GlobeNewswire - Annual Report 2008/09

Satair performed well in one of the most diffi cult years in the history of aviation, posting a modest revenue decline and a sustained profi t. This demonstrates the robustness of the Group’s business model and its ability to add value to customers and suppliers.

Annual Report 2008/09

2

Financial crisisThe fi nancial crisis puts a damper on global demand and causes an actual

production decline in large parts of the world.

Fewer travellersLess economic activity means fewer airline passengers, in particular on business class.

Air carriers have to reduce seat capacity.

Aircraft groundedAircraft are being decommissioned and grounded, in particular old aircraft. The need for

maintenance is dwindling, and at the same time the demand for new aircraft goes down.

Lower demandWith fewer aircraft requiring maintenance and a reduction in production levels,

the demand for production parts and spares for maintenance goes down.

3

ContentsFinancial highlights and key ratios 4

Summary 5

Review of operations 6

Shareholder relations 16

Corporate governance 18

Management 21

Financial review 22

Defi nitions of key fi gures and ratios 25

Signatures 26

Income statement 27

Balance sheet 28

Statement of cash fl ows 30

Consolidated statement of shareholders’ equity 31

List of notes 33

Cash fl owIntensifi ed focus on inventory management and customer

credit resulted in a signifi cantly improved cash fl ow in the

second half of 2008/09.

CostsStrict cost control and an adjustment of the headcount.

The cost percentage dropped from the year-earlier level.

GrowthNew sales initiatives. Sustained focus on an expansion of the product portfolio.

The addition of new product lines at the closing of FY 2008/09 with an

expected contribution to annual revenue in the range of USD 20-25 million.

RelationsEnhanced communication with customers and suppliers.

An open discussion of shared challenges. The preparation

of concepts aimed at increasing the supply chain effi ciency.

Satair’s response

This is a translation into English of the original text in Danish. In case of discrepancies between the two texts, the Danish text shall be considered fi nal and conclusive.

4

USDm 2004/05 2005/06 2006/07 2007/08 2008/09

Income statement Revenue 219.1 261.2 358.4 423.7 410.6Gross profi t 49.5 56.8 76.3 96.4 95.1Staff cost and other cost (36.9) (37.3) (48.9) (62.3) (57.1)Profi t before special items, depreciation and amortization (EBITDA before special items) 12.6 19.2 25.4 34.0 38.0Profi t before depreciation and amortization (EBITDA) 12.6 19.5 27.4 37.3 26.8Profi t on primary operations (EBIT) 10.3 16.0 22.6 33.0 22.4Profi t on fi nancial items (4.3) (4.0) (5.8) (11.4) (12.6)Profi t before tax 6.0 12.0 16.8 21.6 9.8Profi t for the year 3.9 9.0 13.7 14.8 7.7Share to Satair A/S of profi t for the year 3.9 8.9 13.7 14.9 7.7

Balance sheet Total assets 136.4 237.3 270.3 310.5 299.0Total shareholders’ equity 40.1 91.7 103.1 117.4 119.8Interest-bearing debt, credit institutions 47.5 67.9 78.0 106.2 97.2Invested capital 82.0 161.4 181.2 221.7 218.0

Statement of cash fl ows Cash fl ow from operating activities 2.1 (2.1) (0.6) (7.9) 8.2Cash fl ow from investing activities (1.6) (48.6) (1.9) (8.7) (2.1)Cash fl ow from fi nancing activities 8.1 50.1 (14.2) (13.7) (4.7)Net cash fl ow for the year 8.6 (0.6) (16.6) (30.3) 1.4

Key ratios Gross profi t, % 22.6 21.7 21.3 22.7 23.2EBITDA margin before special items, % 5.8 7.3 7.1 8.0 9.3EBITDA margin, % 5.8 7.4 7.6 8.8 6.5EBIT margin, % 4.7 6.1 6.3 7.8 5.5Return on equity, % 10.0 13.6 14.1 13.5 6.5Equity ratio, % 29.4 38.7 38.1 37.8 40.1

Share-related key ratios No. of shares at year-end 2,455,073 4,262,267 4,262,267 4,282,252 4,282,252Average no. of shares, restated 2,880,244 3,454,346 4,262,267 4,294,414 4,282,252Earnings per share, USD 1.35 2.59 3.22 3.47 1.80Earnings per share – diluted, USD - - 3.21 3.46 1.80Cash fl ow from operating activities per share, USD 0.7 (0.6) (0.1) (1.8) 1.9Book value per share, USD 16.3 21.5 24.2 27.4 28.0Proposed in dividend per share, DKK 5.0 5.0 5.5 5.5 3.0Proposed in dividend for the year, USDm 2.0 3.5 4.3 5.0 2.4Listed share price, DKK 148.0 222.5 290.6 232.0 135.0Market cap, USDm 59.0 161.6 224.8 210.0 109.7

Other indicators USD/DKK as of June 30 616 586 551 473 527No. of employees, average 426 431 504 526 533No. of employees, year-end 422 494 514 534 520

Financial highlights and key ratios

5

Summary

After several good years in succession, fi scal 2008/09 was a challenging year for Satair. The aviation industry is in a period of turbulence, and factors such as declining passenger volumes, inventory reductions and lower production levels for several types of aircraft have contributed to a worsening of the market environment by putting a damper on the airlines’ demand for spares and components.

However, despite the global economic crisis Satair did relatively well in the fi scal year in review, reporting only a modest revenue decline.

Responding to the diffi cult environment, Satair has tuned its business by means of measures such as a cost reduction to match the lower revenue level. Also, the Group has made an active effort to forge closer relations to customers and suppliers for the purpose of fi nding good common solutions to the challenges.

At the same time, Satair is pursuing the overall guidelines of its adopted corporate strategy and continues to strengthen the foundation for future growth – for instance by developing new supply chain solutions and expanding its product portfolio.

Implementation of the new ERP system throughout the Group was completed by the end of the fi scal year, paving the way for effi ciencies in the internal processes and the development of better services.

Revenue in 2008/09 came to USD 410.6 million (-3%). The Aftermarket Division posted revenue of USD 292.4 million (+2%). The OEM Division posted revenue of USD 118.2 million (-13% reported in USD and -5% reported in local currencies). Despite the revenue decline, EBITDA before special items increased by 12% to

USD 38.0 million, and the EBITDA margin before special items came to 9.3% against the year-earlier 8.0%.

EBITDA stood at USD 26.8 million against USD 37.3 million last year, the decline being due to the effect of currency contracts, which contributed a gain of USD 5.7 million in 2007/08 against a loss of USD 10.7 million in 2008/09.

Profi t before tax totaled USD 9.8 million against USD 21.6 million last year (-55%). Profi t for the year after tax came to USD 7.7 million against USD 14.8 million

last year (-48%). Earnings per share came to USD 1.80 USD (-48%). Revenue is on a par with the most recently announced expectations (see

release of May 13, 2009), with profi t before tax refl ecting a decline,

The Board of Directors recommends that a dividend be declared for FY 2008/09 of DKK 3.00 per DKK 20 share, corresponding to 32% of the profi t for the year.

Outlook for 2009/10 FY 2009/10 is expected to see revenue at the same level as in 2008/09, an EBITDA in the region of USD 28-32 million and a profi t before tax of approx. USD 18-22 million.

Because of the scope and extent of the challenges currently prevailing in aviation, the outlook uncertainty for FY 2009/10 is high.

Revenue USDm

500

400

300

200

100

0

04/05 08/0907/0806/0705/06

Profi t before taxUSDm

25

20

15

10

5

0

04/05 08/0907/0806/0705/06

EBITDA before special items USDm

40

35

30

25

20

15

10

5

0

04/05 08/0907/0806/0705/06

EBIT margin*EBITDA margin before special items

EBITDA margin*/EBIT margin %

10

8

6

4

2

0

04/05 08/0907/0806/0705/06

6 REVIEW OF OPERATIONS

“The past year was characterized by declining passenger volumes, inventory reductions and lowered production levels for several types of aircraft, all of which contributed to the negative market developments. This notwithstanding Satair performed relatively well in the year in review, posting only a modest decline in revenue”.

Despite the global economic crisis Satair did relatively well in 2008/09, reporting only a modest revenue decline.

After several years of high growth in air traffi c, the past year was characterized by declining air passenger volumes and capacity reductions. Also, the tight fi nancial situation among air carriers put even stronger focus on the need to achieve effi ciencies, for instance in the form of inventory reductions. The aggregate effect of all these factors was a decline in the demand for spares and components, etc., on the part of air carriers.

Satair’s OEM Division mainly provides services to manufacturers of aircraft and helicopters, and the market for business jets in particular suffered under the economic recession. While helicopter manufacturers, who mainly sell to customers in the military segment, reported of a stable development in the order intake, major aircraft manufacturers registered a signifi cant decline in order intake net growth.

Also, practically all customers have slimmed their inventory levels, and this has affected both Group divisions.

Needless to say, the diffi cult market environment has prompted Satair to shift its focus and change its order of priorities. Besides trimming costs to match the lower revenue level, the Group has focused on forging stronger relationships with customers and suppliers.

Since practically all aircraft manufacturers and operators are severely affected by the crisis, it is important to fi nd good com-mon solutions and make the necessary adjustments in purchas-ing and inventory levels.

Satair has also decided to continue pursuing the overall guide-lines in its corporate strategy and sustain efforts to strengthen the foundation for future growth. Development of new supply chain solutions continues, and the Group is engaged in intense dialogues with customers and suppliers on this subject. Work is

also in progress to develop the product portfolio, and a new major supplier contract was signed in June 2009. The contract is expected to make a revenue contribution in the range of USD 20-25 million once it has been fully phased in.

Satair also continued developing Aftermarket programs in a collaborative effort with aircraft manufacturers and supplies products and services for Boeing’s IMM program (Integrated Material Management) and through Blue Sky Alliance. The Group-wide implementation of SAP, the new ERP system, was successfully completed by the end of the fi scal year. All Group companies now use the same IT platform, and that paves the way for effi ciencies in the internal processes and the development of better services.

It is diffi cult to predict when the current economic climate will improve, but Satair is ready to face yet another challenging year in 2009/10. The Group will keep up its efforts to tune the organization to the market environment and, at the same time, actively strengthen its opportunities for growth. Management fi nds that Satair is in a good position to emerge stronger from the current crisis in the world economy and aviation.

MARKET DEVELOPMENTS It was clear already at the beginning of Satair’s fi scal year that 2008/09 might become an extremely diffi cult year for the aviation industry due to the economic recession and the high fuel prices prevailing at the time. The fear turned out to be well-founded, and the past year was witness to some of the most dramatic fl uctuations ever experienced in the history of aviation.

The global economic slump dealt a severe blow to the aviation industry in the form of a dwindling demand for air tickets, including a sharp dive in the number of business class travelers, and a dive in air cargo volumes. Air carriers responded by reducing the number of destinations, resulting in aircraft being grounded. The result is a shrinking market for aircraft mainte-nance and, hence, sales of spares.

Review of operations

REVIEW OF OPERATIONS 7

Development in international passenger traffi c and air freightAnnual growth in %

International freight growthInternational traffi c growth

5

0

-5

-10

-15

-20

-25

-30

Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09

Group revenue by marketUSDm

Asia Pacifi cEMEA (Europe, the Middle East and Africa)

North and South America

27%

18%

55%

500

400

300

200

100

0

04/05 08/0907/0806/0705/06

After peaking at USD 147 per barrel in July 2008, oil prices dropped signifi cantly in the second half of 2008 to approx. USD 40 per barrel at year-end 2008. At the closing of Satair’s fi scal year the price of oil stood at USD 70 per barrel, and these wide fl uctuations pose a major challenge to air carriers.

Despite the cost reductions resulting from the declining oil prices and the signifi cant capacity adjustments, 2008 was an extremely bad year for air carriers all over the world, resulting in a total accounting defi cit in the industry of approx. USD 10 billion.

Developments in air traffi cIn 2008 IATA, the International Air Transport Association, reported a 1.6% growth in international air traffi c volumes against a growth rate in 2007 of 7.4%. Air traffi c shrank considerably in the second half of 2008 and the fi rst half of 2009 (Satair’s fi scal year) in most regions.

Traditionally, growth in air traffi c follows the fl uctuations in the world economy, however with wider swings. In periods of economic upturn, the growth rate of air traffi c is higher than that of the economy while, in recessionist periods, air traffi c will decline more than the economy.

The activity level within air cargo is refl ective of developments in international trade, which dropped by 4% in 2008. However, the decline in the second half of 2008 and the fi rst half of 2009 was much steeper.

IATA describes the current crisis as the worst ever in aviation. Air carrier revenue declined by 7% after 9/11, but IATA fears that the decline in 2009 may be as high as 15%.

Production of aircraft and helicoptersAfter several years of high growth in both order intake and production levels, 2008 proved to be a turning point for the two large manufacturers of commercial aircraft, Airbus and Boeing.

The combined effect of the diffi cult situation of air carriers and the challenges of fi nancing purchases of new aircraft sets an entirely new agenda for aircraft manufacturers. Although the two large manufacturers have a healthy order backlog corresponding to some fi ve years of production, they now fi nd themselves confronted with requests from several air carriers for postpone-ments or, even worse, cancellations of orders for new aircraft.

When an air carrier places an order for new aircraft, it has to pay a deposit, and for that reason order cancellations are an expensive solution. However, the situation is such that the underlying traffi c level is currently insuffi cient to justify all the new aircraft ordered. Airbus and Boeing try to accommodate the requests from air carriers for postponements.

Accordingly, Airbus and Boeing have responded to the current market environment by lowering production levels of certain types of aircraft. Also, the order intake in 2009 has been insignifi cant compared to the order intake in 2008, which was upwards of 1,400. In the fi rst half of 2009 Airbus had a net order intake of 68, with Boeing receiving only one new order.

2008 also posed problems in other respects, with additional delays in relation to Boeing’s 787 Dreamliner and the military transport aircraft A400M from Airbus. The order backlog for both aircraft is considerable, and both Airbus and Boeing suffer fi nancially because of the delays. Boeing also experienced a 53-day strike in 2008, as a result of which its aircraft deliveries dropped 15% from the 2007 level to 375 aircraft for the whole year.

In the fi rst half of 2009 a total of 500 aircraft were delivered by Boeing (246) and Airbus (254), and that is 14 aircraft more than in the same period in 2008. Despite certain reductions in produc-tion levels in the second half of the year, 2009 may turn out to be a record year for aircraft manufacturers. The existing record is from 1999, when the total production of aircraft stood at 914.

Source: IATA Carrier Tracker


BoeingSource: Airbus

DeliveriesNew orders

1,500

1,200

900

600

300

0

2004 2008200720062005

DeliveriesNew orders

AirbusSource: Airbus

1,500

1,200

900

600

300

0

2004 2008200720062005

Despite the economic crisis and the many problems in the avia-tion industry, it has been Boeing’s position throughout that the industry has a major growth potential. According to Boeing’s forecasts, air traffi c will grow by an average of 4.9% over the next 20 years, requiring a total of 29,000 new aircraft, or 1,450 new aircraft every year.

Satair’s largest customers within the production of helicopters reported a steady increase in 2008, and the order intake was good. The military segment accounts for most of the helicopter market, and it remained relatively stable and did not suffer from the negative impact of the economic crisis to the same degree as the commercial segments.

THE AFTERMARKET DIVISIONThe Aftermarket Division handles sales and distribution of aircraft spares to all types of commercial operators, mainte-nance workshops and a number of military operators. Satair is a global distributor within aftermarket services and has sales and warehousing locations in Europe, North America, the Middle East, and Asia Pacifi c. Sales in USDm

2007/08 2008/09 Growth Share

EMEA 116.4 122.4 5% 42%

Asia Pacifi c 102.2 103.9 2% 35%

North/South America 69.3 66.1 (5%) 23%

Total 287.9 292.4 2% 100%

The Aftermarket Division posted revenue of USD 292.4 million in 2008/09, refl ecting 2% in growth which was entirely organic. Growth in 2007/08 was 19%.

The main driver of revenue growth was the sales increase in Europe and the Middle East (EMEA) as well as in Asia Pacifi c, whereas sales in the American markets refl ected a general decline.

The Division’s activity levels are determined by the number of aircraft in operation. Fewer aircraft in operation reduce the need for maintenance and, hence, the demand for Satair’s services. According to an estimate from the Australian bank Macquarie, the global fl eet of aircraft had declined by 4.4% in the fi rst half

of 2009 from the year-earlier level due to the sagging demand for air travel and the resulting closing down of destinations by air carriers in an effort to tune costs to the lower activity levels.

Air passenger traffi c and capacity development June 2008 - 2009, Y/Y growth Region Traffi c Capacity

World (5.9%) (5.0%)

USA (4.5%) (4.8%)

Europe (8.0%) (7.3%)

Asia Pacifi c (5.8%) (3.2%)

Source: Macquarie Research

In view of the development in activities it is considered satisfac-tory that Satair’s Aftermarket Division achieved a minor increase in revenue. Growth was mainly driven by an optimization of sales of existing product lines, involving stricter customer focus and several new sales initiatives. Thus, the increase in 2008/09 is mainly attributable to improved order execution and increased project sales based upon an underlying strong customer portfolio, which means that it was achieved without the addition of major new product lines. However, new product lines were added late in the fi scal year, and they are expected to contribute revenue in the range of USD 20-25 million once they have been fully phased in.

Developments by regionThe revenue contribution from EMEA (Europe, the Middle East and Africa) in 2008/09 totaled USD 122.4 million, up 5%. Revenue growth was contributed by a large number of customers. EMEA accounts for 42% (40% in 2007/08) of the Aftermarket Division’s revenue.

Revenue growth in Europe came to 3% in 2008/09 driven by high growth in France, Germany and Turkey, whereas the UK, the Netherlands and Italy reported a decline due to reduced activity levels in some of the major air carriers.

The effect of the economic crisis on the European aerospace industry has been noticeable, and the crisis has been particularly severe in the UK, Italy and Spain with resulting considerable


“The Aftermarket Division posted revenue growth of 2% in the past year despite a reduction in the global fl eet of aircraft upwards of 4%. The primary reason for the positive development is Satair’s focus on an optimization of sales efforts and the redevelopment of its relationship with existing customers”.

declines in air traffi c. From July 2008 to June 2009 passenger volumes in British airports dropped 6%, and in the fi rst fi ve months of 2009 the drop was 7.5%.

The European air carriers have been reducing their capacity on an ongoing basis, and in June 2009 it had fallen to 7.3% below the year-earlier level.

Customers in the Middle East generated revenue growth of as much as 15%, with Dubai being a strong driver. The Middle East now accounts for 6.5% of the Aftermarket Division’s revenue, and the region has posted positive growth rates for several years in a row.

Asia Pacifi c contributed revenue of USD 103.9 million in 2008/09, up 2%. Asia Pacifi c accounts for 35% of the Division’s revenue, the highest growth rates occurring in China which remains a high-growth market in which the demand for air travel is on the rebound.

Besides China, the main growth drivers were Hong Kong, Australia and Thailand, while a decline was reported in India, Pakistan and Japan. For that reason aircraft capacity was also reduced considerably in several countries in Asia Pacifi c.

North and South America contributed revenue of USD 66.1 million in 2008/09, down 5%. The customers in this region were the fi rst to reduce capacity, the reason being that this was where the crisis started, and so the American air carriers were the fi rst to be affected by it. In view of the considerable capacity reduction and consolidation among American air carriers, revenue devel-opments in the American market are considered satisfactory.

Product linesOn the product side the positive trends in 2008/09 were driven mainly by the running-in of the A380 airliner. Every new aircraft in the air holds a high sales potential for Satair. At the closing of fi scal 2008/09, a total of 14 aircraft were operational (in Singapore Airlines, Qantas and Emirates), and Airbus has orders for an additional 186 aircraft. The next operator is likely to be Air France, who will take delivery of the fi rst A380 in late 2009.

Similar new opportunities will emerge when Boeing starts up deliveries of its new B787 Dreamliner, which is expected to fl y in the second half of 2010 after considerable delays. Satair’s sales potential per aircraft is expected to be at the same level as for the A380, but as Boeing has upwards of 800 aircraft on its order book the overall potential for the Dreamliner is signifi cantly above that of the A380.

Satair’s product strategy is targeted towards closer cooperation with systems suppliers, a group consisting primarily of major producers who aim at becoming participants in the new aircraft programs. To secure continued sales of spares and components, it is vital for Satair to make sure that its suppliers are preferred business partners of the large aircraft manufacturers.

One of Satair’s important product lines is cargo systems, and this line was adversely affected by the plunge in the market for air cargo which declined by 20%-plus in only one year.

ServicesActing upon the strong pressure on their fi nancial situation in the past two years, air carriers are now intensifying their focus on savings and effi ciencies. Processes are reviewed and new business models are being tested, and not surprisingly the outsourcing of non-core activities is a central element in their considerations.

Satair wishes to play a key role in helping customers achieve effi ciencies in their supply chain by means of new solutions. This will require closer ties between supplier, distributor and customer so as to create a more effi cient supply chain. Against this back-drop Satair is working on the development of new service concepts based upon close dialogues with selected customers.

Satair has gleaned considerable experience with the so-called service provider agreements from its many years in the OEM market, but despite advanced negotiations no new major con-tracts were signed in 2008/09. As service provider agreements involve the reassignment of purchasing responsibility and, hence, responsibility for reliability in supply, the parties are very careful to prepare mutually tenable contracts, and that proved to be more time-consuming than expected. Up until now Satair


has signed only minor service provider agreements in the Aftermarket, but the Group expects to sign more in future, provided that the terms and conditions are right.

Satair is also still collaborating closely with its suppliers on the development of power-by-the-hour concepts. Under these concepts, rather than having to invest in inventories of com-ponents, customers pay Satair an agreed rate for each hour the plane is in the air, or for each take-off or landing. Such projects are investment-intensive and require a large portfolio of aircraft in order for the customer to achieve the desired savings. Similar concepts are operated by Airbus and Boeing as well as by the large maintenance workshops, and there are plenty of indications that this will be part of the future business model in the aviation industry. As yet, no contracts have been signed under the power-by-the-hour concept.

Satair also cooperates with the two large actors in the outsourc-ing market, Boeing (under the IMM program) and UK-based Aero Inventory.

Blue Sky AllianceTogether with two partners, Satair concluded an agreement on an extension of the long-standing cooperation with Airbus in July 2008.

Thus, through a strategic alliance with Airbus and in a cooperation with Interturbine Logistics from Germany and Avio-Diepen from the Netherlands, Satair has concluded an agreement to support Airbus’ customers with aircraft maintenance parts. Between them, the partners have formed Blue Sky Alliance whose operative base is located with Airbus Spares Support & Services in Hamburg, Germany.

Airbus is a very important customer and partner to Satair, and the agreement reaffi rms the close ties between the two com-panies. There is broad cooperation between Satair and Airbus, both as regards the delivery of production parts for new aircraft – on a pan-European level and more recently also in China - and through Satair’s IPP concept which supports a wide range of Airbus global customers with spares from a large group of manufacturers in Airbus’ global portfolio of suppliers.

Blue Sky Alliance is the redevelopment of a well-established concept enabling Airbus operators to optimize their supply chain as regards the procurement of aircraft maintenance parts on a parallel basis to existing solutions. Blue Sky Alliance offers Airbus operators what is in principle a one-stop solution regarding deliveries of spares from a very large number of suppliers under the concept known as Single Point of Contact.

Blue Sky Alliance has pilot customers in Europe to test the concept, and contract interviews are being conducted with a large number of customers worldwide. For that reason it is too early to assess the real potential of this concept.

Repairs As part of efforts to expand its range of service concepts, Satair launched a program for repairs of spares and components intended for customers in Asia Pacifi c. In the current fi scal year Satair increased the range of services under the program to include services for/repairs of various A380 and B777 components. The revenue contributed by this business area remains modest.

THE OEM DIVISIONSatair’s OEM Division is a global distributor of fasteners, hard-ware, and ”C-class” products used directly in the manufacture of aircraft, helicopters and aviation systems. The products include primarily rivets, screws, bolts as well as a wide range of other products used in the manufacture of aircraft. Satair also offers customers an array of service concepts linked to the distribution of the products for the manufacture of aircraft.

Growth

Sales in USDm Actual Local

2007/08 2008/09 currency Share

EMEA 116.0 100.2 (14%) (6%) 85%

Asia Pacifi c 12.6 11.2 (11%) (11%) 9%

North/South America 7.2 6.8 (6%) 6% 6%

Total 135.8 118.2 (13%) (5%) 100%

2008/09 was a disappointing year for the OEM Division, with revenue declining 13% to USD 118.2 million. However, reported in local currency the revenue decline was only 5%. Sizeable falls in the exchange rates of GBP and EUR were the


“Satair has forged closer links to several customers and suppliers in an effort to fi nd common solutions to the challenges shared by all actors in the industry. The strengthened coop-eration helps Satair emerge from the global economic crisis as a stronger company”.

main contributors to the revenue decline of the OEM Division. The weakening of GBP and EUR against USD from the year-earlier level accounted for approx. USD 10 million of the total decline of USD 17.6 million.

The revenue decline was contributed mainly by EMEA, which posted a decline of 14% due to the negative developments in the UK market and the exchange rate effect. Since EMEA accounts for some 85% of the Division’s total revenue, the decline was attributable mainly to developments in this region. Revenue in Asia Pacifi c fell by 11% as a result of lower activity levels in China, which accounts for most of the sales in the region. The American markets reported a decline of 6% mainly as result of reductions in aircraft manufacturer Hawker Beechcraft.

Airbus and BoeingSatair sells considerable volumes to the manufacture of aircraft, either directly to the manufacturers or indirectly through sales to sub-suppliers. A large proportion of sales goes to companies in the EADS Group – Airbus in particular – with only a minor proportion going to Boeing.

The two largest aircraft manufacturers also feel the effects of the economic crisis, but due to the sizeable order backlog from previous years production levels were record high in 2008/09. This was refl ected in higher sales by Satair’s OEM Division to the large aircraft manufacturers and their sub-suppliers.

However, the fi nancial problems experienced by some air carriers have made them submit a request for postponements or cancellations of orders for new aircraft, and this has caused some problems for the manufacturers of aircraft. In this situation doubts have arisen concerning the solidity of the order backlog, and late in Satair’s fi scal year both Airbus and Boeing cut down production levels or issued notices of plans to do so.

At the same time, considerable delays have occurred in connec-tion with the launch of new airliner programs, the B787 Dream-liner from Boeing and the military transport aircraft A400M from Airbus. This has caused problems for the manufacturers and their sub-suppliers and has also had an adverse effect on Satair’s sales. Moreover, Boeing experienced a lengthy strike in

the fall of 2008 which affected several of the large sub-suppliers, who are Satair’s customers.

And lastly, many customers are doing an active effort to reduce inventory levels which have become too high as a result of the turn in business trends.

Business jetsThe steep reduction in the production of business jets has taken its toll on Satair. Sales of business jets are mainly determined by the level of accounting profi t in businesses as well as the general economic environment, and the market for business jets feels the brunt of the current crisis. The growing political focus on efforts to reduce CO2 emissions has also put a damper on the market for business jets. The effect on Satair is a sizeable reduction in sales to Hawker Beechcraft as well as to several sub-suppliers of aircraft manufacturers Bombardier in Canada and Embraer in Brazil, who manufacture business jets and small commercial aircraft.

HelicoptersThe helicopter market continued the positive developments in 2008. The total production output of Satair’s major customers – Eurocopter and AgustaWestland – increased by up to 20% in 2008 from the year-earlier level. The helicopter market is dominated by orders from the military, and this segment reported fi ne growth in the year in review.

A future surrounded by uncertaintyAt the present stage there is considerable uncertainty concerning the future production levels for aircraft and helicopters. On the one hand the economic crisis involves more postponements and cancellations of orders, but on the other hand the development of several underlying factors indicates a sustained increase in the demand for new aircraft and, hence, a high production level.

Oil prices have been widely fl uctuating and have been extremely high for periods of time. This is likely to trigger an increase in the demand for new aircraft with modern technology and a resulting lower fuel consumption. Also, there are strict environmental requirements for air carriers ahead, and that is another incentive to invest in environmentally-friendly aircraft.


“The OEM Division had a challenging year, and declining production levels with several customers – in particular for business jets – caused the Division’s revenue to go down. Although the production of aircraft may fall in the short term, the forecast for the long term is that renewed growth, the demand for aircraft with a lower fuel consumption and future strict environmental requirements to air carriers will provide a basis for higher production levels”.

As globalization spreads, travel patterns change and lead to the need for larger aircraft capable of fl ying long hauls. This is one of the reasons why, over a period of time, Airbus built up a healthy order backlog for the A380 and Boeing got several new customers for its long-distance B787 Dreamliner.

However, the order intake has now slowed to a trickle. In the fi rst half of 2009 Airbus and Boeing recorded a total net order intake of 69 aircraft, or a mere 7% of the 962 aircraft ordered during the same period in 2008.

But aircraft manufacturers remain optimistic and despite the economic crisis they uphold their long-term forecasts almost unchanged. Airbus and Boeing both expect a doubling of the existing fl eet of aircraft over the next 20 years, whereas experts in the industry expect a considerable decline in production levels beginning in 2010/11 and lasting for a couple of years, until the demand for aircraft starts edging its way back to a higher level.

THE IMPLEMENTATION OF SAPSatair made the decision to implement an ERP system common for all companies in the Group in order to achieve effi ciencies, reduce operating costs and allow the development of advanced solutions for customers and suppliers.

The implementation of SAP throughout the Group was completed at year-end and marked the end of a comprehensive process requiring sizeable investments, strong internal focus and a major effort on the part of all employees. Despite a few teething pro-blems, the implementation was successful. The total investment in the new ERP system amounts to approx. USD 7 million.

Satair is keen on making sure that the investment in SAP generates a return as soon as possible, and it is noted with satisfaction that the platform works well and is fully integrated.

Efforts to reap the benefi ts of the investment are already well under way. Reporting structures are being standardized, processes are being simplifi ed, and purchases are being improved. Informa-tion sharing has been greatly simplifi ed, and that helps improve cooperation between divisions and units. Cash savings are

available in the form of simplifi ed processes, and this work will be further intensifi ed in the coming fi scal year. The organiza-tional structure is being reviewed for the purpose of achieving effi ciency gains and exploiting the opportunities offered by the ERP system.

THE DEVELOPMENT OF EMPLOYEES AND KNOWLEDGEThe last couple of years have involved major changes in the aviation industry and its actors – among them Satair. At the same time, the current economic crisis poses considerable challenges – one of them being Satair’s ability to tune its organization and service offerings to the prevailing market environment.

The industry as a whole is exposed to changes in the role assigned to its actors in the value chain and in the services demanded by customers, and there is ever-increasing focus on cost control and effi ciency. Based on a wish to enhance its business opportunities, Satair is expanding its business and business concepts on an ongoing basis, and this is a major challenge to the organization’s ability to innovate and respond to change.

Among the major preconditions for Satair’s ability to retain and strengthen its position within aviation is its ability to develop knowledge and competencies and, at the same time, to display creativity. That is why Satair wishes to be able to attract, develop and retain employees with the right competencies.

The recruitment and development of employees build upon Satair’s corporate values, and special emphasis is on the follow-ing qualities in Group employees:

The ability to set ambitious targets – and to do one’s best and have the resources and energy necessary to meet these targets.

The ability to take a positive view of change and to consider change a chance to develop both the company and oneself.

The ability to engage in teamwork, contribute to a good working environment and provide services to customers and suppliers in a way that makes them appreciate being a business partner of Satair.


Breakdown of employees on market

Denmark USARest of Europe Asia Pacifi c

32%

39%

12%

17%

Denmark, averageOutside Denmark, averageYear-end

No. of employees

600

500

400

300

200

100

0

04/05 08/0907/0806/0705/06

Individual development plans are drawn up for all employees to ensure that their competencies develop in accordance with the requirements of the business as well as with their personal potential. At the same time, employees are developed by means of both internal and external training programs in the form of job training and other upgrading activities.

The Group has rolled out leadership training programs that operate across the global organization. These programs play an important role in efforts to develop management competencies and quality and to maintain and strengthen a common manage-ment culture in the Group. Satair’s ability to fulfi ll its strategic objectives hinges upon a successful outcome of these efforts.

One of these programs is a new 2-year international talent pro-gram targeted at employees who have previously demonstrated a good understanding of the business and achieved excellent results, and who besides possessing a certain level of manage-ment experience also have the right personal and professional competencies. The purpose of the talent program is to build an international talent pool consisting of strong and competent employees, to fi nd natural successors to current key resources, and to create attractive internal career paths. The program aims to develop the participants’ management skills and give them an in-depth knowledge of Satair’s global activities. As part of the process, each participant will be assigned an internal mentor who will provide regular sparring and guidance.

The Group’s targeted efforts in relation to HR was a contributory factor in earning it the ‘Silver Standard for Aerospace Best Employer Award’, which is presented by the Association of Aerospace Industries, Singapore, and which went to Satair in the spring of 2009. Having received such an award helps Satair attract employees with the right competencies and gives a strong boost to internal motivation.

The Group fi nds it important to ensure that the management and dissemination of knowledge and information accumulated by its employees is handled in a coordinated manner. Over a number of years, focus has been on the development of powerful IT systems capable of supporting effi cient knowledge

management and knowledge sharing. The internationalization of the Group’s activities has made it necessary to develop systems that facilitate and ensure an exchange of knowledge and information across geographical and subject-related boundaries. Satair’s current IT systems cover its needs with regard to both Business Intelligence and fast and effi cient knowledge sharing by all parts of the organization. The systems help increase the effi ciency and speed with which information trickles down within the Group and make sure that decisions are made on the basis of relevant and necessary information.

At the expiry of FY 2008/09 the Group had a total of 520 full-time employees of whom 172 worked in Denmark.

THE ENVIRONMENTIn the performance of its business activities the Group endeavors to assess and reduce the impact on the environment, and it strives to make both a direct and indirect contribution to a sustainable environment.

The direct environmental impact from Satair is extremely limited, as its business activities comprise distribution and service provision.

The Group is not involved in any contamination cases.

Satair is not covered by the provisions of Danish legislation on environmental permits, nor is it covered by the Danish act on environmental corporate reporting in the form of ‘green’ accounts.

INCENTIVE SCHEMESIt is a part of the Group’s strategy to establish incentive schemes to make sure that its management, employees and shareholders are endeavoring to achieve common goals.

Satair’s current incentive schemes involve: a warrant program for the Executive Committee and a

number of people in key management positions a bonus program for the Executive Committee and a

number of people in key management positions employee shares


Warrant programThe existing warrant program was established late in FY 2006/07 and covers the Group’s Executive Committee (3 persons) and a number of people in key management positions in the global organization (up to 18 persons).

Allocation is made on the basis of the fulfi llment of pre-deter-mined fi nancial targets for the Group’s revenue and earnings, and the number of warrants depends upon the degree of fulfi llment. Warrants are fi nally allocated upon the adoption by the Board of Directors of the Annual Report 2009/10, and participants in the scheme must still be employed by the Group to be eligible for the grant.

Warrants earned may be exercised in the period from the publication of the Annual Report 2009/10 and until the publication of the Annual Report 2012/13 and in the trading windows occurring during that period. Warrants earned but not exercised in the course of the above period will cease to exist and no further compensation will be available.

For more information about the warrant program, see note 32.

Bonus programIn June 2007 it was also decided to roll out a new bonus program covering the same group of people as the warrant program. An annual cash bonus will be granted based upon the fulfi llment of targets defi ned for each individual participant in relation to his or her personal development and business area. The size of the bonus will depend upon the degree of fulfi llment of each of the pre-defi ned targets.

Employee sharesSatair has been offering employee shares on a regular basis – most recently in December 2007. The employee shares, which are currently placed on trust, account for a total of 1.4% of the total share capital. At the closing of FY 2008/09 a total of 63% of the Group’s employees held Satair shares, accounting for about 2% of the share capital.

PROPOSAL TO THE ANNUAL SHAREHOLDERS’ MEETINGThe Board proposes to the Annual Shareholders’ Meeting that the profi t for the year, USD 7.7 million, be distributed as follows:

A dividend of DKK 3.00 share of DKK 20 USD 2.438 m

Transfer to distributable reserves USD 5.273 m

Total USD 7.711 m

The Board of Directors proposes the re-election of N. E. Nielsen, Finn Rasmussen and W. Nicholas Howley.

The Board also proposes that in the period until the next ordinary Annual Shareholders’ Meeting, the Board be authorized to arrange for the company to acquire treasury shares for maximum 10% of the amount in sharecapital at the price listed at the time of acquisition plus/minus 10%.

OUTLOOK FOR FISCAL 2009/10Market developmentsThe continued global crisis and the current challenges in the aviation industry still make it diffi cult to predict developments in Satair’s activity levels and earnings in fi scal 2009/10.

The decline in the demand for air transport force air carriers to reduce capacity and cost levels by grounding aircraft. Moreover, a number of air carriers allegedly need to postpone or cancel already placed orders for new aircraft, as in the next couple of years the total capacity is likely to exceed the demand.

The sagging demand for air capacity affected the OEM Division in 2008/09 and will remain a considerable challenge in 2009/10. Although the production of new aircraft by both Airbus and Boeing will be at a record high in the calendar year 2009, many subsup-pliers have already been affected by a decline in production levels caused by the high inventory levels of prefab aircraft parts. Against that background it is uncertain to what degree production will decline in 2009/10. The production of business jets has dropped signifi cantly and is not expected to bounce back in 2009/10.


“Satair did well during one of the most diffi cult years ever in the history of aviation, posting a moderate decline in revenue and sustained profi t. This is testimony of a robust business model capable of adding value for customers, suppliers and shareholders”.

For Satair as a whole, the second half of the year is expected to see activity levels that are higher than in the fi rst half. However, the development, too, is subject to considerable uncertainty.

Financial expectationsThe stated expectations for 2009/10 build upon a DKK/USD rate of 535 and interest rates at around the present level.

Revenue in 2009/10 is forecast in the region of USD 400-415 million, unchanged from the year-earlier level.

The Aftermarket Division expects some improvement in market conditions in the second half of the year. The new product lines from Eaton will be released into the market in the course of the year and are expected to contribute revenue of approx. USD 15 million. The Division expects total revenue growth of around 3-5%.

The situation is different for manufacturers of aircraft and helicopters and their many sub-suppliers – all of them customers of the OEM Division. With lowered production levels, the closing of airliner programs and high inventory levels, 2009/10 is expected to become a diffi cult year. The OEM Division expects a total revenue decline of around 10%.

The gross margin is forecast at around 21.0-22.0%, a decline of some 1-2 percentage points from the 2008/09 level mainly due to a lower margin in the OEM Division as a result of closed-down production programs and keener competition. Other contributory factors are pressure from suppliers and air carriers who wish to reduce their cost levels.

The EBITDA margin before special items is forecast at around 7.0-8.0% against 9.3% last year. Operating costs are expected to total USD 55.0 million against the year-earlier level of USD 57.1 million. However, the line of initiatives taken by Satair to achieve cost reductions will not fully compensate for the above factors, resulting in a reduced margin.

Special items are forecast at nil based on the assumptions made in relation to exchange rates. Because of the low growth level forecast for next year, it is unlikely that any warrants will be allo-cated in 2009/10. Special items in 2008/09 totaled 11.2 million.

EBITDA is forecast in the range of USD 28-32 million, and the EBITDA margin is forecast in the range of 7.0-8.0% against 6.5% in 2007/08.

Amortization, depreciation and write-downs are forecast at around USD 5.3 million, including USD 0.8 million in depreciation on the SAP investment.

Financial items are forecast to refl ect net costs in the order of USD 5.0 million. In 2008/09 fi nancial items refl ected USD 12.6 million in net costs following adjustments in the fair value of interest hedging contracts.

Profi t before tax is forecast in the range of USD 18-22 million against USD 9.8 million in 2008/09.

The effective tax rate for 2009/10 is forecast at around 25%.

Cash fl owsThe level of funds tied up in net working capital is related to the level of activities. Under the assumption of total revenue growth of around nil, the cash fl ow from operating activities in 2009/10 is forecast at an improved, positive level.

The cash fl ow from investing activities is forecast in the range of USD 1-2 million.

The question of dividend will be decided on the basis of the Group’s adopted dividend policy.

FORWARD-LOOKING STATEMENTThe above forward-looking statements, in particular those that relate to future sales and operating profi t, are subject to risks and uncertainties as various factors, many of which are outside Satair’s control, may cause the actual development to differ materially from the expectations contained in this annual report. Factors that might affect such expectations include, among others, major changes in the market environment, the product portfolio, the customer portfolio, exchange rates or company acquisitions or divestments. See also the section on Risk Management on p. 40.

16

Shareholder relations

Developments in price and trading volumes of the Satair sharePrice No. of shares

PriceMidCap, relative

Trading volume

300,000

225,000

150,000

75,000

0

Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09

250

200

150

100

50

BASIC DATA FOR SATAIR

Share capital 85,645,040

No. of shares 4,282,252

Denomination DKK 20

No. of share classes 1

Voting right restrictions None

Listing locations NASDAQ OMX Copenhagen

Trading symbol SAT

ISIN code DKK10230390

Bloomberg code SAT DC

Reuter code SATA.CO

Index MidCap

INVESTOR RELATIONSIt is Satair’s ambition that the share price will always refl ect the company’s actual and expected ability to create shareholder value. Satair endeavors to attain this ambition by communicating regular, timely, accurate and relevant information about the company – including its strategy, results and expectations. By means of detailed reporting, Satair aims to give its stakeholders simple, convenient access to information, while stressing the importance of engaging in an active dialogue with the stakeholders. For instance, the Exec-utive Committee regularly participates in meetings with investors, analysts and the media. Communications and share-related presentations from Satair are made available on the company’s website, www.satair.com, immediately following their publication.

THE SATAIR SHARE In end-June 2009 the share capital consisted of 4,282,252 shares in denominations of DKK 20, corresponding to a share capital of DKK 85,645,040, see the above table. There were no changes in the share capital in FY 2008/09.

Movements in Satair’s share capital No. of shares Share capital

of DKK 20 in DKK

IPO in 1997 2,005,073 40,101,460

Issue of employee shares in 1997 50,000 1,000,000

Issue of employee shares in 2000 25,000 500,000


Issue of shares in 2004 300,000 6,000,000


Targeted placement in November 2005 245,000 4,900,000

Pre-emptive issue in January 2006 1,349,252 26,985,040

Targeted placement in May 2006 212,942 4,258,840


Total at June 30, 2009 4,282,252 85,645,040

During the period until November 2010, the Board of Directors is authorized to issue up to 338,487 warrants, corresponding to nominal DKK 6,769,740. In addition, the Board of Directors has authorization valid until 2011 to increase the share capital by up to nominal DKK 1,000,000 through the issue of employee shares and by up to nominal DKK 400,000 through the issue of bonus shares to the employees.

In end-June 2009 the price of the Satair share was 135.0, refl ect-ing a decline of 42% during fi scal 2008/09, while the MidCap index at NASDAQ OMX Copenhagen declined by 46% over the same period.

The total volume of Satair shares traded in FY 2008/09 stood at 1,066,456 (1,596,548 in FY 2007/08), corresponding to approx. 25% of the total number of shares in the Group.

The Satair share is covered by the following analysts: SEB Enskilda and Nordea.

SHAREHOLDER RELATIONS 17

SHAREHOLDERSApprox. 4,000 shareholders had arranged for name registration of their shares by June 30, 2009, representing 93% of the share capital.

Shareholders having fi led ownership of 5% or more of the share capital:

Matignon Investissement 2 FCPR 1, rue de la Faisanderie, 75116 Paris, France

(8.1% of the share capital). Compagnie du Bois Sauvage s.a.

Rue du Bois Sauvage 17 B, 1000 Bruxelles, Belgium (7.0% of the share capital). ATP (labour market pension scheme)

Kongens Vaenge 8, 3400 Hilleroed, Denmark (5.0% of the share capital).

The Group had no holding of treasury shares at the closing of FY 2008/09.

Members of the company’s Board of Directors and Executive Committee held a total of 2.4% of the share capital at June 30, 2009.

DIVIDENDOn an ongoing basis, the Board of Directors assesses the policy for distributing the earnings generated by the company between declaration of dividends to the shareholders and investments in the company. The review build upon the assumptions that Satair fi nds it important to continue paying out dividend to its shareholders on an ongoing basis; that Satair must be able to expand its business through value-adding activities whether or not there are periods of time during which these activities do not create positive liquidity; that Satair must maintain a justifi able balance between the level of shareholders’ equity and foreign capital; and that the decision to declare dividend must always be considered against the Group’s commercial developments going forward as well as developments in the markets, com-mercial and fi nancial, where the Group operates.

The Board takes the view that it should be a guiding principle of Satair’s dividend policy to declare a dividend of 30% of the earnings in any given year.

Based on the Board of Directors’ assessment of the above aspects and the present capital structure, the Board proposes to the Annual Shareholders’ Meeting that a dividend be declared of DKK 3.00 per DKK 20 share, corresponding to 32% of the profi t for the year (2007/08: 34%). Compared to 2007/08 dividend has been reduced by some 50% due to the decline in earnings.

Dividend for the year is paid out automatically through VP Securities Service immediately after the Annual Shareholders’ Meeting which is held on October 22, 2009.

ANNUAL SHAREHOLDERS’ MEETINGis held on October 22, 2009 at 5pm at the ‘Den Sorte Diamant’, Søren Kierkegaards Plads 1, DK-1214 Copenhagen K.

Enquiries concerning Satair from shareholders, analysts, investors, stockbrokers and other stakeholders should be addressed to:

Amager Landevej 147ADK-2770 Kastrup Tel.: +45 3247 0100

IR responsibles:CEO John StærE-mail: [email protected]

CFO Michael HøjgaardE-mail [email protected]

Contact: Coordinator Lisette Bjørn CappaiE-mail: [email protected]

IMPORTANT RELEASES TO THE NASDAQ OMX COPENHAGEN IN 2008/09

2008July 15 Satair and Airbus to intensify cooperationSeptember 17 Annual Report 2007/08October 8 Notice of Annual General Meeting in SatairOctober 23 Preliminary information about Q1 2008/09October 23 Annual General Meeting November 12 Report for Q1 2008/09

2009February 5 Report for Q2 2008/09May 13 Report for Q3 2008/09June 9 Financial diary 2009/10

FINANCIAL DIARYOctober 22, 2009 Annual General MeetingNovember 11, 2009 Report for Q1 2009/10February 4, 2010 Report for Q2 2009/10May 12, 2010 Report for Q3 2009/10June 30, 2010 Closing of fi scal 2009/10

18

Corporate governance

Satair’s Management has a steadfast commitment to good corporate governance practices and reviews the framework and principles of the overall management and control of the company on an ongoing basis.

The recommendations issued by NASDAQ OMX Copenhagen regarding corporate governance are applicable to Satair, and Satair complies with practically all of these recommendations. However, Satair has decided that members of the Board of Directors elected by the Annual Shareholders’ Meeting sit for a two-year term, and that no information is disclosed on the remuneration paid to the individual members of the Executive Committee.

INTERACTION WITH SHAREHOLDERS AND OTHER STAKEHOLDERSSatair’s Management wishes to engage in, and is making an active effort to establish and maintain, good communication and dialogues with shareholders and other stakeholders. Satair is striving to achieve a high degree of openness and transparency in the dissemination of information about its fi nancial perform-ance, activities and strategy.

Information to and dialogues with shareholders and stakeholders take the form of communications and releases and also involve meetings with investors, fi nancial analysts and the press. Commu-nications and presentations are available on the Group’s website immediately upon their publication. The website is in English, but communications and releases, annual reports and the Group’s Articles of Association are also available in Danish.

The Board of Directors reviews the Group’s capital and share structure on an ongoing basis to check that it is tuned to the interests of the Group and its shareholders.

Satair has one class of shares, and there are no privileges attached to any of its shares. Each share of DKK 20 gives its holder one vote.

The Group’s Articles of Association impose no restrictions on shareholdings or voting rights. If an offer is made to take over the Group’s shares, the Board of Directors will consider such an offer in an open and transparent process – as required by law – and communicate the offer to the Group’s shareholders with its comments.

Satair has concluded a few agreements with suppliers which may be terminated in case of a change of control of the company.

The Annual Shareholders’ Meeting is Satair’s highest decision-making authority, and the Board of Directors is committed to briefi ng shareholders thoroughly about matters to be decided

by the Meeting. Matters to be decided by the Annual Share-holders’ Meeting are decided by simple majority. The adoption of special resolutions, such as proposals to amend the Group’s Articles of Association and to change the size of the share capi-tal, requires the support of two thirds of the votes cast and two thirds of the voting stock represented at the Meeting.

A notice convening the Annual Shareholders’ Meeting is issued and sent to registered shareholders not later than eight days prior to the day of the Meeting. All shareholders are entitled to attend and vote at the Meeting, see the Articles of Association. Furthermore, shareholders may give a proxy to the Board of Directors or others for each of the items on the agenda. At the Annual General Meetings, shareholders get an opportunity to put questions to the Board of Directors and the Executive Com-mittee. Also, there is a deadline before which shareholders may submit proposals for consideration by the Annual General Meeting.

THE DUTIES OF THE BOARD OF DIRECTORSThe Board of Directors is responsible for the overall management of Satair and deals with all matters relating to the overall devel-opment of the Group, including its objectives and strategies, budgets, risk management, proposals for mergers, acquisitions and divestments, and major development and investment projects.

The general guidelines pertaining to the duties of the Board of Directors are defi ned in its Order of Business which is revised minimum once a year and adjusted as and when required. The Order of Business contains provisions on e.g. procedures for the reporting by the Executive Committee, the working methods to be applied by the Board of Directors, and a description of the duties and responsibilities of the Chairman of the Board.

The Board usually meets six times a year, and the content and topics of the meetings follow a fi xed plan. One of the meetings involves an in-depth discussion and determination of the Group’s strategy. The Board may also meet as and when required. In 2008/09 the Board held eight meetings of which two were held as conference calls. Board members cancelled their attendance at board meetings in 2008/09 eight times. The Board receives regular briefi ngs on the Group’s affairs – and these briefi ngs include a monthly report.

Satair has set up two committees – an Audit Committee, and a Remuneration Committee. The Audit Committee consists of two members, Finn Rasmussen (chairman), and Carsten L. Sørensen, and it held three meetings in 2008/09. The Remuneration Committee also consists of two members, N. E. Nielsen and W. Nicholas Howley, and it held two meetings in 2008/09.

CORPORATE GOVERNANCE 19

THE COMPOSITION OF THE BOARDIt follows from the Group’s Articles of Association that the Annual Shareholders’ Meeting elects between three and six members to the Board. The Board currently has nine members of whom six have been elected by the Annual Shareholders’ Meeting and three are employee representatives. The former group is elected for a term of two years and may be reelected. This is not in compliance with the recommendations issued by NASDAQ OMX Copenhagen according to which all board members should sit for a one-year term. The term of two years was chosen in order to ensure continuity in the work performed by the Board. The members elected by the employees sit for a term of four years, and this term was fi xed in pursuance of the provisions of the Danish Companies Act. See p. 21 for a presentation of the individual board members. The Board elects a chairman.

The Board members elected by the Annual Shareholders’ Meeting will resign from the Board at the Annual Shareholders’ Meeting of the year in which they turn 70, unless the Board has made a unanimous decision to the contrary.

When the Board proposes new candidates for board membership, it does so only after a careful assessment of the knowledge and professional experience needed to ensure the presence on the Board of all the necessary competencies. Also, the Board strives to achieve the best possible composition in relation to age, background, gender, etc., so as to ensure a competent and diverse contribution to the work performed by the Board. It was in keeping with this principle that, a couple of years ago, the Board deemed it appropriate to allow the Group’s international activities to be refl ected in its composition. Consequently, the Group now has four non-Danish board members from Belgium, the USA, Singapore and Malaysia, respectively.

The Board fi nds that its current membership is satisfactory in view of the tasks and challenges facing the Group. The members of the Board have wide experience in general management, aviation, transnational corporate activities, and sales and marketing.

The members of the Board elected by the Annual Shareholders’ Meeting are all deemed as being independent. The Chairman of the Board is a partner in Bech-Bruun lawfi rm, which in some cases acts as legal adviser to Satair. However, Satair also retains the services of other lawfi rms, and the business relationship between Bech-Bruun and Satair is not material to either party.

THE EXECUTIVE COMMITTEEThe Executive Committee is employed by the Board of Directors that also lays down the terms of employment and the framework for the duties to be performed by the Executive Committee. The

Executive Committee is responsible for the day-to-day running of the Group, including the development of its activities and operations, its performance and internal development as well as the implementation of its strategy and the overall decisions approved by the Board of Directors.

The Board assigns powers and responsibilities to the Executive Committee in pursuance of the Board’s Order of Business. Pro-cedures have been drawn up for the reporting and communi-cation to be provided by the Executive Committee to ensure a continuous fl ow of relevant and necessary information to the Board of Directors.

Satair’s Executive Committee has three members – a CEO, a CFO responsible for accounting, fi nance and IT, and a COO responsible for sales, marketing, business development and the foreign subsidiaries.

SALARY AND EMOLUMENTS TO BOARD AND EXECUTIVE COMMITTEESatair strives to ensure that members of Board and Executive Committee are paid salaries/emoluments at a competitive and fair level suffi cient to enable the Group to attract and retain competent employees.

Members of the Board receive a fi xed annual amount in emolu-ment, and the total amount in emoluments is approved by the Annual Shareholders’ Meeting in connection with its approval of the Annual Report. In the accounts for FY 2008/09 the amount in emoluments totaled USD 360,000 of which USD 80,000 was the emolument paid to the Chairman. This is unchanged from last year. The Board is not covered by bonus or warrant schemes.

The two members of the Audit Committee share an additional total fee of USD 20,000. This is unchanged from last year. Members of the Remuneration Committee do not receive a separate fee for their work on the committee.

The Board of Directors determines the salary to be paid to Exec-utive Committee members and endeavors to apply principles of remuneration which promote longterm value creation, ongoing earnings improvement and the performance of the individual member. In 2008/09 the salary to Executive Committee members consisted of a basic salary, including the usual benefi ts in the form of a company car and paid phone, and a bonus scheme. The granting of bonus is linked to the degree of fulfi llment of targets specifi c to the individual business area as well as personal targets and may account for up to two thirds of the amount in basic salary. The Board may also grant bonus on a discretionary basis, for instance because of extraordinary circumstances, work

20 CORPORATE GOVERNANCE

efforts or a quite unique performance. The total amount paid in salary to the Executive Committee in 2008/09 stood at USD 2.7 million (2007/08: USD 2.9 million). Executive Committee members are also covered by a warrant program (see note 32). The Board believes that the remuneration paid to individual Executive Committee members is a personal matter, and for that reason it has been decided not to disclose this information.

An agreement has been concluded with the members of the Executive Committee enabling them to resign with two years’ pay in case of a change of control of the company.

EVALUATION OF BOARD AND EXECUTIVE COMMITTEEEvery year a self assessment procedure is carried out of the work performed by the Board of Directors and the Executive Committee. The procedure is carried out by the Chairman of the Board as a questionnaire survey and involves the members of the two bodies. It includes a review of the achievements of Board and Executive Committee, the cooperation between the two bodies, their competencies and the quality of Executive Committee’s reporting to the Board. The Board Chairman reviews the individual evaluations, using them as a basis for one-on-one interviews and a discussion in plenary at a Board meeting. Based on the outcome of the self assessment process, the Board decides which initia-tives that are required to improve the effi ciency and quality of the work done by the Board and the Executive Committee.

RISK MANAGEMENTThe Board performs an assessment of the overall risk profi le of the Group as well as of the individual risk factors that follow from its activities.

The Board decides the policy and frameworks that apply to the Group’s signifi cant risks and ensures that the Group has an effective risk management system. Briefi ngs on developments in relation to the most signifi cant risks are contained in the ongoing reports to the Board.

A detailed description of Satair’s risk profi le is available in note 2 of the Annual Report.

As part of the Group’s risk management, a set of internal control systems has been established which is assessed by the Board minimum once a year for the purpose of making sure that it is appropriate and adequate and in compliance with good practice in the fi eld.

AUDITORS Satair’s external auditor is appointed by the Annual Shareholders’ Meeting for a term of one year. Prior to the nomination, the auditor is subjected to an assessment by the Board to establish the independence and competency of the auditor.

The frames of reference for the work performed by the auditor, including the fee, auditrelated assignments and non-audit assignments, are agreed between the Board and the auditor on an annual basis upon recommendation of the Audit Committee.

The members of the Board receive the long-form reports prepared by the external auditor about the auditors’ review of the annual report.

The Board of Directors and the Audit Committee meet with the external auditor to go over the annual report and the long-form reports, and at the meeting they discuss the observations made by the auditor as well as any material aspects raised by him on the basis of the audit performed. At the meeting the parties also go over the most important accounting policies and accounting estimates.

21

Management

BOARD OF DIRECTORS

N. E. NIELSEN, born 1948

Attorney-at-law

Chairman of the Board

Joined the Board in 1994

Reelected in 2007,

term expiring 2009

Chairman of the Board of:

Amagerbanken A/S

Ambu A/S

CAREPOINT Haslev/ Ringsted A/S

Charles Christensen A/S

Cimber Air-Holding A/S

Dampskibsselskabet TORM A/S

Danica-Elektronik A/S

Gammelrand Skærvefabrik A/S

InterMail A/S

Mezzanin Kapital A/S

PELE Holding A/S

P.O.A. Ejendomme A/S

SCF Technologies A/S

Member of the Board of:

Weibel Scientifi c A/S

and their subsidiaries

Special competencies:

General management as chairman of

listed companies with global activities.

Specialist in company law

DORTE SONNE EKNER, born 1969

Deputy Project Manager

Elected by the employees

Joined the Board in 2002,

term expiring in 2010

W. NICHOLAS HOWLEY, born 1952

CEO and chairman of the board of

TransDigm Group Inc.


Reelected in 2007,



Founder of TransDigm, which is

engaged in the design, manufacture

and distribution of components for civil

and military aircraft, based in the USA

PER IVERSEN, born 1957

Director – Business Development




ANJA KONGSTED, born 1969

Contract & Sales Support

Manager, Asia




YVES LIÉNART, born 1962

Member of the Executive Committee

of Compagnie du Bois Sauvage,

Brussels, Belgium.


Reelected in 2008,



Management background from both

industrial and fi nancial companies,

based in Belgium

CHAN NYUK LIN, born 1954

President


Reelected in 2008,

term expiring in 2010.


International experience within

aerospace, based in Singapore

FINN RASMUSSEN, born 1949

General Manager


Reelected in 2007,



International experience within

aerospace. Aviation maintenance and

insurance specialist based in Denmark.

CARSTEN L. SØRENSEN, born 1952

President


Reelected in 2008,

term expiring in 2010.


General management, sales and

marketing experience from major

international companies, based in the

Far East.

SHAREHOLDINGS OF MEMBERS OF BOARDAND EXECUTIVE COMMITTEE No. of shares held at Sold in Acquired in

30/6 2009 2008/09 2008/09

N. E. Nielsen 1,706 0 0

Dorte Sonne Ekner 1,634 0 384

W. Nicholas Howley 2,695 0 0

Per Iversen 1,048 0 0

Anja Kongsted 357 0 0

Yves Liénart 0 0 0

Chan Nyuk Lin 0 0 0

Finn Rasmussen 65,800 0 0

Carsten L. Sørensen 12,734 0 0

John Stær 14,339 0 0

Morten Olsen 2,670 0 0

Michael Højgaard 50 0 0

I alt 103,033 0 384

EXECUTIVE COMMITTEE

JOHN STÆR, born 1951

CEO

Joined Satair in 1994

Member of the Board of:

Ambu A/S

MORTEN OLSEN, born 1964

COO


MICHAEL HØJGAARD, born 1964

CFO


22

Financial review

INCOME STATEMENTFiscal 2008/09 was a diffi cult year for Satair, with both com-mercial and fi nancial challenges that had a signifi cant adverse effect on the Group’s overall fi nancial performance. The global crisis has caused dramatic changes in the market environment in which Satair operates.

Against that backdrop the growth expectations announced at the opening of fi scal 2008/09 could not be met, and the considerable changes in exchange rates and interest rates, in a combination with the increasing risk premiums charged by the banks, had a material effect on Satair’s cost structure. Moreover, the level of earnings actually attained in the year in review was somewhat different from the opening guidance.

However, notwithstanding the impact of these external factors Satair succeeded in improving its key fi gures and ratios and internal processes in the course of 2008/09.

For instance, the gross profi t for the year and the EBITDA margin before special items rose to the highest levels in the past fi ve years; investments in working capital have gone down, and for the year as a whole cash resources were released; and the SAP platform has been implemented throughout the Group, paving the way for additional process improvements and cost reductions.

Consolidated revenue in 2008/09 totaled USD 410.6 million, refl ecting 3% in negative organic growth, which is in line with the most recent guidance.

The Aftermarket Division posted revenue of USD 292.4 million, up 2%, while the OEM Division posted revenue of USD 118.2 million, down 13%.

Reported in local currencies the OEM Division posted negative growth of 5% as most of the revenue is invoiced in GBP and EUR. The OEM Division’s revenue stated in USD refl ects a major impact of any weakening in these two currencies. In the year in review, the average cross rate GBP/USD dropped 20%, while the cross rate EUR/USD rate declined by 7%.

In the Aftermarket Division revenue is mainly invoiced in USD, which makes the Group’s growth less sensitive to fl uctuations in exchange rates. Reported in local currencies, consolidated growth aggregated -1%.

Gross profi t in FY 2008/09 came to USD 95.1 million, and as stated in the most recent guidance the gross margin went signifi cantly above the year-earlier level.

In 2008/09 the gross margin was impacted by a number of favorable circumstances in both divisions, resulting in a con-solidated gross margin of 23.2% against 22.7% last year. The increase is partly attributable to the continued work on customer segmentation and price differentiation as well as a favorable development in product mix. Another positive effect came from developments in exchange rates, especially as regards the contracts under which purchases are made in EUR, while sales are settled in USD.

Profi t before special items, depreciation and amortization (EBITDA before special items) came to USD 38.0 million in 2008/09 against USD 34 million in 2007/08.

In the most recent guidance the EBITDA margin before special items was expected ‘in the region of USD 40 million’, and the actual fi gure is believed to be on the low side of this level.

Compared to the most recent guidance, the level of total SG&A costs was stated at a higher level, primarily as a result of addi-tional costs towards consultants for the SAP implementation, wages, etc.

The total cost percentage in 2008/09 stood at 13.9% against 14.7% last year, up 0.8 percentage points. The cost percentage refl ects the negative impact of the revenue decline as well as the positive impact of increase of the USD rate. There is also a certain positive effect from achieved cost effi ciencies, but the full effect will not be seen until next year.

The EBITDA margin before special items for 2008/09 came to 9.3%, up 1.3% percentage points from last year due to the higher gross profi t and the lower cost percentage.

Costs relating to the SAP implementation were recognized in the income statement in an amount of approx. USD 1.5 million.

Profi t before depreciation and amortization (EBITDA) came to USD 26.8 million in 2008/09 against USD 37.3 million last year, refl ecting an EBITDA margin of 6.5% in 2008/09 against 8.8% in 2007/08. This was on a par with expectations.

The reason for the decline was a major impact on the 2008/09 EBITDA of a net loss of USD 10.7 million from currency hedging contracts against a net gain of USD 5.7 million in 2007/08. The loss on currency contracts was generally on a par with expectations.

FINANCIAL REVIEW 23

Because of the change in the Group’s risk management policy carried out in FY 2008/09, the accounting loss on currency hedging contracts recognized in the income statement equals the actual loss. At the end of fi scal 2008/09 currency hedging contracts had been signed so as to hedge next year’s cash fl ow in currencies. In accordance with the Group’s accounting policies unrealized gains on these contracts are taken directly to shareholders’ equity in an amount of USD 0.9 million.

Reference is made to note 2 as well as to the section on the fi nancial outlook for additional information about currency hedging.

Also included in the income statement for 20087/09 in special items is a cost item of USD 0.5 million concerning costs related to the warrant program set up in June 2007 (calculated using the Black-Scholes formula). The recognized amount in cost is much lower than in 2007/08, as the defi ned fi nancial targets could not be met, and for that reason much fewer warrants were allocated than in 2007/08. Additional information on the warrant program is available in note 7 as well as in the review of operations and in note 32.

Depreciation, amortization, and impairment contributed total costs of USD 4.4 million of which amortization of acquired distribution rights constitutes a total of USD 2.8 million (2007/08: USD 2.8 million).

Profi t from primary operations (EBIT) came to USD 22.4 million in 2008/09 against USD 33.0 million in 2007/08, refl ecting an EBIT margin of 5.5% against 7.8% in 2007/08.

Net interest expenses totaled USD 7.5 million in 2008/09 against USD 5.8 million in 2007/08. The increase in interest expenses is mainly attributable to a generally increasing risk premium on external fi nancing. The decline in interest rates has not affected Satair to any signifi cant degree, as approx. two thirds of the Group’s total external fi nancing was taken out at fi xed interest rates through interest hedging contracts. The aggregate amount in net interest expenses is on a par with expectations.

Foreign exchange adjustments of outstanding balances with banks as well as payables and receivables contributed a total of USD 1.2 million in net income (2007/08: USD 1.6 million in net costs).

Fair value adjustments of interest hedging contracts amounted to a total cost item of USD 6.6 million in 2008/09 against an expected USD 7.3 million announced in the most recent guid-ance. The interest hedging contracts contributed with a net cost of USD 4.3 million in 2007/08.

The change made in the Group’s risk management policy in Q3 2008/09 led to a modifi cation of the majority of interest hedging contracts in order to make them comply with the criteria for hedge accounting. Effective from the time the modifi cation was effected in March 2009 and until the closing of fi scal 2008/09 in June 2009, a total of USD 3.3 million in fair value adjustments of interest hedging contracts in hedging of a total amount in debt of USD 66.4 million has been taken directly to shareholders’ equity.

This leaves a number of short-term interest hedging contracts that still do not comply with the criteria for hedge accounting. These contracts expire in December 2009 and resulted in a total positive fair value adjustment of USD 0.2 million in 2008/09 against an expected negative fair value adjustment of USD 0.5 million, which makes them the main reason why the actual costs of fair value adjustments of interest hedging contracts are lower than expected.

Reference is made to note 2 for additional information on interest rate risks.

Profi t before tax in 2008/09 came to USD 9.8 million (USD 21.6 million in 2007/08) against the expected level of USD 12 million. The reason for the shortfall in profi t before tax is the increase in operating costs.

The total amount in income tax expense for the year came to USD 2.1 million, refl ecting a tax rate of 21% (31% in 2007/08). The tax rate in 2008/09 refl ects the positive effect of a lower amount in non-deductible costs and increased earnings in countries with a relatively low tax level.

BALANCE SHEETAt the end of fi scal 2008/09 the amount in invested capital including goodwill totaled USD 218.0 million, down from USD 221.7 million at the end of last year due to an improvement in working capital.

24 FINANCIAL REVIEW

CASH FLOWS AND INVESTMENTSThe cash fl ow from operating activities in 2008/09 was positive in an amount of USD 8.2 million (USD -7.9 million last year), which was on a par with expectations. The increase was due mainly to a focused effort to reduce the amount in funds tied up in receivables by means of a reduction of the amount in receivables fallen due.

The amount of capital tied up in inventories came to USD 160.4 million at the end of 2008/09 against USD 154.0 million last year. Because of the lengthy delivery times from Satair’s suppliers the amount tied up in inventories will be adversely affected when the expected revenue growth does not materialize. The OEM Division often signs contracts with customers of 3-5 years’ duration, which means that Satair hedges its price risk by placing purchasing orders of a similar duration. In periods with sales below the expected level, Satair will experience an increase in inventories in the medium term of certain product types for which there are no other buyers. The Group is endeavoring to adjust the inventory levels of such products by adapting its purchases and by invoking contractual provisions enabling Satair to transfer certain non-consumed inventories to the customer on prearranged conditions.

There is still a considerable challenge in upholding payment terms for certain suppliers, and part of the improvements achieved in relation to inventory turnover and trade debtors are not refl ected in improved net cash fl ows but compensate for deteriorated payment terms with suppliers.

The cash fl ow from investing activities was negative in an amount of USD 2.1 million (USD -8.7 million in 2007/08), the most important item being the SAP investment of USD 2.2 million. Over the past two years Satair has rolled out an extra-ordinarily large investment program totaling USD 12.1 million concerning the domicile property and SAP. The process was completed by the end of FY 2008/09, and going forward the necessary investments are expected to remain at a much lower level.

The cash fl ow from fi nancing activities was negative in an amount of USD 4.7 million (USD 13.7 million in 2007/08), refl ecting mainly the dividend declared to shareholders in Satair A/S of USD 4.1 million.

CASH RESOURCESThe Group’s agreed total drawing rights amount to USD 150 million, and with a total of USD 97.2 million in net bank debt at the closing of 2008/09 the unutilized cash resources at closing came to USD 52.8 million (USD 18.8 million in 2007/08). The Group conducts an ongoing dialogue with the banks concerning the maintenance of its credit facilities.

25

Defi nitions of key fi gures and ratios

The key fi gures and ratios are calculated in accordance with the recommendations of the Danish Association of Financial Analysts and as stated below:

Gross margin: Gross profi t * 100

Revenue

SG&A margin: Staff and other costs * 100

Revenue

EBITDA margin EBITDA before special items * 100

before special items: Revenue

EBITDA margin: EBITDA * 100

Revenue

EBIT margin: EBIT * 100

Revenue

Return on equity: Profi t after tax and minorities * 100

Average shareholders’ equity less minorities

Equity ratio: Shareholders’ equity at year-end less minorities * 100

Balance sheet total at year-end

Earnings per share: Profi t after tax and minorities

Average no. of shares

Cash fl ow from operating Cash fl ow from operating activities

activities per share: Average no. of shares

Book value per share: Shareholders’ equity at year-end less minorities

No. of shares at year-end

Market cap/book value: Listed price at year-end * no. of shares at year-end

USD rate at year-end

Invested capital: Working capital, intangible and

tangible assets and other provisions

26

Signatures and Auditors’ Report

MANAGEMENT’S STATEMENT ON THE ANNUAL REPORT

The Executive and Supervisory Boards have today considered and

adopted the Annual Report of Satair A/S for 2008/09.

The Annual Report was prepared in accordance with International

Financial Reporting Standards as adopted by the EU and additional

Danish disclosure requirements for annual reports of listed companies.

In our opinion, the Annual Report gives a true and fair view of the

fi nancial position at 30 June 2009 of the Group and the Parent Company

as well as of the results of the Group and Parent Company operations

and cash fl ows for the fi nancial year 1 July 2008 - 30 June 2009.

In our opinion, Management’s Review gives a true and fair view of the

development in the activities and fi nancial circumstances of the Group

and the Parent Company, of results of operations for the year and of

the overall fi nancial position of the enterprises comprised by the

Consolidated Financial Statements, as well as the fi nancial position of

the Parent Company, and a description of the most signifi cant risks

and uncertainties facing the Group and the Parent Company.

We recommend that the Annual Report be adopted at the Annual

General Meeting.

Kastrup, September 15, 2009

Executive Committee

John Stær Morten Olsen Michael Højgaard(CEO) (COO) (CFO)

Board of Directors

N. E. Nielsen (Chairman)

Dorte Sonne Ekner W. Nicholas Howley

Per Iversen Anja Kongsted

Yves Liénart Chan Nyuk Lin

Finn Rasmussen Carsten L. Sørensen

INDEPENDENT AUDITORS’ REPORT

To the shareholders of Satair A/S

We have audited the Annual Report of Satair A/S for the fi nancial year

1 July 2008 - 30 June 2009, which comprises Management’s Statement,

Management’s Review, signifi cant accounting policies, income statement,

balance sheet, statement of changes in equity, cash fl ow statements

and notes for the Group as well as for the Parent Company.

The Annual Report is prepared in accordance with International Financial

Reporting Standards as adopted by the EU and additional Danish

disclosure requirements for annual reports of listed companies.

Management’s responsibility for the Annual Report

Management is responsible for the preparation and fair presentation of

the Annual Report in accordance with International Financial Reporting

Standards as adopted by the EU and additional Danish disclosure

requirements for annual reports of listed companies. This responsibility

includes: designing, implementing and maintaining internal control

relevant to the preparation and fair presentation of an Annual Report

that is free from material misstatement, whether due to fraud or error;

selecting and applying appropriate accounting policies; and making

accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on the Annual Report based

on our audit. We conducted our audit in accordance with Danish Auditing

Standards. Those Standards require that we comply with ethical require-

ments and plan and perform the audit to obtain reasonable assurance

that the Annual Report is free from material misstatement. An audit

involves performing procedures to obtain audit evidence about the

amounts and disclosures in the Annual Report. The procedures selected

depend on the auditor’s judgment, including the assessment of the risks

of material misstatement of the Annual Report, whether due to fraud

or error. In making those risk assessments, the auditor considers internal

control relevant to the Entity’s preparation and fair presentation of the

Annual Report in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the Entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by Management, as well

as evaluating the overall presentation of the Annual Report. We believe

that the audit evidence we have obtained is suffi cient and appropriate

to provide a basis for our audit opinion.

Our audit has not resulted in any qualifi cation.

Opinion

In our opinion, the Annual Report gives a true and fair view of the

fi nancial position at 30 June 2009 of the Group and the Parent Company

and of the results of the Group and Parent Company operations and cash

fl ows for the fi nancial year 1 July 2008 - 30 June 2009 in accordance

with International Financial Reporting Standards as adopted by the EU

and additional Danish disclosure requirements for annual reports of

listed companies.

Copenhagen, September 15, 2009

PricewaterhouseCoopers

Statsautoriseret Revisionsaktieselskab

Jens Otto Damgaard Birgitte Schou Lassen

State Authorized Public Accountant State Authorized Public Accountant

27

Income statement for the period July 1, 2008 to June 30, 2009 (USD ‘000)

3 Revenue 188,908 188,182 423,710 410,564 Cost of goods sold (156,062) (155,894) (327,354) (315,479) Gross profi t 32,846 32,288 96,356 95,085 4 Staff costs (21,194) (20,435) (41,904) (39,067)5 Other costs (3,698) (1,270) (20,406) (18,012) Profi t before special items and depreciation and amortization (EBITDA before special items) 7,954 10,583 34,046 38,006 6 Fair value adjustments of certain hedging instruments 5,704 (10,657) 5,704 (10,657)7 Other special items (2,090) (427) (2,445) (545) Profi t before depreciation and amortization (EBITDA) 11,568 (501) 37,305 26,804 13 Amortization (75) (228) (2,952) (3,075)15 Depreciation (532) (578) (1,387) (1,344) Profi t on primary operations (EBIT) 10,961 (1,307) 32,966 22,385 16 Dividends 11,666 (1,661) - -8 Financial income 1,258 2,096 1,622 1,8859 Financial expenses (3,423) (4,711) (8,980) (8,118) Fair value adjustments of interest hedging contracts (4,370) (4,772) (4,280) (6,634)17 Share of profi t of associates (76) (73) 247 296 Profi t before tax 16,016 (10,428) 21,575 9,814 10 Income tax expense (1,957) 2,046 (6,735) (2,103) Profi t for the year 14,059 (8,382) 14,840 7,711

Attributable to: Equityholders of the parent company 14,059 (8,382) 14,887 7,711 Minority interest - - (47) - Profi t for the year 14,059 (8,382) 14,840 7,711

Earnings per share11 Earnings per share - - 3.47 1.8011 Earnings per share - diluted - - 3.46 1.80

Note 2007/08 2008/09 2007/08 2008/09

GROUPPARENT COMPANY

28

ASSETS

Non-current assets 13, 14 Intangible assets 5,391 11,686 48,774 52,87515 Property, plant and equipment 8,172 7,834 12,924 11,98216 Investments in subsidiaries 62,730 59,961 - -17 Investments in associates 36 27 1,125 1,190 Receivables from subsidiaries - 26,553 - -18 Deferred tax assets - 1,517 4,132 6,371 Total non-current assets 76,329 107,578 66,955 72,418 Current assets 19 Inventories 52,034 52,558 153,974 160,37220 Receivables from sales and services 24,856 19,310 81,671 55,264 Receivables from subsidiaries 7,330 6,333 - - Receivable in corporate tax 602 374 882 47121 Other receivables and prepayments 1,538 1,294 3,859 2,177 Cash and cash equivalents 1,385 3,370 3,168 8,272 Total current assets 87,745 83,239 243,554 226,556

Total assets 164,074 190,817 310,509 298,974

Note 2007/08 2008/09 2007/08 2008/09

Balance sheet At June 30, 2009 (USD ‘000)

GROUPPARENT COMPANY

BALANCE SHEET 29

EQUITY AND LIABILITIES

Shareholders’ equity 22 Share capital 12,745 12,745 12,745 12,745 Reserves and retained earnings 83,432 72,692 104,651 107,062 Shareholders’ equity belonging to the parent company’s shareholders 96,177 85,437 117,396 119,807 Minorities - - - - Total shareholders’ equity 96,177 85,437 117,396 119,807 Non-current liabilities 18 Deferred tax liability 81 - - -27 Other non-current liabilities 150 3,372 1,863 4,52627 Credit institutions 11,033 11,033 47,849 34,602 Total non-current liabilities 11,264 14,405 49,712 39,128 Current liabilities 27 Credit institutions 11,204 48,726 61,546 70,863 Payable to suppliers 34,205 23,988 63,089 45,386 Payable to subsidiaries 221 5,788 - - Current tax payable - - 2,465 4,60723, 27 Other current liabilities 11,003 12,473 16,301 19,183 Total current liabilities 56,633 90,975 143,401 140,039

Total liabilities 67,897 105,380 193,113 179,167

Total equity and liabilities 164,074 190,817 310,509 298,974 26 Cash and cash equivalents less overdraft facilities 27 Derivative fi nancial instruments28 Pledges and security29 Contingent liabilities30 Lease commitments31 Transaction with closely related parties32 Share-based remunerations – warrant program33 Subsequent events34 Group directory

Note 2007/08 2008/09 2007/08 2008/09

GROUPPARENT COMPANY

30

Profi t before depreciation and amortization (EBITDA) 11,568 (501) 37,305 26,804 Non-cash items 835 1,171 (4,577) 1,438 Interest received 1,628 533 1,567 102 Interest paid (2,330) (4,183) (6,621) (7,238) Paid in corporate tax (2,464) 229 (4,718) (2,535)24 Change in working capital (3,615) (5,088) (30,832) (10,331) Cash fl ow from operating activities 5,622 (7,839) (7,876) 8,240 Dividend from subsidiaries 11,666 461 - - Dividend from associates - - 443 295 Acquisition of intangible assets (4,025) (2,291) (4,025) (2,292) Acquisition of tangible assets (4,956) (240) (5,964) (705) Capital increase in subsidiaries and associates (10,645) (68) (63) (68)25 Acquisition of company – adjustment of purchase price - 650 - 650 Disposals of property, plant and equipment 803 - 883 51 Cash fl ow from investing activities (7,157) (1,488) (8,726) (2,069) Dividend paid to the shareholders of Satair A/S (4,538) (4,122) (4,538) (4,122) Capital increases (net) 63 - 63 - Proceeds from long-term borrowings 5,900 - 5,900 - Repayment of long-term borrowings (14,541) - (15,141) (600) Loans to subsidiaries 2,557 (22,088) - - Cash fl ow from fi nancing activities (10,559) (26,210) (13,716) (4,722) Net cash fl ow for the year (12,094) (35,537) (30,318) 1,449

Cash and cash equivalents less overdraft facilities at July 1 13,026 932 (12,047) (44,474) Foreign exchange adjustment of cash and cash equivalents - - (2,109) 3,957 26 Cash and cash equivalents less overdraft facilities at June 30 932 (34,605) (44,474) (39,068)

Note 2007/08 2008/09 2007/08 2008/09

Statement of cash fl ows for the period July 1, 2008 to June 30, 2009 (USD ‘000)

GROUPPARENT COMPANY

31

Consolidated statement of shareholders’ equity (USD ‘000)

Foreign Share Premium Cash fl ow exchange Retained capital on issue hedge adjustments earnings Total Minorities Total

2007/08Shareholders’ equity at July 1, 2007 12,668 42,396 - 1,264 46,740 103,068 79 103,147Foreign exchange adjustment of investments in subsidiaries - - - 1,045 - 1,045 (2) 1,043Adjustment on liquidation of company - - - - (12) (12) (30) (42)Net profi t recognized directly in shareholders’ equity - - - 1,045 (12) 1,033 (32) 1,001 Profi t for the year - - - - 14,887 14,887 (47) 14,840 Total income - - - 1,045 14,875 15,920 (79) 15,841

Costs of share-based remuneration - - - 2,883 2,883 - 2,883Issue of employee shares 77 (14) - - 63 - 63Dividend - - - - (4,538) (4,538) - (4,538)Shareholders’ equity at June 30, 2008 12,745 42,382 - 2,309 59,960 117,396 - 117,396

Under the item “Issue of employee shares”, the premium in connection with the capital increase amounts to USD 19,000 after deduction of total costs incurred in connection with the capital increase, amounting to USD 33,000.

2008/09Shareholders’ equity at July 1, 2008 12,745 42,382 - 2,309 59,960 117,396 - 117,396Revaluation of fi nancial contracts before tax - - 4,186 - - 4,186 - 4,186Foreign exchange adjustment of associates - - - (7) - (7) - (7)Translation adjustment of investment in subsidiaries - - - (5,250) - (5,250) - (5,250)Tax on movements in shareholders’ equity - - (1,083) 431 - (652) - (652)Net profi t recognized directly in shareholders’ equity - - 3,103 (4,826) - (1,723) - (1,723)Profi t for the year - - - - 7,711 7,711 - 7,711 Total income - - 3,103 (4,826) 7,711 5,988 - 5,988

Costs of share-based remuneration - - - - 545 545 - 545Dividend - - - - (4,122) (4,122) (4,122)Shareholders’ equity at June 30, 2009 12,745 42,382 3,103 (2,517) 64,094 119,807 - 119,807

The share capital consists of 4,282,252 shares in denominations of DKK 20. The share capital is registered in DKK, but converted into USD at historical price it totals USD 12,745,424. Movements in shareholders’ equity are explained in shareholder relations p. 16.

Proposal for and payment of dividend is described in note 12.

32

Statement of shareholders’ equity, parent company (USD ‘000)

Foreign Share Premium Cash fl ow exchange Retained capital on issue hedge adjustments earnings Total

2007/08Shareholders’ equity at July 1, 2007 12,668 42,396 - - 28,995 84,059Foreign exchange adjustment of associates - - - 6 - 6 Net profi t recognized directly in shareholders’ equity - - - 6 - 6 Profi t for the year - - - - 14,059 14,059 Total income - - - 6 14,059 14,065

Costs of share-based remuneration - - - - 2,528 2,528Issue of employee shares 77 (14) - - - 63Dividend - - - - (4,538) (4,538)Shareholders’ equity at June 30, 2008 12,745 42,382 - 6 41,044 96,177

Under the item “Issue of employee shares”, the premium in connection with the capital increase amounts to USD 19,000 after deduction of total costs incurred in connection with the capital increase, amounting to USD 33,000.

2008/09Shareholders’ equity at July 1, 2008 12,745 42,382 - 6 41,044 96,177Foreign exchange adjustment of associates - - - (7) - (7)Translation adjustment of investment in subsidiaries - - - (1,727) - (1,727)Revaluation of fi nancial contracts before tax - - 3,519 - - 3,519Tax on movements in shareholders’ equity - - (879) 431 - (448)Net profi t recognized directly in shareholders’ equity - - 2,640 (1,303) - 1,337 Profi t for the year - - - - (8,382) (8,382)Total income - - 2,640 (1,303) (8,382) (7,045)

Costs of share-based remuneration - - - - 427 427Dividend - - - - (4,122) (4,122)Shareholders’ equity at June 30, 2009 12,745 42,382 2,640 (1,297) 28,967 85,437

The share capital consists of 4,282,252 shares in denominations of DKK 20. The share capital is registered in DKK, but converted into USD at historical price it totals USD 12,745,424. Movements in shareholders’ equity are explained in shareholder relations p. 16.

Proposal for and payment of dividend is described in note 12.

33

1 Accounting policies 34

2 Risk management 40

3 Segment information – Group 44

4 Staff costs 46

5 Remuneration to auditor elected by the annual shareholders’ meeting 46

6 Fair value adjustment of certain hedging instruments 46

7 Other special items 46

8 Financial income 46

9 Financial expenses 47

10 Income tax expenses 47

11 Earnings per share 47

12 Paid and proposed dividend 47

13 Intangible assets 2007/08 Group 48

13 Intangible assets 2008/09 Group 48

13 Intangible assets 2007/08 Parent company 49

13 Intangible assets 2008/09 Parent company 49

14 Impairment test 50

15 Property, plant and equipment 2007/08 Group 51

15 Property, plant and equipment 2008/09 Group 51

15 Property, plant and equipment 2007/08 Parent company 52

15 Property, plant and equipment 2008/09 Parent company 52

16 Investments in subsidiaries 52

17 Investment in associates 53

18 Deferred tax assets and liabilities 53

19 Inventories 54

20 Receivables from sales and services 54

21 Other receivables and prepayments 54

22 Share capital 54

23 Other current liabilities and prepayments 54

24 Changes in working capital 55

25 Acquisition of company 55

26 Cash and cash equivalents less overdraft facilities 55

27 Derivative fi nancial instruments 56

28 Pledges and security 61

29 Contingent liabilities 61

30 Lease commitments 61

31 Transactions with closely related parties 61

32 Share-based remuneration – warrant program 62

33 Subsequent events 63

34 Group directory 63

Note

List of notes

34

Note

Notes

1 ACCOUNTING POLICIES

The Annual Report for 2008/09 of Satair A/S is prepared in

accordance with the EU-approved International Financial Reporting

Standards (IFRS) at June 30, 2009 as well as Danish reporting

requirements to the fi nancial reporting by listed companies.

Basis for preparation

The accounts have been prepared under the historical cost conven-

tion, except for areas in which IFRS explicitly require the use of fair

values.

The accounting policies outlined below have been applied consist-

ently in the fi scal year and in the comparative fi gures.

The USD is considered the most important functional currency for

both the Group and the Parent Company, and for that reason it

has been chosen as the presentation currency in the presentation

of the accounts for both Group and Parent Company.

Accounting policies – changes in the risk management policy

Effective from Q3 2008/09 the Group changed its risk management

policy in relation to derivative fi nancial instruments. The accounting

policies applied in the presentation of the Annual Report are

unchanged from last year, but because of the change in policies

the majority of the contracts used effective from the beginning of

Q3 of the current fi scal year qualify for hedge accounting under

the accounting rules.

Derivative fi nancial instruments are still arranged solely for the

purpose of hedging future cash fl ows and in accordance with the

Group’s risk management policy. Previously the derivative fi nancial

instruments were not seen to qualify for hedge accounting under the

accounting rules. In future, the Group will primarily use derivative

fi nancial instruments that qualify for hedge accounting under the

accounting rules, and for that reason the accounting rules on

hedging will also be applied.

Changes in such part of the fair value of derivative fi nancial instru-

ments as meets the criteria for recognition as a hedge of future cash

fl ows and which act as an effective hedge against changes in the

value of the hedged item are recognized in shareholders’ equity in

a separate reserve for hedge transactions. Upon the realization of

the hedged transaction any gains or losses arising under such hedge

transactions will be released from shareholders’ equity and recog-

nized in the income statement under separate accounting items.

Changes in derivative fi nancial instruments that are not seen to

qualify for hedge accounting are recognized in the income statement

on an ongoing basis.

The recognition in the income statement of both effective and

ineffective derivative fi nancial instruments is effected by means of

the same accounting items as before the change in the risk manage-

ment policy.

Because of the changed policy, a gain of USD 4.2 million was recog-

nized in shareholders’ equity at the closing of the fi scal year relating

to currency hedging of future cash fl ows and interest hedging.

Implementation of new fi nancial reporting standards

No new fi nancial reporting standards were implemented in fi scal

2008/09.

Financial reporting standards for subsequent implementation

The following new standards, changes and interpretation contribu-

tions approved by the EU as at the balance sheet date have not

been applied prior to the effective date:

Changes to IAS 1 requiring changes in the presentation of

certain fi nancial reporting elements. The changes do not affect

the recognition, measurement or presentation of individual

transactions or other events.

IFRS 8, which requires segments and segment information to

be identifi ed on the basis of internal management reports. The

standard replaces the existing IAS 14, where segment information

is based on business areas and geographical location. IFRS 8 is

expected to be applied from 2009/10 and it is currently being

considered how the implementation should take place.

The other standards, changes and interpretation contributions

issued by IASB but irrelevant for Satair at the present stage

include: IFRS 1-4, 7 and IAS 23, 32 and 39, the annual proposals

for improvements and a number of minor changes from May

2008, and IFRIC 12-18.

PRINCIPLES OF CONSOLIDATION

The consolidated fi nancial statements

The consolidated fi nancial statements comprise the parent company,

Satair A/S, and subsidiaries in which the parent company directly

or indirectly holds the majority of voting rights or in which in some

other way it has operational and fi nancial control.

The consolidated fi nancial statements are prepared based on the

fi nancial statements of parent company and subsidiaries by consoli-

dating uniform accounting items. The fi nancial statements used for

the annual report of the Group have been prepared in accordance

with the Group’s accounting policies.

NOTES 35

Note

1 ACCOUNTING POLICIES (CONTINUED)

On consolidation, intra-group income and expenses, shareholdings,

dividends and balances, and realized and unrealized gains and losses

on intragroup transactions are eliminated. In the consolidated

fi nancial statements the accounting items of subsidiaries are included

in full. The proportionate share to minorities of the result for the

year is recognized as part of the consolidated profi t for the year and

as a separate part of the Group’s shareholders’ equity.

Business combinations

Newly acquired or newly founded subsidiaries are recognized from

the time when control over the acquired subsidiary is transferred.

On the acquisition of subsidiaries the purchase method is applied.

Any difference between the cost of an acquisition and the Group’s

share of the net asset value of the acquired enterprise at the date of

acquisition as calculated in accordance with the Group’s accounting

policies is distributed on the individual assets and liabilities of the

acquired enterprise on the basis of their fair value. This includes

any contingent liabilities in relation to the acquired enterprise. Any

remaining difference (group goodwill) is recognized as an intangible

asset. Goodwill is not amortized but is tested for impairment once

a year. In the event of impairment, the asset will be written down

to the lower recoverable amount.

Enterprises disposed of or liquidated are recognized until the date

of disposal. Any gains or losses in relation to the carrying amount

at the date of disposal are entered in the income statement.

The comparative fi gures are not restated for acquisitions, disposals

or liquidations.

Segment information

The Group’s primary reporting format is business segments and its

secondary format is geographical segments.

Information on business segments follows the Group’s return and

risks as well as its management structure and internal fi nancial

control.

Sales of goods between business segments are effected on market

terms.

Income and expenses up to and including ”Profi t on primary oper-

ations (EBIT)” can be reliably attributed to the segment and are an

integral part of the Group’s internal fi nancial control. Primary

operations include costs that are not directly attributable and which

have been allocated on the basis of pre-determined distribution keys.

Non-current assets in the segment include non-current assets

directly used in the segment’s operations, including intangible as

well as property, plant and equipment.

Current assets in the segment include current assets directly used in

the segment’s operations, including inventories, receivable from sales

and services.

Segment liabilities are liabilities resulting from the operating activities

of the segment, including payables to suppliers.

Foreign currency translation

Transactions denominated in foreign currencies in the course of the

year are translated at the exchange rates at the transaction date.

Gains and losses arising between the exchange rates at transaction

date and date of payment are recognized in the income statement.

Receivables, payables and other monetary items denominated in

foreign currencies which are not settled at the balance sheet date

are translated at the exchange rates at the balance sheet date. The

difference between the exchange rates at balance sheet date and

transaction date is recognized in the income statement.

Balance sheet items of foreign subsidiaries in another functional cur-

rency than USD are translated at the exchange rates at the balance

sheet date, and their income statements and cash fl ow statements

are translated at average exchange rates corresponding approximately

to the rates as at the transaction date. Foreign exchange differences

arising on the translation of opening shareholders’ equity in foreign

subsidiaries, and foreign exchange differences arising on the

translation of income statements at average exchange rates and on

the translation of balance sheet items at the exchange rates at the

balance sheet date, are recognized directly in shareholders’ equity.

Derivative fi nancial instruments

The Group’s derivative fi nancial instruments act as an effi cient fi nan-

cial hedge under the Group’s risk management policy, and following

the change made in the current fi scal year in the Group’s risk man-

agement policy, the majority of derivative fi nancial instruments now

qualify for hedge accounting under the accounting rules.

Derivative fi nancial instruments that are seen to qualify for cash

fl ow hedge accounting are called ‘effective’, whereas derivative

fi nancial instruments that are not seen to meet these criteria are

called ‘ineffective’.

Changes in the fair value of effective derivative fi nancial instruments

are recognized directly in shareholders’ equity in a separate reserve

and is released to the income statement in the period during which

the hedged item affect the income statement.

36 NOTES

Note


Changes in the fair value of ineffective derivate fi nancial instruments

are recognized directly in the income statement under separate items

captioned ‘fair value adjustments of interest hedging contracts’ and

‘fair value adjustments of certain hedging instruments’.

Derivative fi nancial instruments are initially recognized in the balance

sheet at fair value and are subsequently measured at fair value.

Positive and negative fair values of derivative fi nancial instruments

are included in the items ‘Other receivables and prepayments’ and

‘Other current liabilities’.

The fair value of derivative fi nancial instruments is determined by

means of generally used valuation methods for such instruments

based on observable market data. The fair value of interest hedging

contracts is calculated as the net present value of anticipated future

cash fl ows. The fair value of forward exchange contracts is deter-

mined as the net present value of the difference between the

exchange rate at which the contracts were signed and the exchange

rate at the balance sheet date. The fair value of currency options is

determined on the basis of the difference between the exercise price

and the exchange rate listed at the balance sheet date and volatility.

For both effective and ineffective derivative fi nancial instruments,

such part of the fair value adjustment as is attributable to the time

value is always recognized directly in the income statement.

All fair values are based on prices stated at market value or standard

pricing models.

INCOME STATEMENT

Revenue

Revenue comprises invoiced sales of goods and services made during

the year provided that delivery and transfer of risk to the buyer has

taken place by fi scal year-end.

Cost of goods sold

Cost of goods sold comprises the cost of commercial products

consumed to achieve the revenue for the fi scal year and other

direct, variable costs including write-downs for obsolescence.

Staff costs

Staff costs include wages, salaries and pension costs for the Group’s

employees as well as other staff-related costs.

Incentive program

The value of services received from employees in return for warrants

is measured at the fair value of the warrants at the day of grant and

is recognized in the income statement under special items for the

period in which the fi nal entitlement in the warrants is achieved.

The related contra-entry is recognized directly in shareholders’ equity.

In connection with the initial recognition of warrants, an estimate is

made of the number of warrants to which the employees are expect-

ed to become entitled. The estimate will subsequently be adjusted

in order for the overall recognition to build upon the actual number

of warrants to which the employees have become entitled.

The fair value of warrants granted is calculated by means of the

Black-Scholes formula.

Other costs

Other costs comprise the costs of distribution, sales, advertising,

administration, operational leasing, rental of premises, etc. Services

provided in connection with operational leasing are recognized in

the income statement for the duration of the leasing period.

Other special items

Special items comprise costs calculated on the basis of the Black

Scholes formula for the incentive program, including employee

shares, as well as profi t from the sale of real property.

Amortization, depreciation and impairment

Amortization includes amortization of intangible assets, while

depreciation and impairment comprise depreciation and impairment

for the year of property, plant and equipment.

Dividend and profi t on investment in associates

In the consolidated fi nancial statements the item contains the

proportionate share in the profi t or loss after tax of associates.

In the parent company’s accounts the item contains write-downs

and dividend for the year declared by subsidiaries and associates.

Dividend is recognized once the competent corporate bodies have

approved the shareholder’s entitlement to dividend.

If the amount in dividend exceeds the amount in total earnings

after the time of acquisition, the latter will be recognized as a

write-down of the cost of the investment.

Financial income and expenses, net

Financial income and expenses, net comprise interest received and

paid as well as foreign exchange adjustments relating to receivables

and payables not stated in a functional currency.

Also, fair value adjustments of ineffective interest swaps are

recognized directly under fi nancial income and expenses, net.

NOTES 37

Note


Tax

Income tax expenses consists of current tax and deferred tax for

the year, the effect on deferred tax of changes in tax rates, and

adjustments of current tax relating to previous years. Such part of

tax for the year as is attributable to items directly under shareholders’

equity is taken directly to shareholders’ equity.

Current tax is calculated at the tax rate applicable for the year.

Deferred tax is measured according to the tax rules and at the tax

rates applicable by law in the respective countries at the balance sheet

date when the deferred tax is expected to crystallize as current tax.

Current tax payable and receivable is recognized in the balance sheet

as tax computed on the taxable income for the year, adjusted for

tax on the taxable income of prior years and for tax paid on account.

Deferred tax is measured using the balance sheet liability method

on all temporary differences between the carrying amount and the

tax base of assets and liabilities. Adjustment is made to deferred tax

relating to unrealized intragroup profi ts and losses.

Deferred tax assets, including the tax base of tax loss carryforwards,

are measured at the expected value of their utilization; either as a

set-off against tax on future income or as a set-off against deferred

tax liabilities in the same legal tax entity.

BALANCE SHEET

Intangible assets

Goodwill is measured at cost less accumulated write-downs.

Acquired distribution rights are recognized at cost less amortization.

Rights under non-cancelable contracts are amortized on a linear

basis over the contract term. Other rights are amortized on a linear

basis over the expected useful life. Distribution rights are amortized

over 5-10 years.

Acquired IT software and development costs are recognized as

assets provided that there is suffi cient assurance that the value in

use of future earnings will cover the related costs.

IT software and development costs are measured at cost less accum-

ulated amortization and impairment. The amortization period is up

to 10 years and is determined on the basis of the experience gained

with regard to the useful life of the individual groups of assets.

The residual values and useful lives of assets are reassessed and

changed, if necessary, at each balance sheet date.

Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated

depreciation and impairment. Land is not depreciated.

Cost comprises the purchase price and any costs directly attributable

to the acquisition of the asset until the date when it is available for

use. Borrowing costs are not recognized in the cost.

Depreciation calculated as cost less any residual value is provided

on a straight-line basis over the expected useful lives of the assets.

The expected useful lives are as follows:

Offi ce and warehouse buildings 30 - 50 years

IT hardware 3 years

Fixtures, fi ttings, tools and equipment 7 years

The 3- and 7-year depreciation periods are based on experience with

regard to the duration of the period in which such assets are in use.

The residual values and useful lives of assets are reassessed and

changed, if necessary, at each balance sheet date.

Gains and losses on the disposal of plant, property and equipment

are determined as the difference between the sales price less disposal

costs and the carrying amount at the date of disposal. Gains or

losses are recognized in the income statement under other costs.

Investments

Investments in associates are measured in the fi nancial statements

for the Group and Parent Company under the equity method less

impairment.

Investments in subsidiaries and associates are recognized in the

Parent Company’s annual accounts at cost less impairment.

Loans to subsidiaries are recognized in the Parent Company’s

accounts under long-term assets when these are seen to be part of

the investment.

Impairment of assets and property, plant and equipment

The carrying amount of intangible assets and property, plant and

equipment is reviewed regularly to look for any indication that an

asset may be impaired beyond what is refl ected by the current

amortization and depreciation. When such an indication exists, the

recoverable amount of the asset is assessed and the carrying amount

is fi xed at the lower of recoverable amount and carrying amount.

The recoverable amount is fi xed at the higher of expected net selling

price and expected value in use of the asset. The value in use is deter-

mined as the net present value of the estimated future cash fl ows.

38 NOTES

Note


For assets which do not generate cash fl ows independently of other

assets, the recoverable amount is calculated for the smallest cash

fl ow-generating unit of which the asset forms part. The determination

of cash fl ow-generating units follows the management structure,

internal fi nance management and reporting in the Group. A cash

fl ow-generating unit may constitute up to but no more than one

segment. Goodwill is attributed to the cash fl ow-generating units

and is tested for impairment annually and in case of impairment

indications.

Inventories

Inventories (aircraft spare parts) are recognized at acquisition cost

on the basis of the lower of average acquisition cost and net

realizable value.

Net realizable value is measured on the basis of an individual

assessment. Write-downs for obsolescence are made on aircraft

spare parts based on a model providing for slow-moving products.

The acquisition cost of aircraft spare parts is measured at purchase

price plus delivery costs.

Receivables, etc.

Receivables and loans comprise receivables originating from sales

of goods and services. Such receivables are classifi ed as current

except for those falling due 12 months after the balance sheet date

or later. The amounts are contained in the items ‘Receivables from

sales and services’ and ‘Other receivables and prepayments’.

Receivables are recognized in the balance sheet at fair value and are

subsequently measured at amortized cost. For current non-interest-

bearing receivables and receivables with a fl oating interest this

usually corresponds to the nominal value.

On each balance sheet date the company will look for indications

suggesting the impairment of signifi cant individual receivables. This

assessment is done on the basis of an age criterion and objective

indicators of a debtor’s fi nancial diffi culties. If the assessment shows

that a receivable will not be paid in full, the amortized cost will be

determined on the basis of such expected reduced payments. The

company will also look for indications of impairment in groups of

receivables that are not individually signifi cant. Groups will be written

down based on the company’s experience.

Shareholders’ equity

Dividend is recognized as a liability at the date when it is adopted

at the annual shareholders’ meeting.

Provisions

Provisions are recognized when, as a result of events happening

before or at the balance sheet date, the Group has a legal or a

constructive obligation and it is probable that there may be an

outfl ow of economic benefi ts to settle the obligation.

Financial liabilities

Amounts owed to credit institutions are recognized at the date of

borrowing at fair value corresponding to the net proceeds received

less transaction costs paid. In subsequent periods, the amounts are

measured at amortized cost, meaning that the effective interest rate

is recognized in the income statement over the term of the loan.

Other fi nancial liabilities, which include payables to suppliers and

subsidiaries, are measured at amortized cost which, for these items,

usually corresponds to the nominal value.

STATEMENT OF CASH FLOWS

The statement of cash fl ows shows the Group’s cash fl ows for the

year from operating, investing and fi nancing activities.

Cash and cash equivalents include cash reserves less overdraft

facilities.

Debt to credit institutions recognized in the balance sheet under

current debt is included in cash fl ows from fi nancing activities

insofar as it is considered to be capital debt.

SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

Accounting estimates

On acquisitions of companies and distribution rights, the company’s

management makes an assessment as to whether, in accounting

terms, the acquisition concerns a company or a series of individual

assets and liabilities. The assessment is based on whether the

acquisition is integrated activities or assets.

NOTES 39

Note


Uncertainties in the estimates

Calculation of the book value of certain assets and liabilities will

require certain assessments, estimates and assumptions regarding

future events. The estimates made are based on historic experience

and other factors deemed proper and adequate under the circums-

tances by the management, but which by nature are uncertain and

unpredictable. The assumptions may be incomplete or inaccurate,

and unexpected events or circumstances may occur. Furthermore,

the company is exposed to certain risks and uncertainties which may

cause the actual outcomes to deviate from the estimates. Special

risks for Satair are mentioned in the Review of Operations and in

the notes to the consolidated fi nancial statements. It may become

necessary to change previously made estimates due to changes in

the conditions on which the previous estimates were based or

because of the acquisition of new information or the occurrence of

subsequent events.

IMPAIRMENT OF ASSETS

Goodwill

In the annual impairment test of goodwill, an estimate is made of the

extent to which those parts of the company (cash fl ow-generating

units) which are associated therewith will be able to continue

generating suffi cient positive net cash fl ows to support the value of

goodwill and other necessary investments. The estimate of the future

net cash fl ow is based on budgets and business plans for the coming

year and projections for the subsequent years. Important parameters

are revenue developments, profi t ratio, investments in net working

capital and growth expectations for the subsequent years. Budgets

and business plans for the coming year are based on specifi c future

business initiatives in which the risks of the signifi cant parameters

are assessed and recognized in the expectations of future cash fl ows.

Projections after the fi rst coming year are based on general expect-

ations and risks. The discounting rates applied in calculating the

recoverable amount are before tax and refl ect the risk-free interest

rate with addition of specifi c risks in the individual segments. The

cash fl ow fi gures used are inclusive of the impact of the future risks

associated therewith, and consequently such risks are not added in

the applied discounting rates. For a description of the impairment

test for intangible assets, reference is made to note 14. The carrying

amount of goodwill as at June 30, 2009 totaled USD 27,839,000

(USD 27,189,000 as at June 30, 2008).

Inventories

Inventories are recognized at cost less write-down to net salvage

value in case of impairment due to failing demand. The estimate of

the required write-downs is made on the basis of a mathematical

model based on the individual characteristics and historical informa-

tion on the sales patterns for the inventories. In addition, further

write-downs are made to the extent there are specifi c indications of

impairment. The mathematical model ensures reversal of write-downs

made for products which are subsequently sold. It is estimated that

the write-downs made are suffi cient and that the fi nancial uncertainty

linked to the depreciation to net salvage value on inventories is

considered limited. The book value of inventories as at 30 June 2009

totals USD 160,372,000 (USD 153,974,000 as at 30 June 2008).

Receivables from sales and services

Receivables are recognized at the amortized cost less impairment

losses due to failing payment capacity. Loss estimates are made on

the basis of the customers’ payment capacity, historic information on

payment patterns and doubtful debts, and customer concentration,

customers’ credit worthiness and fi nancial trends in the company’s

sales channels. Estimates will be updated if a debtor’s payment

capacity should change. It is estimated that the write-downs made

will be suffi cient to cover losses. The fi nancial uncertainty associated

with making write-downs to counter loss on doubtful debts is con-

sidered limited. The book value of receivables as at 30 June 2009

totals USD 55,264,000 (USD 81,671,000 as at 30 June 2008).

40 NOTES

Note

2 RISK MANAGEMENT

Satair’s business transactions involve a variety of commercial and

fi nancial risks that may adversely affect the Group’s future operations

and performance. Satair is engaged in a continuous effort to identify

these risks and, whenever possible, to counteract and reduce them.

Below is an outline of the most important risks identifi ed by the

Group. The outline does not necessarily constitute an exhaustive

list of risk factors, and the factors are not listed in any order of

priority. The reporting requirements to fi nancial risks are regulated

by IFRS. In this note Satair also describes commercial and other

risks although it is not required by IFRS.

COMMERCIAL RISKS

Developments in aviation activity

For the past 30 years or more, aviation has seen almost continuous

growth in passenger and air cargo volumes, however with an

interruption of this trend in connection with the fi rst Gulf war in

1991 and the terrorist attack on September 11, 2001. Historically,

passenger traffi c has shown annual growth rates in the order of

5% p.a. on the global level. In recent quarters, the uninterrupted

growth achieved in the past years has been replaced by negative

growth in passenger and air cargo volumes.

The decline in demand has forced air carriers to reduce capacity

and cost levels by grounding aircraft and lay off employees. Also,

some air carriers wish to postpone or cancel already placed orders

for new aircraft. It is necessary to tune air capacity to the new

environment, and besides it is much more diffi cult than previously

to fi nance new aircraft. Besides, fi nancing costs have risen steeply.

Satair’s marketing potential in the Aftermarket is primarily

determined by the type of aircraft in operation, the scope of air

carrier operations, and the total number of aircraft.

In the OEM market Satair is affected primarily by fl uctuations in

the production of aircraft and helicopters, and production is currently

prone to considerable cyclic fl uctuations. Moreover, the production

levels of the individual part segments (all types of commercial air-

craft, business jets, private jets, aircraft for the military and helicop-

ters for the commercial and private market and the armed forces)

are fl uctuating widely. Historically, the OEM market is more volatile

than the Aftermarket.

Aviation is also sensitive to sudden and unexpected events such as

war, terrorist attacks and epidemics. When they occur, such events

may have dramatic and sudden effects on activity levels within

aviation.

Competition and prices

The market for the distribution of aviation products is fi ercely

competitive. To be an attractive intermediary between customers

and manufacturers, distributors must be able to deliver the right

combination of a broad product range and attractive services.

The Aftermarket is relatively fragmented, and none of the distributors

have captured a signifi cant market share in the global market for

spares. The majority of Satair’s products are exposed to competition.

Recent years have seen growth in sales of PMA products, defi ned

as products for which a number of manufacturers have obtained

approval from the US authorities to produce and market an existing

product (Parts Manufacturing Approval). In most cases this leads to

intensifi ed price competition for the original products, and this usually

has an adverse effect on Satair which mainly distributes original

products. A number of Satair’s suppliers also develop PMA products

based on products from other suppliers to the advantage of Satair.

Competition in the OEM market is dominated by a group of large,

specialized distributors. The past couple of years have seen consider-

able consolidation in the OEM market in the USA as well as in

Europe, and Satair has taken active part in this development. The

trend is expected to continue, and this means continued intensifi ca-

tion of competition in coming years. Moreover, customers are likely

to intensify efforts to optimize the supply chain for the purpose of

achieving further cost reductions and effi ciencies.

Consolidation within aviation

Manufacturers in the industry are undergoing a process of consider-

able consolidation, and this may affect Satair. In case an existing

Satair supplier is acquired by a major group, there is a risk that the

new owners will want to evaluate existing sales outlets with a view

to optimizing them in relation to the rest of their business activities.

This may result in a change of distributor or the insourcing of

distribution activities.

In recent years, many airlines have entered into mergers and alliances,

and this is generally a period of signifi cant structural change in the

industry.

Satair endeavors to secure a favorable position for itself in the value

chain of the aviation industry, but after several years of constant

pressure on airline earnings as well as changes in the value chain of

the industry there may be renewed and increased pressure on

Satair’s earnings.

NOTES 41

Note

2 RISK MANAGEMENT (CONTINUED)

Dependency on suppliers

Satair has between 5 and 10 important suppliers, and in 2008/09

the largest of them accounted for approx. 12% of the Group’s

consolidated revenue, while the ten largest suppliers together

accounted for approx. 60% of consolidated revenue.

Satair’s supplier contracts are highly varied as regards the length

of termination notices, and in connection with the most recent

renegotiations and new negotiations, a specifi c aim has been to

ensure longer notices. Typically, contracts may be terminated at a

notice period of between 3 and 12 months, and in the case of

important suppliers, the duration of contracts is typically between

tree and fi ve years.

Historically, Satair has been able to replace a number of terminated

contracts by similar contracts with competing manufacturers. In

these cases, Satair’s market and product expertise have been an

attractive sales argument.

In some cases it was found that a terminated contract and the

products covered by it were not appropriate for the future product

portfolio, for instance because of obsolete technology or applications

belonging to old/out-of-production types of aircraft. In these cases,

Satair has decided not to look for a direct replacement of the

terminated contract, working instead to conclude contracts on

products which are more technologically future-proof or based on

novel technology.

Only few of Satair’s suppliers have terminated their distribution

contracts. However, the loss of an important supplier could cause a

signifi cant decline in revenues and earnings in the short term.

Dependency on customers

Satair distributes products and offers related services to a wide range

of customers worldwide. The distribution of the Group’s products

and services is generally closely linked to developments in activity

levels and the general fi nancial situation within aviation, and that is

why sales to Satair’s existing customers and the conclusion of new

customer agreements may be associated with some uncertainty.

Satair’s sales go to more than 2,500 customers all over the globe.

The ten largest customers accounted for approx. 24% of consolidated

revenue in 2008/09, with no single customer contributing more

than 4%, and so the Group is not deemed to be dependent on any

single customer in the Aftermarket. The same applies to the OEM

Division which is, however, indirectly very dependent on Airbus.

Satair has cooperated with most of its customers for many years.

The sales of the Aftermarket Division are often based on framework

agreements, whereas sales in the OEM Division are typically covered

by Service Provider Agreements with a term of 3 to 5 years. Under

certain circumstances such contracts may be terminated prematurely,

e.g. in the case of breach of contract on the part of Satair. The loss

of major service provider agreements in the OEM Division may result

in a considerable loss of earnings and inventory write-downs.

Inventories

In the Aftermarket Division, the most signifi cant inventory risks

relate to the situation where types of aircraft are grounded by the

air carriers either permanently or for a long period of time. When

that happens, Satair’s inventories of spares for that particular type

of aircraft alone will fully or partially lose value. Until now, such

changes in the use of aircraft types have occurred over a period of

several years, thereby reducing the risk of obsolescence of spares

for such aircraft.

In the OEM Division, the most signifi cant inventory risks relate to

customers to whom Satair supplies products designed specifi cally

for a given type of aircraft.

Sales to the aviation industry are generally characterized by involving

a very high number of part numbers many of which are sold relatively

rarely. This increases the risk of obsolescence, and the Group’s

business model therefore allows for obsolescence being part of the

cost side of distribution in aviation.

To guard against the risk of obsolescence on inventories, Satair has

signed agreements with some of the manufacturers of distribution

products for a return privilege on slow-moving products or products

that have become obsolete due to the launch of new versions. The

Group endeavors to apply global inventory management for distri-

bution products at all locations so as to minimize total inventory

levels and reduce the risk of obsolescence.

Technological developments

Technological developments in commercial aviation point towards

an increased use of computer-controlled systems and electronic

components on board the aircraft in replacement of the mechanical

systems which historically have been dominant. In the long term,

these developments may have a negative impact on Satair, both

the Aftermarket Division and the OEM Division.

42 NOTES

Note


In the Aftermarket Division the demand for mechanical components,

such as those distributed by Satair, may be reduced as new aircraft

based on more electronic components become more widespread.

The impact on Satair of this long-term scenario will depend on a

number of different factors, such as the ability of Satair’s suppliers to

adapt to the new situation, or Satair’s ability to develop cooperation

with new, potential suppliers.

For the OEM Division, which is a signifi cant supplier in Europe of

standard hardware and mechanical attachment products, including

rivets, the transition to new technology by a number of the main

European customers may have a negative impact on the future

sales potential.

Insurance

It is Satair’s policy to arrange insurance against risks to its fi nancial

position, and the Group endeavors to have adequate insurance

cover at any point in time. However, no guarantee can be offered

that the insurance taken out by Satair is adequate or that no claims

will be advanced against the Group in relation to areas not covered

by insurance, or that any compensation claims advanced against

Satair’s subsuppliers will not also be advanced against the Group if

the subsupplier is unable to cover the claims made.

The Group’s insurance strategy and cover is reviewed once a year

by the Board of Directors on the basis of a declaration from an

independent insurance broker.

Buildings, operating equipment and inventories are insured on an

all-risk basis, and assets are insured at replacement value.

The very strict demands to safety and security in relation to aircraft

and air traffi c are refl ected in the equally strict demands for reliability

and safety of products and systems installed and used on board the

aircraft. Satair’s product liability risk is deemed to be modest, as the

Group has only a minor spares production of its own. Satair has

arranged for the usual product liability insurance in cover of any

claims being made against it by third parties for defects in products

from the Group’s own production as well as in products manufac-

tured by the Group’s sub-suppliers.

FINANCIAL RISKS

Because of the nature of its operations, investments and fi nancing

the Group is exposed to changes in foreign exchange rates and

interest rates. As it is Group policy not to engage in speculation in

fi nancial risks, the management of fi nancial risks is targeted solely

towards risks relating to its operations and fi nancing. See note 27

for detailed information about fi nancial risks.

Liquidity risks

The Group’s total drawing rights with its two banks amount to

USD 150 million, of which USD 60 million are committed and

subject to agreed covenants.

At June 30, 2009 the total amount in unutilized, drawing rights

came to USD 52.8 million against USD 18.8 million last year.

Interest risks

The Group’s interest-bearing bank debt at year-end amounted to

USD 105.5 million of which USD 15.6 million, calculated before

interest rate management, carries a fi xed rate of interest. The interest

rate risk is managed by means of interest hedging contracts.

A considerable proportion of the bank debt has been converted into

fi xed-interest debt by means of interest hedging contracts with an

average remaining term to maturity of 7.3 years. Accordingly, the

average fi xed rate on debt in USD comes to 4.93% p.a., while debt

in GBP carries a fi xed rate of 5.25% p.a.

See note 27 for details on the Group’s total interest hedging

contracts at June 30, 2009.

Including the value of interest hedging contracts arranged, the

duration of the Group’s total net interest-bearing debt at June 30,

2009 is 4.8 years against 7.7 years in 2007/08.

The overall effect on the Group’s net fi nancial expenses of a change

of 1 percentage point in interest rate levels is USD 0.2 million.

NOTES 43

Note


Currency risks

Pursuant to its policy on currency management, Satair strives to

arrange full fi nancial cover of its important net currency positions,

whereas cover of its expected future cash fl ows is arranged for a

period of up to 12 months by means of forward currency contracts

and currency options.

Foreign exchange adjustments of investments in subsidiaries and

associates abroad with a functional currency different from that of

the parent company are recognized directly in shareholders’ equity.

Cover is not arranged of the exchange rate risks related thereto, as

the Group fi nds that ongoing forward cover of such long-term

investments is not the optimal solution in view of the overall risk

and cost level.

The Group’s primary currency exposure is in EUR and DKK against

USD. In the coming fi scal year, the exchange requirement of EUR

and DKK against USD is expected to amount to the counter value of

approx. USD 60 million. The exchange requirement is the result of

the fact that some overheads, investments, and dividends are paid in

DKK or in EUR. In addition, a minor part of the cost of goods pro-

duced is settled in EUR, while the invoicing is predominantly in USD.

At 30 June 2009 the future exchange requirement of DKK/EUR was

hedged at a level corresponding to USD/DKK 521 or EUR/USD

145 by the application of a mathematical model and by means of

identifi ed stop-loss exchange rate levels.

In case of a decline of 1% in USD against DKK and EUR, and

stated before the effect of currency hedging, the Group’s cash

fl ows will be adversely affected by an estimated USD 0.6 million,

while the profi t for the year will be adversely affected by an

estimated USD 0.4 million.

Credit risks

In accordance with Satair’s policy for the assumption of credit risk,

the credit rating of customers and partners is evaluated on an

ongoing basis.

The primary credit risks are associated with receivables from sales

and deposits with banks.

The pattern of receivables from sales and services is such that the

involved credit risks are not seen to be unusual. In case of sales on

deferred terms to customers with a low credit rating, it is standard

procedure to ask for a letter of credit or advance payment. Thanks

to its long-term market presence and its resulting in-depth knowl-

edge of customers, combined with effective follow-up procedures,

Satair has not yet suffered any major losses on individual debtors.

Satair has no signifi cant concentrations of receivables from individual

customers or geographical areas. Reference is also made to note 27.

Deposits of cash funds and agreements with banks concerning

derivative fi nancial instruments are made exclusively with banks

with a high credit rating.

44

Note 2007/08 2008/09

GROUP

3 SEGMENT INFORMATION

Business areas – primary segment After- Not After- Not market OEM allocated Group market OEM allocated Group

Income statement

Revenue 287,912 135,798 - 423,710 292,367 118,197 - 410,564

Intra-group revenue 5 2,028 (2,033) - 32 1,808 (1,840) -

Segment revenue 287,917 137,826 (2,033) 423,710 292,399 120,005 (1,840) 410,564

Amortization (2,921) (31) - (2,952) (3,074) (1) - (3,075)

Depreciation (1,024) (363) - (1,387) (1,014) (330) - (1,344)

Profi t on primary operations (EBIT) 17,926 15,040 - 32,966 8,060 14,325 - 22,385

Financial income and expenses, net - - - (11,391) - - - (12,571)

Profi t before tax - - - 21,575 - - - 9,814

Income tax expense - - - (6,735) - - - (2,103)

Profi t for the year - - - 14,840 - - - 7,711

Cash fl ow statement

Acquisitions of non-current assets 9,646 343 - 9,989 2,678 319 - 2,997

Signifi cant non-cash items 353 (4,810) (120) (4,577) (818) 2,245 11 1,438

Balance sheet

Segment goodwill & distribution rights 43,383 - - 43,383 45,420 - - 45,420

Segment other non-current assets 18,184 1,256 - 19,440 19,573 1,054 - 20,627

Segment current assets 124,959 110,686 - 235,645 113,134 102,502 - 215,636

Assets not allocated - - 12,041 12,041 - - 17,291 17,291

Total assets 186,526 111,942 12,041 310,509 178,127 103,556 17,291 298,974

Shareholders’ equity - - 117,396 117,396 - - 119,807 119,807

Segment not interest-bearing debt 47,987 15,102 - 63,089 34,684 10,702 - 45,386

Interest-bearing debt - - 111,108 111,108 - - 105,465 105,465

Liabilities not allocated - - 18,916 18,916 - - 28,316 28,316

Total equity and liabilities 47,987 15,102 247,420 310,509 34,684 10,702 253,588 298,974

Aftermarket includes sales and distribution of aircraft spares to all types of commercial operators, maintenance workshops and a number of military operators.

OEM is a provider of hardware primarily to manufacturers of commercial aircraft and helicopters in Europe and is among the leading suppliers in Europe in this market.

Transactions between the individual segments are priced on market terms.

Notes – Income statement (USD ‘000)

NOTES 45

Note

GROUP

3 SEGMENT INFORMATION (CONTINUED)

Geographical – secondary segment Segment Segment Acquisitions goodwill & other Segment of non- distribution non-current Current total current Revenue rights assets assets assets assets

2007/08

EMEA 232,404 23,190 14,893 168,634 206,717 9,323

North and South America 76,533 18,339 333 27,246 45,918 224

Asia Pacifi c 114,773 1,854 4,214 39,765 45,833 442

Total 423,710 43,383 19,440 235,645 298,468 9,989

2008/09

EMEA 222,631 26,973 16,358 154,042 197,373 2,841

North and South America 72,859 16,840 359 24,823 42,022 142

Asia Pacifi c 115,074 1,607 3,910 36,771 42,288 14

Total 410,564 45,420 20,627 215,636 281,683 2,997

46 NOTES

4 STAFF COSTS

Wages, salaries and emoluments (18,325) (17,527) (34,552) (31,905)

Pensions, defi ned contribution (1,260) (1,282) (1,865) (1,863)

Other social security costs, etc. (311) (319) (2,137) (2,178)

Other staff-related costs (1,298) (1,307) (3,350) (3,121)

Total (21,194) (20,435) (41,904) (39,067)

Share-based remuneration recognized under special items (2,528) (427) (2,883) (545)

Staff costs including share-based remuneration (23,722) 20,862 (44,787) 39,612

Salaries to the parent company’s Executive Committee* (2,881) (2,570) (2,881) (2,570)

Pensions to the parent company’s Executive Committee* (61) (95) (61) (95)

Share-based remuneration to the parent company’s Executive Committee (1,079) (362) (1,079) (362)

Emoluments to the parent company’s Board of Directors (380) (380) (380) (380)

Average no. of employees 178 170 526 533

*Reference is made to note 32 which gives details of share-based remuneration.

5 REMUNERATION TO AUDITOR ELECTED BY

THE ANNUAL SHAREHOLDERS’ MEETING

PricewaterhouseCoopers, audit fee (226) (233) (445) (490)

PricewaterhouseCoopers, non-audit services (167) (70) (235) (94)

”Non-audit services” comprise accounting and tax consultancy.

6 FAIR VALUE ADJUSTMENT OF CERTAIN HEDGING INSTRUMENTS

Profi t 10,205 2,960 10,205 2,960

Loss (4,501) (13,617) (4,501) (13,617)

Total 5,704 (10,657) 5,704 (10,657)

7 OTHER SPECIAL ITEMS

Warrant program (1,556) (427) (1,911) (545)

Subscription of employee shares (972) - (972) -

Profi t from the sale of property 438 - 438 -

Total (2,090) (427) (2,445) (545)

Reference is made to note 32 which gives details of share-based remuneration.

8 FINANCIAL INCOME

Interest income from subsidiaries 266 968 - -

Other interest income 440 67 540 104

Foreign exchange adjustments - 1,061 440 1,781

Derivative fi nancial instruments 552 - 642 -

Total 1,258 2,096 1,622 1,885

Note 2007/08 2008/09 2007/08 2008/09

GROUPPARENT COMPANY

NOTES 47

9 FINANCIAL EXPENSES

Interest expenses etc. to subsidiaries (13) (131) - -

Other interest expense (1,919) (4,580) (6,344) (7,526)

Foreign exchange adjustments (1,491) - (2,636) (592)

Total (3,423) (4,711) (8,980) (8,118)

10 INCOME TAX EXPENSES

Tax calculated on the taxable income for the year (1,304) - (5,105) (5,358)

Adjustment of deferred tax for the year (377) 2,046 (1,326) 3,204

Adjustment re previous years (276) - (304) 51

Corporate tax in income statement (1,957) 2,046 (6,735) (2,103)

To be broken down as follows:

Income tax expenses (1,957) 2,046 (6,735) (2,103)

Corporate tax in income statement (1,957) 2,046 (6,735) (2,103)

The total tax expense for Group and

parent company appears as follows:

Income tax expense (4,004) 2,607 (5,393) (2,454)

Non-tax items, net, and the effect of different tax

rates in the different Group companies, etc. 2,323 (561) (1,038) 300

Tax adjustment re previous years (276) - (304) 51

Total (1,957) 2,046 (6,735) (2,103)

Satair A/S is taxed jointly with the consolidated business entities in Denmark. The tax effect of the joint taxation is distributed upon both profi t-making and loss-making entities in proportion to their taxable income (full distribution with reimbursement for tax losses). The company is the management company for the joint taxation scheme and handles the settlement of corporate tax with the tax authorities.

11 EARNINGS PER SHARE

Profi t for year attributable to the equity holders of the parent company (USD ’000) 14,887 7,711

Average no. of shares 4,272,037 4,282,252

Average share price 278 148

Average no. of shares – restated 4,294,414 4,282,252

Earnings per share, USD 3.47 1.80

Earnings per share – diluted, USD 3.46 1.80

12 PAID AND PROPOSED DIVIDEND

Declared and paid dividend per share DKK 5.50 (2007/08: DKK 5.50) 4,538 4,122

Proposed dividend per share DKK 3.00 (2007/08: DKK 5.50) – not recognized as a liability at June 30 4,977 2,438

Reference is made to ”Shareholder relations” regarding Satair’s dividend policy.

Note 2007/08 2008/09 2007/08 2008/09

GROUPPARENT COMPANY

48

Note

GROUP

13 INTANGIBLE ASSETS Acquired IT, Acquired software and distribution development Goodwill rights costs, total Total

2007/08

Acquisition cost:

Acquisition cost at July 1, 2007 27,189 23,450 8,609 59,248

Foreign exchange adjustment - - 70 70

Additions - - 4,025 4,025

Disposals - - (7) (7)

Acquisition cost at June 30, 2008 27,189 23,450 12,697 63,336

Amortization at July 1, 2007 - (4,411) (7,136) (11,547)

Foreign exchange adjustment - - (70) (70)

Amortization for the year - (2,846) (106) (2,952)

Disposals - - 7 7

Amortization at June 30, 2008 - (7,257) (7,305) (14,562)

Carrying amount at June 30, 2008 27,189 16,193 5,392 48,774

The carrying amount of goodwill relates to PAS and TPA and totals USD 7.1 million, respectively USD 20.1 million at June 30, 2008.

2008/09

Acquisition cost:

Acquisition cost at July 1, 2008 27,189 23,450 12,697 63,336

Foreign exchange adjustment - - (239) (239)

Additions - 4,232 2,292 6,524

Adjustment of purchase price 650 - - 650

Disposals - - (6,494) (6,494)

Acquisition cost at June 30, 2009 27,839 27,682 8,256 63,777

Amortization at July 1, 2008 - (7,257) (7,305) (14,562)

Foreign exchange adjustment - 2 239 241

Amortization for the year - (2,846) (229) (3,075)

Disposals - - 6,494 6,494

Amortization at June 30, 2009 - (10,101) (801) (10,902)

Carrying amount at June 30, 2009 27,839 17,581 7,455 52,875

The carrying amount of goodwill relates to PAS and TPA and totals USD 7.1 million, respectively USD 20.7 million at June 30, 2009.

Notes – Balance sheet (USD ‘000)

NOTES 49

Note

PARENT COMPANY

13 INTANGIBLE ASSETS (CONTINUED) Acquired IT, software and development costs, total

2007/08

Acquisition cost:

Acquisition cost at July 1, 2007 7,227

Additions 4,025

Acquisition cost at June 30, 2008 11,252

Amortization at July 1, 2007 (5,786)

Amortization for the year (75)

Amortization at June 30, 2008 (5,861)

Carrying amount at June 30, 2008 5,391

Acquired IT, Acquired software and distribution development rights costs, total Total

2008/09

Acquisition cost:

Acquisition cost at July 1, 2008 - 11,252 11,252

Additions 4,232 2,291 6,523

Disposals - (5,337) (5,337)

Acquisition cost at June 30, 2009 4,232 8,206 12,438

Amortization at July 1, 2008 - (5,861) (5,861)

Amortization for the year - (228) (228)

Disposals - 5,337 5,337

Amortization at June 30, 2009 - (752) (752)

Carrying amount at June 30, 2009 4,232 7,454 11,686

50 NOTES

Note

14 IMPAIRMENT TEST

Goodwill

As at 30 June 2009, the Management has completed an impairment

test of the book value of goodwill. The impairment test was made

in the fourth quarter on the basis of the budgets and business plans

approved by the ExCo and the Board, and the other assumptions,

adapted as required under IAS 36.

The book value of goodwill in Satair has arisen in connection with

the acquisition of distribution rights from Pall in December 2005,

and the acquisition of TPA Pte Ltd in May 2006. Both companies

belong under the Aftermarket Division.

In the impairment test for cash-fl ow generating units, the recover-

able amount (utility value), calculated as the rediscounted value of

the expected future cash fl ows, is compared to the book value of

the individual cash fl ow-generating units. The expected future cash

fl ows are based on budgets and business plans for the coming ten

years as the useful life of aircraft makes it possible to use this time

scale in business plans.

As the two acquisitions since fi scal 2006/07 have been fully inte-

grated in the Aftermarket Division, it has been decided to consider

the Aftermarket Division one cash fl ow-generating unit, thus

basing the impairment test on the Division’s total fi nancial results.

At 30 June 2009 the total goodwill of Satair totaled USD 27.8 million,

refl ecting an increase of USD 0.6 million in 2008/09 due to the fi nal

adjustment of the purchase price as agreed with the vendor of TPA

Pte. Ltd.

For all segments, the most important parameters are revenue, EBITDA,

capital tied up in net working capital, and growth assumptions.

The growth rate applied in the impairment test for the years after

2008/09 is 4% declining to 2% during the terminal period, thereby

being set at a level signifi cantly below the hitherto actual and

expected growth rates as a precautionary measure.

An EBITDA margin of 7.0% has been applied in the impairment

test based on historic fi gures and the outlook for the coming years.

Over the last two years, the net working capital has constituted

around 27% of the revenue. In Satair’s opinion it will be possible

to maintain this level in the future, and on that background, the

impairment test has for prudence reasons been set up with an

investment requirement of 30% of the revenue.

Budgets and business plans for the coming ten years are based on

Satair’s known and expected events and risks in the important

parameters and recognized in the expected future cash fl ows.

The fi rst year is based on the budget approved by Management.

Projections for year two and beyond are based on general market

expectations and risks.

The terminal value after ten years is fi xed with due account taken

of general growth expectations and is set at 2% per year.

The discount rate applied in the calculation of the recoverable amount

is 6.7% (2007/08: 7.9%), and has been calculated before tax,

refl ecting the risk-free interest rate in the individual geographical

segments. The cash fl ow fi gures applied include the impact of the

future risks associated therewith, and consequently such risks are

not added in the applied discounting rates.

In the opinion of the Management, no foreseen changes in the

fundamental conditions will cause the book value of goodwill to

exceed the recoverable amount in any of the segments.

IT software

As in previous years, Management carried out an impairment test

of the carrying amount of new IT software (SAP) in 2008/09. The

project was assessed in relation to business plans and budgets, and

it was found that the recoverable amount exceeded the carrying

amount.

NOTES 51

Note

GROUP

15 PROPERTY, PLANT AND EQUIPMENT Other Land and plant and buildings equipment Total

2007/08

Acquisition cost:

Acquisition cost at July 1, 2007 8,474 7,607 16,081

Foreign exchange adjustment (1) 87 86

Additions 4,754 1,210 5,964

Disposals (779) (452) (1,231)


Depreciation and impairment at July 1, 2007 (2,804) (4,495) (7,299)

Foreign exchange adjustment - (60) (60)

Depreciation for the year (297) (1,090) (1,387)

Reversal of depreciation of disposals for the year 491 279 770

Depreciation and impairment at June 30, 2008 (2,610) (5,366) (7,976)


2008/09

Acquisition cost:


Foreign exchange adjustment - (526) (526)

Additions 115 590 705

Disposals - (2,458) (2,458)



Foreign exchange adjustment 1 335 336

Depreciation for the year (355) (989) (1,344)

Reversal of depreciation of disposals for the year - 2,345 2,345



52 NOTES

PARENT COMPANY

15 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Other Land and plant and buildings equipment Total

2007/08

Acquisition cost:


Additions 4,745 212 4,957

Disposals (779) (141) (920)



Depreciation for the year (87) (445) (532)

Reversal of depreciation of disposals for the year 491 61 552


Carrying amount at June 30, 2008 7,520 652 8,172

2008/09

Acquisition cost:


Additions 115 125 240

Disposals - (992) (992)



Depreciation for the year (158) (420) (578)

Reversal of depreciation of disposals for the year - 992 992


Carrying amount at June 30, 2009 7,477 357 7,834

16 INVESTMENTS IN SUBSIDIARIES

Acquisition cost at July 1 52,148 62,730

Additions on Group reorganization 10,582 -

Disposals on Group reorganization - (2,769)

Acquisition cost at June 30 62,730 59,961

Carrying amount at June 30 62,730 59,961

Losses on Group reorganizations total USD 1,661,000 (2007/08: 0.0 USD)

Note

2007/08 2008/09

PARENT COMPANY

NOTES 53

Note 2007/08 2008/09 2007/08 2008/09

GROUP

GROUP

PARENT COMPANY

PARENT COMPANY

17 INVESTMENT IN ASSOCIATES

Acquisition cost at July 1 43 117 931 1,005

Foreign exchange adjustment 11 (13) 11 (13)

Additions 63 71 63 71

Acquisition cost at June 30 117 175 1,005 1,063

Revaluation and impairment at July 1 - (81) 321 120

Foreign exchange adjustment (5) 6 (5) 6

Dividends received - - (443) (295)

Share in profi t (76) (73) 247 296

Revaluation and impairment at June 30 (81) (148) 120 127

Carrying amount at June 30 36 27 1,125 1,190

The associates included in the Group chart on p. 63 posted the following amounts in revenue, profi t,

assets and liabilities (100% fi gures), cf. the most recent annual accounts.

Registered Stake at 30 USD’ 000 offi ce Revenue Profi t Assets Liabilities June, 2009

Blue Sky Alliance GmbH Germany 282 (220) 481 138 33.3%

Telair International Services Pte. Ltd. Singapore 7,292 1,250 4,729 492 29.5%

For both companies the fi scal year matches the calendar year. Both associates operate within the Aftermarket segment.

18 DEFERRED TAX ASSETS AND LIABILITIES

Tax assets at July 1 871 (81) 5,812 4,132

Foreign exchange adjustment - - 247 (219)

Deferred tax re profi t for the year (377) 2,046 (1,280) 3,204

Deferred tax re previous years (575) - (647) (94)

Deferred tax recognized in shareholders’ equity - (448) - (652)

Deferred tax assets at June 30 (81) 1,517 4,132 6,371

A specifi cation of deferred tax assets:

Inventory write-downs (43) - 3,273 3,565

Write-downs of receivables from sales and services 226 211 301 375

Derivative fi nancial instruments 800 1,341 800 1,709

Property, plant and equipment (1,649) (2,153) (1,649) (2,188)

Tax loss carryforwards - 2,045 - 2,045

Other 585 73 1,407 865

Deferred tax assets at June 30 (81) 1,517 4,132 6,371

Total value of all tax loss carryforwards - 2,045 - 2,045

Recognized value of tax loss carryforwards - 2,045 - 2,045

The tax loss carryforwards are scheduled for realization within 1-5 years. The loss carryforward is expected to be utilized in full in fi scal 2009/10.

2007/08 2008/09 2007/08 2008/09

54 NOTES

19 INVENTORIES

A specifi cation of inventories:

Commercial products 50,592 52,419 152,383 159,724

Prepayments from vendors 1,442 139 1,591 648

Total inventories 52,034 52,558 153,974 160,372

Inventory for the year exclusive of write-downs (156,109) (154,769) (327,991) (313,446)

Inventory write-down for the year (1,992) (1,853) (7,777) (5,866)

Reversal of inventory write-downs for the year

due to sale of the inventories written down 2,039 728 8,414 3,833

Adjustments re inventory write-downs are stated under cost of goods sold.

20 RECEIVABLES FROM SALES AND SERVICES

Gross receivables from sales and services 25,758 20,153 82,976 57,049

Write-down for loss on bad and doubtful debts (902) (843) (1,305) (1,785)

Net receivables from sales and services 24,856 19,310 81,671 55,264

Write-downs for bad and doubtful debts, July 1 (934) (902) (1,977) (1,305)

Foreign exchange adjustment - 1 (11) 4

Write-downs for the year (278) (308) (405) (736)

Reversal of write-downs previously recognized 310 366 1,088 252

Write-downs at June 30 (902) (843) (1,305) (1,785)

Adjustments re write-downs for bad and doubtful debts are stated under other costs.

21 OTHER RECEIVABLES AND PREPAYMENTS

Derivative fi nancial instruments 1,115 1,061 1,115 1,061

Prepayments 423 182 907 719

Other receivables - 51 1,837 397

Total 1,538 1,294 3,859 2,177

Prepayments consist of prepaid cost items relating to insurance, leasing payments and IT service contracts, etc.

22 SHARE CAPITAL

The share capital consists of 4,282,252 shares in denominations of DKK 20,

corresponding to a total capital of DKK 85,645,040. Translated into historical

cost, the share capital amounts to USD 12,745,424.

23 OTHER CURRENT LIABILITIES

Prepayments from customers - - 135 753

Derivative fi nancial instruments 4,314 6,425 4,421 7,740

Other debt 6,689 6,048 11,745 10,690

Total 11,003 12,473 16,301 19,183

Note 2007/08 2008/09 2007/08 2008/09

GROUPPARENT COMPANY

55

Note 2007/08 2008/09 2007/08 2008/09

GROUPPARENT COMPANY

Notes – Consolidated statement of cash fl ows (USD ‘000)

24 CHANGE IN WORKING CAPITAL

Change in receivables from sales and services (2,188) 5,604 (6,876) 21,485

Change in inventories (15,637) (1,160) (33,341) (15,215)

Change in other receivables (326) 179 (131) 223

Change in payables to suppliers 12,176 (10,217) 6,231 (15,795)

Change in intercompany balances (324) 2,098 - -

Change in other liabilities 2,684 (1,592) 3,285 (1,029)

Total (3,615) (5,088) (30,832) (10,331)

26 CASH AND CASH EQUIVALENTS LESS OVERDRAFT FACILITIES

Current debt to credit institutions (11,204) (48,726) (61,546) (70,863)

Amount thereof in current debt for inclusion in

cash fl ows from fi nancing activities (10,751) (10,751) (13,904) (23,523)

Overdraft facilities (453) (37,975) (47,642) (47,340)

Cash and cash equivalents 1,385 3,370 3,168 8,272

Total 932 (34,605) (44,474) (39,068)

Overdraft facilities are included under the accounting item “Credit institutions”.

25 ACQUISITION OF COMPANY

2007/08

The amount calculated in goodwill was not adjusted in 2007/08.

2008/09

The contract signed with the vendor of TPA Pte. Ltd in 2006 stated

the future earnings targets for the acquired company that were to

be included in the fi nal calculation of the purchase price upon the

expiry of a two-year period.

At the closing of fi scal 2006/07 Satair carried out a preliminary

assessment of this. The result was an expected receivable of USD

1.3 million which was recognized in the balance sheet.

In 2008/09 the fi nal calculation of the purchase sum was agreed

with the vendor of TPA Pte. Ltd, resulting in Satair receiving an

amount of USD 0.7 million in reimbursement of the purchase sum,

with the remaining USD 0.6 million being added to the goodwill

originally calculated.

There are no further important obligations between Satair and the

vendor of TPA Pte. Ltd.

GROUPPARENT COMPANY

2007/08 2008/09 2007/08 2008/09

56

Notes – Additional information (USD ‘000)

Note

27 DERIVATIVE FINANCIAL INSTRUMENTS

See note 2 for additional information about fi nancial risks.

The Group’s risk management policy

Because of the nature of the Group’s operations, investments, and

fi nancing, it is exposed to changes in foreign exchange rates and

interest rates. It is Group policy not to engage in speculation in

fi nancial risks.

Market risk

Currency

Invoicing is effected in USD, GBP and EUR, with USD being the

primary currency. Out of the total receivables from sales and

services, 10% are receivables in GBP (15% in 2007/08), while 9%

are receivables in EUR (14% in 2007/08). Procurement of goods is

effected in USD, GBP and EUR, with USD being the primary currency.

Out of the total procurements, 8% are procurements in GBP (9%

in 2007/08), while 16% are procurements in EUR (17% in

2007/08) and the rest in USD.

The individual subsidiaries pay their operating costs in local

currencies, i.e. DKK, SGD, EUR, GBP, and USD. The assessment

and possible hedging of the Group’s foreign exchange risks are

made in accordance with the defi ned policy, exclusively by the

Parent Company by means of forward cover contracts and

currency option contracts.

As regards the fi nancial assets and liabilities recognized in the

balance sheet, a 10% increase in the USD/EUR rate will have a

negative impact on profi t and shareholders’ equity of USD 0.4

million (USD -0.4 million in 2007/08) if all other parameters remain

unchanged. A decline in the USD/EUR rate will have the same

effect in absolute terms, however with the opposite sign.


balance sheet, a 10% increase in the USD/DKK rate will have a

positive impact on profi t and shareholders’ equity of USD 0.1

million (USD +0.2 million in 2007/08) if all other parameters

remain unchanged. A decline in the USD/DKK rate will have the

same effect in absolute terms, however with the opposite sign.


balance sheet, a 10% increase in the USD/GBP rate will have a

negative impact on profi t and shareholders’ equity of USD 1.5

million (USD -0.6 million in 2007/08) if all other parameters remain

unchanged. A decline in the USD/GBP rate will have the same

effect in absolute terms, however with the opposite sign.

Interest

The Group’s interest risk is associated with its debts to credit

institutions and cash and cash equivalents. Interest-rate contracts

have been signed to hedge against interest risks on loans, and

where the rules of IAS 39 on hedge accounting have been applied.

For these interest-rate contracts a change of 1.0% will have an

impact on profi t and shareholders’ equity of approx. USD 4 million

(2007/08: USD 2-4 million).

For loans for which no interest-rate contracts have been made,

a 1.0% change in interest rates will have an impact on profi t and

shareholders’ equity of approx. USD 0.2 million (2007/08: USD 0.2

million).

Capital management

The carrying amount of shareholders’ equity is considered to be

Satair’s capital. Satair’s capital structure is characterized by a high

equity interest the purpose of which is to ensure stable conditions

for the execution of the approved corporate strategy Delivering

500+. Satair considers payment of dividends an important matter

for shareholders. The adopted dividend policy appears from

’Review of Operations’ on p.17.

NOTES 57

Credit risk

The Group is exposed to credit risks related to its receivables and bank deposits. The maximum credit risk corresponds to the book value. No credit

risks are found to be associated with cash and cash equivalents, as the counterpart are banks with good credit ratings. In accordance with the

established procedure, outstanding receivables are regularly followed up on by corporate management. If any uncertainty should arise concerning a

customer’s ability or will to pay a given receivable, and the outstanding balance is found to be risk-prone, write-downs are made to cover this risk.

The balance of receivables from sales and services is composed as follows:

GROUP

2007/08 0-60 days 61-120 days 121-180 days > 180 days June 30, 2008

Receivables which are not impaired 74,343 4,049 1,454 1,459 81,305

Receivables which are impaired 228 146 70 1,227 1,671

Total receivables before write-down 82,976

Write-down (1,305)

Value after write-down 81,671


Receivables which are not impaired 51,100 2,528 198 1,198 55,024

Receivables which are impaired 334 178 469 1,044 2,025


Write-down (1,785)


MODERSELSKAB


Receivables which are not impaired 20,981 1,725 941 850 24,497

Receivables which are impaired 198 83 37 943 1,261


Write-down (902)



Receivables which are not impaired 16,981 1,260 342 714 19,297

Receivables which are impaired 32 1 3 820 856


Write-down (843)


58 NOTES

GROUP

Liquidity risk

Satair’s fi nancial reserves at year-end 2008/09 consist of loans and credits taken out with banks and loans granted by vendors in connection with

purchases of rights. Loans granted by vendors in connection with purchases of rights have an average term to maturity of approx. 4 years.

List of terms to maturity as at June 30, 2008 0-1 years 1-2 years 2-5 years >5 years Total* Fair value** Book value

Measured at amortized cost:

Credit institutions (66, 415) (17,042) (15,450) (23,928) (122,835) (109,098) (111,108)

Payable to suppliers (63,089) - - - (63,089) (63,089) (63,089)

Other current liabilities (11,880) - - - (11,880) (11,880) (11,880)

Measured at fair value (trading portfolio):

Interest-rate contracts - (626) - (3,795) (4,421) (4,421) (4,421)

Total fi nancial liabilities (141,384) (17,668) (15,450) (27,723) (202,225) (188,488) (190,498)


Cash and cash equivalents 3,168 - - - 3,168 3,168 3,168

Receivables from sales and services 81,678 - - - 81,678 81,678 81,678

Other receivables 2,744 - - - 2,744 2,744 2,744


Foreign exchange hedging contracts 1,115 - - - 1,115 1,115 1,115

Financial assets, total 88,705 - - - 88,705 88,705 88,705

Net, Group (52,679) (17,668) (15,450) (27,723) (113,520) (99,783) (101,793)

List of terms to maturity as at June 30, 2009


Credit institutions (61,789) (4,230) (44,830) (180) (111,029) (104,723) (105,465)


Other non-current liabilities (660) (769) (1,500) (1,532) (4,461) (4,386) (4,386)



Interest-rate hedging contracts (2,096) (903) (2,710) (2,031) (7,740) (7,740) (7,740)





Other receivables 1,116 - - - 1,116 1,116 1,116

Measured at fair value (trading portfolio)



Net, Group (55,661) (5,902) (49,040) (3,743) (114,346) (107,965) (108,707)

* All cash fl ows are non-discounted and include all liabilities according to agreements made, which includes, i.a., future payments of interest on loans.** The fair value of fi nancial liabilities is calculated on the basis of discounted cash fl ow models based on the market interest rates and credit conditions applying on the balance sheet date.

June 30, 2008 June 30, 2009

Credit facilities:

Unused credit facilities 18,773 52,807

The unutilized credit facilities are deemed suffi cient to secure the Group’s ongoing operations.

NOTES 59

PARENT COMPANY

List of terms to maturity as at June 30, 2008 0-1 years 1-2 years 2-5 years >5 years Total* Fair value** Book value


Credit institutions (11,909) (664) (1,991) (11,480) (26,044) (22,258) (22,237)


Debt owing to subsidiaries (221) - - - (221) (221) (221)



Interest-rate contracts - (626) - (3,688) (4,314) (4,314) (4,314)





Receivables from subsidiaries 7,330 - - - 7,330 7,330 7,330

Other receivables 423 - - - 423 423 423




Net, parent company (17,915) (1,290) (1,991) (15,168) (36,364) (32,578) (32,557)

List of terms to maturity as at June 30, 2009


Credit institutions (38,908) (522) (23,167) (180) (62,777) (59,759) (59,759)


Debt owing to subsidiaries (5,788) - - - (5,788) (5,788) (5,788)

Other non-current liabilities - (200) (1,500) (1,532) (3,232) (3,232) (3,232)



Interest-rate contracts (1,688) (769) (2,307) (1,661) (6,425) (6,425) (6,425)





Receivables from subsidiaries 6,333 - - 26,553 32,886 32,886 32,886

Other receivables 233 233 233 233



Financial assets, total 30,307 - - 26,553 56,860 56,860 56,860

Net, parent company (46,113) (1,491) (26,974) (23,180) (51,398) (48,380) (48,380)

* All cash fl ows are non-discounted and include all liabilities according to agreements made, which includes, i.a., future payments of interest on loans.** The fair value of fi nancial liabilities is calculated on the basis of discounted cash fl ow models based on the market interest rates and credit conditions applying on the balance sheet date.

June 30, 2008 June 30, 2009

Credit facilities:

Unused credit facilities 6,181 25,044

The unutilized credit facilities are deemed suffi cient to secure the Group’s ongoing operations.

60 NOTES

2007/08 2008/09 2007/08 2008/09

Financial instruments are used for currency risk management

The Group uses forward contracts and currency option contracts to control its currency risks.

Forward contracts and currency option contracts signed to hedge future transactions

In 2008/09 changes have been made to the Group’s risk management policy in relation to currency. Up to and including Q2 2008/09, and in

accordance with the risk management policy and accounting policies applied at the time, foreign exchange gains and losses under forward contracts

and options were recognized in a separate item in the income statement captioned ‘Fair value adjustments of certain hedging instruments’, as the

criteria set out in IAS 39 concerning hedge accounting were not seen to be met.

Beginning in Q3 2008/09, the risk management policy has been changed so that now the criteria set out in IAS 39 for application of the rules on

hedge accounting is seen to be met. Henceforth, unrealized foreign exchange gains and losses on forward contracts and options will be recognized

in shareholders’ equity and be released to the income statement as and when they are realized.

The following net outstanding forward cover contracts at June 30 were used as a hedge of future transactions:

Accumulated Accumulated Accumulated foreign exchange foreign exchange foreign exchange gain/loss Term to gain/loss gain/loss Term to Notional recognized in Fair value maturity Notional recognized in recognized in Fair value maturity amount* the income of principal (months) amount* the income shareholders’ of principal (months) USDm statement amount up to USD m statement equity amount up to

DKK 11.0 0.2 11.2 2 - - - - -

EUR 6.0 0.1 6.1 2 16.0 - 0.6 16.6 6

Total 17.0 0.3 17.3 2 16.0 - 0.6 16.6 6

*Positive principal amounts of forward cover contracts refl ect purchases of the currency in question.

Currency options arranged in cover of future transactions

As at 30 June 2009, by the sale of options the counter value in DKK and EUR of a total of USD 14.5 million (2007/08: USD 54 million) had been

hedged at an average EUR/USD of 129 (2007/08: 156). Similarly, commitments had been made to sell the counter value of up to a total of USD 25

million (2007/08: USD 44 million) against DKK and EUR at an average EUR/USD rate of 138 (2007/08: USD 150) if the EUR/USD rate increases to

a level of EUR/USD 138 (2007/08: USD 150) or above. The fair value of the currency option contracts signed at 30 June 2009 amounts to USD 0.3

million (2007/08: USD 0.8 million). The average term to maturity is 4-6 months.

2007/08 2008/09

Interest hedging contracts arranged as a hedge of future transactions

The notional amount and fair value of interest hedging contracts as at

the balance sheet date are determined as follows:

The rules of The rules of The rules of The rules of IAS 39 on IAS 39 on IAS 39 on IAS 39 on hedge hedge hedge hedge accounting accounting accounting accounting have been have been have not have not applied applied been applied been applied

Notional amount - 66,372 68,921 -

Fair value - (6,548) (4,421) (1,192)

NOTES 61

Note

2007/08 2008/09 2007/08 2008/09

28 PLEDGES AND SECURITY

Mortgages registered to Satair A/S at a total value of DKK 30 million have been issued and are in the company’s possession.

29 CONTINGENT LIABILITIES

For derivative fi nancial instruments, see note 27.

Satair A/S is jointly and severally liable with Satair Service A/S for a possible amount imposed in corporate tax.

Satair A/S has guaranteed the loans and credit facilities of subsidiaries in an amount of USD 65.9 million. At June 30, 2009 a total of

USD 7.0 million of the credit facilities had been utilized and a total of USD 36.3 million had been granted in loans, bringing the total

amount in debt at June 30, 2009 to USD 43.3 million. All loans and credit facilities are included in the credit line rescheduled in

2006/07 and with a 7-year term.

30 LEASE COMMITMENTS

Group and parent company have signed leases that are non-cancelable

by the Group beyond 1 year. The net present value of the total lease

commitments of Group and parent company is as follows:

Lease costs payable within 1 year (968) (811) (2,729) (2,293)

Lease costs payable within 2 to 5 years (959) (505) (4,724) (4,611)

Lease costs payable after 5 years - - (2,626) (3,416)

Total (1,927) (1,316) (10,079) (10,320)

Lease costs for the year for the Group, respectively the parent company, amount to USD 2,817,000 (2007/08: USD 2,912,000), respectively USD 1,117,000 (2007/08: USD 1,080,000). The leasing contracts relate mainly to operating equipments and real property.

31 TRANSACTIONS WITH CLOSELY RELATED PARTIES

The Group has no closely related parties with a controlling infl uence.

The Group’s closely related parties with considerable infl uence include members

of the Board and Executive Committee and senior executives in the Group

companies as well as their family members. Closely related parties also include

companies in which the above persons have considerable infl uence.

Closely related parties also include Group companies, cf. note 34, in which

Satair A/S has a controlling or considerable infl uence.

Trade and balances with closely related parties consist of:

Sales of goods and services, Group companies 45,232 42,982 - -

Purchases of goods and services, Group companies (20,432) (23,398) - -

Legal assistance provided by Bech-Bruun (246) (61) (246) (61)

Dividend from associates - - 443 295

Interest income from Group companies 266 968 - -

Interest expenses to Group companies (13) (131) - -

Receivable from closely related parties, Group companies 7,330 32,886 - -

Payable to closely related parties, Group companies (221) (5,788) - -

Payable to Bech-Bruun (50) (6) (50) (6)

Salaries and emoluments to members of Board and Executive Committee are explained in note 4. There have been no other transactions in the course of the year with members of Board and Executive Committee or other closely related parties.

PARENT COMPANY GROUP

62 NOTES

Note

32 SHARE-BASED REMUNERATION – WARRANT PROGRAM

At the end of fi scal 2006/07 Satair established an incentive pro-

gram in the form of options. As expected at the time of estab-

lishment, the program was changed into a warrants program at

the company’s Annual Shareholder Meeting in October 2007.

The program runs over three years during which the participating

employees in the period 2006/07 to 2009/10 may be allocated

individual numbers of warrants depending on the company’s

fi nancial performance. In the current fi scal year one executive left

the program. As a result, in end-June 2009 the program covered a

total of 14 persons including the Executive Committee (three per-

sons). Accordingly, the program will be able to accommodate an

additional seven employees. The Board of Directors is not covered

by the program.

In principle it is possible to allocate up to 338,487 warrants over

the three-year program period. The exercise period runs from June

2010 up to and including July 2013. Each warrant entitles its holder

to subscribe for one DKK 20 share in Satair A/S at a price per share

of DKK 250, refl ecting the listed price of the share in March 2007.

At end-June 2009 it was possible for members of the Executive

Committee to be allocated a total of 152,000 warrants over the

three-year program period, while other executive staff could be

allocated a total of 111,000 warrants over the three-year period.

In addition to this total of 263,000 warrants, any possible subse-

quent expansions of the program will make it possible to allocate

up to 75,487 additional warrants, bringing the total number of

warrants allocated under the program to 338,487.

In connection with the publication of the annual reports for

2007/08, 2008/09 and 2009/2010, warrants for the past fi scal

year will allocated on the basis of the performance achieved in

that year. Warrants will be fi nally granted in September 2010,

where the program participants must still be employees of the

company in order to be eligible for the allocation.

Allocation is made on the basis of fulfi llment of pre-determined

fi nancial objectives for the Group’s revenue and earnings, and

the number of warrants allocated will depend on the degree of

fulfi llment.

The fair value at the time of allocation (time of establishment) of

the warrants will be recognized in the profi t and loss account in

the three years during which warrants are allocated with a set-off

in shareholders’ equity. At the time of allocation, the fair value

amounted to USD 3,579,000 based on the precise fulfi llment of

the fi nancial objectives, and USD 5,010,000 based on the fi nancial

objectives being exceeded and the maximum number of warrants

being allocated.

The Group’s performance in 2008/09 did not allow the pre-deter-

mined fi nancial objectives of the program to be fulfi lled, and so

fewer warrants were allocated than accounted for in the program.

Accordingly, in the current fi scal year a total of 33,924 warrants

have been allocated of which 18,819 were allocated to the Execu-

tive Committee, and the remaining 15,105 warrants were allocated

to other executive staff.

As a result of the requirement that employment with Satair in Sep-

tember 2010 is a condition for the fi nal allocation of warrants, a

total of 5,029 warrants will be added back to the program because

of the executive leaving the company in 2008/09. The adding

back involves warrants allocated in 2007/08 as well as in 2008/09.

Calculated under the Black-Scholes model and stated at the time of

allocation on June 22, 2007, the allocation of warrants in 2008/09

represents a total operating cost of USD 641,000 before, and USD

545,000 after, adding back the above warrants.

At the closing of fi scal 2008/09 the 14 employees participating

in the program had been allocated a total of 120,228 warrants,

and in 2009/10 these employees may be allocated an additional

117,724 warrants. Calculated at the end of 2008/09, this brings

the maximum number of warrants available for allocation at the

expiry of the program in 2009/10 to 237,952 and will require the

fulfi llment of ambitious fi nancial objectives for 2009/10.

Other assumptions applied in the calculation of the fair value at the

time of allocation were:

A volatility of 31% determined on the basis of volatility in the

period between May 2004 and May 2007

A dividend rate of 1.75%

A risk-free interest rate of 4.7%

Exercise 3 years after the expiry of the vesting period

NOTES 63

Note

GROUPPARENT COMPANY

Executive Others Total Executive Others Total

Committee Committee

No. of warrants allocated

July 1, 2008 50,667 23,666 74,333 50,667 40,666 91,333

Allocated for the year 18,819 6,067 24,886 18,819 15,105 33,924

Cancelled - (5,029) (5,029) - (5,029) (5,029)

June 30, 2009 69,486 24,704 94,190 69,486 50,742 120,228

Value of allocated warrants

2007/08 1,072 484 1,556 1,072 839 1,911

2008/09 362 65 427 362 183 545

Total costs in accordance with IFRS 2 at

June 30, 2009 1,434 549 1,983 1,434 1,022 2,456

No. of outstanding warrants

July 1, 2008 152,000 71,000 223,000 152,000 122,000 274,000

Allocated for the year - - - - - -

Cancelled - (11,000) (11,000) - (11,000) (11,000)

Adjustment based upon

fulfi llment of objectives (14,476) (5,714) (20,190) (14,476) (10,572) (25,048)

Not exercised - - - - - -

June 30, 2009 137,524 54,286 191,810 137,524 100,428 237,952

Adjustment based upon fulfi llment

of objectives - - - - - 25,048

Unallocated - - - - - 75,487

Total authorization - - - - - 338,487

The annually calculated allocation of warrants is conditional upon continued employment with Satair in September 2010.

33 SUBSEQUENT EVENTS

There have been no subsequent events of signifi cance which may affect the Group’s position.

34 GROUP DIRECTORY

Subsidiaries Registered offi ce Stake

Satair USA Inc. USA 100%

Satair Pte. Ltd. Singapore 100%

Satair Service A/S Denmark 100%

Satair Hardware Group Ltd. United Kingdom 100%

Satair Hardware Ltd. (no activity) United Kingdom 100%

Satair Hardware UK Ltd. United Kingdom 100%

Satair Hardware SAS France 100%

Satair Hardware USA Inc. USA 100%

Associates

Blue Sky Alliance GmbH Germany 33.3%

Telair International Services Pte. Ltd. Singapore 29.5%

Satair A/SAmager Landevej 147ADK-2770 KastrupTel: +45 3247 0100Fax: +45 3251 3434 www.satair.come-mail: [email protected]

Incorp. no. 78419717 Stock code: DK001023039-0 in the municipality of Tårnby

Satair® og IPP® are registered trademarks of Satair A/S.

SATAIR – A GLOBAL COMPANY Satair is one of the world’s leading companies within sales and distribution of production components and spares for the aero-space industry. With its sales and warehousing locations in Europe, North America, the Middle East and Asia Pacifi c, Satair services customers throughout the world.

Satair has two divisions, the Aftermarket Division and the OEM Division. The Aftermarket Division handles sales and distribution of aircraft spares to all types of commercial operators, mainte-nance workshops and a number of military operators. The OEM Division delivers production parts primarily to manufacturers of commercial aircraft and helicopters in Europe.

Thanks to its size, broad product portfolio and global presence, Satair is able to offer customers and suppliers access to an effi cient global network. The Group offers a variety of services to both customers and suppliers and invests many resources in the development of new business concepts designed to reduce the supply chain costs – to the benefi t of customers and suppliers alike.

For a number of years, Satair has gradually reinforced its position in the aviation industry through organic growth and acquisitions. The Group employs a staff of 500+ at global level. MISSION STATEMENTOur mission is to become the global leader in aerospace distribution services by exceeding both customer and supplier needs for competitive and innovative supply chain solutions.

SATAIR VALUES We are committed to serving our customers and our suppliers We succeed through knowledge and competence We demonstrate initiative and commitment We will conduct business professionally, ethically and

respectfully

Copenhagen, Denmark

Dubai, UAE

Beijing, China

Singapore

Melbourne, Australia

Senlis, France

Atlanta, USA

Ft. Lauderdale, USA

Sales & Warehouse Warehouse

Shoreham, UK

Southend, UK

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