Full Year results for year ended 31 January 2018

11 June 2018

Air Partner plc

Full Year results for the year ended 31 January 2018

Air Partner reports a strong trading performance

Air Partner plc ("Air Partner" or "Group"), the global aviation services group, today reports results for the year ended 31 January 2018.

§ - Underlying results are stated before other items (see note 3)

* - Restated for accounting issue identified (noted below)

Financial Highlights:

· Gross profit of £36.1m, a year-on-year increase of 13.8%, reflecting robust trading in the Charter division and continued progress in the Consulting & Training division

· Underlying profit before tax of £5.8m, a year-on-year increase of 23.7%

· Statutory profit before tax of £4.8m, a year-on-year increase of 20%

· Underlying EPS of 8.4p, a year-on-year increase of 41.8%

· Proposed final dividend of 3.8p, an increase of 5.6%, payable on 20 July 2018. Full Year dividend up 5.8% to 5.5p

· Strong Group financial position with net cash of £4.8m

· Accounting review completed

o £4.0m overstatement of net assets, net of associated corporation tax, in line with the RNS of 11 April 2018

o Profits restated across years 2010/11 - 2017/18

o Total cost impact of £1.3m to be expensed in 2018/19; review fees of £0.8m and £0.5m of aborted acquisition costs

o A thorough, transparent and detailed review

o The issue has been contained, reviewed and resolved

o Air Partner is well placed to pursue its strategic aims

Operating Highlights:

· Charter division driving underlying trading performance

o Record results in US and in Freight

o Good performance from Remarketing, with a number of exclusive mandates secured

o JetCard recognised as the most flexible membership programme in the US and Europe

o Further investment in people and processes to support long term growth

· Consulting & Training division delivered encouraging second half

o SafeSkys acquisition integrated successfully

o Baines Simmons contract wins across military and civil sectors

o 4,000 people completed Consulting & Training programmes

o Clockwork Research performing in line with expectations

Strategic Highlights and Outlook

· Clear, long term growth strategy

· Customer First programme driving deeper understanding of customers, promoting cross selling opportunities

· Acquisition of SafeSkys extends offer further into safety and airport management support with global potential

Mark Briffa, CEO of Air Partner, commented: "I am pleased to be reporting a strong trading performance. In addition to robust trading in our Charter division, we saw an encouraging performance from the Consulting & Training division, reflecting the progress we are making against our strategic objective to create a balanced business mix. Since the year end, Baines Simmons and SafeSkys have been awarded multi-year contracts by the Ministry of Defence and the Royal Air Force respectively, and the pipeline ahead is healthy across all our divisions.

The accounting review announced in April has concluded, the issue is resolved and we are now well placed to move forward with a stronger platform from which to deliver our strategy. Our long term approach and growth strategy continue to bear fruit and we are excited about future prospects for the Group. We shall carry on assessing investment opportunities that enhance or extend the services and capabilities we offer our customers, and which will ultimately strengthen and advance our market position as we deliver exceptional service and value to our customers globally."

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

CHAIRMAN'S STATEMENT

I am pleased to report a positive trading performance for the year ended 31 January 2018. The accounting review announced in April 2018 has concluded. It was an unwelcome, challenging and costly event, and certainly not how any business would wish to start a new financial year. It is important to note that it was an accounting issue and not a business issue. It was discovered by the Air Partner team following an upgrade in our finance capabilities which led to a more thorough analysis of our financials.  However, it had the potential to overshadow our trading performance and the substantial progress made operationally and financially since our transformation strategy first began in 2015. Now with the review behind us, we have learnt from its findings and will emerge a better, stronger company.

Accounting Review

In April 2018, following the recruitment of new and enhanced skills into the Group finance department, the Company identified an issue, predominantly relating to the accounting for receivables and deferred income, originating in 2010/11. We immediately appointed independent advisers to carry out a thorough, transparent and exhaustive review into this matter which is now concluded.

A full analysis of the financial impact is explained in the Financial Review but key to note is that no cash or assets were lost and no customer, operator or supplier was impacted or disadvantaged. The underlying business remains strong. Integrating the review into the full year audit took significant time and, disappointingly, forced the suspension of trading in our shares. Upon the resignation of Neil Morris, the Chief Financial Officer, we moved quickly to appoint an Interim CFO, to progress a thorough review of our financial controls and to address immediately identified weaknesses. The rectification is underway. These initiatives should give shareholders the necessary confidence in the growth trajectory of Air Partner. Although we will incur £1.3m of cost in the financial year 2018/19, as a result of the review and an aborted acquisition, we now move forwards with a robust set of financial statements from which we can confidently pursue our strategy. I would like to thank, in particular, our Chief Executive Mark Briffa, Interim Chief Financial Officer Chris Mann and Financial Controller Ilze Williamson for their tireless work in identifying and resolving these issues.

I would like to emphasise that, as a Board, we are committed to maintaining a consistent and robust level of corporate governance across the business in order to protect value and maintain the stable platform from which we can successfully deliver our strategy. Our governance frameworks are reviewed continually to ensure they evolve appropriately in the best interests of our customers, our people and our shareholders.

Strategy Unchanged

Over 2017/18 we continued to deliver on our strategy, building further on our position as a long term partner to the aviation industry. Driven by a particularly encouraging second half, gross profit for the year was up 13.8% to £36.1m and underlying profit before tax rose by 23.7% to £5.8m. The results are presented after correction of the overstatement of profits and net assets announced in April 2018 which were fully investigated by the comprehensive post year end accounting review. This review ensured the issue has been completely addressed and leaves Air Partner well placed to pursue its strategic aims. 

Our clear growth strategy remains unchanged: we manage the business for the long term in close alignment to the needs of our global customer base. We will continue to grow our Charter business, offering the best possible experience. In addition, we will broaden our offer to build a more complete portfolio of aviation services, reducing the Group's exposure to charter market volatility and improving the overall quality of our earnings. These results give me further confidence that we are pursuing the right strategy and delivering to plan.

Our strategic objectives are supported by a culture committed to customer centricity, strong governance, our great people and to shareholder returns.

Customer First

Our customers have always been our key focus; our Customer First programme puts them at the heart of every decision we make. Not only does it help to differentiate Air Partner from competitors, but a deeper understanding of our customers and their individual needs enables us to deliver a consistently outstanding service, improving retention and winning new business. 

The Board

As previously announced, Richard Everitt stood down as Chairman in June 2017 and I was delighted to take on the role. Following this change, Amanda Wills became Chair of the Remuneration Committee and Richard Jackson became Senior Independent Director. Shaun Smith remains Chair of the Audit and Risk Committee.

As previously reported on 13 April 2018, following the end of the financial year, Chief Financial Officer Neil Morris resigned from the Board.

Our People

We have many great people throughout the business who display a passion and determination to deliver the extraordinary every day. It has enabled us to retain our position as a preferred supplier to some of the world's leading corporations, militaries, governments, regulators, sports teams, creative talent and high net worth individuals. Thanks in large part to Mark Briffa's strong leadership, throughout the accounting review process, colleagues across the Group's UK and international offices remained resolutely focused on maintaining an outstanding service for our global customers. I am immensely proud of this and, on behalf of the Board, would like to thank everyone at Air Partner for their hard work and commitment. 

Dividend

The Board is proposing a final dividend of 3.8p, a year on year increase of 5.6%, taking the full year dividend to 5.5p, a year on year increase of 5.8%. The final dividend is expected to be paid on 20 July 2018 to those shareholders on the share register at close of business on 22 June 2018. The ex dividend date will be 21 June 2018. The Board would also like to reaffirm its ongoing commitment to its dividend policy, which targets cover of between 1.5 and 2.0 times underlying earnings per share.

Outlook

2017/18 was a good year of trading performance for Air Partner. I believe these results are a consequence of our customer focused teams constantly delivering high quality services and products to global customers every day. In addition, the long term strategic initiatives and investments that were made two to three years ago are now growing the business, delivering and adding value. We continue to invest in our long term future, and will remain committed to recruiting and training our people, developing and improving products and services, and opening new offices and expanding existing ones. As a result, we have broadened our geographic reach and further diversified our customer and product profile.

As we always state, the global charter business has consistently been, and will continue to be, a volatile industry. Against this backdrop we will manage the business for the long term, with a very clear strategy of alignment to the needs of our global customer base.

Peter Saunders

Chairman

CHIEF EXECUTIVE'S REVIEW

Air Partner performed well over the financial year ended 31 January 2018, reporting underlying profit before tax of £5.8m, an increase of 23.7%. The results for the year are presented after completion of the post year end accounting review and the consequent correction of an overstatement of net assets, the resulting financial impact of which is explained in the Financial Review.

Strategy

We have a clear, long term growth strategy in place and I am confident that we are well placed to continue to deliver that strategy.

When I became CEO in 2010, Air Partner was heavily reliant on military contracts which made up over 60% of our £2.8m pre-tax profits. On a like for like comparison, that number is now less than 3% of £5.8m as we have successfully diversified our global customer base, significantly reducing our risk and demonstrating our value as a global player in the industry. Now, no one customer makes up more than 10% of profits. 

Since 2015, we have been consistent in pursuing our strategic objective to create a global aviation services group, with balance between our market leading divisions of Charter and Consulting & Training. This objective aims to deliver increasingly high-quality and visible earnings for our shareholders.

In previous reports I have explained how we began our transformation journey with a strong belief that we could generate improved performance from our Charter activities. We firmly placed the customer at the heart of the business: we refreshed our organisational leadership and skills; we re-emphasised our customer and product focus; we developed new channels to market and innovative strategic partnerships, and we are designing and building new systems infrastructure and processes.

Our Charter business generates a strong return on capital employed and is highly cash generative. We reinvest a substantial portion of this cash in products and capabilities, recruitment, new offices and acquisitions. These investments benefit customers and employees and, as a consequence, benefit our shareholders.

Today we have a well invested business and a world class platform enabling us to compete globally to fulfil our customers' highest expectations. I would characterise our approach as one of continual assessment and improvement: we are looking for ways to be better every day. We will continue to invest in the business, in systems, products, and in people and we expect to make further acquisitions to broaden or extend our activities, or to consolidate our market position. Of particular focus are two areas: people and acquisitions.

People

Over the last twelve months we have recruited some exceptional people across the organisation as we continue our drive to upskill management and processes. Our ability to attract the best talent is greatly helped by our customers' recognition of our platform strength and market position, our capabilities and strategy. We will continue to recruit across the organisation globally. We are actively looking to expand existing offices as well as looking to open offices in new geographic locations. 

Acquisitions

We regularly review acquisition opportunities, many of which we have developed relationships with over several years. We are selective in our approach, assessing each acquisition not only for product, capability and customers, but also for a strong financial track record and future returns and, importantly, for its cultural fit and its people. As well as making both strategic and financial sense, the acquisitions that we have made to date have brought on board excellent teams of highly skilled and experienced people. We have an experienced team enabling us to identify, acquire and integrate these acquisitions.

In September 2017 we acquired SafeSkys Limited, a leading Environmental and Air Traffic Control services provider to UK and International airports. SafeSkys is a fantastic addition to the Group and its acquisition brought some great people into our organisation. SafeSkys was swiftly integrated after acquisition and, though early in our ownership, we are excited for its long term prospects within our Group and see areas where we can support the team and help them grow the scale of their activities, both in the UK and internationally.

In late 2017, we entered discussions to acquire a high quality managed services business with international operations and significant long term contracts with blue chip customers. At the beginning of January 2018, having agreed transaction terms, we entered into an exclusivity period expiring at the end of April 2018. The acquisition, on the agreed terms, would have met our financial return criteria and significantly progressed the delivery of our clear, long term strategic objectives, immediately increasing the weighting of our Consulting and Training profitability to in excess of 30%.

Despite the compelling strategic attractions of the acquisition, when our accounting issues were identified, we rightly focused our priorities on our existing business and on our customers, employees and shareholders. As a result, despite six months work and being a few days from announcement, we let the exclusivity lapse. In total £0.5m of cost was incurred, and will be expensed in financial year 2018/19. Although we are no longer in exclusivity we have built a strong relationship with the target company and remain in dialogue with the Board members.

Accounting Review

The events following the end of the financial year have been some of the most challenging I have faced as Chief Executive. In April, we confirmed evidence of repeated and consistently mis-posted accounting journals, resulting in a total net assets overstatement of £4.0m net of corporation tax. This proved a complex issue to resolve and one which had arisen over a period of years dating back as far as 2010/11. The specific accounting corrections are explained in the Financial Review.

As part of our strategy to attract and recruit the best people for our transforming business we effected significant change in our Finance team during 2017, and it was the ability and vigilance of this new team that identified this issue. The investigation to understand the issue, rectify errors and processes, and prevent any similar breakdown in reporting accuracy, has been comprehensive and appropriate.

We have developed a healthy culture of self-improvement across the business, supported by senior management encouraging all of our employees to raise issues and challenge business practices through open channels of communication. Sadly, this case of accounting weakness was complex, without a consistent pattern and difficult to detect, with no clear motivation or evidence of personal gain. It is encouraging that it was our new finance team that identified the issue. This isolated incident does not reflect our values or how we do business, and frankly it lets down our people and adversely impacts our shareholders investment. Our on-going people management processes and the current upgrading of key financial controls place us on a very firm footing to deliver transparency, and provide confidence for our current and potential shareholders in the reporting accuracy of our business performance going forward. It is also important to confirm that no customer, operator or supplier was impacted or disadvantaged by circumstances or outcomes relating to these accounting mis-statements. I would like to thank all involved for their hard work to conclude this issue.

Focused on the long term

Our approach is long term. Our track record of capturing opportunity in a volatile industry has enabled us to grow and develop the business into a market leader, to diversify our customer base and to innovate with new products and services. Aviation is an industry which demands long term partners with shared objectives and vision. These demands regularly go unmet. We choose to take a different approach and to meet these demands, aligning closely with our customers' own strategic plans and activities.

Long term strategic thinking and partnership will continue to inform our actions and behaviour. We will not take a short term decision if we believe that it may have a negative impact on the long term growth, health or reputation of our Group. We will always strive to do things in the right way, for the good of customers and employees, over the long term, firm in the belief that this approach will mean that we get things right and deliver considerable value for our shareholders. 

DIVISIONAL REVIEW

Charter

Our Charter division has delivered a robust full year performance, with gross profit up 22.8% to £31.3m and underlying operating profit up 9.5% to £6.7m.

Commercial Jets

This performance has been driven by growth in Commercial Jets with gross profit up 22.7% to £17.3m and underlying operating profit up 13.7% to £3.8m. Strength has been seen across territories and sectors and from new and existing customers. In the US we posted record results, despite a strong comparative period last year when we benefited from the US election candidates' flying. The traditionally softer second half of the trading year did not materialise as we were able to respond effectively to customers' needs in the face of hurricanes Irma and Maria, which hit the US and the Caribbean in September, and to a non-hurricane related evacuation for one of our customers in the leisure sector. We have also seen an increase in activity in the MICE sector (Meetings, Incentives and Corporate Entertainment). In Europe we benefited from prior investment in people in the sports sector and we are well placed to continue to perform well with this year's FIFA World Cup taking place in Russia. We saw good results from Tour Operating programmes and continued strength in automotive, where we have helped with the launch of a cross over vehicle for a major German manufacturer and are seeing growing opportunities despite an increasingly competitive environment. In the UK and Europe, we continue to see steady, year round demand to meet government requirements.

Air Partner Remarketing has had an encouraging year in which it has secured a number of exclusive mandates and demonstrated the benefit of inclusion in the wider Air Partner Group with its most recent sale of a 2009 vintage Beechcraft King Air 200 for Air Hamburg, the result of an introduction from Private Jets. During the year, Air Partner Remarketing has successfully sold and delivered two B737-700 aircraft and a GE engine for Kenya Airways, two 747-400s on behalf of China Airlines, and won exclusive contracts with a large Australian bank and with Saudia, the latter to market 15 Boeing 777-200ER aircraft.

Private Jets

In Private Jets, gross profit was up 3.4% to £10.6m, while underlying operating profit decreased by 56.6% to £1.1m. This largely reflects lower sales in the UK as we moved key personnel to the US and the subsequent impact of investment we have made in upskilling our sales teams across territories. We are beginning to see the benefit of this investment with some good new client wins and expect to see further benefit in the new financial year. In the US, where we expanded our New York office last year and recruited new management to bring greater focus and strong leadership to the region, investment has enabled us to service an increase in demand and we have seen a record rise in overall client numbers of 80%. Business from existing customers is performing well with JetCard renewals up 16% including two €1m renewals and utilisation up 8%. The Air Partner JetCard in the US has been recognised as the most flexible membership programme in the industry for four consecutive years and this accolade has this year been extended to JetCard in Europe. We welcomed back a number of clients from competitors and we continue to go the extra mile to exceed customer expectations. All JetCard cash is held in segregated client accounts. The partnerships and alliances we have rolled out in the last 18 months have not only enhanced our customer experience but have introduced new customers to us. We have continued to add to JetCard's exceptional product offering with the introduction of new gourmet menus across 33 airports in Europe and we plan to expand this further.

Freight

Freight is an especially volatile sector, but is a strategic offering, enabling us to provide our customers with a full aviation service. Freight has had a record year with gross profit up 202.4% and client numbers at their highest level. This outperformance has been driven by a mix of charters carried out across the Caribbean to support the relief effort in the wake of hurricanes Irma and Maria, the positive and immediate impact of new hires over the period, and ongoing contracts in the Middle East. Our ability to respond quickly to requirements in this region demonstrates the advantage of Air Partner's geographic reach.

Consulting & Training

In our Consulting & Training division, gross profit was down 23.1% year on year at £4.8m, while underlying operating profit was down 8.8% at £0.6m. 

Baines Simmons

Baines Simmons has had an encouraging year with good, longer term contract wins and some of the pipeline projects crystallising in the second half. Customer engagement and contract wins have been good across civil and military organisations and the forward pipeline remains strong. In the first half Baines Simmons secured contracts with Tier 1 national carriers, the Royal Air Force of Oman and the European Defence Agency. In January, we won the STEP (Safety Training for Error Prevention) tender with the MOD, for a four to six year project. This is the third time we have been selected in a competitive tender to provide training, advice and guidance to the UK Ministry of Defence (MOD) and extends our remit to include the Royal Navy and the Army as well as the Royal Air Force. Academy Training has also continued to perform well with over 4,000 people completing training programmes during the year. A number of commercial contracts were also won throughout the year. In the second half we began work on a new three year strategic plan for Baines Simmons which is extremely exciting, and as part of that, in April 2018 we appointed Ian Holder, a safety management specialist, as Baines Simmons Managing Director. This is an important appointment and it follows a period of interim management. Ian has been integral to developing the new plan and he will undoubtedly bring strong leadership with a transparent and team orientated approach, and a deep understanding of the business and the market. 

Clockwork Research

Our Fatigue Risk Management (FRM) Team, trading as Clockwork Research, has had a good second half. Over the year Clockwork has carried out work for Tier 1 national carriers and airlines across the world and for a high profile train provider in the UK. In a move into rotary, a national air rescue client became the first rotary operator in Europe to be given fatigue risk management approval by the regulator. With Clockwork now fully integrated into the Baines Simmons offer we are beginning to see the benefits of a complementary client list. The pipeline of opportunities is good and we expect to increase efficiency further next year.

SafeSkys

SafeSkys, acquired in September 2017, has performed well over the last quarter of the financial year. The integration of the team into our Gatwick headquarters was completed in November and we are extremely pleased with progress. SafeSkys has a good customer base with stable contracts of an average of four to six years duration and good visibility of revenues. A key RAF contract was secured at year end to operate in the Scottish region. The air traffic control side of the business is performing in line with expectations and in the years ahead offers considerable opportunities for growth from a global perspective.

We continue to assess acquisition opportunities within Consulting & Training, as we aim to create a balanced mix between our two divisions. 

Outlook

2017/18 was a good year for Air Partner's trading performance. Much of the strategic work undertaken over the past few years, our focus on self-improvement, and a long term approach to managing the business are evident in these results. These results are also a testament to the hard work and dedication of our staff, and their focus on delivering for our customers.

The accounting review announced at Easter proved to be an unexpected and challenging event for everyone at Air Partner. With the review concluded, I want to thank our staff for their diligence through this period, as their focus on our customer service never wavered. The review has spurred us on to accelerate additional investments in technology and processes to improve our risk measures and reporting so that an event such as this cannot be repeated. As a consequence of the review we start the 2018/19 year with a material one-off cost of £1.3m which will not recur, consisting of £0.8m of professional review fees and £0.5m of aborted acquisition cost.

We are rarely anything more than cautiously optimistic at the start of a year, and this year would certainly be no different. We have a strong portfolio of global Charter products which provides us with exposure to various markets and geographies, and our portfolio approach, without any single product or market dominance, often benefits us to mitigate volatility, in either direction, in any one market or product line over the course of a year. At this point in the year we are seeing a particularly strong performance in Freight and USA, Commercial Jets is flat, while Private Jets UK has started the year slowly. As ever at the beginning of the year, for global Charter at least, it is far too early to predict the full year outcome. Our more pipeline orientated businesses are in Consulting & Training and also Remarketing and these activities have encouraging order books which will develop even further during the year ahead. We have exciting investment initiatives in people, offices and infrastructure planned and underway from previous years; these will position the business well for the years ahead. As a Group we will make further progress in extending our market position and delivering exceptional service and value to our customers globally.

As we always state, the global charter business has consistently been, and will continue to be, a volatile industry. Against this backdrop we will manage the business for the long term, with a very clear strategy of alignment to the needs of our global customer base. In line with our clear growth strategy, the Board continues to assess investment opportunities, both organic and acquisition, to enhance or extend the services and capabilities we offer our customers, which will ultimately strengthen and advance our business. 

FINANCIAL REVIEW

The Accounting Issue has been contained and resolved, and the correction to net assets has been quantified. Despite the resulting restatement, the strength of our balance sheet will continue to support our competitive positioning and advantage in the market place.

Financial impact of the post year end accounting review

As explained in the preceding Chairman's Statement and Chief Executive's Review, as part of its year end process the Company identified an issue over its financial controls which had a material impact on prior period results. An extensive review was subsequently undertaken with external advisory support. The financial implications of this issue are summarised as follows:

· The total cumulative impact on total net assets was an overstatement of £4.0m net of associated corporation tax; this was in line with the guidance provided that it would not exceed £4.0m.

· The £4.0m correction to decrease net assets is effected as follows:

o £4.3m decrease of net assets as at 31 January 2018 being a pre-tax gross impact of £4.4m less related corporation tax relief arising in the year of £0.1m

o £0.3m increase of net assets as at 31 January 2019 - being the retrospective corporation tax relief expected to be reclaimed on the gross correction attributable to prior periods

· Of the gross amount, £0.9m was identified as relating to the year ended 31 July 2011. It has not been possible to attribute the remaining £3.5m to specific trading years, nor to specific lines in the Income Statement.

· In light of the review findings and this misstatement of accounting entries since 2010/11, the Directors deemed it appropriate to correct the unidentified £3.5m net assets overstatement by apportioning this amount on a straight line basis across each of the last eight trading periods.

· In the opinion of the Directors this is the most reasonable approach and the Directors believe that, after adopting this method of correction, the historic, adjusted accounts broadly represent the growth pattern of the business during this period. However, the Auditor's report will contain a limitation of scope qualification in respect of the apportionment of the £3.5m. This is inevitable as it cannot be estimated reliably across either the accounting periods or the Income Statement lines impacted. 

· As a result of the Board's apportionment the profit for both the current and prior years is stated after classifying the £0.4m correction as exceptional costs in each of these years. This resulted in a corresponding £4.0m reduction in opening retained earnings as at 1 February 2017.

· The anticipated total corporation tax recovery resulting from the total net assets correction is £0.4m. Of this amount £0.1m is included in the 2017/18 results; the remaining £0.3m is expected to be recognised next year following agreement by HMRC.

· There was no related impact on cash or debt balances

· The review undertaken to investigate the issue was wide-ranging and exhaustive. Total associated costs of £1.38m, representing £0.8m for the services of external advisors and £0.5m of aborted acquisition costs, will be recognised as an expense in the year ended 31 January 2019.

· A thorough assessment of financial controls has been progressed to address all weaknesses and support the essential transparency of financial reporting, to give current and potential investors the necessary confidence in the growth trajectory of the Company.

Accounting policies

There have been no changes to accounting policies during the year. However, a review of the potential impact of IFRS 9, Financial Instruments, IFRS 15, Revenue from Contracts with Customers and IFRS 16, Leases, was conducted during the period. It is management's conclusion that there will be no material impact on the financial statements arising from the implementation of IFRS 9 and IFRS 15 in subsequent financial years. However, under IFRS 16 the majority of operating leases will be accounted for as right of use assets, which will largely be offset by corresponding lease liabilities. The lease liability will increase net debt. It is anticipated that operating expenses will decrease and financing costs will increase as the operating lease charge is replaced by depreciation and interest. The overall impact on net profit is not expected to be material.

Balance sheet strength

Despite the impact of the accounting review and correction the strength of the balance sheet will continue to support our competitive advantage and positioning in the market.

At the balance sheet date the Group's own cash, net of borrowings, was £4.8m (2017: net debt £1.8m). As noted in the interim report, the Group has moved all JetCard cash into segregated client accounts to provide protection to our customers.

The increase in the Group's own cash reflects the trading performance over the year together with positive changes in working capital. The Group's debt facility at 31 January 2018 comprised a revolving credit facility ("RCF") of up to £7.5m, arranged through the Group's principal banker, of which £2.5m was drawn down as at the year end. The Group also has an unutilised £1.5m overdraft facility. All financial covenants were complied with during the period and to the date of approval of this report.

Financial overview

Gross transaction value: top line performance increased by £45.5m (21.1%) to £261.3m (2017: £215.8m) primarily due to an increase in client activity in the Freight division and the United States operations. Freight activity is often driven by one off and unusual events; our investment in people realised financial benefits in the year as we were well placed to win hurricane relief related contracts. In the USA we delivered a significant new contract with a major insurance company as new hires brought new clients into the business.

Revenue: Air Partner primarily uses gross profit as its key indicator of business performance. This is due to the potential for revenue, as determined under IFRS, to fluctuate depending on the number of contracts enacted in the year where the Company acts as principal, as opposed to agent. The £6.0m (14.0%) increase in revenue to £48.5m (2017: £42.5m) is largely driven by the £4.4m increase in gross profit. The remaining increase of £2.0m is due to an increase in revenue from contracts where Air Partner acts as principal. 

Gross profit: this primary measure increased by £4.4m (13.8%) to £36.1m (2017: £31.7m), attributable to improved performance in the USA, Freight and Commercial Jets. The Commercial Jets division similarly highlighted the commercial benefits of strong relationships with loyal customers, operating three aircraft on tours throughout the summer season to boost results. The 13.8% increase in gross profit is lower than the 21.1% increase in gross transaction value due to the difference in gross margins realised across the product mix.

Underlying operating profit: underlying operating profit increased by 24.9% to £5.9m (2017: £4.7m), with the majority of the increase being attributable to the improved performance in the USA and Freight, as noted above. Excluding the impact of Air Partner Remarketing's results from the Commercial Jets division, our core Charter business's performance increased by £1.7m on a like-for-like basis. The operating profit figures for both the current and prior years is stated after accounting for a £0.4m exceptional expense item in each year, as explained in the commentary on the post year end accounting review above.

Other items: other items of £1.0m comprised £0.3m of restructuring costs, £0.3m for the amortisation of intangible assets arising on acquisition and £0.4m of acquisition-related costs.

Operating profit: operating profit increased by £0.9m to £4.9m (2017: £4.0m) as a result of the year on year improvement in underlying performance more than compensating for the restructuring and acquisition related costs incurred during the period. 

Finance charges: the Group's net finance charge of £0.1m comprises interest on the Group's loan and interest receivable on cash balances.

Taxation 

The Group's underlying effective tax rate for the financial year was 24% (2017: 33%) and total effective tax rate was 27% (2017: 35%). During the year, the Group implemented a new global transfer pricing policy, reflecting best practices and the guidelines issued by the Organisation for Economic Cooperation and Development.

Foreign exchange

Where possible, the Group uses natural hedges to minimise its foreign exchange exposure, for example matching JetCard deposits denominated in Euro or US dollars with the respective liability. In addition, the Group uses derivative financial instruments to hedge certain transactions in accordance with its internal policies. 

Accounting developments 

The Group uses Navision as its accounting system. During the period, the Group successfully upgraded the system by completing the global roll-out of Navision 2016 on schedule and on budget, facilitating improved reporting, more robust financial control and an ability to integrate automatically with our CRM system. In addition, the UK finance team was restructured, supported by the recruitment of more qualified staff to upskill the function. These two actions are critical enablers in a wider evolutionary change programme that will see the short term development of an effective financial control framework, together with a leveraging of this platform to drive enhanced business performance insight and accurate decision making in order to more effectively realise commercial success and associated financial returns.

Forward-looking statements

Announcements issued by Air Partner plc may contain forward looking statements, indicated by words such as "aims", "believes," "expects", "intends," and similar expressions. These statements reflect current views and expectations up to the date of approval of this statement and are made in good faith by the directors. Unless otherwise required by laws, regulations or changes in accounting standards, Air Partner accepts no obligation to update these statements as a result of future events or new information subsequently obtained. New announcements will be made to the market as required under the Disclosure and Transparency Rules.

Trends and factors affecting the business

Air Partner's lead times for ad hoc bookings are measured in days or weeks, rather than months and future revenues cannot be predicted with any certainty. Forward bookings can be impacted very suddenly by changes in financial markets, political instability and natural events affecting the movement of people or cargo from one country to another. Lead times in the Remarketing business can be up to one year and therefore forecasting when a particular contract may be realised is not easy to predict. Economic uncertainty affects corporate, government and individual clients and affects the quality of supply of aircraft as operators consolidate or leave the market. These trends are outside the Group's control but the strategy remains to diversify to address seasonality and broaden the client mix.

Principal risks and uncertainties facing the Group

Aircraft charter broking, remarketing and consultancy can be classed as a relatively low financial risk business, in that the business sells capacity on aircraft owned and operated by a third party and contracts are normally placed as mirrored transactions, or remarkets aircraft on behalf of a third party. The Group does not have any contractual arrangements with any significant individual or company which are essential to continuation of the business. The Board reviews risks which may have a significant impact on the Group, including operational aviation related risks (quality and quantity of supply, adverse weather conditions, competitive pricing pressure and regulatory changes) and financial risks such as foreign exchange and interest rate fluctuations, credit risk and liquidity and cash flow management. The profile of both financial and operational risks varies from time to time but the current level of risk is not substantially different from that as at 31 January 2017, as described in the principal risks and uncertainties section of the annual report. The principal risk to the Group's business remains the degree to which clients' available financial resources and the general economic conditions in which they operate affect their willingness to charter. The Group recognises that ad hoc charters are likely to continue to be impacted by changes, both positive and negative, in the macro-economic climate.

Related party transactions

There has been no significant change in the level of transactions between Air Partner plc and its subsidiaries since that disclosed in the annual report for the year ended 31 January 2017. Such transactions did not materially affect the financial position or performance of the Group in the period under review. There are no other related party transactions which are required to be disclosed under DTR 4.2.8R.

Going concern

After making enquiries, the directors are satisfied that the Group and the Company have adequate resources to continue in business for the foreseeable future. The directors have therefore continued to adopt the going concern basis in the preparation of these financial statements.

Directors' responsibility statement

The responsibility statement below has been prepared in accordance with the Company's full annual report for the year ended 31 January 2018. Certain parts thereof are not included in this announcement.

Each of the directors serving at the date of approval of the accounts confirms that, to the best of his knowledge and belief: 

· The financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and financial performance of the Group; and

· The Chairman's Statement, the Chief Executive's Review and the Financial Review, together with the supporting notes, give a fair review of the Group, including a description of the principal risks and uncertainties faced by Air Partner plc.

The responsibility statement was approved by the Board of Directors on 11 June 2018.

The directors of Air Partner plc are listed in the Group's Annual Report and Accounts for the year ended 31 January 2018, available on our website at www.airpartner.com.

See more at: http://www.airpartner.com/en/investors.

About Air Partner:

Founded in 1961, Air Partner is a global aviation services group that provides worldwide solutions to industry, commerce, governments and private individuals. The Group has two divisions‎: Charter division, comprising air charter broking and remarketing; and the Consulting & Training division, comprising the aviation safety consultancies, Baines Simmons, Clockwork Research and SafeSkys, as well as Air Partner's Emergency Planning Division. For reporting purposes, the Group is structured into four divisions: Commercial Jets, Private Jets, Freight (Charter) and Consulting & Training (Baines Simmons, Clockwork Research, SafeSkys and Air Partner's Emergency Planning Division). The Commercial Jet division charters large airliners to move groups of any size. Air Partner Remarketing, which is within the Commercial Jet division, provides comprehensive remarketing programmes for all types of commercial and corporate aircraft to a wide range of international clients. Private Jets offers the Company's unique pre-paid JetCard scheme and on-demand charter. Freight charters aircraft of every size to fly almost any cargo anywhere, at any time. Baines Simmons is a world leader in aviation safety consulting specialising in aviation regulation, compliance and safety management. Clockwork Research is a leading fatigue risk management consultancy. SafeSkys is a leading Environmental and Air Traffic Control services provider to UK and International airports. Air Partner is headquartered alongside Gatwick airport in the UK. Air Partner operates 24/7 year-round and has 20 offices globally. Air Partner is listed on the London Stock Exchange (AIR) and is ISO 9001:2008 compliant for commercial airline and private jet solutions worldwide. www.airpartner.com 

Consolidated income statementfor the year ended 31 January 2018

Consolidated statement of comprehensive incomefor the year ended 31 January 2018

Consolidated statement of changes in equityfor the year ended 31 January 2018

Consolidated statement of financial positionas at 31 January 2018

+Results for the year ended 31 January 2017 and 2016 have been restated: please see note 11 for further details 

Consolidated statement of cash flows

for the year ended 31 January 2018

JetCard cash

The closing cash and cash equivalents balance can be further analysed into 'JetCard cash' (being restricted and unrestricted cash received by the Group in respect of its JetCard product) and 'non-JetCard cash' as follows:

1 GENERAL INFORMATION, BASIS OF PREPARATION AND ACCOUNTING POLICIES

General information

The Company is a limited liability company incorporated and domiciled in England and Wales under registration number 00980675. The address of its registered office is 2 City Place, Beehive Ring Road, Gatwick, West Sussex RH6 0PA. The Company is listed on the London Stock Exchange.

This consolidated financial information was approved for issue on 11 June 2018.

This consolidated financial information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 January 2018 were approved by the board of directors on 11 June 2018, but have not yet been delivered to the Registrar of Companies.

The auditor's reports on the financial statements of the year ended 31 January 2018 were qualified with a limitation of scope in relation to the inability of the Company to determine the appropriate accounting periods and line items in respect of £3.5m of the gross accumulated accounting adjustments referred to in Note 11 of £4.4m.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union in accordance with EU law (IAS regulation EC1606/2002) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The Company has today published its full financial statements.

Going concern

The Directors are, based on current financial projections satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, that is a period of at least 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Interim report.

Key accounting estimates and judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances. Actual results could differ from these estimates. These underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period; or in the period of the revision and future periods if these are also affected.

2 SEGMENTAL ANALYSIS

The services provided by the Group consist of chartering different types of aircraft and related aviation services.

The group has four operating segments: Commercial Jet Broking, Private Jet Broking, Freight Broking and Consulting and Training. Air Partner Remarketing results are aggregated in to Commercial Jet Broking. Overheads with the exception of Corporate costs are allocated to the Group's operating segments in relation to operating activities.

Sales transactions between operating segments are carried out on an arm's length basis. All results, assets and liabilities reviewed by the Board (which is the chief operating decision maker) are prepared on a basis consistent with those that are reported in the financial statements.

The Board does not review revenue, assets and liabilities at segmental level, therefore these items are not disclosed.

The segmental information, as provided to the Board on a monthly basis, is as follows:

The company is domiciled in the UK but due to the nature of the Group's operations, a significant amount of gross profit is derived from overseas countries. The Group reviews gross profit based upon location of the assets used to generate that gross profit. Apart from the UK, no single country is deemed to have material non-current asset levels other than goodwill in relation to the French operation of £977,000.

The Board also reviews information on a geographical basis based on parts of the world which are considered to be key to operational activities. As a result the following additional information is provided showing a geographical split of the UK, Europe, the USA and the Rest of the World:

Europe can be further analysed as:

3 OTHER ITEMS

Restructuring costs relate to changes to the management structure following the acquisitions made during the prior year.

4 DIVIDENDS

The Directors propose a final dividend for the year ended 31 January 2018 of 3.8 pence per share, subject to shareholder approval at the Annual General Meeting to be held on 11 July 2018.

The Air Partner Employee Benefit Trust, which held 402,690 ordinary shares of 1p each at 31 January 2018 (2017: 341,820 ordinary shares of 1p each) representing 0.70% (2017: 0.65%) of the Company's issued share capital is not entitled to receive dividends. A further 272,731 ordinary shares of 1p each (2017: 413,640 ordinary shares of 1p each) shares are held by the Trust in a nominee capacity for one (2017: two) beneficiary of the Trust.

5 EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following data:

On 25 January 2017, the Company's shareholders approved a 5 to 1 split of the Company's shares, which reduced the nominal value of the ordinary shares to 1 pence each. The share split became effective on 31 January 2017. As a result the prior year number of shares and EPS calculations have been restated to show comparable numbers.

The calculation of underlying earnings per share (before other items) is included as the directors believe it provides a better understanding of the underlying performance of the Group. Other items are disclosed in note 3.

6 NET CASH INFLOW FROM OPERATING ACTIVITIES

7 TAXATION

Corporation tax in the UK was calculated at 19.16% (2016: 20%) of the estimated assessable profit for the period. Taxation for other jurisdictions was calculated at the rates prevailing in the respective jurisdictions.

The charge for the period can be reconciled to the profit per the consolidated income statement as follows:

The UK corporation tax rate decreased from 20% to 19% from 1 April 2017. The impact on the tax charge is shown above.

Further reductions to the UK corporation tax rate have been announced. A reduction to 19% effective from 1 April 2017 and to 17% on 1 April 2020 was substantively enacted on 16 October 2016 and the deferred tax balance has been adjusted to reflect this change.

8 CONTINGENT LIABILITIES

The Company's bankers hold free and floating charge over the Company's assets.

9 ACQUISITIONS

Safeskys Limited

On 01 September 2017, Air Partner plc acquired 100% of the issued share capital of Safeskys Limited, obtaining control of the company on that date. Safeskys Limited is a leading supplier of turnkey ATC services and wildlife management services. The acquisition of Safeskys Limited adds significant specialist consulting expertise and knowledge to the Group. The provisional amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below.

Deferred consideration of up to £800,000 is payable depending on earnings performance in the 1st and 2nd years post acquisition. The directors consider it likely that the performance conditions will be met and have therefore recognised the maximum amounts payable. No goodwill is deductible for tax purposes.

The goodwill of £2,005,000 arising from the acquisition is attributable to the value of the assembled workforce and the ability of the senior staff to generate future business. Acquisition related costs (included in Other items) amounted to £61,000.

Safeskys Limited contributed revenue of £743,000 and profits after tax of £70,000 being the results for the period between the date of acquisition and 31 January 2017. If the acquisition of Safeskys Limited had been completed on the first day of the financial year, Group revenues for the period would have been £49,653,320 and Group profit after tax would have been £3,735,000..

10 PRIOR YEAR ACQUISITIONS

On 12 December 2016, Air Partner plc acquired 100% of the issued share capital of Clockwork Research Limited, obtaining control of the company on that date. Clockwork Research Limited is a leading fatigue risk management consultant. The acquisition of Clockwork Research Limited adds significant specialist consulting expertise and knowledge to the group.

The Goodwill of £333,000 arising from the acquisition is attributable to the value of the assembled workforce and the ability of senior staff to generate future business.

The amounts recognized in respect of the identifiable assets acquired and liabilities assumed on the acquisition of Clockwork Limited are set out in the table below.

11 ACCOUNTING RESTATEMENT

As a result of the accounting issue explained in the Financial Review, the company has had to estimate in which historical accounting periods the £4.4m (£4.0m net of tax) accounting issue arose between years ended 31 July 2011 and 31 January 2018 as accurate prior period accounting records could not be recreated. Of the £4.4m identified, £0.9m is a known issue relating to the year ended 31 July 2011.

The directors have spread the accounting error of £4.4m as follows:

A straight-line approach was used as this was deemed the fairest and most appropriate way to account for the issue.

As the causes of this adjustment are believed have resulted from matters which the directors consider principally related to the underlying business, the directors have reported these amounts as exceptional items within the underlying operating profits.

Accordingly, the comparative balance sheet and income statement line items have been restated as follows:

Consolidated

,