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AVIA SOLUTIONS GROUP AB Consolidated Interim Financial Information For the Six-Month Period Ended 30 June 2012 (Unaudited)

1


Beginning of the financial period

1 January 2012

End of reporting period

30 June 2012

Name of the company

Avia Solutions Group, AB (hereinafter “the Company�)

Legal form

public company (joint-stock company)

Date of registration

31 August 2010

Code of enterprise

302541648

Name of Register of Legal Entities

State Enterprise Centre of Registers

Registered office

Smolensko Str. 10, LT-03201 Vilnius, Lithuania

Telephone number

+370 5 252 5500

Fax number

+370 5 252 5501

Internet address

www.AviaSG.com

Main activities of consolidated Group

Charter Operations, Aircraft Maintenance, Repair and Overhaul, Aircraft Ground Handling and Fuelling, Pilot and Crew Training

2


CONTENTS

Pages

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

4

CONSOLIDATED INTERIM BALANCE SHEET

5

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

6

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

7

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION

8 - 13

1.

Accounting policies

2.

Investment in subsidiaries and associates

3.

Segment information

4.

Other operating expenses

11

5.

Income tax

11

6.

Share capital

11

7.

Earnings per share

11

8.

Property, plant and equipment, intangible assets

12

9.

Cash and cash equivalents

12

8 8-9 9 - 10

10. Trade and other receivables

12

11. Related party transactions

13

MANAGEMENT REPORT

14

MANAGEMENT CONFIRMATION OF THE CONSOLIDATED INTERIM FINANCIAL INFORMATION

19

3


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME April – June 2011

2012

2011

199 824

118 351

341 118

193 260

Note Revenue

January – June

2012

Other income

594

110

1 277

514

Aircraft fuel expenses

(67 378)

(34 062)

(104 765)

(51 605)

Employee related expenses

(23 196)

(14 454)

(43 179)

(25 663)

Spare parts and consumables expenses

(22 563)

(11 301)

(48 988)

(18 432)

Cost of services resold

(15 414)

(3 972)

(22 394)

(6 717)

Rent of aircraft and equipment

(14 763)

(16 931)

(22 910)

(25 124)

Aircraft servicing and handling expenses

(13 340)

(11 142)

(24 665)

(16 392)

Aircraft maintenance expenses

(8 510)

(5 328)

(13 821)

(8 009)

Training and related expenses

(3 610)

(3 487)

(8 790)

(7 065)

(3 068)

(1 754)

(5 936)

(3 378)

(2 961)

(1 785)

(6 429)

(3 761)

( 72)

( 10)

( 100)

( 40) (20 140)

Depreciation and amortization

8

Rent and maintenance of premises Impairment of receivables Other operating expenses

(13 576)

(11 729)

(24 416)

Other gain/(loss) - net

4

( 185)

306

1 313

460

Operating profit (loss)

11 782

2 812

17 315

7 908

246

158

766

218

Finance cost

(1 885)

(260)

(2 610)

(866)

Finance costs – net

(1 639)

(102)

(1 844)

(648)

(94)

-

(947)

-

Finance income

Share of profit/(loss) of associates

Profit (loss) before income tax Income tax

5

Profit (loss) for the year

10 049

2 710

14 524

7 260

(2 437)

(131)

(3 093)

(1 609)

7 612

2 579

11 431

5 651

7 715

2 758

11 653

6 063

Profit (loss) attributable to: Equity holders Minority interests

(103)

(179)

(222)

(412)

7 612

2 579

11 431

5 651

Other comprehensive income: Other comprehensive income for the period Total comprehensive income for the year Total comprehensive income attributable to: Equity holders Minority interests

34

(6)

(549)

34

7 646

2 573

10 882

5 908

-

-

-

-

7 741

2 753

11 111

6 095

(96)

(180)

(230)

(410)

7 645

2 573

10 881

5 685

1.292

0.438

1.940

1.016

Basic and diluted earnings (loss) per share (in LTL)

7

4


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

CONSOLIDATED INTERIM BALANCE SHEET Note

30 June 2012

31 December 2011

ASSETS Non-current assets Property, plant and equipment

8

56 112

52 615

Intangible assets

8

8 670

10 044

Deferred income tax assets Trade and other receivables

10, 11

7 754

7 533

7 533

15 274

80 069

85 466

Current assets Inventories

82 523

35 619

124 201

97 222

3 718

6 512

Prepaid income tax

410

299

Short-term bank deposits

123

268

16 848

17 781

227 823

157 701

307 892

243 167

Trade and other receivables

10, 11

Amount due from customers for contract work

Cash and cash equivalents

9

Total assets EQUITY Equity attributable to the Group’s equity shareholders Share capital

6

5 893

5 893

Share premium

6

58 770

58 770

Legal reserve Merger reserve Cumulative translations differences Retained earnings Non-controlling interests Total equity

263

263

(2 746)

(2 746)

83

624

45 184

33 531

107 447

96 335

( 597)

18

106 850

96 353

29 663

28 245

1 943

2 109

LIABILITIES Non-current liabilities Borrowings Trade and other payables Deferred income tax liabilities

529

289

Security deposits received

435

10 238

32 570

40 881

Current liabilities Borrowings

47 622

24 891

Trade and other payables

94 711

60 694

Advances received

12 601

8 162

Current income tax liabilities

7 452

4 661

Security deposits received

6 086

7 525

168 472

105 933

Total liabilities

201 042

146 814

Total equity and liabilities

307 892

243 167

5


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Share capital

Balance at 1 January 2011 Comprehensive income Currency translation difference

Equity attributable to equity holders of the Group Share Merger Legal Currency Retained premium reserve reserve translation earnings differences

Total equity

119

25 051

-

(3 517)

44

(16)

-

-

-

-

32

-

32

2

34

-

-

-

-

32

6 063 6 063

6 063 6 095

(412) (410)

5 651 5 685

1 473

66 282

-

-

-

-

67 755

-

67 755

-

(7 512) -

-

219

-

(219)

(7 512) -

-

(7 512) -

-

-

-

-

-

-

-

192

192

1 473 5 893

58 770 58 770

(3 517)

219 263

16

(219) 29 845

60 243 91 270

192 (99)

60 435 91 171

Balance at 1 January 2012 Comprehensive income Currency translation difference

5 893

58 770

(2 746)

263

624

33 531

96 335

18

96 353

-

-

-

-

(541)

-

(541)

(8)

(549)

Profit (loss) for the period

-

-

-

-

-

11 653

11 653

(222)

11 431

Total comprehensive income Decrease of non-controlling interests pursuant to the disposal of subsidiary - total transactions with owners

-

-

-

-

(541)

11 653

11 112

(230)

11 882

-

-

(385)

(385)

(597)

106 850

Increase in share capital Cost of capital increase Transfer to legal reserve Effect on transactions with non-controlling interests Total transactions with owners Balance at 30 June 2011

Balance at 30 June 2012

-

-

-

-

-

5 893

58 770

(2 746)

263

83

6

24 932

Noncontrolling interests

4 420

Profit (loss) for the period Total comprehensive income

24 001

Total

45 184 107 447


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS January – June Notes

2012

2011

11 431

5 874

3 093

1 609

5 936

3 378

1 120

594

Operating activities Profit for the period Income tax

5

Adjustments for: Depreciation and amortisation

8

Interest expenses Share of (profit)/loss of associates Impairment of accounts receivable

947

-

6

10

Discounting effect on deposits placed

(158)

154

Interest income

(211)

(32)

Currency translations differences

(760)

-

(1 802)

1 753

- Inventories

(46 903)

(15 214)

- Trade and other receivables

(41 518)

(15 018)

37 700

6 152

Accruals of c-check costs, hangar lease payments Changes in working capital:

- Trade and other payables, advances received - Security deposits received Cash generated from (used in) operations Interest received Interest paid Income tax paid Net cash generated from (used in) operating activities

4 270

(69)

(26 849)

(10 965)

172

-

(1 059)

(177)

(248)

-

(27 984)

(11 142)

(11 328)

(11 336)

10 835

-

Investing activities Purchase of PPE and intangible assets Proceeds from PPE and intangible assets Proceeds from sale of interest in subsidiary with loss of control

2

1 274

-

-

211

Loans granted

(6 090)

(4 411)

Repayments of loans granted

13 373

1 093

Deposits placed

(2 658)

(1 458)

390

-

5 796

(15 901)

-

60 208

Proceeds from sale of interest in subsidiary without loss of control

Repayments of deposits placed Net cash used in (generated from) investing activities Financing activities Contribution to share capital in cash Bank borrowings received

29 349

6 269

Repayments of bank borrowings

(5 063)

(11269)

Borrowings from related parties received

-

552

(1)

(18 375)

Increase (decrease) in financial lease liabilities

(1 908)

(205)

Net cash generated from financing activities

22 377

37 215

Repayments of borrowings from related parties

Increase (decrease) in cash and cash equivalents At beginning of period Increase (decrease) in cash and cash equivalents At end of period

9

7

189

10 172

14 821

10 006

189

10 172

15 010

20 178


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION

1

Accounting policies The consolidated interim financial information for the six-month period ended 30 June 2012 (hereinafter The Consolidated Financial Information) is prepared in accordance with the International Financial Accounting Standards, as adopted by the European Union, includes IAS 34 „Interim financial reporting“. In all material respects, the same accounting principles have been followed as in the preparation of financial statements for 2011. The presentation currency is litas. The consolidated financial information is presented in thousands of litas, unless indicated otherwise. The consolidated financial information is prepared under the historical cost convention. The consolidated interim financial information for the six-month period ended 30 June 2012 is not audited. Financial Statements for the year ended 31 December 2011 were audited by the external auditor PricewaterhouseCoopers UAB.

2

Investments in subsidiaries and associates The consolidated group (hereinafter the Group) consists of the Company, its subsidiaries and associates. The subsidiaries and associates are listed below.

30-062012

Share of equity, % 31-1230-062011 2011

The Group’s companies

Country of establishment

Operating segment

AviationCV.com UAB

Lithuania

Pilot and Crew Training

91

91

100

The subsidiary was established in spring of 2011. The company provides aviation personnel solutions.

Baltic Aviation Academy UAB

Lithuania

Pilot and Crew Training

100

100

100

The Group company was established on 22 November 2006. The company provides aircraft crew training services.

Baltic Ground Services UAB

Lithuania

Aircraft Ground Handling and Fuelling

100

100

100

The subsidiary was acquired on 31 October 2008. The company provides aircraft ground handling and fueling services.

Baltic Ground Services Sp.z.o.o.

Poland

Aircraft Ground Handling and Fuelling

100

100

100

The subsidiary was established in spring of 2010. It is a direct subsidiary of Baltic Ground Services UAB. The company provides aircraft ground handling and fueling services in Poland.

Baltic Ground Services s.r.l.

Italy

Aircraft Ground Handling and Fuelling

100

100

100

The subsidiary was established in winter of 2010. It is a direct subsidiary of Baltic Ground Services UAB. The subsidiary does not conduct active operations.

Baltic Ground Services UA TOV

Ukraine

Aircraft Ground Handling and Fuelling

100

100

-

The subsidiary was established in summer of 2011. It is a direct subsidiary of Ground Handling CIS UAB. The subsidiary does not conduct active operations.

Ground Handling CIS UAB

Lithuania

Aircraft Ground Handling and Fuelling

100

100

-

The subsidiary was established in summer of 2011. It is a direct subsidiary of Baltic Ground Services UAB. The subsidiary does not conduct active operations.

FL Technics AB

Lithuania

Aircraft maintenan ce, repair and overhaul (MRO)

100

100

100

The subsidiary was established on 22 December 2005. In summer of 2007 the Company started active sales of aircraft maintenance, repair and overhaul (MRO) services.

FL Technics Jets UAB

Lithuania

Aircraft maintenan ce, repair and overhaul (MRO)

100

100

100

The subsidiary was acquired on 1 December 2010. In summer of 2011 the Company started active sales of maintenance services for business aircraft.

FL Technics Line OOO

Russia

Aircraft maintenan ce, repair and overhaul (MRO)

100

100

-

The subsidiary was established in summer of 2011. It is a direct subsidiary of FL Technics AB. Currently it has started preparations for aircraft line stations activity in Russia and the CIS.

8

Date of acquiring/establishment and activity


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated) 2

Investments in subsidiaries and associates (continued)

Share of equity, % 30-0631-1230-062012 2011 2011

The Group’s companies

Country of establishment

Operating segment

FL Technics Ulyanovsk OOO

Russia

Aircraft maintenan ce, repair and overhaul (MRO)

99

99

-

The subsidiary was established in summer of 2011. It is a direct subsidiary of FLT Trading House UAB. Currently it has started preparations for aircraft maintenance activity in Ulyanovsk, Russia.

FLT Trading House UAB

Lithuania

Aircraft maintenan ce, repair and overhaul (MRO)

100

100

100

The subsidiary was acquired on 19 November 2010. The subsidiary does not conduct active operations.

Locatory.com UAB

Lithuania

Aircraft maintenan ce, repair and overhaul (MRO)

95

95

100

The subsidiary was established on 7 December 2010. Starting summer 2011, the Company provides a platform for the aviation industry to search, buy and sell aviation inventory.

Small Planet Airlines UAB

Lithuania

Charter operations

95.5

95.5

95.5

The subsidiary was established on 14 March 2007. In autumn of 2008 the Company started active sales of charter flights.

Small Planet Airlines AS

Estonia

Charter operations

-

-

95.5

The subsidiary was established on 5 December 2008. On 22 November 2011 the Company was sold.

Small Planet Airlines Sp.z.o.o.

Poland

Charter operations

95.5

95.5

95.5

The subsidiary was established on 25 November 2009. In spring of 2010 the Company started active sales of charter flights.

Small Planet Airlines s.r.l.

Italy

Charter operations

35.5

85.5

85.5

The subsidiary was established on 17 February 2010. In summer of 2011 the Company started active sales of charter flights. On 3 January 2012 the Company sold 50 per cent shareholding in the subsidiary.

Storm Aviation Ltd.

The United Kingdom

Aircraft maintenan ce, repair and overhaul (MRO)

100

100

-

The subsidiary was acquired on 30 September 2011. It is a direct subsidiary of FL Technics AB. The company provides aircraft line station services.

Storm Aviation (Cyprus) Ltd.

Republic of Cyprus

Aircraft maintenan ce, repair and overhaul (MRO)

100

100

-

The subsidiary was acquired on 30 September 2011. It is a direct subsidiary of Storm Aviation Ltd. The company provides aircraft line station services in Cyprus.

3

Date of acquiring/establishment and activity

Segment information For management purposes, the Group is organized into business units based on the services provided, and has five reportable operating segments: charter operations; aircraft maintenance, repair and overhaul (MRO); aircraft ground handling and fuelling; pilot and crew training and unallocated segment. The unallocated sales include sales of management services, which cannot be attributed to the other segments. The management assesses the performance of the Group based on measure of Gross Profit. Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, segment cost of sales and segment gross profit include transfers between business segments. Those transfers are eliminated in consolidation. The following table present sales to external customers, costs of sales and gross profit information according to the Group’s business segments for the six-month period ended 30 June 2012:

9


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

3

Segment information (continued) Aircraft maintenance, repair and overhaul (MRO)

Aircraft ground handling and fuelling

Pilot and crew training

Unallocated

Intersegment eliminations

Total continuing operations

115 666

134 202

75 884

15 205

161

-

341 118

389

13

771

9

94

-

1 277

1 700

6 210

48 113

451

3 308

(59 782)

-

117 755

140 425

124 769

15 664

3 563

(59 782)

342 395

(119 682)

(110 152)

(119 740)

(9 789)

(650)

54 881

(305 133)

(1 927)

30 273

5 029

5 875

2 913

(4 901)

37 262

46 755

182 406

56 259

13 201

9 272

-

307 892

Charter operations

Six-month period ended 30 June 2012 Revenue Sales to external customers Other income Inter-segment sales Total revenue Cost of sales Segment gross profit As at 30 June 2012 Segment assets

The following table present sales to external customers, costs of sales and gross profit information according to the Group’s business segments for the six-month period ended 30 June 2011: Charter

Aircraft

Aircraft

Pilot and

Unallo-

Inter-

Total

operations

maintenance,

ground

crew

cated

segment

continuing

repair and

handling

training

elimina-

operations

overhaul

and

(MRO)

fuelling

79 899

67 954

34 743

10 543

121

-

193 260

127

341

26

-

20

-

514

4 457

2 975

9 162

608

1 836

(19 038)

-

84 483

71 270

43 931

11 151

1 977

(19 038)

193 774

(88 606)

(46 669)

(41 308)

(7 519)

(949)

11 738

(173 313)

(4 123)

24 601

2 623

3 632

1 029

(7 300)

20 462

38 281

80 119

31 390

6 417

14 592

-

170 799

tions

Six-month period ended 30 June 2011 Revenue Sales to external customers Other income Inter-segment sales Total revenue Cost of sales Segment gross profit As at 30 June 2011 Segment assets

Three reportable Group’s business segments were influenced by seasonal movements on both summer and winter periods. The highest growth comes in summer-season (June-September) from charter operations’ and aircraft ground handling, fuelling segments, and in the winter-season (October-April) increase of sales is recorded in aircraft maintenance, repair and overhaul (MRO) segment. The Management motivates these seasonal movements to have a material effect on Group‘s consolidated revenue.

10


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

4

5

January – June 2012

Other operating expenses

2011

Transportation and related expenses

4 808

4 433

Business travel expenses

4 580

4 126

Marketing and sales expenses

3 251

1 097

Employee lease expenses Insurance expenses

2 759 1 752

3 341 2 094

Consultation expenses

1 628

1 553

Office administrative expenses

986

705

Rent and maintenance of training simulators

956

471

Communications expenses

666

424

VAT in business use expenses

511

0

IT expenses

434

203

Bank services

426

222

Audit expenses

45

150

Other expenses

1 614

1 322

24 416

20 140

Income tax The tax expenses for the period comprise current and deferred tax. Domestic income tax is calculated at 15 per cent of the annual profit for the year, in Poland income tax – 19 per cent, in Italy – 27.5 per cent, in the United Kingdom – 21 per cent. The annual profit earned by companies located in Estonia is not taxed. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when deferred income taxes relate to the same fiscal authority. Deferred income tax asset and liability related to the entities operating in Lithuania are calculated at 15% rate (2011: 15% rate), in Poland - at 19% rate (2011: 19% rate), in Italy - at 27.5% rate (2011: 27,5% rate). Due to the nature of the taxation system, the companies registered in Estonia don‘t have any differences between the tax bases of assets and their carrying amounts, no deferred income tax assets and liabilities arise.

6

Share capital On 18 February 2011 the Company issued additional 1,473,333 ordinary shares with a par value LTL 1 each for issue price of PLN 52 (25.0 % of the total ordinary share capital issued). Following the increase of the capital, share premium amounts to thousand 58,770 litas. On 3 March 2011 shares of the Company were introduced to trading at Warsaw Stock Exchange. On 30 June 2012 the share capital of the Company amounts to 5,893,333 litas and consists of 5,893,333 ordinary registered shares with a nominal value of one litas each (on 30 June 2012 – 5,893,333 ordinary registered shares). All shares are fully paid up.

7

Earnings per share Basic earnings per share are calculated by dividing the net profit (loss) for the period by the weighted average number of ordinary shares in issue during the period. The Group has no dilutive potential ordinary shares and therefore diluted earnings per share are the same as basic earnings per share.

Profit for the period Weighted average number of ordinary shares (thousand) EPS – basic and diluted (in LTL)

11

April – June 2012

2011

January – June 2012 2011

7 612 5 893 1.292

2 579 5 893 0.438

11 431 5 893 1.940

5 651 5 561 1.016


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

8

Property, plant and equipment, intangible assets Property, plant and

Intangible assets

equipment Opening net book amount as at 1 January 2011 Additions

2 723

9 035

1 585

Depreciation charge

(2 981)

(319)

Closing net book amount as at 30 June 2011

35 252

3 990

Opening net book amount as at 1 January 2012

52 615

10 044

Additions

12 914

459

Disposals

(4 760)

-

(57)

(1 032)

Disposals of subsidiaries (Note 2) Write-offs Depreciation charge Cumulative currency differences Closing net book amount as at 30 June 2012

30 June 2012 9

29 198

(6)

-

(4 868)

(1 068)

274

267

56 112

8 670

31 December 2011

Cash and cash equivalents

16 848

17 781

Bank overdraft

(1 838)

(2 960)

(279)

15 010

14 821

20 178

30 June 2012 10

30 June 2011

Cash and cash equivalents 20 457

31 December 2011

Trade and other receivables Trade receivables

81,563

60 113

(8)

(3 129)

81,554

56 984

6,485

4 190

6,485

4 190

Security deposit with lessor Discounting of security deposit

7,710

15 232

(285)

(478)

Security deposit – net

7,425

14 754

Other receivables

1,332

1 925

Less: provision for impairment of trade receivables Trade receivables – net Receivables from related parties Less: provision for impairment of trade receivables from related parties Receivables from related parties - net (Note 11)

-

-

Less: provision for impairment of other receivables Other receivables - net

(41)

(364)

1,291

1 561

Loans granted

5,143

14 716

Less: provision for impairment of loans granted Loans granted - net Prepayments

-

(10)

5 143

14 706

11 752

5 510

Deferred charges

8 119

8 859

VAT receivables

5 673

5 161

Loans to related parties Other receivables from related parties (Note 11)

3 372 37

750 21

876

-

Deferred charges to related parties Prepayments from related parties (Note 11) Less non-current portion : Current portion : 12

6

-

131 733

112 496

(7 533)

(15 274)

124 201

97 222


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

11

Related party transactions Related parties of the Company and the Group include entities having significant influence over the Company, key management personnel of the Group and other related parties. Entities having significant influence over the Company and the Group are ZIA Valda Cyprus Ltd and ZIA Valda AB (the sole shareholder of ZIA Valda Cyprus Ltd). Transactions with these companies are presented separately. Related parties also include subsidiaries of ZIA Valda AB group. They are presented as other related parties. Related parties of the Company also include subsidiaries of the Group. The following transactions were carried out with related parties:

January – June

January - December

2012

2011

Other related parties

7 969 7 969

4 184 4 184

Total sales of assets and services

7 969

4 184

Sales of services to:

Purchases of assets from: Entities having significant influence Other related parties

78 78

59 59

Entities having significant influence Other related parties

161 13 240 13 401

20 420 20 420

Total purchases of assets and services

13 479

20 479

Purchases of services from:

30 June 2012

31 December 2011

Trade receivables from related parties Trade receivables from entities having significant influence Trade receivables from other related parties (Note 10) Other trade receivables from related parties (Note 10) Prepayments from related parties (Note 10)

6 485 37 6 6 528

1 4 189 21 4 211

Payables and advances received from related parties Amounts payable to entities having significant influence Amounts payable to other related parties

13

-

13

6 852

1 501

6 852

1 514


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

CONSOLIDATED MANAGEMENT REPORT I. GENERAL INFORMATION Reporting period

Six-month period ended 30 June 2012

Issuer and its contact details Name of the Issuer Legal form Date of registration Name of Register of Legal Entities Code of enterprise Registered office Telephone number Fax number Internet address

Avia Solutions Group AB (hereinafter – ‘Avia Solutions Group AB’ or ‘the Company’) Public company (joint-stock company) 31 August 2010 State Enterprise Centre of Registers 302541648 Smolensko St 10, LT-03201 Vilnius, Lithuania +370 5 252 5500 +370 5 252 5501 www.aviasg.com

Main activities Avia Solutions Group AB is a holding company together with its subsidiaries (hereinafter collectively – the ‘Group’) engaged in delivering our clients integrated aviation related services. The Group operates are in four business segments: Aircraft Maintenance, Repair and Overhaul (MRO); Aircraft Ground Handling and Fuelling; Charter Operations; Pilot and Crew Training. Aircraft Maintenance, Repair and Overhaul (MRO) Activities in our MRO business segment are conducted by FL Technics AB (FL Technics), FL Technics Jets UAB (FL Technics Jets), Locatory.com AB (Locatory.com), Storm Aviation Limited (Storm Aviation) and include: aircraft base and line maintenance; component maintenance; engineering services; spare parts and consumable sales; technical training; consulting; engine maintenance management; aircraft parts marketplace services other related aircraft maintenance services. Charter operations Charter operations segment comprises activities conducted through a group of companies jointly referred to as Small Planet Airlines, namely: Small Planet Airlines UAB (“Small Planet Airlines LT”), Small Planet Airlines Sp. z.o.o. (“Small Planet Airlines PL”) and Small Planet Airlines S.r.l. (“Small Planet Airlines IT”). Small Planet Airlines is a regional group of charter airlines offering a full range of charter and leisure travel services, including but not limited to: Full charter programmes for tour operators; Aircraft wet-lease programmes; Ad-hoc flights. Aircraft Ground Handling and Fuelling Aircraft ground handling and fuelling services are conducted by two Subsidiaries of the Company, namely: Baltic Ground Services UAB (“Baltic Ground Services LT”) and Baltic Ground Services PL Sp. z.o.o. (“Baltic Ground Services PL”). Baltic Ground Services LT and Baltic Ground Services PL are jointly referred to as “Baltic Ground Services”. Pilot and Crew Training Pilot and crew training operations are carried through Baltic Aviation Academy UAB (“Baltic Aviation Academy”) that is one of the leading aviation training organizations in Eastern Europe, and AviationCV UAB (“AviationCV.com”).

14


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

As on 30 June 2012, the Group consisted of the parent company, Avia Solutions Group AB, (registered on 31 August 2010, code 302541648, name of the Register of Legal Entities: State Enterprise Center of Registers; address: Smolensko St 10, LT-03201 Vilnius tel.: +370 5 252 5500; fax. +370 5 252 5501; internet address: www.aviasg.com) and its effective subsidiaries: Name of the company

Date of registration, code, name of Register of Legal Entities

AviationCV.com UAB

13 April 2011, code 302615625, Register of Legal Persons of the Republic of Lithuania

Baltic Aviation Academy UAB

22 November 2006, code 300618099, Register of Legal Persons of the Republic of Lithuania

Baltic Ground Services UAB

11 August 2005, code 300136658, Register of Legal Persons of the Republic of Lithuania

Baltic Ground Services PL Sp. z.o.o.

15 April 2010, code 0000353957, Register of Entrepreneurs of the National Court Register held by the District Court for the Capital City of Warsaw in Warsaw, XIII Commercial Division of the National Court Register 29 August 2011, code 37856865, State Register of Legal Entities and Individual Entrepreneurs of Ukraine

Baltic Ground Services UA TOV Baltic Ground Services s.r.l.

Code R.E.A. RM-1287462, Company Registration Number c/o Chamber of Commerce: CCIAA T 76480595

Ground Handling CIS UAB FL Technics AB

04 July 2011, code 302644356, Register of Legal Persons of the Republic of Lithuania

FL Technics Jets UAB

11 June 2007, code 300869952, Register of Legal Persons of the Republic of Lithuania

FL Technics Line OOO

03 August 2011, code 7746600289, State Register of Legal Entities of Russian Federation

FL Technics Ulyanovsk OOO

22 July 2011, code 7329004322, State Register of Legal Entities of Russian Federation

FLT Trading House UAB

26 May 2010, code 302514409, Register of Legal Persons of the Republic of Lithuania

Locatory.com UAB

7 December 2010, code 302572273, Register of Legal Persons of the Republic of Lithuania

Small Planet Airlines UAB

14 March 2007, code 300659612, Register of Legal Persons of the Republic of Lithuania

Small Planet Airlines Sp. z.o.o.

25 November, code 0000342451, Register of Entrepreneurs of the National Court Register held by the District Court for the Capital City of Warsaw in Warsaw, XIII Commercial Division of the National Court Register 17 February 2010, code PD-390928, Padova Chamber of Commerce

Small Planet Airlines S.r.l. Storm Aviation (Cyprus) Ltd. Storm Aviation Limited

22 December 2005, code 300517602, Register of Legal Persons of the Republic of Lithuania

30 September 2011, code HE290461, Ministry of Commerce, Industry and Tourism, Department of Registrar of Companies and Official Receiver Nicosia 30 September 2011, code 05229468, The Registrar of Companies for England

As at 30 June 2012 the Company had no branches.

15

Contact details Dariaus ir Girėno str. 21, Vilnius, Lithuania tel. +370 5 2525500, fax. +370 5 2525501, www.aviationcv.com Dariaus ir Girėno str. 21, Vilnius, Lithuania tel. +370 5 2525536, fax. +370 5 2525537, www.balticaa.com Rodūnios road 6, LT- 02187 Vilnius, Lithuania tel. +370 5 252 55 92, fax. +370 5 252 50 07, www.bgs.aero 17 Stycznia 45 B, 02-146 Warsaw, Poland, tel. +48 22 256 99 00, fax. +48 22 256 99 01, www.bgs.aero

Effective holding of the Company (%) 91.00

100.00

100.00

100.00

Kniazhnyj Zaton str. 2/30, 02095, Kiev, Ukraine tel. +370 5 252 55 92, fax. +370 5 252 50 07

100.00

Via Della Scafa 158, Fiumicino, Rome - 00054, Italy, Tel . +390683517845 Fax : +3906650275333, www.bgs.aero Rodūnios road 6, LT- 02187 Vilnius, Lithuania tel. +370 5 252 55 92, fax. +370 5 252 50 07

100.00

Rodūnios road 2, LT-02189 Vilnius, Lithuania tel. +370 5 252 5015, fax. +370 5 252 5646, www.fltechnics.com Smolensko str. 10, LT-03201 Vilnius, Lithuania tel. +370 5 252 5015, fax. +370 5 252 5646, www.fltjets.com Hachaturana str. 12, 127562, Mockow Tel. +370 5 252 5015, fax. +370 5 252 5646

100.00

Sovietskaya str. 6, 433400, Cherdakly, Cherdaklinsky District, Ulyanovsk Region, Russian Federation Tel. +370 5 252 5015, fax. +370 5 252 5646 Žirmūnų str. 139, Vilnius, Lithuania Tel. 370 5 2525500, fax. +370 5 2525501 Smolensko str. 10, LT-03201 Vilnius, Lithuania tel. +370 5 252 5500, fax. +370 5 252 5501, www.locatory.com Smolensko str. 10, LT- 03201 Vilnius, Lithuania tel. +370 5 252 5660, fax. +370 5 252 5661, www.smallplanet.aero 17 Stycznia 45 B, 02-146, Warsaw, Poland tel. +48 22 427 9090, +48 22 427 9093, www.smallplanet.aero Padova (PD) Galleria dei Borromeo 3 cap 35137, Italy tel. +390 66502751, fax. +390 6650275333, www.smallplanet.aero Rafail Santi 58, Nefeli Court 11, 1st floor, Flat/Office 104-105, 6052, Larnaca, Cyprus www.fltechnicsline.com The Clock House, 140 London Road, Guildford, Surrey GU1 1UW www.fltechnicsline.com

100.00

100.00

100.00

99.00

100.00

95.00

95.5

95.5

35.5

100.00

100.00


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated) Data about securities traded on regulated market On 3 March 2011 shares of the Company were introduced to trading at Warsaw Stock Exchange (code: AVIASG): Type of shares

Number of shares

Nominal value in LTL

Total nominal value in LTL

ISIN

5,893,333

1

5,893,333

LT0000128381

Ordinary registered shares

Securities of the Company's subsidiaries are not traded publicly.

II. FINANCIAL AND OPERATIONAL INFORMATION In the six-month period ended 30 June 2012 Avia Solutions Group AB and its subsidiaries (hereinafter – the Group) earned net profit of LTL 11.4 million. Comparing with the same period in 2011 the income of the Group has increased by 76.5% up to LTL 341 million. Results were generated primarily as a result of strategic decisions made and operational plans implemented. These measures were taken in order to increase the Group’s profitability in the upcoming periods. Key events during six-month period ended 30 June 2012 are summarized below: -

From the 1st of January, 2012 FL Technics Jets UAB obtained a right to perform authorized maintenance services on the warranted Hawker 125 series aircraft.

-

In February 2012 Baltic Ground Services PL Sp. z o.o. started providing into-plane fuelling services at Warsaw Frederic Chopin airport.

-

In March 2012 Baltic Ground Services Sp. z o.o. started providing into-plane fuelling services to the Deutsche Lufthansa AG air carriers and Czech AirLines j.s.c in the International Airports of Warsaw (WAW), Krakow (KRK) and Katowice (KTW).

-

In March 2012 the Company granted current loans to third party in total amount of LTL 5 000 thousand and to subsidiary in total amount of LTL 6 000 thousand.

-

FL Technics AB received Part 21, Section A, Subpart J Design Organization Approval from the European Aviation Safety Agency (EASA).

-

In June 2012 FL Technics AB acquired FL Technics AB acquires Boeing 737-600 aircraft for part-out

The major events to the Group’s structure during 6 months period ended 30 June 2012 were as follows: Date

Operating Segment

Event

January 2012

Charter operations

50.0 % of Small Planet Airlines AS share capital were sold.

The consolidated financial statements of the Group have been prepared according to International Financial Reporting Standards as adopted by the European Union.

Key figures of the Group Financial figures

January - June

Revenue (LTL thousand) Operating profit (LTL thousand) Operating profit margin (%)

Change

2012

2011

341 118

193 260

76.5%

17 315

7 908

119.0%

5.1%

4.2%

0.9pp

Profit before income tax (LTL thousand)

14 524

7 483

94.1%

Profit for the period (LTL thousand)

94.6%

11 431

5 874

Profit for the period margin (%)

3.4%

3.0%

0.4pp

Earnings per share (LTL)

1.940

1.016

90.9%

Weighted average number of ordinary shares (thousand)

5 893

5 561

6.0%

16


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

Operating figures

January - June

Number of SOLD man-hours in base maintenance Number of SOLD man-hours in engineering Number of SOLD man-hours in maintenance training Number of line stations at the end of the period Number of aircraft at the end of the period Number of flights

Change, %

2012

2011

163 942

178 493

33 680

26 075

29.2

3 439

4 353

(21.0)

24

23

4.3

6

5

20.0

(8.1)

1 984

1 550

29.7

238 609

186 400

28.3

Number of block hours

6 494

4 835

32.9

Number of aircraft served

5 601

2 219

152.4

767 759

284 038

170.3

25 346

13 184

150.3

5 411

10 317

(47.6)

12 019

8 709

38.0

Number of passengers carried (in thousands)

Number of passengers served Volume of fuel sold (tonnes) TRTO - Number of sold theoretical training hours TRTO - Number of sold practical training (FFS) hours

Information about related party transactions Information about related party transactions is provided in Note 12 of the Consolidated Financial Information for the six-month period ended 30 June 2012. Research and development activities There were no major research and development projects undertaken during six-month period ended 30 June 20121, except the on-going development and improvement of the Group's services, spare parts trade platform (www.locatory.com) and web-platform for training planning, track relevant training information (www.balticaa.com/en/my-baa/). Environmental protection In its activities, the Group uses innovative means and the modern technological processes that meet all ecological standards and help reduce the negative impact on the environment. Risk management The main risk factors associated with the activities of the Group are as follows: Demand for aviation services; Changes in the legal regulation of the Group's activities; Competition with other market players; Currencies' exchange rates fluctuation. The Group's activities expose it to the following financial risks: market risk (including foreign exchange risk, and cash flow and fair value interest rate risk), credit risk, liquidity risk. The Group's Policy for Treasury Management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects of the financial performance of the Group. The Company's financial risk management is carried out by the CFO and the Management Board. Significant post balance sheet events In July 2012 Baltic Ground Services Sp. z o.o. starts providing catering services at the Warsaw Frederic Chopin Airport. Plans and forecasts In second half-year of 2012 the Group will strive to increase revenues in all services provided by the Group with the focus on expansion of maintenance facilities, developing ground handling and fuelling operations in Poland, increasing spare part trading volumes and development of engine management service. The group will continue sustainable growth and geographical expansion.

17


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

III. INFORMATION ABOUT SHARE CAPITAL AND SHAREHOLDERS The authorised capital of the Company as at 30 June 2012 was LTL 5,893,333 and is divided into 5,893,333 ordinary shares with a par value of LTL 1 each. All shares carry equal voting rights. On 3 March 2011 shares of the Company were introduced to trading at Warsaw Stock Exchange. Shareholders and share capital of the Company as at 30 June 2012 were as follows: No.

Shareholder

Role in the Company’s Management

Number of

Percentage

shares

owned

1.

ZIA Valda Cyprus Ltd.

1 939 275

32.906%

2.

Indeco: Investment and Development UAB

1 292 850

21.938%

3.

Harberin Enterprises Limited

777 375

13.191%

4.

ING Otwarty Fundusz Emerytalny

390 000

6.618%

5.

Hubert Bojdo

Member of the Supervisory Board

100 000

1.697%

6.

Vytautas Kaikaris

Member of the Management Board

55 250

0.938%

7.

Jonas Butautis

Member of the Management Board

44 200

0.750%

8.

Aurimas Sanikovas

Member of the Management Board

11 050

0.188%

9.

Other

10.

200 000

3.39%

Other free float

1 083 333

18.38%

Total

5 893 333

100.00%

IV. PERSONNEL Number of the Group’s employees at the end of the reporting period: 2012-06-30 1 274

Number of full-time employees

2011-12-31 1 027

2011-06-30 903

V. MANAGING BODIES OF THE ISSUER According to the By-laws of Avia Solutions Group AB (hereinafter – the Company) managing bodies are General Meeting, Supervisory Council, Management Board and General Manager. The Management Board, the Supervisory Council and the Key Executives of the Company as at 30 June 2012 were as follows: Name

Position within the Company

In the position Since

Until

Supervisory Council Vladas Bagavičius

Chairman of the Supervisory Council

23 August 2010

23 August 2014

Irtautė Ščerbavičienė

Member of the Supervisory Council

30 April 2012

23 August 2014

Džiuginta Balčiūnė

Member of the Supervisory Council

23 August 2010

23 August 2014

Hubert Bojdo Dariusz Marek Formela

Member of the Supervisory Council

23 August 2010

23 August 2014

Member of the Supervisory Council

29 April 2011

29 April 2015

Gediminas Žiemelis

Chairman of the Management Board

25 August 2010

25 August 2014

Saulius Batavičius

Member of the Management Board

25 August 2010

25 August 2014

Aurimas Sanikovas

Member of the Management Board

25 August 2010

25 August 2014

Jonas Butautis

Member of the Management Board

25 August 2010

25 August 2014

Vytautas Kaikaris

Member of the Management Board

25 August 2010

25 August 2014

Linas Dovydėnas

General Manager

25 August 2010

Indefinite

Aurimas Sanikovas

Chief Financial Officer

30 September 2010

Indefinite

Gediminas Žiemelis

Director of Development

30 September 2010

Indefinite

Management Board

Key Executives

18


AVIA SOLUTIONS GROUP AB CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2012 (All tabular amounts are in LTL ‘000 unless otherwise stated)

MANAGEMENT CONFIRMATION OF THE CONSOLIDATED INTERIM FINANCIAL INFORMATION

Following Article 22 of the Law on Securities of the Republic of Lithuania and Rules on Preparation and Submission of Periodic and Additional Information of the Lithuanian Securities Commission, we, Linas Dovydėnas, General Manager of Avia Solutions Group AB, and Aurimas Sanikovas, Chief Financial Officer of Avia Solutions Group AB, hereby confirm that, to the best of our knowledge, the not audited Avia Solutions Group AB Consolidated Interim Financial Information for the six-month period ended 30 June 2012, prepared in accordance with International Financial Reporting Standarts as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position, profit and cash flows of the Group.

General Manager

Linas Dovydėnas

Chief Financial Officer

Aurimas Sanikovas

Vilnius, 14 August 2012

19


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