BBA Aviation plc 2014 Interim Financial Report Results for the half - PDF document

BBA Aviation plc 2014 Interim Financial Report Results for the half year ended 30 June 2014 For further information please contact: Mike Powell, Group Finance Director (020) 7514 3999 Jemma Spalton, Head of Communications & Investor Relations BBA AVIATION PLC David Allchurch / Christian Cowley (020) 7353 4200 TULCHAN COMMUNICATIONS A video interview with management is now available on www.bbaaviation.com and www.cantos.com A live audio webcast of the analyst presentation will be available from 09:00 today on www.bbaaviation.com and www.cantos.com 1

INTERIM FINANCIAL REPORT FOR PERIOD ENDED 30 JUNE 2014 Results in brief ($m) Underlying results 1 Statutory results 2014 2013 % Change 2014 2013 % Change Revenue 1,148.1 1,114.4 3% 1,148.1 1,114.4 3% Underlying EBITDA² 126.5 125.1 1% 143.7 114.5 26% Operating profit 93.1 94.0 (1)% 78.1 78.8 (1)% 79.2 92.0 Profit before tax 78.4 1% 63.2 46% Basic earnings per share 14.0¢ 13.9¢ 1% 18.7¢ 11.4¢ 64% Return on invested capital 3 10.0% 4 9.8% (20)bps Free cash flow 5 (33.7) 42.9 (179)% (33.7) 42.9 (179)% Net debt (2013: year-end) 564.3 478.5 17.9% 564.3 478.5 17.9% 4.62 ¢ Dividend per share - - - 4.40¢ 5% (1) Before exceptional items (as defined in the financial statements) (2) Underlying EBITDA is calculated as underlying operating profit before depreciation and amortisation charged through underlying operating profit (3) Underlying operating profit return on average invested capital including goodwill and intangibles amortised or written off to reserves (4) Return on invested capital for full year 2013 (5) Cash generated by operations, plus dividends from associates, less tax, net interest and net capital expenditure These definitions as outlined above are consistently applied throughout this results announcement Key Highlights Major market continues to recover  US business & general aviation movements up 4%  European business & general aviation movements down 1%  Commercial aircraft movements down 2% in North America and 1% in Europe Businesses delivering  Market outperformance and positive progress in Flight Support offsetting weaker Aftermarket volumes  Flight Support (65% of Group EBIT): organic revenue up 8%, underlying operating profit up 14% - strong delivery in Signature and underlying operational progress in ASIG, despite ongoing challenges  Aftermarket Services (35% of Group EBIT): after adjusting for APPH revenue down 4% and operating profit down 11% - weaker but now improving Engine Repair & Overhaul markets partly offset by stronger than anticipated Legacy performance  Cash generation supporting on-going investment in key growth projects with short-term impact on return on invested capital Further strategic progress  Significant Flight Support network expansion: including the acquisition in August of the Scottsdale AirCenter FBO for $55.8 million  Further Aftermarket Services portfolio growth: additional major ERO rotorcraft authorisations awarded and Legacy Support licences signed  Over $150 million of growth investment committed year to date with strong pipeline  Successful integration of acquisitions and progress on development projects Simon Pryce, BBA Aviation Chief Executive Officer, commented: “BBA Aviation delivered as anticipated in the first half of 2014. Flight Support benefited from the continued recovery in US business and general aviation flying and from the success of a number of commercial initiatives. The recovery in flying hours has yet to impact engine repair activity where inputs were lower than anticipated. Margin performance was satisfactory, although in Flight Support was constrained by some cost increases mainly due to growth and investment, which take time to pass on to customers and these will continue to be a minor headwind into the second half. We are making progress on our major growth projects and the Engine Repair & Overhaul footprint reduction is on track. We continue to invest in network expansion, new authorisations and licences and to integrate them effectively, with the particularly significant addition of the Scottsdale FBO to Signature’s portfolio and a strong pipeline of further investment opportunities. As we enter the second half, we continue to see recovery in our major US business and general aviation market. We also saw a strengthening of the Aftermarket order book at the end of the first half. This, together with second half contributions from acquisitions and our Engine Repair & Overhaul footprint optimisation programme, means that we are confident that BBA Aviation remains well positioned for another year of progress .” 2

BBA Aviation plc – Interim Financial Report, 5 August 2014 INTERIM FINANCIAL REPORT 2014 Overview BBA Aviation had a good first half in 2014, with market outperformance and further progress in Flight Support offsetting softer volumes in Aftermarket Services. The Group continues to make good strategic progress with significant network expansion in Flight Support and new authorisations and licenses in Aftermarket Services. Group revenue increased by 3% to $1,148.1 million (2013: $1,114.4 million). The disposal of APPH reduced revenue by $37.3 million, and lower fuel prices reduced reported revenue by a further $3.5 million. These were offset by a $31.4 million revenue contribution from acquisitions and a $16.1 million increase from foreign exchange movements. On an organic basis Group revenue increased by 2% (excluding the impact of foreign exchange, fuel prices, acquisitions and disposals). Underlying operating profit was $93.1 million (2013: $94.0 million) including a $4.8 million contribution from acquisitions, which was partially offset by the $3.1 million impact of the APPH disposal. On an organic basis operating profit was $91.4 million, $2.6 million lower year on year with positive progress in Flight Support partly offsetting weaker Aftermarket Services volumes. Group underlying operating margin reduced to 8.1% on a fuel price adjusted basis (2013 constant fuel price: 8.5%). Margin development in Flight Support was partly constrained by $7 million of expansion driven cost increases, although these costs will be passed on to customers over time. Aftermarket margins were well managed despite the volume decline. Net interest expense declined by $1.7 million to $13.9 million (2013: $15.6 million) mainly due to a reduction in the blended average interest rate as a result of new interest rate swaps coming into effect during the period at lower rates. Interest cover increased to 9.1x (2013: 8.0x), and underlying profit before tax increased by 1.0% to $79.2 million (2013: $78.4 million). The underlying tax rate increased to 16.5% (2013: 15.2%) refle cting the increased proportion of the Group’s pre-tax profits arising in high marginal tax jurisdictions. With the increase in underlying profit before tax, and the reduced average number of shares due to the on-going buy-back programme, adjusted earnings per share were up 1% to 14.0¢ (2013: 13.9¢). Statutory profit before tax increased by 46% to $92.0 million (2013: $63.2 million) including a net exceptional gain of $12.8 million (2013: loss of $15.2 million). The profit on disposal of APPH of $27.8 million was partly offset by $2.5 million of M&A related costs (2013: $5.3 million) and $8.1 million of restructuring expenses primarily related to the previously announced Engine Repair & Overhaul footprint rationalisation (2013: $4.9 million). Non-cash amortisation of acquired intangibles totalled $4.4 million (2013: $4.6 million). Unadjusted earnings per share increased by 64% to 18.7¢ (2013: 11.4¢). The Group ’s continued ability to generate strong cash flows supported the capital expenditure associated with key expansion projects at Luton, San Jose and other FBO development projects and Engine Repair & Overhaul’s Pratt & Whitney rotorcraft authorisations. On a reported basis free cash flow reduced by $76.6 million to a $33.7 million outflow (2013: inflow of $42.9 million) due to the anticipated reversal of the working capital outperformance at the end of 2013, increased working capital in Engine Repair & Overhaul associated with strong inputs at the end of the first half, a $17 million tax payment associated with the $42 million agreed settlement with HMRC and expansion related capital expenditure. Gross capital expenditure amounted to $65.7 million (2013: $36.8 million) with principal items including the investment in Signature’s FBO development projects and Engine Repair & Overhaul’s investment associated with the recent Pratt & Whitney authorisations. As previously indicated, total capital expenditure for the year is expected to be around 2.0x depreciation and amortisation, supporting significant future non-market related growth in both divisions. Other cash flow items include the $52.5 million dividend payment, $48.8 million related to share repurchases and the net APPH disposal proceeds of $122.7 million. Total spend on acquisitions and licences completed 3