BBA Aviation. BBA Aviation 2017 Final Results

Transcription

1 BBA Aviation

2 2017 Strong execution in favourable market conditions Signature Significant progress on the commercial renegotiations Unique global network of 198 FBOs Investing for future growth Signature leases, hangar space and new non-fuel services Ontic has recently acquired five licences and continues to see a strong pipeline Capital structure Increased target debt range to x based on Group s strong cash flow generation Progress Ongoing cost discipline Improved financial performance at Ontic New CEO, Group Finance Director and two new NEDs Strategic review of ERO Total operating profit 1 $360.6m Aftermarket Services 17% Flight Support 83% 2016 Aftermarket Services 12% Note 1: Underlying operating profit (pre exceptional and other items) Total operating profit 1 $302.6m Flight Support 88% 01

3 Outperforming a strong market Signature outperformance Good second half progress through commercial renegotiations Network benefits starting to show through: Improved loyalty and customer satisfaction Improved fuel volumes Improved fuel margins Extended non-fuel services contribution Aftermarket Services progress Ontic strong performance, with a good contribution from 2016 licences Further second half Ontic licence portfolio growth Improving ERO performance in continuing weak markets Opportunities for capital investment at attractive ROIC. 2

4 Performance Review David Crook Group Finance Director 3

5 Strong operating profit growth for 2017 Flight Support (83% of continuing OP 1 ): Signature continued outperformance with strong drop-through Improved second half performance as new commercial agreements contribute Aftermarket Services (17% of continuing OP 1 ): Ontic strong performance ERO much improved H2 performance Basic adjusted EPS (continuing) up 24% to 24.0c Dividend increased 5.1% to 13.4c per share Continued strong cash flow Free cash flow $220.6 million Further deleveraging to 2.6x New target leverage range of 2.5x-3.0x. Note 1: Underlying operating profit (pre exceptional and other items) Operating profit 1 ($m) Change Flight Support % Aftermarket Services % Central costs (34.1) (33.4) 2.1% Group continuing % Discontinued (0.2) 27.5 Basic adjusted EPS (continuing) 24.0c 19.4c 23.7% Dividend per share 13.40c 12.75c 5.1% Free cashflow ($m) (3.5) Net debt ($m) (1,167.1) (1,335.3) (168.2) Net debt to EBITDA, covenant Net debt to EBITDA, reported 2.6x 3.1x (0.5)x 2.6x 3.2x (0.6)x 4

6 Flight Support: up 12% 83% of continuing OP 1 Strong revenue growth of 7% (constant fuel prices) Signature good organic growth of 3.8%; (H1 : 3.2%, H2 : 4.4%) Landmark contribution for January shown under acquisitions Organic operating profit growth of 11% Building off a strong underlying US market at 3.7% Strong drop through Operating margins up 140bps to 20.0% at constant fuel prices excluding disposals Network New strategic lease at Dulles International, Washington Lease extension at Santa Barbara Investment returns Divisional ROIC 12.2% (FY 2016: 11.2%). Revenue Bridge ($m) 1,443.2 Operating Profit 1 ($m) (2.6) (0.6) ,531.3 (7.8) FX Fuel 2016 Likefor-like Acquisitions ,643.0 Organic FX Fuel Disposals 2016 Likefor-like Acquisitions Organic 2017 Note 1: Underlying operating profit (pre exceptional and other items) 5

7 Aftermarket Services: up 55% 17% of continuing OP 1 Revenue up 3% Revenue Bridge ($m) Ontic delivered 27% revenue growth (5% organic growth) ERO organic revenues declined 7% in H1 and 0.5% in H (5.8) (12.2) Operating profit 1 up 55% Ontic strong operational performance c.85% of division Strong contribution from new Ontic licences 2016 FX 2016 Like-forlike Acq's Organic 2017 Contribution from B52 parts and C130 radar units in Ontic not expected to repeat in 2018 Much improved ERO performance in H2 Investment returns Operating Profit 1 ($m) Divisional ROIC 11.3% (2016: 6.9%) (1.3) 40.7 Note 1: Underlying operating profit (pre exceptional and other items) 2016 FX 2016 Like-forlike Acq's Organic

8 Underlying Group Income Statement Continuing operations ($m) Change Revenue % Revenue (fuel adjusted) % Operating profit¹ % Margin % 15.2% 14.1% 110bps Margin % (fuel & disposal adjusted) 15.2% 13.2% 200bps Net interest (62.1) (63.9) (2.8)% Profit before tax % Profit after tax % Continuing, adjusted EPS 24.0c 19.4c 23.7% Total Group Change ROIC 11.0% 10.1% 90bps Adjusted EPS (cents) % Adjusted EPS (continuing in cents) % Dividend (cents) % Continuing operations by segment ($m) Change Flight Support % Aftermarket Services % Central costs (34.1) (33.4) 2.1% Operating profit¹ % Note 1: Underlying operating profit (pre exceptional and other items) 7

9 Exceptional and other items Exceptional and other items Continuing (before tax) Amortisation of acquired intangibles: $93.8m (non-cash) Restructuring expenses of $28.0m (ERO and Corporate) Continuing (tax) One off non-cash charge $17.5m in respect of US tax reform One time repatriation charge $3.0m, payable over 8 years Discontinued (after tax) Disposal of ASIG ($22.5m) in January

10 Continuing strong cash generation Continuing businesses Strong cash generative business driven by earnings growth Working capital outflow reflects the anticipated $20m reversal from 2016 outperformance Capex investments at FBOs in Boeing Field, Palm Beach and Nashville Cash tax rate remains substantially lower than underlying effective tax rate Exceptional cash costs relate to restructuring costs Acquisitions of $80.7m, primarily in Ontic Leverage 2.6x Discontinued business Working capital outflow for ASIG in January prior to its disposal Tax payable on gain related to ASIG disposal. $m Continuing Discontinued Underlying operating profit 1 Depreciation & amortisation (0.2) Underlying EBITDA Working capital movement (20.6) (25.7) (46.3) 51.5 Capex (80.3) - (80.3) (102.4) Net Interest paid (57.3) - (57.3) (61.9) Tax paid (33.4) (8.4) (41.8) (15.8) Exceptional and other items (12.7) - (12.7) (63.5) All other movements Free cash flow (33.4) Dividends (130.7) - (130.7) (124.3) Issue of shares Acquisitions & licences (80.7) - (80.7) (2,108.8) Disposals Other + FX (11.8) - (11.8) 30.3 Change in net debt (1,791.8) Net debt (1,167.1) (1,167.1) (1,335.3) Net debt to EBITDA, covenant 2.6x 2.6x 3.1x Net debt to EBITDA, reported 2.6x 2.6x 3.2x Note 1: Underlying operating profit (pre exceptional and other items) Note 2: Underlying operating profit before depreciation and amortisation 9

11 Other financial matters and guidance FY18 Central costs ~$25m Group central costs in FY18 Capital expenditure FY18 capex $ m Ontic licence investment in FY18 of c.$30m Pensions Total pensions valuation net deficit $71.7m (2016: $82.8m) due to better than expected returns on plan assets UK payment schedule as agreed with trustees: 3m for next 3 years, 2.7m thereafter until 2034 Next UK actuarial review March Tax Underlying effective tax rate c20%, cash tax rate c10% Interest Update to follow refinancing 10

12 BBA Aviation Robust and flexible cash flows Net debt to EBITDA Flexible Cost Base 3.5x 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x 2.7x 2.9x 2.8x 2.1x 1.5x 1.6x 1.8x 2.2x 2.3x¹ 3.1x 2.6x % 25% Fixed costs - Leases & other Variable costs - Fuel & labour US FBO long leases Capital Expenditure and licences $160.1m $136.8m Licenses FBO/Hangar dvpmt FBO Maintenance Ontic 50.0 ERO ASIG Other delivered through long-term lease and IP protected portfolio Note 1: 2015 historically adjusted for the results of the equity raise 11

13 Strategy translated into our capital allocation policy Ongoing organic growth and market outperformance Enlarged network proposition Capital expenditure Signature Elite Signature Select Ontic licences Expanded non-fuel service offering Expanded line maintenance services M&A opportunities Hangar development Core dividend sustainable growth Technology Market leading service quality Return to shareholders 12

14 Financing $650m RCF to be refinanced in H Facility B acquisition debt to be refinanced in 2018 Facility C acquisition debt to be refinanced by 2019 US PP $500m ($120m maturing May 2018) will be retained and reviewed periodically as we refinance. Debt facilities aligned both to the target leverage range and with tenure that better reflects the long-term nature of the Group s lease and IP portfolio 13

15 BBA Aviation Wayne Edmunds Interim Group Chief Executive 14

16 BBA Aviation What s next? o BBA has evolved from Aviation Services conglomerate to the global leader in FBOs o BBA has a durable and defensible market position from which to launch new growth Core assets 198 FBOs average US lease term of 18 years 150 long term Ontic licences demonstrable success in buying and integrating new FBO and licences Cost advantage from scale in IT, purchasing etc 12%+ ROIC at manageable risk levels over the long term o Recent sources of EBITDA outperformance include: Organic fuel and non-fuel services growth Additional investments in FBOs, Ontic licences and non-fuel services Synergies. 15

17 BBA Aviation What s next? o Consensus Free Cash Flow $ m over next few years Includes $100m capital expenditure (1x depreciation) This funding supports organic growth from fuel and non-fuel services o Additional investment of $100-$150m per year will be made to extend the Signature services and Ontic licences We have demonstrable success in buying and integrating in our sweet spot of new FBOs and Ontic licences 12%+ ROIC at manageable risk levels over the long term Yield management more fuel volume and more services over a comparatively fixed cost base increases all key financial KPIs. Landmark integration complete, major portfolio work underway and Group de-levered 16

18 What s next for the Signature network? Market Growth Organic B&GA growth at 2-3% FBO additions Network Agreements Fractionals Charter Other Expansion of non-fuel services Hangaring Baggage handling De-icing Customer and pilot services New services and asset utilisation Franchise - Select Aircraft management & charter (GASAM) Line maintenance - TECHNICAir Travel services and Elite Data analytics for targeted promotions and revenue management Technology. 17

19 Ontic profile Aftermarket services for 25+ major OEMs Financial profile 150+ licences for more than 6,500 parts $200m+ revenues 15% ROIC $30m average annual licence investment What sets us apart IP rights for wide portfolio Partnerships with more than 25 OEMs Balanced portfolio of licences between commercial & military aviation Flexible manufacturing and product support capabilities with cross-trained workforce Depth of knowledge on multiple aircraft systems Key services Provision of equipment, components and spare parts for maturing and legacy platforms Transition of non-core products from OEMs Maintenance, repair and overhaul. 18

20 What s next for Aftermarket Services? Expanded investment to leverage unique position Data analytics for pricing and end-of-life management Licence acquisition expanded M&A to expand on more platforms and add technology ERO strategic review 19

21 Strategy translated into our capital allocation policy Ongoing organic growth and market outperformance Enlarged network proposition Capital expenditure Signature Elite Signature Select Ontic licences Expanded non-fuel service offering Expanded line maintenance services M&A opportunities Hangar development Core dividend sustainable growth Technology Market leading service quality Return to shareholders 20

22 Self-fund expansion of core assets to support long-term growth High quality business Market leadership, barriers to entry Strong brands, durable business model Ontic acquisitions contributing; ERO cost efficient Good growth prospects Network strength brings market outperformance opportunity Expansion of non-fuel services Ontic pipeline potential Data analytic approach Portfolio optimisation Attractive financial characteristics Strong cash generation Effective capital structure appropriate for the Group going forwards and allows for return to shareholders Expand ROIC. 21

23 Outlook Solid B&GA market growth expected Investments in our Signature network focused on delivering continued market outperformance A growing portfolio of IP protected licences at Ontic offers significant opportunities despite some non-recurring 2017 contributions Strategic review at ERO Strong balance sheet with appropriate capital structure allowing flexibility for both organic and inorganic growth opportunities Expectations for 2018 performance remain unchanged. 22

24 Questions 23

25 Appendix 24

26 Flight Support H1 and H2 bridges H1 Revenue ($m) H2 Revenue ($m) (6.3) Organic 2017 H H2 FX Fuel 2016 H2 Like-for-Like 2016 H1 FX Fuel 2016 H1 Likefor-like Acquisitions Acquisitions Organic 2017 H2 H1 Operating Profit 1 ($m) H2 Operating Profit 1 ($m) (0.9) - (8.0) H1 Like-for-like 2016 H1 FX Fuel Disposals Acquisitions Organic 2017 H H2 FX Disposals 2016 H2 Likefor-like Organic 2017 H2 Note 1: Underlying operating profit (pre exceptional and other items) 25

27 Aftermarket Services H1 and H2 bridges H1 Revenue ($m) H2 Revenue ($m) (6.3) (12.3) H1 FX 2016 H1 Likefor-like Acq's Organic 2017 H H2 FX 2016 H2 Likefor-like Acq's Organic 2017 H2 H1 Operating Profit 1 ($m) H2 Operating Profit 1 ($m) (0.9) (0.4) H1 FX 2016 H1 Likefor-like Acq's Organic 2017 H H2 FX 2016 H2 Likefor-like Acq's Organic 2017 H2 Note 1: Underlying operating profit (pre exceptional and other items) 26

28 Depreciation and Amortisation 2017 Continuing Underlying Exceptional Statutory OP (123.0) Depreciation Amortisation EBITDA (29.2) Discontinued Underlying Exceptional Statutory OP (0.2) - (0.2) Depreciation Amortisation EBITDA Total Underlying Exceptional Statutory OP (123.0) Depreciation Amortisation EBITDA (29.2) Extract from cash flow 2017 Operating profit Operating profit from discontinued operations (0.2) Share of profit from associates and joint ventures (3.4) Profit from operations Depreciation of property, plant and equipment 71.4 Amortisation of intangible assets

29 Revenue split 1 and organic growth 2 Flight Support 69% Organic 4% Aftermarket Services 31% Organic (2)% Flight Support RoW 11% Organic 7% Flight Support N. America 89% Organic 4% ERO 71% Organic (4)% Ontic 29% Organic 5% Revenue 2 ($m) N. America RoW Total Signature Flight Support 1, ,643.0 Engine Repair & Overhaul Ontic , ,370.6 Note 1: Revenue for continuing operations only Note 2: Organic growth representing continuing operations only 28

30 Adjusted earnings per share Discontinued Continuing Total Adjusted earnings A Underlying DT Adjusted earnings on current tax B IFRS weighted average number of shares C - 1, , , , ,026.6 Underlying EPS A/C - 1.7c 24.0c 19.4c 24.0c 21.1c Growth % 13.7% Cash EPS B/C - 2.5c 28.6c 22.1c 28.6c 24.6c Growth % 16.2% 29

31 Disclaimer This presentation 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. 30