2016 Interim Results August 2016 BBA Aviation transformed in H1 - - PowerPoint PPT Presentation

2016 Interim Results

August 2016

BBA Aviation transformed in H1 2016…

The enlarged Signature  Landmark Aviation as anticipated  Extended global leadership  Extended customer proposition Aftermarket Services  Ontic delivering  ERO restructuring progressing, performance unsatisfactory

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…materially enhanced prospects

Aftermarket Services

7%

Flight Support

93%

Military

5%

Commercial

7%

B&GA

88%

Note: H1 2016. All figures are reported on a continuing operations basis

• 1. Underlying operating profits (pre exceptional and other items)

Enlarged Signature Atlantic Aviation Million Air Jet Aviation Total locations 200* 64 29 21 North America 136 64 27 7 Sole source locations 62** 24 14 1 Top 50 US airports 38‡ 27 10 5

Locations comprise licenses, JVs and fully owned entities and correct as at time of announcement * 154 of 200 locations are wholly owned ** 58 of the 62 are wholly owned locations ‡ Adjusted for overlap locations within the top 50 of the respective category shown (i.e. where two FBOs on one airport, we count as one location)

Enhanced Signature leadership position Operating profit1 Revenue by key markets

Landmark Aviation integration process ahead of plan

Integration progressing well  Organisation design and management in place  Re-branding complete  Operations, customer service and safety training on track  Systems conversion in progress, 30 bases now live  Procurement RFPs broadly complete Actions delivering the vast majority of cost savings now complete Further network benefits to come

2

…materially reduced execution risk

Flight Hours TTM Y-on-Y Months

• f Growth

Large Cabin Jets +2% 72 months Midsize Cabin Jets

• Aircraft >10yrs old
• Aircraft <10yrs old
• 5%

+ 2% 55 months 74 months Small Cabin Jets +0.5% 37 months TOTAL +1% 68 months

Modest growth in US B&GA flying continues…

Markets broadly flat  US B&GA departures +0.2%  European B&GA movements down -0.8%  Commercial aviation movements 1.2% in NA and 4.6% in Europe  Military market stable

Decline in key engine repair segments

 Legacy mid cabin  Oil and gas rotorcraft

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…Signature continuing to outperform

US Market Segments

Source: FAA, OAG

• 1. H1 2016 underlying operating profits (pre exceptional and other items) on a continuing basis

Operating profit1

Strong overall performance…

Continuing Signature performing well  Strong growth in enlarged Signature  Continued market outperformance Aftermarket Services weaker  Ontic (Legacy Support) delivered ahead of plan, strong pipeline  ERO weak performance, progress on restructuring but challenging outlook, $185m non-cash impairment Discontinued Good year on year underlying operational and financial performance ASIG reclassified as held for sale discontinued  $129m non-cash impairment

4

…leverage down and dividend up

Aftermarket Services

7%

Flight Support

93%

Performance Review

Mike Powell Group Finance Director

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Delivery and momentum

Flight Support (93% of continuing operations): Signature strong, Landmark delivering  Integration going well  New locations delivering as expected  Synergies on track and high confidence in delivery  Existing Signature continues to outperform with good drop-through Aftermarket Services (7% of continuing operations): weak result  Ontic on track, ahead of forecast for H1  Continued low volumes and margins in ERO; restructuring continues Group  ASIG disposal process proceeding, now shown as “held for sale”  Cash generation driving de-leverage to 3.2x1  Dividend increased by 5%

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…driven by Signature, underpinned by Ontic

All figures are reported on a continuing operations basis unless stated Existing Signature refers to Signature excluding former Landmark bases

• 1. Covenant basis

Changes to usual presentation of results

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Used to be… Now…  Flight Support ─ Signature and ASIG  Aftermarket Services ─ ERO and Ontic  Central costs  Flight Support:

─ Signature (existing/new locations, synergies)

 Aftermarket Services

─ ERO and Ontic

 Central costs

─ Central costs ─ Central costs that support ASIG Continuing Operations Discontinued Operations

 Flight Support: ASIG

─ Profit after tax, gross of central support costs ─ Balance sheet treatment: collapsed into two lines, assets and liabilities held for sale

Strong performance from Flight Support1

93% of continuing operations

New reporting shows Signature standalone for the first time Increased scale of FBO business feeding through to operating margin  Existing Signature organic revenue up 3.6% Landmark Aviation delivering as anticipated  Synergies of $8.7m ahead of plan New Signature Flight Support divisional ROIC 12.3% (H1 2015: 14.3%, FY 2015: 15.4%)

8 Operating profit2 ($m) H1 2016 H1 2015 Change Existing Signature 79.2 75.4 5.0% HK one-off

• 5.2
• Landmark
• Continuing
• FBOs sold

45.5 7.9

• Synergies

8.7

• Total Signature

141.3 80.6 75.5% Other 0.3 (3.7) Total Flight Support 141.6 76.8 84.4% Operating margin3 20.8% 15.8% 500bps

Notes: HK one-off refers to the 2015 reclassification of our investment in the Hong Kong Business Aviation Centre as an associate rather than a financial investment, which realised an accounting profit of $5.2 million

• 1. Flight Support continuing operations represents Existing Signature plus Landmark Aviation

plus those elements of ASIG not included in discontinued operations (primarily the impact of our ASIG Singapore operations in 2015, now terminated)

• 2. Figures refer to actual underlying operating profit (pre exceptional and other items)
• 3. Underlying operating margin

Existing Signature: excellent profit progression

Strong growth in existing business  Network benefits continuing to drive market

• utperformance

Organic revenue up 3.6% (adjusted for fuel, FX)  US B&GA movements +0.2% Underlying operating profit growth 5.8%1  Good operating leverage

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…driven by robust operational delivery

Revenue Bridge ($m) Operating Profit2 ($m)

• 1. Excluding the 2015 reclassification of our investment in the Hong Kong Business Aviation

Centre as an associate rather than a financial investment, which realised an accounting profit of $5.2 million All figures are reported on a continuing operations basis Acquisitions refers to four FBOs acquired in Italy

477.9 (3.6) (52.6) 421.7 2.0 15.3 439.0 2015 H1 FX Fuel 2015 H1 Like for like Acq's Organic 2016 H1

• 2. Underlying operating profit (pre exceptional and other items)

80.6 (0.5) 80.1 (5.2) (0.0) 4.3 79.2 2015 H1 FX 2015 H1 Like for like Hong Kong Acq's Organic 2016 H1

Synergy progression

Landmark Aviation integration progress

Acquisition assumptions validated Operating margins in line with expectations  H1 operating profit margin 19% excluding associate profit1 and synergies Synergies ahead of schedule  $8.7m synergies in H1  Will accelerate into H2: active annualised run rate of $28m  High degree of confidence in $35m target run rate starting January 2017 Costs to deliver Integration plans on track  $16m booked in H1 out of total $25m this year ─ Significant proportion labour  Full year cash spend to deliver integration: $19m capex, $25m operating costs ─ On track; low cash out in H1

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…delivering on acquisition objectives

• 1. Earnings from six disposed FBOs and aircraft management and charter business accounted as associate

undertakings

$0m $5m $10m $15m $20m $25m $30m $35m $40m H1 2016 2017 run rate Realised H1 actions annualised To do

Cost reduction actions undertaken represent $28m run rate in 2017

Revenue down 14%  Weak H1 performance in ERO as trading conditions remain challenging  Ontic ahead of plan Operating profit1 down 56%  Depressed volumes in ERO’s market sub- segments, reduced workscopes and competitive pricing, OEM actions, reduced engine trading  Ontic robust ERO footprint rationalisation programme progressing well and on track  Cost reduction benefits continue in H2 Ontic strong order book for H2 Good acquisitions pipeline for Ontic Divisional ROIC 6.5% (H1 2015: 10.8%, 2015: 8.4%)

Aftermarket Services: mixed performance

7% of continuing operations

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…with good result and outlook from Ontic

Revenue Bridge ($m) Operating Profit1 ($m)

396.4 (5.1) 391.2 4.9 (56.1) 340.1 2015 H1 FX 2015 Like for like Acq's Organic 2016 H1 25.2 (0.7) 24.4 1.9 (15.3) 11.1 2015 H1 FX 2015 Like for like Acq's Organic 2016 H1

Organic includes $29.4m engine trading revenue recognised in previous year

• 1. Underlying operating profit (pre exceptional and other items)

All figures are reported on a continuing operations basis

Discontinued ASIG Operations

Review of value maximisation alternatives well advanced Further update before year end Assets written down by $128.9m Good underlying financial and operational performance year on year  Despite weak de-icing season H1 2016 ROIC 2.6% (H1 2015: 2.4%, 2015: 1.7%)

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Revenue Bridge ($m) Operating Profit1 ($m)

214.1 (4.7) (1.8) 207.7 9.1 (8.0) 208.8 2015 H1 FX Fuel 2015 H1 Like for like Acq's Organic 2016 H1 11.4 (0.1) 11.3 0.9 1.8 14.0 2015 H1 FX 2015 Like for like Acq's Organic 2016 H1

• 1. Underlying operating profit (pre exceptional and other items)

Operating profit includes the benefit of $9.3m support costs now reported against continuing

• perations (H1 2015: $8.8m)

Acquisitions refers to ASIG Panama, acquired in H2 2015 Acquisitions refers to ASIG Panama, acquired in H2 2015

Underlying1 Group Income Statement

13 Continuing operations ($m) H1 2016 H1 2015 Change Revenue 1,020.6 882.3 16% Revenue (fuel adjusted2) 1,020.6 829.7 23% Operating profit 135.6 84.2 61% Margin % 13.3% 9.6% 3.7% Margin % (fuel adjusted) 13.3% 10.1% 3.1% Net interest (30.1) (16.3) 85% Profit before tax 105.5 67.9 55% Profit after tax 88.0 56.7 55% Continuing, adjusted EPS3 10.2c 9.3c 10%

• 1. Pre exceptional and other items
• 2. Constant fuel price
• 3. Adjusted weighted average number of shares in issue to align the capital base with the earnings arising from the deployment of the rights issue

Discontinued operations ($m) H1 2016 H1 2015 Change Operating profit 14.0 11.4 23% Group ($m) H1 2016 H1 2015 Change ROIC 9.9% 11.4% (1.5%) Adjusted EPS3 11.6c 10.9 6% Dividend3 3.63c 3.47c 5% Profit after tax 12.3 8.9 38% Continuing operations by segment ($m) H1 2016 H1 2015 Change Flight Support 141.6 76.8 84% Aftermarket Services 11.1 25.2 (56%) Central costs (normal & ASIG costs) (17.1) (17.8) 4% Group underlying operating profit 135.6 84.2 61%

$m H1 2016 H1 2015 Underlying operating profit Less amortisation of intangibles Depreciation & amortisation 149.6 (51.9) 97.6 95.6 (5.6) 40.2 Underlying EBITDA 195.3 130.2 Working capital movement 9.3 (34.1) Capex (49.6) (44.3) Net interest and tax paid (36.5) (22.0) Exceptional and other items (41.7) (3.8) All other movements 14.9 (14.2) Free cash flow 91.7 11.8 Dividends (87.2) (53.9) Share repurchases

• (12.7)

Acquisitions & licences (2,092.0) (21.1) Disposals

186.5

• Other

7.5 (3.0) Change in net debt (1,893.5) (78.9) Net debt 1,437.0 698.1* Net debt to EBITDA, covenant 3.2x 2.6x Net debt to EBITDA, reported 4.3x 2.6x

 Strong cash generative ability enhanced by Landmark Aviation acquisition  Capex spend in line with expectations  Exceptional cash costs relating to Landmark Aviation transaction and integration  Leverage 3.2x on covenant basis

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Continued strong cash generation…

…supporting a de-leveraging profile

All figures are reported on a continuing operations basis * FY 2015 net cash $456.5m

Jun-15 Dec-15 Jun-16 Dec-16

Landmark 1 month forecast Landmark 11 months actual Old BBA LTM* actual Landmark 7 months forecast Landmark 5 months actual Old BBA LTM* actual

Actual Forecast

Good de-leverage in H1

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EBITDA for covenant ratio (3.2x)

H1 2016 FY 2016 …ratios converge at year end

EBITDA for reported ratio (4.3x) EBITDA for covenant ratio EBITDA for reported ratio

Jan-17

*Last twelve months

Other financial matters

Main exceptional and other items (before tax) Continuing  Restructuring expenses: ERO $6.2m  Amortisation of acquired intangibles: $51.2m  Landmark Aviation integration costs $16.1m  ERO impairment $185.3m ─ Subdued outlook for legacy mid- cabin fixed wing and rotorcraft flying Discontinued  ASIG write-down $128.9m

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Pensions  UK DB scheme closed: $1.5m charge  Total pensions valuation net deficit $49.4m (2015: $40.1m)  Revised payment schedule agreed with trustees: £3m for 5 years, £2.7m for following 14 years 2016 guidance  FY16 capex $150m, includes $19m synergy capex  Tax rate c16-17%, cash tax rate 8-9%

Summary and Outlook

Simon Pryce Group Chief Executive

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B&GA flying stable…

 B&GA flying now drives ~90% of Group revenues  Stable medium-term indicators ─ Corporate confidence steady ─ Second-hand fleet for sale stable ─ Second-hand pricing satisfactory  GDP plus growth through-cycle

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…longer term GDP plus structural growth

Source: GAMA and US Bureau of Economic Analysis Note: 2004 the GAMA survey coverage expanded for turbine airplanes and rotorcraft, accounting for part of the increase in hours flown

US B&GA Flight Hours and GDP

500 1000 1500 2000 2500 3000 3500 4000 4500 5000 10000 15000 20000 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Business Jet Flight Hours (000s) US GDP ($bn) Business Jet Flight Hours (Thousands) GDP (Billions in 2009 Dollars)

Well-placed into H2…

Focused market leader Delivering strong performance  Above market growth  Integration benefit  Ontic order book, ERO footprint reduction  Operational optimisation Further opportunity  Network benefit  ERO fix, Ontic pipeline  Cross business potential  Portfolio optimisation Longer term value  B&GA market growth  Cash generation

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…delivering on the opportunity

Questions

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Appendix

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Revenue split and organic growth

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Flight Support 67% Organic 2.3% Signature 99.6% Organic 3.6% ASIG 0.4% Organic (70)% Signature

• N. America

89% Organic 5% Signature RoW 11% Organic (2)% Aftermarket Services 33% Organic (14)% Ontic 21% Organic (10)% ERO 79% Organic (15)% Revenue1 ($m)

• N. America

RoW Total Signature Flight Support 600.9 77.3 678.2 ASIG 152.6 58.5 211.1 Engine Repair & Overhaul 230.3 39.6 269.9 Ontic 44.8 25.4 70.1 1,028.6 200.8 1,229.4

• 1. Group (continuing and discontinued operations)

Signature’s market outperformance

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Source: FAA

• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30%

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16

USA Market vs. 2007 USA Market vs. Prior Year SFS USA Gallons vs. Prior Year

ROIC and EPS definitions

Underlying Earnings Per Share (EPS) Adjusted earnings pre exceptional and other items attributable to BBA Aviation Divided by the weighted average shares in issue Change to previous measure replaces accounting tax with current tax charge  Better reflects the performance of the Group

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Return on Invested Capital (ROIC) ROIC calculation: simpler definition Now: Adjusted Operating Profit Statutory invested capital Invested capital = average net assets + average net debt

Disclaimer

This presentation contains forward-looking statements including, without limitation, statements relating to: future demand and markets of the Group’s products and services; research and development relating to new products and services; liquidity and capital; and implementation of restructuring plans and efficiencies. These forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may

• ccur in the future. Accordingly, actual results may differ

materially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changes in interest and exchange rates, commodity prices and other economic conditions; negotiations with customers relating to renewal of contracts and future volumes and prices; events affecting international security, including global health issues and terrorism; changes in regulatory environment; and the outcome of litigation. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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