30th Aug 2007 07:01
BBA Aviation PLC30 August 2007 BBA Aviation plc 2007 Interim results Results for the half year ended 30th June 2007 INTERIM RESULTS FOR PERIOD ENDED 30TH JUNE 2007 Results in Brief - £m Constant exchange rates (6)Continuing operations H1 2007 H1 2006 H1 2006 Revenue 486.7 484.4 445.8Underlying Operating Profit (1) 53.2 50.4 45.7Underlying Operating Margin (1) 10.9% 10.4% 10.4%Operating Profit 71.0 47.7 43.0Profit Before Tax 61.2 35.7 32.9Earnings per Share (Adjusted) (2) 7.7p 5.4pEarnings per Share (Unadjusted) 11.6p 5.0pFree Cash Flow (3) 13.0 9.0Total GroupProfit /(Loss) for the period 47.6 (24.6)Interim Dividend (5) 2.25p 2.1pFree cash flow (4) (9.5) (9.4)Net Debt at 30th June 345.3 576.9 Group: • Sales increased by 9% at constant exchange rates driven by organic growth. • Underlying operating profit up 6% to £53.2m (2006: £50.4m) and up 16% at constant exchange rates. • Operating margins increased to 10.9% (2006: 10.4%). • Operating profit up 49% to £71.0m (2006: £47.7m). • Adjusted earnings per share of 7.7p (2006: 5.4p). Unadjusted 11.6p (2006: 5.0p). • Interim dividend 2.25p up 7% against rebased prior year following the demerger of Fiberweb. Flight Support: • Strong operational performance. • Acquisition of Executive Beechcraft for £37.5m completed in July 2007. • Signature's lease at San Francisco airport renewed for a further 10 years. • Network strengthened further with the addition of two new FBO locations in the USA. • Strong de-icing season for ASIG. Aftermarket Services and Systems: • Good demand across a wide range of engine programmes. • C27J Military cargo aircraft is expected to generate lifetime orders of c.$60m for landing gear systems. • Disposal of businesses at Oxford realised a total value of £77m with a profit on disposal of £38m. Commenting, Simon Pryce, BBA Aviation Chief Executive Officer, said: "This is another good set of results from our Aviation businesses and builds onthe improvements we saw in 2006. We continue to make positive, absolute progressagainst the prior year despite the adverse impact of a weaker dollar on ourreported earnings. Our underlying performance has been strong with our operatingprofits up by 16 per cent compared to the first half of 2006 at constantexchange rates. We have benefited from generally buoyant market conditions andcontinue to deliver operational improvements. We realised excellent value forour non-core business at Oxford and we have continued to invest to expandselectively our Signature network and to support new opportunities, contractwins and licence awards in all our businesses. Our markets remain strong and, assuming current growth rates and fuel volumesare broadly maintained, we expect to make good underlying progress for the yearas a whole." (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) Per (3) but for all operations. (5) Prior year interim dividend declared was 3.5p which was rebased followingthe demerger of Fiberweb to 2.1p. (6) Restated to average US Dollar rates used in the preparation of these results$1.98 (2005: 1.78). These definitions as outlined above are consistently applied throughout this preliminary announcement. 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 BBA Aviation plc - Interim Results, 30th August 2007 INTERIM RESULTS 2007 Revenue from continuing operations was broadly unchanged at £486.7m (2006:£484.4m) but on a constant currency basis was 9 per cent ahead of the priorperiod with all of the growth being organic. Underlying operating profitincreased 6 per cent to £53.2m (2006: £50.4m) and was 16 per cent higher atconstant exchange rates. A particularly strong performance from our FlightSupport businesses was the main driver behind a further improvement in operatingmargins, which increased to 10.9 per cent (2006: 10.4 per cent). Profit before tax increased by 71 per cent to £61.2m from £35.7m as a result ofthe increased operating profit, lower restructuring costs and the profit ondisposal of Oxford Aviation Training of £18.8m. Movements in exchange rates had a material impact on the comparison with theprior period. The average dollar rate for the half-year was $1.98 (2006 H1:$1.78). This weakening of the dollar reduced our underlying operating profits by£4.7m compared to the first half of 2006. Adjusted earnings per share were 7.7p (2006: 5.4p). 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 wasused in the calculation, adjusted earnings per share for the prior period wouldhave been 7.1p and the year on year increase 8 per cent. Further adjusting theprior period to reflect constant exchange rates adjusted earnings per sharewould have been 6.4p and the year on year increase 20 per cent. An interim dividend of 2.25p has been recommended by the Board (2006: 3.5p). Theinterim dividend in 2006 was prior to the rebasing of the dividend following thedemerger of Fiberweb. Assuming that Fiberweb had been demerged at the beginningof 2006 and BBA Aviation had been operating as an independent company from thattime the comparable rebased interim dividend for 2006 would have been 2.1p. In the prior period there was a significant after tax loss for discontinuedoperations of £48.9m. This included the results of Fiberweb, which was demergedin November, and Becorit, which was sold in December 2006. These results ofFiberweb in the prior period included the costs of the demerger, restructuringcharges and asset impairment adjustments associated with the demerger, asdisclosed in the information sent to shareholders prior to the demerger beingcompleted. Cash flow from operating activities of continuing operations was £45.8m,slightly lower than the prior period of £51.8m. Total cash flow from operatingactivities at £23.3m was lower than the prior period of £63.1m, largely due tothe payment of advisor costs (£10m) and additional pension costs (£12m) in early2007 associated with the demerger together with the loss of operating cashinflow from discontinued operations of £11.3m. Free cash inflow from continuing operations was £13.0m (2006: £9.0m). Assumingthat Fiberweb had been demerged on the 1st January 2006, free cash flow forcontinuing operations would have been approximately £13.3m for the first half of2006. The Group invested £2.9m during the period to acquire a business for APPH basedin Wichita that focuses on landing gear components for Business Aviationaircraft. The Group generated proceeds of £32.0m from the disposal of OxfordAviation Training and retained a further £5m of cash associated with thisbusiness. Subsequent to the end of the first half the Group acquired ExecutiveBeechcraft for £37.5m, disposed of Oxford Airport for £40.0m and acquired twomore FBO's in the USA for £11.1m. Net debt was £345.3m, slightly lower than at the end of 2006 (£356.9m). Net debtto EBITDA was 2.5 times. Business Review Flight Support Flight Support showed good progress overall. At constant exchange rates, salesof £281.9m were 8 per cent higher and underlying operating profits of £36.0mwere 17 per cent higher than the prior period assisted by strong volume growthat Signature and a good de-icing season at ASIG. Organic sales growth was 8 percent. Operating margins also improved to 12.8 per cent (2006: 11.9 per cent). On a reported basis sales were broadly unchanged at £281.9m (2006: £284.5m) andunderlying operating profits of £36.0m were 6 per cent improved on the priorperiod (2006: £33.9m). The division generated operating cash flow of £17.5m(2006: £8.5m). Signature Revenue at the half year increased to £185.5m, an 11 per cent improvement over2006 at constant exchange rates. Changes in fuel prices had a minimal impact onthe comparison with the prior period and all of the increase in sales related toorganic growth in both the USA and the Rest of the World. We continued to seegood growth in fuel volumes from fractional operators with increases of morethan 20 per cent in the first six months of the year. Our traditional(non-fractional) business grew by 2 per cent during the period. We have successfully retained our lease at San Francisco International Airportfollowing a competitive tender process earlier in the year. San Francisco is animportant asset in the Signature Network and the new lease will produce anattractive financial return over the next ten years. As part of the new leaseand operating agreement Signature will invest approximately $15m (mostly in2008) to upgrade and modernise the existing terminal and hangar facilities andbuild a new hangar to accommodate growing customer demand. Since the half year we have acquired two additional FBO's for the Signaturenetwork, Marathon Flight Services at Kissimmee (Orlando) and Carolina Air Centreat Hilton Head (South Carolina) for a combined consideration of £11.1m. TheHilton Head acquisition is subject to final approval by the airport authority.Together these will add approximately £6m of sales per annum once they have beenfully integrated. The previously announced acquisition of Executive Beechcraft Inc. (EB) for£37.5m was completed in July and the integration process is fully underway. Inthe year to 31st December 2006 EB had sales of £32m. The company operates fourfull service FBOs in Kansas and Missouri and each location benefits from longlease terms. In addition to providing a full range of FBO services EB is anauthorised independent dealer and service centre for Hawker Beechcraft (formerlyRaytheon Aircraft Company) for piston, King Air and Hawker 400 aircraft. In total BBA Aviation now has 74 wholly owned FBO locations worldwide of which53 are in the USA covering 41 of the top 50 US Metro Areas, 17 of the top 30U.S. hub airports and 24 of the reported top 50 fractional operations airports.In addition Signature has an interest in 14 other FBO operations in Hong Kongand Brazil. In Europe, Signature won a new multi-year agreement from NetJets Europe namingit the preferred handler at a number of strategic locations. Signature alsocontinued to expand its FBO and hangar facilities to meet growing demandthroughout Europe, and recently commenced a £2m renovation of a hangar facilityat Le Bourget airport in Paris. ASIG Revenue in the half year was £96.4m, an increase of 4 per cent at constantexchange rates. This growth arose from the improved levels of de-icing activityand significant growth in new business which is more than offsetting the loss ofless attractive contracts as we continue to improve the overall quality of thebusiness that we undertake. In addition efforts to reduce costs and exit fromuneconomic locations in 2006 have resulted in a significantly improved profitperformance in the first half of the current year. ASIG continued to be successful in expanding its existing customer relationshipsand adding new contracts, including a major fuelling agreement with UnitedAirlines at its three US hub operations. The commercial aviation services market remains price sensitive and competitive.However we expect further consolidation in the industry, which will continue todrive outsourcing opportunities in the higher skill and higher margin areas,which ASIG is ideally positioned to exploit. Aftermarket Services and Systems Our Aviation Services and Systems businesses have continued to improve followingthe focused initiatives implemented in 2006. On a constant currency basis salesat £204.8m were 10 per cent higher and underlying operating profits of £21.9mwere 12 per cent higher than the prior period assisted by a further improvementin engine repair and overhaul, and a strong performance by Ontic which togethermore than offset lower demand in the parts distribution businesses. Organicsales growth was 12 per cent. Operating margins were slightly improved at 10.7per cent (2006: 10.6 per cent). On an as reported basis, sales at £204.8m (2006:£199.9m) and underlying operating profits at £21.9m (2006: £21.2m) were bothsome 3 per cent higher. The division generated operating cash flow of £9.4m(2006: £16.8m) and it is anticipated that this cash flow will improve during thesecond half as a build up of inventory in the first half is unwound. Engine Repair and Overhaul Sales in the first half of 2007 were £135.9m, a 10 per cent increase over theprior period at constant exchange rates, all of which was organic. The growthreflected strong demand across a wide range of engine programmes with PW300/500and RR Tay particularly buoyant. We grew our market share in the HoneywellTFE731 and despite soft market conditions managed to increase our revenue onthis engine programme. Good order intake performance resulted in a significantgrowth in the orderbook during the first six months of the year. The ongoing initiative to increase productivity, which we started in 2006,continues to have a positive impact on the results and the business deliveredimprovements in turn time, labour utilisation and quality. The recently launchedcapability for PW300/500 services yielded significant growth and the demand forfield service and 'on-wing' inspections has also increased during the first halfof the year. We have expanded our field service capability and this has resultedin deeper market penetration producing more engine overhaul events. The support of PW JT15D engines has commenced in Europe, which should alsogenerate more business from the Far East as we are now in a better position tosupport this market. Component Repair and Overhaul (CRO) Total revenue grew to £23.0m, an increase of 12 per cent over the first half of2006 at constant exchange rates. All of the revenue increase can be attributedto the acquisition of Ontic, which was acquired at the end of February 2006. Ontic continues to perform above our expectations and is addressing a number ofnew licencing opportunities which we anticipate will generate significantrevenue growth over the next three years. New product development for a numberof large commercial aircraft and military transports and fighters will stretchthe capacity of OEMs to support customers' needs in the aftermarket which shouldresult in an increasing need to outsource non-core or legacy products. Ontic'sknowledge and experience of the issues and support needs of legacy products andtheir proven ability to deliver the material and services necessary to supportthe large operational fleets that utilise this equipment should result insignificant growth opportunities for Ontic and BBA Aviation. Our parts distribution businesses have experienced lower demand forreconditioned engines and more competitive market conditions for serviceableparts on a number of specific engine programmes. We expect that this willcontinue in the second half of the year. International Governor Services (IGS) obtained AWARS (Authorised Warranty andRepair Station) status at the end of 2006 and has seen good demand for componentrepairs in the first half of the year. Landing Gear and Hydraulics Sales for the APPH group of companies were £30.6m, some 13 per cent higher thanthe first half of 2006. The acquisition of Commercial Aircraft Products LLC(CAP) at the start of the year generated 4 percentage points of the increasewhich was partially offset by an adverse transactional exchange rate exposureleaving organic growth of 12 per cent. Overall, the APPH group is performingahead of our expectations. APPH will benefit from the recently announced order from the US Military for theFinnmeccanica C27J Joint Cargo Aircraft, for which APPH, in conjunction with itsItalian partner Magnaghi, is responsible for the supply of the landing gearsystems. This programme is expected to generate circa $60m of revenue for APPHfor the supply of original equipment and logistical support over the next 10years. This significant success follows the order for the Eurocopter EC175landing gear system received in December which could be worth up to $100m overthe next 20 years. 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 is on schedule to becompleted in September. The markets in which APPH operates are strong and with the continued growth ofits order book during the first half of 2007, APPH is well positioned for thesecond half of the year. Oxford Oxford Aviation Training (OAT) On 19 June we announced that we had sold OAT to GCAT Flight Academy for £32m incash and in addition we retained cash of £5m as part of the transaction. Theprofit on the disposal of the business was £18.8m and there was a related taxcharge of £1.8m. In the period prior to its disposal the business producedoperating profit of £1.8m (2006: £0.5m). Oxford Airport On 20 July we announced that we had sold Oxford Airport for £40m. The profit onthe disposal is expected to be in the region of £19m and there is not expectedto be any tax payable as a result of the transaction. As anticipated, prior tothe completion of the sale we spent £5.5m to widen and strengthen the runway andinstall an Instrument Landing System. The disposal of both Oxford assets realised a total value of £77m, which will bereinvested in our core Flight Support and Aftermarket Services and Systemsdivisions. Other Financial Information The impact of share based payments for continuing operations during the firsthalf of the year was to reduce profits by £0.8m compared to a credit of £1.9m inthe first half of 2006. The credit in the prior period was caused by a reductionin the company's share price at the start of the year prior to an award vestingin March 2006. The net interest charge was £9.8m (2006: £12.0m) with the impact of higher USinterest rates being more than offset by the reduction in borrowings as a resultof the debt transfer to Fiberweb on demerger. Interest cover was 5.4 times(2006: 4.2 times). On an adjusted basis, assuming that Fiberweb had beendemerged on 1 January 2006, interest costs for the first half of 2006 would havebeen approximately £8.3m and interest cover 6.1 times. The normalised tax rate for continuing operations was 27.2 per cent (2006: 31.8per cent). The current year rate has benefited from the release of a provision(£2.3m) relating to a potential tax exposure, which has been satisfactorilyresolved. Excluding the impact of the provision release the underlying tax ratefor continuing operations would have been 32.5 per cent. For the year as a wholewe anticipate a similar tax rate of circa 27 per cent. Gross capital expenditure for continuing operations was £21.8m (2006: £23.3m)and represents 1.5 times depreciation (2006: 1.4 times). This figure includesthe continued investment in facilities at Signature (£5m) and the installationof the Integrated Landing System at Oxford Airport (£5.5m) prior to itsdisposal. For the year as a whole we continue to anticipate capital expenditureof circa £45m. Board Simon Pryce joined the Board as Group Chief Executive on 11 June and MichaelHarper has assumed the role of Non-Executive Chairman. Outlook Our markets remain strong and, assuming current growth rates and fuel volumesare broadly maintained, we expect to make good underlying progress for the yearas a whole. Simon Pryce, Group Chief Executive30th August 2007 Consolidated Income Statement (Unaudited) Underlying* Note i First half Underlying* 2007 Notes £m £m £m £m----------------------------- ----- ------- ------ ------- ------- Continuing operationsRevenue 1 486.7 - 486.7 484.4Cost of sales (386.6) - (386.6) (392.9)----------------------------- ----- ------- ------ ------- -------Gross profit 100.1 - 100.1 91.5 Distribution costs (9.4) - (9.4) (9.5)Administrative expenses (37.7) (0.2) (37.9) (31.9)Other operating income 0.2 - 0.2 0.8Share of results of associates 0.3 - 0.3 -Other operating expenses (0.3) - (0.3) (0.5)Restructuring costs - (0.8) (0.8) -Gain on disposal of businesses - 18.8 18.8 ------------------------------ ----- ------- ------ ------- -------Operating profit/(loss) from continuing operations 1 53.2 17.8 71.0 50.4 Investment income 19.5 - 19.5 19.9Finance costs (29.3) - (29.3) (31.9)----------------------------- ----- ------- ------ ------- -------Profit/(loss) before tax 43.4 17.8 61.2 38.4 Tax 4 (11.8) (1.8) (13.6) (12.2)----------------------------- ----- ------- ------ ------- -------Profit/(loss) for the period from continuing operations 31.6 16.0 47.6 26.2 Profit/(loss) after tax from discontinued operations - - - 9.3Profit on disposal after tax - - - ------------------------------ ----- ------- ------ ------- -------Profit/(loss) for the period 31.6 16.0 47.6 35.5----------------------------- ----- ------- ------ ------- ------- Attributable to:Equity shareholders ofBBA Group plc 31.7 16.0 47.7 35.5Minority interests (0.1) - (0.1) ------------------------------ ----- ------- ------ ------- ------- 31.6 16.0 47.6 35.5----------------------------- ----- ------- ------ ------- ------- Note i First half Underlying* Note i Full year 2006 2006 Notes £m £m £m £m £m---------------------- ----- ------ ------- ------- ------ -------Continuing operationsRevenue 1 - 484.4 950.1 - 950.1Cost of sales - (392.9) (767.4) - (767.4)---------------------- ----- ------ ------- ------- ------ -------Gross profit - 91.5 182.7 - 182.7 Distribution costs - (9.5) (18.8) - (18.8)Administrativeexpenses (0.1) (32.0) (64.7) (0.6) (65.3)Other operatingincome - 0.8 3.5 - 3.5Share of resultsof associates - - 0.4 - 0.4Other operatingexpenses - (0.5) (0.3) - (0.3)Restructuringcosts (2.6) (2.6) - (7.4) (7.4)Gain on disposal of - - - - -businesses ---------------------- ----- ------ ------- ------- ------ -------Operating profit/(loss) from continuingoperations 1 (2.7) 47.7 102.8 (8.0) 94.8 Investment income - 19.9 43.5 - 43.5Finance costs - (31.9) (68.1) - (68.1)---------------------- ----- ------ ------- ------- ------ -------Profit/(loss)before tax (2.7) 35.7 78.2 (8.0) 70.2 Tax 4 0.8 (11.4) (23.4) 2.7 (20.7)---------------------- ----- ------ ------- ------- ------ -------Profit/(loss) for the period from continuingoperations (1.9) 24.3 54.8 (5.3) 49.5 Profit/(loss) after tax from discontinuedoperations (58.2) (48.9) 16.7 (92.9) (76.2)Profit on disposalafter tax - - - 16.5 16.5---------------------- ----- ------ ------- ------- ------ -------Profit/(loss) for the period (60.1) (24.6) 71.5 (81.7) (10.2)---------------------- ----- ------ ------- ------- ------ ------- Attributable to:Equity shareholders ofBBA Group plc (60.1) (24.6) 71.4 (81.7) (10.3)Minority interests - - 0.1 - 0.1---------------------- ----- ------ ------- ------- ------ ------- (60.1) (24.6) 71.5 (81.7) (10.2)---------------------- ----- ------ ------- ------- ------ ------- * Before items described in Note i below Note i: Restructuring costs and amortisation of acquired intangibles net of gainon disposal of businesses as set out in note 3 to the financial statements The consolidated income statement has been prepared in accordance with theaccounting policies set out in note 2 Earnings per share From continuing and discontinuedoperationsBasic 7 11.6p (5.0p) (2.2p)Diluted 7 11.6p (5.0p) (2.1p) From continuing operationsBasic 7 11.6p 5.0p 10.3pDiluted 7 11.6p 5.0p 10.3p-------------- ----- -------- ----------- ----------- Consolidated Balance Sheet (Unaudited) 30 June 30 June 31 Dec 2007 2006 2006 Notes £m £m £m--------------------------------------- ----- -------- -------- --------Non-current assetsIntangible assets: Goodwill 298.9 422.1 314.1 Licences & other 20.2 29.9 20.9Property, plant and equipment 291.6 693.4 316.4Interests in associates 9.8 18.1 8.8Trade and other receivables 23.5 16.5 28.8--------------------------------------- ----- -------- -------- -------- 644.0 1,180.0 689.0--------------------------------------- ----- -------- -------- --------Current assetsInventories 137.9 222.7 131.3Trade and other receivables 181.9 279.3 171.8Cash and cash equivalents 150.2 128.0 156.5Tax recoverable 0.1 - 0.1Assets held for sale 20.1 - ---------------------------------------- ----- -------- -------- -------- 490.2 630.0 459.7--------------------------------------- ----- -------- -------- --------Total assets 1 1,134.2 1,810.0 1,148.7--------------------------------------- ----- -------- -------- --------Current liabilitiesTrade and other payables (162.4) (238.0) (185.5)Tax liabilities (47.1) (50.7) (43.0)Obligations under finance leases (0.5) (3.3) (1.0)Bank overdrafts and loans (37.0) (38.6) (27.6)Provisions (2.2) (3.6) (3.4)Liabilities directly associatedwith assets classified as held forsale (5.4) - ---------------------------------------- ----- -------- -------- -------- (254.6) (334.2) (260.5)--------------------------------------- ----- -------- -------- --------Net current assets 235.6 295.8 199.2--------------------------------------- ----- -------- -------- -------- Non-current liabilitiesBank loans (453.6) (623.8) (470.7)Other payables due after one year (9.2) (18.7) (7.9)Retirement benefit obligations (7.3) (45.9) (21.1)Obligations under finance leases (25.0) (35.5) (27.5)Deferred tax liabilties (17.6) (47.4) (15.7)Provisions (21.5) (30.7) (22.8)--------------------------------------- ----- -------- -------- -------- (534.2) (802.0) (565.7)--------------------------------------- ----- -------- -------- --------Total liabilities 1 (788.8) (1,136.2) (826.2)--------------------------------------- ----- -------- -------- -------- Net assets 345.4 673.8 322.5======================================= ===== ======== ======== ======== EquityShare capital 122.7 122.4 122.5Share premium account 346.4 344.1 345.1Other reserves 3.9 3.9 3.9Treasury shares (0.6) (0.6) (1.4)Capital reserve 16.2 16.1 15.5Hedging and translation reserves (30.2) (9.6) (27.7)Retained earnings (113.7) 196.7 (136.2)--------------------------------------- ----- -------- -------- --------Equity attributable to shareholdersof BBA Aviation plc 344.7 673.0 321.7Minority interests 0.7 0.8 0.8--------------------------------------- ----- -------- -------- -------- Total equity 345.4 673.8 322.5======================================= ===== ======== ======== ======== Consolidated Cash Flow Statement (Unaudited) Notes First half First half Full year 2007 2006 2006 £m £m £m----------------------------------- ----- -------- -------- --------Operating activitiesNet cash flow from operatingactivities 8 23.3 63.1 118.8 Investing activitiesDividends received fromassociates - - 0.3Purchase of property, plant andequipment (20.1) (52.9) (90.7)Purchase of intangible assets (1.7) (0.4) (1.1)Proceeds from disposal ofproperty, plant and equipment 2.2 1.3 5.9Acquisition of subsidiaries (2.9) (48.2) (52.7)Proceeds from disposal ofsubsidiaries and associates 32.0 - 27.8Deferred consideration paid fromprior year activities (0.3) (0.7) (1.5)Reduction in cash and cashequivalents on demerger - - (37.5)----------------------------------- ----- -------- -------- --------Net cash inflow/(outflow) frominvesting activities 9.2 (100.9) (149.5)----------------------------------- ----- -------- -------- --------Financing activitiesInterest received 15.2 19.9 41.9Interest paid (27.6) (39.5) (69.9)Interest element of financeleases paid (0.8) (0.9) (2.1)Dividends paid (20.6) (40.6) (57.7)Proceeds from issue of ordinaryshares 1.5 4.7 5.8Purchase of own shares - - (0.9)(Decrease)/increase in loans (7.2) 56.3 121.3Decrease in finance leases (2.3) (1.5) (3.1)Increase/(decrease) inoverdrafts 9.1 (0.4) (3.8)Decrease in other liquid assets - - 3.0----------------------------------- ----- -------- -------- --------Net cash outflow from financingactivities (32.7) (2.0) 34.5----------------------------------- ----- -------- -------- --------(Decrease)/increase in cash andcash equivalents (0.2) (39.8) 3.8Cash and cash equivalents atbeginning of year 156.5 174.9 174.9Exchange adjustments (6.1) (7.1) (22.2)----------------------------------- ----- -------- -------- --------Cash and cash equivalents at endof year 150.2 128.0 156.5----------------------------------- ----- -------- -------- --------Net debt at beginning of year (356.9) (527.1) (527.1)(Decrease)/increase in cashequivalents (0.2) (39.8) 3.8Decrease/(increase) in loans 7.2 (56.3) (121.3)Decrease in finance leases 2.3 1.5 3.1(Increase)/decrease in overdrafts (9.1) 0.4 3.8Decrease in other liquid assets - - (3.0)Bank loans disposed of on disposal/demerger of subsidiaries - - 209.6Bank loans acquired - (3.0) (2.9)Exchange adjustments 11.4 47.4 77.1----------------------------------- ----- -------- -------- --------Net debt at end of year (345.3) (576.9) (356.9)----------------------------------- ----- -------- -------- -------- Consolidated Statement of Recognised Income and Expense (Unaudited) First half First half Full year 2007 2006 2006 £m £m £m-------------------------------------------- -------- -------- --------Exchange difference on translation of foreignoperations (16.2) (68.3) (119.5)Gains on net asset hedges 13.7 50.7 82.9Exchange differences recycled on disposal ofsubsidiaries - - 4.4Fair value movements in foreign exchange cash flow hedges 1.0 2.6 4.1Fair value movements in interest rate cash flow hedges 1.4 4.6 2.2Fair value movements in commodity contract cash flow hedges - (0.5) (0.6)Actuarial gains/(losses) on defined benefit pension schemes (4.8) 7.7 (5.6)Tax on items recognised directly in equity - (2.4) 0.3-------------------------------------------- -------- -------- --------Net expense recognised directly in equity (4.9) (5.6) (31.8)-------------------------------------------- -------- -------- --------Transfer to profit or loss from equity on foreign exchange cash flow hedges (1.4) (0.5) (2.0)Transfer to profit or loss from equity on interest rate cash flow hedges (0.9) (0.4) (1.7)Transfer to profit or loss from equity on commodity contract cash flow hedges - 3.9 4.0Tax on items transferred to profit or loss from equity - - -Profit/(loss) for the period 47.6 (24.6) (10.2)-------------------------------------------- -------- -------- -------- Total recognised income andexpense for the period 40.4 (27.2) (41.7)-------------------------------------------- -------- -------- -------- Attributable to:Equity shareholders of the parent 40.5 (27.2) (41.8)Minority interests (0.1) - 0.1-------------------------------------------- -------- -------- -------- 40.4 (27.2) (41.7)-------------------------------------------- -------- -------- -------- Reconciliation of Movements in Total Shareholders' Equity (Unaudited) First half First half Full year 2007 2006 2006 £m £m £m-------------------------------------------- -------- -------- --------Total recognised income andexpense for the period 40.4 (27.2) (41.7)Equity dividends paid (20.6) (40.6) (57.7)Dividend in specie - - (320.0)Credit to equity for equitysettled share based payments 0.9 0.3 0.4Movement in minority interests (0.1) 0.5 0.4Movement on treasury shares 0.8 - (0.8)Issue of shares 1.5 4.7 5.8-------------------------------------------- -------- -------- --------Net movement in total shareholders' equity for the period 22.9 (62.3) (413.6)Total shareholders' equity at the beginning of the period 322.5 736.1 736.1-------------------------------------------- -------- -------- --------Total shareholders' equity at the end of the period 345.4 673.8 322.5-------------------------------------------- -------- -------- -------- Notes to the Consolidated Financial Statements (Unaudited) 1. Segmental information Aftermarket Flight Services & Total Unallocated Total Support Systems Aviation Corporate ContinuingBusiness Segments £m £m £m £m £m---------------------- --------- -------- -------- --------- ---------First half 2007External Revenue 281.9 204.8 486.7 - 486.7 Underlying operatingprofit 36.0 21.9 57.9 (4.7) 53.2Restructuring costs and amortisationof acquired intangiblesnet of gains on disposal of businesses (0.4) (0.6) (1.0) 18.8 17.8---------------------- --------- -------- -------- --------- ---------Segment result fromcontinuing operations* 35.6 21.3 56.9 14.1 71.0---------------------- --------- -------- -------- --------- --------- Underlying operatingmargin (%) 12.8% 10.7% 11.9% - 10.9%---------------------- --------- -------- -------- --------- --------- Capital additions 8.3 13.4 21.7 0.1 21.8Depreciation andamortisation 9.5 5.3 14.8 0.1 14.9---------------------- --------- -------- -------- --------- --------- Assets 504.5 426.7 931.2 203.0 1,134.2Liabilities (72.3) (57.4) (129.7) (659.1) (788.8)---------------------- --------- -------- -------- --------- ---------*Segment result includes £0.3m profit of associates within Flight Support. First half 2006External Revenue 284.5 199.9 484.4 - 484.4 Underlying operating profit 33.9 21.2 55.1 (4.7) 50.4 Restructuring costs andamortisation of acquiredintangibles net of gains ondisposal of businesses (2.4) (0.3) (2.7) - (2.7)---------------------- --------- -------- -------- --------- ---------Segment result fromcontinuing operations* 31.5 20.9 52.4 (4.7) 47.7---------------------- --------- -------- -------- --------- ---------Underlying operating margin (%) 11.9% 10.6% 11.4% - 10.4%---------------------- --------- -------- -------- --------- ---------Capital additions 12.9 9.1 22.0 0.1 22.1Depreciation and amortisation 9.5 6.5 16.0 0.1 16.1---------------------- --------- -------- -------- --------- --------- Assets 546.4 435.9 982.3 136.6 1,118.9Liabilities (118.8) (68.2) (187.0) (770.9) (957.9)---------------------- --------- -------- -------- --------- ---------*Segment result includes £0.1m profit of associates within Flight Support. Full year 2006External Revenue 556.4 393.7 950.1 - 950.1 Underlying operating profit 65.5 44.6 110.1 (7.3) 102.8Restructuring costs andamortisation of acquiredintangibles net of gains ondisposal of businesses (2.2) (3.5) (5.7) (2.3) (8.0)---------------------- --------- -------- -------- --------- ---------Segment result fromcontinuing operations* 63.3 41.1 104.4 (9.6) 94.8---------------------- --------- -------- -------- --------- ---------Underlying operating margin (%) 11.8% 11.3% 11.6% - 10.8%---------------------- --------- -------- -------- --------- ---------Capital additions 29.4 17.4 46.8 0.2 47.0Depreciation and amortisation 19.1 12.4 31.5 0.2 31.7---------------------- --------- -------- -------- --------- --------- Assets 503.6 428.5 932.1 216.6 1,148.7Liabilities (82.5) (56.6) (139.1) (687.1) (826.2)---------------------- --------- -------- -------- --------- ---------*Segment result includes £0.4m profit of associates within Flight Support Revenue from continuing operations Capital By destination By origin additions AssetsGeographical Segments £m £m £m £m------------------- ----------- -------- -------- ----------First half 2007United Kingdom 71.1 101.6 8.9 330.9Mainland Europe 29.9 10.0 0.8 34.0North America 361.9 373.4 12.1 753.0Rest of World 23.8 1.7 - 16.3------------------- ----------- -------- -------- ----------Total 486. 7 486.7 21.8 1,134.2------------------- ----------- -------- -------- ---------- First half 2006United Kingdom 65.3 100.0 6.8 291.2Mainland Europe 30.1 8.9 3.0 29.4North America 361.6 373.7 11.4 781.6Rest of World 27.4 1.8 0.9 16.6------------------- ----------- -------- -------- ----------Total 484.4 484.4 22.1 1,118.8------------------- ----------- -------- -------- ---------- Full year 2006United Kingdom 135.0 197.3 13.4 347.9Mainland Europe 66.5 21.5 3.9 35.1North America 698.9 727.6 27.8 749.4Rest of World 49.7 3.7 1.9 16.3------------------- ----------- -------- -------- ----------Total 950.1 950.1 47.0 1,148.7------------------- ----------- -------- -------- ---------- 2. Basis of Preparation and Accounting Policies The financial information set out above does not constitute the Company'sstatutory financial statements for 2007 or 2006 under section 240 of theCompanies Act 1985. The figures for the full year 2006 are an abridged versionof the financial statements for that year. Those accounts, together with anunqualified audit report, have been filed with the Registrar of Companies anddid not contain a report under section 235 of the Companies Act 1985. In thesecond half of 2006, BBA completed the demerger of Fiberweb and the sale ofBecorit, both of which were classified as discontinued operations. This requiredthe re-presentation of the financial information included in this report for theperiod ended 30 June 2006. The unaudited interim results for the six months ended 30 June 2007 have beenprepared in accordance with the Group's accounting policies under InternationalFinancial Reporting Standards. Except as noted above the same accountingpolicies and methods of computation are followed in the annual financialstatements, as published by the company on 26 February 2007, which are availableon the Company's website, www.bbaaviation.com. The interim results do notinclude all of the information and disclosures required in the annual financialstatements, and should be read in conjunction with the Group's annual financialstatements as at 31 December 2006. 3. Restructuring costs and amoritisation of acquired intangibles net of gains ondisposal of businesses Restructuring costs and amortisation of acquired intangibles net of gains ondisposal of businesses included within operating profit from continuingoperations amounted to a credit of £17.8 million (First half 2006: charge £2.7million). The main items included within this are: First half 2007: Administrative expenses of £0.2 million relating toamortisation of intangible assets acquired and valued in accordance with IFRS 3;restructuring costs of £0.8 million relating to a small number of aviationrestructuring initiatives, and; a gain on the disposal of Oxford AviationTraining of £18.8 million. First half 2006: Administrative expenses of £0.1 million relating toamortisation of intangible assets acquired and valued in accordance with IFRS 3,and; restructuring costs of £2.6 million relating to a small number of aviationrestructuring initiatives. Net of tax, restructuring costs and non-recurring items included withindiscontinued operations amounted to £nil (First half 2006: £58.2 million). Thecosts in 2006 primarily related to impairment charges for a number of Fiberwebwipes lines; line impairment charges, severance costs and other closure costsassociated with the rationalisation of Fiberweb North America Hygiene; and, thecosts of the demerger of Fiberweb. 4. Taxation First half First half Full year 2007 2006 2006 £m £m £m---------------------------------------- ------- ------- ------ Current and deferred tax : Corporate income tax 11.2 9.1 10.8 Deferred tax 2.4 (20.5) 9.9---------------------------------------- ------- ------- ------ Total tax charge/(credit) (continuing) 13.6 (11.4) 20.7---------------------------------------- ------- ------- ------ Current and deferred tax : UK 2.1 (2.5) 4.5 Overseas 11.5 (8.9) 16.2---------------------------------------- ------- ------- ------ Total tax charge/(credit) (continuing) 13.6 (11.4) 20.7---------------------------------------- ------- ------- ------ Corporation tax for the interim period is charged at an effective rate of 27% onunderlying profit before tax (First Half 2006: 32%; Full Year 2006: 30%),representing the best estimate of the weighted average annual corporation taxexpected for the full financial year. 5. 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 control of Oxford Aviation Trainingpassed to the acquirer. Post Balance Sheet Date Events On 19 July 2007, the Group entered into a sale agreement to dispose of OxfordAirport for a consideration of £40.0 million. The disposal was completed on 19July 2007, on which date control of Oxford Airport passed to the acquirer. In total, Oxford Aviation Training and Oxford Airport contributed £2.0 millionto operating profit in the first half of 2007. On 19 July 2007, the Group purchased Executive Beechcraft, Inc for an immediatecash consideration of $73.1 million (£36.0 million) and a deferred cashconsideration of $3.0m (£1.5 million) On 27 July 2007, the Group acquired Marathon Flight Services for an immediatecash consideration of $5.8 million (£2.9 million). 6. Dividends The 2007 interim dividend of 2.25 pence per share (2006: 3.5 pence per share)was approved by the Board of Directors on 29 August 2007 and will be paid on 2November 2007 to ordinary shareholders registered on 14 September 2007. Thisinterim dividend has not been included as a liability as at 30 June 2007. Adjusted earnings per share is shown calculated on earnings before restructuringcosts and amortisation of acquired intangibles net of gains on disposal ofbusinesses because the directors consider that this gives a better indication ofunderlying performance. 7. Earnings per Share Continuing Continuing and operations discontinued operations Earnings First half First half Full year First half First half Full year 2007 2006 2006 2007 2006 2006 £m £m £m £m £m £m------------------------------------------------- ------- ------- ------- ------- ------- -------Basic: EarningsProfit/(loss) for the period 47.6 24.3 49.5 47.6 (24.6) (10.2)Minority interests 0.1 - (0.1) 0.1 - (0.1)------------------------------------------------- ------- ------- ------- ------- ------- -------Basic earnings attributable to ordinaryshareholders 47.7 24.3 49.4 47.7 (24.6) (10.3)Restructuring costs and amortisation of acquiredintangibles net of gain on disposals after tax (16.0) 1.9 5.3 (16.0) 60.1 98.2Profit after tax on disposal (discontinuedoperations) - - - - - (16.5)------------------------------------------------- ------- ------- ------- ------- ------- -------Adjusted earnings 31.7 26.2 54.7 31.7 35.5 71.4------------------------------------------------- ------- ------- ------- ------- ------- ------- Diluted: EarningsBasic earnings attributable to ordinaryshareholders 47.7 24.3 49.4 47.7 (24.6) (10.3)------------------------------------------------- ------- ------- ------- ------- ------- -------Diluted earnings attributable to ordinaryshareholders 47.7 24.3 49.4 47.7 (24.6) (10.3)Restructuring costs and amortisationof acquired intangibles net of gain on disposalsafter tax (16.0) 1.9 5.3 (16.0) 60.1 98.2Profit after tax on disposal (discontinuedoperations) - - - - - (16.5)------------------------------------------------- ------- ------- ------- ------- ------- -------Adjusted diluted earnings 31.7 26.2 54.7 31.7 35.5 71.4------------------------------------------------- ------- ------- ------- ------- ------- ------- Number of sharesWeighted average number of 25p ordinary shares:For basic earnings per share 411.3 487.2 478.4 411.3 487.2 478.4Exercise of share options 1.2 2.9 2.2 1.2 2.9 2.2------------------------------------------------- ------- ------- ------- ------- ------- -------For diluted earnings per share 412.5 490.1 480.6 412.5 490.1 480.6------------------------------------------------- ------- ------- ------- ------- ------- ------- Earnings per shareBasic:Adjusted 7.7p 5.4p 11.4p 7.7p 7.3p 14.9pUnadjusted 11.6p 5.0p 10.3p 11.6p (5.0p) (2.2p) Diluted:Adjusted 7.7p 5.3p 11.4p 7.7p 7.2p 14.9pUnadjusted 11.6p 5.0p 10.3p 11.6p (5.0p) (2.1p) Adjusted earnings per share is shown calculated on earnings before restructuringcosts and non recurring items because the directors consider that this gives abetter indication of underlying performance. 8. CASH FLOW FROM OPERATING ACTIVITIES First First Full half half year 2007 2006 2006 £m £m £m---------------------------------------------------- --------- -------- -------- Operating profit from continuing operations 71.0 47.7 94.8Operating loss from discontinued operations - (68.1) (97.9)Share of profit from associates (0.3) (0.4) (0.8)---------------------------------------------------- --------- -------- -------- Profit/(loss) from operations 70.7 (20.8) (3.9)Depreciation of property, plant & equipment 13.3 34.8 62.4Amortisation of intangible assets 1.6 2.2 4.3Loss/(profit) on sale of property, plant & equipment 0.4 (0.3) (1.4)Share based payment expense 0.8 - -(Decrease)/increase in provisions (2.4) 2.4 1.5Pension scheme payments (16.2) (7.9) (14.3)Non-cash impairments - 61.2 70.5Gain on disposal of businesses (18.8) - - ---------------------------------------------------- --------- -------- -------- Operating cashflows before movements in working capital 49.4 71.6 119.1(Increase)/decrease in working capital (19.4) (5.4) 9.2---------------------------------------------------- --------- -------- -------- Cash generated by operations 30.0 66.2 128.3Income taxes paid (6.7) (3.1) (9.5)---------------------------------------------------- --------- -------- -------- Net cash flow from operating activities 23.3 63.1 118.8---------------------------------------------------- --------- -------- -------- Analysed as:Net cash flow for continuing operations 45.8 51.8 122.1Net cash flow for discontinued operations (22.5) 11.3 (3.3)---------------------------------------------------- --------- -------- -------- 23.3 63.1 118.8---------------------------------------------------- --------- -------- -------- Dividends received from associates - - 0.3Purchase of property, plant and equipment (20.1) (52.9) (90.7)Purchase of intangible assets (1.7) (0.4) (1.1)Proceeds from disposal of property, plant and equipment 2.2 1.3 5.9Interest received 15.2 19.9 41.9Interest paid (27.6) (39.5) (69.9)Interest element of finance leases paid (0.8) (0.9) (2.1)---------------------------------------------------- --------- -------- -------- Free cashflow (9.5) (9.4) 3.1---------------------------------------------------- --------- -------- -------- Analysed as:Free cash flow for continuing operations 13.0 9.0 48.1Free cash flow for discontinued operations (22.5) (18.4) (45.0)---------------------------------------------------- --------- -------- -------- (9.5) (9.4) 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. 9. RETIREMENT OBLIGATIONS The defined benefit obligation at 30 June 2007 is estimated based on the latestactuarial valuation at 31 March 2004, with assumptions updated to reflect marketconditions at 30 June 2007 where appropriate. The defined benefit plan assetshave been updated to reflect their market value as at 30 June 2007. As at 30 June 2007 the update of the actuarial valuation of the UK Income andProtection Plan indicates a net surplus of £19.8 million. In accordance with IAS19, IFRIC 14 and the Group's accounting policies, the actuarial gain has beenrestricted 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. 10. FINANCIAL CALENDAR The preliminary announcement of results for the year ending 31 December 2007will be made in late February 2008. Independent Review Report to BBA Aviation plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises the income statement, balancesheet, cash flow statement, statement of total recognised income and expenses,reconciliation of movements in total shareholders' equity and related notes 1 to10. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' Responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review Work Performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered AccountantsLondon 29 August 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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