TIDMBBA
RNS Number : 8162H
BBA Aviation PLC
05 August 2019
BBA Aviation plc
2019 Interim Financial Report
Unaudited results for the half year ended
30 June 2019
For further information please contact:
David Crook, Group Finance Director (020) 7514 3999
Kate Moy, Investor Relations
BBA AVIATION PLC
David Allchurch / Lisa Jarrett-Kerr (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 2019
Highlights(1)
-- Total Group underlying operating profit, on a pre IFRS 16
basis, grew 5.3% to $190.0 million (H1 2018: $180.5 million);
Signature FBO network outperformed the US B&GA market
-- Proposed sale of Ontic to CVC for $1,365 million announced on 30 July 2019
-- Continuing operations:
o Signature
-- Organic revenue up 0.4% (Signature FBO up 1.0%) with new
commercial initiatives contributing to outperformance against a
strong prior year comparative
-- US B&GA market growth of 0.3% in the six months to June
2019
-- Underlying Signature FBO operating profit on a pre-IFRS 16
basis reduced 2.6% to $156.4 million (H1 2018: $160.5 million) in a
flat H1 US B&GA market with reduced heavy jet traffic in our
network
-- EPIC acquisition delivered $2.9 million operating profit for
six months as expected, with card and network fuel benefits to come
from H2 19 onwards
o Ontic
-- Underlying operating profit growth on a pre IFRS 16 basis
increased to $31.7 million (H1 2018: $24.5 million), driven by good
organic growth and the Firstmark acquisition
-- Further licence signed with Meggitt in the period
-- Firstmark acquisition integrating well and proceeding to
plan
-- Discontinued operations:
o Engine Repair and Overhaul (ERO) delivered underlying
operating profit performance of $18.8 million on a pre IFRS 16
basis (H1 2018: $13.4 million) through robust trading with the
benefit of depreciation and amortisation suspension
-- Group statutory operating profit is up 21.7% at $156.0
million (H1 2018: $128.2 million) due to the adoption of IFRS 16 on
1 January 2019
-- Total Group free cashflow up 12.8% to $129.2 m (H1 2018:
$114.5 million) highlighting inherently strong free cash flow
generation
-- Leverage stable at 2.8x net debt/underlying EBITDA on a
covenant basis, well within our target range of 2.5-3.0x,
reflecting continued strong free cash flow generation funding Ontic
licence investment in the period and our progressive dividend
-- Total Group ROIC on a pre IFRS 16 basis is flat at 11.4% (Dec 2018: 11.4%)
-- Underlying Total Group adjusted basic EPS (pre IFRS 16)
decreased by 3% to 11.3c (2018: 11.7c). Total Group basic EPS (pre
IFRS 16) decreased by 43.1% to 3.7c (2018: 6.5c) reflecting higher
exceptional and other item charges
-- Interim dividend increased by 5% to 4.2c reflecting continued
confidence in the Group's future growth prospects and free cash
generation.
Mark Johnstone, BBA Aviation Group Chief Executive,
commented:
"The first half of 2019 has been broadly in line with our
expectations for BBA Aviation, with a solid Signature performance,
in a flat B&GA market. Our Ontic legacy business has delivered
a strong performance.
We are pleased to have advanced our new commercial initiatives
in Signature including a successful fuel RFP and increasing the
EPIC fuel card penetration within the Signature owned network.
Ontic's first half performance was ahead of expectations, with
strong organic growth driven primarily by our GE licence
portfolios. Ontic continues to see a strong pipeline of licence
opportunities and we invested $23.6 million during the period.
On 30 July we were delighted to announce the proposed sale of
Ontic to CVC for a consideration of $1,365 million which represents
a compelling transaction multiple which we believe fully recognises
the strategic value and strong growth track record for the
business.
Looking forward, Signature is focused on maintaining its level
of performance against the US B&GA market in the second half.
Post the proposed disposals, BBA Aviation will be focused on the
cash generative Signature business which will enable us to maintain
our progressive dividend policy, coupled with the prospect of
returns to shareholders as we maintain our target leverage range.
The Board is confident of delivering market outperformance through
our Signature strategic growth initiatives."
Underlying
results(1) H1 2019 H1 2018
$m Total Continuing(5) Total Continuing % Change(2)
Group Group
--------------------- ---------- -------------- ---------- ----------- ------------
Revenue 1,528.1 1,262.7 1,281.9 1,024.3 19%
EBITDA (Pre IFRS 16) 229.8 211.0 222.0 204.9 4%
Operating profit
(Pre
IFRS 16) 190.0 171.2 180.5 167.1 5%
Profit before tax
(Pre
IFRS 16) 150.2 132.0 153.1 140.2 (2)%
Basic adjusted EPS
(Pre
IFRS 16) 11.3c 10.0c 11.7c 10.7c (3)%
Return on invested
capital(4,6)
(Pre IFRS 16) 11.4% 11.4% -
Free cash flow 129.2 107.2 114.5 159.8 13%
Net debt (Pre IFRS
16
basis) (6) (1,341.1) (1,332.2) 7%
--------------------- ---------- -------------- ---------- ----------- ------------
Statutory
results H1 2019 H1 2018
$m Total Continuing(5) Total Continuing % Change(2)
Group Group
--------------------- ---------- -------------- ---------- ----------- ------------
Revenue 1,528.1 1,262.7 1,281.9 1,024.3 19%
===================== ========== ============== ========== =========== ============
EBITDA 287.9 263.0
IFRS 16 impact (70.9) (64.8)
EBITDA (Pre IFRS 16) 217.0 198.2 213.2 197.2 2%
===================== ========== ============== ========== =========== ============
Operating profit 156.0 131.1
IFRS 16 impact (26.7) (20.6)
Operating profit
(Pre
IFRS 16) 129.3 110.5 128.2 115.9 1%
===================== ========== ============== ========== =========== ============
Profit before tax 47.3 57.5
IFRS 16 impact 9.5 13.8
Profit before tax
(Pre
IFRS 16) 56.8 71.3 83.0 76.2 (32)%
===================== ========== ============== ========== =========== ============
Basic unadjusted
EPS(3) 3.0c 4.5c
IFRS 16 impact 0.7c 1.0c
Basic unadjusted
EPS(3)
(Pre IFRS 16) 3.7c 5.5c 6.5c 6.0c (43)%
===================== ========== ============== ========== =========== ============
Dividend per share 4.20c 4.00c 5%
===================== ========== ============== ========== =========== ============
Net debt (2,537.3)
IFRS 16 impact 1,196.2
Net debt (Pre IFRS
16)(6) (1,341.1) (1,332.2) - 7%
--------------------- ---------- -------------- ---------- ----------- ------------
(1) Underlying results represent alternative performance
measures (APM), see APM section in note 19 outlining all such
measures. Where applicable and for comparability these are
presented on a pre IFRS 16 basis
(2) % change based on total (including discontinued
operations)
(3) Statutory measure is basic earnings per share (EPS)
(4) ROIC is calculated on a pre IFRS 16 basis as there is no
full 12 months of operating profit on an IFRS 16 basis
(5) Ontic's performance is presented as a continuing operation,
consistent with its position at the balance sheet date
(6) 2018 return on invested capital and net debt is shown for
the full year ended 31 December 2018
NOTE ON IFRS 16:
As previously noted we have adopted the modified retrospective
approach available within the new accounting standard and therefore
we have not restated our comparative disclosures for the impact of
IFRS 16, which came into effect from 1 January 2019. The statutory
results have been split out to show the IFRS 16 impact to aid
comparison period on period.
We reiterate that the adoption of IFRS 16 has no impact on the
economic prospects, strategy, cash generative nature of our
business, our progressive dividend policy or our stated capital
allocation policy.
At adoption on 1 January 2019, and for this interim period,
IFRS16 does significantly impact several key financial metrics with
regard to reported performance, financial position, financing costs
and associated financial leverage.
The approach we have taken to ensure consistency and
comparability is to report APMs (non-GAAP metric) that convert and
reconcile IFRS 16 reported financials back to the historical
accounting treatment of leases. This historical accounting
treatment of leases is the basis on which we are tested under our
banking covenants, plus monitor performance, KPIs and remuneration
targets.
INTERIM RESULTS 2019
Overview
Overall BBA Aviation performed broadly in line with our
expectations, with Signature growing ahead of a flat US B&GA
market and strong organic and inorganic growth in our Ontic
business. We have made further progress with the implementation of
our strategy and delivered as expected from our recent acquisitions
of EPIC, Firstmark and from the Ontic licence acquisitions acquired
in 2018.
Continuing Group revenue increased by 23.3% to $1,262.7 million
(H1 2018: $1,024.3 million) including a $230.2 million contribution
from the acquisition of EPIC and a $21.4 million contribution from
Ontic licence acquisitions and Firstmark.
-- Signature revenue increased 23.3%, reflecting the six-month
contribution from EPIC, partially offset by the impact of lower
fuel prices ($10.7 million) and foreign exchange movements ($6.6
million). Organic growth in the Signature FBO business was
1.0%.
-- Ontic revenue increased by 28.2% with organic revenue growth
of 8.0% supplemented by the contribution from the 2018 licence
acquisitions and Firstmark (H1 2019: $16.4 million) contributing as
expected.
Continuing Group underlying operating profit (on a pre IFRS 16
basis) was $171.2 million (H1 2018: $167.1 million).
-- Underlying operating profit performance in Signature, on a
pre IFRS 16 basis, was $160.0 million (H1 2018: $163.7 million)
which includes a $2.9 million contribution from EPIC.
-- Ontic delivered strong underlying operating profit, on a pre
IFRS 16 basis, of $31.7 million (H1 2018: $24.5 million) which
includes a $5.3 million contribution from the Firstmark acquisition
and $1.4m from new licences
-- Total central costs were broadly flat at $20.5 million (H1 2018: $20.5 million).
Continuing group statutory operating profit increased 13.1% to
$131.1 million (H1 2018: $115.9 million) primarily due to the
adoption of IFRS 16 on 1(st) January 2019.
Our Engine Repair and Overhaul (ERO) business performed well,
delivering strong underlying operating profit performance of $18.8
million on a pre IFRS 16 basis, a 40.3% increase on the $13.4
million in H1 2018, through robust trading with the benefit of $5.9
million depreciation and amortisation suspension.
Net interest for the continuing operations, including the impact
of IFRS 16, was $73.6 million (H1 2018: $26.9 million). The
increase of $46.7 million results primarily from the adoption of
IFRS 16, with the introduction of net interest on lease liabilities
of $34.4 million. The increase in underlying net interest on a pre
IFRS 16 basis is as expected and primarily reflects the revised
debt structure implemented in April 2018.
Net debt on a reported basis increased to $2,537.3 million (FY
2018: $1,332.2 million) following the adoption of IFRS 16 which
results in the recognition of additional $1,196.2 million in lease
liabilities within the definition of net debt. Our banking
covenants are tested on the accounting standards in force at the
time the debt financing was secured, consequently they are not
impacted by the adoption of IFRS 16. Net debt to underlying EBITDA
on a covenant basis was flat at 2.8x on a covenant basis (FY 2018:
2.8x). Interest cover on a covenant basis decreased to 6.5x for the
12 months to June 2019 (FY 2018: 7.9x).
Continuing underlying profit before tax (on a pre IFRS 16 basis)
was $132.0 million (H1 2018: $140.2 million). The decrease
primarily results from the additional net interest costs following
the revision to our debt structure in April 2018. Statutory profit
before tax for the continuing Group was $57.5 million (H1 2018:
$76.2 million). The decrease arose principally from the adoption of
IFRS 16 and the increased net interest on debt partially offset by
lower levels of exceptional and other items charged.
The Group's underlying tax rate for continuing operations was
21.5% (H1 2018: 21.0%). Cash taxes paid increased in line with
expectations to $23.0 million (H1 2018: $10.2 million). This
increase largely represents timing of payments between 2018 and
2019.
Adjusted earnings per share (on a pre IFRS 16 basis) for
continuing operations was 10.0c (H1 2018: 10.7c).
Statutory earnings per share for continuing operations decreased
to 4.5c (H1 2018: 6.0c) principally as a result of the impairment
recognised on ERO and the adoption of IFRS 16.
Exceptional and other items after tax, for continuing and
discontinued operations, totalled $78.5 million (H1 2018: $54.3
million) of which $32.5 million (H1 2018: $5.0 million) related to
discontinued operations. Key components of this for continuing
operations are the non-cash amortisation of acquired intangibles
accounted for under IFRS 3 ($47.9 million), restructuring expenses
($1.4 million), and provisions in respect of previously disposed
businesses of ($10.4 million). Exceptional and other items on
discontinued operations of $32.5 million, net of tax, relate to the
impairment of ERO net assets, to fair value less costs to sell, and
transaction costs relating to the disposal process of the ERO
business.
Total Group free cash flow increased 13% to $129.2 million (H1
2018: $114.5 million). This improvement resulted from a partial
turnaround in working capital within our ERO business following the
significant working capital outflows in H1 2018. Free cash flow for
the continuing Group reduced to $107.2 million (H1 2018: $159.8
million), primarily as a result of the expected payment of
additional interest ($16.9 million) and additional tax payments
($12.8 million) and a working capital inflow in the prior year.
Gross capital expenditure for the total Group amounted to $41.1
million (H1 2018: $43.1 million). Principal capital expenditure
items include investment in Signature's FBO developments at
Teterboro, and Palm Beach.
Cash flows on exceptional and other items were an outflow of
$1.8 million (H1 2018: $12.2 million outflow) and are largely a
result of restructuring expenses and costs associated with the
disposal process for our ERO discontinued operations.
The Group made $2.3 million of pension scheme payments (H1 2018:
$2.2 million). During H1 2019 the Group completed and signed off
the 2018 actuarial review of its UK defined benefit pension scheme.
Net interest payments were $38.4 million (H1 2018: $21.5 million)
and dividend payments amounted to $103.9 million (H1 2018: $99.3
million).
Total spend on acquisitions and licences completed during the
period was $26.5 million (H1 2018: $27.7 million), which included
deferred consideration on a Meggitt licence acquired in December
2018, the acquisition of a new licence from Meggitt in June and the
final working capital settlements in respect of EPIC and
Firstmark.
Total Group Return on Invested Capital (ROIC) on a pre IFRS 16
basis was flat at 11.4% (FY 2018: 11.4%).
Business Review - Continuing Operations
Signature (83% of continuing operations' underlying operating
profit, pre IFRS 16)
Signature ("Signature FBO", "TechnicAir" and "EPIC") provides
specialist on-airport services including refuelling, ground
handling and line maintenance to the business & general
aviation (B&GA) market.
H1 2019 Signature TechnicAir EPIC Total
FBO
$m
Revenue(2) 879.1 33.2 230.2 1,142.5
Organic revenue growth 1.0% (13.8)% - 0.4%
Underlying operating profit 176.7 0.7 2.9 180.3
Underlying operating profit
(Pre IFRS 16) 156.4 0.7 2.9 160.0
Constant fuel margin 20.1 % 2.1% 1.3 % 15.8 %
Constant fuel margin (Pre
IFRS 16) 17.8 % 2.1 % 1.3 % 14.0 %
Statutory operating profit 142.7
EBITDA 256.2
EBITDA (Pre IFRS 16) 193.1
Operating cash flow 234.9
Operating cash flow (Pre
IFRS 16) 174.1
Divisional return on invested
capital 11.7%
H1 2018 Signature TechnicAir EPIC(3) Total
FBO
$m
Revenue 887.5 38.8 - 926.3
Organic revenue growth 4.8% 10.8% 5.0%
Underlying operating profit
Underlying operating profit
(Pre IFRS 16) 160.5 3.2 - 163.7
Constant fuel margin
Constant fuel margin (Pre
IFRS 16) 18.3% 8.1% - 17.7%
Statutory operating profit 126.0
EBITDA
EBITDA (Pre IFRS 16) 194.8
Operating cash flow
Operating cash flow (Pre
IFRS 16) 197.8
Divisional return on invested
capital(1) 11.8%
Period on period change Signature TechnicAir EPIC Total
$m FBO
Revenue (0.9)% (14.4)% - 23.3%
Organic revenue growth (3.8)% (24.6)% (4.6)%
Underlying operating profit
Underlying operating profit
(Pre IFRS 16) (2.6)% (78.1)% - (2.3)%
Constant fuel margin
Constant fuel margin (Pre (50)bps (600)bps - (390)bps
IFRS 16)
Statutory operating profit 13.3%
EBITDA
EBITDA (Pre IFRS 16) (0.9)%
Operating cash flow
Operating cash flow (Pre
IFRS 16) (12.0)%
Divisional return on invested (10) bps
capital
(1) Return on invested capital for full year 2018
(2) Revenue is stated pre IFRS 16, Signature revenue post IFRS
16 was $1,140.4 million (H1 2018: $926.3 million)
(3) EPIC acquired 1 July 2018
Signature FBO revenue increased 1.0% on an organic basis against
a strong prior year comparator. On a reported basis revenue was
down 0.9% to $879.1 million (H1 2018: $887.5 million) as a result
of lower fuel prices of $10.7 million and foreign exchange
movements of $6.2 million. This was delivered against a backdrop of
US B&GA movements (source: FAA) which were up 0.3% for the six
months to June 2019, representing outperformance of 70 basis
points. Heavy jet traffic (over 5k gallon uplifts) was down within
our Signature network, which has limited our ability to outperform
the overall US B&GA market at our usual levels.
We continue to believe the US B&GA market is a long-term
structural growth market, correlated with US GDP growth.
Uncertainty around the US trade tariffs, Gulf tensions and a
slowdown in China continues to impact business confidence, and the
reduction in discretionary flying, which has been most notable in
our charter customer segment, continues. Furthermore, we have
experienced challenges, in what has been a low growth market, as
the long tail value behaviours become more pronounced.
European B&GA movements were down 4.7% in H1 2019 (source:
WingX) and while Europe is a small part of Signature, this has
clearly impacted overall performance, although encouragingly we saw
a much-improved performance in June.
The underlying operating profit in our Signature FBO business
for the six months ended June 2019 (on a pre IFRS 16 basis) was
down 2.6% to $156.4 million (H1 2018: $160.5 million) as the
positive impact from fuel and non-fuel commercial initiatives were
offset by wage and other cost inflation that we were unable to
fully pass on in a flat market. We remain confident in Signature's
ability to deliver significant longer-term value creation across
our enlarged network, supported by the commercial growth
investments made during 2018 and the phased implementation of the
strategic growth initiatives presented at the Capital Markets Day
in November 2018.
The underlying operating margin, on a pre IFRS 16 basis, in
Signature FBO was 17.8% (2018 on a constant fuel price basis:
18.3%) and reflects the wage inflation experienced in a tight US
labour market.
TECHNICAir continued to face challenges in the first half of
2019 with organic revenue decline of 14.4% to $33.2 million (H1
2018: $38.8 million) as we rationalised the footprint from 15
locations down to 8. Underlying operating profit on a pre IFRS 16
basis decreased to $0.7 million (H1 2018: $3.2 million) albeit when
compared to H2 2018 the performance was broadly flat. Going
forward, TECHNICAir is a smaller but lower risk business given the
actions being taken on the fixed cost base.
EPIC contributed revenues of $230.2 million and underlying
operating profit of $2.9 million, on a pre IFRS 16 basis, for the
first six months of 2019. The integration of EPIC is progressing in
line with expectations and in the period, we have made good
progress on the fuel card penetration within the Signature
network.
Signature's overall revenue, which includes our Signature FBO
business, our line maintenance business TECHNICAir and EPIC,
increased by 23.3% to $1,142.5 million (H1 2018: $926.3 million) on
a pre IFRS 16 basis. The EPIC acquisition contribution was $230.2
million and Signature's organic revenue increased by 0.4%.
Statutory operating profit of $142.7 million increased by 13.3%
(H1 2018: $126.0 million) primarily due to the adoption of IFRS
16.
Operating cash flow for Signature, on a pre IFRS 16 basis,
decreased to $174.1 million (H1 2018: $197.8 million), principally
due to working capital outflows. Return on invested capital
decreased to 11.7% (FY 2018: 11.8%).
Our FBO network
There are 193 locations in Signature's global network, including
16 Signature Select(R) franchise locations. The acquisition of EPIC
added 202 privately owned, EPIC branded independent FBOs and a
further 121 unbranded locations. This creates a total network of
over 400 FBO locations, which has significantly extended
Signature's network relevance and the range of services it can
offer.
Signature Strategic growth initiatives
In the current low growth US B&GA market we have continued
to invest in our Signature FBO network and have started to capture
benefits from the recent investments in new technology, designed to
enhance our fuel and non-fuel revenue management capabilities
through enhanced EPoS and revenue optimisation tools.
EPIC acquisition
EPIC was acquired on 1 July 2018 and provides fuel and fuel
related services at 202 EPIC branded, privately owned independent
FBO locations, and 121 unbranded locations. Our existing Signature
Select(R) branded locations are complementary to EPIC's FBO
locations and have now been incorporated/folded into the EPIC
network to operate alongside our market-leading owned FBO
network.
Pre-acquisition, EPIC was our Signature FBO fuel card partner
and the acquisition has given Signature full end-to-end management
of this card programme, associated transaction processing and data
capture, as a platform for an enhanced service offering across our
entire owned and non-owned network. As communicated at the Capital
Markets Day we believe that deeper penetration of this branded fuel
card, within our Signature network, represents a $4-8 million
underlying operating profit opportunity over time. We are pleased
to have made good initial progress on increasing own card usage in
the first six months of 2019, which has now grown to over 5% in the
Signature FBO network.
EPIC's proprietary QTPod technology for self-fuelling AvGas
services is performing very well. We have made good progress as
QTPod expands its footprint in the aviation industry, with a new
generation proprietary and cloud based self-serve fuelling
systems.
Fuel RFP
We have recently concluded our biennial fuel RFP on the combined
Signature and EPIC gallons, which total over 500 million gallons
per annum. This new agreement took effect on 1 July 2019. We are
pleased to announce that the new deal creates c.$7 million of cost
savings on a full year basis. As previously noted, in the current
tight US labour market the benefits of this new deal will be used
to mitigate some of the impact of the higher wage costs.
Leveraging our network
In the current low growth B&GA market, we will continue to
drive value through leveraging Signature's unique network of FBOs
by a combination of organic growth, core revenue optimisation,
non-fuel revenue growth incorporating new services and improved
asset utilisation. We are focused on delivering improved yield
management of both fuel and non-fuel revenues from our real estate
footprint through first-class customer experience, customer
segmentation and technology. On the cost side we are about to roll
out labour efficiency benchmarking across the US network.
With regard to new services that will contribute over the next
few years, we have made positive initial progress on a US roll-out
of the ELITE Class(TM) (our commercial passenger interconnect
service). We believe this is further evidence of Signature
redefining the market reach for B&GA infrastructure.
Over time, we will look to leverage the increased opportunity in
advertising throughout our real estate, which builds on our unique
customer group that controls significant wealth. Through this range
of growth opportunities, over the medium term we will target
enhanced market outperformance of some 250 basis points above US
B&GA FAA movement growth.
We continue to evaluate a number of investment opportunities
that we believe will further enhance and fortify Signature's unique
real estate network as we continue to lead the development of the
B&GA market.
Uber Elevate partnership
With a view to remaining at the forefront of industry
developments, we have recently partnered with Uber Elevate to
facilitate ground-based operations to support skyport
infrastructure for UberAIR, which plans to operate a network of
electric air taxis in cities worldwide. These electric vertical
take-off and landing vehicles (eVTOLs) differ from helicopters as
they are quieter, safer, more affordable and more
environmentally-friendly. This partnership will leverage
Signature's leading scale, distribution and aviation expertise with
Uber's innovative services and technology leadership to forge a
vision for the future of transportation. Signature will also be the
ground-based operator of choice for Uber's helicopter services in
Manhattan.
Ontic (17% of continuing operations' underlying operating
profit, pre IFRS 16)
Ontic, the Group's legacy support business is focused on the
support of maturing aerospace platforms.
$m H1 2019 H1 2018 % Change
Revenue(2) 122.3 95.4 28.2%
Underlying operating profit 31.7 - -
Underlying operating profit
(Pre IFRS 16) 31.7 24.5 29.4%
Underlying operating margin 25.9% - -
Underlying operating margin
(Pre IFRS 16) 25.9% 25.7% 20 bps
Statutory operating profit 21.0 17.8 18.0%
EBITDA 36.5 - -
EBITDA (Pre IFRS 16) 35.6 28.7 24.0%
Operating cash flow 28.5 - -
Operating cash flow (Pre
IFRS 16) 27.7 25.5 8.6%
Divisional ROIC(3) 15.4% 15.6% (20) bps
(1) Note: Our former Aftermarket Services business ERO (Middle
East) is included under Ontic for H1 2018 in Note 2 Segmental
Analysis but is excluded from the table above to provide a directly
comparable analysis of the Ontic business only. In H1 2018 the ERO
(Middle East) business contributed revenue of $2.7 million and an
underlying operating loss of $0.6 million.
(2) No IFRS 16 impact
(3) Return on invested capital for full year 2018
Ontic revenue increased by 28.2% to $122.3 million (H1 2018:
$95.4 million). On an organic basis, which adjusts for FX of $(2.0)
million and the contribution from Ontic licence acquisitions
acquired within the last twelve months and Firstmark of $21.4
million, revenue increased by 8.0% driven by a strong performance
from our GE license portfolio.
Underlying operating profit on a pre IFRS 16 basis of $31.7
million increased by 29.4% (H1 2018: $24.5 million) driven by the
contribution from the Firstmark acquisition, which added $5.3
million, and Ontic licence acquisitions acquired within the last 12
months of $1.4 million. On an organic basis, excluding FX of $0.8
million and acquisitions of $6.7 million, Ontic's underlying
operating profit increased 5.5%. Underlying operating margins
improved to 25.9% (H1 2018: 25.7%).
Statutory operating profit of $21.0 million was up 18.0% (H1
2018: $17.8 million).
There was an operating cash inflow for the division of $27.7
million (H1 2018: $25.5 million) on a pre IFRS 16 basis, driven by
working capital performance. Return on invested capital was 15.4 %
(FY 2018: 15.6%).
Ontic Strategic growth initiatives
New licence acquisitions
In June 2019 we were pleased to sign a new licence with Meggitt
Sensors, part of Meggitt plc, for signal conditioners, military
chip detectors, cockpit indicators and connector harnesses. These
products are used on a range of commercial, B&GA and military
platforms.
This licence agreement follows on from the Meggitt licence
signed in December 2018 for legacy support on engine pressure
transmitters, fuel flow transmitters and fluid monitoring chip
detectors fitted to a range of commercial/military rotorcraft and
fixed wing platforms. Under the terms of both agreements Ontic, out
of its Chatsworth facility in California, will be responsible for
all ongoing new build production and repairs and spares support for
the global customers for the large installed base. This further
enhances our relationship with Meggitt and highlights our
capability to strategically assist OEM partners with on-going
support of their non-core products.
Furthermore, in late June we signed a small licence with a new
relationship OEM, Thales UK Limited, to acquire manufacturing and
aftermarket rights for the complete family of doppler velocity
sensors. This licence will transition into our Cheltenham facility
during the second half of 2019.
Our total cash spend on licence acquisitions was $23.6 million
(H1 2018: $22.5 million) which includes deferred consideration of
$10.0 million paid in January 2019 for the December 2018 licence
acquisition from Meggitt.
Firstmark Corp acquisition
We completed the acquisition of Firstmark Corp, an aerospace
focused aftermarket service provider, in November 2018. Firstmark
is a leading provider of highly engineered, proprietary components
and subsystems for the aerospace and defence industries. The
company employs over 70 people and has locations at Creedmoor,
North Carolina and Plainview, New York and expands Ontic's US
footprint to the East Coast. It is highly complementary to Ontic's
existing sites in Chatsworth (California), Cheltenham (UK), and
Singapore.
Firstmark has enhanced Ontic's exposure to the commercial and
military aerospace markets, providing access to a range of growth
opportunities across various established strategic platforms, with
a significant installed base, high utilisation rates and extended
in-service lives.
Post Balance Sheet Event
BBA is pleased to announce that it has entered into an agreement
to sell Ontic, a leading provider of high-quality, OEM-licensed
parts for legacy aerospace platforms, to CVC Fund Vll, for a cash
consideration of $1,365 million on a cash-free and debt-free
basis.
The Transaction is a Class 1 transaction for BBA under the
Listing Rules and is therefore conditional upon the approval of
shareholders. A circular containing further details of the
Transaction, together with a notice to convene a general meeting
expected to be in late August 2019 (General Meeting), will be sent
to shareholders as soon as is practicable.
The Board believes the price agreed for Ontic fully recognises
the strategic value of Ontic's strong brand, attractive returns and
significant growth potential. The Board intends to use some of the
disposal proceeds to reduce the Group's financial indebtedness to
help ensure that the net debt of the Retained Group remains near
the lower end of the stated target range of net debt to underlying
adjusted EBITDA of 2.5 to 3.0 times on a covenant basis at 31
December 2019, following Completion. After taking into account
these deployments of the disposal proceeds, the Board expects to
return between $750m and $850m to the Company's shareholders.
Further details on the Board's current expectations regarding the
use of proceeds and the proposed return of capital to the Company's
shareholders will be set out in the Circular.
The Company will also work with the Group's Pension Trustee to
obtain its consent to release applicable security.
Central costs
Total central costs, which includes support costs relating to
the discontinued ERO business, on a pre IFRS 16 basis are flat at
$20.5 million (H1 2018: $20.5 million). Underlying central costs
were broadly flat in H1 2019 (excluding support costs of
discontinued operations) at $15.1 million (H1 2018: $14.8
million).
The costs associated with supporting the ERO business will be
addressed post completion of the ERO disposal or upon completion of
the associated Transitional Support Agreement period, as
appropriate.
Business Review - Discontinued Operations
As previously announced, at the end of May 2018 management
committed to a plan to sell substantially all our 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. The ERO (Middle East) business has now
ceased trading and is not part of the disposal process.
In the six months to 30 June 2019 ERO's revenue increased by
9.6% to $282.4 million (H1 2018: $257.6 million) on a pre IFRS 16
basis. In stable markets, ERO's underlying operating profit on a
pre IFRS 16 basis was $18.8 million (H1 2018: $13.4 million). ERO's
underlying operating profit improvement includes the $5.9 million
benefit from the suspension of depreciation and amortisation for
the six months to 30 June 2019 compared to a benefit of $0.7
million for H1 2018, this being the required accounting treatment
while the business is held for sale. In the period an impairment
charge of $32.5 million, net of tax, was taken on the net assets of
ERO, to reflect fair value less costs to sell and transaction
costs, relating to the disposal process.
The ERO disposal process is ongoing and we expect to update the
market in due course. Disposal proceeds would provide an
opportunity to further enhance our proposed return on capital.
Pensions
The Group's net defined benefit pension and other
post-retirement benefits liabilities increased by $4.5 million in
the first half from $28.2 million at 31 December 2018 to $32.7
million at 30 June 2019. The increase in the net deficit of $4.5
million since 31 December 2018 is primarily due to lower discount
rate assumptions.
During H1 2019 the Group completed and signed off the 2018
actuarial valuation of its UK defined benefit pension plan. As a
result of this valuation and the initial recognition of past
service liabilities in line with the recent High Court ruling in
the Lloyds Banking Group case on Guaranteed Minimum Pension (GMP)
equalisation we have agreed to make additional payments of GBP8.5
million in total between July 2019 and September 2021.
Dividend
The Board is declaring an increased interim dividend of 4.20c
(H1 2018: 4.00c) 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 7
October 2019.
Board Changes
As previously announced, in January 2019 we welcomed two new
non-executive Directors, Vicky Jarman and Stephen King, to the
Board. Vicky started her career with KPMG where she qualified as a
Chartered Accountant. Shortly after qualification Ms Jarman moved
to Lazard & Co working in the Corporate Finance team before
becoming Chief Operating Officer for the London and Middle East
operations until 2009. Ms Jarman is currently a non-executive
director at Knight Frank, the global commercial and residential
real estate advisor, and previously held non-executive appointments
at De La Rue, Equiniti Group and Hays.
Stephen qualified as a Chartered Accountant with Coopers &
Lybrand and has held a number of finance roles in blue chip
organisations including Lucas Industries plc, Seeboard plc, De La
Rue plc and Caledonia Investments plc, where he was Group Finance
Director for nine years. Mr King is currently a non-executive
director of Chemring Group plc and TT Electronics where he is the
Senior Independent Director and also chairs the Audit
Committee.
Susan Kilsby, Chairman of the Remuneration Committee, retired
from the Board at the AGM in May. Peter Ventress has taken over
from Susan as Chairman of the Remuneration Committee and as our
Senior Independent Director. Stephen King has replaced Peter
Ventress as the Chairman of the Audit and Risk Committee.
Outlook
In 2019, we are pleased with the progress we have made on our
strategic initiatives, against a largely flat US B&GA market
which we had anticipated. In Signature, our ongoing investments in
commercial decision making and technology, and the EPIC
acquisition, will help underpin the future growth and longer-term
market outperformance of our business.
We remain focused on improving both our efficiency and also our
level of performance against the US B&GA market in the second
half of 2019.
The Group is focused on high quality, high ROIC and strongly
cash generative businesses which will enable us to grow and deliver
shareholder value within our target leverage range of 2.5x to 3.0x.
The strong cash generative nature of the core Signature business
supports both a progressive dividend policy and the prospect of
further returns to shareholders. Additionally the Group has planned
capital returns from both the proposed sales of Ontic and ERO.
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, including Brexit (the impact of which is not expected to
be significant) 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
2 August 2019 2 August 2019
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
Six months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
------------------ ------ ---------------------------------------------- ----------------------------------------- -----------------------------------------
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 1,262.7 - 1,262.7 1,024.3 - 1,024.3 2,347.3 - 2,347.3
Cost of sales (978.0) - (978.0) (770.2) - (770.2) (1,825.3) - (1,825.3)
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Gross profit 284.7 - 284.7 254.1 - 254.1 522.0 - 522.0
Distribution
costs (4.9) - (4.9) (5.1) - (5.1) (13.7) - (13.7)
Administrative
expenses 3 (91.0) (47.9) (138.9) (84.1) (43.5) (127.6) (170.6) (88.8) (259.4)
Other operating
income 2.1 - 2.1 1.3 - 1.3 1.3 - 1.3
Share of profit
of associates and
joint ventures 1.6 - 1.6 1.7 - 1.7 4.0 - 4.0
Other operating
expenses 3 (0.7) (11.4) (12.1) (0.8) - (0.8) (2.8) (14.9) (17.7)
Restructuring
costs 3 - (1.4) (1.4) - (7.7) (7.7) - (8.9) (8.9)
Operating
profit/(loss) 2, 3 191.8 (60.7) 131.1 167.1 (51.2) 115.9 340.2 (112.6) 227.6
Impairment
of assets - - - - (12.8) (12.8) - (14.1) (14.1)
Investment
income 1.2 - 1.2 0.3 - 0.3 0.7 - 0.7
Finance costs (74.8) - (74.8) (27.2) - (27.2) (67.0) - (67.0)
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) before
tax 118.2 (60.7) 57.5 140.2 (64.0) 76.2 273.9 (126.7) 147.2
Tax
(expense)/credit 3, 4 (25.4) 14.7 (10.7) (29.5) 14.7 (14.8) (57.6) 29.1 (28.5)
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss)
from continuing
operations 92.8 (46.0) 46.8 110.7 (49.3) 61.4 216.3 (97.6) 118.7
Discontinued operations
Profit/(loss)
from ERO
discontinued
operations,
net of tax 3, 16 17.1 (32.5) (15.4) 10.3 (5.0) 5.3 24.2 (5.0) 19.2
------------------ ------ -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) for
the period 109.9 (78.5) 31.4 121.0 (54.3) 66.7 240.5 (102.6) 137.9
-------------------------- -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Attributable
to:
Equity holders
of BBA Aviation
plc 109.7 (78.5) 31.2 121.0 (54.3) 66.7 240.2 (102.6) 137.6
Non-controlling
interests 0.2 - 0.2 - - - 0.3 - 0.3
-------------------------- -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) for
the period 109.9 (78.5) 31.4 121.0 (54.3) 66.7 240.5 (102.6) 137.9
-------------------------- -------------- -------------------- -------- -------------- ------------ ----------- -------------- ------------ -----------
Six months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
Earnings/(loss) Note Adjusted(1) Unadjusted Adjusted(1) Unadjusted Adjusted(1) Unadjusted
per share
------------------ ------ -------------- ------ ---------------------- -------------- ------------ ----------- -------------- ------------ -----------
Total Group
Basic 6 10.7c 3.0c 11.7c 6.5c 23.3c 13.4c
Diluted 6 10.5c 3.0c 11.6c 6.4c 23.1c 13.2c
Continuing operations
Basic 6 9.0c 4.5c 10.7c 6.0c 21.0c 11.5c
Diluted 6 8.9c 4.5c 10.6c 5.9c 20.8c 11.4c
Discontinued
operations
Basic 16 1.7c (1.5c) 1.0c 0.5c 2.3c 1.9c
Diluted 16 1.6c (1.5c) 1.0c 0.5c 2.3c 1.8c
------------------ ------ -------------- ------------------------------ -------------- ------------ ----------- -------------- ------------ -----------
(1) Underlying results and adjusted earnings per share are
stated before exceptional and other items and include the impact of
IFRS 16 which was adopted on 1 January 2019. Exceptional and other
items are disclosed in note 3.
Alternative performance measures are reconciled to IFRS measures
and are explained in note 19, the Alternative Performance Measures
section. For comparability and where applicable, this also includes
a reconciliation to a pre IFRS 16 basis.
Unaudited condensed consolidated statement of comprehensive
income
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Note $m $m $m
--------------------------------------- ----- ----------- --------------- -----------------
Profit for the period 31.4 66.7 137.9
Other comprehensive income/(loss)
Items that will not be reclassified
subsequently to profit or loss
Actuarial (losses)/gains on defined
benefit pension schemes (6.2) 25.2 51.2
Tax charge relating to components
of other comprehensive income/(loss)
that will not be reclassified
subsequently to profit or loss 4 0.9 (5.4) (9.0)
--------------------------------------- ----- ----------- --------------- -----------------
(5.3) 19.8 42.2
--------------------------------------- ----- ----------- --------------- -----------------
Items that may be reclassified subsequently
to profit or loss
Exchange difference on translation
of foreign operations (12.4) (24.4) (27.5)
Fair value movements in assets
classified as financial instruments
through other comprehensive income - - (1.8)
Fair value movements in foreign
exchange cash flow hedges (0.5) (3.8) (2.9)
Transfer to profit or loss from
other comprehensive income on
foreign exchange cash flow hedges 0.3 0.9 (1.0)
Fair value movement in interest
rate cash flow hedges 5.2 (4.1) 5.9
Transfer to profit or loss from
other comprehensive income on
interest rate cash flow hedges (1.7) 4.9 (6.3)
Tax relating to components of
other comprehensive income that
may be subsequently reclassified
to profit or loss 4 0.6 0.4 1.7
--------------------------------------- ----- ----------- --------------- -----------------
(8.5) (26.1) (31.9)
--------------------------------------- ----- ----------- --------------- -----------------
Other comprehensive (loss)/income
for the period (13.8) (6.3) 10.3
--------------------------------------- ----- ----------- --------------- -----------------
Total comprehensive income for
the period 17.6 60.4 148.2
--------------------------------------- ----- ----------- --------------- -----------------
Attributable to:
Equity holders of BBA Aviation
plc 17.4 60.4 147.9
Non-controlling interests 0.2 - 0.3
--------------------------------------- ----- ----------- --------------- -----------------
17.6 60.4 148.2
--------------------------------------- ----- ----------- --------------- -----------------
Unaudited condensed consolidated balance sheet
As at As at As at
30 June 30 June 31 December
2019 2018 2018
Note $m $m $m
------------------------------------ ----- ---------- ---------- -------------
Non-current assets
Goodwill 1,193.1 1,120.6 1,191.1
Other intangible assets 1,293.0 1,263.2 1,329.4
Property, plant and equipment 765.4 779.7 779.9
Right of use assets 7 1,065.1 - -
Interests in associates
and joint ventures 52.2 41.4 53.5
Trade and other receivables 55.3 18.0 18.8
------------------------------------ ----- ---------- ---------- -------------
4,424.1 3,222.9 3,372.7
------------------------------------ ----- ---------- ---------- -------------
Current assets
Inventories 137.8 110.7 120.3
Trade and other receivables 257.0 208.2 260.2
Cash and cash equivalents 8 116.7 147.6 109.3
Tax recoverable 0.9 0.3 1.1
Assets held for sale 16 430.8 369.0 407.6
------------------------------------ ----- ---------- ---------- -------------
943.2 835.8 898.5
------------------------------------ ----- ---------- ---------- -------------
Total assets 2 5,367.3 4,058.7 4,271.2
------------------------------------ ----- ---------- ---------- -------------
Current liabilities
Trade and other payables (406.7) (415.4) (439.2)
Tax liabilities (35.2) (38.5) (39.8)
Lease liabilities 9 (57.9) (0.2) (1.1)
Borrowings 8 - (0.7) (1.5)
Provisions (24.2) (27.9) (23.0)
Liabilities held for sale 16 (188.0) (109.5) (146.8)
------------------------------------ ----- ---------- ---------- -------------
(712.0) (592.2) (651.4)
------------------------------------ ----- ---------- ---------- -------------
Net current assets 231.2 243.6 247.1
------------------------------------ ----- ---------- ---------- -------------
Non-current liabilities
Borrowings 8 (1,486.2) (1,337.7) (1,436.6)
Trade and other payables
due after one year (1.4) (7.8) (7.6)
Pensions and other post-retirement
benefits 15 (32.7) (44.5) (28.2)
Deferred tax liabilities (161.1) (141.8) (162.8)
Lease liabilities 9 (1,073.9) (1.1) (3.2)
Provisions (34.3) (38.4) (37.2)
------------------------------------ ----- ---------- ---------- -------------
(2,789.6) (1,571.3) (1,675.6)
------------------------------------ ----- ---------- ---------- -------------
Total liabilities 2 (3,501.6) (2,163.5) (2,327.0)
------------------------------------ ----- ---------- ---------- -------------
Net assets 2 1,865.7 1,895.2 1,944.2
------------------------------------ ----- ---------- ---------- -------------
Equity
Share capital 17 510.0 509.3 509.3
Share premium account 1,594.5 1,594.5 1,594.5
Other reserve (7.2) (5.4) (7.2)
Treasury reserve (102.5) (95.2) (95.3)
Capital reserve 61.1 53.6 56.2
Hedging and translation
reserves (104.8) (100.4) (105.7)
Retained earnings (87.6) (62.9) (9.9)
------------------------------------ ----- ---------- ---------- -------------
Equity attributable to equity holders
of BBA Aviation plc 1,863.5 1,893.5 1,941.9
Non-controlling interest 2.2 1.7 2.3
------------------------------------ ----- ---------- ---------- -------------
Total equity 1,865.7 1,895.2 1,944.2
------------------------------------ ----- ---------- ---------- -------------
Details of the restatement made to the opening retained earnings
as at 1 January 2019 due to the adjustment arising on the adoption
of IFRS 16 can be found in note 1 and note 20.
Unaudited condensed consolidated cash flow statement
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Note $m $m $m
----------------------------------------- ----- ----------- ----------- -------------
Operating activities
Net cash flow from operating activities 11 273.3 177.1 368.3
Investing activities
Interest received 0.3 0.3 12.7
Interest received on sublease 0.9 - -
assets
Receipt of capital element of 1.3 - -
sublease assets
Dividends received from joint
ventures and associates 2.9 1.7 2.0
Purchase of property, plant and
equipment (34.9) (40.1) (85.3)
Purchase of intangible assets(1) (7.2) (4.2) (7.8)
Proceeds from disposal of property,
plant and equipment 3.6 0.3 4.7
Acquisition of businesses, net
of cash/(debt) acquired 13 (25.5) (21.3) (210.6)
Investment in joint ventures and
associates - - (10.0)
Investment in assets classified
as financial instruments measured
through other comprehensive income
(FVTOCI) - (5.2) (5.0)
----------------------------------------- ----- ----------- ----------- -------------
Net cash (outflow)/inflow from
investing activities (58.6) (68.5) (299.3)
----------------------------------------- ----- ----------- ----------- -------------
Financing activities
Interest paid (38.7) (21.8) (70.9)
Interest element of lease liabilities
paid (37.2) - (0.1)
Dividends paid 5 (103.9) (99.3) (140.7)
Gains/(losses) from realised foreign
exchange contracts 5.5 (2.7) 4.5
Proceeds from issue of ordinary
shares net of issue costs 0.7 0.3 0.3
(Purchase)/sale of own shares
(2) (2.8) (5.4) (5.5)
Increase/(decrease) in loans 23.3 26.8 117.1
Payments of lease liabilities (36.1) - (0.4)
Decrease in overdrafts (1.5) (3.3) (2.3)
----------------------------------------- ----- ----------- ----------- -------------
Net cash outflow from financing
activities (190.7) (105.4) (98.0)
----------------------------------------- ===== =========== =========== =============
Increase/(decrease) in cash and
cash equivalents 24.0 3.2 (29.0)
Cash and cash equivalents at beginning
of the period 111.3 153.5 153.5
Exchange adjustments (9.5) (6.7) (13.2)
----------------------------------------- ----- ----------- ----------- -------------
Cash and cash equivalents at end
of the period 125.8 150.0 111.3
----------------------------------------- ----- ----------- ----------- -------------
Comprised of:
Cash and cash equivalents at
end of the period 116.7 147.6 109.3
Cash included in Assets held for sale
at end of the period (note 16) 9.1 2.4 2.0
(1) Purchase of intangible assets includes $1.0 million (30 June
2018: $1.2 million; 31 December 2018: $1.2 million) paid in
relation to Ontic licences not accounted for as acquisitions under
IFRS 3.
(2) (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.
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
2019 pre IFRS 16 509.3 1,594.5 (9.9) (152.0) 1,941.9 2.3 1,944.2
Adoption of IFRS 16(1) - - 5.3 - 5.3 - 5.3
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Balance at 1 January
2019 after adoption 509.3 1,594.5 (4.6) (152.0) 1,947.2 2.3 1,949.5
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Profit for the period - - 31.2 - 31.2 0.2 31.4
Other comprehensive loss
for the period - - (10.0) (3.8) (13.8) - (13.8)
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Total comprehensive income/(loss)
for the period - - 21.2 (3.8) 17.4 0.2 17.6
Dividends - - (103.9) - (103.9) - (103.9)
Issue of share capital 0.7 - - - 0.7 - 0.7
Movement on treasury
reserve - - - (2.8) (2.8) - (2.8)
Credit to equity for
equity-settled share-based
payments - - - 4.8 4.8 - 4.8
Changes in non-controlling
interest - - - - - (0.3) (0.3)
Tax on share-based payment
transactions - - 0.1 - 0.1 - 0.1
Transfer to retained
earnings - - (0.4) 0.4 - - -
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Balance at 30 June 2019 510.0 1,594.5 (87.6) (153.4) 1,863.5 2.2 1,865.7
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
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/(loss)
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
2018 509.0 1,594.5 (50.1) (121.7) 1,931.7 1.5 1,933.2
Profit for the period - - 137.6 - 137.6 0.3 137.9
Other comprehensive income/(loss)
for the period - - 43.9 (33.6) 10.3 - 10.3
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Total comprehensive income
(loss) for the period - - 181.5 (33.6) 147.9 0.3 148.2
Dividends - - (140.7) - (140.7) (0.3) (141.0)
Issue of share capital 0.3 - - - 0.3 - 0.3
Movement on treasury
reserve - - - (5.5) (5.5) - (5.5)
Credit to equity for
equity-settled share-based
payments - - - 8.2 8.2 - 8.2
Tax on share-based payment
transactions - - 0.5 - 0.5 - 0.5
Change in non-controlling
interests - - (0.5) - (0.5) 0.8 0.3
Transfer to retained
earnings - - (0.6) 0.6 - - -
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Balance at 31 December
2018 509.3 1,594.5 (9.9) (152.0) 1,941.9 2.3 1,944.2
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
(1) Further information on the restatement of opening retained
earnings as at 1 January 2019 due to the impact of adopting IFRS 16
is outlined in note 1 and note 20.
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 2019
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 2018.
The Group's annual financial statements for the year ended 31
December 2018 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 is a new standard effective in the period which
has had a material impact on the condensed consolidated interim
financial statements. The Group adopted IFRS 16 from 1 January 2019
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 10 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.
Alternative Performance Measures are reconciled to IFRS measures
and explained in Note 19, the Alternative Performance Measures
section.
For comparability with prior periods, the financial information
disclosed in Note 20 is presented excluding the impact of adoption
of IFRS 16. Note 19 presents APMs on a pre and post IFRS 16 basis
with a reconciliation to the equivalent statutory measure.
New financial reporting requirements
IFRS 16 Leases
The Group adopted IFRS 16 leases from 1 January 2019. IFRS 16
replaced IAS 17 'Leases' and IFRIC 4 'Determining whether an
arrangement contains a lease'.
IFRS 16 requires lessees to account for most contracts under an
on-balance sheet model, with the distinction between operating and
finance leases removed. 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.
The Group has applied the modified-retrospective transition
method approach and consequently the comparatives have not been
restated. A one off transitional impact on reserves has been
recorded as a result of recognising finance lease subcontracts
under the standard. The impact on reserves is set out in the
unaudited condensed consolidated statement of changes in
equity.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 January 2019 was 6.7%.
Practical expedients adopted on transition
On initial adoption, the Group has elected to use the following
practical expedients permitted under the standard:
-- The application of a single discount rate to a portfolio of leases with reasonably similar characteristics
-- IFRS 16 has been applied to contracts that were previously
classified as leases under IAS 17 and IFRIC 4
-- Right of use assets have been adjusted by the carrying amount
of onerous lease provisions at 31 December 2018 instead of
performing impairment reviews under IAS 36
Practical expedients also exist to not recognise lease
liabilities for short term or low value leases, however on
transition the Group has elected not to adopt these expedients.
Significant judgements applied in the adoption of IFRS 16
included determining an incremental borrowing rate where the rate
implicit in a lease could not be readily determined.
Impact on lessee accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off-balance
sheet.
Applying IFRS 16, the Group now recognises right of use assets
and lease liabilities in the consolidated balance sheet, initially
measured at the present value of the future lease payments.
Lease incentives are recognised as part of the measurement of
the right of use asset whereas under IAS 17 they resulted in the
recognition of a lease incentive liability, amortised as a
reduction of rental expenses on a straight-line basis.
Under IFRS 16, right of use assets will be tested for impairment
in accordance with IAS 36 Impairment of Assets. This replaces the
previous requirement to recognise a provision for onerous lease
contracts.
Under IFRS 16 the Group recognises depreciation of right of use
assets and interest on lease liabilities in the consolidated income
statement, whereas under IAS 17 operating leases previously gave
rise to a straight-line expense in the income statement.
Under IFRS 16 the Group separates the total amount of cash paid
for leases that are on balance sheet into the principal portion
(presented within financing activities) and interest in the
consolidated cash flow statement. Under IAS 17 operating lease
payments were presented as operating cash outflows. Under both IFRS
16 and IAS 17 there is no difference to net cashflow.
Former finance leases
The main differences between IFRS 16 and IAS 17 with respect to
assets formerly held under a finance lease is the measurement of
the residual value guarantees provided by the lessee to the lessor.
IFRS 16 requires that the Group recognises as part of its lease
liability only the amount expected to be payable under a residual
value guarantee, rather than the maximum amount guaranteed as
required by IAS 17. This change does not have an effect on the
Groups consolidated financial statements. Former finance leases are
presented together with new leases taken on balance sheet as part
of the transition to IFRS 16.
The impact of adopting IFRS 16 is summarised in Note 20 which
details the Group's condensed consolidation income statement,
condensed consolidated balance sheet and condensed consolidated
interim statement of cash flows.
Finance leases and operating leases for the comparative periods
ended 30 June 2018 and the year ended 31 December 2018 were
recognised and measured in accordance with IAS 17 Leases. The
accounting policies set out below are those applied to the current
period, in accordance with IFRS 16.
Accounting policy for leases
When a contractual arrangement contains a lease, the Group
recognises a lease liability and a corresponding right of use asset
at the commencement of the lease.
At the commencement date the lease liability is measured at the
present value of the future lease payments, discounted using the
Group's incremental borrowing rate where the interest rate in the
lease is not readily determined.
Lease payments included in the measurement of the lease
liability include:
-- Fixed lease payments (including in substance fixed payments), less any lease incentives;
-- Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- The amount expected to be payable by the lessee under residual value guarantees;
-- The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
-- Payment of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease
In general, where extension options exist, the Group recognises
these as part of the lease liability as invariably these are
exercised.
The lease liability is presented as a separate line in the
consolidated statement of financial position
Subsequently, the lease liability is adjusted by increasing the
carrying amount to reflect interest on the lease liability,
reducing the carrying amount to reflect the lease payments made and
remeasuring the carrying amount to reflect any reassessment or
lease modifications.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right of use asset)
whenever:
-- The lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease
payments using the discount rate appropriate at that point in
time
-- The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which case the lease liability is remeasured by discounting the
revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in the floating interest
rate, in which case a revised discount rate is used)
-- A lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments
using the revised discount rate.
The right of use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs.
In addition, on transition, the right of use asset is adjusted
for:
-- The value of any lease incentives on the balance sheet at 31 December 2018
-- The value of any onerous lease provisions on the balance at 31 December 2018
The right of use asset is subsequently measured at cost less
accumulated depreciation and impairment losses. Whenever the Group
incurs an obligation for costs to dismantle and remove a leased
asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms of the
lease, a provision is recognised and measured under IAS 37 and
included in the related right of use asset.
Right of use assets are depreciated over the shorter period of
the lease term and the useful life of the underlying asset. The
depreciation starts at the commencement date of the lease. The
Group does not have any leases that include purchase or transfer
options of the underlying asset.
The right of use assets are presented as a separate line item on
the condensed consolidated statement of financial position, however
the categories used in the Note 7 to the consolidated financial
statements are the same as those used for owned tangible assets -
namely Land & buildings and Fixtures and Equipment.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease liability and the right of
use asset. The related payments are recognised as an expense in the
period in which the event or condition that triggers those payments
occur and are generally included within cost of sales in the
consolidated income statement.
Subleasing
The Group has several contracts in place to rent space or assets
to third parties, predominately across its FBO portfolio.
The Group assesses these contracts to determine firstly whether
they constitute leases under IFRS 16, and secondly, where they do,
to assess whether these should be accounted for as finance
leases.
Where such contracts constitute leases, the assessment considers
both the term of the master lease against any subcontract; and the
present value of the master lease liability against the present
value of the subcontract rental income stream.
Where finance subleases exist the associated right of use asset
is derecognised and instead a receivable recognised from the lessee
(also referred to as "net investment in the sublease"). The lease
liability pertaining to the master lease remains unaffected.
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.
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 Group Chief Executive to allocate
resources to the segments and to assess their performance.
The Group provides information to the Chief Executive on the
basis of components that are substantially similar within the
segments in the following aspects:
-- the nature of the long-term financial performance;
-- the nature of the products and services;
-- the nature of the production processes;
-- the type of class of customer for the products and services;
and
-- the nature of the regulatory environment.
Based on the above, the operating segments of the Group
identified in accordance with IFRS 8 are Signature (formerly known
as Flight Support), which comprises Signature Flight Support and
EPIC Fuels, and Ontic (formerly known as Aftermarket Services). The
Ontic segment results show the effect of the ERO discontinued
operations being removed.
The businesses within the Signature segment provide refuelling,
ground handling, line maintenance and other services to the
Business & General Aviation (B&GA) and commercial aviation
markets. The Ontic segment maintains and supports aerospace
components, sub-systems and systems.
Sales between segments are immaterial.
Alternative Performance Measures are reconciled to IFRS measures
and explained in Note 19, the Alternative Performance Measures
section.
As at, and for the six months ended Unallocated
30 June 2019 Signature(1) Ontic(5) Total Corporate(2) Total
Business segments $m $m $m $m $m
----------------------------------------- ------------- --------- -------- -------------- --------
External revenue
External revenue from continuing
and discontinued operations 1,140.4 387.7 1,528.1 - 1,528.1
Less external revenue from ERO
discontinued operations, note 16 - (265.4) (265.4) - (265.4)
----------------------------------------- ------------- --------- -------- -------------- --------
External revenue from continuing
operations 1,140.4 122.3 1,262.7 - 1,262.7
Underlying operating profit
Underlying operating profit/(loss)
from continuing and discontinued
operations 180.3 51.2 231.5 (14.8) 216.7
Less underlying operating profit
from ERO discontinued operations - (24.9) (24.9) - (24.9)
Adjusted for intergroup charges
for ERO discontinued operations(3) - 5.4 5.4 (5.4) -
----------------------------------------- ------------- --------- -------- -------------- --------
Underlying operating profit/(loss)
from continuing operations 180.3 31.7 212.0 (20.2) 191.8
Underlying operating margin from
continuing operations 15.8% 25.9% 16.8% - 15.2%
Exceptional and other items
Exceptional and other items from
continuing and discontinued operations (37.6) (10.7) (48.3) (12.4) (60.7)
Less exceptional and other items - - - - -
from ERO discontinued operations
----------------------------------------- ------------- --------- -------- -------------- --------
Exceptional and other items from
continuing operations (37.6) (10.7) (48.3) (12.4) (60.7)
Operating profit/(loss) from continuing
operations 142.7 21.0 163.7 (32.6) 131.1
Impairment of fixed assets -
Net finance costs (73.6)
----------------------------------------- ------------- --------- -------- -------------- --------
Profit before tax from continuing
operations 57.5
----------------------------------------- ------------- --------- -------- -------------- --------
Other information
Capital additions(4) 32.9 8.4 41.3 0.8 42.1
Less capital additions from ERO
discontinued operations - (6.3) (6.3) - (6.3)
----------------------------------------- ------------- --------- -------- -------------- --------
Capital additions from continuing
operations 32.9 2.1 35.0 0.8 35.8
----------------------------------------- ------------- --------- -------- -------------- --------
Depreciation and amortisation 116.2 15.2 131.4 0.5 131.9
----------------------------------------- ------------- --------- -------- -------------- --------
Depreciation and amortisation from
continuing operations 116.2 15.2 131.4 0.5 131.9
----------------------------------------- ------------- --------- -------- -------------- --------
As at, and for the six months ended Unallocated
30 June 2019 Signature(1) Ontic(5) Total Corporate(2) Total
Business segments $m $m $m $m $m
------------------------------------------ ------------- --------- ---------- -------------- ----------
Balance sheet
Total assets 4,225.9 1,048.7 5,274.6 92.7 5,367.3
Total liabilities (1,441.6) (267.0) (1,708.6) (1,793.0) (3,501.6)
------------------------------------------ ------------- --------- ---------- -------------- ----------
Net assets/(liabilities) 2,784.3 781.7 3,566.0 (1,700.3) 1,865.7
Less net (assets)/liabilities from
ERO discontinued operations - (242.8) (242.8) - (242.8)
------------------------------------------ ------------- --------- ---------- -------------- ----------
Net assets/(liabilities) from continuing
operations 2,784.3 538.9 3,323.2 (1,700.3) 1,622.9
------------------------------------------ ------------- --------- ---------- -------------- ----------
As at, and for the six months ended Unallocated
30 June 2018 Signature(1) Ontic(5) Total Corporate(2) Total
Business segments $m $m $m $m $m
------------------------------------------ ------------- --------- -------- -------------- ----------
30 June 2018 restated
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 - (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 - (13.4) (13.4) - (13.4)
Adjusted for intergroup charges
for ERO discontinued operations(3) - 5.7 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 - 1.1 1.1 - 1.1
------------------------------------------ ------------- --------- -------- -------------- ----------
Exceptional and other items from
continuing operations (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
Less capital additions from ERO
discontinued operations - (13.0) (13.0) - (13.0)
------------------------------------------ ------------- --------- -------- -------------- ----------
Capital additions from continuing
operations 29.7 1.6 31.3 - 31.3
------------------------------------------ ------------- --------- -------- -------------- ----------
Depreciation and amortisation 70.1 14.7 84.8 0.2 85.0
Less depreciation and amortisation
from ERO discontinued operations - (3.7) (3.7) - (3.7)
------------------------------------------ ------------- --------- -------- -------------- ----------
Depreciation and amortisation from
continuing operations 70.1 11.0 81.1 0.2 81.3
------------------------------------------ ------------- --------- -------- -------------- ----------
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
Less net (assets)/liabilities from
ERO discontinued operations - (259.5) (259.5) - (259.5)
------------------------------------------ ------------- --------- -------- -------------- ----------
Net assets/(liabilities) from continuing
operations 2,816.3 399.2 3,215.5 (1,579.8) 1,635.7
------------------------------------------ ------------- --------- -------- -------------- ----------
2.
As at, and for the year ended 31 Unallocated
December 2018 Signature(1) Ontic(5) Total Corporate(2) Total
Business segments $m $m $m $m $m
------------------------------------------ ------------- --------- -------- -------------- ----------
External revenue
External revenue from continuing
and discontinued operations 2,127.6 753.3 2,880.9 - 2,880.9
Less external revenue from ERO
discontinued operations - (533.6) (533.6) - (533.6)
------------------------------------------ ------------- --------- -------- -------------- ----------
External revenue from continuing
operations 2,127.6 219.7 2,347.3 - 2,347.3
------------------------------------------ ------------- --------- -------- -------------- ----------
Underlying operating profit
Underlying operating profit/(loss)
from continuing and discontinued
operations 320.6 82.9 403.5 (28.3) 375.2
Less underlying operating profit
from ERO discontinued operations - (35.0) (35.0) - (35.0)
Adjusted for intergroup charges
for ERO discontinued operations(3) - 10.7 10.7 (10.7) -
------------------------------------------ ------------- --------- -------- -------------- ----------
Underlying operating profit/(loss)
from continuing operations 320.6 58.6 379.2 (39.0) 340.2
------------------------------------------ ------------- --------- -------- -------------- ----------
Underlying operating margin from
continuing operations 15.1% 26.7% 16.2% - 14.5%
Exceptional and other items
Exceptional and other items from
continuing and discontinued operations (76.0) (21.7) (97.7) (16.0) (113.7)
Less exceptional and other items
from ERO discontinued operations - 1.1 1.1 - 1.1
------------------------------------------ ------------- --------- -------- -------------- ----------
Exceptional and other items from
continuing operations (76.0) (20.6) (96.6) (16.0) (112.6)
------------------------------------------ ------------- --------- -------- -------------- ----------
Operating profit/(loss) from continuing
operations 244.6 38.0 282.6 (55.0) 227.6
Impairment of fixed assets (14.1)
Net finance costs (66.3)
------------------------------------------ ------------- --------- -------- -------------- ----------
Profit before tax from continuing
operations 147.2
------------------------------------------ ------------- --------- -------- -------------- ----------
Other information
Capital additions(4) 66.1 22.5 88.6 4.5 93.1
Less capital additions from ERO
discontinued operations - (18.2) (18.2) - (18.2)
------------------------------------------ ------------- --------- -------- -------------- ----------
Capital additions from continuing
operations 66.1 4.3 70.4 4.5 74.9
------------------------------------------ ------------- --------- -------- -------------- ----------
Depreciation and amortisation 143.0 26.6 169.6 0.4 170.0
Less depreciation and amortisation
from ERO discontinued operations - (3.7) (3.7) - (3.7)
------------------------------------------ ------------- --------- -------- -------------- ----------
Depreciation and amortisation from
continuing operations 143.0 22.9 165.9 0.4 166.3
------------------------------------------ ------------- --------- -------- -------------- ----------
Balance sheet
Total assets 3,198.8 984.2 4,183.0 88.2 4,271.2
Total liabilities (354.5) (221.8) (576.3) (1,750.7) (2,327.0)
------------------------------------------ ------------- --------- -------- -------------- ----------
Net assets/(liabilities) 2,844.3 762.4 3,606.7 (1,662.5) 1,944.2
Less net (assets)/liabilities from
ERO discontinued operations - (260.8) (260.8) - (260.8)
------------------------------------------ ------------- --------- -------- -------------- ----------
Net assets/(liabilities) from continuing
operations 2,844.3 501.6 3,345.9 (1,662.5) 1,683.4
------------------------------------------ ------------- --------- -------- -------------- ----------
(1) Operating profit/(loss) from continuing operations includes
$1.6 million (30 June 2018: $1.7 million; 31 December 2018: $4.0
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 which has been classified
as discontinued operations.
(4) Capital additions represent cash expenditures in the year.
Capital additions include additions to property, plant and
equipment, and intangible assets including Ontic licences not
accounted for as acquisitions under IFRS 3.
(5) The 2018 Ontic results include the former ERO (Middle East)
business which is not part of the ERO discontinued operations. The
business did not trade in 2019. (30 June 2018: revenue of $2.6
million, operating loss of $0.6 million and statutory loss of $6.6
million; 31 December 2018: revenue of $3.7 million, operating loss
of $0.7 million and statutory loss of $5.5 million).
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 2019
United Kingdom 46.9 143.8 2.4 334.3
Mainland Europe 104.3 27.6 0.7 89.5
North America 1,314.0 1,346.9 39.0 3,971.4
Rest of world 62.9 9.8 0.0 2.2
---------------------------------- ---------------- ----------- -------------- ------------
Total from continuing and
discontinued operations 1,528.1 1,528.1 42.1 4,397.4
Less discontinued ERO operations (265.4) (265.4) (6.3) -
---------------------------------- ---------------- ----------- -------------- ------------
Total from continuing operations 1,262.7 1,262.7 35.8 4,397.4
---------------------------------- ---------------- ----------- -------------- ------------
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 ERO discontinued operations (257.6) (257.6) (13.0) -
---------------------------------- ---------------- ----------- -------------- ------------
Total from continuing operations 1,024.3 1,024.3 31.3 3,210.2
---------------------------------- ---------------- ----------- -------------- ------------
Restated as at, and for the year ended
31 December 2018
United Kingdom 62.7 288.6 3.8 269.7
Mainland Europe 237.8 64.7 0.5 60.8
North America 2,465.4 2,500.8 88.4 3,027.9
Rest of world 115.0 26.8 0.4 1.8
---------------------------------- ---------------- ----------- -------------- ------------
Total from continuing and
discontinued operations 2,880.9 2,880.9 93.1 3,360.2
Less ERO discontinued operations (533.6) (533.6) (18.2) -
---------------------------------- ---------------- ----------- -------------- ------------
Total from continuing operations 2,347.3 2,347.3 74.9 3,360.2
---------------------------------- ---------------- ----------- -------------- ------------
(1) Capital additions represent cash expenditures in the year.
Capital additions include additions to property, plant and
equipment, and intangible assets including Ontic licenses not
accounted for as acquisitions under IFRS 3.
(2) The disclosure of non-current assets by geographical segment
excludes deferred tax $nil (30 June 2018: $nil; 31 December 2018:
$nil) and financial instruments balances of $26.7 million (30 June
2018: $12.7 million; 31 December 2018: $12.5 million), 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 items are items which
are material or non-recurring in nature, and include costs relating
to acquisitions which are material to the associated business
segment, costs related to strategic disposals (including those
previously completed) and significant 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 includes amortisation of acquired intangibles
accounted for under IFRS 3. The directors consider that this gives
a useful indication of underlying performance and better visibility
of Key Performance Indicators. 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.
Alternative Performance Measures are reconciled to IFRS measures
and explained in Note 19, Alternative Performance Measures
section.
Exceptional and other items on discontinued operations are
presented in note 16. Exceptional and other items on continuing
operations are as follows:
Six months Six months
ended ended
30 30 Year ended
Other June June 31 December
Administrative operating Restructuring 2019 2018 2018
expenses expenses costs Total Total Total
$m $m $m $m $m $m
------------------------------- --------------- ----------- -------------- ----------- ----------- -------------
Restructuring expenses
ERO Middle East impairment
loss - - - - 6.1 4.9
Central costs rationalisation - - 1.4 1.4 1.6 4.0
------------------------------- --------------- ----------- -------------- ----------- ----------- -------------
Other
Pension GMP equalisation - - - - - 11.1
Amounts related to
previously disposed
businesses - 10.4 - 10.4 - 2.3
Other exceptional
items - 1.0 - 1.0 - 0.1
Acquisition related
Amortisation of intangibles
assets arising on
acquisition and valued
in accordance with
IFRS 3 47.9 - - 47.9 43.5 88.8
Transaction costs(1) - - - - - 1.4
------------------------------- --------------- ----------- -------------- ----------- ----------- -------------
Operating loss on
continuing operations 47.9 11.4 1.4 60.7 51.2 112.6
Impairment loss - 12.8 14.1
------------------------------- --------------- ----------- -------------- ----------- ----------- -------------
Loss before tax on continuing
operations 60.7 64.0 126.7
------------------------------------------------ ----------- -------------- ----------- ----------- -------------
Tax impact of exceptional
and other items (14.7) (14.7) (29.1)
------------------------------------------------ ----------- -------------- ----------- ----------- -------------
Loss for the period on continuing
operations 46.0 49.3 97.6
------------------------------------------------ ----------- -------------- ----------- ----------- -------------
Loss from ERO discontinued operation, net
of tax, see note 16 32.5 5.0 5.0
----------------------------------------------------------------------------- ----------- ----------- -------------
Total exceptional and other items 78.5 54.3 102.6
----------------------------------------------------------------------------- ----------- ----------- -------------
1 All transaction costs presented as exceptional and other items
in the prior period related to Ontic's acquisition of
Firstmark.
4. Income tax
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
Recognised in the Income statement $m $m $m
----------------------------------------- ----------- ----------- -------------
Current tax expense 18.6 17.1 41.5
Adjustments in respect of prior periods
- current tax - - (4.6)
----------------------------------------- ----------- ----------- -------------
Current tax 18.6 17.1 36.9
----------------------------------------- ----------- ----------- -------------
Deferred tax (credit)/expense(1) (3.0) (2.3) 2.8
Adjustments in respect of prior periods
- deferred tax 0.3 - (3.3)
----------------------------------------- ----------- ----------- -------------
Deferred tax (2.7) (2.3) (0.5)
----------------------------------------- ----------- ----------- -------------
Income tax expense for the period from
continuing and discontinued operations 15.9 16.3 36.4
Less: ERO discontinued operations (5.2) (1.5) (7.9)
----------------------------------------- ----------- ----------- -------------
Income tax expense for the period from
continuing operations 10.7 14.8 28.5
----------------------------------------- ----------- ----------- -------------
(1) The deferred tax credit includes $1.8 million relating to
IFRS 16 lease liabilities.
Corporation tax on continuing operations for the interim period
is charged at an effective rate of 21.5% (30 June 2018: 21.0%; 31
December 2018: 21.0%) on underlying profit before tax, representing
the best estimate of the weighted average annual corporation tax
expected for the full financial year. The total income tax expense
for the six months ended 30 June 2019 includes a tax credit of
$14.7 million (30 June 2018: $14.7 million; 31 December 2018: $29.1
million) relating to exceptional and other items (see note 3).
Tax credited to other comprehensive income and equity is as
follows:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
Recognised in other comprehensive income $m $m $m
---------------------------------------------- ----------- ----------- -------------
Tax on items that will not be reclassified subsequently
to profit or loss
Current tax other - - 0.7
Deferred tax credit/(charge) on actuarial
(losses)/gains 0.9 (5.4) (9.7)
---------------------------------------------- ----------- ----------- -------------
0.9 (5.4) (9.0)
---------------------------------------------- ----------- ----------- -------------
Tax on items that may be reclassified subsequently
to profit or loss
Current tax credit on foreign exchange
movements - - 0.8
Deferred tax credit on derivative financial
instruments 0.6 0.4 0.9
---------------------------------------------- ----------- ----------- -------------
0.6 0.4 1.7
---------------------------------------------- ----------- ----------- -------------
Total tax charge within other comprehensive
income 1.5 (5.0) (7.3)
---------------------------------------------- ----------- ----------- -------------
Recognised in equity
---------------------------------------------- ----------- ----------- -------------
Current tax credit on share-based payments
movement 0.1 0.1 0.8
Deferred tax charge on share-based payments
movement - - (0.3)
---------------------------------------------- ----------- ----------- -------------
Total tax credit within equity 0.1 0.1 0.5
---------------------------------------------- ----------- ----------- -------------
Total tax charge within other comprehensive
income and equity 1.6 (4.9) (6.8)
---------------------------------------------- ----------- ----------- -------------
EU State Aid
The Group continues to monitor developments in relation to the
EU State Aid investigation including the European Commission's
decision in April that concluded the UK's Controlled Foreign
Company regime partially represents State Aid and the UK
authorities' subsequent appeal of this decision. In common with
many other UK based multinational Groups whose arrangements were in
line with UK CFC legislation, the Group may be affected by this
decision. We have calculated our maximum potential liability to be
approximately $113.0 million. We do not consider that any provision
is required based on our current assessment of the issue.
5. Dividends
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018
$m $m $m
------------------------------------------------ ----------- ----------- -------------
Paid during the period:
Final dividend for the year ended 31 December
2018: 10.07 cents per share (30 June 2018:
Final dividend for the year ended 31 December
2017 of 9.59 cents per share; 31 December
2018: Final dividend for the year ended
31 December 2017 of 9.59 cents per share
and 2018 interim dividend of 4.00 cents
per share) 103.9 99.3 140.7
------------------------------------------------ ----------- ----------- -------------
The 2019 interim dividend of 4.20 cents per share (2018: 4.00
cents per share; total dividend $41.4 million) was approved by the
Board of Directors on 2 August 2019 and will be paid on 1 November
2019 to ordinary shareholders registered on 13 September 2019.
Shareholders will receive their dividends in sterling unless they
complete and submit to the Company's registrars by 5.30pm on 7
October 2019 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 8 October 2019 and this exchange rate
will be announced on 9 October 2019.
6. Earnings per share
Alternative Performance Measures are reconciled to IFRS measures
and explained in Note 19, the Alternative Performance Measures
section. The calculation of the basic and diluted earnings per
share is based on the following data:
Continuing Total
--------------------------------------- ---------------------------------------
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
2019 2018 2018 2019 2018 2018
$m $m $m $m $m $m
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Basic and diluted
Earnings:
Profit for the period 46.8 61.4 118.7 31.4 66.7 137.9
Non-controlling interests (0.2) - (0.3) (0.2) - (0.3)
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Basic earnings attributable
to ordinary shareholders 46.6 61.4 118.4 31.2 66.7 137.6
Exceptional and other
items (net of tax) 46.0 49.3 97.6 78.5 54.3 102.6
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Adjusted earnings for
adjusted earnings per
share 92.6 110.7 216.0 109.7 121.0 240.2
Impact of adopting
IFRS 16 (note 20) 10.2 - - 7.1 - -
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Adjusted earnings for
adjusted pre IFRS 16
earnings per share 102.8 110.7 216.0 116.8 121.0 240.2
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Underlying deferred
tax(1) 12.1 11.8 20.7 12.7 12.5 26.1
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Adjusted earnings for
cash earnings per share(1) 114.9 122.5 236.7 129.5 133.5 266.3
----------------------------- ----------- ----------- ------------- ----------- ----------- -------------
Number of shares
Weighted average number of 29 (16) /(21) p
ordinary shares:
For basic earnings per
share 1,031.2 1,029.9 1,030.1 1,031.2 1,029.9 1,030.1
----------------------------------- --------- -------- -------- -------- -------- --------
Dilutive potential ordinary
shares from share options 8.2 10.4 8.9 8.2 10.4 8.9
----------------------------------- --------- -------- -------- -------- -------- --------
For diluted earnings
per share 1,039.4 1,040.3 1,039.0 1,039.4 1,040.3 1,039.0
----------------------------------- --------- -------- -------- -------- -------- --------
For diluted losses per
share 1,031.2 1,029.9 1,030.1 1,031.2 1,029.9 1,030.1
----------------------------------- --------- -------- -------- -------- -------- --------
Basic:
Adjusted pre IFRS 16 10.0c 10.7c 21.0c 11.3c 11.7c 23.3c
Adjusted 9.0c 10.7c
Unadjusted pre IFRS
16 5.5c 6.0c 11.5c 3.7c 6.5c 13.4c
Unadjusted 4.5c 3.0c
Cash pre IFRS 16(1) 11.1c 11.9c 23.0c 12.6c 13.0c 25.9c
Diluted:
Adjusted pre IFRS 16 9.9c 10.6c 20.8c 11.2c 11.6c 23.1c
Adjusted 8.9c 10.5c
Unadjusted pre IFRS
16 5.5c 5.9c 11.4c 3.7c 6.4c 13.2c
Unadjusted 4.5c 3.0c
Cash pre IFRS 16(1) 11.0c 11.8c 22.8c 12.5c 12.8c 25.6c
(1) As disclosed in the 2018 Annual Report, the Remuneration
Committee decided to simplify the earnings per share measure used
for the LTIP and use underlying earnings per share. For more
information refer to the "Implementation of policy in 2019" on page
82 of the 2018 Annual Report.
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.
Cash earnings per share is presented pre IFRS 16, calculated on
earnings before exceptional and other items (note 3) and using
current tax charge, not the total tax charge for the period,
thereby excluding the deferred tax charge.
Adjusted earnings per share is presented calculated on earnings
before exceptional and other items (note 3), and adjusted pre-IFRS
16, this is consistent with the performance measures relation to
the LTIP awards. Both adjustments have been made because the
directors consider that this gives a useful indication of
underlying performance.
Earnings per share on discontinued operations is presented in
note 16.
7. Right of use assets
Information presented in this note is in respect of the
financial period ended 30 June 2019 in accordance with IFRS 16.
BBA Aviation holds property and equipment under leasing
arrangement that are recognised as right of use assets and lease
liabilities, with remaining lease terms ranging up to 89 years in
duration. The majority of the lease liability relates to long term
leases on BBA's FBO network.
Information in respect of maturity analysis of lease
liabilities, are set out in note 9 of the interim financial report.
The amounts recognised for right of use assets, including the
carrying amount, additions and depreciation for continuing
operations is set out below:
Land and Fixtures Total
buildings and equipment
$m $m $m
Cost or valuation
Recognised on adoption of IFRS 16 1,048.6 39.6 1,088.2
Exchange adjustments 0.2 - 0.2
Additions and renewals 17.4 3.5 20.9
------------------------------------ ----------- --------------- --------
At 30 June 2019 1,066.2 43.1 1,109.3
------------------------------------ ----------- --------------- --------
Depreciation
Depreciation charge for the period 37.5 6.7 44.2
------------------------------------ ----------- --------------- --------
At 30 June 2019 37.5 6.7 44.2
------------------------------------ ----------- --------------- --------
Carrying amount
At 30 June 2019 1,028.7 36.4 1,065.1
------------------------------------ ----------- --------------- --------
Recognised on adoption of IFRS 16 1,048.6 39.6 1,088.2
------------------------------------ ----------- --------------- --------
The carrying value of right of use assets classified separately
as assets held for sale is $71.2 million (see note 20), the right
of use asset recognised on adoption of IFRS 16 and classified
separately as held for sale was $61.8 million (see note 20).
On transition the right of use asset has been adjusted for the
impact of lease incentives and onerous lease provisions recognised
on the balance sheet as at 31 December 2018 ($24.9 million and $3.7
million respectively). The right of use asset has also been reduced
by $20.0m for the impact of finance sublease receivables under IFRS
16, accordingly amounts receivable from subleases have been
recognised within Trade and other receivables.
8. Cash and cash equivalents and borrowings
The carrying value of cash and cash equivalents for continuing
operations of $116.7 million (30 June 2018: $147.6 million; 31
December 2018: $109.3 million) approximates to its fair value.
As at As at As at
30 June 30 June 31 December
2019 2018 2018
Borrowings $m $m $m
------------------------------------------------- -------- -------- ------------
Bank overdrafts - 0.7 1.5
Bank loans 592.8 473.7 565.3
US private placement senior notes (USPP) 385.0 373.9 376.8
US senior notes 508.1 489.8 494.2
Other loans 0.3 0.3 0.3
------------------------------------------------- -------- -------- ------------
1,486.2 1,338.4 1,438.1
------------------------------------------------- -------- -------- ------------
The borrowings are repayable as follows:
On demand or within one year - 0.7 1.5
In the second year 568.6 - 448.2
In the third to fifth years inclusive 255.6 700.6 345.8
After five years 662.0 637.1 642.6
------------------------------------------------- -------- -------- ------------
1,486.2 1,338.4 1,438.1
Less: Amount due for settlement within 12 months
(shown within current liabilities) - (0.7) (1.5)
------------------------------------------------- -------- -------- ------------
Amount due for settlement after 12 months 1,486.2 1,337.7 1,436.6
------------------------------------------------- -------- -------- ------------
Bank loans, US private placement senior notes and US senior
notes are stated after their respective transaction costs and
related amortisation.
As at 30 June 2019
Facility Amortisation Fair value
Type amount Headroom Principal costs adjustment Drawn
-------- --------
$m $m $m $m $m $m Facility Maturity
date date
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Multicurrency
revolving bank
credit facility 650.0 501.0 149.0 (4.8) - 144.2 Mar 2018 Mar 2024
Acquisition facility
bank term loan
- Facility C 450.0 - 450.0 (1.4) - 448.6 Sep 2015 Sep 2020
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank loans 1,100.0 501.0 599.0 (6.2) - 592.8
$300m USPP - Series
B 120.0 - 120.0 (0.3) 0.3 120.0 May 2011 May 2021
$300m USPP - Series
C 60.0 - 60.0 (0.1) 1.0 60.9 May 2011 May 2023
$200m USPP - Series
A 50.0 - 50.0 (0.1) 0.6 50.5 Dec 2014 Dec 2021
$200m USPP - Series
B 100.0 - 100.0 (0.2) 2.4 102.2 Dec 2014 Dec 2024
$200m USPP - Series
C 50.0 - 50.0 (0.1) 1.5 51.4 Dec 2014 Dec 2026
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total USPP 380.0 - 380.0 (0.8) 5.8 385.0
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
$500m US senior
notes 500.0 - 500.0 (9.2) 17.3 508.1 Apr 2018 May 2026
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total US senior
notes 500.0 - 500.0 (9.2) 17.3 508.1
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank and
loans notes 1,980.0 1,479.0 (16.2) 23.1 1,485.9
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Bank overdraft - UK -
cash pool
Other loans 0.3
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
1,486.2
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
As at 30 June 2018
Facility Amortisation Fair value
Type amount Headroom Principal costs adjustment Drawn
-------- --------
$m $m $m $m $m $m Facility Maturity
date date
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
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 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 USPP - Series
B 120.0 - 120.0 (0.3) (0.5) 119.2 May 2011 May 2021
$300m USPP - Series
C 60.0 - 60.0 (0.2) (2.0) 57.8 May 2011 May 2023
$200m USPP - Series
A 50.0 - 50.0 (0.2) - 49.8 Dec 2014 Dec 2021
$200m USPP - Series
B 100.0 - 100.0 (0.3) (1.6) 98.1 Dec 2014 Dec 2024
$200m USPP - Series
C 50.0 - 50.0 (0.2) (0.8) 49.0 Dec 2014 Dec 2026
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total USPP 380.0 - 380.0 (1.2) (4.9) 373.9
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
$500m US senior
notes 500.0 - 500.0 (10.5) 0.3 489.8 Apr 2018 May 2026
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total US senior
notes 500.0 - 500.0 (10.5) 0.3 489.8
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank and
loans notes 1,980.0 618.0 1,362.0 (20.0) (4.6) 1,337.4
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Bank overdraft - UK
cash pool 0.7
Other loans 0.3
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
1,338.4
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
As at 31 December 2018
Facility Amortisation Fair value
Type amount Headroom Principal costs adjustment Drawn
-------- --------
$m $m $m $m $m $m Facility Maturity
date date
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Multicurrency
revolving bank
credit facility 650.0 528.0 122.0 (4.9) - 117.1 Mar 2018 Mar 2023
Acquisition facility
bank term loan
- Facility C 450.0 - 450.0 (1.8) - 448.2 Sep 2015 Sep 2020
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank loans 1,100.0 528.0 572.0 (6.7) - 565.3
$300m USPP - Series
B 120.0 - 120.0 (0.3) 0.2 119.9 May 2011 May 2021
$300m USPP - Series
C 60.0 - 60.0 (0.2) (1.2) 58.6 May 2011 May 2023
$200m USPP - Series
A 50.0 - 50.0 (0.2) 0.1 49.9 Dec 2014 Dec 2021
$200m USPP - Series
B 100.0 - 100.0 (0.3) (0.8) 98.9 Dec 2014 Dec 2024
$200m USPP - Series
C 50.0 - 50.0 (0.1) (0.4) 49.5 Dec 2014 Dec 2026
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total USPP 380.0 - 380.0 (1.1) (2.1) 376.8
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
$500m US senior
notes 500.0 - 500.0 (9.8) 4.0 494.2 Apr 2018 May 2026
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total US senior
notes 500.0 - 500.0 (9.8) 4.0 494.2
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Total bank and
loans notes 1,980.0 528.0 1,452.0 (17.6) 1.9 1,436.3
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
Bank overdraft - UK
cash pool 1.5
Other loans 0.3
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
1,438.1
--------------------- -------- -------- --------- ------------ ----------- ------- -------- --------
During the first half, on the first anniversary of the $650
million multicurrency revolving credit facility (RCF) the lenders
approved an extension to the facility for an additional year and
the RCF is now due to expire in March 2024. The RCF includes an
option to extend the maturity date for an additional year at the
second anniversary. The extension option is at the lenders'
option.
As at 30 June 2019, the Group had $149 million drawn under the
RCF (30 June 2018: $32 million; 31 December 2018: $122 million).
During the first half the Acquisition facility bank term loan -
Facility C was novated to BBA U.S. Holdings Inc.
As at 30 June 2019, the Group had $380 million (30 June 2018:
$380 million; 31 December 2018: $380 million) of US private
placement senior notes outstanding with $280 million (30 June 2018:
$280 million; 31 December 2018: $280 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.
As at 30 June 2019, the Group also had $500 million (30 June
2018: $500 million; 31 December 2018: $500 million) of US senior
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. These notes were
issued by BBA U.S. Holdings Inc.
The Group excludes the fair value movement on its loan notes
from its definition of net debt (refer to Note 19, Alternative
Performance Measures section), as this movement is offset by the
change in fair value of the underlying interest rate swaps. The
fair value loss on its US private placement senior notes at 30 June
2019 was $5.8 million (30 June 2018: $4.9 million gain; 31 December
2018: $2.1 million gain). The fair value loss on its US senior
notes at 30 June 2019 was $17.3 million (30 June 2018: $0.3 million
gain; 31 December 2018: $4.0 million loss).
All other borrowings are held at amortised cost.
9. Lease liabilities
Information presented in this note is in respect of the
financial period ended 30 June 2019 in accordance with IFRS 16.
BBA Aviation holds property and equipment under leasing
arrangements that are recognised as right of use assets and lease
liabilities, with remaining lease terms ranging up to 89 years in
duration. The majority of the lease liability relates to long term
leases on BBA's FBO network.
Information in respect of the amounts recognised for right of
use assets, including the carrying amount, additions and
depreciation, are set out in note 7 of the interim financial
report. A maturity analysis of lease liabilities for continuing
operations is set out below:
As at As at As at
30 June 30 June 31 December
2019 2018(1) 2018(1)
$m $m $m
-------------------------------------------- --------- --------- -------------
Amounts payable under lease liabilities(2)
-------------------------------------------- --------- --------- -------------
Minimum lease payments
Within one year 128.0 0.4 1.5
In the second to fifth years inclusive 444.5 1.0 3.2
More than five years 1,700.9 0.1 0.4
-------------------------------------------- --------- --------- -------------
2,273.4 1.5 5.1
-------------------------------------------- --------- --------- -------------
Present value of minimum lease payments
Within one year 57.9 0.2 1.1
In the second to fifth years inclusive 192.8 1.0 2.9
More than five years 881.1 0.1 0.3
-------------------------------------------- --------- --------- -------------
1,131.8 1.3 4.3
-------------------------------------------- --------- --------- -------------
Lease liabilities recognised in the condensed
consolidated balance sheet
Current 57.9 0.2 1.1
Non-current 1,073.9 1.1 3.2
-------------------------------------------- --------- --------- -------------
1,131.8 1.3 4.3
-------------------------------------------- --------- --------- -------------
(1) The amounts presented in the comparative periods represents
finance leases recognised in accordance with IAS 17.
(2) Amounts payable under lease liabilities for discontinued
operations are presented in note 16.
Six months Six months
Ended Ended Year Ended
30 June 30 June 31 December
2019 2018(2) 2018(2)
$m $m $m
---------------------------------------------- ----------- ----------- -------------
Amounts recognised in the condensed consolidated income statement
for continuing operations
Interest on sublease assets 0.9 - -
Interest on lease liabilities (35.4) - (0.1)
Expenses relating to variable lease payments (12.1) - -
not included in the measurement of lease
liabilities
Depreciation on right of use assets (44.2) - -
---------------------------------------------- ----------- ----------- -------------
(90.8) - (0.1)
---------------------------------------------- ----------- ----------- -------------
Total amounts recognised in the condensed consolidated
cash flow statement(1)
Interest received on subleases assets 0.9 - -
Receipt of capital element of sublease 1.3 - -
assets
Interest element of lease liabilities
paid(2) (37.2) - (0.1)
Payments of lease liabilities (36.1) - (0.4)
---------------------------------------------- ----------- ----------- -------------
(71.1) - (0.5)
---------------------------------------------- ----------- ----------- -------------
(1) Condensed consolidated cash flow statement includes the cash
inflows/(outflows) for the continuing and discontinued
operations.
(2) Interest element of lease liabilities paid includes $1.9
million on leases from ERO discontinued operation (30 June 2018:
$nil; 31 December 2018: $nil).
(3) Payments of lease liabilities includes $5.8 million for
leases classified with liabilities held for sale (30 June 2018:
$nil; 31 December 2018: $nil) and $0.5 million on leases previously
accounted for as finance leases under IAS 17 (30 June 2018: $nil;
31 December 2018: $0.4 million).
Year Ended
31 December
2018
$m
-------------------------------------------------------------- -------------
Operating lease commitments as disclosed
at 31 December 2018 2,679.9
Reconciling items:
* Effect of discounting (at incremental borrowing rate
at 1 January 2019) (1,254.3)
* Adjustments for commitments outside the scope of IFRS
16 (300.4)
* Other adjustments to undiscounted future minimum
lease payments(1) 74.8
* Finance lease liabilities recognised at 31 December
2018 under IAS 17 4.3
---------------------------------------------------------------- -------------
Lease liabilities at 1 January 2019 1,204.3
---------------------------------------------------------------- -------------
Continuing operations 1,141.0
Discontinued operations 63.3
---------------------------------------------------------------- -------------
Total from continuing and discontinued operations 1,204.3
---------------------------------------------------------------- -------------
(1) Adjustments include certain amendments to base data
following completion the review of the lease portfolio and
embedding variable CPI uplifts applied on the transition date (1
January 2019) into the opening lease liability.
10. 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
2019 2018 2018
Carrying Carrying Carrying
value value value
$m $m $m
--------------------------------------------- ---------- ---------- ------------
Financial assets
Fair value through profit or loss - foreign
exchange contracts(1) 0.3 1.1 0.2
Derivative instruments held in fair value
hedges(2) 22.1 0.3 4.1
Derivative instruments held in cash flow
hedges 2.1 8.3 6.0
Assets classified as financial instruments
fair valued through other comprehensive
income (FVTOCI) 3.2 5.1 3.7
Loans and receivables (including cash
and cash equivalents)(3,4) 293.0 294.2 287.8
--------------------------------------------- ---------- ---------- ------------
320.7 309.0 301.8
--------------------------------------------- ---------- ---------- ------------
Financial liabilities
Fair value through profit or loss - foreign
exchange contracts(1) (0.4) (0.1) (1.0)
Derivative instruments held in fair value
hedges(2) - (6.9) (3.6)
Derivative instruments held in cash flow
hedges (3.3) (2.5) (3.0)
Financial liabilities at amortised cost(4) (1,213.5) (1,097.7) (1,193.0)
Financial liabilities at fair value (547.9) (519.4) (526.2)
--------------------------------------------- ---------- ---------- ------------
(1,765.1) (1,626.6) (1,726.8)
--------------------------------------------- ---------- ---------- ------------
(1) 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.
(2) 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.
(3) Recoveries from third parties in respect of environmental
and other liabilities totalling $5.4 million (30 June 2018: $5.7
million; 31 December 2018: $5.7m) are included within trade and
other receivables.
(4) 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.
30 June 2019 30 June 2018 31 December 2018
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 85.9 0.3 114.1 1.1 3.3 0.2
Fair value hedges
Interest rate swaps (530.0) 22.1 (250.0) 0.3 (250.0) 4.1
Cash flow hedges
Interest rate swaps (284.9) 1.1 (291.0) 6.6 (284.9) 4.6
Foreign exchange
forward contracts 12.3 1.0 (18.4) 1.7 18.4 1.4
---------------------- --------- ----------- --------- ----------- --------- -----------
(716.7) 24.5 (445.3) 9.7 (513.2) 10.3
---------------------- --------- ----------- --------- ----------- --------- -----------
30 June 2019 30 June 2018 31 December 2018
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 162.4 (0.4) 72.8 (0.1) 188.9 (1.0)
Fair value hedges
Interest rate swaps - - (280.0) (6.9) (280.0) (3.6)
Cash flow hedges
Interest rate swaps - - (50.0) (0.1) - -
Foreign exchange
forward contracts (73.0) (3.3) (42.4) (2.4) (81.2) (3.0)
---------------------- --------- ----------- --------- ----------- --------- -----------
89.4 (3.7) (299.6) (9.5) (172.3) (7.6)
---------------------- --------- ----------- --------- ----------- --------- -----------
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.
11. Net cash flow from operating activities
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018
$m $m $m
----------------------------------------------- ------------ ------------- --------------
Operating profit 131.1 115.9 227.6
Operating profit from discontinued operations
(note 16) 24.9 12.3 33.9
Less: Share of profit from associates
and joint ventures (1.6) (1.7) (4.0)
----------------------------------------------- ------------ ------------- --------------
Profit from operations 154.4 126.5 257.5
Depreciation of property, plant and equipment 34.4 35.3 69.0
Depreciation of right of use assets 44.2 - -
Amortisation of intangible assets 53.3 49.7 101.0
(Profit)/loss on sale of property, plant
and equipment (0.3) 0.6 3.4
Share-based payment expense 4.8 5.7 8.2
Decrease in provisions (0.7) (2.8) (12.4)
Pension scheme payments (2.3) (2.2) (5.9)
Other non-cash items 11.7 (1.1) 1.8
Unrealised foreign exchange movements (0.8) (0.7) (1.0)
----------------------------------------------- ------------ ------------- --------------
Operating cash inflows before movements
in working capital 298.7 211.0 421.6
Increase in working capital (2.4) (23.7) (26.2)
----------------------------------------------- ------------ ------------- --------------
Cash generated by operations 296.3 187.3 395.4
Net income taxes paid (23.0) (10.2) (27.1)
----------------------------------------------- ------------ ------------- --------------
Net cash from operating activities 273.3 177.1 368.3
----------------------------------------------- ------------ ------------- --------------
Dividends received from associates and
joint ventures 2.9 1.7 2.0
Purchase of property, plant and equipment (34.9) (40.1) (85.3)
Purchase of intangible assets(1) (6.2) (3.0) (6.6)
Proceeds from disposal of property, plant
and equipment 3.6 0.3 4.7
Interest received 0.3 0.3 12.7
Interest received on sublease assets 0.9 - -
Receipt of capital element of sublease 1.3 - -
assets
Interest paid (38.7) (21.8) (70.9)
Interest element of lease liabilities
paid (37.2) - (0.1)
Payments of lease liabilities (36.1) - -
----------------------------------------------- ------------ ------------- --------------
Free cash flow(2) 129.2 114.5 224.8
----------------------------------------------- ------------ ------------- --------------
(1) Purchase of intangible assets excludes $1.0 million (30 June
2018: $1.2 million; 31 December 2018 $1.2 million) paid in relation
to Ontic licenses, 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.
2 There is no IFRS 16 impact on free cash flow as a result of adopting IFRS 16.
12. Analysis of changes in net debt
As at 30 June 2019
Transfer
to
(assets)/
At 1 Adoption Cash Fair Foreign liabilities At 30
January of IFRS (inflow)/ value exchange Amortisation New lease held June
2019 16 outflow(1) movements movements costs liabilities for sale 2019
$m $m $m $m $m $m $m $m $m
------------------- --------- --------- ---------- --------- --------- ------------ ----------- ----------- -----------
Bank loans (565.3) - (26.3) - - (1.2) - - (592.8)
USPP(2) (376.8) - - (7.9) - (0.3) - - (385.0)
US senior notes(3) (494.2) - - (13.3) - (0.6) - - (508.1)
Other loans (0.3) - - - - - - - (0.3)
Bank overdraft (1.5) - 1.5 - - - - - -
Lease liabilities
for covenants(4) (4.3) - 0.5 - - - - - (3.8)
------------------- --------- --------- ---------- --------- --------- ------------ ----------- ----------- ---------
Arising from
financing
activities (1,442.4) - (24.3) (21.2) - (2.1) - - (1,490.0)
Cash and cash
equivalents 109.3 - 24.0 - (9.5) - - (7.1) 116.7
------------------- --------- --------- ---------- --------- --------- ------------ ----------- ----------- ---------
Net debt for
covenants
purposes(4) (1,333.1) - (0.3) (21.2) (9.5) (2.1) - (7.1) (1,373.3)
Lease liabilities - (1,136.7) 29.8 - 0.3 - (21.4) - (1,128.0)
------------------- --------- --------- ---------- --------- --------- ------------ ----------- ----------- ---------
Net debt per
balance
sheet including
Lease
liabilities(2,3,5) (1,333.1) (1,136.7) 29.5 (21.2) (9.2) (2.1) (21.4) (7.1) (2,501.3)
Less fair value
adjustments 1.9 - - 21.2 - - - - 23.1
Net debt classified
as held for
sale(6) (1.0) (63.3) 8.8 - (0.4) - (10.3) 7.1 (59.1)
------------------- --------- --------- ---------- --------- --------- ------------ ----------- ----------- ---------
Net debt per cash
flow (2,3,5) (1,332.2) (1,200.0) 38.3 - (9.6) (2.1) (31.7) - (2,537.3)
------------------- --------- --------- ---------- --------- --------- ------------ ----------- ----------- ---------
As at 30 June 2018
Transfer
Acquisition to (assets)/
At 1 Cash Fair Foreign from liabilities At 30
January (inflow)/ value exchange Amortisation third held June
2018 outflow(1) movements movements costs parties for sale 2018
$m $m $m $m $m $m $m $m
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Bank loans (813.3) 342.3 - - (2.7) - - (473.7)
USPP(2) (502.2) 120.0 8.4 - (0.1) - - (373.9)
US senior
notes(3) - (489.1) (0.3) - (0.4) - - (489.8)
Other loans (3.3) - - - - - 3.0 (0.3)
Bank overdraft (4.0) 3.3 - - - - - (0.7)
Lease liabilities
for covenants
(4) (1.3) - - - - - - (1.3)
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Arising from
financing
activities (1,324.1) (23.5) 8.1 - (3.2) - 3.0 (1,339.7)
Cash and cash
equivalents 153.5 3.2 - (6.7) - - (2.4) 147.6
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Net debt per
balance
sheet (1,170.6) (20.3) 8.1 (6.7) (3.2) - 0.6 (1,192.1)
Less fair value
adjustments 3.5 - (8.1) - - - - (4.6)
Net debt
classified
as held for sale - - - - - - (0.6) (0.6)
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Net debt per cash
flow (2,3,5) (1,167.1) (20.3) - (6.7) (3.2) - - (1,197.3)
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
As at 31 December 2018
Transfer
Acquisition to (assets)/
At 1 Cash Fair Foreign from liabilities At 31
January (inflow)/ value exchange Amortisation third held December
2018 outflow(1) movements movements costs parties for sale 2018
$m $m $m $m $m $m $m $m
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Bank loans (813.3) 252.0 - - (4.0) - - (565.3)
USPP(2) (502.2) 120.0 5.6 - (0.2) - - (376.8)
US senior
notes(3) - (489.1) (4.0) - (1.1) - - (494.2)
Other loans (3.3) - - - - - 3.0 (0.3)
Bank overdraft (4.0) 2.3 - 0.2 - - - (1.5)
Lease liabilities
for covenants(4) (1.3) 0.4 - - - (3.4) - (4.3)
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Arising from
financing
activities (1,324.1) (114.4) 1.6 0.2 (5.3) (3.4) 3.0 (1.442.4)
Cash and cash
equivalents 153.5 (35.4) - (13.2) - 6.4 (2.0) 109.3
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Net debt per
balance
sheet (1,170.6) (149.8) 1.6 (13.0) (5.3) 3.0 1.0 (1,333.1)
Less fair value
adjustments 3.5 - (1.6) - - - - 1.9
Net debt
classified
as held for sale - - - - - - (1.0) (1.0)
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
Net debt per cash
flow (2,3,5) (1,167.1) (149.8) - (13.0) (5.3) 3.0 - (1,332.2)
----------------- --------- ----------- ---------- ---------- ------------ ----------- ------------- ---------
(1) The cash flows from bank loans, US private placement senior
notes, US senior notes and other loans make up the net
increase/(decrease) in loans in the cash flow statement, net of
transaction costs.
(2) Within the Group's definition of net debt, the US private
placement is included at its face value of $380 million (30 June
2018: $380 million; 31 December 2018: $380 million), reflecting the
fact that the liabilities will be in place until maturity. This is
$5.8 million lower (30 June 2018: $4.9 million higher; 31 December
2018: $2.1 million higher) than its carrying value.
(3) Within the Group's definition of net debt the senior notes
are included at their face value of $500 million (30 June 2018:
$500 million; 31 December 2018: $500 million) reflecting the fact
that the liabilities will be in place until maturity. This is $17.3
million lower (30 June 2018: $0.3 million lower; 31 December 2018:
$4.0 million lower than its carrying value.
(4) Net debt for covenant purposes includes lease liabilities
previously accounted for as finance leases under IAS 17. For the
purposes of net debt we have analysed lease liabilities between the
previous obligations under finance leases and additional lease
liabilities recognised following the adoption of IFRS 16.
(5) Alternative Performance Measures are reconciled to IFRS
measures and explained in Note 19, the Alternative Performance
Measures section.
(6) The cash outflow within net debt classified as held for sale
for the period ended 30 June 2019 includes $3.0 million repayment
of borrowings and $5.8 million payment of lease liabilities.
13. Acquisitions
On 24 June 2019 the Group's Ontic business has acquired an
exclusive licence agreement for signal conditioners, military chip
detectors, cockpit indicators and connector harnesses from Meggitt
for a total consideration of $12.0 million. Ontic has paid $11.5
million upfront and the remaining $0.5 million is deferred
consideration.
In the half year, $10.7 million of deferred and contingent
consideration was paid in relation to prior year acquisitions in
Ontic (30 June 2018: $3.1 million; 31 December 2018 $3.7 million
including the 2018 acquisition of Honeywell).
Prior period acquisitions
As disclosed in the 2018 Annual Report, Signature completed the
acquisition of EPIC Aviation LLC doing business as EPIC Fuels
("EPIC"). In the period, the purchase price accounting has been
finalised, the measurement period adjustments resulting a increase
in goodwill of $0.5 million. Further consideration of $2.9 million
was paid in January 2019 representing the final working capital
adjustment.
As disclosed in the 2018 Annual Report, Ontic completed the
acquisition of Firstmark Corp ("Firstmark") on 20 November 2018.
The transaction remains in the measurement period and the purchase
price accounting will be finalised in the 2019 annual report. In
the period, provisional measurement period adjustments have been
recognised resulting in an increase in goodwill of $0.8 million and
further consideration of $0.4 million was paid in April 2019
representing the final working capital adjustment.
No other measurement period adjustments have been made in the
period. Further information in relation to the purchase price
accounting for these acquisitions is available in the 2018 annual
report and accounts.
14. 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
2019 2018 2018 2019 2018 2018
$m $m $m $m $m $m
---------------------- ----------- ----------- ------------- ----------- ----------- -------------
Associates and joint
ventures 2.5 2.3 4.3 367.1 366.9 738.8
---------------------- ----------- ----------- ------------- ----------- ----------- -------------
Amounts owed by related Amounts owed to related
parties parties
---------------------- -------------------------------- --------------------------------
30 June 30 June 31 December 30 June 30 June 31 December
2019 2018 2018 2019 2018 2018
$m $m $m $m $m $m
---------------------- -------- -------- ------------ -------- -------- ------------
Associates and joint
ventures 0.2 0.1 0.6 65.1 85.8 82.1
---------------------- -------- -------- ------------ -------- -------- ------------
Purchases of goods principally relates to the purchase of
aviation fuel including excise taxes. 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.
At the balance sheet date, Group companies had loan receivables
from associates and joint ventures of $0.2 million (30 June 2018:
$0.1 million; 31 December 2018: $0.6 million). The loans are
unsecured and will be settled in cash, and were made on terms which
reflect the relationships between the parties.
The Group has various pension and other post-retirement benefit
schemes for its employees. Details are set out in note 15.
15. 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 2019 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 2018, with
assumptions updated to reflect market conditions as at 30 June 2019
where appropriate.
The IPP closed to future accrual on 31 May 2016. The defined
benefit plan assets have been updated to reflect their market value
as at 30 June 2019. The Group's foreign retirement obligations
relate to a number of arrangements in North America. Pension costs
are calculated by independent qualified actuaries, using the
projected unit method and assumptions appropriate to the
arrangements in place.
As at 30 June 2019, the IAS 19 valuation of the UK plan and US
schemes, indicate a net deficit of $32.7 million (30 June 2018:
$44.5 million; 31 December 2018: $28.2 million).
During the first half of 2019, the Group agreed a revised
schedule of payments to the IPP. Payments due as at 30 June 2019
are as follows:
-- GBP0.3 million per annum from 30 June 2019 to 31 December 2020;
-- Additional contributions of GBP3.4 million per annum from 30
June 2019 to 30 September 2021;
-- GBP2.7 million per annum from 30 June 2019 to March 2034
(through an Asset-Backed Funding arrangement (ABF))
The ABF structure consists of a Scottish Limited Partnership
(SLP), formed between two newly incorporated subsidiaries of the
Group and the Trustee of the IPP. The SLP has a long-term
inter-company loan receivable due from Ontic Engineering &
Manufacturing UK Limited (Ontic UK), on which annual interest
payments of GBP2.7 million are due over the term of the loan.
The ABF structure was established so that the three newly
created entities are consolidated into the Group's financial
statements. In addition, the interest in the SLP held by the IPP is
not treated as an asset under IAS19, and therefore is not included
as part of the Group's pensions disclosures under IAS19. Instead,
the payments due to the IPP are treated as a series of payments
which the Group has committed to make.
16. Discontinued operations
ERO divestiture
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 was not classified as a discontinued
operation as its operations have now ceased.
The fair values of the assets held for sale 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.
Results of ERO discontinued operations
Six months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
----------------- ------ ----------------------------------------- ----------------------------------------- -----------------------------------------
Exceptional Exceptional Exceptional
and and and
other other other
Underlying(1) Items Total Underlying(1) Items Total Underlying(1) Items Total
Notes $m $m $m $m $m $m $m $m $m
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Revenue 2 265.4 - 265.4 257.6 - 257.6 533.6 - 533.6
Cost of sales (218.8) - (218.8) (219.6) - (219.6) (449.8) - (449.8)
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Gross profit 46.6 - 46.6 38.0 - 38.0 83.8 - 83.8
Distribution
costs (16.9) - (16.9) (14.2) - (14.2) (29.3) - (29.3)
Administrative
expenses (10.2) - (10.2) (16.1) - (16.1) (30.3) - (30.3)
Other operating
income - - - - - - 0.1 - 0.1
Restructuring costs - - - - (1.1) (1.1) - (1.1) (1.1)
------------------------- -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Operating profit/(loss)
including internal
Group charges 19.5 - 19.5 7.7 (1.1) 6.6 24.3 (1.1) 23.2
Elimination of
internal Group
charges 5.4 - 5.4 5.7 - 5.7 10.7 - 10.7
------------------------- -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Operating
profit/(loss) 2 24.9 - 24.9 13.4 (1.1) 12.3 35.0 (1.1) 33.9
Impairment
loss(2) - (31.8) (31.8) - - - - - -
Transaction
costs(3) - (0.9) (0.9) - (5.0) (5.0) - (5.9) (5.9)
Finance costs(4) (2.4) - (2.4) (0.5) - (0.5) (0.9) - (0.9)
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) before
tax 22.5 (32.7) (10.2) 12.9 (6.1) 6.8 34.1 (7.0) 27.1
Tax
(charge)/credit (5.4) 0.2 (5.2) (2.6) 1.1 (1.5) (9.9) 2.0 (7.9)
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) for
the period 17.1 (32.5) (15.4) 10.3 (5.0) 5.3 24.2 (5.0) 19.2
------------------------- -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Attributable
to:
Equity holders
of BBA Aviation
plc 17.1 (32.5) (15.4) 10.3 (5.0) 5.3 24.2 (5.0) 19.2
Non-controlling - - - - - - - - -
interests
------------------------- -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Profit/(loss) for
the period 17.1 (32.5) (15.4) 10.3 (5.0) 5.3 24.2 (5.0) 19.2
------------------------- -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Earnings Adjusted(1) Unadjusted Adjusted(1) Unadjusted Adjusted(1) Unadjusted
per share
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Basic pre
IFRS 16 1.4c (1.8)c 1.0c 0.5c 2.3c 1.9c
Basic 1.7c (1.5)c
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
Diluted pre
IFRS 16 1.3c (1.8)c 1.0c 0.5c 2.3c 1.8c
Diluted 1.6c (1.5)c
----------------- ------ -------------- ------------ ----------- -------------- ------------ ----------- -------------- ------------ -----------
(1) Underlying profit and adjusted earnings per share is stated
before exceptional and other items.
(2) The impairment of $31.8 million reported in exceptional and
other items represents impairment of net assets held for sale to
fair value less costs to sell.
(3) Transaction costs of $0.9 million (30 June 2018: $5.0
million; 31 December 2018: $5.9 million) represents costs to sell
incurred to date.
(4) Finance costs of $2.4 million (30 June 2018: $0.5 million;
31 December 2018: $0.9 million) includes $1.9 million of finance
costs following the adoption of IFRS 16 (30 June 2018: $nil; 31
December 2018: $nil).
Alternative Performance Measures are reconciled to IFRS measures
and explained in Note 19, the Alternative Performance Measures
section.
Effect of the disposal Group on the financial position of the
Group as at 30 June 2019.
As at As at As at
30 June 30 June 31 December
2019 2018 2018
Note $m $m $m
------------------------------- ------ --------- --------- -------------
Assets held for sale
Non-current assets
Other intangible assets 16.1 17.4 17.7
Property, plant and equipment 58.5 77.7 80.8
Right of use assets 71.2 - -
------------------------------- ------ --------- --------- -------------
145.8 95.1 98.5
-------------------------------------- --------- --------- -------------
Current assets
Inventories 158.7 150.6 168.2
Trade and other receivables 117.2 120.9 138.9
Cash and cash equivalents 9.1 2.4 2.0
---------------------------------------- --------- --------- -------------
285.0 273.9 309.1
-------------------------------------- --------- --------- -------------
Total assets held for sale 430.8 369.0 407.6
---------------------------------------- --------- --------- -------------
Liabilities held for sale
Current liabilities
Trade and other payables (117.6) (104.1) (142.0)
Lease liabilities (9.3) - -
Borrowings - - (3.0)
Provisions (0.9) (1.1) (0.9)
---------------------------------------- --------- --------- -------------
(127.8) (105.2) (145.9)
-------------------------------------- --------- --------- -------------
Non-current liabilities
Borrowings - (3.0) -
Trade and other payables
due after one year (0.4) (0.4) -
Lease liabilities (58.9) - -
Provisions (0.9) (0.9) (0.9)
---------------------------------------- --------- --------- -------------
(60.2) (4.3) (0.9)
-------------------------------------- --------- --------- -------------
Total liabilities held
for sale (188.0) (109.5) (146.8)
---------------------------------------- --------- --------- -------------
Net assets held for sale(1) 242.8 259.5 260.8
---------------------------------------- --------- --------- -------------
(1) The net assets of the ERO business held for sale as at 30
June 2019 exclude deferred tax liabilities of $17.0 million which
have been recognised within the Group tax position (30 June 2018:
deferred tax liabilities of $10.6 million, 31 December 2018:
deferred tax liabilities of $15.3 million).
Cash flows (used in)/from ERO discontinued operations
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
$m $m $m
--------------------------------- ----------- ----------- -------------
Net cash inflow/(outflow) from
operating activities 33.5 (29.9) (7.2)
Net cash outflow from investing
activities (6.1) (11.5) (16.1)
Net cash inflow/(outflow) from
financing activities (20.3) 42.1 23.6
---------------------------------- ----------- ----------- -------------
Net cash inflow for the period 7.1 0.7 0.3
---------------------------------- ----------- ----------- -------------
(1) Net cash flows from operating activities in the period
comprise operating profit $24.9 million (30 June 2018: $12.3
million; 31 December 2018: $33.9 million), transaction costs $0.3
million (30 June 2019: $5.0 million; 31 December 2018: $5.9
million), working capital inflow $8.8 million (30 June 2018: $47.9
million outflow; 31 December 2018: $44.2 million outflow), and tax
paid $0.1 million (30 June 2018: $0.2 million received; 31 December
2018: $0.2 million received) in relation to the discontinued
operations.
As at As at As at
Lease liabilities recognised within liabilities 30 June 30 June 31 December
held for sale 2019 2018 2018
$m $m $m
------------------------------------------------ --------- --------- -------------
Minimum lease payments
Within one year 13.0 - -
In the second to fifth years inclusive 32.4 - -
More than five years 107.2 - -
------------------------------------------------ --------- --------- -------------
152.6 - -
------------------------------------------------ --------- --------- -------------
Present value of minimum lease payments
Within one year 9.3 - -
In the second to fifth years inclusive 20.5 - -
More than five years 38.4 - -
------------------------------------------------ --------- --------- -------------
68.2 - -
------------------------------------------------ --------- --------- -------------
Lease liabilities recognised in liabilities held
for sale
Current 9.3 - -
Non-current 58.9 - -
------------------------------------------------ --------- --------- -------------
68.2 - -
------------------------------------------------ --------- --------- -------------
Six months Six months
Ended Ended Year Ended
30 June 30 June 31 December
2019 2018 2018
$m $m $m
------------------------------- ----------- ----------- -------------
Amounts recognised in the condensed consolidated income statement
for discontinued operations
Interest on lease liabilities (1.9) - -
------------------------------- ----------- ----------- -------------
(1.9) - -
------------------------------- ----------- ----------- -------------
17. Share capital
Ordinary share capital as at 30 June 2019 amounted to $510.0
million (30 June 2018: $509.3 million; 31 December 2018: $509.3
million). During the period 1.9 million ordinary shares were issued
to satisfy options exercised and the vesting of share awards under
the Group's various share schemes (30 June 2018: 0.7 million; 31
December 2018: 1.0 million). The consideration for shares issued in
respect of share options for the period ended 30 June 2019 $0.7
million (30 June 2018: $0.3 million; and 31 December 2018: $0.3
million).
The number of shares in issue as at 30 June 2019 was 1,048.2
million (30 June 2018: 1,046.2 million; 31 December 2018: 1,046.3
million).
18. Post balance sheet events
Proposed sale of Ontic
On 30 July 2019 the Group announced the proposed sale of Ontic,
a leading provider of high-quality, OEM-licensed parts for legacy
aerospace platforms, to CVC Fund Vll, for an enterprise value of
$1,365 million.
The disposal is a class 1 transaction under the UK listing rules
and is therefore conditional on approval of the shareholders, as
well as being subject to regulatory consents. A circular containing
further details of the Transaction, together with a notice to
convene a general meeting expected to be in late August 2019
(General Meeting), will be sent to shareholders as soon as is
practicable.
This disposal of the Ontic segment (Note 2) is expected to
complete in Q4 2019.
19. Alternative performance measures
Introduction
We assess the performance of the Group using a variety of
Alternative Performance Measures. We principally discuss the
Group's results on an 'adjusted' and/or 'underlying' basis. 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
rationale behind using the measures.
As set out in Note 1 Basis of preparation the Group has adopted
IFRS 16 in the period. Under the transition option adopted
comparatives are not restated. For comparability and where
applicable, a reconciliation has been presented below to a pre IFRS
16 basis.
The Alternative Performance Measures we use are: organic revenue
growth, underlying operating profit and margin, EBITDA and
underlying EBITDA, underlying profit before tax, underlying
deferred tax, cash 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 items in the current
and/or prior years include costs relating to acquisitions which are
material to the associated business segment, costs related to
strategic disposals (including those previously completed),
significant restructuring programmes some of which span multiple
years asset, and impairment charges. In the event that other items
meet the criteria, which are applied consistently from year to
year, they are 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 condensed consolidated
Financial Statements.
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.
A reconciliation from the growth in reported revenue, the most
directly comparable IFRS measures, to the organic revenue growth is
set out below.
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
$m $m $m
----------------------------------------------------------- ----------- ----------- -------------
Revenue prior year (continuing operations) 1,024.3 898.6 1,857.3
Revenue prior year (ERO discontinued operations) 257.6 246.9 513.3
Revenue prior year (ASIG discontinued operations) - 38.2 38.4
----------------------------------------------------------- ----------- ----------- -------------
Reported revenue prior period (continuing
and discontinued) 1,281.9 1,183.7 2,409.0
Rebase for foreign exchange movements(1) (8.6) 11.9 10.9
Rebase for fuel price movements(2) (10.7) 70.8 138.2
Rebase for disposals and discontinued operations
(note 16) (257.6) (285.1) (551.7)
----------------------------------------------------------- ----------- ----------- -------------
Rebased comparative revenue 1,005.0 981.3 2,006.4
----------------------------------------------------------- ----------- ----------- -------------
Reported revenue current period (continuing
and discontinued) 1,528.1 1,281.9 2,880.9
Add: Impact of adopting IFRS 16 (continuing) 2.1 - -
Less: Contribution from discontinued operations/disposals (265.4) (257.6) (533.6)
Less: Contribution from acquisitions (251.6) (5.0) (304.8)
----------------------------------------------------------- ----------- ----------- -------------
Organic revenue(3) 1,013.2 1,019.3 2,042.5
----------------------------------------------------------- ----------- ----------- -------------
Organic revenue growth from continuing operations 0.8% 3.9% 1.8%
----------------------------------------------------------- ----------- ----------- -------------
(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.
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 months ended 30 Six months ended Year ended 31 December
June 2019 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m $m $m $m
---------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Operating
profit 156.0 131.1 24.9 128.2 115.9 12.3 261.5 227.6 33.9
Add: Exceptional and other items:
Amortisation
of intangible
assets
arising
on
acquisition
and valued
in accordance
with IFRS 3 47.9 47.9 - 43.5 43.5 - 88.8 88.8 -
Acquisition
related
transaction
costs - - - - - - 1.4 1.4 -
Restructuring
costs 1.4 1.4 - 8.8 7.7 1.1 10.0 8.9 1.1
Other
exceptional
items 11.4 11.4 - - - - 13.5 13.5 -
---------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Exceptional
and other
items 60.7 60.7 - 52.3 51.2 1.1 113.7 112.6 1.1
---------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Underlying
operating
profit 216.7 191.8 24.9 180.5 167.1 13.4 375.2 340.2 35.0
---------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Underlying
operating
margin
(%) 14.2% 15.2% 9.4% 14.1% 16.3% 5.2% 13.0% 14.5% 6.6%
---------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
IFRS 16 impact on operating profit
Operating profit 156.0 131.1 24.9 128.2 115.9 12.3 261.5 227.6 33.9
Impact of IFRS
16 (26.7) (20.6) (6.1) - - - - - -
------------------- ------- ------- ------ ------ ------ ----- ------ ------ -----
Operating profit
pre IFRS 16 129.3 110.5 18.8 128.2 115.9 12.3 261.5 227.6 33.9
------------------- ------- ------- ------ ------ ------ ----- ------ ------ -----
IFRS 16 impact on underlying operating profit
-------------------------------------------------------------------------------------------
Underlying
operating profit 216.7 191.8 24.9 180.5 167.1 13.4 375.2 340.2 35.0
Impact of IFRS
16 (26.7) (20.6) (6.1) - - - - - -
------------------- ------- ------- ------ ------ ------ ----- ------ ------ -----
Underlying
operating profit
pre IFRS 16 190.0 171.2 18.8 180.5 167.1 13.4 375.2 340.2 35.0
------------------- ------- ------- ------ ------ ------ ----- ------ ------ -----
EBITDA and underlying EBITDA
In addition to measuring the financial performance of the Group
and lines of business based on underlying operating profit, we 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.
We consider EBITDA and underlying EBITDA to be useful measures
of our operating performance because they approximate the
underlying operating cash flow by eliminating depreciation and
amortisation. EBITDA and underlying EBITDA are not direct measures
of our liquidity, which is shown by our cash flow statement, and
need to be considered in the context of our financial
commitments.
A reconciliation from profit or loss to EBITDA and underlying
EBITDA, is set out below.
Six months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m $m $m $m
--------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Profit/(loss)
for the
period 31.4 46.8 (15.4) 66.7 61.4 5.3 137.9 118.7 19.2
Add: Finance
costs 77.2 74.8 2.4 27.7 27.2 0.5 67.9 67.0 0.9
Less:
Investment
income (1.2) (1.2) - (0.3) (0.3) - (0.7) (0.7) -
Add: Tax
charge 15.9 10.7 5.2 16.3 14.8 1.5 36.4 28.5 7.9
Add:
Depreciation
and
amortisation 131.9 131.9 - 85.0 81.3 3.7 170.0 166.3 3.7
Add:
Impairment
and other
charges 32.7 - 32.7 17.8 12.8 5.0 20.0 14.1 5.9
EBITDA 287.9 263.0 24.9 213.2 197.2 16.0 431.5 393.9 37.6
--------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Acquisition
related
transaction
costs - - - - - - 1.4 1.4 -
Restructuring
costs 1.4 1.4 - 8.8 7.7 1.1 10.0 8.9 1.1
Amounts
related
to previously
disposed
businesses 10.4 10.4 - - - - 2.3 2.3 -
Other
exceptional
items 1.0 1.0 - - - - 11.2 11.2 -
Underlying
EBITDA 300.7 275.8 24.9 222.0 204.9 17.1 456.4 417.7 38.7
--------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
EBITDA and underlying EBITDA - continued
The following tables summarises the impact of adopting IFRS 16
on the Group's profit/(loss) for the period, EBITDA and underlying
EBITDA for the period ended 30 June 2019.
Six months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m $m $m $m
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
IFRS 16 impact on profit/(loss) for the period
Profit/(loss)
for the
period 31.4 46.8 (15.4) 66.7 61.4 5.3 137.9 118.7 19.2
Impact of IFRS
16 7.1 10.2 (3.1) - - - - - -
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Profit/(loss)
for the
period
pre IFRS 16
(1) 38.5 57.0 (18.5) 66.7 61.4 5.3 137.9 118.7 19.2
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
IFRS 16 impact on EBITDA
EBITDA 287.9 263.0 24.9 213.2 197.2 16.0 431.5 393.9 37.6
Impact of IFRS
16 (70.9) (64.8) (6.1) - - - - - -
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
EBITDA pre
IFRS 16 217.0 198.2 18.8 213.2 197.2 16.0 431.5 393.9 37.6
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
IFRS 16 impact on underlying EBITDA
Underlying
EBITDA 300.7 275.8 24.9 222.0 204.9 17.1 456.4 417.7 38.7
Impact of IFRS
16 (70.9) (64.8) (6.1) - - - - - -
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Underlying
EBITDA pre
IFRS 16 229.8 211.0 18.8 222.0 204.9 17.1 456.4 417.7 38.7
--------------- ------- ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
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 months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m $m $m $m
--------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Profit/(loss)
before tax 47.3 57.5 (10.2) 83.0 76.2 6.8 174.3 147.2 27.1
Exceptional
and other
items
excluding tax
effect 93.4 60.7 32.7 70.1 64.0 6.1 133.7 126.7 7.0
Underlying
profit before
tax 140.7 118.2 22.5 153.1 140.2 12.9 308.0 273.9 34.1
--------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
The following tables summarises the impact of adopting IFRS 16
on the Group's profit/(loss) before tax and underlying
profit/(loss) before tax.
IFRS 16 impact on profit/(loss) before tax
---------------------------------------------------------------------------------------
Profit/(loss)
before tax 47.3 57.5 (10.2) 83.0 76.2 6.8 174.3 147.2 27.1
Impact of IFRS
16 9.5 13.8 (4.3) - - - - - -
---------------- ------ ------ ------- ------ ------ ----- ------ ------ -----
Profit/(loss)
before tax
pre IFRS 16 56.8 71.3 (14.5) 83.0 76.2 6.8 174.3 147.2 27.1
---------------- ------ ------ ------- ------ ------ ----- ------ ------ -----
IFRS 16 impact on underlying profit/(loss) before tax
---------------------------------------------------------------------------------------
Underlying
profit/(loss)
before tax 140.7 118.2 22.5 153.1 140.2 12.9 308.0 273.9 34.1
Impact of IFRS
16 9.5 13.8 (4.3) - - - - - -
---------------- ------ ------ ------- ------ ------ ----- ------ ------ -----
Underlying
profit/(loss)
before tax
pre IFRS 16 150.2 132.0 18.2 153.1 140.2 12.9 308.0 273.9 34.1
---------------- ------ ------ ------- ------ ------ ----- ------ ------ -----
Underlying deferred tax
Cash adjusted basic and diluted earnings per ordinary share set
out in note 6 are calculated by removing exceptional and other
items, the impact of IFRS 16 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 months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m $m $m $m
----------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Total deferred
tax
(credit)/charge (2.7) (4.8) 2.1 (1.1) (2.3) 1.2 (0.5) (6.7) 6.2
Adjust for
exceptional
deferred tax
charge/(credit) 13.6 14.0 (0.4) 13.6 14.1 (0.5) 26.6 27.4 (0.8)
Impact of IFRS
16 1.8 2.9 (1.1) - - - - - -
----------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Underlying
deferred
tax
charge/(credit) 12.7 12.1 0.6 12.5 11.8 0.7 26.1 20.7 5.4
----------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Cash basic and diluted earnings per ordinary share
As set out in note 6, the adjusted basic and diluted earnings
per ordinary share are calculated using the adjusted basic and
diluted earnings.
A reconciliation from the basic and diluted earnings per
ordinary share, the most directly comparable IFRS measure, to the
cash basic and diluted earnings per ordinary share is set out
below.
Six months ended Six months ended Year ended 31 December
30 June 2019 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
c c c c c c c c c
------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Basic
earnings
per share
pre
IFRS 16 3.7 5.5 (1.8) 6.5 6.0 0.5 13.4 11.5 1.9
Adjustments
for
adjusted
measure 8.9 5.6 3.3 6.5 5.9 0.6 12.5 11.5 1.0
------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Cash basic
earnings
per share
pre
IFRS 16 12.6 11.1 1.5 13.0 11.9 1.1 25.9 23.0 2.9
------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Diluted
earnings
per share
pre
IFRS 16 3.7 5.5 (1.8) 6.4 5.9 0.5 13.2 11.4 1.8
Adjustments
for
adjusted
measure 8.8 5.5 3.3 6.4 5.9 0.5 12.4 11.4 1.0
------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
Cash diluted
earnings
per
share pre
IFRS
16 12.5 11.0 1.5 12.8 11.8 1.0 25.6 22.8 2.8
------------- ------ ----------- ------------- ------ ----------- ------------- ------ ----------- -------------
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.
As noted above the transition option adopted for IFRS 16 means
comparative information is not available and therefore it is not
possible to calculate ROIC on a reported post IFRS 16 basis.
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
measure, 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
2019 2019 2019 Discontinued(1) 2018 2018
Total Continuing $m Total Total
$m $m $m $m
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Underlying operating profit 216.7 191.8 24.9 180.5 375.2
Impact of IFRS 16 (26.7) (20.6) (6.1) - -
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Underlying operating profit pre
IFRS 16 190.0 171.2 18.8 180.5 375.2
Underlying operating profit prior
period six months ended December 194.7 173.1 21.6 185.7 -
Adjustments for FX (0.3) (0.2) (0.1) (0.1) -
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Underlying operating profit pre
IFRS 16 for ROIC 384.4 344.1 40.3 366.1 375.2
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Net assets 1,865.7 1,622.9 242.8 1,895.2 1,944.2
Add back impact of IFRS 16 1.8 6.0 (4.2) - -
Add back impairment made to disposal
Group - (31.8) 31.8 - -
Adjustments for FX and averaging 69.6 62.7 6.9 39.4 (0.1)
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Pre IFRS 16 net assets for ROIC 1,937.1 1,659.8 277.3 1,934.6 1,944.1
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Borrowings (1,486.2) (1,486.2) - (1,341.4) (1,441.1)
Lease liabilities (1,200.0) (1,131.8) (68.2) (1.3) (4.3)
Add back Lease liabilities recognised
under IFRS 16 1,196.2 1,128.0 68.2
Cash and cash equivalents 125.8 116.7 9.1 150.0 111.3
Adjustments for FX and averaging (59.3) (50.7) (8.6) (108.9) (3.0)
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Less Pre IFRS 16 net debt for
ROIC(2) (1,423.5) (1,424.0) 0.5 (1,301.6) (1,337.1)
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
Pre IFRS 16 invested capital
for ROIC(2) 3,360.6 3,083.8 276.8 3,236.2 3,281.2
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
ROIC (%) 11.4% 11.2% 14.6% 11.3% 11.4%
--------------------------------------- ---------- ------------ ----------------------- ----------- -------------
(1) ROIC for discontinued operations has been calculated
excluding $5.4 m of support costs borne by the continuing Group (30
June 2018: $5.7m, 31 December 2018: $10.7m)
(2) Excluding the impact of IFRS 16
Operating cash flow
Operating cash flow is one of the Group's 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 buy-backs,
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 Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 Total Total
Total $m $m
$m
------------------------------------------------- ----------- ------------ -------------
Net cash flow from operating activities 273.3 177.1 368.3
Less: purchase of property, plant and equipment (34.9) (40.1) (85.3)
Less: purchase of intangible assets (7.2) (4.2) (7.8)
Add: Ontic licences not accounted for under
IFRS 3 1.0 1.2 1.2
Add: income tax paid 23.0 10.2 27.1
Add: proceeds from disposal of property,
plant and equipment 3.6 0.3 4.7
Operating cash flow 258.8 144.5 308.2
------------------------------------------------- ----------- ------------ -------------
Impact on Net cash flow from operating activities pre IFRS 16
Net cash flow from operating activities 273.3 177.1 368.3
IFRS 16 impact (70.6) - -
Net cash flow from operating activities
pre IFRS 16 202.7 177.1 368.3
------------------------------------------------- ----------- ------------ -------------
Impact on Operating cash flow by pre IFRS 16
Operating cash flow 258.8 144.5 308.2
IFRS 16 impact (70.6) - -
Operating cash flow pre IFRS 16 188.2 144.5 308.2
------------------------------------------------- ----------- ------------ -------------
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 set out in note 11 and reconciled
to net cash inflow from operating activities, the most directly
comparable IFRS measure.
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 cash generated from
operations.
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 Total
Total Total %
% %
------------------------------- ----------- ----------- -------------
Cash conversion 166%
Cash conversion (pre IFRS 16) 146% 113% 118%
------------------------------- ----------- ----------- -------------
Net debt
Net debt consists of borrowings (both current and non-current),
less cash and cash equivalents, the fair value adjustment on the US
private placement senior notes and the fair value adjustment on the
US senior 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 at 31 December
As at 30 June 2019 As at 30 June 2018 2018
Total Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued
$m $m $m $m $m $m $m $m $m
---------------- ---------- ----------- ------------- ---------- ----------- ------------- ---------- ----------- -------------
Borrowings (1,486.2) (1,486.2) - (1,341.4) (1,338.4) (3.0) (1,441.1) (1,438.1) (3.0)
Amortisation
costs (16.2) (16.2) - (20.0) (20.0) - (17.6) (17.6) -
Fair value
adjustment
on USPP senior
notes 5.8 5.8 - (4.9) (4.9) - (2.1) (2.1) -
Fair value
adjustment
on US senior
notes 17.3 17.3 - 0.3 0.3 - 4.0 4.0 -
Total principal
of borrowings (1,479.3) (1,479.3) - (1,366.0) (1,363.0) (3.0) (1,456.8) (1,453.8) (3.0)
Cash and cash
equivalents 125.8 116.7 9.1 150.0 147.6 2.4 111.3 109.3 2.0
---------------- ---------- ----------- ------------- ---------- ----------- ------------- ---------- ----------- -------------
Total net
principal
of borrowings (1,353.5) (1,362.6) 9.1 (1,216.0) (1,215.4) (0.6) (1,345.5) (1,344.5) (1.0)
Amortisation
costs 16.2 16.2 - 20.0 20.0 - 17.6 17.6 -
Lease
liabilities
for
covenants(1) (3.8) (3.8) - (1.3) (1.3) - (4.3) (4.3) -
Net debt for
covenants
purposes(1) (1,341.1) (1,350.2) 9.1 (1,197.3) (1,196.7) (0.6) (1,332.2) (1,331.2) (1.0)
---------------- ---------- ----------- ------------- ---------- ----------- ------------- ---------- ----------- -------------
Lease
liabilities(1) (1,196.2) (1,128.0) (68.2) - - - - - -
---------------- ---------- ----------- ------------- ---------- ----------- ------------- ---------- ----------- -------------
Net debt
including
the impact
of IFRS 16 (2,537.3) (2,478.2) (59.1) (1,197.3) (1,196.7) (0.6) (1,332.2) (1,331.2) (1.0)
---------------- ---------- ----------- ------------- ---------- ----------- ------------- ---------- ----------- -------------
(1) Net debt for covenant purposes includes lease liabilities
previously accounted for as finance leases under IAS 17. For the
purposes of net debt we have analysed lease liabilities between the
previous obligations under finance leases and additional lease
liabilities recognised following the adoption of IFRS 16.
20. Impact of adoption IFRS 16 leases
The following table summarises the impact of adopting IFRS 16 on
the Group's condensed consolidated balance sheet as at 1 January
2019.
Impact on the condensed consolidated balance sheet as at 1
January 2019
As at As at
31 December IFRS 16 1 January
2018 impact 2019
Note $m $m $m
------------------------------------ ------ ------------- --------- -----------
Non-current assets
Goodwill 1,191.1 - 1,191.1
Other intangible assets 1,329.4 - 1,329.4
Property, plant and equipment 779.9 - 779.9
Right of use assets - 1,088.2 1,088.2
Interests in associates
and joint ventures 53.5 - 53.5
Trade and other receivables 18.8 24.4 43.2
Deferred tax asset - - -
------
3,372.7 1,112.6 4,485.3
Current assets
Inventories 120.3 - 120.3
Trade and other receivables 260.2 2.6 262.8
Cash and cash equivalents 109.3 - 109.3
Tax recoverable 1.1 - 1.1
Assets held for sale 407.6 61.8 469.4
898.5 64.4 962.9
Total assets 4,271.2 1,177.0 5,448.2
Current liabilities
Trade and other payables (439.2) 24.9 (414.3)
Tax liabilities (39.8) - (39.8)
Lease liabilities (1.1) (52.9) (54.0)
Borrowings (1.5) - (1.5)
Provisions (23.0) 0.5 (22.5)
Liabilities held for sale (146.8) (61.8) (208.6)
(651.4) (89.3) (740.7)
Net current assets 247.1 (24.9) 222.2
Non-current liabilities
Borrowings (1,436.6) - (1,436.6)
Trade and other payables
due after one year (7.6) - (7.6)
Pensions and other post-retirement
benefits (28.2) - (28.2)
Deferred tax liabilities (162.8) (1.8) (164.6)
Lease liabilities (3.2) (1,083.8) (1,087.0)
Provisions (37.2) 3.2 (34.0)
(1,675.6) (1082.4) (2,758.0)
Total liabilities (2,327.0) (1,171.7) (3,498.7)
Net assets 1,944.2 5.3 1,949.5
Equity
Share capital 509.3 - 509.3
Share premium account 1,594.5 - 1,594.5
Other reserve (7.2) - (7.2)
Treasury reserve (95.3) - (95.3)
Capital reserve 56.2 - 56.2
Hedging and translation
reserves (105.7) - (105.7)
Retained earnings (9.9) 5.3 (4.6)
Equity attributable to equity holders
of BBA Aviation plc 1,941.9 5.3 1,947.2
Non-controlling interest 2.3 - 2.3
Total equity 1,944.2 5.3 1,949.5
The following tables summarises the impact of adopting IFRS 16
on the Group's condensed consolidation income statement and
condensed consolidated interim statement of cash flows for the
period ended 30 June 2019 and the condensed consolidated balance
sheet as at 30 June 2019
Impact on the condensed consolidated interim income
statement
Six months ended 30 June 2019
Six months Six months Six months
ended ended ended
30 June 30 June 30 June
2019 as IFRS 16 2019 pre 2018
reported impact IFRS 16 as reported
Note $m $m $m $m
--------------------------------
Continuing operations
Revenue 1,262.7 2.1 1,264.8 1,024.3
Cost of sales (978.0) (22.4) (1,000.4) (770.2)
Gross profit/(loss) 284.7 (20.3) 264.4 254.1
Distribution costs (4.9) - (4.9) (5.1)
Administrative expenses (138.9) (0.3) (139.2) (127.6)
Other operating income 2.1 - 2.1 1.3
Share of profit of associates
and joint ventures 1.6 - 1.6 1.7
Other operating expenses (12.1) - (12.1) (0.8)
Restructuring costs (1.4) - (1.4) (7.7)
---------------------------------------
Operating profit/(loss) 131.1 (20.6) 110.5 115.9
Impairment of assets - - - (12.8)
Investment income 1.2 (0.9) 0.3 0.3
Finance costs (74.8) 35.3 (39.5) (27.2)
---------------------------------------
Profit/(loss) before tax 57.5 13.8 71.3 76.2
Tax expense (10.7) (3.6) (14.3) (14.8)
---------------------------------------
Profit/(loss) from continuing
operations 46.8 10.2 57.0 61.4
(Loss)/profit from ERO
discontinued operations,
net of tax(1) (15.4) (3.1) (18.5) 5.3
---------------------------------------
Profit for the period 31.4 7.1 38.5 66.7
---------------------------------------
Attributable to:
Equity holders of BBA Aviation
plc 31.2 7.1 38.3 66.7
Non-controlling interests 0.2 - 0.2 -
---------------------------------------
Profit for the period 31.4 7.1 38.5 66.7
---------------------------------------
(1) (Loss)/profit from ERO discontinued operations includes $2.4
million of finance costs of which $1.9m represents finance costs
relating to the adoption of IFRS 16.
Impact on the condensed consolidated balance sheet
As at 30 June 2019
30 June
30 June 2019 31 December
2019 IFRS 16 pre IFRS 2018
as reported impact 16 as reported
Note $m $m $m $m
Non-current assets
Goodwill 1,193.1 - 1,193.1 1,191.1
Other intangible assets 1,293.0 - 1,293.0 1,329.4
Property, plant and equipment 765.4 - 765.4 779.9
Right of use assets 1,065.1 (1,065.1) - -
Interests in associates
and joint ventures 52.2 - 52.2 53.5
Trade and other receivables 55.3 (23.1) 32.2 18.8
4,424.1 (1,088.2) 3,335.9 3,372.7
Current assets
Inventories 137.8 - 137.8 120.3
Trade and other receivables 257.0 (2.7) 254.3 260.2
Cash and cash equivalents 116.7 - 116.7 109.3
Tax recoverable 0.9 - 0.9 1.1
Assets held for sale 430.8 (71.2) 359.6 407.6
943.2 (73.9) 869.3 898.5
Total assets 5,367.3 (1,162.1) 4,205.2 4,271.2
Current liabilities
Trade and other payables (406.7) (27.1) (433.8) (439.2)
Tax liabilities (35.2) (0.7) (35.9) (39.8)
Lease liabilities (57.9) 56.8 (1.1) (1.1)
Borrowings - - - (1.5)
Provisions (24.2) (0.5) (24.7) (23.0)
Liabilities held for sale (188.0) 67.0 (121.0) (146.8)
(712.0) 95.5 (616.5) (651.4)
Net current assets 231.2 21.6 252.8 247.1
Non-current liabilities
Borrowings (1,486.2) - (1,486.2) (1,436.6)
Trade and other payables
due after one year (1.4) - (1.4) (7.6)
Pensions and other post-retirement
benefits (32.7) - (32.7) (28.2)
Deferred tax liabilities (161.1) - (161.1) (162.8)
Lease liabilities (1,073.9) 1,071.2 (2.7) (3.2)
Provisions (34.3) (2.8) (37.1) (37.2)
(2,789.6) 1,068.4 (1,721.2) (1,675.6)
Total liabilities (3,501.6) 1,163.9 (2,337.7) (2,327.0)
Net assets 1,865.7 1.8 1,867.5 1,944.2
Equity
Share capital 510.0 - 510.0 509.3
Share premium account 1,594.5 - 1,594.5 1,594.5
Other reserve (7.2) - (7.2) (7.2)
Treasury reserve (102.5) - (102.5) (95.3)
Capital reserve 61.1 - 61.1 56.2
Hedging and translation
reserves (104.8) - (104.8) (105.7)
Retained earnings (87.6) 1.8 (85.8) (9.9)
Equity attributable to equity
holders of BBA Aviation
plc 1,863.5 1.8 1,865.3 1,941.9
Non-controlling interest 2.2 - 2.2 2.3
Total equity 1,865.7 1.8 1,867.5 1,944.2
Impact on the condensed consolidated interim statement of cash
flows
Six month ended 30 June 2019
30 June 30 June 30 June
2019 IFRS 16 2019 2018
as reported impact pre IFRS 16 as reported
$m $m $m $m
Operating activities 273.3 (70.6) 202.7 177.1
Net cash flow from operating
activities
Investing activities
Interest received 0.3 - 0.3 0.3
Interest received on sublease
assets 0.9 (0.9) - -
Capital element of finance sublease
assets 1.3 (1.3) - -
Dividends received from associates 2.9 - 2.9 1.7
Purchase of property, plant
and equipment (34.9) - (34.9) (40.1)
Purchase of intangible assets (7.2) - (7.2) (4.2)
Proceeds from disposal of property,
plant and equipment 3.6 - 3.6 0.3
Acquisition of businesses, net
of cash/(debt) acquired (25.5) - (25.5) (21.3)
Investment in assets classified
as financial instruments measured
through other comprehensive
income (FVTOCI) - - - (5.2)
Net cash (outflow) from investing
activities (58.6) (2.2) (60.8) (68.5)
Financing activities
Interest paid (38.7) - (38.7) (21.8)
Interest element on leases paid (37.2) 37.2 - -
Dividends paid (103.9) - (103.9) (99.3)
Gains/(Losses) from realised
foreign exchange contracts 5.5 - 5.5 (2.7)
Proceeds from issue of ordinary
shares net of issue costs 0.7 - 0.7 0.3
(Purchase)/sale of own shares (2.8) - (2.8) (5.4)
(Decrease)/increase in loans 23.3 - 23.3 26.8
Payments of lease liabilities (36.1) 35.6 (0.5) -
(Decrease)/increase in overdrafts (1.5) - (1.5) (3.3)
Net cash outflow from financing
activities (190.7) 72.8 (117.9) (105.4)
Increase/(decrease) in cash
and cash equivalents 24.0 - 24.0 3.2
Cash and cash equivalents at
beginning of the period 111.3 - 111.3 153.5
Exchange adjustments (9.5) - (9.5) (6.7)
Cash and cash equivalents at
end of the period 125.8 - 125.8 150.0
21. 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 pages 45 - 46
of the annual report for the year ended 31 December 2018. 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.
-- 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. In 2018, the major change has been the
introduction of General Data Protection Regulation (GDPR).
-- 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.
-- Changes in tax regulation in both the USA and EMEA could
impact the Group's effective tax rate and cash tax liabilities.
-- Delay in delivery of parts from multi-tiered supply chains
operating across multiple countries.
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 2019 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated cash flow statement, the consolidated
statement of changes in equity, and related notes 1 to 21. 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 2019 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
2 August 2019
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 CKBDQOBKDFFK
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August 05, 2019 02:00 ET (06:00 GMT)
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