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BBA Aviation
BBA Aviation
2018 Final Results
www.bbaaviation.com
BBA Aviation
2018 – Strategic progress
1. Outperforming today
- Signature continues to outperform the US B&GA market + 210bps
- Market share gains
2. Strong Free Cash Flow generation >$250m
3. Investment for tomorrow
- Commercial technology investments for 2019 deployment
- People and culture
- Acquisition and licence growth – EPIC, Firstmark and licences
2018 Final Results
Strong platform for sustainable growth
1
BBA Aviation
www.bbaaviation.com
Performance Review
David Crook
Group Finance Director
BBA Aviation 2018 Final Results
2
BBA Aviation
Underlying total operating profit growth of 4%
Signature (85% of continuing OP1): - Signature FBO revenue outperforming a soft market by
210 bps
Ontic (15% of continuing OP1):- $6m contribution from new licence acquisitions and
Firstmark offsetting non repeat of cyclical military orders
- Strong order book and pipeline of licence opportunities
Discontinued operations- Strong performance at ERO with 45% increase in
operating profit- Suspension of depreciation and amortisation of $5.2m
included for the seven months from June 2018
Total basic adjusted EPS - down 2.9% to 23.3c
Dividend increased 5% to 14.07c per share
2018 Final Results
Note 1: Underlying operating profit (pre exceptional and other items)
Operating profit1 ($m) 2018 2017 Change
Signature 320.6 329.4 (2.7)%
Ontic 59.3 55.2 7.4%
Middle East (ERO) (0.7) (2.4) 71%
Total continuing central costs (39.0) (45.7) 14.7%
Group continuing 340.2 336.5 1.1%
Discontinued 35.0 23.9 46.4%
Group total 375.2 360.4 4.1%
Total basic adjusted EPS 23.3 24.0 (2.9)%
Dividend per share 14.07c 13.40c 5.0%
3
BBA Aviation
Signature: revenue up 29% (85% of continuing OP1)
Organic revenue growth of 2.7% (constant currency and fuel prices)- Signature FBO up 3.0%,
TECHNICAir down 3.4%- FAA US B&GA movements
growth of 0.9%
Organic operating profit decline of 2.9%- Impact of IT investments $14m- Challenging maintenance
market, TECHNICAir down $3.8m- Customer mix and bad debt
impacting FBO drop through
Investment returns- Divisional ROIC 11.8%
(FY 2017: 12.2%).
2018 Final Results
Note 1: Underlying operating profit (pre exceptional and other items)
Operating Profit1 ($m)
1,643.0 6.0
138.2 1,787.2
292.5 -
50.5(2.6) -
2,127.6
2017 FX Fuel 2017 Like for Like
Acqui-sitions
FBO TECHNICAir 2018
329.4 0.8
-
330.2 2.9
(1.7)
7.0
(3.8)
(14.0)
320.6
2017 FX Fuel 2017 Like for Like
EPICTrade
EPICAcquis-
ition costs
FBO TECHNICAir IT 2018
Revenue Bridge ($m)
4
BBA Aviation
Ontic: revenue up 3% (15% of continuing OP1)
- New licences and Firstmark contributed $12.3m of revenue
- Organic revenue decline of 3.7% due to non repeat of cyclical military orders
Operating profit1 up 7%- Includes $6.0m contribution from new Ontic licences- Organic operating profit down largely due to 2017
contribution from B52 parts and C130 radar units not repeated in 2018
- Underlying operating margin of 27.5%, up 110 bps
Investment returns- ROIC 15.6% (FY 2017: 16.8%)
Order book remains strong with good visibility through 2019 and beyond
2018 Final Results
Note 1: Underlying operating profit (pre exceptional and other items)
Ontic Operating Profit1 ($m)
Ontic Revenue Bridge ($m)
208.8 2.7 211.5 12.3 (7.8)
216.0
2017 FX 2017 like for like
Acquisitions Organic 2018
55.2 0.9 56.1 6.0
(2.8)
59.3
2017 FX 2017like for like
Acquisitions Organic 2018
5
BBA Aviation
Discontinued ERO: revenue up 4%
- Improved underlying operating profit $35.0m, up 45.2%
- Includes $5.2m benefit from suspension of depreciation and amortisation for the seven months from June 2018
- Excludes the $10.7m of support costs for ERO
Note 1: Underlying operating profit (pre exceptional and other items)
Revenue Bridge ($m)
Operating profit ($m) 2018 2017
ERO pre discontinued ops 18.4 10.1
Add back: Middle East loss 0.7 2.4
Add back: support costs 10.7 11.6
Add back: Depreciation & amortisation suspension 5.2 -
ERO discontinued ops 35.0 24.1
Operating Profit1 ($m)
2018 Final Results
513.3 1.8 515.1
18.5 533.6
2017 FX 2017 likefor like
Organic 2018
24.1 0.2 24.3
10.7 35.0
2017 FX 2017 likefor like
Organic 2018
Reconciliation of pre and post discontinued operations reporting
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BBA Aviation
Central costs
2018 Final Results
Note 1: Underlying operating profit (pre exceptional and other items)
($m) 2018 2017 Change
Underlying central costs (28.3) (34.1) (17.0)%
ERO support costs (10.7) (11.6) (7.8)%
Total continuing central costs (39.0) (45.7) (14.7)%
- Underlying central costs down 17% to $28.3m
- Reduction reflects 2017 comparative impacted by
- One-time costs in our captive insurance company for hurricane damage
- Remaining ASIG support costs (now removed)
- Total central costs
- includes $10.7m of support costs relating to the discontinued ERO business
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BBA Aviation
Underlying Income Statement
2018 Final Results
Note 1: Underlying operating profit (pre exceptional and other items)
($m) 2018 2017 Change
Total Group operating profit1 375.2 360.4 4.1%
Net interest (67.2) (62.1) 8.2%
Profit before tax 308.0 298.3 3.3%
Profit after tax 240.5 246.3 (2.4)%
Total basic adjusted EPS 23.3c 24.0c (2.9)%
Total dividend per share 14.07c 13.40c 5.0%
8
BBA Aviation
Exceptional and other items - largely non-cash
2018 Final Results
Continuing- Amortisation of acquired intangibles: $88.8m
(non-cash)
- Restructuring expenses of $8.9m (corporate and closure of ERO in the Middle East)
- Previously noted impairment of $14.1m primarily relating to Sloulin Field FBO (non-cash)
- One-off past service pension cost with regard to GMP equalisation within the UK plan of $11.1m
Discontinued- ERO disposal process costs of $5.9m
- Completion costs of ERO footprint rationalisation in Dallas of $1.1m
9
BBA Aviation
Continuing strong cash generation
Continuing businesses- Strong cash generative business
- Working capital inflow in Signature
- Capex investments at FBOs including Miami and Nashville
- Cash tax rate remains substantially lower than underlying effective tax rate
- Leverage 2.8x on a covenant basis
Discontinued business- Working capital outflow driven
largely by parts availability from OEMs
Note 1: Underlying operating profit before depreciation and amortisation
2018 Final Results
$m Continuing Discontinued 2018 2017
Underlying EBITDA pre support costs 428.4 38.7 467.1 459.5
ERO support costs (10.7) - (10.7) (11.6)
Underlying EBITDA1 417.7 38.7 456.4 447.9
Working capital movement 22.0 (48.2) (26.2) (46.3)
Capex (75.8) (16.1) (91.9) (80.3)
Net Interest paid (57.4) (0.9) (58.3) (57.3)
Tax paid (27.1) - (27.1) (41.8)
Exceptionals (12.5) (7.0) (19.5) (12.7)
Other items (8.3) (0.3) (8.6) 11.1
Free cash flow 258.6 (33.8) 224.8 220.6
Net debt (1,331.3) (0.9) (1,332.2) (1,167.1)
Net debt to EBITDA, covenant 2.8x 2.6x
Net debt to EBITDA, reported 2.9x 2.6x
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BBA Aviation
Guidance FY19
2018 Final Results
Note 1: Underlying operating profit (pre exceptional and other items)
Central costs- ~$27m Group central costs in FY19- ~$12m ERO annual support costs in FY19 - ERO support costs to be eliminated post disposal/TSA period
Capital expenditure (continuing group)- FY19 capex $115-125m
Tax- Underlying effective tax rate c21%, cash tax rate c14%
Interest (excl. IFRS 16)- Interest expense $75m - Cash interest $75m
11
BBA Aviation
IFRS 16
2018 Final Results
IFRS 16 does not impact our
Strong free cash flows
Business prospects
Ability to deliver our strategy
Debt covenants
Progressive dividend policy
But it will significantly impact our published financial statements
12
BBA Aviation
IFRS 16 – Impact on financials
2018 Final Results
Metric Increase/decrease No Impact
Free cash flow (FY 2019) - -
Revenue (FY 2019) - -
Metric Increase/decrease Impact
Operating profit (FY 2019) Increase c12%
EBITDA (FY 2019) Increase c30%
Interest (FY 2019) Increase c100%
Profit before tax (FY 2019) Decrease c10%
Adjusted EPS (FY 2019) Decrease c10%
Total assets (1 Jan 2019) Increase c25%
Total liabilities (1 Jan 2019) Increase c50%
Operating cashflow (FY 2019) Increase c35%
Net debt (1 Jan 2019) Increase c85%
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BBA Aviation
www.bbaaviation.com
BBA Aviation
Mark Johnstone
Group Chief Executive Officer
BBA Aviation 2018 Final Results
14
BBA Aviation
BBA Aviation – Strong platform for sustainable growth
1
2
3
US B&GA market
Implementation of our growth strategy – Signature and Ontic
Outlook
2018 Final Results
15
BBA Aviation
Signature Market Drivers
Macro Economic Drivers
Aircraft Utilisation
Macro Economic
Drivers
Operational Installed
Fleet
Corporate profits
R² = 0.773
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
- 500 1,000 1,500 2,000
Busin
ess j
et h
ours
flow
n (a
nnua
l, in
100
0s)
GDP
R² = 0.857
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
- 10,000 20,000 30,000
Busin
ess j
et h
ours
flow
n (a
nnua
l, in
100
0s)
GDP (billions, USD) Corporate profits (billions, USD)
Source: US Bureau of Economic Analysis & GAMA 2018 Annual Report Source: St Louis Federal Economic Research & GAMA 2018 Annual Report
2018 Final Results
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BBA Aviation
Through cycle structural market growth of 2%+ CAGR tracking GDP
2018 Final Results
US B&GA FAA Flight Movements and GDP
0
500
1,000
1,500
2,000
2,500
3,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
FAA
Busi
ness
Jet F
light
Mov
emen
ts (0
00s)
)
US
GDP
($bn
)
GDP (Billions in 2012 chained Dollars) FAA Movements (thousands)
Source: US Bureau of Economic Analysis and FAA
17
BBA Aviation
2018 US B&GA market performance
2018 Final Results
Market- US B&GA movements grew 0.9% in 2018
- Strong first half and a weaker second half
Why did the market slow in H2?
- Geopolitical tensions
- Fed rate rises
- Slowing capital investment and FDI
- Business confidence reducing in H2 2018
- Charter activity reduced - discretionary customer segment and most sensitive to economic uncertainty
Change picture
18
BBA Aviation
US market by segment – YoY movements
2018 Final Results
Continued Signature Outperformance
Source: ARGUS, FAA & US Bureau of Economic Analysis
i. Short term flying hours fluctuates both above and below GDP through time
ii. Charter more sensitive to business confidenceiii. Fractional flying less volatile than charteriv. Q4 2018 returned to nominal growth from Q3
2018
-6
-4
-2
0
2
4
6
8
10
12
14
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Charter (P135) GA (P91) Fractional (P91K) Total SFS market Real GDP FAA
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BBA Aviation
Investing in our real estate – improving customer experience
2018 Final Results
- Developed a new 3,500 sq ft new sports charter terminal at Miami International
- $15 million investment in a new executive and sports charter terminal at Nashville plus additional hangar space with a new 30-year lease
- Atlanta – new 20-year lease (plus five-year extension) at our sole source FBO at the world’s busiest hub airport
- Renovation at Las Vegas FBO at McCarren International
Miami Sports Charter terminal
New FBO lounge at Nashville
20
BBA Aviation
Leveraging our Signature network to deliver more value
Organic Growth
Core revenue source optimisation
Non-fuel revenue growth
New services and asset utilisation
1
2
3
4
Pricing optimisation
Credit card
Elite
Drop through >50% >50% >50%
Advertising
(1-2 yrs)
(2-4 yrs)
(2-5 yrs)
Underlying operating profit ($M) ~10 7-14 5-10
2018 Final Results
21
BBA Aviation
2018 Ontic investment to support long-term growth
Ontic licence investments ($27.5m)- Licence with Honeywell for cockpit LCD displays on multiple commercial, military fixed-wing and rotorcraft platforms- Military fuel control product licence with UTAS*- Further licence with Ultra Electronics (including on Typhoon platform)- Licence with Esterline for legacy military and civil avionics products (primarily on Hawk platform)- Licence with a major OEM signed in December 2018
Firstmark acquisition completed in late 2018
* United Technologies Aerospace Systems
2018 Final Results
22
BBA Aviation
Ontic growth platform
- Licence or acquire IP
- Legacy aftermarket space
- Ensure availability of parts and service
- Sole source positions
- OEM relationships
- Integration capability
- Supply chain proficiency
- 32 licence & M&A deals signed
- Revenue growth from $46M to $216M
- EBITDA margins of 30%+
- Active and extensive pipeline of opportunities
- Platform & Market analysis tools
- Scalable organisation ready to execute on future growth
What we do
Competitive advantage
Historical performance
Future growth
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3
4
Market leading position, strong value creation and significant future opportunity
2018 Final Results
23
BBA Aviation
Executing strategy
2018 Final Results
Growth and Value Creation
Fortified Network & Expanded Portfolio
Operational Efficiency &
Process Improvement
Technology Solutions for Customers
Improved Customer
Experience
Data Empowered
Decision Making
1100 10110001101010
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BBA Aviation
BBA Aviation – Strong platform for sustainable growth
1
2
3
4
5
6
7
Simplified portfolio
Continuing Group generates $250-300m FCF per annum
2018 investments delivering to plan
Expand network and platform positions through connections to customers
Further opportunities for value creation from our infrastructure & IP
Signature flight path to deliver 250bps mid term through cycle outperformance
Ontic grows to a $100m EBITDA business by end 2021
2018 Final Results
25
BBA Aviation
Group outlook
2018 Final Results
ERO disposal process ongoing
The continuing Group is focused on high ROIC and strongly cash generative businesses
At Signature, our investments in both our network and technology will underpin the growth and continued market outperformance of our FBO business
1
2
4
5 The Board is confident of growth in 2019, through continued outperformance against a flat US B&GA market backdrop
3
Ontic continues to have a strong pipeline of growth opportunities and strong order book coverage for 2019 and beyond
26
BBA AviationBBA Aviation 2018 Final Results
www.bbaaviation.com
Questions
2018 Final Results
27
BBA AviationBBA Aviation 2018 Final Results
Appendix
www.bbaaviation.com
2018 Final Results
28
BBA Aviation
Debt facilities that support growth and long-term nature of core assets
- Leverage range set at 2.5-3.0x on a covenant basis (2.8x at December 2018)
- $650m unsecured RCF refinanced in H1 2018, expiry March 2023
- In April 2018 issued our inaugural $500m senior unsecured notes due 2026 at 5.375%
- Proceeds used to repay Facility B acquisition debt and maturing US PP notes
- Facility C acquisition debt of $450m likely to be refinanced in 2019 (matures 2020)
- Headroom of $528m at December 2018
2018 Final Results
Debt Maturity Profile
$m
0
100
200
300
400
500
600
2018 2019 2020 2021 2022 2023 2024 2025 2026
USPP RCF Usage Term Debt Usage Bond
29
BBA Aviation
Depreciation and Amortisation 2018
2018 Final Results
Extract from cash flow2018
Operating profit 227.6
Operating profit from discontinued operations 33.9
Share of profit from associates and joint ventures (4.0)
Profit from operations 257.5
Depreciation of property, plant and equipment 69.0
Amortisation of intangible assets 101.0
TotalUnderlying Exceptional Statutory
OP 375.2 (113.7) 261.5
Depreciation 69.0 - 69.0
Amortisation 12.2 88.8 101.0
EBITDA 456.4 (24.9) 431.5
DiscontinuedUnderlying Exceptional Statutory
OP 35.0 (1.1) 33.9
Depreciation1 2.1 - 2.1
Amortisation1 1.6 - 1.6
EBITDA 38.7 (1.1) 37.6
ContinuingUnderlying Exceptional Statutory
OP 340.2 (112.6) 227.6
Depreciation 66.9 - 66.9
Amortisation 10.6 88.8 99.4
EBITDA 417.7 (23.8) 393.9
Note 1: Suspended from June 2018 30
BBA Aviation
Revenue split1 and organic growth2
2018 Final Results
Note 1: Revenue by origin for continuing operations only | Note 2: Organic growth representing continuing operations only
Signature 91%
Organic 3%
SignatureN. America 91%
Organic 3%
Signature RoW 9%
Organic 3%
Ontic 98%
Organic (4)%
Revenue2 ($m) N. America RoW Total
Signature 1,926.5 201.1 2,127.6
Middle East - 3.7 3.7
Ontic 134.1 81.9 216.0
2,060.6 286.7 2,347.3
Middle East 2%
Organic (34)%
Ontic (incl Middle East) 9%
Organic (5)%
31
BBA Aviation
Adjusted earnings per share - basic
2018 Final Results
Discontinued Continuing Total
2018 2017 2018 2017 2018 2017
Adjusted earnings A 24.2 22.6 216.0 223.8 240.2 246.4
Underlying DT 5.4 (3.2) 20.7 50.9 26.1 47.7
Adjusted earnings on current tax B 29.6 19.4 236.7 274.7 266.3 294.1
IFRS weighted average number of shares C 1,030.1 1,028.2 1,030.1 1,028.2 1,030.1 1,028.2
Underlying EPS A/C 2.3c 2.2c 21.0c 21.8c 23.3c 24.0c
Growth 4.5% (3.7)% (2.9)%
Cash EPS B/C 2.9c 1.9c 23.0c 26.7c 25.9c 28.6c
Growth 52.6% (13.9)% (9.4)%
32
BBA Aviation
Disclaimer
2018 Final Results
www.bbaaviation.com
This presentation contains forward-looking statements including, without limitation, statements relating to: future demand andmarkets 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 uncertaintiesbecause they relate to events and depend on circumstances that will or may occur in the future. Accordingly, actual results may differmaterially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changesin interest and exchange rates, in tax rates or tax legislation, commodity prices and other economic conditions; negotiations withcustomers relating to renewal of contracts and future volumes and prices; events affecting international security, including globalhealth issues and terrorism; changes in regulatory environment; the introduction or variation of tariffs or duties; and the outcome oflitigation. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result ofnew information, future events or otherwise.
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