BBA Aviation plc Final Results. Results for the year ended 31 December 2013

Transcription

1 BBA Aviation plc 2013 Final Results Results for the year ended 31 December 2013 For further information please contact: Mark Hoad, Group Finance Director (020) Jemma Spalton, Head of Investor Relations BBA AVIATION PLC David Allchurch / Christian Cowley (020) TULCHAN COMMUNICATIONS A video interview with Simon Pryce, CEO and Mark Hoad, FD is now available on and A live audio webcast of the analyst presentation will be available from 09:00 today on and

2 FINAL RESULTS FOR PERIOD ENDED 31 DECEMBER 2013 Results in brief ($m) Underlying results 1 Statutory results % Change % Change (restated) 2 (restated) 2 Revenue 2, , % 2, , % EBITDA % % Operating profit % % Profit before tax % % Earnings per share % % Return on invested capital % 9.8% Free cash flow % Net debt Dividend per share % (1) Before exceptional items (as defined in the condensed consolidated financial statements). (2) Restatement for IAS19 Revised as set out in Note 1 to the condensed consolidated financial statements. (3) Basic earnings per share. (4) Underlying operating profit return on average invested capital including goodwill and intangibles amortised or written off to reserves. (5) Cash generated by operations, plus dividends from associates, less tax, net interest and net capital expenditure. These definitions as outlined above are consistently applied throughout this results announcement. Industry leading businesses Good results in broadly flat markets Positive financial performance with 2% revenue growth, underlying profit before tax up 8% and EPS up 9% Continued strong cash conversion of 101% and a 21% increase in free cash flow ROIC progression despite continued investment for long-term growth Group s strategic focus enhanced by value creative disposal of APPH for $128 million Good performance Flight Support (53% of Group EBIT) Organic revenue growth of 4%, underlying operating profit increase of 5% Signature: continued market outperformance and network expansion, good progress on key investment projects ASIG: costs incurred to address service levels led to improved operational performance in the second half and significant new contract wins post year end Aftermarket Services and Systems (47% of Group EBIT) Organic revenue reduction of 2%, underlying operating profit up 2% ERO: weaker than anticipated revenue, partially offset by operational improvements, structural cost reduction programme launched Legacy Support: revenue increased 14%, major contracts completed Growth and value creation $150m of strategic investments made or committed in 2013 o Four acquisitions in Flight Support including three FBO acquisitions o Six new licences signed across multiple OEMs In 2014, FBO acquisitions in Biggin Hill and Detroit, the expansion of ASIG fuelling activities in North America via $16.8 million Skytanking acquisition and a new Legacy licence from Rolls Royce Strong cash conversion supporting on-going creation of significant investment capacity $125 million share repurchase programme launched to return APPH disposal proceeds to shareholders Simon Pryce, BBA Aviation Chief Executive Officer, commented: BBA Aviation produced another good performance in 2013, despite the low growth environment. Profit before tax was up 8% and earnings per share up 9%, driven in particular by Signature and Legacy, although ERO was weaker than anticipated. We also made strong strategic progress, with $150m of strategic investments across both divisions, the disposal of APPH and the planned return of $125m to shareholders. While inputs in ERO are expected to remain subdued in 2014, and growth in Legacy will pause following the completion of several major contracts in 2013, North American B&GA flying, although still volatile, is showing some signs of a recovery. This, together with the incremental contribution from strategic investments already announced, an additional $24m of acquisitions and new licences agreed since year-end, continuing operational improvements and a solid investment pipeline, gives us confidence that 2014 will be another year of progress for BBA Aviation. Over the longer term, the underlying strengths of our market-leading businesses, the continuing improvement in their operational performance and the structural growth and consolidation in our major markets give us increasing confidence in our ability to generate superior through-cycle returns. 2

3 BBA Aviation plc Final Results, 5 March 2014 FINAL RESULTS 2013 Overview BBA Aviation has made good progress in 2013 as expected, delivering further market outperformance and an improvement in key operating metrics, as well as continuing effectively to execute the Group s growth strategy. Group revenue in 2013 of $2,218.6 million increased by 2% compared with the prior year (2012: $2,178.9 million), notwithstanding our key markets having remained broadly flat. There was a $27.1 million revenue contribution from acquisitions, but lower fuel prices reduced revenue by $20.6 million. The organic increase in revenue (excluding the impact of exchange rates, fuel prices, acquisitions and disposals) also totalled 2%. Underlying operating profit (excluding exceptional items) increased by 4% to $200.1 million (2012: $192.7 million) and the Group operating margin showed a modest improvement to 9.0% (2012 fuel adjusted: 8.9%). The progress in underlying operating profit was due to the contribution from organic growth in Flight Support and margin progression in Aftermarket Services. The previously announced reorganisation of the Group from five businesses to two divisions has begun to deliver benefits. Both management teams are now established and have started to implement more standardised processes and practices and to optimise management and support structures. There was a $5.3 million reduction in the underlying net interest expense to $29.6 million (2012: $34.9 million) due to a reduction in the blended average interest rate, principally as a result of closing out higher rate interest rate swaps in mid Interest cover improved to 8.8 times (2012: 7.3 times) as a result of the reduction in net interest charge, coupled with the improvement in underlying EBITDA. Underlying profit before tax improved by 8% to $170.5 million (2012: $157.8 million). The underlying effective tax rate of 14.5% was marginally lower than the prior year (2012: 15.4%). As a result of the improvement in underlying operating profit and reduction in net interest expense, basic adjusted earnings per share increased by 9% to 30.5 cents (2012: 27.9 cents). Profit before tax increased by 16% to $145.2 million (2012: $125.1 million) and profit for the period increased by 25% to $138.1 million (2012: $110.3 million). Net exceptional items after tax amounted to $7.6 million (2012: $23.2 million), a reduction of 67%. We once again turned operating profit into good operating cash flow with cash conversion of 101%. Free cash flow for the year increased by 21% to $146.5 million (2012: $121.2 million) with the increase principally as a result of improved operating profit, working capital and net interest payments. Net capital expenditure increased as planned to $76.3 million (2012: $55.4 million), equivalent to 1.2 times underlying depreciation and amortisation (2012: 0.9 times), with significant investments in key projects including the dedicated NetJets facility at Palm Beach, the new FBO terminal at Newark and the commencement of the redevelopment of our FBO at Luton. The Group s strong cash conversion continued to support the on-going creation of significant investment capacity. Total acquisition and licence spend in the year amounted to $86.1 million (2012: $35.5 million), including the $67.0 million acquisition of the Maguire Aviation FBO at Van Nuys, California, the $3.0 million purchase of the 75% share of Starlink Aviation s FBO in Montreal, ASIG s $4.3 million acquisition of gategroup s cleaning and de-icing business in London and Dublin, and the $11.8 million investment in Legacy licences. The agreed and previously announced $38.5 million acquisition of the Jet Systems FBO at Westchester County Airport, New York is expected to complete in the first half of As announced on 3 February 2014, we completed the disposal of APPH, further increasing BBA Aviation s focus as an aviation support and aftermarket services provider. The total consideration of $128 million is equivalent to 17.8 times 2013 underlying operating profit. Further to the disposal of APPH, BBA Aviation intends to return the net cash proceeds to shareholders by way of a $125 million share repurchase programme. This is consistent with the Group s disciplined approach to capital management, whilst retaining the financial headroom to continue to implement the Group s acquisition strategy. 3

4 Net debt increased to $478.5 million (2012: $416.4 million) with a total net cash outflow of $61.6 million, after total dividend payments in the year of $71.3 million, the $28.8 million cash cost of closing out the final remaining cross-currency swaps in the first half of the year and aggregate acquisition and licence spend of $86.1 million. At the end of the year net debt to underlying EBITDA was 1.8 times (2012: 1.6 times). Return on invested capital increased by 20 basis points to 10.0% (2012: 9.8%), despite investments made in the year which are expected to generate superior returns over the longer term. Business Review Flight Support Our Flight Support division provides specialist on-airport support services including refuelling and ground handling to the business & general aviation market through our Signature Flight Support brand and to the commercial aviation market through our ASIG brand. $m * Change Revenue 1, , % Organic revenue growth 4% (4)% Underlying operating profit % Operating margins 8.5% 8.5% Operating cash flow % Divisional ROIC 9.7% 9.3% * Restated for the implementation of IAS19R as set out in note 1 in the Condensed Financial Statements Operating margins at constant fuel prices Flight Support revenues increased by 4% to $1,375.9 million (2012: $1,321.8 million). Acquisitions contributed $21.7 million of increased revenue and lower fuel prices reduced revenue by $20.6 million. On an organic basis Flight Support revenues increased by 4%, which was largely driven by market outperformance as well as a return to more normal levels of de-icing activity following the weak comparator in The organic revenue growth drove an increase in underlying operating profit for the division of 5% to $116.3 million (2012: $110.9 million) with operating margins unchanged at 8.5% (2012: 8.5%) after adjusting for fuel prices. Flight Support again delivered good cash conversion of 118% (2012: 105%), which was in part driven by a working capital inflow linked to timing of fuel vendor payments, and there was positive absolute progress with a 17% increase in operating cash flow for the division to $137.0 million (2012: $116.6 million). Return on invested capital increased by 40 basis points to 9.7% (2012: 9.3%) despite the level of acquisitions and investments made to deliver future superior growth. Signature Flight Support (Signature) delivered a strong performance in 2013 as it outpaced its major market in North America and grew its network through meaningful acquisitions and the continued expansion of Signature Select TM, its asset light licensing model. Signature s revenue increased by 2% to $968.4 million (2012: $952.9 million). Adjusted for fuel price fluctuations, organic revenue increased by 4%. US B&GA activity increased by 2% in the year and European B&GA movements declined by 2%. In Europe, Signature was also impacted by slot availability at London Heathrow, although this issue has been largely resolved going into Continued outperformance in North America offset this European market softness. During the course of the year Signature completed or signed agreements to add five new FBOs to its market-leading network. There are now a total of 118 FBOs in the network globally, with 71 of these in North America. As previously announced, Signature extended its presence at Van Nuys Airport through the acquisition of Maguire Aviation Group, LLC making Signature the largest operator at this key B&GA airport. The acquisition completed in December Signature will also extend its leading position at Westchester County Airport through the acquisition of Jet Systems, which is expected to complete in the first half of 4

5 2014. Since year end Signature has also agreed to acquire FBOs at London Biggin Hill and Detroit Metropolitan Wayne County Airport, Michigan for a total cash consideration of $7.0 million. Signature further extended its network in Europe, the Caribbean, Asia and South America as it commenced operations at Berlin Tegel Airport, won an RFP for a new FBO at Port of Spain, Trinidad, started handling operations at Singapore Changi International Airport and in early 2014, started construction for a new FBO in Panama through an airport licensing agreement with ASIG. In September Signature purchased a 75% share of Starlink Aviation Inc s FBO in Montréal, Quebec, Canada, formerly part of the Signature Select TM network, representing the first acquisition of a Signature Select TM location. The Signature Select TM network continued to grow with the addition of the Sonoma Jet Center at Sonoma County Airport. Signature also signed an exclusive licensing arrangement with Imperial Oil to provide its 37 Esso dealers in Canada with the opportunity to join the Signature Select TM network. Signature continued progress in securing lease extensions across its network with the average residual lease life of Signature s locations in the US at 18 years. In total, Signature has secured 12 lease extensions in the last 2 years, including a 10-year lease extension to our sole source facility in Washington DC. Signature also won the RFP to construct a new facility at Mineta San Jose International Airport, under a 50-year lease which is expected to be completed in Signature has completed two of its previously announced construction projects with the grand openings of the new dedicated NetJets private terminal at Palm Beach International Airport in June and the stateof-the-art private aviation terminal at Newark Liberty International Airport in November. Meanwhile, the ongoing redevelopment of Signature s FBO at Luton remains on track for the new hangar to be operational in the second quarter of 2014 and the new FBO to open in the second half of Signature s commitment to consistently exceed customer expectations by continuously improving the safety and quality of the services it provides resulted in another increase in its customer loyalty score to 85%, the highest level in the company s history. ASIG s revenue increased by 10% to $407.5 million (2012: $368.9 million) despite the reduction in commercial aviation movements by 1% in North America and by 2% in Europe. Half of the revenue increase related to the acquisition of PLH Aviation Services and Dryden Air Services in Canada that completed in August 2012 and the acquisition of gategroup s cleaning and de-icing business in London and Dublin that completed in June The balance of the increase was organic. Under a new leadership team, ASIG has reinvigorated its focus on operational effectiveness, ensuring that it strives to maintain the highest safety standards, service differentiation and long-term is the lowest total cost quality service provider in its selected markets. Incremental short-term costs incurred to support this effort impacted ASIG s financial performance in 2013, but have supported operational improvement in the second half and a number of encouraging new contract wins for ASIG s industry leading position as an into-plane re-fueller and manager of fuel farms was reinforced with the addition of a new fuel farm operation at Nashville International Airport, and the successful renewal of three fuel farm management contracts. Furthermore, in February 2014 ASIG agreed to acquire the assets of Skytanking USA, Inc., an independent provider of aviation fuel handling services for a net cash payment of $16.8 million. Under the terms of the transaction, ASIG will divest to Skytanking its airport fuel operations at Linz and Klagenfurt airports in Austria along with its 50% joint venture operations (with Skytanking) at Munich and Vienna airports. The transaction is subject to customary approvals and is expected to complete in the first half of Upon completion the deal will create a further seven sole source commercial into-plane refuelling airports for ASIG in the US. In August, ASIG was awarded the contract for common check-in services for zones A and D of London Heathrow s new Terminal 2 operation, which includes 14 airline customers. In addition, ASIG has also been awarded a number of ground handling contracts at Terminal 2. Terminal 2 will become operational in the summer of 2014.These contract awards build on ASIG s prior acquisition of gategroup s London cleaning and de-icing business and the acquisition of SGS at London Heathrow, supporting our strategy of achieving critical mass by line of business at hub airports. 5

6 Aftermarket Services Our Aftermarket Services division is focused on the repair and overhaul of engines through our ERO businesses and the support of maturing aerospace platforms through our Legacy Support business. In 2013, APPH which manufactures and services landing gear and hydraulic subsystems, formed part of the Aftermarket Services division. This business was sold in February $m * Change Revenue (2)% Organic revenue growth (2)% 3% Underlying operating profit % Operating margins 12.0% 11.6% Operating cash flow % Divisional ROIC 11.3% 11.1% *Restated for the implementation of IAS19R as set out in note 1 in the Condensed Financial Statements Revenue in Aftermarket Services declined by 2% to $842.7 million (2012: $857.1 million) with the organic reduction also 2% and there was a $5.4 million revenue contribution from acquisitions. Despite the organic revenue reduction, there was a 2% increase in underlying operating profit to $101.3 million (2012: $99.5 million), with operating margins improving by 40 basis points to 12.0% (2012: 11.6%). The division delivered a 6% increase in operating cash flow to $98.4 million (2012: $93.1 million) with cash conversion of 97% (2012: 94%). Return on invested capital improved by 20 basis points to 11.3% (2012: 11.1%). In Engine Repair and Overhaul (ERO), revenue was $597.8 million (2012: $641.2 million), an 8% organic revenue reduction. This was against a particularly strong 2012 comparator and amidst a weaker overall market for its authorised programmes, particularly Tay and TFE731. In the first half of the year ERO implemented a sales organisation restructuring, which resulted in some short-term disruption and loss of market share. Whilst we are seeing the broader benefits of the sales force restructuring and there was some recovery in the third quarter, demand for Tay overhauls in particular was weaker than anticipated in the fourth quarter and is expected to remain subdued in ERO continues to focus on improving operational efficiency and expanding its global field support organisation through its F1RST SUPPORT network. Additionally, ERO launched a mobile app for customers to track work in progress. ERO added the Honeywell RE220 auxiliary power unit (APU) line authorisation bolstering its field service portfolio for Gulfstream and Bombardier long-range aircraft. In early 2014, ERO signed an authorisation with Woodward to handle the maintenance, repair and overhaul for PT6 and TPE331 Fuel Controls & Governors, and signed agreements to be authorised maintenance, repair and overhaul centres for the RR300, which powers the rapidly growing fleet of Robinson R66 helicopters. ERO s investments in 2012 began to deliver benefits with an increased inflow of field repair work on the Bombardier Challenger 300 and Gulfstream G280 business jets as a result of the Consolidated Turbine Services acquisition and the first series of on-field engine removals for the BR710 turbofan engine following the authorisation from Rolls-Royce CorporateCare TM for mobile repair support. There was also a steady flow of engine inputs following the agreement signed with GE Aviation to handle all engine care and maintenance programme commercial shop visits for the CT7-5A and -9B engines used on Saab 340 aircraft. In late May, ERO s Singapore Regional Turbine Centre (RTC) completed its first Honeywell TFE731 Major Periodic Inspection (MPI), the first of several engines to be serviced at the facility. The Singapore RTC is the only Honeywell authorised facility in the region and also houses a F1RST SUPPORT TM centre. In line with our continued assessment of ERO s operational effectiveness, we undertook a detailed review of ERO s capacity which has confirmed the opportunity for significant structural cost improvement. Over the course of the next two years we will be undertaking a phased rationalisation of our ERO footprint, transitioning products to existing facilities and to a new facility to be constructed in the Dallas Fort Worth 6

7 area. The total cash cost of the project is expected to amount to $16 million, with annualised savings of $10 million, which are expected to begin to accrue from mid Total exceptional charges of $11 million are expected to be incurred over the life of the project which is likely to be more than offset by exceptional gains on the disposal of APPH. Legacy Support s revenue increased by 14% to $168.2 million (2012: $147.3 million), the majority of which was organic. Sales were driven by the substantial completion of large contracts for landing gear shock strut assemblies for the AH-64 Apache, and LANTIRN environmental control units for the F-15, together with strong demand for Airbus 320 and B777 fuel gauging system upgrades, and significant sales for landing gear cylinder assemblies for the EA-6B Prowler to the US government. Organic revenue growth was 15%, although the substantial completion of these larger contracts resulted in a decrease in order book of 14% year over year. In the first half of 2013, Legacy Support successfully transferred the product lines and staff from its facility in Slough, UK to its Cheltenham, UK facility. A regional base was also established in Singapore, colocated with ERO s regional turbine centre, to provide component and accessory spares and MRO services in-region. Additionally, Legacy successfully transitioned two new product lines from licence agreements signed in December 2012 into its Cheltenham and Chatsworth facilities; further proving Legacy s successful adoption and transition process. Legacy Support extended its OEM relationships and grew its portfolio of products under licence in 2013, signing three new licence agreements with Curtiss-Wright Controls, and two new licences with Safran Power Systems. These new licences for electronic and electro-mechanical products used on a range of military and commercial platforms represented a total $35.2 million investment, with $11.8 million paid in the year. Since year end, Legacy Support has signed a licence agreement with Rolls-Royce, another new OEM relationship, for the complete support of spare components for the Dart engine, which powers the HS-748 and YS-11 aircraft. The new licences signed during 2013 are expected to begin to contribute to revenues from the second half of the year. In APPH, revenue increased by 12% to $76.7million (2012: $68.6 million), with 13% organic growth principally driven by increased original equipment sales for the Hawk, C27 and AW159 programmes. Sales of spare parts remained broadly flat. This strong performance built on the significant operational and financial progress the business had made over the last two years. In February 2014 we announced the sale of APPH to Héroux-Devtek Inc. for a total cash consideration of US$128 million, representing 17.8 times $7.2 million of underlying operating profit for APPH was the only part of BBA Aviation that focused on product design and development, with significant manufacturing activities and a higher fixed cost base than the rest of the Group. The disposal enhances the Group s focus on aviation support and aftermarket services, as well as delivering good value for our shareholders. Other Financial Information Unallocated central costs were broadly unchanged at $17.5 million (2012: $17.7 million). Exceptional items after tax amounted to $7.6 million (2012: $23.2 million), a reduction of 67%. Included within exceptional items were $6.1 million of restructuring expenses (2012: $17.0 million), relating principally to the costs of the transition to the two divisional structure; $8.7 million of M&A related costs (2012: $6.6 million) principally incurred in pursuit of value creative investment and acquisition opportunities; $6.9 million of environmental costs in relation to disposed business (2012: $1.5 million); and non-cash amortisation of acquired intangibles of $9.0 million (2012: $7.6 million). There was a $5.4 million accounting gain in relation to a restructuring of our investment in Lider in Brazil (2012: $nil). There was a $6.5 million tax credit on these exceptional items (2012: $9.5 million), together with a $11.2 million tax credit relating to a reduction in our tax risk provision as a result of the progress made in relation to open tax years (2012: $nil). 7

8 Net debt at the end of the period was $478.5 million (2012: $416.4 million) with a net cash outflow of $61.6 million and an adverse foreign exchange movement of $0.5m. During the year the final $125 million of cross currency swaps were closed out at a cash cost of $28.8 million. $432 million of the total borrowing commitments of $1,050 million remained undrawn at the year-end and reported net debt to EBITDA was 1.8x (2012: 1.6x) with the increase being driven by acquisitions and investment in new licences. Interest cover stands at 8.8x (2012: 7.3x). Of the $1,050 million of total borrowing facilities, $250 million matures in April During the year we agreed a settlement with HMRC in relation to the 2006 to 2012 tax years, as a result of which we have agreed to make total payments of $42 million of which $8 million was paid in 2013, with the balance to be paid in The settlement was fully provided for. The combined accounting deficit for the UK and US pension schemes decreased to $57.6 million (2012: $66.3 million), principally as a result of cash contributions and positive asset returns. The 2012 triennial valuation of the UK defined benefit pension scheme was completed during the year, resulting in a funding deficit of 30 million (c. $49 million). The Company will continue to pay scheme expenses on an as incurred basis. The next triennial valuation is due to be undertaken in As a result of the disposal of APPH post the year-end, a participating employer in the UK defined benefit scheme, ordinarily a section 75 debt would have been triggered. We have agreed with the Trustees of the scheme to apportion the section 75 debt and at the same time have agreed to put in place an asset backed funding structure, which will replace the previously agreed schedule of deficit contributions. As a result of this we expect to make payments of 3.7 million (c. $6 million) in 2014 and 6.9 million (c. $11 million) in Thereafter the payments will reduce to approximately 2.7 million (c. $4 million) per annum for a further 18 years, unless the scheme becomes 110% funded in which case the payments will be suspended. The accounting deficit at 31 December 2013 does not reflect the impact of this new structure. A revised pensions accounting standard, IAS 19, was effective from 1 January Prior year comparative figures have been restated to reflect this change. The impact of the restatement is set out in Note 1 to the condensed consolidated financial statements. Dividend The Board is proposing a final dividend of cents per share (2012: cents per share), taking the full year dividend to cents per share (2012: cents per share). This is a 5% increase and reflects the Board s progressive dividend policy and continuing confidence in the Group s medium-term growth prospects. Board changes During the course of 2013 there were a number of changes to the Board. As previously announced, Hansel Tookes and Mark Harper stepped down as non-executive directors to focus on their increasing personal and business commitments. In August we welcomed Wayne Edmunds as a non-executive director and in December we welcomed Sir Nigel Rudd as Deputy Chairman, with the intention that he will succeed Michael Harper as Chairman following Michael s retirement from the Board in May It is also announced separately today that Mark Hoad, Group Finance Director will be standing down from the Board on 30 June 2014 after nine years of service. The process of appointing a successor is underway and a further announcement will be made in due course. Outlook BBA Aviation produced another good performance in 2013, despite the low growth environment. Profit before tax was up 8% and earnings per share up 9%, driven in particular by Signature and Legacy, although ERO was weaker than anticipated. We also made strong strategic progress, with $150m of strategic investments across both divisions, the disposal of APPH and the planned return of $125m to shareholders. While inputs in ERO are expected to remain subdued in 2014, and growth in Legacy will pause following the completion of several major contracts in 2013, North American B&GA flying, although still volatile, is showing some signs of a recovery. This, together with the incremental contribution from strategic 8

9 investments already announced, an additional $24m of acquisitions and new licences agreed since yearend, continuing operational improvements and a solid investment pipeline, gives us confidence that 2014 will be another year of progress for BBA Aviation. Over the longer term, the underlying strengths of our market-leading businesses, the continuing improvement in their operational performance and the structural growth and consolidation in our major markets give us increasing confidence in our ability to generate superior through-cycle returns. Going Concern The Directors have carried out a review of the Group s trading outlook and borrowing facilities (as outlined above), 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 the going concern basis. Directors Responsibilities The responsibility statement below has been prepared in connection with the Company's full annual report for the year ending 31 December Certain parts of the annual report are not included within this announcement. We confirm that to the best of our knowledge: the financial statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole; and the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face; and the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, business model and strategy of the company. Signed on behalf of the Board, Simon Pryce Group Chief Executive Mark Hoad Group Finance Director 4 March March 2014 This final results announcement 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 report is available in electronic format from the Company s website, 9

10 Consolidated income statement For the year ended 31 December Underlying 1 Exceptional items Total Underlying 1 Restated 2 Exceptional Items Total Restated 2 $m $m $m $m $m $m Revenue 2, , , ,178.9 Cost of sales (1,789.2) - (1,789.2) (1,766.5) - (1,766.5) Gross profit Distribution costs (38.0) - (38.0) (38.8) - (38.8) Administrative expenses (194.8) (9.0) (203.8) (185.0) (7.6) (192.6) Other operating income Share of profit of associates and joint ventures Other operating expenses (0.3) (15.6) (15.9) (0.3) (8.1) (8.4) Restructuring costs - (6.1) (6.1) - (17.0) (17.0) Operating profit (30.7) (32.7) Investment income Finance costs (34.2) - (34.2) (40.7) - (40.7) Profit before tax (25.3) (32.7) Tax (24.8) 17.7 (7.1) (24.3) 9.5 (14.8) Profit/(loss) for the year (7.6) (23.2) Attributable to: Equity holders of BBA Aviation plc (7.6) (23.2) Non controlling interest (0.4) - (0.4) (0.3) - (0.3) (7.6) (23.2) Earnings per share Adjusted Unadjusted Adjusted Restated 2 Unadjusted Restated 2 Basic 30.5c 28.9c 27.9c 23.1c Diluted 30.1c 28.5c 27.5c 22.7c 1 Underlying profit is before exceptional items. Exceptional items are items which are material or non-recurring in nature, costs relating to acquisitions and disposals, and the amortisation of acquired intangibles (see note 3). 2 IAS 19: Employee Benefits (Revised) (IAS 19R) is effective for financial reporting periods beginning 1 January 2013 with retrospective application required. The results for the year ended 31 December 2012 have been restated for the impact of applying IAS 19R and more detail is set out in note 1 to these consolidated financial statements. 10

11 Consolidated statement of comprehensive income Restated 1 For the year ended 31 December $m $m Profit for the year Other comprehensive income Items that will not be reclassified subsequently to profit or loss Actuarial gains/(losses) on defined benefit pension schemes 26.0 (22.3) Change in pension asset under IFRIC 14 (22.3) 4.5 Tax relating to components of other comprehensive income that will not be reclassified subsequently to profit or loss (10.8) Items that may be reclassified subsequently to profit or loss Exchange difference on translation of foreign operations (15.7) (24.6) Gains on net investment hedges Fair value movements in foreign exchange cash flow hedges Transfer to profit or loss from other comprehensive income on foreign exchange cash flow hedges (2.1) (0.8) Fair value movement in interest rate cash flow hedges 2.6 (5.4) Transfer to profit or loss from other comprehensive income on interest rate cash flow hedges Tax relating to components of other comprehensive income that may be reclassified subsequently to profit or loss Other comprehensive income for the year Total comprehensive income for the year Attributable to: Equity holders of BBA Aviation plc Non-controlling interests (0.4) (0.3) IAS 19: Employee Benefits (Revised) (IAS 19R) is effective for financial reporting periods beginning 1 January 2013 with retrospective application required. The results for the year ended 31 December 2012 have been restated for the impact of applying IAS 19R and more detail is set out in note 1 to these consolidated financial statements. 11

12 Consolidated balance sheet As at 31 December $m $m NON-CURRENT ASSETS Goodwill Other intangible assets Property, plant and equipment Interests in associates and joint ventures Trade and other receivables Deferred tax asset , ,585.0 CURRENT ASSETS Inventories Trade and other receivables Assets classified as held for sale Cash and cash equivalents Tax recoverable Total assets 2, ,386.2 CURRENT LIABILITIES Trade and other payables (447.2) (471.1) Tax liabilities (69.6) (96.1) Obligations under finance leases (1.4) (1.5) Borrowings (18.2) (11.2) Provisions (3.2) (3.9) Liabilities associated with assets held for sale (17.9) - (557.5) (583.8) Net current assets NON-CURRENT LIABILITIES Borrowings (627.5) (580.6) Other payables due after one year (25.9) (23.5) Retirement benefit obligations (57.6) (66.3) Obligations under finance leases - (1.4) Deferred tax liabilities (87.8) (82.0) Provisions (14.1) (27.2) (812.9) (781.0) Total liabilities (1,370.4) (1,364.8) Net assets 1, ,021.4 EQUITY Share capital Share premium account Other reserves Treasury reserve (17.1) (5.5) Capital reserve Hedging and translation reserves (37.7) (38.0) Retained earnings Equity attributable to equity holders of BBA Aviation plc 1, ,025.9 Non-controlling interest (4.7) (4.5) Total equity 1, ,

13 Consolidated cash flow statement For the year ended 31 December Operating activities Net cash inflow from operating activities $m 2012 $m Investing activities Interest received Dividends received from associates Purchase of property, plant and equipment (71.0) (51.1) Purchase of intangible assets 1 (18.8) (5.4) Proceeds from disposal of property, plant and equipment Acquisition of subsidiaries (71.3) (35.1) Investment in joint ventures (3.0) - Net cash outflow from investing activities (157.0) (82.8) Financing activities Interest paid (25.2) (38.3) Interest element of finance leases paid (0.1) (0.4) Dividends paid (71.3) (67.9) Losses from realised foreign exchange contracts (36.2) (20.8) Proceeds from issue of ordinary shares Purchase of own shares (15.0) (12.4) Increase in loans Decrease in finance leases (1.5) (1.5) Increase /(decrease) in overdrafts 8.5 (12.1) Net cash outflow from financing activities (71.8) (99.1) Increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange adjustments Cash and cash equivalents at end of year Net debt at beginning of year (416.4) (403.6) Increase in cash and cash equivalents Increase in loans (68.5) (52.5) Decrease in finance leases (Increase)/decrease in overdrafts (8.5) 12.1 Exchange adjustments (0.5) 0.8 Net debt at end of year 3, 4 (478.5) (416.4) 1 Purchase of intangible assets includes $11.8 million (2012: $0.4 million) paid in relation to Ontic licences. 2 Cash and cash equivalents includes $2.9 million (2012: $nil) included within assets classified as held for sale (see note 12). 3 Net debt includes $2.9 million (2012: $nil) of cash and cash equivalents and $2.5 million (2012: $nil) of borrowings included within net assets classified as held for sale (see note 12). 4 Within the Group s definition of net debt the US private placement is included at its face value of $300 million reflecting the fact that the liabilities will be in place until maturity. This is $6.1 million (2012: $27.2 million) lower than its carrying value. 13

14 Consolidated statement of changes in equity Share capital Share premium Retained earnings Other reserves Noncontrolling interests Total equity $m $m $m $m $m $m Balance at 1 January (18.7) (3.9) Total comprehensive income for the year (0.3) Dividends - - (67.9) - - (67.9) Issue of share capital Movement on treasury reserve (12.4) - (12.4) Credit to equity for equity-settled share-based payments Tax on share-based payment transactions Changes in non-controlling interests (0.3) (0.3) Transfer to retained earnings - - (10.2) Balance at 1 January (2.2) (4.5) 1,021.4 Total comprehensive income for the year (0.4) Dividends - - (71.3) - - (71.3) Issue of share capital Movement on treasury reserve (15.0) - (15.0) Credit to equity for equity-settled share-based payments Tax on share-based payment transactions Changes in non-controlling interests Transfer to retained earnings - - (0.2) Balance at 31 December (7.3) (4.7) 1,

15 Notes to the financial statements 1 Basis of preparation The consolidated financial statements of BBA Aviation plc, for the year ended 31 December 2013 have been prepared in accordance with International Financial Reporting Standards (IFRS) endorsed for use in the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. They have also been prepared in accordance with IFRS as issued by the International Accounting Standards Board. The financial information for the year ended 31 December 2013 contained in this preliminary announcement was approved by a duly appointed and authorised committee of the Board of Directors on 4 March The announcement does not constitute statutory accounts of the Company within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the year ended 31 December 2012 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2013 will be delivered to the Registrar of Companies following the Company s Annual General meeting. The Group s annual financial statements for the year ended 31 December 2013 have been reported upon by the Group s auditor. 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 a statement under section 498(2) or 498(3) of the Companies Act Except as described below, these consolidated 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 New reporting requirements Amendments to IAS 1: Presentation of Financial Statements are applicable for financial reporting periods commencing 1 January 2013 and require items within other comprehensive income that may be classified to the income statement to be grouped together. This amendment relates to presentation only and has no impact on the reported results or balance sheet of the Group. IAS19: Employee Benefits (Revised) (IAS 19R) is effective for financial reporting periods beginning 1 January 2013 with retrospective application required. The principal impact of IAS 19R is that the concepts of expected return on assets and interest expense on the defined benefit obligation as separate components of the defined benefit cost have been replaced by a single concept such that interest is now calculated on the net defined benefit deficit. This calculation uses the discount rate previously used to measure defined benefit pension liabilities after allowance for any asset ceilings and additional liability under IFRIC 14: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (IFRIC 14). In addition, plan administration expenses, previously deducted from the expected return on scheme assets, are now included within operating profit. As a result of these amendments, the comparative financial information in the income statement and statement of comprehensive income for the year ended 31 December 2012 has been restated. For the year ended 31 December 2012, the impact on the income statement is to reduce operating profit by $2.7 million and increase net finance costs by $2.5 million, and reduce actuarial losses by $5.2 million in the statement of comprehensive income. The pension deficit has remained unchanged and so the balance sheet has not been restated. The impact on earnings per share is to decrease basic adjusted and unadjusted earnings per share by 1.1c per share to 27.9c and 23.1c per share respectively, and to decrease diluted adjusted earnings per share by 1.0c per share to 27.5c per share and diluted unadjusted earnings per share by 1.1c per share to 22.7c per share. IFRS 13: Fair Value Measurement (IFRS 13) is applicable for financial reporting periods beginning 1 January It aims to improve consistency and comparability in fair value measurements and related disclosures by providing a precise definition of fair value and a single source of related disclosure requirements for use across other IFRSs. The standard has clarified the method for measuring fair value to incorporate credit adjustments for the Company in addition to credit adjustments for counterparties. The requirements do not extend the use of fair value accounting. The Company has determined that any such adjustments are immaterial for the year ended 31 December Amendments to IAS 36: Impairment of assets (IAS 36) clarifies the disclosure requirements with respect to recoverable amounts of cash generating units. These amendments have been early adopted with effect from 1 January

16 Notes to the financial statements (continued) A number of EU - endorsed standards and amendments to existing standards and interpretations, which are listed below, are effective for annual periods beginning on or after 1 January 2014 and have not been applied in preparing these consolidated financial statements. None of these standards are expected to have a material impact on the consolidated financial statements of the Group. New standards and amendments to existing standards: - IFRS 10: Consolidated Financial Statements; - IFRS 11: Joint Arrangements; - IFRS 12: Disclosure of Interests in Other Entities; - amendments to IAS 27: Consolidated and Separate Financial Statements; - amendments to IAS 28: Investments in Associates. 2 Segmental information 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 Executive to allocate resources to the segments and to assess their performance. The Group provides information to the Chief Executive on the basis of components that are substantially similar within the segments in the following aspects: the nature of the long-term financial performance; the nature of the products and services; the nature of the production processes; the type of class of customer for the products and services; and the nature of the regulatory environment. Based on the above, the primary reportable segments of the Group have been deemed to be Flight Support, which comprises Signature Flight Support and ASIG, and Aftermarket Services, which comprises Engine Repair and Overhaul, Legacy Support and APPH. 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. 1 2 Business Segments 2013 Flight Support Aftermarket Services Total Unallocated Corporate Total $m $m $m $m $m External revenue 1, , ,218.6 Underlying operating profit (17.5) Exceptional items (9.8) (6.0) (15.8) (14.9) (30.7) Segment result (32.4) Underlying operating margin 8.5% 12.0% 9.8% - 9.0% Net finance costs (24.2) Profit before tax Other information Capital additions Depreciation and amortisation Balance sheet Total assets 1, , ,464.4 Total liabilities (229.1) (193.7) (422.8) (947.6) (1,370.4) Net assets/(liabilities) 1, ,864.7 (770.7) 1,094.0 Segmental results includes $1.4 million profit of associates and joint ventures within Flight Support Capital additions represent cash expenditures in the year 16

17 Notes to the financial statements (continued) 2 Segmental information (continued) Aftermarket Unallocated Flight Support Services Total Corporate Total Restated Restated Restated Restated Restated Business Segments $m $m $m $m $m 2012 External revenue 1, , ,178.9 Underlying operating profit (17.7) Exceptional items (16.5) (14.4) (30.9) (1.8) (32.7) Segment result (19.5) Underlying operating margin 8.4% 11.6% 9.7% % Net finance costs Profit before tax Other information Capital additions Depreciation and amortisation Balance sheet Total assets 1, , ,386.2 Total liabilities (206.7) (200.1) (406.8) (958.0) (1,364.8) Net assets/(liabilities) 1, ,750.4 (729.0) 1, Segmental results includes $1.6 million profit of associates and joint ventures within Flight Support 2 Capital additions represent cash expenditures in the year Revenue by destination Revenue by origin Capital additions 1 (34.9) Non-current assets Geographical segments $m $m $m $m 2013 United Kingdom Mainland Europe North America 1, , ,359.3 Rest of world Total 2, , , United Kingdom Mainland Europe North America 1, , ,278.8 Rest of world Total 2, , , Capital additions represent cash expenditures in the year 17