TIDMDNA
RNS Number : 6931E
Doric Nimrod Air One Limited
05 July 2019
DORIC NIMROD AIR ONE LIMITED
ANNUAL FINANCIAL REPORT
The Board of the Company is pleased to announce its results for
the year ended 31 March 2019.
To view the Company's Annual Financial Report please follow the
link below:
http://www.rns-pdf.londonstockexchange.com/rns/6931E_1-2019-7-5.pdf
In addition, to comply with DGTR 4.1 please find below the full
text of the annual financial report. The report will also shortly
be available on the Company's website, www.dnairone.com.
ANNUAL GENERAL MEETING
Notice of the annual general meeting of the shareholders of the
Company will be published in due course.
For further information, please contact:
For administrative and Company information:
JTC Fund Solutions (Guernsey) Limited
+44 (0) 1481 702400
For shareholder information:
Nimrod Capital LLP
+44 (0) 20 7382 4565
OF ANNOUNCEMENT
E&OE - in transmission
Doric Nimrod Air One Limited
Annual Financial Report
From 1 April 2018 to
31 March 2019
SUMMARY INFORMATION
Listing Specialist Fund Segment of the London Stock
Exchange's Main Market
Ticker DNA
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Share Price 90.00 pence (as at 31 March 2019)
90.00 pence (as at 3 July 2019)
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Market Capitalisation GBP 38.2 million (as at 3 July 2019)
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Current / Future Anticipated Current dividends are 2.25 pence per quarter
Dividend per share (9 pence per annum) and it is
anticipated this will continue until the
aircraft lease terminates in 2022
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Dividend Payment Dates April, July, October, January
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Currency Sterling
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Launch Date / Share Price 13 December 2010 / 100 pence
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Incorporation and Domicile Guernsey
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Aircraft Registration A6 - EDC (16 December 2022)
Number (Lease Expiry Date)
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Asset Manager Doric GmbH
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Corporate and Shareholder Nimrod Capital LLP
Adviser
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Administrator JTC Fund Solutions (Guernsey) Limited
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Auditor Deloitte LLP
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Market Makers Investec Bank
finnCap Ltd
Jefferies International Ltd
Numis Securities Ltd
Shore Capital Limited
Winterflood Securities Ltd
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SEDOL, ISIN B4MF389, GG00B4MF3899
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Year End 31 March
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Stocks & Shares ISA Eligible
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Website www.dnairone.com
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COMPANY OVERVIEW
Doric Nimrod Air One Limited (LSE Ticker: DNA) ("DNA" or the
"Company") is a Guernsey company incorporated on 8 October 2010.
Its shares were admitted to trading on the Specialist Fund Segment
("SFS") of the London Stock Exchange's Main Market on 13 December
2010.
The Company's total issued share capital currently consists of
42,450,000 ordinary preference shares (the "Shares") which were
admitted to trading at an issue price of 100 pence per Share. As at
3 July 2019, the latest practicable date prior to publication of
this report, these Shares were trading at 90.00 pence per
Share.
Investment Objectives and Policy
The Company's investment objective is to obtain income returns
and a capital return for its shareholders (the "Shareholders") by
acquiring, leasing and then selling a single aircraft. The Company
purchased one Airbus A380-861 aircraft, manufacturers' serial
number 016 (the "Asset" or the "Aircraft") in December 2010 for
$179 million, which it leased (the "Lease") for twelve years to
Emirates Airline ("Emirates"), the national carrier owned by The
Investment Corporation of Dubai based in Dubai, United Arab
Emirates.
Distribution Policy
The Company aims to provide its Shareholders with an attractive
total return comprising income from distributions through the
period of the Company's ownership of the Asset and capital upon the
sale of the Asset.
The Company receives income from the lease rentals paid by
Emirates pursuant to the Lease. It is anticipated that income
distributions will be made quarterly, subject to compliance with
applicable laws and regulations. The Company currently targets a
distribution of 2.25 pence per Share per quarter. Emirates bears
all costs (including maintenance, repair and insurance) relating to
the Aircraft during the lifetime of the Lease.
There can be no guarantee that dividends will be paid to
Shareholders and, if dividends are paid, as to the timing and
amount of any such dividend. There can also be no guarantee that
the Company will, at all times, satisfy the solvency test required
to be satisfied pursuant to section 304 of The Companies (Guernsey)
Law, 2008, as amended (the "Law") enabling the Directors to effect
the payment of dividends.
Performance Overview
All payments by Emirates have, to date, been made in accordance
with the terms of the Lease.
During the financial year under review, and in accordance with
the Distribution Policy, the Company declared four interim
dividends of 2.25 pence per Share. One interim dividend of 2.25
pence per Share was declared after the reporting period. Further
details of dividend payments can be found on page 17.
Return of Capital
If and when the Company is wound up (pursuant to a shareholder
resolution, including the liquidation resolution) the Company
intends to return to Shareholders the net capital proceeds upon the
eventual sale of the Asset subject to compliance with the Company's
Articles of Incorporation (the "Articles") and the applicable laws
(including any applicable requirements of the solvency test
contained therein).
Liquidation Resolution
Although the Company does not have a fixed life, the Articles
require that the Directors convene a general meeting of the Company
six months before the end of the term of the Lease where an
ordinary resolution will be proposed that the Company proceed to an
orderly wind-up at the end of the term of the Lease and the
Directors will consider (and if necessary, propose to Shareholders)
alternatives for the future of the Company, including re-leasing
the Asset, or selling the Asset and reinvesting the capital
received from the sale of the Asset in another aircraft.
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the Company's annual
financial report, covering the period from 1 April 2018 until 31
March 2019 (the "Period").
I am happy to report that during the Period the Company has
performed as anticipated and has declared and paid four quarterly
dividends of 2.25 pence per share, as expected, equivalent to 9
pence per share per annum.
The Company's investment objective is to obtain income returns
and a capital return for its Shareholders by acquiring, leasing and
then selling a single aircraft. The Company purchased the Aircraft
in December 2010 which it leased to Emirates. A senior secured
finance facility provided by Westpac, in the amount of $122 million
made up the monies along with the placing proceeds for the
acquisition of the Asset. Upon the purchase of the Aircraft, the
Company entered into a 12 year lease with Emirates with fixed lease
rentals for the duration. The debt portion of the funding will be
fully amortised over the term of the lease, which will leave the
Aircraft unencumbered on the conclusion of the lease. Emirates
bears all costs (including maintenance, repair and insurance)
relating to the Aircraft during the lifetime of the lease and all
payments thus far by Emirates have been made in accordance with the
terms of the lease.
The key development during the Period was the announcement on 14
February 2019 that Airbus will close production of the A380 in
2021. This development means that the total production run for the
aircraft will be around 250 units, almost half of which will be
operated by Emirates. The A380 remains a unique double-decker
aircraft in that it has the capability to carry over 500 passengers
on two floors and this can help facilitate growth at
slot-constrained airports around the world. It remains the case
that a secondary market for the A380 has yet to develop and
uncertainty over future residual values remain. Notwithstanding
this, at the time of the announcement by Airbus, His Highness
Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive,
Emirates Airline and Group stated, "For us, the A380 is a wonderful
aircraft loved by our customers and our crew. It is a
differentiator for Emirates. The A380 will remain a pillar of our
fleet well into the 2030s." More recently, the Emirates Annual
Financial Report highlighted: "We are strong believers in the A380
programme, despite Airbus' decision to stop production in 2021."
The announcement by Airbus has no direct impact on the Company's
lease nor its ability to pay targeted distributions. The Company's
lease expiry does not fall due until December 2022. Furthermore,
the Company's debt structure is such that all loan liabilities will
be fully paid off at the end of the lease (subject only to the
continued solvency of Emirates) at which point the Aircraft will be
unencumbered.
Nonetheless, the Directors note that following the 14 February
2019 announcement by Airbus regarding the cessation of the A380
programme in 2021, there has been a broadening of opinion between
the Company's three independent appraisers with regard to the asset
appraisal values as they each continue to assess the consequences,
positive and negative, of the Airbus decision.
The Company's share price fell sharply on the day of the
announcement, having demonstrated relatively little volatility
since launch in December 2010 and at the time of writing the share
price has stabilised somewhat, at around 90 pence.Further details
on the cessation of the A380 programme and Emirates can be found in
the Asset Manager's report. The Company's Asset Manager, Doric GmbH
("Doric") has been and will continue to be in regular dialogue with
Emirates, and the A380 remains intensely popular with
passengers.
Doric continues to monitor the lease and to report regularly to
the Board. Nimrod Capital LLP
("Nimrod"), the Company's Corporate and Shareholder Adviser,
continues to liaise between the Board and Shareholders, and also
communicates with Shareholders regularly regarding relevant news
flow and the Company's financial statements and quarterly fact
sheets.
In economic reality and in cash flow terms, the Company has
performed well, and as expected. However, the financial statements
do not, in the Board's view, properly convey this economic reality
due to the accounting treatments for foreign exchange, rental
income and finance costs, as required by International Financial
Reporting Standards ("IFRS").
IFRS, with which the Company is fully compliant, requires that
transactions denominated in currencies other than the presentation
currency (including, most importantly, the cost of the Aircraft)
are translated into the presentation currency at the exchange rate
ruling at the date of the transaction whilst monetary items
(principally the outstanding borrowings) are translated at the rate
prevailing on the reporting date. The result is that the figures
sometimes show very large mismatches which are reported as
unrealised foreign exchange differences.
On an on-going basis and assuming the lease and loan payments
are made as anticipated, such exchange differences do not reflect
the commercial substance of the situation in the sense that the key
transactions denominated in US dollars are in fact closely matched.
Rental income received in US dollars is used to make loan
repayments due which are likewise denominated in US dollars.
Furthermore, the US dollar lease rentals and loan repayments are
fixed at the outset of the Company's life and are very similar in
amount and timing.
In addition to this, lease rental income receivable is credited
evenly to the Statement of Comprehensive Income over the planned
life of the lease. Conversely, the methodology for accounting for
interest cost means that the proportion of the loan repayments
which is treated as interest, and is debited to the Statement of
Comprehensive Income, varies over the course of the loan with a
higher proportion of interest expense recognised in earlier
periods, so that the differential between rental income and
interest cost (as reported in the Statement of Comprehensive
Income) reduces. In reality however, the amount of rental income is
fixed so as to closely match the interest and principal components
of each loan repayment instalment and allow for payments of
operating costs and dividends.
The Board encourages Shareholders to read the Company's
quarterly fact sheets which we believe provide a great deal of
interesting information and we hope these regular reports, in
addition to the communication you receive from Nimrod, are useful
and informative. We welcome Shareholder engagement and feedback,
including on the topic referenced above, and encourage you to
contact Nimrod to request a meeting or relay your feedback.
On behalf of the Board, I would like to thank our service
providers for all their help and Shareholders for their continuing
support of the Company. I look forward to keeping all Shareholders
up to date with further progress.
Charles Wilkinson
Chairman
4 July 2019
ASSET MANAGER'S REPORT
At the request of the Directors of the Company, this commentary
has been provided by the Asset Manager of the Company.
1. The Doric Nimrod Air One Airbus A380
The Airbus A380 is registered in the United Arab Emirates under
the registration mark A6-EDC. For the period from original delivery
of the aircraft to Emirates in November 2008 until the end of March
2019, a total of 5,510 flight cycles were logged. Total flight
hours were 45,626. This equates to an average flight duration of
around eight hours and 17 minutes.
The A380 owned by the Company recently visited Amsterdam,
Brisbane, Madrid, Osaka, and Zurich.
Maintenance Status
Emirates maintains its A380 aircraft fleet based on a
maintenance programme according to which minor maintenance checks
are performed every 1,500 flight hours, and more significant
maintenance checks (C checks) at 36-month or 18,000-flight hour
intervals, whichever occurs first.
Emirates bears all costs (including for maintenance, repairs and
insurance) relating to the aircraft during the lifetime of the
lease.
2. Market Overview
Following a moderation over the second half of 2018,
industry-wide passenger traffic, measured in global revenue
passenger kilometres (RPKs), ended the calendar year with an
average growth rate of 6.6%. According to the International Air
Transport Association (IATA), the slowdown in RPK growth
corresponds to ongoing concerns about future global economic
expansion. However, RPKs in January grew by the fastest pace since
mid-2018 (6.5%). This result lies between the average RPK growth
rate seen over the past decade (6.1%) and five-year historical
average (7.1%). IATA states that recent developments remain
consistent with its forecast passenger growth rate of 6.0% for
2019. Industry-wide capacity, measured in available seat kilometres
(ASKs), increased by 6.1% in 2018. This resulted in a 0.3
percentage point increase in worldwide passenger load factors
(PLFs) to 81.9%. With the PLF at 79.6% in January, the load factor
was essentially unchanged from the same month the year before.
Passenger traffic in the Middle East grew by 4.0% in 2018. This
was outpaced by a 4.9% increase in capacity, leading to a 0.6
percentage point decrease in PLF to 74.8%. However, following the
adverse impact of a number of policy measures and geopolitical
tensions in recent years, IATA notes that a healthy recovery in RPK
growth commenced early in 2019 with passenger traffic up 1.5% in
January compared to the same month in the year before, after flat
growth was observed toward the end of 2018.
Asia/Pacific-based operators remained the top performers in
overall market demand in 2018 as RPKs increased by 8.6% compared to
the previous year. Europe ranked second with 6.7% followed by Latin
America with 6.2%. North America saw an increase of 5.0% while
Africa had the slowest growth rate at 2.3%.
(c) International Air Transport Association, 2019. Air Passenger
Market Analysis December 2018. Air Passenger Market Analysis
January 2019. All Rights Reserved. Available on the IATA Economics
page.
3. Lessee - Emirates Key Financials
The 2018/19 financial year, ending on 31 March 2019, marked the
31(st) consecutive year of profit for the airline. With a net
profit of AED 871 million (USD 237 million), the bottom line was
down by 69% compared to the previous financial year. This decline
in net profit came despite an increase of 6% in revenue to AED 97.9
billion (USD 26.7 billion). Due to a combination of high fuel
prices, intensified competition in the lessee's key markets, and an
unfavourable currency impact, the airline saw its profit margin
decrease to 0.9%, down from 3.0% in the previous year. The past
financial year "has been tough, and our performance was not as
strong as we would have liked", said His Highness Sheikh Ahmed bin
Saeed Al Maktoum, Chairman and Chief Executive of Emirates Airline,
commenting on the latest results. He further noted that Emirates'
regional competitors "one-point business plan" was "to always
undercut Emirates' fares at all costs". The lessee tried to avoid
engaging in price wars and was focused "to improve yield, even if
it meant conceding market share".
During the 2018/19 financial year, operating costs increased by
8% compared to the previous year. Fuel represented the largest of
the airline's expenses, accounting for 32% of all operating costs.
The average price of jet fuel increased 22% plus a 3% higher uplift
in line with capacity increases, which resulted in the fuel bill
increasing 25% compared to the 2017/18 period, to an amount of AED
30.8 billion (USD 8.4 billion). Additionally, the relative
strengthening of the US dollar against currencies in many of the
airline's key markets had an AED 572 million (USD 156 million)
negative impact compared to the positive currency impact of AED 661
million (USD 180 million) the year before. The number of employees
decreased by 3%, a continuation of the development already visible
in the previous year. However, productivity measured in revenue per
airline employee, increased by 11%.
As of 31 March 2019, Emirate's balance sheet totalled AED 127.4
billion (USD 34.7 billion), largely flat compared with the previous
year. Total equity increased to AED 37.7 billion (USD 10.3
billion), resulting in an equity ratio of 29.6%. In the year
before, the airline's equity ratio stood at 29.0%. The current
ratio stood at 0.83, meaning the airline would be able to meet 83%
of its current liabilities by liquidating all its current
assets.
Emirates raised AED 14.2 billion (USD 3.9 billion) in the
2018/19 financial year in order to fund fleet replacement and
growth, using a combination of term loans, finance and operating
leases. This included a Japanese Operating Lease with a Call Option
(JOLCO) raising funding of more than USD 1 billion for the
financing of its final six Boeing 777-300ER aircraft. Emirates'
cash balance amounted to AED 17.0 billion (USD 4.6 billion) at the
end of the financial year, down 17% compared to the beginning of
the financial year, primarily due to the reduction in profits,
payment for the outright purchase of two A380s and the payment of
last year's dividend (AED 1 billion or USD 272 million) to the
owner of Emirates.
Emirates' overall passenger number remained flat during the
2018/19 financial year with the airline carrying 58.6 million
passengers, with a share of 41% flying on an A380. Passenger
traffic, measured in RPKs, increased by 2.7%, while capacity,
measured in ASKs, grew by 3.6%. This resulted in a passenger load
factor of 76.8% compared to last year's 77.5%. The high seat factor
on the A380 fleet continues to demonstrate the customer preference
for the A380, according to the annual report.
During the 2018/19 financial year, Emirates added 13 new
aircraft to its fleet: seven Airbus A380s and six Boeing
777-300ERs, including its last of the 777-300ER type before the
first Boeing 777X is scheduled to arrive in 2020. Only one of the
aircraft, which joined the fleet, was on an operating lease. The
carrier also withdrew 11 aircraft from its fleet, leaving the fleet
count (including 12 freighters) at 270 as of 31 March 2019. This
fleet roll-over resulted in an average fleet age of 6.1 years, an
increase of five months compared to the end of the previous
financial year.
Emirates launched three new passenger destinations during the
year: London Stansted (UK), Santiago (Chile) and Edinburgh
(Scotland, UK), and also reinstated services to Sabiha Gokcen
(Turkey). The operator has a proven track record in introducing new
routes with the Boeing 777-300ER, generating opportunities for A380
services once the demand has been increased.Furthermore, it added
flight capacity to 14 existing destinations and upgraded capacity
to six cities by offering a higher frequency with more onward
connections. At the end of the 2018/19 financial year Emirates
serviced 158 destinations, one more than 12 months before, in 85
countries.
Due to the closure of Dubai International's southern runway for
refurbishment work between 16 April and 30 May 2019, Emirates has
temporarily grounded 48 aircraft and cut its flight schedule by
25%. Some services have been cancelled, others re-timed or operated
with different aircraft to reduce the impact on customers. However,
a negative impact on the current year's financial results is
expected. Emirates also intends to make other changes to its
network later in the year, including deploying the Airbus A380 on
services to Boston and Glasgow in the summer.
Emirates entered into a memorandum of understanding with China
Southern Airlines (China Southern) to begin codesharing on 18
routes in China, the Middle East and Africa. Subject to government
approval, Emirates will place its code on China Southern services
to Fuzhou, Chongqing, Kunming, Qingdao, Xiamen, Chengdu, Nanjing
and Xian. China Southern will place its code on Emirates' services
to Cairo, Dammam, Lagos and Riyadh. The airlines have not yet
disclosed a start date for the codesharing.
Emirates has also continued to develop its partnership with
flydubai, optimising flight schedules and offering new city-pair
connections through Dubai. The codeshare and network optimisation
scheme is set to cover 240 destinations by 2022, of which 67 were
already available as of 31 March. The two airlines have also
combined their loyalty programmes under Emirates Skywards.
In February 2019, Emirates provided an update on its fleet
planning: Months of discussions with Airbus and engine manufacturer
Rolls-Royce resulted in an agreement to reduce the number of
unfilled A380 orders from 53 to 14. The remaining deliveries shall
take place by 2021. In parallel the lessee signed a heads of
agreement to order 40 Airbus A330-900 and 30 A350-900 with
deliveries starting from 2021 and 2024 respectively.
Notwithstanding the new order, His Highness Sheikh Ahmed bin Saeed
Al Maktoum emphasized that "the A380 will remain a pillar of our
fleet well into the 2030s" and that the operator continues to
invest in this product.
Emirates Airline's decision to adjust the number of A380s still
up for delivery should encourage the operator to keep already
delivered A380 aircraft longer in its fleet. A number of aircraft
from the original order was earmarked to replace aircraft leaving
the fleet after 12 or more years in service. In order to keep its
A380 capacity at least flat, Emirates might be inclined - from an
operational as well as from an economic point of view - to extend
otherwise expiring lease contracts.
Source: Cirium, Emirates
4. Aircraft - A380
As of mid-March 2019, Emirates operated a fleet of 109 A380s,
which currently serve 50 destinations within its global network via
its hub in Dubai. A380 destinations include: Amsterdam, Athens,
Auckland, Bangkok, Barcelona, Beijing, Birmingham, Brisbane,
Casablanca, Christchurch, Copenhagen, Dusseldorf, Frankfurt,
Guangzhou, Hamburg, Hong Kong, Houston, Johannesburg, Kuala Lumpur,
Kuwait, London Gatwick, London Heathrow, Los Angeles, Madrid,
Manchester, Mauritius, Melbourne, Milan, Moscow, Mumbai, Munich,
New York JFK, Nice, Osaka, Paris, Perth, Prague, Rome, San
Francisco, Sao Paulo, Seoul, Shanghai, Singapore, Sydney, Taipei,
Tokyo Narita, Toronto, Vienna, Washington, and Zurich.
As of mid-March 2019, the global A380 fleet consisted of 230
commercially operated planes in service. The fourteen operators are
Emirates (109), Singapore Airlines (19), Deutsche Lufthansa (14),
Qantas (12), British Airways (12), Korean Air Lines (10), Etihad
Airways (10), Air France (10), Qatar Airways (10), Malaysia
Airlines (6), Thai Airways (6), Asiana Airlines (6), China Southern
Airlines (5) and Hi Fly (1). Another two are listed as in storage.
In addition, two A380s are earmarked for part-out after the owners
of the aircraft voted for such a solution.
In February 2019, Airbus announced that it will discontinue its
A380 programme in 2021, following a revised agreement with Emirates
under which the airline is cutting its A380 order total from 162 to
123 aircraft - leaving just 14 to be delivered to the airline.
Another two aircraft will be delivered to All Nippon Airways
("ANA") with the airline having taken delivery of its first A380 on
21 March. Therefore, a total of 251 A380s will now ever be
manufactured. According to its departing CEO Tom Enders, Airbus no
longer has a "substantial A380 backlog and hence no basis to
sustain production". Enders added that - notwithstanding the
upcoming production end - Airbus will "continue to fully support
the A380 operators".
Qantas has stated that it remains committed to the 12
superjumbos already in its fleet over the long-term with cabin
refurbishments scheduled to commence mid-year.
Air France intends to return three A380s upon expiry of their
leases in 2020-2021 and is currently reviewing the status of
another two leased A380s. The move comes as part of a fleet
optimisation programme and will reduce the number of Airbus A380s
from the 10 it currently operates. The remaining A380s will begin
retrofitting from 2020 onwards.
Qatar Airways CEO Akbar al-Baker announced that the airline
intends to phase out its A380 fleet from 2024. The start of the
phase-out coincides with the 10-year anniversary of the A380 at
Qatar Airways, which received its first superjumbo in 2014.
Lufthansa disclosed that it will sell six of its 14 A380 jets
back to Airbus in 2022 and 2023. The buyback is reportedly part of
an agreement between Airbus and Lufthansa Group to order another 20
Airbus A350-900s.
It remains undisputed that the Airbus A380 is a niche asset in a
class of its own from its inception. Due to the young age of the
fleet the secondary market is yet to develop with the first
second-hand A380 making its way to a new operator only a year ago.
At this early stage and with only one transaction fully completed,
the secondary market is still in its infancy. Whether or not all of
the announced A380 returns from Air France, Lufthansa and Qatar
will materialize, remains to be seen. In the meantime, potential
operators have the chance to test the A380 via a wet lease
arrangement over a limited period of time and without making any
long-term commitments. This opportunity allows airlines interested
in the A380 to explore the full potential of the aircraft and can
create additional demand for second hand equipment, once it becomes
available.
Hi Fly, a Portuguese wet lease operator, stated that its A380
continues to attract significant commercial interest and has a
"busy season ahead" this summer. A decision on acquiring more
planes will be taken after the completion of a full financial
study, it said.
In February 2019, Malaysia Airlines launched a new brand called
Amal that will run Malaysia A380 flights from South East Asia to
Saudi Arabia for Islamic pilgrimage.
ANA received its first A380 and will deploy it thrice weekly on
the Tokyo Narita-Honolulu route from May this year with 11 other
services flown by Boeing 787-9s. From July, the second A380 will
also join the route as A380 services increase to 10 per week with
four 787-9s services. As of yet, ANA has not indicated whether its
third A380, due in September, will be used on the Hawaiian
route.
Source: Airbus, Cirium, Emirates, Reuters
DIRECTORS
Charles Edmund Wilkinson - Chairman (Age 76) (Independent
non-executive director)
Charles Wilkinson is a solicitor who retired from Lawrence
Graham LLP in March 2005. While at Lawrence Graham he specialised
in corporate finance and commercial law, latterly concentrating on
investment trust and fund work.
Charles is currently Chairman of Doric Nimrod Air Three Limited,
Chairman of the Audit Committee of Doric Nimrod Air Two Limited and
a director of Landore Resources Ltd, a Guernsey based mining
exploration company. He is resident in Guernsey.
Geoffrey Alan Hall (Age 70) (Independent non-executive
director)
Geoffrey Hall has extensive experience in asset management,
having previously been Chief Investment Officer of Allianz
Insurance plc, a major UK general insurance company and an
investment manager at HSBC Asset Management, County Investment
Management, and British Railways Pension Funds. Geoffrey is also
currently the Chairman of Doric Nimrod Air Two Limited and a
Director of Doric Nimrod Air Three Limited.
Geoffrey earned his masters degree in Geography at the
University of London. He is an associate of the CFA Society of the
UK.
John Le Prevost (Age 67) (Independent non-executive
director)
John Le Prevost is the Chief Executive Officer of Anson Group
Limited and Chairman of Anson Registrars Limited (the Company's
Registrar). He has spent over 30 years working in offshore trusts
and investment business during which time he was Managing Director
of County NatWest Investment Management (Channel Islands) Limited,
Royal Bank of Canada's mutual fund company in Guernsey and Republic
National Bank of New York's international trust company. He is a
director of a number of other companies associated with Anson
Group's business as well as being a trustee of the Guernsey Sailing
Trust.
John is also currently a director of Doric Nimrod Air Two
Limited, Doric Nimrod Air Three Limited and Amedeo Air Four Plus
Limited. He is resident in Guernsey.
SERVICE PROVIDERS
Management and the Delegation of Functions
The Directors, whose details are set out on page 10 are
responsible for reviewing the business affairs of the Company in
accordance with the Articles and have overall responsibility for
the Company's activities including all business decisions, review
of performance and authorisation of distributions. All of the
Directors are independent and non-executive. The Company has
delegated management of the Asset to Doric GmbH ("Doric") or
("Asset Manager"), which is a company incorporated in Germany.
Further details are outlined below under the heading Asset Manager.
The Directors delegate secretarial and administrative functions to
JTC Fund Solutions (Guernsey) Limited ("JTC" or the "Secretary" or
the "Administrator") which is a company incorporated in Guernsey
and licensed by the Guernsey Financial Services Commission (the
"GFSC") for the provision of administration services. The registrar
function is delegated to Anson Registrars Limited ("Anson") which
is licensed and regulated by the GFSC.
Asset Manager
Doric has been appointed by the Company to provide asset
management services to the Company. Pursuant to the Asset
Management Agreement, Doric will: (i) monitor Emirates' and any
subsequent lessees' performance of its obligations under the lease
and any subsequent leases respectively (which shall include the
obligations relating to the maintenance of insurance cover); (ii)
provide the Company with information regarding alternatives with
respect to any potential sale or re-lease of the Asset; (iii) carry
out mid-lease inspections of the Asset; (iv) provide the Company
with asset monitoring reports describing the state and any material
changes to the state of the Asset; and (v) liaise, as and when
necessary, with lenders, on all matters relating to the Loan, as
required.
Doric has further undertaken that it will dedicate sufficient
time and resources as it reasonably believes is required from time
to time to fulfil any contractual arrangements it enters into with
the Company.
Doric Partners LLP ("Doric LLP"), a limited liability
partnership incorporated in England and Wales and Amedeo Services
(UK) Limited ("Amedeo") have been appointed by the Company,
pursuant to the Amended Liaison Services Agreement to act as
Liaison agents. Doric LLP has been appointed to (i) coordinate the
provision of services by Doric to the Company under the Asset
Management Agreement; and (ii) facilitate communication between the
Company and Doric.
The Doric Group is also a member of ISTAT, the International
Society of Transport Aircraft Trading.
The Doric Group is a leading provider of products and services
for investors in the fields of aviation, shipping, renewable energy
and real estate. The Doric Group has an international presence,
with offices in Germany, Hong Kong, the United Kingdom, and the
United States, and a multinational team which offers access to
extensive relationship networks and expert asset knowledge
maintaining regulated financial institutions in the United States
and Europe. One of the firm's core competencies is its asset
management expertise, which is an integrated part of all Doric
transactions and a cornerstone of the business. For further
information about the Doric Group, please visit www.doric.com.
The aircraft portfolio currently managed by the Doric Group is
valued at $7 billion and consists of forty four aircraft under
management. These aircraft include commercial airliners ranging
from ATR 72-500s and the Airbus A320 family, through the Boeing
737, 777, 787 and Airbus A330/A340 family, up to the Boeing 747-8F
and Airbus A380.
The Doric Group has twenty two Airbus A380 aircraft currently
under management and is therefore considered well positioned to
perform the technical asset management of this aircraft type.
Liaison Agent
Amedeo has been appointed by the Company, pursuant to the
Liaison Services Agreement, to, when requested by the Board,
participate in Board meetings, assist in the review of all asset
management matters and provide advice in all asset management
related matters. Amedeo is authorised by the Financial Conduct
Authority and is part of the Amedeo group of companies.
The Amedeo group is primarily involved in the operating lease
and management of widebody aircraft. The aircraft portfolio
currently managed by the Amedeo Group is valued at over $8 billion
and consists of fifty aircraft under management. These aircraft
include commercial airliners including Airbus A380, A350, A330,
A321 and Boeing 777, 787 and 747-8F. Amedeo is a member of the
International Society of Transport Aircraft Trading ("ISTAT") and
is a Strategic Partner of the International Air Transport
Association ("IATA").
Corporate and Shareholder Adviser
Nimrod, which is authorised by the Financial Conduct Authority,
has been appointed as the Corporate and Shareholder adviser by the
Company.
Nimrod was founded in 2008 as an entirely independent
organisation which specialises in generating and sourcing
interesting investment funds, themes and solutions managed by
experts in their fields for the professional investor marketplace.
It has launched nine listed investment companies since its
formation and it also provides investment, marketing, distribution
and advisory services to investment companies and their Board and
managers.
Nimrod, together with Doric and Emirates, was awarded the
"Innovative Deal of the Year 2010" by the international aviation
magazine Airfinance Journal in recognition of the innovative
financing of an Airbus A380 leased to Emirates by the Company,
which was the first stock market listed aircraft investment
vehicle.
Secretary & Administrator
JTC is an independent provider of institutional and private
client services to clients in numerous jurisdictions and is a
member of the JTC Group. For further information about the JTC
Group please visit www.jtcgroup.com.
JTC is a Guernsey incorporated company and provides
administration and secretarial services to the Company pursuant to
an Administration and Secretarial Agreement. In such capacity, JTC
is responsible for the general secretarial functions required by
the Law and assists the Company in its compliance with its
continuing legal and regulatory obligations, as well as providing
advice on good corporate governance and best practice for a
publicly traded company.
JTC is also responsible for the Company's general administrative
functions and for the preparation of unaudited half-yearly and
audited annual financial reports, subject to the direction and
oversight of the Company's Board of directors.
Registrar
Anson is the Company's CREST compliant registrar. The Company's
registrar is responsible for the maintenance of the Company's share
register and for the processing of dividend payments and stock
transfers. Anson is licensed and regulated by the GFSC and further
information about Anson may be obtained from their website at
www.anson-group.com.
Review
The Board keeps under review the performance of the Asset
Manager, Liaison Agent, Corporate and Shareholder Adviser, the
Secretary and Administrator and the Registrar and the powers
delegated to each service provider. In the opinion of the Board,
the continuing appointments of the service providers on the terms
agreed are in the best interests of the Company's shareholders as a
whole.
A full list of the Company's service providers is set out on
page 67.
MANAGEMENT REPORT
A description of important events which have occurred during the
financial year under review, their impact on the performance of the
Company as shown in the financial statements and a description of
the principal risks and uncertainties facing the Company are given
in the Chairman's Statement, Asset Manager's Report, Statement of
Principal Risks and the notes to the financial statements contained
on pages 42 to 66 and are incorporated here by reference.
Principal Risks and Uncertainties
The Board has undertaken a robust assessment of the principal
risks facing the Company and has undertaken a detailed review of
the effectiveness of its risk management and internal control
systems. The Board is comfortable that the risks are being
appropriately monitored on a regular basis.
The risks set out below are those which are considered to be the
material risks relating to an investment in the Shares but are not
the only risks relating to the Shares or the Company. Additional
risks and uncertainties of which the Company is presently unaware
or that the Company currently believes are immaterial may also
adversely affect its business, financial condition, results of
operations or the value of the Shares.
The principal risks associated with the Company are:
-- Operational risk: the Board is ultimately responsible for all
operational facets of performance including cash management, asset
management, regulatory and listing obligations. The Company has no
employees and so enters into a series of contracts/legal agreements
with a series of service providers to ensure both operational
performance and the regulatory obligations are met. This risk has
been mitigated by the Company using well established, reputable and
experienced service providers and assessing service providers'
continued appointment on at least an annual basis.
-- Investment risk: there are a number of risks associated with
the Company's Asset in relation to the occurrence of technical
faults with the Asset or actions by third parties causing both
damage to the Asset and also damaging the demand for global air
travel. This risk has been mitigated by the lessee's contractual
responsibility to insure, repair and maintain the aircraft for the
duration of the Lease.
-- Borrowings and financing risk: there is a risk that the
Company is exposed to fluctuations in market interest rates and
foreign exchange rates. This risk has been mitigated by ensuring
that loan repayments are made from lease rental revenues received
in the matching currency and by fixing the interest rates on loan
and lease rentals.
Emirates is the sole lessee of the Asset and is headquartered in
the Middle East. Should Emirates default on the rental payments due
to domestic events, events in the wider airline industry or other
reasons it is unlikely the Company will be able to meet its
targeted dividends or, in the case of ongoing default, continue as
a going concern. The risk of default is mitigated by the ability of
the Company to sell or re-lease the Asset in the event of a single
default.
-- Secondary market risk: there is a risk that the Company would
not be able to achieve the projected resale value of the Asset due
to changes in demand for second hand aircraft of the type owned by
the Company. The Board monitors, and revises the residual value of
the Aircraft on an annual basis.
-- Regulatory risk: the Company is required to comply with the
disclosure guidance and transparency rules of the Financial Conduct
Authority and the requirements imposed by the Law and the GFSC. Any
failure to comply could lead to criminal or civil proceedings.
Although responsibility ultimately lies with the Board, the
Secretary also monitors compliance with regulatory
requirements.
Data Protection
The Company has implemented measures designed to ensure its
compliance with the EU General Data Protection Regulation (EU)
2016/679 and associated legislation in Guernsey. The Company has
also issued a privacy notice explaining the data it holds, how the
data is processed and its procedures for processing this data. This
notice is available for review and download at the Company's
website.
Going Concern
The Company's principal activities are set out within the
Company Overview on pages 2 to 3. The financial position of the
Company is set out on page 39. In addition, note 18 to the
financial statements includes the Company's objectives, policies
and processes for managing its capital, its financial risk
management objectives and its exposures to credit risk and
liquidity risk.
The loan interest rate has been fixed and the fixed rental
income under the Lease means that the rent should be sufficient to
repay the loan and provide surplus income to pay for the Company's
expenses and permit payment of dividends.
After making reasonable enquiries, and taking into account the
cash flow characteristics as described above, the Directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis of
accounting in preparing these annual financial statements.
Viability Statement
In accordance with provision C.2.2 of The UK Corporate
Governance Code, the Directors of the Company have considered the
prospects of the Company over the period from present until the
liquidation resolution is put to shareholders six months before the
Lease is due to terminate in 2022, a period of approximately three
years. In choosing the period of viability for the Company the
Board has considered the prospect of Emirates performing their
obligations till the end of their lease.
The Board, in assessing the viability of the Company, has paid
particular attention to the principal risks faced by the Company as
disclosed in the Chairman's Statement, Asset Manager's Report and
the notes to the financial statements, reviewing on an annual basis
the risks faced and ensuring that any mitigation measures in place
are functioning correctly.
In addition, the Board has considered a detailed cashflow
projection for the running costs of the Company and has assumed
that Emirates is a going concern. The Company retains sufficient
cash to cover the forecast operating costs of the Company until the
termination date of the Lease in 2022, assuming receipt of planned
rental income.
The Directors believe that their assessment of the viability of
the Company over the period chosen was sufficiently robust and
encompassed the risks which would threaten the business model,
future performance, solvency or liquidity of the Company.
As a result of their review, the Directors of the Company have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due until the
termination date of the Lease in 2022.
Responsibility Statement
The Directors jointly and severally confirm that to the best of
their knowledge:
(a) the financial statements, prepared in accordance with IFRS
give a true and fair view of the assets, liabilities, financial
position and profits of the Company and performance of the
Company;
(b) this Management Report includes or incorporates by reference
a fair review of the development and performance of the business
and the position of the Company, together with a description of the
principal risks and uncertainties that it faces;
(c) the annual report taken as a whole is fair, balanced and
understandable and provides the information necessary for the
Company's Shareholders to assess the Company's position,
performance, business model and strategy; and
(d) the annual report and financial statements includes
information required by the London Stock Exchange and for ensuring
the Company complies with the relevant provisions of the Disclosure
Guidance and Transparency Rules (the "DGTRs") of the UK'S Financial
Conduct Authority.
Charles Wilkinson Geoffrey Hall
Chairman Director
4 July 2019
DIRECTORS' REPORT
The Directors present their report and financial statements of
the Company for the financial year ended 31 March 2019.
Principal Activities and Business Review
The principal activity of the Company is to acquire, lease and
then sell a single aircraft. The Directors do not envisage any
change in these activities for the foreseeable future. A
description of the activities of the Company in the year under
review is given in the Chairman's Statement and the Asset Manager's
Report respectively on pages 4 to 5 and 6 to 9.
Status
The Company is a Guernsey domiciled company the Shares of which
are admitted to trading on the SFS of the London Stock Exchange's
Main Market. Its registered number is 52484. The Company operates
in accordance with the Law.
Results and Dividends
The results of the Company for the financial year are set out on
page 38.
The Company declared dividends during the financial year under
review as follows:
Quarter End Announcement Date Dividend per Share
Payment Date (pence)
31 March 2018 12 April 2018 30 April 2018 2.25
------------------- ----------------- -------------------
30 June 2018 11 July 2018 31 July 2018 2.25
------------------- ----------------- -------------------
30 September 2018 10 October 2018 31 October 2018 2.25
------------------- ----------------- -------------------
31 December 2018 17 January 2019 31 January 2019 2.25
------------------- ----------------- -------------------
The Company aims to continue to pay quarterly dividends of 2.25
pence per Share, in line with the Distribution Policy. There is no
guarantee that any future dividends will be paid.
Directors
The Directors in office are shown on page 10 and all Directors
remain in office as at the date of signing of these financial
statements. Further details of the Directors' responsibilities are
given on page 16.
Anson is the Company's Registrar, Transfer Agent and Paying
Agent. John Le Prevost is a director and controlling shareholder of
Anson Group Limited, the holding company of Anson.
Other than the above non executive director appointments
disclosed above, no Director has a contract of service with the
Company, nor are any such contracts proposed.
The following interests in Shares of the Company are held by
persons discharging managerial responsibility and their persons
closely associated:
Number of Shares Number of Shares
held as at 31 held as at 4
March 2019 July 2019
Charles Wilkinson 100,000 100,000
Geoffrey Hall 45,000 45,000
Other than the above shareholdings and Mr Le Prevost's interest
in Anson, none of the Directors nor any persons connected with them
had a material interest in any of the Company's transactions,
arrangements or agreements during the year and none of the
Directors has or has had any interest in any transaction which is
or was unusual in its nature or conditions or significant to the
business of the Company, and which was effected by the Company
during the reporting year.
As at the financial year end and as at the date of this report,
there are no outstanding loans or guarantees between the Company
and any Director.
There were no material related party transactions which took
place in the financial year under review, other than those
disclosed in the Directors' Report and at note 21 to the financial
statements.
Substantial Controllers of Voting Rights
The Company has identified the following substantial controlling
interests in voting rights attached to the Company's issued share
capital in accordance with Chapter 5 of the DGTRs. These are based
on notifications made to the Company since inception and may differ
substantially from positions recorded on the Company's Share
register.
There have been no material changes in the below list of
substantial controlling interests between the end of the year under
review and 4 July 2019, being the latest practicable date prior to
the date of approval of this report.
Registered Holder % of Total Voting Rights Number of Shares
Insight Investment Management (Global) Limited 11.78% 5,000,000
City of Bradford Metropolitan District Council 10.60% 4,500,000
East Riding of Yorkshire Council 10.60% 4,500,000
Nestle Capital Management Limited 9.42% 4,000,000
Baring Asset Management Limited 6.07% 2,577,500
Corporate Governance
Statement of Compliance with The UK Corporate Governance Code
April 2016, as published in June 2016 (the "Code")
As a Guernsey incorporated company and under the DGTRs, the
Company was not, for the year under review, required to comply with
the Code. The Company has, however, voluntarily committed to comply
with the Code or explain any departures. A copy of the Code is
available for download from the UK Financial Reporting Council's
website www.frc.org.uk.
Having reviewed the Code, the Board considers that it has
maintained procedures during the year to ensure that it has
complied with the Code, other than the following exceptions:
(i) there is no chief executive (since the Company does not have any Executive Directors);
(ii) there is no senior independent director (since the Company
considers that each Director who is not Chairman can effectively
fulfil this function);
(iii) there is no remuneration committee (given the small size
of the exclusively non-executive and independent Board);
(iv) there is no nomination committee (given the small size of
the exclusively non-executive and independent Board);
(v) Directors have not been appointed for a fixed term given the
term of the lease between the Company and Emirates (the "Lease") is
twelve years, the Board considers that the defined life of the
Company means that the Directors should be appointed to serve until
the Lease ends and the Company is liquidated, subject to the
Company's Articles which provide that directors are subject to
re-election three yearly save that once a director has held office
for nine years they will be eligible for re-election each year);
and
(vi) there is no internal audit function (as the Company has no
executives or employees of its own).
Board Evaluation
The Board has conducted a performance evaluation of itself, its
committees and each of the Directors, as required by provision
B.6.1 of the Code. This process was led by an external facilitator,
Platinum Compliance Guernsey Limited ("Platinum"), which has no
other connection with the Company. As part of this process Platinum
requested each Director to complete a questionnaire, interviewed
each Director and the Administrator separately, performed a review
of the papers provided to the Directors. At the conclusion of its
evaluation, Platinum provided the Directors with a report on Board
effectiveness and made minor suggestions for improvements thereon,
which are being considered by the Directors.
Board Responsibilities
The Board comprises three Directors and their biographies appear
on page 10 demonstrating the wide range of skills and experience
they each bring to the Board. All the Directors are non-executive
and independent, with Charles Wilkinson acting as Chairman.
The Board regularly reviews the balance, knowledge and
effectiveness of the Board, to identify if any additional
experience or skills are needed and to ensure that the current
Directors have sufficient available time to undertake the tasks
required and remain independent. The Directors are able and
encouraged to provide statements to the Board of their concerns and
ensure that any items of concern are recorded in the Board minutes.
When undertaking a search for a new director the Board would be
mindful of diversity and meritocracy.
The other significant commitments of the current Chairman are
detailed in his biography on page 10. The Board was satisfied
during the year and remains satisfied that the Chairman's other
commitments do not interfere with his day-to-day performance of his
duties to the Company and that he has the commitment and time to
make himself available at short notice should the need arise.
In accordance with the Company's Articles the Directors shall
determine the Directors fees payable provided that the aggregate
amount of such fees paid in respect of services rendered to the
Company shall not exceed GBP150,000 per annum. All Directors
receive an annual fee and there are no share options or other
performance related benefits available to them. All Directors are
paid a fee of GBP15,000 per annum and the Chairman is paid an
additional fee of GBP5,000 per annum. The Chairman of the Audit
Committee is paid an additional GBP3,000 per annum.
The terms and conditions of appointment of non-executive
directors are available for inspection at the Company's registered
office by prior arrangement with the Secretary.
The Board meets in Guernsey at least twice per year to consider
the business and affairs of the Company, at which meetings the
Directors review the Company's assets and all other important
issues to ensure control is maintained. The Directors hold either a
Board meeting or Dividend Committee meeting each quarter in
Guernsey to consider and if thought suitable, approve the payment
of a dividend in accordance with the Company's Distribution
Policy.
Between these regular meetings the Board keeps in contact by
email and telephone as well as meeting to consider specific matters
of a transactional nature. Additionally the Directors may hold
strategy meetings with its relevant advisors in attendance as
appropriate.
The Directors are kept fully informed by the Asset Manager and
Secretary of all matters that are relevant to the business of the
Company and should be brought to the attention of the Directors
and/or the Shareholders. All Directors have direct access to the
Secretary who is responsible for ensuring that Board procedures are
followed and that there are effective information flows both within
the Board and between Committees and the Board.
The Directors also have access to the advice and services of the
Asset Manager and the Corporate and Shareholder Adviser and may
also, in the furtherance of their duties, take independent
professional advice at the Company's expense.
During the year the number of full Board meetings and committee
meetings attended by the Directors was as follows:
Director Board Meetings Audit Committee Dividend Committee
Meetings Meetings
Charles Wilkinson 3 of 3 3 of 3 1 of 4
--------------- ---------------- -------------------
Geoffrey Hall 3 of 3 3 of 3 1 of 4
--------------- ---------------- -------------------
John Le Prevost 3 of 3 3 of 3 4 of 4
--------------- ---------------- -------------------
Audit Committee
The Directors are all members of the Audit Committee. The Audit
Committee has regard to the Guidance on Audit Committees published
by the Financial Reporting Council in September 2012 and most
recently updated in April 2016. The Audit Committee examines the
effectiveness of the Company's and its service providers' internal
control systems as appropriate, the annual and half-yearly reports
and financial statements, the auditor's remuneration and
engagement, as well as the auditor's independence and any non-audit
services provided by them.
The Audit Committee considers the nature, scope and results of
the auditor's work and reviews it annually prior to providing a
recommendation to the Board on the re-appointment or removal of the
auditor. When evaluating the external auditor the Audit Committee
has regard to a variety of criteria including industry experience,
independence, reasonableness of audit plan, ability to deliver
constructive criticism, effectiveness of communication with the
Board and the Company's service providers, quality control
procedures, effectiveness of audit process and added value beyond
assurance in audit opinion.
Auditor independence is maintained through limiting non-audit
services to specific audit-related work that falls within defined
categories; for example, the provision of advice on the application
of IFRS or formal reports for any stock exchange purposes. All
engagements with the auditor are subject to pre-approval from the
Audit Committee and fully disclosed within the annual financial
report for the relevant period.
A new lead audit partner is appointed every five years and the
Audit Committee ensures the auditor has appropriate internal
mechanisms in place to ensure its independence.
The Audit Committee has recommended to the Board that the
re-appointment of Deloitte LLP as the Company's external auditor be
proposed to Shareholders at the 2019 Annual General Meeting. The
Audit Committee will, if appropriate, consider arranging for the
external audit contract to be tendered in 2022 (being ten years
from the initial appointment) with the aim of ensuring a high
quality and effective audit.
The Audit Committee meets in Guernsey at least twice per year,
shortly before the Board meets to consider the Company's
half-yearly and annual financial reports, and reports to the Board
with its deliberations and recommendations and also holds an annual
audit planning meeting with the auditor.
The Audit Committee operates within clearly defined terms of
reference based on the Institute of Chartered Secretaries and
Administrators recommended terms and provides a forum through which
the Company's external auditor reports to the Board. The Audit
Committee can request information from the Company's service
providers with the majority of information being directly sourced
from the Asset Manager, the Secretary and Administrator and the
external auditor. The terms of reference of the Audit Committee are
available on the Company's website and on request from the
Secretary.
Each year the Board examines the Audit Committee's performance
and effectiveness, and ensures that its tasks and processes remain
appropriate. Key areas covered included the clarity of the Audit
Committee's role and responsibilities, the balance of skills among
its members and the effectiveness of reporting its work to the
Board. The Board is satisfied that all members of the Audit
Committee have relevant financial experience and knowledge and
ensure that such knowledge remains up to date. Overall the Board
considers that the Audit Committee has the right composition in
terms of expertise and has effectively undertaken its activities
and reported them to the Board during the year under review.
During the financial year the Audit Committee met to consider
the annual financial report for the year ended 31 March 2018 and
the half-yearly financial report for the period ended 30 September
2018. The Audit Committee also met in January 2019, with the
auditor in attendance, to approve the 2019 audit plan.
Dividend Committee
The Dividend Committee consists of any one Director, who has
been given full power and authority to consider and, if thought
suitable, declare and approve the payment of a dividend in
accordance with the Company's Distribution Policy, provided all
Directors had been provided with prior notice of the proposal to
declare each dividend and no Director had raised any objection. to
the declaration of each dividend.
Internal Control and Financial Reporting
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms
that there is an on-going process for identifying, evaluating and
monitoring the significant risks faced by the Company.
The internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against misstatement and loss.
The Board on an annual basis conducts a full review of the
Company's risk management systems including consideration of a risk
matrix which covers various areas of risk including corporate
strategy, accuracy of published information, compliance with laws
and regulations, relationships with service providers and business
activities.
Asset management services are provided to the Company by Doric.
Corporate and shareholder advisory services are provided to the
Company by Nimrod. Administration and Secretarial duties for the
Company are performed by JTC.
The Directors of the Company clearly define the duties and
responsibilities of their agents and advisors. The appointment of
agents and advisers is conducted by the Board after consideration
of the quality of the parties involved and the Board monitors their
on-going performance and contractual arrangements. The Board also
specifies which matters are reserved for a decision by the Board
and which matters may be delegated to its agents and advisers.
Anti Bribery Policy
The Directors have undertaken to operate the business in an
honest and ethical manner and accordingly take a zero-tolerance
approach to bribery and corruption. The key components of this
approach are implemented as follows:
-- The Board is committed to acting professionally, fairly and with integrity in all its
business dealings and relationships.
-- The Company will implement and enforce effective procedures to counter bribery.
-- The Company requires all its service providers and advisors to adopt equivalent or
similar principles.
Dialogue with Shareholders
All holders of Shares in the Company have the right to receive
notice of, and attend, the general meetings of the Company, during
which members of the Board will be available to discuss issues
affecting the Company.
The primary responsibility for Shareholder relations lies with
the Company's Corporate and Shareholder Adviser. In addition, the
Directors are always available to enter into dialogue with
Shareholders and the Chairman is always willing to meet
Shareholders as the Company believes such communication to be
important. The Company's Directors can be contacted at the
Company's registered office or via the Secretary.
Climate change
Whilst the Company has a limited carbon footprint in respect of
its day to day activities, the Group leases its aircraft to
Emirates and notes the actions by Emirates in relation to climate
change via publications issued by Emirates. The Board notes that
Emirates Group recognises that environmental responsibility is core
to their long-term business success. The Emirates environmental
policy is available on their website.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable Guernsey
law and regulations.
Under the Law the Directors are required to prepare financial
statements for each financial year. The Directors have chosen to
prepare the Company's financial statements in accordance with
IFRS.
Under the Law the Directors must not approve the accounts unless
they are satisfied that they give a true and fair view of the state
of affairs of the Company and of the profit or loss of the Company
for that period.
In preparing these financial statements, International
Accounting Standard 1 requires that Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Law. They are also
responsible for safeguarding the assets of the Company and for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Disclosure of Information to the Auditor
The Directors who held office at the date of approval of this
Directors' Report confirm in accordance with the provisions of
Section 249 of the Law that, so far as they are each aware, there
is no relevant audit information of which the Company's auditor is
unaware; and each Director has taken all the steps that he ought to
have taken as a Director to make himself aware of any relevant
audit information and to establish that the Company's auditor is
aware of that information.
Auditor
Deloitte LLP have expressed their willingness to continue in
office as auditor and the Audit Committee has recommended their
reappointment. A resolution proposing their reappointment will be
submitted at the Company's forthcoming annual general meeting to be
held pursuant to section 199 of the Law.
Charles Wilkinson Geoffrey Hall
Chairman of the Board Director
Signed on behalf of the Board on 4 July 2019
AUDIT COMMITTEE REPORT
Membership
Geoffrey Hall - Chairman of the Audit Committee
Charles Wilkinson - Chairman of the Board
John Le Prevost - Non-executive Director
Key Objective
The provision of effective governance over (i) the
appropriateness of the Company's financial reporting including the
adequacy of related disclosures, (ii) the performance of the
Company's external auditor, (iii) monitoring of the systems of
internal controls operated by the Company and (iv) the Company's
principal service providers and the management of the Company's
regulatory compliance activities.
Responsibilities
The key duties of the Audit committee (the "Committee") are as
follows:
-- reviewing the Company's financial results announcements and
financial statements and monitoring compliance with relevant
statutory and listing requirements;
-- reporting to the Board on the appropriateness of the
Company's accounting policies and practices including critical
accounting policies and practices;
-- advising the Board on whether the annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
position, performance, business model and strategy;
-- overseeing the relationship with the external auditor and
reviewing the effectiveness of the external audit process; and
-- monitoring the systems of internal controls operated by the
Company and by the Company's principal service providers.
Committee Meetings
The Committee meet in Guernsey at least twice a year. The
Committee reports to the Board as part of a separate agenda item,
on its activities and on matters of particular relevance to the
Board in the conduct of its work. During the financial year under
review the Committee formally reported to the Board on two
occasions.
Main Activities of the Committee during the financial year
The Committee assisted the Board in carrying out its
responsibilities in relation to financial reporting requirements,
compliance and the assessment of internal controls. The Committee
also managed the Company's relationship with the external
auditor.
Fair, Balanced and Understandable
In order to comply with The UK Corporate Governance Code, the
Board has requested that the Committee advises them on whether it
believes the annual financial report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for Shareholders to assess the Company's performance, business
model and strategy.
The Committee engaged with the Company's auditor and the
Company's administrator in order to ensure that the financial
statements were fair, balanced and understandable.
Financial Reporting and Significant Issues
The Committee's primary role in relation to financial reporting
is to review, with its service providers and the external auditor,
the appropriateness of the half-year and annual financial
statements, the significant financial reporting issues and
accounting policies and disclosures in the financial statements.
The Committee has considered the key risks identified as being
significant to these accounts and the most appropriate treatment
and disclosure of any new significant issues identified during the
audit and half-year reviews as well as any recommendations or
observations made by the external auditor, Deloitte LLP
("Deloitte"). To aid its review the Committee considered reports
prepared by external service providers, including Doric and Nimrod,
and reports from Deloitte on the outcome of their annual audit. The
significant issues considered by the Committee in relation to the
2019 accounts and how these were addressed are detailed below:
Significant issues for the How the Committee addressed these significant
Period issues
Residual value of aircraft The Company has engaged three internationally
asset recognised expert appraisers to provide
the Company with third party consultancy
The non-current asset of valuation services. In the absence of
the Company comprises a sales data for similar used assets, appraisers
single Airbus A380 aircraft are heavily reliant on databases containing
(the "Asset"). An annual historical data points of aircraft sales
review is required of the relating to large commercial aircraft.
residual value of the Asset Interpretation of historical data is
as per IAS 16 Property, the basis for the current market value
Plant and Equipment, which and provides, together with the expected
defines residual value as developments in the future, the foundation
"the estimated amount that for their opinions on future values.
an entity would currently Furthermore, the appraisers' valuations
obtain from disposal of take into account specific technical
the asset, after deducting and economic developments as well as
the estimated costs of disposal, general future trends in the aviation
if the asset were already industry and the macro-economic outlook.
of an age and in the condition The Company has used the average forecast
expected at the end of its base values of the three independent
useful life." appraisers, excluding inflation as a
guide to determine the residual value
The Company's estimation as required by IAS 16 Property, Plant
technique is to make reference and Equipment.
to the most recently produced
forecast base value (excluding The Company believes that the use of
inflation), not an estimate forecast base values excluding inflation
of the amount that would best approximates residual value as required
currently be achieved, and per IAS 16 Property, Plant and Equipment.
so this is not a direct An increase in USD terms in the residual
application of the IAS 16 value of the aircraft from the prior
definition. This approach year, has resulted in an adjustment made
has been taken because a to depreciation in the current year,
current market value in details of which have been disclosed
today's prices for a twelve in Note 9.
year old A380 does not exist
at the reporting date. The Asset Manager has confirmed that
in the year ending 31 March 2019 there
were no changes to the methodology used
to determine the residual values.
As updated investment valuations of the
Asset as at the year end were commissioned
and received from third party professional
valuers and analysed by the Asset Manager
and the directors, the Committee believes
that those valuations are appropriate
for use in preparing the financial statements.
Therefore, the average residual value
excluding inflation used in the accounts
are based on these appraisals.
Upon review of the advice they have received
from Doric and the appraisers, the Committee
is of the opinion that, the current estimate
of the residual values excluding inflation
of the Asset is a reasonable approximation
of the residual value of the aircraft
within the IAS 16 definition.
------------------------------------------------
Recording foreign exchange In assessing foreign exchange, the Committee
gains/losses has considered the issue at length and
are of the opinion that, on an on-going
IFRS require that certain basis and assuming the lease and loan
transactions denominated payments are made as anticipated, such
in currencies other than exchange differences do not reflect the
the presentation currency commercial substance of the situation
(including, most importantly, in the sense that the key transactions
the cost of the Asset) be denominated in US dollars are in fact
translated into presentation closely matched. Rental income received
currency at the exchange in US dollars is used to pay loan repayments
rate ruling transaction due which are likewise denominated in
date whilst monetary balances US dollars. US dollar lease rentals and
(principally the outstanding loan repayments are furthermore fixed
borrowings) are translated at the outset of the Company's life and
at the rate prevailing on are very similar in amount and timing.
the reporting date. The
resultant figures sometimes The Committee concluded that the matching
show very large mismatches of the lease rentals to settle loan repayments
which are reported as unrealised therefore mitigates risks of foreign
foreign exchange differences. exchange fluctuations.
During the Period the Company The Committee has carefully considered
recorded a significant foreign the disclosure in note 18(b) to the financial
exchange rate loss due to statements to ensure that the reality
the depreciation of Sterling of the Company's foreign exchange risk
against US dollars and the exposure is properly explained.
consequent increase in the
Sterling value of the US
dollar denominated debt.
------------------------------------------------
Risk of default by the Lessee The Committee received quarterly reports
on lease rentals receivable from Doric during the year which comment
on the performance of Emirates. Doric
Emirates are the sole lessee have advised that Emirates has continued
of the Asset. Should Emirates to perform well.
default on the rental payments,
it is unlikely the Company The Committee concluded that it would
will be able to meet its continue to receive quarterly reports
targeted dividends or, in from Doric on the performance of Emirates
the case of ongoing default, and would continue to monitor Emirates'
continue as a going concern. overall performance.
The Committee carefully considered the
disclosure in note 18(c) to the financial
statements to ensure that this concentration
of credit risk is properly reflected.
------------------------------------------------
Consideration of any triggers The Committee has considered the issue
for impairment at length and accordingly an impairment
IAS 36 Impairment of Assets review has been undertaken as at 31 March
requires that a review for 2019. Refer to Note 3 for further detail
impairment be carried out on the factors triggering the review
by the Company when there and the sensitivity analysis performed
is an indication of impairment on the discount rates and residual value
of an asset and if events inputs.
or changes in circumstances
indicate that the carrying
amount of an asset may not
be recoverable. The review
will compare the carrying
amount of the asset with
its recoverable amount,
which is the higher of its
value if sold (if known)
and its value-in-use.
------------------------------------------------
We note that the auditors also consider the recognition of
rental income and the accounting for debt within their key audit
matters. These items have been considered by the Committee in the
current year, but, as there have been no changes in respect of
these risks they have not been a primary area of focus of the
Committee in the current year.
Going Concern
After making enquiries, the Committee has a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. The Committee
believe the Company is well placed to manage its business risks
successfully as the interest on the Company's Loan has been fixed,
and the fixed rental income under the operating lease means that
the rentals should be sufficient to repay the Loan and provide
surplus income to pay for the Company's expenses and permit payment
of dividends. Accordingly, the Committee has adopted the going
concern basis in preparing the financial information.
Internal Controls
The Committee has made due enquiry of the internal controls of
the Administrator. The Committee is satisfied with the controls
currently implemented by the Administrator. However, it has
requested that the Administrator keep the Company informed of any
developments and improved internal control procedures. The most
recent report on the internal control of JTC's administration
services, prepared in accordance with the International Standard on
Assurance Engagement 3402 ("ISAE 3402") for the period from 1
February 2018 to 31 March 2019, together with a bridging letter for
the period from 1 April 2019 to 20 May 2019, has been provided to
the Committee.
Internal Audit
The Company has no employees and operates no systems of its own,
relying instead on the employees and systems of its external
service providers. Following a recommendation from the Committee,
the Board has therefore taken the decision that it would be of
insufficient benefit for the Company to engage an internal
auditor.
External Audit
The effectiveness of the external audit process is dependent on
appropriate audit risk identification at the start of the audit
cycle. The Committee received from Deloitte a detailed audit plan
identifying their assessment of the key risks. For the financial
year under review, the primary risks identified were in respect of
valuation and ownership of the Asset, the recording of lease rental
income and accounting for fixed rate debt using the effective
interest rate method.
Using its collective skills, the Committee evaluates the
effectiveness of the audit process in addressing the matters raised
through the reporting it received from Deloitte at the conclusion
of the audit. In particular the Committee formally appraise
Deloitte against the following criteria:
-- Independence
-- Ethics and conflicts
-- Knowledge and experience
-- Challenge
-- Promptness
-- Cost
-- Overall quality of service
In addition the Committee sought feedback from the Administrator
on the effectiveness of the audit process.
For the financial year under review, the Committee was satisfied
that there had been appropriate focus on the primary areas of audit
risk and assessed the quality of the audit process to be good. The
Committee discussed their findings with Deloitte and agreed how
future external audits could be improved.
The Committee holds meetings with the external auditor to
provide additional opportunity for open dialogue and feedback from
the auditor. Should it be necessary, Committee members meet with
the external auditor without the Administrator and Asset Manager
being present. Matters typically discussed include the auditor's
assessment of business risks and management activity thereon, the
transparency and openness of interactions with the Administrator,
confirmation that there has been no restriction in scope placed on
them by the Administrator on the independence of their audit and
how they have exercised professional scepticism.
Appointment and Independence
The Committee considers the reappointment of the external
auditor, including the rotation of the audit partner, each year and
also evaluates their independence on an on-going basis.
The external auditor is required to rotate the audit partner
responsible for the audit every five years. The current lead audit
partner has been in place since August 2016 with her first audit
reporting period being the year to 31 March 2017. This is her third
year of involvement.
Deloitte has been the Company's external auditor since October
2012. The Committee has provided the Board with its recommendation
to the Company's Shareholders on the reappointment of Deloitte as
external auditor for the year ending 31 March 2020. Accordingly a
resolution proposing the reappointment of Deloitte as the Company's
auditor will be put to the Company's Shareholders at the 2019
annual general meeting.
There are no contractual obligations restricting the Committee's
choice of external auditor. The Committee continues to consider the
audit tendering provisions outlined in the revised UK Corporate
Governance Code, of which it is very supportive. The Committee
will, if applicable, consider arranging for the external audit
contract to be tendered in 2022 (being ten years from the date of
initial appointment of Deloitte with the aim of ensuring a high
quality and effective audit).
Non-Audit Services
To further safeguard the objectivity and independence of the
external auditor from becoming compromised, the Committee has a
formal policy governing the engagement of the external auditor to
provide non-audit services. No changes have been made to this
policy during the year. This policy specifies that Deloitte should
only be engaged for non-audit services where there is considered to
be a very low threat to auditor independence.
Deloitte is prohibited from providing any other services without
the Committee's prior approval. In reaching such a determination
the Committee will take into consideration whether it is in the
best interests of the Company that such services should be supplied
by the Company's external auditor (rather than another service
provider) and, if so, whether any safeguards regarding auditor
objectivity and independence in the conduct of the audit should be
put in place, whether these would be effective and how such
safeguards should be disclosed.
Committee Evaluation
The Committee's activities formed part of the review of Board
effectiveness performed in the year under review.
An internal evaluation of the Committee's effectiveness will be
carried out in 2019.
Geoffrey Hall
Chairman of the Audit Committee
4 July 2019
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF DORIC NIMROD AIR ONE
LIMITED
Report on the audit of the financial statements
Opinion
-----------------------------------------------------------------------------
In our opinion the financial statements of Doric Nimrod Air One
Limited (the 'company'):
* give a true and fair view of the state of the
company's affairs as at 31 March 2019 and of its
profit for the year then ended;
* have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union; and
* have been prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements which comprise:
* the statement of comprehensive income;
* the statement of financial position;
* the statement of changes in equity;
* the statement of cash flows; and
* the related notes 1 to 22.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union.
Basis for opinion
---------------------------------------------------------------------------------
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor's responsibilities
for the audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, including the Financial Reporting Council's (the 'FRC's')
Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Summary of our audit approach
---------------------------------------------------------------------------------
Key audit matters The key audit matters that we identified in the current
year were:
* Valuation and ownership of aircraft;
* Recognition of lease rental income; and
* Accounting for debt using the effective interest
method.
All key audit matters are consistent with the prior
year.
-----------------------------------------------------------
Materiality The materiality that we used in the current year
was GBP961,000 which was determined on the basis
of 2% of forecasted shareholders' equity. This is
consistent with the prior year.
-----------------------------------------------------------
Scoping All audit work for the company was performed by the
same audit engagement team.
-----------------------------------------------------------
Significant There have been no significant changes in our approach
changes in our from prior year.
approach
-----------------------------------------------------------
Conclusions relating to going concern, principal risks and viability
statement
------------------------------------------------------------------------------------------------------------------------------------
Going concern
We have reviewed the directors' statement We confirm that we have
in note 2(j) to the financial statements nothing material to report,
about whether they considered it appropriate add or draw attention
to adopt the going concern basis of accounting to in respect of these
in preparing them and their identification matters.
of any material uncertainties to the company's
ability to continue to do so over a period
of at least twelve months from the date
of approval of the financial statements. We confirm that we have
nothing material to report,
Principal risks and viability statement add or draw attention
Based solely on reading the directors' statements to in respect of these
and considering whether they were consistent matters.
with the knowledge we obtained in the course
of the audit, including the knowledge obtained
in the evaluation of the directors' assessment
of the company's ability to continue as
a going concern, we are required to state
whether we have anything material to add
or draw attention to in relation to:
-- the disclosures on page 14 that describe
the principal risks and explain how they
are being managed or mitigated;
-- the directors' confirmation on page 15
that they have carried out a robust assessment
of the principal risks facing the company,
including those that would threaten its
business model, future performance, solvency
or liquidity; or
-- the directors' explanation on page 15
as to how they have assessed the prospects
of the company, over what period they have
done so and why they consider that period
to be appropriate, and their statement as
to whether they have a reasonable expectation
that the company will be able to continue
in operation and meet its liabilities as
they fall due over the period of their
assessment,
including any related disclosures drawing
attention to any necessary qualifications
or assumptions.
We state whether we have anything material
to add or draw attention to in relation
to that statement that would be required
by Listing Rule 9.8.6R(3) if the company
had a premium listing and report if the
statement is materially inconsistent with
our knowledge obtained in the audit.
Key audit matters
------------------------------------------------------------------------------------------------------------------------------------
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements
of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that
we identified. These matters included those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Valuation and ownership of aircraft
Key audit matter Included on the company's statement of financial position
description as at 31 March 2019 are aircraft asset amounting to
GBP83.3 million (2018: GBP87.1 million) as disclosed
in Note 9 to the financial statements. As explained
in Note 2(l), the company's accounting policy is to
measure its aircraft asset at depreciated historic
cost less impairment. The asset is being depreciated
on a straight-line basis over the term of the lease
to an estimated residual value at the end of that
period. As stated in Note 3, estimation of aircraft
residual value is a source of uncertainty and is a
key determinant in preparing the financial statements.
A number of factors, including but not limited to,
Airbus' decision to discontinue the delivery of new
A380s, prompted management to perform an impairment
review in current year Refer to the considerations
by the audit committee on residual value and impairment
as discussed on pages 26-28.
The valuation and ownership of aircraft was deemed
to be a key audit matter as:
* the selected useful life or residual value used in
determining depreciation might not be appropriate as
the estimation of aircraft useful life and residual
value is a key judgement area;
* an indicator of impairment of the asset might arise
in which case an impairment review should be
performed and the value of the asset written down to
recoverable amount if less than carrying value.
Judgement is required in assessing whether an
indicator of impairment exists and estimation is
required on key inputs of the impairment review model
such as the terminal value, discount rate, future
cash flows and fair value less costs to sell; and
* the economic substance of the original aircrarft
acquisition transaction might not have been fully
considered, such that the asset might be recognised
in the financial statements when it does not belong
to the company. In addition, the aircraft might be
recognised when the company does not have proper
legal title.
--------------------------------------------------------- -------------------------------------------------------------------------
How the scope Our procedures included:
of our audit * critically assessing the conclusions reached by the
responded to Board of Directors ("Board") on the appropriateness
the key audit of the selected residual value and evaluating their
matter consistency with available market information,
including forecast valuations obtained by the company
from expert aircraft valuers and the terms of the
aircraft lease agreement. We considered the
qualifications and experience of the valuers engaged
by management. We also considered the adequacy of the
disclosure related to this estimation uncertainty set
out in Note 3;
* engaging our internal aircraft valuation specialists
in reviewing the Board and asset manager's
conclusions on the assessments made on residual value
used at year end;
* engaging our internal aircraft valuation specialists
in assessing the reasonableness of assumptions and
methodology used by a sample of expert appraisers, in
their estimation of forecast residual values and
current market value estimates;
* reviewing and challenging the reasonableness of key
inputs, assumptions and methodoly used in the
assessment of impairment. This was achieved through
our inspection of supporting evidence and through our
consideration of internal and external factors which
affect the impairment review process on the aircraft;
and
* reviewing the original purchase agreement for
consistency with the asset owned and obtaining
certificate of registration directly from 'The
International Registry for International Interests in
Mobile Equipment' to confirm ownership. In addition,
we reassesed our evaulation of the economic substance
of the original purchase transaction in order to
evaluate if the asset was appropriately recognised.
--------------------------------------------------------- -------------------------------------------------------------------------
Key observations Having carried out the procedures, we concluded that
the useful life selected, residual values used are
appropriate. In addition, the Board's assessment that
recoverable amount of the aircract was more than carrying
value and thus no impairment write down was required
as at 31 March 2019 was considered to be appropriate
and reasonable.
Having considered both the economic substance of transaction
and the legal form, we concluded that the asset recorded
in the financial statements is owned by the company.
--------------------------------------------------------- -------------------------------------------------------------------------
Recognition of lease rental income
Key audit matter The company's lease has been classified as an operating
description lease and as such rental income which amounts to GBP14.9
million (2018: GBP14.7 million) should be recognised
on a straight-line basis over the lease term, which
differs from the profile of actual rental payments.
As set out in Note 4 of the financial statements,
a significant portion of the lease rentals is receivable
in US Dollars and must be appropriately translated
into the Sterling functional and presentation currency.
The recognition of revenue also requires consideration
of all terms of the signed lease contract. As stated
in Note 3, classification of leases as operating leases
is a key source of uncertainty in preparing the financial
statements.The recognition of revenue was deemed to
be a key audit matter as:
* revenue might not be properly recorded in accordance
with requirements of the lease contract and in
accordance with the straight-line basis;
* related deferred or accrued income might not be
recognised appropriately; and
* revenue transactions and related amortisation of
deferred income are significant to the company's
financial performance, hence any material
misstatements in revenue will have a direct impact on
reported comprehensive income.
--------------------------------------------------------- -------------------------------------------------------------------------
How the scope Our procedures included:
of our audit * consideration on whether the classification of the
responded to leases as operating is appropriate with reference to
the key audit the lease terms and the nature of the asset and the
matter requirements of IAS 17: Leases;
* developing independent expectations of lease income
for the year based on total lease rentals receivable,
the lease term and the applicable foreign exchange
rates during the year. We also traced a sample of
rental income receipts to bank statements;
* recalculating deferred and accrued rental income
recognised in the Consolidated Statement of Financial
Position and testing accuracy of related translation
differences; and
* tracing all rental income receipts to bank
statements.
--------------------------------------------------------- -------------------------------------------------------------------------
Key observations Having performed the procedures above, we concluded
that classification of the lease is appropriate and
that revenue recognition is in line with the terms
of the signed lease contract and is in line with IAS17:Leases.
We also concluded that deferred and accrued income
balances recorded were appropriate as they were not
materially different from results of our recalculations.
--------------------------------------------------------- -------------------------------------------------------------------------
Accounting for debt using the effective interest method
Key audit matter In order to part-finance acquisition of the asset,
description the company obtained a fixed rate loan. As at 31 March
2019 the value of total debt held by the company was
GBP25.3 million (2018: GBP32.7 million) as disclosed
in Note 14 to the financial statements. The debt is
amortising over the lease term. As set out in Note
2(m) to the financial statements, the debt instruments
are carried at amortised cost with interest expense
recognised at the effective interest rate. The debt
might not be properly accounted for using the effective
interest rate method or adequate disclosures might
not made in the financial statements.
--------------------------------------------------------- -------------------------------------------------------------------------
How the scope Our procedures included:
of our audit * reviewing the debt amortisation schedule prepared by
responded to management to recalculate the effective interest rate
the key audit on the loan and checked whether it is consistent with
matter the repayment schedule;
* obtaining direct confirmation of the principal
balance outstanding and recalculating accrued
interest using the effective interest rate; and
* developing an expectation of the interest charge for
the period using the average outstanding principal
balance during the period and the effective interest
rate.
--------------------------------------------------------- -------------------------------------------------------------------------
Key observations Having carried out the procedures, we concluded that
the debt was appropriately valued in line with the
effective interest rate method and related interest
calculation was within our expectation.
--------------------------------------------------------- -------------------------------------------------------------------------
Our application of materiality
---------------------------------------------------------------------------------
We define materiality as the magnitude of misstatement in the financial
statements that makes it obable that the economic decisions of
a reasonably knowledgeable person would be changed or influenced.
We use materiality both in planning the scope of our audit work
and in evaluating the results of our work
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP961,000 (2018: GBP1,013,000)
Basis for determining 2% (2018: 2%) of forecasted shareholders' equity.
materiality The determined materiality represents 1.95%
of the shareholder's equity at 31 March 2019.
-------------------------------------------------------
Rationale for Our materiality is based on shareholders' equity
the benchmark of the company. Comprehensive income is significantly
applied influenced by fluctuations in exchange rates,
hence it will not be a stable benchmark to
use in our determination of materiality. We
consider shareholders' equity to be the most
important balance on which the shareholders
would judge the performance of the company.
-------------------------------------------------------
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of GBP48,050 (2018: GBP50,650),
as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the
Audit Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
An overview of the scope of our audit
---------------------------------------------------------------------------------------------------------
Our audit was scoped by obtaining an understanding of the company
and its environment, including internal control, and assessing
the risks of material misstatement. Audit work to respond to the
risks of material misstatement was performed directly by the audit
engagement team.
The company is administered by a third party Guernsey regulated
service provider, as part of our audit we assessed the design,
implementation and operating effectiveness of controls established
at the service provider for the purposes of our audit.
This is a standalone entity and the audit of the company's financial
statements has been performed by a single audit team with no involvement
of other auditors.
Other information
---------------------------------------------------------------------------------------------------------
The directors are responsible for the other We have nothing to report
information. The other information comprises in respect of these matters.
the information included in the annual report,
other than the financial statements and
our auditor's report thereon.
Our opinion on the financial statements
does not cover the other information and
we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read
the other information and, in doing so,
consider whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained in
the audit or otherwise appears to be materially
misstated.
If we identify such material inconsistencies
or apparent material misstatements, we are
required to determine whether there is a
material misstatement in the financial statements
or a material misstatement of the other
information. If, based on the work we have
performed, we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
In this context, matters that we are specifically
required to report to you as uncorrected
material misstatements of the other information
include where we conclude that:
* Fair, balanced and understandable - the statement
given by the directors that they consider the annual
report and financial statements taken as a whole is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
company's position and performance, business model
and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
* Audit committee reporting - the section describing
the work of the audit committee does not
appropriately address matters communicated by us to
the audit committee[; or
* Directors' statement of compliance with the UK
Corporate Governance Code - the parts of the
directors' statement that would be required if the
company had a premium listing relating to the
company's compliance with the UK Corporate Governance
Code containing provisions specified for review by
the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a departure from
a relevant provision of the UK Corporate Governance
Code.
Responsibilities of directors
---------------------------------------------------------------------------------------------------------
As explained more fully in the directors' responsibilities statement,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the company or to cease operations,
or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
---------------------------------------------------------------------------------------------------------
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor's report.
Report on other legal and regulatory requirements
Matters on which we are required to report by exception
-------------------------------------------------------------------------------------------------
Adequacy of explanations received and accounting
records We have nothing to report
Under the Companies (Guernsey) Law, 2008 in respect of these matters.
we are required to report to you if, in
our opinion:
* we have not received all the information and
explanations we require for our audit; or
* proper accounting records have not been kept by the
parent company; or
* the financial statements are not in agreement with
the accounting records.
Use of our report
-------------------------------------------------------------------------------------------------
This report is made solely to the company's members, as a body,
in accordance with Section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state
to the company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions
we have formed.
Nicola Sarah Paul
For and on behalf of Deloitte LLP
Recognised Auditor
St Peter Port, Guernsey
5 July 2019
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2019
Year ended Year ended
Notes 31 Mar 2019 31 Mar 2018
GBP GBP
INCOME
A rent income 4 10,419,796 10,176,487
B rent income 4 4,508,388 4,508,388
------------
14,928,184 14,684,875
EXPENSES
Operating expenses 5 (621,486) (627,798)
Depreciation of Asset 9 (3,793,256) (5,106,696)
------------ ------------
(4,414,742) (5,734,494)
Net profit for the period before
finance costs and foreign exchange
(losses)/gains 10,513,442 8,950,381
Finance costs 10 (1,813,492) (2,291,148)
Net profit for the year after finance
costs before foreign exchange (losses)/gains 8,699,950 6,659,233
Unrealised foreign exchange (losses)/gains 18b (3,151,880) 5,384,191
------------ ------------
Profit for the year 5,548,070 12,043,424
------------ ------------
Other Comprehensive Income - -
------------ ------------
Total Comprehensive Income for
the year 5,548,070 12,043,424
------------ ------------
Pence Pence
Earnings per Ordinary Share for
the year - Basic and Diluted 8 13.07 28.37
In arriving at the results for the financial year, all amounts
above relate to continuing operations.
The notes on pages 42 to 66 form an integral part of these
financial statements.
STATEMENT OF FINANCIAL POSITION
As at 31 March 2019
31 Mar 2019 31 Mar 2018
Notes GBP GBP
NON-CURRENT ASSETS
Aircraft 9 83,287,243 87,080,499
----------------------- ----------------------
CURRENT ASSETS
Accrued income 654,870 468,114
Cash and cash equivalents 16 4,009,908 3,984,293
Receivables 12 13,582 12,743
----------------------- ----------------------
4,678,360 4,465,150
----------------------- ----------------------
TOTAL ASSETS 87,965,603 91,545,649
======================= ======================
CURRENT LIABILITIES
Borrowings 14 10,603,335 9,328,715
Deferred income 13,153,168 11,027,679
Payables - due within one year 13 175,811 127,972
----------------------- ----------------------
23,932,314 20,484,366
NON-CURRENT LIABILITIES
Borrowings 14 14,658,681 23,414,245
----------------------- ----------------------
14,658,681 23,414,245
----------------------- ----------------------
TOTAL LIABILITIES 38,590,995 43,898,611
======================= ======================
TOTAL NET ASSETS 49,374,608 47,647,038
----------------------- ----------------------
EQUITY
Share capital 15 39,016,728 39,016,728
Retained earnings 10,357,880 8,630,310
----------------------- ----------------------
49,374,608 47,647,038
----------------------- ----------------------
Pence Pence
Net asset value per Ordinary Share based
on 42,450,000 (Mar 2018: 42,450,000) shares
in issue 116.31 112.24
The financial statements were approved by the Board of Directors
and authorised for issue on 4
July 2019 and are signed on its behalf by:
Charles Wilkinson John Le Prevost
Director Director
The notes on pages 42 to 66 form an integral part of these
financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 March 2019
Year ended Year ended
31 Mar 2019 31 Mar 2018
Notes GBP GBP
OPERATING ACTIVITIES
Profit for the year 5,548,070 12,043,424
Movement in accrued and deferred
income 1,109,553 1,063,354
Depreciation of Asset 9 3,793,256 5,106,696
Loan interest 10 1,752,938 2,230,594
Increase in payables 47,839 70,566
Increase in receivables (839) (59)
Amortisation of debt arrangement
costs 10 60,554 60,554
Foreign exchange movement 18b 3,151,880 (5,384,191)
-------------------- --------------------
NET CASH FROM OPERATING ACTIVITIES 15,463,251 15,190,938
-------------------- --------------------
FINANCING ACTIVITIES
Dividends paid 7 (3,820,500) (3,820,500)
Repayments of capital on borrowings 19 (10,014,993) (9,216,397)
Repayments of interest on borrowings 19 (1,739,923) (2,231,299)
-------------------- --------------------
NET CASH USED IN FINANCING ACTIVITIES (15,575,416) (15,268,196)
-------------------- --------------------
CASH AND CASH EQUIVALENTS AT BBEGINNINGBEGINNING
BEGINNING OF YEAR 3,984,293 4,376,502
Decrease in cash and cash equivalents (112,165) (77,258)
Exchange rate adjustment 137,780 (314,951)
-------------------- --------------------
CASH AND CASH EQUIVALENTS AT
OF
YEAR 16 4,009,908 3,984,293
-------------------- --------------------
The notes on pages 42 to 66 form an integral part of these
financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2019
Notes Share Retained Total
Capital Earnings
GBP GBP GBP
Balance as at 1 April 2018 39,016,728 8,630,310 47,647,038
Total Comprehensive Income
for the year - 5,548,070 5,548,070
Dividends paid 7 - (3,820,500) (3,820,500)
------------ ------------------ --------------
Balance as at 31 March 2019 39,016,728 10,357,880 49,374,608
------------ ------------------ --------------
Notes Share Retained Total
Capital Earnings
GBP GBP GBP
Balance as at 1 April 2017 39,016,728 407,386 39,424,114
Total Comprehensive Income
for the year - 12,043,424 12,043,424
Dividends paid 7 - (3,820,500) (3,820,500)
------------ ------------ ------------
Balance as at 31 March 2018 39,016,728 8,630,310 47,647,038
------------ ------------ ------------
The notes on pages 42 to 66 form an integral part of these
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2019
1 GENERAL INFORMATION
Doric Nimrod Air One Limited (the "Company") was incorporated in
Guernsey on 8 October 2010 with registered number 52484. The address
of the registered office is given on page 66.
Its share capital consists of one class of Ordinary Preference Shares
("Ordinary Shares") and one class of Subordinated Administrative
Shares ("Administrative Shares"). The Company's Ordinary Preference
Shares have been admitted to trading on the Specialist Fund Segment("SFS")
of the London Stock Exchange's Main Market (the "LSE").
The Company's investment objective is to obtain income returns and
a capital return for its shareholders by acquiring, leasing and
then selling a single aircraft. The principal activities of the
Company are set out in the Chairman's Statement and Management Report
on pages 4 and 14 respectively.
2 ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are
as follows:
(a) Basis of Preparation
The financial statements have been prepared in conformity with
IFRS, as adopted by the European Union ("EU"), which comprise
standards and interpretations approved by the International
Accounting Standards Board ("IASB") and International Financial
Reporting Interpretations Committee ("IFRIC") as adopted by the EU
and applicable Guernsey law. The financial statements have been
prepared on a historical cost basis.
The accounting policies adopted are consistent with those of the
previous financial year, except for the adoption of the new and
amended standards set out below:
(b) Adoption of new and revised Standards
New and amended IFRS Standards that are effective for current
year
The following Standards or Interpretations have been adopted in
the current period. Their adoption has not had any impact on the
amounts reported in these financial statements and is not expected
to have any impact on future financial periods:
-- IFRS 9, 'Financial Instruments - Classification and
Measurement, Impairment of Financial Assets, Hedge Accounting'.
Effective for accounting periods commencing on or after 1 January
2018 and is endorsed by the EU.
-- IFRS 15 and amendments to IFRS 15 Revenue from contracts with
customers - The standard and amendments are effective for annual
periods beginning on or after 1 January 2018 and is endorsed by the
EU.
(i) Impact of initial application of IFRS 9 Financial
Instruments
IFRS 9 replaces the provisions of IAS 39 that relate to the
recognition, classification and measurement of financial assets and
financial liabilities, derecognition of financial instruments,
impairment of financial assets and hedge accounting.
The adoption of IFRS 9 'Financial Instruments' from 1 April 2018
did not result in any adjustments to the amounts recognised in the
financial statements and accordingly there was no impact on the
retained earnings as at 1 April 2018. The new accounting policies
reflecting the new terminology of IFRS 9 are set out in Note 2 (m)
below.
Classification Financial Assets and of Financial Liabilities
IFRS 9 contains three principal classification categories for financial
assets and liabilities: measured at amortised cost, fair value
through other comprehensive income ("FVOCI") and fair value through
profit or loss ("FVTPL"). IFRS 9 classification is generally based
on the business model in which a financial asset is managed and
its contractual cash flows.
Based on the Company's assessment, this standard does not have
a material impact on the classification of financial assets and
financial liabilities of the Company. This is because:
* financial instruments currently measured at amortised
cost are accrued income, short-term investments, cash
and cash equivalents, receivables, borrowings,
deferred income and payables. These instruments meet
the solely principal and interest criterion and are
held in a held-to-collect business model. Accordingly,
they will continue to be measured at amortised cost
under IFRS 9.
Impairment of Financial Assets
IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected
credit loss' model. The new impairment model also applies to certain
loan commitments and financial guarantee contracts but not to equity
investments. Under IFRS 9, credit losses are recognised earlier
than under IAS 39.
The Company assesses on a forward looking basis the expected credit
losses associated with its debt instruments carried at amortised
cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. The Company has
chosen to apply the simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables.
Based on the Company's assessment, changes to the impairment model
do not have a material impact on the financial assets of the Company.
This is because:
* the accrued income and receivables at amortised cost
are short-term (i. e. no longer than 12 months) and
considered to be of high credit quality as the
Company selected a lessee with a strong balance sheet
and financial outlook which has no history of
defaulting on any rental payments.
* while cash and cash equivalents are also subject to
the impairment requirements of IFRS 9, the identified
impairment loss is expected to be small as the
instruments are held with regulated entities subject
to prudential supervision, or with high credit
ratings assigned by international credit rating
agencies.
(ii) Impact of application of IFRS 15 Revenue from Contracts with
Customers
-
IFRS 15 deals with revenue recognition and establishes principles
for reporting useful information to users of financial statements
about the nature, amount, timing and uncertainty of revenue and
cash flows arising from an entity's contracts with customers. Revenue
is recognised when a customer obtains control of a good or service
and thus has the ability to direct the use and obtain the benefits
from the good or service. The standard replaces IAS 18 'Revenue'
and IAS 11 'Construction contracts', related interpretations. The
only contractual receipts which the Company currently has are rental
income from Emirates leasing its Aircraft. Rental income is currently
recognised in accordance with IAS 17 (which will be replaced by
IFRS 16 which is specifically excluded from IFRS 15. The adoption
of IFRS 15 'Revenue from Contracts with Customers' from 1 April
2018 does thus not materially impact the financial statements.
(iii) Impact of adoption of IFRIC 22 Foreign Currency transactions
and advance consideration
IFRIC 22 'Foreign currency transactions and advance consideration'
- this IFRIC addresses foreign currency transactions or parts of
transactions where there is consideration that is denominated or
priced in a foreign currency. The interpretation provides guidance
for when a single payment/receipt is made as well as for situations
where multiple payments/receipts are made. The guidance aims to
reduce diversity in practice, is effective for annual periods beginning
on or after 1 January 2018 and is endorsed by the EU. The adoption
of this standard did not have an impact as the Group did not participate
in any foreign currency transactions involving an advance payment
or receipt in current year.
New and Revised Standards in issue but not yet effective
The following Standards or Interpretations, which are expected
to affect the Company, have been issued but not yet adopted by
the Company. Other Standards or Interpretations issued by the International
Accounting Standards Board ("IASB") and International Financial
Reporting Standards Interpretations Committee ("IFRIC") are not
expected to affect the Company.
IFRS 16 Leases - specifies how an IFRS reporter will recognise,
measure, present and disclose leases. The standard provides a single
lessee accounting model, requiring lessees to recognise assets
and liabilities for all leases unless the lease term is 12 months
or less or the underlying asset has a low value. Lessors continue
to classify leases as operating or finance, with IFRS 16's approach
to lessor accounting substantially unchanged from its predecessor,
IAS 17. This standard is effective for annual periods beginning
on or after 1 January 2019 and is endorsed by the EU.
The Directors have considered the above and are of the opinion
that the above Standards and Interpretations are not expected to
have an impact on the Company's financial statements except for
the presentation of additional disclosures and changes to the presentation
of components of the financial statements. These items will be
applied in the first financial period for which they are required.
(c) Taxation
The Company has been assessed for tax at the Guernsey standard
rate of 0 percent
(d) Share Capital
Ordinary Shares are classified as equity. Incremental costs
directly attributable to the issue of Shares are recognised as a
deduction from equity.
(e) Expenses
All expenses are accounted for on an accruals basis.
(f) Interest Income
Interest income is accounted for on an accruals basis.
(g) Foreign Currency Translation
The currency of the primary economic environment in which the
Company operates (the functional currency) is Pounds Sterling
("GBP" or "Sterling"), which is also the presentation currency.
Transactions denominated in foreign currencies are translated
into Sterling at the rate of exchange ruling at the date of the
transaction.
Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated into the functional
currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
Statement of Comprehensive Income.
(h) Cash and Cash Equivalents
Cash at bank and short term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits with a term of no more than three
months from the start of the deposit and highly liquid investments
readily convertible to known amounts of cash and subject to
insignificant risk of changes in value.
(i) Segmental Reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being acquiring, leasing and selling
of one Airbus A380-861 aircraft (the "Asset").
(j) Going Concern
After making enquiries, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future.
The Directors believe the Company is well placed to manage its
business risks successfully despite the current economic climate as
the interest on the Company's Loan has been fixed and the fixed
rental income under the operating lease means that the rents should
be sufficient to repay the Loan and provide surplus income to pay
for the Company's expenses and permit payment of dividends.
Accordingly, the Directors have adopted the going concern basis in
preparing the financial information. The Board is not aware of any
material uncertainty that may cast significant doubt upon the
Company's ability to continue as a going concern.
(k) Leasing and Rental Income
The lease relating to the Asset has been classified as an
operating lease as the terms of the lease do not transfer
substantially all the risks and rewards of ownership to the lessee.
The Asset is shown as a non-current asset in the Statement of
Financial Position. Further details of the lease are given in Note
11.
Rental income and advance lease payments from the operating
lease are recognised on a straight line basis over the term of the
lease. Initial direct costs incurred in negotiating and arranging
an operating lease are added to the carrying amount of the leased
asset and recognised in profit or loss on a straight-line basis
over the lease term.
(l) Property, Plant and Equipment - Aircraft
In line with IAS 16 Property Plant and Equipment, the Asset is
initially recorded at the fair value of the consideration paid. The
cost of the Asset is made up of the purchase price of the Asset
plus any costs directly attributable to bringing it into working
condition for its intended use. Costs incurred by the lessee in
maintaining, repairing or enhancing the Aircraft are not recognised
as they do not form part of the costs to the Company. Accumulated
depreciation and any recognised impairment loss are deducted from
cost to calculate the carrying amount of the Asset.
Depreciation is recognised so as to write off the cost of the
Asset less the estimated residual value over the estimated useful
life of the Asset of 12 years, using the straight line method. As
at 31 March 2019, the estimated residual value of the Asset is
GBP69.3 million (2018: GBP63.1 million). Residual values have been
arrived at by taking the average amount of three independent
external valuers and after taking into account disposition fees.
The Directors consider that the use of forecast base values
excluding inflation best approximates residual value as required by
IAS 16 Property, Plant and Equipment.
The depreciation method reflects the pattern of benefit
consumption. The residual value is reviewed annually and is an
estimate of the amount the Company would receive today if the Asset
were already of the age and condition expected at the end of its
useful life. Useful life is also reviewed annually and, for the
purposes of the financial statements, represents the likely period
of the Company's ownership of the Asset. Due to a change in
estimate of residual value for the aircraft in the current year,
there has been a GBP1,313,438 decrease in the annual depreciation
for the current year as a result. Depreciation starts when the
Asset is available for use.
At each audited Statement of Financial Position date, the
Company reviews the carrying amounts of the Asset to determine
whether there is any indication that the Asset has suffered an
impairment loss. If any such indication exists, the recoverable
amount of the Asset is estimated to determine the extent of the
impairment loss (if any). Further details are given in Note 3.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the Asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of the Asset is estimated to be less
than its carrying amount, the carrying amount of the Asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the Asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the Asset in prior years. A
reversal of an impairment loss is recognised immediately in profit
or loss.
(m) Financial instruments
A financial instrument is recognised when the Company becomes a
party to the contractual provisions of the instrument. Financial
liabilities are derecognised if the Company's obligations,
specified in the contract, expire or are discharged or cancelled.
Financial assets are derecognised if the Company's contractual
rights to the cash flows from the financial assets expire, are
extinguished, or if the Company transfers the financial assets to a
third party and transfers all the risks and rewards of ownership of
the asset, or if the Company does not retain control of the asset
and transfers substantially all the risk and rewards of ownership
of the asset.
Under IFRS 9, on initial recognition, a financial asset is
classified as measured at:
- Amortised cost;
- Fair value through other comprehensive income ("FVOCI"); or
- Fair value through profit or loss ("FVTPL").
The classification of financial assets under IFRS 9 is generally
based on the business model in which a financial asset is managed
and its contractual cash flow characteristics. The Company only has
financial assets that are classified as amortised cost.
i) Financial assets held at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and
interest are measured at amortised cost. These assets are
subsequently measured at amortised cost using the effective
interest method. The effective interest method calculates the
amortised cost of financial instruments and allocates the interest
over the period of the instrument.
The Company's financial assets held at amortised cost include
trade and other receivables and cash and cash equivalents.
The Company assesses on a forward looking basis the expected
credit losses associated with its financial assets held at
amortised cost. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
ii) Financial liabilities held at amortised cost
Financial liabilities consist of payables and borrowings. The classification
of financial liabilities at initial recognition depends on the purpose
for which the financial liability was issued and its characteristics.
All financial liabilities are initially measured at fair value,
net of transaction costs. All financial liabilities are recorded
on the date on which the Company becomes party to the contractual
requirements of the financial liability. Financial liabilities are
subsequently measured at amortised cost using the effective interest
method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised
cost of the financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
The Company derecognises financial liabilities when, and only when,
the Company's obligations are discharged, cancelled or they expire.
The impact of the adoption of the above standard are disclosed in
Note 2 (b).
3 SIGNIFICANT JUDGEMENTS AND ESTIMATES
In the application of the Company's accounting policies, which are
described in Note 2, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the
revision affects both current and future periods.
The following are the critical judgements and estimates that the
Directors have made in the process of applying the Company's accounting
policies and that have the most significant effect on the amounts
recognised in financial statements.
Estimates
Residual Value and Useful Life of the Asset
As described in Note 2 (l), the Company depreciates the Asset on
a straight line basis over the estimated useful life of the Asset
after taking into consideration the estimated residual value. IAS
16 Property, Plant and Equipment requires residual value to be determined
as an estimate of the amount that the Company would currently obtain
from the disposal of the Asset, after deducting the estimated costs
of disposal, if the Asset were of the age and condition expected
at the end of its useful life. However, there are currently no aircraft
of a similar type of sufficient age for the Directors to make a
direct market comparison in making this estimation. After consulting
with the Company's Advisors, the Directors have concluded that a
forecast base value (determined annually) for the Aircraft at the
end of its useful life (excluding inflationary effects) best represents
residual value as required by a strict interpretation of relevant
accounting standards. In estimating residual value for the year,
the Directors referred to forecast base values (excluding inflationary
effects) for the Asset obtained from three independent expert aircraft
valuers.
The estimation of residual value remains subject to inherent uncertainty.
If the estimate of residual value had been decreased by 20 percent.
with effect from the beginning of this period, the net profit for
the period and closing shareholders' equity would have been decreased
by approximately GBP2.9 million (2018: GBP2.2 million). An increase
in residual value by 20 percent would have been an equal but opposite
effect. This reflects the range of estimates of residual value that
the Directors believe would be reasonable at this time. The estimated
useful life of the Asset is based on the expected period for which
the Company will own and lease the Asset.
Judgements
Operating Lease Commitments - Company as Lessor
The Company has entered into a lease on the Asset. The Company
has determined, based on an evaluation of the terms and conditions
of the arrangements, that it retains all the significant risks and
rewards of ownership of this asset and accounts for the contract as
an operating lease.
The Company has determined that the operating lease on the Asset
is for 12 years without an extension option.
Impairment
As described in Note 2(l), an impairment loss exists when the
carrying value of an asset or cash generating unit exceeds its
recoverable amount, which is the higher of its fair value less
costs to sell and its value-in-use. The Directors review the
carrying amount of its Asset at each audited Statement of Financial
Position date and monitor the Asset for any indications of
impairment as required by IAS 16 Property, Plant and Equipment and
IAS 36 Impairment of Assets.
In assessing value-in-use, the estimated future cash flows
expected to be generated by the asset (ie the income streams
associated with the lease and the expected future market value of
the aircraft at the end of the lease) are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the Asset.
In determining fair value less costs of disposal, recent market
transactions are taken into account, if available. If no such
transactions can be identified, an appropriate valuation model is
used. Such valuation reflects the highest and best use of the Asset
given the fact that the Aircraft are held for use in a leasing
business.
Factors that are considered important which could trigger an
impairment review include, but are not limited to, significant
decline in the market value beyond that which would be expected
from the passage of time or normal use, significant changes in the
technology and regulatory environments, evidence from internal
reporting which indicates that the economic performance of the
Asset is, or will be, worse than expected.
The Board together with the Asset Manager believes that it would
be prudent to conduct an impairment test in the current year as the
below items may result in pricing changes for the current portfolio
of Aircraft:
-- As further Airbus A380 aircraft reach comparable 12 year ages
and exit their first lease agreements further market data is
available to Doric and the asset valuers.
-- Lack of publicly available secondary market data for the specific aircraft.
-- Changing technologies, market innovation and changes to key
production programs as well as the success and / or failure as well
as the timing of new aircraft model launches.
-- Information regarding Airbus cancellation of the A380
programme, creating uncertainty as to the liquidity of the future
market for sale or re-lease.
The assessment was performed by comparing the net book value of
the Aircraft to the higher of its respective fair value less costs
to sell and value-in-use. In determining the value-in-use, the
gross value of future contractual cash flows including a residual
value assumption was discounted to present value, using the
Company's discount rate, as the cash flows are contractual. Any
assumptions with regards to issues in counterparty credit risk
would be reflected in the discount rate used to calculate the net
present value of future contractual cash flows. There are no
indications at this time that Emirates will default or that the
Aircraft will not be marketable post lease. In determining the fair
value less costs to sell, the current market value of the Aircraft
was used, less estimated costs to dispose of the Aircraft.
The Asset Manager considers that 6.5% is the most appropriate
discount rate for the following reasons;
-- The discount rate should be a rate commensurate with what a
normal market participant would consider to be the risk inherent in
the assets; and
-- As the Aircraft is with Emirates, who is considered to have a low credit risk profile.
Based on the impairment review performed, the Directors are of
the opinion that no impairment loss is required to be recognised in
the current year.
In addition, these values have been tested for their sensitivity
to the discount rate and the residual value, the following being
the two largest inputs into the calculation:
-- Discount rates at -1% and +1% intervals have been tested on
either side of the Company discount rate (6.5%); and
-- A reduction of the residual value used in the calculation by 10% and 20% respectively.
The sensitivity test exhibited that the recoverable amount is
greater than the net nook value at financial year end for the
Aircraft, except when using an 8.5% or higher discount rate and a
20% or higher reduction in residual value, a situation the Asset
Manager considers highly unlikely. As such, no impairment is
identified.
4 RENTAL INCOME
Year ended Year ended
31 Mar 2019 31 Mar 2018
GBP GBP
A rent income 11,716,105 11,426,597
Revenue received but not yet
earned (1,296,309) (1,250,110)
------------ ---------------
10,419,796 10,176,487
B rent income 4,321,632 4,321,632
Revenue earned but not yet received 186,756 186,756
----------- -------------
4,508,388 4,508,388
Total rental income 14,928,184 14,684,875
----------- -------------
Rental income is derived from the leasing of the Asset. Rent is
split into A rent, which is received in US dollars ("$") and B rent,
which is received in Sterling. Rental income received in US dollars
is translated into the functional currency (Sterling) at the date
of the transaction.
A and B rental income receivable will decrease / increase respectively,
10 years from the start of the lease between the Company and Emirates
(the "Lease"). An adjustment has been made to spread the actual
total income receivable evenly over the term of the Lease.
5 OPERATING EXPENSES
Year ended Year ended
31 Mar 2019 31 Mar 2018
GBP GBP
118,152 114,284
Corporate shareholder and adviser fee
(Note 21)
Asset Management fee (Note 21) 295,388 285,706
Liason agency fees (Note 21) 11,316 10,809
Administration fees 61,493 61,775
Accountancy fees 11,149 10,931
Registrars fee (Note 21) 10,236 9,884
Audit fee 23,450 21,000
Directors' remuneration (Note 6) 50,000 67,800
Directors' and Officers' insurance 7,900 8,031
Legal and professional expenses 13,874 16,200
Annual fees 7,400 7,304
Other operating expenses 11,128 14,074
--------------------------- ---------------------------
621,486 627,798
--------------------------- ---------------------------
6 DIRECTORS' REMUNERATION
Under their terms of appointment, each Director is paid a fee of
GBP15,000 per annum by the Company, except for the Chairman, who
receives GBP20,000 per annum. Where an individual has been
appointed to the position, the Chairman of the audit committee is
entitled to receive an additional GBP3,000 per annum.
7 DIVIDS IN RESPECT OF EQUITY SHARES
Dividends in respect of Ordinary Year ended
Shares 31 Mar 2019
GBP Pence per
share
First interim dividend 955,125 2.25
Second interim dividend 955,125 2.25
Third interim dividend 955,125 2.25
Fourth interim dividend 955,125 2.25
------------------- -------------------
3,820,500 9.00
------------------- -------------------
Dividends in respect of Ordinary Year ended
Shares 31 Mar 2018
GBP Pence per
Ordinary
Share
First interim dividend 955,125 2.25
Second interim dividend 955,125 2.25
Third interim dividend 955,125 2.25
Fourth interim dividend 955,125 2.25
------------------- -------------------
3,820,500 9.00
------------------- -------------------
8 EARNINGS PER SHARE
Earnings per Share ("EPS") is based on the net profit for the
year attributable to holders of Ordinary Shares in the Company ("Shareholders")
of GBP5,548,070 (31 March 2018: GBP12,043,424) and 42,450,000 Shares
(31 March 2018: 42,450,000) being the weighted average number of
Ordinary Shares in issue during the year.
There are no dilutive instruments and therefore basic and diluted
EPS are identical.
9 PROPERTY, PLANT AND EQUIPMENT - AIRCRAFT
COST Aircraft
As at 1 Apr 2018 GBP
114,532,547
----------------
As at 31 Mar 2019 114,532,547
ACCUMULATED DEPRECIATION
As at 1 Apr 2018 27,452,048
----------------
Depreciation charge based on previous residual values 5,106,694
Adjustment due to change in US dollar residual values (279,815)
Adjustment due to FX movements on residual values (1,033,623)
----------------
Net depreciation charge for the year 3,793,256
----------------
As at 31 Mar 2019 31,245,304
----------------
CARRYING AMOUNT
As at 31 Mar 2019 83,287,243
----------------
As at 31 Mar 2018 87,080,499
----------------
The cost in US dollars and the exchange rates at acquisition for
the Aircraft was as follows:
Cost in USD 178,549,805
GBP/US dollars exchange rate 1.5502
The Company believes that the use of forecast base values excluding
inflation best approximates residual value as required per IAS 16
Property, Plant and Equipment (refer to note 3). The combined effect
of translating residual values at the Sterling / US Dollar exchange
rate prevailing at 31 March 2019 of 1.3035 (31 March 2018: 1.4018)
and a 2.1 per cent. increase in average appraised residual values
in US Dollar terms, resulted in a GBP1,313,438 decrease in the annual
depreciation charge for the current year.
The Company may dispose of the Asset during the term of the Lease,
but is required to meet certain conditions and needs Emirates' consent
(such consent not be unreasonably withheld). If at the end of the
Lease the Company makes the choice to sell the Asset rather than
leasing it out again, Emirates will be given first refusal to purchase
the Asset at an independently appraised value.
Under IAS 17 Leases the direct costs attributed in negotiating and
arranging the Lease have been added to the carrying amount of the
Asset and will be recognised as an expense over the lease term.
Refer to Note 3 for details on the impairment review and sensitivities
conducted.
10 FINANCE COSTS
Year ended Year ended
31 Mar 2019 31 Mar 2018
GBP GBP
Amortisation of debt arrangement
costs 60,554 60,554
Loan interest 1,752,938 2,230,594
------------- -------------
1,813,492 2,291,148
------------- -------------
11 OPERATING LEASES
The amounts of minimum future lease receipts at the reporting
date under non cancellable operating leases are detailed below:
31 Mar 2019 After 5
Next 12 1 to 5 years Total
months years
GBP GBP GBP GBP
Aircraft - A rental
payments 11,711,566 13,837,692 - 25,549,258
Aircraft - B rental
payments 4,321,632 13,082,208 - 17,403,840
----------- ----------- -------- -----------
16,033,198 26,919,900 - 42,953,098
----------- ----------- -------- -----------
31 Mar 2018 1 to 5 After 5
Next 12 years years Total
months
GBP GBP GBP GBP
Aircraft- A rental
payments 10,890,292 23,757,639 - 34,647,931
Aircraft - B rental
payments 4,321,632 17,403,840 - 21,725,472
----------- ----------- -------- -----------
15,211,924 41,161,479 - 56,373,403
----------- ----------- -------- -----------
The operating lease is for an Airbus A380-861 aircraft. The term
of the lease is for 12 years ending December 2022 with reduced
rental payments in the last two years and no extension option.
At the end of the lease term the lessee has the right to
exercise an option to purchase the Asset if the Company chooses to
sell the Asset. If a purchase option event occurs the Company and
the lessee will be required to arrange for a current market value
appraisal of the Asset to be carried out by three independent
appraisers. The purchase price will be equal to the average
valuation of those three appraisals.
12 RECEIVABLES
31 Mar 2019 31 Mar 2018
GBP GBP
Prepayments 13,571 12,732
Sundry debtors 11 11
------------
13,582 12,743
------------ ------------
The above carrying value of receivables is equivalent to its
fair value.
13 PAYABLES (amounts falling due within one year)
31 Mar 2019 31 Mar 2018
GBP GBP
Accrued administration fees 6,015 6,011
Accrued audit fee 13,710 12,960
Accrued asset manager and corporate
and shareholder adviser fees 147,711 99,998
Other accrued expenses 8,375 9,003
------------
175,811 127,972
------------ ------------
The above carrying value of payables is equivalent to its fair
value.
14 BORROWINGS
31 Mar 2019 31 Mar 2018
GBP GBP
Bank loan 25,486,481 33,027,979
Transaction costs (224,465) (285,019)
------------ ------------
25,262,016 32,742,960
------------ ------------
Current portion 10,603,335 9,328,715
------------ ------------
Non-current portion 14,658,681 23,414,245
------------ ------------
Notwithstanding the fact that GBP10 million of capital was repaid
during the period, as per the Statement of Cash Flows, the value
of the borrowings has only decreased by GBP7.4 million due to the
7 percent decrease in the Sterling/US dollar exchange rate for the
year ended 31 March 2019.
The amounts below detail the future contractual undiscounted cashflows
in respect of the Loan, including both the principal and interest
payments, and will not agree directly to the amounts recognised
in the Statement of Financial Position:
31 Mar 2019 31 Mar 2018
GBP GBP
Amount due for settlement within 12 months 11,782,056 10,955,849
Amount due for settlement after 12 months 15,772,354 25,622,181
------------ ------------
The loan was arranged with Westpac Banking Corporation ("Westpac")
for $122,000,000, runs for 12 years until December 2022 and has
an effective interest rate of 5.4950 percent, which is the same
as the contractual fixed interest rate. The Loan is secured on the
Asset. No breaches or defaults occurred in the year. Transaction
costs of arranging the Loan have been deducted from the carrying
amount of the Loan and are being amortised over its life.
In the Directors' opinion, the above carrying value of the bank
loan is approximate to its fair value.
15 SHARE CAPITAL
The Share Capital of the Company is represented by an unlimited
number of shares of no par value being issued or reclassified by
the Company as Ordinary Shares or Administrative Shares.
Issued Administrative Ordinary
Shares Shares
Issued shares as at 31 March 2019
and as at 31 March 2018 2 42,450,000
------------------------ --------------
GBP
Ordinary Share Capital
Total Share Capital as at 31 March 2019 and as
at 31 March 2018 39,016,728
--------------
Members holding Ordinary Shares are entitled to receive and participate
in any dividends out of income; other distributions of the Company
available for such purposes and resolved to be distributed in respect
of any accounting period; or other income or right to participate
therein. On a winding up, members are entitled to the surplus assets
remaining after payment of all the creditors of the Company. Members
have the right to receive notice of and to attend, speak and vote
at general meetings of the Company.
The holders of Administrative Shares are not entitled to receive,
and participate in, any dividends out of income; other distributions
of the Company available for such purposes and resolved to be distributed
in respect of any accounting period; or other income or right to
participate therein. On a winding up, holders are entitled to a
return of capital paid up on them after the Ordinary Shares have
received a return of their capital paid up but ahead of the return
of all additional capital to the holders of Ordinary Shares. Holders
of Administrative Shares shall not have the right to receive notice
of and shall have no right to attend, speak and vote at general
meetings of the Company, except for the Liquidation Proposal Meeting
(general meeting convened six months before the end term of the
Lease where the Liquidation Resolution will be proposed) or if there
are no Ordinary Shares in existence.
The Ordinary Shares are not puttable instruments as the holder does
not have the right to put the Ordinary Shares back to the Company
for cash or another financial instrument.
16 CASH AND CASH EQUIVALENTS
31 Mar 2019 31 Mar 2018
GBP GBP
Cash at bank 4,009,908 3,984,293
---- ------------ --------------
Cash and cash equivalents are highly liquid, readily convertible
and are subject to insignificant risk of changes in value.
17 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the
Company's operations; and
(b) Loan secured on non-current asset.
18 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's objective is to obtain income returns and a
capital return for its Shareholders by acquiring, leasing and then
selling a single aircraft.
The following table details the categories of financial assets
and liabilities held by the Company at the reporting date:
31 Mar 2019 31 Mar 2018
GBP GBP
Financial assets
Cash and cash equivalents 4,009,908 3,984,293
Receivables (excluding prepayments) 11 11
------------ ------------
Financial assets at amortised cost 4,009,919 3,984,304
------------ ------------
Financial liabilities
Payables 175,811 127,972
Loans payable 25,262,016 32,742,960
------------ ------------
Financial liabilities measured at amortised
cost 25,437,827 32,870,932
------------ ------------
The main risks arising from the Company's financial instruments
are capital management risk, foreign currency risk, credit risk,
liquidity risk and interest rate risk. The Board regularly reviews
and agrees policies for managing each of these risks and these are
summarised below:
(a) Capital Management
The Company manages its capital to ensure that the Company will
be able to continue as a going concern while maximising the return
to Shareholders through the optimisation of the debt and equity
balance. The Company is not subject to any externally imposed capital
requirements.
The capital structure of the Company consists of debt, which includes
the borrowings disclosed in Note 14, cash and cash equivalents disclosed
in Note 16 and equity attributable to equity holders, comprising
issued capital and retained earnings.
The Company's Board reviews the capital structure on a bi-annual
basis.
Equity includes all capital and reserves of the Company that are
managed as capital.
No changes were made in the objectives, policies or processes for
managing capital during the years ended 31 March 2019 and 2018.
(b) Foreign Currency Risk
The Company's accounting policy under IFRS requires the use of a
Sterling historic cost of the Asset and the value of the US dollar
loan as translated at the spot exchange rate on every statement of
financial position date. In addition, US dollar operating lease
receivables are not immediately recognised in the statement of
financial position and are accrued over the period of the Lease.
The Directors consider that this introduces artificial variance due
to the movement over time of foreign exchange rates. In actuality,
the US dollar operating lease receivables should offset the US
dollar payables on amortising loans. The foreign exchange exposure
in relation to the Loan is thus largely naturally hedged.
Lease rentals (as detailed in Notes 4 and 11) are received in US
dollars and Sterling. Those lease rentals received in US dollars
are used to pay the loan repayments due, also in US dollars. Both
US dollar lease rentals and loan repayments are fixed and are for
similar sums and similar timings. The matching of lease rentals to
settle loan repayments therefore mitigates risks caused by foreign
exchange fluctuations.
The carrying amounts of the Company's foreign currency
denominated monetary assets and liabilities at the reporting date
are as follows:
31 Mar 2019 31 Mar 2018
GBP GBP
Bank loan (US dollar) - liabilities (25,486,481) (33,027,979)
Cash and cash equivalents (US dollar)
- assets 2,346,211 2,247,268
------------- -------------
The following table details the Company's sensitivity to a 25
percent (31 March 2018: 25 percent) appreciation of Sterling
against the US dollar. 25 percent (31 March 2018: 25 percent)
represents the Directors' assessment of the reasonably possible
change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and
adjusts their translation at the year end for a 25 percent (31
March 2018: 25 percent) change in foreign currency rates. A
positive number below indicates an increase in profit and equity
where Sterling strengthens 25 percent (31 March 2018: 25 percent)
against US dollar. For a 25 percent (31 March 2018: 25 percent)
weakening of Sterling against the US dollar, there would be a
comparable but opposite impact on the profit and equity.
31 Mar 2019 31 Mar 2018
USD impact USD impact
GBP GBP
Profit or loss 4,628,054 6,156,142
Assets (469,242) (449,454)
Liabilities 5,097,296 6,605,596
----------------- -----------------
On the eventual sale of the Asset, the Company may be subject to
foreign currency risk if the sale was made in a currency other than
Sterling. Transactions in similar assets are typically priced in US
dollars.
(c) Credit Risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company.
The credit risk on cash transactions are mitigated by
transacting with counterparties that are regulated entities subject
to prudential supervision, or with high credit ratings assigned by
international credit rating agencies.
The Company's financial assets exposed to credit risk are as
follows:
31 Mar 2019 31 Mar 2018
GBP GBP
Receivables (excluding prepayments) 11 11
Cash and cash equivalents 4,009,908 3,984,293
------------
4,009,919 3,984,304
------------ ------------
Surplus cash is held in accounts with Barclays and Westpac
Banking Corporation, which have credit ratings given by Moody's of
A2 (stable) and Aa3 (stable) respectively.
There is a contractual credit risk arising from the possibility
that the lessee may default on the lease payments. This risk is
mitigated, as under the terms of the lease agreement between the
lessee and the Company, any non-payment of the lease rentals
constitutes a Special Termination Event, under which the lease
terminates and the Company may either choose to sell the Asset or
lease it to another party.
At the inception of the Lease, the Company selected a lessee
with a strong balance sheet and financial outlook. The financial
strength of Emirates is regularly reviewed by the Board and the
Asset Manager.
(d) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty
in realising assets or otherwise raising funds to meet financial
commitments. The Company's main financial commitments are its ongoing
operating expenses and loan repayments to Westpac.
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which established an appropriate liquidity
management framework at the incorporation of the Company, through
the timings of lease rentals and loan repayments. The Company manages
liquidity risk by maintaining adequate reserves, banking facilities
and borrowing facilities, by monitoring forecast and actual cash
flows, and by matching profiles of financial assets and liabilities.
The table below details the residual contractual maturities of financial
liabilities, including estimated interest payments. The amounts
below are contractual undiscounted cash flows, including both principal
and interest payments, and will not agree directly to the amounts
recognised in the statement of financial position.
31 Mar 2019 1-3 months 3-12 months 1-2 years 2-5 years Over 5 years
GBP GBP GBP GBP GBP
Financial liabilities
Payables -
due within
one year 175,811 - - - -
Loans payable 2,945,514 8,836,542 11,782,056 15,772,354 -
----------- ------------ ----------- ----------- -------------
3,121,325 8,836,542 11,782,056 15,772,354 -
----------- ------------ ----------- ----------- -------------
31 Mar 2018 1-3 months 3-12 months 1-2 years 2-5 years Over 5 years
GBP GBP GBP GBP GBP
Financial liabilities
Payables -
due within
one year 127,972 - - - -
Loans payable 2,738,962 8,216,887 10,955,849 14,666,332 -
2,866,934 8,216,887 10,955,849 14,666,332 -
----------- ------------ ----------- ----------- -------------
(e) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest
rates will affect future cash flows. It is the risk that fluctuations
in market interest rates will result in a reduction in deposit interest
earned on bank deposits held by the Company.
The Company mitigates interest rate risk by fixing the interest
rate on the Loan and the lease rentals.
The following table details the Company's exposure to interest rate
risks, by interest rate refinancing period:
31 Mar 2019 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial assets
Receivables (excluding
prepayments) - - 11 11
Cash and cash
equivalents 4,009,908 - - 4,009,908
---------------------- ----------------------- ----------------------------- ----------
Total financial assets 4,009,908 - 11 4009,919
---------------------- ----------------------- ----------------------------- ----------
Financial liabilities
Payables - - 175,811 175,811
Loans payable - 25,486,481 - 25,486,481
---------------------- ----------------------- ----------------------------- ----------
Total financial
liabilities - 25,486,481 175,811 25,662,292
---------------------- ----------------------- ----------------------------- ----------
Total interest
sensitivity
gap 4,009,908 25,486,481
---------------------- -----------------------
31 Mar 2018 Variable Fixed Non-interest Total
interest interest Bearing
GBP GBP GBP GBP
Financial assets
Receivables (excluding
prepayments - - 11 11
Cash and cash
equivalents 3,984,293 - - 3,984,293
---------------------- ----------------------- ----------------------------- ----------
Total financial assets 3,984,293 - 11 3,984,304
---------------------- ----------------------- ----------------------------- ----------
Financial liabilities
Payables - - 127,972 127,972
Loans payable - 33,027,979 - 33,027,979
---------------------- ----------------------- ----------------------------- ----------
Total financial
liabilities - 33,027,979 127,972 33,155,951
---------------------- ----------------------- ----------------------------- ----------
Total interest
sensitivity
gap 3,984,293 33,027,979
---------------------- -----------------------
If interest rates had been 50 basis points higher throughout the
year and all other variables were held constant, the Company's
profit for the year and net assets attributable to Shareholders as
at 31 March 2019 would have been GBP20,050 (31 March 2018:
GBP19,921) greater due to an increase in the amount of interest
receivable on the bank balances.
If interest rates had been 50 basis points lower and all other
variables were held constant, the Company's profit for the year and
net assets attributable to Shareholders as at 31 March 2019 would
have been GBP20,050 (31 March 2018: GBP19,921) lower due to an
decrease in the amount of interest receivable on the bank
balances.
19 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
The following table discloses the effects of the amendments to IAS
7 Statement of Cash Flows which requires additional disclosures
that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes
arising from cash flows and non-cash flows. The table below excludes
non-cash flows arising from the amortisation of associated costs
(see note 14).
31 Mar 2019 31 Mar 2018
GBP GBP
Opening Balance 33,027,979 46,748,096
Cash flows paid - capital (10,014,993) (9,216,397)
Cash flows paid - interest (1,739,923) (2,231,299)
Non-cash flows
- Interest accrued 1,752,938 2,230,594
- Effects of foreign exchange 2,460,480 (4,503,015)
Closing Balance 25,486,481 33,027,979
------------------- -------------------
20 ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, the Company has no ultimate
controlling party.
21 RELATED PARTIES AND MATERIAL CONTRACTS
Nimrod Capital LLP ("Nimrod") is the Company's Corporate and Shareholder
Adviser. The Company pays to Nimrod for its services as Corporate
and Shareholder Adviser a fee of GBP100,000 per annum (adjusted
annually for inflation from 2012 onwards at 2.25 percent per annum)
payable quarterly in arrears.
During the year, the Company incurred GBP118,152 (31 March 2018:
GBP114,284) of fees and expenses with Nimrod, of which GBPnil (31
March 2018: GBP28,571) was outstanding to this related party at
31 March 2019.
Doric GmbH ("Doric") is the Company's Asset Manager. The Company
pays Doric a management and advisory fee of GBP250,000 per annum
(adjusted annually for inflation from 2012 onwards, at 2.25 percent
per annum), payable quarterly in arrears. Doric will also receive
a fee for its sales and remarketing services upon disposition of
the Asset and subsequent winding up of the Company ("the Disposition
Fee"). This will be payable by the Company out of the proceeds of
sale and will follow an incentivised structure. Doric will not be
entitled to the Disposition Fee (but for the avoidance of doubt
will be entitled to reimbursement for properly incurred costs and
expenses) if Shareholders do not recover 100 pence per share net
of all costs, fees and expenses upon the winding up of the Company.
If Shareholders receive between 100 pence per Share and 150 pence
per Share (inclusive) (in each case net of all cost, fees and expense)
upon the winding up of the Company, Doric will be entitled to receive
a Disposition Fee of two percent of the realised value of the Asset.
If Shareholders receive more than 150 pence per Share (net of all
costs, fees and expenses) Doric will be entitled to receive three
percent of the Realised Value of the Asset.
During the year, the Company incurred GBP306,704 (31 March 2018:
GBP296,515) of fees and expenses with Doric which consisted of asset
management fees of GBP295,388 (31 March 2018: GBP285,706) and liaison
agency fees of GBP11,316 (31 March 2018: GBP10,809). At 31 March
2019 GBP147,711 (31 March 2018: GBP71,427) was outstanding to this
related party.
John Le Prevost is a director of Anson Registrars Limited ("Anson"),
the Company's registrar, transfer agent and paying agent. During
the year GBP10,236 (31 March 2018: GBP9,884) of costs were incurred
with Anson, of which GBP534 (31 March 2018: GBP585) was outstanding
as at 31 March 2019.
22 SUBSEQUENT EVENTS
On 11 April 2019, a further dividend of 2.25 pence per Ordinary
Preference Share was declared and this was paid on 30 April
2019.
ADVISERS AND CONTACT INFORMATION
KEY INFORMATION
Exchange: Specialist Fund Segment of the London Stock Exchange's
Main Market
Ticker: DNA1
Listing Date: 13 December 2010
Financial Year End: 31 March
Base Currency: GBP
ISIN: GG00B4MF3899
SEDOL: B4MF389
Country of Incorporation: Guernsey
Registration number: 52484
MANAGEMENT AND ADMINISTRATION
Registered Office Company Secretary and Administrator
Doric Nimrod Air One Limited JTC Fund Solutions (Guernsey) Limited
Ground Floor Ground Floor
Dorey Court Dorey Court
Admiral Park Admiral Park
St Peter Port St Peter Port
Guernsey GY1 2HT Guernsey GY1 2HT
Asset Manager Liaison Agent
Doric GmbH Amedeo Services (UK) Limited
Berliner Strasse 114 29-30 Cornhill
63065 Offenbach am Main London
Germany EC3V 3NF
Corporate and Shareholder
Adviser Lease and Debt Arranger
Doric Asset Finance GmbH & Co.
Nimrod Capital LLP KG
3 St Helen's Place Berliner Strasse 114
London 63065 Offenbach am Main
EC3A 6AB Germany
Solicitors to the Company (as Advocates to the Company (as to
to English Law) Guernsey Law)
Herbert Smith Freehills LLP Carey Olsen
Exchange House Carey House
Primrose Street Les Banques
London St Peter Port
EC2A 2EG Guernsey GY1 4HP
Registrar Auditor
Anson Registrars Limited Deloitte LLP
PO Box 426 Regency Court
Anson House Glategny Esplanade
Havilland Street St Peter Port
St Peter Port Guernsey GY1 3HW
Guernsey GY1 3WX
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSDFIIFUSESW
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