TIDMBBA
RNS Number : 1092V
BBA Aviation PLC
05 August 2015
BBA Aviation plc
2015 Interim Financial Report
Results for the half year ended
30 June 2015
For further information please contact:
Mike Powell, Group Finance Director (020) 7514 3999
Jemma Spalton, Head of Communications & Investor
Relations
BBA AVIATION PLC
David Allchurch / Martha Walsh (020) 7353 4200
TULCHAN COMMUNICATIONS
A video interview with management is now available on
www.bbaaviation.com and www.cantos.com
A live audio webcast of the analyst presentation will be
available from 09:00 today on www.bbaaviation.com and
www.cantos.com
INTERIM FINANCIAL REPORT FOR PERIOD ENDED 30 JUNE 2015
Results in brief ($m)
Underlying results(1) Statutory results
H1 2015 H1 2014 % Change H1 2015 H1 2014 % Change
Revenue 1,096.4 1,148.1 (5)% 1,096.4 1,148.1 (5)%
EBITDA(2) 130.2 126.5 3% 118.3 143.7 (18)%
Operating profit 95.6 93.1 3% 78.1 78.1 -
Profit before
tax 79.2 79.2 - 61.7 92.0 (33)%
Profit after tax 65.6 66.1 (1)% 51.2 88.8 (42)%
Basic earnings
per share 14.1c 14.0c 1% 11.0c 18.7c (41)%
Return on invested
capital(3) 9.3% 9.4%(4) (10)bps - - -
Free cash flow(5) - - - 11.8 (33.7) 135%
Net debt - - - 698.1 619.2(6) -
Dividend per share - - - 4.85 c 4.62 c 5%
(1) Before exceptional and other items (as defined in the
financial statements)
(2) Underlying EBITDA is calculated as underlying operating
profit before depreciation and amortisation charged through
underlying operating profit
(3) Underlying operating profit return on average invested
capital including goodwill and intangibles amortised or written off
to reserves
(4) Return on invested capital for full year 2014
(5) Cash generated by operations, plus dividends from
associates, less tax, net interest and net capital expenditure
(6) Net debt for full year 2014
These definitions as outlined above are consistently applied
throughout this results announcement
Highlights
Markets: Continued US B&GA growth
-- US business & general aviation movements up 1%
-- European business & general aviation movements down 3%
-- Commercial aircraft movements down 1% in North America and up 2% in Europe
Flight Support (76% of Group OP): Very strong performance driven
by Signature
-- Revenue up 7% (adjusted for fuel and FX); underlying operating profit up 19%
-- Signature: further market outperformance and good operating leverage
-- ASIG: satisfactory underlying progress given net contract losses and Singapore exit
-- Outlook: continued strong progress despite lower than anticipated B&GA movement growth
Aftermarket Services (24% of Group OP): Weaker than anticipated
due to impact of ERO footprint rationalisation
-- Revenue up 6%; underlying operating profit down 33%
-- ERO: greater than anticipated throughput inefficiencies associated with ongoing footprint rationalisation
-- Legacy Support: satisfactory performance in line with expectations
-- Outlook: ERO footprint rationalisation challenges addressed
and expected to materially improve H2 performance, supported by
strong Legacy order book
Strategic progress
-- Flight Support further expansion: successful integration of
the 11 FBOs added in 2014 and a further 8 Signature Select(TM)
locations added in H1 2015
-- Aftermarket Services growth: further extension of Legacy
Support's product portfolio from important new licensors, $10.8
million acquisition
-- Good progress on FBO development projects and ERO rotorcraft expansion
-- Strong pipeline of value creative opportunities
-- Dividend increased by 5% reflecting continued confidence in Group's future growth prospects
Simon Pryce, BBA Aviation Chief Executive Officer,
commented:
"The Group delivered a good first half overall. Flight Support's
very strong performance was driven by Signature's excellent
operational delivery, with continued buoyant customer demand for
its services across its unique, growing and world leading network.
This more than offset ongoing challenges in ASIG and an
unsatisfactory contract in Singapore which we have now exited.
Aftermarket Services delivered a weak first half due to greater
than anticipated production inefficiencies within ERO associated
with the ongoing footprint rationalisation programme. These
inefficiencies were addressed at the end of Q2 and support a much
stronger performance in the second half as evident in June and July
trading. Legacy delivered well as anticipated.
We remain confident in the full year outlook. We have strong
momentum in Flight Support, with Signature's continued
outperformance and reduced start-up costs in ASIG. In Aftermarket
Services, we anticipate a more positive second half performance as
the efficiency improvements in ERO feed through, underpinned by the
completion of new licence adoptions and a strong order book in
Legacy. This coupled with a continued, albeit slow, recovery in our
major markets gives us confidence that 2015 will be a year of good
growth with strong momentum into 2016."
BBA Aviation plc - Interim Financial Report, 5 August 2015
INTERIM FINANCIAL REPORT 2015
Overview
BBA Aviation had a good first half overall in 2015. Above market
growth in Flight Support offset a disappointing Aftermarket
Services performance. The Group continues to make strategic
progress with further network expansion in Flight Support and the
addition of important further licences with new licensors in
Aftermarket Services.
Group revenue decreased by 5% to $1,096.4 million (H1 2014:
$1,148.1 million) reflecting the impact of lower fuel prices and
foreign exchange movements that reduced Group revenue by $128.6
million. Acquisitions contributed $32.9 million of revenue during
the period. On an organic basis, Group revenue increased by 5%
(excluding the impact of fuel prices, foreign exchange,
acquisitions and disposals).
Underlying operating profit was $95.6 million (H1 2014: $93.1
million) including a $6.8 million contribution from acquisitions.
On an organic basis, operating profit declined by 2% with the
significant progress in Flight Support offset by a weak Aftermarket
Services performance.
Group underlying operating profit margin reduced slightly to
8.7% on a fuel price adjusted basis (H1 2014 constant fuel price:
8.9%) with positive margin development in Flight Support offset by
a lower margin in Aftermarket Services.
Net interest increased by $2.5 million to $16.4 million (H1
2014: $13.9 million) due to both the cost of the new longer-term
debt put in place last year, and the impact of higher net debt
resulting from the significant growth investment made over the last
12 months. Net debt increased to $698.1 million (FY 2014: $619.2
million). Interest cover decreased modestly to 8.7x (FY 2014: 9.3x)
and the net debt to EBITDA ratio increased to 2.6x (FY 2014:
2.3x).
Underlying profit before tax remained flat at $79.2 million (H1
2014: $79.2 million).
The underlying tax rate increased to 17.2% (H1 2014: 16.5%) as
expected, reflecting the greater proportion of the Group's pre-tax
profits arising in higher marginal tax jurisdictions. With
underlying profit before tax unchanged and the average number of
shares reduced by the share repurchase programme, which is
currently paused, adjusted earnings per share increased 1% to 14.1c
(H1 2014: 14.0c).
Statutory profit before tax of $61.7 million represented a 33%
decline against the 2014 comparator that included the $27.8 million
profit on disposal of APPH (H1 2014: $92.0 million).
Exceptional and other items include restructuring expenses of
$8.6 million (H1 2014: $8.1 million). $5.9 million of this related
to the termination of ASIG's contract in Singapore and $2.7 million
is associated with Engine Repair & Overhaul's ongoing footprint
rationalisation programme. Amortisation of intangible assets
amounted to $5.6 million (H1 2014: $4.4 million), and there were
$3.3 million of M&A and other costs (H1 2014: $2.5
million).
Unadjusted earnings per share decreased by 41% to 11.0c against
the 2014 comparator that included the profit on disposal of APPH
(H1 2014: 18.7c).
Free cash flow for the first half was an inflow of $11.8 million
(H1 2014: $33.7 million outflow). The Group continues to deploy its
strong underlying cash flow in major investments and there was an
anticipated reversal of the working capital outperformance at the
end of 2014.
Gross capital expenditure amounted to $44.3 million (H1 2014:
$65.7 million). Principal items include the investment in
Signature's FBO development projects at San Jose and London Luton,
as well as Engine Repair & Overhaul's footprint rationalisation
and investment in its new Middle East facility in support of the
rotorcraft authorisations signed last year.
The Group also paid net $11.0 million of pension payments, of
which $8.5 million represented pension deficit payments reflecting
the agreed payments to the scheme.
The Group's tax and interest payments in the first half were
$22.0 million (H1 2014: $36.0 million).
Other cash flow items include the $53.9 million dividend payment
(H1 2014: $52.5 million), and $12.7 million related to share
repurchases (H1 2014: $48.8 million).
Total spend on acquisitions and licences completed during the
period amounted to $21.1 million (H1 2014: $65.1 million) including
$10.8 million for Legacy Support's recent acquisition from Pratt
& Whitney Canada of the manufacturing rights for select JT15D
engine components.
ROIC remained broadly flat at 9.3% (FY 2014: 9.4%) despite
further significant investments made during the period.
Business Review
Flight Support
Our Flight Support division provides specialist on-airport
services including refuelling and ground handling to the business
& general aviation (B&GA) market through Signature Flight
Support (Signature) and to the commercial aviation market through
ASIG.
$m H1 2015 H1 2014 Change
Revenue 700.0 775.5 (10)%
Organic revenue growth 2% - -
Underlying operating
profit 79.4 66.6 19%
Operating margins 11.3% 10.0% 130bps
Operating cash flow 45.9 21.4 114%
Divisional ROIC 10.7% 9.9%* 80bps
(Operating margins at constant fuel prices)
(* Return on invested capital for full year 2014)
Revenue in Flight Support decreased by 10% to $700.0 million (H1
2014: $775.5 million), reflecting the net impact of lower fuel
prices and foreign exchange movements that reduced revenue by
$120.7 million. Acquisitions contributed $31.9 million of revenue
during the period. On an organic basis, revenue increased by
2%.
Underlying operating profit in Flight Support increased by 19%
to $79.4 million (H1 2014: $66.6 million), supported by strong
operational delivery. During the period, acquisitions completed in
2014 contributed $7.3 million to operating profit.
The division's operating profit was impacted in the period by
two one-off items which broadly offset each other: firstly, a
reclassification of our investment in the Hong Kong Business
Aviation Centre as an associate rather than a financial investment
to more appropriately reflect its scale and our level of influence,
interest and control, which resulted in the recognition of an
accounting profit of $5.2 million relating to prior years; and
secondly, prior to the termination of the contract, ASIG's trading
losses at Singapore Changi Airport of $4.0 million.
On an organic basis, operating profit increased by 10%.
Operating margins improved to 11.3% (H1 2014: 10.0%) after
adjusting for fuel prices. This was driven primarily by Signature's
continued market outperformance and its particularly strong
operating leverage in the period. This reflects low input cost
inflation and limited additional costs of Signature's lease
extension and network investment programme in the half, as those
incurred in prior periods are passed on to the customer. The growth
in Signature's operating profit more than offset the reduced
contribution from ASIG due to net contract losses (that was partly
offset by lower start-up costs). Signature now accounts for more
than 90% of Flight Support's operating profit.
Operating cash flow for the division was $45.9 million (H1 2014:
$21.4 million) due to the anticipated reversal of the working
capital outperformance at the end of 2014. Return on invested
capital increased to 10.7% (FY 2014: 9.9%)
Signature Flight Support delivered a very strong performance
despite weaker than anticipated markets reflecting the continued
benefits of successful execution of its strategy. In the first half
of 2015, Signature once again outperformed its key markets, with
continued demand from existing and new customers for its
independently acknowledged market leading services and facilities
across its unique, growing and global network.
Signature's revenue decreased by 13% to $478.0 million (H1 2014:
$548.5 million). Adjusting for lower fuel prices and foreign
exchange movements, and after adjusting for acquisitions that
contributed $25.1 million to revenue in the half, organic revenue
increased by 3% representing a material outperformance relative to
its markets with US B&GA movements up 1% and European B&GA
movements down 3% during the period.
The integration of the 8 new Signature FBOs and 3 new Signature
Select(TM) locations completed in 2014 has gone well with the new
locations performing to plan. These acquisitions, which are
seasonally weighted to the first half, enhance the relevance and
attractiveness of the Signature network to existing and new
customers. There are now a total of 133 FBOs in the network
globally, with 79 of these in North America.
During the period, Signature further expanded its network and
relevance through its affiliate FBO programme, Signature Select(TM)
, with the addition of 8 new locations at Camarillo, Vancouver,
Vienna, Graz, Innsbruck, Klagenfurt, Linz and Salzburg taking the
Signature Select(TM) network up to 15 locations globally.
Signature's ongoing development projects at Mineta San Jose
International Airport and London Luton Airport are progressing
well. San Jose remains on track to be operational by the beginning
of 2016 and the new FBO and increased apron at London Luton are
expected to be completed by the end of 2016.
ASIG's revenue decreased by 2% to $222.0 million (H1 2014:
$227.0 million) with commercial aviation movements down 1% in North
America and up 2% in Europe. On an organic basis, revenue declined
by 1%, reflecting net contract losses, principally the previously
announced loss of the ground handling contract at John F. Kennedy
International Airport Terminal One in February.
ASIG's position as the leading provider of commercial fuel
handling services in the US was reinforced by its acquisition of
Skytanking in April last year, which continues to perform well. In
ground handling, ASIG commenced operations at Singapore Changi
Airport in October 2014. The costs of meeting service level
obligations proved to be significantly in excess of those
anticipated at the time of entering into the contract due to
variations in flight volumes, scheduling and handling. As a result,
a trading loss of $4.0 million was realised in the first half.
Despite extensive efforts over a number of months, ASIG was unable
to agree appropriate revisions to the contract terms. The contract
was therefore terminated in July 2015 and an additional exceptional
charge of $5.9 million related to the closure of ASIG's operations
in Singapore has been recognised.
The Singapore situation and contract was extremely unusual but
more broadly, the US and UK ground handling market remains highly
competitive at a time of increased general employment and wage and
benefit cost inflation. Management remains focused on driving
improvements in underlying operational and cost performance and
service delivery, whilst seeking to pass labour cost increases on
to the customer and maintaining our usual high standards of
financial and operating rigour.
Aftermarket Services
Our Aftermarket Services division is focused on the repair and
overhaul of engines through our Engine Repair and Overhaul (ERO)
businesses and the support of maturing aerospace platforms through
our Legacy Support business.
$m H1 2015 H1 2014 Change
Revenue 396.4 372.6 6%
Organic revenue growth 10% - -
Underlying operating
profit 25.2 37.5 (33)%
Operating margins 6.4% 10.1% (370)bps
Operating cash flow 1.8 (10.4) 117%
Divisional ROIC 8.7% 10.4%* (170)bps
(* Return on invested capital for full year 2014)
In Aftermarket Services, revenue increased by 6% to $396.4
million (H1 2014: $372.6 million, which included a $4.6 million
contribution from APPH that was disposed of last year). On an
organic basis revenue increased by 10%, in part due to engine
trading.
Underlying operating profit of $25.2 million decreased by 33%
(H1 2014: $37.5 million). This decline was due principally to ERO
where, despite increased inputs, markets were highly competitive
and we experienced materially greater than anticipated throughput
inefficiencies associated with the footprint rationalisation
programme. In addition, there were some start-up costs related to
the Pratt & Whitney rotorcraft authorisations ERO signed last
year. These headwinds were partly offset by profit on engine
trading. On an organic basis, operating profit was down $10.7
million or 29.4% with operating margins at 6.4% (H1 2014:
10.1%).
Operating cash flow for the division was $1.8 million reflecting
the capital expenditure associated with the rotorcraft
authorisations signed last year and higher working capital as a
result of throughput inefficiencies in ERO. Return on invested
capital decreased to 8.7% (FY 2014: 10.4%) reflecting the growth
investment in the new engine repair and overhaul facilities and
operating profit decline.
In Engine Repair and Overhaul, revenue was $321.9 million (H1
2014: $286.4 million), representing a 14% organic revenue increase,
over half of which was related to engine trading.
ERO's volumes and market share picked up during the first half
despite continued weak market conditions, particularly in the small
and mid-cabin segments, although markets were particularly
competitive.
In 2014 ERO began a significant footprint rationalisation
programme and commenced the movement of engine overhaul lines and
site closures. It was anticipated that this footprint change would
have a short term impact on productivity and cost. In the first
quarter, this transition proved more challenging than anticipated
as overhaul cells were reassembled, and labour was cross-trained
and brought up to capacity. Cross training was slower than
expected, the phased transfer of engine lines was disrupted and
engines took longer to process. These greater than anticipated
inefficiencies led to materially increased costs associated with
overtime payments, customer concessions and penalties and higher
engine lease costs.
Significant measures have now been taken to improve turn times
and reduce the cost inefficiencies. These have already begun to
feed through to operating results in June and July and support our
expectations for a much improved performance in the second half of
2015.
Once completed, the footprint rationalisation programme will
allow ERO to offer faster turnaround times and an improved cost
structure, enhancing pricing flexibility and customer
responsiveness, although the impact of weather driven construction
delays to our new Dallas overhaul and test facility in the first
half will delay completion of the programme by six months to the
end of 2016.
Notwithstanding these short-term challenges, in the first half,
ERO expanded its field support capabilities with authorisations
from Honeywell for the HTF7000 engine in Brazil and GE Aviation for
the CF34 engine in Asia Pacific and renewed its long-standing
engine repair and overhaul authorizations with Pratt & Whitney
Canada on the JT15D, PT6A, PT6T and PW100 engines.
The new rotorcraft engine repair facility in Abu Dhabi is
progressing as expected and ERO has now received its first PW200
engine for overhaul at its Dallas facility, in support of the
significant rotorcraft authorisations signed in 2014.
Revenue in Legacy Support decreased by 9% to $74.5 million (H1
2014: $81.6 million), and on an organic basis revenue declined by
7%, reflecting a satisfactory performance and in line with our
expectations.
During the period, Legacy Support signed its first product
licence with Thales Avionics for surveillance equipment used on
military and commercial aircraft, further extending the breadth of
Legacy Support's OEM relationships. In June, Legacy Support
acquired the manufacturing rights from Pratt & Whitney Canada
(P&WC) for select JT15D engine components for an initial cash
consideration of $10.8 million, with further conditional payments
of up to $3.2 million. This is Legacy Support's first acquisition
from P&WC and further expands its existing portfolio of engine
support capabilities.
Legacy Support continues to have a strong order book, supported
by the successful transition of the four licences signed last
year.
Other Financial Information
Unallocated central costs were $2.0 million lower at $9.0
million (H1 2014: $11.0 million), due to lower share based
payments.
Net debt increased to $698.1 million (FY 2014: $619.2 million).
The net cash outflow included the $53.9 million dividend payment
and $12.7 million related to share repurchases.
Net debt to EBITDA was 2.6x (FY 2014: 2.3x). Interest cover
based on EBITDA was 8.7x (FY 2014: 9.3x).
Pensions
Under the terms of the Asset-Backed Funding (ABF) structure
which was put in place for the UK defined benefit pension plan in
2014, the Group made an additional one-off payment of GBP4.2
million ( $6.4 million) on top of the agreed annual deficit
contributions of GBP2.7 million ( $4.1 million) payable each year
until 2034. Total deficit contributions for the half year amounted
to GBP5.6 million ( $8.5 million).
As at 30 June 2015, the accounting net deficit across the UK and
US plans was $36.4 million (H1 2014: $47.6 million; FY 2014: $62.2
million), which when combined with the minimum funding liability
recognised previously in accordance with IFRIC 14, of $nil (H1
2014: $49.2 million; FY 2014: $nil) gives a combined liability
recognised on the balance sheet of $36.4 million (H1 2014: $96.8
million; FY 2014: $62.2 million).
The accounting net deficit for the Group has improved since 31
December 2014 largely as a result of the deficit reduction
contributions of $8.5 million paid into the UK Plan, and pension
increases within the UK Plan being lower than expected resulting in
a gain of $13.5 million.
A new triennial valuation of the UK Plan is currently underway,
with an effective date of 31 March 2015, with the outcome of this
valuation expected to be known by the end of 2015.
Dividend
The Board is declaring an increased interim dividend of 4.85c
(H1 2014: 4.62c) up 5% reflecting the Board's progressive dividend
policy and its continued confidence in Group's future growth
prospects.
Outlook
We remain confident in the full year outlook. We have strong
momentum in Flight Support, with Signature's continued
outperformance and reduced start-up costs in ASIG. In Aftermarket
Services, we anticipate a more positive second half performance as
the efficiency improvements in ERO feed through, underpinned by the
completion of new licence adoptions and a strong order book in
Legacy. This coupled with a continued, albeit slow, recovery in our
major markets gives us confidence that 2015 will be a year of good
growth with strong momentum into 2016.
Going Concern
The Directors have carried out a review of the Group's trading
outlook and borrowing facilities, with due regard to the risks and
uncertainties to which the Group is exposed, the uncertain economic
climate and the impact that this could have on trading performance.
Based on this review, the Directors believe that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the financial
statements have been prepared on a going concern basis.
Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
(a) the condensed consolidated set of financial statements has
been prepared in accordance with IAS 34 "Interim Financial
Reporting";
(b) the interim financial report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and,
(c) the interim financial report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Signed on behalf of the Board,
Simon Pryce Mike Powell
Group Chief Executive Group Finance Director
4 August 2015 4 August 2015
This interim financial report contains forward-looking
statements including, without limitation, statements relating to:
future demand and markets of the Group's products and services;
research and development relating to new products and services;
liquidity and capital; and implementation of restructuring plans
and efficiencies. These forward-looking statements involve risks
and uncertainties because they relate to events and depend on
circumstances that will or may occur in the future. Accordingly,
actual results may differ materially from those set out in the
forward-looking statements as a result of a variety of factors
including, without limitation: changes in interest and exchange
rates, commodity prices and other economic conditions; negotiations
with customers relating to renewal of contracts and future volumes
and prices; events affecting international security, including
global health issues and terrorism; changes in regulatory
environment; and the outcome of litigation. The Company undertakes
no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise. This interim financial report has been drawn up and
presented in accordance with and in reliance on applicable English
company law and the liabilities of the directors in connection with
this report shall be subject to the limitations and restrictions
provided by such law.
This report is available in electronic format from the Company's
website www.bbaaviation.com
Unaudited condensed consolidated income statement
Six months ended Six months ended Year ended 31 December
30 June 2015 30 June 2014 2014
----------------- ------ ---------------------------------------------- -------------------------------- ----------------------------------------
Exceptional Exceptional Exceptional
and other and other and other
Underlying(1) Items Total Underlying(1) Items Total Underlying(1) Items Total
Note $m $m $m $m $m $m $m $m $m
----------------- ------ -------------- ------------ -------- ---------------- ------------ -------- -------------- ------------ ----------
Revenue 2 1,096.4 - 1,096.4 1,148.1 - 1,148.1 2,289.8 - 2,289.8
Cost of sales (888.9) - (888.9) (931.6) - (931.6) (1,845.9) - (1,845.9)
----------------- ------ -------------- ------------ -------- ---------------- ------------ -------- -------------- ------------ ----------
Gross profit 207.5 - 207.5 216.5 - 216.5 443.9 - 443.9
Distribution
costs (17.5) - (17.5) (19.1) - (19.1) (36.8) - (36.8)
Administrative
expenses 3 (102.0) (5.6) (107.6) (106.3) (4.4) (110.7) (209.9) (11.1) (221.0)
Other operating
income 0.9 - 0.9 1.4 - 1.4 2.1 - 2.1
Share of
profits of
associates
and joint
ventures 1 7.0 - 7.0 0.6 - 0.6 2.4 - 2.4
Other operating
expenses 3 (0.3) (3.3) (3.6) - (2.5) (2.5) (0.5) (22.2) (22.7)
Restructuring
costs 3 - (8.6) (8.6) - (8.1) (8.1) - (13.8) (13.8)
Operating
profit/(loss) 2, 3 95.6 (17.5) 78.1 93.1 (15.0) 78.1 201.2 (47.1) 154.1
Net exceptional
gain on
disposal
of businesses 3,10 - - - - 27.8 27.8 - 27.1 27.1
Investment
income 1.8 - 1.8 1.9 - 1.9 3.8 - 3.8
Finance costs (18.2) - (18.2) (15.8) - (15.8) (32.6) - (32.6)
----------------- ------ -------------- ------------ -------- ---------------- ------------ -------- -------------- ------------ ----------
Profit/(loss)
before tax 79.2 (17.5) 61.7 79.2 12.8 92.0 172.4 (20.0) 152.4
Tax
(charge)/credit 3, 4 (13.6) 3.1 (10.5) (13.1) 9.9 (3.2) (27.6) 37.7 10.1
================= ====== ============== ============ ======== ================ ============ ======== ============== ============ ==========
Profit/(loss)
for the period 3 65.6 (14.4) 51.2 66.1 22.7 88.8 144.8 17.7 162.5
================= ====== ============== ============ ======== ================ ============ ======== ============== ============ ==========
Attributable
to:
Equity holders
of BBA Aviation
plc 65.7 (14.4) 51.3 66.3 22.7 89.0 145.1 17.7 162.8
Non-controlling
interests (0.1) - (0.1) (0.2) - (0.2) (0.3) - (0.3)
================= ====== ============== ============ ======== ================ ============ ======== ============== ============ ==========
65.6 (14.4) 51.2 66.1 22.7 88.8 144.8 17.7 162.5
================= ====== ============== ============ ======== ================ ============ ======== ============== ============ ==========
Earnings Note Adjusted(1) Unadjusted Adjusted(1) Unadjusted Adjusted(1) Unadjusted
per share
Basic 5 14.1c 11.0c 14.0c 18.7c 30.7c 34.5c
Diluted 5 13.9c 10.9c 13.7c 18.4c 30.4c 34.1c
========= ======= ================ ================ ============ ============= ============== ======= =========
(1) Underlying profit and adjusted earnings per share is stated
before exceptional and other items. Exceptional and other items are
defined in note 3.
Unaudited condensed consolidated statement of comprehensive
income
Six months Six months Year ended
ended 30 ended 30 31 December
June 2015 June 2014 2014
$m $m $m
------------------------------------------------ ----------- -------------- -----------------
Profit for the period 51.2 88.8 162.5
Other comprehensive income
Items that will not be reclassified
subsequently to profit or loss
Actuarial gains/(losses) on defined
benefit pension schemes 15.4 (17.6) (37.7)
Change in pension obligation under
IFRIC 14 - (23.8) 24.6
Tax relating to components of other
comprehensive income that will not
be reclassified subsequently to profit
or loss (3.0) 7.4 4.0
================================================ =========== ============== =================
12.4 (34.0) (9.1)
================================================ =========== ============== =================
Items that may be reclassified subsequently
to profit or loss
Exchange difference on translation
of foreign operations (15.7) (23.4) 29.2
Gains/(losses) on net investment hedges 6.5 18.6 (57.3)
Fair value movements in foreign exchange
cash flow hedges 3.0 (1.8) (9.8)
Transfer to profit or loss from other
comprehensive income on foreign exchange
cash flow hedges (0.8) 1.2 4.5
Fair value movement in interest rate
cash flow hedges (3.5) (3.1) (4.8)
Transfer to profit or loss from other
comprehensive income on interest rate
cash flow hedges 1.9 1.6 3.5
Tax relating to components of other
comprehensive income that may be reclassified
subsequently to profit or loss - 2.1 3.3
================================================ =========== ============== =================
(8.6) (4.8) (31.4)
================================================ =========== ============== =================
Other comprehensive income / (loss)
for the period 3.8 (38.8) (40.5)
================================================ =========== ============== =================
Total comprehensive income for the
period 55.0 50.0 122.0
================================================ =========== ============== =================
Attributable to:
Equity holders of BBA Aviation plc 55.1 50.2 122.3
Non-controlling interests (0.1) (0.2) (0.3)
================================================ =========== ============== =================
55.0 50.0 122.0
================================================ =========== ============== =================
Unaudited condensed consolidated balance sheet
30 June 30 June 31 December
2015 2014 2014
Note $m $m $m
--------------------------------- --------- ---------- ----------- ------------
NON-CURRENT ASSETS
Goodwill 896.8 882.2 897.9
Other intangible assets 268.8 264.6 253.7
Property, plant and equipment 638.2 575.1 635.9
Interests in associates
and joint ventures 12.6 6.6 7.4
Trade and other receivables 20.1 22.1 22.1
Deferred tax asset 12.0 19.2 16.5
1,848.5 1,769.8 1,833.5
================================= ========= ========== ========== =============
CURRENT ASSETS
Inventories 238.4 192.7 204.3
Trade and other receivables 354.6 417.7 385.3
Cash and cash equivalents 7 131.4 154.9 166.3
Tax recoverable 8.3 0.2 6.5
--------------------------------- --------- ---------- ---------- -------------
732.7 765.5 762.4
================================= ========= ========== ========== =============
Total assets 2 2,581.2 2,535.3 2,595.9
================================= ========= ========== ========== =============
CURRENT LIABILITIES
Trade and other payables (458.9) (475.5) (489.9)
Tax liabilities (37.0) (51.5) (38.3)
Obligations under finance
leases 7 - (1.1) -
Borrowings 7 (13.3) (32.5) (20.4)
Provisions (11.2) (3.7) (6.8)
(520.4) (564.3) (555.4)
================================= ========= ========== ========== =============
Net current assets 212.3 201.2 207.0
================================= ========= ========== ========== =============
NON-CURRENT LIABILITIES
Borrowings 7 (827.8) (696.7) (778.4)
Other payables due after
one year (23.5) (26.0) (21.4)
Retirement benefit obligations 12 (36.4) (96.8) (62.2)
Obligations under finance 7 - - -
leases
Deferred tax liabilities (91.4) (89.5) (86.6)
Provisions (11.7) (15.2) (12.9)
--------------------------------- --------- ---------- ---------- -------------
(990.8) (924.2) (961.5)
================================= ========= ========== ========== =============
Total liabilities 2 (1,511.2) (1,488.5) (1,516.9)
================================= ========= ========== ========== =============
Net assets 1,070.0 1,046.8 1,079.0
================================= ========= ========== ========== =============
EQUITY
Share capital 13 252.6 252.3 252.3
Share premium account 733.1 733.0 733.1
Other reserves 6.9 6.9 6.9
Treasury reserve (80.9) (51.0) (71.9)
Capital reserve 38.9 38.6 41.6
Hedging and translation
reserves (81.0) (44.6) (72.4)
Retained earnings 205.4 116.6 194.4
--------------------------------- --------- ---------- ---------- -------------
Equity attributable to
equity holders of BBA Aviation
plc 1,075.0 1,051.8 1,084.0
Non-controlling interests (5.0) (5.0) (5.0)
================================= ========= ========== ========== =============
Total equity 1,070.0 1,046.8 1,079.0
================================= ========= ========== ========== =============
Unaudited condensed consolidated cash flow statement
Six months Six months Year ended
ended 30 ended 30 31 December
June 2015 June 2014 2014
Note $m $m $m
----------------------------------------- ----- ----------- ----------- -------------
Operating activities
Net cash flow from operating activities 9 67.7 47.3 187.7
Investing activities
Interest received 6.1 2.5 4.3
Dividends received from associates 1.8 0.1 1.0
Purchase of property, plant and
equipment (39.4) (37.3) (85.8)
Purchase of intangible assets
(1) (14.9) (38.7) (53.2)
Proceeds from disposal of property,
plant and equipment 0.7 0.6 0.4
Acquisition of businesses, net
of cash acquired 10 (11.1) (54.8) (138.5)
Proceeds from disposal of subsidiaries - 125.3 125.3
Investment in associates - - (0.1)
Net cash outflow from investing
activities (56.8) (2.3) (146.6)
========================================= ===== =========== =========== =============
Financing activities
Interest paid (20.2) (18.4) (25.8)
Interest element of finance leases - (0.1) -
paid
Dividends paid 6 (53.9) (52.5) (74.2)
Gains/(losses) from realised foreign
exchange contracts 2.0 (9.5) 2.0
Proceeds from issue of shares - 0.5 0.6
Purchase of own shares (3) (12.7) (48.8) (76.6)
Increase in loans 50.0 63.3 133.5
Decrease in finance leases - (0.3) (1.4)
(Decrease)/increase in overdrafts (12.3) 10.6 6.7
========================================= ===== =========== =========== =============
Net cash outflow from financing
activities (47.1) (55.2) (35.2)
========================================= ===== =========== =========== =============
(Decrease)/increase in cash and
cash equivalents (36.2) (10.2) 5.9
Cash and cash equivalents at beginning
of the period 166.3 165.0 165.0
Exchange adjustments 1.3 0.1 (4.6)
========================================= ===== =========== =========== =============
Cash and cash equivalents at end
of the period (4) 131.4 154.9 166.3
========================================= ===== =========== =========== =============
Net debt at beginning of the period (619.2) (478.5) (478.5)
(Decrease)/increase in cash equivalents (36.2) (10.2) 5.9
Increase in loans (50.0) (63.3) (133.5)
Decrease in finance leases - 0.3 1.4
Decrease/(increase) in overdrafts 12.3 (10.6) (6.7)
Exchange adjustments (5.0) (2.0) (7.8)
========================================= ===== =========== =========== =============
Net debt at end of the period
(2) (698.1) (564.3) (619.2)
========================================= ===== =========== =========== =============
(1) Purchase of intangible assets includes $10.0 million (30
June 2014: $10.3 million: 31 December 2014: $22.6 million) paid in
relation to Ontic licences.
(2) Within the Group's definition of net debt the US private
placement is included at its face value of $500 million (30 June
2014: $300 million; 31 December 2014: $500 million) reflecting the
fact that the liabilities will be in place until maturity. This is
$11.6 million (30 June 2014: $11.1 million; 31 December 2014: $13.3
million) lower than its carrying value.
(3) Purchase of own shares includes shares purchased for the
Employee Benefit Trust and shares purchased from employees to
settle their tax liabilities as part of the share scheme.
(4) Bank overdrafts which are repayable on demand are not
included within cash and cash equivalents for the purposes of the
cash flow statement.
Unaudited condensed consolidated statement of changes in
equity
Share Share Retained Other Non-controlling Total
capital premium earnings reserves interests equity
$m $m $m $m $m $m
------------------------------------- --------- --------- ---------- ---------- ---------------- --------
Balance at 1 January 2015 252.3 733.1 194.4 (95.8) (5.0) 1,079.0
Profit for the period - - 51.3 - (0.1) 51.2
Other comprehensive income
for the period - - 12.4 (8.6) - 3.8
===================================== ========= ========= ========== ========== ================ ========
Total comprehensive income
for the period - - 63.7 (8.6) (0.1) 55.0
===================================== ========= ========= ========== ========== ================ ========
Equity dividends - - (53.9) - - (53.9)
Issue of share capital 0.3 - - - - 0.3
Movement on treasury reserve - - - (13.0) - (13.0)
Credit to equity for equity-settled
share-based payments - - - 3.0 - 3.0
Tax on share-based payment
transactions - - (0.5) - - (0.5)
Changes in non-controlling
interests - - - - 0.1 0.1
Transfer to retained earnings - - 1.7 (1.7) - -
===================================== ========= ========= ========== ========== ================ ========
Balance at 30 June 2015 252.6 733.1 205.4 (116.1) (5.0) 1,070.0
===================================== ========= ========= ========== ========== ================ ========
Balance at 1 January 2014 251.8 733.0 121.2 (7.3) (4.7) 1,094.0
Profit for the period - - 89.0 - (0.2) 88.8
Other comprehensive income
for the period - - (31.9) (6.9) - (38.8)
===================================== ========= ========= ========== ========== ================ ========
Total comprehensive income
for the period - - 57.1 (6.9) (0.2) 50.0
===================================== ========= ========= ========== ========== ================ ========
Equity dividends - - (52.5) - - (52.5)
Issue of share capital 0.5 - - - - 0.5
Movement on treasury reserve - - - (49.9) - (49.9)
Credit to equity for equity-settled
share-based payments - - - 4.6 - 4.6
Tax on share-based payment
transactions - - 0.2 - - 0.2
Changes in non-controlling
interests - - - - (0.1) (0.1)
Transfer to retained earnings - - (9.4) 9.4 - -
===================================== ========= ========= ========== ========== ================ ========
Balance at 30 June 2014 252.3 733.0 116.6 (50.1) (5.0) 1,046.8
===================================== ========= ========= ========== ========== ================ ========
Balance at 1 January 2014 251.8 733.0 121.2 (7.3) (4.7) 1,094.0
Profit for the period - - 162.8 - (0.3) 162.5
Other comprehensive income
for the period - - (5.8) (34.7) - (40.5)
===================================== ========= ========= ========== ========== ================ ========
Total comprehensive income
for the period - - 157.0 (34.7) (0.3) 122.0
===================================== ========= ========= ========== ========== ================ ========
Equity dividends - - (74.2) - - (74.2)
Issue of share capital 0.5 0.1 - - - 0.6
Movement on treasury reserve - - - (72.0) - (72.0)
Credit to equity for equity-settled
share-based payments - - - 7.5 - 7.5
Tax on share-based payment
transactions - - 1.1 - - 1.1
Transfer to retained earnings - - (10.7) 10.7 - -
===================================== ========= ========= ========== ========== ================ ========
Balance at 31 December 2014 252.3 733.1 194.4 (95.8) (5.0) 1,079.0
===================================== ========= ========= ========== ========== ================ ========
Notes to the condensed consolidated half yearly financial
statements
1 Basis of preparation
The unaudited condensed consolidated financial statements of BBA
Aviation plc (the "Group"), for the six months ended 30 June 2015
have been prepared in accordance with the Disclosure and
Transparency Rules of the UK's Financial Conduct Authority and
International Accounting Standard IAS 34: Interim Financial
Reporting (IAS 34) which permits the presentation of the financial
information on a condensed basis. These condensed consolidated half
yearly financial statements do not comprise statutory accounts
within the meaning of Section 434 of the Companies Act 2006, and
therefore should be read in conjunction with the Group's Annual
Report for the year ended 31 December 2014.
The Group's annual financial statements for the year ended 31
December 2014 have been reported upon by the Group's auditor and
delivered to the Registrar of Companies. The report of the auditor
was unqualified, did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and did not contain statements under
section 498(2) or 498(3) of the Companies Act 2006.
Except as described below, these condensed consolidated half
yearly financial statements have been prepared in accordance with
the accounting policies, presentation and methods of calculation as
set out in the Group's consolidated financial statements for the
year ended 31 December 2014, which were prepared in accordance with
International Financial Reporting Standards (IFRS) endorsed for use
in the European Union and the Companies Act 2006, and comply with
Article 4 of the EU IAS Regulation.
Going concern
The directors are satisfied that, at the time of approving the
condensed consolidated financial statements, it is appropriate to
continue to adopt the going concern basis of accounting. Further
information is given on page 10 of the interim statement.
New reporting requirements
There have been no new EU - endorsed standards or amendments to
existing standards and interpretations, for annual periods
beginning on or after 1 January 2015.
Financial reporting standards applicable for future financial
periods
IFRS 9: Financial Instruments (IFRS 9) and IFRS 15: Revenue from
contracts with customers (IFRS 15) have been issued but not yet
endorsed by the EU. Therefore, the date from which they become
effective is not yet known. IFRS 9 addresses the classification,
measurement and recognition of financial assets and financial
liabilities. IFRS 15 addresses recognition of revenue from customer
contracts and impacts the amounts and timing of the recognition of
such revenue. The Group is yet to assess the impact of IFRS 9 and
IFRS 15 on the consolidated financial statements.
Joint ventures and associates
In the period we have reclassified our investment in Hong Kong
Business Aviation Centre from a financial instrument to an
associate to more appropriately reflect its scale and our level of
influence. The reclassification of the investment has resulted in
the recognition of $5.2m of operating profit during the period
relating to prior periods.
Presentational reclassifications
There has been a re-classification between cost of sales and
administrative expenses in the prior period to improve consistency
of treatment within cost of sales.
There has been a re-classification between non-current and
current payables in the prior year end to improve consistency of
treatment between current and non-current liabilities.
Goodwill Impairment
As disclosed in the 2014 annual report management's most recent
budget and strategic plan assumed an improvement in the performance
of both DAI and ASIG. In both cases the recoverable amount in
excess of the carrying value is significant but sensitive to those
assumptions in the five year forecast period. The Group has
reviewed the position as at 30 June 2015 and adequate headroom
remains based on the Group's current forecast although DAI and ASIG
remain sensitive to the assumptions used.
2 Segmental analysis
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker (for the
Group, this is the Chief Executive) to allocate resources to the
segments and to assess their performance.
Based on the above, the reportable segments of the Group are
Flight Support and Aftermarket Services.
The businesses within the Flight Support segment provide
re-fuelling, ground handling and other services to the business,
general and commercial aviation markets. The businesses within the
Aftermarket Services segment maintain and support engines and
aerospace components, sub-systems and systems. Sales between
segments are immaterial.
There has been no change to the Group's reportable segments
since the last annual report.
As at, and for
the six months Aftermarket Unallocated
ended 30 June 2015 Flight Support(1) Services(2) Total Corporate(3) Total Continuing
Business Segments $m $m $m $m $m
-------------------------- ------------------- ------------- -------- -------------- -----------------
External revenue 700.0 396.4 1,096.4 - 1,096.4
Underlying operating
profit 79.4 25.2 104.6 (9.0) 95.6
Exceptional and
other items (10.3) (4.4) (14.7) (2.8) (17.5)
========================== =================== ============= ======== ============== =================
Segment result 69.1 20.8 89.9 (11.8) 78.1
Underlying operating
margin 11.3% 6.4% 9.5% 8.7%
========================== =================== ============= ======== ============== =================
Other information
Capital additions
cash flows 25.9 26.7 52.6 1.7 54.3
Depreciation and
amortisation 29.7 10.2 39.9 0.3 40.2
========================== =================== ============= ======== ============== =================
Balance sheet
Total assets 1,542.1 891.2 2,433.3 147.9 2,581.2
Total liabilities (231.4) (195.1) (426.5) (1,084.7) (1,511.2)
========================== =================== ============= ======== ============== =================
Net assets/(liabilities) 1,310.7 696.1 2,006.8 (936.8) 1,070.0
========================== =================== ============= ======== ============== =================
(1) Flight Support's segment result includes $7.0 million (30
June 2014: $0.6 million; 31 December 2014: $2.4 million) relating
to profits of associates and joint ventures. As described in note 1
in the period we have reclassified our investment in Hong Kong
Business Aviation Centre from a financial instrument to an
associate. The reclassification of the investment has resulted in
the recognition of $5.2 million of operating profit during the
period relating to prior periods.
(2) In the period ERO entered into a sale and lease back
transaction with respect to a portion of its rental engine fleet.
The transaction led to the recognition of $29.4 million of revenue
(30 June 2014: nil; 31 December 2014: $10.3 million).
(3) Unallocated corporate balances include debt, tax,
provisions, pensions, insurance captives and trading balances from
central activities.
2 Segmental analysis - continued
As at, and for
the six months Aftermarket Unallocated
ended 30 June 2014 Flight Support Services Total Corporate Total Continuing
Business Segments $m $m $m $m $m
-------------------------- ---------------- ------------ -------- ------------ -----------------
External revenue 775.5 372.6 1,148.1 - 1,148.1
Underlying operating
profit 66.6 37.5 104.1 (11.0) 93.1
Exceptional items (7.2) (6.4) (13.6) (1.4) (15.0)
========================== ================ ============ ======== ============ =================
Segment result 59.4 31.1 90.5 (12.4) 78.1
Underlying operating
margin 8.6% 10.1% 9.1% 8.1%
========================== ================ ============ ======== ============ =================
Other information
Capital additions
cash flows 28.8 45.3 74.1 1.9 76.0
Depreciation and
amortisation 27.3 10.1 37.4 0.4 37.8
========================== ================ ============ ======== ============ =================
Balance sheet
Total assets 1,514.7 852.5 2,367.2 168.1 2,535.3
Total liabilities (254.6) (179.4) (434.0) (1,054.5) (1,488.5)
========================== ================ ============ ======== ============ =================
Net assets/(liabilities) 1,260.1 673.1 1,933.2 (886.4) 1,046.8
========================== ================ ============ ======== ============ =================
As at, and for
the year ended Flight Aftermarket Unallocated
31 December 2014 Support Services Total Corporate Total Continuing
Business Segments $m $m $m $m $m
-------------------------- --------- ------------ -------- ------------ -----------------
External revenue 1,536.3 753.5 2,289.8 - 2,289.8
Underlying operating
profit 132.7 89.6 222.3 (21.1) 201.2
Exceptional items (16.6) (28.6) (45.2) (1.9) (47.1)
========================== ========= ============ ======== ============ =================
Segment result 116.1 61.0 177.1 (23.0) 154.1
Underlying operating
margin 8.6% 11.9% 9.7% - 8.8%
========================== ========= ============ ======== ============ =================
Other information
Capital additions
cash flows 65.7 67.6 133.3 5.7 139.0
Depreciation and
amortisation 57.3 19.1 76.4 0.7 77.1
========================== ========= ============ ======== ============ =================
Balance sheet
Total assets 1,552.9 845.6 2,398.5 197.4 2,595.9
Total liabilities (281.2) (182.5) (463.7) (1,053.2) (1,516.9)
========================== ========= ============ ======== ============ =================
Net assets/(liabilities) 1,271.7 663.1 1,934.8 (855.8) 1,079.0
========================== ========= ============ ======== ============ =================
2 Segmental analysis - continued
Capital
Revenue Revenue additions Non-current
Geographical segments by destination by origin cash flows assets(1)
$m $m $m $m
---------------------------- ---------------- ----------- ------------ ------------
As at, and for the six
months ended 30 June 2015
United Kingdom 113.3 175.0 9.7 253.5
Mainland Europe 57.3 15.9 0.1 35.4
North America 864.3 889.1 39.1 1,534.5
Rest of world 61.5 16.4 5.4 5.1
============================ ================ =========== ============ ============
Total 1,096.4 1,096.4 54.3 1,828.5
============================ ================ =========== ============ ============
As at, and for the six
months ended 30 June 2014
United Kingdom 129.2 189.3 13.8 242.2
Mainland Europe 62.0 20.1 - 45.0
North America 899.3 925.4 61.9 1,440.9
Rest of world 57.6 13.3 0.3 15.6
============================ ================ =========== ============ ============
Total 1,148.1 1,148.1 76.0 1,743.7
============================ ================ =========== ============ ============
As at, and for the year
ended 31 December 2014
United Kingdom 267.0 398.4 33.9 246.4
Mainland Europe 117.1 41.6 0.4 40.0
North America 1,782.7 1,822.0 91.6 1,516.3
Rest of world 123.0 27.8 13.1 5.5
============================ ================ =========== ============ ============
Total 2,289.8 2,289.8 139.0 1,808.2
============================ ================ =========== ============ ============
(1) The disclosure of non-current assets by geographical segment
has been amended to exclude balances related to deferred tax and
financial instruments in all periods, as required under IFRS 8.
3 Exceptional and other items
Underlying profit is shown before exceptional and other items on
the face of the income statement because the directors consider
that this gives a useful indication of underlying performance and
better visibility of key performance indicators.
In the six months ended 30 June 2015, exceptional items amount
to a charge of $14.4 million (30 June 2014: credit of $22.7
million; 31 December 2014: credit of $17.7 million) of which a
charge of $17.5 million (30 June 2014: $15.0 million charge; 31
December 2014: $47.1 million charge) is included within operating
profit.
Exceptional items included within operating profit comprise
restructuring expenses of $8.6 million (30 June 2014: $8.1 million;
31 December 2014: $13.8 million); amortisation of intangible assets
arising on acquisition and valued in accordance with IFRS 3 of $5.6
million (30 June 2014: $4.4 million; 31 December 2014: $11.1
million) included within administrative expenses; $2.9 million (30
June 2014: $2.5 million; 31 December 2014: $5.8 million) of
transaction costs and $0.4m of other costs relating to transactions
reported as exceptional in prior periods. In 2014, exceptional
operating expenses included $16.4 million in relation to the
settlement with the US Department of Justice.
Restructuring expenses for the period of $8.6 million comprises
$2.7 million in respect of the rationalisation of the Aftermarket
Services footprint and $5.9 million in respect of ASIG Singapore
closure. Whilst there remains some uncertainty regarding further
costs to be incurred in terminating ASIG's operations in Singapore,
any costs are not expected to be material. Restructuring expenses
of $8.1 million incurred during the six months ended 30 June 2014
comprised $4.6 million in respect of the rationalisation of the
Aftermarket Services footprint and $3.5 million in respect of
management reorganisation. Restructuring expenses of $13.8 million
incurred during the year ended 2014 related to rationalisation of
Aftermarket Services footprint and the re-organisation of Flight
Support management. In 2014, an exceptional gain of $27.1 million
was recognised following the disposal of APPH and the assets
disposed of as part of the Skytanking acquisition. Refer to the
2014 annual report for further disclosure.
In the six months ended 30 June 2015, an exceptional tax credit
of $3.1 million (30 June 2014: $9.9 million; 31 December 2014:
$37.7 million) was recognised in the income statement. This relates
to the tax impact on the exceptional items explained above.
4 Income tax
Six months Six months Year ended
ended 30 ended 30 June 31 December
June 2015 2014 2014
Recognised in the income statement $m $m $m
------------------------------------- ----------- --------------- -------------
Current tax charge 6.8 7.8 19.4
Adjustments in respect of prior
periods - current tax (0.1) 0.2 (17.6)
Deferred tax charge/(credit) 3.8 (4.7) (10.8)
Adjustments in respect of prior
periods - deferred tax - (0.1) (1.1)
===================================== =========== =============== =============
Income tax expense/(credit) for
the period 10.5 3.2 (10.1)
===================================== =========== =============== =============
Corporation tax for the interim period is charged at an
effective rate of 17.2% (30 June 2014: 16.5%; 31 December 2014:
16.0%) on underlying profit before tax, representing the best
estimate of the weighted average annual corporation tax expected
for the full financial year. The total income tax expense for the
six months ended 30 June 2015 includes a tax credit of $3.1 million
(30 June 2014: $9.9 million; 31 December 2014: $37.7 million)
relating to exceptional and other items (see note 3).
Tax credited to other comprehensive income and equity is as
follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2015 June 2014 2014
Recognised in other comprehensive
income and equity $m $m $m
---------------------------------------------- ------------- ----------- -------------
Recognised in other comprehensive
income
Tax on items that will not be reclassified
subsequently to profit or loss
Current tax credit on actuarial gains/losses 1.8 0.3 1.4
Deferred tax (charge)/credit on actuarial
gains/losses (4.8) 7.1 2.6
---------------------------------------------- ------------- ----------- -------------
(3.0) 7.4 4.0
---------------------------------------------- ------------- ----------- -------------
Tax on items that may be reclassified
subsequently to profit or loss
Current tax credit on foreign exchange
movements - - 1.2
Adjustments in respect of prior periods
- deferred tax - 2.1 2.1
---------------------------------------------- ------------- ----------- -------------
- 2.1 3.3
---------------------------------------------- ------------- ----------- -------------
Total tax (charge)/credit within other
comprehensive income (3.0) 9.5 7.3
Recognised in equity
Current tax credit on share-based
payments movements 0.2 0.2 2.1
Deferred tax charge on share-based
payments movements (0.7) - (1.0)
---------------------------------------------- ------------- ----------- -------------
Total tax (charge)/credit within equity (0.5) 0.2 1.1
---------------------------------------------- ------------- ----------- -------------
Total tax (charge)/credit within other
comprehensive income and equity (3.5) 9.7 8.4
============================================== ============= =========== =============
5 Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2015 June 2014 2014
$m $m $m
----------------------------------------- ----------- ----------- -------------
Basic and diluted:
Earnings:
Profit for the period 51.2 88.8 162.5
Non-controlling interests 0.1 0.2 0.3
----------------------------------------- ----------- ----------- -------------
Basic earnings attributable to ordinary
shareholders 51.3 89.0 162.8
Exceptional and other items net of tax 14.4 (22.7) (17.7)
========================================= =========== =========== =============
Adjusted earnings 65.7 66.3 145.1
========================================= =========== =========== =============
Number of shares
Weighted average number of 29 16/21p
ordinary shares:
For basic earnings per share 466.9 475.2 472.5
Dilutive potential ordinary shares from
share options 4.8 7.4 5.3
========================================= ======== ========== ========
For diluted earnings per share 471.7 482.6 477.8
----------------------------------------- -------- ---------- --------
Earnings per share:
Basic:
Adjusted 14.1c 14.0c 30.7c
Unadjusted 11.0c 18.7c 34.5c
Diluted:
Adjusted 13.9c 13.7c 30.4c
Unadjusted 10.9c 18.4c 34.1c
Adjusted earnings per share is shown calculated on earnings
before exceptional and other items (note 3) because the directors
consider that this gives a useful indication of underlying
performance.
6 Equity dividends on ordinary shares
Six months Six months
ended ended
30 June 30 June
2015 2014
$m $m
------------------------------------------------- ----------- -----------
Declared during the period:
Final dividend for the year ended 31 December
2014: 11.58 cents per share (2013: 11.00 cents
per share) 53.9 52.5
================================================= =========== ===========
The 2015 interim dividend of 4.85 cents per share (2014: 4.62
cents per share; $21.7 million in total) was approved by the Board
of Directors on 3 August 2015 and will be paid on 30 October 2015
to ordinary shareholders registered on 18 September 2015.
Shareholders will receive their dividends in sterling unless they
complete and submit to the Company's registrars by 5.30pm on 5
October 2015 an election form stating their wish to receive their
dividends in US dollars. The sterling dividend will be converted at
a prevailing exchange rate on 6 October 2015 and this exchange rate
will be announced on 7 October 2015.
7 Cash and cash equivalents and borrowings
The carrying value of cash and cash equivalents of $131.4
million (30 June 2014: $154.9 million; 31 December 2014: $166.3
million) approximates to their fair value.
The Group's fixed rate debt (including borrowings and finance
lease obligations) adjusted for interest rate hedging had a
carrying value at 30 June 2015 of $399.9 million (30 June 2014:
$271.0 million; 31 December 2014: $363.6 million). The fair value
of these borrowings (adjusted for interest rate hedging) at 30 June
2015 was $419.6 million (June 2014: $274.3 million; 31 December
2014: $383.5 million).
The carrying value at 30 June 2015 of the Group's floating
interest rate borrowings adjusted for interest rate hedging was
$441.2 million (30 June 2014: $459.3 million; 31 December 2014:
$435.2 million).
During the six months to 30 June 2015, the Group cancelled the
$200 million tranche leftover from its 2011 multicurrency revolving
credit facility, leaving the Group with its $650 million
multicurrency revolving credit facility which it signed in April
2014. As at 30 June 2015, the Group had available $330.0 million
(30 June 2014: $467.7 million; 31 December 2014: $580.0 million) of
undrawn facilities.
In addition, the Group has $500 million of US private placement
("USPP") senior notes; $300 million is dated 18 May 2011 with
maturities of 7, 10 and 12 years and $200 million is dated 17
December 2014 with maturities of 7, 10 and 12 years. Of the $500
million, $400 million has been swapped to a floating interest rate
and is accounted for at fair value through the profit and loss as
the fair value interest rate risk has been hedged from fixed to
floating rates. The remainder is accounted for at amortised cost.
Within the Group's definition of net debt the USPP is included at
its face value of $500 million. This is $11.6 million lower than
its carrying value (30 June 2014: $11.1 million; 31 December 2014:
$13.3 million).
8 Financial instruments
Categories of financial instruments
The carrying values of the financial instruments of the Group
are analysed below:
30 June 30 June 31 December
2015 2014 2014
Carrying Carrying Carrying
value value value
$m $m $m
--------------------------------------------- ---------- ---------- ------------
Financial assets
Fair value through profit or loss - foreign
exchange contracts (a) 1.8 1.5 1.8
Derivative instruments held in fair value
hedges (b) 7.2 6.9 8.2
Derivative instruments held in cash flow
hedges 1.5 5.2 0.5
Available for sale investments 6.8 9.1 8.5
Trade and other receivables (including
cash and cash equivalents) (c, d) 393.7 430.4 442.3
============================================= ========== ========== ============
411.0 453.1 461.3
============================================= ========== ========== ============
Financial liabilities
Fair value through profit or loss - foreign
exchange contracts (a) (3.6) (4.9) (1.7)
Derivative instruments held in fair value
hedges (b) (0.3) (1.4) -
Derivative instruments held in cash flow
hedges (5.6) (4.1) (5.2)
Borrowings and other payables (d) (1,124.4) (1,005.5) (1,094.2)
============================================= ========== ========== ============
(1,133.9) (1,015.9) (1,101.1)
============================================= ========== ========== ============
(a The foreign exchange contracts disclosed as fair value
through profit or loss are not designated in a formal hedging
relationship and are used to hedge foreign currency flows through
the BBA Aviation plc company bank accounts to ensure that the Group
is not exposed to foreign exchange risk through the management of
its international cash management structure.)
(b Derivative instruments held in fair value hedges are
designated in formal hedging relationships and are used to hedge
the change in fair value of fixed rate US dollar borrowings.)
c Recoveries from third parties in respect of environmental and
other liabilities totalling $5.3m (30 June 2014: $4.4m; 31 December
2014: $4.5m) are included within trade and receivables.
(d The carrying value of trade and other receivables, and other
payables approximates their fair value.)
8 Financial instruments (continued)
Derivative financial instruments
The fair values and notional amounts of derivative financial
instruments are shown below. The fair value on initial recognition
is the transaction price unless part of the consideration given or
received is for something other than the instrument itself. The
fair value of derivative financial instruments is subsequently
calculated using discounted cash flow techniques or other
appropriate pricing models. All valuation techniques take into
account assumptions based upon available market data at the balance
sheet date. The notional amounts are based on the contractual gross
amounts at the balance sheet date.
The fair values of the available for sale investments and
derivative financial instruments are categorised within Level 2 of
the fair value hierarchy on the basis that their fair value has
been calculated using inputs that are observable in active markets
which are related to the individual asset or liability. The Group
does not have any derivative financial instruments which would be
categorised as either Level 1 or 3 of the fair value hierarchy.
30 June 30 June 30 June 30 June 31 December 31 December
2015 2015 2014 2014 2014 2014
Notional Notional Notional
amount Fair value amount Fair value amount Fair value
Derivative financial
assets $m $m $m $m $m $m
---------------------- --------- ----------- --------- ----------- ------------ ------------
Derivatives not
in a formal hedging
relationship
Foreign exchange
forward contracts 241.8 1.8 (115.5) 1.5 247.2 1.8
Fair value hedges
Interest rate
swaps (265.0) 7.2 (195.0) 6.9 (400.0) 8.2
Cash flow hedges
Interest rate
swaps - - (135.0) 0.4 (135.0) 0.3
Foreign exchange
forward contracts (43.6) 1.5 (60.6) 4.8 (1.8) 0.2
(66.8) 10.5 (506.1) 13.6 (289.6) 10.5
====================== ========= =========== ========= =========== ============ ============
30 June 30 June 30 June 30 June 31 December 31 December
2015 2015 2014 2014 2014 2014
Notional Notional Notional
amount Fair value amount Fair value amount Fair value
Derivative financial
liabilities $m $m $m $m $m $m
---------------------- --------- ------------- --------- ------------- ------------ ------------
Derivatives not
in a formal hedging
relationship
Foreign exchange
forward contracts 101.6 (3.6) 345.9 (4.9) 21.6 (1.7)
Fair value hedges
Interest rate swaps (135.0) (0.3) (105.0) (1.4) - -
Cash flow hedges
Interest rate swaps (505.0) (4.8) (370.0) (3.7) (420.0) (3.4)
Foreign exchange
forward contracts (35.3) (0.8) 7.7 (0.4) (56.1) (1.8)
(573.7) (9.5) (121.4) (10.4) (454.5) (6.9)
====================== ========= ============= ========= ============= ============ ============
Adjustments relating to the credit risk of BBA Aviation plc and
its counterparties, as defined within IFRS 13, are immaterial in
the current period and prior periods.
9 Cash flow from operating activities
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2014
2015 2014
$m $m $m
----------------------------------------------- ----------- ----------- -------------
Operating profit 78.1 78.1 154.1
Share of profit from associates and joint
ventures (7.0) (0.6) (2.4)
----------------------------------------------- ----------- ----------- -------------
Profit from operations 71.1 77.5 151.7
Depreciation of property, plant and equipment 29.3 28.6 56.6
Amortisation of intangible assets 10.9 9.2 20.5
Loss/ (profit) on sale of property, plant
and equipment 0.2 (0.3) 0.2
Share-based payment expense 3.0 4.6 7.5
Increase in provisions 3.2 1.1 2.8
Pension scheme payments (11.0) (5.3) (9.1)
Other non-cash items 3.1 1.0 2.6
Unrealised foreign exchange movements (0.1) 0.2 (0.4)
Operating cash inflows before movements
in working capital 109.7 116.6 232.4
Increase in working capital (34.1) (49.2) (16.3)
----------------------------------------------- ----------- ----------- -------------
Cash generated by operations 75.6 67.4 216.1
Income taxes paid (7.9) (20.1) (28.4)
=============================================== =========== =========== =============
Net cash flow from operating activities 67.7 47.3 187.7
Dividends received from associates 1.8 0.1 1.0
Purchase of property, plant and equipment (39.4) (37.3) (85.8)
Purchase of intangible assets (1) (4.9) (28.4) (30.6)
Proceeds from disposal of property, plant
and equipment 0.7 0.6 0.4
Interest received 6.1 2.5 4.3
Interest paid (20.2) (18.4) (25.8)
Interest element of finance leases paid - (0.1) -
=============================================== =========== =========== =============
Free cash flow 11.8 (33.7) 51.2
=============================================== =========== =========== =============
(1) Purchase of intangible assets excludes $10.0 million (30
June 2014: $10.3 million; 31 December 2014: $22.6 million) paid in
respect of Ontic licences since the directors believe these
payments are more akin to expenditure in relation to acquisitions,
and are therefore outside of the Group's definition of free cash
flow. These amounts are included within purchase of intangible
assets on the face of the cash flow statement.
10 Acquisitions and Disposals
On the 30 June 2015 the Group's Legacy Support business acquired
the manufacturing rights and processes from Pratt & Whitney
Canada for selected JT15D engine component parts for a total
consideration of $14.0 million including $10.8 million cash
consideration, deferred consideration of $1.5 million and $1.7
million of contingent consideration. All of the consideration has
been attributed to intangible assets. The rights and processes
acquired in this acquisition constitute a business under the
definition of IFRS 3. Due to the proximity of the acquisition to
the period end the fair value of the assets acquired is subject to
amendment on finalisation of a fair value exercise.
In the period an increase to goodwill of $1.2 million has been
made in respect of prior year acquisitions in Flight Support as a
result of completing final fair value exercises.
On 3 February 2014, the Group disposed of its 100% shareholdings
in APPH Limited (APPH UK) and APPH Wichita Inc (Wichita), part of
the Aftermarket Services segment, to Héroux-Devtek for cash
proceeds of $128.0 million. During the year, the Group also closed
its APPH Houston operations. The net gain of $26.8 million from
these transactions is included within exceptional items in the
Consolidated Income Statement. Refer to the Group's 2014 annual
report for further disclosure.
11 Related party transactions
Transactions between the Group and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Details of transactions between the Group
and other related parties are detailed below.
During the period, Group companies entered into the following
transactions with related parties who are not members of the
Group:
Sales of goods Purchases of goods
========================== ===================================== =======================================
Six months Six months Six months Six months
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2015 2014 2014 2015 2014 2014
$m $m $m $m $m $m
---------------------- ------------- ----------- ------------- ----------- ----------- -------------
Associates and joint
ventures 5.6 8.1 16.9 192.2 268.4 530.2
====================== ============= =========== ============= =========== =========== =============
Amounts owed by related Amounts owed to related
parties parties
====================== ================================ ================================
30 June 30 June 31 December 30 June 30 June 31 December
2015 2014 2014 2015 2014 2014
$m $m $m $m $m $m
---------------------- -------- -------- ------------ -------- -------- ------------
Associates and joint
ventures 1.0 2.5 1.5 48.1 39.9 46.1
====================== ======== ======== ============ ======== ======== ============
Purchases of goods principally relates to the purchase of
aviation fuel. Purchases were made at market price, discounted to
reflect the quantity of goods purchased. The amounts outstanding
are unsecured and will be settled in cash. No guarantees have been
given or received.
In addition, at the balance sheet date, Group companies had loan
receivables from an associated undertaking of $2.4 million (30 June
2014: $2.5 million; 31 December 2014: $2.5 million). The loans are
unsecured and will be settled in cash, and were made on terms which
reflect the relationships between the parties.
The Group has various pension and other post-retirement benefit
schemes for its employees. Details are set out in note 12.
12 Retirement obligations
The defined benefit obligation at 30 June 2015 for the UK Income
and Protection Plan (the "IPP") under IAS 19 is estimated based on
the latest actuarial valuation as at 31 March 2012, with
assumptions updated to reflect market conditions as at 30 June 2015
where appropriate. The defined benefit plan assets have been
updated to reflect their market value as at 30 June 2015. The
Group's foreign retirement obligations relate to a number of funded
final salary defined benefit pension arrangements in North America.
Pension costs are calculated by independent qualified actuaries,
using the projected unit method and assumptions appropriate to the
arrangements in place.
As at 30 June 2015, the IAS 19 valuations of the UK and US
schemes indicate a net deficit of $36.4 million (30 June 2014:
$47.6 million; 31 December 2014: $62.2 million), which when
combined with the minimum funding liability recognised in
accordance with IFRIC 14, of $nil (30 June 2014: $49.2 million; 31
December 2014: $nil) gives a combined liability recognised on the
balance sheet of $36.4 million (30 June 2014: $96.8 million; 31
December 2014: $62.2 million).
During the first half of 2014, the Group agreed a new long-term
funding package with the Trustee of the UK Plan, following the sale
of APPH Limited. This new funding package replaced the deficit
contributions agreed with the Trustee as part of the 2012 triennial
valuation of the UK Plan. As part of this funding package, an
Asset-Backed Funding (ABF) structure was put in place, which
entitles the Trustee to receive payments of GBP2.7 million ($4.1
million) each year until 2034. In addition, the Group agreed to
make and made an additional payment of GBP4.2 million ($6.4
million) on 31 January 2015.
A new triennial valuation of the UK Plan is currently underway,
with an effective date of 31 March 2015, with the outcome of this
valuation expected to be known by the end of 2015.
13 Share capital
Ordinary share capital as at 30 June 2015 amounted to $252.6
million (30 June 2014: $252.3 million; 31 December 2014: $252.3
million). During the period the Group issued 0.8 million (30 June
2014: 0.9 million; 31 December 2014: 1.0 million) of ordinary
shares to satisfy options exercised and the vesting of share awards
under the Group's various share schemes. The consideration for
shares issued in respect of share options was $nil million (30 June
2014: $0.5 million;
31 December 2014: $0.6 million). During the period, the company
acquired 1.1 million shares as part of the share buy-back
programme.
The number of shares in issue as at 30 June 2015 was 482.2
million (30 June 2014: 481.4 million; 31 December 2014: 481.4
million).
14 Risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the year ended 31 December 2014. The risks and
uncertainties are summarised below:
-- General economic downturn leading to a reduction in revenues
and profits as a result of reduced B&GA and commercial flying
and military expenditure.
-- Catastrophic global event (terrorism, weather) with a
material impact on global air travel leading to a reduction in
revenues and profits as a result of reduced B&GA and commercial
flying.
-- Legislative changes causing a material increase to the cost
of BG&A flight relative to alternatives leading to a reduction
in revenues and profits as a result of a reduction in B&GA
flying hours.
-- Ability to attract and retain high quality and capable people
resulting in a loss of key personnel, lack of internal successors
to key management roles, and short to medium term disruption to the
business.
-- Potential liabilities from defects in services and products
resulting in adverse reputational impact with associated
deterioration in customer relationships and a loss of earnings from
liability claims.
-- Intentional or inadvertent non-compliance with legislation
leading to adverse reputational impact and exposure to potential
litigation or criminal proceedings.
-- Environmental exposures resulting in a loss of earnings from
the cost to remediate or from potential litigation, the potential
for the loss of licence to operate, or greater than expected
liabilities associated with historical operations.
Independent Review Report to BBA Aviation plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated cash flow
statement, the consolidated statement of changes in equity, and
related notes 1 to 14. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
4 August 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
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