TIDMBBA
RNS Number : 5535O
BBA Aviation PLC
08 November 2016
Press Release
8 November 2016
Trading Statement and Acquisition
BBA Aviation plc ("BBA Aviation", "the Group"), a market-leading
provider of global aviation support and aftermarket services, is
pleased to announce a trading statement for the period from 1
January to 31 October 2016, and an acquisition by our Ontic
business.
Trading Statement - Continuing operations
The Group's trading and cash flow remains in-line with
expectations, with revenue up 27% year-on-year, reflecting the
contribution from the Landmark acquisition completed in February
and good organic growth at Signature.
In Flight Support, the enlarged Signature revenues grew 56% and
4.1% on a like-for-like basis (constant currency, adjusting for
lower fuel prices and before acquisitions). Signature continued to
deliver good market outperformance and drop-through and Landmark is
on track. North American B&GA flight movements remain modestly
up, recording 0.6% growth in the year to end September (same period
last year: 0.7%).
The integration of Landmark Aviation continues to progress well,
with systems roll-out to new US FBO locations completed in
September, ahead of schedule. The vast majority of actions required
to achieve at least $35 million of annual cost savings are now
complete. Signature development projects are also on track, and new
Signature Select locations were added in Farmingdale, Long Island
in September, and since 31 October, in Bogota, Columbia.
Aftermarket Services revenue was lower than the prior year
period due to decline in ERO sales. Ontic, our legacy support
business, continues to perform well, with increased activity
materialising as expected in the second half of this year, and a
good contribution from licenses acquired in 2015. Ontic continues
to assess a pipeline of opportunities in relation to new products
and license adoptions, signing a new agreement in the period, in
addition to agreeing the acquisition detailed below. Conditions in
ERO's markets remain challenging and while organic revenues were
down 10.7%, we did see a small improvement in ERO's operating
performance since the half year.
Trading Statement - Discontinued operations
In September, we announced the sale of ASIG, our commercial
aviation services company, for $202 million. The transaction is
subject to customary approvals and completion is expected around
the end of 2016. ASIG, now classified as a discontinued operation,
reported organic revenue growth of 1.0%, with continued good
operational performance. This disposal further enhances BBA
Aviation's focus as a high quality, strongly cash generative market
leader in the provision of business and general aviation and
maturing aerospace platform services.
Acquisition of part of GE Aviation's avionics business
Ontic, BBA Aviation's legacy support business, has reached
agreement to acquire a portfolio of legacy avionics products (the
"Business") from GE Aviation, for a cash consideration of $61.5
million on a cash and debt free basis, paid from existing financial
resources.
The Business comprises a portfolio of legacy avionics parts
servicing the military and commercial aviation markets, including
electro mechanical, barometric, gyroscopes and electronics
products. Key platforms include Boeing 737, Sikorsky Sea King and
Leonardo AW101 helicopters, Lockheed C130/J transports and BAE Hawk
aircraft. The portfolio has a strong fit with Ontic's existing
business, and the acquisition is aligned to Ontic's strategy to
deliver continued profitable growth in mature avionics and
electronics products with high intellectual property content. With
significant experience of acquisitions including a similar business
bought from GE Aviation in 2011, Ontic has proven processes to
ensure the seamless integration of new product lines, which will be
supported in this case by a transitional services agreement with GE
Aviation.
The Business employs around 90 employees at its principal
location adjacent to Ontic's existing site in Cheltenham, UK, and
has two further sites in Florida, US and Brisbane, Australia. The
relevant work will relocate from the latter sites to Ontic's
locations in Chatsworth, US and Singapore respectively. The
transaction is expected to complete early in the New Year, subject
to the satisfaction of certain conditions.
Financial effects
In its first full year of ownership, the Business is expected to
contribute approximately $7.5 million of operating profit after
expected year one transition costs of approximately $1.6 million,
and will exceed the Group's ROIC hurdle. In addition to the $61.5
million capital needed to acquire the Business, we anticipate
approximately a further $5 million of capital expenditure in the
first year.
Simon Pryce, Group Chief Executive of BBA Aviation, said:
"Despite our primary markets only showing slow growth, the Group
is performing as anticipated with continued outperformance from the
enlarged Signature business and good margin drop through. The
integration of Landmark has gone well, with synergies ahead of
plan, and actions completed that will drive annualised synergies of
at least $35 million in 2017. With the enlarged Signature business
allowing us to extend our industry leading service and network
management abilities to over 200 FBOs, we continue to see
opportunities for continued market outperformance. Our Aftermarket
division is performing as we expected with Ontic delivering the
anticipated second half uptick in revenue and ERO showing signs of
stability and small improvement despite tough markets.
"Today's acquisition is a strategically significant deal for
Ontic - a business that has grown significantly since the Group
acquired it in 2006. Ontic is already the leading provider of
high-quality, cost-effective solutions for the continuing support
of maturing aerospace platforms and we look forward to expanding
our product offering in legacy avionic parts.
"In a year of great transformation, the Group is on track to
deliver good further progress in 2016."
Enquiries:
BBA Aviation plc
Mike Powell, Group Finance Director / Martha Walsh, Interim Head
of Investor Relations
(020) 7514 3999
Tulchan Communications
David Allchurch / Doug Campbell
(020) 7353 4200
Notes:
The value of the gross assets of the acquired portfolio is $18.8
million as at 30 June 2016. The profit attributable to the
portfolio was $9.9 million in FY 2015, before the 2016 retirement
of the UK's Sikorsky Sea King fleet.
Information on BBA Aviation plc
BBA Aviation plc is a leading global aviation support and
aftermarket services provider with market leading businesses and
attractive growth opportunities. BBA Aviation's Flight Support
businesses (Signature Flight Support and ASIG) are focused on
refuelling and ground handling of business and commercial aviation
aircraft. Its Aftermarket Services businesses (Dallas Airmotive,
H+S Aviation, International Turbine Service, Barrett Turbine Engine
Company, International Governor Services and Ontic) are focused on
the repair and overhaul of jet engines and the service of aerospace
sub-systems and components. For more information, please visit
www.bbaaviation.com
This information is provided by RNS
The company news service from the London Stock Exchange
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