Air Touring Group plc

May 28, 2009 02:00 ET

Final Results


                                       Air Touring Group plc
                              ("Air Touring Group" or the "Company")
                     Results for the period from 1 October to 31 December 2008

Air  Touring  Group plc, a leading distributor of general aviation aircraft in the United  Kingdom
and Europe, is pleased to announce its results for the period ended 31 December 2008.

Financial Highlights
                                                           1 October 2007                Year ended
                                                           To 31 December       30th September 2007
                                                                        £                         £
Turnover                                                       10,888,038                10,470,649
Gross Profit                                                    1,571,243                   952,789
Operating Profit                                                   87,925                   109,011
Profit on Ordinary Activities before Tax                           45,046                    58,171
Profit on Ordinary Activities after Tax                            45,046                    58,171
Earnings per Share (pence)                                            0.4                       0.5
Diluted Earnings per Share (pence)                                    0.3                       0.4

*   Record annual TBM aircraft sales - 10 new aircraft sold in the period
*   Air Touring Germany became 100% owned by the Group on 1 November 2008 and was positively
    accretive to earnings for the period
*   Middle East joint venture being set-up and expected to contribute to Group sales in latter
    half of 2009
*   EPS performance holding up well and shareholder value preserved, despite downturn in
    global economy



Two  significant  business events took place in the second half of the financial period  ended  31
December 2008, namely:-

  1.  The acquisition by Air Touring Ltd, our UK subsidiary, of the outstanding 50% share in
      Socata Deutschland GmbH and the subsequent transfer of the 100% interest to the Group. The 
      German company was also renamed Air Touring GmbH, to better reflect our corporate identity; 
  2.  The signing of a Joint Venture agreement with Hydra Trading LLC (a subsidiary of the Royal
      Group based in Abu Dhabi), to form a joint venture company in 2009 to be named Hydra Aviation 
      LLC "Hydra Aviation". Hydra Aviation will be involved in the marketing of new and pre-owned 
      aircraft in the Middle East and also in the sourcing and procurement of aviation spare parts 
      for military operators in the Gulf.

These business development activities were the culmination of many months of planning and activity
and  followed  a  strategy, formulated in late 2007, to diversify some  of  the  Group's  business
interests, both from a geographical and a product sales standpoint.

Sales of new TBM 850 aircraft led the strong sales performance of the Group. Six were sold by  the
UK  subsidiary  and four were sold by the German subsidiary, making a total of  ten  new  TBM  850
aircraft,  the highest number of TBM 850 aircraft sold thus far by Air Touring. Sales of pre-owned
and  other aircraft did not perform as well as expected and therefore overall sales in the fifteen
month period were only ahead of 2007 by 3.8%. However, because the TBM 850 product carries a  much
higher margin on a sale compared to other products, gross profit actually increased by 65% (£1.57m
in 2008 compared to £0.95m in 2007). On an annualised basis gross profit increased by 32%.

The  poor  global economy and weakening sterling, which started to impact the Group from September
2008  onwards, took its toll on our operating profit in the latter part of 2008. Operating  profit
shrunk to £87,925 from £109,011 in 2007, as a result of an increase of 40% on an annualised  basis
in administrative expenses over 2007. A major increase on our administrative expenses was due to a
foreign exchange translation loss of £93,419 on conversion of a US dollar liability to sterling in
October 2008 when sterling was at its weakest, relative to the US dollar.

The  other items that contributed to an increase in administrative expenses were advisor and legal
fees relating to the German acquisition. There were also higher travel and communications costs in
relation  to this acquisition and with the joint venture discussions held in the Middle East.  The
total of these non-recurring expenses is circa £85,000.

Net  profit held up well in 2008, notwithstanding the increase in administrative expenses, due  to
two factors. Firstly, our German company performed well. The Group's share of its results prior to
it  becoming  a  100%  subsidiary added £78,890 to Income from Associates.  Secondly,  by  careful
management of treasury operations in the first half of 2008 and from declining interest  rates  in
the  second  half,  our net annualised interest expense was slightly lower in 2008  than  in  2007
(£97,415  compared to £100,202).

The  Group achieved a profit for the period (£45,046 compared to £58,171 in 2007) and EPS did  not
decline significantly, thereby preserving shareholder value.

The Directors will not be recommending the payment of a dividend for this period.


The  first part of the period was particularly busy for the Group due to the level of interest  in
the  TBM  850  aircraft.  The  TBM 850 product is only in its second production  year  and,  as  a
consequence, there was much latent interest carried over from late 2007, which resulted in a  high
number of sales lead conversions. We exhibited at EBACE (Geneva), Aero Expo in the UK and at a few
smaller shows on the Continent.

In  the  latter  half of the period, as the economy in Europe started to decline  in  earnest,  we
reduced  advertising  spend in some discretionary areas but increased advertising  for  stock  and
brokerage aircraft in less costly but more efficient promotional platforms (e.g. web based media).
We will continue this approach through 2009.

Our  website has been improved and revised to reflect the new Group structure but we have  stopped
short of developing a totally new web engine at this stage for cost reasons.

We  expect that focus on the Middle East will increase, as this is perhaps one region in the world
that is less affected by the global decline. Advertising and promotional activity will increase in
our joint venture company but those costs will be shared between the joint venture partners.

2008  was also the inaugural year for our Mooney distributorship. The beginning of our efforts  in
marketing the Mooney aircraft coincided with the start of the major decline of the UK economy  and
this, coupled with Mooney's scale down of production and support activities in the early autumn of
2008,  had a major impact on our sales efforts. Nevertheless, we made every attempt to attend  all
major air shows in the UK and on the continent, including discussing fractional ownership sales of
Mooneys  in the UK with potential partners. Although we generated many leads as a result of  these
efforts, we were not able to sell any Mooneys. The Mooney will remain in our stable of distributed
aircraft  but our focus will now switch to marketing it extensively on the continent, where  there
is a large Mooney following, through our German subsidiary.

In 2009, we intend to continue to develop the business and pursue opportunities in the Middle East
for  various projects that are not just limited to aircraft sales.  Through our JV company,  Hydra
Aviation, whose other shareholder is Hydra Trading LLC, a subsidiary of the Royal Group,  we  hope
to diversify into the following areas:-

    *  Procurement, sale and lease of business aviation aircraft
    *  Procurement and sales of spare parts for aircraft and other aviation related equipment 
       (e.g. spare parts procurement for the UAE Air Force)
    *  Provision of aviation services including aviation consultancy, charter management and
    *  Operation and management of corporate, private and commercial aircraft

Air  Touring has now secured a stable foothold in the Middle East by virture of its JV partnership
with a member of the Royal Group, which is one of the leading conglomerates owned by the Abu Dhabi
royal  family. This will hopefully make our venture in the UAE successful and bear  fruit  in  the
latter half of 2009 when we hope that some of the projects we are pursuing will mature.


Engineering turnover has increased in both the UK and German subsidiaries. Turnover in the  period
was  £1.3m  compared to £0.8m in 2007. Even on an annualised basis, engineering turnover increased
by 28% over 2007.

Moderate improvements have been made to the labour efficiency of the engineering workforce and  we
are  now consistently able to produce gross margins that are positive and averaging 6 to 8%, month
on month. In previous years, gross margins had either been negative or at breakeven.

The  aim  in 2009 is to improve efficiency to a level which will bring double digit gross  margins
for the engineering business.

We  also  look  forward to another challenge in 2009 in the form of the European  Aviation  Safety
Agency (EASA) Part M Continuing Airworthiness Management (CAM) regulations coming into force. CAM,
in  brief,  brings  a  business opportunity to Engineering, through the devolution  of  the  CAA's
responsibility  in  renewing  the  annual airworthiness of UK  registered  aircraft,  to  approved
organisations like Air Touring. The same opportunity presents itself to our German subsidiary  for
German  registered aircraft, as it is a European wide initiative, implemented by EASA.  There  are
some  set-up and training costs involved in order for both subsidiaries to take on this  work  but
these  are  minimal.  The  CAM  regulations, in effect, create a potential  locked-in  engineering
customer  base for each organisation and the increase in and constancy of revenues from  customers
that  cannot  switch  from one service provider to another easily, will  more  than  offset  these
additional costs.


The  Group purchased the outstanding 50% stake in Socata Deutschland GmbH on 1 November  2008  and
renamed it Air Touring GmbH.

Air  Touring  GmbH's results over the 15 month reporting period (1 October 07 to 31  December  08)
have been reflected in these Consolidated accounts as follows:

    1.  In the period 1 October 07 to 30 October 08, equity accounting added £78,890 to Income
        from Investment in associated undertaking and
    2.  In the period 1 November 08 to 31 December 08, the Group consolidated its results, adding
        £95,819 to the Net Profit for the Group

We anticipate Air Touring GmbH will continue to be profitable during 2009.


Notwithstanding adverse trading conditions resulting from the declining economy in the second half
of  the  period,  we managed to maintain our profitability and more importantly, stopped  it  from
being  eroded  further in late 2008. Operating profit (before non-cash FRS  20  charges)  for  the
period was £125,751, compared with £145,246 for 2007.

In 2009 we will seek to reduce the risk of exchange movements through careful treasury management,
including  the use of hedging instruments where appropriate. Also, we do not expect to  engage  in
any  M&A  activity this year and therefore would not expect to incur advisor or other professional
fees in this regard.


2009  is  expected  to be challenging and we remain focussed on retaining tight cost  control  and
improving margins, in anticipation of declining sales revenue from our European businesses.

We  will consider appropriate options for strengthening our capital structure, if required, in the
light of the continued downturn in the economy and the fact that much of the banking industry  has
contracted  their  credit  lines to many industry sectors. In early 2009 we  successfully  secured
additional  funding  from  a  major shareholder in the form of a Loan Note  of  £250,000.  Further
alternative hybrid funding of this kind, will be considered if appropriate.

We  are also negotiating with another bank to replace the credit facilities currently provided  by
Barclays  Bank plc and hope to successfully conclude them on favourable terms and margins  by  the
end of the second quarter of 2009.

As  part  of  our  on-going efforts to reduce financial risk to the Group, we  have  recently  re-
negotiated  our  contract  with  Daher-Socata (our principal for TBM  aircraft)  and  changed  our
distribution agreement to an Area Sales Representative (ASR) agreement. At the same time, we  have
also secured the same ASR rights for both Germany and the Middle East. In a single stroke, we have
mitigated  the risk of stocking too many new aircraft under the old distribution agreement,  which
could  be  a  strain  on  our financial resources and at the same time,  effectively  secured  and
broadened our footprint globally, without added risk.

We  now expect to devote increased energy and attention to our business development efforts in the
Middle  East, through our new Joint Venture Company, Hydra Aviation LLC. This will help  diversify
risks and bring in another source of income into the Group in 2009.

Michael Pearce
Chief Executive

for the period from 1 October 2007 to 31 December 2008
                                                                                  2008               2007
                                                                                     £                  £
 TURNOVER                                                                     10,888,038        10,470,649         
 Cost of sales                                                                (9,316,795)       (9,517,860)
                                                                               --------           --------
GROSS PROFIT                                                                   1,571,243           952,789
 Selling and distribution costs                                                  (36,436)           (6,790)
 Administrative expenses                                                      (1,422,446)         (811,253)
 Share based payment (FRS 20)                                                    (37,826)          (36,235)
 Other operating income                                                           13,390            10,500
                                                                               --------          --------
OPERATING PROFIT                                                                  87,925           109,011         
 Income from investment in associate company                                      78,890            49,362
 Interest receivable                                                              28,288            13,809
 Interest payable                                                               (150,057)         (114,011)
                                                                               --------           --------   
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION                                     45,046            58,171
 TAX ON PROFIT ON ORDINARY ACTIVITIES                                                  -                 -
                                                                               --------           --------   
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION                                      45,046            58,171
                                                                               --------           --------   
Earnings per share (pence)                                                           0.4               0.5
Diluted Earnings per share (pence)                                                   0.3               0.4

as at 31 December 2008
                                                                         2008                          2007
                                                           £               £              £              £
 FIXED ASSETS                                                                                         
Intangible fixed assets                                              128,504                             -
Tangible fixed assets                                              1,164,619                      1,141,805
Fixed asset investments                                                    -                         95,284   
                                                                    --------                       --------   
                                                                   1,293,123                      1,237,089
Stocks                                              4,139,589                       717,775    

Debtors                                             1,726,984                       454,793    

Cash at bank and in hand                               12,337                       916,695    
                                                     --------                      --------    
                                                    5,878,910                     2,089,263    
amounts falling due within one year                (4,431,097)                   (1,459,192)
                                                     --------                      --------    
NET CURRENT ASSETS                                                  1,447,813                       630,071
                                                                     --------                      --------   
                                                                    2,740,936                     1,867,160
amounts falling due after more than one               
year                                                               (1,060,922)                     (324,018)           

                                                                    --------                       --------   
NET ASSETS                                                          1,680,014                     1,543,142

                                                                    --------                       --------
Called up share capital                                               610,800                       610,800

Share premium account                                                 876,211                       876,211

Revaluation reserve                                                   484,691                       441,166
Other reserves                                                      1,168,804                     1,168,804
Profit and loss account                                            (1,460,492)                   (1,553,839)
                                                                    --------                       --------   
SHAREHOLDERS' FUNDS - All equity                                    1,680,014                     1,543,142
                                                                    --------                       --------

The above is an extract from the full financial statements.

The Directors of the Issuer accept responsibility for this announcement.

For further information:
Air Touring Group Plc:
Michael Pearce - CEO
Telephone: 01959 579710

Corporate Adviser:
St Helens Capital plc:
Duncan Vasey
Telephone: 020 7628 5582

Contact Information

  • Air Touring Group plc