28th Feb 2008 07:02
BBA Aviation PLC28 February 2008 BBA Aviation plc 2007 Preliminary results Results for the year ended 31 December 2007 For further information please contact: Simon Pryce, Chief Executive Officer (020) 7514 3990Andrew Wood, Finance Director (020) 7514 3950BBA AVIATION PLC Mike Harrison / Kate Miller (020) 7404 5959BRUNSWICK PRELIMINARY RESULTS FOR PERIOD ENDED 31 DECEMBER 2007 Results in Brief - £m Constant exchange rates (5)Continuing operations 2007 2006 2006Revenue 979.4 950.1 891.3Underlying Operating Profit (1) 105.7 102.8 96.0Underlying Operating Margin (1) 10.8% 10.8% 10.8%Operating Profit 130.1 94.8 88.4Profit Before Tax 110.8 70.2 66.6Earnings per Share (Adjusted) (2) 15.4p 11.4pEarnings per Share (Unadjusted) 21.2p 10.3pFree Cash Flow (3) 41.8 48.1Total GroupProfit /(Loss) for the period 87.2 (10.2)Dividend (4) 7.6p 8.5p (7.1p rebased)Net Debt at 31 December 375.2 356.9 Group: • Sales increased by 10% at constant exchange rates, organic growth 8% • Underlying operating profit up 10% to £105.7m at constant exchange rates and 3% on an as reported basis • Profit Before Tax up 58% to £110.8m (2006: £70.2m) • Adjusted earnings per share up 35% to 15.4p (2006: 11.4p). Unadjusted 21.2p (2006: 10.3p) • Return on Invested Capital increased to 11.3% (Excl. Oxford) (2006: 11.0%) • Dividend for the year of 7.6p up 7% against rebased prior year of 7.1p following the demerger of Fiberweb Flight Support: • Organic revenue growth of 6% • 10 new locations added to Signature network during the year at a cost of £73m • Signature's lease at San Francisco airport renewed for a further 10 years • ASIG secures TOGA contract valued at $150m over 7 years and continues to exit from uneconomic locations • ASIG margins improved significantly • Agreement to acquire Hawker Beechcraft's FBO network for $128.5m announced on 22 February 2008 Aftermarket Services and Systems: • Organic revenue growth of 10% • Good progress across a wide range of engine programmes • Parts distribution had a difficult year in rapidly changing market conditions • Significant new licences secured in Ontic and strong order intake in APPH • Disposal of businesses at Oxford realised a total value of £76m (incl. retained cash of £5m) with a profit on disposal of £38m Commenting, Simon Pryce, BBA Aviation Chief Executive Officer, said: "2007 was another year of excellent progress for BBA Aviation, its first fullyear as a focused aviation services and systems support company. The Groupdelivered a strong financial performance both on an underlying and absolutebasis, benefiting from good market conditions and continuing operationalimprovement. We gained significant net new business across the portfolio andmade a number of strategic acquisitions at attractive prices that willaccelerate BBA Aviation's future growth. "The announcement on 22 February that we had acquired Hawker Beechcraft's LineService Operations was another important step in extending Signature's network,further strengthening our position as the world's leading provider of airportservices for the Business and General Aviation market. Since the beginning of2007 we have added 17 new FBOs which have expanded the global network oflocations by 25 per cent. "It is too early to assess the impact of slower economic growth on our businessalthough, in the first few weeks of trading in the current year, we have seensofter fuel volumes in Signature North America than in the same period in 2007when we experienced strong growth. All of our other businesses are performingwell and in line with our expectations. Assisted by the significant developmentsin 2007 and the year to date, we still expect to make good overall progress in2008. Looking further out our long term prospects are exciting." (1) Underlying operating profit being total operating profit (includingassociates) from continuing operations before restructuring costs, amortisationof acquired intangibles and gain on disposal of businesses. (2) Basic earnings per share from continuing operations adjusted to exclude theafter-tax impact of restructuring costs, amortisation of acquired intangiblesand gain on disposal of businesses. (3) Cash generated by continuing operations, plus dividends from associates,less tax, net interest and net capital expenditure. (4) Prior year dividend declared was 8.5p which was rebased following thedemerger of Fiberweb to 7.1p. (5) Restated to average US Dollar rates used in the preparation of these results$2.00 (2006: $1.84). These definitions as outlined above and on page 1 are consistently appliedthroughout this preliminary announcement. BBA Aviation plc - Preliminary Results, 28 February 2008 PRELIMINARY RESULTS 2007------------------------ This was another set of strong results for BBA Aviation. Despite the weaker USdollar, revenue and underlying operating profit from continuing operationsincreased by 3% to £979.4m (2006: £950.1m) and £105.7m (2006: £102.8m)respectively. At constant exchange rates the increase in sales and underlyingoperating profit was 10%. Organic sales growth was 8% reflecting the strongmarket conditions experienced during the year and market share gains. Operatingmargins for the Group were maintained at 10.8%. Profit before tax increased by 58% to £110.8m from £70.2m principally as aresult of the profit on disposal of the businesses at Oxford Airport of £38.4m. In 2007 the US dollar depreciated against sterling by some 9% which has resultedin a significant reduction in the translated sterling value of our US dollarearnings. In 2006 the average dollar rate used in the Group was $1.84 and in2007 was $2.00. This weakening of the dollar reduced our underlying operatingprofits by some £8.0m compared to 2006. Adjusted earnings per share rose 35% to 15.4p (2006: 11.4p). Assuming that theinterest benefit from the debt transferred to Fiberweb had been received from 1January 2006 and the reduced consolidated number of shares at 31 December 2006was used in the calculation, adjusted earnings per share for the prior periodwould have been 14.6p and the year on year increase 5%. Further adjusting theprior period to reflect constant exchange rates, adjusted earnings per sharewould have been 13.8p and the year on year increase 12%. In the prior period there was a significant after tax loss from discontinuedoperations of £(76.2)m and this related to the results of Fiberweb prior to itsdemerger on 17 November 2006. Consequently there was a sharp recovery in theoverall profit for the period which increased to £87.2m compared to a loss in2006 of £(10.2)m. Free cash flow for continuing operations was £41.8m (2006: £48.1m) with capitalexpenditure at £39.8m reduced from the prior year of £47.0m. The Group invested£76.0m on acquisitions, principally to extend the Signature network, and raised£71.1m from the sale of its businesses at Oxford airport. There was a net cashoutflow of £19.3m after paying a dividend of £29.9m and pension/other costsassociated with the demerger of £23.7m. As a result net debt increased to£375.2m (2006: 356.9m) and net debt to EBITDA was 2.8x (2006: 2.7x). A final dividend of 5.35p has been recommended by the board bringing the totalfor the year to 7.6p (2006: 8.5p), an increase of 7% over the rebased 2006dividend of 7.1p. Business Review--------------- Flight Support-------------- Flight Support operations showed good progress overall with sales and operatingprofits well ahead of the prior year. Total sales grew to £579.5m, a 12%increase over 2006 on a constant currency basis with organic growth of 6%.Underlying operating profits increased by 18% to £72.2m (constant currency) andoperating margins improved to 12.5%, assisted by the strong deicing season atthe start and end of the year in ASIG. Increased fuel costs inflated sales byapproximately £10m and reduced operating margins by 0.2%. On a reported basis sales increased by 4% (2006: £556.4m) and underlyingoperating profits were 10% improved on the prior period (2006: £65.5m). Strongoperating cash flow of £65.2m was generated and 90% of operating profit wasconverted into cash. The return on invested capital improved over the year to13.9% (2006: 13.0%). Signature Despite historically high crude oil costs and a commensurate rise in averageretail jet fuel prices to more than $6.00 per gallon in some areas, Business andGeneral Aviation ("B&GA") flight activity remained buoyant and Signaturelocations both in the U.S. and Europe performed strongly in 2007. Revenueincreased by 17% to £394.7m at constant exchange rates. Organic growth atconstant fuel prices was 9% with the balance being accounted for by higher fuelprices (3%) and acquisitions (5%). We continued to see good growth fromfractional operators, up 11%, and they now account for approximately 25% oftotal revenue. Non-fractional revenue grew organically by 8% during the year.Our businesses outside the USA which generalte some 20% of total revenue had aparticularly strong year growing their revenues organically by 12%. Signature continued to add new price volume incentive programs which weresuccessful in winning new customers and increasing volume at all levels withinits existing customer base. Such programs have been highly effective inemploying the depth and logistical quality of Signature's network to createdifferentiating competitive price advantages. New facilities were completed in Teterboro, New Jersey, which added over 60,000square feet of hangar and related office space. Major expansion and renovations(£2m) were also completed at the Signature FBO terminal at Paris Le Bourget,creating the largest FBO complex on the airport. Work began on a new hangar andterminal renovation at San Francisco International Airport (total investment$15m) following the award to Signature of a 10 year lease extension by theairport authorities. Signature has followed a strategy of acquiring FBO's positioned in majorbusiness centers, resort destinations and more recently, key reliever airports.During 2007 Signature added 10 new FBO locations to its global network of which8 were acquired in the USA, 1 acquired in Greece and a new operation was startedup at Liege in Belgium. These new locations will generate incremental revenue ofapproximately £53m p.a. in the first full year of operation. In 2007 theycontributed sales of £18m. BBA Aviation announced on 22 February that it had agreed to acquire the assetsof Hawker Beechcraft Services Inc's Line Service Operations for a cashconsideration of $128.5M on a debt and cash free basis. The acquisition consistsof 7 geographically diverse Fixed Base Operations (FBOs) in strategicallyimportant growth markets in the USA. Each location is an important corporateaircraft destination and the assets represent a good mix of major businessaviation, commercial and key reliever airports. In 2007 Hawker Beechcraft's LineService Operations had sales of $73M, EBITDA margins of 12% and gross assets ofapproximately $16M. It is expected that the acquisition will be immediatelyearnings enhancing and returns should be in excess of BBA Aviation's cost ofcapital by 2010. The bases are highly complementary to Signature in terms oflocation, service reputation and quality of facilities. The acquisition willsignificantly strengthen Signature's network and provide an opportunity for realvalue creation through benefits associated with network fuel volume, price, costand real estate, which are expected to be fully realised by 2010 with limitedinvestment. Including the Hawker Beechcraft FBOs BBA Aviation now has a total of 84 whollyowned locations worldwide, of which 61 are located in the U.S. These cover 47 ofthe top 50 U.S. Metropolitan Areas, 18 of top 30 US hub airports, as well as 27of the top 50 fractional operations airports. In addition Signature has aminority interest in 14 other FBO locations in Brazil and Hong Kong. ASIG Total revenue at ASIG of £184.8m increased slightly by 1.5% at constant exchangerates but on an as reported basis reduced by 5.4%. Much improved de-icingseasons at the start and end of 2007 added £5m of revenue compared to the prioryear and net new business amounted to £3m but this was offset by the continuedwithdrawal from uneconomic locations. Overall there was a significantimprovement in profitability and margins compared to the prior year. The commercial flight support market continued its steady recovery in 2007.Airlines overcame the effect of historically high fuel prices with an emphasison improved systems and supply chain efficiency which created new outsourcingopportunities for ASIG in higher skill / higher margin activities. ASIG was alsosuccessful in achieving rate increases in a number of major contract renewals asprices continued to firm in the wake of strong demand and ASIG's ability toleverage its increasingly differentiated level of service and quality. ASIG continues to seek opportunities to expand its business by leveraging itsnetwork scale and growing expertise as an integrated systems and servicesprovider to the airlines, both airside and landside. ASIG was awarded a 7 year, $150m contract by Terminal One Group Association(TOGA), comprised of four of the world's leading airlines - Air France, JapanAirlines, Korean Air and Lufthansa - to provide full ground handling services toall 16 airlines operating at New York's JFK International Airport's TerminalOne. ASIG will handle over 10,000 flights and 4m passengers annually andservices started smoothly on 1 February 2008. To support this contract ASIG willinvest $16m in ground support and other equipment. ASIG was named the "Best Airport Fuel Operator" for an unprecedented thirdconsecutive year in an annual survey of the World's major airlines conducted byArmbrust, a leading industry trade organization. Aftermarket Services and Systems-------------------------------- Sales in our Aftermarket Services and Systems businesses grew by 7% on aconstant currency basis. Organic growth was 10% after taking into account thesale of the businesses at Oxford Airport in the middle of the year. Operatingprofits reduced to £43.2m (2006: £44.6m) on an as reported basis but increasedby 4% at constant exchange rates. Whilst margins in our ERO business continuedto improve, there was a slight reduction overall to 10.8% (2006: 11.3%) due tothe previously indicated fall in profitability in our parts distributionbusiness (see below). The division generated operating cash flow of £34.8m(2006: £42.6m) with a significant improvement during the second half of the yearas anticipated at the time of the interim results. Our return on investedcapital over the year (including goodwill previously written off to reserves andexcluding the impact of the Oxford businesses disposed during the year) improvedto 9.5% (2006: 8.6%). Engine Repair and Overhaul Engine Repair and Overhaul (ERO) had another good year in 2007 against abackdrop of strong market conditions. Sales increased by 4.6% on an as reportedbasis to £272.5m (2006: £260.4m) and by 12% on a constant currency basis, withall of the growth being organic. Business and General Aviation aircraft provide over 75% of ERO's revenue and allmajor programs experienced solid growth. Revenue increased almost two-fold onour newest authorization the PW300/500 as demand continued for field service andhot section inspection work. The PT6/JT15D business delivered good growth duringthe year despite challenges due to changing market dynamics. Rolls-Royce Tay andSpey are a key component of our B&GA sector and experienced significant growthdriven partly by our introduction onto the Tay 611-8C and Rolls-Royce CorporateCare programs. The TFE731 is our single largest source of revenue and grew well. Civil rotor-wing operations present an opportunity for ERO across the world withgrowth rate projections anticipated to outpace all other market sectors over thenext ten years. In 2007, our Rolls-Royce 250 helicopter engine program sawstrong growth in revenue over 2006. We have added additional resources andrepair services to this business that will benefit 2008 and beyond. We signed long-term agreements with several large fleet and medical serviceoperators and will continue to focus on strategic growth opportunities. We arewell positioned to assume new rotorcraft engine authorizations that will roundout our service offerings within the transport and utility helicopter markets. ERO continues to make improvements in its operations and supply chain structureto facilitate profitable organic growth. At the end of 2007, a strategicdecision was made to incorporate the activities of the two BBA Aviation partsdistribution companies -- International Turbine Services (ITS) and the BarrettTurbine Engine Company (BTEC) -- under ERO leadership going forward (see below). Legacy Support (formerly Component Repair and Overhaul (CRO)) Total revenue was £43.6m, a 4% increase over 2006 at constant exchange rateswith all of the growth relating to the impact of full year sales from Onticwhich was acquired in early 2006. Overall market conditions for the component companies continue to be very robustwith strong inputs and orders for both Ontic and IGS. Commercial backlog andworkload at the OEMs and customers served by these businesses remains extremelyhigh and the continued use of a large number of Military aircraft around theworld results in a steady demand for parts and support of those legacy aircraft. In the second half of 2007 Ontic signed licenses for new products which willgenerate sales of over £6m per year over the next 5 years for a variety ofproducts including Military Landing Gear and Fuel Controls and Gas Compressors /Generators. Order intake for existing licensed products was over £22m whichresulted in the largest order backlog in the company's history at the end of2007. The pipeline of new license opportunities continues to be robust lookingforward into 2008. Market conditions for the engine part distribution businesses (ITS and Barrett),which focus primarily on Business and General Aviation aircraft, were lessrobust than in prior years partly reflecting more activity from OEM engineexchange and upgrade programmes. Actions have been taken to address this byincreasing sales and marketing resources whilst reducing costs overall. As partof the process, ITS and Barrett have been transferred to the ERO division toenable full exploitation of the synergies between them and the group's other B&GA engine repair and overhaul businesses. Landing Gear and Hydraulics Sales at £62.8m were 12% higher than the prior year, with all of the growthbeing organic. The markets that we service remained strong during 2007, with Original Equipmentfor Business and Military applications being particularly buoyant. Continuingmilitary activity will result in ongoing high demand for military equipment, forboth fixed and rotor wing applications, where APPH has a relatively strongposition. 2008 should see high demand in the Business Aviation sector for bothconventional and increasingly, Very Light Jet applications, an area where we areregionally positioned to take advantage of this market trend. Several new contracts were won for System Hydraulics and associated equipmentwith Eurocopter on the EC175-Z15 (£50m), Hindustan Aeronautics on the AdvancedJet Trainer (AJT) (£2.6m), and Cessna on various aircraft types including theCJ4 Throttle Quadrant (£2.0m). Our MRO facility was awarded a contract insupport of the Repair & Overhaul of the Landing Gear System for the B717worldwide fleet which should generate sales of circa. £1m per annum. On our established programmes, L3 Communications announced the selection of theC27J aircraft for the Joint Cargo Aircraft programme, in support of the US Armyand Airforce, who require a minimum of 78 aircraft. APPH, together with itsItalian partner, supplies the Landing Gear System for this platform (order value£30m). In February 2007 we announced the acquisition of CAP, based in Wichita USA, foran initial payment of £2.9m. CAP specialises in the design and manufacture ofhydraulic components, electro mechanical positioning systems and accessmechanisms used on a wide range of business aviation and light jet programmes.The integration of CAP into the existing Airight facility was completed inSeptember. Oxford Oxford Aviation Training and Oxford Airport were sold during the year for £71.1mand the monies received invested in our core businesses. In 2007 thesebusinesses generated sales of £10.9m and operating profit of £2.0m. A smallengineering business "CSE Aviation" which was based at the airport was closed inearly 2008 and an asset write down of £2.3m was included in reorganisation costsduring the year. The cash cost of this closure is expected to be approximately£2m and this will be accounted for in the accounts for 2008. Other Financial Information The impact of share based payments for continuing operations during the year wasto reduce profits by £0.9m compared to a credit of £1.6m in 2006. The credit inthe prior year was caused by a reduction in the share price impacting theaccounting cost of a share award which was cash settled (USA share optionholders). The cost in the current year also benefited from a similaradjustment (circa. £1.1m) as a number of these shares remain outstanding.Compared to the prior year the reduction in profits impacted the results ofFlight Support by £1.4m, Aftermarket Services and Systems by £0.9m and centraloverhead by £0.2m. Unallocated central overhead rose to £9.7m (2006: £7.3m). This increase resultsfrom the inclusion in the prior year of a profit of £1.6m relating to acurtailment gain in the UK pension scheme following the demerger of Fiberweb andthe allocation of £3.7m of central overhead costs to Fiberweb in 2006 which hasbeen mostly, but not entirely, offset by cost reductions. Restructuring costs and amortisation of acquired intangibles for continuingoperations were £6.4m (2006: £8.0m) and principally related to the closure ofCSE, site relocations in APPH and the continued exit from uneconomic locationsin ASIG. The Group acquired five businesses during the year for a total consideration of£76.0m. We acquired commercial Aircraft Products (CAP) to strengthen thepresence of APPH in the USA. All of the other businesses related to Signatureand in total added another 9 locations to our network of bases. These businesseshave contributed approximately £21m of turnover in 2007. The fair market valueof the assets acquired was £38.2m, and the resulting goodwill was £40.1m. These acquisitions were financed by our free cash flow and the disposal of ourbusinesses at Oxford Airport which together raised £71.1m and generated a profiton disposal of £38.4m. An investment in Lider in Brazil was written down by£7.6m. The decision to write down the investment was taken after a discussionwith other shareholders regarding our future participation in the venture whichled to a reconsideration of the influence that we could exert on future strategyand the carrying value of the investment. The net interest charge was £19.3m (2006: £24.6m) with the reduction mostlyrelating to lower debt levels due to the transfer of £173m of debt to Fiberwebat the time of its demerger in November 2006. Interest cover was 5.5 times(2006: 4.2 times). Assuming that Fiberweb had been demerged on 1 January 2006,interest costs would have been approximately £17.0m in the prior year. The normalised tax rate for continuing operations was 27.0% (2006: 29.9%) withthe reduction in the rate reflecting the implementation of a new tax structureand the release of tax provisions for potential tax exposures in Europe and USAwhich were no longer required. The overall value of our pension scheme assets is unchanged at £478.1m (2006:£477.1m), whilst liabilities have fallen significantly, due principally toincreased discount rates, to £422.8m (2006: £498.2m). The resulting surplus of£65.6m in the UK scheme was not recognised as it is not expected that thesurplus will result in a reduction to the company's contributions to the scheme.Excluding the surplus on the UK scheme there was an overall deficit of £(10.3)m(2006: £(21.1)m). Following an actuarial valuation of the UK schemes in 2004,the Company made a special contribution of £5m during 2005 and 2006 and afurther contribution of £3.7m was made in 2007. Cash flow from operating activities for the Group reduced to £78.7m (2006:£118.8m) and for continuing operations was £102.4m (2006: £122.1m). Thereduction for continuing operations resulted from higher tax cash payments andan outflow in working capital of £5.2m compared to an inflow in 2006 of £7.4m..As anticipated there was a working capital inflow during the second half of£3.9m , in total there was a free cash inflow of £18.1m compared to £3.1m in2006. Net debt was £375.2m, similar to the end of 2006 (£356.9m). There was a net cashoutflow of £19.3m in the period which included cash payments in respect of thedemerger of £23.7m relating to adviser costs and the settlement of a Section 75pension obligation. Gross capital expenditure reduced to £39.8m (2006: £91.8m) and represents 1.3times depreciation (2006: 1.4 times). Aviation expenditure in 2006 amounted to£47.0m and the reduction in 2007 related to Signature where the prior yearincluded major investments at Teterboro, Boston and Paris. Dividend The Board is recommending a final dividend of 5.35p bringing the total for theyear to 7.6p (2006: 8.5p).If Fiberweb had been demerged at the beginning of 2006and if BBA Aviation had been operating as an independent company from that timeit is anticipated that the full year dividend would have been 7.1p. Against thisrebased full year dividend the recommended 2007 dividend represents an increaseof 7%. Board Simon Pryce joined the Board as Group Chief Executive on 11 June and MichaelHarper has assumed the role of Non-Executive Chairman as planned. Outlook It is too early to assess the impact of slower economic growth on our businessalthough, in the first few weeks of trading in the current year, we have seensofter fuel volumes in Signature North America than in the same period in 2007when we experienced strong growth. All of our other businesses are performingwell and in line with our expectations. Assisted by the significant developmentsin 2007 and the year to date, we still expect to make good overall progress in2008. Looking further out our long term prospects are exciting. Simon Pryce, Group Chief Executive28 February 2008 Group income statementfor the year ended 31 December 2007 Underlying Note i 2007 Total £m £m £m -------- ------- -------- Continuing operations Revenue Revenue 979.4 - 979.4 Cost of sales (786.1) - (786.1) -------- ------- -------- Gross profit 193.3 - 193.3 Net operating costs Distribution costs (17.3) - (17.3) Administrative expenses (71.5) (0.8) (72.3) Other operating income 0.5 - 0.5 Share of profit of associates 1.1 - 1.1 Amounts written-off associates - (7.6) (7.6) Other operating expenses (0.4) - (0.4) Restructuring costs - (5.6) (5.6) Gain on disposal of businesses - 38.4 38.4 -------- ------- -------- Operating profit Operating profit from continuing operations 105.7 24.4 130.1 Investment income 44.8 - 44.8 Finance costs (64.1) - (64.1) -------- ------- -------- Profit before tax 86.4 24.4 110.8 Tax (23.3) (0.3) (23.6) -------- ------- -------- Profit for the period from continuing operations 63.1 24.1 87.2 Discontinued Profit/(loss) after tax from discontinued operations - - - operations Profit/(loss) on disposal after tax - - - -------- ------- -------- Profit/(loss) for the period 63.1 24.1 87.2 -------- ------- -------- Attributable to: Equity holders of the parent 63.3 24.1 87.4 Minority interest (0.2) - (0.2) -------- ------- -------- 63.1 24.1 87.2 -------- ------- -------- Adjusted Unadjusted Earnings per From continuing and discontinued operations ordinary share -------- ------- -------- Basic 15.4p 21.2p -------- ------- -------- Diluted 15.3p 21.1p -------- ------- -------- From continuing operations Basic 15.4p 21.2p -------- ------- -------- Diluted 15.3p 21.1p -------- ------- -------- Note i: Restructuring costs and amortisation of acquired intangibles net ofgains on disposal of businesses as set out in Note 8 to the financialstatements. The consolidated income statement has been prepared in accordance with theaccounting policies set out in note 2 Group income statement (cont./)for the year ended 31 December 2007 Underlying Note i 2006 Total £m £m £m Continuing operations Revenue Revenue 950.1 - 950.1 Cost of sales (767.4) - (767.4) ------- ------- -------- Gross profit 182.7 - 182.7 Net operating costs Distribution costs (18.8) - (18.8) Administrative expenses (64.7) (0.6) (65.3) Other operating income 3.5 - 3.5 Share of profit of associates 0.4 - 0.4 Amounts written-off associates - - - Other operating expenses (0.3) - (0.3) Restructuring costs - (7.4) (7.4) Gain on disposal of businesses - - - ------- ------- -------- Operating profit Operating profit from continuing operations 102.8 (8.0) 94.8 Investment income 43.5 - 43.5 Finance costs (68.1) - (68.1) ------- ------- -------- Profit before tax 78.2 (8.0) 70.2 Tax (23.4) 2.7 (20.7) ------- ------- -------- Profit for the period from continuing operations 54.8 (5.3) 49.5 Discontinued Profit/(loss) after tax from discontinued operations 16.7 (92.9) (76.2) operations Profit/(loss) on disposal after tax - 16.5 16.5 ------- ------- -------- Profit/(loss) for the period 71.5 (81.7) (10.2) ------- ------- -------- Attributable to: Equity holders of the parent 71.4 (81.7) (10.3) Minority interest 0.1 - 0.1 ------- ------- -------- 71.5 (81.7) (10.2) ------- ------- -------- Adjusted Unadjusted Earnings per From continuing and discontinued operations ------- ------- -------- ordinary share Basic 14.9p (2.2p) ------- ------- -------- Diluted 14.9p (2.1p) ------- ------- -------- From continuing operations Basic 11.4p 10.3p ------- ------- -------- Diluted 11.4p 10.3p ------- ------- -------- Group balance sheetat 31 December 2007 2007 2006 £m £m -------- -------- Non-current assets Intangible assets Goodwill 340.2 314.1 Licenses and other 40.1 20.9 Property, plant and equipment 310.4 316.4 Investments in associates 1.6 8.8 Trade and other receivables 16.9 28.8 -------- -------- 709.2 689.0 -------- -------- Current assets Inventories 141.9 131.3 Trade and other receivables 185.7 171.8 Cash and cash equivalents 99.2 156.5 Tax recoverable 3.4 0.1 -------- -------- 430.2 459.7 -------- -------- Total assets 1,139.4 1,148.7 -------- -------- Currentliabilities Trade and other payables (193.5) (185.5) Tax liabilities (42.8) (43.0) Obligations under finance leases (0.6) (1.0) Bank overdrafts and loans (25.6) (27.6) Provisions (2.0) (3.4) (264.5) (260.5) -------- -------- Net current assets 165.7 199.2 Non-currentliabilities Bank loans (416.7) (470.7) Other payables due after one year (9.7) (7.9) Retirement benefit obligations (10.3) (21.1) Obligations under finance leases (24.9) (27.5) Deferred tax liabilities (20.2) (15.7) Provisions (21.2) (22.8) -------- -------- (503.0) (565.7) -------- -------- Total liabilities (767.5) (826.2) -------- -------- Net assets 371.9 322.5 -------- -------- Equity Share capital 122.7 122.5 Share premium account 346.4 345.1 Other reserve 3.9 3.9 Treasury shares - (1.4) Capital reserve 17.2 15.5 Hedging and translation reserves (32.5) (27.7) Retained earnings (86.5) (136.2) -------- -------- Equity attributable to BBA Aviation plc shareholders 371.2 321.7 Minority interest 0.7 0.8 -------- -------- Total equity 371.9 322.5 -------- -------- Group cash flow statementfor the year ended 31 December 2007 2007 2006 £m £m ------ ------ Operations Net cash flow from continuing operations 102.4 122.1 Net cash flow from discontinued operations (23.7) (3.3) ------ ------- Net cash flow from operating activities 78.7 118.8 ------ ------- Investingactivities Dividends received from associates 0.5 0.3 Purchase of property, plant and equipment (36.3) (90.7) Purchase of intangible assets (3.5) (1.1) Proceeds from disposal of property, plant and 2.9 5.9 equipment Acquisition of subsidiaries (75.9) (52.7) Proceeds from disposal of subsidiaries and associates 68.1 27.8 Deferred consideration on prior year acquistions (1.0) (1.5) Recuction in cash and cash equivalents on demerger - (37.5) ------ ------- Net cash outflow from investing activities (45.2) (149.5) ------ ------- Financingactivities Interest received 35.8 41.9 Interest paid (58.4) (69.9) Interest element of finance leases paid (1.6) (2.1) Dividends paid (30.0) (57.7) Proceeds from issue of ordinary shares 1.5 5.8 Purchase of own shares - (0.9) Increase/(decrease) in loans (59.7) 121.3 Decrease in finance leases (2.7) (3.1) Decrease in overdrafts (4.0) (3.8) Decrease in other liquid assets 18.6 3.0 ------ ------- Net cash inflow/(outflow) from financing activities (100.5) 34.5 ------ ------- Cash and cashequivalents (Decrease)/increase in cash and cash equivalents (67.0) 3.8 Cash and cash equivalents at beginning of year 156.5 174.9 Exchange adjustments 9.7 (22.2) ------ ------- Cash and cash equivalents at end of year 99.2 156.5 ------ ------- Net debt Net debt at beginning of year (356.9) (527.1) (Decrease)/increase in cash equivalents (67.0) 3.8 (Increase)/decrease in loans 59.7 (121.3) Decrease in finance leases 2.7 3.1 Decrease in overdrafts 4.0 3.8 Decrease in other liquid assets (18.6) (3.0) Bank loans acquired - (2.9) Bank loans disposed of on disposal/demerger of subsidiaries - 209.6 Finance leases acquired (0.1) - Exchange adjustments 1.0 77.1 ------ ------- Net debt at end of year (375.2) (356.9) ------ ------- Group statement of recognised income and expensesfor the year ended 31 December 2007 2007 2006 £m £m ------- ------- Exchange difference on translation of foreign operations 10.2 (119.5) (Losses/gains on net asset hedges (8.7) 82.9 Exchange differences recycled on disposal of subsidiaries - 4.4 Fair value movements in foreign exchange cash flow hedges 0.1 4.1 Fair value movements in interest rate cash flow hedges (2.6) 2.2 Fair value movements in commodity contract cash flow hedges - (0.6) Actuarial losses on defined benefit pension schemes (10.6) (5.6) Tax on items recognised directly in equity 3.4 0.3 ------- ------- Net income recognised directly in equity (8.2) (31.8) ------- ------- Transfer to profit or loss from equity on cash flow hedges (2.1) (2.0) Transfer to profit or loss from equity on interest rate cash flow hedges (1.7) (1.7) Transfer to profit or loss from equity on commodity contract cash flow hedges - 4.0 Profit/(loss) for the period 87.2 (10.2) ------- ------- Total recognised income and expense for the period 75.2 (41.7) ------- ------- Reconciliation of movements in total shareholders' equityfor the year ended 31 December 2007 2007 2006 £m £m ------- ------- Total recognised income and expense for the period 75.2 (41.7) Equity dividends (29.9) (57.7) Dividend in specie - (320.0) Credit to equity for equity settled share based payments 1.9 0.4 Movement in minority interests (0.1) 0.4 Movement on treasury reserve 0.8 (0.8) Issue of shares 1.5 5.8 ------- ------- Net movement in total shareholders' equity for the period 49.4 (413.6) Total shareholders' equity at beginning of period 322.5 736.1 ------- ------- Total shareholders' equity at end of period 371.9 322.5 ------- ------- 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 -------- -------- -------- -------- -------- 2007External revenue 579.5 399.9 979.4 - 979.4 Underlyingoperating profit 72.2 43.2 115.4 (9.7) 105.7Underlyingoperating margin 12.5% 10.8% 11.8% - 10.8% -------- -------- -------- -------- --------Other information -------- -------- -------- -------- --------Capital additions 20.6 19.0 39.6 0.2 39.8Depreciation andamortisation 19.6 10.3 29.9 0.2 30.1 -------- -------- -------- -------- --------Balance sheetAssets:Segment assets 579.1 396.2 975.3 59.9 1,035.2Investments inassociates 1.6 - 1.6 - 1.6Tax recoverable 3.4Cash and cashequivalents 99.2 -------- -------- -------- -------- --------Consolidated totalassets 1,139.4 -------- -------- -------- -------- --------Liabilities:Segment liabilities (90.5) (51.8) (142.3) (94.4) (236.7)Tax liabilities (63.0)Finance lease andloan liabilities (467.8) -------- -------- -------- -------- -------- (767.5) -------- -------- -------- -------- -------- 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) -------- -------- -------- -------- -------- (826.2) -------- -------- -------- -------- -------- Geographical Segments Revenue from continuing Capital operations additions Assets 2007United Kingdom 197.0 12.2 200.4Mainland Europe 24.5 2.6 28.3North America 754.6 24.9 799.0Rest of World 3.3 0.1 7.5 -------- -------- --------Total 979.4 39.8 1,035.2 -------- -------- ------- 2006United 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 -------- -------- -------- 2. Basis of preparation The financial information set out above does not constitute the Company's statutory financial statements for 2007 or 2006 under section 240 of the Companies Act 1985. Statutory accounts for 2006, together with an unqualified audit report, have been filed with the Registrar of Companies and did not contain a report under section 237 (2) and (3) of the Companies Act 1985. Those for 2007 will be delivered to the Registrar following the Company's annual general meeting. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards(IFRSs) and in accordance with the Group's IFRS accounting policies, this announcement does not itself contain sufficient information to comply with IFRSs. The same accounting policies and methods of computation are followed in the audited results for the year ended 31 December 2007. The BBA accounting policies under IFRS are as reported in the annual financial statements for the year ended 31 December 2006, as published by the Company on 26 February 2007. 2007 2006 3. Net capital expenditure £m £m Net capital expenditure (continuing operations) 36.9 44.8 -------- -------- Net capital expenditure to depreciation - times 1.2 1.4 -------- -------- 4. Number of employees 2007 2006 At 31 December 10,317 10,757 -------- -------- 5. Earnings per share Continuing Continuing and operations discontinued operations 2007 2006 2007 2006 Earnings £m £m £m £m Basic: Basic earnings attributable to ordinary shareholders 87.4 49.4 87.4 (10.3) Restructuring costs and amortisation of acquired intangibles net of gains on disposal after tax (24.1) 5.3 (24.1) 98.2 Profit after tax on disposal (discontinued operations) - - - (16.5) ------- -------- -------- -------- Adjusted earnings 63.3 54.7 63.3 71.4 ------- -------- -------- -------- Diluted: Diluted earnings attributable to ordinary shareholders 87.4 49.4 87.4 (10.3) Restructuring costs and amortisation of acquired intangibles net of gains on disposal after tax (24.1) 5.3 (24.1) 98.2 Profit after tax on disposal (discontinued operations) - - - (16.5) ------- -------- -------- -------- Adjusted diluted earnings 63.3 54.7 63.3 71.4 ------- -------- -------- -------- Millions Millions Millions Millions Average number of 29 16/21p ordinary shares: Basic 412.2 478.4 412.2 478.4 ------- -------- -------- -------- Diluted 413.6 480.6 413.6 480.6 ------- -------- -------- -------- Earnings per share: Basic: Adjusted 15.4p 11.4p 15.4p 14.9p ------- -------- -------- -------- Unadjusted 21.2p 10.3p 21.2p (2.2p) ------- -------- -------- -------- Diluted: Adjusted 15.3p 11.4p 15.3p 14.9p ------- -------- -------- -------- Unadjusted 21.1p 10.3p 21.1p (2.1p) ------- -------- -------- -------- 6. Taxation 2007 2006 £m £m Continuing operations Current tax 16.3 11.7 Adjustments in respect of prior years - current tax 0.5 (0.9) Deferred tax 8.3 7.9 Adjustments in respect of prior years - deferred tax (1.5) 2.0 -------- -------- 23.6 20.7 -------- -------- 2007 2006 7. Cash flow from operating activities £m £m Operating profit from continuing operations 130.1 94.8 Operating loss from discontinued operations - (97.9) Share of profit from associates (1.1) (0.8) -------- -------- Profit/(loss) from operations 129.0 (3.9) Depreciation of property, plant & equipment 26.9 62.4 Amortisation of intangible assets 3.2 4.3 Loss/(profit) on sale of property, plant & equipment 0.2 (1.4) Share based payment expense 2.0 - (Decrease)/increase in provisions (3.5) 1.5 Pension scheme payments (17.1) (14.3) Non-cash impairments 9.9 70.5 Gain on disposal of businesses (38.4) - -------- -------- Operating cash flows before movements in working capital 112.2 119.1 (Increase)/decrease in working capital (15.5) 9.2 -------- -------- Cash generated by operations 96.7 128.3 Income taxes paid (18.0) (9.5) -------- -------- Net cash inflow from operating activities 78.7 118.8 -------- -------- Analysed as Net cash flow for continuing operations 102.4 122.1 Net cash flow for discontinued operations (23.7) (3.3) -------- -------- 78.7 118.8 Dividends received from associates 0.5 0.3 Purchase of plant, property and equipment (36.3) (90.7) Purchase of intangible assets (3.5) (1.1) Proceeds from disposal of property, plant and equipment 2.9 5.9 Interest received 35.8 41.9 Interest paid (58.4) (69.9) Interest element of finance leases paid (1.6) (2.1) -------- -------- Free cash flow 18.1 3.1 -------- -------- Analysed as Free cash flow for continuing operations 41.8 48.1 Free cash flow for discontinued operations (23.7) (45.0) -------- -------- 18.1 3.1 In 2007, cash flows from discontinued operations relate to the settlement ofdemerger cost creditors and the payment of a section 75 debt payment in relationto a Fiberweb company that was previously a participating employer in the UKdefined benefit pension scheme 8. Restructuring costs and other non-recurring items Restructuring costs and amortisation of acquired intangibles net of gains ondisposal of businesses included within statutory operating profit amounted to acredit of £24.4 million (2006: charge £8.0 million). The main items includedwithin this are - 2007: Administrative expenses of £0.8 million relating to amortisation ofintangible assets acquired and valued in accordance with IFRS 3; restructuringcosts of £5.6 million relating to a number of small aviation restructuringinitiatives; an impairment loss of £7.6 million on an investment in anassociated company in Brazil, and; a total gain on the disposal of OxfordAviation Training and Oxford Airport of £38.4 million. - 2006: Administrative expenses of £0.6 million relating to amortisation ofintangible assets acquired and valued in accordance with IFRS 3, and;restructuring costs of £7.4 million relating to a number of small aviationrestructuring initiatives Net of tax, restructuring costs and non-recurring items included withindiscontinued operations amounted to £nil (2006: £92.9 million). The costs in2006 primarily related to impairment charges for a number of Fiberweb wipeslines; line impairment costs, severance costs and other closure costs associatedwith the rationalisation of Fiberweb North America Hygiene; and the costs of thedemerger of Fiberweb 9. Acquisitions and disposals On 2 February 2007, the Group purchased Commercial Aviation Products for animmediate cash consideration of $5.7 million (£2.9 million) and a deferredcontingent cash consideration of up to $3.3 million (£1.7 million). On 19 June 2007, the Group entered into a sale agreement to dispose of OxfordAviation Training for a consideration of £32.0 million. The disposal wascompleted on 29 June 2007, on which date the control of Oxford Aviation Trainingpassed to the acquirer. On 19 July 2007, the Group entered into a sale agreement to dispose of OxfordAirport for a consideration of £39.1 million. The disposal was completed on 19July 2007, on which date the control of Oxford Airport passed to the acquirer. On 19 July 2007, the Group purchased Executive Beechcraft Inc for an immediatecash consideration of $75.9 million (£37.4 million) and a deferred cashconsideration of $2.5 million (£1.3 million). On 27 July 2007, the Group purchased Marathon Flight Services for an immediatecash consideration of $5.4 million (£2.6 million) and a deferred cashconsideration of $0.6 million (£0.3 million). On 29 September 2007, the Group purchased the assets of Carolina Air Centre, aFBO at Hilton Head, North Carolina for an immediate cash consideration of $16.7million (£8.2 million). On 7 November 2007, the Group purchased Regent Aviation Inc for an immediatecash consideration of $50.3 million (£24.5 million). 10. Retirement Obligations The retirement benefit obligation at 31 December 2007 is estimated based on thepreliminary results of latest actuarial valuation at 31 March 2007, withassumptions updated to reflect market conditions at 31 December 2007 whereappropriate. The defined benefit plan assets have been updated to reflect theirmarket value as at 31 December 2007 As at 31 December 2007 the update of the actuarial valuation of the UK Incomeand Protection Plan indicated a net surplus of £65.6 million. In accordance withIAS 19, IFRIC 14 and the Group's accounting policies, the actuarial gain hasbeen restricted and no asset has been recognised in the balance sheet , as anyeconomic benefit of recovery via refund or reduction in future contributions isnot sufficiently certain 11. Dividends Subject to shareholder approval, the final dividend will be paid on 23 May 2008to ordinary shareholders on the register at the close of business on 25 April2008. Shareholders are being offered the opportunity of buying additional sharesin lieu of a cash dividend under the existing BBA Dividend Re-investment Plan(DRIP). This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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