Aero Inventory plc annual report and accounts 2008 - Investis CMS

Aero Inventory plcannual report and accounts 2008

United KingdomAero Inventory plc/Aero Inventory (UK) Limited 30 Lancaster Road, New Barnet Hertfordshire, EN4 8AP United KingdomTel +44 (0)20 8449 9263 Fax +44 (0)20 8449 3555Email [email protected]

Hong KongAero Inventory (Hong Kong) LimitedUnits 01-06, 6th Floor, Airport Freight Forwarding Centre2 Chun Wan Road, Chek Lap Kok, Hong KongTel +852 3657 2600Fax +852 3657 2601Email [email protected] AustraliaAero Inventory (Australia) Pty LimitedLevel 7, 250 Victoria ParadeEast Melbourne, Victoria 3002Tel +61 3 9445 5700Fax +61 3 9445 5798Email [email protected] United States of AmericaAero Inventory (USA) Inc12257 Florence AvenueSanta Fe Springs, California 90670Tel +1 562-236-5500Fax +1 562-236-5501Email [email protected]

BahrainAero Inventory (Bahrain) S.P.C.Door 1 & 2, Gate 18Free Trade Zone – GLS CompoundBahrain International AirportMuharraq Kingdom of BahrainTel +973 173 20560Fax +973 173 20762 Email [email protected]

JapanAero Inventory Japan KK Utility Center Building 4th Floor3-5-10 Haneda AirportOtaku, Tokyo 144-0041 JapanTel +81-3-5756-7700Fax +81-3-5756-0303Email [email protected]

www.aero-inventory.com

Aero

Inventory p

lc annual report and accounts 2008

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Aero Inventory is listed on the Alternative Investment Market of the London Stock Exchange with operations in the United Kingdom, Australia, Canada, China, Bahrain, Hong Kong, Indonesia, Japan, Switzerland and the United States of America.

We are a service provider to companies in the aerospace industry, providing a comprehensive procurement and inventory management service.

We focus on the hundreds of thousands of consumable and expendable parts required in the maintenance of commercial aircraft and our e-based systems are complemented by on-site representation and 24-hour customer support. We aim to grow the business by securing contracts with additional customers who can benefit operationally and financially from our services, including airlines and aerospace maintenance and repair companies.

Aero Inventory’s ultimate goal is to become the world’s leading aircraft consumable parts service provider

Aero InventoryAero Inventory is proud to be a major sponsor of the Vulcan to the Sky Trust for 2008/09.

The mission of the Trust is • To preserve and protect AVRO Vulcan G-VLCN ( XH558), to return her to full working order for the benefit of the public.• To demonstrate and display the aircraft at public events and to conserve her as a heritage asset in perpetuity.• To advance the education of the general public, and also specifically engineers and aviators, in the AVRO Vulcan, her provenance; historical and social context; design technologies; operational and maintenance processes and procedures; for the benefit of British heritage, historical and technical knowledge and conservation.• To assist in the conservation to full working order of other heritage aircraft of the 20th century.

The Trust delivered its aim of demonstrating Vulcan XH558 at a number of UK air shows in 2008, attracting much public and commercial interest. With this sponsorship, Aero Inventory aims to support the Trust’s objectives of honouring the past and inspiring the future.

Aero Inventory is using its association with the Vulcan to the Sky Trust to build global awareness of the Aero Inventory brand.

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Aero Inventory plc 2008 01

$93.3mup 76%

Operating profit

$440mup 78%

Revenues

$73.1mup 60%

Pre-tax profit

102cup 56%

Fully diluted EPS

Our Business Governance Financials01 Highlights02 What we do04 How we do it06 Where we do it08 Where are we going?10 A track record of success 12 Chairman’s statement14 Chief Executive’s statement

20 Directors’ biographies22 Directors’ report25 Corporate governance26 Remuneration report30 Statement of directors’

responsibilities

31 Independent auditors’ report32 Consolidated income statement33 Consolidated statement of

recognised income and expense34 Consolidated balance sheet35 Consolidated cash flow statement36 Notes to the consolidated financial

statements59 Notice of Annual General Meeting65 Shareholder information66 Five year summary66 Company information67 Form of proxy

PRE-TAX PROFITS$’000

45.6

18.2

73.1

13.0

3.0

04 05 06 07 08

REVENUES$’000

247.0

117.1

440.0

79.5

38.6

04 05 06 07 08

Highlights


02 Aero Inventory plc 2008

Our StrategyOur MarketsOur Business

Aero Inventory provides inventory management and procurement services for commercial aircraft maintenanceWe enter into exclusive long-term supply contracts with airlines and with aircraft maintenance repair and overhaul businesses. The contracts specify a defined list of part numbers covering the entire range of consumable and expendable parts used by each customer in the maintenance of commercial aircraft, components and engines.

At the beginning of a contract Aero Inventory typically buys the customer’s stocks of partsFrequently used ‘planned’ stocks continue to be stored at our customers’ locations as this is most convenient to them. All parts supplied are delivered with the relevant quality paperwork to meet the standards set by both the relevant airworthiness authorities and the customer.

Right parts, right time, right serviceDuring the term of the contract Aero Inventory is responsible for ensuring that the right parts are available at the right time and commits to service levels, typically an ‘off-the-shelf’ availability percentage for key (planned) parts in the order of 95 per cent.

Our growth has been achieved through winning additional contracts, all of which are similar in nature As further contracts are won, increasing demands for parts from customers all draw off one enlarged pool of stock which allows us to enjoy more efficient inventory management than is available to any single customer, particularly given the irregular usage of some slower moving parts which is typical in aircraft maintenance.

Benefits to our customers include:

• Paymentforpartsonlyastheyareconsumed

• Fewerstockoutsorshortages,resultinginimprovedefficiencyandshorterturnroundtimes

• Eliminationofthefinancialcostofholdinginventory

• CashinjectionfromAeroInventorystockpurchase

• Areductionindirectcostsinthoseareasencompassedbyourservice

• Betterpartsusageinformation

What we do

Parts delivered round the clock every day.



Our Performance FinancialsGovernance

Right part, right time, right service.



Our StrategyOur Markets

AIstockfromcustomerpurchases

Otherstockistsofnewparts

OriginalEquipmentManufacturers(OEMs)andDistributors

Our Business

How we do it

Our business model is essentially straightforward and seeks to ensure that the right parts are available to our customers in the right quantity and at the right time. A complex supply chain operates to ensure the smooth running of this process.

Inventory management and demand planning Using the ever increasing history of parts usage both in our own operations and from customer histories together with data on parts availability and lead times, demand planning models are used to generate the stock profiles. Criteria agreed with each customer determine if a part is ‘planned’ to be held in stock or will be supplied only when a specific need arises.

ProcurementAero Inventory works with key suppliers to build long-term relationships focusing on providing the supply needed by our customers. An increasing number of long-term partnership agreements are in place with major OEMs and parts vendors.

PurchasingIf not already available in Aero Inventory’s stock, orders to obtain required parts, whether for planned part replenishment or to meet shortages, are sent through to suppliers using Aero Inventory’s proprietary system, Parts Central, and industry standard EDI links. Orders are expedited as needed to ensure that service targets are achieved.

LogisticsPartnership arrangements with expert global third party logistics providers take parts from the source to the end customer location. Consolidation of shipments optimises the flow of parts.

PricingTransparent pricing is vital to our customers. Our pricing teams maintain an ever increasing database of prices and histories so that accurate timely information on the cost of parts used can be provided to customers.

Accounts payables managementAero Inventory takes away from the customer the need to manage the large number of suppliers and transactions involved in having the right parts in the right place at the right time.

Over 1000 suppliers

Aero Inventory DemandplanningProcurementPurchasingLogisticsPricingAccountspayable



Our Performance Financials

Customer picks part

Airlines–MROs

Aero InventorySuppliespartsneededbycustomersinlinewithcontractedservicelevels

Focus on maintenance activities

Governance

Aero Inventory’s stocks support customers worldwide

> Customers pick over 2 million parts every year

> 50 million items in stock

> Over 6 million parts on a Boeing 747-400

Aero Inventory supplies/replenishesstock & invoices for parts used



Our StrategyOur Business

Distribution of personnel

1. 13% Australia2. 28% America3. 21% Asia4. 38% UK and rest of Europe

Our Markets

1

2

3

4

The aerospace market represents an attractive market opportunity for an IT-intensive service provider specialising in aerospace parts.

It has a requirement for a large number of distinct parts. The supplier base of such parts to the aerospace industry is highly fragmented, resulting in there being many different sources of supply.Aerospace manufacturers, commercial airlines, and aircraft maintenance and repair organisations have in the past traditionally largely handled procurement and inventory management internally.The trend toward the outsourcing of aircraft parts procurement and inventory management is strengthening and is creating significant new contract opportunities.

The marketAero Inventory is listed on the Alternative Investment Market of the London Stock Exchange with operations in the United Kingdom, Australia, Canada, China, Bahrain, Hong Kong, Indonesia, Japan, Switzerland and the United States of America.

We have expanded our global presence significantly. Strong central direction from the UK head office is underpinned by highly capable regional offices which deal with customers and suppliers around the world in their own regions and time zones to ensure optimum supply and customer service. Over 50 per cent of our staff are now based outside the UK.

Our presence

Where we do it

All Nippon Airways Boeing 747-400 aircraft are supported

by Aero Inventory




Delivering parts worldwide

North America

LosAngelesOperationsCentre Procurement/Purchasing/Logistics/Quality

MiamiOperationsSatellite Logistics

MontréalOperationsCentre Procurement/Purchasing/Logistics/Quality/ On-sitecustomersupport

Toronto/Winnipeg/Vancouver On-sitecustomersupport

SanSalvador,ElSalvador On-sitecustomersupport

OperationalCentresandCustomerlocatedoffices OperationalCentres Customerlocatedoffices

Our Regions

Europe & Middle East

NewBarnet,London Headofficefunctions/ Commercial/Pricing/Procurement/ Purchasing/Logistics/Quality

Dublin(Ireland),Stansted(UK), Zurich(Switzerland),Bahrain On-sitecustomersupport

Asia Pacific

HongKong,Melbourne,Tokyo OperationalCentres/Procurement/ Purchasing/Logistics/Quality

HongKong,Xiamen,Jinan(China), Melbourne,Sydney,Brisbane(Australia), Jakarta(Indonesia) On-sitecustomersupport



Our Business Our Markets Our Strategy

REVENUES$’000

247.0

117.1

440.0

79.5

38.6

04 05 06 07 08

will benefit operationally and financially from our services and who are prepared for Aero Inventory to achieve its financial returns, subject to meeting cost and performance targets.

As the business grows and the commonality of parts between contracts increases, Aero Inventory believes there will be economies of scale in purchasing and in the trading of our inventories. We also see increasing opportunities to pool inventory across our different customer contracts, where appropriate. Aero Inventory also believes there will be opportunities to increase efficiency through improved logistics.

Our strategyOur strategy is to grow the business rapidly and profitably by securing further long-term, sole-supplier contracts.

With major long-term contracts in place with a number of the world’s leading airlines and maintenance and repair organisations (MROs) and holding an extensive inventory of current aircraft parts, Aero Inventory believes it is well placed to capitalise on a large, emerging outsourcing market, as aerospace businesses seek to gain cost and efficiency advantages through outsourcing parts procurement and inventory management.

Aero Inventory believes that there are opportunities to add incremental business related to our existing customers and to secure further contracts among MROs, airlines, aircraft manufacturers and government agencies. We seek customers who

Where are we going?




Grow the business rapidly and profitably by securing further long-term, sole-supplier contracts.

Capitalise on the outsourcing market, as aerospace businesses seek to gain advantages through outsourcing parts procurement and inventory management.

Seek customers who will benefit operationally and financially from our services.

Add incremental business related to our existing customers and to secure further contracts among MROs, airlines, aircraft manufacturers and government agencies.

Generate further economies of scale in purchasing and in the trading of our inventories.

Increase efficiency through improved logistics.

Aero Inventory supports Qantas at four locations in Australia




Aero Inventory’s recent history started in 1994 when an existing distribution business was acquired, since when the management team has transformed it into an aerospace parts service provider, focusing on consumable and expendable (C&E) parts. The Company has generated strong growth both by extending business with existing customers and by winning new contracts.

In May 2000 the Company’s shares were listed on the Alternative Investment Market (“AIM”), allowing the Company to raise new capital for expansion. Aero Inventory has subsequently grown rapidly and profitably. At the time of its admission to trading on AIM in May 2000, Aero Inventory had two UK customers, CF Taylor and Britax.

Aero Inventory’s first major overseas customer, in 2000, was the Hong Kong Aircraft Engineering Company (HAECO), a major MRO in Hong Kong. This covered the customer’s Component Workshop activities at Tseung Kwan O in Hong Kong.

In 2004, a second large-scale sole-supplier contract was signed covering HAECO’s line and base maintenance activities at Chep Lap Kok airport in Hong Kong. In 2006, these two contracts were rolled into a new HAECO group ‘umbrella’ contract. Further activities have been added to the agreement: Aero Inventory is now the parts supplier to HAECO group companies, Taikoo (Xiamen) Aircraft Engineering Co. Limited (TAECO) at Xiamen in China and Taikoo (Shandong) Aircraft Engineering Co. Limited (STAECO) at Jinan in China. Most recently, Aero Inventory has started to supply parts to HAECO’s new operation in Bahrain in the United Arab Emirates.

In October 2003, Aero Inventory signed a procurement and inventory management contract with SR Technics Switzerland, a leading independent MRO. Two essentially identical service contracts were then signed in 2004 with SR Technics group companies in the UK and Ireland.

A track record of success

Customer service – a key success factor Reliable parts availability is crucial to aircraft maintenance activities

Aero Inventory agrees service level targets specific to each contract customer based on the availability of key parts. These are measured and reported monthly. To ensure that focus is maintained, 50 per cent of Aero Inventory’s staff bonus is earned by the achievement of service delivery targets. Our internal targets were once again achieved in 2007/08.

The measures used are developed for each customer and were not always in use before Aero Inventory’s appointment and the full operational implementation of Aero Inventory’s service. From the data which is available, Aero Inventory believes that the service provided to all our customers gives better parts availability than they had before we implemented the Aero Inventory solution.

Following a comprehensive competitive supplier selection process, in 2006, Aero Inventory was awarded a 10-year contract by Qantas Airways Limited for the supply of procurement, purchasing, inventory management and logistics services for Qantas’ Expendables and Recoverable spares.

In November 2007, a further large scale contract was awarded to Aero Inventory by Air Canada Technical Services (now Aveos Fleet Performance Inc.) covering all parts for this North American MRO and its operations in Canada and El Salvador.

This was followed in March 2008 by a breakthrough into the Japanese market when All Nippon Airways of Japan, ranked as one of the top ten airlines in the world, selected Aero Inventory to supply parts for a significant part of its fleet.



GovernanceOur Performance Financials

HISTORIC GROWTH

All Nippon Airways 2008

Aveos Fleet Performance Inc (Formerly Air Canada Technical Services) 2007

Qantas Airways Limited 2006

HAECO Group contract expansion 2006

SR Technics UK and Ireland 2004

SR Technics Switzerland 2003

HAECO contract 2000

Revenues increased by 78% to $440m in 2008. The five year compound growth rate is 85%.




Nigel McCorkellChairman

Strong growthI am pleased to report another year of substantial growth from Aero Inventory, with revenue up 78 per cent, pre-tax profits up 60 per cent and diluted EPS up 56 per cent. We are proposing an increased final dividend of 12 pence per share to give total dividends for the year of 18 pence. Aero Inventory has now reinforced its position as a leading aircraft consumable parts service provider and is better placed than before to continue its expansion.

Asset based borrowing facilityAs well as the strong financial results, I would like to highlight the $500 million asset-based long-term financing facility that we put in place during the year. This innovative financing reflects the quality of our stocks and debtors and the quality of the cash flows from our long-term contracts. The interest rate on this facility is US Dollar LIBOR +3 per cent. The facility has been designed to be expandable as Aero Inventory grows.

The futureAero Inventory’s strategy is to grow the business rapidly and profitably by securing further long-term sole-supplier contracts with airlines or Maintenance, Repair and Overhaul companies (MROs) to supply a wide range of consumable parts used in commercial aircraft maintenance. The market is very large and continues to grow despite the recent pressures on the airline industry and this presents

a considerable opportunity for Aero Inventory. During the last year there appears to have been a tipping point in airlines’ attitude to the outsourcing of consumable parts. Following many approaches from major airlines, we are currently discussing a number of potential multi-year contracts with an aggregate value of several billion US Dollars. While such a level of new business will involve challenges, we think it is essential that Aero Inventory takes this unique opportunity to secure a dominant position in its marketplace.

Further rapid expansion of the business should bring considerable benefits to shareholders. This is because new contracts are not expected to involve a proportional increase in operating costs or stocks, meaning that the profitability on incremental business should be high. There are increasing opportunities to reduce the total amount of stocks that need to be held by the business and this provides considerable potential to improve both stock turns and the return on capital employed. The unsolicited approach received by the Group in June 2008 by a potential offerer is, I believe, a reflection of the increasing attractiveness of the business.

Chairman’s statement

During the year there appears to have been a tipping point in airlines’ attitude to the outsourcing of consumable parts.

WethinkitessentialthatAeroInventorytakethisuniqueopportunitytosecureadominantpositioninitsmarketplace.




Long Term Incentive PlanThe Aero Inventory Long-Term Incentive Plan was approved by shareholders and adopted by the Group in December 2007. It provides an important incentive to management to maximise the growth of the business and provides substantial rewards to management if the Group’s share price reaches 1500 pence per share at the end of three years.

Appointment of joint brokerI am pleased to announce that Numis Securities Limited has been appointed as joint broker to the Group. We look forward to working with both our brokers to maximise shareholder value.

Thanks to staffOur success is driven by our employees. They play the key role in helping us meet client service expectations and in supporting our growth. The Board would like to welcome those who have joined the Group during the year and to thank everyone across the Group for all their hard work during the year.

NigelMcCorkell Chairman 22 September 2008

+60%Pre-tax profits

Air Canada is a major customer of Aveos Fleet Performance Inc. Now an independent

maintenance and repair organisation, it was formerly Air Canada Technical Services

+56%Diluted EPS




IntroductionThe 2007/08 financial year showed significant and exciting growth for Aero Inventory. Two key new contracts were signed and we continued to make progress in our operational performance to support the service levels to which we have committed. The year has not only benefited from a full year’s trading from our contract with Qantas but also includes significant contributions from the new contracts with ACTS and ANA (All Nippon Airways).

Review of resultsTurnover for the year ended 30 June 2008 increased by 78 per cent to $440 million (2007: $247 million). The largest part of the increase resulted from our new contract with ACTS, which generated higher revenues than originally anticipated, but the figures also benefited from a full year’s revenue contribution from our contract with Qantas. There was some expansion of our business with the HAECO group, particularly in China, as well as some expansion in revenues from SR Technics. The new contract with ANA also contributed to revenues in the latter months of the year.

As a company listed on AIM we are now obliged to present our results under International Financial Reporting Standards (IFRSs). The two principal adjustments made are to show our

Rupert LewinChief Executive

capitalised IT development costs as an intangible asset rather than a tangible one and to retrospectively change our functional and presentational currency to US Dollars at 1 July 2006, resulting in the value of stocks being stated at the US Dollar values at which they were purchased. All the figures in this statement are shown in US Dollars including comparative figures from last year and almost all our trading and our debt is now denominated in US Dollars. The change in reporting currency is a logical step for a business that trades almost entirely in US Dollars and gives a clearer picture of the underlying financial performance.

Operating profit rose by 76 per cent to $93.3 million (2007: $52.9 million) with significant contributions arising from the new contracts (ACTS and ANA) and continuing contributions from Qantas, SR Technics and HAECO. The operating margin remained at 21 per cent.

Net interest payable amounted to $20.2 million (2007: $7.3 million) reflecting a higher level of borrowings following the commencement of the contract with ACTS. The pre-tax profit was $73.1 million (2007: $45.6 million).

After a tax charge of $21.5 million (2007: $14.5 million) – an effective rate of 29.4 per cent (2007: 31.7 per cent) – profit after tax was $51.6 million (2007: $31.1 million) and basic

Chief Executive’s statement

The full operational go-live of the Qantas and ACTS contracts during the course of the year trebled the operational transactions processed by Aero Inventory.




earnings per share were 108.7 cents (2007: 65.9 cents). Diluted earnings per share were 102.0 cents (2007: 65.3 cents).

Net debt at the year end was $391.0 million compared to $110.6 million at 30 June 2007. Although we have strong positive operational cash flow from our established customers, we invested heavily in the year to support our contracts with ACTS and Qantas. In particular we acquired $95 million of stocks and intellectual property from ACTS in November 2007 and then purchased further parts to support the higher than expected levels of trading at ACTS. The intellectual property consisted principally of the database of parts usage in historic maintenance activity which has a considerable value to our business. We will be amortising the cost of the intellectual property purchase over the initial ten year term of the ACTS contract.

Year-end shareholders’ funds amounted to $294.2 million (2007: $253.8 million). This takes into account the retained profits for the year less dividends paid during the year.

The year-end consolidated balance sheet once again shows significantly increased stocks at $690.1 million (2007: $390.9 million). The principal increase in stock levels reflects the inventory purchase connected with our

contract with ACTS. In addition to the initial stock purchase referred to above we also made further purchases of stock during the period to enable us to achieve the service levels to which we had contractually committed to, particularly for the contracts with ACTS and Qantas. High levels of stock have to date been necessary to provide a high level of performance for our customers and, as our business expands further, we are increasingly well placed to service new customers from our existing stocks. As our contracts mature and as the initial stocking requirements are met there is a significant reduction in monthly stock purchases; in September 2008 stock purchases are expected to be some 40 per cent below the level seen in March 2008.

Growing stock efficiencies The commonality of parts between our growing customer base is increasing. On average 73 per cent of our active parts on hand at the year end are used to service two contracts and this presents considerable opportunities to us to improve the utilisation of our stocks. The increasing commonality of our stocks coupled with improved purchasing and secondary market trading is beginning to improve our stock turn. Despite the stock increases required to support our newer contracts, annualising the last quarter’s revenues, Group revenues are running around 80 per cent of period end stocks,




the same level reported at the end of our half year.

Transfers of stock between sites are also increasing as we seek to locate stocks where they are most likely to be consumed by customers. Some $18 million of stocks were transferred in the second half of our financial year compared to only $9 million transferred in the first half. We have also increased the amount of stock sold to non-contract customers.

Enlarged bank facilitiesIn February 2008 we signed a new syndicated asset based lending facility. The new five year syndicated facility was led by Lloyds TSB Commercial Finance and is an asset based lending facility secured on Aero Inventory’s stocks and trade debtors in the UK, Switzerland, Ireland, Canada, the United States, Hong Kong, Australia and Japan. As was anticipated the facility was further extended in June 2008 to $500 million. The asset based lending facility is well suited to the business given its potential for expansion.

The Group’s bank facilities have therefore risen from £85 million (equivalent to $170 million) to $500 million during the year and this increase has given the business the capability to take on significant amounts of new business, in particular the contracts with ACTS and ANA.

DividendReflecting our confidence in the future, the Board is recommending the payment of a final dividend of 12 pence per share (equivalent to 23.7 cents per share at the period end exchange rate). Taken with the interim dividend of 6.0 pence per share (equivalent to 11.3 cents per share) paid in May 2008, the total dividends for the year amount to 18 pence (equivalent to 35.0 cents at the period end exchange rate). The final dividend will be paid on 11 December 2008 to shareholders on the register on 14 November 2008.

Operational reviewAero Inventory’s business is essentially a straightforward one and just seeks to ensure that the right parts are available to customers at the right time. However the number of parts required, the number of sites involved and the irregularity of the usage of parts used in maintenance as well as all the challenges of operating a global supply chain provide great complexity. We now hold in stock over 50 million individual parts with over 400,000 part numbers held in over 40 different locations. The number of part picks in a typical month now approaches 200,000.

Given these complexities in our business and our rapid growth we constantly need to continue to develop and improve the operational procedures

Chief Executive’s statement continued

We now hold in stock over 50 million individual parts with over 400,000 part numbers held in over 40 different locations. The number of part picks in a typical month now approaches 200,000.




within the business. We continued to develop our operational structure during the year in order to provide a robust framework to support both current operations and future business and we have expanded our global presence significantly. Strong central direction from the UK head office is underpinned by highly capable regional offices which deal with customers and suppliers around the world in their own regions and time zones. This structure enables customer service and responsiveness to be maximised. It also allows strong relationships to be developed with suppliers in different regions and provides access to all relevant sources of parts while bringing to bear Aero Inventory’s position as an increasingly important player in the aircraft parts supply chain. Good progress was made during the year in strengthening our relationships with a number of key suppliers.

It is worth noting that the full operational go-live of the Qantas and ACTS contracts during the course of the year trebled the operational transactions processed by Aero Inventory compared to the previous activity level.

We have continued to develop Aero Inventory’s proprietary system, Parts Central, to support the growing business. We also invested in the infrastructure of our IT resource to

support the ever more widely spread locations and to provide greater capacity and resilience.

In a year which saw us complete our work to bring the Qantas contract into full operation, we also remained strongly focused on our existing customers and it is very pleasing to report that we achieved high service levels with all our major customers, in all cases achieving better performance levels than were previously achieved by customers’ in-house operations.

In more detail, the key operational developments during the year were as follows:

Canada – Our largest contract, with ACTS (shortly to be renamed Aveos Fleet Performance), was signed in November 2007 and we are well on the way to full contract implementation. We have opened an office in Canada and have recruited a team to support the four ACTS locations across Canada and the ACTS subsidiary, Aeroman, in El Salvador.

Japan – Following the signing of our contract with ANA in March 2008 we have opened an office in Japan and are currently involved in recruitment and detailed contract implementation.

Australia – Our office in Melbourne has some 50 locally recruited staff to support the supply of parts to the four Qantas

+78%Revenues up to $440m

The HAECO Group carries out passenger aircraft

to freighter conversions as part of its range of services

+76%Operating profit up to $93.3m




maintenance and repair locations in Australia. The Australian team also deals with the local Australian supply base. Contract implementation was successfully completed in July 2007. Many of the developments in operational procedures and IT systems developed for Qantas are now being used to improve our service at other sites.

Europe – Our major contracts with SR Technics in Zurich, Stansted and Dublin all performed satisfactorily. This business is operated from our office in New Barnet in the UK, supported by local on-site account support staff.

Hong Kong and China – Business in Hong Kong and China has continued to grow, largely driven by increasing business with HAECO’s subsidiaries in China, TAECO in Xiamen and STAECO in Jinan. We have enlarged our local support team in Hong Kong and we also have a dedicated warehouse and distribution facility. As well as providing the interface to customers in the region, the Hong Kong team has responsibility for procurement and purchasing from our Asia Pacific based suppliers.

Middle East – We continue to support ADAT in Abu Dhabi and have opened a small facility in Bahrain to support HAECO.

Indonesia – Business in Jakarta continues to be satisfactory with good potential for further expansion.

United States – The team based at our facility in Los Angeles has expanded significantly during the year. The number of buyers there in particular has increased to service the US based supplier base. The facility also acts as a logistics consolidation point for the considerable volumes of material which we source in the US for supply to our customers worldwide. In addition we have positioned some inventories not immediately required for current customer contracts in the facility and we market such materials to customers in the US.

StaffDuring the period, Aero Inventory increased headcount significantly from 268 at June 2007 to 371 at June 2008. Over 50 per cent of our staff are now based outside the UK. This is a clear demonstration of the globalisation of Aero Inventory’s business.

There has been a major recruitment exercise in Canada to support the new contract with ACTS. An experienced team has been assembled with backgrounds in operational management, procurement, purchasing, inventory and demand planning. There has also been considerable expansion at our Los Angeles facility where we have increased our number of buyers in particular, so that they are based in the same time zone as the suppliers they buy from. More recently we have also been recruiting for our new

Chief Executive’s statement continued

Aero Inventory has grown its revenues and profits considerably in the last financial year. Aero Inventory is now an established industry player and in an excellent position to win further contracts.




contract with ANA in Japan. At a global level, we substantially increased our training efforts to ensure that all staff are equipped with the skills to maximise their effectiveness and contribution.

Current trading and prospectsAero Inventory has grown its revenues and profits considerably in the last financial year and has strengthened its position within the industry. Aero Inventory is now an established industry player and in an excellent position to win further contracts. The business is also now realising some of the benefits of its increased size and is beginning to use its stock more efficiently which will lead to improving stock turn and cash flow. Although there is much more that needs to be done to achieve optimum stock turn we are now accelerating our plans for improvements in the current year.

Airlines are now being forced to react to the impact of both increased fuel costs and recessionary pressures and this has resulted in more enquiries for new business than ever before. This places Aero Inventory in an excellent position to win new contracts in addition to working on the successful implementation of our contracts with ACTS and ANA.

RupertLewinChief Executive 22 September 2008

Aero Inventory supports Aveos Fleet Performance Inc., with parts for its engine, airframe and component

maintenance solutions




Paul Docker (born 22 July 1965)Chief Operating Officer

Paul Docker joined Aero Inventory (UK) Limited as Procurement Director in November 2003 and held the position of Operations Director from July 2004 until June 2007. From 1981 to 1996, Mr Docker worked for Dunlop Aerospace and was involved in supplies management and business process re-engineering. In 1996, he moved to Smiths Group where he held successive senior purchasing positions within Smiths Aerospace. In 1999 he became Materials Executive for Portex Limited, a large multi-site operation within Smiths Group Medical Division.

Martin Dodge (born 17 February 1962)Commercial Director

Martin Dodge joined the Company at the same time as Rupert Lewin in 1994. He has been closely involved in all areas of the business. He was Commercial Director between December 1998 and August 2002 when he became Asia Pacific Director to reflect his position as Managing Director of Aero Inventory (Hong Kong) Limited. He joined Courage Limited (part of the Imperial Group plc) in 1985 where he progressed to the position of Promotions and Marketing Manager. From 1988 to 1994 he worked as Business Development Manager at SI Industries Limited.

Directors’ biographies

Nigel McCorkell (born 9 January 1947)Chairman

Nigel McCorkell joined the Company as a Non-executive Director in April 2000. A Chartered Accountant, he was Finance Director of Flight Refuelling plc (Cobham plc) from 1981 to 1984. After purchasing an equity interest in Meggitt plc in 1984, he was Finance Director, becoming Managing Director between 1991 and 1994. He was Deputy Chairman of Meggitt between 1994 and 1996. In 1996 he became Chairman of Cork Industries Limited until the company was acquired in 1999. He is a Non-executive Director of FFastFill plc.

Rupert Lewin (born 19 October 1955)Chief Executive

Rupert Lewin has had overall responsibility for the direction and management of the Company since 1994. Between 1977 and 1991, he worked as a research analyst for a number of City firms, including Scott, Goff, Hancock & Co. (1977-80), Moy, Vandervell & Co. (1980-82), Sheppards and Chase (1982) and Robert Fleming (1982-91). He was a director of Robert Fleming Securities Limited between 1987 and 1991 and, for part of this time, Head of Corporate Broking. Between 1992 and 1994, he was Chief Executive of SI Industries Limited.

Hugh Bevan (born 27 September 1961)Finance Director

Hugh Bevan, a Chartered Accountant, joined the Company in April 2002. Between 1987 and 2001 he worked for Robert Fleming and Jardine Fleming, subsequently acquired by JP Morgan Chase. During this time, he worked mainly in the Hong Kong and London offices on fundraising and advisory transactions. In 1997 he became Chief Operating Officer of Jardine Fleming’s Asian Corporate Finance business, and in 1999 returned from Hong Kong to London as Head of Equity Capital Markets Execution. He is also a Non-executive Director of Foamasters International Limited.




Roger Davis (born 4 June 1956)Non-executive Director

Roger Davis joined the Company as a Non-executive Director on 8 January 2007. Mr Davis worked for Barclays plc from 1997 until December 2005. From January 2004, he was a director of Barclays plc and held the position of Chief Executive, UK Banking. Mr Davis had been a member of the Barclays Group Executive Committee since February 2003 and his previous roles for the Barclays Group included Chief Executive of Business Banking; Chairman and Chief Executive of Barclays Capital, Asia Pacific. Before joining Barclays, he spent 12 years in the British Army and ten years in investment banking at Robert Fleming. He is Chairman of Life Trust Holdings Plc and of Gem Diamonds Limited and is also a Non-executive Director of Experian Group Limited.

Laurence Heyworth (born 19 March 1955)Non-executive Director

Laurence Heyworth re-joined the Company as a Non-executive Director on 7 September 2007. He was Chairman of the Company at the time of its flotation in 2000, before becoming Executive Deputy Chairman from 2001 to 2004 during which time he helped structure the business and played a key role in recruiting a number of the current management team in preparation for a period of substantial growth. He ceased to be an executive director in 2004 in order to establish two new businesses, in the fields of media and insurance. Between 1980 and 2000 Mr Heyworth worked for Robert Fleming (the investment bank) in various roles including Head of European Capital Markets.

Frank Turner (born 7 June 1943)Non-executive Director

Frank Turner joined the Company as a Non-executive Director in May 2000. He was appointed Non-executive Deputy Chairman in June 2000 and became Non-executive Chairman in July 2001 until stepping down on 1 January 2005. A fellow of the Royal Academy of Engineering, he spent 33 years at Rolls-Royce, becoming a main board director in 1988. He was Managing Director of Lucas Aerospace Limited as well as a director of Lucas Industries plc from 1992 to 1995. He was Chief Executive of British Midland Aviation Services Limited from 1996 to 1999 as well as a main board director of British Midland plc from 1997 to 1999. He is currently Chairman of Symmetry Medical Inc., Oxford Aviation Academy and Potenza Group Limited and an adviser on aerospace to Star Capital Partners, and 3i. A former Council Member of the Society of British Aerospace Companies and the Royal Aeronautical Society, he is currently President of the International Federation of Airworthiness.

Collin Trupp (born 20 November 1971)Business Development Director

Collin Trupp joined Aero Inventory as Software Development Manager in December 2002 and became Information Systems Director of Aero Inventory (UK) Limited in October 2003 and then Information Director of Aero Inventory plc in April 2005, in which role he played a key part in the conception and development of Aero Inventory’s Parts Central corporate business system. He relocated to Australia in early 2006 and took up the position of Australasia Director, a position he held until June 2007. A Canadian citizen, he had previously worked in IT and systems roles at Oz New Media Inc., Imaging Solutions Limited and Flint Energy in Canada.

Martin Webster (born 1 July 1957)Resources Director

Martin Webster joined the Company as Personnel Director & Company Secretary of Aero Inventory (UK) Limited and was Company Secretary of Aero Inventory plc since June 2004 before being appointed as Resources Director on 8 January 2007. Mr Webster is responsible for Human Resources within Aero Inventory and for a range of other areas including training and development, legal matters, insurance and risk management. He also acts as Company Secretary. Prior to joining the Company, Mr Webster had been Director of Business Services and Group Company Secretary of the Dexion Group where he had worked since 1984.



Our StrategyOur Business Our Markets

The directors present their annual report on the affairs of Aero Inventory plc (the ‘Company’) and its subsidiaries (the ‘Group’), together with the accounts and auditors’ report, for the year ended 30 June 2008.

Results and dividendsThe profit for the year after taxation amounted to $51.6 million (2007: $31.1 million). The directors recommend the payment of a final dividend of 12 pence per share (2007: 10.5 pence), payable on 11 December 2008 to shareholders on the register on 14 November 2008, which will be reflected in the 2009 accounts, making a total for the year of 18 pence per share, equivalent to 35.0 cents per share (2007: 15 pence, equivalent to 30.2 cents).

Principal activitiesThe principal activity of the Company is that of a holding company to its subsidiary undertakings. Aero Inventory (UK) Limited is primarily engaged in procurement and inventory management for the aerospace industry. Aero Inventory (Hong Kong) Limited, Aero Inventory (Switzerland) AG, Aero Inventory (Australia) Pty Limited, Aero Inventory (Canada) Inc., Aero Inventory (Bahrain) SPC and Aero Inventory Japan KK provide customer support in relation to the activities of Aero Inventory (UK) Limited. Aero Inventory (USA) Inc. provides services to Aero Inventory (UK) Limited in relation to the procurement and purchasing of aircraft parts, logistics and the sale of parts to non-contract customers in the USA.

Review of businessA review of the business and future developments is given in the Chairman’s and Chief Executive’s statements.

There are a number of risks and uncertainties, which could impact the Group’s performance. The Group has a risk management structure in place which is designed to identify, manage and mitigate business risk as described in the Corporate Governance report on page 25. The Group has experienced, and may in the future experience, fluctuations in the results of its operations. There are a number of factors that can affect the results.

Operating risksThese include the achievement and timing of new customer agreements, the achievement of the demanding service levels included in customer contracts, prolonged disruption to the Group’s IT services, the successful implementation of new contracts, the Group’s ability to attract and retain the right quality and quantity of personnel, logistics and transport, the failure of a product supplied by the Group and the ability to procure aircraft parts in such a way as to maintain a satisfactory level of profitability.

External risksThe Group’s performance is also subject to external macro economic conditions and changes in factors such as exchange rates, interest rates and inflation. A global economic downturn in the aerospace industry could negatively affect Aero Inventory’s business. Demand for consumable aircraft parts primarily depends on the number of flights and hours flown. Any events or circumstances that severely affect demand for air travel generally or in a specific region to the extent that a portion of the fleet is grounded could affect the Group’s business. Operations in emerging or new markets may have a higher than average risk of political or economic instability and may carry increased credit and financial risk. Financial risksThe Group’s activities expose it to a number of financial risks including price risk, credit risk, cash flow risk, liquidity risk and exchange rate risk. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on the use of financial derivatives to manage these risks. At present the Group does not use financial derivatives.

The Group’s financial instruments comprise cash and liquid resources and an asset backed revolving facility (‘the Facility’) as at 30 June 2008 of $500 million (2007: £85 million, equivalent to $170 million). The main purpose of these financial instruments is the funding of the Group’s activities. It has been the Group’s policy throughout the period under review that no trading in financial instruments shall be undertaken.

Credit riskThe Group’s principal financial assets are bank balances and cash, trade and other receivables. The Group’s credit risk is primarily attributable to its trade receivables, which are concentrated in a small number of high value customer accounts.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

Cash flow riskThe Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. Interest bearing assets and liabilities are held at fixed rates to ensure certainty of cash flows.

Liquidity riskGroup policy is to maintain the available credit facility to meet its anticipated requirements over a two to three year period. The facility, which is available until February 2013, may be drawn in advances, which may be of 1, 3, 6, 9 or 12 months duration.

Directors’ report




Exchange rate riskA reasonable percentage of the Group’s overhead costs are denominated in currencies other than US Dollars. The Group has not hedged these transactions. The Group is therefore exposed to a degree of risk in respect of changes in the exchange rate between the US Dollar and other currencies.

Supplier payment policyOur strategy is to have mutually beneficial long-term relationships with our suppliers. The Group’s policy is to negotiate the terms of payment with suppliers and abide by those terms. At 30 June 2008 the average period of credit taken from the Group’s suppliers amounted to 69 days (2007: 76 days). The Company has no trade creditors. DirectorsThe directors who served during the period and to the date of signing were:

H N P McCorkellP R Lewin H C BevanR W J DavisP M Docker M P DodgeL Heyworth (appointed 7 September 2007)C L Trupp F TurnerM J WebsterT Davey (resigned 17 December 2007)

Biographical details of the directors are provided on pages 20 and 21.

In accordance with the Articles of Association of the Company H N P McCorkell, P R Lewin and C L Trupp will retire at the next Annual General Meeting of the Company and, being eligible, offer themselves for re-election. Directors’ interestsThe directors’ interests in the Company’s issued share capital were:

Ordinary Ordinary shares of shares of 1.25 pence 1.25 pence each each 30 June 30 June 2008 2007

H C Bevan 54,552 54,552R W J Davis 1,008,681 1,008,681P M Docker 13,265 10,000M P Dodge 302,973 302,973L Heyworth (appointed 7 September 2007) 463,848 – P R Lewin 1,289,559 1,289,559H N P McCorkell 109,309 109,309C L Trupp – – F Turner 616,046 616,046M J Webster 45,562 17,500

Directors’ share options are detailed in the Remuneration Report on pages 26 to 29.

•••••••••••

Substantial interestsAt 22 September 2008, the Company has been notified of the following interests in 3.0 per cent or more of the issued share capital:

Ordinary Percentage shares of of issued Investor 1.25p each share capital

AXA S.A. 1,967,137 4.13%Calypso Capital Management Limited 2,500,000 5.25%Credit Suisse Securities (Europe) Limited 2,011,854 4.22%Deutsche Bank AG 2,676,022 5.62%Gartmore Investment Limited 3,063,125 6.43%Henderson Global Investors Limited 5,009,532 10.52%HSBC Holdings plc 2,805,107 5.89%Lansdowne Partners Limited 4,704,332 9.88%

The mid-market price of the Company’s shares on 30 June 2008 was 567.0 pence and the range from 1 July 2007 to 30 June 2008 was 431.75 pence to 722.5 pence.

Charitable donationsDuring the year the Company made charitable donations amounting to $2,400 (2007: $11,492).

Employee involvementThe number of staff employed by the Group has increased as the business has grown. As at 30 June 2008, the Group employed 371 persons (2007: 268). We seek to encourage employee involvement through regular Chief Executive briefings, Company newsletters and other formal and informal communication channels. A structured performance appraisal system is operated to align individual and team objectives and performance to Group goals and all staff are eligible to participate in Group incentive arrangements which reward both individual and Group performance. The Group’s share option schemes and the Aero Inventory plc Long Term Incentive Plan, details of which are given at note 22, create further alignment between employee interests and those of the Company and its shareholders.

Employment policies generally are developed to apply local legal, cultural and employment requirements to an overall Group approach of high standards of performance and ethical integrity.

Equal opportunities/disabled employees The Group operates equal opportunity policies which aim to treat individuals fairly and not to discriminate on the basis of gender, race, ethnic origin, disability or any other prohibited basis. These policies apply to recruitment and selection, training and development, and promotion.

Applications for employment by disabled people are given full consideration in the context of the aptitudes of the applicant and the requirements of the position concerned. If an existing employee becomes disabled, all reasonable efforts are made to allow their employment to continue through physical accommodations or training.




Authority to allot and issue sharesAt the forthcoming Annual General Meeting, the Company will seek authority for the allotment and issue of shares equal to 33.3% of the issued share capital at the date of the Annual General Meeting, and for disapplication of pre-emption rights on new shares equal to 10% of the issued share capital at the date of the Annual General Meeting. The maximum number of shares to which the authority would apply is 15,875,601, and the number of shares for which pre-emption rights might be disapplied is 4,762,680.

During the year 273,083 shares were issued to satisfy option exercises by employees. Details of changes in the Company’s share capital are given in note 23.

Going concernOn the basis of current financial projections and the facilities available, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Accounts.

AuditorsEach of the persons who is a director at the date of approval of this report confirms that:1) so far as the director is aware, there is no relevant audit

information of which the auditors are unaware; and2) the director has taken all steps that he ought to have taken as

a director in order to make himself aware of any relevant audit information and to ascertain that the Company’s auditors are aware of the information.

This confirmation is given and shall be interpreted in accordance with the provisions of s 234ZA of the Companies Act 1985.

Deloitte & Touche LLP have expressed their willingness to continue in office as auditors and a resolution proposing their reappointment will be submitted to the forthcoming Annual General Meeting.

By order of the Board of Directors

Martin Webster Secretary

22 September 2008

Registered Office30 Lancaster RoadNew BarnetHertfordshire EN4 8AP

Directors’ report continued




AIM listed companies are not required to comply with the disclosure requirements of the New Combined Code on Corporate Governance that was issued in 2006 by the Financial Reporting Council. However, the Board supports the principles contained in the New Combined Code and is committed to applying the principles set out therein where they are appropriate, given the Company’s size. The following provides information on how these principles have been applied but does not constitute full compliance with the New Combined Code.

The Board of DirectorsThere is a clear division of responsibility between the Chairman and the Chief Executive. The Board comprises ten directors of whom four are independent Non-executive Directors. None of the Non-executive Directors has day-to-day involvement in running the business. The board is responsible for overall strategy, approval of major projects and consideration of significant financing matters. The Board meets at regular scheduled intervals and follows a formal agenda: it can also meet to approve specific transactions.

The directors have access to the advice and services of the Company Secretary and may take, at the Company’s expense, independent professional advice.

Board committeesThe Board has delegated responsibility in specific matters to three committees, the Audit Committee, the Nominations Committee and the Remuneration Committee. During the year the Audit and Remuneration Committees consisted of the four Non-executive Directors, F Turner, H N P McCorkell, R W J Davis and L Heyworth (from September 2007). The Nominations Committee consists of the four non-executive directors, together with P R Lewin. H N P McCorkell is the Chairman of the Nominations Committee and the Audit Committee, F Turner is the Chairman of the Remuneration Committee.

The Audit Committee receives and reviews reports from management and the Company’s auditors relating to the annual and interim accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee has unrestricted access to the Company’s auditors.

The Nominations Committee nominates candidates for the approval of the Board and makes recommendations to the board regarding its composition and balance.

The Remuneration Committee is responsible for the remuneration of the executive directors. The policies adopted by the Committee together with details of the directors’ remuneration and service agreements are included in the Remuneration report on pages 26 to 29.

Internal controls and risk managementThe Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness. The Group’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve the Group’s business objectives and therefore provides reasonable, rather than absolute, assurance against material misstatement or loss. The Group operates a series of controls to meet its needs. The Board considers that there is no necessity at the present time to establish an independent internal audit function.

The process of monitoring and updating internal controls and procedures continued throughout the year and is supplemented by a risk management process. Existing processes and practices are continually reviewed to ensure that risks are effectively managed around a sound internal control structure. A fundamental element of the internal control structure involves the identification and documentation of significant risks, the likelihood of those risks occurring, their potential impact and the plans for managing and mitigating each of those risks. These assessments are reviewed by the Board. The plans are regularly discussed, updated and reviewed, and any matters arising from internal reviews or external audit are also considered.

Relations with shareholders The Board understands the need for communication with both institutional and private shareholders. In addition to individual presentations after publication of results, periodic meetings are held with fund managers, analysts and institutional investors. The Company’s Annual General Meeting provides a forum for all shareholders to attend and put questions to the Board. Results statements, announcements and presentations are posted on the Company’s website, www.aero-inventory.com.

Corporate governance




The Remuneration Committee The Remuneration Committee consists of F Turner, H N P McCorkell, R W J Davis and, since September 2007, L Heyworth. It is chaired by F Turner. The Committee has access to advice from the Resources Director who is responsible for Human Resources matters within the Company and from the Chief Executive. External advice is obtained when appropriate. The Committee usually meets on a bi-monthly basis.

Remuneration policyExecutive remuneration packages are designed to motivate, reward and retain directors of the calibre necessary to continue the development of the Company’s business. Each executive director’s salary and benefits are reviewed annually by the Remuneration Committee. In deciding appropriate levels of remuneration the Remuneration Committee has regard to rates of pay for similar jobs in comparable companies as well as internal factors such as performance. The Committee also takes account of the level of commitment, dedication and sustained performance improvement needed to deliver the potential which the Company’s development to date has created. The Remuneration Committee recognises the importance of providing both short- and long-term rewards to the executive directors in recognition of achieving performance related targets with the aim of enhancing shareholder value.

The remuneration and terms and conditions of appointment of the non-executive directors are set by the Board.

Service agreementsService agreements and letters of appointment have been entered into with all the directors of the Company. No notice period is longer than 12 months. The service agreements with the executive directors are in line with the guidance of the New Combined Code. Directors’ remunerationAn analysis of directors’ emoluments for the year ended 30 June 2008 is set out below.

Director Benefits Pension Salaries/Fees Bonus in Kind Contribution Total 2008 Total 2007 $000 $000 $000 $000 $000 $000

Executive directors:P R Lewin 837 594 86 105 1,622 1,124H C Bevan 416 149 5 55 625 713P M Docker 470 238 1 45 754 537M P Dodge 490 297 3 62 852 672C L Trupp 456 238 1 37 732 467M J Webster 304 186 3 38 531 148T C N Davey (resigned 17 December 2007) 146 15 2 – 163 –

3,119 1,717 101 342 5,279 3,661

Non-executive directors:H N P McCorkell 223 – 2 – 225 141R W J Davis 106 – – – 106 34L Heyworth 99 – – – 99 – F Turner 106 – – – 106 141

534 – 2 – 536 316

3,653 1,717 103 342 5,815 3,977

Note: Included in the 2007 salary/fees paid in respect of the services of F Turner are consultancy fees of $75,000: there were no such payments in 2007/08. During the period $178,000 was paid to one former director, T C N Davey, as compensation for loss of office and termination of employment (2007: nil).

A bonus provision of $2,000,000 (2007: $1,449,000) has been included in the accounts for the year ended 30 June 2008 and will be in relation to potential bonuses payable to executive directors and senior managers. This bonus has not been included in the above table as the final bonus amounts have yet to be determined.

Remuneration report




Directors’ bonus schemeAn annual bonus scheme is in place, based on a combination of stretching corporate and individual performance targets. The bonus potential available to executive directors is determined by the Remuneration Committee each year.

PensionsUK based executive directors are able to participate in a contributory defined contribution Group pension arrangement. For C L Trupp, who is resident in Australia, a pension arrangement has been established in accordance with Australian practice. Company contributions are provided as a percentage of the base salary excluding bonus and other benefits.

Long Term Incentive Plan With the approval of the Company’s shareholders, the Company has implemented a new Long Term Incentive Plan (the ‘Plan’).

The purpose of the Plan is to provide incentives to executive directors, selected senior management and other staff in the form of options to acquire newly issued ordinary shares at nominal value following the end of a three year period, subject to the achievement of the performance condition described below.

During the period covered by the Plan, the executive directors will not participate in any further share-based incentive arrangements operated by the Company.

The Company made a grant of options to executive directors under the Plan in December 2007, details are set out in the table in the next column.

As a condition of participation in the Plan, the executive directors are required to invest 50 per cent of all post-tax cash bonuses paid in calendar years 2008 and 2009 into Company shares, purchased at market value. These shares will be restricted such that the directors concerned cannot dispose of them during the lifetime of the Plan or the Plan options would lapse. These shares are not subject to forfeiture, and the restrictions on disposal will fall away at the end of the Plan period (or cessation of employment if earlier). It is expected that the Remuneration Committee will determine 2008 bonuses during September 2008 and that the investment of 50 per cent of the after tax amount for each executive would be made thereafter. Plan options will vest and become exercisable if the Company’s share price reaches 1,500 pence per share at the close of any business day as recorded by the London Stock Exchange during a period beginning on the date of announcement of the Company’s results for the financial year ending 30 June 2010 and ending seven days after the Company’s 2010 Annual General Meeting. No vesting will occur if the target is not met i.e., there will be no partial vesting of Plan options for performance below the target level, subject to certain provisions regarding a change of control.

If the target is achieved, Plan options will become immediately exercisable provided the executive is still employed in the Group. On payment of the exercise price, newly issued ordinary shares will be used to satisfy the Plan options, and exercise must take place within a period of three months after vesting (after which time they shall lapse). If the target is not achieved the Plan options will lapse immediately.

Once a Plan option has been exercised and shares acquired by executives, one half of those shares will be unrestricted and can immediately be sold or otherwise transferred. The other half will be subject to restrictions for a period of one year, during which time the executive will forfeit any right to them if they cease to be employed with the Group subject to certain Remuneration Committee discretions. Options LTIP Options held at Exercise granted 30 June price during year 2008 pence

H C Bevan 446,104 446,104 1.25P M Docker 557,630 557,630 1.25M P Dodge 557,630 557,630 1.25P R Lewin 1,115,260 1,115,260 1.25C L Trupp 446,104 446,104 1.25M J Webster 223,052 223,052 1.25

Share optionsThe Company’s policy on options is to ensure that, through successive awards of share options, executive directors have a meaningful exposure to the equity of the Company in order to align their interests with those of shareholders.

Previously directors have been considered for awards of share options under the Approved and Unapproved Share Option Schemes from time to time as considered appropriate by the Remuneration Committee. Other than awards made under the Executive Option Plan of the Unapproved Scheme, as described below, awards have not been made subject to performance conditions. No option awards are to be made to executive directors during the Long Term Incentive Plan performance period described above.

In 2006 and 2007, options were granted to executive directors under the terms of the Executive Option Plan, a performance based executive share arrangement within the Aero Inventory plc Unapproved Share Option Scheme. These options are exercisable between three and ten years from the date of the grant subject to the achievement of performance conditions. In respect of the award made in 2006, the full award will vest if the Company achieves earnings per share (as defined in the rules of the Plan) of 65 pence per share for the financial year ending on 30 June 2008. In the event that earnings per share are greater than 50 pence but less than 65 pence, partial exercise may be made on a stepped scale. In respect of the award made in 2007, the full award will vest if the Company achieves earnings per share (as defined in the rules of the Plan) of 80 pence per share for the financial year ending on 30 June 2009. In the event that earnings per share are greater than 60 pence but less than 80 pence, partial exercise may be made on a stepped scale.

UK based executive directors are also eligible to participate in the Aero Inventory plc Savings-Related Share Option Scheme which is open to all permanent UK employees.




Details of options held by executive directors under the Aero Inventory plc Enterprise Management Incentive Scheme (‘EMI’), the Aero Inventory plc Share Option Scheme (‘SOS’), the Aero Inventory plc Unapproved Share Option Scheme (‘USOS’), the Executive Option Plan within the Aero Inventory plc Unapproved Share Option Scheme (‘EOP’) and the Aero Inventory plc Savings-Related Share Option Scheme (‘SRSOS’) are set out below. Options Options held as at Options Options Options held at Exercise 1 July granted lapsed exercised 30 June price Date from 2007 during year during year during year 2008 pence which exercisable Expiry date

H C BevanEMI 32,123 – – – 32,123 390 9 April 2005 8 April 2012USOS 29,133 – – – 29,133 343 29 October 2005 28 October 2013USOS 34,799 – – – 34,799 359 27 November 2005 26 November 2012USOS 160,358 – – – 160,358 249 22 October 2007 21 October 2014SRSOS 2,486 – – – 2,486 376 1 May 2009 31 October 2009EOP 34,125 – – – 34,125 410 1 May 2009 30 April 2016USOS 21,289 – – – 21,829 347 16 November 2009 15 November 2016EOP 54,794 – – – 54,794 370 23 April 2010 22 April 2017

P M DockerUSOS 23,862 – – – 23,862 293 1 April 2007 31 March 2014SOS 10,226 – – – 10,226 293 29 April 2007 28 April 2014USOS 128,286 – – – 128,286 249 22 October 2007 21 October 2014USOS 5,507 – – – 5,507 363 4 November 2008 3 November 2015EOP 26,812 – – – 26,812 410 1 May 2009 30 April 2016USOS 57,786 – – – 57,786 347 16 November 2009 15 November 2016EOP 43,835 – – – 43,835 370 23 April 2010 22 April 2017SRSOS 4,910 – – – 4,910 333 30 April 2010 30 October 2010

M P DodgeSOS 12,026 – – – 12,026 249 22 October 2007 21 October 2014USOS 148,331 – – – 148,331 249 22 October 2007 21 October 2014USOS 44,054 – – – 44,054 363 4 November 2008 3 November 2015EOP 34,125 – – – 34,125 410 1 May 2009 30 April 2016USOS 69,165 – – – 69,165 347 16 November 2009 15 November 2016EOP 54,794 – – – 54,794 370 23 April 2010 22 April 2017SRSOS 4,910 – – – 4,910 333 30 April 2010 30 October 2010

P R LewinSOS 12,026 – – – 12,026 249 22 October 2007 21 October 2014USOS 204,456 – – – 204,456 249 22 October 2007 21 October 2014USOS 82,602 – – – 82,602 363 4 November 2008 3 November 2015EOP 51,188 – – – 51,188 410 1 May 2009 30 April 2016USOS 103,747 – – – 103,747 347 16 November 2009 15 November 2016EOP 82,191 – – – 82,191 370 23 April 2010 22 April 2017SRSOS 4,910 – – – 4,910 333 30 April 2010 30 October 2010

C L TruppEMI 6,264 – – – 6,264 287 30 April 2006 29 April 2013EMI 13,186 – – – 13,186 379 10 October 2006 9 October 2013SOS 7,516 – – – 7,516 305 29 April 2007 28 April 2014USOS 106,721 – – – 106,721 275 15 April 2008 14 April 2015SOS 2,534 – – – 2,534 275 15 April 2008 14 April 2015USOS 2,493 – – – 2,493 363 4 November 2008 3 November 2015EOP 24,375 – – – 24,375 410 1 May 2009 30 April 2016USOS 69,178 – – – 69,178 347 16 November 2009 15 November 2016EOP 43,835 – – – 43,835 370 23 April 2010 22 April 2017

Remuneration report continued




Options Options held as at Options Options Options held at Exercise 1 July granted lapsed exercised 30 June price Date from 2007 during year during year during year 2008 pence which exercisable Expiry date

M J WebsterSOS 12,026 – – – 12,026 249 22 October 2007 21 October 2014USOS 28,062 – – 28,062 – 249 22 October 2007 21 October 2014USOS 20,651 – – – 20,651 363 14 October 2008 13 October 2015USOS 5,507 – – – 5,507 363 4 November 2008 3 November 2015SRSOS 4,281 – – – 4,281 376 1 May 2011 31 October 2011EOP 18,281 – – – 18,281 410 1 May 2009 30 April 2016USOS 93,660 – – – 93,660 347 16 November 2009 15 November 2016EOP 34,246 – – – 34,246 370 23 April 2010 22 April 2017

Apart from options granted under the terms of the Aero Inventory plc Savings-Related Share Option Scheme where there is a limited exercise period after the maturity of the related savings contract, options are exercisable between three and ten years from the date of the grant.

Signed by order of the Board of Directors

Martin WebsterResources Director

22 September 2008




The directors are responsible for preparing the Annual Report, Directors’ Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors are required by the IAS Regulation to prepare the Group financial statements under International Financial Reporting Standards (IFRSs) as adopted by the European Union and have also elected to prepare the Parent Company financial statements in accordance with IFRSs as adopted by the European Union. The financial statements are also required by law to be properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. However, directors are also required to:

properly select and apply accounting policies;•present information, including accounting policies, in a manner •that provides relevant, reliable, comparable and understandable information; and provide additional disclosures when compliance with the •specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also 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 corporate and financial information included on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.

Statement of directors’ responsibilities

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Our Performance Governance Financials

We have audited the Group and Parent Company financial statements (the ‘financial statements’) of Aero Inventory plc for the year ended 30 June 2008 which comprise the Consolidated Income Statement, the Consolidated Statement of Recognised Income and Expense, the Consolidated and Company Balance Sheets, the Consolidated Cash Flow Statement, and the related notes 1 to 28. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. 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 auditors’ 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.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements. The information given in the Directors’ Report includes that specific information presented in the Chairman’s and Chief Executive’s statements that are cross referred from the Review of Business section of the Directors’ Report.

In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Directors’ Report, the Chairman’s Statement and the Chief Executive’s Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any further information outside the Annual Report.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion:

the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 30 June 2008 and of its profit for the year then ended;the Parent Company’s financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the Parent Company’s affairs as at 30 June 2008;the financial statements have been properly prepared in accordance with the Companies Act 1985; andthe information given in the Directors’ Report is consistent with the financial statements.

Deloitte & Touche LLPChartered Accountants and Registered Auditors

Reading, United Kingdom22 September 2008

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Independent auditors’ report to the members of Aero Inventory plc




2008 2007 Notes $’millions $’millions

Revenue 3 440.0 247.0Cost of revenue (278.2) (164.2)Net operating expenses (68.5) (29.9)

Operating profit 5 93.3 52.9Investment revenue 3, 8 – 0.8Finance costs 9 (20.2) (8.1)

Profit before tax 73.1 45.6Tax 10 (21.5) (14.5)

Profit for the year 51.6 31.1

Earnings per share (expressed in cents per share)Basic 12 108.7c 65.9cDiluted 12 102.0c 65.3c

All amounts are derived from continuing operations.

Consolidated income statementfor the year ending 30 June 2008




2008 2007 Note $’millions $’millions

Taxation on share based payments 24 1.4 –

Net income recognised directly in equity 1.4 –Profit for the year 51.6 31.1

Total recognised income for the year 53.0 31.1

Consolidated statement of recognised income and expensefor the year ending 30 June 2008





Non-current assetsIntangible assets 13 52.8 37.5Property, plant and equipment 14 3.9 2.5

56.7 40.0

Current assetsInventories 15 690.1 390.9Trade and other receivables 16 96.8 51.3Deferred taxation 10 2.8 0.1Cash and cash equivalents 17 1.2 0.4

790.9 442.7

Total assets 847.6 482.7

Current liabilitiesTrade and other payables 18 141.9 101.0Corporation tax payable 10 19.3 16.9

161.2 117.9

Non-current liabilitiesBorrowings 19 392.2 111.0

Total liabilities 553.4 228.9

Net assets 294.2 253.8

EquityShare capital 23 1.0 1.0Share premium account 24 212.1 210.3Share based payment reserve 24 3.3 2.0Retained earnings 24 77.8 40.5

Total equity 25 294.2 253.8

The accounts were approved by the Board on 22 September 2008 and signed on its behalf:

Rupert Lewin Chief Executive

Hugh BevanFinance Director

Consolidated balance sheetAs at 30 June 2008




Consolidated cash flow statementfor the year ending 30 June 2008


Operating activitiesProfit for the year 51.6 31.1Adjustments to reconcile profit for the period to net cash inflow from operating activities:Net finance costs 18.3 7.3Income tax expense 21.5 14.5Depreciation of property, plant and equipment 1.9 0.3Amortisation of intangible assets 10.2 2.5Cost of share based payments 1.3 0.8Increase in inventories (300.5) (216.4)Increase in trade and other receivables (45.5) (4.9)Increase in trade and other payables 36.5 45.5Increase in provisions 1.3 1.4

Cash absorbed by operations (203.4) (117.9)Income taxes paid (20.0) (3.3)

Net cash outflows from operating activities (223.4) (121.2)

Investing activitiesPurchase of property, plant and equipment (3.3) (2.1)Purchase of intangible assets (25.8) (38.5)

Net cash flows used in investing activities (29.1) (40.6)

Financing activitiesNet interest paid (14.0) (5.7)Proceeds on issue of ordinary share – net of expenses 1.8 1.0Dividends paid (15.7) (10.2)Repayment of borrowings 19 (111.0) –New bank loans raised 19 410.9 112.2Loan costs 19 (18.7) (1.2)

Net cash flows from financing activities 253.3 96.1

Net increase/(decrease) in cash and cash equivalents 0.8 (65.7)Cash and cash equivalents at beginning of year 17 0.4 66.1

Cash and cash equivalents at end of year 17 1.2 0.4




Notes to the consolidated financial statementsat 30 June 2008

1. Authorisation of financial statements and statement of compliance with IFRSsAero Inventory plc is a public limited company incorporated under the Companies Act 1985 and domiciled in the United Kingdom. The Company’s ordinary shares are traded on the Alternative Investment Market (AIM).

The principal accounting policies adopted by the Group are set out in note 2.

2. Significant accounting policiesa) Basis of accountingThe financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 June 2008 and applied in accordance with the Companies Act 1985. The disclosures required by IFRS 1 concerning the transition from United Kingdom Generally Accepted Accounting Practice (UK GAAP) to IFRSs are given in note 27.

The Group financial statements are presented in United States (US) Dollars and all values are rounded to the nearest 0.1 million ($’million) except when otherwise indicated.

The Company financial statements are presented in Sterling and values are rounded to the nearest 0.1 thousand (£’000).

The financial statements have been prepared on the historical cost basis, except for the valuation of financial instruments. The principal accounting policies adopted are set out below.

b) Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies of the entity concerned, generally accompanying a shareholding of more than one half of the voting rights.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

c) New standards and interpretationsThe International Accounting Standards Board (‘IASB’) and International Financial Reporting Interpretations Committee (‘IFRIC’) have issued the following standards and interpretations with effective dates after the date of these financial statements that have not yet been adopted by the Company. Effective date

IASBIAS 23 Amendment – Borrowing Costs 1 January 2009*IFRS 2 Amendment – Share-based Payment 1 January 2009*IAS 1 Comprehensive revision – Presentation of Financial Statements 1 January 2009*IAS 32 Amendment – Financial Instruments: Presentation 1 January 2009*IFRS 8 Operating Segments 1 January 2009IFRS 3 Comprehensive revision – Business Combinations 1 July 2009*IAS 27 Amendment – Consolidated and Separate Financial Statements 1 July 2009*IAS 28 Amendment – Investments in Associates 1 July 2009*IAS 31 Amendment – Interests in Joint Ventures 1 July 2009*

IFRICIFRIC 12 Service Concession Arrangements 1 January 2008IFRIC 13 Customer Loyalty Programmes 1 July 2008*IFRIC 14 IAS19 – The limit on a defined benefit asset, minimum funding requirements and their interaction 1 January 2008

* not yet endorsed by the EU.

Whilst the revised IAS 1 will have no impact on the measurement of the Company’s results or net assets it is likely to result in certain changes in the presentation of the Company’s financial statements following adoption. The directors do not anticipate that the adoption of the above standards will have a material impact on the consolidated financial statements of the Group in the period of initial application.

New standards early adopted Effective date

IFRS 8 Operating Segments 1 January 2009

IFRS 8 requires disclosure based on information presented to the Board. Whilst this does not change the business segments about which information is given, the secondary segment information has been replaced by country specific analysis of revenues and non-current assets.




2. Significant accounting policies continuedd) Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other revenue-related taxes.

Revenue for goods is recognised when title has passed to the customer.

The billings of pre-contract consumption are not recognised as revenue, as the Group does not bear the risks and rewards of the inventory until contract signing.

e) LeasingLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

f) Foreign currenciesThe individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in the US Dollar, which is the functional currency of the principal trading entity and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

g) TaxationThe tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the income statement because it excludes items of income or 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 substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

The Group intends to settle its current tax assets and liabilities on a net basis.




Notes to the consolidated financial statements continuedat 30 June 2008

2. Significant accounting policies continuedh) Property, plant and equipmentFixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets, less estimated residual value, other than land and properties under construction, over their estimated useful lives, using the straight-line method, on the following bases:

Leasehold improvements over the unexpired term of the leaseFixtures and equipment 12.5%–331/3%Computer equipment 331/3%Motor vehicles 30%

i) Intangible assetsDatabase rightsDatabase rights are included at cost and amortised on a straight-line basis over a period of ten years which is their estimated useful economic life. Provision is made for any impairment.

Software assetsInternal staffing costs relating to the development of IT systems are capitalised and amortised over a period of three years which is their estimated useful economic life. Provision is made for any impairment.

j) Impairment of tangible and intangible assetsAt each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

k) InventoriesInventories are valued at the lower of cost (including appropriate overheads) and net realisable value after making due allowance for obsolete and slow-moving inventory. The Company regards inventory as slow moving where it is unlikely to be sold within the periods of its various long-term inventory management contracts.

Where the Group purchases bulk stock at the commencement of a new contract, the price paid is determined based on physical inventory extant at a date which is typically several months before contract signing date. This allows the Group to evaluate the material in advance of purchase. The cost of the bulk purchase is allocated across all lines based on selling price. The consumption of any of this inventory by the customer in advance of contract signing is billed to the customer at contract prices. The billings of pre-contract consumption are not recognised as revenue, as the Group does not bear the risks and rewards of the inventory until contract signing, but result in a margin accruing to the Group. This margin is deducted from the cost of inventory at signing date on a line by line basis. Similarly any purchases of inventory by the customer after the bulk stock is determined are paid for by the Group and recorded at cost on a line by line basis. Where, on a line by line basis, accrued margin on consumption exceeds cost to the Group the resulting credit is recorded as a reduction in cost of revenue over an appropriate period.




2. Significant accounting policies continuedl) Financial instrumentsFinancial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Loans and receivablesTrade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equityFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.

m) Finance costsFinance costs are amortised over the term of the instrument at a constant rate on the carrying amount.

n) ProvisionsProvisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

o) Share-based paymentsThe Group has applied the requirements of IFRS 2, Share-based Payment. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 July 2006.

The Group issues equity-settled and cash-settled share-based payments to certain employees.

Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the group’s estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured by use of an appropriate valuation model such as the Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

p) Critical judgements and key sources of estimation uncertaintyThe preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

InventoryPre-contract consumption billed to the customer results in a margin accruing to the Group on contract signing dates. Management judgement is required in determining the appropriate period over which this margin is released.

The Company regards inventory as slow moving where it is unlikely to be sold within the periods of its various long-term inventory management contracts.





2. Significant accounting policies continuedIntangiblesDatabase rights are acquired with inventories on new contracts. Management judgement is required in determining the value to be assigned to those rights and their useful lives.

Share-based paymentsThe Group measure the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Judgement is required in determining the most appropriate valuation model for a grant of equity instruments, depending on the terms and conditions of the grant. Management are also required to use judgement in determining the most appropriate inputs to the valuation model including expected life of the option, volatility and dividend yield. The assumptions and models used are disclosed in note 22.

3. RevenueRevenue recognised in the income statement is analysed as follows: 2008 2007 $’millions $’millions

Sale of goods 440.0 247.0Finance revenue – 0.8

440.0 247.8

4. Business segmentsAll turnover arose from the activity of procurement and inventory management for the aerospace industry.

An analysis of turnover by type of sale is as follows: 2008 2007 $’millions $’millions

Revenue to contracted customers under long-term supply agreements 434.3 241.0Other revenue 5.7 6.0

440.0 247.0

Geographical analysis is presented below: 2008 2007 $’millions $’millions

TurnoverUK, rest of Europe and Middle East 78.1 73.5America 143.4 –Asia Pacific 218.5 173.5

440.0 247.0

2008 2007 $’millions $’millions

AssetsUK, rest of Europe and Middle East 258.6 206.7America 231.4 7.3Asia Pacific 357.6 268.7

847.6 482.7


LiabilitiesUK, rest of Europe and Middle East 480.4 197.0America 23.2 9.5Asia Pacific 49.8 22.4

553.4 228.9




5. Operating profitThe following items have been charged/(credited) in arriving at operating profit: 2008 2007 $’millions $’millions

Staff costs (see note 7) 32.9 18.2Depreciation of property, plant and equipment 1.9 0.3Amortisation of intangible assets 10.2 2.5Operating lease rentals (see note 20):– plant and machinery 0.1 0.2– other 1.0 0.9Net foreign currency differences – (1.0)

6. Auditors’ remunerationThe Group paid the following amounts to its auditors, Deloitte & Touche LLP, in respect of the audit of the financial statements and for other services provided to the Group. 2008 2007 $’millions $’millions

Audit fees 0.4 0.3

Other fees to auditors:Other services pursuant to legislation 0.2 0.1Other services relating to taxation 0.2 0.1

0.8 0.5

Fees payable to the Company’s auditors for the audit of the Company’s accounts were $80,000 (2007: $70,000). Fees payable to the Company’s auditors for the audit of the Company’s subsidiaries, pursuant to legislation, were $280,000 (2007: $210,000).

Non-audit fees consist of tax services (2008: $180,000, 2007: $110,000) and other services only the Company’s auditors can be reasonably expected to perform (2008: $172,000, 2007: $98,000).

7. Staff costs and directors’ emolumentsa) Staff costs, including executive directors’ remuneration, were as follows: 2008 2007 $’millions $’millions

Wages and salaries 28.6 15.5Pension costs 1.1 0.5Social security costs 1.9 1.3Share based payment costs (note 22) 1.3 0.9

32.9 18.2

The average monthly number of employees, including directors, during the year was as follows: 2008 2007 No. No.

Operations and administration 297 184

297 184

b) Directors’ emoluments were as follows: 2008 2007 $’millions $’millions

Remuneration 5.8 3.9

The highest paid director received:Salaries/fees 1.4 0.9Pension 0.1 0.1Benefits in kind 0.1 0.1

1.6 1.1





8. Investment revenue 2008 2007 $’millions $’millions

Bank interest receivable – 0.8

9. Finance costs 2008 2007 $’millions $’millions

Interest on bank facilities 18.3 7.7Amortisation of loan costs 1.9 0.4

Total interest payable 20.2 8.1

10. Taxa) Tax on profit on ordinary activities 2008 2007 $’millions $’millions

Current year taxation:UK Corporation Tax 22.8 14.2Adjustment in respect of prior year (0.2) 0.7Foreign taxation 0.2 –

22.8 14.9

Deferred tax:Origination and reversal of temporary differences (1.3) (0.4)

Total deferred tax (note 10(c)) (1.3) (0.4)

Tax charge in the income statement 21.5 14.5

b) Reconciliation of the total tax chargeThe tax assessed for the year is lower than the standard rate of UK Corporation Tax of 29.5 per cent (2007: 30 per cent). The differences are explained below: 2008 2007 $’millions $’millions

Profit before tax 73.1 45.6

Profit on ordinary items activities multiplied by standard rate of Corporation Tax in the UK of 29.5 per cent (2007: 30 per cent) 21.6 13.7Tax effects of:Expenses not deductible for tax purposes 0.1 0.4Adjustment in respect of prior years (0.2) 0.4

Total tax expense 21.5 14.5

The UK Corporation Tax rate decreased from 30 per cent to 28 per cent from 1 April 2008 resulting in an average standard rate of 29.5 per cent for the year ending 30 June 2008.

c) Deferred taxDeferred tax included in the consolidated balance sheet is as follows: Other Accelerated Share short-term capital based timing allowances payments difference Total $’millions $’millions $’millions $’millions

At 1 July 2006 0.4 (0.2) (0.5) (0.3)Credit/(charge) to income statement for the year 1.1 0.3 (1.0) 0.4

At 1 July 2007 1.5 0.1 (1.5) 0.1(Charge)/credit to income statement for the year (1.6) 0.4 2.5 1.3Credit to equity for the year – 1.4 – 1.4

At 30 June 2008 (0.1) 1.9 1.0 2.8


Disclosed on the consolidated balance sheetDeferred tax asset 2.9 1.6Deferred tax liability (0.1) (1.5)

2.8 0.1




11. Dividends paid and proposed 2008 2007 $’millions $’millions

Amounts recognised as distributions to equity holders in the year:Final dividend for the year ended 30 June 2007 of 10.5 pence per share, equivalent to 21.42 cents per share (2006: 6.7 pence, equivalent to 13.45 cents per share) 10.0 5.8Interim dividend for the year ended 30 June 2008 of 6 pence per share, equivalent to 11.27 cents per share (2007: 4.5 pence, equivalent to 8.82 cents per share) 5.7 4.7

15.7 10.5

Proposed final dividend for the year ended 30 June 2008 of 12 pence per share, equivalent to 23.78 cents per share at the period exchange rate (2007: 10.5 pence, equivalent to 20.3 cents per share) 11.3 9.6

The proposed dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

12. Earnings per shareThe calculation of the basic and diluted earnings per share is based on the following data:

Earnings 2008 2007 $’millions $’millions

Earnings for the purposes of basic and diluted earnings per share 51.6 31.1

Number of shares 2008 2007 Number Number

Weighted average number of ordinary shares for the purposes of basic earnings per share 47,463,677 47,205,097

Effect of dilutive potential ordinary shares:Share options 3,139,320 417,727

Weighted average number of ordinary shares for the purposes of diluted earnings per share 50,602,997 47,622,824

2008 2007 Cents Cents

Basic earnings per share 108.7 65.9Effect of dilutive potential ordinary shares (6.7) (0.6)

Diluted earnings per share 102.0 65.3





13. Intangible assets Database Software rights Total $’millions $’millions $’millions

Cost:1 July 2007 14.8 26.4 41.2Additions 10.8 15.0 25.8Disposals (0.7) – (0.7)

At 30 June 2008 24.9 41.4 66.3

Amortisation:1 July 2007 1.7 2.0 3.7Charge for the year 6.6 3.6 10.2Disposals (0.4) – (0.4)

At 30 June 2008 7.9 5.6 13.5

Net book value:At 30 June 2008 17.0 35.8 52.8

At 30 June 2007 13.1 24.4 37.5

The amortisation period for software development costs incurred by the Group is three years.

Database rights are amortised on a straight-line basis over a period of ten years.

14. Property, plant and equipment Leasehold Fixtures & Motor IT improvements equipment vehicles systems Total $’millions $’millions $’millions $’millions $’millions

Cost:At 1 July 2007 0.5 2.7 0.2 1.9 5.3Additions 0.7 0.7 – 1.9 3.3

At 30 June 2008 1.2 3.4 0.2 3.8 8.6

Depreciation:At 1 July 2007 0.2 1.6 0.2 0.8 2.8Charge for the year 0.2 0.4 – 1.3 1.9

At 30 June 2008 0.4 2.0 0.2 2.1 4.7

Net book value:At 30 June 2008 0.8 1.4 – 1.7 3.9

At 30 June 2007 0.3 1.1 – 1.1 2.5




15. Inventories 2008 2007 $’millions $’millions

Goods for resale 690.1 390.9

690.1 390.9

Inventories with a carrying amount of $573.5 million (2007: $nil) have been pledged as security for the Group’s loan facilities.

16. Trade and other receivables 2008 2007 $’millions $’millions

Trade receivables 11.6 28.1Accrued revenue 78.6 13.6Prepayments 6.6 5.9Other debtors – 3.7

96.8 51.3

Trade receivables are non-interest bearing and are generally on 30–90 days’ terms and are shown net of a provision for impairment. The average debtors days for the period is ten (2007: 40). As at 30 June 2008, trade receivables at nominal value of $nil (2007: $1.7 million) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows: 2008 2007 $’millions $’millions

At 1 July 1.7 1.4Charge for the year – 0.3Unused amounts released (1.7) –

At 30 June – 1.7

As at 30 June, the analysis of trade receivables that were past due but not impaired is as follows: Past due but not impaired

Neither past Total nor impaired <30 days 30-60 days >60 days $’millions $’millions $’millions $’millions $’millions

2007 28.1 22.1 1.7 0.4 3.92008 11.6 6.6 2.8 1.0 1.2

The credit quality of trade receivables that are neither past due nor impaired is assessed by reference to external credit ratings, where available, or historical information relating to counterparty default rates.

The directors consider that the carrying amounts of trade and other receivables approximate their fair value.

17. Cash and cash equivalents 2008 2007 $’millions $’millions

Cash at bank 1.2 0.4

Cash at bank earns interest at floating rates based on bank deposit rates. The book value of cash and cash equivalents approximates their fair value.





18. Trade and other payables 2008 2007 $’millions $’millions

Trade payables 53.0 90.4Other taxation and social security 1.5 0.3Other creditors 0.3 0.4Accruals and deferred income 79.9 7.0Accrued interest payable 7.2 2.9

141.9 101.0

Trade and other payables are non-interest bearing and it is the Company’s policy to pay within the stated terms which typically vary from 30–45 days. Due to their short maturities, the book value of trade payables approximates to their fair value.

19. Borrowings and net debt 2008 2007 $’millions $’millions

CashBank 1.2 0.4

BorrowingsBank loans 410.9 112.2Loan costs (18.7) (1.2)

392.2 111.0

Net debt 391.0 110.6

At 30 June 2008, the Group had available $89.1 million (2007: $57,000) of undrawn committed borrowing facilities.

The bank loan is secured by a fixed and floating charge which is secured by the trade receivables and inventory of the Group. The book value of financial liabilities approximates their fair value.

In February 2008 a new five year syndicated asset based lending facility was signed and increased the size of our available banking facility from $356 million to $425 million. The facility was increased on 23 June 2008 to $500 million. 2008 2007 $’millions $’millions

The borrowings are repayable as follows: On demand or within one year – – In the second year – – In the third to fifth years inclusive 410.9 112.2

410.9 112.2Less: Amount due for settlement within 12 months (shown under current liabilities) – –

Amounts due for settlement after 12 months 410.9 112.2

The interest rate charged on the facility is US LIBOR + 3 per cent. The average interest rate charged in the period was 5.78 per cent (2007: 7.05 per cent).




20. Operating lease commitmentsThe Group has entered into commercial leases on certain properties, motor vehicles and items of machinery. These leases have an average duration of between three and ten years. Only the property lease agreements contain an option for renewal, with such options being exercisable three months before the expiry of the lease term at rentals based on market prices at the time of exercise. There are no restrictions placed upon the lessee by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases are as follows: 2008 2007 $’millions $’millions

Within one year 1.7 0.9Two to five years 2.7 1.6More than five years – –

4.4 2.5

During the period, $1.1 million was recognised as a lease expense (2007: $1.1 million).

21. Financial instrumentsThe Group’s financial instruments as at 30 June 2008 comprise cash, bank overdraft and bank loans at the rate of 3 per cent above the United States LIBOR. The main purpose of these financial instruments is the funding of the Group’s activities. It has been the Group’s policy throughout the period under review that no trading in financial instruments shall be undertaken.

Liquidity riskGroup policy is to maintain available credit facilities to meet its anticipated requirements over at least a two to three year period. The facility, which is available until February 2013, may be drawn in advances which revolve over periods of 1, 3, 6, 9 or 12 months. The Group has a revolving credit facility as at 30 June 2008 of $500 million (2007: $170.68 million).

Foreign currency riskThe Group undertakes certain transactions such as a small proportion of borrowings and dividend payment denominated in Sterling rather than US Dollars, which is its functional currency. The Group has not hedged these transactions and therefore is exposed to a degree of risk in respect of changes in the Sterling/Dollar exchange rate.

The following table demonstrates the sensitivity to a reasonably possible change in Sterling against the US Dollar exchange rate with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets, liabilities and forward currency contracts). Increase/ Effect decrease on profit in Sterling vs before tax US Dollar $’millions

2008Sterling +10% – –10% –

2007Sterling +10% 5.5 –10% (5.5)





21. Financial Instruments continuedInterest rate riskThe following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact on floating rate borrowings). There is no impact on the Group’s equity.

The sensitivity analysis includes all non-derivative floating rate financial instruments. Effect Increase/ on profit decrease in before tax basis points $’millions

2008Borrowings +50 (0.6) –50 0.6

2007Borrowings +50 0.6 –50 (0.6)

Credit riskThere are no significant concentrations of credit risk within the Group unless otherwise disclosed. The maximum credit risk exposure relating to financial assets is represented by carrying value as at the balance sheet date.

The Group has established procedures to minimise the risk of default by trade debtors including detailed credit checks undertaken before a customer is accepted. Historically, these procedures have proved effective in minimising the level of impaired and past due debtors.

22. Share-based paymentThe Company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions (share options), whereby employees render services in exchange for rights over shares (‘equity-settled transactions’). The fair value of the employee services rendered is determined by reference to the fair value of the options granted.

All share options are valued using an appropriate option-pricing model such as Black-Scholes. This fair value is charged to the profit and loss account over the vesting period of the share-based payment scheme, with the corresponding increase in equity. The value of the charge is adjusted in the profit and loss account over the remainder of the vesting period to reflect expected and actual levels of options vesting, with the corresponding adjustment made in equity.

The Group has recognised a total expense of $1.3 million relating to equity settled share option scheme transactions in the year ended 30 June 2008 ($0.9 million in the year ended to 30 June 2007).

Details of the share options outstanding during the year are as follows: 2008 2008 2007 2007 Weighted Weighted Number of average Number of average share exercise share exercise options price (£) options price (£)

Outstanding at beginning of period 3,269,148 3.31 2,092,928 3.13Granted during the year 7,156,831 2.29 1,443,554 3.56Lapsed during the year (219,184) 4.77 (99,094) 3.49Exercised during the year (273,083) 3.33 (168,240) 2.99

Outstanding at the end of the year 9,933,172 2.63 3,269,148 3.31

Exercisable at the end of the year 1,076,630 2.69 1,229,864 2.73

The weighted average share price at the date of exercise for share options during the period was £3.33 (2007: £2.99). The options outstanding at 30 June 2008 had a weighted average exercise price of £2.63 (2007: £3.31), and a weighted average remaining contractual life of 3.3 years (2007: 2.2 years). In 2008, options were granted on 19 October 2007, 15 November 2007, 19 December 2007, 28 April 2008, 7 May 2008 and 9 May 2008 (2007: 16 November 2006, 23 April 2007 and 30 April 2007). The aggregate of the estimated fair value of the options granted on those dates is £3.6 million (2007: £5.1 million).




22. Share based payment continuedThe inputs into the Black-Scholes option pricing model are as follows: 2008 2007

Weighted average share price £5.70 £3.31Weighted average exercise price £2.74 £2.99Expected volatility 25% 25%Expected life 5 years 5 yearsRisk-free rate 4.6% 4.6%Dividend yield 2.9% 2.9%

Expected volatility was determined by an estimation based on similar AIM listed companies. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Share options have been granted and are still outstanding under the Aero Inventory plc Share Option Scheme, the Aero Inventory plc Unapproved Share Option Scheme, Aero Inventory plc Enterprise Management Incentive Scheme and the Aero Inventory plc Savings-Related Share Option Scheme as follows:

Aero Inventory plc Share Option SchemeThis approved share incentive scheme was introduced when the Company’s shares were listed on the Alternative Investment Market in 2000. At 30 June 2008, the following options had been granted and were still outstanding under this scheme:- Number Exercise of share price Date of grant options (pence)

24 September 2001 7,516 148.91 April 2004 20,452 293.029 April 2004 10,020 305.022 October 2004 40,716 249.015 April 2005 2,534 275.029 April 2005 28,422 283.014 October 2005 8,259 363.028 April 2006 74,250 414.016 November 2006 73,355 347.023 April 2007 83,296 370.019 October 2007 10,301 565.028 April 2008 14,123 590.0

Total 373,244

These options are exercisable between three and ten years from the date of the grant. During the year ended 30 June 2008 32,487 options lapsed (2007: 68,426).





22. Share based payment continuedAero Inventory plc Unapproved Share Option SchemeAt 30 June 2008, the following options had been granted and were still outstanding under this scheme: Number Exercise of share price Date of grant options (pence)

27 November 2002 34,799 359.010 October 2003 29,133 379.029 October 2003 3,760 343.01 April 2004 47,724 293.029 April 2004 1,252 305.022 October 2004 641,431 249.015 April 2005 106,721 275.029 April 2005 1,252 283.014 October 2005 97,608 363.04 November 2005 134,656 363.028 April 2006 21,057 414.016 November 2006 679,064 347.023 April 2007 90,449 370.019 October 2007 192,642 565.028 April 2007 51,711 590.0

Total 2,133,259

These options are exercisable between three and ten years from the date of the grant. During the year 166,515 (2007: 16,578) options lapsed.

Aero Inventory plc Unapproved Share Option Scheme – Executive Option PlanThis unapproved Share Option Scheme was approved by shareholders in 2005 and the first grant of shares was made in May 2006. At 30 June 2008, the following options had been granted and were still outstanding under this scheme: Number Exercise of share price Date of grant options (pence)

1 May 2006 188,906 410.323 April 2007 313,695 370.0

Total 502,601

These options are exercisable between three and ten years from the date of the grant subject to the achievement of targets.

The target for the award made on 1 May 2006 is to achieve earnings (as defined in the rules of the Plan) of 65 pence per share for the financial year ending on 30 June 2008. In the event that earnings per share are greater than 50 pence but less than 65 pence, partial vesting will occur on a stepped scale.

The target for the award made on 23 April 2007 is to achieve earnings (as defined in the rules of the Plan) of 80 pence per share for the financial year ending on 30 June 2009. In the event that earnings per share are greater than 60 pence but less than 80 pence, partial vesting will occur on a stepped scale.




22. Share based payment continuedAero Inventory plc Enterprise Management Incentive SchemeAt 30 June 2008, the following options had been granted and were still outstanding under this scheme. Following the rights issue carried out by the Company in March 2006, on 16 November 2006 the terms of the options were varied as required by the Rules of Aero Inventory plc Share Option Scheme using the methodology prescribed by HM Revenue and Customs. No further grants will be made under this Scheme.

Number Exercise of share price Date of grant options (pence)

9 April 2002 4,258 322.026 April 2002 32,123 311.030 April 2003 23,801 287.010 October 2003 40,716 379.0

Total 100,898

These options are exercisable between three and ten years from the date of the grant. During the year nil (2007: 12,997) options lapsed.

Aero Inventory plc Savings-Related Share Option SchemeThis approved Savings-Related Share Option Scheme was approved by shareholders in 2005 and the first grant of shares was made in April 2006. At 30 June 2008, the following options had been granted and were still outstanding under this scheme: Number Exercise of share price Date of grant options (pence)

28 April 2006 8,307 376.030 April 2007 46,073 333.59 May 2008 29,473 513.0

Total 83,853

These options are exercisable upon the maturity of three or five year approved savings contracts. During the year 5,088 (2007: 1,093) options lapsed.

Aero Inventory plc Long Term Incentive PlanThe proposal to introduce a Long Term Incentive Plan was approved by Aero Inventory plc’s shareholders at an Extraordinary General Meeting held on 3 December 2007. At 30 June 2008, the following options had been granted and were still outstanding under this scheme:

Number Exercise of share price Date of grant options (pence)

19 December 2007 3,345,780 1.257 May 2008 1,394,077 1.25

4,739,857

Other share option plansSubject to the revenues from business with ACTS amounting to $250 million or more in the third full year of the contract, the Company has granted an option to ACTS over 2 million shares at a price of 588 pence per share exercisable at any time during the fourth, fifth or sixth years of the contract.





23. Share capital 2008 2007 $’millions $’millions

Authorised80,000,000 ordinary shares of 1.25 pence 1.7 1.7

Issued and fully paid47,626,804 ordinary shares of 1.25 pence each (2007: 47,353,721 ordinary shares of 1.25 pence each) 1.0 1.0

Nominal Number Value of shares $’millions

As at 1 July 2007 47,353,721 1.0Shares issued during the year 273,083 –

As at 30 June 2008 47,626,804 1.0

During the year ended 30 June 2008 55,421 shares, nominal value £693 (2007: 45,863 shares, nominal value £573) were issued and allotted as a result of the exercise of options under the Aero Inventory plc Share Option Scheme. 174,400 shares, nominal value £2,180 (2007: 44,521 shares, nominal value £557) were issued and allotted as a result of the exercise of options under the Aero Inventory plc Unapproved Share Option Scheme. 43,262 shares, nominal value £540 (2007: 77,856 shares, nominal value £973) were issued and allotted as a result of the exercise of options under the Aero Inventory plc Enterprise Management Incentive Scheme. The aggregate subscriptions payable for these shares were £184,023, £570,445, £154,498 respectively (2007: £235,914, £128,190 and £165,544 respectively).

24. Reserves Share Share based premium payment Retained account reserve earnings Total $’millions $’millions $’millions $’millions

At 1 July 2006 209.2 1.1 19.9 230.2Profit for the financial period – – 31.1 31.1Dividends paid – – (10.5) (10.5)Share-based payments – 0.9 – 0.9Shares issued 1.1 – – 1.1

At 30 June 2007 and 1 July 2007 210.3 2.0 40.5 252.8Profit for the financial period – – 51.6 51.6Dividends paid – – (15.7) (15.7)Share-based payments – 1.3 – 1.3Shares issued 1.8 – – 1.8Taxation on share-based payments – – 1.4 1.4

At 30 June 2008 212.1 3.3 77.8 293.2

25. Reconciliation of movements in shareholders’ funds 2008 2007 $’millions $’millions

Profit for the year 51.6 31.1Dividends (15.7) (10.5)

35.9 20.6New shares issued 1.8 1.1Share-based payments 1.3 0.9Taxation on share-based payments 1.4 –

Net addition to shareholders’ funds 40.4 22.6Opening shareholders’ funds 253.8 231.2

Closing shareholders’ funds 294.2 253.8




26. Related party transactionsDuring the year the Group entered into transactions, in the ordinary course of business, with other related parties. Transactions entered into, and trading balances outstanding at 30 June, are as follows:

Rupert Lewin Racing Limited (of which P R Lewin is a director and shareholder) entered into a licence agreement with Aero Inventory (UK) Limited on 1 December 2002 in respect of the use of the warehouse space as licensee at Unit A, Lancaster Road Industrial Estate, New Barnet, Hertfordshire, for the storage and repair of private motor vehicles. During the period of the licence Rupert Lewin Racing Limited agreed to pay Aero Inventory (UK) Limited a fee of £1,000 per month (inclusive of VAT).$nil (2007: $150,000) was paid to Rupert Lewin Racing Limited during the year in respect of corporate entertainment provided to Aero Inventory’s guests.Mr Turner’s services as a non-executive director are provided via Potenza Enterprises Limited, a service company owned by Mr Turner and his family. As well as acting as a non-executive director of the Company, Mr Turner also provides consultancy services in relation to the strategic direction and market development of the Company. During the period, $nil (2007: $78,000) was paid to Potenza Enterprises Limited in respect of such consultancy services. No amounts are outstanding at 30 June 2008 (2007: $nil).

27. Explanation of transition to IFRSIFRS 1, First time adoption of International Financial Reporting Standards, sets out the procedures that the Group must follow as it adopts IFRS for the first time as the basis for preparing its consolidated financial statements. The Group is required to establish its accounting policies at 30 June 2008 and, in general, apply these retrospectively to determine the IFRS opening balance sheet as its date of transition, 1 July 2006.

Key changes in accounting policies:a) The effects of changes in foreign exchange ratesThe guidance for the determination of the Group’s functional currency is more prescriptive under IAS 21, The effect of changes in foreign exchange rates. Under IAS 21 the primary indicators of a functional currency are determined by the currency that mainly influences revenue prices where it is often the currency that the revenue prices are denominated in and settled in, and the currency in which the costs of providing goods and services are denominated and settled. Accordingly, as the Group predominately trades in US Dollars, it has changed functional and presentational currency under IFRS retrospectively at 1 July 2006 from Sterling to US Dollars.

b) Intangible assetsUnder UK GAAP, software assets were included as part of the cost of property, plant and equipment whereas under IFRS, unless they are integral to another fixed asset, they are classified as intangible assets. In the balance sheet, a reclassification of $11,864,000 from property, plant and equipment to intangible assets was reflected under IFRS at 30 June 2007 (1 July 2006: $755,000). There was no impact on either profit before taxation or total net assets under IFRS.

c) Other – Employee benefitsUnder IAS 19 there is a requirement to recognise the monetary value of employee benefits accruing to employees but not yet settled; typically holiday pay. This required the present value of employee benefits to be paid in future for services to be provided up to the reporting date.

Employee’s holiday entitlement is aligned to the calendar year. Accordingly a holiday accrual has been recognised of $212,000 as at 31 December 2007 (1 July 2006: $242,000). The impact on the income statement is an increase in profit before tax of $62,000 for the year to 30 June 2007.

•

•

•





27. Explanation of transition to IFRS continuedReconciliation of equity at 1 July 2006 (date of transition to IFRSs) Other IFRS UK GAAP Functional Sub total adjustments IFRS £’millions currency $’millions $’millions $’millions

AssetsNon-current assetsIntangible assets – – – 0.7 0.7Property, plant and equipment 1.6 1.2 2.8 (0.7) 2.1

1.6 1.2 2.8 – 2.8

Current assetsInventories 103.8 70.8 174.6 – 174.6Trade and other receivables 25.2 20.6 45.8 – 45.8Cash at bank and at hand 36.3 29.7 66.0 – 66.0

Total assets 166.9 122.3 289.2 – 289.2

LiabilitiesCurrent liabilitiesTrade and other payables (31.8) (26.0) (57.8) (0.2) (58.0)Non-current liabilitiesBank loan – – – – –

Total liabilities (31.8) (26.0) (57.8) (0.2) (58.0)

Net assets 135.1 96.3 231.4 (0.2) 231.2

EquityShare capital 0.6 0.4 1.0 – 1.0Share premium account 123.5 85.7 209.2 – 209.2Share based payment reserve 0.6 0.5 1.1 – 1.1Retained earnings 10.4 9.7 20.1 (0.2) 19.9

Total equity 135.1 96.3 231.4 (0.2) 231.2

Reconciliation of profit for year ended 30 June 2007 Other IFRS UK GAAP Functional Sub total adjustments IFRS £’millions currency $’millions $’millions $’millions

Revenue: 127.8 119.2 247.0 – 247.0Operating expenses (97.3) (96.8) (194.1) – (194.1)

Operating profit 30.5 22.4 52.9 – 52.9Interest receivable 0.4 0.4 0.8 – 0.8Interest payable (4.2) (3.9) (8.1) – (8.1)

Profit before tax 26.7 18.9 45.6 – 45.6Tax (8.2) (6.3) (14.5) – (14.5)

Profit for year 18.5 12.6 31.1 – 31.1




27. Explanation of transition to IFRS continuedReconciliation of balance sheet at 30 June 2007 (date of last UK GAAP financial statements) Other IFRS UK GAAP Functional Sub total adjustments IFRS £’millions currency $’millions $’millions $’millions

AssetsNon current assetsIntangible assets 13.3 11.2 24.5 13.0 37.5Property, plant and equipment 8.1 7.4 15.5 (13.0) 2.5

21.4 18.6 40.0 – 40.0

Current assetsInventories 216.0 174.9 390.9 – 390.9Trade and other receivables 26.2 26.4 52.6 – 52.6Cash at bank and at hand 0.2 0.2 0.4 – 0.4

Total assets 263.8 220.1 483.9 – 483.9

LiabilitiesCurrent liabilitiesTrade and other payables (58.6) (59.1) (117.7) (0.2) (117.9)Non-current liabilitiesBank loan (55.9) (56.3) (112.2) – (112.2)

Total liabilities (114.5) (115.4) (229.9) (0.2) (230.1)

Net assets 149.3 104.7 254.0 (0.2) 253.8

EquityShare capital 0.6 0.4 1.0 – 1.0Share premium account 124.0 86.3 210.3 – 210.3Share based payment reserve 1.0 1.0 2.0 – 2.0Retained earnings 23.7 17.0 40.5 (0.2) 40.7

Total equity 149.3 104.7 254.0 (0.2) 253.8





28. Company financial statementsCompany balance sheetat 30 June 2008 2008 2007 Notes £’000 £’000

Non-current assetsInvestments B 83 83

83 83

Current assetsDebtors – due after one year C 128,404 132,579

Net current assets 128,404 132,579

Net assets 128,487 132,662

EquityShare capital D 595 592Share premium account E 124,925 124,020Share based payment reserve E 1,701 1,043Retained earnings E 1,266 7,007

Total equity 128,487 132,662

The accounts were approved by the Board on 22 September 2008 and signed on its behalf:

Rupert LewinChief Executive

Hugh BevanFinance Director




28. Company financial statements continuedA. Significant accounting policiesThe separate financial statements of the Company are presented as required by the Companies Act 1985. As permitted by the Act, the separate financial statements have been prepared in accordance with International Financial Reporting Standards.

The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial statements except as noted below:

Investment in subsidiaries are stated at cost less, where appropriate, provision for impairment.

A cash flow statement has not been presented as the Company has no cash transactions.

The directors have taken advantage of the exemption available under section 230 of the Companies Act 1985 and have not presented a profit and loss account for the Company.

B. Investments 2008 2007 £’000 £’000

Cost and net book value 83 83

The Company owns the entire issued ordinary share capital of Aero Inventory (UK) Limited, a company principally engaged in procurement and inventory management for the aerospace industry. Aero Inventory (UK) Limited is registered in England and Wales.

Aero Inventory (UK) Limited owns the entire issued ordinary share capital of Aero Inventory (Hong Kong) Limited, Aero Inventory (Switzerland) AG, Aero Inventory (Australia) Pty Limited, Aero Inventory (USA) Inc., Aero Inventory (Canada) Inc. and Aero Inventory (Japan) KK and Aero Inventory (USA) Inc. owns the entire issued ordinary share capital of Aero Inventory (Bahrain) SPC.

All companies are principally engaged in customer support activities for procurement and inventory management services for the aerospace industry.

The companies are incorporated in the following countries:Aero Inventory (Hong Kong) Limited – Hong KongAero Inventory (Switzerland) AG – SwitzerlandAero Inventory (Australia) Pty Limited – AustraliaAero Inventory (USA) Inc. – USAAero Inventory (Canada) Inc – CanadaAero Inventory Japan KK – JapanAero Inventory (Bahrain) SPC – Bahrain

C. Debtors – due after more than one year 2008 2007 £’000 £’000

Amounts owed by Group undertakings 128,404 132,579

•••••••




28. Company financial statements continuedD. Share capital 2008 2007 £’000 £’000

Authorised80,000,000 ordinary shares of 1.25 pence 1,000 1,000

Issued and fully paid47,626,804 ordinary shares of 1.25 pence each (2007: 47,353,721 ordinary shares of 1.25 pence each) 595 592

Nominal Number Value of shares £’000

As at 1 July 2007 47,353,721 592Shares issued during the year 273,083 3

As at 30 June 2008 47,626,804 595

During the year ended 30 June 2008 55,421 shares, nominal value £693 (2007: 45,863 shares, nominal value £573) were issued and allotted as a result of the exercise of options under the Aero Inventory plc Share Option Scheme. 174,400 shares, nominal value £2,180 (2007: 44,521 shares, nominal value £557) were issued and allotted as a result of the exercise of options under and the Aero Inventory plc Unapproved Share Option Scheme. 43,262 shares, nominal value £540 (2007: 77,856 shares, nominal value £973) were issued and allotted as a result of the exercise of options under the Aero Inventory plc Enterprise Management Incentive Scheme. The aggregate subscriptions payable for these shares were £184,023, £570,445, £154,498 respectively (2007: £235,914, £128,190 and £165,544 respectively).

E. Reserves Share Share Share-based capital premium payment Retained account account reserve earnings Total £’000 £’000 £’000 £’millions £’millions

At 1 July 2006 589 123,492 609 5,295 129,985Profit for the financial period – – – 7,000 7,000Dividends paid – – – (5,288) (5,288)Share based payments – – 434 – 434Shares issued 3 528 – – 531

At 30 June 2007 and 1 July 2007 592 124,020 1,043 7,007 132,662Profit for the financial period – – – 2,195 2,195Dividends paid – – – (7,936) (7,936)Share based payments – – 658 – 658Shares issued 3 905 – – 908

At 30 June 2008 595 124,925 1,701 1,266 128,487



Our Performance Governance


Shareholder Information

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of Aero Inventory plc (‘the Company’) will be held at The Royal Aeronautical Society, 4 Hamilton Place, London W1J 7BQ on Monday 24th November 2008 at 11.00am for the following purposes.

To consider and, if thought fit, pass the following resolutions, of which resolutions 1 to 10 and 13 will be proposed as ordinary resolutions and resolutions 11 and 12 will be proposed as special resolutions.

Ordinary business1. To receive and adopt the Company’s annual accounts for the period ended 30 June 2008 and the reports of the directors and auditors on

those accounts.2. To declare a final dividend in respect of the year ended 30 June 2008 at the rate of 12 pence (net) per ordinary share to be paid on 11

December 2008 to shareholders on the register at the close of business on 14 November 2008.3. To re-elect P R Lewin who retires by rotation.4. To re-elect H N P McCorkell who retires by rotation.5. To re-elect C L Trupp who retires by rotation.6. To re-appoint Deloitte & Touche LLP as auditors of the Company and to authorise the directors to agree their remuneration.

Special business7. That the adoption of a global savings related share option plan (‘the Global Plan’) for the benefit of the Company’s personnel in overseas

jurisdictions, the principal terms of which are summarised in Appendix 1 to this Notice, be hereby approved and that the directors be authorised to do all acts and things which they consider or expedient to establish and carry the Global Plan into effect including making any changes which they consider appropriate, without further approval of the Company in general meeting, to take account of or mitigate or comply with taxation, securities or exchange control laws or to improve the tax and/or social security position of any of the personnel eligible to participate, provided that any such arrangements which are established for overseas participants will not be materially more favourable to such participants than the Company’s UK savings related share option scheme.

8. That the rules of the Aero Inventory plc Unapproved Share Option Scheme (‘the Unapproved Scheme’) be amended by the insertion of the following rule 11.2A after rule 11.2;11.2A Without limitation to the above, the Committee shall have power from time to time to adopt any amendments necessary including

any sub-plan or addendum to the Plan which it considers fit, without the prior approval of the Company in general meeting to: (i) conform its terms with the requirements of each jurisdiction where an Eligible Employee is located; or (ii) take account of or mitigate or comply with taxation, securities or exchange control laws; or (iii) improve the tax and/social security position of the Company or any other Participating Company or of any Eligible Employee. No such arrangements established for overseas Eligible Employees will be materially more favourable to such participants than the terms of options granted to UK Eligible Employees.

9. That the directors be hereby authorised to grant options to non-employees providing services to the Company in overseas jurisdictions under the terms of the Aero Inventory plc Unapproved Share Option Scheme (‘the Unapproved Scheme’) and/or the terms of the Aero Inventory plc Long Term Incentive Plan (‘the LTIP’) and to take all steps which they consider necessary or expedient including the creation of any sub-plan or addendum to the Unapproved Scheme or the LTIP without further approval of the Company in general meeting to make such grants and to: (i) conform their terms with the requirements of each jurisdiction where a participant is located; or (ii) take account of or mitigate or comply with taxation, securities or exchange control laws; or (iii) improve the tax and/or social security position of the Company or any other group company or of any of the non-employees eligible to participate, provided that any such arrangements which are established for non-employees will not be materially more favourable to such participants than to those granted to Eligible Employees under the Unapproved Scheme or the LTIP.

10. That in substitution for any existing authorities:(a) in accordance with Section 80 of the Companies Act 1985 (‘the Act’), the directors be and generally are unconditionally authorised to

exercise all the powers of the Company to allot relevant securities (as defined in section 80(2) of the Act) within the terms of the following restrictions and provisions, namely:

(i) this authority shall expire (unless previously renewed, revoked or varied) on the earlier of the date of the next Annual General Meeting of the Company following the date of the passing of this resolution and the date which is 15 months after the date of the passing of this resolution; and

(ii) this authority shall be limited to the allotment of relevant securities up to an aggregate nominal amount of £198,445.01; and(b) for the purpose of sub-paragraph 10 (a) above:

(i) the said power shall allow and enable the directors to make an offer or agreement which would or might require relevant securities to be allotted after such expiry of the authority and the directors may allot relevant securities in pursuance of such an offer or agreement as if the power conferred by this resolution had not expired; and

(ii) words and expressions defined in or for the purposes of Part IV of the Act shall bear the same meaning in this resolution.

11. That in substitution for any existing authorities:(a) conditionally upon the passing of resolution 10 above and in accordance with section 95 of the Act, the directors be and are hereby

given power to allot equity securities pursuant to the authority conferred by resolution 10 above as if section 89(1) of the Act did not apply to any such allotment provided that the power granted by this resolution shall be limited to:




(i) the allotment of equity securities in connection with or pursuant to an offer by way of rights to the holders of shares in the Company and other persons entitled to participate in such offer, in the proportion (as nearly may be) to the existing shareholdings of such members (or, as appropriate, to the number of shares which such other persons are for these purposes deemed to hold) subject only to such exclusions or other arrangements as the directors may feel necessary or expedient to deal with fractional entitlements or the regulations of any recognised regulatory body in any territory;

(ii) the grant of options to subscribe for shares in the Company under the terms of any share option schemes adopted or operated by the Company up to a maximum aggregate nominal amount equal to 10 per cent of the nominal amount of the issued share capital of the Company as at the date of grant of such option(s), and the allotment of such shares pursuant to the exercise of options granted;

(iii) the grant of up to 1,394,077 options to subscribe for shares in the Company under the terms of the Aero Inventory plc Long Term Incentive Plan and the allotment of such shares pursuant to the exercise of options granted; and

(iv) the allotment of equity securities, otherwise than pursuant to sub-paragraphs 11(a)(i), 11(a)(ii) and 11(a)(iii) above, up to an aggregate nominal amount of £59,533.50;

(b) the power granted by this resolution shall expire on the earlier of the date of the next Annual General Meeting of the Company following the date of the passing of this resolution and the date which is 15 months after the date of the passing of this resolution, save that the said power shall allow and enable the directors before this power expires or is replaced, to make an offer or agreement which would or might require equity securities to be allotted pursuant to such offer or agreement as if the power conferred by this resolution had not expired, or, as the case may be, been replaced. This power applies in relation to a sale of shares which is an allotment of equity securities by virtue of section 94(3A) of the Act as if in the first paragraph of this resolution the words ‘That, conditionally upon the passing of resolution 10 above’, were omitted; and

(c) words and expressions defined in or for the purposes of Part IV of the Act shall bear the same meanings in this resolution.

12. That the articles of association contained in the document produced to the meeting (and signed by the Chairman for the purposes of identification), as summarised in the explanatory notes and Appendix 2 to this Notice, be adopted as the articles of association of the Company in substitution for, and to the exclusion of, the existing articles of association of the Company.

13. That, without prejudice to article 35 of the Company’s articles of association which authorise the Company to use electronic communications, the Company be and is hereby authorised (subject to the provisions of the Companies Act 2006 and the Disclosure and Transparency Rules made by the Financial Services Authority (‘the DTR’)) to use electronic means to convey any notice, document or information to shareholders or debt securities holders. For the purposes of this resolution, the terms ‘electronic means’, ‘shareholders’ and ‘debt securities holders’ shall bear the respective meanings applicable under the DTR.

By order of the Board

Martin Webster Secretary

Registered office30 Lancaster RoadNew BarnetHertfordshire EN4 8AP22 September 2008 Notes1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company specifies that only those shareholders registered in the register of members of the Company at 11.00 am on 22 November 2008 shall be entitled to attend or vote at the Annual General Meeting in respect of the number of shares registered in their respective names at that time. Changes to entries on the register of members after that time will be disregarded in determining the rights of any person to attend or vote at the meeting.

2. If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to attend, speak and vote at the Meeting and you should have received a proxy form with this Notice of Meeting. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.

3 . If you are not a member of the Company but you have been nominated by a member of the Company to enjoy information rights, you do not have a right to appoint any proxies under the procedures set out in these notes. Please read section 11 below.

4. A proxy does not need to be a member of the Company but must attend the Meeting to represent you. Details of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.

5. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact Capita Registrars, Proxy Dept., The Registrar, 34 Beckenham Road, Beckenham, Kent BR3 4TU.

Notice of Annual General Meeting continued



Our Performance Governance Shareholder Information

6. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.

7. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.To appoint a proxy using the proxy form, the form must be:

completed and signed;sent or delivered to Capita Registrars, Proxy Dept., The Registrar, 34 Beckenham Road, Beckenham, Kent BR3 4TU; andreceived by Capita Registrars no later than 11.00 am on 22 November 2008.

In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company.

Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form.

8. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior).

9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Replacement proxy forms can be obtained from the Company Secretary.

If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.

10. In order to revoke a proxy instruction you will need to inform the Company as follows:By sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Capita Registrars, Proxy Dept., The Registrar, 34 Beckenham Road, Beckenham, Kent BR3 4TU.In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice.

The revocation notice must be received by Capita Registrars no later than 11.00 am on 22 November 2008.

If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid.

Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.

11. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights you may have a right under an agreement between you and the member of the Company who has nominated you to have information rights (Relevant Member) to be appointed or to have someone else appointed as a proxy for the Meeting. If you either do not have such a right or if you have such a right but do not wish to exercise it, you may have a right under an agreement between you and the Relevant Member to give instructions to the Relevant Member as to the exercise of voting rights.

12. Copies of the service contracts and letters of appointment of the directors of the Company will be available:for at least 15 minutes prior to the Meeting; and during the Meeting.

Explanatory notesResolution 1: Report and accountsThis is a standard resolution common to all Annual General Meetings.

Resolution 2: DividendThis is a standard resolution to declare the final dividend.

Resolutions 3, 4 & 5: Re-election of directorsMessrs Lewin, McCorkell and Trupp will retire by rotation and being eligible will stand for re-election by the shareholders.

Resolution 6: Appointment of auditorsCompany law requires Aero Inventory plc, at each general meeting at which accounts are laid, to appoint auditors who will remain in office until the next general meeting at which accounts are laid. This resolution will, therefore, re-appoint Deloitte & Touche LLP as auditors of Aero Inventory plc and authorise the directors to agree their remuneration.

•••

•

•

••




Resolution 7: Aero Inventory plc Global Savings-Related Share Option Plan (‘the Plan’)It is proposed to implement a Global Savings-Related Share Option Plan, open to all eligible employees outside the UK. The Company already successfully operates a Revenue approved scheme of this kind for UK employees. As outlined in the Annual Report, more than 50 per cent of the Group’s employees are now located outside the UK. The Remuneration Committee believes that the Scheme will form a useful addition to the rewards package offered by Aero Inventory and will generate greater alignment between the interests of employees and shareholders. The principal terms of the Scheme are summarised in Appendix 1 to this notice.

Resolution 8: Aero Inventory plc Unapproved Share Option Scheme (‘the Unapproved Scheme’)The Aero Inventory plc Unapproved Share Option Scheme allows options to be granted to employees anywhere in the world. Some jurisdictions have local reporting and compliance requirements and also provide tax/social security efficient opportunities to encourage the grant of options. The proposed change to the Unapproved Scheme rules allows the establishment of sub-plans or arrangements to support compliance and to allow the utilisation of local tax/social security mitigation opportunities where it is sensible so to do.

Resolution 9: Aero Inventory plc Unapproved Share Option Scheme (‘the Unapproved Scheme’) and the Aero Inventory plc Long Term Incentive Plan (‘the LTIP’)Some of Aero Inventory’s contracts with non-UK customers provide for staff previously working for the customer to become ‘sub-vented’ to Aero Inventory and work on behalf of the Company as part of the on-site customer support. Some such personnel (less than 10 per cent of overall headcount), whilst legally employed by our customer, operate for all other purposes as if employed by Aero Inventory. In some other locations, personnel are contracted on a long-term basis through local agencies to avoid the complexity of establishing local payrolls etc. Such personnel provide valuable committed services to the Company and it is desired to allow them to be considered for the grant of share options under the Unapproved Scheme or the LTIP as if they were legal employees.

Resolution 10: General authority to allot sharesYour Directors may only allot shares or grant rights over shares if authorised to do so by the shareholders. The authority granted at the Annual General Meeting of the Company held on 19 November 2007 is due to expire at this year’s Annual General Meeting. Accordingly, this resolution will be proposed as an ordinary resolution to grant a new authority to allot unissued share capital up to an aggregate nominal value of £198,445.01, representing 33.3 per cent of the total issued ordinary share capital as at the date of this notice. If given, this authority will expire on 24 February 2010 or at the conclusion of the Annual General Meeting in 2009 whichever is the earlier. The directors have no present intention of exercising this authority.

Resolution 11: Dis-application of pre-emption rightsYour Directors also request additional authority from the shareholders to allot shares or grant rights over shares where they propose to do so for cash and otherwise than to existing shareholders pro rata to their holdings. The authority granted at the Annual General Meeting of the Company held on 19 November 2007 is due to expire at this year’s Annual General Meeting. Accordingly, this resolution will be proposed as a special resolution to grant such authority. The authority will be limited to the issue of shares up to an aggregate nominal value of £59,533.50 (being 10 per cent of the total issued ordinary share capital as at the date of this notice). If given, this authority will expire on 24 February 2010 or at the conclusion of the Annual General Meeting in 2009 whichever is the earlier. The directors have no present intention of exercising this authority.

The Resolution also requests the renewal of authorities previously given in relation to options to be granted under share option schemes.

Resolution 12: Adoption of new articles of associationThis Resolution seeks approval for the adoption of new articles of association of the Company. The Company’s current articles of association were last amended on 21 November 2005. Since then there have been a number of developments in the law and market practice which affect the Company’s articles of association including, recently, the implementation of certain parts of the Companies Act 2006. The Company together with its advisers has therefore carried out a detailed review of its articles of association and considers that this is an appropriate time to update them to reflect the current law and practice.

A summary of the reasons for and effect of the principal differences between the existing articles of association and those proposed to be adopted are summarised in Appendix 2 to this notice.

Resolution 13: Sending documents by making them available on a websiteNew provisions of the Companies Act 2006 came into effect on 20 January 2007, enabling companies, in certain circumstances, to send documents to shareholders by making them available on a website and notifying the shareholders where the documents can be accessed. This resolution seeks to grant authority for the Company to take advantage of this legal change in the future if the Board decides that this would be in the best interests of the Company.

If the Company decides to implement the authority to be given by this Resolution, an individual separate letter from the Company requesting each shareholder’s consent to send copies of annual reports and other documents in future by means of making them available on a website will be sent under separate cover. The letter will advise that if a shareholder wishes to consent to this method of communication, they should do nothing, as a nil response will constitute deemed consent after 28 days have passed. The letter will also advise what to do if a shareholder does NOT wish to consent.

Notice of Annual General Meeting continued




Aero Inventory plc Global Savings-Related Share Option Plan (‘the Global Plan’)It is proposed to implement a global savings-related share option plan in addition to the existing UK savings related share option scheme. This will give Aero Inventory personnel outside the UK the opportunity to apply for and be granted share options. The shares will eventually be bought using amounts they have saved under a savings arrangement. Where considered appropriate, the Global Plan will be structured as far as possible to provide a tax-advantageous way for participants to gain an interest in the shares of the Company. The principal features of the Global Plan are as follows:

1. AdministrationThe Company’s Remuneration Committee (‘the Committee’) is responsible for administering the Global Plan.

2. Tax authority approvalIn relevant jurisdictions, formal approval in relation to local tax and securities legislation will be sought. The Global Plan will be operated in compliance with all relevant legal and tax requirements.

3. Grant of options and eligibilityThe Committee may invite all eligible personnel employees to apply for the grant of an option to acquire ordinary shares in the Company during the appropriate Invitation Period. A fixed number of shares may be made available for such applications. If applications exceed the number of shares available, the Global Plan rules will provide for applications to be scaled back.

4. Invitation periodsInvitation Periods are a period of six weeks commencing four days after each date on which the Company announces its annual or half-yearly results.

5. Savings contractThe grant of options will be subject to applicants agreeing to enter into a suitable savings arrangement for no less than three years, saving the equivalent of between £10 and £250 per month.

6. Exercise priceThe exercise price per ordinary share shall be not less than the higher of the nominal value of the share or 90 per cent of the average market value of a share on the three business days before the invitation to apply for that option was issued.

7. Plan limitThe maximum number of ordinary shares over which options to subscribe may be granted under the Global Plan or any other share option scheme (other than the Aero Inventory plc Long Term Incentive Plan) may not exceed 10 per cent of the issued and issuable share capital from time to time.

8. Exercise and lapse of optionsGeneral positionOptions are generally exercisable at or after the dates when the relevant savings arrangement matures. Participants may choose not to exercise the options and retain the proceeds of the savings arrangement.Special circumstancesOptions will generally lapse on cessation of service except in particular situations such as redundancy or disability. Exercise is also permitted in special circumstances such as a takeover.Exchange of options on a takeoverIn the event of a takeover, an option holder may be permitted to exchange their options for options over shares in the acquiring company.

9. Variations of share capitalOn certain variations of the ordinary share capital of the Company, the Committee may, subject to the approval of the Company’s auditors, adjust the exercise price and the number of ordinary shares comprised in existing options.

10. AmendmentThe Committee may amend the rules of the Global Plan provided that no amendment may materially affect an existing option, and no amendment may be made which would make the terms on which options may be granted more generous with the prior approval of the company in general meeting.

Further, the Committee may make any changes which they consider appropriate, including the creation of any sub-plan or addendum to the Plan, without further approval of the Company in general meeting, to: (i) conform the terms of the Global Plan with the requirements of each jurisdiction where a participant is located; or (ii) take account of or mitigate or comply with taxation, securities or exchange control laws; or (iii) improve the tax and/or social security position of the Company or any other group company or of any of the persons eligible to participate. However, any such arrangements which are established for overseas participants will not be materially more favourable to such participants than the Company’s UK savings related share option scheme.

11. Relationship with employment contractThe grant of an option does not form part of an option holder’s rights or entitlements under their contract of employment, nor does it affect the terms of their contract of employment.

Appendix 1




Explanatory notes of principal changes to the Company’s Articles of Association1. Articles which duplicate statutory provisionsProvisions in the Current Articles which may conflict with provisions in the Companies Act 2006 are in the main amended to bring them into line with the Companies Act 2006. Certain examples of such provisions include provisions as to the form of resolutions, the variation of class rights, the requirement to keep accounting records and provisions regarding the period of notice required to convene general meetings. The main changes made to reflect this approach are detailed below.

2. Form of resolutionThe Current Articles contain a provision that, where for any purpose an ordinary resolution is required, a special or extraordinary resolution is also effective and that, where an extraordinary resolution is required, a special resolution is also effective. This provision is being amended as the concept of extraordinary resolutions has not been retained under the Companies Act 2006.

3. Convening extraordinary and annual general meetingsThe provisions in the Current Articles dealing with the convening of general meetings and the length of notice required to convene general meetings are being amended to conform to new provisions in the Companies Act 2006. In particular a general meeting to consider a special resolution can be convened on 14 days’ notice whereas previously 21 days’ notice was required.

4. Votes of membersUnder the Companies Act 2006 proxies are entitled to vote on a show of hands whereas under the current articles proxies are only entitled to vote on a poll. The time limits for the appointment or termination of a proxy appointment have been altered by the Companies Act 2006 so that the articles cannot provide that they should be received more than 48 hours before the meeting or in the case of a poll taken more than 48 hours after the meeting, more than 24 hours before the time for the taking of a poll, with weekends and bank holidays being permitted to be excluded for this purpose. Multiple proxies may be appointed provided that each proxy is appointed to exercise the rights attached to a different share held by the shareholder. The proposed new articles reflect all of these new provisions.

5. Conflicts of interestThe Companies Act 2006 sets out directors’ general duties which largely codify the existing law but with some changes. Under the Companies Act 2006, from 1 October 2008 a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the Company’s interests. The requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect. The Companies Act 2006 also allows the articles of association to contain other provisions for dealing with directors’ conflicts of interest to avoid a breach of duty. The new articles give the directors authority to approve such situations and to include other provisions to allow conflicts of interest to be dealt with in a similar way to the current position.

These are safeguards which will apply when directors decide whether to authorise a conflict or potential conflict. First, only directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the Company’s success. The directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate.

It is also proposed that the new articles should contain provisions relating to confidential information, attendance at board meetings and availability of board papers to protect a director being in breach of duty if a conflict of interest or potential interest arises. These provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the directors. It is the Board’s intention to report annually on the Company’s procedures for ensuring that the Board’s powers to authorise conflicts are operated effectively.

6. GeneralGenerally the opportunity has been taken to bring clearer language into the New Articles.

Appendix 2




Financial calendar

Financial year end 30 June 2008Preliminary results 22 September 2008

Ex-dividend date 14 November 2008Annual General Meeting 24 November 2008Payment of final dividend 11 December 2008Interim results March 2009Financial year end 30 June 2009Preliminary results September 2009

Annual reportsFurther copies of this annual report are available from the Company Secretary at the Registered Office. It can also be ordered through the Financial Times Annual Report service.

Share price informationThe Company’s share price is quoted daily in the Financial Times and the Daily Telegraph, in both cases in the Alternative Investment Market section.

Reuters code: AI.LBloomberg code: AI/ LN

Investor relations informationThe Company’s website – www.aero-inventory.com – provides certain investor relations information, including press releases and access to up-to-date share price data.

RegistrarEnquiries about administrative matters relating to the holding of Aero Inventory plc shares should be addressed to the Company’s registrars, Capita Registrars, Shareholder Services Department, Northern House, Woodsome Park, Fenay Bridge, Huddersfield, West Yorkshire HD8 0LA, tel: 0870 1623 3100*. (Telephone number from outside the UK: +44 20 8629 3399). This includes: loss of share certificates; notification of change of address; and transfer of shares to another person.

CRESTA computerised system for settling sales and purchases of shares (CREST) operates for the Company’s shares. It is a voluntary system that enables shareholders, if they choose, to hold and transfer shareholdings electronically rather than in paper form. Shareholders wishing to retain their paper certificates continue to be able to do so.

Further informationFor further information, please contact Hugh Bevan (Finance Director) on +44 (0)20 8447 3303, or by email, to [email protected]

*Calls cost 10p per minute plus network extras.

Shareholder information




DirectorsH N P McCorkell FCAP R Lewin M P Dodge MBA H C Bevan FCA P M Docker C L Trupp M J WebsterR W J DavisL HeyworthF Turner FR Eng

SecretaryM J Webster FCIS

Company number2887038

Registered office30 Lancaster RoadNew BarnetHertfordshireEN4 8AP

AuditorsDeloitte & Touche LLPReading Solicitors Taylor WessingLondon Principal bankers Lloyds TSB Bank plc10 Gresham StreetLondonEC2V 7AE

Nominated adviser and joint brokerJ P Morgan Cazenove Limited20 MoorgateLondonEC2R 6DA Joint broker Numis Securities Limited10 Paternoster SquareLondonEC2M 7LT

Registrars Capita RegistrarsShareholder Services Department Northern HouseWoodsome ParkFenay BridgeHuddersfieldWest Yorkshire HD8 0LA

Company information

Five year summary

Aero Inventory would like to thank its customers HAECO, Aveos Fleet Services and Qantas Airways for the provision of photographs for use in this report.

Year ended 30 June 2004 2005 2006 2007 2008 $’000 $’000 $’000 $’001 $’000

Turnover 38.6 79.5 117.1 247.0 440.0Operating profit 3.5 14.3 21.2 52.9 93.3Net Interest (0.4) (1.3) (3.0) (7.3) (20.2)

Pre-tax profit 3.0 13.0 18.2 45.6 73.1Tax (1.2) (3.8) (6.1) (14.5) (21.5)

Profit after tax 1.9 9.2 12.1 31.1 51.6

Fully diluted EPS (cents) 10.4 45.9 40.5 65.2 101.8

Dividends per share (pence) 4.8 8.0 10.0 15.0 18.0Shareholders’ funds 59.6 76.4 231.2 253.8 294.2

Employees (average) 101 114 139 184 297


I/We (block letters please)

ofbeing a member/members of Aero Inventory plc hereby appoint the Chairman of the Meeting or

as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the company to be held on 24 November 2008, and at any adjournment thereof, in the manner specified below.

Resolutions For Against

1. To receive and adopt the accounts

2. To declare the dividend

3. To re-elect P R Lewin

4. To re-elect H N P McCorkell

5. To re-elect C L Trupp

6. To re-appoint the auditors and to authorise the directors to agree their remuneration

7. To approve the establishment of the Aero Inventory plc Global Savings-Related Share Option Plan and to authorise the directors to put the plan into effect

8. To amend the rules of the Aero Inventory plc Unapproved Share Option Scheme to allow the establishment of non-UK sub-plans

9. To authorise the grant of options under the Aero Inventory plc Unapproved Share Option Scheme and the Aero Inventory plc Long Term Incentive Plan to certain non-employee personnel

10. To authorise the directors under section 80

11. To disapply pre-emption rights

12. To adopt new Articles of Association

13. To authorise the Company to use electronic communications to shareholders

Signature Dated 2008

Notes(1) Please indicate by a X in the space provided how you wish your votes to be cast. Without such directions the proxy will vote or abstain at his/her discretion.

(2) In the case of a corporation this form of proxy should be completed under its common seal or signed by its attorney or by an officer on its behalf.

(3) In the case of joint holders the vote of the senior who tenders the vote will be accepted to the exclusion of all others, seniority being determined by the order in which the names stand in the Register of Members.

(4) To be valid this form of proxy, duly executed, and the power of attorney or other authority (if any) under which it is executed or a certified copy of such power or authority must be received at the Company’s registered office not later than 48 hours before the time appointed for the Meeting.

(5) If a member wishes to appoint any other person to act as proxy, insert the name in the space provided and strike out all other appointees. The proxy need not be a member of the Company.

(6) Completion of this form will not preclude you from attending and voting at the Meeting if you so wish.

(7) Any alteration to this form of proxy must be initialled.

Form of proxy

✂ For Company Secretary’s useNumber of shares


SECOND FOLD

THIRD FOLD AND TUCK IN OPPOSITE

FIR

ST

FOLD

AFFIX

STAMP

HERE

Capita Registrars (Proxies)

PO Box 25

34 Beckenham Road

Beckenham

Kent

BR3 4BR


Aero Inventory is listed on the Alternative Investment Market of the London Stock Exchange with operations in the United Kingdom, Australia, Canada, China, Bahrain, Hong Kong, Indonesia, Japan, Switzerland and the United States of America.

We are a service provider to companies in the aerospace industry, providing a comprehensive procurement and inventory management service.

We focus on the hundreds of thousands of consumable and expendable parts required in the maintenance of commercial aircraft and our e-based systems are complemented by on-site representation and 24-hour customer support. We aim to grow the business by securing contracts with additional customers who can benefit operationally and financially from our services, including airlines and aerospace maintenance and repair companies.

Aero Inventory’s ultimate goal is to become the world’s leading aircraft consumable parts service provider

Aero InventoryAero Inventory is proud to be a major sponsor of the Vulcan to the Sky Trust for 2008/09.

The mission of the Trust is • To preserve and protect AVRO Vulcan G-VLCN ( XH558), to return her to full working order for the benefit of the public.• To demonstrate and display the aircraft at public events and to conserve her as a heritage asset in perpetuity.• To advance the education of the general public, and also specifically engineers and aviators, in the AVRO Vulcan, her provenance; historical and social context; design technologies; operational and maintenance processes and procedures; for the benefit of British heritage, historical and technical knowledge and conservation.• To assist in the conservation to full working order of other heritage aircraft of the 20th century.

The Trust delivered its aim of demonstrating Vulcan XH558 at a number of UK air shows in 2008, attracting much public and commercial interest. With this sponsorship, Aero Inventory aims to support the Trust’s objectives of honouring the past and inspiring the future.

Aero Inventory is using its association with the Vulcan to the Sky Trust to build global awareness of the Aero Inventory brand.


Aero Inventory plcannual report and accounts 2008

United KingdomAero Inventory plc/Aero Inventory (UK) Limited 30 Lancaster Road, New Barnet Hertfordshire, EN4 8AP United KingdomTel +44 (0)20 8449 9263 Fax +44 (0)20 8449 3555Email [email protected]

Hong KongAero Inventory (Hong Kong) LimitedUnits 01-06, 6th Floor, Airport Freight Forwarding Centre2 Chun Wan Road, Chek Lap Kok, Hong KongTel +852 3657 2600Fax +852 3657 2601Email [email protected] AustraliaAero Inventory (Australia) Pty LimitedLevel 7, 250 Victoria ParadeEast Melbourne, Victoria 3002Tel +61 3 9445 5700Fax +61 3 9445 5798Email [email protected] United States of AmericaAero Inventory (USA) Inc12257 Florence AvenueSanta Fe Springs, California 90670Tel +1 562-236-5500Fax +1 562-236-5501Email [email protected]

BahrainAero Inventory (Bahrain) S.P.C.Door 1 & 2, Gate 18Free Trade Zone – GLS CompoundBahrain International AirportMuharraq Kingdom of BahrainTel +973 173 20560Fax +973 173 20762 Email [email protected]

JapanAero Inventory Japan KK Utility Center Building 4th Floor3-5-10 Haneda AirportOtaku, Tokyo 144-0041 JapanTel +81-3-5756-7700Fax +81-3-5756-0303Email [email protected]

www.aero-inventory.com

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