21st Mar 2016 15:49
Date of notification: 21 March 2016
BBA Aviation plc (the "Company")
Annual Financial Report and Notice of AGM
Further to the release of the Company's Final Results announcement on 3 March 2016, the Company announces that it has today published its Annual Financial Report 2015 ("Annual Report 2015").
The Company also announces that it has today posted to shareholders notice of an Annual General Meeting to be held at 10.30am on Friday 6 May 2016 at the Royal Aeronautical Society, No. 4 Hamilton Place, London W1J 7BQ.
The Annual Report 2015 can be viewed at or downloaded from the Company's website at:
http://www.bbaaviation.com/investors/reports.aspx
The Notice of Annual General Meeting 2016 can be viewed at or downloaded from the Company's website at: http://www.bbaaviation.com/investors/shareholder-information/agm-(annual-general-meeting).aspx
Copies of the documents listed below have also been submitted to the National Storage Mechanism located at www.morningstar.co.uk/UK/NSM:
· Annual Report 2015
· Chairman's Letter and Notice of Annual General Meeting
· Annual General Meeting Proxy Card
· Notice of Availability of BBA Aviation plc Annual Report 2015 and Notice of Annual General Meeting
At the Annual General Meeting due to be held on 6 May 2016 it is proposed that the Company seek, inter alia, general authority from ordinary shareholders for the Company to make market purchases of up to 14.99 per cent of the Company's existing issued ordinary share capital. This renews the authority granted by shareholders at the Annual General Meeting held on 8 May 2015. Any ordinary shares purchased under the authority may be cancelled or held in treasury.
The Company's Final Results announcement released on 3 March 2016 contained the responsibility statement of the directors on the Annual Report 2015 and details of significant events occurring during the period. For the purposes of compliance with DTR 6.3.5 set out below is the statement of principal risks and uncertainties which is set out in the Annual Report 2015 and the text of note 25 to the consolidated financial statements in the Annual Report 2015 concerning related party transactions.
"Our Risks
We are committed to effective risk management which supports the achievement of our strategic objectives.
Our risk management process is designed to improve the likelihood of delivering our business objectives, protect the interests of our shareholders and key stakeholders and enhance the quality of our decision making. It also assists in the safeguarding of our assets, including people, finances, property and reputation. We are committed to conducting business in accordance with all applicable laws and regulations and in a manner that is consistent with our values.
BBA Aviation's risk mitigation strategy and risk appetite are matters that are overseen by the Board, with the support of the Audit and Risk Committee, which manages the processes that underpin risk assessment and our systems of internal control.
Risk Governance Structure
The Board
Responsible for our system of corporate governance, strategy, policy, risk management and financial performance.
Accountability for monitoring
Audit and Risk Committee
Responsible for reviewing and approving the adequacy and effectiveness of our risk management and internal controls.
Audit functionReviews and reports on the system of internal control.
Chief Risk OfficerReports on key risks and risk mitigation.
Executive Committee
Delegated with Board authority to review risks and take appropriate action.
Business Divisions
Responsible for identifying, assessing and managing risks within their businesses.
Company Risk Map (Risk Register)
& Divisional Risk Maps
Management teams in business units review risks through self-assessment methodology and develop risk registers which together with risk maps that are developed from the risk registers, are submitted to the Executive Committee and the Audit and Risk Committee on a bi-annual basis.
Responsibility for implementing
How we manage risk across BBA Aviation
The Board has established a framework for assessing risk in the context of likelihood and impact in financial and reputational terms. Each Group-level risk is assessed against this framework and the Board re-assesses its risk appetite on a bi-annual basis when Risk Maps are presented to the Audit and Risk Committee.
Group policies, standards and internal controls, together with our values and our focus on safety, underpin our approach to risk management. We are committed to being a responsible values-led business and our leaders are responsible for embedding this into BBA Aviation's culture, our decision-making and how we work.
Our employees are accountable for working to established standards and for identifying and escalating encountered risks so that they can be appropriately managed. The Group has comprehensive training programmes to ensure that employees are appropriately trained in BBA Aviation's ethics policies.
Risk Management Process
The key features of our risk management process are set out below:
Board, Executive, Committee Review
Progress is monitored at global, divisional and business levels and risks assessed on an ongoing basis as part of the business and risk management process.
Business Objectives
Our business objectives are established on a 5-year basis and drive our annual objectives.
Strategic Plan Development & Update
Our strategy informs the setting of shorter-term objectives across the business and is widely communicated.
Portfolio and Investment Decisions
Portfolio and investment decisions are made based on risk appetite to obtaining our business objectives.
Bi-Annual Risk Assessment Process
Annual Key & Emerging Strategic Risks Identification
Strategic Risk Mitigation
Ongoing Key Risk Monitoring
The bi-annual risk assessment process looks forward three years to create BBA Aviation's risk profile. These key Group level risks are input into the scenario modelling for the viability statement, which is explained further on page 105 [of the Annual Report].
Progress in 2015
In 2015 we appointed a Chief Risk Officer to drive improvement in our risk management process and integrate it more effectively with our strategic planning and operational management processes. We have updated our Risk Management Framework and more closely aligned our Risk Management and Internal Audit functions. The risk assessment process drives the internal audit scope, and the Chief Risk Officer and Head of Internal Audit attend Audit and Risk Committee meetings to provide regular updates.
We have changed the Internal Audit approach from one based on substantive testing to a risk and controls based approach. All audit findings are reported in terms of risk and impact, which is aligned with BBA Aviation's Risk Model.
We strengthened our project management capability on major projects including in our preparation for completion of the Landmark Aviation acquisition. We prepared for this by employing a specialist integration management consultancy to guide us through the integration planning process to ensure that we deliver an effective integration of Landmark Aviation into the BBA Aviation Group and deliver the targeted synergies from the deal.
We have further developed our approach to third party vetting to ensure that we are informed as to the identity and affairs of our business partners before entering into business relationships with them. We are investing in a leading-edge third party risk management platform to move the due diligence process from manual processing to an online data collection platform, automating research and analysis. This reduces administrative tasks, enabling us to focus on third party risk mitigation and working more closely with our business partners.
The acquisition of Landmark Aviation completed on 5 February 2016. We have undertaken a risk management workshop with representative Landmark Aviation senior managers to understand the risk profile of the Landmark Aviation business and assess its impact on BBA Aviation's business.
Principal Risks
We have identified ten principal risks and uncertainties facing BBA Aviation which are considered by the Board to be material to the development, performance, position or future prospects of the Group. These risks, mitigations and changes during the year are summarised in the table below. They are not set out in priority order.
Objective | Risks | Mitigation action/Control | Change during year |
Growth | Structural changes in the global economic environment or cycle fluctuations: - drive down B&GA and commercial flying, and military expenditure. - cause market weakness in the ERO sector. | - Active monitoring of lead economic indicators. - Strong financial controls to monitor financial performance and provide a basis for corrective action when required. - Low fixed costs allow cost base to be flexed to meet demand.
| Increased exposure to early cycle business as a result of the Landmark Aviation acquisition. |
Global terrorist events either inflight, at or near major airports materially impacting global air travel. | - Airport and internal access security processes, vetting of potential staff members in recruitment process. - Low fixed costs allow cost base to be flexed to enable corrective action to be taken. | Global threat of terrorism has increased this year. | |
Legislative changes causing material increase to cost of B&GA flight relative to alternatives such as commercial flying, road or rail travel. | - Active participation in all relevant industry bodies. - Ongoing monitoring of all US and EMEA politicalactivity which may impact B&GA activity. - Low fixed costs allow cost base to be flexed to meet demand. | ||
Performance | Ability to deliver major projects effectively - including the integration of Landmark Aviation. | - Extensive due diligence conducted. - Project Management Office established to ensure controlled execution of planning and integration activities. - Retention agreements for key members of staff. | Investment in project management capability to deliver key strategic projects. |
Ability to attract and retain high-quality and capable people at senior and mid management levels. | - Succession planning process embedded with review at Executive Management Committee and Board level annually. - Remuneration structure designed to reward superior performance and promote retention. - Proactive employee development and key talent retention processes. | ||
Potential liabilities from defects in services and products. | - Standard operating procedures with routine root cause analysis of all incidents. - Liability insurance. | ||
Intentional or inadvertent non-compliance with company values and legislation, both within BBA Aviation and with trading partners. | - Clear values statement and ethical policies. - Semi-annual compliance certification by all senior management. - Rigorous third party vetting processes. - Robust internal control environment and regular review by internal and external audit. | ||
Performance | Environmental exposures. | - Strong procedural controls and physical containment when working with fuel or other hazardous chemicals - Active management of known environmental matters to minimise costs to resolve. - Environmental insurance where appropriate.
| |
Non-compliance with banking covenants caused by: - increase in debt funding as a result of the Landmark Aviation acquisition. - tighter regulatory environment around sanctions compliance, which is a key condition of our banking covenants. | - Strong treasury management controls concerning liquidity management. - Rigorous third party vetting processes, which includes the compliance with sanctions regulations. | Increase in bank debt facilities to enable Landmark Aviation acquisition. | |
Value Creative Investment | Changes in tax regulation in both the USA and EMEA could impact our effective tax rate and our cash tax liabilities. | - Timely compliance with all international tax requirements. - Continuous monitoring of changes to tax legislation, taking advice where appropriate from reputable professional advisers. | The Base Erosion and Profit Sharing ("BEPS") project led by the OECD is likely to accelerate the pace of legislative change in the countries in which the Group operates." |
"Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are detailed below.
Compensation of key management personnel
Key management are the directors and members of the Executive Committee. The remuneration of directors and other members of key management during the year was as follows:
2015 $m | Restated2014 $m | |
Short-term benefits | 8.6 | 8.8 |
Post-employment benefits | 0.6 | 0.9 |
Share-based payments | 0.9 | 1.7 |
10.1 | 11.4 |
Post-employment benefits include contributions of $0.6 million (2014: $0.6 million) in relation to defined contribution schemes.
The remuneration of directors and key executives is determined by the Remuneration Committee having regard to the performance of individuals and market trends. The directors' remuneration is disclosed in the Directors' Remuneration Report on pages 79 to 104.
Share-based payments of $0.9 million (2014: $1.7 million) disclosed in the above table exclude the portion of the annual bonus subject to compulsory deferral, which will be expensed over the vesting period in accordance with IFRS 2: Share-based payment. The 2015 annual bonus subject to compulsory deferral is $nil million (2014: $1.2 million).
Other related party transactions
During the year, Group companies entered into the following transactions with related parties which are not members of the Group:
Sales of goods | Purchase of goods | Amounts owed byrelated parties | Amounts owed torelated parties | |||||
2015$m | 2014$m | 2015$m | 2014$m | 2015$m | 2014$m | 2015$m | 2014$m | |
Associates | 8.5 | 16.9 | 355.5 | 530.2 | 0.3 | 1.5 | 52.1 | 46.1 |
Purchases of goods principally relates to the purchase of aviation fuel. Purchases were made at market price discounted to reflect the quantity of goods purchased. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.
At the balance sheet date, Group companies had loan receivables from an associated undertaking of $2.6 million (2014: $2.5 million). The loans are unsecured and will be settled in cash, and were made on terms which reflect the relationships between the parties.
The Group operates various pension and other post-retirement benefit schemes for its employees. Details are set out in note 18."
The financial information set out in the Company's Final Results announcement of 3 March 2016 does not constitute the Company's statutory accounts for the year ended 31 December 2015. Statutory accounts for 2015 will be delivered to the Registrar of Companies in due course.
This announcement should be read in conjunction with, and is not a substitute for, reading the full Annual Report 2015.
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