27th Feb 2007 07:04
BBA Aviation PLC27 February 2007 BBA Aviation plc 2006 Preliminary Results Results for the Year Ended 31st December 2006 For further information please contact: Michael Harper, Executive Chairman (020) 7514 3990Andrew Wood, Finance Director (020) 7514 3950BBA AVIATION PLC Nick Claydon or Lucie Anne Brailsford (020) 7404 5959BRUNSWICK BBA Aviation plc - Tuesday, 27th February 2007 PRELIMINARY RESULTS FOR YEAR ENDED 31ST DECEMBER 2006 - HIGHLIGHTS Continuing Operations • Sales up 9% to £950.1m (2005: £875.1m), organic growth 6%. • Underlying operating profit* up 24% to £102.8m (2005:£83.0m). • Operating margins increased to 10.8% (2005: 9.5%). • Adjusted earnings per share** 11.4p (2005: 9.8p), Unadjusted 10.3p (2005: 6.6p). • Statutory operating profit increased to £94.8m (2005: £59.2m). • Underlying profit before tax £78.2m (2005: £62.1m) • Profit before tax up to £70.2m (2005: £38.3m). • Free cash inflow of £48.1m (2005: £45.0m). • If Fiberweb had been demerged at the beginning of 2006 and if BBA Aviation had been operating as an independent listed company since that date it is estimated that adjusted earnings per share** would have been 14.6p, the full year dividend 7.1p and free cash flow approximately £55m. Discontinued Operations • Loss of £76.2m after absorbing pre-tax restructuring costs and non-recurring items associated with the demerger of Fiberweb of £118.6m. • Gain on disposal of Becorit of £16.5m. Total Group • Loss for the period of £10.2m (2005: Profit £75.3m). • Free cash flow** of £3.1m (2005: £86.3m) impacted by cost of demerger. • Net debt of £356.9m (2005: £527.1m) after transferring £173.1m of debt to Fiberweb on demerger. • Final dividend of 5.0p making 8.5p for the year (2005:11.8p). Flight Support • Sales up 8% to £556.4m (2005: £514.4m). • Underlying operating profit* up 9% to £65.5m (2005: £60.3m). • Operating margins 11.8% (2005: 11.7%). • Signature performed well; ASIG impacted by weak de-icing season. • Significant investment in the quality, capacity and scale of the FBO network supporting future growth. Aftermarket Services and Systems • Sales up 9% to £393.7m (2005: £360.7m). • Underlying operating profits* up 43% to £44.6m (2005: £31.3m). • Operating margins improved significantly to 11.3% (2005: 8.7%). • Encouraging performances from Ontic, which was acquired in February and by the Engine Repair and Overhaul businesses due to good organic growth and the impact of productivity and restructuring initiatives. • Strong organic and acquired sales growth in landing gear and hydraulics. Commenting, Michael Harper, BBA Aviation Executive Chairman, said: "2006 was a pivotal year for BBA. We completed the demerger of Fiberweb inNovember and are now a focused Aviation Services company concentratingprincipally on the Business Aviation market. The results for 2006 show goodprogress over the prior year reflecting an improving market, the impact ofacquisitions and the benefits of management initiatives. We are particularlypleased with the performance of our Aftermarket Services and Systems businesses,which recovered well during the year. The business aviation market is strong, underpinned by increased OEM backlogsfor business jets, the continued success of the fractional operators and theanticipated introduction of Very Light Jets during 2007. With market-leadingbusinesses we are well positioned to exploit this strength and also to play ourpart in continuing to consolidate what remains a largely fragmented market. Withan increased order backlog and an encouraging start to the year, we expect tomake further progress on a constant currency basis in 2007." *Continuing operations before restructuring costs, amortisation of acquiredintangibles and non-recurring items (see below).**See definitions below. Preliminary Results BBA Aviation plc, the international aviation services company, announces itspreliminary results for the twelve months ended 31st December 2006. FINANCIAL HEADLINES (audited)£m (other than percentages and per share amounts in pence) 2006 2005REVENUE (continuing operations) 950.1 875.1UNDERLYING OPERATING PROFIT (1) 102.8 83.0UNDERLYING OPERATING MARGIN (1) 10.8% 9.5%OPERATING PROFIT CONTINUING OPERATIONS (Statutory) 94.8 59.2NET INTEREST (24.6) (20.9)PROFIT BEFORE TAX 70.2 38.3(LOSS)/PROFIT AFTER TAX FROM DISCONTINUED OPERATIONS (76.2) 22.6PROFIT ON DISPOSAL AFTER TAX 16.5 21.5(LOSS)/PROFIT FOR THE PERIOD (Statutory) (10.2) 75.3EARNINGS PER SHARE (Adjusted) (2) 11.4p 9.8pEARNINGS PER SHARE (Unadjusted) (3) 10.3p 6.6pDIVIDENDS PER ORDINARY SHARE 8.5p 11.8pFREE CASH FLOW (4) 3.1 86.3NET DEBT 356.9 527.1 (1) Underlying operating profit being total operating profit (includingassociates) from continuing operations of £94.8m (2005: £59.2m) beforerestructuring costs, amortisation of acquired intangibles and non-recurringitems of £(8.0)m (2005: £(23.8)m). This measure of earnings is shown because thedirectors consider that it gives a better indication of underlying performance. (2) Basic earnings per share from continuing operations of 10.3p (2005: 6.6p)adjusted to exclude the after-tax impact of restructuring costs, amortisation ofacquired intangibles and non-recurring items of 1.1p (2005: 3.2p). (3) Basic earnings per share from continuing operations. (4) Cash generated by operations of £128.3m (2005: £183.7m) plus dividends fromassociates of £0.3m (2005: £0.4m) less tax of £9.5m (2005: £9.7m), net interestof £30.1m (2005: £16.2m), preference dividends of £Nil (2005: £1.9m) and netcapital expenditure of £85.9m (2005: £70.0m). (5) 2006: EBITDA being operating profit (as defined in (1) above) beforedepreciation from continuing operations of £31.9m. (6) Exchange rates used in the preparation of these results US$ - Average $1.84(2005: $1.82), spot $1.96 (2005: $1.72); Euro - Average €1.46 (2005: €1.46),Spot €1.48 (2005: €1.46). These definitions as outlined above and on page 1 are consistently appliedthroughout this preliminary announcement. BBA Aviation plc - Preliminary Results, 27th February 2006 PRELIMINARY RESULTS 2006 Revenue from continuing operations increased by 9 per cent to £950.1m (2005:£875.1m). Underlying operating profit increased 24 per cent to £102.8m with aparticularly strong performance from our Aftermarket Services and Systemsbusinesses which were the main driver behind the significant improvement inoperating margins which increased to 10.8 per cent (2005: 9.5 per cent). Profit before tax increased by 83% to £70.2m from £38.3m as a result of theincreased operating profit and also reflecting a reduction in restructuringcosts and non-recurring items for continuing operations. Restructuring costs,amortisation of acquired intangibles and non-recurring items were £8.0m in 2006compared to £23.8m in 2005 with the latter figure mostly relating to the closureof Millville. Movements in exchange rates did not have any material impact on the comparisonwith the prior period. The average dollar rate for the full year was $1.84(2005: $1.82). At the current weaker US dollar rate of circa $1.96 thetranslated value of the group's 2006 pre tax profits would have been some £4mlower. Adjusted earnings per share were 11.4p (2005: 9.8p). Assuming that the interestbenefit from the debt transferred to Fiberweb had been received from 1st January2006 and the reduced consolidated number of shares at 31st December 2006 wereused in the calculation, adjusted earnings per share would have been 14.6p. There was a significant after tax loss for discontinued operations of £76.2m.This includes the results of Fiberweb until the date of demerger and Becorituntil its sale. An analysis of these results is shown below and includes thecosts of the demerger, restructuring charges and asset impairment adjustmentsassociated with the demerger of Fiberweb, as disclosed in the information sentto shareholders prior to the demerger being completed. Cash flow from operating activities of £118.8m was significantly lower than theprior year of £174.0m due principally to the lower underlying operating profitsfrom Fiberweb and the cash costs of the demerger and associated restructuringinitiatives. There was a free cash inflow of £3.1m compared to £86.3m in 2005which reflected higher capital expenditure of £91.8m (2005: £73.3m) togetherwith the lower cash flow from operating activities. There was a free cash inflowfor continuing operations of £48.1m (2005: £45.0m). Assuming that Fiberweb hadbeen demerged on the 1st January 2006, free cash flow for continuing operationswould have been approximately £55m. The Group invested £49.6m on aviationacquisitions during the period (2005: £28.0m) to expand into aviation componentslicensing and to add to our business aviation network. The Group also raised£26.8m from the disposal of Becorit. Net debt was £356.9m, significantly lower than at the end of 2005 (£527.1m). Thelower debt resulted from the transfer of £173.1m of debt to Fiberweb prior toits demerger. Net debt to EBITDA was 2.7 times. Flight Support Flight Support showed good progress overall with sales and operating profitswell ahead of the prior year. Total sales grew to £556.4m, an 8% increase over2005. Organic growth was 2%, impacted by the poor de-icing seasons at the startand end of the year. Underlying operating profits increased by 9% to £65.5m(2005: £60.3m) and operating margins were unchanged at 11.8% (2005: 11.7%). Thedivision generated strong operating cash flow of £56.3m and 89% of operatingprofit was converted into cash. The return on invested capital for the divisionimproved over the year to 13.2% (2005: 12.5%). Signature Revenue increased to £361.0m, a 14.1% improvement over 2005. Exchange ratesreduced the rate of sales growth by almost 1%. Organic growth was 3% with thebalance being accounted for by higher fuel prices (6%) and acquisitions (4%). Wecontinued to see good growth in fuel volumes from fractional operators withincreases of almost 10% in the year. Fractional operators continue to expandtheir share of our total business and account for approximately 30% of totalrevenue. Our traditional (non-fractional) business was flat over the year.Signature finished the year strongly with growth in the last quarter ofapproximately 7% compared to the last quarter of 2005. Throughout the year, Signature continued to invest in improving the quality andcapacity of its FBOs to support the growing demand for business jet facilities,ramp and hangar space. New facilities were completed at Indianapolis and Chicago(Palwaukee), we continued with a significant project to upgrade our facilitiesat Teeterboro and work began in July on a new £5m state of the art terminal andground support equipment (GSE) maintenance facility at Boston LoganInternational Airport as part of Signature's recent award of a 10 year leaseextension at the airport. Signature increased both the size and scale of its leading FBO network with theacquisitions of the former Mair FBO at Thermal, CA, a major resort destinationfor business jet operators near Palm Springs; the former Air 1 FBO at St.Petersburg (FL); and le Terminal at Paris' Le Bourget International Airport. Itwas also successful with a tender to commence FBO operations at Doncaster, UK.In total Signature now has 81 locations of which 46 are in the USA covering 34of the top 50 US Metro Areas, 15 of the top 30 U.S. hub airports and 24 of thereported top 50 fractional operations airports. Signature also introduced a series of innovative new pricing and customerloyalty programmes during 2006. This will maximise the value of the Signaturenetwork to all levels of business jet operators by delivering volume based fuelincentives. The Fleet PowerTM, Tenant PowerTM and Net PowerTM incentiveprogrammes were successful in adding new customers and increasing volume amongSignature's existing customer base. The surge in business jet deliveries is creating a growing demand for flightsupport services. Signature with its unrivalled network of quality locations,existing infrastructure and portfolio of long-term lease agreements is wellpositioned to take advantage of this trend. ASIG Total revenue at ASIG reduced slightly to £195.4m (£198.0m). This was primarilydue to a weather related shortfall in de-icing activity, which reduced sales byapproximately £7m compared to the prior period, and impacted the organic salesgrowth rate by almost 4%. In addition ASIG continued with its policy ofwithdrawing from uneconomic locations at Miami and Albany, which reduced revenueby a further £5m. However ASIG successfully introduced new higher marginservices such as GSE maintenance and recorded a number of new business wins withmajor airlines as well as being named the "Best Airport Operator" for a secondconsecutive year. ASIG continues to grow its business globally. In Asia, it commenced fuellingoperations at Bangkok's new Suvarnabhami International Airport under a 20 yearlicense agreement and was immediately successful in adding new fuellingcontracts with British Airways, United Airlines, Singapore Airlines andLufthansa. ASIG also expanded its operations in Europe with the addition offuelling services at Austria's Vienna International Airport and Durham TeesValley Airport in the United Kingdom. The increase in GSE maintenance follows a series of new business wins from anumber of major airlines including Delta, USAirways, American and Jet Blue.Refuelling contracts were won with Southwest Airlines at Denver and SkyWestAirlines at Los Angeles. Our cabin cleaning business also continued to grow in2006. ASIG was awarded a new 5 year agreement by British Airways to provide acomprehensive cabin cleaning service at London Heathrow. The commercial aviation services market is expected to grow organically at circa5% per annum whilst remaining price sensitive and competitive. We expect furtherconsolidation in the industry, which will continue to drive outsourcingopportunities in the higher skill and higher margin areas, where ASIG is ideallypositioned. Aftermarket Services and Systems Our Aviation Services and Systems businesses recovered strongly in 2006supported in particular by a much better performance in Engine Repair andOverhaul. Total revenue grew to £393.7m, a 9% increase over 2005, which wasmostly organic. Operating profits increased by 43% to £44.6m (2005: £31.3m) andoperating margins improved significantly to 11.3% (2005: 8.7%). This was partlydue to the acquisition of Ontic in February 2006 but also to a significantimprovement in engine repair as the benefits of productivity initiatives andrationalisation activities began to come through. Operating cash flow for thedivision of £39.2m represented an operating profit to cash conversion ratio of95%. The return on invested capital over the year improved to 9.0% (2005: 6.5%). Engine Repair and Overhaul Sales in 2006 were £260.4m (2005: £267.1m). Sales were reduced by £24.0m by achange onto a consignment basis of one significant European contract. Adjustingfor this change organic revenue growth was 11% with market share increasedacross a number of product lines. The order backlog at the end of the year was25% higher that in 2005 and positions ERO well for 2007. A significant effort to increase productivity was made during the year and thebusiness delivered improvements in turn time, labour utilisation and quality.Facility rationalisations accomplished during the year brought decreasedoperating costs in Dallas by reducing three sites to two. A similar successfulconsolidation occurred through the relocation of the Bournemouth RegionalTurbine Centre (RTC) to the H+S Aviation campus in Portsmouth UK, reducing twosites to one. We anticipate continued improvements from these initiatives in2007. The recently launched capability for PW300/500 services yielded significantgrowth as demand for field service and 'on-wing' inspections increased duringthe year. The maturer Pratt and Whitney Canada programs such as JT15D, PT6 andPW100 likewise saw a rise in inputs to our heavy maintenance facilities as wellas Regional Turbine Centres (RTCs). Improvements in the ALF502 program andincrease in TFE731 Core Zone Inspection (CZI) work scopes were major factors inthe double-digit volume growth seen in the Honeywell programs. The increaseddemand for Rolls-Royce Tay overhauls and the addition of the Tay 811-C to theproduct portfolio helped offset an ageing Rolls-Royce Spey engine market. Inaddition the 2006 Rolls Royce 'Corporate-Care' agreement enabled DallasAirmotive to increase its support of both engine and aircraft producers whosecustomers prefer an ongoing OEM maintenance program. The ERO market remains competitive yet evidence supports a continued favourabletrend in BBA Aviation share and revenue growth. Market forecasts areanticipating a major expansion in Very Light Jets (VLJs) and ERO is innegotiations with a number of OEMs to become a major service provider in thisnew sector. In addition leveraging both BBA's component repair & overhaulfacilities as well as logistics specialists, such as International TurbineServices (ITS) and Barrett Turbines, provides significant advantages that areparticularly evident when comparing ERO to its competitors. Component Repair and Overhaul (CRO) Total revenue grew to £45.7m (2005: £24.9m), an increase of 84% over 2005 withthe addition of Ontic in February 2006 and the full year impact of additionalsales from International Governor Services (IGS), acquired in mid 2005. Organicgrowth was 3%. The integration of Ontic into the broader CRO organisation has provided acatalyst for growth across the division. This has allowed BBA Aviation to offera broad range of product support services for components, including entireengines, which is unmatched in the industry. It also provides an effectivevehicle to support these products through Ontic's licensing model. The combineddivision has unparalleled knowledge and experience of the issues and supportneeds of legacy products and the proven ability to deliver the material andservices necessary to support the large operational fleets that utilise thisequipment. International Governor Services (IGS) obtained AWARS (authorised warranty andrepair station) status from Honeywell late in the year, which will allow them torepair a broader range of products. ITS and Barrett continued to augment theirexisting product lines by adding products like APUs (auxiliary power units) fromHoneywell. The large operating base of Business and General Aviation aircraft and therobust projections for continued aircraft shipments over the next 10 yearsprovide a strong business base for CRO. The legacy military aircraft that theysupport also provide a relatively stable base, requiring parts and serviceparticularly with high levels of ongoing US military activity. New productdevelopment for a number of large commercial aircraft and military transportsand fighters will stress the capacity of the OEMs to support customers needs inthe aftermarket which will result in an increasing need to offload non-core orlegacy products. There is little competition to the licensing skills that Ontichas established to acquire these types of products, which should result insignificant growth opportunities for the company and the Group. Landing Gear and Hydraulics Sales at £56.1m were 24% higher than the prior year (2005: £45.3m), with theacquisition of Arnoni at the start of the year representing 15 percentage pointsof the increase with the balance of 9% being organic. Overall markets were firm, with business aviation original equipment supplyshowing good growth. The military original equipment order book increasedsubstantially during the year, reflecting the BAE Systems Hawk Trainer andAugusta Westland EH101 helicopter order successes. Spare parts sales, in allareas, showed an improvement over the previous year with repair and overhaulactivity reflecting a similar trend. In the early part of 2006, APPH was awardeda contract with a value of $7.5m, to design and develop the landing gear systemfor the Korean Helicopter Programme. In December, a contract was awarded todesign, develop and manufacture the Eurocopter EC175 landing gear system, whichhas a potential contract value of circa $100m over 20 years. The division's footprint has also expanded during the year. On 1st January 2006,BBA Aviation acquired the assets of Arnoni Aviation for an initial considerationof $5m. Arnoni Aviation is a world leader in the supply and repair of RaytheonHawker 125 series sub-system components and rotables. On 5th February 2007 BBAAviation announced the acquisition of CAP based in Wichita USA for an initialpayment of $5.7m. CAP specialises in the design and manufacture of hydraulicsystems components, electro mechanical positioning systems and access mechanismsused on a wide range of business aviation and light jet programmes. The markets in which we operate are currently strong and with the continuedgrowth of our order book during 2006, APPH is well positioned for the future. Oxford Oxford Aircraft Training (OAT) OAT recovered well during the year with sales up 20% to £18.5m (2005: £15.4m)and a strong recovery in profitability as the demand for pilot trainingincreased and we started to benefit from the new fair weather training facilitylocated in Phoenix, USA. The outlook for OAT is positive. Airlines, such as BA, BMI and Thomas Cook arecontinuing to recruit Oxford students and in 2006 Netjets confirmed a sponsoredscheme with OAT, moving OAT into the business jet pilot training market. OATalso plans to develop a more integrated approach to training which will broadenthe services that it is able to provide. Oxford Airport During 2006 the Airport was successful in its planning application to widen andstrengthen the runway and install an Instrument Landing System ("ILS"). Theproject is expected to be completed by the summer of 2007 and will costapproximately £5.5m. On completion of the works, Oxford Airport will have a 1300metre long, 30m wide all-weather runway, enabling larger commercial aircraft tooperate out of the Airport than is possible today, positioning the Airport forexpansion in the regional market. The upgrade will also make the Airport moreattractive to business aviation users. Financial Information Revenue from continuing operations increased by 9 per cent to £950.1m (2005:£875.1m), underlying operating profit increased 24 per cent to £102.8m andoperating margins increased to 10.8 per cent (2005: 9.5 per cent). Profit before tax increased to £70.2m from £38.3m as a result of the increasedoperating profit and also reflected a reduction in restructuring costs andnon-recurring items for continuing operations. The impact of share based payments for continuing operations during the year wasto increase profits by £1.6m compared to a charge of £3.0m in 2005. The movementwas caused by a reduction in the company's share price at the start of the yearprior to an award vesting in March. Compared to the prior year the improvementbenefited the results of Flight Support by £2.6m, Aftermarket Services andSystems by £1.7m and central overhead by £0.3m. In 2006 the company also benefited from a curtailment gain of £1.6m in respectof its UK pension scheme associated with the departure of Fiberweb employeesfrom the scheme as at the date of demerger. This item has been accounted for inunallocated central overhead of continuing operations in the segmental analysisas it relates to the reduction of a future liability for BBA Aviation plc. The results of discontinued operations amounted to an after tax loss of £76.2mand an analysis is shown in the table below: Analysis of the Results of Discontinued Operations Profit -------------- £m £m Fiberweb underlying operating profit (to 17thNovember) 20.8Allocation of central costs to Fiberweb (3.0)Becorit underlying operating profit (to 1st December) 2.9 -------Underlying Operating Profit 20.7 Fiberweb impairment charges (70.5)Polypropylene hedge loss (2.3)Fiberweb restructuring charges (11.7)Becorit restructuring charges (0.4) -------Restructuring costs and non-recurring items (84.9) Demerger professional fees (29.4)Staff Bonuses (3.2)Debt arrangement fees write-off (1.1) -------Demerger Costs (33.7) Fiberweb interest costs (1.5) -------Loss before Tax from Discontinued Operations (99.4) Tax credit 23.2 -------Loss after tax from Discontinued Operations (76.2) ======= The cash element of the Fiberweb restructuring costs, non-recurring items anddemerger costs above amounted to approximately £45m. The net interest charge was £24.6m (2005: £20.9m) with the increase mostlyrelating to higher US interest rates, which has been offset in part by theinclusion in the prior period of a £2.6m charge in respect of a dividend onpreference shares that were redeemed in June 2005. Interest cover was 4.2 times(2005: 4.0 times). On an adjusted basis assuming that Fiberweb had been demergedon the 1st January 2006 interest costs would have been approximately £17.0m andinterest cover 6.0 times. The normalised tax rate for continuing operations was 29.9 per cent (2005: 25.4per cent) with the increase in the rate reflecting a significant shift in themix of profits to the USA with the demerger of Fiberweb and the inclusion in theprior period of a release of a provision for a potential tax exposure in the UK,which was no longer required. There is expected to be some upward pressure onthe rate in the short to medium term due to the change in mix of profits to theUSA, the limited opportunities available for tax planning and the potential lackof tax capacity in the UK. Cash flow from operating activities was £118.8m, significantly lower than theprior year of £174.0m due principally to the lower underlying operating profitsfrom Fiberweb and the cash costs of the demerger and associated restructuringinitiatives of £56.9m shown on the table above. There was a free cash inflow of£3.1m compared to £86.3m in 2005 which reflected higher capital expenditure of£91.8m (2005: £73.3m) together with the lower cash flow from operatingactivities. Assuming that Fiberweb had been demerged on the 1st January 2006,free cash flow would have been approximately £55m. The Group invested £49.6m inacquisitions during the period (2005: £28.0m) to expand into aviation componentslicensing and to add to our business aviation network. The Group also raised£26.8m from disposing of non-core businesses, mostly Becorit. Gross capital expenditure increased to £91.8m (2005: £73.3m) and represents 1.3times depreciation (2005: 0.9 times). Aviation expenditure amounted to £47.0m(2005: £39.9m) with Flight Support accounting for the majority of theexpenditure (£29.4m) principally relating to investment in our FBO facilities atBoston, Teeterboro and Paris and in the start up of our new commercial handlingoperation at Bangkok airport. Fiberweb expenditure amounted to £44.2m (2005:£32.7m). Net debt was £356.9m, significantly lower than at the end of 2005 (£527.1m). Thelower debt resulted from the transfer of £173.1m of debt to Fiberweb prior toits demerger and the balance to the impact of exchange rates on the translationof our dollar debt which reduced net debt by £77.1m. This was offset by a netcash outflow of £76.1m in the period. Dividend At the time of the interim results announced on 31st August 2006 the Boardexplained that, in the light of the demerger of Fiberweb, it had decided torebase future dividend payments. The interim dividend for 2006 was maintained at3.5 pence (2005: 3.5 pence) and the Board is now recommending a final dividendof 5.0 pence (2005: 8.3 pence) bringing the total dividend for the year to 8.5pence (2005: 11.8 pence). If Fiberweb had been demerged at the beginning of 2006and if BBA Aviation had been operating as an independent listed company sincethat date it is expected that the full year dividend would have been 7.1p. Board There have been a number of changes to the Board over the last few months. Theprevious chairman, Roberto Quarta, stepped down following the completion of thedemerger and Michael Harper became executive chairman pending the appointment ofa CEO when he will assume the role of non-executive chairman. Richard Stilwellalso left the board at the time of the demerger to join Fiberweb. A number ofnew non-executives have joined the Board; Nick Land, Mark Harper and mostrecently Hansel Tookes. It is currently intended that David Rough and BobPhillips, who have both given the company significant service, will leave theBoard at the AGM on the 26th April following which the restructuring of the nonexecutive members of the Board will be complete. The search for the new CEO continues and it is anticipated that this processwill be concluded in the next few months. Outlook The business aviation market is strong, underpinned by increased OEM backlogsfor business jets, the continued success of the fractional operators and theanticipated introduction of VLJ's during 2007. With our market-leading portfolioof businesses we are well positioned to exploit this strength and also to playour part in continuing to consolidate what remains a largely fragmented market.With an increased order backlog and an encouraging start to the year we expectto make further progress on a constant currency basis in 2007. Michael Harper, Executive Chairman27th February 2007 Group income statementfor the year ended 31 December 2006 Underlying Note i 2006 Underlying Note i 2005 Total Total £m £m £m £m £m £m ------------------------------------------------------------------------------------------- Continuing operations Revenue Revenue 950.1 - 950.1 875.1 - 875.1 Cost of sales (771.8) - (771.8) (717.9) (4.4) (722.3) ----------------------------------------------------------------------------- Gross profit 178.3 - 178.3 157.2 (4.4) 152.8 Net operating Distribution costs costs (18.8) - (18.8) (18.9) - (18.9) Administrative expenses (60.3) (0.6) (60.9) (56.3) (3.5) (59.8) Other operating income 3.5 - 3.5 1.3 0.6 1.9 Share of profit 0.4 - 0.4 0.3 - 0.3 of associates Other operating expenses (0.3) - (0.3) (0.6) (1.9) (2.5) Restructuring costs - (7.4) (7.4) - (13.3) (13.3) Loss on disposal of businesses - - - - (1.3) (1.3) ----------------------------------------------------------------------------- Operating Operating profit profit from continuing operations 102.8 (8.0) 94.8 83.0 (23.8) 59.2 Investment income 43.5 - 43.5 35.4 - 35.4 Finance costs (68.1) - (68.1) (56.3) - (56.3) ---------------- -------- ------ ------ ------- ------ ------ Profit before tax 78.2 (8.0) 70.2 62.1 (23.8) 38.3 Tax (23.4) 2.7 (20.7) (15.8) 8.7 (7.1) ---------------- -------- ------ ------ ------- ------ ------ Profit for the period from continuing operations 54.8 (5.3) 49.5 46.3 (15.1) 31.2 Discontinued Profit/(loss) operations after tax from discontinued operations 16.7 (92.9) (76.2) 40.4 (17.8) 22.6 Profit on disposal after tax - 16.5 16.5 - 21.5 21.5 ---------------------------------------------------------------------------- Profit/(loss) for the period 71.5 (81.7) (10.2) 86.7 (11.4) 75.3 ----------------------------------------------------------------------------- Attributable to: Equity holders of the parent 71.4 (81.7) (10.3) 86.5 (11.4) 75.1 Minority interest 0.1 - 0.1 0.2 - 0.2 ------------------------------------------------------------------------------ 71.5 (81.7) (10.2) 86.7 (11.4) 75.3 ------------------------------------------------------------------------------ Earnings per From continuing and discontinued operations ordinary share Basic 14.9p (2.2p) 18.4p 15.9p ----------------------------------------------------------------------------- Diluted 14.9p (2.1p) 18.2p 15.8p ------------------------------------------------------------------------------ From continuing operations Basic 11.4p 10.3p 9.8p 6.6p ---------------------------------------------------------------------------- Diluted 11.4p 10.3p 9.7p 6.5p ----------------------------------------------------------------------------- Note i: Restructuring costs, amortisation of acquired intangibles andnon-recurring items as set out in Note 8 to the financial statements. Group balance sheetat 31 December 2006 2006 2005 £m £m -------------------------------------------------------------------------- Non-current assets Intangible assets Goodwill 314.1 429.8 Licenses & other 20.9 24.5 Property, plant & equipment 316.4 746.4 Investments in associates 8.8 18.4 Trade and other receivables 28.8 14.2 -------------------------------------------------------------------------- 689.0 1,233.3 -------------------------------------------------------------------------- Current assets Inventories 131.3 234.2 Trade and other receivables 171.8 294.2 Cash and cash equivalents 156.5 174.9 Tax recoverable 0.1 2.8 -------------------------------------------------------------------------- 459.7 706.1 --------------------------------------------------------------------------- Total assets 1,148.7 1,939.4 -------------------------------------------------------------------------- Currentliabilities Trade and other payables (185.5) (278.3) Tax liabilities (43.0) (53.9) Obligations under finance leases (1.0) (4.3) Bank overdrafts and loans (27.6) (44.0) Provisions (3.4) (7.0) -------------------------------------------------------------------------- (260.5) (387.5) -------------------------------------------------------------------------- Net current assets 199.2 318.6 Non-currentliabilities Bank loans (470.7) (585.2) Other payables due after one year (7.9) (43.1) Retirement benefit obligations (21.1) (64.6) Obligations under finance leases (27.5) (38.1) Deferred tax liabilities (15.7) (59.5) Provisions (22.8) (25.3) -------------------------------------------------------------------------- (565.7) (815.8) -------------------------------------------------------------------------- Total liabilities (826.2) (1,203.3) -------------------------------------------------------------------------- Net assets 322.5 736.1 -------------------------------------------------------------------------- Equity Share capital 122.5 121.6 Share premium account 345.1 340.2 Revaluation reserve 3.9 3.9 Treasury shares (1.4) (0.6) Capital reserve 15.5 15.8 Hedging and translation reserves (27.7) (1.5) Retained earnings (136.2) 256.4 --------------------------------------------------------------------------- Equity attributable to BBA Aviation plc shareholders 321.7 735.8 Minority interest 0.8 0.3 -------------------------------------------------------------------------- Total equity 322.5 736.1 -------------------------------------------------------------------------- Group cash flow statementfor the year ended 31 December 2006 2006 2005 £m £m--------------------------------------------------------------------------------------------------------Operations Net cash inflow from operating activities 118.8 174.0 Investingactivities Dividends from associates 0.3 0.4 Purchase of property, plant and equipment (90.7) (72.6) Purchase of intangible assets (1.1) (0.7) Proceeds from disposal of property, plant and equipment 5.9 3.3 Acquisition of subsidiaries (52.7) (28.0) Proceeds from disposal of subsidiaries and associates 27.8 46.7 Deferred consideration on prior year acquistions (1.5) (0.9) Recuction in cash and cash equivalents on demerger (37.5) - --------------------------------------------------------------------------------------- Net cash outflow from investing activities (149.5) (51.8) ---------------------------------------------------------------------------------------- Financingactivities Interest received 41.9 36.4 Interest paid (69.9) (50.6) Interest element of finance leases paid (2.1) (2.0) Preference dividends paid - (1.9) Dividends paid (57.7) (53.0) Proceeds from issue of ordinary shares 5.8 7.7 Proceeds from sale of own shares - 5.6 Purchase of own shares (0.9) - Increase/(decrease) in loans 121.3 (79.7) Decrease in finance leases (3.1) (2.8) (Decrease)/increase in overdrafts (3.8) (5.5) (Increase)/decrease in other liquid assets 3.0 58.7 ---------------------------------------------------------------------------------------- Net cash inflow / (outflow) from financing activities 34.5 (87.1) --------------------------------------------------------------------------------------- Cash and cashequivalents Increase in cash and cash equivalents 3.8 35.1 Cash and cash equivalents at beginning of year 174.9 134.0 Exchange adjustments (22.2) 5.8 --------------------------------------------------------------------------------------- Cash and cash equivalents at end of year 156.5 174.9 --------------------------------------------------------------------------------------- Net debt Net debt at beginning of year (527.1) (511.6) Increase in cash and cash equivalents 3.8 35.1 (Increase)/decrease in loans (121.3) 79.7 (Increase)/decrease in finance leases 3.1 2.8 (Increase)/decrease in overdrafts 3.8 5.5 Increase/(decrease) in other liquid assets (3.0) (58.7) Bank loans acquired (2.9) - Bank loans disposed of on demerger 209.6 - Finance leases acquired - (3.3) Exchange adjustments 77.1 (76.6) --------------------------------------------------------------------------------------- Net debt at end of year (356.9) (527.1) --------------------------------------------------------------------------------------- Group statement of recognised income and expensesfor the year ended 31 December 2006 2006 2005 £m £m------------------------------------------------------------------------------------- Exchange difference on translation of foreign operations (119.5) 98.7Gains/(losses) on net asset hedges 82.9 (79.5)Exchange differences recycled on disposal of subsidiaries 4.4 -Fair value movements in foreign exchange cash flow hedges 4.1 (6.1)Fair value movements in interest rate cash flow hedges 2.2 9.3Fair value movements in commodity contract cash flowhedges (0.6) (3.4)Actuarial gains on defined benefit pension schemes (5.6) (0.6)Tax on items transferred from equity 0.3 10.4-------------------------------------------------------------------------------------Net income recognised directly in equity (31.8) 28.8------------------------------------------------------------------------------------- Transfer to profit or loss from equity on cash flow hedges (2.0) (2.5)Transfer to profit or loss from equity on interest ratecash flow hedges (1.7) -Transfer to profit or loss from equity on commoditycontract cash flow hedges 4.0 -Tax on items transferred to profit or loss from equity - -(Loss) / profit for the period (10.2) 75.3-------------------------------------------------------------------------------------Total recognised income and expense for the period (41.7) 101.6------------------------------------------------------------------------------------- Fair value of cash flow hedges on adoption of IAS39 - 8.2Fair value of interest rate swaps on adoption of IAS39 - (6.4)Reduction in net assets on initial adoption of IAS32(restated) - (52.8)-------------------------------------------------------------------------------------Change of accounting policy on adoption of IAS32/39 - (51.0)------------------------------------------------------------------------------------- Reconciliation of movements in total shareholders' equityfor the year ended 31 December 2006 2006 2005 £m £m------------------------------------------------------------------------------------ Total recognised income and expense for the period (41.7) 101.6Equity dividends (57.7) (53.0)Dividend in specie (320.0) -Conversion of preference shares (restated) - 53.5Credit to equity for equity settled share based payments 0.4 0.6Movement in minority interests 0.4 -Movement in treasury shares (0.8) 5.6Issue of shares 5.8 7.7------------------------------------------------------------------------------------Net movement in total shareholders' equity for the period (413.6) 116.0Change of accounting policy on adoption of IAS32/39(restated) - (51.2)Total shareholders' equity at beginning of period 736.1 671.3------------------------------------------------------------------------------------Total shareholders' equity at end of period 322.5 736.1------------------------------------------------------------------------------------ The 2005 comparative results in respect of the effect of the change inaccounting policy of IAS 32 and the conversion of preference shares have beenamended to reflect the Group's revised presentation of movements on the 6.75 percent cumulative redeemable preference shares that were converted in the yearended 31 December 2005. This revised presentation reflects the requirements ofIAS 1 "Presentation of Financial Statements" as adopted in practice. Notes to the financial statements 1. Segmental Information Business Segments Aftermarket Flight Services & Total Unallocated Total Support Systems Aviation corporate Continuing £m £m £m £m £m---------------------------------------------------------------------------------------- 2006External revenue 556.4 393.7 950.1 - 950.1 Underlyingoperating profit 65.5 44.6 110.1 (7.3) 102.8Underlyingoperating margin 11.8% 11.3% 11.6% - 10.8%---------------------------------------------------------------------------------------- Other information -----------------------------------------------------------------------------------------Capital additions 29.4 17.4 46.8 0.2 47.0Depreciation andamortisation 19.1 12.4 31.5 0.2 31.7---------------------------------------------------------------------------------------- Balance sheetAssets:Segment assets 494.8 428.5 923.3 60.0 983.3Investments inassociates 8.8 - 8.8 - 8.8Tax recoverable 0.1Cash and cashequivalents 156.5----------------------------------------------------------------------------------------Consolidated totalassets 1,148.7----------------------------------------------------------------------------------------Liabilities:Segment liabilities (82.5) (56.6) (139.1) (101.6) (240.7)Tax liabilities (58.7)Finance lease andloan liabilities (526.8)----------------------------------------------------------------------------------------Consolidated totalliabilities (826.2)---------------------------------------------------------------------------------------- 2005External revenue 514.4 360.7 875.1 - 875.1 Underlyingoperating profit 60.3 31.3 91.6 (8.6) 83.0Underlyingoperating margin 11.7% 8.7% 10.5% - 9.5%---------------------------------------------------------------------------------------- Other information ----------------------------------------------------------------------------------------Capital additions 26.6 18.7 45.3 0.2 45.5Depreciation andamortisation 17.7 11.0 28.7 0.2 28.9----------------------------------------------------------------------------------------Balance sheetAssets:Segment assets 533.1 424.2 957.3 53.4 1,010.7Investments inassociates 9.9 - 9.9 - 9.9Tax recoverable 1.8 147.3Discontinuedoperations 769.7----------------------------------------------------------------------------------------Consolidated totalassets 1,939.4----------------------------------------------------------------------------------------Liabilities:Segment liabilities (94.7) (58.0) (152.7) (185.8) (338.5)Tax liabilities (27.9)Finance lease andloan liabilities (640.7)Discontinuedoperations (196.2)----------------------------------------------------------------------------------------Consolidated totalliabilities (1,203.3)---------------------------------------------------------------------------------------- Geographical Segments Revenue from continuing Capital operations additions Assets2006United Kingdom 197.3 13.4 240.4Mainland Europe 21.5 3.9 21.8North America 727.6 27.8 714.0Rest of World 3.7 1.9 7.1-------------------------------------------------------------------------------- Total 950.1 47.0 983.3-------------------------------------------------------------------------------- 2005United Kingdom 197.8 11.6 222.9Mainland Europe 13.4 0.3 16.4North America 662.6 33.6 768.7Rest of World 1.3 - 2.7-------------------------------------------------------------------------------- Total 875.1 45.5 1,010.7-------------------------------------------------------------------------------- 2. Basis of preparation The financial information set out above does not constitute the Company'sstatutory financial statements for 2006 or 2005 under section 240 of theCompanies Act 1985. Statutory accounts for 2005, together with an unqualifiedaudit report, have been filed with the Registrar of Companies and did notcontain a report under section 237 (2) and (3) of the Companies Act 1985. Thosefor 2006 will be delivered to the Registrar following the Company's annualgeneral meeting. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs) and in accordance with the Group's IFRS accounting policies, thisannouncement does not itself contain sufficient information to comply withIFRSs. The same accounting policies and methods of computation are followed inthe audited results for the year ended 31 December 2006. The BBA accountingpolicies under IFRS are as reported in the annual financial statements for theyear ended 31 December 2005, as published by the Company on 20 March 2006. 2006 20053. Net Capital expenditure £m £m Net capital expenditure (continuing operations) 44.8 40.0 ---------------------- Net capital expenditure to depreciation - times 1.4 1.4 ---------------------- 4. Number of employees Thousands Thousands At 31 December (continuing operations) 10.8 14.1 ---------------------- 5. Earnings per share Continuing and Continuing discontinued operations operations 2006 2005 2006 2005 Earnings £m £m £m £m Basic: Basic earnings attributable to ordinary shareholders 49.4 31.0 (10.3) 75.1 Restructuring costs, amortisation of acquired intangibles and non-recurring items after tax 5.3 15.1 98.2 32.9 (Profit) after tax on disposal (discontinued operations) - - (16.5) (21.5) --------------------------------------- Adjusted earnings 54.7 46.1 71.4 86.5 ----------------------------------------- Diluted: Diluted earnings attributable to ordinary shareholders 49.4 31.0 (10.3) 75.1 Restructuring costs, amortisation of acquired intangibles and non-recurring items after tax 5.3 15.1 98.2 32.9 (Profit) after tax on disposal (discontinued operations) - - (16.5) (21.5) --------------------------------------- Adjusted diluted earnings 54.7 46.1 71.4 86.5 ---------------------------------------- Millions Millions Millions Millions Average number of 29 16/21p (2005: 25p) ordinary shares: Basic 478.4 471.0 478.4 471.0 ----------------------------------------- Diluted 480.6 475.8 480.6 475.8 ------------------------------------------ Earnings per share: Basic: Adjusted 11.4p 9.8p 14.9p 18.4p ---------------------------------------- Unadjusted 10.3p 6.6p (2.2p) 15.9p ---------------------------------------- Diluted: Adjusted 11.4p 9.7p 14.9p 18.2p ---------------------------------------- Unadjusted 10.3p 6.5p (2.1p) 15.8p ---------------------------------------- 6. Taxation £m £m Continuing operations Current tax 11.7 15.4 Adjustments in respect of prior years - current tax (0.9) (6.0) Deferred tax 7.9 (2.1) Adjustments in respect of prior years 2.0 - ---------------- - deferred tax 20.7 7.3 ------------------- 2006 2005 7. Cash flow from operating activities £m £m Operating profit from continuing operations 94.8 59.2 Operating profit from discontinued operations (97.9) 24.0 Share of profit from associates (0.8) (2.8) ----------------- Profit from operations (3.9) 80.4 Depreciation of property, plant & equipment 62.4 71.4 Amortisation of intangible assets 4.3 4.0 Profit on sale of property, plant & equipment (1.4) (0.2) Increase in provisions 1.5 1.8 Pension scheme payments (14.3) (7.6) Non-cash impairments 70.5 11.5 Other non-cash items - 8.3 ------- -------- Operating cash flows before movements in working 119.1 169.6 capital Decrease in working capital 9.2 14.1 ----------------- Cash generated by operations 128.3 183.7 Income taxes paid (9.5) (9.7) ------------------ Net cash inflow from operating activities 118.8 174.0 ------------------ 8. Restructuring costs and other non-recurring items Restructuring costs, amortisation of acquired intangibles and non-recurringitems included within statutory operating profit amounted to £8.0 million (2005:£23.8 million). The main items included within this are: - 2006: Administrative expenses of £0.6 million relating toamortisation of intangible assets acquired and valued in accordance with IFRS 3,and; restructuring costs of £7.4 million relating to a number of small aviationrestructuring initiatives. - 2005: Cost of sales of £4.4 million, being WIP write-off followingthe introduction of a new computer system and the exit from Millville;administrative expenses of £3.5 million being the write-down of a receivablefollowing a decision to exit a joint venture, and amortisation of intangibleassets acquired and valued in accordance with IFRS 3; other operating income of£(0.6) million being surplus amounts provided on acquisition; other operatingexpenses of £1.9 million being mainly settlement costs in respect of legalproceedings; restructuring costs £13.3 million relating mainly to the completionof the closure of the Millville facility and completion of the integration ofAGI, and; loss on disposal of businesses of £1.3m relating to the sale of asmall aviation parts supplier based at Oxford Airport. Net of tax, restructuring costs and non-recurring items included withindiscontinued operations amounted to £92.9 million (2005: £17.8 million). Thesecosts primarily relate to impairment charges for a number of Fiberweb wipeslines; line impairment charges, severance costs and other closure costsassociated with the rationalisation of Fiberweb North America Hygiene; and thecosts of the demerger of Fiberweb. 9. Acquisitions and disposals On 3 January 2006, the Group purchased Arnoni Aviation Services Inc. for animmediate cash consideration of $5.0 million (£2.9 million) and a deferredcontingent cash consideration of up to $2.0 million (£1.1 million). On 17 February 2006, the Group purchased an FBO at La Quinta, California for animmediate cash consideration of $8.1 million (£4.6 million) and a deferredcontingent cash consideration of $0.4 million (£0.2 million). On 24 February 2006, the Group purchased Ontic Engineering & Manufacturing for aconsideration of $67.0 million (£38.5 million). On 1 April 2006, the Group purchased Blowitex GmbH for an immediate cashconsideration of €3.8 million (£2.7 million) and a deferred contingent cashconsideration of €0.7million (£0.5 million). On 26 April 2006, the Group purchased a further 40% of the shares of AthensAviation Services for a consideration of €1.7 million (£1.2 million). On 27 October 2006, the Group acquired Air-1 Aircraft LLC at St Petersburg,Florida for a cash consideration of $4.5 million (£2.3 million). On 17 November 2006, the Group demerged Fiberweb by way of dividend in specie. On 1 December 2006, the Group disposed of the entire share capital of BecoritGmbH for cash consideration of €39.7 million (£26.8 million) on a debt free cashfree basis. 10. Dividends Subject to shareholder approval, the final dividend will be paid on 18 May 2007to ordinary shareholders on the register at the close of business on 13 April2007. Shareholders are being offered the opportunity of buying additional sharesin lieu of a cash dividend under the existing BBA Dividend Re-investment Plan(DRIP). On the demerger of Fiberweb on 17 November 2006, a dividend was declared whichwas satisfied by the issue of shares in Fiberweb plc - a dividend in specie. Thedividend in specie of £320.0 million represented the net assets of thebusinesses transferred to Fiberweb on demerger. The existing shareholders of BBAGroup plc were given shares in Fiberweb plc on a ratio of one share in Fiberwebplc for every four shares held in BBA Group plc. Immediately after the demergerBBA Group plc changed its name to BBA Aviation plc. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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