BBA Aviation enabling flight; expanding horizons 2016 Final Results - - PowerPoint PPT Presentation

BBA Aviation – enabling flight; expanding horizons

2016 Final Results

BBA Aviation

2016 – a transformational year

Major expansion of Signature ‒ Acquired Landmark ‒ Unique global network of >200 FBOs Focused the Group ‒ Value added, IP protected, strong ROIC / cash flow ‒ Merged aircraft management and charter business ‒ Grown Ontic ‒ ASIG disposal Successfully integrated Landmark Aviation ‒ Cost synergies quicker and greater than anticipated ‒ Extended opportunity for outperformance

…enhanced underlying quality, growth and opportunity for value creation

106 112 115 118 125 138 203

2010 2011 2012 2013 2014 2015 Now

Signature global network expansion Historical1 Today2

Total operating profit

$181.5m

Total operating profit

$302.6m

01 Note 1: Based on 2015 financial information Note 2: Based on 2016 financial information 2016 Final Results

Aftermarket Services 28% Flight Support 72% Aftermarket Services 12% Flight Support 88%

BBA Aviation

Modest growth in US B&GA flying continues

US Market Segments

…Signature continuing to outperform

2

Low market growth

‒ US B&GA departures +1% ‒ European B&GA movements +2% ‒ Military market stable

Continued decline in key engine repair segment

‒ Legacy mid cabin

Source: FAA, OAG

Flight hours TTM Y-on-Y Months

• f growth /

decline

Large Cabin Jets +5% 79 months Midsize Cabin Jets

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

+ 2% 61 months 80 months Small Cabin Jets

• 1%

6 months Total Market +1% 80 months

2016 Final Results

BBA Aviation

Strong business performance

Continuing Signature performing well

‒ Continued outperformance; new locations delivering; integration complete ‒ Further network expansion ‒ Large development projects successfully completed ‒ Created one of the largest aircraft charter and management businesses

Aftermarket Services mixed

‒ Ontic good performance, new licences contributing ‒ Significant Ontic portfolio growth ‒ ERO footprint rationalisation programme on track; improving performance in weak markets

…delivering further good growth

3

Discontinued ASIG

‒ Further operational improvements and new business wins ‒ Business in good shape, sold in January 2017

2016 Final Results

BBA Aviation

Performance Review

Mike Powell

Group Finance Director

4 2016 Final Results

BBA Aviation

2016: continued excellent delivery

…driven by Signature, underpinned by Ontic

5

Flight Support (88% of continuing OP1):

‒ Existing Signature continued outperformance with good drop- through ‒ New locations delivering as expected; integration successfully completed; ‒ Synergies faster and greater than anticipated

Aftermarket Services (12% of continuing OP1):

‒ Ontic good performance, H2 revenue uptick ‒ ERO slight H2 improvement

Discontinued operations

‒ ASIG successfully sold for $202 million in January 2017

Continued strong cash flow

‒ Further deleveraging

2016 Final Results

Operating profit1 ($m) 2016 2015 restated Change

Flight Support (continuing) 294.0 154.4 90% Aftermarket Services 42.0 59.6 (30)% Central costs (continuing) (14.8) (16.1) 8% Central costs (ASIG) (18.6) (16.4) (13)% Total central costs (33.4) (32.5) (3)% Group continuing 302.6 181.5 67% Discontinued 27.5 20.5 34% Group total 330.1 202.0 63% Basic adjusted EPS (continuing) 19.4c 18.0c 8% Cash EPS (continuing) 22.1c 18.6c 19% Dividend per share 12.75c 12.15c 5% Net debt (1,335.3) 456.5 Net debt to EBITDA, covenant 3.1x 2.3x Net debt to EBITDA, reported 3.2x 2.3x

Note 1: Underlying operating profit (pre exceptional and other items)

BBA Aviation

Flight Support: strong performance

88% of continuing OP1

Strong revenue growth

‒ Signature good organic growth of 5%; further outperformance ‒ Significant contribution from Landmark

Organic operating profit growth of 72%

‒ Extended customer service offering through new locations and new services supporting good operating leverage

Landmark Aviation delivering as anticipated

‒ $21.9m synergies delivered in 2016

6 FBOs successfully sold One of the largest aircraft charter and management fleets Divisional ROIC 11.2% (FY 2015: 15.3%)

2016 Final Results 6

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

Note 1: Underlying operating profit (pre exceptional and other items) Note 2: Adjusted for two one-off items in 2015: the reclassification of our investment in the Hong Kong Business Aviation Centre as an associate and the trading losses from ASIG’s operations at Singapore Changi Airport

931.6 (11.4) (56.9) 863.3 545.9 40.0 (6.0) 1,443.2 2015 FX Fuel 2015 Like- for-like Acq's Organic Prior Year

• ne-offs (HK /

Singapore) 2016 154.4 (1.8)

• 152.6

110.5 21.9 10.1 (1.2) 294.0 2015 FX Fuel 2015 Like- for-like Acq's Syne- rgies Organic Prior Year

• ne-offs (HK

/ Singapore) 2016

BBA Aviation

Landmark Aviation progress

Successful integration of 62 new FBOs Operating margins in line with expectations Cost synergies delivered ahead of schedule

‒ Annualised cost savings of $39m from 20171

~$42m total integration costs

‒ $24.9m of one off expenses (shown as exceptional) ‒ $17m of capital expenditure

Synergies and Landmark contribution will no longer be reported separately

…delivering on acquisition objectives

7 2016 Final Results Cleveland Burke Lakefront Airport

BBA Aviation

Aftermarket Services: mixed performance

Revenue down 9.5%1 ‒ Ontic delivering uptick in revenues in H2 ‒ Depressed volumes in ERO, challenging trading conditions Operating profit2 down 30% ‒ Ontic good operational performance – now >85% of division ‒ Good contributions from new Ontic licences ‒ ERO performance reflecting market conditions, reduced workscopes, competitive pricing, OEM actions, reduced engine trading, leading to $184.4m impairment ERO footprint rationalisation programme stabilising business ‒ Cost reduction benefiting H2 performance Divisional ROIC 6.9% (2015: 8.2%)

…with good result and outlook from Ontic

8

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

Note 1: Comparator includes $39.7 million of engine trading Note 2: Underlying operating profit (pre exceptional and other items)

Organic includes $(39.7)m engine trading revenue recognised in previous year

2016 Final Results

59.6 (3.1) 56.5 4.3 (18.8) 42.0 2015 FX 2015 Like- for-like Acq's Organic 2016 782.4 (16.5) 765.9 12.8 (72.8) 705.9 2015 FX 2015 Like- for-like Acq's Organic 2016

$(39.7)m engine trading

BBA Aviation

Revenue Bridge ($m)

415.8 (13.3) (2.3) 400.2 16.6 416.8 2015 FX Fuel 2015 Like-… Underlying 2016

Discontinued ASIG operations

‒ Successful disposal for $202m completed in January 2017, net proceeds of ~$170m ‒ Good underlying financial and operational performance ‒ $7.1m benefit from suspension of depreciation ‒ Assets written down by $109.1m, in anticipation of sale

9

Operating Profit1 ($m)

2016 Final Results

20.5 0.1

• 20.6

11.2 (4.3) 27.5 2015 FX Fuel 2015 Like- for-like Underlying Panama 2015 gain

• n purchase

2016

Note 1: Underlying operating profit (pre exceptional and other items)

BBA Aviation

Underlying Group Income Statement

10

Continuing operations ($m) 2016 2015 Change Revenue 2149.1 1714.0 25% Revenue (fuel adjusted) 2149.1 1657.1 30% Operating profit 302.6 181.5 67% Margin % 14.1% 10.6% Margin % (fuel adjusted) 14.1% 11.0% Net interest (63.9) (31.8) 101% Profit before tax 238.7 149.7 60% Profit after tax 199.2 128.9 63% Continuing, adjusted EPS 19.4c 18.0c 8% Continuing operations by segment ($m) 2016 2015 Change Flight Support 294.0 154.4 90% Aftermarket Services 42.0 59.6 (30)% Central costs (continuing) (14.8) (16.1) 8% Central costs (ASIG) (18.6) (16.4) (13)% Total central costs (33.4) (32.5) (3)% Operating profit 302.6 181.5 67% Total Group ($m) 2016 2015 Change ROIC 10.1% 11.0% (90)bps Adjusted EPS 21.1 20.1 5% Adjusted EPS (continuing) 19.4 18.0 8% Dividend 12.75 12.15 5% Discontinued operations ($m) 2016 2015 Change Operating profit 27.5 20.5 34% Profit after tax 17.9 15.4 16%

2016 Final Results

BBA Aviation

Exceptional and other items

Main exceptional and other items (before tax) Continuing

‒ Restructuring expenses: ERO $9.9m ‒ Landmark Aviation integration costs $24.9m ‒ Amortisation of acquired intangibles: $98.6m ‒ ERO impairment $184.4m

Discontinued

‒ ASIG write down in anticipation of sale $109.1m

11 2016 Final Results

BBA Aviation

$m 2016 2015

Underlying operating profit 1 Depreciation & amortisation

330.1 84.6

202.0 71.1

Underlying EBITDA2 414.7

273.1

Working capital movement 51.5

(21.7)

Capex (102.4)

(90.7)

Net Interest paid (61.9)

(29.4)

Tax paid (15.8)

(5.0)

Exceptional and other items (63.5)

(28.6)

All other movements 1.5

(9.3)

Free cash flow 224.1

88.4

Dividends (124.3) (76.6) Issue of shares 0.3 1,117.5

Acquisitions & licences

(2,108.8) (32.9)

Disposals

186.6

• Other + FX

30.3 (20.6) Change in net debt (1,791.8)

1,075.8

Net debt (1,335.3)

456.5

Net debt to EBITDA, covenant 3.1x

2.3x

Net debt to EBITDA, reported 3.2x

2.3x

Enhanced and continuing strong cash generation

‒ Strong cash generative ability enhanced by Landmark Aviation acquisition ‒ Working capital inflow due to improved processes and timing of payments, ~$20m to reverse in 2017 ‒ Cash tax lower than income statement tax as anticipated; will continue. ‒ Exceptional cash costs relating to Landmark Aviation, ERO restructuring and ASIG disposal ‒ Net cash proceeds of $186.6m from disposal of 6 FBOs ‒ ASIG disposal and Ontic GE acquisition in 2017 cash flow ‒ Leverage 3.1x on covenant basis

…supporting further value creation

12 2016 Final Results Note 1: Underlying operating profit (pre exceptional and other items) Note 2: Underlying operating profit before depreciation and amortisation

BBA Aviation

Other financial matters and technical guidance FY17

Central costs

‒ ~$20m Group central costs in FY17 ‒ ~$5m ASIG central costs in FY17 ‒ All ASIG costs eliminated by 2018, ~$8-10m exceptional cost to achieve

Capital expenditure

‒ FY17 capex $100-120m

ERO footprint rationalisation

‒ Sale of ERO Forest Park facilities progressing, sale planned in H2

Tax

‒ Tax rate c19%, cash tax rate 12%

Interest

‒ ~$60m interest charges in 2017

13

Pensions

‒ UK DB scheme closed: $1.5m charge ‒ Total pensions valuation net deficit $82.8m (2015: $40.1m) due to lower UK corporate bond yields ‒ Revised payment schedule agreed with trustees: £3m for 5 years, £2.7m for following 14 years

2016 Final Results

BBA Aviation

BBA Aviation going forward

14

Simon Pryce

Group Chief Executive

2016 Final Results

BBA Aviation

Increased exposure to B&GA market

Indicator Details

Short Term Aircraft utilisation ‒ B&GA flying hours continued growth Corporate confidence ‒ B&GA flying closely correlated to corporate confidence ‒ SME confidence measures continue to improve Medium Term Fleet growth ‒ Global B&GA fleet continues to expand ‒ Forecast fleet growth of 3-4% CAGR through 2025 ‒ % of second hand fleet for sale and pricing stable Fleet dynamics ‒ Larger aircraft are an increasing proportion of the fleet, up from 22% to 28% (2005-2016) ‒ Higher average age of fleet Long Term GDP ‒ Through-cycle growth in excess of GDP ‒ External forecasts of 2.5% flight hours growth p.a.

…continued outperformance

2016 Final Results 15

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

• f the increase in hours flown

1000 2000 3000 4000 5000 10000 15000 20000 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Business Jet Flight Hours (000s) US GDP ($bn) Business Jet Flight Hours (Thousands) GDP (Billions in 2009 Dollars)

US B&GA Flight Hours and GDP

• 25.0%
• 20.0%
• 15.0%
• 10.0%
• 5.0%

0.0% 5.0% 10.0% 15.0% Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16

US B&GA Aircraft Movements and US Small Business Confidence

YOY 12 month rolling change in B&GA aircraft movements % YOY change in Small Business Confidence

BBA Aviation

BBA Aviation well placed…

…for accelerated value creation

2016 Final Results 16

High quality business

‒ Market leadership, barriers to entry ‒ Integration benefit ‒ Ontic acquisitions contributing; ERO stabilised

Enhanced growth prospects

‒ Network strength and opportunity ‒ Further expansion ‒ Ontic pipeline and potential ‒ Portfolio optimisation

Attractive financial characteristics

‒ Strong cash generation ‒ Capital structure and allocation

BBA Aviation

Questions

2016 Final Results 17

BBA Aviation

Appendix

18 2016 Final Results

BBA Aviation

Revenue split1 and organic growth2

19

Flight Support 72% Organic 4% Signature 77% Organic 5% ASIG 23% Organic (57)% Signature

• N. America

89% Organic 5% Signature RoW 11% Organic (2)% Aftermarket Services 28% Organic (10)% Ontic 23% Organic (3)% ERO 77% Organic (11)% Revenue2 ($m)

• N. America

RoW Total Signature Flight Support 1,274.3 164.0 1,438.3 ASIG 305.8 115.9 421.7 Engine Repair & Overhaul 459.0 82.4 541.4 Ontic 108.9 55.6 164.5 2,148.0 417.9 2,565.9

Note 1: Total revenue for continuing and discontinued operations Note 2: Organic growth representing continuing operations only 2016 Final Results

BBA Aviation

76.9 (0.4)

• 76.5

53.4 8.7 4.2 (1.2) 141.6 2015 H1 FX Fuel 2015 H1 Like- for-like Acquisitions Syne- rgies Existing Signature

• rganic

Prior Year

• ne-offs (HK

/ Singapore) 2016 H1

77.5 (1.4)

• 76.1

57.1 13.2 5.9 152.4 2015 H2 FX Fuel 2015 H2 Like- for-like Acquisitions Syne- rgies Existing Signature

• rganic

2016 H2 445.8 (7.7) (4.3) 433.8 304.7 24.1 762.6 2015 H2 FX Fuel 2015 H2 Like- for-like Acquisitions Existing Signature

• rganic

2016 H2

Flight Support – H1 and H2 bridges

2016 Final Results 20

H2 Revenue ($m) H2 Operating Profit1 ($m) H1 Operating Profit1 ($m) H1 Revenue ($m)

485.8 (3.7) (52.6) 429.5 241.2 15.9 (6.0) 680.6 2015 H1 FX Fuel 2015 H1 Like- for-like Acquisitions Existing Signature

• rganic

Prior Year

• ne-offs

(HK / Singapore) 2016 H1

Organic (incl. SFS & ASIG) Organic (incl. SFS & ASIG) Organic (incl. SFS & ASIG) Organic (incl. SFS & ASIG)

Note 1: Underlying operating profit (pre exceptional and other items)

BBA Aviation 34.4 (2.4) 32.1 2.4 (3.5) 30.9 2015 H2 FX 2015 H2 Like- for-like Acquisitions Organic 2016 H2 386.0 (11.4) 374.6 7.9 (16.7) 365.8 2015 H2 FX 2015 H2 Like- for-like Acquisitions Organic 2016 H2

25.2 (0.7) 24.4 1.9 (15.3) 11.1

2015 H1 FX 2015 h1 Like- for-like Acquisitions Organic 2016 H1

396.4 (5.1) 391.3 4.9 (56.1) 340.1

2015 H1 FX 2015 H1 Like- for-like Acquisitions Organic 2016 H1

Aftermarket Services – H1 and H2 bridges

2016 Final Results 21

H2 Revenue ($m) H2 Operating Profit1 ($m) H1 Operating Profit1 ($m) H1 Revenue ($m)

Organic includes $(10.3)m engine trading revenue recognised in previous year Organic includes $(29.4)m engine trading revenue recognised in previous year

Note 1: Underlying operating profit (pre exceptional and other items)

BBA Aviation

Depreciation and Amortisation 2016

2016 Final Results 22

Total

Underlying Exceptional Statutory OP 330.1 (137.2) 192.9 Depreciation 69.7

• 69.7

Amortisation 14.9 99.3 114.2 EBITDA 414.7 (37.9) 376.8

Discontinued

Underlying Exceptional Statutory OP 27.5 (0.7) 26.8 Depreciation 2.7

• 2.7

Amortisation

• 0.7

0.7 EBITDA 30.2

• 30.2

Continuing

Underlying Exceptional Statutory OP 302.6 (136.5) 166.1 Depreciation 67.0

• 67.0

Amortisation 14.9 98.6 113.5 EBITDA 384.5 (37.9) 346.6

Extract from cash flow

2016 Operating profit 166.1 Operating profit from discontinued operations 26.8 Share of profit from associates and joint ventures (13.4) Profit from operations 179.5 Depreciation of property, plant and equipment 69.7 Amortisation of intangible assets 114.2

BBA Aviation

Adjusted earnings per share

2016 Final Results 23

Discontinued Continuing Total

2016 2015 2016 2015 2016 2015

Adjusted earnings A 18.3 15.0 198.8 129.4 217.1 144.4 Underlying DT 7.9 5.5 27.7 4.3 35.6 9.8 Adjusted earnings on current tax B 26.2 20.5 226.5 133.7 252.7 154.2 IFRS weighted average number of shares C 1,026.6 718.6 1,026.6 718.6 1,026.6 718.6 Underlying EPS A/C 1.7c 2.1c 19.4c 18.0c 21.1c 20.1c Growth (19.0)% 7.8% 5.0% Cash EPS B/C 2.5c 2.9c 22.1c 18.6c 24.6c 21.5c Growth (13.8)% 18.8% 14.4%

BBA Aviation

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 occur 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

• ther 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

• bligation to publicly update or revise any forward-looking

statement, whether as a result of new information, future events or otherwise.

24 2016 Final Results