrangeandourgeographicpresencethroughcarefullytargetedacquisitions,whichshouldintimeoffermutualbenefitstoourcorebrokingbusiness.Thekeytosuccessinthisareaisintegration,andtheacquisitionofCabotAviation,nowAirPartnerRemarketing,enabledustotestthewater.Asmallbusinessinasimilarfield,itprovedthemodel,whiletheacquisitionofBainesSimmonsaddedsafetyconsultingandtrainingtoouroffer.TheadditionofClockworkResearchattheendof2016,withthesafetybenefitsoffatigueriskmanagement,willhelpadddepthtotheconsultingandtrainingsideofthebusiness.
Eachnewacquisitionnotonlybroadensourproductoffering,itbroadensourgeographicreachaswell,sinceeachhastradingpartnersindifferentterritories.Inaddition,itgivesustheabilitytoofferatotalaviationservicetocustomers,whichbecomesincreasinglyattractiveacrossallmarkets.
Strong financesUnderpinningthisstrategyiscarefulfinancialmanagement.Capitalallocationiskey,andlowriskisofparamountimportance–everypoundwespendmustgeneratethehighestpossiblereturn.
“�Each�new�acquisition�helps�us�offer�a�total�aviation�service�to�customers.”�
MARK BRIFFA, Chief Executive Officer
Aspartofthat,weneedarobustintegrationplan,andwehavelearnedmanylessonsfromtheacquisitionsofCabotAviationandBainesSimmons,particularlytheimportanceofcommunicationandculture,whichwillhelpusintegrateClockworkResearch,andotherpotentialnewbusinesses.Wearepleasedthat,underthefirstfullyearofourmanagement,bothCabotAviationandBainesSimmonshavedeliveredprofitstotheGroup,andwelookforwardtoworkingcloselywiththeClockworkResearchteam.
Looking aheadTheGroupcontinuestoassessinvestmentopportunities,bothorganicandacquisitions,inlinewithourstatedstrategicobjectivetobecomeaworld-classglobalaviationservicesgroup.
Racing safelyOurCommercialJetsdivisionwaspresentedwithatypicalenquiryfromawell-knownautomotivecompany,comprisingthecustomer’srequiredflightroute,numberandprofileofpassengers.Atthispoint,ourGroupCharterteamidentifiedasynergyofsafetyculturebetweenAirPartnerandourclient.Asaresult,CommercialJetsliaisedwithBainesSimmonsandaskedthemtocarryoutanauditofthetwooperatorsthatourclientwouldbeusing.CommercialJetsandBainesSimmons:awinningcombination!
16 Air Partner plc | Annual Report and Accounts 2017
Explaining our business: business model and strategy continued
1 Air Partner Remarketing (Cabot Aviation) Providescomprehensiveremarketingservicesforalltypesofcommercialandcorporateaircrafttoawiderangeofinternationalclients.
Expanding our servicescontinued
Triple 777 successNotonlydidbeingpartofaplchelpCabotAviation(nowAirPartnerRemarketing)winthemandatefromKenyaAirwaystoremarketfourB777-200ERsbutAirPartner’slong-standingrelationshipwithamajorindependentAmericanoperatorfacilitatedthesuccessfulsaleofthreeoftheseaircrafttothiscarrier.
2 Baines Simmons Aworldleaderinaviationsafetyconsultingspecialisinginaviationregulation,complianceandsafetymanagement.
3 Clockwork Research Aleadingfatigueriskmanagementconsultancy.
Strategic reportCorporate governance
Financial statements
17Air Partner plc | Annual Report and Accounts 2017
1 Air Partner Remarketing (Cabot Aviation) – a sure first stepWithourfirstacquisition,inMay2015–aircraftremarketingspecialistCabotAviation–weweredealingwithanadhocbusinesswiththesameessentialqualityofearningsasouraircraftcharterdivisions.Itwasthereforeafairlysurestepwithwhichtotestourintegrationcapabilities,whilegivingusavaluablefootholdinnewterritories.CabothadaveryprofitablefirstfullyearaspartofAirPartner,andisnowbeingbroughtmorecloselyintothefoldasAirPartnerRemarketing.
Air Partner Remarketing (Cabot Aviation) – key facts• Foundedin1998• Oneoftheleadingspecialistaircraftremarketingbrokers
intheworld• Globalsalespresence• Actsasagentandbrokertoairlinesandairlineowners
2 Diversifying our offer with Baines SimmonsOurnextacquisition,inAugust2015,ofsafetyconsultingandtrainingexpertsBainesSimmons,wasafundamentalstepforwardinourstrategy,addingabrandnewareaofexpertisetotheAirPartneroffer.Assuch,theintegrationhastakenmoretimeandworkthanCabotAviation,butdespitethechallenges,BainesSimmonshasalsohadaprofitablefirstfullyearwiththeGroup.Ouraimtoachievemorebalancedearningsisthereforealreadytakingshape.
Baines Simmons – key facts• Foundedin2001• Leadingauthorityinaviationsafetyconsultancyforcivil
andmilitarymarkets• Specialisesinaviationregulation,complianceandsafety
management• Clientsinclude750+aviationorganisationsand40+
aviationauthorities• 46permanentemployees
3 Expanding our specialist skills with Clockwork ResearchWiththeacquisitionofClockworkResearch,weareinvestingfurtherinsafetymanagementandconsulting,andexpandingourofferalongsidethecoreconsultingandtrainingservicesofBainesSimmons.Co-founderDrAlexandraHolmesdiscussesjoiningAirPartner.
‘Considerable mutual benefit’‘We’vebeengoingfor12yearsandhavebuiltupaverygoodreputationamongthebigaviationoperators,’shesays.‘Whatweofferisalmostunique.Wedosometimescomeupagainstuniversitiesbuttheywouldn’t,forinstance,repeatedlygototheMaldivestocarryoutresearchandbuildabespokefatiguemanagementsystem.We’reveryhandsonandspendalotoftimewithclients,buildingrelationships.Wetendnottolosethem.
‘Weweren’tlookingtosellnecessarily,butcouldseethattherewasamuchlargerneedforourservicewiththeincreasingawarenessofperformancesafetyandhealth.JoiningAirPartnerwillhelpusgrowandmeetthatneed.Therearehugeopportunitiesand,alongwithBainesSimmonsandothercomplementaryacquisitions,wewillhelpmovetheGroupintoadifferentspace.We’relookingforwardtoworkingwithAirPartner’sexistingclientsandalsointroducingthemtoours–weseeconsiderablemutualbenefit.
‘MyteamhasreallyembracedbecomingpartofAirPartner,whichhasmadetheintegrationprocessreallystraightforward.’
Clockwork Research – key facts• Foundedin2005• Recognisedleaderinfatigueriskmanagementsystems• Clientsinaviation,oilandgasandmining;government
departmentsandindustrybodies• CoreteamofscientistsbasedintheUKsupportedby
consultantsintheUS,Europe,MiddleEastandAustralia• Fivepeople
18 Air Partner plc | Annual Report and Accounts 2017
Explaining our business
Principal risks and uncertainties
TheBoardhascarriedoutarobustassessmentoftheprincipalrisksfacingtheGroupincludingthosethatwouldthreatenitsbusinessmodel,futureperformance,solvencyorliquidity.
Risk management processTheBoarddefinestheriskappetiteandmonitorsthemanagementofsignificantriskstoensurethatthenatureandextentofthesignificantriskstakenbytheCompanyarealignedwiththeoverallgoalsandstrategicobjectives.Ourriskappetiteinfluencesthecultureofourbusinessandhowweoperate,andisreflectedinourmanagementstructure.TheOperatingBoardsupportstheBoardinmonitoringtheexposuresthroughregularreviewsanditsgeneraloversightoftheday-to-dayrunningofthebusiness.
Annual risk analysisWeidentifiedandassessednewandexistingrisksoverthecourseoftheyearastheGroup’soverallriskprofilecontinuedtoevolve.TheBoardandtheOperatingBoardperformedfurtheranalysistoprioritisetheserisks,withafocusonthoseconsideredtoposethegreatestrisktoachievingourobjectives.
Duringtheyear,therehasbeenachangetoourlegalandregulatoryrisksfollowingthepotentialuncertaintiesarisingfromBrexitandtheUSPresidentialelection.However,bothofthesepoliticaleventscouldpresentopportunities,andwearecontinuingtoevaluatethesituation.
Our principal risks and uncertaintiesTheprincipalrisktotheGroup’sbusinessstemsfromthegeneraleconomicconditionsinwhichourclientsoperate,affectingtheirwillingnessandabilitytocharterorcontractconsultingservices.Adhocchartersarelikelytocontinuetobeaffectedbyseriouseconomicinstabilityinthemajorworldmarkets.
ThepervasiverisktoAirPartner’scharteringbusinessisthefactthatleadtimesforadhocbookingsaremeasuredindaysorweeks,ratherthanmonths.Forwardbookingscanbeimpactedverysuddenlybychangesinfinancialmarkets,politicalinstabilityandnaturaleventsaffectingthemovementofpeopleorcargofromonecountrytoanother.Economicuncertaintyaffectscorporate,governmentandindividualclientsandaffectsthequalityofaircraftsupplyasoperatorsconsolidateorleavethemarket.
Contractually,thisriskismitigatedinthatwesellcapacityonaircraftownedandoperatedbyathirdparty,andcontractswithourcustomersarenormallyplacedasmirroredtransactions.
TheGroupdoesnothaveanycontractualarrangementswithanysignificantindividualorcompanywhichareessentialtocontinuationofthebusiness.
GeneralbusinessrisksfacedbytheGroup,suchasthosedisclosedwithinnote2,arethosefacedbybusinesseswithsimilarcharacteristics.ThoselistedherearetheprincipalrisksconsideredbytheBoardtohaveapotentiallymaterialimpactontheGroupnotachievingitslong-termstrategicobjectives.
Strategic reportCorporate governance
Financial statements
19Air Partner plc | Annual Report and Accounts 2017
Risk
Change in risk assessment
Strategic initiatives potentially impacted
Potential impact Controls/processes to mitigate
Market conditions/cost structureForwardvisibilityintoaircharterbookingsisoftenmeasuredindaysorweeks,ratherthanmonthsandcanbemateriallyaffectedbychangesinfinancialmarkets,politicalinstabilityandnaturaleventsaffectingthemovementofpeopleorcargofromonecountrytoanother.
Customers
Maintainingbrandvalue
Limitedvisibilityintofuturebookingsmayresultinacoststructurethatdoesnotalignwithmarketconditions.
ExtensionoftheofferingfollowingtheacquisitionofCabotAviationServicesandparticularlyBainesSimmonshasenhancedthestabilityofearningsbyaddingmorepredictablerevenuestreamstotheGroup.
Furtherdiversificationoftheclientbaseoftheaircraftcharteringbusinessacrossgovernmentsandnon-governmentalorganisations,commercialenterprisesandindividuals,aswellasacrossgeographicregions,allowsforsomesmoothingwhenthereareseasonalorsectorialchangesindemand.
Wecontinuetofocusonoverheadstoensuretheyareappropriatetothelevelofbusinessandappropriateactionistakenifnecessary.
Retaining, developing and expanding the Group’s customer baseThechallengeofretainingandexpandingcustomersinahighlycompetitiveenvironmentwithlowbarrierstoentry.
Customers TheGroup’sabilitytomaintainandgrowrevenuecouldbeadverselyaffected.
Roll-outoftheCustomerFirstprogrammewhichunderpinstheGroup’sstrategyforidentificationof,andmarketingto,potentialcustomerswhileelevatingthecustomerexperiencethroughimprovedprocesscapabilities.
Attraction, retention and motivation of staffThechallengeofattractingnewtalentandretainingexistingkeystaff.
Customers
Developingandretainingourpeople
Optimisingourcore
Extendingandenhancingouroffer
Lossofearnings. Investmentinrecruitmentandintalentmanagement,throughinternalandexternalcourses,especiallythroughalong-standingarrangementwithCranfieldUniversitytoimproveperformance.
ElementsofremunerationaretiedtoindividualandGroupperformance.
Regularreviewofremunerationandotherincentivestoensureweremainonparwithourcompetitors.
20 Air Partner plc | Annual Report and Accounts 2017
Explaining our business
Risk
Change in risk assessment
Strategic initiatives potentially impacted
Potential impact Controls/processes to mitigate
Financial counter party riskFinancialexposurefollowingpaymentsinadvanceofservicestooperators.
Customers Lossofearnings. Whenselectingwhichoperatortouse,weassessreputationandfinancialstrengthinordertomitigatetheriskofmakingpaymentstobusinessesthatmayfail.Inaddition,wherepossible,weusethird-partybankguaranteesinsteadofcashdeposits.
Non-financial counter party riskRelianceonthirdpartiesfordeliveryofservicestoendclients.
Operatorcompliancewithrelevantregulations.
Customers
Maintainingbrandvalue
FailureofaircraftoroperatorcharteredbyAirPartner.
Wealwayschoosehigh-qualityaircraftandcarriersforeverycharter.AirPartnermaintainsnon-ownedaircraftliabilityinsurancewhichcanalsobeextendedtoclients.Allflightsarewatchedinoperationbythein-houseoperationsteam.Inaddition,thereisbothaninternalauditandexternalauditprocess,thelatterperformedaspartoftheISOaccreditation.
Competitor riskTheriskoffallingbehindcompetitorsinproductdevelopment,standardsofserviceorcosteffectiveness.
Creatingvalue
Maintainingbrandvalue
Lossofcustomers. Roll-outoftheCustomerFirstprogrammeacrosstheGroupwillembedaunifiedandelevatedlevelofcustomerservicedeliverybyaligningoursalesandmarketingstrategywithservicedelivery.
Wealsoundertakeregularclientsurveystoensureweremainresponsivetocompetitoractivityandclientdemandswithinacceptablepricelevelsforthequalityandstandardsofserviceprovided.
Legal and regulatoryThechallengeofoperatinginmultiplejurisdictionssubjecttoalargenumberofdifferentandevolvinglawsandregulations,includingtaxandcivilaviationauthorityrequirements.
Customers
Maintainingbrandvalue
Non-compliancewithregulationscouldresultinlossofcustomersordamagetotheGroup’sbrand.
ManagementreviewspoliciesandprocessesatOperatingBoardlevel.Thebusinesshasarangeofpoliciestominimisetheserisks,andreviewsandupdatesthemonaregularbasis.
Principal risks and uncertaintiescontinued
Strategic reportCorporate governance
Financial statements
21Air Partner plc | Annual Report and Accounts 2017
Risk
Change in risk assessment
Strategic initiatives potentially impacted
Potential impact Controls/processes to mitigate
Business growthChallengesinenhancingandextendingtheAirPartnerofferfollowingrecentacquisitions.
Customers
Extendingandenhancingouroffer
Maintainingcontroloverthestrategicandcommercialactivitiesofnewoperationsresultinginfinanciallossorreputationaldamage.
Wehaveadedicatedintegrationteamtoensurethatbenefitsarisingfromanacquisitionaremaximisedwhilemaintainingcontroloveroperations.
Reputational riskDamagetoAirPartner’sreputationfollowingincidentorinappropriateaction.
Customers
Maintainingbrandvalue
DamagetotheGroup’sbrandcouldresultinlossofclientsorimpairitsabilitytoexpandthecustomerbase.
Ourbrandvaluesofhonesty,truthandreliabilityaretreatedveryseriously.Discretioniskeytoourcustomerserviceanditsimportanceiscommunicatedtoallmembersoftheteam.
Business interruptionRelianceonsystemsforsourcingandbookingaircraftandclientmanagement.
Customers
Maintainingbrandvalue
Systemsfailurecouldresultinbusinessinterruption.
Businesscontinuityanddisasterrecoveryplansareinplacetomitigatethisrisk.
Strategic reportCorporate governance
Financial statements
23Air Partner plc |AnnualReportandAccounts2017
2017 performance
24 Air Partner plc | Annual Report and Accounts 2017
2017 performance
Chief Executive’s review
2016willbeayearthatmanywillrememberasoneofseismicandsurprisingchange,especiallyonthepoliticalfrontbothathomeandabroad.Onthequieterstageofaviation,ourskiesgetbusierandbusinessgetsmorechallenging,butAirPartnerhascompletedtheyearwithasetofresultstomakeusproudandgiveourshareholdersconfidenceinourstrategy.
Mark Briffa ChiefExecutiveOfficer
TheGrouphasmadegreatprogressduringtheyear,deliveringanunderlyingprofitbeforetaxof£5.1m,a17.2%increaseyear-on-year.Asever,theseresultsreflectthededicationanddriveofallourstaff,whocontinuetoputourcustomersfirst,providinganunrivalledanddifferentiatedserviceinoursector.
One Group, two divisionsTheGroupisstructuredintotwocomplementarydivisions:Broking,whichdeliversaircraftcharterandremarketingservices;andConsulting&Training,whichdeliversprofessionalservices,predominantlyintheaviationsafetysector.Bothdivisionsoperateinternationally,servicingahigh-qualitycustomerbase.Bothdivisionswillplayimportantrolesindeliveringourlong-termstrategytobecomeaworld-classglobalaviationservicesgroupwithabalancedbusinessmixbetweenthetwo.
Broking performanceOurBrokingdivisionhasperformedwellthisyear,achievingagrossprofitof£26.1mandanunderlyingoperatingprofitof£6.6mwhichcompareto£25.2mand£6.1mrespectivelyintheprioryear.Thismasksabetterunderlyingperformance,withsomesignificantnewbusinesswinsreplacingacontractweexpectednottoberenewedasweenteredtheyear.Thesewinswerearesultofsomeexcellentteamwork,creativityandinnovationbyourpeopledeliveringsolutionstosomeofourcustomers’mostcomplexandtechnicalneeds.OurCustomerFirstapproachisdelivering,andhelpingusmeasure,betterlevelsofserviceandpartnershipwithourmostvaluedcustomers.Asaresult,weareseeingincreasedcustomerloyalty,and,withagreaterportfolioofproducts,weareseeingthebreadthofouractivitywithvaluedcustomersexpand.
Duringtheyear,wetookstepstofurtherenhanceourPrivateJetandJetCardoffers,andweexpecttoevolveJetCardintheyearsaheadtoreflectthelifestyleneedsofourcustomers,inpartnershipwithCamper&NicholsonsInternational.Since1782,theyhavebeensynonymouswiththeworld’sleadingyachts,andtodayaregloballeadersinallluxuryyachtingactivities,specialisingintheircharter,sale,purchase,marketing,managementandconstruction.Thispartnership
Strategic reportCorporate governance
Financial statements
25Air Partner plc |AnnualReportandAccounts2017
Highlights of the year
£31.7mGrossprofit
£5.1mUnderlyingprofitbeforetax
6.5pUnderlyingEPS
5.2pDividendpershare
• Stand-outperformancefromCommercialJets
• Consulting&Trainingdivisionprofitableinfirstfullyearofownership
• RecordJetCardperformance
“�These�results�reflect�the�dedication�and�drive�of�all�our�staff,�who�continue�to�put�our�customers�first.”
providescustomerswithaone-stopshopforallluxuryairandsea-basedtravelneeds.OtherinitiativesareunderwaytofurtherenhanceJetCardandIhopetobeabletoreporttoyouinthefutureaboutsomeinnovativeworkwearedoingtomakeourcustomerexperiencetheverybestitcanbe.
AirPartnerremarketing–formerlyCabotAviation–alsocompletedsomesignificantprojectsintheyearandthepipelinefortheyearaheadlooksgood.
Theteam,underthestrongleadershipofTonyWhitty,isresponsibleforallremarketingactivityatAirPartnerglobally,andduringtheperiodwetookthedecisiontoconsolidateallourshort-termleasingactivitiesunderTony’swingsothatwecanleverageourexpertiseandunderstandingofthemarketplaceandservicethecustomerbetter.Theresultsfromboththerebrandingandthecombinationhavebeenoutstanding,andIbelievethelong-termoutlookforourremarketingoperationisexcellentasweworkwithmoreinternationalcustomersandaddscale.Remarketingwillbeabeneficiaryoforganicinvestmentandfocus,and,whilewewillnotrushanything,wehopetohaveasignificantlylargerremarketingbusinessinthreetofiveyearsthanwedotoday.
Consulting & Training performanceThisreportmarksthefirstfullyearofoperationfromourConsulting&Trainingdivision,withacontributionof£0.5m,equatingto10%ofourunderlyingprofits.Iamverypleasedwiththismaidenperformance,andexcitedthatthedivisioniswellpositionedforfuturesuccess.AlmostallofthiscomesfromBainesSimmons,ourleadingaviationsafetyconsultantsspecialisinginaviationregulation,complianceandsafetymanagement,whichhasperformedwellandisinastrongpositiontogrowanddevelopintheyearsahead.InDecember2016–sevenweeksbeforetheendofthefinancialyearand15monthsafterthecompletionoftheBainesSimmonsacquisition–weacquiredClockworkResearch,aleadingfatigueriskmanagementconsultancy.IntegrationofClockworkResearchwascarriedoutontimeandasplanned.SimilartoAirPartnerRemarketing,ClockworkResearchwillbeabeneficiaryoffutureorganicinvestmentandfocusaswe
26 Air Partner plc | Annual Report and Accounts 2017
2017 performance
assistthemtoscalethebusiness.AsweworkbettertogetheracrosstheGrouptodeliverwhatourcustomersneed,weexpectthedivision’scontributiontoourresultstoincreaseinfutureyearsaswebecomeamorebalancedbusiness.
A common platform for growthWehavemaintainedourcommitmenttoorganicinvestmentincoresystemsandcontrols.Ourtechnologyprogramme,ProjectConnect,beganin2014andgotusfittocompeteglobally.Itenabledourlatestupgrades,whichbeganinFebruaryandshouldbefinalisedbytheendof2017.Thescaleoftheprogrammecannotbeunderstatedasitputsinplaceasolidfoundationforfuturegrowthandisacoreenablertosuccessfullycarryingoutourlong-termstrategy.
WeareintroducingnewplatformsfromwhichwecansharedataacrosstheGroupandwhichhavetheabilitytoaccommodatetheneedsofanynewacquisitionsassoonastheycomeonboard.Thiswillgiveusgreaterconsistencyandflexibility.WeintroducedanewGroup-widefinancesystem,whichcameon-streaminFebruary,andwillbemovingallourcompaniesontoacommonCRMplatformduring2017.
Transforming the business mixOrganicgrowthandself-improvementareattheheartofourlong-termstrategy,andbyaligningourselvescloselywithourmostvaluedcustomers,wearebetterabletoidentifynotonlynewbusinessopportunitiesbutalsothestrategicgapsacrosstheGroup.Wehaveidentifiedtheservicesandcapabilitiesweneedtoaddorenhanceandalsoidentifiedthegeographieswhereweneedtodevelopapresenceoraddscale.Intheyearsahead,wewilladdressthesestrategicgapsbyeitherbuildingamarket-leadingpositionorganicallyoracquiringsuitablebusinessesandplatforms.
Itsoundsstraightforward–andasanidea,itis.Thechallengeliesinexecution.Werecognisethateveryacquisitioncarriesrisk–asitdoesrewardandopportunity.Wewilljudgeriskandrewardindetailbeforecommittingtoacquisitionsanddeployingourcapital.Weareabletoquicklyassessabusiness’sstrategicfitonvariouscriteria,butalongsidetheanalysisofitsfinancialstatements–theduediligenceof
financialtrackrecordandperformance,andtheassessmentoffutureeconomicreturnsallspeaktovalue–wespendahugeamountoftimegettingcomfortablewiththenon-financialcomponentsofabusiness,predominantlythepeopleandculture.
Themostimportantquestionweaskourselveswhenweevaluateapotentialacquisitionis‘IsthisanAirPartnercompany?’.Theacquiredbusinesswill,fromdayone,carryourbrandoranassociationwithourbrand,andindeedmayadoptourbrandinduecourse,soweneedtogetcomfortablewithalotmorethanjustthenumbers.Thestrategy,productorservice,capital,scale,customerbase,operatingethosandmethodologiesareallimportant,buttheyarebroughttolifebythepeopleandtheorganisation’sculture.Ifwecannottickalltheboxes–bothfinancialandnon-financial–andgetcomfortable,wewillnotpursuetheopportunity.
Theaviationindustryhasmanypassionateanddedicatedpeoplewhoaredeliveringgreatproductsandservices.Overtheyears,wehavehadtheprivilegetomeetgreatbusinessesandwehaveevaluatedmanyopportunities.Thereareplentyofacquisitionopportunities,butweareselective,lookingforcomplementarybusinesses.Innearlyeveryinstance,wearedealingdirectwiththeownersormanagers,andtheirdecisiontosellcanbetriggeredbyavarietyofbusinessorlifeevents.Inadvanceofthatdecision,wedevelopmutualtrustandourunderstandingofthebusiness.
Wearedelightedtohaveacquiredthreegreatbusinessesoverthepasttwoyears–CabotAviationandBainesSimmonsin2015andClockworkResearchin2016.Thesebusinessesareallrunbypassionateanddedicatedpeopleanddeliveranexceptionalservicetotheircustomers.Aswellasthefinancialcontribution,theybringnewservicesandcapabilitiestotheGroupwhichourcustomersandstaffvalue,intheprocessmakingusabetterandsmarterorganisation.
PreviousreportsintroducedtheacquisitionsofCabotAviationandBainesSimmonsandthisyearIampleasedtointroduceClockworkResearch.ClockworkResearchbringsnewservicesandcapabilityinthespecialistfieldoffatigueriskmanagement.
Chief Executive’s review continued
“�We�have�identified�the�services�and�capabilities�we�need�to�add�or�enhance,�and�the�geographies�where�we�need�to�add�scale.”
Strategic reportCorporate governance
Financial statements
27Air Partner plc | Annual Report and Accounts 2017
ClockworkResearchusessystemsmodelstomeasure,monitorandreducefatigueinpilotsandotherkeypersonnel,ensuringtheygetthenecessarysleeptocarryouttheirtaskseffectivelyandsafely.FoundedbyDrPaulJacksonandDrAlexandraHolmes,thebusinessisaleaderandinnovatorinitsfield.BothPaulandAlexarededicatedandpassionateabouthelpingcustomerstacklethechallengestheyface.
Great peopleAswegoforwardonourjourneyoftransformation,it’simportantthatwesharethesamevisionandthatallourpeopleunderstandit.Enhancingourbrandisasmuchaboutourinternalaudienceasitisabouttheexternal,andaccordinglyweareworkingtoarticulateourvisionandvaluesandenhanceourinternalcommunicationsbyengagingourstaffacrosstheorganisationmorefrequently.Wecandoalotbetter,butwearestartingfromastrongbase,witharichheritageandgloballyrecognisedbrand.Wehaveaclear,long-termstrategyandarebecominganexcitingplacetowork,withservicesandcapabilitiesthataddvalueandenableustocompetebeyondprice,andthatwilloffersteadycareerprogression.Weaimtorewardgoodperformanceandexceptionalbehaviour,and,aswegrow,akeyaimistoretainourexistingculturethatkeepspeopleatitsheart.
InJanuary2016,wehiredLeePyleasGroupHeadofTechnology.Underhisleadership,wearemakingaconsiderableinvestmentintechnologyinordertocreateasolidandsustainablebasisforgrowth.
InJune2016,wehiredJuliaTimmsasGroupMarketingDirector.Duringthelatterpartoftheyear,shesetinmotionanoverhauloftheAirPartnerbrand,whichwillbecometheumbrellabrandforallourproductofferings,includinganyfutureacquisitions.Thisisareallyimportantleveroftransformation,inthatitwillprojectaclear,unifiedidentitytotheworld,enhancingourabilitytocross-sellourservices.
Finally,inJanuary2017,weappointedDavidMcCown,whowasformerlyourVice-PresidentforBusinessDevelopmentfortheUnitedStates,asPresidentforourUSbusiness,akeyfocusfororganicgrowthfor2017andbeyond.
OutlookWe’reonajourneyoftransformation,and2016hasbeenanencouragingyearonanumberoffronts.Thepathaheadisexcitingbut,aswealwaysstate,intheworldofaviation,andmostespeciallyinthecharterindustry,wemustbecautiouswhenmanagingexpectations.Thecharterbusinesshasalwaysbeen,andwillcontinuetobe,avolatileindustry.Despitethis,overnearlysixdecades,wehavedevelopedourbusinessandadaptedtogrowandsucceed.
Weareconfidentwehaveasuccessfulandveryclearlong-termstrategy.Wemanageouroperationsforlong-termsuccess,aligningwhatwedowithourcustomersandaimingtoexceedtheirmostcomplexandtechnicalneeds.
Weaimtobecomeabalancedbusiness,withtwomarketleadingdivisions–BrokingandConsulting&Training–deliveringexceptionalserviceandvaluetocustomers,and,asaconsequence,high-qualityandincreasinglyvisibleearningstoourshareholders.Thiswilladdvaluetoourcustomersandstaffandbuildrealvaluetotheownersofourbusiness.
Brokingstillaccountsfor90%ofourprofits,butinthefutureweexpectourbusinessmixtoevolvesignificantly,drivenbyorganicgrowthandsuitableacquisitions.Ourorganicinvestmentsarerewardingusandwehavesomeexcitinginitiativesunderway.Ournewlyacquiredbusinesseshavedeliveredstrongoperationalperformanceandmadeanexcellentfirstfull-yearfinancialcontributiontotheGroup.Wewillcontinuetobuildrelationshipswiththeownersandmanagersofthemanysuitablebusinesseswehaveidentifiedaspotentialacquisitions,butwewillremainpatientandkeeptoourstrictevaluationcriteria.
“�We�aim�to�become�a�balanced�business,�with�two�market-leading�divisions�delivering�exceptional�service�and�value�to�our�customers�and�increasingly�visible�earnings�to�our�shareholders.”
Mark BriffaChiefExecutiveOfficer26April2017
28
2017 performance
Air Partner plc |AnnualReportandAccounts2017
Financial review
AirPartner’sfinancialtransparency,asaresultofbeingtheonlylistedcompanyinthissector,andbalancesheetstrengtharekeyinsupportingtwooftheGroup’smainstrategicfocuses:puttingourcustomersfirstandexpandingourserviceoffering.
A strong balance sheetInacrowdedmarketwithlowbarrierstoentry,weareabletouseourfinancialpositiontodifferentiateourservicestokeycustomersthroughourabilitytoofferfavourablecredittermsonlargeprojects,asevidencedbythemovementinworkingcapitalandnon-JetCardcashatthebalancesheetdate.Inaddition,wehaveexpandedourserviceofferingtopursuethestrategyofbecomingaglobalaviationservicescompanythroughtheacquisitionofcomplementarybusinessesusingcashordebt.Subsequenttothebalancesheetdate,theloanoutstandingat31January2017wasrefinancedthrougharevolvingcreditfacilityof£7.5mwhich,incombinationwithanoverdraftfacility,providestheGroupwith£9moffacilitiesinadditiontonon-JetCardcash.
Financial overviewRevenue:AirPartnerprimarilyusesgrossprofitasitskeyindicatorofbusinessperformancegiventhepotentialforrevenue,asdeterminedunderIFRS,tofluctuatedependingonthenumberofcontractsenactedintheyearwhereweactasprincipal,asopposedtoagent.Thereductioninrevenueof£7.4mto£42.5m(2016:£49.9m)isduetothenon-repeatofaspecificoilandgascontractwhichendedearlyin2017.
Underlying operating profit:underlyingoperatingprofitincreasedby16.6%to£5.1m(2016:£4.4m),withthemajorityoftheincreasebeingattributabletotheimprovedperformanceoftheConsulting&Trainingdivision.ExcludingtheimpactofAirPartnerRemarketing’sresultsfromtheCommercialJetssegment,ourlegacybusiness’sperformanceincreasedby£0.1m,or2.9%,onalike-for-likebasis.
Other items:otheritemscompriserestructuringcosts,amortisationofintangibleassetsarisingonacquisition,acquisition-relatedcostsandnon-cashacquisition-relatedcosts(beingtheIFRS2chargearisingontheshare-basedconsiderationforAirPartnerRemarketing).Theoverallreductionin‘otheritems’of£0.5mto£0.7m(2016:£1.2m)isdueto:• theloweramountincurredinrespectofrestructuringof
£0.2mfollowingthemajorrestructuringoftheOperatingBoardthattookplaceintheyearended31January2016
• loweracquisitionrelatedcostsof£0.1m,areductionof£0.3m,duetotheirbeingonlyoneacquisitionintheyear,thatofClockworkResearch.
Amortisationofintangiblesarisingfromacquisitionsof£0.3mandnon-cashacquisitionrelatedcostsof£0.1mwereconsistentwiththeprioryear.
Operating profit:operatingprofitincreasedby£1.2mto£4.4m(2016:£3.2m)duetoacombinationoftheincreasedtradingperformanceof£0.7matanunderlyingoperatingprofitlevelcombinedwithareductionin‘otheritems’of£0.5m.
Finance charges:theGroup’snetfinancechargeremainedat£0.1m,comprisinginterestontheGroup’sloanandinterestreceivableoncashbalances.
Neil Morris ChiefFinancialOfficer
Strategic reportCorporate governance
Financial statements
29Air Partner plc | Annual Report and Accounts 2017
“�In�a�crowded�market�with�low�barriers�to�entry,�we�are�able�to�use�our�financial�position�to�differentiate�our�services�to�key�customers�through�our�ability�to�offer�favourable�credit�terms�on�large�projects.”
TaxationTheGroup’sunderlyingeffectivetaxratefortheyearwas33%(2016:30%)andhasbeenaffectedbyanadjustmentinrespectofprioryearstotalling£0.4m.Withoutthisadjustment,theunderlyingtaxratewouldhavebeen25%.Thechangearoseprimarilyduetoanadjustmentinrespectofaresearchanddevelopmentclaimmadeintheyearended31January2015.
Thestatutoryeffectivetaxratefortheyearwas35%(2016:39%).Thelowerratebeingduetoareductioninamountsdisallowablefortaxpurposesincludedwithin‘otheritems’.
Financial positionJetCard cash:thereductionof£0.9misasaresultofrecordutilisationintheyearoutstrippingthepaceofnewcardsandrenewals.Subsequenttothebalancesheetdate,theGroupwillbeplacingallJetCardfundsintosegregatedaccountsasfurtherassurancetoourcustomers.
Non-JetCard cash net of borrowings:thenetdebtpositionhasimprovedasaresultoftheimprovedtradingpositionincreasingnetcashinflowfromoperatingactivitiesof£1.9m,lessoutflowsfortheinvestmentinClockworkResearchof£0.4m,dividendspaidof£2.5mandrepaymentofborrowingsof£0.5mbutbenefitingfromaforeignexchangegainof£1.6m.
Asnotedabove,theGroup’sbankloan,whichstoodat£3.0matthebalancesheetdate,wasrefinancedwithanewrevolvingcreditfacility,whichhastotalavailabilityof£7.5m,providedbyAirPartner’smainbankers.ThefacilityexpiresinFebruary2020.
Other net current assets and liabilities:withcashexcluded,theGroupisinanetcurrentliabilitiespositionasaresultofdeferredincome,particularlyinrespectoftheJetCardproductexceedingothercurrentassets.
Foreign exchangeWherepossible,theGroupusesnaturalhedgingtominimiseitsforeignexchangeexposure,forexamplematchingJetCarddepositsdenominatedineurosorUSdollarswiththerespectivedeferredincome.Inaddition,theGroupalsousesderivativefinancialinstrumentstohedgecertaintransactionsin
accordancewithitsinternalpolicy.Thefairvalueoftheseinstrumentsatthebalancesheetdatewasaliabilityof£9,000(2016:anassetof£36,000)andthelossrecognisedthroughtheincomestatementasaresultinthechangeinfairvaluewasachargeof£45,000(2016:againof£186,000).
WhileBrexithascausedadegreeofvolatilityincurrencymarketsduringtheyear,givenourgeographicalreach,withprofitsarisingintheUSindollars,andinEuropeineuros,theGroupasawholehasnotsufferedadverselyfinanciallyasaresultoftheleavevotetodate.InitsAircraftBrokingdivisionintheUK,themostlikelytohaveacurrencymismatchbetweenincomeandcosts,thebrokersareabletosourcealternativesupplierstohelpmitigateanyerosionofmarginandalsoapplytheGroup’sinternalpolicyonhedgingwhennecessary.Overall,theGroup’snetforeignexchangegainthroughtheincomestatementfortheyearwasalossof£20,000(2016:gainof£2,000).
Neil MorrisChiefFinancialOfficer26April2017
The Group’s financial position can be summarised as follows:
2017£’000
2016£’000
Property,plantandequipment 1,086 1,281
Goodwillandotherintangibleassets 8,743 8,384
Netdeferredtaxliability (192) (408)
Netcurrentliabilitiesexcludingcashandborrowings (11,541) (11,723)
JetCardcash 15,886 16,776
Non-JetCardcashnetofborrowings 972 (456)
Netassets 14,934 13,854
30 Air Partner plc | Annual Report and Accounts 2017
2017 performance
Key performance indicators
Wemonitorarangeoffinancialindicatorsthatreflecttheunderlyingstrengthofourbusiness.Thisyear,wehaveintroducedasetofstrategicindicatorstohelpusmeasureprogressagainstourstrategy.
Financial KPIs1,2,3
Gross transaction value£m
Thisrepresentsthetotalamountinvoicedtoourcustomers.
£215.8m
Non-JetCard cash£m
RepresentingcashexcludingJetCardcash.
£3.9m
Return on equity%
Returnonequityiscalculatedasoperatingprofitovernetassets.
29.5%
Underlying earnings per sharePence
BeingEPSderivedfromunderlyingoperatingprofit(whichexcludesotheritems).
6.5p
Dividends per sharePence
Asadjustedforthesharesplitwhichtookeffecton31January2017.
5.2p
Basic earnings per sharePence
BeingEPSderivedfromoperatingprofitincludingotheritems.
5.4p
Total cash£m
RepresentingJetCardcashandnon-JetCardcash.
£19.8m
Total shareholder return%
Iscalculatedasclosingsharepriceplusdividendslessopeningsharepricealldividedbyopeningshareprice.
50.4%
12 14 15 16 17
227.6211.5
192.1210.8 215.8
12 14 15 16 17
8.1
9.7
4.7
3.03.9
12 14 15 16 17
29.8 29.7
20.423.2
29.5
12 14 15 16 17
4.3
5.7 5.55.9
6.5
12 14 15 16 17
3.6
5.6
4.44.8
5.2
12 14 15 16 17
15.7
18.4 18.819.8 19.8
12 14 15 16 17
5.8 6.05.5
3.7
5.4
12 14 15 16 17
-39.8
120.9
-37.6
31.850.4
Strategic reportCorporate governance
Financial statements
31Air Partner plc | Annual Report and Accounts 2017
AhighpercentageoftheGroup’sbusinessisdrivenbytheshort-termneedsofourcustomers.Alongforward-orderbookisthereforeneitheravailablenorappropriatetouseasameasureofourlonger-termprospects.
Strategic KPIsWeareonajourneyoftransformationtobecomeaworld-classglobalaviationservicesgroup.Thisyear,weidentifiedfourKPIstomeasureourprogress:twofinancialandtwonon-financial.ThefinancialKPIsare:
• optimise:increaseingrossprofitfromlegacyAirPartnerbrokerbusiness
• enhance:thecontributionmadebytheGroup’snewacquisitionstooverallGroupunderlyingprofit.
Ourtwonon-financialKPIsmeasureourtwomostimportantassets–ourcustomersandourpeople:
• customers:netpromoterscore
• people:employeeturnover.
TheseKPIsmaybeamended,oraddedto,aswecontinuetotransform.
1. FinancialKPIsareforthelastfivefinancialperiods,beingthefinancialyearsended31July2012,theunauditedpro-formafinancialyearended31January2014andthefinancialyearsended31January2015,31January2016and31January2017.
2. AllfinancialKPIsarebasedontotalratherthanunderlyingmeasures,exceptforunderlyingprofitbeforetaxandunderlyingbasicearningspershare.
3. Detailedsegmentalreportingissetoutinnote4tothefinancialstatements.
Gross profit£m
Beingthemaindeterminantoftop-lineperformancewithinthebusiness.
£31.7m
Underlying profit before tax%
Beingthemainmeasureoffinancialperformanceusedwithinthebusiness.
£5.1m
ENHANCE
Acquisition contributionto underlying operating profit£m
Thismeasuredemonstratesthecontributiontoprofitsarisingfromourstrategyofintroducingnewservicelinestoourcustomers.
£0.7mCUSTOMERS
Net Promoter Score%
OurNetPromoterScoreiscalculatedbytakingthepercentageofcustomerswhoaredetractors(scoretheGroup’sservice0-6outof10)fromthosewhoarepromoters(scoretheGroup’sservicegreaterthan9outof10).
75%
PEOPLE
Employee turnover%
CalculatedasthepercentageofemployeeswholeavetheGroupduringthefinancialyearandarereplacedbynewemployees.
25%
OPTIMISE
Legacy business increase in gross profit£m
Giventheinherentvolatilityofaircraftchartergrossprofit,weimplementedourCustomerFirstprogrammetodrivecustomerloyalty.Thenetincreasefromyearend2016ismodestsincetheprioryearbenefitedfromaone-offcontract.
£0.3m12 14 15 16 17
21.823.4 22.0
27.3
31.7
12 14 15 16 17
3.2
4.1
2.6
4.3
5.1
32 Air Partner plc | Annual Report and Accounts 2017
2017 performance: divisional reviews
Intheworldofcommercialairlinecharter,successdependsonexperience,expertiseandreputationbuiltoverdecades.AirPartner’sCommercialJetsteamofferslogisticalexcellence,valueformoneyanddependability.
PerformanceTheperiodunderreviewsawCommercialJetsdeliverastrongperformanceinbothEuropeandtheUS.Grossprofitincreasedby5.0%to£14.7m(2016:£14.0m)andunderlyingoperatingprofitimprovedto£3.8m,anincreaseof30.3%(2016:£3.0m).ThiswasdrivenlargelybytheperformanceofAirPartnerRemarketing(formerlyCabotAviation)forafullyear,whilestrongperformancesbytouroperations,sportsandgovernmentclientsinEuropewasabletooffsetthedownturnintheoilandgasmarketintheUK.
IntheUS,despiteareducedflyingschedulefromakeycustomer,webenefitedfromthepresidentialelection,workingonthe‘HillaryforAmerica’campaign.
IntheUK,aone-offmajoroilandgascontractwhichoperatedthroughoutthepreviousfinancialyearcametoanend,butwecontinuedtomakegainsinthesportsmarket,particularlywithanumberofPremiershipfootballteams.
Emergency PlanningOurEmergencyPlanningproduct,wherebywemapoutevacuationcontingenciesforbluechipcompanieswithpersonnelstationedinvolatileregimes,isasubscription-basedserviceandprovidesarecurringincomestream.Thedivisiontypicallyservescompaniesoperatinginunstablepartsoftheglobebutalsoassistscharitieswithcivilemergencyevacuationanddisasterrelief.EmergencyPlanningmetexpectationsfortheyearand,giventheuncertaintiesinthegeopoliticalenvironment,webelievethisbusinessiswellplacedforfuturegrowth.
A strong year for Air Partner Remarketing (formerly Cabot Aviation)AirPartnerRemarketinghadaprofitableyearinitsfirstfullyearofownershipandgoesinto2017withastrongpipelineofmandates.KeysalessuccessesincludedthesaleofthreeKenyaB777stoaUSoperator.Duringtheyear,wealsomovedshort-termleasing(ACMI)intoAirPartnerRemarketingandasaresultithaditsstrongestyearoverthelastfive-yearperiod.TheintegrationofAirPartnerRemarketingintoourofficesatGatwickhasbeenverysmoothandsuccessful.
OurCommercialJetsteamservescustomers24/7
Commercial Jets IncludingAirPartnerRemarketing
Highlights of the year
£14.7mGrossprofit
£3.8mUnderlyingprofit
• StrongperformancesfromEuropeandtheUS
• AirPartnerRemarketingprofitableinfirstfullyearofownership
Strategic reportCorporate governance
Financial statements
33Air Partner plc |AnnualReportandAccounts2017
On the campaign trailHillaryClintonwithSimonMooreofAirPartner
Key fact: REMARKETING
3 777ssold
Key facts: COMMERCIAL JETS
7nationalfootballteams
35footballclubs
34 Air Partner plc | Annual Report and Accounts 2017
2017 performance: divisional reviewscontinued
Private Jets
Aspartofoneoftheworld’slargestsuppliersofaircraftcharter,ourPrivateJetsteamhastheexperience,relationshipsandaviationexpertisetotailorsolutionstomeetourcustomers’exactingneeds.
PerformanceOverall,PrivateJetshasfaredwellthisyear.Mixedresultsfromadhocbusiness,withcorporatecustomersflyinglessoften,wasoffsetbyJetCard,whichhadanotherrecordyear.Grossprofitincreasedby9.3%to£10.2mandunderlyingoperatingprofitroseby4.4%to£2.5m.WehadagreatstarttotheyearintheUK,thoughadhocflyingtailedoffsomewhatinthesecondhalfoftheyear,whileconversely,intheUS,wehadaslowstartandastrongfinish.2017alsosawstrongperformanceforPrivateJetsinEurope,especiallyinGermany.JetCardutilisationhasincreased41%on2016,afantasticachievement.Cardnumbershaveincreasedby13to222althoughJetCarddepositshavedecreasedto£15.9m(2016:£16.8m)reflectingthehigherutilisationintheyear.
Customer First gives us an edgeTheprivatejetmarketisextremelycompetitivebutwebelieveourCustomerFirststrategy,whichdeliversanunrivalledlevelofservice,particularlyforJetCard,togetherwithourfinancialstability,transparencyandsecurity,meanswehaveauniqueproposition.Wehavesomeexcitinginitiativesunderwaywhichwebelievewillfurtherextendourservicesinthisareaanddeliverexceptionalservicestoourcustomers.Wecontinuetomonitortechnologyplatformsintheprivatejetspace,butwefundamentally
believe–andourcustomersseemtoagree–thatuntiltechnologicalcapabilitieshavefurtherdeveloped,complextravelschedulingisbetterhandledbypeopleratherthanmachines.
OurCustomerFirstprogrammeremainspivotaltoouroperationsandwebelieveitaccountsforalargeproportionofourcontinuingsuccess.Byputtingourcustomersfirst,wecontinuetoprovideanunrivalledservice,togetherwithavalueformoneyproposition.Thisformulaisprovingtobegoodforeveryonewhousesourservices,aswellasallourstakeholders.
AspartofourstrategytogrowintheUS,weinvestedinanewofficeinNewYork,withtheaimofgrowingourmarketsharebyhighlightingourproducts’flexibilityandserviceoffering.IncreasedtradeinUSdollarswill,webelieve,helptooffsettheBrexiteffectintheUK.
Developing our offerWehaveinvestedinsalesandhavemadegreaterin-roadsintoEuropewherewealreadyhaveasolidfoothold.Wehavealsostartedtoofferadditionalserviceslikecontrolledcateringandhavereceivedenthusiasticfeedbackfromourcustomerswho,inthisclass,areextremelydiscerningandusedtohighstandards.Furthermore,andasdiscussed,wewentintopartnershipwithCamper&Nicholsons,theluxuryyachtspecialists,inApril2017.
PeteTong,BritishDJ,disembarkingfromoneofourPrivateJetscharters
Highlights of the year
£10.2mGrossprofit
£2.5mUnderlyingprofit
• OpenednewofficeinNewYork
• RecordJetCardutilisation
£15.9mJetCarddeposits
Strategic reportCorporate governance
Financial statements
35Air Partner plc |AnnualReportandAccounts2017
222 JetCardsKey facts: PRIVATE JETS
36 Air Partner plc | Annual Report and Accounts 2017
2017 performance: divisional reviewscontinued
Freight
AirPartner’sFreightteamdeliversbespokeairfreightsolutionstomeetthemostdemandingschedules,reliablyandatthebestpossiblerates.
PerformanceAirPartnerisprimarilyapassengerbusiness,butweseeFreightasastrategic,protectiveofferingwhichallowsustoofferafullaviationservicetocustomers.Fromasmallbase,wecanaddvalue–agoodexamplebeingtheGermanautomotivebusiness.Theyear’sperformanceinthatparticularmarketwasbuoyant,andcomplementsourserviceofferingfromCommercialJetsintheautomotivesector.
However,overall,Freight’sperformancereflectedthehighprioryearcomparable,boostedbyonekeycontract,whichwasnotrenewed.Thedownturnintheoilandgasindustry,whereFreighthastraditionallybeeninvolvedwiththetransportationofheavypipesandotherdrillinggear,alsomeantalessbusyperiod,withgrossprofitof£1.1m(2016:£1.9m)andunderlyingoperatingprofitof£0.2m(2016:£0.8m).Thedivisionisalwayssubjecttotheunpredictabilityofjust-in-timelogistics,frommovingaircraftorautomotivesparestomobilisingatamoment’snoticetoassistindisasterrecovery.
OurFreightteamensuressecure,timecriticaldeliveryofcargoallovertheworld
Highlights of the year
£1.1mGrossprofit
£0.2mUnderlyingprofit
• Challengingyearduetolossofkeycontract
• Remainsastrategicserviceofferingtoourcustomers
Strategic reportCorporate governance
Financial statements
37Air Partner plc |AnnualReportandAccounts2017
Key facts: FREIGHT
445Romanianartefacts
200,000 one-dayoldchicks
38 Air Partner plc | Annual Report and Accounts 2017
2017 performance: divisional reviewscontinued
BainesSimmonsisaworld-leadingaviationsafetyconsultancywhichspecialisesinaviationregulation,complianceandsafetymanagement.ClockworkResearchisaleadingfatigueriskmanagementconsultancy.
PerformanceInitsfirstfullyearofoperation,ourConsulting&Trainingdivisiondeliveredagrossprofitof£5.7mandanunderlyingoperatingprofitof£0.5m,equivalentto10.3%oftheGrouptotal.BainesSimmonsdeliveredgoodresultsinitsfirstfullyearofownership,whileinDecember2016theacquisitionofClockworkResearchstrengthenedourConsulting&Trainingproposition.Overthecomingyear,wehaveanambitiousplanforthecontinuousdevelopmentofSMARRTMAP(SafetyManagementandRiskReductionToolMeasurementandPerformance)whichwillenhanceouroverallpropositionandwhichwillfurtherstrengthentherelationshipbetweenourconsultingandtrainingservices.
Integrating Baines SimmonsTheintroductionofCustomerFirstintoBainesSimmonshasestablishedstrongfoundationsforthefuture.Bystandardisingmanyofourprocesseswecanensuretheconsistenthigh-qualitydeliveryofourproductsandservices.Weconstantlyreviewtheseproductsandservicestoensuretheyarealignedtoourcustomers’needs.
TheintegrationofsharedGroupservicessuchasmarketing,finance,HRandITwaslargelycompletedduringtheyear.
BainesSimmonscontinuedtobenefitfromanumberoflargeandlong-termcustomerprogrammeswhichcutacrossbothconsultingandtrainingproductsandservices,whileourAviationSafetyAcademyexperienceditsbestevermonthlyperformanceinNovember.
Outsourced servicesInApril2016,weannouncedthatwehadbeensuccessfulinsecuringafurther10-yearcontracttoprovideaviationsupportservicestotheIsleofManAircraftRegistry(IOMAR).InJanuary2017,IOMARwasnamedBestGlobalAviationRegistryinWorldCommerceReviewMagazine’s2017awards.IOMARwillcelebrateits10-yearanniversaryinMay2017and,sincelaunch,almost950aircrafthavebeenregistered,highlightingthecontinuedsuccessoftheRegistrywhichisnowthesixthlargestprivate/corporateaircraftregistryintheworld.
Welcoming Clockwork ResearchClockworkResearch,withitssmartinnovationsinfatiguemanagement,isanaturalfitwithBainesSimmonsintermsofsafetycontrolandriskmanagement.
Itstrengthensourofferingandtheopportunitiesaregood.Headedupbyasmallteamofenterprisingacademics,ClockworkResearchisverywellrespectedbymajoroperatorsacrosstheworld.Thebusinessusessystemsmodelstoensurethatpilotsandotheressentialpersonnelaregettingthenecessarysleeptocarryouttheirtaskseffectivelyandsafely.Thepipelineoffutureprojectsisencouraging,andincludesalargeprojectwithafleetoperatorinAsiatocarryoutalarge-scaleresearchstudyandthenhelpthemtobuildafatiguemanagementsystem.Thisisafirstfortheregion.TheBainesSimmonsteamisdrivenbyour
passiontomaketheskiessaferforall
Consulting & Training (BainesSimmonsandClockworkResearch)
Highlights of the year
£5.7mGrossprofit
£0.5mUnderlyingprofit
• AwardedIsleofManAircraftRegistrycontractfor10yearsinApril2016
• AcquisitionofClockworkResearchcompletedinDecember2016
• CustomerFirstprogrammerolledoutacrossBainesSimmons
635,000 milesflownbyconsultants
Strategic reportCorporate governance
Financial statements
39Air Partner plc |AnnualReportandAccounts2017
Key facts: BAINES SIMMONS
467 surveys
4 continents
Director’s approval statement
ThisStrategicreportwasreviewedandapprovedbytheBoardofdirectorson26April2017.
Neil MorrisChiefFinancialOfficer
Strategic reportCorporate governance
Financial statements
41Air Partner plc |AnnualReportandAccounts2017
Corporategovernance
42 Air Partner plc | Annual Report and Accounts 2017
Board of directors
Richard Everitt Independent non-executive Chairman ARC RC NC
RichardqualifiedasasolicitorandbecamedirectoratBAAplcbeforebeingappointedChiefExecutiveofNationalAirTrafficServicesin2001andchiefexecutiveofthePortofLondonAuthorityfrom2004to2014.HejoinedtheBoardasanon-executivedirectorin1995andbecameChairmanin2012.HewasappointedasacommissionerofBelfastHarbourandchairmanoftheDoverHarbourBoardin2016.RichardwillstanddownfromtheBoardaftertheAGMinJune.
Mark Briffa Chief Executive Officer
Markhasanextensiveknowledgeofaircharterbrokingandoftheaviationindustryworldwide,withnearly30years’experienceworkingwithintheaviationsector.BeforejoiningAirPartner,heheldcommercialrolesatAir2000andAllLeisure.HestartedhiscareerwithAirPartnerin1996asaCommercialJetsbrokerandjoinedtheBoardin2006asChiefOperatingOfficer,becomingChiefExecutiveOfficerinApril2010.
Neil Morris Chief Financial Officer
Neilisacharteredaccountant,havingtrainedatDeloitteLLPwherehespent11years,primarilyworkingintheaviationandtravelsector.PriortojoiningAirPartner,hewasgroupfinancedirectorofAllLeisureGroupplc,anAIMtradedtouroperator.HewasappointedChiefFinancialOfficerofAirPartnerinJune2014,havingheldthepositionofinterimChiefFinancialOfficerfromApril2014andGroupFinancialControllerpriortothat.
Peter Saunders Independent non-executive director/Chairman designate ARC RC
PeterjoinedtheBoardinSeptember2014andbecameChairmanoftheRemunerationCommitteeinMarch2015andSeniorIndependentDirectorinJune2016.Peterhasawealthofexperienceinmarketingandcustomerservice.HeisleaddirectorofGodivaChocolatierNV,non-executivedirectorofTotalWines&MoreandwasChiefExecutiveOfficerofBodyShopInternationalplcfrom2002to2008.PastboardexperienceincludesCanadianTireCorporation,JackWillsandSecondCup.AsreportedintheChairman’sstatementonpage4,PeterwillformallytakeoverasChairmanattheconclusionoftheAGMinJune.
Richard Jackson Independent non-executive director ARC RC
RichardjoinedtheBoardon8September2016.HeservedattheCivilAviationAuthorityfor11yearsasgroupdirectorofconsumerprotectionwherehewasinstrumentalintheintroductionofnewATOLregulations.RichardbeganhiscareerwiththeMODin1974beforejoiningthefinancialservicessector.Richardalsoactsasconsultanttoanumberofaviationandtravel-relatedclients.
Shaun Smith Independent non-executive director ARC RC NC
ShaunjoinedtheBoardon1May2016.HebeganhiscareerinretailmanagementandcorporatetreasuryatMarksandSpencerplc.HejoinedAgaRangemasterGroupplc(formerlyGlynwedInternationalplc)in1989,becominggrouptreasurerin1999andgroupfinancedirectorfrom2001to2015.Heisaqualifiedcorporatetreasurer,andhasaneconomicsdegree.ShaunisalsogroupfinancedirectorofNorcrosplc.HewasappointedChairmanoftheAuditandRiskCommitteeinJune2016.
Amanda Wills Independent non-executive director ARC RC NC
AmandajoinedtheBoardon20April2016.AmandabeganhercareerwithAirtoursplcandwasCEOofVirginHolidaysTravelGroupfrom2001to2014.Amandaiscurrentlynon-executivedirectorofeDreamsODIGEOS.A.,aglobalonlinetravelagency,andchairmanofUrbanologie.com,adigitalstart-upbusinesscateringforthehighnetworthandluxurysector.ShewasawardedaCBEintheQueen’s2015NewYearHonourslistforservicestotheBritishtravelindustryandtocharity.
ARCMemberoftheAuditandRiskCommittee
RCMemberoftheRemunerationCommittee
NCMemberoftheNominationCommittee
43Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Senior management
Lee Pyle Group Head of Technology
Justin Scarborough Interim Managing Director, Baines Simmons
Sally Chandler Group Company Secretary
Tony Whitty Head of Aircraft Remarketing and ACMI
Julia Timms Group Marketing Director
Richard Smith Head of Product, Air Partner Broking
Rachel Thripp Group HR Director
Mark Briffa Chief Executive Officer
Neil Morris Chief Financial Officer
Seeopposite.
“�Our�plc�status�is�a�unique�strength,�offering�reassurance�to�our�stakeholders�that�we�operate�to�high�standards�of�governance�and�ethics.”
RICHARD EVERITT Chairman
44 Air Partner plc | Annual Report and Accounts 2017
Chairman’s introduction to governance
UK Corporate Governance Code
TheBoardsupportstheprinciplesandprovisionssetoutintheUKCorporateGovernanceCodeissuedbytheFinancialReportingCouncilinSeptember2014(theCode).OurdutyistomanagetheGroupinaccordancewiththeCode,andwebelievethat,throughouttheyear,theCompanyappliedthemainprinciplesoftheCode,andcompliedwithitsprovisions.WehavestructuredourcorporategovernancereportinlinewiththeCode’sprinciples,andyouwillfindtherelevantcompliancestatementshighlightedineachsection.
Leadership–seepage45
Effectiveness–seepage47,andtheNominationCommitteereportonpage50
Accountability–seepage48,andtheAuditandRiskCommitteereportonpage51
Remuneration–seetheDirectors’remunerationreportpages54to65
Relations with shareholders–seepage49
Dear Shareholder
Asannouncedon2February,IwillbesteppingdownafterfiveyearsasChairman.IamproudtohaveservedasyourChairman,guidingtheBoardandsupportingthemanagementteamduringbothtoughand,Iampleasedtosay,morebuoyanttimesinrecentyears.
Our focus this yearWehavebeenactiveontheacquisitionfrontandaconsiderableamountofoureffortasaBoardhasbeenspentscrutinisingproposalsandduediligencenecessarytoensurethatproposedacquisitionsmeetthehighstandardsourshareholdersexpect.IampleasedtowelcomeClockworkResearch,leadersinfatigueriskmanagement,totheGroup(seepage17).AnotherkeyareaoffocushasbeenIT.TheBoardhasapprovedinvestmentintechnologyplatformsthatwillsignificantlyenhanceourcurrentoperationswhilealsosettingupoursystemstoenableustointegrateouracquisitionsseamlessly.
A new programme of Board visitsWiththeexpandinggeographicalfootprintoftheGroup,forthefirsttimethisyearwedecidedtoholdtwoBoardmeetingsoutsidetheUK,oneinParisandoneinFortLauderdale,Florida.Visitingoursitesandmeetingourpeopleis
enormouslyvaluable;whatwelearnabouttheGroupinashortvisitisworthhoursoftimeintheboardroom.
Board changesDuringtheyear,wewelcomedShaunSmithandAmandaWillstotheBoardasindependentnon-executivedirectors.WealsosaidfarewelltoAndrewWoodatour2016AGMandPeterSaundersreplacedhimasourSeniorIndependentDirector.Laterintheyear,on8September2016,wewelcomedRichardJacksontotheBoard.RichardservedattheCivilAviationAuthorityfor11yearsasgroupdirectorofconsumerprotection,andwasinstrumentalintheintroductionofnewATOLregulationsandtheATOLProtectionContributionandoversawtherestructuringofanumberofmajortouroperators.RichardbeganhiscareerwiththeMinistryofDefencein1974beforejoiningthefinancialservicessector.Richardalsoactsasconsultanttoanumberofaviationandtravel-relatedclients.
FollowingmydecisiontostanddownasChairmanaftertheAGMinJune,theNominationCommitteeconductedaselectionprocessassetoutonpage50.IampleasedthatPeterSaunderswilltakeuptheroleasChairmanaftertheconclusionoftheAGMon28June.
WehaveonceagainundertakenaBoardperformanceevaluationexercise.BecauseofthechangesintheBoard’scompositionduringtheyear,wedecideditwasmoreappropriate,aswellascosteffective,tocarryoutaninternalevaluationratherthananexternallyfacilitatedexercise,asdiscussedonpage50.
IamconfidentthatIwillbeleavingAirPartnerwitharenewedBoardandarevitalisedseniormanagementteam.Ihaveeveryconfidencethattogethertheywillbringtofruitiontheexcitingtransformationjourneysetoutinthisreport.
Richard Everitt Chairman26April2017
45Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Corporate governance report
Leadership
UK Corporate Governance Code
A. LeadershipA.1 The role of the BoardTheBoard’sroleistoprovideentrepreneurialleadershiptotheGroupwithinaframeworkofprudentandeffectivecontrolswhichenablesrisktobeassessedandmanaged.TheBoardsetstheGroup’sstrategicaimsandensuresthatthenecessaryresourcesareinplacetoachievethoseaims.TheBoardmetformallyeighttimesduringtheyear.ThereisaclearscheduleofmattersreservedfortheBoard,togetherwithdelegatedauthoritiesthroughouttheGroup.
A.2 Division of responsibilitiesTherolesoftheChairmanandtheChiefExecutiveOfficerareclearlydefined.TheChairman,RichardEveritt,isresponsiblefortheleadershipandeffectivenessoftheBoard.TheChiefExecutiveOfficer,MarkBriffa,isresponsibleforleadingtheday-to-daymanagementoftheGroupinlinewiththestrategysetbytheBoard.RolesandresponsibilitiesofkeyBoardmembersareavailableonlineatwww.airpartner.com.
A.3 The role of the ChairmanTheChairmansetstheagendasfortheBoardmeetings,managesthemeetingtimetableinconjunctionwiththeCompanySecretaryandpromotesopenandconstructivedebatebetweenexecutivedirectorsandnon-executivedirectorsduringmeetings.
A.4 The role of non-executive directorsTheChairmanactivelyinvitesthenon-executivedirectors’views.Theyscrutinisetheperformanceofmanagementagainstagreedgoalsandprovideobjectiveandconstructivechallengetotheexecutivedirectors.TheyattendanannualstrategydaywiththeOperatingBoardandhelpdevelopproposalsonstrategy.IfadirectorhadaconcernwhichcouldnotberesolvedabouttherunningoftheCompanyoraproposedaction,theywouldensurethattheirconcernswererecordedintheBoardminutes.Thenon-executivedirectorshavediscussionswithouttheexecutivedirectorspresent.
MarkBriffaandNeilMorrisarenotmembersoftheAuditandRiskCommitteeorRemunerationCommitteebutattendmeetingswhenappropriatebyinvitation.Otherseniorexecutivesareregularlyinvitedtoattendmeetingsforspecificitems.
Board meetingsThetablebelowshowstheattendancerecordofindividualdirectorsatBoardmeetingsandrelevantCommitteemeetings.
Numberofmeetings BoardAuditandRisk
CommitteeRemuneration
CommitteeNominationCommittee
Executive directors
MarkBriffa 8 – – –
NeilMorris 8 – – –
Non-executive directors
RichardEveritt 8 4 4 2
RichardJackson1 4 2 1 –
PeterSaunders 8 4 4 1
ShaunSmith1 5 2 2 2
AmandaWills1 7 3 3 2
AndrewWood2 3 1 1 –
1AmandaWills,ShaunSmithandRichardJacksonwereappointedasdirectorson20April2016,1May2016and8September2016respectivelyandthereforeonlyattendedmeetingsfromthedateoftheirappointments.
2AndrewWoodresignedasadirectoron29June2016.
Role of the BoardItistheBoard’sroletoensuretheeffectivedirectionandcontroloftheGroup’sbusinessforthelong-termbenefitofallshareholders.TheapplicationofstandardsofcorporategovernanceappropriatetotheGroup’ssize,profileandcircumstanceisanimportantpartofthatrole.
TheBoardsetsthestrategicaimsoftheGroupandrigorouslyreviewstradingperformanceagainststrategicinitiatives,andagainstfinancialtargetssetatthebeginningoftheyear.TheBoard’sactivitiesduringtheyearhaveincludedtheconsiderationofproposalsinlinewithitsacquisitionstrategyandtheapprovaloftheappointmentofnewmembersto
theBoard.TheBoardmeetsformallyatleastfivetimesayearwithadditionalmeetingsasnecessary.
AformalscheduleofmattersisreservedforBoarddecision,includingformulationanddevelopmentofstrategy,majoracquisitionsordisposals,significantbankborrowings,Board-levelappointments,theapprovaloffinancialreportsandprice-sensitivestatementsandoverallbusinessriskassessment.Acopyofthescheduleisavailableonlineatwww.airpartner.com.
TheBoardreceivesreportsateachmeetingfromtheChiefExecutiveOfficer,theChiefFinancialOfficerand,followingmeetingsofBoardcommittees,fromtheirrespectivechairmen.
46 Air Partner plc | Annual Report and Accounts 2017
Corporate governance report continued
Governance structure: Board and committees
Operating Board Responsibilities
MarkBriffa,ChairNeilMorrisLeePyleJustinScarboroughRichardSmithJuliaTimmsRachelThrippTonyWhitty
TheOperatingBoardhascollectiveresponsibilityforrunningtheGroup’sbusinessundertheleadershipoftheChiefExecutiveOfficer
•ImplementingtheGroup’sstrategyapprovedbytheBoard•RecommendingcapitalexpenditureandinvestmentbudgetsforBoardapproval•Monitoringfinancial,operationalandserviceperformance•AllocatingresourcesasagreedbytheBoard•Planninganddeliveringmajorprogrammes•Reviewingtheseniortalentbaseandsuccessionplans
Remuneration Committee
PeterSaunders,ChairRichardEverittRichardJacksonShaunSmithAmandaWills
Responsibilities
•DeterminingandagreeingwiththeBoardthepolicyforremunerationoftheChiefExecutiveOfficerandChiefFinancialOfficer
•Reviewingtheongoingappropriatenessandrelevanceoftheremunerationpolicyincomparisonwithindustrybenchmarksandlevelsofremunerationinthebusinessasawhole
•Approvingthedesignandtargetsofperformance-relatedpayandshareincentiveplansandawardsmadetoexecutivedirectorsandperformancetargetstobeused
Readmoreonpage54
Audit and Risk Committee
ShaunSmith,ChairRichardEverittRichardJacksonPeterSaundersAmandaWills
Responsibilities
•Reviewingfinancialreporting,focusingontheappropriatenessofaccountingpoliciesandjudgementsandinclusionofrelevantdisclosures
•Assessingtheeffectivenessofinternalcontrolsandriskmanagementsystemsandtheriskmanagementprocess
•Reviewingthescopeandeffectivenessofinternalauditprocesses
•Overseeingtherelationshipwiththeexternalauditorandtheeffectivenessoftheexternalauditprocess
Readmoreonpage51
Nomination Committee
RichardEveritt,ChairPeterSaunders
Responsibilities
•ConsideringthecompositionoftheBoardasawholeandtherangeofskills,knowledgeandexperienceofthedirectors
•Planningandcarryingoutappropriatesuccessionasdeemednecessary
•Reviewingthere-appointmentofnon-executivedirectorsattheexpirationofthetermsetoutintheirappointmentletters
Readmoreonpage50
Chief Executive
MarkBriffa
The Board Responsibilities
RichardEverittChairman
TheBoardcarriesultimateresponsibilityfortheeffectivedirectionandcontroloftheGroup’sbusinessandisaccountabletoshareholdersforthelong-termsuccessoftheGroup.Thisisachievedthrough:
•settingthestrategicobjectivesoftheGroup•approvingstrategicprojectsandGroupanddivisionalbudgets•ensuringthattheGrouphasaneffectiveriskmanagement•reviewingtradingperformanceagainstfinancialtargetssetatthestartofthe
financialyear.
Leadershipcontinued
47Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
UK Corporate Governance Code
B. EffectivenessB.1 The composition of the BoardWhenmakingappointmentstotheBoard,theBoardandtheNominationCommitteeconsiderthewiderangeofskills,knowledge,experienceandindependencerequiredtomaintainaneffectiveBoard.
B.2 Board appointmentsTheBoardisresponsiblefortheappointmentofexecutivedirectors.Successionplanningandtheappointmentofnewnon-executivedirectorstotheBoardisledbytheNominationCommittee.TheNominationCommitteereportisonpage50andgivesdetailsoftherecruitmentprocessandappointmentofRichardJacksonasindependentnon-executivedirectoron8September2016.AstheChairmanshouldnotchairthenominationcommitteewhenitisdealingwiththeappointmentofasuccessortothechairmanship,asub-committeeoftheNominationCommitteeconductedtheChairmansuccessionprocessandrecommendedtotheBoardthatPeterSaundersbeappointedasthenew
Chairman.TheBoardapprovedtherecommendationandtheappointmentofPeterSaundersasChairmanwilltakeeffectimmediatelyfollowingtheconclusionofthe2017AGMon28June.
B.3 CommitmentWhenappointed,directorsareinformedofthetimecommitmentexpectedfromthem.Acopyofthetermsandconditionsoftheappointmentofthenon-executivedirectorsisavailableforinspectionattheCompany’sregisteredofficeduringnormalbusinesshoursandattheAGM.
B.4 DevelopmentNewlyappointedBoardmembersreceiveafullandtailoredinduction.Followingthisinduction,meetingsarearrangedwithkeyexecutivesandmanagerswithinthebusinesstoprovideongoingeducationandinformationaboutthebusinessandeachnon-executivedirectorattendsoneOperatingBoardmeetingeachyear.AlldirectorsattendanannualStrategyDaywiththeOperatingBoardandotherseniormanagers.
B.5 Information and supportTheChairman,inconjunctionwiththeCompanySecretary,ensuresthatallBoardmembersreceiveaccurateandtimelyinformation.TheBoardensuresthatalldirectorshaveaccesstoindependentprofessionaladviceattheCompany’sexpensewheretheyjudgeitnecessarytodischargetheirresponsibilitiesasdirectors.AlldirectorshaveaccesstotheadviceandservicesoftheCompanySecretary.
B.6 Board evaluationDuringtheyear,theBoardanditscommitteesundertookanevaluationoftheirperformance.Thenon-executivedirectorsareresponsibleforperformanceevaluationoftheChairmantakingintoaccounttheviewsoftheexecutivedirectors.
B.7 Re-election of the directors AlldirectorsaresubjecttoelectionbyshareholdersatthefirstAGMaftertheirappointmentandtoannualre-electionthereafter.
Composition of the BoardThecompositionoftheBoardisshownonpage42.
Board changesAsstatedinthe2016AnnualReport,AndrewWoodresignedasanon-executivedirectoroftheCompanyattheconclusionoftheAGMon29June2016.Duringtheyear,thefollowingappointmentsweremadetotheBoard:
• AmandaWillson20April2016• ShaunSmithon1May2016• RichardJacksonon8September2016.
FollowingAndrew’sretirementfromtheBoard,PeterSaunderswasappointedasSeniorIndependentDirectorandShaunSmithwasappointedChairmanoftheAuditandRiskCommittee.
After12yearsontheBoardandfiveyearsasChairman,RichardEveritthasdecidedtostepdownasChairmanandthereforewillnotstandforre-electionatthe2017AGM.Fulldetailsregardingtheprocesstoselecthissuccessortogetherwiththeappointmentofthenewnon-executivedirectorsaresetoutintheNominationCommitteereportonpage50.
Independence of non-executive directorsTheBoardconsidersallthenon-executivedirectorstobeindependent.Giventheirrelativelysmallshareholdings,theBoarddoesnotbelievethattheseimpactontheindependenceofRichardEveritt,PeterSaundersorShaunSmith.
Board performance evaluationTheCompanycontinueseachyeartoevaluatetheperformanceoftheBoardanditscommittees.BecauseofthechangesintheBoard’scompositionduringtheyear,itwasdecidedthatitwasmoreappropriate,aswellascosteffectiveandpragmatic,tocarryoutaninternalreviewratherthananexternallyfacilitatedevaluationexercise.ThereforetheBoard’seffectivenesswasassessedinternallybywayofaquestionnairecompletedbyBoardmembers.TheresponsestothequestionnaireswereevaluatedbytheChairmanandtheCompanySecretaryandareportwaspreparedfortheBoard.
TheBoardconfirmsitsbeliefthatalldirectorsbringsignificantvaluetothebusiness,areeffectiveinBoarddecisionmakingandshowtheappropriatelevelofcommitmenttotheirroles.
Election and re-election of directorsFollowinghisappointmenttotheBoardon8September2016,RichardJacksonwillstandforelectionatthisyear’sAGM.TheBoardrecommendstheelectionofRichardJacksonaslistedintheseparateNoticeofAnnualGeneralMeeting.
Inaccordancewithbestpractice,allotherdirectorswillresignatthe2017AGMandstandforre-election,withtheexceptionofRichardEverittwho,aspreviouslyexplained,isstandingdownfromtheBoard.
Effectiveness
48 Air Partner plc | Annual Report and Accounts 2017
Corporate governance report continued
UK Corporate Governance Code
C. AccountabilityC.1 Financial and business reportingTheBoardisresponsibleforpreparingfair,balancedandunderstandablefinancialinformation.Thestrategicreportissetoutonpages1to39inclusiveandthisprovidesinformationabouttheperformanceoftheGroup,thebusinessmodel,strategyandtherisksanduncertaintiesrelatingtotheGroup’sbusiness.
C.2 Risk management and internal control systemsTheBoardsetsoutthenatureandextentofthesignificantrisksandmaintainssoundriskmanagementandinternalcontrolsystems.FurtherinformationonriskmanagementandinternalcontrolsystemsissetoutintheAuditandRiskCommitteereportonpages51to53.
C.3 The role of the Audit and Risk CommitteeTheactivitiesoftheAuditandRiskCommittee,whichassiststheBoardwithitsresponsibilitiesformonitoringandreviewingtheeffectivenessofinternalcontrolandriskmanagementsystems,internalauditandtheexternalauditor,aresetoutintheAuditandRiskCommitteereportonpages51to53.ThetermsofreferenceoftheAuditandRiskCommitteeareavailableonlineatwww.airpartner.com.TheAuditandRiskCommitteeasawholehascompetencerelevanttothesectorinwhichtheCompanyoperates.
Risk management and internal controlDuringtheyear,thefullBoardwasresponsiblefortheGroup’ssystemofriskmanagementandinternalcontrolandforreviewingitseffectiveness,thoughreportsareprovidedinthefirstinstancetotheAuditandRiskCommitteebytheChiefFinancialOfficer.TheBoardhasestablishedanongoingprocessforidentifying,evaluatingandmanagingsignificantrisk.ThisprocessisreviewedregularlybytheBoard.
Thekeyinternalproceduresinplacefortheyearended31January2017anduptothedateofapprovaloftheAnnualReportareasfollows:
• adetailedandcomprehensiveannualbudgetisproducedandformallyapprovedbytheBoard
• theBoardmaintainsascheduleofkeymattersreservedforitsapproval,whichincludefinancingandchangestobankingarrangements,allsignificantcapitalexpenditureandallacquisitionsanddisposals
• boththeBoardandtheOperatingBoardreceivemonthlyfinancialreports,showingtheperformanceofeachdivisionandcountry,withrelevantcommentariestohighlightvariancefrombudgetorparticularareasofconcern
• businessperformancereportsarecirculatedtotheOperatingBoardonaweeklybasisforsalesbookings,andmonthlytomonitoroverallperformance
• clearlydefinedauthoritylimitsandcontrolsareinplaceovercontractsigninglimits,purchasingcommitmentsandtheextensionofcredittoclients;inparticular,brokersoperatewithinindividual,pre-setlimitsofauthorityandonlythosestaffwhohavesuccessfullycompletedasix-monthprobationaryperiodcansignchartercommitmentsonbehalfoftheGroup.Adherencetotheselimitsandcontrolsaretestedonanongoingbasisaspartoftheinternalauditprocess
• eachoftheGroup’smajorofficesisvisitedatleastonceayearbyaseniormemberofthefinanceteam
• theCompanyhasarobustriskmanagementprocessthatfollowsasequenceofriskidentification,assessmentofprobabilityandimpact,andassignsanownertomanagemitigationactivities.AriskregisterismonitoredbyseniormanagementandreportedtotheAuditandRiskCommittee.Theriskregisterandthemethodologyappliedisthesubjectofcontinuousreviewbyseniormanagementandupdatedtoreflectnewanddevelopingareaswhichmightimpactbusinessstrategy.TheAuditandRiskCommitteeactivelyreviewstheriskregisterandassessestheactionsbeingtakenbyseniormanagementtomonitorandmitigatetherisks.ThoseriskswhichareconsideredtobetheprincipalrisksoftheGrouparepresentedonpages18to21
• theGroupdoesnottradespeculativelyinderivatives.Otherthanforwardforeignexchangecontracts,theGroupdoesnotusecomplextreasuryinstrumentsinthenormalcourseofbusinessandanyspecificprojectsthatmayinvolvesuchinstrumentsrequireBoardapproval.
TheBoardconfirmsthatithascompliedwiththeCodewithregardtoitsresponsibilitiesrelatingtoriskmanagementandinternalcontrols.
ThedirectorsreviewedtheeffectivenessoftheGroup’sinternalcontrolandriskmanagementsystemsduringtheyear.Intheirreview,whichcoveredallmaterialcontrolsincludingfinancial,operationalandcompliancecontrols,thedirectorsconsideredthenatureoftheGroup’sbusiness,theriskstowhichthatparticularbusinessisexposed,thelikelihoodofsuchrisksoccurringandthecostsofprotectingagainstthem.However,suchasystemisdesignedtomanageratherthaneliminatetheriskoffailuretoachievebusinessobjectives,andcanonlyprovidereasonable,andnotabsolute,assurance.
WhistleblowingAwhistleblowingpolicyisinplaceacrosstheGrouptoenablemembersofstafftobringtotheattentionofanydirectorseriousmattersoffinancialmisconductwhichtheybelievewoulddamagetheperformanceorreputationoftheCompany.
Accountability
49Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
UK Corporate Governance Code
E. Relations with shareholdersE.1 Shareholder contactTheBoardvaluesopportunitiestomeetwithshareholdersandiskeptinformedofshareholderviews.
E.2 Annual General MeetingTheBoardwelcomestheopportunitytoengagewithshareholdersattheAnnualGeneralMeeting.AlldirectorsattendtheAGMandareavailabletoanswerquestionsbefore,duringandafterthemeeting.
TheBoardrecognisestheimportanceofeffectivecommunicationwithshareholders,analystsandthefinancialpressandiskeentogainanunderstandingoftheviewsofbothinstitutionalandprivateindividualshareholders.ThisisconductedprimarilythroughmeetingsoftheChiefExecutiveOfficerandChiefFinancialOfficerwithanalystsandsignificantshareholdersfollowingboththeinterimandpreliminaryannouncementsoftheresultsoftheGroup,andtheChairmanandSeniorIndependentDirectorareavailableifrequested.FeedbackofshareholdermeetingsisprovidedviatheGroup’scorporatestockbroker.
TheBoardexercisescaretoensurethatallinformation,includingthatwhichispotentiallypricesensitive,isreleasedtoallshareholdersatthesametime,inaccordancewithapplicablelegalandregulatoryrequirements.
Annual General MeetingTheCompanywelcomestheparticipationofshareholdersatitsAnnualGeneralMeeting.TheChairmenoftheBoardanditsCommitteeswillbeavailableattheAGMtoanswerquestionsthatmightarise.Duringtheyearunderreview,theAGMwasheldinJune2016andeachmemberoftheBoardattendedandwasavailabletotakequestions.AllshareholdersareentitledtovoteontheresolutionsputtotheAGMandallvotescastarecounted,whetherinpersonorbyproxy,bymeansofapolloneveryresolutionintheNoticeofAGM.Theresultsofthevotesontheresolutions,includingthenumberofvotesforandagainsteachresolutionandthenumberofsharesforwhichthevotewasdirectedtobewithheld,aregivenatthemeeting.TheyaremadepublicbymeansofanannouncementthroughaRegulatoryNewsServiceandpublishedontheCompany’swebsite.
The2017AGMwillbeheldat11amonWednesday28Juneat2CityPlace,BeehiveRingRoad,Gatwick,RH60PA.TheCompanyconfirmsthatitwillsendtheNoticeofAGMandrelateddocumentationtoshareholdersatleast20workingdaysbeforethemeeting,eitherbypost,tothoseshareholderswhopreferapapercopy,orbyemailtothoseshareholderswhohaveagreedthattheCompanycancommunicatewiththemelectronically.BoththeNoticeofAGMandtheProxyformareavailabletodownloadfromtheInvestorssectionontheCompany’swebsite.
Website informationAllshareholdersandpotentialshareholderscanaccessinvestor-relatedinformationontheshareprice,corporategovernance,annualreports,presentationstoinvestors,AGMdocumentation,regulatorynewsandotherinformationaboutAirPartnerintheInvestorssectionoftheCompany’swebsite,www.airpartner.com.Thissitealsoprovidescontactdetailsforanyinvestorrelatedqueries.
Relations with shareholders
50 Air Partner plc | Annual Report and Accounts 2017
Dear Shareholder
TheprincipalpurposeoftheNominationCommittee(theCommittee)istoleadtheprocessfortheappointmentofnewnon-executivedirectorstotheBoard.
MembershipwillvarybutthetermsofreferencefortheCommitteehavebeenagreedbytheBoardandareavailableonlineatwww.airpartner.com.TheCommitteeismadeupofthreedirectors,includingoneexecutivedirector.
Whenproposingappointmentsofnon-executivedirectors,theCommitteeconsiderstheindependence,skills,knowledgeandexperiencethatacandidatepossessescomparedtotheskillsetsandexperienceoftheBoardasitcurrentlystands.SelectionofcandidatesalsotakesintoconsiderationthebreadthofknowledgethattheBoardhasandthatitmayrequiretoprovideawell-balancedenvironmentwhichencouragesscrutinyandappropriatechallengeofexecutivemanagement.
Changes to non-executive rolesAssetoutinthe2016AnnualReport,theNominationCommitteemadeupofmyself,PeterSaundersandMarkBriffarecommendedtotheBoardthatAmandaWillsbeappointedasanon-executivedirector.AmandawasappointedtotheBoardwitheffectfrom20April2016.
FollowingAndrewWood’sdecisiontostepdownasanon-executivedirectorafterthe2016AGM,theCommitteealsosoughtanon-executivedirectorwiththeappropriateexpertisetoreplaceAndrewasChairmanoftheAuditandRiskCommittee.Followingconsultationwithitsadvisers,anumberofrecommendationswereputforwardandaftercarefulconsiderationofcandidatesagainstcriteriaandinterviewsbyeachmemberoftheCommitteeandtheChiefFinancialOfficer,theCommitteerecommendedtotheBoardthatShaunSmithbeappointedasanon-executivedirector.ShaunjoinedtheBoardon1May2016andwasappointedChairmanoftheAuditandRiskCommitteeon29June2016.
Laterintheyear,theNominationCommitteemadeupofmyself,PeterSaundersandMarkBriffamadeadecisiontoseekafurthernon-executivedirectorwithexpertiseintheaviationsectortoassisttheBoardinitsacquisitionstrategy.TheCommitteeconsultedwithitsadviserstoobtainrecommendationsforsuitablecandidates.AfterconsiderationofcandidatesagainstcriteriaandinterviewswitheachmemberoftheCommitteeandthewiderBoard,theCommitteerecommendedtotheBoardthatRichardJacksonbeappointedasanon-executivedirector.RichardwasappointedtotheBoardon8September2016.
Chairman successionAsannouncedon2February,IwillstanddownfromtheBoardaftertheAGMinJune2017.TheNominationCommitteeappointedasub-committeetoconductaprocesstoselectanewChairman.Itcomprisedourindependentnon-executivedirectorsShaunSmithandAmandaWills,whoappointedexternalsearchconsultants,RidgewayPartners,tosupportthem.Thesub-committeepreparedadetailedspecificationfortheroleofChairman,specifyingtheskills,knowledge,experienceandattributesrequired.Theythenconductedarobustprocessinvolvingdiscussionswithexistingdirectorsandadvisers,followedbyinterviewswiththepotentialcandidates.RidgewayPartnersalsocarriedoutdetailedresearchintothecandidatesandmaderecommendationstothesub-committee.Thedecision-makingprocessdidnotinvolvemyself,PeterSaunderswhowasacandidate,ortheChiefExecutiveOfficer,MarkBriffaashewillreporttothenewChairman.
Followingthisprocess,theCommitteerecommendedtotheBoardthatPeterSaundersbeappointedasChairmanandtheBoardapprovedtherecommendationon26April2017.
Peterhasbeenanon-executivedirectoroftheCompanysinceSeptember2014,ChairmanoftheRemunerationCommitteesinceMarch2015andSeniorIndependentDirectorsinceJune2016.HewilltakeuptheroleofChairmanimmediatelyaftertheAGMon28June2017.
DiversityTheCompanyisateammadeupofpeoplewithabroadrangeofbackgrounds.OurpolicyistoensurethatthebestcandidateisselectedtojointheBoard;thispolicywillremaininplacegoingforwardandtheBoarddoesnotintendtoadoptaquotasystemwithprescriptive,quantitativetargets.Instructionstoanyexternaladviserconductingasearchforappropriatecandidatesrequirethemtosearchforcandidatesfromasmanydifferentbackgroundsaspossible.
Richard Everitt Chairman26April2017
Nomination Committee report
51Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Dear Shareholder
TheAuditandRiskCommittee(theCommittee)supportstheBoardinmaintainingsoundinternalcontrolandriskmanagementprocedures.Itisresponsibleforensuringthatappropriatecorporatereporting,riskmanagementandinternalcontrolsystemsareappliedthroughouttheGroupandreportsregularlytotheBoard.
TheCommittee’sprincipaldutiesaretomonitortheintegrityoftheCompany’sfinancialstatements,toreviewtheconsistencyof,andanychangesto,accountingpoliciesandstandards,toreviewonbehalfoftheBoardtheeffectivenessofauditproceduresandtheworkoftheinternalandexternalauditorandtomonitoronbehalfoftheBoardthesystemsforriskmanagementandinternalfinancialcontrol.TheBoardasawholeisresponsibleforinternalcontrolandriskmanagement.TheCommitteeisrequiredtoreportitsfindingstotheBoard,makinganynecessaryrecommendationsforactionorimprovements.
TheCommitteereviewedandreviseditstermsofreferenceduringtheyearunderreview.ItstermsofreferencecanbefoundontheCompany’swebsitewww.airpartner.com.
Robust review of riskTheCommitteeactsonbehalfoftheBoardtoreviewtheeffectivenessoftheinternalcontrolsystemandriskmanagementprocessesonaregularandongoingbasis.
TheCommitteeundertookthisreviewprocessthroughouttheyearandsubsequenttothebalancesheetdatetoincludethedateofapprovalofthisAnnualReport.
Ateachmeeting,theCommitteereceivesanupdatefromtheCFOonanymaterialmatterstogetherwithareportfromtheGroup’sinternalauditprocess.Theexternalauditor,DeloitteLLP,presentsitsfindingstotheCommitteetwiceayear,specificallyafterthehalf-yearreviewandfollowingtheyear-endauditprocess.IssuesreviewedbytheCommitteearedetailedbelow.
MembershipTheCommitteeismadeupofthenon-executivedirectors:
ShaunSmith(Chairman)RichardEverittRichardJacksonPeterSaundersAmandaWills
ShaunSmithwasappointedtotheCommitteeonhisappointmentasanon-executivedirectoron1May2016andappointedasChairmanoftheCommitteeon29June2016whentheformerCommitteeChairman,AndrewWoodsteppeddownasanon-executivedirector.RichardJacksonjoinedtheCommitteeafterhisappointmentasanon-executivedirectoron8September2016.
TheBoardissatisfiedthatCommitteemembershavetheappropriatelevelofexpertisetofulfilitsTermsofReference.TheChairman,ShaunSmith,aqualifiedCorporateTreasurerwithanHonoursdegreeinEconomics,isconsideredtohaverecentandrelevantfinancialexperience.TheCommitteeasawholeisconsideredtohavecompetencerelevanttotheaviationandtravelsector.Biographiesofthenon-executivedirectorsaresetoutonpage42.
Althoughnotmembers,theexternalauditor,DeloitteLLP(Deloitte),theChiefExecutiveOfficerandtheChiefFinancialOfficerarenotifiedofallmeetingsandmayattendbyinvitation.Ateachmeeting,theCommitteehastheopportunitytotalktotheexternalauditorwithouttheCEOortheCFObeingpresent.Deloitteattendedallmeetingsduringtheyear.
MeetingsTheattendanceofdirectorsatthemeetingsoftheCommitteeissetoutonpage45.TheCommitteemetfourtimesduringtheyear.
Inadditiontoreviewingtheinterimandannualresultsannouncementsinadvanceofpublicationandplanningfortheannualstatutoryaudit,theCommitteehasfocusedontheprocessforriskmanagementandcontinuestoreviewinternalcontroldevelopments.
Significant issues related to the financial statementsThesignificantaccountingandauditmattersconsideredbytheCommitteeanddiscussedwiththeexternalauditorduringtheyearandinrelationtothe31January2017yearendwere:
Roll-out of new contract approval policyAsaresultofthechangeinrevenuerecognitionpolicyadoptedinthefinancialyearended31January2016,theGrouphasundertakenafullreviewofitscontractapprovalpolicyresultinginthelaunchofanewpolicyduringtheyeartoensurecontractsthatareprincipalinnaturecanbeidentifiedbymanagement.Giventhisnewpolicywasadoptedduringthefinancialyear,managementhavealsoappliedaretrospectivereviewprocesstoensuresuchcontractsarecaptured.
Revenue recognitionDuringthepreviousyear,thedirectorsreviewedtheGroup’srevenuerecognitionmethodologywiththeconclusionbeingthatitwasmoreappropriatetorecognisethemajorityoftheGroup’scontractsonanagencybasis.Thenewcontractapprovalpolicy,asdescribedabove,wasintroducedasawayofensuringanycontractsthatareprincipalinnaturearecapturedappropriatelybymanagement.
Audit and Risk Committee report
52 Air Partner plc | Annual Report and Accounts 2017
The completeness of provisions against operator prepayments ItisAirPartner’spolicytonegotiatecontracttermswithaircraftoperatorswhichminimisedepositpaymentsandalignthefinalflightpaymentwiththeflightdateascloselyaspossible.Inaddition,AirPartner’sinternalqualitycontrolfunctionassessesaircraftoperatorspriortoselectiontoensurethatonlyoperatorsofthehighestqualityareused.Furthertoensuringthecompletenessoftheprovisionsagainstpre-payments,theCommitteesoughttoensurethatthecontrolprocedurespertainingtotheauthorisationofpaymentstooperatorswerecompliedwithviatheinternalauditprocess.
Completeness of operator accrualsWhenrevenuesandcostsforairchartercontractsareinitiallyrecognised,estimatesmayneedtobemadeinordertoaccrueitemsofincomeandexpenditurethathavenotbeeninvoiced.Theseestimatesmaydifferfromtheactualoutcome.JudgementisexercisedwhenassessingthelevelofprovisionsnecessaryandtheCommitteerequiresthatprudentbutreasonablediscretionisexercisedonmattersofjudgement.TheCommitteedeterminedthatthelevelofaccrualswasreasonablefollowingadetailedreviewofthecontrolsandthelevelofaccrualsinrelationtotradingactivityintheperiodbeforeyearend.
Finalisation of purchase price allocation relating to the acquisition of Baines Simmons LimitedDuringthepreviousfinancialyear,theGroupacquiredBainesSimmonsLimited.Thereissignificantjudgementrequiredinthevaluationoftheintangibles,andaccordinglytheinitialrecognitionwasmadeonaprovisionalbasis.Thepurchasepriceallocationwasrevisedduringtheyear,whichresultedinachangetothevaluesofintangiblesandgoodwillrecognised.Athird-partyspecialistwasengagedtoperformboththeinitialandsubsequentpurchasepriceallocation.
The valuation of goodwill and intangible assets created through acquisitionsDuringtheyear,therewasapotentialindicatorofimpairmentintheconsultingandtrainingcashgeneratingunit(CGU)ofBainesSimmonsLimited.Havingperformedafullimpairmentreviewexercise,itwastheviewofmanagementthatnoimpairmentofthegoodwillorotherintangiblesrelatedtothisCGU.Therewerenoissuesarisingfromanyotherimpairmentreviewperformedinrespectofothergoodwillorintangibleassets.
External auditDeloittewasappointedastheGroup’sexternalauditorin2011.TheGroup’scurrentauditengagementpartnerwasappointedduringtheperiodended31January2014,withthenextpartnerrotationbeingdueafter31January2018.Thetimingofacompetitivetenderwillcontinuetobeassessedonanannualbasis,consideringtheresultsoftheannualeffectivenessreview.
Priortotheauditbeingconducted,theCommitteeconsideredthecontentandscopeofauditworkandtheauditfees
proposedbyDeloitteanddiscussedchangesinaccountingpoliciesandnewdevelopmentswithinthebusinesswhichmightaffectfinancialreportinggoingforward.AformalreportreceivedfromDeloitte,inrespectoftheauditandmattersarisingfromthereportwasdiscussedpriortotheBoard’sapprovalofthefinancialstatements.
TheCommitteeisawareoftheneedtosafeguardtheauditor’sobjectivityandindependenceandtheissueisdiscussedannuallybytheCommitteeandperiodicallywiththeauditengagementpartnerfromDeloitte.Inadditiontothis,policiesontheawardofnon-auditworktotheexternalauditorexist.Duringtheyearended31January2017,feesof£26,000werepaidtoDeloitteinrespectofnon-auditservices.Ofthisamount,£22,000wasinrespectofaudit-relatedassuranceservices.
InassessingtheeffectivenessoftheexternalauditprocessbytheCommittee,theauditorswereaskedtoarticulatethestepsthattheyhavetakentoensureobjectivityandindependence.Thisyear,theCommitteereviewedandchallengedtheexternalauditplantoensurethathavingidentifiedpotentialareasofrisks,Deloittewouldemployeffectiveauditprocedurestoexaminethem.TheCommitteemonitorstheauditors’performance,behaviourandeffectivenessduringtheexerciseoftheirduties,whichinformstheCommittee’sdecisiontorecommendreappointmentonanannualbasis.
External auditor effectivenessTheCommitteereviewstheeffectivenessoftheexternalauditorwiththeCFOattheendofeachauditperiod.TheCommitteehasbeguntheprocessofformallyassessingDeloitte’seffectivenessbyaskingmembersoftheCommittee,theCFOandindividualswhohaveworkedwithDeloitteduringtheyearunderreviewtoprovidetheirfeedback.
DeloittehasindicateditswillingnesstocontinueinofficeandtheCommitteehasrecommendedDeloitte’sappointmenttotheBoard.AresolutiontoreappointDeloittewillbeproposedatthe2017AGM.
Internal auditDuringtheyearended31January2017,theresponsibilitiesoftheinternalauditrolewereextendedtoincludeauditsrelatingtotheGroup’sISOcertification.
ThefindingsoftheinternalauditworkprogrammearepresentedtotheCommitteeforreview.TheinternalauditfunctionisnotfullyindependentofmanagementasitiscurrentlystaffedbyseniormembersoftheGroupfinancefunction.Althoughnotindependent,theseniormembersoftheGroupfinancefunctionwhoundertaketheworkareconsideredappropriatelyqualifiedtoundertakethiswork.
Nosignificantdeficienciesinthesystemofinternalcontrolswereidentifiedfollowingtheinternalauditreview.
Audit and Risk Committee report continued
53Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Internal audit effectivenessTheCodeandtheCommittee’stermsofreferencerequiretheCommitteetomonitorandreviewtheeffectivenessoftheCompany’sinternalauditprocesses.TheCommitteeissatisfiedthattheinternalauditfunctionfulfilleditsobjectivesfortheyear.
WhistleblowingTheCommitteereviewedtheGroup’swhistleblowingpolicy,knownastheConcernatWorkPolicy,whichisinplacetoenablemembersofstafftoraiseconcernsaboutpossibleimproprietiesinmattersoffinancialreportingorothermatterswhichtheybelievewoulddamagetheperformanceorreputationoftheCompany.
Fair, balanced and understandableTheBoardsoughtadvicefromtheCommitteethattheinformationpresentedinthisAnnualReport,whentakenasawhole,isfair,balancedandunderstandableandcontainstheinformationnecessaryforshareholderstoassesstheGroup’sperformance,businessmodelandstrategy.
ThestepstakenbytheCommittee,oronitsbehalf,toprovidethisadvicetotheBoardincludedsettingupacommitteeofseniorindividualswithintheGrouptodrafttheAnnualReport,witheachoftheseindividualshavingresponsibilityfortheproductionofcertainsectionsofthedocument.
TheBoardrequestedthattheCommitteeadviseonwhetheritbelievestheAnnualReportandAccounts,takenasawhole,isfair,balancedandunderstandableandprovidestheinformationnecessaryforshareholderstoassesstheCompany’spositionandperformance,businessmodelandstrategy.TheCommitteehasadvisedtheBoardaccordingly.
Discharge of responsibilitiesDuringtheyear,theCommitteehascontinueditsdetailedscrutinyoftheappropriatenessoftheGroup’ssystemofriskmanagementandinternalcontrols,andtherobustnessandintegrityoftheGroup’sfinancialreporting,alongwithboththeinternalandexternalauditprocesses.
TheCommitteehasdevotedsignificanttimetoreviewingtheseareas,whichareintegraltotheGroup’scoremanagementandfinancialprocesses,aswellasengagingregularlywithmanagement.
TheCommitteehas,wherenecessary,takeninitiativeinrequestinginformationinordertoprovidetheappropriateconstructivechallengeforitsrole.Duringthecourseoftheyear,theinformationthattheCommitteehasreceivedhasbeentimelyandclearandhasenabledtheCommitteetodischargeitsdutieseffectively.
ApprovalOnbehalfoftheAuditandRiskCommittee.
Shaun Smith ChairmanoftheAuditandRiskCommittee26April2017
Compliance statements
Viability statementInaccordancewithprovisionC.2.2oftheCode,theBoardaddressedtheprospectsoftheCompanyoveraperiodlongerthanthe12monthsrequiredbythegoingconcernprovision.TheBoardconductedthisreviewforaperiodofthreeyears,whichwasselectedforthefollowingreasons:
•theGroup’sstrategicplancoversathree-yearperiod
•thevariabilityofearningsmeansthatforecastingbeyondthreeyearsismoresubjective,hencetheBoardbelievesathree-yearperiodisthemostappropriate.
Thethree-yearstrategicplanconsiderstheGroup’scashflows,forecastedunderlyingprofit,covenantcomplianceandinvestmentsintechnology.Thesemetricsaresubjecttosensitivityanalysiswhichinvolvesconsiderationofdownsidescenarios.Wherepossible,thisanalysisiscarriedouttoevaluatethepotentialimpactoftheGroup’sprincipalrisks.
Thethree-yearplanisunderpinnedbyregularBoardbriefingsprovidedbythebusinessunitheadsandthediscussionofanynewstrategicinitiativesundertakenbytheBoardinitsnormalcourseofbusiness.
Basedontheresultsofthisanalysis,theBoardhasareasonableexpectationthattheCompanywillbeabletocontinueinoperationandmeetitsliabilitiesastheyfalldueoverthethree-yearperiodoftheassessment.
Going concernHavingconsideredtheGroup’scurrentfinancialposition,thefactorsaffectingitscostbase,thestateoftheaircharterandaviationconsultancymarketasawholeandforecastsforaperiodofnotlessthan12monthsfromthedateofapprovalofthesefinancialstatements,thedirectorsaresatisfiedthattheGroupandCompanyhaveadequateresourcestocontinueinbusinessfortheforeseeablefutureandthattheCompanyisagoingconcern.Therefore,thedirectorshavecontinuedtoadoptthegoingconcernbasisinthepreparationofthefinancialstatements.
“�Going�forward,�we�will�support,�on�behalf�of�shareholders,�
the�ongoing�development�and�effective�governance�of�a�remuneration�framework�appropriate�
for�our�Group”PETER SAUNDERSChairman of the Remuneration Committee
54 Air Partner plc | Annual Report and Accounts 2017
Dear Shareholder
OnbehalfoftheRemunerationCommittee(theCommittee),IampleasedtopresenttheDirectors’remunerationreportfortheyearended31January2017.Duringtheyear,IwaspleasedtowelcomenewBoardmembers,AmandaWills,ShaunSmithandRichardJacksontotheCommittee.Goingforward,wewillsupport,onbehalfofshareholders,theongoingdevelopmentandeffectivegovernanceofaremunerationframeworkappropriateforourGroup.
Ihavesetoutinmystatementthefollowinginformation:
• theCommittee’sphilosophyforremuneration• howtheCommitteereflectsemployeeremuneration
arrangementsinconsideringexecutiveremuneration• thekeyactivitiesundertakenbytheCommitteeduring
theyear• thekeyareasoffocusfortheCommitteeduring2017/18
andbeyond.
Our remuneration philosophyTheGroup’stotalremunerationpackagesaredesignedtobecompetitivetoattract,retainandmotivatehigh-qualityindividualsthroughoutthebusiness.OurpackagesaimtorecruittalentedexecutivesandseniormanagerscapableofeffectivelydeliveringontheGroup’sstrategyanddrivingbusinessoutcomesthroughtheirteams,therebyenhancinglong-termshareholdervalue.
Theprinciplesofourremunerationpolicyareto:
• ensureoverallremunerationismarketcompetitivetoattractandretaintheleadershipandtalentrequiredtodrivethebusinessforthebenefitofallstakeholders
• adoptasimple,transparentandcost-effectiveapproachtoremunerationwhichisclearandunderstandableforbusinessleaders,shareholdersandthewiderteam
• aligncompensationtoperformanceandincorporateabalanceoffixedandvariableremuneration
• designincentiveplanswhichreinforcebothshort-andlong-termbehaviours,promotelong-termdevelopmentandsupportthestrategicplansofthebusiness
• ensureremunerationpackagesmotivateandincentiviseexecutivedirectors,managementandthebroaderteamtodeliveronstretchingperformancetargets.
TheCompanyemploysanumberofpeopleinavarietyofroles,frombrokersandadministrationsupportstafftoconsultants,seniormanagementanddirectorsacrossarangeofgeographies.Therewardstructureforourpeopleisbuiltaroundasetofcommonrewardprinciplesonaframeworkalteredtosuittheneedsoftheeachbusinessarea.Rewardpackagesdiffer,takingintoaccountanumberoffactorsincludingseniority,role,impactonthebusiness,localpractice,customandlegislation.
TheremunerationpolicyfortheexecutivedirectorsreflectstheoverallremunerationphilosophyandprinciplesofthewiderGroup.Whendeterminingremunerationpolicyandarrangementsforexecutivedirectors,theRemunerationCommitteeconsidersthewiderpayandemploymentconditionselsewhereintheGrouptoensurepaystructuresfromdirectortoseniormanagementarealignedandappropriate.
Whenconsideringsalaryincreasesfortheexecutivedirectors,theCommitteeconsidersthegenerallevelofsalaryincreaseacrosstheGroup.Typically,salaryincreaseswillbealignedwiththosereceivedelsewhereintheGroupunlesstheRemunerationCommitteeconsidersthatspecificcircumstancesrequireadifferentlevelofincreaseforexecutivedirectors.
Key remuneration activities during the yearFollowingshareholderapprovalatour2016AGM,therevisedpolicyandLongTermIncentivePlan(LTIP)wereimplemented.Detailsofhowthepolicywasappliedduringtheyeararesetoutonpages60to65.
Inmy2016report,IstatedthattheCompanyintendedinduecoursetointroduceaCompany-wideshareplan.TheCommitteeundertookathoroughreviewofpossibleoptionsforanall-employeeshareplan,theobjectivebeingtoimplementaGroupplanthatwouldbenefitandincentivisebothUKandinternationalemployees.Proposalsandcostsweresoughtfromthreeseparatemarket-leadingshareplanproviders.Thereviewhighlightedthat,althoughaUKplanset-upwouldbestraightforwardandcosteffective,thesetupandannualmaintenancecostsofimplementingoverseasplansinsixjurisdictionswereprohibitive,especiallygiventherelativelysmallnumberofemployeesinthosecountries.Afterdiscussion,theCommitteeconcludedthatitwouldnotbepossibletointroduceaGroup-wideschemethatofferedanequivalentbenefitforallGroupemployeesandtherefore
Annual statement by the Chairman of the Remuneration Committee
Directors’ remuneration report
55Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
decidednottoproceedwiththeimplementationofaGroupshareplanatthistime.Itwasagreedthattheshareplanenvironmentshouldbekeptunderreviewandthatifthepositionchanged,theCommitteewouldconsiderthisagaininthefuture.Theintroductionofsuchaplanwouldrequireshareholderapproval.
OtherkeyactivitiesundertakenbytheCommitteeduringtheyearwere:
• annualbenchmarkingofexecutiveremunerationtoensureitremainsappropriatetopromotethelong-termsuccessoftheCompany
• settingbonustargetsfollowingtheapprovalofthefinancialbudget
• determiningtheextenttowhichtheperformancemeasuresinrespectoftheincentiveplanhavebeenachieved
• approvingtheKeyResultsAreasfortheCEOandCFOfor2017/18.
Focus for 2017/18 and beyondDuringthecurrentyear,theCommitteewillcontinuetoreviewexecutiveandGroup-wideremunerationtoensureitremainsappropriatetopromotethelong-termsuccessoftheCompany.
Compliance statementThisreportcomplieswiththeCompaniesAct2006,Schedule8oftheLargeandMedium-sizedCompaniesandGroups(AccountsandReports)(Amendment)Regulations2013andtheListingRulesandappliesthemainprinciplesrelatingtoremunerationwhicharesetoutintheUKCorporateGovernanceCode.
RecommendationPositivevotesof99.84%infavouroftheDirectors’remunerationreportandtheDirectors’remunerationpolicyreportwerereceivedfromshareholdersatthe2016AGM,providingastrongendorsementforourremunerationstrategy.Iwillbeavailable,togetherwithmyfellowCommitteemembers,atourAGMinJune2017toansweranyquestionsorreceiveyourfeedbackwithregardtoourpolicyandhowwehaveimplementedit.
OnbehalfoftheCommittee,IlookforwardtoreceivingyoursupportattheAGM.
Peter Saunders ChairmanoftheRemunerationCommittee26April2017
UK Corporate Governance Code
D. RemunerationD.1 Setting levels of remunerationTheRemunerationCommitteesetslevelsofremunerationtopromotethelong-termsuccessoftheCompanyandstructuresexecutiveremunerationsoastolinkrewardstocorporateandindividualperformance.
D.2 ProcedureThecompositionoftheRemunerationCommitteeanditsactivitiesandapproachtosettingtheremunerationpolicyfortheexecutivedirectorsandrecommendationsandmonitoringofthelevelandstructureofremunerationforseniormanagementcanbefoundintheAnnualstatementoftheChairmanoftheRemunerationCommitteesetoutonpages54to55.TheBoarddeterminestheremunerationofthenon-executivedirectorswithinthelimitssetintheCompany’sArticlesofAssociation.
Theinformationcontainedinthefollowingpartsofthisreporthasbeenaudited:thetablecontainingthesingletotalfigureofremunerationfordirectorsandaccompanyingnotes,pensionentitlementsandincentiveawardsmadeduringtheyearonpage60anddirectors’beneficialinterestsinsharesonpage63.
Theinformationsetoutonpages60to65ofthisreportincludes,asindicated,theauditabledisclosuresreferredtointheAuditors’reportonpages72to79asspecifiedbytheUKListingAuthorityandtheLargeandMedium-sizedCompaniesandGroups(AccountsandReports)(Amendment)Regulations2013(theRegulations).
AsrequiredbytheRegulations,therestofthisreportisdividedintotwosections:
• thedirectors’remunerationpolicytablewhichsetsouttheelementsoftheCompany’spolicyondirectorremuneration
• theannualreportonremunerationwhichsetsoutpaymentsmadetotheDirectorswhichwillbeputtoshareholdervoteatthe2017AGM.
56 Air Partner plc | Annual Report and Accounts 2017
Remuneration policy report
Directors’ remuneration report continued
Remuneration policy table – executive directors
Remunerationelement
Purposeandlinktoremunerationpolicy
Keyfeaturesandoperation
Maximumpotentialvalue
Performancemetrics
Provisionforclawbackorwithholdingofpayment
Base salary Supportstherecruitmentandretentionofexecutivedirectorsofthecalibrerequiredtofulfiltherolewithoutpayingmorethanisnecessary.
Rewardsexecutivesfortheperformanceoftheirrole.
Reflectstheindividual’sskills,experienceandrolewithintheGroup.
Paidincash.
Normallyreviewedannuallytotakeeffecton1Augustbutexceptionallymaytakeplaceatothertimesoftheyear.
Indeterminingbasesalaries,theCommitteeconsiders:
•paylevelsatcompaniesofasimilarsizeandcomplexity
•externalmarketconditions
•payandconditionselsewhereintheGroup
•personalperformance.
TheCommittee’spolicyistosetbasesalaryatanappropriateleveltakingintoaccountthefactorsoutlinedinthistable;thereisnomaximumvalue.TheCommitteeconsidersindividualsalariesattheappropriateCommitteemeetingeachyear.
N/A None
Pension Providesfundstoallowexecutivestosaveforretirement.
Providesamarketcompetitiveretirementbenefit.
Incentivisesandencouragesretention.
Indeterminingpensionarrangements,theCommitteetakesintoaccountrelevantmarketpractice.
Theschemeisdefinedcontribution.
Asalarysacrificeschemeisinoperationforexecutivedirectors.
ExecutivedirectorsmayelectwiththeCommittee’sconsenttoreceivesomeoralloftheCompany’spensioncontributionasacashalternative.
Bonusesarenon-pensionable.
BoththeCEOandCFOreceiveacompanycontributionof12.0%ofbasicsalary.
N/A None
Benefits in kind
Providesamarketcompetitivelevelofbenefitstoexecutivedirectors.
Executivedirectorscanreceivelifeassurance,healthinsurance,carallowance,incomeprotection,criticalillnesscoverandsportscluborgymmembership.
Thereisnomaximumvalue.
N/A None
Extractsfromtheremunerationpolicythatwasapprovedbyshareholdersatthe2016AGMaresetoutbelowtoenablethereportedremunerationtobeassessedinthecontextoftherelevantaspectsofthepolicy.Thecurrentintentionisthatthispolicywilloperateuntilthe2019AGM.TheoriginalRemunerationpolicyreportfortheyearended31January2016ispublishedinitsentiretyintheCompany’sAnnualReportfortheyearwhichisavailableatwww.airpartner.com.
57Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Remunerationelement
Purposeandlinktoremunerationpolicy
Keyfeaturesandoperation
Maximumpotentialvalue
Performancemetrics
Provisionforclawbackorwithholdingofpayment
Relocation/ expatriate assistance
ProvidesassistancetoexecutivedirectorswhoarerequiredtoworkawayfromtheirhomelocationtoenabletheCompanytorecruitthebestpersonfortherole.
Assistancewillinclude(butisnotlimitedto)facilitatingormeetingthecostsofobtainingvisasorworkpermitsforexecutivedirectorsandtheirimmediatefamily,removalandotherrelocationcosts,housepurchaseorrentalcosts,limitedamountoftravelcosts,taxequalisationarrangements.
Thereareanumberofvariablesaffectingtheamountthatmaybepayable,buttheRemunerationCommitteewouldpaynomorethanitjudgedreasonablynecessary.Themaximumamountpayableshallnotexceed£50,000perindividualinanyfinancialyear.
N/A None
Annual bonus Rewardsandincentivisestheachievementofannualfinancialobjectiveswhicharealignedwithkeystrategicgoalsandsupporttheenhancementofshareholdervalue.
Paidincashfollowingannouncementoffinancialyearresults.
Bonusesarenon-pensionable.
MaybepaidinsharesattheCommittee’sdiscretion.
Maximumopportunitytoachieve:
•CEO:150%ofbasesalary
•CFO:100%ofbasesalary
Bonusaccruesfromthresholdlevelsofperformance.
BothCEOandCFObonuspaymentbasedon:
•personalobjectives:30%basedonperformancetowardsKeyResultsAreas(KRA)definedatthebeginningofeachfinancialyear
•Companyperformance:70%basedonfinancialmetrics.
Bonusisusuallynotpaidtoagoodleavershouldtheyleavebeforethepaymentdateofsaidbonus.
From2016,arrangementsinplaceunderwhichamountspaidoutinbonuscanbeclawedbackfromexecutivedirectorsindefinedcircumstances.
Long Term Incentive Plan (LTIP)
IncentivisesexecutivestoachievetheCompany’slong-termstrategyandcreatesustainableshareholdervalue.
Enhancesshareholdervaluebymotivatinggrowthinearningsandmaintenanceofanefficientandsustainablelevelofreturnofcapital.
Alignswithshareholderintereststhroughthedeliveryofshares.
AwardsvestafterthreeyearsbasedonGroupfinancialtargets.
Awardsareintheformofnil-costoptionsandmustbeexercisedwithinfouryearsofvesting.
25%ofawardsvestatthresholdlevelsofperformance.Forperformanceabovethreshold,awardsvestonastraight-linebasisuptoamaximumof100%.
Maximumplanawardof150%ofbasesalarytobeusedinexceptionalcircumstances.
Usualawardlevelswillbe:
•CEO:100%-150%ofbasesalary
•CFO:75%-100%ofbasesalary.
TheCommitteewillreviewtheappropriatenessofperformancemeasuresonanannualbasisandsetchallengingtargetsconsistentwiththebusinessstrategy.TheCommitteehastheabilitytoselectappropriateperformanceconditioncriteria,mixandtargetseachyear.Inthepast,thesehavebeenEPSandTSRbasedtargetsandtheCommitteeexpectsthistocontinue.FurtherdetailofthespecificmeasuresthattheRemunerationCommitteeintendstoapplytoawardsmadeintheyearending31January2017aresetoutintheannualreportsectionofthisreport.
Aspertherulesofthescheme,awardswilllapseiftheexecutiveleavesbeforetheendoftheperformanceperiod.
TheRemunerationCommitteehasdiscretionincertaincircumstances(forexampledeath,seriousillness,redundancy)topermitanawardtovestbeforetheendoftheperformanceperiod.
Containsprovisionsunderwhichamountspaidoutcanbeclawedbackfromexecutivedirectorsindefinedcircumstances.
Containsa‘malus’provision.
Shareholding guideline
IncentivisesexecutivestoachievetheCompany’slong-termstrategyandcreatesustainableshareholdervalue.
Alignswithshareholderinterests.
Targetvaluetobeachievedoverfiveyears:
•CEO–100%ofsalary
•CFO–50%ofsalary.
Untiltheguidelinehasbeenachieved,executivesmustretainatleasthalfvestedLTIPawardsbeyondthoseneedingtobesoldtopaytax.
N/A N/A N/A
58 Air Partner plc | Annual Report and Accounts 2017
Directors’ remuneration report continued
Remuneration policy table – non-executive directors TheCompanyintendstohaveatleasttwoindependentnon-executivedirectorsontheBoardatanytime,inadditiontotheChairman.TheBoardconsiderseachofthenon-executivedirectorstobeindependent.
Thenon-executivedirectors’remuneration(includingthatoftheChairman)reflectstheanticipatedtimecommitmenttofulfiltheirduties.Non-executivedirectorsdonotreceivebenefits,bonuses,long-termincentiveawards,apensionorcompensationonterminationoftheirappointments.
ThefollowingtablesetsoutasummaryoftheCompany’sremunerationpolicyfornon-executivedirectors:
Remuneration policy report continued
Remunerationelement Purposeandlinktoremunerationpolicy Keyfeaturesandoperation(includingmaximumlevels)
Fees Feesfornon-executivedirectorsaresetatanappropriateleveltorecruitandretaindirectorsofasufficientcalibrewithoutpayingmorethanisnecessarytodoso.Feesaresettakingintoaccountthefollowingfactors:thetimecommitmentrequiredtofulfiltherole,typicalpracticeatothercompaniesofasimilarsize,andsalarylevelsofemployeesthroughouttheGroup.
Thenon-executivedirectorfeespolicyis:•topayabasicfeeformembershipoftheBoard•topayadditionalfeesforchairmanshipoftheBoardandchairmanship
ofacommitteetotakeintoaccounttheadditionalresponsibilitiesandtimecommitmentoftheseroles.
Feesarereviewedatappropriatelevelsatappropriateintervals(normallyonceeveryyear)bytheBoardwithreferencetoindividualexperience,theexternalmarketandtheexpectedtimecommitmentrequiredofthedirector.TheCompany’scurrentmaximumfeesareasfollows:•basicfee–£30,000•additionalfeeforBoardChairman–£30,000•additionalfeeforCommitteeChairman–£5,000.
Illustration of application of remuneration policyThreescenariosofexecutivedirectors’remunerationareillustratedbelow:
ChiefExecutiveOfficer ChiefFinancialOfficer
Maximum performance(Fixedpayplusfullvestingofallperformancerelatedpay.)
FixedremunerationPerformancebonuspay-outequivalentto150%ofbasesalary.
FixedremunerationPerformancebonuspay-outequivalentto100%ofbasesalary.
At expectation performance (Fixedpayplusshort-andlong-termperformancerelatedpayvestingatthelevelsreasonablyexpected.)
FixedremunerationPerformancebonuspay-outequivalentto78.5%ofbasesalary.
FixedremunerationPerformancebonuspay-outequivalentto54.75%ofbasesalary.
Below threshold performance(Onlyfixedpay(salary,benefitsinkindandpension)ispayableandnoshort-orlong-termperformance-relatedpayaccrues.)
FixedremunerationNoperformancebonuspay-out.
FixedremunerationNoperformancebonuspay-out.
59Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
• Salary,benefitsinkindandpension(aspertheremunerationpolicy)areshownasestimatedcashcostortaxablevaluetotheindividual.
• TheCompany’sbonusschemesoperatesothatamountsinrespectofthecurrentfinancialperiodareonlypaidinthefollowingfinancialyear,afterthecompletionoftheauditandBoardapprovaloftheaccounts.Thechartreflectsthebonusamountearnedintheperiodbutnotnecessarilypaidatyearend.
Thechartbelowsetsoutanillustrationofthepotentialvalueofthecurrentcomponentsoftheexecutivedirectors’remunerationfortheyearended31January2017,showingtheproportionoftotalremunerationmadeupofeachcomponentandthevalueofeachcomponent.
Chief Executive Officer £’000
Annual bonus Fixed pay
Chief Financial Officer £’000
Annual bonus Fixed pay
In line with expectations
In line with expectations
Minimum performance
Minimum performance
Maximum Maximum
100%
£286
£465
£714
£290
£257
100%62%
71%40%
63%
38%
29%
60%
37%
£182
• Bonusatbelowthresholdperformancereflectsapositionwherenoneofthepersonalorcorporatemetricswasachievedatthresholdlevel;expectationreflectsmetricsachievedattargetlevelandmaximumreflectsthepositionwhereeverymetricisachievedatstretchuptotheamountofbonuscap.Pleaserefertothetablein‘Annualbonus(audited)’onpage61foranillustrationofthecriteriathathavebeenappliedtothethreescenariospresentedinthistable.
60 Air Partner plc | Annual Report and Accounts 2017
Thissectionofthereportsetsouttheannualreportonremunerationfortheyearended31January2017.
Remuneration Committee structureTheCommitteeisconstitutedasaformalsub-committeeoftheBoardwithitsowndefinedtermsofreference.Itsprimaryroleistoreviewandsettheremunerationpolicyfortheexecutivedirectors,withinthecontextofsalariesandbenefitspaidacrosstheGroupasawhole,andmakingdiscretionaryperformance-relatedawardstotheexecutivedirectors.ThefullBoardagreestheremunerationoftheChairmanandnon-executivedirectorsontheprinciplethatnoindividualshouldbeabletodeterminetheirownremuneration.
Remuneration Committee membershipThemembersoftheCommitteeduringtheyearuntilthedateofthisreportwere:
PeterSaunders(Chairman)RichardEverittRichardJackson(appointed8September2016)ShaunSmith(appointed1May2016)AmandaWills(appointed20April2016)AndrewWood(resigned29June2016)
Directors’ remuneration report continued
Annual report on remuneration
Inaddition,theChiefExecutiveOfficer,ChiefFinancialOfficerandGroupHeadofHumanResourcesareinvitedfromtimetotimetoattendmeetingsoftheCommittee.Noindividualsareinvolvedindecisionsrelatingtotheirownremuneration.TheCommitteemetformallyfourtimesduringtheyear.ThetermsofreferencefortheCommitteecanbeviewedontheCompany’swebsite.
Advisers to the CommitteeTheCommitteecananddidobtaininformationandadviceduringtheperiodunderreviewfromtheGroupHeadofHumanResources,RachelThripp,theCompanySecretary,SallyChandler,andtheexecutivedirectors,NeilMorrisandMarkBriffa,andmayseekadvicefromanyotheremployeesasrequired.
Itmayalsoobtain,attheexpenseoftheCompany,anynecessarylegalorprofessionaladvice,uptoapredeterminedlimit.In2015/16,theCommitteesoughtadviceonexecutiveremunerationfromanindependentremunerationadviserasdetailedintheAnnualstatementoftheChairmanoftheRemunerationCommitteeonpages54and55.h2glenfernLimitedcontinuestoprovideadvicetotheCommitteeonexecutiveremunerationasrequired.h2glenfernvoluntarily
Directors’ remuneration for the year ended 31 January 2017 (audited)Thefollowingtableprovidesdetailsofthedirectors’remunerationfortheyearended31January2017,togetherwiththeirremunerationfortheyearended31January2016:
Salary Taxablebenefits BonusGainonvestingofshareoption Pension Total
(Audited)2017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’000
Executive directors
MarkBriffa 250 230 20 19 188 246 178 – 16 75 652 570
NeilMorris1 155 152 13 13 59 78 – – 36 32 263 275
Non-executive directors
RichardEveritt 60 60 – – – – – – – – 60 60
AndrewWood2 15 35 – – – – – – – – 15 35
PeterSaunders3 35 34 – – – – – – – – 35 34
AmandaWills4 23 – – – – – – – – – 23 –
ShaunSmith5 25 – – – – – – – – – 25 –
RichardJackson6 12 – – – – – – – – – 12 –
GrahameChilton2 – 4 – – – – – – – – – 4
Total 575 515 33 32 247 324 178 – 52 107 1,085 978
1. Fortheyearended31January2017,NeilMorrissurrendered£14,000outofhisbonustobepaidaspensioncontribution.2. GrahameChiltonandAndrewWoodresignedfromtheBoardon16March2015and29June2016respectively.3. PeterSaunderswasappointedasChairmanoftheRemunerationCommitteeon16March2015.
ExpensesreimbursedtoPeter,includingairfarestoBoardmeetings,amountedto£28,000intheyearto31January2017.4. AmandaWillswasappointedtotheBoardon20April2016.5. ShaunSmithwasappointedtotheBoardon1May2016andasChairmanoftheAuditandRiskCommitteeon29June2016.6. RichardJacksonwasappointedtotheBoardon8September2016.
61Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
operatesinaccordancewiththeCodeofConductoftheRemunerationConsultants’GroupinrelationtoexecutiveremunerationconsultingintheUnitedKingdomandhasconfirmedthatithasadheredtotheRemunerationConsultantGroup’sCodeofConductthroughouttheyearforallremunerationservicesprovidedtotheGroup.TheCommitteehasthereforesatisfieditselfthatalladviceprovidedbyh2glenfernwasobjectiveandindependent.Afeeof£20,040waspayabletoh2glenfernintheyearunderreview.h2glenferndoesnotprovideservicestotheGroupotherthanremunerationadvice.
Taxablebenefits–executivedirectorsreceiveabenefitspackageincludingacarallowance,lifeassurance,subsidisedgymmembershipandhometelephoneandinternetfacility.ThecarallowancepayabletotheCEOandCFOincludedintheaboveamountwas£15,000and£10,000respectively(2016:£15,000and£10,000).
Bonus–themaximumbonusfortheperiodfortheCEOandCFOwascappedat150%ofthefinancialelementofthebonus,whichequatestoamaximumof150%ofsalaryand100%ofsalaryrespectively.
LTIP–awardsundertherevisedAirPartnerShareIncentivePlan2012followingapprovalatthe2016AGMwasmadetobothexecutivedirectorsintheperiodunderreviewandaresubjecttoperformanceandcontinuedserviceconditions.
Pension-relatedbenefit–bothexecutivedirectorsaremembersoftheAirPartnerPensionScheme(adefinedcontributionscheme)andreceiveapensioncontributionof12%ofbasesalary.ExecutivedirectorsmayelectwiththeCommittee’sconsenttoreceivesomeoralloftheCompany’spensioncontributionasacashalternative.
Annual bonus (audited)Asnotedabove,thebonuspaymentsforboththeCEOandCFOarebasedonthefollowingweighting:70%onachievementoftheGroup’sunderlyingprofitbeforetaxtargetand30%attributabletopersonalobjectives,whichonlybecomepayableshouldtheGroupachieve65%orhigherofitsunderlyingprofitbeforetaxtarget.Forreference,theunderlyingprofitbeforetaxtargetforthefinancialyearended31January2016was£3.8mandforthefinancialyearended31January2015was£4.8m,thethresholdsfor2017were£5.0mand£5.5mrespectively.
Inrespectofthepersonalobjectiveelement,theexecutivedirectorsreceivefourtofiveobjectiveseachyearagainstwhichtheywillreceiveascoreof0(unacceptableperformance)to4(excellentperformance).AlthougheveryeffortismadetoensurethatpersonalobjectivesareSMART,thereislikelytobeadegreeofsubjectivitytothescoresattributedagainsteachobjective.
AstheGroupachieveditsunderlyingprofitbeforetaxtargetandsurpassedthe65%underpinlevelofthepaymentofthepersonalobjectiveelement,bonuseswerepayabletotheexecutivedirectorsfortheperiodending31January2017.
Mark Briffa
Weightingas%ofbonus
%achievedin2017
Totalbonusearned
Personalobjectives 30% 88% 65,625Financialtarget 70% 70% 122,500
Total bonus achieved 100% 188,125
Neil Morris
Weightingas%ofbonus
%achievedin2017
Totalbonusearned
Personalobjectives 30% 63% 20,278Financialtarget 70% 70% 52,994
Total bonus achieved 100% 73,272
Thespecificperformancetargetsfortheannualbonusforthecurrentandpreviousyearareconsideredtobecommerciallysensitiveandaccordinglyarenotdisclosed.
Payment table of employee wages and other company metrics
2016-2017 2015-2016 %variance
Totalemployeepaycomparedtopriorperiod(£m) 18,453 15,291 20.68Profitbeforetax(£m)1 4,348 3,137 38.92
Total dividends paid (pence) 24.93 22.73 9.68
1.TheRemunerationCommitteeconsidersprofitbeforetaxtobeakeymeasureoftheGroup’sperformance,thereforeitisshownabove.
62 Air Partner plc | Annual Report and Accounts 2017
Performance graph and CEO remuneration tableTohelpinvestorstomeasuretheCompany’scomparativeperformance,thegraphbelowshowsthechangeinthetotalshareholderreturnoftheCompanyforeachofthepasteightfinancialyearscomparedwiththeFTSEAllShareIndex.
Directors’ remuneration report continued
Annual report on remuneration continued
31 Jan2009
31 Jan2010
31 Jan2011
31 Jan2012
31 Jan2013
31 Jan2014
31 Jan2015
31 Jan2016
31 Jan2017
0
50
100
150
200
250
300
350
Air Partner FTSE All Share
Air Partner and FTSE All Share Index total return (rebased)£’000
TheCompanyisnotcurrentlyaconstituentmemberoftheFTSEAllShareIndex,buttheIndexhasbeenselectedasanappropriatecomparatorbecauseitiseasilyaccessiblebyinvestorsandcoverstheperformanceofabroadrangeofcompanies,includingaviation,transportandluxuryretailbusinesses.
ThetablebelowsetsoutthedetailsforthedirectorundertakingtheroleofChiefExecutiveOfficer:
Year
CEOsinglefigureoftotalremuneration
£‘000
Annualbonuspay-outagainstmaximum
%
Long-termincentivevestingratesagainst
maximumopportunity%
2017 652 50.1 65.5
2016 570 73.9 –
2015 271 – –
2014 – 18months 656 92.8 66.7
2012 249 16.8 –
2011 369 100.0 –
2010 215 15.0 –
ThetablebelowshowsthepercentagechangeinremunerationofthedirectorundertakingtheroleofChiefExecutiveOfficerandtheGroup’sUKemployeesasawholebetweentheyearended31January2017,onanannualisedbasis,and31January2016.
AllUKemployeesemployedbytheGroupinbothJanuary2016andJanuary2017werechosenasthemostappropriatecomparatorgroupasthisincludesseniormanagementandexcludesinternationalemployeeswhoareondifferentpaystructures.
% Salary Benefits Annualbonus
CEO 8.74 4.00 -24.60
AveragepaybasedonalloftheGroup’sUKemployees 5.86 2.24 -20.99
63Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Long-Term Incentive Plan (LTIP) (audited)
Directors’ beneficial interests in shares (audited) Thedirectorswhoheldofficeduringtheyearhadthefollowingbeneficialinterestsinordinarysharesof1peachintheCompany,fullypaidup,atthebeginningoftheyearandendoftheyear:
31 Jan 17 31 Jan16
MABriffa 262,230 33,061
RLEveritt 25,000 5,000
PSaunders 25,000 –
SSmith 11,635 –
ARWood(resigned29June2016) 50,000 10,000
Therewerenochangesinthedirectors’beneficialinterestsinsharesbetween31January2016and26April2017(beingthelatestpracticabledatepriortothepublicationofthisreport).Nodirectorhasanon-beneficialinterestinthesharesoftheCompany.
Share options Non-executivedirectorsarenoteligibletoparticipateintheCompany’sshareoptionscheme.Detailsoftheoptionsheldbyexecutivedirectorsatthebeginningandendoftheyearareasfollows:
Shareoptions(audited) Numberofoptions
Name31 January
2016 Granted Exercised Expired Lapsed31January
2017Exercise
priceEarliestdate
ofexercise Expirydate
MABriffa 200,000 – – – 200,000 – 158.5p1 21Nov2009 21Nov2016
50,000 – – – – 50,000 176.8p2 24Jan2011 24Jan2018
200,000 – – – – 200,000 109.0p2 27Nov2011 27Nov2018
25,000 – – – – 25,000 78.5p2 26Oct2013 26 Oct2020
475,000 – – – 200,000 275,000
1.astheperformancecriteriafortheseshareoptionswerenotmet,theoptionshavelapsed.2.optionvestedbutnotexercised.
Shareoptions(audited) Numberofoptions
NameDateof
grant31 January
2016 Granted Exercised Expired Lapsed31January
2017Exercise
priceEarliestdate
ofexercise Expirydate
MABriffa 22Oct2013 279,200 – 182,875 – 96,325 – 0.0p 22Oct2016 22Oct2020
3 Jun2015 435,485 – – – – 435,485 0.0p 04Jun2018 04Jun2025
29June2016 – 552,080 – – – 552,080 0.0p 29Jun2019 29Jun2026
Total 714,685 552,080 182,875 – 96,325 987,565
NJMorris 3 Jun 2015 193,550 – – – – 193,550 0.0p 04Jun2018 04Jun2025
29June2016 – 113,730 – – – 113,730 0.0p 29Jun2019 29 Jun2026
Total 193,550 113,730 – – – 307,280
ThenumberofshareoptionsawardedundertheLTIPwasdeterminedbyusingtheclosingpriceofanAirPartnerplcshareonthedayprecedingthedateofgrantasascertainedbytheOfficialListwhichwas502.5pon21October2013,387.5pon2June2015and339.63pon28June2016.
ThefacevalueofawardsmadetoMarkBriffaandNeilMorrison3June2015are£340,000and£151,000.Thisiscalculatedbasedonaclosingsharepriceof£3.89on3June2015.Pricesquotedarepre-sharesplit.
TheawardsgrantedaresubjecttotheachievementofperformanceandemploymentconditionsasspecifiedbytheRemunerationCommittee.
64 Air Partner plc | Annual Report and Accounts 2017
Directors’ remuneration report continued
Vestingofthegrantsissubjecttoacombinationof50%earningspershare(EPS)and50%totalshareholderreturn(TSR)relatedtargets:
EPS:• 100%vestifperformancegreaterthanRPI+20%perannum• 25%vestifperformanceequaltoRPI+15%perannum.
TSR:• 100%vestifperformancegreaterthan75thpercentile• 25%ifperformanceequalto50thpercentile.
Betweenthesetargetlevels,shareoptionswillvestonastraight-linebasisandshareswillvest,subjecttoachievementoftheseperformanceconditions,on3June2018.
TheadjustedunderlyingEPSforthebaseyearending31January2015hasbeencalculatedas19.5pexcludingtheimpactofone-offtaxcredits.
ThefacevalueofawardsmadetoMarkBriffaandNeilMorrison29June2016are£408,539and£84,157.Thisiscalculatedbasedonaclosingsharepriceof370pon29June2016.ThenumberofLTIPsawardedwasdeterminedfromtheclosingsharepricethedaypriortogrant(339.63ppershare)andtheexecutivedirectors’salariesatthedateofgrant.
TheawardsgrantedaresubjecttotheachievementofperformanceandemploymentconditionsasspecifiedbytheRemunerationCommittee.
EPSTwo-thirdsoftheaward(66.67%oftheaward)willbesubjecttoanearningspershare(EPS)compoundannualgrowthtargetwhichwillbeinadditiontoanyincreaseintheConsumerPricesIndex(CPI),asfollows:
EPSgrowth %ofawardvesting
BelowCPI+5%pa Nil
CPI+5%pa 25%
CPI+10%paorabove 100%
ForintermediateperformancebetweenCPI+5%paandCPI+10%pavestingwilloccuronastraight-linebasis.
TSRTheremainingone-thirdoftheaward(33.33%oftheaward)willbesubjecttoanabsolutetotalshareholderreturn(TSR)performanceconditionasfollows:
EPSgrowth %ofawardvesting
Below9%pareturns Nil
9%pareturns 25%
16%pareturnsorabove 100%
Forintermediateperformancebetween9%pareturnsand16%pareturns,vestingwilloccuronastraight-linebasis.
TheadjustedunderlyingEPSforthebaseyearending31January2016hasbeencalculatedas24.6p.
Themarketpricepershareat31January2017was108p(540p)(31January2016:77p(385p))andrangedbetween66p(330p)and108p(540p)duringtheyear.Theaveragepriceduringtheyearended31January2017was86p(430p)(31January2016:76p(380p)pershare).Pricesshowninbracketsarepre-sharesplit.
Share award vestingTheshareawardundertheLTIPgrantedtoMarkBriffaon22October2013(the2013award)vestedon3October2016.Thevestingcoveredtheperformanceperiodfrom1August2013to31July2016.
The2013awardwassubjecttoaperformanceconditionwithanEPSelementandaTSRelement.
TheCompany’sbroker,LiberumCapitalconfirmedtotheCommitteethatwereAirPartnerintheFTSESmallCapIndex,itwouldhaveranked52ndoverthemeasurementperiodandthatasthescheduleoftherulesoftheLTIPstatedthattherewouldbeconditionalvestingwheretheperformancewasbetweenthe50thand75thpercentilerankings,thisresultedin31%oftheTSRelementbeingachievedwithAirPartnerrankingas52nd.TheCommitteethereforeagreedthat31%oftheTSRelementoftheaward,being50%ofthetotalaward,wouldvest.
TheRemunerationCommitteesatisfieditselfthattherecordedEPSgrowthandTSRrankingwasagenuinereflectionoftheunderlyingbusinessperformanceoftheGroup,andapprovedthevestingofthe2013awardatthecalculatedpercentagessetoutbelow:
Performancecriterion Achieved %ofawardtovest
EPSgrowth GrowthgreaterthanRPI+10% 100%
TSR 52ndpercentileagainsttheFTSESmallCapIndex
31%
Themeasurementperiodwasnon-coterminoustoAirPartner’saccountingreferencedate.
Annual report on remuneration continued
65Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Followingsuchvesting,MarkBriffaexercisedoptionsandacquiredsharesandsharesweresurrenderedforcashtopaythePAYE/NICliabilitiesrelatedtotheoptionexerciseassetoutbelow:
2013awardSharesvested
inaward
Sharessurrendered
forcashtosatisfytax/NIliabilities
Sharesretained
MarkBriffa 36,575 17,190 19,385
Shareholder votingAtthe2016AGM,theresultsofthevotesontheDirectors’remunerationreportwere:
Directors’remunerationreport Directors’remunerationpolicy
Numberofvotes
%ofvotescast
Numberofvotes
%ofvotescast
For(includingdiscretionary) 4,037,578 99.84 4,037,578 99.84
Against 6,614 0.16 6,614 0.16
Voteswithheld 12,528 – 12,528 –
Application of the policy for 2016/17
Fixed payDetailsofthefixedpayoftheexecutivedirectorsforthecurrentyeararesetoutinthetablebelow:
Basicsalary£’000
Carallowance
£’000Total
£’000
CEO 250 15 265
CFO 155 10 165
PensionTheCompanypensioncontributionfortheexecutivedirectorswillremainthesameinthecurrentfinancialyear.ExecutivedirectorsmayelectwiththeCommittee’sconsenttoreceivesomeoralloftheCompany’spensioncontributionasacashalternative.
Annual bonusTheRemunerationCommitteehassetstretchingtargetsforbothGroupfinancialperformanceandpersonalobjectivesundertheannualbonusplan.Detailonthetargetsisconsideredcommerciallysensitiveandforthisreasonisnotdisclosedduringthecurrentfinancialyear.
Theperformancemeasuresandweightingsforthefinancialyearending31January2018areasfollows:
Aspercentageofmaximumbonusopportunity
Measures CEO CFO
Underlyingprofitbeforetax 70% 70%
Personalobjectives 30% 30%
TheDirectors’remunerationreportwasapprovedbytheBoardon26April2017andissignedonitsbehalfby:
Peter Saunders ChairmanoftheRemunerationCommittee
66 Air Partner plc | Annual Report and Accounts 2017
Thedirectorspresenttheirreportsandtheauditedfinancialstatementsfortheyearended31January2017.
Statutory information contained elsewhere in the Annual ReportInformationrequiredtobepartoftheDirectors’reportcanbefoundelsewhereinthisdocument,asindicated,isincorporatedintothisreportbyreference:
• ResultsanddividendintheChairman’sstatementonpage4• CorporategovernanceandtheGroup’sfinancialrisk
managementobjectivesandpoliciesintheCorporategovernancestatementonpages45to49
• Detailsofthesalaries,bonuses,benefitsandshareinterestsofdirectorsintheDirectors’remunerationreportonpage60
• Directors’responsibilitystatementsonpage69• EmployeerelationsandequalopportunitiesinOurPeople
onpages12and13.
Likelyfutureeventsandallpost-balancesheeteventsaredisclosedwithintheStrategicreportonpages1to39.
Management reportTheStrategicreportonpages1to39andthisDirectors’report,withitsinclusionsasindicatedabove,formtheManagementreportasrequiredbyDTR4.1.5R.
Directors and directors’ interestsThenamesofthedirectorsoftheCompanyareshownonpage42andchangestodirectorshipsduringthereportingperiodareshownonpage45.BiographicaldetailsofthecurrentdirectorsoftheCompanyareshownonpage42.Detailsofdirectors’interestsinthesharesoftheCompanyareshownonpage63.Thisinformationisincorporatedintothisreportbyreference.
Directors’ indemnities and insuranceTheCompanyhasmadequalifyingthird-partyindemnityprovisionsforthebenefitofitsdirectorsthatremaininforceatthedateofthisreport.Incertaincircumstances,theCompanycanindemnifydirectors,inaccordancewithitsArticlesofAssociation,againstcostsincurredinthedefenceoflegalproceedingsbroughtagainstthembyvirtueoftheiroffice.Directors’andofficers’liabilityinsurancecoverremainsinplacetoprotectalldirectorsandseniormanagers.
Directors’ conflict of interestNodirectorhad,duringtheyear,anybeneficialinterestinanycontractsignificanttotheCompany’sbusiness,otherthanacontractofemployment.TheCompanyhasproceduresinplaceformanagingconflictsofinterest.Shouldadirectorbecomeawarethatthey,ortheirconnectedparties,haveaninterestinanexistingorproposedtransactionwiththeCompany,theyarerequiredtonotifytheBoardinwritingoratthenextBoardmeeting.
Articles of AssociationAnyamendmenttotheCompany’sarticlesofassociationmayonlybemadebypassingaspecialresolutionoftheshareholdersoftheCompany.
Substantial shareholdingsAsat26April2017,theCompanywasawareofsubstantialinterestsintheCompany’ssharesorhadbeennotifiedofinterestsinvotingrightsunderChapter5oftheDisclosureandTransparencyRules,asfollows:
ShareholderNumber
ofshares %heldNature
ofholding
SchroderInvestmentManagement 8,783,915 16.82 Indirect
AberforthPartnersLLP 6,754,630 12.94 Indirect
SanfordDeLandAssetManagement 3,500,000 6.70 Indirect
BlackRock 2,159,980 4.14 Indirect
Theinterestsshownmayincludesharesheldunderdiscretionarymanagementagreementsforwhichthemanagermaynotexercisevotingrights.
Share split, share capital structure, buying back and shareholder rightsOn25January2017,theCompany’sshareholdersapproveda5to1splitoftheCompany’sshares,whichreducedthenominalvalueoftheordinarysharesto1peach.Thesharesplitbecameeffectiveon31January2017.
TheauthorisedsharecapitaloftheCompanyis£750,000dividedinto75,000,000ordinarysharesof1penceeach.TheCompanyhasoneclassofordinaryshareswhichhaveequalrightstodividendsandcapitalandtovoteatgeneralmeetingsoftheCompany,assetoutintheCompany’sArticlesofAssociation.Thenumberofordinarysharesof1penceeachissuedandfullypaidat31January2017was52,217,565(2016,beforesharesplit:10,443,513ordinarysharesof5peach).Otherthaninrespectofthesharesplit,nonewshareshavebeenissuedduringtheyear.Noshareswereboughtbackduringtheyear.
Optionsoutstandingunderallemployeeshareschemesamountedto6.12%oftheCompany’sissuedsharecapitalasat31January2017.Thisincludesoptionsgrantedwhichhavenotyetvested.Inaddition,optionsrepresenting8.99%oftheissuedsharecapitalhavebeenexercisedwithinthe10yearspreceding31January2017.Nomorethan10%oftheissuedsharecapitalinanyrolling10-yearperiodmaycurrentlybetakenupbyemployeeshareschemesbywayofdilutionwithanyexcess(uptoafurther10%oftheissuedsharecapital)beingacquiredbypurchaseinthemarketviatheAirPartnerEmployeeBenefitTrust(theTrust).UndertheArticlesof
Directors’ report
67Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Association,theCompanyhasauthoritytoissue75,000,000ordinaryshares.Resolutionstorenewtheauthoritiesgiventodirectorstoallotshares,todis-applycertainpre-emptionrightsandtomakemarketpurchasesoftheCompany’sownshares,allsubjecttoappropriatelimits,willbeputtotheAnnualGeneralMeeting(AGM)toreplacetheauthoritiesgrantedin2016.
TheTrustholdsordinarysharesintheCompanyinordertosatisfyoptionsundertheGroup’sshareoptionschemes.At31January2017,thenumberofordinarysharesheldbytheTrustwas341,820.SharesheldbytheTrustabstainfromvotingandarenotentitledtoreceivedividends.Afurther413,640sharesareheldbytheTrustinanomineecapacityfortwobeneficiariesoftheTrust.
Therearenospecificrestrictionsonthesizeofaholdingnoronthetransferofshares,whicharebothgovernedbythegeneralprovisionsoftheArticlesofAssociationandprevailinglegislation.ThedirectorsarenotawareofanyagreementsbetweenholdersoftheCompany’ssharesthatmayresultinrestrictionsonthetransferofsecuritiesoronvotingrights.
NopersonhasanyspecialrightsofcontrolovertheCompany’ssharecapitalandallissuedsharesarefullypaid.
Noindividualorcorporateentityhastherighttoappointadirector.TheappointmentandreplacementofdirectorsisgovernedbytheArticlesofAssociation,theUKCorporateGovernanceCode,theCompaniesAct2006andrelatedlegislation.
Change of control – significant contractsThereareanumberofcommercialagreementsthattakeeffect,alterorterminateuponachangeofcontroloftheCompany;noneisconsideredtobesignificantintermsofitspotentialimpactonthebusinessoftheGroupasawhole.
TheCompanydoesnothaveagreementswithanydirectororemployeethatwouldprovidecompensationforlossofofficeoremploymentresultingfromatakeover,exceptthatprovisionsoftheCompany’sshareschemesandplansmaycauseoptionsandawardsgrantedtoemployeesundersuchschemesandplanstovestonatakeover.
Branches TheCompanyanditssubsidiarieshaveanestablishedbranchinAustria.
Greenhouse gas emissions
2017Global tonnes
of CO2e
2016Globaltonnes
ofCO2e
Vehicles 18 16
Electricity 387 307
Total 405 323
WehavereportedonalloftheemissionsourcesrequiredundertheLargeandMedium-SizedCompaniesandGroups(AccountsandReports)Regulations2008asamendedinAugust2013.Thereportingboundaryusedforcollationoftheabovedataisconsistentwiththatusedforconsolidationpurposesinthefinancialstatements.WehaveusedtheGHGProtocolCorporateAccountingandReportingStandard(revisededition),datagatheredtofulfilourrequirementsundertheCRCEnergyEfficiencyscheme,andemissionfactorsfromtheUKGovernment’sGHGConversionFactorsforCompanyReporting2014tocalculatetheabovedisclosures.
GiventheGroup’soperations,CO2eemissionsarerestrictedtoofficeuseandtheoperationofasmallnumberofvehicles.Inthecaseofoffices,occupationiswithinamulti-occupiedbuildingforalloftheGroup’ssubsidiarieswithoutseparatemeteringforindividualusagebyeachtenant.Accordingly,anestimatehasbeenused.
68 Air Partner plc | Annual Report and Accounts 2017
Political contributionsTherewerenopoliticalcontributionsduringtheyear(2016:£nil).
Directors’ statementsAsrequiredundertheCompaniesAct2006,theUKCorporateGovernanceCode2014andtheDisclosureandTransparencyRules(DTRs),variousstatementshavebeenmadebytheBoardassetoutonpages44and55andareincorporatedintothisreportbyreference.
Independent auditorDeloitteLLPhasconfirmedthatitiswillingtobereappointedasauditorforthefinancialyearending31January2017.
InaccordancewithSection489oftheCompaniesAct2006,aresolutionproposingtheappointmentofastatutoryauditorwillbeproposedatthe2017AGM.
Annual General MeetingThe2017AGMwillbeheldat11amonWednesday28Juneat2CityPlace,BeehiveRingRoad,Gatwick,RH60PA.TheCompanyconfirmsthatitwillsendtheNoticeofAGMandrelateddocumentationtoshareholdersatleast20workingdaysbeforethemeeting,eitherbypost,tothoseshareholderswhopreferapapercopy,orbyemailtothoseshareholderswhohaveagreedthattheCompanycancommunicatewiththemelectronically.
BoththeNoticeofAGMandtheProxyformareavailabletodownloadfromtheInvestorssectionontheCompany’swebsite.
TheDirectors’reportwasapprovedbytheBoardon26April2017andissignedonitsbehalfby:
Sally Chandler CompanySecretaryAirPartnerplc
Directors’ report continued
69Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
ThedirectorsareresponsibleforpreparingtheStrategicreportincorporatingthebusinessreview,theDirectors’report,theDirectors’remunerationreportandtheGroupandParentCompanyfinancialstatements.ThedirectorsarerequiredtopreparefinancialstatementsfortheGroupinaccordancewithInternationalFinancialReportingStandards(IFRS)asadoptedforuseintheEuropeanUnionandhavealsoelectedtopreparefinancialstatementsfortheCompanyinaccordancewithIFRSasadoptedforuseintheEuropeanUnion.CompanylawrequiresthedirectorstopreparesuchfinancialstatementsinaccordancewithIFRSandtheCompaniesAct2006andArticle4oftheIASRegulation.
InternationalAccountingStandard1requiresthatfinancialstatementspresentfairlyforeachfinancialyeartheGroup’sandCompany’sfinancialposition,financialperformanceandcashflows.Thisrequiresthefairpresentationoftheeffectsoftransactions,othereventsandconditionsinaccordancewiththedefinitionsandrecognitioncriteriaforassets,liabilities,incomeandexpensessetoutintheInternationalAccountingStandardsBoard’s‘FrameworkforthePreparationandPresentationofFinancialStatements’.Invirtuallyallcircumstances,afairpresentationwillbeachievedbycompliancewithallapplicableIFRS.
Directorsarealsorequiredto:
• selectsuitableaccountingpoliciesandapplythemconsistently
• makejudgementsandestimatesthatarereasonableandprudent
• statewhetherapplicableaccountingstandardshavebeenfollowed,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements
• presentinformation,includingaccountingpolicies,inamannerthatprovidesrelevant,reliable,comparableandunderstandableinformation
• provideadditionaldisclosureswhencompliancewithspecificrequirementsinIFRSisinsufficienttoenableuserstounderstandtheimpactofparticulartransactions,othereventsandconditionsontheentity’sfinancialpositionandfinancialperformance
• preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriatetopresumethattheCompanywillcontinueinbusiness.
ThedirectorsareresponsibleforkeepingadequateaccountingrecordswhichdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheGroupandoftheCompany,forsafeguardingtheassets,fortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities,andforthepreparationofaDirectors’reportandDirectors’remunerationreportwhichcomplywiththerequirementsoftheCompaniesAct2006.
ThedirectorsareresponsibleforthemaintenanceandintegrityoftheGroupwebsite.LegislationintheUnitedKingdomgoverningthepreparationanddisseminationofthefinancialstatementsmaydifferfromlegislationinotherjurisdictions.
Directors’ statement of responsibility for financial statementsEachofthedirectorsservingatthedateofapprovaloftheaccountsconfirmsthat,tothebestofhis/herknowledgeandbelief:
• thefinancialstatements,whichhavebeenpreparedinaccordancewithIFRSasadoptedbytheEuropeanUnion,giveatrueandfairviewoftheassets,liabilities,financialpositionandfinancialperformanceoftheGroupandCompany
• theStrategicreportandtheDirectors’reportgiveafairreviewoftheGroup,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthattheGroupfaces.
Directors’ statement of responsibility for disclosure of information to auditorAsrequiredbysection418oftheCompaniesAct2006,eachdirectorservingatthedateofapprovalofthefinancialstatementsconfirmsthat:
• tothebestofhis/herknowledgeandbelief,thereisnoinformationrelevanttothepreparationoftheirreportsofwhichtheCompany’sauditorisunaware
• eachdirectorhastakenallthestepsadirectormightreasonablybeexpectedtohavetakentobeawareofrelevantauditinformationandtoestablishthattheCompany’sauditorisawareofthatinformation.
Wordsandphrasesusedinthisconfirmationshouldbeinterpretedinaccordancewithsection418oftheCompaniesAct2006.
TheDirectors’statementswereapprovedbytheBoardon26April2017andaresignedonitsbehalfby:
Sally Chandler CompanySecretaryAirPartnerplc
Directors’ responsibility statement
Strategic reportCorporate governance
Financial statements
71Air Partner plc |AnnualReportandAccounts2017
Financialstatements
72 Air Partner plc | Annual Report and Accounts 2017
Summary of our audit approach
Key risks Thekeyrisksthatweidentifiedinthecurrentyearwere:
1Revenuerecognition:classificationaseitheragentorprincipal
2Completenessofprovisionsagainstoperatorprepayments
3Completenessofoperatoraccruals
4FinalisationofpurchasepriceallocationrelatingtotheacquisitionofBainesSimmons
5ImpairmentofgoodwillandintangibleassetsrelatingtotheBainesSimmonsconsultingandtrainingcash-generatingunit.
Withinthisreport,anynewrisksareidentifiedwith andanyriskswhicharethesameastheprioryearareidentifiedwith .
Materiality Ourchosenmaterialityof£410,000(2016:£285,000)represents8.1%(2016:6.6%)ofunderlyingprofitbeforetax,1.3%(2016:1.0%)ofgrossprofitand2.7%(2016:2.1%)ofnetassets.
Underlyingprofitbeforetaxisdefinedbymanagementinnote2.
Scoping Ourglobaltestingapproachisacombinationoffullscope,specifiedauditproceduresanddefinedprocedures.Wehavemadechangestoourscopingdecisionsmadeintheprioryearforseveralglobalentitiestoreflecttheircurrentsignificance.
Significant changes in our approach
WeidentifiedanadditionalkeyriskinthecurrentyearrelatingtotheriskofimpairmentoftheBainesSimmonsconsultingandtrainingcash-generatingunit.WehavenotreportedontherevenuerecognitionofJetCardandotherdeferredincomeasthisriskdidn’thaveasignificanteffectontheallocationofresourcesintheauditinthecurrentyear.
Independent auditor’s report to the members of Air Partner plc
Opinion on financial statements of Air Partner plcInouropinion:
• thefinancialstatementsgiveatrueandfairviewofthestateoftheGroup’sandoftheParentCompany’saffairsasat31January2017andoftheGroup’sprofitfortheyearthenended
• theGroupfinancialstatementshavebeenproperlypreparedinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnion
• theParentCompanyfinancialstatementshavebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnionandasappliedinaccordancewiththeprovisionsoftheCompaniesAct2006
• thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006and,asregardstheGroupfinancialstatements,Article4oftheIASRegulation.
Thefinancialstatementsthatwehaveauditedcomprise:
• theConsolidatedIncomeStatement• theConsolidatedStatementofComprehensiveIncome• theConsolidatedandCompanyStatementsofFinancialPosition• theConsolidatedandCompanyCashFlowStatements• theConsolidatedandCompanyStatementsofChangesinEquity• therelatednotes1to38.
ThefinancialreportingframeworkthathasbeenappliedintheirpreparationisapplicablelawandIFRSsasadoptedbytheEuropeanUnionand,asregardstheParentCompanyfinancialstatements,asappliedinaccordancewiththeprovisionsoftheCompaniesAct2006.
73Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Separate opinion in relation to IFRSs as issued by the IASB
Asexplainedinnote1totheGroupfinancialstatements,inadditiontocomplyingwithitslegalobligationtoapplyIFRSsasadoptedbytheEuropeanUnion,theGrouphasalsoappliedIFRSsasissuedbytheInternationalAccountingStandardsBoard(IASB).
InouropiniontheGroupfinancialstatementscomplywithIFRSsasissuedbytheIASB.
Going concern and the directors’ assessment of the principal risks that would threaten the solvency or liquidity of the Group
AsrequiredbytheListingRuleswehavereviewedthedirectors’statementregardingtheappropriatenessofthegoingconcernbasisofaccountingcontainedwithinnote2tothefinancialstatementsandthedirectors’statementonthelonger-termviabilityoftheGroupcontainedwithintheAuditandRiskCommitteereportonpage51.
Wearerequiredtostatewhetherwehaveanythingmaterialtoaddordrawattentiontoinrelationto:
• thedirectors’confirmationonpage53thattheyhavecarriedoutarobustassessmentoftheprincipalrisksfacingtheGroup,includingthosethatwouldthreatenitsbusinessmodel,futureperformance,solvencyorliquidity
• thedisclosuresonpages18-21thatdescribethoserisksandexplainhowtheyarebeingmanagedormitigated
• thedirectors’statementinnote2tothefinancialstatementsaboutwhethertheyconsidereditappropriatetoadoptthegoingconcernbasisofaccountinginpreparingthemandtheiridentificationofanymaterialuncertaintiestotheGroup’sabilitytocontinuetodosooveraperiodofatleast12monthsfromthedateofapprovalofthefinancialstatements
• thedirectors’explanationonpage53astohowtheyhaveassessedtheprospectsoftheGroup,overwhatperiodtheyhavedonesoandwhytheyconsiderthatperiodtobeappropriate,andtheirstatementastowhethertheyhaveareasonableexpectationthattheGroupwillbeabletocontinueinoperationandmeetitsliabilitiesastheyfalldueovertheperiodoftheirassessment,includinganyrelateddisclosuresdrawingattentiontoanynecessaryqualificationsorassumptions.
We confirm that we have nothing material to add or draw attention to in respect of these matters.
We agreed with the directors’ adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.
Independence
WearerequiredtocomplywiththeFinancialReportingCouncil’sEthicalStandardsforAuditorsandconfirmthatweareindependentoftheGroupandwehavefulfilledourotherethicalresponsibilitiesinaccordancewiththosestandards.
We confirm that we are independent of the Group and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services referred to in those standards.
Our assessment of risks of material misstatement
Theassessedrisksofmaterialmisstatementdescribedonpages74to76arethosethathadthegreatesteffectonourauditstrategy,theallocationofresourcesintheauditanddirectingtheeffortsoftheengagementteam.
74 Air Partner plc | Annual Report and Accounts 2017
1. Revenue recognition: classification as either agent or principal
Risk description AirPartnerplcprovidesaircharterservicestocustomersusingoperatoraircrafttosupplytheflight.Therecognitionofrevenueaseither‘agent’or‘principal’isdeterminedbytheapplicationofthecriteriasetoutinIAS18‘Revenue’.Underthisstandard,anentityisactingasprincipalwhenithasexposuretothesignificantrisksandrewardsassociatedwiththerenderingofservices.
ManagementmustapplytheirjudgementtoconsideriftheCompanyisactingastheprincipalortheagentineachcontractwiththeendcustomerwhereAirPartner’sstandardtermsandconditionsaremodified(orindeednotusedasabasisforthecontract).
Thereisariskthatrevenueisrecognisedincorrectlyeitheras‘gross’revenuewhenthebusinessisnotexposedto‘principal’risk,orbookedas‘net’or‘agency’revenuewhenthebalanceofriskpointstotheCompanybeingthe‘principal’inthearrangement.
Totalgrosstransactionvalue(GTV)was£215.8mintheyearended31January2017(2016:£210.8m).GTVrepresentsthetotalvalueofinvoicesraisedtocustomers.
TheGroup’srevenuerecognitionaccountingpolicyisincludedonpage92ofthenotestothefinancialstatements.ThisisdiscussedbytheAuditandRiskCommitteeonpage51.
How the scope of our audit responded to the risk
Inordertoaddressthisrisk:
• wetestedthedesignandimplementationofmanagement’scontrolsovertheclassificationofrevenue• weobtainedandreviewedAirPartner’sstandardcontracttermsandthosecontractswheremanagement
concludedthattheywereprincipalagainsttheIAS18criteriatoassesswhetherthecorrectapplicationofIAS18recognitionwasapplied
• wealsoselectedasampleofrecordedrevenueamounts,obtainedandreviewedthecustomercontractinordertoassesswhetherthecorrectapplicationofIAS18revenueclassificationhadbeenapplied
• weperformedfocusedtestingonafurthersampleofcontractswhichmanagementhasclassifiedasagentarrangementsbyselectingasampleofthosewhichhadsimilarcharacteristics(industry,size,margin)tocustomercontractswhereAirPartnerwasclassifiedasprincipal.Fortheseweevaluatedmanagement’sassessmentonwhetherAirPartnerisanagentusingthecriteriaofIAS18.
Key observations Fromtheworkperformedabove,wearesatisfiedthatrevenuerecognitionhasbeenappropriatelyappliedinaccordancewithIAS18.
2. Completeness of provisions against operator prepayments
Risk description TheGroupentersintosalescontractswithcustomersforaircraftcharterandentersintopurchasecontracts‘back-to-back’.TheGroupisrequiredtoprepayoperatorsforflightswhichoccurinthefuture.Attheyearend,thevalueofGroupprepaymentswas£5.2m(2016:£7.0m)whichincludesoperatorprepayments.AlthoughtheGroupmatchesthepurchasecontractwiththecustomerreceipt,thereisacreditriskincaseswheresuppliersdefaultbeforetheflighttakesoffandthatmoniesprepaidtosuppliersarenotrecoverable.Incertaincases,AirPartnermaystillfulfiltheflightforthecustomer.Thereisarisktheseprepaymentsneedtobeprovidedfor.ThisisdiscussedbytheAuditandRiskCommitteeonpage52.
How the scope of our audit responded to the risk
Inordertoaddressthisrisk:
• wecheckedtheaccuracyofthelistingofprepaidoperatorcostsasat31January2017byagreeingasamplethroughtosignedcontracts
• wereviewedprepaidoperatorcoststoidentifythosewhichhadahigherchanceofirrecoverability• wetracedasampleofprepaymentsthroughtopost-yearendflightrecordstocheckthattheoperatorhad
suppliedtheflight• forthoseflightsinoursamplethathadnotyettakenoffatthedateofourtestingwereviewedtheoperator’s
businesshistorywiththeGroupforevidenceofdisputeandslowpaymentaswellasthird-partyevidenceoftheirfinancialposition
• werequesteddetailsfromtheGroup’sexternallegaladviserstoidentifylegaldisputeswithoperators.
Key observations Fromtheworkperformedabove,wearesatisfiedthatoperatorprepaymentsarevaluedappropriately.
Independent auditor’s report to the members of Air Partner plccontinued
75Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
3. Completeness of operator accruals
Risk description FlightsandrelatedservicesarepurchasedfromalargenumberofdifferentsuppliersandthenatureoftheGroup’sproductsandservicesisthattheyarebespokeandtailoredtotheclient’srequirements.Asaresult,theprocessofmatchingcostsandassociatedrevenuesinordertoappropriatelyaccountonanaccrualsbasisrequiresestimationoffuturecosts.Theriskofcompletenessisconsideredsignificantas:
• supplierssubmitinvoiceswithdifferingtimescales,oftensignificantlylaterthanthedateoftheserviceprovision
• certainemployeeshaveelementsoftheirremunerationbaseduponacommissioncalculatedwithreferencetogrossprofitonflightservices.
Thesefactorsresultinaheightenedriskofunder-accrualofcosts.ThisisdiscussedbytheAuditandRiskCommitteeonpage52.
How the scope of our audit responded to the risk
Inordertoaddressthisrisk:
• wetestedasampleofpurchaseinvoicesandpaymentsmadeafter31January2017.Weagreedthesetoevidencesupportingthedateofflightsorservicedeliveryandconsideredwhether,wherethiswasbeforetheyearend,anaccrualhadbeenrecorded
• weperformedanalyticalproceduresongrossmarginforthecomponentsinourscopetohighlightinstanceswherecostsmaynothavebeenrecorded.Ifweidentifiedanunexpectedmargin,wecarriedoutmorefocusedtestingonthecompletenessofaccruals
• wereviewedsignificantaccrualamountsagainstamountsrecordedatthepriorperiodendtohighlightanypotentialriskofunder-accrual.
Key observations Fromtheworkperformedabove,wedidnotidentifyanyincompleteaccrualswhichrequiredreportingtotheAuditandRiskCommittee.
4. Finalisation of purchase price allocation relating to the acquisition of Baines Simmons
Risk description Duringtheyearended31January2016,AirPartneracquiredBainesSimmonsLimited.Inthecurrentyear,managementfinalisedtheBainesSimmonsacquisitionaccounting,inaccordancewithIFRS3(revised)BusinessCombinations.Goodwillis£1.7m(2016:£2.8m)andintangiblesare£4.0m(2016:£2.7m).Seenote33wherethefinalisedallocationhasbeendisclosed.
Thereissignificantjudgementrequiredinthevaluationsofthegoodwillandintangibleassetsandmanagementhasusedavaluationexperttoassistinthisprocess.Wehaveidentifiedthefinalisationofthepurchasepriceallocationasthesignificantriskintheacquisitionaccounting.
Wehavepinpointedtherisktomanagement’sfinalisationofthepurchasepriceallocationbetweencash-generatingunits(CGUs)andtherelatedgoodwillandintangibleassets.ThemainassumptionsusedinallocatingthisbetweentheCGUsarerevenuegrowth,theallocationofoverheadsandthediscountrateappliedtoeach.
TheGroup’saccountingpolicyisincludedonpage89ofthenotestothefinancialstatements.ThisisdiscussedbytheAuditandRiskCommitteeonpage52.
How the scope of our audit responded to the risk
Inordertoaddressthisrisk:
• wecheckedtheaccuracyoftheschedulessupportingthevaluationofgoodwillandintangibleassetsacquired• wechallengedtheinputsandassumptionslistedaboveusedinthevaluation.Thisincludedinvolving
internalspecialiststobenchmarkthediscountrateandchallengethemethodologyused• wealsoassessedthereasonablenessofcashflowforecaststhroughcomparisontohistoricalresultsand
otherknowledgegainedfromouraudit• weassessedwhethertheaccountingjournalspostedinrelationtothetransactionwereinaccordance
withIFRS3• weconsideredthecompetencyofmanagement’sexpert.
Key observations Fromtheworkperformedabove,weconcludedthattheassumptionsusedintheallocationswereappropriate.
76 Air Partner plc | Annual Report and Accounts 2017
Independent auditor’s report to the members of Air Partner plccontinued
5. Impairment of goodwill and intangible assets relating to the Baines Simmons consulting and training cash-generating unit (CGU)
Risk description ManagementisrequiredtotestGroupgoodwillbalancesannuallyforimpairment.Theassessmentofthecarryingvalueofgoodwillandintangiblesinvolvesjudgementinrelationtoforecastingfuturecashflowsandissensitivetogrowthratesandthediscountrateappliedtofuturecashflows.
Managementhasassessedthefuturecashflowsofthecashgeneratingunitandconcludedthatitisnotimpaired.WehaveconsideredtheCompany’sforecastperformanceandpinpointedourriskspecificallytotherevenueandgrossprofitgrowthratesanddiscountrateappliedwithintheBainesSimmonsconsultingandtrainingCGU.Asat31January2017,goodwillandintangibleassetsrelatingtothisCGUtotal£1.6m(2016:£3.2m).
TheGroup’sgoodwillandintangibleassetsaccountingpoliciesareincludedonpage87ofthenotestothefinancialstatements.ThisisdiscussedbytheAuditandRiskCommitteeonpage52.
How the scope of our audit responded to the risk
Inordertoaddressthisrisk:
• wecheckedtheaccuracyoftheschedulessupportingthecashflowmodel• wechallengedtheappropriatenessofthekeyassumptionsofcashflowgrowth,revenueandgrossprofit
growthratesusinghistoricalperformance,historicalforecastingaccuracy,knowledgeofthebusinessandsensitivityanalysis
• wechallengedthediscountfactorused,usingourinternalspecialists,toassesstheappropriatenessforthisbusiness,bycomparisontoexternaldataandviasensitivityanalysis
• wealsotestedthecompletenessofdirectandoverheadcostsviapost-yearendpaymenttestingandtheoccurrenceofrevenuefor2017.
Key observations Fromtheworkperformedabove,weconcludedthattheinputsandassumptionsappliedinthevaluationmodelwereappropriate.
Thesematterswereaddressedinthecontextofourauditofthefinancialstatementsasawhole,andinformingouropinionthereon,andwedonotprovideaseparateopiniononthesematters.
Our application of materiality
Wedefinematerialityasthemagnitudeofmisstatementinthefinancialstatementsthatmakesitprobablethattheeconomicdecisionsofareasonablyknowledgeablepersonwouldbechangedorinfluenced.Weusematerialitybothinplanningthescopeofourauditworkandinevaluatingtheresultsofourwork.
Basedonourprofessionaljudgement,wedeterminedmaterialityforthefinancialstatementsasawholeasfollows:
Group materiality £410,000(2016:£285,000)
Basis for determining materiality
Weusedacombinationofunderlyingprofitbeforetax,grossprofitandnetassetstodeterminemateriality.
Ourchosenmaterialityrepresents8.1%(2016:6.6%)ofunderlyingprofitbeforetax,1.3%(2016:1.0%)ofgrossprofitand2.7%(2016:2.1%)ofnetassets.
Rationale for the benchmark applied
Indeterminingourmaterialitybenchmarkweconsideredtheperformanceindicatorsmostapplicabletotheusersofthefinancialstatements,thenatureofthebusinessandcomparativeauditreportsforlistedentities.Grossprofitandunderlyingprofitbeforetaxarethekeymeasuresusedbyanalystsinpresentingbusinessperformancetousersofthefinancialstatements.However,asprofit-basedmeasuresdonotfullyrepresentthesizeofthebalancesheet,wehavealsoconsiderednetassetsindeterminingmateriality.Inmakingthisdetermination,weconsideredtheprofitmetricsofboththeprioryearandthecurrentyearbecauseofthevariation.Underlyingprofitisdefinedbymanagementonpage91.
WeagreedwiththeAuditandRiskCommitteethatwewouldreporttotheCommitteeallauditdifferencesinexcessof£20,500(2016:£5,700),aswellasdifferencesbelowthatthresholdthat,inourview,warrantedreportingonqualitativegrounds.WealsoreporttotheAuditandRiskCommitteeondisclosuremattersthatweidentifiedwhenassessingtheoverallpresentationofthefinancialstatements.
77Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
An overview of the scope of our audit
OurauditwasscopedbyobtaininganunderstandingoftheGroupanditsenvironment,includinginternalcontrol,howtheGroupisorganised,theconsolidationprocess,theperformanceandfinancialpositionofeachcomponentasaproportionofthetotalfortheGroupandassessingtherisksofmaterialmisstatementthroughouttheGroup.Basedonthatassessment,wefocusedourGroupauditscopeprimarilyontheGroupoperationsintheUK,France,theUSandGermany.
TheUKandFranceweresubjecttoafullaudit,whiletheUSandGermanyweresubjecttospecifiedauditproceduresincludingfullauditproceduresonsignificantrisks.OurtestingintheUSandGermanywasbasedonourassessmentoftherisksofmaterialmisstatementandofthematerialityoftheGroup’soperationsatthoselocationsincludinganauditofaccountbalancesrelatingtothesignificantrisksareasapplicabletothoselocations.
TheGroupauditengagementteamvisitedalloverseascomponentauditteamsaspartofouroversightoftheirwork.WevisitedeachoftheoverseaslocationssetoutaboveinorderforaseniormemberoftheGroupauditengagementteamtoupdateourunderstandingoftheoperations,risksandcontrolenvironmentsofeachcomponentaswellastoreviewthecomponentauditors’workingpapers.TheGroupauditengagementteamperformedtheauditoftheUKbusinessandproceduresontheUSbusinesswithouttheinvolvementofacomponentteam.
Forallotherlocations,wehaveperformedanalyticalreviewproceduresatGrouplevel.Attheparententitylevelwealsotestedtheconsolidationprocess.Thechangesinscopethisyeararethatweperformed:
• specifiedauditproceduresonrevenueandcostofsalesforBainesSimmonsLimited• analyticalreviewproceduresforItaly,ratherthanspecifiedauditprocedures• analyticalreviewproceduresforthenewlyacquiredsubsidiaryClockworkResearchLimited.
TheGroupauditengagementteamhasobtainedanunderstandingoftheGroup,includingtheconsolidationprocessandGroup-widecontrols,toconfirmourconclusionthattherewerenosignificantrisksofmaterialmisstatementoftheaggregatedfinancialinformationoftheremainingcomponentsnotsubjecttoauditorauditofspecifiedaccountbalances.TheGroupresultsaresplitasfollows:
51%42%
7%
Gross profit
47%46%
7%
Statutory profit before tax
78%
16%
6%
New assets
Fullauditscope Specifiedauditprocedures Analyticalreviewprocedures
Thematerialityusedineachlocationwhereweperformedanauditorspecifiedauditproceduresrangedfrom£213,000to£340,000(2016:£128,000to£228,000).
78 Air Partner plc | Annual Report and Accounts 2017
Independent auditor’s report to the members of Air Partner plccontinued
Opinion on other matters prescribed by the Companies Act 2006
Inouropinion,basedontheworkundertakeninthecourseoftheaudit:
• thepartoftheDirectors’remunerationreporttobeauditedhasbeenproperlypreparedinaccordancewiththeCompaniesAct2006• theinformationgivenintheStrategicreportandtheDirectors’reportforthefinancialyearforwhichthefinancialstatementsareprepared
isconsistentwiththefinancialstatements• theStrategicreportandtheDirectors’reporthavebeenpreparedinaccordancewithapplicablelegalrequirements.
InthelightoftheknowledgeandunderstandingoftheCompanyanditsenvironmentobtainedinthecourseoftheaudit,wehavenotidentifiedanymaterialmisstatementsintheStrategicreportandtheDirectors’report.
Matters on which we are required to report by exception
Adequacy�of�explanations�received�and�accounting�records
UndertheCompaniesAct2006wearerequiredtoreporttoyouif,inouropinion:
• wehavenotreceivedalltheinformationandexplanationswerequireforouraudit,or• adequateaccountingrecordshavenotbeenkeptbytheParentCompany,orreturns
adequateforouraudithavenotbeenreceivedfrombranchesnotvisitedbyus,or• theParentCompanyfinancialstatementsarenotinagreementwiththeaccounting
recordsandreturns.
We have nothing to report in respect of these matters.
Directors’�remuneration
UndertheCompaniesAct2006wearealsorequiredtoreportifinouropinioncertaindisclosuresofdirectors’remunerationhavenotbeenmadeorthepartoftheDirectors’remunerationreporttobeauditedisnotinagreementwiththeaccountingrecordsandreturns.
We have nothing to report arising from these matters.
Corporate�governance�statement
UndertheListingRuleswearealsorequiredtoreviewpartoftheCorporategovernancestatementrelatingtotheCompany’scompliancewithcertainprovisionsoftheUKCorporateGovernanceCode.
We have nothing to report arising from our review.
Our�duty�to�read�other�information�in�the�annual�report
UnderInternationalStandardsonAuditing(UKandIreland),wearerequiredtoreporttoyouif,inouropinion,informationintheannualreportis:
• materiallyinconsistentwiththeinformationintheauditedfinancialstatements,or• apparentlymateriallyincorrectbasedon,ormateriallyinconsistentwith,our
knowledgeoftheGroupacquiredinthecourseofperformingouraudit,or• otherwisemisleading.
Inparticular,wearerequiredtoconsiderwhetherwehaveidentifiedanyinconsistenciesbetweenourknowledgeacquiredduringtheauditandthedirectors’statementthattheyconsidertheannualreportisfair,balancedandunderstandableandwhethertheannualreportappropriatelydisclosesthosemattersthatwecommunicatedtotheAuditandRiskCommitteewhichweconsidershouldhavebeendisclosed.
We confirm that we have not identified any such inconsistencies or misleading statements.
79Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Respective responsibilities of directors and auditor
AsexplainedmorefullyintheDirectors’responsibilitiesstatement,thedirectorsareresponsibleforthepreparationofthefinancialstatementsandforbeingsatisfiedthattheygiveatrueandfairview.OurresponsibilityistoauditandexpressanopiniononthefinancialstatementsinaccordancewithapplicablelawandInternationalStandardsonAuditing(UKandIreland).WealsocomplywithInternationalStandardonQualityControl1(UKandIreland).Ourauditmethodologyandtoolsaimtoensurethatourqualitycontrolproceduresareeffective,understoodandapplied.Ourqualitycontrolsandsystemsincludeourdedicatedprofessionalstandardsreviewteamandindependentpartnerreviews.
ThisreportismadesolelytotheCompany’smembers,asabody,inaccordancewithChapter3ofPart16oftheCompaniesAct2006.OurauditworkhasbeenundertakensothatwemightstatetotheCompany’smembersthosematterswearerequiredtostatetotheminanauditor’sreportandfornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthantheCompanyandtheCompany’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.
Scope of the audit of the financial statements
Anauditinvolvesobtainingevidenceabouttheamountsanddisclosuresinthefinancialstatementssufficienttogivereasonableassurancethatthefinancialstatementsarefreefrommaterialmisstatement,whethercausedbyfraudorerror.Thisincludesanassessmentof:whethertheaccountingpoliciesareappropriatetotheGroup’sandtheParentCompany’scircumstancesandhavebeenconsistentlyappliedandadequatelydisclosed;thereasonablenessofsignificantaccountingestimatesmadebythedirectors;andtheoverallpresentationofthefinancialstatements.Inaddition,wereadallthefinancialandnon-financialinformationintheannualreporttoidentifymaterialinconsistencieswiththeauditedfinancialstatementsandtoidentifyanyinformationthatisapparentlymateriallyincorrectbasedon,ormateriallyinconsistentwith,theknowledgeacquiredbyusinthecourseofperformingtheaudit.Ifwebecomeawareofanyapparentmaterialmisstatementsorinconsistenciesweconsidertheimplicationsforourreport.
Robert Knight FCA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Crawley,UnitedKingdom
26April2017
80 Air Partner plc | Annual Report and Accounts 2017
Consolidated income statementfortheyearended31January2017
Financial statements
Year ended 31 January 2017 Yearended31January2016
Continuing operations NoteUnderlying*
£’000Other items
£’000Total
£’000Underlying*
£’000Otheritems
£’000Total
£’000
Gross transaction value (GTV) 2 215,829 – 215,829 210,752 – 210,752
Revenue 3 42,538 – 42,538 49,942 – 49,942
Gross profit 4 31,707 – 31,707 27,269 – 27,269Administrativeexpenses (26,593) (709) (27,302) (22,883) (1,178) (24,061)
Operating profit 5,114 (709) 4,405 4,386 (1,178) 3,208
Financeincome 9 39 – 39 10 – 10Financeexpense 9 (96) – (96) (81) – (81)
Profit before tax 5,057 (709) 4,348 4,315 (1,178) 3,137Taxation 10 (1,654) 153 (1,501) (1,311) 81 (1,230)
Profit for the year from continuing operations 3,403 (556) 2,847 3,004 (1,097) 1,907
Discontinued operationsProfitfortheyearfromdiscontinuedoperations 11 – – – 387 – 387
Profit for the year 3,403 (556) 2,847 3,391 (1,097) 2,294
Attributable to:OwnersoftheParentCompany 3,403 (556) 2,847 3,391 (1,097) 2,294
Earnings/(loss) per share:Continuing operationsBasic 13 6.5p (1.1)p 5.4p 5.9p (2.2)p 3.7pDiluted 13 6.4p (1.1)p 5.3p 5.8p (2.2)p 3.6p
Discontinued operationsBasic 13 – – – 0.8p – 0.8pDiluted 13 – – – 0.8p – 0.8p
Continuing and discontinued operationsBasic 13 6.5p (1.1)p 5.4p 6.7p (2.2)p 4.5pDiluted 13 6.4p (1.1)p 5.3p 6.6p (2.2)p 4.4p
*Beforeotheritems(seenote7)
Year ended 31 January
2017£’000
Yearended31January
2016£’000
Profitfortheyear 2,847 2,294Other comprehensive income – items that may subsequently be reclassified to profit or loss:Exchangedifferencesontranslationofforeignoperations 346 (29)
Total comprehensive income for the year 3,193 2,265
Attributable to:OwnersoftheParentCompany 3,193 2,265
Consolidated statement of comprehensive incomefortheyearended31January2017
81Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Consolidated statement of changes in equity fortheyearended31January2017
Sharecapital£’000
Sharepremiumaccount
£’000
Mergerreserve
£’000
Ownshares
reserve£’000
Translationreserve
£’000
Shareoption
reserve£’000
Retainedearnings
£’000
Totalequity£’000
Opening equity as at 1 February 2015 513 4,518 – (1,051) 1,093 1,485 6,753 13,311Profitfortheyear – – – – – – 2,294 2,294Exchangedifferencesontranslationofforeignoperations – – – – (29) – – (29)
Total comprehensive income for the year – – – – (29) – 2,294 2,265Issueofshares 9 296 295 (300) – – – 300Shareoptionmovementintheyear – – – – – 223 – 223Deferredtaxonshare-basedpaymenttransactions(note26) – – – – – – 18 18Shareoptionsexercisedduringtheyear – – – 152 – – (84) 68Dividendspaid(note12) – – – – – – (2,331) (2,331)
Closing equity as at 31 January 2016 522 4,814 295 (1,199) 1,064 1,708 6,650 13,854
Sharecapital£’000
Sharepremiumaccount
£’000
Mergerreserve
£’000
Ownshares
reserve£’000
Translationreserve
£’000
Shareoption
reserve£’000
Retainedearnings
£’000
Totalequity£’000
Opening equity as at 1 February 2016 522 4,814 295 (1,199) 1,064 1,708 6,650 13,854Profitfortheyear – – – – – – 2,847 2,847Exchangedifferencesontranslationofforeignoperations – – – – 346 – – 346
Total comprehensive income for the year – – – – 346 – 2,847 3,193Shareoptionmovementfortheyear – – – – – 369 – 369Issueofshares – (59) 59 60 – (60) – –Deferredtaxonshare-basedpaymenttransactions(note26) – – – – – – (66) (66)Shareoptionsexercisedduringtheyear – – – 467 – – (286) 181Remeasurementsofpost-employmentbenefitobligations – – – – – – (23) (23)Dividendspaid(note12) – – – – – – (2,574) (2,574)
Closing equity as at 31 January 2017 522 4,755 354 (672) 1,410 2,017 6,548 14,934
82 Air Partner plc | Annual Report and Accounts 2017
Financial statementscontinued
Company statement of changes in equity fortheyearended31January2017
Sharecapital£’000
Sharepremiumaccount
£’000
Mergerreserve
£’000
Ownshares
reserve£’000
Shareoption
reserve£’000
Retainedearnings
£’000
Totalequity£’000
Opening equity as at 1 February 2015 513 4,518 – (1,051) 1,485 4,549 10,014Profitfortheyear – – – – – 5,636 5,636
Total comprehensive income for the period – – – – – 5,636 5,636Issueofshares 9 296 295 (300) – – 300Shareoptionmovementfortheyear – – – – 223 – 223
Deferredtaxonshare-basedpaymenttransactions(note26) – – – – – 18 18Shareoptionsexercisedduringtheyear – – – 152 – (84) 68Dividendspaid(note12) – – – – – (2,331) (2,331)
Closing equity as at 31 January 2016 522 4,814 295 (1,199) 1,708 7,788 13,928
Sharecapital£’000
Sharepremiumaccount
£’000
Mergerreserve
£’000
Ownshares
reserve£’000
Shareoption
reserve£’000
Retainedearnings
£’000
Totalequity£’000
Opening equity as at 1 February 2016 522 4,814 295 (1,199) 1,708 7,788 13,928Profitfortheyear – – – – – 1,154 1,154
Total comprehensive income for the year – – – – – 1,154 1,154Issueofshares – (59) 59 60 (60) – –Shareoptionmovementfortheyear – – – – 369 – 369
Deferredtaxonshare-basedpaymenttransactions(note26) – – – – – (37) (37)Shareoptionsexercisedduringtheyear – – – 467 – (320) 147Dividendspaid(note12) – – – – – (2,574) (2,574)
Closing equity as at 31 January 2017 522 4,755 354 (672) 2,017 6,011 12,987
Merger reserveThemergerreserverepresentsthefairvalueoftheconsiderationgiveninexcessofthenominalvalueoftheordinarysharesissuedinanacquisitionpartlymadebytheissueofshares.
Own sharesTheownsharesreserverepresentsthecostofsharesinAirPartnerplcpurchasedinthemarketandheldbytheAirPartnerEmployeeBenefitTrusttosatisfyoptionsundertheGroup’sshareoptionschemes(seenote31).
Translation reserveThetranslationreserverepresentstheaccumulatedexchangedifferencesarisingfromtheimpactofthetranslationofsubsidiarieswithafunctionalcurrencyotherthanpoundssterling.
Share option reserveTheshareoptionreserverelatestotheaccumulatedcostsassociatedwiththeoutstandingshareoptionsissuedtostaffbutnotexercised.
83Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Consolidated statement of financial positionasat31January2017
Note
31 January2017
£’000
31January2016
£’000
AssetsNon-current assetsGoodwill 14 3,787 3,346Otherintangibleassets 15 4,956 5,038Property,plantandequipment 16 1,086 1,281Deferredtaxassets 26 533 143
Total non-current assets 10,362 9,808
Current assetsTradeandotherreceivables 18 25,405 23,708Currenttaxassets 506 438Restricted�bank�balances 1,965 2,840Other�cash�and�cash�equivalents 17,830 16,951Totalcashandcashequivalents 19,795 19,791Derivativefinancialinstruments 24 – 36
Total current assets 45,706 43,973
Total assets 56,068 53,781
Current liabilitiesTradeandotherpayables 20 (4,359) (3,911)Currenttaxliabilities (1,071) (133)Otherliabilities 21 (4,463) (5,633)Borrowings 19 (514) (514)Deferredincome (27,350) (25,807)Provisions 23 – (421)Derivativefinancialinstruments 24 (9) –
Total current liabilities (37,766) (36,419)
Net current assets 7,940 7,554
Long-term liabilitiesBorrowings 19 (2,443) (2,957)Deferredconsideration 22 (200) –Deferredtaxliability 26 (725) (551)
Total long-term liabilities (3,368) (3,508)
Total liabilities (41,134) (39,927)
Net assets 14,934 13,854
EquitySharecapital 28 522 522Sharepremiumaccount 29 4,755 4,814Mergerreserve 30 354 295Ownsharesreserve 31 (672) (1,199)Translationreserve 1,410 1,064Shareoptionreserve 2,017 1,708Retainedearnings 6,548 6,650
Total equity 14,934 13,854
ThesefinancialstatementswereapprovedandauthorisedforissuebytheBoardon26April2017andweresignedonitsbehalfby:
M A Briffa Director N J Morris Director
84 Air Partner plc | Annual Report and Accounts 2017
Company statement of financial positionasat31January2017
Financial statements continued
Note
31 January2017
£’000
31January2016
£’000
AssetsNon-current assetsIntangibleassets 15 1,039 992Property,plantandequipment 16 726 897Investments 17 9,350 8,587Deferredtaxassets 26 24 75
Total non-current assets 11,139 10,551
Current assetsTradeandotherreceivables 18 13,539 15,483Currenttaxassets 208 337Restricted�bank�balances 1,965 2,840Other�cash�and�cash�equivalents 12,237 12,146Totalcashandcashequivalents 14,202 14,986Derivativefinancialinstruments 24 – 36
Total current assets 27,949 30,842
Total assets 39,088 41,393
Current liabilitiesTradeandotherpayables 20 (1,677) (1,462)Currenttaxliabilities (80) –Otherliabilities 21 (5,170) (5,460)Borrowings 19 (514) (514)Deferredincome (16,008) (16,906)Provisions 23 – (166)Derivativefinancialinstruments 24 (9) –
Total current liabilities (23,458) (24,508)
Net current assets 4,491 6,334
Long-term liabilitiesBorrowings 19 (2,443) (2,957)Deferredconsideration (200) –
Total long-term liabilities (2,643) (2,957)
Total liabilities (26,101) (27,465)
Net assets 12,987 13,928
EquitySharecapital 28 522 513Sharepremiumaccount 29 4,755 4,518Mergerreserve 30 354 –Ownsharesreserve 31 (672) (1,051)Shareoptionreserve 2,017 1,485Retainedearnings 6,011 4,549
Total equity 12,987 10,014
ThesefinancialstatementswereapprovedandauthorisedforissuebytheBoardon26April2017andweresignedonitsbehalfby:
M A Briffa Director N J Morris DirectorAir Partner plc Registeredno.00980675
85Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
Group Company
Note
Year ended
31 January2017
£’000
Yearended
31January2016
£’000
Year ended
31 January2017
£’000
Yearended
31January2016
£’000
Net cash inflow from operating activities 34 1,874 5,785 1,926 387
Investing activitiesContinuingoperations–Interestreceived 39 10 34 3–Dividendsreceivedfromsubsidiaries – – – 3,277
–Purchasesofproperty,plantandequipment 16 (96) (118) (53) (69)–Purchasesofintangibleassets 15 (173) (153) (173) (153)–Acquisitionofsubsidiaries 32 (362) (5,902) (469) (514)
Net cash generated (used in)/by investing activities (592) (6,163) (661) 2,544
Financing activitiesContinuingoperations–Dividendspaid (2,574) (2,331) (2,574) (2,331)–Proceedsonexerciseofshareoptions 181 68 147 68–Newbankloansraised – 3,600 – 3,600
–Repaymentsofborrowings (514) (129) (514) (129)Net cash (used in)/generated by financing activities (2,907) 1,208 (2,941) 1,208Net (decrease)/increase in cash and cash equivalents (1,625) 830 (1,676) 4,139Openingcashandcashequivalents 19,791 18,794 14,986 10,729Effectofchangesinforeignexchangerates 1,629 167 892 118
Closing cash and cash equivalents 19,795 19,791 14,202 14,986
JetCard cashTheclosingcashandcashequivalentsbalancecanbefurtheranalysedinto‘JetCardcash’(beingrestrictedandunrestrictedcashreceivedbytheGroupandCompanyinrespectofitsJetCardproduct)and‘non-JetCardcash’asfollows:
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
JetCardcashrestrictedinitsuse 1,965 2,840 1,965 2,840JetCardcashunrestrictedinitsuse 13,901 13,936 10,568 10,303
TotalJetCardcash 15,866 16,776 12,533 13,143Non-JetCardcash 3,929 3,015 1,669 1,843
Cash and cash equivalents 19,795 19,791 14,202 14,986
Consolidated and company statement of cash flowsfortheyearended31January2017
86 Air Partner plc | Annual Report and Accounts 2017
1 General informationAirPartnerplc(‘theCompany’)isacompanyincorporatedanddomiciledinEnglandandWalesunderregistrationnumber00980675.Theaddressoftheregisteredofficeis2CityPlace,BeehiveRingRoad,Gatwick,WestSussexRH60PA.ThenatureoftheGroup’soperationsanditsprincipalactivitiesaresetoutintheStrategicreportonpages1to39.
2 Accounting policies a) Basis of preparation of financial statementsThefinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRSs)asadoptedforuseintheEuropeanUnioninaccordancewithEUlaw(IASregulationEC1606/2002)andthosepartsoftheCompaniesAct2006applicabletocompaniesreportingunderIFRS.
Thefinancialstatementsarepresentedinsterling,beingthecurrencyoftheprimaryeconomicenvironmentinwhichtheGroupoperates.Unlessotherwisestated,figuresareroundedtothenearestthousand.Theyarepreparedonthehistoricalcostbasis,exceptfortherevaluationofcertainfinancialinstrumentswhicharestatedatfairvalue.
Theaccountingpoliciesadoptedareconsistentwiththoseofthepreviousfinancialyear,exceptasdescribedinthefollowingsections.
Adoption of new and revised standardsThefollowingnewandrevisedstandardsandinterpretationshavebeenadoptedinthecurrentyear:
• IFRS11(amendments)AccountingforacquisitionsofinterestinJointOperations;effectiveforperiodsbeginningonorafter1January2016
• IAS16(amendments)Property,PlantandEquipmentandIAS38IntangibleAssets:Amendmentsregardingtheclarificationofacceptablemethodsofdepreciationandamortisation;effectiveforperiodsbeginningonorafter1January2016
• IAS16andIAS41(amendments)Property,PlantandEquipment:AmendmentstobringbearerplantsintothescopeofIAS16ratherthanIAS41;effectiveforperiodsbeginningonorafter1January2016
• IAS27(amendments)SeparateFinancialStatements;Amendmentsreinstatingtheequitymethod;effectiveforperiodsbeginningonorafter1January2016
• IAS1(amendments)Disclosureinitiative;effectiveforperiodsbeginningonorafter1January2016• IFRS10Consolidatedfinancialstatements,IFRS12DisclosureofinterestsinotherentitiesandIAS28Investmentinassociates;
applyingtheconsolidationexceptionforinvestmententities;effectiveforperiodsbeginningonorafter1January2016.
Adoptionoftheabovehashadnoimpactonthedisclosuresorontheamountsrecognisedintheconsolidatedfinancialstatements.
Annual Improvements 2012-2014 cycleTheAnnualImprovementscycleprovidesastreamlinedprocessfordealingefficientlywithacollectionofamendmentstoIFRSs.Theprimaryobjectiveoftheprocessistoenhancethequalityofstandards,byamendingexistingIFRSstoclarifyguidanceandwording,ortocorrectforrelativelyminorunintendedconsequences,conflictsoroversights.
AdoptionoftheAnnualImprovements2012-2014cyclehashadnoimpactonthedisclosuresorontheamountsrecognisedintheconsolidatedfinancialstatements.
New standards, amendments and interpretations in issue but not yet effectiveThefollowingstandards,amendmentsandinterpretationstoexistingstandardshavebeenpublished–theyarenotmandatoryforthecurrentaccountingperiod,andhavenotbeenearlyadoptedbytheGroup:
• IAS12Incometaxes:clarifyrecognitionofdeferredtaxassetsforunrealisedlosses;effectiveforperiodsbeginningonorafter1January2017
• AnnualImprovementstoIFRSstandards2014-2016cycle;effectiveforperiodsbeginningonorafter1January2017• IAS7Statementofcashflows:clarifydisclosurerequirements;effectiveforperiodsbeginningonorafter1January2017• IFRS9(2014)FinancialInstruments;effectiveforperiodsbeginningonorafter1January2018• IFRS2Share-basedpayment:classificationandmeasurementofshare-basedpaymenttransactions;effectiveforperiods
beginningonorafter1January2018• IAS40InvestmentProperty:transfersofinvestmentproperty;effectiveforperiodsbeginningonorafter1January2018• IFRS16Leases;effectiveforperiodsbeginningonorafter1January2019• IFRS15RevenuefromContractswithCustomers;effectiveforperiodsbeginningonorafter1January2018.
Notes to the financial statementsfortheyearended31January2017
87Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
2 Accounting policies continuedTherearenostandardsandinterpretationsinissuebutnotyetadoptedwhich,intheopinionofthedirectors,willhaveamaterialeffectonthereportedincomeornetassetsoftheGrouporCompany.
b) Basis of consolidationTheconsolidatedfinancialstatementsincorporatethefinancialstatementsoftheCompanyandentitiescontrolledbytheCompany(itssubsidiaries)madeupto31Januaryeachyear.ControlisachievedwheretheCompanyhasthepowertogovernthefinancialandoperatingpoliciesofaninvesteeentitysoastoobtainbenefitsfromitsactivities.
Theresultsofsubsidiariesacquiredordisposedofduringtheyearareincludedintheconsolidatedincomestatementfromtheeffectivedateofacquisitionoruptotheeffectivedateofdisposal,asappropriate.Wherenecessary,adjustmentsaremadetothefinancialstatementsofsubsidiariestobringtheaccountingpoliciesusedintolinewiththoseusedbytheGroup.Allintra-Grouptransactions,balances,incomeandexpensesareeliminatedonconsolidation.
c) Critical accounting estimates and judgementsThepreparationoffinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffecttheapplicationofpoliciesandreportedamountsofassetsandliabilities,incomeandexpenses.Theseestimatesandassociatedassumptionsarebasedonhistoricalexperienceandvariousotherfactorsbelievedtobereasonableunderthecircumstances.Actualresultscoulddifferfromtheseestimates.Theseunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedintheperiodinwhichtheestimateisrevisediftherevisionaffectsonlythatperiod;orintheperiodoftherevisionandfutureperiodsifthesearealsoaffected.
Impairment of goodwillManagementconductsannualimpairmentreviewsofthecarryingvalueofgoodwillinrelationtoacquiredsubsidiaries.
Accruals related to air charter contractsWhenrevenuesandcostsforairchartercontractsareinitiallyrecognised,estimatesmayneedtobemadeinordertoaccrueitemsofincomeandexpenditurethathavenotbeeninvoicedbutareexpectedtocrystallise.Theseestimatesmaynotreflecttheultimateoutcome.
Valuation of acquisition goodwill and intangiblesAnintangibleresourceacquiredwithasubsidiaryundertakingisrecognisedasanintangibleassetifitisseparablefromtheacquiredbusinessorarisesfromcontractualorlegalrights,anditisexpectedtogeneratefutureeconomicbenefitsanditsfairvaluecanbemeasuredreliably.Theidentificationofintangibleassetsacquiredaspartofbusinesscombinationsrequiresjudgement.Foreachbusinesscombinationthebalanceofgoodwilltootherintangibleassetsisreviewedforappropriateness.Acquiredintangibleassets,comprisingbrands,customerrelationships,othermandatesandtrainingmaterials,areamortisedthroughtheConsolidatedincomestatementonastraight-linebasisovertheirestimatedeconomiclivesofbetweenoneand20years.Significantjudgementisrequiredindeterminingthefairvalueandeconomiclivesofacquiredintangibleassets.Externalvaluationsareobtainedforsignificantacquisitions.Detailsoftheintangibleassetsrecognisedonacquisitionduringtheyeararedisclosedinnote32.
d) Going concernTheGroup’sbusinessactivities,togetherwiththefactorslikelytoaffectitsfuturedevelopment,performanceandpositionaresetoutintheStrategicreportonpages1to39.ThefinancialpositionoftheGroup,itscashflows,liquiditypositionandborrowingfacilitiesaredescribedintheStrategicReportonpages1to39.Inaddition,note24tothefinancialstatementsincludestheGroup’sobjectives,policiesandprocessesformanagingitscapitalrisk;detailsofitsfinancialinstrumentsandhedgingactivities;anditsexposurestointerestraterisk,creditrisk,liquidityriskandforeigncurrencyrisk.
TheGrouphasconsiderablecashresourcesandlittledebt.Asaconsequence,thedirectorsbelievethattheGroupiswellplacedtomanageitsbusinessriskssuccessfullydespitethecurrentuncertaineconomicoutlook.
ThedirectorshaveareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Thustheycontinuetoadoptthegoingconcernbasisofaccountinginpreparingtheannualfinancialstatements.
88 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
2 Accounting policies continuede) Foreign currencyi) Foreign currency transactionsTransactionsinforeigncurrenciesaretranslatedattheforeignexchangerateprevailingatthetimeofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthereportingdatearetranslatedtothefunctionalcurrencyoftheentityattheforeignexchangeraterulingatthatdate.Foreignexchangedifferencesarisingontranslationarerecognisedintheincomestatement.Non-monetaryassetsandliabilitiesthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedusingtheexchangerateatthedateofthetransaction.
ii) Financial statements of foreign operations Theassetsandliabilitiesofforeignoperationsaretranslatedatexchangeratesprevailingatthereportingdate.Incomeandexpensesaretranslatedattheaverageratefortheperiod.ExchangedifferencesarisingareclassifiedasequityandtransferredtotheGroup’stranslationreserve.
f) GoodwillGoodwillarisinginabusinesscombinationisrecognisedasanassetatthedatethatcontrolisacquired(theacquisitiondate).Goodwillismeasuredastheexcessofthesumoftheconsiderationtransferred,theamountofanynon-controllinginterestintheacquireeandthefairvalueoftheacquirer’spreviouslyheldequityinterest(ifany)intheentityoverthenetoftheacquisitiondateamountsoftheidentifiableassetsacquiredandtheliabilitiesassumed.
Goodwilldenominatedincurrenciesotherthansterlingisrevaluedattherateofexchangerulingatbalancesheetdate.
If,afterreassessment,theGroup’sinterestinthefairvalueoftheacquiree’sidentifiablenetassetsexceedsthesumoftheconsiderationtransferred,theamountofanynon-controllinginterestintheacquireeandthefairvalueoftheacquirer’spreviouslyheldequityinterestintheacquiree(ifany),theexcessisrecognisedimmediatelyinprofitorlossasabargainpurchasegain.
Goodwillisnotamortisedbutisreviewedforimpairmentatleastannually.Forthepurposeofimpairmenttesting,goodwillisallocatedtoeachoftheGroup’scash-generatingunitsexpectedtobenefitfromthesynergiesofthecombination.Cash-generatingunitstowhichgoodwillhasbeenallocatedaretestedforimpairmentannually,ormorefrequentlywhenthereisanindicationthattheunitmaybeimpaired.Iftherecoverableamountofthecash-generatingunitislessthanthecarryingamountoftheunit,theimpairmentlossisallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitandthentotheotherassetsoftheunitprorataonthebasisofthecarryingamountofeachassetintheunit.Animpairmentlossrecognisedforgoodwillisnotreversedinasubsequentperiod.
Ondisposalofasubsidiary,theattributableamountofgoodwillisincludedinthedeterminationoftheprofitorlossondisposal.
g) Intangible assets Internally generated assets InternallygeneratedintangibleassetsdevelopedbytheGrouparerecognisedonlyifallofthefollowingconditionsaremet:
• anassetiscreatedthatcanbeidentified• itisprobablethattheassetcreatedwillgeneratefutureeconomicbenefits• thedevelopmentcostoftheassetcanbemeasuredreliably.
Otherresearchexpenditureiswrittenoffintheperiodinwhichitisincurred.
Amortisationischargedtotheincomestatementsoastowriteoffthecostofassetslesstheirresidualvaluesovertheirestimatedusefullives,whichinthecaseofsoftwareis10%-20%perannumonastraight-linebasis.Thecarryingvalueofintangibleassetswithafinitelifeisreviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingvaluemaynotberecoverable.
89Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
2 Accounting policies continuedOther intangible assetsIntangibleassetsarisingonacquisitionarestatedatfairvaluelessaccumulatedamortisationandanyimpairmentlosses.Amortisationofthecarryingvalueofintangibleassetsarisingonacquisitionischargedtotheincomestatementovertheestimatedusefullife,whichisasfollows:
Brands 10%perannumonastraight-linebasis
Mandates/orderbook 100%perannum
Customerrelationships 5%-16.7%perannumonastraight-linebasis
Trainingmaterials 10%perannumonastraight-linebasis
Thecarryingvalueofintangibleassetswithafinitelifeisreviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingvaluemaynotberecoverable.
h) Property, plant and equipmentItemsofproperty,plantandequipmentarestatedatcostlessaccumulateddepreciationandanyimpairmentlosses.
Depreciationischargedtotheincomestatementsoastowriteoffthecostofassetslesstheirresidualvaluesovertheirestimatedusefullives,asfollows:
Shortleaseholdproperty overthelifeoftheleaseonastraight-linebasis
Leaseholdimprovements overthelifeoftheleaseonastraight-linebasis
Fixturesandequipment 10%-33%perannumonastraight-linebasis
Motorvehicles 25%reducingbalance
i) Impairment of tangible and intangible assets excluding goodwillAteachbalancesheetdate,theGroupreviewsthecarryingamountsofitstangibleandintangibleassetstodeterminewhetherthereisanyindicationthatthoseassetshavesufferedanimpairmentloss.Ifanysuchindicationexists,therecoverableamountoftheassetisestimatedtodeterminetheextentoftheimpairmentloss(ifany).Wheretheassetdoesnotgeneratecashflowsthatareindependentfromotherassets,theGroupestimatestherecoverableamountofthecash-generatingunittowhichtheassetbelongs.Anintangibleassetwithanindefiniteusefullifeistestedforimpairmentatleastannuallyandwheneverthereisanindicationthattheassetmaybeimpaired.
Recoverableamountisthehigheroffairvaluelesscoststosellandvalueinuse.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetforwhichtheestimatesoffuturecashflowshavenotbeenadjusted.
Iftherecoverableamountofanasset(orcash-generatingunit)isestimatedtobelessthanitscarryingamount,thecarryingamountoftheasset(orcash-generatingunit)isreducedtoitsrecoverableamount.Animpairmentlossisrecognisedimmediatelyinprofitorloss,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasetheimpairmentlossistreatedasarevaluationdecrease.
Whereanimpairmentlosssubsequentlyreverses,thecarryingamountoftheasset(orcash-generatingunit)isincreasedtotherevisedestimateofitsrecoverableamount,butsothattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheasset(orcash-generatingunit)inprioryears.Areversalofanimpairmentlossisrecognisedimmediatelyinprofitorloss,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasethereversaloftheimpairmentlossistreatedasarevaluationincrease.
j) Assets in disposal groups classified as held for saleNon-currentassetsanddisposalgroupsareclassifiedasheldforsaleonlyiftheyareavailableforimmediatesaleintheirpresentconditionandasaleishighlyprobableandexpectedtobecompletedwithinoneyearfromthedateofclassification.Suchassetsaremeasuredatthelowerofcarryingamountandfairvaluelesscoststosellandarenotdepreciatedoramortised.
90 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
2 Accounting policies continuedk) Financial instrumentsFinancial assetsTheGroupclassifiesitsfinancialassetsinthefollowingcategories:atfairvaluethroughprofitorloss,andloansandreceivables.Theclassificationdependsonthepurposeforwhichthefinancialassetswereacquired.Managementdeterminestheclassificationofitsfinancialassetsatinitialrecognition.
Purchasesandsalesoffinancialassetsarerecognisedonthetradedate–thedateonwhichtheGroupcommitstopurchaseorselltheasset.Financialassetsareinitiallyrecognisedatfairvalueplustransactioncosts,exceptforfinancialassetsheldatfairvaluethroughprofitorlosswhichareinitiallyrecognisedatfairvalue,andtransactioncostsareexpensedintheincomestatement.FinancialassetsarederecognisedwhentherightstoreceivecashflowshaveexpiredorhavebeentransferredandtheGrouphastransferredsubstantiallyallrisksandrewardsofownership.
Financial assets at fair value through profit or lossFinancialassetsatfairvaluethroughprofitorlossarefinancialassetsheldfortrading.Afinancialassetisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshortterm.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedashedges.Assetsinthiscategoryareclassifiedascurrentassetsiftheyareexpectedtobesettledwithin12months;otherwise,theyareclassifiedasnon-current.Financialassetsatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvalueatthedatethecontractisenteredinto,andsubsequentlygainsorlossesarisingfromchangesintheirfairvaluearepresentedintheincomestatementwithinadministrativeexpensesintheperiodinwhichtheyarise.TheGroup’sfinancialassetsatfairvaluethroughprofitorlosscomprisederivativefinancialinstruments.
Derivative financial instrumentsTheGroupentersintoderivativefinancialinstruments,includingforeignexchangeforwardcontracts,tomanageitsexposuretoforeignexchangeraterisk.Derivativesnotdesignatedintoaneffectivehedgerelationshipareclassifiedasafinancialassetorafinancialliability.TheGrouphasnotdesignatedanyderivativesashedgingitemsandthereforedoesnotapplyhedgeaccounting.
Loans and receivablesLoansandreceivablesarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Theyareincludedincurrentassets,exceptformaturitiesgreaterthan12monthsattheendofthereportingperiod.Theseareclassifiedasnon-currentassets.Loansandreceivablesaresubsequentlycarriedatamortisedcostusingtheeffectiveinterestmethod.TheGroup’sloansandreceivablescomprisetradereceivables,otherreceivables,accruedincomeandcashandcashequivalentsinthebalancesheet.
Trade receivablesTradereceivablesareamountsduefromcustomersforservicesperformedintheordinarycourseofbusiness.Ifcollectionisexpectedinoneyearorless,theyareclassifiedascurrentassets.Ifnot,theyarepresentedasnon-currentassets.
Other receivablesOtherreceivablesareotheramountscontractuallyduefromthirdparties,forexampledepositsreceivableforleasedassets.
Accrued incomeAccruedincomeisrevenuethathasbeencontractedandrecognisedinaccordancewiththeGroup’saccountingpolicies,butnotyetinvoiced.
Cash and cash equivalents Cashandcashequivalentscomprisecashbalancesandcalldepositswithanoriginalmaturityofthreemonthsorless.Thecarryingamountoftheseassetsapproximatestheirfairvalue.
91Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
2 Accounting policies continuedFinancial liabilitiesTheGroupclassifiesitsfinancialliabilitiesinthefollowingcategories:atfairvaluethroughprofitorloss,andatamortisedcost.Theclassificationdependsonthepurposeforwhichthefinancialliabilitieswereacquired.Managementdeterminestheclassificationofitsfinancialliabilitiesatinitialrecognition.FinancialliabilitiesarerecognisedwhentheGroupbecomesapartytothecontractualagreementoftheinstrument.
Financial liabilities at fair value through profit or lossFinancialliabilitiesatfairvaluethroughprofitorlossarefinancialliabilitiesheldfortrading.Afinancialliabilityisclassifiedinthiscategoryifacquiredprincipallyforthepurposeofsellingintheshortterm.Derivativesarealsocategorisedasheldfortradingunlesstheyaredesignatedashedges.Liabilitiesinthiscategoryareclassifiedascurrentliabilitiesiftheyareexpectedtobesettledwithin12months;otherwise,theyareclassifiedasnon-current.Financialliabilitiesatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvalueatthedatethecontractisenteredinto,andsubsequentlygainsorlossesarisingfromchangesintheirfairvaluearepresentedintheincomestatementwithinadministrativeexpensesintheperiodinwhichtheyarise.TheGroup’sfinancialliabilitiesatfairvaluethroughprofitorlosscomprisederivativefinancialinstruments.
Financial liabilities at amortised costTheGroup’sfinancialliabilitiesatamortisedcostcomprisetradepayables,otherpayables,accruedcostsandborrowings.Theyareinitiallymeasuredatfairvalue,netoftransactioncosts,andaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.
Trade payablesTradepayablesareobligationstopayforgoodsorservicesthathavebeenacquiredintheordinarycourseofbusinessfromsuppliers.Tradepayablesareclassifiedascurrentliabilitiesifpaymentisduewithinoneyearorless.Ifnot,theyarepresentedasnon-currentliabilities.
Other payablesOtherpayablesthatarefinancialliabilitiesatamortisedcostarecertaincustomerdepositswhicharecontractuallyrefundabletocustomersondemand.
Accrued costsAccruedcostsarecoststhathavebeencontractedandrecognisedinaccordancewiththeGroup’saccountingpolicies,butforwhichinvoiceshavenotyetbeenreceivedorpaymentsmade,asapplicable.
BorrowingsBorrowingsconsistofaninterest-bearingbankloanwhichisrecordedatfairvalue.
Offsetting financial instrumentsFinancialassetsandliabilitiesareoffsetandthenetamountreportedinthebalancesheetwhenthereisalegallyenforceablerighttooffsettherecognisedamountsandthereisanintentiontosettleonanetbasisorrealisetheassetandsettletheliabilitysimultaneously.
Other itemsThedirectorsbelievethattheunderlyingprofitandearningspersharemeasuresprovideadditionalusefulinformationforshareholdersontheunderlyingperformanceofthebusiness.Thesemeasuresareconsistentwithhowunderlyingbusinessperformanceismeasuredinternally.TheunderlyingprofitbeforetaxmeasureisnotarecognisedprofitmeasureunderIFRSandmaynotbedirectlycomparablewithadjustedprofitmeasuresusedbyothercompanies.Theadjustmentsmadetoreportedprofitbeforetaxaretoexcludethefollowing:
• restructuringcosts• significantandone-offimpairmentchargesandprovisionsthatdistortunderlyingtrading• costsrelatingtostrategychangesthatarenotconsiderednormaloperatingcostsoftheunderlyingbusiness• acquisitioncosts• amortisationofintangibleassetsrecognisedonacquisition• acquisitionconsiderationclassifiedasanemployeecostunderIFRS3BusinessCombinations.
92 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
2 Accounting policies continuedEquity instruments issued by the GroupAnequityinstrumentisacontractthatevidencesaresidualinterestintheassetofanentityafterdeductingallitsliabilities.Equityinstrumentsarerecordedattheproceedsreceived,netofdirectissuecosts.TheGroup’sequityinstrumentscomprisesharecapitalinthebalancesheet.
l) ProvisionsProvisionsarerecognisedwhentheGrouphasapresentobligationasaresultofapastevent,anditisprobablethattheGroupwillberequiredtosettlethatobligation.Provisionsaremeasuredatthedirectors’bestestimateoftheexpenditurerequiredtosettletheobligationatthereportingdate,andarediscountedtopresentvalue.
ArestructuringprovisionisrecognisedwhentheGrouphasdevelopedadetailedformalplanfortherestructuringandhasraisedavalidexpectationinthoseaffectedthatitwillcarryouttherestructuringbystartingtoimplementtheplanorannouncingitsmainfeaturestothoseaffectedbyit.
m) RevenueRevenuesarederivedfromaircraftcharteringservices,aircraftremarketingservices,aircraftinspectionservicesandtheprovisionoftrainingandsafetyconsultingservices.InlinewithIAS18Revenue,whereacontracthasbeendeterminedasprincipal,thefullamountoftheinvoiceisrecognisedasrevenue.WhereAirPartnerisnotactingasprincipal,revenueisrecognisedonanagencybasisandonlygrossmarginisreportedasrevenue.Revenueismeasuredasthefairvalueoftheconsiderationreceivedfortheprovisionofgoodsandservicestothird-partycustomersandisstatedexclusiveofvalueaddedtaxandisonlyrecognisedwherethereisacontractualrighttoreceiveconsiderationforworkundertaken,theamountcanbemeasuredreliablyanditisprobablethatfutureeconomicbenefitswillflow.
Aircraft chartering servicesAmountsreceivableinrespectofaircraftcharteringservicesarerecognisedasrevenuewhentheeconomicbenefitsaredeemedtohavepassedtothecustomer,whichisgenerallytheflightdate.IninstanceswheretheGroupisactingasagent,thenetamountreceivablebytheGroupisrecognisedasrevenue.IninstanceswheretheGroupisactingasprincipal,thefullamountofthecontractisrecognisedasrevenue.
Aircraft remarketing servicesAirPartnerRemarketing’s(formerlyCabotAviation)principalactivityisthatofanaircraftremarketingbroker.Feesearnedinrespectoftheseservicesarerecognisedwhentheybecomepayableinaccordancewiththetermsofthecontractwiththecustomer.
Aircraft inspection servicesAircraftregisteredwiththeIsleofManAircraftRegistry,whichismanagedbyBainesSimmonsLimited,requireanannualinspection.Amountsreceivableinrespectofsuchinspectionsarerecognisedasrevenueoncetheaircrafthasbeeninspected.
Provision of aviation-related training and safety consulting servicesBainesSimmonsLimitedprovidesaviation-relatedspecialisttrainingandconsultancyservices.Revenueisrecognisedbyreferencetothestageofcompletionofthecontractdeterminedbythevalueoftheservicesprovidedatbalancesheetdateasaproportionofthetotalvalueoftheassignment.Amountsinrespectofunbilledservicesprovidedtoclientsarerecognisedasrevenueatbalancesheetdate.
n) Segmental reportingOperatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothechiefoperatingdecisionmaker.Thechiefoperatingdecisionmaker,whoisresponsibleforresourceallocationandassessingperformanceoftheoperatingsegments,isconsideredtobetheBoard.Thenatureoftheoperatingsegmentsissetoutinnote4.
o) Share-based paymentsFromtimetotime,theGroupwillgrantoptionstoemployeestosubscribeforordinarysharesintheCompany.Thefairvalueofoptionsgrantedisrecognisedasanemployeeexpensewithacorrespondingincreaseinequity.ThefairvalueismeasuredatgrantdateusingtheMonteCarlomethodandspreadovertheperiodduringwhichemployeesbecomeunconditionallyentitledtotheoptions,basedonmanagement’sestimateofthenumberofoptionswhichwillultimatelyvest,adjustingateachreportingdatefortheeffectofnon-marketbasedvestingconditions.
93Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
2 Accounting policies continuedp) Retirement benefit costsPaymentstodefinedcontributionretirementbenefitschemesarechargedasanexpenseintheperiodinwhichtheemployeesrenderservice.Paymentsmadetostate-managedretirementbenefitschemesaredealtwithaspaymentstodefinedcontributionschemeswheretheGroup’sobligationsundertheschemesareequivalenttothosearisinginadefinedcontributionretirementbenefitscheme.
q) TaxationThetaxexpenserepresentscurrentanddeferredtax.Taxisrecognisedintheincomestatementexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequity,inwhichcaseitisrecognisedinequity.
Currenttaxistheexpectedtaxpayableonthetaxableincomefortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andanyadjustmentstothetaxpayableinrespectofpreviousyears.
Deferredtaxisthetaxexpectedtobepayableorrecoverableondifferencesbetweenthecarryingamountofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationoftaxableprofitandisaccountedforusingthebalancesheetliabilitymethod.Deferredtaxliabilitiesarerecognisedforalltemporarydifferencesanddeferredtaxassetsarerecognisedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichdeductibletemporarydifferencescanbeutilised.Suchassetsandliabilitiesarenotrecognisedifthetemporarydifferencesarisefromgoodwillorfromtheinitialrecognition(otherthaninabusinesscombination)ofotherassetsandliabilitiesinatransactionthataffectsneitherthetaxableprofitnortheaccountingprofit.
Deferredtaxiscalculatedatthetaxratesthatareenactedorsubstantivelyenactedatthereportingdate.
r) Gross transaction valueGrosstransactionvalue(GTV)representsthetotalvalueinvoicedtoclientsandisstatedexclusiveofvalueaddedtax.
s) LeasingLeasesareclassifiedasfinanceleaseswheneverthetermsoftheleasetransferall,orsubstantiallyall,oftherisksandrewardsofownershiptothelessee.Allotherleasesareclassifiedasoperatingleases.Rentalincomeorexpenditurefromoperatingleasesisrecognisedonastraight-linebasisovertheleaseterm.
t) Dividends FinaldividendsonordinarysharesarerecognisedasaliabilityintheperiodinwhichthedividendsareapprovedbytheCompany’sshareholders.Dividendsarerecognisedasaliabilityintheperiodinwhichtheyareapproved.
3 RevenueAnanalysisoftheGroup’srevenueisasfollows:
Continuing operations2017
£’0002016
£’000
Aircraftbroking 35,992 47,289Aircraftremarketing 760 273Aircraftinspection 1,469 627Safetyconsultingandtraining 4,317 1,753
42,538 49,942
IncludedinrevenuearisingfromtheUKisrevenueofapproximately£8,375,000(2016:£21,963,000)whicharosefromsalestotheGroup’slargestcustomer(2016:twolargestcustomers).Noothersinglecustomercontributedmorethan10%totheGroup’srevenuein2017or2016.
94 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
4 Segmental analysisTheservicesprovidedbytheGroupconsistofcharteringdifferenttypesofaircraftandrelatedaviationservices.
TheGrouphasfoursegments:CommercialJets,PrivateJets,FreightandConsulting&Training.AirPartnerRemarketing’s(formerlyCabotAviation)resultsareaggregatedintoCommercialJets.OverheadswiththeexceptionofcorporatecostsareallocatedtotheGroup’ssegmentsinrelationtooperatingactivities.
Salestransactionsbetweenoperatingsegmentsarecarriedoutonanarm’slengthbasis.Allresults,assetsandliabilitiesreviewedbytheBoard(whichisthechiefoperatingdecisionmaker)arepreparedonabasisconsistentwiththosethatarereportedinthefinancialstatements.
TheBoarddoesnotreviewrevenue,assetsandliabilitiesatsegmentallevel,thereforetheseitemsarenotdisclosed.
Thesegmentalinformation,asprovidedtotheBoardonamonthlybasis,isasfollows:
Year ended31 January 2017
Continuing operations
CommercialJets
£’000
PrivateJets
£’000Freight
£’000
Consulting&Training
£’000
Corporatecosts£’000
Total£’000
Segmentalgrossprofit 14,704 10,236 1,113 5,654 – 31,707
Depreciationandamortisation (249) (162) – (62) – (473)
Underlyingoperatingprofit 3,848 2,491 233 527 (1,985) 5,114
Otheritems(seenote7) (182) – – (399) (128) (709)
Segmentresult 3,666 2,491 233 128 (2,113) 4,405
Financeincome 39Financeexpense (96)
Profitbeforetax 4,348Tax (1,501)
Profitfortheyear 2,847
Year ended31 January 2016
Continuing operations
CommercialJets
£’000
PrivateJets
£’000Freight
£’000
Consulting&Training
£’000
Corporatecosts£’000
Total£’000
Segmentalgrossprofit 14,005 9,361 1,857 2,046 – 27,269
Depreciationandamortisation (339) (186) – (6) – (531)
Impairmentlosses (361) – – (29) – (390)
Underlyingoperatingprofit 2,952 2,387 767 (99) (1,621) 4,386
Otheritems(seenote7) (436) (261) (44) (437) – (1,178)
Segmentresult 2,516 2,126 723 (536) (1,621) 3,208
Financeincome 10Financeexpense (81)
Profitbeforetax 3,137Tax (1,230)
Profitaftertax 1,907Discontinuedoperations 387
Profitfortheyear 2,294
TheCompanyisdomiciledintheUKbutduetothenatureoftheGroup’soperations,asignificantamountofgrossprofitisderivedfromoverseascountries.TheGroupreviewsgrossprofitbaseduponlocationoftheassetsusedtogeneratethatgrossprofit.ApartfromtheUK,nosinglecountryisdeemedtohavematerialnon-currentassetlevelsotherthangoodwillinrelationtotheFrenchoperationof£956,000.
95Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
4 Segmental analysis continuedTheBoardalsoreviewsinformationonageographicalbasisbasedonpartsoftheworldwhichareconsideredtobekeytooperationalactivities.Asaresult,thefollowingadditionalinformationisprovidedshowingageographicalsplitoftheUK,Europe,theUSandtheRestoftheWorld:
Continuing operationsUK
£’000Europe
£’000US
£’000
RestoftheWorld£’000
Total£’000
Year ended 31 January 2017Grossprofit 18,812 8,930 3,771 194 31,707Non-currentassets(excludingdeferredtaxassets) 8,696 1,090 39 4 9,829
Year ended 31 January 2016Grossprofit 16,486 7,353 3,187 243 27,269Non-currentassets(excludingdeferredtaxassets) 8,616 995 48 6 9,665
Europecanbefurtheranalysedas:
Continuing operationsFrance£’000
Germany£’000
Italy£’000
Other£’000
Total£’000
Year ended 31 January 2017Grossprofit 3,047 2,547 1,854 1,482 8,930
Year ended 31 January 2016Grossprofit 2,730 2,306 1,491 826 7,353
5 Operating profit Operatingprofitfortheyearhasbeenarrivedataftercharging/(crediting)thefollowing:
Continuing operations2017
£’0002016
£’000
Netforeignexchangeloss/(gain) 20 (2)Changeinthefairvalueofderivativefinancialinstruments 45 (186)Depreciationofproperty,plantandequipment 347 304Amortisationofintangiblefixedassets–acquired 305 216Amortisationofintangiblefixedassets–other 128 225Impairmentoftradereceivables 34 390Operatingleaserentals–landandbuildings 283 494Operatingleaserentals–other 66 99Staffcosts(seenote8) 18,453 15,291
96 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
6 Auditor’s remunerationFeespayabletotheprincipalauditoranditsnetworkfirmsforauditandotherservicesaredisclosedbelow:
2017£’000
2016£’000
The analysis of auditor’s remuneration is as follows:FeespayabletotheCompany’sauditorfortheauditoftheCompany’sannualfinancialstatements 143 146FeespayabletotheCompany’sauditoranditsassociatesfortheauditofsubsidiariespursuanttolegislation(includingthatofcountriesandterritoriesoutsidetheUK) 65 51
Total audit fees 208 197
2017£’000
2016£’000
Fees payable to the Company’s auditor and its associates for other services to the Group:Taxservices – 22Auditrelatedassuranceservices 22 21Othernon-auditservices 4 –
Total non-audit fees 26 43
7 Other items
Continuing operations2017
£’0002016
£’000
Restructuringcosts (183) (419)Amortisationofpurchasedintangibles (304) (242)Acquisitioncosts (128) (419)Non-cashacquisitionrelatedcosts (94) (98)
(709) (1,178)Taxeffectofotheritems 153 81
Otheritemsaftertaxation (556) (1,097)
Restructuringcostsrelatetochangestothemanagementstructurefollowingtheacquisitionsmadeduringtheprioryear.
97Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
8 Staff costsTheaveragenumberofpeopleemployedbytheGroup(includingdirectors)duringtheyear,analysedbycategorywasasfollows:
Continuing operations2017
Number2016
Number
Operations 179 140Administration 78 89
257 229
Theaggregatepayrollcostscomprised:
Continuing operations2017
£’0002016
£’000
Wagesandsalaries 15,537 12,730Socialsecuritycosts 2,219 1,956
Pensioncosts 506 480Share-basedpayments 191 125
18,453 15,291
TheGroupcontributestopersonalpensionplansofcertainemployeesandthiscostischargedtotheincomestatementintheperiodinwhichitisincurred.
Fulldisclosureofdirectors’emoluments,shareoptionsanddirectors’pensionentitlementswhichformpartoftheirremunerationpackages,andtheirinterestsintheCompany’ssharecapitalaredisclosedintheDirectors’remunerationreport.
9 Finance income and expense
Continuing operations2017
£’0002016
£’000
Finance incomeInterestonbankdeposits 39 10
Continuing operations2017
£’0002016
£’000
Finance expenseInterestonloansandbankoverdrafts 96 74Unwindingofdiscountonprovisions – 7
96 81
98 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
10 Taxation
Continuing operations Discontinued operations Total
2017£’000
2016£’000
2017£’000
2016£’000
2017£’000
2016£’000
Current tax:UKcorporationtax 528 561 – 98 528 659Foreigntax 822 488 – – 822 488Currenttaxadjustmentsinrespectofprioryears(UK) 376 12 – – 376 12 Currenttaxadjustmentsinrespectofprioryears(Overseas) 66 333 – – 66 333
1,792 1,394 – 98 1,792 1,492Deferred tax (see note 26) (291) (164) – – (291) (164)
Total tax 1,501 1,230 – 98 1,501 1,328
Of which:Taxonunderlyingprofit 1,654 1,311 – 98 1,654 1,409Taxonotheritems(seenote7) (153) (81) – – (153) (81)
1,501 1,230 – 98 1,501 1,328
CorporationtaxintheUKwascalculatedat20%(2016:20.16%)oftheestimatedassessableprofitfortheperiod.Taxationforotherjurisdictionswascalculatedattheratesprevailingintherespectivejurisdictions.
Thechargefortheperiodcanbereconciledtotheprofitpertheconsolidatedincomestatementasfollows:
2017£’000
2016£’000
Profitfromcontinuingoperationsbeforetax 4,348 3,163Profitfromdiscontinuedoperationsbeforetax – 485
Accountingprofitbeforetax 4,348 3,648
TaxattheUKcorporationtaxrateof20%(2016:20.16%) 870 735EffectofchangetoUKcorporationtaxrate(2016:21%from1February2015to31March2015) (41) (61)Taxeffectofitemsthatarenotrecognisedindeterminingtaxableprofit 64 205Taxeffectofdifferenttaxratesofsubsidiariesoperatinginotherjurisdictions 212 139Currenttaxadjustmentsinrespectofprioryears 442 303Deferredtaxnotrecognised 22 7Optionsdeductions (68) –
Total tax charge 1,501 1,328
TheUKcorporationtaxratedecreasedfrom21%to20%from1April2016.Theimpactonthetaxchargeisshownabove.
FurtherreductionstotheUKcorporationtaxratehavebeenannounced.Areductionto19%effectivefrom1April2017andto17%on1April2020wassubstantivelyenactedon16October2016andthedeferredtaxbalancehasbeenadjustedtoreflectthischange(seenote26).
99Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
11 Discontinued operationsInMarch2010,AirPartnerPrivateJetsLimitedwasclosed.Aclaimagainstthecompanywasfiledbyformeremployeesofthatbusinessonthegroundsthatcontractualundertakingscouldnolongerbefulfilled.Thelastdatefortheclaimstobepursuedwas16March2016.Asnofurtheractionshavebeentakenbytheclaimants,theclaimshavelapsed.Asaresult,theprovisionwasderecognisedinthepreviousfinancialyear.
2017£’000
2016£’000
Revenue – –Costofsales – –
Gross profit – –Administrativeexpenses – 485
Profit before tax – 485Taxation – (98)
Net profit attributable to discontinued operations – 387
Therewerenocashflowsattributabletodiscontinuedoperationsintheyearended31January2017(2016:£nil).
12 Dividends
2017£’000
2016£’000
Amounts recognised as distributions to owners of the Parent CompanyFinaldividendfortheyearended31January2016of16.9pencepershare 1,741 1,578
(Finaldividendtheyearended31January2015of15.4pence)Interimdividendfortheyearended31January2017of8.03pencepershare 833 753(Interimdividendfortheyearended31January2016of7.33pence)
2,574 2,331
AlldividendsabovewerepriortotheCompany’sshareholdersapprovinga5to1splitoftheCompany’sshares,whichreducedthenominalvalueoftheordinarysharesto1penceeach.Thesharesplitbecameeffectiveon31January2017.
Thedirectorsproposeafinaldividendfortheyearended31January2017of3.6pencepershare,subjecttoshareholderapprovalattheAnnualGeneralMeetingtobeheldon28June2017.
TheAirPartnerEmployeeBenefitTrust,whichheld341,820ordinarysharesof1peachat31January2017(2016:159,236ordinarysharesof5peach)representing0.65%(2016:1.6%)oftheCompany’sissuedsharecapitalisnotentitledtoreceivedividends.Afurther413,640ordinarysharesof1peach(2016:100,910ordinarysharesof5peach)sharesareheldbytheTrustinanomineecapacityfortwo(2016:two)beneficiariesoftheTrust.
100 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
13 Earnings per shareThecalculationofthebasicanddilutedearningspershareisbasedonthefollowingdata:
Continuing and discontinued operations2017
£’0002016
£’000
EarningsforthecalculationofbasicanddilutedearningspershareProfitattributabletoownersoftheParentCompany 2,847 2,294Adjustmenttoexcludeotheritems 556 1,097
UnderlyingprofitattributabletoownersoftheParentCompany 3,403 3,391
Number of shares2017
Number2016
Number
Weightedaveragenumberofordinarysharesforthecalculationofbasicearningspershare 52,361,659 50,606,225Effectofdilutivepotentialordinaryshares:shareoptions 1,133,083 275,720
Weightedaveragenumberofordinarysharesforthecalculationofdilutedearningspershare 53,494,742 50,881,945
From continuing operations2017
£’0002016
£’000
EarningsProfitattributabletoownersoftheParentCompany 2,847 2,294Adjustmenttoexcludeprofitfortheyearfromdiscontinuedoperations – (387)Adjustmenttoexcludeotheritems 556 1,097
Underlyingearningsforthecalculationofbasicanddilutedearningspershare 3,403 3,004
From discontinued operations2017
£’0002016
£’000
EarningsEarningsforthecalculationofdiscontinuedbasicanddilutedearningspershare – 387
On25January2017,theCompany’sshareholdersapproveda5to1splitoftheCompany’sshares,whichreducedthenominalvalueoftheordinarysharesto1penceeach.Thesharesplitbecameeffectiveon31January2017.AsaresulttheprioryearnumberofsharesandEPScalculationshavebeenrestatedtoshowcomparablenumbers.
Thedenominatorsusedarethesameasthoseaboveforbothbasicanddilutedearningspersharefromcontinuinganddiscontinuedoperations.
Thecalculationofunderlyingearningspershare(beforeotheritems)isincludedasthedirectorsbelieveitprovidesabetterunderstandingoftheunderlyingperformanceoftheGroup.Otheritemsaredisclosedinnote7.
101Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
14 Goodwill
Group £’000
CostAt1February2015 838Recognisedonacquisitionofsubsidiaries 2,498Foreigncurrencyadjustments 10
At31January2016 3,346Recognisedonacquisitionofsubsidiaries(note32) 333Foreigncurrencyadjustments 108
At31January2017 3,787
Provision for impairmentAt1February2015,31January2016and31January2017 –
Net book valueAt31January2017 3,787
At31January2016 3,346
At1February2015 838
Goodwillacquiredinabusinesscombinationisallocated,atacquisition,tothecashgeneratingunits(CGUs),orgroupofunitsthatareexpectedtobenefitfromthatbusinesscombination.Beforerecognitionofimpairmentlosses,thecarryingamountofgoodwillhasbeenallocatedasfollows:
2017£’000
2016£’000
AirPartnerInternationalS.A.S. 956 848BainesSimmonsLimited(Consulting&Training) 1,072 1,072BainesSimmonsLimited(ManagedServices) 639 639CabotAviationServicesLimited 787 787ClockworkResearchLimited 333 –
3,787 3,346
TheGrouptestsgoodwillannuallyforimpairment,ormorefrequentlyifthereareindicationsthatgoodwillmightbeimpaired.
Forthepurposeofimpairmenttesting,therecoverableamountofthecashgeneratingunitwasmeasuredonthebasisofitsvalueinuse,byapplyingcashflowprojectionsbasedonfinancialforecastscoveringathree-yearperiod.Thekeyassumptionsforthevalueinusecalculationwerethoseregardingthediscountrates,growthratesandexpectedchangestosellingpricesanddirectcostsduringtheforecastperiod.Theestimatedgrowthrateswerebasedonpastperformanceandexpectationoffuturechangesinthemarket.Thegrowthrateusedtoextrapolatecashflowprojectionsbeyondtheperiodcoveredbythefinancialforecastswas2%(2016:2%).Thepre-taxrateusedtodiscounttheforecastcashflowsrangedfrom10.76%-13%(2016:13%).
Thedirectorsdonotbelievethatthereareanyreasonablypossiblechangestothekeyassumptionsthatwouldresultinamaterialimpairmentofgoodwill.
102 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
15 Other intangible assets
GroupBrands
£’000
Othermandates
£’000
Customerrelationships
£’000
Trainingmaterials
£’000Software
£’000Total
£’000
CostAt1February2015 – – – – 1,921 1,921Additions – – – – 153 153Acquiredonacquisitionofsubsidiaries 158 171 3,540 414 – 4,283
At31January2016 158 171 3,540 414 2,074 6,357
Additions – – – – 173 173Acquiredonacquisitionofsubsidiaries(note32) – – 174 – – 174Foreigncurrencyadjustments – – – – 4 4
At31January2017 158 171 3,714 414 2,251 6,708
Amortisation and impairmentAt1February2015 – – – – 855 855Chargefortheyear 7 123 91 19 225 465Foreigncurrencyadjustments – – – – (1) (1)
At31January2016 7 123 91 19 1,079 1,319Chargefortheyear 16 47 200 42 128 433
At31January2017 23 170 291 61 1,207 1,752
Net book valueAt31January2017 135 1 3,423 353 1,044 4,956
At31January2016 151 48 3,449 395 995 5,038
At1February2015 – – – – 1,066 1,066
Customerrelationshipshavearemainingamortisationperiodofbetween2.9yearsand18.5years.
CompanySoftware
£’000
CostAt1February2015 1,905Additions 153
At31January2016 2,058Additions 173
At31January2017 2,231
Amortisation and impairmentAt1February2015 842Chargefortheyear 224
At31January2016 1,066Chargefortheyear 126
At31January2017 1,192
Net book valueAt31January2017 1,039
At31January2016 992
At1February2015 1,063
Otherintangibleassetscomprisesoftwareandassetsacquiredonacquisitionsincludingtrainingmaterials,customerrelationships,mandatestoremarketaircraftandbrands.
103Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
16 Property, plant and equipment
Group
Shortleaseholdpropertyand
leaseholdimprovements
£’000
Fixturesandequipment
£’000
Motorvehicles
£’000Total
£’000
CostAt1February2015 769 2,427 – 3,196Additions 47 34 37 118Acquiredonacquisitionofsubsidiaries 40 151 – 191Foreigncurrencyadjustments 2 3 – 5
At31January2016 858 2,615 37 3,510Additions – 77 19 96Acquiredonacquisitionofsubsidiaries(note32) – 5 30 35Foreigncurrencyadjustments 12 45 – 57
At31January2017 870 2,742 86 3,698
Depreciation and impairmentAt1February2015 242 1,681 – 1,923Chargefortheyear 92 210 2 304Foreigncurrencyadjustments 1 1 – 2
At31January2016 335 1,892 2 2,229Chargefortheyear 94 242 11 347Foreigncurrencyadjustments 4 32 – 36
At31January2017 433 2,166 13 2,612
Net book valueAt31January2017 437 576 73 1,086
At31January2016 523 723 35 1,281
At1February2015 527 746 – 1,273
104 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
16 Property, plant and equipmentcontinued
Company
Shortleaseholdpropertyand
leaseholdimprovements
£’000
Fixturesandequipment
£’000
Motorvehicles
£’000Total
£’000
CostAt1February2015 714 1,524 – 2,238Additions 20 12 37 69
At31January2016 734 1,536 37 2,307Additions – 34 19 53
At31January2017 734 1,570 56 2,360
DepreciationAt1February2015 231 975 – 1,206Chargefortheyear 72 130 2 204
At31January2016 303 1,105 2 1,410Chargefortheyear 72 141 11 224
At31January2017 375 1,246 13 1,634
Net book valueAt31January2017 359 324 43 726
At31January2016 431 431 35 897
At1February2015 483 549 – 1,032
105Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
17 Investments
Company
Investmentsinsharesof
subsidiaries£’000
Capitalcontributions
tosubsidiaries£’000
Total£’000
CostAt1February2015 1,179 1,582 2,761Additions 814 5,650 6,464Additions–Groupshare-basedpayments – 98 98
At31January2016 1,993 7,330 9,323
Additions 669 – 669Additions–Groupshare-basedpayments – 94 94
At31January2017 2,662 7,424 10,086
Amounts provided
At31January2016and31January2017 101 635 736
Net book valueAt31January2017 2,561 6,789 9,350
At31January2016 1,892 6,695 8,587
At1February2015 1,078 947 2,025
Intheyearended31January2016,AirPartnerplcmadeacapitalcontributionof£5,650,000toAirPartnerConsultingLimitedforthepurchaseofBainesSimmonsLimited.
TheCompanytestsitsinvestmentsforimpairmentifthereareindicationsthattheinvestmentsmaybeimpaired.Therecoverableamountofeachinvestmentwasmeasuredonthebasisofitsvalueinuse,byapplyingcashflowprojectionsbasedonthefinancialforecastscoveringathree-yearperiod.Thekeyassumptionsforthevalueinusecalculationforeachsubsidiarywerethoseregardingthediscountrates,growthratesandexpectedchangestosellingpricesanddirectcostsduringtheperiod.Theestimatedgrowthrateswerebasedonpastperformanceandexpectationoffuturechangesinthemarket.Thegrowthrateusedtoextrapolatecashflowprojectionsbeyondtheperiodcoveredbythefinancialforecastswas2%(2016:2%).Thepre-taxrateusedtodiscounttheforecastcashflowswas13%(2016:13%).ThedirectorsdonotbelievethatthereareanyreasonablypossiblechangestothekeyassumptionsthatwouldresultinafurtherimpairmentoftheCompany’sinvestments.
106 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
17 InvestmentscontinuedThefollowingisalistofthesubsidiariesofwhichAirPartnerplc,incorporatedinEnglandandWales,isthebeneficialowner:
Name PrincipalactivityCountryof
incorporationCompany
numberCompany
address
AirPartnerInternationalS.A.S. Aircharterbroking France B398335489 AAirPartnerInternationalGmbH Aircharterbroking Germany HRB 28279 BAirPartner,Inc. Aircharterbroking US 65-0770487 CAirPartner(Switzerland)AG Aircharterbroking Switzerland CH-020.3.022.925.4 DAirPartnerTravelManagementCompanyLimited Travelagency EnglandandWales 03767092 E
AirPartnerSrl Aircharterbroking Italy MI-1811083 FAirPartnerHavacilikveTasimacilikLimitedSirketi Aircharterbroking Turkey 720099 GCabotAviationServicesLimited Aircraftremarketing EnglandandWales 03874833 E
AirPartnerConsultingLimited Holdingcompany EnglandandWales 02070950 EBainesSimmonsLimited Aviationsafetyconsultants EnglandandWales 04295495 EAviationComplianceLimited Aviationsafetyconsultants EnglandandWales 06545827 EClockworkResearchLimited Aviationsafetyconsultants EnglandandWales 05477740 EAirPartnerJetCharterandSalesPrivateLimited Dormant India U63000DL2012FTC234664 HBusinessJetsLimited Dormant EnglandandWales 04146214 EAirPartnerGroupLimited Dormant EnglandandWales 03685545 EAirPartnerInvestmentsLimited Dormant EnglandandWales 06727735 EAirPartnerEnclaveLimited Dormant EnglandandWales 06671502 EAirPartnerNordic AirCharterBroking Sweden 556724-5369 I
Alloftheaboveare100%ownedbyAirPartnerplc,exceptforAirPartnerHavacilikveTasimacilikLimitedSirketiwhere40%isheldbyasubsidiaryundertaking,andAirPartnerJetCharterandSalesPrivateLimitedwhichis99.99%heldbyonesubsidiarycompanyand0.01%heldbyanothersubsidiarycompany.AirPartnerplc’sholdingsareintheordinarysharecapitalofallthesubsidiariesandtherearenootherclassesofshares.
Registeredcompanyaddressesareasfollows:
A 89 RueduFaubourg,Saint-Honoré,75008 Paris,FranceB Technologiepark,HS 56,Friedrich-Ebert-Str.75, 51429BergischGladbach,GermanyC 1100LeeWagenerBlvd,Suite328,FortLauderdale,FL33315,USD Postfach8722, 8036Zurich,SwitzerlandE 2CityPlace,BeehiveRingRoad,Gatwick,WestSussex,RH60PA,UK
F ViaValtellina67, 20159Milano,ItalyG YenibosnaMerkezmah.Degirmenbahcecad.IstwestKonutlarıNo:17A1BBlokD:23Istanbul,TurkeyH MaulseriHouse,7,KapasheraEstate,NewDelhi-110037, IndiaI CeridRedovisningsbyraAB,Svanegatan10, 22224Lund,Skane,Malmö,Sweden
Intheopinionofthedirectors,therecoverableamountoftheCompany’ssubsidiaryundertakingsisconsideredtobeinexcessofthecarryingvalue.
107Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
18 Trade and other receivables
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Grosstradereceivables 19,189 16,318 7,263 8,558Allowanceforbadanddoubtfuldebts (322) (809) – (135)
Tradereceivables 18,867 15,509 7,263 8,423AmountsowedbyGroupundertakings – – 3,498 1,505Socialsecurityandothertaxes 1,045 1,018 699 726
Otherreceivables 278 172 69 49Prepaymentsandaccruedincome 5,215 7,009 2,010 4,780
25,405 23,708 13,539 15,483
Thedirectorsconsiderthatthecarryingamountoftradeandotherreceivablesapproximatestheirfairvalue.
Alltradeandotherreceivableshavebeenreviewedforindicatorsofimpairment.Themovementinimpairedreceivablesintheyearisshownbelow:
Group£’000
Company£’000
At31January2015 385 128Acquiredonacquisition 61 –Chargefortheyear 390 –Receivableswrittenoffduringtheyear (60) (10)Foreigncurrencyadjustments 33 17
At31January2016 809 135Chargefortheyear 34 (2)Receivableswrittenoffduringtheyear (580) (133)Foreigncurrencyadjustments 59 –
At31January2017 322 –
Oftheamountsimpairedduringtheperiod,£34,000(2016:£386,000)wasforanamountpastduebylessthanoneyearwiththeremainderbeingalloverduebymorethanoneyear.
Inaddition,someoftheunimpairedtradereceivableswerepastdueatthereportingdate.Theageingoffinancialassetswasasfollows:
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Neitherpastduenorimpaired 11,361 10,346 4,773 5,803Ageingofpastduebutnotimpaired:–Bynotmorethan3months 6,598 4,459 2,087 2,431–Bymorethan3monthsbutnotmorethan6months 701 146 229 (32)–Bymorethan6monthsbutnotmorethan1year 83 227 6 3–Bymorethan1year 124 331 168 218
18,867 15,509 7,263 8,423
108 Air Partner plc | Annual Report and Accounts 2017
19 Borrowings
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Securedbankloans 2,957 3,471 2,957 3,471
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Amountdueforsettlementwithin12months 514 514 514 514Amountdueforsettlementafter12months 2,443 2,957 2,443 2,957
2,957 3,471 2,957 3,471
Allborrowingsareinsterling.
TheGroup’sborrowingsconsistsofabankloanof£2.96m(2016:£3.47m)fromtheCompanybankers.Theloanwastakenouton12August2016.Repaymentscommencedon12November2016andwillcontinueuntil12August2020.TheloanissecuredbyafloatingchargeovertheCompany’sassets.Theloancarriesinterestat2.5%aboveLIBOR.
Subsequenttothebalancesheetdate,thesecuredbankloanof£2.96mwasrefinancedusinganewrevolvingcreditfacilityprovidedbytheGroup’smainbanker.Thefacilityisfor£7.5m,expiringinFebruary2020,andcarriesaninterestrateof2.5%aboveLIBOR.
20 Trade and other payables
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Tradepayables 3,601 3,182 1,473 1,333Othertaxationandsocialsecuritypayable 758 729 204 129
4,359 3,911 1,677 1,462
Thedirectorsconsiderthatthecarryingamountoftradeandotherpayablesapproximatestheirfairvalue.
Notes to the financial statements continuedfortheyearended31January2017
109Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
21 Other liabilities
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Accruals 3,662 4,980 1,548 2,772Otherliabilities 801 653 51 –AmountsowedtoGroupundertakings – – 3,571 2,688
4,463 5,633 5,170 5,460
Thedirectorsconsiderthatthecarryingamountofotherliabilitiesapproximatestheirfairvalue.
22 Other long-term liabilities
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
DeferredconsiderationinrespectofClockworkResearchLimited(note32) 200 – 200 –
23 Provisions
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Restructuringcosts – 421 – 166
Group Company
Restructuring£’000
Total£’000
Restructuring£’000
Total£’000
At1February2016 421 421 166 166Utilisationofprovision (421) (421) (166) (166)
At31January2017 – – – –
Aprovisionof£421,000wascreatedintheyearended31January2016inrelationtothepotentialcostsofreorganisingtheleadershipteamintotheOperatingBoardandthiswasfullyutilisedduringtheyear.
110 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
24 Financial instrumentsTheobjectivesoftheGroup’streasuryactivitiesaretomanagefinancialrisk,minimiseadverseeffectsoffluctuationsinthefinancialmarketsonthevalueoftheGroup’sfinancialassetsandliabilities,andtoensurethattheworkingcapitalrequirementsfittheneedsoftheongoingbusiness.
TheGrouphasvariousfinancialinstrumentssuchascash,tradereceivables,tradepayablesandborrowingsthatarisedirectlyfromitsoperations,alongwithforwardcurrencycontractsundertakentominimiseriskonfuturebusiness.
a) Interest rate riskTheGroup’spolicyistomanageinterestrateriskandtomaximiseitsreturnfromitscashbalances.TheGroup’smaininterestrateriskisrelatedtovariableratesoncashheldatthebank.Certaincashbalancesaredepositsonfixedinterestterms,butareneverlodgedformorethanthreemonthstoensurethattheGroupdoesnotsufferundulyfromtheriskofinterestratevariation.
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Cashheldatyearendonfixedinterestrates 4,415 4,290 3,317 2,156Cashheldatyearendonvariableinterestrates 15,380 15,501 10,885 12,830
19,795 19,791 14,202 14,986
Thefollowingtableillustratesthesensitivityofcashheldonvariableinterestratesonprofitbeforetaxfortheyeartoareasonablypossiblechangeininterestrates,witheffectfromthebeginningoftheyear.Therewasnoadditionalimpactonshareholders’equity.Thesechangesareconsideredtobereasonablypossiblebasedonobservationofcurrentmarketconditions.Theraterangeonwhichinterestwasreceivableduringtheyearwas0.0%to1.0%(2016:0.0%to1.0%).
Effectonprofitbeforetax
100basispointsincrease 100basispointsdecrease
Group2017
£’0002016
£’0002017
£’0002016
£’000
Cashheldatyearendonvariableinterestrates 154 155 (154) (155)
Effectonprofitbeforetax
100basispointsincrease 100basispointsdecrease
Company2017
£’0002016
£’0002017
£’0002016
£’000
Cashheldatyearendonvariableinterestrates 109 128 (109) (128)
TheGroupisfurtherexposedtointerestrateriskduetovariableinterestowedonitsborrowings,£2,957,000,linkedtoLIBOR.
Thefollowingtableillustratesthesensitivityofborrowingsonvariableinterestratesonprofitbeforetaxfortheyeartoareasonablypossiblechangeininterestrates,witheffectfromthebeginningoftheyear.Therewasnoadditionalimpactonshareholders’equity.Thesechangesareconsideredtobereasonablypossiblebasedonobservationofcurrentmarketconditions.Therateatwhichinterestwaspayableduringtheyearwas3.09%(2016:3.09%).
Effectonprofitbeforetax
100basispointsincrease 100basispointsdecrease
Group and Company2017
£’0002016
£’0002017
£’0002016
£’000
Borrowingsonvariableinterestrates 30 35 (30) (35)
111Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
24 Financial instruments continuedb) Credit riskThecarryingamountoffinancialassetsrecognisedatthereportingdate,assummarisedbelow,representstheGroup’smaximumexposuretocreditrisk:
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Cashandcashequivalents 19,795 19,791 14,202 14,986Tradeandotherreceivables 20,035 17,651 7,488 10,163
39,830 37,442 21,690 25,149
TheGroupconstantlymonitorsdefaultsofcustomersandothercounterpartiesandincorporatesthisinformationintoitscreditriskcontrols.ItistheGroup’spolicythatallcounterpartieswhowishtotradeoncredittermsaresubjecttoanexternalcreditverificationprocess.
Thedirectorsconsiderthatalloftheabovefinancialassetsthatarenotimpairedforeachofthereportingdatesunderreviewareofgoodcreditquality,includingthosethatarepastdue.
TheGrouphasnosignificantconcentrationofcreditrisktocommercialcustomers,ascreditriskispredominantlygovernmentbased.
Thecreditriskonliquidfundsandderivativefinancialinstrumentsislimitedbecausethecounterpartiesarebankswithhighcreditratingsassignedbyinternationalcreditratingagencies.
Refertonote18fordetailsofimpairmentlossesforfinancialinstruments.
c) Liquidity riskTheGroupfacesliquidityrisksinpayingoperatorsbeforeaflightoccursorbeforepaymentisreceivedfromtheclient.TheGroupaimstomitigateliquidityriskby,wherepossible,makingpaymentstooperatorsonlyoncepaymentfromtheclienthasbeenreceived.
TheGroupmanagescashwithinitsoperationsandensuresthatcashcollectionisefficientlymanaged.Anyexcesscashisplacedonlow-risk,short-terminterest-bearingdepositsordistributedtoshareholdersthroughdividends,althoughtheGroupretainsenoughworkingcapitalinthebusinesstoensurethatthebusinessoperationscanrunsmoothly.
Asat31January2017,theGroupandCompany’sfinancialliabilitieshadcontractualmaturitieswhicharesummarisedbelow:
Current Non-current
Within6months 6to12months 1to5years Morethan5years
Group2017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’000
Tradeandotherpayables 23,386 22,353 257 257 2,443 2,957 – –Derivativefinancialinstruments 9 – – – – – – –
23,395 22,353 257 257 2,443 2,957 – –
Current Non-current
Within6months 6to12months 1to5years Morethan5years
Company2017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’0002017
£’0002016
£’000
Tradeandotherpayables 19,382 17,353 257 257 2,443 2,957 – –Derivativefinancialinstruments 9 – – – – – – –
19,391 17,353 257 257 2,443 2,957 – –
112 Air Partner plc | Annual Report and Accounts 2017
24 Financial instruments continuedd) Foreign currency riskTheGrouphasinvestedinforeignoperationsoutsidetheUKandalsobuysandsellsgoodsandservicesdenominatedincurrenciesotherthansterling.AsaresultthevalueoftheGroup’snon-sterlingrevenue,purchases,financialassetsandliabilitiesandcashflowscanbeaffectedbymovementsinexchangeratesingeneralandinUSDollarandEuroratesinparticular.TheGroup’spolicyonforeigncurrencyriskisnottoenterintoforwardcontractsuntilafirmcontracthasbeensigned.
TheGroupconsidersusingderivativeswhereappropriatetohedgeitsexposuretofluctuationsinforeignexchangerates.ThepurposeistomanagethecurrencyrisksarisingfromtheGroupoperations.ItistheGroup’spolicythatnotradinginfinancialinstrumentswillbeundertaken.
Foreigncurrencydenominatedfinancialassetsandliabilities,translatedintosterlingattheclosingrate,areasfollows:
2017£’000
2016£’000
Group Eur € US $ GBP £ Other Eur€ US$ GBP£ Other
Financialassets 19,231 5,213 14,593 793 15,628 4,714 16,825 275Financialliabilities (15,549) (3,349) (4,180) (39) (15,397) (3,176) (3,750) (53)
Short-term exposure 3,682 1,864 10,413 754 231 1,538 13,075 222
Financialassets – – – – – – – –Financialliabilities – – (2,443) – – – (2,957) –
Long-term exposure – – (2,443) – – – (2,957) –
3,682 1,864 7,970 754 231 1,538 10,118 222
2017£’000
2016£’000
Company Eur€ US $ GBP £ Other Eur€ US$ GBP£ Other
Financialassets 8,468 2,404 19,185 801 10,027 2,058 14,176 395Financialliabilities (11,873) (2,520) (3,484) (144) (13,271) (34) (4,059) (173)
Short-term exposure (3,405) (116) 15,701 657 (3,244) 2,024 10,117 222
Financialassets – – – – – – – –Financialliabilities – – (2,443) – – – (2,957) –
Long-term exposure – – (2,443) – – – (2,957) –
(3,405) (116) 13,258 657 (3,244) 2,024 7,160 222
Notes to the financial statements continuedfortheyearended31January2017
113Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
24 Financial instruments continuedd) Foreign currency riskcontinuedThefollowingtabledemonstratesthesensitivityoffinancialinstrumentstoareasonablypossiblechangeintheeuroandUSdollarexchangerates,withallothervariablesheldconstant,onprofitbeforetaxandequity.Itassumesa10%changeofthesterling/euroexchangeratefortheyearended31January2017(2016:10%).A10%changeisalsoassumedforthesterling/USdollarexchangerate(2016:10%).Bothofthesepercentageshavebeendeterminedbasedontheaveragemarketvolatilityinexchangeratesintheprevious12months.ThesensitivityisbasedontheGroup’sforeigncurrencyfinancialinstrumentsheldateachreportingdateandalsotakesintoaccountforwardexchangecontractsthatoffseteffectsfromchangesincurrencyexchangerates.
IfsterlinghadstrengthenedagainsttheeuroandUSdollarby10%(2016:10%)and10%(2016:10%)respectively,theimpactwouldhavebeenasfollows:
2017£’000
2016£’000
Group Eur € US $ Total Eur€ US$ Total
Financialassets (1,923) (521) (2,444) (1,563) (471) (2,034)Financialliabilities 1,555 335 1,890 1,540 318 1,858
Effectonprofitbeforetax (368) (186) (554) (23) (153) (176)
2017 2016
Company Eur € US $ Total Eur€ US$ Total
Financialassets (847) (240) (1,087) (1,003) (206) (1,209)Financialliabilities 1,187 252 1,439 1,327 3 1,330
Effectonprofitbeforetax 340 12 352 324 (203) 121
IfsterlinghadweakenedagainsttheeuroandUSdollarby10%(2016:10%)and10%(2016:10%)respectively,theimpactwouldhavebeenasfollows:
2017 2016
Group Eur € US $ Total Eur€ US$ Total
Financialassets 1,923 521 2,444 1,563 471 2,034Financialliabilities (1,555) (335) (1,890) (1,540) (318) (1,858)
Effectonprofitbeforetax 368 186 554 23 153 176
2017 2016
Company Eur € US $ Total Eur€ US$ Total
Financialassets 847 240 1,087 1,003 206 1,209Financialliabilities (1,187) (252) (1,439) (1,327) (3) (1,330)
Effectonprofitbeforetax (340) (12) (352) (324) 203 (121)
114 Air Partner plc | Annual Report and Accounts 2017
24 Financial instruments continuede) Forward contractsTheGrouputilisescurrencyderivativestohedgesignificantfuturetransactionsandcashflows.TheGroupisapartytoforeigncurrencyforwardcontractsinthemanagementofitsexchangerateexposures.TheinstrumentspurchasedareprimarilydenominatedinthecurrenciesoftheGroup’sprincipalmarkets.
Derivativesthatdonotqualifyforhedgeaccountingareaccountedforastradinginstruments,andanychangeintheirfairvaluedeterminedasthemark-to-marketvalueatbalancesheetdateisrecognisedintheincomestatement.Noderivativesqualifiedforhedgeaccountingduringtheyear(2016:none).
Atthereportingdate,thetotalnotionalamountofoutstandingforwardforeignexchangecontractsthattheGrouphadcommittedareasbelowandtheirrelatedfairvaluewasasfollows(termsnotexceedingthreemonthsfrom31January2017):
Group and Company2017
£’0002016
£’000
Forwardforeignexchangecontracts–notionalamount 682 537Financial(liability)/asset (9) 36
Changesinthefairvalueofderivativefinancialinstrumentsamountingto£45,000havebeenchargedtotheincomestatementintheperiod(2016:creditof£186,000).
Thesederivativefinancialinstrumentsarenottradedinactivemarkets.Theirfairvaluehasbeendeterminedbyusingvaluationtechniqueswhichmaximisetheuseofobservablemarketdata,namelythecontractexchangerateandthebank’sforwardrate.Thederivativesarethereforecategorisedaslevel2usingthefairvaluehierarchy.
f) Capital risk managementTheGroup’sobjectiveswhenmanagingcapitalaretosafeguardtheGroup’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholders.
TheGroup’sprimarytoolinmanagingriskiscashflowanalysis.Inadditiontostrategiccashflowmanagement,theGroupperformsdetailedweeklycashflowmodelling.
ThescheduleofmattersreservedforBoarddecisionincludesapprovalofanyfinancialinstrumentsorbankborrowingsinexcessof£2,000,000.
ThecapitalstructureoftheGroupconsistsofnetdebt(borrowingsandotherlong-termliabilitiesdisclosedinnote19afterdeductingnon-JetCardcashandbankbalances)andequityoftheGroup(comprisingissuedcapital,reserves,andretainedearningsdisclosedinnotes28to31).
TheGroupisnotsubjecttoanyexternallyimposedcapitalrequirements.TheGroup’sgearingratioatyearendisasfollows:
2017£’000
2016£’000
Debt 2,957 3,471Cashandcashequivalents 3,929 3,015
Netcash/(debt) 972 (456)
Equity 14,934 13,880
Netdebttoequityratio (6.51%) 3.29%
Debtisdefinedaslong-andshort-termborrowingsandotherlong-termliabilitiesasdetailedinnote19.
EquityincludesallsharecapitalandreservesoftheGroupthataremanagedascapital.
Notes to the financial statements continuedfortheyearended31January2017
115Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
24 Financial instruments continuedg) Financial assets by category
Group2017
£’0002016
£’000
Cashandbankbalances 19,795 19,791Financialassetsheldatfairvaluethroughprofitorloss – 36Loansandreceivables 20,985 17,651Currentassetswhicharenotfinancialassets 4,926 6,495
Totalcurrentassets 45,706 43,973
Company2017
£’0002016
£’000
Cashandbankbalances 14,202 14,986Financialassetsheldatfairvaluethroughprofitorloss – 36Loansandreceivables 7,488 10,163Currentassetswhicharenotfinancialassets 6,259 5,657
Totalcurrentassets 27,949 30,842
h) Financial liabilities by category
Group2017
£’0002016
£’000
Financialliabilitiesheldatfairvaluethroughprofitorloss (9) –Financialliabilitiesmeasuredatamortisedcost (7,577) (8,676)Currentliabilitieswhicharenotfinancialliabilities (30,180) (27,743)
Totalcurrentliabilities (37,766) (36,419)
Company2017
£’0002016
£’000
Financialliabilitiesheldatfairvaluethroughprofitorloss (9) –Financialliabilitiesmeasuredatamortisedcost (6,906) (7,307)Currentliabilitieswhicharenotfinancialliabilities (16,543) (17,201)
Totalcurrentliabilities (23,458) (24,508)
Group and Company2017
£’0002016
£’000
Financialliabilitiesmeasuredatamortisedcost (2,643) (2,957)
Totallong-termliabilities (2,643) (2,957)
Thedirectorsconsiderthatthecarryingamountofthefinancialassetsandliabilitiesapproximatestheirfairvalue.
116 Air Partner plc | Annual Report and Accounts 2017
25 Share-based paymentsTheCompanyoperatesashareoptionschemeunderwhichoptionsmaybegrantedtocertainstaffoftheGrouptosubscribeforordinarysharesintheCompany.Theschemerulescovergrantsunderanapprovedandanunapprovedsectionofthescheme.Thevestingperiodisthreeyears.Withcertainexceptions,optionsareforfeitedifanemployeeleavestheGroupandoutstandingoptionsexpireiftheyremainunexercisedafteraperiodof6.8to10yearsfromthedateofgrant.
Detailsoftheshareoptionsoutstandingduringtheyearareasfollows:
2017 2016
Numberof shareoptions
Weightedaverageexercise
price(pence)
Numberofshareoptions
Weightedaverageexercise
price(pence)
Outstandingasatstartofyear 785,060 301.7 702,136 371.9
Outstandingasatstartofyearfollowing5:1sharesplit 3,925,300 60.3 – –Grantedduringtheyear 918,290 0.0 246,717 29.2Forfeited/lapsedduringtheyear (1,168,980) 74.9 (133,793) 286.3 Exercisedduringtheyear (683,026) 30.4 (30,000) 284.1
Outstandingatyearend 2,991,584 32.2 785,060 301.7
Exercisableatyearend 1,187,044 105.4 403,775 282.2
Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheyearendwas4.83years(2016:4.14years).
Theexercisepricesofshareoptionsoutstandingatyearendrangedfromnilpenceto177pence(2016:nilpenceto1,316pence).
Thetotalchargefortheyearrelatingtoemployeeshare-basedpaymentplanswas£493,000.
Inthecurrentyear,optionsweregrantedon29June2016.Theestimatedfairvaluesoftheoptionsgrantedonthosedatesis£458,000.InputsintotheMonteCarlomodelwereasfollows:
29June2016options
Weightedaverageshareprice 370pWeightedaverageexerciseprice 0.0pExpectedvolatility 43.76%Expectedlife 3 yearsRisk-freerate 0.12%Expecteddividendyields 6.48%
ExpectedvolatilitywasdeterminedbycalculatingthehistoricalvolatilityoftheGroup’ssharepriceoverthepreviousthreeyears.
Notes to the financial statements continuedfortheyearended31January2017
117Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
26 Deferred tax Deferredtaxhasbeencalculatedat17%(2016:18%)inrespectofUKcompaniesandattheprevailingtaxratesfortheoverseassubsidiaries.ThefollowingarethemajordeferredtaxliabilitiesandassetsrecognisedbytheGroupandtheCompanywithmovementsthereonduringthecurrentandpriorreportingperiods.
Group
IFRS3intangibles
£’000
Netaccelerated
taxdepreciation
£’000Taxlosses
£’000
Share-basedpayment
£’000
Othertemporary
differences£’000
Total£’000
At1February2015 – (84) 130 138 115 299Arisingonacquisitionofsubsidiaries (857) (30) – – – (887)Exchangedifferences – (3) – – 19 16Credit/(charge)totheincomestatement 132 63 (128) – 79 146Creditdirecttoequity – – – 18 – 18
At31January2016 (725) (54) 2 156 213 (408)Arisingonacquisitionofsubsidiaries (35) – – – – (35)Exchangedifferences – – – – (40) (40)Credit/(charge)totheincomestatement 94 (23) (2) – 288 357Creditdirecttoequity – – – (66) – (66)
At31January2017 (666) (77) – 90 461 (192)
Company
Netaccelerated
taxdepreciation
£’000
Share-basedpayment
£’000Total
£’000
At1February2015 (93) 138 45Chargetotheincomestatement 12 – 12Creditdirecttoequity – 18 18
At31January2016 (81) 156 75Chargetotheincomestatement 20 – 20Chargedirecttoequity – (71) (71)
At31January2017 (61) 85 24
DeferredtaxassetsandliabilitiesareoffsetwheretheGrouphasalegallyenforceablerighttodoso.Thefollowingistheanalysisofthedeferredtaxbalancesforfinancialreportingpurposes:
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Deferredtaxliabilities (725) (551) – –Deferredtaxassets 533 143 24 75
(192) (408) 24 75
Atthebalancesheetdate,theGrouphadundistributedearningsinrespectofoverseassubsidiariesthatwouldbesubjecttooverseaswithholdingtaxesonremissiontotheUK.NoliabilityhasbeenrecognisedinrespectoftheseearningsbecausetheGroupisinapositiontocontrolthetimingofthereversalofthetemporarydifferencesanditisprobablethatsuchdifferenceswillnotreverseintheforeseeablefuture.
Atthebalancesheetdate,theGrouphadunusedtaxlossestotalling£167,000(2016:£232,000)forwhichnodeferredtaxassetwasrecognised,asitisnotconsideredprobablethattherewillbefuturetaxableprofitsavailable.
118 Air Partner plc | Annual Report and Accounts 2017
27 Employee benefitsIntheUK,theCompanyoperatesadefinedcontributionretirementbenefitschemeforallqualifyingemployees.TheassetsoftheschemeareheldinindividualpersonalpensionschemeswhicharefullytransferableiftheemployeeleavestheCompany.
SimilarschemesoperateacrosstherestoftheGroupdependingonlocalregulationsandindividualsocialcontributionlevels.Theamountofexpenserelatedtosuchpensioncontributionsisdisclosedinnote8.
Inothersubsidiaries,theemployeesaremembersofstate-managedretirementfundsoperatedbyrespectivegovernments,withcontributionspayablebeingaspecifiedpercentageofpayrollcosts.TheonlyobligationoftheGroupwithrespecttotheretirementbenefitschemeistomakethespecifiedcontributions.Thetotalcostchargedtoincomeof£506,000(2016:£480,000)representscontributionspayabletothesevariousschemesbytheGroup.Asatthebalancesheetdate,£67,000(2016:£129,000)wasaccruedinrespectofsuchschemes.
28 Share capital
2017£’000
2016£’000
Authorised75,000,000ordinarysharesof1penceeach 750 –
15,000,000ordinarysharesof5penceeach – 750
Issued and fully paid52,217,565ordinarysharesof1penceeach 522 –
10,443,513ordinarysharesof5penceeach – 522
On25January2017,theCompany’sshareholdersapproveda5to1splitoftheCompany’sshares,whichreducedthenominalvalueoftheordinarysharesto1penceeach.Thesharesplitbecameeffectiveon31January2017.
TheCompanyhasoneclassofordinaryshareswhichcarriesnorighttofixedincomeandentitlesholderstoonevotepershareatgeneralmeetingsoftheCompany.
181,820sharesof5penceeachwereissuedintheyearended31January2016aspartoftheacquisitionconsiderationforCabotAviationServicesLimited.
29 Share premium
Group andCompany
£’000
Balanceat1February2016 4,814Issueofshares (59)
Balanceat31January2017 4,755
Notes to the financial statements continuedfortheyearended31January2017
119Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
30 Merger reserve
Group andCompany
£’000
Balanceat1February2016 295Issueofshares 59
Balanceat31January2017 354
ThemergerreserverepresentsthefairvalueoftheconsiderationgiveninexcessofthenominalvalueoftheordinarysharesissuedaspartoftheacquisitionconsiderationforCabotAviationServicesLimited.
31 Own shares reserve
Group andCompany
£’000
Balanceat1February2016 (1,199)
Issueofshares 60Disposedonexerciseofoptions 467
Balanceat31January2017 (672)
TheownsharesreserverepresentsthecostofsharesinAirPartnerplcpurchasedinthemarketandheldbytheAirPartnerEmployeeBenefitTrust,whichwasestablishedtosatisfythefutureexerciseofoptionsundertheGroup’sshareoptionsschemes(seenote25).ThenumberofordinarysharesheldbytheAirPartnerEmployeeBenefitTrustat31January2017was341,820ordinarysharesof1penceeach(2016:159,236ordinarysharesof5penceeach).Afurther413,640ordinarysharesof1penceeach(2016:100,910ordinarysharesof5penceeach)areheldbytheTrustinanomineecapacityfortwobeneficiaries(2016:two)oftheTrust.
120 Air Partner plc | Annual Report and Accounts 2017
Notes to the financial statements continuedfortheyearended31January2017
32 Acquisition of subsidiariesOn12December2016,AirPartnerplcacquired100%oftheissuedsharecapitalofClockworkResearchLimited,obtainingcontrolofthecompanyonthatdate.ClockworkResearchLimitedisaleadingfatigueriskmanagementconsultant.TheacquisitionofClockworkResearchLimitedaddssignificantspecialistconsultingexpertiseandknowledgetotheGroup.
Theprovisionalamountsrecognisedinrespectoftheidentifiableassetsacquiredandliabilitiesassumedaresetoutinthetablebelow.
Clockwork Research Limited
£’000
Fair values of assets acquired
Financialassets 325
Property,plantandequipment 35
Intangibleassets–customerrelationships 174
Deferredtaxonintangibleassets (35)Financialliabilities (163)
Goodwill 333
Totalconsideration 669
Satisfied byCash 469
Deferredconsideration 200
Totalconsideration 669
Net cash outflow arising on acquisition
Cashconsideration 469Lesscashandcashequivalentsacquired (107)
Netcashoutflow 362
Deferredconsiderationofupto£200,000ispayabledependingonearningsperformanceinthe12-monthperiodsending31March2017and31March2018.Thedirectorsconsideritlikelythattheperformanceconditionswillbemetandhavethereforerecognisedthemaximumamountspayable.
Nogoodwillisdeductiblefortaxpurposes.
Clockwork Research LimitedThegoodwillof£333,000arisingfromtheacquisitionisattributabletothevalueoftheassembledworkforceandtheabilityoftheseniorstafftogeneratefuturebusiness.
Acquisitionrelatedcosts(includedinOtheritems)amountedto£55,000.
ClockworkResearchLimitedcontributedrevenueof£70,000andlossesaftertaxof£3,000beingtheresultsfortheperiodbetweenthedateofacquisitionand31January2017.
IftheacquisitionofClockworkResearchLimitedhadbeencompletedonthefirstdayofthefinancialyear,Grouprevenuesfortheperiodwouldhavebeen£43,000,000andGroupprofitaftertaxwouldhavebeen£2,955,000.
121Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
33 Prior year acquisitionsOn18August2015,AirPartnerplcacquired100%oftheissuedsharecapitalofBainesSimmonsLimited,obtainingcontrolofthecompanyonthatdate.BainesSimmonsLimitedisaleadingaviationsafetyconsultant.BainesSimmonsLimitedwillenableAirPartnertoextendtheGroup’sserviceandproductcapabilitieswithofferingscomplementarytoitsexistingcharterbusiness.
Contingentconsiderationofupto£600,000ispayabletothevendorsofBainesSimmonsLimiteddependingontheperformanceto31January2018.Asthedirectorsdonotconsideritlikelythattheminimumperformancethresholdwillbemet,noamountshavebeenrecognisedinrespectofthis.
At31January2016,thepurchasepriceallocationwasprovisional:theaccountinginrespectoftheacquisitionofBainesSimmonsLimitedhassincebeenfinalised.Thisresultedinadjustmenttothevalueofintangiblesrecognisedonacquisition,anincreaseincustomerrelationshipsof£1.6m,anddecreasesinthevalueofthebrandof£0.04mandtrainingmaterialsof£0.2m.
TheamountsrecognisedinrespectoftheidentifiableassetsacquiredandliabilitiesassumedontheacquisitionofBainesSimmonsLimitedaresetoutinthetablebelow.
Baines Simmons Limited
£’000
Fair values of assets acquired
Financialassets 1,490Property,plantandequipment 191
Intangibleassets–brands 158
Intangibleassets–customerrelationships 3,448
Intangibleassets–trainingmaterials 415
Deferredtaxonintangibleassets (780)Financialliabilities (983)
3,939Goodwill 1,711
Totalconsideration 5,650
Satisfied byCash 5,650
Net cash outflow arising on acquisition
Cashconsideration 5,650Lesscashandcashequivalentsacquired (350)
Netcashoutflow 5,300
122 Air Partner plc | Annual Report and Accounts 2017
34 Net cash inflow from operating activities
Group Company
2017£’000
2016£’000
2017£’000
2016£’000
Profit for the year
Continuingoperations 2,847 1,933 1,168 5,285Discontinuedoperations – 387 – 387
2,847 2,320 1,168 5,672Adjustmentsfor:Dividendsreceived – – – (3,277)Financeincome (39) (10) (34) (3)Financeexpense 96 81 – 28Incometax 1,501 1,328 791 640Depreciationandamortisation 780 745 350 428Fairvaluemovementonderivativefinancialinstruments 45 (186) 45 (186)Shareoptioncostforperiod 369 223 369 223Decreaseinprovisions (421) (91) (166) (312)Foreignexchangedifferences (938) (140) (892) (118)
Operating cash flows before movements in working capital 4,240 4,270 1,631 3,095Changeinreceivables (481) (1,377) 1,944 (3,193)Changeinpayables (867) 3,901 (1,067) 1,054
Cash generated from operations 3,009 6,794 2,508 956Incometaxespaid (922) (928) (582) (541)Interestpaid (96) (81) – (28)
Net cash inflow from operating activities 1,874 5,785 1,926 387
35 Operating lease arrangements
The Group as lessee
2017Land andbuildings
£’000
2016Landandbuildings
£’000
2017Other£’000
2016Other£’000
2017Total
£’000
2016Total
£’000
Minimumleasepaymentsunderoperatingleasesrecognisedascostsfortheperiod 454 494 68 99 522 593
Atthereportingdate,theGrouphadoutstandingcommitmentsforfutureminimumleasepaymentsundernon-cancellableoperatingleases,whichfalldueasfollows:
The Group as lessee
2017Land andbuildings
£’000
2016Landandbuildings
£’000
2017Other£’000
2016Other£’000
2017Total
£’000
2016Total
£’000
Withinoneyear 428 457 65 66 493 523Inthesecondtofifthyearinclusive 1,565 1,411 135 108 1,700 1,519Afterfiveyears – 119 – 5 – 124
1,993 1,987 200 179 2,193 2,166
OperatingleasepaymentsrepresentrentalspayablebytheGroupforcertainofficeproperties,motorvehiclesandofficeequipmentituses.Leasesarenegotiatedinisolation,dependentonthetradingconditionsinthecountry/regionconcerned.
Notes to the financial statements continuedfortheyearended31January2017
123Air Partner plc | Annual Report and Accounts 2017
Strategic reportCorporate governance
Financial statements
36 Profit for the financial yearTheGroupfinancialstatementsdonotincludeaseparateincomestatementforAirPartnerplc(theparentundertaking)aspermittedbySection408oftheCompaniesAct2006.TheParentCompanyprofitaftertaxforthefinancialyearwas£1,154,000(2016:£5,636,000)includingdividendsfromsubsidiarycompaniesof£nil(2016:£3,277,000).TheParentCompanyhasnootheritemsofcomprehensiveincome.
37 Related party transactionsTheCompanyhadthefollowingtransactionswithrelatedpartiesintheordinarycourseofbusinessduringtheyearunderreview.
Trading transactions2017
£’0002016
£’000
Subsidiaries
Salestosubsidiaries – 31
Purchasesfromsubsidiaries (23) (33)
Amountsowedbysubsidiariesatperiodend 3,498 1,505Amountsowedtosubsidiariesatperiodend (3,571) (2,688)
Outstandingbalancesthatrelatetotradingbalancesareplacedoninter-companyaccountswithnospecificcreditperiod.
Compensation of key management personnel (being the Board of directors)2017
£’0002016
£’000
Short-termemployeebenefits 985 871Post-employmentbenefits 52 107
1,037 978
Inadditiontotheaboveamounts,keymanagementpersonnelwhowerealsoshareholdersreceived£10,000ofdividendsinrespectoftheirshareholdingsintheyearended31January2017(2016:£11,000).
Boardofdirectors’remunerationinaccordancewithSchedule5oftheAccountingRegulationswasasfollows:
Aggregate directors’ remuneration2017
£’0002016
£’000
Emoluments 863 871Companycontributionstomoneypurchasepensioncontributions 52 107
915 978
Two(2016:two)directorsaremembersofmoneypurchasepensionschemes.
FurtherinformationabouttheremunerationofindividualdirectorsisprovidedintheauditedpartoftheDirectors’remunerationreportonpages60to63.
38 Contingent liabilitiesTheGrouphadissuedthefollowingguaranteesattheyearend.
Description Currency2017
£’0002016
£’000
Dubaiemployeerights Sterling – 17
Inaddition,theCompany’sbankersholdafreeandfloatingchargeovertheCompany’sassets.Thereisalsocontingentconsiderationofupto£600,000payabletothevendorsofBainesSimmonsLimiteddependingontheperformanceto31January2018.
PrintedbyParkCommunicationsonFSC®certifiedpaper.
ParkisanEMAScertifiedcompanyanditsEnvironmentalManagementSystemiscertifiedtoISO14001.
ThisdocumentisprintedonGenYous,apapercontaining100%virginfibresourcedfromwellmanaged,responsible,FSC®certifiedforests.Thepulpusedinthisproductisbleachedusinganelementalchlorinefree(ECF)process.
Edited,designedandproducedbyFalconWindsor.
www.falconwindsor.com
Page33photocredit:BarbaraKinney–‘HillaryforAmerica’.