Steve Slater summarises the Association’s financial performance for 2021

Each year, ahead of the formal presentation of our annual accounts at the Annual General Meeting in October (see AGM notice in News), we share the financial information with all members in Light Aviation magazine. This year’s summary, fresh from the auditors, shows our income and expenditure for 2021, along with our planned performance in 2022, and our future planning for 2023 and beyond.

In April, our accounts for the past year were given their formal audit by our accountants, Henson Rees Russell LLP and, as I would have hoped, given a clean bill of health to both our accounting processes and our governance, even taking into account the challenging times we have faced in the past year or two.

No one could have predicted the exceptional circumstances we have all endured over the past couple of years. As part of our long-term contingency planning, we maintain a ‘risk register’, which lists theoretical challenges and how we might respond. I never expected that we might face the risk of ‘a total stop on recreational flying’, which was marked as ‘high risk, but low likelihood’ on our register.

In fact, due to Covid we had to endure it twice. Then there was the cancellation of the 2020 LAA Rally and, despite a highly successful 2021 event at Sywell, a longer-term effect in forcing the relocation of the 2022 event to Popham. And, while not directly affecting the 2021 accounts, we are now managing the challenges

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Income vs Expenditure

posed by the extraordinary increase in fuel and other costs, as a result of the conflict in the Ukraine.

In fact, those challenges have brought out the best in the LAA, both from the staff, Inspectors and members. The LAA inspectorate and HQ airworthiness team successfully handled a huge post-lockdown ‘bow-wave’ of Permit renewals, even while the office team were still home-working in line with Covid restrictions.

In addition, we were able to reap the benefits of our past investment in remote Cloud-based IT systems, while innovative, hybrid ways of working were adopted to facilitate everything from LAA Board and AGM meetings, to monthly ‘Virtual Pub Nights’, which provided another means of keeping in touch with members. A big thank you to everyone who contributed to that achievement.

The 2021 accounts

So, what has been the effect on our finances? Well, in overall terms we performed better than we might have expected. Overall incoming revenues returned to pre-Covid levels with 2021 at £1,306,006; in comparison with the dip to £1,196,160 in 2020 and £1,308,724 in pre-Covid 2019.

Membership and Permit renewal make up more than 80% of incoming funds, and membership income at £520,006 was up 6% on 2020 (£491,989), due to a combination of recovery in membership levels and the increase in membership fees, which we initiated at the start of 2021. Permit renewals were up 4% at £621,508 against £597,380 in 2020.

That’s income, so what about our costs? You may remember that in 2019, prior to Covid having its effect, the Board agreed to use our reserves to enable increased engineering staffing levels, both to improve the level of service to members and to provide longer-term succession planning resulting in planned short-term deficits. This, together with other increases in costs mentioned below, increased overall costs from £1,326,030 in 2019 to £1,333,560 in 2020 and to £1,484,376 in 2021.

Including funds received from our investments and other assets, our deficit for the financial year 2021 was £157,360, up from £113,920 in 2020. It should be emphasised that this is a short-term loss, or rather an investment of cash held within the Association. This total included the allocation of £48,700 towards engineering restructuring costs, which included the recruitment of John Radcliffe as Engineering Director, facilitating the transition of leadership from Francis Donaldson at the end of the year, with Francis remaining in a consultative capacity in the coming years.

Income

remains confident that these are more than adequate to meet any short-term challenges, and the long-term future needs of the Association.

One of the big decisions made at the end of 2021 was to renew our tenancy for the LAA HQ building at Turweston. Its lease is a significant cost and we looked at other sites in the area as well as the possibility of buying a facility and asked the question, if home-working works, do we need such a large office space? Ultimately, we decided that while a move to more flexible working is a likely way to boost efficiency in the immediate future, Turweston’s location, along with the steady increases in training in the HQ’s classrooms and workshops, is the way forward to even better services based around Turweston.

We also worked hard with our insurance broker to hold back the rising cost of our insurance coverage, which includes liability cover of up to £20 million for Member Club and Strut events and liability cover for staff, Inspectors and Pilot Coaches when they are working on behalf of the LAA. Until 2020 we typically paid around £85,000 for this. However, the preponderance of ‘no win no fee’ litigation and our need to defend ourselves from the claims they generate, has meant that premiums last year rose to over £110,000. We thought they might even reach £130,000 per annum. For the coming year, we have at least been able to maintain the same costs as last year.

While we seek to maintain sound cost control there are clearly external pressures on expenditure that will affect us. The rising oil costs have not just affected our fuel bills, but also areas such as printing this magazine, which has seen a 53% rise in print costs in the past six months.

Outgoings

Key:

■ Membership

■ Other

■ Investment

■ Magazine advertising

■ Engineering

■ Rally

Key:

■ Wages, salaries

■ Other

■ Training/course

■ Rally

■ Engineering restructuring

■ HQ Rent and expenses

■ Admin IT and operations

■ Liability Insurance

■ Magazine

The good news is that magazine advertising revenues began to show a small recovery by the year end at £96,765 and few seem to have noticed the cost-saving move back to stapled rather than bound editions a few months ago. We also moved our distribution from Royal Mail to a third-party supplier last year, reducing these costs by more than £5,000 per annum, so don’t worry, the future of Light Aviation is secure!

The future

Looking ahead to 2023 and beyond, as our reorganisations bear fruit, in particular by restructuring workload and additional income from training courses, we had anticipated a return to zero-deficit (or better) by late 2023.

Of course, we are now looking at the inflationary pressures surrounding wages and other costs and this could mean increases in some areas of fees, but even against that, we are still planning to be able to minimise the cost to members while planning to return to break even by 2024 and still offer the best value to members in terms of support, permits and training to keep us and our aircraft flying in the most cost-effective manner possible. ■