TIDMDPA
RNS Number : 7815X
DP Aircraft I Limited
28 April 2023
28 April 2023
DP Aircraft I Limited (the 'Company')
Annual Report and Accounts
The Company is pleased to provide a copy of the Audited
Consolidated Financial Statements of the Company for the year ended
31 December 2022 (the "Annual Report"), which is available from the
Company's registered office and will shortly be available to view
or download from the Company's website www.dpaircraft.com
For further information, please contact:
Aztec Financial Services (Guernsey) Limited +44(0) 1481 748833
Sarah Felmingham / Chris Copperwaite
DP AIRCRAFT I LIMITED
ANNUAL REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
CONTENTS
3 Fact Sheet
4 Summary
7 Highlights
8 Chairman's Statement
10 Asset Manager's Report
20 Directors
21 Directors' Report
30 Report of the Audit Committee
33 Statement of Principal Risks and Uncertainties
36 Statement of Directors' Responsibilities
37 Independent Auditor's Report to the shareholders of DP Aircraft I Limited
43 Consolidated Statement of Comprehensive Income
44 Consolidated Statement of Financial Position
45 Consolidated Statement of Cash Flows
46 Consolidated Statement of Changes in Equity
47 Notes to the Consolidated Financial Statements
74 Company Information
75 Appendix 1 - Alternative Investment Fund Managers Directive
FACT SHEET
Ticker DPA
Company Number 56941
ISIN Number GG00BBP6HP33
SEDOL Number BBP6HP3
Traded Specialist Fund Segment ('SFS') of the London Stock
Exchange
SFS Admission Date 4-Oct-13
Share Price US$ 0.045 at 31 December 2022
Profit per Share US$ 0.03 for the year ended 31 December
2022
Country of Incorporation Guernsey
Current Ordinary Shares in Issue 239,333,333
Administrator and Company Secretary Aztec Financial Services
(Guernsey) Limited
Asset Manager DS Aviation GmbH & Co. KG
Auditor KPMG, Chartered Accountants
Corporate Broker Investec Bank Plc
Aircraft Registration HS-TQD
HS-TQC
Aircraft Serial Number 35320
36110
Aircraft Type and Model B787-8
Lessees Thai Airways International Public Company Limited ('Thai
Airways')
Website www.dpaircraft.com
SUMMARY
COMPANY OVERVIEW
DP Aircraft I Limited (the 'Company') was incorporated with
limited liability in Guernsey under the Companies (Guernsey) Law,
2008 on 5 July 2013 with registered number 56941.
The Company was established to invest in aircraft. The Company
is a holding company, and made its investment in aircraft held
through two wholly owned subsidiary entities, DP Aircraft Guernsey
III Limited and DP Aircraft Guernsey IV Limited (collectively and
hereinafter, the 'Borrowers'), each being a Guernsey incorporated
company limited by shares and one intermediate lessor company, DP
Aircraft UK Limited (the 'Lessor'), a UK incorporated private
limited company. The Company and its consolidated subsidiaries, DP
Aircraft Guernsey III Limited, DP Aircraft Guernsey IV Limited and
DP Aircraft UK Limited comprise the consolidated Group (the
'Group').
Pursuant to the Company's Prospectus dated 27 September 2013,
the Company offered 113,000,000 ordinary shares of no par value in
the capital of the Company at an issue price of US$ 1.00 per share
by means of a Placing. The Company's shares were admitted to
trading on the Specialist Fund Segment (previously the Specialist
Fund Market) of the London Stock Exchange on 4 October 2013 and the
Company was listed on the Channel Islands Securities Exchange until
27 May 2015.
On 5 June 2015, the Company offered 96,333,333 ordinary shares
(the 'New Shares') of no-par value in the capital of the Company at
an issue price of US$ 1.0589 per share by means of a Placing. The
Company's New Shares were admitted to trading on the Specialist
Fund Segment of the London Stock Exchange on 12 June 2015.
On 13 July 2022 the Company raised gross proceeds of $750,000
through the issue of 30,000,000 new ordinary shares in the capital
of the Company at a price of US$0.025 per new ordinary share. The
new ordinary shares were admitted to trading on the Specialist Fund
Segment of the London Stock Exchange on 15 July 2022.
In total there are now 239,333,333 Ordinary Shares in issue with
voting rights.
In addition to the equity raised above in 2013 and 2015, the
Group also utilised external debt to fund the initial acquisition
of the aircraft. Further details are given within this summary
section.
INVESTMENT OBJECTIVE & POLICY
The Company and Group's investment objective is to obtain income
and capital returns for its shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling aircraft
(the 'Asset' or 'Assets').
THE BOARD
The Board comprises independent non-executive Directors. The
Directors of the Board are responsible for managing the business
affairs of the Company and Group in accordance with the Articles of
Incorporation and have overall responsibility for the Company's and
Group's activities, including portfolio and risk management. The
asset management activities of the Group are provided by DS
Aviation GmbH & Co. KG (the 'Asset Manager').
THE ASSET MANAGER
The Asset Manager has undertaken to provide the asset management
advisory services to the Company and Group under the terms of an
asset management agreement but does not undertake any regulated
activities for the purpose of the UK Financial Services and Markets
Act 2000.
SUMMARY (CONTINUED)
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
The Group recognises the Paris Agreement on climate change. The
Group operates NTA ('New Technology Aircraft') - specifically
Boeing 787-8's equipped with Rolls Royce Trent-1000 engines which
are 20% more fuel efficient on a revenue-per-kilometre basis than
similar comparable current technology legacy aircraft. The Board
has taken steps to reduce its own travelling and maximises the use
of virtual meetings within the board and with all its key service
providers.
CORONAVIRUS ('COVID-19')
COVID-19 has had a significant impact on the airline sector, and
by extension the aircraft leasing sector. More information is
provided below and in the Asset Manager's Report.
THAI AIRWAYS INTERNATIONAL PCL ('THAI AIRWAYS' / 'THAI')
The suspension of travel due to COVID-19 in 2020 resulted in
Thai Airways entering into business rehabilitation. The Central
Bankruptcy Court approved Thai's Business Rehabilitation plan on 15
June 2021. The rehabilitation process is currently ongoing, please
refer to the Asset Manager Report on pages 10 to 19 for more
details regarding the rehabilitation process.
The Group signed a Letter of Intent ('LOI') dated 1 March 2021
with Thai Airways under which the parties agreed to amend the lease
terms that existed then. The actual lease agreement reflecting the
terms set out in the LOI was signed on 1 April 2022. The effective
date for the lease modification was agreed by both parties as 15
June 2021.
The new lease terms provided for a power by the hour ('PBH')
arrangement until 31 December 2022 (with rent payable by reference
to actual monthly utilisation of the Thai aircraft and engines),
with scaled back monthly fixed lease payments thereafter until
October 2026 for aircraft MSN 36110 and December 2026 for aircraft
MSN 35320 reflecting reduced market rates in the long-haul market.
The lease term can be extended for a further 3 years to October and
December 2029 respectively, with further scaled back monthly lease
payments starting from November 2026 and January 2027. The
Extension Period is however subject to agreement with the Group
after consulting the Lenders. Given the uncertainty around the
lease extension, the lease terms are considered to be the period up
to October and December 2026.
A corresponding agreement was reached with the lenders as
detailed below.
DEKABANK DEUTSCHE GIROZENTRALE AND THREE OTHER CONSORTIUM
MEMBERS ('DekaBank')
On 6 May 2021, subsequent to the LOI being entered into by the
Group and Thai as described above, the Group and DekaBank amended
and restated the existing loan facility agreements in respect of
the Thai aircraft to accommodate the new lease terms, First
Amendment and Restatement to the Loan Agreements. Repayments of
principal were deferred until after the end of the PBH arrangement
(31 December 2022), and a new repayment schedule was to be
renegotiated close to the end of the PBH arrangement.
On 7 February 2023, the Group and DekaBank entered into a Second
Amendment and Restatement to the Loan Agreement in which the
parties agreed on the following main terms:
SUMMARY (CONTINUED)
DEKABANK DEUTSCHE GIROZENTRALE AND THREE OTHER CONSORTIUM
MEMBERS ('DekaBank') (CONTINUED)
-- the total loan amount outstanding was split into two tranches:
o Facility A loan of US$ 61,144,842 made up of MSN 35320 loan of
US$ 31,099,453 and MSN 36110 loan of US$ 30,045,389. The Facility A
loan amortizes to a combined balloon of US$ 33,947,878 and
represents the scheduled debt.
o Facility B loan of US$ 35,504,024 (non-amortizing), made up of
MSN 35320 loan of US$ 17,366,650 and MSN 36110 loan of US$
18,137,374. The Facility B loan will be settled as a balloon
payment at the end of the loan term in 2026.
-- USD 2.36m of surplus cash generated under the PBH period was
used to immediately repay debt on the amortizing Facility A loan in
February 2023, while an agreed cash reserve of US$ 500,000 per
aircraft will be retained to cover unforeseen costs going
forward.
-- the interest rate swap currently in place for the scheduled
debt was dissolved at no net gain or loss.
-- the MSN 35320 and MSN 36110 Facility A loans bear fixed
interest rates of 6.61% and 6.89% respectively.
-- the MSN 35320 and MSN 36110 Facility B loans bear fixed
interest rates of 5.26% and 5.42% respectively.
-- from the monthly fixed lease rental of US$ 510,000 per
aircraft (which denotes the maximum amount the Company can earn in
operations per month), US$ 475,000 is legally restricted so that
those funds are only payable to the lenders, and US$ 35,000 per
aircraft can be retained by the company to contribute towards
ongoing fixed costs of the Company.
Due to the limited liquidity position of the Group,
restructuring fees associated with the second amendment and
restatement will be paid after the eventual remarketing of the
aircraft, subject to surplus sales proceeds being realised.
IMPAIRMENT
In line with each reporting date, but more relevant in light of
the continuing impact of COVID-19 and market capitalisation of US$
10.8 million at 31 December 2022, a detailed impairment assessment
of the aircraft was undertaken. Following this review an impairment
of US$ nil (31 December 2021: US$ nil) was booked against the
aircraft. See note 3 for further details regarding the impairment
and comments under Highlights on page 7 where comment regarding the
difference between net asset value and market capitalisation.
DISTRIBUTION POLICY
Under normal circumstances, the Group aims to provide
shareholders with an attractive total return comprising income,
from distributions through the period of the Company's ownership of
the Assets, and capital, upon any sale of the Assets. The Company
originally targeted a quarterly distribution in February, May,
August, and November of each year. The target distribution was US$
0.0225 per share per quarter. The dividends were targets only with
no assurance or guarantee of performance or profit forecast.
Investors should not place any reliance on such target dividends or
assume that the Company will make any distributions at all.
Due to the impact of COVID-19 on the aviation industry and
therefore our lessor, the Board suspended the payment of dividends
from 3 April 2020 until further notice. This suspension remains in
place to date. Any lease rental payments received by the Company in
respect of the Thai aircraft are expected to be applied exclusively
towards the running costs of the Company and its subsidiaries, and
as a priority towards interest and principal repayments to the
DekaBank. Given this backdrop the Company feels that there is no
realistic prospect of the Company's shareholders receiving a
dividend or other distribution during the remaining lease period.
The Board and its advisers will continue to consult with
shareholders and its advisors in the future with a view to
determining the best course of action to take for the future of the
Company.
HIGHLIGHTS
RESULTS FOR THE YEAR
Results for the year ended 31 December 2022 is a profit after
tax of US$ 7,660,823 (profit per share US$ 0.03). For the year
ended 31 December 2021 there was a loss after tax of US$ 21,859,073
(loss per share US$ 0.10).
The results for the period ended 31 December 2022 are mainly
driven by rental income earned of US$ 16,462,372 (31 December 2021:
US$ 18,391,211), a provision on straight lining lease asset of US$
1,591,516 (31 December 2021: US$ 12,508,499) and finance costs
incurred of US$ 4,860,305 (31 December 2021: US$ 5,869,097).
Refer to page 43 for full details of results for the period.
NET ASSET VALUE ('NAV')
The NAV for the reporting period was US$ 0.18692 per share at 31
December 2022 (31 December 2021: US$ 0.17366). NAV per share has
increased due to the profit made during the year (see above). The
NAV excluding the financial effects of the straight-lining lease
asset was US$ 0.13662 per share at 31 December 2022 (31 December
2021: US$ 0.15086).
The straight-lining lease asset represents the result of
straight lining of future fixed Thai lease payments over the lease
term and will reduce to nil over time. Therefore, the NAV excluding
the straight-lining lease asset is presented to provide what the
Directors consider to be a more relevant assessment of the Group's
net asset position.
As of 31 December As at 31 December
2022 2021
US$ US$ per US$ US$ per
share share
NAV per the financial statements 44,736,121 0.18692 36,352,122 0.17366
Less: Straight-lining lease
asset (13,525,502) (0.05651) (4,772,296) (0.0228)
Add Provision for straight lining
lease asset 1,486,453 0.00621 - -
------------- ---------- ------------ ---------
NAV excluding straight-lining
lease asset 32,697,072 0.13662 31,579,826 0.15086
------------- ---------- ------------ ---------
As at 31 December 2022 the price per share was US$ 0.045 which
is significantly lower than the NAV per share above. The reason for
the difference is due to the market price per share reflecting
other factors such as market sentiment that cannot be accounted for
in a set of annual financial statements. The main asset in the
Group, the aircraft, has been assessed for impairment (see note 3)
- with no resulting impairment for the period. Other significant
assets comprise cash and receivables whose values are considered to
be reflective of fair value due to their short-term nature.
Therefore, the low share price is not indicative of a need for
further impairment to the assets of the Group.
DIVIDS
As previously outlined the result of the Coronavirus pandemic on
global aviation and particularly on its lessees; the company
suspended dividends on 3 April 2020 until further notice to help
preserve liquidity. Further details on the impact of the COVID-19
pandemic can be found within the Summary, the Asset Manager's
Report, and the Directors' Report. Furthermore, in accordance with
the second amended loan agreement with DekaBank, the Group will
make no dividend payments while loan deferrals remained outstanding
under the amended loan agreement.
OFFICIAL LISTING
The Company's Shares were first admitted to trading on the
Specialist Fund Segment of the London Stock Exchange on 4 October
2013.
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the Annual Report of
the Group for the year ended 31 December 2022.
The profit per share for the year was US$ 0.03429 compared to a
loss per share of US$ 0.10442 for the same period last year. The
net asset value per share at the year end was US$ 0.18692 compared
to US$ 0.17366 at 31 December 2021.
IFRS requires rental income to be recognised on a straight-line
basis over the remaining lease period and consequently the
accounting treatment has resulted in some income being recognised
earlier than would normally be the case. In addition, IFRS requires
a provision to be made against that additional income which has
been estimated based on recent credit reports on Thai. Please refer
to page 7 which explains the net impact of this on the profit for
the period and the NAV of US$ 0.0503 per share.
The Company raised $750,000 in equity following a successful tap
issue in July. Some service providers and the directors will
continue to defer some amounts due. The focus of the Company
remains the preservation of the Group's long-term financial
stability and asset values. The Company believes the 787 remains an
attractive asset.
During the period we have seen an improvement in the global
aviation market following the challenges resulting from the effects
of the COVID-19 pandemic on its operations. Today, the slight
optimism we were experiencing at the beginning of 2022 has
continued. However, some challenges remain. The resultant pressures
from the Ukraine war have created additional pressures beyond Covid
for the aviation industry not least on jet fuel price increases.
The combined situation of Covid impacting Chinese inbound tourism
to Thailand and the loss of Russian tourists following the Ukraine
war has had a negative impact on tourism - Thailand's biggest
industry - in 2022. With Covid restrictions in China being lifted
there is cause for some optimism in tourism numbers from that
sector in 2023.
Our aircraft utilisation during the year was above expectation
and the resulting Power by the Hour (PBH) income was higher than
expected. From 2023 our aircraft are operating on fixed monthly
lease payments with Thai until December 2026, reflecting the
reduced lease rates now seen in the market.
As previously noted, the lease term on the leases may be
extended by a further 3 years to October 2029 for aircraft MSN
36110 and December 2029 for aircraft MSN 35320, with further scaled
back monthly lease payments starting from November 2026 and January
2027 respectively, and the Group retaining a right of early
termination in October and December 2026 after consultation with
the Lenders. Both aircraft are being well utilised and serving
markets in the Asian region from Thai's Bangkok hub.
Long-haul travel has picked up in nearly all markets growing the
demand for wide body aircraft. Delayed deliveries for new equipment
like Boeing's 787 and 777-8/9 are further strengthening this
demand. Thai is currently progressing through its Rehabilitation
Plan and it is expected this may be successfully concluded in early
Q2 2024. Thai is also expected to raise further equity over the
coming year.
This would allow us to take advantage of upcoming opportunities
and manage the company into a sustainable position. The Board and
the Asset Manager remain fully committed to extract the highest
possible value for shareholders in this process.
After a significant amount of work undertaken by the Board, the
Group has concluded the Loan restructuring with the Lenders and a
final balloon repayment of $69.5 million for both loans was
announced in March.
CHAIRMAN'S STATEMENT (CONTINUED)
As previously noted, there is no realistic prospect of the
Company's shareholders receiving a dividend or other distribution
prior to the end of the lease term. The key uncertainty remains the
outlook for Thai and the airline industry particularly with higher
fuel prices, the impact of inflation and a slowing economy on
travel demand and the knock on effect these factors may have on
aircraft values and Thai.
I would like to thank the Board and its service providers for
their continued significant support over the period. I would like
to thank our Investors for their continued support in the Group.
The Board and its advisers will continue consulting with investors
on an ongoing basis.
Jonathan Bridel
Chairman
ASSET MANAGER'S REPORT
THE AIRLINE MARKET
General overview of current airline industry situation
As COVID-19 rules are relaxed and more passengers travel,
revenues are increasing. The International Air Transport
Association (IATA) predicts that the global airline industry will
return to profitability in 2023, despite continued worries about
financial losses brought on by pandemics, rising prices, and cost
constraints. Although 2022 presented a number of difficulties for
airlines, including growing operational expenses, labour shortages,
strikes, and disruptions in major global hubs, they were
nevertheless able to reduce losses due to the rise in demand for
air travel combined with significant operational cost cutting
measures. Airlines are anticipated to have a comparatively small
net profit of $4.7 billion in 2023, or a net profit margin of 0.6%.
This would represent the industry's first profit since 2019, when
net profits totalled $26.4 billion (3.1% net profit margin). In
2022, airline net losses are expected to be $6.9 billion (an
improvement on the $9.7 billion loss for 2022 in IATA's June
outlook). Which in turn is significantly better than losses of
$42.0 billion and $137.7 billion that were realized in 2021 and
2020 respectively.
A return to industry profitability in 2023 (Expectation)
Source: IATA Economics chart of the week, 9(th) December
2022
However, the Russian invasion of Ukraine and the subsequent
sanctions imposed upon the country have brought with them myriad
challenges for the aviation industry, just as it was recovering
from the crippling effects of the Covid-19 lockdowns. As an
associated result of the war between Russia and Ukraine jet fuel
prices have increased. As such costs represent between 20% to 25%
of total operational costs this has presented further financial
challenges. The jet fuel price rose by more than 70% during the
first 6 months of 2022, marking one of the steepest increases since
2002, and causing unprecedent pressure in terms of cost management
for the airline industry. The cancellation of flights, the longer
routes, the higher fuel costs and rising inflation are only some of
the reasons behind the increase in air ticket prices.
Covid-19's effects can still be seen in the aviation sector. The
demand for flights was undoubtedly enhanced by removing travel
restrictions. Despite this rise in demand, it is still impossible
to estimate the airline's overall effects. The severe impact of the
pandemic compared to other major events in history is shown in the
graph below. The total passenger numbers are slightly recovering
from year to year, but it will take time to get back to pre-Covid
numbers. The chart below chart shows the total number of passenger
numbers are slightly recovering from year to year.
ASSET MANAGER'S REPORT (CONTINUED)
THE AIRLINE MARKET (CONTINUED)
Source: ICAO: "Effects of Novel Coronavirus (COVID--19) on Civil
Aviation: Economic Impact Analysis"; 27(th) January 2023
Year 2022 outlook
The impact of COVID-19 on world scheduled passenger traffic for
year 2022 (estimated results), compared to pre-COVID 2019
levels:
-- Overall reduction of 25% to 26% of seats offered by airlines
-- Overall reduction of 1,278 to 1,281 million passengers (-28% to -29%)
-- Approx. USD 174 to 175 billion loss of gross passenger operating revenues of airlines
International Passenger Traffic (2022 vs. 2019)
-- Overall reduction of 33% to 34% of seats offered by airlines
-- Overall reduction of 658 to 660 million passengers (-35% to -36%)
-- Approx. USD 123 to 124 billion loss of gross operating revenues of airlines
ASSET MANAGER'S REPORT (CONTINUED)
THE AIRLINE MARKET (CONTINUED)
The below fact sheet from December 2022 is the latest version
available and therefore added here. This sheet is provided by IATA
on a regular basis and shows statistics about the airline industry
as of December 2022. The next update will be available in June
2023.
Fact Sheet- December 2022
System-wide global commercial airlines 2020 2021 2022F 2023F
------------------------------------------------------------------------ -------- -------- ======== ========
REVENUES, $ billion 382 506 727 779
======================================================================== ======== ======== ======== ========
% change y-o-y -54.4% 32.4% 43.6% 7.1%
======================================================================== ======== ======== ======== ========
% change vs 2019 -39.6% -13.2% -7.0%
======================================================================== ======== ======== ======== ========
Passenger, $ billion 189 239 438 522
======================================================================== ======== ======== ======== ========
Cargo, $ billion 138.5 204.2 201.4 149.4
======================================================================== ======== ======== ======== ========
Traffic volumes
======================================================================== ======== ======== ======== ========
Passenger growth, RPK, %ch y-o-y -65.8% 21.8% 69.4% 21.1%
======================================================================== ======== ======== ======== ========
% ch vs 2019 -58.3% -29.4% -14.5%
======================================================================== ======== ======== ======== ========
Cargo growth, CTK+MTK, %ch y-o-y -9.9% 18.8% -8.0% -4.1%
======================================================================== ======== ======== ======== ========
%ch vs 2019 7.0% -1.6% 4.8%
======================================================================== ======== ======== ======== ========
Cargo tonnes, millions 55.4 65.6 60.3 57.7
======================================================================== ======== ======== ======== ========
World economic growth, %ch y-o-y -3.5% 5.8% 2.9% 1.3%
======================================================================== ======== ======== ======== ========
Passenger yield, %ch y-o-y -9.1% 3.8% 8.4% -1.7%
======================================================================== ======== ======== ======== ========
Cargo yield %ch y-o-y 52.5% 24.2% 7.2% -22.6%
======================================================================== ======== ======== ======== ========
EXPENSES, $ billion 493 551 737 776
======================================================================== ======== ======== ======== ========
% change y-o-y -37.9% 11.8% 33.6% 5.3%
======================================================================== ======== ======== ======== ========
% change vs 2019 -30.6% -7.3% -2.4%
======================================================================== ======== ======== ======== ========
Fuel, $ billion 80 103 222 229
======================================================================== ======== ======== ======== ========
% of expenses 16% 19% 30% 30%
======================================================================== ======== ======== ======== ========
Crude oil price, Brent, $/b 41.8 70.7 103.2 92.3
======================================================================== ======== ======== ======== ========
Jet kerosene price, $/b 46.6 77.8 138.8 111.9
======================================================================== ======== ======== ======== ========
Fuel consumption, billion gallons 52 60 73 80
======================================================================== ======== ======== ======== ========
Non-fuel, $ billion 413 448 515 547
======================================================================== ======== ======== ======== ========
cents per ATK (non-fuel unit cost) 48.1 44.9 41.7 39.8
======================================================================== ======== ======== ======== ========
% change y-o-y 22.7% -6.7% -7.2% -4.5%
======================================================================== ======== ======== ======== ========
Capacity growth, atk, %ch y-o-y -44.3% 16.2% 23.7% 11.1%
======================================================================== ======== ======== ======== ========
%ch vs 2019 -35.3% -19.9% 59.7%
======================================================================== ======== ======== ======== ========
Flights, million 16.9 20.1 27.9 32.4
======================================================================== ======== ======== ======== ========
Break-even weight load factor,
% ATK 76.8% 67.2% 68.3% 68.6%
======================================================================== ======== ======== ======== ========
Weight load factor achieved, %
ATK 59.5% 61.7% 67.5% 68.9%
======================================================================== ======== ======== ======== ========
Passenger load factor achieved,
% ASK 65.2% 66.9% 78.9% 81.0%
======================================================================== ======== ======== ======== ========
OPERATING PROFIT, $ billion -110.8 -45.1 -9.3 3.2
======================================================================== ======== ======== ======== ========
% margin -29.0% -8.9% -1.3% 0.4%
======================================================================== ======== ======== ======== ========
ASSET MANAGER'S REPORT (CONTINUED)
THE AIRLINE MARKET (CONTINUED)
Fact Sheet- December 2022 (continued)
System-wide global commercial airlines 2020 2021 2022F 2023F
----------------------------------------- ------ ------ ======= =======
NET PROFIT, $ billion -137.7 -42.0 -6.9 4.7
======== ======= ======
% margin -36.0% -8.3% -1.0% 0.6%
================================ ======== ======== ======= ======
per departing passenger, $ -76.22 -19.20 -2.02 1.11
================================ ======== ======== ======= ======
RETURN ON INVESTED CAPITAL, % -19.3% -8.0% -1.7% 0.6%
-------------------------------- -------- -------- ------- ------
Source: ICAO, IATA, The Airline Analyst, Datastream, Platts.
Updated: 12/2022 Next Update: 06/2023
Financial Results
System-wide commercial
airlines EBIT margin, % revenues Net profit, $ billion
global
2020 2021 2022F 2023F 2020 2021 2022F 2023F
---------------- -------- -------- ------- ------- -------- ------- ======= =======
Global -29.0% -8.9% -1.3% 0.4% -137.7 -42.0 -6.9 4.7
================ ======== ======== ======= ======= ======== ======= ======= =======
Regions
================ ======== ======== ======= ======= ======== ======= ======= =======
North America -27.3% -5.9% 2.4% 3.3% -35.1 -2.3 9.9 11.4
================ ======== ======== ======= ======= ======== ======= ======= =======
Europe -27.1% -9.0% -1.3% 0.6% -34.5 -12.1 -3.1 0.6
================ ======== ======== ======= ======= ======== ======= ======= =======
Asia-Pacific -34.3% -13.2% -8.2% -4.7% -45.0 -14.8 -10.0 -6.6
================ ======== ======== ======= ======= ======== ======= ======= =======
Middle East -24.3% -11.4% -1.1% 0.8% -9.4 -4.7 -1.1 0.3
================ ======== ======== ======= ======= ======== ======= ======= =======
Latin America -28.5% -9.1% -2.4% -0.6% -11.9 -7.0 -2.0 -0.8
================ ======== ======== ======= ======= ======== ======= ======= =======
Africa -16.9% -6.8% -4.2% -1.1% -1.8 -1.1 -0.6 -0.2
---------------- -------- -------- ------- ------- -------- ------- ------- -------
Sources: IATA estimates for regions. IATA forecast for 2022 and
2023.
Traffic Results
Passenger traffic (RPK) Passenger capacity (ASK)
System-wide % change vs previous year % change vs 2019 % change vs previous % change
Global commercial year vs 2019
airlines
-------------------- ---------------------------- ------------------- ----------------------- ------------------
2020 2021 2022E 2023F 2020 2021 2022E 2023F
-------------------- ---------------------------- ------------------- ------------ --------- ------------------
Global -65.8% 21.8% -29.4% -14.5% -56.6% 18.7% -26.1% -12.9%
==================== ============= ============= ========= ======== ============ ========= ======== ========
Regions
==================== ============= ============= ========= ======== ============ ========= ======== ========
North America -65.1% 74.7% -8.6% -2.8% -50.3% 41.1% -6.3% -1.1%
==================== ============= ============= =================== ============ ========= ======== ========
Europe -69.5% 27.5% -18.6% -11.3% -62.3% 29.8% -16.0% -10.9%
==================== ============= ============= =================== ============ ========= ======== ========
Asia-Pacific -62.0% -12.8% -55.7% -29.2% -53.8% -6.0% -48.9% -24.5%
==================== ============= ============= ========= ======== ============ ========= ======== ========
Middle East -72.1% 8.5% -20.7% -2.2 -63.0% 21.2% -22.0% -5.5%
==================== ============= ============= =================== ============ ========= ======== ========
Latin America -62.5% 40.5% -12.6% -4.4% -59.0% 37.3% -11.4% -5.8%
==================== ============= ============= =================== ============ ========= ======== ========
Africa -68.2% 17.0% -32.3% -13.7% -62.1% 18.5% -31.1% -16.1%
-------------------- ------------- ------------- --------- -------- ------------ --------- -------- --------
Source and Note: IATA. Includes domestic and international
traffic, and all commercial airlines. Historical data are
subject
to revision.
Updated: 12/2022 Next Update: 06/2023
ASSET MANAGER'S REPORT (CONTINUED)
THE AIRLINE MARKET (CONTINUED)
Russia-Ukraine War in brief
The escalation of the conflict between Ukraine and Russia has
significant implications on the aviation industry. Governments have
adopted economic sanctions that specifically target the industry
and closed large areas of air space, fuel is trading at a
historical high and fear of continued warfare is affecting the
already fragile air passenger demand. The combination of the
sanctions and the air bans has forced several airline companies to
either suspend or reroute their flights. Russia's flagship airline,
Aeroflot, has announced it is halting all its international
flights, except those to Belarus, and the country's second-biggest
airline, S7, has also suspended its international flights.
GlobalData's Tourism Demands and Flows Database shows that Turkey,
China, Kazakhstan, Thailand, the United Arab Emirates (UAE), Spain,
Azerbaijan, Ukraine, Georgia and Italy are the top ten destinations
in terms of international departures from Russia by number of
travellers in 2021, with the modes of transport including air,
land, sea and rail. Russia has in turn banned airlines in most of
those countries from entering or flying over Russia. Several
airlines from countries not directly impacted by sanctions have
also temporarily reduced flights to/from Russia, for example in
Japan and South Korea. In 2021, international traffic between
Russia and the rest of the world accounted for 5.2% of global
international traffic, but only 1.3% of global total traffic.
International air traffic to and from Russia accounted for 5.7% of
total European traffic in 2021.
Recovery in Airline Industry
The International Air Transport Association (IATA) announced
that the air travel recovery continued through November 2022. Total
traffic in November 2022 (measured in revenue passenger kilometers
or RPKs) rose 41.3% compared to November 2021. Globally, traffic is
now at 75.3% of November 2019 levels. International traffic rose
85.2% versus November 2021. The Asia-Pacific continued to report
the strongest year-over-year results with all regions showing
improvement compared to the prior year. November 2022 international
RPKs reached 73.7% of November 2019 levels. Domestic traffic for
November 2022 was up 3.4% compared to November 2021 with travel
restrictions in China continuing to dampen the global result. Total
November 2022 domestic traffic was at 77.7% of the November 2019
level.
Asia-Pacific airlines had a 373.9% rise in November 2022 traffic
compared to November 2021, which was the strongest year-over-year
rate among the regions. Capacity rose 159.2% and the load factor
was up 35.9 percentage points to 79.2%.
ASSET MANAGER'S REPORT (CONTINUED)
THE AIRLINE MARKET (CONTINUED)
Recovery in Airline Industry
Source: IATA, Press release No: 02, 09(th) January 2023.
Outlook & Conclusion
Due to less travel restrictions around the world in 2022
compared to 2021, there was an increase in air traffic. However,
the airline industry is still struggling to get back to the 2019
levels. It is expected that the airline industry will regain
profitability for the first time post Covid-19 but not to 2019
levels.
Geographically, Russia has always been the major over fly route
for Asia-Europe flights and because of the war some flights have
longer duration (or have been cancelled) than which results in
greater fuel consumption. According to IATA, Europe-Asia and
Asia-North America were the most heavily impacted markets
routes.
All outlooks shared in this report are based on historic data
and assumptions made by industry experts. It should be considered
as a potential guideline. From a historical point of view, the
airline industry has proven to be resilient and has recovered from
all previous crises and up to the end of 2022 shows a slow growing
recovery compared to the previous year. To sum up, the airline
industry has already suffered a lot from the Covid-19 pandemic and
now war in Ukraine has made the recovery more challenging.
ASSET MANAGER'S REPORT (CONTINUED)
THE LESSEE
Thai Airways International Public Company Limited
Overview
-- Thai Airways International has received court approval for
its proposed amendment to its business rehabilitation plan, paving
the way for it to meet financial indicators to exit business
rehabilitation.
-- Thai Airways International and its subsidiaries made a
pre-tax loss of Bt4.96 billion ($137 million) in the third quarter
ended 30 September, as compared with a profit of Bt40 billion in
the year-ago period.
-- Thai Airways International is planning to recruit over 300
cabin crew to support the noteworthy growth in travel demand.
-- According to data from Cirium 43 aircraft are in operation and 47 aircraft are stored.
-- Thai Airways International is in process of returning to
service three Airbus A330s previously earmarked for sale, to meet
capacity needs, and is exploring the viability of reactivating some
of its A380s.
Year-2022 financial results (in Baht)
Consolidated Financial Separate Financial Statements
Statement
========================= ========================= ================================
2022 2021 2022 2021
========================= ============= ========== =============== ===============
Total Revenues 105.21 bn 89.98 bn 97.68 bn 88.95 bn
========================= ============= ========== =============== ===============
Revenues from Passenger 73.41 bn 5.53 bn 64.86 bn 3.28 bn
and excess baggage
========================= ============= ========== =============== ===============
Revenue from Freight 23.78 bn 10.98 bn 23.74 bn 10.91 bn
and mail
========================= ============= ========== =============== ===============
Total Expenses 94.09 bn 28.20 bn 82.78 bn 23.61 bn
========================= ============= ========== =============== ===============
Profit from operating 11.12 bn 61.78 bn 14.91 bn 65.34 bn
activities
========================= ============= ========== =============== ===============
Profit (loss) before (1.68) bn 52.33 bn 1.24 bn 55.49 bn
income tax expense
========================= ============= ========== =============== ===============
Income tax income 1.43 bn 2.78 bn 1.45 bn 2.78 bn
========================= ============= ========== =============== ===============
Profit (loss) (251.61) m 55.11 bn 2.69 bn 58.27 bn
for the years
========================= ============= ========== =============== ===============
Total Assets 198.18 bn 161.22 bn 198.29 bn 162.65 bn
========================= ============= ========== =============== ===============
Total Liabilities 269.20 bn 232.46 bn 261.79 bn 229.32 bn
============= ========== =============== ===============
Source: THAI's Financial Statements Year-2022
Thai Restructuring and Rehabilitation Process summary since 31st
December 2021 .
-- 13th February 2023: Thai Airways International will resume
flights to Beijing and Shanghai from March, as it plans to ramp up
frequencies to China to about one fifth of pre-pandemic levels.
-- 13(th) December 2022: Thai Airways International has
appointed Cherdchome Therdsteerasukdi as its new chief financial
officer, effective 1 February.
-- 2nd December 2022: Thai Airways International and Singapore
Airlines have signed a memorandum of understanding (MoU) to
codeshare on certain routes.
-- 8th November 2022: Thai Airways International is again
seeking bids for the outright purchase of six used Boeing
777-200s.
ASSET MANAGER'S REPORT (CONTINUED)
THE LESSEE (CONTINUED)
Thai Restructuring and Rehabilitation Process summary since 31st
December 2021 (continued)
-- 21st October 2022: Thailand's Central Bankruptcy Court
approved the amendments on 20 October 2022, which cover measures to
shore up liquidity primarily through a capital restructuring, Thai
indicates in a same-day filing to the Stock Exchange of Thailand.
This will see it increasing registered capital amounting to a total
of nearly Bt315 billion ($8.2 billion).
-- 04th July 2022: Thai Airways is targeting to complete its
debt and capital restructuring within 2024. The airline expects
their shares likely to be traded on the stock exchange in 2025
again.
Outlook & Opportunities - The "New Thai Airways"
-- Measures to be taken
o Thai Airways International is in process of returning to
service three Airbus A330s previously earmarked for sale, to meet
capacity needs, and is exploring the viability of reactivating some
of its A380s.
o Coming to end at the amendment of favourable interim lease
contract ( e.g., Power-by-the Hour contracts) and entering again
into fixed rate lease contracts.
-- Capital raise of about USD 1.5 billion necessary to repay debt.
-- Fleet of 86 aircraft and five different aircraft types in 2025.
-- Thai expects to return to profit in 2023 and to state shareholder equity above zero by 2030.
-- Thailand's economy is dependent on tourism and Thai Airways
benefits from measures initiated by the Government to stimulate
tourism arrivals.
Comments & conclusions
The tourism industry in Thailand was one of the most negatively
affected industries by the COVID-19 pandemic. With the globally
wide-spread COVID-19 outbreak, the Thai tourism industry was
heavily affected. In 2022, the Thai government eased COVID-19
restrictions, resulting in an increase of the annual volume of
airport passengers in Thailand in 2022. The recovery of the tourism
sector is expected to be further bolstered in 2023 by the return of
Chinese visitors. In 2022, the number of tourist arrivals amounted
to around 11.15 million, which drastically increased from the
previous year of only 0.43 million. The tourism industry in
Thailand was one of the most negatively affected industries by the
COVID-19 pandemic. Furthermore, in 2022, the number of airport
passengers in Thailand amounted to approximately 63 million
representing a significant increase from the previous year.
Despite the global issues, Thai Airways generated revenues of
105.21 Billion Baht by December 2022 year end this compares to
revenues of 89.98 Billion Baht during 2021. This serves to
highlight the growing market demand and the gradual improving
progress of Thai Airways.
In these times of rising flight demand even though the cost is
increasing, a fleet of new and efficient aircraft is a very
important factor for a successful airline operation. With the two
DP Aircraft owned Rolls Royce Trent 1000 equipped 787-8's belonging
to the latest generation airframes these combine fuel efficient
operations with best-in-class passenger comfort. They are the right
equipment for Thai Airways and can be flexibly used also on most
routes including those with lower demand that does not justify
using a larger widebody aircraft.
ASSET MANAGER'S REPORT (CONTINUED)
THE ASSETS
Update B787
-- Up to now, 7x B787 were ordered in 2023 and 3 x B787 were delivered to customers during 2023.
-- During 2022, the total number of B787 orders were 139 and Boeing delivered 31 B787 in 2022.
-- The orderbook currently shows a backlog of 516 aircraft.
-- Currently, 986 aircraft are in-service and only 27 are in
storage which shows the growing demand of this type of aircraft and
big importance of this aircraft type during the recovery of the
airline industry after the COVID pandemic.
Assets & Operations
Overview
Both our aircraft HS-TQC and HS-TQD are currently in regular
commercial service within the international route (mostly withing
Asia-Pacific region) of Thai Air Airways and are based at Bangkok
Airport. The aircraft are equipped with overhead cabin and overhead
flight crew rest to allow operation on international long-haul
routes. Thai Airways has announced its winter schedule that
commenced on October 30, 2022 and ran through March 25, 2023. The
newly listed schedule connects to 34 destinations across Europe,
Australia and Asia.
AIRCRAFT OPERATIONS Thai Airways
HS-TQC HS-TQD
------------- ------------
Cabin Layout 24 Business Class Seats
240 Economy Class Seats
---------------------------
LAST PHYSICAL INSPECTION
---------------------------
Date 18.02.2022 18.02.2022
------------- ------------
Place Bangkok Airport (BKK)
---------------------------
AIRFRAME STATUS
(31(st) January 2023)
------------- ------------
Total Flight Hours 20,515 18,588
------------- ------------
Total Flight Cycles 4,519 4,105
------------- ------------
Hours/cycles ratio since
delivery 4.5 4.5
------------- ------------
Titled Engines Report
As of 31(st) HS-TQC HS-TQD
October
2022
ESN 10239 ESN 10243 ESN 10244 ESN 10248
---------- ----------------- ----------------- ---------------
Total Time
[Flight
Hours] 18,938 15,729 14,870 19,585
---------- ----------------- ----------------- ---------------
Total Flight
Cycles 4,139 16,175 3,389 4,197
---------- ----------------- ----------------- ---------------
Location On-wing On-wing (HS-TQD) On-wing (HS-TQE) In maintenance
at SEASL in
Singapore
---------- ----------------- ----------------- ---------------
ASSET MANAGER'S REPORT (CONTINUED)
THE ASSETS (CONTINUED)
Asset Manager's actions ensured asset value
Regular monitoring to make sure that the Aircraft are in service
and keeping the Aircraft under the best condition in accordance
with the manufacturer's requirement is the top priority for DS
Aviation as DP Aircraft's Asset Manager. HS-TQD is currently in
regular commercial service alongside with HS-TQC. Two aircraft
inspections were carried out on HS-TQD in January and February 2023
to make sure that the aircraft gets back to commercial service in
the best possible condition and in full compliance with all
requirements of the lease and the manufacturer manuals. DS Aviation
continues to have an "on demand" contract with the on-site service
provider. Their expertise and manpower are available whenever the
circumstance calls for it, ensuring prompt and efficient support on
the spot.
Comments and Conclusions
The Thai economy is anticipated to reach its pre-pandemic level
in 2022 (results not yet published) when final results become
available, but due to external challenges, the rate of expansion
will be slower than anticipated in 2023. As both aircraft are in
regular commercial service and Thai Airways re-enters into fixed
lease rate contracts after completing the PBH-period. The
resumption of a monthly fixed lease can be considered to be one of
the satisfactory achievements from Thai Airways. In addition to the
progress, Thai Airways International has received court approval
for its proposed amendment to its business rehabilitation plan,
which, amongst others consisted of the increase in registered
capital of no more than 31,500 million shares with the goal of
making the capital positive to create stability in the financial
position. This would result in Thai's securities being readmitted
for trading on the stock exchange again.
Regarding the route profile of the assets, although Thai Airways
announced to setting up their flight operation in Europe, Australia
and Asia, the assets are principally operating mid-range flights
within Asia due to due to the high demand for smaller passenger
capacity of the 787-8 compared with the larger widebody aircraft.
Thai Airways International intend to reactivate three A330s to meet
the market demand and are exploring the viability of reactivating
some of its A380s which indicates that the demand is rising quicker
than expected and the need for aircraft is strong.
As a result of the foregoing, the asset manager continues to
keep a watchful eye on the assets and maintains the on-site staff
in the background to respond swiftly in case of any unforeseen
events because the recovery process is still delicate and dependent
on numerous external factors.
DIRECTORS
Jonathan (Jon) Bridel, Non-Executive Chairman (58), appointed 10
July 2013
Jon is a Guernsey resident and is currently a non-executive
director of SME Credit Realisation Fund Limited (in wind down)
which is listed on the Main Market of the London Stock Exchange.
Other companies include Fair Oaks Income Fund Limited. Jon was
previously Managing Director of Royal Bank of Canada's investment
businesses in the Channel Islands and served as a director on other
RBC companies including RBC Regent Fund Managers Limited. Prior to
joining RBC, Jon served in a number of senior management positions
in banking, specialising in credit and corporate finance and
private businesses as Chief Financial Officer in London, Australia
and Guernsey having previously worked at Price Waterhouse Corporate
Finance in London.
Jon graduated from the University of Durham with a degree of
Master of Business Administration, holds qualifications from the
Institute of Chartered Accountants in England and Wales (1987)
where he is a Fellow, the Chartered Institute of Marketing and the
Australian Institute of Company Directors. Jon is a Chartered
Marketer and a Member of the Chartered Institute of Marketing, a
Chartered Director and Fellow of the Institute of Directors and a
Chartered Fellow of the Chartered Institute for Securities and
Investment.
Jeremy Thompson, Non-Executive Director (67), appointed 10 July
2013
Jeremy Thompson is a Guernsey resident. He acts as a
non-executive director to a number of businesses which include
three private equity funds and to an Investment Manager serving the
listed NextEnergy Solar Fund Limited. In addition, Jeremy is also a
non-executive director of London listed Riverstone Energy Limited.
Between 2005 and 2009 he was a director of multiple businesses
within a London based private equity group. This entailed board
positions on both private, listed and SPV companies and highly
successful exits. Prior to that he was CEO of four autonomous
global businesses within Cable & Wireless PLC and earlier held
CEO roles within the Dowty Group. Jeremy has studied and worked in
the UK, USA and Germany.
Jeremy currently serves as chairman of the States of Guernsey
Renewable Energy Team and is a commissioner of the Alderney
Gambling Control Commission. He is also an independent member of
the Guernsey Tax Tribunal panel. Jeremy is an engineering graduate
of Brunel (B.Sc) and Cranfield (MBA) Universities and attended the
UK's senior defence course (Royal College of Defence Studies). He
holds the Institute of Directors (IoD) Certificate and Diploma in
Company Direction and is an associate of the Chartered Institute of
Arbitration. He completed an M.Sc in Corporate Governance in 2016
and qualified as a Chartered Company Secretary in 2017.
Harald Brauns, Non-Executive Director (68), appointed 1 November
2019
Harald is a German banker with extensive experience in the
specialised lending sector. He joined NORD/LB Hannover, Germany in
1977 with a first engagement in the shipping segment. In 1985 he
started the aircraft finance activities for the bank from scratch.
As the Global Head of Aircraft Finance, he built successively a
team of more than 40 dedicated aviation experts located in
Hannover, New York and Singapore. Focused on an asset-based
business model with sophisticated solutions for selected clients,
he and his team advanced to global leaders in commercial aircraft
finance with an exposure of well above US$ 10 billion split over a
portfolio of 650 aircraft assets. After more than 35 years in the
aviation industry Harald retired in October 2019. He is a resident
in Germany and was appointed as a non-executive director of the
Company with effect from 1 November 2019.
DIRECTORS' REPORT
The Directors present their Annual Report and Audited
Consolidated Financial Statements for DP Aircraft I Limited for the
year ended 31 December 2022.
Principal Activity and Review of the Business
The Company's principal activity is to purchase, lease and then
sell Boeing 787-8 Aircraft (the 'Assets'). The Company wholly owns
two subsidiary entities, DP Aircraft Guernsey III Limited and DP
Aircraft Guernsey IV Limited (collectively and hereinafter, the
'Borrowers'), each being a Guernsey incorporated company limited by
shares and one intermediate lessor company, DP Aircraft UK Limited
(the 'Lessor'), a UK incorporated private limited company. The
Company and its consolidated subsidiaries, DP Aircraft Guernsey III
Limited, DP Aircraft Guernsey IV Limited and DP Aircraft UK Limited
comprise the consolidated Group (the 'Group').
The investment objective of the Group is to obtain income and
capital returns for the Company's shareholders by acquiring,
leasing and then, when the Board considers it appropriate, selling
the Assets. The Company has made its investments in the Assets
through its subsidiaries. The Ordinary Shares of the Company are
currently trading on the Specialist Fund Segment of the London
Stock Exchange.
For the year ended 31 December 2022 the Group made a profit of
US$ 7,660,823 (31 December 2021: loss of US$ 21,859,073). The loss
in the prior year was the result of significantly high expected
credit losses on receivables, net losses of financial assets at
fair value and loss on loss of control of assets, liabilities and
subsidiaries. There have been no such high losses in the financial
year under review. As a result, the group made a profit during the
period ended 31 December 2022, see page 43 for full results for the
year.
Notwithstanding the requirement for the aircraft to be parked in
the past due to Trent 1000 issues there are no incidents to bring
to the attention of Shareholders concerning the operation of the
Thai aircraft. Inspections have revealed no matters of concern. The
aircraft have been operational for most of the 2022 year and are
currently in regular commercial use. Rolls Royce are continuing to
address the Trent 1000 engine warranty related issues which have
not impacted the Company. A more detailed review of the business
and prospects is contained in detail in the Asset Manager's Report
on pages 10 to 19.
Results and Dividends
The profit for the year ended 31 December 2022 was US$ 7,660,823
(31 December 2021: loss of US$ 21,859,073).
Under normal circumstances, the Company aims to provide
Shareholders with an attractive total return comprising income,
from distributions through the period of the Company's ownership of
the Assets, and capital, upon any sale of the Assets. The Company
targets a quarterly distribution in February, May, August and
November of each year. The target distribution is US$ 0.0225 per
Share per quarter.
On 3 April 2020, the Company announced a suspension of dividends
until further notice due to the impact of Covid-19 in global
aviation and especially with long haul operations. The suspension
is continuing and due to recent developments as noted in Summary
report on pages 4 to 6, there is no realistic prospect of the
Company's shareholders receiving a dividend or other
distribution.
Subsequent Events
Refer to note 23 for further details regarding Subsequent
Events.
DIRECTORS' REPORT (CONTINUED)
Directors
The Directors of the Company, who served during the year and to
date, are as shown below:
-- Jonathan Bridel;
-- Jeremy Thompson; and
-- Harald Brauns.
Directors' Interests
The Directors interests in the shares of the Company as at 31
December 2022 are set out below and there have been no changes in
such interests up to the current date:
Number of Number of
ordinary shares ordinary shares
31 December 2022 31 December 2021
Connected parties of Jon Bridel 90,000 90,000
Jeremy Thompson 15,000 15,000
Harald Brauns - -
Principal Risks and Uncertainties
The Statement of Principal Risks and Uncertainties are as
described on pages 33 to 35.
Substantial Shareholdings
The Directors note the following substantial interests in the
Company's share capital as at 31 December 2022 (10% and more
shareholding):
o M&G Investments 59,633,421 shares - 24.92 %
o West Yorkshire PF 22,804,367 shares - 9.53 %
As at the date of this report there have been no significant
changes in the above list of substantial shareholdings.
The Board
The Board consists of three directors, all of whom are
non-executive. Mr Bridel and Mr Thompson satisfy all the criteria
for assessing director independence set out by the Association of
Investment Companies ("AIC") and adopted by the Board. Although
they have served on the Board for almost ten years, respectively,
it is the opinion of the other member of the Board that they both
continue to demonstrate objective and independent thought processes
during Board meetings and in their dealings with the Asset Manager,
and therefore consider them both to be independent, despite their
long service.
Jeremy Thompson was appointed as Senior Independent Director
(the 'SID') on 1 April 2016.
During the year ended 31 December 2022 the Board had a breadth
of experience relevant to the Company and a balance of skills and
experience.
The Board recognises the importance of diversity and will
evaluate applicants to fill any vacant positions regardless of
gender and without prejudice. Applicants will be assessed on their
broad range of skills, expertise and industry knowledge, and
business and other expertise. In view of the long-term nature of
the Company's investments, the Board believes that a stable board
composition is fundamental to run the Company. The Board has not
stipulated a maximum term of any directorship.
DIRECTORS' REPORT (CONTINUED)
Board Independence and Disclosure
The Board is composed entirely of independent Directors, who
meet as required without the presence of the Asset Manager or
service providers to scrutinise the achievement of agreed goals,
objectives and monitor performance. Through the Audit Committee and
the Management Engagement Committee they are able to ascertain the
integrity of financial information and confirm that all financial
controls and risk management systems are robust and analyse the
performance of the Asset Manager and other service providers on a
regular basis.
The Directors have challenged the Asset Manager throughout the
year under review and for the purposes of assessing compliance with
the AIC Code, the Board as a whole considers that each Director is
independent of the Asset Manager and free from any business or
other relationship that could materially interfere with the
exercise of their independent judgment. If required, the Board is
able to access independent professional advice. Open communication
between the Asset Manager and the Board is facilitated by regular
Board meetings, to which the Asset Manager is invited to attend and
update the Board on the current status of the Company's aircraft,
along with ad hoc meetings as required.
The Board has met very frequently during the Covid and post
Covid period and have been actively engaged in negotiating revised
agreements with its lending group and Thai. Jon Bridel and Jeremy
Thompson have served for nine years and together with Harald Brauns
have acted independently and in the best interests of the Company.
The Board is now focused on using its experience to work with the
Asset Manager to maximise value for shareholders.
Directors
As the Company is not a FTSE 350 company, Directors were not
subject to annual election by the shareholders nor for the
requirement for the external audit contract to be put out to tender
every 10 years. Historically, the Directors had offered themselves
by rotation for re-election at each annual general meeting ('AGM').
Jon Bridel was re-elected at the AGM on 29 July 2022. Harald Brauns
is offering himself for re-election at the forthcoming AGM.
The Directors are on a termination notice of three months.
Directors' Duties and Responsibilities
The Board of Directors has overall responsibility for the
Company's affairs and is responsible for the determination of the
investment policy of the Company, resolving conflicts and for
monitoring the overall portfolio of investments of the Company. To
assist the Board in the day-to-day operations of the Company,
arrangements have been put in place for the performance of certain
of the day-to-day operations of the Company to third-party service
providers, such as the Asset Manager, Administrator and Company
Secretary, under the supervision of the Board. The Board receives
full details of the Company's assets, liabilities and other
relevant information in advance of Board meetings.
The Board undertakes an annual evaluation of its own performance
and the performance of its audit committee and individual
Directors. This is to ensure that they continue to act effectively
and efficiently and to fulfil their respective duties, and to
identify any training requirements. The results of the most recent
evaluation have been reviewed by the Chairman and his fellow
Directors. No significant corporate governance issues arose from
this review.
The Board also undertakes an annual review of the effectiveness
of the Company's system of internal controls and the safeguarding
of shareholders' investments and the Company's assets. A Management
Engagement Committee, chaired by Harald Brauns has been established
to further this safeguarding. At each quarterly meeting the Board
will table and review a risk matrix. Issues identified as a result
of this review are discussed and action plans put in place as is
necessary. There is nothing to highlight from the reviews of these
reports as at the date of this report.
DIRECTORS' REPORT (CONTINUED)
Board Meetings
The Board meets at least four times a year to consider the
business and affairs of the Company for the previous quarter.
Between these quarterly meetings the Board keeps in regular contact
by email and video calls as well as meeting to consider specific
matters of a transactional nature. There is regular contact with
the Secretary and administrator.
The Directors are kept fully informed of investment and
financial controls and other matters that are relevant to the
business of the Company. The Directors also have access, where
necessary in the furtherance of their duties, to professional
advice at the expense of the Company.
The Board considers agenda items laid out in the Notice and
Agenda which are formally circulated to the Board in advance of any
meeting as part of the board papers. Such items include but are not
limited to; investment performance, share price performance, review
of marketing and shareholder communication. The Directors may
request any agenda items to be added that they consider appropriate
for Board discussion. In addition, each Director is required to
inform the Board of any potential or actual conflict of interest
prior to Board discussion.
Board meetings are attended by representatives of the Asset
Manager. The Company's corporate brokers also attend to assist the
Directors in understanding the views of major shareholders about
the Company.
Board Meeting attendance
The table below shows the attendance at Board meetings and Audit
Committee meetings during the year.
Director No of board meetings No of audit committee
attended meetings attended
Jonathan Bridel 4 4
Jeremy Thompson 4 4
Harald Brauns 4 4
--------------------- ----------------------
No. of meetings during the
year 4 4
--------------------- ----------------------
The Directors also attended over 20 ad-hoc Board, Management and
Committee meetings in addition to the regular quarterly meetings as
shown in the above table and the Chairman attended further meetings
with various stakeholders and on management related matters. The
board also attended committee meetings for the Management
Engagement Committee.
Directors' Remuneration
The remuneration of the non-executive Directors is reviewed on
an annual basis and compared with the level of remuneration for
directorships of funds with similar responsibilities and
commitments.
Base annual fees are as follows:
Annual Fees Oct 22 to Jan 22 Jan 21
Dec 22 to Sept to Dec
22 21
Jonathan Bridel GBP61,750 GBP66,000 GBP66,000
Jeremy Thompson GBP49,450 GBP53,700 GBP53,700
Harald Brauns GBP49,450 GBP53,800 GBP53,800
Director fees have now been reduced by 10% which was the portion
being deferred and possibly payable in shares. The reduction in
fees is effective 1 October 2022.
DIRECTORS' REPORT (CONTINUED)
Directors' Remuneration (continued)
In the prior year, in recognition of the extra services
performed by the Directors and the significant increase of
committed time during 2021 due to the Group's circumstances, the
board earned extra fees of GBP65,000 which were not paid in cash
but deferred to be possibly settled by the issue of shares. No
additional fees were earned by the board during the 2022 financial
period.
Additional Fees 2022 2021
Jonathan Bridel - GBP25,000
Jeremy Thompson - GBP20,000
Harald Brauns - GBP20,000
During the current and prior year each Director received the
following remuneration in the form of Directors' fees from Group
companies:
Year ended Year ended
31 December 2022 31 December 2021
GBP US$ equivalent GBP US$ equivalent
Jonathan Bridel (Chairman) 64,937 80,701 91,000 121,613
Jeremy Thompson (Audit Committee
Chairman) 52,637 65,503 73,700 98,493
Harald Brauns (Management Engagement
Committee Chairman) 48,229 60,064 75,050 100,298
-------------------------------------- -------- --------------- -------- ---------------
165,803 206,268 239,750 320,404
-------------------------------------- -------- --------------- -------- ---------------
Up to 30 September 2022, 10% of base fees and all extra fees
were not paid by way of cash payments but were deferred to be
settled in the future or to be paid by way of equity. There has
been no settlement of director remuneration via the issue of equity
in the current year (2021: nil) and the deferred fees remain
outstanding as at 31 December 2022 (see note 13).
There are no executive director service contracts in issue.
Remuneration Policy
All Directors of the Company are non-executive and therefore
there are no incentive or performance schemes. Each director's
appointment is subject to an appointment letter and article 24 of
the Company's articles of association. Base remuneration is paid
monthly in arrears and reflects the experience, responsibility,
time, commitment and position on the main board as well as
responsibility for sitting on subsidiary boards when required. The
Chairman, Audit Chairman (SID) and other committee Chairman may
receive additional remuneration to reflect the increased level of
responsibility and accountability. The maximum amount of directors'
fees payable by the Company in any one year is currently set at
GBP200,000 in accordance with article 24. Remuneration may if
deemed appropriate also be payable for special or extra services if
required in accordance with article 24. This is defined as work
undertaken in connection with a corporate transaction including a
new prospectus to acquire, finance and lease an aircraft and/or
engines, managing a default, refinancing, sale or re-lease of
aircraft and for defending a takeover bid. This may include
reasonable travel time if applicable. The board may appoint an
independent consultant to review fees if it is considered an above
inflation rise may be appropriate.
Internal Controls and Risk Management Review
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms
that there is an ongoing process for identifying, evaluating and
monitoring the significant risks faced by the Company.
DIRECTORS' REPORT (CONTINUED)
Internal Controls and Risk Management Review (continued)
The Board carries out an annual review of internal controls
including those of the administrator. 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 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
ongoing performance and contractual arrangements. Each service
provider is reviewed annually, and key risks and operating matters
are addressed as part of that review.
Dialogue with Shareholders
All holders of shares in the Company have the right to receive
notice of, and attend, all general meetings of the Company, during
which the Directors are available to discuss issues affecting the
Company. The Directors are available to enter into dialogue with
shareholders and make themselves available for such purpose when
reasonably required. The Company believes such communications to be
important. Reports are provided to the Board of Directors on
shareholders' views about the Company and any issues or concerns
they might have.
Board Policy on Tenure and Independence
The Board has not yet formed a policy on tenure. However, it
does consider the independence of each director on an annual basis
during the performance evaluation process. All Directors are
considered independent.
Auditor
KPMG, Chartered Accountants have indicated their willingness to
continue in office.
Going Concern
The Directors believe that it is appropriate to prepare these
financial statements on the going concern basis due to current cash
flow forecasts which include fixed rentals and show that the Group
has sufficient cash and resources to cover operating costs for a
period of at least 12 months from the signing of these financial
statement.
In making this conclusion, the Directors have also taken into
account: -
-- the positive outlook for Thai Airways with both Thai aircraft
in a full return to service condition and now earning fixed
rentals. There is an expectation, based on commentary by the Thai
Administrator responsible for the rehabilitation of Thai Airways,
that Thai Airways will continue to be viable and will be able to
meet the terms of the revised lease agreements. This position
regarding Thai's viability is further enhanced by the announcement
on 9 August 2022 that Thai state-owned banks will provide new loans
and cash infusions to Thai. Furthermore, the Thai Government has
stated that it plans to preserve its 40% holding in Thai which may
grow further but will not exceed 50%; and
-- the expectation that DekaBank which made loans to the Group
(with certain loan concessions) will continue supporting the Group.
The loan agreement with DekaBank was amended and restated in
February 2023. Per the amended terms, monthly payments of interest
and principal will be limited to net lease rental monies available
for application towards the loans of US$ 475,000 per loan and the
final balloon repayments will be settled out of proceeds from sale
of the aircraft at the end of the lease term if the loan is not
refinanced. The US$ 475,000 equates to a monthly lease rental of
US$ 510,000 less US$ 35,000 paid to the Company as a contribution
towards its costs.
DIRECTORS' REPORT (CONTINUED)
Going Concern (continued)
The Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as
a going concern.
Viability Statement
As with previous reports the Directors regularly assess the
viability of the Group with respect to the impact of potential
risks the Group faces and the Group's current position.
The Group has been in extensive negotiations with its lenders
during the year and subsequent to the year end. In February 2023,
the Group and DekaBank entered into Second Amendment and
Restatement to the Loan Agreements in which the parties agreed to
new repayment schedules for the loans in place. Under the revised
repayment schedules, monthly payments of interest and principal
will be limited to net lease rental
monies available for application towards the loans of US$475,000
per loan and the final balloon repayments will be settled out of
proceeds from sale of the aircraft at the end of the lease term.
These new repayment terms are in line with the lease agreements in
place and so the terms are beneficial to the group.
The PBH period on the Thai Airways leases expired on 31 December
2022 and now the Group will be receiving fixed monthly rental
payments of US$510,000 per aircraft from Thai effective January
2023. This is in line with the amended lease agreements finalised
and signed on 1 April 2022. US$35,000 per aircraft of the fixed
monthly rental payments will be retained by the Group to contribute
to ongoing fixed costs, the remainder will be used to cover
principal and interest payable on the DekaBank loans per above.
Both aircraft have been operational for most of the 2022 year
and are currently in regular commercial use. With both aircraft
operational, this not only means the aircraft are earning revenue,
but it also means that if Thai were to default, the aircraft are in
the best possible condition for either a re-lease or a sale. The
viability and therefore continuation of the Group looks positive
save any major, likely force majeure, scenarios.
Mindful of the significant challenges which could still impact
the airline industry, Thai Airways in particular and the Company,
the Company has extended its viability period to June 2024 assuming
Thai Airways continue to meet its lease payment obligations and
certain service providers continue to defer some of their fees as
agreed.
The Group is required to present a plan for refinancing or
similar to the lenders before the expiry of the current loan
facilities in the last quarter of 2026. The Directors will consider
their options after the viability period.
Foremost amongst the near-term risks faced by the Group, is the
successful emergence from restructuring of Thai Airways and the
recovery from Covid related restrictions to Thai's tourist economy.
So far, the news from Thai Airways has been positive, the Thai
Administrator (Planner) responsible for the rehabilitation of Thai
has outlined that he feels that the measures taken have materially
addressed major cost areas (fleet size reduction, staff cuts, pay
cuts, property rationalisation) and further that Thai have raised a
reasonable amount of capital from asset sales. The Directors note
that whilst they believe that Thai Airways has a strong possibility
of successfully completing the rehabilitation, there is no
guarantee of this. The Directors continue to monitor the
developments of the rehabilitation process and the impact on the
Group.
The Directors regularly consider and assess the viability of the
Company and take into account the Company's current position and
the potential impact of the principal risks outlined below. The
Directors have considered the impact of the Russian invasion of
Ukraine on the Group and concluded that to date there has been no
material impact on the operations of the Group serve for indirect
impacts such as rising fuel costs.
DIRECTORS' REPORT (CONTINUED)
Viability Statement (continued)
The Directors continue to consider that an investment in the
Company should be regarded as long term in nature and is suitable
only for sophisticated investors, investment professionals, high
net worth bodies corporate, unincorporated associations and
partnerships and trustees of high value trusts and private clients
(all of whom will invest through brokers), in each case, who can
bear the economic risk of a substantial or entire loss of their
investment and who can accept that there may be limited liquidity
in the shares.
The Directors consider that the Notes to the Financial
Statements are integral to the support of the Viability
Statement.
Annual General Meeting
The next AGM of the Company will be held in Guernsey at a date
that will communicated in the future at East Wing, Trafalgar Court,
Les Banques, St Peter Port, Guernsey. The meeting will be held to,
inter alia; receive the Annual Report and Audited Consolidated
Financial Statements; elect and re-elect Directors; propose the
reappointment of the auditor; authorise the Directors to determine
the auditor's remuneration; approve the Directors' remuneration
policy; authorise the Company to issue and allot new shares and
approve a partial disapplication of the pre-emption rights to allow
the Company to issue new shares by way of tap issues. Shareholders
are encouraged to vote in advance by proxy. The formal notice of
AGM will be issued to shareholders in due course.
The Board continues to welcome engagement with its shareholders
and those who have questions relating directly to the business of
the AGM can forward their questions to the Company Secretary by
email to DPA@aztecgroup.co.uk by no later than one week before the
AGM. A Q&A reflecting the questions received and responses
provided will be made available on the Company's website at
www.dpaircraft.com as soon as practicable following the AGM.
On 29 July 2022 at the Company's last AGM, 22.34% of total votes
cast were cast against resolution 4 (to approve the Directors'
remuneration report as set out in the 2021 Annual Report) and
against resolution 5 (to approve the Directors' Remuneration Policy
for the year ending 31 December 2022 as set out in the 2021 Annual
Report). The Company noted that it would reflect and continue to
consult with shareholders in this respect.
The Company has subsequently discussed the matter with
shareholders who wished to engage further and explained the reason
for higher director fees in 2021 was due to the significant extra
work required by the Board to restructure lease and loan agreements
resulting from the significant revenue reduction due to the impact
of the Covid pandemic on the Company's Lessees. Notwithstanding the
higher fees payable, to date no additional fees and some annual
fees have not been paid due to restrictions imposed by the Lenders
as part of the loan restructuring. The Company also highlighted
that additional fees would be unlikely in 2022 notwithstanding the
considerable time still invested.
The Board is thankful to all shareholders for their continuous
support.
Corporate Governance
The Company is not required to comply with any particular
corporate governance codes in the UK or Guernsey, but the Directors
take corporate governance seriously and will have regard to
relevant corporate governance standards in determining the
Company's governance policies including without limitation in
relation to corporate reporting, risk management and internal
control procedures.
The Directors intend to comply, and ensure that the Company
complies, with any obligations under the Companies (Guernsey) Law,
2008 and the Articles to treat shareholders fairly as between
themselves.
DIRECTORS' REPORT (CONTINUED)
Directors' Share Dealings
The Board has agreed to adopt and implement the Market Abuse
Regulation for Directors' dealings. The Board will be responsible
for taking all proper and reasonable steps to ensure compliance
with the Market Abuse Regulation.
Board Committees
The Board of Directors has established an audit committee, which
operates under detailed terms of reference, copies of which are
available on request from the Company Secretary. Details of the
Company Secretary are included within the Company information on
page 74 .
The Board have established a Management Engagement Committee
which reviewed the performance of the Asset Manager and the key
service providers at least annually and this review includes a
consideration of the service providers' internal controls, risk
management, operational management, information technology and
their effectiveness.
Alternative Investment Fund Managers Directive ('AIFMD')
In July 2013 the European Alternative Investment Fund Management
Directive ('AIFMD') came into effect with transitional provisions
until July 2014. The Company has been determined to be a
'self-managed' Guernsey Alternative Investment Fund ('AIF') and as
such will be treated as a non-EU AIFM for the purposes of the
Directive. The Company has registered with the Financial Conduct
Authority (and notified the Guernsey Financial Services Commission)
under the AIFMD (Marketing) Rules, 2013.
For a non-EU AIFM that has over EUR 100 million (equivalent to
US$ 107 million at 31 December 2022) of net assets under management
and also utilises leverage, certain Annual Investor Disclosures are
required.
For the purpose of AIFMD, the Company is a Self-Managed
Alternative Investment Fund Manager with assets above the EUR 100
million (equivalent to US$ 107 million at 31 December 2022), with
leverage, threshold.
AIFMD does not prescribe use of any one particular accounting
standard. However, the financial statements must be audited by an
auditor empowered by law to audit the accounts in accordance with
the EU Statutory Audit Directive.
The required disclosures for investors are contained within the
Financial Conduct Authority checklist and the Company's compliance
therewith can be found in Appendix 1 to these financial
statements.
Environmental, social and governance (ESG)
The Group recognises the Paris Agreement on climate change. The
Group operates NTA ('New Technology Aircraft') - specifically
Boeing 787-8's equipped with Rolls Royce Trent-1000 engines which
are 20% more fuel efficient on a revenue-per-kilometre basis than
similar comparable current technology legacy aircraft. The Board
continue to implement steps to reduce its own travelling and
maximises the use of virtual meetings within the board and with all
its key service providers.
Jonathan Bridel Jeremy Thompson
Director Director
REPORT OF THE AUDIT COMMITTEE
On the following pages, we present the Audit Committee (the
'Committee') Report for 2022, setting out the Committee's structure
and composition, principal duties and key activities during the
year. The Committee has reviewed the Company's financial reporting,
the independence and effectiveness of the independent auditor (the
'auditor') and the internal control and risk management systems of
service providers.
The Board is satisfied that for the period under review and
thereafter the Committee has recent and relevant commercial and
financial knowledge sufficient to satisfy the requirements of the
Committee's remit.
Structure and Composition
The Committee is chaired by Mr Thompson and its other members
are Mr Bridel and Mr Brauns.
The Committee conducts formal meetings not less than three times
a year. There were four meetings during the period under review and
multiple ad-hoc meetings. All Directors were present and forming
part of the quorum. The auditor is invited to attend those meetings
at which the annual and interim reports are considered.
Principal Duties
The role of the Committee includes:
-- Monitoring the integrity of the published financial statements of the Group;
-- Keeping under review the consistency and appropriateness of
accounting policies on a year to year basis;
-- Satisfying itself that the annual financial statements, the
interim statement of financial results and any other major
financial statements issued by the Group follow International
Financial Reporting Standards and give a true and fair view of the
Group and its subsidiaries' affairs; matters raised by the external
auditors about any aspect of the financial statements or of the
Group's internal control, are appropriately considered and, if
necessary, brought to the attention of the board, for
resolution;
-- Monitoring and reviewing the quality and effectiveness of the auditor and their independence;
-- Considering and making recommendations to the Board on the
appointment, reappointment, replacement and remuneration of the
Group's auditor;
-- Monitoring and reviewing the internal control and risk
management systems of the service providers; and
-- Considering at least once a year whether there is a need for an internal audit function.
The complete details of the Committee's formal duties and
responsibilities are set out in the Committee's terms of reference,
a copy of which can be obtained from the Secretary.
Independent Auditor
The Committee is also the forum through which the auditor
reports to the Board of Directors. The Committee reviews the scope
and results of the audit, its cost effectiveness and the
independence and objectivity of the auditor, with particular regard
to the terms under which it is appointed to perform non-audit
services including fees. The Committee has established pre-approval
policies and procedures for the engagement of KPMG, Ireland
('KPMG') to provide non-audit services. KPMG has been the
independent auditor from the date of the initial listing on the
Specialist Fund Segment of the London Stock Exchange.
The audit fees proposed by the auditor each year are reviewed by
the Committee taking into account the Group's structure, operations
and other requirements during the year and the Committee make
appropriate recommendations to the Board. The Committee considers
KPMG to be independent of the Company. The Committee also met with
the external auditors without the Asset Manager or Administrator
being present so as to provide a forum to raise any matters of
concern in confidence.
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
Evaluations or Assessments made during the year
The following sections discuss the assessments made by the
Committee during the year:
Significant Areas of Focus for the Financial Statements
The Committee's review of the interim and annual financial
statements focused on:
-- Valuation of the Company's Assets (more detail in relation to the approach is in note 3);
-- Assessing straight lining lease asset for impairment;
-- The financial statements giving a true and fair view and
being prepared in accordance with International Financial Reporting
Standards and the Companies (Guernsey) Law, 2008; and
-- Going concern and the viability statement review.
Effectiveness of the Audit
The Committee had formal meetings with KPMG during the period
under review:
-- Before the start of the audit to discuss formal planning,
discuss any potential issues and agree the scope that will be
covered; and
-- After the audit work was concluded to discuss any significant
matters such as those stated above.
-- The Board considered the effectiveness and independence of
KPMG by using a number of measures, including but not limited
to:
-- The audit plan presented to them before the start of the audit;
-- The audit results report;
-- Changes to audit personnel;
-- The auditor's own internal procedures to identify threats to independence; and
-- Feedback from both the Asset Manager and Administrator.
Internal Audit
There is no internal audit function. As all of the Directors are
non-executive and all of the Company's administration functions
have been delegated to independent third parties, the Audit
Committee considers that there is no need for the Company to have
an internal audit function. However, this matter is reviewed
periodically.
Conclusion and Recommendation
After reviewing various reports such as the operation and risk
management framework and performance reports from the Directors and
the Asset Manager and assessing the significant areas of focus for
the financial statements listed on pages 43 to 46, the Committee is
satisfied that the financial statements appropriately address the
critical judgements and key estimates (both in respect to the
amounts reported and the disclosures).
The Committee is also satisfied that the significant assumptions
used for assessing going concern and, determining the value of
assets and liabilities have been appropriately scrutinised,
challenged and are sufficiently robust. The independent auditor
reported to the Committee that no material misstatements were found
in the course of its work. Furthermore, the Administrator confirmed
to the Committee that they were not aware of any material
misstatements including matters relating to presentation.
The Committee confirms that it is satisfied that the independent
auditor has fulfilled its responsibilities with diligence and
professional scepticism. Following the completion of the financial
statements review process on the effectiveness of the independent
audit and the review of audit services, the Committee will
recommend that KPMG be reappointed at the next Annual General
Meeting.
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
Conclusion and Recommendation (continued)
For any questions on the activities of the Committee not
addressed in the foregoing, a member of the Committee will attend
each Annual General Meeting to respond to such questions.
By order of the Audit Committee
Jeremy Thompson
Audit Committee Chairman
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
Geopolitical and economic risks
The Company leases aircraft to a customer in Thailand exposing
it to (i) Thailand's varying economic, social, legal and
geopolitical risks, (ii) instability of Thailand markets and (iii)
the impact of global health pandemics and other global market
disruptions. The Directors continue to monitor the development of
COVID-19 and are continuing to assess the impact on the Company.
Exposure to Thailand's jurisdiction may adversely affect the
Company's future performance, position and growth potential if
Thailand's economy does not perform well or if laws and regulations
that have an adverse impact on the aviation industry are passed in
Thailand. The adequacy and timeliness of the Company's response to
emerging risks in this jurisdiction is of critical importance to
the mitigation of their potential impact on the Company.
The Geopolitical risk surrounding the Russian invasion of
Ukraine and the subsequent fall-out have the potential to impact
travel and/or travellers' willingness to travel which in turn could
impact the volume of traffic to and from Thailand.
Exposure to the commercial airline industry
As a supplier to and partner of the airline industry, the Group
is exposed to the financial condition of the airline industry as it
leases its aircraft to commercial airline customers. The financial
condition of the airline industry is affected by, among other
things, geopolitical events, outbreaks of communicable pandemic
diseases and natural disasters, fuel costs and the demand for air
travel. To the extent that any of these factors adversely affect
the airline industry they may result in (i) downward pressure on
lease rates and aircraft values, (ii) higher incidences of lessee
defaults, restructuring, and repossessions and (iii) inability to
lease aircraft on commercially acceptable terms.
Thai Airways
Thai went into debt rehabilitation on 27 May 2020 and the
business rehabilitation plan was approved on 15 June 2021 by the
Central Bankruptcy Court of Thailand. There is risk that the
business rehabilitation plan does not achieve the desired results,
and this would have an adverse impact on the entity's lease
arrangements with Thai Airways which is the core source of income
for the Group.
The continuing impact of COVID-19 and the conflict between
Russia and Ukraine has the potential to impact Thai's business
rehabilitation plan and adversely impact the Group. This is
particularly relevant for the Group given the aircraft leased to
Thai Airways is the sole source of income for the Group.
COVID-19 Impact
The COVID-19 pandemic continues to put a significant burden on
the airline industry. Even as travel bans are gradually being
lifted, it may take years until capacity and numbers of passenger
return to pre-COVID-19 levels. Expectations are that capacity will
not return to pre-COVID-19 levels before 2024. This uncertainty as
to when capacity will return to normal levels and the possibility
of further strains which could again result in lockdowns and travel
bans pose a risk to the Group.
Asset risk
The Company's Assets as at year end comprise of two Boeing 787-8
aircraft. The Group bears the risk of selling or re-leasing the
aircraft in its fleet at the end of their lease terms or if the
lease is terminated. If demand for aircraft decreases market lease
rates may fall, and should such conditions continue for an extended
period, it could affect the market value of aircraft in the fleet
and may result in an impairment charge. The Directors have engaged
an asset manager with appropriate experience of the aviation
industry to manage the fleet and remarket or sell aircraft as
required to reduce and address this risk. Any lasting impact of the
COVID-19 situation on both aircraft demand and lease rates are at
present unknown.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Asset risk (continued)
There is no guarantee that, upon expiry or cessation of the
leases, the Assets could be sold or re-leased for an amount that
would enable shareholders to realise a capital profit on their
investment or to avoid a loss. Costs regarding any future
re-leasing of the assets would depend upon various economic factors
and would be determinable only upon an individual re-leasing event.
Potential reconfiguration costs could in certain circumstances be
substantial.
Key personnel risk
The ability of the Company to achieve its investment objective
is significantly dependent upon the advice of certain key personnel
at its Asset Manager DS Aviation GmbH & Co. KG; there is no
guarantee that such personnel will be available to provide services
to the Company for the scheduled term of the Leases or following
the termination of the Lease. However, Key Man clauses within the
Asset Management agreement do provide a base line level of
protection against this risk.
Credit risk & Counterparty risk
Credit risk is the risk that a significant counterparty will
default on its contractual obligations. The Group's most
significant counterparty is Thai Airways as lessee and provider of
income and DekaBank Deutsche Girozentrale ('DekaBank') as holder of
the Group's cash and restricted cash. The lessee does not maintain
a credit rating. Thai Airways is currently in the early stages of
implementing a rehabilitation plan. The Moody's credit rating of
DekaBank is Aa2 (2021: Aa2).
There is no guarantee that the business rehabilitation process
of Thai Airways will be successful even though developments to date
have been positive. Failure of any material part of the business
rehabilitation plan may have an adverse impact on its ability to
comply with its obligations under the amended lease agreement
entered into in 2022.
Any failure by Thai Airways to pay any amounts when due could
have an adverse effect on the Group's ability to comply with its
obligations under the DekaBank loan agreements and could result in
the lenders enforcing their security and selling the relevant
Assets on the market potentially negatively impacting the returns
to investors. In mitigation, Thai Airways is an international
full-service carrier and is important to Thailand's economy and as
such it is unlikely that the Government will not provide it with
the necessary support to see it through its restructure. However,
there is no guarantee and hence a significant risk remains.
Refinancing risk
The Group is required to present a plan for refinancing or
similar to the lenders before the expiry of the current loan
facilities in the last quarter of 2026. There is a risk that the
Group will not be able to replace the DekaBank debt obligation with
new debt before the expiry of the current loan facilities. If not
able to refinance, the Group would have to dispose the aircraft to
settle the loan and there is no guarantee that the Assets could be
sold for an amount that would enable shareholders to realise a
capital profit on their investment or to avoid a loss.
Liquidity risk
In order to finance the purchase of the Assets, the Group
entered into loan agreements. Pursuant to the loan agreements, the
lenders are given first ranking security over the Assets. Under the
provisions of each of the loan agreements, the Borrowers are
required to comply with loan covenants and undertakings. A failure
to comply with such covenants or undertakings may result in the
relevant lenders recalling the relevant loan. In such
circumstances, the Group may be required to remarket the relevant
Asset (either sell or enter into a subsequent lease) to repay the
outstanding relevant loan and/or re-negotiate the loan terms with
the relevant lender.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
Boeing
The Company is exposed to Boeing being able to resolve any
identified 787 related problems which the FAA or other regulatory
bodies designate as restricting commercial operations. At present
no such restrictions exist. The 787 is considered a latest
generation aircraft type which has pioneered areas including the
extensive use of carbon fibre in its fuselage and wing
construction.
Rolls Royce
The Company has exposure to Rolls Royce as suppliers of the
Trent 1000 engines in terms of ongoing support. Announcements by RR
have implied that the low-pressure turbine (LPT) and other known
previous engine performance issues have been resolved. The Trent
1000 is a highly fuel-efficient engine, representing the latest
engine technology. As such the Company is exposed to any future as
yet unknown performance issues. This situation is partially
mitigated by Thai using Rolls Royce Total Care and by the Asset
Manager having oversight of performance issues from both physical
and desktop checks.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the financial
statements in accordance with the applicable financial reporting
framework. They have decided to prepare the financial statements in
accordance with International Financial Reporting Framework
('IFRS'). The financial statements are required by law to comply
with the Companies (Guernsey) Law, 2008.
The Directors are also responsible for ensuring its Annual
Report and Audited Consolidated Financial Statement meet the
requirements of the UK's FCA Disclosure and Transparency Rules.
In preparing these financial statements, the Directors have:
-- selected suitable accounting policies and applied them consistently;
-- made judgements and estimates that are reasonable and prudent;
-- stated whether they have been prepared in accordance with IFRS;
-- assessed the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and
-- used the going concern basis of accounting unless they either
intend to liquidate the Company or cease operations or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records which disclose with reasonable accuracy at any time the
assets, liabilities, financial position and profit or loss of the
Company and which enable them to ensure that these financial
statements comply with IFRS and the Companies (Guernsey) Law, 2008.
They are also responsible for such internal controls as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have a general responsible for safeguarding the
assets of the Company, and hence 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 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.
Signed on behalf of the Board by
Jonathan Bridel Jeremy Thompson
Director Director
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF DP AIRCRAFT I
LIMITED
Report on the audit of the financial statements
Opinion
We have audited the consolidated financial statements ("the
financial statements") of DP Aircraft I Limited ('the Company') and
its consolidated undertakings (collectively 'the Group') for the
year ended 31 December 2022, which comprise the consolidated
statement of financial position, the consolidated statement of
comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows and related notes,
including the summary of significant accounting policies set out in
note 2. The financial reporting framework that has been applied in
their preparation is Guernsey Law, UK adopted international
accounting standards and, as regards the Company financial
statements, as applied in accordance with the provisions of the
Companies (Guernsey) Law 2008 and UK adopted international
accounting standards.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's affairs as at 31 December 2022 and of the
Group's profit for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
-- the financial statements have been prepared in accordance
with the requirements of the Companies (Guernsey) Law 2008.
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 believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the
audit committee.
We were appointed as auditor by the directors for the year ended
31 December 2014. The period of total uninterrupted engagement is
for the eight financial years ended 31 December 2022. We have
fulfilled our ethical responsibilities under, and we remain
independent of the Group in accordance with UK ethical
requirements, including the Financial Reporting Council (FRC)'s
Ethical Standard as applied to listed public interest entities.
During the year we identified a breach of certain aspects of the
ethical requirements relating to the provision of prohibited tax
services to subsidiaries of the Company. Notwithstanding the
aforementioned we have concluded that our objectivity has not been
compromised and the firm and the engagement team are independent of
the Company. The firm no longer provides these prohibited
services.
Conclusions relating to going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group or
to cease their operations, and as they have concluded that the
Group's financial position means that this is realistic. They have
also concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
INDEPENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DP AIRCRAFT I
LIMITED (CONTINUED)
Report on the audit of the financial statements (continued)
Conclusions relating to going concern (continued)
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the entity's ability to
continue to adopt the going concern basis of accounting
included.
We evaluated the directors' assessment of the entity's ability
to continue to adopt the going concern basis of accounting. In our
evaluation of the Directors' conclusions, we considered the
inherent risks to the Group's business model and analysed how those
risks might affect the Group's financial resources or ability to
continue operations over the going concern period.
The risk that we considered most likely to adversely affect the
Group's available financial resources over this period is the
ability of the Group's lessee to continue to meet its contractual
lease obligations.
As this is a risk that could potentially cast significant doubt
on the Group's ability to continue as a going concern, we
considered sensitivities over the level of available financial
resources indicated by the Group's financial forecasts taking
account of reasonably possible (but not unrealistic) adverse
effects that could arise from these risks individually and
collectively. We evaluated the achievability of the actions the
Directors consider they would take to improve the position should
the risks materialise.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's ability to continue as a going concern for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Group will
continue in operation.
Detecting irregularities including fraud
We identified the areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements and risks of material misstatement due to fraud, using
our understanding of the entity's industry, regulatory environment
and other external factors and inquiry with the directors. In
addition, our risk assessment procedures included:
-- Inquiring with the directors as to the Group's policies and
procedures regarding compliance with laws and regulations,
identifying, evaluating and accounting for litigation and claims,
as well as whether they have knowledge of non-compliance or
instances of litigation or claims.
-- Inquiring of directors as to the Group's policies and
procedures to prevent and detect fraud, as well as whether they
have knowledge of any actual, suspected or alleged fraud.
-- Inquiring of directors regarding their assessment of the risk
that the financial statements may be materially misstated due to
irregularities, including fraud.
-- Reading Board and audit committee minutes.
We discussed identified laws and regulations, fraud risk factors
and the need to remain alert among the audit team.
INDEPENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DP AIRCRAFT I
LIMITED (CONTINUED)
Report on the audit of the financial statements (continued)
Detecting irregularities including fraud (continued)
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including companies and
financial reporting legislation. We assessed the extent of
compliance with these laws and regulations as part of our
procedures on the related financial statement items, including
assessing the financial statement disclosures and agreeing them to
supporting documentation when necessary.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely
to have such an effect: ongoing compliance with listing rules given
the regulated nature of the Group's activities.
Auditing standards limit the required audit procedures to
identify non-compliance with these non-direct laws and regulations
to inquiry of the directors and inspection of regulatory and legal
correspondence, if any. These limited procedures did not identify
actual or suspected non-compliance
We assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. As required by auditing standards, we performed
procedures to address the risk of management override of. On this
audit we do not believe there is a fraud risk related to revenue
recognition.
In response to the fraud risks, we also performed procedures
including:
-- Identifying journal entries and other adjustments to test
based on risk criteria and comparing the identified entries to
supporting documentation.
-- Assessing significant accounting estimates for bias
-- Assessing the disclosures in the financial statements
As the Group is regulated, our assessment of risks involved
obtaining an understanding of the legal and regulatory framework
that the Group operates and gaining an understanding of the control
environment including the entity's procedures for complying with
regulatory requirements.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations (irregularities) is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of irregularities, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the override
of internal controls. We are not responsible for preventing
non-compliance and cannot be expected to detect non-compliance with
all laws and regulations.
Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including 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.
INDEPENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DP AIRCRAFT I
LIMITED (CONTINUED)
Report on the audit of the financial statements (continued)
Valuation of PPE - Aircraft & related components $125.5 million (2021: $126.4 million)
Refer to page 49, (accounting policy), pages 53 and 54 (significant estimates) and page 57
and 58 (financial disclosures)
The key audit matter How the matter was addressed in our audit
At 31 December 2022, the carrying value of the Group's In relation to the audit of the impairment
aircraft portfolio, including related assessment of aircraft and related components,
components amounted to $125.5 million or 79% of total the procedures we undertook included, amongst
assets. others:
The Group applies the requirements of IAS-36 Impairment
of Assets ('IAS-36') in order to determine We obtained an understanding of, and tested the
whether it is necessary to recognise an impairment loss design and implementation, of the key control
on any aircraft and related assets. around the impairment assessment of aircraft and
There is a significant risk relating to the valuation of related components being the consideration
aircraft given the judgemental nature and approval by the Board of Directors of the
of the assumptions and the inputs to the impairment model impairment assessment.
that require consideration by the
Board of Directors. We inquired of the Board of Directors about plans
for aircraft disposals or other actions
that may negatively impact on aircraft recoverable
amounts.
We evaluated the (i) competence, capabilities and
objectivity of experts employed by the Group
to provide aircraft current market values and (ii)
the appropriateness of their work as audit
evidence. We obtained the current market value
reports o f the independent valuers to validate
the current market values to the impairment model
and compared to the other independent valuers
reports to determine the were reasonable.
We evaluated the Board of Directors identification
and reasonableness of impairment indicators,
and assessed the methodology adopted in its
impairment model with reference to our
understanding
of the Group's business and the requirements of
IAS-36. We assessed the calculations underlying
the impairment model by checking that the data and
assumptions input (including current market
value) into the model were in agreement with those
that we had evaluated.
We assessed the adequacy of the disclosures made by
the Group regarding the impairment assessment
of aircraft and related components in the financial
statements for compliance with the relevant
accounting standards.
As a result of the procedures performed, we found
the Groups judgements around current market
values were reasonable.
INDEPENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DP AIRCRAFT I
LIMITED (CONTINUED)
Report on the audit of the financial statements (continued)
Our application of materiality and an overview of the scope of
our audit
Materiality for the Group financial statements as a whole was
set at $1.15m (2021: $0.7m), determined with reference to a
benchmark of total assets (of which it represents 0.75% (2021:
0.5%)).
In applying our judgement in determining the most appropriate
benchmark, the factors, which had the most significant impact
were:
-- our understanding that one of the principal considerations
for investors in assessing the financial performance is the value
of the Group's assets; and
-- the stability of the Group, resulting from its nature, where
the Group is in its life cycle and the industry in which the Group
operates.
In applying our judgement in determining the percentage to be
applied to the benchmark, the following qualitative factors, had
the most significant impact, increasing our assessment of
materiality:
-- the increased stability of the business environment in which it operates
We applied Group materiality to assist us determine the overall
audit strategy
Performance materiality
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 75% (2021: 75%) of
materiality for the financial statements, which equates to $0.86m
(2021: $0.5m) for the Group.
Audit misstatement posting threshold
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding $0.06m, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
Other information
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. The other information comprises the information
included in the Fact Sheet, Summary, Highlights, Chairmans
Statement, Asset Manager's Report, Director's Report, Report of the
Audit Committee, Statement of Principal Risks and Uncertainties,
Company Information and Appendix 1 - Alternative Investment Fund
Directive. The financial statements and our auditor's report
thereon do not comprise part of the other information. Our opinion
on the financial statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except as
explicitly stated below, any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
INDEPENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF DP AIRCRAFT I
LIMITED (CONTINUED)
We have nothing to report on other matters on which we are
required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Respective responsibilities and restrictions on use
Responsibilities of directors for the financial statements
As explained more fully in the directors' responsibilities
statement set out on page 32, the directors are responsible for:
the preparation of the financial statements including being
satisfied that they give a true and fair view; such internal
control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error; assessing the Group'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 they either intend to liquidate the Group 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, other irregularities or error,
and to issue an opinion in an auditor's report. 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, other irregularities 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 fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
The purpose of our audit work and to whom we owe our
responsibilities
Our 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.
Niall Naughton 27 April 2023
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Harbourmaster Place
IFSC
Dublin 1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
Year ended Year ended
31 Dec 2022 31 Dec 2021
Notes US$ US$
Income
Lease rental income 4 16,462,372 18,391,211
16,462,372 18,391,211
Expenses
Asset management fees 22 (471,590) (757,254)
General and administrative expenses 5 (1,094,587) (2,640,895)
Expected credit loss on straight lining
lease asset 11 (1,486,453) -
Expected credit loss write off 11 (105,063) (12,508,499)
Depreciation 9 (958,760) (175,160)
(4,116,453) (16,081,808)
Operating profit 12,345,919 2,309,403
Finance costs 6 (4,860,305) (5,869,097)
Net losses on financial assets at fair
value - (8,547,935)
Loss on loss of control of assets,
liabilities and subsidiary undertaking - (9,874,940)
Dividend income/Other Income 1,552 57,902
Finance income 194,906 21,358
----------------------------------------- ------ ------------ -------------
Net finance costs (4,663,847) (24,212,712)
Profit/(loss) before tax 7,682,072 (21,903,309)
Taxation 7 (21,249) 44,236
Profit/(loss) for the year 7,660,823 (21,859,073)
----------------------------------------- ------ ------------ -------------
Total Comprehensive Income/(Loss)
for the period 7,660,823 (21,859,073)
Earnings per Share for the year -
basic and diluted 8 0.03429 (0.10442)
----------------------------------------- ------ ------------ -------------
All income is attributable to the Ordinary Shares of the
Company.
The notes on pages 47 to 73 form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
* Restated * Restated
31 Dec 2022 31 Dec 2021 1 Jan 2021
Notes US$ US$ US$
NON-CURRENT ASSETS
PPE- Aircraft & Related Components 9 125,466,080 126,424,840 126,600,000
Trade and other receivables 11 8,935,454 4,772,296 -
Restricted Cash 10 14,979,197 14,465,329 15,547,974
--------------------------------------- ---------- -------------- -------------- --------------
Total non-current assets 149,380,731 145,662,465 142,147,974
CURRENT ASSETS
Aircraft held for sale - - 82,000,000
Investments held at fair
value - - 15,630,526
Trade and other receivables 11 3,857,514 251,216 45,930
Restricted cash 10 4,175,280 2,788,517 11,890,358
Cash and cash equivalents 1,479,541 1,179,211 6,949,167
--------------------------------------- ---------- -------------- -------------- --------------
Total current assets 9,512,335 4,218,944 116,515,981
TOTAL ASSETS 158,893,066 149,881,409 258,663,955
--------------------------------------- ---------- -------------- -------------- --------------
EQUITY
Share Capital 15 211,279,828 210,556,652 210,556,652
Retained deficit 16 (166,543,707) (174,204,530) (152,345,457)
--------------------------------------- ---------- -------------- -------------- --------------
TOTAL EQUITY 44,736,121 36,352,122 58,211,195
--------------------------------------- ---------- -------------- -------------- --------------
NON-CURRENT LIABILITIES
Bank borrowings 14 80,779,172 98,304,863 -
Maintenance provision 12 14,829,296 14,460,682 14,460,682
Total non-current liabilities 95,608,468 112,765,545 14,460,682
CURRENT LIABILITIES
Bank borrowings 14 17,707,184 136,010 180,915,582
Derivative instrument liabilities - - 4,183,715
Trade and other payables 13 841,293 627,732 892,781
--------------------------------------- ---------- -------------- -------------- --------------
Total current liabilities 18,548,477 763,742 185,992,078
TOTAL LIABILITIES 114,156,945 113,529,287 200,452,760
------------------------------------- ---- ---------------------- -------------- --------------
TOTAL EQUITY AND LIABILITIES 158,893,066 149,881,409 258,663,955
--------------------------------------- -------------------------- -------------- --------------
* Comparative information has been restated due to
reclassification adjustments, see note 24 for further
information.
The financial statements on pages 43 to 73 were approved by the
Board of Directors and were authorised for issue on 27 April 2023.
They were signed on its behalf by:
Jonathan Bridel Jeremy Thompson
Chairman Director
The notes on pages 47 to 73 form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
Year ended Year ended
Notes 31 Dec 2022 31 Dec 2021
US$ US$
Profit/(loss) for the year 7,660,823 (21,859,073)
Adjusted for:
Depreciation and amortisation 9 958,760 175,160
Finance costs 6 4,860,305 6,328,112
Gain on derivatives at fair value 6 - (459,015)
Loss on financial assets at fair
value - 8,547,935
Taxation 7 21,249 (44,236)
Loss on loss of control of assets,
liabilities and subsidiary undertaking - 9,874,940
Straight lining rental income 4 (8,753,206) (4,772,296)
Expected credit loss 11 105,063 12,508,499
Provision on straight lining lease
asset 11 1,486,453 -
Tax-paid - (54,388)
Changes in:
Increase in maintenance reserves 12 368,614 -
Increase/(decrease) in trade and
other payables 13 192,312 (92,942)
Increase in trade and other receivables 11 (607,766) (12,713,785)
NET CASH FLOW FROM/ (USED IN) OPERATING
ACTIVITIES 6,292,607 (2,561,089)
---------------------------------------------------- ------------ -------------
INVESTING ACTIVITIES
Loss of control of subsidiary undertakings - (5,456,182)
Sales of investments in Norwegian - 4,069,880
Restricted cash (1,900,631) 3,348,896
-------------------------------------------- ------ ------------ -------------
NET CASH FLOW (USED IN)/ FROM INVESTING
ACTIVITIES (1,900,631) 1,962,594
---------------------------------------------------- ------------ -------------
FINANCING ACTIVITIES
Share issue proceeds 750,000 -
Share issue costs (26,824) -
Bank loan principal repaid 14 - (274,173)
Bank loan interest paid 14 (4,814,822) (4,595,529)
Swap interest paid 14 - (301,759)
NET CASH FLOW USED IN FINANCING
ACTIVITIES (4,091,646) (5,171,461)
-------------------------------------------- ------ ------------ -------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 1,179,211 6,949,167
Increase/(decrease) in cash and cash
equivalents 300,330 (5,769,956)
-------------------------------------------- ------ ------------ -------------
CASH AND CASH EQUIVALENTS AT
OF YEAR 1,479,541 1,179,211
-------------------------------------------- ------ ------------ -------------
The notes on pages 47 to 73 form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Retained Total
Share capital deficit Equity
Note US$ US$ US$
As at 1 January 2022 210,556,652 (174,204,530) 36,352,122
Total comprehensive income for
the year
Profit for the year - 7,660,823 7,660,823
Total comprehensive income - 7,660,823 7,660,823
------------------------------------ -------------- -------------- -------------
Transactions with owners
Issue of ordinary shares 750,000 - 750,000
Share issue costs paid (26,824) - (26,824)
------------------------------------ -------------- -------------- -------------
As at 31 December 2022 211,279,828 (166,543,707) 44,736,121
------------------------------------ -------------- -------------- -------------
As at 1 January 2021 210,556,652 (152,345,457) 58,211,195
Total comprehensive income for
the year
Loss for the year - (21,859,073) (21,859,073)
Total comprehensive loss - (21,859,073) (21,859,073)
------------------------------------ -------------- -------------- -------------
As at 31 December 2021 210,556,652 (174,204,530) 36,352,122
------------------------------------ -------------- -------------- -------------
The notes on pages 47 to 73 form an integral part of these
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022
1) GENERAL INFORMATION
The consolidated audited financial statements ('financial
statements') incorporate the results of the Company and that of
wholly owned subsidiary entities, DP Aircraft Guernsey III Limited,
DP Aircraft Guernsey IV Limited (collectively and hereinafter, the
'Borrowers'), each being a Guernsey incorporated company limited by
shares and one intermediate lessor company, DP Aircraft UK Limited
(the 'Lessor'), a UK incorporated private limited company
respectively. The Company and its subsidiaries (the Borrowers and
the Lessor) comprise the Group.
DP Aircraft I Limited (the 'Company') was incorporated on 5 July
2013 with registered number 56941. The Company is admitted to
trading on the Specialist Fund Segment of the London Stock
Exchange.
The Share Capital of the Company comprises 239,333,333 Ordinary
Shares (2021: 209,333,333) of no par value and one Subordinated
Administrative Share of no par value.
The Company's investment objective is to obtain income and
capital returns for its shareholders by acquiring, leasing and
then, when the Board considers it appropriate, selling
aircraft.
The financial statements were approved by the Board of Directors
and authorised for issue on 27 April 2023.
2) SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
These financial statements are prepared in accordance with
International Financial Reporting Standards, International
Accounting Standards and Interpretations ('IFRS') issued by the
International Accounting Standards Board ('IASB') and the
Disclosure and Transparency Rules (the 'DTRs') of the UK's
Financial Conduct Authority (the 'FCA').
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also
requires the Directors to exercise judgement in applying the
Company's accounting policies. The areas where significant
judgements and estimates have been made in preparing the financial
statements and their effect are disclosed in note 3.
The financial statements are presented in United States Dollars
(US$) which is also the functional currency of the Company and its
subsidiaries.
Going Concern
The Directors believe that it is appropriate to prepare these
financial statements on the going concern basis due to current cash
flow forecasts which include fixed rentals and show that the Group
has sufficient cash and resources to cover operating costs for a
period of at least 12 months from the signing of these financial
statement.
In making this conclusion, the Directors have also taken into
account:-
-- the positive outlook for Thai Airways with both Thai aircraft
airworthy and earning fixed rentals. There is an expectation, based
on commentary by the Thai Administrator responsible for the
rehabilitation of Thai Airways, that Thai Airways will continue to
be viable and will be able to meet the terms of the revised lease
agreements. This position regarding Thai's viability is further
enhanced by the announcement on 9 August 2022 that Thai state owned
banks will provide new loans and cash infusions to Thai.
Furthermore, the Thai Government has stated that it plans to
preserve its 40% holding in Thai which may grow further but will
not exceed 50%; and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a) Basis of preparation (continued)
Going Concern (continued)
-- the expectation that DekaBank which made loans to the Group
(with certain loan concessions) will continue supporting the Group.
The loan agreement with DekaBank was amended and restated in
February 2023. Per the amended terms, monthly payments of interest
and principal will be limited to net lease rental monies available
for application towards the loans of US$ 475,000 per loan and the
final balloon repayments will be settled out of proceeds from sale
of the aircraft at the end of the lease term if the loan is not
refinanced. The US$ 475,000 equates to a monthly lease rental of
US$ 510,000 per aircraft less US$ 35,000 paid to the Company as a
contribution towards its costs.
The Directors are not aware of any material uncertainties that
may cast significant doubt upon the Group's ability to continue as
a going concern.
New standards, interpretations and amendments effective from 1
January 2022
The below new standards, amendments to standards and
interpretations are effective for annual periods beginning on 1
January 2022 and have no material impact on the financial
statements:
-- Reference to the Conceptual Framework (Amendments to IFRS 3)
-- Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
-- Annual Improvements to IFRS Standards 2018-2020
New standards, interpretations and amendments in issue but not
yet effective
The below new standards, amendments to standards and
interpretations that are effective for annual periods beginning
after 1 January 2023 are not expected to have a material impact on
the financial statements:
-- Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
-- Disclosure of Accounting Policies (Amendments to IAS 1)
-- Definition of Accounting Estimates (Amendments to IAS 8)
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
-- IFRS 17 Insurance Contracts
b) Basis of consolidation
The financial statements incorporate the financial statements of
the Company and the subsidiary undertakings controlled by the
Company made up to 31 December each year. Control is achieved where
the Company has power over the investee, exposure or rights to
variable returns from its involvement with the investee and the
ability to use its power to affect the amount of the investor's
returns.
When control of a subsidiary undertaking is lost, the assets and
liabilities of that subsidiary are deconsolidated at the date of
loss of control and a resulting loss or gain on loss of control is
reported in profit or loss.
The results of subsidiary undertakings acquired or disposed of
during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition or up
to the effective date of disposal as appropriate.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c ) Taxation
The Company and the Guernsey subsidiaries are exempt from
taxation in Guernsey and are charged an annual exemption fee of
GBP1,200 (2021: GBP1,200). This is treated as an operating
expense.
DP Aircraft UK Limited is subject to income tax in the United
Kingdom.
Taxable profit differs from net profit as reported in the
statement of comprehensive income because it excludes items of
income and expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible.
The Group's liability for current tax is calculated using tax rates
that have been enacted or substantially enacted by the reporting
date in the relevant jurisdictions.
d) Property, Plant and Equipment (PPE) - Aircraft and Related Components
Upon delivery, aircraft (the 'Assets') are initially recognised
at cost plus initial direct costs which may be capitalised under
IAS 16. In accounting for property, plant and equipment, the Group
makes estimates about the expected useful lives, the fair value of
attached leases and the estimated residual value of aircraft. In
estimating useful lives, fair value of leases and residual value of
aircraft, the Group relies upon actual industry experience,
supported by estimates received from independent appraisers.
When an aircraft is acquired with a lease attached, an
evaluation of whether the lease is at fair value is undertaken. A
lease premium is recognised when it is determined that the acquired
lease terms are above fair value. Lease premiums are recognised as
a component of aircraft and are amortised to profit or loss on a
straight-line basis over the term of the lease.
The two aircraft leased to Thai Airways International were
acquired in 2015 and had a useful economic lease life of 12 years
at acquisition. The useful economic lease life since acquisition of
12 years is unchanged as at year end.
The Group's policy is to depreciate the Assets over their
remaining lease life (given the intention to sell the Assets at the
end of each respective lease) to an appraised residual value at the
end of the lease. Residual values are reviewed annually at the
beginning of each year, and such estimates are supported by future
values determined by three external valuations and discounted by
the inflation rate incorporated into those valuations, see note 3
for further details.
In accordance with IAS 36, the Group's aircraft and related
components that are to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying value of the aircraft may not be recoverable. An
impairment review involves consideration as to whether the carrying
value of an aircraft including related assets is in excess of the
higher of its value in use (discounted cashflows) and its fair
value less costs to sell. In such circumstances a loss is
recognised as a write down of the carrying value of the aircraft to
the higher of value in use and fair value less cost to sell. The
review for recoverability has a level of subjectivity and requires
the use of judgement in the assessment of estimated future cash
flows associated with the use of an item of property, plant and
equipment and its eventual disposition. See note 3 for further
details regarding impairment assessment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e) Financial Instruments
A financial instrument is recognised when the Group becomes a
party to the contractual provisions of the instrument. Regular way
purchases and sales of financial assets are accounted for at trade
date, i.e., the date that the Group commits itself to purchase or
sell the asset. Financial liabilities are derecognised if the
Group's obligations, specified in the contract, expire or are
discharged or cancelled. Financial assets are derecognised if the
Group's contractual rights to the cash flows from the financial
assets expire, are extinguished, or if the Group transfers the
financial assets to a third party and transfers all the risks and
rewards of ownership of the asset, or if the Group 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') - debt investment;
-- FVOCI - equity investment; 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 or
FVTPL.
Financial assets at amortised cost are initially measured fair
value plus transaction costs that are directly attributed to its
acquisition, unless it is a trade receivable without a significant
financing component which is initially measured at its transaction
price.
These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses as detailed below.
Financial assets at amortised cost
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated 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.
Trade and other receivables are classified as held at amortised
cost.
Cash and cash equivalents comprise cash balances held for the
purpose of meeting short term cash commitments and investments
which are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
Restricted cash comprises cash held by the Group, but which is
ring-fenced or used as security for specific financing
arrangements, and to which the Group does not have unfettered
access. Restricted cash includes monies received in relation to
maintenance provisions and security deposits.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e) Financial Instruments (continued)
Financial liabilities at amortised cost
Bank borrowings are recognised initially at fair value, net of
transaction costs incurred. Bank borrowings are subsequently stated
at amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised through
profit or loss in the consolidated statement of comprehensive
income over the period of borrowing using the effective interest
rate method. Bank borrowings are classified as current liabilities
unless the Group has an unconditional right to defer settlement of
the liability for at least one year after the reporting date.
Initial direct costs related to bank borrowings are capitalised,
presented net against the bank borrowings in the statements of
financial position and amortised to the statement of comprehensive
income over the period of the related loan as part of the effective
interest rate.
Where loans are modified, the modification is assessed in line
with IFRS 9 to determine whether the modification is substantial.
Where the modification is substantial, the existing loan is
derecognised and the new loan is recognised at fair value. Where
the modification is not substantial, the existing loan is not
derecognised. Any difference arising on modification is recognised
as a gain or loss within the statement of comprehensive income
regardless of whether the modification is substantial or not.
M aintenance reserves are lessee contributions to a retention
account held by the lessor which are calculated by reference to the
budgeted cost of maintenance and overhaul events (the 'supplemental
rentals'). They are intended to ensure that at all times the lessor
holds sufficient funds to cover the proportionate cost of
maintenance and overhaul of the Asset relating to the life used on
the airframe, engines and parts since new or since the last
overhaul. During the term of the lease, all maintenance is required
to be carried out at the cost of the lessee, and maintenance
provisions are required to be released only upon receipt of
satisfactory evidence that the relevant qualifying maintenance or
overhaul has been completed.
Maintenance reserves are recorded in the consolidated statement
of financial position during the term of the lease as a liability.
Reimbursements will be charged against this liability as qualifying
maintenance work is performed. Maintenance reserves are restricted
and not distributable until, at the end of the lease, the Group is
released from the obligation to make any further reimbursements in
relation to the aircraft, and the remaining balance of maintenance
provisions, if any, is released through profit or loss as lease
related income. On termination of the lease maintenance reserves
balance is also released to profit or loss as lease related
income.
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method.
Fair value measurement
The Group measures certain financial instruments such as
derivatives at fair value at the end of each reporting period using
recognised valuation techniques and following the principles of
IFRS 13.
The fair value measurement of the Group's financial assets and
liabilities utilises market observable inputs as far as possible.
Inputs used in determining fair value measurements are categorised
into different levels based on how observable the inputs used in
the valuation technique utilised are:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e) Financial Instruments (continued)
Fair value measurement (continued)
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities;
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is directly
or indirectly observable; and
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
The classification of an item into the above levels is based on
the lowest level of the inputs used that has a significant effect
on the fair value measurement of the item.
f) Share capital
Shares are classified as equity. Incremental costs directly
attributable to the issue of shares are recognised as a deduction
from equity to the extent they are incremental costs directly
attributable to the equity transaction that otherwise would have
been avoided.
g) Dividends
Dividends are recognised as a liability in the financial
statements in the period in which they become obligations of the
Company.
h) Lease rental income
Leases relating to the Aircraft are classified as operating
leases where the terms of the lease do not transfer substantially
all the risks and rewards of ownership to the lessee. Fixed rental
income from operating leases is recognised on a straight-line basis
over the term of the lease. Variable rental income is accounted for
on an accrual basis. Any modifications to operating leases are
accounted for as a new lease from the effective date of the
modification, considering any prepaid or accrued lease payments
relating to the original lease as part of the lease payments for
the new lease.
Initial direct costs incurred in setting up a lease are
capitalised to Property, Plant and Equipment and amortised over the
lease term.
i) Expenses
Expenses are accounted for on an accrual basis.
j) Finance costs and finance income
Interest expense is calculated using the effective interest rate
method. The effective interest method is a method of calculating
the amortised cost of a financial asset or liability and of
allocating interest income and expense over the relevant
period.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments (including all fees or
amounts paid or received that form an integral part of the
effective interest rate, including transaction costs and other
premiums or discounts) through the expected life of the financial
asset or liability.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
2) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
k) Foreign currency translation
Transactions denominated in foreign currencies are translated
into US$ 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 US$ at the
rate of exchange ruling at the reporting date. Foreign exchange
gains or losses arising on translation are recognised through
profit or loss in the consolidated statement of comprehensive
income.
l) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being acquiring, leasing and subsequent
selling of aircraft. All significant operating decisions are based
upon analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements of the
Group as a whole.
3) SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with IFRS
requires that the Directors make estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses. Such estimates and associated
assumptions are generally based on historical experience and
various other factors that are believed to be reasonable under the
circumstances and form the basis of making the judgements about
attributing values of assets and liabilities that are not readily
apparent from other sources.
Information about assumptions and estimation uncertainty at 31
December 2022 that have a significant risk of resulting in a
material adjustment to the carrying amounts of assets and
liabilities in the next financial year are:
Significant estimates
Impairment of property, plant and equipment
As with each reporting date, but more relevant in light of the
continuing impact of COVID-19, a detailed impairment assessment of
the aircraft has been undertaken.
IAS 36 requires an assessment of the aircraft carrying value
versus the recoverable amount i.e., the higher of the value in use
and fair value less cost to sell. In considering the impairment of
the Thai aircraft, the board concluded that the fair value less
costs to sell was the recoverable amount. The fair value less costs
to sell used in the assessment is based on the full-life market
value of each aircraft as determined by 2 independent appraisers
given the aircraft have a lease with a full-life return condition
attached to them. The board considered it appropriate not to apply
any discounts and adjustments for these aircraft given the specific
circumstances of these aircraft.
The board considered all possible valuation ranges and concluded
that the Thai aircraft were not impaired as at 31 December 2022
given the fair value less costs to sell was greater than the book
value of the aircraft. 2 independent appraisers determined that the
full life market value of the aircraft as at 31 December 2022
ranges from US$ 57.6mil to US$ 74.3 mil. Note, every appraiser has
its own opinion of the market and how the market will develop. On a
specific aircraft type one appraiser might be more favourable
compared to another firm and vice versa. In addition, appraisers
obtain their market information from different sources
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
3) SIGNIFICANT JUDGEMENTS AND ESTIMATES (CONTINUED)
Significant estimates (continued)
Impairment of property, plant and equipment (continued)
and use different calculation models. This has an influence on
future and current market values hence the wide range. Therefore,
there is no wrong or right estimate of future and current market
values. In order to eliminate peaks in one or the other direction
we take the average of the 2 appraisers in determining market
values for the aircraft. This approach is consistent with the
approach adopted by other market participants (lessors, lenders,
etc) and is consistent with prior periods. Given the nature and
life of our aircraft we consider this approach to be reasonable.
The average market value less selling costs for each aircraft is
more than each aircraft's carrying value. Therefore, no impairment
loss has been recognised during the financial year ended 31
December 2022 (31 December 2021: US$ nil).
The board also considered if there was any indication that the
accumulated impairment recognised in previous years on Thai
aircraft of US$ 58,839,697 had reversed partially or in full. The
board has concluded that based on the possible ranges of the
aircraft valuations, there was no reversal during the year ended 31
December 2022.
The aircraft are currently in a half-life state which means the
airframe, engines, landing gear and other major time/cycle limited
components are halfway through their various overhaul and /or life
cycles. Note that the aircraft will be returned in a full-life
condition on termination of the leases hence full-life market value
was used in the impairment assessment. If the Group had used the
half-life market value in assessing impairment, the aircraft would
be impaired by US$ 30,003,182 (31 December 2021: US$ 24,577,855) in
total.
Depreciation of aircraft
As described in note 2, the Group depreciates the Assets on a
straight-line basis over the remaining lease life and taking into
consideration the estimated residual value at the end of the lease
term. The Group engage independent expert valuers (appraisers) each
year to provide a valuation of the Assets and take into account the
average of the valuations provided.
Residual value estimates of the Aircraft were determined by the
full life inflated base values at the end of the leases from
external valuations and discounted by the inflation rate
incorporated into those valuations.
The full life inflated base value is the appraiser's opinion of
the underlying economic value of the aircraft in an open,
unrestricted, stable market environment with a reasonable balance
of supply and demand and assumes full consideration of its 'highest
and best use'. The full life inflated values used within the
financial statements match up the two lease termination dates
(October 2026 and December 2026) and have been discounted by the
inflation rate incorporated into the valuations. The residual value
of the aircraft does not represent the current fair value of the
aircraft.
The residual value estimates at the end of each year are used to
determine the aircraft depreciation of future periods. The residual
value estimates for aircraft as at 31 December 2022 was US$
120,247,838 (31 December 2021: US$ 121,750,421), carrying value as
at 31 December 2022 was US$ 125,466,080 (31 December 2021: US$
126,424,840). As a result, the year ending 31 December 2023 and
future aircraft depreciation charges for aircraft, with all other
inputs staying constant, will be US$ 1,343,497 (2022: US$ 958,760).
The actual aircraft depreciation charge for 2024 onwards will vary
based on the residual value estimates as at 31 December 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
4) LEASE RENTAL INCOME
Year ended Year ended
31 December 31 December
2022 2021
US$ US$
Variable rental (PBH rent) income 7,709,166 1,110,416
Fixed rental income - 12,508,499
Straight lining rental income 8,753,206 4,772,296
------------------------------------ ----------- ------------
Total lease rental income 16,462,372 18,391,211
------------------------------------ ----------- ------------
All lease rental income was derived from Thai Airways and the
related two Boeing 787-8 aircraft leased to them. Variable rental
income only started being earned in mid-2021 subsequent to lease
amendments. Also, the aircraft were less operational in 2021
compared to 2022. As a result, variable rental income for 2021 is
less compared to 2022. Furthermore, subsequent to the lease
amendment in mid-2021, the Group ceased recognising fixed rental
income and started recognising straight lining rental income hence
the results as disclosed in the table above.
The lease terms provide for a power by the hour ('PBH')
arrangement until 31 December 2022 (i.e., rent will be payable by
reference to actual monthly utilisation of the Thai aircraft), with
monthly fixed lease payments of US$ 510,000 per month thereafter
until 2026. The monthly PBH rent amount is capped at US$
510,000.
The lease term may be extended by three years to October 2029
for aircraft MSN 36110 and December 2029 for aircraft MSN 35320
(the "Extension Period") with further scaled back monthly lease
payments starting from November 2026 and January 2027 respectively.
The Extension Period is however subject to agreement with the Group
after consulting the Lenders. The lease term has been determined to
be the period to October 2026 and December 2026 which is the
non-cancellable term of each aircraft lease.
The contracted cash lease rental payments to be received under
non-cancellable operating leases at the reporting date are:
Boeing 787-8 Boeing 787-8
Serial No: 35320 Serial No: Total
36110
31 Dec 2022 US$ US$ US$
2023 6,120,000 6,120,000 12,240,000
2024 6,120,000 6,120,000 12,240,000
2025 6,120,000 6,120,000 12,240,000
2026 5,758,065 5,067,097 10,825,162
>2027 - - -
24,118,065 23,427,097 47,545,162
------------- ----------------- ------------- -------------------
31 Dec 2021 US$ US$ US$
2022 - - -
2023 6,120,000 6,120,000 12,240,000
2024 6,120,000 6,120,000 12,240,000
2025 6,120,000 6,120,000 12,240,000
2026 5,758,065 5,067,097 10,825,162
>2027 - - -
------------- ----------- ----------- ------------
24,118,065 23,427,097 47,545,162
------------- ----------- ----------- ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
4) LEASE RENTAL INCOME (CONTINUED)
US$13,525,502 (31 December 2021: US$ 4,772,296) of the future
contracted lease rental payments are recognised as a straight
lining lease asset as at year end.
5) GENERAL AND ADMINISTRATIVE EXPENSES
Year ended Year ended
31-Dec-22 31-Dec-21
US$ US$
Administration fees 305,896 438,198
Aircraft agency fees 12,033 12,000
Aircraft valuation fees 9,092 9,170
Aircraft security trustee fees 12,000 17,985
Audit fees 73,056 89,991
Company broker fees 167,902 167,902
Consultancy fees 8,501 -
Broker fees on sale of NAS shares - 8,140
Directors' fees and expenses 212,593 326,650
Insurance costs, including directors' insurance 100,873 71,318
Foreign exchange 4,974 21,736
IT and printing costs 22,378 6,376
Legal fees 3,157 3,326
Liquidation costs in relation to DPAG I &
II - 19,488
Marketing fees - 4,175
Miscellaneous costs 8,399 6,118
Registrar fees 28,738 21,454
Regulatory fees 8,040 23,098
Restructuring fees in relation to NAS 19,664 290,278
Restructuring fees in relation to Thai 93,107 1,094,936
Tax advice fees 4,184 8,556
Total general and administrative expenses 1,094,587 2,640,895
==================== =========================
6) FINANCE COSTS
Year ended Year ended
31 December 31 December
2022 2021
US$ US$
Loan interest payable 4,860,305 4,727,053
Loan modification adjustment - 432,976
---------------------------------------------- ------------ ------------
Total finance costs at effective
interest rate* 4,860,305 5,160,029
Swap interest paid - 228,277
Swap breakage costs - 939,806
----------------------------------------- --- ------------ ------------
4,860,305 6,328,112
Gain on derivative at fair value (note
14) - (459,015)
----------------------------------------------- ------------ ------------
Total finance costs 4,860,305 5,869,097
----------------------------------------------- ------------ ------------
*On liabilities measured at amortised cost.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
7) TAXATION
With the exception of DP Aircraft UK Limited, all companies
within the Group are exempt from taxation in Guernsey and are
charged an annual exemption fee of GBP1,200 each (2021:
GBP1,200).
DP Aircraft UK Limited are subject to taxation at the applicable
rate in the United Kingdom. The amount of taxation during the year
ended 31 December 2022 was US$ 21,249 (2021: refund of US$ 44,236).
The Directors do not expect the taxation payable to be material to
the Group.
A taxation reconciliation has not been presented in these
financial statements as the tax expenses is not material. The
effective tax rate based on tax charge for the year is 0.0028%
(2021: (0.0021%))
8) EARNINGS PER SHARE
Year ended Year ended
31 December 2022 31 December
2021
US$ US$
Profit/(Loss) for the year 7,660,823 (21,859,073)
Weighted average number of
shares 223,388,128 209,333,333
----------------------------- ----------------- -------------
Earnings per Share 0.03429 (0.10442)
----------------------------- ----------------- -------------
9) PROPERTY, PLANT & EQUIPMENT - AIRCRAFT & RELATED COMPONENTS
Aircraft Lease Premium Total
US$ US$ US$
COST
----------------------------------------- ------------ -------------- ------------
As at 1 January 2022 and 31 December
2022 238,731,161 17,398,493 256,129,654
----------------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION / AMORTISATION
As at 1 January 2022 53,466,624 8,200,047 61,666,671
Charge for the year 958,760 - 958,760
As at 31 December 2022 54,425,384 8,200,047 62,625,431
----------------------------------------- ------------ -------------- ------------
IMPAIRMENT
As at 1 January 2022 58,839,697 9,198,446 68,038,143
Charge for the year - - -
As at 31 December 2022 58,839,697 9,198,446 68,038,143
----------------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
----------------------------------------- ------------ -------------- ------------
As at 31 December 2022 125,466,080 - 125,466,080
----------------------------------------- ------------ -------------- ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
9) PROPERTY, PLANT & EQUIPMENT - AIRCRAFT & RELATED COMPONENTS (CONTINUED)
Aircraft Lease Premium Total
US$ US$ US$
COST
As at 1 January 2021 and 31
December 2021 238,731,161 17,398,493 256,129,654
----------------------------------------- ------------ -------------- ------------
ACCUMULATED DEPRECIATION / AMORTISATION
As at 1 January 2021 53,291,464 8,200,047 61,491,511
Charge for the year 175,160 - 175,160
As at 31 December 2021 53,466,624 8,200,047 61,666,671
----------------------------------------- ------------ -------------- ------------
IMPAIRMENT
As at 1 January 2021 58,839,697 9,198,446 68,038,143
Charge for the year - - -
As at 31 December 2021 58,839,697 9,198,446 68,038,143
----------------------------------------- ------------ -------------- ------------
CARRYING AMOUNT
----------------------------------------- ------------ -------------- ------------
As at 31 December 2021 126,424,840 - 126,424,840
----------------------------------------- ------------ -------------- ------------
As at year end PPE is comprised of two aircraft leased to Thai
Airways. Under the terms of the leases that existed during the
year, the cost of repair and maintenance of the Assets is to be
borne by Thai Airways and Thai Airways has an obligation to return
the Assets in a full life condition. However, after expiry or
termination of the leases with Thai, the cost of repair and
maintenance will fall upon the Group. Therefore, after expiry or
termination of the Thai leases, the Group may bear higher costs and
the terms of any subsequent leasing arrangements (including terms
for repair, maintenance and insurance costs relative to those
agreed under the leases) may be less favourable, which could reduce
the overall distributions paid to the shareholders.
Refer to note 3 for details regarding residual value estimates.
The Group depreciates the aircraft on a straight-line basis over
the remaining lease term. The lease term has been determined to end
in 2026.
As detailed in note 3, as at 31 December 2022 there is no
impairment to the aircraft and there are no indications of reversal
of prior year impairment either. Refer to note 3 for further
details.
The loans entered into by the Group to complete the purchase of
the two Thai aircraft are cross collateralised. Each of the loans
are secured by way of security taken over each of the two
aircraft.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
10) RESTRICTED CASH
2022 *2021 Restated
Current assets US$ US$
Security deposit accounts 91 90
Lease rental accounts 4,175,189 2,788,427
---------------------------------- ----------- ---------------
4,175,280 2,788,517
Non-current assets
Maintenance reserves accounts* 14,979,197 14,465,329
--------------------------------- ----------- ---------------
Total restricted
cash 19,154,477 17,253,846
---------------------------------- ----------- ---------------
*The comparative maintenance reserves accounts balance has been
reclassified from current to non-current, see note 24 for further
information.
Maintenance reserves collected, in line with the lease
agreement, are to be used solely to cover costs related to the
maintenance of the two Thai aircraft.
The majority of security deposits were transferred to Lease
Rental Accounts during the prior period and are being used to
service loan payments due to DekaBank in accordance with the
DekaBank financing arrangements. Monies received into the Lease
Rental Accounts during the PBH and fixed rent period are to be
transferred into Borrower Rental Accounts and applied in a specific
manner as agreed between DekaBank and the Group.
Access to the Lease Rental Accounts, Security deposit accounts
and Maintenance reserves accounts is physically restricted by
DekaBank therefore these monies are classified as restricted
cash.
11) TRADE AND OTHER RECEIVABLES
2022 *2021 Restated
US$ US$
Prepayments 82,333 110,996
Rent receivable 671,586 140,220
Straight-lining lease asset 13,525,502 4,772,296
Total trade and other receivables 14,279,421 5,023,512
------------------------------------------ ------------ ---------------
Less: Expected credit loss on straight (1,486,453) -
lining lease asset
Net trade and other receivables 12,792,968 5,023,512
------------------------------------------ ------------ ---------------
Current and non-current split as at year end is as follows:
2022 2021
Current assets US$ US$
Prepayments 82,333 110,996
Rent receivable 671,586 140,220
Straight-lining lease 3,103,595 -
asset
------------------------------- ----------- ----------
3,857,514 251,216
Non-current assets
Straight-lining lease
asset* 8,935,454 4,772,296
------------------------------- ----------- ----------
Trade and other receivables 12,792,968 5,023,512
------------------------------- ----------- ----------
*The comparative straight-lining lease asset balance has been
reclassified from current to non-current, see note 24 for further
information.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
11) TRADE AND OTHER RECEIVABLES (CONTINUED)
The Group has assessed the straight-lining lease asset for
impairment. This balance represents the result of straight lining
of future fixed Thai lease payments over the lease term. The Group
has performed an assessment on the straight-lining lease asset
taking into account current and future information relating to the
airline industry as well as the lessee specifically and concluded
that the impairment provision as at 31 December 2022 is US$
1,486,453 (31 December 2021: US$ nil). For the remaining
receivables, the Group has concluded that these are not material
thus any provision, if any, would also be immaterial and so no
further assessment is necessary.
Movements in the impairment provision for trade receivables is
as follows:
2022 2021
US$ US$
Opening provision - 10,111,605
Expected credit loss on straight 1,486,453 -
lining lease asset
Expected credit loss on lease
receivable 105,063 12,508,499
Lease receivable written off (105,063) (22,620,104)
----------------------------------------- ----------- -------------
Closing provision 1,486,453 -
----------------------------------------- ----------- -------------
In the prior year, due to amendment of the lease agreements with
Thai, rental due between 1 January 2021 and 14 June 2021 of US$
12,508,499 was provided for and fully written off during the 2021
year together with the opening provision. In the current period the
provision increased by US$ 1,486,453 and rental due from Thai of
US$ 105,063 was written off as agreed per the Engine Exchange
Agreement entered into on 1 April 2022.
12) MAINTENANCE PROVISION
2022 2021
US$ US$
Maintenance provision -
Thai Airways 14,829,296 14,460,682
--------------------------- ----------- -----------
Total maintenance 14,829,296 14,460,682
--------------------------- ----------- -----------
Maintenance reserves liability relates to funds received from
Thai Airways reserved for covering the cost of maintenance.
13) TRADE AND OTHER PAYABLES
2022 2021
US$ US$
Accruals and other payables 221,749 218,934
Asset Manager fees payable (note 22) 218,033 122,941
Broker fees payable 167,902 67,160
Director fees payable (note 21) 212,360 218,697
Taxation payable 21,249 -
-------------------------------------- -------- --------
Total trade and other payables 841,293 627,732
-------------------------------------- -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
14) BANK BORROWINGS
US$ US$
Current liabilities: Bank interest payable
and Bank borrowings 17,707,184 136,010
Non-current liabilities: Bank borrowings 80,779,172 98,304,863
-------------------------------------------- ----------- -----------
Total liabilities 98,486,356 98,440,873
-------------------------------------------- ----------- -----------
The borrowings are repayable as follows:
Interest payable 181,493 136,010
Within one year 17,525,691 -
In two to five years 80,779,172 98,304,863
After five years - -
-------------------------------------------- ----------- -----------
Total Bank borrowings 98,486,356 98,440,873
-------------------------------------------- ----------- -----------
The table below analyses the movements in the Group's bank
borrowings:
2022 2021
US$ US$
Opening balance 98,304,863 180,676,613
Loan modification adjustment - 432,976
Repayment of loan - (274,173)
Loss of control of subsidiary undertakings - (82,530,553)
Principal Bank borrowings 98,304,863 98,304,863
Interest payable 181,493 136,010
-------------------------------------------- ------------ -------------
Total Bank borrowings 98,486,356 98,440,873
-------------------------------------------- ------------ -------------
The table below sets out an analysis of net debt and the
movements in net debt for the year ended 31 December 2022
Cash and Derivative
cash equivalents Principal Interest Instrument Net Debt
US$ US$ US$ US$ US$
At 1 January
2022 1,179,211 (98,304,863) (136,010) - (97,261,662)
Cash flows 300,330 - 4,814,822 - 5,115,152
Non cash: -
Interest charge - - (4,860,305) - (4,860,305)
At 31 December
2022 1,479,541 (98,304,863) (181,493) - (97,006,815)
------------------ ------------- ------------ ------------ -------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
14) BANK BORROWINGS (CONTINUED)
Cash and Derivative
cash equivalents Principal Interest Instrument Net Debt
US$ US$ US$ US$ US$
At 1 January
2021 6,949,167 (180,676,613) (238,969) (4,257,198) (178,223,613)
Cash flows (5,769,956) 274,173 4,595,529 301,759 (598,495)
Non cash: -
Fair value movement - - - 459,015 459,015
Termination - - - 4,664,507 4,664,507
( 4,727,053
Interest charge - - ) (228,277) (4,955,330)
Penalty fee - - - (939,806) (939,806)
Loan modification
adjustment - (432,976) - - (432,976)
Loss of control
of assets, liabilities
and subsidiary
undertaking - 82,530,553 234,483 - 82,765,036
At 31 December
2021 1,179,211 (98,304,863) (136,010) - (97,261,662)
------------------ -------------- ------------ ------------ --------------
DekaBank Deutsche Girozentrale
During the year ended 31 December 2015, the Company utilised the
proceeds from the placing and the proceeds of two separate loans
from DekaBank Deutsche Girozentrale ('DekaBank') of US$ 78,500,000
each to fund the purchase of two Boeing 787-8 aircraft. The balance
on the loans on 31 December 2022 was US$ 98,486,356 (31 December
2021: US$ 98,440,873).
In accordance with the Amendment and Restatement to the Loan
Agreements dated 6 May 2021, repayments of any principal were to be
deferred until the end of the PBH arrangement i.e., 31 December
2022. Interest on the non-deferred principal of the loans was to
accrue at a fixed rate of 4.10 per cent and interest on the
deferred principal was to accrue at a rate per annum equal to the
sum 5.0% per annum plus LIBOR/SONIA for the applicable period (such
rate to be determined by the Facility Agent).
On 7 February 2023 the Group and DekaBank entered into a Second
Amendment and Restatement to the Loan Agreements. The new terms
agreed are as follows:
-- the total loan amount outstanding was split into two tranches:
o Facility A loan of US$ 61,144,842 made up of MSN 35320 loan of
US$ 31,099,453 and MSN 36110 loan of US$ 30,045,389. The Facility A
loan amortizes to a combined balloon of US$ 33,947,878 and
represents the scheduled debt.
o Facility B loan of US$ 35,504,024 (non-amortizing), made up of
MSN 35320 loan of US$ 17,366,650 and MSN 36110 loan of US$
18,137,374. The Facility B loan will be settled as a balloon
payment at the end of the loan term in 2026.
-- the MSN 35320 and MSN 36110 Facility A loans bear fixed
interest rates of 6.61% and 6.89% respectively.
-- the MSN 35320 and MSN 36110 Facility B loans bear fixed
interest rates of 5.26% and 5.42% respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
14) BANK BORROWINGS (CONTINUED)
-- from the monthly fixed lease rental of US$ 510,000 per
aircraft (which denotes the maximum amount the Company can earn in
operations per month), US$ 475,000 is legally restricted so that
those funds are only payable to the lenders, and US$ 35,000 per
aircraft can be retained by the company to contribute towards
ongoing fixed costs of the Company.
The MSN 35320 loan and the MSN 36110 loan have a final maturity
date of 9 December 2026 and 29 October 2026 respectively.
The two DekaBank loans (MSN 35320 loan and MSN 36110 loan
referred to as the third and fourth loan) entered into by the Group
to complete the purchase of the two Thai aircraft (referred to as
the third and fourth Assets) are cross collateralised. Each of the
third and fourth loan is secured by way of security taken over the
third and fourth Assets and enforce security over both Assets. This
means that a default on one loan places both of the Assets at risk.
Following the enforcement of security and sale of the aircraft, the
remaining proceeds, if any, may be substantially lower than
investors' initial investment in the Company.
Also, please refer to note 23 for further details regarding
amendment and restatement of the loan agreement after 31 December
2022.
15) SHARE CAPITAL
Company's authorised share capital is unlimited.
Year ended 31 December 2022 Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid (no par value Number Number Number
shares):
Shares as at 1 January 2022 1 209,333,333 209,333,334
Share issued during the year - 30,000,000 30,000,000
---------------------------------------- --------------- ------------ ------------
Shares as at 31 December 2022 1 239,333,333 239,333,334
---------------------------------------- --------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January 2022 - 210,556,652 210,556,652
Proceeds from issue of shares 750,000 750,000
Issue cost paid - (26,824) (26,824)
---------------------------------------- --------------- ------------ ------------
Share capital as at 31 December
2022 - 211,279,828 211,279,828
---------------------------------------- --------------- ------------ ------------
Year ended 31 December 2021 Subordinated
Administrative Ordinary
Share Shares Total
Issued and fully paid (no par value Number Number Number
shares):
Shares as at 1 January 2021 and
31 December 2021 1 209,333,333 209,333,334
---------------------------------------- --------------- ------------ ------------
US$ US$ US$
Share capital as at 1 January 2021
and 31 December 2021 - 210,556,652 210,556,652
---------------------------------------- --------------- ------------ ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
15) SHARE CAPITAL (CONTINUED)
Subject to the applicable company law and the Company's Articles
of Incorporation, the Company may issue an unlimited number of
shares of par value and/or no par value or a combination of
both.
The Subordinated Administrative Share is held by DS Aviation
GmbH & Co. KG, (the Asset Manager).
Holders of Subordinated Administrative Shares are not entitled
to participate in any dividends and other distributions of the
Company. On a winding up of the Company the holders of the
Subordinated Administrative Shares are entitled to an amount out of
the surplus assets available for distribution equal to the amount
paid up, or credited as paid up, on such shares after payment of an
amount equal to the amount paid up, or credited as paid up, on the
Ordinary Shares to the Shareholders. Holders of Subordinated
Administrative Shares shall not have the right to receive notice of
and have no right to attend, speak and vote at general meetings of
the Company except if there are no Ordinary Shares in
existence.
Without prejudice to the provisions of the applicable company
law and without prejudice to any rights attached to any existing
shares or class of shares, or the provisions of the Articles of
Incorporation, any share may be issued with such preferred,
deferred or other rights or restrictions, as the Company may by
ordinary resolution, subject to or in default of any such
direction, as the Directors may determine.
The Directors are entitled to issue and allot C Shares. No C
Shares have been issued since the Company was incorporated.
On 13 July 2022 the Company raised gross proceeds of $750,000
through the issue of 30,000,000 new ordinary shares in the capital
of the Company at a price of US$0.025 per new ordinary share.
16) RESERVES
The movements in the Group's reserves are shown on page 46.
Retained deficit comprises accumulated profits and losses over
time and is taken to this reserve which may be utilised for the
payment of dividends if overall in a profitable position.
17) DIVIDS
The dividends declared and paid during the year ended 31
December 2022 are US$ nil (31 December 2021: US$ nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
18) INVESTMENT IN SUBSIDIARY UNDERTAKINGS
The Company's investments in subsidiaries, all of which have
been included in these consolidated financial statements, are as
follows:
Proportion of
Date of Country of ownership interest
Name Incorporation Incorporation at 31 December
2022
DP Aircraft Guernsey
III Limited 21 May 2015 Guernsey 100%
DP Aircraft Guernsey
IV Limited 21 May 2015 Guernsey 100%
DP Aircraft UK Limited 14 April 2015 United Kingdom 100%
19) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The following table details the categories of financial
instruments held by the Group at the reporting date:
2022 2021
US$ US$
Cash and cash equivalents 1,479,541 1,179,211
Restricted cash 19,154,477 17,253,846
Trade and other receivables (excluding
prepayments and straight-lining lease
asset) 671,586 140,220
--------------------------------------------- ------------ ------------
Financial assets measured at amortised
cost 21,305,604 18,573,277
--------------------------------------------- ------------ ------------
Financial liabilities
Bank borrowings 98,486,356 98,440,873
Maintenance provision 14,829,296 14,460,682
Trade and other payables (excluding tax) 841,293 627,732
--------------------------------------------- ------------ ------------
Financial liabilities measured at amortised
cost 114,156,945 113,529,287
--------------------------------------------- ------------ ------------
The primary risks arising from the Group's financial instruments
are capital management, credit risk, market risk and liquidity
risk. The principal nature of such risks is summarised below. The
Group's main financial instruments as at year end comprised of cash
and cash equivalents, restricted cash, maintenance reserves payable
and bank loans.
Capital Management
The capital managed by the Group comprises the ordinary shares
and the subordinated administrative shares. The Company is not
subject to externally imposed capital requirements.
Until COVID-19 and the impact on the aircraft industry and the
lessees, income distributions were generally made quarterly,
subject to compliance with Applicable Law and regulations, in
February, May, August and November of each year. The Company aimed
to make a distribution to investors of US$ 0.0225 per share per
quarter.
As a result of the COVID-19 pandemic impact on global aviation
and especially its lessees, the Group has suspended dividends until
further notice to help preserve liquidity. Further details on the
impact of the COVID-19 pandemic can be found within the Directors'
Report.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
19) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Credit risk
Credit risk is the risk that a significant counterparty will
default on its contractual obligations. The Group's main
counterparty during the year was Thai Airways as lessee and
provider of income. The Group, through the Asset Manager, mitigates
credit risk related to Thai Airways through regular monitoring of
Thai's use of the aircraft, review of Thai's financial position,
performance, and prospects and through a general review of the
performance of the airline market.
The Group assesses the probability of Thai defaulting under
different scenarios and the losses that would be incurred under
those different scenarios. The probability of each default scenario
occurring and the related loss that would be incurred under that
scenario is determined taking into account Thai's historic
financial position, performance and future prospects. The general
performance of the Thai economy and the overall airline industry is
also considered in the assessment.
There are gross lease rentals receivable from Thai at 31
December 2022, US$ 671,586 (2021: US$ 140,220). A full lifetime ECL
was recognised for the lease rentals receivable from Thai in the
prior year however no ECL has been recognised for the balance due
as at year end (see note 11). Furthermore, the Group has also
recognised a gross straight lining lease asset as at 31 December
2022 of US$ 13,525,502 (31 December 2021: US$ 4,772,296). A
provision is recognised against this straight lining lease asset as
at 31 December 2022 of US$ 1,486,453 (31 December 2021: US$ nil).
Refer to note 11 for further details.
Whilst the board expect that the approved Thai rehabilitation
plan will succeed, the final outcome of these proceedings is
unknown. Failure of any material part of the rehabilitation plan
may have an adverse impact on its ability to comply with its
obligations under the lease (see note 4 for details re obligations
of lessee).
Cash and restricted cash are all held at DekaBank. The credit
rating of DekaBank is Aa2 (2021: Aa2). The lessees do not maintain
a credit rating.
The carrying amount of financial assets measured at amortised
cost recorded in the financial statements represents the Group's
maximum exposure to credit risk. The Group holds no collateral as
security or any other credit enhancements.
Market risk - interest rate risk
Interest rate risk arises on the Group's various
interest-bearing assets and liabilities from changes in the general
economic conditions of the market from time to time. The bank
borrowings have the most significant interest impact on the Group.
As detailed in note 14, post year end the Group's bank borrowings
were amended and restated. As part of the amendment and
restatement, interest rates were set at fixed rates. Therefore, the
Group's interest rate exposure is currently limited only to the
restricted cash and bank balances which earn an immaterial amount
of interest. As a result, the Group has no material exposure to
interest rate risk subsequent to year end.
A 0.25% increase or decrease in interest rates on all
interest-bearing financial instruments would result in an increase
or decrease in net finance costs for the year of US$ 194,177 (2021:
US$ 199,680).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
19) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
The following table details the Group's exposure to interest
rate risk as at year end:
Non-interest
Fixed rate Variable bearing
rate
31 December 2022 instruments instruments instruments Total
US$ US$ US$ US$
Restricted cash - 19,154,477 - 19,154,477
Trade and other receivables
(excluding prepayments
and straight-lining lease
asset) - - 671,586 671,586
Cash and cash equivalents - 1,479,541 - 1,479,541
Total financial assets - 20,634,018 671,586 21,305,604
----------------------------- ------------- ------------- ------------- --------------
Trade and other payables - - (820,044) (820,044)
Maintenance reserves - - (14,829,296) (14,829,296)
Bank borrowings* (62,800,839) (35,504,024) (181,493) (98,486,356)
----------------------------- ------------- ------------- ------------- --------------
Total financial liabilities (62,800,839) (35,504,024) (15,830,833) (114,135,696)
----------------------------- ------------- ------------- ------------- --------------
Total interest rate
sensitivity gap (62,800,839) (14,870,006)
----------------------------- ------------- -------------
*Interest is charged on the deferred portion of the loan based
on a variable rate and a fixed rate for the loan portion not
deferred.
Non-interest
Fixed rate Variable bearing
rate
31 December 2021 instruments instruments instruments Total
US$ US$ US$ US$
Restricted cash - 17,253,846 - 17,253,846
Trade and other receivables
(excluding prepayments
and straight-lining lease
asset) - - 140,220 140,220
Cash and cash equivalents - 1,179,211 - 1,179,211
Total financial assets - 18,433,057 140,220 18,573,277
----------------------------- ------------- ------------- ------------- --------------
Trade and other payables - - (627,732) (627,732)
Maintenance reserves - - (14,460,682) (14,460,682)
Bank borrowings (77,208,294) (21,096,569) (136,010) (98,440,873)
----------------------------- ------------- ------------- ------------- --------------
Total financial liabilities (77,208,294) (21,096,569) (15,224,424) (113,529,287)
----------------------------- ------------- ------------- ------------- --------------
Total interest rate
sensitivity gap (77,208,294) (2,663,512)
----------------------------- ------------- -------------
Market risk - foreign currency risk
The Group's exposure to foreign currency risk is not significant
as its cash flows are predominantly in US$ which is the functional
currency of the company and subsidiaries, and presentation currency
of the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
19) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting its obligations in respect of its financial
liabilities. The Group's main financial commitments are the loans
due to DekaBank as well as meeting its ongoing operating
expenses.
Liquidity risk management
In the event that the Leases are terminated as a result of a
default by Thai Airways, there is a risk that the Group will not be
able to remarket the Thai Assets successfully within the
remarketing period specified in the loan agreements and that the
Group will not have sufficient liquidity to comply with its
obligations under the Loan Agreements. This may lead to a
suspension in distributions paid on the shares and/or a reduction
in the value of the shares and have an adverse effect on the Group
and could ultimately result in the Dekabank enforcing their
security and selling the relevant Asset or Assets on the market.
There can be no guarantee that the Group will be able to re-lease
the Assets on terms equivalent to the existing leases, which may
have an adverse effect on the Group and its ability to meet its
investment objective and its dividend target. Accordingly, were any
or all of the Assets to be re-leased on less favourable terms, this
may have an adverse effect on the Group and its share price. The
Group monitors the impact of its obligations, including the
Dekabank loan, on liquidity through cash flow forecasts which are
prepared on a monthly basis.
As detailed in note 23, post year end the Group has successfully
renegotiated an amendment to the Dekabank loans and new terms were
agreed. The new terms agreed change the liquidity profile of the
Group compared the analysis shown below. Under the new terms, total
loan repayments will be US$ 950,000 per month (US$ 475,000 for each
of the two loans), see note 23 for further details.
The following table details the contractual maturity analysis of
the Group's financial liabilities as at 31 December 2022. The
amounts are contractual undiscounted cash flows and therefore will
not agree directly to the balances in the statement of financial
position as at 31 December 2022.
31 December 2022 2-5 years After 5 Total
Next 12 months years
US$ US$ US$ US$
Bank borrowings and
interest (20,172,088) (92,309,392) - (112,481,480)
Maintenance provision - (14,829,296) - (14,829,296)
Trade and other payables (841,293) - - (841,293)
-------------------------- --------------- -------------- -------- --------------
Total (21,013,381) (107,138,688) - (128,152,069)
-------------------------- --------------- -------------- -------- --------------
31 December 2021 Next 12 2-5 years After 5 Total
months years
US$ US$ US$ US$
Bank borrowings and
interest (4,302,804) (103,353,004) - (107,655,808)
Maintenance provision - (14,460,682) - (14,460,682)
Trade and other payables (627,732) - - (627,732)
-------------------------- ------------ -------------- -------- --------------
Total (4,930,536) (117,813,686) - (122,744,222)
-------------------------- ------------
In addition to the bank loans, the Group may from time-to-time
use borrowings. To this end the Group may arrange an overdraft
facility for efficient cash management. The Directors intend to
restrict borrowings other than the bank loans to an amount not
exceeding 15 percent of the net asset value of the Group at the
time of drawdown. Borrowing facilities will only be drawn down with
the approval of the Directors on a case-by-case basis. The
Directors may also draw down on an overdraft facility for
extraordinary expenses determined-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
19) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Liquidity risk (continued)
Liquidity risk management
by them, on the advice of DS Aviation, to be necessary to
safeguard the overall investment objective. With the exception of
the loans, the Directors have no intention, as at the date of this
report, to use such borrowings or overdraft facility for structural
investment purposes.
No right of redemption or repurchase
Shareholders have no right to have their shares redeemed or
repurchased by the Company at any time. Shareholders wishing to
realise their investment in the Company would be required to
dispose of their shares on the stock market. Accordingly, the
ability of shareholders to realise the Net Asset Value of, or any
value in respect of, their shares is mainly dependent on the
existence of a liquid market in the shares and the market price of
such shares.
Liquidity Proposal
Although the Company does not have a fixed life, the Articles
require that the Directors convene a Liquidity Proposal Meeting to
be held no later than 30 June 2026 at which a Liquidity Proposal in
the form of an ordinary resolution will be put forward proposing
that the Company should proceed to an orderly wind-up at the end of
the term of the leases. In the event the Liquidity Proposal is not
passed, the Directors will consider alternatives for the Company
and shall propose such alternatives at a general meeting of the
shareholders, including re-leasing the Assets, or selling the
Assets and reinvesting the capital received from the sale of the
Assets in other aircraft.
20) FAIR VALUE MEASUREMENT
The accounting policies and basis of measurement in respect of
financial instruments are detailed in note 2.
Financial assets and financial liabilities at amortised cost
The fair value of cash and cash equivalents, trade and other
receivables (excluding prepayment and straight lining lease asset),
restricted cash and interest payable approximate their carrying
amounts due to the short-term maturities of these instruments.
Derivative instruments held at fair value
In the prior period, the Group held interest rate swaps which
were valued on a recurring basis and were categorised within level
2 of the fair value hierarchy required by IFRS 13. The interest
rate swaps were terminated in the prior period.
21) RELATED PARTY TRANSACTIONS
The Directors who served during the year received the following
remuneration:
Year ended Year ended
31 December 31 December
2022 2021
US$ US$
Jonathan Bridel (Chairman) 80,701 121,613
Jeremy Thompson (Chairman of the Audit Committee
and Senior Independent Director) 60,064 98,493
Harald Brauns (Chairman of the Management
Engagement Committee) 65,503 100,298
Total 206,268 320,404
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
21) RELATED PARTY TRANSACTIONS (CONTINUED)
Up to 30 September 2022, 10% of base fees and all extra fees
were not paid by way of cash payments but were deferred to be
settled in the future or to be paid by way of equity. There has
been no settlement of director remuneration via the issue of equity
in the current year (2021: nil) and the deferred fees remain
outstanding as at 31 December 2022 (see note 13).
Directors' expenses totalling US$ 1,273 were paid during the
year ended 31 December 2022 (2021: US$ 63), with US$ nil due to be
paid at the year-end (31 December 2021: US$ nil).
Base annual fees are as follows:
Annual Fees Oct 22 to Jan 22 Jan 21
Dec 22 to Sept to Dec
22 21
Jonathan Bridel GBP61,750 GBP66,000 GBP66,000
Jeremy Thompson GBP49,450 GBP53,700 GBP53,700
Harald Brauns GBP49,450 GBP53,800 GBP53,800
*Note: Directors fees were agreed in GBP, the financial
statements are presented in USD
Director fees has been reduced by 10% which was the portion
being deferred and possibly payable in shares. The reduction in
fees is effective 1 October 2022.
In recognition of the additional work performed in relation to
the Group's circumstances, the board have earned extra fees of
GBPnil (31 December 2021: GBP65,000) split as follows: -
Additional Fee 2022 2021
Jonathan Bridel - GBP25,000
Jeremy Thompson - GBP20,000
Harald Brauns - GBP20,000
*Note: Directors fees were agreed in GBP, the financial
statements are presented in USD
Director's shareholdings in the Company are detailed in the
Directors' Report and Directors' received dividends of US$ nil
during the year (31 December 2021: US$ nil).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
22) MATERIAL CONTRACTS
Asset Management Agreement
The Asset Management Agreement dated 19 September 2013, between
the Group and DS Aviation was initially amended on 5 June 2015 to
reflect the acquisition of two new aircraft. A second amendment via
a side letter, effective 1 January 2021, was made to the Asset
Management Agreement on 7 May 2021.
Disposal fee
The initial amendment provides a calculation methodology for the
disposal fee which will only become payable when all four of the
Assets (first two currently under receivership and second two
currently held by the Group) have been sold after the expiry of the
second Thai Airways lease in December 2026. The fee will be
calculated as a percentage of the aggregate net sale proceeds of
the four assets, such percentage rate depending upon the Initial
Investor Total Asset Return per share being the total amount
distributed to an initial investor by way of dividend, capital
return or otherwise over the life of the Company. If each of the
Assets is sold subsequent to the expiry of their respective leases,
the percentage rate shall be:
-- Nil if the Initial Investor Total Asset Return per Share is less than 205%;
-- 1.5% if the Initial Total Asset Return per Share equals or
exceeds 205% but is less than 255%;
-- 2% if the Initial Total Asset Return per Share equals or
exceeds 255% but is less than 305%; or
-- 3% if the Initial Total Asset Return per Share equals or exceeds 305%.
In the event that any of the Assets are sold prior to the expiry
of its lease the percentage hurdles set out above will be adjusted
on the following basis:
-- An amount will be deducted in respect of each Asset sold
prior to the expiry of its lease, equal to the net present value of
the aggregate amount of dividends per Share that were targeted to
be paid but were not paid as a result of the early divestment of
the relevant Asset; and
-- A further amount will be deducted, in respect of each Asset
sold prior to the expiry of its lease, equal to the amount by which
the proportion of the non-dividend component of the relevant
percentage hurdle attributable to the relevant Asset would need to
be reduced in order to meet its net present value.
Per the second amendment, payment of any Disposal Fee per above
(if any) in connection with the sale of any of the Assets that were
under receivership is subordinated to the DekaBank loans and will
only become payable after the loans (including the deferred
element) have been repaid or prepaid in full.
The disposal fee is a cash-settled payment to the Asset Manager.
There is no disposal fee expected to be payable as at 31 December
2022 (31 December 2021: US$ nil).
Management fees
The Asset Manager is paid a monthly base fee of US$ 15,085 (US$
16,666 up to 31 December 2020) per asset in respect of the two
Assets that are currently held by the Group, increasing by 2.5 per
cent per annum from May 2021.
As consideration for the Asset Manager agreeing to a reduction
of the monthly base fee in respect of the two Assets that are
currently held by the Group, the Company agreed that, when
permissible as advised by the corporate broker, the Asset Manager
shall receive an allocation of shares in the Company determined to
be of a value equivalent to the reduction in the monthly base fee
with respect to the two Assets. The share allocation will be
carried out using a share price for the conversion which is fair
and reasonable as advised by corporate broker.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
22) MATERIAL CONTRACTS
Asset Management Agreement
Management fees (continued)
In the year ended 31 December 2022 Asset Management fees
totalled US$ 471,590 (2021: US$ 757,254) of which US$ 218,033 (note
13) was due at 31 December 2022 (31 December 2021: US$
122,941).
Administration Agreement
The Administrator of the Company is Aztec Financial Services
(Guernsey) Limited. Aztec Financial Services (Guernsey) Limited and
Aztec Financial Services (UK) Limited provide administration
services to the Company's underlying subsidiaries. These
administrator companies are collectively known as the
"Administrators". Total fees charged by the Administrators during
the period were US$ 305,896 (31 December 2021: US$ 438,198) of
which US$ 57,711 remained payable at 31 December 2022 (31 December
2021: US$ 46,876).
The Administrators have the right to be reimbursed from the
Company for any reasonable out of pocket expenses incurred in
carrying out their responsibilities.
Directors' fees
Details of the fees paid to the Directors are included in note
21.
23) SUBSEQUENT EVENTS
On 7 February 2023, the Group and DekaBank entered into a Second
Amendment and Restatement to the Loan Agreement in which the
parties agreed on the following main terms:
-- the total loan amount outstanding was split into two tranches:
o Facility A loan of US$ 61,144,842 made up of MSN 35320 loan of
US$ 31,099,453 and MSN 36110 loan of US$ 30,045,389. The Facility A
loan amortizes to a combined balloon of US$ 33,947,878 and
represents the scheduled debt.
o Facility B loan of US$ 35,504,024 (non-amortizing), made up of
MSN 35320 loan of US$ 17,366,650 and MSN 36110 loan of US$
18,137,374. The Facility B loan represents the deferred debt and
will be settled as a balloon payment at the end of the loan
term.
-- US$ 2.36m of surplus cash generated under the PBH period was
used to immediately repay debt on the amortizing Facility A loan in
February 2023, while an agreed cash reserve of US$ 500,000 per
aircraft will be retained to cover unforeseen costs going
forward.
-- the interest rate swap currently in place for the scheduled
debt was dissolved at no net gain or loss.
-- the MSN 35320 and MSN 36110 Facility A loans bear fixed
interest rates of 6.61% and 6.89% respectively.
-- the MSN 35320 and MSN 36110 Facility B loans bear fixed
interest rates of 5.26% and 5.42% respectively.
-- from the monthly fixed lease rental of US$ 510,000 per
aircraft (which denotes the maximum amount the Company can earn in
operations per month), US$ 475,000 is legally restricted so that
those funds are only payable to the lenders, and US$ 35,000 per
aircraft can be retained by the company to contribute towards
ongoing fixed costs of the Company.
Due to the limited liquidity position of the Group,
restructuring fees associated with the second amendment and
restatement will be paid after the eventual remarketing of the
aircraft, subject to surplus sales proceeds being realized.
DP Aircraft Guernsey I Limited and DP Aircraft Guernsey II
Limited were voluntarily liquidated on 20 February 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended 31 December 2022
24) PRIOR YEAR RECLASSIFICATION
In preparing these financial statements, the Group discovered
that restricted cash comprising maintenance reserves and the
straight lining lease asset included in trade and other receivables
were erroneously presented as current assets when should have been
reported as non-current assets given these were not expected to be
realised within 12 months after the reporting period.
The errors have been corrected by reclassifying each of the
affected financial statement line items for prior periods from
current to non-current as follows:
1 January 2021 As previously Reclassification
reported adjustment As Restated
NON-CURRENT ASSETS US$ US$ US$
PPR - Aircraft & Related
Components 126,600,000 - 126,600,000
Restricted Cash - 15,547,974 15,547,974
Total non-current assets 126,600,000 15,547,974 142,147,974
CURRENT ASSET
Assets held for sale 82,000,000 - 82,000,000
Investment held at fair
value 15,630,526 - 15,630,526
Trade and other receivables 45,930 - 45,930
Restricted Cash 27,438,332 (15,547,974) 11,890,358
Cash and cash equivalents 6,949,167 - 6,949,167
Total current assets 132,063,955 (15,547,974) 116,515,918
TOTAL ASSETS 258,663,955 - 258,663,955
31 December 2021 As previously Reclassification
reported adjustment As Restated
NON-CURRENT ASSETS US$ US$ US$
PPR - Aircraft & Related
Components 126,424,840 - 126,424,840
Trade and other receivables - 4,772,296 4,772,296
Restricted Cash - 14,465,329 14,465,329
Total non-current assets 126,424,840 19,237,625 145,662,465
CURRENT ASSET
Trade and other receivables 5,023,512 (4,772,296) 251,216
Restricted Cash 17,253,846 (14,465,329) 2,788,517
Cash and cash equivalents 1,179,211 - 1,179,211
Total current assets 23,456,569 (19,237,625) 4,218944
TOTAL ASSETS 149,881,409 - 149,881,409
The reclassification adjustment has no impact on retained
earnings, operating profit, earnings per share or any other primary
statements.
COMPANY INFORMATION
Directors
Jonathan Bridel
Jeremy Thompson
Harald Brauns
Registered Office East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Asset Manager DS Aviation GmbH & Co. KG
Stockholmer Allee 53
44269 Dortmund
Germany
Solicitors to the Company Norton Rose Fulbright LLP
(as to English law) 3 More London Riverside
London
SE1 2AQ
United Kingdom
Advocates to the Company Mourant
(as to Guernsey law) Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 1HP
Channel Islands
Auditor
KPMG, Chartered Accountants
1 Harbourmaster Place
IFSC
Dublin 1
Ireland
Administrator and Company Secretary Aztec Financial Services
(Guernsey) Limited
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
Channel Islands
Corporate Broker Investec Bank plc
30 Gresham Street
London
EC2V 7QN
United Kingdom
THE FOLLOWING PAGES DO NOT FORM PART OF THE AUDITED FINANCIAL
STATEMENTS
APPIX 1 - ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE
REGULATORY REFERENCE DOCUMENT NAME, PAGE AND REFERENCE
AIFMD Article 23(1)
(a) a description of the investment Prospectus, page 38, Information
strategy and objectives of the AIF; on the Company.
if the AIF is a feeder AIF, information Not applicable.
on where the master AIF is established;
if the AIF is a fund of funds, Not applicable.
information on where the underlying
funds are established;
a description of the types of assets Prospectus, page 38, Information
in which the AIF may invest; on the Company.
the investment techniques that Prospectus, page 38, Information
the AIF, or the AIFM on behalf of on the Company.
the AIF, may employ and all associated Prospectus, pages 18-31, disclosure
risks; of risk factors.
any applicable investment restrictions; Prospectus, page 8.
the circumstances in which the Prospectus, page 20, Risk of Debt
AIF may use leverage; Financing.
the types and sources of leverage Prospectus, page 20, Risk of Debt
permitted and the associated risks; Financing.
any restrictions on the use of Prospectus, page 20, Risk of Debt
leverage and any collateral and Financing.
asset reuse arrangements; and
the maximum level of leverage which Prospectus, page 20, Risk of Debt
the AIFM is entitled to employ on Financing.
behalf of the AIF;
(b) a description of the procedures Prospectus, page 38, Investment
by which the AIF may change its Policy.
investment strategy or investment
policy, or both;
(c) a description of the main legal Prospectus, page 80, Part IX, Loans
implications of the contractual and Loan Agreements.
relationship entered into for the Prospectus, page 142, Part IV, Definitions.
purpose of investment, including
information on jurisdiction, the
applicable law and the existence
or absence of any legal instruments
providing for the recognition and
enforcement of judgments in the
territory where the AIF is established;
(d) the identity of the AIFM, the Prospectus, page 36, Directors and
AIF's depositary, the auditor and Advisers.
any other service providers and Prospectus, page 152 (h).
a description of their duties and
the investors' rights;
(e) a description of how the AIFM Prospectus, page 151 (g).
complies with the AIFMD's requirements
relating to professional liability
risk;
APPIX 1 - ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE
(CONTINUED)
REGULATORY REFERENCE DOCUMENT NAME, PAGE AND REFERENCE
AIFMD Article 23(1)
(f) a description of:
any AIFM management function delegated Not applicable.
by the AIFM;
any safe-keeping function delegated Not applicable.
by the depositary;
the identify of each delegate appointed; Not applicable.
and
any conflicts of interest that Not applicable.
may arise from such delegations;
(g) a description of the AIF's valuation Prospectus, page 152 (i).
procedure and of the pricing methodology
for valuing assets, including the
methods used in valuing any hard-to-value
assets;
(h) a description of the AIF's liquidity Prospectus, page 152 (j).
risk management, including the redemption
rights of investors in normal and
exceptional circumstances, and the
existing redemption arrangements
with investors;
(i) a description of all fees, charges Prospectus, pages 48-50, Fees and
and expenses, and the maximum amounts Expenses.
directly or indirectly borne by
investors;
(j) a description of how the AIFM Prospectus, page 152 (l).
ensures a fair treatment of investors;
whenever an investor obtains preferential
treatment or the right to obtain
preferential treatment, a description
of:
that preferential treatment; Prospectus, page 152 (l).
the type of investors who obtain Prospectus, page 152 (l).
such preferential treatment; and
where relevant, their legal or Not applicable.
economic links with the AIF or AIFM;
(k) the latest annual report Contained in this document.
(l) the procedure and conditions Prospectus, page 44, Further Issue
for the issue and sale of units of Shares.
or shares;
(m) the latest net asset value of The Company's shares are traded
the AIF or the latest market price on the London Stock Exchange so
of the unit or share of the AIF; the latest share price should be
available on www.londonstockexchange.com
.
APPIX 1 - ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE
(CONTINUED)
REGULATORY REFERENCE DOCUMENT NAME, PAGE AND REFERENCE
AIFMD Article 23(1)
(n) where available, the historical Not applicable.
performance of the AIF;
(o) the identity of any prime broker; Prospectus, page 152 (o).
a description of any material arrangements Prospectus, page 152 (o).
of the AIF with its prime brokerage
firm and the way any conflicts of
interest are managed;
the provision in the contract with Prospectus, page 151 (a).
the depositary on the possibility
of transfer and reuse of AIF assets;
and
information about any transfer Prospectus, page 152 (o).
of liability to the prime brokerage
firm that may exist; and
(p) a description of how and when Information may be disclosed in
the information required under Art. the Company's annual report or by
23(4) and Art. 23(5) of the AIFMD the Company publishing the relevant
will be disclosed. information on the Company's website
( http://www.dpaircraft.com ) or
by the Company issuing an announcement
via a Regulatory Information Service.
AIFMD Article 23(5)
(a) any changes to the maximum level Not applicable as no changes to
of leverage which the AIFM may employ the maximum level of leverage.
on behalf of the AIF as well as
any right of the reuse of collateral
or any guarantee granted under the
leveraging arrangement;
(b) the total amount of leverage The leverage employed by AIF is
employed by that AIF. US$ 98,462,379 as at 31 December
2022.
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END
FR SEMFAWEDSEIL
(END) Dow Jones Newswires
April 28, 2023 02:00 ET (06:00 GMT)
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