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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bba Aviation Plc | LSE:BBA | London | Ordinary Share | GB00B1FP8915 | ORD 29 16/21P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 314.80 | 314.00 | 314.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
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
Hot Features
Premium
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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