BBA Aviation 2018 Final Results BBA Aviation 2018 Final Results - - PowerPoint PPT Presentation

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BBA Aviation 2018 Final Results BBA Aviation 2018 Final Results - - PowerPoint PPT Presentation

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BBA Aviation www.bbaaviation.com BBA Aviation 2018 Final Results BBA Aviation 2018 Final Results 2018 Strategic progress 1. Outperforming today - Signature continues to outperform the US B&GA market + 210bps - Market share gains

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SLIDE 1

BBA Aviation

BBA Aviation

2018 Final Results

www.bbaaviation.com

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SLIDE 2

BBA Aviation

2018 – Strategic progress

  • 1. Outperforming today
  • Signature continues to outperform the US B&GA

market + 210bps

  • Market share gains
  • 2. Strong Free Cash Flow generation >$250m
  • 3. Investment for tomorrow
  • Commercial technology investments for

2019 deployment

  • People and culture
  • Acquisition and licence growth – EPIC,

Firstmark and licences

2018 Final Results

Strong platform for sustainable growth

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BBA Aviation www.bbaaviation.com

Performance Review David Crook

Group Finance Director

BBA Aviation 2018 Final Results

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SLIDE 4

BBA Aviation

Underlying total operating profit growth of 4%

Signature (85% of continuing OP1):

  • Signature FBO revenue outperforming a soft market by

210 bps

Ontic (15% of continuing OP1):

  • $6m contribution from new licence acquisitions and

Firstmark offsetting non repeat of cyclical military

  • rders
  • Strong order book and pipeline of licence
  • pportunities

Discontinued operations

  • Strong performance at ERO with 45% increase in
  • perating profit
  • Suspension of depreciation and amortisation of $5.2m

included for the seven months from June 2018

Total basic adjusted EPS

  • down 2.9% to 23.3c

Dividend increased 5% to 14.07c per share

2018 Final Results

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

Operating profit1 ($m) 2018 2017 Change Signature 320.6 329.4 (2.7)% Ontic 59.3 55.2 7.4% Middle East (ERO) (0.7) (2.4) 71% Total continuing central costs (39.0) (45.7) 14.7% Group continuing 340.2 336.5 1.1% Discontinued 35.0 23.9 46.4% Group total 375.2 360.4 4.1% Total basic adjusted EPS 23.3 24.0 (2.9)% Dividend per share 14.07c 13.40c 5.0%

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BBA Aviation

Signature: revenue up 29% (85% of continuing OP1)

Organic revenue growth of 2.7% (constant currency and fuel prices)

  • Signature FBO up 3.0%,

TECHNICAir down 3.4%

  • FAA US B&GA movements

growth of 0.9%

Organic operating profit decline of 2.9%

  • Impact of IT investments $14m
  • Challenging maintenance

market, TECHNICAir down $3.8m

  • Customer mix and bad debt

impacting FBO drop through

Investment returns

  • Divisional ROIC 11.8%

(FY 2017: 12.2%).

2018 Final Results

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

Operating Profit1 ($m)

1,643.0 6.0 138.2 1,787.2 292.5

  • 50.5

(2.6)

  • 2,127.6

2017 FX Fuel 2017 Like for Like Acqui- sitions FBO TECHNICAir 2018

329.4 0.8

  • 330.2

2.9 (1.7) 7.0 (3.8) (14.0) 320.6

2017 FX Fuel 2017 Like for Like EPIC Trade EPIC Acquis- ition costs FBO TECHNICAir IT 2018

Revenue Bridge ($m)

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BBA Aviation

Ontic: revenue up 3% (15% of continuing OP1)

  • New licences and Firstmark contributed $12.3m of

revenue

  • Organic revenue decline of 3.7% due to non repeat of

cyclical military orders Operating profit1 up 7%

  • Includes $6.0m contribution from new Ontic licences
  • Organic operating profit down largely due to 2017

contribution from B52 parts and C130 radar units not repeated in 2018

  • Underlying operating margin of 27.5%, up 110 bps

Investment returns

  • ROIC 15.6% (FY 2017: 16.8%)

Order book remains strong with good visibility through 2019 and beyond

2018 Final Results

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

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

208.8 2.7 211.5 12.3 (7.8) 216.0 2017 FX 2017 like for like Acquisitions Organic 2018 55.2 0.9 56.1 6.0 (2.8) 59.3 2017 FX 2017like for like Acquisitions Organic 2018

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BBA Aviation

Discontinued ERO: revenue up 4%

  • Improved underlying operating profit $35.0m,

up 45.2%

  • Includes $5.2m benefit from suspension of

depreciation and amortisation for the seven months from June 2018

  • Excludes the $10.7m of support costs for ERO

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

Revenue Bridge ($m)

Operating profit ($m) 2018 2017 ERO pre discontinued ops 18.4 10.1 Add back: Middle East loss 0.7 2.4 Add back: support costs 10.7 11.6 Add back: Depreciation & amortisation suspension 5.2

  • ERO discontinued ops

35.0 24.1

Operating Profit1 ($m)

2018 Final Results

513.3 1.8 515.1 18.5 533.6 2017 FX 2017 like for like Organic 2018 24.1 0.2 24.3 10.7 35.0 2017 FX 2017 like for like Organic 2018

Reconciliation of pre and post discontinued operations reporting

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BBA Aviation

Central costs

2018 Final Results

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

($m) 2018 2017 Change Underlying central costs (28.3) (34.1) (17.0)% ERO support costs (10.7) (11.6) (7.8)% Total continuing central costs (39.0) (45.7) (14.7)%

  • Underlying central costs down 17% to $28.3m
  • Reduction reflects 2017 comparative impacted by
  • One-time costs in our captive insurance

company for hurricane damage

  • Remaining ASIG support costs (now

removed)

  • Total central costs
  • includes $10.7m of support costs relating to

the discontinued ERO business

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BBA Aviation

Underlying Income Statement

2018 Final Results

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

($m) 2018 2017 Change Total Group operating profit1 375.2 360.4 4.1% Net interest (67.2) (62.1) 8.2% Profit before tax 308.0 298.3 3.3% Profit after tax 240.5 246.3 (2.4)% Total basic adjusted EPS 23.3c 24.0c (2.9)% Total dividend per share 14.07c 13.40c 5.0%

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BBA Aviation

Exceptional and other items - largely non-cash

2018 Final Results

Continuing

  • Amortisation of acquired intangibles: $88.8m

(non-cash)

  • Restructuring expenses of $8.9m (corporate

and closure of ERO in the Middle East)

  • Previously noted impairment of $14.1m

primarily relating to Sloulin Field FBO (non- cash)

  • One-off past service pension cost with regard

to GMP equalisation within the UK plan of $11.1m

Discontinued

  • ERO disposal process costs of $5.9m
  • Completion costs of ERO footprint

rationalisation in Dallas of $1.1m

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BBA Aviation

Continuing strong cash generation

Continuing businesses

  • Strong cash generative business
  • Working capital inflow in Signature
  • Capex investments at FBOs

including Miami and Nashville

  • Cash tax rate remains substantially

lower than underlying effective tax rate

  • Leverage 2.8x on a covenant basis

Discontinued business

  • Working capital outflow driven

largely by parts availability from OEMs

Note 1: Underlying operating profit before depreciation and amortisation

2018 Final Results

$m Continuing Discontinued 2018 2017 Underlying EBITDA pre support costs 428.4 38.7 467.1 459.5 ERO support costs (10.7)

  • (10.7)

(11.6) Underlying EBITDA1 417.7 38.7 456.4 447.9 Working capital movement 22.0 (48.2) (26.2) (46.3) Capex (75.8) (16.1) (91.9) (80.3) Net Interest paid (57.4) (0.9) (58.3) (57.3) Tax paid (27.1)

  • (27.1)

(41.8) Exceptionals (12.5) (7.0) (19.5) (12.7) Other items (8.3) (0.3) (8.6) 11.1 Free cash flow 258.6 (33.8) 224.8 220.6 Net debt (1,331.3) (0.9) (1,332.2) (1,167.1) Net debt to EBITDA, covenant 2.8x 2.6x Net debt to EBITDA, reported 2.9x 2.6x 10

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BBA Aviation

Guidance FY19

2018 Final Results

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

Central costs

  • ~$27m Group central costs in FY19
  • ~$12m ERO annual support costs in FY19
  • ERO support costs to be eliminated post disposal/TSA period

Capital expenditure (continuing group)

  • FY19 capex $115-125m

Tax

  • Underlying effective tax rate c21%, cash tax rate c14%

Interest (excl. IFRS 16)

  • Interest expense $75m
  • Cash interest $75m

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BBA Aviation

IFRS 16

2018 Final Results

IFRS 16 does not impact our Strong free cash flows Business prospects Ability to deliver our strategy Debt covenants Progressive dividend policy

But it will significantly impact our published financial statements

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BBA Aviation

IFRS 16 – Impact on financials

2018 Final Results

Metric Increase/decrease No Impact

Free cash flow (FY 2019)

  • Revenue (FY 2019)
  • Metric

Increase/decrease Impact

Operating profit (FY 2019) Increase c12% EBITDA (FY 2019) Increase c30% Interest (FY 2019) Increase c100% Profit before tax (FY 2019) Decrease c10% Adjusted EPS (FY 2019) Decrease c10% Total assets (1 Jan 2019) Increase c25% Total liabilities (1 Jan 2019) Increase c50% Operating cashflow (FY 2019) Increase c35% Net debt (1 Jan 2019) Increase c85%

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BBA Aviation www.bbaaviation.com

BBA Aviation Mark Johnstone

Group Chief Executive Officer

BBA Aviation 2018 Final Results

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BBA Aviation

BBA Aviation – Strong platform for sustainable growth

1 2 3

US B&GA market Implementation of our growth strategy – Signature and Ontic Outlook

2018 Final Results

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BBA Aviation

Signature Market Drivers

Macro Economic Drivers

Aircraft Utilisation Macro Economic Drivers Operational Installed Fleet

Corporate profits

R² = 0.773

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

  • 500

1,000 1,500 2,000

Business jet hours flown (annual, in 1000s)

GDP

R² = 0.857

  • 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

  • 10,000

20,000 30,000

Business jet hours flown (annual, in 1000s) GDP (billions, USD) Corporate profits (billions, USD)

Source: US Bureau of Economic Analysis & GAMA 2018 Annual Report Source: St Louis Federal Economic Research & GAMA 2018 Annual Report

2018 Final Results

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BBA Aviation

Through cycle structural market growth of 2%+ CAGR tracking GDP

2018 Final Results

US B&GA FAA Flight Movements and GDP

500 1,000 1,500 2,000 2,500 3,000 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 FAA Business Jet Flight Movements (000s)) US GDP ($bn) GDP (Billions in 2012 chained Dollars) FAA Movements (thousands)

Source: US Bureau of Economic Analysis and FAA

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BBA Aviation

2018 US B&GA market performance

2018 Final Results

Market

  • US B&GA movements grew 0.9% in 2018
  • Strong first half and a weaker second half

Why did the market slow in H2?

  • Geopolitical tensions
  • Fed rate rises
  • Slowing capital investment and FDI
  • Business confidence reducing in H2 2018
  • Charter activity reduced - discretionary

customer segment and most sensitive to economic uncertainty

Change picture

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BBA Aviation

US market by segment – YoY movements

2018 Final Results

Continued Signature Outperformance

Source: ARGUS, FAA & US Bureau of Economic Analysis

i. Short term flying hours fluctuates both above and below GDP through time ii. Charter more sensitive to business confidence

  • iii. Fractional flying less volatile than charter
  • iv. Q4 2018 returned to nominal growth from Q3

2018

  • 6
  • 4
  • 2

2 4 6 8 10 12 14 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018

Charter (P135) GA (P91) Fractional (P91K) Total SFS market Real GDP FAA 19

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BBA Aviation

Investing in our real estate – improving customer experience

2018 Final Results

  • Developed a new 3,500 sq ft new sports

charter terminal at Miami International

  • $15 million investment in a new

executive and sports charter terminal at Nashville plus additional hangar space with a new 30-year lease

  • Atlanta – new 20-year lease (plus five-

year extension) at our sole source FBO at the world’s busiest hub airport

  • Renovation at Las Vegas FBO at

McCarren International

Miami Sports Charter terminal New FBO lounge at Nashville 20

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BBA Aviation

Leveraging our Signature network to deliver more value

Organic Growth Core revenue source optimisation Non-fuel revenue growth New services and asset utilisation 1 2 3 4

Pricing optimisation Credit card Elite

Drop through

>50% >50% >50% Advertising

(1-2 yrs) (2-4 yrs) (2-5 yrs) Underlying operating profit ($M)

~10 7-14 5-10

2018 Final Results

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BBA Aviation

2018 Ontic investment to support long-term growth

Ontic licence investments ($27.5m)

  • Licence with Honeywell for cockpit LCD displays on multiple commercial, military fixed-wing and rotorcraft platforms
  • Military fuel control product licence with UTAS*
  • Further licence with Ultra Electronics (including on Typhoon platform)
  • Licence with Esterline for legacy military and civil avionics products (primarily on Hawk platform)
  • Licence with a major OEM signed in December 2018

Firstmark acquisition completed in late 2018

* United Technologies Aerospace Systems

2018 Final Results

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BBA Aviation

Ontic growth platform

  • Licence or acquire IP
  • Legacy aftermarket space
  • Ensure availability of parts

and service

  • Sole source positions
  • OEM relationships
  • Integration capability
  • Supply chain proficiency
  • 32 licence & M&A deals

signed

  • Revenue growth from

$46M to $216M

  • EBITDA margins of 30%+
  • Active and extensive pipeline
  • f opportunities
  • Platform & Market analysis

tools

  • Scalable organisation ready to

execute on future growth

What we do Competitive advantage Historical performance Future growth

1 2 3 4

Market leading position, strong value creation and significant future opportunity

2018 Final Results

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BBA Aviation

Executing strategy

2018 Final Results

Growth and Value Creation

Fortified Network & Expanded Portfolio Operational Efficiency & Process Improvement Technology Solutions for Customers Improved Customer Experience Data Empowered Decision Making

1100 10110 00110 1010

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BBA Aviation

BBA Aviation – Strong platform for sustainable growth

1 2 3 4 5 6 7

Simplified portfolio Continuing Group generates $250-300m FCF per annum 2018 investments delivering to plan Expand network and platform positions through connections to customers Further opportunities for value creation from our infrastructure & IP Signature flight path to deliver 250bps mid term through cycle outperformance Ontic grows to a $100m EBITDA business by end 2021

2018 Final Results

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BBA Aviation

Group outlook

2018 Final Results

ERO disposal process ongoing The continuing Group is focused on high ROIC and strongly cash generative businesses At Signature, our investments in both our network and technology will underpin the growth and continued market

  • utperformance of our FBO business

1 2 4 5

The Board is confident of growth in 2019, through continued outperformance against a flat US B&GA market backdrop

3

Ontic continues to have a strong pipeline

  • f growth opportunities and strong order

book coverage for 2019 and beyond

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BBA Aviation BBA Aviation 2018 Final Results www.bbaaviation.com

Questions

2018 Final Results

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BBA Aviation BBA Aviation 2018 Final Results

Appendix

www.bbaaviation.com

2018 Final Results

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BBA Aviation

Debt facilities that support growth and long-term nature of core assets

  • Leverage range set at 2.5-3.0x on a

covenant basis (2.8x at December 2018)

  • $650m unsecured RCF refinanced in H1

2018, expiry March 2023

  • In April 2018 issued our inaugural $500m

senior unsecured notes due 2026 at 5.375%

  • Proceeds used to repay Facility B

acquisition debt and maturing US PP notes

  • Facility C acquisition debt of $450m likely to

be refinanced in 2019 (matures 2020)

  • Headroom of $528m at December 2018

2018 Final Results

Debt Maturity Profile

$m

100 200 300 400 500 600 2018 2019 2020 2021 2022 2023 2024 2025 2026 USPP RCF Usage Term Debt Usage Bond 29

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BBA Aviation

Depreciation and Amortisation 2018

2018 Final Results

Extract from cash flow

2018 Operating profit 227.6 Operating profit from discontinued operations 33.9 Share of profit from associates and joint ventures (4.0) Profit from operations 257.5 Depreciation of property, plant and equipment 69.0 Amortisation of intangible assets 101.0

Total

Underlying Exceptional Statutory OP 375.2 (113.7) 261.5 Depreciation 69.0

  • 69.0

Amortisation 12.2 88.8 101.0 EBITDA 456.4 (24.9) 431.5

Discontinued

Underlying Exceptional Statutory OP 35.0 (1.1) 33.9 Depreciation1 2.1

  • 2.1

Amortisation1 1.6

  • 1.6

EBITDA 38.7 (1.1) 37.6

Continuing

Underlying Exceptional Statutory OP 340.2 (112.6) 227.6 Depreciation 66.9

  • 66.9

Amortisation 10.6 88.8 99.4 EBITDA 417.7 (23.8) 393.9 Note 1: Suspended from June 2018

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BBA Aviation

Revenue split1 and organic growth2

2018 Final Results

Note 1: Revenue by origin for continuing operations only | Note 2: Organic growth representing continuing operations only

Signature 91% Organic 3% Signature

  • N. America

91% Organic 3% Signature RoW 9% Organic 3% Ontic 98% Organic (4)%

Revenue2 ($m)

  • N. America

RoW Total Signature 1,926.5 201.1 2,127.6 Middle East

  • 3.7

3.7 Ontic 134.1 81.9 216.0 2,060.6 286.7 2,347.3

Middle East 2% Organic (34)% Ontic (incl Middle East) 9% Organic (5)%

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BBA Aviation

Adjusted earnings per share - basic

2018 Final Results

Discontinued Continuing Total 2018 2017 2018 2017 2018 2017 Adjusted earnings A 24.2 22.6 216.0 223.8 240.2 246.4 Underlying DT 5.4 (3.2) 20.7 50.9 26.1 47.7 Adjusted earnings on current tax B 29.6 19.4 236.7 274.7 266.3 294.1 IFRS weighted average number of shares C 1,030.1 1,028.2 1,030.1 1,028.2 1,030.1 1,028.2 Underlying EPS A/C 2.3c 2.2c 21.0c 21.8c 23.3c 24.0c Growth 4.5% (3.7)% (2.9)% Cash EPS B/C 2.9c 1.9c 23.0c 26.7c 25.9c 28.6c Growth 52.6% (13.9)% (9.4)%

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BBA Aviation

Disclaimer

2018 Final Results

www.bbaaviation.com

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, in tax rates or tax legislation, 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; the introduction or variation of tariffs or duties; 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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