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Annual Results

BBA Aviation underlying operating profits rise

01 March 2017 09:29

BBA Aviation reports a strong performance for the year to the end of December with underlying total operating profit up 63% at $330.1m.

Continuing group revenue increased by 25% to $2,149.1 million, including a $558.7 million contribution from acquisitions.

Continuing Flight Support revenue increased 55%, reflecting a good Signature result and the contribution of acquisitions of $545.9 million, including Landmark Aviation and the addition of four new FBOs in Italy, offset by the impact of lower fuel prices and foreign exchange movements that reduced Flight Support revenue by $68.3 million.

Aftermarket Services' revenue was down 10% driven by ERO. Continuing underlying Group operating profit was $302.6 million (2015: $181.5 million).

The group said there was an excellent performance in Flight Support as well as a $132.4 million contribution from acquisitions, of which $21.9 million related to cost synergies.

Aftermarket Services, now only 12% of continuing group underlying operating profit pre central costs, was down 30%; again due to ERO's weak performance.

Continuing group underlying operating profit margin increased to 14.1% (2015 constant fuel price: 11.0%) with a greater contribution from Signature partly offset by a lower margin in Aftermarket Services.

Underlying net interest increased by $32.1 million to $63.9 million (2015: $31.8 million) mostly due to the acquisition facilities drawn down on completion of the Landmark Aviation acquisition.

Net debt increased to $1,335.3 million (2015: net cash position of $456.5 million).

On a covenant basis, the net debt to EBITDA ratio increased to 3.1x (2015 historically adjusted for the results of the capital raise: 2.3x), and on a reported basis to 3.2x (2015 historically adjusted 2.3x).

Interest cover on a covenant basis decreased to 6.5x (2015: 8.5x), due to the increased interest on the drawn debt.

Underlying profit before tax increased to $238.7 million (2015: $149.7 million).

The group's underlying tax rate for continuing operations is 16.5% (2015: 13.9%).

Underlying profit before tax increased by 60% and the adjusted average number of shares increased by 308 million via the October 2015 capital raising; resulting in continuing underlying adjusted earnings per share (EPS) increasing by 8% to 19.4 cents (adjusted 2015: 18.0 cents).

Exceptional and other items after tax, for continuing and discontinued operations, totalled $316.0 million.

It said the key items of this were the previously reported impairment charge of $184.4 million in relation to ERO's assets due to its continuing challenging trading environment; and the impairment charge of $109.1 million following the write down of ASIG's assets in anticipation of its sale.

Further items which were all anticipated include:

- restructuring expenses of $9.9 million (2015: $15.1 million), mainly associated with ERO's ongoing footprint rationalisation programme;

- $24.9 million of integration costs related to the acquisition of Landmark Aviation

- $98.6 million of non-cash amortisation of acquired intangible assets (2015: $9.3 million), an increase resulting primarily from the acquisition of Landmark Aviation.

Continuing statutory loss before tax was $82.2 million compared with a $77.4 million profit for the prior year.

Chief executive Simon Pryce said: "2016 was a transformational year for BBA Aviation.

"Effective execution of our strategy and continued operational delivery has significantly repositioned the Group and materially enhanced its growth prospects and value creation potential.

"We completed the significant acquisition of Landmark Aviation, which materially expanded the Signature network, and made further investment in Ontic's IP protected licence portfolio.

"We executed the successful integration of 62 new FBOs into the Signature FBO network, delivering greater cost synergies more rapidly than originally anticipated.

"We also successfully sold six Landmark FBOs required by the US Department of Justice and ASIG, which completed in January 2017.

"This has all been achieved at the same time as delivering a strong underlying operational performance with excellent cash generation and deleveraging.

"As a result Signature comprises the majority of the Group and has a global network of over 200 FBOs that can meet more of the needs of our customers at most of the locations they want to fly to.

"This enhances and extends our opportunity for continued market outperformance. Ontic, which generates the majority of the Aftermarket operating profit, is a unique portfolio of IP protected licences enhanced by the business acquired from GE Aviation at the end of 2016.

"As we begin to adopt the GE products we are pleased with our initial findings.

"Ontic continues to see significant growth opportunities and has a strong pipeline and a good order book.

"Although ERO, continues to be impacted by reduced legacy mid-cabin fixed wing flying, our footprint reduction programme remains on track and should lead to further improved financial performance even at lower levels of activity.

"In summary, the Group is now focused on higher value-added, better IP protected, high ROIC and strongly cash generative businesses with enhanced prospects and the Board remains confident of good growth in 2017."

At 9:29am: (LON:BBA) BBA Aviation PLC share price was -8.55p at 296.45p

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