TIDMBBA
RNS Number : 3763W
BBA Aviation PLC
01 August 2018
BBA Aviation plc
2018 Interim Financial Report
Unaudited results for the half year ended
30 June 2018
For further information please contact:
David Crook, Group Finance Director (020) 7514 3999
Kate Moy, Investor Relations
BBA AVIATION PLC
David Allchurch (020) 7353 4200
TULCHAN COMMUNICATIONS
A video with Mark Johnstone, Group Chief Executive, and David
Crook, Group Finance Director, is now available on
www.bbaaviation.com
A live audio webcast of the analyst presentation will be
available from 08:30 today on www.bbaaviation.com
INTERIM FINANCIAL REPORT FOR PERIODED 30 JUNE 2018
GROUP
Underlying results(1) Statutory results
-----------------------------------------
----------------------
H1 2018 H1 2017 Restated(2) H1 2018 H1 2017 Restate
d(2)
$m Continuing Total Continuing Total % Change(3) Continuing Total Continuing Tot
al
(including (including (including (in
cluding % Change(3)
discontinued discontinued discontinued dis
continued
operations) operations) operations) ope
rations)
Revenue 1,024.3 1,281.9 898.6 1,183.7 8% 1,024.3 1,281.9 898.6 1,1
83.7 8%
EBITDA 204.9 222.0 204.6 217.8 2% 197.2 213.2 203.0 212
.5 - %
Operating
profit 167.1 180.5 165.3 174.7 3% 115.9 128.2 117.0 122
.7 4%
Profit
before
tax 140.2 153.1 134.1 143.3 7% 76.2 83.0 85.8 84.
7 (2)%
Profit
after
tax 110.7 121.0 111.0 117.1 3% 61.4 66.7 80.7 52.
5 27%
Basic
adjusted
earnings
per
share(4) 10.7c 11.7c 10.8c 11.4c 3% 6.0c 6.5c 7.8c 5.1
c 27%
Underlying and
Statutory
Return on
invested
capital(5) - 11.3% - 11.0% 30bps
Free cash
flow - 114.5 - 56.6 102%
Net debt(5) - (1,197.3) - (1,167.1) -
Dividend
per
share - 4.00c - 3.81c 5%
1. Underlying results represent alternative performance measures, see
note 17 outlining all such measures
2. Restated following the presentation of ERO (excluding the Middle East)
as a discontinued operation
3. % change based on total (including discontinued operations)
4. Statutory measure is basic earnings per share
5. 2017 return on invested capital and net debt are shown for the full
year ended 31 December 2017, see note 17
Highlights
-- Total underlying operating profit up 3.3% to $180.5 million;
Signature network outperforming a soft market
-- Continuing operations:
o Flight Support (87% of continuing Group underlying operating
profit)
-- Organic revenue up 5.0% with network agreements contributing
to outperformance
-- US B&GA market softer than the expected 3% growth, with
Q1: 2.6% and April & May average of 1.9%
-- Operating profit up 1.8% with opex investment in technology
on track for deployment in 2019
o Aftermarket Services (13% of continuing Group underlying
operating profit)
-- Operating profit growth of 8.6% to $23.9m, driven by Ontic
licence acquisitions
-- Licence acquisitions and FX more than offsetting prior year
cyclical military orders
-- Discontinued operations:
o Engine Repair and Overhaul excluding the Middle East (ERO)
delivered further improvement in underlying operating profit
performance of $3.8 million representing 39.6% growth over H1
2017
-- Statutory total operating profit increased by 4% to GBP128.2
million (H1 2017: $122.7 million)
-- Continuing statutory profit before tax was $76.2 million
versus $85.8 million for the first half of 2017
-- Strong free cash flow of $114.5 million (H1 2017: $56.6
million), leverage at 2.6x net debt/EBITDA
-- Group ROIC increased by 30 basis points to 11.3% (Dec 2017: 11.0%)
-- Underlying total adjusted basic EPS increased by 3% to 11.7c.
Total basic EPS increased by 27% to 6.5c
-- Interim dividend increased by 5% to 4.00 cents reflecting
continued confidence in the Group's future growth prospects
Mark Johnstone, BBA Aviation Group Chief Executive,
commented:
"We are pleased with our operational achievements in the first
half of 2018 and were delighted to announce the $88m acquisition of
EPIC. Against the background of a softer US B&GA market that
grew 2.3% during the first five months of the year, we delivered
continued market outperformance and made progress in driving the
benefits of Signature's unique global network of FBOs. We have
invested in technology to underpin the future growth and
longer-term market outperformance and capture the potential we see
to expand the offering of non-fuel services, improve yield
management and further leverage our market leading network and
service quality.
In Aftermarket Services, Ontic had a solid first half against a
strong prior year comparative and is expected to perform in line
with expectations for the full year. It has a growing portfolio of
IP protected licences and continues to have a strong pipeline of
growth opportunities as we look to leverage data analytics and
expand on more platforms.
In summary, the continuing Group is focused on high ROIC and
strongly cash generative market leading businesses and has a good
pipeline of investment opportunities. The Board is confident of
modest growth in 2018, through continued outperformance against a
softer US B&GA market backdrop."
INTERIM FINANCIAL REPORT 2018
Overview
BBA Aviation performed well in the first half of 2018 and made
further progress with the implementation of its strategy.
Flight Support (Signature) delivered underlying operating profit
growth of 1.8% against US B&GA movements that grew 2.3% during
the first five months of the year. With the first full six months
contribution from the network agreements, Signature is making
encouraging progress despite the softer than expected US B&GA
market. Ontic continues to perform well, though as previously noted
its first half performance has been impacted by phasing of certain
deliveries.
Continuing Group revenue increased by 14.0% to $1,024.3 million
(H1 2017: $898.6 million) including a $5.0m contribution from Ontic
licence acquisitions. Signature revenue increased 15.4%, reflecting
organic growth of 5.0% and the positive impact of higher fuel
prices ($70.8 million) and foreign exchange movements ($8.3
million), which increased revenue by $79.1 million. Continuing
Aftermarket Services revenue increased by 2.3% with the
contribution from the 2017 and 2018 acquisitions in Ontic broadly
offsetting the decline in cyclical military orders.
Continuing Group underlying operating profit was $167.1 million
(H1 2017: $165.3 million). There was a good operating performance
in Signature, with network agreements delivering in line with
expectations while drop through was impacted by weaker than
expected US market growth and the impact of growth investments
being made. Underlying continuing operating profit at Aftermarket
Services of $23.9 million (H1 2017: $22.0 million) includes a $2.7
million contribution from Ontic acquisitions and now accounts for
13% of the continuing Group.
Continuing Group underlying operating profit margin decreased to
16.3% (H1 2017 at H1 2018 fuel prices: 17.1%) reflecting the impact
of investments being made in Signature.
We have now completed the strategic review of our Engine Repair
and Overhaul (ERO) business and reclassified the business as held
for sale and reported it as a discontinued operation. We now
consider the sale of the business to be highly probable, albeit
there is no certainty that an acceptable transaction will result.
We anticipate making a further announcement on ERO before the end
of the year.
Net interest for the total Group reduced by $4.0 million to
$27.4 million (H1 2017: $31.4 million), due to one-time gain from
hedging contracts closed out as part of the refinancing. Net debt
increased to $1,197.3 million (FY 2017: $1,167.1 million). Net debt
to EBITDA was flat at 2.6x on a covenant basis (FY 2017: 2.6x) and
2.6x on a reported basis (FY 2017: 2.6x). Interest cover on a
covenant basis increased to 9.4x for the 12 months to 30 June 2018
(FY 2017: 8.4x).
Continuing underlying profit before tax increased to $140.2
million (H1 2017: $134.1 million).
The Group's underlying tax rate for continuing operations was
21.0% (H1 2017: 17.2%). Adjusted earnings per share for continuing
operations was down 0.9% to 10.7c (H1 2017: 10.8c).
Exceptional and other items after tax, for continuing and
discontinued operations, totalled $54.3 million. Key components of
this for continuing operations are the non-cash amortisation of
acquired intangibles ($43.5 million), the impairment of the Sloulin
Field FBO ($12.8 million), restructuring expenses ($7.7 million)
and a tax credit ($14.7 million). Exceptional and other items on
discontinued operations relate to the costs of restructuring and
completing the strategic review of the ERO business.
Continuing statutory profit before tax was $76.2 million versus
$85.8 million for the first half of 2017. The reduction arises
principally from the higher level of exceptional and other items
charged during the first six months of 2018.
Free cash inflow was $57.9 million higher at $114.5 million (H1
2017: $56.6 million). There was a $23.7 million outflow of working
capital in the first half of 2018 (H1 2017: $65.1 million outflow,
FY 2017: $46.3 million outflow). The outflow during the first half
was largely due to the availability of parts from OEMs in the ERO
business which impacted timing of completion on engine overhaul
events.
Gross capital expenditure amounted to $44.3 million (H1 2017:
$38.2 million). Principal capital expenditure items include the
investment in Signature's FBO development at Nashville and the
investment in the sports terminal at our Miami FBO.
Cash flows on exceptional and other items are largely a result
of restructuring expenses.
The Group made $2.2 million of pension scheme payments (H1 2017:
$2.1 million).
The Group's tax payments during the period were $10.2 million
(H1 2017: $18.8 million) and net interest payments were $21.5
million (H1 2017: $28.8 million). The dividend payment was $99.3
million (H1 2017: $91.5 million).
Total spend on acquisitions and licences completed during the
period was $27.7 million (H1 2017: $61.3 million), which included
Ontic licence acquisitions from Honeywell and UTAS along with the
acquisition of a minority stake in Alyssum. H1 2017 included
proceeds from disposals of $180.4 million related to the disposal
of ASIG, net of costs.
Return on Invested Capital (ROIC) increased to 11.3% (FY 2017:
11.0%).
Business Review - Continuing Operations
Flight Support (87% of continuing operations' underlying
operating profit)
The Flight Support division ("Signature") provides specialist
on-airport services including refuelling and ground handling to the
business & general aviation (B&GA) market.
$m H1 2018 H1 2017 % Change
Revenue 926.3 802.8 15.4 %
Underlying operating profit 163.7 160.8 1.8 %
Underlying operating margin 17.7% 20.0% (230) pts
Constant fuel margin(1) 17.7% 18.4% (70) pts
Statutory operating profit 126.0 119.7 5.3 %
Operating cash flow 197.8 154.0 28.4%
Divisional return on invested 12.2% 12.2%* - pts
capital
(1) H1 2017 underlying operating margin adjusted for constant
fuel prices (unadjusted H1 2017 underlying operating margin:
20.0%)
*Return on invested capital for full year 2017
Revenue at Signature increased by 15.4% to $926.3 million (H1
2017: $802.8 million). This included the positive impact of higher
fuel prices and foreign exchange movements, which increased revenue
by $79.1 million. Signature's organic revenue, which excludes the
impact of higher fuel prices and foreign exchange, increased by
5.0%. This was against a backdrop of US B&GA movements (source:
FAA) up 2.3% for the five months to May. Whilst FAA market data is
not available for June, a useful alternative reference point is the
report by Argus TRAQPak which showed a 0.1% contraction in flight
activity in June. European B&GA movements were up 4.5% in H1
2018.
Underlying operating profit at Signature increased by 1.8% to
$163.7 million (H1 2017: $160.8 million) and on an organic basis,
which adjusts for FX of $0.6 million, underlying operating profit
increased by 1.4%. The Group remains confident in Signature's
ability to continue to deliver significant value creation across
the enlarged network, supported by the investments we are making
during 2018.
Underlying operating margin was lower at 17.7% (H1 2017: 20.0%)
due primarily to the increase in fuel prices. After adjusting H1
2017 underlying operating margin for 2018 fuel prices, Signature's
underlying operating margin for H1 2017 was 18.4%. This represents
a margin reduction of 70 basis points.
Statutory operating profit of $126.0 million has increased by
5.3% (H1 2017: $119.7 million). This increase is a result of
organic growth and lower charges for exceptional and other
items.
Operating cash flow for Signature improved to $197.8 million (H1
2017: $154.0 million), principally due to improved working capital
performance. Return on invested capital remained consistent at
12.2% (FY 2017: 12.2%).
We continue to invest in our Signature network, including recent
investments in new technology to enhance our fuel and non-fuel
revenue management capabilities. As previously noted, we have been
investing in enhanced EPoS and revenue management tools. The Group
is confident that the outperformance of the Signature network
against the US B&GA market demonstrates the ability of our
unrivalled network to deliver value.
Signature has recently secured a significant lease term
extension with a new 20-year lease (with a possible further
five-year extension) at its sole source FBO at Hartsfield Jackson
Atlanta International Airport. Here, at what is the world's busiest
hub airport, we will invest in a new FBO facility and will launch
our Signature Elite(TM) service (private transfers to/from
commercial flights via Signature's FBO facilities).
In May 2018 we acquired EPIC Aviation LLC, doing business as
EPIC Fuels (EPIC), a leading fuel and fuel related services
supplier to an extensive FBO network for a cash consideration of
$88.1m. This deal completed on 1 July 2018 following regulatory
approvals.
EPIC provides fuel and fuel related services at 208 privately
owned independent FBO locations, 189 of these locations are branded
EPIC and 19 are branded UVAir. The addition of EPIC's 208 FBO
locations is complementary to our existing Signature Select(R)
branded locations, establishing a non-owned, network to operate
alongside our market-leading owned FBO network.
EPIC is our existing Signature fuel card partner and the
acquisition allows Signature to have full end-to-end management of
the existing SFS EPIC fuel card programme, associated transaction
processing and data capture as a platform for an enhanced service
offering across our entire network. The Group has also acquired
EPIC's proprietary QTPod technology for self-fuelling AvGas
services. QTPod has the potential to expand its footprint in the
aviation industry with a new proprietary and cloud based self-serve
fuelling terminal.
EPIC is expected to contribute revenue of around $400m in the
first full year of ownership. The $88.1m consideration represents
an expected year one EBITDA multiple of 11.7x, pre-acquisition
related expenses of around $1.2m and EPIC is expected to achieve
BBA's ROIC target threshold of 12% by year three.
There are 199 locations in Signature's global network, including
20 Signature Select(R) franchise locations, where we have recently
added Gary International Airport in Chicago. Following the
acquisition of EPIC we now have 228 privately owned, independent
FBOs and 179 owned FBOs. This creates a total network of over 400
FBO locations significantly extending Signature's network relevance
and the range of services it can offer.
Aftermarket Services (13% of continuing operations' underlying
operating profit)
The Aftermarket Services division is focused on the support of
maturing aerospace platforms through Ontic, the Group's Legacy
Support business.
$m H1 2018 H1 2017 % Change
Revenue 98.0 95.8 2.3 %
Underlying operating
profit 23.9 22.0 8.6 %
Underlying operating
margin 24.4% 23.0% 140 bps
Statutory operating
profit 11.2 16.4 (31.7) %
Operating cash flow 18.4 12.6 46.0%
Divisional ROIC 14.6% 15.0% (40) pts
*Return on invested capital for full year 2017
** ERO (Middle East) is included in continuing Aftermarket
Services while the business is being closed (Revenue $2.7m,
operating loss $0.6m, H1 2017: Revenue $1.6m and operating loss of
$2.2m)
In Aftermarket Services, revenue increased by 2.3% to $98.0
million (H1 2017: $95.8 million). On an organic basis, which
adjusts for FX ($3.6 million) and acquisitions ($5.0 million),
revenue declined by 6.4% due to the previously highlighted prior
year non-recurring cyclical military orders and phasing of
deliveries.
Underlying operating profit of $23.9 million increased by 8.6%
(H1 2017: $22.0 million) driven by a contribution from Ontic
acquisitions of $2.7m. As previously highlighted, the year on year
performance at Ontic has been impacted by the phasing of its
revenues, against a strong prior year comparative, but is expected
to perform in line with expectations for the full year. On an
organic basis, excluding FX and acquisitions, Aftermarket Services
underlying operating profit decreased 9.0%. Underlying operating
margins improved to 24.4% (H1 2017: 23.0%). The performance of
Aftermarket Services includes a $0.6 million operating loss (H1
2017: $2.2 million loss) in our ERO Middle East business, which is
not included as part of the discontinued operations and will be
closed over the next few months.
Statutory operating profit of $11.2 million has decreased by
$5.2 million (H1 2017: $16.4 million), principally as a result of
closure costs relating to our ERO facility in the Middle East.
There was an operating cash inflow for the division of $18.4
million (H1 2017: $12.6 million inflow) driven by working capital
performance in Ontic and narrowing of losses in the Middle East.
Return on invested capital was broadly flat at 14.6 % (FY 2017:
15.0%).
Early in 2018 Ontic signed a first product licence with Racal
Acoustics, part of Esterline Corporation, for various military and
civil avionics products including cockpit communication control
systems. We have also recently signed a new licensing agreement
with Honeywell for cockpit LCD displays on multiple commercial,
military fixed-wing and rotorcraft platforms. We are also pleased
to sign a first product licence with Engine Control Services (part
of United Technologies Aerospace Systems) for the manufacturing and
aftermarket support for military fuel control products. Our fourth
licence in the first half was with Ultra Electronics bringing our
total cash spend on licence acquisitions to $22.5 million (H1 2017:
$61.3 million, predominantly relating to the GE Aviation avionics
portfolio).
Ontic continues to assess a strong pipeline of opportunities in
relation to new products and licence adoptions and possible
M&A.
Central costs
Underlying central costs have increased during the first half of
2018 by $3.0 million to $20.5 million (H1 2017: $17.5 million).
This primarily reflects additional one-time costs incurred in our
captive insurance company for the damage to our US and Caribbean
facilities in the 2017 hurricanes, increased share based payment
charges and costs associated with the CEO transition.
Central costs now also include $5.7 million of costs to support
ERO (H1 2017: $5.6 million) which are not considered as
discontinued operations.
Business Review - Discontinued Operations
At the end of May 2018 management committed to a plan to sell
substantially all our Engine Repair and Overhaul business and as
such at that point the relevant assets and liabilities were
classified as held for sale. At that time, as a major line of the
Group's business, the ERO operations were also classified as a
discontinued operation.
ERO's revenue increased by $10.7 million to $257.6 million (H1
2017: $246.9 million). In stable markets, ERO's underlying
operating profit was up 39.6% to $13.4 million (H1 2017: $9.6
million). ERO's profit improvement also includes the benefit from a
suspension of depreciation and amortisation of $0.7 million for the
month of June 2018, the required accounting treatment while the
asset is held for sale.
Also shown in discontinued operations for the six months ended
30 June 2017 are revenues of $38.2m and an underlying operating
loss of $0.2 million for ASIG, sold to John Menzies plc on 31
January 2017, which generated proceeds of $180.4 million, net of
costs.
Other Financial Information & Refinancing
Net debt increased by $30.2 million to $1,197.3 million (FY
2017: $1,167.1 million). At 30 June 2018 the Group had total
borrowings of $1,338.4 million (FY 2017 $1,322.8 million),
obligations under finance leases of $1.3 million (FY 2017 $1.3
million) and cash and cash equivalents of $147.6 million for
continuing operations (FY 2017: $152.6 million).
Net debt to EBITDA was stable at 2.6x on a covenant basis (FY
2017: 2.6x) and 2.6x on a reported basis (FY 2017: 2.6x). Interest
cover on a covenant basis increased to 9.4x for the 12 months to 30
June 2017 (FY 2017: 8.4x).
Operating cashflow was $42.2m higher at $144.5 million (H1 2017
$102.3 million). This was driven by a reduced outflow of working
capital in the first half of 2018 of $23.7 million (H1 2017: $65.1
million outflow, FY 2017: $46.3 million outflow). The continuing
Group's strong working capital performance was offset by the
discontinued ERO business where the availability of parts from OEMs
impacted timing of completion on engine overhaul events. Gross
capital expenditure amounted to $44.3 million (H1 2017: $38.2
million), including IT spend and investments on our FBOs in
Nashville and Miami.
Income taxes paid was down $8.6 million to $10.2 million (H1
2017: $18.8 million) due largely to non-repeat of tax paid in the
prior year on ASIG disposal and net interest payments were down
$7.2 million to $21.5 million (H1 2017: $28.7 million). As a
result, free cash inflow was $57.9 million higher at $114.5 million
(H1 2017: $56.6 million).
As recently announced, the Group has refinanced its $650 million
unsecured multicurrency revolving credit facility (RCF) which was
due to mature in April 2019, with a new facility which will expire
in March 2023. The new RCF has been agreed predominantly with the
Group's existing lenders with an overall weighted average interest
cost in line with the previous facility. We have also recently
issued our inaugural $500 million senior unsecured notes due 2026
at 5.375%. The proceeds from the issuance of $500 million senior
unsecured notes were used to repay the $253 million Facility B of
our acquisition financing and $120 million of US private placement
notes which matured in May 2018. This gives the Group a diversified
debt structure with an extended maturity profile to align better
with the long-term nature of the assets being financed and to
support future growth.
Pensions
The Group's net defined benefit pension and other
post-retirement benefits liabilities reduced by $27.2 million
during the first half of 2018 from $71.7 million at 31 December
2017 to $44.5 million at 30 June 2018. The reduction in the net
deficit since 31 December 2017 reflects contributions and the
favourable impact of market based financial assumptions, slightly
offset by asset performance being below expectations and liability
experience losses.
Dividend
The Board is declaring an increased interim dividend of 4.00c
(H1 2017: 3.81c) up 5% reflecting the Board's progressive dividend
policy and its continued confidence in the Group's future growth
prospects.
A dividend reinvestment plan is in operation. Those shareholders
who have not elected to participate in this plan, and who would
like to participate, please register via the share portal
www.signalshares.com. The deadline for elections is 5:30pm on 8
October 2018.
Board Changes
As previously announced, Mark Johnstone was appointed as Group
Chief Executive with effect from 1 April 2018. Wayne Edmunds
stepped down from his role as Interim Group Chief Executive on 31
March 2018 and remains on the Board as a non-executive
director.
Outlook
Overall, we are pleased with the progress we have made in the
first half of 2018. Our investments in technology will underpin the
future growth and longer-term market outperformance of our
business.
The continuing Group is focused on high ROIC and strongly cash
generative businesses. The Board is confident of modest growth in
2018, through continued outperformance against a soft US B&GA
market backdrop and Ontic continues to have a strong pipeline of
growth opportunities. We will continue to invest in our Signature
network and remain focused on delivering continued US B&GA
market outperformance in 2019 and beyond.
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,
Mark Johnstone David Crook
Group Chief Executive Officer Group Finance Director
31 July 2018 31 July 2018
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, in tax rates or tax legislation, 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; the introduction
or variation of tariffs or duties; 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
Restated Restated
Six months ended Six months ended Year ended 31 December
30 June 2018 30 June 2017 2017
------------------ ------ ---------------------------------------------- ----------------------------------------- -----------------------------------------
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
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Continuing operations
Revenue 2 1,024.3 - 1,024.3 898.6 - 898.6 1,857.3 - 1,857.3
Cost of sales (770.2) - (770.2) (662.4) - (662.4) (1,369.5) - (1,369.5)
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Gross profit 254.1 - 254.1 236.2 - 236.2 487.8 - 487.8
Distribution
costs (5.1) - (5.1) (6.0) - (6.0) (12.1) - (12.1)
Administrative
expenses 3 (84.1) (43.5) (127.6) (68.7) (46.7) (115.4) (149.6) (93.8) (243.4)
Other operating
income 1.3 - 1.3 2.6 - 2.6 8.3 - 8.3
Share of
profit of
associates
and joint
ventures 1.7 - 1.7 1.7 - 1.7 3.4 - 3.4
Other operating
expenses 3 (0.8) - (0.8) (0.5) - (0.5) (1.3) (1.2) (2.5)
Restructuring
costs 3 - (7.7) (7.7) - (1.6) (1.6) - (22.4) (22.4)
Operating
profit/(loss) 2, 3 167.1 (51.2) 115.9 165.3 (48.3) 117.0 336.5 (117.4) 219.1
Impairment
of assets - (12.8) (12.8) - - - - - -
Investment
income 0.3 - 0.3 1.0 - 1.0 3.2 - 3.2
Finance costs (27.2) - (27.2) (32.2) - (32.2) (64.7) - (64.7)
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss)
before tax 140.2 (64.0) 76.2 134.1 (48.3) 85.8 275.0 (117.4) 157.6
Tax
(expense)/credit 3, 4 (29.5) 14.7 (14.8) (23.1) 18.0 (5.1) (51.3) 12.2 (39.1)
================== ====== ============== ==================== ======== ============== ============ =========== ============== ============ ===========
Profit/(loss)
from continuing
operations 110.7 (49.3) 61.4 111.0 (30.3) 80.7 223.7 (105.2) 118.5
Discontinued operations
Profit/(loss)
from ERO
discontinued
operations,
net of tax 3, 14 10.3 (5.0) 5.3 6.3 (2.4) 3.9 22.6 0.7 23.3
Profit/(loss)
from ASIG
discontinued
operations,
net of tax 3, 14 - - - (0.2) (31.9) (32.1) - (22.5) (22.5)
Profit/(loss)
for the period 121.0 (54.3) 66.7 117.1 (64.6) 52.5 246.3 (127.0) 119.3
================== ====== ============== ==================== ======== ============== ============ =========== ============== ============ ===========
Attributable
to:
Equity holders
of BBA Aviation
plc 121.0 (54.3) 66.7 117.0 (64.6) 52.4 246.4 (127.0) 119.4
Non-controlling
interests - - - 0.1 - 0.1 (0.1) - (0.1)
================== ====== ============== ==================== ======== ============== ============ =========== ============== ============ ===========
Profit/(loss)
for the period 121.0 (54.3) 66.7 117.1 (64.6) 52.5 246.3 (127.0) 119.3
================== ====== ============== ==================== ======== ============== ============ =========== ============== ============ ===========
Six months ended Six months ended Year ended 31 December
30 June 2018 30 June 2017 2017
Earnings/(loss) Note Adjusted(1) Unadjusted Adjusted(1) Unadjusted Adjusted(1) Unadjusted
per share
Total group
Basic 5 11.7c 6.5c 11.4c 5.1c 24.0c 11.6c
Diluted 5 11.6c 6.4c 11.3c 5.0c 23.7c 11.5c
Continuing operations
Basic 5 10.7c 6.0c 10.8c 7.8c 21.8c 11.5c
Diluted 5 10.6c 5.9c 10.7c 7.8c 21.5c 11.4c
Discontinued
operations
Basic 14 1.0c 0.5c 0.6c (2.7)c 2.2c 0.1c
Diluted 14 1.0c 0.5c 0.6c (2.8)c 2.2c 0.1c
================== ====== ============== ============================== ============== ============ =========== ============== ============ ===========
(1) Underlying results and adjusted earnings per share are
stated before exceptional and other items. Exceptional and other
items are disclosed in note 3.
All alternative performance measures are reconciled to IFRS
measures and are explained in note 17.
The Group has presented a discontinued operation in the current
year, and accordingly the prior period has been restated as
required by IFRS, see note 14. In addition, in the comparative
period, the Group presented a separate discontinued operation.
Unaudited condensed consolidated statement of comprehensive
income
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
$m $m $m
------------------------------------------------ ----------- --------------- -----------------
Profit for the period 66.7 52.5 119.3
Other comprehensive income/(loss)
Items that will not be reclassified
subsequently to profit or loss
Actuarial gains on defined benefit
pension schemes 25.2 4.5 11.2
Tax charge relating to components
of other comprehensive income/(loss)
that will not be reclassified subsequently
to profit or loss (5.4) (0.9) (1.1)
================================================ =========== =============== =================
19.8 3.6 10.1
================================================ =========== =============== =================
Items that may be reclassified subsequently
to profit or loss
Exchange difference on translation
of foreign operations (24.4) (11.5) (6.8)
Recycling of translational exchange
differences accumulated in equity
upon disposal of subsidiary - 6.4 6.4
Fair value movements in assets classified
as financial instruments through other
comprehensive income - - (4.4)
Fair value movements in foreign exchange
cash flow hedges (3.8) 7.0 10.1
Transfer to profit or loss from other
comprehensive income on foreign exchange
cash flow hedges 0.9 (1.9) (2.2)
Fair value movement in interest rate
cash flow hedges (4.1) (1.9) 1.7
Transfer to profit or loss from other
comprehensive income on interest rate
cash flow hedges 4.9 2.3 4.0
Tax relating to components of other
comprehensive income that may be subsequently
reclassified to profit or loss 0.4 (1.1) (4.3)
================================================ =========== =============== =================
(26.1) (0.7) 4.5
================================================ =========== =============== =================
Other comprehensive (loss)/income
for the period (6.3) 2.9 14.6
================================================ =========== =============== =================
Total comprehensive income for the
period 60.4 55.4 133.9
================================================ =========== =============== =================
Attributable to:
Equity holders of BBA Aviation plc 60.4 55.3 134.0
Non-controlling interests - 0.1 (0.1)
================================================ =========== =============== =================
60.4 55.4 133.9
================================================ =========== =============== =================
Unaudited condensed consolidated balance sheet
As at As at As at
30 June 30 June 31 December
2018 2017 2017
Note $m $m $m
------------------------------------ ----- ---------- ---------- -------------
Non-current assets
Goodwill 1,120.6 1,118.3 1,126.6
Other intangible assets 1,263.2 1,339.8 1,311.3
Property, plant and equipment 779.7 867.1 845.5
Interests in associates
and joint ventures 41.4 40.4 41.4
Trade and other receivables 18.0 19.9 20.1
Deferred tax asset - 0.7 0.1
3,222.9 3,386.2 3,345.0
==================================== ===== ========== ========== =============
Current assets
Inventories 110.7 243.3 249.9
Trade and other receivables 208.2 289.4 321.4
Cash and cash equivalents 7 147.6 152.6 153.5
Tax recoverable 0.3 1.1 0.7
Assets held for sale 14 369.0 - -
835.8 686.4 725.5
==================================== ===== ========== ========== =============
Total assets 2 4,058.7 4,072.6 4,070.5
==================================== ===== ========== ========== =============
Current liabilities
Trade and other payables (415.4) (451.8) (502.1)
Tax liabilities (38.5) (63.1) (31.9)
Obligations under finance
leases (0.2) (0.2) (0.2)
Borrowings 7 (0.7) (124.4) (124.2)
Provisions (27.9) (26.1) (32.2)
Liabilities held for sale 14 (109.5) - -
(592.2) (665.6) (690.6)
==================================== ===== ========== ========== =============
Net current assets 243.6 20.8 34.9
==================================== ===== ========== ========== =============
Non-current liabilities
Borrowings 7 (1,337.7) (1,291.7) (1,198.6)
Trade and other payables
due after one year (7.8) (3.1) (0.9)
Pensions and other post-retirement
benefits 13 (44.5) (80.1) (71.7)
Deferred tax liabilities (141.8) (108.2) (137.8)
Obligations under finance
leases (1.1) (1.3) (1.1)
Provisions (38.4) (38.0) (36.6)
------------------------------------ ----- ---------- ---------- -------------
(1,571.3) (1,522.4) (1,446.7)
==================================== ===== ========== ========== =============
Total liabilities 2 (2,163.5) (2,188.0) (2,137.3)
==================================== ===== ========== ========== =============
Net assets 1,895.2 1,884.6 1,933.2
==================================== ===== ========== ========== =============
Equity
Share capital 15 509.3 508.8 509.0
Share premium account 1,594.5 1,594.5 1,594.5
Other reserve (5.4) 0.3 (5.4)
Treasury reserve (95.2) (91.7) (92.8)
Capital reserve 53.6 47.1 50.4
Hedging and translation
reserves (100.4) (87.9) (73.9)
Retained earnings (62.9) (88.2) (50.1)
------------------------------------ ----- ---------- ---------- -------------
Equity attributable to
equity holders of BBA Aviation
plc 1,893.5 1,882.9 1,931.7
Non-controlling interest 1.7 1.7 1.5
==================================== ===== ========== ========== =============
Total equity 1,895.2 1,884.6 1,933.2
==================================== ===== ========== ========== =============
Unaudited condensed consolidated cash flow statement
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
Note $m $m $m
----------------------------------------- ----- ----------- ----------- -------------
Operating activities
Net cash flow from operating activities 9 177.1 121.4 339.0
Investing activities
Interest received 0.3 0.5 3.3
Dividends received from associates 1.7 1.9 2.4
Purchase of property, plant and
equipment (40.1) (35.9) (73.4)
Purchase of intangible assets (4.2) (2.3) (11.9)
Proceeds from disposal of property,
plant and equipment 0.3 0.3 16.8
Acquisition of businesses, net
of cash/(debt) acquired 10 (21.3) (61.3) (75.7)
Investment in joint ventures and
associates - (0.5) (0.3)
Investment in assets classified (5.2) - -
as financial instruments measured
through other comprehensive income
(FVTOCI)
Proceeds from disposal of subsidiaries
and associates, net of cash/(debt)
disposed 11 - 180.4 170.5
Net cash (outflow)/inflow from
investing activities (68.5) 83.1 31.7
========================================= ===== =========== =========== =============
Financing activities
Interest paid (21.8) (29.2) (60.5)
Interest element of finance leases
paid - (0.1) (0.1)
Dividends paid 6 (99.3) (91.5) (130.7)
Losses from realised foreign exchange
contracts (2.7) (5.0) (15.0)
Proceeds from issue of ordinary
shares net of issue costs 0.3 0.1 0.3
(Purchase)/sale of own shares (5.4) (2.1) 0.3
Increase/(decrease) in loans 26.8 (134.0) (222.6)
Decrease in finance leases - (0.2) (0.4)
(Decrease)/increase in overdrafts (3.3) 2.5 3.0
========================================= ===== =========== =========== =============
Net cash outflow from financing
activities (105.4) (259.5) (425.7)
========================================= ===== =========== =========== =============
Increase/(decrease) in cash and
cash equivalents 3.2 (55.0) (55.0)
Cash and cash equivalents at beginning
of the period 153.5 205.3 205.3
Exchange adjustments (6.7) 2.3 3.2
========================================= ===== =========== =========== =============
Cash and cash equivalents at end
of the period 150.0 152.6 153.5
========================================= ===== =========== =========== =============
Comprised of:
Cash and cash equivalents at
end of the period 147.6 152.6 153.5
Cash included in Assets held 2.4 - -
for sale at end of the period
Net debt at beginning of the period (1,167.1) (1,335.3) (1,335.3)
Increase/(decrease) in cash and
cash equivalents 3.2 (55.0) (55.0)
(Increase)/decrease in loans (26.8) 134.0 222.6
Increase in accrued borrowing (3.3) - -
costs
Decrease in finance leases - 0.2 0.4
Decrease/(increase) in overdrafts 3.3 (2.5) (3.0)
Exchange adjustments (6.6) 2.3 3.2
========================================= ===== =========== =========== =============
Net debt at end of the period (1,197.3) (1,256.3) (1,167.1)
========================================= ===== =========== =========== =============
Purchase of intangible assets includes $1.2 million (30 June
2017: $nil million; 31 December 2017: $5.0 million) paid in
relation to Ontic licences.
Purchase/(sale) of shares includes the share purchases for the
share buy-back scheme, shares purchased for the Employee Benefit
Trust and shares purchased for employees to settle their tax
liabilities as part of the share schemes.
Within the Group's definition of net debt, the US private
placement is included at its face value of $380 million (30 June
2017: $500 million; 31 December 2017: $500 million) reflecting the
fact that the liabilities will be in place until maturity. This is
$4.9 million higher (30 June 2017: $8.7 million lower; 31 December
2017: $3.5 million lower) than its carrying value. Also within the
Group's definition of net cash the senior notes are included at
their face value of $500 million reflecting the fact that the
liabilities will be in place until maturity. This is $0.3m lower
than its carrying value.
Unaudited condensed consolidated statement of changes in
equity
Share Share Retained Other Non-controlling Total
capital premium earnings reserves Total interests equity
$m $m $m $m $m $m $m
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Balance at 1 January 2018 509.0 1,594.5 (50.1) (121.7) 1,931.7 1.5 1,933.2
Profit for the period - - 66.7 - 66.7 - 66.7
Other comprehensive income/(loss)
for the period - - 20.2 (26.5) (6.3) - (6.3)
================================== ========= ========= ========== ========== ======== ================ ========
Total comprehensive income
for the period - - 86.9 (26.5) 60.4 - 60.4
================================== ========= ========= ========== ========== ======== ================ ========
Dividends - - (99.3) - (99.3) - (99.3)
Issue of share capital 0.3 - - - 0.3 - 0.3
Movement on treasury reserve - - - (5.4) (5.4) - (5.4)
Credit to equity for
equity-settled
share-based payments - - - 5.7 5.7 - 5.7
Changes in non-controlling
interest - - - - - 0.2 0.2
Tax on share-based payment
transactions - - 0.1 - 0.1 - 0.1
Transfer to retained earnings - - (0.5) 0.5 - - -
================================== ========= ========= ========== ========== ======== ================ ========
Balance at 30 June 2018 509.3 1,594.5 (62.9) (147.4) 1,893.5 1.7 1,895.2
================================== ========= ========= ========== ========== ======== ================ ========
Balance at 1 January 2017 508.7 1,594.5 (52.2) (134.0) 1,917.0 1.6 1,918.6
Profit for the period - - 52.4 - 52.4 0.1 52.5
Other comprehensive income
for the period - - 2.4 0.5 2.9 - 2.9
================================== ========= ========= ========== ========== ======== ================ ========
Total comprehensive income
for the period - - 54.8 0.5 55.3 0.1 55.4
================================== ========= ========= ========== ========== ======== ================ ========
Dividends - - (91.5) - (91.5) - (91.5)
Issue of share capital 0.1 - - - 0.1 - 0.1
Movement on treasury reserve - - - (2.1) (2.1) - (2.1)
Credit to equity for
equity-settled
share-based payments - - - 3.9 3.9 - 3.9
Changes in non-controlling
interest - - 0.2 - 0.2 - 0.2
Transfer to retained earnings - - 0.5 (0.5) - - -
================================== ========= ========= ========== ========== ======== ================ ========
Balance at 30 June 2017 508.8 1,594.5 (88.2) (132.2) 1,882.9 1.7 1,884.6
================================== ========= ========= ========== ========== ======== ================ ========
Balance at 1 January 2017 508.7 1,594.5 (52.2) (134.0) 1,917.0 1.6 1,918.6
Profit for the period - - 119.4 - 119.4 (0.1) 119.3
Other comprehensive income
for the period - - 5.8 8.8 14.6 - 14.6
================================== ========= ========= ========== ========== ======== ================ ========
Total comprehensive income
for the period - - 125.2 8.8 134.0 (0.1) 133.9
================================== ========= ========= ========== ========== ======== ================ ========
Dividends - - (130.7) - (130.7) - (130.7)
Issue of share capital 0.3 - - - 0.3 - 0.3
Movement on treasury reserve - - - 0.3 0.3 - 0.3
Credit to equity for
equity-settled
share-based payments - - - 10.0 10.0 - 10.0
Tax on share-based payment
transactions - - 0.8 - 0.8 - 0.8
Transfer to retained earnings - - 6.8 (6.8) - - -
================================== ========= ========= ========== ========== ======== ================ ========
Balance at 31 December
2017 509.0 1,594.5 (50.1) (121.7) 1,931.7 1.5 1,933.2
================================== ========= ========= ========== ========== ======== ================ ========
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 2018
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 2017.
The Group's annual financial statements for the year ended 31
December 2017 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.
These condensed consolidated half yearly financial statements
have been 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. There are no new or amended standards effective in the
period which have had a material impact on the condensed
consolidated interim financial statements. The Group adopted IFRS 9
and IFRS 15 from 1 January 2018 and further details of the impact
of the accounting standards is referred to below.
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 8 of the interim statement.
Alternative Performance Measures (APMs)
In the reporting of financial information, the directors have
adopted various Alternative Performance Measures (APMs). The
Group's results are principally discussed on an 'adjusted' and/or
'underlying' basis. Results on an adjusted basis are presented
before exceptional and other items. APMs should be considered in
addition to, and are not intended to be a substitute for, or
superior to, IFRS measures.
All APMs have been defined, explained and reconciled to the
nearest GAAP measure in note 17.
New financial reporting requirements
A number of EU-endorsed amendments to existing standards and
interpretations were effective for annual periods beginning on or
after 1 January 2018 and have been applied in preparing the
Condensed Consolidated Financial Statements of the Group. There is
no impact on the Condensed Consolidated Financial Statements of the
Group from applying these standards.
The Group adopted from 1 January 2018 two significant changes to
the IFRS framework being IFRS 9: Financial Instruments (IFRS 9) and
IFRS 15: Revenue from contracts with customers (IFRS 15).
IFRS 9
IFRS 9 addresses the classification, measurement and recognition
of financial assets and financial liabilities, impairment and hedge
accounting.
Classification and measurement: The number of categories of
financial assets under IFRS 9 has been reduced compared to IAS 39.
The classification is based on the business model within which the
asset is held and the contractual cash flow characteristics of the
assets.
For financial assets that are debt instruments the
classification categories are amortised cost; fair value through
other comprehensive income (FVTOCI) and fair value through profit
or loss (FVTPL). Equity investments that fall within the scope of
the standard are usually measured at FVTPL unless an irrevocable
election is made to recognise them within other comprehensive
income. On the transition the Group elected to recognise changes in
the fair value of the equity investments in Alyssum Group Limited
(previously known as Fly Victor Limited) and Lider Taxi Aero S.A.
Air Brasil which are classified as financial instruments through
other comprehensive income (FVTOCI).
Impairment: The impairment model under IFRS 9 reflects expected
credit losses, as opposed to only incurred credit losses under IAS
39.
Hedge accounting: On initial application of the standard, an
entity may choose, as its accounting policy, to continue to apply
the hedge accounting requirements of IAS 39 instead of the hedge
accounting requirements of IFRS 9. The Group adopted the hedge
accounting requirements of IFRS 9 from 1 January 2018.
The Group performed an assessment of the impact of adopting IFRS
9 based on the financial instruments and hedging relationships upon
transition to IFRS 9 and management concluded that the impact of
IFRS 9 on the Group was not material.
IFRS 15
IFRS 15 addresses the recognition of revenue from customer
contracts and impacts on the amounts and timing of the recognition
of such revenue.
The standard introduces a five-step approach to revenue
recognition - identifying the contract; identifying the performance
obligations in the contract; determining the transaction price;
allocating that transaction price to the performance obligations
and finally recognising the revenue as those performance
obligations are satisfied.
The Group recognises revenue from the following major income
streams:
Flight Support:
-- Fuelling & fuel farm management
-- Property management
-- Ground handling
-- Technical services
Aftermarket Services:
-- Repair & overhaul
-- Engine & part sales
An impact assessment has been performed on the impact of IFRS
15:
Within the Aftermarket Services division, the methodology
adopted for revenue recognition under IFRS 15 was not materially
different from the previous standard, IAS 18 Revenue.
Within the Flight Support division, IFRS 15 did not have a
material impact due to the nature of the services provided - the
cycle from order through to delivery of these services is generally
short.
The Group performed an assessment of the impact of adopting IFRS
15 based on the Group's trading upon transition to IFRS 15 and
management concluded that the impact of IFRS 15 on the Group was
not material.
Note that the majority of Aftermarket Services' repair and
overhaul and a significant proportion of the engine & parts
service activities are classified as a discontinued operation.
Financial reporting standards applicable for future financial
periods
A number of EU-endorsed standards and amendments to existing
standards and interpretations, which are described below, are
effective for annual periods beginning on or after 1 January 2019
and have not been applied in preparing the Consolidated Financial
Statements of the Group.
The most significant change to the IFRS framework in these
forthcoming standards and amendments to standards is IFRS 16:
Leases.
IFRS 16
IFRS 16 replaces existing leasing guidance, including IAS 17
'Leases' and IFRIC 4 'Determining whether an arrangement contains a
lease'. The standard is effective for annual periods beginning on
or after 1 January 2019, with early adoption permitted for entities
that apply IFRS 15 'Revenue recognition' at or before the date of
initial application of IFRS 16. The Group intends to transition to
the new standard adopting the modified-retrospective approach.
Consequently, the comparatives will not be restated.
The standard requires lessees to account for most contracts
under an on-balance sheet model, with the distinction between
operating and finance leases being removed.
The standard provides certain exemptions from recognising leases
on the balance sheet, including where the asset is of low value or
the lease term is 12 months or less. In addition, the standard
makes changes to the definition of a lease to focus on, amongst
other things, which party has the right to direct the use of the
asset.
Under the new standard, the Group will be required to:
-- Recognise right of use lease assets and lease liabilities on
the balance sheet. The right of use asset is initially measured at
cost and subsequently measured at cost (subject to certain
exceptions) less accumulated depreciation and impairment losses,
adjusted for any re-measurement of the lease liability. Liabilities
are measured based on the present value of future lease payments
over the lease term. Subsequently, the lease liability is adjusted
for interest and lease payments, as well as the impact of lease
modifications, amongst others.
-- The recognition of the depreciation of right of use lease
assets and interest on lease liabilities over the lease term will
have no overall impact on profit before tax over the life of the
lease, however the result in any individual year will be impacted
and the change in presentation of costs will likely be material to
the Group's key metrics. Under the IAS 17, the charge is booked in
full to operating profit. Metrics which will therefore be affected
will include operating profit & operating margin, interest
& interest cover, EBITDA, ROIC, operating cash flow, net debt
and leverage.
-- Furthermore, the principal amount of cash paid and interest
in the cash flow statement will be presented separately as a
financing activity. Operating lease payments under IAS 17 would
have been presented as operating cash flows.
Work during the first half of 2018 has included:
-- A detailed review of contracts to establish both lease
classification and to capture the additional data which will be
required under IFRS 16,
-- Assessing the different transition options available,
-- Preliminary quantification and modelling of the potential financial impacts,
-- Commencing reviews on potential systems solutions.
Work in this area will continue during the second half of the
year. It is therefore not practicable to provide a reasonable
estimate of the financial effect until the directors complete their
review.
Assets and associated liabilities classified as held for
sale
Assets classified as held for sale are measured at the lower of
carrying amount or fair value less costs to sell. Assets are
classified as held for sale if their net carrying amount will be
recovered through a sale transaction rather than through continuing
use. This condition is regarded as met only when the sale is highly
probable and the asset is available for immediate sale in its
present condition. Management must be committed to the sale which
should be expected to qualify for recognition as a completed sale
within one year of the date of classification.
When the Group is committed to a sale plan involving loss of
control of a subsidiary, all the assets and liabilities of that
subsidiary are classified as held for sale when the criteria
described above are met, regardless of whether the Group will
retain a non-controlling interest in its former subsidiary after
the sale.
Discontinued operations presentation
Prior period results have been restated for the impact of the
presentation of the ERO businesses as a discontinued operation. ERO
Middle East is not classified as a discontinued operation as it
intended for these operations to be closed.
Further explanation of this change is presented in note 14.
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.
2 Segmental analysis - continued
As at, and for
the six months
ended 30 June Flight Aftermarket Unallocated
2018 Support(1) Services(5) Total Corporate(2) Total
Business segments Note $m $m $m $m $m
-------------------------- ----- ------------- ------------- -------- -------------- ----------
External revenue
External revenue
from continuing
and discontinued
operations 926.3 355.6 1,281.9 - 1,281.9
Less external
revenue from
ERO discontinued
operations 14 - (257.6) (257.6) - (257.6)
========================== ===== ============= ============= ======== ============== ==========
External revenue
from continuing
operations 926.3 98.0 1,024.3 - 1,024.3
========================== ===== ============= ============= ======== ============== ==========
Underlying operating
profit
Underlying operating
profit/(loss)
from continuing
and discontinued
operations 163.7 31.6 195.3 (14.8) 180.5
Less underlying
operating profit
from ERO discontinued
operations 14 - (7.7) (7.7) - (7.7)
Adjusted for
intergroup charges
for ERO discontinued
operations(3) 14 - - - (5.7) (5.7)
========================== ===== ============= ============= ======== ============== ==========
Underlying operating
profit/(loss)
from continuing
operations 163.7 23.9 187.6 (20.5) 167.1
========================== ===== ============= ============= ======== ============== ==========
Underlying operating
margin from
continuing operations 17.7% 24.4% 18.3% - 16.3%
Exceptional
and other items
Exceptional
and other items
from continuing
and discontinued
operations (37.7) (13.8) (51.5) (0.8) (52.3)
Less exceptional
and other items
from ERO discontinued
operations 14 - 1.1 1.1 - 1.1
========================== ===== ============= ============= ======== ============== ==========
Exceptional
and other items
from continuing
operations 3 (37.7) (12.7) (50.4) (0.8) (51.2)
========================== ===== ============= ============= ======== ============== ==========
Operating profit/(loss)
from continuing
operations 126.0 11.2 137.2 (21.3) 115.9
Impairment of
fixed assets (12.8)
Net finance
costs (26.9)
========================== ===== ============= ============= ======== ============== ==========
Profit before
tax from continuing
operations 76.2
========================== ===== ============= ============= ======== ============== ==========
Other information
Capital additions(4) 29.7 14.6 44.3 - 44.3
Depreciation
and amortisation 70.1 14.7 84.8 0.2 85.0
========================== ===== ============= ============= ======== ============== ============
Balance sheet
Total assets 3,156.0 834.8 3,990.8 67.9 4,058.7
Total liabilities (339.7) (176.1) (515.8) (1,647.7) (2,163.5)
========================== ===== ============= ============= ======== ============== ============
Net assets/(liabilities) 2,816.3 658.7 3,475.0 (1,579.8) 1,895.2
========================== ===== ============= ============= ======== ============== ============
(1) Operating profit/(loss) from continuing operations includes
$1.7 million (30 June 2017: $1.7 million; 31 December 2017: $3.4
million) relating to profits of associates and joint ventures.
(2) Unallocated corporate balances include debt, tax,
provisions, pensions, insurance captives and trading balances from
central activities.
(3) Costs previously allocated to ERO.
(4) Capital additions represent cash expenditures in the year.
Capital additions include additions to Property, Plant &
Equipment, and intangible assets including Ontic licences not
accounted for as acquisitions under IFRS 3.
(5) In 2018, ERO entered into a series of sale and lease-back
transactions with respect to parts of its rental engine fleet. The
transactions led to the recognition of $10.0 million of revenue
within discontinued operations.
2 Segmental analysis - continued
Restated
As at, and for
the six months
ended 30 June Flight Aftermarket Unallocated
2017 Support(1) Services Total Corporate(2) Total
Business segments Note $m $m $m $m $m
-------------------------- ----- ------------- ------------ -------- -------------- ----------
External revenue
External revenue
from continuing
and discontinued
operations . 841.0 342.7 1,183.7 - 1,183.7
Less external
revenue from
ERO discontinued
operations 14 - (246.9) (246.9) - (246.9)
Less external
revenue from
ASIG discontinued
operations 14 (38.2) - (38.2) - (38.2)
========================== ===== ============= ============ ======== ============== ==========
External revenue
from continuing
operations 802.8 95.8 898.6 - 898.6
========================== ===== ============= ============ ======== ============== ==========
Underlying operating
profit
Underlying operating
profit/(loss)
from continuing
and discontinued
operations 160.6 26.0 186.6 (11.9) 174.7
Less underlying
operating profit
from ERO discontinued
operations 14 - (4.0) (4.0) - (4.0)
Adjusted for
intergroup charges
for ERO discontinued
operations(3) - - - (5.6) (5.6)
Less underlying
operating loss
from ASIG discontinued
operations 14 0.2 - 0.2 - 0.2
========================== ===== ============= ============ ======== ============== ==========
Underlying operating
profit/(loss)
from continuing
operations 160.8 22.0 182.8 (17.5) 165.3
========================== ===== ============= ============ ======== ============== ==========
Underlying operating
margin from continuing
operations 20.0% 23.0% 20.3% - 18.4%
Exceptional and
other items
Exceptional and
other items from
continuing and
discontinued
operations (41.1) (9.3) (50.4) (1.6) (52.0)
Less exceptional
and other items
from ERO discontinued
operations 14 - 3.7 3.7 - 3.7
========================== ===== ============= ============ ======== ============== ==========
Exceptional and
other items from
continuing operations 3 (41.1) (5.6) (46.7) (1.6) (48.3)
========================== =====
Operating profit/(loss)
from continuing
operations 119.7 16.4 136.1 (19.1) 117.0
Net finance costs
from continuing
operations (31.2)
========================== ===== ============= ============ ======== ============== ==========
Profit before
tax from continuing
operations 85.8
========================== ===== ============= ============ ======== ============== ==========
Other information
Capital additions(4) 32.0 6.2 38.2 - 38.2
Depreciation
and amortisation 75.4 14.2 89.6 0.2 89.8
========================== ===== ============= ============ ======== ============== ==========
Balance sheet
Total assets 3,203.7 773.2 3,976.9 95.7 4,072.6
Total liabilities (297.9) (141.2) (439.1) (1,748.9) (2,188.0)
========================== ===== ============= ============ ======== ============== ==========
Net assets/(liabilities) 2,905.8 632.0 3,537.8 (1,653.2) 1,884.6
========================== ===== ============= ============ ======== ============== ==========
2 Segmental analysis - continued
Restated
As at, and for
the year ended Flight Aftermarket Unallocated
31 December 2017 Support(1) Services Total Corporate(2) Total
Business segments Note $m $m $m $m $m
-------------------------- ----- ------------- ------------ -------- -------------- ----------
External revenue
External revenue
from continuing
and discontinued
operations 1,681.4 727.6 2,409.0 - 2,409.0
Less external
revenue from
ERO discontinued
operations 14 - (513.3) (513.3) - (513.3)
Less external
revenue from
ASIG discontinued
operations 14 (38.4) - (38.4) - (38.4)
========================== ===== ============= ============ ======== ============== ==========
External revenue
from continuing
operations 1,643.0 214.3 1,857.3 - 1,857.3
========================== ===== ============= ============ ======== ============== ==========
Underlying operating
profit
Underlying operating
profit/(loss)
from continuing
and discontinued
operations 329.2 65.3 394.5 (34.1) 360.4
Less underlying
operating profit
from ERO discontinued
operations 14 - (12.5) (12.5) - (12.5)
Adjusted for
intergroup charges
for ERO discontinued
operations(3) 14 - - - (11.6) (11.6)
Less underlying
operating loss
from ASIG discontinued
operations 14 0.2 - 0.2 - 0.2
Underlying operating
profit/(loss)
from continuing
operations 329.4 52.8 382.2 (45.7) 336.5
========================== ===== ============= ============ ======== ============== ==========
Underlying operating
margin from continuing
operations 20.0% 24.6% 20.6% - 18.1%
Exceptional and
other items
Exceptional and
other items from
continuing and
discontinued
operations (82.3) (31.7) (114.0) (9.0) (123.0)
Less exceptional
and other items
from ERO discontinued
operations 14 - 5.6 5.6 - 5.6
========================== ===== ============= ============ ======== ============== ==========
Exceptional and
other items from
continuing operations 3 (82.3) (26.1) (108.4) (9.0) (117.4)
========================== ===== ============= ============ ======== ============== ==========
Operating profit/(loss)
from continuing
operations 247.1 26.7 273.8 (54.7) 219.1
Net finance costs
from continuing
operations (61.5)
========================== ===== ============= ============ ======== ============== ==========
Profit before
tax from continuing
operations 157.6
Other information
Capital additions(4) 60.0 25.3 85.3 - 85.3
Depreciation
and amortisation 151.9 29.0 180.9 0.4 181.3
========================== ===== ============= ============ ======== ============== ==========
Balance sheet
Total assets 3,196.3 763.8 3,960.1 110.4 4,070.5
Total liabilities (304.8) (176.8) (481.6) (1,655.7) (2,137.3)
========================== ===== ============= ============ ======== ============== ==========
Net assets/(liabilities) 2,891.5 587.0 3,478.5 (1,545.3) 1,933.2
========================== ===== ============= ============ ======== ============== ==========
2 Segmental analysis - continued
Revenue Revenue Capital Non-current
Geographical segments by destination by origin additions(1) assets(2)
$m $m $m $m
----------------------------------- ---------------- ----------- -------------- ------------
As at, and for the six months
ended 30 June 2018
United Kingdom 34.5 131.1 4.0 281.6
Mainland Europe 115.0 31.7 0.3 68.4
North America 1,086.6 1,106.1 39.9 2,855.7
Rest of world 45.8 13.0 0.1 4.5
=================================== ================ =========== ============== ============
Total from continuing and
discontinued operations 1,281.9 1,281.9 44.3 3,210.2
Less discontinued ERO operations (257.6) (257.6)
=================================== ================ ===========
Total from continuing operations 1,024.3 1,024.3
=================================== ================ ===========
Restated as at, and for the
six months ended 30 June
2017
United Kingdom 39.8 137.0 2.2 236.9
Mainland Europe 103.2 26.5 0.3 48.8
North America 993.7 1,010.1 35.2 3,066.2
Rest of world 47.0 10.1 0.5 20.0
=================================== ================ =========== ============== ============
Total from continuing and
discontinued operations 1,183.7 1,183.7 38.2 3,371.9
Less ERO discontinued operations (246.9) (246.9)
Less ASIG discontinued operations (38.2) (38.2)
=================================== ================ ===========
Total from continuing operations 898.6 898.6
=================================== ================ ===========
Restated as at, and for the
year ended 31 December 2017
United Kingdom 76.7 277.6 7.1 298.0
Mainland Europe 221.7 57.5 0.3 71.9
North America 2,017.7 2,051.1 75.9 2,955.2
Rest of world 92.9 22.8 2.0 5.9
=================================== ================ =========== ============== ============
Total from continuing and
discontinued operations 2,409.0 2,409.0 85.3 3,331.0
Less ERO discontinued operations (513.3) (513.3)
Less ASIG discontinued operations (38.4) (38.4)
=================================== ================ ===========
Total from continuing operations 1,857.3 1,857.3
=================================== ================ ===========
(1) Capital additions represent cash expenditures in the
year.
(2) 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. Exceptional and other items are
items which are material and non-recurring in nature and also
include costs relating to acquisitions, disposal and significant
business restructuring programmes some of which span multiple
years. This is consistent with the way that financial performance
is measured by management and reported to the Board and the
Executive Committee, and assists in providing a meaningful analysis
of the trading results of the Group. Other items include
amortisation of acquired intangibles accounted for under IFRS 3.
Exclusion of amortisation of acquired intangibles accounted for
under IFRS 3 from the Group's underlying results assists with the
comparability of the Group's underlying profitability with peer
companies.
Exceptional and other items on discontinued operations are
presented in note 14. Exceptional and other items on continuing
operations are as follows:
Restated
Six months Restated
ended Year ended
30 June 31 December
Six months ended 30 June 2018 2017 2017
Other
Administrative operating Restructuring
expenses expenses costs Total Total Total
$m $m $m $m $m $m
----------------------- ------------------- ----------- -------------- ------- ------------ --------------
Restructuring expenses
ERO Middle East
closure - - 6.1 6.1 - 15.7
Central costs
rationalisation - - 1.6 1.6 1.6 6.7
Acquisition related
Amortisation of
intangibles
assets arising on
acquisition and
valued
in accordance with
IFRS 3 43.5 - - 43.5 46.7 93.8
Transaction costs(1) - - - - - 0.1
Other - - - - - 1.1
======================= =================== =========== ============== ======= ============ ==============
Operating loss on
continuing operations 43.5 - 7.7 51.2 48.3 117.4
Impairment loss 12.8 - -
Loss before tax on continuing
operations 64.0 48.3 117.4
Net impact of United
States tax reform - - 20.5
Tax on other
exceptional
items (14.7) (18.0) (32.7)
======================= =================== =========== ============== ======= ============ ==============
Tax impact of exceptional
and other items (14.7) (18.0) (12.2)
Loss for the year on continuing
operations 49.3 30.3 105.2
Loss/(profit) from
ERO discontinued
operation, net of
tax, see note 14 5.0 2.4 (0.7)
Loss from ASIG
discontinued
operation, net of
tax, see note 14 - 31.9 22.5
Total exceptional and
other items 54.3 64.6 127.0
======================= ================================================ ======= ============ ==============
(1) All transaction costs presented in exceptional and other
items in the prior period related to Ontic's acquisition of the GE
Avionics portfolio.
4 Income tax
Restated Restated
Six months Six months Year ended
ended 30 ended 30 June 31 December
June 2018 2017 2017
Recognised in the income statement $m $m $m
------------------------------------------- ------------- --------------- -------------
Current tax expense/(credit) 17.1 (2.3) 21.9
Adjustments in respect of prior
periods - current tax - (1.2) (6.2)
=========================================== ============= =============== =============
Current tax 17.1 (3.5) 15.7
Deferred tax (credit)/expense (2.3) 8.6 24.8
Adjustments in respect of prior
periods - deferred tax - - (1.4)
=========================================== ============= =============== =============
Deferred tax (2.3) 8.6 23.4
Income tax expense for the period
from continuing operations 14.8 5.1 39.1
=========================================== ============= =============== =============
Tax expense/(credit) relating
to ERO discontinued operations 1.5 1.8 (5.4)
Tax expense relating to ASIG discontinued
operations - 25.3 15.7
=========================================== ============= =============== =============
Total income tax expense 16.3 32.2 49.4
=========================================== ============= =============== =============
4 Income tax - continued
Corporation tax on continuing operations for the interim period
is charged at an effective rate of 21.0% (30 June 2017: 17.2%; 31
December 2017: 18.7%) 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 2018 includes a tax credit of
$14.7 million (30 June 2017: $18.0 million; 31 December 2017: $12.2
million) relating to exceptional and other items (see note 3).
On 22 December 2017, the United States enacted tax reform that
implemented substantial changes to the federal tax system by
reducing the headline federal tax rate from 35% to 21% and limiting
interest deductions to a maximum of 30% of US EBITDA. The reduction
in the headline rate of tax has resulted in a revaluation of US
deferred tax balances amounting to a credit of $59.3 million.
Additionally, in 2017 the Group re-measured a deferred tax asset
relating to financing costs from prior year amounting to a charge
of $54.5 million together with a charge of $22.3 million. Also in
2017, the tax reform introduced a tax on repatriation of profits of
overseas subsidiaries resulting in a charge of $3 million.
The Group is monitoring developments in relation to the EU State
Aid investigation including the European Commission's announcement
on 26 October 2017 that it will conduct a State Aid investigation
into the UK's Controlled Foreign Company (CFC) regime. In common
with many other UK based multinational groups whose arrangements
are in line with current UK CFC legislation, the Group may be
affected by the final outcome of this investigation. We have
calculated our maximum potential liability to be approximately $100
million. We do not consider that any provision is required based on
our current assessment of the issue.
Tax credited to other comprehensive income and equity is as
follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
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 pension deficit
payments - - 0.5
Deferred tax (expense)/credit on actuarial
gains/(losses) (5.4) (0.9) (1.6)
---------------------------------------------- ----------- ----------- -------------
(5.4) (0.9) (1.1)
---------------------------------------------- ----------- ----------- -------------
Tax on items that may be reclassified
subsequently to profit or loss
Current tax credit on foreign exchange
movements - - (1.6)
Deferred tax (expense)/credit on derivative
instruments 0.4 (1.1) (2.7)
0.4 (1.1) (4.3)
---------------------------------------------- ----------- ----------- -------------
Total tax expense within other comprehensive
income (5.0) (2.0) (5.4)
---------------------------------------------- ----------- ----------- -------------
Recognised in equity
Current tax credit on share-based
payments movements 0.1 0.1 0.8
Deferred tax credit on share-based - 0.1 -
payments movements
---------------------------------------------- ----------- ----------- -------------
Total tax credit within equity 0.1 0.2 0.8
---------------------------------------------- ----------- ----------- -------------
Total tax expense within other comprehensive
income and equity (4.9) (1.8) (4.6)
============================================== =========== =========== =============
5 Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Continuing Total
Restated
Six months Six months Restated Six months Six months
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
$m $m $m $m $m $m
----------------------------- ----------- ------------ ------------- ----------- ----------- -------------
Basic and diluted:
Earnings:
Profit for the period 61.4 80.7 118.5 66.7 52.5 119.3
Non-controlling interests - (0.1) 0.1 - (0.1) 0.1
----------------------------- ----------- ------------ ------------- ----------- ----------- -------------
Basic earnings attributable
to ordinary shareholders 61.4 80.6 118.6 66.7 52.4 119.4
Exceptional and other
items net of tax 49.3 30.3 105.2 54.3 64.6 127.0
============================= =========== ============ ============= =========== =========== =============
Adjusted earnings for
adjusted earnings per
share 110.7 110.9 223.8 121.0 117.0 246.4
Underlying deferred
tax 11.8 26.3 50.9 12.5 29.6 47.7
============================= =========== ============ ============= =========== =========== =============
Adjusted earnings for
cash earnings per share 122.5 137.2 274.7 133.5 146.6 294.1
============================= =========== ============ ============= =========== =========== =============
Continuing Total
Six months Six months Year ended Six months Six months
ended ended 31 December ended ended Year ended
30 June 30 June 2017 30 June 30 June 31 December
2018 2017 2018 2017 2017
$m $m $m $m $m $m
Number of shares
Weighted average
number
of 29 16/21p
ordinary
shares:
For basic earnings
per share 1,029.9 1,027.5 1,028.2 1,029.9 1,027.5 1,028.2
Dilutive potential
ordinary shares
from
share options 10.4 12.1 10.6 10.4 12.1 10.6
==================== =========== =========== ============== =========== ============= ================
For diluted
earnings
per share 1,040.3 1,039.6 1,038.8 1,040.3 1,039.6 1,038.8
==================== =========== =========== ============== =========== ============= ================
For diluted losses
per share 1,029.9 1,027.5 1,028.2 1,029.9 1,027.5 1,028.2
==================== =========== =========== ============== =========== ============= ================
Potential ordinary shares are only treated as dilutive when
their conversion to ordinary shares would decrease earnings per
share, or increase the loss per share.
Continuing Total
Restated
Six months Six months Restated Six months Six months
ended ended Year ended ended ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
--------------------- ----------- ------------ ----------------- ----------- ------------- ----------------
Earnings per share:
Basic:
Adjusted 10.7c 10.8c 21.8c 11.7c 11.4c 24.0c
Cash 11.9c 13.4c 26.7c 13.0c 14.3c 28.6c
Unadjusted 6.0c 7.8c 11.5c 6.5c 5.1c 11.6c
Diluted:
Adjusted 10.6c 10.7c 21.5c 11.6c 11.3c 23.7c
Cash 11.8c 13.2c 26.4c 12.8c 14.1c 28.3c
Unadjusted 5.9c 7.8c 11.4c 6.4c 5.0c 11.5c
5 Earnings per share - continued
Earnings per share on discontinued operations is presented in
note 14.
Adjusted earnings per share is presented calculated on earnings
before exceptional and other items (note 17). Cash earnings per
share is calculated on earnings before exceptional and other items
(note 17) and using current tax charge, not the total tax charge
for the period thereby excluding the deferred tax charge. Both
adjustments have been made because the directors consider that this
gives a useful indication of underlying performance.
6 Equity dividends on ordinary shares
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2017
2018 2017
$m $m $m
------------------------------------------------ ----------- ----------- -------------
Paid during the period:
Final dividend for the year ended 31 December
2017: 9.59 cents per share (30 June 2017:
Final dividend for the year ended 31 December
2016 of 9.12 cents per share; 31 December
2017: Final dividend for the year ended
31 December 2016 of 9.12 cents per share
and 2017 interim dividend of 3.81 cents
per share) 99.3 91.5 130.7
================================================ =========== =========== =============
The 2018 interim dividend of 4.00 cents per share (2017: 3.81
cents per share; $39.2 million in total) was approved by the Board
of Directors on 31 July 2018 and will be paid on 2 November 2018 to
ordinary shareholders registered on 14 September 2018. Shareholders
will receive their dividends in sterling unless they complete and
submit to the Company's registrars by 5.30pm on 8 October 2018 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 9 October 2018 and this exchange rate will be
announced on 10 October 2018.
7 Cash and cash equivalents and borrowings
The carrying value of cash and cash equivalents for continuing
operations of $147.6 million (30 June 2017: $152.6 million; 31
December 2017: $153.5 million) approximates to its fair value.
As at As at As at
30 June 30 June 31 December
2018 2017 2017
Borrowings $m $m $m
------------------------------------------------- -------- -------- ------------
Bank overdrafts 0.7 3.5 4.0
Bank loans 473.7 902.2 813.3
Loan notes 373.9 507.2 502.2
Bonds 489.8 - -
Other loans 0.3 3.2 3.3
------------------------------------------------- -------- -------- ------------
1,338.4 1,416.1 1,322.8
------------------------------------------------- -------- -------- ------------
The borrowings are repayable as follows:
On demand or within one year 0.7 124.4 124.2
In the second year - 455.5 369.3
In the third to fifth years inclusive 700.6 624.6 619.6
After five years 637.1 211.6 209.7
------------------------------------------------- -------- -------- ------------
1,338.4 1,416.1 1,322.8
Less: Amount due for settlement within 12 months
(shown within current liabilities) (0.7) (124.4) (124.2)
------------------------------------------------- -------- -------- ------------
Amount due for settlement after 12 months 1,337.7 1,291.7 1,198.6
------------------------------------------------- -------- -------- ------------
Bank loans and loan notes are stated after their respective
transaction costs and related amortisation.
7 Cash and cash equivalents and borrowings - continued
As at 30 June 2018
Type Fair
Facility Amortisation value Facility Maturity
Amount Headroom Principal costs adjustment Drawn Date Date
$m $m $m $m $m $m
Multicurrency revolving
bank credit facility 650.0 618.0 32.0 (6.0) - 26.0 Mar 2018 Mar 2023
Acquisition facility
Bank term loan - Facility
C(1) 450.0 - 450.0 (2.3) - 447.7 Sep 2015 Sep 2020
Total bank loans 1,100.0 618.0 482.0 (8.3) - 473.7
$300m US private placement
senior notes - Series
B 120.0 - 120.0 (0.3) (0.5) 119.2 May 2011 May 2021
$300m US private placement
senior notes - Series
C 60.0 - 60.0 (0.2) (2.0) 57.8 May 2011 May 2023
$200m US private placement
senior notes - Series
A 50.0 - 50.0 (0.2) - 49.8 Dec 2014 Dec 2021
$200m US private placement
senior notes - Series
B 100.0 - 100.0 (0.3) (1.6) 98.1 Dec 2014 Dec 2024
$200m US private placement
senior notes - Series
C 50.0 - 50.0 (0.2) (0.8) 49.0 Dec 2014 Dec 2026
-------- -------- --------- ------------ ----------- -------
Total US private placement
senior notes 380.0 - 380.0 (1.2) (4.9) 373.9
$500m senior notes 500.0 - 500.0 (10.5) 0.3 489.8 Apr 2018 May 2026
-------- -------- --------- ------------ ----------- -------
Total senior notes 500.0 - 500.0 (10.5) 0.3 489.8
Total bank loans, loan
notes and bonds 1,980.0 618.0 1,362.0 (20.0) (4.6) 1,337.4
-------- -------- --------- ------------ ----------- -------
Bank overdraft 0.7
Other loans 0.3
-------
Borrowings 1,338.4
-------
As at 30 June 2017
Type Fair
Facility Amortisation value Facility Maturity
Amount Headroom Principal costs adjustment Drawn Date Date
$m $m $m $m $m $m
Multicurrency
revolving
bank credit
facility 650.0 445.0 205.0 (1.4) - 203.6 Apr 2014 Apr 2019
Acquisition
facility
bank term loan
- Facility
B(1) 253.4 - 253.4 (1.5) - 251.9 Sep 2015 Feb 2019
Acquisition
facility
Bank term loan
- Facility
C(1) 450.0 - 450.0 (3.3) - 446.7 Sep 2015 Sep 2020
Total bank
loans 1,353.4 445.0 908.4 (6.2) - 902.2
$300m US
private
placement
senior notes -
Series
A 120.0 - 120.0 (0.4) 1.3 120.9 May 2011 May 2018
$300m US
private
placement
senior notes -
Series
B 120.0 - 120.0 (0.4) 4.3 123.9 May 2011 May 2021
$300m US
private
placement
senior notes -
Series
C 60.0 - 60.0 (0.2) 0.6 60.4 May 2011 May 2023
$200m US
private
placement
senior notes -
Series
A 50.0 - 50.0 (0.1) 1.2 51.1 Dec 2014 Dec 2021
$200m US
private
placement
senior notes -
Series
B 100.0 - 100.0 (0.3) 0.8 100.5 Dec 2014 Dec 2024
$200m US
private
placement
senior notes -
Series
C 50.0 - 50.0 (0.1) 0.5 50.4 Dec 2014 Dec 2026
-------- -------- --------- ------------ ----------- -------
Total loan
notes 500.0 - 500.0 (1.5) 8.7 507.2
Total bank
loans and
loan notes 1,853.4 445.0 1,408.4 (7.7) 8.7 1,409.4
-------- -------- --------- ------------ ----------- -------
Bank overdraft 3.5
Other loans 3.2
-------
Borrowings 1,416.1
-------
7 Cash and cash equivalents and borrowings - continued
As at 31 December 2017
Type Facility Amortisation Fair value Facility Maturity
Amount Headroom Principal costs adjustment Drawn Date Date
$m $m $m $m $m $m
Multicurrency revolving
bank credit facility 650.0 535.0 115.0 (1.2) - 113.8 Apr 2014 Apr 2019
Acquisition facility
bank term loan - Facility
B(1) 253.4 - 253.4 (1.0) - 252.4 Sep 2015 Feb 2019
Acquisition facility
Bank term loan - Facility
C(1) 450.0 - 450.0 (2.9) - 447.1 Sep 2015 Sep 2020
Total bank loans 1,353.4 535.0 818.4 (5.1) - 813.3
$300m US private placement
senior notes - Series
A 120.0 - 120.0 (0.3) 0.5 120.2 May 2011 May 2018
$300m US private placement
senior notes - Series
B 120.0 - 120.0 (0.3) 2.3 122.0 May 2011 May 2021
$300m US private placement
senior notes - Series
C 60.0 - 60.0 (0.2) (0.3) 59.5 May 2011 May 2023
$200m US private placement
senior notes - Series
A 50.0 - 50.0 (0.1) 0.7 50.6 Dec 2014 Dec 2021
$200m US private placement
senior notes - Series
B 100.0 - 100.0 (0.3) 0.1 99.8 Dec 2014 Dec 2024
$200m US private placement
senior notes - Series
C 50.0 - 50.0 (0.1) 0.2 50.1 Dec 2014 Dec 2026
-------- -------- --------- ------------ ----------- -------
Total loan notes 500.0 - 500.0 (1.3) 3.5 502.2
Total bank loans and
loan notes 1,853.4 535.0 1,318.4 (6.4) 3.5 1,315.5
-------- -------- --------- ------------ ----------- -------
Bank overdraft 4.0
Other loans 3.3
-------
Borrowings 1,322.8
-------
(1) Drawings carried forward under the acquisition term debt
facilities from 2017 were $253.4m for Facility B and $450m for
Facility C. On 26 April 2018, BBA U.S. Holdings Inc., a member of
the Group, issued $500m of senior notes due 2026. Part of the net
proceeds was used to prepay all outstanding Facility B loans in
full under the requirements of the loan documentation.
As at 30 June 2018, the Group had $380 million (30 June 2017:
$500 million; 31 December 2017: $500 million) of U.S. private
placement senior loan notes outstanding with $280 million (30 June
2017: $400 million; 31 December 2017: $400 million) accounted for
at fair value through 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.
During the first half, the Group refinanced its $650 million
multicurrency revolving credit facility (RCF) with a new facility
for the same amount which will expire in March 2023. As part of
this refinancing exercise, BBA U.S. Holdings Inc. has been added as
an additional borrower and guarantor under the RCF and Facility C
of the acquisition bank term loan due to expire in September 2020.
As at 30 June 2018, $32 million was drawn under the RCF in the name
of BBA U.S. Holdings Inc. and the term debt drawn under Facility C
remains in the name of BBA Aviation plc. In addition, BBA U.S.
Holdings Inc. has been added as an additional guarantor under the
U.S. private placement senior notes.
As at 30 June 2018, the Group also had $500 million of U.S.
senior loan notes outstanding with $250 million accounted for at
fair value through 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.
Under IFRS hedge accounting rules the fair value movement on the
loan notes is booked to interest and is offset by the fair value
movement on the underlying interest rate swaps.
The Group excludes the fair value movement on its loan notes
from its definition of net debt (note 17), as this movement is
offset by the change in fair value of the underlying interest rate
swaps. The fair value loss on its U.S. private placement senior
loan notes at 30 June 2018 was $4.9 million (30 June 2017: $8.7
million gain; 31 December 2017: $3.5 million gain). The fair value
gain on its U.S. senior loan notes at 30 June 2018 was $0.3
million.
All other borrowings are held at amortised cost.
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
2018 2017 2017
Carrying Carrying Carrying
value value value
$m $m $m
---------------------------------------------- ---------- ---------- ------------
Financial assets
Fair value through profit or loss - foreign 1.1 - -
exchange contracts(a)
Derivative instruments held in fair value
hedges(b) 0.3 5.8 1.5
Derivative instruments held in cash flow
hedges 8.3 4.7 10.4
Assets classified as financial instruments
measured through other comprehensive income
(FVTOCI) 5.1 4.5 5.4
Trade and other receivables (including
cash and cash equivalents)(c, d) 294.2 380.2 395.8
============================================== ========== ========== ============
309.0 395.2 413.1
============================================== ========== ========== ============
Financial liabilities
Fair value through profit or loss - foreign
exchange contracts(a) (0.1) (4.8) (2.5)
Derivative instruments held in fair value
hedges(b) (6.9) - (0.3)
Derivative instruments held in cash flow
hedges (2.5) (4.7) (2.3)
Financial liabilities at amortised cost(d) (1,097.7) (1,305.5) (1,233.6)
Financial liabilities at fair value (519.4) (406.3) (402.0)
============================================== ========== ========== ============
(1,626.6) (1,721.3) (1,640.7)
============================================== ========== ========== ============
(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 $5.7 million (30 June 2017: $5.7
million; 31 December 2017: $5.7m) are included within trade and
other receivables.
(d The carrying value of trade and other receivables, and other
payables approximates their fair value.)
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 assets classified as financial
instruments within other comprehensive income 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.
8 Financial instruments - continued
30 June 30 June 30 June 30 June 31 December 31 December
2018 2018 2017 2017 2017 2017
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 114.1 1.1 1.6 - 0.9 -
Fair value hedges
Interest rate swaps (250.0) 0.3 (400.0) 5.8 (270.0) 1.5
Cash flow hedges
Interest rate swaps (291.0) 6.6 (567.5) 2.8 (526.6) 6.6
Foreign exchange
forward contracts (18.4) 1.7 (55.3) 1.9 (75.5) 3.8
(445.3) 9.7 (1,021.2) 10.5 (871.2) 11.9
====================== ========= =========== ========== =========== ============ ============
30 June 30 June 30 June 30 June 31 December 31 December
2018 2018 2017 2017 2017 2017
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 72.8 (0.1) 351.9 (4.8) 309.4 (2.5)
Fair value hedges
Interest rate swaps (280.0) (6.9) - - (130.0) (0.3)
Cash flow hedges
Interest rate swaps (50.0) (0.1) (275.0) (2.5) (100.0) (1.0)
Foreign exchange
forward contracts (42.4) (2.4) (19.8) (2.2) (4.1) (1.3)
(299.6) (9.5) 57.1 (9.5) 75.3 (5.1)
====================== ========= =========== ========= =========== ============ ============
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 Net cash flow from operating activities
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2017
2018 2017
$m $m $m
----------------------------------------------- ------------ ------------- --------------
Operating profit 115.9 117.0 219.1
Operating profit from ERO discontinued
operations 12.3 5.9 18.5
Operating loss from ASIG discontinued
operations - (0.2) (0.2)
Share of profit from associates and joint
ventures (1.7) (1.7) (3.4)
----------------------------------------------- ------------ ------------- --------------
Profit from operations 126.5 121.0 234.0
Depreciation of property, plant and equipment 35.3 35.5 71.4
Amortisation of intangible assets 49.7 54.3 109.9
Loss/(profit) on sale of property, plant
and equipment 0.6 0.6 (2.2)
Share-based payment expense 5.7 3.9 9.9
Decrease in provisions (2.8) (4.8) (7.3)
Pension scheme payments (2.2) (2.1) (5.1)
Non-cash impairment - - 15.7
Other non-cash items (1.1) (2.5) 1.3
Unrealised foreign exchange movements (0.7) (0.6) (0.5)
Operating cash inflows before movements
in working capital 211.0 205.3 427.1
Increase in working capital (23.7) (65.1) (46.3)
----------------------------------------------- ------------ ------------- --------------
Cash generated by operations 187.3 140.2 380.8
Net income taxes paid (10.2) (18.8) (41.8)
=============================================== ============ ============= ==============
Net cash inflow from operating activities 177.1 121.4 339.0
=============================================== ============ ============= ==============
10 Acquisitions
In the period, the Group acquired two businesses:
Honeywell licences
On 26 March 2018 the Group's Ontic business acquired an
exclusive perpetual licence for LCD cockpit displays from Honeywell
for a total consideration of $25.9 million. Ontic has paid $16.5
million upfront and the remaining $9.4 million is deferred
consideration. The rights and processes acquired in this
acquisition constitute a business under the definition of IFRS
3.
The provisional fair value of the net assets acquired comprise
$26.1 million intangible assets, $0.6 million inventories and $0.8
million provisions.
In the period since acquisition, the operations acquired have
contributed $2.6 million to revenue and $1.6 million to operating
profit. If the acquisition had occurred on the first day of the
financial year, the total revenue and operating profit from these
acquisition is estimated to be $5.2 million and $3.2 million
respectively.
Esterline Racal Acoustics licences
On 4 January 2018 the Group's Ontic business acquired the
manufacturing rights and processes to support a variety of parts
that are fitted onto the Hawk platform from Esterline Racal
Acoustics for a total consideration of $4.8 million. The rights and
processes acquired in this acquisition constitute a business under
the definition of IFRS 3. The provisional fair value of the net
assets acquired comprise $6.6 million intangible assets, $1.1
million deferred tax liability and $0.7 million provisions.
In the period since acquisition, the operations acquired have
contributed $0.1 million to revenue and operating profit
respectively. If the acquisition had occurred on the first day of
the financial year, the total revenue and operating profit from
these acquisition is estimated to be $0.1 million respectively.
Prior period acquisitions
As disclosed in the 2017 annual report the Group's Ontic
business made several acquisitions in 2017. No measurement period
adjustments have been made in the period. The fair values disclosed
in the prior year were final. Further information in relation to
the purchase price accounting for these acquisitions is available
in the 2017 annual report and accounts.
11 Disposals
On 31 January 2017 the Group completed the sale of its ASIG
business and received gross proceeds of $202.0 million. The net
proceeds of $170.5 million are stated after disposal costs and a
working capital and net debt adjustment to the proceeds.
12 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
2018 2017 2017 2018 2017 2017
$m $m $m $m $m $m
---------------------- ----------- ----------- ------------- ----------- ----------- -------------
Associates and joint
ventures 2.3 2.1 14.4 366.9 303.6 610.5
====================== =========== =========== ============= =========== =========== =============
Amounts owed by related Amounts owed to related
parties parties
====================== ================================ ================================
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
$m $m $m $m $m $m
---------------------- -------- -------- ------------ -------- -------- ------------
Associates and joint
ventures 0.1 1.2 2.0 85.8 91.6 64.7
====================== ======== ======== ============ ======== ======== ============
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.
The Group has various pension and other post-retirement benefit
schemes for its employees. Details are set out in note 13.
13 Pensions and other post-retirement benefits
The Group operates a number of plans worldwide, both of the
defined benefit and defined contribution type. The defined benefit
obligation at 30 June 2018 for the UK Income and Protection Plan
(the "IPP" or "UK Plan") under IAS 19 is estimated based on the
latest completed actuarial valuation as at 31 March 2015, with
assumptions updated to reflect market conditions as at 30 June 2018
where appropriate. The next actuarial valuation as at 31 March 2018
is currently in progress and will be considered at the year-end.
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 2018, the IAS 19 valuation of the UK plan and US
schemes indicate a net deficit of $44.5 million (30 June 2017:
$80.1 million; 31 December 2017: $71.7 million). The reduction in
the net deficit of $27.2 million since 31 December 2017 reflects
contributions and the favourable impact of market based financial
assumptions slightly offset by asset performance being under
expectations and liability experience losses.
14 Discontinued operations
It was announced in March 2018 that ERO was under strategic
review. At the end of May 2018, management committed to a plan to
sell substantially all of the ERO business and as such at that
point the relevant assets and liabilities were classified as held
for sale. At that time, as a major line of the Group's business,
the ERO operations were also classified as a discontinued
operation. ERO Middle East is not classified as a discontinued
operation as it intended for these operations to be closed.
ERO was not previously classified as held for sale or as a
discontinued operation. The comparative consolidated profit or loss
and other comprehensive income has been restated to show the
discontinued operation separately from continuing operations.
Following its classification as held for sale the asset group is
held at its net book value.
Results of ERO discontinued operations
Six months ended Six months ended Year ended 31 December
30 June 2018 30 June 2017 2017
------------------- ------ -------------------------------------- -------------------------------------- --------------------------------------
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 2 257.6 - 257.6 246.9 - 246.9 513.3 - 513.3
Cost of sales (219.6) - (219.6) (214.4) - (214.4) (443.6) - (443.6)
------------------- ------ -------------- ------------ -------- -------------- ------------ -------- -------------- ------------ --------
Gross profit 38.0 - 38.0 32.5 - 32.5 69.7 - 69.7
Distribution
costs (14.2) - (14.2) (12.3) - (12.3) (24.0) - (24.0)
Administrative
expenses (16.1) - (16.1) (16.4) - (16.4) (33.8) - (33.8)
Restructuring
costs - (1.1) (1.1) - (3.7) (3.7) - (5.6) (5.6)
Other operating
income - - - 0.2 - 0.2 0.6 - 0.6
Operating
(loss)/profit
incl. group
charges 7.7 (1.1) 6.6 4.0 (3.7) 0.3 12.5 (5.6) 6.9
Elimination
of internal
group charges 5.7 - 5.7 5.6 - 5.6 11.6 - 11.6
------------------- ------ -------------- ------------ -------- -------------- ------------ -------- -------------- ------------ --------
Operating
(loss)/profit 2 13.4 (1.1) 12.3 9.6 (3.7) 5.9 24.1 (5.6) 18.5
Impairment
and other
charges on
classification
as held for
sale (2) - (5.0) (5.0) - - - - - -
Finance costs (0.5) - (0.5) (0.2) - (0.2) (0.6) - (0.6)
------------------- ------ -------------- ------------ -------- -------------- ------------ -------- -------------- ------------ --------
(Loss)/profit
before tax 12.9 (6.1) 6.8 9.4 (3.7) 5.7 23.5 (5.6) 17.9
Tax
(expense)/credit (2.6) 1.1 (1.5) (3.1) 1.3 (1.8) (0.9) 6.3 5.4
=================== ====== ============== ============ ======== ============== ============ ======== ============== ============ ========
(Loss)/profit
for the period 10.3 (5.0) 5.3 6.3 (2.4) 3.9 22.6 0.7 23.3
=================== ====== ============== ============ ======== ============== ============ ======== ============== ============ ========
Attributable
to:
Equity holders
of BBA Aviation
plc 10.3 (5.0) 5.3 6.3 (2.4) 3.9 22.6 0.7 23.3
Non-controlling - - - - - - - - -
interests
=================== ====== ============== ============ ======== ============== ============ ======== ============== ============ ========
(Loss)/profit
for the period 10.3 (5.0) 5.3 6.3 (2.4) 3.9 22.6 0.7 23.3
=================== ====== ============== ============ ======== ============== ============ ======== ============== ============ ========
Earnings Note Adjusted(1) Unadjusted Adjusted(1) Unadjusted Adjusted(1) Unadjusted
per share
Basic 5 1.0c 0.5c 0.6c 0.4c 2.2c 2.3c
Diluted 5 1.0c 0.5c 0.6c 0.3c 2.2c 2.3c
========== ===== ============ =============== ============ =========== ============ ===============
(1) Underlying profit and adjusted earnings per share is stated
before exceptional and other items.
(2) The impairment of $5.0 million reported in exceptional and
other items includes $nil million impairment of net assets held for
sale to fair value less costs to sell and $5.0 million of costs to
sell incurred to date.
All alternative performance measures are reconciled to IFRS
measures and are explained in note 17.
14 Discontinued operations - continued
Effect of the disposal group on the financial position of the
Group as at 30 June 2018. The comparative figures have been
included for information only and do not represent net assets held
for sale at the comparative balance sheet dates.
30 June 30 June 31 December
2018 2017 2017
$m $m $m
=========================== ==== ======== ======== ===========
Assets held for sale
Non-current assets
Other intangible assets 17.4 20.6 19.0
Property, plant and
equipment 77.7 76.3 63.5
--------------------------------- -------- -------- -----------
95.1 96.9 82.5
-------------------------------- -------- -------- -----------
Current assets
Inventories 150.6 142.1 140.7
Trade receivables 111.9 103.5 96.4
Other receivables 9.0 7.9 13.2
Cash and cash equivalents 2.4 2.7 1.7
--------------------------------- -------- -------- -----------
273.9 256.2 252.0
-------------------------------- -------- -------- -----------
Total assets held for
sale 369.0 353.1 334.5
--------------------------------- -------- -------- -----------
Liabilities held for
sale
Current liabilities
Trade payables (75.9) (78.4) (92.7)
Other payables (28.2) (21.4) (28.5)
Provisions (1.1) (1.1) (1.1)
--------------------------------- -------- -------- -----------
(105.2) (100.9) (122.3)
-------------------------------- -------- -------- -----------
Non-current liabilities
Borrowings (3.0) (3.0) (3.0)
Other payables (0.4) (1.5) (0.4)
Provisions (0.9) (1.1) (0.9)
--------------------------------- -------- -------- -----------
(4.3) (5.6) (4.3)
-------------------------------- -------- -------- -----------
Total liabilities held
for sale before tax (109.5) (106.5) (126.6)
--------------------------------- -------- -------- -----------
Net assets held for
sale 259.5 246.6 207.9
--------------------------------- -------- -------- -----------
The net assets of the ERO business held for sale as at 30 June
2018 exclude deferred tax liabilities of $10.6 million which remain
within the Group tax position.
Cash flows (used in)/from ERO discontinued operations
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
$m $m $m
-------------------------------- ----------- ----------- -------------
Net cash (outflow)/inflow from
operating activities (29.9) (18.0) 31.4
Net cash (outflow)/inflow from
investing activities (11.5) (4.2) 1.1
Net cash inflow/(outflow) from
financing activities 42.1 22.1 (33.6)
Net cash inflow/(outflow) for
the period 0.7 (0.1) (1.1)
================================= =========== =========== =============
14 Discontinued operations - continued
It was announced on 16 September 2016 that the Group had reached
agreement with John Menzies plc ("Menzies") on the terms of the
sale of ASIG, a leading commercial aviation services company, for
$202 million in cash. On 31 January 2017 the Group announced the
completion of the sale and that all the terms of the transaction
remain as outlined in the announcement made on 16 September
2016.
As a major line of the Group's business the ASIG operations were
classified as a discontinued operation.
Results of ASIG discontinued operations
Six months ended Six months ended Year ended 31 December
30 June 2018 30 June 2017 2017
------------------- ------ ------------------------------------ ------------------------------------- -------------------------------------
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 - - - 38.2 - 38.2 38.4 - 38.4
Cost of sales - - - (35.7) - (35.7) (35.9) - (35.9)
------------------- ------ -------------- ------------ ------ -------------- ------------ ------- -------------- ------------ -------
Gross profit - - - 2.5 - 2.5 2.5 - 2.5
Distribution - - - - - - - - -
costs
Administrative
expenses - - - (2.7) - (2.7) (2.7) - (2.7)
Other operating - - - - - - - - -
income
Other operating - - - - - - - - -
expenses
Operating
loss incl.
group charges - - - (0.2) - (0.2) (0.2) - (0.2)
Elimination - - - - - - - - -
of internal
group charges
------------------- ------ -------------- ------------ ------ -------------- ------------ ------- -------------- ------------ -------
Operating
loss 2 - - - (0.2) - (0.2) (0.2) - (0.2)
Impairment
and other
charges on
classification
as held for
sale - - - - (6.6) (6.6) - (6.6) (6.6)
Investment - - - - - - - - -
income
Finance costs - - - - - - - - -
------------------- ------ -------------- ------------ ------ -------------- ------------ ------- -------------- ------------ -------
Loss before
tax - - - (0.2) (6.6) (6.8) (0.2) (6.6) (6.8)
Tax
(expense)/credit - - - - (25.3) (25.3) 0.2 (15.9) (15.7)
=================== ====== ============== ============ ====== ============== ============ ======= ============== ============ =======
Loss for
the period - - - (0.2) (31.9) (32.1) - (22.5) (22.5)
=================== ====== ============== ============ ====== ============== ============ ======= ============== ============ =======
Attributable
to:
Equity holders
of BBA Aviation
plc - - - (0.2) (31.9) (32.1) - (22.5) (22.5)
Non-controlling - - - - - - - - -
interests
=================== ====== ============== ============ ====== ============== ============ ======= ============== ============ =======
Loss for
the period - - - (0.2) (31.9) (32.1) - (22.5) (22.5)
=================== ====== ============== ============ ====== ============== ============ ======= ============== ============ =======
Earnings Note Adjusted(1) Unadjusted Adjusted(1) Unadjusted Adjusted(1) Unadjusted
per share
Basic 5 - - - (3.1)c - (2.2)c
Diluted 5 - - - (3.1)c - (2.2)c
========== ===== ============ =============== ============ =========== ============ ===========
(1) Underlying profit and adjusted earnings per share is stated
before exceptional and other items.
All alternative performance measures are reconciled to IFRS
measures and are explained in note 17.
14 Discontinued operations - continued
Cash flows (used in)/from ASIG discontinued operations
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
$m $m $m
--------------------------------- ------------ ----------- -------------
Net cash outflow from operating
activities - (24.8) (33.4)
Net cash inflow from investing - 0.2 -
activities
Net cash outflow for the period - (24.6) (33.4)
================================== =========== =========== =============
15 Share capital
Ordinary share capital as at 30 June 2018 amounted to $509.3
million (30 June 2017: $508.8 million; 31 December 2017: $509.0
million). During the period the Group issued 0.7 million (30 June
2017: 0.5 million; 31 December 2017: 0.4 million) 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 $0.8 million (30 June 2017:
$0.1 million;
31 December 2017: $0.3 million).
The number of shares in issue as at 30 June 2018 was 1,046.2
million (30 June 2017: 1,045.4 million; 31 December 2017: 1,045.3
million).
16 Post balance sheet events
On 1 July 2018 the Group completed an acquisition of fuel
services partner EPIC Aviation LLC doing business as EPIC Fuels
("EPIC") for a cash consideration of $88.1m. EPIC is a leading fuel
and fuel related services supplier providing fuel and fuel related
services at 208 privately owned independent FBO locations.
17 Alternative performance measures
Introduction
The directors assess the performance of the Group using a
variety of alternative performance measures and principally discuss
the Group's results on an 'adjusted' and/or 'underlying' basis.
These terms are consistently used throughout the results
announcement. Results on an adjusted basis are presented before
exceptional and other items.
Alternative performance measures have been defined and
reconciled to the nearest GAAP measure below, along with the
rationales behind using these measures.
The alternative performance measures that are used are: organic
revenue growth, underlying operating profit and margin, EBITDA and
underlying EBITDA, underlying profit before tax, underlying
deferred tax, adjusted basic and diluted earnings per ordinary
share, return on invested capital, operating cash flow, free cash
flow, cash conversion, and net debt. A reconciliation from these
adjusted performance measures to the nearest measure prepared in
accordance with IFRS is presented below. The alternative
performance measures we use may not be directly comparable with
similarly titled measures used by other companies.
Where applicable, divisional measures are calculated in
accordance with Group measures.
Exceptional and other items
The Group's income statement and segmental analysis separately
identify trading results before exceptional and other items. The
directors believe that presentation of the Group's results in this
way is relevant to an understanding of the Group's financial
performance, as exceptional and other items are identified by
virtue of their size, nature or incidence. This presentation is
consistent with the way that financial performance is measured by
management and reported to the Board and the Executive Committee
and assists in providing a meaningful analysis of the trading
results of the Group. In determining whether an event or
transaction is treated as an exceptional and other item, management
considers quantitative as well as qualitative factors such as the
frequency or predictability of occurrence.
Examples of charges or credits meeting the above definition and
which have been presented as exceptional and other items in the
current and/or prior years include costs relating to significant
acquisitions/disposals of significant businesses and investments,
significant business restructuring programmes some of which span
multiple years, asset impairment charges and impact of the US Tax
Cuts and Job Act 2017. In the event that other items meet the
criteria, which are applied consistently from year to year, they
are also treated as exceptional and other items. Other items
include amortisation of intangible assets arising on acquisition
and valued in accordance with IFRS 3. These charges are presented
separately to improve comparability of the Group's underlying
profitability with peer companies.
Exceptional and other items are disclosed and reconciled to the
nearest GAAP Measure in note 3 to the Consolidated Financial
Statements.
17 Alternative performance measures - continued
Organic revenue growth
Organic revenue growth is a measure which seeks to reflect the
performance of the Group that will contribute to long-term
sustainable growth. As such organic revenue growth excludes the
impact of acquisitions or disposals, fuel price movements and
foreign exchange movements. We focus on the trends in organic
revenue growth. Organic revenue growth for ERO and Ontic exclude
the impact of fuel price fluctuations as these businesses are not
exposed to fuel price fluctuations.
A reconciliation from the growth in reported revenue, the most
directly comparable IFRS measures, to the organic revenue growth,
is set out below.
Restated Restated
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
$m $m $m
--------------------------------------------------- ----------- ------------ --------------
Reported revenue prior period (continuing
and discontinued) 1,183.7 1,229.4 2,565.9
Revenue prior year (continuing) 898.6 751.8 1,611.4
Revenue prior year (ERO discontinued) 246.9 268.8 537.7
Revenue prior year (ASIG discontinued) 38.2 208.8 416.8
Less: Impact for foreign exchange(1) 11.9 (9.2) (5.3)
Less: Impact for fuel price fluctuations(2) 70.8 52.2 90.7
Less: Contribution from discontinued/disposals (285.1) (477.6) (954.5)
--------------------------------------------------- ----------- ------------ --------------
Rebased comparative revenue 981.3 794.8 1,696.8
--------------------------------------------------- ----------- ------------ --------------
Reported revenue current period (continuing
and discontinued) 1,281.9 1,183.7 2,409.0
Less: Contribution from discontinued/disposals (257.6) (285.1) (551.7)
Less: Contribution from acquisitions (5.0) (74.0) (92.7)
--------------------------------------------------- ----------- ------------ --------------
Organic revenue current period 1,019.3 824.6 1,764.6
--------------------------------------------------- ----------- ------------ --------------
Organic revenue growth from continuing operations 3.9% 3.7% 4.0%
--------------------------------------------------- ----------- ------------ --------------
(1) Impact from foreign exchange is calculated based on the
prior year revenue translated at the current year exchange
rates.
(2) Impact from fuel price fluctuations is calculated based on
the prior year revenue recognised at the current year fuel
prices.
17 Alternative performance measures - continued
Underlying operating profit and margin
Underlying operating profit and margin are measures which seek
to reflect the underlying performance of the Group that will
contribute to long-term sustainable profitable growth. As such they
exclude the impact of exceptional and other items. The directors
focus on the trends in underlying operating profit and margins.
A reconciliation from operating profit, the most directly
comparable IFRS measure, to the underlying operating profit and
margin, is set out below.
Six Restated Restated Restated
Six months Six Restated Year Year Year
months Six months Six months ended months Six months ended ended ended
ended ended ended 30 ended ended 31 31 31 December
30 June 30 June 30 June June 30 June 30 June December December 2017
2018 2018 2018 2017 2017 2017 2017 2017 Discontinued
Total Continuing Discontinued Total Continuing Discontinued Total Continuing $m
$m $m $m $m $m $m $m $m
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
Operating
profit 128.2 115.9 12.3 122.7 117.0 5.7 237.4 219.1 18.3
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
Add:
Exceptional
and other
items:
Amortisation
of intangible
assets
arising
on
acquisition
and valued
in accordance
with IFRS 3 43.5 43.5 - 46.7 46.7 - 93.8 93.8 -
Acquisition
related
transaction
costs - - - - - - 0.1 0.1 -
Restructuring
costs 8.8 7.7 1.1 5.3 1.6 3.7 28.0 22.4 5.6
Others - - - - - - 1.1 1.1 -
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
Exceptional
and other
items 52.3 51.2 1.1 52.0 48.3 3.7 123.0 117.4 5.6
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
Underlying
operating
profit 180.5 167.1 13.4 174.7 165.3 9.4 360.4 336.5 23.9
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
Revenue 1,281.9 1,024.3 257.6 1,183.7 898.6 285.1 2,409.0 1,857.3 551.7
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
Underlying
operating
margin
(%) 14.1% 16.3% 5.2% 14.8% 18.4% 3.3% 15.0% 18.1% 4.3%
--------------- -------- ----------- -------------- -------- ----------- -------------- --------- ----------- --------------
17 Alternative performance measures - continued
EBITDA and Underlying EBITDA
In addition to measuring the financial performance of the Group
and lines of business based on underlying operating profit, the
directors also measure performance based on EBITDA and underlying
EBITDA. EBITDA is defined as the Group profit or loss before
depreciation, amortisation, net finance expense and taxation.
Underlying EBITDA is defined as EBITDA before exceptional and other
items. EBITDA is a common measure used by investors and analysts to
evaluate the operating financial performance of companies.
The directors consider EBITDA and underlying EBITDA to be useful
measures of the Group's operating performance because they
approximate the underlying operating cash flow by eliminating
depreciation and amortisation. EBITDA and underlying EBITDA are not
direct measures of the Group's liquidity, which is shown in the
condensed consolidated cash flow statement, and should be
considered in the context of the Group's financial commitments.
A reconciliation from profit or loss to EBITDA and underlying
EBITDA, is set out below.
Six Six Restated Restated Restated
months Six Six months months Restated Six months Year Year Year
ended months ended ended Six months ended ended ended ended
30 ended 30 June 30 ended 30 June 31 31 31 December
June 30 June 2018 June 30 June 2017 December December 2017
2018 2018 Discontinued 2017 2017 Discontinued 2017 2017 Discontinued
Total Continuing $m Total Continuing $m Total Continuing $m
$m $m $m $m $m $m
----------- -------------- --------------
Profit/(loss)
for the
period 66.7 61.4 5.3 52.5 80.7 (28.2) 119.3 118.5 0.8
Add: Finance
costs 27.7 27.2 0.5 32.4 32.2 0.2 65.3 64.7 0.6
Less: Investment
income (0.3) (0.3) - (1.0) (1.0) - (3.2) (3.2) -
Add: Tax
charge/(credit) 16.3 14.8 1.5 32.2 5.1 27.1 49.4 39.1 10.3
Add:
Depreciation
and
amortisation 85.0 81.3 3.7 89.8 86.0 3.8 181.3 173.4 7.9
Add: Impairment
and other
charges 17.8 12.8 5.0 6.6 - 6.6 6.6 - 6.6
----------- -------------- -------------- ----------
EBITDA 213.2 197.2 16.0 212.5 203.0 9.5 418.7 392.5 26.2
----------- -------------- -------------- ----------
Add: Exceptional
and other
items:
Restructuring
costs 8.8 7.7 1.1 5.3 1.6 3.7 28.0 22.4 5.6
Other - - - - - - 1.1 1.1 -
Acquisition
related
transaction
costs and
others - - - - - - 0.1 0.1 -
----------- -------------- -------------- ----------
Underlying
EBITDA 222.0 204.9 17.1 217.8 204.6 13.2 447.9 416.1 31.8
----------- -------------- -------------- ----------
17 Alternative performance measures - continued
Underlying profit before tax
Underlying profit before tax is a measure which seeks to reflect
the underlying performance of the Group that will contribute to
long-term sustainable profitable growth. As such underlying profit
before tax excludes the impact of exceptional and other items. We
focus on the trends in underlying profit before tax.
A reconciliation from profit before tax, the most directly
comparable IFRS measures, to the underlying profit before tax, is
set out below.
Six Six Restated Restated Restated
months months Six Restated Year Year Year
ended Six months Six months ended months Six months ended ended ended
30 ended ended 30 ended ended 31 31 31 December
June 30 June 30 June June 30 June 30 June December December 2017
2018 2018 2018 2017 2017 2017 2017 2017 Discontinued
Total Continuing Discontinued Total Continuing Discontinued Total Continuing $m
$m $m $m $m $m $m $m $m
------- ----------- -------------- ------- -------------- --------- -----------
Profit/(loss)
before tax 83.0 76.2 6.8 84.7 85.8 (1.1) 168.7 157.6 11.1
Exceptional
and other
items
excluding tax
effect 70.1 64.0 6.1 58.6 48.3 10.3 129.6 117.4 12.2
------- ----------- -------------- ------- -------------- --------- ----------- -------------
Underlying
profit before
tax 153.1 140.2 12.9 143.3 134.1 9.2 298.3 275.0 23.3
------- ----------- -------------- ------- -------------- --------- ----------- -------------
Underlying deferred tax
Cash adjusted basic and diluted earnings per ordinary share set
out in note 5 are calculated by removing exceptional and other
items and underlying deferred tax to better reflect the underlying
basic and diluted earnings per share.
A reconciliation from deferred tax, the most directly comparable
IFRS measures, to the underlying deferred tax, is set out
below:
Six Six Restated Restated
months months Restated Restated Year Year Year
ended Six months Six months ended Six months Six months ended ended ended
30 ended ended 30 ended ended 31 31 31 December
June 30 June 30 June June 30 June 30 June December December 2017
2018 2018 2018 2017 2017 2017 2017 2017 Discontinued
Total Continuing Discontinued Total Continuing Discontinued Total Continuing $m
$m $m $m $m $m $m $m $m
------- ----------- -------------- ------- --------- ----------- --------------
Deferred Tax
(credit)/charge (1.1) (2.3) 1.2 (12.9) 8.6 (21.5) 12.3 23.4 (11.1)
Deferred tax
charge/(credit)
on exceptional
and other
items 13.6 14.1 (0.5) 42.5 17.7 24.8 35.4 27.5 7.9
------- ----------- -------------- ------- ---------- ------------- --------- ----------- --------------
Underlying
deferred tax
charge/(credit) 12.5 11.8 0.7 29.6 26.3 3.3 47.7 50.9 (3.2)
------- ----------- -------------- ------- ---------- ------------- --------- ----------- --------------
17 Alternative performance measures - continued
Adjusted and cash earnings per share
As set out in note 5 adjusted earnings per share is calculated
using basic earnings, adjusted to exclude exceptional and other
items net of tax. This earnings measure is further adjusted to
exclude deferred tax in arriving at earnings for cash earnings per
share.
A reconciliation from the basic and diluted earnings per
ordinary share, the most directly comparable IFRS measures, to the
cash basic and diluted earnings per ordinary share, is set out
below.
Six Six Year Restated
months Six months months Restated Restated ended Restated Year ended
ended Six months ended ended Six months Six months 31 Year ended 31 December
30 ended 30 June 30 ended ended December 31 2017
June 30 June 2018 June 30 June 30 June 2017 December Discontinued
2018 2018 Discontinued 2017 2017 2017 Total 2017 c
Total Continuing c Total Continuing Discontinued Total Continuing
c c c c c c c
Basic
earnings
per share 6.5 6.0 0.5 5.1 7.8 (2.7) 11.6 11.5 0.1
Adjustments
for
adjusted
measure 6.5 5.9 0.6 9.2 5.6 3.6 17.0 15.2 1.8
----------
Cash basic
earnings
per share 13.0 11.9 1.1 14.3 13.4 0.9 28.6 26.7 1.9
----------
Diluted
earnings
per share 6.4 5.9 0.5 5.0 7.8 (2.8) 11.5 11.4 0.1
Adjustments
for
adjusted
measure 6.4 5.9 0.5 9.1 5.4 3.7 16.8 15.0 1.8
----------
Cash diluted
earnings
per share 12.8 11.8 1.0 14.1 13.2 0.9 28.3 26.4 1.9
----------
17 Alternative performance measures - continued
Return on invested capital (ROIC)
Measuring ROIC ensures the Group is focused on efficient use of
assets, with the target of operating returns generated across the
cycle exceeding the cost of holding the assets.
ROIC is calculated by dividing the last twelve months underlying
operating profit for ROIC by invested capital for ROIC, both of
which are at the same exchange rate which is the average of the
last 13 months' spot rate. The invested capital for ROIC is
calculated by adding net assets for ROIC and net debt for ROIC,
both of which are calculated by averaging their respective balance
over the last 13 months.
A reconciliation from underlying operating profit to underlying
operating profit for ROIC is set out below. In addition, a
reconciliation from net assets, the most directly comparable IFRS
measures, to invested capital for ROIC, is set out below.
Six
months Six months Six months Six months Year
ended ended ended ended ended
30 June 30 June 30 June 30 June 31 December
2018 2018 2018 Discontinued(1) 2017 2017
Total Continuing $m Total Total
$m $m $m $m
---------- ------------ ----------------------- -------------
Underlying operating profit 180.5 167.1 13.4 174.7 360.4
Underlying operating profit prior
period six months ended December 185.7 171.2 14.5 180.5 -
Adjustments for FX (0.1) (0.2) 0.1 (1.1) 0.1
---------- ------------ ----------------------- -------------
Underlying operating profit for
ROIC 366.1 338.1 28.0 354.1 360.5
---------- ------------ ----------------------- -------------
Net assets 1,895.2 1,635.7 259.5 1,884.6 1,933.2
Add back impairment made to disposal - - - - -
group
Adjustments for FX and averaging 39.4 48.2 (8.8) (16.3) (10.9)
---------- ------------ ----------------------- -------------
Net assets for ROIC 1,934.6 1,683.9 250.7 1,868.3 1,922.3
---------- ------------ ----------------------- -------------
Borrowings (1,341.4) (1,338.4) (3.0) (1,416.1) (1,322.8)
Finance leases (1.3) (1.3) - (1.5) (1.3)
Cash and cash equivalents 150.0 147.6 2.4 152.6 153.5
Adjustments for FX and averaging (108.9) (108.3) (0.6) (184.5) (175.9)
---------- ------------ ----------------------- -------------
Less net debt for ROIC (1,301.6) (1,300.4) (1.2) (1,449.5) (1,346.5)
---------- ------------ ----------------------- -------------
Invested capital for ROIC 3,236.2 2,984.3 251.9 3,317.8 3,268.8
---------- ------------ ----------------------- -------------
ROIC (%) 11.3% 11.3% 11.1% 10.7% 11.0%
---------- ------------ ----------------------- -------------
(1) ROIC for discontinued operations has been calculated
excluding $11.7m of support costs borne by the continuing
Group.
17 Alternative performance measures - continued
Operating cash flow
Operating cash flow is one of the key performance indicators by
which our financial performance is measured. Operating cash flow is
defined as the aggregate of cash generated by operations, purchase
of property, plant and equipment, purchase of intangible assets
less Ontic licences not accounted for under IFRS 3, and proceeds
from disposal of property plant and equipment.
Operating cash flow is primarily an overall operational
performance measure. However, we also believe it is an important
indicator of our liquidity.
Operating cash flow reflects the cash we generate from
operations after net capital expenditure which is a significant
ongoing cash outflow associated with investing in our
infrastructure. In addition, operating cash flow excludes cash
flows that are determined at a corporate level independently of
ongoing trading operations such as dividends, share buybacks,
acquisitions and disposals, financing costs, tax payments,
dividends from associates and the repayment and raising of debt.
Operating cash flow is not a measure of the funds that are
available for distribution to shareholders.
A reconciliation from Group net cash flow from operating
activities, the most directly comparable IFRS measure, to adjusted
operating cash flow, is set out below.
Six months Year ended
ended Six months 31 December
30 June ended 2017
2018 30 June Total
Total 2017 Total $m
$m $m
Net cash flow from operating activities 177.1 121.4 339.0
Less: purchase of property, plant and equipment (40.1) (35.9) (73.4)
Less: purchase of intangible assets (4.2) (2.3) (11.9)
Add: income tax paid 10.2 18.8 41.8
Add: Ontic licences not accounted for under
IFRS 3 1.2 - 5.0
Add: proceeds from disposal of property,
plant and equipment 0.3 0.3 16.8
Operating cash flow 144.5 102.3 317.3
Free cash flow
Free cash flow represents the cash that a company is able to
generate after spending the money required to maintain or expand
its asset base. Free cash flow is reconciled to net cash flow from
operating activities, the most directly comparable IFRS measure
below.
Six months Year ended
ended Six months 31 December
30 June ended 2017
2018 30 June Total
Total 2017 $m
$m Total
$m
Net cash flow from operating activities 177.1 121.4 339.0
Dividends received from associates 1.7 1.9 2.4
Purchase of property, plant and equipment (40.1) (35.9) (73.4)
Purchase of intangible assets(1) (3.0) (2.3) (6.9)
Proceeds from disposal of property, plant
and equipment 0.3 0.3 16.8
Interest received 0.3 0.5 3.3
Interest paid (21.8) (29.2) (60.5)
Interest element of finance leases paid - (0.1) (0.1)
Free cash flow 114.5 56.6 220.6
(1) Purchase of intangible assets excludes $1.2 million (30 June
2017: $nil million; 31 December 2017: $5.0 million) paid in respect
of Ontic licences, not accounted for as acquisitions under IFRS 3
since the directors believe these payments are more akin to
expenditure in relation to acquisitions, and are therefore outside
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.
17 Alternative performance measures - continued
Cash conversion
Cash conversion is a key part of the Group strategy for
disciplined capital management with absolute cash generation and
strong cash conversion. Cash conversion is defined as operating
cash flow as a percentage of continuing and discontinued operating
profit. Operating cash flow has been reconciled above to the most
directly comparable IFRS measure, being net cash flow from
operating activities.
Six months Year ended
ended Six months 31 December
30 June ended 2017
2018 30 June Total
Total 2017 %
% Total
%
Cash conversion 113% 83% 134%
Net debt
Net debt consists of borrowings (both current and non-current),
less cash and cash equivalents and the fair value adjustment on all
senior loan notes.
Net debt is a measure of the Group's net indebtedness that
provides an indicator of the overall balance sheet strength. It is
also a single measure that can be used to assess both the Group's
cash position and its indebtedness. The use of the term 'net debt'
does not necessarily mean that the cash included in the net debt
calculation is available to settle the liabilities included in this
measure.
Net debt is considered to be an alternative performance measure
as it is not defined in IFRS. The most directly comparable IFRS
measure is the aggregate of borrowings (current and non-current),
and cash and cash equivalents. A reconciliation from these to net
debt is given below.
As Restated Restated
at Restated Restated As at As at As at
As at As at As at 30 As at As at 31 31 31 December
30 June 30 June 30 June June 30 June 30 June December December 2017
2018 2018 2018 2017 2017 2017 2017 2017 Discontinued
Total Continuing Discontinued Total Continuing Discontinued Total Continuing $m
$m $m $m $m $m $m $m $m
-------------- ---------- ------------ -------------- ---------- ---------- ----------- --------------
Borrowings (1,341.4) (1,338.4) (3.0) (1,416.1) (1,413.1) (3.0) (1,322.8) (1,319.8) (3.0)
Amortisation
costs (20.0) (20.0) - (7.7) (7.7) - (6.4) (6.4) -
Fair value
adjustment
on private
placement
notes (4.9) (4.9) - 8.7 8.7 - 3.5 3.5 -
Fair value
adjustment
on senior
loan
notes 0.3 0.3 - - - - - - -
-------------- ---------- ------------ -------------- ---------- ---------- ------------- ---------- ----------- --------------
Total
principal
of
borrowings (1,366.0) (1,363.0) (3.0) (1,415.1) (1,412.1) (3.0) (1,325.7) (1,322.7) (3.0)
Cash and cash
equivalents 150.0 147.6 2.4 152.6 149.9 2.7 153.5 151.8 1.7
-------------- ---------- ------------ -------------- ---------- ---------- ------------- ---------- ----------- --------------
Total net
principal
of
borrowings (1,216.0) (1,215.4) (0.6) (1,262.5) (1,262.2) (0.3) (1,172.2) (1,170.9) (1.3)
Amortisation
costs 20.0 20.0 - 7.7 7.7 - 6.4 6.4 -
Finance
leases (1.3) (1.3) - (1.5) (1.5) - (1.3) (1.3) -
Net debt (1,197.3) (1,196.7) (0.6) (1,256.3) (1,256.0) (0.3) (1,167.1) (1,165.8) (1.3)
18 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 on page 23 of the
annual report for the year ended 31 December 2017. The risks and
uncertainties are summarised below:
-- Structural changes in the global economic environment, or
cycle fluctuations which drive down B&GA and commercial flying
and military expenditure or cause market weakness in the ERO
sector.
-- Global terrorist events either in-flight, at or near major
airports materially impacting global air travel.
-- Legislative changes causing material increase to cost of
B&GA flight relative to alternatives such as commercial flying,
road or rail travel.
-- Ongoing competitor activity to replicate market position of Signature network.
-- Ability to attract and retain high-quality and capable people
at senior and mid-management levels.
-- Potential liabilities from defects in services and products.
-- Impact of a successful cyber-attack.
-- International or inadvertent non-compliance with company
values and legislation, both within BBA Aviation and with trading
partners.
-- Environmental exposures.
-- Non-compliance with banking covenants caused by a tighter
regulatory environment around sanctions compliance, which is a key
condition of the Group's banking covenants.
-- Ability to effectively manage key resources and dependencies across major projects.
-- Changes in tax regulation in both the USA and EMEA could
impact the Group's effective tax rate and cash tax liabilities.
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 2018 which comprises the consolidated
income statement, the consolidated statement of comprehensive
(loss) / income, the consolidated balance sheet, the consolidated
cash flow statement, the consolidated statement of changes in
equity, and related notes 1 to 17. 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 Financial
Reporting Council. 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 Financial Reporting Council 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 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 2018 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
Statutory Auditor
London, United Kingdom
31 July 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FKDDKABKDNON
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